Labor Law 1 Cases Employer-Employee Relationship

LABOR LAW 1: EMPLOYER - EMPLOYEE RELATIONSHIP
G.R. No. L-12582 January 28, 1961
LVN PICTURES, INC., petitioner-appellant,

vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS, respondents-appellees.
x---------------------------------------------------------x
G.R. No. L-12598 January 28, 1961
SAMPAGUITA PICTURES, INC., petitioner-appellant,

vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS, respondents-appellees.
Nicanor S. Sison for petitioner-appellant.

Jaime E. Ilagan for respondent-appellee Court of Agrarian Relations.
Gerardo P. Cabo Chan for respondent-appellee Philippine Musicians Guild.
CONCEPCION, J.:
Petitioners herein, LVN Pictures, Inc. and Sampaguita Pictures, Inc. seek a review by certiorari of an order of the Court of
Industrial Relations in Case No. 306-MC thereof, certifying the Philippine Musicians Guild (FFW), petitioner therein and
respondent herein, as the sole and exclusive bargaining agency of all musicians working with said companies, as well as with
the Premiere Productions, Inc., which has not appealed. The appeal of LVN Pictures, Inc., has been docketed as G.R. No. L-
12582, whereas G.R. No. L-12598 is the appeal of Sampaguita Pictures, Inc. Involving as they do the same order, the two cases
have been jointly heard in this Court, and will similarly be disposed of.
In its petition in the lower court, the Philippine Musicians Guild (FFW), hereafter referred to as the Guild, averred that it is a
duly registered legitimate labor organization; that LVN Pictures, Inc., Sampaguita Pictures, Inc., and Premiere Productions, Inc.
are corporations, duly organized under the Philippine laws, engaged in the making of motion pictures and in the processing
and distribution thereof; that said companies employ musicians for the purpose of making music recordings for title music,
background music, musical numbers, finale music and other incidental music, without which a motion picture is incomplete;
that ninety-five (95%) percent of all the musicians playing for the musical recordings of said companies are members of the
Guild; and that the same has no knowledge of the existence of any other legitimate labor organization representing musicians
in said companies. Premised upon these allegations, the Guild prayed that it be certified as the sole and exclusive bargaining
agency for all musicians working in the aforementioned companies. In their respective answers, the latter denied that they
have any musicians as employees, and alleged that the musical numbers in the filing of the companies are furnished by
independent contractors. The lower court, however, rejected this pretense and sustained the theory of the Guild, with the
result already adverted to. A reconsideration of the order complained of having been denied by the Court en banc, LVN
Pictures, inc., and Sampaguita Pictures, Inc., filed these petitions for review for certiorari.
Apart from impugning the conclusion of the lower court on the status of the Guild members as alleged employees of the film
companies, the LVN Pictures, Inc., maintains that a petition for certification cannot be entertained when the existence of
employer-employee relationship between the parties is contested. However, this claim is neither borne out by any legal
provision nor supported by any authority. So long as, after due hearing, the parties are found to bear said relationship, as in
the case at bar, it is proper to pass upon the merits of the petition for certification.
It is next urged that a certification is improper in the present case, because, "(a) the petition does not allege and no evidence
was presented that the alleged musicians-employees of the respondents constitute a proper bargaining unit, and (b) said
alleged musicians-employees represent a majority of the other numerous employees of the film companies constituting a
proper bargaining unit under section 12 (a) of Republic Act No. 875."
1
The absence of an express allegation that the members of the Guild constitute a proper bargaining unit is fatal proceeding, for
the same is not a "litigation" in the sense in which this term is commonly understood, but a mere investigation of a non-
adversary, fact finding character, in which the investigating agency plays the part of a disinterested investigator seeking
merely to ascertain the desires of employees as to the matter of their representation. In connection therewith, the court
enjoys a wide discretion in determining the procedure necessary to insure the fair and free choice of bargaining
representatives by employees.1 Moreover, it is alleged in the petition that the Guild it a duly registered legitimate labor
organization and that ninety-five (95%) percent of the musicians playing for all the musical recordings of the film companies
involved in these cases are members of the Guild. Although, in its answer, the LVN Pictures, Inc. denied both allegations, it
appears that, at the hearing in the lower court it was merely the status of the musicians as its employees that the film
companies really contested. Besides, the substantial difference between the work performed by said musicians and that of
other persons who participate in the production of a film, and the peculiar circumstances under which the services of that
former are engaged and rendered, suffice to show that they constitute a proper bargaining unit. At this juncture, it should be
noted that the action of the lower court in deciding upon an appropriate unit for collective bargaining purposes is
discretionary (N.L.R.B. v. May Dept. Store Co., 66 Sup. Ct. 468. 90 L. ed. 145) and that its judgment in this respect is entitled to
almost complete finality, unless its action is arbitrary or capricious (Marshall Field & Co. v. N.L.R.B. [C.C.A. 19431, 135 F. 2d.
891), which is far from being so in the cases at bar.
Again, the Guild seeks to be, and was, certified as the sole and exclusive bargaining agency for the musicians working in the
aforesaid film companies. It does not intend to represent the other employees therein. Hence, it was not necessary for the
Guild to allege that its members constitute a majority of all the employees of said film companies, including those who are not
musicians. The real issue in these cases, is whether or not the musicians in question are employees of the film companies. In
this connection the lower court had the following to say:
As a normal and usual course of procedure employed by the companies when a picture is to be made, the producer
invariably chooses, from the musical directors, one who will furnish the musical background for a film. A price is
agreed upon verbally between the producer and musical director for the cost of furnishing such musical background.
Thus, the musical director may compose his own music specially written for or adapted to the picture. He engages his
own men and pays the corresponding compensation of the musicians under him.
When the music is ready for recording, the musicians are summoned through 'call slips' in the name of the film
company (Exh 'D'), which show the name of the musician, his musical instrument, and the date, time and place where
he will be picked up by the truck of the film company. The film company provides the studio for the use of the
musicians for that particular recording. The musicians are also provided transportation to and from the studio by the
company. Similarly, the company furnishes them meals at dinner time.
During the recording sessions, the motion picture director, who is an employee of the company, supervises the
recording of the musicians and tells what to do in every detail. He solely directs the performance of the musicians
before the camera as director, he supervises the performance of all the action, including the musicians who appear in
the scenes so that in the actual performance to be shown on the screen, the musical director's intervention has
stopped.
And even in the recording sessions and during the actual shooting of a scene, the technicians, soundmen and other
employees of the company assist in the operation. Hence, the work of the musicians is an integral part of the entire
motion picture since they not only furnish the music but are also called upon to appear in the finished picture.
The question to be determined next is what legal relationship exits between the musicians and the company in the
light of the foregoing facts.
We are thus called upon to apply R.A. Act 875. which is substantially the same as and patterned after the Wagner Act
substantially the same as a Act and the Taft-Hartley Law of the United States. Hence, reference to decisions of
American Courts on these laws on the point-at-issue is called for.
2
Statutes are to be construed in the light of purposes achieved and the evils sought to be remedied. (U.S. vs. American
Tracking Association, 310 U.S. 534, 84 L. ed. 1345.) .
In the case of National Labor Relations Board vs. Hearts Publication, 322 U.S. 111, the United States Supreme Court
said the Wagner Act was designed to avert the 'substantial obstruction to the free flow of commerce which results
from strikes and other forms of industrial unrest by eliminating the causes of the unrest. Strikes and industrial unrest
result from the refusal of employers' to bargain collectively and the inability of workers to bargain successfully for
improvement in their working conditions. Hence, the purposes of the Act are to encourage collective bargaining and
to remedy the workers' inability to bargaining power, by protecting the exercise of full freedom of association and
designation of representatives of their own choosing, for the purpose of negotiating the terms and conditions of their
employment.'
The mischief at which the Act is aimed and the remedies it offers are not confined exclusively to 'employees' within
the traditional legal distinctions, separating them from 'independent contractor'. Myriad forms of service relationship,
with infinite and subtle variations in the term of employment, blanket the nation's economy. Some are within this
Act, others beyond its coverage. Large numbers will fall clearly on one side or on the other, by whatever test may be
applied. Inequality of bargaining power in controversies of their wages, hours and working conditions may
characterize the status of one group as of the other. The former, when acting alone may be as helpless in dealing with
the employer as dependent on his daily wage and as unable to resist arbitrary and unfair treatment as the latter.'
To eliminate the causes of labor dispute and industrial strike, Congress thought it necessary to create a balance of
forces in certain types of economic relationship. Congress recognized those economic relationships cannot be fitted
neatly into the containers designated as 'employee' and 'employer'. Employers and employees not in proximate
relationship may be drawn into common controversies by economic forces and that the very dispute sought to be
avoided might involve 'employees' who are at times brought into an economic relationship with 'employers', who are
not their 'employers'. In this light, the language of the Act's definition of 'employee' or 'employer' should be
determined broadly in doubtful situations, by underlying economic facts rather than technically and exclusively
established legal classifications. (NLRB vs. Blount, 131 F [2d] 585.)
In other words, the scope of the term 'employee' must be understood with reference to the purposes of the Act and
the facts involved in the economic relationship. Where all the conditions of relation require protection, protection
ought to be given .
By declaring a worker an employee of the person for whom he works and by recognizing and protecting his rights as
such, we eliminate the cause of industrial unrest and consequently we promote industrial peace, because we enable
him to negotiate an agreement which will settle disputes regarding conditions of employment, through the process of
collective bargaining.
The statutory definition of the word 'employee' is of wide scope. As used in the Act, the term embraces 'any
employee' that is all employees in the conventional as well in the legal sense expect those excluded by express
provision. (Connor Lumber Co., 11 NLRB 776.).
It is the purpose of the policy of Republic Act 875; (a) To eliminate the causes of industrial unrest by protecting the
exercise of their right to self-organization for the purpose of collective bargaining. (b) To promote sound stable
industrial peace and the advancement of the general welfare, and the best interests of employers and employees by
the settlement of issues respecting terms and conditions of employment through the process of collective bargaining
between employers and representatives of their employees.
The primary consideration is whether the declared policy and purpose of the Act can be effectuated by securing for
the individual worker the rights and protection guaranteed by the Act. The matter is not conclusively determined by a
contract which purports to establish the status of the worker, not as an employee.
3
The work of the musical director and musicians is a functional and integral part of the enterprise performed at the
same studio substantially under the direction and control of the company.
In other words, to determine whether a person who performs work for another is the latter's employee or an
independent contractor, the National Labor Relations relies on 'the right to control' test. Under this test an employer-
employee relationship exist where the person for whom the services are performed reserves the right to control not
only the end to be achieved, but also the manner and means to be used in reaching the end. (United Insurance
Company, 108, NLRB No. 115.).
Thus, in said similar case of Connor Lumber Company, the Supreme Court said:.
'We find that the independent contractors and persons working under them are employees' within the
meaning of Section 2 (3) of its Act. However, we are of the opinion that the independent contractors have
sufficient authority over the persons working under their immediate supervision to warrant their exclusion
from the unit. We shall include in the unit the employees working under the supervision of the independent
contractors, but exclude the contractors.'
'Notwithstanding that the employees are called independent contractors', the Board will hold them to be employees
under the Act where the extent of the employer's control over them indicates that the relationship is in reality one of
employment. (John Hancock Insurance Co., 2375-D, 1940, Teller, Labor Dispute Collective Bargaining, Vol.).
The right of control of the film company over the musicians is shown (1) by calling the musicians through 'call slips' in
'the name of the company; (2) by arranging schedules in its studio for recording sessions; (3) by furnishing
transportation and meals to musicians; and (4) by supervising and directing in detail, through the motion picture
director, the performance of the musicians before the camera, in order to suit the music they are playing to the
picture which is being flashed on the screen.
Thus, in the application of Philippine statutes and pertinent decisions of the United States Courts on the matter to the
facts established in this case, we cannot but conclude that to effectuate the policies of the Act and by virtue of the
'right of control' test, the members of the Philippine Musicians Guild are employees of the three film companies and,
therefore, entitled to right of collective bargaining under Republic Act No. 875.
In view of the fact that the three (3) film companies did not question the union's majority, the Philippine Musicians
Guild is hereby declared as the sole collective bargaining representative for all the musicians employed by the film
companies."
We are fully in agreement with the foregoing conclusion and the reasons given in support thereof. Both are substantially in
line with the spirit of our decision in Maligaya Ship Watchmen Agency vs. Associated Watchmen and Security Union, L-12214-
17 (May 28, 1958). In fact, the contention of the employers in the Maligaya cases, to the effect that they had dealt with
independent contractors, was stronger than that of the film companies in these cases. The third parties with whom the
management and the workers contracted in the Maligaya cases were agencies registered with the Bureau of Commerce and
duly licensed by the City of Manila to engage in the business of supplying watchmen to steamship companies, with permits to
engage in said business issued by the City Mayor and the Collector of Customs. In the cases at bar, the musical directors with
whom the film companies claim to have dealt with had nothing comparable to the business standing of said watchmen
agencies. In this respect, the status of said musical directors is analogous to that of the alleged independent contractor
in Caro vs. Rilloraza, L-9569 (September 30, 1957), with the particularity that the Caro case involved the enforcement of the
liability of an employer under the Workmen's Compensation Act, whereas the cases before us are merely concerned with the
right of the Guild to represent the musicians as a collective bargaining unit. Hence, there is less reason to be legalistic and
technical in these cases, than in the Caro case.
4
Herein, petitioners-appellants cite, in support of their appeal, the cases of Sunripe Coconut Product Co., Inc vs. CIR (46 Off.
Gaz., 5506, 5509), Philippine Manufacturing Co. vs. Santos Vda. de Geronimo, L-6968 (November 29, 1954), Viana vs. Al-
Lagadan, L-8967 (May 31, 1956), and Josefa Vda. de Cruz vs. The Manila Hotel Co. (53 Off. Gaz., 8540). Instead of favoring the
theory of said petitioners-appellants, the case of the Sunripe Coconut Product Co., Inc. is authority for herein respondents-
appellees. It was held that, although engaged as piece-workers, under the "pakiao" system, the "parers" and "shellers" in the
case were, not independent contractor, but employees of said company, because "the requirement imposed on the 'parers' to
the effect that 'the nuts are pared whole or that there is not much meat wasted,' in effect limits or controls the means or
details by which said workers are to accomplish their services" — as in the cases before us.
The nature of the relation between the parties was not settled in the Viana case, the same having been remanded to the
Workmen's Compensation Commission for further evidence.
The case of the Philippine Manufacturing Co. involved a contract between said company and Eliano Garcia, who undertook to
paint a tank of the former. Garcia, in turn engaged the services of Arcadio Geronimo, a laborer, who fell while painting the
tank and died in consequence of the injuries thus sustained by him. Inasmuch as the company was engaged in the
manufacture of soap, vegetable lard, cooking oil and margarine, it was held that the connection between its business and the
painting aforementioned was purely casual; that Eliano Garcia was an independent contractor; that Geronimo was not an
employee of the company; and that the latter was not bound, therefore, to pay the compensation provided in the Workmen's
Compensation Act. Unlike the Philippine Manufacturing case, the relation between the business of herein petitioners-
appellants and the work of the musicians is not casual. As held in the order appealed from which, in this respect, is not
contested by herein petitioners-appellants — "the work of the musicians is an integral part of the entire motion picture."
Indeed, one can hardly find modern films without music therein. Hence, in the Caro case (supra), the owner and operator of
buildings for rent was held bound to pay the indemnity prescribed in the Workmen's Compensation Act for the injury suffered
by a carpenter while working as such in one of said buildings even though his services had been allegedly engaged by a third
party who had directly contracted with said owner. In other words, the repair work had not merely a casual connection with
the business of said owner. It was a necessary incident thereof, just as music is in the production of motion pictures.
The case of Josefa Vda. de Cruz vs. The Manila Hotel Co., L-9110 (April 30, 1957) differs materially from the present cases. It
involved the interpretation of Republic Act No. 660, which amends the law creating and establishing the Government Service
Insurance System. No labor law was sought to be construed in that case. In act, the same was originally heard in the Court of
First Instance of Manila, the decision of which was, on appeal, affirmed by the Supreme Court. The meaning or scope if the
term "employee," as used in the Industrial Peace Act (Republic Act No. 875), was not touched therein. Moreover, the subject
matter of said case was a contract between the management of the Manila Hotel, on the one hand, and Tirso Cruz, on the
other, whereby the latter greed to furnish the former the services of his orchestra, consisting of 15 musicians, including Tirso
Cruz, "from 7:30 p.m. to closing time daily." In the language of this court in that case, "what pieces the orchestra shall play,
and how the music shall be arranged or directed, the intervals and other details — such are left to the leader's discretion."
This is not situation obtaining in the case at bar. The musical directors above referred to have no such control over the
musicians involved in the present case. Said musical directors control neither the music to be played, nor the musicians
playing it. The film companies summon the musicians to work, through the musical directors. The film companies, through the
musical directors, fix the date, the time and the place of work. The film companies, not the musical directors, provide the
transportation to and from the studio. The film companies furnish meal at dinner time.
What is more — in the language of the order appealed from — "during the recording sessions, the motion picture director
who is an employee of the company" — not the musical director — "supervises the recording of the musicians and tells them
what to do in every detail". The motion picture director — not the musical director — "solely directs and performance of the
musicians before the camera". The motion picture director "supervises the performance of all the actors, including the
musicians who appear in the scenes, so that in the actual performance to be shown in the screen, the musical director's
intervention has stopped." Or, as testified to in the lower court, "the movie director tells the musical director what to do; tells
the music to be cut or tells additional music in this part or he eliminates the entire music he does not (want) or he may want
5
more drums or move violin or piano, as the case may be". The movie director "directly controls the activities of the musicians."
He "says he wants more drums and the drummer plays more" or "if he wants more violin or he does not like that.".
It is well settled that "an employer-employee relationship exists . . .where the person for whom the services are performed
reserves a right to control not only the end to be achieved but also the means to be used in reaching such end . . . ." (Alabama
Highway Express Co., Express Co., v. Local 612, 108S. 2d. 350.) The decisive nature of said control over the "means to be
used", is illustrated in the case of Gilchrist Timber Co., et al., Local No. 2530 (73 NLRB No. 210, pp. 1197, 1199-1201), in which,
by reason of said control, the employer-employee relationship was held to exist between the management and the workers,
notwithstanding the intervention of an alleged independent contractor, who had, and exercise, the power to hire and fire said
workers. The aforementioned control over the means to be used" in reading the desired end is possessed and exercised by the
film companies over the musicians in the cases before us.
WHEREFORE, the order appealed from is hereby affirmed, with costs against petitioners herein. It is so ordered.
G.R. No. 119500 August 28, 1998
PAGUIO TRANSPORT CORPORATION, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and WILFREDO MELCHOR, respondents.
PANGANIBAN, J.:
In dismissing the petition, this Court reiterates the following doctrines: (1) the "boundary system" used in taxi (and jeepney)
operations presupposes an employer-employee relation; (2) the employer must prove just (or authorized) cause and due
process to justify dismissal of an employee; (3) strained relations must be demonstrated as a fact; and (4) back wages and
reinstatement are necessary consequences of illegal dismissal.
The Case
Before us is a petition for certiorari and prohibition with preliminary injunction, assailing the December 16, 1994 Decision of
the National Labor Relations Commission in NLRC NCR Case No. 00-02-01564-94 entitled "Wilfredo Melchor vs. Paguio
1
Transport Corporation/Serafin Paguio." The dispositive portion of the challenged Decision reads:
WHEREFORE, premises considered, the appeal insofar as it seeks reversal of the finding on illegal dismissal is
denied for lack of merit. The decision declaring that complainant was illegally dismissed is affirmed. The
decision is however partially modified insofar as liability therefor is concerned. The liability shall inure against
PAGUIO TRANSPORT CORPORATION, subject to the provision of the Corporation Code and the Rules of Court
on matters taken herein. The backwages as computed in the assailed decision is set aside, and a new one is
hereby provided in the amount of P86,400.00 as computed in the immediately preceding paragraph.
Petitioner also impugns the February 21, 1995 NLRC Resolution denying the motion for reconsideration.
2
The June 28, 1994 Decision of the labor arbiter, which the NLRC modified as to the amount of back wages, disposed as
3
follows:
WHEREFORE, the respondents are hereby ordered to reinstate the complainant with full backwages from the
time his salaries were withheld from him until his actual reinstatement.
6
The respondents are further ordered to pay him his 13th month pay in the amount of P5,600.00.
Complainant's backwages up to the date of this Decision as computed by LEILANI E. CALALANG of the
Commission's NLRC NCR Branch is:
11/28/93 - 6/28/94 = 7 mos.
P800.00 x 3 days x 4 weeks = P9,600.00
P9,600.00 x 7 mos. = P67,200.00
The aspect of reinstatement either in the job or payroll at the option of the employers being immediately
executory pursuant to Article 223 of the Labor Code, the respondents are hereby directed to so reinstate him
when he reports for work by virtue of this Decision.
Other claims are hereby dismissed for lack of evidence.
The Facts
The facts, as summarized in the challenged Decision, are as follows:
Complainant Wilfredo Melchor was hired by respondent company as a taxi driver on 25 December 1992
under the "[b]oundary [s]ystem. 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. On 24 [sic] November 1993,
complainant allegedly met a vehicular accident along Quirino Avenue near the PNR Station and Plaza Dilao
when he accidentally bumped a car which stopped at the intersection even when the traffic light was green
and go. 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. Hence, the complaint for illegal dismissal, among others.
Respondent[s] for their part maintained that complainant was not illegally dismissed, there being in the first
place no employer-employee relationship between them. In amplification, it was argued that the element of
control which [was] a paramount test to determine the existence of such a relationship [was] lacking. So too,
it argued the element of the payment of compensation. Considering that in lieu of the latter, payment of
boundary is instead made allegedly makes the relationship between them of a "wase-agreement" [sic].
Respondents then argued that even if an employer-employee relationship were to be presumed as present,
still complainant's termination arose out of a valid cause and after he refused to articulate his stand on the
investigation being conducted on him. Respondents then harped on the supposed three occasions when
complainant figured in a vehicular accident involving the taxi unit he was driving, viz: On August 3, which
resulted in damages to the respondent in the amount of P150.00; On August 4 which again resulted [in] the
damages to the respondent in the amount of P615.00; and, again on 4 November 1993, the mishap costing
the respondents this time P25,370.00 in damages. As a result of the alleged compounded damages which the
respondents had to shoulder on account of the supposed reckless driving of the complainant, the former was
allegedly left with no alternative but to ask complainant's explanation why he should still be allowed to drive.
Complainant, despite several chances, allegedly failed to do so. 4
Ruling of the NLRC
The NLRC held that private respondent was an illegally dismissed employee of petitioner. Upholding the existence of an
employer-employee relationship, it cited Doce v. WCC, in which the Supreme Court ruled that "the relationship created
5
7
between the parties operating under a 'boundary system' is one of an employer and employee, and not of a lessor and a
lessee."
6
The NLRC sustained the ruling of the labor arbiter that the private respondent was illegally dismissed, for he "was not afforded
the twin requirements of due process . . . ." It rejected petitioner's claim that private respondent had figured in three
7
vehicular incidents because of his reckless driving. It found that "except for petitioner's bare statements, no proof was
presented to establish with particularity the circumstances being claimed. . . . The guilt and culpability of [private respondent]
which would give [petitioner] valid ground to effect his dismissal cannot be established by a mere allegation of his reckless
driving." 8
Public Respondent NLRC found petitioner liable for back wages in the amount of P86,400, and not P67,200 as computed by
the labor arbiter. It found, however, that this liability should be imposed on Petitioner Corporation only, and not on its
president who was also impleaded by private respondent.
Hence, this petition. 9
Issues
Petitioner raises the following issues:
a. Whether or not public respondent Commission acted in excess of jurisdiction and/or with grave abuse of
discretion amounting to lack of jurisdiction in ordering the reinstatement of private respondent with full
backwages, despite its strained relations with the petitioner and the reinstatement would, in effect, be
inimical to the interest of the latter in particular, and to the riding public in general;
b. Whether or not public respondent acted in excess of jurisdiction and/or with grave abuse of discretion in
refusing to reconsider its decision and resolution complained of despite the facts prevailing to support the
reconsideration. 10
In resolving the petition, we shall address the following points: (1) employer-employee relation, (2) presence of just cause, (3)
due process, (4) strained relationship, and (5) propriety of reinstatement and backwages.
The Court's Ruling
The petition is not meritorious.
First Issue:
Employer-Employee Relation
Under the "boundary system," private respondent was engaged to drive petitioner's taxi unit on a 24-hour schedule every two
days. On each such trip, private respondent remitted to petitioner a "boundary" of P650. Whatever he earned in excess of that
amount was considered his income.
Petitioner argues that under said arrangement, he had no control over the number of hours private respondent had to work
and the routes he had to take. Therefore, he concludes that the employer-employee relationship cannot be deemed to exist.
Petitioner's contention is not novel. In Martinez v. National Labor Relations Commission, this Court already ruled that the
11
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.:
8
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. 12
Second Issue:
Just Cause
Petitioner also asserts that private respondent's involvement in three vehicular accidents within a span of several months
constitutes just cause for his dismissal. It alleges that, according to the police report concerning the most recent and serious
vehicular mishap, it was private respondent who was at fault and that the "city prosecutor of Quezon City recommended that
an Information for reckless imprudence resulting in damage to property be filed against him." 13
Petitioner, however, did not submit any proof to support these allegations. Well-settled is the rule that the employer has the
burden of proving that the dismissal of an employee is for a just cause. The failure of the employer to discharge this burden
means that the dismissal is not justified and that the employee is entitled to reinstatement and backwages. In this case,
14
petitioner failed to prove any just or authorized cause for his dismissal. Private respondent, therefore, must be deemed
illegally dismissed.
15
Petitioner contends that he "submitted and presented material and competent documentary evidence consisting of police
reports of vehicular accidents of taxicab units owned by petitioner and driven by private respondent, the repairs and expenses
suffered by the petitioner as a result thereof and the resolution of the [c]ity [p]rosecutor of Quezon City finding private
respondent at fault for the November 4, 1993 vehicular accident caused by the latter." Adding that the submission of these
16
documents only on appeal does not diminish their probative value, petitioner cites Article 221 of the Labor Code which reads:
Art. 221. Technical rules not binding and prior resort to amicable settlement. — In any proceeding before the
Commission or any of the Labor Arbiters, the rules of procedure prevailing in courts of law and equity shall
not be controlling and it is the spirit and intention of the Code that the Commission and its members and the
Labor Arbiters shall use every and all reasonable means to ascertain the facts in each case speedily and
objectively without regard to technicalities of law and procedure, all in the interest of due process. In any
proceeding before the Commission or any Labor Arbiter, the parties may be represented by legal counsel but
it shall be the duty of the Chairman, any Presiding Commissioner or Commissioner or any Labor Arbiter to
exercise complete control of the proceedings at all stages.
Any provision of law to the contrary notwithstanding, the Labor Arbiter shall exert all efforts towards [t]he
amicable settlement of a labor dispute within his jurisdiction on or before the first hearing. The same rule
shall apply to the Commission in the exercise of its original jurisdiction.
However, a careful examination of both the original Complaint and the Petitioner's Memorandum of Appeal from the labor
arbiter's Decision reveals that said pieces of documentary evidence were not mentioned or included therein, but were
17
submitted by petitioner only when he filed his present petition with this Court. These pieces of evidence were attached and
referred to as Annexes "G", "H", "I", "J", "K" and "L" of the said petition. Such factual issues cannot be resolved in a petition
for certiorari like the present case, because the Court's review of NLRC decisions is limited to questions of jurisdiction and
grave abuse of discretion. In PMI Colleges v. NLRC, the Court held:
18
9
This Court is definitely not the proper venue to consider this matter for it is not a trier of
facts. . . . Certiorari is a remedy narrow in its scope and inflexible in character. It is not a general utility tool in
the legal workshop. Factual issues are not a proper subject for certiorari, as the power of the Supreme Court
to review labor cases is limited to the issue of jurisdiction and grave abuse of discretion. . . . .
Of the same tenor was our disquisition in Ilocos Sur Electric Cooperative, Inc. v. NLRC where we made plain
that:
In certiorari proceedings under Rule 65 of the Rules of Court, judicial review by this Court
does not go so far as to evaluate the sufficiency of evidence upon which the Labor Arbiter
and the NLRC based their determinations, the inquiry being limited essentially to whether or
not said public respondents had acted without or in excess of [their] jurisdiction or with
grave abuse of discretion.
. . . Our deference to the expertise acquired by quasi-judicial agencies and the limited scope granted us in the
exercise of certiorari jurisdiction restrain us from going so far as to probe into the correctness of a tribunal's
evaluation of evidence, unless there is a palpable mistake and complete disregard thereof in which
case certiorari would be proper. In plain terms, in certiorari proceedings, we are concerned with mere errors
of jurisdiction and not errors of judgment.
Equally devoid of correctness is petitioner's claim that the documents should be considered, pursuant to Article 221 of the
Labor Code which stares that technical rules are not binding in proceedings before the labor arbiters and the NLRC. The
Supreme Court is not a trier of facts; as earlier stated, its jurisdiction in a petition for certiorari, like the present case, is
confined to questions of jurisdiction and grave abuse of discretion. The unexplained failure of petitioner to present its
evidence before the labor arbiter and the NLRC cannot compel this Court to expand the scope of its review. Indeed, petitioner
has not proffered a sufficient reason for this Court to do so.
Petitioner's reliance on Canete v. National Labor Relations Commission is misplaced. In that case, the documents were
19
submitted to the NLRC before they were tackled by the Supreme Court.
Private respondent's admission that he was involved in the November 4, 1993 accident did not give petitioner a just cause to
dismiss him. Mere involvement in an accident, absent any showing of fault or recklessness on the part of an employee, is not a
valid ground for dismissal.
Third Issue:
No Due Process
Petitioner insists that private respondent was accorded due process, because he was allowed to explain his side and to show
cause why he should still be allowed to act as one of petitioner's drivers.
This does not persuade. The Court has consistently held that in the dismissal of employees, the twin requirements of notice
and hearing are essential elements of due process. The employer must furnish the worker two written notices: (1) one to
apprise him of the particular acts or omissions for which his dismissal is sought and (2) the other to inform him of his
employer's decision to dismiss him. As to the requirement of a hearing, the essence of due process lies simply in an
opportunity to be heard, and not always and indispensably in an actual hearing. 20
In the present case, petitioner failed to present proof, other than its bare allegations, that it had complied with these
requirements. We reiterate: the burden of proof rests on the employer. Private respondent, in fact, was not given notice
21
that he was being dismissed. When ordered to explain the vehicular accident that happened on November 4, 1993, he was
not informed that petitioner was contemplating his dismissal and that his involvement in said vehicular accident was the cause
thereof. Private respondent was merely asked to explain the vehicular accident per se, not his defense against a charge of
10
dismissal arising from the vehicular accident. He became aware of his employer's intention to dismiss him only when he was
actually told not to report for work anymore.
Fourth Issue:
Strained Relations
Notwithstanding its failure to prove just cause and due process in the dismissal of private respondent, petitioner seeks to bar
his reinstatement by invoking the doctrine of strained relations. It contends that as a result of private respondent's "reckless
and incompetent manner of driving . . ., compounded by the damages suffered by petitioner in terms of repairs, related
expenses, and the institution of the instant case, the relationship between the parties are so strained as to preclude a
harmonious working atmosphere to the prejudice of the petitioner as well as private respondent." 22
We are not persuaded. Strained relations must be demonstrated as a fact. Petitioner failed to do so. Its allegation that private
respondent was incompetent and reckless in his manner of driving, which led to the his involvement in three vehicular
accidents, is not supported by the records. As earlier noted, no evidence was properly submitted by petitioner to prove or give
credence to his assertions. Thus, Respondent NLRC ruled:
Despite allegation on the matter, not an iota of proof was presented to establish the claim. This observation
equally applies to the allegation that complainants, in three (3) occasions had figured in [a] vehicular accident
due to his reckless driving . . . .
23
Because the claim of petitioner has no factual basis, the doctrine on strained relations cannot be applied in this case.
Moreover, the filing of the Complaint for illegal dismissal does not by itself justify the invocation of this doctrine. As the Court
held in Capili vs. NLRC:
24
. . . [T]he doctrine on "strained relations" cannot be applied indiscriminately since every labor dispute almost
invariably results in "strained relations"; otherwise, reinstatement can never be possible simply because
some hostility is engendered between the parties as a result of their disagreement. That is human nature.
Fifth Issue:
Reinstatement and Back Wages
Because he was illegally dismissed, private respondent is entitled to reinstatement and back wages pursuant to Section 279 of
the Labor Code, which reads:
Art. 279. Security of Tenure. — In cases of regular employment, the employer shall not terminate the services
of an employee except for a just cause or when authorized by this Title. An employee who is unjustly
dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges
and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from him up to the time of his actual reinstatement.
Interpreting this provision, the Court held in Bustamante v. NLRC that illegally dismissed employees are entitled to full back
25
wages without conditions or limitations, viz.:
. . . [A] closer adherence to the legislative policy behind Rep. Act No. 6715 points to "full backwages" as
meaning exactly that, i.e., without deducting from backwages the earnings derived elsewhere by the
concerned employee during the period of his illegal dismissal. In other words, the provision calling for "full
backwages" to illegally dismissed employees is clear, plain and free from ambiguity and, therefore, must be
applied without attempted or strained interpretation.
The labor arbiter awarded back wages in the sum of P67,200 based on the following computation:
11
11/28/93 - 6/28/94 = 7 mos.
P800.00 x 3 days x 4 weeks = P6,600.00
P9,600 x 7 mos. = P67,200.00 26
In modifying the foregoing award, the NLRC relied on this other formula:
11/28/93 - 11/28/94 = 12 months
P600.00 x 3 days x 4 weeks = P 7,200.00
P7,200 x 12 months = P86,400.00. 27
Although the NLRC adjusted the amount of private respondent's monthly income and the period during which back wages
may be awarded, neither the petitioner nor the private respondent questioned the new computation. Accordingly we sustain
the award but stress that the back wages ought to be computed from the time of the illegal dismissal to the time of
reinstatement, either actual or in the payroll, without any deduction or qualification.
WHEREFORE, the petition is hereby DISMISSED for utter lack merit, and the assailed Decision and Resolution are hereby
AFFIRMED. Costs against petitioners.
SO ORDERED.
G.R. No. 169704 November 17, 2010
ALBERT TENG, doing business under the firm name ALBERT TENG FISH TRADING, and EMILIA TENG-CHUA, Petitioners,
vs.
ALFREDO S. PAHAGAC, EDDIE D. NIPA, ORLANDO P. LAYESE, HERNAN Y. BADILLES and ROGER S. PAHAGAC, Respondents.
DECISION
BRION, J.:
Before this Court is a Petition for Review on Certiorari1 filed by petitioners Albert Teng Fish Trading, its owner Albert Teng, and
its manager Emilia Teng-Chua, to reverse and set aside the September 21, 2004 decision 2 and the September 1, 2005
resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 78783. The CA reversed the decision of the Voluntary Arbitrator
(VA), National Conciliation and Mediation Board (NCMB), Region IX, Zamboanga City, and declared that there exists an
employer-employee relationship between Teng and respondents Hernan Badilles, Orlando Layese, Eddie Nipa, Alfredo
Pahagac, and Roger Pahagac (collectively, respondent workers). It also found that Teng illegally dismissed the respondent
workers from their employment.
BACKGROUND FACTS
Albert Teng Fish Trading is engaged in deep sea fishing and, for this purpose, owns boats (basnig), equipment, and other
fishing paraphernalia. As owner of the business, Teng claims that he customarily enters into joint venture agreements with
master fishermen (maestros) who are skilled and are experts in deep sea fishing; they take charge of the management of each
fishing venture, including the hiring of the members of its complement. He avers that the maestros hired the respondent
workers as checkers to determine the volume of the fish caught in every fishing voyage. 4
12
On February 20, 2003, the respondent workers filed a complaint for illegal dismissal against Albert Teng Fish Trading, Teng,
and Chua before the NCMB, Region Branch No. IX, Zamboanga City.
The respondent workers alleged that Teng hired them, without any written employment contract, to serve as his "eyes and
ears" aboard the fishing boats; to classify the fish caught by bañera; to report to Teng via radio communication the classes and
volume of each catch; to receive instructions from him as to where and when to unload the catch; to prepare the list of the
provisions requested by the maestro and the mechanic for his approval; and, to procure the items as approved by him. 5 They
also claimed that they received regular monthly salaries, 13th month pay, Christmas bonus, and incentives in the form of
shares in the total volume of fish caught.
They asserted that sometime in September 2002, Teng expressed his doubts on the correct volume of fish caught in every
fishing voyage.6 In December 2002, Teng informed them that their services had been terminated. 7
In his defense, Teng maintained that he did not have any hand in hiring the respondent workers; the maestros, rather than he,
invited them to join the venture. According to him, his role was clearly limited to the provision of the necessary capital, tools
and equipment, consisting of basnig, gears, fuel, food, and other supplies.8
The VA rendered a decision9 in Teng’s favor and declared that no employer-employee relationship existed between Teng and
the respondent workers. The dispositive portion of the VA’s May 30, 2003 decision reads:
WHEREFORE, premises considered, judgment is hereby rendered dismissing the instant complaint for lack of merit.
It follows also, that all other claims are likewise dismissed for lack of merit.10
The respondent workers received the VA’s decision on June 12, 2003.11 They filed a motion for reconsideration, which was
denied in an order dated June 27, 2003 and which they received on July 8, 2003. 12 The VA reasoned out that Section 6, Rule VII
of the 1989 Procedural Guidelines in the Conduct of Voluntary Arbitration Proceedings (1989 Procedural Guidelines) does not
provide the remedy of a motion for reconsideration to the party adversely affected by the VA’s order or decision. 13 The order
states:
Under Executive Order No. 126, as amended by Executive Order No. 251, and in order to implement Article 260-262 (b) of the
Labor Code, as amended by R.A. No. 6715, otherwise known as the Procedural Guidelines in the Conduct of Voluntary
Arbitration Proceedings, inter alia:
An award or the Decision of the Voluntary Arbitrators becomes final and executory after ten (10) calendar days from receipt of
copies of the award or decision by the parties (Sec. 6, Rule VII).
Moreover, the above-mentioned guidelines do not provide the remedy of a motion for reconsideration to the party adversely
affected by the order or decision of voluntary arbitrators.14
On July 21, 2003, the respondent-workers elevated the case to the CA. In its decision of September 21, 2004, the CA reversed
the VA’s decision after finding sufficient evidence showing the existence of employer-employee relationship:
WHEREFORE, premises considered, the petition is granted. The questioned decision of the Voluntary Arbitrator dated May 30,
2003 is hereby REVERSED and SET ASIDE by ordering private respondent to pay separation pay with backwages and other
monetary benefits. For this purpose, the case is REMANDED to the Voluntary Arbitrator for the computation of petitioner’s
backwages and other monetary benefits. No pronouncement as to costs.
SO ORDERED.15
13
Teng moved to reconsider the CA’s decision, but the CA denied the motion in its resolution of September 1, 2005. 16 He,
thereafter, filed the present Petition for Review on Certiorari under Rule 45 of the Rules of Court, claiming that:
a. the VA’s decision is not subject to a motion for reconsideration; and
b. no employer-employee relationship existed between Teng and the respondent workers.
Teng contends that the VA’s decision is not subject to a motion for reconsideration in the absence of any specific provision
allowing this recourse under Article 262-A of the Labor Code.17 He cites the 1989 Procedural Guidelines, which, as the VA
declared, does not provide the remedy of a motion for reconsideration. 18 He claims that after the lapse of 10 days from its
receipt, the VA’s decision becomes final and executory unless an appeal is taken. 19 He argues that when the respondent
workers received the VA’s decision on June 12, 2003, 20 they had 10 days, or until June 22, 2003, to file an appeal. As the
respondent workers opted instead to move for reconsideration, the 10-day period to appeal continued to run; thus, the VA’s
decision had already become final and executory by the time they assailed it before the CA on July 21, 2003. 21
Teng further insists that the VA was correct in ruling that there was no employer-employee relationship between him and the
respondent workers. What he entered into was a joint venture agreement with the maestros, where Teng’s role was only to
provide basnig, gears, nets, and other tools and equipment for every fishing voyage. 22
THE COURT’S RULING
We resolve to deny the petition for lack of merit.
Article 262-A of the Labor Code does not prohibit the filing of a motion for reconsideration.
On March 21, 1989, Republic Act No. 671523 took effect, amending, among others, Article 263 of the Labor Code which was
originally worded as:
Art. 263 x x x Voluntary arbitration awards or decisions shall be final, unappealable, and executory.
As amended, Article 263 is now Article 262-A, which states:
Art. 262-A. x x x [T]he award or decision x x x shall contain the facts and the law on which it is based. It shall be final and
executory after ten (10) calendar days from receipt of the copy of the award or decision by the parties.
Notably, Article 262-A deleted the word "unappealable" from Article 263. The deliberate selection of the language in the
amendatory act differing from that of the original act indicates that the legislature intended a change in the law, and the court
should endeavor to give effect to such intent.24 We recognized the intent of the change of phraseology in Imperial Textile Mills,
Inc. v. Sampang,25 where we ruled that:
It is true that the present rule [Art. 262-A] makes the voluntary arbitration award final and executory after ten calendar days
from receipt of the copy of the award or decision by the parties. Presumably, the decision may still be reconsidered by the
Voluntary Arbitrator on the basis of a motion for reconsideration duly filed during that period. 26
In Coca-Cola Bottlers Phil., Inc., Sales Force Union-PTGWO-Balais v. Coca-Cola Bottlers Philippines, Inc.,27 we likewise ruled that
the VA’s decision may still be reconsidered on the basis of a motion for reconsideration seasonably filed within 10 days from
receipt thereof.28 The seasonable filing of a motion for reconsideration is a mandatory requirement to forestall the finality of
such decision.29 We further cited the 1989 Procedural Guidelines which implemented Article 262-A, viz:30
14
[U]nder Section 6, Rule VII of the same guidelines implementing Article 262-A of the Labor Code, this Decision, as a matter of
course, would become final and executory after ten (10) calendar days from receipt of copies of the decision by the parties x x
x unless, in the meantime, a motion for reconsideration or a petition for review to the Court of Appeals under Rule 43 of the
Rules of Court is filed within the same 10-day period. 31
These rulings fully establish that the absence of a categorical language in Article 262-A does not preclude the filing of a motion
for reconsideration of the VA’s decision within the 10-day period. Teng’s allegation that the VA’s decision had become final
and executory by the time the respondent workers filed an appeal with the CA thus fails. We consequently rule that the
respondent workers seasonably filed a motion for reconsideration of the VA’s judgment, and the VA erred in denying the
motion because no motion for reconsideration is allowed.
The Court notes that despite our interpretation that Article 262-A does not preclude the filing of a motion for reconsideration
of the VA’s decision, a contrary provision can be found in Section 7, Rule XIX of the Department of Labor’s Department Order
(DO) No. 40, series of 2003:32
Rule XIX
Section 7. Finality of Award/Decision. – The decision, order, resolution or award of the voluntary arbitrator or panel of
voluntary arbitrators shall be final and executory after ten (10) calendar days from receipt of the copy of the award or decision
by the parties and it shall not be subject of a motion for reconsideration.
Presumably on the basis of DO 40-03, the 1989 Procedural Guidelines was revised in 2005 (2005 Procedural
Guidelines),33 whose pertinent provisions provide that:
Rule VII – DECISIONS
Section 6. Finality of Decisions. – The decision of the Voluntary Arbitrator shall be final and executory after ten (10) calendar
days from receipt of the copy of the decision by the parties.
Section 7. Motions for Reconsideration. – The decision of the Voluntary Arbitrator is not subject of a Motion for
Reconsideration.
We are surprised that neither the VA nor Teng cited DO 40-03 and the 2005 Procedural Guidelines as authorities for their
cause, considering that these were the governing rules while the case was pending and these directly and fully supported their
theory. Had they done so, their reliance on the provisions would have nevertheless been unavailing for reasons we shall now
discuss.
In the exercise of its power to promulgate implementing rules and regulations, an implementing agency, such as the
Department of Labor,34 is restricted from going beyond the terms of the law it seeks to implement; it should neither modify
nor improve the law. The agency formulating the rules and guidelines cannot exceed the statutory authority granted to it by
the legislature.35
By allowing a 10-day period, the obvious intent of Congress in amending Article 263 to Article 262-A is to provide an
opportunity for the party adversely affected by the VA’s decision to seek recourse via a motion for reconsideration or a
petition for review under Rule 43 of the Rules of Court filed with the CA. Indeed, a motion for reconsideration is the more
appropriate remedy in line with the doctrine of exhaustion of administrative remedies. For this reason, an appeal from
administrative agencies to the CA via Rule 43 of the Rules of Court requires exhaustion of available remedies 36 as a condition
precedent to a petition under that Rule.
The requirement that administrative remedies be exhausted is based on the doctrine that in providing for a remedy before an
administrative agency, every opportunity must be given to the agency to resolve the matter and to exhaust all opportunities
15
for a resolution under the given remedy before bringing an action in, or resorting to, the courts of justice. 37 Where Congress
has not clearly required exhaustion, sound judicial discretion governs,38 guided by congressional intent.39
By disallowing reconsideration of the VA’s decision, Section 7, Rule XIX of DO 40-03 and Section 7 of the 2005 Procedural
Guidelines went directly against the legislative intent behind Article 262-A of the Labor Code. These rules deny the VA the
chance to correct himself40 and compel the courts of justice to prematurely intervene with the action of an administrative
agency entrusted with the adjudication of controversies coming under its special knowledge, training and specific field of
expertise. In this era of clogged court dockets, the need for specialized administrative agencies with the special knowledge,
experience and capability to hear and determine promptly disputes on technical matters or intricate questions of facts,
subject to judicial review, is indispensable.41 In Industrial Enterprises, Inc. v. Court of Appeals,42 we ruled that relief must first
be obtained in an administrative proceeding before a remedy will be supplied by the courts even though the matter is within
the proper jurisdiction of a court.43
There exists an employer-employee relationship between Teng and the respondent workers.
We agree with the CA’s finding that sufficient evidence exists indicating the existence of an employer-employee relationship
between Teng and the respondent workers.
While Teng alleged that it was the maestros who hired the respondent workers, it was his company that issued to the
respondent workers identification cards (IDs) bearing their names as employees and Teng’s signature as the employer.
Generally, in a business establishment, IDs are issued to identify the holder as a bona fide employee of the issuing entity.
For the 13 years that the respondent workers worked for Teng, they received wages on a regular basis, in addition to their
shares in the fish caught.44 The worksheet showed that the respondent workers received uniform amounts within a given year,
which amounts annually increased until the termination of their employment in 2002. 45 Teng’s claim that the amounts
received by the respondent workers are mere commissions is incredulous, as it would mean that the fish caught throughout
the year is uniform and increases in number each year.
More importantly, the element of control – which we have ruled in a number of cases to be a strong indicator of the existence
of an employer-employee relationship – is present in this case. Teng not only owned the tools and equipment, he directed
how the respondent workers were to perform their job as checkers; they, in fact, acted as Teng’s eyes and ears in every fishing
expedition.
Teng cannot hide behind his argument that the respondent workers were hired by the maestros. To consider the respondent
workers as employees of the maestros would mean that Teng committed impermissible labor-only contracting. As a policy,
the Labor Code prohibits labor-only contracting:
ART. 106. Contractor or Subcontractor – x x x The Secretary of Labor and Employment may, by appropriate regulations,
restrict or prohibit the contracting-out of labor.
xxxx
There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and
placed by such persons are performing activities which are directly related to the principal business of such employer. In
such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by him.
Section 5 of the DO No. 18-02,46 which implements Article 106 of the Labor Code, provides:
16
Section 5. Prohibition against labor-only contracting. – Labor-only contracting is hereby declared prohibited. For this
purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies
or places workers to perform a job, work or service for a principal, and any of the following elements are present:
(i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or
service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal; or
(ii) The contractor does not exercise the right to control over the performance of the work of the contractual
employee.
In the present case, the maestros did not have any substantial capital or investment. Teng admitted that he solely provided
1avvphi1
the capital and equipment, while the maestros supplied the workers. The power of control over the respondent workers was
lodged not with the maestros but with Teng. As checkers, the respondent workers’ main tasks were to count and classify the
fish caught and report them to Teng. They performed tasks that were necessary and desirable in Teng’s fishing business.
Taken together, these incidents confirm the existence of a labor-only contracting which is prohibited in our jurisdiction, as it is
considered to be the employer’s attempt to evade obligations afforded by law to employees.
Accordingly, we hold that employer-employee ties exist between Teng and the respondent workers. A finding that the
maestros are labor-only contractors is equivalent to a finding that an employer-employee relationship exists between Teng
and the respondent workers. As regular employees, the respondent workers are entitled to all the benefits and rights
appurtenant to regular employment.
The dismissal of an employee, which the employer must validate, has a twofold requirement: one is substantive, the other is
procedural.47 Not only must the dismissal be for a just or an authorized cause, as provided by law; the rudimentary
requirements of due process – the opportunity to be heard and to defend oneself – must be observed as well. 48 The employer
has the burden of proving that the dismissal was for a just cause; failure to show this, as in the present case, would necessarily
mean that the dismissal was unjustified and, therefore, illegal.49
The respondent worker’s allegation that Teng summarily dismissed them on suspicion that they were not reporting to him the
correct volume of the fish caught in each fishing voyage was never denied by Teng. Unsubstantiated suspicion is not a just
cause to terminate one’s employment under Article 28250 of the Labor Code. To allow an employer to dismiss an employee
based on mere allegations and generalities would place the employee at the mercy of his employer, and would emasculate
the right to security of tenure.51 For his failure to comply with the Labor Code’s substantive requirement on termination of
employment, we declare that Teng illegally dismissed the respondent workers.
WHEREFORE, we DENY the petition and AFFIRM the September 21, 2004 decision and the September 1, 2005 resolution of
the Court of Appeals in CA-G.R. SP No. 78783. Costs against the petitioners.
SO ORDERED.
G.R. No. L-32245 May 25, 1979
DY KEH BENG, petitioner,
vs.
INTERNATIONAL LABOR and MARINE UNION OF THE PHILIPPINES, ET AL., respondents.
A. M Sikat for petitioner.
D. A. Hernandez for respondents.
17
DE CASTRO, J.:
Petitioner Dy Keh Beng seeks a review by certiorari of the decision of the Court of Industrial Relations dated March 23, 1970 in
Case No. 3019-ULP and the Court's Resolution en banc of June 10, 1970 affirming said decision. The Court of Industrial
Relations in that case found Dy Keh Beng guilty of the unfair labor practice acts alleged and order him to
reinstate Carlos Solano and Ricardo Tudla to their former jobs with backwages from their respective dates of
dismissal until fully reinstated without loss to their right of seniority and of such other rights already acquired
by them and/or allowed by law. 1
Now, Dy Keh Beng assigns the following errors as having been committed by the Court of Industrial Relations:
2
RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND TUDLA WERE EMPLOYEES OF
PETITIONERS.
II
RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND TUDLA WERE DISMISSED FROM
THEIR EMPLOYMENT BY PETITIONER.
III
RESPONDENT COURT ERRED IN FINDING THAT THE TESTIMONIES ADDUCED BY COMPLAINANT ARE
CONVINCING AND DISCLOSES (SIC) A PATTERN OF DISCRIMINATION BY THE PETITIONER HEREIN.
IV
RESPONDENT COURT ERRED IN DECLARING PETITIONER GUILTY OF UNFAIR LABOR PRACTICE ACTS AS
ALLEGED AND DESCRIBED IN THE COMPLAINT.
RESPONDENT COURT ERRED IN PETITIONER TO REINSTATE RESPONDENTS TO THEIR FORMER JOBS WITH
BACKWAGES FROM THEIR RESPECTIVE DATES OF DISMISSALS UNTIL FINALLY REINSTATED WITHOUT LOSS TO
THEIR RIGHT OF SENIORITY AND OF SUCH OTHER RIGHTS ALREADY ACQUIRED BY THEM AND/OR ALLOWED
BY LAW.
The facts as found by the Hearing Examiner are as follows:
A charge of unfair labor practice was filed against Dy Keh Beng, proprietor of a basket factory, for discriminatory acts within
the meaning of Section 4(a), sub-paragraph (1) and (4). Republic Act No. 875, by dismissing on September 28 and 29, 1960,
3
respectively, Carlos N. Solano and Ricardo Tudla for their union activities. After preliminary investigation was conducted, a
case was filed in the Court of Industrial Relations for in behalf of the International Labor and Marine Union of the Philippines
and two of its members, Solano and Tudla In his answer, Dy Keh Beng contended that he did not know Tudla and that Solano
was not his employee because the latter came to the establishment only when there was work which he did on pakiaw basis,
18
each piece of work being done under a separate contract. Moreover, Dy Keh Beng countered with a special defense of simple
extortion committed by the head of the labor union, Bienvenido Onayan.
After trial, the Hearing Examiner prepared a report which was subsequently adopted in toto by the Court of Industrial
Relations. An employee-employer relationship was found to have existed between Dy Keh Beng and complainants Tudla and
Solano, although Solano was admitted to have worked on piece basis. The issue therefore centered on whether there existed
4
an employee employer relation between petitioner Dy Keh Beng and the respondents Solano and Tudla .
According to the Hearing Examiner, the evidence for the complainant Union tended to show that Solano and Tudla became
employees of Dy Keh Beng from May 2, 1953 and July 15, 1955, respectively, and that except in the event of illness, their
5
work with the establishment was continuous although their services were compensated on piece basis. Evidence likewise
showed that at times the establishment had eight (8) workers and never less than five (5); including the complainants, and
that complainants used to receive ?5.00 a day. sometimes less. 6
According to Dy Keh Beng, however, Solano was not his employee for the following reasons:
(1) Solano never stayed long enought at Dy's establishment;
(2) Solano had to leave as soon as he was through with the
(3) order given him by Dy;
(4) When there were no orders needing his services there was nothing for him to do;
(5) When orders came to the shop that his regular workers could not fill it was then that Dy went to his
address in Caloocan and fetched him for these orders; and
(6) Solano's work with Dy's establishment was not continuous. , 7
According to petitioner, these facts show that respondents Solano and Tudla are only piece workers, not employees under
Republic Act 875, where an employee is referred to as
8
shall include any employee and shag not be limited to the employee of a particular employer unless the Act
explicitly states otherwise and shall include any individual whose work has ceased as a consequence of, or in
connection with any current labor dispute or because of any unfair labor practice and who has not obtained
any other substantially equivalent and regular employment.
while an employer 9
includes any person acting in the interest of an employer, directly or indirectly but shall not include any labor
organization (otherwise than when acting as an employer) or anyone acting in the capacity of officer or agent
of such labor organization.
Petitioner really anchors his contention of the non-existence of employee-employer relationship on the control test. He points
to the case of Madrigal Shipping Co., Inc. v. Nieves Baens del Rosario, et al., L-13130, October 31, 1959, where the Court ruled
that:
The test ... of the existence of employee and employer relationship is whether there is an understanding
between the parties that one is to render personal services to or for the benefit of the other and recognition
19
by them of the right of one to order and control the other in the performance of the work and to direct the
manner and method of its performance.
Petitioner contends that the private respondents "did not meet the control test in the fight of the ... definition of the terms
employer and employee, because there was no evidence to show that petitioner had the right to direct the manner and
method of respondent's work. Moreover, it is argued that petitioner's evidence showed that "Solano worked on
10
a pakiaw basis" and that he stayed in the establishment only when there was work.
While this Court upholds the control test under which an employer-employee relationship exists "where the person for
11
whom the services are performed reserves a right to control not only the end to be achieved but also the means to be used in
reaching such end, " it finds no merit with petitioner's arguments as stated above. It should be borne in mind that the control
test calls merely for the existence of the right to control the manner of doing the work, not the actual exercise of the
right. Considering the finding by the Hearing Examiner that the establishment of Dy Keh Beng is "engaged in the
12
manufacture of baskets known as kaing, it is natural to expect that those working under Dy would have to observe, among
13
others, Dy's requirements of size and quality of the kaing. Some control would necessarily be exercised by Dy as the making of
the kaing would be subject to Dy's specifications. Parenthetically, since the work on the baskets is done at Dy's
establishments, it can be inferred that the proprietor Dy could easily exercise control on the men he employed.
As to the contention that Solano was not an employee because he worked on piece basis, this Court agrees with the Hearing
Examiner that
circumstances must be construed to determine indeed if payment by the piece is just a method of
compensation and does not define the essence of the relation. Units of time ... and units of work are in
establishments like respondent (sic) just yardsticks whereby to determine rate of compensation, to be
applied whenever agreed upon. We cannot construe payment by the piece where work is done in such an
establishment so as to put the worker completely at liberty to turn him out and take in another at pleasure.
At this juncture, it is worthy to note that Justice Perfecto, concurring with Chief Justice Ricardo Paras who penned the decision
in "Sunrise Coconut Products Co. v. Court of Industrial Relations" (83 Phil..518, 523), opined that
judicial notice of the fact that the so-called "pakyaw" system mentioned in this case as generally practiced in
our country, is, in fact, a labor contract -between employers and employees, between capitalists and
laborers.
Insofar as the other assignments of errors are concerned, there is no showing that the Court of Industrial Relations abused its
discretion when it concluded that the findings of fact made by the Hearing Examiner were supported by evidence on the
record. Section 6, Republic Act 875 provides that in unfair labor practice cases, the factual findings of the Court of Industrial
Relations are conclusive on the Supreme Court, if supported by substantial evidence. This provision has been put into effect in
a long line of decisions where the Supreme Court did not reverse the findings of fact of the Court of Industrial Relations when
they were supported by substantial evidence. 14
Nevertheless, considering that about eighteen (18) years have already elapsed from the time the complainants were
dismissed, and that the decision being appealed ordered the payment of backwages to the employees from their respective
15
dates of dismissal until finally reinstated, it is fitting to apply in this connection the formula for backwages worked out by
Justice Claudio Teehankee in "cases not terminated sooner." The formula cans for fixing the award of backwages without
16
qualification and deduction to three years, "subject to deduction where there are mitigating circumstances in favor of the
employer but subject to increase by way of exemplary damages where there are aggravating circumstances. Considering
17
there are no such circumstances in this case, there is no reason why the Court should not apply the abovementioned formula
in this instance.
20
WHEREFORE; the award of backwages granted by the Court of Industrial Relations is herein modified to an award of
backwages for three years without qualification and deduction at the respective rates of compensation the employees
concerned were receiving at the time of dismissal. The execution of this award is entrusted to the National Labor Relations
Commission. Costs against petitioner.
SO ORDERED.
G.R. No. 84484 November 15, 1989
INSULAR LIFE ASSURANCE CO., LTD., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO, respondents.
Tirol & Tirol for petitioner.
Enojas, Defensor & Teodosio Cabado Law Offices for private respondent.
NARVASA, J.:
On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called the Company) and Melecio T. Basiao entered into a
contract by which:
1
1. Basiao was "authorized to solicit within the Philippines applications for insurance policies and annuities in
accordance with the existing rules and regulations" of the Company;
2. he would receive "compensation, in the form of commissions ... as provided in the Schedule of
Commissions" of the contract to "constitute a part of the consideration of ... (said) agreement;" and
3. the "rules in ... (the Company's) Rate Book and its Agent's Manual, as well as all its circulars ... and those
which may from time to time be promulgated by it, ..." were made part of said contract.
The contract also contained, among others, provisions governing the relations of the parties, the duties of the Agent, the acts
prohibited to him, and the modes of termination of the agreement, viz.:
RELATION WITH THE COMPANY. The Agent shall be free to exercise his own judgment as to time, place and
means of soliciting insurance. Nothing herein contained shall therefore be construed to create the
relationship of employee and employer between the Agent and the Company. However, the Agent shall
observe and conform to all rules and regulations which the Company may from time to time prescribe.
ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from giving, directly or indirectly, rebates in any
form, or from making any misrepresentation or over-selling, and, in general, from doing or committing acts
prohibited in the Agent's Manual and in circulars of the Office of the Insurance Commissioner.
TERMINATION. The Company may terminate the contract at will, without any previous notice to the Agent,
for or on account of ... (explicitly specified causes). ...
Either party may terminate this contract by giving to the other notice in writing to that effect. It shall
become ipso facto cancelled if the Insurance Commissioner should revoke a Certificate of Authority
21
previously issued or should the Agent fail to renew his existing Certificate of Authority upon its expiration.
The Agent shall not have any right to any commission on renewal of premiums that may be paid after the
termination of this agreement for any cause whatsoever, except when the termination is due to disability or
death in line of service. As to commission corresponding to any balance of the first year's premiums
remaining unpaid at the termination of this agreement, the Agent shall be entitled to it if the balance of the
first year premium is paid, less actual cost of collection, unless the termination is due to a violation of this
contract, involving criminal liability or breach of trust.
ASSIGNMENT. No Assignment of the Agency herein created or of commissions or other compensations shall
be valid without the prior consent in writing of the Company. ...
Some four years later, in April 1972, the parties entered into another contract — an Agency Manager's Contract — and to
implement his end of it Basiao organized an agency or office to which he gave the name M. Basiao and Associates, while
concurrently fulfilling his commitments under the first contract with the Company. 2
In May, 1979, the Company terminated the Agency Manager's Contract. After vainly seeking a 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 starting April 1, 1980. 3
Basiao thereafter filed with the then Ministry of Labor a complaint against the Company and its president. Without
4
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. 5
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. Said official's decision directed payment of his unpaid commissions "... equivalent to the balance of the
first year's premium remaining unpaid, at the time of his termination, of all the insurance policies solicited by ... (him) in favor
of the respondent company ..." plus 10% attorney's fees. 6
This decision was, on appeal by the Company, affirmed by the National Labor Relations Commission. Hence, the present
7
petition for certiorari and prohibition.
The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become the Company's employee by virtue of
the contract invoked by him, thereby placing his claim for unpaid commissions within the original and exclusive jurisdiction of
the Labor Arbiter under the provisions of Section 217 of the Labor Code, or, contrarily, as the Company would have it, that
8
under said contract Basiao's status was that of an independent contractor whose claim was thus cognizable, not by the Labor
Arbiter in a labor case, but by the regular courts in an ordinary civil action.
The Company's thesis, that no employer-employee relation in the legal and generally accepted sense existed between it and
Basiao, is drawn from the terms of the contract they had entered into, which, either expressly or by necessary implication,
made Basiao the master of his own time and selling methods, left to his judgment the time, place and means of soliciting
insurance, set no accomplishment quotas and compensated him on the basis of results obtained. He was not bound to
observe any schedule of working hours or report to any regular station; he could seek and work on his prospects anywhere
and at anytime he chose to, and was free to adopt the selling methods he deemed most effective.
Without denying that the above were indeed the expressed implicit conditions of Basiao's contract with the Company, the
respondents contend that they do not constitute the decisive determinant of the nature of his engagement, invoking
precedents to the effect that the critical feature distinguishing the status of an employee from that of an independent
contractor is control, that is, whether or not the party who engages the services of another has the power to control the
22
latter's conduct in rendering such services. Pursuing the argument, the respondents draw attention to the provisions of
Basiao's contract obliging him to "... observe and conform to all rules and regulations which the Company may from time to
time prescribe ...," as well as to the fact that the Company prescribed the qualifications of applicants for insurance, processed
their applications and determined the amounts of insurance cover to be issued as indicative of the control, which made
Basiao, in legal contemplation, an employee of the Company. 9
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 10
... 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 (35 Am. Jur. 445). ...
has been followed and applied in later cases, some fairly recent. Indeed, it is without question a valid test of the character of
11
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.
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
12
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.
There is no dearth of authority holding persons similarly placed as respondent Basiao to be independent contractors, instead
of employees of the parties for whom they worked. In Mafinco Trading Corporation vs. Ople, the Court ruled that a person
13
engaged to sell soft drinks for another, using a truck supplied by the latter, but with the right to employ his own workers, sell
according to his own methods subject only to prearranged routes, observing no working hours fixed by the other party and
obliged to secure his own licenses and defray his own selling expenses, all in consideration of a peddler's discount given by the
other party for at least 250 cases of soft drinks sold daily, was not an employee but an independent contractor.
In Investment Planning Corporation of the Philippines us. Social Security System a case almost on all fours with the present
14
one, this Court held that there was no employer-employee relationship between a commission agent and an investment
company, but that the former was an independent contractor where said agent and others similarly placed were: (a) paid
compensation in the form of commissions based on percentages of their sales, any balance of commissions earned being
payable to their legal representatives in the event of death or registration; (b) required to put up performance bonds; (c)
subject to a set of rules and regulations governing the performance of their duties under the agreement with the company
and termination of their services for certain causes; (d) not required to report for work at any time, nor to devote their time
23
exclusively to working for the company nor to submit a record of their activities, and who, finally, shouldered their own selling
and transportation expenses.
More recently, in Sara vs. NLRC, it was held that one who had been engaged by a rice miller to buy and sell rice and palay
15
without compensation except a certain percentage of what he was able to buy or sell, did work at his own pleasure without
any supervision or control on the part of his principal and relied on his own resources in the performance of his work, was a
plain commission agent, an independent contractor and not an employee.
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 Labor Arbiter's decision makes reference to Basiao's claim of having been connected with the Company for twenty-five
years. Whatever this is meant to imply, the obvious reply would be that what is germane here is Basiao's status under the
contract of July 2, 1968, not the length of his relationship with the Company.
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.
WHEREFORE, the appealed Resolution of the National Labor Relations Commission is set aside, and that complaint of private
respondent Melecio T. Basiao in RAB Case No. VI-0010-83 is dismissed. No pronouncement as to costs.
SO ORDERED.
G.R. No. 167622 June 29, 2010
GREGORIO V. TONGKO, Petitioner,
vs.
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and RENATO A. VERGEL DE DIOS, Respondents.
RESOLUTION
BRION, J.:
This resolves the Motion for Reconsideration1 dated December 3, 2008 filed by respondent The Manufacturers Life Insurance
Co. (Phils.), Inc. (Manulife) to set aside our Decision of November 7, 2008. In the assailed decision, we found that an employer-
employee relationship existed between Manulife and petitioner Gregorio Tongko and ordered Manulife to pay Tongko
backwages and separation pay for illegal dismissal.
The following facts have been stated in our Decision of November 7, 2008, now under reconsideration, but are repeated,
simply for purposes of clarity.
The contractual relationship between Tongko and Manulife had two basic phases. The first or initial phase began on July 1,
1977, under a Career Agent’s Agreement (Agreement) that provided:
24
It is understood and agreed that the Agent is an independent contractor and nothing contained herein shall be construed or
interpreted as creating an employer-employee relationship between the Company and the Agent.
xxxx
a) The Agent shall canvass for applications for Life Insurance, Annuities, Group policies and other products offered by the
Company, and collect, in exchange for provisional receipts issued by the Agent, money due to or become due to the Company
in respect of applications or policies obtained by or through the Agent or from policyholders allotted by the Company to the
Agent for servicing, subject to subsequent confirmation of receipt of payment by the Company as evidenced by an Official
Receipt issued by the Company directly to the policyholder.
xxxx
The Company may terminate this Agreement for any breach or violation of any of the provisions hereof by the Agent by giving
written notice to the Agent within fifteen (15) days from the time of the discovery of the breach. No waiver, extinguishment,
abandonment, withdrawal or cancellation of the right to terminate this Agreement by the Company shall be construed for any
previous failure to exercise its right under any provision of this Agreement.
Either of the parties hereto may likewise terminate his Agreement at any time without cause, by giving to the other party
fifteen (15) days notice in writing.2
Tongko additionally agreed (1) to comply with all regulations and requirements of Manulife, and (2) to maintain a standard of
knowledge and competency in the sale of Manulife’s products, satisfactory to Manulife and sufficient to meet the volume of
the new business, required by his Production Club membership.3
The second phase started in 1983 when Tongko was named Unit Manager in Manulife’s Sales Agency Organization. In 1990,
he became a Branch Manager. Six years later (or in 1996), Tongko became a Regional Sales Manager. 4
Tongko’s gross earnings consisted of commissions, persistency income, and management overrides. Since the beginning,
Tongko consistently declared himself self-employed in his income tax returns. Thus, under oath, he declared his gross business
income and deducted his business expenses to arrive at his taxable business income. Manulife withheld the corresponding
10% tax on Tongko’s earnings.5
In 2001, Manulife instituted manpower development programs at the regional sales management level. Respondent Renato
Vergel de Dios wrote Tongko a letter dated November 6, 2001 on concerns that were brought up during the October 18, 2001
Metro North Sales Managers Meeting. De Dios wrote:
The first step to transforming Manulife into a big league player has been very clear – to increase the number of agents to at
least 1,000 strong for a start. This may seem diametrically opposed to the way Manulife was run when you first joined the
organization. Since then, however, substantial changes have taken place in the organization, as these have been influenced by
developments both from within and without the company.
xxxx
The issues around agent recruiting are central to the intended objectives hence the need for a Senior Managers’ meeting
earlier last month when Kevin O’Connor, SVP-Agency, took to the floor to determine from our senior agency leaders what
more could be done to bolster manpower development. At earlier meetings, Kevin had presented information where
evidently, your Region was the lowest performer (on a per Manager basis) in terms of recruiting in 2000 and, as of today,
continues to remain one of the laggards in this area.
25
While discussions, in general, were positive other than for certain comments from your end which were perceived to be
uncalled for, it became clear that a one-on-one meeting with you was necessary to ensure that you and management, were
on the same plane. As gleaned from some of your previous comments in prior meetings (both in group and one-on-one), it
was not clear that we were proceeding in the same direction.
Kevin held subsequent series of meetings with you as a result, one of which I joined briefly. In those subsequent meetings you
reiterated certain views, the validity of which we challenged and subsequently found as having no basis.
With such views coming from you, I was a bit concerned that the rest of the Metro North Managers may be a bit confused as
to the directions the company was taking. For this reason, I sought a meeting with everyone in your management team,
including you, to clear the air, so to speak.
This note is intended to confirm the items that were discussed at the said Metro North Region’s Sales Managers meeting held
at the 7/F Conference room last 18 October.
xxxx
Issue # 2: "Some Managers are unhappy with their earnings and would want to revert to the position of agents."
This is an often repeated issue you have raised with me and with Kevin. For this reason, I placed the issue on the table before
the rest of your Region’s Sales Managers to verify its validity. As you must have noted, no Sales Manager came forward on
their own to confirm your statement and it took you to name Malou Samson as a source of the same, an allegation that Malou
herself denied at our meeting and in your very presence.
This only confirms, Greg, that those prior comments have no solid basis at all. I now believe what I had thought all along, that
these allegations were simply meant to muddle the issues surrounding the inability of your Region to meet its agency
development objectives!
Issue # 3: "Sales Managers are doing what the company asks them to do but, in the process, they earn less."
xxxx
All the above notwithstanding, we had your own records checked and we found that you made a lot more money in the Year
2000 versus 1999. In addition, you also volunteered the information to Kevin when you said that you probably will make more
money in the Year 2001 compared to Year 2000. Obviously, your above statement about making "less money" did not refer to
you but the way you argued this point had us almost believing that you were spouting the gospel of truth when you were not.
xxx
xxxx
All of a sudden, Greg, I have become much more worried about your ability to lead this group towards the new direction that
we have been discussing these past few weeks, i.e., Manulife’s goal to become a major agency-led distribution company in the
Philippines. While as you claim, you have not stopped anyone from recruiting, I have never heard you proactively push for
greater agency recruiting. You have not been proactive all these years when it comes to agency growth.
xxxx
I cannot afford to see a major region fail to deliver on its developmental goals next year and so, we are making the following
changes in the interim:
26
1. You will hire at your expense a competent assistant who can unload you of much of the routine tasks which can be easily
delegated. This assistant should be so chosen as to complement your skills and help you in the areas where you feel "may not
be your cup of tea."
You have stated, if not implied, that your work as Regional Manager may be too taxing for you and for your health. The above
could solve this problem.
xxxx
2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the North Star Branch (NSB) in
autonomous fashion. x x x
I have decided to make this change so as to reduce your span of control and allow you to concentrate more fully on
overseeing the remaining groups under Metro North, your Central Unit and the rest of the Sales Managers in Metro North. I
will hold you solely responsible for meeting the objectives of these remaining groups.
xxxx
The above changes can end at this point and they need not go any further. This, however, is entirely dependent upon you. But
you have to understand that meeting corporate objectives by everyone is primary and will not be compromised. We are
meeting tough challenges next year, and I would want everybody on board. Any resistance or holding back by anyone will be
dealt with accordingly.6
Subsequently, de Dios wrote Tongko another letter, dated December 18, 2001, terminating Tongko’s services:
It would appear, however, that despite the series of meetings and communications, both one-on-one meetings between
yourself and SVP Kevin O’Connor, some of them with me, as well as group meetings with your Sales Managers, all these
efforts have failed in helping you align your directions with Management’s avowed agency growth policy.
xxxx
On account thereof, Management is exercising its prerogative under Section 14 of your Agents Contract as we are now issuing
this notice of termination of your Agency Agreement with us effective fifteen days from the date of this letter. 7
Tongko responded by filing an illegal dismissal complaint with the National Labor Relations Commission (NLRC) Arbitration
Branch. He essentially alleged – despite the clear terms of the letter terminating his Agency Agreement – that he was
Manulife’s employee before he was illegally dismissed.8
Thus, the threshold issue is the existence of an employment relationship. A finding that none exists renders the question of
illegal dismissal moot; a finding that an employment relationship exists, on the other hand, necessarily leads to the need to
determine the validity of the termination of the relationship.
A. Tongko’s Case for Employment Relationship
Tongko asserted that as Unit Manager, he was paid an annual over-rider not exceeding ₱50,000.00, regardless of production
levels attained and exclusive of commissions and bonuses. He also claimed that as Regional Sales Manager, he was given a
travel and entertainment allowance of ₱36,000.00 per year in addition to his overriding commissions; he was tasked with
numerous administrative functions and supervisory authority over Manulife’s employees, aside from merely selling policies
and recruiting agents for Manulife; and he recommended and recruited insurance agents subject to vetting and approval by
Manulife. He further alleges that he was assigned a definite place in the Manulife offices when he was not in the field – at the
27
3rd Floor, Manulife Center, 108 Tordesillas corner Gallardo Sts., Salcedo Village, Makati City – for which he never paid any
rental. Manulife provided the office equipment he used, including tables, chairs, computers and printers (and even office
stationery), and paid for the electricity, water and telephone bills. As Regional Sales Manager, Tongko additionally asserts that
he was required to follow at least three codes of conduct.9
B. Manulife’s Case – Agency Relationship with Tongko
Manulife argues that Tongko had no fixed wage or salary. Under the Agreement, Tongko was paid commissions of varying
amounts, computed based on the premium paid in full and actually received by Manulife on policies obtained through an
agent. As sales manager, Tongko was paid overriding sales commission derived from sales made by agents under his
unit/structure/branch/region. Manulife also points out that it deducted and withheld a 10% tax from all commissions Tongko
received; Tongko even declared himself to be self-employed and consistently paid taxes as such—i.e., he availed of tax
deductions such as ordinary and necessary trade, business and professional expenses to which a business is entitled.
Manulife asserts that the labor tribunals have no jurisdiction over Tongko’s claim as he was not its employee as characterized
in the four-fold test and our ruling in Carungcong v. National Labor Relations Commission.10
The Conflicting Rulings of the Lower Tribunals
The labor arbiter decreed that no employer-employee relationship existed between the parties. However, the NLRC reversed
the labor arbiter’s decision on appeal; it found the existence of an employer-employee relationship and concluded that
Tongko had been illegally dismissed. In the petition for certiorari with the Court of Appeals (CA), the appellate court found
that the NLRC gravely abused its discretion in its ruling and reverted to the labor arbiter’s decision that no employer-employee
relationship existed between Tongko and Manulife.
Our Decision of November 7, 2008
In our Decision of November 7, 2008, we reversed the CA ruling and found that an employment relationship existed between
Tongko and Manulife. We concluded that Tongko is Manulife’s employee for the following reasons:
1. Our ruling in the first Insular11 case did not foreclose the possibility of an insurance agent becoming an employee of
an insurance company; if evidence exists showing that the company promulgated rules or regulations that effectively
controlled or restricted an insurance agent’s choice of methods or the methods themselves in selling insurance, an
employer-employee relationship would be present. The determination of the existence of an employer-employee
relationship is thus on a case-to-case basis depending on the evidence on record.
2. Manulife had the power of control over Tongko, sufficient to characterize him as an employee, as shown by the
following indicators:
2.1 Tongko undertook to comply with Manulife’s rules, regulations and other requirements, i.e., the different
codes of conduct such as the Agent Code of Conduct, the Manulife Financial Code of Conduct, and the
Financial Code of Conduct Agreement;
2.2 The various affidavits of Manulife’s insurance agents and managers, who occupied similar positions as
Tongko, showed that they performed administrative duties that established employment with
Manulife;12 and
2.3 Tongko was tasked to recruit some agents in addition to his other administrative functions. De Dios’ letter
harped on the direction Manulife intended to take, viz., greater agency recruitment as the primary means to
sell more policies; Tongko’s alleged failure to follow this directive led to the termination of his employment
with Manulife.
28
The Motion for Reconsideration
Manulife disagreed with our Decision and filed the present motion for reconsideration on the following GROUNDS:
1. The November 7[, 2008] Decision violates Manulife’s right to due process by: (a) confining the review only to the
issue of "control" and utterly disregarding all the other issues that had been joined in this case; (b) mischaracterizing
the divergence of conclusions between the CA and the NLRC decisions as confined only to that on "control"; (c)
grossly failing to consider the findings and conclusions of the CA on the majority of the material evidence, especially
[Tongko’s] declaration in his income tax returns that he was a "business person" or "self-employed"; and (d) allowing
[Tongko] to repudiate his sworn statement in a public document.
2. The November 7[, 2008] Decision contravenes settled rules in contract law and agency, distorts not only the legal
relationships of agencies to sell but also distributorship and franchising, and ignores the constitutional and policy
context of contract law vis-à-vis labor law.
3. The November 7[, 2008] Decision ignores the findings of the CA on the three elements of the four-fold test other
than the "control" test, reverses well-settled doctrines of law on employer-employee relationships, and grossly
misapplies the "control test," by selecting, without basis, a few items of evidence to the exclusion of more material
evidence to support its conclusion that there is "control."
4. The November 7[, 2008] Decision is judicial legislation, beyond the scope authorized by Articles 8 and 9 of the Civil
Code, beyond the powers granted to this Court under Article VIII, Section 1 of the Constitution and contravenes
through judicial legislation, the constitutional prohibition against impairment of contracts under Article III, Section 10
of the Constitution.
5. For all the above reasons, the November 7[, 2008] Decision made unsustainable and reversible errors, which should
be corrected, in concluding that Respondent Manulife and Petitioner had an employer-employee relationship, that
Respondent Manulife illegally dismissed Petitioner, and for consequently ordering Respondent Manulife to pay
Petitioner backwages, separation pay, nominal damages and attorney’s fees.13
THE COURT’S RULING
A. The Insurance and the Civil Codes;

the Parties’ Intent and Established
Industry Practices
We cannot consider the present case purely from a labor law perspective, oblivious that the factual antecedents were set in
the insurance industry so that the Insurance Code primarily governs. Chapter IV, Title 1 of this Code is wholly devoted to
"Insurance Agents and Brokers" and specifically defines the agents and brokers relationship with the insurance company and
how they are governed by the Code and regulated by the Insurance Commission.
The Insurance Code, of course, does not wholly regulate the "agency" that it speaks of, as agency is a civil law matter
governed by the Civil Code. Thus, at the very least, three sets of laws – namely, the Insurance Code, the Labor Code and the
Civil Code – have to be considered in looking at the present case. Not to be forgotten, too, is the Agreement (partly
reproduced on page 2 of this Dissent and which no one disputes) that the parties adopted to govern their relationship for
purposes of selling the insurance the company offers. To forget these other laws is to take a myopic view of the present case
and to add to the uncertainties that now exist in considering the legal relationship between the insurance company and its
"agents."
The main issue of whether an agency or an employment relationship exists depends on the incidents of the relationship. The
Labor Code concept of "control" has to be compared and distinguished with the "control" that must necessarily exist in a
29
principal-agent relationship. The principal cannot but also have his or her say in directing the course of the principal-agent
relationship, especially in cases where the company-representative relationship in the insurance industry is an agency.
a. The laws on insurance and agency
The business of insurance is a highly regulated commercial activity in the country, in terms particularly of who can be in the
insurance business, who can act for and in behalf of an insurer, and how these parties shall conduct themselves in the
insurance business. Section 186 of the Insurance Code provides that "No person, partnership, or association of persons shall
transact any insurance business in the Philippines except as agent of a person or corporation authorized to do the business of
insurance in the Philippines." Sections 299 and 300 of the Insurance Code on Insurance Agents and Brokers, among other
provisions, provide:
Section 299. No insurance company doing business in the Philippines, nor any agent thereof, shall pay any commission or
other compensation to any person for services in obtaining insurance, unless such person shall have first procured from the
Commissioner a license to act as an insurance agent of such company or as an insurance broker as hereinafter provided.
No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement of applications for
insurance, or receive for services in obtaining insurance, any commission or other compensation from any insurance company
doing business in the Philippines or any agent thereof, without first procuring a license so to act from the Commissioner x x x
The Commissioner shall satisfy himself as to the competence and trustworthiness of the applicant and shall have the right to
refuse to issue or renew and to suspend or revoke any such license in his discretion. 1avvphi1.net
Section 300. Any person who for compensation solicits or obtains insurance on behalf of any insurance company or transmits
for a person other than himself an application for a policy or contract of insurance to or from such company or offers or
assumes to act in the negotiating of such insurance shall be an insurance agent within the intent of this section and shall
thereby become liable to all the duties, requirements, liabilities and penalties to which an insurance agent is subject.
The application for an insurance agent’s license requires a written examination, and the applicant must be of good moral
character and must not have been convicted of a crime involving moral turpitude.14 The insurance agent who collects
premiums from an insured person for remittance to the insurance company does so in a fiduciary capacity, and an insurance
company which delivers an insurance policy or contract to an authorized agent is deemed to have authorized the agent to
receive payment on the company’s behalf.15 Section 361 further prohibits the offer, negotiation, or collection of any amount
other than that specified in the policy and this covers any rebate from the premium or any special favor or advantage in the
dividends or benefit accruing from the policy.
Thus, under the Insurance Code, the agent must, as a matter of qualification, be licensed and must also act within the
parameters of the authority granted under the license and under the contract with the principal. Other than the need for a
license, the agent is limited in the way he offers and negotiates for the sale of the company’s insurance products, in his
collection activities, and in the delivery of the insurance contract or policy. Rules regarding the desired results (e.g., the
required volume to continue to qualify as a company agent, rules to check on the parameters on the authority given to the
agent, and rules to ensure that industry, legal and ethical rules are followed) are built-in elements of control specific to an
insurance agency and should not and cannot be read as elements of control that attend an employment relationship governed
by the Labor Code.
On the other hand, the Civil Code defines an agent as a "person [who] binds himself to render some service or to do
something in representation or on behalf of another, with the consent or authority of the latter."16 While this is a very broad
definition that on its face may even encompass an employment relationship, the distinctions between agency and
employment are sufficiently established by law and jurisprudence.
Generally, the determinative element is the control exercised over the one rendering service. The employer controls the
employee both in the results and in the means and manner of achieving this result. The principal in an agency relationship, on
30
the other hand, also has the prerogative to exercise control over the agent in undertaking the assigned task based on the
parameters outlined in the pertinent laws.
Under the general law on agency as applied to insurance, an agency must be express in light of the need for a license and for
the designation by the insurance company. In the present case, the Agreement fully serves as grant of authority to Tongko as
Manulife’s insurance agent.17 This agreement is supplemented by the company’s agency practices and usages, duly accepted
by the agent in carrying out the agency.18 By authority of the Insurance Code, an insurance agency is for compensation,19 a
matter the Civil Code Rules on Agency presumes in the absence of proof to the contrary. 20 Other than the compensation, the
principal is bound to advance to, or to reimburse, the agent the agreed sums necessary for the execution of the agency. 21 By
implication at least under Article 1994 of the Civil Code, the principal can appoint two or more agents to carry out the same
assigned tasks,22 based necessarily on the specific instructions and directives given to them.
With particular relevance to the present case is the provision that "In the execution of the agency, the agent shall act in
accordance with the instructions of the principal."23 This provision is pertinent for purposes of the necessary control that the
principal exercises over the agent in undertaking the assigned task, and is an area where the instructions can intrude into the
labor law concept of control so that minute consideration of the facts is necessary. A related article is Article 1891 of the Civil
Code which binds the agent to render an account of his transactions to the principal.
B. The Cited Case
The Decision of November 7, 2008 refers to the first Insular and Grepalife cases to establish that the company rules and
regulations that an agent has to comply with are indicative of an employer-employee relationship. 24 The Dissenting Opinions
of Justice Presbitero Velasco, Jr. and Justice Conchita Carpio Morales also cite Insular Life Assurance Co. v. National Labor
Relations Commission (second Insular case)25 to support the view that Tongko is Manulife’s employee. On the other hand,
Manulife cites the Carungcong case and AFP Mutual Benefit Association, Inc. v. National Labor Relations Commission
(AFPMBAI case)26 to support its allegation that Tongko was not its employee.
A caveat has been given above with respect to the use of the rulings in the cited cases because none of them is on all fours
with the present case; the uniqueness of the factual situation of the present case prevents it from being directly and readily
cast in the mold of the cited cases. These cited cases are themselves different from one another; this difference underscores
the need to read and quote them in the context of their own factual situations.
The present case at first glance appears aligned with the facts in the Carungcong, the Grepalife, and the second Insular Life
cases. A critical difference, however, exists as these cited cases dealt with the proper legal characterization of a subsequent
management contract that superseded the original agency contract between the insurance company and its agent.
Carungcong dealt with a subsequent Agreement making Carungcong a New Business Manager that clearly superseded the
Agreement designating Carungcong as an agent empowered to solicit applications for insurance. The Grepalife case, on the
other hand, dealt with the proper legal characterization of the appointment of the Ruiz brothers to positions higher than their
original position as insurance agents. Thus, after analyzing the duties and functions of the Ruiz brothers, as these were
enumerated in their contracts, we concluded that the company practically dictated the manner by which the Ruiz brothers
were to carry out their jobs. Finally, the second Insular Life case dealt with the implications of de los Reyes’ appointment as
acting unit manager which, like the subsequent contracts in the Carungcong and the Grepalife cases, was clearly defined
under a subsequent contract. In all these cited cases, a determination of the presence of the Labor Code element of control
was made on the basis of the stipulations of the subsequent contracts.
In stark contrast with the Carungcong, the Grepalife, and the second Insular Life cases, the only contract or document extant
and submitted as evidence in the present case is the Agreement – a pure agency agreement in the Civil Code context similar to
the original contract in the first Insular Life case and the contract in the AFPMBAI case. And while Tongko was later on
designated unit manager in 1983, Branch Manager in 1990, and Regional Sales Manager in 1996, no formal contract regarding
these undertakings appears in the records of the case. Any such contract or agreement, had there been any, could have at the
very least provided the bases for properly ascertaining the juridical relationship established between the parties.
31
These critical differences, particularly between the present case and the Grepalife and the second Insular Life cases, should
therefore immediately drive us to be more prudent and cautious in applying the rulings in these cases.
C. Analysis of the Evidence
c.1. The Agreement
The primary evidence in the present case is the July 1, 1977 Agreement that governed and defined the parties’ relations until
the Agreement’s termination in 2001. This Agreement stood for more than two decades and, based on the records of the
case, was never modified or novated. It assumes primacy because it directly dealt with the nature of the parties’ relationship
up to the very end; moreover, both parties never disputed its authenticity or the accuracy of its terms.
By the Agreement’s express terms, Tongko served as an "insurance agent" for Manulife, not as an employee. To be sure, the
Agreement’s legal characterization of the nature of the relationship cannot be conclusive and binding on the courts; as the
dissent clearly stated, the characterization of the juridical relationship the Agreement embodied is a matter of law that is for
the courts to determine. At the same time, though, the characterization the parties gave to their relationship in the
Agreement cannot simply be brushed aside because it embodies their intent at the time they entered the Agreement, and
they were governed by this understanding throughout their relationship. At the very least, the provision on the absence of
employer-employee relationship between the parties can be an aid in considering the Agreement and its implementation, and
in appreciating the other evidence on record.
The parties’ legal characterization of their intent, although not conclusive, is critical in this case because this intent is not
illegal or outside the contemplation of law, particularly of the Insurance and the Civil Codes. From this perspective, the
provisions of the Insurance Code cannot be disregarded as this Code (as heretofore already noted) expressly envisions a
principal-agent relationship between the insurance company and the insurance agent in the sale of insurance to the public. 1awph!
For this reason, we can take judicial notice that as a matter of Insurance Code-based business practice, an agency relationship
1
prevails in the insurance industry for the purpose of selling insurance. The Agreement, by its express terms, is in accordance
with the Insurance Code model when it provided for a principal-agent relationship, and thus cannot lightly be set aside nor
simply be considered as an agreement that does not reflect the parties’ true intent. This intent, incidentally, is reinforced by
the system of compensation the Agreement provides, which likewise is in accordance with the production-based sales
commissions the Insurance Code provides.
Significantly, evidence shows that Tongko’s role as an insurance agent never changed during his relationship with Manulife. If
changes occurred at all, the changes did not appear to be in the nature of their core relationship. Tongko essentially remained
an agent, but moved up in this role through Manulife’s recognition that he could use other agents approved by Manulife, but
operating under his guidance and in whose commissions he had a share. For want of a better term, Tongko perhaps could be
labeled as a "lead agent" who guided under his wing other Manulife agents similarly tasked with the selling of Manulife
insurance.
Like Tongko, the evidence suggests that these other agents operated under their own agency agreements. Thus, if Tongko’s
compensation scheme changed at all during his relationship with Manulife, the change was solely for purposes of crediting
him with his share in the commissions the agents under his wing generated. As an agent who was recruiting and guiding other
insurance agents, Tongko likewise moved up in terms of the reimbursement of expenses he incurred in the course of his lead
agency, a prerogative he enjoyed pursuant to Article 1912 of the Civil Code. Thus, Tongko received greater reimbursements
for his expenses and was even allowed to use Manulife facilities in his interactions with the agents, all of whom were, in the
strict sense, Manulife agents approved and certified as such by Manulife with the Insurance Commission.
That Tongko assumed a leadership role but nevertheless wholly remained an agent is the inevitable conclusion that results
from the reading of the Agreement (the only agreement on record in this case) and his continuing role thereunder as sales
agent, from the perspective of the Insurance and the Civil Codes and in light of what Tongko himself attested to as his role as
Regional Sales Manager. To be sure, this interpretation could have been contradicted if other agreements had been submitted
32
as evidence of the relationship between Manulife and Tongko on the latter’s expanded undertakings. In the absence of any
such evidence, however, this reading – based on the available evidence and the applicable insurance and civil law provisions –
must stand, subject only to objective and evidentiary Labor Code tests on the existence of an employer-employee
relationship.
In applying such Labor Code tests, however, the enforcement of the Agreement during the course of the parties’ relationship
should be noted. From 1977 until the termination of the Agreement, Tongko’s occupation was to sell Manulife’s insurance
policies and products. Both parties acquiesced with the terms and conditions of the Agreement. Tongko, for his part, accepted
all the benefits flowing from the Agreement, particularly the generous commissions.
Evidence indicates that Tongko consistently clung to the view that he was an independent agent selling Manulife insurance
products since he invariably declared himself a business or self-employed person in his income tax returns. This consistency
with, and action made pursuant to the Agreement were pieces of evidence that were never mentioned nor considered in
our Decision of November 7, 2008. Had they been considered, they could, at the very least, serve as Tongko’s admissions
against his interest. Strictly speaking, Tongko’s tax returns cannot but be legally significant because he certified under oath the
amount he earned as gross business income, claimed business deductions, leading to his net taxable income. This should be
evidence of the first order that cannot be brushed aside by a mere denial. Even on a layman’s view that is devoid of legal
considerations, the extent of his annual income alone renders his claimed employment status doubtful.27
Hand in hand with the concept of admission against interest in considering the tax returns, the concept of estoppel – a legal
and equitable concept28 – necessarily must come into play. Tongko’s previous admissions in several years of tax returns as an
independent agent, as against his belated claim that he was all along an employee, are too diametrically opposed to be simply
dismissed or ignored. Interestingly, Justice Velasco’s dissenting opinion states that Tongko was forced to declare himself a
business or self-employed person by Manulife’s persistent refusal to recognize him as its employee. 29 Regrettably, the dissent
has shown no basis for this conclusion, an understandable omission since no evidence in fact exists on this point in the
records of the case. In fact, what the evidence shows is Tongko’s full conformity with, and action as, an independent agent
until his relationship with Manulife took a bad turn.
Another interesting point the dissent raised with respect to the Agreement is its conclusion that the Agreement negated any
employment relationship between Tongko and Manulife so that the commissions he earned as a sales agent should not be
considered in the determination of the backwages and separation pay that should be given to him. This part of the dissent is
correct although it went on to twist this conclusion by asserting that Tongko had dual roles in his relationship with Manulife;
he was an agent, not an employee, in so far as he sold insurance for Manulife, but was an employee in his capacity as a
manager. Thus, the dissent concluded that Tongko’s backwages should only be with respect to his role as Manulife’s manager.
The conclusion with respect to Tongko’s employment as a manager is, of course, unacceptable for the legal, factual and
practical reasons discussed in this Resolution. In brief, the factual reason is grounded on the lack of evidentiary support of the
conclusion that Manulife exercised control over Tongko in the sense understood in the Labor Code. The legal reason, partly
based on the lack of factual basis, is the erroneous legal conclusion that Manulife controlled Tongko and was thus its
employee. The practical reason, on the other hand, is the havoc that the dissent’s unwarranted conclusion would cause the
insurance industry that, by the law’s own design, operated along the lines of principal-agent relationship in the sale of
insurance.
c.2. Other Evidence of Alleged Control
A glaring evidentiary gap for Tongko in this case is the lack of evidence on record showing that Manulife ever exercised
means-and-manner control, even to a limited extent, over Tongko during his ascent in Manulife’s sales ladder. In 1983,
Tongko was appointed unit manager. Inexplicably, Tongko never bothered to present any evidence at all on what this
designation meant. This also holds true for Tongko’s appointment as branch manager in 1990, and as Regional Sales Manager
in 1996. The best evidence of control – the agreement or directive relating to Tongko’s duties and responsibilities – was never
introduced as part of the records of the case. The reality is, prior to de Dios’ letter, Manulife had practically left Tongko alone
33
not only in doing the business of selling insurance, but also in guiding the agents under his wing. As discussed below, the
alleged directives covered by de Dios’ letter, heretofore quoted in full, were policy directions and targeted results that the
company wanted Tongko and the other sales groups to realign with in their own selling activities. This is the reality that the
parties’ presented evidence consistently tells us.
What, to Tongko, serve as evidence of labor law control are the codes of conduct that Manulife imposes on its agents in the
sale of insurance. The mere presentation of codes or of rules and regulations, however, is not per se indicative of labor law
control as the law and jurisprudence teach us.
As already recited above, the Insurance Code imposes obligations on both the insurance company and its agents in the
performance of their respective obligations under the Code, particularly on licenses and their renewals, on the
representations to be made to potential customers, the collection of premiums, on the delivery of insurance policies, on the
matter of compensation, and on measures to ensure ethical business practice in the industry.
The general law on agency, on the other hand, expressly allows the principal an element of control over the agent in a manner
consistent with an agency relationship. In this sense, these control measures cannot be read as indicative of labor law control.
Foremost among these are the directives that the principal may impose on the agent to achieve the assigned tasks, to the
extent that they do not involve the means and manner of undertaking these tasks. The law likewise obligates the agent to
render an account; in this sense, the principal may impose on the agent specific instructions on how an account shall be made,
particularly on the matter of expenses and reimbursements. To these extents, control can be imposed through rules and
regulations without intruding into the labor law concept of control for purposes of employment.
From jurisprudence, an important lesson that the first Insular Life case teaches us is that a commitment to abide by the rules
and regulations of an insurance company does not ipso facto make the insurance agent an employee. Neither do guidelines
somehow restrictive of the insurance agent’s conduct necessarily indicate "control" as this term is defined in
jurisprudence. Guidelines indicative of labor law "control," as the first Insular Life case tells us, should not merely relate to
the mutually desirable result intended by the contractual relationship; they must have the nature of dictating the means or
methods to be employed in attaining the result, or of fixing the methodology and of binding or restricting the party hired to
the use of these means. In fact, results-wise, the principal can impose production quotas and can determine how many
agents, with specific territories, ought to be employed to achieve the company’s objectives. These are management policy
decisions that the labor law element of control cannot reach. Our ruling in these respects in the first Insular Life case was
practically reiterated in Carungcong. Thus, as will be shown more fully below, Manulife’s codes of conduct, 30 all of which do
not intrude into the insurance agents’ means and manner of conducting their sales and only control them as to the desired
results and Insurance Code norms, cannot be used as basis for a finding that the labor law concept of control existed between
Manulife and Tongko.
The dissent considers the imposition of administrative and managerial functions on Tongko as indicative of labor law control;
thus, Tongko as manager, but not as insurance agent, became Manulife’s employee. It drew this conclusion from what the
other Manulife managers disclosed in their affidavits (i.e., their enumerated administrative and managerial functions) and
after comparing these statements with the managers in Grepalife. The dissent compared the control exercised by Manulife
over its managers in the present case with the control the managers in the Grepalife case exercised over their employees by
presenting the following matrix:31
Duties of Manulife’s Manager Duties of Grepalife’s Managers/Supervisors

- to render or recommend prospective agents to - train understudies for the position of district
be licensed, trained and contracted to sell manager
Manulife products and who will be part of my
Unit
- to coordinate activities of the agents under - properly account, record and document the
34
[the managers’] Unit in [the agents’] daily, company’s funds, spot-check and audit the work of
weekly and monthly selling activities, making the zone supervisors, x x x follow up the submission
sure that their respective sales targets are met; of weekly remittance reports of the debit agents and
zone supervisors
- to conduct periodic training sessions for [the]
agents to further enhance their sales skill; and - direct and supervise the sales activities of the debit
agents under him, x x x undertake and discharge the
- to assist [the] agents with their sales activities functions of absentee debit agents, spot-check the
by way of joint fieldwork, consultations and one- record of debit agents, and insure proper
on-one evaluation and analysis of particular documentation of sales and collections of debit
accounts agents.
Aside from these affidavits however, no other evidence exists regarding the effects of Tongko’s additional roles in Manulife’s
sales operations on the contractual relationship between them.
To the dissent, Tongko’s administrative functions as recruiter, trainer, or supervisor of other sales agents constituted a
substantive alteration of Manulife’s authority over Tongko and the performance of his end of the relationship with Manulife.
We could not deny though that Tongko remained, first and foremost, an insurance agent, and that his additional role as
Branch Manager did not lessen his main and dominant role as insurance agent; this role continued to dominate the relations
between Tongko and Manulife even after Tongko assumed his leadership role among agents. This conclusion cannot be
denied because it proceeds from the undisputed fact that Tongko and Manulife never altered their July 1, 1977 Agreement, a
distinction the present case has with the contractual changes made in the second Insular Life case. Tongko’s results-based
commissions, too, attest to the primacy he gave to his role as insurance sales agent.
The dissent apparently did not also properly analyze and appreciate the great qualitative difference that exists between:
 the Manulife managers’ role is to coordinate activities of the agents under the managers’ Unit in the agents’ daily,
weekly, and monthly selling activities, making sure that their respective sales targets are met.
 the District Manager’s duty in Grepalife is to properly account, record, and document the company's funds, spot-
check and audit the work of the zone supervisors, conserve the company's business in the district through
"reinstatements," follow up the submission of weekly remittance reports of the debit agents and zone supervisors,
preserve company property in good condition, train understudies for the position of district managers, and maintain
his quota of sales (the failure of which is a ground for termination).
 the Zone Supervisor’s (also in Grepalife) has the duty to direct and supervise the sales activities of the debit agents
under him, conserve company property through "reinstatements," undertake and discharge the functions of absentee
debit agents, spot-check the records of debit agents, and insure proper documentation of sales and collections by the
debit agents.
These job contents are worlds apart in terms of "control." In Grepalife, the details of how to do the job are specified and pre-
determined; in the present case, the operative words are the "sales target," the methodology being left undefined except to
the extent of being "coordinative." To be sure, a "coordinative" standard for a manager cannot be indicative of control; the
standard only essentially describes what a Branch Manager is – the person in the lead who orchestrates activities within the
group. To "coordinate," and thereby to lead and to orchestrate, is not so much a matter of control by Manulife; it is simply a
statement of a branch manager’s role in relation with his agents from the point of view of Manulife whose business Tongko’s
sales group carries.
A disturbing note, with respect to the presented affidavits and Tongko’s alleged administrative functions, is the selective
citation of the portions supportive of an employment relationship and the consequent omission of portions leading to the
contrary conclusion. For example, the following portions of the affidavit of Regional Sales Manager John Chua, with
35
counterparts in the other affidavits, were not brought out in the Decision of November 7, 2008, while the other portions
suggesting labor law control were highlighted. Specifically, the following portions of the affidavits were not brought out:32
1.a. I have no fixed wages or salary since my services are compensated by way of commissions based on the
computed premiums paid in full on the policies obtained thereat;
1.b. I have no fixed working hours and employ my own method in soliticing insurance at a time and place I see fit;
1.c. I have my own assistant and messenger who handle my daily work load;
1.d. I use my own facilities, tools, materials and supplies in carrying out my business of selling insurance;
xxxx
6. I have my own staff that handles the day to day operations of my office;
7. My staff are my own employees and received salaries from me;
xxxx
9. My commission and incentives are all reported to the Bureau of Internal Revenue (BIR) as income by a self-
employed individual or professional with a ten (10) percent creditable withholding tax. I also remit monthly for
professionals.
These statements, read with the above comparative analysis of the Manulife and the Grepalife cases, would have readily
yielded the conclusion that no employer-employee relationship existed between Manulife and Tongko.
Even de Dios’ letter is not determinative of control as it indicates the least amount of intrusion into Tongko’s exercise of his
role as manager in guiding the sales agents. Strictly viewed, de Dios’ directives are merely operational guidelines on how
Tongko could align his operations with Manulife’s re-directed goal of being a "big league player." The method is to expand
coverage through the use of more agents. This requirement for the recruitment of more agents is not a means-and-method
control as it relates, more than anything else, and is directly relevant, to Manulife’s objective of expanded business operations
through the use of a bigger sales force whose members are all on a principal-agent relationship. An important point to note
here is that Tongko was not supervising regular full-time employees of Manulife engaged in the running of the insurance
business; Tongko was effectively guiding his corps of sales agents, who are bound to Manulife through the same Agreement
that he had with Manulife, all the while sharing in these agents’ commissions through his overrides. This is the lead agent
concept mentioned above for want of a more appropriate term, since the title of Branch Manager used by the parties is really
a misnomer given that what is involved is not a specific regular branch of the company but a corps of non-employed agents,
defined in terms of covered territory, through which the company sells insurance. Still another point to consider is that
Tongko was not even setting policies in the way a regular company manager does; company aims and objectives were simply
relayed to him with suggestions on how these objectives can be reached through the expansion of a non-employee sales
force.
Interestingly, a large part of de Dios’ letter focused on income, which Manulife demonstrated, in Tongko’s case, to be
unaffected by the new goal and direction the company had set. Income in insurance agency, of course, is dependent on
results, not on the means and manner of selling – a matter for Tongko and his agents to determine and an area into which
Manulife had not waded. Undeniably, de Dios’ letter contained a directive to secure a competent assistant at Tongko’s own
expense. While couched in terms of a directive, it cannot strictly be understood as an intrusion into Tongko’s method of
operating and supervising the group of agents within his delineated territory. More than anything else, the "directive" was a
signal to Tongko that his results were unsatisfactory, and was a suggestion on how Tongko’s perceived weakness in delivering
results could be remedied. It was a solution, with an eye on results, for a consistently underperforming group; its obvious
36
intent was to save Tongko from the result that he then failed to grasp – that he could lose even his own status as an agent, as
he in fact eventually did.
The present case must be distinguished from the second Insular Life case that showed the hallmarks of an employer-employee
relationship in the management system established. These were: exclusivity of service, control of assignments and removal of
agents under the private respondent’s unit, and furnishing of company facilities and materials as well as capital described as
Unit Development Fund. All these are obviously absent in the present case. If there is a commonality in these cases, it is in the
collection of premiums which is a basic authority that can be delegated to agents under the Insurance Code.
As previously discussed, what simply happened in Tongko’s case was the grant of an expanded sales agency role that
recognized him as leader amongst agents in an area that Manulife defined. Whether this consequently resulted in the
establishment of an employment relationship can be answered by concrete evidence that corresponds to the following
questions:
 as lead agent, what were Tongko’s specific functions and the terms of his additional engagement;
 was he paid additional compensation as a so-called Area Sales Manager, apart from the commissions he received
from the insurance sales he generated;
 what can be Manulife’s basis to terminate his status as lead agent;
 can Manulife terminate his role as lead agent separately from his agency contract; and
 to what extent does Manulife control the means and methods of Tongko’s role as lead agent?
The answers to these questions may, to some extent, be deduced from the evidence at hand, as partly discussed above. But
strictly speaking, the questions cannot definitively and concretely be answered through the evidence on record. The concrete
evidence required to settle these questions is simply not there, since only the Agreement and the anecdotal affidavits have
been marked and submitted as evidence.
Given this anemic state of the evidence, particularly on the requisite confluence of the factors determinative of the existence
of employer-employee relationship, the Court cannot conclusively find that the relationship exists in the present case, even if
such relationship only refers to Tongko’s additional functions. While a rough deduction can be made, the answer will not be
fully supported by the substantial evidence needed.
Under this legal situation, the only conclusion that can be made is that the absence of evidence showing Manulife’s control
over Tongko’s contractual duties points to the absence of any employer-employee relationship between Tongko and Manulife.
In the context of the established evidence, Tongko remained an agent all along; although his subsequent duties made him a
lead agent with leadership role, he was nevertheless only an agent whose basic contract yields no evidence of means-and-
manner control.
This conclusion renders unnecessary any further discussion of the question of whether an agent may simultaneously assume
conflicting dual personalities. But to set the record straight, the concept of a single person having the dual role of agent and
employee while doing the same task is a novel one in our jurisprudence, which must be viewed with caution especially when it
is devoid of any jurisprudential support or precedent. The quoted portions in Justice Carpio-Morales’ dissent, 33 borrowed from
both the Grepalife and the second Insular Life cases, to support the duality approach of the Decision of November 7, 2008, are
regrettably far removed from their context – i.e., the cases’ factual situations, the issues they decided and the totality of the
rulings in these cases – and cannot yield the conclusions that the dissenting opinions drew.
The Grepalife case dealt with the sole issue of whether the Ruiz brothers’ appointment as zone supervisor and district
manager made them employees of Grepalife. Indeed, because of the presence of the element of control in their contract of
engagements, they were considered Grepalife’s employees. This did not mean, however, that they were simultaneously
considered agents as well as employees of Grepalife; the Court’s ruling never implied that this situation existed insofar as the
Ruiz brothers were concerned. The Court’s statement – the Insurance Code may govern the licensing requirements and other
particular duties of insurance agents, but it does not bar the application of the Labor Code with regard to labor standards and
37
labor relations – simply means that when an insurance company has exercised control over its agents so as to make them
their employees, the relationship between the parties, which was otherwise one for agency governed by the Civil Code and
the Insurance Code, will now be governed by the Labor Code. The reason for this is simple – the contract of agency has been
transformed into an employer-employee relationship.
The second Insular Life case, on the other hand, involved the issue of whether the labor bodies have jurisdiction over an illegal
termination dispute involving parties who had two contracts – first, an original contract (agency contract), which was
undoubtedly one for agency, and another subsequent contract that in turn designated the agent acting unit manager (a
management contract). Both the Insular Life and the labor arbiter were one in the position that both were agency contracts.
The Court disagreed with this conclusion and held that insofar as the management contract is concerned, the labor arbiter has
jurisdiction. It is in this light that we remanded the case to the labor arbiter for further proceedings. We never said in this case
though that the insurance agent had effectively assumed dual personalities for the simple reason that the agency contract has
been effectively superseded by the management contract. The management contract provided that if the appointment was
terminated for any reason other than for cause, the acting unit manager would be reverted to agent status and assigned to
any unit.
The dissent pointed out, as an argument to support its employment relationship conclusion, that any doubt in the existence of
an employer-employee relationship should be resolved in favor of the existence of the relationship. 34 This observation,
apparently drawn from Article 4 of the Labor Code, is misplaced, as Article 4 applies only when a doubt exists in the
"implementation and application" of the Labor Code and its implementing rules; it does not apply where no doubt exists as in
a situation where the claimant clearly failed to substantiate his claim of employment relationship by the quantum of evidence
the Labor Code requires.
On the dissent’s last point regarding the lack of jurisprudential value of our November 7, 2008 Decision, suffice it to state that,
as discussed above, the Decision was not supported by the evidence adduced and was not in accordance with controlling
jurisprudence. It should, therefore, be reconsidered and abandoned, but not in the manner the dissent suggests as the
dissenting opinions are as factually and as legally erroneous as the Decision under reconsideration.
In light of these conclusions, the sufficiency of Tongko’s failure to comply with the guidelines of de Dios’ letter, as a ground for
termination of Tongko’s agency, is a matter that the labor tribunals cannot rule upon in the absence of an employer-employee
relationship. Jurisdiction over the matter belongs to the courts applying the laws of insurance, agency and contracts.
WHEREFORE, considering the foregoing discussion, we REVERSE our Decision of November 7, 2008, GRANT Manulife’s motion
for reconsideration and, accordingly, DISMISS Tongko’s petition. No costs.
SO ORDERED.
ARTURO D. BRION
Associate Justice
WE CONCUR:
RENATO C. CORONA
Chief Justice
ANTONIO T. CARPIO CONCHITA CARPIO MORALES

Associate Justice Associate Justice
PRESBITERO J. VELASCO, JR. ANTONIO EDUARDO B. NACHURA
38
TERESITA J. LEONARDO-DE CASTRO DIOSDADO M. PERALTA

LUCAS P. BERSAMIN MARIANO C. DEL CASTILLO

ROBERTO A. ABAD MARTIN S. VILLARAMA, JR.

JOSE PORTUGAL PEREZ JOSE CATRAL MENDOZA

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Resolution had
been reached in consultation before the case was assigned to the writer of the opinion of the Court.
RENATO C. CORONA
Chief Justice
Footnotes
1
Rollo, pp. 772-819.
2
Tongko v. The Manufacturers Life Insurance Co. (Phils.), Inc., G.R. No. 167622, November 7, 2008, 570 SCRA 503,
506-507.
3
Rollo, p. 52.
4
Id. at 53.
5
Ibid.
6
Supra note 2, at 508-510.
7
Id. at 511.
8
Rollo, pp. 57-58.
9
Tongko’s Petition for Review, id. at 3-46; and Summary of Tongko’s Position in the September 27, 2004 decision of
the NLRC (id. at 349-351) and the CA decision (id. at 57-58).
39
347 Phil. 587 (1997); see Summary of Manulife’s Position in the September 27, 2004 decision of the NLRC (rollo, pp.
10
351-353) and the CA decision (rollo, pp. 58-59).
11
Insular Life Assurance Co., Ltd. v. NLRC, G.R. No. 84484, November 15, 1989, 179 SCRA 459.
12
In an Affidavit dated April 28, 2003, John D. Chua, a Regional Sales Manager of Manulife, stated:
4. On September 1, 1996, my services were engaged by Manulife as an Agency Regional Sales Manager
("RSM") for Metro South Region pursuant to an Agency Contract. As such RSM, I have the following functions:
1. Refer and recommend prospective agents to Manulife
2. Coach agents to become productive
3. Regularly meet with, and coordinate activities of agents affiliated to my region.
While Amanda Toledo, a Branch Manager of Manulife, stated in her Affidavit, dated April 29, 2003,
that:
3. In January 1997, I was assigned as a Branch Manager ("BM") of Manulife for the Metro North
Sector;
4. As such BM, I render the following services:
a. Refer and recommend prospective agents to Manulife;
b. Train and coordinate activities of other commission agents;
c. Coordinate activities of Agency Managers who, in turn, train and coordinate activities of
other commission agents;
d. Achieve agreed production objectives in terms of Net Annualized Commissions and Case
Count and recruitment goals; and
e. Sell the various products of Manulife to my personal clients.
While Ma. Lourdes Samson, a Unit Manager of Manulife, stated in her Affidavit, dated April 28, 2003,
that:
3. In 1977, I was assigned as a Unit Manager ("UM") of North Peaks Unit, North Star Branch, Metro
North Region;
4. As such UM, I render the following services:
a. To render or recommend prospective agents to be licensed, trained and contracted to sell

Manulife products and who will be part of my Unit.
b. To coordinate activities of the agents under my Unit in their daily, weekly and monthly
selling activities, making sure that their respective sales targets are met.
40
c. To conduct periodic training sessions for my agents to further enhance their sales skills.
d. To assist my agents with their sales activities by way of joint fieldwork, consultations and
one-on-one evaluation and analysis of particular accounts.
e. To provide opportunities to motivate my agents to succeed like conducting promos to

increase sales activities and encouraging them to be involved in company and industry
activities.
f. To provide opportunities for professional growth to my agents by encouraging them to be

a member of the LUCAP (Life Underwriters Association of the Philippines).
13
Rollo, pp. 776-777.
14
Sections 303 and 304, Insurance Code.
15
Section 306, Insurance Code.
16
Article 1868, Civil Code.
17
18
19
Section 299, Insurance Code.
20
21
Articles 1886 and 1918, Civil Code.
22
23
24
Supra note 2, at 519-520.
25
G.R. No. 119930, March 12, 1998, 287 SCRA 476.
26
G.R. No. 102199, January 28, 1997, 267 SCRA 47.
In 1997, his income was ₱2,822.620.00; in 1998 – ₱4,805,166.34; in 1999, ₱6,797,814.05; in 2001, ₱6,214,737.11;
27
and in 2002, ₱8,003,180.38.
28
Articles 1431 to 1439 of the Civil Code.
Justice Velasco’s Dissenting Opinion, p. 10. Justice Velasco maintains that Tongko’s declaration in his tax returns
29
that he was self-employed was forced upon him by Manulife, which refused and still refuses to consider him as its
employee, and withheld 10% of Tongko’s income as an agent for taxes. Tongko therefore had no choice but to use the
withholding tax certificates issued to Manulife in connection with the taxes it paid on his income as an agent and he
could not have been faulted for declaring himself as self-employed.
41
These include the Agent Code of Conduct, the Manulife Financial Code of Conduct, and the Manulife Code of
30
Conduct Agreement.
31
Justice Velasco’s Dissenting Opinion, pp. 3-4.
Motion for Reconsideration dated December 3, 2008; quoting the Affidavit of John Chua (Regional Sales Manager)
32
dated April 28, 2003, Affidavit of Amanda Tolentino (Branch Manager) dated April 29, 2003, and Affidavit of Lourdes
Samson (Unit Manager) dated April 28, 2003. Rollo, p. 803.
Separate Dissenting Opinion of Justice Conchita Carpio Morales, pp. 1-2. Justice Carpio Morales asserts that an agent
33
may, at the same time, be an employee of a life insurance company and quotes the Grepalife case:
True, it cannot be denied that based on the definition of an "insurance agent" in the Insurance Code some of
the functions performed by private respondents were those of insurance agents. Nevertheless, it does not
follow that they are not employees of Grepalife. The Insurance Code may govern the licensing requirements
and other particular duties of insurance agents, but it does not bar the application of the Labor Code with
regard to labor standards and labor relations.
She additionally posits that the hybrid model is not novel—the second Insular Life case purportedly held that
Pantaleon delos Reyes, acting unit manager, was an employee of Insular Life only insofar as the management
contract is concerned, quoting in support of this assertion the following discussion in the second Insular Life
case:
Parenthetically, both petitioner and respondent NLRC treated the agency contract and the management
contract entered into between petitioner and De los Reyes as contracts of agency. We, however, hold
otherwise. Unquestionably there exist major distinctions between the two agreements. While the first has
the earmarks of an agency contract, the second is far removed from the concept of agency in that provided
therein are conditionalities that indicate an employer-employee relationship. The NLRC therefore was correct
in finding that private respondent was an employee of petitioner, but this holds true only insofar as the
management contract is concerned. In view thereof, the Labor Arbiter has jurisdiction over the case.
34
Justice Presbitero Velasco, Jr.’s Dissenting Opinion, p. 12.
The Lawphil Project - Arellano Law Foundation
SEPARATE DISSENTING OPINION
CARPIO MORALES, J.:
Writing for the Court, Justice Arturo Brion grants the Motion for Reconsideration (Motion) filed by respondent Manufacturer’s
Life Insurance Co. (Phils.). The ponente, who concurred in the Court’s November 7, 2008 Decision,1 this time reverses the
finding of employer-employee relationship. The ponencia states that petitioner cannot simultaneously assume the dual or
hybrid role of employee and agent.
I dissent.
42
I submit this Separate Dissenting Opinion, after taking a closer look at the juxtaposition of five pertinent labor cases bearing
on the insurance industry, three of which ruled in favor of the existence of an employer-employee relationship.
An agent may, at the same time, be an

employee of a life insurance company
In Great Pacific Life Assurance Corp. v. NLRC2 (second Grepalife case), the Court found that an employer-employee relationship
existed between Grepalife and the Ruiz brothers in their capacities as zone supervisor and district manager. On the relevant
point, it elucidated:
True, it cannot be denied that based on the definition of an "insurance agent" in the Insurance Code some of the functions
performed by private respondents were those of insurance agents. Nevertheless, it does not follow that they are not
employees of Grepalife. The Insurance Code may govern the licensing requirements and other particular duties of insurance
agents, but it does not bar the application of the Labor Code with regard to labor standards and labor relations.3 (Citations
omitted; emphasis and underscoring supplied)
This type of hybrid role is not novel. In Insular Life Assurance Co., Ltd. v. NLRC (4th Division)4 (second Insular Life case), the
Court ruled that the therein respondent Pantaleon de los Reyes, acting unit manager, was an employee of Insular Life only
insofar as the management contract is concerned.
Parenthetically, both petitioner and respondent NLRC treated the agency contract and the management contract entered into
between petitioner and De los Reyes as contracts of agency. We[,] however[,] hold otherwise. Unquestionably there exist
major distinctions between the two agreements. While the first has the earmarks of an agency contract, the second is far
removed from the concept of agency in that provided therein are conditionalities that indicate an employer-employee
relationship. The NLRC therefore was correct in finding that private respondent was an employee of petitioner, but this
holds true only insofar as the management contract is concerned. In view thereof, the Labor Arbiter has jurisdiction over the
case.5 (Emphasis and underscoring supplied)
In the present case, the employer-employee relationship is extant from petitioner’s management functions as Unit Manager in
1983, later as Branch Manager in 1990, and finally as Regional Sales Manager in 1996, notwithstanding the absence of written
management contracts. Even assuming that management contracts were executed, the law is deemed written into them and
its application cannot be disavowed by the parties.
Admittedly, petitioner was allowed to continue selling as an agent simultaneously with his management functions. Insofar as
the termination of his agency agreement6 is concerned, the trial court has jurisdiction over such controversy.
The ponencia finds it "conflicting" for petitioner to assume the dual roles of agent and employer. It agrees, however, that
petitioner’s "additional role as Branch Manager did not lessen his main and dominant role as insurance agent," without
explaining how to weigh the dominance of one function over another.
In the present Motion, there is no reiteration of the invocation of Insurance Commission (IC) Memorandum Circular 3-93 (June
28, 1993) which provides that "[n]o official or employee of an insurance brokerage or an adjustment company and no
individual adjuster, shall be licensed to act as an insurance agent or general agent" and that "[n]o employee with the rank of
manager and above of an insurance company shall be licensed to act as its insurance agent or general agent." 7
There is no conflict between the 1993 IC Circular and the Court’s 1998 Decision in the second Insular Life case. That the
regulation says that things should run in a certain manner does not mean that any determination of facts should not be
contrary to that manner. "He should not" is different from "he did not." Respondent may assert that the parties herein could
not have violated the Circular, but it does not bar the Court to determine otherwise when facts glaringly point to the existence
of an employer-employee relationship.
43
Whatever infraction or tolerance committed or exhibited by the parties in defiance of the Circular or any other regulation or
Code, it is for the IC or the appropriate body to determine. The same holds true with the corollary tax implications which
respondent invites the Court to explore. Reconcilability of tax returns has never been decisive of the issue of employer-
employee relationship. It never became the business of this Court to thresh out for the parties the tax consequences arising
from every labor dispute where an alleged "independent contractor" was declared by the Court to be an employee. Suffice it
to state that a party would have to face the consequences, if any, of his or her actions before the proper forum.
On one hand, respondent proffers petitioner’s income tax returns and documents 8 as an admission that it did not employ
petitioner, to which petitioner replies that the withholding and remittance of taxes were done by respondent as payor and
withholding agent, as indicated in the Certificates of Creditable Income Tax Withheld at Source.
On the other, petitioner relies as respondent’s implied admission that he is an employee respondent’s having offered him a
Stock Option that could only be exercised by "active employees" and would be terminated upon "termination of
employment,"9 respondent’s disclaimer to this exceptional grant solely decided by its Head Office in Canada notwithstanding.
As the conflicting claims effectively cancel each other, a review of the other array of evidence is in order.
Control over the means and methods

in the attainment of the result
It bears noting that the NLRC Decision of September 27, 2004 judiciously explained why the resolution of the employment
status of petitioner hinges on the "control test" after discussing the three other components of the four-fold test. 10
Delving into jurisprudence, no employer-employee relationship was found in Insular Life Assurance Co., Ltd. v. NLRC11 (first
Insular Life case) because the Court, applying the control test, found that Insular Life neither controlled nor restricted the
choice of methods – or the methods themselves – of selling insurance by agency manager Melecio Basiao, leaving him free to
exercise his own judgment as to the time, place and means of soliciting insurance.
In declaring the type of "control" that is necessary for one to be deemed an employee, the Court explained in the first Insular
Life case, viz:
x x x 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.
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
44
cannot justifiably be said to establish an employer-employee relationship between him and the company.12 (Emphasis and
underscoring supplied)
I thus concur with the conclusion that the imposition of the codes of conduct is not indicative of control on the part of an
insurance company.
In Great Pacific Life Assurance Corporation v. Judico13 (first Grepalife case), however, the therein respondent Honorato Judico
was found to be an employee because
x x x 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 P200.00 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 P200.00 weekly "allowance". Furthermore, his contract of services with petitioner is not for a
piece of work nor for a definite period.14 (Underscoring supplied)
The question on the presence of "control over the means and methods" must always be taken in relation to the attainment of
the result or goal. The proper query is thus not whether respondent exercised means-and-method control but whether such
control was directed in attaining which result.
Although the bottomline of any commercial enterprise has always been sales, the identification of the specific "result or goal"
in a particular case can only be gathered from the nature of one’s functions. It is thus imperative to identify the functions
appurtenant to the goal before administering the control test.
In the first Insular Life case, it was clear that selling or soliciting insurance was the goal, the attainment of which Insular Life
did not exercise control over the methodology of the agency manager. Insular Life set no accomplishment quotas and
compensated him on the basis of results obtained. He was not bound to observe any schedule of working hours or report to
any regular station. He could seek and work on his prospects anywhere and at anytime he chooses.
In the first Grepalife case, however, although the debit agent’s goal of selling was basically identical, Grepalife retained control
over the means in achieving sales. Grepalife assigned him a definite place in the office to work on when he is not in the field,
gave him collection and canvassing jobs, required him to make regular report regarding these duties, and, in fact, exercised
the power of dismissal for his dismal performance.
There is no element of control with respect to petitioner’s function of selling insurance as an agent. His managerial function,
however, takes another form.
In the second Insular Life and Grepalife cases, the goal expected from the managers was different from the first set of cases.
The "result or goal" (in how to accomplish it the company was found to have exercised control) were specifically aligned to the
coordination and supervision of the whole marketing effort or strategy.
In the second Insular Life case, the acting unit manager was assigned the task of supervising and coordinating the sales
efforts of the underwriters who were to be recruited and trained within his designated territory.
In the second Grepalife case, the zone supervisor and the district manager were entrusted with supervisory, sales and
administrative functions to guard Grepalife's business interests, to bring in more clients to the company, and to ensure that all
collections and reports are faithfully brought to the company.
45
In both cases, the manner by which those goals were carried out was dictated by their respective employers. Similarly, in the
present case, the nature of petitioner’s job as such called for the exercise of supervisory and administrative functions,
including recruitment and training of agents, which, when examined in the light of the two cases, were discharged within the
close range of control wielded by respondent. Tersely stated, petitioner’s duty of supervision was under the "control" of
respondent.
A comparison of functions with that obtaining in the second Grepalife case illustrates an intimate similarity:
Furthermore, it cannot be gainsaid that Grepalife had control over private respondents' performance as well as the result of
their efforts. A cursory reading of their respective functions as enumerated in their contracts reveals that the company
practically dictates the manner by which their jobs are to be carried out. For instance, the District Manager must properly
account, record and document the company's funds spot-check and audit the work of the zone supervisors, conserve the
company's business in the district through 'reinstatements', follow up the submission of weekly remittance reports of the
debit agents and zone supervisors, preserve company property in good condition, train understudies for the position of
district manager, and maintain his quota of sales (the failure of which is a ground for termination). On the other hand, a zone
supervisor must direct and supervise the sales activities of the debit agents under him, conserve company property through
"reinstatements", undertake and discharge the functions of absentee debit agents, spot-check the records of debit agents,
and insure proper documentation of sales and collections by the debit agents. 15 (Underscoring supplied)
In contradistinction with Carungcong v. NLRC,16 which also involves an insurance manager, the Court found the therein
petitioner Susan Carungcong, a new business manager of Sun Life Assurance Company, to be an independent contractor. In
the absence of restrictive or interfering company regulations that effectively and actually controlled her choice of methods in
performing her management duties, the Court gave weight to the contractual disavowals in the management contracts and
her admission that she alone judges the element of time and place and means in the performance of duties. She patently
admitted that she performed "monitoring, training, recruitment and sales, at her own time and convenience, at however she
deemed convenient, and with whomever she chose."17
More significantly, in the succeeding Insular Life case, the Court found the following indicators material in finding the presence
of control in cases involving insurance managers:
Exclusivity of service, control of assignments and removal of agents under private respondent's unit, collection of premiums,
furnishing of company facilities and materials as well as capital described as Unit Development Fund are but hallmarks of the
management system in which herein private respondent worked. This obtaining, there is no escaping the conclusion that
private respondent Pantaleon de los Reyes was an employee of herein petitioner. 18 (Underscoring supplied)
The ponencia concludes that "[a]ll these are obviously absent" in petitioner’s case. The facts show otherwise, however. On top
of the exclusive service rendered to respondent, which AFP Mutual Benefit Association, Inc. v. NLRC19 instructs to be not
controlling, other factors were present. Petitioner established no agency of his own as the Metro North Region to which he
was assigned remained intact even after his ties with respondent were severed.20 Respondent provided and furnished
company facilities, equipments and materials for petitioner at respondent’s Makati office.21 Respondent’s control of
assignments was evident from its act of removing the North Star Branch from petitioner’s scope of the Metro North Region,
on which a "memo to spell this matter out in greater detail" was advised to be issued shortly
thereafter.22 Respondent reserved to impose other improvements in the region after manifesting its intention to closely follow
the region.23 Respondent’s managers, like petitioner, could only refer and recommend to respondent prospective agents who
would be part of their respective units.24 In other words, respondent had the last say on the composition and structure of the
sales unit or region of petitioner. Respondent, in fact, even devised the deployment of an Agency Development Officer in the
region to "contribute towards the manpower development work x x x as part of our agency growth campaign."
Such an arrangement leads to no other conclusion than that respondent exercised the type of control of an employer, thereby
wiping away the perception that petitioner was only a "lead agent" as viewed by the ponencia. Even respondent sees
otherwise when it rebuked petitioner that "[y]ou (petitioner) may have excelled in the past as an agent but, to this date, you
46
still carry the mindset of a senior agent."25 Insofar as his management functions were concerned, petitioner was no longer
considered a senior agent.
I vote to DENY respondent’s Motion but MODIFY the dispositive portion of the Court’s November 7, 2008 Decision to (a)
clarify that petitioner, Gregorio Tongko, became respondent’s employee not when he started as an agent in 1977 but when he
was appointed as unit manager in 1983, thus moving the reckoning of the computation of separation pay; and (b) remand the
case to the NLRC for the purpose of computing petitioner’s proper backwages as manager.
CONCHITA CARPIO MORALES

Associate Justice
Footnotes
1
570 SCRA 503, decided by the Court’s Second Division, per Velasco, J.
2
G.R. Nos. 80750-51, July 23, 1990, 187 SCRA 694, decided by the Court’s Third Division, per Cortes, J.
3
Id. at 699.
4
G.R. No. 119930, March 12, 1998, 287 SCRA 476, decided by the Court’s First Division, per Bellosillo, J.
5
Id. at 483.
6
Rollo, pp. 451-453.
7
Vide Manulife’s Comment, rollo, p. 418.
8
Rollo, pp. 456-462.
9
Id. at 291-294.
10
Vide rollo, pp. 358-360.
11
G.R. No. 84484, November 15, 1989, 179 SCRA 459, decided by the Court’s First Division, per Narvasa, J.
12
Id. at 464-465.
13
G.R. No. 73887, December 21, 1989, 180 SCRA 445, decided by the Court’s Second Division, per Paras, J.
14
Id. at 450.
15
Supra at 698-699.
16
G.R. No. 118086, December 15, 1997, 283 SCRA 308, decided by the Court’s Third Division, per Narvasa, C.J.
17
Id. at 322.
47
18
Supra at 489.
19
G.R. No. 102199, January 28, 1997, 267 SCRA 47.
20
Rollo, pp. 364-365.
21
Id. at 9, 727; vide rollo, pp. 241-242.
22
Id. at 299.
23
Ibid.
24
Id. at 592-595.
25
Rollo, p. 298.
The Lawphil Project - Arellano Law Foundation
DISSENTING OPINION
VELASCO, JR., J.:
By Decision dated November 7, 2008, the Court, on the finding that petitioner Gregorio V. Tongko was illegally dismissed as
employee of respondent Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife), awarded him full backwages and separation
benefits, in lieu of reinstatement.
Manulife, via this Motion for Reconsideration, urges the Court to reconsider and set aside its aforementioned Decision by
declaring, in effect, that Tongko had never been its employee.1 As Manulife avers, the subject Decision effectively "converted
agency contracts of life insurance agents to contracts of regular employment."2 It thus warns that the ruling, if not
reconsidered, would apply to all 41,853 life insurance agents spread across the country, thrusting in the process the insurance
industry in the Philippines into a crisis.3
The majority seems to agree with the grim possibilities thus painted by Manulife.
As was before the National Labor Relations Commission (NLRC), then the Court of Appeals and as it is before the Court, the
critical issue in the present case is the same: whether or not Tongko––during all the time he was directly or indirectly
connected with the company, first as an agent, pursuant to a Career Agent’s Agreement (Agreement), and then as unit, branch
and eventually regional sales manager of Manulife’s Sales Agency Organization––was an employee of Manulife. In resolving
the issue of whether an employer-employee tie obtains, attention was focused, as jurisprudential trend dictates, on the four-
fold test on employment developed and invariably invoked by labor officials and this Court as a guiding, if not governing norm,
to determine, based on the facts and circumstances involved in a given situation, whether such relationship exists. These four
elements are: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and
(4) the control test.4 And as stressed in the Decision subject of this recourse, of the four, the control test––meaning whether
or not 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 the means and methods employed in reaching that end––constitutes the most important index of the existence
of an employer-employee relationship. And as also there emphasized, the security of tenure of a regular employee flowing
48
from employment cannot be defeated by any contract, for the law defines the employment status of a person. 5 Article 280 of
the Labor Code provides that "[t]he provisions of written agreement to the contrary notwithstanding and regardless of oral
agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform
activities which are usually necessary or desirable in the usual business or trade of the employer."
From the evidence on record, it appears that Manulife had control over the work of Tongko after his appointment as manager
of the company’s insurance sales force, indubitably implying the existence of an employer-employee relationship between
them.
It cannot be over-emphasized enough that in Great Pacific Life Assurance Corporation v. NLRC, Ernesto Ruiz and Rodrigo
Ruiz6 (Grepalife), the Court considered respondents Ruizes, then district managers, as employees of Grepalife, taking into
account their duties and undertakings. Some excerpts from Grepalife:
x x x A cursory reading of their respective functions as enumerated in their contracts reveals that the company practically
dictates the manner by which their jobs are to be carried out. For instance, the District Manager must properly account,
record and document the company’s funds, spot-check and audit the work of the zone supervisors, conserve the company’s
business in the district through ‘reinstatements’, follow up the submission of weekly remittance reports of the debit agents
and zone supervisors, preserve company property in good condition, train understudies for the position of district manager,
and maintain his quota of sales (the failure of which is a ground for termination). On the other hand, a zone supervisor must
direct and supervise the sales activities of the debit agents under him, conserve company property through "reinstatements",
undertake and discharge the functions of absentee debit agents, spot-check the records of debit agents, and insure proper
documentation of sales and collections by the debit agents.7 (Emphasis supplied.)
A comparative look at the duties of the Ruizes, as set forth in the decision in Grepalife, and those of Tongko, as may be
deduced from affidavits8 of insurance managers of Manulife, would reveal a striking similarity in their respective duties as
would adequately support a similar finding on the question of whether the petitioner, like the Ruizes, is an employee of
Manulife just as the Ruizes were Grepalife’s. Consider:
Duties of Manulife’s Managers Duties of Grepalife’s Managers/Supervisors

- to render or recommend prospective agents to - train understudies for the position of district
be licensed, trained and contracted to sell manager
Manulife products, and who will be part of the
managers’ Unit
- to coordinate activities of the agents under [the - properly account, record and document the
managers’] Unit in [the agents’] daily, weekly and company’s funds, spot-check and audit the work
monthly selling activities, making sure that their of the zone supervisors, x x x follow up the
respective sales targets are met; submission of weekly remittance reports of the
debit agents and zone supervisors
- to conduct periodic training sessions for [the]
agents to further enhance their sales skills; and - direct and supervise the sales activities of the
debit agents under him, x x x undertake and
- to assist [the] agents with their sales activities by discharge the functions of absentee debit agents,
way of joint fieldwork, consultations and one-on- spot-check the records of debit agents, and insure
one evaluation and analysis of particular accounts proper documentation of sales and collections by
the debit agents.
The ponencia would altogether deny Tongko––either while serving as insurance agent or underwriter pursuant to the
Agreement, or as appointed manager––the status of Manulife’s employee. It added the observation that the factual
antecedents in this case were set in the insurance industry and, hence, the Insurance Code and the industry practices instead
49
of the Labor Code shall primary govern in determining the element of control and necessarily whether an employer-employee
existed between Tongko and Manulife. The ponencia also went on to state that the Agreement, which provided that "the
Agent is an independent contractor x x x and nothing herein shall be construed as creating an employer-employee relationship
between the Company and Agent," embodies the intent of Manulife and Tongko at the time they executed
the Agreement and they were governed by this understanding throughout their relationship.
I beg to disagree.
First, the suggestion in the ponencia that the characterization the parties gave their relationship cannot simply be brushed
aside runs counter against established jurisprudence. As it were, the question of the existence of an employer-employee
relationship is a matter of public concern, never left, if ever, for the parties to peremptorily determine. To borrow from Insular
Life Assurance Co., Ltd. v. NLRC (4th Division)9 (Insular Life II), neither can such existence be negated by expressly repudiating
it in the management contract and providing therein, as here, that the employee is an independent contractor. For, as earlier
indicated, the law defines and prescribes the employment status of a person, not what the clashing parties chose to call it or
say it should be.10 We said as much in Servidad v. National Labor Relations Commission: 11
The private agreement of the parties cannot prevail over Article 1700 of the Civil Code, which provides:
Art. 1700. The relations between capital and labor are not merely contractual. They are so impressed with public interest that
labor contracts must yield to the common good. Therefore, such contracts are subject to special laws on labor unions,
collective bargaining, strikes and lockouts, closed shops, wages, working conditions, hours of labor and similar subjects.
Similarly telling is the case of Pakistan Airlines Corporation vs. Pole, et al. There, it was said:
xxx provisions of applicable law, especially provisions relating to matters affected with public policy, are deemed written into
the contract. Put a little differently, the governing principle is that the parties may not contract away applicable provisions of
law especially peremptory provisions dealing with matters heavily impressed with public interest. The law relating to labor and
employment is clearly such an area and parties are not at liberty to insulate themselves and their relationships from the
impact of labor laws and regulations by simply contracting with each other. . .
Of the same tenor is the Court’s fairly recent holding in Paguio v. National Labor Relations Commission: 12
Respondent company cannot seek refuge under the terms of the agreement it has entered into with petitioner. The law, in
defining their contractual relationship, does so, not necessarily or exclusively upon the terms of their written or oral contract,
but also on the basis of the nature of the work petitioner has been called upon to perform. The law affords protection to an
employee, and it will not countenance any attempt to subvert its spirit and intent. A stipulation in an agreement can be
ignored as and when it is utilized to deprive the employee of his security of tenure. The sheer inequality that characterizes
employer-employee relations, where the scales generally tip against the employee, often scarcely provides him real and better
options. (Emphasis supplied.)
Second, and in relation to the first reason, the fact that the Agreement was subsisting even after Tongko’s appointment as
manager does not militate against a conclusion that Tongko was Manulife’s employee, at least during his stint as such
manager. To be sure, an insurance agent may at the same time be an employee of an insurance company. Or to put it a bit
differently, an employee-manager may be given the privilege of soliciting insurance, as agent, and earn in the process
commission for every contract concluded as a result of such solicitation. The reality of two personalities–– one as employee
and the other as non-employee of an insurance company, coinciding in one person––was acknowledged in Insular Life II, in
which the Court wrote:
Parenthetically, both petitioner and respondent NLRC treated the agency contract and the management contract entered into
between [Insular Life] and [respondent] De Los Reyes as contracts of agency. We however hold otherwise. Unquestionably
there exist major distinctions between the two agreements. While the first has the earmarks of an agency contract, the
50
second is far removed from the concept of agency in that provided therein are conditionalities that indicate an employer-
employee relationship. The NLRC therefore was correct in finding that private respondent was an employee of petitioner, but
this holds true only insofar the management contract is concerned. 13 x x x
Grepalife may also be cited where we declared:
True, it cannot be denied that based on the definition of an "insurance agent" in the Insurance Code some of the functions
performed by private respondent were those of insurance agents. Nevertheless, it does not follow that they are not
employees of Grepalife. The Insurance Code may govern the licensing requirements and other particular duties of insurance
agents, but it does not bar the application of the Labor Code with regard to labor standards and labor relations. 14
The ponencia points out that Grepalife and Insular Life II factually differ with the instant case in that: "these cited cases dealt
with the proper legal characterization of a subsequent management contract that superseded the original agency contract
between the insurance company and its agent." In other words, the majority opinion distinguishes the instant case
from Grepalife and Insular Life II in the lack of a written management contract between Tongko and Manulife.
The cited difference does not, for that reason alone, pose a plausible bar to the application of Grepalife and Insular Life II to
the instant case. In fact, the absence of a written agreement to memorialize the naming and assumption of Tongko as unit and
later branch manager is irrelevant to the issue of the presence of an employer-employee relationship. A management
contract, for purposes of determining the relationship between the worker and the employer, is simply an evidence to
support a conclusion either way. Such document, or the absence thereof, would not influence the conclusion on the issue of
employment. The presence of a management contract would merely simplify the issue as to the duties and responsibilities of
the employee concerned as they would then be defined more clearly.
Manulife’s decision not to execute a management contract with Tongko was well within its discretion. However, the fact of
Manulife and Tongko not having inked a management contract, if this were the case, did not reduce the petitioner to a mere
"lead agent," as the ponencia would have it. While there was perhaps no written management contract whence Tongko’s
rights, duties and functions as unit/branch manager may easily be fleshed out as a prelude to determining if an employer-
employee relationship with Manulife did exist, other evidence was adduced to show such duties and responsibilities. For one,
in his letter15 of November 6, 2001, respondent de Dios distinctly referred to Tongko as sales manager. For another, it is well
nigh inconceivable that Manulife issued no promotional appointments to petitioner as unit manager, branch manager and
eventually regional sales manager. Basic and sound management practice simply requires an appointment for any upward
personnel movement, particularly when additional duties and compensation are involved. Then, too, the aforementioned
affidavits of the managers of Manulife as to the duties and responsibilities of a unit manager, such as Tongko, point to the
conclusion that these managers were employees of Manulife, applying the four-fold test.
To my mind, Grepalife and Insular Life II bear obvious parallelism to the instant case vis-à-vis the facts against which they are
cast. Too, the parties are similarly situated in point of positions occupied, the agreed exclusivity of service and functional
profiles to warrant the application of the stare decisis doctrine. The Latin maxim stare decisis et non quieta movere, translates
"stand by the thing and do not disturb the calm." It requires that high courts must follow, as a matter of sound policy, its own
precedents, or respect settled jurisprudence absent compelling reason to do otherwise.16 Put a bit differently, the doctrine
holds that when a court has laid down a principle of law as applicable to a certain set of facts, it will abide with that principle
in future cases in which the facts are substantially the same.17 In the view I take of this case, there is absolutely nothing
in Grepalife and Insular Life II which may be viewed as plainly unreasonable as to justify withholding from them the stare
decisis effect.
And lest it be overlooked, both Grepalife and Insular Life II appreciated and applied the element of control––the most crucial
and determinative indicator of an employer-employee relationship––as a labor law concept. The Labor Code and other labor
relations laws, some of which have been incorporated in the Civil Code, regulate the relationship between labor and capital or
between worker and employer in the private sector. The Insurance Code, on the other hand, governs the licensing
requirements and other particular duties of insurance agents; 18 it also regulates not only the relationship between the insurer
51
and the insured but also the internal affairs of the insurance company.19 These are the particular areas of operation of the
aforementioned laws. To argue then that the Insurance Code and insurance industry practice shall determine the existence of
an employer-employee relationship in the case at bench is, it is submitted, simplistic if not downright erroneous. Both law and
jurisprudence do not support the contention on the primacy of the Insurance Code and insurance usages in determining said
relationship. As a matter of fact, the Court, in a string of cases involving corporations engaged in non-insurance activities as
well as those into the insurance business, notably in Grepalife, Insular Life I20 and II, Great Pacific Life Assurance Corporation v.
Judico,21 and AFP Mutual Benefit Association v. NLRC,22 held that the determination of the existence of an employer-employee
relationship lies in the four-fold test. An examination of these cases yields no indication that a separate law, other than the
Labor Code and labor law concepts, was ever considered by the Court in determining the existence of an employer-employee
relationship.
There can be no quibbling that Tongko, as unit, branch and regional sales manager, was without a fixed salary, but earned his
income strictly on commission basis. However, how and when he was paid his compensation is, without more, not an
argument against a finding that he was an employee of Manulife. For, the phrase "wage paid," as a component of
employment and as an element of the four-fold test, is defined under Art. 97(f) of the Labor Code as "the remuneration or
earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task,
piece or commission basis or other method of calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done, or for services rendered or to be
rendered."23 Lazaro v. Social Security Commission24 is emphatic on this point:
Lazaro’s arguments may be dispensed with by applying precedents. Suffice it to say, the fact that Laudato was paid by way of
commission does not preclude the establishment of an employer-employee relationship. In Grepalife v. Judico, the Court
upheld the existence of an employer-employee relationship between the insurance company and its agents, despite the fact
that the compensation that the agents on commission received was not paid by the company but by the investor or the
person insured. The relevant factor remains, as stated earlier, whether the "employer" controls or has reserved the right to
control the "employee" not only as to the result of the work to be done but also as to the means and methods by which the
same is to be accomplished. (Emphasis supplied.)
Much has been made in the ponencia, following Manulife’s line, of Tongko’s income tax returns (ITRs), in which he described
himself to be "self-employed." It must be stressed in this regard, however, that he had no other choice but to do so, for the
following reasons: (1) Manulife had refused to consider him as its employee; and (2) Manulife withheld 10% of his income as
an agent as taxes. Tongko had no other viable alternative but to make use of the withholding tax certificates issued by
Manulife in paying his taxes. Thus, petitioner could not have really been faulted for including in his ITRs an entry declaring
himself as self-employed. While perhaps not on all fours here, because its issue revolved around estoppel instead of
declaration against interest made in an ITR, Philippine National Construction Corporation v. NLRC25 is nonetheless most
instructive:
Time honored is the precept that quitclaims are ineffective in barring recovery for the full measure of the worker's rights and
that acceptance of benefits therefrom does not amount to estoppel. In Lopez Sugar Corporation vs. Federation of Free
Workers, the Court explained:
Acceptance of those benefits would not amount to estoppel. The reason is plain. Employer and employee, obviously do not
stand on the same footing. The employer drove the employee to the wall. The latter must have to get hold of money. Because,
out of the job, he has to face harsh necessities of life. He thus found himself in no position to resist money proffered. His,
then, is a case of adherence, not of choice. One thing sure, however, is that petitioners did not relent their claim. They pressed
it. They are deemed not to have waived any of their rights. x x x
It may be noted at this juncture that Manulife has changed its stance on the issue of illegal dismissal. In its Position Paper with
Motion to Dismiss filed before the Labor Arbiter, in its Motion for Reconsideration (Re: Decision dated 27 September 2004)
dated October 11, 2004 filed before the NLRC, and in its Comment dated August 5, 2006 filed before the Court, Manulife had
consistently assumed the posture that the dismissal of petitioner was a proper exercise of termination proviso under the
52
Agreement.26 In this motion, however, Manulife, in a virtual acknowledgment of Tongko being its employee, contends that he
was "dismissed for a just and lawful cause – for gross and habitual neglect of duties, inefficiency and willful disobedience of
the lawful orders."27 Manulife adds that:
Respondents presented an abundance of evidence demonstrating how termination happened only after failure to meet
company goals, after all remedial efforts to correct the inefficiency of Petitioner failed and after Petitioner, as found by the CA,
created dissension in Respondent Manulife when he refused to accept the need for improvement in his area and continued to
spread the bile of discontent and rebellion that he had generated among the other agents. 28
If Manulife claimed at every possible turn that Tongko was never an employee of the insurance company, why take a formal
action of dismissal with a statement of the grounds therefor?
No less than the Constitution itself guarantees protection to labor:
ARTICLE XIII
LABOR
Section 3. 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.
xxxx
The State shall promote the principle of shared responsibility between workers and employers and the preferential use of
voluntary modes in settling disputes, including conciliation, and shall enforce their mutual compliance therewith to foster
industrial peace.
The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share in the
fruits of production and the right of enterprises to reasonable returns to investments, and to expansion and growth.
Complementing the foregoing guarantee provisions is Article 1702 of the Civil Code mandating that, in case of doubt, all labor
legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer. Along side with the
Civil Code command is Art. 4 of the Labor Code providing:
ART. 4. Construction in favor of labor.––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.
The fairly recent Dealco Farms, Inc. v. National Labor Relations Commission (5th Division) 29 is reflective of the statutory bias in
favor of the working class and the need to give labor the benefit of the doubt, thus:
Having failed to substantiate its allegation on the relationship between the parties, we stick to the settled rule in controversies
between a laborer and his master that doubts reasonably arising from the evidence should be resolved in the former’s favor.
(Emphasis supplied.)
In the instant case, doubts as to the true relationship between Tongko and Manulife should be resolved in favor of the former
and for employment.
Lest it be misunderstood, this dissent proposes only to affirm the underlying Decision of the Court dated November 7, 2008,
but only insofar as it considered Tongko Manulife’s employee following his hiring as manager, first as unit manager, then
branch manager and ultimately as regional sales manager. For, it was only after such engagement that Manulife exercised
effective control not only over the results of his works, but also over the means and methods by which it is to be
53
accomplished; it was then that Tongko was tasked to perform administrative duties. As to Tongko’s stint as insurance agent,
an employer-employee relationship cannot be posited in light of the paucity of evidence to support the proposition.
In view of the foregoing, I vote to partially grant the motion for reconsideration but only in the sense that petitioner Tongko
shall only be considered as employee of respondent Manulife only after his engagement as manager of the company.
Accordingly, his entitlement to backwages and separation benefits shall be reckoned from that point in time and the amount
shall correspond to his commission earned as such manager only, subject to the usual accounting requirements.
PRESBITERO J. VELASCO, JR.

Associate Justice
G.R. No. 102199 January 28, 1997
AFP MUTUAL BENEFIT ASSOCIATION, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and EUTIQUIO BUSTAMANTE, respondents.
PANGANIBAN, J.:
The determination of the proper forum is crucial because the filing of the petition or complaint in the wrong court or tribunal
is fatal, even for a patently meritorious claim. More specifically, labor arbiters and the National Labor Relations Commission
have no jurisdiction to entertain and rule on money claims where no employer-employee relations is involved. Thus, any such
award rendered without jurisdiction is a nullity.
This petition for certiorari under Rule 65, Rules of Court seeks to annul the Resolution of the National Labor Relations
1
Commission, promulgated September 27, 1991, in NLRC-NCR Case No. 00-02-01196-90, entitled "Eutiquio Bustamante vs. AFP
Mutual Benefit Association, Inc.," affirming the decision of the labor arbiter which ordered payment of the amount of
P319,796.00 as insurance commissions to private respondent.
The Antecedent Facts
The facts are simple. Private respondent Eutiquio Bustamante had been an insurance underwriter of petitioner AFP Mutual
Benefit Association, Inc. since 1975. The Sales Agent's Agreement between them provided: 2
B. Duties and Obligations:
1. During the lifetime of this Agreement, the SALES AGENT (private respondent) shall solicit exclusively for
AFPMBAI (petitioner), and shall be bound by the latter's policies, memo circulars, rules and regulations which
it may from time to time, revise, modify or cancel to serve its business interests.
2. The SALES AGENT shall confine his business activities for AFPMBAI while inside any military camp,
installation or residence of military personnel. He is free to solicit in the area for which he/she is licensed and
as authoriied, provided however, that AFPMBAI may from time to time, assign him a specific area of
responsibility and a production quota on a case to case basis.
xxx xxx xxx
C. Commission
54
1. The SALES AGENT shall be entitled to the commission due for all premiums actually due and received by
AFPMBAI out of life insurance policies solicited and obtained by the SALES AGENT at the rates set forth in the
applicant's commission schedules hereto attached.
xxx xxx xxx
D. General Provisions
1. There shall be no employer-employee relationship between the parties, the SALES AGENT being hereby
deemed an independent contractor.
As compensation, he received commissions based on the following percentages of the premiums paid: 3
"30% of premium paid within the first year;

10% of premium paid with the second year;
5% of the premium paid during the third year;
3% of the premium paid during the fourth year; and
1% of the premium paid during the fifth year up to
the tenth year.
On July 5, 1989, petitioner dismissed private respondent for misrepresentation and for simultaneously selling insurance for
another life insurance company in violation of said agreement.
At the time of his dismissal, private respondent was entitled to accrued commissions equivalent to twenty four (24) months
per the Sales Agent Agreement and as stated in the account summary dated July 5, 1989, approved by Retired Brig. Gen.
Rosalino Alquiza, president of petitioner-company. Said summary showed that private respondent had a total commission
receivable of P438,835.00, of which only P78,039.89 had been paid to him.
Private respondent wrote petitioner seeking the release of his commissions for said 24 months. Petitioner, through Marketing
Manager Juan Concepcion, replied that he was entitled to only P75,000.00 to P100,000.00. Hence, believing Concepcion's
computations, private respondent signed a quitclaim in favor of petitioner.
Sometime in October 1989, private respondent was informed that his check was ready for release. In collecting his check, he
discovered from a document (account summary) attached to said check that his total commissions for the 24 months actually
amounted to P354,796.09. Said document stated: 4
6. The total receivable for Mr. Bustamante out of the renewals and old business generated since 1983
grosses P438,835.00 less his outstanding obligation in the amount of P78,039.89 as of June 30, 1989, total
expected commission would amount to P354,796.09. From that figure at a 15% compromise settlement this
would mean P53,219.41 due him to settle his claim.
Private respondent, however, was paid only the amount of P35,000.00.
On November 23, 1989, private respondent filed a complaint with the Office of the Insurance Commissioner praying for the
payment of the correct amount of his commission. Atty. German C. Alejandria, Chief of the Public Assistance and Information
Division, Office of the Insurance Commissioner, advised private respondent that it was the Department of Labor and
Employment that had jurisdiction over his complaint.
On February 26, 1990, private respondent filed his complaint with the Department of Labor claiming: (1) commission for 2
years from termination of employment equivalent to 30% of premiums remitted during employment; (2) P354,796.00 as
55
commission earned from renewals and old business generated since 1983; (3) P100,000.00 as moral damages; and (4)
P100,000.00 as exemplary damages.
After submission of position papers, Labor Arbiter Jose G. de Vera rendered his decision, dated August 24, 1990, the
dispositive portion of which reads: 5
WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered declaring the
dismissal of the complainant as just and valid, and consequently, his claim for separation pay is denied. On
his money claim, the respondent company is hereby ordered to pay complainant the sum of P319,796.00 plus
attorney's fees in the amount of P31,976.60.
All other claims of the complainant are dismissed for want of merit.
The labor arbiter relied on the Sales Agent's Agreement proviso that petitioner could assign private respondent a specific area
of responsibility and a production quota, and read it as signalling the existence of employer- employee relationship between
petitioner and private respondent.
On appeal, the Second Division of the respondent Commission affirmed the decision of the Labor Arbiter. In the assailed
6
Resolution, respondent Commission found no reason to disturb said ruling of the labor arbiter and
ruled:
7
WHEREFORE, in view of the foregoing considerations, the subject appeal should be as it is hereby, denied and
the decision appealed from affirmed
SO ORDERED.
Hence, this petition.
The Issue
Petitioner contends that respondent Commission committed grave abuse of discretion in ruling that the labor arbiter had
jurisdiction over this case. At the heart of the controversy is the issue of whether there existed an employer-employee
relationship between petitioner and private respondent.
Petitioner argues that, despite provisions B(1) and (2) of the Sales Agent's Agreement, there is no employer-employee
relationship between private respondent and itself. Hence, respondent commission gravely abused its discretion when it held
that the labor arbiter had jurisdiction over the case.
The Court's Ruling
The petition is meritorious.
First Issue: Not All That Glitters Is Control
Well-settled 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 determinative factor in such finality is the presence of substantial
8
evidence to support said finding, otherwise, such factual findings cannot bind this Court.
Respondent Commission concurred with the labor arbiter's findings that: 9
56
x x x The complainant's job as sales insurance agent is usually necessary and desirable in the usual business of
the respondent company. Under the Sales Agents Agreement, the complainant was required to solicit
exclusively for the respondent company, and he was bound by the company policies, memo circulars, rules
and regulations which were issued from time to time. By such requirement to follow strictly management
policies, orders, circulars, rules and regulations, it only shows that the respondent had control or reserved
the right to control the complainant's work as solicitor. Complainant was not an independent contractor as
he did not carry on an independent business other than that of the company's . . .
To this, respondent Commission added that the Sales Agent's Agreement specifically provided that petitioner may assign
private respondent a specific area of responsibility and a production quota. From there, it concluded that apparently there is
that exercise of control by the employer which is the most important element in determining employer- employee
relationship.
10
We hold, however, that respondent Commission misappreciated the facts of the case. Time and again, the Court has applied
the "four-fold" test in determining the existence of employer-employee relationship. This test considers the following
elements: (1) the power to hire; (2) the payment of wages; (3) the power to dismiss; and (4) the power to control, the last
being the most important element. 11
The difficulty lies in correctly assessing if certain factors or elements properly indicate the presence of control. Anent the issue
of exclusivity in the case at bar, the fact that private respondent was required to solicit business exclusively for petitioner
could hardly be considered as control in labor jurisprudence. Under Memo Circulars No. 2-81 and 2-85, dated December 17,
12
1981 and August 7, 1985, respectively, issued by the Insurance Commissioner, insurance agents are barred from serving more
than one insurance company, in order to protect the public and to enable insurance companies to exercise exclusive
supervision over their agents in their solicitation work. Thus, the exclusivity restriction clearly springs from a regulation issued
by the Insurance Commission, and not from an intention by petitioner to establish control over the method and manner by
which private respondent shall accomplish his work. This feature is not meant to change the nature of the relationship
between the parties, nor does it necessarily imbue such relationship with the quality of control envisioned by the law.
So too, the fact that private respondent was bound by company policies, memo/circulars, rules and regulations issued from
time to time is also not indicative of control. In its Reply to Complainant's Position Paper, petitioner alleges that the policies,
13
memo/circulars, and rules and regulations referred to in provision B(1) of the Sales Agent's Agreement are only those
pertaining to payment of agents' accountabilities, availment by sales agents of cash advances for sorties, circulars on
incentives and awards to be given based on production, and other matters concerning the selling of insurance, in accordance
with the rules promulgated by the Insurance Commission. According to the petitioner, insurance solicitors are never affected
or covered by the rules and regulations concerning employee conduct and penalties for violations thereof, work standards,
performance appraisals, merit increases, promotions, absenteeism/attendance, leaves of absence, management-union
matters, employee benefits and the like. Since private respondent failed to rebut these allegations, the same are deemed
admitted, or at least proven, thereby leaving nothing to support the respondent Commission's conclusion that the foregoing
elements signified an employment relationship between the parties.
In regard to the territorial assignments given to sales agents, this too cannot be held as indicative of the exercise of control
over an employee. First of all, the place of work in the business of soliciting insurance does not figure prominently in the
equation. And more significantly, private respondent failed to rebut petitioner's allegation that it had never issued him any
territorial assignment at all. Obviously, this Court cannot draw the same inference from this feature as did the respondent
Commission.
To restate, the significant factor in determining the relationship of the parties is the presence or absence of supervisory
authority to control the method and the details of performance of the service being rendered, and the degree to which the
principal may intervene to exercise such control. The presence of such power of control is indicative of an employment
relationship, while absence thereof is indicative of independent contractorship. In other words, the test to determine the
existence of independent contractorship is whether one claiming to be an independent contractor has contracted to do the
57
work according to his own methods and without being subject to the control of the employer except only as to the result of
the work. Such is exactly the nature of the relationship between petitioner and private respondent.
14
Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the
services being rendered may be accorded the effect of establishing an employer-employee relationship. The facts of this case
fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of
the mutually desired result without dictating the means or methods to be employed in attaining it, and those
that control or fix the methodology and bind or restrict the party hired to the use of such means. The first,
which aim only to promote the result, create no employer-employee relationship unlike the second, which
address both the result and the means used to achieve it. 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 insurande 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. . . . 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. 15
Private respondent's contention that he was petitioner's employee is belied by the fact that he was free to sell insurance at
any time as he was not subject to definite hours or conditions of work and in turn was compensated according to the result of
his efforts. By the nature of the business of soliciting insurance, agents are normally left free to devise ways and means of
persuading people to take out insurance. There is no prohibition, as contended by petitioner, for private respondent to work
for as long as he does not violate the Insurance Code. As petitioner explains:
(Private respondent) was free to solicit life insurance anywhere he wanted and he had free and unfettered
time to pursue his business. He did not have to punch in and punch out the bundy clock as he was not
required to report to the (petitioner's) office regularly. He was not covered by any employee policies or
regulations and not subject to the disciplinary action of management on the basis of the Employee Code of
Conduct. He could go out and sell insurance at his own chosen time. He was entirely left to his own choices of
areas or territories, with no definite, much less supervised, time schedule.
(Private respondent) had complete control over his occupation and (petitioner) did not exercise any right of
Control and Supervision over his performance except as to the payment of commission the amount of which
entirely depends on the sole efforts of (private respondent). He was free to engage in other occupation or
practice other profession for as long as he did not commit any violation of the ethical standards prescribed in
the Sales Agent's Agreement. 16
Although petitioner could have, theoretically, disapproved any of private respondent's transactions, what could be
disapproved was only the result of the work, and not the means by which it was accomplished.
The "control" which the above factors indicate did not sum up to the power to control private respondent's conduct in and
mode of soliciting insurance. On the contrary, they clearly indicate that the juridical element of control had been absent in this
situation. Thus, the Court is constrained to rule that no employment relationship had ever existed between the parties.
Second Issue: Jurisdiction of Respondent

Commission & Labor Arbiter
58
Under the contract invoked, private respondent had never been petitioner's employee, but only its commission agent. As an
independent contractor, his claim for unpaid commission should have been litigated in an ordinary civil action. 17
The jurisdiction of labor arbiters and respondent Commission is set forth in Article 217 of the Labor Code. The unifying
18
element running through paragraphs (1) — (6) of said provision is the consistent reference to cases or disputes arising out of
or in connection with an employer-employee relationship. Prior to its amendment by Batas Pambansa Blg. 227 on June 1, 1982,
this point was clear as the article included "all other cases arising from employer-employee relation unless expressly excluded
by this Code." Without this critical element of employment relationship, the labor arbiter and respondent Commission can
19
never acquire jurisdiction over a dispute. As in the case at bar. It was serious error on the part of the labor arbiter to have
assumed jurisdiction and adjudicated the claim. Likewise, the respondent Commission's affirmance thereof.
Such lack of jurisdiction of a court or tribunal may be raised at any stage of the proceedings, even on appeal. The doctrine of
estoppel cannot be properly invoked by respondent Commission to cure this fatal defect as it cannot confer jurisdiction upon
a tribunal that to begin with, was bereft of jurisdiction over a cause of action. Moreover, in the proceedings below,
20
petitioner consistently challenged the jurisdiction of the labor arbiter and respondent Commission.
21 22
It remains a basic fact in law that the choice of the proper forum is crucial as the decision of a court or tribunal without
jurisdiction is a total nullity. A void judgment for want of jurisdiction is no judgment at all. It cannot be the source of any
23
right nor the creator of any obligation. All acts performed pursuant to it and all claims emanating from it have no legal effect.
Hence, it can never become final. ". . . (I)t may be said to be a lawless thing which can be treated as an outlaw and slain at
sight, or ignored wherever and whenever it exhibits its head." 24
The way things stand, it becomes unnecessary to consider the merits of private respondent's claim for unpaid commission. Be
that as it may, this ruling is without prejudice to private respondent's right to file a suit for collection of unpaid commissions
against petitioner with the proper forum and within the proper period.
WHEREFORE, the petition is hereby GRANTED, and the assailed Resolution is hereby SET ASIDE.
SO ORDERED.
G.R. No. 129315 October 2, 2000
OSIAS I. CORPORAL, SR., PEDRO TOLENTINO, MANUEL CAPARAS, ELPIDIO LACAP, SIMPLICIO PEDELOS, PATRICIA NAS, and
TERESITA FLORES, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LAO ENTENG COMPANY, INC. and/or TRINIDAD LAO ONG, respondents.
DECISION
QUISUMBING, J.:
This special civil action for certiorari seeks the review of the Resolution dated October 17, 1996 of public respondent National
Labor Relations Commission (First Division), in NLRC NCR Case No. 00-04-03163-95, and the Resolution dated March 5, 1997
1
denying the motion for reconsideration. The aforecited October 17th Resolution affirmed the Decision dated September 28,
1996 of Labor Arbiter Potenciano S. Cañizares dismissing the petitioners' complaint for illegal dismissal and declaring that
petitioners are not regular employees of private respondent Lao Enteng Company, Inc..
The records of the case show that the five male petitioners, namely, Osias I. Corporal, Sr., Pedro Tolentino, Manuel Caparas,
Elpidio Lacap, and Simplicio Pedelos worked as barbers, while the two female petitioners, Teresita Flores and Patricia Nas
worked as manicurists in New Look Barber Shop located at 651 P. Paterno Street, Quiapo, Manila owned by private
respondent Lao Enteng Co. Inc.. Petitioner Nas alleged that she also worked as watcher and marketer of private respondent.
59
Petitioners claim that at the start of their employment with the New Look Barber Shop, it was a single proprietorship owned
and managed by Mr. Vicente Lao. In or about January 1982, the children of Vicente Lao organized a corporation which was
registered with the Securities and Exchange Commission as Lao Enteng Co. Inc. with Trinidad Ong as President of the said
corporation. Upon its incorporation, the respondent company took over the assets, equipment, and properties of the New
Look Barber Shop and continued the business. All the petitioners were allowed to continue working with the new company
until April 15, 1995 when respondent Trinidad Ong informed them that the building wherein the New Look Barber Shop was
located had been sold and that their services were no longer needed. 2
On April 28, 1995, petitioners filed with the Arbitration Branch of the NLRC, a complaint for illegal dismissal, illegal deduction,
separation pay, non-payment of 13th month pay, and salary differentials. Only petitioner Nas asked for payment of salary
differentials as she alleged that she was paid a daily wage of P25.00 throughout her period of employment. The petitioners
also sought the refund of the P1.00 that the respondent company collected from each of them daily as salary of the sweeper
of the barber shop.
Private respondent in its position paper averred that the petitioners were joint venture partners and were receiving fifty
percent commission of the amount charged to customers. Thus, there was no employer-employee relationship between them
and petitioners. And assuming arguendo, that there was an employer-employee relationship, still petitioners are not entitled
to separation pay because the cessation of operations of the barber shop was due to serious business losses.
Respondent Trinidad Lao Ong, President of respondent Lao Enteng Co. Inc., specifically stated in her affidavit dated September
06, 1995 that Lao Enteng Company, Inc. did not take over the management of the New Look Barber Shop, that after the death
Lao Enteng petitioner were verbally informed time and again that the partnership may fold up anytime because nobody in the
family had the time to be at the barber shop to look after their interest; that New Look Barber Shop had always been a joint
venture partnership and the operation and management of the barber shop was left entirely to petitioners; that her father's
contribution to the joint venture included the place of business, payment for utilities including electricity, water, etc. while
petitioners as industrial partners, supplied the labor; and that the barber shop was allowed to remain open up to April 1995
by the children because they wanted to give the partners a chance at making it work. Eventually, they were forced to close the
barber shop because they continued to lose money while petitioners earned from it. Trinidad also added that private
respondents had no control over petitioners who were free to come and go as they wished. Admittedly too by petitioners they
received fifty percent to sixty percent of the gross paid by customers. Trinidad explained that some of the petitioners were
allowed to register with the Social Security System as employees of Lao Enteng Company, Inc. only as an act of
accommodation. All the SSS contributions were made by petitioners. Moreover, Osias Corporal, Elpidio Lacap and Teresita
Flores were not among those registered with the Social Security System. Lastly, Trinidad avers that without any employee-
employer relationship petitioners claim for 13th month pay and separation pay have no basis in fact and in law. 3
In a Decision dated September 28, 1995, Labor Arbiter Potenciano S. Cañizares, Jr. ordered the dismissal of the complaint on
the basis of his findings that the complainants and the respondents were engaged in a joint venture and that there existed no
employer-employee relation between them. The Labor Arbiter also found that the barber shop was closed due to serious
business losses or financial reverses and consequently declared that the law does not compel the establishment to pay
separation pay to whoever were its employees. 4
On appeal, NLRC affirmed the said findings of the Labor Arbiter and dismissed the complaint for want of merit, ratiocinating
thus:
Indeed, complainants failed to show the existence of employer-employee relationship under the fourway test established by
the Supreme Court. It is a common practice in the Barber Shop industry that barbers supply their own scissors and razors and
they split their earnings with the owner of the barber shop. The only capital of the owner is the place of work whereas the
barbers provide the skill and expertise in servicing customers. The only control exercised by the owner of the barber shop is to
ascertain the number of customers serviced by the barber in order to determine the sharing of profits. The barbers maybe
characterized as independent contractors because they are under the control of the barber shop owner only with respect to
60
the result of the work, but not with respect to the details or manner of performance. The barbers are engaged in an
independent calling requiring special skills available to the public at large.
5
Its motion for reconsideration denied in the Resolution dated March 5, 1997, petitioners filed the instant petition assigning
6
that the NLRC committed grave abuse of discretion in:
I. ARBITRARILY DISREGARDING SUBSTANTIAL EVIDENCE PROVING THAT PETITIONERS WERE EMPLOYEES OF

RESPONDENT COMPANY IN RULING THAT PETITIONERS WERE INDEPENDENT CONTRACTORS.
II. NOT HOLDING THAT PETITIONERS WERE ILLEGALLY DISMISSED AND IN NOT AWARDING THEIR MONEY CLAIMS. 7
Petitioners principally argue that public respondent NLRC gravely erred in declaring that the petitioners were independent
contractors. They contend that they were employees of the respondent company and cannot be considered as independent
contractors because they did not carry on an independent business. They did not cut hair, manicure, and do their work in their
own manner and method. They insist they were not free from the control and direction of private respondents in all matters,
and their services were engaged by the respondent company to attend to its customers in its barber shop. Petitioners also
stated that, individually or collectively, they do not have substantial capital nor investments in tools, equipments, work
premises and other materials necessary in the conduct of the barber shop. What the barbers owned were merely combs,
scissors, and razors, while the manicurists owned only nail cutters, nail polishes, nippers and cuticle removers. By no standard
can these be considered "substantial capital" necessary to operate a barbers shop.
Finally, petitioners fault the NLRC for arbitrarily disregarding substantial evidence on record showing that petitioners Pedro
Tolentino, Manuel Caparas, Simplicio Pedelos, and Patricia Nas were registered with the Social Security System as regular
employees of the respondent company. The SSS employment records in common show that the employer's ID No. of Vicente
Lao/Barber and Pawn Shop was 03-0606200-1 and that of the respondent company was 03-8740074-7. All the foregoing
entries in the SSS employment records were painstakingly detailed by the petitioners in their position paper and in their
memorandum appeal but were arbitrarily ignored first by the Labor Arbiter and then by the respondent NLRC which did not
even mention said employment records in its questioned decision.
We found petition is impressed with merit.
In our view, this case is an exception to the general rule that findings of facts of the NLRC are to be accorded respect and
finality on appeal. We have long settled that this Court will not uphold erroneous conclusions unsupported by substantial
evidence. We must also stress that where the findings of the NLRC contradict those of the labor arbiter, the Court, in the
8
exercise of its equity jurisdiction, may look into the records of the case and reexamine the questioned findings.9
The issues raised by petitioners boil down to whether or not an employer-employee relationship existed between petitioners
and private respondent Lao Enteng Company, Inc. The Labor Arbiter has concluded that the petitioners and respondent
company were engaged in a joint venture. The NLRC concluded that the petitioners were independent contractors.
The Labor Arbiter's findings that the parties were engaged in a joint venture is unsupported by any documentary evidence. It
should be noted that aside from the self-serving affidavit of Trinidad Lao Ong, there were no other evidentiary documents, nor
written partnership agreements presented. We have ruled that even the sharing of proceeds for every job of petitioners in the
barber shop does not mean they were not employees of the respondent company. 10
Petitioner aver that NLRC was wrong when it concluded that petitioners were independent contractors simply because they
supplied their own working implements, shared in the earnings of the barber shop with the owner and chose the manner of
performing their work. They stressed that as far as the result of their work was concerned the barber shop owner controlled
them.
61
An independent contractor is one who undertakes "job contracting", i.e., a person who (a) carries on an independent business
and undertakes the contract work on his own account under his own responsibility according to his own manner and method,
free from the control and direction of his employer or principal in all matters connected with the performance of the work
except as to the results thereof, and (b) has substantial capital or investment in the form of tools, equipment, machineries,
work premises, and other materials which are necessary in the conduct of the business. 11
Juxtaposing this provision vis-à-vis the facts of this case, we are convinced that petitioners are not "independent contractors".
They did not carry on an independent business. Neither did they undertake cutting hair and manicuring nails, on their own as
their responsibility, and in their own manner and method. The services of the petitioners were engaged by the respondent
company to attend to the needs of its customers in its barber shop. More importantly, the petitioners, individually or
collectively, did not have a substantial capital or investment in the form of tools, equipment, work premises and other
materials which are necessary in the conduct of the business of the respondent company. What the petitioners owned were
only combs, scissors, razors, nail cutters, nail polishes, the nippers - nothing else. By no standard can these be considered
substantial capital necessary to operate a barber shop. From the records, it can be gleaned that petitioners were not given
work assignments in any place other than at the work premises of the New Look Barber Shop owned by the respondent
company. Also, petitioners were required to observe rules and regulations of the respondent company pertaining, among
other things, observance of daily attendance, job performance, and regularity of job output. The nature of work performed by
were clearly directly related to private respondent's business of operating barber shops. Respondent company did not dispute
that it owned and operated three (3) barber shops. Hence, petitioners were not independent contractors.
Did an employee-employer relationship exist between petitioners and private respondent? The following elements must be
present for an employer-employee relationship to exist: (1) the selection and engagement of the workers; (2) power of
dismissal; (3) the payment of wages by whatever means; and (4) the power to control the worker's conduct, with the latter
assuming primacy in the overall consideration. Records of the case show that the late Vicente Lao engaged the services of the
petitioners to work as barbers and manicurists in the New Look Barber Shop, then a single proprietorship owned by him; that
in January 1982, his children organized a corporation which they registered with the Securities and Exchange Commission as
Lao Enteng Company, Inc.; that upon its incorporation, it took over the assets, equipment, and properties of the New Look
Barber Shop and continued the business; that the respondent company retained the services of all the petitioners and
continuously paid their wages. Clearly, all three elements exist in petitioners' and private respondent's working arrangements.
Private respondent claims it had no control over petitioners. The power to control refers to the existence of the power and
1âwphi1
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. As to the "control test", the
12
following facts indubitably reveal that respondent company wielded control over the work performance of petitioners, in that:
(1) they worked in the barber shop owned and operated by the respondents; (2) they were required to report daily and
observe definite hours of work; (3) they were not free to accept other employment elsewhere but devoted their full time
working in the New Look Barber Shop for all the fifteen (15) years they have worked until April 15, 1995; (4) that some have
worked with respondents as early as in the 1960's; (5) that petitioner Patricia Nas was instructed by the respondents to watch
the other six (6) petitioners in their daily task. Certainly, respondent company was clothed with the power to dismiss any or all
of them for just and valid cause. Petitioners were unarguably performing work necessary and desirable in the business of the
respondent company.
While it is no longer true that membership to SSS is predicated on the existence of an employee-employer relationship since
the policy is now to encourage even the self-employed dressmakers, manicurists and jeepney drivers to become SSS
members, we could not agree with private respondents that petitioners were registered with the Social Security System as
their employees only as an accommodation. As we have earlier mentioned private respondent showed no proof to their claim
that petitioners were the ones who solely paid all SSS contributions. It is unlikely that respondents would report certain
persons as their workers, pay their SSS premium as well as their wages if it were not true that they were indeed their
employees. 13
62
Finally, we agree with the labor arbiter that there was sufficient evidence that the barber shop was closed due to serious
business losses and respondent company closed its barber shop because the building where the barber shop was located was
sold. An employer may adopt policies or changes or adjustments in its operations to insure profit to itself or protect
investment of its stockholders. In the exercise of such management prerogative, the employer may merge or consolidate its
business with another, or sell or dispose all or substantially all of its assets and properties which may bring about the dismissal
or termination of its employees in the process. 14
Prescinding from the above, we hold that the seven petitioners are employees of the private respondent company; as such,
they are to be accorded the benefits provided under the Labor Code, specifically Article 283 which mandates the grant of
separation pay in case of closure or cessation of employer's business which is equivalent to one (1) month pay for every year
of service. Likewise, they are entitled to the protection of minimum wage statutes. Hence, the separation pay due them may
15
be computed on the basis of the minimum wage prevailing at the time their services were terminated by the respondent
company. The same is true with respect to the 13th month pay. The Revised Guidelines on the Implementation of the 13th
Month Pay Law states that "all rank and file employees are now entitled to a 13th month pay regardless of the amount of
basic salary that they receive in a month. Such employees are entitled to the benefit regardless of their designation or
employment status, and irrespective of the method by which their wages are paid, provided that they have worked for at least
one (1) month during a calendar year" and so all the seven (7) petitioners who were not paid their 13th month pay must be
paid accordingly. 16
Anent the other claims of the petitioners, such as the P10,000.00 as penalty for non-compliance with procedural process;
P10,000.00 as moral damages; refund of P1.00 per day paid to the sweeper; salary differentials for petitioner Nas; attorney's
fees), we find them without basis.
IN VIEW WHEREOF, the petition is GRANTED. The public respondent's Decision dated October 17, 1996 and Resolution dated
March 05, 1997 are SET ASIDE. Private respondents are hereby ordered to pay, severally and jointly, the seven (7) petitioners
their (1) 13th month pay and (2) separation pay equivalent to one month pay for every year of service, to be computed at the
then prevailing minimum wage at the time of their actual termination which was April 15, 1995.
Costs against private respondents.
SO ORDERED.
G.R. No. 120969 January 22, 1998
ALEJANDRO MARAGUINOT, JR. and PAULINO ENERO, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION) composed of Presiding Commissioner RAUL T. AQUINO,
Commissioner ROGELIO I. RAYALA and Commissioner VICTORIANO R. CALAYCAY (Ponente), VIC DEL ROSARIO and VIVA
FIMS, respondents.
DAVIDE, JR., J.:
By way of this special civil action for certiorari under Rule 65 of the Rules of Court, petitioners seek to annul the 10 February
1995 Decision of the National Labor Relations Commission (hereafter NLRC), and its 6 April 1995 Resolution denying the
1 2
motion to reconsider the former in NLRC-NCR-CA No. 006195-94. The decision reversed that of the Labor Arbiter in NLRC-NCR-
Case No. 00-07-03994-92.
The parties present conflicting sets of facts.
63
Petitioner Alejandro Maraguinot, Jr. maintains that he was employed by private respondents on 18 July 1989 as part of the
filming crew with a salary of P375.00 per week. About four months later, he was designated Assistant Electrician with a weekly
salary of P400.00, which was increased to P450.00 in May 1990. In June 1991, he was promoted to the rank of Electrician with
a weekly salary of P475.00, which was increased to P539.00 in September 1991.
Petitioner Paulino Enero, on his part, claims that private respondents employed him in June 1990 as a member of the shooting
crew with a weekly salary of P375.00, which was increased to P425.00 in May 1991, then to P475.00 on 21 December 1991. 3
Petitioners' tasks consisted of loading, unloading and arranging movie equipment in the shooting area as instructed by the
cameraman, returning the equipment to Viva Films' warehouse, assisting in the "fixing" of the lighting system, and performing
other tasks that the cameraman and/or director may assign. 4
Sometime in May 1992, petitioners sought the assistance of their supervisors, Mrs. Alejandria Cesario, to facilitate their
request that private respondents adjust their salary in accordance with the minimum wage law. In June 1992, Mrs. Cesario
informed petitioners that Mr. Vic del Rosario would agree to increase their salary only if they signed a blank employment
contract. As petitioners refused to sign, private respondents forced Enero to go on leave in June 1992, then refused to take
him back when he reported for work on 20 July 1992. Meanwhile, Maraguinot was dropped from the company payroll from 8
to 21 June 1992, but was returned on 22 June 1992. He was again asked to sign a blank employment contract, and when he
still refused, private respondents terminated his services on 20 July 1992. Petitioners thus sued for illegal dismissal before
5 6
the Labor Arbiter.
On the other hand, private respondents claim that Viva Films (hereafter VIVA) is the trade name of Viva Productions, Inc.,
and that it is primarily engaged in the distribution and exhibition of movies — but not in the business of making movies; in
the same vein, private respondent Vic del Rosario is merely an executive producer, i.e., the financier who invests a certain
sum of money for the production of movies distributed and exhibited by VIVA. 7
Private respondents assert that they contract persons called "producers" — also referred to as "associate producers" — to8
"produce" or make movies for private respondents; and contend that petitioners are project employees of the association
producers who, in turn, act as independent contractors. As such, there is no employer-employee relationship between
petitioners and private respondents.
Private respondents further contend that it was the associate producer of the film "Mahirap Maging Pogi," who hired
petitioner Maraguinot. The movie shot from 2 July up to 22 July 1992, and it was only then that Maraguinot was released
upon payment of his last salary, as his services were no longer needed. Anent petitioner Enero, he was hired for the movie
entitled "Sigaw ng Puso," later re-tired "Narito and Puso." He went on vacation on 8 June 1992, and by the time he
reported for work on 20 July 1992, shooting for the movie had already been completed. 9
After considering both versions of the facts, the Labor Arbiter found as follows:
On the first issue, this Office rules that complainants are the employees of the respondents. The producer
cannot be considered as an independent contractor but should be considered only as a labor-only
contractor and as such, acts as a mere agent of the real employer, the herein respondent. Respondents
even failed to name and specify who are the producers. Also, it is an admitted fact that the complainants
received their salaries from the respondents. The case cited by the respondents, Rosario Brothers,
Inc. vs. Ople, 131 SCRA 72 does not apply in this case.
It is very clear also that complainants are doing activities which are necessary and essential to the business
of the respondents, that of movie-making. Complainant Maraguinot worked as an electrician while
complainant Enero worked as a crew [member]. 10
Hence, the Labor Arbiter, in his decision of 20 December 1993, decreed as follows:
64
WHEREFORE, judgment is hereby rendered declaring that complainants were illegally dismissed.
Respondents are hereby ordered to reinstate complainant to their former positions without loss [of]
seniority rights and pay their backwages starting July 21, 1992 to December 31, 1993 temporarily
computed in the amount of P38,000.00 for complainant Paulino Enero and P46,000.00 for complainant
Alejandro Maraguinot, Jr. and thereafter until actually reinstated.
Respondents are ordered to pay also attorney's fees equivalent to ten (10%) and/or P8,400.00 on top of
the award. 11
Private respondents appealed to the NLRC (docketed as NLRC NCR-CA No. 006195-94). In its decision of 10 February 1995,
12
the NLRC found the following circumstances of petitioners' work "clearly established:"
1. Complainants [petitioners herein] were hired for specific movie projects and their employment was co-
terminus with each movie project the completion/termination of which are pre-determined, such fact
being made known to complainants at the time of their engagement.
x x x x x x x x x
2 Each shooting unit works on one movie project at a time. And the work of the shooting units, which work
independently from each other, are not continuous in nature but depends on the availability of movie
projects.
3. As a consequence of the non-continuous work of the shooting units, the total working hours logged by
complainants in a month show extreme variations. . . For instance, complainant Maraguinot worked for
only 1.45 hours in June 1991 but logged a total of 183.25 hours in January 1992. Complainant Enero logged
a total of only 31.57 hours in September 1991 but worked for 183.35 hours the next month, October 1991.
4. Further shown by respondents is the irregular work schedule of complainants on a daily basis.
Complainant Maraguinot was supposed to report on 05 August 1991 but reported only on 30 August 1991,
or a gap of 25 days. Complainant Enero worked on 10 September 1991 and his next scheduled working day
was 28 September 1991, a gap of 18 days.
5. The extremely irregular working days and hours of complainants' work explain the lump sum payment
for complainants' services for each movie project. Hence, complainants were paid a standard weekly salary
regardless of the number of working days and hours they logged in. Otherwise, if the principle of "no work
no pay" was strictly applied, complainants' earnings for certain weeks would be very negligible.
6. Respondents also alleged that complainants were not prohibited from working with such movie
companies like Regal, Seiko and FPJ Productions whenever they are not working for the independent
movie producers engaged by respondents . . . This allegation was never rebutted by complainants and
should be deemed admitted.
The NLRC, in reversing the Labor Arbiter, then concluded that these circumstances, taken together, indicated that
complainants (herein petitioners) were "project employees."
After their motion for reconsideration was denied by the NLRC in its Resolution of 6 April 1995, petitioners filed the
13
instant petition, claiming that the NLRC committed grave abuse of discretion amounting to lack or excess of jurisdiction in:
(1) finding that petitioners were project employees; (2) ruling that petitioners were not illegally dismissed; and (3) reversing
the decision of the Labor Arbiter.
65
To support their claim that they were regular (and not project) employees of private respondents, petitioners cited their
performance of activities that were necessary or desirable in the usual trade or business of private respondents and added
that their work was continuous, i.e., after one project was completed they were assigned to another project. Petitioners
thus considered themselves part of a work pool from which private respondents drew workers for assignment to different
projects. Petitioners lamented that there was no basis for the NLRC's conclusion that they were project employees, while
the associate producers were independent contractors; and thus reasoned that as regular employees, their dismissal was
illegal since the same was premised on a "false cause," namely, the completion of a project, which was not among the
causes for dismissal allowed by the Labor Code.
Private respondents reiterate their version of the facts and stress that their evidence supports the view that petitioners are
project employees; point to petitioners' irregular work load and work schedule; emphasize the NLRC's finding that
petitioners never controverted the allegation that they were not prohibited from working with other movie companies; and
ask that the facts be viewed in the context of the peculiar characteristics of the movie industry.
The Office of the Solicitor General (OSG) is convinced that this petition is improper since petitioners raise questions of fact,
particularly, the NLRC's finding that petitioners were project employees, a finding supported by substantial evidence; and
submits that petitioners' reliance on Article 280 of the Labor Code to support their contention that they should be deemed
regular employees is misplaced, as said section "merely distinguishes between two types of employees, i.e., regular
employees and casual employees, for purposes of determining the right of an employee to certain benefits."
The OSG likewise rejects petitioners' contention that since they were hired not for one project, but for a series of projects,
they should be deemed regular employees. Citing Mamansag v. NLRC, the OSG asserts that what matters is that there was
14
a time-frame for each movie project made known to petitioners at the time of their hiring. In closing, the OSG disagrees
with petitioners' claim that the NLRC's classification of the movie producers as independent contractors had no basis in fact
and in law, since, on the contrary, the NLRC "took pains in explaining its basis" for its decision.
As regards the propriety of this action, which the Office of the Solicitor General takes issue with, we rule that a special civil
action for certiorari under Rule 65 of the Rules of Court is the proper remedy for one who complains that the NLRC acted in
total disregard of evidence material to or decisive of the controversy. In the instant case, petitioners allege that the
15
NLRC's conclusions have no basis in fact and in law, hence the petition may not be dismissed on procedural or jurisdictional
grounds.
The judicious resolution of this case hinges upon, first, the determination of whether an employer-employee relationship
existed between petitioners and private respondents or any one of private respondents. If there was none, then this
petition has no merit; conversely, if the relationship existed, then petitioners could have been unjustly dismissed.
A related question is whether private respondents are engaged in the business of making motion pictures. Del Rosario is
necessarily engaged in such business as he finances the production of movies. VIVA, on the other hand, alleges that it does
not "make" movies, but merely distributes and exhibits motion pictures. There being no further proof to this effect, we
cannot rely on this self-serving denial. At any rate, and as will be discussed below, private respondents' evidence even
supports the view that VIVA is engaged in the business of making movies.
We now turn to the critical issues. Private respondents insist that petitioners are project employees of associate producers
who, in turn, act as independent contractors. It is settled that the contracting out of labor is allowed only in case of job
contracting. Section 8, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code describes permissible job
contracting in this wise:
Sec. 8. Job contracting. — There is job contracting permissible under the Code if the following conditions
are met:
66
(1) The contractor carries on an independent business and undertakes the

contract work on his own account under his own responsibility according
to his own manner and method, free from the control and direction of his
employer or principal in all matters connected with the performance of
the work except as to the results thereof; and
(2) The contractor has substantial capital or investment in the form of

tools, equipment, machineries, work premises, and other materials which
are necessary in the conduct of his business.
Assuming that the associate producers are job contractors, they must then be engaged in the business of making motion
pictures. As such, and to be a job contractor under the preceding description, associate producers must have tools,
equipment, machinery, work premises, and other materials necessary to make motion pictures. However, the associate
producers here have none of these. Private respondents' evidence reveals that the movie-making equipment are supplied
to the producers and owned by VIVA. These include generators, cables and wooden platforms, cameras and "shooting
16 17
equipment;" in fact, VIVA likewise owns the trucks used to transport the equipment. It is thus clear that the associate
18 19
producer merely leases the equipment from VIVA. Indeed, private respondents' Formal Offer of Documentary Evidence
20
stated one of the purposes of Exhibit "148" as:
To prove further that the independent Producers rented Shooting Unit No. 2 from Viva to finish their
films.
21
While the purpose of Exhibits "149," "149-A" and "149-B" was:
[T]o prove that the movies of Viva Films were contracted out to the different independent Producers who
rented Shooting Unit No. 3 with a fixed budget and time-frame of at least 30 shooting days or 45 days
whichever comes first. 22
Private respondent further narrated that VIVA's generators broke down during petitioners' last movie project, which forced
the associate producer concerned to rent generators, equipment and crew from another company. This only shows that
23
the associate producer did not have substantial capital nor investment in the form of tools, equipment and other materials
necessary for making a movie. Private respondents in effect admit that their producers, especially petitioners' last
producer, are not engaged in permissible job contracting.
If private respondents insist that the associate producers are labor contractors, then these producers can only be "labor-
only" contractors, defined by the Labor Code as follows:
Art. 106. Contractor or subcontractor. — . . .
There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such persons are performing activities which are directly
related to the principal business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.
A more detailed description is provided by Section 9, Rule VIII, Book III of the Omnibus Rules Implementing the
Labor Code:
Sec. 9. Labor-only contracting. — (a) Any person who undertakes to supply workers to an employer shall be
deemed to be engaged in labor-only contracting where such person:
67
(1) Does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises and other materials; and
(2) The workers recruited and placed by such person are performing activities which are
directly related to the principal business or operations of the employer in which workers
are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the

person acting as contractor shall be considered merely as an agent or
intermediary of the employer who shall be responsible to the workers in
the same manner and extent as if the latter were directly employed by
him.
(c) For cases not falling under this Article, the Secretary of Labor shall
determine through appropriate orders whether or not the contracting out
of labor is permissible in the light of the circumstances of each case and
after considering the operating needs of the employer and the rights of
the workers involved. In such case, he may prescribe conditions and
restrictions to insure the protection and welfare of the workers.
As labor-only contracting is prohibited, the law considers the person or entity engaged in the same a mere agent or
intermediary of the direct employer. But even by the preceding standards, the associate producers of VIVA cannot be
considered labor-only contractors as they did not supply, recruit nor hire the workers. In the instant case, it was Juanita
Cesario, Shooting Unit Supervisor and an employee of VIVA, who recruited crew members from an "available group of free-
lance workers which includes the complainants Maraguinot and Enero." And in their Memorandum, private respondents
24
declared that the associate producer "hires the services of . . . 6) camera crew which includes (a) cameraman; (b) the utility
crew; (c) the technical staff; (d) generator man and electrician; (e) clapper; etc. . . . ." This clearly showed that the
25
associate producers did not supply the workers required by the movie project.
The relationship between VIVA and its producers or associate producers seems to be that of agency, as the latter make
26
movies on behalf of VIVA, whose business is to "make" movies. As such, the employment relationship between petitioners
and producers is actually one between petitioners and VIVA, with the latter being the direct employer.
The employer-employee relationship between petitioners and VIVA can further be established by the "control test." While
four elements are usually considered in determining the existence of an employment relationship, namely: (a) the selection
and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to
control of the employee's conduct, the most important element is the employer's control of the employee's conduct, not
only as to the result of the work to be done but also as to the means and methods to accomplish the same. These four
27
elements are present here. In their position paper submitted to the Labor Arbiter, private respondents narrated the
following circumstances:
[T]he PRODUCER has to work within the limits of the budget he is given by the company, for as long as the
ultimate finish[ed] product is acceptable to the company . . .
The ensure that qualify films are produced by the PRODUCER who is an independent contractor, the
company likewise employs a Supervising PRODUCER, a Project accountant and a Shooting unit supervisor.
The Company's Supervising PRODUCER is Mr. Eric Cuatico, the Project accountant varies from time to time,
and the Shooting Unit Supervisor is Ms. Alejandria Cesario.
The Supervising PRODUCER acts as the eyes and ears of the company and of the Executive Producer to
monitor the progress of the PRODUCER's work accomplishment. He is there usually in the field doing the
68
rounds of inspection to see if there is any problem that the PRODUCER is encountering and to assist in
threshing out the same so that the film project will be finished on schedule. He supervises about 3 to 7
movie projects simultaneously [at] any given time by coordinating with each film "PRODUCER". The Project
Accountant on the other hand assists the PRODUCER in monitoring the actual expenses incurred because
the company wants to insure that any additional budget requested by the PRODUCER is really justified and
warranted especially when there is a change of original plans to suit the tast[e] of the company on how a
certain scene must be presented to make the film more interesting and more commercially viable.
(emphasis supplied).
VIVA's control is evident in its mandate that the end result must be a "quality film acceptable to the company." The means
and methods to accomplish the result are likewise controlled by VIVA, viz., the movie project must be finished within
schedule without exceeding the budget, and additional expenses must be justified; certain scenes are subject to change to
suit the taste of the company; and the Supervising Producer, the "eyes and ears" of VIVA and del Rosario, intervenes in the
movie-making process by assisting the associate producer in solving problems encountered in making the film.
It may not be validly argued then that petitioners are actually subject to the movie director's control, and not VIVA's
direction. The director merely instructs petitioners on how to better comply with VIVA's requirements to ensure that a
quality film is completed within schedule and without exceeding the budget. At bottom, the director is akin to a supervisor
who merely oversees the activities of rank-and-file employees with control ultimately resting on the employer.
Moreover, appointment slips issued to all crew members state:

28
During the term of this appointment you shall comply with the duties and responsibilities of your position
as well as observe the rules and regulations promulgated by your superiors and by Top Management.
The words "supervisors" and "Top Management" can only refer to the "supervisors" and "Top Management" of VIVA. By
commanding crew members to observe the rules and regulations promulgated by VIVA, the appointment slips only
emphasize VIVA's control over petitioners.
Aside from control, the element of selection and engagement is likewise present in the instant case and exercised by VIVA.
A sample appointment slip offered by private respondents "to prove that members of the shooting crew except the driver
are project employees of the Independent Producers" reads as follows:
29
VIVA PRODUCTIONS, INC.

16 Sct. Albano St.
Diliman, Quezon City
PEDRO NICOLAS Date: June 15, 1992
APPOINTMENT SLIP
You are hereby appointed as SOUNDMAN for the film project entitled "MANAMBIT". This appointment
shall be effective upon the commencement of the said project and shall continue to be effective until the
completion of the same.
For your services you shall receive the daily/weekly/monthly compensation of P812.50.
69
During the term of this appointment you shall comply with the duties and responsibilities of your position
as well as observe the rules and regulations promulgated by your superiors and by Top Management.
Very
truly
yours,
(an
illegible
signatur
e)
CONFORME:
_________________
Name of appointee
Signed in the presence of:
___________________
Notably, nowhere in the appointment slip does it appear that it was the producer or associate producer who hired the crew
members; moreover, it is VIVA's corporate name which appears on the heading of the appointment slip. What likewise tells
against VIVA is that it paid petitioners' salaries as evidenced by vouchers, containing VIVA's letterhead, for that purpose. 30
All the circumstances indicate an employment relationship between petitioners and VIVA alone, thus the inevitable
conclusion is that petitioners are employees only of VIVA.
The next issue is whether petitioners were illegally dismissed. Private respondents contend that petitioners were project
employees whose employment was automatically terminated with the completion of their respective projects. Petitioners
assert that they were regular employees who were illegally dismissed.
It may not be ignored, however, that private respondents expressly admitted that petitioners were part of a work
pool; and, while petitioners were initially hired possibly as project employees, they had attained the status of regular
31
employees in view if VIVA's conduct.
A project employee or a member of a work pool may acquire the status of a regular employee when the following concur:
1) There is a continuous rehiring of project employees even after cessation of a project; and
32
2) The tasks performed by the alleged "project employee" are vital, necessary and indispensable to the usual business or
trade of the employer. 33
However, the length of time during which the employee was continuously re-hired is not controlling, but merely
serves as a badge of regular employment. 34
In the instant case, the evidence on record shows that petitioner Enero was employed for a total of two (2) years and
engaged in at least eighteen (18) projects, while petitioner Maraguinot was employed for some three (3) years and worked
70
on at least twenty-three (23) projects. Moreover, as petitioners' tasks involved, among other chores, the loading,
35
unloading and
FILM DATE DATE ASSOCIATE PRODUCER

STARTED COMPLETED
LOVE AT FIRST SIGHT 1/3/90 2/16/90 MARIVIC ONG
PAIKOT-IKOT 1/26/90 3/11/90 EDITH MANUEL
ROCKY & ROLLY 2/13/90 3/29/90 M. ONG
PAIKOT-IKOT (addl. 1/2) 3/12/90 4/3/90 E. MANUEL
ROCKY & ROLLY (2nd contract) 4/6/90 5/20/90 M. ONG
NARDONG TOOTHPICK 4/4/90 5/18/90 JUN CHING
BAKIT KAY TAGAL NG SANDALI 6/26/90 10/20/90 E. MANUEL
BAKIT KAY TAGAL (2nd contract) 8/10/90 9/23/90 E. MANUEL
HINUKAY KO NA ANG LIBINGAN MO 9/6/90 10/20/90 JUN CHING
MAGING SINO KA MAN 10/25/90 12/8/90 SANDY STA. MARIA
M. SINO KA MAN (2nd contract) 12/9/90 1/22/91 SANDY S
NOEL JUICO 1/29/91 3/14/90 JUN CHING
NOEL JUICO (2nd contract) 3/15/91 4/6/91 JUN CHING
ROBIN GOOD 5/7/91 6/20/91 M. ONG
UTOL KONG HOODLUM # 1 6/23/91 8/6/91 JUN CHING
KAPUTOL NG ISANG AWIT 8/18/91 10/2/91 SANDY S.
DARNA 10/4/91 11/18/91 E. MANUEL
DARNA (addl. 1/2) 11/20/91 12/12/91 E. MANUEL
MAGNONG REHAS 12/13/91 1/27/92 BOBBY GRIMALT
M. REHAS (2nd contract) 1/28/92 3/12/92 B. GRIMALT
HIRAM NA MUKHA 3/15/92 4/29/92 M. ONG
HIRAM (2nd contract) 5/1/92 6/14/92 M. ONG
KAHIT AKO'Y BUSABOS 5/28/92 7/7/92 JERRY OHARA
SIGAW NG PUSO 7/1/92 8/4/92 M. ONG
SIGAW (addl. 1/2) 8/15/92 9/5/92 M. ONG
71
NGAYON AT KAILANMAN 9/6/92 10/20/92 SANDY STA. MARIA
While Maraguinot was a member of Shooting Unit III, which made the following movies (Annex "4-A" of Respondents'
Position Paper; OR, 29):
FILM DATE STARTED DATE ASSOCIATE PRODUCER

COMPLETED
GUMAPANG KA SA LUSAK 1/27/90 3/12/90 JUN CHING
PETRANG KABAYO 2/19/90 4/4/90 RUTH GRUTA
LUSAK (2nd contract) 3/14/90 4/27/90 JUN CHING
P. KABAYO (Addl 1/2 contract) 4/21/90 5/13/90 RUTH GRUTA
BADBOY 6/15/90 7/29/90 EDITH MANUEL
BADBOY (2nd contract) 7/30/90 8/21/90 E. MANUEL
ANAK NI BABY AMA 9/2/90 10/16/90 RUTH GRUTA
A.B. AMA (addl 1/2) 10/17/90 11/8/90 RUTH GRUTA
A.B. AMA (addl 2nd 1/2) 11/9/90 12/1/90 R. GRUTA
BOYONG MANALAC 11/30/90 1/14/91 MARIVIC ONG
HUMANAP KA NG PANGET 1/20/91 3/5/91 EDITH MANUEL
H. PANGET(2nd contract) 3/10/91 4/23/91 E. MANUEL
B. MANALAC (2nd contract) 5/22/91 7/5/91 M. ONG
ROBIN GOOD (2nd contract) 7/7/91 8/20/91 M. ONG
PITONG GAMOL 8/30/91 10/13/91 M. ONG
P. GAMOL (2nd contract) 10/14/91 11/27/91 M. ONG
GREASE GUN GANG 12/28/91 2/10/92 E. MANUEL
ALABANG GIRLS (1/2 contract) 3/4/92 3/26/92 M. ONG
BATANG RILES 3/9/92 3/30/92 BOBBY GRIMALT
UTOL KONG HOODLUM (part 2) 3/22/92 5/6/92 B. GRIMALT
UTOL (addl. 1/2 contract) 5/7/92 5/29/92 B. GRIMALT
MANDURUGAS (2nd contract) 5/25/92 7/8/92 JERRY OHARA
MAHIRAP MAGING POGI 7/2/92 8/15/92 M. ONG
arranging of movie equipment in the shooting area as instructed by the cameramen, returning the equipment to
the Viva Films' warehouse, and assisting in the "fixing" of the lighting system, it may not be gainsaid that these
tasks were vital, necessary and indispensable to the usual business or trade of the employer. As regards the
underscored phrase, it has been held that this is ascertained by considering the nature of the work performed and
its relation to the scheme of the particular business or trade in its entirety.
36
A recent pronouncement of this Court anent project or work pool employees who had attained the status of regular
employees proves most instructive:
The denial by petitioners of the existence of a work pool in the company because their projects were not
continuous is amply belied by petitioners themselves who admit that: . . .
A work pool may exist although the workers in the pool do not receive salaries and are free to seek other
employment during temporary breaks in the business, provided that the worker shall be available when
72
called to report of a project. Although primarily applicable to regular seasonal workers, this set-up can
likewise be applied to project workers insofar as the effect of temporary cessation of work is
concerned. This is beneficial to both the employer and employee for it prevents the unjust situation of
"coddling labor at the expense of capital" and at the same time enables the workers to attain the status of
regular employees. Clearly, the continuous rehiring of the same set of employees within the framework of
the Lao Group of Companies is strongly indicative that private respondents were an integral part of a work
pool from which petitioners drew its workers for its various projects.
In a final attempt to convince the Court that private respondents were indeed project employees,
petitioners point out that the workers were not regularly maintained in the payroll and were free to offer
their services to other companies when there were no on-going projects. This argument however cannot
defeat the workers' status of regularity. We apply by analogy the vase of Industrial-Commercial-
Agricultural Workers Organization v. CIR [16 SCRA 526, 567-568 (1966)] which deals with regular seasonal
employees. There we held: . . .
Truly, the cessation of construction activities at the end of every project is a foreseeable suspension of
work. Of course, no compensation can be demanded from the employer because the stoppage of
operations at the end of a project and before the start of a new one is regular and expected by both parties
to the labor relations. Similar to the case of regular seasonal employees, the employment relation is not
severed by merely being suspended. [citing Manila Hotel Co. v. CIR, 9 SCRA 186 (1963)] The employees are,
strictly speaking, not separated from services but merely on leave of absence without pay until they are
reemployed. Thus we cannot affirm the argument that non-payment of salary or non-inclusion in the
payroll and the opportunity to seek other employment denote project employment. (emphasis supplied)
37
While Lao admittedly involved the construction industry, to which Policy Instruction No. 20/Department Order No.
19 regarding work pools specifically applies, there seems to be no impediment to applying the underlying principles to
38
industries other than the construction industry. Neither may it be argued that a substantial distinction exists between the
39
projects undertaken in the construction industry and the motion picture industry. On the contrary, the raison d' etre of
both industries concern projects with a foreseeable suspension of work.
At this time, we wish to allay any fears that this decision unduly burdens an employer by imposing a duty to re-hire a
project employee even after completion of the project for which he was hired. The import of this decision is not to impose a
positive and sweeping obligation upon the employer to re-hire project employees. What this decision merely accomplishes
is a judicial recognition of the employment status of a project or work pool employee in accordance with what is fait
accompli, i.e., the continuous re-hiring by the employer of project or work pool employees who perform tasks necessary or
desirable to the employer's usual business or trade. Let it not be said that this decision "coddles" labor, for as Lao has ruled,
project or work pool employees who have gained the status of regular employees are subject to the "no work-no pay"
principle, to repeat:
A work pool may exist although the workers in the pool do not receive salaries and are free to seek other employment
during temporary breaks in the business, provided that the worker shall be available when called to report for a project.
Although primarily applicable to regular seasonal workers, this set-up can likewise be applied to project workers insofar as
the effect of temporary cessation of work is concerned. This is beneficial to both the employer and employee for it prevents
the unjust situation of "coddling labor at the expense of capital" and at the same time enables the workers to attain the
status of regular employees.
The Court's ruling here is meant precisely to give life to the constitutional policy of strengthening the labor sector, but, we
40
stress, not at the expense of management. Lest it be misunderstood, this ruling does not mean that simply because an
employee is a project or work pool employee even outside the construction industry, he is deemed, ipso jure, a regular
employee. All that we hold today is that once a project or work pool employee has been: (1) continuously, as opposed to
intermittently, re-hired by the same employer for the same tasks or nature of tasks; and (2) these tasks are vital, necessary
73
and indispensable to the usual business or trade of the employer, then the employee must be deemed a regular employee,
pursuant to Article 280 of the Labor Code and jurisprudence. To rule otherwise would allow circumvention of labor laws in
industries not falling within the ambit of Policy Instruction No. 20/Department Order No. 19, hence allowing the prevention
of acquisition of tenurial security by project or work pool employees who have already gained the status of regular
employees by the employer's conduct.
In closing then, as petitioners had already gained the status of regular employees, their dismissal was unwarranted, for the
cause invoked by private respondents for petitioners' dismissal, viz.: completion of project, was not, as to them, a valid
cause for dismissal under Article 282 of the Labor Code. As such, petitioners are now entitled to back wages and
reinstatement, without loss of seniority rights and other benefits that may have accrued. Nevertheless, following the
41
principles of "suspension of work" and "no pay" between the end of one project and the start of a new one, in computing
petitioners' back wages, the amounts corresponding to what could have been earned during the periods from the date
petitioners were dismissed until their reinstatement when petitioners' respective Shooting Units were not undertaking any
movie projects, should be deducted.
Petitioners were dismissed on 20 July 1992, at a time when Republic Act No. 6715 was already in effect. Pursuant to Section
34 thereof which amended Section 279 of the Labor Code of the Philippines and Bustamante v. NLRC, petitioners are
42
entitled to receive full back wages from the date of their dismissal up to the time of their reinstatement, without deducting
whatever earnings derived elsewhere during the period of illegal dismissal, subject however, to the above observations.
WHEREFORE, the instant petition is GRANTED. The assailed decision of the National Labor Relations Commission in NLRC
NCR CA No. 006195-94 dated 01 February 1995, as well as its Resolution dated 6 April 1995, are hereby ANNULLED and SET
ASIDE for having been rendered with grave abuse of discretion, and the decision of the Labor Arbiter in NLRC NCR Case No.
00-07-03994-92 is REINSTATED, subject, however, to the modification above mentioned in the computation of back wages.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 176484 November 25, 2008
CALAMBA MEDICAL CENTER, INC., petitioner

vs.
NATIONAL LABOR RELATIONS COMMISSION, RONALDO LANZANAS AND MERCEDITHA* LANZANAS, respondents.
DECISION
CARPIO MORALES, J.:
The Calamba Medical Center (petitioner), a privately-owned hospital, engaged the services of medical doctors-spouses Ronaldo
Lanzanas (Dr. Lanzanas) and Merceditha Lanzanas (Dr. Merceditha) in March 1992 and August 1995, respectively, as part of its team
of resident physicians. Reporting at the hospital twice-a-week on twenty-four-hour shifts, respondents were paid a monthly
"retainer" of P4,800.00 each.1 It appears that resident physicians were also given a percentage share out of fees charged for out-
patient treatments, operating room assistance and discharge billings, in addition to their fixed monthly retainer. 2
The work schedules of the members of the team of resident physicians were fixed by petitioner's medical director Dr. Raul Desipeda
(Dr. Desipeda). And they were issued identification cards3 by petitioner and were enrolled in the Social Security System
(SSS).4 Income taxes were withheld from them.5
74
On March 7, 1998, Dr. Meluz Trinidad (Dr. Trinidad), also a resident physician at the hospital, inadvertently overheard a telephone
conversation of respondent Dr. Lanzanas with a fellow employee, Diosdado Miscala, through an extension telephone line.
Apparently, Dr. Lanzanas and Miscala were discussing the low "census" or admission of patients to the hospital. 6
Dr. Desipeda whose attention was called to the above-said telephone conversation issued to Dr. Lanzanas a Memorandum of March
7, 1998 reading:
As a Licensed Resident Physician employed in Calamba Medical Center since several years ago, the hospital management
has committed upon you utmost confidence in the performance of duties pursuant thereto. This is the reason why you
were awarded the privilege to practice in the hospital and were entrusted hospital functions to serve the interest of both
the hospital and our patients using your capability for independent judgment.
Very recently though and unfortunately, you have committed acts inimical to the interest of the hospital, the details of
which are contained in the hereto attached affidavit of witness.
You are therefore given 24 hours to explain why no disciplinary action should be taken against you .
Pending investigation of your case, you are hereby placed under 30-days [sic] preventive suspension effective upon
receipt hereof.7 (Emphasis, italics and underscoring supplied)
Inexplicably, petitioner did not give respondent Dr. Merceditha, who was not involved in the said incident, any work schedule after
sending her husband Dr. Lanzanas the memorandum, 8 nor inform her the reason therefor, albeit she was later informed by the
Human Resource Department (HRD) officer that that was part of petitioner's cost-cutting measures. 9
Responding to the memorandum, Dr. Lanzanas, by letter of March 9, 1998, 10 admitted that he spoke with Miscala over the phone
but that their conversation was taken out of context by Dr. Trinidad.
On March 14, 1998,11 the rank-and-file employees union of petitioner went on strike due to unresolved grievances over terms and
conditions of employment.12
On March 20, 1998, Dr. Lanzanas filed a complaint for illegal suspension 13 before the National Labor Relations Commission (NLRC)-
Regional Arbitration Board (RAB) IV. Dr. Merceditha subsequently filed a complaint for illegal dismissal. 14
In the meantime, then Sec. Cresenciano Trajano of the Department of Labor and Employment (DOLE) certified the labor dispute to
the NLRC for compulsory arbitration and issued on April 21, 1998 return-to-work Order to the striking union officers and employees
of petitioner pending resolution of the labor dispute. 15
In a memorandum16 of April 22, 1998, Dr. Desipeda echoed the April 22, 1998 order of the Secretary of Labor directing all union
officers and members to return-to-work "on or April 23, 1998, except those employees that were already terminated or are serving
disciplinary actions." Dr. Desipeda thus ordered the officers and members of the union to "report for work as soon as possible" to
the hospital's personnel officer and administrator for "work scheduling, assignments and/or re-assignments."
Petitioner later sent Dr. Lanzanas a notice of termination which he received on April 25, 1998, indicating as grounds therefor his
failure to report back to work despite the DOLE order and his supposed role in the striking union, thus:
On April 23, 1998, you still did not report for work despite memorandum issued by the CMC Medical Director implementing
the Labor Secretary's ORDER. The same is true on April 24, 1998 and April 25, 1998,--you still did not report for work [sic].
You are likewise aware that you were observed (re: signatories [sic] to the Saligang Batas of BMCMC-UWP) to be unlawfully
participating as member in the rank-and-file union's concerted activities despite knowledge that your position in the
hospital is managerial in nature (Nurses, Orderlies, and staff of the Emergency Room carry out your orders using your
independent judgment) which participation is expressly prohibited by the New Labor Code and which prohibition was
75
sustained by the Med-Arbiter's ORDER dated February 24, 1998. (Emphasis and italics in the original; underscoring partly in
the original and partly supplied)
For these reasons as grounds for termination, you are hereby terminated for cause from employment effective today,
April 25, 1998, without prejudice to further action for revocation of your license before the Philippine [sic] Regulations [sic]
Commission.17 (Emphasis and underscoring supplied)
Dr. Lanzanas thus amended his original complaint to include illegal dismissal. 18 His and Dr. Merceditha's complaints were
consolidated and docketed as NLRC CASE NO. RAB-IV-3-9879-98-L.
By Decision19 of March 23, 1999, Labor Arbiter Antonio R. Macam dismissed the spouses' complaints for want of jurisdiction upon a
finding that there was no employer-employee relationship between the parties, the fourth requisite or the "control test" in the
determination of an employment bond being absent.
On appeal, the NLRC, by Decision20 of May 3, 2002, reversed the Labor Arbiter's findings, disposing as follows:
WHEREFORE, the assailed decision is set aside. The respondents are ordered to pay the complainants their full backwages;
separation pay of one month salary for every year of service in lieu of reinstatement; moral damages of P500,000.00 each;
exemplary damages of P250,000.00 each plus ten percent (10%) of the total award as attorney's fees.
SO ORDERED.21
Petitioner's motion for reconsideration having been denied, it brought the case to the Court of Appeals on certiorari.
The appellate court, by June 30, 2004 Decision,22 initially granted petitioner's petition and set aside the NLRC ruling. However, upon
a subsequent motion for reconsideration filed by respondents, it reinstated the NLRC decision in an Amended Decision 23 dated
September 26, 2006 but tempered the award to each of the spouses of moral and exemplary damages to P100,000.00
and P50,000.00, respectively and omitted the award of attorney's fees .
In finding the existence of an employer-employee relationship between the parties, the appellate court held:
x x x. While it may be true that the respondents are given the discretion to decide on how to treat the petitioner's patients,
the petitioner has not denied nor explained why its Medical Director still has the direct supervision and control over the
respondents. The fact is the petitioner's Medical Director still has to approve the schedule of duties of the respondents .
The respondents stressed that the petitioner's Medical Director also issues instructions or orders to the respondents
relating to the means and methods of performing their duties , i.e. admission of patients, manner of characterizing cases,
treatment of cases, etc., and may even overrule, review or revise the decisions of the resident physicians . This was not
controverted by the petitioner. The foregoing factors taken together are sufficient to constitute the fourth element, i.e.
control test, hence, the existence of the employer-employee relationship. In denying that it had control over the
respondents, the petitioner alleged that the respondents were free to put up their own clinics or to accept other
retainership agreement with the other hospitals. But, the petitioner failed to substantiate the allegation with substantial
evidence. (Emphasis and underscoring supplied)24
The appellate court thus declared that respondents were illegally dismissed.
x x x. The petitioner's ground for dismissing respondent Ronaldo Lanzanas was based on his alleged participation in union
activities, specifically in joining the strike and failing to observe the return-to-work order issued by the Secretary of Labor.
Yet, the petitioner did not adduce any piece of evidence to show that respondent Ronaldo indeed participated in the strike.
x x x.
76
In the case of respondent Merceditha Lanzanas, the petitioner's explanation that "her marriage to complainant Ronaldo has
given rise to the presumption that her sympat[hies] are likewise with her husband" as a ground for her dismissal is
unacceptable. Such is not one of the grounds to justify the termination of her employment.25 (Underscoring supplied)
The fallo of the appellate court's decision reads:
WHEREFORE, the instant Motion for Reconsideration is GRANTED, and the Court's decision dated June 30, 2004, is SET
ASIDE. In lieu thereof, a new judgment is entered, as follows:
WHEREFORE, the petition is DISMISSED. The assailed decision dated May 3, 2002 and order dated September 24,
2002 of the NLRC in NLRC NCR CA No. 019823-99 are AFFIRMED with the MODIFICATION that the moral and
exemplary damages are reduced to P100,000.00 each and P50,000.00 each, respectively.
SO ORDERED.26 (Emphasis and italics in the original; underscoring supplied)
Preliminarily, the present petition calls for a determination of whether there exists an employer-employee relationship 27 between
petitioner and the spouses-respondents.
Denying the existence of such relationship, petitioner argues that the appellate court, as well as the NLRC, overlooked its twice-a-
week reporting arrangement with respondents who are free to practice their profession elsewhere the rest of the week. And it
invites attention to the uncontroverted allegation that respondents, aside from their monthly retainers, were entitled to one-half of
all suturing, admitting, consultation, medico-legal and operating room assistance fees. 28 These circumstances, it stresses, are clear
badges of the absence of any employment relationship between them.
This Court is unimpressed.
Under the "control test," an employment relationship exists between a physician and a hospital if the hospital controls both the
means and the details of the process by which the physician is to accomplish his task. 29
Where a person who works for another does so more or less at his own pleasure and is not subject to definite hours or conditions of
work, and is compensated according to the result of his efforts and not the amount thereof, the element of control is absent. 30
As priorly stated, private respondents maintained specific work-schedules, as determined by petitioner through its medical director,
which consisted of 24-hour shifts totaling forty-eight hours each week and which were strictly to be observed under pain of
administrative sanctions.
That petitioner exercised control over respondents gains light from the undisputed fact that in the emergency room, the operating
room, or any department or ward for that matter, respondents' work is monitored through its nursing supervisors, charge nurses
and orderlies. Without the approval or consent of petitioner or its medical director, no operations can be undertaken in those areas.
For control test to apply, it is not essential for the employer to actually supervise the performance of duties of the employee, it being
enough that it has the right to wield the power. 31
With respect to respondents' sharing in some hospital fees, this scheme does not sever the employment tie between them and
petitioner as this merely mirrors additional form or another form of compensation or incentive similar to what commission-based
employees receive as contemplated in Article 97 (f) of the Labor Code, thus:
"Wage" paid to any employee shall mean the remuneration or earning, however designated, capable of being expressed in
terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating
the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work
done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by
the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee. x x x
(Emphasis and underscoring supplied),
77
Respondents were in fact made subject to petitioner-hospital's Code of Ethics, 32 the provisions of which cover administrative and
disciplinary measures on negligence of duties, personnel conduct and behavior, and offenses against persons, property and the
hospital's interest.
More importantly, petitioner itself provided incontrovertible proof of the employment status of respondents, namely, the
identification cards it issued them, the payslips33 and BIR W-2 (now 2316) Forms which reflect their status as employees, and the
classification as "salary" of their remuneration. Moreover, it enrolled respondents in the SSS and Medicare (Philhealth) program. It
bears noting at this juncture that mandatory coverage under the SSS Law 34 is premised on the existence of an employer-employee
relationship,35 except in cases of compulsory coverage of the self-employed. It would be preposterous for an employer to report
certain persons as employees and pay their SSS premiums as well as their wages if they are not its employees. 36
And if respondents were not petitioner's employees, how does it account for its issuance of the earlier-quoted March 7, 1998
memorandum explicitly stating that respondent is "employed" in it and of the subsequent termination letter indicating respondent
Lanzanas' employment status.
Finally, under Section 15, Rule X of Book III of the Implementing Rules of the Labor Code, an employer-employee relationship exists
between the resident physicians and the training hospitals, unless there is a training agreement between them, and the training
program is duly accredited or approved by the appropriate government agency. In respondents' case, they were not undergoing any
specialization training. They were considered non-training general practitioners,37 assigned at the emergency rooms and ward
sections.
Turning now to the issue of dismissal, the Court upholds the appellate court's conclusion that private respondents were illegally
dismissed.
Dr. Lanzanas was neither a managerial nor supervisory employee but part of the rank-and-file. This is the import of the Secretary of
Labor's Resolution of May 22, 1998 in OS A-05-15-98 which reads:
xxxx
In the motion to dismiss it filed before the Med-Arbiter, the employer (CMC) alleged that 24 members of petitioner are
supervisors, namely x x x Rolando Lanzonas [sic] x x x.
A close scrutiny of the job descriptions of the alleged supervisors narrated by the employer only proves that except for the
contention that these employees allegedly supervise, they do not however recommend any managerial action. At most,
their job is merely routinary in nature and consequently, they cannot be considered supervisory employees .
They are not therefore barred from membership in the union of rank[-]and[-]file, which the petitioner [the union] is
seeking to represent in the instant case.38 (Emphasis and underscoring supplied)
xxxx
Admittedly, Dr. Lanzanas was a union member in the hospital, which is considered indispensable to the national interest. In labor
disputes adversely affecting the continued operation of a hospital, Article 263(g) of the Labor Code provides:
ART. 263. STRIKES, PICKETING, AND LOCKOUTS.–
xxxx
(g) x x x x
x x x x. In labor disputes adversely affecting the continued operation of such hospitals, clinics or medical institutions, it
shall be the duty of the striking union or locking-out employer to provide and maintain an effective skeletal workforce of
78
medical and other health personnel, whose movement and services shall be unhampered and unrestricted, as are necessary
to insure the proper and adequate protection of the life and health of its patients, most especially emergency cases, for the
duration of the strike or lockout. In such cases, the Secretary of Labor and Employment is mandated to immediately
assume, within twenty-four hours from knowledge of the occurrence of such strike or lockout, jurisdiction over the same or
certify to the Commission for compulsory arbitration. For this purpose, the contending parties are strictly enjoined to
comply with such orders, prohibitions and/or injunctions as are issued by the Secretary of Labor and Employment or the
Commission, under pain of immediate disciplinary action, including dismissal or loss of employment status or payment
by the locking-out employer of backwages, damages and other affirmative relief, even criminal prosecution against
either or both of them.
x x x x (Emphasis and underscoring supplied)
An assumption or certification order of the DOLE Secretary automatically results in a return-to-work of all striking workers, whether
a corresponding return-to-work order had been issued. 39 The DOLE Secretary in fact issued a return-to-work Order, failing to comply
with which is punishable by dismissal or loss of employment status. 40
Participation in a strike and intransigence to a return-to-work order must, however, be duly proved in order to justify immediate
dismissal in a "national interest" case. As the appellate court as well as the NLRC observed, however, there is nothing in the records
that would bear out Dr. Lanzanas' actual participation in the strike. And the medical director's Memorandum 41 of April 22, 1998
contains nothing more than a general directive to all union officers and members to return-to-work. Mere membership in a labor
union does not ipso facto mean participation in a strike .
Dr. Lanzanas' claim that, after his 30-day preventive suspension ended on or before April 9, 1998, he was never given any work
schedule42 was not refuted by petitioner. Petitioner in fact never released any findings of its supposed investigation into Dr.
Lanzanas' alleged "inimical acts."
Petitioner thus failed to observe the two requirements,before dismissal can be effected ─ notice and hearing ─ which constitute
essential elements of the statutory process; the first to apprise the employee of the particular acts or omissions for which his
dismissal is sought, and the second to inform the employee of the employer's decision to dismiss him. 43 Non-observance of these
requirements runs afoul of the procedural mandate. 44
The termination notice sent to and received by Dr. Lanzanas on April 25, 1998 was the first and only time that he was apprised of the
reason for his dismissal. He was not afforded, however, even the slightest opportunity to explain his side. His was a "termination
upon receipt" situation. While he was priorly made to explain on his telephone conversation with Miscala, 45 he was not with respect
to his supposed participation in the strike and failure to heed the return-to-work order.
As for the case of Dr. Merceditha, her dismissal was worse, it having been effected without any just or authorized cause and without
observance of due process. In fact, petitioner never proferred any valid cause for her dismissal except its view that "her marriage to
[Dr. Lanzanas] has given rise to the presumption that her sympath[y] [is] with her husband; [and that when [Dr. Lanzanas] declared
that he was going to boycott the scheduling of their workload by the medical doctor, he was presumed to be speaking for himself
[and] for his wife Merceditha."46
Petitioner's contention that Dr. Merceditha was a member of the union or was a participant in the strike remained just that. Its
termination of her employment on the basis of her conjugal relationship is not analogous to
any of the causes enumerated in Article 28247 of the Labor Code. Mere suspicion or belief, no matter how strong, cannot substitute
for factual findings carefully established through orderly procedure. 48
The Court even notes that after the proceedings at the NLRC, petitioner never even mentioned Dr. Merceditha's case. There is thus
no gainsaying that her dismissal was both substantively and procedurally infirm.
Adding insult to injury was the circulation by petitioner of a "watchlist" or "watch out list" 49 including therein the names of
respondents. Consider the following portions of Dr. Merceditha's Memorandum of Appeal:
79
3. Moreover, to top it all, respondents have circulated a so called "Watch List" to other hospitals, one of which [was]
procured from Foothills Hospital in Sto. Tomas, Batangas [that] contains her name. The object of the said list is precisely to
harass Complainant and malign her good name and reputation. This is not only unprofessional, but runs smack of
oppression as CMC is trying permanently deprived [sic] Complainant of her livelihood by ensuring that she is barred from
practicing in other hospitals.
4. Other co-professionals and brothers in the profession are fully aware of these "watch out" lists and as such, her
reputation was not only besmirched, but was damaged, and she suffered social humiliation as it is of public knowledge that
she was dismissed from work. Complainant came from a reputable and respected family, her father being a retired full
Colonel in the Army, Col. Romeo A. Vente, and her brothers and sisters are all professionals, her brothers, Arnold and
Romeo Jr., being engineers. The Complainant has a family protection [sic] to protect. She likewise has a professional
reputation to protect, being a licensed physician. Both her personal and professional reputation were damaged as a result
of the unlawful acts of the respondents.50
While petitioner does not deny the existence of such list, it pointed to the lack of any board action on its part to initiate such listing
and to circulate the same, viz:
20. x x x. The alleged watchlist or "watch out list," as termed by complainants, were merely lists obtained by one Dr. Ernesto
Naval of PAMANA Hospital. Said list was given by a stockholder of respondent who was at the same time a stockholder of
PAMAN[A] Hospital. The giving of the list was not a Board action.51 (Emphasis and underscoring supplied)
The circulation of such list containing names of alleged union members intended to prevent employment of workers for union
activities similarly constitutes unfair labor practice, thereby giving a right of action for damages by the employees prejudiced. 52
A word on the appellate court's deletion of the award of attorney's fees. There being no basis advanced in deleting it, as exemplary
damages were correctly awarded,53 the award of attorney's fees should be reinstated.
WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP No. 75871 is AFFIRMED with MODIFICATION in that the award by
the National Labor Relations Commission of 10% of the total judgment award as attorney's fees is reinstated. In all other aspects, the
decision of the appellate court is affirmed.
SO ORDERED.
G.R. No. 119268 February 23, 2000
ANGEL JARDIN, DEMETRIO CALAGOS, URBANO MARCOS, ROSENDO MARCOS, LUIS DE LOS ANGELES, JOEL ORDENIZA and
AMADO CENTENO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC) and GOODMAN TAXI (PHILJAMA INTERNATIONAL, INC.) respondents.
QUISUMBING, J.:
This special civil action for certiorari seeks to annul the decision1 of public respondent promulgated on October 28, 1994, in
NLRC NCR CA No. 003883-92, and its resolution2 dated December 13, 1994 which denied petitioners motion for
reconsideration.
Petitioners were drivers of private respondent, Philjama International Inc., a domestic corporation engaged in the operation of
"Goodman Taxi." Petitioners used to drive private respondent's taxicabs every other day on a 24-hour work schedule under
the boundary system. Under this arrangement, the petitioners earned an average of P400.00 daily. Nevertheless, private
respondent admittedly regularly deducts from petitioners, daily earnings the amount of P30.00 supposedly for the washing of
the taxi units. Believing that the deduction is illegal, petitioners decided to form a labor union to protect their rights and
interests.
80
Upon learning about the plan of petitioners, private respondent refused to let petitioners drive their taxicabs when they
reported for work on August 6, 1991, and on succeeding days. Petitioners suspected that they were singled out because they
were the leaders and active members of the proposed union. Aggrieved, petitioners filed with the labor arbiter a complaint
against private respondent for unfair labor practice, illegal dismissal and illegal deduction of washing fees. In a decision 3 dated
August 31, 1992, the labor arbiter dismissed said complaint for lack of merit.
On appeal, the NLRC (public respondent herein), in a decision dated April 28, 1994, reversed and set aside the judgment of the
labor arbiter. The labor tribunal declared that petitioners are employees of private respondent, and, as such, their dismissal
must be for just cause and after due process. It disposed of the case as follows:
WHEREFORE, in view of all the foregoing considerations, the decision of the Labor Arbiter appealed from is hereby
SET ASIDE and another one entered:
1. Declaring the respondent company guilty of illegal dismissal and accordingly it is directed to reinstate the
complainants, namely, Alberto A. Gonzales, Joel T. Morato, Gavino Panahon, Demetrio L. Calagos, Sonny M. Lustado,
Romeo Q. Clariza, Luis de los Angeles, Amado Centino, Angel Jardin, Rosendo Marcos, Urbano Marcos, Jr., and Joel
Ordeniza, to their former positions without loss of seniority and other privileges appertaining thereto; to pay the
complainants full backwages and other benefits, less earnings elsewhere, and to reimburse the drivers the amount
paid as washing charges; and
2. Dismissing the charge of unfair [labor] practice for insufficiency of evidence.
SO ORDERED.4
Private respondent's first motion for reconsideration was denied. Remaining hopeful, private respondent filed another motion
for reconsideration. This time, public respondent, in its decision5 dated October 28, 1994, granted aforesaid second motion for
reconsideration. It ruled that it lacks jurisdiction over the case as petitioners and private respondent have no employer-
employee relationship. It held that the relationship of the parties is leasehold which is covered by the Civil Code rather than
the Labor Code, and disposed of the case as follows:
VIEWED IN THE LIGHT OF ALL THE FOREGOING, the Motion under reconsideration is hereby given due course.
Accordingly, the Resolution of August 10, 1994, and the Decision of April 28, 1994 are hereby SET ASIDE. The Decision
of the Labor Arbiter subject of the appeal is likewise SET ASIDE and a NEW ONE ENTERED dismissing the complaint for
lack of jurisdiction.
No costs.
SO ORDERED.6
Expectedly, petitioners sought reconsideration of the labor tribunal's latest decision which was denied. Hence, the instant
petition.
In this recourse, petitioners allege that public respondent acted without or in excess of jurisdiction, or with grave abuse of
discretion in rendering the assailed decision, arguing that:
81
THE NLRC HAS NO JURISDICTION TO ENTERTAIN RESPONDENT'S SECOND MOTION FOR RECONSIDERATION WHICH IS
ADMITTEDLY A PLEADING PROHIBITED UNDER THE NLRC RULES, AND TO GRANT THE SAME ON GROUNDS NOT EVEN INVOKED
THEREIN.
II
THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES IS ALREADY A SETTLED ISSUE
CONSTITUTING RES JUDICATA, WHICH THE NLRC HAS NO MORE JURISDICTION TO REVERSE, ALTER OR MODIFY.
III
IN ANY CASE, EXISTING JURISPRUDENCE ON THE MATTER SUPPORTS THE VIEW THAT PETITIONERS-TAXI DRIVERS ARE
EMPLOYEES OF RESPONDENT TAXI COMPANY.7
The petition is impressed with merit.
The phrase "grave abuse of discretion amounting to lack or excess of jurisdiction" has settled meaning in the jurisprudence of
procedure. It means such capricious and whimsical exercise of judgment by the tribunal exercising judicial or quasi-judicial
power as to amount to lack of power.8 In labor cases, this Court has declared in several instances that disregarding rules it is
bound to observe constitutes grave abuse of discretion on the part of labor tribunal.
In Garcia vs. NLRC,9 private respondent therein, after receiving a copy of the labor arbiter's decision, wrote the labor arbiter
who rendered the decision and expressed dismay over the judgment. Neither notice of appeal was filed nor cash or surety
bond was posted by private respondent. Nevertheless, the labor tribunal took cognizance of the letter from private
respondent and treated said letter as private respondent's appeal. In a certiorari action before this Court, we ruled that the
labor tribunal acted with grave abuse of discretion in treating a mere letter from private respondent as private respondent's
appeal in clear violation of the rules on appeal prescribed under Section 3(a), Rule VI of the New Rules of Procedure of NLRC.
In Philippine Airlines Inc. vs. NLRC,10 we held that the labor arbiter committed grave abuse of discretion when he failed to
resolve immediately by written order a motion to dismiss on the ground of lack of jurisdiction and the supplemental motion to
dismiss as mandated by Section 15 of Rule V of the New Rules of Procedure of the NLRC.
In Unicane Workers Union-CLUP vs. NLRC,11 we held that the NLRC gravely abused its discretion by allowing and deciding an
appeal without an appeal bond having been filed as required under Article 223 of the Labor Code.
In Mañebo vs. NLRC,12 we declared that the labor arbiter gravely abused its discretion in disregarding the rule governing
position papers. In this case, the parties have already filed their position papers and even agreed to consider the case
submitted for decision, yet the labor arbiter still admitted a supplemental position paper and memorandum, and by taking
into consideration, as basis for his decision, the alleged facts adduced therein and the documents attached thereto.
In Gesulgon vs. NLRC,13 we held that public respondent gravely abused its discretion in treating the motion to set aside
judgment and writ of execution as a petition for relief of judgment. In doing so, public respondent had, without sufficient
basis, extended the reglementary period for filing petition for relief from judgment contrary to prevailing rule and case law.
In this case before us, private respondent exhausted administrative remedy available to it by seeking reconsideration of public
respondent's decision dated April 28, 1994, which public respondent denied. With this motion for reconsideration, the labor
tribunal had ample opportunity to rectify errors or mistakes it may have committed before resort to courts of justice can be
had.14 Thus, when private respondent filed a second motion for reconsideration, public respondent should have forthwith
denied it in accordance with Rule 7, Section 14 of its New Rules of Procedure which allows only one motion for
reconsideration from the same party, thus:
82
Sec. 14. Motions for Reconsideration. — Motions for reconsideration of any order, resolution or decision of the
Commission shall not be entertained except when based on palpable or patent errors, provided that the motion is
under oath and filed within ten (10) calendar days from receipt of the order, resolution or decision with proof of
service that a copy of the same has been furnished within the reglementary period the adverse party and provided
further, that only one such motion from the same party shall be entertained. [Emphasis supplied]
The rationale for allowing only one motion for reconsideration from the same party is to assist the parties in obtaining an
expeditious and inexpensive settlement of labor cases. For obvious reasons, delays cannot be countenanced in the resolution
of labor disputes. The dispute may involve no less than the livelihood of an employee and that of his loved ones who are
dependent upon him for food, shelter, clothing, medicine, and education. It may as well involve the survival of a business or
an industry.15
As correctly pointed out by petitioner, the second motion for reconsideration filed by private respondent is indubitably a
prohibited pleading16 which should have not been entertained at all. Public respondent cannot just disregard its own rules on
the pretext of "satisfying the ends of justice",17 especially when its disposition of a legal controversy ran afoul with a clear and
long standing jurisprudence in this jurisdiction as elucidated in the subsequent discussion. Clearly, disregarding a settled legal
doctrine enunciated by this Court is not a way of rectifying an error or mistake. In our view, public respondent gravely abused
its discretion in taking cognizance and granting private respondent's second motion for reconsideration as it wrecks the
orderly procedure in seeking reliefs in labor cases.
But, there is another compelling reason why we cannot leave untouched the flip-flopping decisions of the public respondent.
As mentioned earlier, its October 28, 1994 judgment is not in accord with the applicable decisions of this Court. The labor
tribunal reasoned out as follows:
On the issue of whether or not employer-employee relationship exists, admitted is the fact that complainants are taxi
drivers purely on the "boundary system". Under this system the driver takes out his unit and pays the owner/operator
a fee commonly called "boundary" for the use of the unit. Now, in the determination the existence of employer-
employee relationship, the Supreme Court in the case of Sara, et al., vs. Agarrado, et al. (G.R. No. 73199, 26 October
1988) has applied the following four-fold test: "(1) the selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the power of control the employees conduct."
"Among the four (4) requisites", the Supreme Court stresses that "control is deemed the most important that the
other requisites may even be disregarded". Under the control test, an employer-employee relationship exists if the
"employer" has reserved the right to control the "employee" not only as to the result of the work done but also as to
the means and methods by which the same is to be accomplished. Otherwise, no such relationship exists. (Ibid.)
Applying the foregoing parameters to the case herein obtaining, it is clear that the respondent does not pay the
drivers, the complainants herein, their wages. Instead, the drivers pay a certain fee for the use of the vehicle. On the
matter of control, the drivers, once they are out plying their trade, are free to choose whatever manner they conduct
their trade and are beyond the physical control of the owner/operator; they themselves determine the amount of
revenue they would want to earn in a day's driving; and, more significantly aside from the fact that they pay for the
gasoline they consume, they likewise shoulder the cost of repairs on damages sustained by the vehicles they are
driving.
Verily, all the foregoing attributes signify that the relationship of the parties is more of a leasehold or one that is
covered by a charter agreement under the Civil Code rather than the Labor Code.18
The foregoing ratiocination goes against prevailing jurisprudence.
In a number of cases decided by this Court,19 we ruled that 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. We
83
explained that in the lease of chattels, the lessor loses complete control over the chattel leased although the lessee cannot be
reckless in the use thereof, otherwise he would be responsible for the damages to the lessor. In the case of jeepney
owners/operators and jeepney drivers, the former exercise supervision and control over the latter. The management of the
business is in the owner's hands. The owner as holder of the certificate of public convenience must see to it that the driver
follows the route prescribed by the franchising authority and the rules promulgated as regards its operation. Now, the fact
that the drivers do not receive fixed wages but get only that in excess of the so-called "boundary" they pay to the
owner/operator is not sufficient to withdraw the relationship between them from that of employer and employee. We have
applied by analogy the abovestated doctrine to the relationships between bus owner/operator and bus conductor, 20 auto-
calesa owner/operator and driver,21 and recently between taxi owners/operators and taxi drivers.22 Hence, petitioners are
undoubtedly employees of private respondent because as taxi drivers they perform activities which are usually necessary or
desirable in the usual business or trade of their employer.
As consistently held by this Court, termination of employment must be effected in accordance with law. The just and
authorized causes for termination of employment are enumerated under Articles 282, 283 and 284 of the Labor Code. The
requirement of notice and hearing is set-out in Article 277 (b) of the said Code. Hence, petitioners, being employees of private
respondent, can be dismissed only for just and authorized cause, and after affording them notice and hearing prior to
termination. In the instant case, private respondent had no valid cause to terminate the employment of petitioners. Neither
were there two (2) written notices sent by private respondent informing each of the petitioners that they had been dismissed
from work. These lack of valid cause and failure on the part of private respondent to comply with the twin-notice requirement
underscored the illegality surrounding petitioners' dismissal.
Under the law, an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority
rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement. 23 It
must be emphasized, though, that recent judicial pronouncements24 distinguish between employees illegally dismissed prior to
the effectivity of Republic Act No. 6715 on March 21, 1989, and those whose illegal dismissals were effected after such date.
Thus, employees illegally dismissed prior to March 21, 1989, are entitled to backwages up to three (3) years without deduction
or qualification, while those illegally dismissed after that date are granted full backwages inclusive of allowances and other
benefits or their monetary equivalent from the time their actual compensation was withheld from them up to the time of
their actual reinstatement. The legislative policy behind Republic Act No. 6715 points to "full backwages" as meaning exactly
that, i.e., without deducting from backwages the earnings derived elsewhere by the concerned employee during the period of
his illegal dismissal. Considering that petitioners were terminated from work on August 1, 1991, they are entitled to full
backwages on the basis of their last daily earnings.
With regard to the amount deducted daily by private respondent from petitioners for washing of the taxi units, we view the
same as not illegal in the context of the law. We note that after a tour of duty, it is incumbent upon the driver to restore the
unit he has driven to the same clean condition when he took it out. Car washing after a tour of duty is indeed a practice in the
taxi industry and is in fact dictated by fair play.25 Hence, the drivers are not entitled to reimbursement of washing charges.
1âwphi1.nêt
WHEREFORE, the instant petition is GRANTED. The assailed DECISION of public respondent dated October 28, 1994, is hereby
SET ASIDE. The DECISION of public respondent dated April 28, 1994, and its RESOLUTION dated December 13, 1994, are
hereby REINSTATED subject to MODIFICATION. Private respondent is directed to reinstate petitioners to their positions held at
the time of the complained dismissal. Private respondent is likewise ordered to pay petitioners their full backwages, to be
computed from the date of dismissal until their actual reinstatement. However, the order of public respondent that
petitioners be reimbursed the amount paid as washing charges is deleted. Costs against private respondents.
SO ORDERED.
G.R. No. 138051 June 10, 2004
84
JOSE Y. SONZA, petitioner,
vs.
ABS-CBN BROADCASTING CORPORATION, respondent.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari1 assailing the 26 March 1999 Decision2 of the Court of Appeals in CA-G.R.
SP No. 49190 dismissing the petition filed by Jose Y. Sonza ("SONZA"). The Court of Appeals affirmed the findings of the
National Labor Relations Commission ("NLRC"), which affirmed the Labor Arbiter’s dismissal of the case for lack of jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-CBN") signed an Agreement ("Agreement") with the Mel
and Jay Management and Development Corporation ("MJMDC"). ABS-CBN was represented by its corporate officers while
MJMDC was represented by SONZA, as President and General Manager, and Carmela Tiangco ("TIANGCO"), as EVP and
Treasurer. Referred to in the Agreement as "AGENT," MJMDC agreed to provide SONZA’s services exclusively to ABS-CBN as
talent for radio and television. The Agreement listed the services SONZA would render to ABS-CBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.3
ABS-CBN agreed to pay for SONZA’s services a monthly talent fee of ₱310,000 for the first year and ₱317,000 for the second
and third year of the Agreement. ABS-CBN would pay the talent fees on the 10th and 25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBN’s President, Eugenio Lopez III, which reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May 1994 entered into by your goodself on
behalf of ABS-CBN with our company relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his programs and
career. We consider these acts of the station violative of the Agreement and the station as in breach thereof.
In this connection, we hereby serve notice of rescission of said Agreement at our instance effective as of
date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount stipulated in
paragraph 7 of the Agreement but reserves the right to seek recovery of the other benefits under said
Agreement.
Thank you for your attention.
Very truly yours,
85
(Sgd.)
JOSE Y. SONZA
President and Gen. Manager4
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor and Employment, National
Capital Region in Quezon City. SONZA complained that ABS-CBN did not pay his salaries, separation pay, service incentive
leave pay, 13th month pay, signing bonus, travel allowance and amounts due under the Employees Stock Option Plan
("ESOP").
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship existed between
the parties. SONZA filed an Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZA’s monthly talent fees through his account at PCIBank, Quezon Avenue
Branch, Quezon City. In July 1996, ABS-CBN opened a new account with the same bank where ABS-CBN deposited SONZA’s
talent fees and other payments due him under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter5 denied the motion to dismiss and directed the parties to file their
respective position papers. The Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was an employee of respondent company until
April 15, 1996 and that he was not paid certain claims, it is sufficient enough as to confer jurisdiction over the instant
case in this Office. And as to whether or not such claim would entitle complainant to recover upon the causes of
action asserted is a matter to be resolved only after and as a result of a hearing. Thus, the respondent’s plea of lack of
employer-employee relationship may be pleaded only as a matter of defense. It behooves upon it the duty to prove
that there really is no employer-employee relationship between it and the complainant.
The Labor Arbiter then considered the case submitted for resolution. The parties submitted their position papers on 24
February 1997.
On 11 March 1997, SONZA filed a Reply to Respondent’s Position Paper with Motion to Expunge Respondent’s Annex 4 and
Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBN’s witnesses Soccoro Vidanes and Rolando V. Cruz. These
witnesses stated in their affidavits that the prevailing practice in the television and broadcast industry is to treat talents like
SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of jurisdiction. 6 The pertinent parts
of the decision read as follows:
xxx
While Philippine jurisprudence has not yet, with certainty, touched on the "true nature of the contract of a talent," it
stands to reason that a "talent" as above-described cannot be considered as an employee by reason of the peculiar
circumstances surrounding the engagement of his services.
It must be noted that complainant was engaged by respondent by reason of his peculiar skills and talent as a TV
host and a radio broadcaster. Unlike an ordinary employee, he was free to perform the services he undertook to
render in accordance with his own style. The benefits conferred to complainant under the May 1994 Agreement are
certainly very much higher than those generally given to employees. For one, complainant Sonza’s monthly talent
fees amount to a staggering ₱317,000. Moreover, his engagement as a talent was covered by a specific contract.
Likewise, he was not bound to render eight (8) hours of work per day as he worked only for such number of hours as
may be necessary.
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The fact that per the May 1994 Agreement complainant was accorded some benefits normally given to an employee
is inconsequential. Whatever benefits complainant enjoyed arose from specific agreement by the parties and not by
reason of employer-employee relationship. As correctly put by the respondent, "All these benefits are merely talent
fees and other contractual benefits and should not be deemed as ‘salaries, wages and/or other remuneration’
accorded to an employee, notwithstanding the nomenclature appended to these benefits. Apropos to this is the rule
that the term or nomenclature given to a stipulated benefit is not controlling, but the intent of the parties to the
Agreement conferring such benefit."
The fact that complainant was made subject to respondent’s Rules and Regulations, likewise, does not detract from
the absence of employer-employee relationship. As held by the Supreme Court, "The line should be drawn between
rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the
means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict
the party hired to the use of such means. The first, which aim only to promote the result, create no employer-
employee relationship unlike the second, which address both the result and the means to achieve it." (Insular Life
Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15, 1989).
x x x (Emphasis supplied)7
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the Labor Arbiter’s decision.
SONZA filed a motion for reconsideration, which the NLRC denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals assailing the decision and
resolution of the NLRC. On 26 March 1999, the Court of Appeals rendered a Decision dismissing the case. 8
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRC’s finding that no employer-employee relationship existed between SONZA and ABS-
CBN. Adopting the NLRC’s decision, the appellate court quoted the following findings of the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as an agent of
complainant Sonza, the principal. By all indication and as the law puts it, the act of the agent is the act of the principal
itself. This fact is made particularly true in this case, as admittedly MJMDC ‘is a management company devoted
exclusively to managing the careers of Mr. Sonza and his broadcast partner, Mrs. Carmela C. Tiangco.’ (Opposition to
Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC, and not between
ABS-CBN and MJMDC. This is clear from the provisions of the May 1994 Agreement which specifically referred to
MJMDC as the ‘AGENT’. As a matter of fact, when complainant herein unilaterally rescinded said May 1994
Agreement, it was MJMDC which issued the notice of rescission in behalf of Mr. Sonza, who himself signed the same
in his capacity as President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically, the parties to the said
agreements are ABS-CBN and Mr. Sonza. And it is only in the May 1994 Agreement, which is the latest Agreement
executed between ABS-CBN and Mr. Sonza, that MJMDC figured in the said Agreement as the agent of Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere ‘labor-only’ contractor of ABS-CBN such that there exist[s]
employer-employee relationship between the latter and Mr. Sonza. On the contrary, We find it indubitable, that
MJMDC is an agent, not of ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly admitted by the latter and
MJMDC in the May 1994 Agreement.
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It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the regular courts, the
same being in the nature of an action for alleged breach of contractual obligation on the part of respondent-appellee.
As squarely apparent from complainant-appellant’s Position Paper, his claims for compensation for services, ‘13th
month pay’, signing bonus and travel allowance against respondent-appellee are not based on the Labor Code but
rather on the provisions of the May 1994 Agreement, while his claims for proceeds under Stock Purchase Agreement
are based on the latter. A portion of the Position Paper of complainant-appellant bears perusal:
‘Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound itself to pay
complainant a signing bonus consisting of shares of stocks…with FIVE HUNDRED THOUSAND PESOS
(₱500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay based on an amount not lower than the
amount he was receiving prior to effectivity of (the) Agreement’.
Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travel benefit
amounting to at least One Hundred Fifty Thousand Pesos (₱150,000.00) per year.’
Thus, it is precisely because of complainant-appellant’s own recognition of the fact that his contractual relations with
ABS-CBN are founded on the New Civil Code, rather than the Labor Code, that instead of merely resigning from ABS-
CBN, complainant-appellant served upon the latter a ‘notice of rescission’ of Agreement with the station, per his
letter dated April 1, 1996, which asserted that instead of referring to unpaid employee benefits, ‘he is waiving and
renouncing recovery of the remaining amount stipulated in paragraph 7 of the Agreement but reserves the right to
such recovery of the other benefits under said Agreement.’ (Annex 3 of the respondent ABS-CBN’s Motion to Dismiss
dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the Stock Purchase
Agreement by respondent-appellee that complainant-appellant filed his complaint. Complainant-appellant’s claims
being anchored on the alleged breach of contract on the part of respondent-appellee, the same can be resolved by
reference to civil law and not to labor law. Consequently, they are within the realm of civil law and, thus, lie with the
regular courts. As held in the case of Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21 November
1994, an action for breach of contractual obligation is intrinsically a civil dispute.9 (Emphasis supplied)
The Court of Appeals ruled that the existence of an employer-employee relationship between SONZA and ABS-CBN is a factual
question that is within the jurisdiction of the NLRC to resolve.10 A special civil action for certiorari extends only to issues of
want or excess of jurisdiction of the NLRC.11 Such action cannot cover an inquiry into the correctness of the evaluation of the
evidence which served as basis of the NLRC’s conclusion.12 The Court of Appeals added that it could not re-examine the
parties’ evidence and substitute the factual findings of the NLRC with its own.13
The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRC’S DECISION AND REFUSING TO FIND THAT AN
EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN, DESPITE THE WEIGHT OF
CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH A FINDING. 14
The Court’s Ruling
We affirm the assailed decision.
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No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming the NLRC ruling which
upheld the Labor Arbiter’s dismissal of the case for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws and jurisprudence define clearly the
elements of an employer-employee relationship, this is the first time that the Court will resolve the nature of the relationship
between a television and radio station and one of its "talents." There is no case law stating that a radio and television program
host is an employee of the broadcast station.
The instant case involves big names in the broadcast industry, namely Jose "Jay" Sonza, a known television and radio
personality, and ABS-CBN, one of the biggest television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee of ABS-CBN. On the other
hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction because SONZA was an independent contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a question of fact. Appellate courts accord the factual findings of the
Labor Arbiter and the NLRC not only respect but also finality when supported by substantial evidence. 15 Substantial evidence
means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. 16 A party cannot prove
the absence of substantial evidence by simply pointing out that there is contrary evidence on record, direct or circumstantial.
The Court does not substitute its own judgment for that of the tribunal in determining where the weight of evidence lies or
what evidence is credible.17
SONZA maintains that all essential elements of an employer-employee relationship are present in this case. Case law has
consistently held that the elements of an employer-employee relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to control the employee on the
means and methods by which the work is accomplished.18 The last element, the so-called "control test", is the most important
element.19
A. Selection and Engagement of Employee
ABS-CBN engaged SONZA’s services to co-host its television and radio programs because of SONZA’s peculiar skills, talent and
celebrity status. SONZA contends that the "discretion used by respondent in specifically selecting and hiring complainant over
other broadcasters of possibly similar experience and qualification as complainant belies respondent’s claim of independent
contractorship."
Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from
ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent and celebrity status not
possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an independent contractual
relationship. If SONZA did not possess such unique skills, talent and celebrity status, ABS-CBN would not have entered into the
Agreement with SONZA but would have hired him through its personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must consider all
the circumstances of the relationship, with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that this mode
of fee payment shows that he was an employee of ABS-CBN. SONZA also points out that ABS-CBN granted him benefits and
privileges "which he would not have enjoyed if he were truly the subject of a valid job contract."
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All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA were ABS-
CBN’s employee, there would be no need for the parties to stipulate on benefits such as "SSS, Medicare, x x x and 13th month
pay"20 which the law automatically incorporates into every employer-employee contract. 21 Whatever benefits SONZA enjoyed
arose from contract and not because of an employer-employee relationship. 22
SONZA’s talent fees, amounting to ₱317,000 monthly in the second and third year, are so huge and out of the ordinary that
they indicate more an independent contractual relationship rather than an employer-employee relationship. ABS-CBN agreed
to pay SONZA such huge talent fees precisely because of SONZA’s unique skills, talent and celebrity status not possessed by
ordinary employees. Obviously, SONZA acting alone possessed enough bargaining power to demand and receive such huge
talent fees for his services. The power to bargain talent fees way above the salary scales of ordinary employees is a
circumstance indicative, but not conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an independent
contractor. The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC is the AGENT of SONZA, to
whom MJMDC would have to turn over any talent fee accruing under the Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their relationship. SONZA failed to show that ABS-
CBN could terminate his services on grounds other than breach of contract, such as retrenchment to prevent losses as
provided under labor laws.23
During the life of the Agreement, ABS-CBN agreed to pay SONZA’s talent fees as long as "AGENT and Jay Sonza shall faithfully
and completely perform each condition of this Agreement."24 Even if it suffered severe business losses, ABS-CBN could not
retrench SONZA because ABS-CBN remained obligated to pay SONZA’s talent fees during the life of the Agreement. This
circumstance indicates an independent contractual relationship between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him his talent fees. Plainly, ABS-
CBN adhered to its undertaking in the Agreement to continue paying SONZA’s talent fees during the remaining life of the
Agreement even if ABS-CBN cancelled SONZA’s programs through no fault of SONZA. 25
SONZA assails the Labor Arbiter’s interpretation of his rescission of the Agreement as an admission that he is not an employee
of ABS-CBN. The Labor Arbiter stated that "if it were true that complainant was really an employee, he would merely resign,
instead." SONZA did actually resign from ABS-CBN but he also, as president of MJMDC, rescinded the Agreement. SONZA’s
letter clearly bears this out.26 However, the manner by which SONZA terminated his relationship with ABS-CBN is immaterial.
Whether SONZA rescinded the Agreement or resigned from work does not determine his status as employee or independent
contractor.
D. Power of Control
Since there is no local precedent on whether a radio and television program host is an employee or an independent
contractor, we refer to foreign case law in analyzing the present case. The United States Court of Appeals, First Circuit,
recently held in Alberty-Vélez v. Corporación De Puerto Rico Para La Difusión Pública ("WIPR") 27 that a television program
host is an independent contractor. We quote the following findings of the U.S. court:
Several factors favor classifying Alberty as an independent contractor. First, a television actress is a skilled position
requiring talent and training not available on-the-job. x x x In this regard, Alberty possesses a master’s degree in
public communications and journalism; is trained in dance, singing, and modeling; taught with the drama department
at the University of Puerto Rico; and acted in several theater and television productions prior to her affiliation with
"Desde Mi Pueblo." Second, Alberty provided the "tools and instrumentalities" necessary for her to
perform. Specifically, she provided, or obtained sponsors to provide, the costumes, jewelry, and other image-related
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supplies and services necessary for her appearance. Alberty disputes that this factor favors independent contractor
status because WIPR provided the "equipment necessary to tape the show." Alberty’s argument is misplaced. The
equipment necessary for Alberty to conduct her job as host of "Desde Mi Pueblo" related to her appearance on the
show. Others provided equipment for filming and producing the show, but these were not the primary tools that
Alberty used to perform her particular function. If we accepted this argument, independent contractors could never
work on collaborative projects because other individuals often provide the equipment required for different aspects
of the collaboration. x x x
Third, WIPR could not assign Alberty work in addition to filming "Desde Mi Pueblo." Alberty’s contracts with WIPR
specifically provided that WIPR hired her "professional services as Hostess for the Program Desde Mi Pueblo." There is
no evidence that WIPR assigned Alberty tasks in addition to work related to these tapings. x x x 28 (Emphasis supplied)
Applying the control test to the present case, we find that SONZA is not an employee but an independent contractor. The
control test is the most important test our courts apply in distinguishing an employee from an independent contractor. 29 This
test is based on the extent of control the hirer exercises over a worker. The greater the supervision and control the hirer
exercises, the more likely the worker is deemed an employee. The converse holds true as well – the less control the hirer
exercises, the more likely the worker is considered an independent contractor.30
First, SONZA contends that ABS-CBN exercised control over the means and methods of his work.
SONZA’s argument is misplaced. ABS-CBN engaged SONZA’s services specifically to co-host the "Mel & Jay" programs. ABS-
CBN did not assign any other work to SONZA. To perform his work, SONZA only needed his skills and talent. How SONZA
delivered his lines, appeared on television, and sounded on radio were outside ABS-CBN’s control. SONZA did not have to
render eight hours of work per day. The Agreement required SONZA to attend only rehearsals and tapings of the shows, as
well as pre- and post-production staff meetings.31 ABS-CBN could not dictate the contents of SONZA’s script. However, the
Agreement prohibited SONZA from criticizing in his shows ABS-CBN or its interests.32 The clear implication is that SONZA had a
free hand on what to say or discuss in his shows provided he did not attack ABS-CBN or its interests.
We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZA’s work. 33 ABS-
CBN did not instruct SONZA how to perform his job. ABS-CBN merely reserved the right to modify the program format and
airtime schedule "for more effective programming."34 ABS-CBN’s sole concern was the quality of the shows and their standing
in the ratings. Clearly, ABS-CBN did not exercise control over the means and methods of performance of SONZA’s work.
SONZA claims that ABS-CBN’s power not to broadcast his shows proves ABS-CBN’s power over the means and methods of the
performance of his work. Although ABS-CBN did have the option not to broadcast SONZA’s show, ABS-CBN was still obligated
to pay SONZA’s talent fees... Thus, even if ABS-CBN was completely dissatisfied with the means and methods of SONZA’s
performance of his work, or even with the quality or product of his work, ABS-CBN could not dismiss or even discipline SONZA.
All that ABS-CBN could do is not to broadcast SONZA’s show but ABS-CBN must still pay his talent fees in full. 35
Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened as it was by the obligation to continue paying in full
SONZA’s talent fees, did not amount to control over the means and methods of the performance of SONZA’s work. ABS-CBN
could not terminate or discipline SONZA even if the means and methods of performance of his work - how he delivered his
lines and appeared on television - did not meet ABS-CBN’s approval. This proves that ABS-CBN’s control was limited only to
the result of SONZA’s work, whether to broadcast the final product or not. In either case, ABS-CBN must still pay SONZA’s
talent fees in full until the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al.,36 the United States Circuit Court of Appeals ruled that vaudeville performers were
independent contractors although the management reserved the right to delete objectionable features in their shows. Since
the management did not have control over the manner of performance of the skills of the artists, it could only control the
result of the work by deleting objectionable features.37
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SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and crew. No doubt, ABS-
CBN supplied the equipment, crew and airtime needed to broadcast the "Mel & Jay" programs. However, the equipment,
crew and airtime are not the "tools and instrumentalities" SONZA needed to perform his job. What SONZA principally needed
were his talent or skills and the costumes necessary for his appearance. 38 Even though ABS-CBN provided SONZA with the
place of work and the necessary equipment, SONZA was still an independent contractor since ABS-CBN did not supervise and
control his work. ABS-CBN’s sole concern was for SONZA to display his talent during the airing of the programs. 39
A radio broadcast specialist who works under minimal supervision is an independent contractor.40 SONZA’s work as television
and radio program host required special skills and talent, which SONZA admittedly possesses. The records do not show that
ABS-CBN exercised any supervision and control over how SONZA utilized his skills and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBN’s employee because ABS-CBN subjected him to its rules and standards of
performance. SONZA claims that this indicates ABS-CBN’s control "not only [over] his manner of work but also the quality of
his work."
The Agreement stipulates that SONZA shall abide with the rules and standards of performance "covering talents"41 of ABS-
CBN. The Agreement does not require SONZA to comply with the rules and standards of performance prescribed for
employees of ABS-CBN. The code of conduct imposed on SONZA under the Agreement refers to the "Television and Radio
Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY (ABS-CBN) as its Code
of Ethics."42 The KBP code applies to broadcasters, not to employees of radio and television stations. Broadcasters are not
necessarily employees of radio and television stations. Clearly, the rules and standards of performance referred to in the
Agreement are those applicable to talents and not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the
former.43 In this case, SONZA failed to show that these rules controlled his performance. We find that these general rules are
merely guidelines towards the achievement of the mutually desired result, which are top-rating television and radio programs
that comply with standards of the industry. We have ruled that:
Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the
services being rendered may be accorded the effect of establishing an employer-employee relationship. The facts of this case
fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or methods to be employed in attaining it, and those that control
or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to
promote the result, create no employer-employee relationship unlike the second, which address both the result and
the means used to achieve it.44
The Vaughan case also held that one could still be an independent contractor although the hirer reserved certain supervision
to insure the attainment of the desired result. The hirer, however, must not deprive the one hired from performing his
services according to his own initiative.45
Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the most extreme form of control which ABS-CBN
exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an employee of ABS-CBN. Even an
independent contractor can validly provide his services exclusively to the hiring party. In the broadcast industry, exclusivity is
not necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry. 46 This practice is not
designed to control the means and methods of work of the talent, but simply to protect the investment of the broadcast
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station. The broadcast station normally spends substantial amounts of money, time and effort "in building up its talents as
well as the programs they appear in and thus expects that said talents remain exclusive with the station for a commensurate
period of time."47 Normally, a much higher fee is paid to talents who agree to work exclusively for a particular radio or
television station. In short, the huge talent fees partially compensates for exclusivity, as in the present case.
MJMDC as Agent of SONZA
SONZA protests the Labor Arbiter’s finding that he is a talent of MJMDC, which contracted out his services to ABS-CBN. The
Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists that MJMDC is a "labor-
only" contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2) the employee who is ostensibly
under the employ of the "labor-only" contractor; and (3) the principal who is deemed the real employer. Under this
scheme, the "labor-only" contractor is the agent of the principal. The law makes the principal responsible to the employees
of the "labor-only contractor" as if the principal itself directly hired or employed the employees. 48 These circumstances are not
present in this case.
There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-CBN. MJMDC merely acted as
SONZA’s agent. The Agreement expressly states that MJMDC acted as the "AGENT" of SONZA. The records do not show that
MJMDC acted as ABS-CBN’s agent. MJMDC, which stands for Mel and Jay Management and Development Corporation, is a
corporation organized and owned by SONZA and TIANGCO. The President and General Manager of MJMDC is SONZA himself.
It is absurd to hold that MJMDC, which is owned, controlled, headed and managed by SONZA, acted as agent of ABS-CBN in
entering into the Agreement with SONZA, who himself is represented by MJMDC. That would make MJMDC the agent of both
ABS-CBN and SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to managing the careers of SONZA and his
broadcast partner, TIANGCO. MJMDC is not engaged in any other business, not even job contracting. MJMDC does not have
any other function apart from acting as agent of SONZA or TIANGCO to promote their careers in the broadcast and television
industry.49
Policy Instruction No. 40
SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8 January 1979 finally settled the
status of workers in the broadcast industry. Under this policy, the types of employees in the broadcast industry are the station
and program employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of law. There is no legal
presumption that Policy Instruction No. 40 determines SONZA’s status. A mere executive issuance cannot exclude
independent contractors from the class of service providers to the broadcast industry. The classification of workers in the
broadcast industry into only two groups under Policy Instruction No. 40 is not binding on this Court, especially when the
classification has no basis either in law or in fact.
Affidavits of ABS-CBN’s Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando Cruz without giving his counsel
the
opportunity to cross-examine these witnesses. SONZA brands these witnesses as incompetent to attest on the prevailing
practice in the radio and television industry. SONZA views the affidavits of these witnesses as misleading and irrelevant.
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While SONZA failed to cross-examine ABS-CBN’s witnesses, he was never prevented from denying or refuting the allegations in
the affidavits. The Labor Arbiter has the discretion whether to conduct a formal (trial-type) hearing after the submission of the
position papers of the parties, thus:
Section 3. Submission of Position Papers/Memorandum
xxx
These verified position papers shall cover only those claims and causes of action raised in the complaint excluding
those that may have been amicably settled, and shall be accompanied by all supporting documents including the
affidavits of their respective witnesses which shall take the place of the latter’s direct testimony. x x x
Section 4. Determination of Necessity of Hearing. – Immediately after the submission of the parties of their position
papers/memorandum, the Labor Arbiter shall motu propio determine whether there is need for a formal trial or
hearing. At this stage, he may, at his discretion and for the purpose of making such determination, ask clarificatory
questions to further elicit facts or information, including but not limited to the subpoena of relevant documentary
evidence, if any from any party or witness.50
The Labor Arbiter can decide a case based solely on the position papers and the supporting documents without a formal
trial.51 The holding of a formal hearing or trial is something that the parties cannot demand as a matter of right. 52 If the Labor
Arbiter is confident that he can rely on the documents before him, he cannot be faulted for not conducting a formal trial,
unless under the particular circumstances of the case, the documents alone are insufficient. The proceedings before a Labor
Arbiter are non-litigious in nature. Subject to the requirements of due process, the technicalities of law and the rules obtaining
in the courts of law do not strictly apply in proceedings before a Labor Arbiter.
Talents as Independent Contractors
ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries to treat talents like
SONZA as independent contractors. SONZA argues that if such practice exists, it is void for violating the right of labor to
security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution53 arises only if there is an employer-employee
relationship under labor laws. Not every performance of services for a fee creates an employer-employee relationship. To
hold that every person who renders services to another for a fee is an employee - to give meaning to the security of tenure
clause - will lead to absurd results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their services as independent contractors. The
right to life and livelihood guarantees this freedom to contract as independent contractors. The right of labor to security of
tenure cannot operate to deprive an individual, possessed with special skills, expertise and talent, of his right to contract as an
independent contractor. An individual like an artist or talent has a right to render his services without any one controlling the
means and methods by which he performs his art or craft. This Court will not interpret the right of labor to security of tenure
to compel artists and talents to render their services only as employees. If radio and television program hosts can render their
services only as employees, the station owners and managers can dictate to the radio and television hosts what they say in
their shows. This is not conducive to freedom of the press.
Different Tax Treatment of Talents and Broadcasters
The National Internal Revenue Code ("NIRC")54 in relation to Republic Act No. 7716,55 as amended by Republic Act No.
8241,56 treats talents, television and radio broadcasters differently. Under the NIRC, these professionals are subject to the 10%
value-added tax ("VAT") on services they render. Exempted from the VAT are those under an employer-employee
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relationship.57 This different tax treatment accorded to talents and broadcasters bolters our conclusion that they are
independent contractors, provided all the basic elements of a contractual relationship are present as in this case.
Nature of SONZA’s Claims
SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay, service incentive leave, signing
bonus, travel allowance, and amounts due under the Employee Stock Option Plan. We agree with the findings of the Labor
Arbiter and the Court of Appeals that SONZA’s claims are all based on the May 1994 Agreement and stock option plan, and
not on the Labor Code. Clearly, the present case does not call for an application of the Labor Code provisions but an
interpretation and implementation of the May 1994 Agreement. In effect, SONZA’s cause of action is for breach of contract
which is intrinsically a civil dispute cognizable by the regular courts.58
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26 March 1999 in CA-G.R. SP No.
49190 is AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. 164156 September 26, 2006
ABS-CBN BROADCASTING CORPORATION, petitioner,

vs.
MARLYN NAZARENO, MERLOU GERZON, JENNIFER DEIPARINE, and JOSEPHINE LERASAN, respondents.
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari of the Decision 1 of the Court of Appeals (CA) in CA-G.R. SP No. 76582 and the
Resolution denying the motion for reconsideration thereof. The CA affirmed the Decision 2 and Resolution3 of the National
Labor Relations Commission (NLRC) in NLRC Case No. V-000762-2001 (RAB Case No. VII-10-1661-2001) which likewise
affirmed, with modification, the decision of the Labor Arbiter declaring the respondents Marlyn Nazareno, Merlou Gerzon,
Jennifer Deiparine and Josephine Lerasan as regular employees.
The Antecedents
Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the broadcasting business and owns a network of
television and radio stations, whose operations revolve around the broadcast, transmission, and relay of telecommunication
signals. It sells and deals in or otherwise utilizes the airtime it generates from its radio and television operations. It has a
franchise as a broadcasting company, and was likewise issued a license and authority to operate by the National
Telecommunications Commission.
Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as production assistants (PAs) on different dates.
They were assigned at the news and public affairs, for various radio programs in the Cebu Broadcasting Station, with a
monthly compensation of P4,000. They were issued ABS-CBN employees’ identification cards and were required to work for a
minimum of eight hours a day, including Sundays and holidays. They were made to perform the following tasks and duties:
a) Prepare, arrange airing of commercial broadcasting based on the daily operations log and digicart of respondent ABS-CBN;
b) Coordinate, arrange personalities for air interviews;
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c) Coordinate, prepare schedule of reporters for scheduled news reporting and lead-in or incoming reports;
d) Facilitate, prepare and arrange airtime schedule for public service announcement and complaints;
e) Assist, anchor program interview, etc; and
f) Record, log clerical reports, man based control radio.4
Their respective working hours were as follows:
Name Time No. of Hours
1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7 ½
8:00 A.M.-12:00 noon
2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7 ½
3. Joy Sanchez 1:00 P.M.-10:00 P.M.(Sunday) 9 hrs.
9:00 A.M.-6:00 P.M. (WF) 9 hrs.
4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs.5
The PAs were under the control and supervision of Assistant Station Manager Dante J. Luzon, and News Manager Leo
Lastimosa.
On December 19, 1996, petitioner and the ABS-CBN Rank-and-File Employees executed a Collective Bargaining Agreement
(CBA) to be effective during the period from December 11, 1996 to December 11, 1999. However, since petitioner refused to
recognize PAs as part of the bargaining unit, respondents were not included to the CBA.6
On July 20, 2000, petitioner, through Dante Luzon, issued a Memorandum informing the PAs that effective August 1, 2000,
they would be assigned to non-drama programs, and that the DYAB studio operations would be handled by the studio
technician. Thus, their revised schedule and other assignments would be as follows:
Monday – Saturday
4:30 A.M. – 8:00 A.M. – Marlene Nazareno.
Miss Nazareno will then be assigned at the Research Dept.
From 8:00 A.M. to 12:00
4:30 P.M. – 12:00 MN – Jennifer Deiparine
Sunday
5:00 A.M. – 1:00 P.M. – Jennifer Deiparine
1:00 P.M. – 10:00 P.M. – Joy Sanchez

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Respondent Gerzon was assigned as the full-time PA of the TV News Department reporting directly to Leo Lastimosa.
On October 12, 2000, respondents filed a Complaint for Recognition of Regular Employment Status, Underpayment of
Overtime Pay, Holiday Pay, Premium Pay, Service Incentive Pay, Sick Leave Pay, and 13th Month Pay with Damages against the
petitioner before the NLRC. The Labor Arbiter directed the parties to submit their respective position papers. Upon
respondents’ failure to file their position papers within the reglementary period, Labor Arbiter Jose G. Gutierrez issued an
Order dated April 30, 2001, dismissing the complaint without prejudice for lack of interest to pursue the case. Respondents
received a copy of the Order on May 16, 2001.7 Instead of re-filing their complaint with the NLRC within 10 days from May 16,
2001, they filed, on June 11, 2001, an Earnest Motion to Refile Complaint with Motion to Admit Position Paper and Motion to
Submit Case For Resolution.8 The Labor Arbiter granted this motion in an Order dated June 18, 2001, and forthwith admitted
the position paper of the complainants. Respondents made the following allegations:
1. Complainants were engaged by respondent ABS-CBN as regular and full-time employees for a continuous period of more
than five (5) years with a monthly salary rate of Four Thousand (P4,000.00) pesos beginning 1995 up until the filing of this
complaint on November 20, 2000.
Machine copies of complainants’ ABS-CBN Employee’s Identification Card and salary vouchers are hereto attached as follows,
thus:
I. Jennifer Deiparine:
Exhibit "A" - ABS-CBN Employee’s Identification Card
Exhibit "B", - ABS-CBN Salary Voucher from Nov.
Exhibit "B-1" & 1999 to July 2000 at P4,000.00
Exhibit "B-2"
Date employed: September 15, 1995
Length of service: 5 years & nine (9) months
II. Merlou Gerzon - ABS-CBN Employee’s Identification Card
Exhibit "C"
Exhibit "D"
Exhibit "D-1" &
Exhibit "D-2" - ABS-CBN Salary Voucher from March
1999 to January 2001 at P4,000.00
Date employed: September 1, 1995
Length of service: 5 years & 10 months
III. Marlene Nazareno

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Exhibit "E" - ABS-CBN Employee’s Identification Card
Exhibit "E" - ABS-CBN Salary Voucher from Nov.
Exhibit "E-1" & 1999 to December 2000
Exhibit :E-2"
Date employed: April 17, 1996
Length of service: 5 years and one (1) month
IV. Joy Sanchez Lerasan
Exhibit "F" - ABS-CBN Employee’s Identification Card
Exhibit "F-1" - ABS-CBN Salary Voucher from Aug.
Exhibit "F-2" & 2000 to Jan. 2001
Exhibit "F-3"
Exhibit "F-4" - Certification dated July 6, 2000
Acknowledging regular status of
Complainant Joy Sanchez Lerasan
Signed by ABS-CBN Administrative
Officer May Kima Hife
Date employed: April 15, 1998
Length of service: 3 yrs. and one (1) month9
Respondents insisted that they belonged to a "work pool" from which petitioner chose persons to be given specific
assignments at its discretion, and were thus under its direct supervision and control regardless of nomenclature. They prayed
that judgment be rendered in their favor, thus:
WHEREFORE, premises considered, this Honorable Arbiter is most respectfully prayed, to issue an order compelling
defendants to pay complainants the following:
1. One Hundred Thousand Pesos (P100,000.00) each
and by way of moral damages;
2. Minimum wage differential;
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3. Thirteenth month pay differential;
4. Unpaid service incentive leave benefits;
5. Sick leave;
6. Holiday pay;
7. Premium pay;
8. Overtime pay;
9. Night shift differential.
Complainants further pray of this Arbiter to declare them regular and permanent employees of respondent ABS-CBN as a
condition precedent for their admission into the existing union and collective bargaining unit of respondent company where
they may as such acquire or otherwise perform their obligations thereto or enjoy the benefits due therefrom.
Complainants pray for such other reliefs as are just and equitable under the premises. 10
For its part, petitioner alleged in its position paper that the respondents were PAs who basically assist in the conduct of a
particular program ran by an anchor or talent. Among their duties include monitoring and receiving incoming calls from
listeners and field reporters and calls of news sources; generally, they perform leg work for the anchors during a program or a
particular production. They are considered in the industry as "program employees" in that, as distinguished from regular or
station employees, they are basically engaged by the station for a particular or specific program broadcasted by the radio
station. Petitioner asserted that as PAs, the complainants were issued talent information sheets which are updated from time
to time, and are thus made the basis to determine the programs to which they shall later be called on to assist. The program
assignments of complainants were as follows:
a. Complainant Nazareno assists in the programs:
1) Nagbagang Balita (early morning edition)
2) Infor Hayupan
3) Arangkada (morning edition)
4) Nagbagang Balita (mid-day edition)
b. Complainant Deiparine assists in the programs:
1) Unzanith
2) Serbisyo de Arevalo
3) Arangkada (evening edition)
4) Balitang K (local version)
5) Abante Subu
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6) Pangutana Lang
c. Complainant Gerzon assists in the program:
1) On Mondays and Tuesdays:
(a) Unzanith
(b) Serbisyo de Arevalo
(c) Arangkada (evening edition)
(d) Balitang K (local version)
(e) Abante Sugbu
(f) Pangutana Lang
2) On Thursdays
Nagbagang Balita
3) On Saturdays
(a) Nagbagang Balita
(b) Info Hayupan
(c) Arangkada (morning edition)
(d) Nagbagang Balita (mid-day edition)
4) On Sundays:
(a) Siesta Serenata
(b) Sunday Chismisan
(c) Timbangan sa Hustisya
(d) Sayri ang Lungsod
(e) Haranahan11
Petitioner maintained that PAs, reporters, anchors and talents occasionally "sideline" for other programs they produce, such
as drama talents in other productions. As program employees, a PA’s engagement is coterminous with the completion of the
program, and may be extended/renewed provided that the program is on-going; a PA may also be assigned to new programs
upon the cancellation of one program and the commencement of another. As such program employees, their compensation is
computed on a program basis, a fixed amount for performance services irrespective of the time consumed. At any rate,
petitioner claimed, as the payroll will show, respondents were paid all salaries and benefits due them under the law. 12
100
Petitioner also alleged that the Labor Arbiter had no jurisdiction to involve the CBA and interpret the same, especially since
respondents were not covered by the bargaining unit.
On July 30, 2001, the Labor Arbiter rendered judgment in favor of the respondents, and declared that they were regular
employees of petitioner; as such, they were awarded monetary benefits. The fallo of the decision reads:
WHEREFORE, the foregoing premises considered, judgment is hereby rendered declaring the complainants regular employees
of the respondent ABS-CBN Broadcasting Corporation and directing the same respondent to pay complainants as follows:
I - Merlou A. Gerzon P12,025.00
II - Marlyn Nazareno 12,025.00
III - Jennifer Deiparine 12,025.00
IV - Josephine Sanchez Lerazan 12,025.00
_________
P48,100.00
plus ten (10%) percent Attorney’s Fees or a TOTAL aggregate amount of PESOS: FIFTY TWO THOUSAND NINE HUNDRED TEN
(P52,910.00).
Respondent Veneranda C. Sy is absolved from any liability.
SO ORDERED.13
However, the Labor Arbiter did not award money benefits as provided in the CBA on his belief that he had no jurisdiction to
interpret and apply the agreement, as the same was within the jurisdiction of the Voluntary Arbitrator as provided in Article
261 of the Labor Code.
Respondents’ counsel received a copy of the decision on August 29, 2001. Respondent Nazareno received her copy on August
27, 2001, while the other respondents received theirs on September 8, 2001. Respondents signed and filed their Appeal
Memorandum on September 18, 2001.
For its part, petitioner filed a motion for reconsideration, which the Labor Arbiter denied and considered as an appeal,
conformably with Section 5, Rule V, of the NLRC Rules of Procedure. Petitioner forthwith appealed the decision to the NLRC,
while respondents filed a partial appeal.
In its appeal, petitioner alleged the following:
1. That the Labor Arbiter erred in reviving or re-opening this case which had long been dismissed without prejudice for more
than thirty (30) calendar days;
2. That the Labor Arbiter erred in depriving the respondent of its Constitutional right to due process of law;
3. That the Labor Arbiter erred in denying respondent’s Motion for Reconsideration on an interlocutory order on the ground
that the same is a prohibited pleading;
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4. That the Labor Arbiter erred when he ruled that the complainants are regular employees of the respondent;
5. That the Labor Arbiter erred when he ruled that the complainants are entitled to 13th month pay, service incentive leave
pay and salary differential; and
6. That the Labor Arbiter erred when he ruled that complainants are entitled to attorney’s fees. 14
On November 14, 2002, the NLRC rendered judgment modifying the decision of the Labor Arbiter. The fallo of the decision
reads:
WHEREFORE, premises considered, the decision of Labor Arbiter Jose G. Gutierrez dated 30 July 2001 is SET ASIDE and
VACATED and a new one is entered ORDERING respondent ABS-CBN Broadcasting Corporation, as follows:
1. To pay complainants of their wage differentials and other benefits arising from the CBA as of 30 September 2002 in the
aggregate amount of Two Million Five Hundred, Sixty-One Thousand Nine Hundred Forty-Eight Pesos and 22/100
(P2,561,948.22), broken down as follows:
a. Deiparine, Jennifer - P 716,113.49
b. Gerzon, Merlou - 716,113.49
c. Nazareno, Marlyn - 716,113.49
d. Lerazan, Josephine Sanchez - 413,607.75
Total - P 2,561,948.22
2. To deliver to the complainants Two Hundred Thirty-Three (233) sacks of rice as of 30 September 2002 representing their
rice subsidy in the CBA, broken down as follows:
a. Deiparine, Jennifer - 60 Sacks
b. Gerzon, Merlou - 60 Sacks
c. Nazareno, Marlyn - 60 Sacks
d. Lerazan, Josephine Sanchez - 53 Sacks
Total 233 Sacks; and
3. To grant to the complainants all the benefits of the CBA after 30 September 2002.
SO ORDERED.15
The NLRC declared that the Labor Arbiter acted conformably with the Labor Code when it granted respondents’ motion to
refile the complaint and admit their position paper. Although respondents were not parties to the CBA between petitioner
and the ABS-CBN Rank-and-File Employees Union, the NLRC nevertheless granted and computed respondents’ monetary
benefits based on the 1999 CBA, which was effective until September 2002. The NLRC also ruled that the Labor Arbiter had
jurisdiction over the complaint of respondents because they acted in their individual capacities and not as members of the
102
union. Their claim for monetary benefits was within the context of Article 217(6) of the Labor Code. The validity of
respondents’ claim does not depend upon the interpretation of the CBA.
The NLRC ruled that respondents were entitled to the benefits under the CBA because they were regular employees who
contributed to the profits of petitioner through their labor. The NLRC cited the ruling of this Court in New Pacific Timber &
Supply Company v. National Labor Relations Commission.16
Petitioner filed a motion for reconsideration, which the NLRC denied.
Petitioner thus filed a petition for certiorari under Rule 65 of the Rules of Court before the CA, raising both procedural and
substantive issues, as follows: (a) whether the NLRC acted without jurisdiction in admitting the appeal of respondents; (b)
whether the NLRC committed palpable error in scrutinizing the reopening and revival of the complaint of respondents with
the Labor Arbiter upon due notice despite the lapse of 10 days from their receipt of the July 30, 2001 Order of the Labor
Arbiter; (c) whether respondents were regular employees; (d) whether the NLRC acted without jurisdiction in entertaining and
resolving the claim of the respondents under the CBA instead of referring the same to the Voluntary Arbitrators as provided in
the CBA; and (e) whether the NLRC acted with grave abuse of discretion when it awarded monetary benefits to respondents
under the CBA although they are not members of the appropriate bargaining unit.
On February 10, 2004, the CA rendered judgment dismissing the petition. It held that the perfection of an appeal shall be upon
the expiration of the last day to appeal by all parties, should there be several parties to a case. Since respondents received
their copies of the decision on September 8, 2001 (except respondent Nazareno who received her copy of the decision on
August 27, 2001), they had until September 18, 2001 within which to file their Appeal Memorandum. Moreover, the CA
declared that respondents’ failure to submit their position paper on time is not a ground to strike out the paper from the
records, much less dismiss a complaint.
Anent the substantive issues, the appellate court stated that respondents are not mere project employees, but regular
employees who perform tasks necessary and desirable in the usual trade and business of petitioner and not just its project
employees. Moreover, the CA added, the award of benefits accorded to rank-and-file employees under the 1996-1999 CBA is
a necessary consequence of the NLRC ruling that respondents, as PAs, are regular employees.
Finding no merit in petitioner’s motion for reconsideration, the CA denied the same in a Resolution 17 dated June 16, 2004.
Petitioner thus filed the instant petition for review on certiorari and raises the following assignments of error:
1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT JURISDICTION AND GRAVELY ERRED IN UPHOLDING THE NATIONAL
LABOR RELATIONS COMMISSION NOTWITHSTANDING THE PATENT NULLITY OF THE LATTER’S DECISION AND RESOLUTION.
2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE NLRC FINDING RESPONDENTS
REGULAR EMPLOYEES.
3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE NLRC AWARDING CBA BENEFITS
TO RESPONDENTS.18
Considering that the assignments of error are interrelated, the Court shall resolve them simultaneously.
Petitioner asserts that the appellate court committed palpable and serious error of law when it affirmed the rulings of the
NLRC, and entertained respondents’ appeal from the decision of the Labor Arbiter despite the admitted lapse of the
reglementary period within which to perfect the same. Petitioner likewise maintains that the 10-day period to appeal must be
reckoned from receipt of a party’s counsel, not from the time the party learns of the decision, that is, notice to counsel is
notice to party and not the other way around. Finally, petitioner argues that the reopening of a complaint which the Labor
103
Arbiter has dismissed without prejudice is a clear violation of Section 1, Rule V of the NLRC Rules; such order of dismissal had
already attained finality and can no longer be set aside.
Respondents, on the other hand, allege that their late appeal is a non-issue because it was petitioner’s own timely appeal that
empowered the NLRC to reopen the case. They assert that although the appeal was filed 10 days late, it may still be given due
course in the interest of substantial justice as an exception to the general rule that the negligence of a counsel binds the
client. On the issue of the late filing of their position paper, they maintain that this is not a ground to strike it out from the
records or dismiss the complaint.
We find no merit in the petition.
We agree with petitioner’s contention that the perfection of an appeal within the statutory or reglementary period is not only
mandatory, but also jurisdictional; failure to do so renders the assailed decision final and executory and deprives the appellate
court or body of the legal authority to alter the final judgment, much less entertain the appeal. However, this Court has time
and again ruled that in exceptional cases, a belated appeal may be given due course if greater injustice may occur if an appeal
is not given due course than if the reglementary period to appeal were strictly followed. 19 The Court resorted to this
extraordinary measure even at the expense of sacrificing order and efficiency if only to serve the greater principles of
substantial justice and equity.20
In the case at bar, the NLRC did not commit a grave abuse of its discretion in giving Article 223 21 of the Labor Code a liberal
application to prevent the miscarriage of justice. Technicality should not be allowed to stand in the way of equitably and
completely resolving the rights and obligations of the parties.22 We have held in a catena of cases that technical rules are not
binding in labor cases and are not to be applied strictly if the result would be detrimental to the workingman. 23
Admittedly, respondents failed to perfect their appeal from the decision of the Labor Arbiter within the reglementary period
therefor. However, petitioner perfected its appeal within the period, and since petitioner had filed a timely appeal, the NLRC
acquired jurisdiction over the case to give due course to its appeal and render the decision of November 14, 2002. Case law is
that the party who failed to appeal from the decision of the Labor Arbiter to the NLRC can still participate in a separate appeal
timely filed by the adverse party as the situation is considered to be of greater benefit to both parties. 24
We find no merit in petitioner’s contention that the Labor Arbiter abused his discretion when he admitted respondents’
position paper which had been belatedly filed. It bears stressing that the Labor Arbiter is mandated by law to use every
reasonable means to ascertain the facts in each case speedily and objectively, without technicalities of law or procedure, all in
the interest of due process.25 Indeed, as stressed by the appellate court, respondents’ failure to submit a position paper on
time is not a ground for striking out the paper from the records, much less for dismissing a complaint. 26 Likewise, there is
simply no truth to petitioner’s assertion that it was denied due process when the Labor Arbiter admitted respondents’
position paper without requiring it to file a comment before admitting said position paper. The essence of due process in
administrative proceedings is simply an opportunity to explain one’s side or an opportunity to seek reconsideration of the
action or ruling complained of. Obviously, there is nothing in the records that would suggest that petitioner had absolute lack
of opportunity to be heard.27 Petitioner had the right to file a motion for reconsideration of the Labor Arbiter’s admission of
respondents’ position paper, and even file a Reply thereto. In fact, petitioner filed its position paper on April 2, 2001. It must
be stressed that Article 280 of the Labor Code was encoded in our statute books to hinder the circumvention by unscrupulous
employers of the employees’ right to security of tenure by indiscriminately and absolutely ruling out all written and oral
agreements inharmonious with the concept of regular employment defined therein.28
We quote with approval the following pronouncement of the NLRC:
The complainants, on the other hand, contend that respondents assailed the Labor Arbiter’s order dated 18 June 2001 as
violative of the NLRC Rules of Procedure and as such is violative of their right to procedural due process. That while suggesting
that an Order be instead issued by the Labor Arbiter for complainants to refile this case, respondents impliedly submit that
there is not any substantial damage or prejudice upon the refiling, even so, respondents’ suggestion acknowledges
104
complainants right to prosecute this case, albeit with the burden of repeating the same procedure, thus, entailing additional
time, efforts, litigation cost and precious time for the Arbiter to repeat the same process twice. Respondent’s suggestion,
betrays its notion of prolonging, rather than promoting the early resolution of the case.
Although the Labor Arbiter in his Order dated 18 June 2001 which revived and re-opened the dismissed case without prejudice
beyond the ten (10) day reglementary period had inadvertently failed to follow Section 16, Rule V, Rules Procedure of the
NLRC which states:
"A party may file a motion to revive or re-open a case dismissed without prejudice within ten (10) calendar days from receipt
of notice of the order dismissing the same; otherwise, his only remedy shall be to re-file the case in the arbitration branch of
origin."
the same is not a serious flaw that had prejudiced the respondents’ right to due process. The case can still be refiled because
it has not yet prescribed. Anyway, Article 221 of the Labor Code provides:
"In any proceedings before the Commission or any of the Labor Arbiters, the rules of evidence prevailing in courts of law or
equity shall not be controlling and it is the spirit and intention of this Code that the Commission and its members and the
Labor Arbiters shall use every and all reasonable means to ascertain the facts in each case speedily and objectively and
without regard to technicalities of law or procedure, all in the interest of due process."
The admission by the Labor Arbiter of the complainants’ Position Paper and Supplemental Manifestation which were belatedly
filed just only shows that he acted within his discretion as he is enjoined by law to use every reasonable means to ascertain
the facts in each case speedily and objectively, without regard to technicalities of law or procedure, all in the interest of due
process. Indeed, the failure to submit a position paper on time is not a ground for striking out the paper from the records,
much less for dismissing a complaint in the case of the complainant. (University of Immaculate Conception vs. UIC Teaching
and Non-Teaching Personnel Employees, G.R. No. 144702, July 31, 2001).
"In admitting the respondents’ position paper albeit late, the Labor Arbiter acted within her discretion. In fact, she is enjoined
by law to use every reasonable means to ascertain the facts in each case speedily and objectively, without technicalities of law
or procedure, all in the interest of due process". (Panlilio vs. NLRC, 281 SCRA 53).
The respondents were given by the Labor Arbiter the opportunity to submit position paper. In fact, the respondents had filed
their position paper on 2 April 2001. What is material in the compliance of due process is the fact that the parties are given
the opportunities to submit position papers.
"Due process requirements are satisfied where the parties are given the opportunities to submit position papers". (Laurence
vs. NLRC, 205 SCRA 737).
Thus, the respondent was not deprived of its Constitutional right to due process of law.29
We reject, as barren of factual basis, petitioner’s contention that respondents are considered as its talents, hence, not regular
employees of the broadcasting company. Petitioner’s claim that the functions performed by the respondents are not at all
necessary, desirable, or even vital to its trade or business is belied by the evidence on record.
Case law is that this Court has always accorded respect and finality to the findings of fact of the CA, particularly if they
coincide with those of the Labor Arbiter and the National Labor Relations Commission, when supported by substantial
evidence.30 The question of whether respondents are regular or project employees or independent contractors is essentially
factual in nature; nonetheless, the Court is constrained to resolve it due to its tremendous effects to the legions of production
assistants working in the Philippine broadcasting industry.
105
We agree with respondents’ contention that where a person has rendered at least one year of service, regardless of the
nature of the activity performed, or where the work is continuous or intermittent, the employment is considered regular as
long as the activity exists, the reason being that a customary appointment is not indispensable before one may be formally
declared as having attained regular status. Article 280 of the Labor Code provides:
ART. 280. REGULAR AND CASUAL EMPLOYMENT.—The provisions of written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been
engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer except
where the employment has been fixed for a specific project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in
nature and the employment is for the duration of the season.
In Universal Robina Corporation v. Catapang,31 the Court reiterated the test in determining whether one is a regular employee:
The primary standard, therefore, of determining regular employment is the reasonable connection between the particular
activity performed by the employee in relation to the usual trade or business of the employer. The test is whether the former
is usually necessary or desirable in the usual business or trade of the employer. The connection can be determined by
considering the nature of work performed and its relation to the scheme of the particular business or trade in its entirety.
Also, if the employee has been performing the job for at least a year, even if the performance is not continuous and merely
intermittent, the law deems repeated and continuing need for its performance as sufficient evidence of the necessity if not
indispensability of that activity to the business. Hence, the employment is considered regular, but only with respect to such
activity and while such activity exists.32
As elaborated by this Court in Magsalin v. National Organization of Working Men:33
Even while the language of law might have been more definitive, the clarity of its spirit and intent, i.e., to ensure a "regular"
worker’s security of tenure, however, can hardly be doubted. In determining whether an employment should be considered
regular or non-regular, the applicable test is the reasonable connection between the particular activity performed by the
employee in relation to the usual business or trade of the employer. The standard, supplied by the law itself, is whether the
work undertaken is necessary or desirable in the usual business or trade of the employer, a fact that can be assessed by
looking into the nature of the services rendered and its relation to the general scheme under which the business or trade is
pursued in the usual course. It is distinguished from a specific undertaking that is divorced from the normal activities required
in carrying on the particular business or trade. But, although the work to be performed is only for a specific project or
seasonal, where a person thus engaged has been performing the job for at least one year, even if the performance is not
continuous or is merely intermittent, the law deems the repeated and continuing need for its performance as being sufficient
to indicate the necessity or desirability of that activity to the business or trade of the employer. The employment of such
person is also then deemed to be regular with respect to such activity and while such activity exists. 34
Not considered regular employees are "project employees," the completion or termination of which is more or less
determinable at the time of employment, such as those employed in connection with a particular construction project, and
"seasonal employees" whose employment by its nature is only desirable for a limited period of time. Even then, any employee
who has rendered at least one year of service, whether continuous or intermittent, is deemed regular with respect to the
activity performed and while such activity actually exists.
It is of no moment that petitioner hired respondents as "talents." The fact that respondents received pre-agreed "talent fees"
instead of salaries, that they did not observe the required office hours, and that they were permitted to join other productions
during their free time are not conclusive of the nature of their employment. Respondents cannot be considered "talents"
because they are not actors or actresses or radio specialists or mere clerks or utility employees. They are regular employees
who perform several different duties under the control and direction of ABS-CBN executives and supervisors.
106
Thus, there are two kinds of regular employees under the law: (1) those engaged to perform activities which are necessary or
desirable in the usual business or trade of the employer; and (2) those casual employees who have rendered at least one year
of service, whether continuous or broken, with respect to the activities in which they are employed. 35
The law overrides such conditions which are prejudicial to the interest of the worker whose weak bargaining situation
necessitates the succor of the State. What determines whether a certain employment is regular or otherwise is not the will or
word of the employer, to which the worker oftentimes acquiesces, much less the procedure of hiring the employee or the
manner of paying the salary or the actual time spent at work. It is the character of the activities performed in relation to the
particular trade or business taking into account all the circumstances, and in some cases the length of time of its performance
and its continued existence.36 It is obvious that one year after they were employed by petitioner, respondents became regular
employees by operation of law.37
Additionally, respondents cannot be considered as project or program employees because no evidence was presented to
show that the duration and scope of the project were determined or specified at the time of their engagement. Under existing
jurisprudence, project could refer to two distinguishable types of activities. First, a project may refer to a particular job or
undertaking that is within the regular or usual business of the employer, but which is distinct and separate, and identifiable as
such, from the other undertakings of the company. Such job or undertaking begins and ends at determined or determinable
times. Second, the term project may also refer to a particular job or undertaking that is not within the regular business of the
employer. Such a job or undertaking must also be identifiably separate and distinct from the ordinary or regular business
operations of the employer. The job or undertaking also begins and ends at determined or determinable times. 38
The principal test is whether or not the project employees were assigned to carry out a specific project or undertaking, the
duration and scope of which were specified at the time the employees were engaged for that project. 39
In this case, it is undisputed that respondents had continuously performed the same activities for an average of five years.
Their assigned tasks are necessary or desirable in the usual business or trade of the petitioner. The persisting need for their
services is sufficient evidence of the necessity and indispensability of such services to petitioner’s business or trade. 40 While
length of time may not be a sole controlling test for project employment, it can be a strong factor to determine whether the
employee was hired for a specific undertaking or in fact tasked to perform functions which are vital, necessary and
indispensable to the usual trade or business of the employer.41 We note further that petitioner did not report the termination
of respondents’ employment in the particular "project" to the Department of Labor and Employment Regional Office having
jurisdiction over the workplace within 30 days following the date of their separation from work, using the prescribed form on
employees’ termination/ dismissals/suspensions.42
As gleaned from the records of this case, petitioner itself is not certain how to categorize respondents. In its earlier pleadings,
petitioner classified respondents as program employees, and in later pleadings, independent contractors. Program employees,
or project employees, are different from independent contractors because in the case of the latter, no employer-employee
relationship exists.
Petitioner’s reliance on the ruling of this Court in Sonza v. ABS-CBN Broadcasting Corporation 43 is misplaced. In that case, the
Court explained why Jose Sonza, a well-known television and radio personality, was an independent contractor and not a
regular employee:
A. Selection and Engagement of Employee
ABS-CBN engaged SONZA’S services to co-host its television and radio programs because of SONZA’S peculiar skills, talent and
celebrity status. SONZA contends that the "discretion used by respondent in specifically selecting and hiring complainant over
other broadcasters of possibly similar experience and qualification as complainant belies respondent’s claim of independent
contractorship."
107
Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from
ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent and celebrity status not
possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an independent contractual relationship.
If SONZA did not possess such unique skills, talent and celebrity status, ABS-CBN would not have entered into the Agreement
with SONZA but would have hired him through its personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must consider all
the circumstances of the relationship, with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that this mode
of fee payment shows that he was an employee of ABS-CBN. SONZA also points out that ABS-CBN granted him benefits and
privileges "which he would not have enjoyed if he were truly the subject of a valid job contract."
All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA were ABS-
CBN’s employee, there would be no need for the parties to stipulate on benefits such as "SSS, Medicare, x x x and 13th month
pay which the law automatically incorporates into every employer-employee contract. Whatever benefits SONZA enjoyed
arose from contract and not because of an employer-employee relationship.
SONZA’s talent fees, amounting to P317,000 monthly in the second and third year, are so huge and out of the ordinary that
they indicate more an independent contractual relationship rather than an employer-employee relationship. ABS-CBN agreed
to pay SONZA such huge talent fees precisely because of SONZA’S unique skills, talent and celebrity status not possessed by
ordinary employees. Obviously, SONZA acting alone possessed enough bargaining power to demand and receive such huge
talent fees for his services. The power to bargain talent fees way above the salary scales of ordinary employees is a
circumstance indicative, but not conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an independent
contractor. The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC is the AGENT of SONZA, to
whom MJMDC would have to turn over any talent fee accruing under the Agreement. 44
In the case at bar, however, the employer-employee relationship between petitioner and respondents has been proven.
First. In the selection and engagement of respondents, no peculiar or unique skill, talent or celebrity status was required from
them because they were merely hired through petitioner’s personnel department just like any ordinary employee.
Second. The so-called "talent fees" of respondents correspond to wages given as a result of an employer-employee
relationship. Respondents did not have the power to bargain for huge talent fees, a circumstance negating independent
contractual relationship.
Third. Petitioner could always discharge respondents should it find their work unsatisfactory, and respondents are highly
dependent on the petitioner for continued work.
Fourth. The degree of control and supervision exercised by petitioner over respondents through its supervisors negates the
allegation that respondents are independent contractors.
The presumption is that when the work done is an integral part of the regular business of the employer and when the worker,
relative to the employer, does not furnish an independent business or professional service, such work is a regular employment
of such employee and not an independent contractor.45 The Court will peruse beyond any such agreement to examine the
facts that typify the parties’ actual relationship.46
108
It follows then that respondents are entitled to the benefits provided for in the existing CBA between petitioner and its rank-
and-file employees. As regular employees, respondents are entitled to the benefits granted to all other regular employees of
petitioner under the CBA.47 We quote with approval the ruling of the appellate court, that the reason why production
assistants were excluded from the CBA is precisely because they were erroneously classified and treated as project employees
by petitioner:
x x x The award in favor of private respondents of the benefits accorded to rank-and-file employees of ABS-CBN under the
1996-1999 CBA is a necessary consequence of public respondent’s ruling that private respondents as production assistants of
petitioner are regular employees. The monetary award is not considered as claims involving the interpretation or
implementation of the collective bargaining agreement. The reason why production assistants were excluded from the said
agreement is precisely because they were classified and treated as project employees by petitioner.
As earlier stated, it is not the will or word of the employer which determines the nature of employment of an employee but
the nature of the activities performed by such employee in relation to the particular business or trade of the employer.
Considering that We have clearly found that private respondents are regular employees of petitioner, their exclusion from the
said CBA on the misplaced belief of the parties to the said agreement that they are project employees, is therefore not proper.
Finding said private respondents as regular employees and not as mere project employees, they must be accorded the
benefits due under the said Collective Bargaining Agreement.
A collective bargaining agreement is a contract entered into by the union representing the employees and the employer.
However, even the non-member employees are entitled to the benefits of the contract. To accord its benefits only to
members of the union without any valid reason would constitute undue discrimination against non-members. A collective
bargaining agreement is binding on all employees of the company. Therefore, whatever benefits are given to the other
employees of ABS-CBN must likewise be accorded to private respondents who were regular employees of petitioner. 48
Besides, only talent-artists were excluded from the CBA and not production assistants who are regular employees of the
respondents. Moreover, under Article 1702 of the New Civil Code: "In case of doubt, all labor legislation and all labor contracts
shall be construed in favor of the safety and decent living of the laborer."
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The assailed Decision and Resolution of the Court of
Appeals in CA-G.R. SP No. 76582 are AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. 183810 January 21, 2010
FARLEY FULACHE, MANOLO JABONERO, DAVID CASTILLO, JEFFREY LAGUNZAD, MAGDALENA MALIG-ON BIGNO, FRANCISCO
CABAS, JR., HARVEY PONCE and ALAN C. ALMENDRAS, Petitioners,
vs.
ABS-CBN BROADCASTING CORPORATION, Respondent.
DECISION
BRION, J.:
The petition for review on certiorari1 now before us seeks to set aside the decision2 and resolution3 of the Court of Appeals,
Nineteenth Division (CA) promulgated on March 25, 2008 and July 8, 2008, respectively, in CA- G.R. SP No. 01838. 4
The Antecedents
109
The Regularization Case.
In June 2001, petitioners Farley Fulache, Manolo Jabonero, David Castillo, Jeffrey Lagunzad, Magdalena Malig-on Bigno,
Francisco Cabas, Jr., Harvey Ponce and Alan C. Almendras (petitioners) and Cresente Atinen (Atinen) filed two separate
complaints for regularization, unfair labor practice and several money claims (regularization case) against ABS-CBN
Broadcasting Corporation-Cebu (ABS-CBN). Fulache and Castillo were drivers/cameramen; Atinen, Lagunzad and Jabonero
were drivers; Ponce and Almendras were cameramen/editors; Bigno was a PA/Teleprompter Operator-Editing, and Cabas was
a VTR man/editor. The complaints (RAB VII Case Nos. 06-1100-01 and 06-1176-01) were consolidated and were assigned to
Labor Arbiter Julie C. Rendoque.
The petitioners alleged that on December 17, 1999, ABS-CBN and the ABS-CBN Rank-and-File Employees Union (Union)
executed a collective bargaining agreement (CBA) effective December 11, 1999 to December 10, 2002; they only became
aware of the CBA when they obtained copies of the agreement; they learned that they had been excluded from its coverage
as ABS-CBN considered them temporary and not regular employees, in violation of the Labor Code. They claimed they had
already rendered more than a year of service in the company and, therefore, should have been recognized as regular
employees entitled to security of tenure and to the privileges and benefits enjoyed by regular employees. They asked that
they be paid overtime, night shift differential, holiday, rest day and service incentive leave pay. They also prayed for an award
of moral damages and attorney’s fees.
ABS-CBN explained the nature of the petitioners’ employment within the framework of its operations. It claimed that: it
operates in several divisions, one of which is the Regional Network Group (RNG). The RNG exercises control and supervision
over all the ABS-CBN local stations to ensure that ABS-CBN programs are extended to the provinces. A local station, like the
Cebu station, can resort to cost-effective and cost-saving measures to remain viable; local stations produced shows and
programs that were constantly changing because of the competitive nature of the industry, the changing public demand or
preference, and the seasonal nature of media broadcasting programs. ABS-CBN claimed, too, that the production of
programs per se is not necessary or desirable in its business because it could generate profits by selling airtime to block-timers
or through advertising.
ABS-CBN further claimed that to cope with fluctuating business conditions, it contracts on a case-to-case basis the services of
persons who possess the necessary talent, skills, training, expertise or qualifications to meet the requirements of its programs
and productions. These contracted persons are called "talents" and are considered independent contractors who offer their
services to broadcasting companies.
Instead of salaries, ABS-CBN pointed out that talents are paid a pre-arranged consideration called "talent fee" taken from the
budget of a particular program and subject to a ten percent (10%) withholding tax. Talents do not undergo probation. Their
services are engaged for a specific program or production, or a segment thereof. Their contracts are terminated once the
program, production or segment is completed.
ABS-CBN alleged that the petitioners’ services were contracted on various dates by its Cebu station as independent
contractors/off camera talents, and they were not entitled to regularization in these capacities.
On January 17, 2002, Labor Arbiter Rendoque rendered his decision5 holding that the petitioners were regular employees of
ABS-CBN, not independent contractors, and are entitled to the benefits and privileges of regular employees.
ABS-CBN appealed the ruling to the National Labor Relations Commission (NLRC) Fourth Division, mainly contending that the
petitioners were independent contractors, not regular employees.6
The Illegal Dismissal Case.
While the appeal of the regularization case was pending, ABS-CBN dismissed Fulache, Jabonero, Castillo, Lagunzad and Atinen
(all drivers) for their refusal to sign up contracts of employment with service contractor Able Services. The four drivers and
110
Atinen responded by filing a complaint for illegal dismissal (illegal dismissal case). The case (RAB VII Case No. 07-1300-2002)
was likewise handled by Labor Arbiter Rendoque.
In defense, ABS-CBN alleged that even before the labor arbiter rendered his decision of January 17, 2002 in the regularization
case, it had already undertaken a comprehensive review of its existing organizational structure to address its operational
requirements. It then decided to course through legitimate service contractors all driving, messengerial, janitorial, utility,
make-up, wardrobe and security services for both the Metro Manila and provincial stations, to improve its operations and to
make them more economically viable. Fulache, Jabonero, Castillo, Lagunzad and Atinen were not singled out for dismissal; as
drivers, they were dismissed because they belonged to a job category that had already been contracted out. It argued that
even if the petitioners had been found to have been illegally dismissed, their reinstatement had become a physical
impossibility because their employer-employee relationships had been strained and that Atinen had executed a quitclaim and
release.
In her April 21, 2003 decision in the illegal dismissal case, 7 Labor Arbiter Rendoque upheld the validity of ABS-CBN's
contracting out of certain work or services in its operations. The labor arbiter found that petitioners Fulache, Jabonero,
Castillo, Lagunzad and Atinen had been dismissed due to redundancy, an authorized cause under the law. 8 He awarded them
separation pay of one (1) month’s salary for every year of service.
Again, ABS-CBN appealed to the NLRC which rendered on December 15, 2004 a joint decision on the regularization and illegal
dismissal cases.9 The NLRC ruled that there was an employer-employee relationship between the petitioners and ABS-CBN as
the company exercised control over the petitioners in the performance of their work; the petitioners were regular employees
because they were engaged to perform activities usually necessary or desirable in ABS-CBN's trade or business; they cannot be
considered contractual employees since they were not paid for the result of their work, but on a monthly basis and were
required to do their work in accordance with the company’s schedule. The NLRC thus affirmed with modification the labor
arbiter's regularization decision of January 17, 2002, additionally granting the petitioners CBA benefits and privileges.
The NLRC reversed the labor arbiter’s ruling in the illegal dismissal case; it found that petitioners Fulache, Jabonero, Castillo,
Lagunzad and Atinen had been illegally dismissed and awarded them backwages and separation pay in lieu of reinstatement.
Under both cases, the petitioners were awarded CBA benefits and privileges from the time they became regular employees up
to the time of their dismissal.
The petitioners moved for reconsideration, contending that Fulache, Jabonero, Castillo and Lagunzad are entitled to
reinstatement and full backwages, salary increases and other CBA benefits as well as 13th month pay, cash conversion of sick
and vacation leaves, medical and dental allowances, educational benefits and service awards. Atinen appeared to have been
excluded from the motion and there was no showing that he sought reconsideration on his own.
ABS-CBN likewise moved for the reconsideration of the decision, reiterating that Fulache, Jabonero, Castillo and Lagunzad
were independent contractors, whose services had been terminated due to redundancy; thus, no backwages should have
been awarded. It further argued that the petitioners were not entitled to the CBA benefits because they never claimed these
benefits in their position paper before the labor arbiter while the NLRC failed to make a clear and positive finding that that
they were part of the bargaining unit; neither was there evidence to support this finding.
The NLRC resolved the motions for reconsideration on March 24, 200610 by reinstating the two separate decisions of the labor
arbiter dated January 17, 2002,11 and April 21, 2003,12 respectively. Thus, on the regularization issue, the NLRC stood by the
ruling that the petitioners were regular employees entitled to the benefits and privileges of regular employees. On the illegal
dismissal case, the petitioners, while recognized as regular employees, were declared dismissed due to redundancy. The NLRC
denied the petitioners’ second motion for reconsideration in its order of May 31, 2006 for being a prohibited pleading. 13
The CA Petition and Decision
111
The petitioners went to the CA through a petition for certiorari under Rule 65 of the Rules of Court.14 They charged the NLRC
with grave abuse of discretion in: (1) denying them the benefits under the CBA; (2) finding no evidence that they are part of
the company’s bargaining unit; (3) not reinstating and awarding backwages to Fulache, Jabonero, Castillo and Lagunzad; and
(4) ruling that they are not entitled to damages and attorney’s fees.
ABS-CBN, on the other hand, questioned the propriety of the petitioners’ use of a certiorari petition. It argued that the proper
remedy for the petitioners was an appeal from the reinstated decisions of the labor arbiter.
In its decision of March 25, 2008,15 the appellate court brushed aside ABS-CBN’s procedural question, holding that the petition
was justified because there is no plain, speedy or adequate remedy from a final decision, order or resolution of the NLRC; the
reinstatement of the labor arbiter’s decisions did not mean that the proceedings reverted back to the level of the arbiter. It
likewise affirmed the NLRC ruling that the petitioners’ second motion for reconsideration is a prohibited pleading under the
NLRC rules.16
On the merits of the case, the CA ruled that the petitioners failed to prove their claim to CBA benefits since they never raised
the issue in the compulsory arbitration proceedings, and did not appeal the labor arbiter’s decision which was silent on their
entitlement to CBA benefits. The CA found that the petitioners failed to show with specificity how Section 1 (Appropriate
Bargaining Unit) and the other provisions of the CBA applied to them.
On the illegal dismissal issue, the CA upheld the NLRC decision reinstating the labor arbiter’s April 21, 2003 ruling. 17 Thus, the
drivers – Fulache, Jabonero, Castillo and Lagunzad – were not illegally dismissed as their separation from the service was due
to redundancy; they had not presented any evidence that ABS-CBN abused its prerogative in contracting out the services of
drivers. Except for separation pay, the CA denied the petitioners’ claim for backwages, moral and exemplary damages, and
attorney’s fees.
The petitioners moved for reconsideration, but the CA denied the motion in a resolution promulgated on July 8, 2008. 18 Hence,
the present petition.
The Petition
The petitioners challenge the CA ruling on both procedural and substantive grounds. As procedural questions, they submit
that the CA erred in: (1) affirming the NLRC resolution which reversed its own decision; (2) sustaining the NLRC ruling that
their second motion for reconsideration is a prohibited pleading; (3) not ruling that ABS-CBN admitted in its position paper
before the labor arbiter that they were members of the bargaining unit as the matter was not raised in its appeal to the NLRC;
and, (4) not ruling that notwithstanding their failure to appeal from the first decision of the Labor Arbiter, they can still
participate in the appeal filed by ABS-CBN regarding their employment status.
On the substantive aspect, the petitioners contend that the CA gravely erred in: (1) not considering the evidence submitted to
the NLRC on appeal to bolster their claim that they were members of the bargaining unit and therefore entitled to the CBA
benefits; (2) not ordering ABS-CBN to pay the petitioners’ salaries, allowances and CBA benefits after the NLRC has declared
that they were regular employees of ABS-CBN; (3) not ruling that under existing jurisprudence, the position of driver cannot
be declared redundant, and that the petitioners-drivers were illegally dismissed; and, (4) not ruling that the petitioners were
entitled to damages and attorney’s fees.
The petitioners argue that the NLRC resolution of March 24, 200619 which set aside its joint decision of December 15,
200420 and reinstated the twin decisions of the labor arbiter,21 had the effect of promulgating a new decision based on issues
that were not raised in ABS-CBN’s partial appeal to the NLRC. They submit that the NLRC should have allowed their second
motion for reconsideration so that it may be able to equitably evaluate the parties’ "conflicting versions of the facts" instead
of denying the motion on a mere technicality.
112
On the question of their CBA coverage, the petitioners contend that the CA erred in not considering that ABS-CBN admitted
their membership in the bargaining unit, for nowhere in its partial appeal from the labor arbiter’s decision in the
regularization case did it allege that the petitioners failed to prove that they are members of the bargaining unit; instead, the
company stood by its position that the petitioners were not entitled to the CBA benefits since they were independent
contractors/program employees.
The petitioners submit that while they did not appeal the labor arbiter’s decision in the regularization case, ABS-CBN raised
the employment status issue in its own appeal to the NLRC; this appeal laid this issue open for review. They argue that they
could still participate in the appeal proceedings at the NLRC; pursue their position on the issue; and introduce evidence as
they did in their reply to the company’s appeal.22 They bewail the appellate court’s failure to consider the evidence they
presented to the NLRC (consisting of documents and sworn statements enumerating the activities they are performing) clearly
indicating that they are part of the rank-and-file bargaining unit at ABS-CBN.
The petitioners then proceeded to describe the work they render for the company. Collectively, they claim that they work as
assistants in the production of the Cebuano news program broadcast daily over ABS-CBN Channel 3, as follows: Fulache,
Jabonero, Castillo and Lagunzad as production assistants to drive the news team; Ponce and Almendras, to shoot scenes and
events with the use of cameras owned by ABS-CBN; Malig-on Bigno, as studio production assistant and assistant
editor/teleprompter operator; and Cabas, Jr., as production assistant for video editing and operating the VTR machine
recorder. As production assistants, the petitioners submit that they are rank-and-file employees (citing in support of their
position the Court’s ruling in ABS-CBN Broadcasting Corp. v. Nazareno23) who are entitled to salary increases and other
benefits under the CBA. Relying on the Court’s ruling in New Pacific Timber and Supply Company, Inc. v. NLRC,24 they posit that
to exclude them from the CBA "would constitute undue discrimination and would deprive them of monetary benefits they
would otherwise be entitled to."
As their final point, the petitioners argue that even if they were not able to prove that they were members of the bargaining
unit, the CA should not have dismissed their petition. When the CA affirmed the rulings of both the labor arbiter and the NLRC
that they are regular employees, the CA should have ordered ABS-CBN to recognize their regular employee status and to give
them the salaries, allowances and other benefits and privileges under the CBA. 1avvphi1
On the dismissal of Fulache, Jabonero, Castillo and Lagunzad, the petitioners impute bad faith on ABS-CBN when it abolished
the positions of drivers claiming that the company failed to comply with the requisites of a valid redundancy action. They
maintain that ABS-CBN did not present any evidence on the new staffing pattern as approved by the management of the
company, and did not even bother to show why it considered the positions of drivers superfluous and unnecessary; it is not
true that the positions of drivers no longer existed because these positions were contracted out to an agency that, in turn,
recruited four drivers to take the place of Fulache, Jabonero, Castillo and Lagunzad. As further indication that the redundancy
action against the four drivers was done in bad faith, the petitioners call attention to ABS-CBN’s abolition of the position of
drivers after the labor arbiter rendered her decision declaring Fulache, Jabonero, Castillo and Lagunzad regular company
employees. The petitioners object to the dismissal of the four drivers when they refused to sign resignation letters and join
Able Services, a contracting agency, contending that the four had no reason to resign after the labor arbiter declared them
regular company employees.
Since their dismissal was illegal and attended by bad faith, the petitioners insist that they should be reinstated with
backwages, and should likewise be awarded moral and exemplary damages, and attorney's fees.
The Case for ABS-CBN
In its Comment filed on January 28, 2009,25 ABS-CBN presents several grounds which may be synthesized as follows:
1. The petition raises questions of fact and not of law.
2. The CA committed no error in affirming the resolution of the NLRC reinstating the decisions of the labor arbiter.
113
ABS-CBN submits that the petition should be dismissed for having raised questions of fact and not of law in violation of Rule
45 of the Rules of Court. It argues that the question of whether the petitioners were covered by the CBA (and therefore
entitled to the CBA benefits) and whether the petitioners were illegally dismissed because of redundancy, are factual
questions that cannot be reviewed on certiorari because the Court is not a trier of facts.
ABS-CBN dismisses the petitioners’ issues and arguments as mere rehash of what they raised in their pleadings with the CA
and as grounds that do not warrant further consideration. It further contends that because the petitioners did not appeal the
labor arbiter decisions, these decisions had lapsed to finality and could no longer be the subject of a petition for certiorari; the
petitioners cannot obtain from the appellate court affirmative relief other than those granted in the appealed decision. It also
argues that the NLRC did not commit any grave abuse of discretion in reinstating the twin decisions of the labor arbiter,
thereby affirming that no CBA benefits can be awarded to the petitioners; in the absence of any illegal dismissal, the
petitioners were not entitled to reinstatement, backwages, damages, and attorney's fees.
The Court's Ruling
We first resolve the parties’ procedural questions.
ABS-CBN wants the petition to be dismissed outright for its alleged failure to comply with the requirement of Rule 45 of the
Rules of Court that the petition raises only questions of law.26
We find no impropriety in the petition from the standpoint of Rule 45. The petitioners do not question the findings of facts of
the assailed decisions. They question the misapplication of the law and jurisprudence on the facts recognized by the decisions.
For example, they question as contrary to law their exclusion from the CBA after they were recognized as regular rank-and-file
employees of ABS-CBN. They also question the basis in law of the dismissal of the four drivers and the legal propriety of the
redundancy action taken against. To reiterate the established distinctions between questions of law and questions of fact, we
quote hereunder our ruling in New Rural Bank of Guimba (N.E.) Inc. v. Fermina S. Abad and Rafael Susan:27
We reiterate the distinction between a question of law and a question of fact. A question of law exists when the doubt or
controversy concerns the correct application of law or jurisprudence to a certain set of facts; or when the issue does not call
for an examination of the probative value of the evidence presented, the truth or falsehood of the facts being admitted. A
question of fact exists when a doubt or difference arises as to the truth or falsehood of facts or when the query invites
calibration of the whole evidence considering mainly the credibility of the witnesses, the existence and relevancy of specific
surrounding circumstances, as well as their relation to each other and to the whole, and the probability of the situation.
We also find no error in the CA’s affirmation of the denial of the petitioners’ second motion for reconsideration of the March
24, 2006 resolution of the NLRC reinstating the labor arbiter’s twin decisions. The petitioners’ second motion for
reconsideration was a prohibited pleading under the NLRC rules of procedure. 28
The parties’ other procedural questions directly bear on the merits of their positions and are discussed and resolved below,
together with the core substantive issues of: (1) whether the petitioners, as regular employees, are members of the
bargaining unit entitled to CBA benefits; and (2) whether petitioners Fulache, Jabonero, Castillo and Lagunzad were illegally
dismissed.
The Claim for CBA Benefits
We find merit in the petitioners’ positions.
As regular employees, the petitioners fall within the coverage of the bargaining unit and are therefore entitled to CBA benefits
as a matter of law and contract. In the root decision (the labor arbiter’s decision of January 17, 2002) that the NLRC and CA
affirmed, the labor arbiter declared:
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WHEREFORE, IN THE LIGHT OF THE FOREGOING, taking into account the factual scenario and the evidence adduced by both
parties, it is declared that complainants in these cases are REGULAR EMPLOYEES of respondent ABS-CBN and not
INDEPENDENT CONTRACTORS and thus henceforth they are entitled to the benefits and privileges attached to regular status
of their employment.
This declaration unequivocally settled the petitioners’ employment status: they are ABS-CBN’s regular employees entitled to
the benefits and privileges of regular employees. These benefits and privileges arise from entitlements under the law
(specifically, the Labor Code and its related laws), and from their employment contract as regular ABS-CBN employees, part of
which is the CBA if they fall within the coverage of this agreement. Thus, what only needs to be resolved as an issue for
purposes of implementation of the decision is whether the petitioners fall within CBA coverage.
The parties’ 1999-2002 CBA provided in its Article I (Scope of the Agreement) that: 29
Section 1. APPROPRIATE BARGAINING UNIT. – The parties agree that the appropriate bargaining unit shall be regular rank-
and-file employees of ABS-CBN BROADCASTING CORPORATION but shall not include:
a) Personnel classified as Supervisor and Confidential employees;
b) Personnel who are on "casual" or "probationary" status as defined in Section 2 hereof;
c) Personnel who are on "contract" status or who are paid for specified units of work such as writer-producers, talent-
artists, and singers.
The inclusion or exclusion of new job classifications into the bargaining unit shall be subject of discussion between the
COMPANY and the UNION. [emphasis supplied]
Under these terms, the petitioners are members of the appropriate bargaining unit because they are regular rank-and-file
employees and do not belong to any of the excluded categories. Specifically, nothing in the records shows that they are
supervisory or confidential employees; neither are they casual nor probationary employees. Most importantly, the labor
arbiter’s decision of January 17, 2002 – affirmed all the way up to the CA level – ruled against ABS-CBN’s submission that they
are independent contractors. Thus, as regular rank-and-file employees, they fall within CBA coverage under the CBA’s express
terms and are entitled to its benefits.
We see no merit in ABS-CBN’s arguments that the petitioners are not entitled to CBA benefits because: (1) they did not claim
these benefits in their position paper; (2) the NLRC did not categorically rule that the petitioners were members of the
bargaining unit; and (3) there was no evidence of this membership. To further clarify what we stated above, CBA coverage is
not only a question of fact, but of law and contract. The factual issue is whether the petitioners are regular rank-and-file
employees of ABS-CBN. The tribunals below uniformly answered this question in the affirmative. From this factual finding
flows legal effects touching on the terms and conditions of the petitioners’ regular employment. This was what the labor
arbiter meant when he stated in his decision that "henceforth they are entitled to the benefits and privileges attached to
regular status of their employment." Significantly, ABS-CBN itself posited before this Court that "the Court of Appeals did not
gravely err nor gravely abuse its discretion when it affirmed the resolution of the NLRC dated March 24, 2006 reinstating and
adopting in toto the decision of the Labor Arbiter dated January 17, 2002 x x x."30 This representation alone fully resolves all
the objections – procedural or otherwise – ABS-CBN raised on the regularization issue.
The Dismissal of Fulache, Jabonero,

Castillo and Lagunzad
The termination of employment of the four drivers occurred under highly questionable circumstances and with plain and
unadulterated bad faith.
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The records show that the regularization case was in fact the root of the resulting bad faith as this case gave rise and led to
the dismissal case. First, the regularization case was filed leading to the labor arbiter’s decision31 declaring the petitioners,
including Fulache, Jabonero, Castillo and Lagunzad, to be regular employees. ABS-CBN appealed the decision and maintained
its position that the petitioners were independent contractors.
In the course of this appeal, ABS-CBN took matters into its own hands and terminated the petitioners’ services, clearly
disregarding its own appeal then pending with the NLRC. Notably, this appeal posited that the petitioners were not employees
(whose services therefore could be terminated through dismissal under the Labor Code); they were independent contractors
whose services could be terminated at will, subject only to the terms of their contracts. To justify the termination of service,
the company cited redundancy as its authorized cause but offered no justificatory supporting evidence. It merely claimed that
it was contracting out the petitioners’ activities in the exercise of its management prerogative.
ABS-CBN’s intent, of course, based on the records, was to transfer the petitioners and their activities to a service contractor
without paying any attention to the requirements of our labor laws; hence, ABS-CBN dismissed the petitioners when they
refused to sign up with the service contractor. 32 In this manner, ABS-CBN fell into a downward spiral of irreconcilable legal
positions, all undertaken in the hope of saving itself from the decision declaring its "talents" to be regular employees.
By doing all these, ABS-CBN forgot labor law and its realities.
It forgot that by claiming redundancy as authorized cause for dismissal, it impliedly admitted that the petitioners were regular
employees whose services, by law, can only be terminated for the just and authorized causes defined under the Labor Code.
Likewise ABS-CBN forgot that it had an existing CBA with a union, which agreement must be respected in any move affecting
the security of tenure of affected employees; otherwise, it ran the risk of committing unfair labor practice – both a criminal
and an administrative offense.33 It similarly forgot that an exercise of management prerogative can be valid only if it is
undertaken in good faith and with no intent to defeat or circumvent the rights of its employees under the laws or under valid
agreements.34
Lastly, it forgot that there was a standing labor arbiter’s decision that, while not yet final because of its own pending appeal,
cannot simply be disregarded. By implementing the dismissal action at the time the labor arbiter’s ruling was under review,
the company unilaterally negated the effects of the labor arbiter’s ruling while at the same time appealling the same ruling to
the NLRC. This unilateral move is a direct affront to the NLRC’s authority and an abuse of the appeal process.
All these go to show that ABS-CBN acted with patent bad faith. A close parallel we can draw to characterize this bad faith is
the prohibition against forum-shopping under the Rules of Court. In forum-shopping, the Rules characterize as bad faith the
act of filing similar and repetitive actions for the same cause with the intent of somehow finding a favorable ruling in one of
the actions filed.35 ABS-CBN’s actions in the two cases, as described above, are of the same character, since its obvious intent
was to defeat and render useless, in a roundabout way and other than through the appeal it had taken, the labor arbiter’s
decision in the regularization case. Forum-shopping is penalized by the dismissal of the actions involved. The penalty against
ABS-CBN for its bad faith in the present case should be no less.
The errors and omissions do not belong to ABS-CBN alone. The labor arbiter himself who handled both cases did not see the
totality of the company’s actions for what they were. He appeared to have blindly allowed what he granted the petitioners
with his left hand, to be taken away with his right hand, unmindful that the company already exhibited a badge of bad faith in
seeking to terminate the services of the petitioners whose regular status had just been recognized. He should have recognized
the bad faith from the timing alone of ABS-CBN’s conscious and purposeful moves to secure the ultimate aim of avoiding the
regularization of its so-called "talents."
The NLRC, for its part, initially recognized the presence of bad faith when it originally ruled that:
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While notice has been made to the employees whose positions were declared redundant, the element of good faith in
abolishing the positions of the complainants appear to be wanting. In fact, it remains undisputed that herein complainants
were terminated when they refused to sign an employment contract with Able Services which would make them appear as
employees of the agency and not of ABS-CBN. Such act by itself clearly demonstrates bad faith on the part of the respondent
in carrying out the company’s redundancy program x x x.36
On motion for reconsideration by both parties, the NLRC reiterated its "pronouncement that complainants were illegally
terminated as extensively discussed in our Joint Decision dated December 15, 2004." 37 Yet, in an inexplicable turnaround, it
reconsidered its joint decision and reinstated not only the labor arbiter’s decision of January 17, 2002 in the regularization
case, but also his illegal dismissal decision of April 21, 2003.38 Thus, the NLRC joined the labor arbiter in his error that we
cannot but characterize as grave abuse of discretion.
The Court cannot leave unchecked the labor tribunals’ patent grave abuse of discretion that resulted, without doubt, in a
grave injustice to the petitioners who were claiming regular employment status and were unceremoniously deprived of their
employment soon after their regular status was recognized. Unfortunately, the CA failed to detect the labor tribunals’ gross
errors in the disposition of the dismissal issue. Thus, the CA itself joined the same errors the labor tribunals committed.
The injustice committed on the petitioners/drivers requires rectification. Their dismissal was not only unjust and in bad faith
as the above discussions abundantly show. The bad faith in ABS-CBN’s move toward its illegitimate goal was not even hidden;
it dismissed the petitioners – already recognized as regular employees – for refusing to sign up with its service contractor.
Thus, from every perspective, the petitioners were illegally dismissed.
By law,39 illegally dismissed employees are entitled to reinstatement without loss of seniority rights and other privileges and to
full backwages, inclusive of allowances, and to other benefits or their monetary equivalent from the time their compensation
was withheld from them up to the time of their actual reinstatement. The four dismissed drivers deserve no less.
Moreover, they are also entitled to moral damages since their dismissal was attended by bad faith. 40 For having been
compelled to litigate and to incur expenses to protect their rights and interest, the petitioners are likewise entitled to
attorney’s fees.41
WHEREFORE, premises considered, we hereby GRANT the petition. The decision dated March 25, 2008 and the resolution
dated July 8, 2008 of the Court of Appeals in CA-G.R. SP No. 01838 are hereby REVERSED and SET ASIDE. Accordingly,
judgment is hereby rendered as follows:
1. Confirming that petitioners FARLEY FULACHE, MANOLO JABONERO, DAVID CASTILLO, JEFFREY LAGUNZAD,
MAGDALENA MALIG-ON BIGNO, FRANCISCO CABAS, JR., HARVEY PONCE and ALAN C. ALMENDRAS are
regular employees of ABS-CBN BROADCASTING CORPORATION, and declaring them entitled to all the rights, benefits
and privileges, including CBA benefits, from the time they became regular employees in accordance with existing
company practice and the Labor Code;
2. Declaring illegal the dismissal of Fulache, Jabonero, Castillo and Lagunzad, and ordering ABS-CBN to immediately
reinstate them to their former positions without loss of seniority rights with full backwages and all other monetary
benefits, from the time they were dismissed up to the date of their actual reinstatement;
3. Awarding moral damages of ₱100,000.00 each to Fulache, Jabonero, Castillo and Lagunzad; and,
4. Awarding attorney’s fees of 10% of the total monetary award decreed in this Decision.
Costs against the respondent.
SO ORDERED.
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PEREZ, J.:
The existence of an employer-employee relationship is at the heart of this Petition for Review
on Certiorari filed pursuant to Rule 45 of the Rules of Court, primarily assailing the 29 June
2011 Decision[1] rendered by the Fourth Division of the Court of Appeals (CA) in CA-G.R. SP No.
116928 which ruled out said relationship between the parties.
The Facts
Respondent ABS-CBN Corporation (formerly ABS-CBN Broadcasting Corporation) is a television

and radio broadcasting corporation which, for its Regional Network Group in Naga City,
employed respondent Amalia Villafuerte (Villafuerte) as Manager. There is no dispute
regarding the fact that, thru Villafuerte, ABS-CBN engaged the services of petitioners Nelson
Begino (Begino) and Gener Del Valle (Del Valle) sometime in 1996 as Cameramen/Editors for
TV Broadcasting. Petitioners Ma. Cristina Sumayao (Sumayao) and Monina Avila-Llorin (Llorin)
were likewise similarly engaged as reporters sometime in 1996 and 2002, respectively. With
their services engaged by respondents thru Talent Contracts which, though regularly renewed
over the years, provided terms ranging from three (3) months to one (1) year, petitioners were
given Project Assignment Forms which detailed, among other matters, the duration of a
particular project as well as the budget and the daily technical requirements thereof. In the
aforesaid capacities, petitioners were tasked with coverage of news items for subsequent daily
airings in respondents’ TV Patrol Bicol Program.[2]
While specifically providing that nothing therein shall be deemed or construed to establish an
employer-employee relationship between the parties, the aforesaid Talent Contracts included,
among other matters, provisions on the following matters: (a) the Talent’s creation and
performance of work in accordance with the ABS-CBN’s professional standards and
compliance with its policies and guidelines covering intellectual property creators, industry
codes as well as the rules and regulations of the Kapisanan ng mga Broadcasters sa Pilipinas
(KBP) and other regulatory agencies; (b) the Talent’s non-engagement in similar work for a
person or entity directly or indirectly in competition with or adverse to the interests of ABS-
CBN and non-promotion of any product or service without prior written consent; and (c) the
results-oriented nature of the talent’s work which did not require them to observe normal or
fixed working hours.[3] Subjected to contractor’s tax, petitioners’ remunerations were
denominated as Talent Fees which, as of last renewal, were admitted to be pegged per airing
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day at P273.35 for Begino, P302.92 for Del Valle, P323.08 for Sumayao and P315.39 for Llorin.
[4]
Claiming that they were regular employees of ABS-CBN, petitioners filed against respondents
the complaint[5] docketed as Sub-RAB 05-04-00041-07 before the National Labor Relations
Commission’s (NLRC) Sub- Regional Arbitration Branch No. 5, Naga City. In support of their
claims for regularization, underpayment of overtime pay, holiday pay, 13th month pay, service
incentive leave pay, damages and attorney's fees, petitioners alleged that they performed
functions necessary and desirable in ABS-CBN's business. Mandated to wear company IDs and
provided all the equipment they needed, petitioners averred that they worked under the
direct control and supervision of Villafuerte and, at the end of each day, were informed about
the news to be covered the following day, the routes they were to take and, whenever the
subject of their news coverage is quite distant, even the start of their workday. Due to the
importance of the news items they covered and the necessity of their completion for the
success of the program, petitioners claimed that, under pain of immediate termination, they
were bound by the company’s policy on, among others, attendance and punctuality. [6]
Aside from the constant evaluation of their actions, petitioners were reportedly subjected to
an annual competency assessment alongside other ABS-CBN employees, as condition for their
continued employment. Although their work involved dealing with emergency situations at
any time of the day or night, petitioners claimed that they were not paid the labor standard
benefits the law extends to regular employees. To avoid paying what is due them, however,
respondents purportedly resorted to the simple expedient of using said Talent Contracts
and/or Project Assignment Forms which denominated petitioners as talents, despite the fact
that they are not actors or TV hosts of special skills. As a result of this iniquitous situation,
petitioners asseverated that they merely earned an average of P7,000.00 to P8,000.00 per
month, or decidedly lower than the P21,773.00 monthly salary ABS-CBN paid its regular rank-
and-file employees. Considering their repeated re-hiring by respondents for ostensible fixed
periods, this situation had gone on for years since TV Patrol Bicol has continuously aired from
1996 onwards.[7]
In refutation of the foregoing assertions, on the other hand, respondents argued that,
although it occasionally engages in production and generates programs thru various means,
ABS-CBN is primarily engaged in the business of broadcasting television and radio content. Not
having the full manpower complement to produce its own program, the company had
allegedly resorted to engaging independent contractors like actors, directors, artists,
anchormen, reporters, scriptwriters and various production and technical staff, who offered
their services in relation to a particular program. Known in the industry as talents, such
independent contractors inform ABS- CBN of their availability and were required to accomplish
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Talent Information Forms to facilitate their engagement for and appearance on designated
project days. Given the unpredictability of viewer preferences, respondents argued that the
company cannot afford to provide regular work for talents with whom it negotiates specific or
determinable professional fees on a per project, weekly or daily basis, usually depending on
the budget allocation for a project.[8]
Respondents insisted that, pursuant to their Talent Contracts and/or Project Assignment
Forms, petitioners were hired as talents, to act as reporters and/or cameramen for TV Patrol
Bicol for designated periods and rates. Fully aware that they were not considered or to
consider themselves as employees of a particular production or film outfit, petitioners were
supposedly engaged on the basis of the skills, knowledge or expertise they already possessed
and, for said reason, required no further training from ABS-CBN. Although petitioners were
inevitably subjected to some degree of control, the same was allegedly limited to the
imposition of general guidelines on conduct and performance, simply for the purpose of
upholding the standards of the company and the strictures of the industry. Never subjected to
any control or restrictions over the means and methods by which they performed or
discharged the tasks for which their services were engaged, petitioners were, at most, briefed
whenever necessary regarding the general requirements of the project to be executed. [9]
Having been terminated during the pendency of the case, Petitioners filed on 10 July 2007 a
second complaint against respondents, for regularization, payment of labor standard benefits,
illegal dismissal and unfair labor practice, which was docketed as Sub-RAB 05-08-00107-07.
Upon respondents’ motion, this complaint was dismissed for violation of the rules against
forum shopping in view of the fact that the determination of the issues in the second case
hinged on the resolution of those raised in the first.[10] On 19 December 2007, however, Labor
Arbiter Jesus Orlando Quiñones (Labor Arbiter Quiñones) resolved Sub-RAB 05-04-00041-07 in
favor of petitioners who, having rendered services necessary and related to ABS-CBN’s
business for more than a year, were determined to be its regular employees. With said
conclusion found to be buttressed by, among others, the exclusivity clause and prohibitions
under petitioners’ Talent Contracts and/or Project Assignment Forms which evinced
respondents’ control over them,[11] Labor Arbiter Quiñones disposed of the case in the
following wise:
WHEREFORE, finding merit in the causes of action set forth by the complainants, judgment is
hereby rendered declaring complainants MONINA AVILA-LLORIN, GENER L. DEL VALLE,
NELSON V. BEGINO and MA. CRISTINA V. SUMAYAO, as regular employees of respondent
company, ABS-CBN BROADCASTING CORPORATION.
Accordingly, respondent ABS-CBN Broadcasting Corporation is hereby ORDERED to pay

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complainants, subject to the prescriptive period provided under Article 291 of the Labor Code,
however applicable, the total amount of Php2,440,908.36, representing salaries/wage
differentials, holiday pay, service incentive leave pay and 13th month pay, to include 10% of the
judgment award as attorney’s fees of the judgment award (computation of the monetary
awards are attached hereto as integral part of this decision).
Moreover, respondents are directed to admit back complainants to work under the same
terms and conditions prevailing prior to their separation or, at respondents' option, merely
reinstated in the payroll.
Other than the above, all other claims and charges are ordered DISMISSED for lack of merit. [12]
Aggrieved by the foregoing decision, respondents elevated the case on appeal before the
NLRC, during the pendency of which petitioners filed a third complaint against the former, for
illegal dismissal, regularization, non- payment of salaries and 13th month pay, unfair labor
practice, damages and attorney’s fees. In turn docketed as NLRC Case No. Sub-RAB-V-05-03-
00039-08, the complaint was raffled to Labor Arbiter Quiñones who issued an Order dated 30
April 2008, inhibiting himself from the case and denying respondents’ motion to dismiss on the
grounds of res judicata and forum shopping.[13] Finding that respondents’ control over
petitioners was indeed manifest from the exclusivity clause and prohibitions in the Talent
Contracts and/or Project Assignment Forms, on the other hand, the NLRC rendered a Decision
dated 31 March 2010, affirming said Labor Arbiter’s appealed decision. [14] Undeterred by the
NLRC’s 31 August 2010 denial of their motion for reconsideration, [15] respondents filed the
Rule 65 petition for certiorari docketed before the CA as CA-G.R. SP No. 116928 which, in
addition to taking exceptions to the findings of the assailed decision, faulted petitioners for
violating the rule against forum shopping.[16]
On 29 June 2011, the CA rendered the herein assailed decision, reversing the findings of the
Labor Arbiter and the NLRC. Ruling out the existence of forum shopping on the ground that
petitioners' second and third complaints were primarily anchored on their termination from
employment after the filing of their first complaint, the CA nevertheless discounted the
existence of an employer-employee relation between the parties upon the following findings
and conclusions: (a) petitioners, were engaged by respondents as talents for periods, work and
the program specified in the Talent Contracts and/or Project Assignment Forms concluded
between them; (b) instead of fixed salaries, petitioners were paid talent fees depending on the
budget allocated for the program to which they were assigned; (c) being mainly concerned
with the result, respondents did not exercise control over the manner and method by which
petitioner accomplished their work and, at most, ensured that they complied with the
standards of the company, the KBP and the industry; and, (d) the existence of an employer-
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employee relationship is not necessarily established by the exclusivity clause and prohibitions
which are but terms and conditions on which the parties are allowed to freely stipulate. [17]
Petitioners’ motion for reconsideration of the foregoing decision was denied in the CA's 3
October 2011 Resolution,[18] hence, this petition.
The Issues
Petitioners seek the reversal of the CA’s assailed Decision and
Resolution on the affirmative of the following issues:
1. Whether or not the CA seriously and reversibly erred in not dismissing respondents’ petition
for certiorari in view of the fact that they did file a Notice of Appeal at the NLRC level and did
not, by themselves or through their duly authorized representative, verify and certify the
Memorandum of Appeal they filed thereat, in accordance with the NLRC Rules of Procedure;
and
2. Whether or not the CA seriously and reversibly erred in brushing aside the determination
made by both the Labor Arbiter and the NLRC of the existence of an employer-employee
relationship between the parties, despite established jurisprudence supporting the same.
The Court's Ruling
The Court finds the petition impressed with merit.
Petitioners preliminarily fault the CA for not dismissing respondents’ Rule 65 petition
for certiorari in view of the fact that the latter failed to file a Notice of Appeal from the Labor
Arbiter’s decision and to verify and certify the Memorandum of Appeal they filed before the
NLRC. While concededly required under the NLRC Rules of Procedure, however, these matters
should have been properly raised during and addressed at the appellate stage before the
NLRC. Instead, the record shows that the NLRC took cognizance of respondents’ appeal and
proceeded to resolve the same in favor of petitioners by affirming the Labor Arbiter’s decision.
Not having filed their own petition for certiorari to take exception to the liberal attitude the
NLRC appears to have adopted towards its own rules of procedure, petitioners were hardly in
the proper position to raise the same before the CA or, for that matter, before this Court at
this late stage. Aside from the settled rule that a party who has not appealed is not entitled to
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affirmative relief other than the ones granted in the decision [19] rendered, liberal interpretation
of procedural rules on appeal had, on occasion, been favored in the interest of substantive
justice.[20]
Although the existence of an employer-employee relationship is, on the other hand, a

question of fact[21] which is ordinarily not the proper subject of a Rule 45 petition for review
on certiorari like the one at bar, the conflicting findings between the labor tribunals and the CA
justify a further consideration of the matter.[22] To determine the existence of said relation,
case law has consistently applied the four-fold test, to wit: (a) the selection and engagement
of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's
power to control the employee on the means and methods by which the work is
accomplished.[23] Of these criteria, the so-called “control test” is generally regarded as the
most crucial and determinative indicator of the presence or absence of an employer-employee
relationship. Under this test, an employer-employee relationship is said to exist where the
person for whom the services are performed reserves the right to control not only the end
result but also the manner and means utilized to achieve the same.[24]
In discounting the existence of said relationship between the parties, the CA ruled that
Petitioners' services were, first and foremost, engaged thru their Talent Contracts and/or
Project Assignment Forms which specified the work to be performed by them, the project to
which they were assigned, the duration thereof and their rates of pay according to the budget
therefor allocated. Because they are imbued with public interest, it cannot be gainsaid,
however, that labor contracts are subject to the police power of the state and are placed on a
higher plane than ordinary contracts. The recognized supremacy of the law over the
nomenclature of the contract and the stipulations contained therein is aimed at bringing life to
the policy enshrined in the Constitution to afford protection to labor.[25] Insofar as the nature
of one’s employment is concerned, Article 280 of the Labor Code of the Philippines also
provides as follows:
ART. 280. Regular and Casual Employment. — The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an employment
shall be deemed to be regular where the employee has been engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the employer, except
where the employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the engagement of the employee or
where the work or service to be performed is seasonal in nature and the employment is for
the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph:

123
Provided, That, any employee who has rendered at least one year of service, whether such
service is continuous or broken, shall be considered a regular employee with respect to the
activity in which he is employed and his employment shall continue while such actually exists.
It has been ruled that the foregoing provision contemplates four kinds of employees, namely:
(a) regular employees or those who have been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer; (b) project employees or
those whose employment has been fixed for a specific project or undertaking, the completion
or termination of which has been determined at the time of the engagement of the employee;
(c) seasonal employees or those who work or perform services which are seasonal in nature,
and the employment is for the duration of the season; and (d) casual employees or those who
are not regular, project, or seasonal employees.[26] To the foregoing classification of employee,
jurisprudence has added that of contractual or fixed term employee which, if not for the fixed
term, would fall under the category of regular employment in view of the nature of the
employee’s engagement, which is to perform activity usually necessary or desirable in the
employer’s business.[27]
The Court finds that, notwithstanding the nomenclature of their Talent Contracts and/or
Project Assignment Forms and the terms and condition embodied therein, petitioners are
regular employees of ABS-CBN. Time and again, it has been ruled that the test to determine
whether employment is regular or not is the reasonable connection between the activity
performed by the employee in relation to the business or trade of the employer. [28] As
cameramen/editors and reporters, petitioners were undoubtedly performing functions
necessary and essential to ABS-CBN’s business of broadcasting television and radio content. It
matters little that petitioners’ services were engaged for specified periods for TV Patrol Bicol
and that they were paid according to the budget allocated therefor. Aside from the fact that
said program is a regular weekday fare of the ABS-CBN’s Regional Network Group in Naga City,
the record shows that, from their initial engagement in the aforesaid capacities, petitioners
were continuously re-hired by respondents over the years. To the mind of the Court,
respondents’ repeated hiring of petitioners for its long-running news program positively
indicates that the latter were ABS-CBN’s regular employees.
If the employee has been performing the job for at least one year, even if the performance is
not continuous or merely intermittent, the law deems the repeated or continuing performance
as sufficient evidence of the necessity, if not indispensability of that activity in the business.
[29]
Indeed, an employment stops being co-terminous with specific projects where the
employee is continuously re-hired due to the demands of the employer’s business. [30] When
circumstances show, moreover, that contractually stipulated periods of employment have
been imposed to preclude the acquisition of tenurial security by the employee, this Court has
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not hesitated in striking down such arrangements as contrary to public policy, morals, good
customs or public order.[31] The nature of the employment depends, after all, on the nature of
the activities to be performed by the employee, considering the nature of the employer’s
business, the duration and scope to be done, and, in some cases, even the length of time of
the performance and its continued existence.[32] In the same manner that the practice of
having fixed-term contracts in the industry does not automatically make all talent contracts
valid and compliant with labor law, it has, consequently, been ruled that the assertion that a
talent contract exists does not necessarily prevent a regular employment status. [33]
As cameramen/editors and reporters, it also appears that petitioners were subject to the
control and supervision of respondents which, first and foremost, provided them with the
equipments essential for the discharge of their functions. Prepared at the instance of
respondents, petitioners’ Talent Contracts tellingly provided that ABS-CBN retained “all
creative, administrative, financial and legal control” of the program to which they were
assigned. Aside from having the right to require petitioners “to attend and participate in all
promotional or merchandising campaigns, activities or events for the Program,” ABS-CBN
required the former to perform their functions “at such locations and Performance/Exhibition
Schedules” it provided or, subject to prior notice, as it chose determine, modify or change.
Even if they were unable to comply with said schedule, petitioners were required to give
advance notice, subject to respondents’ approval.[34] However obliquely worded, the Court
finds the foregoing terms and conditions demonstrative of the control respondents exercised
not only over the results of petitioners’ work but also the means employed to achieve the
same.
In finding that petitioners were regular employees, the NLRC further ruled that the exclusivity
clause and prohibitions in their Talent Contracts and/or Project Assignment Forms were
likewise indicative of respondents’ control over them. Brushing aside said finding, however,
the CA applied the ruling in Sonza v. ABS-CBN Broadcasting Corporation[35] where similar
restrictions were considered not necessarily determinative of the existence of an employer-
employee relationship. Recognizing that independent contractors can validly provide his
exclusive services to the hiring party, said case enunciated that guidelines for the achievement
of mutually desired results are not tantamount to control. As correctly pointed out by
petitioners, however, parallels cannot be expediently drawn between this case and that
of Sonza case which involved a well-known television and radio personality who was
legitimately considered a talent and amply compensated as such. While possessed of skills for
which they were modestly recompensed by respondents, petitioners lay no claim to fame
and/or unique talents for which talents like actors and personalities are hired and generally
compensated in the broadcast industry.
125
Later echoed in Dumpit-Murillo v. Court of Appeals,[36] this Court has rejected the application
of the ruling in the Sonza case to employees similarly situated as petitioners in ABS-CBN
Broadcasting Corporation v. Nazareno.[37] The following distinctions were significantly
observed between employees like petitioners and television or radio personalities like Sonza,
to wit:
First. In the selection and engagement of respondents, no peculiar or unique skill, talent or
celebrity status was required from them because they were merely hired through petitioner’s
personnel department just like any ordinary employee.
Second. The so-called "talent fees" of respondents correspond to wages given as a result of an
employer-employee relationship. Respondents did not have the power to bargain for huge
talent fees, a circumstance negating independent contractual relationship.
Third. Petitioner could always discharge respondents should it find their work unsatisfactory,
and respondents are highly dependent on the petitioner for continued work.
Fourth. The degree of control and supervision exercised by petitioner over respondents
through its supervisors negates the allegation that respondents are independent contractors.
The presumption is that when the work done is an integral part of the regular business of the
employer and when the worker, relative to the employer, does not furnish an independent
business or professional service, such work is a regular employment of such employee and not
an independent contractor. The Court will peruse beyond any such agreement to examine the
facts that typify the parties’ actual relationship.[38] (Emphasis omitted)
Rather than the project and/or independent contractors respondents claim them to be, it is
evident from the foregoing disquisition that petitioners are regular employees of ABS-CBN.
This conclusion is borne out by the ineluctable showing that petitioners perform functions
necessary and essential to the business of ABS-CBN which repeatedly employed them for a
long-running news program of its Regional Network Group in Naga City. In the course of said
employment, petitioners were provided the equipments they needed, were required to
comply with the Company's policies which entailed prior approval and evaluation of their
performance. Viewed from the prism of these considerations, we find and so hold that the CA
reversibly erred when it overturned the NLRC's affirmance of the Labor Arbiter's finding that
an employer-employee relationship existed between the parties. Given the fact, however, that
Sub-RAB-V-05-03-00039-08 had not been consolidated with this case and appears, for all
intents and purposes, to be pending still, the Court finds that the reinstatement of petitioners
ordered by said labor officer and tribunal should, as a relief provided in case of illegal
126
dismissal, be left for determination in said case.
WHEREFORE, the Court of Appeals' assailed Decision dated 29 June 2011 and Resolution dated
3 October 2011 in CA-G.R. SP No. 116928 are REVERSED and SET ASIDE. Except for the
reinstatement of Nelson V. Begino, Gener Del Valle, Monina Avila-Llorin and Ma. Cristina
Sumayao, the National Labor and Relations· Commission's 31 March 2010 Decision is,
accordingly, REINSTATED.
SO ORDERED.
G.R. No. 155207 August 13, 2008
WILHELMINA S. OROZCO, petitioner,
vs.
THE FIFTH DIVISION OF THE HONORABLE COURT OF APPEALS, PHILIPPINE DAILY INQUIRER, and LETICIA JIMENEZ
MAGSANOC, respondents.
DECISION
NACHURA, J.:
The case before this Court raises a novel question never before decided in our jurisdiction – whether a newspaper columnist is an
employee of the newspaper which publishes the column.
In this Petition for Review under Rule 45 of the Revised Rules on Civil Procedure, petitioner Wilhelmina S. Orozco assails the
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 50970 dated June 11, 2002 and its Resolution 2 dated September 11, 2002
denying her Motion for Reconsideration. The CA reversed and set aside the Decision 3 of the National Labor Relations Commission
(NLRC), which in turn had affirmed the Decision 4 of the Labor Arbiter finding that Orozco was an employee of private
respondent Philippine Daily Inquirer (PDI) and was illegally dismissed as columnist of said newspaper.
In March 1990, PDI engaged the services of petitioner to write a weekly column for its Lifestyle section. She religiously submitted her
articles every week, except for a six-month stint in New York City when she, nonetheless, sent several articles through mail. She
received compensation of P250.00 – later increased to P300.00 – for every column published.5
On November 7, 1992, petitioner’s column appeared in the PDI for the last time. Petitioner claims that her then editor, Ms. Lita T.
Logarta,6 told her that respondent Leticia Jimenez Magsanoc, PDI Editor in Chief, wanted to stop publishing her column for no reason
at all and advised petitioner to talk to Magsanoc herself. Petitioner narrates that when she talked to Magsanoc, the latter informed
her that it was PDI Chairperson Eugenia Apostol who had asked to stop publication of her column, but that in a telephone
conversation with Apostol, the latter said that Magsanoc informed her (Apostol) that the Lifestyle section already had many
columnists.7
On the other hand, PDI claims that in June 1991, Magsanoc met with the Lifestyle section editor to discuss how to improve said
section. They agreed to cut down the number of columnists by keeping only those whose columns were well-written, with regular
feedback and following. In their judgment, petitioner’s column failed to improve, continued to be superficially and poorly written,
and failed to meet the high standards of the newspaper. Hence, they decided to terminate petitioner’s column. 8
Aggrieved by the newspaper’s action, petitioner filed a complaint for illegal dismissal, backwages, moral and exemplary damages,
and other money claims before the NLRC.
127
On October 29, 1993, Labor Arbiter Arthur Amansec rendered a Decision in favor of petitioner, the dispositive portion of
which reads:
WHEREFORE, judgment is hereby rendered, finding complainant to be an employee of respondent company; ordering
respondent company to reinstate her to her former or equivalent position, with backwages.
Respondent company is also ordered to pay her 13 th month pay and service incentive leave pay.
Other claims are hereby dismissed for lack of merit.
SO ORDERED.9
The Labor Arbiter found that:
[R]espondent company exercised full and complete control over the means and method by which complainant’s work –
that of a regular columnist – had to be accomplished. This control might not be found in an instruction, verbal or oral, given
to complainant defining the means and method she should write her column. Rather, this control is manifested and
certained (sic) in respondents’ admitted prerogative to reject any article submitted by complainant for publication.
By virtue of this power, complainant was helplessly constrained to adopt her subjects and style of writing to suit the
editorial taste of her editor. Otherwise, off to the trash can went her articles.
Moreover, this control is already manifested in column title, "Feminist Reflection" allotted complainant. Under this title,
complainant’s writing was controlled and limited to a woman’s perspective on matters of feminine interests. That
respondent had no control over the subject matter written by complainant is strongly belied by this observation. Even the
length of complainant’s articles were set by respondents.
Inevitably, respondents would have no control over when or where complainant wrote her articles as she was a columnist
who could produce an article in thirty (3) (sic) months or three (3) days, depending on her mood or the amount of research
required for an article but her actions were controlled by her obligation to produce an article a week. If complainant did not
have to report for work eight (8) hours a day, six (6) days a week, it is because her task was mainly mental. Lastly, the fact
that her articles were (sic) published weekly for three (3) years show that she was respondents’ regular employee, not a
once-in-a-blue-moon contributor who was not under any pressure or obligation to produce regular articles and who wrote
at his own whim and leisure.10
PDI appealed the Decision to the NLRC. In a Decision dated August 23, 1994, the NLRC Second Division dismissed the appeal thereby
affirming the Labor Arbiter’s Decision. The NLRC initially noted that PDI failed to perfect its appeal, under Article 223 of the Labor
Code, due to non-filing of a cash or surety bond. The NLRC said that the reason proffered by PDI for not filing the bond – that it was
difficult or impossible to determine the amount of the bond since the Labor Arbiter did not specify the amount of the judgment
award – was not persuasive. It said that all PDI had to do was compute based on the amount it was paying petitioner, counting the
number of weeks from November 7, 1992 up to promulgation of the Labor Arbiter’s decision. 11
The NLRC also resolved the appeal on its merits. It found no error in the Labor Arbiter’s findings of fact and law. It sustained the
Labor Arbiter’s reasoning that respondent PDI exercised control over petitioner’s work.
PDI then filed a Petition for Review12 before this Court seeking the reversal of the NLRC Decision. However, in a Resolution 13 dated
December 2, 1998, this Court referred the case to the Court of Appeals, pursuant to our ruling in St. Martin Funeral Homes v.
National Labor Relations Commission.14
The CA rendered its assailed Decision on June 11, 2002. It set aside the NLRC Decision and dismissed petitioner’s Complaint. It held
that the NLRC misappreciated the facts and rendered a ruling wanting in substantial evidence. The CA said:
128
The Court does not agree with public respondent NLRC’s conclusion. First, private respondent admitted that she was and
[had] never been considered by petitioner PDI as its employee. Second, it is not disputed that private respondent had no
employment contract with petitioner PDI. In fact, her engagement to contribute articles for publication was based on a
verbal agreement between her and the petitioner’s Lifestyle Section Editor. Moreover, it was evident that private
respondent was not required to report to the office eight (8) hours a day. Further, it is not disputed that she stayed in New
York for six (6) months without petitioner’s permission as to her leave of absence nor was she given any disciplinary action
for the same. These undisputed facts negate private respondent’s claim that she is an employee of petitioner.
Moreover, with regards (sic) to the control test, the public respondent NLRC’s ruling that the guidelines given by petitioner
PDI for private respondent to follow, e.g. in terms of space allocation and length of article, is not the form of control
envisioned by the guidelines set by the Supreme Court. The length of the article is obviously limited so that all the articles to
be featured in the paper can be accommodated. As to the topic of the article to be published, it is but logical that private
respondent should not write morbid topics such as death because she is contributing to the lifestyle section. Other than
said given limitations, if the same could be considered limitations, the topics of the articles submitted by private respondent
were all her choices. Thus, the petitioner PDI in deciding to publish private respondent’s articles only controls the result of
the work and not the means by which said articles were written.
As such, the above facts failed to measure up to the control test necessary for an employer-employee relationship to exist. 15
Petitioner’s Motion for Reconsideration was denied in a Resolution dated September 11, 2002. She then filed the present Petition
for Review.
In a Resolution dated April 29, 2005, the Court, without giving due course to the petition, ordered the Labor Arbiter to clarify the
amount of the award due petitioner and, thereafter, ordered PDI to post the requisite bond. Upon compliance therewith, the
petition would be given due course. Labor Arbiter Amansec clarified that the award under the Decision amounted to P15,350.00.
Thus, PDI posted the requisite bond on January 25, 2007. 16
We shall initially dispose of the procedural issue raised in the Petition.
Petitioner argues that the CA erred in not dismissing outright PDI’s Petition for Certiorari for PDI’s failure to post a cash or surety
bond in violation of Article 223 of the Labor Code.
This issue was settled by this Court in its Resolution dated April 29, 2005. 17 There, the Court held:
But while the posting of a cash or surety bond is jurisdictional and is a condition sine qua non to the perfection of an appeal,
there is a plethora of jurisprudence recognizing exceptional instances wherein the Court relaxed the bond requirement as a
condition for posting the appeal.
xxxx
In the case of Taberrah v. NLRC, the Court made note of the fact that the assailed decision of the Labor Arbiter concerned
did not contain a computation of the monetary award due the employees, a circumstance which is likewise present in this
case. In said case, the Court stated,
As a rule, compliance with the requirements for the perfection of an appeal within the reglamentary (sic) period is
mandatory and jurisdictional. However, in National Federation of Labor Unions v. Ladrido as well as in several
other cases, this Court relaxed the requirement of the posting of an appeal bond within the reglementary period as
a condition for perfecting the appeal. This is in line with the principle that substantial justice is better served by
allowing the appeal to be resolved on the merits rather than dismissing it based on a technicality.
The judgment of the Labor Arbiter in this case merely stated that petitioner was entitled to backwages, 13 th month pay and
service incentive leave pay without however including a computation of the alleged amounts.
129
xxxx
In the case of NFLU v. Ladrido III, this Court postulated that "private respondents cannot be expected to post such appeal
bond equivalent to the amount of the monetary award when the amount thereof was not included in the decision of the
labor arbiter." The computation of the amount awarded to petitioner not having been clearly stated in the decision of the
labor arbiter, private respondents had no basis for determining the amount of the bond to be posted.
Thus, while the requirements for perfecting an appeal must be strictly followed as they are considered indispensable
interdictions against needless delays and for orderly discharge of judicial business, the law does admit of exceptions when
warranted by the circumstances. Technicality should not be allowed to stand in the way of equitably and completely
resolving the rights and obligations of the parties. But while this Court may relax the observance of reglementary periods
and technical rules to achieve substantial justice, it is not prepared to give due course to this petition and make a
pronouncement on the weighty issue obtaining in this case until the law has been duly complied with and the requisite
appeal bond duly paid by private respondents. 18
Records show that PDI has complied with the Court’s directive for the posting of the bond; 19 thus, that issue has been laid to rest.
We now proceed to rule on the merits of this case.
The main issue we must resolve is whether petitioner is an employee of PDI, and if the answer be in the affirmative, whether she
was illegally dismissed.
We rule for the respondents.
The existence of an employer-employee relationship is essentially a question of fact. 20 Factual findings of quasi-judicial agencies like
the NLRC are generally accorded respect and finality if supported by substantial evidence. 21
Considering, however, that the CA’s findings are in direct conflict with those of the Labor Arbiter and NLRC, this Court must now
make its own examination and evaluation of the facts of this case.
It is true that petitioner herself admitted that she "was not, and [had] never been considered respondent’s employee because the
terms of works were arbitrarily decided upon by the respondent." 22 However, the employment status of a person is defined and
prescribed by law and not by what the parties say it should be. 23
This Court has constantly adhered to the "four-fold test" to determine whether there exists an employer-employee relationship
between parties.24 The four elements of an employment relationship are: (a) the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the employer’s power to control the employee’s conduct. 25
Of these four elements, it is the power of control which is the most crucial 26 and most determinative factor,27 so important, in fact,
that the other elements may even be disregarded.28 As this Court has previously held:
the significant factor in determining the relationship of the parties is the presence or absence of supervisory authority to
control the method and the details of performance of the service being rendered, and the degree to which the principal
may intervene to exercise such control.29
In other words, the test is whether the employer controls or has reserved the right to control the employee, not only as to the work
done, but also as to the means and methods by which the same is accomplished. 30
Petitioner argues that several factors exist to prove that respondents exercised control over her and her work, namely:
130
a. As to the Contents of her Column – The PETITIONER had to insure that the contents of her column hewed closely to the
objectives of its Lifestyle Section and the over-all principles that the newspaper projects itself to stand for. As admitted, she
wanted to write about death in relation to All Souls Day but was advised not to.
b. As to Time Control – The PETITIONER, as a columnist, had to observe the deadlines of the newspaper for her articles to
be published. These deadlines were usually that time period when the Section Editor has to "close the pages" of the
Lifestyle Section where the column in located. "To close the pages" means to prepare them for printing and publication.
As a columnist, the PETITIONER’s writings had a definite day on which it was going to appear. So she submitted her articles
two days before the designated day on which the column would come out.
This is the usual routine of newspaper work. Deadlines are set to fulfill the newspapers’ obligations to the readers with
regard to timeliness and freshness of ideas.
c. As to Control of Space – The PETITIONER was told to submit only two or three pages of article for the column, (sic)
"Feminist Reflections" per week. To go beyond that, the Lifestyle editor would already chop off the article and publish the
rest for the next week. This shows that PRIVATE RESPONDENTS had control over the space that the PETITIONER was
assigned to fill.
d. As to Discipline – Over time, the newspaper readers’ eyes are trained or habituated to look for and read the works of
their favorite regular writers and columnists. They are conditioned, based on their daily purchase of the newspaper, to look
for specific spaces in the newspapers for their favorite write-ups/or opinions on matters relevant and significant issues
aside from not being late or amiss in the responsibility of timely submission of their articles.
The PETITIONER was disciplined to submit her articles on highly relevant and significant issues on time by the PRIVATE
RESPONDENTS who have a say on whether the topics belong to those considered as highly relevant and significant, through
the Lifestyle Section Editor. The PETITIONER had to discuss the topics first and submit the articles two days before
publication date to keep her column in the newspaper space regularly as expected or without miss by its readers. 31
Given this discussion by petitioner, we then ask the question: Is this the form of control that our labor laws contemplate such as to
establish an employer-employee relationship between petitioner and respondent PDI?
It is not.
Petitioner has misconstrued the "control test," as did the Labor Arbiter and the NLRC.
Not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the former. Rules which serve
as general guidelines towards the achievement of the mutually desired result are not indicative of the power of control. 32 Thus, this
Court has explained:
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.
create no employer-employee relationship unlike the second, which address both the result and the means used to achieve
it. x x x.33
131
The main determinant therefore is whether the rules set by the employer are meant to control not just the results of the work but
also the means and method to be used by the hired party in order to achieve such results. Thus, in this case, we are to examine the
factors enumerated by petitioner to see if these are merely guidelines or if they indeed fulfill the requirements of the control test.
Petitioner believes that respondents’ acts are meant to control how she executes her work. We do not agree. A careful examination
reveals that the factors enumerated by the petitioner are inherent conditions in running a newspaper. In other words, the so-called
control as to time, space, and discipline are dictated by the very nature of the newspaper business itself.
We agree with the observations of the Office of the Solicitor General that:
The Inquirer is the publisher of a newspaper of general circulation which is widely read throughout the country. As such,
public interest dictates that every article appearing in the newspaper should subscribe to the standards set by the Inquirer,
with its thousands of readers in mind. It is not, therefore, unusual for the Inquirer to control what would be published in the
newspaper. What is important is the fact that such control pertains only to the end result, i.e., the submitted articles. The
Inquirer has no control over [petitioner] as to the means or method used by her in the preparation of her articles. The
articles are done by [petitioner] herself without any intervention from the Inquirer. 34
Petitioner has not shown that PDI, acting through its editors, dictated how she was to write or produce her articles each week. Aside
from the constraints presented by the space allocation of her column, there were no restraints on her creativity; petitioner was free
to write her column in the manner and style she was accustomed to and to use whatever research method she deemed suitable for
her purpose. The apparent limitation that she had to write only on subjects that befitted the Lifestyle section did not translate to
control, but was simply a logical consequence of the fact that her column appeared in that section and therefore had to cater to the
preference of the readers of that section.
The perceived constraint on petitioner’s column was dictated by her own choice of her column’s perspective. The column title
"Feminist Reflections" was of her own choosing, as she herself admitted, since she had been known as a feminist writer. 35 Thus,
respondent PDI, as well as her readers, could reasonably expect her columns to speak from such perspective.
Contrary to petitioner’s protestations, it does not appear that there was any actual restraint or limitation on the subject matter –
within the Lifestyle section – that she could write about. Respondent PDI did not dictate how she wrote or what she wrote in her
column. Neither did PDI’s guidelines dictate the kind of research, time, and effort she put into each column. In fact, petitioner herself
said that she received "no comments on her articles…except for her to shorten them to fit into the box allotted to her column."
Therefore, the control that PDI exercised over petitioner was only as to the finished product of her efforts, i.e., the column itself, by
way of either shortening or outright rejection of the column.
The newspaper’s power to approve or reject publication of any specific article she wrote for her column cannot be the control
contemplated in the "control test," as it is but logical that one who commissions another to do a piece of work should have the right
to accept or reject the product. The important factor to consider in the "control test" is still the element of control over how the
work itself is done, not just the end result thereof.
In contrast, a regular reporter is not as independent in doing his or her work for the newspaper. We note the common practice in
the newspaper business of assigning its regular reporters to cover specific subjects, geographical locations, government agencies, or
areas of concern, more commonly referred to as "beats." A reporter must produce stories within his or her particular beat and
cannot switch to another beat without permission from the editor. In most newspapers also, a reporter must inform the editor
about the story that he or she is working on for the day. The story or article must also be submitted to the editor at a specified time.
Moreover, the editor can easily pull out a reporter from one beat and ask him or her to cover another beat, if the need arises.
This is not the case for petitioner. Although petitioner had a weekly deadline to meet, she was not precluded from submitting her
column ahead of time or from submitting columns to be published at a later time. More importantly, respondents did not dictate
upon petitioner the subject matter of her columns, but only imposed the general guideline that the article should conform to the
standards of the newspaper and the general tone of the particular section.
132
Where a person who works for another performs his job more or less at his own pleasure, in the manner he sees fit, not subject to
definite hours or conditions of work, and is compensated according to the result of his efforts and not the amount thereof, no
employer-employee relationship exists. 36
Aside from the control test, this Court has also used the economic reality test. The economic realities prevailing within the activity or
between the parties are examined, taking into consideration the totality of circumstances surrounding the true nature of the
relationship between the parties.37 This is especially appropriate when, as in this case, there is no written agreement or contract on
which to base the relationship. In our jurisdiction, the benchmark of economic reality in analyzing possible employment relationships
for purposes of applying the Labor Code ought to be the economic dependence of the worker on his employer. 38
Petitioner’s main occupation is not as a columnist for respondent but as a women’s rights advocate working in various women’s
organizations.39 Likewise, she herself admits that she also contributes articles to other publications. 40 Thus, it cannot be said that
petitioner was dependent on respondent PDI for her continued employment in respondent’s line of business. 41
The inevitable conclusion is that petitioner was not respondent PDI’s employee but an independent contractor, engaged to do
independent work.
There is no inflexible rule to determine if a person is an employee or an independent contractor; thus, the characterization of the
relationship must be made based on the particular circumstances of each case. 42 There are several factors43 that may be considered
by the courts, but as we already said, the right to control is the dominant factor in determining whether one is an employee or an
independent contractor.44
In our jurisdiction, the Court has held that an independent contractor is one who carries on a distinct and independent business and
undertakes to perform the job, work, or service on one’s own account and under one’s own responsibility according to one’s own
manner and method, free from the control and direction of the principal in all matters connected with the performance of the work
except as to the results thereof.45
On this point, Sonza v. ABS-CBN Broadcasting Corporation46 is enlightening. In that case, the Court found, using the four-fold test,
that petitioner, Jose Y. Sonza, was not an employee of ABS-CBN, but an independent contractor. Sonza was hired by ABS-CBN due to
his "unique skills, talent and celebrity status not possessed by ordinary employees," a circumstance that, the Court said, was
indicative, though not conclusive, of an independent contractual relationship. Independent contractors often present themselves to
possess unique skills, expertise or talent to distinguish them from ordinary employees. 47 The Court also found that, as to payment of
wages, Sonza’s talent fees were the result of negotiations between him and ABS-CBN. 48 As to the power of dismissal, the Court
found that the terms of Sonza’s engagement were dictated by the contract he entered into with ABS-CBN, and the same contract
provided that either party may terminate the contract in case of breach by the other of the terms thereof. 49 However, the Court held
that the foregoing are not determinative of an employer-employee relationship. Instead, it is still the power of control that is most
important.
On the power of control, the Court found that in performing his work, Sonza only needed his skills and talent – how he delivered his
lines, appeared on television, and sounded on radio were outside ABS-CBN’s control. 50 Thus:
We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZA’s work.
ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN merely reserved the right to modify the program format
and airtime schedule "for more effective programming." ABS-CBN’s sole concern was the quality of the shows and their
standing in the ratings. Clearly, ABS-CBN did not exercise control over the means and methods of performance of SONZA’s
work.
SONZA claims that ABS-CBN’s power not to broadcast his shows proves ABS-CBN’s power over the means and methods of
the performance of his work. Although ABS-CBN did have the option not to broadcast SONZA’s show, ABS-CBN was still
obligated to pay SONZA’s talent fees... Thus, even if ABS-CBN was completely dissatisfied with the means and methods of
SONZA’s performance of his work, or even with the quality or product of his work, ABS-CBN could not dismiss or even
discipline SONZA. All that ABS-CBN could do is not to broadcast SONZA’s show but ABS-CBN must still pay his talent fees in
full.
133
Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened as it was by the obligation to continue paying in full
SONZA’s talent fees, did not amount to control over the means and methods of the performance of SONZA’s work. ABS-CBN
could not terminate or discipline SONZA even if the means and methods of performance of his work - how he delivered his
lines and appeared on television - did not meet ABS-CBN’s approval. This proves that ABS-CBN’s control was limited only to
the result of SONZA’s work, whether to broadcast the final product or not. In either case, ABS-CBN must still pay SONZA’s
talent fees in full until the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al., the United States Circuit Court of Appeals ruled that vaudeville performers were
independent contractors although the management reserved the right to delete objectionable features in their shows.
Since the management did not have control over the manner of performance of the skills of the artists, it could only control
the result of the work by deleting objectionable features.
SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and crew. No doubt, ABS-
CBN supplied the equipment, crew and airtime needed to broadcast the "Mel & Jay" programs. However, the equipment,
crew and airtime are not the "tools and instrumentalities" SONZA needed to perform his job. What SONZA principally
needed were his talent or skills and the costumes necessary for his appearance. Even though ABS-CBN provided SONZA
with the place of work and the necessary equipment, SONZA was still an independent contractor since ABS-CBN did not
supervise and control his work. ABS-CBN’s sole concern was for SONZA to display his talent during the airing of the
programs.
A radio broadcast specialist who works under minimal supervision is an independent contractor. SONZA’s work as television
and radio program host required special skills and talent, which SONZA admittedly possesses. The records do not show that
ABS-CBN exercised any supervision and control over how SONZA utilized his skills and talent in his shows. 51
The instant case presents a parallel to Sonza. Petitioner was engaged as a columnist for her talent, skill, experience, and her unique
viewpoint as a feminist advocate. How she utilized all these in writing her column was not subject to dictation by respondent. As
in Sonza, respondent PDI was not involved in the actual performance that produced the finished product. It only reserved the right
to shorten petitioner’s articles based on the newspaper’s capacity to accommodate the same. This fact, we note, was not unique to
petitioner’s column. It is a reality in the newspaper business that space constraints often dictate the length of articles and columns,
even those that regularly appear therein.
Furthermore, respondent PDI did not supply petitioner with the tools and instrumentalities she needed to perform her work.
Petitioner only needed her talent and skill to come up with a column every week. As such, she had all the tools she needed to
perform her work.
Considering that respondent PDI was not petitioner’s employer, it cannot be held guilty of illegal dismissal.
WHEREFORE, the foregoing premises considered, the Petition is DISMISSED. The Decision and Resolution of the Court of Appeals in
CA-G.R. SP No. 50970 are hereby AFFIRMED.
SO ORDERED.
G.R. No. 167648 January 28, 2008
TELEVISION AND PRODUCTION EXPONENTS, INC. and/or ANTONIO P. TUVIERA, petitioners,

vs.
ROBERTO C. SERVAÑA, respondent.
DECISION
TINGA, J.:
134
This petition for review under Rule 45 assails the 21 December 2004 Decision1 and 8 April 2005 Resolution2 of the Court of
Appeals declaring Roberto Servaña (respondent) a regular employee of petitioner Television and Production Exponents, Inc.
(TAPE). The appellate court likewise ordered TAPE to pay nominal damages for its failure to observe statutory due process in
the termination of respondent’s employment for authorized cause.
TAPE is a domestic corporation engaged in the production of television programs, such as the long-running variety program,
"Eat Bulaga!". Its president is Antonio P. Tuviera (Tuviera). Respondent Roberto C. Servaña had served as a security guard for
TAPE from March 1987 until he was terminated on 3 March 2000.
Respondent filed a complaint for illegal dismissal and nonpayment of benefits against TAPE. He alleged that he was first
connected with Agro-Commercial Security Agency but was later on absorbed by TAPE as a regular company guard. He was
detailed at Broadway Centrum in Quezon City where "Eat Bulaga!" regularly staged its productions. On 2 March 2000,
respondent received a memorandum informing him of his impending dismissal on account of TAPE’s decision to contract the
services of a professional security agency. At the time of his termination, respondent was receiving a monthly salary
of P6,000.00. He claimed that the holiday pay, unpaid vacation and sick leave benefits and other monetary considerations
were withheld from him. He further contended that his dismissal was undertaken without due process and violative of existing
labor laws, aggravated by nonpayment of separation pay.3
In a motion to dismiss which was treated as its position paper, TAPE countered that the labor arbiter had no jurisdiction over
the case in the absence of an employer-employee relationship between the parties. TAPE made the following assertions: (1)
that respondent was initially employed as a security guard for Radio Philippines Network (RPN-9); (2) that he was tasked to
assist TAPE during its live productions, specifically, to control the crowd; (3) that when RPN-9 severed its relationship with the
security agency, TAPE engaged respondent’s services, as part of the support group and thus a talent, to provide security
service to production staff, stars and guests of "Eat Bulaga!" as well as to control the audience during the one-and-a-half hour
noontime program; (4) that it was agreed that complainant would render his services until such time that respondent
company shall have engaged the services of a professional security agency; (5) that in 1995, when his contract with RPN-9
expired, respondent was retained as a talent and a member of the support group, until such time that TAPE shall have
engaged the services of a professional security agency; (6) that respondent was not prevented from seeking other
employment, whether or not related to security services, before or after attending to his "Eat Bulaga!" functions; (7) that
sometime in late 1999, TAPE started negotiations for the engagement of a professional security agency, the Sun Shield
Security Agency; and (8) that on 2 March 2000, TAPE issued memoranda to all talents, whose functions would be rendered
redundant by the engagement of the security agency, informing them of the management’s decision to terminate their
services.4
TAPE averred that respondent was an independent contractor falling under the talent group category and was working under
a special arrangement which is recognized in the industry.5
Respondent for his part insisted that he was a regular employee having been engaged to perform an activity that is necessary
and desirable to TAPE’s business for thirteen (13) years.6
On 29 June 2001, Labor Arbiter Daisy G. Cauton-Barcelona declared respondent to be a regular employee of TAPE. The Labor
Arbiter relied on the nature of the work of respondent, which is securing and maintaining order in the studio, as necessary
and desirable in the usual business activity of TAPE. The Labor Arbiter also ruled that the termination was valid on the ground
of redundancy, and ordered the payment of respondent’s separation pay equivalent to one (1)-month pay for every year of
service. The dispositive portion of the decision reads:
WHEREFORE, complainant’s position is hereby declared redundant. Accordingly, respondents are hereby ordered to
pay complainant his separation pay computed at the rate of one (1) month pay for every year of service or in the total
amount of P78,000.00.7
135
On appeal, the National Labor Relations Commission (NLRC) in a Decision 8 dated 22 April 2002 reversed the Labor Arbiter and
considered respondent a mere program employee, thus:
We have scoured the records of this case and we find nothing to support the Labor Arbiter’s conclusion that
complainant was a regular employee.
xxxx
The primary standard to determine regularity of employment is the reasonable connection between the particular
activity performed by the employee in relation to the usual business or trade of the employer. This connection can be
determined by considering the nature and work performed and its relation to the scheme of the particular business
or trade in its entirety. x x x Respondent company is engaged in the business of production of television shows. The
records of this case also show that complainant was employed by respondent company beginning 1995 after
respondent company transferred from RPN-9 to GMA-7, a fact which complainant does not dispute. His last salary
was P5,444.44 per month. In such industry, security services may not be deemed necessary and desirable in the usual
business of the employer. Even without the performance of such services on a regular basis, respondent’s company’s
business will not grind to a halt.
xxxx
Complainant was indubitably a program employee of respondent company. Unlike [a] regular employee, he did not
observe working hours x x x. He worked for other companies, such as M-Zet TV Production, Inc. at the same time that
he was working for respondent company. The foregoing indubitably shows that complainant-appellee was a program
employee. Otherwise, he would have two (2) employers at the same time.9
Respondent filed a motion for reconsideration but it was denied in a Resolution 10 dated 28 June 2002.
Respondent filed a petition for certiorari with the Court of Appeals contending that the NLRC acted with grave abuse of
discretion amounting to lack or excess of jurisdiction when it reversed the decision of the Labor Arbiter. Respondent asserted
that he was a regular employee considering the nature and length of service rendered.11
Reversing the decision of the NLRC, the Court of Appeals found respondent to be a regular employee. We quote the
dispositive portion of the decision:
IN LIGHT OF THE FOREGOING, the petition is hereby GRANTED. The Decision dated 22 April 2002 of the public
respondent NLRC reversing the Decision of the Labor Arbiter and its Resolution dated 28 June 2002 denying
petitioner’s motion for reconsideration are REVERSED and SET ASIDE. The Decision dated 29 June 2001 of the Labor
Arbiter is REINSTATED with MODIFICATION in that private respondents are ordered to pay jointly and severally
petitioner the amount of P10,000.00 as nominal damages for non-compliance with the statutory due process.
SO ORDERED.12
Finding TAPE’s motion for reconsideration without merit, the Court of Appeals issued a Resolution 13 dated 8 April 2005
denying said motion.
TAPE filed the instant petition for review raising substantially the same grounds as those in its petition for certiorari before the
Court of Appeals. These matters may be summed up into one main issue: whether an employer-employee relationship exists
between TAPE and respondent.
On 27 September 2006, the Court gave due course to the petition and considered the case submitted for decision. 14
136
At the outset, it bears emphasis that the existence of employer-employee relationship is ultimately a question of fact.
Generally, only questions of law are entertained in appeals by certiorari to the Supreme Court. This rule, however, is not
absolute. Among the several recognized exceptions is when the findings of the Court of Appeals and Labor Arbiters, on one
hand, and that of the NLRC, on the other, are conflicting, 15 as obtaining in the case at bar.
Jurisprudence is abound with cases that recite the factors to be considered in determining the existence of employer-
employee relationship, namely: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power
of dismissal; and (d) the employer's power to control the employee with respect to the means and method by which the work
is to be accomplished.16 The most important factor involves the control test. Under the control test, there is an employer-
employee relationship when the person for whom the services are performed reserves the right to control not only the end
achieved but also the manner and means used to achieve that end.17
In concluding that respondent was an employee of TAPE, the Court of Appeals applied the "four-fold test" in this wise:
First. The selection and hiring of petitioner was done by private respondents. In fact, private respondents themselves
admitted having engaged the services of petitioner only in 1995 after TAPE severed its relations with RPN Channel 9.
By informing petitioner through the Memorandum dated 2 March 2000, that his services will be terminated as soon
as the services of the newly hired security agency begins, private respondents in effect acknowledged petitioner to be
their employee. For the right to hire and fire is another important element of the employer-employee relationship.
Second. Payment of wages is one of the four factors to be considered in determining the existence of employer-
employee relation. . . Payment as admitted by private respondents was given by them on a monthly basis at a rate
of P5,444.44.
Third. Of the four elements of the employer-employee relationship, the "control test" is the most important. x x x
The bundy cards representing the time petitioner had reported for work are evident proofs of private respondents’
control over petitioner more particularly with the time he is required to report for work during the noontime program
of "Eat Bulaga!" If it were not so, petitioner would be free to report for work anytime even not during the noontime
program of "Eat Bulaga!" from 11:30 a.m. to 1:00 p.m. and still gets his compensation for being a "talent." Precisely,
he is being paid for being the security of "Eat Bulaga!" during the above-mentioned period. The daily time cards of
petitioner are not just for mere record purposes as claimed by private respondents. It is a form of control by the
management of private respondent TAPE.18
TAPE asseverates that the Court of Appeals erred in applying the "four-fold test" in determining the existence of employer-
employee relationship between it and respondent. With respect to the elements of selection, wages and dismissal, TAPE
proffers the following arguments: that it never hired respondent, instead it was the latter who offered his services as a talent
to TAPE; that the Memorandum dated 2 March 2000 served on respondent was for the discontinuance of the contract for
security services and not a termination letter; and that the talent fees given to respondent were the pre-agreed consideration
for the services rendered and should not be construed as wages. Anent the element of control, TAPE insists that it had no
control over respondent in that he was free to employ means and methods by which he is to control and manage the live
audiences, as well as the safety of TAPE’s stars and guests. 19
The position of TAPE is untenable. Respondent was first connected with Agro-Commercial Security Agency, which assigned
him to assist TAPE in its live productions. When the security agency’s contract with RPN-9 expired in 1995, respondent was
absorbed by TAPE or, in the latter’s language, "retained as talent." 20 Clearly, respondent was hired by TAPE. Respondent
presented his identification card21 to prove that he is indeed an employee of TAPE. It has been in held that in a business
establishment, an identification card is usually provided not just as a security measure but to mainly identify the holder
thereof as a bona fide employee of the firm who issues it.22
137
Respondent claims to have been receiving P5,444.44 as his monthly salary while TAPE prefers to designate such amount as
talent fees. Wages, as defined in the Labor Code, are remuneration or earnings, however designated, capable of being
expressed in terms of money, whether fixed or ascertained on a time, task, piece or commission basis, or other method of
calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment
for work done or to be done, or for service rendered or to be rendered. It is beyond dispute that respondent received a fixed
amount as monthly compensation for the services he rendered to TAPE.
The Memorandum informing respondent of the discontinuance of his service proves that TAPE had the power to dismiss
respondent.
Control is manifested in the bundy cards submitted by respondent in evidence. He was required to report daily and observe
definite work hours. To negate the element of control, TAPE presented a certification from M-Zet Productions to prove that
respondent also worked as a studio security guard for said company. Notably, the said certificate categorically stated that
respondent reported for work on Thursdays from 1992 to 1995. It can be recalled that during said period, respondent was still
working for RPN-9. As admitted by TAPE, it absorbed respondent in late 1995.23
TAPE further denies exercising control over respondent and maintains that the latter is an independent contractor. 24 Aside
from possessing substantial capital or investment, a legitimate job contractor or subcontractor carries on a distinct and
independent business and undertakes to perform the job, work or service on its own account and under its own responsibility
according to its own manner and method, and free from the control and direction of the principal in all matters connected
with the performance of the work except as to the results thereof.25 TAPE failed to establish that respondent is an
independent contractor. As found by the Court of Appeals:
We find the annexes submitted by the private respondents insufficient to prove that herein petitioner is indeed an
independent contractor. None of the above conditions exist in the case at bar. Private respondents failed to show
that petitioner has substantial capital or investment to be qualified as an independent contractor. They likewise failed
to present a written contract which specifies the performance of a specified piece of work, the nature and extent of
the work and the term and duration of the relationship between herein petitioner and private respondent TAPE. 26
TAPE relies on Policy Instruction No. 40, issued by the Department of Labor, in classifying respondent as a program employee
and equating him to be an independent contractor.
Policy Instruction No. 40 defines program employees as—
x x x those whose skills, talents or services are engaged by the station for a particular or specific program or
undertaking and who are not required to observe normal working hours such that on some days they work for less
than eight (8) hours and on other days beyond the normal work hours observed by station employees and are
allowed to enter into employment contracts with other persons, stations, advertising agencies or sponsoring
companies. The engagement of program employees, including those hired by advertising or sponsoring companies,
shall be under a written contract specifying, among other things, the nature of the work to be performed, rates of pay
and the programs in which they will work. The contract shall be duly registered by the station with the Broadcast
Media Council within three (3) days from its consummation.27
TAPE failed to adduce any evidence to prove that it complied with the requirements laid down in the policy instruction. It did
not even present its contract with respondent. Neither did it comply with the contract-registration requirement.
Even granting arguendo that respondent is a program employee, stills, classifying him as an independent contractor is
misplaced. The Court of Appeals had this to say:
We cannot subscribe to private respondents’ conflicting theories. The theory of private respondents that petitioner is
an independent contractor runs counter to their very own allegation that petitioner is a talent or a program
138
employee. An independent contractor is not an employee of the employer, while a talent or program employee is an
employee. The only difference between a talent or program employee and a regular employee is the fact that a
regular employee is entitled to all the benefits that are being prayed for. This is the reason why private respondents
try to seek refuge under the concept of an independent contractor theory. For if petitioner were indeed an
independent contractor, private respondents will not be liable to pay the benefits prayed for in petitioner’s
complaint.28
More importantly, respondent had been continuously under the employ of TAPE from 1995 until his termination in March
2000, or for a span of 5 years. Regardless of whether or not respondent had been performing work that is necessary or
desirable to the usual business of TAPE, respondent is still considered a regular employee under Article 280 of the Labor Code
which provides:
Art. 280. Regular and Casual Employment.—The provisions of written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee
has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of engagement of the employee or where the work or service
to be performed is seasonal in nature and employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph. Provided, that, any
employee who has rendered at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he is employed and his employment shall
continue while such activity exists.
As a regular employee, respondent cannot be terminated except for just cause or when authorized by law. 29 It is clear from the
tenor of the 2 March 2000 Memorandum that respondent’s termination was due to redundancy. Thus, the Court of Appeals
correctly disposed of this issue, viz:
Article 283 of the Labor Code provides that the employer may also terminate the employment of any employee due
to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of
operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of
this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1)
month before the intended date thereof. In case of termination due to the installation of labor saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month
pay or to at least one (1) month pay for every year or service, whichever is higher.
xxxx
We uphold the finding of the Labor Arbiter that "complainant [herein petitioner] was terminated upon [the]
management’s option to professionalize the security services in its operations. x x x" However, [we] find that although
petitioner’s services [sic] was for an authorized cause, i.e., redundancy, private respondents failed to prove that it
complied with service of written notice to the Department of Labor and Employment at least one month prior to the
intended date of retrenchment. It bears stressing that although notice was served upon petitioner through a
Memorandum dated 2 March 2000, the effectivity of his dismissal is fifteen days from the start of the agency’s take
over which was on 3 March 2000. Petitioner’s services with private respondents were severed less than the month
requirement by the law.
Under prevailing jurisprudence the termination for an authorized cause requires payment of separation pay.
Procedurally, if the dismissal is based on authorized causes under Articles 283 and 284, the employer must give the
employee and the Deparment of Labor and Employment written notice 30 days prior to the effectivity of his
separation. Where the dismissal is for an authorized cause but due process was not observed, the dismissal should be
139
upheld. While the procedural infirmity cannot be cured, it should not invalidate the dismissal. However, the employer
should be liable for non-compliance with procedural requirements of due process.
xxxx
Under recent jurisprudence, the Supreme Court fixed the amount of P30,000.00 as nominal damages. The basis of the
violation of petitioners’ right to statutory due process by the private respondents warrants the payment of indemnity
in the form of nominal damages. The amount of such damages is addressed to the sound discretion of the court,
taking into account the relevant circumstances. We believe this form of damages would serve to deter employer from
future violations of the statutory due process rights of the employees. At the very least, it provides a vindication or
recognition of this fundamental right granted to the latter under the Labor Code and its Implementing Rules.
Considering the circumstances in the case at bench, we deem it proper to fix it at P10,000.00.30
In sum, we find no reversible error committed by the Court of Appeals in its assailed decision.
However, with respect to the liability of petitioner Tuviera, president of TAPE, absent any showing that he acted with malice
or bad faith in terminating respondent, he cannot be held solidarily liable with TAPE.31 Thus, the Court of Appeals ruling on this
point has to be modified.
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are AFFIRMED with MODIFICATION in that only
petitioner Television and Production Exponents, Inc. is liable to pay respondent the amount of P10,000.00 as nominal
damages for non-compliance with the statutory due process and petitioner Antonio P. Tuviera is accordingly absolved from
liability.
SO ORDERED.
G.R. No. 121143 January 21, 1997
PURIFICACION G. TABANG, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and PAMANA GOLDEN CARE MEDICAL CENTER FOUNDATION,
INC., respondents.
REGALADO, J.:
This is a petition for certiorari which seeks to annul the resolution of the National Labor Relations Commission (NLRC), dated
June 26, 1995, affirming in toto the order of the labor arbiter, dated April 26, 1994, which dismissed petitioner's complaint for
illegal dismissal with money claims for lack of jurisdiction.
The records show that petitioner Purificacion Tabang was a founding member, a member of the Board of Trustees, and the
corporate secretary of private respondent Pamana Golden Care Medical Center Foundation, Inc., a non-stock corporation
engaged in extending medical and surgical services.
On October 30, 1990, the Board of Trustees issued a memorandum appointing petitioner as Medical Director and Hospital
Administrator of private respondent's Pamana Golden Care Medical Center in Calamba, Laguna.
140
Although the memorandum was silent as to the amount of remuneration for the position, petitioner claims that she received
a monthly retainer fee of five thousand pesos (P5,000.00) from private respondent, but the payment thereof was allegedly
stopped in November, 1991.
As medical director and hospital administrator, petitioner was tasked to run the affairs of the aforesaid medical center and
perform all acts of administration relative to its daily operations.
On May 1, 1993, petitioner was allegedly informed personally by Dr. Ernesto Naval that in a special meeting held on April 30,
1993, the Board of Trustees passed a resolution relieving her of her position as Medical Director and Hospital Administrator,
and appointing the latter and Dr. Benjamin Donasco as acting Medical Director and acting Hospital Administrator, respectively.
Petitioner averred that she thereafter received a copy of said board resolution.
On June 6, 1993, petitioner filled a complaint for illegal dismissal and non-payment of wages, allowances and 13th month pay
before the labor arbiter.
Respondent corporation moved for the dismissal of the complaint on the ground of lack of jurisdiction over the subject
matter. It argued that petitioner's position as Medical Director and Hospital Administrator was interlinked with her position as
member of the Board of Trustees, hence, her dismissal is an intra-corporate controversy which falls within the exclusive
jurisdiction of the Securities and Exchange Commission (SEC).
Petitioner opposed the motion to dismiss, contending that her position as Medical Director and Hospital Administrator was
separate and distinct from her position as member of the Board of Trustees. She claimed that there is no intra-corporate
controversy involved since she filed the complaint in her capacity as Medical Director and Hospital Administrator, or as an
employee of private respondent.
On April 26, 1994, the labor arbiter issued an order dismissing the complaint for lack of jurisdiction. He ruled that the case falls
within the jurisdiction of the SEC, pursuant to Section 5 of Presidential Decree No.
902-A. 1
Petitioner's motion for reconsideration was treated as an appeal by the labor arbiter who consequently ordered the elevation
of the entire records of the case to public respondent NLRC for appellate review. 2
On appeal, respondent NLRC affirmed the dismissal of the case on the additional ground that "the position of a Medical
Director and Hospital Administrator is akin to that of an executive position in a corporate ladder structure." hence, petitioner's
removal from the said position was an intra-corporate controversy within the original and exclusive jurisdiction of the SEC. 3
Aggrieved by the decision, petitioner filed the instant petition which we find, however, to be without merit.
We agree with the findings of the NLRC that it is the SEC which has jurisdiction over the case at bar. The charges against herein
private respondent partake of the nature of an intra-corporate controversy. Similarly, the determination of the rights of
petitioner and the concomitant liability of private respondent arising from her ouster as a medical director and/or hospital
administrator, which are corporate offices, is an intra-corporate controversy subject to the jurisdiction of the SEC.
Contrary to the contention of petitioner, a medical director and a hospital administrator are considered as corporate officers
under the by-laws of respondent corporation. Section 2(i), Article I thereof states that one of the powers of the Board of
Trustees is "(t)o appoint a Medical Director, Comptroller/Administrator, Chiefs of Services and such other officers as it may
deem necessary and prescribe their powers and duties." 4
The president, vice-president, secretary and treasurer are commonly regarded as the principal or executive officers of a
corporation, and modern corporation statutes usually designate them as the officers of the corporation. However, other
5
offices are sometimes created by the charter or by-laws of a corporation, or the board of directors may be empowered under
141
the by-laws of a corporation to create additional offices as may be necessary. It has been held that an "office'' is created by
6
the charter of the corporation and the officer is elected by the directors or stockholders. On the other hand, an "employee"
7
usually occupies no office and generally is employed not by action of the directors or stockholders but by the managing officer
of the corporation who also determines the compensation to be paid to such employee. 8
In the case at bar, considering that herein petitioner, unlike an ordinary employee, was appointed by respondent
corporation's Board of Trustees in its memorandum of October 30, 1990, she is deemed an officer of the corporation.
9
Perforce, Section 5(c) of Presidential Decree No. 902-A, which provides that the SEC exercises exclusive jurisdiction over
controversies in the election appointment of directors, trustees, officers or managers of corporations, partnerships or
associations, applies in the present dispute. Accordingly, jurisdiction over the same is vested in the SEC, and not in the Labor
Arbiter or the NLRC.
Moreover, the allegation of petitioner that her being a member of the Board of Trustees was not one of the considerations for
her appointment is belied by the tenor of the memorandum itself. It states: "We hope that you will uphold and promote the
mission of our foundation," and this cannot be construed other than in reference to her position or capacity as a corporate
10
trustee.
A corporate officer's dismissal is always a corporate act, or an intra-corporate controversy, and the nature is not altered by the
reason or wisdom with which the Board of Directors may have in taking such action. Also, an intra-corporate controversy is
11
one which arises between a stockholder and the corporation. There is no distinction, qualification, nor any exemption
whatsoever. The provision is broad and covers all kinds of controversies between stockholders and corporations. 12
With regard to the amount of P5,000,00 formerly received by herein petitioner every month, the same cannot be considered
as compensation for her services rendered as Medical Director and Hospital Administrator. The vouchers submitted by
13
petitioner show that the said amount was paid to her by PAMANA, Inc., a stock corporation which is separate and distinct
from herein private respondent. Although the payments were considered advances to Pamana Golden Care, Calamba branch,
there is no evidence to show that the Pamana Golden Care stated in the vouchers refers to herein respondent Pamana Golden
Care Medical Center Foundation, Inc.
Pamana Golden Care is a division of Pamana, Inc., while respondent Pamana Golden Care Medical Center Foundation, Inc. is a
non-stock, non-profit corporation. It is stated in the memorandum of petitioner that Pamana, Inc. is a stock and profit
corporation selling pre-need plan for education, pension and health care. The health care plan is called Pamana Golden Care
Plan and the holders are called Pamana Golden Care Card Holders or, simply, Pamana Members. 14
It is an admitted fact that herein petitioner is a retained physician of Pamana, Inc., whose patients are holders of the Pamana
Golden Care Card. In fact, in her complaint filed before the Regional Trial Court of Calamba, herein petitioner is asking
15
among others, for professional fees and/or retainer fees earned for her treatment of Pamana Golden Care card
holders. Thus, at most, said vouchers can only be considered as proof of payment of retainer fees made by Pamana, Inc. to
16
herein petitioner as a retained physician of Pamana Golden Care.
Moreover, even assuming that the monthly payment of P5,000.00 was a valid claim against respondent corporation, this
would not operate to effectively remove this case from the jurisdiction of the SEC. In the case of Cagayan de Oro
Coliseum, Inc. vs. Office of the Minister of Labor and Employment, etc., et al., we ruled that "(a)lthough the reliefs sought by
17
Chavez appear to fall under the jurisdiction of the labor arbiter as they are claims for unpaid salaries and other remunerations
for services rendered, a close scrutiny thereof shows that said claims are actually part of the perquisites of his position in, and
therefore interlinked with, his relations with the corporation. In Dy, et al., vs. NLRC, et al., the Court said: "(t)he question of
remuneration involving as it does, a person who is not a mere employee but a stockholder and officer, an integral part, it
might be said, of the corporation, is not a simple labor problem but a matter that comes within the area of corporate affairs
and management and is in fact a corporate controversy in contemplation of the Corporation Code."
142
WHEREFORE, the questioned resolution of the NLRC is hereby AFFIRMED, without prejudice to petitioner's taking recourse to
and seeking relief through the appropriate remedy in the proper forum.
SO ORDERED.
G.R. No. 170087 August 31, 2006
ANGELINA FRANCISCO, Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA,
IRENE BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul and set aside the Decision and
Resolution of the Court of Appeals dated October 29, 2004 1 and October 7, 2005, 2 respectively, in CA-G.R. SP No. 78515
dismissing the complaint for constructive dismissal filed by herein petitioner Angelina Francisco. The appellate court reversed
and set aside the Decision of the National Labor Relations Commission (NLRC) dated April 15, 2003, 3 in NLRC NCR CA No.
032766-02 which affirmed with modification the decision of the Labor Arbiter dated July 31, 2002, 4 in NLRC-NCR Case No. 30-
10-0-489-01, finding that private respondents were liable for constructive dismissal.
In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as Accountant and
Corporate Secretary and was assigned to handle all the accounting needs of the company. She was also designated as Liaison
Officer to the City of Makati to secure business permits, construction permits and other licenses for the initial operation of the
company. 5
Although she was designated as Corporate Secretary, she was not entrusted with the corporate documents; neither did she
attend any board meeting nor required to do so. She never prepared any legal document and never represented the company
as its Corporate Secretary. However, on some occasions, she was prevailed upon to sign documentation for the company. 6
In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as accountant in lieu of petitioner.
As Acting Manager, petitioner was assigned to handle recruitment of all employees and perform management administration
functions; represent the company in all dealings with government agencies, especially with the Bureau of Internal Revenue
(BIR), Social Security System (SSS) and in the city government of Makati; and to administer all other matters pertaining to the
operation of Kasei Restaurant which is owned and operated by Kasei Corporation. 7
For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her salary was P27,500.00 plus
P3,000.00 housing allowance and a 10% share in the profit of Kasei Corporation. 8
In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was required to sign a
prepared resolution for her replacement but she was assured that she would still be connected with Kasei Corporation.
Timoteo Acedo, the designated Treasurer, convened a meeting of all employees of Kasei Corporation and announced that
nothing had changed and that petitioner was still connected with Kasei Corporation as Technical Assistant to Seiji Kamura and
in charge of all BIR matters. 9
Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to September 2001 for a total
reduction of P22,500.00 as of September 2001. Petitioner was not paid her mid-year bonus allegedly because the company
was not earning well. On October 2001, petitioner did not receive her salary from the company. She made repeated follow-
ups with the company cashier but she was advised that the company was not earning well. 10
143
On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but she was informed that she is
no longer connected with the company. 11
Since she was no longer paid her salary, petitioner did not report for work and filed an action for constructive dismissal before
the labor arbiter.
Private respondents averred that petitioner is not an employee of Kasei Corporation. They alleged that petitioner was hired in
1995 as one of its technical consultants on accounting matters and act concurrently as Corporate Secretary. As technical
consultant, petitioner performed her work at her own discretion without control and supervision of Kasei Corporation.
Petitioner had no daily time record and she came to the office any time she wanted. The company never interfered with her
work except that from time to time, the management would ask her opinion on matters relating to her profession. Petitioner
did not go through the usual procedure of selection of employees, but her services were engaged through a Board Resolution
designating her as technical consultant. The money received by petitioner from the corporation was her professional fee
subject to the 10% expanded withholding tax on professionals, and that she was not one of those reported to the BIR or SSS as
one of the company’s employees. 12
Petitioner’s designation as technical consultant depended solely upon the will of management. As such, her consultancy may
be terminated any time considering that her services were only temporary in nature and dependent on the needs of the
corporation.
To prove that petitioner was not an employee of the corporation, private respondents submitted a list of employees for the
years 1999 and 2000 duly received by the BIR showing that petitioner was not among the employees reported to the BIR, as
well as a list of payees subject to expanded withholding tax which included petitioner. SSS records were also submitted
showing that petitioner’s latest employer was Seiji Corporation. 13
The Labor Arbiter found that petitioner was illegally dismissed, thus:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. finding complainant an employee of respondent corporation;
2. declaring complainant’s dismissal as illegal;
3. ordering respondents to reinstate complainant to her former position without loss of seniority rights and jointly and
severally pay complainant her money claims in accordance with the following computation:
a. Backwages 10/2001 – 07/2002 275,000.00
(27,500 x 10 mos.)
b. Salary Differentials (01/2001 – 09/2001) 22,500.00
c. Housing Allowance (01/2001 – 07/2002) 57,000.00
d. Midyear Bonus 2001 27,500.00
e. 13th Month Pay 27,500.00
f. 10% share in the profits of Kasei
144
Corp. from 1996-2001 361,175.00
g. Moral and exemplary damages 100,000.00
h. 10% Attorney’s fees 87,076.50
P957,742.50
If reinstatement is no longer feasible, respondents are ordered to pay complainant separation pay with additional backwages
that would accrue up to actual payment of separation pay.
SO ORDERED. 14
On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter, the dispositive portion of which
reads:
PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as follows:
1) Respondents are directed to pay complainant separation pay computed at one month per year of service in addition to full
backwages from October 2001 to July 31, 2002;
2) The awards representing moral and exemplary damages and 10% share in profit in the respective accounts of P100,000.00
and P361,175.00 are deleted;
3) The award of 10% attorney’s fees shall be based on salary differential award only;
4) The awards representing salary differentials, housing allowance, mid year bonus and 13th month pay are AFFIRMED.
SO ORDERED. 15
On appeal, the Court of Appeals reversed the NLRC decision, thus:
WHEREFORE, the instant petition is hereby GRANTED. The decision of the National Labor Relations Commissions dated April
15, 2003 is hereby REVERSED and SET ASIDE and a new one is hereby rendered dismissing the complaint filed by private
respondent against Kasei Corporation, et al. for constructive dismissal.
SO ORDERED. 16
The appellate court denied petitioner’s motion for reconsideration, hence, the present recourse.
The core issues to be resolved in this case are (1) whether there was an employer-employee relationship between petitioner
and private respondent Kasei Corporation; and if in the affirmative, (2) whether petitioner was illegally dismissed.
Considering the conflicting findings by the Labor Arbiter and the National Labor Relations Commission on one hand, and the
Court of Appeals on the other, there is a need to reexamine the records to determine which of the propositions espoused by
the contending parties is supported by substantial evidence. 17
We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there has been no uniform test to determine the existence of
an employer-employee relation. Generally, courts have 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
145
reaching such end. In addition to the standard of right-of-control, the existing economic conditions prevailing between the
parties, like the inclusion of the employee in the payrolls, can help in determining the existence of an employer-employee
relationship.
However, in certain cases the control test is not sufficient to give a complete picture of the relationship between the parties,
owing to the complexity of such a relationship where several positions have been held by the worker. There are instances
when, aside from the employer’s power to control the employee with respect to the means and methods by which the work is
to be accomplished, economic realities of the employment relations help provide a comprehensive analysis of the true
classification of the individual, whether as employee, independent contractor, corporate officer or some other capacity.
The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employer’s power to control the
employee with respect to the means and methods by which the work is to be accomplished; and (2) the underlying economic
realities of the activity or relationship.
This two-tiered test would provide us with a framework of analysis, which would take into consideration the totality of
circumstances surrounding the true nature of the relationship between the parties. This is especially appropriate in this case
where there is no written agreement or terms of reference to base the relationship on; and due to the complexity of the
relationship based on the various positions and responsibilities given to the worker over the period of the latter’s
employment.
The control test initially found application in the case of Viaña v. Al-Lagadan and Piga, 19 and lately in Leonardo v. Court of
Appeals, 20 where we held that there is an employer-employee relationship when the person for whom the services are
performed reserves the right to control not only the end achieved but also the manner and means used to achieve that end.
In Sevilla v. Court of Appeals, 21 we observed the need to consider the existing economic conditions prevailing between the
parties, in addition to the standard of right-of-control like the inclusion of the employee in the payrolls, to give a clearer
picture in determining the existence of an employer-employee relationship based on an analysis of the totality of economic
circumstances of the worker.
Thus, the determination of the relationship between employer and employee depends upon the circumstances of the whole
economic activity, 22 such as: (1) the extent to which the services performed are an integral part of the employer’s business; (2)
the extent of the worker’s investment in equipment and facilities; (3) the nature and degree of control exercised by the
employer; (4) the worker’s opportunity for profit and loss; (5) the amount of initiative, skill, judgment or foresight required for
the success of the claimed independent enterprise; (6) the permanency and duration of the relationship between the worker
and the employer; and (7) the degree of dependency of the worker upon the employer for his continued employment in that
line of business. 23
The proper standard of economic dependence is whether the worker is dependent on the alleged employer for his continued
employment in that line of business. 24 In the United States, the touchstone of economic reality in analyzing possible
employment relationships for purposes of the Federal Labor Standards Act is dependency. 25 By analogy, the benchmark of
economic reality in analyzing possible employment relationships for purposes of the Labor Code ought to be the economic
dependence of the worker on his employer.
By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation because she was under the
direct control and supervision of Seiji Kamura, the corporation’s Technical Consultant. She reported for work regularly and
served in various capacities as Accountant, Liaison Officer, Technical Consultant, Acting Manager and Corporate Secretary,
with substantially the same job functions, that is, rendering accounting and tax services to the company and performing
functions necessary and desirable for the proper operation of the corporation such as securing business permits and other
licenses over an indefinite period of engagement.
146
Under the broader economic reality test, the petitioner can likewise be said to be an employee of respondent corporation
because she had served the company for six years before her dismissal, receiving check vouchers indicating her
salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as deductions and Social Security contributions
from August 1, 1999 to December 18, 2000. 26 When petitioner was designated General Manager, respondent corporation
made a report to the SSS signed by Irene Ballesteros. Petitioner’s membership in the SSS as manifested by a copy of the SSS
specimen signature card which was signed by the President of Kasei Corporation and the inclusion of her name in the on-line
inquiry system of the SSS evinces the existence of an employer-employee relationship between petitioner and respondent
corporation. 27
It is therefore apparent that petitioner is economically dependent on respondent corporation for her continued employment
in the latter’s line of business.
In Domasig v. National Labor Relations Commission, 28 we held that in a business establishment, an identification card is
provided not only as a security measure but mainly to identify the holder thereof as a bona fide employee of the firm that
issues it. Together with the cash vouchers covering petitioner’s salaries for the months stated therein, these matters
constitute substantial evidence adequate to support a conclusion that petitioner was an employee of private respondent.
We likewise ruled in Flores v. Nuestro 29 that a corporation who registers its workers with the SSS is proof that the latter were
the former’s employees. The coverage of Social Security Law is predicated on the existence of an employer-employee
relationship.
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established that petitioner never acted as
Corporate Secretary and that her designation as such was only for convenience. The actual nature of petitioner’s job was as
Kamura’s direct assistant with the duty of acting as Liaison Officer in representing the company to secure construction
permits, license to operate and other requirements imposed by government agencies. Petitioner was never entrusted with
corporate documents of the company, nor required to attend the meeting of the corporation. She was never privy to the
preparation of any document for the corporation, although once in a while she was required to sign prepared documentation
for the company. 30
The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001 affidavit has been allegedly
withdrawn by Kamura himself from the records of the case. 31 Regardless of this fact, we are convinced that the allegations in
the first affidavit are sufficient to establish that petitioner is an employee of Kasei Corporation.
Granting arguendo, that the second affidavit validly repudiated the first one, courts do not generally look with favor on any
retraction or recanted testimony, for it could have been secured by considerations other than to tell the truth and would
make solemn trials a mockery and place the investigation of the truth at the mercy of unscrupulous witnesses. 32 A recantation
does not necessarily cancel an earlier declaration, but like any other testimony the same is subject to the test of credibility and
should be received with caution. 33
Based on the foregoing, there can be no other conclusion that petitioner is an employee of respondent Kasei Corporation. She
was selected and engaged by the company for compensation, and is economically dependent upon respondent for her
continued employment in that line of business. Her main job function involved accounting and tax services rendered to
respondent corporation on a regular basis over an indefinite period of engagement. Respondent corporation hired and
engaged petitioner for compensation, with the power to dismiss her for cause. More importantly, respondent corporation had
the power to control petitioner with the means and methods by which the work is to be accomplished.
The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a month from January to September
2001. This amounts to an illegal termination of employment, where the petitioner is entitled to full backwages. Since the
position of petitioner as accountant is one of trust and confidence, and under the principle of strained relations, petitioner is
further entitled to separation pay, in lieu of reinstatement. 34
147
A diminution of pay is prejudicial to the employee and amounts to constructive dismissal. Constructive dismissal is an
involuntary resignation resulting in cessation of work resorted to when continued employment becomes impossible,
unreasonable or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear discrimination, insensibility
or disdain by an employer becomes unbearable to an employee. 35 In Globe Telecom, Inc. v. Florendo-Flores, 36 we ruled that
where an employee ceases to work due to a demotion of rank or a diminution of pay, an unreasonable situation arises which
creates an adverse working environment rendering it impossible for such employee to continue working for her employer.
Hence, her severance from the company was not of her own making and therefore amounted to an illegal termination of
employment.
In affording full protection to labor, this Court must ensure equal work opportunities regardless of sex, race or creed. Even as
we, in every case, attempt to carefully balance the fragile relationship between employees and employers, we are mindful of
the fact that the policy of the law is to apply the Labor Code to a greater number of employees. This would enable employees
to avail of the benefits accorded to them by law, in line with the constitutional mandate giving maximum aid and protection to
labor, promoting their welfare and reaffirming it as a primary social economic force in furtherance of social justice and
national development.
WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals dated October 29, 2004 and
October 7, 2005, respectively, in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE. The Decision of the National Labor
Relations Commission dated April 15, 2003 in NLRC NCR CA No. 032766-02, is REINSTATED. The case is REMANDED to the
Labor Arbiter for the recomputation of petitioner Angelina Francisco’s full backwages from the time she was illegally
terminated until the date of finality of this decision, and separation pay representing one-half month pay for every year of
service, where a fraction of at least six months shall be considered as one whole year.
SO ORDERED.
G.R. No. 169207 March 25, 2010
WPP MARKETING COMMUNICATIONS, INC., JOHN STEEDMAN, MARK WEBSTER, and NOMINADA LANSANG, Petitioners,
vs.
JOCELYN M. GALERA, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 169239
JOCELYN M. GALERA, Petitioner,
vs.
WPP MARKETING COMMUNICATIONS, INC., JOHN STEEDMAN, MARK WEBSTER, and NOMINADA LANSANG, Respondents.
DECISION
CARPIO, Acting C.J.:
The Case
G.R. Nos. 169207 and 169239 are petitions for review1 assailing the Decision2 promulgated on 14 April 2005 as well as the
Resolution3 promulgated on 1 August 2005 of the Court of Appeals (appellate court) in CA-G.R. SP No. 78721. The appellate
court granted and gave due course to the petition filed by Jocelyn M. Galera (Galera). The appellate court’s decision reversed
and set aside that of the National Labor Relations Commission (NLRC), and directed WPP Marketing Communications, Inc.
(WPP) to pay Galera backwages, separation pay, unpaid housing benefit, unpaid personal and accident insurance benefits,
148
cash value under the company’s pension plan, 30 days paid holiday benefit, moral damages, exemplary damages, 10% of the
total judgment award as attorney’s fees, and costs of the suit.
The Facts
The appellate court narrated the facts as follows:
Petitioner is Jocelyn Galera (GALERA), a [sic] American citizen who was recruited from the United States of America by private
respondent John Steedman, Chairman-WPP Worldwide and Chief Executive Officer of Mindshare, Co., a corporation based in
Hong Kong, China, to work in the Philippines for private respondent WPP Marketing Communications, Inc. (WPP), a
corporation registered and operating under the laws of Philippines. GALERA accepted the offer and she signed an Employment
Contract entitled "Confirmation of Appointment and Statement of Terms and Conditions" (Annex B to Petition for Certiorari).
The relevant portions of the contract entered into between the parties are as follows:
Particulars:
Name : Jocelyn M. Galera
Address : 163 Mediterranean Avenue
Hayward, CA 94544
Position : Managing Director
Mindshare Philippines
Annual Salary : Peso 3,924,000
Start Date : 1 September 1999
Commencement Date : 1 September 1999
(for continuous service)
Office : Mindshare Manila
6. Housing Allowance
The Company will provide suitable housing in Manila at a maximum cost (including management fee and other
associated costs) of Peso 576,000 per annum.
7. Other benefits.
The Company will provide you with a fully maintained company car and a driver.
The Company will continue to provide medical, health, life and personal accident insurance plans, to an amount not
exceeding Peso 300,000 per annum, in accordance with the terms of the respective plans, as provided by JWT Manila.
The Company will reimburse you and your spouse one way business class air tickets from USA to Manila and the
related shipping and relocation cost not exceeding US$5,000 supported by proper documentation. If you leave the
Company within one year, you will reimburse the Company in full for all costs of the initial relocation as described
therein.
You will participate in the JWT Pension Plan under the terms of this plan, the Company reserves the right to transfer
this benefit to a Mindshare Pension Plan in the future, if so required.
149
8. Holidays
You are entitled to 20 days paid holiday in addition to public holidays per calendar year to be taken at times agreed
with the Company. Carry-over of unused accrued holiday entitlement into a new holiday year will not normally be
allowed. No payment will be made for holidays not taken. On termination of your employment, unless you have been
summarily dismissed, you will be entitled to receive payment for unused accrued holiday pay. Any holiday taken in
excess of your entitlement shall be deducted from your final salary payment.
9. Leave Due to Sickness or Injury
The maximum provision for sick leave is 15 working days per calendar year.
12. Invention/Know-How
Any discovery, invention, improvement in procedure, trademark, trade name, designs, copyrights or get-ups made,
discovered or created by you during the continuance of your employment hereunder relating to the business of the
Company shall belong to and shall be the absolute property of the Company. If required to do so by the Company
(whether during or after the termination of your employment) you shall at the expense of the company execute all
instruments and do all things necessary to vest in ownership for all other rights, title and interests (including any
registered rights therein) in such discovery, invention, improvement in procedure, trademark, trade name, design,
copyright or get-up in the Company (or its Nominee) absolutely and as sole beneficial owner.
14. Notice.
The first three months of your employment will be a trial period during which either you or the Company may
terminate your employment on one week’s notice. If at the end of that period, the Company is satisfied with your
performance, you will become a permanent employee. Thereafter you will give Company and the Company will give
you three months notice of termination of employment. The above is always subject to the following: (1) the
Company’s right to terminate the contract of employment on no or short notice where you are in breach of contract;
(2) your employment will at any event cease without notice on your retirement date when you are 60 years of age.
SIGNED JOCELYN M. GALERA 8-16-99

Date of Birth [sic] 12-25-55
Employment of GALERA with private respondent WPP became effective on September 1, 1999 solely on the instruction of the
CEO and upon signing of the contract, without any further action from the Board of Directors of private respondent WPP.
Four months had passed when private respondent WPP filed before the Bureau of Immigration an application for petitioner
GALERA to receive a working visa, wherein she was designated as Vice President of WPP. Petitioner alleged that she was
constrained to sign the application in order that she could remain in the Philippines and retain her employment.
Then, on December 14, 2000, petitioner GALERA alleged she was verbally notified by private respondent STEEDMAN that her
services had been terminated from private respondent WPP. A termination letter followed the next day. 4
On 3 January 2001, Galera filed a complaint for illegal dismissal, holiday pay, service incentive leave pay, 13th month pay,
incentive plan, actual and moral damages, and attorney’s fees against WPP and/or John Steedman (Steedman), Mark Webster
(Webster) and Nominada Lansang (Lansang). The case was docketed as NLRC NCR Case No. 30-01-00044-01.
The Labor Arbiter’s Ruling
150
In his Decision dated 31 January 2002, Labor Arbiter Edgardo M. Madriaga (Arbiter Madriaga) held WPP, Steedman, Webster,
and Lansang liable for illegal dismissal and damages. Arbiter Madriaga stated that Galera was not only illegally dismissed but
was also not accorded due process. Arbiter Madriaga explained, thus:
[WPP] failed to observe the two-notice rule. [WPP] through respondent Steedman for a five (5) minute meeting on December
14, 2000 where she was verbally told that as of that day, her employment was being terminated. [WPP] did not give [Galera]
an opportunity to defend herself and explain her side. [Galera] was even prohibited from reporting for work that day and was
told not to report for work the next day as it would be awkward for her and respondent Steedman to be in the same premises
after her termination. [WPP] only served [Galera] her written notice of termination only on 15 December 2001, one day after
she was verbally apprised thereof.
The law mandates that the dismissal must be properly done otherwise, the termination is gravely defective and may be
declared unlawful as we hereby hold [Galera’s] dismissal to be illegal and unlawful. Where there is no showing of a clear, valid
and legal cause for the termination of employment, the law considers the matter a case of illegal dismissal and the burden is
on the employer to prove that the termination was for a valid or authorized cause. The law mandates that both the
substantive and procedural aspects of due process should be observed. The facts clearly show that respondents were remiss
on both aspects. Perforce, the dismissal is void and unlawful.
xxxx
Considering the work performance and achievements of [Galera] for the year 2000, we do not find any basis for the alleged
claim of incompetence by herein respondents. Had [Galera] been really incompetent, she would not have been able to
generate enormous amounts [sic] of revenues and business for [WPP]. She also appears to be well liked as a leader by her
subordinates, who have come forth in support of [Galera]. These facts remain undisputed by respondents.
A man’s job being a property right duly protected by our laws, an employer who deprives an employee [of] the right to defend
himself is liable for damages consistent with Article 32 of the Civil Code. To allow an employer to terminate the employment
of his worker based merely on allegations without proof places the [employee] in an uncertain situation. The unflinching rule
in illegal dismissal cases is that the employer bears the burden of proof.
In the instant case, respondents have not been able to muster evidence to counter [Galera’s] allegations. [Galera’s] allegations
remain and stand absent proof from respondents rebutting them. Hence, our finding of illegal dismissal against respondents
who clearly have conspired in bad faith to deprive [Galera] of her right to substantive and procedural due process. 5
The dispositive portion of Arbiter Madriaga’s decision reads as follows:
WHEREFORE, premises considered, we hereby hold herein respondents liable for illegal dismissal and damages, and award to
[Galera], by virtue of her expatriate status, the following:
a. Reinstatement without loss of seniority rights.
b. Backwages amounting to $120,000 per year at ₱50.00 to US $1 exchange rate, 13th month pay, transportation and
housing benefits.
c. Remuneration for business acquisitions amounting to Two Million Eight Hundred Fifty Thousand Pesos
(₱2,850,000.00) and Media Plowback Incentive equivalent to Three Million Pesos (₱3,000,000.00) or a total of not less
than One Hundred Thousand US Dollars ($100,000.00).
d. US Tax Protection of up to 35% coverage equivalent to Thirty Eight Thousand US Dollars ($38,000).
151
e. Moral damages including implied defamation and punitive damages equivalent to Two Million Dollars
(US$2,000,000.00).
f. Exemplary damages equivalent to One Million Dollars ($1,000,000.00).
g. Attorney’s fees of 10% of the total award herein.
SO ORDERED.6
The Ruling of the NLRC
The First Division of the NLRC reversed the ruling of Arbiter Madriaga. In its Decision 7 promulgated on 19 February 2003, the
NLRC stressed that Galera was WPP’s Vice-President, and therefore, a corporate officer at the time she was removed by the
Board of Directors on 14 December 2000. The NLRC stated thus:
It matters not that her having been elected by the Board to an added position of being a member of the Board of Directors did
not take effect as her May 31, 2000 election to such added position was conditioned to be effective upon approval by SEC of
the Amended By-Laws, an approval which took place only in February 21, 2001, i.e., after her removal on December 14, 2000.
What counts is, at the time of her removal, she continued to be WPP’s Vice-President, a corporate officer, on hold over
capacity.
Ms. Galera’s claim that she was not a corporate officer at the time of her removal because her May 31, 2000 election as Vice
President for Media, under WPP’s Amended By-Laws, was subject to the approval by the Securities and Exchange Commission
and that the SEC approved the Amended By-Laws only in February 2001. Such claim is unavailing. Even if Ms. Galera’s
subsequent election as Vice President for Media on May 31, 2000 was subject to approval by the SEC, she continued to hold
her previous position as Vice President under the December 31, 1999 election until such time that her successor is duly
elected and qualified. It is a basic principle in corporation law, which principle is also embodied in WPP’s by-laws, that a
corporate officer continues to hold his position as such until his successor has been duly elected and qualified. When Ms.
Galera was elected as Vice President on December 31, 1999, she was supposed to have held that position until her successor
has been duly elected and qualified. The record shows that Ms. Galera was not replaced by anyone. She continued to be Vice
President of WPP with the same operational title of Managing Director for Mindshare and continued to perform the same
functions she was performing prior to her May 31, 2000 election.
In the recent case of Dily Dany Nacpil v. International Broadcasting Corp., the definition of corporate officer for purposes of
intra-corporate controversy was even broadened to include a Comptroller/Assistant Manager who was appointed by the
General Manager, and whose appointment was later approved by the Board of Directors. In this case, the position of
comptroller was not even expressly mentioned in the By-Laws of the corporation, and yet, the Supreme Court found him to be
a corporate officer. The Court ruled that —
(since) petitioner’s appointment as comptroller required the approval and formal action of IBC’s Board of Directors to become
valid, it is clear therefore that petitioner is a corporate officer whose dismissal may be the subject of a controversy cognizable
by the SEC... Had the petitioner been an ordinary employee, such board action would not have been required.
Such being the case, the imperatives of law require that we hold that the Arbiter below had no jurisdiction over Galera’s case
as, again, she was a corporate officer at the time of her removal.
WHEREFORE, the appeals of petitioner from the Decision of Labor Arbiter Edgardo Madriaga dated January 31, 2002 and his
Order dated March 21, 2002, respectively, are granted. The January 31, 2002 decision of the Labor Arbiter is set aside for
being null and void and the temporary restraining order we issued on April 24, 2002 is hereby made permanent. The
complaint of Jocelyn Galera is dismissed for lack of jurisdiction.
152
SO ORDERED.8
In its Resolution9 promulgated on 4 June 2003, the NLRC further stated:
We are fully convinced that this is indeed an intra-corporate dispute which is beyond the labor arbiter’s jurisdiction. These
consolidated cases clearly [involve] the relationship between a corporation and its officer and is properly within the definition
of an intra-corporate relationship which, under P.D. No. 902-A, is within the jurisdiction of the SEC (now the commercial
courts). Such being the case, We are constrained to rule that the Labor Arbiter below had no jurisdiction over Ms. Galera’s
complaint for illegal dismissal.
WHEREFORE, the motion for reconsideration filed by Ms. Galera is hereby denied for lack of merit. We reiterate our February
19, 2003 Decision setting aside the Labor Arbiter’s Decision dated January 31, 2002 for being null and void.
SO ORDERED.10
Galera assailed the NLRC’s decision and resolution before the appellate court and raised a lone assignment of error.
The National Labor Relations Commission acted with grave abuse of discretion amounting to lack or excess of jurisdiction
when it reversed the decision of the Labor Arbiter not on the merits but for alleged lack of jurisdiction. 11
The Decision of the Appellate Court
The appellate court reversed and set aside the decision of the NLRC. The appellate court ruled that the NLRC’s dismissal of
Galera’s appeal is not in accord with jurisprudence. A person could be considered a "corporate officer" only if appointed as
such by a corporation’s Board of Directors, or if pursuant to the power given them by either the Articles of Incorporation or
the By-Laws.12
The appellate court explained:
A corporation, through its board of directors, could only act in the manner and within the formalities, if any, prescribed by its
charter or by the general law. If the action of the Board is ultra vires such is motu proprio void ab initio and without legal effect
whatsoever. The by-laws of a corporation are its own private laws which substantially have the same effect as the laws of the
corporation. They are, in effect, written into the charter. In this sense, they beome part of the fundamental law of the
corporation with which the corporation and its directors and officers must comply.
Even if petitioner GALERA had been appointed by the Board of Directors on December 31, 1999, private respondent WPP’s By-
Laws provided for only one Vice-President, a position already occupied by private respondent Webster. The same defect also
stains the Board of Directors’ appointment of petitioner GALERA as a Director of the corporation, because at that time the By-
Laws provided for only five directors. In addition, the By-laws only empowered the Board of Directors to appoint a general
manager and/or assistant general manager as corporate officers in addition to a chairman, president, vice-president and
treasurer. There is no mention of a corporate officer entitled "Managing Director."
Hence, when the Board of Directors enacted the Resolutions of December 31, 1999 and May 31, 2000, it exceeded its
authority under the By-Laws and are, therefore, ultra vires. Although private respondent WPP sought to amend these defects
by filing Amended By-Laws with the Securities and Exchange Commission, they did not validate the ultra vires resolutions
because the Amended By-Laws did not take effect until February 16, 2001, when it was approved by the SEC. Since by-laws
operate only prospectively, they could not validate the ultra vires resolutions.13
The dispositive portion of the appellate court’s decision reads:
153
WHEREFORE, the petition is hereby GRANTED and GIVEN DUE COURSE. The assailed Decision of the National Labor Relations
Commission is hereby REVERSED and SET ASIDE and a new one is entered DIRECTING private respondent WPP MARKETING
COMMUNICATIONS, INC. to:
1. Pay [Galera] backwages at the peso equivalent of US$120,000.00 per annum plus three months from her summary
December 14, 2000 dismissal up to March 14, 2001 because three months notice is required under the contract, plus
13th month pay, bonuses and general increases to which she would have been normally entitled, had she not been
dismissed and had she not been forced to stop working, including US tax protection of up to 35% coverage which she
had been enjoying as an expatriate;
2. Pay x x x GALERA the peso equivalent of US$185,000.00 separation pay (1 ½ years);
3. Pay x x x GALERA any unpaid housing benefit for the 18 ½ months of her employment in the service to the
Company as an expatriate in Manila, Philippines at the rate of ₱576,000 per year; unpaid personal and accident
insurance benefits for premiums at the rate of ₱300,000.00 per year; whatever cash value in the JWT Pension Plan;
and thirty days paid holiday benefit under the contract for the 1 ½ calendar years with the Company;
4. Pay x x x GALERA the reduced amount of PhP2,000,000.00 as moral damages;
5. Pay [Galera] the reduced amount of PhP1,000,000.00 as exemplary damages;
6. Pay [Galera] an amount equivalent to 10% of the judgment award as attorney’s fees;
7. Pay the cost of the suit.
SO ORDERED.14
Respondents filed a motion for reconsideration on 5 May 2005. Galera filed a motion for partial reconsideration and/or
clarification on the same date. The appellate court found no reason to revise or reverse its previous decision and subsequently
denied the motions in a Resolution promulgated on 1 August 2005.15
The Issues
WPP, Steedman, Webster, and Lansang raised the following grounds in G.R. No. 169207:
I. The Court of Appeals seriously erred in ruling that the NLRC has jurisdiction over [Galera’s] complaint because she
was not an employee. [Galera] was a corporate officer of WPP from the beginning of her term until her removal from
office.
II. Assuming arguendo that the Court of Appeals correctly ruled that the NLRC has jurisdiction over [Galera’s]
complaint, it should have remanded the case to the Labor Arbiter for reception of evidence on the merits of the case.
III. [Galera] is an alien, hence, can never attain a regular or permanent working status in the Philippines.
IV. [Galera] is not entitled to recover backwages, other benefits and damages from WPP. 16
On the other hand, in G.R. No. 169239, Galera raised the following grounds in support of her petition:
154
The CA decision should be consistent with Article 279 of the Labor Code and applicable jurisprudence, that full backwages and
separation pay (when in lieu of reinstatement), should be reckoned from time of dismissal up to time of reinstatement (or
payment of separation pay, in case separation instead of reinstatement is awarded).
Accordingly, petitioner Galera should be awarded full backwages and separation pay for the period from 14 December 2000
until the finality of judgment by the respondents, or, at the very least, up to the promulgation date of the CA decision.
The individual respondents Steedman, Webster and Lansang must be held solidarily liable with respondent WPP for the
wanton and summary dismissal of petitioner Galera, to be consistent with law and jurisprudence as well as the specific finding
of the CA of bad faith on the part of respondents. 17
This Court ordered the consolidation of G.R. Nos. 169207 and 169239 in a resolution dated 16 January 2006. 18
The Ruling of the Court
In its consolidated comment, the Office of the Solicitor General (OSG) recommended that (A) the Decision dated 14 April 2005
of the appellate court finding (1) Galera to be a regular employee of WPP; (2) the NLRC to have jurisdiction over the present
case; and (3) WPP to have illegally dismissed Galera, be affirmed; and (B) the case remanded to the Labor Arbiter for the
computation of the correct monetary award. Despite the OSG’s recommendations, we see that Galera’s failure to seek an
employment permit prior to her employment poses a serious problem in seeking relief before this Court. Hence, we settle the
various issues raised by the parties for the guidance of the bench and bar.
Whether Galera is an Employee or a Corporate Officer
Galera, on the belief that she is an employee, filed her complaint before the Labor Arbiter. On the other hand, WPP,
Steedman, Webster and Lansang contend that Galera is a corporate officer; hence, any controversy regarding her dismissal is
under the jurisdiction of the Regional Trial Court. We agree with Galera.
Corporate officers are given such character either by the Corporation Code or by the corporation’s by-laws. Under Section 25
of the Corporation Code, the corporate officers are the president, secretary, treasurer and such other officers as may be
provided in the by-laws.19 Other officers are sometimes created by the charter or by-laws of a corporation, or the board of
directors may be empowered under the by-laws of a corporation to create additional offices as may be necessary.
An examination of WPP’s by-laws resulted in a finding that Galera’s appointment as a corporate officer (Vice-President with
the operational title of Managing Director of Mindshare) during a special meeting of WPP’s Board of Directors is an
appointment to a non-existent corporate office. WPP’s by-laws provided for only one Vice-President. At the time of Galera’s
appointment on 31 December 1999, WPP already had one Vice-President in the person of Webster. Galera cannot be said to
be a director of WPP also because all five directorship positions provided in the by-laws are already occupied. Finally, WPP
cannot rely on its Amended By-Laws to support its argument that Galera is a corporate officer. The Amended By-Laws
provided for more than one Vice-President and for two additional directors. Even though WPP’s stockholders voted for the
amendment on 31 May 2000, the SEC approved the amendments only on 16 February 2001. Galera was dismissed on 14
December 2000. WPP, Steedman, Webster, and Lansang did not present any evidence that Galera’s dismissal took effect with
the action of WPP’s Board of Directors.1avvphi1
The appellate court further justified that Galera was an employee and not a corporate officer by subjecting WPP and Galera’s
relationship to the four-fold test: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power
of dismissal; and (d) the employer’s power to control the employee with respect to the means and methods by which the
work is to be accomplished. The appellate court found:
155
x x x Sections 1 and 4 of the employment contract mandate where and how often she is to perform her work; sections 3, 5, 6
and 7 show that wages she receives are completely controlled by x x x WPP; and sections 10 and 11 clearly state that she is
subject to the regular disciplinary procedures of x x x WPP.
Another indicator that she was a regular employee and not a corporate officer is Section 14 of the contract, which clearly
states that she is a permanent employee — not a Vice-President or a member of the Board of Directors.
xxxx
Another indication that the Employment Contract was one of regular employment is Section 12, which states that the rights to
any invention, discovery, improvement in procedure, trademark, or copyright created or discovered by petitioner GALERA
during her employment shall automatically belong to private respondent WPP. Under Republic Act 8293, also known as the
Intellectual Property Code, this condition prevails if the creator of the work subject to the laws of patent or copyright is an
employee of the one entitled to the patent or copyright.
Another convincing indication that she was only a regular employee and not a corporate officer is the disciplinary procedure
under Sections 10 and 11 of the Employment Contract, which states that her right of redress is through Mindshare’s Chief
Executive Officer for the Asia-Pacific. This implies that she was not under the disciplinary control of private respondent WPP’s
Board of Directors (BOD), which should have been the case if in fact she was a corporate officer because only the Board of
Directors could appoint and terminate such a corporate officer.
Although petitioner GALERA did sign the Alien Employment Permit from the Department of Labor and Employment and the
application for a 9(g) visa with the Bureau of Immigration – both of which stated that she was private respondent’s WPP’ Vice
President – these should not be considered against her. Assurming arguendo that her appointment as Vice-President was a
valid act, it must be noted that these appointments occurred afater she was hired as a regular employee. After her
appointments, there was no appreciable change in her duties.20
Whether the Labor Arbiter and the NLRC
have jurisdiction over the present case
Galera being an employee, then the Labor Arbiter and the NLRC have jurisdiction over the present case. Article 217 of the
Labor Code provides:
Jurisdiction of Labor Arbiters and the Commission. — (a) Except as otherwise provided under this Code, the Labor Arbiters
shall have original and exclusive jurisdiction to hear and decide x x x the following cases involving all workers, whether
agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay,
hours of work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and
lockouts;
156
6. Except claims for Employees Compensation, Social Security, Medicare and other maternity benefits, all other
claims, arising from employer-employee relations, including those of persons in domestic or household service,
involving an amount exceeding five thousand pesos (₱5,000.00) regardless of whether accompanied with a claim for
reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.
(c) Cases arising from the interpretation of collective bargaining agreements and those arising from the
interpretation or enforcement of company personnel policies shall be disposed of by the Labor Arbiter by
referring the same to the grievance machinery and voluntary arbitration as may be provided in said
agreements.
In contrast, Section 5.2 of Republic Act No. 8799, or the Securities Regulation Code, states:
The Commission’s jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is hereby
transferred to the courts of general jurisdiction or the appropriate Regional Trial Court: Provided, That the Supreme Court in
the exercise of its authority may designate the Regional Trial Court branches that shall exercise jurisdiction over these cases.
The Commission shall retain jurisdiction over pending cases involving intra-corporate disputes submitted for final resolution
which should be resolved within one year from the enactment of this Code. The Commission shall retain jurisdiction over
pending suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally disposed.
The pertinent portions of Section 5 of Presidential Decree No. 902-A, mentioned above, states:
b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members
or associates; between any or all of them and the corporation, partnership or association of which they are
stockholders, members or associates, respectively; and between such corporation, partnership or association and the
state insofar as it concerns their individual franchise or right to exist as such entity;
c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations,
partnerships or associations.
Whether WPP illegally dismissed Galera
WPP’s dismissal of Galera lacked both substantive and procedural due process.
Apart from Steedman’s letter dated 15 December 2000 to Galera, WPP failed to prove any just or authorized cause for
Galera’s dismissal. Steedman’s letter to Galera reads:
The operations are currently in a shamble. There is lack of leadership and confidence in your abilities from within, our agency
partners and some clients.
Most of the staff I spoke with felt they got more guidance and direction from Minda than yourself. In your role as Managing
Director, that is just not acceptable.
I believe your priorities are mismanaged. The recent situation where you felt an internal strategy meeting was more important
than a new business pitch is a good example.
You failed to lead and advise on the two new business pitches. In both cases, those involved sort (sic) Minda’s input. As I
discussed with you back in July, my directive was for you to lead and review all business pitches. It is obvious [that] confusion
existed internally right up until the day of the pitch.
157
The quality output is still not to an acceptable standard, which was also part of my directive that you needed to focus on back
in July.
I do not believe you understand the basic skills and industry knowledge required to run a media special operation. 21
WPP, Steedman, Webster, and Lansang, however, failed to substantiate the allegations in Steedman’s letter. Galera, on the
other hand, presented documentary evidence22 in the form of congratulatory letters, including one from Steedman, which
contents are diametrically opposed to the 15 December 2000 letter.
The law further requires that the employer must furnish the worker sought to be dismissed with two written notices before
termination of employment can be legally effected: (1) notice which apprises the employee of the particular acts or omissions
for which his dismissal is sought; and (2) the subsequent notice which informs the employee of the employer’s decision to
dismiss him. Failure to comply with the requirements taints the dismissal with illegality.23 WPP’s acts clearly show that Galera’s
dismissal did not comply with the two-notice rule.
Whether Galera is entitled to the monetary award
WPP, Steedman, Webster, and Lansang argue that Galera is not entitled to backwages because she is an alien. They further
state that there is no guarantee that the Bureau of Immigration and the Department of Labor and Employment will continue
to grant favorable rulings on the applications for a 9(g) visa and an Alien Employment Permit after the expiry of the validity of
Galera’s documents on 31 December 2000. WPP’s argument is a circular argument, and assumes what it attempts to prove.
Had WPP not dismissed Galera, there is no doubt in our minds that WPP would have taken action for the approval of
documents required for Galera’s continued employment.
This is Galera’s dilemma: Galera worked in the Philippines without a proper work permit but now wants to claim employee’s
benefits under Philippine labor laws.
Employment of GALERA with private respondent WPP became effective on September 1, 1999 solely on the instruction of
the CEO and upon signing of the contract, without any further action from the Board of Directors of private respondent WPP.
Four months had passed when private respondent WPP filed before the Bureau of Immigration an application for petitioner
GALERA to receive a working visa, wherein she was designated as Vice President of WPP. Petitioner alleged that she was
constrained to sign the application in order that she could remain in the Philippines and retain her employment. 24
The law and the rules are consistent in stating that the employment permit must be acquired prior to employment. The Labor
Code states: "Any alien seeking admission to the Philippines for employment purposes and any domestic or foreign employer
who desires to engage an alien for employment in the Philippines shall obtain an employment permit from the Department of
Labor."25 Section 4, Rule XIV, Book 1 of the Implementing Rules and Regulations provides:
Employment permit required for entry. — No alien seeking employment, whether as a resident or non-resident, may enter the
Philippines without first securing an employment permit from the Ministry. If an alien enters the country under a non-working
visa and wishes to be employed thereafter, he may only be allowed to be employed upon presentation of a duly approved
employment permit.
Galera cannot come to this Court with unclean hands. To grant Galera’s prayer is to sanction the violation of the Philippine
labor laws requiring aliens to secure work permits before their employment. We hold that the status quo must prevail in the
present case and we leave the parties where they are. This ruling, however, does not bar Galera from seeking relief from other
jurisdictions.
WHEREFORE, we PARTIALLY GRANT the petitions in G.R. Nos. 169207 and 169239. We SET ASIDE the Decision of the Court of
Appeals promulgated on 14 April 2005 as well as the Resolution promulgated on 1 August 2005 in CA-G.R. SP No. 78721.
158
SO ORDERED.
G.R. No. 157802 October 13, 2010
MATLING INDUSTRIAL AND COMMERCIAL CORPORATION, RICHARD K. SPENCER, CATHERINE SPENCER, AND ALEX
MANCILLA, Petitioners,
vs.
RICARDO R. COROS, Respondent.
DECISION
BERSAMIN, J.:
This case reprises the jurisdictional conundrum of whether a complaint for illegal dismissal is cognizable by the Labor Arbiter
(LA) or by the Regional Trial Court (RTC). The determination of whether the dismissed officer was a regular employee or a
corporate officer unravels the conundrum. In the case of the regular employee, the LA has jurisdiction; otherwise, the RTC
exercises the legal authority to adjudicate.
In this appeal via petition for review on certiorari, the petitioners challenge the decision dated September 13, 2002 1 and the
resolution dated April 2, 2003,2 both promulgated in C.A.-G.R. SP No. 65714 entitled Matling Industrial and Commercial
Corporation, et al. v. Ricardo R. Coros and National Labor Relations Commission, whereby by the Court of Appeals (CA)
sustained the ruling of the National Labor Relations Commission (NLRC) to the effect that the LA had jurisdiction because the
respondent was not a corporate officer of petitioner Matling Industrial and Commercial Corporation (Matling).
Antecedents
After his dismissal by Matling as its Vice President for Finance and Administration, the respondent filed on August 10, 2000 a
complaint for illegal suspension and illegal dismissal against Matling and some of its corporate officers (petitioners) in the
NLRC, Sub-Regional Arbitration Branch XII, Iligan City.3
The petitioners moved to dismiss the complaint,4 raising the ground, among others, that the complaint pertained to the
jurisdiction of the Securities and Exchange Commission (SEC) due to the controversy being intra-corporate inasmuch as the
respondent was a member of Matling’s Board of Directors aside from being its Vice-President for Finance and Administration
prior to his termination.
The respondent opposed the petitioners’ motion to dismiss,5 insisting that his status as a member of Matling’s Board of
Directors was doubtful, considering that he had not been formally elected as such; that he did not own a single share of stock
in Matling, considering that he had been made to sign in blank an undated indorsement of the certificate of stock he had been
given in 1992; that Matling had taken back and retained the certificate of stock in its custody; and that even assuming that he
had been a Director of Matling, he had been removed as the Vice President for Finance and Administration, not as a Director,
a fact that the notice of his termination dated April 10, 2000 showed.
On October 16, 2000, the LA granted the petitioners’ motion to dismiss, 6 ruling that the respondent was a corporate officer
because he was occupying the position of Vice President for Finance and Administration and at the same time was a Member
of the Board of Directors of Matling; and that, consequently, his removal was a corporate act of Matling and the controversy
resulting from such removal was under the jurisdiction of the SEC, pursuant to Section 5, paragraph (c) of Presidential Decree
No. 902.
Ruling of the NLRC
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The respondent appealed to the NLRC,7 urging that:
THE HONORABLE LABOR ARBITER COMMITTED GRAVE ABUSE OF DISCRETION GRANTING APPELLEE’S MOTION TO DISMISS
WITHOUT GIVING THE APPELLANT AN OPPORTUNITY TO FILE HIS OPPOSITION THERETO THEREBY VIOLATING THE BASIC
PRINCIPLE OF DUE PROCESS.
II
THE HONORABLE LABOR ARBITER COMMITTED AN ERROR IN DISMISSING THE CASE FOR LACK OF JURISDICTION.
On March 13, 2001, the NLRC set aside the dismissal, concluding that the respondent’s complaint for illegal dismissal was
properly cognizable by the LA, not by the SEC, because he was not a corporate officer by virtue of his position in Matling,
albeit high ranking and managerial, not being among the positions listed in Matling’s Constitution and By-Laws. 8 The NLRC
disposed thuswise:
WHEREFORE, the Order appealed from is SET ASIDE. A new one is entered declaring and holding that the case at bench does
not involve any intracorporate matter. Hence, jurisdiction to hear and act on said case is vested with the Labor Arbiter, not the
SEC, considering that the position of Vice-President for Finance and Administration being held by complainant-appellant is not
listed as among respondent's corporate officers.
Accordingly, let the records of this case be REMANDED to the Arbitration Branch of origin in order that the Labor Arbiter
below could act on the case at bench, hear both parties, receive their respective evidence and position papers fully observing
the requirements of due process, and resolve the same with reasonable dispatch.
SO ORDERED.
The petitioners sought reconsideration,9 reiterating that the respondent, being a member of the Board of Directors, was a
corporate officer whose removal was not within the LA’s jurisdiction.
The petitioners later submitted to the NLRC in support of the motion for reconsideration the certified machine copies of
Matling’s Amended Articles of Incorporation and By Laws to prove that the President of Matling was thereby granted "full
power to create new offices and appoint the officers thereto, and the minutes of special meeting held on June 7, 1999 by
Matling’s Board of Directors to prove that the respondent was, indeed, a Member of the Board of Directors. 10
Nonetheless, on April 30, 2001, the NLRC denied the petitioners’ motion for reconsideration. 11
Ruling of the CA
The petitioners elevated the issue to the CA by petition for certiorari, docketed as C.A.-G.R. No. SP 65714, contending that the
NLRC committed grave abuse of discretion amounting to lack of jurisdiction in reversing the correct decision of the LA.
In its assailed decision promulgated on September 13, 2002,12 the CA dismissed the petition for certiorari, explaining:
For a position to be considered as a corporate office, or, for that matter, for one to be considered as a corporate officer, the
position must, if not listed in the by-laws, have been created by the corporation's board of directors, and the occupant thereof
appointed or elected by the same board of directors or stockholders. This is the implication of the ruling in Tabang v. National
Labor Relations Commission, which reads:
160
"The president, vice president, secretary and treasurer are commonly regarded as the principal or executive officers of a
corporation, and modern corporation statutes usually designate them as the officers of the corporation. However, other
offices are sometimes created by the charter or by-laws of a corporation, or the board of directors may be empowered under
the by-laws of a corporation to create additional offices as may be necessary.
It has been held that an 'office' is created by the charter of the corporation and the officer is elected by the directors or
stockholders. On the other hand, an 'employee' usually occupies no office and generally is employed not by action of the
directors or stockholders but by the managing officer of the corporation who also determines the compensation to be paid to
such employee."
This ruling was reiterated in the subsequent cases of Ongkingco v. National Labor Relations Commission and De Rossi v.
National Labor Relations Commission.
The position of vice-president for administration and finance, which Coros used to hold in the corporation, was not created by
the corporation’s board of directors but only by its president or executive vice-president pursuant to the by-laws of the
corporation. Moreover, Coros’ appointment to said position was not made through any act of the board of directors or
stockholders of the corporation. Consequently, the position to which Coros was appointed and later on removed from, is not a
corporate office despite its nomenclature, but an ordinary office in the corporation.
Coros’ alleged illegal dismissal therefrom is, therefore, within the jurisdiction of the labor arbiter.
WHEREFORE, the petition for certiorari is hereby DISMISSED.
SO ORDERED.
The CA denied the petitioners’ motion for reconsideration on April 2, 2003.13
Issue
Thus, the petitioners are now before the Court for a review on certiorari, positing that the respondent was a
stockholder/member of the Matling’s Board of Directors as well as its Vice President for Finance and Administration; and that
the CA consequently erred in holding that the LA had jurisdiction.
The decisive issue is whether the respondent was a corporate officer of Matling or not. The resolution of the issue determines
whether the LA or the RTC had jurisdiction over his complaint for illegal dismissal.
Ruling
The appeal fails.
The Law on Jurisdiction in Dismissal Cases
As a rule, the illegal dismissal of an officer or other employee of a private employer is properly cognizable by the LA. This is
pursuant to Article 217 (a) 2 of the Labor Code, as amended, which provides as follows:
Article 217. Jurisdiction of the Labor Arbiters and the Commission. - (a) Except as otherwise provided under this Code, the
Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the
161
submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following
cases involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of
pay, hours of work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee
relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of
strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other
claims arising from employer-employee relations, including those of persons in domestic or household
service, involving an amount exceeding five thousand pesos (₱5,000.00) regardless of whether accompanied
with a claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation of collective bargaining agreements and those arising
from the interpretation or enforcement of company personnel policies shall be disposed of by the Labor Arbiter by
referring the same to the grievance machinery and voluntary arbitration as may be provided in said agreements. (As
amended by Section 9, Republic Act No. 6715, March 21, 1989).
Where the complaint for illegal dismissal concerns a corporate officer, however, the controversy falls under the jurisdiction of
the Securities and Exchange Commission (SEC), because the controversy arises out of intra-corporate or partnership relations
between and among stockholders, members, or associates, or between any or all of them and the corporation, partnership, or
association of which they are stockholders, members, or associates, respectively; and between such corporation, partnership,
or association and the State insofar as the controversy concerns their individual franchise or right to exist as such entity; or
because the controversy involves the election or appointment of a director, trustee, officer, or manager of such corporation,
partnership, or association.14 Such controversy, among others, is known as an intra-corporate dispute.
Effective on August 8, 2000, upon the passage of Republic Act No. 8799,15 otherwise known as The Securities Regulation Code,
the SEC’s jurisdiction over all intra-corporate disputes was transferred to the RTC, pursuant to Section 5.2 of RA No. 8799, to
wit:
5.2. The Commission’s jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is hereby
transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court: Provided, that the Supreme Court in
the exercise of its authority may designate the Regional Trial Court branches that shall exercise jurisdiction over these cases.
The Commission shall retain jurisdiction over pending cases involving intra-corporate disputes submitted for final resolution
which should be resolved within one (1) year from the enactment of this Code. The Commission shall retain jurisdiction over
pending suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally disposed.
Considering that the respondent’s complaint for illegal dismissal was commenced on August 10, 2000, it might come under
the coverage of Section 5.2 of RA No. 8799, supra, should it turn out that the respondent was a corporate, not a regular,
officer of Matling.
162
II
Was the Respondent’s Position of Vice President

for Administration and Finance a Corporate Office?
We must first resolve whether or not the respondent’s position as Vice President for Finance and Administration was a
corporate office. If it was, his dismissal by the Board of Directors rendered the matter an intra-corporate dispute cognizable by
the RTC pursuant to RA No. 8799.
The petitioners contend that the position of Vice President for Finance and Administration was a corporate office, having been
created by Matling’s President pursuant to By-Law No. V, as amended, 16 to wit:
BY LAW NO. V
Officers
The President shall be the executive head of the corporation; shall preside over the meetings of the stockholders and
directors; shall countersign all certificates, contracts and other instruments of the corporation as authorized by the Board of
Directors; shall have full power to hire and discharge any or all employees of the corporation; shall have full power to create
new offices and to appoint the officers thereto as he may deem proper and necessary in the operations of the corporation and
as the progress of the business and welfare of the corporation may demand; shall make reports to the directors and
stockholders and perform all such other duties and functions as are incident to his office or are properly required of him by
the Board of Directors. In case of the absence or disability of the President, the Executive Vice President shall have the power
to exercise his functions.
The petitioners argue that the power to create corporate offices and to appoint the individuals to assume the offices was
delegated by Matling’s Board of Directors to its President through By-Law No. V, as amended; and that any office the
President created, like the position of the respondent, was as valid and effective a creation as that made by the Board of
Directors, making the office a corporate office. In justification, they cite Tabang v. National Labor Relations
Commission,17 which held that "other offices are sometimes created by the charter or by-laws of a corporation, or the board of
directors may be empowered under the by-laws of a corporation to create additional officers as may be necessary."
The respondent counters that Matling’s By-Laws did not list his position as Vice President for Finance and Administration as
one of the corporate offices; that Matling’s By-Law No. III listed only four corporate officers, namely: President, Executive Vice
President, Secretary, and Treasurer; 18 that the corporate offices contemplated in the phrase "and such other officers as may
be provided for in the by-laws" found in Section 25 of the Corporation Code should be clearly and expressly stated in the By-
Laws; that the fact that Matling’s By-Law No. III dealt with Directors & Officers while its By-Law No. V dealt with Officers
proved that there was a differentiation between the officers mentioned in the two provisions, with those classified under By-
Law No. V being ordinary or non-corporate officers; and that the officer, to be considered as a corporate officer, must be
elected by the Board of Directors or the stockholders, for the President could only appoint an employee to a position pursuant
to By-Law No. V.
We agree with respondent.
Section 25 of the Corporation Code provides:
Section 25. Corporate officers, quorum.--Immediately after their election, the directors of a corporation must formally
organize by the election of a president, who shall be a director, a treasurer who may or may not be a director, a secretary who
shall be a resident and citizen of the Philippines, and such other officers as may be provided for in the by-laws. Any two (2) or
more positions may be held concurrently by the same person, except that no one shall act as president and secretary or as
president and treasurer at the same time.
163
The directors or trustees and officers to be elected shall perform the duties enjoined on them by law and the by-laws of the
corporation. Unless the articles of incorporation or the by-laws provide for a greater majority, a majority of the number of
directors or trustees as fixed in the articles of incorporation shall constitute a quorum for the transaction of corporate
business, and every decision of at least a majority of the directors or trustees present at a meeting at which there is a quorum
shall be valid as a corporate act, except for the election of officers which shall require the vote of a majority of all the
members of the board.
Directors or trustees cannot attend or vote by proxy at board meetings.
Conformably with Section 25, a position must be expressly mentioned in the By-Laws in order to be considered as a corporate
office. Thus, the creation of an office pursuant to or under a By-Law enabling provision is not enough to make a position a
corporate office. Guerrea v. Lezama,19 the first ruling on the matter, held that the only officers of a corporation were those
given that character either by the Corporation Code or by the By-Laws; the rest of the corporate officers could be considered
only as employees or subordinate officials. Thus, it was held in Easycall Communications Phils., Inc. v. King:20
An "office" is created by the charter of the corporation and the officer is elected by the directors or stockholders. On the other
hand, an employee occupies no office and generally is employed not by the action of the directors or stockholders but by the
managing officer of the corporation who also determines the compensation to be paid to such employee.
In this case, respondent was appointed vice president for nationwide expansion by Malonzo, petitioner’'s general manager,
not by the board of directors of petitioner. It was also Malonzo who determined the compensation package of respondent.
Thus, respondent was an employee, not a "corporate officer." The CA was therefore correct in ruling that jurisdiction over the
case was properly with the NLRC, not the SEC (now the RTC).
This interpretation is the correct application of Section 25 of the Corporation Code, which plainly states that the corporate
officers are the President, Secretary, Treasurer and such other officers as may be provided for in the By-Laws. Accordingly, the
corporate officers in the context of PD No. 902-A are exclusively those who are given that character either by the Corporation
Code or by the corporation’s By-Laws.
A different interpretation can easily leave the way open for the Board of Directors to circumvent the constitutionally
guaranteed security of tenure of the employee by the expedient inclusion in the By-Laws of an enabling clause on the creation
of just any corporate officer position.
It is relevant to state in this connection that the SEC, the primary agency administering the Corporation Code, adopted a
similar interpretation of Section 25 of the Corporation Code in its Opinion dated November 25, 1993,21 to wit:
Thus, pursuant to the above provision (Section 25 of the Corporation Code), whoever are the corporate officers enumerated
in the by-laws are the exclusive Officers of the corporation and the Board has no power to create other Offices without
amending first the corporate By-laws. However, the Board may create appointive positions other than the positions of
corporate Officers, but the persons occupying such positions are not considered as corporate officers within the meaning of
Section 25 of the Corporation Code and are not empowered to exercise the functions of the corporate Officers, except those
functions lawfully delegated to them. Their functions and duties are to be determined by the Board of Directors/Trustees.
Moreover, the Board of Directors of Matling could not validly delegate the power to create a corporate office to the President,
in light of Section 25 of the Corporation Code requiring the Board of Directors itself to elect the corporate officers. Verily, the
power to elect the corporate officers was a discretionary power that the law exclusively vested in the Board of Directors, and
could not be delegated to subordinate officers or agents.22 The office of Vice President for Finance and Administration created
by Matling’s President pursuant to By Law No. V was an ordinary, not a corporate, office.
To emphasize, the power to create new offices and the power to appoint the officers to occupy them vested by By-Law No. V
merely allowed Matling’s President to create non-corporate offices to be occupied by ordinary employees of Matling. Such
164
powers were incidental to the President’s duties as the executive head of Matling to assist him in the daily operations of the
business.
The petitioners’ reliance on Tabang, supra, is misplaced. The statement in Tabang, to the effect that offices not expressly
mentioned in the By-Laws but were created pursuant to a By-Law enabling provision were also considered corporate offices,
was plainly obiter dictum due to the position subject of the controversy being mentioned in the By-Laws. Thus, the Court held
therein that the position was a corporate office, and that the determination of the rights and liabilities arising from the ouster
from the position was an intra-corporate controversy within the SEC’s jurisdiction.
In Nacpil v. Intercontinental Broadcasting Corporation,23 which may be the more appropriate ruling, the position subject of the
controversy was not expressly mentioned in the By-Laws, but was created pursuant to a By-Law enabling provision authorizing
the Board of Directors to create other offices that the Board of Directors might see fit to create. The Court held there that the
position was a corporate office, relying on the obiter dictum in Tabang.
Considering that the observations earlier made herein show that the soundness of their dicta is not
unassailable, Tabang and Nacpil should no longer be controlling.
III
Did Respondent’s Status as Director and

Stockholder Automatically Convert his Dismissal
into an Intra-Corporate Dispute?
Yet, the petitioners insist that because the respondent was a Director/stockholder of Matling, and relying on Paguio v.
National Labor Relations Commission24 and Ongkingko v. National Labor Relations Commission, 25 the NLRC had no jurisdiction
over his complaint, considering that any case for illegal dismissal brought by a stockholder/officer against the corporation was
an intra-corporate matter that must fall under the jurisdiction of the SEC conformably with the context of PD No. 902-A.
The petitioners’ insistence is bereft of basis.
To begin with, the reliance on Paguio and Ongkingko is misplaced. In both rulings, the complainants were undeniably
corporate officers due to their positions being expressly mentioned in the By-Laws, aside from the fact that both of them had
been duly elected by the respective Boards of Directors. But the herein respondent’s position of Vice President for Finance
and Administration was not expressly mentioned in the By-Laws; neither was the position of Vice President for Finance and
Administration created by Matling’s Board of Directors. Lastly, the President, not the Board of Directors, appointed him.
True it is that the Court pronounced in Tabang as follows:
Also, an intra-corporate controversy is one which arises between a stockholder and the corporation. There is no distinction,
qualification or any exemption whatsoever. The provision is broad and covers all kinds of controversies between stockholders
and corporations.26
However, the Tabang pronouncement is not controlling because it is too sweeping and does not accord with reason, justice,
and fair play. In order to determine whether a dispute constitutes an intra-corporate controversy or not, the Court considers
two elements instead, namely: (a) the status or relationship of the parties; and (b) the nature of the question that is the
subject of their controversy. This was our thrust in Viray v. Court of Appeals:27
The establishment of any of the relationships mentioned above will not necessarily always confer jurisdiction over the dispute
on the SEC to the exclusion of regular courts. The statement made in one case that the rule admits of no exceptions or
distinctions is not that absolute. The better policy in determining which body has jurisdiction over a case would be to consider
not only the status or relationship of the parties but also the nature of the question that is the subject of their controversy.
165
Not every conflict between a corporation and its stockholders involves corporate matters that only the SEC can resolve in the
exercise of its adjudicatory or quasi-judicial powers. If, for example, a person leases an apartment owned by a corporation of
which he is a stockholder, there should be no question that a complaint for his ejectment for non-payment of rentals would
still come under the jurisdiction of the regular courts and not of the SEC. By the same token, if one person injures another in a
vehicular accident, the complaint for damages filed by the victim will not come under the jurisdiction of the SEC simply
because of the happenstance that both parties are stockholders of the same corporation. A contrary interpretation would
dissipate the powers of the regular courts and distort the meaning and intent of PD No. 902-A.
In another case, Mainland Construction Co., Inc. v. Movilla,28 the Court reiterated these determinants thuswise:
In order that the SEC (now the regular courts) can take cognizance of a case, the controversy must pertain to any of the
following relationships:
a) between the corporation, partnership or association and the public;
b) between the corporation, partnership or association and its stockholders, partners, members or officers;
c) between the corporation, partnership or association and the State as far as its franchise, permit or license to
operate is concerned; and
d) among the stockholders, partners or associates themselves.
The fact that the parties involved in the controversy are all stockholders or that the parties involved are the stockholders and
the corporation does not necessarily place the dispute within the ambit of the jurisdiction of SEC. The better policy to be
followed in determining jurisdiction over a case should be to consider concurrent factors such as the status or relationship of
the parties or the nature of the question that is the subject of their controversy. In the absence of any one of these factors,
the SEC will not have jurisdiction. Furthermore, it does not necessarily follow that every conflict between the corporation and
its stockholders would involve such corporate matters as only the SEC can resolve in the exercise of its adjudicatory or quasi-
judicial powers.29
The criteria for distinguishing between corporate officers who may be ousted from office at will, on one hand, and ordinary
corporate employees who may only be terminated for just cause, on the other hand, do not depend on the nature of the
services performed, but on the manner of creation of the office. In the respondent’s case, he was supposedly at once an
employee, a stockholder, and a Director of Matling. The circumstances surrounding his appointment to office must be fully
considered to determine whether the dismissal constituted an intra-corporate controversy or a labor termination dispute. We
must also consider whether his status as Director and stockholder had any relation at all to his appointment and subsequent
dismissal as Vice President for Finance and Administration.
Obviously enough, the respondent was not appointed as Vice President for Finance and Administration because of his being a
stockholder or Director of Matling. He had started working for Matling on September 8, 1966, and had been employed
continuously for 33 years until his termination on April 17, 2000, first as a bookkeeper, and his climb in 1987 to his last
position as Vice President for Finance and Administration had been gradual but steady, as the following sequence indicates:
1966 – Bookkeeper
1968 – Senior Accountant
1969 – Chief Accountant
1972 – Office Supervisor
166
1973 – Assistant Treasurer
1978 – Special Assistant for Finance
1980 – Assistant Comptroller
1983 – Finance and Administrative Manager
1985 – Asst. Vice President for Finance and Administration
1987 to April 17, 2000 – Vice President for Finance and Administration
Even though he might have become a stockholder of Matling in 1992, his promotion to the position of Vice President for
Finance and Administration in 1987 was by virtue of the length of quality service he had rendered as an employee of Matling.
His subsequent acquisition of the status of Director/stockholder had no relation to his promotion. Besides, his status of
Director/stockholder was unaffected by his dismissal from employment as Vice President for Finance and Administration. 1avvphi1
In Prudential Bank and Trust Company v. Reyes,30 a case involving a lady bank manager who had risen from the ranks but was
dismissed, the Court held that her complaint for illegal dismissal was correctly brought to the NLRC, because she was deemed
a regular employee of the bank. The Court observed thus:
It appears that private respondent was appointed Accounting Clerk by the Bank on July 14, 1963. From that position she rose
to become supervisor. Then in 1982, she was appointed Assistant Vice-President which she occupied until her illegal dismissal
on July 19, 1991. The bank’s contention that she merely holds an elective position and that in effect she is not a regular
employee is belied by the nature of her work and her length of service with the Bank. As earlier stated, she rose from the
ranks and has been employed with the Bank since 1963 until the termination of her employment in 1991. As Assistant Vice
President of the Foreign Department of the Bank, she is tasked, among others, to collect checks drawn against overseas banks
payable in foreign currency and to ensure the collection of foreign bills or checks purchased, including the signing of
transmittal letters covering the same. It has been stated that "the primary standard of determining regular employment is the
reasonable connection between the particular activity performed by the employee in relation to the usual trade or business of
the employer. Additionally, "an employee is regular because of the nature of work and the length of service, not because of
the mode or even the reason for hiring them." As Assistant Vice-President of the Foreign Department of the Bank she
performs tasks integral to the operations of the bank and her length of service with the bank totaling 28 years speaks volumes
of her status as a regular employee of the bank. In fine, as a regular employee, she is entitled to security of tenure; that is, her
services may be terminated only for a just or authorized cause. This being in truth a case of illegal dismissal, it is no wonder
then that the Bank endeavored to the very end to establish loss of trust and confidence and serious misconduct on the part of
private respondent but, as will be discussed later, to no avail.
WHEREFORE, we deny the petition for review on certiorari, and affirm the decision of the Court of Appeals.
Costs of suit to be paid by the petitioners.
SO ORDERED.
THIRD DIVISION
[ G.R. No. 209085, June 06, 2018 ]
NICANOR F. MALCABA, CHRISTIAN C. NEPOMUCENO, AND LAURA MAE FATIMA F. PALIT-ANG, PETITIONERS, V.
PROHEALTH PHARMA PHILIPPINES, INC., GENEROSO R. DEL CASTILLO, JR., AND DANTE M. BUSTO, RESPONDENTS.
167
DECISION
LEONEN, J.:
This case involves fundamental principles in labor cases.
First, in appeals of illegal dismissal cases, employers are strictly mandated to file an appeal bond to perfect their appeals. Substantial compliance,
however, may merit liberality in its application.
Second, before any labor tribunal takes cognizance of termination disputes, it must first have jurisdiction over the action. The Labor Arbiter and the
National Labor Relations Commission only exercise jurisdiction over termination disputes between an employer and an employee. They do not
exercise jurisdiction over termination disputes between a corporation and a corporate officer.
Third, while this Court recognizes the inherent right of employers to discipline their employees, the penalties imposed must be commensurate to
the infractions committed. Dismissal of employees for minor and negligible offenses may be considered as illegal dismissal.
This is a Petition for Review on Certiorari [1] assailing the Court of Appeals February 19, 2013 Decision [2] and September 10, 2013 Resolution [3] in CA-
G.R. SP No. 119093, which reversed the judgments of the Labor Arbiter and of the National Labor Relations Commission. The Court of Appeals
found that Nicanor F. Malcaba (Malcaba), a corporate officer, should have questioned his dismissal before the Regional Trial Court, not before the
Labor Arbiter. It likewise held that Christian C. Nepomuceno (Nepomuceno) and Laura Mae Fatima F. Palit-Ang (Palit-Ang) were validly dismissed
from service for loss of trust and confidence, and insubordination, respective1y.
ProHealth Pharma Philippines, Inc. (ProHealth) is a corporation engaged in the sale of pharmaceutical products and health food on a wholesale and
retail basis. Generoso Del Castillo (Del Castillo) is the Chair of the Board of Directors and Chief Executive Officer while Dante Busto (Busto) is the
Executive Vice President. Malcaba, Tomas Adona, Jr. (Adona), Nepomuceno, and Palit-Ang were employed as its President, Marketing Manager,
Business Manager, and Finance Officer, respectively. [4]
Malcaba had been employed with ProHealth since it started in 1997. He was one of its incorporators together with Del Castillo and Busto, and they
were all members of the Board of Directors in 2004. He held 1,000,000 shares in the corporation. He was initially the Vice President for Sales then
became President in 2005.[5]
Malcaba alleged that Del Castillo did acts that made his job difficult. He asked to take a leave on October 23, 2007. When he attempted to return on
November 5, 2007, Del Castillo insisted that he had already resigned and had his things removed from his office. He attested that he was paid a
lower salary in December 2007 and his benefits were withheld. [6] On January 7, 2008, Malcaba tendered his resignation effective February 1, 2008.
[7]
Nepomuceno, for his part, alleged that he was initially hired as a medical representative in 1999 but was eventually promoted to District Business
Manager for South Luzon. On March 24, 2008, he applied for vacation leave for the dates April 24, 25, and 28, 2008, which Busto approved. When
he left for Malaysia on April 23, 2008, ProHealth sent him a Memorandum dated April 24, 2008 asking him to explain his absence. He replied
through email that he tried to call ProHealth to inform them that his flight was on April 22, 2008 at 9:00p.m. and not on April 23, 2008 but was
unable to connect on the phone. He tried to explain again on May 2, 2008 and requested for a personal dialogue with Del Castillo. [8]
On May 7, 2008, Nepomuceno was given a notice of termination, which was effective May 5, 2008, on the ground of fraud and willful breach of
trust.[9]
Palit-Ang, on the other hand, was hired to join ProHealth's audit team in 2007. She was later promoted to Finance Officer. [10] On November 26,
2007, Del Castillo instructed Palit-Ang to give P3,000.00 from the training funds to Johnmer Gamboa (Gamboa), a District Business Manager, to
serve as cash advance. [11]
On November 27, 2007, Busto issued a show cause memorandum for Palit-Ang's failure to release the cash advance. Palit-Ang was also relieved of
her duties and reassigned to the Office of the Personnel and Administration Manager. [12]
In her explanation, Palit-Ang alleged that when Gamboa saw that she was busy receiving cash sales from another District Business Manager, he told
her that he would just return the next day to collect his cash advance. [13] When he told her that the cash advance was for car repairs, Palit-Ang told
him to get the cash from his revolving fund, which she would reimburse after the repairs were done. Del Castillo was dissatisfied with her
explanation and transferred her to another office.[14]
On December 3, 2007, Palit-Ang was invited to a fact-finding investigation, [15] which was held on December 10, 2007, where Palit-Ang was again
asked to explain her actions.[16]
On December 17, 2007, she was handed a notice of termination effective December 31, 2007, for disobeying the order of ProHealth's highest
official.[17]
Malcaba, Nepomuceno, Palit-Ang, and Adona separately filed Complaints [18] before the Labor Arbiter for illegal dismissal, nonpayment of salaries
and 13th month pay, damages, and attorney's fees.
The Labor Arbiter found that Malcaba was constructively dismissed. He found that ProHealth never controverted the allegation that Del Castillo
made it difficult for Malcaba to effectively fulfill his duties. He likewise ruled that ProHealth's insistence that Malcaba's leave of absence in October
2007 was an act of resignation was false since Malcaba continued to perform his duties as President through December 2007. [19]
The Labor Arbiter declared that Nepomuceno's failure to state the actual date of his flight was an excusable mistake on his part, considering that
this was his first infraction in his nine (9) years of service. He noted that no administrative proceedings were conducted before Nepomuceno's
dismissal, thereby violating his right to due process. [20]
Palit-Ang's dismissal was also found to have been illegal as delay in complying with a lawful order was not tantamount to disobedience. The Labor
Arbiter further noted that delay in giving a cash advance for car maintenance would not have affected the company's operations. He declared that
Palit-Ang's dismissal was too harsh of a penalty.[21]
The dispositive portion of the Labor Arbiter's April 5, 2009 Decision [22] read:
168
WHEREFORE, premises considered, judgment is hereby rendered declaring that complainants were illegally dismissed by respondents. Accordingly,
respondents are directed solidarily to pay complainants the following:
1. Complainant Nicanor F. Malcaba:

a. Separation pay of P1,800,000.00;
b. Full backwages from the time of his illegal dismissal [o]n 11 November 2007 until the finality of this decision, which as of this date
amounts to P2,810,795.40;
c. 13th month pay for the years 2007 and 2008 amounting to P126,625.00;
2. Complainant Christian C. Nepomuceno:
a. Separation pay of P190,000.00;
b. Full backwages from the time of his illegal dismissal [i]n May 2007 until the finality of this decision, which as of this date amounts to
P568,827.45;
c. 13th month pay for 2008 amounting to P6,333.33;
3. Complainant Laura Mae Fatima F. Palit-Ang:
b. Full backwages from the time of her illegal dismissal on 1 January 2008 until the finality of this decision, which as of [t]his date amounts
to P266,694.63;
c. 13th month pay for 2008 of P18,000.00; and
4. Complainant Tomas C. Adona, Jr.:
b. Full backwages from time of his illegal dismissal [i]n June 2007 until the finality of this decision, which as of this date amounts to
P609,832.37;
c. 13th month pay for 2008 of P10,416.66.
Complainants are further awarded moral damages of Php100,000.00 each and exemplary damages of Php100,000.00 each.
Finally, respondents are assessed the sum equivalent to ten percent (10%) of the total monetary award as and for attorney's fees.
All other claims are dismissed for lack of merit.
SO ORDERED.[23]
ProHealth appealed to the National Labor Relations Commission. [24] On September 29, 2010, the National Labor Relations Commission rendered its
Decision,[25] affirming the Labor Arbiter's April 5, 2009 Decision with modifications. The dispositive portion of this Decision read:
WHEREFORE, premises considered, the appeal is partially granted. The assailed Decision is modified in that: a) complainant Adona is declared to
have voluntarily resigned and is entitled only to his 13th month pay; b) the award of moral and, exemplary damages in favor of complainants
Nepomuceno and Palit-Ang are deleted; and c) respondents del Castillo and Busto are held jointly and severally liable with ProHealth for the claims
of complainant Malcaba.
All dispositions not affected by the modifications stay.
SO ORDERED.[26]
ProHealth moved for reconsideration[27] but was denied by the National Labor Relations Commission in its January 31, 2011 Resolution. [28] Thus,
ProHealth, Del Castillo, and Busto filed a Petition for Certiorari [29] before the Court of Appeals.
On February 19, 2013, the Court of Appeals rendered its Decision [30] reversing and setting aside the National Labor Relations Commission
September 29, 2010 Decision.
On the procedural issues, the Court of Appeals found that ProHealth substantially complied with the requirement of an appeal bond despite it not
appearing in the records of the surety company since ProHealth believed in good faith that the bond it secured was genuine. [31]
On the substantive issues, the Court of Appeals held that there was no employer-employee relationship between Malcaba and ProHealth since he
was a corporate officer. Thus, he should have filed his complaint with the Regional Trial Court, not with the Labor Arbiter, since his dismissal from
service was an intra-corporate dispute. [32]
The Court of Appeals likewise concluded that ProHealth was justified in dismissing Nepomuceno and Palit-Ang since both were given opportunities
to fully explain their sides.[33] It found that Nepomuceno's failure to diligently check the true schedule of his flight abroad and his subsequent lack of
effort to inform his superiors were enough for his employer to lose its trust and confidence in him. [34] It likewise found that Palit-Ang displayed
"arrogance and hostility" when she defied the lawful orders of the company's highest ranking officer; thus, her insubordination was just cause to
terminate her services.[35]
While the Court of Appeals ordered the return of the amounts given to Malcaba, it allowed Nepomuceno and Palit-Ang to keep the amounts given
considering that even if the finding of illegal dismissal were reversed on appeal, the employer was still obliged to reinstate and pay the wages of a
dismissed employee during the period of appeal. [36] The dispositive portion of the Court of Appeals February 19, 2013 Decision read:
WHEREFORE, premises considered, it is hereby ruled:
169
(a) that the September 29, 2010 Decision and January 31, 2011 Resolution of the National Labor Relations
Commission are REVERSED and SET ASIDE for being issued with grave abuse of discretion;
(b) that Our Decision is without prejudice to Mr. Nicanor F. Malcaba's available recourse for relief through
the appropriate remedy in the proper forum;

(c) that all the amounts released in favor of Mr. Nicanor F. Malcaba amounting to Four Million Nine
Hundred Thirty[-]Seven Thousand Four Hundred Twenty pesos and 40/100 (P4,937,420.[40]) be
RETURNED to herein petitioners;

(d) that NO REFUND will be ordered by this Court against Mr. Christian Nepomuceno and Ms. Laura Mae
Fatima Palit-Ang.
SO ORDERED.[37]
Malcaba, Nepomuceno, and Palit-Ang moved for reconsideration but were denied in a Resolution [38] dated September 10, 2013. Hence, this
Petition[39] was filed before this Court.
Petitioners argue that the Court of Appeals should have dismissed outright the Petition for Certiorari since respondents failed to post a genuine
appeal bond before the National Labor Relations Commission. They allege that when Sheriff Ramon Nonato P. Dayao attempted to enforce the
judgment award against the appeal bond, he was informed that the appeal bond procured by respondents did not appear in the records of Alpha
Insurance and Surety Company, Inc. (Alpha Insurance). They also claim that respondents were notified by the National Labor Relations Commission
four (4) times that their appeal bond was not genuine, showing that respondents did not comply with the requirement in good faith. [40]
Petitioners contend that petitioner Malcaba properly filed his Complaint before the Labor Arbiter since he was an employee of respondent
ProHealth, albeit a high-ranking one. They argue that respondents merely alleged that petitioner Malcaba is a corporate officer but failed to
substantiate this allegation.[41] They maintain that petitioner Malcaba did not resign on September 24, 2007 considering that the General
Information Sheet for 2007 submitted on October 11, 2007 listed him as respondent ProHealth's President. They submit that respondent Del
Castillo's action took a toll on petitioner Malcaba's well-being; hence, the latter merely took a leave of absence and returned to work in November
2007. They claim that respondents made it difficult for petitioner Malcaba to continue his work upon his return, resulting in his resignation in
January 2008. Thus, they argue that petitioner Malcaba was constructively dismissed. [42]
Petitioners likewise argue that petitioners Nepomuceno and Palit-Ang were illegally dismissed. They claim that petitioner Nepomuceno committed
an "honest and negligible mistake"[43] that should not have warranted dismissal considering his loyal service for nine (9) years. They contend that
petitioner Nepomuceno's absence did not injure respondent ProHealth's business since he turned over all pending work to a reliever before he left
and even surpassed his sales quota for the month. [44] They likewise claim that his dismissal was done in violation of his right to due process since he
was not given any opportunity to explain his side and was only given a notice of termination two (2) days after he was actually dismissed. [45]
Petitioners maintain that petitioner Palit-Ang believed in good faith that Gamboa would just claim his cash advance the day after he tried to claim it
and that there was nothing in her actions that would prove that she intended to disobey or defy respondent Del Castillo's instructions. They insist
that delay in complying with orders is not tantamount to disobedience and would not constitute just cause for petitioner Palit-Ang's dismissal. They
likewise submit that while petitioner Palit-Ang was subjected to a fact-finding investigation, respondents failed to inform her of her right to be
assisted by counsel.[46]
Respondents, on the other hand, counter that a liberal application of the procedural rules was necessary in their case since they acted in good faith
in posting their appeal bond.[47] They likewise contend that the issue should have already been considered moot since petitioners "were able to
garnish and collect the amounts allegedly due to them."[48]
Respondents likewise insist that petitioner Malcaba was a corporate officer considering that he was not only an incorporator and stockholder, but
also an elected Director and President of respondent ProHealth. [49] They also point out that he filed his labor complaint seven (7) months after his
resignation and that his voluntary resignation already disproves his claim of constructive dismissal. [50]
Respondents argue that they were justified in dismissing petitioners Nepomuceno and Palit-Ang. They contend that petitioner Nepomuceno's
abandonment of his duties at a critical sales period and his failure to immediately advise his superiors of his whereabouts was ground for
respondents to lose their trust and confidence in him. [51] They likewise maintain that petitioner Palit-Ang was correctly found by the Court of
Appeals to have defied the lawful instructions of respondent Del Castillo and illustrated her "grave disrespect towards authority." [52]
From the arguments and allegations of the parties, it is clear that this case involves three (3) different illegal dismissal complaints, with three (3)
different complainants in three (3) different factual situations during three (3) different time periods. The only commonality is that they involve the
same respondents.
While this Court commends the economy by which the National Labor Relations Commission resolved these cases, the three (3) complaints should
have been resolved separately since the three (3) petitioners raise vastly different substantive issues. This leaves this Court with the predicament of
having to resolve three (3) different cases of illegal dismissal in one (1) Petition for Review. Thus, each petitioner's case will have to be resolved
170
separately within this Decision. This Court's ruling over one (1) petitioner may not necessarily affect the other co-petitioners. The National Labor
Relations Commission's zeal for economy and convenience should never prejudice the individual rights of each party. The National Labor Relations
Commission should know the rule that joinder of parties [53] or causes of action[54] applies suppletorily in appeals[55] and for good reason.[56]
Petitioners raise the common procedural issue of whether or not respondents failed to perfect their appeal when it was discovered that their
appeal bond was a forged bond, which this Court will address before proceeding with the substantive issues. The substantive issues raised,
however, are dependent on the factual circumstances applicable to each petitioner. This Court tackles these substantive issues in order:
First, whether or not the Labor Arbiter and National Labor Relations Commission had jurisdiction over petitioner Nicanor F. Malcaba's termination
dispute considering the allegation that he was a corporate officer, and not a mere employee;
Second, whether or not petitioner Christian C. Nepomuceno was validly dismissed for willful breach of trust when he failed to inform respondents
ProHealth Pharma Philippines, Inc., Generoso R. Del Castillo, Jr., and Dante M. Busto of the actual dates of his vacation leave; and
Finally, whether or not petitioner Laura Mae Fatima F. Palit-Ang was validly dismissed for willful disobedience when she failed to immediately
comply with an order of her superior.
I
Appeal is not a matter of right.[57] Courts and tribunals have the discretion whether to give due course to an appeal or to dismiss it outright. The
perfection of an appeal is, thus, jurisdictional. Non-compliance with the manner in which to file an appeal renders the judgment final and
executory.[58]
In labor cases, an appeal by an employer is perfected only by filing a bond equivalent to the monetary award. Thus, Article 229 [223] [59] of the Labor
Code provides:
Article 229. [223] Appeal.
...
In case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond
issued by a reputable bonding company duly accredited by the Commission in the amount equivalent to the monetary award in the judgment
appealed from.
This requirement is again repeated m the 2011 National Labor Relations Commission Rules of Procedure:
Section 4. Requisites for Perfection of Appeal. — (a) The appeal shall be:
....
(5) accompanied by:
....
(ii) posting of a cash or surety bond as provided in Section 6 of this Rule[.]
....
Section 6. Bond. — In case the decision of the Labor Arbiter or the Regional Director involves a monetary award, an appeal by the employer may be
perfected only upon the posting of a bond, which shall either be in the form of cash deposit or surety bond equivalent in the amount to the
monetary award, exclusive of damages and attorney's fees.
In case of surety bond, the same shall be issued by a reputable bonding company duly accredited by the Commission and shall be accompanied by
original or certified true copies of the following:
(a) a joint declaration under oath by the employer, his/her counsel, and the bonding company, attesting that the bond posted is genuine, and shall
be in effect until final disposition of the case;
(b) an indemnity agreement between the employer appellant and bonding company;
(c) proof of security deposit or collateral securing the bond: provided, that a check shall not be considered as an acceptable security; and,
(d) notarized board resolution or secretary's certificate from the bonding company showing its authorized signatories and their specimen
signatures.
The Commission through the Chairman may on justifiable grounds blacklist an accredited bonding company.
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A cash or surety bond shall be valid and effective from the date of deposit or posting, until the case is finally decided, resolved or terminated, or the
award satisfied. This condition shall be deemed incorporated in the terms and conditions of the surety bond, and shall be binding on the appellants
and the bonding company.
The appellant shall furnish the appellee with a certified true copy of the said surety bond with all the above-mentioned supporting documents. The
appellee shall verify the regularity and genuineness thereof and immediately report any irregularity to the Commission.
Upon verification by the Commission that the bond is irregular or not genuine, the Commission shall cause the immediate dismissal of the appeal,
and censure the responsible parties and their counsels, or subject them to reasonable fine or penalty, and the bonding company may be
blacklisted.
No motion to reduce bond shall be entertained except on meritorious grounds, and only upon the posting of a bond in a reasonable amount in
relation to the monetary award.
The mere filing of a motion to reduce bond without complying with the requisites in the preceding paragraphs shall not stop the running of the
period to perfect an appeal.[60]
The purpose of requiring an appeal bond is "to guarantee the payment of valid and legal claims against the employer." [61] It is a measure of financial
security granted to an illegally dismissed employee since the resolution of the employer's appeal may take an indeterminable amount of time. In
particular:
The requirement that the employer post a cash or surety bond to perfect its/his appeal is apparently intended to assure the workers that if they
prevail in the case, they will receive the money judgment in their favor upon the dismissal of the employer's appeal. It was intended to discourage
employers from using an appeal to delay, or even evade, their obligation to satisfy their employees' just and lawful claims. [62]
Procedural rules require that the appeal bond filed be "genuine." An appeal bond determined by the National Labor Relations Commission to be
"irregular or not genuine" shall cause the immediate dismissal of the appeal. [63]
In this case, petitioners allege that respondents' appeal should not have been given due course by the National Labor Relations Commission since
the appeal bond they filed "[did] not appear in the records of [Alpha Insurance]" [64] and was, therefore, not genuine. As evidence, they presented a
certification from Alpha Insurance, which read:
This is to certify that the bond being presented by MR. JOSEPH D. DE JESUS is allegedly a Surety Bond filed with the NATIONAL LABOR RELATIONS
COMMISSION, identified as Bond No. G(16)00358/2009 on an alleged case NLRC NCR Case No. 08-12090-08, is a faked and forged bond, and it was
not issued by ALPHA INSURANCE & SURETY COMPANY, INC. [65]
This Court in Navarro v. National Labor Relations Commission[66] found that an employer failed to perfect its appeal as it submitted an appeal bond
that was "bogus[,] having been issued by an officer no longer connected for a long time with the bonding company." [67] The mere fictitiousness of
the bond, however, was not the only factor taken into consideration. This Court likewise took note of the employer's failure to sufficiently explain
this irregularity and its failure to file the bond within the reglementary period.
In Quiambao v. National Labor Relations Commission,[68] this Court held that the mandatory and jurisdictional requirement of the filing of an appeal
bond could be relaxed if there was substantial compliance. Quiambao proceeded to outline situations that could be considered as substantial
compliance, such as late payment, failure of the Labor Arbiter to state the exact amount of money judgment due, and reliance on a notice of
judgment that failed to state that a bond must first be filed in order to appeal. [69] Rosewood Processing v. National Labor Relations
Commission[70] likewise enumerated other instances where there would be a liberal application of the procedural rules:
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. [71]
Thus, while the procedural rules strictly require the employer to submit a genuine bond, an appeal could still be perfected if there was substantial
compliance with the requirement.
In this instance, the National Labor Relations Commission certified that respondents filed a security deposit in the amount of P6,512,524.84 under
Security Bank check no. 0000045245,[72] showing that the premium for the appeal bond was duly paid and that there was willingness to post it.
[73]
Respondents likewise attached documents proving that Alpha Insurance was a legitimate and accredited bonding company. [74]
Despite their failure to collect on the appeal bond, petitioners do not deny that they were eventually able to garnish the amount from respondents'
bank deposits.[75] This fulfills the purpose of the bond, that is, "to guarantee the payment of valid and legal claims against the
employer[.]"[76] Respondents are considered to have substantially complied with the requirements on the posting of an appeal bond.
II
Under the Labor Code, the Labor Arbiter exercises original and exclusive jurisdiction over termination disputes between an employer and an
employee while the National Labor Relations Commission exercises exclusive appellate jurisdiction over these cases:
Article 224. [217] Jurisdiction of the Labor Arbiters and the Commission. — (a) Except as otherwise provided under this Code, the Labor Arbiters shall
have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for
172
decision without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-
agricultural:
...
(2) Termination disputes;
...
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters. [77]
The presumption under this provision is that the parties have an employer-employee relationship. Otherwise, the case would be cognizable in
different tribunals even if the action involves a termination dispute.
Petitioner Malcaba alleges that the Court of Appeals erred m dismissing his complaint for lack of jurisdiction, insisting that he was an employee of
respondent, not a corporate officer.
At the time of his alleged dismissal, petitioner Malcaba was the President of respondent corporation. Strangely, this same petitioner disputes this
position as respondents' bare assertion, [78] yet he also insists that his name appears as President in the corporation's General Information Sheet for
2007.[79]
Under Section 25 of the Corporation Code,[80] the President of a corporation is considered a corporate officer. The dismissal of a corporate officer is
considered an intra-corporate dispute, not a labor dispute. Thus, in Tabang v. National Labor Relations Commission:[81]
A corporate officer's dismissal is always a corporate act, or an intra-corporate controversy, and the nature is not altered by the reason or wisdom
with which the Board of Directors may have in taking such action. Also, an intra-corporate controversy is one which arises between a stockholder
and. the corporation. There is no distinction, qualification, nor any exemption whatsoever. The provision is broad and covers all kinds of
controversies between stockholders and corporations. [82]
Further, in Matling Industrial and Commercial Corporation v. Coros,[83] this Court stated that jurisdiction over intra-corporate disputes involving the
illegal dismissal of corporate officers was with the Regional Trial Court, not with the Labor Arbiter:
Where the complaint for illegal dismissal concerns a corporate officer, however, the controversy falls under the jurisdiction of the Securities and
Exchange Commission (SEC), because the controversy arises out of intra-corporate or partnership relations between and among stockholders,
members, or associates, or between any or all of them and the corporation, partnership, or association of which they are stockholders, members,
or associates, respectively; and between such corporation, partnership, or association and the State insofar as the controversy concerns their
individual franchise or right to exist as such entity; or because the controversy involves the election or appointment of a director, trustee, officer, or
manager of such corporation, partnership, or association. Such controversy, among others, is known as an intra-corporate dispute.
Effective on August 8, 2000, upon the passage of Republic Act No. 8799, otherwise known as The Securities Regulation Code, the SEC's jurisdiction
over all intra-corporate disputes was transferred to the RTC, pursuant to Section 5.2 of RA No. 8799, to wit:
5.2. The Commission's jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is hereby transferred to the Courts
of general jurisdiction or the appropriate Regional Trial Court: Provided, that the Supreme Court in the exercise of its authority may designate the
Regional Trial Court branches that shall exercise jurisdiction over these cases. The Commission shall retain jurisdiction over pending cases involving
intra-corporate disputes submitted for final resolution which should be resolved within one (1) year from the enactment of this Code. The
Commission shall retain jurisdiction over pending suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally disposed. [84]
The mere designation as a high-ranking employee, however, is not enough to consider one as a corporate officer. In Tabang, this Court discussed
the distinction between an employee and a corporate officer, regardless of designation:
The president, vice-president, secretary and treasurer are commonly regarded as the principal or executive officers of a corporation, and modern
corporation statutes usually designate them as the officers of the corporation. However, other offices are sometimes created by the charter or by-
laws of a corporation, or the board of directors may be empowered under the by-laws of a corporation to create additional offices as may be
necessary.
It has been held that an "office" is created by the charter of the corporation and the officer is elected by the directors or stockholders. On the other
hand, an "employee" usually occupies no office and generally is employed not by action of the directors or stockholders but by the managing officer
of the corporation who also determines the compensation to be paid to such employee. [85]
The clear weight of jurisprudence clarifies that to be considered a corporate officer, first, the office must be created by the charter of the
corporation, and second, the officer must be elected by the board of directors or by the stockholders.
Petitioner Malcaba was an incorporator of the corporation and a member of the Board of Directors. [86] Respondent corporation's By-Laws creates
the office of the President. That foundational document also states that the President is elected by the Board of Directors:
ARTICLE IV
OFFICER
Section 1. Election/Appointment — Immediately after their election, the Board of Directors shall formally organize by electing the President, the
Vice President, the Treasurer, and the Secretary at said meeting. [87]
This case is similar to Locsin v. Nissan Lease Philippines:[88]
173
Locsin was undeniably Chairman and President, and was elected to these positions by the Nissan board pursuant to its By-laws. As such, he was a
corporate officer, not an employee. The CA reached this conclusion by relying on the submitted facts and on Presidential Decree 902-A, which
defines corporate officers as "those officers of a corporation who are given that character either by the Corporation Code or by the corporation's
by-laws." Likewise, Section 25 of Batas Pambansa Blg. 69, or the Corporation Code of the Philippines (Corporation Code) provides that corporate
officers are the president, secretary, treasurer and such other officers as may be provided for in the by-laws.[89] (Emphasis in the original)
Petitioners cite Prudential Bank and Trust Company v. Reyes[90] as basis that even high-ranking officers may be considered regular employees, not
corporate officers.[91] Prudential Bank, however, is not applicable to this case.
In Prudential Bank, an employer was considered estopped from raising the argument of an intra-corporate dispute since this was only raised when
the case was filed with this Court. This Court also noted that an employee rose from the ranks and was regularly performing tasks integral to the
business of the employer throughout the length of her tenure, thus:
It appears that private respondent was appointed Accounting Clerk by the Bank on July 14, 1963. From that position she rose to become supervisor.
Then in 1982, she was appointed Assistant Vice-President which she occupied until her illegal dismissal on July 19, 1991. The bank's contention that
she merely holds an elective position and that in effect she is not a regular employee is belied by the nature of her work and her length of service
with the Bank. As earlier stated, she rose from the ranks and has been employed with the Bank since 1963 until the termination of her employment
in 1991. As Assistant Vice President of the foreign department of the Bank, she is tasked, among others, to collect checks drawn against overseas
banks payable in foreign currency and to ensure the collection of foreign bills or checks purchased, including the signing of transmittal letters
covering the same. It has been stated that "the primary standard of determining regular employment is the reasonable connection between the
particular activity performed by the employee in relation to the usual trade or business of the employer.["] Additionally, "an employee is regular
because of the nature of work and the length of service, not because of the mode or even the reason for hiring them." As Assistant Vice-President
of the Foreign Department of the Bank she performs tasks integral to the operations of the bank and her length of service with the bank totaling 28
years speaks volumes of her status as a regular employee of the bank. In fine, as a regular employee, she is entitled to security of tenure; that is,
her services may be terminated only for a just or authorized cause. This being in truth a case of illegal dismissal, it is no wonder then that the Bank
endeavored to the very end to establish loss of trust and confidence and serious misconduct on the part of private respondent but, as will be
discussed later, to no avail.[92]
An "Assistant Vice President" is not among the officers stated in Section 25 of the Corporation Code. [93] A corporation's President, however, is
explicitly stated as a corporate officer.
Finding that petitioner Malcaba is the President of respondent corporation and a corporate officer, any issue on his alleged dismissal is beyond the
jurisdiction of the Labor Arbiter or the National Labor Relations Commission. Their adjudication on his money claims is void for lack of jurisdiction.
As a matter of equity, petitioner Malcaba must, therefore, return all amounts received as judgment award pending final adjudication of his claims.
This Court's dismissal of petitioner Malcaba's claims, however, is without prejudice to his filing of the appropriate case in the proper forum.
III
Article 294 [279]] of the Labor Code provides that an employer may terminate the services of an employee only upon just or authorized causes.
[94]
Article 297 [282] enumerates the just causes for termination, among which is "[f]raud or willful breach by the employee of the trust reposed in
him by his employer or duly authorized representative[.]"
Loss of trust and confidence is a just cause to terminate either managerial employees or rank-and-file employees who regularly handle large
amounts of money or property in the regular exercise of their functions. [95]
For an act to be considered a loss of trust and confidence, it must be first, work-related, and second, founded on clearly established facts:
The complained act must be work related such as would show the employee concerned to be unfit to continue working for the employer and it
must be based on a willful breach of trust and founded on clearly established facts. The basis for the dismissal must be clearly and convincingly
established but proof beyond reasonable doubt is not necessary. [96]
The breach of trust must likewise be willful, that is, "it is done intentionally, knowingly and purposely, without justifiable excuse, as distinguished
from an act done carelessly, thoughtlessly, heedlessly or inadvertently." [97]
Petitioner Nepomuceno alleges that he was illegally dismissed merely for his failure to inform his superiors of the actual dates of his vacation leave.
Respondents, however, contend that as District Business Manager, petitioner Nepomuceno lost the corporation's trust and confidence by failing to
report for work during a crucial sales period.
As found by the National Labor Relations Commission, petitioner Nepomuceno had filed for leave, which was approved, for April 24, 25, and 28,
2008 to go on vacation in Malaysia. However, he left for Malaysia on the evening of April 22, 2008, and thus, failed to report for work on April 23,
2008.
Petitioner Nepomuceno claims that he only knew that his flight was for the evening of April 22, 2008 on the day of his flight. Respondents,
however, insist that he "deliberately concealed the actual date of departure as he knows that he would be out of the country on a crucial period of
sales generation and bookings . . . [and] therefore knew that his application for leave would be denied." [98] Otherwise stated, respondents contend
that his dismissal was a valid exercise of their management prerogative to discipline and dismiss managerial employees unworthy of their trust and
confidence.
The concept of a management prerogative was already passed upon by this Court in San Miguel Brewery Sales Force Union v. Ople:[99]
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Except as limited by special laws, an employer is free to regulate, according to his own discretion and judgment, all aspects of employment,
including hiring, work assignments, working methods, time, place and manner of work, tools to be used, processes to be followed, supervision of
workers, working regulations, transfer of employees, work supervision, lay-off of workers and the discipline, dismissal and recall of work. . . .
Every business enterprise endeavors to increase its profits. In the process, it may adopt or devise means designed towards that goal. In Abott
Laboratories vs. NLRC, . . . We ruled:
. . . Even as the law is solicitous of the welfare of the employees, it must also protect the right of an employer to exercise what are clearly
management prerogatives. The free will of management to conduct its own business affairs to achieve its purpose cannot be denied.
So long as a company's management prerogatives are exercised in good faith for the advancement of the employer's interest and not for the
purpose of defeating or circumventing the rights of the employees under special laws or under valid agreements, this Court will uphold them. [100]
While an employer is free to regulate all aspects of employment, the exercise of management prerogatives must be in good faith and must not
defeat or circumvent the rights of its employees.
In industries that mainly rely on sales, employers are free to discipline errant employees who deliberately fail to report for work during a crucial
sales period. It would have been reasonable for respondents to discipline petitioner Nepomuceno had he been a problematic employee who
unceremoniously refused to do his work.
However, as found by the Labor Arbiter and the National Labor Relations Commission, petitioner Nepomuceno turned over all of his pending work
to a reliever before he left for Malaysia. He was able to reach his sales quota and surpass his sales target even before taking his vacation leave.
Respondents did not suffer any financial damage as a result of his absence. This was also petitioner Nepomuceno's first infraction in his nine (9)
years of service with respondents. [101] None of these circumstances constitutes a willful breach of trust on his part. The penalty of dismissal, thus,
was too severe for this kind of infraction.
The manner of petitioner Nepomuceno's dismissal was likewise suspicious. In all cases of employment termination, the employee must be granted
due process. The manner by which this is accomplished is stated in Book V, Rule XXIII, Section 2 of the Rules Implementing the Labor Code:
Section 2. Standard of due process: requirements of notice.
— In all cases of termination of employment, the following standards of due process shall be substantially observed.
I. For termination of employment based on just causes as defined in Article 282 of the Code:
(a) A written notice served on the employee specifying the ground or grounds for termination, and giving to said employee reasonable opportunity
within which to explain his side;
(b) A hearing or conference during which the employee concerned, with the assistance of counsel if the employee so desires, is given opportunity
to respond to the charge, present his evidence or rebut the evidence presented against him; and
(c) A written notice of termination served on the employee indicating that upon due consideration of all the circumstance, grounds have been
established to justify his termination.
Here, petitioner Nepomuceno received a memorandum on April 23, 2008, asking him to explain why no administrative investigation should be held
against him. He submitted an explanation on the same day and another explanation on May 2, 2008. On May 7, 2008, he was given his notice of
termination, which had already taken effect two (2) days earlier, or on May 5, 2008. [102]
It is true that "[t]he essence of due process is simply an opportunity to be heard." [103] Petitioner Nepomuceno had two (2) opportunities within
which to explain his actions. This would have been sufficient to satisfy the requirement. The delay in handing him his notice of termination,
however, appears to have been an afterthought. While strictly not a violation of procedural due process, respondents should have been more
circumspect in complying with the due process requirements under the law.
Considering that petitioner Nepomuceno's dismissal was done without just cause, he is entitled to reinstatement and full backwages. [104] If
reinstatement is not possible due to strained relations between the parties, he shall be awarded separation pay at the rate of one (1) month for
every year of service. [105]
IV
Under Article 297 [282] of the Labor Code, an employer may terminate the services of an employee who commits willful disobedience of the lawful
orders of the employer:
Article 297. [282] Termination by Employer. — An employer may terminate an employment for any of the following causes:
175
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work[.]
For disobedience to be considered as just cause for termination, two (2) requisites must concur: first, "the employee's assailed conduct must have
been wilful or intentional," and second, "the order violated must have been reasonable, lawful, made known to the employee and must pertain to
the duties which he [or she] had been engaged to discharge." [106] For disobedience to be willful, it must be "characterized by a wrongful and
perverse mental attitude rendering the employee's act inconsistent with proper subordination." [107]
The conduct complained of must also constitute "harmful behavior against the business interest or person of his [or her] employer." [108] Thus, it is
implied in every case of willful disobedience that "the erring employee obtains undue advantage detrimental to the business interest of the
employer."[109]
Petitioner Palit-Ang, as Finance Officer, was instructed by respondent Del Castillo to give a cash advance of P3,000.00 to District Branch Manager
Gamboa on November 26, 2007. This order was reasonable, lawful, made known to petitioner Palit-Ang, and pertains to her duties. [110] What is left
to be determined, therefore, is whether petitioner Palit-Ang intentionally and willfully violated it as to amount to insubordination.
When Gamboa went to collect the money from petitioner Palit-Ang, he was told to return the next day as she was still busy. When petitioner Palit-
Ang found out that the money was to be used for a car tune-up, she suggested to Gamboa to just get the money from his mobilization fund and
that she just would reimburse it after.[111] The Court of Appeals found that these circumstances characterized petitioner Palit-Ang's "arrogance and
hostility,"[112] in failing to comply with respondent Del Castillo's order, and thus, warranted her dismissal.
On the contrary, there was no ill will between Gamboa and petitioner Palit-Ang. Petitioner Palit-Ang's failure to immediately give the money to
Gamboa was not the result of a perverse mental attitude but was merely because she was busy at the time. Neither did she profit from her failure
to immediately give the cash advance for the car tune-up nor did respondents suffer financial damage by her failure to comply. The severe penalty
of dismissal was not commensurate to her infraction. In Dongon v. Rapid Movers and Forwarders:[113]
To us, dismissal should only be a last resort, a penalty to be meted only after all the relevant circumstances have been appreciated and evaluated
with the goal of ensuring that the ground for dismissal was not only serious but true. The cause of termination, to be lawful, must be a serious and
grave malfeasance to justify the deprivation of a means of livelihood. This requirement is in keeping with the spirit of our Constitution and laws to
lean over backwards in favor of the working class, and with the mandate that every doubt must be resolved in their favor.
Although we recognize the inherent right of the employer to discipline its employees, we should still ensure that the employer exercises the
prerogative to discipline humanely and considerately, and that the sanction imposed is commensurate to the offense involved and to the degree of
the infraction. The discipline exacted by the employer should further consider the employee's length of service and the number of infractions
during his employment. The employer should never forget that always at stake in disciplining its employee are not only his position but also his
livelihood, and that he may also have a family entirely dependent on his earnings. [114]
Petitioner Palit-Ang likewise assails the failure of respondents to inform her of her right to counsel when she was being investigated for her
infraction. As previously discussed, "[t]he essence of due process is simply an opportunity to be heard," [115] not that the employee must be
accompanied by counsel at all times. A hearing was conducted and she was furnished a notice of termination explaining the grounds for her
dismissa1.[116] She was not denied due process.
Petitioner Palit-Ang, nonetheless, is considered to have been illegally dismissed, her penalty not having been proportionate to the infraction
committed. Thus, she is entitled to reinstatement and full backwages. [117] If reinstatement is not possible due to strained relations between the
parties, she shall be awarded separation pay at the rate of one (1) month for every year of service. [118]
WHEREFORE, the Petition is PARTIALLY GRANTED. Petitioner Christian C. Nepomuceno and petitioner Laura Mae Fatima F. Palit-Ang
are DECLARED to have been illegally dismissed. They are, therefore, entitled to reinstatement without loss of seniority rights, or in lieu thereof,
separation pay; and the payment of backwages from the filing of their Complaints until finality of this Decision.
The Court of Appeals February 19, 2013 Decision and September 10, 2013 Resolution in CA-G.R. SP No. 119093, finding that the National Labor
Relations Commission had no jurisdiction to adjudicate petitioner Nicanor F. Malcaba's claims is SUSTAINED. Petitioner Malcaba is further ordered
to RETURN the amount of P4,937,420.40 to respondents for having been erroneously awarded. This shall be without prejudice to the filing of
petitioner Malcaba's claims in the proper forum.
This case is hereby REMANDED to the Labor Arbiter for the proper computation of petitioners Christian C. Nepomuceno's and Laura Mae Fatima F.
Palit-Ang's money claims.
SO ORDERED.
G.R. No. 172101 November 23, 2007
REPUBLIC OF THE PHILIPPINES, represented by the SOCIAL SECURITY COMMISSION and SOCIAL SECURITY
SYSTEM, Petitioners,
vs.
ASIAPRO COOPERATIVE, Respondent.
DECISION
176
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure seeking to
annul and set aside the Decision1 and Resolution2 of the Court of Appeals in CA-G.R. SP No. 87236, dated 5 January 2006 and
20 March 2006, respectively, which annulled and set aside the Orders of the Social Security Commission (SSC) in SSC Case No.
6-15507-03, dated 17 February 20043 and 16 September 2004,4 respectively, thereby dismissing the petition-complaint dated
12 June 2003 filed by herein petitioner Social Security System (SSS) against herein respondent.
Herein petitioner Republic of the Philippines is represented by the SSC, a quasi-judicial body authorized by law to resolve
disputes arising under Republic Act No. 1161, as amended by Republic Act No. 8282. 5 Petitioner SSS is a government
corporation created by virtue of Republic Act No. 1161, as amended. On the other hand, herein respondent Asiapro
Cooperative (Asiapro) is a multi-purpose cooperative created pursuant to Republic Act No. 6938 6 and duly registered with the
Cooperative Development Authority (CDA) on 23 November 1999 with Registration Certificate No. 0-623-2460. 7
The antecedents of this case are as follows:
Respondent Asiapro, as a cooperative, is composed of owners-members. Under its by-laws, owners-members are of two
categories, to wit: (1) regular member, who is entitled to all the rights and privileges of membership; and (2) associate
member, who has no right to vote and be voted upon and shall be entitled only to such rights and privileges provided in its by-
laws.8 Its primary objectives are to provide savings and credit facilities and to develop other livelihood services for its owners-
members. In the discharge of the aforesaid primary objectives, respondent cooperative entered into several Service
Contracts9 with Stanfilco - a division of DOLE Philippines, Inc. and a company based in Bukidnon. The owners-members do not
receive compensation or wages from the respondent cooperative. Instead, they receive a share in the service surplus 10 which
the respondent cooperative earns from different areas of trade it engages in, such as the income derived from the said Service
Contracts with Stanfilco. The owners-members get their income from the service surplus generated by the quality and amount
of services they rendered, which is determined by the Board of Directors of the respondent cooperative.
In order to enjoy the benefits under the Social Security Law of 1997, the owners-members of the respondent cooperative,
who were assigned to Stanfilco requested the services of the latter to register them with petitioner SSS as self-employed and
to remit their contributions as such. Also, to comply with Section 19-A of Republic Act No. 1161, as amended by Republic Act
No. 8282, the SSS contributions of the said owners-members were equal to the share of both the employer and the employee.
On 26 September 2002, however, petitioner SSS through its Vice-President for Mindanao Division, Atty. Eddie A. Jara, sent a
letter11 to the respondent cooperative, addressed to its Chief Executive Officer (CEO) and General Manager Leo G. Parma,
informing the latter that based on the Service Contracts it executed with Stanfilco, respondent cooperative is actually a
manpower contractor supplying employees to Stanfilco and for that reason, it is an employer of its owners-members working
with Stanfilco. Thus, respondent cooperative should register itself with petitioner SSS as an employer and make the
corresponding report and remittance of premium contributions in accordance with the Social Security Law of 1997. On 9
October 2002,12 respondent cooperative, through its counsel, sent a reply to petitioner SSS’s letter asserting that it is not an
employer because its owners-members are the cooperative itself; hence, it cannot be its own employer. Again, on 21 October
2002,13 petitioner SSS sent a letter to respondent cooperative ordering the latter to register as an employer and report its
owners-members as employees for compulsory coverage with the petitioner SSS. Respondent cooperative continuously
ignored the demand of petitioner SSS.
Accordingly, petitioner SSS, on 12 June 2003, filed a Petition14 before petitioner SSC against the respondent cooperative and
Stanfilco praying that the respondent cooperative or, in the alternative, Stanfilco be directed to register as an employer and to
report respondent cooperative’s owners-members as covered employees under the compulsory coverage of SSS and to remit
the necessary contributions in accordance with the Social Security Law of 1997. The same was docketed as SSC Case No. 6-
15507-03. Respondent cooperative filed its Answer with Motion to Dismiss alleging that no employer-employee relationship
exists between it and its owners-members, thus, petitioner SSC has no jurisdiction over the respondent cooperative. Stanfilco,
on the other hand, filed an Answer with Cross-claim against the respondent cooperative.
177
On 17 February 2004, petitioner SSC issued an Order denying the Motion to Dismiss filed by the respondent cooperative. The
respondent cooperative moved for the reconsideration of the said Order, but it was likewise denied in another Order issued
by the SSC dated 16 September 2004.
Intending to appeal the above Orders, respondent cooperative filed a Motion for Extension of Time to File a Petition for
Review before the Court of Appeals. Subsequently, respondent cooperative filed a Manifestation stating that it was no longer
filing a Petition for Review. In its place, respondent cooperative filed a Petition for Certiorari before the Court of Appeals,
docketed as CA-G.R. SP No. 87236, with the following assignment of errors:
I. The Orders dated 17 February 2004 and 16 September 2004 of [herein petitioner] SSC were issued with grave abuse of
discretion amounting to a (sic) lack or excess of jurisdiction in that:
A. [Petitioner] SSC arbitrarily proceeded with the case as if it has jurisdiction over the petition a quo,
considering that it failed to first resolve the issue of the existence of an employer-employee relationship
between [respondent] cooperative and its owners-members.
B. While indeed, the [petitioner] SSC has jurisdiction over all disputes arising under the SSS Law with respect
to coverage, benefits, contributions, and related matters, it is respectfully submitted that [petitioner] SSC
may only assume jurisdiction in cases where there is no dispute as to the existence of an employer-employee
relationship.
C. Contrary to the holding of the [petitioner] SSC, the legal issue of employer-employee relationship raised in
[respondent’s] Motion to Dismiss can be preliminarily resolved through summary hearings prior to the
hearing on the merits. However, any inquiry beyond a preliminary determination, as what [petitioner SSC]
wants to accomplish, would be to encroach on the jurisdiction of the National Labor Relations Commission
[NLRC], which is the more competent body clothed with power to resolve issues relating to the existence of
an employment relationship.
II. At any rate, the [petitioner] SSC has no jurisdiction to take cognizance of the petition a quo.
A. [Respondent] is not an employer within the contemplation of the Labor Law but is a multi-purpose
cooperative created pursuant to Republic Act No. 6938 and composed of owners-members, not employees.
B. The rights and obligations of the owners-members of [respondent] cooperative are derived from their
Membership Agreements, the Cooperatives By-Laws, and Republic Act No. 6938, and not from any contract
of employment or from the Labor Laws. Moreover, said owners-members enjoy rights that are not consistent
with being mere employees of a company, such as the right to participate and vote in decision-making for the
cooperative.
C. As found by the Bureau of Internal Revenue [BIR], the owners-members of [respondent] cooperative are
not paid any compensation income.15 (Emphasis supplied.)
On 5 January 2006, the Court of Appeals rendered a Decision granting the petition filed by the respondent cooperative. The
decretal portion of the Decision reads:
WHEREFORE, the petition is GRANTED. The assailed Orders dated [17 February 2004] and [16 September 2004], are
ANNULLED and SET ASIDE and a new one is entered DISMISSING the petition-complaint dated [12 June 2003] of [herein
petitioner] Social Security System.16
Aggrieved by the aforesaid Decision, petitioner SSS moved for a reconsideration, but it was denied by the appellate court in its
Resolution dated 20 March 2006.
178
Hence, this Petition.
In its Memorandum, petitioners raise the issue of whether or not the Court of Appeals erred in not finding that the SSC has
jurisdiction over the subject matter and it has a valid basis in denying respondent’s Motion to Dismiss. The said issue is
supported by the following arguments:
I. The [petitioner SSC] has jurisdiction over the petition-complaint filed before it by the [petitioner SSS] under R.A. No.
8282.
II. Respondent [cooperative] is estopped from questioning the jurisdiction of petitioner SSC after invoking its
jurisdiction by filing an [A]nswer with [M]otion to [D]ismiss before it.
III. The [petitioner SSC] did not act with grave abuse of discretion in denying respondent [cooperative’s] [M]otion to
[D]ismiss.
IV. The existence of an employer-employee relationship is a question of fact where presentation of evidence is
necessary.
V. There is an employer-employee relationship between [respondent cooperative] and its [owners-members].
Petitioners claim that SSC has jurisdiction over the petition-complaint filed before it by petitioner SSS as it involved an issue of
whether or not a worker is entitled to compulsory coverage under the SSS Law. Petitioners avow that Section 5 of Republic Act
No. 1161, as amended by Republic Act No. 8282, expressly confers upon petitioner SSC the power to settle disputes on
compulsory coverage, benefits, contributions and penalties thereon or any other matter related thereto. Likewise, Section 9 of
the same law clearly provides that SSS coverage is compulsory upon all employees. Thus, when petitioner SSS filed a petition-
complaint against the respondent cooperative and Stanfilco before the petitioner SSC for the compulsory coverage of
respondent cooperative’s owners-members as well as for collection of unpaid SSS contributions, it was very obvious that the
subject matter of the aforesaid petition-complaint was within the expertise and jurisdiction of the SSC.
Petitioners similarly assert that granting arguendo that there is a prior need to determine the existence of an employer-
employee relationship between the respondent cooperative and its owners-members, said issue does not preclude petitioner
SSC from taking cognizance of the aforesaid petition-complaint. Considering that the principal relief sought in the said
petition-complaint has to be resolved by reference to the Social Security Law and not to the Labor Code or other labor
relations statutes, therefore, jurisdiction over the same solely belongs to petitioner SSC.
Petitioners further claim that the denial of the respondent cooperative’s Motion to Dismiss grounded on the alleged lack of
employer-employee relationship does not constitute grave abuse of discretion on the part of petitioner SSC because the latter
has the authority and power to deny the same. Moreover, the existence of an employer-employee relationship is a question
of fact where presentation of evidence is necessary. Petitioners also maintain that the respondent cooperative is already
estopped from assailing the jurisdiction of the petitioner SSC because it has already filed its Answer before it, thus,
respondent cooperative has already submitted itself to the jurisdiction of the petitioner SSC.
Finally, petitioners contend that there is an employer-employee relationship between the respondent cooperative and its
owners-members. The respondent cooperative is the employer of its owners-members considering that it undertook to
provide services to Stanfilco, the performance of which is under the full and sole control of the respondent cooperative.
On the other hand, respondent cooperative alleges that its owners-members own the cooperative, thus, no employer-
employee relationship can arise between them. The persons of the employer and the employee are merged in the owners-
members themselves. Likewise, respondent cooperative’s owners-members even requested the respondent cooperative to
register them with the petitioner SSS as self-employed individuals. Hence, petitioner SSC has no jurisdiction over the petition-
complaint filed before it by petitioner SSS.
179
Respondent cooperative further avers that the Court of Appeals correctly ruled that petitioner SSC acted with grave abuse of
discretion when it assumed jurisdiction over the petition-complaint without determining first if there was an employer-
employee relationship between the respondent cooperative and its owners-members. Respondent cooperative claims that
the question of whether an employer-employee relationship exists between it and its owners-members is a legal and not a
factual issue as the facts are undisputed and need only to be interpreted by the applicable law and jurisprudence.
Lastly, respondent cooperative asserts that it cannot be considered estopped from assailing the jurisdiction of petitioner SSC
simply because it filed an Answer with Motion to Dismiss, especially where the issue of jurisdiction is raised at the very first
instance and where the only relief being sought is the dismissal of the petition-complaint for lack of jurisdiction.
From the foregoing arguments of the parties, the issues may be summarized into:
I. Whether the petitioner SSC has jurisdiction over the petition-complaint filed before it by petitioner SSS against the
respondent cooperative.
II. Whether the respondent cooperative is estopped from assailing the jurisdiction of petitioner SSC since it had
already filed an Answer with Motion to Dismiss before the said body.
Petitioner SSC’s jurisdiction is clearly stated in Section 5 of Republic Act No. 8282 as well as in Section 1, Rule III of the 1997
SSS Revised Rules of Procedure.
Section 5 of Republic Act No. 8282 provides:
SEC. 5. Settlement of Disputes. – (a) Any dispute arising under this Act with respect to coverage, benefits, contributions and
penalties thereon or any other matter related thereto, shall be cognizable by the Commission, x x x. (Emphasis supplied.)
Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of Procedure states:
Section 1. Jurisdiction. – Any dispute arising under the Social Security Act with respect to coverage, entitlement of benefits,
collection and settlement of contributions and penalties thereon, or any other matter related thereto, shall be cognizable by
the Commission after the SSS through its President, Manager or Officer-in-charge of the Department/Branch/Representative
Office concerned had first taken action thereon in writing. (Emphasis supplied.)
It is clear then from the aforesaid provisions that any issue regarding the compulsory coverage of the SSS is well within the
exclusive domain of the petitioner SSC. It is important to note, though, that the mandatory coverage under the SSS Law is
premised on the existence of an employer-employee relationship 17 except in cases of compulsory coverage of the self-
employed.
It is axiomatic that the allegations in the complaint, not the defenses set up in the Answer or in the Motion to Dismiss,
determine which court has jurisdiction over an action; otherwise, the question of jurisdiction would depend almost entirely
upon the defendant.18 Moreover, it is well-settled that once jurisdiction is acquired by the court, it remains with it until the full
termination of the case.19 The said principle may be applied even to quasi-judicial bodies.
In this case, the petition-complaint filed by the petitioner SSS before the petitioner SSC against the respondent cooperative
and Stanfilco alleges that the owners-members of the respondent cooperative are subject to the compulsory coverage of the
SSS because they are employees of the respondent cooperative. Consequently, the respondent cooperative being the
employer of its owners-members must register as employer and report its owners-members as covered members of the SSS
and remit the necessary premium contributions in accordance with the Social Security Law of 1997. Accordingly, based on the
aforesaid allegations in the petition-complaint filed before the petitioner SSC, the case clearly falls within its jurisdiction.
Although the Answer with Motion to Dismiss filed by the respondent cooperative challenged the jurisdiction of the petitioner
SSC on the alleged lack of employer-employee relationship between itself and its owners-members, the same is not enough to
180
deprive the petitioner SSC of its jurisdiction over the petition-complaint filed before it. Thus, the petitioner SSC cannot be
faulted for initially assuming jurisdiction over the petition-complaint of the petitioner SSS.
Nonetheless, since the existence of an employer-employee relationship between the respondent cooperative and its owners-
members was put in issue and considering that the compulsory coverage of the SSS Law is predicated on the existence of such
relationship, it behooves the petitioner SSC to determine if there is really an employer-employee relationship that exists
between the respondent cooperative and its owners-members.
The question on the existence of an employer-employee relationship is not within the exclusive jurisdiction of the National
Labor Relations Commission (NLRC). Article 217 of the Labor Code enumerating the jurisdiction of the Labor Arbiters and the
NLRC provides that:
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. - (a) x x x.
xxxx
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from
employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding
five thousand pesos (₱5,000.00) regardless of whether accompanied with a claim for reinstatement. 20
Although the aforesaid provision speaks merely of claims for Social Security, it would necessarily include issues on the
coverage thereof, because claims are undeniably rooted in the coverage by the system. Hence, the question on the existence
of an employer-employee relationship for the purpose of determining the coverage of the Social Security System is explicitly
excluded from the jurisdiction of the NLRC and falls within the jurisdiction of the SSC which is primarily charged with the duty
of settling disputes arising under the Social Security Law of 1997.
On the basis thereof, considering that the petition-complaint of the petitioner SSS involved the issue of compulsory coverage
of the owners-members of the respondent cooperative, this Court agrees with the petitioner SSC when it declared in its Order
dated 17 February 2004 that as an incident to the issue of compulsory coverage, it may inquire into the presence or absence
of an employer-employee relationship without need of waiting for a prior pronouncement or submitting the issue to the NLRC
for prior determination. Since both the petitioner SSC and the NLRC are independent bodies and their jurisdiction are well-
defined by the separate statutes creating them, petitioner SSC has the authority to inquire into the relationship existing
between the worker and the person or entity to whom he renders service to determine if the employment, indeed, is one that
is excepted by the Social Security Law of 1997 from compulsory coverage. 21
Even before the petitioner SSC could make a determination of the existence of an employer-employee relationship, however,
the respondent cooperative already elevated the Order of the petitioner SSC, denying its Motion to Dismiss, to the Court of
Appeals by filing a Petition for Certiorari. As a consequence thereof, the petitioner SSC became a party to the said Petition for
Certiorari pursuant to Section 5(b)22 of Republic Act No. 8282. The appellate court ruled in favor of the respondent cooperative
by declaring that the petitioner SSC has no jurisdiction over the petition-complaint filed before it because there was no
employer-employee relationship between the respondent cooperative and its owners-members. Resultantly, the petitioners
SSS and SSC, representing the Republic of the Philippines, filed a Petition for Review before this Court.
Although as a rule, in the exercise of the Supreme Court’s power of review, the Court is not a trier of facts and the findings of
fact of the Court of Appeals are conclusive and binding on the Court,23 said rule is not without exceptions. There are several
recognized exceptions24 in which factual issues may be resolved by this Court. One of these exceptions finds application in this
present case which is, when the findings of fact are conflicting. There are, indeed, conflicting findings espoused by the
petitioner SSC and the appellate court relative to the existence of employer-employee relationship between the respondent
cooperative and its owners-members, which necessitates a departure from the oft-repeated rule that factual issues may not
be the subject of appeals to this Court.
181
In determining the existence of an employer-employee relationship, the following elements are considered: (1) the selection
and engagement of the workers; (2) the payment of wages by whatever means; (3) the power of dismissal; and (4) the power
to control the worker’s conduct, with the latter assuming primacy in the overall consideration. 25 The most important element
is the employer’s control of the employee’s conduct, not only as to the result of the work to be done, but also as to the means
and methods to accomplish.26 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.27 All the aforesaid elements are present in this case.
First. It is expressly provided in the Service Contracts that it is the respondent cooperative which has the exclusive discretion
in the selection and engagement of the owners-members as well as its team leaders who will be assigned at
Stanfilco.28 Second. Wages are defined as "remuneration or earnings, however designated, capable of being expressed in
terms of money, whether fixed or ascertained, on a time, task, piece or commission basis, or other method of calculating the
same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done
or to be done, or for service rendered or to be rendered."29 In this case, the weekly stipends or the so-called shares in the
service surplus given by the respondent cooperative to its owners-members were in reality wages, as the same were
equivalent to an amount not lower than that prescribed by existing labor laws, rules and regulations, including the wage order
applicable to the area and industry; or the same shall not be lower than the prevailing rates of wages. 30 It cannot be doubted
then that those stipends or shares in the service surplus are indeed wages, because these are given to the owners-members
as compensation in rendering services to respondent cooperative’s client, Stanfilco. Third. It is also stated in the above-
mentioned Service Contracts that it is the respondent cooperative which has the power to investigate, discipline and remove
the owners-members and its team leaders who were rendering services at Stanfilco. 31 Fourth. As earlier opined, of the four
elements of the employer-employee relationship, the "control test" is the most important. In the case at bar, it is the
respondent cooperative which has the sole control over the manner and means of performing the services under the Service
Contracts with Stanfilco as well as the means and methods of work.32 Also, the respondent cooperative is solely and entirely
responsible for its owners-members, team leaders and other representatives at Stanfilco. 33 All these clearly prove that, indeed,
there is an employer-employee relationship between the respondent cooperative and its owners-members.
It is true that the Service Contracts executed between the respondent cooperative and Stanfilco expressly provide that there
shall be no employer-employee relationship between the respondent cooperative and its owners-members. 34 This Court,
however, cannot give the said provision force and effect.
As previously pointed out by this Court, an employee-employer relationship actually exists between the respondent
cooperative and its owners-members. The four elements in the four-fold test for the existence of an employment relationship
have been complied with. The respondent cooperative must not be allowed to deny its employment relationship with its
owners-members by invoking the questionable Service Contracts provision, when in actuality, it does exist. The existence of
an employer-employee relationship cannot be negated by expressly repudiating it in a contract, when the terms and
surrounding circumstances show otherwise. The employment status of a person is defined and prescribed by law and not by
what the parties say it should be.35
It is settled that the contracting parties may establish such stipulations, clauses, terms and conditions as they want, and their
agreement would have the force of law between them. However, the agreed terms and conditions must not be contrary to
law, morals, customs, public policy or public order.36 The Service Contract provision in question must be struck down for being
contrary to law and public policy since it is apparently being used by the respondent cooperative merely to circumvent the
compulsory coverage of its employees, who are also its owners-members, by the Social Security Law.
This Court is not unmindful of the pronouncement it made in Cooperative Rural Bank of Davao City, Inc. v. Ferrer-
Calleja37 wherein it held that:
A cooperative, therefore, is by its nature different from an ordinary business concern, being run either by persons,
partnerships, or corporations. Its owners and/or members are the ones who run and operate the business while the others
are its employees x x x.
182
An employee therefore of such a cooperative who is a member and co-owner thereof cannot invoke the right to collective
bargaining for certainly an owner cannot bargain with himself or his co-owners. In the opinion of August 14, 1981 of the
Solicitor General he correctly opined that employees of cooperatives who are themselves members of the cooperative have
no right to form or join labor organizations for purposes of collective bargaining for being themselves co-owners of the
cooperative.1awp++i1
However, in so far as it involves cooperatives with employees who are not members or co-owners thereof, certainly such
employees are entitled to exercise the rights of all workers to organization, collective bargaining, negotiations and others as
are enshrined in the Constitution and existing laws of the country.
The situation in the aforesaid case is very much different from the present case. The declaration made by the Court in the
aforesaid case was made in the context of whether an employee who is also an owner-member of a cooperative can exercise
the right to bargain collectively with the employer who is the cooperative wherein he is an owner-member. Obviously, an
owner-member cannot bargain collectively with the cooperative of which he is also the owner because an owner cannot
bargain with himself. In the instant case, there is no issue regarding an owner-member’s right to bargain collectively with the
cooperative. The question involved here is whether an employer-employee relationship can exist between the cooperative
and an owner-member. In fact, a closer look at Cooperative Rural Bank of Davao City, Inc. will show that it actually recognized
that an owner-member of a cooperative can be its own employee.
It bears stressing, too, that a cooperative acquires juridical personality upon its registration with the Cooperative
Development Authority.38 It has its Board of Directors, which directs and supervises its business; meaning, its Board of
Directors is the one in charge in the conduct and management of its affairs.39 With that, a cooperative can be likened to a
corporation with a personality separate and distinct from its owners-members. Consequently, an owner-member of a
cooperative can be an employee of the latter and an employer-employee relationship can exist between them.
In the present case, it is not disputed that the respondent cooperative had registered itself with the Cooperative Development
Authority, as evidenced by its Certificate of Registration No. 0-623-2460. 40 In its by-laws,41 its Board of Directors directs,
controls, and supervises the business and manages the property of the respondent cooperative. Clearly then, the
management of the affairs of the respondent cooperative is vested in its Board of Directors and not in its owners-members as
a whole. Therefore, it is completely logical that the respondent cooperative, as a juridical person represented by its Board of
Directors, can enter into an employment with its owners-members.
In sum, having declared that there is an employer-employee relationship between the respondent cooperative and its owners-
member, we conclude that the petitioner SSC has jurisdiction over the petition-complaint filed before it by the petitioner SSS.
This being our conclusion, it is no longer necessary to discuss the issue of whether the respondent cooperative was estopped
from assailing the jurisdiction of the petitioner SSC when it filed its Answer with Motion to Dismiss.
WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Decision and the Resolution of the Court of
Appeals in CA-G.R. SP No. 87236, dated 5 January 2006 and 20 March 2006, respectively, are hereby REVERSED and SET ASIDE.
The Orders of the petitioner SSC dated 17 February 2004 and 16 September 2004 are hereby REINSTATED. The petitioner SSC
is hereby DIRECTED to continue hearing the petition-complaint filed before it by the petitioner SSS as regards the compulsory
coverage of the respondent cooperative and its owners-members. No costs.
SO ORDERED.
183

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LABOR LAW 1: EMPLOYER - EMPLOYEE RELATIONSHIP

G.R. No. L-12582 January 28, 1961

LVN PICTURES, INC., petitioner-appellant,

G.R. No. L-12598 January 28, 1961

SAMPAGUITA PICTURES, INC., petitioner-appellant,

Nicanor S. Sison for petitioner-appellant.

G.R. No. 119500 August 28, 1998

PAGUIO TRANSPORT CORPORATION, petitioner,

11/28/93 - 6/28/94 = 7 mos.

P800.00 x 3 days x 4 weeks = P9,600.00

P9,600.00 x 7 mos. = P67,200.00

Other claims are hereby dismissed for lack of evidence.

The facts, as summarized in the challenged Decision, are as follows:

Ruling of the NLRC

Hence, this petition. 9

Petitioner raises the following issues:

The Court's Ruling

The petition is not meritorious.

wages without conditions or limitations, viz.:

11/28/93 - 6/28/94 = 7 mos.

P800.00 x 3 days x 4 weeks = P6,600.00

P9,600 x 7 mos. = P67,200.00 26

11/28/93 - 11/28/94 = 12 months

P600.00 x 3 days x 4 weeks = P 7,200.00

P7,200 x 12 months = P86,400.00. 27

G.R. No. 169704 November 17, 2010

a. the VA’s decision is not subject to a motion for reconsideration; and

b. no employer-employee relationship existed between Teng and the respondent workers.

THE COURT’S RULING

We resolve to deny the petition for lack of merit.

As amended, Article 263 is now Article 262-A, which states:

Rule VII – DECISIONS

G.R. No. L-32245 May 25, 1979

A. M Sikat for petitioner.

D. A. Hernandez for respondents.

The facts as found by the Hearing Examiner are as follows:

(1) Solano never stayed long enought at Dy's establishment;

(2) Solano had to leave as soon as he was through with the

(3) order given him by Dy;

(6) Solano's work with Dy's establishment was not continuous. , 7

G.R. No. 84484 November 15, 1989

INSULAR LIFE ASSURANCE CO., LTD., petitioner,

Tirol & Tirol for petitioner.

petition for certiorari and prohibition.

G.R. No. 167622 June 29, 2010

A. Tongko’s Case for Employment Relationship

B. Manulife’s Case – Agency Relationship with Tongko

The Conflicting Rulings of the Lower Tribunals

Our Decision of November 7, 2008

The Motion for Reconsideration

THE COURT’S RULING

A. The Insurance and the Civil Codes;

a. The laws on insurance and agency

B. The Cited Case

C. Analysis of the Evidence

c.2. Other Evidence of Alleged Control

Duties of Manulife’s Manager Duties of Grepalife’s Managers/Supervisors

7. My staff are my own employees and received salaries from me;

ANTONIO T. CARPIO CONCHITA CARPIO MORALES

PRESBITERO J. VELASCO, JR. ANTONIO EDUARDO B. NACHURA

Associate Justice Associate Justice

TERESITA J. LEONARDO-DE CASTRO DIOSDADO M. PERALTA

LUCAS P. BERSAMIN MARIANO C. DEL CASTILLO