b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m.
,
[G.R. No. 138051. June 10, 2004]
JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING
CORPORATION, respondent.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari[1] assailing the 26
March 1999 Decision[2] of the Court of Appeals in CA-G.R. SP No. 49190
dismissing the petition filed by Jose Y. Sonza (SONZA). The Court of Appeals
affirmed the findings of the National Labor Relations Commission (NLRC),
which affirmed the Labor Arbiters dismissal of the case for lack of
jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation (ABS-
CBN) signed an Agreement (Agreement) with the Mel and Jay Management
and Development Corporation (MJMDC). ABS-CBN was represented by its
corporate officers while MJMDC was represented by SONZA, as President
and General Manager, and Carmela Tiangco (TIANGCO), as EVP and
Treasurer. Referred to in the Agreement as AGENT, MJMDC agreed to
provide SONZAs services exclusively to ABS-CBN as talent for radio and
television. The Agreement listed the services SONZA would render to ABS-
CBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m.,
Mondays to Fridays;
Sundays.[3]
ABS-CBN agreed to pay for SONZAs services a monthly talent fee
of P310,000 for the first year and P317,000 for the second and third year of
the Agreement. ABS-CBN would pay the talent fees on the 10th and 25th days
of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio
Lopez III, which reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May 1994
entered into by your goodself on behalf of ABS-CBN with our company
relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent
events concerning his programs and career. We consider these acts of the
station violative of the Agreement and the station as in breach thereof. In
this connection, we hereby serve notice of rescission of said Agreement at
our instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the
remaining amount stipulated in paragraph 7 of the Agreement but reserves
the right to seek recovery of the other benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE
Y. SONZA
President and Gen.
Manager[4]
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the
Department of Labor and Employment, National Capital Region in Quezon
City. SONZA complained that ABS-CBN did not pay his salaries, separation
pay, service incentive leave pay, 13th month pay, signing bonus, travel
allowance and amounts due under the Employees Stock Option Plan (ESOP).
1
 On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that
no employer-employee relationship existed between the parties. SONZA
filed an Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees
through his account at PCIBank, Quezon Avenue Branch, Quezon City. In
July 1996, ABS-CBN opened a new account with the same bank where ABS-
CBN deposited SONZAs talent fees and other payments due him under the
Agreement.
In his Order dated 2 December 1996, the Labor Arbiter[5] denied the
motion to dismiss and directed the parties to file their respective position
papers. The Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was an
employee of respondent company until April 15, 1996 and that he was not
paid certain claims, it is sufficient enough as to confer jurisdiction over the
instant case in this Office. And as to whether or not such claim would
entitle complainant to recover upon the causes of action asserted is a
matter to be resolved only after and as a result of a hearing. Thus, the
respondents plea of lack of employer-employee relationship may be
pleaded only as a matter of defense. It behooves upon it the duty to prove
that there really is no employer-employee relationship between it and the
complainant.
The Labor Arbiter then considered the case submitted for resolution.
The parties submitted their position papers on 24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondents Position Paper
with Motion to Expunge Respondents Annex 4 and Annex 5 from the
Records. Annexes 4 and 5 are affidavits of ABS-CBNs witnesses Soccoro
Vidanes and Rolando V. Cruz. These witnesses stated in their affidavits that
the prevailing practice in the television and broadcast industry is to treat
talents like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing
the complaint for lack of jurisdiction.[6] The pertinent parts of the decision
read as follows:
xxx
While Philippine jurisprudence has not yet, with certainty, touched on the
true nature of the contract of a talent, it stands to reason that a talent as
above-described cannot be considered as an employee by reason of the
peculiar circumstances surrounding the engagement of his services.
It must be noted that complainant was engaged by respondent by
reason of his peculiar skills and talent as a TV host and a radio
broadcaster. Unlike an ordinary employee, he was free to perform
the services he undertook to render in accordance with his own
style. The benefits conferred to complainant under the May 1994
Agreement are certainly very much higher than those generally given to
employees. For one, complainant Sonzas monthly talent fees amount to a
staggering P317,000. Moreover, his engagement as a talent was covered
by a specific contract. Likewise, he was not bound to render eight (8)
hours of work per day as he worked only for such number of hours as may
be necessary.
The fact that per the May 1994 Agreement complainant was accorded
some benefits normally given to an employee is
inconsequential. Whatever benefits complainant enjoyed arose from
specific agreement by the parties and not by reason of employer-
employee relationship. As correctly put by the respondent, All these
benefits are merely talent fees and other contractual benefits and should
not be deemed as salaries, wages and/or other remuneration accorded to
an employee, notwithstanding the nomenclature appended to these
benefits. Apropos to this is the rule that the term or nomenclature given to
a stipulated benefit is not controlling, but the intent of the parties to the
Agreement conferring such benefit.
The fact that complainant was made subject to respondents Rules
and Regulations, likewise, does not detract from the absence of
employer-employee relationship. As held by the Supreme Court, The
line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating
the means or methods to be employed in attaining it, and those that
control or fix the methodology and bind or restrict the party hired to the
use of such means. The first, which aim only to promote the result, create
no employer-employee relationship unlike the second, which address both
the result and the means to achieve it. (Insular Life Assurance Co., Ltd. vs.
NLRC, et al., G.R. No. 84484, November 15, 1989).
x x x (Emphasis supplied)[7]
SONZA appealed to the NLRC. On 24 February 1998, the NLRC
rendered a Decision affirming the Labor Arbiters decision. SONZA filed a
motion for reconsideration, which the NLRC denied in its Resolution dated 3
July 1998.
2
 On 6 October 1998, SONZA filed a special civil action for certiorari
before the Court of Appeals assailing the decision and resolution of the
NLRC. On 26 March 1999, the Court of Appeals rendered a Decision
dismissing the case.[8]
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRCs finding that no employer-
employee relationship existed between SONZA and ABS-CBN. Adopting the
NLRCs decision, the appellate court quoted the following findings of the
NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered into
the contract merely as an agent of complainant Sonza, the principal. By all
indication and as the law puts it, the act of the agent is the act of the
principal itself. This fact is made particularly true in this case, as
admittedly MJMDC is a management company devoted exclusively to
managing the careers of Mr. Sonza and his broadcast partner, Mrs.
Carmela C. Tiangco. (Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between
complainant Sonza and MJMDC, and not between ABS-CBN and
MJMDC. This is clear from the provisions of the May 1994 Agreement which
specifically referred to MJMDC as the AGENT. As a matter of fact, when
complainant herein unilaterally rescinded said May 1994 Agreement, it was
MJMDC which issued the notice of rescission in behalf of Mr. Sonza, who
himself signed the same in his capacity as President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the
fact that historically, the parties to the said agreements are ABS-CBN and
Mr. Sonza. And it is only in the May 1994 Agreement, which is the latest
Agreement executed between ABS-CBN and Mr. Sonza, that MJMDC
figured in the said Agreement as the agent of Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere labor-only contractor
of ABS-CBN such that there exist[s] employer-employee relationship
between the latter and Mr. Sonza. On the contrary, We find it indubitable,
that MJMDC is an agent, not of ABS-CBN, but of the talent/contractor Mr.
Sonza, as expressly admitted by the latter and MJMDC in the May 1994
Agreement.
It may not be amiss to state that jurisdiction over the instant controversy
indeed belongs to the regular courts, the same being in the nature of an
action for alleged breach of contractual obligation on the part of
respondent-appellee. As squarely apparent from complainant-appellants
Position Paper, his claims for compensation for services, 13th month pay,
signing bonus and travel allowance against respondent-appellee are not
based on the Labor Code but rather on the provisions of the May 1994
Agreement, while his claims for proceeds under Stock Purchase Agreement
are based on the latter. A portion of the Position Paper of complainant-
appellant bears perusal:
Under [the May 1994 Agreement] with respondent ABS-CBN, the latter
contractually bound itself to pay complainant a signing bonus consisting of
shares of stockswith FIVE HUNDRED THOUSAND PESOS (P500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay based on
an amount not lower than the amount he was receiving prior to effectivity
of (the) Agreement.
Under paragraph 9 of (the May 1994 Agreement), complainant is entitled
to a commutable travel benefit amounting to at least One Hundred Fifty
Thousand Pesos (P150,000.00) per year.
Thus, it is precisely because of complainant-appellants own recognition of
the fact that his contractual relations with ABS-CBN are founded on the
New Civil Code, rather than the Labor Code, that instead of merely
resigning from ABS-CBN, complainant-appellant served upon the latter a
notice of rescission of Agreement with the station, per his letter dated April
1, 1996, which asserted that instead of referring to unpaid employee
benefits, he is waiving and renouncing recovery of the remaining amount
stipulated in paragraph 7 of the Agreement but reserves the right to such
recovery of the other benefits under said Agreement. (Annex 3 of the
respondent ABS-CBNs Motion to Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994
Agreement and/or the Stock Purchase Agreement by respondent-appellee
that complainant-appellant filed his complaint.Complainant-appellants
claims being anchored on the alleged breach of contract on the part of
respondent-appellee, the same can be resolved by reference to civil law
and not to labor law. Consequently, they are within the realm of civil law
3
and, thus, lie with the regular courts. As held in the case of Dai-Chi
Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21 November
1994, an action for breach of contractual obligation is intrinsically a
civil dispute.[9] (Emphasis supplied)
The Court of Appeals ruled that the existence of an employer-employee
relationship between SONZA and ABS-CBN is a factual question that is within
the jurisdiction of the NLRC to resolve.[10] A special civil action for certiorari
extends only to issues of want or excess of jurisdiction of the NLRC.[11] Such
action cannot cover an inquiry into the correctness of the evaluation of the
evidence which served as basis of the NLRCs conclusion.[12] The Court of
Appeals added that it could not re-examine the parties evidence and
substitute the factual findings of the NLRC with its own.[13]
The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS
DECISION AND REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE
RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN, DESPITE THE
WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO
SUPPORT SUCH A FINDING.[14]
The Courts Ruling
We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the decision of the
Court of Appeals affirming the NLRC ruling which upheld the Labor Arbiters
dismissal of the case for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine
labor laws and jurisprudence define clearly the elements of an employer-
employee relationship, this is the first time that the Court will resolve the
nature of the relationship between a television and radio station and one of
its talents. There is no case law stating that a radio and television program
host is an employee of the broadcast station.
The instant case involves big names in the broadcast industry, namely
Jose Jay Sonza, a known television and radio personality, and ABS-CBN, one
of the biggest television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case
because he was an employee of ABS-CBN. On the other hand, ABS-CBN
insists that the Labor Arbiter has no jurisdiction because SONZA was an
independent contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a question of
fact. Appellate courts accord the factual findings of the Labor Arbiter and the
NLRC not only respect but also finality when supported by substantial
evidence.[15] Substantial evidence means such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion.[16] A
party cannot prove the absence of substantial evidence by simply pointing
out that there is contrary evidence on record, direct or circumstantial. The
Court does not substitute its own judgment for that of the tribunal in
determining where the weight of evidence lies or what evidence is
credible.[17]
SONZA maintains that all essential elements of an employer-employee
relationship are present in this case. Case law has consistently held that the
elements of an employer-employee relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employers power to control the employee on the
means and methods by which the work is accomplished.[18] The last element,
the so-called control test, is the most important element.[19]
A. Selection and Engagement of Employee
ABS-CBN engaged SONZAs services to co-host its television and radio
programs because of SONZAs peculiar skills, talent and celebrity
status. SONZA contends that the discretion used by respondent in
specifically selecting and hiring complainant over other broadcasters of
possibly similar experience and qualification as complainant belies
respondents claim of independent contractorship.
4
 Independent contractors often present themselves to possess unique
skills, expertise or talent to distinguish them from ordinary employees. The
specific selection and hiring of SONZA, because of his unique skills,
talent and celebrity status not possessed by ordinary employees, is
a circumstance indicative, but not conclusive, of an independent contractual
relationship. If SONZA did not possess such unique skills, talent and
celebrity status, ABS-CBN would not have entered into the Agreement with
SONZA but would have hired him through its personnel department just like
any other employee.
In any event, the method of selecting and engaging SONZA does not
conclusively determine his status. We must consider all the circumstances
of the relationship, with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of
his fees going to MJMDC. SONZA asserts that this mode of fee payment
shows that he was an employee of ABS-CBN. SONZA also points out that
ABS-CBN granted him benefits and privileges which he would not have
enjoyed if he were truly the subject of a valid job contract.
All the talent fees and benefits paid to SONZA were the result of
negotiations that led to the Agreement. If SONZA were ABS-CBNs employee,
there would be no need for the parties to stipulate on benefits such as SSS,
Medicare, x x x and 13th month pay[20] which the law automatically
incorporates into every employer-employee contract.[21] Whatever benefits
SONZA enjoyed arose from contract and not because of an employer-
employee relationship.[22]
SONZAs talent fees, amounting to P317,000 monthly in the second and
third year, are so huge and out of the ordinary that they indicate more an
independent contractual relationship rather than an employer-employee
relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely
because of SONZAs unique skills, talent and celebrity status not possessed
by ordinary employees. Obviously, SONZA acting alone possessed enough
bargaining power to demand and receive such huge talent fees for his
services. The power to bargain talent fees way above the salary scales of
ordinary employees is a circumstance indicative, but not conclusive, of an
independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does
not negate the status of SONZA as an independent contractor. The parties
expressly agreed on such mode of payment. Under the Agreement, MJMDC
is the AGENT of SONZA, to whom MJMDC would have to turn over any talent
fee accruing under the Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party
may terminate their relationship. SONZA failed to show that ABS-CBN could
terminate his services on grounds other than breach of contract, such as
retrenchment to prevent losses as provided under labor laws.[23]
During the life of the Agreement, ABS-CBN agreed to pay SONZAs
talent fees as long as AGENT and Jay Sonza shall faithfully and completely
perform each condition of this Agreement.[24] Even if it suffered severe
business losses, ABS-CBN could not retrench SONZA because ABS-CBN
remained obligated to pay SONZAs talent fees during the life of the
Agreement. This circumstance indicates an independent contractual
relationship between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his
programs, ABS-CBN still paid him his talent fees. Plainly, ABS-CBN adhered
to its undertaking in the Agreement to continue paying SONZAs talent fees
during the remaining life of the Agreement even if ABS-CBN cancelled
SONZAs programs through no fault of SONZA.[25]
SONZA assails the Labor Arbiters interpretation of his rescission of the
Agreement as an admission that he is not an employee of ABS-CBN. The
Labor Arbiter stated that if it were true that complainant was really an
employee, he would merely resign, instead. SONZA did actually resign from
ABS-CBN but he also, as president of MJMDC, rescinded the
Agreement.SONZAs letter clearly bears this out.[26] However, the manner by
which SONZA terminated his relationship with ABS-CBN is
immaterial. Whether SONZA rescinded the Agreement or resigned from
work does not determine his status as employee or independent contractor.
D. Power of Control
Since there is no local precedent on whether a radio and television
program host is an employee or an independent contractor, we refer to
foreign case law in analyzing the present case. The United States Court of
5
Appeals, First Circuit, recently held in Alberty-Vlez v. Corporacin De
Puerto Rico Para La Difusin Pblica (WIPR)[27] that a television program
host is an independent contractor. We quote the following findings of
the U.S. court:
Several factors favor classifying Alberty as an independent
contractor. First, a television actress is a skilled position requiring
talent and training not available on-the-job. x x x In this regard,
Alberty possesses a masters degree in public communications and
journalism; is trained in dance, singing, and modeling; taught with the
drama department at the University of Puerto Rico; and acted in several
theater and television productions prior to her affiliation with Desde Mi
Pueblo. Second, Alberty provided the tools and instrumentalities
necessary for her to perform. Specifically, she provided, or obtained
sponsors to provide, the costumes, jewelry, and other image-related
supplies and services necessary for her appearance. Alberty disputes that
this factor favors independent contractor status because WIPR provided
the equipment necessary to tape the show. Albertys argument is
misplaced. The equipment necessary for Alberty to conduct her job as host
of Desde Mi Pueblo related to her appearance on the show.Others provided
equipment for filming and producing the show, but these were not the
primary tools that Alberty used to perform her particular function. If we
accepted this argument, independent contractors could never work on
collaborative projects because other individuals often provide the
equipment required for different aspects of the collaboration. x x x
Third, WIPR could not assign Alberty work in addition to filming
Desde Mi Pueblo. Albertys contracts with WIPR specifically provided that
WIPR hired her professional services as Hostess for the Program Desde Mi
Pueblo. There is no evidence that WIPR assigned Alberty tasks in addition
to work related to these tapings. x x x[28] (Emphasis supplied)
Applying the control test to the present case, we find that SONZA is
not an employee but an independent contractor. The control test is the most
important test our courts apply in distinguishing an employee from an
independent contractor.[29] This test is based on the extent of control the
hirer exercises over a worker. The greater the supervision and control the
hirer exercises, the more likely the worker is deemed an employee. The
converse holds true as well the less control the hirer exercises, the more
likely the worker is considered an independent contractor.[30]
First, SONZA contends that ABS-CBN exercised control over the means
and methods of his work.
SONZAs argument is misplaced. ABS-CBN engaged SONZAs services
specifically to co-host the Mel & Jay programs. ABS-CBN did not assign any
other work to SONZA. To perform his work, SONZA only needed his skills
and talent. How SONZA delivered his lines, appeared on television, and
sounded on radio were outside ABS-CBNs control. SONZA did not have to
render eight hours of work per day. The Agreement required SONZA to
attend only rehearsals and tapings of the shows, as well as pre- and post-
production staff meetings.[31] ABS-CBN could not dictate the contents of
SONZAs script. However, the Agreement prohibited SONZA from criticizing
in his shows ABS-CBN or its interests.[32] The clear implication is that SONZA
had a free hand on what to say or discuss in his shows provided he did not
attack ABS-CBN or its interests.
We find that ABS-CBN was not involved in the actual performance that
produced the finished product of SONZAs work.[33] ABS-CBN did not instruct
SONZA how to perform his job.ABS-CBN merely reserved the right to modify
the program format and airtime schedule for more effective
programming.[34] ABS-CBNs sole concern was the quality of the shows and
their standing in the ratings. Clearly, ABS-CBN did not exercise control over
the means and methods of performance of SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his shows proves
ABS-CBNs power over the means and methods of the performance of his
work. Although ABS-CBN did have the option not to broadcast SONZAs
show, ABS-CBN was still obligated to pay SONZAs talent fees. Thus, even if
ABS-CBN was completely dissatisfied with the means and methods of
SONZAs performance of his work, or even with the quality or product of his
work, ABS-CBN could not dismiss or even discipline SONZA. All that ABS-
CBN could do is not to broadcast SONZAs show but ABS-CBN must still pay
his talent fees in full.[35]
Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as
it was by the obligation to continue paying in full SONZAs talent fees, did
not amount to control over the means and methods of the performance of
SONZAs work. ABS-CBN could not terminate or discipline SONZA even if the
means and methods of performance of his work - how he delivered his lines
and appeared on television - did not meet ABS-CBNs approval. This proves
that ABS-CBNs control was limited only to the result of SONZAs work,
whether to broadcast the final product or not. In either case, ABS-CBN must
still pay SONZAs talent fees in full until the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al.,[36] the United States Circuit
Court of Appeals ruled that vaudeville performers were independent
contractors although the management reserved the right to delete
objectionable features in their shows. Since the management did not have
6
control over the manner of performance of the skills of the artists, it could
only control the result of the work by deleting objectionable features.[37]
SONZA further contends that ABS-CBN exercised control over his work
by supplying all equipment and crew. No doubt, ABS-CBN supplied the
equipment, crew and airtime needed to broadcast the Mel & Jay
programs. However, the equipment, crew and airtime are not the tools and
instrumentalities SONZA needed to perform his job. What SONZA principally
needed were his talent or skills and the costumes necessary for his
appearance. [38] Even though ABS-CBN provided SONZA with the place of
work and the necessary equipment, SONZA was still an independent
contractor since ABS-CBN did not supervise and control his work. ABS-CBNs
sole concern was for SONZA to display his talent during the airing of the
programs.[39]
A radio broadcast specialist who works under minimal supervision is an
independent contractor.[40] SONZAs work as television and radio program
host required special skills and talent, which SONZA admittedly
possesses. The records do not show that ABS-CBN exercised any supervision
and control over how SONZA utilized his skills and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBNs employee
because ABS-CBN subjected him to its rules and standards of performance.
SONZA claims that this indicates ABS-CBNs control not only [over] his
manner of work but also the quality of his work.
The Agreement stipulates that SONZA shall abide with the rules and
standards of performance covering talents[41] of ABS-CBN. The Agreement
does not require SONZA to comply with the rules and standards of
performance prescribed for employees of ABS-CBN. The code of conduct
imposed on SONZA under the Agreement refers to the Television and Radio
Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has
been adopted by the COMPANY (ABS-CBN) as its Code of Ethics.[42] The KBP
code applies to broadcasters, not to employees of radio and television
stations. Broadcasters are not necessarily employees of radio and television
stations. Clearly, the rules and standards of performance referred to in the
Agreement are those applicable to talents and not to employees of ABS-
CBN.
In any event, not all rules imposed by the hiring party on the hired
party indicate that the latter is an employee of the former.[43] In this case,
SONZA failed to show that these rules controlled his performance. We find
that these general rules are merely guidelines towards the achievement of
the mutually desired result, which are top-rating television and radio
programs that comply with standards of the industry. We have ruled that:
Further, not every form of control that a party reserves to himself over the
conduct of the other party in relation to the services being rendered may
be accorded the effect of establishing an employer-employee relationship.
The facts of this case fall squarely with the case of Insular Life Assurance
Co., Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result without
dictating the means or methods to be employed in attaining it, and those
that control or fix the methodology and bind or restrict the party hired to
the use of such means. The first, which aim only to promote the result,
create no employer-employee relationship unlike the second, which
address both the result and the means used to achieve it.[44]
The Vaughan case also held that one could still be an independent
contractor although the hirer reserved certain supervision to insure the
attainment of the desired result. The hirer, however, must not deprive the
one hired from performing his services according to his own initiative.[45]
Lastly, SONZA insists that the exclusivity clause in the Agreement is
the most extreme form of control which ABS-CBN exercised over him.
This argument is futile. Being an exclusive talent does not by itself
mean that SONZA is an employee of ABS-CBN. Even an independent
contractor can validly provide his services exclusively to the hiring party. In
the broadcast industry, exclusivity is not necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted practice in
the entertainment industry.[46] This practice is not designed to control the
means and methods of work of the talent, but simply to protect the
investment of the broadcast station. The broadcast station normally spends
substantial amounts of money, time and effort in building up its talents as
well as the programs they appear in and thus expects that said talents
remain exclusive with the station for a commensurate period of
time.[47] Normally, a much higher fee is paid to talents who agree to work
exclusively for a particular radio or television station. In short, the huge
talent fees partially compensates for exclusivity, as in the present case.
MJMDC as Agent of SONZA
SONZA protests the Labor Arbiters finding that he is a talent of MJMDC,
which contracted out his services to ABS-CBN. The Labor Arbiter ruled that
7
as a talent of MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists
that MJMDC is a labor-only contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the labor-
only contractor; (2) the employee who is ostensibly under the employ of the
labor-only contractor; and (3) the principal who is deemed the real
employer. Under this scheme, the labor-only contractor is the agent of
the principal. The law makes the principal responsible to the employees of
the labor-only contractor as if the principal itself directly hired or employed
the employees.[48] These circumstances are not present in this case.
There are essentially only two parties involved under the Agreement,
namely, SONZA and ABS-CBN. MJMDC merely acted as SONZAs agent. The
Agreement expressly states that MJMDC acted as the AGENT of SONZA. The
records do not show that MJMDC acted as ABS-CBNs agent. MJMDC, which
stands for Mel and Jay Management and Development Corporation, is a
corporation organized and owned by SONZA and TIANGCO. The President
and General Manager of MJMDC is SONZA himself. It is absurd to hold that
MJMDC, which is owned, controlled, headed and managed by SONZA, acted
as agent of ABS-CBN in entering into the Agreement with SONZA, who
himself is represented by MJMDC. That would make MJMDC the agent of
both ABS-CBN and SONZA.
As SONZA admits, MJMDC is a management company
devoted exclusively to managing the careers of SONZA and his broadcast
partner, TIANGCO. MJMDC is not engaged in any other business, not even
job contracting. MJMDC does not have any other function apart from acting
as agent of SONZA or TIANGCO to promote their careers in the broadcast
and television industry.[49]
Policy Instruction No. 40
SONZA argues that Policy Instruction No. 40 issued by then Minister of
Labor Blas Ople on 8 January 1979 finally settled the status of workers in
the broadcast industry. Under this policy, the types of employees in the
broadcast industry are the station and program employees.
Policy Instruction No. 40 is a mere executive issuance which does not
have the force and effect of law. There is no legal presumption that Policy
Instruction No. 40 determines SONZAs status. A mere executive issuance
cannot exclude independent contractors from the class of service providers
to the broadcast industry. The classification of workers in the broadcast
industry into only two groups under Policy Instruction No. 40 is not binding
on this Court, especially when the classification has no basis either in law or
in fact.
Affidavits of ABS-CBNs Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits of
Socorro Vidanes and Rolando Cruz without giving his counsel the opportunity
to cross-examine these witnesses.SONZA brands these witnesses as
incompetent to attest on the prevailing practice in the radio and television
industry. SONZA views the affidavits of these witnesses as misleading and
irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses, he was
never prevented from denying or refuting the allegations in the
affidavits. The Labor Arbiter has the discretion whether to conduct a formal
(trial-type) hearing after the submission of the position papers of the parties,
thus:
Section 3. Submission of Position Papers/Memorandum
xxx
These verified position papers shall cover only those claims and causes of
action raised in the complaint excluding those that may have been
amicably settled, and shall be accompanied by all supporting documents
including the affidavits of their respective witnesses which shall take the
place of the latters direct testimony. x x x
Section 4. Determination of Necessity of Hearing. Immediately after the
submission of the parties of their position papers/memorandum, the Labor
Arbiter shall motu propio determine whether there is need for a formal trial
or hearing. At this stage, he may, at his discretion and for the purpose of
making such determination, ask clarificatory questions to further elicit
facts or information, including but not limited to the subpoena of relevant
documentary evidence, if any from any party or witness.[50]
The Labor Arbiter can decide a case based solely on the position papers
and the supporting documents without a formal trial.[51] The holding of a
formal hearing or trial is something that the parties cannot demand as a
matter of right.[52] If the Labor Arbiter is confident that he can rely on the
8
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.
professionals are subject to the 10% value-added tax (VAT) on services they
render. Exempted from the VAT are those under an employer-employee
relationship.[57] This different tax treatment accorded to talents and
broadcasters bolters our conclusion that they are independent contractors,
provided all the basic elements of a contractual relationship are present as
in this case.

Talents as Independent Contractors Nature of SONZAs Claims

ABS-CBN claims that there exists a prevailing practice in the broadcast SONZA seeks the recovery of allegedly unpaid talent fees, 13th month
and entertainment industries to treat talents like SONZA as independent pay, separation pay, service incentive leave, signing bonus, travel
contractors. SONZA argues that if such practice exists, it is void for violating allowance, and amounts due under the Employee Stock Option Plan. We
the right of labor to security of tenure. agree with the findings of the Labor Arbiter and the Court of Appeals that
SONZAs claims are all based on the May 1994 Agreement and stock
The right of labor to security of tenure as guaranteed in the option plan, and not on the Labor Code. Clearly, the present case does
Constitution[53] arises only if there is an employer-employee relationship not call for an application of the Labor Code provisions but an interpretation
under labor laws. Not every performance of services for a fee creates an and implementation of the May 1994 Agreement. In effect, SONZAs cause
employer-employee relationship. To hold that every person who renders of action is for breach of contract which is intrinsically a civil dispute
services to another for a fee is an employee - to give meaning to the security cognizable by the regular courts.[58]
of tenure clause - will lead to absurd results.
WHEREFORE, we DENY the petition. The assailed Decision of the Court
Individuals with special skills, expertise or talent enjoy the freedom to of Appeals dated 26 March 1999 in CA-G.R. SP No. 49190 is
offer their services as independent contractors. The right to life and AFFIRMED. Costs against petitioner.
livelihood guarantees this freedom to contract as independent
contractors. The right of labor to security of tenure cannot operate to deprive SO ORDERED.
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

9
G.R. Nos. 83380-81 November 15, 1989
MAKATI HABERDASHERY, INC., JORGE LEDESMA and CECILIO G.
INOCENCIO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, CEFERINA J.
DIOSANA (Labor Arbiter, Department of Labor and Employment,
National Capital Region), SANDIGAN NG MANGGAGAWANG
PILIPINO (SANDIGAN)-TUCP and its members, JACINTO
GARCIANO, ALFREDO C. BASCO, VICTORIO Y. LAURETO, ESTER
NARVAEZ, EUGENIO L. ROBLES, BELEN N. VISTA, ALEJANDRO A.
ESTRABO, VEVENCIO TIRO, CASIMIRO ZAPATA, GLORIA ESTRABO,
LEONORA MENDOZA, MACARIA G. DIMPAS, MERILYN A. VIRAY,
LILY OPINA, JANET SANGDANG, JOSEFINA ALCOCEBA and MARIA
ANGELES, respondents.
FERNAN, C.J.:
This petition for certiorari involving two separate cases filed by private
respondents against herein petitioners assails the decision of respondent
National Labor Relations Commission in NLRC CASE No. 7-2603-84 entitled
"Sandigan Ng Manggagawang Pilipino (SANDIGAN)-TUCP etc., et al. v.
Makati Haberdashery and/or Toppers Makati, et al." and NLRC CASE No. 2-
428-85 entitled "Sandigan Ng Manggagawang Pilipino (SANDIGAN)-TUCP
etc., et al. v. Toppers Makati, et al.", affirming the decision of the Labor
Arbiter who jointly heard and decided aforesaid cases, finding: (a)
petitioners guilty of illegal dismissal and ordering them to reinstate the
dismissed workers and (b) the existence of employer-employee
relationship and granting respondent workers by reason thereof their
various monetary claims.
The undisputed facts are as follows:
Individual complainants, private respondents herein, have been working
for petitioner Makati Haberdashery, Inc. as tailors, seamstress, sewers,
basters (manlililip) and "plantsadoras". They are paid on a piece-rate basis
except Maria Angeles and Leonila Serafina who are paid on a monthly
basis. In addition to their piece-rate, they are given a daily allowance of
three (P 3.00) pesos provided they report for work before 9:30 a.m.
everyday.
Private respondents are required to work from or before 9:30 a.m. up to
6:00 or 7:00 p.m. from Monday to Saturday and during peak periods even
on Sundays and holidays.
On July 20, 1984, the Sandigan ng Manggagawang Pilipino, a labor
organization of the respondent workers, filed a complaint docketed as
NLRC NCR Case No. 7-2603-84 for (a) underpayment of the basic wage;
(b) underpayment of living allowance; (c) non-payment of overtime work;
(d) non-payment of holiday pay; (e) non-payment of service incentive
pay; (f) 13th month pay; and (g) benefits provided for under Wage Orders
Nos. 1, 2, 3, 4 and 5.1
During the pendency of NLRC NCR Case No. 7-2603-84, private
respondent Dioscoro Pelobello left with Salvador Rivera, a salesman of
petitioner Haberdashery, an open package which was discovered to contain
a "jusi" barong tagalog. When confronted, Pelobello replied that the same
was ordered by respondent Casimiro Zapata for his customer. Zapata
allegedly admitted that he copied the design of petitioner Haberdashery.
But in the afternoon, when again questioned about said barong, Pelobello
and Zapata denied ownership of the same. Consequently a memorandum
was issued to each of them to explain on or before February 4, 1985 why
no action should be taken against them for accepting a job order which is
prejudicial and in direct competition with the business of the
company. 2 Both respondents allegedly did not submit their explanation
and did not report for work. 3 Hence, they were dismissed by petitioners on
February 4, 1985. They countered by filing a complaint for illegal dismissal
docketed as NLRC NCR Case No. 2-428-85 on February 5, 1985. 4
On June 10, 1986, Labor Arbiter Ceferina J. Diosana rendered judgment,
the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in NLRC NCR
Case No. 2-428-85 finding respondents guilty of illegal
dismissal and ordering them to reinstate Dioscoro
Pelobello and Casimiro Zapata to their respective or
similar positions without loss of seniority rights, with full
backwages from July 4, 1985 up to actual reinstatement.
The charge of unfair labor practice is dismissed for lack of
merit.
In NLRC NCR Case No. 7-26030-84, the complainants'
claims for underpayment re violation of the minimum
wage law is hereby ordered dismissed for lack of merit.
10
 Respondents are hereby found to have violated the
decrees on the cost of living allowance, service incentive
leave pay and the 13th Month Pay. In view thereof, the
economic analyst of the Commission is directed to
compute the monetary awards due each complainant
based on the available records of the respondents
retroactive as of three years prior to the filing of the
instant case.
SO ORDERED. 5
From the foregoing decision, petitioners appealed to the NLRC. The latter
on March 30, 1988 affirmed said decision but limited the backwages
awarded the Dioscoro Pelobello and Casimiro Zapata to only one (1)
year. 6
After their motion for reconsideration was denied, petitioners filed the
instant petition raising the following issues:
I 4. Effective immediately, new procedures shall be
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT AN
EMPLOYER-EMPLOYEE RELATIONSHIP EXISTS BETWEEN PETITIONER
HABERDASHERY AND RESPONDENTS WORKERS.
II
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT
RESPONDENTS WORKERS ARE ENTITLED TO MONETARY CLAIMS DESPITE
THE FINDING THAT THEY ARE NOT ENTITLED TO MINIMUM WAGE.
III
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT
RESPONDENTS PELOBELLO AND ZAPATA WERE ILLEGALLY DISMISSED.
The first issue which is the pivotal issue in this case is resolved in favor of
private respondents. We have repeatedly held in countless decisions that
the test of employer-employee relationship is four-fold: (1) the selection
and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power to control the employee's conduct.
It is the so called "control test" that is the most important element. 8 This
simply means the determination of whether the employer controls or has
reserved the right to control the employee not only as to the result of the
work but also as to the means and method by which the same is to be
accomplished. 9
The facts at bar indubitably reveal that the most important requisite of
control is present. As gleaned from the operations of petitioner, when a
customer enters into a contract with the haberdashery or its proprietor,
the latter directs an employee who may be a tailor, pattern maker, sewer
or "plantsadora" to take the customer's measurements, and to sew the
pants, coat or shirt as specified by the customer. Supervision is actively
manifested in all these aspects — the manner and quality of cutting,
sewing and ironing.
Furthermore, the presence of control is immediately evident in this
memorandum issued by Assistant Manager Cecilio B. Inocencio, Jr. dated
May 30, 1981 addressed to Topper's Makati Tailors which reads in part:
followed:
A. To follow instruction and orders from the
undersigned Roger Valderama, Ruben Delos Reyes and
Ofel Bautista. Other than this person (sic) must ask
permission to the above mentioned before giving orders
or instructions to the tailors.
B. Before accepting the job orders tailors must check the
materials, job orders, due dates and other things to
maximize the efficiency of our production. The materials
should be checked (sic) if it is matched (sic) with the
sample, together with the number of the job order.
C. Effective immediately all job orders must be finished
7 one day before the due date. This can be done by proper
scheduling of job order and if you will cooperate with your
supervisors. If you have many due dates for certain day,
advise Ruben or Ofel at once so that they can make
necessary adjustment on due dates.
11
 D. Alteration-Before accepting alteration person attending
on customs (sic) must ask first or must advise the tailors
regarding the due dates so that we can eliminate what we
call 'Bitin'.
E. If there is any problem regarding supervisors or co-
tailor inside our shop, consult with me at once settle the
problem. Fighting inside the shop is strictly prohibited.
Any tailor violating this memorandum will be subject to
disciplinary action.
For strict compliance. 10
From this memorandum alone, it is evident that petitioner has reserved
the right to control its employees not only as to the result but also the
means and methods by which the same are to be accomplished. That
private respondents are regular employees is further proven by the fact
that they have to report for work regularly from 9:30 a.m. to 6:00 or 7:00
p.m. and are paid an additional allowance of P 3.00 daily if they report for
work before 9:30 a.m. and which is forfeited when they arrive at or after
9:30 a.m. 11
Since private respondents are regular employees, necessarily the
argument that they are independent contractors must fail. As established
in the preceding paragraphs, private respondents did not exercise
independence in their own methods, but on the contrary were subject to
the control of petitioners from the beginning of their tasks to their
completion. Unlike independent contractors who generally rely on their
own resources, the equipment, tools, accessories, and paraphernalia used
by private respondents are supplied and owned by petitioners. Private
respondents are totally dependent on petitioners in all these aspects.
Coming now to the second issue, there is no dispute that private
respondents are entitled to the Minimum Wage as mandated by Section
2(g) of Letter of Instruction No. 829, Rules Implementing Presidential
Decree No. 1614 and reiterated in Section 3(f), Rules Implementing
Presidential Decree 1713 which explicitly states that, "All employees paid
by the result shall receive not less than the applicable new minimum wage
rates for eight (8) hours work a day, except where a payment by result
rate has been established by the Secretary of Labor. ..." 12 No such rate
has been established in this case.
But all these notwithstanding, the question as to whether or not there is in
fact an underpayment of minimum wages to private respondents has
already been resolved in the decision of the Labor Arbiter where he stated:
"Hence, for lack of sufficient evidence to support the claims of the
complainants for alleged violation of the minimum wage, their claims for
underpayment re violation of the Minimum Wage Law under Wage Orders
Nos. 1, 2, 3, 4, and 5 must perforce fall." 13
The records show that private respondents did not appeal the above ruling
of the Labor Arbiter to the NLRC; neither did they file any petition raising
that issue in the Supreme Court. Accordingly, insofar as this case is
concerned, that issue has been laid to rest. As to private respondents, the
judgment may be said to have attained finality. For it is a well-settled rule
in this jurisdiction that "an appellee who has not himself appealed cannot
obtain from the appellate court-, any affirmative relief other than the ones
granted in the decision of the court below. " 14
As a consequence of their status as regular employees of the petitioners,
they can claim cost of living allowance. This is apparent from the provision
defining the employees entitled to said allowance, thus: "... All workers in
the private sector, regardless of their position, designation or status, and
irrespective of the method by which their wages are paid. " 15
Private respondents are also entitled to claim their 13th Month Pay under
Section 3(e) of the Rules and Regulations Implementing P.D. No. 851
which provides:
Section 3. Employers covered. — The Decree shall apply
to all employers except to:
xxx xxx xxx
(e) Employers of those who are paid on purely
commission, boundary, or task basis, and those who are
paid a fixed amount for performing a specific work,
irrespective of the time consumed in the performance
thereof, except where the workers are paid on piece-rate
basis in which case the employer shall be covered by this
issuance insofar as such workers are
concerned. (Emphasis supplied.)
12
On the other hand, while private respondents are entitled to Minimum
Wage, COLA and 13th Month Pay, they are not entitled to service incentive
leave pay because as piece-rate workers being paid at a fixed amount for
performing work irrespective of time consumed in the performance
thereof, they fall under one of the exceptions stated in Section 1(d), Rule
V, Implementing Regulations, Book III, Labor Code. For the same reason
private respondents cannot also claim holiday pay (Section 1(e), Rule IV,
Implementing Regulations, Book III, Labor Code).
With respect to the last issue, it is apparent that public respondents have
misread the evidence, for it does show that a violation of the employer's
rules has been committed and the evidence of such transgression, the
copied barong tagalog, was in the possession of Pelobello who pointed to
Zapata as the owner. When required by their employer to explain in a
memorandum issued to each of them, they not only failed to do so but
instead went on AWOL (absence without official leave), waited for the
period to explain to expire and for petitioner to dismiss them. They
thereafter filed an action for illegal dismissal on the far-fetched ground
that they were dismissed because of union activities. Assuming that such
acts do not constitute abandonment of their jobs as insisted by private
respondents, their blatant disregard of their employer's memorandum is
undoubtedly an open defiance to the lawful orders of the latter, a
justifiable ground for termination of employment by the employer
expressly provided for in Article 283(a) of the Labor Code as well as a clear
indication of guilt for the commission of acts inimical to the interests of the
employer, another justifiable ground for dismissal under the same Article
of the Labor Code, paragraph (c). Well established in our jurisprudence is
the right of an employer to dismiss an employee whose continuance in the
service is inimical to the employer's interest. 16
In fact the Labor Arbiter himself to whom the explanation of private
respondents was submitted gave no credence to their version and found
their excuses that said barong tagalog was the one they got from the
embroiderer for the Assistant Manager who was investigating them,
unbelievable.
Under the circumstances, it is evident that there is no illegal dismissal of
said employees. Thus, We have ruled that:
No employer may rationally be expected to continue in
employment a person whose lack of morals, respect and
loyalty to his employer, regard for his employer's rules,
and appreciation of the dignity and responsibility of his
office, has so plainly and completely been bared.
That there should be concern, sympathy, and solicitude
for the rights and welfare of the working class, is meet
and proper. That in controversies between a laborer and
his master, doubts reasonably arising from the evidence,
or in the interpretation of agreements and writings should
be resolved in the former's favor, is not an unreasonable
or unfair rule. But that disregard of the employer's own
rights and interests can be justified by that concern and
solicitude is unjust and unacceptable. (Stanford
Microsystems, Inc. v. NLRC, 157 SCRA 414-415 [1988] ).
The law is protecting the rights of the laborer authorizes neither oppression
nor self-destruction of the employer. 17More importantly, while the
Constitution is committed to the policy of social justice and the protection
of the working class, it should not be supposed that every labor dispute
will automatically be decided in favor of labor. 18
Finally, it has been established that the right to dismiss or otherwise
impose discriplinary sanctions upon an employee for just and valid cause,
pertains in the first place to the employer, as well as the authority to
determine the existence of said cause in accordance with the norms of due
process. 19
There is no evidence that the employer violated said norms. On the
contrary, private respondents who vigorously insist on the existence of
employer-employee relationship, because of the supervision and control of
their employer over them, were the very ones who exhibited their lack of
respect and regard for their employer's rules.
Under the foregoing facts, it is evident that petitioner Haberdashery had
valid grounds to terminate the services of private respondents.
WHEREFORE, the decision of the National Labor Relations Commission
dated March 30, 1988 and that of the Labor Arbiter dated June 10, 1986
are hereby modified. The complaint filed by Pelobello and Zapata for illegal
dismissal docketed as NLRC NCR Case No. 2-428-85 is dismissed for lack
of factual and legal bases. Award of service incentive leave pay to private
respondents is deleted.
13
 [G.R. No. 120969. January 22, 1998]
ALEJANDRO MARAGUINOT, JR. and PAULINO ENERO, petitioners,
vs. NATIONAL LABOR RELATIONS COMMISSION (SECOND
DIVISION) composed of Presiding Commissioner RAUL T.
AQUINO, Commissioner ROGELIO I. RAYALA and
Commissioner VICTORIANO R. CALAYCAY (Ponente), VIC
DEL ROSARIO and VIVA FILMS, respondents.
DECISION
DAVIDE, JR., J.:
By way of this special civil action for certiorari under Rule 65 of the
Rules of Court, petitioners seek to annul the 10 February 1995 Decision[1] of
the National Labor Relations Commission (hereafter NLRC), and its 6 April
1995 Resolution[2] denying the motion to reconsider the former in NLRC-
NCR-CA No. 006195-94. The decision reversed that of the Labor Arbiter in
NLRC-NCR-Case No. 00-07-03994-92.
The parties present conflicting sets of facts.
Petitioner Alejandro Maraguinot, Jr. maintains that he was employed
by private respondents on 18 July 1989 as part of the filming crew with a
salary of P375.00 per week. About four months later, he was designated
Assistant Electrician with a weekly salary of P400.00, which was increased
to P450.00 in May 1990. In June 1991, he was promoted to the rank of
Electrician with a weekly salary of P475.00, which was increased to P593.00
in September 1991.
Petitioner Paulino Enero, on his part, claims that private respondents
employed him in June 1990 as a member of the shooting crew with a weekly
salary of P375.00, which was increased to P425.00 in May 1991, then
to P475.00 on 21 December 1991.[3]
Petitioners tasks consisted of loading, unloading and arranging movie
equipment in the shooting area as instructed by the cameraman, returning
the equipment to Viva Films warehouse, assisting in the fixing of the lighting
system, and performing other tasks that the cameraman and/or director
may assign.[4]
Sometime in May 1992, petitioners sought the assistance of their
supervisor, Mrs. Alejandria Cesario, to facilitate their request that private
respondents adjust their salary in accordance with the minimum wage
law. In June 1992, Mrs. Cesario informed petitioners that Mr. Vic del Rosario
would agree to increase their salary only if they signed a blank employment
contract.As petitioners refused to sign, private respondents forced Enero to
go on leave in June 1992, then refused to take him back when he reported
for work on 20 July 1992. Meanwhile, Maraguinot was dropped from the
company payroll from 8 to 21 June 1992, but was returned on 22 June
1992. He was again asked to sign a blank employment contract, and when
he still refused, private respondents terminated his services on 20 July
1992.[5] Petitioners thus sued for illegal dismissal[6] before the Labor Arbiter.
On the other hand, private respondents claim that Viva Films (hereafter
VIVA) is the trade name of Viva Productions, Inc., and that it is primarily
engaged in the distribution and exhibition of movies -- but not in the
business of making movies; in the same vein, private respondent Vic del
Rosario is merely an executive producer, i.e., the financier who invests a
certain sum of money for the production of movies distributed and exhibited
by VIVA.[7]
Private respondents assert that they contract persons called producers
-- also referred to as associate producers[8] -- to produce or make movies
for private respondents; and contend that petitioners are project employees
of the associate producers who, in turn, act as independent contractors. As
such, there is no employer-employee relationship between petitioners and
private respondents.
Private respondents further contend that it was the associate producer
of the film Mahirap Maging Pogi, who hired petitioner Maraguinot. The movie
shot from 2 July up to 22 July 1992, and it was only then that Maraguinot
was released upon payment of his last salary, as his services were no longer
needed. Anent petitioner Enero, he was hired for the movie entitled Sigaw
ng Puso, later re-titled Narito ang Puso. He went on vacation on 8 June
1992, and by the time he reported for work on 20 July 1992, shooting for
the movie had already been completed.[9]
After considering both versions of the facts, the Labor Arbiter found as
follows:
On the first issue, this Office rules that complainants are the employees of
the respondents. The producer cannot be considered as an independent
contractor but should be considered only as a labor-only contractor and as
such, acts as a mere agent of the real employer, the herein respondents.
Respondents even failed to name and specify who are the producers. Also,
it is an admitted fact that the complainants received their salaries from the
respondents. The case cited by the respondents, Rosario Brothers,
Inc. vs. Ople, 131 SCRA 72 does not apply in this case.
14
It is very clear also that complainants are doing activities which are
necessary and essential to the business of the respondents, that of movie-
making. Complainant Maraguinot worked as an electrician while
complainant Enero worked as a crew [member].[10]
Hence, the Labor Arbiter, in his decision of 20 December 1993, decreed
as follows:
WHEREFORE, judgment is hereby rendered declaring that complainants
were illegally dismissed.
Respondents are hereby ordered to reinstate complainants to their former
positions without loss [of] seniority rights and pay their backwages starting
July 21, 1992 to December 31, 1993 temporarily computed in the amount
of P38,000.00 for complainant Paulino Enero and P46,000.00 for
complainant Alejandro Maraguinot, Jr. and thereafter until actually
reinstated.
Respondents are ordered to pay also attorneys fees equivalent to ten
(10%) and/or P8,400.00 on top of the award.[11]
Private respondents appealed to the NLRC (docketed as NLRC NCR-CA
No. 006195-94). In its decision[12] of 10 February 1995, the NLRC found the
following circumstances of petitioners work clearly established:
1. Complainants [petitioners herein] were hired for specific movie projects
and their employment was co-terminus with each movie project the
completion/termination of which are pre-determined, such fact being made
known to complainants at the time of their engagement.
xxx
2. Each shooting unit works on one movie project at a time. And the work
of the shooting units, which work independently from each other, are not
continuous in nature but depends on the availability of movie projects.
3. As a consequence of the non-continuous work of the shooting units, the
total working hours logged by complainants in a month show extreme
variations... For instance, complainant Maraguinot worked for only 1.45
hours in June 1991 but logged a total of 183.25 hours in January 1992.
Complainant Enero logged a total of only 31.57 hours in September 1991
but worked for 183.35 hours the next month, October 1991.
4. Further shown by respondents is the irregular work schedule of
complainants on a daily basis. Complainant Maraguinot was supposed to
report on 05 August 1991 but reported only on 30 August 1991, or a gap
of 25 days. Complainant Enero worked on 10 September 1991 and his next
scheduled working day was 28 September 1991, a gap of 18 days.
5. The extremely irregular working days and hours of complainants work
explain the lump sum payment for complainants services for each movie
project. Hence, complainants were paid a standard weekly salary
regardless of the number of working days and hours they logged in.
Otherwise, if the principle of no work no pay was strictly applied,
complainants earnings for certain weeks would be very negligible.
6. Respondents also alleged that complainants were not prohibited from
working with such movie companies like Regal, Seiko and FPJ Productions
whenever they are not working for the independent movie producers
engaged by respondents... This allegation was never rebutted by
complainants and should be deemed admitted.
The NLRC, in reversing the Labor Arbiter, then concluded that these
circumstances, taken together, indicated that complainants (herein
petitioners) were project employees.
After their motion for reconsideration was denied by the NLRC in its
Resolution[13] of 6 April 1995, petitioners filed the instant petition, claiming
that the NLRC committed grave abuse of discretion amounting to lack or
excess of jurisdiction in: (1) finding that petitioners were project employees;
(2) ruling that petitioners were not illegally dismissed; and (3) reversing the
decision of the Labor Arbiter.
To support their claim that they were regular (and not project)
employees of private respondents, petitioners cited their performance of
activities that were necessary or desirable in the usual trade or business of
private respondents and added that their work was continuous, i.e., after
one project was completed they were assigned to another
project. Petitioners thus considered themselves part of a work pool from
which private respondents drew workers for assignment to different
projects. Petitioners lamented that there was no basis for the NLRCs
conclusion that they were project employees, while the associate producers
were independent contractors; and thus reasoned that as regular
employees, their dismissal was illegal since the same was premised on a
false cause, namely, the completion of a project, which was not among the
causes for dismissal allowed by the Labor Code.
15
 Private respondents reiterate their version of the facts and stress that
their evidence supports the view that petitioners are project employees;
point to petitioners irregular work load and work schedule; emphasize the
NLRCs finding that petitioners never controverted the allegation that they
were not prohibited from working with other movie companies; and ask that
the facts be viewed in the context of the peculiar characteristics of the movie
industry.
The Office of the Solicitor General (OSG) is convinced that this petition
is improper since petitioners raise questions of fact, particularly, the NLRCs
finding that petitioners were project employees, a finding supported by
substantial evidence; and submits that petitioners reliance on Article 280 of
the Labor Code to support their contention that they should be deemed
regular employees is misplaced, as said section merely distinguishes
between two types of employees, i.e., regular employees and casual
employees, for purposes of determining the right of an employee to certain
benefits.
The OSG likewise rejects petitioners contention that since they were
hired not for one project, but for a series of projects, they should be deemed
regular employees. Citing Mamansag v. NLRC,[14] the OSG asserts that what
matters is that there was a time-frame for each movie project made known
to petitioners at the time of their hiring. In closing, the OSG disagrees with
petitioners claim that the NLRCs classification of the movie producers as
independent contractors had no basis in fact and in law, since, on the
contrary, the NLRC took pains in explaining its basis for its decision.
As regards the propriety of this action, which the Office of the Solicitor
General takes issue with, we rule that a special civil action
for certiorari under Rule 65 of the Rules of Court is the proper remedy for
one who complains that the NLRC acted in total disregard of evidence
material to or decisive of the controversy.[15] In the instant case, petitioners
allege that the NLRCs conclusions have no basis in fact and in law, hence
the petition may not be dismissed on procedural or jurisdictional grounds.
The judicious resolution of this case hinges upon, first, the
determination of whether an employer-employee relationship existed
between petitioners and private respondents or any one of private
respondents. If there was none, then this petition has no merit; conversely,
if the relationship existed, then petitioners could have been unjustly
dismissed.
A related question is whether private respondents are engaged in the
business of making motion pictures. Del Rosario is necessarily engaged in
such business as he finances the production of movies. VIVA, on the other
hand, alleges that it does not make movies, but merely distributes and
exhibits motion pictures. There being no further proof to this effect, we
cannot rely on this self-serving denial. At any rate, and as will be discussed
below, private respondents evidence even supports the view that VIVA is
engaged in the business of making movies.
We now turn to the critical issues. Private respondents insist that
petitioners are project employees of associate producers who, in turn, act
as independent contractors. It is settled that the contracting out of labor is
allowed only in case of job contracting. Section 8, Rule VIII, Book III of the
Omnibus Rules Implementing the Labor Code describes permissible job
contracting in this wise:
Sec. 8. Job contracting. -- There is job contracting permissible under the
Code if the following conditions are met:
(1) The contractor carries on an independent business and
undertakes the contract work on his own account under
his own responsibility according to his own manner and
method, free from the control and direction of his
employer or principal in all matters connected with the
performance of the work except as to the results thereof;
and
(2) The contractor has substantial capital or investment in the
form of tools, equipment, machineries, work premises,
and other materials which are necessary in the conduct of
his business.
Assuming that the associate producers are job contractors, they must
then be engaged in the business of making motion pictures. As such, and to
be a job contractor under the preceding description, associate producers
must have tools, equipment, machinery, work premises, and other materials
necessary to make motion pictures. However, the associate producers here
have none of these. Private respondents evidence reveals that the movie-
making equipment are supplied to the producers and owned by VIVA. These
include generators,[16]cables and wooden platforms,[17] cameras and
shooting equipment;[18] in fact, VIVA likewise owns the trucks used to
transport the equipment.[19] It is thus clear that the associate producer
merely leases the equipment from VIVA.[20] Indeed, private respondents
Formal Offer of Documentary Evidence stated one of the purposes of Exhibit
148 as:
16
To prove further that the independent Producers rented Shooting Unit No.
2 from Viva to finish their films.[21]
While the purpose of Exhibits 149, 149-A and 149-B was:
[T]o prove that the movies of Viva Films were contracted out to the
different independent Producers who rented Shooting Unit No. 3 with a
fixed budget and time-frame of at least 30 shooting days or 45 days
whichever comes first.[22]
Private respondents further narrated that VIVAs generators broke down
during petitioners last movie project, which forced the associate producer
concerned to rent generators, equipment and crew from another
company.[23] This only shows that the associate producer did not have
substantial capital nor investment in the form of tools, equipment and other
materials necessary for making a movie. Private respondents in effect admit
that their producers, especially petitioners last producer, are not engaged in
permissible job contracting.
If private respondents insist that their associate producers are labor
contractors, then these producers can only be labor-only contractors,
defined by the Labor Code as follows:
Art. 106. Contractor or subcontractor.-- x x x
There is labor-only contracting where the person supplying workers to an
employer does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others, and the
workers recruited and placed by such persons are performing activities
which are directly related to the principal business of such employer. In
such cases, the person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.
A more detailed description is provided by Section 9, Rule VIII, Book
III of the Omnibus Rules Implementing the Labor Code:
Sec. 9. Labor-only contracting. -- (a) Any person who undertakes to supply
workers to an employer shall be deemed to be engaged in labor-only
contracting where such person:
(1) Does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises and other
materials; and
(2) The workers recruited and placed by such person are performing
activities which are directly related to the principal business or
operations of the employer in which workers are habitually
employed.
(b) Labor-only contracting as defined herein is hereby prohibited
and the person acting as contractor shall be considered
merely as an agent or intermediary of the employer who
shall be responsible to the workers in the same manner
and extent as if the latter were directly employed by him.
(c) For cases not falling under this Article, the Secretary of Labor
shall determine through appropriate orders whether or not
the contracting out of labor is permissible in the light of
the circumstances of each case and after considering the
operating needs of the employer and the rights of the
workers involved. In such case, he may prescribe
conditions and restrictions to insure the protection and
welfare of the workers.
As labor-only contracting is prohibited, the law considers the person or
entity engaged in the same a mere agent or intermediary of the direct
employer. But even by the preceding standards, the associate producers of
VIVA cannot be considered labor-only contractors as they did not supply,
recruit nor hire the workers. In the instant case, it was Juanita Cesario,
Shooting Unit Supervisor and an employee of VIVA, who recruited crew
members from an available group of free-lance workers which includes the
complainants Maraguinot and Enero.[24]And in their Memorandum, private
respondents declared that the associate producer hires the services of... 6)
camera crew which includes (a) cameraman; (b) the utility crew; (c) the
technical staff; (d) generator man and electrician; (e) clapper; etc....[25] This
clearly showed that the associate producers did not supply the workers
required by the movie project.
The relationship between VIVA and its producers or associate producers
seems to be that of agency,[26] as the latter make movies on behalf of VIVA,
whose business is to make movies.As such, the employment relationship
between petitioners and producers is actually one between petitioners and
VIVA, with the latter being the direct employer.
17
 The employer-employee relationship between petitioners and VIVA can
further be established by the control test. While four elements are usually
considered in determining the existence of an employment relationship,
namely: (a) the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the employers power
to control the employees conduct, the most important element is the
employers control of the employees conduct, not only as to the result of the
work to be done but also as to the means and methods to accomplish the
same.[27] These four elements are present here. In their position paper
submitted to the Labor Arbiter, private respondents narrated the following
circumstances:
[T]he PRODUCER has to work within the limits of the budget he is given by
the company, for as long as the ultimate finish[ed] product is acceptable to
the company...
To ensure that quality films are produced by the PRODUCER who is an
independent contractor, the company likewise employs a Supervising
PRODUCER, a Project accountant and a Shooting unit supervisor. The
Companys Supervising PRODUCER is Mr. Eric Cuatico, the Project
accountant varies from time to time, and the Shooting Unit Supervisor is
Ms. Alejandria Cesario.
The Supervising PRODUCER acts as the eyes and ears of the company and
of the Executive Producer to monitor the progress of the PRODUCERs work
accomplishment. He is there usually in the field doing the 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 ours)
VIVAs control is evident in its mandate that the end result must be a
quality film acceptable to the company. The means and methods to
accomplish the result are 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 directors control, and not VIVAs direction. The director merely
instructs petitioners on how to better comply with VIVAs requirements to
ensure that a quality film is completed within schedule and without
exceeding the budget. At bottom, the 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 [28]
issued to all crew members state:
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 superiors and Top Management can only refer to the
superiors and Top Management of VIVA. By commanding crew members to
observe the rules and regulations promulgated by VIVA, the appointment
slips only emphasize VIVAs control over petitioners.
Aside from control, the element of selection and engagement is likewise
present in the instant case and exercised by VIVA. A sample appointment
slip offered by private respondents to prove that members of the shooting
crew except the driver are project employees of the Independent
Producers[29] reads as follows:
VIVA PRODUCTIONS, INC.
16 Sct. Albano St.
Diliman, Quezon City
PEDRO NICOLAS Date: June 15, 1992
__________________
APPOINTMENT SLIP
18
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.
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 signature)
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 VIVAs corporate name which appears on the heading of the appointment
slip. What likewise tells against VIVA is that it paid petitioners salaries as
evidenced by vouchers, containing VIVAs letterhead, for that purpose.[30]
All the circumstances indicate an employment relationship between
petitioners and VIVA alone, thus the inevitable conclusion is that petitioners
are employees only of VIVA.
The next issue is whether petitioners were illegally dismissed. Private
respondents contend that petitioners were project employees whose
employment was automatically terminated with the completion of their
respective projects. Petitioners assert that they were regular employees who
were illegally dismissed.
It may not be ignored, however, that private respondents expressly
admitted that petitioners were part of a work pool;[31] and, while petitioners
were initially hired possibly as project employees, they had attained the
status of regular employees in view of VIVAs conduct.
A project employee or a member of a work pool may acquire the status
of a regular employee when the following concur:
1) There is a continuous rehiring of project employees even after cessation
of a project;[32] and
2) The tasks performed by the alleged project employee are vital,
necessary and indispensable to the usual business or trade of the
employer.[33]
However, the length of time during which the employee was
continuously re-hired is not controlling, but merely serves as a badge of
regular employment.[34]
In the instant case, the evidence on record shows that petitioner Enero
was employed for a total of two (2) years and engaged in at least eighteen
(18) projects, while petitioner Maraguinot was employed for some three (3)
years and worked on at least twenty-three (23) projects.[35] Moreover, as
petitioners tasks involved, among other chores, the loading, unloading and
arranging of movie equipment in the shooting area as instructed by the
cameramen, returning the equipment to the Viva Films warehouse, and
assisting in the fixing of the lighting system, it may not be gainsaid that
these tasks were vital, necessary and indispensable to the usual business or
trade of the employer. As regards the underscored phrase, it has been held
that this is ascertained by considering the nature of the work performed and
its relation to the scheme of the particular business or trade in its entirety.[36]
A recent pronouncement of this Court anent project or work pool
employees who had attained the status of regular employees proves most
instructive:
The denial by petitioners of the existence of a work pool in the company
because their projects were not continuous is amply belied by petitioners
themselves who admit that: xxx
A work pool may exist although the workers in the pool do not receive
salaries and are free to seek other employment during temporary breaks in
the business, provided that the worker shall be available when called to
report for a project. Although primarily applicable to regular seasonal
19
workers, this set-up can likewise be applied to project workers insofar as
the effect of temporary cessation of work is concerned. This is beneficial to
both the employer and employee for it prevents the unjust situation of
coddling labor at the expense of capital and at the same time enables the
workers to attain the status of regular employees. Clearly, the continuous
rehiring of the same set of employees within the framework of the Lao
Group of Companies is strongly indicative that private respondents were an
integral part of a work pool from which petitioners drew its workers for its
various projects.
In a final attempt to convince the Court that private respondents were
indeed project employees, petitioners point out that the workers were not
regularly maintained in the payroll and were free to offer their services to
other companies when there were no on-going projects. This argument
however cannot defeat the workers status of regularity. We apply by
analogy the case of Industrial-Commercial-Agricultural Workers
Organization v. CIR [16 SCRA 562, 567-68 (1966)] which deals with
regular seasonal employees. There we held: xxx
Truly, the cessation of construction activities at the end of every project is
a foreseeable suspension of work. Of course, no compensation can be
demanded from the employer because the stoppage of operations at the
end of a project and before the start of a new one is regular and expected
by both parties to the labor relations. Similar to the case of regular
seasonal employees, the employment relation is not severed by merely
being suspended. [citing Manila Hotel Co. v. CIR, 9 SCRA 186 (1963)] The
employees are, strictly speaking, not separated from services but merely
on leave of absence without pay until they are reemployed. Thus we
cannot affirm the argument that non-payment of salary or non-inclusion in
the payroll and the opportunity to seek other employment denote project
employment.[37] (underscoring supplied)
While Lao admittedly involved the construction industry, to which
Policy Instruction No. 20/Department Order No. 19[38] regarding work pools
specifically applies, there seems to be no impediment to applying the
underlying principles to industries other than the construction
industry.[39] Neither may it be argued that a substantial distinction exists
between the projects undertaken in the construction industry and the motion
picture industry. On the contrary, the raison d' etre of both industries
concern projects with a foreseeable suspension of work.
At this time, we wish to allay any fears that this decision unduly
burdens an employer by imposing a duty to re-hire a project employee even
after completion of the project for which he was hired. The import of this
decision is not to impose a positive and sweeping obligation upon the
employer to re-hire project employees. What this decision merely
accomplishes is a judicial recognition of the employment status of a project
or work pool employee in accordance with what is fait accompli, i.e., the
continuous re-hiring by the employer of project or work pool employees who
perform tasks necessary or desirable to the employers usual business or
trade. Let it not be said that this decision coddles labor, for as Lao has ruled,
project or work pool employees who have gained the status of regular
employees are subject to the no work-no pay principle, to repeat:
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 Courts ruling here is meant precisely to give life to the
constitutional policy of strengthening the labor sector,[40] but, we stress, not
at the expense of management. Lest it be misunderstood, this ruling does
not mean that simply 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 and indispensable to the usual business or trade
of the employer, then the employee must be deemed a regular employee,
pursuant to Article 280 of the Labor Code and jurisprudence. To rule
otherwise would allow circumvention of labor laws in industries not falling
within the ambit of Policy Instruction No. 20/Department Order No. 19,
hence allowing the prevention of acquisition of tenurial security by project
or work pool employees who have already gained the status of regular
employees by the employers conduct.
In closing then, as petitioners had already gained the status of regular
employees, their dismissal was unwarranted, for the cause invoked by
private respondents for petitioners dismissal, viz., completion of project,
was not, as to them, a valid cause for dismissal under Article 282 of the
Labor Code. As such, petitioners are now entitled to back wages and
reinstatement, without loss of seniority rights and other benefits that may
have accrued.[41] Nevertheless, following the principles of suspension of
20
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,[42] petitioners are entitled to receive full back wages from the date
of their dismissal up to the time of their reinstatement, without deducting
whatever earnings derived elsewhere during the period of illegal dismissal,
subject, however, to the above observations.

WHEREFORE, the instant petition is GRANTED. The assailed decision

of the National Labor Relations Commission in NLRC NCR CA No. 006195-94
dated 10 February 1995, as well as its Resolution dated 6 April 1995, are
hereby ANNULLED and SET ASIDE for having been rendered with grave
abuse of discretion, and the decision of the Labor Arbiter in NLRC NCR Case
No. 00-07-03994-92 is REINSTATED, subject, however, to the modification
above mentioned in the computation of back wages.

No pronouncement as to costs.

SO ORDERED.

Bellosillo, Vitug, and Kapunan, JJ., concur.

21
ANGELINA FRANCISCO, G.R. No. 170087 assigned to handle all the accounting needs of the company. She was also
Petitioner, designated as Liaison Officer to the City of Makati to secure business
Present: permits, construction permits and other licenses for the initial operation of
Panganiban, C.J. the company.[5]
(Chairperson),
- versus - Ynares-Santiago, Although she was designated as Corporate Secretary, she was not
Austria-Martinez, entrusted with the corporate documents; neither did she attend any board
Callejo, Sr., and meeting nor required to do so. She never prepared any legal document and
Chico- never represented the company as its Corporate Secretary. However, on
Nazario, JJ. 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
NATIONAL LABOR RELATIONS management administration functions; represent the company in all
COMMISSION, KASEI CORPORATION, dealings with government agencies, especially with the Bureau of Internal
SEIICHIRO TAKAHASHI, TIMOTEO Revenue (BIR), Social Security System (SSS) and in the city government of
ACEDO, DELFIN LIZA, IRENE Makati; and to administer all other matters pertaining to the operation of
BALLESTEROS, TRINIDAD LIZA Promulgated: Kasei Restaurant which is owned and operated by Kasei Corporation.[7]
and RAMON ESCUETA,
Respondents. For five years, petitioner performed the duties of Acting
August 31, 2006 Manager. As of December 31, 2000 her salary was P27,500.00 plus
x ---------------------------------------------------------------------------------- P3,000.00 housing allowance and a 10% share in the profit of Kasei
------ x Corporation.[8]

DECISION In January 2001, petitioner was replaced by Liza R. Fuentes as

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.
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]

In 1995, petitioner was hired by Kasei Corporation during its incorporation

stage. She was designated as Accountant and Corporate Secretary and was

22
 On October 15, 2001, petitioner asked for her salary from Acedo jointly and severally pay complainant her money claims in
and the rest of the officers but she was informed that she is no longer accordance with the following computation:
connected with the company.[11]
a. Backwages 10/2001 07/2002 275,000.00
Since she was no longer paid her salary, petitioner did not report (27,500 x 10 mos.)
for work and filed an action for constructive dismissal before the labor b. Salary Differentials (01/2001
arbiter. 09/2001) 22,500.00
c. Housing Allowance (01/2001
Private respondents averred that petitioner is not an employee of 07/2002) 57,000.00
Kasei Corporation. They alleged that petitioner was hired in 1995 as one of d. Midyear Bonus 2001 27,500.00
its technical consultants on accounting matters and act concurrently as e. 13th Month Pay 27,500.00
Corporate Secretary. As technical consultant, petitioner performed her work f. 10% share in the profits of Kasei
at her own discretion without control and supervision of Kasei Corporation. Corp. from 1996-2001 361,175.00
Petitioner had no daily time record and she came to the office any time she g. Moral and exemplary damages 100,000.00
wanted. The company never interfered with her work except that from time h. 10% Attorneys fees 87,076.50
to time, the management would ask her opinion on matters relating to her P957,742.50
profession. Petitioner did not go through the usual procedure of selection of
employees, but her services were engaged through a Board Resolution If reinstatement is no longer feasible, respondents are
designating her as technical consultant. The money received by petitioner ordered to pay complainant separation pay with additional
from the corporation was her professional fee subject to the 10% expanded backwages that would accrue up to actual payment of
withholding tax on professionals, and that she was not one of those reported separation pay.
to the BIR or SSS as one of the companys employees.[12]
SO ORDERED.[14]
Petitioners designation as technical consultant depended solely
upon the will of management. As such, her consultancy may be terminated On April 15, 2003, the NLRC affirmed with modification the Decision
any time considering that her services were only temporary in nature and of the Labor Arbiter, the dispositive portion of which reads:
dependent on the needs of the corporation.
PREMISES CONSIDERED, the Decision of July 31,
To prove that petitioner was not an employee of the corporation, 2002 is hereby MODIFIED as follows:
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 1) Respondents are directed to pay complainant
employees reported to the BIR, as well as a list of payees subject to separation pay computed at one month per year of service
expanded withholding tax which included petitioner. SSS records were also in addition to full backwages from October 2001 to July 31,
submitted showing that petitioners latest employer was Seiji Corporation.[13] 2002;

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 complainants dismissal as illegal;
3. ordering respondents to reinstate complainant
to her former position without loss of seniority rights and
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% attorneys 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.

23

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 petitioners 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 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 employers 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 employers 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 latters employment.
The control test initially found application in the case of Viaa 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 employers business; (2) the extent of the workers
investment in equipment and facilities; (3) the nature and degree of control
exercised by the employer; (4) the workers 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
24
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 corporations 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.
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. Petitioners 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 latters 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 petitioners 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 formers
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 petitioners job was as Kamuras 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]
25
 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 Franciscos 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.

26
G.R. No. L-53515 February 8, 1989
SAN MIGUEL BREWERY SALES FORCE UNION (PTGWO), petitioner,
vs.
HON. BLAS F. OPLE, as Minister of Labor and SAN MIGUEL
CORPORATION, respondents.
Lorenzo F. Miravite for petitioner.
Isidro D. Amoroso for New San Miguel Corp. Sales Force Union.
Siguion Reyna, Montecillo & Ongsiako for private respondent.
GRIÑO-AQUINO, J.:
This is a petition for review of the Order dated February 28, 1980 of the
Minister of Labor in Labor Case No. AJML-069-79, approving the private
respondent's marketing scheme, known as the "Complementary
Distribution System" (CDS) and dismissing the petitioner labor union's
complaint for unfair labor practice.
On April 17, 1978, a collective bargaining agreement (effective on May 1,
1978 until January 31, 1981) was entered into by petitioner San Miguel
Corporation Sales Force Union (PTGWO), and the private respondent, San
Miguel Corporation, Section 1, of Article IV of which provided as follows:
Art. IV, Section 1. Employees within the appropriate
bargaining unit shall be entitled to a basic monthly
compensation plus commission based on their respective
sales. (p. 6, Annex A; p. 113, Rollo.)
In September 1979, the company introduced a marketing scheme known
as the "Complementary Distribution System" (CDS) whereby its beer
products were offered for sale directly to wholesalers through San Miguel's
sales offices.
The labor union (herein petitioner) filed a complaint for unfair labor
practice in the Ministry of Labor, with a notice of strike on the ground that
the CDS was contrary to the existing marketing scheme whereby the Route
Salesmen were assigned specific territories within which to sell their stocks
of beer, and wholesalers had to buy beer products from them, not from the
company. It was alleged that the new marketing scheme violates Section
1, Article IV of the collective bargaining agreement because the
introduction of the CDS would reduce the take-home pay of the salesmen
and their truck helpers for the company would be unfairly competing with
them.
The complaint filed by the petitioner against the respondent company
raised two issues: (1) whether the CDS violates the collective bargaining
agreement, and (2) whether it is an indirect way of busting the union.
In its order of February 28, 1980, the Minister of Labor found:
... We see nothing in the record as to suggest that the
unilateral action of the employer in inaugurating the new
sales scheme was designed to discourage union
organization or diminish its influence, but rather it is
undisputable that the establishment of such scheme was
part of its overall plan to improve efficiency and economy
and at the same time gain profit to the highest. While it
may be admitted that the introduction of new sales plan
somewhat disturbed the present set-up, the change
however was too insignificant as to convince this Office to
interpret that the innovation interferred with the worker's
right to self-organization.
Petitioner's conjecture that the new plan will sow
dissatisfaction from its ranks is already a prejudgment of
the plan's viability and effectiveness. It is like saying that
the plan will not work out to the workers' [benefit] and
therefore management must adopt a new system of
marketing. But what the petitioner failed to consider is the
fact that corollary to the adoption of the assailed
marketing technique is the effort of the company to
compensate whatever loss the workers may suffer
because of the new plan over and above than what has
been provided in the collective bargaining agreement. To
us, this is one indication that the action of the
management is devoid of any anti-union hues. (pp. 24-25,
Rollo.)
The dispositive part of the Minister's Order reads:
27
 WHEREFORE, premises considered, the notice of strike
filed by the petitioner, San Miguel Brewery Sales Force
Union-PTGWO is hereby dismissed. Management however
is hereby ordered to pay an additional three (3) months
back adjustment commissions over and above the
adjusted commission under the complementary
distribution system. (p. 26, Rollo.)
members of its sales force who will be adversely affected by the
implementation of the CDS by paying them a so-called "back adjustment
commission" to make up for the commissions they might lose as a result of
the CDS proves the company's good faith and lack of intention to bust
their union.
WHEREFORE, the petition for certiorari is dismissed for lack of merit.

The petition has no merit. SO ORDERED.

Public respondent was correct in holding that the CDS is a valid exercise of
management prerogatives:

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. ...
(NLU vs. Insular La Yebana Co., 2 SCRA 924; Republic
Savings Bank vs. CIR 21 SCRA 226, 235.) (Perfecto V.
Hernandez, Labor Relations Law, 1985 Ed., p. 44.)
(Emphasis ours.)

Every business enterprise endeavors to increase its profits. In the process,

it may adopt or devise means designed towards that goal. In Abbott
Laboratories vs. NLRC, 154 SCRA 713, 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 (LVN
Pictures Workers vs. LVN, 35 SCRA 147; Phil. American Embroideries vs.
Embroidery and Garment Workers, 26 SCRA 634; Phil. Refining Co. vs.
Garcia, 18 SCRA 110). San Miguel Corporation's offer to compensate the

28
 [G.R. No. 119205. April 15, 1998]
SIME DARBY PILIPINAS, INC., petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION (2ND DIVISION) and SIME DARBY
SALARIED EMPLOYEES ASSOCIATION (ALU-
TUCP), respondents.
DECISION
Is the act of management in revising the work schedule of its
employees and discarding their paid lunch break constitutive of unfair labor
practice?
Sime Darby Pilipinas, Inc., petitioner, is engaged in the manufacture of
automotive tires, tubes and other rubber products. Sime Darby Salaried
Employees Association (ALU-TUCP), private respondent, is an association of
monthly salaried employees of petitioner at its Marikina factory. Prior to the
present controversy, all company factory workers in Marikina including
members of private respondent union worked from 7:45 a.m. to 3:45
p.m. with a 30 minute paid on call lunch break.
On 14 August 1992 petitioner issued a memorandum to all factory-
based employees advising all its monthly salaried employees in its Marikina
Tire Plant, except those in the Warehouse and Quality Assurance
Department working on shifts, a change in work schedule effective 14
September 1992 thus
TO: ALL FACTORY-BASED EMPLOYEES
RE: NEW WORK SCHEDULE
Effective Monday, September 14, 1992, the new work schedule
factory office will be as follows:
7:45 A.M. 4:45 P.M. (Monday to Friday)
7:45 A.M. 11:45 P.M. (Saturday).
Coffee break time will be ten minutes only anytime between:
9:30 A.M. 10:30 A.M. and
2:30 P.M. 3:30 P.M.
Lunch break will be between:
12:00 NN 1:00 P.M. (Monday to Friday).
Excluded from the above schedule are the Warehouse and QA
employees who are on shifting. Their work and break time
schedules will be maintained as it is now.[1]
Since private respondent felt affected adversely by the change in the
work schedule and discontinuance of the 30-minute paid on call lunch break,
it filed on behalf of its members a complaint with the Labor Arbiter for unfair
labor practice, discrimination and evasion of liability pursuant to the
resolution of this Court in Sime Darby International Tire Co., Inc. v.
NLRC.[2]However, the Labor Arbiter dismissed the complaint on the ground
that the change in the work schedule and the elimination of the 30-minute
paid lunch break of the factory workers constituted a valid exercise of
management prerogative and that the new work schedule, break time and
one-hour lunch break did not have the effect of diminishing the benefits
granted to factory workers as the working time did not exceed eight (8)
hours.
The Labor Arbiter further held that the factory workers would be justly
enriched if they continued to be paid during their lunch break even if they
were no longer on call or required to work during the break. He also ruled
that the decision in the earlier Sime Darby case[3] was not applicable to the
instant case because the former involved discrimination of certain
employees who were not paid for their 30-minute lunch break while the rest
of the factory workers were paid; hence, this Court ordered that the
discriminated employees be similarly paid the additional compensation for
their lunch break.
Private respondent appealed to respondent National Labor Relations
Commission (NLRC) which sustained the Labor Arbiter and dismissed the
appeal.[4] However, upon motion for reconsideration by private respondent,
the NLRC, this time with two (2) new commissioners replacing those who
earlier retired, reversed its arlier decision of 20 April 1994 as well as the
decision of the Labor Arbiter.[5] The NLRC considered the decision of this
Court in the Sime Darby case of 1990 as the law of the case wherein
petitioner was ordered to pay the money value of these covered employees
deprived of lunch and/or working time breaks. The public respondent
declared that the new work schedule deprived the employees of the benefits
of time-honored company practice of providing its employees a 30-minute
paid lunch break resulting in an unjust diminution of company privileges
29
prohibited by Art. 100 of the Labor Code, as amended. Hence, this petition
alleging that public respondent committed grave abuse of discretion
amounting to lack or excess of jurisdiction: (a) in ruling that petitioner
committed unfair labor practice in the implementation of the change in the
work schedule of its employees from 7:45 a.m. 3:45 p.m. to 7:45 a.m. 4:45
p.m. with one-hour lunch break from 12:00 nn to 1:00 p.m.; (b) in holding
that there was diminution of benefits when the 30-minute paid lunch break
was eliminated; (c) in failing to consider that in the earlier Sime Darby case
affirming the decision of the NLRC, petitioner was authorized to discontinue
the practice of having a 30-minute paid lunch break should it decide to do
so; and (d) in ignoring petitioners inherent management prerogative of
determining and fixing the work schedule of its employees which is expressly
recognized in the collective bargaining agreement between petitioner and
private respondent.
The Office of the Solicitor General filed in lieu of comment a
manifestation and motion recommending that the petition be granted,
alleging that the 14 August 1992 memorandum which contained the new
work schedule was not discriminatory of the union members nor did it
constitute unfair labor practice on the part of petitioner.
We agree, hence, we sustain petitioner. The right to fix the work
schedules of the employees rests principally on their employer. In the
instant case petitioner, as the employer, cites as reason for the adjustment
the efficient conduct of its business operations and its improved
production.[6] It rationalizes that while the old work schedule included a 30-
minute paid lunch break, the employees could be called upon to do jobs
during that period as they were on call. Even if denominated as lunch break,
this period could very well be considered as working time because the
factory employees were required to work if necessary and were paid
accordingly for working. With the new work schedule, the employees are
now given a one-hour lunch break without any interruption from their
employer. For a full one-hour undisturbed lunch break, the employees can
freely and effectively use this hour not only for eating but also for their rest
and comfort which are conducive to more efficiency and better performance
in their work. Since the employees are no longer required to work during
this one-hour lunch break, there is no more need for them to be
compensated for this period. We agree with the Labor Arbiter that the new
work schedule fully complies with the daily work period of eight (8) hours
without violating the Labor Code.[7] Besides, the new schedule applies to all
employees in the factory similarly situated whether they are union members
or not.[8]
Consequently, it was grave abuse of discretion for public respondent to
equate the earlier Sime Darby case[9] with the facts obtaining in this
case. That ruling in the former case is not applicable here. The issue in that
case involved the matter of granting lunch breaks to certain employees while
depriving the other employees of such breaks. This Court affirmed in that
case the NLRCs finding that such act of management was discriminatory and
constituted unfair labor practice.
The case before us does not pertain to any controversy involving
discrimination of employees but only the issue of whether the change of
work schedule, which management deems necessary to increase production,
constitutes unfair labor practice. As shown by the records, the change
effected by management with regard to working time is made to apply to all
factory employees engaged in the same line of work whether or not they are
members of private respondent union. Hence, it cannot be said that the new
scheme adopted by management prejudices the right of private respondent
to self-organization.
Every business enterprise endeavors to increase its profits. In the
process, it may devise means to attain that goal. 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.[10] Thus,
management is free to regulate, according to its own discretion and
judgment, all aspects of employment, including hiring, work assignments,
working methods, time, place and manner of work, processes to be followed,
supervision of workers, working regulations, transfer of employees, work
supervision, lay off of workers and discipline, dismissal and recall of
workers.[11] Further, management retains the prerogative, whenever
exigencies of the service so require, to change the working hours of its
employees. So long as such prerogative is exercised in good faith for the
advancement of the employers 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 such exercise.[12]
While the Constitution is committed to the policy of social justice and
the protection of the working class, it should not be supposed that every
dispute will be automatically decided in favor of labor. Management also has
right which, as such, are entitled to respect and enforcement in the interest
of simple fair play. Although this Court has inclined more often than not
toward the worker and has upheld his cause in his conflicts with the
employer, such as favoritism has not blinded the Court to the rule that
justice is in every case for the deserving, to be dispensed in the light of the
established facts and the applicable law and doctrine.[13]
WHEREFORE, the Petition is GRANTED. The Resolution of the National
Labor Relations Commission dated 29 November 1994 is SET ASIDE and the
decision of the Labor Arbiter dated 26 November 1993 dismissing the
complaint against petitioner for unfair labor practice is AFFIRMED.
30
G.R. No. 70705 August 21, 1989
MOISES DE LEON, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and LA TONDEÑ;A
INC., respondents.
Amorito V. Canete for petitioner.
Pablo R. Cruz for private respondent.
FERNAN, C.J.:
This petition for certiorari seeks to annul and set aside: (1) the majority
decision dated January 28, 1985 of the National Labor Relations
Commission First Division in Case No. NCR- 83566-83, which reversed the
Order dated April 6,1984 of Labor Arbiter Bienvenido S. Hernandez
directing the reinstatement of petitioner Moises de Leon by private
respondent La Tondeñ;a Inc. with payment of backwages and other
benefits due a regular employee; and, (2) the Resolution dated March 21,
1985 denying petitioner's motion for reconsideration.
It appears that petitioner was employed by private respondent La
Tondeñ;a Inc. on December 11, 1981, at the Maintenance Section of its
Engineering Department in Tondo, Manila. 1 His work consisted mainly of
painting company building and equipment, and other odd jobs relating to
maintenance. He was paid on a daily basis through petty cash vouchers.
In the early part of January, 1983, after a service of more than one (1)
year, petitioner requested from respondent company that lie be included in
the payroll of regular workers, instead of being paid through petty cash
vouchers. Private respondent's response to this request was to dismiss
petitioner from his employment on January 16, 1983. Having been refused
reinstatement despite repeated demands, petitioner filed a complaint for
illegal dismissal, reinstatement and payment of backwages before the
Office of the Labor Arbiter of the then Ministry now Department of Labor
and Employment.
Petitioner alleged that he was dismissed following his request to be treated
as a regular employee; that his work consisted of painting company
buildings and maintenance chores like cleaning and operating company
equipment, assisting Emiliano Tanque Jr., a regular maintenance man; and
that weeks after his dismissal, he was re-hired by the respondent company
indirectly through the Vitas-Magsaysay Village Livelihood Council, a labor
agency of respondent company, and was made to perform the tasks which
he used to do. Emiliano Tanque Jr. corroborated these averments of
petitioner in his affidavit. 2
On the other hand, private respondent claimed that petitioner was not a
regular employee but only a casual worker hired allegedly only to paint a
certain building in the company premises, and that his work as a painter
terminated upon the completion of the painting job.
On April 6, 1984, Labor Arbiter Bienvenido S. Hernandez rendered a
decision 3 finding the complaint meritorious and the dismissal illegal; and
ordering the respondent company to reinstate petitioner with full
backwages and other benefits. Labor Arbiter Hernandez ruled that
petitioner was not a mere casual employee as asserted by private
respondent but a regular employee. He concluded that the dismissal of
petitioner from the service was prompted by his request to be included in
the list of regular employees and to be paid through the payroll and is,
therefore, an attempt to circumvent the legal obligations of an employer
towards a regular employee.
Labor Arbiter Hernandez found as follows:
After a thorough examination of the records of the case
and evaluation of the evidence and versions of the parties,
this Office finds and so holds that the dismissal of
complainant is illegal. Despite the impressive attempt of
respondents to show that the complainant was hired as
casual and for the work on particular project, that is the
repainting of Mama Rosa Building, which particular work
of painting and repainting is not pursuant to the regular
business of the company, according to its theory, we find
differently. Complainant's being hired on casual basis did
not dissuade from the cold fact that such painting of the
building and the painting and repainting of the equipment
and tools and other things belonging to the company and
the odd jobs assigned to him to be performed when he
had no painting and repainting works related to
maintenance as a maintenance man are necessary and
desirable to the better operation of the business company.
31
 Respondent did not even attempt to deny and refute the
corroborating statements of Emiliano Tanque Jr., who was
regularly employed by it as a maintenance man doing
same jobs not only of painting and repainting of building,
equipment and tools and machineries or machines if the
company but also other odd jobs in the Engineering and
Maintenance Department that complainant Moises de Leon
did perform the same odd jobs and assignments as were
assigned to him during the period de Leon was employed
for more than one year continuously by Id respondent
company. We find no reason not to give credit and weight
to the affidavit and statement made therein by Emiliano
Tanque Jr. This strongly confirms that complainant did the
work pertaining to the regular business in which the
company had been organized. Respondent cannot be
permitted to circumvent the law on security of tenure by
considering complainant as a casual worker on daily rate
basis and after working for a period that has entitled him
to be regularized that he would be automatically
terminated. ... . 4
On appeal, however, the above decision of the Labor Arbiter was reversed
by the First Division of the National Labor Relations Commission by virtue
of the votes of two members 5 which constituted a majority. Commissioner
Geronimo Q. Quadra dissented, voting "for the affirmation of the well-
reasoned decision of the Labor Arbiter below." 6 The motion for
reconsideration was denied. Hence, this recourse.
Petitioner asserts that the respondent Commission erred and gravely
abuse its discretion in reversing the Order of the Labor Arbiter in view of
the uncontroverted fact that the tasks he performed included not only
painting but also other maintenance work which are usually necessary or
desirable in the usual business of private respondent: hence, the reversal
violates the Constitutional and statutory provisions for the protection of
labor.
The private respondent, as expected, maintains the opposite view and
argues that petitioner was hired only as a painter to repaint specifically the
Mama Rosa building at its Tondo compound, which painting work is not
part of their main business; that at the time of his engagement, it was
made clear to him that he would be so engaged on a casual basis, so much
so that he was not required to accomplish an application form or to comply
with the usual requisites for employment; and that, in fact, petitioner was
never paid his salary through the regular payroll but always through petty
cash vouchers. 7
The Solicitor General, in his Comment, recommends that the petition be
given due course in view of the evidence on record supporting petitioner's
contention that his work was regular in nature. In his view, the dismissal
of petitioner after he demanded to be regularized was a subterfuge to
circumvent the law on regular employment. He further recommends that
the questioned decision and resolution of respondent Commission be
annulled and the Order of the Labor Arbiter directing the reinstatement of
petitioner with payment of backwages and other benefits be upheld. 8
After a careful review of the records of this case, the Court finds merit in
the petition as We sustain the position of the Solicitor General that the
reversal of the decision of the Labor Arbiter by the respondent Commission
was erroneous.
The law on the matter is Article 281 of the Labor Code which defines
regular and casual employment as follows:
Art. 281. Regular and casual employment. The provisions
of a written agreement to the contrary notwithstanding
and regardless of the oral agreements of the parties, an
employment shall be deemed to be regular where the
employee has been engaged to perform 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.
An employment shall be deemed to be casual if it is not
covered by the preceding paragraph: Provided, That any
employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity
in which he is employed and his employment shall
continue while such actually exists.
This provision reinforces the Constitutional mandate to protect the interest
of labor. Its language evidently manifests the intent to safeguard the
32
tenurial interest of the worker who may be denied the rights and benefits
due a regular employee by virtue of lopsided agreements with the
economically powerful employer who can maneuver to keep an employee
on a casual status for as long as convenient. Thus, contrary agreements
notwithstanding, an employment is deemed regular when the activities
performed by the employee are usually necessary or desirable in the usual
business or trade of the employer. Not considered regular are the so-called
"project employment" 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 9 and seasonal
employment which by its nature is only desirable for a limited period of
time. However, any employee who has rendered at least one year of
service, whether continuous or intermittent, is deemed regular with
respect to the activity he performed and while such activity actually exists.
The primary standard, therefore, of determining a regular employment is
the reasonable connection between the particular activity performed by the
employee in relation to the usual business or trade 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 the 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 one year, even if the
performance is not continuous or merely intermittent, the law deems the
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 also considered regular, but only with respect to such
activity and while such activity exists.
In the case at bar, the respondent company, which is engaged in the
business of manufacture and distillery of wines and liquors, claims that
petitioner was contracted on a casual basis specifically to paint a certain
company building and that its completion rendered petitioner's
employment terminated. This may have been true at the beginning, and
had it been shown that petitioner's activity was exclusively limited to
painting that certain building, respondent company's theory of casual
employment would have been worthy of consideration.
However, during petitioner's period of employment, the records reveal that
the tasks assigned to him included not only painting of company buildings,
equipment and tools but also cleaning and oiling machines, even operating
a drilling machine, and other odd jobs assigned to him when he had no
painting job. A regular employee of respondent company, Emiliano Tanque
Jr., attested in his affidavit that petitioner worked with him as a
maintenance man when there was no painting job.
It is noteworthy that, as wisely observed by the Labor Arbiter, the
respondent company did not even attempt to negate the above averments
of petitioner and his co- employee. Indeed, the respondent company did
not only fail to dispute this vital point, it even went further and confirmed
its veracity when it expressly admitted in its comment that, "The main bulk
of work and/or activities assigned to petitioner was painting and other
related activities. Occasionally, he was instructed to do other odd things in
connection with maintenance while he was waiting for materials he would
need in his job or when he had finished early one assigned to him. 10
The respondent Commission, in reversing the findings of the Labor Arbiter
reasoned that petitioner's job cannot be considered as necessary or
desirable in the usual business or trade of the employer because, "Painting
the business or factory building is not a part of the respondent's
manufacturing or distilling process of wines and liquors. 11
The fallacy of the reasoning is readily apparent in view of the admitted fact
that petitioner's activities included not only painting but other maintenance
work as well, a fact which even the respondent Commission, like the
private respondent, also expressly recognized when it stated in its decision
that, 'Although complainant's (petitioner) work was mainly painting, he
was occasionally asked to do other odd jobs in connection with
maintenance work. 12 It misleadingly assumed that all the petitioner did
during his more than one year of employment was to paint a certain
building of the respondent company, whereas it is admitted that he was
given other assignments relating to maintenance work besides painting
company building and equipment.
It is self-serving, to say the least, to isolate petitioner's painting job to
justify the proposition of casual employment and conveniently disregard
the other maintenance activities of petitioner which were assigned by the
respondent company when he was not painting. The law demands that the
nature and entirety of the activities performed by the employee be
considered. In the case of petitioner, the painting and maintenance work
given him manifest a treatment consistent with a maintenance man and
not just a painter, for if his job was truly only to paint a building there
would have been no basis for giving him other work assignments In
between painting activities.
33
It is not tenable to argue that the painting and maintenance work of
petitioner are not necessary in respondent's business of manufacturing
liquors and wines, just as it cannot be said that only those who are directly
involved in the process of producing wines and liquors may be considered
as necessary employees. Otherwise, there would have been no need for
the regular Maintenance Section of respondent company's Engineering
Department, manned by regular employees like Emiliano Tanque Jr., whom
petitioner often worked with.
Furthermore, the petitioner performed his work of painting and
maintenance activities during his employment in respondent's business
which lasted for more than one year, until early January, 1983 when he
demanded to be regularized and was subsequently dismissed. Certainly, by
this fact alone he is entitled by law to be considered a regular employee.
And considering further that weeks after his dismissal, petitioner was
rehired by the company through a labor agency and was returned to his
post in the Maintenance Section and made to perform the same activities
that he used to do, it cannot be denied that as activities as a regular
painter and maintenance man still exist.
Commission itself admitted to be so, in justifying a conclusion adverse to
the aggrieved laborer clearly spells a grave abuse of discretion amounting
to lack of jurisdiction.
WHEREFORE, the petition is GRANTED. The assailed Decision and
Resolution of the National Labor Relations Commission are hereby annulled
and set aside. The Order of Labor arbiter Bienvenido S. Hernandez dated
April 6, 1984 is reinstated. Private respondent is ordered to reinstate
petitioner as a regular maintenance man and to pay petitioner 1)
backwages equivalent to three years from January 16,1983, in accordance
with the Aluminum Wage Orders in effect for the period covered, 2) ECOLA
3) 13th Month Pay, 4) and other benefits under pertinent Collective
Bargaining Agreements, if any.
SO ORDERED.

It is of no moment that petitioner was told when he was hired that his
employment would only be casual, that he was paid through cash
vouchers, and that he did not comply with regular employment procedure.
Precisely, the law overrides such conditions which are prejudicial to the
interest of the worker whose weak bargaining position needs the support
of the State. That determines whether a certain employment is regular or
casual is not the will and word of the employer, to which the desperate
worker often accedes, much less the procedure of hiring the employee or
the manner of paying his salary. It is the nature of the activities performed
in relation to the particular business or trade considering all circumstances,
and in some cases the length of time of its performance and its continued
existence.

Finally, considering its task to give life and spirit to the Constitutional
mandate for the protection of labor, to enforce and uphold our labor laws
which must be interpreted liberally in favor of the worker in case of doubt,
the Court cannot understand the failure of the respondent Commission to
perceive the obvious attempt on the part of the respondent company to
evade its obligations to petitioner by dismissing the latter days after he
asked to be treated as a regular worker on the flimsy pretext that his
painting work was suddenly finished only to rehire him indirectly weeks
after his dismissal and assign him to perform the same tasks he used to
perform. The devious dismissal is too obvious to escape notice. The
inexplicable disregard of established and decisive facts which the

34
G.R. Nos. 82643-67 August 30, 1990
PHILIPPINE GEOTHERMAL, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, TEODULO C.
CUEBILLAS, ARMANDO CILOT, MARIANO CORULLO, YOLANDA CAL,
EFREN CLERIGO, FELICISSIMO VARGAS, et al., respondents.
Romulo, Mabanta, Buenaventura, Sayoc and De los Angeles for petitioner.
Napoleon Banzuela, Jr. for private respondents.
PARAS, J.:
This is a petition for review on certiorari seeking to annul and set aside;
(a) the Resolution of the National Labor Relations Commission * dated
November 9, 1987 in Labor Cases Nos. RAB-403-85 to 427-85 and RAB
Nos. 0392-85 to 0393-85 entitled Teodulo C. Cuebillas, et. al. vs.
Philippine Geothermal, Inc. et al. and Efren N. Clerigo et. al. vs. Phil.
Geothermal Inc. respectively which declared respondent employees as
regular and permanent employees of petitioner company and ordered their
reinstatement and (b) the Resolution dated March 9,1988 which denied the
Motion for Reconsideration.
The facts of the case are as follows:
Petitioner Philippine Geothermal, Inc. is a U.S. corporation engaged in the
exploration and development of geothermal energy resources as an
alternative source of energy. It is duly authorized to engage in business in
the Philippines and at present is the prime contractor of the National Power
Corporation at the latter's operation of the Tiwi, Albay and the Makiling-
Banahaw Geothermal Projects. 1
Private respondents, on the other hand, are employees of herein petitioner
occupying various positions ranging from carpenter to Clerk II who had
worked with petitioner company under individual contracts, categorized as
contractual employment, for a period ranging from fifteen (15) days to
three (3) months. These contracts were regularly renewed to the extent
that individual private respondents had rendered service from three (3) to
five (5) years until 1983 and 1984 when petitioner started terminating
their employment by not renewing their individual contracts. Subsequently
petitioner entered into job contracting agreement with Dra. Generosa
Gonzales who supplies it with skilled
manpower. 2
Sometime in July 1983, herein private respondents organized a separate
labor union in view of their exclusion in the bargaining unit of the regular
rank and file employees represented by the Federation of Free Workers. In
August 1983, they filed a petition for certification election with the Ministry
of Labor and Employment, NCR, docketed as Case No. NCD-LRD-8-242-84.
Because of this, herein petitioner allegedly started harassing them and
replaced them with so called "contract workers". Thus, complainant union
and herein respondent employees filed a case for illegal lock-out and unfair
labor practice, docketed as Case No. 1420-83 and the instant consolidated
cases RAB Case Nos. 0403-85 to 427-85 and RAB Cases Nos. 0392-85 to
0393-85, involving 26 workers, for unfair labor practice and/or illegal
dismissal, reinstatement backwages and service incentive. 3
On March 3, 1987, Labor Arbiter Voltaire A. Balitaan rendered a decision in
favor of the respondents the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the
petitioners and they are hereby declared regular and
permanent employees of the respondent and finding their
dismissal from the service illegal, respondent is ordered to
reinstate them to their former positions without loss of
seniority rights and with one year backwages without
qualification or deduction in the amount of P590,021.76.
SO ORDERED. 4
On Appeal, the National Labor Relations Commission on November 9, 1987
rendered a decision dismissing the appeal and affirming the decision of the
Labor Arbiter. 5 A motion for reconsideration was denied on March 9, 1988
for lack of merit. 6
Hence, this petition which was filed on April 22, 1988.
In the meantime, a writ of execution was issued by Executive Arbiter
Gelacio L. Rivera, Jr. on April 11, 1988 on the ground that no appeal was
interposed hence the decision of the Labor Arbiter had become final and
executory. 7
35
On April 20, 1988, petitioner filed a motion for the issuance of a
Temporary Restraining Order as the Sheriff tried to enforce the Writ of
Execution dated April 11, 1988 against petitioner on April 18, 1988. They
further alleged that they are ready, willing and able to post a supersedeas
bond to answer for damages which respondents may suffer. 8
On June 29, 1988, this Court issued a Temporary Restraining Order
enjoining respondents from enforcing the Resolution dated November 9,
1987, any writ of execution or notice of garnishment issued in RAB Cases
Nos. 0403-85 to 427-85 and RAB Cases Nos. 0392-85 to 393-85 of the
National Labor Relations Commission, Department of Labor and
Employment. 9
On April 17, 1989, this Court resolved to dismiss the petition for failure to
sufficiently show that the respondent commission had committed grave
abuse of discretion in rendering the questioned judgment and lifted the
Temporary Restraining Order issued on June 29, 1988. 10 A motion for
reconsideration was filed by petitioner on May 25, 1989. 11
On June 5, 1989, this Court granted the motion; and set aside the
resolution dated April 17, 1989; gave due course to the petition and
required the patties to submit simultaneously, their respective
memoranda. 12
Private respondents filed their memorandum on August 8, 1989 13 while
public respondent filed its memorandum on September 1,
1989. 14 Petitioner filed its memorandum on September 8, 1989. 15
The main issue in the case at bar is whether or not private respondents
may be considered regular and permanent employees due to their length
of service in the company despite the fact that their employment is on
contractual basis.
Petitioner alleges that it engaged the services of private respondents on a
monthly basis to ensure that manpower would be available when and
where needed. Private respondents were fully aware of the nature of their
employment as this was clearly spelled out in the employment contracts.
What happened to them was not a case of unwarranted dismissal but
simply one of expiration of the tenure of employment contracts and the
completion of the phase of the project for which their services were
hired. 16
In the recent case of Kimberly Independent Labor Union for Solidarity,
Activism, and Nationalism-Olalia vs. Hon. Franklin M. Drilon, G.R. Nos.
77629 and 78791 promulgated last May 9, 1990, this Court classified the
two kinds of regular employees, as: 1) those who are engaged to perform
activities which are usually necessary or desirable in the usual business or
trade of the employer; and 2) those who have rendered at least one (1)
year of service, whether continuous or broken with respect to the activity
in which they are employed. While the actual regularization of these
employees entails the mechanical act of issuing regular appointment
papers and compliance with such other operating procedures, as may be
adopted by the employer, it is more in keeping with the intent and spirit of
the law to rule that the status of regular employment attaches to the
casual employee on the day immediately after the end of his first year of
service.
Assuming therefore, that an employee could properly be regarded as a
casual (as distinguished from a regular employee) he becomes entitled to
be regarded as a regular employee of the employer as soon as he has
completed one year of service. Under the circumstances, employers may
not terminate the service of a regular employee except for a just cause or
when authorized under the Labor Code. It is not difficult to see that to
uphold the contractual arrangement between the employer and the
employee would in effect be to permit employers to avoid the necessity of
hiring regular or permanent employees indefinitely on a temporary or
casual status, thus to deny them security of tenure in their jobs. Article
106 of the Labor Code is precisely designed to prevent such result. 17
It is the policy of the state to assure the right of workers to "security of
tenure." 18 The guarantee is an act of social justice. When a person has no
property, his job may possibly be his only possession or means of
livelihood. Therefore, he should be protected against any arbitrary
deprivation of his job. Article 280 of the Labor Code has construed
"security of tenure" as meaning that "the employer shall not terminate the
services of the employee except for a just cause or when authorized by the
Code." 19
PREMISES CONSIDERED, the decision of the National Labor Relations
Commission is hereby AFFIRMED and the Temporary Restraining Order
issued on June 29, 1988 is hereby LIFTED permanently.
SO ORDERED.
36
G.R. No. 82973 September 15, 1989 A. Payumo's Res. 9/10/80

MARIO CARTAGENAS, JESUS N. MIRABALLES, VICTOR C. MONSOD State Center 3/05/81-7/13/81

and VICENTE BARROA, petitioners,
vs. FEBTC Bldg. 7/14/81-9/21/81
ROMAGO ELECTRIC COMPANY, INC., NATIONAL LABOR RELATIONS
COMMISSION (Fifth Division), respondents.
SMC Complex 9/22/81-9/10/84

Isidro G. Pasana for petitioners.

PNB Finance Complex 9/11/84-7/12/86

Constantino B. de Jesus & Associates for private respondent.

(Annexes 1 to 25, respondent's Position Paper)

2. Victor C. Monsod
GRINO-AQUIÑO, J.:
Project Assigned Period Covered

he issue in this case is whether the petitioners are project employees of

the private respondent Romago Electric Company, Inc., as found by the MMRH Project 4/13/76-2/02/80
National Labor Relations Commission, or regular employees as found by
the Labor Arbiter. Manila Hotel 2/03/80-7/19/81

The facts are recited in the decision of the NLRC as follows: PNB Project 7/20/81-7/16/84

Respondent Romago is a general contractor engaged in Manila Hotel 7/17/84-7/02/84

contracting and sub-contracting of specific building
construction projects or undertaking such as electrical, PNB Finance Center 10/3/84-7/12/86
mechanical and civil engineering aspects in the repair of
buildings and from other kindred services.
(Annexes 30 to 41, Ibid)
Individual complainants are employed by the respondent
in connection with particular construction projects and 3. Vicente Barroa
they are as follows:
Project Assigned Period Covered
1. Jesus N. Miraballes Project Assigned Period Covered
SMC Hoc. Project 7/5/82-1/21/85
L. Towers 4/23/79-2/26/80
PNB Finance Complex 1/22/85-7/12/86
Nat'l Bookstore 2/26/80-8/28/80
(Annexes 42 to 47, Ibid)
PNRC-MHQ Bldg. 8/29/80-9/09/80

37
4. Mario Cartagenas I hereby agree to the foregoing conditions and accept my
employment for a fixed period and from the above
Project Assigned Period Covered mentioned Project/Assignment only.

PNB Finance Complex 3/26/82-7/12/86 The conditions of employment to which the complainant
agreed are mentioned in the right upper portion of the
same page of said application form, an example of which
(Annexes 52 to 54, Ibid) reads:

Effective July 12,1986, individual complainants and

Lawrence Deguit were temporarily laid-off by virtue of a Assigned to FEBTC G.P. FORMOSO Project
memorandum issued by the respondent. In said
memorandum they were also informed that a meeting Position Electrician
regarding the resumption of operation will be held on July
16, 1986 and that they will be notified as to when they Effectivity 7-14-81
will resume work.
Salary P18.50/day & allowance
On July 28, 1986, complainants filed the instant case for
Conditions Hired for above project only
illegal dismissal but before the respondent could receive a
copy of the complaint and the notification and summons
Approved: Signed
issued by the NLRC National Capital Region (actually
received only on August 22, 1986, page 4, records)
individual complainants re-applied with the respondent Personnel Manager
and were assigned to work with its project at Robinson-
EDSA, specifically on the following dates, to wit:
7/14/81

1. Mirabelles and Monsod August 2/86 Date

2. Barroa August 11/86

(Employment Application Form of MIRABALLES JESUS
NIEVA dated July 14,1981, Annex 16; 16-A and 16-B,
3. Cartagenas August 4/86
Ibid)

(Annexes 26 to 29-B; '39-4l'; 48 to 51 -B; '55 to 58- Thereafter the hired employee is given by the respondent
A', Ibid) an assignment slip, an example of which reads:

In hiring the herein complainants to be assigned to a ASSIGNMENT SLIP

particular project they have to fill up an employment
application form and are subjected to a pre-hiring DATE: July 14, 1981
examination. If evaluated to be qualified they sign at the
end portion of their employment application form that:
Engr. C.A. Castro
AGREEMENT

38
 Project In-Charge
FEFTC
Name of Project
The bearer, Mr. Jesus N. Miraballes will work under you as
electrician effective 14 July 81. His employment will
terminate upon completion/stoppage of the project or
terminated earlier for cause.
Signed
GUDIOSO PLATA
Chief Engineer
CONFORME:
SGD. JESUS N. MIRABALLES
(Assignment slip of Jesus N. Miraballes, Annex 17, Ibid.)
xxx xxx xxx
... Respondent introduced documentary exhibits that the
complainant have invariably been issued appointment
from project to projects and were issued notice of
temporary lay-off when the PNB Finance Center project
was suspended due to lack of funds and that when work
was available particularly respondent's project at
Robinson-EDSA they were rehired and assigned to this
project. (pp. 16-19; 21-22, Rollo.)
The NLRC held that the complainants were project employees because
their appointments were "co-terminus with the phase or item of work
assigned to them in said project," It held further:
The fact that the complainants worked for the respondent
under different project employment contracts for so many
years could not be made a basis to consider them as
regular employees for they remain project employees
regardless of the number of projects in which they have
worked. (p. 22, Rollo.)
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 agreements 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.
An employment shall be deemed to be casual if it is not
covered by the preceding paragraph: Provided, That, any
employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity
in which he is employed and his employment shall
continue while such actually exists (Emphasis supplied).
(p. 46, Rollo.)
As an electrical contractor, the private respondent depends for its business
on the contracts it is able to obtain from real estate developers and
builders of buildings. Since its work depends on the availability of such
contracts or "projects," necessarily the duration of the employment of its
work force is not permanent but co-terminus with the projects to which
they are assigned and from whose payrolls they are paid. It would be
extremely burdensome for their employer who, like them, depends on the
availability of projects, if it would have to carry them as permanent
employees and pay them wages even if there are no projects for them to
work on. We hold, therefore, that the NLRC did not abuse its discretion in
finding, based on substantial evidence in the records, that the petitioners
are only project workers of the private respondent.
39
This case is similar to Sandoval Shipyards, Inc. vs. NLRC, 136 SCRA 675 & Central Shipping Office Workers Union vs. San Miguel Corp., 122 SCRA
(1985), where we held: 557; Mamerto vs. Inciong, 118 SCRA 265; Phil. Labor Alliance Council vs.
Bureau of Labor Relations, 75 SCRA 162).
We feel that there is merit in the contention of the
applicant corporation. To our mind, the employment of WHEREFORE, the petition for certiorari is dismissed for lack of merit. No
the employees concerned were fixed for a specific project costs.
or undertaking. For the nature of the business the
corporation is engaged into is one which will not allow it to SO ORDERED.
employ workers for an indefinite period. "It is significant
to note that the corporation does not construct vessels for
sale or otherwise which will demand continuous
productions of ships and will need permanent or regular
workers. It merely accepts contracts for ship-building or
for repair of vessels from third parties and, only, on
occasion when it has work contract of this nature that it
hires workers to do the job which, needless to say, lasts
only for less than a year or longer.

The completion of their work or project automatically

terminates their employment, in which case, the employer
is, under the law, only obliged to render a report on the
termination of the employment. (P. 48, Rollo.)

Petitioners' invocation of the resolution of this Court in Romago Electric

Company, Inc, vs. Romago Electric United Workers Union-Christian Labor
Organization, (REWU-CLOP), et al., G.R. No. 79774, February 1, 1988,
where this Court dismissed the petition, is not well taken. As pointed out
by the public respondent, the issue in that case was whether the members
of the union may properly participate in the holding of a certification
election. Since the petitioners in their complaint for illegal dismissal dated
July 28, 1986 (Annex A of petition) averred that they do not belong to any
union, the ruling in Romago vs, REWU-CLOP may not apply to them. In
their Reply to the public respondents' Comment in this case, they disclosed
that they are members and officers of a new union which they organized
on March 13, 1988 (pp. 62-63, Rollo). That supervening fact, however, has
no relevance to this case.

We find no reason to depart from the well-settled rule that findings of fact
of labor officials are generally conclusive and binding upon this Court when
supported by substantial evidence, as in this case (Edi-Staff Builders
International, Inc. vs, Leogardo, Jr., 152 SCRA 453; Asiaworld Publishing
House, Inc. vs. Ople, 152 SCRA 219; National Federation of Labor Union
vs. Ople, 143 SCRA 124; Dangan vs. NLRC, 127 SCRA 706; Special Events

40