1.

Four-Fold Test

• Asia Steel Corp. WCC, L-7636, June 27, 1965

• Royale Homes v. Alcantara, G.R. No. 195190, July 28, 2014
• Benigno v. ABS-CBN, G.R. No. 199166, April 20, 2015
• Valencia v. Classique Vinyl Products, G.R. No. 206390, January 30, 2017
• Bazar v. Ruizol, G.R. No. 198782, October 19, 2016
• Legend Hotel v. Realuyo, G.R. No. 153511, July 18, 2012
• Tan v. Lagrama, G.R. No. 151228, August 15, 2002
• Marsman & Company, Inc. v. Sta. Rtia, G.R. No. 194765, April 23, 2018
• Tongko vs. Manufacturer Life Insurance Co. (Phils), Inc., et al., G.R. No. 167622, January 25, 2011
• Caong, Jr. vs. Begualos, GR No. 179428, Jan. 26, 2011
• Atok Big Wedge Company vs. Gison, G.R. No. 169510, August 8, 2011
• Bernarte vs. Phil. Basketball Association et al., G.R. No. 192084, September 14, 2011
• Sonza vs. ABS-CBN, G.R. No. 138051, June 10, 2004
• Lazaro vs. Social Security Commission, 435 SCRA 472 [2004]
• Phil. Global Communication vs. De Vera, 459 SCRA 260 [2005]
• ABS-CBN vs. Nazareno, G.R. No. 164156, Sept. 26, 2006
• Nogales et al., vs. Capitol Medical Center et al., G.R. No. 142625, December 19, 2006
• Calamba Medical Center, Inc. NLRC, G.R. No. 176484, November 25, 2008
• D.O. No. 182, Series of 2017
G.R. No. L-7636

[ G.R. No. L-7636, June 27, 1955 ]

ASIA STEEL CORPORATION, PETITIONER, VS. WORKMEN'S COMPENSATION COMMISSION AND ISMAEL CARBAJOSA,
RESPONDENTS.

DECISION

BENGZON, J.:

Petition to review the order of the Workmen's Compensation Commission approving the award of its referee in favor of the laborer
Ismael Carbajosa, against his employer Asia Steel Corporation.

It appears that on April 16, 1951, while working in said Corporation's steel factory in Grace Park, Manila, Carbajosa tapped the belt of a
running machine to tighten it, but his hand was caught accidentally by the belt, he stumbled down and his two feet were so seriously
injured, they had to be amputated at the Chinese General Hospital where he was rushed immediately after the mishap. Hospitalization
were paid by the corporation.

Thereafter Carbajosa claimed for compensation. The referee, having found that he was employed as apprentice, and that the accident
arose out of employment, required the Asia Steel Corporation to indemnify in the total sum of two thousand two hundred forty six pesos
and forty centavos (P2,246.40) and to pay the costs.

The instant petition for review rests on two major propositions: (1) Ismael Carbajosa was not an employee or laborer and (2) the
accident was "occasioned by" his "own fault and negligence".

This second issue, however, was not tendered in the Corporation's motion to dismiss, Annex B, filed with Workmen's Compensation
Commission, and neither the referee nor the Commission made findings on such question of negligence. Anyway it is no excuse for the
employer: it merely reduces the compensation. (Art. 1711 New Civil Code.) Nevertheless, on close examination the contention turn out
to be founded on the reasoning that being a stranger in the premises -not an employee- Carbajosa had no right, and therefore was
careless, to touch the machines of the factory. (p. 27 Record.)

Hence this revision may be limited to the simple question whether the petitioner had given employment to Carbajosa.

According to the Commission,

"x x x the claimant, a native of Negros Occidental, came to Manila on March 31, 1951, to look for a job. On April 5, 1951, he met an
aquaintance, Pablo Sesia, whose aid sought in the matter of securing employment. Sesia, who was employed in the Asia Steel
Corporation as a mechanic, promised to take Carbajosa to his employer.

Upon previous arrangement with Sesia, therefore, Carbajosa went to respondent's nail factory at Grace Park, Caloocan, Rizal, on April
9, 1951. Sesia introduced the claimant to Mr. Kim, in charge of the factory. During the interview, Kim told the claimant that he, (Kim)
would take up the matter with the manager, and Carbajosa would know the manager's decision as soon as he (the claimant) returned.
The next morning, the claimant came back to the factory and was told by Kim to begin working as an apprentice. It was further agreed
that claimant's wage would be determined upon the arrival of materials which the manager ordered from Japan. The claimant assumed
work on the same day, doing odd jobs under the direction of Sesia.

It also appears that Kim lived in the factory. Pablo Sesia was also lodging in the factory and permission was secured from Kim in order
that the claimant might live in the factory with Sesia.

On April 16, 1951, hardly a week since the claimant began working in the factory, while he was tightening the belt of one of the
machines, his hand was caught by the running belt. The force of the moving belt caused claimant to lose his balance. He was dragged
to the other end of the machine. His feet were smashed by the iron shaft and he was pinned under the machine itself."x x x

Under the laws we are bound to accept these findings; and must disregard petitioner's arguments disputing them [1]. But this does not
necessarily dispose of the matter, because ther remains the legal proposition extensively discussed by counsel for petitioner that Kim's
acts could not bind the corporation, since only the President, Yu Kong Tiong, was authorized by its by-laws to hire employees for the
manufacturing establishment.

The Commission found that Yu Kong Tiong was the president of the corporation and Sy Te the manager; but Yu Kong Tiong was
permitted actually to manage its affairs, (it being a "family" corporation) by remote control from his office in Manila thru Kim who was "in
charge" of the factory in Caloocan. It also declared that Kim was allowed by Yu Kong Tiong to employ Carbajosa as apprentice. (p. 52
Record.)

From such circumstances, the conclusion flows inevitably that Carbajosa was, at the time of the occurence, an employee of the
petitioning corporation.

Of course it is undeniable that as president and manager Yu Kong Tiong could legally employ, by himself, manual laborers to work in
the factory[2]. And there is nothing to prevent him from employing Carbajosa, thru his agent Kim, as the latter did. In fact it may even be
held that in default of proof establishing Yu Kong Tiong's assent to the employment, inasmuch as Kim the person actually in charge of
the factory represented to Carbajosa that he was authorized by the manager to engage his (Carbajosa's) services, there was apparent
authority of Kim, sufficiently ample to create the relationship of employer and employee for the purposes of the Workmen's
Compensation Law.

"It may be stated as a general rule that anagent, who with authority express, implied, apparent or actual, employs help for the benefit of
his principal's business, therby creates the relationship of employer and employee between such help and his principal." (Schneider,
Workmen's Compensation (Permanent Ed.) Vol. I p. 617, citing many cases.)

"It has been held: that where a driver, employed to solicit sales of beer and make delivery, was permitted to employ helpers, a helper
who was injured while in the performance of his duty was entitled to compensation from brewery; that an expert, hired by a factory
owner to supervise the installation of machinery, who hired assistants, paid by the owner, one of such assistants being injured while so
engaged was entitled to compensation from the factory owner; that workmen hired by an agent of the company, which took over the
logging work of an independent contractor, became the employees of the company." (Schneider, op. cit. p. 619.)

Needless to say, the existence of employer-employee relationship is the jurisdictional foundation without which an indemnity is
unauthorized. Schneider p. 569-570.) It is often difficult of determination, because purposely made so by employers bent on evading
liability under the Compensation Acts. Hence, if the object of the law is to be accomplished with a liberal construction[3], the creation of
the relationship should not be adjudged strictly in accordance with technical legal rules, but rather according to the actualities and
realities of industrial or business practice. A laborer is told to work for the establishment by the person-in-charge, who in turn
represented he had consulted with the manager. If the by-laws of the corporation had provided that no laborer may be hired unless with
the written consent of the board of directors, would it be consonant with justice to deny such laborer compensation for injuries, upon the
ground of lack of written authority? If so, a loophole has thereby been created in the Workmen's Compensation Law. That is perhaps
the reason why apparent authority has been considered enough, what with the principles of estoppel lending persuasive support.
(Schneider op. cit. Vol. I p. 623.)

A parallel situation arose in Flores et al. v. La Compañia Maritima, 32 O. Gaz. No. 21 pp. 406-407. The heirs of Graciano Paninsoro
demanded compensation because he died by reason of injuries received while working on the ship "Albay" belonging to and operated
by the Compañia Maritima, a corporation. The facts were;

"About the last week of the month of October, 1929, the defendant's boat, Albay, dropped anchor in the port of Cebu where the captain
thereof, through a contractor or agent, recruited laborers who were to board the ship for the purpose of unloading her cargo upon arrival
at the next port of call, Davao, and loading cargo for various ports of call on her return trip. Among those laborers was the appellant
Eusebia Flores' husband, Graciano Paninsoro, who was earning a daily wage of P1.50 including subsistence."

The defendant contended on appeal that Paninsoro was not its employee. This Court held,

"There is not a least shadow of a doubt that the deceased was a laborer in the legal sense. He had been recruited by order of the
captain of the ship and he was engage in a task of unloading the ship's cargo at the time of the accident. There can be no dispute that
this kind of work is included in the business in which the appellee is engaged. That the deceased had been recruited or engaged by a
contractor is of no moment because the latter, for purposes of the law, was in turn, represented the appellee." (Flores et al. v. La
Compañia Maritima, 32 O. Gaz. No. 21 pp. 406-407.)

It should be observed in the above litigation that neither the board of directors nor the President nor the manager of the defendant
corporation had hired the laborer Paninsoro. It was the captain of the ship, thru an agent, that employed him. Now then, in this case as
the person-in-charge of the factory (Kim) hired Carbajosa, the contract of employment should be upheld.

There is further circumstance, implying ratification of the employment, that the acting manager of the corporation Atty. Mercado directed
the payment by the corporation of Carbajosa's hospital expenses, amounting to P2,000.00. Mercado's explanation that he did it out of
pity, was not, and could not be accepted since the Asia Steel Corporation is not a charitable institution.

In view of the foregoing, and the petitioner not having questioned the amount of compensation, the order of the Commission, should be
, as it is hereby, affirmed with costs. So ordered.

Padilla, Montemayor, Reyes, Jugo, Bautista Angelo, Labrador, Concepcion, and Reyes, J.B.L., JJ., concur.
739 PHIL. 744

SECOND DIVISION

[ G.R. No. 195190, July 28, 2014 ]

ROYALE HOMES MARKETING CORPORATION, PETITIONER, VS. FIDEL P. ALCANTARA [DECEASED], SUBSTITUTED BY HIS
HEIRS, RESPONDENT.

DECISION

DEL CASTILLO, J.:

Not every form of control that a hiring party imposes on the hired party is indicative of employee-employer relationship. Rules and
regulations that merely serve as guidelines towards the achievement of a mutually desired result without dictating the means and
methods of accomplishing it do not establish employer-employee relationship.[1]

This Petition for Review on Certiorari[2] assails the June 23, 2010 Decision[3] of the Court of Appeals (CA) in CA-G.R. SP No. 109998
which (i) reversed and set aside the February 23, 2009 Decision [4]of the National Labor Relations Commission (NLRC), (ii) ordered
petitioner Royale Homes Marketing Corporation (Royale Homes) to pay respondent Fidel P. Alcantara (Alcantara) backwages and
separation pay, and (iii) remanded the case to the Labor Arbiter for the proper determination and computation of said monetary awards.

Also assailed in this Petition is the January 18, 2011 Resolution[5] of the CA denying Royale Homes’ Motion for Reconsideration,[6] as
well as its Supplemental[7] thereto.

Factual Antecedents

In 1994, Royale Homes, a corporation engaged in marketing real estates, appointed Alcantara as its Marketing Director for a fixed
period of one year. His work consisted mainly of marketing RoyaleHomes’ real estate inventories on an exclusive
basis. Royale Homes reappointed him for several consecutive years, the last of which covered the period January 1 to December 31,
2003 where he held the position of Division 5 Vice-President-Sales.[8]

Proceedings before the Labor Arbiter

On December 17, 2003, Alcantara filed a Complaint for Illegal Dismissal[9] against Royale Homes and its President Matilde Robles,
Executive Vice-President for Administration and Finance Ma. Melinda Bernardino, and Executive Vice- President for Sales Carmina
Sotto. Alcantara alleged that he is a regular employee of Royale Homes since he is performing tasks that are necessary and desirable
to its business; that in 2003 the company gave him P1.2 million for the services he rendered to it; that in the first week of November
2003, however, the executive officers of Royale Homes told him that they were wondering why he still had the gall to come to office and
sit at his table;[10] and that the acts of the executive officers of Royale Homes amounted to his dismissal from work without any valid or
just cause and in gross disregard of the proper procedure for dismissing employees. Thus, he also impleaded the corporate officers
who, he averred, effected his dismissal in bad faith and in an oppressive manner.

Alcantara prayed to be reinstated to his former position without loss of seniority rights and other privileges, as well as to be paid
backwages, moral and exemplary damages, and attorney’s fees. He further sought that the ownership of the Mitsubishi Adventure with
Plate No. WHD-945 be transferred to his name.

Royale Homes, on the other hand, vehemently denied that Alcantara is its employee. It argued that the appointment paper
of Alcantara is clear that it engaged his services as an independent sales contractor for a fixed term of one year only. He never
received any salary, 13th month pay, overtime pay or holiday pay from Royale Homes as he was paid purely on commission basis. In
addition, Royale Homes had no control on how Alcantara would accomplish his tasks and responsibilities as he was free to solicit sales
at any time and by any manner which he may deem appropriate and necessary. He is even free to recruit his own sales personnel to
assist him in pursuance of his sales target.

According to Royale Homes, Alcantara decided to leave the company after his wife, who was once connected with it as a sales agent,
had formed a brokerage company that directly competed with its business, and even recruited some of its sales agents. Although this
was against the exclusivity clause of the contract, Royale Homes still offered to accept Alcantara’s wife back so she could continue to
engage in real estate brokerage, albeit exclusively for Royale Homes. In a special management committee meeting on October 8,
2003, however, Alcantara announced publicly and openly that he would leave the company by the end of October 2003 and that he
would no longer finish the unexpired term of his contract. He has decided to join his wife and pursue their own brokerage
business. Royale Homes accepted Alcantara’s decision. It then threw a despedida party in his honor and, subsequently, appointed a
new independent contractor.

Two months after he relinquished his post, however, Alcantara appeared in Royale Homes and submitted a letter claiming that he was
illegally dismissed.

Ruling of the Labor Arbiter

On September 7, 2005, the Labor Arbiter rendered a Decision [11] holding that Alcantara is an employee of Royale Homes with a fixed-
term employment period from January 1 to December 31, 2003 and that the pre-termination of his contract was against the
law. Hence, Alcantara is entitled to an amount which he may have earned on the average for the unexpired portion of the
contract. With regard to the impleaded corporate officers, the Labor Arbiter absolved them from any liability.

The dispositive portion of the Labor Arbiter’s Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent Royale Homes Marketing Corp. to pay the
complainant the total amount of TWO HUNDRED SEVENTY SEVEN THOUSAND PESOS (P277,000.00) representing his
compensation/commission for the unexpired term of his contract.

All other claims are dismissed for lack of merit.

SO ORDERED.[12]

Both parties appealed the Labor Arbiter’s Decision to the NLRC. Royale Homes claimed that the Labor Arbiter grievously erred in
ruling that there exists an employer-employee relationship between the parties. It insisted that the contract between them expressly
states that Alcantara is an independent contractor and not an ordinary employee. It had no control over the means and methods by
which he performed his work. Royale Homes likewise assailed the award of P277,000.00 for lack of basis as it did not pre-terminate
the contract. It was Alcantara who chose not to finish the contract.

Alcantara, for his part, argued that the Labor Arbiter erred in ruling that his employment was for a fixed-term and that he is not entitled
to backwages, reinstatement, unpaid commissions, and damages.

Ruling of the National Labor Relations Commission

On February 23, 2009, the NLRC rendered its Decision,[13] ruling that Alcantara is not an employee but a mere independent contractor
of Royale Homes. It based its ruling mainly on the contract which does not require Alcantara to observe regular working hours. He was
also free to adopt the selling methods he deemed most effective and can even recruit sales agents to assist him in marketing the
inventories of Royale Homes. The NLRC also considered the fact that Alcantara was not receiving monthly salary, but was being paid
on commission basis as stipulated in the contract. Being an independent contractor, the NLRC concluded that Alcantara’s Complaint is
cognizable by the regular courts.

The fallo of the NLRC Decision reads:

WHEREFORE, premises considered, the Decision of Labor Arbiter Dolores Peralta-Beley dated September 5, 2005 is REVERSED and
SET ASIDE and a NEW ONE rendered dismissing the complaint for lack of jurisdiction.

SO ORDERED.[14]

Alcantara moved for reconsideration.[15] In a Resolution[16] dated May 29, 2009, however, the NLRC denied his motion.

Alcantara thus filed a Petition for Certiorari[17] with the CA imputing grave abuse of discretion on the part of the NLRC in ruling that he is
not an employee of Royale Homes and that it is the regular courts which have jurisdiction over the issue of whether the pre-termination
of the contract is valid.

Ruling of the Court of Appeals

On June 23, 2010, the CA promulgated its Decision[18] granting Alcantara’s Petition and reversing the NLRC’s Decision. Applying the
four-fold and economic reality tests, it held that Alcantara is an employee of Royale Homes. Royale Homes exercised some degree of
control over Alcantara since his job, as observed by the CA, is subject to company rules, regulations, and periodic evaluations. He was
also bound by the company code of ethics. Moreover, the exclusivity clause of the contract has made Alcantara economically
dependent on Royale Homes, supporting the theory that he is an employee of said company.

The CA further held that Alcantara’s termination from employment was without any valid or just cause, and it was carried out in violation
of his right to procedural due process. Thus, the CA ruled that he is entitled to backwages and separation pay, in lieu of
reinstatement. Considering, however, that the CA was not satisfied with the proof adduced to establish the amount of Alcantara’s
annual salary, it remanded the case to the Labor Arbiter to determine the same and the monetary award he is entitled to. With regard to
the corporate officers, the CA absolved them from any liability for want of clear proof that they assented to the patently unlawful acts or
that they are guilty of bad faith or gross negligence. Thus:

WHEREFORE, in view of the foregoing, the instant PETITION is GRANTED. The assailed decision of the National Labor Relations
Commission in NLRC NCR CASE NO. 00-12-14311-03 NLRC CA NO. 046104-05 dated February 23, 2009 as well as the Resolution
dated May 29, 2009 are hereby SET ASIDE and a new one is entered ordering the respondent company to pay petitioner backwages
which shall be computed from the time of his illegal termination in October 2003 up to the finality of this decision, plus separation pay
equivalent to one month salary for every year of service. This case is REMANDED to the Labor Arbiter for the proper determination
and computation of back wages, separation pay and other monetary benefits that petitioner is entitled to.
SO ORDERED.[19]

Royale Homes filed a Motion for Reconsideration[20] and a Supplemental Motion for Reconsideration.[21] In a Resolution[22] dated
January 18, 2011, however, the CA denied said motions.

Issues

Hence, this Petition where Royale Homes submits before this Court the following issues for resolution:

A.

WHETHER THE COURT OF APPEALS HAS DECIDED THE INSTANT CASE NOT IN ACCORD WITH LAW AND APPLICABLE
DECISIONS OF THE SUPREME COURT WHEN IT REVERSED THE RULING OF THE NLRC DISMISSING THE COMPLAINT OF
RESPONDENT FOR LACK OF JURISDICTION AND CONSEQUENTLY, IN FINDING THAT RESPONDENT WAS ILLEGALLY
DISMISSED[.]

B.

WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN DISREGARDING THE EN BANC RULING OF
THIS HONORABLE COURT IN THE CASE OF TONGKO VS. MANULIFE, AND IN BRUSHING ASIDE THE APPLICABLE RULINGS
OF SONZA VS. ABS CBN AND CONSULTA V. CA[.]

C.

WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN DENYING THE MOTION FOR
RECONSIDERATION OF PETITIONER AND IN REFUSING TO CORRECT ITSELF[.][23]

Royale Homes contends that its contract with Alcantara is clear and unambiguous - it engaged his services as an independent
contractor. This can be readily seen from the contract stating that noemployer-employee relationship exists between the parties;
that Alcantara was free to solicit sales at any time and by any manner he may deem appropriate; that he may recruit sales personnel to
assist him in marketing Royale Homes’ inventories; and, that his remunerations are dependent on his sales performance.

Royale Homes likewise argues that the CA grievously erred in ruling that it exercised control over Alcantara based on a shallow ground
that his performance is subject to company rules and regulations, code of ethics, periodic evaluation, and exclusivity clause of
contract. Royale Homes maintains that it is expected to exercise some degree of control over its independent contractors, but that
does not automatically result in the existence of employer-employee relationship. For control to be considered as a proof tending to
establish employer-employee relationship, the same must pertain to the means and method of performing the work; not on the
relationship of the independent contractors among themselves or their persons or their source of living.

Royale Homes further asserts that it neither hired nor wielded the power to dismiss Alcantara. It was Alcantara who openly and publicly
declared that he was pre-terminating his fixed-term contract.

The pivotal issue to be resolved in this case is whether Alcantara was an independent contractor or an employee of Royale Homes.

Our Ruling

The Petition is impressed with merit.

The determination of whether a party who renders services to another is an employee or an independent contractor involves an
evaluation of factual matters which, ordinarily, is not within the province of this Court. In view of the conflicting findings of the tribunals
below, however, this Court is constrained to go over the factual matters involved in this case. [24]

The juridical relationship of the parties

based on their written contract

The primary evidence of the nature of the parties’ relationship in this case is the written contract that they signed and executed in
pursuance of their mutual agreement. While the existence of employer-employee relationship is a matter of law, the characterization
made by the parties in their contract as to the nature of their juridical relationship cannot be simply ignored, particularly in this case
where the parties’ written contract unequivocally states their intention at the time they entered into it. In Tongko v. The Manufacturers
Life Insurance Co. (Phils.), Inc.,[25] it was held that:

To be sure, the Agreement’s legal characterization of the nature of the relationship cannot be conclusive and binding on the courts; x x
x the characterization of the juridical relationship the Agreement embodied is a matter of law that is for the courts to determine. At the
same time, though, the characterization the parties gave to their relationship in the Agreement cannot simply be brushed aside because
it embodies their intent at the time they entered the Agreement, and they were governed by this understanding throughout their
relationship. At the very least, the provision on the absence of employer-employee relationship between the parties can be an aid in
considering the Agreement and its implementation, and in appreciating the other evidence on record. [26]

In this case, the contract,[27] duly signed and not disputed by the parties, conspicuously provides that “no employer-employee
relationship exists between” Royale Homes and Alcantara, as well as his sales agents. It is clear that they did not want to be bound by
employer-employee relationship at the time of the signing of the contract. Thus:

January 24, 2003

MR. FIDEL P. ALCANTARA

13 Rancho I
Marikina City

Dear Mr. Alcantara,

This will confirm your appointment as Division 5 VICE[-]PRESIDENT-SALES of ROYALE HOMES MARKETING CORPORATION
effective January 1, 2003 to December 31, 2003.

Your appointment entails marketing our real estate inventories on an EXCLUSIVE BASIS under such price, terms and condition to be
provided to you from time to time.

As such, you can solicit sales at any time and by any manner which you deem appropriate and necessary to market our real estate
inventories subject to rules, regulations and code of ethics promulgated by the company. Further, you are free to recruit sales
personnel/agents to assist you in marketing of our inventories provided that your personnel/agents shall first attend the required
seminars and briefing to be conducted by us from time to time for the purpose of familiarizing them of terms and conditions of sale, the
nature of property sold, etc., attendance of which shall be a condition precedent for their accreditation by us.

That as such Division 5 VICE[-]PRESIDENT-SALES you shall be entitled to:

1. Commission override of 0.5% for all option sales beginning January 1, 2003 booked by your sales agents.

2. Budget allocation depending on your division’s sale performance as per our budget guidelines.

3. Sales incentive and other forms of company support which may be granted from time to time.

It is understood, however, that no employer-employee relationship exists between us, that of your sales personnel/agents,
and that you shall hold our company x x x, its officers and directors, free and harmless from any and all claims of liability and damages
arising from and/or incident to the marketing of our real estate inventories.

We reserve, however, our right to terminate this agreement in case of violation of any company rules and regulations, policies and code
of ethics upon notice for justifiable reason.

Your performance shall be subject to periodic evaluation based on factors which shall be determined by the management.

If you are amenable to the foregoing terms and conditions, please indicate your conformity by signing on the space provided below and
return [to] us a duplicate copy of this letter, duly accomplished, to constitute as our agreement on the matter. (Emphasis ours)

Since “the terms of the contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its
stipulations should control.”[28] No construction is even needed as they already expressly state their intention. Also, this Court adopts
the observation of the NLRC that it is rather strange on the part of Alcantara, an educated man and a veteran sales broker who claimed
to be receiving P1.2 million as his annual salary, not to have contested the portion of the contract expressly indicating that he is not an
employee of Royale Homes if their true intention were otherwise.

The juridical relationship of the

parties based on Control Test

In determining the existence of an employer-employee relationship, this Court has generally relied on the four-fold test, to wit: (1) the
selection and engagement of 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. [29] Among the four, the most
determinative factor in ascertaining the existence of employer-employee relationship is the “right of control test”.[30] “It is deemed to be
such an important factor that the other requisites may even be disregarded.” [31] This holds true where the issues to be resolved is
whether a person who performs work for another is the latter’s employee or is an independent contractor,[32] as in this case. For where
the person for whom the services are performed reserves the right to control not only the end to be achieved, but also the means by
which such end is reached, employer-employee relationship is deemed to exist.[33]

In concluding that Alcantara is an employee of Royale Homes, the CA ratiocinated that since the performance of his tasks is subject to
company rules, regulations, code of ethics, and periodic evaluation, the element of control is present.
The Court disagrees.

Not every form of control is indicative of employer-employee relationship. A person who performs work for another and is subjected to
its rules, regulations, and code of ethics does not necessarily become an employee. [34] As long as the level of control does not interfere
with the means and methods of accomplishing the assigned tasks, the rules imposed by the hiring party on the hired party do not
amount to the labor law concept of control that is indicative of employer-employee relationship. In Insular Life Assurance Co., Ltd. v.
National Labor Relations Commission[35] it was pronounced 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. x x x [36]

In this case, the Court agrees with Royale Homes that the rules, regulations, code of ethics, and periodic evaluation alluded to
by Alcantara do not involve control over the means and methods by which he was to perform his
job. Understandably, Royale Homes has to fix the price, impose requirements on prospective buyers, and lay down the terms and
conditions of the sale, including the mode of payment, which the independent contractors must follow. It is also necessary
for Royale Homes to allocate its inventories among its independent contractors, determine who has priority in selling the same, grant
commission or allowance based on predetermined criteria, and regularly monitor the result of their marketing and sales efforts. But to
the mind of this Court, these do not pertain to the means and methods of how Alcantara was to perform and accomplish his task of
soliciting sales. They do not dictate upon him the details of how he would solicit sales or the manner as to how he would transact
business with prospective clients. In Tongko, this Court held that guidelines or rules and regulations that do not pertain to the means or
methods to be employed in attaining the result are not indicative of control as understood in labor law. Thus:

From jurisprudence, an important lesson that the first Insular Life case teaches us is that a commitment to abide by the rules and
regulations of an insurance company does not ipso factomake the insurance agent an employee. Neither do guidelines somehow
restrictive of the insurance agent’s conduct necessarily indicate “control” as this term is defined in jurisprudence. Guidelines
indicative of labor law “control,” as the first Insular Life case tells us, should not merely relate to the mutually desirable result
intended by the contractual relationship; they must have the nature of dictating the means or methods to be employed in
attaining the result, or of fixing the methodology and of binding or restricting the party hired to the use of these means. In
fact, results-wise, the principal can impose production quotas and can determine how many agents, with specific territories, ought to be
employed to achieve the company’s objectives. These are management policy decisions that the labor law element of control cannot
reach. Our ruling in these respects in thefirst Insular Life case was practically reiterated in Carungcong. Thus, as will be shown more
fully below, Manulife’s codes of conduct, all of which do not intrude into the insurance agents’ means and manner of conducting their
sales and only control them as to the desired results and Insurance Code norms, cannot be used as basis for a finding that the labor
law concept of control existed between Manulife and Tongko.[37] (Emphases in the original)

As the party claiming the existence of employer-employee relationship, it behoved upon Alcantara to prove the elements thereof,
particularly Royale Homes’ power of control over the means and methods of accomplishing the work.[38] He, however, failed to cite
specific rules, regulations or codes of ethics that supposedly imposed control on his means and methods of soliciting sales and dealing
with prospective clients. On the other hand, this case is replete with instances that negate the element of control and the existence of
employer-employee relationship. Notably, Alcantara was not required to observe definite working hours.[39] Except for soliciting
sales, Royale Homes did not assign other tasks to him. He had full control over the means and methods of accomplishing his tasks as
he can “solicit sales at any time and by any manner which [he may] deem appropriate and necessary.” He performed his tasks on his
own account free from the control and direction of Royale Homes in all matters connected therewith, except as to the results thereof. [40]

Neither does the repeated hiring of Alcantara prove the existence of employer-employee relationship.[41] As discussed above, the
absence of control over the means and methods disproves employer-employee relationship. The continuous rehiring
of Alcantara simply signifies the renewal of his contract with Royale Homes, and highlights his satisfactory services warranting the
renewal of such contract. Nor does the exclusivity clause of contract establish the existence of the labor law concept of
control. In Consulta v. Court of Appeals,[42] it was held that exclusivity of contract does not necessarily result in employer-employee
relationship, viz:

x x x However, the fact that the appointment required Consulta to solicit business exclusively for Pamana did not mean that Pamana
exercised control over the means and methods of Consulta’s work as the term control is understood in labor jurisprudence. Neither did
it make Consulta an employee of Pamana. Pamana did not prohibit Consulta from engaging in any other business, or from being
connected with any other company, for as long as the business [of the] company did not compete with Pamana’s business.[43]

The same scenario obtains in this case. Alcantara was not prohibited from engaging in any other business as long as he does not sell
projects of Royale Homes’ competitors. He can engage in selling various other products or engage in unrelated businesses.

Payment of Wages

The element of payment of wages is also absent in this case. As provided in the contract, Alcantara’s remunerations consist only of
commission override of 0.5%, budget allocation, sales incentive and other forms of company support. There is no proof that he received
fixed monthly salary. No payslip or payroll was ever presented and there is no proof that Royale Homes deducted from his supposed
salary withholding tax or that it registered him with the Social Security System, Philippine Health Insurance Corporation, or Pag-Ibig
Fund. In fact, his Complaint merely states a ballpark figure of his alleged salary of P100,000.00, more or less. All of these indicate an
independent contractual relationship.[44] Besides, if Alcantara indeed considered himself an employee of Royale Homes, then he, an
experienced and professional broker, would have complained that he was being denied statutorily mandated benefits. But for nine
consecutive years, he kept mum about it, signifying that he has agreed, consented, and accepted the fact that he is not entitled to those
employee benefits because he is an independent contractor.

This Court is, therefore, convinced that Alcantara is not an employee of Royale Homes, but a mere independent contractor. The NLRC
is, therefore, correct in concluding that the Labor Arbiter has nojurisdiction over the case and that the same is cognizable by the regular
courts.

WHEREFORE, the instant Petition is hereby GRANTED. The June 23, 2010 Decision of the Court of Appeals in CA-G.R. SP No.
109998 is REVERSED and SET ASIDE. The February 23, 2009 Decision of the National Labor Relations Commission
is REINSTATED and AFFIRMED.

SO ORDERED.

Carpio, (Chairperson), Brion, Perez, and Perlas-Bernabe, JJ., concur.

758 Phil. 467

FIRST DIVISION

[ G.R. No. 199166, April 20, 2015 ]

NELSON V. BEGINO, GENER DEL VALLE, MONINA AVILA-LLORIN AND MA. CRISTINA SUMAYAO, PETITIONERS, VS. ABS-
CBN CORPORATION (FORMERLY, ABS-CBN BROADCASTING CORPORATION) AND AMALIA VILLAFUERTE,
RESPONDENTS.

DECISION

PEREZ, J.:

The existence of an employer-employee relationship is at the heart of this Petition for Review on Certiorari filed pursuant to Rule 45 of
the Rules of Court, primarily assailing the 29 June 2011 Decision[1] rendered by the Fourth Division of the Court of Appeals (CA) in CA-
G.R. SP No. 116928 which ruled out said relationship between the parties.

The Facts

Respondent ABS-CBN Corporation (formerly ABS-CBN Broadcasting Corporation) is a television and radio broadcasting corporation
which, for its Regional Network Group in Naga City, employed respondent Amalia Villafuerte (Villafuerte) as Manager. There
is no dispute regarding the fact that, thru Villafuerte, ABS-CBN engaged the services of petitioners Nelson Begino (Begino) and Gener
Del Valle (Del Valle) sometime in 1996 as Cameramen/Editors for TV Broadcasting. Petitioners Ma. Cristina Sumayao (Sumayao) and
Monina Avila-Llorin (Llorin) were likewise similarly engaged as reporters sometime in 1996 and 2002, respectively. With their services
engaged by respondents thru Talent Contracts which, though regularly renewed over the years, provided terms ranging from three (3)
months to one (1) year, petitioners were given Project Assignment Forms which detailed, among other matters, the duration of a
particular project as well as the budget and the daily technical requirements thereof. In the aforesaid capacities, petitioners were tasked
with coverage of news items for subsequent daily airings in respondents’ TV Patrol Bicol Program. [2]

While specifically providing that nothing therein shall be deemed or construed to establish an employer-employee relationship between
the parties, the aforesaid Talent Contracts included, among other matters, provisions on the following matters: (a) the Talent’s creation
and performance of work in accordance with the ABS-CBN’s professional standards and compliance with its policies and guidelines
covering intellectual property creators, industry codes as well as the rules and regulations of the Kapisanan ng mga Broadcasters sa
Pilipinas (KBP) and other regulatory agencies; (b) the Talent’s non-engagement in similar work for a person or entity directly or
indirectly in competition with or adverse to the interests of ABS-CBN and non-promotion of any product or service without prior written
consent; and (c) the results-oriented nature of the talent’s work which did not require them to observe normal or fixed working
hours.[3] Subjected to contractor’s tax, petitioners’ remunerations were denominated as Talent Fees which, as of last renewal, were
admitted to be pegged per airing day at P273.35 for Begino, P302.92 for Del Valle, P323.08 for Sumayao and P315.39 for Llorin. [4]

Claiming that they were regular employees of ABS-CBN, petitioners filed against respondents the complaint[5] docketed as Sub-RAB
05-04-00041-07 before the National Labor Relations Commission’s (NLRC) Sub- Regional Arbitration Branch No. 5, Naga City. In
support of their claims for regularization, underpayment of overtime pay, holiday pay, 13th month pay, service incentive leave pay,
damages and attorney's fees, petitioners alleged that they performed functions necessary and desirable in ABS-CBN's business.
Mandated to wear company IDs and provided all the equipment they needed, petitioners averred that they worked under the direct
control and supervision of Villafuerte and, at the end of each day, were informed about the news to be covered the following day, the
routes they were to take and, whenever the subject of their news coverage is quite distant, even the start of their workday. Due to the
importance of the news items they covered and the necessity of their completion for the success of the program, petitioners claimed
that, under pain of immediate termination, they were bound by the company’s policy on, among others, attendance and punctuality.[6]

Aside from the constant evaluation of their actions, petitioners were reportedly subjected to an annual competency assessment
alongside other ABS-CBN employees, as condition for their continued employment. Although their work involved dealing with
emergency situations at any time of the day or night, petitioners claimed that they were not paid the labor standard benefits the law
extends to regular employees. To avoid paying what is due them, however, respondents purportedly resorted to the simple expedient of
using said Talent Contracts and/or Project Assignment Forms which denominated petitioners as talents, despite the fact that they are
not actors or TV hosts of special skills. As a result of this iniquitous situation, petitioners asseverated that they merely earned an
average of P7,000.00 to P8,000.00 per month, or decidedly lower than the P21,773.00 monthly salary ABS-CBN paid its regular rank-
and-file employees. Considering their repeated re-hiring by respondents for ostensible fixed periods, this situation had gone on for
years since TV Patrol Bicol has continuously aired from 1996 onwards. [7]

In refutation of the foregoing assertions, on the other hand, respondents argued that, although it occasionally engages in production
and generates programs thru various means, ABS-CBN is primarily engaged in the business of broadcasting television and radio
content. Not having the full manpower complement to produce its own program, the company had allegedly resorted to engaging
independent contractors like actors, directors, artists, anchormen, reporters, scriptwriters and various production and technical staff,
who offered their services in relation to a particular program. Known in the industry as talents, such independent contractors
inform ABS- CBN of their availability and were required to accomplish Talent Information Forms to facilitate their engagement for and
appearance on designated project days. Given the unpredictability of viewer preferences, respondents argued that the company cannot
afford to provide regular work for talents with whom it negotiates specific or determinable professional fees on a per project, weekly or
daily basis, usually depending on the budget allocation for a project. [8]

Respondents insisted that, pursuant to their Talent Contracts and/or Project Assignment Forms, petitioners were hired as talents, to act
as reporters and/or cameramen for TV Patrol Bicol for designated periods and rates. Fully aware that they were not considered or to
consider themselves as employees of a particular production or film outfit, petitioners were supposedly engaged on the basis of the
skills, knowledge or expertise they already possessed and, for said reason, required no further training from ABS-CBN. Although
petitioners were inevitably subjected to some degree of control, the same was allegedly limited to the imposition of general guidelines
on conduct and performance, simply for the purpose of upholding the standards of the company and the strictures of the industry.
Never subjected to any control or restrictions over the means and methods by which they performed or discharged the tasks for which
their services were engaged, petitioners were, at most, briefed whenever necessary regarding the general requirements of the project
to be executed.[9]

Having been terminated during the pendency of the case, Petitioners filed on 10 July 2007 a second complaint against respondents, for
regularization, payment of labor standard benefits, illegal dismissal and unfair labor practice, which was docketed as Sub-RAB 05-08-
00107-07. Upon respondents’ motion, this complaint was dismissed for violation of the rules against forum shopping in view of the fact
that the determination of the issues in the second case hinged on the resolution of those raised in the first. [10] On 19 December 2007,
however, Labor Arbiter Jesus Orlando Quiñones (Labor Arbiter Quiñones) resolved Sub-RAB 05-04-00041-07 in favor of petitioners
who, having rendered services necessary and related to ABS-CBN’s business for more than a year, were determined to be its regular
employees. With said conclusion found to be buttressed by, among others, the exclusivity clause and prohibitions under petitioners’
Talent Contracts and/or Project Assignment Forms which evinced respondents’ control over them, [11] Labor Arbiter Quiñones disposed
of the case in the following wise:
WHEREFORE, finding merit in the causes of action set forth by the complainants, judgment is hereby rendered declaring complainants
MONINA AVILA-LLORIN, GENER L. DEL VALLE, NELSON V. BEGINO and MA. CRISTINA V. SUMAYAO, as regular employees of
respondent company, ABS-CBN BROADCASTING CORPORATION.

Accordingly, respondent ABS-CBN Broadcasting Corporation is hereby ORDERED to pay complainants, subject to the prescriptive
period provided under Article 291 of the Labor Code, however applicable, the total amount of Php2,440,908.36, representing
salaries/wage differentials, holiday pay, service incentive leave pay and 13 th month pay, to include 10% of the judgment award as
attorney’s fees of the judgment award (computation of the monetary awards are attached hereto as integral part of this decision).

Moreover, respondents are directed to admit back complainants to work under the same terms and conditions prevailing prior to their
separation or, at respondents' option, merely reinstated in the payroll.

Other than the above, all other claims and charges are ordered DISMISSED for lack of merit. [12]
Aggrieved by the foregoing decision, respondents elevated the case on appeal before the NLRC, during the pendency of which
petitioners filed a third complaint against the former, for illegal dismissal, regularization, non- payment of salaries and 13th month pay,
unfair labor practice, damages and attorney’s fees. In turn docketed as NLRC Case No. Sub-RAB-V-05-03-00039-08, the complaint
was raffled to Labor Arbiter Quiñones who issued an Order dated 30 April 2008, inhibiting himself from the case and denying
respondents’ motion to dismiss on the grounds of res judicata and forum shopping.[13] Finding that respondents’ control over petitioners
was indeed manifest from the exclusivity clause and prohibitions in the Talent Contracts and/or Project Assignment Forms, on the other
hand, the NLRC rendered a Decision dated 31 March 2010, affirming said Labor Arbiter’s appealed decision. [14] Undeterred by the
NLRC’s 31 August 2010 denial of their motion for reconsideration, [15]respondents filed the Rule 65 petition for certiorari docketed before
the CA as CA-G.R. SP No. 116928 which, in addition to taking exceptions to the findings of the assailed decision, faulted petitioners for
violating the rule against forum shopping.[16]

On 29 June 2011, the CA rendered the herein assailed decision, reversing the findings of the Labor Arbiter and the NLRC. Ruling out
the existence of forum shopping on the ground that petitioners' second and third complaints were primarily anchored on their
termination from employment after the filing of their first complaint, the CA nevertheless discounted the existence of an employer-
employee relation between the parties upon the following findings and conclusions: (a) petitioners, were engaged by respondents as
talents for periods, work and the program specified in the Talent Contracts and/or Project Assignment Forms concluded between them;
(b) instead of fixed salaries, petitioners were paid talent fees depending on the budget allocated for the program to which they were
assigned; (c) being mainly concerned with the result, respondents did not exercise control over the manner and method by which
petitioner accomplished their work and, at most, ensured that they complied with the standards of the company, the KBP and the
industry; and, (d) the existence of an employer-employee relationship is not necessarily established by the exclusivity clause and
prohibitions which are but terms and conditions on which the parties are allowed to freely stipulate. [17]

Petitioners’ motion for reconsideration of the foregoing decision was denied in the CA's 3 October 2011 Resolution,[18] hence, this
petition.

The Issues

Petitioners seek the reversal of the CA’s assailed Decision and

Resolution on the affirmative of the following issues:

1. Whether or not the CA seriously and reversibly erred in not dismissing respondents’ petition for certiorari in view of the fact that they
did file a Notice of Appeal at the NLRC level and did not, by themselves or through their duly authorized representative, verify and
certify the Memorandum of Appeal they filed thereat, in accordance with the NLRC Rules of Procedure; and

2. Whether or not the CA seriously and reversibly erred in brushing aside the determination made by both the Labor Arbiter and the
NLRC of the existence of an employer-employee relationship between the parties, despite established jurisprudence supporting the
same.

The Court's Ruling

The Court finds the petition impressed with merit.

Petitioners preliminarily fault the CA for not dismissing respondents’ Rule 65 petition for certiorari in view of the fact that the latter failed
to file a Notice of Appeal from the Labor Arbiter’s decision and to verify and certify the Memorandum of Appeal they filed before the
NLRC. While concededly required under the NLRC Rules of Procedure, however, these matters should have been properly raised
during and addressed at the appellate stage before the NLRC. Instead, the record shows that the NLRC took cognizance of
respondents’ appeal and proceeded to resolve the same in favor of petitioners by affirming the Labor Arbiter’s decision. Not having filed
their own petition for certiorari to take exception to the liberal attitude the NLRC appears to have adopted towards its own rules of
procedure, petitioners were hardly in the proper position to raise the same before the CA or, for that matter, before this Court at this late
stage. Aside from the settled rule that a party who has not appealed is not entitled to affirmative relief other than the ones granted in the
decision[19] rendered, liberal interpretation of procedural rules on appeal had, on occasion, been favored in the interest of substantive
justice.[20]

Although the existence of an employer-employee relationship is, on the other hand, a question of fact[21] which is ordinarily not the
proper subject of a Rule 45 petition for review on certiorari like the one at bar, the conflicting findings between the labor tribunals and
the CA justify a further consideration of the matter.[22] To determine the existence of said relation, case law has consistently applied the
four-fold test, to wit: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d)
the employer's power to control the employee on the means and methods by which the work is accomplished. [23] Of these criteria, the
so-called “control test” is generally regarded as the most crucial and determinative indicator of the presence or absence of an employer-
employee relationship. Under this test, an employer-employee relationship is said to exist where the person for whom the services are
performed reserves the right to control not only the end result but also the manner and means utilized to achieve the same. [24]

In discounting the existence of said relationship between the parties, the CA ruled that Petitioners' services were, first and foremost,
engaged thru their Talent Contracts and/or Project Assignment Forms which specified the work to be performed by them, the project to
which they were assigned, the duration thereof and their rates of pay according to the budget therefor allocated. Because they are
imbued with public interest, it cannot be gainsaid, however, that labor contracts are subject to the police power of the state and are
placed on a higher plane than ordinary contracts. The recognized supremacy of the law over the nomenclature of the contract and the
stipulations contained therein is aimed at bringing life to the policy enshrined in the Constitution to afford protection to labor.[25]Insofar
as the nature of one’s employment is concerned, Article 280 of the Labor Code of the Philippines also provides as follows:
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 service to be performed is seasonal in nature and the employment is for the duration
of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who has
rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with
respect to the activity in which he is employed and his employment shall continue while such actually exists.
It has been ruled that the foregoing provision contemplates four kinds of employees, namely: (a) regular employees or those who have
been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer; (b) project
employees or those whose 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; (c) seasonal employees or those who work or perform services which
are seasonal in nature, and the employment is for the duration of the season; and (d) casual employees or those who are not regular,
project, or seasonal employees.[26] To the foregoing classification of employee, jurisprudence has added that of contractual or fixed
term employee which, if not for the fixed term, would fall under the category of regular employment in view of the nature of the
employee’s engagement, which is to perform activity usually necessary or desirable in the employer’s business. [27]

The Court finds that, notwithstanding the nomenclature of their Talent Contracts and/or Project Assignment Forms and the terms and
condition embodied therein, petitioners are regular employees of ABS-CBN. Time and again, it has been ruled that the test to determine
whether employment is regular or not is the reasonable connection between the activity performed by the employee in relation to the
business or trade of the employer.[28] As cameramen/editors and reporters, petitioners were undoubtedly performing functions
necessary and essential to ABS-CBN’s business of broadcasting television and radio content. It matters little that petitioners’ services
were engaged for specified periods for TV Patrol Bicol and that they were paid according to the budget allocated therefor. Aside from
the fact that said program is a regular weekday fare of the ABS-CBN’s Regional Network Group in Naga City, the record shows that,
from their initial engagement in the aforesaid capacities, petitioners were continuously re-hired by respondents over the years. To the
mind of the Court, respondents’ repeated hiring of petitioners for its long-running news program positively indicates that the latter
were ABS-CBN’s regular employees.

If the employee has been performing the job for at least one year, even if the performance is not continuous or merely intermittent, the
law deems the repeated or continuing performance as sufficient evidence of the necessity, if not indispensability of that activity in the
business.[29] Indeed, an employment stops being co-terminous with specific projects where the employee is continuously re-hired due to
the demands of the employer’s business.[30] When circumstances show, moreover, that contractually stipulated periods of employment
have been imposed to preclude the acquisition of tenurial security by the employee, this Court has not hesitated in striking down such
arrangements as contrary to public policy, morals, good customs or public order.[31] The nature of the employment depends, after all, on
the nature of the activities to be performed by the employee, considering the nature of the employer’s business, the duration and scope
to be done, and, in some cases, even the length of time of the performance and its continued existence.[32] In the same manner that the
practice of having fixed-term contracts in the industry does not automatically make all talent contracts valid and compliant with labor
law, it has, consequently, been ruled that the assertion that a talent contract exists does not necessarily prevent a regular employment
status.[33]

As cameramen/editors and reporters, it also appears that petitioners were subject to the control and supervision of respondents which,
first and foremost, provided them with the equipments essential for the discharge of their functions. Prepared at the instance of
respondents, petitioners’ Talent Contracts tellingly provided that ABS-CBN retained “all creative, administrative, financial and legal
control” of the program to which they were assigned. Aside from having the right to require petitioners “to attend and participate in all
promotional or merchandising campaigns, activities or events for the Program,” ABS-CBN required the former to perform their functions
“at such locations and Performance/Exhibition Schedules” it provided or, subject to prior notice, as it chose determine, modify or
change. Even if they were unable to comply with said schedule, petitioners were required to give advance notice, subject to
respondents’ approval.[34] However obliquely worded, the Court finds the foregoing terms and conditions demonstrative of the control
respondents exercised not only over the results of petitioners’ work but also the means employed to achieve the same.

In finding that petitioners were regular employees, the NLRC further ruled that the exclusivity clause and prohibitions in their Talent
Contracts and/or Project Assignment Forms were likewise indicative of respondents’ control over them. Brushing aside said finding,
however, the CA applied the ruling in Sonza v. ABS-CBN Broadcasting Corporation[35] where similar restrictions were considered not
necessarily determinative of the existence of an employer-employee relationship. Recognizing that independent contractors can validly
provide his exclusive services to the hiring party, said case enunciated that guidelines for the achievement of mutually desired results
are not tantamount to control. As correctly pointed out by petitioners, however, parallels cannot be expediently drawn between this case
and that of Sonza case which involved a well-known television and radio personality who was legitimately considered a talent and
amply compensated as such. While possessed of skills for which they were modestly recompensed by respondents, petitioners
lay no claim to fame and/or unique talents for which talents like actors and personalities are hired and generally compensated in the
broadcast industry.

Later echoed in Dumpit-Murillo v. Court of Appeals,[36] this Court has rejected the application of the ruling in the Sonza case to
employees similarly situated as petitioners in ABS-CBN Broadcasting Corporation v. Nazareno.[37] The following distinctions were
significantly observed between employees like petitioners and television or radio personalities like Sonza, to wit:
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 petitioner’s 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. The Court will peruse beyond any such agreement to examine the facts that typify the parties’
actual relationship.[38] (Emphasis omitted)
Rather than the project and/or independent contractors respondents claim them to be, it is evident from the foregoing disquisition that
petitioners are regular employees of ABS-CBN. This conclusion is borne out by the ineluctable showing that petitioners perform
functions necessary and essential to the business of ABS-CBN which repeatedly employed them for a long-running news program of its
Regional Network Group in Naga City. In the course of said employment, petitioners were provided the equipments they needed, were
required to comply with the Company's policies which entailed prior approval and evaluation of their performance. Viewed from the
prism of these considerations, we find and so hold that the CA reversibly erred when it overturned the NLRC's affirmance of the Labor
Arbiter's finding that an employer-employee relationship existed between the parties. Given the fact, however, that Sub-RAB-V-05-03-
00039-08 had not been consolidated with this case and appears, for all intents and purposes, to be pending still, the Court finds that the
reinstatement of petitioners ordered by said labor officer and tribunal should, as a relief provided in case of illegal dismissal, be left for
determination in said case.

WHEREFORE, the Court of Appeals' assailed Decision dated 29 June 2011 and Resolution dated 3 October 2011 in CA-G.R. SP No.
116928 are REVERSED and SET ASIDE. Except for the reinstatement of Nelson V. Begino, Gener Del Valle, Monina Avila-Llorin and
Ma. Cristina Sumayao, the National Labor and Relations· Commission's 31 March 2010 Decision is, accordingly, REINSTATED.

SO ORDERED.

Sereno, C. J., (Chairperson), Leonardo-De Castro, Bersamin, and Perlas-Bernabe, JJ., concur.
804 Phil. 492

FIRST DIVISION

[ G.R. No. 206390, January 30, 2017 ]

JACK C. VALENCLA, PETITIONER, VS. CLASSIQUE VINYL PRODUCTS CORPORATION, JOHNNY CHANG (OWNER) AND/OR
CANTINGAS MANPOWER SERVICES, RESPONDENTS.

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari assails the December 5, 2012 Decision[1] and March 18, 2013 Resolution[2] of the Court of
Appeals (CA) in CA G.R. SP No. 120999, which respectively denied the Petition for Certiorari filed therewith by petitioner Jack
C. Valencia (Valencia) and the motion for reconsideration thereto.

Factual Antecedents

On March 24, 2010, Valencia filed with the Labor Arbiter a Complaint[3] for Underpayment of Salary and Overtime Pay; Non-Payment of
Holiday Pay, Service Incentive Leave Pay, 13th Month Pay; Regularization; Moral and Exemplary Damages; and, Attorney's Fees
against respondents Classique Vinyl Products Corporation (Classique Vinyl) and its owner Johnny Chang (Chang) and/or respondent
Cantingas Manpower Services (CMS). When Valencia, however, asked permission from Chang to attend the hearing in connection with
the said complaint on April 17, 2010, the latter allegedly scolded him and told him not to report for work anymore.
Hence, Valencia amended his complaint to include illegal dismissal.[4]

In his Sinumpaang Salaysay,[5] Valencia alleged that he applied for work with Classique Vinyl but was told by the latter's personnel
office to proceed to CMS, a local manpower agency, and therein submit the requirements for employment. Upon submission thereof,
CMS made him sign a contract of employment[6] but no copy of the same was given to him. He then proceeded to Classique Vinylfor
interview and thereafter started working for the company in June 2005 as felitizer operator. Valencia claimed that he worked 12 hours a
day from Monday to Saturday and was receiving P187.52 for the first eight hours and an overtime pay of P117.20 for the next four
hours or beyond the then minimum wage mandated by law. Five months later, he was made to serve as extruder operator but without
the corresponding increase in salary. He was neither paid his holiday pay, service incentive leave pay, and 13 th month pay. Worse,
premiums for Philhealth and Pag-IBIG Fund were not paid and his monthly deductions for Social Security System (SSS) premiums
were not properly remitted. He was also being deducted the amounts of P100.00 and 60.00 a week for Cash Bond and Agency Fee,
respectively. Valencia averred that his salary was paid on a weekly basis but his pay slips neither bore the name of Classique Vinyl nor
of CMS; that all the machineries that he was using/operating in connection with his work were all owned by Classique Vinyl; and, that
his work was regularly supervised by Classique Vinyl. He further averred that he worked for Classique Vinyl for four years until his
dismissal. Hence, by operation of law, he had already attained the status of a regular employee of his true employer, Classique Vinyl,
since according to him, Civ1S is a mere labor only contractor. Valencia, therefore, argued that Classique Vinyl should be held guilty of
illegal dismissal for failing to comply with the twin-notice requirement when it dismissed him from the service and be made to pay for his
monetary claims.

Classique Vinyl, for its part, denied having hired Valencia and instead pointed to CMS as the one who actually selected, engaged, and
contracted out Valencia's services. It averred that CMS would only deploy Valencia to Classique Vinyl whenever there was an urgent
specific task or temporary work and these occasions took place sometime in the years 2005, 2007, 2009 and 2010. It stressed
that Valencia's deployment to Classique Vinyl was intermittent and limited to three to four months only in each specific
year. Classique Vinyl further contended that Valencia's performance was exclusively and directly supervised by CMS and that his
wages and other benefits were also paid by the said agency. It likewise denied dismissing Valencia from work and instead averred that
on April 16, 2010, while deployed with Classique Vinyl, Valencia went on a prolonged absence from work for reasons only known to
him. In sum, Classique Vinyl asserted that there was no employer-employee relationship between it and Valencia, hence, it could not
have illegally dismissed the latter nor can it be held liable for Valencia's monetary claims. Even assuming that Valencia is entitled to
monetary benefits, Classique Vinyl averred that it cannot be made to pay the same since it is an establishment regularly employing less
than 10 workers. As such, it is exempted from paying the prescribed wage orders in its area and other benefits under the Labor Code.
At any rate, Classique Vinyl insisted that Valencia's true employer was CMS, the latter being an independent contractor as shown by
the fact that it was duly incorporated and registered not only with the Securities and Exchange Commission but also with the
Department of Labor and Employment; and, that it has substantial capital or investment in connection with the work performed and
services rendered by its employees to clients.

CMS, on the other hand, denied any employer-employee relationship between it and Valencia. It contended that after it
deployed Valencia to Classique Vinyl, it was already the latter which exercised full control and supervision over him. Also, Valencia's
wages were paid by Classique Vinyl only that it was CMS which physically handed the same to Valencia.

Ruling of the Labor Arbiter

On September 13, 2010, the Labor Arbiter issued a Decision,[7] the pertinent portions of which read:
Is [Valencia] a regular employee of respondent [Classique Vinyl]?

The Certificate of Business Name Registration issued by the Department of Trade and Industry dated 17 August 2007 and the Renewal
of PRPA License No. M-08-03-269 for the period 29 August 2008 to 28 August 2010 issued by the Regional Director of the National
Capital Region of the Department of Labor and Employment [on the] 1 st day of September 2008 are pieces of evidence to prove that
respondent [CMS] is a legitimate Private Recruitment and Placement Agency.

Pursuant to its business objective, respondent CMS entered into several Employment Contracts with complainant Valencia as
Contractual Employee for deployment to respondent [ClassiqueVinyl], the last of which was signed by [Valencia] on 06 February 2010.

The foregoing Employment Contract for a definite period supports respondent [Classique Vinyl's] assertion that [Valencia] was not hired
continuously but intermittently ranging from 3 months to 4 months for the years 2005, 2007, 2009 and 2010. Notably, no controverting
evidence was offered to dispute respondent [Classiquc Vinyl's] assertion.
Obviously, [Valencia] was deployed by CMS to [Classique Vinyl] for a fixed period.

In Pangilinan v. General Milling Corporation, G.R. No. 149329, July 12, 2004, the Supreme Court ruled that it does not necessarily
follow that where the duties of the employee consist of activities usually necessary or desirable in the usual business of the employer,
the parties are forbidden from agreeing on a period of time for the performance of such activities. There is thus nothing essentially
contradictory between a definite period of employment and the nature of the employee's duties.

Thus, even if respondent [Classique Vinyl] exercises full control and supervision over the activities performed by [Valencia], the latter's
employment cannot be considered as regular.

Likewise, even if [Valencia] is considered the regular employee of respondent CMS, the complaint for illegal dismissal cannot prosper
as [the] employment was not terminated by respondent CMS.

On the other hand, there is no substantial evidence to support [Valencia's] view that he was actually dismissed from his employment by
respondent [Classique Vinyl]. After all, it is elementary that he who makes an affirmative allegation has the burden of proof. On this
score, [Valencia] failed to establish that he was actually dismissed from his job by respondent [Classique Vinyl], aside from his bare
allegation.

With regard to underpayment of salary, respondent CMS admitted that it received from respondent [Classique Vinyl] the salary for
[Valencia's] deployment. Respondent CMS never contested that the amount received was sufficient for the payment of [Valencia's]
salary.

Furthermore, respondent [Classique Vinyl] cannot be obliged to pay [Valencia's] overtime pay, holiday pay, service incentive leave and
13th month pay as well as the alleged illegal deduction on the following grounds:

a) [Valencia] is not a rank-and-file employee of [Classique Vinyl];

b) No proof was offered to establish that [Valencia] actually rendered overtime services;

c) [Valencia had] not [worked] continuously or even intermittently for [one whole] (1) year[-]period during the specific year of his
deployment with respondent [Classique Vinyl] to be entitled to service incentive leave pay.

d) [Valencia] failed to offer substantia1 evidence to prove that respondent [Classique Vinyl] illegally deducted fiom his salary the alleged
agency and cash bond.

Moreover, as against respondent CMS[,] the record is bereft of factual basis for the exact computation of [Valencia's] money claims as it
has remained uncontroverted that [Valencia] was not deployed continuously neither with respondent [Classique Vinyl] and/or to such
other clientele.

WHEREFORE, premises considered, judgment is hereby rendered [d]ismissing the above-entitled case fur lack of merit and/or factual
basis.

SO ORDERED.[8]
Ruling of the National Labor Relations Commission

Valencia promptly appealed to the National Labor Relations Commission (NLRC). Applying the four-fold test, the NLRC, however,
declared CMS as Valencia's employer in its Resolution[9] dated April 14, 2011, viz.:
In Order to determine the existence of an employer-employee relationship, the following yardstick had been consistently applied: (1) the
selection and engagement; (2) payment of wages; (3) power of dismissal and; (4) the power to control the employee[']s conduct.

In this case, [Valencia] admitted that he applied for work with respondent [CMS] x x x. Upon the acceptance of his application, he was
made to sign an employment contract x x x. [Valencia] also admitted that he received his wages from respondent [CMS] x x x. As a
matter of tact, respondent [CMS] argued that [Valencia] was given a non-cash wage in the approximate amount of Php3,000.00 x x x.

Notably, it is explicitly stated in the employment contract of [Valencia] that he is required to observe all the rules and regulations of the
company as well as [the] lawful instructions of the management during his employment. That failure to do so would cause the
termination of his employment contract. The pertinent provision of the contract reads:
2. The employee shall observe all the rules and regulations of the company during the period of employment and [the] lawful
instructions of the management or its representatives. Failure to do so or if performance is below company standards, management
[has] the right to immediately cancel this contract. x x x
The fact that [Valencia] was subjected to such restriction is an evident exercise of the power of control over [Valencia].

The power of control of respondent [CMS] over Valencia was further bolstered by the declaration of the former that they will not take
against [Valencia] his numerous tardiness and absences at work and[;] his nonobservance of the company rules. The statement of
[CMS] reads:

Needless to say that [Valencia] in the course of his employment has incurred many infractions like tardiness and absences, non-
observance of company rules, but respondent [CMS], in reiteration will not take this up as leverage against [Valencia]. x x x

Though [Valencia] worked in the premises of Classique Vinyl x x x and that the [equipment] he used in the performance of his work was
provided by the latter, the same is not sufficient to establish employer-employee relationship between [Valencia] and Classique Vinyl x
x x in view of the foregoing circumstances earlier reflected. Besides, as articulated by jurisprudence, the power of control does not
require actual exercise of the power but the power to wield that power x x x.

With the foregoing chain of events, it is evident that [Valencia] is an employee of respondent [CMS].

x x x x[10]
Accordingly, the NLRC held that there is no basis for Valencia to hold Classique Vinyl liable for his alleged illegal dismissal as well as
for his money claims. Hence, the NLRC dismissed Valencia's appeal and affirmed the decision of the Labor Arbiter.

Valencia's motion for reconsideration thereto was likewise denied for lack of merit in the Resolution[11] dated June 8, 2011.

Ruling of the Court of Appeals

When Valencia sought recourse from the CA, the said court rendered a Decision[12] dated December 5, 2012 denying his Petition
for Certiorari and affirming the ruling of the NLRC.

Valencia's motion for reconsideration was likewise denied in a Resolution [13] dated March 18, 2013.

Hence, this Petition tor Review on Certiorari imputing upon the CA the following errors:
WITH DUE RESPECT, IT IS A SERIOUS ERROR WHICH CONSITITUTE[S] GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OR IN EXCESS OF JURISDICTION ON THE PART OF THE HONORABLE COURT OF APPEALS TO HAVE RULED THAT
PETITIONER IS AN EMPLOYEE OF CMS AND FURTHER RULED THAT HE IS NOT ENTITLED TO HIS MONETARY CLAIMS.

WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS['] DECISION AND RESOLUTION ARE CONTRARY TO LAW AND
WELL-SETTLED RULE.[14]
Valencia points out that the CA, in ruling that he was an employee of CMS, relied heavily on the employment contract which the latter
caused him to sign. He argues, however, that the said contract deserves scant consideration since aside from being improperly filled up
(there were many portions without entries), the same was not notarized, Valencia likewise stresses that the burden of proving that CMS
is a legitimate job contractor lies with respondents. Here, neither Classique Vinyl nor CMS was able to present proof that the latter has
substantial capital to do business as to be considered a legitimate independent contractor. Hence, CMS is presumed to be a mere
labor-only contractor and Classique Vinyl, as CMS' principal, was Valencia's true employer. As to his alleged dismissal, Valenciaargues
that respondents failed to establish just or authorized cause, thus, his dismissal was illegal Anent his monetary claims, Valencia invokes
the principle that he who pleads payment has the burden of proving it. Since respondents failed to present even a single piece of
evidence that he has been paid his labor standards benefits, he believes that he is entitled to recover them from respondents who must
be held jointly and severally liable tor the same. Further, Valencia contends that respondents should be assessed moral and exemplary
damages for circumventing pertinent labor laws by preventing him from attaining regular employment status. Lastly, for having been
compelled to engage the services of counsel, Valencia claims that he is likewise entitled to attorney's fees.

For their part, respondents Classique Vinyl and Chang point out that the issues raised by Valencia involve questions of fact which are
not within the ambit of a petition for review on certiorari. Besides, findings of facts of the labor tribunals when affirmed by the CA are
generally binding on this Court. At any rate, the said respondents reiterate the arguments they raised before the labor tribunals and the
CA.

With respect to respondent CMS, the Court dispensed with the filing of its comment[15] when the resolution requiring it to file one was
returned to the Court unserved[16] and after Valencia informed the Court that per Certification[17] of the Office of the Treasurer of
Valenzuela City where CMS's office was located, the latter had already closed down its business on March 21, 2012.

Our Ruling

There is no merit in the Petition.

The core issue here is whether there exists an employer-employee relationship between Classique Vinyl and Valencia. Needless to
state, it is from the said determination that the other issues raised, i.e., whether Valencia was illegally dismissed by Classique Vinyl and
whether the latter is liable for his monetary claims, hinge. However, as correctly pointed out by Classique Vinyl, "[t]he issue of whether
or not an employer-employee relationship existed between [Valencia] and [Classique Vinyl] is essentially a question of fact."[18] "The
Court is not a trier of facts find will not review the factual findings of the lower tribunals as these are generally binding and
conclusive."[19] While there are recognized exceptions,[20] none of them applies in this case.

Even if otherwise, the Court is not inclined to depart from the uniform findings of the Labor Arbiter, the NLRC and the CA.

"It is an oft-repeated rule that in labor cases, as in other administrative and quasi-judicial proceedings, 'the quantum of proof necessary
is substantial evidence, or such amount of relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion.' 'The burden of proof rests upon the party who asserts the affirmative of an issue'." [21] Since it is Valencia here who is
claiming to be an employee of Classique Vinyl, it is thus incumbent upon him to proffer evidence to prove the existence of employer-
employee relationship between them. He "needs to show by substantial evidence that he was indeed an employee of the company
against which he claims illegal dismissal."[22] Corollary, the burden to prove the element of an employer employee relationship, viz.: (l)
the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power of control, lies
upon Valencia.

Indeed, there is no hard and fast rule designed to establish the aforementioned elements of employer-employee relationship.[23] "Any
competent and relevant evidence to prove the relationship may be admitted." [24] In this case however, Valencia failed to present
competent evidence, documentary or otherwise, to support his claimed employer employee relationship between him
and Classique Vinyl. All he advanced were mere tactual assertions unsupported by proof.

In fact, most of Valencia's allegations even militate against his claim that Classique Vinyl was his true employer. For
one, Valencia stated in his Sinumpaang Salaysay that his application was actually received and processed by CMS which required him
to submit the necessary requirements for employment. Upon submission thereof, it was CMS that caused him to sign an employment
contract, which upon perusal, is actually a contract between him and CMS. It was only after he was engaged as a contractual employee
of CMS that he was deployed to Classique Vinyl. Clearly, Valencia's selection and engagement was undertaken by CMS and
conversely, this negates the existence of such element insofar as Classique Vinyl is concerned. It bears to state, in addition, that as
opposed to Valencia's argument, the lack of notarization of the said employment contract did not adversely affect its veracity and
effectiveness since significantly, Valencia does not deny having signed the same.[25] The CA, therefore, did not err in relying on the said
employment contract in its determination of the merits of this case. For another, Valencia himself acknowledged that the pay slips[26] he
submitted do not bear the name of Classique Vinyl. While the Court in Vinoya v. National Labor Relations Commission[27] took judicial
notice of the practice of employer to course through the purported contractor the act of paying wages to evade liabilities under the
Labor Code, hence, the non-appearance of employer's name in the pay slip, the Court is not inclined to rule that such is the case here.
This is considering that although CMS claimed in its supplemental Position Paper/Comment that the money it used to pay Valencia's
wages came from Classique Vinyl,[28] the same is a mere allegation without proof. Moreover, such allegation is inconsistent with CMS's
earlier assertion in its Position Paper[29] that Valencia received from it non-cash wages in an approximate amount of P3,000.00. A clear
showing of the element of payment of wages by Classique Vinyl is therefore absent.

Aside from the afore-mentioned inconsistent allegations of Valencia, his claim that his work was supervised by Classique Vinyl does not
hold water. Again, the Court finds the same as a self-serving assertion unworthy of credence. On the other hand, the employment
contract which Valencia signed with CMS categorically states that the latter possessed not only the power of control but also of
dismissal over him, viz.:
xxxx

2. That the employee shall observe all rules and regulations of the company during the period of employment and [the] lawful
instructions of the management or its representatives. Failure to do so or if performance is below company standards, management
[has] the right to immediately cancel this contract.

x x x x[30]
Clearly, therefore, no error can be attributed on the part of the labor tribunals and the CA in ruling out the existence of employer-
employee relationship between Valencia and Classique Vinyl.

Further, the Court finds untenable Valencia's argument that neither Classique Vinyl nor CMS was able to present proof that the latter is
a legitimate independent contractor and therefore unable to rebut the presumption that a contractor is presumed to be a labor-only
contractor. "Generally, the presumption is that the contractor is a labor-only [contractor] unless such contractor overcomes the burden
of proving that it has the substantial capital, investment, tools and the like." [31] Here, to prove that CMS was a legitimate
contractor, Classique Vinyl presented the former's Certificate of Registration[32] with the Department of Trade and Industry and,
License[33] as private recruitment and placement agency from the Department of Labor and Employment. Indeed, these documents are
not conclusive evidence of the status of CMS as a contractor. However, such fact of registration of CMS prevented the legal
presumption of it being a mere labor-only contractor from arising.[34] In any event, it must be stressed that "in labor-only contracting, the
statute creates an employer-employee relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The
contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor-only
contractor as if such employees had been directly employed by the principal employer. The principal employer therefore becomes
solidarity liable with the labor-only contractor for all the rightful claims of the employees." [35] The facts of this case, however, failed to
establish that there is any circumvention of labor laws as to call for the creation by the statute of an employer-employee relationship
between Classique Vinyl and Valencia. In fact, even as against CMS, Valencia's money claims has been debunked by the labor
tribunals and the CA. Again, the Court is not inclined to disturb the same.
In view of the above disquisition, the Court finds no necessity to dwell on the issue of whether Valencia was illegally dismissed
by Classique Vinyl and whether the latter is liable for Valencia's money claims.

WHEREFORE, the Petition for Review on Certiorari is DENIED. The assailed December 5, 2012 Decision and March 18, 2013
Resolution of the Court of Appeals in CA-G.R. SP No. 120999 are AFFIRMED.

SO ORDERED.

Sereno, C. J., (Chairperson), Leonardo-De Castro, Perlas-Bernabe, and Caguioa, JJ., concur.
 THIRD DIVISION

[ G.R. No. 198782, October 19, 2016 ]

ALLAN BAZAR, PETITIONER, VS. CARLOS A. RUIZOL, RESPONDENT.

DECISION

PEREZ, J.:

This is a petition for review of the Decision[1] and Resolution[2] of the Court of Appeals in CA-G.R. SP No. 00937-MIN dated 11
November 2010 and 8 September 2011, respectively.

The antecedent facts follow.

Respondent Carlos A. Ruizol (also identified as Carlos Ruisol in the Complaint, Labor Arbiter's Decision and in other pleadings) was a
mechanic at Norkis Distributors and assigned at the Surigao City branch. He was terminated effective 27 March 2002. At the time of his
termination, respondent was receiving a monthly salary of P2,050.00 and was working from 8:00 a.m. to 5:00 p.m. with a one-hour meal
break for six (6) days in a week. Respondent claimed that petitioner Allan Bazar came from Tandag branch before he was assigned as
a new manager in the Surigao City branch. Respondent added that he was dismissed by petitioner because the latter wanted to appoint
his protege as a mechanic. Because of his predicament, respondent filed a complaint before Regional Arbitration Branch No. XIII of the
National Labor Relations Commission (NLRC) in Butuan City for illegal dismissal and other monetary claims. An Amended Complaint
was filed on 12 August 2002 changing the name of the petitioner therein from Norkis Display Center to Norkis Distributors, Inc. (NDI).

Petitioner, on the other hand, alleged that NDI is a corporation engaged in the sale, wholesale and retail of Yamaha motorcycle units.
Petitioner countered that respondent is not an employee but a franchised mechanic of NDI pursuant to a retainership agreement.
Petitioner averred that respondent, being the owner of a motor repair shop, performed repair warranty service, back repair of Yamaha
units, and ordinary repair at his own shop. Petitioner maintained that NDI terminated the retainership contract with respondent because
they were no longer satisfied with the latter's services.

On 8 October 2003,[3] Executive Labor Arbiter Noel Augusto S. Magbanua ruled in favor of respondent declaring him a regular
employee of NDI and that he was illegally dismissed, to wit:

WHEREFORE, judgment is hereby rendered:

1. Declaring [respondent] a regular employee of [NDI and petitioner];

2. Declaring [respondent's] dismissal illegal;
3. Ordering [NDI] to pay [respondent] Carlos A. Ruisol the total amount of TWO HUNDRED THREE THOUSAND FIVE
HUNDRED FIFTY ONE PESOS & 33/100 (P203,551.33) representing his monetary award computed above.
4. Other claims of [respondent] are dismissed for lack of merit. [4]

The Labor Arbiter stressed that an employer-employee relationship existed in this case. He did not give any weight to the unsworn
contract of retainership based on the reason that it is a clear circumvention of respondent's security of tenure.

On appeal, petitioner reiterated that there is no employer-employee relationship between NDI and respondent because the latter is only
a retainer mechanic of NDI. Finding merit in the appeal, the NLRC reversed the ruling of the Labor Arbiter and dismissed the case for
lack of cause of action. The NLRC held that respondent failed to refute petitioner's allegation that he personally owns a motor shop
offering repair and check-up services to other customers and that he worked on the units referred by NDI either at his own motor shop
or at NDI's service shop. The NLRC also ruled that NDI had no power of control and supervision over the means and method by which
respondent performed job as mechanic. The NLRC concluded that respondent is bound to adhere to and respect the retainership
contract wherein he declared and acknowledged that he is not an employee of NDI.

Respondent filed a petition for certiorari before the Court of Appeals, submitting that the Labor Arbiter's ruling had become final with
respect to NDI because the latter failed to appeal the same. · Respondent asserted that the NLRC erred in ruling that there
is no employer-employee relationship between the parties. Respondent also prayed for re'i?statement.

On 11 November 2010, the Court of Appeals:granted the petition. The Court of Appeals ruled that petitioner had no legal personality to
make the appeal for NDI. The Court of Appeals held that te labor arbiter's decision with respect to NDI is final. The Court of Appeals
found that there was employer-employee relationship between respondent and NDI and that respondent was unlawfully dismissed.
Finally, the Court of Appeals awarded respondent separation pay in lieu of reinstatement.
Petitioner sought reconsideration of the decision but its motion for reconsideration was denied. Hence, this petition.

Before this Court, petitioner assigns the following alleged errors committed by the Court of Appeals:

1. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN GRANTING THE PETITION FOR CERTIORARI, AND
REVERSING THE "DECISION" AND "RESOLUTION" (ANNEXES "A" AND "B") OF THE NATIONAL LABOR RELATIONS
COMMISSION - FIFTH DIVISION, CAGAYAN DE ORO CITY, AS THE SAME ARE NOT IN ACCORDANCE WITH EXISTING
LAWS ANDIOR DECISIONS [PROMULGATED] BY THE HONORABLE SUPREME COURT.

a. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FAILING TO APPLY THE. DECISION OF THE
HONORABLE SUPREME COURT THAT "JURISDICTION CANNOT BE ACQUIRED OVER THE DEFENDANT
WITHOUT SERVICE OF SUMMONS, EVEN IF HE KNOWS OF THE CASE AGAINST HIM, UNLESS HE
VOLUNTARILY SUBMITS TO THE JURISDICTION OF THE COURT BY APPEARING THEREIN AS THROUGH HIS
COUNSEL FILING THE CORRESPONDING PLEADING IN THE CASE", PURSUANT TO THE RULING OF THIS
HONORABLE SUPREME COURT IN THE CASE OF "HABANA VS. VAMENTA, ET AL., L-27091, JUNE 30, 1970."

b. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FAILING TO APPLY THE LEGAL PRINCIPLE
THAT "IT IS BASIC THAT A CORPORATION IS INVESTED BY LAW WITH A [PERSONALITY] SEPARATE AND
DISTINCT FROM THOSE OF THE PERSONS COMPOSING IT AS WELL AS FROM THAT OF ANY OTHER LEGAL
ENTITY TO WHICH IT MAY BE RELATED.", PURSUANT TO THE RULING OF THE HONORABLE SUPREME
COURT IN THE CASE OF "ELCEE FARMS, INC. VS. NATIONAL LABOR RELATIONS COMMISSION, 512 SCRA
602."

c. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FAILING TO APPLY THE RULE REGARDING
"DECLARATION AGAINST INTEREST", PURSUANT TO SECTION 38, RULE 130 ON THE REVISED RULES ON
EVIDENCE.

d. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FAILING TO APPLY THE DECISION OF THE
HONORABLE SUPREME COURT THAT "LD. CARDS WHERE THE WORDS "EMPLOYEE'S NAME" APPEAR
PRINTED THEREIN DO NOT PROVE EMPLOYER EMPLOYEE RELATIONSHIP WHERE SAID I.D. CARDS ARE
ISSUED FOR THE PURPOSE OF ENABLING CERTAIN "CONTRACTORS" SUCH AS SINGERS AND BAND
PERFORMERS, TO ENTER THE PREMISES OF AN ESTABLISHMENT", PURSUANT TO THE RULING OF THIS
HONORABLE SUPREME COURT IN THE CASE OF "TSPIC CORPORATION VS. TSPIC EMPLOYEES UNION
(FFE), 545 SCRA 215."

2. THE HONORABLE COURT OF APPEALS MANIFESTLY OVERLOOKED CERTAIN RELEVANT AND UNDISPUTED FACTS
THAT, IF PROPERLY CONSIDERED, WOULD JUSTIFY A DIFFERENT CONCLUSION.

a. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FAILING TO DECLARE THAT "NORKIS
DISTRIBUTORS, INC. IS NOT A PARTY IN THE INSTANT CASE."

b. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FAILING TO DECLARE THAT "THE DECISION
OF THE LABOR ARBITER IS NOT BINDING UPON NORKIS DISTRIBUTORS, INC."

c. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DECLARING THAT, "WITH RESPECT TO
NORKIS DISTRIBUTORS, INC., THE DECISION OF THE LABOR ARBITER HAD ALREADY BECOME FINAL",
FOR THE REASON THAT NO JURISDICTION HAD BEEN ACQUIRED OVER NORKIS DISTRIBUTORS, INC.
SINCE THERE WAS NO PROPER SERVICE OF SUMMONS UPON THE CORPORATION.

d. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN SETTING ASIDE THE "DECISION" OF THE
NATIONAL LABOR RELATIONS COMMISSION FIFTH DIVISION, CAGAYAN DE ORO CITY, AND REINSTATING
THE "DECISION" OF THE LABOR ARBITER, AS RESPONDENT IS NOT AN EMPLOYEE OF
NORKIS DISTRIBUTORS, INC., BUT ONLY A "RETAINER MECHANIC", JUST LIKE A RETAINER LAWYER WHO
IS NOT AN EMPLOYEE OF THE LAWYER'S CLIENT.

e. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DECLARING THE : EXISTENCE OF EMPLOYER-
EMPLOYEE RELATIONSHIP, SINCE THERE IS AN ABSENCE OF EMPLOYER-EMPLOYEE RELATIONSHIP
BETWEEN NORKIS DISTRIBUTORS, INC. AND RESPONDENT RUIZOL.

f. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DISREGARDING THE "MASTERLIST OF ALL
EMPLOYEES" OF NORKIS DISTRIBUTORS, INC. AS PROOF THAT RESPONDENT RUIZOL IS NOT ITS
EMPLOYEE.
 g. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE "DECISION" OF THE LABOR
ARBITER REGARDING THE AWARD OF 10% ATTORNEY'S FEES, FOR THE REASON THAT RESPONDENT
WAS, AT THAT TIME, REPRESENTED BY A PUBLIC LAWYER FROM THE PUBLIC ATTORNEY'S OFFICE OF
BUTUAN CITY.

h. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN REINSTATING THE "DECISION" OF THE LABOR
ARBITER, WHICH AWARDS BACKWAGES, SALARY DIFFERENTIAL, 13THMONTH PAY, SEPARATION PAY,
SERVICE INCENTIVE LEAVE AND ATTORNEY'S FEES, AS THERE IS NO EMPLOYER-EMPLOYEE
RELATIONSHIP BETWEEN NDI AND RESPONDENT RUIZOL.[5]

Petitioner first raises a question of procedure. Petitioner asserts that no summons was served on NDI. Thus, NDI had no reason to
appeal the adverse decision of the Labor Arbiter because jurisdiction over its person was not acquired by the labor tribunal. Considering
the foregoing, petitioner maintains that he cannot be made personally liable for the monetary awards because he has a personality
separate and distinct from NDI.

We partly grant the petition.

The NLRC, despite ruling against an employer-employee relationship had nevertheless upheld the jurisdiction of the Labor Arbiter over
NDI. The NLRC ruled and we agree, thus:

Indeed, NDI was impleaded as respondent in this case as clearly indicated in the amended complaint filed by [respondent] on August
12, 2002, contrary to the belief of [NDI and petitioner]. And considering that the summons and other legal processes issued by the
Regional Arbitration Branch a quo were duly served to [petitioner] in his capacity as branch manager of NDI, the Labor Arbiter had
validly acquired jurisdiction over the juridical person of NDI. [6]

The Court of Appeals correctly added that the Labor Arbiter's ruling with respect to NDI has become final and executory for the latter's
failure to appeal within the reglementary period; and that petitioner had no legal personality to appeal for and/or behalf of the
corporation.

Interestingly, despite vehemently arguing that NDI was not bound by the ruling because it was not impleaded as respondent to the
complaint, petitioner in the same breath admits even if impliedly NDI is covered by the ruling, arguing that there cannot be any illegal
dismissal because there is no employer-employee relationship between NDI and respondent. We are not convinced.

We emphasize at the outset that the existence of an employer employee relationship is ultimately a question of fact. Only errors of law
are generally reviewed by this Court. Factual findings of administrative and quasi-judicial agencies specializing in their respective fields,
especially when affirmed by the Court of Appeals, must be accorded high respect, if not finality. [7] We here see an exception to the rule
on the binding effect on us of the factual conclusiveness of the quasi-judicial agency. The findings of the Labor Arbiter are in conflict
with that of the NLRC and Court of Appeals. We can thus look into the factual issues involved in this case.

The four-fold test used in determining the, existence of 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 employer's power to control the employee with respect to
the means and. method by which the work is to be accomplished. [8]

In finding that respondent was an employee of NDI, the Court of Appeals applied the four-fold test in this wise:

x x x First, the services of [respondent] was indisputably engaged by the [NDI] without the aid of a third party. Secondly, the fact that the
[respondent] was paid a retainer fee and on a per diem basis does not altogether negate the existence of an [employer]-employee
relationship. The retainer agreement only provided the breakdown, of the [respondent's] monthly income. On a more important note, the
[NDI] did not present its payroll, which it could conveniently do, to disprove the [respondent's] claim that he was their employee. x x x

Third, the [NDI's] power of dismissal can be [gleaned] from the termination of the [respondent] although couched under the guise of the
non-renewal of his contract with the company. Also, the contract alone showed that the [respondent] provided service to Yamaha
motorbikes brought to the NDI service shop in accordance with the manual of the unit and subject to the minimum standards set by the
company. Also, tool kits were furnished to the mechanics which they use in repairs and checking of the units conducted inside or in
front of the Norkis Display Center.[9]

Petitioner argues that respondent was not engaged as an employee but the parties voluntarily executed a retainership contract where
respondent became NDI's retainer mechanic; that respondent was paid a retainer's fee similar to that of the services of lawyers; that the
termination of the retainership contract does not constitute illegal dismissal of the retained mechanic; and that NDI is only interested in
the outcome of respondent's work. Petitioner further explained that respondent is free to use his own means and methods by which his
work is to be accomplished and the manual of the Yamaha motorbike unit is necessary in order to guide respondent in the repairs of the
motorbikes.
At the outset, respondent denied the existence of a retainership contract. Indeed, the contract presented by NDI was executed by the
latter and a certain Eusequio Adorable. The name "Carlos Ruizol" was merely added as a retainer/franchised mechanic and the same
was unsigned. Assuming, however, that such a contract did exist, its provisions should not bind respondent. We agree with the Labor
Arbiter on the following points:

Paragraph 5 and 6 of the unsworned contract of Retainership between [respondent] and [NDI and petitioner] dated March 1, 1989
states as follows:
"5. That the franchised mechanic, though not an employee of the NDI agrees to observe and abide by the rules and regulations by the
NDI aims to maintain a good quality and efficient service to customer.

6.) Franchised mechanic hereby acknowledge that he is not an employee of NDI, hence, not entitled to Labor Standard benefits.

It bears stressing that the contents of the unsworn Contract of Retainership is a clear circumvention of the security of tenure pursuant to
Articles 279 and 280 of the Labor Code. The agreement embodied in the said contract is contrary to law. thus [respondent] is not bound
to comply with the same.[10]

NDI admitted to have engaged the services of respondent, although under the guise of a retainership agreement. The fact of
engagement does not exclude the power ofNDI to hire respondent as its employee.

Assuming that respondent signed the retainership agreement, it is not indicative of his employment status. It is the law that defines and
governs an employment relationship, whose terms are not restricted by those fixed in the written contract, for other factors, like the
nature of the work the employee has been called upon to perform, are also considered. The law affords protection to an employee, and
does not countenance any attempt to subvert its spirit and intent. Any stipulation in writing can be ignored when the employer utilizes
the stipulation to deprive the employee of his security of tenure. The inequality that characterizes employer-employee relations
generally tips the scales in favor of the employer, such that the employee is often scarcely provided real and better options.[11]

Petitioner claims that respondent was receiving 1!2,050.00 as his monthly retainer's fee as of his termination in March 2002. This fee is
covered by the term "wages" and defined as 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.[12] For services rendered to NDI, respondent received compensation. NDI could have easily disproved that
respondent was its employee by presenting the manner by which such compensation was paid to respondent. NDI did not do so.

That NDI had the power to dismiss respondent was clearly evidenced by the fact that respondent's services were terminated.

The control test is the most crucial and determinative indicator of the presence or absence of an employer-employee relationship.
Under the control test, an employer-employee relationship exists where the person for whom the services are performed reserves the
right to control not only the end achieved, but also the manner and means to be used in reaching that end.[13]

Petitioner asserts that NDI did not exercise the power of control over respondent because he is free to use his own means and methods
by which his work is to be accomplished. The records show the contrary. It was shown that respondent had to abide by the standards
sets by NDI in conducting repair work on Yamaha motorbikes done in NDI's service shop. As a matter of fact, on allegations that
respondent failed to live up to the demands of the work, he was sent several memoranda [14] by NDI. We agree with the Labor Arbiter
that the presence of control is evident thus:

This Branch agree with the complainants' contention that there is no contract and that he is a regular employee as shown in Annexes
"2" & "3" respectively of the respondents position paper, as follows:
"Furthermore, you are directed and advice to religiously follow orders from your immediate superior x x x

Failure on your part to submit a written explanation will be construed as a waiver of your right and your case will be decided based on
available information"

The above memo is so worded in a way that it unmistakably show that it is addressed to the [respondent] who is an employee of [NDI].
It shows clearly the presence of the element of "control" by [NDI and petitioner] over [respondent's] manner of work.[15]

Petitioner points out that respondent actually owns a motor repair shop where he performs repair warranty service and back job repairs
of Yamaha motorcycles for NDI and other clients. This allegation was unsubstantiated. We cannot give credit to such claim.

Petitioner argues that the appellate court erred in holding that respondent is an employee of NDI based on the identification card issued
to him. While it is true that identification cards do not prove employer employee relationship, the application of the four-fold test in this
case proves that an employer-employee relationship did exist between respondent and NDI.

Since it was sufficiently established that petitioner is an employee of NDI, he is entitled to security of tenure. He can only be dismissed
for a just or authorized cause. Petitioner was dismissed through a letter informing him of termination of contract of retainership which
we construe as a termination notice. For lack of a just or authorized cause coupled with failure to observe the twin-notice rule in
termination cases, respondent's dismissal is clearly illegal.

An illegally dismissed employee is entitled to two reliefs: backwages and reinstatement. The two reliefs provided are separate and
distinct. In instances where reinstatement is no longer feasible because of strained relations between the employee and the employer,
separation pay is granted. In effect, an illegally dismissed employee is entitled to either reinstatement, if viable, or separation pay if
reinstatement is no longer viable, and backwages.[16]

Based on the foregoing, we affirm that NDI is not only liable for respondent's illegal dismissal, but that the Labor Arbiter's decision
against it had already become final and executory.

We now go to the liability of petitioner for payment of the monetary award. There is solidary liability when the obligation expressly so
states, when the law so provides, or when the nature of the obligation so requires. [17] Settled is the rule that a director or officer shall
only be personally liable for the obligations of the corporation, if the following conditions concur: (1) the complainant alleged in the
complaint that the director or officer assented to patently unlawful acts of the corporation, or that the officer was guilty of gross
negligence or bad faith; and (2) the complainant clearly and convincingly proved such unlawful acts, negligence or bad faith.[18]

In the instant case, there is an allegation that petitioner dismissed respondent because he wanted to hire his own mechanic. However,
this remained to be an allegation absent sufficient proof of motive behind respondent's termination. Petitioner may have directly issued
the order to dismiss respondent but respondent must prove with certainty bad faith on the part of petitioner. No bad faith can be
presumed from the lone fact that immediately after respondent's termination, a new mechanic was hired. That the new mechanic was
actually petitioner's protege is a mere allegation with no proof. Therefore, petitioner, as branch manager, cannot be held solidarily liable
with NDI.

WHEREFORE, the instant Petition is PARTLY GRANTED. The Decision dated 11 November 2010 and Resolution dated 8 September
2011 of the Court of Appeals in CA-G.R. SP No. 00937-MIN reinstating the Decision of the Labor Arbiter declaring respondent
Carlos Ruizol's dismissal as illegal are AFFIRMED. Petitioner Allan Bazar is however ABSOLVED from the liability adjudged against
Norkis Distributors, Inc.

SO ORDERED.

Velasco, Jr., (Chairperson), Peralta, Reyes, and Jardeleza, JJ., concur.

691 Phil. 226

FIRST DIVISION

[ G.R. No. 153511, July 18, 2012 ]

LEGEND HOTEL (MANILA), OWNED BY TITANIUM CORPORATION, AND/OR, NELSON NAPUD, IN HIS CAPACITY AS THE
PRESIDENT OF PETITIONER CORPORATION, PETITIONER, VS. HERNANI S. REALUYO, ALSO KNOWN AS JOEY ROA,
RESPONDENT.

DECISION

BERSAMIN, J.:

This labor case for illegal dismissal involves a pianist employed to perform in the restaurant of a hotel.

On August 9, 1999, respondent, whose stage name was Joey R. Roa, filed a complaint for alleged unfair labor practice, constructive
illegal dismissal, and the underpayment/nonpayment of his premium pay for holidays, separation pay, service incentive leave pay, and
13th month pay. He prayed for attorney's fees, moral damages of P100,000.00 and exemplary damages for P100,000.00. [1]

Respondent averred that he had worked as a pianist at the Legend Hotel’s Tanglaw Restaurant from September 1992 with an initial
rate of P400.00/night that was given to him after each night’s performance; that his rate had increased to P750.00/night; and that during
his employment, he could not choose the time of performance, which had been fixed from 7:00 pm to 10:00 pm for three to six
times/week. He added that the Legend Hotel’s restaurant manager had required him to conform with the venue’s motif; that he had
been subjected to the rules on employees’ representation checks and chits, a privilege granted to other employees; that on July 9,
1999, the management had notified him that as a cost-cutting measure his services as a pianist would no longer be required
effective July 30, 1999; that he disputed the excuse, insisting that Legend Hotel had been lucratively operating as of the filing of his
complaint; and that the loss of his employment made him bring his complaint.[2]

In its defense, petitioner denied the existence of an employer- employee relationship with respondent, insisting that he had been only a
talent engaged to provide live music at Legend Hotel’s Madison Coffee Shop for three hours/day on two days each week; and stated
that the economic crisis that had hit the country constrained management to dispense with his services.

On December 29, 1999, the Labor Arbiter (LA) dismissed the complaint for lack of merit upon finding that the parties had no employer-
employee relationship.[3] The LA explained thusly:

xxx

On the pivotal issue of whether or not there existed an employer-employee relationship between the parties, our finding is in the
negative. The finding finds support in the service contract dated September 1, 1992 xxx.

xxx

Even if we grant the initial non-existence of the service contract, as complainant suggests in his reply (third paragraph, page 4), the
picture would not change because of the admission by complainant in his letter dated October 8, 1996 (Annex “C”) that what he was
receiving was talent fee and not salary.

This is reinforced by the undisputed fact that complainant received his talent fee nightly, unlike the regular employees of the hotel who
are paid by monthly xxx.

xxx

And thus, absent the power to control with respect to the means and methods by which his work was to be accomplished, there
is no employer-employee relationship between the parties xxx.

xxx

WHEREFORE, this case must be, as it is hereby, DISMISSED for lack of merit.

SO ORDERED.[4]

Respondent appealed, but the National Labor Relations Commission (NLRC) affirmed the LA on May 31, 2001. [5]

Respondent assailed the decision of the NLRC in the Court of Appeals (CA) on certiorari.

On February 11, 2002, the CA set aside the decision of the NLRC, [6] Holding:
 xxx

Applying the above-enumerated elements of the employee-employer relationship in this case, the question to be asked is, are those
elements present in this case?

The answer to this question is in the affirmative. x x x Well settled is the rule that of the four (4) elements of employer- employee
relationship, it is the power of control that is more decisive.

In this regard, public respondent failed to take into consideration that in petitioner’s line of work, he was supervised and controlled by
respondent’s restaurant manager who at certain times would require him to perform only tagalog songs or music, or wear barong
tagalog to conform with Filipiniana motif of the place and the time of his performance is fixed by the respondents from 7:00 pm to 10:00
pm, three to six times a week. Petitioner could not choose the time of his performance. xxx.

As to the status of petitioner, he is considered a regular employee of private respondents since the job of the petitioner was in
furtherance of the restaurant business of respondent hotel. Granting that petitioner was initially a contractual employee, by the sheer
length of service he had rendered for private respondents, he had been converted into a regular employee xxx.

xxx

xxx In other words, the dismissal was due to retrenchment in order to avoid or minimize business losses, which is recognized by law
under Article 283 of the Labor Code, xxx.

xxx

WHEREFORE, foregoing premises considered, this petition is GRANTED. xxx.[7]

Issues

In this appeal, petitioner contends that the CA erred:

I. XXX WHEN IT RULED THAT THERE IS THE EXISTENCE OF EMPLOYER-EMPLOYEE RELATIONSHIP

BETWEEN THE PETITIONER HOTEL AND RESPONDENT ROA.

II. XXX IN FINDING THAT ROA IS A REGULAR EMPLOYEE AND THAT THE TERMINATION OF HIS SERVICES
WAS ILLEGAL. THE CA LIKEWISE ERRED WHEN IT DECLARED THE REINSTATEMENT OF ROA TO HIS
FORMER POSITION OR BE GIVEN A SEPARATION PAY EQUIVALENT TO ONE MONTH FOR EVERY YEAR OF
SERVICE FROM SEPTEMBER 1999 UNTIL JULY 30, 1999 CONSIDERING THE ABSENCE OF AN EMPLOYMENT
RELATIONSHIP BETWEEN THE PARTIES.

III. XXX WHEN IT DECLARED THAT ROA IS ENTITLED TO BACKWAGES, SERVICE INCENTIVE LEAVE AND
OTHER BENEFITS CONSIDERING THAT THERE IS NO EMPLOYER EMPLOYEE RELATIONSHIP BETWEEN
THE PARTIES.

IV. XXX WHEN IT NULLIFIED THE DECISION DATED MAY 31, 2001 IN NLRC NCR CA NO. 023404-2000 OF THE
NLRC AS WELL AS ITS RESOLUTION DATED JUNE 29, 2001 IN FAVOR OF HEREIN
PETITIONER HOTEL WHEN HEREIN RESPONDENT ROA FAILED TO SHOW PROOF THAT THE NLRC AND
THE LABOR ARBITER HAVE COMMITTED GRAVE ABUSE OF DISCRETION OR LACK OF JURISDICTION IN
THEIR RESPECTIVE DECISIONS.

V. XXX WHEN IT OVERLOOKED THE FACT THAT THE PETITION WHICH ROA FILED IS IMPROPER SINCE IT
RAISED QUESTIONS OF FACT. VI. XXX WHEN IT GAVE DUE COURSE TO THE PETITION FILED BY ROA
WHEN IT IS CLEARLY IMPROPER AND SHOULD HAVE BEEN DISMISSED OUTRIGHT CONSIDERING THAT A
PETITION FOR CERTIORARI UNDER RULE 65 IS LIMITED ONLY TO QUESTIONS OR ISSUES OF GRAVE
ABUSE OF DISCRETION OR LACK OF JURISDICTION COMMITTED BY THE NLRC OR THE LABOR ARBITER,
WHICH ISSUES ARE NOT PRESENT IN THE CASE AT BAR.

The assigned errors are divided into the procedural issue of whether or not the petition for certiorari filed in the CA was the proper
recourse; and into two substantive issues, namely: (a) whether or not respondent was an employee of petitioner; and (b) if respondent
was petitioner’s employee, whether he was validly terminated.

Ruling

The appeal fails.

Procedural Issue:
Certiorari was a proper recourse
Petitioner contends that respondent’s petition for certiorari was improper as a remedy against the NLRC due to its raising mainly
questions of fact and because it did not demonstrate that the NLRC was guilty of grave abuse of discretion.

The contention is unwarranted. There is no longer any doubt that a petition for certiorari brought to assail the decision of the NLRC may
raise factual issues, and the CA may then review the decision of the NLRC and pass upon such factual issues in the process.[8] The
power of the CA to review factual issues in the exercise of its original jurisdiction to issue writs of certiorari is based on Section 9 of
Batas Pambansa Blg. 129, which pertinently provides that the CA “shall have the power to try cases and conduct hearings, receive
evidence and perform any and all acts necessary to resolve factual issues raised in cases falling within its original and appellate
jurisdiction, including the power to grant and conduct new trials or further proceedings.”

Substantive Issue No. 1:

Employer-employee relationship
existed between the parties

We next ascertain if the CA correctly found that an employer- employee relationship existed between the parties.

The issue of whether or not an employer-employee relationship existed between petitioner and respondent is essentially a question of
fact.[9] The factors that determine the issue include who has the power to select the employee, who pays the employee’s wages, who
has the power to dismiss the employee, and who exercises control of the methods and results by which the work of the employee is
accomplished.[10] Although no particular form of evidence is required to prove the existence of the relationship, and any competent and
relevant evidence to prove the relationship may be admitted,[11]a finding that the relationship exists must nonetheless rest on substantial
evidence, which is that amount of relevant evidence that a reasonable mind might accept as adequate to justify a conclusion. [12]

Generally, the Court does not review factual questions, primarily because the Court is not a trier of facts. However, where, like here,
there is a conflict between the factual findings of the Labor Arbiter and the NLRC, on the one hand, and those of the CA, on the other
hand, it becomes proper for the Court, in the exercise of its equity jurisdiction, to review and re-evaluate the factual issues and to look
into the records of the case and re-examine the questioned findings.[13]

A review of the circumstances reveals that respondent was, indeed, petitioner’s employee. He was undeniably employed as a pianist in
petitioner’s Madison Coffee Shop/Tanglaw Restaurant from September 1992 until his services were terminated on July 9, 1999.

First of all, petitioner actually wielded the power of selection at the time it entered into the service contract dated September 1, 1992
with respondent. This is true, notwithstanding petitioner’s insistence that respondent had only offered his services to provide live music
at petitioner’s Tanglaw Restaurant, and despite petitioner’s position that what had really transpired was a negotiation of his rate and
time of availability. The power of selection was firmly evidenced by, among others, the express written recommendation dated January
12, 1998 by Christine Velazco, petitioner’s restaurant manager, for the increase of his remuneration. [14]

Petitioner could not seek refuge behind the service contract entered into with respondent. It is the law that defines and governs an
employment relationship, whose terms are not restricted to those fixed in the written contract, for other factors, like the nature of the
work the employee has been called upon to perform, are also considered. The law affords protection to an employee, and does not
countenance any attempt to subvert its spirit and intent. Any stipulation in writing can be ignored when the employer utilizes the
stipulation to deprive the employee of his security of tenure. The inequality that characterizes employer-employee relations generally
tips the scales in favor of the employer, such that the employee is often scarcely provided real and better options. [15]

Secondly, petitioner argues that whatever remuneration was given to respondent were only his talent fees that were not included in the
definition of wage under the Labor Code; and that such talent fees were but the consideration for the service contract entered into
between them.

The argument is baseless.

Respondent was paid P400.00 per three hours of performance from 7:00 pm to 10:00 pm, three to six nights a week. Such rate of
remuneration was later increased to P750.00 upon restaurant manager Velazco’s recommendation. There is no denying that the
remuneration denominated as talent fees was fixed on the basis of his talent and skill and the quality of the music he played during the
hours of performance each night, taking into account the prevailing rate for similar talents in the entertainment industry. [16]

Respondent’s remuneration, albeit denominated as talent fees, was still considered as included in the term wage in the sense and
context of the Labor Code, regardless of how petitioner chose to designate the remuneration. Anent this, Article 97(f) of the Labor Code
clearly states:

xxx wage paid to any employee shall mean the 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 services rendered or to be rendered, and includes the fair and reasonable value, as determined by the Secretary of Labor, of
board, lodging, or other facilities customarily furnished by the employer to the employee.

Clearly, respondent received compensation for the services he rendered as a pianist in petitioner’s hotel. Petitioner cannot use the
service contract to rid itself of the consequences of its employment of respondent. There is no denying that whatever amounts he
received for his performance, howsoever designated by petitioner, were his wages.

It is notable that under the Rules Implementing the Labor Code and as held in Tan v. Lagrama,[17] every employer is required to pay his
employees by means of a payroll, which should show in each case, among others, the employee’s rate of pay, deductions made from
such pay, and the amounts actually paid to the employee. Yet, petitioner did not present the payroll of its employees to bolster its
insistence of respondent not being its employee.

That respondent worked for less than eight hours/day was of no consequence and did not detract from the CA’s finding on the
existence of the employer-employee relationship. In providing that the “ normal hours of work of any employee shall not exceed eight
(8) hours a day,” Article 83 of the Labor Code only set a maximum of number of hours as “normal hours of work” but did not prohibit
work of less than eight hours.

Thirdly, the power of the employer to control the work of the employee is considered the most significant determinant of the existence of
an employer-employee relationship.[18] This is the so-called control test, and is premised on whether the person for whom the services
are performed reserves the right to control both the end achieved and the manner and means used to achieve that end. [19]

Petitioner submits that it did not exercise the power of control over respondent and cites the following to buttress its submission,
namely: (a) respondent could beg off from his nightly performances in the restaurant for other engagements; (b) he had the sole
prerogative to play and perform any musical arrangements that he wished; (c) although petitioner, through its manager, required him to
play at certain times a particular music or song, the music, songs, or arrangements, including the beat or tempo, were under his
discretion, control and direction; (d) the requirement for him to wear barong Tagalog to conform with the Filipiniana motif of the venue
whenever he performed was by no means evidence of control; (e) petitioner could not require him to do any other work in the restaurant
or to play the piano in any other places, areas, or establishments, whether or not owned or operated by petitioner, during the three hour
period from 7:00 pm to 10:00 pm, three to six times a week; and (f)respondent could not be required to sing, dance or play another
musical instrument.

A review of the records shows, however, that respondent performed his work as a pianist under petitioner’s supervision and control.
Specifically, petitioner’s control of both the end achieved and the manner and means used to achieve that end was demonstrated by
the following, to wit:

a. He could not choose the time of his performance, which petitioners had fixed from 7:00 pm to 10:00 pm, three to six times a
week;
b. He could not choose the place of his performance;
c. The restaurant’s manager required him at certain times to perform only Tagalog songs or music, or to wear barong Tagalog to
conform to the Filipiniana motif; and
d. He was subjected to the rules on employees’ representation check and chits, a privilege granted to other employees. Relevantly,
it is worth remembering that the employer need not actually supervise the performance of duties by the employee, for it sufficed
that the employer has the right to wield that power.

Lastly, petitioner claims that it had no power to dismiss respondent due to his not being even subject to its Code of Discipline, and that
the power to terminate the working relationship was mutually vested in the parties, in that either party might terminate at will, with or
without cause.

The claim is contrary to the records. Indeed, the memorandum informing respondent of the discontinuance of his service because of the
present business or financial condition of petitioner[20] showed that the latter had the power to dismiss him from employment.[21]

Substantive Issue No. 2:

Validity of the Termination

Having established that respondent was an employee whom petitioner terminated to prevent losses, the conclusion that his termination
was by reason of retrenchment due to an authorized cause under the Labor Code is inevitable.

Retrenchment is one of the authorized causes for the dismissal of employees recognized by the Labor Code. It is a management
prerogative resorted to by employers to avoid or to minimize business losses. On this matter, Article 283 of the Labor Code states:

Article 283. Closure of establishment and reduction of personnel. –

The employer may also terminate the employment of any employee due to the installation of labor-saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the
closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of
Labor and Employment at least one (1) month before the intended date thereof. xxx. In case of retrenchment to prevent losses and
in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every
year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.

The Court has laid down the following standards that an employer should meet to justify retrenchment and to foil abuse, namely:

(a) The expected losses should be substantial and not merely de minimis in extent;
(b) The substantial losses apprehended must be reasonably imminent;
(c) The retrenchment must be reasonably necessary and likely to effectively prevent the expected losses; and
(d) The alleged losses, if already incurred, and the expected imminent losses sought to be forestalled must be proved by sufficient
and convincing evidence.[22]

Anent the last standard of sufficient and convincing evidence, it ought to be pointed out that a less exacting standard of proof would
render too easy the abuse of retrenchment as a ground for termination of services of employees. [23]

Was the retrenchment of respondent valid?

In termination cases, the burden of proving that the dismissal was for a valid or authorized cause rests upon the employer. Here,
petitioner did not submit evidence of the losses to its business operations and the economic havoc it would thereby imminently sustain.
It only claimed that respondent’s termination was due to its “present business/financial condition.” This bare statement fell short of the
norm to show a valid retrenchment. Hence, we hold that there was no valid cause for the retrenchment of respondent.

Indeed, not every loss incurred or expected to be incurred by an employer can justify retrenchment. The employer must prove, among
others, that the losses are substantial and that the retrenchment is reasonably necessary to avert such losses. Thus, by its failure to
present sufficient and convincing evidence to prove that retrenchment was necessary, respondent’s termination due to retrenchment is
not allowed.

The Court realizes that the lapse of time since the retrenchment might have rendered respondent's reinstatement to his former
job no longer feasible. If that should be true, then petitioner should instead pay to him separation pay at the rate of one. month pay for
every year of service computed from September 1992 (when he commenced to work for the petitioners) until the finality of this decision,
and full backwages from the time his compensation was withheld until the finality of this decision.

WHEREFORE, we DENY the petition for review on certiorari, and AFFIRM the decision of the Court of Appeals promulgated on
February 11, 2002, subject to the modification that should reinstatement be no longer feasible, petitioner shall pay to respondent
separation pay of one month for every year of service computed from September 1992 until the finality of this decision, and full
backwages from the time his compensation was withheld until the finality of this decision.

Costs of suit to be paid by the petitioners.

SO ORDERED.

Del Castillo, Abad,* Villarama, Jr., and Perlas-Bernabe, JJ., concur.

436 Phil. 190

SECOND DIVISION

[ G.R. No. 151228, August 15, 2002 ]

ROLANDO Y. TAN, PETITIONER, VS. LEOVIGILDO LAGRAMA AND THE HONORABLE COURT OF APPEALS, RESPONDENTS.

DECISION

MENDOZA, J.:

This is a petition for review on certiorari of the decision, [1] dated May 31, 2001, and the resolution,[2] dated November 27, 2001, of the
Court of Appeals in C.A.-G.R. SP. No. 63160, annulling the resolutions of the National Labor Relations Commission (NLRC) and
reinstating the ruling of the Labor Arbiter which found petitioner Rolando Tan guilty of illegally dismissing private respondent
Leovigildo Lagrama and ordering him to pay the latter the amount of P136,849.99 by way of separation pay, backwages, and damages.

The following are the facts.

Petitioner Rolando Tan is the president of Supreme Theater Corporation and the general manager of Crown and Empire Theaters in
Butuan City. Private respondent Leovigildo Lagrama is a painter, making ad billboards and murals for the motion pictures shown at the
Empress, Supreme, and Crown Theaters for more than 10 years, from September 1, 1988 to October 17, 1998.

On October 17, 1998, private respondent Lagrama was summoned by Tan and upbraided: “Nangihi na naman ka sulod sa imong
drawinganan.” (“You again urinated inside your work area.”) When Lagrama asked what Tan was saying, Tan told him, “Ayaw daghang
estorya. Dili ko gusto nga mo-drawing ka pa. Guikan karon, wala nay drawing. Gawas.” (“Don’t say anything further. I don’t want you to
draw anymore. From now on, no more drawing. Get out.”)

Lagrama denied the charge against him. He claimed that he was not the only one who entered the drawing area and that, even if the
charge was true, it was a minor infraction to warrant his dismissal. However, everytime he spoke, Tan shouted “Gawas” (“Get out”),
leaving him with no other choice but to leave the premises.

Lagrama filed a complaint with the Sub-Regional Arbitration Branch No. X of the National Labor Relations Commission (NLRC) in
Butuan City. He alleged that he had been illegally dismissed and sought reinvestigation and payment of 13th month pay, service
incentive leave pay, salary differential, and damages.

Petitioner Tan denied that Lagrama was his employee. He asserted that Lagrama was an independent contractor who did his work
according to his methods, while he (petitioner) was only interested in the result thereof. He cited the admission of Lagrama during the
conferences before the Labor Arbiter that he was paid on a fixed piece-work basis, i.e., that he was paid for every painting turned out as
ad billboard or mural for the pictures shown in the three theaters, on the basis of a “no mural/billboard drawn, no pay” policy. He
submitted the affidavits of other cinema owners, an amusement park owner, and those supervising the construction of a church to
prove that the services of Lagrama were contracted by them. He denied having dismissed Lagrama and alleged that it was the latter
who refused to paint for him after he was scolded for his habits.

As no amicable settlement had been reached, Labor Arbiter Rogelio P. Legaspi directed the parties to file their position papers. On
June 17, 1999, he rendered a decision, the dispositive portion of which reads:

WHEREFORE, premises considered judgment is hereby ordered:

1. Declaring complainant’s [Lagrama’s] dismissal illegal and

2. Ordering respondents [Tan] to pay complainant the following:

A. Separation Pay - P 59,000.00

B. Backwages - 47,200.00
(from 17 October 1998 to 17
June 1999)
C. 13th month pay (3 years) - 17,700.00
D. Service Incentive Leave
Pay (3 years) - 2, 949.99
E. Damages - 10,000.00
______________
 TOTAL [P136,849.99]

Complainant’s other claims are dismissed for lack of merit. [3]

Petitioner Rolando Tan appealed to the NLRC Fifth Division, Cagayan de Oro City, which, on June 30, 2000, rendered a
decision[4] finding Lagrama to be an independent contractor, and for this reason reversing the decision of the Labor Arbiter.

Respondent Lagrama filed a motion for reconsideration, but it was denied for lack of merit by the NLRC in a resolution of September
29, 2000. He then filed a petition for certiorari under Rule 65 before the Court of Appeals.

The Court of Appeals found that petitioner exercised control over Lagrama’s work by dictating the time when Lagrama should submit
his billboards and murals and setting rules on the use of the work area and rest room. Although it found that Lagrama did work for other
cinema owners, the appeals court held it to be a mere sideline insufficient to prove that he was not an employee of Tan. The appeals
court also found no evidence of any intention on the part of Lagrama to leave his job or sever his employment relationship with Tan.
Accordingly, on May 31, 2001, the Court of Appeals rendered a decision, the dispositive portion of which reads:

IN THE LIGHT OF ALL THE FOREGOING, the Petition is hereby GRANTED. The Resolutions of the Public Respondent issued on
June 30, 2000 and September 29, 2000 are ANNULLED. The Decision of the Honorable Labor Arbiter Rogelio P. Legaspi on June 17,
1999 is hereby REINSTATED.

Petitioner moved for a reconsideration, but the Court of Appeals found no reason to reverse its decision and so denied his motion for
lack of merit.[5] Hence, this petition for review on certiorari based on the following assignments of errors:

I. With all due respect, the decision of respondent Court of Appeals in CA-G.R. SP NO. 63160 is bereft of any finding that Public
Respondent NLRC, 5th Division, had no jurisdiction or exceeded it or otherwise gravely abused its discretion in its Resolution of 30
June 2000 in NLRC CA-NO. M-004950-99.

II. With all due respect, respondent Court of Appeals, absent any positive finding on its part that the Resolution of 30 June 2000 of the
NLRC is not supported by substantial evidence, is without authority to substitute its conclusion for that of said NLRC.

III. With all due respect, respondent Court of Appeals’ discourse on “freelance artists and painters” in the decision in question is
misplaced or has no factual or legal basis in the record.

IV. With all due respect, respondent Court of Appeals’ opening statement in its decision as to “employment,” “monthly salary of
P1,475.00” and “work schedule from Monday to Saturday, from 8:00 o’clock in the morning up to 5:00 o’clock in the afternoon” as
“facts” is not supported by the evidence on record.

V. With all due respect, the case of Lambo, et al., v. NLRC, et al., 317 SCRA 420 [G.R. No. 111042 October 26, 1999] relied upon by
respondent Court of Appeals is not applicable to the peculiar circumstances of this case. [6]

The issues raised boil down to whether or not an employer-employee relationship existed between petitioner and private respondent,
and whether petitioner is guilty of illegally dismissing private respondent. We find the answers to these issues to be in the affirmative.

I.

In determining whether there is an employer-employee relationship, we have applied a “four-fold test,” to wit: (1) whether the alleged
employer has the power of selection and engagement of employees; (2) whether he has control of the employee with respect to the
means and methods by which work is to be accomplished; (3) whether he has the power to dismiss; and (4) whether the employee was
paid wages.[7] These elements of the employer-employee relationship are present in this case.

First. The existence in this case of the first element is undisputed. It was petitioner who engaged the services of Lagrama without the
intervention of a third party. It is the existence of the second element, the power of control, that requires discussion here.

Of the four elements of the employer-employee relationship, the “control test” is the most important. Compared to an employee, an
independent contractor is one who 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, 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. [8] Hence, while an independent
contractor enjoys independence and freedom from the control and supervision of his principal, an employee is subject to the employer’s
power to control the means and methods by which the employee’s work is to be performed and accomplished.

In the case at bar, albeit petitioner Tan claims that private respondent Lagrama was an independent contractor and never his
employee, the evidence shows that the latter performed his work as painter under the supervision and control of
petitioner. Lagrama worked in a designated work area inside the Crown Theater of petitioner, for the use of which petitioner prescribed
rules. The rules included the observance of cleanliness and hygiene and a prohibition against urinating in the work area and any place
other than the toilet or the rest rooms.[9] Petitioner’s control over Lagrama’s work extended not only to the use of the work area, but also
to the result of Lagrama’s work, and the manner and means by which the work was to be accomplished.

Moreover, it would appear that petitioner not only provided the workplace, but supplied as well the materials used for the paintings,
because he admitted that he paid Lagrama only for the latter’s services.[10]

Private respondent Lagrama claimed that he worked daily, from 8 o’clock in the morning to 5 o’clock in the afternoon. Petitioner
disputed this allegation and maintained that he paid Lagrama P1,475.00 per week for the murals for the three theaters which the latter
usually finished in 3 to 4 days in one week.[11] Even assuming this to be true, the fact that Lagrama worked for at least 3 to 4 days a
week proves regularity in his employment by petitioner.

Second. That petitioner had the right to hire and fire was admitted by him in his position paper submitted to the NLRC, the pertinent
portions of which stated:

Complainant did not know how to use the available comfort rooms or toilets in and about his work premises. He was urinating right at
the place where he was working when it was so easy for him, as everybody else did and had he only wanted to, to go to the comfort
rooms. But no, the complainant had to make a virtual urinal out of his work place! The place then stunk to high heavens, naturally, to
the consternation of respondents and everyone who could smell the malodor.

...

Given such circumstances, the respondents had every right, nay all the compelling reason, to fire him from his painting job upon
discovery and his admission of such acts. Nonetheless, though thoroughly scolded, he was not fired. It was he who stopped to paint for
respondents.[12]

By stating that he had the right to fire Lagrama, petitioner in effect acknowledged Lagrama to be his employee. For the right to hire and
fire is another important element of the employer-employee relationship.[13] Indeed, the fact that, as petitioner himself said, he waited
for Lagrama to report for work but the latter simply stopped reporting for work reinforces the conviction that Lagrama was indeed an
employee of petitioner. For only an employee can nurture such an expectancy, the frustration of which, unless satisfactorily explained,
can bring about some disciplinary action on the part of the employer.

Third. Payment of wages is one of the four factors to be considered in determining the existence of employer-employee relation. Wages
are defined as “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 services rendered or to be
rendered.”[14] That Lagrama worked for Tan on a fixed piece-work basis is of no moment. Payment by result is a method of
compensation and does not define the essence of the relation. [15] It is a method of computing compensation, not a basis for determining
the existence or absence of employer-employee relationship. One may be paid on the basis of results or time expended on the work,
and may or may not acquire an employment status, depending on whether the elements of an employer-employee relationship are
present or not.[16]

The Rules Implementing the Labor Code require every employer to pay his employees by means of payroll.[17] The payroll should show
among other things, the employee’s rate of pay, deductions made, and the amount actually paid to the employee. In the case at bar,
petitioner did not present the payroll to support his claim that Lagrama was not his employee, raising speculations whether his failure to
do so proves that its presentation would be adverse to his case.[18]

The primary standard for 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. [19] In this case, there is such a connection between the job
of Lagrama painting billboards and murals and the business of petitioner. To let the people know what movie was to be shown in a
movie theater requires billboards. Petitioner in fact admits that the billboards are important to his business.[20]

The fact that Lagrama was not reported as an employee to the SSS is not conclusive on the question of whether he was an employee
of petitioner.[21] Otherwise, an employer would be rewarded for his failure or even neglect to perform his obligation.[22]

Neither does the fact that Lagrama painted for other persons affect or alter his employment relationship with petitioner. That he did so
only during weekends has not been denied by petitioner. On the other hand, Samuel Villalba, for whom Lagrama had rendered service,
admitted in a sworn statement that he was told by Lagrama that the latter worked for petitioner.[23]

Lagrama had been employed by petitioner since 1988. Under the law, therefore, he is deemed a regular employee and is thus entitled
to security of tenure, as provided in Art. 279 of Labor Code:

ART. 279. Security of Tenure. — In cases of regular employment, the employer shall not terminate the services of an employee except
for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.

This Court has held that if the employee has been performing the job for at least one year, even if not continuously but intermittently,
the repeated and continuing need for its performance is sufficient evidence of the necessity, if not indispensability, of that activity to the
business of his employer. Hence, the employment is also considered regular, although with respect only to such activity, and while such
activity exists.[24]

It is claimed that Lagrama abandoned his work. There is no evidence to show this. Abandonment requires two elements: (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,
with the second element as the more determinative factor and being manifested by some overt acts.[25] Mere absence is not sufficient.
What is more, the burden is on the employer to show a deliberate and unjustified refusal on the part of the employee to resume his
employment without any intention of returning.[26] In the case at bar, the Court of Appeals correctly ruled:

Neither do we agree that Petitioner abandoned his job. In order for abandonment to be a just and valid ground for dismissal, the
employer must show, by clear proof, the intention of the employee to abandon his job. . . .

In the present recourse, the Private Respondent has not established clear proof of the intention of the Petitioner to abandon his job or
to sever the employment relationship between him and the Private Respondent. On the contrary, it was Private Respondent who told
Petitioner that he did not want the latter to draw for him and thereafter refused to give him work to do or any mural or billboard to paint
or draw on.

More, after the repeated refusal of the Private Respondent to give Petitioner murals or billboards to work on, the Petitioner filed, with
the Sub-Regional Arbitration Branch No. X of the National Labor Relations Commission, a Complaint for “Illegal Dismissal and Money
Claims.” Such act has, as the Supreme Court declared, negate any intention to sever employment relationship. . . . [27]

II.

The second issue is whether private respondent Lagrama was illegally dismissed. To begin, the employer has the burden of proving the
lawfulness of his employee’s dismissal.[28] The validity of the charge must be clearly established in a manner consistent with due
process. The Implementing Rules of the Labor Code [29] provide that no worker shall be dismissed except for a just or authorized cause
provided by law and after due process. This provision has two aspects: (1) the legality of the act of dismissal, that is, dismissal under
the grounds provided for under Article 282 of the Labor Code and (2) the legality in the manner of dismissal. The illegality of the act of
dismissal constitutes discharge without just cause, while illegality in the manner of dismissal is dismissal without due process. [30]
In this case, by his refusal to give Lagrama work to do and ordering Lagrama to get out of his sight as the latter tried to explain his side,
petitioner made it plain that Lagrama was dismissed. Urinating in a work place other than the one designated for the purpose by the
employer constitutes violation of reasonable regulations intended to promote a healthy environment under Art. 282(1) of the Labor
Code for purposes of terminating employment, but the same must be shown by evidence. Here there is no evidence that Lagrama did
urinate in a place other than a rest room in the premises of his work.

Instead of ordering his reinstatement as provided in Art. 279 of the Labor Code, the Labor Arbiter found that the relationship between
the employer and the employee has been so strained that the latter’s reinstatement would no longer serve any purpose. The parties do
not dispute this finding. Hence, the grant of separation pay in lieu of reinstatement is appropriate. This is of course in addition to the
payment of backwages which, in accordance with the ruling in Bustamante v. NLRC,[31] should be computed from the time of Lagrama’s
dismissal up to the time of the finality of this decision, without any deduction or qualification.

The Bureau of Working Conditions[32] classifies workers paid by results into two groups, namely; (1) those whose time and performance
is supervised by the employer, and (2) those whose time and performance is unsupervised by the employer. The first involves an
element of control and supervision over the manner the work is to be performed, while the second does not. If a piece worker is
supervised, there is an employer-employee relationship, as in this case. However, such an employee is not entitled to service incentive
leave pay since, as pointed out in Makati Haberdashery v. NLRC[33] and Mark Roche International v. NLRC,[34] he is paid a fixed amount
for work done, regardless of the time he spent in accomplishing such work.

WHEREFORE, based on the foregoing, the petition is DENIED for lack of showing that the Court of Appeals committed any reversible
error. The decision of the Court of Appeals, reversing the decision of the National Labor Relations Commission and reinstating the
decision of the Labor Arbiter, is AFFIRMED with the MODIFICATION that the backwages and other benefits awarded to private
respondent Leovigildo Lagrama should be computed from the time of his dismissal up to the time of the finality of this decision, without
any deduction and qualification. However, the service incentive leave pay awarded to him is DELETED.

SO ORDERED.

Bellosillo, (Chairman), Quisumbing, and Corona, JJ., concur.

 FIRST DIVISION

[ G.R. No. 194765, April 23, 2018 ]

MARSMAN & COMPANY, INC., PETITIONER, V. RODIL C. STA. RITA, RESPONDENT.

DECISION

LEONARDO-DE CASTRO,[*] J.:

Before Us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court filed by Marsman & Company, Inc. (Marsman), now
Metro Alliance Holdings & Equities Corporation, seeking the annulment and reversal of the Decision [1] dated June 25, 2010 and the
Resolution[2] dated December 9, 2010 of the Court of Appeals in CA-G.R. SP No. 106516. The appellate court's issuances reversed the
Decision[3] dated July 31, 2008 of the National Labor Relations Commission (NLRC) in NLRC NCR Case No. 30-01-00362-00 (NLRC
CA No. 032892-02) dismissing respondent Rodil C. Sta. Rita's (Sta. Rita's) complaint and the Resolution [4] denying his motion for
reconsideration. The Court of Appeals instead found Marsman guilty of illegal dismissal and ordered the company to pay for
backwages, separation pay, moral damages, exemplary damages and attorney's fees.

Marsman, a domestic corporation, was formerly engaged in the business of distribution and sale of pharmaceutical and consumer
products for different manufacturers within the country.[5] Marsman purchased Metro Drug Distribution, Inc. (Metro Drug), now
Consumer Products Distribution Services, Inc. (CPDSI), which later became its business successor-in-interest. The business transition
from Marsman to CPDSI generated confusion as to the actual employer of Sta. Rita at the time of his dismissal.

Marsman temporarily hired Sta. Rita on November 16, 1993 as a warehouse helper with a contract that was set to expire on April 16,
1994, and paid him a monthly wage of P2,577.00. After the contract expired, Marsman rehired Sta. Rita as a warehouseman and
placed him on probationary status on April 18, 1994 with a monthly salary of P3,166.00. [6] Marsman then confirmed Sta. Rita's status as
a regular employee on September 18, 1994 and adjusted his monthly wage to P3,796.00. Later, Sta. Rita joined Marsman Employees
Union (MEU), the recognized sole and exclusive bargaining representative of Marsman's employees. [7]

Marsman administered Sta. Rita's warehouse assignments. Initially, Marsman assigned Sta. Rita to work in its GMA warehouse.
Marsman then transferred Sta. Rita to Warehouses C and E of Kraft General Foods, Inc. on September 5, 1995. Thereafter, Marsman
reassigned Sta. Rita to Marsman Consumer Product Division Warehouse D in ACSIE, Parañaque. [8]

Sometime in July 1995, Marsman purchased Metro Drug, a company that was also engaged in the distribution and sale of
pharmaceutical and consumer products, from Metro Pacific, Inc. The similarity in Marsman's and Metro Drug's business led to the
integration of their employees which was formalized in a Memorandum of Agreement,[9] dated June 1996, which provides:

MARSMAN & COMPANY, INC.

City of Makati

MEMORANDUM OF AGREEMENT

MARSMAN AND CO., INC. hereinafter referred to as the MANAGEMENT, represented by MR. JOVEN D. REYES, Group President
and Chief Executive Officer and the MARSMAN EMPLOYEES UNION-PSMM/DFA as the Union, represented hereinafter by MR.
BONIFACIO M. PANALIGAN, PSMM President,

WITNESSETH, THAT:

WHEREAS, Marsman Employees Union-PSMM/DFA is the recognized sole and exclusive bargaining representative of Marsman & Co.,
Inc. regular employees in the rank and file and non-managerial category except those excluded in Article I, Section 2 of their existing
CBA signed last June 1995;

WHEREAS, Marsman & Co. Inc. bought Metro Drug Distribution, Inc. from Metro Pacific Inc. last July, 1995;

WHEREAS, the Management of Marsman & Co., Inc. decided to limit Marsman & Co. Inc.'s, functions to those of a holding
company and run Metro Drug Distribution, Inc. as the main operating company;

WHEREAS, in view of this, Management decided to integrate the employees of Marsman & Co. Inc. and Metro Drug
Distribution, Inc. effective July 1, 1996 under the Metro Drug legal entity;
THEREFORE, Management and Marsman Employees Union PSMM/DFA agree: .

1. That, the Union acknowledges Management's decision to transfer all employees of Marsman, including members of MEU-
PSMM/DFA, to Metro Drug Distribution, Inc.

2. That, the Management recognizes the Marsman Employees Union-PSMM/DFA as the exclusive bargaining representative of all the
rank and file employees transferred from Marsman & Co. Inc. to Metro Drug Distribution, Inc. and the other employees who may join the
Union later.

3. That, the name of Marsman Employees Union-PSMM/DFA is retained.

4. That, the tenure or service years of all employees transferred shall be recognized and carried over and will be included in the
computation/consideration of their retirement and other benefits.

5. That, the provisions of the existing Collective Bargaining Agreement signed last June 1995 and the Memorandum of Agreement
signed also last June 1995 will be respected, honored and continue to be implemented until expiry or until superseded as per item 8
below.

6. That, there will be no diminution of present salaries and benefits being enjoyed even after the transfer.

7. That, upon transfer of MCI employees to Metro Drug Distribution, Inc. all employees covered by the CBA or otherwise shall enjoy the
same terms and conditions of employment prior to transfer and shall continue to enjoy the same including company practice until a new
CBA is concluded.

8. That, all of the above rights and obligations of the parties pertaining to the recognition of the union as exclusive bargaining
representative, the effectivity, coverage and validity of the CBA and all other issues relative to the representation of the former
Marsman employees are subject to and be superseded by the result of a Certification Election between Marsman Employees Union-
PSMM/DFA and Metro Drug Corp. Employees Association-FFW in 1996 or at a date to be agreed upon by MEU and MDCEA as
coordinated by the DOLE, and by any agreement that may be entered into by management and the winner in said certification election.

9. That, upon transfer, the Management agrees to address all pending/unresolved grievances and issues lodged by Marsman
Employees Union-PSMM/DFA.

10. That, also upon transfer, the Management agrees to continue negotiation of Truckers and Forwarders issue as stipulated in the
MOA signed last June, 1995.

11. That, Management and Union may continue to negotiate/discuss other concerns/issues with regard to the transfer and integration.

IN WITNESS WHEREOF, the parties have caused this document to be executed by their authorized representatives this ______day of
June, 1996 at Makati City. [Emphases supplied.]

MARSMAN & COMPANY, INC.

(signed)
JOVEN D. REYES
President & Chief Exec. Officer

MARSMAN EMPLOYEES UNION-PSSM/DFA

(signed)
BONIFACIO M. PANALIGAN
President

Witnessed by:
(signed)
JOSE MILO M. GILLESANIA
LUISITO N. REYES
1st Vice-President
Vice-President
MEU-PSMM/DFA
Finance & Administration

Attested by:
(signed)
ABNER M. PADILLA
Conciliator-Mediator
NCMB, DOLE
Concomitant to the integration of employees is the transfer of all office, sales and warehouse personnel of Marsman to Metro Drug and
the latter's assumption of obligation with regard to the affected employees' labor contracts and Collective Bargaining Agreement. The
integration and transfer of employees ensued out of the transitions of Marsman and CPDSI into, respectively, a holding company and
an operating company. Thereafter, on November 7, 1997, Metro Drug amended its Articles of Incorporation by changing its name to
"Consumer Products Distribution Services, Inc." (CPDSI) which was approved by the Securities and Exchange Commission. [10]

In the meantime, on an unspecified date, CPDSI contracted its logistic services to EAC Distributors (EAC). CPDSI and EAC agreed that
CPDSI would provide warehousemen to EAC's tobacco business which operated in EAC-Libis Warehouse. A letter issued by Marsman
confirmed Sta. Rita's appointment as one of the warehousemen for EAC-Libis Warehouse, effective October 13, 1997, which also
stated that the assignment was a "transfer that is part of our cross-training program."[11]

Parenthetically, EAC's use of the EAC-Libis Warehouse was dependent upon the lease contract between EAC and Valiant Distribution
(Valiant), owner of the EAC-Libis Warehouse. Hence, EAC's operations were affected when Valiant decided to terminate their contract
of lease on January 31, 2000. In response to the cessation of the contract of lease, EAC transferred their stocks into their own
warehouse and decided to operate the business by themselves, thereby ending their logistic service agreement with CPDSI.[12]

This sequence of events left CPDSI with no other option but to terminate the employment of those assigned to EAC-Libis Warehouse,
including Sta. Rita. A letter[13] dated January 14, 2000, issued by Michael Leo T. Luna, CPDSI's Vice-President and General Manager,
notified Sta. Rita that his services would be terminated on February 28, 2000 due to redundancy. CPDSI rationalised that they
could no longer accommodate Sta. Rita to another work or position. CPDSI however guaranteed Sta. Rita's separation pay and other
employment benefits. The letter is reproduced in full as follows:

a MARSMAN company
CONSUMER PRODUCTS DISTRIBUTION SERVICES, INC.
January 14, 2000

MR. RODIL STA. RITA

Warehouse Supervisor
EAC Libis Operation
Libis, Quezon City

Dear Rodil,

As we have earlier informed you, EAC Distributors, Inc. has advised us that their Lessor, Valiant Distribution has terminated their lease
contract effective January 31, 2000.

Accordingly, we were informed by EAC Distributors, Inc., that they will no longer need our services effective on the same date. As a
result thereof, your position as warehouseman will become redundant thereafter.

We have exerted efforts to find other work for you to do or other positions where you could be accommodated. Unfortunately, our efforts
proved futile.

In view thereof, we regret to inform you that your services will be terminated effective upon the close of business hours on the 28th of
February, 2000.

You will be paid separation pay and other employment benefits in accordance with the company policies and the law, the details of
which shall be discussed with you by your immediate superior.

In order to cushion the impact of your separation from the service and to give you ample time to look for other employment elsewhere,
you need not report for work from the 18th of January up the end of February, 2000, although you will remain in the payroll of the
company and will be paid the salary corresponding to this period.

We thank you for your contribution to this organization and we wish you well in your future endeavors.

Sincerely,

(signed)
MICHAEL LEO T. LUNA
Vice President & General Manager[14]

CPDSI thereafter reported the matter of redundancy to the Department of Labor and Employment in a letter[15] dated January 17, 2000,
conveying therein Sta. Rita's impending termination. The letter stated:
The Regional Director
Department of Labor & Employment
National Capital Region
Palacio De Gobernador
Intramuros, Manila

Dear Sir:

In compliance with the provisions of Article 283 of the Labor Code, as amended, Consumer Products Distribution Services, Inc.
(CPDSI) "Company" hereby gives notice that our company is implementing a comprehensive streamlining program affecting levels of
employment with the objective of further reducing operating expenses and to cope with the current economic difficulties. The
employment of the employees occupying such positions and whose names are enumerated in the attachment list of (Annex "A") will be
terminated.

In accordance with law, the above enumerated employees will be paid their separation pay in due course. Individual notices of the
termination of employment of said employees have already been served upon them.

Very truly yours,

CONSUMER PRODUCTS DISTRIBUTION SERVICES, INC.

BY:
(signed)

MICHAEL LEO T. LUNA

Vice President and General Manager

xxxx

LIST OF TERMINATED WORKERS

Names of Workers Occupation/Skills Salary
Terminated
RION L. V. RUZGAL xxx WHSE SUPERVISOR P16,000.00
GLENN V. VISTO xxx WHSE SUPERVISOR P15,600.00
CONRADO C. TIUSINGCO, xxx SR. WHSEMAN P7,200.00[16]
JR.
LOLITA D. JAMERO xxx WHSE SUPERVISOR P14,500.00
ARTURO G. CASTRO, JR. xxx WHSEMAN P7,616.00
RODIL C. STA. RITA xxx WHSEMAN P7,746.00
EMILIO MADRIAGA xxx WHSEMAN P7,616.00

Aggrieved, Sta. Rita filed a complaint in the NLRC, National Capital Region-Quezon City against Marsman on January 25, 2000 for
illegal dismissal with damages in the form of moral, exemplary, and actual damages and attorney's fees. Sta. Rita alleged that his
dismissal was without just or authorized cause and without compliance with procedural due process. His affidavit-complaint reads:

RODIL C. STA RITA, of legal age, single, Filipino citizen, with residence and postal address at 1128 R. Papa Street, Bo. Obrero,
Tondo, Manila being under oath hereby deposes and says:

1. He was employed with Marsman on November 16, 1993, with offices and address at Manalac Avenue, Taguig, Metro
Manila, as warehouseman with a basic salary P3,790.00 more (sic);

2. As a regular employee, his salary was increased by P1,600.00 in 1995; in 1996 was increased by P1,300.00; in 1997
was increased by P1,050.00, making a total of P7,740.00 up to his separation from employment on January 18, 2000
x x x;

3. He cannot fathom to know why he was terminated from employment, save the better (sic) of Mr. Michael Leo T. Luna,
Vice President and General Manager of Marsman Company (Consumer Products Distribution Services, Inc.) on
January 14, 2000;

4. His termination from employment is in diametric opposition to Art VI. Sec. 3(d) of the CBA and to Art. 282 of the Labor
Code, as amended, i.e., he was no[t] given the 30-day period prior to his termination, making his dismissal as illegal
per se;
 5. In the absence of any derogatory record of Mr. Rodil Sta. Rita for six (6) years, he is entitled to moral and exemplary
damages, in addition to back wages and separation pay, short of reinstatement and without loss of seniority rights. [17]

Marsman filed a Motion to Dismiss[18] on March 16, 2000 on the premise that the Labor Arbiter had no jurisdiction over the complaint for
illegal dismissal because Marsman is not Sta. Rita's employer. Marsman averred that the Memorandum of Agreement effectively
transferred Sta. Rita's employment from Marsman and Company, Inc. to CPDSI. Said transfer was further verified by Sta. Rita's: 1)
continued work in CPDSI's premises; 2) adherence to CPDSI's rules and regulations; and 3) receipt of salaries from CPDSI. Moreover,
Marsman asserted that CPDSI terminated Sta. Rita.

Labor Arbiter Gaudencio P. Demaisip, Jr. (Demaisip) rendered his Decision [19] on April 10, 2002 finding Marsman guilty of illegal
dismissal, thus:

This Office finds in favor of the complainant.

Article 167 of the Labor Code defines employer, to wit:

"Employer means any person, natural or juridical, employing the services of the employee."

Likewise, Article 212 of the Labor Code defines employer in this wise:

"Employer includes any person acting in the interest of an employer directly or indirectly."

Consumer did not perform any act, thru its responsible officer, to show that it had employed the complainant. Nevertheless, Marsman
acted in the interest of Consumer because "sometime in 1996, for purposes of efficiency and economy Marsman integrated its
distribution business with the business operations of Consumer Products Distribution Services, Inc. xxx" and "in line with the integration
of the distribution businesses of Marsman and CPDSI, the employment of all Marsman office, sales, and warehouse personnel was
transferred to CPDSI. x x x"

Thusly, Marsman qualifies as the employer of the complainant under the aforequoted provisions of the Labor Code.

The MOA was concluded between Marsman and. Co. Inc. and Marsman Employees Union-PSMM/DFA. A perusal of its contents show
that matters, concerning terms and conditions of employment, were contracted and concluded.

On the contrary, the MOA is a piece of evidence that Marsman is the employer of complainant because it is solely the employer who
can negotiate and conclude the terms and conditions of employment of the workers.

Ironically, the MOA does not establish the contention that Consumer is the employer of the complainant.

Rule XVI of Department Order No. 9, Series of 1997, which took effect on June 21, 1997, requires among others, the ratification by the
majority of all workers in the Collective Bargaining Unit of the Agreement. The non-compliance of the requirement, under said
Department Order, renders the MOA ineffective.

Further, it may be concluded that the Consumer is an agent of respondent Marsman, because the former does "[t]he employment of all
Marsman office sales, and warehouse personnel x x x."

Nevertheless, the employer of the complainant is Marsman and Company, Inc.

In illegal dismissal, the burden, to establish the just cause of termination, rest on the employer. The records of this case [are] devoid of
the existence of such cause. Indeed, the respondent Marsman and Company, Inc. failed to show the cause of complainant's dismissal,
warranting the twin remedies of reinstatement and backwages. However, insofar as reinstatement is concerned, this remedy appears to
be impractical because, as gleaned from the position paper of [Sta. Rita], there is uncertainty in the availability of assignment for the
complainant. Instead, the payment of separation pay equivalent to one half month for every year or a fraction of at least six (6) months
be considered as one year, would be equitable.

The rest of the claims are dismissed for lack of merit.

WHEREFORE, premises considered, the complainant is herein declared to have been illegally dismissed. Marsman and Company, Inc.
is directed to pay the complainant backwages and separation pay on the total amount of P152,757.55. [20]

Marsman appealed the foregoing Decision arguing that the Labor Arbiter had no jurisdiction over the complaint because an employer-
employee relationship did not exist between the party-litigants at the time of Sta. Rita's termination. Furthermore, Marsman stated that
the ratification requirement under Rule XVI of Department Order No. 9, Series of 1997[21] applied only to Collective Bargaining
Agreements, and the Memorandum of Agreement was certainly not a replacement for the Collective Bargaining Agreement which
Marsman and MEU entered into in the immediately succeeding year prior to the ratification of the Memorandum of Agreement.
Marsman also maintained that it had a personality that was separate and distinct from CPDSI thus it may not be made liable to answer
for acts or liabilities of CPDSI and vice-versa. Finally, Marsman claimed that Sta. Rita was validly declared redundant when CPDSI's
logistics agreement with EAC was not renewed.[22]

Sta. Rita filed his own appeal, contesting the failure of the Labor Arbiter to award him moral and exemplary damages, and attorney's
fees.

The NLRC in its Decision dated July 31, 2008, reversed Labor Arbiter Demaisip's Decision and found that there was no employer-
employee relationship between Marsman and Sta. Rita. The NLRC held:

Applying the four-fold test in determining the existence of employer-employee relationship fails to convince Us that complainant is
respondent Marsman's employee.

On selection and engagement, by complainant's transfer to CPDSI, he had become the employee of CPDSI. It should be emphasized
that respondent Marsman and CPDSI are corporate entities which are separate and distinct from one another.

On payment of wages, it was CPDSI which paid complainant's salaries and benefits. Complainant never claimed that it was still
respondent Marsman which paid his salaries.

On the power of dismissal, after EAC's lease contract expired deciding to transfer its stock to its own warehouse and handle its
warehousing operations, complainant was left without any work. CPDSI decided to terminate his services by issuing him a termination
notice on January 14, 2000.

On the employer's power to control the employee with respect to the means and methods by which his work is to be accomplished,
complainant was under the control and supervision of CPDSI concomitant to the logistic services which respondent Marsman had
integrated to that of CPDSI. CPDSI saw to it that its obligation to provide logistic services to its client EAC is carried out with
complainant working as warehouseman in the warehouse rented by EAC. The power of control is the most decisive factor in
determining the existence of an employer-employee relationship. x x x.

Having determined that employer-employee relationship does not exist between complainant and respondent Marsman, complainant
has no cause of action for illegal dismissal against the latter. There is no necessity to resolve the [other] issues.

WHEREFORE, premises considered, the Decision of the Labor Arbiter is VACATED and SET ASIDE. A NEW decision is entered
dismissing the complaint for lack of employer-employee relationship.[23]

In a Resolution dated November 11, 2008, the NLRC denied Sta. Rita's motion for reconsideration because his motion "raised no new
matters of substance which would warrant reconsideration of the Decision of [the] Commission." [24]

Sta. Rita filed before the Court of Appeals a Petition for Certiorari[25] imputing grave abuse of discretion on the part of the NLRC for 1)
finding a lack of employer-employee relationship between the party-litigants; and 2) not awarding backwages, separation pay, damages
and attorney's fees.

The Court of Appeals promulgated its Decision on June 25, 2010, reversing the NLRC Decision. The Court of Appeals held that
Marsman was Sta. Rita's employer because Sta. Rita was allegedly not part of the integration of employees between Marsman and
CPDSI. The Court gave credence to Sta. Rita's contention that he purposely refused to sign the Memorandum of Agreement because
such indicated his willingness to be transferred to CPDSI. In addition, the appellate court considered Sta. Rita's assignment to the EAC-
Libis Warehouse as part of Marsman's cross-training program, concluding that only Sta. Rita's work assignment was transferred and
not his employment.

The appellate court also found no merit in the NLRC's contention that CPDSI paid Sta. Rita's salaries and that it exercised control over
the means and methods by which Sta. Rita performed his tasks. On the contrary, the Court of Appeals observed that Sta. Rita filed his
applications for leave of absence with Marsman. Finally, the Court of Appeals adjudged that CPDSI, on the assumption that it had the
authority to dismiss Sta. Rita, did not comply with the requirements for the valid implementation of the redundancy program.

The dispositive portion of the Court of Appeals Decision reads:

WHEREFORE, the instant petition for certiorari is GRANTED. The assailed Decision and Resolution of the public respondent National
Labor Relations Commission are ANNULLED and SET ASIDE. Judgment is rendered declaring petitioner Rodil C. [Sta. Rita's]
dismissal from work as illegal and accordingly, private respondent Marsman and Company, Inc. is ordered to pay said [respondent] the
following:
 1. backwages computed from 18 January 2000 up to the finality of this Decision;

2. separation pay in lieu of reinstatement computed at the rate of one (1) month pay for every year of service from 16
November 1993 up to the finality of this Decision;

3. the amount of P15,000.00 as moral damages;

4. the amount of P15,000.00 as exemplary damages; and

5. the amount equivalent to 10% of his total monetary award, as and for attorney's fees.

Let this case be REMANDED to the Labor Arbiter for the purpose of computing, with reasonable dispatch, petitioner's monetary awards
as above discussed.[26]

Hence, Marsman lodged the petition before us raising the lone issue:

WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN DECIDING A QUESTION OF
SUBSTANCE IN A MANNER NOT IN ACCORD WITH THE LAW, APPLICABLE DECISIONS OF THIS HONORABLE COURT AND
EVIDENCE ON RECORD WHEN IT ANNULLED AND SET ASIDE THE NLRC'S DECISION AND RESOLUTION EFFECTIVELY
RULING THAT [STA. RITA] WAS ILLEGALLY DISMISSED FROM SERVICE WHEN THE LATTER COULD NOT HAVE BEEN
DISMISSED AT ALL ON ACCOUNT OF THE ABSENCE OF EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN SAID [STA. RITA]
AND THE COMPANY[27]

Simply stated, the issue to be resolved is whether or not an employer-employee relationship existed between Marsman and Sta. Rita at
the time of Sta. Rita's dismissal.

This petition is impressed with merit.

The issue of whether or not an employer-employee relationship exists in a given case is essentially a question of fact. As a rule, this
Court is not a trier of facts and this applies with greater force in labor cases. [28] This petition however falls under the exception because
of variance in the factual findings of the Labor Arbiter, the NLRC and the Court of Appeals. Indeed, on occasion, the Court is
constrained to wade into factual matters when there is insufficient or insubstantial evidence on record to support those factual findings;
or when too much is concluded, inferred or deduced from the bare or incomplete facts appearing on record. [29] The Court in the case
of South Cotabato Communications Corporation v. Sto. Tomas [30] held that:

The findings of fact should, however, be supported by substantial evidence from which the said tribunals can make their own
independent evaluation of the facts. In labor cases, as in other administrative and quasi-judicial proceedings, the quantum of proof
necessary is substantial evidence, or such amount of relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion. Although no particular form of evidence is required to prove the existence of an employer-employee relationship, and any
competent and relevant evidence to prove the relationship may be admitted, a finding that the relationship exists must nonetheless rest
on substantial evidence. (Citations omitted)

Settled is the tenet that allegations in the complaint must be duly proven by competent evidence and the burden of proof is on the party
making the allegation.[31] In an illegal dismissal case, the onus probandi rests on the employer to prove that its dismissal of an
employee was for a valid cause. However, before a case for illegal dismissal can prosper, an employer-employee relationship must first
be established.[32] In this instance, it was incumbent upon Sta. Rita as the complainant to prove the employer-employee relationship by
substantial evidence. Unfortunately, Sta. Rita failed to discharge the burden to prove his allegations.

To reiterate the facts, undisputed and relevant to the disposition of this case, Marsman hired Sta. Rita as a warehouseman when it was
still engaged in the business of distribution and sale of pharmaceutical and consumer products. Marsman paid Sta. Rita's wages and
controlled his warehouse assignments, acts which can only be attributed to a bona fide employer. Marsman thereafter purchased Metro
Drug, now CPDSI, which at that time, was engaged in a similar business. Marsman then entered into a Memorandum of Agreement
with MEU, its bargaining representative, integrating its employees with CPDSI and transferring its employees, their respective
employment contracts and the attendant employment obligation to CPDSI. The planned integration was then carried out sometime in
1996, as admitted by Sta. Rita in his pleading.[33]

It is imperative to point out that the integration and transfer was a necessary consequence of the business transition or corporate
reorganization that Marsman and CPDSI had undertaken, which had the characteristics of a corporate spin-off. To recall, a proviso in
the Memorandum of Agreement limited Marsman's function into that of a holding company and transformed CPDSI as its main
operating company. In business parlance, a corporate spin-off occurs when a department, division or portions of the corporate business
enterprise is sold-off or assigned to a new corporation that will arise by the process which may constitute it into a subsidiary of the
original corporation.[34]

The spin-off and the attendant transfer of employees are legitimate business interests of Marsman. The transfer of employees through
the Memorandum of Agreement was proper and did not violate any existing law or jurisprudence.
Jurisprudence has long recognized what are termed as "management prerogatives." In SCA Hygiene Products Corporation Employees
Association-FFW v. SCA Hygiene Products Corporation,[35] we held that:

The hiring, firing, transfer, demotion, and promotion of employees have been traditionally identified as a management prerogative
subject to limitations found in the law, a collective bargaining agreement, or in general principles of fair play and justice. This is a
function associated with the employer's inherent right to control and manage effectively its enterprise. Even as the law is solicitous of
the welfare of employees, it must also protect the right of an employer to exercise what are clearly management prerogatives. The free
will of management to conduct its own business affairs to achieve its purpose cannot be denied. x x x.

Tinio v. Court of Appeals[36] also acknowledged management's prerogative to transfer its employees within the same business
establishment, to wit:

This Court has consistently recognized and upheld the prerogative of management to transfer an employee from one office to another
within the business establishment, provided there is no demotion in rank or a diminution of salary, benefits and other privileges. As a
rule, the Court will not interfere with an employer's prerogative to regulate all aspects of employment which include among others, work
assignment, working methods and place and manner of work. Labor laws discourage interference with an employer's judgment in the
conduct of his business.

xxxx

But, like other rights, there are limits thereto. The managerial prerogative to transfer personnel must be exercised without grave abuse
of discretion, bearing in mind the basic elements of justice and fair play. Having the right should not be confused with the manner in
which the right is exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. The
employer must be able to show that the transfer is not unreasonable, inconvenient, or prejudicial to the employee; nor does it involve a
demotion in rank or a diminution of his salaries, privileges, and other benefits. x x x. (Citations omitted.)

Analogously, the Court has upheld the transfer/absorption of employees from one company to another, as successor employer, as long
as the transferor was not in bad faith[37] and the employees absorbed by a successor-employer enjoy the continuity of their employment
status and their rights and privileges with their former employer. [38]

Sta. Rita's contention that the absence of his signature on the Memorandum of Agreement meant that his employment remained with
Marsman is merely an allegation that is neither proof nor evidence. It cannot prevail over Marsman's evident intention to transfer its
employees.

To assert that Marsman remained as Sta. Rita's employer even after the corporate spin-off disregards the separate personality of
Marsman and CPDSI. It is a fundamental principle of law that a corporation has a personality that is separate and distinct from that
composing it as well as from that of any other legal entity to which it may be related. [39] Other than Sta. Rita's bare allegation that
Michael Leo T. Luna was Marsman's and CPDSI's Vice-President and General Manager, Sta. Rita failed to support his claim that both
companies were managed and operated by the same persons, or that Marsman still had complete control over CPDSI's operations.
Moreover, the existence of interlocking directors, corporate officers and shareholders without more, is not enough justification to pierce
the veil of corporate fiction in the absence of fraud or other public policy considerations. [40]

Verily, the doctrine of piercing the corporate veil also finds no application in this case because bad faith cannot be imputed to
Marsman.[41] On the contrary, the Memorandum of Agreement guaranteed the tenure of the employees, the honoring of the Collective
Bargaining Agreement signed in June 1995, the preservation of salaries and benefits, and the enjoyment of the same terms and
conditions of employment by the affected employees.

Sta. Rita also failed to satisfy the four-fold test which determines the existence of an employer-employee relationship. The elements of
the four-fold test are: 1) the selection and engagement of the employees; 2) the payment of wages; 3) the power of dismissal; and 4)
the power to control the employee's conduct.[42] There is no hard and fast rule designed to establish the aforesaid elements. Any
competent and relevant evidence to prove the relationship may be admitted. Identification cards, cash vouchers, social security
registration, appointment letters or employment contracts, payrolls, organization charts, and personnel lists, serve as evidence of
employee status.[43]

The Memorandum of Agreement effectively transferred Marsman's employees to CPDSI. However, there was nothing in the agreement
to negate CPDSI's power to select its employees and to decide when to engage them. This is in line with Article 1700 of the Civil Code
which provides that:

Art. 1700. The relations between capital and labor are not merely contractual. They are so impressed with public interest that labor
contracts must yield to the common good. Therefore, such contracts are subject to the special laws on labor unions, collective
bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and similar subjects.

A labor contract merely creates an action in personam and does not create any real right which should be respected by third
parties.[44] This conclusion draws its force from the right of an employer to select his/her employees and equally, the right of the
employee to refuse or voluntarily terminate his/her employment with his/her new employer by resigning or retiring. That CPDSI took
Sta. Rita into its employ and assigned him to one of its clients signified the former's acquiescence to the transfer.

Marsman's letter[45] to Sta. Rita dated September 29, 1997 neither assumed nor disturbed CPDSI's power of selection. The letter reads:

MARSMAN & COMPANY, INC.

TO: MR. RODIL STA. RITA

RE: TRANSFER OF ASSIGNMENT

This is to confirm in writing your appointment as warehouseman for EAC-Libis Warehouse and Mercury Drug effective 13 October
1997. This transfer is part of our cross-training program.

Prior to the effectivity of your appointment, you may be instructed to proceed to EAC-Libis Warehouse for work familiarization and other
operational matters related to the job.

You will directly report to Mr. Eusebio Paisaje, warehouse supervisor.

Good luck.
(signed)
Irene C. Nagrampa

cc: EDB/QRI
LRP/Noynoy Paisaje
HRG-201 file
file

It would be amiss to read this letter independent of the Memorandum of Agreement because the Memorandum of Agreement clearly
reflected Marsman's intention to transfer all employees to CPDSI. When read in isolation, the use of "cross-training program" may be
subject to a different interpretation but reading it together with the MOA indicates that the "cross training program" was in relation to the
transition phase that Marsman and CPDSI were then undergoing. It is clear under the terms of the Memorandum of Agreement that
Marsman may continue to negotiate and address issues with the Union even after the signing and execution of said agreement in the
course of fully implementing the transfer to, and the integration of operations with, CPDSI.

To prove the element on the payment of wages, Sta. Rita submitted forms for leave application, with either Marsman's logo or CPDSI's
logo. Significantly, the earlier leave forms bore Marsman's logo but the latest leave application of Sta. Rita already had CPDSI's logo. In
any event, the forms for leave application did not sufficiently establish that Marsman paid Sta. Rita's wages. Sta. Rita could have
presented pay slips, salary vouchers, payrolls, certificates of withholding tax on compensation income or testimonies of his
witnesses.[46] The submission of his Social Security System (SSS) identification card (ID) only proved his membership in the social
insurance program. Sta. Rita should have instead presented his SSS records which could have reflected his contributions, and the
name and address of his employer.[47] Thus, Sta. Rita fell short in his claim that Marsman still had him in its payroll at the time of his
dismissal.

As to the power of dismissal, the letter dated January 14, 2000 clearly indicated that CPDSI, and not Marsman, terminated Sta. Rita's
services by reason of redundancy.

Finally, Sta. Rita failed to prove that Marsman had the power of control over his employment at the time of his dismissal. The power of
an employer to control the work of the employee is considered the most significant determinant of the existence of an employer-
employee relationship.[48] Control in such relationships addresses the details of day to day work like assigning the particular task that
has to be done, monitoring the way tasks are done and their results, and determining the time during which the employee must report
for work or accomplish his/her assigned task.[49] The Court likewise takes notice of the company IDs attached in Sta. Rita's pleading.
The "old" ID bore Marsman's logo while the "new" ID carried Metro Drug's logo. The Court has held that in a business establishment, an
identification card is usually provided not only as a security measure but mainly to identify the holder thereof as a bona fide employee of
the firm that issues it.[50] Thus the "new" ID confirmed that Sta. Rita was an employee of Metro Drug, which, to reiterate, later changed
its name to CPDSI.

Having established that an employer-employee relationship did not exist between Marsman and Sta. Rita at the time of his dismissal,
Sta. Rita's original complaint must be dismissed for want of jurisdiction on the part of the Labor Arbiter to take cognizance of the case.
For this reason, there is no need for the Court to pass upon the other issues raised.

WHEREFORE, premises considered, the petition is GRANTED. The Court of Appeals' assailed Decision dated June 25, 2010 and
Resolution dated December 9, 2010 in CA-G.R. SP No. 106516 are, accordingly, REVERSED and SET ASIDE. The NLRC Decision
dated July 31, 2008 in NLRC NCR Case No. 30-01-00362-00 (NLRC CA No. 032892-02) is REINSTATED.
SO ORDERED.

Del Castillo, Jardeleza, and Tijam, JJ., concur.

Sereno, C.J., on leave.
655 Phil. 595

SECOND DIVISION

[ G.R. No. 179428, January 26, 2011 ]

PRIMO E. CAONG, JR., ALEXANDER J. TRESQUIO, AND LORIANO D. DALUYON, PETITIONERS, VS. AVELINO REGUALOS,
RESPONDENT.

DECISION

NACHURA, J.:

Is the policy of suspending drivers pending payment of arrears in their boundary obligations reasonable? The Court of Appeals (CA)
answered the question in the affirmative in its Decision [1] dated December 14, 2006 and Resolution dated July 16, 2007. In this petition
for review on certiorari, we take a second look at the issue and determine whether the situation at bar merits the relaxation of the
application of the said policy.

Petitioners Primo E. Caong, Jr. (Caong), Alexander J. Tresquio (Tresquio), and Loriano D. Daluyon (Daluyon) were employed by
respondent Avelino Regualos under a boundary agreement, as drivers of his jeepneys. In November 2001, they filed separate
complaints [2] for illegal dismissal against respondent who barred them from driving the vehicles due to deficiencies in their boundary
payments.

Caong was hired by respondent in September 1998 and became a permanent driver sometime in 2000. In July 2001, he was assigned
a brand- new jeepney for a boundary fee of P550.00 per day. He was suspended on October 9-15, 2001 for failure to remit the full
amount of the boundary. Consequently, he filed a complaint for illegal suspension. Upon expiration of the suspension period, he was
readmitted by respondent, but he was reassigned to an older jeepney for a boundary fee of P500.00 per day. He claimed that, on
November 9, 2001, due to the scarcity of passengers, he was only able to remit P400.00 to respondent. On November 11, 2001, he
returned to work after his rest day, but respondent barred him from driving because of the deficiency in the boundary payment. He
pleaded with respondent but to no avail. [3]

Tresquio was employed by respondent as driver in August 1996. He became a permanent driver in 1997. In 1998, he was assigned to
drive a new jeepney for a boundary fee of P500.00 per day. On November 6, 2001, due to the scarcity of passengers, he was only able
to remit P450.00. When he returned to work on November 8, 2001 after his rest day, he was barred by respondent because of the
deficiency of P50.00. He pleaded with respondent but the latter was adamant. [4]

On the other hand, Daluyon started working for respondent in March 1998. He became a permanent driver in July 1998. He was
assigned to a relatively new jeepney for a boundary fee of P500.00 per day. On November 7, 2001, due to the scarcity of passengers,
he was only able to pay P470.00 to respondent. The following day, respondent barred him from driving his jeepney. He pleaded but to
no avail. [5]

During the mandatory conference, respondent manifested that petitioners were not dismissed and that they could drive
his jeepneys once they paid their arrears. Petitioners, however, refused to do so.

Petitioners averred that they were illegally dismissed by respondent without just cause. They maintained that respondent did not comply
with due process requirements before terminating their employment, as they were not furnished notice apprising them of their
infractions and another informing them of their dismissal. Petitioners claimed that respondent's offer during the mandatory conference
to reinstate them was an insincere afterthought as shown by the warning given by respondent that, if they fail to remit the full amount of
the boundary yet again, they will be barred from driving the jeepneys. Petitioners questioned respondent's policy of automatically
dismissing the drivers who fail to remit the full amount of the boundary as it allegedly (a) violates their right to due process; (b) does not
constitute a just cause for dismissal; (c) disregards the reality that there are days when they could not raise the full amount of the
boundary because of the scarcity of passengers.

In his Position Paper, respondent alleged that petitioners were lessees of his vehicles and not his employees; hence, the Labor Arbiter
had no jurisdiction. He claimed that he noticed that some of his lessees, including petitioners, were not fully paying the daily rental of
his jeepneys. In a list which he attached to the Position Paper, it was shown that petitioners had actually incurred arrears since they
started working. The list showed that Caong's total arrears amounted to P10,315.00, that of Tresquio was P10,760.00, while that of
Daluyon was P6,890.00. He made inquiries and discovered that his lessees contracted loans with third parties and used the income of
the jeepneys in paying the loans. Thus, on November 4, 2001, he gathered all the lessees in a meeting and informed them that,
effective November 5, 2001, those who would fail to fully pay the daily rental would not be allowed to rent a jeepney on the following
day. He explained to them that the jeepneys were acquired on installment basis, and that he was paying the monthly amortizations
through the lease income. Most of the lessees allegedly accepted the condition and paid their arrears. Petitioners, however, did not
settle their arrears. Worse, their remittances were again short of the required boundary fee. Petitioner Daluyon's rent payment was
short of P20.00 on November 5, 2001 and P80.00 on November 7, 2001. On November 6, 2001, it was Tresquio who incurred an arrear
of P100.00. On November 7 and 9, 2001, petitioner Caong was in arrear of P50.00 and P100.00, respectively. Respondent stressed
that, during the mandatory conference, he manifested that he would renew his lease with petitioners if they would pay the arrears they
incurred during the said dates. [6]

On March 31, 2003, the Labor Arbiter decided the case in favor of respondent, thus:

WHEREFORE, judgment is hereby rendered, DISMISSING the above-entitled cases for lack of merit. However,
respondent Regualos is directed to accept back complainants Caong, Tresquio and Daluyon, as regular drivers of his passenger
jeepneys, after complainants have paid their respective arrearages they have incurred in the remittance of their respective boundary
payments, in the amount of P150.00, P100.00 and P100.00. Complainants, if still interested to work as drivers, are hereby ordered to
report to respondent Regualos within fifteen (15) days from the finality of this decision. Otherwise, failure to do so means forfeiture of
their respective employments.

Other claims of complainants are dismissed for lack of merit.

SO ORDERED. [7]

According to the Labor Arbiter, an employer-employee relationship existed between respondent and petitioners. The latter were not
dismissed considering that they could go back to work once they have paid their arrears. The Labor Arbiter opined that, as a
disciplinary measure, it is proper to impose a reasonable sanction on drivers who cannot pay their boundary payments. He emphasized
that respondent acquired the jeepneys on loan or installment basis and relied on the boundary payments to comply with his monthly
amortizations. [8]

Petitioners appealed the decision to the National Labor Relations Commission (NLRC). In its resolution [9] dated March 31, 2004, the
NLRC agreed with the Labor Arbiter and dismissed the appeal. It also denied petitioners' motion for reconsideration. [10]

Forthwith, petitioners filed a petition for certiorari with the CA.

In its Decision [11] dated December 14, 2006, the CA found no grave abuse of discretion on the part of the NLRC. According to the CA,
the employer-employee relationship of the parties has not been severed, but merely suspended when respondent refused to allow
petitioners to drive the jeepneys while there were unpaid boundary obligations. The CA pointed out that the fact that it was within the
power of petitioners to return to work is proof that there was no termination of employment. The condition that petitioners should first
pay their arrears only for the period of November 5-9, 2001 before they can be readmitted to work is neither impossible nor
unreasonable if their total unpaid boundary obligations and the need to sustain the financial viability of the employer's enterprise--which
would ultimately redound to the benefit of the employees--are taken into consideration. [12]

The CA went on to rule that petitioners were not denied their right to due process. It pointed out that the case does not involve a
termination of employment; hence, the strict application of the twin-notice rule is not warranted. According to the CA, what is important
is that petitioners were given the opportunity to be heard. The meeting conducted by respondent on November 4, 2001 served as
sufficient notice to petitioners. During the said meeting, respondent informed his employees, including petitioners, to strictly comply with
the policy regarding remittances and warned them that they would not be allowed to take out the jeepneys if they did not remit the full
amount of the boundary. [13]

Dissatisfied, petitioners filed a motion for reconsideration, but the CA denied the motion in its Resolution dated July 16, 2007. [14]

Petitioners are now before this Court resolutely arguing that they were illegally dismissed by respondent, and that such dismissal was
made in violation of the due process requirements of the law.

The petition is without merit.

In an action for certiorari, petitioner must prove not merely reversible error, but grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of respondent. Mere abuse of discretion is not enough. It must be shown that public respondent exercised its
power in an arbitrary or despotic manner by reason of passion or personal hostility, and this must be so patent and so gross as to
amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law. [15]

As correctly held by the CA, petitioners failed to establish that the NLRC committed grave abuse of discretion in affirming the Labor
Arbiter's ruling, which is supported by the facts on record.

It is already settled that the relationship between jeepney owners/operators and jeepney drivers under the boundary system is that of
employer-employee and not of lessor-lessee. The fact that the drivers do not receive fixed wages but only get the amount in excess of
the so-called "boundary" that they pay to the owner/operator is not sufficient to negate the relationship between them as employer and
employee. [16]
The Labor Arbiter, the NLRC, and the CA uniformly declared that petitioners were not dismissed from employment but merely
suspended pending payment of their arrears. Findings of fact of the CA, particularly where they are in absolute agreement with those of
the NLRC and the Labor Arbiter, are accorded not only respect but even finality, and are deemed binding upon this Court so long as
they are supported by substantial evidence. [17]

We have no reason to deviate from such findings. Indeed, petitioners' suspension cannot be categorized as dismissal, considering that
there was no intent on the part of respondent to sever the employer-employee relationship between him and petitioners. In fact, it was
made clear that petitioners could put an end to the suspension if they only pay their recent arrears. As it was, the suspension dragged
on for years because of petitioners' stubborn refusal to pay. It would have been different if petitioners complied with the condition and
respondent still refused to readmit them to work. Then there would have been a clear act of dismissal. But such was not the case.
Instead of paying, petitioners even filed a complaint for illegal dismissal against respondent.

Respondent's policy of suspending drivers who fail to remit the full amount of the boundary was fair and reasonable under the
circumstances. Respondent explained that he noticed that his drivers were getting lax in remitting their boundary payments and, in fact,
herein petitioners had already incurred a considerable amount of arrears. He had to put a stop to it as he also relied on these boundary
payments to raise the full amount of his monthly amortizations on the jeepneys. Demonstrating their obstinacy, petitioners, on the days
immediately following the implementation of the policy, incurred deficiencies in their boundary remittances.

It is acknowledged that an employer has free rein and enjoys a wide latitude of discretion to regulate all aspects of employment,
including the prerogative to instill discipline on his employees and to impose penalties, including dismissal, if warranted, upon erring
employees. This is a management prerogative. Indeed, the manner in which management conducts its own affairs to achieve its
purpose is within the management's discretion. The only limitation on the exercise of management prerogative is that the policies, rules,
and regulations on work-related activities of the employees must always be fair and reasonable, and the corresponding penalties, when
prescribed, commensurate to the offense involved and to the degree of the infraction. [18]

Petitioners argue that the policy is unsound as it does not consider the times when passengers are scarce and the drivers are not able
to raise the amount of the boundary.

Petitioners' concern relates to the implementation of the policy, which is another matter. A company policy must be implemented in
such manner as will accord social justice and compassion to the employee. In case of noncompliance with the company policy, the
employer must consider the surrounding circumstances and the reasons why the employee failed to comply. When the circumstances
merit the relaxation of the application of the policy, then its noncompliance must be excused.

In the present case, petitioners merely alleged that there were only few passengers during the dates in question. Such excuse is not
acceptable without any proof or, at least, an explanation as to why passengers were scarce at that time. It is simply a bare allegation,
not worthy of belief. We also find the excuse unbelievable considering that petitioners incurred the shortages on separate days, and it
appears that only petitioners failed to remit the full boundary payment on said dates.

Under a boundary scheme, the driver remits the "boundary," which is a fixed amount, to the owner/operator and gets to earn the
amount in excess thereof. Thus, on a day when there are many passengers along the route, it is the driver who actually benefits from it.
It would be unfair then if, during the times when passengers are scarce, the owner/operator will be made to suffer by not getting the full
amount of the boundary. Unless clearly shown or explained by an event that irregularly and negatively affected the usual number of
passengers within the route, the scarcity of passengers should not excuse the driver from paying the full amount of the boundary.

Finally, we sustain the CA's finding that petitioners were not denied the right to due process. We thus quote with approval its discussion
on this matter:

Having established that the case at bench does not involve termination of employment, We find that the strict, even rigid, application of
the twin-notice rule is not warranted.

But the due process safeguards are nonetheless still available to petitioners.

Due process is not a matter of strict or rigid or formulaic process. The essence of due process is simply the opportunity to be heard, or
as applied to administrative proceedings, an opportunity to explain one's side or an opportunity to seek a reconsideration of the action
or ruling complained of. A formal or trial-type hearing is not at all times and in all instances essential, as the due process requirements
are satisfied where the parties are afforded fair and reasonable opportunity to explain their side of the controversy at hand. x x x.

xxxx

In the case at bench, private respondent, upon finding that petitioners had consistently failed to remit the full amount of the boundary,
conducted a meeting on November 4, 2001 informing them to strictly comply with the policy regarding their remittances and warned
them to discontinue driving if they still failed to remit the full amount of the boundary. [19]
WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals Decision dated December 14, 2006 and Resolution
dated July 16, 2007 are AFFIRMED.

SO ORDERED.

Carpio, J., (Chairperson), Peralta, Abad, and Mendoza, JJ., concur.

670 Phil. 615

THIRD DIVISION

[ G.R. No. 169510, August 08, 2011 ]

ATOK BIG WEDGE COMPANY, INC., PETITIONER, VS. JESUS P. GISON, RESPONDENT.

DECISION

PERALTA, J.:

This is a petition for review on certiorari seeking to reverse and set aside the Decision[1] dated May 31, 2005 of the Court of Appeals
(CA) in CA-G.R. SP No. 87846, and the Resolution[2] dated August 23, 2005 denying petitioner's motion for reconsideration.

The procedural and factual antecedents are as follows:

Sometime in February 1992, respondent Jesus P. Gison was engaged as part-time consultant on retainer basis by
petitioner Atok Big Wedge Company, Inc. through its then Asst. Vice-President and Acting Resident Manager, Rutillo A. Torres. As a
consultant on retainer basis, respondent assisted petitioner's retained legal counsel with matters pertaining to the prosecution of cases
against illegal surface occupants within the area covered by the company's mineral claims. Respondent was likewise tasked to perform
liaison work with several government agencies, which he said was his expertise.

Petitioner did not require respondent to report to its office on a regular basis, except when occasionally requested by the management
to discuss matters needing his expertise as a consultant. As payment for his services, respondent received a retainer fee of P3,000.00
a month,[3] which was delivered to him either at his residence or in a local restaurant. The parties executed a retainer agreement, but
such agreement was misplaced and can no longer be found.

The said arrangement continued for the next eleven years.

Sometime thereafter, since respondent was getting old, he requested that petitioner cause his registration with the Social Security
System (SSS), but petitioner did not accede to his request. He later reiterated his request but it was ignored by respondent considering
that he was only a retainer/consultant. On February 4, 2003, respondent filed a Complaint[4] with the SSS against petitioner for the
latter's refusal to cause his registration with the SSS.

On the same date, Mario D. Cera, in his capacity as resident manager of petitioner, issued a Memorandum [5] advising respondent that
within 30 days from receipt thereof, petitioner is terminating his retainer contract with the company since his services are no longer
necessary.

On February 21, 2003, respondent filed a Complaint [6] for illegal dismissal, unfair labor practice, underpayment of wages, non-payment
of 13th month pay, vacation pay, and sick leave pay with the National Labor Relations Commission (NLRC), Regional Arbitration Branch
(RAB), Cordillera Administrative Region, against petitioner, Mario D. Cera, and Teofilo R. Asuncion, Jr. The case was docketed as
NLRC Case No. RAB-CAR-02-0098-03.

Respondent alleged that:

x x x [S]ometime in January 1992, Rutillo A. Torres, then the resident manager of respondent Atok Big Wedge Co., Inc., or Atok for
brevity, approached him and asked him if he can help the company's problem involving the 700 million pesos crop damage claims of
the residents living at the minesite of Atok. He participated in a series of dialogues conducted with the residents. Mr. Torres offered to
pay him P3,000.00 per month plus representation expenses. It was also agreed upon by him and Torres that his participation in
resolving the problem was temporary and there will be no employer-employee relationship between him and Atok. It was also agreed
upon that his compensation, allowances and other expenses will be paid through disbursement vouchers.

On February 1, 1992 he joined Atok. One week thereafter, the aggrieved crop damage claimants barricaded the only passage to and
from the minesite. In the early morning of February 1, 1992, a dialogue was made by Atok and the crop damage claimants.
Unfortunately, Atok's representatives, including him, were virtually held hostage by the irate claimants who demanded on the spot
payment of their claims. He was able to convince the claimants to release the company representatives pending referral of the issue to
higher management.

A case was filed in court for the lifting of the barricades and the court ordered the lifting of the barricade. While Atok was prosecuting its
case with the claimants, another case erupted involving its partner, Benguet Corporation. After Atok parted ways with Benguet
Corporation, some properties acquired by the partnership and some receivables by Benguet Corporation was the problem. He was
again entangled with documentation, conferences, meetings, planning, execution and clerical works. After two years, the controversy
was resolved and Atok received its share of the properties of the partnership, which is about 5 million pesos worth of equipment and
condonation of Atok's accountabilities with Benguet Corporation in the amount of P900,000.00.
In the meantime, crop damage claimants lost interest in pursuing their claims against Atok and Atok was relieved of the burden of
paying 700 million pesos. In between attending the problems of the crop damage issue, he was also assigned to do liaison works with
the SEC, Bureau of Mines, municipal government of Itogon, Benguet, the Courts and other government offices.

After the crop damage claims and the controversy were resolved, he was permanently assigned by Atok to take charge of some liaison
matters and public relations in Baguio and Benguet Province, and to report regularly to Atok's office in Manila to attend meetings and so
he had to stay in Manila at least one week a month.

Because of his length of service, he invited the attention of the top officers of the company that he is already entitled to the benefits due
an employee under the law, but management ignored his requests. However, he continued to avail of his representation expenses and
reimbursement of company-related expenses. He also enjoyed the privilege of securing interest free salary loans payable in one year
through salary deduction.

In the succeeding years of his employment, he was designated as liaison officer, public relation officer and legal assistant, and to assist
in the ejection of illegal occupants in the mining claims of Atok.

Since he was getting older, being already 56 years old, he reiterated his request to the company to cause his registration with the SSS.
His request was again ignored and so he filed a complaint with the SSS. After filing his complaint with the SSS, respondents
terminated his services.[7]

On September 26, 2003, after the parties have submitted their respective pleadings, Labor Arbiter Rolando D. Gambito rendered a
Decision[8] ruling in favor of the petitioner. Finding no employer-employee relationship between petitioner and respondent, the Labor
Arbiter dismissed the complaint for lack of merit.

Respondent then appealed the decision to the NLRC.

On July 30, 2004, the NLRC, Second Division, issued a Resolution[9] affirming the decision of the Labor Arbiter. Respondent filed a
Motion for Reconsideration, but it was denied in the Resolution [10] dated September 30, 2004.

Aggrieved, respondent filed a petition for review under Rule 65 of the Rules of Court before the CA questioning the decision and
resolution of the NLRC, which was later docketed as CA-G.R. SP No. 87846. In support of his petition, respondent raised the following
issues:

a) Whether or not the Decision of the Honorable Labor Arbiter and the subsequent Resolutions of the Honorable Public Respondent
affirming the same, are in harmony with the law and the facts of the case;

b) Whether or not the Honorable Labor Arbiter Committed a Grave Abuse of Discretion in Dismissing the Complaint of Petitioner and
whether or not the Honorable Public Respondent Committed a Grave Abuse of Discretion when it affirmed the said Decision. [11]

On May 31, 2005, the CA rendered the assailed Decision annulling and setting aside the decision of the NLRC, the decretal portion of
which reads:

WHEREFORE, the petition is GRANTED. The assailed Resolution of the National Labor Relations Commission dismissing petitioner's
complaint for illegal dismissal is ANNULLED and SET ASIDE. Private respondent Atok Big Wedge Company Incorporated
is ORDERED to reinstate petitioner Jesus P. Gison to his former or equivalent position without loss of seniority rights and to pay him full
backwages, inclusive of allowances and other benefits or their monetary equivalent computed from the time these were withheld from
him up to the time of his actual and effective reinstatement. This case is ordered REMANDED to the Labor Arbiter for the proper
computation of backwages, allowances and other benefits due to petitioner. Costs against private
respondent Atok Big Wedge Company Incorporated.

SO ORDERED.[12]

In ruling in favor of the respondent, the CA opined, among other things, that both the Labor Arbiter and the NLRC may have overlooked
Article 280 of the Labor Code,[13] or the provision which distinguishes between two kinds of employees, i.e., regular and casual
employees. Applying the provision to the respondent's case, he is deemed a regular employee of the petitioner after the lapse of one
year from his employment. Considering also that respondent had been performing services for the petitioner for eleven years,
respondent is entitled to the rights and privileges of a regular employee.

The CA added that although there was an agreement between the parties that respondent's employment would only be temporary, it
clearly appears that petitioner disregarded the same by repeatedly giving petitioner several tasks to perform. Moreover, although
respondent may have waived his right to attain a regular status of employment when he agreed to perform these tasks on a temporary
employment status, still, it was the law that recognized and considered him a regular employee after his first year of rendering service
to petitioner. As such, the waiver was ineffective.

Hence, the petition assigning the following errors:

I. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO LAW AND
APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT GAVE DUE COURSE TO THE PETITION FOR CERTIORARI
DESPITE THE FACT THAT THERE WAS NO SHOWING THAT THE NATIONAL LABOR RELATIONS COMMISSION COMMITTED
GRAVE ABUSE OF DISCRETION.

II. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO THE LAW AND
APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT BASED ITS FINDING THAT RESPONDENT IS ENTITLED TO
REGULAR EMPLOYMENT ON A PROVISION OF LAW THAT THIS HONORABLE COURT HAS DECLARED TO BE INAPPLICABLE
IN CASE THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP IS IN DISPUTE OR IS THE FACT IN ISSUE.

III. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO LAW AND
APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT ERRONEOUSLY FOUND THAT RESPONDENT IS A REGULAR
EMPLOYEE OF THE COMPANY.

IV. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO LAW AND
APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT ERRONEOUSLY DIRECTED RESPONDENT'S
REINSTATEMENT DESPITE THE FACT THAT THE NATURE OF THE SERVICES HE PROVIDED TO THE COMPANY WAS
SENSITIVE AND CONFIDENTIAL.[14]

Petitioner argues that since the petition filed by the respondent before the CA was a petition for certiorari under Rule 65 of the Rules of
Court, the CA should have limited the issue on whether or not there was grave abuse of discretion on the part of the NLRC in rendering
the resolution affirming the decision of the Labor Arbiter.

Petitioner also posits that the CA erred in applying Article 280 of the Labor Code in determining whether there was an employer-
employee relationship between the petitioner and the respondent. Petitioner contends that where the existence of an employer-
employee relationship is in dispute, Article 280 of the Labor Code is inapplicable. The said article only set the distinction between a
casual employee from a regular employee for purposes of determining the rights of an employee to be entitled to certain benefits.

Petitioner insists that respondent is not a regular employee and not entitled to reinstatement.

On his part, respondent maintains that he is an employee of the petitioner and that the CA did not err in ruling in his favor.

The petition is meritorious.

At the outset, respondent's recourse to the CA was the proper remedy to question the resolution of the NLRC. It bears stressing that
there is no appeal from the decision or resolution of the NLRC. As this Court enunciated in the case of St. Martin Funeral Home v.
NLRC,[15] the special civil action of certiorari under Rule 65 of the Rules of Civil Procedure, which is filed before the CA, is the proper
vehicle for judicial review of decisions of the NLRC. The petition should be initially filed before the Court of Appeals in strict observance
of the doctrine on hierarchy of courts as the appropriate forum for the relief desired. [16] This Court not being a trier of facts, the
resolution of unclear or ambiguous factual findings should be left to the CA as it is procedurally equipped for that purpose. From the
decision of the Court of Appeals, an ordinary appeal under Rule 45 of the Rules of Civil Procedure before the Supreme Court may be
resorted to by the parties. Hence, respondent's resort to the CA was appropriate under the circumstances.

Anent the primordial issue of whether or not an employer-employee relationship exists between petitioner and respondent.

Well-entrenched is the doctrine that the existence of an employer-employee relationship is ultimately a question of fact and that the
findings thereon by the Labor Arbiter and the NLRC shall be accorded not only respect but even finality when supported by substantial
evidence.[17] Being a question of fact, the determination whether such a relationship exists between petitioner and respondent was well
within the province of the Labor Arbiter and the NLRC. Being supported by substantial evidence, such determination should have been
accorded great weight by the CA in resolving the issue.

To ascertain the existence of an employer-employee relationship jurisprudence has invariably adhered to the four-fold test, to wit: (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."[18] Of these four, the last one is the most important.[19] The so-called "control test" is
commonly regarded as the most crucial and determinative indicator of the presence or absence of an employer-employee relationship.
Under the control test, an employer-employee relationship exists where the person for whom the services are performed reserves the
right to control not only the end achieved, but also the manner and means to be used in reaching that end. [20]

Applying the aforementioned test, an employer-employee relationship is apparently absent in the case at bar. Among other things,
respondent was not required to report everyday during regular office hours of petitioner. Respondent's monthly retainer fees were paid
to him either at his residence or a local restaurant. More importantly, petitioner did not prescribe the manner in which respondent would
accomplish any of the tasks in which his expertise as a liaison officer was needed; respondent was left alone and given the freedom to
accomplish the tasks using his own means and method. Respondent was assigned tasks to perform, but petitioner did not control the
manner and methods by which respondent performed these tasks. Verily, the absence of the element of control on the part of the
petitioner engenders a conclusion that he is not an employee of the petitioner.

Moreover, the absence of the parties' retainership agreement notwithstanding, respondent clearly admitted that petitioner hired him in a
limited capacity only and that there will be no employer-employee relationship between them. As averred in respondent's Position
Paper:[21]
 2. For the participation of complainant regarding this particular problem of Atok, Mr. Torres offered him a pay in the
amount of Php3,000.00 per month plus representation expenses. It was also agreed by Mr. Torres and the
complainant that his participation on this particular problem of Atok will be temporary since the problem was then
contemplated to be limited in nature, hence, there will be no employer-employee relationship between him
and Atok. Complainant agreed on this arrangement. It was also agreed that complainant's compensations,
allowances, representation expenses and reimbursement of company- related expenses will be processed and paid
through disbursement vouchers;[22]

Respondent was well aware of the agreement that he was hired merely as a liaison or consultant of the petitioner and he agreed to
perform tasks for the petitioner on a temporary employment status only. However, respondent anchors his claim that he became a
regular employee of the petitioner based on his contention that the "temporary" aspect of his job and its "limited" nature could not have
lasted for eleven years unless some time during that period, he became a regular employee of the petitioner by continually performing
services for the company.

Contrary to the conclusion of the CA, respondent is not an employee, much more a regular employee of petitioner. The appellate
court's premise that regular employees are those who perform activities which are desirable and necessary for the business of the
employer is not determinative in this case. In fact, any agreement may provide that one party shall render services for and in behalf of
another, no matter how necessary for the latter's business, even without being hired as an employee. [23] Hence, respondent's length of
service and petitioner's repeated act of assigning respondent some tasks to be performed did not result to respondent's entitlement to
the rights and privileges of a regular employee.

Furthermore, despite the fact that petitioner made use of the services of respondent for eleven years, he still cannot be considered as a
regular employee of petitioner. Article 280 of the Labor Code, in which the lower court used to buttress its findings that respondent
became a regular employee of the petitioner, is not applicable in the case at bar. Indeed, the Court has ruled that said provision is not
the yardstick for determining the existence of an employment relationship because it merely distinguishes between two kinds of
employees, i.e., regular employees and casual employees, for purposes of determining the right of an employee to certain benefits, to
join or form a union, or to security of tenure; it does not apply where the existence of an employment relationship is in dispute.[24] It is,
therefore, erroneous on the part of the Court of Appeals to rely on Article 280 in determining whether an employer-employee
relationship exists between respondent and the petitioner

Considering that there is no employer-employee relationship between the parties, the termination of respondent's services by the
petitioner after due notice did not constitute illegal dismissal warranting his reinstatement and the payment of full backwages,
allowances and other benefits.

WHEREFORE, premises considered, the petition is GRANTED. The Decision and the Resolution of the Court of Appeals in CA-G.R.
SP No. 87846, are REVERSED and SET ASIDE. The Resolutions dated July 30, 2004 and September 30, 2004 of the National Labor
Relations Commission are REINSTATED.

SO ORDERED.

Carpio,* Velasco, Jr., (Chairperson), Brion,** and Sereno,*** JJ., concur.

673 Phil. 384

SECOND DIVISION

[ G.R. No. 192084, September 14, 2011 ]

JOSE MEL BERNARTE, PETITIONER, VS. PHILIPPINE BASKETBALL ASSOCIATION (PBA), JOSE EMMANUEL M. EALA, AND
PERRY MARTINEZ, RESPONDENTS.

DECISION

CARPIO, J.:

The Case

This is a petition for review[1] of the 17 December 2009 Decision[2] and 5 April 2010 Resolution[3] of the Court of Appeals in CA-G.R.
SP No. 105406. The Court of Appeals set aside the decision of the National Labor Relations Commission (NLRC), which affirmed the
decision of the Labor Arbiter, and held that petitioner Jose Mel Bernarte is an independent contractor, and not an employee of
respondents Philippine Basketball Association (PBA), Jose Emmanuel M. Eala, and Perry Martinez. The Court of Appeals denied the
motion for reconsideration.

The Facts

The facts, as summarized by the NLRC and quoted by the Court of Appeals, are as follows:

Complainants (Jose Mel Bernarte and Renato Guevarra) aver that they were invited to join the PBA as referees. During the leadership
of Commissioner Emilio Bernardino, they were made to sign contracts on a year-to-year basis. During the term of Commissioner Eala,
however, changes were made on the terms of their employment.

Complainant Bernarte, for instance, was not made to sign a contract during the first conference of the All-Filipino Cup which was from
February 23, 2003 to June 2003. It was only during the second conference when he was made to sign a one and a half month contract
for the period July 1 to August 5, 2003.

On January 15, 2004, Bernarte received a letter from the Office of the Commissioner advising him that his contract would not be
renewed citing his unsatisfactory performance on and off the court. It was a total shock for Bernarte who was awarded Referee of the
year in 2003. He felt that the dismissal was caused by his refusal to fix a game upon order of Ernie De Leon.

On the other hand, complainant Guevarra alleges that he was invited to join the PBA pool of referees in February 2001. On March 1,
2001, he signed a contract as trainee. Beginning 2002, he signed a yearly contract as Regular Class C referee. On May 6, 2003,
respondent Martinez issued a memorandum to Guevarra expressing dissatisfaction over his questioning on the assignment of referees
officiating out-of-town games. Beginning February 2004, he was no longer made to sign a contract.

Respondents aver, on the other hand, that complainants entered into two contracts of retainer with the PBA in the year 2003. The first
contract was for the period January 1, 2003 to July 15, 2003; and the second was for September 1 to December 2003. After the lapse
of the latter period, PBA decided not to renew their contracts.

Complainants were not illegally dismissed because they were not employees of the PBA. Their respective contracts of retainer were
simply not renewed. PBA had the prerogative of whether or not to renew their contracts, which they knew were fixed. [4]

In her 31 March 2005 Decision,[5] the Labor Arbiter[6] declared petitioner an employee whose dismissal by respondents was illegal.
Accordingly, the Labor Arbiter ordered the reinstatement of petitioner and the payment of backwages, moral and exemplary damages
and attorney's fees, to wit:

WHEREFORE, premises considered all respondents who are here found to have illegally dismissed complainants are hereby ordered
to (a) reinstate complainants within thirty (30) days from the date of receipt of this decision and to solidarily pay complainants:

JOSE MEL BERNARTE RENATO

GUEVARRA
1. backwages from January 1, 2004 up to the finality of this Decision, which to P536,250.00 100,000.00
date is 50,000.00 P211,250.00
2. moral damages 100,000.00

3. exemplary damages 50,000.00

4. 10% attorney's fees

68,625.00 36,125.00
TOTAL
P754,875.00 P397,375.00
or a total of P1,152,250.00

The rest of the claims are hereby dismissed for lack of merit or basis.

SO ORDERED.[7]

In its 28 January 2008 Decision,[8] the NLRC affirmed the Labor Arbiter's judgment. The dispositive portion of the NLRC's decision
reads:

WHEREFORE, the appeal is hereby DISMISSED. The Decision of Labor Arbiter Teresita D. Castillon-Lora dated March 31, 2005 is
AFFIRMED.

SO ORDERED.[9]

Respondents filed a petition for certiorari with the Court of Appeals, which overturned the decisions of the NLRC and Labor Arbiter. The
dispositive portion of the Court of Appeals' decision reads:

WHEREFORE, the petition is hereby GRANTED. The assailed Decision dated January 28, 2008 and Resolution dated August 26, 2008
of the National Labor Relations Commission are ANNULLED and SET ASIDE. Private respondents' complaint before the Labor Arbiter
is DISMISSED.

SO ORDERED.[10]

The Court of Appeals' Ruling

The Court of Appeals found petitioner an independent contractor since respondents did not exercise any form of control over the means
and methods by which petitioner performed his work as a basketball referee. The Court of Appeals held:

While the NLRC agreed that the PBA has no control over the referees' acts of blowing the whistle and making calls during basketball
games, it, nevertheless, theorized that the said acts refer to the means and methods employed by the referees in officiating basketball
games for the illogical reason that said acts refer only to the referees' skills. How could a skilled referee perform his job without blowing
a whistle and making calls? Worse, how can the PBA control the performance of work of a referee without controlling his acts of
blowing the whistle and making calls?

Moreover, this Court disagrees with the Labor Arbiter's finding (as affirmed by the NLRC) that the Contracts of Retainer show that
petitioners have control over private respondents.

xxxx

Neither do We agree with the NLRC's affirmance of the Labor Arbiter's conclusion that private respondents' repeated hiring made them
regular employees by operation of law.[11]

The Issues

The main issue in this case is whether petitioner is an employee of respondents, which in turn determines whether petitioner was
illegally dismissed.

Petitioner raises the procedural issue of whether the Labor Arbiter's decision has become final and executory for failure of respondents
to appeal with the NLRC within the reglementary period.
 The Ruling of the Court

The petition is bereft of merit.

The Court shall first resolve the procedural issue posed by petitioner.

Petitioner contends that the Labor Arbiter's Decision of 31 March 2005 became final and executory for failure of respondents to appeal
with the NLRC within the prescribed period. Petitioner claims that the Labor Arbiter's decision was constructively served on respondents
as early as August 2005 while respondents appealed the Arbiter's decision only on 31 March 2006, way beyond the reglementary
period to appeal. Petitioner points out that service of an unclaimed registered mail is deemed complete five days from the date of first
notice of the post master. In this case three notices were issued by the post office, the last being on 1 August 2005. The unclaimed
registered mail was consequently returned to sender. Petitioner presents the Postmaster's Certification to prove constructive service of
the Labor Arbiter's decision on respondents. The Postmaster certified:

xxx

That upon receipt of said registered mail matter, our registry in charge, Vicente Asis, Jr., immediately issued the first registry notice to
claim on July 12, 2005 by the addressee. The second and third notices were issued on July 21 and August 1, 2005, respectively.

That the subject registered letter was returned to the sender (RTS) because the addressee failed to claim it after our one month
retention period elapsed. Said registered letter was dispatched from this office to Manila CPO (RTS) under bill #6, line 7, page1, column
1, on September 8, 2005.[12]

Section 10, Rule 13 of the Rules of Court provides:

SEC. 10. Completeness of service. - Personal service is complete upon actual delivery. Service by ordinary mail is complete upon the
expiration of ten (10) days after mailing, unless the court otherwise provides. Service by registered mail is complete upon actual receipt
by the addressee, or after five (5) days from the date he received the first notice of the postmaster, whichever date is earlier.

The rule on service by registered mail contemplates two situations: (1) actual service the completeness of which is determined upon
receipt by the addressee of the registered mail; and (2) constructive service the completeness of which is determined upon expiration of
five days from the date the addressee received the first notice of the postmaster. [13]

Insofar as constructive service is concerned, there must be conclusive proof that a first notice was duly sent by the postmaster to the
addressee.[14] Not only is it required that notice of the registered mail be issued but that it should also be delivered to and received by
the addressee.[15] Notably, the presumption that official duty has been regularly performed is not applicable in this situation. It is
incumbent upon a party who relies on constructive service to prove that the notice was sent to, and received by, the addressee. [16]

The best evidence to prove that notice was sent would be a certification from the postmaster, who should certify not only that the notice
was issued or sent but also as to how, when and to whom the delivery and receipt was made. The mailman may also testify that the
notice was actually delivered.[17]

In this case, petitioner failed to present any concrete proof as to how, when and to whom the delivery and receipt of the three notices
issued by the post office was made. There is no conclusive evidence showing that the post office notices were actually received by
respondents, negating petitioner's claim of constructive service of the Labor Arbiter's decision on respondents. The Postmaster's
Certification does not sufficiently prove that the three notices were delivered to and received by respondents; it only indicates that the
post office issued the three notices. Simply put, the issuance of the notices by the post office is not equivalent to delivery to and receipt
by the addressee of the registered mail. Thus, there is no proof of completed constructive service of the Labor Arbiter's decision on
respondents.

At any rate, the NLRC declared the issue on the finality of the Labor Arbiter's decision moot as respondents' appeal was considered in
the interest of substantial justice. We agree with the NLRC. The ends of justice will be better served if we resolve the instant case on
the merits rather than allowing the substantial issue of whether petitioner is an independent contractor or an employee linger and
remain unsettled due to procedural technicalities.

The existence of an employer-employee relationship is ultimately a question of fact. As a general rule, factual issues are beyond the
province of this Court. However, this rule admits of exceptions, one of which is where there are conflicting findings of fact between the
Court of Appeals, on one hand, and the NLRC and Labor Arbiter, on the other, such as in the present case.[18]

To determine the existence of an employer-employee relationship, case law has consistently applied the four-fold test, to wit: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to
control the employee on the means and methods by which the work is accomplished. The so-called "control test" is the most important
indicator of the presence or absence of an employer-employee relationship.[19]
In this case, PBA admits repeatedly engaging petitioner's services, as shown in the retainer contracts. PBA pays petitioner a retainer
fee, exclusive of per diem or allowances, as stipulated in the retainer contract. PBA can terminate the retainer contract for petitioner's
violation of its terms and conditions.

However, respondents argue that the all-important element of control is lacking in this case, making petitioner an independent
contractor and not an employee of respondents.

Petitioner contends otherwise. Petitioner asserts that he is an employee of respondents since the latter exercise control over the
performance of his work. Petitioner cites the following stipulations in the retainer contract which evidence control: (1) respondents
classify or rate a referee; (2) respondents require referees to attend all basketball games organized or authorized by the PBA, at least
one hour before the start of the first game of each day; (3) respondents assign petitioner to officiate ballgames, or to act as alternate
referee or substitute; (4) referee agrees to observe and comply with all the requirements of the PBA governing the conduct of the
referees whether on or off the court; (5) referee agrees (a) to keep himself in good physical, mental, and emotional condition during the
life of the contract; (b) to give always his best effort and service, and loyalty to the PBA, and not to officiate as referee in any basketball
game outside of the PBA, without written prior consent of the Commissioner; (c) always to conduct himself on and off the court
according to the highest standards of honesty or morality; and (6) imposition of various sanctions for violation of the terms and
conditions of the contract.

The foregoing stipulations hardly demonstrate control over the means and methods by which petitioner performs his work as a referee
officiating a PBA basketball game. The contractual stipulations do not pertain to, much less dictate, how and when petitioner will blow
the whistle and make calls. On the contrary, they merely serve as rules of conduct or guidelines in order to maintain the integrity of the
professional basketball league. As correctly observed by the Court of Appeals, "how could a skilled referee perform his job without
blowing a whistle and making calls? x x x [H]ow can the PBA control the performance of work of a referee without controlling his acts of
blowing the whistle and making calls?"[20]

In Sonza v. ABS-CBN Broadcasting Corporation,[21] which determined the relationship between a television and radio station and one of
its talents, the Court held that not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the
former. The Court held:

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. v. 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. [22]

We agree with respondents that once in the playing court, the referees exercise their own independent judgment, based on the rules of
the game, as to when and how a call or decision is to be made. The referees decide whether an infraction was committed, and the PBA
cannot overrule them once the decision is made on the playing court. The referees are the only, absolute, and final authority on the
playing court. Respondents or any of the PBA officers cannot and do not determine which calls to make or not to make and cannot
control the referee when he blows the whistle because such authority exclusively belongs to the referees. The very nature of petitioner's
job of officiating a professional basketball game undoubtedly calls for freedom of control by respondents.

Moreover, the following circumstances indicate that petitioner is an independent contractor: (1) the referees are required to report for
work only when PBA games are scheduled, which is three times a week spread over an average of only 105 playing days a year, and
they officiate games at an average of two hours per game; and (2) the only deductions from the fees received by the referees are
withholding taxes.

In other words, unlike regular employees who ordinarily report for work eight hours per day for five days a week, petitioner is required to
report for work only when PBA games are scheduled or three times a week at two hours per game. In addition, there are no deductions
for contributions to the Social Security System, Philhealth or Pag-Ibig, which are the usual deductions from employees' salaries. These
undisputed circumstances buttress the fact that petitioner is an independent contractor, and not an employee of respondents.

Furthermore, the applicable foreign case law declares that a referee is an independent contractor, whose special skills and independent
judgment are required specifically for such position and cannot possibly be controlled by the hiring party.

In Yonan v. United States Soccer Federation, Inc.,[23] the United States District Court of Illinois held that plaintiff, a soccer referee, is an
independent contractor, and not an employee of defendant which is the statutory body that governs soccer in the United States. As
such, plaintiff was not entitled to protection by the Age Discrimination in Employment Act. The U.S. District Court ruled:
Generally, "if an employer has the right to control and direct the work of an individual, not only as to the result to be achieved, but also
as to details by which the result is achieved, an employer/employee relationship is likely to exist." The Court must be careful to
distinguish between "control[ling] the conduct of another party contracting party by setting out in detail his obligations" consistent with
the freedom of contract, on the one hand, and "the discretionary control an employer daily exercises over its employee's conduct" on
the other.

Yonan asserts that the Federation "closely supervised" his performance at each soccer game he officiated by giving him an assessor,
discussing his performance, and controlling what clothes he wore while on the field and traveling. Putting aside that the Federation did
not, for the most part, control what clothes he wore, the Federation did not supervise Yonan, but rather evaluated his performance after
matches. That the Federation evaluated Yonan as a referee does not mean that he was an employee. There is no question that parties
retaining independent contractors may judge the performance of those contractors to determine if the contractual relationship should
continue. x x x

It is undisputed that the Federation did not control the way Yonan refereed his games. He had full discretion and authority, under the
Laws of the Game, to call the game as he saw fit. x x x In a similar vein, subjecting Yonan to qualification standards and procedures like
the Federation's registration and training requirements does not create an employer/employee relationship. x x x

A position that requires special skills and independent judgment weights in favor of independent contractor status. x x x Unskilled work,
on the other hand, suggests an employment relationship. x x x Here, it is undisputed that soccer refereeing, especially at the
professional and international level, requires "a great deal of skill and natural ability." Yonan asserts that it was the Federation's training
that made him a top referee, and that suggests he was an employee. Though substantial training supports an employment inference,
that inference is dulled significantly or negated when the putative employer's activity is the result of a statutory requirement, not the
employer's choice. x x x

In McInturff v. Battle Ground Academy of Franklin,[24] it was held that the umpire was not an agent of the Tennessee Secondary School
Athletic Association (TSSAA), so the player's vicarious liability claim against the association should be dismissed. In finding that the
umpire is an independent contractor, the Court of Appeals of Tennesse ruled:

The TSSAA deals with umpires to achieve a result-uniform rules for all baseball games played between TSSAA member schools. The
TSSAA does not supervise regular season games. It does not tell an official how to conduct the game beyond the framework
established by the rules. The TSSAA does not, in the vernacular of the case law, control the means and method by which the umpires
work.

In addition, the fact that PBA repeatedly hired petitioner does not by itself prove that petitioner is an employee of the former. For a hired
party to be considered an employee, the hiring party must have control over the means and methods by which the hired party is to
perform his work, which is absent in this case. The continuous rehiring by PBA of petitioner simply signifies the renewal of the contract
between PBA and petitioner, and highlights the satisfactory services rendered by petitioner warranting such contract renewal.
Conversely, if PBA decides to discontinue petitioner's services at the end of the term fixed in the contract, whether for unsatisfactory
services, or violation of the terms and conditions of the contract, or for whatever other reason, the same merely results in the non-
renewal of the contract, as in the present case. The non-renewal of the contract between the parties does not constitute illegal
dismissal of petitioner by respondents.

WHEREFORE, we DENY the petition and AFFIRM the assailed decision of the Court of Appeals.

SO ORDERED.

Brion, Del Castillo,* Perez, and Sereno, JJ., concur.

G.R. No. 138051

FIRST DIVISION

[ 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 Arbiter’s 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 SONZA’s 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 SONZA’s 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-CBN’s 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 SONZA’s 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-CBNdeposited SONZA’s 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 respondent’s 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 Respondent’s Position Paper with Motion to Expunge Respondent’s Annex 4 and Annex 5
from the Records. Annexes 4 and 5 are affidavits of ABS-CBN’s 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 Sonza’s 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 respondent’s 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 Arbiter’s
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 NLRC’s finding that no employer-employee relationship existed between SONZA and ABS-CBN.
Adopting the NLRC’s 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-appellant’s 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 stocks…with 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-appellant’s 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-CBN’s 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-appellant’s 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 NLRC’s 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 NLRC’S 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 Court’s 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 Arbiter’s 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 employer’s 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 SONZA’s services to co-host its television and radio programs because of SONZA’s 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 respondent’s 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-CBNgranted 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-CBN’s
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]

SONZA’s 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 SONZA’s 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 SONZA’s 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 SONZA’s 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 SONZA’s talent fees during the remaining life of the Agreement
even if ABS-CBN cancelled SONZA’s programs through no fault of SONZA.[25]

SONZA assails the Labor Arbiter’s 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. SONZA’s 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-Vélez v.
Corporación De Puerto Rico Para La Difusión Pública (“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 master’s 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.” Alberty’s 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.” Alberty’s 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.

SONZA’s argument is misplaced. ABS-CBN engaged SONZA’s 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-CBN’s 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 SONZA’s 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 SONZA’s 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-CBN’s 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 SONZA’s work.

SONZA claims that ABS-CBN’s power not to broadcast his shows proves ABS-CBN’s power over the means and methods of the
performance of his work. Although ABS-CBN did have the option not to broadcast SONZA’s show, ABS-CBN was still obligated to
pay SONZA’s talent fees... Thus, even if ABS-CBN was completely dissatisfied with the means and methods of SONZA’s 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 SONZA’s show but ABS-CBN must still pay his talent fees in full.[35]

Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened as it was by the obligation to continue paying in full SONZA’s
talent fees, did not amount to control over the means and methods of the performance of SONZA’s 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-CBN’s approval. This proves that ABS-CBN’s control was limited only to the result of SONZA’s work, whether to
broadcast the final product or not. In either case, ABS-CBN must still pay SONZA’s 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-CBN’s
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] SONZA’s 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-CBN’s employee because ABS-CBN subjected him to its rules and standards of
performance. SONZA claims that this indicates ABS-CBN’s 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 Arbiter’s 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 SONZA’s agent. The Agreement expressly states that MJMDC acted as the “AGENT” of SONZA. The records do not show that
MJMDC acted as ABS-CBN’s 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 SONZA’s 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-CBN’s 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-CBN’s 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 latter’s 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 SONZA’s 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 SONZA’s 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, SONZA’s cause of action is for breach of contract which is intrinsically a civil dispute cognizable
by the regular courts.[58]

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.
SO ORDERED.

Davide, Jr., C.J., (Chairman), Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.
479 Phil. 384

SECOND DIVISION

[ G.R. No. 138254, July 30, 2004 ]

ANGELITO L. LAZARO, PROPRIETOR OF ROYAL STAR MARKETING, PETITIONER, VS. SOCIAL SECURITY COMMISSION,
ROSALINA LAUDATO, SOCIAL SECURITY SYSTEM AND THE HONORABLE COURT OF APPEALS, RESPONDENTS.

DECISION

TINGA, J,:

Before us is a Petition for Review under Rule 45, assailing the Decision[1] of the Court of Appeals Fifteenth Division[2] in CA-G.R. Sp.
No. 40956, promulgated on 20 November 1998, which affirmed two rulings of the SocialSecurity Commission (“SSC”) dated 8
November 1995 and 24 April 1996.

Private respondent Rosalina M. Laudato (“Laudato”) filed a petition before the SSC for social security coverage and remittance of
unpaid monthly social security contributions against her three (3) employers. Among the respondents was herein petitioner Angelito
L. Lazaro (“Lazaro”), proprietor of Royal Star Marketing (“Royal Star”), which is engaged in the business of selling home
appliances.[3] Laudato alleged that despite her employment as sales supervisor of the sales agents for Royal Star from April of 1979 to
March of 1986, Lazaro had failed during the said period, to report her to the SSC for compulsory coverage or remit
Laudato’s social securitycontributions.[4]

Lazaro denied that Laudato was a sales supervisor of Royal Star, averring instead that she was a mere sales agent whom he paid
purely on commission basis. Lazaro also maintained that Laudato was not subjected to definite hours and conditions of work. As
such, Laudato could not be deemed an employee of Royal Star. [5]

After the parties submitted their respective position papers, the SSC promulgated a Resolution[6] dated 8 November 1995 ruling in favor
of Laudato.[7] Applying the “control test,” it held that Laudato was an employee of Royal Star, and ordered Royal Star to pay the
unremitted social security contributions of Laudato in the amount of Five Thousand Seven Pesos and Thirty Five Centavos (P5,007.35),
together with the penalties totaling Twenty Two Thousand Two Hundred Eighteen Pesos and Fifty Four Centavos (P22,218.54). In
addition, Royal Star was made liable to pay damages to the SSC in the amount of Fifteen Thousand Six Hundred Eighty Pesos and
Seven Centavos (P15,680.07) for not reporting Laudato for social security coverage, pursuant to Section 24 of
the Social Security Law.[8]

After Lazaro’s Motion for Reconsideration before the SSC was denied,[9] Lazaro filed a Petition for Review with the Court of
Appeals. Lazaro reiterated that Laudato was merely a sales agent who was paid purely on commissionbasis, not included in the
company payroll, and who neither observed regular working hours nor accomplished time cards.

In its assailed Decision, the Court of Appeals noted that Lazaro’s arguments were a reprise of those already presented before the
SSC.[10] Moreover, Lazaro had not come forward with particulars and specifics in his petition to show that the Commission’s ruling is
not supported by substantial evidence.[11] Thus, the appellate court affirmed the finding that Laudato was an employee of Royal Star,
and hence entitled to coverage under the SocialSecurity Law.

Before this Court, Lazaro again insists that Laudato was not qualified for social security coverage, as she was not an employee of
Royal Star, her income dependent on a generation of sales and based on commissions. [12] It is argued that Royal Star had no control
over Laudato’s activities, and that under the so-called “control test,” Laudato could not be deemed an employee.[13]

It is an accepted doctrine that for the purposes of coverage under the Social Security Act, the determination of employer-employee
relationship warrants the application of the “control test,” that is, whether the employer controls or has reserved the right to control the
employee, not only as to the result of the work done, but also as to the means and methods by which the same is
accomplished.[14] The SSC, as sustained by the Court of Appeals, applying the control test found that Laudato was an employee of
Royal Star. We find no reversible error.

Lazaro’s arguments are nothing more but a mere reiteration of arguments unsuccessfully posed before two bodies: the SSC and the
Court of Appeals. They likewise put to issue factual questions already passed upon twice below, rather than questions of law
appropriate for review under a Rule 45 petition. The determination of an employer-employee relationship depends heavily on the
particular factual circumstances attending the professional interaction of the parties. The Court is not a trier of facts[15] and accords
great weight to the factual findings of lower courts or agencies whose function is to resolve factual matters.[16]

Lazaro’s arguments may be dispensed with by applying precedents. Suffice it to say, the fact that Laudato was paid by way
of commission does not preclude the establishment of an employer-employee relationship. In Grepalife v. Judico,[17] the Court upheld
the existence of an employer-employee relationship between the insurance company and its agents, despite the fact that the
compensation that the agents on commission received was not paid by the company but by the investor or the person insured.[18] The
relevant factor remains, as stated earlier, whether the "employer" controls or has reserved the right to control the "employee" not only
as to the result of the work to be done but also as to the means and methods by which the same is to be accomplished.[19]

Neither does it follow that a person who does not observe normal hours of work cannot be deemed an employee. In Cosmopolitan
Funeral Homes, Inc. v. Maalat,[20] the employer similarly denied the existence of an employer-employee relationship, as the claimant
according to it, was a “supervisor on commission basis” who did not observe normal hours of work. This Court declared that there was
an employer-employee relationship, noting that “[the] supervisor, although compensated on commission basis, [is] exempt from the
observance of normal hours of work for his compensation is measured by the number of sales he makes.” [21]

It should also be emphasized that the SSC, also as upheld by the Court of Appeals, found that Laudato was a sales supervisor and not
a mere agent.[22] As such, Laudato oversaw and supervised the sales agents of the company, and thus was subject to the control of
management as to how she implements its policies and its end results. We are disinclined to reverse this finding, in the absence of
countervailing evidence from Lazaro and also in light of the fact that Laudato’s calling cards from Royal Star indicate that she is indeed
a sales supervisor.

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

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

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

Yet, the circumstances in the 1969 case are very different from those at bar. Ruling on the question whether jockeys were considered
employees of the Manila Jockey Club, the Court noted that the jockeys were actually subjected to the control of the racing steward,
whose authority in turn was defined by the Games and Amusements Board.[31] Moreover, the jockey’s choice as to which horse to
mount was subject to mutual agreement between the horse owner and the jockey, and beyond the control of the race club. [32] In the
case at bar, there is no showing that Royal Star was similarly precluded from exerting control or interference over the manner by which
Laudato performed her duties. On the contrary, substantial evidence as found by the SSC and the Court of Appeals have established
the element of control determinative of an employer-employee relationship. We affirm without hesitation.

WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of Appeals dated 20 November 1998 is
AFFIRMED. Costs against petitioner.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.

498 Phil. 301

THIRD DIVISION

[ G.R. NO. 157214, June 07, 2005 ]

PHILIPPINE GLOBAL COMMUNICATIONS, INC., PETITIONER, VS. RICARDO DE VERA, RESPONDENT.

DECISION

GARCIA, J.:

Before us is this appeal by way of a petition for review on certiorari from the 12 September 2002 Decision[1] and the 13 February 2003
Resolution[2] of the Court of Appeals in CA-G.R. SP No. 65178, upholding the finding of illegal dismissal by the National Labor Relations
Commission against petitioner.

As culled from the records, the pertinent facts are:

Petitioner Philippine Global Communications, Inc. (PhilCom), is a corporation engaged in the business of communication services and
allied activities, while respondent Ricardo De Vera is a physician by profession whom petitioner enlisted to attend to the medical needs
of its employees. At the crux of the controversy is Dr. De Vera's status vis a vis petitioner when the latter terminated his engagement.

It appears that on 15 May 1981, De Vera, via a letter dated 15 May 1981,[3] offered his services to the petitioner, therein proposing his
plan of works required of a practitioner in industrial medicine, to include the following:

1. Application of preventive medicine including periodic check-up of employees;

2. Holding of clinic hours in the morning and afternoon for a total of five (5) hours daily for consultation services to
employees;
3. Management and treatment of employees that may necessitate hospitalization including emergency cases and
accidents;
4. Conduct pre-employment physical check-up of prospective employees with no additional medical fee;
5. Conduct home visits whenever necessary;
6. Attend to certain medical administrative function such as accomplishing medical forms, evaluating conditions of
employees applying for sick leave of absence and subsequently issuing proper certification, and all matters referred
which are medical in nature.

The parties agreed and formalized respondent's proposal in a document denominated as RETAINERSHIP CONTRACT[4] which will be
for a period of one year subject to renewal, it being made clear therein that respondent will cover "the retainership the Company
previously had with Dr. K. Eulau" and that respondent's "retainer fee" will be at P4,000.00 a month. Said contract was renewed
yearly.[5] The retainership arrangement went on from 1981 to 1994 with changes in the retainer's fee. However, for the years 1995 and
1996, renewal of the contract was only made verbally.

The turning point in the parties' relationship surfaced in December 1996 when Philcom, thru a letter[6] bearing on the subject boldly
written as "TERMINATION – RETAINERSHIP CONTRACT", informed De Vera of its decision to discontinue the latter's "retainer's
contract with the Company effective at the close of business hours of December 31, 1996" because management has decided that it
would be more practical to provide medical services to its employees through accredited hospitals near the company premises.

On 22 January 1997, De Vera filed a complaint for illegal dismissal before the National Labor Relations Commission (NLRC), alleging
that that he had been actually employed by Philcom as its company physician since 1981 and was dismissed without due process. He
averred that he was designated as a "company physician on retainer basis" for reasons allegedly known only to Philcom. He likewise
professed that since he was not conversant with labor laws, he did not give much attention to the designation as anyway he worked on
a full-time basis and was paid a basic monthly salary plus fringe benefits, like any other regular employees of Philcom.

On 21 December 1998, Labor Arbiter Ramon Valentin C. Reyes came out with a decision [7] dismissing De Vera's complaint for lack of
merit, on the rationale that as a "retained physician" under a valid contract mutually agreed upon by the parties, De Vera was an
"independent contractor" and that he "was not dismissed but rather his contract with [PHILCOM] ended when said contract was not
renewed after December 31, 1996".

On De Vera's appeal to the NLRC, the latter, in a decision[8] dated 23 October 2000, reversed (the word used is "modified") that of the
Labor Arbiter, on a finding that De Vera is Philcom's "regular employee" and accordingly directed the company to reinstate him to his
former position without loss of seniority rights and privileges and with full backwages from the date of his dismissal until actual
reinstatement. We quote the dispositive portion of the decision:
WHEREFORE, the assailed decision is modified in that respondent is ordered to reinstate complainant to his former position without
loss of seniority rights and privileges with full backwages from the date of his dismissal until his actual reinstatement computed as
follows:
 Backwages:

a) Basic Salary
From Dec. 31, 1996 to Apr. 10, 2000 = 39.33 mos.
P44,400.00 x 39.33 mos. P1,750,185.00
b) 13th Month Pay:
1/12 of P1,750,185.00 145,848.75
c) Travelling allowance:
P1,000.00 x 39.33 mos. 39,330.00

GRAND TOTAL P1,935,363.75

The decision stands in other aspects.

SO ORDERED.
With its motion for reconsideration having been denied by the NLRC in its order of 27 February 2001, [9] Philcom then went to the Court
of Appeals on a petition for certiorari, thereat docketed as CA-G.R. SP No. 65178, imputing grave abuse of discretion amounting to lack
or excess of jurisdiction on the part of the NLRC when it reversed the findings of the labor arbiter and awarded thirteenth month pay
and traveling allowance to De Vera even as such award had no basis in fact and in law.

On 12 September 2002, the Court of Appeals rendered a decision,[10] modifying that of the NLRC by deleting the award of traveling
allowance, and ordering payment of separation pay to De Vera in lieu of reinstatement, thus:
WHEREFORE, premises considered, the assailed judgment of public respondent, dated 23 October 2000, is MODIFIED. The award of
traveling allowance is deleted as the same is hereby DELETED. Instead of reinstatement, private respondent shall be paid separation
pay computed at one (1) month salary for every year of service computed from the time private respondent commenced his
employment in 1981 up to the actual payment of the backwages and separation pay. The awards of backwages and 13th month pay
STAND.

SO ORDERED.
In time, Philcom filed a motion for reconsideration but was denied by the appellate court in its resolution of 13 February 2003. [11]

Hence, Philcom's present recourse on its main submission that -

THE COURT OF APPEALS ERRED IN SUSTAINING THE DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION AND
RENDERING THE QUESTIONED DECISION AND RESOLUTION IN A WAY THAT IS NOT IN ACCORD WITH THE FACTS AND
APPLICABLE LAWS AND JURISPRUDENCE WHICH DISTINGUISH LEGITIMATE JOB CONTRACTING AGREEMENTS FROM THE
EMPLOYER-EMPLOYEE RELATIONSHIP.
We GRANT.

Under Rule 45 of the Rules of Court, only questions of law may be reviewed by this Court in decisions rendered by the Court of
Appeals. There are instances, however, where the Court departs from this rule and reviews findings of fact so that substantial justice
may be served. The exceptional instances are where:
"xxx xxx xxx (1) the conclusion is a finding grounded entirely on speculation, surmise and conjecture; (2) the inference made is
manifestly mistaken; (3) there is grave abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5) the findings of
fact are conflicting; (6) the Court of Appeals went beyond the issues of the case and its findings are contrary to the admissions of both
appellant and appellees; (7) the findings of fact of the Court of Appeals are contrary to those of the trial court; (8) said findings of facts
are conclusions without citation of specific evidence on which they are based; (9) the facts set forth in the petition as well as in the
petitioner's main and reply briefs are not disputed by the respondents; and (10) the findings of fact of the Court of Appeals are premised
on the supposed absence of evidence and contradicted by the evidence on record." [12]
As we see it, the parties' respective submissions revolve on the primordial issue of whether an employer-employee relationship exists
between petitioner and respondent, the existence of which is, in itself, a question of fact[13] well within the province of the
NLRC. Nonetheless, given the reality that the NLRC's findings are at odds with those of the labor arbiter, the Court, consistent with its
ruling in Jimenez vs. National Labor Relations Commission,[14] is constrained to look deeper into the attendant circumstances obtaining
in this case, as appearing on record.

In a long line of decisions,[15] the Court, in determining the existence of an employer-employee relationship, has invariably adhered
to the four-fold test, to wit: [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.

Applying the four-fold test to this case, we initially find that it was respondent himself who sets the parameters of what his duties would
be in offering his services to petitioner. This is borne by no less than his 15 May 1981 letter[16] which, in full, reads:
"May 15, 1981
Mrs. Adela L. Vicente
Vice President, Industrial Relations
PhilCom, Paseo de Roxas
Makati, Metro Manila
Madam:

I shall have the time and effort for the position of Company physician with your corporation if you deemed it necessary. I have the
necessary qualifications, training and experience required by such position and I am confident that I can serve the best interests of your
employees, medically.

My plan of works and targets shall cover the duties and responsibilities required of a practitioner in industrial medicine which includes
the following:

1. Application of preventive medicine including periodic check-up of employees;

2. Holding of clinic hours in the morning and afternoon for a total of five (5) hours daily for consultation services
to employees;
3. Management and treatment of employees that may necessitate hospitalization including emergency cases
and accidents;
4. Conduct pre-employment physical check-up of prospective employees with no additional medical fee;
5. Conduct home visits whenever necessary;
6. Attend to certain medical administrative functions such as accomplishing medical forms, evaluating
conditions of employees applying for sick leave of absence and subsequently issuing proper certification,
and all matters referred which are medical in nature.

On the subject of compensation for the services that I propose to render to the corporation, you may state an offer based on your belief
that I can very well qualify for the job having worked with your organization for sometime now.

I shall be very grateful for whatever kind attention you may extend on this matter and hoping that it will merit acceptance, I remain

Very truly yours,

(signed)
RICARDO V. DE VERA, M.D."
Significantly, the foregoing letter was substantially the basis of the labor arbiter's finding that there existed no employer-employee
relationship between petitioner and respondent, in addition to the following factual settings:
The fact that the complainant was not considered an employee was recognized by the complainant himself in a signed letter to the
respondent dated April 21, 1982 attached as Annex G to the respondent's Reply and Rejoinder. Quoting the pertinent portion of said
letter:

'To carry out your memo effectively and to provide a systematic and workable time schedule which will serve the best interests of both
the present and absent employee, may I propose an extended two-hour service (1:00-3:00 P.M.) during which period I can devote
ample time to both groups depending upon the urgency of the situation. I shall readjust my private schedule to be available for the
herein proposed extended hours, should you consider this proposal.

As regards compensation for the additional time and services that I shall render to the employees, it is dependent on your evaluation of
the merit of my proposal and your confidence on my ability to carry out efficiently said proposal.'

The tenor of this letter indicates that the complainant was proposing to extend his time with the respondent and seeking additional
compensation for said extension. This shows that the respondent PHILCOM did not have control over the schedule of the complainant
as it [is] the complainant who is proposing his own schedule and asking to be paid for the same. This is proof that the complainant
understood that his relationship with the respondent PHILCOM was a retained physician and not as an employee. If he were an
employee he could not negotiate as to his hours of work.

The complainant is a Doctor of Medicine, and presumably, a well-educated person. Yet, the complainant, in his position paper, is
claiming that he is not conversant with the law and did not give much attention to his job title- on a 'retainer basis'. But the same
complainant admits in his affidavit that his service for the respondent was covered by a retainership contract [which] was renewed every
year from 1982 to 1994. Upon reading the contract dated September 6, 1982, signed by the complainant himself (Annex 'C' of
Respondent's Position Paper), it clearly states that is a retainership contract. The retainer fee is indicated thereon and the duration of
the contract for one year is also clearly indicated in paragraph 5 of the Retainership Contract. The complainant cannot claim that he
was unaware that the 'contract' was good only for one year, as he signed the same without any objections. The complainant also
accepted its renewal every year thereafter until 1994. As a literate person and educated person, the complainant cannot claim that he
does not know what contract he signed and that it was renewed on a year to year basis. [17]
The labor arbiter added the indicia, not disputed by respondent, that from the time he started to work with petitioner, he never was
included in its payroll; was never deducted any contribution for remittance to the Social Security System (SSS); and was in fact
subjected by petitioner to the ten (10%) percent withholding tax for his professional fee, in accordance with the National Internal
Revenue Code, matters which are simply inconsistent with an employer-employee relationship. In the precise words of the labor
arbiter:
"xxx xxx xxx After more than ten years of services to PHILCOM, the complainant would have noticed that no SSS deductions were
made on his remuneration or that the respondent was deducting the 10% tax for his fees and he surely would have complained about
them if he had considered himself an employee of PHILCOM. But he never raised those issues. An ordinary employee would consider
the SSS payments important and thus make sure they would be paid. The complainant never bothered to ask the respondent to remit
his SSS contributions. This clearly shows that the complainant never considered himself an employee of PHILCOM and thus,
respondent need not remit anything to the SSS in favor of the complainant." [18]
Clearly, the elements of an employer-employee relationship are wanting in this case. We may add that the records are replete with
evidence showing that respondent had to bill petitioner for his monthly professional fees. [19] It simply runs against the grain of common
experience to imagine that an ordinary employee has yet to bill his employer to receive his salary.

We note, too, that the power to terminate the parties' relationship was mutually vested on both. Either may terminate the arrangement
at will, with or without cause.[20]

Finally, remarkably absent from the parties' arrangement is the element of control, whereby the employer has reserved the right to
control the employee not only as to the result of the work done but also as to the means and methods by which the same is to be
accomplished.[21]

Here, petitioner had no control over the means and methods by which respondent went about performing his work at the company
premises. He could even embark in the private practice of his profession, not to mention the fact that respondent's work hours and the
additional compensation therefor were negotiated upon by the parties.[22] In fine, the parties themselves practically agreed on every
terms and conditions of respondent's engagement, which thereby negates the element of control in their relationship. For sure,
respondent has never cited even a single instance when petitioner interfered with his work.

Yet, despite the foregoing, all of which are extant on record, both the NLRC and the Court of Appeals ruled that respondent is
petitioner's regular employee at the time of his separation.

Partly says the appellate court in its assailed decision:

Be that as it may, it is admitted that private respondent's written 'retainer contract' was renewed annually from 1981 to 1994 and the
alleged 'renewal' for 1995 and 1996, when it was allegedly terminated, was verbal.

Article 280 of the Labor code (sic) provides:

'The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreements of the parties, an
employment shall be deemed to be regular where the employee has been engaged to perform in the usual business or trade of the
employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has
been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature
and the employment is for the duration of the season.'

'An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee
who has rendered at least one (1) year of service, whether such is continuous or broken, shall be considered a regular with
respect to the activity in which he is employed and his employment shall continue while such activity exists.'
Parenthetically, the position of company physician, in the case of petitioner, is usually necessary and desirable because the need for
medical attention of employees cannot be foreseen, hence, it is necessary to have a physician at hand. In fact, the importance and
desirability of a physician in a company premises is recognized by Art. 157 of the Labor Code, which requires the presence of a
physician depending on the number of employees and in the case at bench, in petitioner's case, as found by public respondent,
petitioner employs more than 500 employees.

Going back to Art. 280 of the Labor Code, it was made therein clear that the provisions of a written agreement to the contrary
notwithstanding or the existence of a mere oral agreement, if the employee is engaged in the usual business or trade of the employer,
more so, that he rendered service for at least one year, such employee shall be considered as a regular employee. Private respondent
herein has been with petitioner since 1981 and his employment was not for a specific project or undertaking, the period of which was
pre-determined and neither the work or service of private respondent seasonal. (Emphasis by the CA itself).
We disagree to the foregoing ratiocination.

The appellate court's premise that regular employees are those who perform activities which are desirable and necessary for the
business of the employer is not determinative in this case. For, we take it that any agreement may provide that one party shall render
services for and in behalf of another, no matter how necessary for the latter's 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. It does not apply
where, as here, the very existence of an employment relationship is in dispute.[23]

Buttressing his contention that he is a regular employee of petitioner, respondent invokes Article 157 of the Labor Code, and argues
that he satisfies all the requirements thereunder. The provision relied upon reads:
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.
Had only respondent read carefully the very statutory provision invoked by him, he would have noticed that in non-hazardous
workplaces, the employer may engage the services of a physician "on retained basis." As correctly observed by the petitioner, while it
is true that the provision requires employers to engage the services of medical practitioners in certain 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,[24] 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.[25]

Respondent takes no issue on the fact that petitioner's business of telecommunications is not hazardous in nature. As such, what
applies here is the last paragraph of Article 157 which, to stress, provides that the employer may engage the services of a physician
and dentist "on retained basis", subject to such regulations as the Secretary of Labor may prescribe. The successive "retainership"
agreements of the parties definitely hue to the very statutory provision relied upon by respondent.

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

With the recognition of the fact that petitioner consistently engaged the services of respondent on a retainer basis, as shown by their
various "retainership contracts", so can petitioner put an end, with or without cause, to their retainership agreement as therein
provided.[27]

We note, however, that even as the contracts entered into by the parties invariably provide for a 60-day notice requirement prior to
termination, the same was not complied with by petitioner when it terminated on 17 December 1996 the verbally-renewed retainership
agreement, effective at the close of business hours of 31 December 1996.

Be that as it may, the record shows, and this is admitted by both parties, [28] that execution of the NLRC decision had already been
made at the NLRC despite the pendency of the present recourse. For sure, accounts of petitioner had already been garnished and
released to respondent despite the previous Status Quo Order [29] issued by this Court. To all intents and purposes, therefore, the 60-
day notice requirement has become moot and academic if not waived by the respondent himself.

WHEREFORE, the petition is GRANTED and the challenged decision of the Court of Appeals REVERSED and SET ASIDE. The 21
December 1998 decision of the labor arbiter is REINSTATED.

No pronouncement as to costs.

SO ORDERED.

Panganiban, (Chairman), Corona, and Carpio-Morales, JJ., concur.

Sandoval-Gutierrez, J., on official leave.
534 Phil. 306

FIRST DIVISION

[ G.R. NO. 164156, September 26, 2006 ]

ABS-CBN BROADCASTING CORPORATION, PETITIONER, VS. MARLYN NAZARENO, MERLOU GERZON, JENNIFER
DEIPARINE, AND JOSEPHINE LERASAN, RESPONDENTS.

DECISION

CALLEJO, SR., J.:

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 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 of the Labor Arbiter declaring the respondents Marlyn Nazareno, Merlou Gerzon, Jennifer Deiparine and
Josephine Lerasan as regular employees.

The Antecedents

Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the broadcasting business and owns a network of television
and radio stations, whose operations revolve around the broadcast, transmission, and relay of 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 broadcasting
company, and was likewise issued a license and authority to operate by the National Telecommunications Commission.

Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as production assistants (PAs) on different dates. They
were assigned at the news and public affairs, for various radio programs in the Cebu Broadcasting Station, with a monthly
compensation of P4,000. They were issued ABS-CBN employees' 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 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 ½

8:00 A.M.-12:00 noon

2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7 ½

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

Respondent Gerzon was assigned as the full-time PA of the TV News Department reporting directly to Leo Lastimosa.

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 their respective position papers. Upon respondents' failure to file their position
papers within the reglementary period, Labor Arbiter Jose G. Gutierrez issued an Order dated

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] 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 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 admitted the position paper of the complainants.
Respondents made the following allegations:
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 complaint on
November 20, 2000.

Machine copies of complainants' ABS-CBN Employee's Identification Card and salary vouchers are hereto attached as follows, thus:
I. Jennifer Deiparine:

Exhibit "A" - ABS-CBN Employee's Identification Card

Exhibit "B", - ABS-CBN Salary Voucher from Nov.
Exhibit "B-1" & 1999 to July 2000 at P4,000.00
Exhibit "B-2"
Date employed: September 15, 1995
Length of service: 5 years & nine (9) months

II. Merlou Gerzon - ABS-CBN Employee's Identification Card

Exhibit "C"
Exhibit "D"
Exhibit "D-1" &
Exhibit "D-2" - ABS-CBN Salary Voucher from March
1999 to January 2001 at P4,000.00
Date employed: September 1, 1995
Length of service: 5 years & 10 months

III. Marlene Nazareno

Exhibit "E" - ABS-CBN Employee's Identification Card

Exhibit "E" - ABS-CBN Salary Voucher from Nov.
Exhibit "E-1" & 1999 to December 2000
Exhibit :E-2"
Date employed: April 17, 1996
Length of service: 5 years and one (1) month

IV. Joy Sanchez Lerasan

Exhibit "F" - ABS-CBN Employee's 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:
a. Complainant Nazareno assists in the programs:
1) Nagbagang Balita (early morning edition)
2) Infor Hayupan
3) Arangkada (morning edition)
4) Nagbagang Balita (mid-day edition)

b. Complainant Deiparine assists in the programs:

1) Unzanith
2) Serbisyo de Arevalo
3) Arangkada (evening edition)
4) Balitang K (local version)
5) Abante Subu
6) Pangutana Lang

c. Complainant Gerzon assists in the program:

1) On Mondays and Tuesdays:
(a) Unzanith
(b) Serbisyo de Arevalo
(c) Arangkada (evening edition)
(d) Balitang K (local version)
(e) Abante Sugbu
(f) Pangutana Lang

2) On Thursdays
Nagbagang Balita
3) On Saturdays
(a) Nagbagang Balita
(b) Info Hayupan
(c) Arangkada (morning edition)
(d) Nagbagang Balita (mid-day edition)
4) On Sundays:
(a) Siesta Serenata
(b) Sunday Chismisan
(c) Timbangan sa Hustisya
(d) Sayri ang Lungsod
(e) Haranahan[11]
Petitioner maintained that PAs, reporters, anchors and talents occasionally "sideline" for other programs they produce, such as drama
talents in other productions. As program employees, a PA's engagement is 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 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
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]

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.

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:

I - Merlou A. Gerzon P12,025.00

II - Marlyn Nazareno 12,025.00
III - Jennifer Deiparine 12,025.00
IV - Josephine Sanchez Lerazan 12,025.00
____________
P48,100.00

plus ten (10%) percent Attorney's Fees or a TOTAL aggregate amount of PESOS: FIFTY TWO THOUSAND NINE HUNDRED TEN
(P52,910.00).

Respondent Veneranda C. Sy is absolved from any liability.

SO ORDERED.[13]
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.

For its part, petitioner filed a motion for reconsideration, which the Labor Arbiter 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, while respondents filed a
partial appeal.
In its appeal, petitioner alleged the following:

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;

2. That the Labor Arbiter erred in depriving the respondent of its Constitutional right to due process of law;

3. That the Labor Arbiter erred in denying respondent's Motion for Reconsideration on an interlocutory order on the
ground that the same is a prohibited pleading;

4. That the Labor Arbiter erred when he ruled that the complainants are regular employees of the respondent;

5. That the Labor Arbiter erred when he ruled that the complainants are entitled to 13th month pay, service incentive
leave pay and salary differential; and

6. That the Labor Arbiter erred when he ruled that complainants are entitled to attorney's fees. [14]

On November 14, 2002, the NLRC rendered judgment modifying the decision of the Labor Arbiter. The fallo of the decision reads:
WHEREFORE, premises considered, the decision of Labor Arbiter Jose G. Gutierrez 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:

a. Deiparine, Jennifer - P 716,113.49

b. Gerzon, Merlou - 716,113.49
c. Nazareno, Marlyn - 716,113.49
d. Lerazan, Josephine Sanchez - 413,607.75
Total - P 2,561,948.22

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:

a. Deiparine, Jennifer - 60 Sacks

b. Gerzon, Merlou - 60 Sacks
c. Nazareno, Marlyn - 60 Sacks
d. Lerazan, Josephine Sanchez - 53 Sacks
Total 233 Sacks; and

3. To grant to the complainants all the benefits of the CBA after 30 September 2002.

SO ORDERED.[15]
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.

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]

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

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 reopening and revival of the complaint of respondents with the Labor Arbiter upon due
notice despite the lapse of 10 days from their receipt of the July 30, 2001 Order of the Labor Arbiter; (c) whether respondents were
regular employees; (d) whether 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 CBA although they are not members of the
appropriate bargaining unit.

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 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.

Finding no merit in petitioner's motion for reconsideration, the CA denied the same in a Resolution[17] dated June 16, 2004.

Petitioner thus filed the instant petition for review on certiorari and raises the following assignments of error:

1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT JURISDICTION AND GRAVELY ERRED IN
UPHOLDING THE NATIONAL LABOR RELATIONS COMMISSION NOTWITHSTANDING THE PATENT NULLITY
OF THE LATTER'S DECISION AND RESOLUTION.

2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING 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]

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 party's 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 petitioner's 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 petitioner's 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 petitioner's 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 petitioner's 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 one's 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
Arbiter's 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 Arbiter's 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. Respondent's 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, petitioner's contention that respondents are considered as its talents, hence, not regular
employees of the broadcasting company. Petitioner's 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" worker's
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 petitioner's 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.

Petitioner's 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 SONZA'S services to co-host its television and radio programs because of SONZA'S 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 respondent's 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-CBN's
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.

SONZA's 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 SONZA'S 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 petitioner's 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 respondent's 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.

Ynares-Santiago, Austria-Martinez and Chico-Nazario, JJ., concur.

Panganiban, C. J. (Chairperson)., In the result.
540 Phil. 225

THIRD DIVISION

[ G.R. NO. 142625, December 19, 2006 ]

ROGELIO P. NOGALES, FOR HIMSELF AND ON BEHALF OF THE MINORS, ROGER ANTHONY, ANGELICA, NANCY, AND
MICHAEL CHRISTOPHER, ALL SURNAMED NOGALES, PETITIONERS, VS. CAPITOL MEDICAL CENTER, DR. OSCAR
ESTRADA,DR. ELY VILLAFLOR,DR. ROSA UY,DR. JOEL ENRIQUEZ,DR. PERPETUA LACSON, DR. NOE ESPINOLA, AND
NURSE J. DUMLAO, RESPONDENTS

DECISION

CARPIO, J.:

The Case

This petition for review[1] assails the 6 February 1998 Decision[2] and 21 March 2000 Resolution[3] of the Court of Appeals in CA-G.R.
CV No. 45641. The Court of Appeals affirmed in toto the 22 November 1993 Decision[4] of the Regional Trial Court of Manila, Branch
33, finding Dr. Oscar Estrada solely liable for damages for the death of his patient, Corazon Nogales, while absolving the remaining
respondents of any liability. The Court of Appeals denied petitioners' motion for reconsideration.

The Facts

Pregnant with her fourth child, Corazon Nogales ("Corazon"), who was then 37 years old, was under the exclusive prenatal care of Dr.
Oscar Estrada ("Dr. Estrada") beginning on her fourth month of pregnancy or as early as December 1975. While Corazon was on her
last trimester of pregnancy, Dr. Estrada noted an increase in her blood pressure and development of leg edema [5] indicating
preeclampsia,[6] which is a dangerous complication of pregnancy.[7]

Around midnight of 25 May 1976, Corazon started to experience mild labor pains prompting Corazon and Rogelio Nogales ("Spouses
Nogales") to see Dr. Estrada at his home. After examining Corazon, Dr. Estrada advised her immediate admission to the Capitol
Medical Center ("CMC").

On 26 May 1976, Corazon was admitted at 2:30 a.m. at the CMC after the staff nurse noted the written admission request [8] of Dr.
Estrada. Upon Corazon's admission at the CMC, Rogelio Nogales ("Rogelio") executed and signed the "Consent on Admission and
Agreement"[9] and "Admission Agreement."[10] Corazon was then brought to the labor room of the CMC.

Dr. Rosa Uy ("Dr. Uy"), who was then a resident physician of CMC, conducted an internal examination of Corazon. Dr. Uy then called
up Dr. Estrada to notify him of her findings.

Based on the Doctor's Order Sheet,[11] around 3:00 a.m., Dr. Estrada ordered for 10 mg. of valium to be administered immediately by
intramuscular injection. Dr. Estrada later ordered the start of intravenous administration of syntocinon admixed with dextrose, 5%, in
lactated Ringers' solution, at the rate of eight to ten micro-drops per minute.

According to the Nurse's Observation Notes,[12] Dr. Joel Enriquez ("Dr. Enriquez"), an anesthesiologist at CMC, was notified at 4:15
a.m. of Corazon's admission. Subsequently, when asked if he needed the services of an anesthesiologist, Dr. Estrada refused. Despite
Dr. Estrada's refusal, Dr. Enriquez stayed to observe Corazon's condition.

At 6:00 a.m., Corazon was transferred to Delivery Room No. 1 of the CMC. At 6:10 a.m., Corazon's bag of water ruptured
spontaneously. At 6:12 a.m., Corazon's cervix was fully dilated. At 6:13 a.m., Corazon started to experience convulsions.

At 6:15 a.m., Dr. Estrada ordered the injection of ten grams of magnesium sulfate. However, Dr. Ely Villaflor ("Dr. Villaflor"), who was
assisting Dr. Estrada, administered only 2.5 grams of magnesium sulfate.

At 6:22 a.m., Dr. Estrada, assisted by Dr. Villaflor, applied low forceps to extract Corazon's baby. In the process, a 1.0 x 2.5 cm. piece
of cervical tissue was allegedly torn. The baby came out in an apnic, cyanotic, weak and injured condition. Consequently, the baby had
to be intubated and resuscitated by Dr. Enriquez and Dr. Payumo.

At 6:27 a.m., Corazon began to manifest moderate vaginal bleeding which rapidly became profuse. Corazon's blood pressure dropped
from 130/80 to 60/40 within five minutes. There was continuous profuse vaginal bleeding. The assisting nurse administered hemacel
through a gauge 19 needle as a side drip to the ongoing intravenous injection of dextrose.

At 7:45 a.m., Dr. Estrada ordered blood typing and cross matching with bottled blood. It took approximately 30 minutes for the CMC
laboratory, headed by Dr. Perpetua Lacson ("Dr. Lacson"), to comply with Dr. Estrada's order and deliver the blood.

At 8:00 a.m., Dr. Noe Espinola ("Dr. Espinola"), head of the Obstetrics-Gynecology Department of the CMC, was apprised of Corazon's
condition by telephone. Upon being informed that Corazon was bleeding profusely, Dr. Espinola ordered immediate hysterectomy.
Rogelio was made to sign a "Consent to Operation." [13]

Due to the inclement weather then, Dr. Espinola, who was fetched from his residence by an ambulance, arrived at the CMC about an
hour later or at 9:00 a.m. He examined the patient and ordered some resuscitative measures to be administered. Despite Dr. Espinola's
efforts, Corazon died at 9:15 a.m. The cause of death was "hemorrhage, post partum." [14]

On 14 May 1980, petitioners filed a complaint for damages[15] with the Regional Trial Court[16] of Manila against CMC, Dr. Estrada, Dr.
Villaflor, Dr. Uy, Dr. Enriquez, Dr. Lacson, Dr. Espinola, and a certain Nurse J. Dumlao for the death of Corazon. Petitioners mainly
contended that defendant physicians and CMC personnel were negligent in the treatment and management of Corazon's condition.
Petitioners charged CMC with negligence in the selection and supervision of defendant physicians and hospital staff.

For failing to file their answer to the complaint despite service of summons, the trial court declared Dr. Estrada, Dr. Enriquez, and Nurse
Dumlao in default.[17] CMC, Dr. Villaflor, Dr. Uy, Dr. Espinola, and Dr. Lacson filed their respective answers denying and opposing the
allegations in the complaint. Subsequently, trial ensued.

After more than 11 years of trial, the trial court rendered judgment on 22 November 1993 finding Dr. Estrada solely liable for damages.
The trial court ruled as follows:

The victim was under his pre-natal care, apparently, his fault began from his incorrect and inadequate management and lack of
treatment of the pre-eclamptic condition of his patient. It is not disputed that he misapplied the forceps in causing the delivery because it
resulted in a large cervical tear which had caused the profuse bleeding which he also failed to control with the application of inadequate
injection of magnesium sulfate by his assistant Dra. Ely Villaflor. Dr. Estrada even failed to notice the erroneous administration by nurse
Dumlao of hemacel by way of side drip, instead of direct intravenous injection, and his failure to consult a senior obstetrician at an early
stage of the problem.

On the part however of Dra. Ely Villaflor, Dra. Rosa Uy, Dr. Joel Enriquez, Dr. Lacson, Dr. Espinola, nurse J. Dumlao and CMC, the
Court finds no legal justification to find them civilly liable.

On the part of Dra. Ely Villaflor, she was only taking orders from Dr. Estrada, the principal physician of Corazon Nogales. She can only
make suggestions in the manner the patient maybe treated but she cannot impose her will as to do so would be to substitute her good
judgment to that of Dr. Estrada. If she failed to correctly diagnose the true cause of the bleeding which in this case appears to be a
cervical laceration, it cannot be safely concluded by the Court that Dra. Villaflor had the correct diagnosis and she failed to inform Dr.
Estrada. No evidence was introduced to show that indeed Dra. Villaflor had discovered that there was laceration at the cervical area of
the patient's internal organ.

On the part of nurse Dumlao, there is no showing that when she administered the hemacel as a side drip, she did it on her own. If the
correct procedure was directly thru the veins, it could only be because this was what was probably the orders of Dr. Estrada.

While the evidence of the plaintiffs shows that Dr. Noe Espinola, who was the Chief of the Department of Obstetrics and Gynecology
who attended to the patient Mrs. Nogales, it was only at 9:00 a.m. That he was able to reach the hospital because of typhoon Didang
(Exhibit 2). While he was able to give prescription in the manner Corazon Nogales may be treated, the prescription was based on the
information given to him by phone and he acted on the basis of facts as presented to him, believing in good faith that such is the correct
remedy. He was not with Dr. Estrada when the patient was brought to the hospital at 2:30 o'clock a.m. So, whatever errors that Dr.
Estrada committed on the patient before 9:00 o'clock a.m. are certainly the errors of Dr. Estrada and cannot be the mistake of Dr. Noe
Espinola. His failure to come to the hospital on time was due to fortuitous event.

On the part of Dr. Joel Enriquez, while he was present in the delivery room, it is not incumbent upon him to call the attention of Dr.
Estrada, Dra. Villaflor and also of Nurse Dumlao on the alleged errors committed by them. Besides, as anesthesiologist, he
has no authority to control the actuations of Dr. Estrada and Dra. Villaflor. For the Court to assume that there were errors being
committed in the presence of Dr. Enriquez would be to dwell on conjectures and speculations.

On the civil liability of Dr. Perpetua Lacson, [s]he is a hematologist and in-charge of the blood bank of the CMC. The Court cannot
accept the theory of the plaintiffs that there was delay in delivering the blood needed by the patient. It was testified, that in order that
this blood will be made available, a laboratory test has to be conducted to determine the type of blood, cross matching and other
matters consistent with medical science so, the lapse of 30 minutes maybe considered a reasonable time to do all of these things, and
not a delay as the plaintiffs would want the Court to believe.
Admittedly, Dra. Rosa Uy is a resident physician of the Capitol Medical Center. She was sued because of her alleged failure to notice
the incompetence and negligence of Dr. Estrada. However, there is no evidence to support such theory. No evidence was adduced to
show that Dra. Rosa Uy as a resident physician of Capitol Medical Center, had knowledge of the mismanagement of the patient
Corazon Nogales, and that notwithstanding such knowledge, she tolerated the same to happen.

In the pre-trial order, plaintiffs and CMC agreed that defendant CMC did not have any hand or participation in the selection or hiring of
Dr. Estrada or his assistant Dra. Ely Villaflor as attending physician[s] of the deceased. In other words, the two (2) doctors were not
employees of the hospital and therefore the hospital did not have control over their professional conduct. When Mrs. Nogales was
brought to the hospital, it was an emergency case and defendant CMC had no choice but to admit her. Such being the case, there is
therefore no legal ground to apply the provisions of Article 2176 and 2180 of the New Civil Code referring to the vicarious liability of an
employer for the negligence of its employees. If ever in this case there is fault or negligence in the treatment of the deceased on the
part of the attending physicians who were employed by the family of the deceased, such civil liability should be borne by the attending
physicians under the principle of "respondeat superior".

WHEREFORE, premises considered, judgment is hereby rendered finding defendant Dr. Estrada of Number 13 Pitimini St. San
Francisco del Monte, Quezon City civilly liable to pay plaintiffs: 1) By way of actual damages in the amount of P105,000.00; 2) By way
of moral damages in the amount of P700,000.00; 3) Attorney's fees in the amount of P100,000.00 and to pay the costs of suit.

For failure of the plaintiffs to adduce evidence to support its [sic] allegations against the other defendants, the complaint is hereby
ordered dismissed. While the Court looks with disfavor the filing of the present complaint against the other defendants by the herein
plaintiffs, as in a way it has caused them personal inconvenience and slight damage on their name and reputation, the Court cannot
accepts [sic] however, the theory of the remaining defendants that plaintiffs were motivated in bad faith in the filing of this complaint. For
this reason defendants' counterclaims are hereby ordered dismissed.

SO ORDERED.[18]
Petitioners appealed the trial court's decision. Petitioners claimed that aside from Dr. Estrada, the remaining respondents should be
held equally liable for negligence. Petitioners pointed out the extent of each respondent's alleged liability.

On 6 February 1998, the Court of Appeals affirmed the decision of the trial court. [19] Petitioners filed a motion for reconsideration which
the Court of Appeals denied in its Resolution of 21 March 2000.[20]

Hence, this petition.

Meanwhile, petitioners filed a Manifestation dated 12 April 2002 [21] stating that respondents Dr. Estrada, Dr. Enriquez, Dr. Villaflor, and
Nurse Dumlao "need no longer be notified of the petition because they are absolutely not involved in the issue raised before the [Court],
regarding the liability of [CMC]."[22] Petitioners stressed that the subject matter of this petition is the liability of CMC for the negligence of
Dr. Estrada.[23]

The Court issued a Resolution dated 9 September 2002[24] dispensing with the requirement to submit the correct and present
addresses of respondents Dr. Estrada, Dr. Enriquez, Dr. Villaflor, and Nurse Dumlao. The Court stated that with the filing of petitioners'
Manifestation, it should be understood that they are claiming only against respondents CMC, Dr. Espinola, Dr. Lacson, and Dr. Uy who
have filed their respective comments. Petitioners are foregoing further claims against respondents Dr. Estrada, Dr. Enriquez, Dr.
Villaflor, and Nurse Dumlao.

The Court noted that Dr. Estrada did not appeal the decision of the Court of Appeals affirming the decision of the Regional Trial Court.
Accordingly, the decision of the Court of Appeals, affirming the trial court's judgment, is already final as against Dr. Oscar Estrada.

Petitioners filed a motion for reconsideration [25] of the Court's 9 September 2002 Resolution claiming that Dr. Enriquez, Dr. Villaflor and
Nurse Dumlao were notified of the petition at their counsels' last known addresses. Petitioners reiterated their imputation of negligence
on these respondents. The Court denied petitioners' Motion for Reconsideration in its 18 February 2004 Resolution.[26]

The Court of Appeals' Ruling

In its Decision of 6 February 1998, the Court of Appeals upheld the trial court's ruling. The Court of Appeals rejected petitioners' view
that the doctrine in Darling v. Charleston Community Memorial Hospital[27] applies to this case. According to the Court of Appeals, the
present case differs from the Darling case since Dr. Estrada is an independent contractor-physician whereas the Darling case involved
a physician and a nurse who were employees of the hospital.

Citing other American cases, the Court of Appeals further held that the mere fact that a hospital permitted a physician to practice
medicine and use its facilities is not sufficient to render the hospital liable for the physician's negligence. [28] A hospital is not responsible
for the negligence of a physician who is an independent contractor.[29]

The Court of Appeals found the cases of Davidson v. Conole[30] and Campbell v. Emma Laing Stevens Hospital[31] applicable to this
case. Quoting Campbell, the Court of Appeals stated that where there is no proof that defendant physician was an employee of
defendant hospital or that defendant hospital had reason to know that any acts of malpractice would take place, defendant hospital
could not be held liable for its failure to intervene in the relationship of physician-patient between defendant physician and plaintiff.

On the liability of the other respondents, the Court of Appeals applied the "borrowed servant" doctrine considering that Dr. Estrada was
an independent contractor who was merely exercising hospital privileges. This doctrine provides that once the surgeon enters the
operating room and takes charge of the proceedings, the acts or omissions of operating room personnel, and any negligence
associated with such acts or omissions, are imputable to the surgeon. [32] While the assisting physicians and nurses may be employed
by the hospital, or engaged by the patient, they normally become the temporary servants or agents of the surgeon in charge while the
operation is in progress, and liability may be imposed upon the surgeon for their negligent acts under the doctrine of respondeat
superior.[33]

The Court of Appeals concluded that since Rogelio engaged Dr. Estrada as the attending physician of his wife, any liability for
malpractice must be Dr. Estrada's sole responsibility.

While it found the amount of damages fair and reasonable, the Court of Appeals held that no interest could be imposed on unliquidated
claims or damages.

The Issue

Basically, the issue in this case is whether CMC is vicariously liable for the negligence of Dr. Estrada. The resolution of this issue rests,
on the other hand, on the ascertainment of the relationship between Dr. Estrada and CMC. The Court also believes that a determination
of the extent of liability of the other respondents is inevitable to finally and completely dispose of the present controversy.

The Ruling of the Court

The petition is partly meritorious.

On the Liability of CMC

Dr. Estrada's negligence in handling the treatment and management of Corazon's condition which ultimately resulted in Corazon's
death is no longer in issue. Dr. Estrada did not appeal the decision of the Court of Appeals which affirmed the ruling of the trial court
finding Dr. Estrada solely liable for damages. Accordingly, the finding of the trial court on Dr. Estrada's negligence is already final.

Petitioners maintain that CMC is vicariously liable for Dr. Estrada's negligence based on Article 2180 in relation to Article 2176 of the
Civil Code. These provisions pertinently state:

Art. 2180. The obligation imposed by article 2176 is demandable not only for one's own acts or omissions, but also for those of persons
for whom one is responsible.

xxxx

Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned
tasks, even though the former are not engaged in any business or industry.

xxxx

The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a
good father of a family to prevent damage.

Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage
done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter.

Similarly, in the United States, a hospital which is the employer, master, or principal of a physician employee, servant, or agent, may be
held liable for the physician's negligence under the doctrine of respondeat superior.[34]

In the present case, petitioners maintain that CMC, in allowing Dr. Estrada to practice and admit patients at CMC, should be liable for
Dr. Estrada's malpractice. Rogelio claims that he knew Dr. Estrada as an accredited physician of CMC, though he discovered later that
Dr. Estrada was not a salaried employee of the CMC.[35] Rogelio further claims that he was dealing with CMC, whose primary concern
was the treatment and management of his wife's condition. Dr. Estrada just happened to be the specific person he talked to
representing CMC.[36] Moreover, the fact that CMC made Rogelio sign a Consent on Admission and Admission Agreement [37] and a
Consent to Operation printed on the letterhead of CMC indicates that CMC considered Dr. Estrada as a member of its medical staff.

On the other hand, CMC disclaims liability by asserting that Dr. Estrada was a mere visiting physician and that it admitted Corazon
because her physical condition then was classified an emergency obstetrics case.[38]

CMC alleges that Dr. Estrada is an independent contractor "for whose actuations CMC would be a total stranger." CMC maintains that it
had no control or supervision over Dr. Estrada in the exercise of his medical profession.

The Court had the occasion to determine the relationship between a hospital and a consultant or visiting physician and the liability of
such hospital for that physician's negligence in Ramos v. Court of Appeals,[39] to wit:

In the first place, hospitals exercise significant control in the hiring and firing of consultants and in the conduct of their work within the
hospital premises. Doctors who apply for "consultant" slots, visiting or attending, are required to submit proof of completion of
residency, their educational qualifications; generally, evidence of accreditation by the appropriate board (diplomate), evidence of
fellowship in most cases, and references. These requirements are carefully scrutinized by members of the hospital administration or by
a review committee set up by the hospital who either accept or reject the application. This is particularly true with respondent hospital.

After a physician is accepted, either as a visiting or attending consultant, he is normally required to attend clinico-pathological
conferences, conduct bedside rounds for clerks, interns and residents, moderate grand rounds and patient audits and perform other
tasks and responsibilities, for the privilege of being able to maintain a clinic in the hospital, and/or for the privilege of admitting patients
into the hospital. In addition to these, the physician's performance as a specialist is generally evaluated by a peer review committee on
the basis of mortality and morbidity statistics, and feedback from patients, nurses, interns and residents. A consultant remiss in his
duties, or a consultant who regularly falls short of the minimum standards acceptable to the hospital or its peer review committee, is
normally politely terminated.

In other words, private hospitals, hire, fire and exercise real control over their attending and visiting "consultant" staff. While
"consultants" are not, technically employees, a point which respondent hospital asserts in denying all responsibility for the
patient's condition, the control exercised, the hiring, and the right to terminate consultants all fulfill the important hallmarks of
an employer-employee relationship, with the exception of the payment of wages. In assessing whether such a relationship in
fact exists, the control test is determining. Accordingly, on the basis of the foregoing, we rule that for the purpose of
allocating responsibility in medical negligence cases, an employer-employee relationship in effect exists between hospitals
and their attending and visiting physicians. This being the case, the question now arises as to whether or not respondent
hospital is solidarily liable with respondent doctors for petitioner's condition.

The basis for holding an employer solidarily responsible for the negligence of its employee is found in Article 2180 of the Civil Code
which considers a person accountable not only for his own acts but also for those of others based on the former's responsibility under a
relationship of patria potestas. x x x[40] (Emphasis supplied)

While the Court in Ramos did not expound on the control test, such test essentially determines whether an employment relationship
exists between a physician and a hospital based on the exercise of control over the physician as to details. Specifically, the employer
(or the hospital) must have the right to control both the means and the details of the process by which the employee (or the physician)
is to accomplish his task.[41]

After a thorough examination of the voluminous records of this case, the Court finds no single evidence pointing to CMC's exercise of
control over Dr. Estrada's treatment and management of Corazon's condition. It is undisputed that throughout Corazon's pregnancy,
she was under the exclusive prenatal care of Dr. Estrada. At the time of Corazon's admission at CMC and during her delivery, it was Dr.
Estrada, assisted by Dr. Villaflor, who attended to Corazon. There was no showing that CMC had a part in diagnosing Corazon's
condition. While Dr. Estrada enjoyed staff privileges at CMC, such fact alone did not make him an employee of CMC.[42] CMC merely
allowed Dr. Estrada to use its facilities[43] when Corazon was about to give birth, which CMC considered an emergency. Considering
these circumstances, Dr. Estrada is not an employee of CMC, but an independent contractor.

The question now is whether CMC is automatically exempt from liability considering that Dr. Estrada is an independent contractor-
physician.

In general, a hospital is not liable for the negligence of an independent contractor-physician. There is, however, an exception to this
principle. The hospital may be liable if the physician is the "ostensible" agent of the hospital. [44] This exception is also known as the
"doctrine of apparent authority."[45] In Gilbert v. Sycamore Municipal Hospital,[46] the Illinois Supreme Court explained the doctrine of
apparent authority in this wise:

[U]nder the doctrine of apparent authority a hospital can be held vicariously liable for the negligent acts of a physician providing care at
the hospital, regardless of whether the physician is an independent contractor, unless the patient knows, or should have known, that the
physician is an independent contractor. The elements of the action have been set out as follows:

"For a hospital to be liable under the doctrine of apparent authority, a plaintiff must show that: (1) the hospital, or its agent, acted in a
manner that would lead a reasonable person to conclude that the individual who was alleged to be negligent was an employee or agent
of the hospital; (2) where the acts of the agent create the appearance of authority, the plaintiff must also prove that the hospital had
knowledge of and acquiesced in them; and (3) the plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent with
ordinary care and prudence."
The element of "holding out" on the part of the hospital does not require an express representation by the hospital that the person
alleged to be negligent is an employee. Rather, the element is satisfied if the hospital holds itself out as a provider of emergency room
care without informing the patient that the care is provided by independent contractors.

The element of justifiable reliance on the part of the plaintiff is satisfied if the plaintiff relies upon the hospital to provide complete
emergency room care, rather than upon a specific physician.

The doctrine of apparent authority essentially involves two factors to determine the liability of an independent-contractor physician.

The first factor focuses on the hospital's manifestations and is sometimes described as an inquiry whether the hospital acted in a
manner which would lead a reasonable person to conclude that the individual who was alleged to be negligent was an employee or
agent of the hospital.[47] In this regard, the hospital need not make express representations to the patient that the treating
physician is an employee of the hospital; rather a representation may be general and implied. [48]

The doctrine of apparent authority is a species of the doctrine of estoppel. Article 1431 of the Civil Code provides that "[t]hrough
estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as
against the person relying thereon." Estoppel rests on this rule: "Whenever a party has, by his own declaration, act, or omission,
intentionally and deliberately led another to believe a particular thing true, and to act upon such belief, he cannot, in any litigation arising
out of such declaration, act or omission, be permitted to falsify it."[49]

In the instant case, CMC impliedly held out Dr. Estrada as a member of its medical staff. Through CMC's acts, CMC clothed Dr. Estrada
with apparent authority thereby leading the Spouses Nogales to believe that Dr. Estrada was an employee or agent of CMC. CMC
cannot now repudiate such authority.

First, CMC granted staff privileges to Dr. Estrada. CMC extended its medical staff and facilities to Dr. Estrada. Upon Dr. Estrada's
request for Corazon's admission, CMC, through its personnel, readily accommodated Corazon and updated Dr. Estrada of her
condition.

Second, CMC made Rogelio sign consent forms printed on CMC letterhead. Prior to Corazon's admission and supposed hysterectomy,
CMC asked Rogelio to sign release forms, the contents of which reinforced Rogelio's belief that Dr. Estrada was a member of CMC's
medical staff.[50] The Consent on Admission and Agreement explicitly provides:

KNOW ALL MEN BY THESE PRESENTS:

I, Rogelio Nogales, of legal age, a resident of 1974 M. H. Del Pilar St., Malate Mla., being the
father/mother/brother/sister/spouse/relative/ guardian/or person in custody of Ma. Corazon, and representing his/her family, of my own
volition and free will, do consent and submit said Ma. Corazon to Dr. Oscar Estrada (hereinafter referred to as Physician) for cure,
treatment, retreatment, or emergency measures, that the Physician, personally or by and through the Capitol Medical Center
and/or its staff, may use, adapt, or employ such means, forms or methods of cure, treatment, retreatment, or emergency
measures as he may see best and most expedient; that Ma. Corazon and I will comply with any and all rules, regulations,
directions, and instructions of the Physician, the Capitol Medical Center and/or its staff; and, that I will not hold liable or
responsible and hereby waive and forever discharge and hold free the Physician, the Capitol Medical Center and/or its staff, from any
and all claims of whatever kind of nature, arising from directly or indirectly, or by reason of said cure, treatment, or retreatment, or
emergency measures or intervention of said physician, the Capitol Medical Center and/or its staff.

x x x x[51] (Emphasis supplied)

While the Consent to Operation pertinently reads, thus:

I, ROGELIO NOGALES, x x x, of my own volition and free will, do consent and submit said CORAZON NOGALES to Hysterectomy, by
the Surgical Staff and Anesthesiologists of Capitol Medical Center and/or whatever succeeding operations, treatment, or
emergency measures as may be necessary and most expedient; and, that I will not hold liable or responsible and hereby waive and
forever discharge and hold free the Surgeon, his assistants, anesthesiologists, the Capitol Medical Center and/or its staff, from any and
all claims of whatever kind of nature, arising from directly or indirectly, or by reason of said operation or operations, treatment, or
emergency measures, or intervention of the Surgeon, his assistants, anesthesiologists, the Capitol Medical Center and/or its
staff.[52] (Emphasis supplied)

Without any indication in these consent forms that Dr. Estrada was an independent contractor-physician, the Spouses Nogales could
not have known that Dr. Estrada was an independent contractor. Significantly, no one from CMC informed the Spouses Nogales that
Dr. Estrada was an independent contractor. On the contrary, Dr. Atencio, who was then a member of CMC Board of Directors, testified
that Dr. Estrada was part of CMC's surgical staff.[53]

Third, Dr. Estrada's referral of Corazon's profuse vaginal bleeding to Dr. Espinola, who was then the Head of the Obstetrics and
Gynecology Department of CMC, gave the impression that Dr. Estrada as a member of CMC's medical staff was collaborating with
other CMC-employed specialists in treating Corazon.

The second factor focuses on the patient's reliance. It is sometimes characterized as an inquiry on whether the plaintiff acted in reliance
upon the conduct of the hospital or its agent, consistent with ordinary care and prudence.[54]

The records show that the Spouses Nogales relied upon a perceived employment relationship with CMC in accepting Dr. Estrada's
services. Rogelio testified that he and his wife specifically chose Dr. Estrada to handle Corazon's delivery not only because of their
friend's recommendation, but more importantly because of Dr. Estrada's "connection with a reputable hospital, the [CMC]." [55] In other
words, Dr. Estrada's relationship with CMC played a significant role in the Spouses Nogales' decision in accepting Dr. Estrada's
services as the obstetrician-gynecologist for Corazon's delivery. Moreover, as earlier stated, there is no showing that before and during
Corazon's confinement at CMC, the Spouses Nogales knew or should have known that Dr. Estrada was not an employee of CMC.

Further, the Spouses Nogales looked to CMC to provide the best medical care and support services for Corazon's delivery. The Court
notes that prior to Corazon's fourth pregnancy, she used to give birth inside a clinic. Considering Corazon's age then, the Spouses
Nogales decided to have their fourth child delivered at CMC, which Rogelio regarded one of the best hospitals at the time.[56] This is
precisely because the Spouses Nogales feared that Corazon might experience complications during her delivery which would be better
addressed and treated in a modern and big hospital such as CMC. Moreover, Rogelio's consent in Corazon's hysterectomy to be
performed by a different physician, namely Dr. Espinola, is a clear indication of Rogelio's confidence in CMC's surgical staff.

CMC's defense that all it did was "to extend to [Corazon] its facilities" is untenable. The Court cannot close its eyes to the reality that
hospitals, such as CMC, are in the business of treatment. In this regard, the Court agrees with the observation made by the Court of
Appeals of North Carolina in Diggs v. Novant Health, Inc.,[57] to wit:

"The conception that the hospital does not undertake to treat the patient, does not undertake to act through its doctors and nurses, but
undertakes instead simply to procure them to act upon their own responsibility, no longer reflects the fact. Present day hospitals, as
their manner of operation plainly demonstrates, do far more than furnish facilities for treatment. They regularly employ on a
salary basis a large staff of physicians, nurses and internes [sic], as well as administrative and manual workers, and they
charge patients for medical care and treatment, collecting for such services, if necessary, by legal action. Certainly, the
person who avails himself of 'hospital facilities' expects that the hospital will attempt to cure him, not that its nurses or other
employees will act on their own responsibility." x x x (Emphasis supplied)

Likewise unconvincing is CMC's argument that petitioners are estopped from claiming damages based on the Consent on Admission
and Consent to Operation. Both release forms consist of two parts. The first part gave CMC permission to administer to Corazon any
form of recognized medical treatment which the CMC medical staff deemed advisable. The second part of the documents, which may
properly be described as the releasing part, releases CMC and its employees "from any and all claims" arising from or by reason of the
treatment and operation.

The documents do not expressly release CMC from liability for injury to Corazon due to negligence during her treatment or operation.
Neither do the consent forms expressly exempt CMC from liability for Corazon's death due to negligence during such treatment or
operation. Such release forms, being in the nature of contracts of adhesion, are construed strictly against hospitals. Besides, a blanket
release in favor of hospitals "from any and all claims," which includes claims due to bad faith or gross negligence, would be contrary to
public policy and thus void.

Even simple negligence is not subject to blanket release in favor of establishments like hospitals but may only mitigate liability
depending on the circumstances.[58] When a person needing urgent medical attention rushes to a hospital, he cannot bargain on equal
footing with the hospital on the terms of admission and operation. Such a person is literally at the mercy of the hospital. There can
be no clearer example of a contract of adhesion than one arising from such a dire situation. Thus, the release forms of CMC cannot
relieve CMC from liability for the negligent medical treatment of Corazon.

On the Liability of the Other Respondents

Despite this Court's pronouncement in its 9 September 2002 [59] Resolution that the filing of petitioners' Manifestation confined
petitioners' claim only against CMC, Dr. Espinola, Dr. Lacson, and Dr. Uy, who have filed their comments, the Court deems it proper to
resolve the individual liability of the remaining respondents to put an end finally to this more than two-decade old controversy.

a) Dr. Ely Villaflor

Petitioners blame Dr. Ely Villaflor for failing to diagnose the cause of Corazon's bleeding and to suggest the correct remedy to Dr.
Estrada.[60] Petitioners assert that it was Dr. Villaflor's duty to correct the error of Nurse Dumlao in the administration of hemacel.

The Court is not persuaded. Dr. Villaflor admitted administering a lower dosage of magnesium sulfate. However, this was after
informing Dr. Estrada that Corazon was no longer in convulsion and that her blood pressure went down to a dangerous level. [61] At that
moment, Dr. Estrada instructed Dr. Villaflor to reduce the dosage of magnesium sulfate from 10 to 2.5 grams. Since petitioners did not
dispute Dr. Villaflor's allegation, Dr. Villaflor's defense remains uncontroverted. Dr. Villaflor's act of administering a lower dosage of
magnesium sulfate was not out of her own volition or was in contravention of Dr. Estrada's order.
b) Dr. Rosa Uy

Dr. Rosa Uy's alleged negligence consisted of her failure (1) to call the attention of Dr. Estrada on the incorrect dosage of magnesium
sulfate administered by Dr. Villaflor; (2) to take corrective measures; and (3) to correct Nurse Dumlao's wrong method of hemacel
administration.

The Court believes Dr. Uy's claim that as a second year resident physician then at CMC, she was merely authorized to take the clinical
history and physical examination of Corazon. [62] However, that routine internal examination did not ipso facto make Dr. Uy liable for the
errors committed by Dr. Estrada. Further, petitioners' imputation of negligence rests on their baseless assumption that Dr. Uy was
present at the delivery room. Nothing shows that Dr. Uy participated in delivering Corazon's baby. Further, it is unexpected from Dr. Uy,
a mere resident physician at that time, to call the attention of a more experienced specialist, if ever she was present at the delivery
room.

c) Dr. Joel Enriquez

Petitioners fault Dr. Joel Enriquez also for not calling the attention of Dr. Estrada, Dr. Villaflor, and Nurse Dumlao about their
errors.[63] Petitioners insist that Dr. Enriquez should have taken, or at least suggested, corrective measures to rectify such errors.

The Court is not convinced. Dr. Enriquez is an anesthesiologist whose field of expertise is definitely not obstetrics and gynecology. As
such, Dr. Enriquez was not expected to correct Dr. Estrada's errors. Besides, there was noevidence of Dr. Enriquez's knowledge of any
error committed by Dr. Estrada and his failure to act upon such observation.

d) Dr. Perpetua Lacson

Petitioners fault Dr. Perpetua Lacson for her purported delay in the delivery of blood Corazon needed. [64] Petitioners claim that Dr.
Lacson was remiss in her duty of supervising the blood bank staff.

As found by the trial court, there was no unreasonable delay in the delivery of blood from the time of the request until the transfusion to
Corazon. Dr. Lacson competently explained the procedure before blood could be given to the patient. [65] Taking into account the
bleeding time, clotting time and cross-matching, Dr. Lacson stated that it would take approximately 45-60 minutes before blood could
be ready for transfusion.[66] Further, no evidence exists that Dr. Lacson neglected her duties as head of the blood bank.

e) Dr. Noe Espinola

Petitioners argue that Dr. Espinola should not have ordered immediate hysterectomy without determining the underlying cause of
Corazon's bleeding. Dr. Espinola should have first considered the possibility of cervical injury, and advised a thorough examination of
the cervix, instead of believing outright Dr. Estrada's diagnosis that the cause of bleeding was uterine atony.

Dr. Espinola's order to do hysterectomy which was based on the information he received by phone is not negligence. The Court agrees
with the trial court's observation that Dr. Espinola, upon hearing such information about Corazon's condition, believed in good faith that
hysterectomy was the correct remedy. At any rate, the hysterectomy did not push through because upon Dr. Espinola's arrival, it was
already too late. At the time, Corazon was practically dead.

f) Nurse J. Dumlao

In Moore v. Guthrie Hospital Inc.,[67] the US Court of Appeals, Fourth Circuit, held that to recover, a patient complaining of injuries
allegedly resulting when the nurse negligently injected medicine to him intravenously instead of intramuscularly had to show that (1) an
intravenous injection constituted a lack of reasonable and ordinary care; (2) the nurse injected medicine intravenously; and (3) such
injection was the proximate cause of his injury.

In the present case, there is no evidence of Nurse Dumlao's alleged failure to follow Dr. Estrada's specific instructions. Even assuming
Nurse Dumlao defied Dr. Estrada's order, there is no showing that side-drip administration of hemacel proximately caused Corazon's
death. No evidence linking Corazon's death and the alleged wrongful hemacel administration was introduced. Therefore, there
is no basis to hold Nurse Dumlao liable for negligence.

On the Award of Interest on Damages

The award of interest on damages is proper and allowed under Article 2211 of the Civil Code, which states that in crimes and quasi-
delicts, interest as a part of the damages may, in a proper case, be adjudicated in the discretion of the court.[68]

WHEREFORE, the Court PARTLY GRANTS the petition. The Court finds respondent Capitol Medical Center vicariously liable for the
negligence of Dr. Oscar Estrada. The amounts of P105,000 as actual damages and P700,000 as moral damages should each earn
legal interest at the rate of six percent (6%) per annum computed from the date of the judgment of the trial court. The Court affirms the
rest of the Decision dated 6 February 1998 and Resolution dated 21 March 2000 of the Court of Appeals in CA-G.R. CV No. 45641.

SO ORDERED.

Quisumbing, (Chairperson), Carpio-Morales, Tinga, and Velasco, Jr., JJ., concur.

592 Phil. 318

SECOND DIVISION

[ G.R. No. 176484, November 25, 2008 ]

CALAMBA MEDICAL CENTER, INC., PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION, RONALDO LANZANAS
AND MERCEDITHA* LANZANAS, RESPONDENTS.

DECISION

CARPIO MORALES, J.:

The Calamba Medical Center (petitioner), a privately-owned hospital, engaged the services of medical doctors-spouses Ronaldo
Lanzanas (Dr. Lanzanas) and Merceditha Lanzanas (Dr. Merceditha) in March 1992 and August 1995, respectively, as part of its team
of resident physicians. Reporting at the hospital twice-a-week on twenty-four-hour shifts, respondents were paid a monthly "retainer" of
P4,800.00 each.[1] It appears that resident physicians were also given a percentage share out of fees charged for out-patient
treatments, operating room assistance and discharge billings, in addition to their fixed monthly retainer.[2]

The work schedules of the members of the team of resident physicians were fixed by petitioner's medical director Dr. Raul Desipeda
(Dr. Desipeda). And they were issued identification cards[3] by petitioner and were enrolled in the Social Security System
(SSS).[4] Income taxes were withheld from them.[5]

On March 7, 1998, Dr. Meluz Trinidad (Dr. Trinidad), also a resident physician at the hospital, inadvertently overheard a telephone
conversation of respondent Dr. Lanzanas with a fellow employee, Diosdado Miscala, through an extension telephone line. Apparently,
Dr. Lanzanas and Miscala were discussing the low "census" or admission of patients to the hospital. [6]

Dr. Desipeda whose attention was called to the above-said telephone conversation issued to Dr. Lanzanas a Memorandum of March 7,
1998 reading:
As a Licensed Resident Physician employed in Calamba Medical Center since several years ago, the hospital management has
committed upon you utmost confidence in the performance of duties pursuant thereto. This is the reason why you were awarded the
privilege to practice in the hospital and were entrusted hospital functions to serve the interest of both the hospital and our patients using
your capability for independent judgment.

Very recently though and unfortunately, you have committed acts inimical to the interest of the hospital, the details of which are
contained in the hereto attached affidavit of witness.

You are therefore given 24 hours to explain why no disciplinary action should be taken against you.

Pending investigation of your case, you are hereby placed under 30-days [sic] preventive suspension effective upon receipt
hereof.[7] (Emphasis, italics and underscoring supplied)
Inexplicably, petitioner did not give respondent Dr. Merceditha, who was not involved in the said incident, any work schedule after
sending her husband Dr. Lanzanas the memorandum, [8] nor inform her the reason therefor, albeit she was later informed by the Human
Resource Department (HRD) officer that that was part of petitioner's cost-cutting measures.[9]

Responding to the memorandum, Dr. Lanzanas, by letter of March 9, 1998, [10] admitted that he spoke with Miscala over the phone but
that their conversation was taken out of context by Dr. Trinidad.

On March 14, 1998,[11] the rank-and-file employees union of petitioner went on strike due to unresolved grievances over terms and
conditions of employment.[12]

On March 20, 1998, Dr. Lanzanas filed a complaint for illegal suspension[13] before the National Labor Relations Commission (NLRC)-
Regional Arbitration Board (RAB) IV. Dr. Merceditha subsequently filed a complaint for illegal dismissal. [14]

In the meantime, then Sec. Cresenciano Trajano of the Department of Labor and Employment (DOLE) certified the labor dispute to
the NLRC for compulsory arbitration and issued on April 21, 1998 return-to-work Order to the striking union officers and employees of
petitioner pending resolution of the labor dispute.[15]

In a memorandum[16] of April 22, 1998, Dr. Desipeda echoed the April 22, 1998 order of the Secretary of Labor directing all union
officers and members to return-to-work "on or April 23, 1998, except those employees that were already terminated or are serving
disciplinary actions." Dr. Desipeda thus ordered the officers and members of the union to "report for work as soon as possible" to the
hospital's personnel officer and administrator for "work scheduling, assignments and/or re-assignments."

Petitioner later sent Dr. Lanzanas a notice of termination which he received on April 25, 1998, indicating as grounds therefor his failure
to report back to work despite the DOLE order and his supposed role in the striking union, thus:
On April 23, 1998, you still did not report for work despite memorandum issued by the CMC Medical Director implementing the Labor
Secretary's ORDER. The same is true on April 24, 1998 and April 25, 1998,--you still did not report for work [sic].

You are likewise aware that you were observed (re: signatories [sic] to the Saligang Batas of BMCMC-UWP) to be unlawfully
participating as member in the rank-and-file union's concerted activities despite knowledge that your position in the hospital
is managerial in nature (Nurses, Orderlies, and staff of the Emergency Room carry out your orders using your independent judgment)
which participation is expressly prohibited by the New Labor Code and which prohibition was sustained by the Med-
Arbiter's ORDER dated February 24, 1998. (Emphasis and italics in the original; underscoring partly in the original and partly supplied)

For these reasons as grounds for termination, you are hereby terminated for cause from employment effective today, April 25,
1998, without prejudice to further action for revocation of your license before the Philippine [sic] Regulations [sic]
Commission.[17] (Emphasis and underscoring supplied)
Dr. Lanzanas thus amended his original complaint to include illegal dismissal. [18] His and Dr. Merceditha's complaints were consolidated
and docketed as NLRC CASE NO. RAB-IV-3-9879-98-L.

By Decision[19] of March 23, 1999, Labor Arbiter Antonio R. Macam dismissed the spouses' complaints for want of jurisdiction upon a
finding that there was no employer-employee relationship between the parties, the fourth requisite or the "control test" in the
determination of an employment bond being absent.

On appeal, the NLRC, by Decision[20] of May 3, 2002, reversed the Labor Arbiter's findings, disposing as follows:
WHEREFORE, the assailed decision is set aside. The respondents are ordered to pay the complainants their full backwages;
separation pay of one month salary for every year of service in lieu of reinstatement; moral damages of P500,000.00 each; exemplary
damages of P250,000.00 each plus ten percent (10%) of the total award as attorney's fees.

SO ORDERED.[21]
Petitioner's motion for reconsideration having been denied, it brought the case to the Court of Appeals on certiorari.

The appellate court, by June 30, 2004 Decision,[22] initially granted petitioner's petition and set aside the NLRC ruling. However, upon a
subsequent motion for reconsideration filed by respondents, it reinstated the NLRCdecision in an Amended Decision[23] dated
September 26, 2006 but tempered the award to each of the spouses of moral and exemplary damages to P100,000.00 and
P50,000.00, respectively and omitted the award of attorney's fees.

In finding the existence of an employer-employee relationship between the parties, the appellate court held:
x x x. While it may be true that the respondents are given the discretion to decide on how to treat the petitioner's patients, the petitioner
has not denied nor explained why its Medical Director still has the direct supervision and control over the respondents. The fact is
the petitioner's Medical Director still has to approve the schedule of duties of the respondents. The respondents stressed that the
petitioner's Medical Director also issues instructions or orders to the respondents relating to the means and methods of
performing their duties, i.e. admission of patients, manner of characterizing cases, treatment of cases, etc., and may even overrule,
review or revise the decisions of the resident physicians. This was not controverted by the petitioner. The foregoing factors taken
together are sufficient to constitute the fourth element, i.e. control test, hence, the existence of the employer-employee relationship. In
denying that it had control over the respondents, the petitioner alleged that the respondents were free to put up their own clinics or to
accept other retainership agreement with the other hospitals. But, the petitioner failed to substantiate the allegation with substantial
evidence. (Emphasis and underscoring supplied)[24]
The appellate court thus declared that respondents were illegally dismissed.
x x x. The petitioner's ground for dismissing respondent Ronaldo Lanzanas was based on his alleged participation in union activities,
specifically in joining the strike and failing to observe the return-to-work order issued by the Secretary of Labor. Yet, the petitioner did
not adduce any piece of evidence to show that respondent Ronaldo indeed participated in the strike. x x x.

In the case of respondent Merceditha Lanzanas, the petitioner's explanation that "her marriage to complainant Ronaldo has given rise
to the presumption that her sympat[hies] are likewise with her husband" as a ground for her dismissal is unacceptable. Such is not one
of the grounds to justify the termination of her employment.[25] (Underscoring supplied)
The fallo of the appellate court's decision reads:
WHEREFORE, the instant Motion for Reconsideration is GRANTED, and the Court's decision dated June 30, 2004, is SET ASIDE. In
lieu thereof, a new judgment is entered, as follows:
WHEREFORE, the petition is DISMISSED. The assailed decision dated May 3, 2002 and order dated September 24, 2002 of
the NLRC in NLRC NCR CA No. 019823-99 are AFFIRMED with the MODIFICATION that the moral and exemplary damages are
reduced to P100,000.00 each and P50,000.00 each, respectively.
SO ORDERED.[26] (Emphasis and italics in the original; underscoring supplied)
Preliminarily, the present petition calls for a determination of whether there exists an employer-employee relationship[27] between
petitioner and the spouses-respondents.

Denying the existence of such relationship, petitioner argues that the appellate court, as well as the NLRC, overlooked its twice-a-week
reporting arrangement with respondents who are free to practice their profession elsewhere the rest of the week. And it invites
attention to the uncontroverted allegation that respondents, aside from their monthly retainers, were entitled to one-half of all suturing,
admitting, consultation, medico-legal and operating room assistance fees.[28] These circumstances, it stresses, are clear badges of the
absence of any employment relationship between them.
This Court is unimpressed.

Under the "control test," an employment relationship exists between a physician and a hospital if the hospital controls both the means
and the details of the process by which the physician is to accomplish his task.[29]

Where a person who works for another does so more or less at his own pleasure and is not subject to definite hours or conditions of
work, and is compensated according to the result of his efforts and not the amount thereof, the element of control is absent.[30]

As priorly stated, private respondents maintained specific work-schedules, as determined by petitioner through its medical director,
which consisted of 24-hour shifts totaling forty-eight hours each week and which were strictly to be observed under pain of
administrative sanctions.

That petitioner exercised control over respondents gains light from the undisputed fact that in the emergency room, the operating room,
or any department or ward for that matter, respondents' work is monitored through its nursing supervisors, charge nurses and
orderlies. Without the approval or consent of petitioner or its medical director, no operations can be undertaken in those areas. For
control test to apply, it is not essential for the employer to actually supervise the performance of duties of the employee, it being enough
that it has the right to wield the power.[31]

With respect to respondents' sharing in some hospital fees, this scheme does not sever the employment tie between them and
petitioner as this merely mirrors additional form or another form of compensation or incentive similar to what commission-based
employees receive as contemplated in Article 97 (f) of the Labor Code, thus:
"Wage" paid to any employee shall mean the remuneration or earning, 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 services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of board,
lodging, or other facilities customarily furnished by the employer to the employee. x x x (Emphasis and underscoring supplied),
Respondents were in fact made subject to petitioner-hospital's Code of Ethics,[32] the provisions of which cover administrative and
disciplinary measures on negligence of duties, personnel conduct and behavior, and offenses against persons, property and the
hospital's interest.

More importantly, petitioner itself provided incontrovertible proof of the employment status of respondents, namely, the identification
cards it issued them, the payslips[33] and BIR W-2 (now 2316) Forms which reflect their status as employees, and the classification as
"salary" of their remuneration. Moreover, it enrolled respondents in the SSS and Medicare (Philhealth) program. It bears noting at this
juncture that mandatory coverage under the SSS Law[34] is premised on the existence of an employer-employee relationship,[35] except
in cases of compulsory coverage of the self-employed. It would be preposterous for an employer to report certain persons as
employees and pay their SSS premiums as well as their wages if they are not its employees.[36]

And if respondents were not petitioner's employees, how does it account for its issuance of the earlier-quoted March 7, 1998
memorandum explicitly stating that respondent is "employed" in it and of the subsequent termination letter indicating respondent
Lanzanas' employment status.

Finally, under Section 15, Rule X of Book III of the Implementing Rules of the Labor Code, an employer-employee relationship exists
between the resident physicians and the training hospitals, unless there is a training agreement between them, and the training
program is duly accredited or approved by the appropriate government agency. In respondents' case, they were not undergoing any
specialization training. They were considered non-training general practitioners,[37] assigned at the emergency rooms and ward
sections.

Turning now to the issue of dismissal, the Court upholds the appellate court's conclusion that private respondents were illegally
dismissed.

Dr. Lanzanas was neither a managerial nor supervisory employee but part of the rank-and-file. This is the import of the Secretary of
Labor's Resolution of May 22, 1998 in OS A-05-15-98 which reads:
xxxx

In the motion to dismiss it filed before the Med-Arbiter, the employer (CMC) alleged that 24 members of petitioner are supervisors,
namely x x x Rolando Lanzonas [sic] x x x.

A close scrutiny of the job descriptions of the alleged supervisors narrated by the employer only proves that except for the contention
that these employees allegedly supervise, they do not however recommend any managerial action. At most, their job is
merely routinary in nature and consequently, they cannot be considered supervisory employees.

They are not therefore barred from membership in the union of rank[-]and[-]file, which the petitioner [the union] is seeking to
represent in the instant case.[38] (Emphasis and underscoring supplied)

xxxx
Admittedly, Dr. Lanzanas was a union member in the hospital, which is considered indispensable to the national interest. In labor
disputes adversely affecting the continued operation of a hospital, Article 263(g) of the Labor Code provides:
ART. 263. STRIKES, PICKETING, AND LOCKOUTS.—

xxxx

(g) x x x x

x x x x. In labor disputes adversely affecting the continued operation of such hospitals, clinics or medical institutions, it shall
be the duty of the striking union or locking-out employer to provide and maintain an effective skeletal workforce of medical and other
health personnel, whose movement and services shall be unhampered and unrestricted, as are necessary to insure the proper and
adequate protection of the life and health of its patients, most especially emergency cases, for the duration of the strike or lockout. In
such cases, the Secretary of Labor and Employment is mandated to immediately assume, within twenty-four hours from knowledge of
the occurrence of such strike or lockout, jurisdiction over the same or certify to the Commission for compulsory arbitration. For this
purpose, the contending parties are strictly enjoined to comply with such orders, prohibitions and/or injunctions as are
issued by the Secretary of Labor and Employment or the Commission, under pain of immediate disciplinary action, including
dismissal or loss of employment status or payment by the locking-out employer of backwages, damages and other affirmative
relief, even criminal prosecution against either or both of them.

xxxx (Emphasis and underscoring supplied)

An assumption or certification order of the DOLE Secretary automatically results in a return-to-work of all striking workers, whether a
corresponding return-to-work order had been issued.[39] The DOLE Secretary in fact issued a return-to-work Order, failing to comply
with which is punishable by dismissal or loss of employment status. [40]

Participation in a strike and intransigence to a return-to-work order must, however, be duly proved in order to justify immediate
dismissal in a "national interest" case. As the appellate court as well as the NLRC observed, however, there is nothing in the records
that would bear out Dr. Lanzanas' actual participation in the strike. And the medical director's Memorandum[41] of April 22, 1998
contains nothing more than a general directive to all union officers and members to return-to-work. Mere membership in a labor union
does not ipso facto mean participation in a strike.

Dr. Lanzanas' claim that, after his 30-day preventive suspension ended on or before April 9, 1998, he was never given any work
schedule[42] was not refuted by petitioner. Petitioner in fact never released any findings of its supposed investigation into Dr. Lanzanas'
alleged "inimical acts."

Petitioner thus failed to observe the two requirements,before dismissal can be effected ─ notice and hearing ─ which constitute
essential elements of the statutory process; the first to apprise the employee of the particular acts or omissions for which his dismissal
is sought, and the second to inform the employee of the employer's decision to dismiss him.[43] Non-observance of these requirements
runs afoul of the procedural mandate.[44]

The termination notice sent to and received by Dr. Lanzanas on April 25, 1998 was the first and only time that he was apprised of the
reason for his dismissal. He was not afforded, however, even the slightest opportunity to explain his side. His was a "termination upon
receipt" situation. While he was priorly made to explain on his telephone conversation with Miscala,[45] he was not with respect to his
supposed participation in the strike and failure to heed the return-to-work order.

As for the case of Dr. Merceditha, her dismissal was worse, it having been effected without any just or authorized cause and without
observance of due process. In fact, petitioner never proferred any valid cause for her dismissal except its view that "her marriage to
[Dr. Lanzanas] has given rise to the presumption that her sympath[y] [is] with her husband; [and that when [Dr. Lanzanas] declared that
he was going to boycott the scheduling of their workload by the medical doctor, he was presumed to be speaking for himself [and] for
his wife Merceditha."[46]

Petitioner's contention that Dr. Merceditha was a member of the union or was a participant in the strike remained just that. Its
termination of her employment on the basis of her conjugal relationship is not analogous to any of the causes enumerated in Article
282[47] of the Labor Code. Mere suspicion or belief, no matter how strong, cannot substitute for factual findings carefully established
through orderly procedure.[48]

The Court even notes that after the proceedings at the NLRC, petitioner never even mentioned Dr. Merceditha's case. There is
thus no gainsaying that her dismissal was both substantively and procedurally infirm.

Adding insult to injury was the circulation by petitioner of a "watchlist" or "watch out list" [49] including therein the names of respondents.
Consider the following portions of Dr. Merceditha's Memorandum of Appeal:

3. Moreover, to top it all, respondents have circulated a so called "Watch List" to other hospitals, one of which [was]
procured from Foothills Hospital in Sto. Tomas, Batangas [that] contains her name. The object of the said list is
precisely to harass Complainant and malign her good name and reputation. This is not only unprofessional, but runs
smack of oppression as CMC is trying permanently deprived [sic] Complainant of her livelihood by ensuring that she
is barred from practicing in other hospitals.

4. Other co-professionals and brothers in the profession are fully aware of these "watch out" lists and as such, her
reputation was not only besmirched, but was damaged, and she suffered social humiliation as it is of public
knowledge that she was dismissed from work. Complainant came from a reputable and respected family, her father
 being a retired full Colonel in the Army, Col. Romeo A. Vente, and her brothers and sisters are all professionals, her
brothers, Arnold and Romeo Jr., being engineers. The Complainant has a family protection [sic] to protect. She
likewise has a professional reputation to protect, being a licensed physician. Both her personal and professional
reputation were damaged as a result of the unlawful acts of the respondents.[50]

While petitioner does not deny the existence of such list, it pointed to the lack of any board action on its part to initiate such listing and
to circulate the same, viz:

20. x x x. The alleged watchlist or "watch out list," as termed by complainants, were merely lists obtained by one Dr.
Ernesto Naval of PAMANA Hospital. Said list was given by a stockholder of respondent who was at the same
time a stockholder of PAMAN[A] Hospital. The giving of the list was not a Board action.[51] (Emphasis and
underscoring supplied)

The circulation of such list containing names of alleged union members intended to prevent employment of workers for union activities
similarly constitutes unfair labor practice, thereby giving a right of action for damages by the employees prejudiced.[52]

A word on the appellate court's deletion of the award of attorney's fees. There being no basis advanced in deleting it, as exemplary
damages were correctly awarded,[53] the award of attorney's fees should be reinstated.

WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP No. 75871 is AFFIRMED with MODIFICATION in that the award by
the National Labor Relations Commission of 10% of the total judgment award as attorney's fees is reinstated. In all other aspects, the
decision of the appellate court is affirmed.

SO ORDERED.

Quisumbing, (Chairperson), Tinga, Velasco, Jr., and Brion, JJ., concur.