JEROMIE D.

ESCASINAS and EVAN RIGOR SINGCO,

March 4, 2009
Petitioners,

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DECISION
- versus -

CARPIO MORALES, J.:

Registered nurses Jeromie D. Escasinas and Evan Rigor Singco (petitioners) were
engaged in 1999 and 1996, respectively, by Dr. Jessica Joyce R. Pepito (respondent
doctor) to work in her clinic at respondent Shangri-las Mactan Island Resort
SHANGRI-LAS MACTAN ISLAND RESORT and DR. JESSICA J.R. PEPITO, (Shangri-la) in Cebu of which she was a retained physician.

Respondents.

G.R. No. 178827 In late 2002, petitioners filed with the National Labor Relations Commission (NLRC)
Regional Arbitration Branch No. VII (NLRC-RAB No. VII) a complaint[1] for
regularization, underpayment of wages, non-payment of holiday pay, night shift
differential and 13th month pay differential against respondents, claiming that they
Present: are regular employees of Shangri-la. The case was docketed as RAB Case No. 07-11-
2089-02.

QUISUMBING, J., Chairperson,

Shangri-la claimed, however, that petitioners were not its employees but of
CARPIO MORALES, respondent doctor whom it retained via Memorandum of Agreement (MOA)[2]
pursuant to Article 157 of the Labor Code, as amended. TRUE
NACHURA,*

BRION, and
Respondent doctor for her part claimed that petitioners were already working for
PERALTA,** JJ. the previous retained physicians of Shangri-la before she was retained by Shangri-
la; and that she maintained petitioners services upon their request.

Promulgated:
LA
By Decision[3] of May 6, 2003, Labor Arbiter Ernesto F. Carreon declared petitioners
to be regular employees of Shangri-la. The Arbiter thus ordered Shangri-la to grant
them the wages and benefits due them as regular employees from the time their
services were engaged. -
- In finding petitioners to be regular employees of Shangri-la, the Arbiter noted
that they usually perform work which is necessary and desirable to Shangri-las
business; that they observe clinic hours and render services only to Shangri-las
guests and employees; that payment for their salaries were recommended to
Shangri-las Human Resource Department (HRD); that respondent doctor was
Shangri-las in-house physician, hence, also an employee; and that the MOA
between Shangri-la and respondent doctor was an insidious mechanism in order to
circumvent [the doctors] tenurial security and that of the employees under her.
Shangri-la and respondent doctor appealed to the NLRC. Petitioners appealed too,
but only with respect to the non-award to them of some of the benefits they were
claiming.
NLRC
By Decision[4] dated March 31, 2005, the NLRC granted Shangri-las and respondent
doctors appeal and dismissed petitioners complaint for lack of merit, it finding that
no employer-employee relationship exists between petitioner and Shangri-la. In so
deciding, the NLRC held that the Arbiter erred in interpreting Article 157 in relation
to Article 280 of the Labor Code, as what is required under Article 157 is that the
employer should provide the services of medical personnel to its employees, but
nowhere in said article is a provision that nurses are required to be employed; that
contrary to the finding of the Arbiter, even if Article 280 states that if a worker
performs work usually necessary or desirable in the business of the employer, he
cannot be automatically deemed a regular employee; and that the MOA amply
shows that respondent doctor was in fact engaged by Shangri-la on a retainer basis,
under which she could hire her own nurses and other clinic personnel.
Brushing aside petitioners contention that since their application for employment
was addressed to Shangri-la, it was really Shangri-la which hired them and not
respondent doctor, the NLRC noted that the applications for employment were
made by persons who are not parties to the case and were not shown to have been
actually hired by Shangri-la.
On the issue of payment of wages, the NLRC held that the fact that, for some
months, payment of petitioners wages were recommended by Shangri-las HRD did
not prove that it was Shangri-la which pays their wages. It thus credited respondent
doctors explanation that the recommendations for payment were based on the
billings she prepared for salaries of additional nurses during Shangri-las peak
months of operation, in accordance with the retainership agreement, the guests
payments for medical services having been paid directly to Shanrgi-la.
Petitioners thereupon brought the case to the Court of Appeals which, by
Decision[5] of May 22, 2007, affirmed the NLRC Decision that no employer-
employee relationship exists between Shangri-la and petitioners. The appellate
court concluded that all aspects of the employment of petitioners being under the
supervision and control of respondent doctor and since Shangri-la is not principally
engaged in the business of providing medical or healthcare services, petitioners
could not be regarded as regular employees of Shangri-la.
Petitioners motion for reconsideration having been denied by Resolution[6] of July
10, 2007, they interposed the present recourse.
Petitioners insist that under Article 157 of the Labor Code, Shangri-la is required to
hire a full-time registered nurse, apart from a physician, hence, their engagement
should be deemed as regular employment, the provisions of the MOA
notwithstanding; and that the MOA is contrary to public policy as it circumvents
tenurial security and, therefore, should be struck down as being void ab initio. At
most, they argue, the MOA is a mere job contract.
And petitioners maintain that respondent doctor is a labor-only contractor for she
has no license or business permit and no business name registration, which is
contrary to the requirements under Sec. 19 and 20 of the Implementing Rules and
Regulations of the Labor Code on sub-contracting.
Petitioners add that respondent doctor cannot be a legitimate independent
contractor, lacking as she does in substantial capital, the clinic having been set-up
and already operational when she took over as retained physician; that respondent
doctor has no control over how the clinic is being run, as shown by the different
orders issued by officers of Shangri-la forbidding her from receiving cash payments
and several purchase orders for medicines and supplies which were coursed thru
Shangri-las Purchasing Manager, circumstances indubitably showing that she is not
an independent contractor but a mere agent of Shangri-la.
In its Comment,[7] Shangri-la questions the Special Powers of Attorneys (SPAs)
appended to the petition for being inadequate. On the merits, it prays for the
disallowance of the petition, contending that it raises factual issues, such as the
validity of the MOA, which were never raised during the proceedings before the
Arbiter, albeit passed upon by him in his Decision; that Article 157 of the Labor
Code does not make it mandatory for a covered establishment to employ health
personnel; that the services of nurses is not germane nor indispensable to its
operations; and that respondent doctor is a legitimate individual independent
contractor who has the power to hire, fire and supervise the work of the nurses
under her.
The resolution of the case hinges, in the main, on the correct interpretation of Art.
157 vis a vis Art. 280 and the provisions on permissible job contracting of the Labor
Code, as amended.
The Court holds that, contrary to petitioners postulation, Art. 157 does not require
the engagement of full-time nurses as regular employees of a company employing
not less than 50 workers. Thus, the Article provides:
ART. 157. Emergency medical and dental services. It shall be the duty of every
employer to furnish his employees in any locality with free medical and dental
attendance and facilities consisting of:
(a) The services of a full-time registered nurse when the number of
employees exceeds fifty (50) but not more than two hundred (200) except when the
employer does not maintain hazardous workplaces, in which case the services of a
graduate first-aider shall be provided for the protection of the workers, where no
registered nurse is available. The Secretary of Labor shall provide by appropriate
regulations the services that shall be required where the number of employees
does not exceed fifty (50) and shall determine by appropriate order hazardous
workplaces for purposes of this Article;
(b) The services of a full-time registered nurse, a part-time physician and
dentist, and an emergency clinic, when the number of employees exceeds two
hundred (200) but not more than three hundred (300); and
(c) The services of a full-time physician, dentist and full-time registered
nurse as well as a dental clinic, and an infirmary or emergency hospital with one
bed capacity for every one hundred (100) employees when the number of
employees exceeds three hundred (300).
In cases of hazardous workplaces, no employer shall engage the services of a
physician or dentist who cannot stay in the premises of the establishment for at
least two (2) hours, in the case of those engaged on part-time basis, and not less
than eight (8) hours in the case of those employed on full-time basis. Where the
undertaking is nonhazardous in nature, the physician and dentist may be engaged
on retained basis, subject to such regulations as the Secretary of Labor may
prescribe to insure immediate availability of medical and dental treatment and
attendance in case of emergency. (Emphasis and underscoring supplied)
Under the foregoing provision, Shangri-la, which employs more than 200 workers, is
mandated to furnish its employees with the services of a full-time registered
nurse, a part-time physician and dentist, and an emergency clinic which means that
it should provide or make available such medical and allied services to its
employees, not necessarily to hire or employ a service provider. As held in
Philippine Global Communications vs. De Vera:[8]
x x x while it is true that the provision requires employers to engage the services of
medical practitioners in certain establishments depending on the number of their
employees, nothing is there in the law which says that medical practitioners so
engaged be actually hired as employees, adding that the law, as written, only
requires the employer to retain, not employ, a part-time physician who needed to
stay in the premises of the non-hazardous workplace for two (2) hours. (Emphasis
and underscoring supplied)
The term full-time in Art. 157 cannot be construed as referring to the type of
employment of the person engaged to provide the services, for Article 157 must not
be read alongside Art. 280[9] in order to vest employer-employee relationship on
the employer and the person so engaged. So De Vera teaches:
x x x For, we take it that any agreement may provide that one party shall render
services for and in behalf of another, no matter how necessary for the latters
business, even without being hired as an employee. This set-up is precisely true in
the case of an independent contractorship as well as in an agency agreement.
Indeed, Article 280 of the Labor Code, quoted by the appellate court, is not the
yardstick for determining the existence of an employment relationship. As it is, the
provision merely distinguishes between two (2) kinds of employees, i.e., regular and
casual. x x x[10] (Emphasis and underscoring supplied)
FULL TIME REFERS TO KIND OF SERVICES, NOT THE KIND OF EMPLOYMENT
The phrase services of a full-time registered nurse should thus be taken to refer to
the kind of services that the nurse will render in the companys premises and to its
employees, not the manner of his engagement.
As to whether respondent doctor can be considered a legitimate independent
contractor, the pertinent sections of DOLE Department Order No. 10, series of
1997, illuminate:
Job contracting defined
Sec. 8. Job contracting. There is job contracting permissible under the Code if the
following conditions are met:
(1) The contractor carries on an independent business and undertakes the contract
work on his own account under his own responsibility according to his own manner
and method, free from the control and direction of his employer or principal in all
matters connected with the performance of the work except as to the results
thereof; and
(2) The contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are necessary in
the conduct of his business.
Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to
an employer shall be deemed to be engaged in labor-only contracting where such
person:
(1) Does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises and other materials; and
(2) The workers recruited and placed by such persons are performing activities
which are directly related to the principal business or operations of the employer in
which workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the person
acting as contractor shall be considered merely as an agent or intermediary of the
employer who shall be responsible to the workers in the same manner and extent
as if the latter were directly employed by him.
(c) For cases not falling under this Article, the Secretary of Labor shall determine
through appropriate orders whether or not the contracting out of labor is
permissible in the light of the circumstances of each case and after considering the
operating needs of the employer and the rights of the workers involved. In such
case, he may prescribe conditions and restrictions to insure the protection and
welfare of the workers. (Emphasis supplied)
Factors to be permissible contractor
The existence of an independent and permissible contractor relationship is
generally established by considering the following determinants: whether the
contractor is carrying on an independent business; the nature and extent of the
work; the skill required; the term and duration of the relationship; the right to
assign the performance of a specified piece of work; the control and supervision of
the work to another; the employer's power with respect to the hiring, firing and
payment of the contractor's workers; the control of the premises; the duty to
supply the premises, tools, appliances, materials and labor; and the mode, manner
and terms of payment.[11]
EE ER TEST
On the other hand, existence of an employer- employee relationship is established
by the presence of the following determinants: (1) the selection and engagement of
the workers; (2) power of dismissal; (3) the payment of wages by whatever means;
and (4) the power to control the worker's conduct, with the latter assuming primacy
in the overall consideration.[12]
DOCTOR IS LEGIT INDEPENDENT CONTRACTOR
Against the above-listed determinants, the Court holds that respondent doctor is a
legitimate independent contractor. That Shangri-la provides the clinic premises and
medical supplies for use of its employees and guests does not necessarily prove that
respondent doctor lacks substantial capital and investment. Besides, the
maintenance of a clinic and provision of medical services to its employees is
required under Art. 157, which are not directly related to Shangri-las principal
business operation of hotels and restaurants.
As to payment of wages, respondent doctor is the one who underwrites the
following: salaries, SSS contributions and other benefits of the staff[13]; group life,
group personal accident insurance and life/death insurance[14] for the staff with
minimum benefit payable at 12 times the employees last drawn salary, as well as
value added taxes and withholding taxes, sourced from her P60,000.00 monthly
retainer fee and 70% share of the service charges from Shangri-las guests who avail
of the clinic services. It is unlikely that respondent doctor would report petitioners
as workers, pay their SSS premium as well as their wages if they were not indeed
her employees.[15]
With respect to the supervision and control of the nurses and clinic staff, it is not
disputed that a document, Clinic Policies and Employee Manual[16] claimed to have
been prepared by respondent doctor exists, to which petitioners gave their
conformity[17] and in which they acknowledged their co-terminus employment
status. It is thus presumed that said document, and not the employee manual being
followed by Shangri-las regular workers, governs how they perform their respective
tasks and responsibilities.
Contrary to petitioners contention, the various office directives issued by Shangri-
las officers do not imply that it is Shangri-las management and not respondent
doctor who exercises control over them or that Shangri-la has control over how the
doctor and the nurses perform their work. The letter[18] addressed to respondent
doctor dated February 7, 2003 from a certain Tata L. Reyes giving instructions
regarding the replenishment of emergency kits is, at most, administrative in nature,
related as it is to safety matters; while the letter[19] dated May 17, 2004 from
Shangri-las Assistant Financial Controller, Lotlot Dagat, forbidding the clinic from
receiving cash payments from the resorts guests is a matter of financial policy in
order to ensure proper sharing of the proceeds, considering that Shangri-la and
respondent doctor share in the guests payments for medical services rendered. In
fine, as Shangri-la does not control how the work should be performed by
petitioners, it is not petitioners employer.
WHEREFORE, the petition is hereby DENIED. The Decision of the Court of Appeals
dated May 22, 2007 and the Resolution dated July 10, 2007 are AFFIRMED.
SO ORDERED.
G.R. No. L-12582 January 28, 1961
LVN PICTURES, INC., petitioner-appellant,
vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS,
respondents-appellees.

x---------------------------------------------------------x
G.R. No. L-12598 January 28, 1961
SAMPAGUITA PICTURES, INC., petitioner-appellant,
vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS,
respondents-appellees.
Nicanor S. Sison for petitioner-appellant.
Jaime E. Ilagan for respondent-appellee Court of Agrarian Relations.
Gerardo P. Cabo Chan for respondent-appellee Philippine Musicians Guild.
CONCEPCION, J.:
Petitioners herein, LVN Pictures, Inc. and Sampaguita Pictures, Inc. seek a review by
certiorari of an order of the Court of Industrial Relations in Case No. 306-MC
thereof, certifying the Philippine Musicians Guild (FFW), petitioner therein and
respondent herein, as the sole and exclusive bargaining agency of all musicians
working with said companies, as well as with the Premiere Productions, Inc., which
has not appealed. The appeal of LVN Pictures, Inc., has been docketed as G.R. No. L-
12582, whereas G.R. No. L-12598 is the appeal of Sampaguita Pictures, Inc.
Involving as they do the same order, the two cases have been jointly heard in this
Court, and will similarly be disposed of.
In its petition in the lower court, the Philippine Musicians Guild (FFW), hereafter
referred to as the Guild, averred that it is a duly registered legitimate labor
organization; that LVN Pictures, Inc., Sampaguita Pictures, Inc., and Premiere
Productions, Inc. are corporations, duly organized under the Philippine laws,
engaged in the making of motion pictures and in the processing and distribution
thereof; that said companies employ musicians for the purpose of making music
recordings for title music, background music, musical numbers, finale music and
other incidental music, without which a motion picture is incomplete; that ninety-
five (95%) percent of all the musicians playing for the musical recordings of said
companies are members of the Guild; and that the same has no knowledge of the
existence of any other legitimate labor organization representing musicians in said
companies. Premised upon these allegations, the Guild prayed that it be certified as
the sole and exclusive bargaining agency for all musicians working in the
aforementioned companies. In their respective answers, the latter denied that they
have any musicians as employees, and alleged that the musical numbers in the filing
of the companies are furnished by independent contractors. The lower court,
however, rejected this pretense and sustained the theory of the Guild, with the
result already adverted to. A reconsideration of the order complained of having
been denied by the Court en banc, LVN Pictures, inc., and Sampaguita Pictures, Inc.,
filed these petitions for review for certiorari.
Apart from impugning the conclusion of the lower court on the status of the Guild
members as alleged employees of the film companies, the LVN Pictures, Inc.,
maintains that a petition for certification cannot be entertained when the existence
of employer-employee relationship between the parties is contested. However, this
claim is neither borne out by any legal provision nor supported by any authority. So
long as, after due hearing, the parties are found to bear said relationship, as in the
case at bar, it is proper to pass upon the merits of the petition for certification.
It is next urged that a certification is improper in the present case, because, "(a) the
petition does not allege and no evidence was presented that the alleged musicians-
employees of the respondents constitute a proper bargaining unit, and (b) said
alleged musicians-employees represent a majority of the other numerous
employees of the film companies constituting a proper bargaining unit under
section 12 (a) of Republic Act No. 875."
The absence of an express allegation that the members of the Guild constitute a
proper bargaining unit is fatal proceeding, for the same is not a "litigation" in the
sense in which this term is commonly understood, but a mere investigation of a
non-adversary, fact finding character, in which the investigating agency plays the
part of a disinterested investigator seeking merely to ascertain the desires of
employees as to the matter of their representation. In connection therewith, the
court enjoys a wide discretion in determining the procedure necessary to insure the
fair and free choice of bargaining representatives by employees.1 Moreover, it is
alleged in the petition that the Guild it a duly registered legitimate labor
organization and that ninety-five (95%) percent of the musicians playing for all the
musical recordings of the film companies involved in these cases are members of
the Guild. Although, in its answer, the LVN Pictures, Inc. denied both allegations, it
appears that, at the hearing in the lower court it was merely the status of the
musicians as its employees that the film companies really contested. Besides, the
substantial difference between the work performed by said musicians and that of
other persons who participate in the production of a film, and the peculiar
circumstances under which the services of that former are engaged and rendered,
suffice to show that they constitute a proper bargaining unit. At this juncture, it
should be noted that the action of the lower court in deciding upon an appropriate
unit for collective bargaining purposes is discretionary (N.L.R.B. v. May Dept. Store
Co., 66 Sup. Ct. 468. 90 L. ed. 145) and that its judgment in this respect is entitled to
almost complete finality, unless its action is arbitrary or capricious (Marshall Field &
Co. v. N.L.R.B. [C.C.A. 19431, 135 F. 2d. 891), which is far from being so in the cases
at bar.
Again, the Guild seeks to be, and was, certified as the sole and exclusive bargaining
agency for the musicians working in the aforesaid film companies. It does not
intend to represent the other employees therein. Hence, it was not necessary for
the Guild to allege that its members constitute a majority of all the employees of
said film companies, including those who are not musicians. The real issue in these
cases, is whether or not the musicians in question are employees of the film
companies. In this connection the lower court had the following to say:
As a normal and usual course of procedure employed by the companies when a
picture is to be made, the producer invariably chooses, from the musical directors,
one who will furnish the musical background for a film. A price is agreed upon
verbally between the producer and musical director for the cost of furnishing such
musical background. Thus, the musical director may compose his own music
specially written for or adapted to the picture. He engages his own men and pays
the corresponding compensation of the musicians under him.
When the music is ready for recording, the musicians are summoned through 'call
slips' in the name of the film company (Exh 'D'), which show the name of the
musician, his musical instrument, and the date, time and place where he will be
picked up by the truck of the film company. The film company provides the studio
for the use of the musicians for that particular recording. The musicians are also
provided transportation to and from the studio by the company. Similarly, the
company furnishes them meals at dinner time.
During the recording sessions, the motion picture director, who is an employee of
the company, supervises the recording of the musicians and tells what to do in
every detail. He solely directs the performance of the musicians before the camera
as director, he supervises the performance of all the action, including the musicians
who appear in the scenes so that in the actual performance to be shown on the
screen, the musical director's intervention has stopped.
And even in the recording sessions and during the actual shooting of a scene, the
technicians, soundmen and other employees of the company assist in the
operation. Hence, the work of the musicians is an integral part of the entire motion
picture since they not only furnish the music but are also called upon to appear in
the finished picture.
The question to be determined next is what legal relationship exits between the
musicians and the company in the light of the foregoing facts.
We are thus called upon to apply R.A. Act 875. which is substantially the same as
and patterned after the Wagner Act substantially the same as a Act and the Taft-
Hartley Law of the United States. Hence, reference to decisions of American Courts
on these laws on the point-at-issue is called for.
Statutes are to be construed in the light of purposes achieved and the evils sought
to be remedied. (U.S. vs. American Tracking Association, 310 U.S. 534, 84 L. ed.
1345.) .
In the case of National Labor Relations Board vs. Hearts Publication, 322 U.S. 111,
the United States Supreme Court said the Wagner Act was designed to avert the
'substantial obstruction to the free flow of commerce which results from strikes and
other forms of industrial unrest by eliminating the causes of the unrest. Strikes and
industrial unrest result from the refusal of employers' to bargain collectively and
the inability of workers to bargain successfully for improvement in their working
conditions. Hence, the purposes of the Act are to encourage collective bargaining
and to remedy the workers' inability to bargaining power, by protecting the exercise
of full freedom of association and designation of representatives of their own
choosing, for the purpose of negotiating the terms and conditions of their
employment.'
The mischief at which the Act is aimed and the remedies it offers are not confined
exclusively to 'employees' within the traditional legal distinctions, separating them
from 'independent contractor'. Myriad forms of service relationship, with infinite
and subtle variations in the term of employment, blanket the nation's economy.
Some are within this Act, others beyond its coverage. Large numbers will fall clearly
on one side or on the other, by whatever test may be applied. Inequality of
bargaining power in controversies of their wages, hours and working conditions
may characterize the status of one group as of the other. The former, when acting
alone may be as helpless in dealing with the employer as dependent on his daily
wage and as unable to resist arbitrary and unfair treatment as the latter.'
To eliminate the causes of labor dispute and industrial strike, Congress thought it
necessary to create a balance of forces in certain types of economic relationship.
Congress recognized those economic relationships cannot be fitted neatly into the
containers designated as 'employee' and 'employer'. Employers and employees not
in proximate relationship may be drawn into common controversies by economic
forces and that the very dispute sought to be avoided might involve 'employees'
who are at times brought into an economic relationship with 'employers', who are
not their 'employers'. In this light, the language of the Act's definition of 'employee'
or 'employer' should be determined broadly in doubtful situations, by underlying
economic facts rather than technically and exclusively established legal
classifications. (NLRB vs. Blount, 131 F [2d] 585.)
In other words, the scope of the term 'employee' must be understood with
reference to the purposes of the Act and the facts involved in the economic
relationship. Where all the conditions of relation require protection, protection
ought to be given .
By declaring a worker an employee of the person for whom he works and by
recognizing and protecting his rights as such, we eliminate the cause of industrial
unrest and consequently we promote industrial peace, because we enable him to
negotiate an agreement which will settle disputes regarding conditions of
employment, through the process of collective bargaining.
The statutory definition of the word 'employee' is of wide scope. As used in the Act,
the term embraces 'any employee' that is all employees in the conventional as well
in the legal sense expect those excluded by express provision. (Connor Lumber Co.,
11 NLRB 776.).
It is the purpose of the policy of Republic Act 875; (a) To eliminate the causes of
industrial unrest by protecting the exercise of their right to self-organization for the
purpose of collective bargaining. (b) To promote sound stable industrial peace and
the advancement of the general welfare, and the best interests of employers and
employees by the settlement of issues respecting terms and conditions of
employment through the process of collective bargaining between employers and
representatives of their employees.
The primary consideration is whether the declared policy and purpose of the Act
can be effectuated by securing for the individual worker the rights and protection
guaranteed by the Act. The matter is not conclusively determined by a contract
which purports to establish the status of the worker, not as an employee.
The work of the musical director and musicians is a functional and integral part of
the enterprise performed at the same studio substantially under the direction and
control of the company.
In other words, to determine whether a person who performs work for another is
the latter's employee or an independent contractor, the National Labor Relations
relies on 'the right to control' test. Under this test an employer-employee
relationship exist where the person for whom the services are performed reserves
the right to control not only the end to be achieved, but also the manner and means
to be used in reaching the end. (United Insurance Company, 108, NLRB No. 115.).
Thus, in said similar case of Connor Lumber Company, the Supreme Court said:.
'We find that the independent contractors and persons working under them are
employees' within the meaning of Section 2 (3) of its Act. However, we are of the
opinion that the independent contractors have sufficient authority over the persons
working under their immediate supervision to warrant their exclusion from the unit.
We shall include in the unit the employees working under the supervision of the
independent contractors, but exclude the contractors.'
'Notwithstanding that the employees are called independent contractors', the
Board will hold them to be employees under the Act where the extent of the
employer's control over them indicates that the relationship is in reality one of
employment. (John Hancock Insurance Co., 2375-D, 1940, Teller, Labor Dispute
Collective Bargaining, Vol.).
The right of control of the film company over the musicians is shown (1) by calling
the musicians through 'call slips' in 'the name of the company; (2) by arranging
schedules in its studio for recording sessions; (3) by furnishing transportation and
meals to musicians; and (4) by supervising and directing in detail, through the
motion picture director, the performance of the musicians before the camera, in
order to suit the music they are playing to the picture which is being flashed on the
screen.
Thus, in the application of Philippine statutes and pertinent decisions of the United
States Courts on the matter to the facts established in this case, we cannot but
conclude that to effectuate the policies of the Act and by virtue of the 'right of
control' test, the members of the Philippine Musicians Guild are employees of the
three film companies and, therefore, entitled to right of collective bargaining under
Republic Act No. 875.
In view of the fact that the three (3) film companies did not question the union's
majority, the Philippine Musicians Guild is hereby declared as the sole collective
bargaining representative for all the musicians employed by the film companies."
We are fully in agreement with the foregoing conclusion and the reasons given in
support thereof. Both are substantially in line with the spirit of our decision in
Maligaya Ship Watchmen Agency vs. Associated Watchmen and Security Union, L-
12214-17 (May 28, 1958). In fact, the contention of the employers in the Maligaya
cases, to the effect that they had dealt with independent contractors, was stronger
than that of the film companies in these cases. The third parties with whom the
management and the workers contracted in the Maligaya cases were agencies
registered with the Bureau of Commerce and duly licensed by the City of Manila to
engage in the business of supplying watchmen to steamship companies, with
permits to engage in said business issued by the City Mayor and the Collector of
Customs. In the cases at bar, the musical directors with whom the film companies
claim to have dealt with had nothing comparable to the business standing of said
watchmen agencies. In this respect, the status of said musical directors is analogous
to that of the alleged independent contractor in Caro vs. Rilloraza, L-9569
(September 30, 1957), with the particularity that the Caro case involved the
enforcement of the liability of an employer under the Workmen's Compensation
Act, whereas the cases before us are merely concerned with the right of the Guild
to represent the musicians as a collective bargaining unit. Hence, there is less
reason to be legalistic and technical in these cases, than in the Caro case.
Herein, petitioners-appellants cite, in support of their appeal, the cases of Sunripe
Coconut Product Co., Inc vs. CIR (46 Off. Gaz., 5506, 5509), Philippine
Manufacturing Co. vs. Santos Vda. de Geronimo, L-6968 (November 29, 1954),
Viana vs. Al-Lagadan, L-8967 (May 31, 1956), and Josefa Vda. de Cruz vs. The Manila
Hotel Co. (53 Off. Gaz., 8540). Instead of favoring the theory of said petitioners-
appellants, the case of the Sunripe Coconut Product Co., Inc. is authority for herein
respondents-appellees. It was held that, although engaged as piece-workers, under
the "pakiao" system, the "parers" and "shellers" in the case were, not independent
contractor, but employees of said company, because "the requirement imposed on
the 'parers' to the effect that 'the nuts are pared whole or that there is not much
meat wasted,' in effect limits or controls the means or details by which said workers
are to accomplish their services" — as in the cases before us.
The nature of the relation between the parties was not settled in the Viana case,
the same having been remanded to the Workmen's Compensation Commission for
further evidence.
The case of the Philippine Manufacturing Co. involved a contract between said
company and Eliano Garcia, who undertook to paint a tank of the former. Garcia, in
turn engaged the services of Arcadio Geronimo, a laborer, who fell while painting
the tank and died in consequence of the injuries thus sustained by him. Inasmuch as
the company was engaged in the manufacture of soap, vegetable lard, cooking oil
and margarine, it was held that the connection between its business and the
painting aforementioned was purely casual; that Eliano Garcia was an independent
contractor; that Geronimo was not an employee of the company; and that the latter
was not bound, therefore, to pay the compensation provided in the Workmen's
Compensation Act. Unlike the Philippine Manufacturing case, the relation between
the business of herein petitioners-appellants and the work of the musicians is not
casual. As held in the order appealed from which, in this respect, is not contested
by herein petitioners-appellants — "the work of the musicians is an integral part of
the entire motion picture." Indeed, one can hardly find modern films without music
therein. Hence, in the Caro case (supra), the owner and operator of buildings for
rent was held bound to pay the indemnity prescribed in the Workmen's
Compensation Act for the injury suffered by a carpenter while working as such in
one of said buildings even though his services had been allegedly engaged by a third
party who had directly contracted with said owner. In other words, the repair work
had not merely a casual connection with the business of said owner. It was a
necessary incident thereof, just as music is in the production of motion pictures.
The case of Josefa Vda. de Cruz vs. The Manila Hotel Co., L-9110 (April 30, 1957)
differs materially from the present cases. It involved the interpretation of Republic
Act No. 660, which amends the law creating and establishing the Government
Service Insurance System. No labor law was sought to be construed in that case. In
act, the same was originally heard in the Court of First Instance of Manila, the
decision of which was, on appeal, affirmed by the Supreme Court. The meaning or
scope if the term "employee," as used in the Industrial Peace Act (Republic Act No.
875), was not touched therein. Moreover, the subject matter of said case was a
contract between the management of the Manila Hotel, on the one hand, and Tirso
Cruz, on the other, whereby the latter greed to furnish the former the services of
his orchestra, consisting of 15 musicians, including Tirso Cruz, "from 7:30 p.m. to
closing time daily." In the language of this court in that case, "what pieces the
orchestra shall play, and how the music shall be arranged or directed, the intervals
and other details — such are left to the leader's discretion."
This is not situation obtaining in the case at bar. The musical directors above
referred to have no such control over the musicians involved in the present case.
Said musical directors control neither the music to be played, nor the musicians
playing it. The film companies summon the musicians to work, through the musical
directors. The film companies, through the musical directors, fix the date, the time
and the place of work. The film companies, not the musical directors, provide the
transportation to and from the studio. The film companies furnish meal at dinner
time.
What is more — in the language of the order appealed from — "during the
recording sessions, the motion picture director who is an employee of the
company" — not the musical director — "supervises the recording of the musicians
and tells them what to do in every detail". The motion picture director — not the
musical director — "solely directs and performance of the musicians before the
camera". The motion picture director "supervises the performance of all the actors,
including the musicians who appear in the scenes, so that in the actual performance
to be shown in the screen, the musical director's intervention has stopped." Or, as
testified to in the lower court, "the movie director tells the musical director what to
do; tells the music to be cut or tells additional music in this part or he eliminates the
entire music he does not (want) or he may want more drums or move violin or
piano, as the case may be". The movie director "directly controls the activities of
the musicians." He "says he wants more drums and the drummer plays more" or "if
he wants more violin or he does not like that.".
It is well settled that "an employer-employee relationship exists . . .where the
person for whom the services are performed reserves a right to control not only the
end to be achieved but also the means to be used in reaching such end . . . ."
(Alabama Highway Express Co., Express Co., v. Local 612, 108S. 2d. 350.) The
decisive nature of said control over the "means to be used", is illustrated in the case
of Gilchrist Timber Co., et al., Local No. 2530 (73 NLRB No. 210, pp. 1197, 1199-
1201), in which, by reason of said control, the employer-employee relationship was
held to exist between the management and the workers, notwithstanding the
intervention of an alleged independent contractor, who had, and exercise, the and TRADE UNION OF THE
power to hire and fire said workers. The aforementioned control over the means to
be used" in reading the desired end is possessed and exercised by the film PHILIPPINES and ALLIED May 8, 2009
companies over the musicians in the cases before us.
SERVICES (TUPAS),
WHEREFORE, the order appealed from is hereby affirmed, with costs against
petitioners herein. It is so ordered. Respondents.

Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera, x---------------------------------------------------------------------------------------x
Paredes and Dizon, JJ., concur.
Gutierrez David, J., took no part. D E C I S I ON

SOUTH DAVAO DEVELOPMENT G.R. No. 171814 TINGA, J.:

COMPANY, INC. (NOW SODACO

AGRICULTURAL CORPORATION) Before us is a Rule 45 petition[1] which seeks the reversal of the Court of Appeals
decision[2] and resolution[3] in CA-G.R. SP No. 68511. The Court of Appeals decision
AND/OR MALONE PACQUIAO Present: reinstated the NLRCs Resolution[4] dated 23 March 2001 which reversed the labor
arbiters decision.[5]
AND VICTOR A. CONSUNJI,

Petitioners,
Petitioner South Davao Development Company (petitioner or petitioner
CARPIO MORALES,* J. corporation) is the operator of a coconut and mango farm in San Isidro, Davao
Oriental and Inawayan/Baracatan, Davao del Sur. On August 1963 petitioner hired
- versus - Acting Chairperson, respondent Sergio L. Gamo (Gamo) as a foreman. Sometime in 1987, petitioner
appointed Gamo as a copra maker contractor. Respondents Ernesto Belleza, Carlos
TINGA, Rojas, Maximo Malinao were all employees in petitioners coconut farm, while
respondents Felix Terona, Virgilio Cosep, Maximo Tolda, and Nelson Bagaan were
VELASCO, JR., assigned to petitioners mango farm. All of the abovenamed respondents (copra
workers) were later transferred by petitioner to Gamo as the latters copraceros.
SERGIO L. GAMO, ERNESTO LEONARDO DE CASTRO,**and From 1987 to 1999, Gamo and petitioner entered into a profit-sharing agreement
wherein 70% of the net proceeds of the sale of copra went to petitioner and 30% to
BELLEZA, FELIX TERONA, BRION, JJ. Gamo. The copra workers were paid by Gamo from his 30% share.

CARLOS ROJAS, MAXIMO

MALINAO, VIRGILIO COSEP, Petitioner wanted to standardize payments to its contractors in its coconut farms.
On 2 October 1999, petitioner proposed a new payment scheme to Gamo. The new
ELEONOR COSEP, MAXIMO Promulgated: scheme provided a specific price for each copra making activity. Gamo submitted
his counter proposal.[6] Petitioner did not accept Gamos counter proposal since it
TOLDA, NELSON BAGAAN, was higher by at least fifty percent (50%) from its original offer. Without agreeing to
the new payment scheme, Gamo and his copra workers started to do harvesting
work. Petitioner told them to stop. Eventually, petitioner and Gamo agreed that the
latter may continue with the harvest provided that it would be his last contract with
petitioner. Gamo suggested to petitioner to look for a new contractor since he was
not amenable to the new payment scheme.[7]
Gamo and petitioner failed to agree on a payment scheme, thus, petitioner did not
renew the contract of Gamo. Gamo and the copra workers alleged that they were
illegally dismissed.
On the other hand, respondent Eleonor Cosep (Eleonor) was employed as a mango
classifier in the packing house of petitioners mango farm in San Isidro, Davao
Oriental. Sometime in October 1999, she did not report for work as she had wanted
to raise and sell pigs instead. Petitioner, through Malone Pacquiao, tried to
convince Eleonor to report for work but to no avail.
On 22 March 2000, respondents filed a complaint[8] for illegal dismissal against
petitioner. They alleged that sometime in December 1999, petitioner verbally
terminated them en masse.
The labor arbiter dismissed[9] the complaint. He ruled that there was no employee-
employer relationship between petitioner and respondents. As to Eleonor, he ruled
that she had voluntarily stopped working.
Respondents appealed to the National Labor Relations Commission (NLRC). The
NLRCs Resolution[10] reversed the arbiters decision and ruled that respondents
were petitioners employees. Petitioner moved[11] for reconsideration. The NLRC
granted[12] the motion for reconsideration and ruled that the nature of the job of
the respondents could not result in an employer-employee relationship.
Respondents moved for reconsideration which was denied.[13]
Respondents filed a petition for certiorari[14] under Rule 65 with the Court of
Appeals. The Court of Appeals ruled that there existed an employer-employee
relationship. It declared that respondents were regular seasonal employees who
can be dismissed by the petitioner at the end of the season provided due process is
observed.[15] With regard to Eleonor, the Court of Appeals ruled that she did not
abandon her work.
Hence this petition.
Petitioner raises the following issues: (1) whether the Court of Appeals failed to
take judicial notice of the accepted practice of independent contractors in the
coconut industry; (2) whether there is a valid job contracting between petitioner
and Gamo; and (3) whether Eleonor had effectively abandoned her work.
The labor arbiter took judicial notice of the alleged prevailing business practices in
the coconut industry that copra making activities are done quarterly; that the
workers can contract with other farms; and that the workers are independent from
the land owner on all work aspects. Petitioner wants this Court to take judicial
notice of the current business practice in the coconut industry which allegedly
treats copraceros as independent contractors. In Expertravel & Tours, Inc. v. Court
of Appeals, [16] we held, thus:
Generally speaking, matters of judicial notice have three material requisites: (1) the
matter must be one of common and general knowledge; (2) it must be well and
authoritatively settled and not doubtful or uncertain; and (3) it must be known to
be within the limits of the jurisdiction of the court. The principal guide in
determining what facts may be assumed to be judicially known is that of
notoriety.[17] Hence, it can be said that judicial notice is limited to facts evidenced
by public records and facts of general notoriety. Moreover, a judicially noticed fact
must be one not subject to a reasonable dispute in that it is either: (1) generally
known within the territorial jurisdiction of the trial court; or (2) capable of accurate
and ready determination by resorting to sources whose accuracy cannot reasonably
be questionable.[18]
Things of common knowledge, of which courts take judicial matters coming to the
knowledge of men generally in the course of the ordinary experiences of life, or
they may be matters which are generally accepted by mankind as true and are
capable of ready and unquestioned demonstration. Thus, facts which are universally
known, and which may be found in encyclopedias, dictionaries or other
publications, are judicially noticed, provided, they are of such universal notoriety
and so generally understood that they may be regarded as forming part of the
common knowledge of every person. As the common knowledge of man ranges far
and wide, a wide variety of particular facts have been judicially noticed as being
matters of common knowledge. But a court cannot take judicial notice of any fact
which, in part, is dependent on the existence or non-existence of a fact of which the
court has no constructive knowledge.[19]
An invocation that the Court take judicial notice of certain facts should satisfy the
requisites set forth by case law. A mere prayer for its application shall not suffice.
Thus, in this case the Court cannot take judicial notice of the alleged business
practices in the copra industry since none of the material requisites of matters of
judicial notice is present in the instant petition. The record is bereft of any
indication that the matter is of common knowledge to the public and that it has the
characteristic of notoriety, except petitioners self-serving claim.
A related issue is whether Gamo is an independent contractor. In Escario v.
NLRC,[20] we ruled that there is permissible job contracting when a principal agrees
to put out or farm out with a contractor or a subcontractor the performance or
completion of a specific job, work or service within a definite or predetermined
period, regardless of whether such job or work service is to be performed within or
outside the premises of the principal.[21] To establish the existence of an
independent contractor, we apply the following conditions: first, the contractor
carries on an independent business and undertakes the contract work on his own
account under his own responsibility according to his own manner and method,
free from the control and direction of his employer or principal in all matters
connected with the performance of the work except to the result thereof; and
second, the contractor has substantial capital or investments in the form of tools,
equipment, machineries, work premises and other materials which are necessary in
the conduct of his business.[22]
The Implementing Rules and Regulation of the Labor Code defines investmentas
tools, equipment, implements, machineries and work premises, actually and
directly used by the contractor or subcontractor in the performance or completion
of the job, work, or service contracted out.[23] The investment must be sufficient to
carry out the job at hand.
In the case at bar, Gamo and the copra workers did not exercise independent
judgment in the performance of their tasks. The tools used by Gamo and his copra
workers like the karit, bolo, pangbunot, panglugit and pangtapok are not sufficient
to enable them to complete the job.[24] Reliance on these primitive tools is not
enough. In fact, the accomplishment of their task required more expensive
machineries and equipment, like the trucks to haul the harvests and the drying
facility, which petitioner corporation owns.
In order to determine the existence of an employer-employee relationship, the
Court has frequently applied the four-fold test: (1) the selection and engagement of
the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
power to control the employees conduct, or the so called control test, which is
considered the most important element.[25] From the time they were hired by
petitioner corporation up to the time that they were reassigned to work under
Gamos supervision, their status as petitioner corporations employees did not cease.
Likewise, payment of their wages was merely coursed through Gamo. As to the
most determinative test―the power of control, it is sufficient that the power to
control the manner of doing the work exists, it does not require the actual exercise
of such power.[26] In this case, it was in the exercise of its power of control when
petitioner corporation transferred the copra workers from their previous
assignments to work as copraceros. It was also in the exercise of the same power
that petitioner corporation put Gamo in charge of the copra workers although
under a different payment scheme. Thus, it is clear that an employer-employee
relationship has existed between petitioner corporation and respondents since the
beginning and such relationship did not cease despite their reassignments and the
change of payment scheme.
As to the last issue, petitioner seeks our indulgence to declare that Eleonor has
abandoned her work. Petitioner admitted that Eleonor was its regular
employee.[27] However, it claimed that she abandoned her work, preferring to sell
and raise pigs instead.
It is well settled that abandonment as a just and valid ground for dismissal requires
the deliberate and unjustified refusal of the employee to return for work. Two
elements must be present, namely: (1) the failure to report for work or absence
without valid or justifiable reason, and (2) a clear intention to sever the employer-
employee relationship. The second element is more determinative of the intent and
must be evinced by overt acts. Mere absence, not being sufficient, the burden of
proof rests upon the
employer to show that the employee clearly and deliberately intended to
discontinue her employment without any intention of returning.[28] In Samarca v.
Arc-Men Industries, Inc, we held that abandonment is a matter of intention and
cannot lightly be presumed from certain equivocal acts.
To constitute abandonment, there must be clear proof of deliberate and unjustified
intent to sever the employer-employee relationship. Clearly, the operative act is still
the employees ultimate act of putting an end to his employment.[29] However, an
employee who takes steps to protest her layoff cannot be said to have abandoned
her work because a charge of abandonment is totally inconsistent with the
immediate filing of a complaint for illegal dismissal, more so when it includes a
prayer for reinstatement.[30] When Eleonor filed the illegal dismissal complaint, it
totally negated petitioners theory of abandonment.
Also, to effectively dismiss an employee for abandonment, the employer must
comply with the due process requirement of sending notices to the employee. In
Brahm Industries, Inc. v. NLRC,[31] we ruled that this requirement is not a mere
formality that may be dispensed with at will. Its disregard is a matter of serious
concern since it constitutes a safeguard of the highest order in response to mans
innate sense of justice.[32] Petitioner was not able to send the necessary notice
requirement to Eleonor. Petitioners belated claim that it was not able to send the
notice of infraction prior to the filing of the illegal dismissal case cannot simply
unacceptable.[33] Based on the foregoing, Eleonor did not abandon her work.
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals is
AFFIRMED. Cost against petitioner.
SO ORDERED.
G.R. No. L-32245 May 25, 1979
DY KEH BENG, petitioner,
vs.
INTERNATIONAL LABOR and MARINE UNION OF THE PHILIPPINES, ET AL.,
respondents.
A. M Sikat for petitioner.
D. A. Hernandez for respondents.
DE CASTRO, J.:
Petitioner Dy Keh Beng seeks a review by certiorari of the decision of the Court of
Industrial Relations dated March 23, 1970 in Case No. 3019-ULP and the Court's
Resolution en banc of June 10, 1970 affirming said decision. The Court of Industrial
Relations in that case found Dy Keh Beng guilty of the unfair labor practice acts
alleged and order him to
reinstate Carlos Solano and Ricardo Tudla to their former jobs with backwages from
their respective dates of dismissal until fully reinstated without loss to their right of
seniority and of such other rights already acquired by them and/or allowed by law.
1
Now, Dy Keh Beng assigns the following errors 2 as having been committed by the
Court of Industrial Relations:
I
RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND TUDLA
WERE EMPLOYEES OF PETITIONERS.
II
RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND TUDLA
WERE DISMISSED FROM THEIR EMPLOYMENT BY PETITIONER.
III
RESPONDENT COURT ERRED IN FINDING THAT THE TESTIMONIES ADDUCED BY
COMPLAINANT ARE CONVINCING AND DISCLOSES (SIC) A PATTERN OF
DISCRIMINATION BY THE PETITIONER HEREIN.
IV
RESPONDENT COURT ERRED IN DECLARING PETITIONER GUILTY OF UNFAIR LABOR
PRACTICE ACTS AS ALLEGED AND DESCRIBED IN THE COMPLAINT.
V (3)
RESPONDENT COURT ERRED IN PETITIONER TO REINSTATE RESPONDENTS TO THEIR
FORMER JOBS WITH BACKWAGES FROM THEIR RESPECTIVE DATES OF DISMISSALS
UNTIL FINALLY REINSTATED WITHOUT LOSS TO THEIR RIGHT OF SENIORITY AND OF
SUCH OTHER RIGHTS ALREADY ACQUIRED BY THEM AND/OR ALLOWED BY LAW.
The facts as found by the Hearing Examiner are as follows:
A charge of unfair labor practice was filed against Dy Keh Beng, proprietor of a
basket factory, for discriminatory acts within the meaning of Section 4(a), sub-
paragraph (1) and (4). Republic Act No. 875, 3 by dismissing on September 28 and
29, 1960, respectively, Carlos N. Solano and Ricardo Tudla for their union activities.
After preliminary investigation was conducted, a case was filed in the Court of
Industrial Relations for in behalf of the International Labor and Marine Union of the
Philippines and two of its members, Solano and Tudla In his answer, Dy Keh Beng
contended that he did not know Tudla and that Solano was not his employee
because the latter came to the establishment only when there was work which he
did on pakiaw basis, each piece of work being done under a separate contract.
Moreover, Dy Keh Beng countered with a special defense of simple extortion
committed by the head of the labor union, Bienvenido Onayan.
After trial, the Hearing Examiner prepared a report which was subsequently
adopted in toto by the Court of Industrial Relations. An employee-employer
relationship was found to have existed between Dy Keh Beng and complainants
Tudla and Solano, although Solano was admitted to have worked on piece basis.4
The issue therefore centered on whether there existed an employee employer
relation between petitioner Dy Keh Beng and the respondents Solano and Tudla .
According to the Hearing Examiner, the evidence for the complainant Union tended
to show that Solano and Tudla became employees of Dy Keh Beng from May 2,
1953 and July 15, 1955, 5 respectively, and that except in the event of illness, their
work with the establishment was continuous although their services were
compensated on piece basis. Evidence likewise showed that at times the
establishment had eight (8) workers and never less than five (5); including the
complainants, and that complainants used to receive ?5.00 a day. sometimes less. 6
According to Dy Keh Beng, however, Solano was not his employee for the following
reasons:
(1) Solano never stayed long enought at Dy's establishment;
(2) Solano had to leave as soon as he was through with the
order given him by Dy;
(4) When there were no orders needing his services there was nothing for him
to do;
(5) When orders came to the shop that his regular workers could not fill it was
then that Dy went to his address in Caloocan and fetched him for these orders; and
(6) Solano's work with Dy's establishment was not continuous. , 7
According to petitioner, these facts show that respondents Solano and Tudla are
only piece workers, not employees under Republic Act 875, where an employee 8 is
referred to as
shall include any employee and shag not be limited to the employee of a particular
employer unless the Act explicitly states otherwise and shall include any individual
whose work has ceased as a consequence of, or in connection with any current
labor dispute or because of any unfair labor practice and who has not obtained any
other substantially equivalent and regular employment.
while an employer 9
includes any person acting in the interest of an employer, directly or indirectly but
shall not include any labor organization (otherwise than when acting as an
employer) or anyone acting in the capacity of officer or agent of such labor
organization.
Petitioner really anchors his contention of the non-existence of employee-employer
relationship on the control test. He points to the case of Madrigal Shipping Co., Inc.
v. Nieves Baens del Rosario, et al., L-13130, October 31, 1959, where the Court
ruled that:
The test ... of the existence of employee and employer relationship is whether there
is an understanding between the parties that one is to render personal services to
or for the benefit of the other and recognition by them of the right of one to order
and control the other in the performance of the work and to direct the manner and
method of its performance.
Petitioner contends that the private respondents "did not meet the control test in
the fight of the ... definition of the terms employer and employee, because there
was no evidence to show that petitioner had the right to direct the manner and
method of respondent's work. 10 Moreover, it is argued that petitioner's evidence
showed that "Solano worked on a pakiaw basis" and that he stayed in the
establishment only when there was work.
While this Court upholds the control test 11 under which an employer-employee
relationship exists "where the person for whom the services are performed reserves
a right to control not only the end to be achieved but also the means to be used in
reaching such end, " it finds no merit with petitioner's arguments as stated above. It
should be borne in mind that the control test calls merely for the existence of the
right to control the manner of doing the work, not the actual exercise of the right.
12 Considering the finding by the Hearing Examiner that the establishment of Dy
Keh Beng is "engaged in the manufacture of baskets known as kaing, 13 it is natural
to expect that those working under Dy would have to observe, among others, Dy's
requirements of size and quality of the kaing. Some control would necessarily be
exercised by Dy as the making of the kaing would be subject to Dy's specifications.
Parenthetically, since the work on the baskets is done at Dy's establishments, it can
be inferred that the proprietor Dy could easily exercise control on the men he
employed.
As to the contention that Solano was not an employee because he worked on piece
basis, this Court agrees with the Hearing Examiner that
circumstances must be construed to determine indeed if payment by the piece is
just a method of compensation and does not define the essence of the relation.
Units of time ... and units of work are in establishments like respondent (sic) just
yardsticks whereby to determine rate of compensation, to be applied whenever
agreed upon. We cannot construe payment by the piece where work is done in such
an establishment so as to put the worker completely at liberty to turn him out and
take in another at pleasure.
At this juncture, it is worthy to note that Justice Perfecto, concurring with Chief
Justice Ricardo Paras who penned the decision in "Sunrise Coconut Products Co. v.
Court of Industrial Relations" (83 Phil..518, 523), opined that
judicial notice of the fact that the so-called "pakyaw" system mentioned in this case
as generally practiced in our country, is, in fact, a labor contract -between
employers and employees, between capitalists and laborers.
Insofar as the other assignments of errors are concerned, there is no showing that
the Court of Industrial Relations abused its discretion when it concluded that the
findings of fact made by the Hearing Examiner were supported by evidence on the
record. Section 6, Republic Act 875 provides that in unfair labor practice cases, the
factual findings of the Court of Industrial Relations are conclusive on the Supreme
Court, if supported by substantial evidence. This provision has been put into effect
in a long line of decisions where the Supreme Court did not reverse the findings of
fact of the Court of Industrial Relations when they were supported by substantial
evidence. 14
Nevertheless, considering that about eighteen (18) years have already elapsed from
the time the complainants were dismissed, 15 and that the decision being appealed
ordered the payment of backwages to the employees from their respective dates of
dismissal until finally reinstated, it is fitting to apply in this connection the formula
for backwages worked out by Justice Claudio Teehankee in "cases not terminated
sooner." 16 The formula cans for fixing the award of backwages without
qualification and deduction to three years, "subject to deduction where there are
mitigating circumstances in favor of the employer but subject to increase by way of
exemplary damages where there are aggravating circumstances. 17 Considering
there are no such circumstances in this case, there is no reason why the Court
should not apply the abovementioned formula in this instance.
WHEREFORE; the award of backwages granted by the Court of Industrial Relations is
herein modified to an award of backwages for three years without qualification and
deduction at the respective rates of compensation the employees concerned were
receiving at the time of dismissal. The execution of this award is entrusted to the
National Labor Relations Commission. Costs against petitioner.
SO ORDERED.
Teehankee, Makasiar, Guerrero, and Melencio-Herrera, JJ., concur.
Fernandez, J., took no part.
[G.R. No. 129315. October 2, 2000]
OSIAS I. CORPORAL, SR., PEDRO TOLENTINO, MANUEL CAPARAS, ELPIDIO LACAP,
SIMPLICIO PEDELOS, PATRICIA NAS, and TERESITA FLORES, petitioners, vs.
NATIONAL LABOR RELATIONS COMMISSION, LAO ENTENG COMPANY, INC. and/or
TRINIDAD LAO ONG, respondents.
DECISION
QUISUMBING, J.:
This special civil action for certiorari seeks the review of the Resolution dated
October 17, 1996 of public respondent National Labor Relations Commission (First
Division),[1] in NLRC NCR Case No. 00-04-03163-95, and the Resolution dated
March 5, 1997 denying the motion for reconsideration. The aforecited October 17th
Resolution affirmed the Decision dated September 28, 1996 of Labor Arbiter
Potenciano S. Caizares dismissing the petitioners' complaint for illegal dismissal and
declaring that petitioners are not regular employees of private respondent Lao
Enteng Company, Inc..
The records of the case show that the five male petitioners, namely, Osias I.
Corporal, Sr., Pedro Tolentino, Manuel Caparas, Elpidio Lacap, and Simplicio Pedelos
worked as barbers, while the two female petitioners, Teresita Flores and Patricia
Nas worked as manicurists in New Look Barber Shop located at 651 P. Paterno
Street, Quiapo, Manila owned by private respondent Lao Enteng Co. Inc.. Petitioner
Nas alleged that she also worked as watcher and marketer of private respondent.
Petitioners claim that at the start of their employment with the New Look Barber
Shop, it was a single proprietorship owned and managed by Mr. Vicente Lao. In or
about January 1982, the children of Vicente Lao organized a corporation which was
registered with the Securities and Exchange Commission as Lao Enteng Co. Inc. with
Trinidad Ong as President of the said corporation. Upon its incorporation, the
respondent company took over the assets, equipment, and properties of the New
Look Barber Shop and continued the business. All the petitioners were allowed to
continue working with the new company until April 15, 1995 when respondent
Trinidad Ong informed them that the building wherein the New Look Barber Shop
was located had been sold and that their services were no longer needed.[2]
On April 28, 1995, petitioners filed with the Arbitration Branch of the NLRC, a
complaint for illegal dismissal, illegal deduction, separation pay, non-payment of
13th month pay, and salary differentials. Only petitioner Nas asked for payment of
salary differentials as she alleged that she was paid a daily wage of P25.00
throughout her period of employment. The petitioners also sought the refund of
the P1.00 that the respondent company collected from each of them daily as salary
of the sweeper of the barber shop.
Private respondent in its position paper averred that the petitioners were joint
venture partners and were receiving fifty percent commission of the amount
charged to customers. Thus, there was no employer-employee relationship
between them and petitioners. And assuming arguendo, that there was an
employer-employee relationship, still petitioners are not entitled to separation pay
because the cessation of operations of the barber shop was due to serious business
losses.
Respondent Trinidad Lao Ong, President of respondent Lao Enteng Co. Inc.,
specifically stated in her affidavit dated September 06, 1995 that Lao Enteng
Company, Inc. did not take over the management of the New Look Barber Shop,
that after the death Lao Enteng petitioner were verbally informed time and again
that the partnership may fold up anytime because nobody in the family had the
time to be at the barber shop to look after their interest; that New Look Barber
Shop had always been a joint venture partnership and the operation and
management of the barber shop was left entirely to petitioners; that her father's
contribution to the joint venture included the place of business, payment for
utilities including electricity, water, etc. while petitioners as industrial partners,
supplied the labor; and that the barber shop was allowed to remain open up to
April 1995 by the children because they wanted to give the partners a chance at
making it work. Eventually, they were forced to close the barber shop because they
continued to lose money while petitioners earned from it. Trinidad also added that
private respondents had no control over petitioners who were free to come and go
as they wished. Admittedly too by petitioners they received fifty percent to sixty
percent of the gross paid by customers. Trinidad explained that some of the
petitioners were allowed to register with the Social Security System as employees
of Lao Enteng Company, Inc. only as an act of accommodation. All the SSS
contributions were made by petitioners. Moreover, Osias Corporal, Elpidio Lacap
and Teresita Flores were not among those registered with the Social Security
System. Lastly, Trinidad avers that without any employee-employer relationship
petitioners claim for 13th month pay and separation pay have no basis in fact and in
law.[3]
In a Decision dated September 28, 1995, Labor Arbiter Potenciano S. Caizares, Jr.
ordered the dismissal of the complaint on the basis of his findings that the
complainants and the respondents were engaged in a joint venture and that there
existed no employer-employee relation between them. The Labor Arbiter also
found that the barber shop was closed due to serious business losses or financial
reverses and consequently declared that the law does not compel the
establishment to pay separation pay to whoever were its employees.[4]
On appeal, NLRC affirmed the said findings of the Labor Arbiter and dismissed the
complaint for want of merit, ratiocinating thus:
Indeed, complainants failed to show the existence of employer-employee
relationship under the fourway test established by the Supreme Court. It is a
common practice in the Barber Shop industry that barbers supply their own scissors
and razors and they split their earnings with the owner of the barber shop. The only
capital of the owner is the place of work whereas the barbers provide the skill and
expertise in servicing customers. The only control exercised by the owner of the
barber shop is to ascertain the number of customers serviced by the barber in order
to determine the sharing of profits. The barbers maybe characterized as
independent contractors because they are under the control of the barber shop
owner only with respect to the result of the work, but not with respect to the
details or manner of performance. The barbers are engaged in an independent
calling requiring special skills available to the public at large.[5]
Its motion for reconsideration denied in the Resolution[6] dated March 5, 1997,
petitioners filed the instant petition assigning that the NLRC committed grave abuse
of discretion in:
I. ARBITRARILY DISREGARDING SUBSTANTIAL EVIDENCE PROVING THAT
PETITIONERS WERE EMPLOYEES OF RESPONDENT COMPANY IN RULING THAT
PETITIONERS WERE INDEPENDENT CONTRACTORS.
II. NOT HOLDING THAT PETITIONERS WERE ILLEGALLY DISMISSED AND IN NOT
AWARDING THEIR MONEY CLAIMS.[7]
Petitioners principally argue that public respondent NLRC gravely erred in declaring
that the petitioners were independent contractors. They contend that they were
employees of the respondent company and cannot be considered as independent
contractors because they did not carry on an independent business. They did not
cut hair, manicure, and do their work in their own manner and method. They insist
they were not free from the control and direction of private respondents in all
matters, and their services were engaged by the respondent company to attend to
its customers in its barber shop. Petitioners also stated that, individually or
collectively, they do not have substantial capital nor investments in tools,
equipments, work premises and other materials necessary in the conduct of the
barber shop. What the barbers owned were merely combs, scissors, and razors,
while the manicurists owned only nail cutters, nail polishes, nippers and cuticle
removers. By no standard can these be considered "substantial capital" necessary
to operate a barbers shop.
Finally, petitioners fault the NLRC for arbitrarily disregarding substantial evidence
on record showing that petitioners Pedro Tolentino, Manuel Caparas, Simplicio
Pedelos, and Patricia Nas were registered with the Social Security System as regular
employees of the respondent company. The SSS employment records in common
show that the employer's ID No. of Vicente Lao/Barber and Pawn Shop was 03-
0606200-1 and that of the respondent company was 03-8740074-7. All the
foregoing entries in the SSS employment records were painstakingly detailed by the
petitioners in their position paper and in their memorandum appeal but were
arbitrarily ignored first by the Labor Arbiter and then by the respondent NLRC which
did not even mention said employment records in its questioned decision.
We found petition is impressed with merit.
In our view, this case is an exception to the general rule that findings of facts of the
NLRC are to be accorded respect and finality on appeal. We have long settled that
this Court will not uphold erroneous conclusions unsupported by substantial
evidence.[8] We must also stress that where the findings of the NLRC contradict
those of the labor arbiter, the Court, in the exercise of its equity jurisdiction, may
look into the records of the case and reexamine the questioned findings.[9]
The issues raised by petitioners boil down to whether or not an employer-employee
relationship existed between petitioners and private respondent Lao Enteng
Company, Inc. The Labor Arbiter has concluded that the petitioners and respondent
company were engaged in a joint venture. The NLRC concluded that the petitioners
were independent contractors.
The Labor Arbiter's findings that the parties were engaged in a joint venture is
unsupported by any documentary evidence. It should be noted that aside from the
self-serving affidavit of Trinidad Lao Ong, there were no other evidentiary
documents, nor written partnership agreements presented. We have ruled that
even the sharing of proceeds for every job of petitioners in the barber shop does
not mean they were not employees of the respondent company.[10]
Petitioner aver that NLRC was wrong when it concluded that petitioners were
independent contractors simply because they supplied their own working
implements, shared in the earnings of the barber shop with the owner and chose
the manner of performing their work. They stressed that as far as the result of their
work was concerned the barber shop owner controlled them.
An independent contractor is one who undertakes "job contracting", i.e., a person
who (a) carries on an independent business and undertakes the contract work on
his own account under his own responsibility according to his own manner and
method, free from the control and direction of his employer or principal in all
matters connected with the performance of the work except as to the results
thereof, and (b) has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are necessary in
the conduct of the business.[11]
Juxtaposing this provision vis--vis the facts of this case, we are convinced that
petitioners are not "independent contractors". They did not carry on an
independent business. Neither did they undertake cutting hair and manicuring nails,
on their own as their responsibility, and in their own manner and method. The
services of the petitioners were engaged by the respondent company to attend to
the needs of its customers in its barber shop. More importantly, the petitioners,
individually or collectively, did not have a substantial capital or investment in the
form of tools, equipment, work premises and other materials which are necessary
in the conduct of the business of the respondent company. What the petitioners
owned were only combs, scissors, razors, nail cutters, nail polishes, the nippers -
nothing else. By no standard can these be considered substantial capital necessary
to operate a barber shop. From the records, it can be gleaned that petitioners were
not given work assignments in any place other than at the work premises of the
New Look Barber Shop owned by the respondent company. Also, petitioners were
required to observe rules and regulations of the respondent company pertaining,
among other things, observance of daily attendance, job performance, and
regularity of job output. The nature of work performed by were clearly directly
related to private respondent's business of operating barber shops. Respondent
company did not dispute that it owned and operated three (3) barber shops. Hence,
petitioners were not independent contractors.
Did an employee-employer relationship exist between petitioners and private
respondent? The following elements must be present for an employer-employee
relationship to exist: (1) the selection and engagement of the workers; (2) power of
dismissal; (3) the payment of wages by whatever means; and (4) the power to
control the worker's conduct, with the latter assuming primacy in the overall
consideration. Records of the case show that the late Vicente Lao engaged the
services of the petitioners to work as barbers and manicurists in the New Look
Barber Shop, then a single proprietorship owned by him; that in January 1982, his
children organized a corporation which they registered with the Securities and
Exchange Commission as Lao Enteng Company, Inc.; that upon its incorporation, it
took over the assets, equipment, and properties of the New Look Barber Shop and
continued the business; that the respondent company retained the services of all
the petitioners and continuously paid their wages. Clearly, all three elements exist
in petitioners' and private respondent's working arrangements.
Private respondent claims it had no control over petitioners. The power to control
refers to the existence of the power and not necessarily to the actual exercise
thereof, nor is it essential for the employer to actually supervise the performance of
duties of the employee. It is enough that the employer has the right to wield that
power.[12] As to the "control test", the following facts indubitably reveal that
respondent company wielded control over the work performance of petitioners, in
that: (1) they worked in the barber shop owned and operated by the respondents;
(2) they were required to report daily and observe definite hours of work; (3) they
were not free to accept other employment elsewhere but devoted their full time
working in the New Look Barber Shop for all the fifteen (15) years they have worked
until April 15, 1995; (4) that some have worked with respondents as early as in the
1960's; (5) that petitioner Patricia Nas was instructed by the respondents to watch
the other six (6) petitioners in their daily task. Certainly, respondent company was
clothed with the power to dismiss any or all of them for just and valid cause.
Petitioners were unarguably performing work necessary and desirable in the
business of the respondent company.
While it is no longer true that membership to SSS is predicated on the existence of
an employee-employer relationship since the policy is now to encourage even the
self-employed dressmakers, manicurists and jeepney drivers to become SSS
members, we could not agree with private respondents that petitioners were
registered with the Social Security System as their employees only as an
accommodation. As we have earlier mentioned private respondent showed no
proof to their claim that petitioners were the ones who solely paid all SSS
contributions. It is unlikely that respondents would report certain persons as their
workers, pay their SSS premium as well as their wages if it were not true that they
were indeed their employees.[13]
Finally, we agree with the labor arbiter that there was sufficient evidence that the
barber shop was closed due to serious business losses and respondent company
closed its barber shop because the building where the barber shop was located was
sold. An employer may adopt policies or changes or adjustments in its operations to
insure profit to itself or protect investment of its stockholders. In the exercise of
such management prerogative, the employer may merge or consolidate its business
with another, or sell or dispose all or substantially all of its assets and properties
which may bring about the dismissal or termination of its employees in the
process.[14]
Prescinding from the above, we hold that the seven petitioners are employees of
the private respondent company; as such, they are to be accorded the benefits
provided under the Labor Code, specifically Article 283 which mandates the grant of
separation pay in case of closure or cessation of employer's business which is
equivalent to one (1) month pay for every year of service.[15] Likewise, they are
entitled to the protection of minimum wage statutes. Hence, the separation pay
due them may be computed on the basis of the minimum wage prevailing at the
time their services were terminated by the respondent company. The same is true
with respect to the 13th month pay. The Revised Guidelines on the Implementation
of the 13th Month Pay Law states that "all rank and file employees are now entitled
to a 13th month pay regardless of the amount of basic salary that they receive in a
month. Such employees are entitled to the benefit regardless of their designation or
employment status, and irrespective of the method by which their wages are paid,
provided that they have worked for at least one (1) month during a calendar year"
and so all the seven (7) petitioners who were not paid their 13th month pay must
be paid accordingly.[16]
Anent the other claims of the petitioners, such as the P10,000.00 as penalty for
non-compliance with procedural process; P10,000.00 as moral damages; refund of
P1.00 per day paid to the sweeper; salary differentials for petitioner Nas; attorney's
fees), we find them without basis.
IN VIEW WHEREOF, the petition is GRANTED. The public respondent's Decision
dated October 17, 1996 and Resolution dated March 05, 1997 are SET ASIDE.
Private respondents are hereby ordered to pay, severally and jointly, the seven (7)
petitioners their (1) 13th month pay and (2) separation pay equivalent to one
month pay for every year of service, to be computed at the then prevailing
minimum wage at the time of their actual termination which was April 15, 1995.
Costs against private respondents.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.
[G.R. No. 120969. January 22, 1998]
ALEJANDRO MARAGUINOT, JR. and PAULINO ENERO, petitioners, vs. NATIONAL
LABOR RELATIONS COMMISSION (SECOND DIVISION) composed of Presiding
Commissioner RAUL T. AQUINO, Commissioner ROGELIO I. RAYALA and
Commissioner VICTORIANO R. CALAYCAY (Ponente), VIC DEL ROSARIO and VIVA
FILMS, respondents.
DECISION
DAVIDE, JR., J.:
By way of this special civil action for certiorari under Rule 65 of the Rules of Court,
petitioners seek to annul the 10 February 1995 Decision[1] of the National Labor
Relations Commission (hereafter NLRC), and its 6 April 1995 Resolution[2] denying
the motion to reconsider the former in NLRC-NCR-CA No. 006195-94. The decision
reversed that of the Labor Arbiter in NLRC-NCR-Case No. 00-07-03994-92.
The parties present conflicting sets of facts.
Petitioner Alejandro Maraguinot, Jr. maintains that he was employed by private
respondents on 18 July 1989 as part of the filming crew with a salary of P375.00 per
week. About four months later, he was designated Assistant Electrician with a
weekly salary of P400.00, which was increased to P450.00 in May 1990. In June
1991, he was promoted to the rank of Electrician with a weekly salary of P475.00,
which was increased to P593.00 in September 1991.
Petitioner Paulino Enero, on his part, claims that private respondents employed him
in June 1990 as a member of the shooting crew with a weekly salary of P375.00,
which was increased to P425.00 in May 1991, then to P475.00 on 21 December
1991.[3]
Petitioners tasks consisted of loading, unloading and arranging movie equipment in
the shooting area as instructed by the cameraman, returning the equipment to Viva
Films warehouse, assisting in the fixing of the lighting system, and performing other
tasks that the cameraman and/or director may assign.[4]
Sometime in May 1992, petitioners sought the assistance of their supervisor, Mrs.
Alejandria Cesario, to facilitate their request that private respondents adjust their
salary in accordance with the minimum wage law. In June 1992, Mrs. Cesario
informed petitioners that Mr. Vic del Rosario would agree to increase their salary
only if they signed a blank employment contract. As petitioners refused to sign,
private respondents forced Enero to go on leave in June 1992, then refused to take
him back when he reported for work on 20 July 1992. Meanwhile, Maraguinot was
dropped from the company payroll from 8 to 21 June 1992, but was returned on 22
June 1992. He was again asked to sign a blank employment contract, and when he
still refused, private respondents terminated his services on 20 July 1992.[5]
Petitioners thus sued for illegal dismissal[6] before the Labor Arbiter.
On the other hand, private respondents claim that Viva Films (hereafter VIVA) is the
trade name of Viva Productions, Inc., and that it is primarily engaged in the
distribution and exhibition of movies -- but not in the business of making movies; in
the same vein, private respondent Vic del Rosario is merely an executive producer,
i.e., the financier who invests a certain sum of money for the production of movies
distributed and exhibited by VIVA.[7]
Private respondents assert that they contract persons called producers -- also
referred to as associate producers[8] -- to produce or make movies for private
respondents; and contend that petitioners are project employees of the associate
producers who, in turn, act as independent contractors. As such, there is no
employer-employee relationship between petitioners and private respondents.
Private respondents further contend that it was the associate producer of the film
Mahirap Maging Pogi, who hired petitioner Maraguinot. The movie shot from 2 July
up to 22 July 1992, and it was only then that Maraguinot was released upon
payment of his last salary, as his services were no longer needed. Anent petitioner
Enero, he was hired for the movie entitled Sigaw ng Puso, later re-titled Narito ang
Puso. He went on vacation on 8 June 1992, and by the time he reported for work on
20 July 1992, shooting for the movie had already been completed.[9]
After considering both versions of the facts, the Labor Arbiter found as follows:
On the first issue, this Office rules that complainants are the employees of the
respondents. The producer cannot be considered as an independent contractor but
should be considered only as a labor-only contractor and as such, acts as a mere
agent of the real employer, the herein respondents. Respondents even failed to
name and specify who are the producers. Also, it is an admitted fact that the
complainants received their salaries from the respondents. The case cited by the
respondents, Rosario Brothers, Inc. vs. Ople, 131 SCRA 72 does not apply in this
case.
It is very clear also that complainants are doing activities which are necessary and
essential to the business of the respondents, that of movie-making. Complainant
Maraguinot worked as an electrician while complainant Enero worked as a crew
[member].[10]
Hence, the Labor Arbiter, in his decision of 20 December 1993, decreed as follows:
WHEREFORE, judgment is hereby rendered declaring that complainants were
illegally dismissed.
Respondents are hereby ordered to reinstate complainants to their former
positions without loss [of] seniority rights and pay their backwages starting July 21,
1992 to December 31, 1993 temporarily computed in the amount of P38,000.00 for
complainant Paulino Enero and P46,000.00 for complainant Alejandro Maraguinot,
Jr. and thereafter until actually reinstated.
Respondents are ordered to pay also attorneys fees equivalent to ten (10%) and/or
P8,400.00 on top of the award.[11]
Private respondents appealed to the NLRC (docketed as NLRC NCR-CA No. 006195-
94). In its decision[12] of 10 February 1995, the NLRC found the following
circumstances of petitioners work clearly established:
1. Complainants [petitioners herein] were hired for specific movie projects and their
employment was co-terminus with each movie project the completion/termination
of which are pre-determined, such fact being made known to complainants at the
time of their engagement.
xxx
2. Each shooting unit works on one movie project at a time. And the work of the
shooting units, which work independently from each other, are not continuous in
nature but depends on the availability of movie projects.
3. As a consequence of the non-continuous work of the shooting units, the total
working hours logged by complainants in a month show extreme variations... For
instance, complainant Maraguinot worked for only 1.45 hours in June 1991 but
logged a total of 183.25 hours in January 1992. Complainant Enero logged a total of
only 31.57 hours in September 1991 but worked for 183.35 hours the next month,
October 1991.
4. Further shown by respondents is the irregular work schedule of complainants on
a daily basis. Complainant Maraguinot was supposed to report on 05 August 1991
but reported only on 30 August 1991, or a gap of 25 days. Complainant Enero
worked on 10 September 1991 and his next scheduled working day was 28
September 1991, a gap of 18 days.
5. The extremely irregular working days and hours of complainants work explain the
lump sum payment for complainants services for each movie project. Hence,
complainants were paid a standard weekly salary regardless of the number of
working days and hours they logged in. Otherwise, if the principle of no work no pay
was strictly applied, complainants earnings for certain weeks would be very
negligible.
6. Respondents also alleged that complainants were not prohibited from working
with such movie companies like Regal, Seiko and FPJ Productions whenever they are
not working for the independent movie producers engaged by respondents... This
allegation was never rebutted by complainants and should be deemed admitted.
The NLRC, in reversing the Labor Arbiter, then concluded that these circumstances,
taken together, indicated that complainants (herein petitioners) were project
employees.
After their motion for reconsideration was denied by the NLRC in its Resolution[13]
of 6 April 1995, petitioners filed the instant petition, claiming that the NLRC
committed grave abuse of discretion amounting to lack or excess of jurisdiction in:
(1) finding that petitioners were project employees; (2) ruling that petitioners were
not illegally dismissed; and (3) reversing the decision of the Labor Arbiter.
To support their claim that they were regular (and not project) employees of private
respondents, petitioners cited their performance of activities that were necessary
or desirable in the usual trade or business of private respondents and added that
their work was continuous, i.e., after one project was completed they were
assigned to another project. Petitioners thus considered themselves part of a work
pool from which private respondents drew workers for assignment to different
projects. Petitioners lamented that there was no basis for the NLRCs conclusion that
they were project employees, while the associate producers were independent
contractors; and thus reasoned that as regular employees, their dismissal was illegal
since the same was premised on a false cause, namely, the completion of a project,
which was not among the causes for dismissal allowed by the Labor Code.
Private respondents reiterate their version of the facts and stress that their
evidence supports the view that petitioners are project employees; point to
petitioners irregular work load and work schedule; emphasize the NLRCs finding
that petitioners never controverted the allegation that they were not prohibited
from working with other movie companies; and ask that the facts be viewed in the
context of the peculiar characteristics of the movie industry.
The Office of the Solicitor General (OSG) is convinced that this petition is improper
since petitioners raise questions of fact, particularly, the NLRCs finding that
petitioners were project employees, a finding supported by substantial evidence;
and submits that petitioners reliance on Article 280 of the Labor Code to support
their contention that they should be deemed regular employees is misplaced, as
said section merely distinguishes between two types of employees, i.e., regular
employees and casual employees, for purposes of determining the right of an
employee to certain benefits.
The OSG likewise rejects petitioners contention that since they were hired not for
one project, but for a series of projects, they should be deemed regular employees.
Citing Mamansag v. NLRC,[14] the OSG asserts that what matters is that there was a
time-frame for each movie project made known to petitioners at the time of their
hiring. In closing, the OSG disagrees with petitioners claim that the NLRCs
classification of the movie producers as independent contractors had no basis in
fact and in law, since, on the contrary, the NLRC took pains in explaining its basis for
its decision.
As regards the propriety of this action, which the Office of the Solicitor General
takes issue with, we rule that a special civil action for certiorari under Rule 65 of the
Rules of Court is the proper remedy for one who complains that the NLRC acted in
total disregard of evidence material to or decisive of the controversy.[15] In the
instant case, petitioners allege that the NLRCs conclusions have no basis in fact and
in law, hence the petition may not be dismissed on procedural or jurisdictional
grounds.
The judicious resolution of this case hinges upon, first, the determination of
whether an employer-employee relationship existed between petitioners and
private respondents or any one of private respondents. If there was none, then this
petition has no merit; conversely, if the relationship existed, then petitioners could
have been unjustly dismissed.
A related question is whether private respondents are engaged in the business of
making motion pictures. Del Rosario is necessarily engaged in such business as he
finances the production of movies. VIVA, on the other hand, alleges that it does not
make movies, but merely distributes and exhibits motion pictures. There being no
further proof to this effect, we cannot rely on this self-serving denial. At any rate,
and as will be discussed below, private respondents evidence even supports the
view that VIVA is engaged in the business of making movies.
We now turn to the critical issues. Private respondents insist that petitioners are
project employees of associate producers who, in turn, act as independent
contractors. It is settled that the contracting out of labor is allowed only in case of
job contracting. Section 8, Rule VIII, Book III of the Omnibus Rules Implementing the
Labor Code describes permissible job contracting in this wise:
Sec. 8. Job contracting. -- There is job contracting permissible under the Code if the
following conditions are met:
(1) The contractor carries on an independent business and undertakes the contract
work on his own account under his own responsibility according to his own manner
and method, free from the control and direction of his employer or principal in all
matters connected with the performance of the work except as to the results
thereof; and
(2) The contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are necessary in
the conduct of his business.
Assuming that the associate producers are job contractors, they must then be
engaged in the business of making motion pictures. As such, and to be a job
contractor under the preceding description, associate producers must have tools,
equipment, machinery, work premises, and other materials necessary to make
motion pictures. However, the associate producers here have none of these. Private
respondents evidence reveals that the movie-making equipment are supplied to the
producers and owned by VIVA. These include generators,[16] cables and wooden
platforms,[17] cameras and shooting equipment;[18] in fact, VIVA likewise owns the
trucks used to transport the equipment.[19] It is thus clear that the associate
producer merely leases the equipment from VIVA.[20] Indeed, private respondents
Formal Offer of Documentary Evidence stated one of the purposes of Exhibit 148 as:
To prove further that the independent Producers rented Shooting Unit No. 2 from
Viva to finish their films.[21]
While the purpose of Exhibits 149, 149-A and 149-B was:
[T]o prove that the movies of Viva Films were contracted out to the different
independent Producers who rented Shooting Unit No. 3 with a fixed budget and
time-frame of at least 30 shooting days or 45 days whichever comes first.[22]
Private respondents further narrated that VIVAs generators broke down during
petitioners last movie project, which forced the associate producer concerned to
rent generators, equipment and crew from another company.[23] This only shows
that the associate producer did not have substantial capital nor investment in the
form of tools, equipment and other materials necessary for making a movie. Private
respondents in effect admit that their producers, especially petitioners last
producer, are not engaged in permissible job contracting.
If private respondents insist that their associate producers are labor contractors,
then these producers can only be labor-only contractors, defined by the Labor Code
as follows:
Art. 106. Contractor or subcontractor.-- x x x
There is labor-only contracting where the person supplying workers to an employer
does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed
by such persons are performing activities which are directly related to the principal
business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by
him.
A more detailed description is provided by Section 9, Rule VIII, Book III of the
Omnibus Rules Implementing the Labor Code:
Sec. 9. Labor-only contracting. -- (a) Any person who undertakes to supply workers
to an employer shall be deemed to be engaged in labor-only contracting where
such person:
(1) Does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises and other materials; and
(2) The workers recruited and placed by such person are performing activities which
are directly related to the principal business or operations of the employer in which
workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the person
acting as contractor shall be considered merely as an agent or intermediary of the
employer who shall be responsible to the workers in the same manner and extent
as if the latter were directly employed by him.
(c) For cases not falling under this Article, the Secretary of Labor shall determine
through appropriate orders whether or not the contracting out of labor is
permissible in the light of the circumstances of each case and after considering the
operating needs of the employer and the rights of the workers involved. In such
case, he may prescribe conditions and restrictions to insure the protection and
welfare of the workers.
As labor-only contracting is prohibited, the law considers the person or entity
engaged in the same a mere agent or intermediary of the direct employer. But even
by the preceding standards, the associate producers of VIVA cannot be considered
labor-only contractors as they did not supply, recruit nor hire the workers. In the
instant case, it was Juanita Cesario, Shooting Unit Supervisor and an employee of
VIVA, who recruited crew members from an available group of free-lance workers
which includes the complainants Maraguinot and Enero.[24] And in their
Memorandum, private respondents declared that the associate producer hires the
services of... 6) camera crew which includes (a) cameraman; (b) the utility crew; (c)
the technical staff; (d) generator man and electrician; (e) clapper; etc....[25] This
clearly showed that the associate producers did not supply the workers required by
the movie project.
The relationship between VIVA and its producers or associate producers seems to
be that of agency,[26] as the latter make movies on behalf of VIVA, whose business
is to make movies. As such, the employment relationship between petitioners and
producers is actually one between petitioners and VIVA, with the latter being the
direct employer.
The employer-employee relationship between petitioners and VIVA can further be
established by the control test. While four elements are usually considered in
determining the existence of an employment relationship, namely: (a) the selection
and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employers power to control the employees conduct, the most
important element is the employers control of the employees conduct, not only as
to the result of the work to be done but also as to the means and methods to
accomplish the same.[27] These four elements are present here. In their position
paper submitted to the Labor Arbiter, private respondents narrated the following
circumstances:
[T]he PRODUCER has to work within the limits of the budget he is given by the
company, for as long as the ultimate finish[ed] product is acceptable to the
company...
To ensure that quality films are produced by the PRODUCER who is an independent
contractor, the company likewise employs a Supervising PRODUCER, a Project
accountant and a Shooting unit supervisor. The Companys Supervising PRODUCER is
Mr. Eric Cuatico, the Project accountant varies from time to time, and the Shooting
Unit Supervisor is Ms. Alejandria Cesario.
 private respondents to prove that members of the shooting crew except the driver
The Supervising PRODUCER acts as the eyes and ears of the company and of the are project employees of the Independent Producers[29] reads as follows:
Executive Producer to monitor the progress of the PRODUCERs work
accomplishment. He is there usually in the field doing the rounds of inspection to VIVA PRODUCTIONS, INC.
see if there is any problem that the PRODUCER is encountering and to assist in
threshing out the same so that the film project will be finished on schedule. He 16 Sct. Albano St.
supervises about 3 to 7 movie projects simultaneously [at] any given time by
coordinating with each film PRODUCER. The Project Accountant on the other hand Diliman, Quezon City
assists the PRODUCER in monitoring the actual expenses incurred because the
company wants to insure that any additional budget requested by the PRODUCER is PEDRO NICOLAS Date: June 15, 1992
really justified and warranted especially when there is a change of original plans to
suit the tast[e] of the company on how a certain scene must be presented to make __________________
the film more interesting and more commercially viable. (emphasis ours)
APPOINTMENT SLIP
VIVAs control is evident in its mandate that the end result must be a quality film
acceptable to the company. The means and methods to accomplish the result are You are hereby appointed as SOUNDMAN for the film project entitled MANAMBIT.
likewise controlled by VIVA, viz., the movie project must be finished within schedule This appointment shall be effective upon the commencement of the said project
without exceeding the budget, and additional expenses must be justified; certain and shall continue to be effective until the completion of the same.
scenes are subject to change to suit the taste of the company; and the Supervising
Producer, the eyes and ears of VIVA and del Rosario, intervenes in the movie- For your services you shall receive the daily/weekly/monthly compensation of
making process by assisting the associate producer in solving problems encountered P812.50.
in making the film.
During the term of this appointment you shall comply with the duties and
It may not be validly argued then that petitioners are actually subject to the movie responsibilities of your position as well as observe the rules and regulations
directors control, and not VIVAs direction. The director merely instructs petitioners promulgated by your superiors and by Top Management.
on how to better comply with VIVAs requirements to ensure that a quality film is
completed within schedule and without exceeding the budget. At bottom, the Very truly yours,
director is akin to a supervisor who merely oversees the activities of rank-and-file
employees with control ultimately resting on the employer. (an illegible signature)

Moreover, appointment slips [28] issued to all crew members state: CONFORME:

During the term of this appointment you shall comply with the duties and ___________________
responsibilities of your position as well as observe the rules and regulations
promulgated by your superiors and by Top Management. Name of appointee

The words superiors and Top Management can only refer to the superiors and Top
Management of VIVA. By commanding crew members to observe the rules and
regulations promulgated by VIVA, the appointment slips only emphasize VIVAs
control over petitioners.
Aside from control, the element of selection and engagement is likewise present in
the instant case and exercised by VIVA. A sample appointment slip offered by
Signed in the presence of:
_____________________
Notably, nowhere in the appointment slip does it appear that it was the producer or
associate producer who hired the crew members; moreover, it is VIVAs corporate
name which appears on the heading of the appointment slip. What likewise tells
against VIVA is that it paid petitioners salaries as evidenced by vouchers, containing
VIVAs letterhead, for that purpose.[30]
All the circumstances indicate an employment relationship between petitioners and
VIVA alone, thus the inevitable conclusion is that petitioners are employees only of
VIVA.
The next issue is whether petitioners were illegally dismissed. Private respondents
contend that petitioners were project employees whose employment was
automatically terminated with the completion of their respective projects.
Petitioners assert that they were regular employees who were illegally dismissed.
It may not be ignored, however, that private respondents expressly admitted that
petitioners were part of a work pool;[31] and, while petitioners were initially hired
possibly as project employees, they had attained the status of regular employees in
view of VIVAs conduct.
A project employee or a member of a work pool may acquire the status of a regular
employee when the following concur:
1) There is a continuous rehiring of project employees even after cessation of a
project;[32] and
2) The tasks performed by the alleged project employee are vital, necessary and
indispensable to the usual business or trade of the employer.[33]
However, the length of time during which the employee was continuously re-hired
is not controlling, but merely serves as a badge of regular employment.[34]
In the instant case, the evidence on record shows that petitioner Enero was
employed for a total of two (2) years and engaged in at least eighteen (18) projects,
while petitioner Maraguinot was employed for some three (3) years and worked on
at least twenty-three (23) projects.[35] Moreover, as petitioners tasks involved,
among other chores, the loading, unloading and arranging of movie equipment in
the shooting area as instructed by the cameramen, returning the equipment to the
Viva Films warehouse, and assisting in the fixing of the lighting system, it may not
be gainsaid that these tasks were vital, necessary and indispensable to the usual
business or trade of the employer. As regards the underscored phrase, it has been
held that this is ascertained by considering the nature of the work performed and
its relation to the scheme of the particular business or trade in its entirety.[36]
A recent pronouncement of this Court anent project or work pool employees who
had attained the status of regular employees proves most instructive:
The denial by petitioners of the existence of a work pool in the company because
their projects were not continuous is amply belied by petitioners themselves who
admit that: xxx
A work pool may exist although the workers in the pool do not receive salaries and
are free to seek other employment during temporary breaks in the business,
provided that the worker shall be available when called to report for a project.
Although primarily applicable to regular seasonal workers, this set-up can likewise
be applied to project workers insofar as the effect of temporary cessation of work is
concerned. This is beneficial to both the employer and employee for it prevents the
unjust situation of coddling labor at the expense of capital and at the same time
enables the workers to attain the status of regular employees. Clearly, the
continuous rehiring of the same set of employees within the framework of the Lao
Group of Companies is strongly indicative that private respondents were an integral
part of a work pool from which petitioners drew its workers for its various projects.
In a final attempt to convince the Court that private respondents were indeed
project employees, petitioners point out that the workers were not regularly
maintained in the payroll and were free to offer their services to other companies
when there were no on-going projects. This argument however cannot defeat the
workers status of regularity. We apply by analogy the case of Industrial-
Commercial-Agricultural Workers Organization v. CIR [16 SCRA 562, 567-68 (1966)]
which deals with regular seasonal employees. There we held: xxx
Truly, the cessation of construction activities at the end of every project is a
foreseeable suspension of work. Of course, no compensation can be demanded
from the employer because the stoppage of operations at the end of a project and
before the start of a new one is regular and expected by both parties to the labor
relations. Similar to the case of regular seasonal employees, the employment
relation is not severed by merely being suspended. [citing Manila Hotel Co. v. CIR, 9
SCRA 186 (1963)] The employees are, strictly speaking, not separated from services
but merely on leave of absence without pay until they are reemployed. Thus we
cannot affirm the argument that non-payment of salary or non-inclusion in the
payroll and the opportunity to seek other employment denote project
employment.[37] (underscoring supplied)
While Lao admittedly involved the construction industry, to which Policy Instruction
No. 20/Department Order No. 19[38] regarding work pools specifically applies,
there seems to be no impediment to applying the underlying principles to industries
other than the construction industry.[39] Neither may it be argued that a
substantial distinction exists between the projects undertaken in the construction
industry and the motion picture industry. On the contrary, the raison d' etre of both
industries concern projects with a foreseeable suspension of work.
At this time, we wish to allay any fears that this decision unduly burdens an
employer by imposing a duty to re-hire a project employee even after completion of
the project for which he was hired. The import of this decision is not to impose a
positive and sweeping obligation upon the employer to re-hire project employees.
What this decision merely accomplishes is a judicial recognition of the employment
status of a project or work pool employee in accordance with what is fait accompli,
i.e., the continuous re-hiring by the employer of project or work pool employees
who perform tasks necessary or desirable to the employers usual business or trade.
Let it not be said that this decision coddles labor, for as Lao has ruled, project or
work pool employees who have gained the status of regular employees are subject
to the no work-no pay principle, to repeat:
new one, in computing petitioners back wages, the amounts corresponding to what
could have been earned during the periods from the date petitioners were
dismissed until their reinstatement when petitioners respective Shooting Units
were not undertaking any movie projects, should be deducted.
Petitioners were dismissed on 20 July 1992, at a time when Republic Act No. 6715
was already in effect. Pursuant to Section 34 thereof which amended Section 279 of
the Labor Code of the Philippines and Bustamante v. NLRC,[42] petitioners are
entitled to receive full back wages from the date of their dismissal up to the time of
their reinstatement, without deducting whatever earnings derived elsewhere
during the period of illegal dismissal, subject, however, to the above observations.

A work pool may exist although the workers in the pool do not receive salaries and
are free to seek other employment during temporary breaks in the business,
provided that the worker shall be available when called to report for a project.
Although primarily applicable to regular seasonal workers, this set-up can likewise
be applied to project workers insofar as the effect of temporary cessation of work is
concerned. This is beneficial to both the employer and employee for it prevents the
unjust situation of coddling labor at the expense of capital and at the same time
enables the workers to attain the status of regular employees.
WHEREFORE, the instant petition is GRANTED. The assailed decision of the National
Labor Relations Commission in NLRC NCR CA No. 006195-94 dated 10 February
1995, as well as its Resolution dated 6 April 1995, are hereby ANNULLED and SET
ASIDE for having been rendered with grave abuse of discretion, and the decision of
the Labor Arbiter in NLRC NCR Case No. 00-07-03994-92 is REINSTATED, subject,
however, to the modification above mentioned in the computation of back wages.
No pronouncement as to costs.

The Courts ruling here is meant precisely to give life to the constitutional policy of SO ORDERED.
strengthening the labor sector,[40] but, we stress, not at the expense of
management. Lest it be misunderstood, this ruling does not mean that simply Bellosillo, Vitug, and Kapunan, JJ., concur.
because an employee is a project or work pool employee even outside the
construction industry, he is deemed, ipso jure, a regular employee. All that we hold
today is that once a project or work pool employee has been: (1) continuously, as CRC AGRICULTURAL TRADING and ROLANDO B. CATINDIG,
opposed to intermittently, re-hired by the same employer for the same tasks or Petitioners,
nature of tasks; and (2) these tasks are vital, necessary and indispensable to the
usual business or trade of the employer, then the employee must be deemed a
regular employee, pursuant to Article 280 of the Labor Code and jurisprudence. To
rule otherwise would allow circumvention of labor laws in industries not falling
within the ambit of Policy Instruction No. 20/Department Order No. 19, hence
allowing the prevention of acquisition of tenurial security by project or work pool
employees who have already gained the status of regular employees by the
employers conduct. - versus -

In closing then, as petitioners had already gained the status of regular employees,
their dismissal was unwarranted, for the cause invoked by private respondents for
petitioners dismissal, viz., completion of project, was not, as to them, a valid cause
for dismissal under Article 282 of the Labor Code. As such, petitioners are now
entitled to back wages and reinstatement, without loss of seniority rights and other
benefits that may have accrued.[41] Nevertheless, following the principles of
suspension of work and no pay between the end of one project and the start of a
NATIONAL LABOR
DECISION
RELATIONS COMMISSION and ROBERTO OBIAS,

Respondents.

G.R. No. 177664

BRION, J.:

Present:

CARPIO, J., Chairperson, Before this Court is the Petition for Review on Certiorari under Rule 45 of the Rules
of Court assailing the Decision[1] of the Court of Appeals (CA) dated February 20,
LEONARDO-DE CASTRO, 2007 and its related Resolution dated April 30, 2007[2] in CA-G.R. SP No. 95924. The
assailed decision reversed and set aside the August 15, 2006 Resolution[3] of the
BRION, National Labor Relations Commission (NLRC), and reinstated the Labor Arbiters
April 15, 2005 Decision[4] finding respondent Roberto Obias (respondent) illegally
DEL CASTILLO, and dismissed from his employment.

ABAD, JJ.

ANTECEDENT FACTS

Promulgated: The present petition traces its roots to the complaint[5] for illegal dismissal filed by
the respondent against petitioners CRC Agricultural Trading and its owner, Rolando
B. Catindig (collectively, petitioners), before the Labor Arbiter on June 22, 2004.

December 23, 2009

x ------------------------------------------------------------------------------------------x
In his Sinumpaang Salaysay,[6] the respondent alleged that the petitioners
employed him as a driver sometime in 1985. The respondent worked for the
petitioners until he met an accident in 1989, after which the petitioners no longer
allowed him to work. After six years, or in February 1995, the petitioners again
hired the respondent as a driver and offered him to stay inside the companys
premises. The petitioners gave him a P3,000.00 loan to help him build a hut for his
family.
Sometime in March 2003, the petitioners ordered respondent to have the
alternator of one of its vehicles repaired. The respondent brought the vehicle to a Separation Pay - P64,740.00
repair shop and subsequently gave the petitioners two receipts issued by the repair
shop. The latter suspected that the receipts were falsified and stopped talking to
him and giving him work assignments. The petitioners, however, still paid him
P700.00 and P500.00 on April 15 and 30, 2004, respectively, but no longer gave him Backwages
any salary after that. As a result, the respondent and his family moved out of the
petitioners compound and relocated to a nearby place. The respondent claimed
that the petitioners paid him a daily wage of P175.00, but did not give him service Basic pay - P146,491.80
incentive leave, holiday pay, rest day pay, and overtime pay. He also alleged that
the petitioners did not send him a notice of termination. 13th month pay - 12,207.65

SIL - 2,347.63

In opposing the complaint, the petitioners claimed that the respondent was a Salary Differential - 47,944.00
seasonal driver; his work was irregular and was not fixed. The petitioners paid the
respondent P175.00 daily, but under a no work no pay basis. The petitioners also Unpaid SIL - 3,467.00
gave him a daily allowance of P140.00 to P200.00. In April 2003, the respondent
worked only for 15 days for which he was paid the agreed wages. The petitioners __________
maintained that they did not anymore engage the respondents services after April
2003, as they had already lost trust and confidence in him after discovering that he P277,198.08
had forged receipts for the vehicle parts he bought for them. Since then, the
respondent had been working as a driver for different jeepney operators.[7] 10% attorneys fees - 27,719.80

__________

The Labor Arbiter Ruling GRAND TOTAL - P304,917.80

Labor Arbiter Rennell Joseph R. Dela Cruz, in his decision of April 15, 2005, ruled in SO ORDERED.[8]
the respondents favor declaring that he had been illegally dismissed. The labor
arbiter held that as a regular employee, the respondents services could only be
terminated after the observance of due process. The labor arbiter likewise
disregarded the petitioners charge of abandonment against the respondent. He
thus decreed:
The NLRC Ruling

WHEREFORE, premises considered, judgment is hereby rendered ordering

respondents CRC AGRICULTURAL TRADING and ROLANDO CATINDIG to pay The petitioners and the respondent both appealed the labor arbiters decision to the
complainant jointly and severally the following: NLRC. The petitioners specifically questioned the ruling that the respondent was
illegally dismissed. The respondent, for his part, maintained that the labor arbiter
erred when he ordered the payment of separation pay in lieu of reinstatement.

The NLRC, in its resolution of August 15, 2006,[9] modified the labor arbiters
decision. The NLRC ruled that the respondent was not illegally dismissed and
deleted the labor arbiters award of backwages and attorneys fees. The NLRC
reasoned out that it was respondent himself who decided to move his family out of
the petitioners lot; hence, no illegal dismissal occurred. Moreover, the respondent
could not claim wages for the days he did not work, as he was employed by the
petitioners under a no work no pay scheme.
backwages without deduction of earnings derived elsewhere from the time his
compensation was withheld from him, up to the time of his actual reinstatement.
The CA added that reinstatement would no longer be beneficial to both the
petitioners and respondent, as the relationship between them had already been
strained.
Petitioners moved to reconsider the decision, but the CA denied the motion for lack
of merit in its Resolution dated April 30, 2007.

The CA Decision In the present petition, the petitioners alleged that the CA erred when it awarded
the respondent separation pay, backwages, salary differentials, and attorneys fees.
They reiterated their view that an abandoning employee like respondent is not
entitled to separation benefits because he is no different from one who voluntarily
The petitioners filed on August 30, 2006 a petition for certiorari with the CA alleging resigns.
that the NLRC erred in awarding the respondent separation pay and salary
differentials. They argued that an employee who had abandoned his work, like the
respondent, is no different from one who voluntarily resigned; both are not entitled
to separation pay and to salary differentials. The petitioners added that since they
had already four regular drivers, the respondents job was already unnecessary and
redundant. They further argued that they could not be compelled to retain the THE COURTS RULING
services of a dishonest employee.

We do not find the petition meritorious.

The CA, in its decision dated February 20, 2007, reversed and set aside the NLRC
resolution dated August 15, 2006, and reinstated the labor arbiters April 15, 2005
decision.
The existence of an employer-employee relationship

The CA disregarded the petitioners charge of abandonment against the respondent

for their failure to show that there was deliberate and unjustified refusal on the
part of the respondent to resume his employment. The CA also ruled that the
respondents filing of a complaint for illegal dismissal manifested his desire to return
to his job, thus negating the petitioners charge of abandonment. Even assuming
that there had been abandonment, the petitioners denied the respondent due
process when they did not serve him with two written notices, i.e., (1) a notice
which apprises the employee of the particular acts or omissions for which his
dismissal is sought; and (2) a subsequent notice which advises the employee of the
employers decision to dismiss him. Thus, the respondent is entitled to full
A paramount issue that needs to be resolved before we rule on the main issue of
illegal dismissal is whether there existed an employer-employee relationship
between the petitioners and the respondent. This determination has been rendered
imperative by the petitioners denial of the existence of employer-employee
relationship on the reasoning that they only called on the respondent when
needed.
The elements to determine the existence of an employment relationship are: (1)
the selection and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the employers power to control the employees conduct.
The most important element is the employers control of the employees conduct,
not only as to the result of the work to be done, but also as to the means and
methods to accomplish it. All the four elements are present in this case.[10]
First, the petitioners engaged the services of the respondent in 1995. Second, the
petitioners paid the respondent a daily wage of P175.00, with allowances ranging
from P140.00 to P200.00 per day. The fact the respondent was paid under a no
work no pay scheme, assuming this claim to be true, is not significant. The no work
no pay scheme is merely a method of computing compensation, not a basis for
determining the existence or absence of employer-employee relationship. Third,
the petitioners power to dismiss the respondent was inherent in the fact that they
engaged the services of the respondent as a driver. Finally, a careful review of the
record shows that the respondent performed his work as driver under the
petitioners supervision and control. Petitioners determined how, where, and when
the respondent performed his task. They, in fact, requested the respondent to live
inside their compound so he (respondent) could be readily available when the
petitioners needed his services. Undoubtedly, the petitioners exercised control over
the means and methods by which the respondent accomplished his work as a
driver.
We conclude from all these that an employer-employee relationship existed
between the petitioners and respondent.
The respondent did not abandon his job
In a dismissal situation, the burden of proof lies with the employer to show that the
dismissal was for a just cause. In the present case, the petitioners claim that there
was no illegal dismissal, since the respondent abandoned his job. The petitioners
point out that the respondent freely quit his work as a driver when he was
suspected of forging vehicle parts receipts.
Abandonment of work, or the deliberate and unjustified refusal of an employee to
resume his employment, is a just cause for the termination of employment under
paragraph (b) of Article 282 of the Labor Code, since it constitutes neglect of
duty.[11] The jurisprudential rule is that abandonment is a matter of intention that
cannot be lightly presumed from equivocal acts. To constitute abandonment, two
elements must concur: (1) the failure to report for work or absence without valid or
justifiable reason, and (2) a clear intent, manifested through overt acts, to sever the
employer-employee relationship. The employer bears the burden of showing a
deliberate and unjustified
refusal by the employee to resume his employment without any intention of
returning.[12]
In the present case, the petitioners did not adduce any proof to show that the
respondent clearly and unequivocally intended to abandon his job or to sever the
employer-employee relationship. Moreover, the respondents filing of the complaint
for illegal dismissal on June 22, 2004 strongly speaks against the petitioners charge
of abandonment; it is illogical for an employee to abandon his employment and,
thereafter, file a complaint for illegal dismissal. As we held in Samarca v. Arc-Men
Industries, Inc.:[13]
Abandonment is a matter of intention and cannot lightly be presumed from certain
equivocal acts. To constitute abandonment, there must be clear proof of deliberate
and unjustified intent to sever the employer-employee relationship. Clearly, the
operative act is still the employees ultimate act of putting an end to his
employment. [Emphasis in the original]
Respondent was constructively dismissed
Case law defines constructive dismissal as a cessation of work because continued
employment has been rendered impossible, unreasonable, or unlikely, as when
there is a demotion in rank or diminution in pay or both or when a clear
discrimination, insensibility, or disdain by an employer becomes unbearable to the
employee.[14]
The test of constructive dismissal is whether a reasonable person in the employees
position would have felt compelled to give up his position under the circumstances.
It is an act amounting to dismissal but is made to appear as if it were not. In fact,
the employee who is constructively dismissed might have been allowed to keep
coming to work. Constructive dismissal is therefore a dismissal in disguise. The law
recognizes and resolves this situation in favor of employees in order to protect their
rights and interests from the coercive acts of the employer.[15]
In the present case, the petitioners ceased verbally communicating with the
respondent and giving him work assignment after suspecting that he had forged
purchase receipts. Under this situation, the respondent was forced to leave the
petitioners compound with his family and to transfer to a nearby place. Thus, the
respondents act of leaving the petitioners premises was in reality not his choice but
a situation the petitioners created.
The Due Process Requirement
Even assuming that a valid ground to dismiss the respondent exists, the petitioners
failed to comply with the twin requirements of notice and hearing under the Labor
Code.
The long established jurisprudence holds that to justify the dismissal of an
employee for a just cause, the employer must furnish the worker with two written
notices. The first is the notice to apprise the employee of the particular acts or
omissions for which his dismissal is sought. This may be loosely considered as the
charge against the employee. The second is the notice informing the employee of
the employers decision to dismiss him. This decision, however, must come only
after the employee is given a reasonable period from receipt of the first notice
within which to answer the charge, and ample opportunity to be heard and defend
himself with the assistance of his representative, if he so desires. The requirement
of notice is not a mere technicality, but a requirement of due process to which
every employee is entitled.
The petitioners clearly failed to comply with the two-notice requirement. Nothing in
the records shows that the petitioners ever sent the respondent a written notice
informing him of the ground for which his dismissal was sought. It does not also
appear that the petitioners held a hearing where the respondent was given the
opportunity to answer the charges of abandonment. Neither did the petitioners
send a written notice to the respondent informing the latter that his service had
been terminated and the reasons for the termination of employment. Under these
facts, the respondents dismissal was illegal.[16]
Backwages, Separation Pay, and Attorneys Fees
The respondents illegal dismissal carries the legal consequence defined under
Article 279 of the Labor Code: the illegally dismissed employee is entitled to
reinstatement without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances and other benefits or their monetary equivalent,
computed from the time his compensation was withheld from him up to the time of
his actual reinstatement. Thus, an illegally dismissed employee is entitled to two
reliefs: backwages and reinstatement. Where reinstatement is no longer viable as
an option, backwages shall be computed from the time of the illegal termination up
to the finality of the decision.[17] Separation pay equivalent to one month salary for
every year of service should likewise be awarded as an alternative in case
reinstatement in not possible.[18]
In the present case, reinstatement is no longer feasible because of the strained
relations between the petitioners and the respondent. Time and again, this Court
has recognized that strained relations between the employer and employee is an
exception to the rule requiring actual reinstatement for illegally dismissed
employees for the practical reason that the already existing antagonism will only
fester and deteriorate, and will only worsen with possible adverse effects on the
parties, if we shall compel reinstatement; thus, the use of a viable substitute that
protects the interests of both parties while ensuring that the law is respected.
In this case, the antagonism between the parties cannot be doubted, evidenced by
the petitioners refusal to talk to the respondent after their suspicion of fraudulent
misrepresentation was aroused, and by the respondents own decision to leave the
petitioners compound together with his family. Under these undisputed facts, a
peaceful working relationship between them is no longer possible and
reinstatement is not to the best interest of the parties. The payment of separation
pay is the better alternative as it liberates the respondent from what could be a
highly hostile work environment, while releasing the petitioners from the grossly
unpalatable obligation of maintaining in their employ a worker they could no longer
trust.
The respondent having been compelled to litigate in order to seek redress, the CA
correctly affirmed the labor arbiters grant of attorneys fees equivalent to 10% of
the total monetary award.[19]
The records of this case, however, are incomplete for purposes of computing the
exact monetary award due to the respondent. Thus, it is necessary to remand this
case to the Labor Arbiter for the sole purpose of computing the proper monetary
award.
WHEREFORE, premises considered, we hereby DENY the petition. The Decision of
the Court of Appeals dated February 20, 2007 and its Resolution dated April 30,
2007 in CA-G.R. SP No. 95924 are AFFIRMED and the case is REMANDED to the
Labor Arbiter for the sole purpose of computing the full backwages, inclusive of
allowances and other benefits of respondent Roberto Obias, computed from the
date of his dismissal up to the finality of the decision, and separation pay in lieu of
reinstatement equivalent to one month salary for every year of service, computed
from the time of his engagement up to the finality of this decision.
[G.R. No. 138051. June 10, 2004]
JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING CORPORATION,
respondent.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari[1] assailing the 26 March
1999 Decision[2] of the Court of Appeals in CA-G.R. SP No. 49190 dismissing the
petition filed by Jose Y. Sonza (SONZA). The Court of Appeals affirmed the findings
of the National Labor Relations Commission (NLRC), which affirmed the Labor
Arbiters dismissal of the case for lack of jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation (ABS-CBN) signed an
Agreement (Agreement) with the Mel and Jay Management and Development
Corporation (MJMDC). ABS-CBN was represented by its corporate officers while
MJMDC was represented by SONZA, as President and General Manager, and
Carmela Tiangco (TIANGCO), as EVP and Treasurer. Referred to in the Agreement as
AGENT, MJMDC agreed to provide SONZAs services exclusively to ABS-CBN as talent
for radio and television. The Agreement listed the services SONZA would render to
ABS-CBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.[3]
ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for
the first year and P317,000 for the second and third year of the Agreement. ABS-
CBN would pay the talent fees on the 10th and 25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III,
which reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May 1994 entered into
by your goodself on behalf of ABS-CBN with our company relative to our talent JOSE
Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events
concerning his programs and career. We consider these acts of the station violative
of the Agreement and the station as in breach thereof. In this connection, we
hereby serve notice of rescission of said Agreement at our instance effective as of
date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining
amount stipulated in paragraph 7 of the Agreement but reserves the right to seek
recovery of the other benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y. SONZA
President and Gen. Manager[4]
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department
of Labor and Employment, National Capital Region in Quezon City. SONZA
complained that ABS-CBN did not pay his salaries, separation pay, service incentive
leave pay, 13th month pay, signing bonus, travel allowance and amounts due under
the Employees Stock Option Plan (ESOP).
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no
employer-employee relationship existed between the parties. SONZA filed an
Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his
account at PCIBank, Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN
opened a new account with the same bank where ABS-CBN deposited SONZAs
talent fees and other payments due him under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter[5] denied the motion to
dismiss and directed the parties to file their respective position papers. The Labor
Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was an
employee of respondent company until April 15, 1996 and that he was not paid
certain claims, it is sufficient enough as to confer jurisdiction over the instant case
in this Office. And as to whether or not such claim would entitle complainant to
recover upon the causes of action asserted is a matter to be resolved only after and
as a result of a hearing. Thus, the respondents plea of lack of employer-employee
relationship may be pleaded only as a matter of defense. It behooves upon it the
duty to prove that there really is no employer-employee relationship between it
and the complainant.
The Labor Arbiter then considered the case submitted for resolution. The parties
submitted their position papers on 24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with Motion
to Expunge Respondents Annex 4 and Annex 5 from the Records. Annexes 4 and 5
are affidavits of ABS-CBNs witnesses Soccoro Vidanes and Rolando V. Cruz. These
witnesses stated in their affidavits that the prevailing practice in the television and
broadcast industry is to treat talents like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint
for lack of jurisdiction.[6] The pertinent parts of the decision read as follows:
xxx
While Philippine jurisprudence has not yet, with certainty, touched on the true
nature of the contract of a talent, it stands to reason that a talent as above-
described cannot be considered as an employee by reason of the peculiar
circumstances surrounding the engagement of his services.
It must be noted that complainant was engaged by respondent by reason of his
peculiar skills and talent as a TV host and a radio broadcaster. Unlike an ordinary
employee, he was free to perform the services he undertook to render in
accordance with his own style. The benefits conferred to complainant under the
May 1994 Agreement are certainly very much higher than those generally given to
employees. For one, complainant Sonzas monthly talent fees amount to a
staggering P317,000. Moreover, his engagement as a talent was covered by a
specific contract. Likewise, he was not bound to render eight (8) hours of work per
day as he worked only for such number of hours as may be necessary.
The fact that per the May 1994 Agreement complainant was accorded some
benefits normally given to an employee is inconsequential. Whatever benefits
complainant enjoyed arose from specific agreement by the parties and not by
reason of employer-employee relationship. As correctly put by the respondent, All
these benefits are merely talent fees and other contractual benefits and should not
be deemed as salaries, wages and/or other remuneration accorded to an employee,
notwithstanding the nomenclature appended to these benefits. Apropos to this is
the rule that the term or nomenclature given to a stipulated benefit is not
controlling, but the intent of the parties to the Agreement conferring such benefit.
The fact that complainant was made subject to respondents Rules and Regulations,
likewise, does not detract from the absence of employer-employee relationship. As
held by the Supreme Court, The line should be drawn between rules that merely
serve as guidelines towards the achievement of the mutually desired result without
dictating the means or methods to be employed in attaining it, and those that
control or fix the methodology and bind or restrict the party hired to the use of such
means. The first, which aim only to promote the result, create no employer-
employee relationship unlike the second, which address both the result and the
means to achieve it. (Insular Life Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484,
November 15, 1989).
x x x (Emphasis supplied)[7]
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision
affirming the Labor Arbiters decision. SONZA filed a motion for reconsideration,
which the NLRC denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the Court
of Appeals assailing the decision and resolution of the NLRC. On 26 March 1999, the
Court of Appeals rendered a Decision dismissing the case.[8]
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRCs finding that no employer-employee
relationship existed between SONZA and ABS-CBN. Adopting the NLRCs decision,
the appellate court quoted the following findings of the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered into the
contract merely as an agent of complainant Sonza, the principal. By all indication
and as the law puts it, the act of the agent is the act of the principal itself. This fact
is made particularly true in this case, as admittedly MJMDC is a management
company devoted exclusively to managing the careers of Mr. Sonza and his
broadcast partner, Mrs. Carmela C. Tiangco. (Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between complainant
Sonza and MJMDC, and not between ABS-CBN and MJMDC. This is clear from the
provisions of the May 1994 Agreement which specifically referred to MJMDC as the
AGENT. As a matter of fact, when complainant herein unilaterally rescinded said
May 1994 Agreement, it was MJMDC which issued the notice of rescission in behalf
of Mr. Sonza, who himself signed the same in his capacity as President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that
historically, the parties to the said agreements are ABS-CBN and Mr. Sonza. And it is
only in the May 1994 Agreement, which is the latest Agreement executed between
ABS-CBN and Mr. Sonza, that MJMDC figured in the said Agreement as the agent of
Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABS-
CBN such that there exist[s] employer-employee relationship between the latter
and Mr. Sonza. On the contrary, We find it indubitable, that MJMDC is an agent, not
of ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly admitted by the
latter and MJMDC in the May 1994 Agreement.
It may not be amiss to state that jurisdiction over the instant controversy indeed
belongs to the regular courts, the same being in the nature of an action for alleged
breach of contractual obligation on the part of respondent-appellee. As squarely
apparent from complainant-appellants Position Paper, his claims for compensation
for services, 13th month pay, signing bonus and travel allowance against
respondent-appellee are not based on the Labor Code but rather on the provisions
of the May 1994 Agreement, while his claims for proceeds under Stock Purchase
Agreement are based on the latter. A portion of the Position Paper of complainant-
appellant bears perusal:
Under [the May 1994 Agreement] with respondent ABS-CBN, the latter
contractually bound itself to pay complainant a signing bonus consisting of shares of
stockswith FIVE HUNDRED THOUSAND PESOS (P500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay based on an
amount not lower than the amount he was receiving prior to effectivity of (the)
Agreement.
Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a
commutable travel benefit amounting to at least One Hundred Fifty Thousand
Pesos (P150,000.00) per year.
Thus, it is precisely because of complainant-appellants own recognition of the fact
that his contractual relations with ABS-CBN are founded on the New Civil Code,
rather than the Labor Code, that instead of merely resigning from ABS-CBN,
complainant-appellant served upon the latter a notice of rescission of Agreement
with the station, per his letter dated April 1, 1996, which asserted that instead of
referring to unpaid employee benefits, he is waiving and renouncing recovery of the
remaining amount stipulated in paragraph 7 of the Agreement but reserves the
right to such recovery of the other benefits under said Agreement. (Annex 3 of the
respondent ABS-CBNs Motion to Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994
Agreement and/or the Stock Purchase Agreement by respondent-appellee that
complainant-appellant filed his complaint. Complainant-appellants claims being
anchored on the alleged breach of contract on the part of respondent-appellee, the
same can be resolved by reference to civil law and not to labor law. Consequently,
they are within the realm of civil law and, thus, lie with the regular courts. As held in
the case of Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21
November 1994, an action for breach of contractual obligation is intrinsically a civil
dispute.[9] (Emphasis supplied)
The Court of Appeals ruled that the existence of an employer-employee relationship
between SONZA and ABS-CBN is a factual question that is within the jurisdiction of
the NLRC to resolve.[10] A special civil action for certiorari extends only to issues of
want or excess of jurisdiction of the NLRC.[11] Such action cannot cover an inquiry
into the correctness of the evaluation of the evidence which served as basis of the
NLRCs conclusion.[12] The Court of Appeals added that it could not re-examine the
parties evidence and substitute the factual findings of the NLRC with its own.[13]
The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS DECISION AND
REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED
BETWEEN SONZA AND ABS-CBN, DESPITE THE WEIGHT OF CONTROLLING LAW,
JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH A FINDING.[14]
The Courts Ruling
We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the decision of the Court of
Appeals affirming the NLRC ruling which upheld the Labor Arbiters dismissal of the
case for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws
and jurisprudence define clearly the elements of an employer-employee
relationship, this is the first time that the Court will resolve the nature of the
relationship between a television and radio station and one of its talents. There is
no case law stating that a radio and television program host is an employee of the
broadcast station.
The instant case involves big names in the broadcast industry, namely Jose Jay
Sonza, a known television and radio personality, and ABS-CBN, one of the biggest
television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he
was an employee of ABS-CBN. On the other hand, ABS-CBN insists that the Labor
Arbiter has no jurisdiction because SONZA was an independent contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a question of fact. Appellate
courts accord the factual findings of the Labor Arbiter and the NLRC not only
respect but also finality when supported by substantial evidence.[15] Substantial
evidence means such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion.[16] A party cannot prove the absence of
substantial evidence by simply pointing out that there is contrary evidence on
record, direct or circumstantial. The Court does not substitute its own judgment for
that of the tribunal in determining where the weight of evidence lies or what
evidence is credible.[17]
SONZA maintains that all essential elements of an employer-employee relationship
are present in this case. Case law has consistently held that the elements of an
employer-employee relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employers power to control the employee on the means and methods by which the
work is accomplished.[18] The last element, the so-called control test, is the most
important element.[19]
A. Selection and Engagement of Employee
ABS-CBN engaged SONZAs services to co-host its television and radio programs
because of SONZAs peculiar skills, talent and celebrity status. SONZA contends that
the discretion used by respondent in specifically selecting and hiring complainant
over other broadcasters of possibly similar experience and qualification as
complainant belies respondents claim of independent contractorship.
Independent contractors often present themselves to possess unique skills,
expertise or talent to distinguish them from ordinary employees. The specific
selection and hiring of SONZA, because of his unique skills, talent and celebrity
status not possessed by ordinary employees, is a circumstance indicative, but not
conclusive, of an independent contractual relationship. If SONZA did not possess
such unique skills, talent and celebrity status, ABS-CBN would not have entered into
the Agreement with SONZA but would have hired him through its personnel
department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively
determine his status. We must consider all the circumstances of the relationship,
with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going
to MJMDC. SONZA asserts that this mode of fee payment shows that he was an
employee of ABS-CBN. SONZA also points out that ABS-CBN granted him benefits
and privileges which he would not have enjoyed if he were truly the subject of a
valid job contract.

All the talent fees and benefits paid to SONZA were the result of negotiations that
led to the Agreement. If SONZA were ABS-CBNs employee, there would be no need
for the parties to stipulate on benefits such as SSS, Medicare, x x x and 13th month
pay[20] which the law automatically incorporates into every employer-employee
contract.[21] Whatever benefits SONZA enjoyed arose from contract and not
because of an employer-employee relationship.[22]
SONZAs talent fees, amounting to P317,000 monthly in the second and third year,
are so huge and out of the ordinary that they indicate more an independent
contractual relationship rather than an employer-employee relationship. ABS-CBN
agreed to pay SONZA such huge talent fees precisely because of SONZAs unique
skills, talent and celebrity status not possessed by ordinary employees. Obviously,
SONZA acting alone possessed enough bargaining power to demand and receive
such huge talent fees for his services. The power to bargain talent fees way above
the salary scales of ordinary employees is a circumstance indicative, but not
conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate
the status of SONZA as an independent contractor. The parties expressly agreed on
such mode of payment. Under the Agreement, MJMDC is the AGENT of SONZA, to
whom MJMDC would have to turn over any talent fee accruing under the
Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their
relationship. SONZA failed to show that ABS-CBN could terminate his services on
grounds other than breach of contract, such as retrenchment to prevent losses as
provided under labor laws.[23]
During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as long
as AGENT and Jay Sonza shall faithfully and completely perform each condition of
this Agreement.[24] Even if it suffered severe business losses, ABS-CBN could not
retrench SONZA because ABS-CBN remained obligated to pay SONZAs talent fees
during the life of the Agreement. This circumstance indicates an independent
contractual relationship between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN
still paid him his talent fees. Plainly, ABS-CBN adhered to its undertaking in the
Agreement to continue paying SONZAs talent fees during the remaining life of the
Agreement even if ABS-CBN cancelled SONZAs programs through no fault of
SONZA.[25]
SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement
as an admission that he is not an employee of ABS-CBN. The Labor Arbiter stated
that if it were true that complainant was really an employee, he would merely
resign, instead. SONZA did actually resign from ABS-CBN but he also, as president of
MJMDC, rescinded the Agreement. SONZAs letter clearly bears this out.[26]
However, the manner by which SONZA terminated his relationship with ABS-CBN is
immaterial. Whether SONZA rescinded the Agreement or resigned from work does
not determine his status as employee or independent contractor.
D. Power of Control
Since there is no local precedent on whether a radio and television program host is
an employee or an independent contractor, we refer to foreign case law in
analyzing the present case. The United States Court of Appeals, First Circuit,
recently held in Alberty-Vlez v. Corporacin De Puerto Rico Para La Difusin Pblica
(WIPR)[27] that a television program host is an independent contractor. We quote
the following findings of the U.S. court:
Several factors favor classifying Alberty as an independent contractor. First, a
television actress is a skilled position requiring talent and training not available on-
the-job. x x x In this regard, Alberty possesses a masters degree in public
communications and journalism; is trained in dance, singing, and modeling; taught
with the drama department at the University of Puerto Rico; and acted in several
theater and television productions prior to her affiliation with Desde Mi Pueblo.
Second, Alberty provided the tools and instrumentalities necessary for her to
perform. Specifically, she provided, or obtained sponsors to provide, the costumes,
jewelry, and other image-related supplies and services necessary for her
appearance. Alberty disputes that this factor favors independent contractor status
because WIPR provided the equipment necessary to tape the show. Albertys
argument is misplaced. The equipment necessary for Alberty to conduct her job as
host of Desde Mi Pueblo related to her appearance on the show. Others provided
equipment for filming and producing the show, but these were not the primary
tools that Alberty used to perform her particular function. If we accepted this
argument, independent contractors could never work on collaborative projects
because other individuals often provide the equipment required for different
aspects of the collaboration. x x x
Third, WIPR could not assign Alberty work in addition to filming Desde Mi Pueblo.
Albertys contracts with WIPR specifically provided that WIPR hired her professional
services as Hostess for the Program Desde Mi Pueblo. There is no evidence that
WIPR assigned Alberty tasks in addition to work related to these tapings. x x x[28]
(Emphasis supplied)
Applying the control test to the present case, we find that SONZA is not an
employee but an independent contractor. The control test is the most important
test our courts apply in distinguishing an employee from an independent
contractor.[29] This test is based on the extent of control the hirer exercises over a
worker. The greater the supervision and control the hirer exercises, the more likely
the worker is deemed an employee. The converse holds true as well the less control
the hirer exercises, the more likely the worker is considered an independent
contractor.[30]
First, SONZA contends that ABS-CBN exercised control over the means and methods
of his work.
SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically to
co-host the Mel & Jay programs. ABS-CBN did not assign any other work to SONZA.
To perform his work, SONZA only needed his skills and talent. How SONZA delivered
his lines, appeared on television, and sounded on radio were outside ABS-CBNs
control. SONZA did not have to render eight hours of work per day. The Agreement
required SONZA to attend only rehearsals and tapings of the shows, as well as pre-
and post-production staff meetings.[31] ABS-CBN could not dictate the contents of
SONZAs script. However, the Agreement prohibited SONZA from criticizing in his
shows ABS-CBN or its interests.[32] The clear implication is that SONZA had a free
hand on what to say or discuss in his shows provided he did not attack ABS-CBN or
its interests.
We find that ABS-CBN was not involved in the actual performance that produced
the finished product of SONZAs work.[33] ABS-CBN did not instruct SONZA how to
perform his job. ABS-CBN merely reserved the right to modify the program format
and airtime schedule for more effective programming.[34] ABS-CBNs sole concern
was the quality of the shows and their standing in the ratings. Clearly, ABS-CBN did
not exercise control over the means and methods of performance of SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs
power over the means and methods of the performance of his work. Although ABS-
CBN did have the option not to broadcast SONZAs show, ABS-CBN was still
obligated to pay SONZAs talent fees. Thus, even if ABS-CBN was completely
dissatisfied with the means and methods of SONZAs performance of his work, or
even with the quality or product of his work, ABS-CBN could not dismiss or even
discipline SONZA. All that ABS-CBN could do is not to broadcast SONZAs show but
ABS-CBN must still pay his talent fees in full.[35]
Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the
obligation to continue paying in full SONZAs talent fees, did not amount to control
over the means and methods of the performance of SONZAs work. ABS-CBN could
not terminate or discipline SONZA even if the means and methods of performance
of his work - how he delivered his lines and appeared on television - did not meet
ABS-CBNs approval. This proves that ABS-CBNs control was limited only to the result
of SONZAs work, whether to broadcast the final product or not. In either case, ABS-
CBN must still pay SONZAs talent fees in full until the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al.,[36] the United States Circuit Court of Appeals
ruled that vaudeville performers were independent contractors although the
management reserved the right to delete objectionable features in their shows.
Since the management did not have control over the manner of performance of the
skills of the artists, it could only control the result of the work by deleting
objectionable features.[37]
SONZA further contends that ABS-CBN exercised control over his work by supplying
all equipment and crew. No doubt, ABS-CBN supplied the equipment, crew and
airtime needed to broadcast the Mel & Jay programs. However, the equipment,
crew and airtime are not the tools and instrumentalities SONZA needed to perform
his job. What SONZA principally needed were his talent or skills and the costumes
necessary for his appearance. [38] Even though ABS-CBN provided SONZA with the
place of work and the necessary equipment, SONZA was still an independent
contractor since ABS-CBN did not supervise and control his work. ABS-CBNs sole
concern was for SONZA to display his talent during the airing of the programs.[39]
A radio broadcast specialist who works under minimal supervision is an
independent contractor.[40] SONZAs work as television and radio program host
required special skills and talent, which SONZA admittedly possesses. The records
do not show that ABS-CBN exercised any supervision and control over how SONZA
utilized his skills and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBNs employee because ABS-CBN
subjected him to its rules and standards of performance. SONZA claims that this
indicates ABS-CBNs control not only [over] his manner of work but also the quality
of his work.
The Agreement stipulates that SONZA shall abide with the rules and standards of
performance covering talents[41] of ABS-CBN. The Agreement does not require
SONZA to comply with the rules and standards of performance prescribed for
employees of ABS-CBN. The code of conduct imposed on SONZA under the
Agreement refers to the Television and Radio Code of the Kapisanan ng mga
Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY (ABS-CBN)
as its Code of Ethics.[42] The KBP code applies to broadcasters, not to employees of
radio and television stations. Broadcasters are not necessarily employees of radio
and television stations. Clearly, the rules and standards of performance referred to
in the Agreement are those applicable to talents and not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate
that the latter is an employee of the former.[43] In this case, SONZA failed to show
that these rules controlled his performance. We find that these general rules are
merely guidelines towards the achievement of the mutually desired result, which
are top-rating television and radio programs that comply with standards of the
industry. We have ruled that:
Further, not every form of control that a party reserves to himself over the conduct
of the other party in relation to the services being rendered may be accorded the
effect of establishing an employer-employee relationship. The facts of this case fall
squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we
held that:
Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the
means or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The first,
which aim only to promote the result, create no employer-employee relationship
unlike the second, which address both the result and the means used to achieve
it.[44]
The Vaughan case also held that one could still be an independent contractor
although the hirer reserved certain supervision to insure the attainment of the
desired result. The hirer, however, must not deprive the one hired from performing
his services according to his own initiative.[45]
Lastly, SONZA insists that the exclusivity clause in the Agreement is the most
extreme form of control which ABS-CBN exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean that SONZA
is an employee of ABS-CBN. Even an independent contractor can validly provide his
services exclusively to the hiring party. In the broadcast industry, exclusivity is not
necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted practice in the
entertainment industry.[46] This practice is not designed to control the means and
methods of work of the talent, but simply to protect the investment of the
broadcast station. The broadcast station normally spends substantial amounts of
money, time and effort in building up its talents as well as the programs they
appear in and thus expects that said talents remain exclusive with the station for a
commensurate period of time.[47] Normally, a much higher fee is paid to talents
who agree to work exclusively for a particular radio or television station. In short,
the huge talent fees partially compensates for exclusivity, as in the present case.
MJMDC as Agent of SONZA
SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which
contracted out his services to ABS-CBN. The Labor Arbiter ruled that as a talent of
MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists that MJMDC is a
labor-only contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the labor-only
contractor; (2) the employee who is ostensibly under the employ of the labor-only
contractor; and (3) the principal who is deemed the real employer. Under this
scheme, the labor-only contractor is the agent of the principal. The law makes the
principal responsible to the employees of the labor-only contractor as if the
principal itself directly hired or employed the employees.[48] These circumstances
are not present in this case.
There are essentially only two parties involved under the Agreement, namely,
SONZA and ABS-CBN. MJMDC merely acted as SONZAs agent. The Agreement
expressly states that MJMDC acted as the AGENT of SONZA. The records do not
show that MJMDC acted as ABS-CBNs agent. MJMDC, which stands for Mel and Jay
Management and Development Corporation, is a corporation organized and owned
by SONZA and TIANGCO. The President and General Manager of MJMDC is SONZA
himself. It is absurd to hold that MJMDC, which is owned, controlled, headed and
managed by SONZA, acted as agent of ABS-CBN in entering into the Agreement with
SONZA, who himself is represented by MJMDC. That would make MJMDC the agent
of both ABS-CBN and SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to
managing the careers of SONZA and his broadcast partner, TIANGCO. MJMDC is not
engaged in any other business, not even job contracting. MJMDC does not have any
other function apart from acting as agent of SONZA or TIANGCO to promote their
careers in the broadcast and television industry.[49]
Policy Instruction No. 40
SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas
Ople on 8 January 1979 finally settled the status of workers in the broadcast
industry. Under this policy, the types of employees in the broadcast industry are the
station and program employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the force
and effect of law. There is no legal presumption that Policy Instruction No. 40
determines SONZAs status. A mere executive issuance cannot exclude independent
contractors from the class of service providers to the broadcast industry. The
classification of workers in the broadcast industry into only two groups under Policy
Instruction No. 40 is not binding on this Court, especially when the classification has
no basis either in law or in fact.
Affidavits of ABS-CBNs Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes
and Rolando Cruz without giving his counsel the opportunity to cross-examine these
witnesses. SONZA brands these witnesses as incompetent to attest on the
prevailing practice in the radio and television industry. SONZA views the affidavits
of these witnesses as misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses, he was never prevented
from denying or refuting the allegations in the affidavits. The Labor Arbiter has the
discretion whether to conduct a formal (trial-type) hearing after the submission of
the position papers of the parties, thus:
Section 3. Submission of Position Papers/Memorandum
xxx
These verified position papers shall cover only those claims and causes of action
raised in the complaint excluding those that may have been amicably settled, and
shall be accompanied by all supporting documents including the affidavits of their
respective witnesses which shall take the place of the latters direct testimony. x x x
Section 4. Determination of Necessity of Hearing. Immediately after the submission
of the parties of their position papers/memorandum, the Labor Arbiter shall motu
propio determine whether there is need for a formal trial or hearing. At this stage,
he may, at his discretion and for the purpose of making such determination, ask
clarificatory questions to further elicit facts or information, including but not limited
to the subpoena of relevant documentary evidence, if any from any party or
witness.[50]
The Labor Arbiter can decide a case based solely on the position papers and the
supporting documents without a formal trial.[51] The holding of a formal hearing or
trial is something that the parties cannot demand as a matter of right.[52] If the
Labor Arbiter is confident that he can rely on the documents before him, he cannot
be faulted for not conducting a formal trial, unless under the particular
circumstances of the case, the documents alone are insufficient. The proceedings
before a Labor Arbiter are non-litigious in nature. Subject to the requirements of
due process, the technicalities of law and the rules obtaining in the courts of law do
not strictly apply in proceedings before a Labor Arbiter.
Talents as Independent Contractors
ABS-CBN claims that there exists a prevailing practice in the broadcast and
entertainment industries to treat talents like SONZA as independent contractors.
SONZA argues that if such practice exists, it is void for violating the right of labor to
security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution[53] arises
only if there is an employer-employee relationship under labor laws. Not every
performance of services for a fee creates an employer-employee relationship. To
hold that every person who renders services to another for a fee is an employee - to
give meaning to the security of tenure clause - will lead to absurd results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their
services as independent contractors. The right to life and livelihood guarantees this
freedom to contract as independent contractors. The right of labor to security of
tenure cannot operate to deprive an individual, possessed with special skills,
expertise and talent, of his right to contract as an independent contractor. An
individual like an artist or talent has a right to render his services without any one
controlling the means and methods by which he performs his art or craft. This Court
will not interpret the right of labor to security of tenure to compel artists and
talents to render their services only as employees. If radio and television program
hosts can render their services only as employees, the station owners and managers
can dictate to the radio and television hosts what they say in their shows. This is not
conducive to freedom of the press.
Different Tax Treatment of Talents and Broadcasters
The National Internal Revenue Code (NIRC)[54] in relation to Republic Act No.
7716,[55] as amended by Republic Act No. 8241,[56] treats talents, television and
radio broadcasters differently. Under the NIRC, these professionals are subject to
the 10% value-added tax (VAT) on services they render. Exempted from the VAT are
those under an employer-employee relationship.[57] This different tax treatment
accorded to talents and broadcasters bolters our conclusion that they are
independent contractors, provided all the basic elements of a contractual
relationship are present as in this case.
Nature of SONZAs Claims
SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay,
separation pay, service incentive leave, signing bonus, travel allowance, and
amounts due under the Employee Stock Option Plan. We agree with the findings of
the Labor Arbiter and the Court of Appeals that SONZAs claims are all based on the
May 1994 Agreement and stock option plan, and not on the Labor Code. Clearly, the
present case does not call for an application of the Labor Code provisions but an
interpretation and implementation of the May 1994 Agreement. In effect, SONZAs
cause of action is for breach of contract which is intrinsically a civil dispute Respondents. September 26, 2006
cognizable by the regular courts.[58]
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals
dated 26 March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against
petitioner. DECISION

SO ORDERED.

Davide, Jr., C.J., (Chairman), Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.
CALLEJO, SR., J.:
FIRST DIVISION

Before us is a petition for review on certiorari of the Decision[1] of the Court of

Appeals (CA) in CA-G.R. SP No. 76582 and the Resolution denying the motion for
reconsideration thereof. The CA affirmed the Decision[2] and Resolution[3] of the
ABS-CBN BROADCASTING G.R. No. 164156 National Labor Relations Commission (NLRC) in NLRC Case No. V-000762-2001 (RAB
Case No. VII-10-1661-2001) which likewise affirmed, with modification, the decision
CORPORATION, of the Labor Arbiter declaring the respondents Marlyn Nazareno, Merlou Gerzon,
Jennifer Deiparine and Josephine Lerasan as regular employees.
Petitioner, Present
The Antecedents

PANGANIBAN, C.J., Chairperson,

Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the
YNARES-SANTIAGO, broadcasting business and owns a network of television and radio stations, whose
operations revolve around the broadcast, transmission, and relay of
- versus - AUSTRIA-MARTINEZ, telecommunication signals. It sells and deals in or otherwise utilizes the airtime it
generates from its radio and television operations. It has a franchise as a
CALLEJO, SR., and broadcasting company, and was likewise issued a license and authority to operate
by the National Telecommunications Commission.
CHICO-NAZARIO, JJ.

MARLYN NAZARENO, Promulgated: Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as
production assistants (PAs) on different dates. They were assigned at the news and
MERLOU GERZON, public affairs, for various radio programs in the Cebu Broadcasting Station, with a
monthly compensation of P4,000. They were issued ABS-CBN employees
JENNIFER DEIPARINE, identification cards and were required to work for a minimum of eight hours a day,
including Sundays and holidays. They were made to perform the following tasks and
and JOSEPHINE LERASAN, duties:

a) Prepare, arrange airing of commercial broadcasting based on the daily
operations log and digicart of respondent ABS-CBN;
b) Coordinate, arrange personalities for air interviews;
c) Coordinate, prepare schedule of reporters for scheduled news reporting and
lead-in or incoming reports;
d) Facilitate, prepare and arrange airtime schedule for public service
announcement and complaints;
e) Assist, anchor program interview, etc; and
f) Record, log clerical reports, man based control radio.[4]
Their respective working hours were as follows:
Name Time No. of Hours
1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7
8:00 A.M.-12:00 noon
2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7
3. Joy Sanchez 1:00 P.M.-10:00 P.M.(Sunday) 9 hrs.
9:00 A.M.-6:00 P.M. (WF) 9 hrs.
4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs.[5]
The PAs were under the control and supervision of Assistant Station Manager Dante
J. Luzon, and News Manager Leo Lastimosa.
On December 19, 1996, petitioner and the ABS-CBN Rank-and-File Employees
executed a Collective Bargaining Agreement (CBA) to be effective during the period
from December 11, 1996 to December 11, 1999. However, since petitioner refused
to recognize PAs as part of the bargaining unit, respondents were not included to
the CBA.[6]
On July 20, 2000, petitioner, through Dante Luzon, issued a Memorandum
informing the PAs that effective August 1, 2000, they would be assigned to non-
drama programs, and that the DYAB studio operations would be handled by the
studio technician. Thus, their revised schedule and other assignments would be as
follows:
Monday Saturday
4:30 A.M. 8:00 A.M. Marlene Nazareno.
Miss Nazareno will then be assigned at the Research Dept.
From 8:00 A.M. to 12:00
4:30 P.M. 12:00 MN Jennifer Deiparine
Sunday
5:00 A.M. 1:00 P.M. Jennifer Deiparine
1:00 P.M. 10:00 P.M. Joy Sanchez
 Exhibit B, - ABS-CBN Salary Voucher from Nov.

Exhibit B-1 & 1999 to July 2000 at P4,000.00

Respondent Gerzon was assigned as the full-time PA of the TV News Department Exhibit B-2
reporting directly to Leo Lastimosa.
Date employed: September 15, 1995

Length of service: 5 years & nine (9) months

On October 12, 2000, respondents filed a Complaint for Recognition of Regular
Employment Status, Underpayment of Overtime Pay, Holiday Pay, Premium Pay,
Service Incentive Pay, Sick Leave Pay, and 13th Month Pay with Damages against
the petitioner before the NLRC. The Labor Arbiter directed the parties to submit II. Merlou Gerzon - ABS-CBN Employees Identification Card
their respective position papers. Upon respondents failure to file their position
papers within the reglementary period, Labor Arbiter Jose G. Gutierrez issued an Exhibit C
Order dated
Exhibit D
April 30, 2001, dismissing the complaint without prejudice for lack of interest to
pursue the case. Respondents received a copy of the Order on May 16, 2001.[7] Exhibit D-1 &
Instead of re-filing their complaint with the NLRC within 10 days from May 16, 2001,
they filed, on June 11, 2001, an Earnest Motion to Refile Complaint with Motion to Exhibit D-2 - ABS-CBN Salary Voucher from March
Admit Position Paper and Motion to Submit Case For Resolution.[8] The Labor
Arbiter granted this motion in an Order dated June 18, 2001, and forthwith 1999 to January 2001 at P4,000.00
admitted the position paper of the complainants. Respondents made the following
allegations: Date employed: September 1, 1995

Length of service: 5 years & 10 months

1. Complainants were engaged by respondent ABS-CBN as regular and full-time

employees for a continuous period of more than five (5) years with a monthly salary
rate of Four Thousand (P4,000.00) pesos beginning 1995 up until the filing of this III. Marlene Nazareno
complaint on November 20, 2000.
Exhibit E - ABS-CBN Employees Identification Card

Exhibit E - ABS-CBN Salary Voucher from Nov.

Machine copies of complainants ABS-CBN Employees Identification Card and salary
vouchers are hereto attached as follows, thus: Exhibit E-1 & 1999 to December 2000

Exhibit :E-2

I. Jennifer Deiparine: Date employed: April 17, 1996

Exhibit A - ABS-CBN Employees Identification Card Length of service: 5 years and one (1) month

IV. Joy Sanchez Lerasan
Exhibit F - ABS-CBN Employees Identification Card
Exhibit F-1 - ABS-CBN Salary Voucher from Aug.
Exhibit F-2 & 2000 to Jan. 2001
Exhibit F-3
Exhibit F-4 - Certification dated July 6, 2000
Acknowledging regular status of
Complainant Joy Sanchez Lerasan
Signed by ABS-CBN Administrative
Officer May Kima Hife
Date employed: April 15, 1998
Length of service: 3 yrs. and one (1) month[9]
Respondents insisted that they belonged to a work pool from which petitioner
chose persons to be given specific assignments at its discretion, and were thus
under its direct supervision and control regardless of nomenclature. They prayed
that judgment be rendered in their favor, thus:
WHEREFORE, premises considered, this Honorable Arbiter is most respectfully
prayed, to issue an order compelling defendants to pay complainants the following:
1. One Hundred Thousand Pesos (P100,000.00) each
and by way of moral damages;
2. Minimum wage differential;
3. Thirteenth month pay differential;
4. Unpaid service incentive leave benefits;
5. Sick leave;
6. Holiday pay;
7. Premium pay;
8. Overtime pay;
9. Night shift differential.
Complainants further pray of this Arbiter to declare them regular and permanent
employees of respondent ABS-CBN as a condition precedent for their admission
into the existing union and collective bargaining unit of respondent company where
they may as such acquire or otherwise perform their obligations thereto or enjoy
the benefits due therefrom.
Complainants pray for such other reliefs as are just and equitable under the
premises.[10]
For its part, petitioner alleged in its position paper that the respondents were PAs
who basically assist in the conduct of a particular program ran by an anchor or
talent. Among their duties include monitoring and receiving incoming calls from
listeners and field reporters and calls of news sources; generally, they perform leg
work for the anchors during a program or a particular production. They are
considered in the industry as program employees in that, as distinguished from
regular or station employees, they are basically engaged by the station for a
particular or specific program broadcasted by the radio station. Petitioner asserted
that as PAs, the complainants were issued talent information sheets which are
updated from time to time, and are thus made the basis to determine the programs
to which they shall later be called on to assist. The program assignments of
complainants were as follows: (e) Abante Sugbu

(f) Pangutana Lang

a. Complainant Nazareno assists in the programs: 2) On Thursdays

1) Nagbagang Balita (early morning edition) Nagbagang Balita

2) Infor Hayupan 3) On Saturdays

3) Arangkada (morning edition) (a) Nagbagang Balita

4) Nagbagang Balita (mid-day edition) (b) Info Hayupan

(c) Arangkada (morning edition)

b. Complainant Deiparine assists in the programs: (d) Nagbagang Balita (mid-day edition)

1) Unzanith 4) On Sundays:

2) Serbisyo de Arevalo (a) Siesta Serenata

3) Arangkada (evening edition) (b) Sunday Chismisan

4) Balitang K (local version) (c) Timbangan sa Hustisya

5) Abante Subu (d) Sayri ang Lungsod

6) Pangutana Lang (e) Haranahan[11]

c. Complainant Gerzon assists in the program:

1) On Mondays and Tuesdays: Petitioner maintained that PAs, reporters, anchors and talents occasionally sideline
for other programs they produce, such as drama
(a) Unzanith
talents in other productions. As program employees, a PAs engagement is
(b) Serbisyo de Arevalo coterminous with the completion of the program, and may be extended/renewed
provided that the program is on-going; a PA may also be assigned to new programs
(c) Arangkada (evening edition) upon the cancellation of one program and the commencement of another. As such
program employees, their compensation is computed on a program basis, a fixed
(d) Balitang K (local version) amount for performance services irrespective of the time consumed. At any rate,
petitioner claimed, as the payroll will show, respondents were paid all salaries and
benefits due them under the law.[12]
Respondent Veneranda C. Sy is absolved from any liability.

Petitioner also alleged that the Labor Arbiter had no jurisdiction to involve the CBA
and interpret the same, especially since respondents were not covered by the
bargaining unit. SO ORDERED.[13]

On July 30, 2001, the Labor Arbiter rendered judgment in favor of the respondents,
and declared that they were regular employees of petitioner; as such, they were
awarded monetary benefits. The fallo of the decision reads:

WHEREFORE, the foregoing premises considered, judgment is hereby rendered
declaring the complainants regular employees of the respondent ABS-CBN
Broadcasting Corporation and directing the same respondent to pay complainants
as follows:
However, the Labor Arbiter did not award money benefits as provided in the CBA
on his belief that he had no jurisdiction to interpret and apply the agreement, as the
same was within the jurisdiction of the Voluntary Arbitrator as provided in Article
261 of the Labor Code.
Respondents counsel received a copy of the decision on August 29, 2001.
Respondent Nazareno received her copy on August 27, 2001, while the other
respondents received theirs on September 8, 2001. Respondents signed and filed
their Appeal Memorandum on September 18, 2001.

I - Merlou A. Gerzon P12,025.00

For its part, petitioner filed a motion for reconsideration, which the Labor Arbiter
II - Marlyn Nazareno 12,025.00 denied and considered as an appeal, conformably with Section 5, Rule V, of the
NLRC Rules of Procedure. Petitioner forthwith appealed the decision to the NLRC,
III - Jennifer Deiparine 12,025.00 while respondents filed a partial appeal.

IV - Josephine Sanchez Lerazan 12,025.00

_________ In its appeal, petitioner alleged the following:

P48,100.00

1. That the Labor Arbiter erred in reviving or re-opening this case which had long
been dismissed without prejudice for more than thirty (30) calendar days;
plus ten (10%) percent Attorneys Fees or a TOTAL aggregate amount of PESOS:
FIFTY TWO THOUSAND NINE HUNDRED TEN (P52,910.00).
2. That the Labor Arbiter erred in depriving the respondent of its Constitutional a. Deiparine, Jennifer - P 716,113.49
right to due process of law;
b. Gerzon, Merlou - 716,113.49

c. Nazareno, Marlyn - 716,113.49

3. That the Labor Arbiter erred in denying respondents Motion for
Reconsideration on an interlocutory order on the ground that the same is a d. Lerazan, Josephine Sanchez - 413,607.75
prohibited pleading;
Total - P 2,561,948.22

4. That the Labor Arbiter erred when he ruled that the complainants are regular
employees of the respondent; 2. To deliver to the complainants Two Hundred Thirty-Three (233) sacks of rice as
of 30 September 2002 representing their rice subsidy in the CBA, broken down as
follows:

5. That the Labor Arbiter erred when he ruled that the complainants are a. Deiparine, Jennifer - 60 Sacks
entitled to 13th month pay, service incentive leave pay and salary differential; and
b. Gerzon, Merlou - 60 Sacks

c. Nazareno, Marlyn - 60 Sacks

6. That the Labor Arbiter erred when he ruled that complainants are entitled to
attorneys fees.[14] d. Lerazan, Josephine Sanchez - 53 Sacks

Total 233 Sacks; and

On November 14, 2002, the NLRC rendered judgment modifying the decision of the 3. To grant to the complainants all the benefits of the CBA after 30 September
Labor Arbiter. The fallo of the decision reads: 2002.

WHEREFORE, premises considered, the decision of Labor Arbiter Jose G. Gutierrez SO ORDERED.[15]
dated 30 July 2001 is SET ASIDE and VACATED and a new one is entered ORDERING
respondent ABS-CBN Broadcasting Corporation, as follows:

1. To pay complainants of their wage differentials and other benefits arising from
the CBA as of 30 September 2002 in the aggregate amount of Two Million Five
Hundred, Sixty-One Thousand Nine Hundred Forty-Eight Pesos and 22/100
(P2,561,948.22), broken down as follows:
The NLRC declared that the Labor Arbiter acted conformably with the Labor Code
when it granted respondents motion to refile the complaint and admit their
position paper. Although respondents were not parties to the CBA between
petitioner and the ABS-CBN Rank-and-File Employees Union, the NLRC nevertheless
granted and computed respondents monetary benefits based on the 1999 CBA,
which was effective until September 2002. The NLRC also ruled that the Labor
Arbiter had jurisdiction over the complaint of respondents because they acted in
their individual capacities and not as members of the union. Their claim for
monetary benefits was within the context of Article 217(6) of the Labor Code. The
validity of respondents claim does not depend upon the interpretation of the CBA.
September 18, 2001 within which to file their Appeal Memorandum. Moreover, the
CA declared that respondents failure to submit their position paper on time is not a
ground to strike out the paper from the records, much less dismiss a complaint.
Anent the substantive issues, the appellate court stated that respondents are not
mere project employees, but regular employees who perform tasks necessary and
desirable in the usual trade and business of petitioner and not just its project
employees. Moreover, the CA added, the award of benefits accorded to rank-and-
file employees under the 1996-1999 CBA is a necessary consequence of the NLRC
ruling that respondents, as PAs, are regular employees.

The NLRC ruled that respondents were entitled to the benefits under the CBA
because they were regular employees who contributed to the profits of petitioner
through their labor. The NLRC cited the ruling of this Court in New Pacific Timber &
Supply Company v. National Labor Relations Commission.[16]
Finding no merit in petitioners motion for reconsideration, the CA denied the same
in a Resolution[17] dated June 16, 2004.

Petitioner filed a motion for reconsideration, which the NLRC denied.

Petitioner thus filed the instant petition for review on certiorari and raises the
following assignments of error:
Petitioner thus filed a petition for certiorari under Rule 65 of the Rules of Court
before the CA, raising both procedural and substantive issues, as follows: (a)
whether the NLRC acted without jurisdiction in admitting the appeal of
respondents; (b) whether the NLRC committed palpable error in scrutinizing the 1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT JURISDICTION AND
reopening and revival of the complaint of respondents with the Labor Arbiter upon GRAVELY ERRED IN UPHOLDING THE NATIONAL LABOR RELATIONS COMMISSION
due notice despite the lapse of 10 days from their receipt of the July 30, 2001 Order NOTWITHSTANDING THE PATENT NULLITY OF THE LATTERS DECISION AND
of the Labor Arbiter; (c) whether respondents were regular employees; (d) whether RESOLUTION.
the NLRC acted without jurisdiction in entertaining and resolving the claim of the
respondents under the CBA instead of referring the same to the Voluntary
Arbitrators as provided in the CBA; and (e) whether the NLRC acted with grave
abuse of discretion when it awarded monetary benefits to respondents under the 2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING
CBA although they are not members of the appropriate bargaining unit. THE RULING OF THE NLRC FINDING RESPONDENTS REGULAR EMPLOYEES.

3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING

THE RULING OF THE NLRC AWARDING CBA BENEFITS TO RESPONDENTS.[18]
On February 10, 2004, the CA rendered judgment dismissing the petition. It held
that the perfection of an appeal shall be upon the expiration of the last day to
appeal by all parties, should there be several parties to a case. Since respondents
received their copies of the decision on September 8, 2001 (except respondent
Nazareno who received her copy of the decision on August 27, 2001), they had until
Considering that the assignments of error are interrelated, the Court shall resolve
them simultaneously.
Petitioner asserts that the appellate court committed palpable and serious error of
law when it affirmed the rulings of the NLRC, and entertained respondents appeal
from the decision of the Labor Arbiter despite the admitted lapse of the
reglementary period within which to perfect
the same. Petitioner likewise maintains that the 10-day period to appeal must be
reckoned from receipt of a partys counsel, not from the time the party learns of the
decision, that is, notice to counsel is notice to party and not the other way around.
Finally, petitioner argues that the reopening of a complaint which the Labor Arbiter
has dismissed without prejudice is a clear violation of Section 1, Rule V of the NLRC
Rules; such order of dismissal had already attained finality and can no longer be set
aside.
Respondents, on the other hand, allege that their late appeal is a non-issue because
it was petitioners own timely appeal that empowered the NLRC to reopen the case.
They assert that although the appeal was filed 10 days late, it may still be given due
course in the interest of substantial justice as an exception to the general rule that
the negligence of a counsel binds the client. On the issue of the late filing of their
position paper, they maintain that this is not a ground to strike it out from the
records or dismiss the complaint.
We find no merit in the petition.
We agree with petitioners contention that the perfection of an appeal within the
statutory or reglementary period is not only mandatory, but also jurisdictional;
failure to do so renders the assailed decision final and executory and deprives the
appellate court or body of the legal authority to alter the final judgment, much less
entertain the appeal. However, this Court has time and again ruled that in
exceptional cases, a belated appeal may be given due course if greater injustice may
occur if an appeal is not given due course than if the reglementary period to appeal
were strictly followed.[19] The Court resorted to this extraordinary measure even at
the expense of sacrificing order and efficiency if only to serve the greater principles
of substantial justice and equity.[20]
In the case at bar, the NLRC did not commit a grave abuse of its discretion in giving
Article 223[21] of the Labor Code a liberal application to prevent the miscarriage of
justice. Technicality should not be allowed to stand in the way of equitably and
completely resolving the rights and obligations of the parties.[22] We have held in a
catena of cases that technical rules are not binding in labor cases and are not to be
applied strictly if the result would be detrimental to the workingman.[23]
Admittedly, respondents failed to perfect their appeal from the decision of the
Labor Arbiter within the reglementary period therefor. However, petitioner
perfected its appeal within the period, and since petitioner had filed a timely
appeal, the NLRC acquired jurisdiction over the case to give due course to its appeal
and render the decision of November 14, 2002. Case law is that the party who failed
to appeal from the decision of the Labor Arbiter to the NLRC can still participate in a
separate appeal timely filed by the adverse party as the situation is considered to
be of greater benefit to both parties.[24]
We find no merit in petitioners contention that the Labor Arbiter abused his
discretion when he admitted respondents position paper which had been belatedly
filed. It bears stressing that the Labor Arbiter is mandated by law to use every
reasonable means to ascertain the facts in each case speedily and objectively,
without technicalities of law or procedure, all in the interest of due process.[25]
Indeed, as stressed by the appellate court, respondents failure to submit a position
paper on time is not a ground for striking out the paper from the records, much less
for dismissing a complaint.[26] Likewise, there is simply no truth to petitioners
assertion that it was denied due process when the Labor Arbiter admitted
respondents position paper without requiring it to file a comment before admitting
said position paper. The essence of due process in administrative proceedings is
simply an opportunity to explain ones side or an opportunity to seek
reconsideration of the action or ruling complained of. Obviously, there is nothing in
the records that would suggest that petitioner had absolute lack of opportunity to
be heard.[27] Petitioner had the right to file a motion for reconsideration of the
Labor Arbiters admission of respondents position paper, and even file a Reply
thereto. In fact, petitioner filed its position paper on April 2, 2001. It must be
stressed that Article 280 of the Labor Code was encoded in our statute books to
hinder the circumvention by unscrupulous employers of the employees right to
security of tenure by indiscriminately and absolutely ruling out all written and oral
agreements inharmonious with the concept of regular employment defined
therein.[28]
We quote with approval the following pronouncement of the NLRC:
The complainants, on the other hand, contend that respondents assailed the Labor
Arbiters order dated 18 June 2001 as violative of the NLRC Rules of Procedure and
as such is violative of their right to procedural due process. That while suggesting
that an Order be instead issued by the Labor Arbiter for complainants to refile this
case, respondents impliedly submit that there is not any substantial damage or
prejudice upon the refiling, even so, respondents suggestion acknowledges
complainants right to prosecute this case, albeit with the burden of repeating the
same procedure, thus, entailing additional time, efforts, litigation cost and precious
time for the Arbiter to repeat the same process twice. Respondents suggestion,
betrays its notion of prolonging, rather than promoting the early resolution of the
case.
Although the Labor Arbiter in his Order dated 18 June 2001 which revived and re-
opened the dismissed case without prejudice beyond the ten (10) day reglementary
period had inadvertently failed to follow Section 16, Rule V, Rules Procedure of the
NLRC which states:
A party may file a motion to revive or re-open a case dismissed without prejudice
within ten (10) calendar days from receipt of notice of the order dismissing the
same; otherwise, his only remedy shall be to re-file the case in the arbitration
branch of origin.
the same is not a serious flaw that had prejudiced the respondents right to due
process. The case can still be refiled because it has not yet prescribed. Anyway,
Article 221 of the Labor Code provides:
In any proceedings before the Commission or any of the Labor Arbiters, the rules of
evidence prevailing in courts of law or equity shall not be controlling and it is the
spirit and intention of this Code that the Commission and its members and the
Labor Arbiters shall use every and all reasonable means to ascertain the facts in
each case speedily and objectively and without regard to technicalities of law or
procedure, all in the interest of due process.
The admission by the Labor Arbiter of the complainants Position Paper and
Supplemental Manifestation which were belatedly filed just only shows that he
acted within his discretion as he is enjoined by law to use every reasonable means
to ascertain the facts in each case speedily and objectively, without regard to
technicalities of law or procedure, all in the interest of due process. Indeed, the
failure to submit a position paper on time is not a ground for striking out the paper
from the records, much less for dismissing a complaint in the case of the
complainant. (University of Immaculate Conception vs. UIC Teaching and Non-
Teaching Personnel Employees, G.R. No. 144702, July 31, 2001).
In admitting the respondents position paper albeit late, the Labor Arbiter acted
within her discretion. In fact, she is enjoined by law to use every reasonable means
to ascertain the facts in each case speedily and objectively, without technicalities of
law or procedure, all in the interest of due process. (Panlilio vs. NLRC, 281 SCRA 53).
The respondents were given by the Labor Arbiter the opportunity to submit position
paper. In fact, the respondents had filed their position paper on 2 April 2001. What
is material in the compliance of due process is the fact that the parties are given the
opportunities to submit position papers.
Due process requirements are satisfied where the parties are given the
opportunities to submit position papers. (Laurence vs. NLRC, 205 SCRA 737).
Thus, the respondent was not deprived of its Constitutional right to due process of
law.[29]

We reject, as barren of factual basis, petitioners contention that respondents are
considered as its talents, hence, not regular employees of the broadcasting
company. Petitioners claim that the functions performed by the respondents are
not at all necessary, desirable, or even vital to its trade or business is belied by the
evidence on record.
Case law is that this Court has always accorded respect and finality to the findings
of fact of the CA, particularly if they coincide with those of the Labor Arbiter and the
National Labor Relations Commission, when supported by substantial evidence.[30]
The question of whether respondents are regular or project employees or
independent contractors is essentially factual in nature; nonetheless, the Court is
constrained to resolve it due to its tremendous effects to the legions of production
assistants working in the Philippine broadcasting industry.
We agree with respondents contention that where a person has rendered at least
one year of service, regardless of the nature of the activity performed, or where the
work is continuous or intermittent, the employment is considered regular as long as
the activity exists, the reason being that a customary appointment is not
indispensable before one may be formally declared as having attained regular
status. Article 280 of the Labor Code provides:
ART. 280. REGULAR AND CASUAL EMPLOYMENT.The provisions of written
agreement to the contrary notwithstanding and regardless of the oral agreement of
the parties, an employment shall be deemed to be regular where the employee has
been engaged to perform activities which are usually necessary or desirable in the
usual business or trade of the employer except where the employment has been
fixed for a specific project or undertaking the completion or termination of which
has been determined at the time of the engagement of the employee or where the
work or services to be performed is seasonal in nature and the employment is for
the duration of the season.
In Universal Robina Corporation v. Catapang,[31] the Court reiterated the test in
determining whether one is a regular employee:
The primary standard, therefore, 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. The test is whether the
former is usually necessary or desirable in the usual business or trade of the
employer. The connection can be
determined by considering the nature of work performed and its relation to the
scheme of the particular business or trade in its entirety. Also, if the employee has
been performing the job for at least a year, even if the performance is not
continuous and merely intermittent, the law deems repeated and continuing need
for its performance as sufficient evidence of the necessity if not indispensability of
that activity to the business. Hence, the employment is considered regular, but only
with respect to such activity and while such activity exists.[32]
As elaborated by this Court in Magsalin v. National Organization of Working
Men:[33]
Even while the language of law might have been more definitive, the clarity of its
spirit and intent, i.e., to ensure a regular workers security of tenure, however, can
hardly be doubted. In determining whether an employment should be considered
regular or non-regular, the applicable test is the reasonable connection between
the particular activity performed by the employee in relation to the usual business
or trade of the employer. The standard, supplied by the law itself, is whether the
work undertaken is necessary or desirable in the usual business or trade of the
employer, a fact that can be assessed by looking into the nature of the services
rendered and its relation to the general scheme under which the business or trade
is pursued in the usual course. It is distinguished from a specific undertaking that is
divorced from the normal activities required in carrying on the particular business
or trade. But, although the work to be performed is only for a specific project or
seasonal, where a person thus engaged has been performing the job for at least one
year, even if the performance is not continuous or is merely intermittent, the law
deems the repeated and continuing need for its performance as being sufficient to
indicate the necessity or desirability of that activity to the business or trade of the
employer. The employment of such person is also then deemed to be regular with
respect to such activity and while such activity exists.[34]
Not considered regular employees are project employees, the completion or
termination of which is more or less determinable at the time of employment, such
as those employed in connection with a particular construction project, and
seasonal employees whose employment by its nature is only desirable for a limited
period of time. Even then, any employee who has rendered at least one year of
service, whether continuous or intermittent, is deemed regular with respect to the
activity performed and while such activity actually exists.
It is of no moment that petitioner hired respondents as talents. The fact that
respondents received pre-agreed talent fees instead of salaries, that they did not
observe the required office hours, and that they were permitted to join other
productions during their free time are not conclusive of the nature of their
employment. Respondents cannot be considered talents because they are not
actors or actresses or radio specialists or mere clerks or utility employees. They are
regular employees who perform several different duties under the control and
direction of ABS-CBN executives and supervisors.
Thus, there are two kinds of regular employees under the law: (1) those engaged to
perform activities which are necessary or desirable in the usual business or trade of
the employer; and (2) those casual employees who have rendered at least one year
of service, whether continuous or broken, with respect to the activities in which
they are employed.[35]
The law overrides such conditions which are prejudicial to the interest of the
worker whose weak bargaining situation necessitates the succor of the State. What
determines whether a certain employment is regular or otherwise is not the will or
word of the employer, to which the worker oftentimes acquiesces, much less the
procedure of hiring the employee or the manner of paying the salary or the actual
time spent at work. It is the character of the activities performed in relation to the
particular trade or business taking into account all the circumstances, and in some
cases the length of time of its performance and its continued existence.[36] It is
obvious that one year after they were employed by petitioner, respondents became
regular employees by operation of law.[37]
Additionally, respondents cannot be considered as project or program employees
because no evidence was presented to show that the duration and scope of the
project were determined or specified at the time of their engagement. Under
existing jurisprudence, project could refer to two distinguishable types of activities.
First, a project may refer to a particular job or undertaking that is within the regular
or usual business of the employer, but which is distinct and separate, and
identifiable as such, from the other undertakings of the company. Such job or
undertaking begins and ends at determined or determinable times. Second, the
term project may also refer to a particular job or undertaking that is not within the
regular business of the employer. Such a job or undertaking must also be
identifiably separate and distinct from the ordinary or regular business operations
of the employer. The job or undertaking also begins and ends at determined or
determinable times.[38]
The principal test is whether or not the project employees were assigned to carry
out a specific project or undertaking, the duration and scope of which were
specified at the time the employees were engaged for that project.[39]
In this case, it is undisputed that respondents had continuously performed the same
activities for an average of five years. Their assigned tasks are necessary or
desirable in the usual business or trade of the petitioner. The persisting need for
their services is sufficient evidence of the necessity and indispensability of such
services to petitioners business or trade.[40] While length of time may not be a sole
controlling test for project employment, it can be a strong factor to determine
whether the employee was hired for a specific undertaking or in fact tasked to
perform functions which are vital, necessary and indispensable to the usual trade or
business of the employer.[41] We note further that petitioner did not report the
termination of respondents employment in the particular project to the
Department of Labor and Employment Regional Office having jurisdiction over the
workplace within 30 days following the date of their separation from work, using
the prescribed form on employees termination/ dismissals/suspensions.[42]
As gleaned from the records of this case, petitioner itself is not certain how to
categorize respondents. In its earlier pleadings, petitioner classified respondents as
program employees, and in later pleadings, independent contractors. Program
employees, or project employees, are different from independent contractors
because in the case of the latter, no employer-employee relationship exists.
Petitioners reliance on the ruling of this Court in Sonza v. ABS-CBN Broadcasting
Corporation[43] is misplaced. In that case, the Court explained why Jose Sonza, a
well-known television and radio personality, was an independent contractor and
not a regular employee:
A. Selection and Engagement of Employee
ABS-CBN engaged SONZAS services to co-host its television and radio programs
because of SONZAS peculiar skills, talent and celebrity status. SONZA contends that
the discretion used by respondent in specifically selecting and hiring complainant
over other broadcasters of possibly similar experience and qualification as
complainant belies respondents claim of independent contractorship.
Independent contractors often present themselves to possess unique skills,
expertise or talent to distinguish them from ordinary employees. The specific
selection and hiring of SONZA, because of his unique skills, talent and celebrity
status not possessed by ordinary employees, is a circumstance indicative, but not
conclusive, of an independent contractual relationship. If SONZA did not possess
such unique skills, talent and celebrity status, ABS-CBN would not have entered into
the Agreement with SONZA but would have hired him through its personnel
department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively
determine his status. We must consider all the circumstances of the relationship,
with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going
to MJMDC. SONZA asserts that this mode of fee payment shows that he was an
employee of ABS-CBN. SONZA also points out that ABS-CBN granted him benefits
and privileges which he would not have enjoyed if he were truly the subject of a
valid job contract.
All the talent fees and benefits paid to SONZA were the result of negotiations that
led to the Agreement. If SONZA were ABS-CBNs employee, there would be no need
for the parties to stipulate on benefits such as SSS, Medicare, x x x and 13th month
pay which the law automatically incorporates into every employer-employee
contract. Whatever benefits SONZA enjoyed arose from contract and not because
of an employer-employee relationship.
SONZAs talent fees, amounting to P317,000 monthly in the second and third year,
are so huge and out of the ordinary that they indicate more an independent
contractual relationship rather than an employer-employee relationship. ABS-CBN
agreed to pay SONZA such huge talent fees precisely because of SONZAS unique
skills, talent and celebrity status not possessed by ordinary employees. Obviously,
SONZA acting alone possessed enough bargaining power to demand and receive
such huge talent fees for his services. The power to bargain talent fees way above
the salary scales of ordinary employees is a circumstance indicative, but not
conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate
the status of SONZA as an independent contractor. The parties expressly agreed on
such mode of payment. Under the Agreement, MJMDC is the AGENT of SONZA, to
whom MJMDC would have to turn over any talent fee accruing under the
Agreement.[44]

In the case at bar, however, the employer-employee relationship between
petitioner and respondents has been proven.
First. In the selection and engagement of respondents, no peculiar or unique skill,
talent or celebrity status was required from them because they were merely hired
through petitioners personnel department just like any ordinary employee.
Second. The so-called talent fees of respondents correspond to wages given as a
result of an employer-employee relationship. Respondents did not have the power
to bargain for huge talent fees, a circumstance negating independent contractual
relationship.
Third. Petitioner could always discharge respondents should it find their work
unsatisfactory, and respondents are highly dependent on the petitioner for
continued work.
Fourth. The degree of control and supervision exercised by petitioner over
respondents through its supervisors negates the allegation that respondents are
independent contractors.
The presumption is that when the work done is an integral part of the regular
business of the employer and when the worker, relative to the employer, does not
furnish an independent business or professional service, such work is a regular
employment of such employee and not an independent contractor.[45] The Court
will peruse beyond any such agreement to examine the facts that typify the parties
actual relationship.[46]
It follows then that respondents are entitled to the benefits provided for in the
existing CBA between petitioner and its rank-and-file employees. As regular
employees, respondents are entitled to the benefits granted to all other regular
employees of petitioner under the CBA.[47] We quote with approval the ruling of
the appellate court, that the reason why production assistants were excluded from
the CBA is precisely because they were erroneously classified and treated as project
employees by petitioner:
x x x The award in favor of private respondents of the benefits accorded to rank-
and-file employees of ABS-CBN under the 1996-1999 CBA is a necessary
consequence of public respondents ruling that private respondents as production
assistants of petitioner are regular employees. The monetary award is not
considered as claims involving the interpretation or implementation of the
collective bargaining agreement. The reason why production assistants were
excluded from the said agreement is precisely because they were classified and
treated as project employees by petitioner.
As earlier stated, it is not the will or word of the employer which determines the
nature of employment of an employee but the nature of the activities performed by
such employee in relation to the particular business or trade of the employer.
Considering that We have clearly found that private respondents are regular
employees of petitioner, their exclusion from the said CBA on the misplaced belief
of the parties to the said agreement that they are project employees, is therefore
not proper. Finding said private respondents as regular employees and not as mere
project employees, they must be accorded the benefits due under the said
Collective Bargaining Agreement.
A collective bargaining agreement is a contract entered into by the union
representing the employees and the employer. However, even the non-member
employees are entitled to the benefits of the contract. To accord its benefits only to
members of the union without any valid reason would constitute undue
discrimination against non-members. A collective bargaining agreement is binding
on all employees of the company. Therefore, whatever benefits are given to the
other employees of ABS-CBN must likewise be accorded to private respondents
who were regular employees of petitioner.[48]

Besides, only talent-artists were excluded from the CBA and not production
assistants who are regular employees of the respondents. Moreover, under Article
1702 of the New Civil Code: In case of doubt, all labor legislation and all labor
contracts shall be construed in favor of the safety and decent living of the laborer.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The
assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 76582
are AFFIRMED. Costs against petitioner.
SO ORDERED.
ROMEO J. CALLEJO, SR.
Associate Justice
G.R. No. 146881 February 5, 2007
COCA COLA BOTTLERS (PHILS.), INC./ERIC MONTINOLA, Manager, Petitioners,
vs.
DR. DEAN N. CLIMACO, Respondent.
DECISION
AZCUNA, J.:
This is a petition for review on certiorari of the Decision of the Court of Appeals1
promulgated on July 7, 2000, and its Resolution promulgated on January 30, 2001,
denying petitioner’s motion for reconsideration. The Court of Appeals ruled that an
employer-employee relationship exists between respondent Dr. Dean N. Climaco
and petitioner Coca-Cola Bottlers Phils., Inc. (Coca-Cola), and that respondent was
illegally dismissed.
Respondent Dr. Dean N. Climaco is a medical doctor who was hired by petitioner
Coca-Cola Bottlers Phils., Inc. by virtue of a Retainer Agreement that stated:
WHEREAS, the COMPANY desires to engage on a retainer basis the services of a
physician and the said DOCTOR is accepting such engagement upon terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual agreement
hereinafter contained, the parties agree as follows:
1. This Agreement shall only be for a period of one (1) year beginning January 1,
1988 up to December 31, 1988. The said term notwithstanding, either party may
terminate the contract upon giving a thirty (30)-day written notice to the other.
2. The compensation to be paid by the company for the services of the DOCTOR is
hereby fixed at PESOS: Three Thousand Eight Hundred (₱3,800.00) per month. The
DOCTOR may charge professional fee for hospital services rendered in line with his
specialization. All payments in connection with the Retainer Agreement shall be
subject to a withholding tax of ten percent (10%) to be withheld by the COMPANY
under the Expanded Withholding Tax System. In the event the withholding tax rate
shall be increased or decreased by appropriate laws, then the rate herein stipulated
shall accordingly be increased or decreased pursuant to such laws.
3. That in consideration of the above mentioned retainer’s fee, the DOCTOR agrees
to perform the duties and obligations enumerated in the COMPREHENSIVE
MEDICAL PLAN, hereto attached as Annex "A" and made an integral part of this
Retainer Agreement.
4. That the applicable provisions in the Occupational Safety and Health Standards,
Ministry of Labor and Employment shall be followed.
5. That the DOCTOR shall be directly responsible to the employee concerned and
their dependents for any injury inflicted on, harm done against or damage caused
upon the employee of the COMPANY or their dependents during the course of his
examination, treatment or consultation, if such injury, harm or damage was
committed through professional negligence or incompetence or due to the other
valid causes for action.
6. That the DOCTOR shall observe clinic hours at the COMPANY’S premises from
Monday to Saturday of a minimum of two (2) hours each day or a maximum of TWO
(2) hours each day or treatment from 7:30 a.m. to 8:30 a.m. and 3:00 p.m. to 4:00
p.m., respectively unless such schedule is otherwise changed by the COMPANY as
[the] situation so warrants, subject to the Labor Code provisions on Occupational
Safety and Health Standards as the COMPANY may determine. It is understood that
the DOCTOR shall stay at least two (2) hours a day in the COMPANY clinic and that
such two (2) hours be devoted to the workshift with the most number of
employees. It is further understood that the DOCTOR shall be on call at all times
during the other workshifts to attend to emergency case[s];
7. That no employee-employer relationship shall exist between the COMPANY and
the DOCTOR whilst this contract is in effect, and in case of its termination, the
DOCTOR shall be entitled only to such retainer fee as may be due him at the time of
termination.2
The Comprehensive Medical Plan,3 which contains the duties and responsibilities of
respondent, adverted to in the Retainer Agreement, provided:
A. OBJECTIVE
These objectives have been set to give full consideration to [the] employees’ and
dependents’ health:
1. Prompt and adequate treatment of occupational and non-occupational injuries
and diseases.
2. To protect employees from any occupational health hazard by evaluating health
factors related to working conditions.
3. To encourage employees [to] maintain good personal health by setting up
employee orientation and education on health, hygiene and sanitation, nutrition,
physical fitness, first aid training, accident prevention and personnel safety.
4. To evaluate other matters relating to health such as absenteeism, leaves and
termination.
5. To give family planning motivations.
B. COVERAGE
1. All employees and their dependents are embraced by this program.
2. The health program shall cover pre-employment and annual p.e., hygiene and
sanitation, immunizations, family planning, physical fitness and athletic programs
and other activities such as group health education program, safety and first aid
classes, organization of health and safety committees.
3. Periodically, this program will be reviewed and adjusted based on employees’
needs.
C. ACTIVITIES
1. Annual Physical Examination.
2. Consultations, diagnosis and treatment of occupational and non-occupational
illnesses and injuries.
3. Immunizations necessary for job conditions.
4. Periodic inspections for food services and rest rooms.
5. Conduct health education programs and present education materials.
6. Coordinate with Safety Committee in developing specific studies and program to
minimize environmental health hazards.
7. Give family planning motivations.
8. Coordinate with Personnel Department regarding physical fitness and athletic
programs.
9. Visiting and follow-up treatment of Company employees and their dependents
confined in the hospital.
The Retainer Agreement, which began on January 1, 1988, was renewed annually.
The last one expired on December 31, 1993. Despite the non-renewal of the
Retainer Agreement, respondent continued to perform his functions as company
doctor to Coca-Cola until he received a letter4 dated March 9, 1995 from petitioner
company concluding their retainership agreement effective 30 days from receipt
thereof.
It is noted that as early as September 1992, petitioner was already making inquiries
regarding his status with petitioner company. First, he wrote a letter addressed to
Dr. Willie Sy, the Acting President and Chairperson of the Committee on
Membership, Philippine College of Occupational Medicine. In response, Dr. Sy
wrote a letter5 to the Personnel Officer of Coca-Cola Bottlers Phils., Bacolod City,
stating that respondent should be considered as a regular part-time physician,
having served the company continuously for four (4) years. He likewise stated that
respondent must receive all the benefits and privileges of an employee under
Article 157 (b)6 of the Labor Code.

Petitioner company, however, did not take any action. Hence, respondent made
another inquiry directed to the Assistant Regional Director, Bacolod City District
Office of the Department of Labor and Employment (DOLE), who referred the
inquiry to the Legal Service of the DOLE, Manila. In his letter7 dated May 18, 1993,
Director Dennis P. Ancheta, Legal Service, DOLE, stated that he believed that an
employer-employee relationship existed between petitioner and respondent based
on the Retainer Agreement and the Comprehensive Medical Plan, and the
application of the "four-fold" test. However, Director Ancheta emphasized that the
existence of employer-employee relationship is a question of fact. Hence,
termination disputes or money claims arising from employer-employee relations
exceeding ₱5,000 may be filed with the National Labor Relations Commission
(NLRC). He stated that their opinion is strictly advisory.
An inquiry was likewise addressed to the Social Security System (SSS). Thereafter,
Mr. Romeo R. Tupas, OIC-FID of SSS-Bacolod City, wrote a letter8 to the Personnel
Officer of Coca-Cola Bottlers Phils., Inc. informing the latter that the legal staff of his
office was of the opinion that the services of respondent partake of the nature of
work of a regular company doctor and that he was, therefore, subject to social
security coverage.
Respondent inquired from the management of petitioner company whether it was
agreeable to recognizing him as a regular employee. The management refused to
do so.
On February 24, 1994, respondent filed a Complaint9 before the NLRC, Bacolod
City, seeking recognition as a regular employee of petitioner company and prayed
for the payment of all benefits of a regular employee, including 13th Month Pay,
Cost of Living Allowance, Holiday Pay, Service Incentive Leave Pay, and Christmas
Bonus. The case was docketed as RAB Case No. 06-02-10138-94.
While the complaint was pending before the Labor Arbiter, respondent received a
letter dated March 9, 1995 from petitioner company concluding their retainership
agreement effective thirty (30) days from receipt thereof. This prompted
respondent to file a complaint for illegal dismissal against petitioner company with
the NLRC, Bacolod City. The case was docketed as RAB Case No. 06-04-10177-95.
In a Decision10 dated November 28, 1996, Labor Arbiter Jesus N. Rodriguez, Jr.
found that petitioner company lacked the power of control over respondent’s
performance of his duties, and recognized as valid the Retainer Agreement between
the parties. Thus, the Labor Arbiter dismissed respondent’s complaint in the first
case, RAB Case No. 06-02-10138-94. The dispositive portion of the Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered dismissing the
instant complaint seeking recognition as a regular employee.
SO ORDERED.11
In a Decision12 dated February 24, 1997, Labor Arbiter Benjamin Pelaez dismissed
the case for illegal dismissal (RAB Case No. 06-04-10177-95) in view of the previous
finding of Labor Arbiter Jesus N. Rodriguez, Jr. in RAB Case No. 06-02-10138-94 that
complainant therein, Dr. Dean Climaco, is not an employee of Coca-Cola Bottlers
Phils., Inc.
Respondent appealed both decisions to the NLRC, Fourth Division, Cebu City.
In a Decision13 promulgated on November 28, 1997, the NLRC dismissed the appeal
in both cases for lack of merit. It declared that no employer-employee relationship
existed between petitioner company and respondent based on the provisions of the
Retainer Agreement which contract governed respondent’s employment.
Respondent’s motion for reconsideration was denied by the NLRC in a Resolution14
promulgated on August 7, 1998.
Respondent filed a petition for review with the Court of Appeals.
In a Decision promulgated on July 7, 2000, the Court of Appeals ruled that an
employer-employee relationship existed between petitioner company and
respondent after applying the four-fold test: (1) the power to hire the employee; (2)
the payment of wages; (3) the power of dismissal; and (4) the employer’s power to
control the employee with respect to the means and methods by which the work is
to be accomplished.
The Court of Appeals held:
The Retainer Agreement executed by and between the parties, when read together
with the Comprehensive Medical Plan which was made an integral part of the
retainer agreements, coupled with the actual services rendered by the petitioner,
would show that all the elements of the above test are present.
First, the agreements provide that "the COMPANY desires to engage on a retainer
basis the services of a physician and the said DOCTOR is accepting such engagement
x x x" (Rollo, page 25). This clearly shows that Coca-Cola exercised its power to hire
the services of petitioner.
Secondly, paragraph (2) of the agreements showed that petitioner would be
entitled to a final compensation of Three Thousand Eight Hundred Pesos per
month, which amount was later raised to Seven Thousand Five Hundred on the
latest contract. This would represent the element of payment of wages.
Thirdly, it was provided in paragraph (1) of the agreements that the same shall be
valid for a period of one year. "The said term notwithstanding, either party may
terminate the contract upon giving a thirty (30) day written notice to the other."
(Rollo, page 25). This would show that Coca-Cola had the power of dismissing the
petitioner, as it later on did, and this could be done for no particular reason, the
sole requirement being the former’s compliance with the 30-day notice
requirement.
Lastly, paragraphs (3) and (6) of the agreements reveal that Coca-Cola exercised the
most important element of all, that is, control, over the conduct of petitioner in the
latter’s performance of his duties as a doctor for the company.
It was stated in paragraph (3) that the doctor agrees to perform the duties and
obligations enumerated in the Comprehensive Medical Plan referred to above. In
paragraph (6), the fixed and definite hours during which the petitioner must render
service to the company is laid down.
We say that there exists Coca-Cola’s power to control petitioner because the
particular objectives and activities to be observed and accomplished by the latter
are fixed and set under the Comprehensive Medical Plan which was made an
integral part of the retainer agreement. Moreover, the times for accomplishing
these objectives and activities are likewise controlled and determined by the
company. Petitioner is subject to definite hours of work, and due to this, he
performs his duties to Coca-Cola not at his own pleasure but according to the
schedule dictated by the company.
In addition, petitioner was designated by Coca-Cola to be a member of its Bacolod
Plant’s Safety Committee. The minutes of the meeting of the said committee dated
February 16, 1994 included the name of petitioner, as plant physician, as among
those comprising the committee.
It was averred by Coca-Cola in its comment that they exercised no control over
petitioner for the reason that the latter was not directed as to the procedure and
manner of performing his assigned tasks. It went as far as saying that "petitioner
was not told how to immunize, inject, treat or diagnose the employees of the
respondent (Rollo, page 228). We believe that if the "control test" would be
interpreted this strictly, it would result in an absurd and ridiculous situation wherein
we could declare that an entity exercises control over another’s activities only in
instances where the latter is directed by the former on each and every stage of
performance of the particular activity. Anything less than that would be tantamount
to no control at all.
To our minds, it is sufficient if the task or activity, as well as the means of
accomplishing it, is dictated, as in this case where the objectives and activities were
laid out, and the specific time for performing them was fixed by the controlling
party.15
Moreover, the Court of Appeals declared that respondent should be classified as a
regular employee having rendered six years of service as plant physician by virtue of
several renewed retainer agreements. It underscored the provision in Article 28016
of the Labor Code stating 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." Further, it held that the termination of
respondent’s services without any just or authorized cause constituted illegal
dismissal.
In addition, the Court of Appeals found that respondent’s dismissal was an act
oppressive to labor and was effected in a wanton, oppressive or malevolent manner
which entitled respondent to moral and exemplary damages.
The dispositive portion of the Decision reads:
WHEREFORE, in view of the foregoing, the Decision of the National Labor Relations
Commission dated November 28, 1997 and its Resolution dated August 7, 1998 are
found to have been issued with grave abuse of discretion in applying the law to the
established facts, and are hereby REVERSED and SET ASIDE, and private respondent
Coca-Cola Bottlers, Phils.. Inc. is hereby ordered to:
1. Reinstate the petitioner with full backwages without loss of seniority rights from
the time his compensation was withheld up to the time he is actually reinstated;
however, if reinstatement is no longer possible, to pay the petitioner separation pay
equivalent to one (1) month’s salary for every year of service rendered, computed
at the rate of his salary at the time he was dismissed, plus backwages.
2. Pay petitioner moral damages in the amount of ₱50,000.00.
3. Pay petitioner exemplary damages in the amount of ₱50,000.00.
4. Give to petitioner all other benefits to which a regular employee of Coca-Cola is
entitled from the time petitioner became a regular employee (one year from
effectivity date of employment) until the time of actual payment.
SO ORDERED.17
Petitioner company filed a motion for reconsideration of the Decision of the Court
of Appeals.
In a Resolution promulgated on January 30, 2001, the Court of Appeals stated that
petitioner company noted that its Decision failed to mention whether respondent
was a full-time or part-time regular employee. It also questioned how the benefits
under their Collective Bargaining Agreement which the Court awarded to
respondent could be given to him considering that such benefits were given only to
regular employees who render a full day’s work of not less that eight hours. It was
admitted that respondent is only required to work for two hours per day.
The Court of Appeals clarified that respondent was a "regular part-time employee
and should be accorded all the proportionate benefits due to this category of
employees of [petitioner] Corporation under the CBA." It sustained its decision on
all other matters sought to be reconsidered.
Hence, this petition filed by Coca-Cola Bottlers Phils., Inc.
The issues are:
1. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR,
BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE
LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, CONTRARY
TO THE DECISIONS OF THE HONORABLE SUPREME COURT ON THE MATTER.
2. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR,
BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE
LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND
HOLDING INSTEAD THAT THE WORK OF A PHYSICIAN IS NECESSARY AND DESIRABLE
TO THE BUSINESS OF SOFTDRINKS MANUFACTURING, CONTRARY TO THE RULINGS
OF THE SUPREME COURT IN ANALOGOUS CASES.
3. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR,
BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE
LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND
HOLDING INSTEAD THAT THE PETITIONERS EXERCISED CONTROL OVER THE WORK
OF THE RESPONDENT.
4. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR,
BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE
LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND
FINDING THAT THERE IS EMPLOYER-EMPLOYEE RELATIONSHIP PURSUANT TO
ARTICLE 280 OF THE LABOR CODE.
5. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR,
BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE
LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND
FINDING THAT THERE EXISTED ILLEGAL DISMISSAL WHEN THE EMPLOYENT OF THE
RESPONDENT WAS TERMINATED WITHOUT JUST CAUSE.
6. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR,
BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE
LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND
FINDING THAT THE RESPONDENT IS A REGULAR PART TIME EMPLOYEE WHO IS
ENTITLED TO PROPORTIONATE BENEFITS AS A REGULAR PART TIME EMPLOYEE
ACCORDING TO THE PETITIONERS’ CBA.
7. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR,
BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE
LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND
FINDING THAT THE RESPONDENT IS ENTITLED TO MORAL AND EXEMPLARY
DAMAGES.
The main issue in this case is whether or not there exists an employer-employee
relationship between the parties. The resolution of the main issue will determine
whether the termination of respondent’s employment is illegal.
The Court, in determining the existence of an employer-employee relationship, has
invariably adhered to the four-fold test: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power
to control the employee’s conduct, or the so-called "control test," considered to be
the most important element.18
The Court agrees with the finding of the Labor Arbiter and the NLRC that the
circumstances of this case show that no employer-employee relationship exists
between the parties. The Labor Arbiter and the NLRC correctly found that petitioner
company lacked the power of control over the performance by respondent of his
duties. The Labor Arbiter reasoned that the Comprehensive Medical Plan, which
contains the respondent’s objectives, duties and obligations, does not tell
respondent "how to conduct his physical examination, how to immunize, or how to
diagnose and treat his patients, employees of [petitioner] company, in each case."
He likened this case to that of Neri v. National Labor Relations Commission,19 which
held:
In the case of petitioner Neri, it is admitted that FEBTC issued a job description
which detailed her functions as a radio/telex operator. However, a cursory reading
of the job description shows that what was sought to be controlled by FEBTC was
actually the end result of the task, e.g., that the daily incoming and outgoing
telegraphic transfer of funds received and relayed by her, respectively, tallies with and upholds the validity of the Retainership Agreement which clearly stated that no
that of the register. The guidelines were laid down merely to ensure that the employer-employee relationship existed between the parties. The Agreement also
desired end result was achieved. It did not, however, tell Neri how the radio/telex stated that it was only for a period of 1 year beginning January 1, 1988 to December
machine should be operated. 31, 1998, but it was renewed on a yearly basis.

In effect, the Labor Arbiter held that petitioner company, through the
Comprehensive Medical Plan, provided guidelines merely to ensure that the end
result was achieved, but did not control the means and methods by which
respondent performed his assigned tasks.
The NLRC affirmed the findings of the Labor Arbiter and stated that it is precisely
because the company lacks the power of control that the contract provides that
respondent shall be directly responsible to the employee concerned and their
dependents for any injury, harm or damage caused through professional
negligence, incompetence or other valid causes of action.
Considering that there is no employer-employee relationship between the parties,
the termination of the Retainership Agreement, which is in accordance with the
provisions of the Agreement, does not constitute illegal dismissal of respondent.
Consequently, there is no basis for the moral and exemplary damages granted by
the Court of Appeals to respondent due to his alleged illegal dismissal.
WHEREFORE, the petition is GRANTED and the Decision and Resolution of the Court
of Appeals are REVERSED and SET ASIDE. The Decision and Resolution dated
November 28, 1997 and August 7, 1998, respectively, of the National Labor
Relations Commission are REINSTATED.

The Labor Arbiter also correctly found that the provision in the Retainer Agreement No costs.
that respondent was on call during emergency cases did not make him a regular
employee. He explained, thus: WPP MARKETING COMMUNICATIONS, INC.,

Likewise, the allegation of complainant that since he is on call at anytime of the day JOHN STEEDMAN,
and night makes him a regular employee is off-tangent. Complainant does not
dispute the fact that outside of the two (2) hours that he is required to be at MARK WEBSTER, and
respondent company’s premises, he is not at all further required to just sit around
in the premises and wait for an emergency to occur so as to enable him from using NOMINADA LANSANG,
such hours for his own benefit and advantage. In fact, complainant maintains his
own private clinic attending to his private practice in the city, where he services his Petitioners,
patients, bills them accordingly -- and if it is an employee of respondent company
who is attended to by him for special treatment that needs hospitalization or
operation, this is subject to a special billing. More often than not, an employee is
required to stay in the employer’s workplace or proximately close thereto that he
cannot utilize his time effectively and gainfully for his own purpose. Such is not the - versus -
prevailing situation here.1awphi1.net

In addition, the Court finds that the schedule of work and the requirement to be on
call for emergency cases do not amount to such control, but are necessary incidents
to the Retainership Agreement.
JOCELYN M. GALERA,
The Court also notes that the Retainership Agreement granted to both parties the
power to terminate their relationship upon giving a 30-day notice. Hence, petitioner Respondent.
company did not wield the sole power of dismissal or termination.
x-------------------x
The Court agrees with the Labor Arbiter and the NLRC that there is nothing wrong
with the employment of respondent as a retained physician of petitioner company JOCELYN M. GALERA,
Petitioner,

- versus - G.R. No. 169239

Present:

WPP MARKETING COMMUNICATIONS, INC., JOHN STEEDMAN, CARPIO, Acting C.J.,

MARK WEBSTER, and NOMINADA LANSANG, Chairperson,

Respondents. BRION,

DEL CASTILLO,

G.R. No. 169207 ABAD, and

PEREZ, JJ.

Promulgated:

March 25, 2010

x--------------------------------------------------x

DECISION
CARPIO, Acting C.J.: Name: Jocelyn M. Galera

Address: 163 Mediterranean Avenue

The Case Hayward, CA 94544

G.R. Nos. 169207 and 169239 are petitions for review[1] assailing the Decision[2]
promulgated on 14 April 2005 as well as the Resolution[3] promulgated on 1 August Position: Managing Director
2005 of the Court of Appeals (appellate court) in CA-G.R. SP No. 78721. The
appellate court granted and gave due course to the petition filed by Jocelyn M. Mindshare Philippines
Galera (Galera). The appellate courts decision reversed and set aside that of the
National Labor Relations Commission (NLRC), and directed WPP Marketing Annual Salary: Peso 3,924,000
Communications, Inc. (WPP) to pay Galera backwages, separation pay, unpaid
housing benefit, unpaid personal and accident insurance benefits, cash value under Start Date: 1 September 1999
the companys pension plan, 30 days paid holiday benefit, moral damages,
exemplary damages, 10% of the total judgment award as attorneys fees, and costs Commencement Date: 1 September 1999
of the suit.
(for continuous service)

Office: Mindshare Manila

The Facts
6. Housing Allowance

The Company will provide suitable housing in Manila at a maximum cost (including
The appellate court narrated the facts as follows: management fee and other associated costs) of Peso 576,000 per annum.

Petitioner is Jocelyn Galera (GALERA), a [sic] American citizen who was recruited
from the United States of America by private respondent John Steedman,
Chairman-WPP Worldwide and Chief Executive Officer of Mindshare, Co., a
corporation based in Hong Kong, China, to work in the Philippines for private
respondent WPP Marketing Communications, Inc. (WPP), a corporation registered
and operating under the laws of Philippines. GALERA accepted the offer and she
signed an Employment Contract entitled Confirmation of Appointment and
Statement of Terms and Conditions (Annex B to Petition for Certiorari). The relevant
portions of the contract entered into between the parties are as follows:
Particulars:
7. Other benefits.
The Company will provide you with a fully maintained company car and a driver.
The Company will continue to provide medical, health, life and personal accident
insurance plans, to an amount not exceeding Peso 300,000 per annum, in
accordance with the terms of the respective plans, as provided by JWT Manila.
The Company will reimburse you and your spouse one way business class air tickets
from USA to Manila and the related shipping and relocation cost not exceeding
US$5,000 supported by proper documentation. If you leave the Company within
one year, you will reimburse the Company in full for all costs of the initial relocation
as described therein.

You will participate in the JWT Pension Plan under the terms of this plan, the
Company reserves the right to transfer this benefit to a Mindshare Pension Plan in
the future, if so required.
8. Holidays
You are entitled to 20 days paid holiday in addition to public holidays per calendar
year to be taken at times agreed with the Company. Carry-over of unused accrued
holiday entitlement into a new holiday year will not normally be allowed. No
payment will be made for holidays not taken. On termination of your employment,
unless you have been summarily dismissed, you will be entitled to receive payment
for unused accrued holiday pay. Any holiday taken in excess of your entitlement
shall be deducted from your final salary payment.
9. Leave Due to Sickness or Injury
The maximum provision for sick leave is 15 working days per calendar year.
12. Invention/Know-How
Any discovery, invention, improvement in procedure, trademark, trade name,
designs, copyrights or get-ups made, discovered or created by you during the
continuance of your employment hereunder relating to the business of the
Company shall belong to and shall be the absolute property of the Company. If
required to do so by the Company (whether during or after the termination of your
employment) you shall at the expense of the company execute all instruments and
do all things necessary to vest in ownership for all other rights, title and interests
(including any registered rights therein) in such discovery, invention, improvement
in procedure, trademark, trade name, design, copyright or get-up in the Company
(or its Nominee) absolutely and as sole beneficial owner.
14. Notice.
The first three months of your employment will be a trial period during which either
you or the Company may terminate your employment on one weeks notice. If at
the end of that period, the Company is satisfied with your performance, you will
become a permanent employee. Thereafter you will give Company and the
Company will give you three months notice of termination of employment. The
above is always subject to the following: (1) the Companys right to terminate the
contract of employment on no or short notice where you are in breach of contract;
(2) your employment will at any event cease without notice on your retirement
date when you are 60 years of age.
SIGNED JOCELYN M. GALERA 8-16-99
Date of Borth [sic] 12-25-55
Employment of GALERA with private respondent WPP became effective on
September 1, 1999 solely on the instruction of the CEO and upon signing of the
contract, without any further action from the Board of Directors of private
respondent WPP.
Four months had passed when private respondent WPP filed before the Bureau of
Immigration an application for petitioner GALERA to receive a working visa, wherein
she was designated as Vice President of WPP. Petitioner alleged that she was
constrained to sign the application in order that she could remain in the Philippines
and retain her employment.
Then, on December 14, 2000, petitioner GALERA alleged she was verbally notified
by private respondent STEEDMAN that her services had been terminated from
private respondent WPP. A termination letter followed the next day.[4]
On 3 January 2001, Galera filed a complaint for illegal dismissal, holiday pay, service
incentive leave pay, 13th month pay, incentive plan, actual and moral damages, and
attorneys fees against WPP and/or John Steedman (Steedman), Mark Webster
(Webster) and Nominada Lansang (Lansang). The case was docketed as NLRC NCR
Case No. 30-01-00044-01.

The Labor Arbiters Ruling
In his Decision dated 31 January 2002, Labor Arbiter Edgardo M. Madriaga (Arbiter
Madriaga) held WPP, Steedman, Webster, and Lansang liable for illegal dismissal
and damages. Arbiter Madriaga stated that Galera was not only illegally dismissed
but was also not accorded due process. Arbiter Madriaga explained, thus:
[WPP] failed to observe the two-notice rule. [WPP] through respondent Steedman
for a five (5) minute meeting on December 14, 2000 where she was verbally told
that as of that day, her employment was being terminated. [WPP] did not give
[Galera] an opportunity to defend herself and explain her side. [Galera] was even
prohibited from reporting for work that day and was told not to report for work the
next day as it would be awkward for her and respondent Steedman to be in the
same premises after her termination. [WPP] only served [Galera] her written notice
of termination only on 15 December 2001, one day after she was verbally apprised
thereof.
The law mandates that the dismissal must be properly done otherwise, the
termination is gravely defective and may be declared unlawful as we hereby hold
[Galeras] dismissal to be illegal and unlawful. Where there is no showing of a clear,
valid and legal cause for the termination of employment, the law considers the
matter a case of illegal dismissal and the burden is on the employer to prove that
the termination was for a valid or authorized cause. The law mandates that both
the substantive and procedural aspects of due process should be observed. The
facts clearly show that respondents were remiss on both aspects. Perforce, the
dismissal is void and unlawful.
xxxx
Considering the work performance and achievements of [Galera] for the year 2000,
we do not find any basis for the alleged claim of incompetence by herein
respondents. Had [Galera] been really incompetent, she would not have been able
to generate enormous amounts [sic] of revenues and business for [WPP]. She also
appears to be well liked as a leader by her subordinates, who have come forth in
support of [Galera]. These facts remain undisputed by respondents.
A mans job being a property right duly protected by our laws, an employer who
deprives an employee [of] the right to defend himself is liable for damages
consistent with Article 32 of the Civil Code. To allow an employer to terminate the
employment of his worker based merely on allegations without proof places the
[employee] in an uncertain situation. The unflinching rule in illegal dismissal cases is
that the employer bears the burden of proof.
In the instant case, respondents have not been able to muster evidence to counter
[Galeras] allegations. [Galeras] allegations remain and stand absent proof from
respondents rebutting them. Hence, our finding of illegal dismissal against
respondents who clearly have conspired in bad faith to deprive [Galera] of her right
to substantive and procedural due process.[5]
The dispositive portion of Arbiter Madriagas decision reads as follows:
WHEREFORE, premises considered, we hereby hold herein respondents liable for
illegal dismissal and damages, and award to [Galera], by virtue of her expatriate
status, the following:
a. Reinstatement without loss of seniority rights.
b. Backwages amounting to $120,000 per year at P50.00 to US $1
exchange rate, 13th month pay, transportation and housing benefits.
c. Remuneration for business acquisitions amounting to Two Million Eight
Hundred Fifty Thousand Pesos (P2,850,000.00) and Media Plowback Incentive
equivalent to Three Million Pesos (P3,000,000.00) or a total of not less than One
Hundred Thousand US Dollars ($100,000.00).
d. US Tax Protection of up to 35% coverage equivalent to Thirty Eight
Thousand US Dollars ($38,000).
e. Moral damages including implied defamation and punitive damages
equivalent to Two Million Dollars (US$2,000,000.00).
f. Exemplary damages equivalent to One Million Dollars ($1,000,000.00).
g. Attorneys fees of 10% of the total award herein.
SO ORDERED.[6]
The Ruling of the NLRC
The First Division of the NLRC reversed the ruling of Arbiter Madriaga. In its
Decision[7] promulgated on 19 February 2003, the NLRC stressed that Galera was
WPPs Vice-President, and therefore, a corporate officer at the time she was
removed by the Board of Directors on 14 December 2000. The NLRC stated thus:
It matters not that her having been elected by the Board to an added position of
being a member of the Board of Directors did not take effect as her May 31, 2000
election to such added position was conditioned to be effective upon approval by
SEC of the Amended By-Laws, an approval which took place only in February 21,
2001, i.e., after her removal on December 14, 2000. What counts is, at the time of
her removal, she continued to be WPPs Vice-President, a corporate officer, on hold
over capacity.
Ms. Galeras claim that she was not a corporate officer at the time of her removal
because her May 31, 2000 election as Vice President for Media, under WPPs
Amended By-Laws, was subject to the approval by the Securities and Exchange
Commission and that the SEC approved the Amended By-Laws only in February
2001. Such claim is unavailing. Even if Ms. Galeras subsequent election as Vice
President for Media on May 31, 2000 was subject to approval by the SEC, she
continued to hold her previous position as Vice President under the December 31,
1999 election until such time that her successor is duly elected and qualified. It is a
basic principle in corporation law, which principle is also embodied in WPPs by-
laws, that a corporate officer continues to hold his position as such until his
successor has been duly elected and qualified. When Ms. Galera was elected as Vice
President on December 31, 1999, she was supposed to have held that position until
her successor has been duly elected and qualified. The record shows that Ms.
Galera was not replaced by anyone. She continued to be Vice President of WPP with
the same operational title of Managing Director for Mindshare and continued to
perform the same functions she was performing prior to her May 31, 2000 election.
In the recent case of Dily Dany Nacpil v. International Broadcasting Corp., the
definition of corporate officer for purposes of intra-corporate controversy was even
broadened to include a Comptroller/Assistant Manager who was appointed by the
General Manager, and whose appointment was later approved by the Board of
Directors. In this case, the position of comptroller was not even expressly
mentioned in the By-Laws of the corporation, and yet, the Supreme Court found
him to be a corporate officer. The Court ruled that
 WHEREFORE, the motion for reconsideration filed by Ms. Galera is hereby denied
for lack of merit. We reiterate our February 19, 2003 Decision setting aside the
(since) petitioners appointment as comptroller required the approval and formal Labor Arbiters Decision dated January 31, 2002 for being null and void.
action of IBCs Board of Directors to become valid, it is clear therefore that
petitioner is a corporate officer whose dismissal may be the subject of a SO ORDERED.[10]
controversy cognizable by the SEC... Had the petitioner been an ordinary employee,
such board action would not have been required.

Such being the case, the imperatives of law require that we hold that the Arbiter Galera assailed the NLRCs decision and resolution before the appellate court and
below had no jurisdiction over Galeras case as, again, she was a corporate officer at raised a lone assignment of error.
the time of her removal.

The National Labor Relations Commission acted with grave abuse of discretion
WHEREFORE, the appeals of petitioner from the Decision of Labor Arbiter Edgardo amounting to lack or excess of jurisdiction when it reversed the decision of the
Madriaga dated January 31, 2002 and his Order dated March 21, 2002, respectively, Labor Arbiter not on the merits but for alleged lack of jurisdiction.[11]
are granted. The January 31, 2002 decision of the Labor Arbiter is set aside for being
null and void and the temporary restraining order we issued on April 24, 2002 is
hereby made permanent. The complaint of Jocelyn Galera is dismissed for lack of
jurisdiction.

The Decision of the Appellate Court

SO ORDERED.[8]

The appellate court reversed and set aside the decision of the NLRC. The appellate
In its Resolution[9] promulgated on 4 June 2003, the NLRC further stated: court ruled that the NLRCs dismissal of Galeras appeal is not in accord with
jurisprudence. A person could be considered a corporate officer only if appointed as
such by a corporations Board of Directors, or if pursuant to the power given them
by either the Articles of Incorporation or the By-Laws.[12]
We are fully convinced that this is indeed an intra-corporate dispute which is
beyond the labor arbiters jurisdiction. These consolidated cases clearly [involve] the
relationship between a corporation and its officer and is properly within the
definition of an intra-corporate relationship which, under P.D. No. 902-A, is within The appellate court explained:
the jurisdiction of the SEC (now the commercial courts). Such being the case, We
are constrained to rule that the Labor Arbiter below had no jurisdiction over Ms.
Galeras complaint for illegal dismissal.
A corporation, through its board of directors, could only act in the manner and
within the formalities, if any, prescribed by its charter or by the general law. If the
action of the Board is ultra vires such is motu proprio void ab initio and without
legal effect whatsoever. The by-laws of a corporation are its own private laws which
substantially have the same effect as the laws of the corporation. They are, in
effect, written into the charter. In this sense, they beome part of the fundamental
law of the corporation with which the corporation and its directors and officers
must comply.
Even if petitioner GALERA had been appointed by the Board of Directors on
December 31, 1999, private respondent WPPs By-Laws provided for only one Vice-
President, a position already occupied by private respondent Webster. The same
defect also stains the Board of Directors appointment of petitioner GALERA as a
Director of the corporation, because at that time the By-Laws provided for only five
directors. In addition, the By-laws only empowered the Board of Directors to
appoint a general manager and/or assistant general manager as corporate officers
in addition to a chairman, president, vice-president and treasurer. There is no
mention of a corporate officer entitled Managing Director.
Hence, when the Board of Directors enacted the Resolutions of December 31, 1999
and May 31, 2000, it exceeded its authority under the By-Laws and are, therefore,
ultra vires. Although private respondent WPP sought to amend these defects by
filing Amended By-Laws with the Securities and Exchange Commission, they did not
validate the ultra vires resolutions because the Amended By-Laws did not take
effect until February 16, 2001, when it was approved by the SEC. Since by-laws
operate only prospectively, they could not validate the ultra vires resolutions.[13]
The dispositive portion of the appellate courts decision reads:
WHEREFORE, the petition is hereby GRANTED and GIVEN DUE COURSE. The assailed
Decision of the National Labor Relations Commission is hereby REVERSED and SET
ASIDE and a new one is entered DIRECTING private respondent WPP MARKETING
COMMUNICATIONS, INC. to:
1. Pay [Galera] backwages at the peso equivalent of US$120,000.00 per annum
plus three months from her summary December 14, 2000 dismissal up to March 14,
2001 because three months notice is required under the contract, plus 13th month
pay, bonuses and general increases to which she would have been normally
entitled, had she not been dismissed and had she not been forced to stop working,
including US tax protection of up to 35% coverage which she had been enjoying as
an expatriate;
2. Pay x x x GALERA the peso equivalent of US$185,000.00 separation pay (1
years);
3. Pay x x x GALERA any unpaid housing benefit for the 18 months of her
employment in the service to the Company as an expatriate in Manila, Philippines at
the rate of P576,000 per year; unpaid personal and accident insurance benefits for
premiums at the rate of P300,000.00 per year; whatever cash value in the JWT
Pension Plan; and thirty days paid holiday benefit under the contract for the 1
calendar years with the Company;
4. Pay x x x GALERA the reduced amount of PhP2,000,000.00 as moral damages;
5. Pay [Galera] the reduced amount of PhP1,000,000.00 as exemplary damages;
6. Pay [Galera] an amount equivalent to 10% of the judgment award as attorneys
fees;
7. Pay the cost of the suit.
SO ORDERED.[14]

Respondents filed a motion for reconsideration on 5 May 2005. Galera filed a
motion for partial reconsideration and/or clarification on the same date. The
appellate court found no reason to revise or reverse its previous decision and
subsequently denied the motions in a Resolution promulgated on 1 August
2005.[15]
The Issues
WPP, Steedman, Webster, and Lansang raised the following grounds in G.R. No.
169207:
I. The Court of Appeals seriously erred in ruling that the NLRC has jurisdiction
over [Galeras] complaint because she was not an employee. [Galera] was a
corporate officer of WPP from the beginning of her term until her removal from
office.
II. Assuming arguendo that the Court of Appeals correctly ruled that the NLRC has
jurisdiction over [Galeras] complaint, it should have remanded the case to the Labor
Arbiter for reception of evidence on the merits of the case.
III. [Galera] is an alien, hence, can never attain a regular or permanent working
status in the Philippines.
IV. [Galera] is not entitled to recover backwages, other benefits and damages
from WPP.[16]
On the other hand, in G.R. No. 169239, Galera raised the following grounds in
support of her petition:
The CA decision should be consistent with Article 279 of the Labor Code and
applicable jurisprudence, that full backwages and separation pay (when in lieu of
reinstatement), should be reckoned from time of dismissal up to time of
reinstatement (or payment of separation pay, in case separation instead of
reinstatement is awarded).
Accordingly, petitioner Galera should be awarded full backwages and separation
pay for the period from 14 December 2000 until the finality of judgment by the
respondents, or, at the very least, up to the promulgation date of the CA decision.
The individual respondents Steedman, Webster and Lansang must be held solidarily
liable with respondent WPP for the wanton and summary dismissal of petitioner
Galera, to be consistent with law and jurisprudence as well as the specific finding of
the CA of bad faith on the part of respondents.[17]
This Court ordered the consolidation of G.R. Nos. 169207 and 169239 in a
resolution dated 16 January 2006.[18]
The Ruling of the Court
In its consolidated comment, the Office of the Solicitor General (OSG)
recommended that (A) the Decision dated 14 April 2005 of the appellate court
finding (1) Galera to be a regular employee of WPP; (2) the NLRC to have
jurisdiction over the present case; and (3) WPP to have illegally dismissed Galera, be
affirmed; and (B) the case remanded to the Labor Arbiter for the computation of
the correct monetary award. Despite the OSGs recommendations, we see that
Galeras failure to seek an employment permit prior to her employment poses a
serious problem in seeking relief before this Court. Hence, we settle the various
issues raised by the parties for the guidance of the bench and bar.
Whether Galera is an Employee or a Corporate Officer
Galera, on the belief that she is an employee, filed her complaint before the Labor
Arbiter. On the other hand, WPP, Steedman, Webster and Lansang contend that
Galera is a corporate officer; hence, any controversy regarding her dismissal is
under the jurisdiction of the Regional Trial Court. We agree with Galera.
Corporate officers are given such character either by the Corporation Code or by
the corporations by-laws. Under Section 25 of the Corporation Code, the corporate
officers are the president, secretary, treasurer and such other officers as may be
provided in the by-laws.[19] Other officers are sometimes created by the charter or
by-laws of a corporation, or the board of directors may be empowered under the
by-laws of a corporation to create additional offices as may be necessary.
An examination of WPPs by-laws resulted in a finding that Galeras appointment as a
corporate officer (Vice-President with the operational title of Managing Director of
Mindshare) during a special meeting of WPPs Board of Directors is an appointment
to a non-existent corporate office. WPPs by-laws provided for only one Vice-
President. At the time of Galeras appointment on 31 December 1999, WPP already
had one Vice-President in the person of Webster. Galera cannot be said to be a
director of WPP also because all five directorship positions provided in the by-laws
are already occupied. Finally, WPP cannot rely on its Amended By-Laws to support
its argument that Galera is a corporate officer. The Amended By-Laws provided for
more than one Vice-President and for two additional directors. Even though WPPs
stockholders voted for the amendment on 31 May 2000, the SEC approved the
amendments only on 16 February 2001. Galera was dismissed on 14 December
2000. WPP, Steedman, Webster, and Lansang did not present any evidence that
Galeras dismissal took effect with the action of WPPs Board of Directors.
The appellate court further justified that Galera was an employee and not a
corporate officer by subjecting WPP and Galeras relationship to the four-fold test:
(a) the selection and engagement of the employee; (b) the payment of wages; (c)
the power of dismissal; and (d) the employers power to control the employee with
respect to the means and methods by which the work is to be accomplished. The
appellate court found:
x x x Sections 1 and 4 of the employment contract mandate where and how often
she is to perform her work; sections 3, 5, 6 and 7 show that wages she receives are
completely controlled by x x x WPP; and sections 10 and 11 clearly state that she is
subject to the regular disciplinary procedures of x x x WPP.
Another indicator that she was a regular employee and not a corporate officer is
Section 14 of the contract, which clearly states that she is a permanent employee
not a Vice-President or a member of the Board of Directors.
xxxx
Another indication that the Employment Contract was one of regular employment
is Section 12, which states that the rights to any invention, discovery, improvement
in procedure, trademark, or copyright created or discovered by petitioner GALERA
during her employment shall automatically belong to private respondent WPP.
Under Republic Act 8293, also known as the Intellectual Property Code, this
condition prevails if the creator of the work subject to the laws of patent or
copyright is an employee of the one entitled to the patent or copyright.
Another convincing indication that she was only a regular employee and not a
corporate officer is the disciplinary procedure under Sections 10 and 11 of the
Employment Contract, which states that her right of redress is through Mindshares
Chief Executive Officer for the Asia-Pacific. This implies that she was not under the
disciplinary control of private respondent WPPs Board of Directors (BOD), which
should have been the case if in fact she was a corporate officer because only the
Board of Directors could appoint and terminate such a corporate officer.

3. If accompanied with a claim for reinstatement, those cases that

workers may file involving wages, rates of pay, hours of work and other terms and
conditions of employment;

Although petitioner GALERA did sign the Alien Employment Permit from the 4. Claims for actual, moral, exemplary and other forms of damages arising
Department of Labor and Employment and the application for a 9(g) visa with the from the employer-employee relations;
Bureau of Immigration both of which stated that she was private respondents WPP
Vice President these should not be considered against her. Assurming arguendo
that her appointment as Vice-President was a valid act, it must be noted that these
appointments occurred afater she was hired as a regular employee. After her 5. Cases arising from any violation of Article 264 of this Code, including
appointments, there was no appreciable change in her duties.[20] questions involving the legality of strikes and lockouts;

6. Except claims for Employees Compensation, Social Security, Medicare

and other maternity benefits, all other claims, arising from employer-employee
Whether the Labor Arbiter and the NLRC relations, including those of persons in domestic or household service, involving an
amount exceeding five thousand pesos (P5,000.00) regardless of whether
have jurisdiction over the present case accompanied with a claim for reinstatement.

Galera being an employee, then the Labor Arbiter and the NLRC have jurisdiction (b) The Commission shall have exclusive appellate jurisdiction over all cases decided
over the present case. Article 217 of the Labor Code provides: by Labor Arbiters.

Jurisdiction of Labor Arbiters and the Commission. (a) Except as otherwise provided (c) Cases arising from the interpretation of collective bargaining agreements and
under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to those arising from the interpretation or enforcement of company personnel policies
hear and decide x x x the following cases involving all workers, whether agricultural shall be disposed of by the Labor Arbiter by referring the same to the grievance
or non-agricultural: machinery and voluntary arbitration as may be provided in said agreements.

1. Unfair labor practice cases;

In contrast, Section 5.2 of Republic Act No. 8799, or the Securities Regulation Code,
states:
2. Termination disputes;
The Commissions jurisdiction over all cases enumerated under Section 5 of
Presidential Decree No. 902-A is hereby transferred to the courts of general
jurisdiction or the appropriate Regional Trial Court: Provided, That the Supreme
Court in the exercise of its authority may designate the Regional Trial Court
branches that shall exercise jurisdiction over these cases. The Commission shall
retain jurisdiction over pending cases involving intra-corporate disputes submitted
for final resolution which should be resolved within one year from the enactment of
this Code. The Commission shall retain jurisdiction over pending suspension of
payments/rehabilitation cases filed as of 30 June 2000 until finally disposed.
The pertinent portions of Section 5 of Presidential Decree No. 902-A, mentioned
above, states:
b) Controversies arising out of intra-corporate or partnership relations, between
and among stockholders, members or associates; between any or all of them and
the corporation, partnership or association of which they are stockholders,
members or associates, respectively; and between such corporation, partnership or
association and the state insofar as it concerns their individual franchise or right to
exist as such entity;
c) Controversies in the election or appointments of directors, trustees, officers or
managers of such corporations, partnerships or associations.
Whether WPP illegally dismissed Galera
WPPs dismissal of Galera lacked both substantive and procedural due process.
Apart from Steedmans letter dated 15 December 2000 to Galera, WPP failed to
prove any just or authorized cause for Galeras dismissal. Steedmans letter to Galera
reads:
The operations are currently in a shamble. There is lack of leadership and
confidence in your abilities from within, our agency partners and some clients.
Most of the staff I spoke with felt they got more guidance and direction from Minda
than yourself. In your role as Managing Director, that is just not acceptable.
I believe your priorities are mismanaged. The recent situation where you felt an
internal strategy meeting was more important than a new business pitch is a good
example.
You failed to lead and advise on the two new business pitches. In both cases, those
involved sort (sic) Mindas input. As I discussed with you back in July, my directive
was for you to lead and review all business pitches. It is obvious [that] confusion
existed internally right up until the day of the pitch.
The quality output is still not to an acceptable standard, which was also part of my
directive that you needed to focus on back in July.
I do not believe you understand the basic skills and industry knowledge required to
run a media special operation.[21]
WPP, Steedman, Webster, and Lansang, however, failed to substantiate the
allegations in Steedmans letter. Galera, on the other hand, presented documentary
evidence[22] in the form of congratulatory letters, including one from Steedman,
which contents are diametrically opposed to the 15 December 2000 letter.
The law further requires that the employer must furnish the worker sought to be
dismissed with two written notices before termination of employment can be
legally effected: (1) notice which apprises the employee of the particular acts or
omissions for which his dismissal is sought; and (2) the subsequent notice which
informs the employee of the employers decision to dismiss him. Failure to comply
with the requirements taints the dismissal with illegality.[23] WPPs acts clearly
show that Galeras dismissal did not comply with the two-notice rule.
Whether Galera is entitled to the monetary award
WPP, Steedman, Webster, and Lansang argue that Galera is not entitled to
backwages because she is an alien. They further state that there is no guarantee
that the Bureau of Immigration and the Department of Labor and Employment will
continue to grant favorable rulings on the applications for a 9(g) visa and an Alien
Employment Permit after the expiry of the validity of Galeras documents on 31
December 2000. WPPs argument is a circular argument, and assumes what it
attempts to prove. Had WPP not dismissed Galera, there is no doubt in our minds
that WPP would have taken action for the approval of documents required for
Galeras continued employment.
This is Galeras dilemma: Galera worked in the Philippines without a proper work
permit but now wants to claim employees benefits under Philippine labor laws.
Employment of GALERA with private respondent WPP became effective on
September 1, 1999 solely on the instruction of the CEO and upon signing of the
contract, without any further action from the Board of Directors of private
respondent WPP.
Four months had passed when private respondent WPP filed before the Bureau of
Immigration an application for petitioner GALERA to receive a working visa, wherein
she was designated as Vice President of WPP. Petitioner alleged that she was
constrained to sign the application in order that she could remain in the Philippines
and retain her employment.[24]
The law and the rules are consistent in stating that the employment permit must be
acquired prior to employment. The Labor Code states: Any alien seeking admission
to the Philippines for employment purposes and any domestic or foreign employer
who desires to engage an alien for employment in the Philippines shall obtain an
employment permit from the Department of Labor.[25] Section 4, Rule XIV, Book 1
of the Implementing Rules and Regulations provides:
Employment permit required for entry. No alien seeking employment, whether as a
resident or non-resident, may enter the Philippines without first securing an
employment permit from the Ministry. If an alien enters the country under a non-
working visa and wishes to be employed thereafter, he may only be allowed to be
employed upon presentation of a duly approved employment permit.
Galera cannot come to this Court with unclean hands. To grant Galeras prayer is to
sanction the violation of the Philippine labor laws requiring aliens to secure work
permits before their employment. We hold that the status quo must prevail in the
present case and we leave the parties where they are. This ruling, however, does
not bar Galera from seeking relief from other jurisdictions.
WHEREFORE, we PARTIALLY GRANT the petitions in G.R. Nos. 169207 and 169239.
We SET ASIDE the Decision of the Court of Appeals promulgated on 14 April 2005 as
well as the Resolution promulgated on 1 August 2005 in CA-G.R. SP No. 78721.
SO ORDERED.
TELEVISION AND PRODUCTION G.R. No. 167648
This petition for review under Rule 45 assails the 21 December 2004 Decision[1] and
EXPONENTS, INC. and/or ANTONIO 8 April 2005 Resolution[2] of the Court of Appeals declaring Roberto Servaa
(respondent) a regular employee of petitioner Television and Production Exponents,
P. TUVIERA, Present: Inc. (TAPE). The appellate court likewise ordered TAPE to pay nominal damages for
its failure to observe statutory due process in the termination of respondents
Petitioners, employment for authorized cause.

QUISUMBING, J.,

Chairperson, TAPE is a domestic corporation engaged in the production of television programs,

such as the long-running variety program, Eat Bulaga!. Its president is Antonio P.
CARPIO, Tuviera (Tuviera). Respondent Roberto C. Servaa had served as a security guard for
TAPE from March 1987 until he was terminated on 3 March 2000.
- versus - CARPIO MORALES,

TINGA, and
Respondent filed a complaint for illegal dismissal and nonpayment of benefits
VELASCO, JR., JJ. against TAPE. He alleged that he was first connected with Agro-Commercial Security
Agency but was later on absorbed by TAPE as a regular company guard. He was
detailed at Broadway Centrum in Quezon City where Eat Bulaga! regularly staged its
ROBERTO C. SERVAA, productions. On 2 March 2000, respondent received a memorandum informing him
of his impending dismissal on account of TAPEs decision to contract the services of a
Respondent. Promulgated: professional security agency. At the time of his termination, respondent was
receiving a monthly salary of P6,000.00. He claimed that the holiday pay, unpaid
vacation and sick leave benefits and other monetary considerations were withheld
January 28, 2008 from him. He further contended that his dismissal was undertaken without due
process and violative of existing labor laws, aggravated by nonpayment of
separation pay.[3]

x----------------------------------------------------------------------------x

In a motion to dismiss which was treated as its position paper, TAPE countered that
the labor arbiter had no jurisdiction over the case in the absence of an employer-
employee relationship between the parties. TAPE made the following assertions: (1)
that respondent was initially employed as a security guard for Radio Philippines
DECISION Network (RPN-9); (2) that he was tasked to assist TAPE during its live productions,
specifically, to control the crowd; (3) that when RPN-9 severed its relationship with
the security agency, TAPE engaged respondents services, as part of the support
TINGA, J.: group and thus a talent, to provide security service to production staff, stars and
guests of Eat Bulaga! as well as to control the audience during the one-and-a-half
hour noontime program; (4) that it was agreed that complainant would render his
services until such time that respondent company shall have engaged the services
of a professional security agency; (5) that in 1995, when his contract with RPN-9
expired, respondent was retained as a talent and a member of the support group,
until such time that TAPE shall have engaged the services of a professional security
agency; (6) that respondent was not prevented from seeking other employment,
whether or not related to security services, before or after attending to his Eat
Bulaga! functions; (7) that sometime in late 1999, TAPE started negotiations for the
engagement of a professional security agency, the Sun Shield Security Agency; and
(8) that on 2 March 2000, TAPE issued memoranda to all talents, whose functions
would be rendered redundant by the engagement of the security agency, informing
them of the managements decision to terminate their services.[4]
TAPE averred that respondent was an independent contractor falling under the
talent group category and was working under a special arrangement which is
recognized in the industry.[5]
Respondent for his part insisted that he was a regular employee having been
engaged to perform an activity that is necessary and desirable to TAPEs business for
thirteen (13) years.[6]
On 29 June 2001, Labor Arbiter Daisy G. Cauton-Barcelona declared respondent to
be a regular employee of TAPE. The Labor Arbiter relied on the nature of the work
of respondent, which is securing and maintaining order in the studio, as necessary
and desirable in the usual business activity of TAPE. The Labor Arbiter also ruled
that the termination was valid on the ground of redundancy, and ordered the
payment of respondents separation pay equivalent to one (1)-month pay for every
year of service. The dispositive portion of the decision reads:
WHEREFORE, complainants position is hereby declared redundant. Accordingly,
respondents are hereby ordered to pay complainant his separation pay computed
at the rate of one (1) month pay for every year of service or in the total amount of
P78,000.00.[7]
On appeal, the National Labor Relations Commission (NLRC) in a Decision[8] dated
22 April 2002 reversed the Labor Arbiter and considered respondent a mere
program employee, thus:
We have scoured the records of this case and we find nothing to support the Labor
Arbiters conclusion that complainant was a regular employee.
xxxx
The primary standard to determine regularity of employment is the reasonable
connection between the particular activity performed by the employee in relation
to the usual business or trade of the employer. This connection can be determined
by considering the nature and work performed and its relation to the scheme of the
particular business or trade in its entirety. x x x Respondent company is engaged in
the business of production of television shows. The records of this case also show
that complainant was employed by respondent company beginning 1995 after
respondent company transferred from RPN-9 to GMA-7, a fact which complainant
does not dispute. His last salary was P5,444.44 per month. In such industry, security
services may not be deemed necessary and desirable in the usual business of the
employer. Even without the performance of such services on a regular basis,
respondents companys business will not grind to a halt.
xxxx
Complainant was indubitably a program employee of respondent company. Unlike
[a] regular employee, he did not observe working hours x x x. He worked for other
companies, such as M-Zet TV Production, Inc. at the same time that he was working
for respondent company. The foregoing indubitably shows that complainant-
appellee was a program employee. Otherwise, he would have two (2) employers at
the same time.[9]

Respondent filed a motion for reconsideration but it was denied in a Resolution[10]
dated 28 June 2002.
Respondent filed a petition for certiorari with the Court of Appeals contending that
the NLRC acted with grave abuse of discretion amounting to lack or excess of
jurisdiction when it reversed the decision of the Labor Arbiter. Respondent asserted
that he was a regular employee considering the nature and length of service
rendered.[11]
Reversing the decision of the NLRC, the Court of Appeals found respondent to be a
regular employee. We quote the dispositive portion of the decision:
IN LIGHT OF THE FOREGOING, the petition is hereby GRANTED. The Decision dated
22 April 2002 of the public respondent NLRC reversing the Decision of the Labor
Arbiter and its Resolution dated 28 June 2002 denying petitioners motion for
reconsideration are REVERSED and SET ASIDE. The Decision dated 29 June 2001 of
the Labor Arbiter is REINSTATED with MODIFICATION in that private respondents
are ordered to pay jointly and severally petitioner the amount of P10,000.00 as
nominal damages for non-compliance with the statutory due process.
SO ORDERED.[12]
Finding TAPEs motion for reconsideration without merit, the Court of Appeals
issued a Resolution[13] dated 8 April 2005 denying said motion.
TAPE filed the instant petition for review raising substantially the same grounds as
those in its petition for certiorari before the Court of Appeals. These matters may
be summed up into one main issue: whether an employer-employee relationship
exists between TAPE and respondent.
On 27 September 2006, the Court gave due course to the petition and considered
the case submitted for decision.[14]
At the outset, it bears emphasis that the existence of employer-employee
relationship is ultimately a question of fact. Generally, only questions of law are
entertained in appeals by certiorari to the Supreme Court. This rule, however, is
not absolute. Among the several recognized exceptions is when the findings of the
Court of Appeals and Labor Arbiters, on one hand, and that of the NLRC, on the
other, are conflicting,[15] as obtaining in the case at bar.
Jurisprudence is abound with cases that recite the factors to be considered in
determining the existence of employer-employee relationship, namely: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer's power to control the employee with
respect to the means and method by which the work is to be accomplished.[16] The
most important factor involves the control test. Under the control test, there is an
employer-employee relationship when the person for whom the services are
performed reserves the right to control not only the end achieved but also the
manner and means used to achieve that end.[17]
In concluding that respondent was an employee of TAPE, the Court of Appeals
applied the four-fold test in this wise:
First. The selection and hiring of petitioner was done by private respondents. In
fact, private respondents themselves admitted having engaged the services of
petitioner only in 1995 after TAPE severed its relations with RPN Channel 9.

By informing petitioner through the Memorandum dated 2 March 2000, that his
services will be terminated as soon as the services of the newly hired security
agency begins, private respondents in effect acknowledged petitioner to be their
employee. For the right to hire and fire is another important element of the
employer-employee relationship.
Second. Payment of wages is one of the four factors to be considered in
determining the existence of employer-employee relation. . . Payment as admitted
by private respondents was given by them on a monthly basis at a rate of
P5,444.44.
Third. Of the four elements of the employer-employee relationship, the control test
is the most important. x x x
The bundy cards representing the time petitioner had reported for work are evident
proofs of private respondents control over petitioner more particularly with the
time he is required to report for work during the noontime program of Eat Bulaga!
If it were not so, petitioner would be free to report for work anytime even not
during the noontime program of Eat Bulaga! from 11:30 a.m. to 1:00 p.m. and still
gets his compensation for being a talent. Precisely, he is being paid for being the
security of Eat Bulaga! during the above-mentioned period. The daily time cards of
petitioner are not just for mere record purposes as claimed by private respondents.
It is a form of control by the management of private respondent TAPE.[18]
TAPE asseverates that the Court of Appeals erred in applying the four-fold test in
determining the existence of employer-employee relationship between it and
respondent. With respect to the elements of selection, wages and dismissal, TAPE
proffers the following arguments: that it never hired respondent, instead it was the
latter who offered his services as a talent to TAPE; that the Memorandum dated 2
March 2000 served on respondent was for the discontinuance of the contract for
security services and not a termination letter; and that the talent fees given to
respondent were the pre-agreed consideration for the services rendered and should
not be construed as wages. Anent the element of control, TAPE insists that it had no
control over respondent in that he was free to employ means and methods by
which he is to control and manage the live audiences, as well as the safety of TAPEs
stars and guests.[19]
The position of TAPE is untenable. Respondent was first connected with Agro-
Commercial Security Agency, which assigned him to assist TAPE in its live
productions. When the security agencys contract with RPN-9 expired in 1995,
respondent was absorbed by TAPE or, in the latters language, retained as
talent.[20] Clearly, respondent was hired by TAPE. Respondent presented his
identification card[21] to prove that he is indeed an employee of TAPE. It has been
in held that in a business establishment, an identification card is usually provided
not just as a security measure but to mainly identify the holder thereof as a bona
fide employee of the firm who issues it.[22]
Respondent claims to have been receiving P5,444.44 as his monthly salary while
TAPE prefers to designate such amount as talent fees. Wages, as defined in the
Labor Code, are remuneration or earnings, however designated, capable of being
expressed in terms of money, whether fixed or ascertained on a time, task, piece or
commission basis, or other method of calculating the same, which is payable by an
employer to an employee under a written or unwritten contract of employment for
work done or to be done, or for service rendered or to be rendered. It is beyond
dispute that respondent received a fixed amount as monthly compensation for the
services he rendered to TAPE.
The Memorandum informing respondent of the discontinuance of his service proves
that TAPE had the power to dismiss respondent.

Control is manifested in the bundy cards submitted by respondent in evidence. He
was required to report daily and observe definite work hours. To negate the
element of control, TAPE presented a certification from M-Zet Productions to prove
that respondent also worked as a studio security guard for said company. Notably,
the said certificate categorically stated that respondent reported for work on
Thursdays from 1992 to 1995. It can be recalled that during said period, respondent
was still working for RPN-9. As admitted by TAPE, it absorbed respondent in late
1995.[23]
TAPE further denies exercising control over respondent and maintains that the
latter is an independent contractor.[24] Aside from possessing substantial capital or
investment, a legitimate job 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.[25]
TAPE failed to establish that respondent is an independent contractor. As found by
the Court of Appeals:
We find the annexes submitted by the private respondents insufficient to prove
that herein petitioner is indeed an independent contractor. None of the above
conditions exist in the case at bar. Private respondents failed to show that
petitioner has substantial capital or investment to be qualified as an independent
contractor. They likewise failed to present a written contract which specifies the
performance of a specified piece of work, the nature and extent of the work and
the term and duration of the relationship between herein petitioner and private
respondent TAPE.[26]
TAPE relies on Policy Instruction No. 40, issued by the Department of Labor, in
classifying respondent as a program employee and equating him to be an
independent contractor.
Policy Instruction No. 40 defines program employees as
x x x those whose skills, talents or services are engaged by the station for a
particular or specific program or undertaking and who are not required to observe
normal working hours such that on some days they work for less than eight (8)
hours and on other days beyond the normal work hours observed by station
employees and are allowed to enter into employment contracts with other persons,
stations, advertising agencies or sponsoring companies. The engagement of
program employees, including those hired by advertising or sponsoring companies,
shall be under a written contract specifying, among other things, the nature of the
work to be performed, rates of pay and the programs in which they will work. The
contract shall be duly registered by the station with the Broadcast Media Council
within three (3) days from its consummation.[27]
TAPE failed to adduce any evidence to prove that it complied with the requirements
laid down in the policy instruction. It did not even present its contract with
respondent. Neither did it comply with the contract-registration requirement.
Even granting arguendo that respondent is a program employee, stills, classifying
him as an independent contractor is misplaced. The Court of Appeals had this to
say:
We cannot subscribe to private respondents conflicting theories. The theory of
private respondents that petitioner is an independent contractor runs counter to
their very own allegation that petitioner is a talent or a program employee. An
independent contractor is not an employee of the employer, while a talent or
program employee is an employee. The only difference between a talent or
program employee and a regular employee is the fact that a regular employee is
entitled to all the benefits that are being prayed for. This is the reason why private
respondents try to seek refuge under the concept of an independent contractor
theory. For if petitioner were indeed an independent contractor, private
respondents will not be liable to pay the benefits prayed for in petitioners
complaint.[28]
More importantly, respondent had been continuously under the employ of TAPE
from 1995 until his termination in March 2000, or for a span of 5 years. Regardless
of whether or not respondent had been performing work that is necessary or
desirable to the usual business of TAPE, respondent is still considered a regular
employee under Article 280 of the Labor Code which provides:
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
service 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.
As a regular employee, respondent cannot be terminated except for just cause or
when authorized by law.[29] It is clear from the tenor of the 2 March 2000
Memorandum that respondents termination was due to redundancy. Thus, the
Court of Appeals correctly disposed of this issue, viz:
Article 283 of the Labor Code provides that 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 one (1) month before the
intended date thereof. In case of termination due to the installation of labor saving
devices or redundancy, the worker affected thereby shall be entitled to a separation
pay equivalent to at least his one (1) month pay or to at least one (1) month pay for
every year or service, whichever is higher.
xxxx
We uphold the finding of the Labor Arbiter that complainant [herein petitioner] was
terminated upon [the] managements option to professionalize the security services
in its operations. x x x However, [we] find that although petitioners services [sic]
was for an authorized cause, i.e., redundancy, private respondents failed to prove
that it complied with service of written notice to the Department of Labor and
Employment at least one month prior to the intended date of retrenchment. It
bears stressing that although notice was served upon petitioner through a
Memorandum dated 2 March 2000, the effectivity of his dismissal is fifteen days
from the start of the agencys take over which was on 3 March 2000. Petitioners
services with private respondents were severed less than the month requirement
by the law.
Under prevailing jurisprudence the termination for an authorized cause requires
payment of separation pay. Procedurally, if the dismissal is based on authorized
causes under Articles 283 and 284, the employer must give the employee and the
Deparment of Labor and Employment written notice 30 days prior to the effectivity
of his separation. Where the dismissal is for an authorized cause but due process
was not observed, the dismissal should be upheld. While the procedural infirmity
cannot be cured, it should not invalidate the dismissal. However, the employer
should be liable for non-compliance with procedural requirements of due process.
 damages for non-compliance with the statutory due process and petitioner Antonio
P. Tuviera is accordingly absolved from liability.
xxxx

SO ORDERED.

Under recent jurisprudence, the Supreme Court fixed the amount of P30,000.00 as
nominal damages. The basis of the violation of petitioners right to statutory due
process by the private respondents warrants the payment of indemnity in the form
of nominal damages. The amount of such damages is addressed to the sound
discretion of the court, taking into account the relevant circumstances. We believe
this form of damages would serve to deter employer from future violations of the
statutory due process rights of the employees. At the very least, it provides a
vindication or recognition of this fundamental right granted to the latter under the
Labor Code and its Implementing Rules. Considering the circumstances in the case
at bench, we deem it proper to fix it at P10,000.00.[30]

In sum, we find no reversible error committed by the Court of Appeals in its assailed
decision.

However, with respect to the liability of petitioner Tuviera, president of TAPE,

absent any showing that he acted with malice or bad faith in terminating
respondent, he cannot be held solidarily liable with TAPE.[31] Thus, the Court of
Appeals ruling on this point has to be modified.

WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are
AFFIRMED with MODIFICATION in that only petitioner Television and Production
Exponents, Inc. is liable to pay respondent the amount of P10,000.00 as nominal