1. Grepalife vs.

Honorato Judico
G.R. No. 73887 – December 21, 1989
180 scra 445
Facts:
Private respondent entered into an agreement of agency with petitioner to become a debit agent
attached to the industrial life agency. Such admission is in line with the findings of public
respondent that as such debit agent, private respondent Judico had definite work assignments
including but not limited to collection of premiums from policy holders and selling insurance to
prospective clients. Public respondent NLRC also found out that complainant was initially paid P
200. 00 as allowance for thirteen (13) weeks regardless of production and later a certain
percentage denominated as sales reserve of his total collections but not lesser than P 200.00.
Complainant was promoted to the position of Zone Supervisor and was given additional
(supervisor's) allowance fixed at P110.00 per week. Later, he was reverted to his former
position as debit agent but, for unknown reasons, not paid so-called weekly sales reserve of at
least P 200.00. Subsequently, complainant was dismissed by way of termination of his agency
contract.
Petitioner assails the findings of the NLRC that private respondent is an employee of the former.
Petitioner argues that Judico's compensation was not based on any fixed number of hours he
was required to devote to the service of petitioner company but rather it was the production or
result of his efforts or his work that was being compensated and that the so-called allowance for
the first thirteen weeks that Judico worked as debit agent, cannot be fgloconstrued as salary but
as a subsidy or a way of assistance for transportation and meal expenses of a new debit agent
during the initial period of his training which was fixed for thirteen (13) weeks. Stated otherwise,
petitioner contends that Judico's compensation, in the form of commissions and bonuses, was
based on actual production.
Private Respondent maintains that he received a definite amount as his Wage known as "sales
reserve" the failure to maintain the same would bring him back to a beginner's employment with
a fixed weekly wage of P 200.00 regardless of production. He was assigned a definite place in
the office to work on when he is not in the field; and in addition to canvassing and making
regular reports, he was burdened with the job of collection and to make regular weekly report
thereto for which an anemic performance would mean dismissal. He earned out of his faithful
and productive service, a promotion to Zone Supervisor with additional supervisor's allowance,
(a definite or fixed amount of P110.00) that he was dismissed primarily because of anemic
performance and not because of the termination of the contract of agency substantiate the fact
that he was indeed an employee of the petitioner and not an insurance agent in the ordinary
meaning of the term.
Issue:
Whether or not the relationship between insurance agents and their principal, the insurance
company, is that of agent and principal to be governed by the Insurance Code and the Civil
Code provisions on agency, or one of employer-employee, to be governed by the Labor Code.
Held:
• Test to determine Employer-Employee relationship. – One salient point in the
determination of employer-employee relationship which cannot be easily ignored is the fact
that the compensation that these agents on commission received is not paid by the
insurance company but by the investor (or the person insured). After determining the
commission earned by an agent on his sales the agent directly deducts it from the amount
he received from the investor or the person insured and turns over to the insurance
company the amount invested after such deduction is made. The test therefore is 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.
• Contract of services with petitioner by private respondent is not for a piece of work
nor for a definite period. – Applying the aforementioned test to the case at bar, We can
readily see that the element of control by the petitioner on Judico was very much present.
The record shows that petitioner Judico received a definite minimum amount per week as
his wage known as "sales reserve" wherein the failure to maintain the same would bring
him back to a beginner's employment with a fixed weekly wage of P 200.00 for thirteen
weeks regardless of production. He was assigned a definite place in the office to work on
when he is not in the field; and in addition to his canvassing work he was burdened with the
job of collection. In both cases he was required to make regular report to the company
regarding these duties, and for which an anemic performance would mean a dismissal.
Conversely faithful and productive service earned him a promotion to Zone Supervisor with
additional supervisor's allowance, a definite amount of P110.00 aside from the regular P
200.00 weekly "allowance". Furthermore, his contract of services with petitioner is not for a
piece of work nor for a definite period.
• Private Respondent by the nature of his position and work had been a regular
employee of petitioner and entitled to the protection of the law and could not just be
terminated without valid and justifiable cause. – On the other hand, an ordinary
commission insurance agent works at his own volition or at his own leisure without fear of
dismissal from the company and short of committing acts detrimental to the business
interest of the company or against the latter, whether he produces or not is of no moment
as his salary is based on his production, his anemic performance or even dead result does
not become a ground for dismissal. Whereas, in private respondent's case, the undisputed
facts show that he was controlled by petitioner insurance company not only as to the kind of
work; the amount of results, the kind of performance but also the power of dismissal.
Undoubtedly, private respondent, by nature of his position and work, had been a regular
employee of petitioner and is therefore entitled to the protection of the law and could not
just be terminated without valid and justifiable cause.

2. Alipio Ruga vs. National Labor Relation Commission

G.R. No. L-72654-61 – January 22, 1990
181 SCRA 266
Facts:
Petitioners were the fishermen-crew members of 7/B Sandyman II, one of several fishing
vessels owned and operated by private respondent De Guzman Fishing Enterprises which is
primarily engaged in the fishing business. For services rendered in the conduct of private
respondent's regular business of "trawl" fishing, petitioners were paid on percentage
commission basis. As agreed upon, they received thirteen percent (13%) of the proceeds of the
sale of the fish-catch if the total proceeds exceeded the cost of crude oil consumed during the
fishing trip, otherwise, they received ten percent (10%) of the total proceeds of the sale. The
patron/pilot, chief engineer and master fisherman received a minimum income of P350.00 per
week while the assistant engineer, second fisherman, and fisherman-winchman received a
minimum income of P260.00 per week.
Later, upon arrival at the fishing port, petitioners were told to proceed to the police station for
investigation on the report that they sold some of their fish-catch at midsea to the prejudice of
private respondent. Petitioners denied the charge claiming that the same was a countermove to
their having formed a labor union and becoming members of Defender of Industrial Agricultural
Labor Organizations and General Workers Union.
During the investigation, no witnesses were presented to prove the charge against petitioners,
and no criminal charges were formally filed against them. Notwithstanding, private respondent
refused to allow petitioners to return to the fishing vessel to resume their work on the same day.
Consequently, petitioners individually filed their complaints for illegal dismissal and non-
payment of monetary benefits. Private respondent submitted its position paper denying the
employer-employee relationship between private respondent and petitioners on the theory that
private respondent and petitioners were engaged in a joint venture.
Issue:
Whether or not the fishermen-crew members of the trawl fishing vessel 7/B Sandyman II are
employees of its owner-operator, De Guzman Fishing Enterprises.
Held:
• Elements in determining Employer-Employee relationship. – We have consistently
ruled that in determining the existence of an employer-employee relationship, the elements
that are generally considered are the following (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 methods by which the work is
to be accomplished. The employment relation arises from contract of hire, express or
implied. In the absence of hiring, no actual employer-employee relation could exist.
• Right-of-control test. – From the four (4) elements mentioned, We have generally relied
on the so-called right-of-control test where the person for whom the services are performed
reserves a right to control not only the end to be achieved but also the means to be used in
reaching such end. The test calls merely for the existence of the right to control the manner
of doing the work, not the actual exercise of the right.
• The case of Pajarillo vs. SSS, supra, invoked by the public respondent as authority for the
ruling that a "joint fishing venture" existed between private respondent and petitioners is not
applicable in the instant case. There is neither light of control nor actual exercise of such
right on the part of the boat-owners in the Pajarillo case, where the Court found that the
pilots therein are not under the order of the boat-owners as regards their employment; that
they go out to sea not upon directions of the boat-owners, but upon their own volition as to
when, how long and where to go fishing; that the boat-owners do not in any way control the
crew-members with whom the former have no relationship whatsoever; that they simply join
every trip for which the pilots allow them, without any reference to the owners of the vessel;
and that they only share in their own catch produced by their own efforts.
• Records show that in the instant case, as distinguished from the Pajarillo case where the
crew members are under no obligation to remain in the outfit for any definite period as one
can be the crew member of an outfit for one day and be the member of the crew of another
vessel the next day, the herein petitioners, on the other hand, were directly hired by private
respondent, through its general manager, Arsenio de Guzman, and its operations manager,
Conrado de Guzman and have been under the employ of private respondent for a period of
8-15 years in various capacities. While tenure or length of employment is not considered as
the test of employment, nevertheless the hiring of petitioners to perform work which is
necessary or desirable in the usual business or trade of private respondent for a period of
8-15 years since 1968 qualify them as regular employees within the meaning of Article 281
of the Labor Code as they were indeed engaged to perform activities usually necessary or
desirable in the usual fishing business or occupation of private respondent.

3. Paz Martin Jo vs. National Labor Relation Commission

G. R. No. 121605 – February 2, 2000
324 SCRA 437
Facts:
Private respondent Peter Mejila worked as barber to petitioners’ barbershop. The owners and
the barbers shared in the earnings of the barber shop. The barbers got two-thirds (2/3) of the
fee paid for every haircut or shaving job done, while one-third (1/3) went to the owners of the
shop. Later, petitioners designated private respondent as caretaker of the shop because the
former caretaker became physically unfit. Private respondent's duties as caretaker, in addition to
his being a barber, were: (1) to report to the owners of the barbershop whenever the
airconditioning units malfunctioned and/or whenever water or electric power supply was
interrupted, (2) to call the laundry woman to wash dirty linen; (3) to recommend applicants for
interview and hiring; (4) to attend to other needs of the shop. For this additional job, he was
given an honorarium equivalent to one-third (1/3) of the net income of the shop. When the
building occupied by the shop was demolished the barbershop closed. But soon a place nearby
was rented by petitioners and the barbershop resumed operations. Private respondent
continued to be a barber and caretaker, but with a fixed monthly honorarium as caretaker.
Subsequently, private respondent had an altercation with his co-barber. Consequently, private
respondent demanded payment for several thousand pesos as his separation pay and other
monetary benefits. Meanwhile, private respondent continued reporting for work at the
barbershop. But, later, he turned over the duplicate keys of the shop to the cashier and took
away all his belongings therefrom and began working as a regular barber at the newly opened
Barbershop. Subsequently, private respondent filed a complaint for illegal dismissal without
seeking reinstatement. The Labor Arbiter found that private respondent was an employee of
petitioners, and that private respondent was not dismissed but had left his job voluntarily
because of his misunderstanding with his co-worker. The Labor Arbiter dismissed the complaint,
but ordered petitioners to pay private respondent. Petitioners contend that public respondent
gravely erred in declaring that private respondent was their employee. They claim that private
respondent was their "partner in trade" whose compensation was based on a sharing
arrangement per haircut or shaving job done. They argue that private respondent's task as
caretaker could be considered an employment because the chores are very minimal.
Issue:
Whether or not there exists an employer-employee relationship between private respondent and
petitioners.
Held:
• The existence of 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 ample evidence. – At the outset, we
reiterate 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 ample evidence.
• The power of control refers to the existence of the power and not necessarily to the
actual exercise thereof. – In determining the existence of an employer-employee
relationship, the following elements are considered: (1) the selection and engagement of
the workers; (2) power of dismissal; (3) the payment of wages by whatever means; and (4)
the power to control the worker's conduct, with the latter assuming primacy in the overall
consideration. The power of control refers to the existence of the power and not necessarily
to the actual exercise thereof. It is not essential for the employer to actually supervise the
performance of duties of the employee; it is enough that the employer has the right to wield
that power.
• Absent a clear showing that a barbershop owner and a barber had intended to
pursue a relationship of industrial partnership, the Court entertains no doubt that the
latter was employed by the former as caretaker-barber. – Absent a clear showing that
petitioners and private respondent had intended to pursue a relationship of industrial
partnership, we entertain no doubt that private respondent was employed by petitioners as
caretaker-barber. Initially, petitioners, as new owners of the barbershop, hired private
respondent as barber by absorbing the latter in their employ. Undoubtedly, the services
performed by private respondent as barber is related to, and in the pursuit of the principal
 business activity of petitioners. Later on, petitioners tapped private respondent to serve
concurrently as caretaker of the shop. Certainly, petitioners had the power to dismiss
private respondent being the ones who engaged the services of the latter. In fact, private
respondent sued petitioners for illegal dismissal, albeit contested by the latter. As a
caretaker, private respondent was paid by petitioners wages in the form of honorarium,
originally, at the rate of one-third (1/3) of the shop's net income but subsequently pegged at
a fixed amount per month. As a barber, private respondent earned two-thirds (2/3) of the
fee paid per haircut or shaving job done. Furthermore, the following facts indubitably reveal
that petitioners controlled private respondent's work performance, in that: (1) private
respondent had to inform petitioners of the things needed in the shop; (2) he could only
recommend the hiring of barbers and masseuses, with petitioners having the final decision;
(3) he had to be at the shop at 9:00 a.m. and could leave only at 9:00 p.m. because he was
the one who opened and closed it, being the one entrusted with the key.7 These duties
were complied with by the private respondent upon instructions of petitioners. Moreover,
such task was far from being negligible as claimed by petitioners. On the contrary, it was
crucial to the business operation of petitioners as shown in the preceding discussion.
Hence, there was enough basis to declare private respondent an employee of petitioners.
Accordingly, there is no cogent reason to disturb the findings of the labor arbiter and NLRC
on the existence of employer-employee relationship between herein private parties.

4. Paguio transport vs. National Labor Relation Commission

G.R. No. 119500 – August 28, 1998
294 SCRA 657
Facts:
Complainant Wilfredo Melchor was hired by respondent company as a taxi driver under the
boundary system. He was engaged to drive the taxi unit assigned to him on a 24-hour schedule
per trip every two (2) days, for which he used to earn an average income from P500 to P700 per
trip, exclusive of the P650.00 boundary and other deductions imposed on him. Later,
complainant allegedly met a vehicular accident. After he submitted the traffic accident report to
the office of respondents, he was allegedly advised to stop working and have a rest. After
several days, he allegedly reported for work only to be told that his service was no longer
needed. Respondents for their part maintained that complainant was not illegally dismissed,
there being in the first place no employer-employee relationship between them.
Issue:
Whether or not there exists an employer-employee relation between petitioner and private
respondent.
Held:
• The relationship of taxi owners and taxi drivers is the same as that between jeepney
owners and jeepney drivers under the "boundary system." In both cases, the
employer-employee relationship was deemed to exist. – In Martinez v. National Labor
Relations Commission, this Court already ruled that the relationship of taxi owners and taxi
drivers is the same as that between jeepney owners and jeepney drivers under the
"boundary system." In both cases, the employer-employee relationship was deemed to
exist, viz.: The relationship between jeepney owners/operators on one hand and jeepney
drivers on the other under the boundary system is that of employer-employee and not of
lessor-lessee. . . In the lease of chattels[,] the lessor loses complete control over the chattel
leased . . . In the case of jeepney owners/operators and jeepney drivers, the former
exercise supervision and control over the latter. The fact that the drivers do not receive
fixed wages but get only the excess of that so-called boundary they pay to the
owner/operator is not sufficient to withdraw the relationship between them from that of
employer and employee. The doctrine is applicable in the present case. Thus, private
 respondents were employees. . . because they had been engaged to perform activities
which were usually necessary or desirable in the usual trade or business of the employer.

5. Insular life v National Labor Relation Commission

G.R. No. 84484 – November 15, 1989
179 SCRA 459
Facts:
Insular and private respondent entered into a contract whereby the latter was, among others,
authorized to solicit within the Philippines applications for insurance policies and annuities in
accordance with the existing rules and regulations of the Company and receive compensation,
in the form of commissions. Four years later, the parties entered into another contract — an
Agency Manager's Contract — and to implement his end of it Basiao organized an agency or
office while concurrently fulfilling his commitments under the first contract with the Company. the
Company terminated the Agency Manager's Contract. After vainly seeking reconsideration,
Basiao sued the Company in a civil action and this, he was later to claim, prompted the latter to
terminate also his engagement under the first contract and to stop payment of his commissions.
Basiao thereafter filed with the then Ministry of Labor a complaint against the Company and its
president. Without contesting the termination of the first contract, the complaint sought to
recover commissions allegedly unpaid thereunder, plus attorney's fees. The respondents
disputed the Ministry's jurisdiction over Basiao's claim, asserting that he was not the Company's
employee, but an independent contractor and that the Company had no obligation to him for
unpaid commissions under the terms and conditions of his contract. The Labor Arbiter to whom
the case was assigned found for Basiao. He ruled that the underwriting agreement had
established an employer-employee relationship between him and the Company, and this
conferred jurisdiction on the Ministry of Labor to adjudicate his claim.
Issue:
Whether or not there exists an employer-employee relation between petitioner and private
respondent.
Held:
• Not every form of control over the conduct of the party hired in relation to the service
rendered establishes employer-employee relationship. – It is true that the "control test"
expressed in the following pronouncement of the Court in the 1956 case of Viana vs. Alejo
Al-Lagadan: ... In determining the existence of employer-employee relationship, the
following elements are generally considered, namely: (1) the selection and engagement of
the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to
control the employees' conduct — although the latter is the most important element, has
been followed and applied in later cases, some fairly recent. Indeed, it is without question a
valid test of the character of a contract or agreement to render service. It should, however,
be obvious that not every form of control that the hiring party reserves to himself over the
conduct of the party hired in relation to the services rendered may be accorded the effect of
establishing an employer-employee relationship between them in the legal or technical
sense of the term. A line must be drawn somewhere, if the recognized distinction between
an employee and an individual contractor is not to vanish altogether. Realistically, it would
be a rare contract of service that gives untrammelled freedom to the party hired and
eschews any intervention whatsoever in his performance of the engagement.
• When an insurance agent is free to adopt his own selling methods or is free to sell
insurance at his own time, he is an independent contractor. – 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. The distinction acquires particular relevance in the case of an enterprise
affected with public interest, as is the business of insurance, and is on that account subject
to regulation by the State with respect, not only to the relations between insurer and insured
but also to the internal affairs of the insurance company. Rules and regulations governing
the conduct of the business are provided for in the Insurance Code and enforced by the
Insurance Commissioner. It is, therefore, usual and expected for an insurance company to
promulgate a set of rules to guide its commission agents in selling its policies that they may
not run afoul of the law and what it requires or prohibits. Of such a character are the rules
which prescribe the qualifications of persons who may be insured, subject insurance
applications to processing and approval by the Company, and also reserve to the Company
the determination of the premiums to be paid and the schedules of payment. None of these
really invades the agent's contractual prerogative to adopt his own selling methods or to sell
insurance at his own time and convenience, hence cannot justifiably be said to establish an
employer-employee relationship between him and the company.
• The respondents limit themselves to pointing out that Basiao's contract with the Company
bound him to observe and conform to such rules and regulations as the latter might from
time to time prescribe. No showing has been made that any such rules or regulations were
in fact promulgated, much less that any rules existed or were issued which effectively
controlled or restricted his choice of methods — or the methods themselves — of selling
insurance. Absent such showing, the Court will not speculate that any exceptions or
qualifications were imposed on the express provision of the contract leaving Basiao "... free
to exercise his own judgment as to the time, place and means of soliciting insurance.
• The Court, therefore, rules that under the contract invoked by him, Basiao was not an
employee of the petitioner, but a commission agent, an independent contractor whose claim
for unpaid commissions should have been litigated in an ordinary civil action. The Labor
Arbiter erred in taking cognizance of, and adjudicating, said claim, being without jurisdiction
to do so, as did the respondent NLRC in affirming the Arbiter's decision. This conclusion
renders it unnecessary and premature to consider Basiao's claim for commissions on its
merits.

6. Empermaco Abante Jr., vs. Lamadrid Bearing

G.R. No. 159890 – 28 May 2004
430 SCRA 368
Facts:
Petitioner was employed by respondent company as a salesman earning a commission of 3% of
the total paid-up sales. His average monthly income was more or less P16,000.00, but later was
increased. Aside from selling the merchandise of Respondent Corporation, he was also tasked
to collect payments from his various customers. Respondent corporation had complete control
over his work because he was frequently directed to report to a particular area for his sales and
collection activities, and occasionally required him to attend conferences regarding market
strategies. Petitioner was confronted by respondent Lamadrid over the bad accounts and
warned that if he does not issue his own checks to cover the said bad accounts, his
commissions will not be released and he will lose his job. Despite serious misgivings, he issued
his personal checks in favor of respondent corporation on condition that the same shall not be
deposited for clearing and that they shall be offset against his periodic commissions. Not
contented with the issuance of the foregoing checks as security for the bad accounts,
respondents "tricked" petitioner into signing two documents (Promissory Note and Deed of Real
Estate Mortgage). Later, while doing his usual rounds as commission salesman, petitioner was
handed by his customers a letter from the respondent company warning them not to deal with
petitioner since it no longer recognized him as a commission salesman. Petitioner thus filed a
complaint for illegal dismissal with money claims against respondent company and its president.
By way of defense, respondents countered that petitioner was not its employee but a freelance
salesman on commission basis, procuring and purchasing auto parts and supplies from the
latter on credit, consignment and installment basis and selling the same to his customers for
profit and commission of 3% out of his total paid-up sales.
Issue:
Whether or not there exists an employer-employee relation between petitioner and private
respondent.
Held:
• 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. – 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
National Labor Relations Commission shall be accorded not only respect but even finality
when supported by substantial evidence. The decisive factor in such finality is the presence
of substantial evidence to support said finding, otherwise, such factual findings cannot be
accorded finality by this Court. Considering the conflicting findings of fact by the Labor
Arbiter and the NLRC as well as the Court of Appeals, there is a need to reexamine the
records to determine with certainty which of the propositions espoused by the contending
parties is supported by substantial evidence.
• 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. – We are called upon to resolve the issue of whether or not petitioner, as a
commission salesman, is an employee of respondent corporation. To ascertain the
existence of an employer-employee relationship, jurisprudence has invariably applied the
four-fold test, namely: (1) the manner of selection and engagement; (2) the payment of
wages; (3) the presence or absence of the power of dismissal; and (4) the presence or
absence of the power of control. Of these four, the last one is the most important. 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.
• An employer-employee relationship is notably absent in the case of a commission
salesman who received 3% commission of his gross sales, where no quota was
imposed on him by the alleged employer, he was not required to report to the office
at any time or submit any periodic written report on his sales performance and
activities, and he was not designated by respondent to conduct his sales activities at
any particular or specific place. – Applying the aforementioned test, an employer-
employee relationship is notably absent in this case. It is undisputed that petitioner Abante
was a commission salesman who received 3% commission of his gross sales. Yet no quota
was imposed on him by the respondent; such that a dismal performance or even a dead
result will not result in any sanction or provide a ground for dismissal. He was not required
to report to the office at any time or submit any periodic written report on his sales
performance and activities. Although he had the whole of Mindanao as his base of
operation, he was not designated by respondent to conduct his sales activities at any
particular or specific place. He pursued his selling activities without interference or
supervision from respondent company and relied on his own resources to perform his
functions. Respondent company did not prescribe the manner of selling the merchandise;
he was left alone to adopt any style or strategy to entice his customers. While it is true that
 he occasionally reported to the Manila office to attend conferences on marketing strategies,
it was intended not to control the manner and means to be used in reaching the desired
end, but to serve as a guide and to upgrade his skills for a more efficient marketing
performance. As correctly observed by the appellate court, reports on sales, collection,
competitors, market strategies, price listings and new offers relayed by petitioner during his
conferences to Manila do not indicate that he was under the control of respondent.
Moreover, petitioner was free to offer his services to other companies engaged in similar or
related marketing activities as evidenced by the certifications issued by various customers.

7. Encyclopedia Britannica vs. National Labor Relation Commission

G.R. No. 87098 – November 4, 1996
264 SCRA 1
Facts:
Private respondent was a Sales Division Manager of petitioner and was in charge of selling
petitioner's products through some sales representatives. As compensation, private respondent
received commissions from the products sold by his agents. He was also allowed to use
petitioner's name, goodwill and logo. It was, however, agreed upon that office expenses would
be deducted from private respondent's commissions. Petitioner would also be informed about
appointments, promotions, and transfers of employees in private respondent's district. Later,
private respondent resigned from office to pursue his private business. Thereafter, he filed a
complaint against petitioner Encyclopaedia Britannica with the Department of Labor and
Employment, claiming for non-payment of separation pay and other benefits, and also illegal
deduction from his sales commissions. Petitioner alleged that complainant was not its employee
but an independent dealer authorized to promote and sell its products and in return, received
commissions therefrom. Limjoco did not have any salary and his income from the petitioner
company was dependent on the volume of sales accomplished. He also had his own separate
office, financed the business expenses, and maintained his own workforce. The salaries of his
secretary, utility man, and sales representatives were chargeable to his commissions. Thus,
petitioner argued that it had no control and supervision over the complainant as to the manner
and means he conducted his business operations. The latter did not even report to the office of
the petitioner and did not observe fixed office hours. Consequently, there was no employer-
employee relationship.
Issue:
Whether or not there exists an employer-employee relation between petitioner and private
respondent.
Held:
• Elements of employer-employee relationship. – In determining the existence of an
employer-employee relationship the following elements must be present: 1) selection and
engagement of the employee; 2) payment of wages; 3) power of dismissal; and 4) the
power to control the employee's conduct. Of the above, control of employee's conduct 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 to be achieved, but also the manner and
means used in reaching that end.
• In petitioner’s business of selling encyclopaedias and books, the marketing of these
products was done through dealership agreements – the sales operations were
primarily conducted by independent authorized agents who did not receive regular
compensations but only commissions based on the sales of the products. – The fact
that petitioner issued memoranda to private respondents and to other division sales
managers did not prove that petitioner had actual control over them. The different
 memoranda were merely guidelines on company policies which the sales managers follow
and impose on their respective agents. It should be noted that in petitioner's business of
selling encyclopedias and books, the marketing of these products was done through
dealership agreements. The sales operations were primarily conducted by independent
authorized agents who did not receive regular compensations but only commissions based
on the sales of the products. These independent agents hired their own sales
representatives, financed their own office expenses, and maintained their own staff. Thus,
there was a need for the petitioner to issue memoranda to private respondent so that the
latter would be apprised of the company policies and procedures. Nevertheless, private
respondent Limjoco and the other agents were free to conduct and promote their sales
operations. The periodic reports to the petitioner by the agents were but necessary to
update the company of the latter's performance and business income.
• In ascertaining whether the relationship is that of employer-employee or one of
independent contractor, each case must be determined by its own facts and all
features of the relationship are to be considered. – In ascertaining whether the
relationship is that of employer-employee or one of independent contractor, each case must
be determined by its own facts and all features of the relationship are to be considered. The
records of the case at bar showed that there was no such employer-employee relationship.
• 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 in turn is compensated
according to the result of his efforts and not the amount thereof, we should not find
that the relationship of employer and employee exists. – As stated earlier, "the element
of control is absent; 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 in turn is
compensated according to the result of his efforts and not the amount thereof, we should
not find that the relationship of employer and employee exists. In fine, there is nothing in the
records to show or would "indicate that complainant was under the control of the petitioner"
in respect of the means and methods in the performance of complainant's work.

8. Mamerto Besa vs. Cresenciano Trajano

G.R. No. 72409 – December 29, 1986
146 SCRA 501
Facts:
Private respondent KAMPIL, a legitimate labor union, filed a petition for Certification Election to
which herein petitioner Besa opposed on the ground that no employer-employee relationship
existed between him and the petition’s signatories. The Med-Arbiter and BLR Director both ruled
in favor of the union which granted the holding of the certification election. Meanwhile, petitioner
Besa filed actions before the Court and with the Med-Arbiter contending that the 17 shoeshiners
who are members of the union cannot be considered employees and thus has no standing to
vote in the certification election.
Issue:
Whether or not an employer-employee relationship exists between herein petitioner and the
seventeen (17) shoeshiners-members of the respondent union
Held:
• The shoe shiner is distinct from a piece worker because while the latter is paid for work
accomplished, he does not, however, contribute anything to the capital of the employer
other than his service. It is the employer of the piece worker who pays his wages, while the
shoe shiner in this instance is paid directly by his customer. The piece worker is paid for
work accomplished without regard or concern to the profit as derived by his employer, but in
the case of the shoe shiners, the proceeds derived from the trade are always divided share
and share alike with respondent BESA. The shoe shiner can take his share of the proceeds
 everyday if he wanted to or weekly as is the practice of qqqBesas The employer of the
piece worker supervises and controls his work, but in the case of the shoe shiner,
respondent BESA does not exercise any degree of control or supervision over their person
and their work. All these are not obtaining in the case of a piece worker as he is in fact an
employee in contemplation of law, distinct from the shoe shiner in this instance who, in
relation to respondent MAMERTO B. BESA, is a partner in the trade. Consequently,
employer-employee relationship between members of the Petitioning union and respondent
MAMERTO B. BESA being absent the latter could not be held guilty of the unfair tabor
practice acts imputed against him.
• The Office of the Solicitor General as counsel for public respondent agrees that in the
present case, no employer-employee relationship exists.
• A basic factor underlying the exercise of rights under the Labor Code is the status of
employment. It is important in the determination of who shall be included in a proposed
bargaining unit because it is sine qua non. The fundamental and essential condition that a
bargaining unit be composed of employees. Failure to establish this juridical relationship
between the union members and the employer affects the legality of the union itself. It
means the ineligibility of the union members to present a petition for certification election as
well as to vote therein. Existence of employer-employee relationship is determined by the
following elements, namely, a] selection and engagement of the employee; b] payment of
wages; c] powers of dismissal; and d] power to control the employee's conduct although the
latter is the most important element

9. Ushio Marketing vs. National Labor Relation Commission

G.R. No. 124551 – August 28, 1998
294 SCRA 673
Facts:
Private respondent was an electrician who worked within the premises of petitioner’s car
accessory shop. private respondent filed a complaint for illegal dismissal, non-payment of
overtime pay, holiday pay, and other benefits against petitioner Ushio Marketing. In Petitioner's
Motion to Dismiss, she alleged that it was a single proprietorship engaged in the business of
selling automobile spare parts and accessories. Petitioner claimed that private respondent was
not among her employees but a freelance operator who wait[ed] on the shop's customers
should the latter require his services. In stark contrast to the Company's regular employees,
there are independent, freelance operators who are permitted by the Company to position
themselves proximate to the Company premises. These independent operators are allowed by
the Company to wait on Company customer who would be requiring their services. In exchange
for the privileges of favorable recommendation by the Company and immediate access to
customers in need of their services, these independent operators allow the Company to collect
their service fee from the customer and this fee is given back to the independent operator at the
end of the week. Complainant was one such independent, free lance operator. He was allowed
by the Company to provide his services to the customers of the Company who were in need of
such services. He received his fees indirectly from the Company out of the fees paid by the
customers during a given week. In doing his job, he was under the direct supervision and
control of the customer. He was under no compulsion whatsoever to report to the Company on
a regular basis. He was not subject to any disciplinary measures for his work conduct.
Furthermore, he was free to position himself near other car accessory shops to offer his
services to customers of said shops, as he is in fact had done on various occasions prior to the
filing of this complaint.
Issue:
Whether or not there is an existence of an employer-employee relationship between petitioner
and private respondent.
Held:
• The existence of an employer-employee relationship between the parties here was
not proven by substantial evidence. – We hasten to add, however, that even if the NLRC
had taken into account the various pleadings filed before it, as the same malady
characterized those filed by private respondent, the conclusion would still be inevitable that
the existence of an employer-employee relationship between the parties here was not
proven by substantial evidence.
• Factors to be considered in determining the existence of an employer-employee
relationship. – The factors to be considered in determining the existence of an employer-
employee relationship are: (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. 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. –
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.

10. Sameer Overseas vs. Joy C. Cabiles

G.R. No. 170139 – August 05, 2014
732 SCRA 22, 42-44
Facts:
Petitioner is a recruitment and placement agency to which respondent submitted her application
for a quality control job in Taiwan. Joy’s application was accepted and she was later asked to
sign a one year contract. Joy was then deployed to Taiwan and was deployed to work for
Wacoal. A month later, Petitioner was informed that Respondent was terminated. Later, Joy
filed a complaint with the NLRC against petitioner and Wacoal. She claimed that she was
illegally dismissed. She asked for the return of her placement fee, the withheld amount for
repatriation costs, payment of her salary for 23 months as well as moral and exemplary
damages. She identified Wacoal as Sameer Overseas Placement Agency’s foreign principal.
Petitioner alleged that respondent's termination was due to her inefficiency, negligence in her
duties, and her failure to comply with the work requirements of her foreign employer. Petitioner
added that Wacoal's accreditation with petitioner had already been transferred to the Pacific
Manpower. Thus, petitioner asserts that it was already substituted by Pacific Manpower. Pacific
Manpower moved for the dismissal of petitioner’s claims against it. It alleged that there was no
employer-employee relationship between them. Therefore, the claims against it were outside
the jurisdiction of the Labor Arbiter. Pacific Manpower argued that the employment contract
should first be presented so that the employer’s contractual obligations might be identified. It
further denied that it assumed liability for petitioner’s illegal acts.
Issue:
Whether or not the local recruitment agency and the foreign employer may be held liable for
Respondent’s claim.
Held:
• Overseas Filipino Workers; Solidary Obligations; Migrant Workers and Overseas
Filipinos Act of 1995 (RA 8042); Section 10 of the Migrant Workers and Overseas
Filipino Act of 1995 provides that the foreign employer and the local employment
agency are jointly and severally liable for money claims including claims arising out
of an employer-employee relationship and/or damages. – Section 10 of the Migrant
Workers and Overseas Filipinos Act of 1995 provides that the foreign employer and the
 local employment agency are jointly and severally liable for money claims including claims
arising out of an employer-employee relationship and/or damages. This section also
provides that the performance bond filed by the local agency shall be answerable for such
money claims or damages if they were awarded to the employee. This provision is in line
with the state’s policy of affording protection to labor and alleviating workers’ plight. In
overseas employment, the filing of money claims against the foreign employer is attended
by practical and legal complications.1âwphi1 The distance of the foreign employer
alonemakes it difficult for an overseas worker to reach it and make it liable for violations of
the Labor Code. There are also possible conflict of laws, jurisdictional issues, and
procedural rules that may be raised to frustrate an overseas worker’sattempt to advance his
or her claims.

11. Paul Santiago vs. CF Shark Crew

G.R. No. 162419 – July 10, 2007
527 SCRA 165
Facts:
Petitioner had been working as a seafarer for Smith Bell Management, Inc. (respondent) for
about five (5) years. Petitioner was to be deployed on board the "MSV Seaspread" which was
scheduled to leave the port of Manila for Canada. A week before the scheduled date of
departure, respondent’s Vice President sent a facsimile message to the captain of "MSV
Seaspread which warns them that Petitioner might jump ship to Canada just like his brother did.
Petitioner was thus told that he would not be leaving for Canada anymore, but he was
reassured that he might be considered for deployment at some future date. Petitioner then filed
a complaint for illegal dismissal. The Labor Arbiter ruled that the employment contract remained
valid but had not commenced since petitioner was not deployed. According to her, respondent
violated the rules and regulations governing overseas employment when it did not deploy
petitioner, causing petitioner to suffer actual damages representing lost salary income for nine
(9) months and fixed overtime fee.
Issue:
Whether or not there existed an employer-employee relationship between Petitioner and
Respondent.
Held:
• Considering that petitioner was not able to depart from the airport or seaport in the
point of hire, the employment contract did not commence and no employer-employee
relationship was created between the parties. – There is no question that the parties
entered into an employment contract on 3 February 1998, whereby petitioner was
contracted by respondent to render services on board "MSV Seaspread" for the
consideration of US$515.00 per month for nine (9) months, plus overtime pay. However,
respondent failed to deploy petitioner from the port of Manila to Canada. Considering that
petitioner was not able to depart from the airport or seaport in the point of hire, the
employment contract did not commence, and no employer-employee relationship was
created between the parties
• Distinction must be made between the perfection of the employment contract and the
commencement of the employer-employee relationship; even before the start of any
employer0employee relationship, contemporaneous with the perfection of the
employment contract was the birth of certain rights and obligations, the breach of
which may give rise to a cause of action against the erring party. – a distinction must
be made between the perfection of the employment contract and the commencement of the
employer-employee relationship. The perfection of the contract, which in this case
coincided with the date of execution thereof, occurred when petitioner and respondent
agreed on the object and the cause, as well as the rest of the terms and conditions therein.
 The commencement of the employer-employee relationship, as earlier discussed, would
have taken place had petitioner been actually deployed from the point of hire. Thus, even
before the start of any employer-employee relationship, contemporaneous with the
perfection of the employment contract was the birth of certain rights and obligations, the
breach of which may give rise to a cause of action against the erring party. Thus, if the
reverse had happened, that is the seafarer failed or refused to be deployed as agreed
upon, he would be liable for damages.
• Neither the manning agent nor the employer can simply prevent a seafarer from
being deployed without a valid reason; respondent unilaterally and unreasonably
reneged on its obligation to deploy petitioner and must therefore answer for the
actual damage he suffered. – While the POEA Standard Contract must be recognized and
respected, neither the manning agent nor the employer can simply prevent a seafarer from
being deployed without a valid reason. Respondent’s act of preventing petitioner from
departing the port of Manila and boarding "MSV Seaspread" constitutes a breach of
contract, giving rise to petitioner’s cause of action. Respondent unilaterally and
unreasonably reneged on its obligation to deploy petitioner and must therefore answer for
the actual damages he suffered.
• The fact that the POEA rules are silent as to the payment of damages to the affected
seafarer does not mean that the seafarer is precluded from claiming the same. – We
take exception to the Court of Appeals’ conclusion that damages are not recoverable by a
worker who was not deployed by his agency. The fact that the POEA Rules are silent as to
the payment of damages to the affected seafarer does not mean that the seafarer is
precluded from claiming the same. The sanctions provided for non-deployment do not end
with the suspension or cancellation of license or fine and the return of all documents at no
cost to the worker. They do not forfend a seafarer from instituting an action for damages
against the employer or agency which has failed to deploy him.
• Despite the absence of an employer-employee relationship between petitioner and
respondent, the Court rules that the NLRC has jurisdiction over petitioner’s
complaint. – Despite the absence of an employer-employee relationship between
petitioner and respondent, the Court rules that the NLRC has jurisdiction over petitioner’s
complaint. The jurisdiction of labor arbiters is not limited to claims arising from employer-
employee relationships. Section 10 of R.A. No. 8042 (Migrant Workers Act), provides that:
Sec. 10. Money Claims. – Notwithstanding any provision of law to the contrary, the Labor
Arbiters of the National Labor Relations Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety (90) calendar days after the filing of
the complaint, the claims arising out of an employer-employee relationship or by virtue of
any law or contract involving Filipino workers for overseas deployment including
claims for actual, moral, exemplary and other forms of damages. Since the present
petition involves the employment contract entered into by petitioner for overseas
employment, his claims are cognizable by the labor arbiters of the NLRC.

12. Antonio Serrano vs. Gallant Maritime Services

G.R. No. 167614 – March 24, 2009
582 SCRA 254
Facts:
Petitioner was hired by respondents under a Philippine Overseas Employment Administration
(POEA)-approved Contract of Employment. On the date of his departure, petitioner was
constrained to accept a downgraded employment contract for the position of Second Officer
upon the assurance and representation of respondents that he would be made Chief Officer
later. Respondents did not deliver on their promise to make petitioner Chief Officer. Hence,
petitioner refused to stay on as Second Officer and was repatriated to the Philippines. He had
served only two (2) months and seven (7) days of his contract, leaving an unexpired portion of
nine (9) months and twenty-three (23) days. Petitioner filed with the Labor Arbiter (LA) a
Complaint against respondents for constructive dismissal and for payment of his money claims.
In awarding petitioner a lump-sum salary, the LA based his computation on the salary period of
three months only -- rather than the entire unexpired portion.
Issue:
Whether or not Sec. 10 of Republic Act No. 8042 is unconstitutional.
Held:
• Section 18, Article II and Section 3, Article XIII accord all members of the labor
sector, without distinction as to place of deployment, full protection of their rights
and welfare. – Section 18, Article II and Section 3, Article XIII accord all members of the
labor sector, without distinction as to place of deployment, full protection of their rights and
welfare. To Filipino workers, the rights guaranteed under the foregoing constitutional
provisions translate to economic security and parity: all monetary benefits should be equally
enjoyed by workers of similar category, while all monetary obligations should be borne by
them in equal degree; none should be denied the protection of the laws which is enjoyed
by, or spared the burden imposed on, others in like circumstances.
• Prior to RA 8042, all OFWs, regardless of contract periods or the unexpired portions
thereof, were treated alike in terms of the computation of their monetary benefits in
case of illegal dismissal. Their claims were subjected to a uniform rule of
computations; their basic salaries multiplied by the entire unexpired portion of their
employment contract. – It is plain that prior to R.A. No. 8042, all OFWs, regardless of
contract periods or the unexpired portions thereof, were treated alike in terms of the
computation of their monetary benefits in case of illegal dismissal. Their claims were
subjected to a uniform rule of computation: their basic salaries multiplied by the entire
unexpired portion of their employment contracts. The enactment of the subject clause in
R.A. No. 8042 introduced a differentiated rule of computation of the money claims of
illegally dismissed OFWs based on their employment periods, in the process singling out
one category whose contracts have an unexpired portion of one year or more and
subjecting them to the peculiar disadvantage of having their monetary awards limited to
their salaries for 3 months or for the unexpired portion thereof, whichever is less, but all the
while sparing the other category from such prejudice, simply because the latter's unexpired
contracts fall short of one year.
• With the enactment of RA 8042, specifically the adoption of the subject clause,
illegally dismissed OFWs, with an unexpired portion of one year or more in their
employment contract have since been differently treated in that their money claims
are subject to a 3-month cap, whereas no such limitation is imposed on local
workers with fixed-term employment. – prior to R.A. No. 8042, OFWs and local workers
with fixed-term employment who were illegally discharged were treated alike in terms of the
computation of their money claims: they were uniformly entitled to their salaries for the
entire unexpired portions of their contracts. But with the enactment of R.A. No. 8042,
specifically the adoption of the subject clause, illegally dismissed OFWs with an unexpired
portion of one year or more in their employment contract have since been differently treated
in that their money claims are subject to a 3-month cap, whereas no such limitation is
imposed on local workers with fixed-term employment.
• The Supreme Court concludes that the subject clause contains a suspect
classification in that, in the computation of the monetary benefits of fixed-term
employees who are illegally discharged, it imposes a 3-month cap on the claim of
OFWs, with an unexpired portion of one year or more in their contracts, but none on
the claims of other OFWs or local workers with fixed-term employment. The subject
 clause singles out one classification of OFWs, and burdens it with a peculiar
disadvantage. – The Court concludes that the subject clause contains a suspect
classification in that, in the computation of the monetary benefits of fixed-term employees
who are illegally discharged, it imposes a 3-month cap on the claim of OFWs with an
unexpired portion of one year or more in their contracts, but none on the claims of other
OFWs or local workers with fixed-term employment. The subject clause singles out one
classification of OFWs and burdens it with a peculiar disadvantage. There being a suspect
classification involving a vulnerable sector protected by the Constitution, the Court now
subjects the classification to a strict judicial scrutiny, and determines whether it serves a
compelling state interest through the least restrictive means.

13. Feagle Construction vs. Gavino Gayda

G.R. No. 82310 – June 18, 1990
186 SCRA 589
Facts:
Private respondents have been employed with Algosaibi-Bison, Ltd. in Saudi Arabia for three to
five years working on construction projects. Later, Algosaibi-Bison, Ltd. started encountering
financial difficulties. Consequently, the remittance of the allotments of the beneficiaries of
Filipino workers employed with Algosaibi-Bison, Ltd. was delayed. Although all the allotments
for 1983 and 1984 were eventually paid, all these payments were delayed. During all these
years petitioner never charged Filipino workers like private respondents a single centavo for
sending them to work for Algosaibi-Bison, Ltd. Petitioner advanced all mobilization expenses out
of its funds. Because of its financial difficulties, Algosaibi-Bison, Ltd. could not even reimburse
petitioner for the mobilization expenses petitioner advanced. Because of this development,
petitioner decided to stop sending back Filipino workers to work with Algosaibi-Bison, Ltd. Later,
the Filipino workers employed with Algosaibi-Bison, Ltd. who had returned requested petitioner
to return them to their job site in Saudi Arabia. They assured petitioner that they were willing to
assume the risk in case the remittance of their salaries would be delayed. They emphasized
that they were willing to sign a written statement indicating that they would not hold petitioner
liable for any delay or non-payment of their salaries and any amounts due them from Algosaibi-
Bison, Ltd. In accordance with their commitment, the said workers, including private
respondents, signed a Statement. Moreover, the workers stated they would seek the help of
Saudi labor authorities individually in the event they would not be paid.
Issue:
Whether or not Petitioner should be held jointly and severally liable with Algosaibi-Bison, Ltd.
Held:
• As a rule, a recruiter is solidarily liable with unpaid wages of workers sent abroad.
However, case at bar is an exception because it was the workers who persuaded
recruiter to send them back abroad despite knowledge of foreign employer might not
pay their wages and they agreed not to hold recruiter responsible therefor. – We
simply cannot ignore that petitioner was reluctant to send the private respondents back to
Saudi Arabia because as early as 1983, the Algosaibi-Bison, Ltd. started encountering
financial difficulties because of the drop in the price of oil. Private respondents were the
ones who insisted that they be allowed to resume employment. They were informed of the
risks involved relating to the financial reverses of the employer. They insisted to return to
Saudi Arabia and they agreed to sign individual statements, which they did, to the effect
that each one of them did not hold petitioner responsible for delay or non-payment of their
salaries and any amounts due them from Algosaibi-Bison, Ltd. These individual statements
voluntary signed by the private respondents to convince the reluctant petitioner to send
them back to Saudi Arabia, notwithstanding their knowledge of the financial reverses of this
employer, are eloquent individual waivers of their rights against petitioner. They were
 informed of the risk involved in returning to an employer in serious financial distress. They
insisted on returning to work, even persuading petitioner to allow them to do so, by waiving
the possible liability of petitioner. Under these circumstances, when private respondents
were insisting to return to work despite the warning, We cannot consider their written
waivers as to petitioner's responsibilities void. They were not victims of deceit or deception.
They entered into those waivers with open eyes and clear minds. They were aware of the
imminent danger and the great risks involved in their renewed ventures. We also consider
that as of record in the past, petitioner never took advantage of private respondents. They
were always treated fairly and in accordance with law. Private respondents did not question
the good faith of Petitioner. Their former employer Algosaibi-Bison, Ltd. went into
bankruptcy in 1986 and petitioner had nothing to do with that. Private respondents filed their
claims directly with the Liquidator of their former employer Algosaibi-Bison, Ltd. They were
given certificates of the amounts due them, to be given preference under the laws of Saudi
Arabia. They were to be paid directly, again without participation of the petitioner. Petitioner
wrote the Liquidator just to help private respondents, so that their claims may be expedited.

14. Prime marine services vs. National Labor Relation Commission

G.R. No. 97945 – October 8, 1998
297 SCRA 394
Facts:
Private respondent was recruited to work as a Tug Master Arabian Gulf by R & R Management
for a period of 18 months. Private respondent's employment was, however, preterminated
allegedly on the ground that he was incompetent, and thereafter was repatriated to the
Philippines. When private respondent reviewed his employment papers, he discovered that
while R & R Management had acted as recruitment agency in processing his application, it was
actually petitioner Prime Marine Services, Inc., as deployment agent, which had processed his
papers and facilitated his going abroad. Further investigation showed that R & R Management
was not licensed to recruit workers for overseas employment. Accordingly, private respondent
filed a complaint before the Philippine Overseas Employment Agency for illegal dismissal,
underpayment of salaries, and recruitment violations against petitioner, R & R Management,
and Arabian Gulf. Petitioner denied that there was any employer-employee relationship between
it and private respondent. It pointed out that private respondent admitted he had applied with
and paid his placement fee to R & R Management. Petitioner likewise denied that it had any part
in the processing of private respondent's papers and argued that only Arabian Gulf and R & R
Management should be held liable to private respondent. For this reason, petitioner filed a
cross-claim against R & R Management seeking reimbursement for any amount which petitioner
may be held liable for to private respondent. R & R Management, on the other hand, averred
that it referred private respondent to petitioner in order for the latter to facilitate private
respondent's employment abroad and consequently worked in conjunction with petitioner in
processing private respondent's deployment.
Issue:
Whether or not Petitioner should be held liable for private respondent’s claims.
Held:
• A manning agency cannot file a cross-claim against a recruitment agency where a
worker’s claim is founded on the fact that both agencies and not one alone
processed such worker’s recruitment and deployment abroad. – As to petitioner's
second assignment of error, such should be dismissed as its solidary liability with R & R
Management and Arabian Gulf for private respondent's claims is founded on the fact that
both petitioner and R & R Management, and not the latter alone, processed private
respondent's recruitment and deployment abroad.
• Every applicant seeking a license or authority to operate a private employment,
recruitment, or manning agency must submit, among others, a verified undertaking
stating that the applicant shall assume joint and solidary liability with the employer
for all claims and liabilities which may arise in connection with the implementation of
the contract of employment. – There is no question that a private manning agency, such
as petitioner, can be held liable for private respondent's claims. The Rules and Regulations
of the POEA expressly provide that every applicant seeking a license or authority to operate
a private employment, recruitment, or manning agency must submit, among others: d. A
verified undertaking stating that the applicant: x x x (3) shall assume joint and solidary
liability with the employer for all claims and liabilities which may arise in connection with the
implementation of the contract of employment.

15. Herminigildo Ilas vs. National Labor Relation Commission

G.R. Nos. 90394-97 – 7 February 1991
193 SCRA 682
Facts:
Petitioners applied for overseas employment in Doha, Qatar, with CBT/Shiek International, an
unlicensed recruitment agency, under the management of spouses Ngoho. To enable them to
leave, they were assisted by Eddie Sumaway and Erlinda Espeno, the latter being a liaison
officer of private respondent All Seasons Manpower International Services, a licensed
placement agency. Petitioners filed their application papers and paid their placement fees with
the Ngohos. However, it was Espeno who processed their papers and gave them travel exit
passes (TEPS). They were made to sign two-year contracts of employment but they were not
given copies thereof. Subsequently, they were deployed to Doha, Qatar, where they worked for
four (4) months without being paid. They sought the assistance of the Philippine Embassy and
were able to come home to the Philippines with the help of the Philippine Overseas Employment
Administration (POEA). Hence, they filed a complaint to recover their unpaid salaries and for
wages covering the unexpired portion of their contracts against private respondent. Later, the
POEA rendered a decision ordering the respondent to refund to complainants and, among
others, dismissing the claims for the salaries corresponding to the unexpired portion of the
complainant's contracts. Both parties appealed to public respondent National Labor Relations
Commission (NLRC) which in due course rendered a decision modifying the appealed decision
to the effect that petitioners were adjudged entitled to their four (4) months unpaid salaries to be
paid by private respondent but the refund of placement fees was deleted. A motion for
reconsideration thereof was filed by private respondent. Subsequently, a decision was rendered
by public respondent setting aside its ealier decision and dismissing the case for lack of merit.
Issue:
Whether or not public respondent committed a grave abuse of discretion in setting aside its
decision.
Held:
• It is settled that the Court is not a trier of facts and that the findings of facts of
administrative bodies shall not be disturbed on appeal unless it is shown that it
committed a grave abuse of discretion or otherwise acted without jurisdiction or in
excess of its jurisdiction. – No rule is more settled than that this Court is not a trier of
facts and that the findings of facts of administrative bodies, as public respondent, shall not
be disturbed on appeal unless it is shown that it committed a grave abuse of discretion or
otherwise acted without jurisdiction or in excess of its jurisdiction. In this case, petitioners
failed to discharge their burden to warrant a departure from this rule.

16. JMM Promotion vs. Court of Appeals

G.R. No. 120095 – August 5, 1996
 260 SCRA 319
Facts:
Following the much-publicized death of Maricris Sioson, former President Corazon C. Aquino
ordered a total ban against the deployment of performing artists to Japan and other foreign
destinations. The ban was, however, rescinded after leaders of the overseas employment
industry promised to extend full support for a program aimed at removing kinks in the system of
deployment. In its place, the government, through the Secretary of Labor and Employment,
subsequently issued Department Order No. 28, creating the Entertainment Industry Advisory
Council (EIAC), which was tasked with issuing guidelines on the training, testing certification
and deployment of performing artists abroad.
Issue:
Whether or not the issued Department Orders violated the constitutional right to travel and the
constitutional right to life liberty and property.
Held:
• Apart from the State’s police power, the Constitution itself mandates government to
extend the fullest protection to our overseas workers. – In any event, apart from the
State's police power, the Constitution itself mandates government to extend the fullest
protection to our overseas workers. The basic constitutional statement on labor, embodied
in Section 18 of Article II of the Constitution provides: Sec. 18. The State affirms labor as a
primary social economic force. It shall protect the rights of workers and promote their
welfare. More emphatically, the social justice provisions on labor of the 1987 Constitution in
its first paragraph states: The State shall afford full protection to labor, local and overseas,
organized and unorganized and promote full employment and equality of employment
opportunities for all.
• Protection to labor does not indicate promotion of employment alone. – Obviously,
protection to labor does not indicate promotion of employment alone. Under the welfare and
social justice provisions of the Constitution, the promotion of full employment, while
desirable, cannot take a backseat to the government's constitutional duty to provide
mechanisms for the protection of our workforce, local or overseas.
• No right is absolute, and the proper regulation of a profession, calling, business or
trade has always been upheld as a legitimate subject of a valid exercise of the police
power by the state. – Nevertheless, no right is absolute, and the proper regulation of a
profession, calling, business or trade has always been upheld as a legitimate subject of a
valid exercise of the police power by the state particularly when their conduct affects either
the execution of legitimate governmental functions, the preservation of the State, the public
health and welfare and public morals. According to the maxim, sic utere tuo ut alienum non
laedas (use your own property in such a manner as not to injure that of another), it must of
course be within the legitimate range of legislative action to define the mode and manner in
which every one may so use of his own property so as not to pose injury to himself or
others.
• So long as professionals and other workers meet reasonable regulatory standards
no such deprivation exists. – Locally, the Professional Regulation Commission has
began to require previously licensed doctors and other professionals to furnish
documentary proof that they has either re-trained or had undertaken continuing education
courses as a requirement for renewal of their licenses. It is not claimed that these
requirements pose an unwarranted deprivation of a property right under the due process
clause. So long as professionals and other workers meet reasonable regulatory standards
no such deprivation exists.

17. Marcial Gu-miro vs. Rolando Adorable

 G.R. No. 160952 – August 20, 2004
437 scra 162
Facts:
Petitioner was formerly employed as a Radio Officer of respondent which acted for and in behalf
of its principal Bergesen D.Y. ASA, on board its different vessels. Respondent company
traditionally gives an incentive bonus termed as Re-employment Bonus to employees who
decide to rejoin the company after the expiration of their employment contracts. After the
expiration of petitioner's contract, the same was renewed by respondent company. Later,
petitioner's services were terminated due to the installation of labor saving devices which made
his services redundant. Upon his forced separation from the company, petitioner requested that
he be given the incentive bonus plus the additional allowances he was entitled to. Respondent
company, however, refused to accede to his request.
Issue:
Whether or not petitioner should be considered a regular employee of respondent company.
Held:
• Should doubts exist between the evidence presented by the employer and the
employee, the scales of justice must be tilted in favour of the latter (employee). – We
find that respondent company's failure to controvert the allegation, when it had the
opportunity and resources to do so, works in favor of petitioner. Time and again we have
held that should doubts exist between the evidence presented by the employer and the
employee, the scales of justice must be tilted in favor of the latter. Moreover, the law
creates the presumption that evidence willfully suppressed would be adverse if produced.
• Seafarers are not considered regular employees; the exigencies of their work
necessitates that they be employed on a contractual basis. – Clearly, petitioner cannot
be considered as a regular employee notwithstanding that the work he performs is
necessary and desirable in the business of respondent company. As expounded in the
above-mentioned Millares Resolution, an exception is made in the situation of seafarers.
The exigencies of their work necessitates that they be employed on a contractual basis.
Thus, even with the continued re-hiring by respondent company of petitioner to serve as
Radio Officer onboard Bergesen's different vessels, this should be interpreted not as a
basis for regularization but rather a series of contract renewals sanctioned under the
doctrine set down by the second Millares case. If at all, petitioner was preferred because of
practical considerations—namely, his experience and qualifications. However, this does not
alter the status of his employment from being contractual.

18. Doulas Millares vs. National Labor Relation Commission

G.R. No. 110524 - July 29, 2002
385 SCRA 306, 318
Facts:
Petitioner was employed by private respondent ESSO through its local manning agency, private
respondent Trans-Global. He was promoted as Chief Engineer which position he occupied until
he opted to retire. When petitioner applied for a leave of absence, private respondent Trans-
Global, approved the request for leave of absence. Later, petitioner wrote Esso International
informing him of his intention to avail of the optional retirement plan considering that he had
already rendered more than twenty (20) years of continuous service. Respondent Esso denied
petitioner’s request for optional retirement on the following grounds, to wit: (1) he was employed
on a contractual basis; (2) his contract of enlistment (COE) did not provide for retirement before
the age of sixty (60) years; and (3) he did not comply with the requirement for claiming benefits
under the CEIP, i.e., to submit a written advice to the company of his intention to terminate his
employment within thirty (30) days from his last disembarkation date.
Issue:
Whether or not petitioner shall be considered a regular employee for his continuous or unbroken
years of service.
Held:
• Classification of Employment; Seafarers are considered contractual employees;
They cannot be considered as regular employees under Article 280 of the Labor
Code. – From the foregoing cases, it is clear that seafarers are considered contractual
employees. They cannot be considered as regular employees under Article 280 of the
Labor Code. Their employment is governed by the contracts they sign everytime they are
rehired and their employment is terminated when the contract expires. Their employment is
contractually fixed for a certain period of time. They fall under the exception of Article 280
whose employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of engagement of the employee or
where the work or services to be performed is seasonal in nature and the employment is for
the duration of the season.19 We need not depart from the rulings of the Court in the two
aforementioned cases which indeed constitute stare decisis with respect to the employment
status of seafarers.
• There are certain forms of employment which also require the performance of usual
and desirable functions and which exceed one year but do not necessarily attain
regular employment status under Article 280. – Petitioners insist that they should be
considered regular employees, since they have rendered services which are usually
necessary and desirable to the business of their employer, and that they have rendered
more than twenty (20) years of service. While this may be true, the Brent case has,
however, held that there are certain forms of employment which also require the
performance of usual and desirable functions and which exceed one year but do not
necessarily attain regular employment status under Article 280. Overseas workers including
seafarers fall under this type of employment which are governed by the mutual agreements
of the parties.
• Filipino seamen are governed by the Rules and Regulations of the POEA; Contract of
seament shall be for a fixed period, not longer than 12 months. – In this jurisdiction and
as clearly stated in the Coyoca case, Filipino seamen are governed by the Rules and
Regulations of the POEA. The Standard Employment Contract governing the employment
of All Filipino seamen on Board Ocean-Going Vessels of the POEA, particularly in Part I,
Sec. C specifically provides that the contract of seamen shall be for a fixed period. And in
no case should the contract of seamen be longer than 12 months.

19. Association of Marine Officers vs. Laguesma

G.R. No. 107761 – December 27, 1994
239 SCRA 460
Facts:
The Association of Marine Officers and Seamen of Reyes and Lim Co. filed a petition for
certification election. Later, the Med-Arbiter issued an Order for the conduct of a certification
election in the bargaining unit covering the entire complement of four vessels. He ruled that
even as private respondent company alleges certain employees to be managerial, supervisory
and confidential employees (master, chief mate, second mate, third mate, radio officer, chief
engineer and second engineer), the records is bereft of any showing that the marine officers are
performing managerial, supervisory, and confidential functions. Private respondent Reyes and
Lim Co. Inc. appealed this Order to the Secretary of Labor and Employment on the issues of
employees' status as well as the composition of the bargaining unit. The Undersecretary then
modified the Order of the Med-Arbiter excluding Major Patron, Minor Patron, and Chief (Mate)
and Chief Marine Engineer from the bargaining unit. To buttress their position that the
aforementioned employees are not managerial but rank and file employees, petitioner advances
the following arguments.
Issue:
Whether or not the major patron, minor patron, chief mate and chief engineer of a vessel are
managerial employees.
Held:
• Factual findings of quasi-judicial agencies, such as the DOLE which are supported
by substantial evidence, are binding on the court and entitled to great respect. –
More importantly, the credence accorded by public respondent to these job descriptions is
worthy of due respect. The factual findings of quasi-judicial agencies, such as the
Department of Labor and Employment which are supported by substantial evidence, are
binding on us and entitled to great respect considering their expertise in their respective
fields.
• Court accepts public respondent’s evaluation of facts. – Petitioner's failure to overcome
the submissions of private respondent as regards these descriptions and to rebut the same
leaves us no alternative but to accept public respondent's evaluation of facts.
• Public respondent committed no error in concluding that the positions of major
patron, minor patron, chief mate, and chief engineer are managerial. – Public
respondent committed no error in concluding that the positions of major patron, minor
patron, chief mate, and chief engineer are managerial because the job descriptions on
record disclose that the major patron's duties include taking complete charge and command
of the ship and performing the responsibilities and duties of a ship captain; the minor patron
also commands the vessel, plying the limits of inland waterways, ports and estuaries; the
chief mate performs the functions of an executive officer next in command to the captain;
and the chief marine engineer takes over-all charge of the operation of the ship's
mechanical and electrical equipment. Public respondent's assessment of these managerial
functions of the subject officers has adequate basis and should not be disturbed.
• No grave abuse of discretion on the part of the respondent Undersecretary of Labor
when it ruled that the major patron, minor patron, chief mate and chief engineer are
managerial employees. – We find that there has been no grave abuse of discretion on the
part of the respondent Undersecretary of Labor when it ruled that the major patron, minor
patron, chief mate and chief engineer are managerial employees who are not allowed under
Article 245 of the Labor Code to join, assist or form any labor organization.

20. Mercidar Fishing vs. NL National Labor Relation Commission

G.R. No. 112574 – October 8, 1998
297 SCRA 440
Facts:
Private respondent alleged that he had been sick and thus allowed to go on leave without pay
for one month but that when he reported to work at the end of such period with a health
clearance, he was told to come back another time as he could not be reinstated immediately.
Thereafter, petitioner refused to give him work. For this reason, private respondent asked for a
certificate of employment from petitioner. However, when he came back for the certificate,
petitioner refused to issue the certificate unless he submitted his resignation. Since private
respondent refused to submit such letter unless he was given separation pay, petitioner
prevented him from entering the premises. Petitioner, on the other hand, alleged that it was
private respondent who actually abandoned his work claiming that Private Respondent failed to
report for work after his leave had expired and was, in fact, absent without leave for three
months. Petitioner further claims that, nonetheless, it assigned private respondent to another
vessel, but the latter was left behind. Thereafter, private respondent asked for a certificate of
employment on the pretext that he was applying to another fishing company.
Issue:
Whether or not fishing crew members like private respondent can be classified as field
personnel under article 82 of the labor code.
Held:
• Service Incentive Leave Pay; Words and Phrases; Phrase “Whose Actual Hours of
Work in the field cannot be determined with reasonable certainty,” explained. – In the
case of Union of Pilipro Employees (UFE) v. Vicar, 5 this Court explained the meaning of
the phrase "whose actual hours of work in the field cannot be determined with reasonable
certainty" in Art. 82 of the Labor Code, as follows: Moreover, the requirement that "actual
hours of work in the field cannot be determined with reasonable certainty" must be read in
conjunction with Rule IV, Book III of the Implementing Rules which provides: Rule IV
Holidays with Pay: Sec. 1. Coverage — This rule shall apply to all employees except: x x x
(e) Field personnel and other employees whose time and performance is unsupervised by
the employer . . .While contending that such rule added another element not found in the
law (Rollo, p. 13), the petitioner nevertheless attempted to show that its affected members
are not covered by the abovementioned rule. The petitioner asserts that the company's
sales personnel are strictly supervised as shown by the SOD (Supervisor of the Day)
schedule and the company circular dated March 15, 1984 (Annexes 2 and 3, Rollo, pp. 53-
55). Contrary to the contention of the petitioner, the Court finds that the aforementioned rule
did not add another element to the Labor Code definition of field personnel. The clause
"whose time and performance is unsupervised by the employer" did not amplify but merely
interpreted and expounded the clause "whose actual hours of work in the field cannot be
determined with reasonable certainty." The former clause is still within the scope and
purview of Article 82 which defines field personnel. Hence, in deciding whether or not an
employee's actual working hours in the field can be determined with reasonable certainty,
query must be made as to whether or not such employee's time and performance is
constantly supervised by the employer.
• Fishermen; Although fishermen perform non-agricultural work away from their
employer’s business offices, the fact remains that throughout the duration of their
work they are under the effective control and supervision of the employer through
the vessel’s patron or master. – In contrast, in the case at bar, during the entire course of
their fishing voyage, fishermen employed by petitioner have no choice but to remain on
board its vessel. Although they perform non-agricultural work away from petitioner's
business offices, the fact remains that throughout the duration of their work they are under
the effective control and supervision of petitioner through the vessel's patron or master as
the NLRC correctly held.

21. BrokenShire Memorial vs. NLR National Labor Relation Commission

G.R. No. L-69741 – August 19, 1986
143 SCRA 565
Facts:
At the time that PD 851 became effective on December 16, 1975, the hospital had for many
years been giving its employees an annual Christmas bonus. It continued to do so afterwards.
But after 1979 the hospital stopped giving the bonus because avowedly its poor financial
condition no longer made this possible. Protesting the discontinuance, respondent union filed a
complaint against the hospital for unlawful diminution of benefits, alleging a violation of Article
100 of the Labor Code and Section 10 of PD 851. In response, the hospital asserted that the
giving of the bonus was not an established and continuing obligation on its part but was
contingent and entirely dependent on its financial condition in any given year.
Issue:
Whether or not employees in a private enterprise entitled to the so called "13th month pay"
prescribed by PD 851 "on top of bonuses" already being given by the employer prior to the
decree's effectivity.
Held:
• An employer cannot be made to assume the burden of paying the 13th month pay
prescribed by PD 851 on top of bonuses already being given to employees prior to
the Decree’s effectivity on December 16, 1975. – The distinction sought to be drawn by
the Commission between the case at bar and NFSW vs. Ovejera is insubstantial and
unjustifiable. The message of NFSW vs. Ovejera is clear and unequivocal: An employer
may not be obliged to assume a "double burden" of paying the 13th month pay in addition
to bonuses or other pecuniary benefits given by way of fringe benefits aside from the
employees' basic salaries or wages; PD 851 accorded to him the option either to exempt
himself from the obligation to give 13th month pay or discontinue the payment of the
bonuses or fringe benefits deemed to be the equivalent of said 13th month pay. In any
event, whatever doubt might have existed regarding this option on the employer's part
should have been dispelled by this Court's decision in Dole Phils., Inc. vs. Leogardo, Jr.
promulgated on October 23, 1982, more than two (2) years before the rendition of the
resolution of the National Labor Relations Commission on December 14, 1984. In Dole, this
Court declared that when an employer, in order to comply with the mandate of PD 851,
credits the bonus being paid by him as part of his employees' 13th month pay and adopts
the procedure of paying only the difference between said bonus and 1/12 of the employees'
yearly basic salary, said employer acts well within the letter and spirit of the law and its
implementing rules; for in the event that "an employer pays less than one twelfth of the
employees' basic salary, all that said employer is required to do under the law is to pay the
difference." Be this as it may, the fact is that as early as November 5, 1984, the hospital
sent to the Minister of Labor and Employment a notice of closure because of its "critically
grave" financial condition. And on March 2, 1985 the hospital finally ceased to operate for
lack of operating capital resulting from the garnishment of its bank deposits amounting to
P163,047.50. Whether or not this unhappy eventuality would have come to pass had the
decision of the Labor Arbiter or that of the National Labor Relations Commission correctly
applied the doctrine enunciated by this Court in NFSW vs. Ovejera and Dole Phils., Inc. vs.
Leogardo, Jr., is a question that perhaps is incapable of a fair and realistic answer. But the
mere possibility that closure, with the consequent loss of work for so many, was caused or
hastened by the questioned decisions should be enough to give pause and provide an
object lesson to address such matters more studiously and with greater circumspection in
the future.

22. DOLE Philippines vs. Vicente Leogardo Jr.

G.R. No. L-60018 – October 23, 1982
117 SCRA 939
Facts:
Standard Philippines Fruit Corporation or STANFILCO, a company merged with petitioner Dole
Philippines, Inc., entered into a collective bargaining agreement with the Associated Labor
Union, ALU for short, effective for a period of three (3) years. The Collective Bargaining
Agreement provided, among others, the grant of a yearend productivity bonus to all workers
within the collective bargaining unit. Shortly thereafter, PD 851 took effect requiring all
employers to pay their employees receiving a basic salary of not more than P1,000.00 a month,
regardless of the nature of their employment, a 13th month pay. Later, respondents charged
STANFILCO with unfair labor practice and non-implementation of the CBA provision on the
year-end productivity bonus.
Issue:
Whether or not petitioner may be compelled to pay the 13th month pay on top of the productivity
bonus agreed in the CBA.
Held:
• Productivity bonus agreed upon in the Collective Bargaining Agreement is not
demandable over and above the 13th month pay provided for in PD 851. – Tested
against this norm, it becomes clear that the year-end productivity bonus granted by
petitioner to private respondents pursuant to their CBA is, in legal contemplation, an integral
part of their 13th month pay, notwithstanding its conditional nature. When, therefore,
petitioner, in order to comply with the mandate of PD No. 851, credited the year-end
productivity bonus as part of the 13th month pay and adopted the procedure of paying only
the difference between said bonus and 1/12th of the worker's yearly basic salary, it acted
well within the letter and spirit of the law and its implementing rules. For in the event that
"an employer pays less than one-twelfth of the employees' basic salary, all that said
employer is required to do under the law is to pay the difference." To hold otherwise would
be to impose an unreasonable and undue burden upon those employers who had
demonstrated their sensitivity and concern for the welfare of their employees. A contrary
stance would indeed create an absurd situation whereby an employer who started giving
his employees the 13th month pay only because of the unmistakable force of the law would
be in a far better position than another who, by his own magnanimity or by mutual
agreement, had long been extending to his employees the benefits contemplated under PD
No. 851, by whatever nomenclature these benefits have come to be known. Indeed, PD No.
851, a legislation benevolent in its purpose, never intended to bring about such oppressive
situation.

23. United CMC Textile Workers Union vs. Labor Arbiter

G.R. NO. 70763 – April 30, 1987
149 SCRA 424
Facts:
petitioner filed a complaint against Central Textile Mills, Inc. (CTMI, for brevity) at the Ministry of
Labor and Employment for non-payment of Christmas bonus of the rank and file employees of
said company as provided in Art. XI of the then existing collective bargaining agreement
between petitioner and CTMI. Later, respondent Labor Arbiter rendered a decision finding that
the CBA was violated by the refusal of respondent to pay the same despite demand by
complainant. Respondent appealed said decision to the NLRC which affirmed the Labor
Arbiter's decision with the modification. When Petitioner filed with the NLRC a motion for
execution of the decision CTMI filed an appeal with the NLRC invoking the ruling in the case of
National Federation of Sugar Workers vs. Central Azucarera de la Carlota, et al., to the effect
that ,employers already paying the equivalent of the 13th month pay to their employees, such as
Christmas bonus, are under no legal obligation to pay an additional 13th month pay prescribed
under P.D. No. 851. Due to the appeal of CTMI, respondent Labor Arbiter refused to continue
with the execution of the final order.
Issue:
Whether or not Petitioner may be compelled to comply with the CBA despite the settled doctrine
that employers already paying the equivalent of the 13th month pay to their employees, such as
Christmas bonus, are under no legal obligation to pay an additional 13th month pay.
Held:
• Payment of the 1978 bonus in addition to the 13th month pay, sustained; Company’s
intention is that the bonus provided in the CBA was meant to be in addition to the
legal requirement; Purpose of payment was to give bigger reward to senior
 employees, not found in PD 851; Bonus under the CBA and the 13th month pay,
nature of. – Furthermore, the findings of the NLRC as stated in its decision show that the
claim is for Christmas bonus for the year 1978 only. It appears from the records that the
employees of the respondent company had been paid their bonuses in accordance with the
collective bargaining agreement, in addition to the 13th month pay, for the years 1979 and
1980. The Page 431 collective bargaining agreement in question took effect on November
1, 1978, 3 years after the promulgation of P.D. No. 851. If the Christmas bonus was
included in the 13th month pay, then there would be no need for having a specific provision
on Christmas bonus in the CBA. But it did provide for a bonus in graduated amounts
depending on the length of service of the employee. The intention is clear therefore that the
bonus provided in the CBA was meant to be in addition to the legal requirement. Moreover,
why exclude the payment of the 1978 Christmas bonus and pay only the 1979-1980 bonus.
The classification of the company's workers in the CBA according to their years of service
supports the allegation that the reason for the payment of bonus was to give bigger reward
to the senior employees — a purpose which is not found in P.D. 851. A bonus under the
CBA is an obligation created by the contract between the management and workers while
the 13th month pay is mandated by the law (P.D. 851).
• Applicability of the La Carlota doctrine recognized by the union in the 1983 new CBA
but not the 1978 bonus. – Likewise We find no merit in respondent's allegations that the
applicability of the said La Carlota ruling to the case at bar is explicitly recognized by herein
petitioner. A cursory reading of the CBA signed on November 2, 1983 shows that petitioner
Union recognizes only the application of the La Carlota doctrine in so far as it had agreed to
the deletion of the provision on payment of Christmas bonus in the new CBA of 1983
without necessarily giving up their claim for their 1978 bonus under their former collective
bargaining agreement.

24. Universal Corn Products vs. National Labor Relation Commission

G.R. No. L-60337 – August 21, 1987
153 SCRA 191
Facts:
Petitioner and the Universal Corn Products Workers Union entered into a collective bargaining
agreement in which it was provided, among other things, that the latter agrees to grant all
regular workers within the bargaining unit with at least one (1) year of continuous service, a
Christmas bonus equivalent to the regular wages for seven (7) working days, effective
December, 1972. Such agreement had a duration of three years. On account however of
differences between the parties with respect to certain economic issues, the collective
bargaining agreement in question expired without being renewed. Later, the parties entered into
an "addendum" stipulating certain wage increases covering the years from 1974 to 1977.
Simultaneously, they entered into a collective bargaining agreement for the years from 1979 to
1981. Like the "addendum," the new collective bargaining agreement did not refer to the
"Christmas bonus" theretofore paid but dealt only with salary adjustments. According to the
petitioner, the new agreements deliberately excluded the grant of Christmas bonus with the
enactment of Presidential Decree No. 851 on December 16, 1975. It further claims that since
1975, it had been paying its employees 13th-month pay pursuant to the Decree. For failure of
the petitioner to pay the seven-day Christmas bonus for 1975 to 1978 inclusive, in accordance
with the 1972 CBA, the union went to the labor arbiter for relief.
Issue:
Whether or not Petitioner should be held liable for failure to pay the seven-day Christmas bonus
for 1975 to 1978.
Held:
• Collective Bargaining Agreement; Christmas Bonus; UMCT vs. Valenzuela case,
applicable in case at bar; Bonus provided in the bargaining agreement was meant to
be in addition to the legal requirement; Difference between the bonus under the CBA
and the 13th month pay. – We apply instead, United CMC Textile Workers Union v.
Valenzuela a recent decision. In that case this Court, speaking through Mr. Justice Edgardo
Paras, held: x x x If the Christmas bonus was included in the 13th month pay, then there
would be no need for having a specific provision on Christmas bonus in the CBA. But it did
not provide for a bonus in graduated amounts depending on the length of service of the
employee. The intention is clear therefore that the bonus provided in the CBA was meant to
be in addition to the legal requirement. Moreover, why exclude the payment of the 1978
Christmas bonus and pay only the 1979-1980 bonus. The classification of the company's
workers in the CBA according to their years of service supports the allegation that the
reason for the payment of bonus was to give bigger award to the senior employees-a
purpose which is not found by P.D. 851. A bonus under the CBA is an obligation created by
the contract between the management and workers while the 13th month pay is mandated
by the law (P. D. 851).
• Seven day bonus is in addition to the legal requirement. – In the same vein, we
consider the seven-day bonus here demanded "to be in addition to the legal requirement."
Although unlike the Valenzuela CBA, which took effect after the promulgation of
Presidential Decree No. 851 in 1975, the subject agreement was entered into as early as
1972, that is no bar to our application of Valenzuela. What is significant for us is the fact
that, like the Valenzuela, agreement, the Christmas bonus provided in the collective
bargaining agreement accords a reward, in this case, for loyalty, to certain employees. This
is evident from the stipulation granting the bonus in question to workers "with at least one
(1) year of continuous service." As we said in Valenzuela" this is "a purpose not found in
P.D. 851."
• Fact that the new collective bargaining agreements are silent on the 7-day bonus
should not preclude the private respondent’s claims thereon; The 1972 agreement is
basis enough for such claims. – It is claimed, however, that as a consequence of the
impasse between the parties beginning 1974 through 1979, no collective bargaining
agreement was in force during those intervening years. Hence, there is allegedly no basis
for the money award granted by the respondent labor body. But it is not disputed that under
the 1972 collective bargaining agreement, [i]f no agreement and negotiations are continued,
all the provisions of this Agreement shall remain in full force up to the time a new
agreement is executed." The fact, therefore, that the new agreements are silent on the
seven-day bonus demanded should not preclude the private respondents' claims thereon.
The 1972 agreement is basis enough for such claims for the whole writing is " "instinct with
an obligation," imperfectly expressed."

25. PACIWU-TUCP vs. National Labor Relation Commission

G.R. No. 107994 – August 14, 1995
247 SCRA 256
Facts:
Petitioner is the exclusive bargaining agent of the rank and file employees of respondent
Vallacar Transit, Inc. Petitioner union instituted a complaint for payment of 13th month pay in
behalf of the drivers and conductors of respondent company's Visayan operation on the ground
that although said drivers and conductors are compensated on a "purely commission" basis as
described in their Collective Bargaining Agreement (CBA), they are automatically entitled to the
basic minimum pay mandated by law should said commission be less than their basic minimum
for eight (8) hours work. In its position paper, respondent Vallacar Transit, Inc. contended that
since said drivers and conductors are compensated on a purely commission basis, they are not
entitled to 13th month pay.
Issue:
Whether or not the bus drivers and conductors of respondent Vallacar Transit, Inc. are entitled
to 13th month pay.
Held:
• Benefits; 13th Month pay; Every employee receiving a commission in addition to a
fixed or guaranteed wage or salary, is entitled to a 13th month pay. – From the
foregoing legal milieu, it is clear that every employee receiving a commission in addition to
a fixed or guaranteed wage or salary, is entitled to a 13th month pay. For purposes of
entitling rank and file employees a 13th month pay, it is immaterial whether the employees
concerned are paid a guaranteed wage plus commission or a commission with guaranteed
wage inasmuch as the botton line is that they receive a guaranteed wage. This is correctly
construed in the MOLE Explanatory Bulletin No. 86-12.
• What is controlling is not the label attached to the remuneration that the employee
receives but the nature of the remuneration and the purpose for which the 13th month
pay was given. – what is controlling is not the label attached to the remuneration that the
employee receives but the nature of the remuneration and the purpose for which the 13th
month pay was given to alleviate the plight of the working masses who are receiving low
wages.
• The 13th month pay of bus drivers and conductors must be one-twelfth (1/12) of their
earning during the calendar year. – In sum, the 13th month pay of the bus drivers and
conductors who are paid a fixed or guaranteed minimum wage in case their commissions
be less than the statutory minimum, and commissions only in case where the same is over
and above the statutory minimum, must be equivalent to one-twelfth (1/12) of their total
earnings during the calendar year.

26. Philippine Duplicators vs. National Labor Relation Commission

G.R. NO. 110068 – February 15, 1995
241 SCRA 380
Facts:
Petitioner employs salesmen who are paid a fixed or guaranteed salary plus commissions,
which commissions are computed on the selling price of the duplicating machines sold by the
respective salesmen. Later, PD 851 was promulgated requiring employers to pay all their
employees receiving a basic salary of not more than P1,000.00 a month, regardless of the
nature of the employment, a 13th month pay. Subsequently, Memorandum Order No. 28 was
issued modifying PD 851 to the extent that all employers are required to pay all their rank-and-
file employees a 13th month pay. Due to this enactments Private respondent union, for and on
behalf of its member-salesmen, asked petitioner corporation for payment of 13th month pay
computed on the basis of the salesmen's fixed or guaranteed wages plus commissions.
Petitioner corporation refused the union's request, but stated it would respect an opinion from
the MOLE. Acting upon a request for opinion submitted by respondent union, the MOLE
rendered an opinion that since the salesmen of Philippine Duplicators are receiving a fixed basic
wage plus commission on sales and not purely on commission basis, they are entitled to receive
13th month pay provided they worked at least one (1) month during the calendar year.
Notwithstanding the opinion or ruling, petitioner refused to pay the claims of its salesmen for
13th month pay computed on the basis of both fixed wage plus sales commissions.
Issue:
Whether or not petitioner should pay the 13th month pay to private respondent employees
computed on the basis of their fixed wages plus sales commissions.
Held:
• Basic Salary; Thirteenth Month Pay; Bonus; Benefits; The salesman’s commissions,
comprising a pre-determined percent of the selling price of the goods sold by each
salesman, were properly included in the term “basic salary” for purposes of
computing their 13th month pay. – Considering the above circumstances, the Third
Division held, correctly, that the sales commissions were an integral part of the basic salary
structure of Philippine Duplicators' employees salesmen. These commissions are not
overtime payments, nor profit-sharing payments nor any other fringe benefit. Thus, the
salesmen's commissions, comprising a pre-determined percent of the selling price of the
goods sold by each salesman, were properly included in the term "basic salary" for
purposes of computing their 13th month pay.
• A bonus is an amount granted and paid ex gratia to the employee; its payment
constitutes an act of enlightened generosity and self-interest on the part of the
employer, rather than as a demandable or enforceable obligation. – In Boie-Takeda
the so-called commissions "paid to or received by medical representatives of Boie-Takeda
Chemicals or by the rank and file employees of Philippine Fuji Xerox Co.," were excluded
from the term "basic salary" because these were paid to the medical representatives and
rank-and-file employees as "productivity bonuses." The Second Division characterized
these payments as additional monetary benefits not properly included in the term "basic
salary" in computing their 13th month pay. We note that productivity bonuses are generally
tied to the productivity, or capacity for revenue production, of a corporation; such bonuses
closely resemble profit-sharing payments and have no clear director necessary relation to
the amount of work actually done by each individual employee. More generally, a bonus is
an amount granted and paid ex gratia to the employee; its payment constitutes an act of
enlightened generosity and self-interest on the part of the employer, rather than as a
demandable or enforceable obligation.
• A bonus is not a demandable and enforceable obligation. It is so when it is made part
of the wage or salary or compensation. In such a case the latter would be a fixed
amount and the former would be a contingent one dependent upon the realization of
profits. – In Philippine Education Co. Inc. (PECO) v. Court of Industrial Relations,5 the
Court explained the nature of a bonus in the following general terms: As a rule a bonus is
an amount granted and paid to an employee for his industry loyalty which contributed to the
success of the employer's business and made possible the realization of profits. It is an act
of generosity of the employer for which the employee ought to be thankful and grateful. It is
also granted by an enlightened employer to spur the employee to greater efforts for the
success of the business and realization of bigger profits. . . . . From the legal point of view a
bonus is not a demandable and enforceable obligation. It is so when it is made part of the
wage or salary or compensation. In such a case the latter would be a fixed amount and the
former would be a contingent one dependent upon the realization of profits. . (Emphasis
supplied)
• A bonus is a ‘gratuity or act of liberality of the giver which the recipient has no right
to demand as a matter of right.’ – More recently, the non-demandable character of a
bonus was stressed by the Court in Traders Royal Bank v. National Labor Relations
Commission: A bonus is a "gratuity or act of liberality of the giver which the recipient has no
right to demand as a matter of right." (Aragon v. Cebu Portland Cement Co., 61 O.G. 4567).
"It is something given in addition to what is ordinarily received by or strictly due the
recipient." The granting of a bonus is basically a management prerogative which cannot be
forced upon the employer "who may not be obliged to assume the onerous burden of
granting bonuses or other benefits aside from the employee's basic salaries or wages . . ."
(Kamaya Point Hotel v. NLRC, 177 SCRA 160 [1989]).
• Productivity bonus should not be deemed to fall within the “basic salary” of
employees to compute their 13th month pay. – If an employer cannot be compelled to
pay a productivity bonus to his employees, it should follow that such productivity bonus,
when given, should not be deemed to fall within the "basic salary" of employees when the
time comes to compute their 13th month pay.
• Medical representatives are not salesmen; they do not affect any sale of any article at
all. The additional payments made to Boie-Takeda’s medical representatives were
not in fact sales commissions but rather partook of the nature of profit-sharing
bonuses. – It is also important to note that the purported "commissions" paid by the Boie-
Takeda Company to its medical representatives could not have been "sales commissions"
in the same sense that Philippine Duplicators paid its salesmen Sales commissions.
Medical representatives are not salesmen; they do not effect any sale of any article at all. In
common commercial practice, in the Philippines and elsewhere, of which we take judicial
notice, medical representatives are employees engaged in the promotion of pharmaceutical
products or medical devices manufactured by their employer. They promote such products
by visiting identified physicians and inform much physicians, orally and with the aid of
printed brochures, of the existence and chemical composition and virtues of particular
products of their company. They commonly leave medical samples with each physician
visited; but those samples are not "sold" to the physician and the physician is, as a matter
of professional ethics, prohibited from selling such samples to their patients. Thus, the
additional payments made to Boie-Takeda's medical representatives were not in fact sales
commissions but rather partook of the nature of profit-sharing bonuses.
• Additional payments made to employees, to the extent that they partake of the nature
of profit-sharing payments are properly excluded from the ambit of the term “basic
salary” for purposes of computing the 13th month pay due to employees. – The
doctrine set out in the decision of the Second Division is, accordingly, that additional
payments made to employees, to the extent they partake of the nature of profit-sharing
payments, are properly excluded from the ambit of the term "basic salary" for purposes of
computing the 13th month pay due to employees. Such additional payments are not
"commissions" within the meaning of the second paragraph of Section 5 (a) of the Revised
Guidelines Implementing 13th Month Pay.
• Items excluded in the computation of 13th month pay. – The Supplementary Rules and
Regulations Implementing P.D. No. 851 subsequently issued by former Labor Minister Ople
sought to clarify the scope of items excluded in the computation of the 13th month pay; viz.:
Sec. 4. Overtime pay, earnings and other remunerations which are not part of the basic
salary shall not be included in the computation of the 13th month pay.
• Where the earning and remunerations are closely akin to fringe benefits, overtime
pay or profit-sharing payments, they are properly excluded in computing the 13th
month pay. – We observe that the third item excluded from the term "basic salary" is cast
in open ended and apparently circular terms: "other remunerations which are not part of the
basic salary." However, what particular types of earnings and remuneration are or are not
properly included or integrated in the basic salary are questions to be resolved on a case to
case basis, in the light of the specific and detailed facts of each case. In principle, where
these earnings and remuneration are closely akin to fringe benefits, overtime pay or profit-
sharing payments, they are properly excluded in computing the 13th month pay. However,
sales commissions which are effectively an integral portion of the basic salary structure of
an employee, shall be included in determining his 13th month pay.
• A productivity bonus is something extra for which no specific additional services are
rendered by any particular employee and hence not legally demandable, absent a
contractual undertaking to pay it. Sales commission is a percentage of the sales
 closed by a salesman and operates as an integral part of such salesman’s basic pay.
– We recognize that both productivity bonuses and sales commissions may have an
incentive effect. But there is reason to distinguish one from the other here. Productivity
bonuses are generally tied to the productivity or profit generation of the employer
corporation. Productivity bonuses are not directly dependent on the extent an individual
employee exerts himself. A productivity bonus is something extra for which no specific
additional services are rendered by any particular employee and hence not legally
demandable, absent a contractual undertaking to pay it. Sales commissions, on the other
hand, such as those paid in Duplicators, are intimately related to or directly proportional to
the extent or energy of an employee's endeavors. Commissions are paid upon the specific
results achieved by a salesman-employee. It is a percentage of the sales closed by a
salesman and operates as an integral part of such salesman's basic pay.

27. Benjamin Celestial vs. Southern Mindanao

G.R. No. L-12950 – December 9, 1959
106 Phil. 696
Facts:
Ppetitioner are employees and/or workers of the Southern Mindanao Experimental Station, later
referred to as Experimental Station, Bureau of Plant Industry in Davao City, and that since 1952
they had been paid each a daily wage of P2.50. Some time in March 1957, petitioners filed with
the Auditor General's Office their claims for differential pay, alleging among other things that
they were entitled to the minimum wage of P4.00 a day, instead of P2.50, which was actually
paid them by the Experimental Station; and that as already stated, on September 9, 1957, the
Auditor General rendered a decision, holding that petitioner were not entitled to the minimum
daily wage of P4.00, but only to P2.50.
Issue:
Whether or not Petitioners are entitled to the Minimum Wage.
Held:
• Employer and employee; minimum wage law; employees engaged in agriculture;
requisites to be entitled to P2.50 daily. – Under Section 3 (a), (b), and (c) of the Minimum
Wage Law in order that an employee or laborer may be paid the minimum wage of P2.50 a
day, he must be employed by an enterprise (in this case, the Southern Mindanao
Experimental Station) engaged in agriculture; that said employer operates s farm
comprising more than 12 hectares; and that the employee or laborer is engaged in
agriculture.
• Functions deemed agriculture in nature. – Where an experimental station operates a
farm comprising 960 hectares, and, through its employees and laborers actually till the soil,
introduces and plants seeds of the best crop varieties found by it after study and
experiment, raises said crops in the best approved methods of cultivation, including the
spacing of each plant or seedling and the amount of water needed through irrigation,
weeding, etc., and the proper harvesting of the crops, including the timing and method,
discovers plant pests and their eradication by means of treatment with the proper
insecticides. Thereafter, from the harvest are extracted the seeds which are called certified
seeds, for sale and distribution to farmers. There can be no question that all these acts and
function fall within the definition of agriculture provided in the Minimum Wage Law, and,
consequently, are agricultural as distinguished from no-agricultural functions. It follows that
the laborers and farm workers who actually carry out and perform these functions are also
engaged in agriculture. It is possible that not all the laborers and employees in the
Experimental Station are actually engaged in preparing the land for planting, such as
plowing, tilling, and planting the seeds or seedlings, in weeding the farm, in treating plant
diseases and harvesting crops. some employees may be engaged in office work, such as,
 clerks, supervisors, maintenance workers, etc. But inasmuch as they are all employed by
the Experimental Station, which is a farm enterprise, and their work is incidental to
agriculture, they may also be considered as agricultural workers and employees.

28. Ace Navigation Co., Inc., vs. Court of Appeals

G.R. No. 140364 – August 15, 2000
338 SCRA 70
Facts:
Petitioner recruited private respondent to work as a bartender on board the owned by its
principal, Conning. Under their POEA approved contract of employment, Orlando shall receive a
monthly basic salary of four hundred fifty U.S. dollars (U.S. $450.00), flat rate, including
overtime pay for 12 hours of work daily plus tips of two U.S. dollars (U.S. $2.00) per passenger
per day. The contract was to last for one (1) year. After the expiration of the, Orlando returned to
the Philippines and demanded from Ace Nav his vacation leave pay. Ace Nav did not pay him
immediately because he should have been paid prior to his disembarkation and repatriation to
the Philippines. Moreover, Conning did not remit any amount for his vacation leave pay.
Consequently, Orlando filed a complaint before the labor arbiter for vacation leave pay of four
hundred fifty U.S. dollars (U.S. $450.00) and unpaid tips amounting to thirty six, thousand U.S.
dollars (U.S. $36,000.00). thereafter, the Labor Arbiter ordered Ace Nav and Conning to pay
jointly and severally Orlando his vacation leave pay of US$450.00. The claim for tips of Orlando
was dismissed for lack of merit. Orlando appealed to the NLRC. In a decision, the NLRC
ordered Ace Nav and Conning to pay the unpaid tips of Orlando which amounted to
US$36,000.00 in addition to his vacation leave pay.
Issue:
Whether or not petitioners are liable to pay the tips to Orlando.
Held:
• Wages; Tips and Tipping; Words and Phrase; “Tip,” Explained; It has been said that
a tip denotes a voluntary act, but it also has been said that from the very beginning
of the practice of tipping it was evident that, whether considered from the standpoint
of the giver or the recipient, a tip lacked the essential element of a gift, namely, the
free bestowing of a gratuity without a consideration, and that, despite its apparent
voluntariness, there is an element of compulsion in tipping. – The word ["tip"] has
several meanings, with origins more or less obscure, connected with "tap" and with "top." In
the sense of a sum of money given for good service, other languages are more specific,
e.g., Fr. pourboire, for drink. It is suggested that [the word] is formed from the practice, in
early 18th c. London coffeehouses, of having a box in which persons in a hurry would drop
a small coin, to gain immediate attention. The box was labelled To Insure Promptness; then
just with the initials T.I.P. It is more frequently used to indicate additional compensation,
and in this sense "tip" is defined as meaning a gratuity; a gift; a present; a fee; money
given, as to a servant to secure better or more prompt service. A tip may range from pure
gift out of benevolence or friendship, to a compensation for a service measured by its
supposed value but not fixed by an agreement, although usually the word is applied to what
is paid to a servant in addition to the regular compensation for his service in order to secure
better service or in recognition of it. It has been said that a tip denotes a voluntary act, but it
also has been said that from the very beginning of the practice of tipping it was evident that,
whether considered from the standpoint of the giver or the recipient, a tip lacked the
essential element of a gift, namely, the free bestowing of a gratuity without a consideration,
and that, despite its apparent voluntariness, there is an element of compulsion in tipping.
• Although a customer may give a tip as a consideration for services rendered, its
value still depends on the giver, and it is given in addition to the compensation by
the employer; a gratuity given by an employer in order to inspire the employee to
 exert more effort in his work is more appropriately called a bonus. – Tipping is done to
get the attention and secure the immediate services of a waiter, porter or others for their
services. Since a tip is considered a pure gift out of benevolence or friendship, it can not be
demanded from the customer. Whether or not tips will be given is dependent on the will and
generosity of the giver. Although a customer may give a tip as a consideration for services
rendered, its value still depends on the giver. They are given in addition to the
compensation by the employer. A gratuity given by an employer in order to inspire the
employee to exert more effort in his work is more appropriately called a bonus.
• Where payment for overtime was included in the monthly salary, the supposed tips
mentioned in the contract should be deemed included thereat. – The contract of
employment between petitioners and Orlando is categorical that the monthly salary of
Orlando is US$450.00 flat rate. This already included his overtime pay which is integrated
in his 12 hours of work. The words "plus tips of US$2.00 per passenger per day" were
written at the line for overtime. Since payment for overtime was included in the monthly
salary of Orlando, the supposed tips mentioned in the contract should be deemed included
thereat.
• A bartender cannot feign ignorance on the practice of tipping and that tips are
normally paid by customers and not by the employer. – It is presumed that the parties
were aware of the plain, ordinary and common meaning of the word "tip." As a bartender,
Orlando can not feign ignorance on the practice of tipping and that tips are normally paid by
customers and not by the employer.
• It is absurd that an employer intended to give a bartender a salary higher than that of
the ship captain – it will be against common sense for an employer to give a lower
ranked employee a higher compensation than an employee who holds the highest
position in an enterprise. – It is also absurd that petitioners intended to give Orlando a
salary higher than that of the ship captain.1âwphi1 As petitioners point out, the captain of
M/V "Orient Princess" receives US$3,000.00 per month while Orlando will receive
US$3,450.00 per month if the tip of US$2.00 per passenger per day will be given in addition
to his US$450.00 monthly salary. It will be against common sense for an employer to give a
lower ranked employee a higher compensation than an employee who holds the highest
position in an enterprise.

29. Globe-Mackay vs. National Labor Relation Commission

G.R. No. 74156 – June 29, 1988
163 SCRA 71
Facts:
Wage Order No. 6, which took effect on 30 October 1984, increased the cost-of-living allowance
of non-agricultural workers in the private sector. Petitioner corporation complied with the said
Wage Order by paying its monthly-paid employees the mandated P3.00 per day COLA.
However, in computing said COLA, Petitioner Corporation multiplied the P 3.00 daily COLA by
22 days, which is the number of working days in the company. Respondent Union disagreed
with the computation of the monthly COLA claiming that the daily COLA rate of P3.00 should be
multiplied by 30 days to arrive at the monthly COLA rate. The union alleged furthermore that
prior to the effectivity of Wage Order No. 6, Petitioner Corporation had been computing and
paying the monthly COLA on the basis of thirty (30) days per month and that this constituted an
employer practice, which should not be unilaterally withdrawn. After several grievance
proceedings proved futile, the Union filed a complaint against Petitioner for illegal deduction,
underpayment, unpaid allowances, and violation of Wage Order No. 6. The Labor sustained the
position of Petitioner Corporation by holding that since the individual petitioners acted in their
corporate capacity they should not have been impleaded; and that the monthly COLA should be
computed on the basis of twenty two (22) days, since the evidence showed that there are only
22 paid days in a month for monthly-paid employees in the company. On appeal, the NLRC
reversed the Labor Arbiter.
Issue:
Whether or not the NLRC committed a grave abuse of discretion when it reversed the decision
of the Labor Arbiter.
Held:
• COLA; For entitlement for COLA is that basic wage is being paid. – Section 5 of the
Rules Implementing Wage Orders Nos. 2, 3, 5 and 6 uniformly read as follows: Section 5.
Allowance for Unworked Days. All covered employees shall be entitled to their daily living
allowance during the days that they are paid their basic wage, even if unworked. (Emphasis
supplied) The primordial consideration, therefore, for entitlement to COLA is that basic
wage is being paid. In other words, the payment of COLA is mandated only for the days
that the employees are paid their basic wage, even if said days are unworked. So that, on
the days that employees are not paid their basic wage, the payment of COLA is not
mandated. As held in University of Pangasinan Faculty Union vs. University of Pangasinan,
L-63122, February 20, 1984, 127 SCRA 691): ... it is evident that the intention of the law is
to grant ECOLA upon the payment of basic wages. Hence, we have the principle of No Pay,
No ECOLA.
• Monthly paid employees whose monthly salary covers all the days in a month are
deemed paid their basic wages and should be entitled to their COLA on those days
“even if unworked”; CBA provides that basic pay is computed on the basis of 5 days
a week; Case at bar. – Applied to monthly-paid employees if their monthly salary covers all
the days in a month, they are deemed paid their basic wages for all those days and they
should be entitled to their COLA on those days "even if unworked," as the NLRC had
opined. Peculiar to this case, however, is the circumstance that pursuant to the Collective
Bargaining Agreement (CBA) between Petitioner Corporation and Respondent Union, the
monthly basic pay is computed on the basis of five (5) days a week, or twenty two (22) days
a month. Thus, the pertinent provisions of that Agreement read: Art. XV(a)—Eight net
working hours shall constitute the regular work day for five days. Art. XV(b)—Forty net
hours of work, 5 working days, shall constitute the regular work week. Art. XVI, Sec. 1(b)—
All overtime worked in excess of eight net hours daily or in excess of 5 days weekly shall be
computed on hourly basis at the rate of time and one half.
• Computation of overtime pay of monthly paid employees. – The Labor Arbiter also
found that in determining the hourly rate of monthly paid employees for purposes of
computing overtime pay, the monthly wage is divided by the number of actual work days in
a month and then, by eight (8) working hours. If a monthly-paid employee renders overtime
work, he is paid his basic salary rate plus one-half thereof. For example, after examining
the specimen payroll of employee Jesus L. Santos, the Labor Arbiter found: the employee
Jesus L. Santos, who worked on Saturday and Sunday was paid base pay plus 50%
premium. This is over and above his monthly basic pay as supported by the fact that base
pay was paid. If the 6th and 7th days of the week are deemed paid even if unworked and
included in the monthly salary, Santos should not have been paid his base pay for Saturday
and Sunday but should have received only the 50% overtime premium. Similarly, the
specimen payrolls of employees, Dennis Dungon and Rene Sanvictores, showed that in
computing the vacation and sick leaves of the employees, Petitioner Corporation
consistently used twenty-two (22) days. Under the peculiar circumstances obtaining,
therefore, where the company observes a 5-day work week, it will have to be held that the
COLA should be computed on the basis of twenty two (22) days, which is the period during
which the monthly-paid employees of Petitioner Corporation receive their basic wage. The
CBA is the law between the parties and, if not acceptable, can be the subject of future re-
negotiation.
 30. Davao Fruits Corporation vs. Associated Labor Union
G.R. No. 85073 – August 24, 1993
225 SCRA 562
Facts:
Respondent ALU, for and in behalf of all the rank-and-file workers and employees of petitioner,
filed a complaint for "Payment of the Thirteenth-Month Pay Differentials." Respondent ALU
sought to recover from petitioner the thirteenth month pay differential for 1982 of its rank-and-file
employees, equivalent to their sick, vacation and maternity leaves, premium for work done on
rest days and special holidays, and pay for regular holidays which petitioner, allegedly in
disregard of company practice since 1975, excluded from the computation of the thirteenth
month pay for 1982. In its answer, petitioner claimed that it erroneously included items subject
of the complaint in the computation of the thirteenth month pay for the years prior to 1982, upon
a doubtful and difficult question of law. A decision was then rendered by the Labor Arbiter in
favor of respondent ALU ordering Petitioner to pay the 1982 — 13th month pay differential to all
its rank-and-file workers/employees represented by Respondent.
Issue:
Whether or not payments for sick, vacation and maternity leaves, premiums for work done on
rest days and special holidays, and pay for regular holidays may be excluded in the computation
of the thirteenth month pay given by employers to their employees under P.D.
No. 851
Held:
• Benefits; Basic salary does not merely exclude the benefits expressly mentioned but
all payments which may be in the form of fringe benefits or allowances; Overtime pay
earnings and other remunerations shall be excluded in computing the thirteenth
month pay. – Clearly, the term "basic salary" includes renumerations or earnings paid by
the employer to employee, but excludes cost-of-living allowances, profit-sharing payments,
and all allowances and monetary benefits which have not been considered as part of the
basic salary of the employee as of December 16, 1975. The exclusion of cost-of-living
allowances and profit sharing payments shows the intention to strip "basic salary" of
payments which are otherwise considered as "fringe" benefits. This intention is emphasized
in the catch all phrase "all allowances and monetary benefits which are not considered or
integrated as part of the basic salary." Basic salary, therefore does not merely exclude the
benefits expressly mentioned but all payments which may be in the form of "fringe" benefits
or allowances (San Miguel Corporation v. Inciong, supra, at 143-144). In fact, the
Supplementary Rules and Regulations Implementing P.D. No. 851 are very emphatic in
declaring that overtime pay, earnings and other renumerations shall be excluded in
computing the thirteenth month pay.
• Payment for sick, vacation and maternity leaves, premium for work done on rest
days and special holidays as well as pay for regular holidays are likewise excluded in
computing the basic salary for purposes of determining the thirteenth month pay. –
In other words, whatever compensation an employee receives for an eight-hour work daily
or the daily wage rate in the basic salary. Any compensation or remuneration other than the
daily wage rate is excluded. It follows therefore, that payments for sick, vacation and
maternity leaves, premium for work done on rest days special holidays, as well as pay for
regular holidays, are likewise excluded in computing the basic salary for the purpose of
determining the thirteen month pay.
• Any benefit and supplement being enjoyed by the employees cannot be reduced,
diminished, discontinued or eliminated by the employer. – A company practice
favorable to the employees had indeed been established and the payments made pursuant
thereto, ripened into benefits enjoyed by them. And any benefit and supplement being
 enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by
the employer, by virtue of Section 10 of the Rules and Regulations Implementing P.D. No.
851, and Article 100 of the labor of the Philippines, which prohibit the diminution or
elimination by the employer of the employees' existing benefits

31. Traders Royal Bank vs. National Labor Relation Commission

G. R. No. 88168 – August 30, 1990
269 SCRA 733, 750
Facts:
Respondent Union filed a letter-complaint against Petitioner claiming, among others, that: the
management of TRB per memo dated October 10, 1986 paid the employees their HOLIDAY
PAY, but has withheld from the Union the basis of their computation; the computation in
question, has allegedly decreased the daily salary rate of the employees. This diminution of
existing benefits has decreased our overtime rate and has affected the employees' take home
pay; abd the diminution of benefits being enjoyed by the employees since time immemorial, e.g.
mid-year bonus, from two (2) months gross pay to two (2) months basic and year-end bonus
from three (3) months gross to only two (2) months. Petitioner, on the other hand, insisted that it
had paid the employees holiday pay. The practice of giving them bonuses at year's end, would
depend on how profitable the operation of the bank had been. Generally, the bonus given was
two (2) months basic mid-year and two (2) months gross end-year.
Issue:
Whether or not the NLRC gravely abused its discretion in ordering it to pay mid-year/year-end
bonus differential for 1986 to its employees.
Held:
• Benefits; Bonus; Definition of; Granting of onus is a management prerogative which
cannot be forced upon the employer. – A bonus is "a gratuity or act of liberality of the
giver which the recipient has no right to demand as a matter of right" (Aragon vs. Cebu
Portland Cement Co., 61 O.G. 4597). "It is something given in addition to what is ordinarily
received by or strictly due the recipient." The granting of a bonus is basically a management
prerogative which cannot be forced upon the employer "who may not be obliged to assume
the onerous burden of granting bonuses or other benefits aside from the employee's basic
salaries or wages" . . . (Kamaya Point Hotel vs. National Labor Relations Commission,
Federation of Free Workers and Nemia Quiambao, G.R. No. 75289, August 31, 1989).
• Decrease in the mid-year and year-end bonuses does not constitute a diminution of
salaries; Reaons. – Private respondent's contention, that the decrease in the midyear and
year-end bonuses constituted a diminution of the employees' salaries, is not correct, for
bonuses are not part of labor standards in the same class as salaries, cost of living
allowances, holiday pay, and leave benefits, which are provided by the Labor Code.

32. Isagani Ecal vs. National Labor Relation Commission

G.R. Nos. 92777-78 – March 13, 1991
195 SCRA 224
Facts:
Petitioners alleged that they have been employed by Hi-Line. That they were all receiving a
salary of P 35.00 a day; that they were required to report for work 7 days a week including rest
days, legal holidays, except Christmas and Good Friday from 7:00 A.M. to 7:00 P.M.; that they
were not given living allowance, overtime pay, premium pay for rest days and legal holidays,
13th month pay and service incentive leave pay; and, that later, they were not allowed to work
and instead were informed that their services were no longer needed. Private respondents, on
the other hand, denied the existence of an employer-employee relationship between the
company and the petitioners claiming that the latter are under the employ of an independent
contractor, petitioner Isagani Ecal, an employee of the company until his resignation.
Issue:
Whether or not an employer-employee relationship exists between petitioners and private
respondent Hi-Liner.
Held:
• Employer-employee relationship; Four-way test of an employer-employee
relationship. – To determine whether there exists an employer-employee relationship, the
four-way test should be applied, namely: (1) 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—the last being the most important element. Neither the NLRC nor the
labor arbiter utilized these guides in their disposition of the complaint.
• Labor-only contracting; where labor-only contracting exists in a given case, the
statute itself establishes an employer-employee relationship between the employer
and the employees of the labor-only contractor. – On the other hand, the legal effect of
a finding that a contractor is merely a "labor only" contractor was explained in Philippine
Bank of Communications vs. National Labor Relations Commission, et al., — . . . The
"labor-only" contractor — i.e., "the person or intermediary" — is considered "merely as an
agent of the employer." The employer is made by the statute responsible to the employees
of the "labor only" contractor as if such employee had been directly employed by the
employer. Thus, where "labor-only" contracting exists in a given case, the statute itself
implies or establishes an employer-employee relationship between the employer (the owner
of the project) and the employees of the "labor-only" contractor, this time for a
comprehensive purpose: "employer for purposes of this Code, to prevent any violation or
circumvention of any provision of this Code." The law in effect holds both the employer and
the 'labor-only' contractor responsible to the latter's employees for the more effective
safeguarding of the employees' rights under the Labor Code.
• Regular employees; Since petitioner perform tasks which are usually necessary or
desirable in the main business of Hi-Line, they should be deemed regular employees
of the latter. – Since petitioners perform tasks which are usually necessary or desirable in
the main business of Hi-Line, they should be deemed regular employees of the latter and
as such are entitled to all the benefits and rights appurtenant to regular employment. Being
regular employees, they should have been afforded due process prior to their dismissal.
Instead they were unceremoniously dismissed on June 6, 1987 when they were not allowed
to enter the company's premises by the security guards. The argument of private
respondents that the contract of Ecal with the company expired cannot be sustained.
Petitioners may only be dismissed for an authorized or just cause and after due process.

33. Osias Corporal, Sr., vs. National Labor Relation Commission

G.R. No. 129315 – October 2, 2000
341 SCRA 658
Facts:
Petitioners worked as barbers and manicurists in a barbershop owned by private respondent.
Petitioner Nas alleged that she also worked as watcher and marketer of private respondent.
Petitioners claim that at the start of their employment with the barbershoop, it was a single
proprietorship. Later, it was organized as a corporation which was registered with the Securities
and Exchange Commission. Upon its incorporation, the respondent company took over the
assets, equipment, and properties of the barbershop and continued the business. All the
petitioners were allowed to continue working with the new company until they were informed
that the building wherein the shop was located had been sold and that their services were no
longer needed. Subsequently, petitioners filed with the Arbitration Branch of the NLRC, a
complaint for illegal dismissal, illegal deduction, separation pay, non-payment of 13th month
pay, and salary differentials. Private respondent in its position paper averred that the petitioners
were joint venture partners and were receiving fifty percent commission of the amount charged
to customers. Thus, there was no employer-employee relationship between them and
petitioners. And assuming arguendo, that there was an employer-employee relationship, still
petitioners are not entitled to separation pay because the cessation of operations of the barber
shop was due to serious business losses.
Issue:
Whether or not petitioners are considered as independent contractors.
Held:
• Employer-employee relationship; Barber shops; Even the sharing of proceeds for
every job of barners in a barber shop does not mean they were not employees of the
company. – The Labor Arbiter's findings that the parties were engaged in a joint venture is
unsupported by any documentary evidence. It should be noted that aside from the self-
serving affidavit of Trinidad Lao Ong, there were no other evidentiary documents, nor
written partnership agreements presented. We have ruled that even the sharing of
proceeds for every job of petitioners in the barber shop does not mean they were not
employees of the respondent company.
• Independent Contractors; Labor-only contracting; Words and Phrases; “Independent
Contractor,” Explained. – An independent contractor is one who undertakes "job
contracting", i.e., a person who (a) carries on an independent business and undertakes the
contract work on his own account under his own responsibility according to his own manner
and method, free from the control and direction of his employer or principal in all matters
connected with the performance of the work except as to the results thereof, and (b) has
substantial capital or investment in the form of tools, equipment, machineries, work
premises, and other materials which are necessary in the conduct of the business.
• Employer-employee relationship; Elements. – Did an employee-employer relationship
exist between petitioners and private respondent? The following elements must be present
for an employer-employee relationship to exist: (1) the selection and engagement of the
workers; (2) power of dismissal; (3) the payment of wages by whatever means; and (4) the
power to control the worker's conduct, with the latter assuming primacy in the overall
consideration. Records of the case show that the late Vicente Lao engaged the services of
the petitioners to work as barbers and manicurists in the New Look Barber Shop, then a
single proprietorship owned by him; that in January 1982, his children organized a
corporation which they registered with the Securities and Exchange Commission as Lao
Enteng Company, Inc.; that upon its incorporation, it took over the assets, equipment, and
properties of the New Look Barber Shop and continued the business; that the respondent
company retained the services of all the petitioners and continuously paid their wages.
Clearly, all three elements exist in petitioners' and private respondent's working
arrangements.
• The power to control refers to the existence of the power and not necessarily to the
actual exercise thereof. – Private respondent claims it had no control over
petitioners.1âwphi1 The power to control refers to the existence of the power and not
necessarily to the actual exercise thereof, nor is it essential for the employer to actually
supervise the performance of duties of the employee. It is enough that the employer has the
right to wield that power.12 As to the "control test", the following facts indubitably reveal that
respondent company wielded control over the work performance of petitioners, in that: (1)
they worked in the barber shop owned and operated by the respondents; (2) they were
required to report daily and observe definite hours of work; (3) they were not free to accept
other employment elsewhere but devoted their full time working in the New Look Barber
 Shop for all the fifteen (15) years they have worked until April 15, 1995; (4) that some have
worked with respondents as early as in the 1960's; (5) that petitioner Patricia Nas was
instructed by the respondents to watch the other six (6) petitioners in their daily task.
Certainly, respondent company was clothed with the power to dismiss any or all of them for
just and valid cause. Petitioners were unarguably performing work necessary and desirable
in the business of the respondent company.
• Social Security; It is no longer true that membership in Social Security System is
predicated on the existence of an employee-employer relationship since the policy is
now to encourage even the self-employed dressmakers, manicurists and jeepney
drivers to become SSS members; It is unlikely that a company would report certain
persons as its workers, pay their SSS premium as well as their wages if it were not
true that they were indeed its employees. – While it is no longer true that membership to
SSS is predicated on the existence of an employee-employer relationship since the policy is
now to encourage even the self-employed dressmakers, manicurists and jeepney drivers to
become SSS members, we could not agree with private respondents that petitioners were
registered with the Social Security System as their employees only as an accommodation.
As we have earlier mentioned private respondent showed no proof to their claim that
petitioners were the ones who solely paid all SSS contributions. It is unlikely that
respondents would report certain persons as their workers, pay their SSS premium as well
as their wages if it were not true that they were indeed their employees.
• Management Prerogatives; Closure of Establishment; An employer may adopt
policies or changes or adjustments in its operations to insure profit to itself or
protect investment of its stockholders, and in the exercise of such management
prerogative, the employer may merge or consolidate its business with another, or
sell or dispose all or substantially all of its assets and properties which may bring
about the dismissal or termination of its employees in the process. – we agree with
the labor arbiter that there was sufficient evidence that the barber shop was closed due to
serious business losses and respondent company closed its barber shop because the
building where the barber shop was located was sold. An employer may adopt policies or
changes or adjustments in its operations to insure profit to itself or protect investment of its
stockholders. In the exercise of such management prerogative, the employer may merge or
consolidate its business with another, or sell or dispose all or substantially all of its assets
and properties which may bring about the dismissal or termination of its employees in the
process.

34. Rolando Escario vs. National Labor Relation Commission

G.R. No. 124055 – June 08, 2000
333 SCRA 257
Facts:
Petitioners allege that they were employed by CMC as merchandisers. Among the tasks
assigned to them were the withdrawing of stocks from the warehouse, the fixing of prices, price-
tagging, displaying of merchandise, and the inventory of stocks. These were done under the
control, management and supervision of CMC. The materials and equipment necessary in the
performance of their job, such as price markers, gun taggers, toys, pentel pen, streamers and
posters were provided by CMC. Their salaries were being paid by CMC. According to
petitioners, the hiring, control and supervision of the workers and the payment of salaries, were
all coursed by CMC through its agent D.L. Admark in order for CMC to avoid its liability under
the law. CMC, on the other hand, denied the existence of an employer-employee relationship
between petitioner and itself. Rather, CMC contended that it is D.L. Admark who is the employer
of the petitioners. While CMC is engaged in the manufacturing of food products and distribution
of such to wholesalers and retailers, it is not allowed by law to engage in retail or direct sales to
end consumers. It, however, hired independent job contractors such as D.L. Admark, to provide
the necessary promotional activities for its product lines. For its part, D.L. Admark asserted that
it is the employer of the petitioners. Its primary purpose is to carry on the business of
advertising, promotion and publicity, the sales and merchandising of goods and services and
conduct survey and opinion polls. As an independent contractor it serves several clients. Later,
the Labor Arbiter rendered a decision finding that petitioners are the employees of CMC as they
were engaged in activities that are necessary and desirable in the usual business or trade of
CMC.
Issue:
Whether or not the Labor Arbiter erred in considering Petitioners as employees of CMC.
Held:
• Contracts of Employment; There is labor-only contracting when the contractor or
sub-contractor merely recruits, supplies or places workers to perform a job, work or
service for a principal; Elements of labor-only contract. – There is labor-only
contracting when the contractor or sub-contractor merely recruits, supplies or places
workers to perform a job, work or service for a principal. In labor-only contracting, the
following elements are present: (a) The person supplying workers to an employer does not
have substantial capital or investment in the form of tools, equipment, machineries, work
premises, among others; and (b) The workers recruited and placed by such person are
performing activities which are directly related to the principal business of the employer.
• Where there is a Permissible Job Contracting; Conditions of Permissible Job
Contracting. – there is permissible job contracting when a principal agrees to put out or
farm out with a contractor or a subcontractor the performance or completion of a specific
job, work or service within a definite or predetermined period, regardless of whether such
job or work or service is to be performed or completed within or outside the premises of the
principal. In this arrangement, the following conditions must concur: (a)....The contractor
carries on a distinct and independent business and undertakes the contract work on his
account under his own responsibility according to his own manner and method, free from
the control and direction of his employer or principal in all matters connected with the
performance of his work except as to the results thereof; and (b)....The contractor has
substantial capital or investment in the form of tools, equipment, machineries (sic), work
premises, and other materials which are necessary in the conduct of his business.
• In order to be considered an independent contractor it is not enough to show
substantial capitalization or investment in the form of tools, equipment, machinery
and work premises; Factors to be considered in determining an independent
contractor. – In the recent case of Alexander Vinoya vs. NLRC et al., this Court ruled that
in order to be considered an independent contractor it is not enough to show substantial
capitalization or investment in the form of tools, equipment, machinery and work premises.
In addition, the following factors need be considered: (a) whether the contractor is carrying
on an independent business; (b) the nature and extent of the work; (c) the skill required; (d)
the term and duration of the relationship; (e) the right to assign the performance of specified
pieces of work; (f) the control and supervision of the workers; (g) the power of the employer
with respect to the hiring, firing and payment of workers of the contractor; (h) the control of
the premises; (i) the duty to supply premises, tools, appliances, materials, and labor; and (j)
the mode, manner and terms of payment.

35. Virginia Neri vs. National Labor Relation Commission

G.R. Nos. 97008-09 – July 23, 1993
224 SCRA 717
Facts:
Petitioners applied for positions with, and were hired by, respondent BCC, a corporation
engaged in providing technical, maintenance, engineering, housekeeping, security and other
specific services to its clientele. Later, petitioners instituted complaints against FEBTC and BCC
to compel the bank to accept them as regular employees and for it to pay the differential
between the wages being paid them by BCC and those received by FEBTC employees with
similar length of service. The Labor Arbiter dismissed the complaint for lack of merit.
Respondent BCC was considered an independent contractor because it proved it had
substantial capital. Thus, petitioners were held to be regular employees of BCC, not FEBTC.
Petitioners vehemently contend that BCC in engaged in "labor-only" contracting because it
failed to adduce evidence purporting to show that it invested in the form of tools, equipment,
machineries, work premises and other materials which are necessary in the conduct of its
business. Moreover, petitioners argue that they perform duties which are directly related to the
principal business or operation of FEBTC.
Issue:
Whether or not Petitioners should be considered as regular employees of FEBTC.
Held:
• Building Care Corporation is a highly capitalized venture and cannot be deemed
engaged in “labor-only” contracting. – Respondent BCC need not prove that it made
investments in the form of tools, equipment, machineries, work premises, among others,
because it has established that it has sufficient capitalization. The Labor Arbiter and the
NLRC both determined that BCC had a capital stock of P1 million fully subscribed and paid
for. BCC is therefore a highly capitalized venture and cannot be deemed engaged in "labor-
only" contracting.
• Factor to be considered in “labor-only” contracting. – It is well-settled that there is
"labor-only" contracting where: (a) the person supplying workers to an employer does not
have substantial capital or investment in the form of tools, equipment, machineries, work
premises, among others; and, (b) the workers recruited and placed by such person are
performing activities which are directly related to the principal business of the employer.
• BCC cannot be considered a “labor-only” contractor because it has substantial
capital. – Based on the foregoing, BCC cannot be considered a "labor-only" contractor
because it has substantial capital. While there may be no evidence that it has investment in
the form of tools, equipment, machineries, work premises, among others, it is enough that it
has substantial capital, as was established before the Labor Arbiter as well as the NLRC. In
other words, the law does not require both substantial capital and investment in the form of
tools, equipment, machineries, etc. This is clear from the use of the conjunction "or". If the
intention was to require the contractor to prove that he has both capital and the requisite
investment, then the conjunction "and" should have been used. But, having established that
it has substantial capital, it was no longer necessary for BCC to further adduce evidence to
prove that it does not fall within the purview of "labor-only" contracting. There is even no
need for it to refute petitioners' contention that the activities they perform are directly related
to the principal business of respondent bank.
• While the service may be considered directly related to the principal business of the
employer, nevertheless, they are not necessary in the conduct of the principal
business of the employer. – Be that as it may, the Court has already taken judicial notice
of the general practice adopted in several government and private institutions and
industries of hiring independent contractors to perform special services. These services
range from janitorial, security and even technical or other specific services such as those
performed by petitioners Neri and Cabelin. While these services may be considered directly
related to the principal business of the employer, nevertheless, they are not necessary in
the conduct of the principal business of the employer.
• The status of BCC as an independent contractor previously confirmed by the Court
in Associated Labor Unions-TUCP v. NLRC. – In fact, the status of BCC as an
independent contractor was previously confirmed by this Court in Associated Labor Unions-
TUCP v. National Labor Relations Commission.
• Under the “right to control” test, petitioners must still be considered employees of
BCC. – Even assuming ex argumenti that petitioners were performing activities directly
related to the principal business of the bank, under the "right of control" test they must still
be considered employees of BCC.

36. Department of Agriculture vs. National Labor Relation Commission

G.R. No. 104269 – November 11, 1993
227 SCRA 693
Facts:
The Department of Agriculture (herein petitioner) and Sultan Security Agency entered into a
contract for security services to be provided by the latter to the said governmental entity. Save
for the increase in the monthly rate of the guards, the same terms and conditions were also
made to apply to another contract between the same parties. Pursuant to their arrangements,
guards were deployed by Sultan Agency in the various premises of the petitioner. Later, several
guards of the Sultan Security Agency filed a complaint for underpayment of wages, non-
payment of 13th month pay, uniform allowances, night shift differential pay, holiday pay and
overtime pay, as well as for damages against the Department of Agriculture and Sultan Security
Agency. The Executive Labor Arbiter rendered a decision finding herein petitioner and jointly
and severally liable with Sultan Security Agency for the payment of money claims.
Issue:
Whether or not Petitioner may be held liable for money claims charged against it by the security
personnel.
Held:
• Doctrine of non-suability of the State; Contracts; Not all contracts entered into by the
government operate as a waiver of its non-suability; Distinction must still be made
between one which is executed in the exercise of its sovereign function and another
which is done in its proprietary capacity. – The rule, in any case, is not really absolute
for it does not say that the state may not be sued under any circumstances. On the
contrary, as correctly phrased, the doctrine only conveys, "the state may not be sued
without its consent;" its clear import then is that the State may at times be sued. The States'
consent may be given expressly or impliedly. Express consent may be made through a
general law or a special law. In this jurisdiction, the general law waiving the immunity of the
state from suit is found in Act No. 3083, where the Philippine government "consents and
submits to be sued upon any money claims involving liability arising from contract, express
or implied, which could serve as a basis of civil action between private parties." Implied
consent, on the other hand, is conceded when the State itself commences litigation, thus
opening itself to a counterclaim or when it enters into a contract. In this situation, the
government is deemed to have descended to the level of the other contracting party and to
have divested itself of its sovereign immunity. This rule, relied upon by the NLRC and the
private respondents, is not, however, without qualification. Not all contracts entered into by
the government operate as a waiver of its non-suability; distinction must still be made
between one which is executed in the exercise of its sovereign function and another which
is done in its proprietary capacity.
• Money claims under the Labor Code; The Labor Code in relation to Act No. 3083
provides the legal basis for the State liability but the prosecution, enforcement or
satisfaction thereof must still be pursued in accordance with the rules and
 procedures laid down in CA No. 327, as amended by PD 1445. – But, be that as it may,
the claims of private respondents, i.e. for underpayment of wages, holiday pay, overtime
pay and similar other items, arising from the Contract for Service, clearly constitute money
claims. Act No. 3083, aforecited, gives the consent of the State to be "sued upon any
moneyed claim involving liability arising from contract, express or implied, . . . Pursuant,
however, to Commonwealth Act ("C.A.") No. 327, as amended by Presidential Decree
("P.D.") No. 1145, the money claim first be brought to the Commission on Audit. Thus, in
Carabao, Inc., vs. Agricultural Productivity Commission, we ruled: Claimants have to
prosecute their money claims against the Government under Commonwealth Act 327,
stating that Act 3083 stands now merely as the general law waiving the State's immunity
from suit, subject to the general limitation expressed in Section 7 thereof that "no execution
shall issue upon any judgment rendered by any Court against the Government of the
(Philippines), and that the conditions provided in Commonwealth Act 327 for filing money
claims against the Government must be strictly observed." We fail to see any substantial
conflict or inconsistency between the provisions of C.A. No. 327 and the Labor Code with
respect to money claims against the State. The Labor code, in relation to Act No. 3083,
provides the legal basis for the State liability but the prosecution, enforcement or
satisfaction thereof must still be pursued in accordance with the rules and procedures laid
down in C.A. No. 327, as amended by P.D. 1445.

37. Philippine Fisheries Development Authority vs. National Labor Relation Commission
G.R. No. 94825 – September 4, 1992
213 SCRA 621, 629
Facts:
Petitioner is a government-owned or controlled corporation created by P.D. No. 977. It entered
into a contract with the Odin Security Agency for security services. The Security Group of the
AGENCY will be headed by a detachment commander whose main function shall consist of the
administration and supervision control of the AGENCY’s personnel in the FISHING PORT
COMPLEX. The scheduled of compensation includes, among others, (a) Minimum wage (Wage
Order No. 5) (b) Rest Day Pay (c) Night Differential Pay (d) Incentive Leave Pay (e) 13th Month
Pay (f) Emergency Cost of Living Allowance (up to Wage Order No. 5) (g) 4% Contractor’s Tax
(h) Operational Expenses (i) Overhead. The contract for security services also provided for a
one year renewable period unless terminated by either of the parties. Subsequently, and during
the effectivity of the said Security Agreement, the private respondent requested the petitioner to
adjust the contract rate in view of the newly implemented Wage Order No. 6. Requests for
adjustment of the contract price were later reiterated but were ignored by the petitioner.
Issue:
Whether or not Petitioner should be held liable for unpaid amount of re-adjustment rate claimed
by Respondents.
Held:
• Job Contracting; NLRC; Jurisdiction; “Employer” includes government-owned or
controlled corporations. – Notwithstanding that the petitioner is a government agency, its
liabilities, which are joint and solidary with that of the contractor, are provided in Articles
106, 107 and 109 of the Labor Code. This places the petitioner’s liabilities under the scope
of the NLRC. Moreover, Book Three, Title II on Wages specifically provides that the term
"employer" includes any person acting directly or indirectly in the interest of an employer in
relation to an employee and shall include the Government and all its branches, subdivisions
and instrumentalities, all government-owned or controlled corporation and institutions as
well as non-profit private institutions, or organizations (Art. 97 [b], Labor Code; Eagle
Security Agency, Inc. v. NLRC, 173 SCRA 479 [1989]; Rabago v. NLRC, 200 SCRA 158
[1991]). The NLRC, therefore, did not commit grave abuse of discretion in assuming
 jurisdiction to set aside the Order of dismissal by the Labor Arbiter.chanrobles virtual
lawlibrary
• Solidary liability of contractor and “indirect employer” for unpaid wages. – Settled is
the rule that in job contracting, the petitioner as principal is jointly and severally liable with
the contractor for the payment of unpaid wages. The statutory basis for the joint and several
liability is set forth in Articles 107, and 109 in relation to Article 106 of the Labor Code. (Del
Rosario and Sons Logging Enterprises, Inc. v. NLRC, 136 SCRA 669 [1985]; Baguio v.
NLRC, 202 SCRA 465 [1991]; Ecal v. NLRC, 195 SCRA 224 [1991]). In the case at bar, the
action instituted by the private respondent was for the payment of unpaid wage differentials
under Wage Order No. 6. x x x The Wage Orders are statutory and mandatory and can not
be waived. The petitioner can not escape liability since the law provides the joint and
solidary liability of the principal and the contractor for the protection of the laborers. x x x
Given this peculiar circumstance, the private respondent should also be faulted for the
unpaid wage differentials of the security guards. By filing the complaint in its own behalf and
in behalf of the security guards, the private respondent wishes to exculpate itself from
liability on the strength of the ruling in the Eagle case that the ultimate liability rests with the
principal. Nonetheless, the inescapable fact is that the employees must be guaranteed
payment of the wages due them for the performance of any work, task, job or project. They
must be given ample protection as mandated by the Constitution (See Article II, Section 18
and Article XIII, Section 3). Thus, to assure compliance with the provisions of the Labor
Code including the statutory minimum wage, the joint and several liability of the contractor
and the principal is mandated.
• Labor And Social Legislations; Principal And Contractor; Jointly And Severally
Liable For Payment Of Unpaid Wages; Term ‘Employer’ Construed. – Notwithstanding
that the petitioner is a government agency, its liabilities, which are joint and solidary with
that of the contractor, are provided in Articles 106, 107 and 109 of the Labor Code. This
places the petitioner’s liabilities under the scope of the NLRC. Moreover, Book Three, Title
II on Wages specifically provides that the term "employer" includes any person acting
directly or indirectly in the interest of an employer in relation to an employee and shall
include the Government and all its branches, subdivisions and instrumentalities, all
government-owned or controlled corporation and institutions as well as non-profit private
institutions, or organizations (Art. 97 [b], Labor Code; Eagle Security Agency, Inc. v. NLRC,
173 SCRA 479 [1989]; Rabago v. NLRC, 200 SCRA 158 [1991]). Settled is the rule that in
job contracting, the petitioner as principal is jointly and severally liable with the contractor
for the payment of unpaid wages. The statutory basis for the joint and several liability is set
forth in Articles 107, and 109 in relation to Article 106 of the Labor Code.
• Wage Orders, Mandatory And Cannot Be Waived. — In the case at bar, the action
instituted by the private respondent was for the payment of unpaid wage differentials under
Wage Order No. 6. The liabilities of the parties were very well explained in the case of
Eagle Security v. NLRC, supra where the court held: . . . "The solidary liability of PTSI and
EAGLE, however, does not preclude the right of reimbursement from his co-debtor by the
one who paid [See Article 1217, Civil Code]. It is with respect to this right of reimbursement
that petitioners can find support in the aforecited contractual stipulation and Wage Order
provision. "That Wage Orders are explicit that payment of the increases are `to be borne’ by
the principal or client.’To be borne’, however, does not mean that the principal, PTSI in this
case, would directly pay the security guards the wage and allowance increases because
there is no privity of contract between them. The security guards’ contractual relationship is
with their immediate employer, EAGLE. As an employer, EAGLE is tasked, among others,
with the payment of their wages [See Article VII Sec. 3 of the Contract for Security
Services, supra and Bautista v. Inciong, G.R. No. 52824, March 16, 1988, 158 SCRA 556].
. . . The Wage Orders are statutory and mandatory and can not be waived. The petitioner
 cannot escape liability since the law provides the joint and solidary liability of the principal
and the contractor for the protection of the laborers.

38. Rosewood Processing Inc., vs. National Labor Relation Commission

G.R. Nos. 116476-84 – May 21, 1998
290 SCRA 408, 423
Facts:
Complainants were employed by the Veterans Philippine [Security Agency] as security guards.
Napoleon Mamon started working for the [security agency] and was assigned as office guard for
three (3) days without any pay nor allowance as it was allegedly an on-the-job training so there
was no pay. Later, he was transferred to the residence of Mr. Benito Ong with 12 hours duty a
day receiving a salary very much less than the minimum wage for eight (8) hours work until he
received an order transferring him to Rosewood Processing, Inc. where he was required to
render also 12 hours duty every day with a salary of P2,600.00/month. He was not given his
pay for February 1 and 2 by the paymaster of the security agency allegedly because the payroll
could not be located so after two (2) days of 3 to 4 times of going back and forth to the security
agency's office to get his salary, he gave up because he was already spending more than what
he could get thru transportation alone. Rosewood Processing, Inc. asked for the relief of Mamon
and other guards at Rosewood because they came to know that complainants filed a complaint
for underpayment. Later, the security agency assigned him to their main office. After that,
complainant was floated when he was assigned to Mead Johnson Philippines Corporation. At
about a week later, the security agency received summons on complainant's complaint for
underpayment and he was called to[the security agency's office. When he reported, he was told
to sign a Quitclaim and Waiver because accordingly, he could only get a measly sum from his
complaint with the NLRC and if he signed the quitclaim and waiver he would be retained at his
present assignment which was giving quite a good salary and other benefits but if he did not
sign the quitclaim and waiver, he would be relieved from his post and [would] no longer be given
any assignment. When he refused to sign, he was told that he would have no more assignment
and should report to their office. Thinking that it was only a joke, he reported the following and
he was told that the main office relieved him because he did not sign the quitclaim and waiver.
He reported to their office asking for an assignment but he was told that he could no longer be
given an assignment and that he would have to resign. He went back several times to the office
of the security agency but every time the answer was the same: that he better tender his
resignation because he cannot be given any assignment although respondent was recruiting
new guards and posting them. Thereafter, a complaint for illegal dismissal; underpayment of
wages; and for nonpayment of overtime pay, legal holiday pay, premium pay for holiday and
rest day, thirteenth month pay, cash bond deposit, unpaid wages and damages was filed
against Veterans Philippine Scout Security Agency with Petitioner as third-party respondent.
Issue:
Whether or not petitioner should be held jointly and severally liable with the security agency as
the complainants' indirect employer.
Held:
• Appeals; Perfection of an appeal within the reglementary period and in the manner
prescribed by law is jurisdictional, and noncompliance with such legal requirement
is fatal and effectively renders the judgment final and executory. – The perfection of an
appeal within the reglementary period and in the manner prescribed by law is jurisdictional,
and noncompliance with such legal requirement is fatal and effectively renders the
judgment final and executory.
• The appeal of a decision involving a monetary award in labor cases may be perfected
“only upon the posting of a cash or surety bond.” – Indisputable is the legal doctrine
that the appeal of a decision involving a monetary award in labor cases may be perfected
 "only upon the posting of a cash or surety bond." The lawmakers intended the posting of
the bond to be an indispensable requirement to perfect an employer's appeal.
• In a number of cases, the Court has relaxed the requirement in order to bring about
the immediate and appropriate resolution of controversies on the merits. – However,
in a number of cases, this Court has relaxed this requirement in order to bring about the
immediate and appropriate resolution of controversies on the merits. Some of these cases
include: "(a) counsel's reliance on the footnote of the notice of the decision of the labor
arbiter that the aggrieved party may appeal . . . within ten (10) working days; (b)
fundamental consideration of substantial justice; (c) prevention of miscarriage of justice or
of unjust enrichment, as where the tardy appeal is from a decision granting separation pay
which was already granted in an earlier final decision; and (d) special circumstances of the
case combined with its legal merits or the amount and the issue involved."
• Court ruled that a relaxation of the appeal bond requirement could be justified by
substantial compliance with the rule. – In Quiambao vs. National Labor Relations
Commission, this Court ruled that a relaxation of the appeal bond requirement could be
justified by substantial compliance with the rule.
• In actual practice, the NLRC allows the reduction of the appeal bond upon motion of
the appellant and on meritorious grounds. – In Globe General Services and Security
Agency vs. National Labor Relations Commission, the Court observed that the NLRC, in
actual practice, allows the reduction of the appeal bond upon motion of the appellant and
on meritorious grounds; hence, petitioners in that case should have filed a motion to reduce
the bond within the reglementary period for appeal.
• Petitioner’s motion to reduce the bond is a substantial compliance with the Labor
Code. – We hold that petitioner's motion to reduce the bond is a substantial compliance
with the Labor Code. This holding is consistent with the norm that letter-perfect rules must
yield to the broader interest of substantial justice.
• Employers cannot hide behind their contracts in order to evade their or their
contractors’ or subcontractors’ liability for noncompliance with the statutory
minimum wage. – Legally untenable, however, is the contention that petitioner is not liable
for any wage differential for the reason that it paid the employees in accordance with the
contract for security services which it had entered into with the security agency.
Notwithstanding the service contract between the petitioner and the security agency, the
former is still solidarily liable to the employees, who were not privy to said contract,
pursuant to the aforecited provisions of the Code. Labor standard legislations are enacted
to alleviate the plight of workers whose wages barely meet the spiraling costs of their basic
needs. They are considered written in every contract, and stipulations in violation thereof
are considered not written. Similarly, legislated wage increases are deemed amendments
to the contract. Thus, employers cannot hide behind their contracts in order to evade their
or their contractors' or subcontractors' liability for noncompliance with the statutory
minimum wage.

39. Cagayan Sugar Milling vs. Secretary of Labor and Employment

G.R. No. 128399 – January 15, 1998
284 SCRA 150
Facts:
Regional Wage Order No. RO2-02 was issued by the Regional Tripartite Wage and Productivity
Board, Regional Office No. II of the Department of Labor and Employment (DOLE) providing
that upon effectivity of the Wage Order, the statutory minimum wage rates applicable to workers
and employees in the private sector in Region II shall be increased. Later, labor inspectors from
the DOLE Regional Office examined the books of petitioner to determine its compliance with the
wage order. They found that petitioner violated the wage order as it did not implement an across
the board increase in the salary of its employees. At the hearing, petitioner maintained that it
complied with Wage Order No. RO2-02 as it paid the mandated increase in the minimum wage.
Subsequently, public respondent ruled that petitioner violated Wage Order RO2-02 by failing to
implement an across the board increase in the salary of its employees and ordered petitioner to
pay the deficiency in the salary of its employees.
Issue:
Whether or not wage order ro2-02 is null and void for having been issued in violation of the
procedure provided by law and in violation of petitioner's right to due process of law.
Held:
• Minimum Wage; Wage Orders; Due Process; It is a fundamental rule, borne out of a
sense of fairness, that the public is first notified of a law or wage order before it can
be held liable for violation thereof. – In wage-fixing, factors such as fair return of capital
invested, the need to induce industries to invest in the countryside and the capacity of
employers to pay are, among others, taken into consideration. Hence, our legislators
provide for the creation of Regional Tripartite Boards composed of representatives from the
government, the workers and the employers to determine the appropriate wage rates per
region to ensure that all sides are heard. For the same reason, Article 123 of the Labor
Code also provides that in the performance of their wage-determining functions, the
Regional Board shall conduct public hearings and consultations, giving notices to interested
parties. Moreover, it mandates that the Wage Order shall take effect only after publication in
a newspaper of general circulation in the region. It is a fundamental rule, borne out of a
sense of fairness, that the public is first notified of a law or wage order-before it can be held
liable for violation thereof. In the case at bar, it is indisputable that there was no public
consultation or hearing conducted prior to the passage of RO2-02-A. Neither was it
published in a newspaper of general circulation as attested in the February 3, 1995 minutes
of the meeting of the Regional Wage Board that the non-publication was by consensus of
all the board members. Hence, RO2-02-A must be struck down for violation of Article 123 of
the Labor Code.
• It is not just to expect an employer to interpret a Wage Order to mean that it can
grant an across the board increase where such interpretation is not sustained by its
text. – The contention is absurd. Petitioner clearly complied with Wage Order RO2-02
which provided for an increase in statutory minimum wage rates for employees in Region II.
It is not just to expect petitioner to interpret Wage RO2-02 to mean that it granted an across
the board increase as such interpretation is not sustained by its text. Indeed, the Regional
Wage Board had to amend Wage Order RO2-02 to clarify this alleged intent.

40. Metropolitan Bank Employees Union vs. National Labor Relation Commission
G.R. No. 102636 – September 10, 1993
226 SCRA 268
Facts:
Private Respondent (MBTC) entered into a collective bargaining agreement with the MBTCEU,
granting a monthly P900 wage increase effective 01 January 1989, P600 wage increase 01
January 1990, and P200 wage increase effective 01 January 1991. The MBTCEU had also
bargained for the inclusion of probationary employees in the list of employees who would benefit
from the first P900 increase but the bank had adamantly refused to accede thereto.
Consequently, only regular employees as of 01 January 1989 were given the increase to the
exclusion of probationary employees. Barely a month later, Republic Act 6727, took effect fixing
new wage rates, providing wage incentives for industrial dispersal to the countryside, and for
other purposes. Pursuant to the provisions, the bank gave the P25 increase per day, or P750 a
month, to its probationary employees and to those who had been promoted to regular or
permanent status before 01 July 1989 but whose daily rate was P100 and below. The bank
refused to give the same increase to its regular employees who were receiving more than P100
per day and recipients of the P900 CBA increase. Contending that the bank's implementation of
Republic Act 6727 resulted in the categorization of the employees into (a) the probationary
employees as of 30 June 1989 and regular employees receiving P100 or less a day who had
been promoted to permanent or regular status before 01 July 1989, and (b) the regular
employees as of 01 July 1989, whose pay was over P100 a day, and that, between the two
groups, there emerged a substantially reduced salary gap, the MBTCEU sought from the bank
the correction of the alleged distortion in pay. In order to avert an impeding strike, the bank
petitioned the Secretary of Labor to assume jurisdiction over the case or to certify the same to
the National Labor Relations Commission (NLRC) under Article 263 (g) of the Labor Code. The
parties ultimately agreed to refer the issue for compulsory arbitration to the NLRC.
Issue:
Whether or not the implementation by the Metropolitan Bank and Trust Company of Republic
Act No. 6727, mandating an increase in pay of P25 per day for certain employees in the private
sector, created a distortion that would require an adjustment under said law in the wages of the
latter's other various groups of employees.
Held:
• NLRC; Wages; The issue of whether or not a wage distortion exists as a
consequence of the grant of a wage increase to certain employees is a question of
fact, the determination of which is the statutory function of the NLRC. – The issue of
whether or not a wage distortion exists as a consequence of the grant of a wage increase to
certain employees, we agree, is, by and large, a question of fact the determination of which
is the statutory function of the NLRC. Judicial review of labor cases, we may add, does not
go beyond the evaluation of the sufficiency of the evidence upon which the labor official's
findings rest. As such, factual findings of the NLRC are generally accorded not only respect
but also finality provided that its decision are supported by substantial evidence and devoid
of any taint of unfairness of arbitrariness. When, however, the members of the same labor
tribunal are not in accord on those aspects of a case, as in this case, this Court is well
cautioned not to be as so conscious in passing upon the sufficiency of the evidence, let
alone the conclusions derived therefrom. In this case, the majority of the members of the
NLRC, as well as its dissenting member, agree that there is a wage distortion arising from
the bank's implementation of the P25 wage increase; they do differ, however, on the extent
of the distortion that can warrant the adoption of corrective measures required by law.
• In mandating an adjustment, the law did not require that there be an elimination or
total abrogation of quantitative wage or salary differences, a severe contraction
thereof is enough. – The definition of "wage distortion," aforequoted, shows that such
distortion can so exist when, as a result of an increase in the prescribed wage rate, an
"elimination or severe contraction of intentional quantitative differences in wage or salary
rates" would occur "between and among employee groups in an establishment as to
effectively obliterate the distinctions embodied in such wage structure based on skills,
length of service, or other logical bases of differentiation." In mandating an adjustment, the
law did not require that there be an elimination or total abrogation of quantitative wage or
salary differences; a severe contraction thereof is enough. As has been aptly observed by
Presiding Commissioner Edna Bonto-Perez in her dissenting opinion, the contraction
between personnel groupings comes close to eighty-three (83%), which cannot, by any
stretch of imagination, be considered less than severe.
• The SolGen has correctly emphasized that the intention of the parties, whether the
benefits under a CBA should be equated with those granted by law or not unless
there are compelling reasons otherwise it must prevail and be given effect. – The
"intentional quantitative differences" in wage among employees of the bank has been set by
 the CBA to about P900 per month as of 01 January 1989. It is intentional as it has been
arrived at through the collective bargaining process to which the parties are thereby
concluded. The Solicitor General, in recommending the grant of due course to the petition,
has correctly emphasized that the intention of the parties, whether the benefits under a
collective bargaining agreement should be equated with those granted by law or not, unless
there are compelling reasons otherwise, must prevail and be given effect.

41. People’s Broadcasting vs. Secretary of Labor

G.R. No. 179652 – March 6, 2012
667 SCRA 538, 555
Facts:
Private respondent filed a complaint against petitioner with DOLE for illegal deduction,
nonpayment of service incentive leave, 13th month pay, premium pay for holiday and rest day
and illegal diminution of benefits, delayed payment of wages and noncoverage of SSS, PAG-
IBIG and Philhealth. After the conduct of summary investigations, and after the parties
submitted their position papers, the DOLE Regional Director found that private respondent was
an employee of petitioner, and was entitled to his money claims. Petitioner sought
reconsideration of the Director’s Order, but failed. The Acting DOLE Secretary dismissed
petitioner’s appeal on the ground that petitioner submitted a Deed of Assignment of Bank
Deposit instead of posting a cash or surety bond. When the matter was brought before the CA,
where petitioner claimed that it had been denied due process, it was held that petitioner was
accorded due process as it had been given the opportunity to be heard, and that the DOLE
Secretary had jurisdiction over the matter, as the jurisdictional limitation imposed by Article 129
of the Labor Code on the power of the DOLE Secretary under Art. 128(b) of the Code had been
repealed by Republic Act No. 7730 (an act further strengthening the visitorial and enforcement powers of the
secretary of labor and employment, amending for the purpose article 128 [b] of the Labor Code). In the Decision of
this Court, the CA Decision was reversed and set aside, and the complaint against petitioner was
dismissed. The Court found that there was no employer-employee relationship between petitioner and
private respondent. It was held that while the DOLE may make a determination of the existence of an
employer-employee relationship, this function could not be co-extensive with the visitorial and
enforcement power provided in Art. 128(b) of the Labor Code, as amended by RA 7730. The National
Labor Relations Commission (NLRC) was held to be the primary agency in determining the existence of
an employer-employee relationship. This was the interpretation of the Court of the clause "in cases where
the relationship of employer-employee still exists" in Art. 128(b).
Issue:
Whether or not the DOLE may make a determination as to whether an employer-employee
relationship exists.
Held:
• DOLE; Jurisdiction; Visitorial and Enforcement Powers; Under Art. 129 of the Labor
Code, the power of the DOLE and its duly authorized hearing officers to hear and
decide any matter involving the recovery of wages and other monetary claims and
benefits was qualified by the proviso that the complaint does not include a claim for
reinstatement, or that the aggregate money claims does not exceed Php 5,000.00; RA
7730 did not do away with the Php 5,000.00 limitation, allowing the DOLE to exercise
its visitorial and enforcement power for claims beyond Php 5,000.00. – Under Art. 129
of the Labor Code, the power of the DOLE and its duly authorized hearing officers to hear
and decide any matter involving the recovery of wages and other monetary claims and
benefits was qualified by the proviso that the complaint not include a claim for
reinstatement, or that the aggregate money claims not exceed PhP 5,000. RA 7730, or an
Act Further Strengthening the Visitorial and Enforcement Powers of the Secretary of Labor,
did away with the PhP 5,000 limitation, allowing the DOLE Secretary to exercise its visitorial
 and enforcement power for claims beyond PhP 5,000. The only qualification to this
expanded power of the DOLE was only that there still be an existing employer-employee
relationship.
• If there is no employer-employee relationship, whether it has been terminated or it
has not existed from the start, the DOLE has no jurisdiction; an employer-employee
relationship must exist for the exercise of the visitorial and enforcement power of the
DOLE. – It is conceded that if there is no employer-employee relationship, whether it has
been terminated or it has not existed from the start, the DOLE has no jurisdiction. Under
Art. 128(b) of the Labor Code, as amended by RA 7730, the first sentence reads,
"Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in
cases where the relationship of employer-employee still exists, the Secretary of Labor and
Employment or his duly authorized representatives shall have the power to issue
compliance orders to give effect to the labor standards provisions of this Code and other
labor legislation based on the findings of labor employment and enforcement officers or
industrial safety engineers made in the course of inspection." It is clear and beyond debate
that an employer-employee relationship must exist for the exercise of the visitorial and
enforcement power of the DOLE.
• Employer-employee relationship; elements of employer-employee relationship. – The
elements to determine the existence of an employment relationship are: (1) the selection
and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; (4)
the employer’s power to control the employee’s conduct. The use of this test is not solely
limited to the NLRC. The DOLE Secretary, or his or her representatives, can utilize the
same test, even in the course of inspection, making use of the same evidence that would
have been presented before the NLRC.
• DOLE; NLRC; LA; Jurisdiction; If a complaint is brought before the DOLE to give
effect to the labor standards provision of the Labor Code or other labor legislation,
and there is an existing employer-employee relationship, the DOLE exercises
jurisdiction to the exclusion of the NLRC; If there is no employer-employee
relationship, the jurisdiction is properly with the NLRC; If a complaint is filed with the
DOLE, and it is accompanied by a claim for reinstatement, the jurisdiction is properly
with the LA, under Art. 217(3) of the Labor Code. – if a complaint is brought before the
DOLE to give effect to the labor standards provisions of the Labor Code or other labor
legislation, and there is a finding by the DOLE that there is an existing employer-employee
relationship, the DOLE exercises jurisdiction to the exclusion of the NLRC. If the DOLE
finds that there is no employer-employee relationship, the jurisdiction is properly with the
NLRC. If a complaint is filed with the DOLE, and it is accompanied by a claim for
reinstatement, the jurisdiction is properly with the Labor Arbiter, under Art. 217(3) of the
Labor Code, which provides that the Labor Arbiter has original and exclusive jurisdiction
over those cases involving wages, rates of pay, hours of work, and other terms and
conditions of employment, if accompanied by a claim for reinstatement. If a complaint is
filed with the NLRC, and there is still an existing employer-employee relationship, the
jurisdiction is properly with the DOLE. The findings of the DOLE, however, may still be
questioned through a petition for certiorari under Rule 65 of the Rules of Court.

42. Bankard Employees Union vs. National Labor Relation Commission

G.R. No. 140689 – February 17, 2004
243 SCRA 108
Facts:
Bankard, Inc. (Bankard) classifies its employees by levels, to wit: Level I, Level II, Level III,
Level IV, and Level V. On May 28, 1993, its Board of Directors approved a "New Salary Scale",
for the purpose of making its hiring rate competitive in the industry’s labor market. The "New
Salary Scale" increased the hiring rates of new employees, to wit: Levels I and V by one
thousand pesos (P1,000.00), and Levels II, III and IV by nine hundred pesos (P900.00).
Accordingly, the salaries of employees who fell below the new minimum rates were also
adjusted to reach such rates under their levels. Bankard’s move drew Petitioner to press for the
increase in the salary of its old, regular employees. Bankard took the position, however, that
there was no obligation on the part of the management to grant to all its employees the same
increase in an across-the-board manner. As the continued request of petitioner for increase in
the wages and salaries of Bankard’s regular employees remained unheeded, it filed a Notice of
Strike on the ground of discrimination and other acts of Unfair Labor Practice (ULP). The strike
was averted, however, when the dispute was certified by the Secretary of Labor and
Employment for compulsory arbitration. The Second Division of the NLRC finding no wage
distortion, dismissed the case for lack of merit.
Issue:
Whether or not the unilateral adoption by an employer of an upgraded salary scale that
increased the hiring rates of new employees without increasing the salary rates of old
employees resulted in wage distortion.
Held:
• Definition of the term “Wage Distortion.” – Upon the enactment of R.A. No. 6727
(WAGE RATIONALIZATION ACT, amending, among others, Article 124 of the Labor Code)
on June 9, 1989, the term "wage distortion" was explicitly defined as: ... a situation where
an increase in prescribed wage rates results in the elimination or severe contraction of
intentional quantitative differences in wage or salary rates between and among employee
groups in an establishment as to effectively obliterate the distinctions embodied in such
wage structure based on skills, length of service, or other logical bases of differentiation.
• Elements of Wage Distortion. – Prubankers Association v. Prudential Bank and Trust
Company laid down the four elements of wage distortion, to wit: (1.) An existing hierarchy of
positions with corresponding salary rates; (2) A significant change in the salary rate of a
lower pay class without a concomitant increase in the salary rate of a higher one; (3) The
elimination of the distinction between the two levels; and (4) The existence of the distortion
in the same region of the country.
• In a problem with “wage distortion,” the basic assumption is that there exists a
grouping or classification of employees that establishes distinctions among them on
some relevant or legitimate bases. – Normally, a company has a wage structure or
method of determining the wages of its employees. In a problem dealing with "wage
distortion," the basic assumption is that there exists a grouping or classification of
employees that establishes distinctions among them on some relevant or legitimate bases.
• For purposes of determining the existence of wage distortion, employees cannot
create their own independent classification and use it as a basis to demand an
across-the-board increase in salary. – Moreover, for purposes of determining the
existence of wage distortion, employees cannot create their own independent classification
and use it as a basis to demand an across-the-board increase in salary.
• The formulation of a wage structure through the classification of employees is a
matter of management judgment and discretion. – As National Federation of Labor v.
NLRC, et al. teaches, the formulation of a wage structure through the classification of
employees is a matter of management judgment and discretion.
• Mere factual existence of wage distortion does not ipso facto result to an obligation
to rectify it, absent a law or other source of obligation which requires its rectification.
– The mere factual existence of wage distortion does not, however, ipso facto result to an
obligation to rectify it, absent a law or other source of obligation which requires its
rectification. Unlike in Metro Transit then where there existed a "company practice," no such
 management practice is herein alleged to obligate Bankard to provide an across-the-board
increase to all its regular employees.

43. Luz Cristobal vs. Employees’ Compensation Commission

G.R. No. L-49280 – April 30, 1980
103 SCRA 329
Facts:
The deceased, Fortunato S. Cristobal was employed as Supervising Information Officer of the
National Science Development Board (NSDB). Later, he developed loose bowel movement
which later worsened and his excrement was marked with fresh blood. Self-administered
medications were made but symptoms persisted until he was brought to the hospital where he
was diagnosed with rectal malignancy. Subsequently, he was discharged with improved
conditions but just one year thereafter, he was again confined at the hospital for the same
ailment. A second operation became necessary because of the recurrence of malignancy in the
pelvis. Despite earnest medical efforts, he succumbed to his illness. The petitioner herein, as
the decedent's widow and beneficiary, filed with the GSIS, a claim for income (death) benefits
under PD No. 626, as amended. The said claim was denied by the GSIS and as well as the
subsequent request for reconsideration. GSIS held that the disease was not amongst the list of
occupational diseases compensable under the law.
Issue:
Whether or not the illness of the deceased, rectal cancer, is compensable.
Held:
• Employees Compensation; Rectal Cancer; Uncertainty of the cause of rectal cancer
cannot erase probability that the ailment was work-connected as the deceased was
exposed to unhygienic working conditions and that the disease might have even
contracted prior to the effectivity of the New Labor Code. – Therefore, whether or not
the disease rectal cancer was caused or the risk of contracting the same was increased by
the decedent's working conditions remains uncertain. This uncertainty, of course, cannot
eliminate the probability that the ailment was work connected as it had been established
that the deceased was exposed to unhygienic "Forking conditions, various chemicals and
intense heat which are generally considered as predisposing factors of cancer. At this point,
there is need to reiterate that when the deceased started working in 1964, he was free from
any kind of disease. In ruling on the claim, this Court also applied the theory of increased
risk under Section 1(b) Rule Ill of PD 626. x x x aside from the possibility that the disease
might have been contracted even prior to the effectivity of the new Labor Code.
• Evidence; Degree of Proofrequired to establish proof of work-connection between
ailment and the deceased’s employment only substantial evidence or reasonable
work connection; Strict rules of evidence not applicable in claims for workmen’s
compensation; Doubts in implementation and interpretation of the New Labor Code
and its implementing rules and regulations resolved in favour of labor. – To establish
compensability of the claim under the said theory, the claimant must show proof of work-
connection. Impliedly, the degree of proof required is merely substantial evidence, which
means "such relevant evidence as a reasonable mind might accept as adequate to support
a conclusion" (Ang Tibay vs. The Court of Industrial Relations and National Labor Union,
Inc., 69 Phil. 635) or clear and convincing evidence. In this connection, it must be pointed
out that the strict rules of evidence are not applicable in claims for compensation.
Respondents however insist on evidence which would establish direct causal relation
between the disease rectal cancer and the employment of the deceased. Such a strict
requirement which even medical experts in the field cannot support considering the
uncertainty of the nature of the disease would negate the principle of liberality in the matter
of evidence. Apparently, what the law merely requires is a reasonable work-connection and
 not a direct causal relation. This kind of interpretation gives meaning and substance to the
liberal and compassionate spirit of the law as embodied in Article 4 of the new Labor Code
which states that "all doubts in the implementation and interpretation of the provisions of
this Code, including its implementing rules and regulations shall be resolved in favor of
labor.
• Decisions on claims for compensation; ECC and GSIS as agents of the law to
implement the social justice guarantee under the 1935 and 1973 Constitution should
adopt a more liberal attitude in deciding claims for compensation. – As the agents
charged by the law to implement the social justice guarantee secured by both the 1935 and
1973 Constitutions, respondents should adopt a more liberal attitude in deciding claims for
compensation especially when there is some basis in the facts for inferring a work-
connection.
• Workmen’s Compensation Act; Prescription of compensability and theory of
aggravation under the Workmen’s Compensation Act different from liberality under
the New Labor Code. – This should not be confused with the presumption of
compensability and theory of aggravation under the Workmen's Compensation Act. While
these doctrines may have been abandoned under the new Labor Code (the constitutionality
of such abrogation may still be challenged), it is significant that the liberality of the law, in
general, still subsists.
• Computation of death benefits of P12,000.00 awarded to the claimant within the
limitations provided by the Labor Code. – A computation of the death benefits in
accordance with the underlined procedure would disclose that the amount, awarded by this
Court is well within the limitations provided therein.
• Attorney’s Fees; Award of attorney’s fees in employees’ compensation cases proper;
Reasons; Rationale behind Art. 203 of the New Labor Code on award of attorney’s
fees; Denial of compensation to counsel for his professional services amount to
deprivation of property without due process of law. – A close examination of the
aforequoted provision reveals that the intent of the law is to free the awrad from any liability
or charge so that the claimaint who is exempt from liabitity for attorney's fees. The
defaulting employer or governement agency remains libale for attorney's fees; because it
compelled the claimant to employ the services of counsel by unjustly refusing to recognize
the validity of the claim of peitioner. This actually is the rationale behind the prohibition.
Nothing is wrong with the court's award of attorney's fees which is separate and distinct
from the other benefits awarded. Besides, in the instant case, the participation of
petitioner's counsel was not limited to the preparation or filling of the claim but in appealling
petitioner's case before this Court necessitating submission of pleadings to establish his
cause of action and to rebut or refute the arguments of herein respondents. Fairness
dictates that the counsel should receive compensation for his services; otherwise, it would
be entirely difficult for claimants, majority of whom are notlearned in the intrecacies of the
law, to get good legal service. To deny counsel compensation for his professional services,
would amount to deprivation of property without due process of law.
• Pauper litigants; Exemption from payment of legal fees; Manner of appeal in forma
pauperis of claimant not incompatible with award of attorney’s fees; Pauper litigant
exempted from payment of legal fees and from filing appeal bond, printed record and
printed brief, but not exempted from payment of attorney’s fees. – Petitioner appealed
to this Court in forma pauperis. Respondents are of the mistaken belief that such manner of
appeal is incompatible with the award of attorney's fees. It must be pointed out that Section
22, Rule 3 of the Rules of Court merely exempts a pauper litigant from the payment of legal
fees and from the filing of appeal bond, printed record and printed brief, but does not
 exempt him from the payment of attorney's fees. Therefore, the award of attorney's fees in
the instant case is proper.
• Funeral benefits; Award of funeral benefits of P1,000.00 consistent with the Court’s
award in the case of Mitra, Vda. De Torbela and Tuquero cases. – On the award of
funeral benefits in the amount of P700.00, We find that the same should be increased to
Pl,000.00 pursuant to PD 1146, Section 19 in relation to Section 45, and PD 1641, Section
6(d), which took effect on May 31, 1977. This is also consistent with this Court's award in
the cases of Mitra vs. Employees' Compensation Commission (96 SCRA 284 119801);
Vda. de Torbela vs. ECC (96 SCRA 260 119801); and Tuquero vs. ECC (96 SCRA 291
[19801).

44. Zaida Raro vs. Employees’ Compensation Commission

G.R. No. L-58445 – April 27, 1989
172 SCRA 845
Facts:
The petitioner states that she was in perfect health when employed as a clerk by the Bureau of
Mines and Geo-Sciences. About four years later, she began suffering from severe and recurrent
headaches coupled with blurring of vision. Forced to take sick leaves every now and then, she
sought medical treatment in Manila. She was then a Mining Recorder in the Bureau. The
petitioner was diagnosed to be suffering from brain tumor. By that time, her memory, sense of
time, vision, and reasoning power had been lost. A claim for disability benefits filed by her
husband with the Government Service Insurance System (GSIS) was denied. A motion for
reconsideration was similarly denied. An appeal to the Employees' Compensation Commission
resulted in the Commission's affirming the GSIS decision.
Issue:
Whether or not brain tumor which causes are unknown but contracted during employment is
compensable under the present compensation laws.
Held:
• Labor Standards; Disability benefits; State Insurance Fund; A claimant for disability
benefits must prove that his illness was cause by the employment and the risk of
contracting the same was increased by his working conditions. – The law, as it now
stands requires the claimant to prove a positive thing – the illness was caused by
employment and the risk of contracting the disease is increased by the working conditions.
To say that since the proof is not available, therefore, the trust fund has the obligation to
pay is contrary to the legal requirement that proof must be adduced. The existence of
otherwise non-existent proof cannot be presumed.
• Unless it be shown that a particular form of cancer is caused by specific working
conditions, it cannot be concluded that it was the employment which increased the
risk of contracting the disease. – In Navalta v. Government Service Insurance System
(G.R. No. 46684, April 27, 1988) this Court recognized the fact that cancer is a disease of
still unknown origin which strikes; people in all walks of life, employed or unemployed.
Unless it be shown that a particular form of cancer is caused by specific working conditions
(e. g. chemical fumes, nuclear radiation, asbestos dust, etc.) we cannot conclude that it was
the employment which increased the risk of contracting the disease .

45. Apolinario Kirit vs. Government Service Insurance System

G.R. No. L-48580 – July 6, 1990
187 SCRA 224
Facts:
The late Eugenia A. Kirit was a classroom teacher of the Department of Education and Culture.
Her clinical record reveals she was confined at the hospital on complaints of pain on the left
shoulder for six (6) months prior to admission, with limitation of motion, accompanied by
numbness at the left side of the face, shoulder and arm. Her ailments were diagnosed as
"Osteoarthritis and Giant Cell Tumor, left humerus." Thereafter, she succumb to her illness.
Later, a claim for employees' compensation benefits was filed by the decedent's husband with
respondent Government Service Insurance System. Said claim was denied by the GSIS in its
letter-decision, stating that the cause of Mrs. Kirit's death, osteoarthritis and giant cell tumor, left
humerus, are not occupational diseases, taking into consideration the nature of her particular
work. The GSIS further stated that the evidence submitted by petitioners had not shown that
said ailment directly resulted from her occupation or employment as a teacher.
Issue:
Whether or not the death of Eugenia Kirit caused by osteoarthritis and/or giant cell tumor is
legally compensable.
Held:
• Workmen’s Compensation Act; Death Benefits; Presumptions of compensability and
aggravation have been abandoned under the compensation scheme in the present
Labor Code. – Thus, the contentions of petitioners, which are anchored on presumptions of
compensability and aggravation provided under the former Workmen's Compensation Act,
cannot be upheld. The said presumptions have been abandoned under the compensation
scheme in the present Labor Code.
• Compensable sickness defined. – Article 167(1) of the Labor Code, as amended, defines
a compensable sickness as "illness definitely acceptable as an occupational disease listed
by the Commission or any illness caused by employment subject to proof that the risk of
contracting the same is increased by working conditions."
• Osteoarthritis and/or giant cell tumor not listed by the ECC as occupational
diseases; Petitioner must prove that the decedent’s working conditions as a teacher
increased the risk of her contracting the fatal disease. – In the case at bar, the cause of
decedent's death, osteoarthritis and/or giant cell tumor, are not listed by the ECC as
occupational diseases. Consequently, to be compensable it was incumbent upon
petitioners to prove that the decedent's working conditions as a teacher increased the risk
of her contracting the fatal illness.
• Petitioner did not present any evidence to prove work connection; Awards of
compensation cannot be made to rest on presumptions. – A careful review of the
record shows that petitioners did not present any evidence to prove work connection. They
relied solely on the theory of aggravation and presumptions of compensability under the old
compensation law which have no application in this case. In the absence of proof, we
cannot conclude that it was the employment of the decedent which increased the risk of her
contracting the disease. The burden of proof is upon petitioners, as awards of
compensation cannot be made to rest on presumptions.
• Claim for death benefits correctly denied by public respondent. – Petitioners having
failed to discharge the burden of proof placed upon them by the Labor Code, the claim for
death benefits was correctly denied by public respondent.

46. Juan Bonifacio vs. Government Service Insurance System

G.R. No. L-62207 – December 15, 1986
146 SCRA 276
Facts:
The late Lourdes Bonifacio was a classroom teacher until she contracted carcinoma of the
breast with metastases to the gastro-intestinal tract and lungs which caused her death.
Thereafter a claim for death benefits under P.D. No. 626, as amended, was filed by petitioner
with the GSIS. The same was however denied on the ground that the decedent’s principal
ailment, carcinoma of the breast with metastases to gastro-intestinal tract and lungs, is not an
occupational disease for her particular work as a teacher, nor is the risk of contracting said
disease increased by her working conditions. The Employees Compensation Commission, on
appeal, affirmed the decision of the respondent.
Issue:
Whether or not respondent Commission’s affirmance of the denial by respondent System totally
ignored the Supreme Court’s pronouncements on compensation cases.
Held:
• Employees’ Compensation; Classroom Teacher’ Carcinoma of the breast;
Compensable Sickness, concept of; Employees’ Compensation Commission
empowered to determine and approve occupational diseases and work-related
illnesses which may be considered compensable. – A compensable sickness means
"any illness definitely accepted as an occupational disease listed by the Employees
Compensation Commission, or any illness caused by employment subject to proof by the
employee that the risk of contracting the same is increased by working conditions. For this
purpose, the Commission is empowered to determine and approve occupational diseases
and work-related illnesses that may be considered compensable based on peculiar hazards
of employment." [Art. 167(1) Labor Code as amended by P.D. No. 1368, effective May 1,
1978].
• Carcinoma of the breast with metastases to the gastro-intestinal tract and lungs, not
listed by the ECC as an occupational disease. – Carcinoma of the breast with
metastases to the gastro-intestinal tract and lungs is not listed by the Commission as an
occupational disease.
• The cancer which affected the deceased not being occupational in her particular
employment, it is incumbent upon petitioner to prove that the decedent’s working
conditions increased the risk of her contracting the fatal illness; Petitioner failed to
discharge the onus. – The cancer which affected the deceased not being occupational in
her particular employment, it became incumbent upon petitioner to prove that the
decedent’s working conditions increased the risk of her contracting the fatal illness. This
onus, petitioner failed to satisfactorily discharge.
• Under the present Labor Code, the “latitudinarian or expansive application of the
Workmen’s Compensation Law in favour of the employee or worker, no longer
prevails, as he burden of showing proof of causation has shifted back to the
employee; Presumption of compensability and the rule on aggravation of illness
caused by the nature of the employment abolished by the Labor Code. – With this
legal presumption in the old law, the burden of proof shifts to the employer and the
employee no longer suffers the burden of showing causation. Under the present Labor
Code, the "latitudinarian or expansive application of the Workmen’s Compensation Law in
favor of the employee or worker" no longer prevails as the burden of showing proof of
causation has shifted back to the employee particularly in cases of sickness or injuries
which are not accepted or listed as occupational by the Employees Compensation
Commission. As stated in Sulit v. Employees Compensation Commission, [supra] "the
Labor Code abolished the presumption of compensability and the rule on aggravation of
illness caused by the nature of the employment."
• The provision that in case of doubt in the interpretation of the provisions of the
Labor Code, the doubt should be resolved in favour of the labourer, does not apply
where the pertinent provisions of the Labor Code leave no room for doubt either in
their interpretation or application. – While we do not dispute petitioner’s contention that
under the law, in case of doubt in the implementation and interpretation of the provisions of
the Labor Code, including its implementing rules and regulations, the doubt shall be
 resolved in favor of the laborer, we find that the same has no application in this case since
the pertinent provisions of the Labor Code leave no room for doubt either in their
interpretation or application.

47. Salvador Lazo vs. Employees’ Compensation Commission

G.R. No. 78617 – June 18, 1990
186 SCRA 569
Facts:
Salvador Lazo is a security guard of the Central Bank. One day, since the security guard who
was to relieve him failed to arrive, the petitioner rendered overtime duty. The following day, he
asked permission from his superior to leave early in order to take home his sack of rice. On his
way home, the passenger jeepney the petitioner was riding on turned turtle due to slippery road.
As a result, he sustained injuries. For the injuries he sustained, petitioner filed a claim for
disability benefits under PD 626, as amended. His claim, however, was denied by the GSIS
holding that the condition for compensability had not been satisfied. Upon review of the case,
the respondent Employees Compensation Commission affirmed the decision since the accident
which involved the petitioner occurred far from his work place and while he was attending to a
personal matter.
Issue:
Whether or not Petitioner’s injuries should be compensated under PDP 626.
Held:
• Workmen’s Compensation; Labor Law; Central Bank security guard, who was
granted permission to leave his post so he could bring home a sack of rice and who
met an accident along the way, is entitled to workmen’s compensation under PD 626.
– In the case at bar, it can be seen that petitioner left his station at the Central Bank several
hours after his regular time off, because the reliever did not arrive, and so petitioner was
asked to go on overtime. After permission to leave was given, he went home. There is no
evidence on record that petitioner deviated from his usual, regular homeward route or that
interruptions occurred in the journey. While the presumption of compensability and theory of
aggravation under the Workmen's Compensation Act (under which the Baldebrin case was
decided) may have been abandoned under the New Labor Code,8 it is significant that the
liberality of the law in general in favor of the workingman still subsists. As agent charged by
the law to implement social justice guaranteed and secured by the Constitution, the
Employees Compensation Commission should adopt a liberal attitude in favor of the
employee in deciding claims for compensability, especially where there is some basis in the
facts for inferring a work connection to the accident.
• PD 626 should be interpreted liberally. – We are constrained not to consider the defense
of the street peril doctrine and instead interpret the law liberally in favor of the employee
because the Employees Compensation Act, like the Workmen's Compensation Act, is
basically a social legislation designed to afford relief to the working men and women in our
society.

48. Emelita Enao vs. Employees’ Compensation Commission

G.R. No. L-46046 – April 5, 1985
135 SCRA 350
Facts:
While on her way to buy office supplies, Petitioner’s bus was was ambushed and fired upon by
armed men hitting her on her forearm and abdomen necessitating operation. according to
appellant's witnesses, who were members of the ambushed party, she was on her way to
Dipolog City for the purpose of 'securing supplies and other training and school aids necessary
for furthering (our) services as a school teacher.' Later, petitioner sent a notice of claim of injury
to the Secretary of Education and Culture. On the same date, a claim for income benefits for
disability was filed by the herein petitioner with the Government Service Insurance System but
this claim was denied by the System holding that since the day Petitioner was ambushed, it was
her off day; and that under such situation, for purposes of the Employees' Compensation, said
accident happened outside the time and place of work, not to mention the fact that she was not
in the performance of your official functions when it happened.
Issue:
Whether or not Petitioner should be entitled for Employees’ Compensation in the instant case.
Held:
• A school teacher who was ambushed along the way on a Friday, which was made
officially as an off-day, where her purpose was to buy office supplies, is entitled to
workmen’s compensation. – The Petitioner, in proceeding to Dipolog City on August 1,
1975, which is a Friday, from her station at the Municipality of Sergio Osmena, Sr.,
Zamboanga del Norte, intended to procure supplies and other training aids which are
needed facilities in connection with her services as a school teacher at the Wilbon Primary
School, cannot be at all disputed. The companions of the Petitioner at the time of the
ambush and who appear to be co-teachers of the Petitioner, namely: Francisco L. Podol
and Juanita Adanza, have attested in their respective affidavits that they and the Petitioner
were at that time on their way to Dipolog City "for the purpose of securing supplies and
other training and school aids necessary for the furtherance of their services as school
teachers." There is no mention at an in the decision of the Employees' Compensation
Commission that this particular assertion has been at all contradicted or controverted by
any evidence whatsoever submitted to the Commission by the GSIS.
• Affidavits of claimant’s companions regarding purpose of the latter in going to
Dipolog City – to buy office supplies – should not be considered by E.C.C. as self-
serving in the absence of controverting evidence. – We find no basis at an for the
findings made by the Employees' Compensation Commission in its decision that the
statements of Petitioner and her witnesses are merely self-serving declarations because
We can discern no circumstance that would indicate or support such a conclusion. As a
matter of fact, the decision appealed from accepts the fact that the statements given by
Petitioner-Appellant's witnesses constitute prima facie evidence of the matter sought to be
established. Uncontroverted and unrefuted by any evidence, then such statements of
appellant's witnesses would suffice to establish that the multiple gunshot wounds and
injuries sustained by appellant and which caused her confinement at the Zamboanga del
Norte Provincial Hospital from August 1 to 6, 1975 for removal of shrapnels from her left
arm and later at the Dipolog Medical Center from September 1 to 12, 1975, are definitely
work-connected.
• That Dipolog City happened to be the place of residence of claimant should not be
considered as negating the reason that she travelled thereto from Zamboanga del
Norte to but school supplies. She was ambushed along the way. – Furthermore, the
fact that Dipolog City is also the residence of the Petitioner does not at all, by this singular
circumstance, render untrue or false the clear evidence submitted in this case that
Petitioner and her co-teachers were proceeding to Dipolog City at the time to purchase
needed supplies and other training and school aids. That Dipolog City happened to be also
the Petitioner's place of residence, in this instance, becomes simply incidental and/or purely
coincidental.
• Where claimant was performing official functions it hardly matters that she was
injured outside regular working hours and beyond her place of work. – As it can be
rightfully ruled that the Claimant-Petitioner was actually then performing her official
functions, it hardly matters then whether such task which Petitioner was then engaged in or
 discharging, happened outside the regular working hours and not in the Petitioner's place of
work. It is rather obvious that in proceeding to purchase school materials in Dipolog City,
Petitioner would necessarily have to leave the school premises and her travel need not be
during her usual working hours. What is significant and controlling is that the injuries she
sustained are work-connected, which the Court finds to be so.

49. Ciriaco Hinoguin vs. Employees’ Compensation Commission

G.R. No. 84307 – April 17, 1989
172 SCRA 350
Facts:
Sgt. Hinoguin and two (2) members of his Detachment sought permission from their
Commanding Officer to go on overnight pass to settle an important matter. Captain Besas orally
granted them permission to go and to take their issued firearms with them, considering that the
area was regarded as a critical place since it had peace and order problems due to the
presence of elements of the NPA. While on the area, they had some gin and beer, finishing a
bottle of gin and two (2) large bottles of beer. After finishing, they boarded a tricycle. Upon
reaching a certain area, one of his companion, walked towards and in front of the tricycle cab,
holding his M-16 rifle in his right hand, not noticing that the rifle's safety lever was on semi
automatic (and not on "safety"). He accidentally touched the trigger, firing a single shot in the
process and hitting Sgt. Hinoguin, then still sitting in the cab, in the left lower abdomen. The
Sergeant did not apparently realize immediately that he had been hit; he took three (3) steps
forward, cried that he had been hit and fell to the ground and eventually died of his wound.
petitioner filed his claim for compensation benefits under P.D. No. 626 (as amended), claiming
that the death of his son was work-connected and therefore compensable. This was denied by
the GSIS on the ground that petitioner's son was not at his work place nor performing his duty
as a soldier of the Philippine Army at the time of his death.
Issue:
Whether or not the death of Sgt. Lemick Hinoguin is compensable under the applicable statute
and regulations.
Held:
• Labor Standards; Death Benefits; Work-Connected Injuries; The work-connected
character of Sgt. Hinoguin’s injury and death was not precluded by the fact that he
was on an overnight pass at the time he was accidentally shot by a fellow soldier. –
Turning to the question of whether Sgt. Hinoguin was performing official functions at the
time he sustained the gunshot wound, it has already been pointed out above that the Line
of Duty Board of Officers of the 14th Infantry Battalion Headquarters had already
determined that the death of Sgt. Hinoguin had occurred "in line of duty." It may be noted in
this connection that a soldier on active duty status is really on 24 hours a day official duty
status and is subject to military discipline and military law 24 hours a day. He is subject to
call and to the orders of his superior officers at all times, 7 days a week, except, of course,
when he is on vacation leave status (which Sgt. Hinoguin was not). 'Thus, we think that the
work-connected character of Sgt. Hinoguins injury and death was not effectively precluded
by the simple circumstance that he was on an overnight pass to go to the home of Dft.
Alibuyog, a soldier under his own command. Sgt. Hinoguin did not effectively cease
performing "official functions" because he was granted a pass. While going to a fellow
soldier's home for a few hours for a meal and some drinks was not a specific military duty,
he was nonetheless in the course of performance of official functions. Indeed, it appears to
us that a soldier should be presumed to be on official duty unless he is shown to have
clearly and unequivocally put aside that status or condition temporarily by, e.g., going on an
approved vacation leave. Even vacation leave may, it should be remembered, be
preterminated by superior orders.
• From the very nature of his occupation, a soldier assumes the risk of being
accidentally shot or fired upon by his fellow soldier. – More generally, a soldier in the
Armed Forces must accept certain risks, for instance, that he will be fired upon by forces
hostile to the State or the Government. That is not, of course, the only ask that he is
compelled to accept by the very nature of his occupation or profession as a soldier. Most of
the persons around him are necessarily also members of the Armed Forces who carry
firearms, too. In other words, a soldier must also assume the risk of being accidentally fired
upon by his fellow soldiers. This is reasonably regarded as a hazard or risk inherent in his
employment as a soldier.
• The death of Sgt. Hinoguin which resulted from the accidental discharge of his fellow
soldier’s firearm, is work-connected and therefore, compensable. – We hold,
therefore, that the death of Sgt. Hinoguin that resulted from his being hit by an accidental
discharge of the M-16 of Dft. Alibuyog, in the circumstances of this case, arose out of and in
the course of his employment as a soldier on active duty status in the Armed Forces of the
Philippines and hence compensable.
• Statutory Construction; Labor Code provisions must be given interpretation most
likely to effectuate their beneficient and humanitarian purposes. – It may be well to
add that what we have written above in respect of performance of official functions of
members of the Armed Forces must be understood in the context of the specific purpose at
hand, that is, the interpretation and application of the compensation provisions of the Labor
Code and applicable related regulations. It is commonplace that those provisions should, to
the extent possible, be given the interpretation most likely to effectuate the beneficient and
humanitarian purposes infusing the Labor Code.

50. Jesus De Jesus vs. Employees’ Compensation Commission

G.R. No. L-56191 – May 27, 1986
142 SCRA 92
Facts:
Ester P. de Jesus was employed by the Philippine National Railways (PNR) as a telephone
operator. De Jesus worked every other day during the night shift, for continuous periods of 16
hours starting from 4:00 p.m. to 8:00 a.m. of the following day. For how many months she was
hospitalized four times. Her attending physician diagnozed her ailments as chronic
pyelonephritis, diabetes mellitus, anemia and modular pulmonary metastases which is also
known as lung cancer. Despite medications, no improvement was noted and she soon
complained of non-productive cough and mild lumbar pains. Subsequently, after more than 33
years of service, she applied for retirement which was approved. Retirement benefits were
thereafter given. Ester P. de Jesus later died of her ailments. Petitioner Jesus de Jesus, the
deceased's husband, filed a claim for death benefits under P.D. 626, as amended. The claim
was denied by the Government Service Insurance System (GSIS) on the ground that the
deceased's ailments were not occupational diseases under the Labor Code. This decision was
later affirmed on review by the Employees' Compensation Commission.
Issue:
Whether or not the condition of the deceased's work increased the risk of her contracting the
diseases which caused her death, hence, compensable.
Held:
• Employee Compensation; Telephone Operator; Lung Cancer; where the deceased’s
ailments manifested themselves in 1978, the law governing the compensation claim
is the New Labor Code. – Since the ailments of the deceased, as found by her attending
physician, manifested themselves in 1978 or beyond January 1, 1975, the law governing
the petitioner's claim is the New Labor Code (Art. 208, P.D. 442, as amended).
• Requirements for compensability of sickness and disability or death. – Under Article
167 (L) of the New Labor Code and Section I (b), Rule III of the Amended Rules on
Employees' Compensation, for the sickness and the resulting disability or death to be
compensable, the sickness must be the result of an occupational disease listed under
Annex "A" of the Rules with the conditions set therein satisfied; otherwise, proof must be
shown that the risk of contracting the disease is increased by the working conditions.
• Non-compensability of claim, absent proof that the risk of contracting the disease
was increased by the working conditions concomitant with the deceased’s
employment. – After a careful examination of the case, we find the petitioner's claim
without merit. The petitioner has failed to prove by competent evidence that the risk of
contracting said diseases was indeed increased by the working conditions concomitant with
the deceased's employment.
• Evidence; Although the strict rules of evidence are not applicable in compensation
claims, the rule that a mere allegation is not evidence should not be disregarded. –
We regret to note, however, that the allegations have not been substantiated by the
petitioner. While this court has always maintained that the strict rules of evidence are not
applicable in claims for compensation (Neri v. Employees' Compensation Commission, 127
SCRA 672), the basic rule that a mere allegation is not evidence (Topweld Manufacturing,
Inc. v. Court of Appeals, et al., G.R. No. 44944, August 9, 1985; Lagasca v. de Vera, 79
Phil. 376) should not be disregarded.
• The New Labor Code on employees’ compensation discarded the concepts of
presumption of compensation and aggravation; Reason. – Under the old Workmen's
Compensation Act, as amended, which provided for the concepts of "presumption of
compensability" and "aggravation" it was possible to stretch the work related nature of an
ailment beyond seemingly rational limits. In this case, however, there is no dispute that the
governing law is the New Labor Code, which according to settled jurisprudence (Sulit v.
Employees' Compensation Commission, 98 SCRA 483; Armena v. Employees'
Compensation Commission, 122 SCRA 851; Felipe U. Erese v. Employees' Compensation
Commission, GSIS, Metro Manila, G.R. No. L45662, August 20, 1985), discarded the
aforesaid concepts to restore a sensible equilibrium between the employer's obligation to
pay workmen's compensation and the employee's rights to receive reparation for work-
connected death or disability.
• State Insurance Fund, concept and nature of. – The new law establishes a state
insurance fund built up by the contributions of employers based on the salaries of their
employees. The injured worker does not have to litigate his right to compensation. No
employer opposes his claim. There is no notice of injury nor requirement of controversion.
The sick worker simply files a claim with a new neutral Employees' Compensation
Commission which then determines on the basis of the employee's supporting papers and
medical evidence whether or not compensation may be paid. The payment of benefits is
more prompt. The cost of administration is low. The amount of death benefits has also been
doubled. On the other hand, the employer's duty is only to pay the regular monthly
premiums to the scheme. It does not look for insurance companies to meet sudden
demands for compensation payments or set up its own funds to meet these contingencies.
It does not have to defend itself from spuriously documented or long past claims.
• Application of the social security principle in the handling of workmen’s
compensation under the New Labor Code. – The new law applies the social security
principle in the handling of workmen's compensation. The Commission administers and
settles claims from a fund under its exclusive control. The employer does not intervene in
the compensation process and it has no control, as in the past, over payment of benefits.
The open ended Table of Occupational Diseases requires no proof of causation. A covered
 claimant suffering from an occupational disease is automatically paid benefits. Since there
is no employer opposing or fighting a claim for compensation, the rules on presumption of
compensability and controversion cease to have importance. The lopsided situation of an
employer versus one employee, which called for equalization through the various rules and
concepts favoring the claimant, is now absent.

51. Pedrita Marte vs. Employees’ Compensation Commission

G.R. No. L-46362 – March 31, 1982
96 SCRA 884, 890
Facts:
Petitioner Pedrita S. Marte had served as classroom teacher until she retired under the disability
retirement plan. Petitioner consulted a physician on complaints of headache, dizziness which
later on was accompanied by shortness of breath and short pain radiating to the left shoulder.
These symptoms recurred on and off until she was first hospitalized and was again confined on
during which her ailments were diagnosis to be hypertensive cardiovascular disease, with
congestive heart failure, left ventricular enlargement and impending heart failure. Before her
second confinement, she was retired under total permanent disability scheme. Thereafter,
petitioner filed her claim for income benefits with the GSIS which said System denied stating
that the claim cannot be given due course on the ground that the ailments, Hypertensive Cardio-
vascular disease, with congestive heart failure, left ventricular enlargement and impending heart
failure, Renal Hypertension and Coronary Insufficiency, are not occupational disease and are
not to be in the least causally related to her duties and conditions of work. Subsequently, Julio
Marte, petitioner's husband requested for reconsideration of aforesaid denial by the GSIS and
submitted two medical certificates of Dr. Jorge O. Limjoco as additional evidence in support of
his wife's claim. However, the GSIS denied reconsideration and forwarded petitioner's claim to
respondent Employees' Compensation Commission for review.
Issue:
Whether or not the medical certificate of petitioner's physician, Dr. Jorge O. Limjoco is sufficient
to support her request for the grant of permanent total disability benefits
Held:
• Workmen’s Compensation; Doctor’s certification as to the nature of claimant’s
disability may be given credence as he, normally, would not make a false
certification for the sake of a lowly school teacher. – While it is true that there is no
categorical statement or indication in the medical certificate that Dr. Limjoco is the attending
physician of petitioner and an expert in his line of specialization, it must be noted that said
physician, considering his professional stature in Cagayan de Oro City and Northern
Mindanao, would not have risked his profession and practice when he issued the
questioned medical certificate. Even as early as October 4, 1976 (p. 6, rec.), Dr. Limjoco
already certified to petitioner's total and permanent disability retirement and to the fact that
her ailment was work-connected. No physician in his right mind and who is aware of the far-
reaching and serious effect that his statements would cause on a money claim filed with a
government agency, would issue certifications indiscriminately without even minding his
own interests and protection. In fact, if he were not sure of what he was certifying to, then
he would not have issued the second certification or July 12, 1979, knowing fully well that
he would be perpetuating an erroneous or false report. Under normal circumstances, he
would not sacrifice his medical career for the the sake of a lowly public school teacher.
• It is the duty of GSIS to make a personal medical examination of claimant if it
contests the veracity of a private doctor’s findings. – It may even be stated that
respondent GSIS failed in its duty to have petitioner examined by its own medical officer. It
merely relied on the evaluation of its medical officer which is not based on first-hand or
personal examination of petitioner. Thus, as against the reports of petitioner's attending
physician, respondent GSIS had not produced any concrete evidence to support its
allegations. Petitioner has therefore aptly stated that "the truth should not be stifled by the
rigid requirements of evidence when the substantial rights of a party is prejudiced."