Submitted to: Atty.

Benedict Guirey Kato

Submitted by: Louise Angelica Vitug

 1. Paul Santiago vs. CF Sharp Crew Management, Inc. (2007)

Facts:

Petitioner had been working as a seafarer for Smith Bell Management, Inc. (respondent)
for about 5 yrs. In February 3, 1998, petitioner signed a new contract of employment with
respondent, with the duration of 9 months. The contract was approved by POEA.
Petitioner was to be deployed on board the “MSV Seaspread” which was scheduled to
leave the port of Manila for Canada on 13 February 1998.

A week before the date of departure, Capt. Pacifico Fernandez, respondent’s Vice
President, sent a facsimile message to the captain of “MSV Seaspread,”, saying that it
received a phone call from Santiago’s wife and some other callers who did not reveal their
identity and gave him some feedbacks that Paul Santiago this time, if allowed to depart,
will jump ship in Canada like his brother Christopher Santiago. The captain of “MSV
Seaspread replied that it cancel plans for Santiago to return to Seaspread.

Petitioner thus told that he would not be leaving for Canada anymore. Petitioner filed a
complaint for illegal dismissal, damages, and attorney’s fees against respondent and its
foreign principal, Cable and Wireless (Marine) Ltd. The Labor Arbiter (LA) favored
petitioner and ruled that the employment contract remained valid but had not
commenced since petitioner was not deployed and that respondent violated the rules and
regulations governing overseas employment when it did not deploy petitioner, causing
petitioner to suffer actual damages. On appeal by respondent, NLRC ruled that there is no
employer-employee relationship between petitioner and respondent because the
employment contract shall commence upon actual departure of the seafarer from the
airport or seaport at the point of hire and with a POEA-approved contract. In the absence
of an employer-employee relationship between the parties, the claims for illegal dismissal,
actual damages, and attorney’s fees should be dismissed. But the NLRC found
respondent’s decision not to deploy petitioner to be a valid exercise of its management
prerogative. Petitioner filed MR but it was denied. He went to CA. CA affirmed the decision
of NLRC. Petitioner’s MR was denied. Hence this case.

Issue: When does an employer- employee relationship begin?

Held: There is some merit in the petition. The parties entered into an employment
contract whereby petitioner was contracted by respondent to render services on board
“MSV Seaspread” for the consideration of US$515.00 per month for 9 months, plus
overtime pay. However, respondent failed to deploy petitioner from the port of Manila to
Canada. Considering that petitioner was not able to depart from the airport or seaport in
the point of hire, the employment contract did not commence, and no employer-
employee relationship was created between the parties. However, a distinction must be
made between the perfection of the employment contract and the commencement of the
employer-employee relationship. The perfection of the contract, which in this case
coincided with the date of execution thereof, occurred when petitioner and respondent
agreed on the object and the cause, as well as the rest of the terms and conditions therein.
The commencement of the employer-employee relationship would have taken place had
petitioner been actually deployed from the point of hire. Thus, even before the start of any
employer-employee relationship, contemporaneous with the perfection of the
employment contract was the birth of certain rights and obligations, the breach of which
may give rise to a cause of action against the erring party. Thus, if the reverse had
happened, that is the seafarer failed or refused to be deployed as agreed upon, he would
be liable for damages.

Neither the manning agent nor the employer can simply prevent a seafarer from being
deployed without a valid reason. Respondent’s act of preventing petitioner from departing
the port of Manila and boarding “MSV Seaspread” constitutes a breach of contract, giving
rise to petitioner’s cause of action. Respondent unilaterally and unreasonably reneged on
its obligation to deploy petitioner and must therefore answer for the actual damages he
suffered.

Despite the absence of an employer-employee relationship between petitioner and

respondent, the Court rules that the NLRC has jurisdiction over petitioner’s complaint. The
jurisdiction of labor arbiters is not limited to claims arising from employer-employee
relationships. Section 10 of R.A. No. 8042 (Migrant Workers Act), provides that:

Sec. 10. Money Claims. – Notwithstanding any provision of law to the contrary, the Labor
Arbiters of the NLR) shall have the original and exclusive jurisdiction to hear and decide,
within 90 calendar days after the filing of the complaint, the claims arising out of an
employer-employee relationship or by virtue of any law or contract involving Filipino
workers for overseas deployment including claims for actual, moral, exemplary and other
forms of damages.”

Since the present petition involves the employment contract entered into by petitioner for
overseas employment, his claims are cognizable by the labor arbiters of the NLRC.

Respondent is liable to pay petitioner only the actual damages in the form of the loss of
nine (9) months’ worth of salary as provided in the contract. He is not, however, entitled
to overtime pay. While the contract indicated a fixed overtime pay, it is not a guarantee
that he would receive said amount regardless of whether or not he rendered overtime
work. Even though petitioner was prevented without valid reason from rendering regular
much less overtime service, the fact remains that there is no certainty that petitioner will
perform overtime work had he been allowed to board the vessel. The amount stipulated in
the contract will be paid only if and when the employee rendered overtime work.
Realistically speaking, a seaman, by the very nature of his job, stays on board a ship or
vessel beyond the regular eight-hour work schedule. For the employer to give him
overtime pay for the extra hours when he might be sleeping or attending to his personal
chores or even just lulling away his time would be extremely unfair and unreasonable.
 The Court also holds that petitioner is entitled to attorney’s fees in the concept of
damages and expenses of litigation. Respondent’s basis for not deploying petitioner is the
belief that he will jump ship just like his brother, a mere suspicion that is based on alleged
phone calls of several persons whose identities were not even confirmed. This Court has
upheld management prerogatives so long as they 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.
Respondent’s failure to deploy petitioner is unfounded and unreasonable However, moral
damages cannot be awarded in this case. because respondent’s action was not tainted
with bad faith, or done deliberately to defeat petitioner’s rights, as to justify the award of
moral damages.

Seafarers are considered contractual employees and cannot be considered as regular

employees under the Labor Code. Their employment is governed by the contracts they
sign every time they are rehired and their employment is terminated when the contract
expires. The exigencies of their work necessitates that they be employed on a contractual
basis.

WHEREFORE, petition is GRANTED IN PART.

2. Orozco v. Philippine Daily Inquirer (2008)

Facts: In March 1990, Wilhelmina Orozco was hired as a writer by the Philippine Daily Inquirer.
She wad the columnist of “Feminist Reflections” under the lifestyle section of the publication.
She writes on a weekly basis and on per article.
In 1991, Leticia Magsanoc as editor-in-chief sought to improve the Lifestyle section of the
paper. She said there were too many Lifestyle writers, and so it was time to reduce the number.
Orozco’s column was eventually dropped. Orozco filed a case for illegal dismissal. She won in
the Labor Arbiter whereby the arbiter ruled that there exists employer-employee relationship
between PDI and Orozco. Court of Appeals reversed said ruling. Hence, this petition.
Issue: whether or not a newspaper columnist is an employee of the newspaper which publishes
the column
Held: No. The type of control being argued by Orozco is not the type of control contemplated
under the four fold test principle in labor law. The main determinant to test control is whether
the rules set by employer-employee are meant to control not just the results of the work but
also the means and method to be used by the hired party in order to achieve such results.
In this case, such standards set by PDI is merely incidental or inherent in the newspaper
business and is not an exercise of control over Orozco. There were no restraints on her
creativity. The apparent limitation on subjects that befitted the Lifestyle section did not
 translate to control, but was simply a logical consequence of the fact that her column appeared
in that section, and therefore had to cater to the preference of readers.

3. Austria v. NLRC (1999)

Facts: The Seventh Day Adventists(SDA) is a religious corporation under Philippine law. The
petitioner was a pastor of the SDA for 28 years from 1963 until 1991, when his services were
terminated.
On various occasions from August to October 1991, Austria received several communications
form Ibesate, the treasurer of the Negros Mission, asking him to admit accountability and
responsibility for the church tithes and offerings collected by his wife, Thelma Austria, in his
district and to remit the same to the Negros Mission.
The petitioner answered saying that he should not be made accountable since it was Pastor Buhat
and Ibesate who authorized his wife to collect the tithes and offerings since he was very ill to be
able to do the collecting.
A fact-finding committee was created to investigate. The petitioner received a letter of dismissal
citing:
1) Misappropriation of denominational funds;
2) Willful breach of trust;
3) Serious misconduct;
4) Gross and habitual neglect of duties; and

5) Commission of an offense against the person of 
employer's duly authorized representative

as grounds for the termination of his services.
Petitioner filed a complaint with the Labor Arbiter for illegal dismissal, and sued the SDA
for reinstatement and backwages plus damages. Decision was rendered in favor of petitioner.
SDA appealed to the NLRC. Decision was rendered in favor of respondent.

Issues:

1. Whether or not the termination of the services of the petitioner is an ecclesiastical affair, and,
as such, involves the separation of church and state.
2. Whether or not the Labor Arbiter/NLRC has jurisdiction to try and decide the complaint filed
by petitioner against the SDA.

Held:

1. No. The matter at hand relates to the church and its religious ministers but what is involved
here is the relationship of the church as an employer and the minister as an employee, which
is purely secular because it has no relationship with the practice of faith, worship or
doctrines. The grounds invoked for petitioner’s dismissal are all based on Art. 282 of Labor Code.

2. Yes. SDA was exercising its management prerogative (not religious prerogative) to fire an
employee which it believes is unfit for the job. It would have been a different case if Austria was
expelled or excommunicated from the SDA.

4. Atok Big Wedge v. Gison (2011)

Facts: Jesus P. Gison was engaged as part-time consultant on retainer basis by the petitioner
Atok. Petitioner did not require respondent to its office on a regular basis, except when
occasionally requested by the management to discuss matters needing his expertise as a
consultant. As payment for his services, respondent received a retainer fee of P3,000.00 which
was delivered to him at his residence or in a local restaurant. The said arrangement continued
for the next eleven years.
Since the respondent was getting old he requested that petitioner cause his registration with
the SSS but petitioner did not accede his request. Respondent filed a complaint with the SSS
against petitioner for the latter’s refusal to cause his registration with the SSS. On the same
date the petitioner issued a memo advising the termination of the respondent’s retainer
contract. Thus he filed for illegal dismissal.
Issue: whether employer-employee relationship exists

Held: No. To ascertain the existence of an employer-employee relationship jurisprudence has

invariably adhered to the four-fold test to wit: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control
the employee’s conduct, or the so-called “control test”.

The commonly so called control test is commonly regarded as the most crucial and
determinative indicator of the presence or absence of an employer-employee relationship.
Under the control test, an employer-employee relationship exists where the person for
whom the services are performed reserves the right to control not only the end achieved,
but also the manner and means to be used in reaching that end.
 Applying the aforementioned test, an employer-employee relationship is apparently absent
in the case at bar. Among other things, respondent was not required to report everyday
during regular office hours of petitioner. Respondent’s monthly retainer fees were paid to
him either at his residence or a local restaurant. More importantly, petitioner did not
prescribe the manner in which respondent would accomplish any of the tasks in which his
expertise as a liaison officer was needed; respondent was left alone and given the freedom to
accomplish the tasks using his own means and methods. Respondent was assigned tasks to
perform, but petitioner did not control the manner and methods by which respondent
performed these tasks. The absence of the element of control on the part of the petitioner
engenders a conclusion that he is not an employee of the petitioner.
5. Legend Hotel Manila v. Realuyo (2012)
Facts: Respondent averred that he had worked as a pianist at the Legend Hotel’s Tanglaw
Restaurant from September 1992 with an initial rate of P400.00/night that was given to him after
each night’s performance; that his rate had increased to P750.00/night; and that during his
employment, he could not choose the time of performance, which had been fixed from 7:00 pm
to 10:00 pm for three to six times/week. He added that the Legend Hotel’s restaurant manager
had required him to conform with the venue’s motif; that he had been subjected to the rules on
employees’ representation checks and chits, a privilege granted to other employees; that on July
9, 1999, the management had notified him that as a cost-cutting measure his services as a pianist
would no longer be required effective July 30, 1999; that he disputed the excuse, insisting that
Legend Hotel had been lucratively operating as of the filing of his complaint; and that the loss of
his employment made him bring his complaint.

Issues: 1. Whether or not petition for certiorari to the CA is proper.

2. Whether or not there is ER-EE relationship.
3. Whether or not retrenchment as a ground for respondent’s dismissal is valid.

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

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

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

xxx wage paid to any employee shall mean the remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece,
or commission basis, or other method of calculating the same, which is payable by an employer
to an employee under a written or unwritten contract of employment for work done or to be done,
or for services rendered or to be rendered, and includes the fair and reasonable value, as
determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished
by the employer to the employee.

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

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

A review of the records shows, however, that respondent performed his work as a pianist under
petitioner’s supervision and control. Specifically, petitioner’s control of both the end achieved
and the manner and means used to achieve that end was demonstrated by the following, to
wit: a. He could not choose the time of his performance, which petitioners had fixed from 7:00
pm to 10:00 pm, three to six times a week; b. He could not choose the place of his
performance; c. The restaurant’s manager required him at certain times to perform only
Tagalog songs or music, or to wear barong Tagalog to conform to the Filipiniana motif; and d.
He was subjected to the rules on employees’ representation check and chits, a privilege granted
to other employees. Relevantly, it is worth remembering that the employer need not actually
supervise the performance of duties by the employee, for it sufficed that the employer has the
right to wield that power.

NO. Retrenchment is one of the authorized causes for the dismissal of employees recognized by
the Labor Code. It is a management prerogative resorted to by employers to avoid or to
minimize business losses. On this matter, Article 283 of the Labor Code.
The Court has laid down the following standards that an employer should meet to justify
retrenchment and to foil abuse, namely: (a) The expected losses should be substantial and not
merely de minimis in extent; (b) The substantial losses apprehended must be reasonably
imminent; (c) The retrenchment must be reasonably necessary and likely to effectively prevent
the expected losses; and (d) The alleged losses, if already incurred, and the expected imminent
losses sought to be forestalled must be proved by sufficient and convincing evidence.

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

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

6. Sonza v. ABS-CBN (2004)

Facts: In May 1994, respondent ABS-CBN Broadcasting Corporation (“ABS-CBN”) signed an
Agreement (“Agreement”) with the Mel and Jay Management and Development Corporation
(“MJMDC”). ABS-CBN was represented by its corporate officers while MJMDC was represented
by SONZA, as President and General Manager, and Carmela Tiangco (“TIANGCO”), as EVP and
Treasurer. Referred to in the Agreement as “AGENT,” MJMDC agreed to provide SONZA’s
services exclusively to ABS-CBN as talent for radio and television.

On 1 April 1996, SONZA wrote a letter to ABS-CBN’s President, Eugenio Lopez III about the
recent event concerning his program and career, and that the said violation of the company has
breached the agreement, thus, the notice of rescission of the Agreement was sent.

On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor
and Employment, National Capital Region in Quezon City. SONZA complained that ABS-CBN did
not pay his salaries, separation pay, service incentive leave pay, 13th month pay, signing bonus,
travel allowance and amounts due under the Employees Stock Option Plan (“ESOP”).

On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee
relationship existed between the parties. SONZA filed an Opposition to the motion on 19 July
1996.

Issue: whether or not Sonza was an employee or independent contractor

Held: No. Applying the control test to the present case, we find that SONZA is not an employee
but an independent contractor.
First, SONZA contends that ABS-CBN exercised control over the means and methods of his
work.

SONZA’s argument is misplaced. ABS-CBN engaged SONZA’s services specifically to co-host the
“Mel & Jay” programs. ABS-CBN did not assign any other work to SONZA. To perform his work,
SONZA only needed his skills and talent. How SONZA delivered his lines, appeared on television,
and sounded on radio were outside ABS-CBN’s control. SONZA did not have to render eight
hours of work per day. The Agreement required SONZA to attend only rehearsals and tapings
of the shows, as well as pre- and post-production staff meetings. ABS-CBN could not dictate the
contents of SONZA’s script. However, the Agreement prohibited SONZA from criticizing in his
shows ABS-CBN or its interests. 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.

SONZA protests the Labor Arbiter’s finding that he is a talent of MJMDC, which contracted out
his services to ABS-CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an
employee of ABS-CBN. SONZA insists that MJMDC is a “labor-only” contractor and ABS-CBN is
his employer.

In a labor-only contract, there are three parties involved: (1) the “labor-only” contractor; (2)
the employee who is ostensibly under the employ of the “labor-only” contractor; and (3) the
principal who is deemed the real employer. Under this scheme, the “labor-only” contractor is
the agent of the principal. The law makes the principal responsible to the employees of the
“labor-only contractor” as if the principal itself directly hired or employed the employees. These
circumstances are not present in this case.

There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-
CBN. MJMDC merely acted as SONZA’s agent. The Agreement expressly states that MJMDC
acted as the “AGENT” of SONZA. The records do not show that MJMDC acted as ABS-CBN’s
agent. MJMDC, which stands for Mel and Jay Management and Development Corporation, is a
corporation organized and owned by SONZA and TIANGCO. The President and General
Manager of MJMDC is SONZA himself. It is absurd to hold that MJMDC, which is owned,
controlled, headed and managed by SONZA, acted as agent of ABS-CBN in entering into the
Agreement with SONZA, who himself is represented by MJMDC. That would make MJMDC the
agent of both ABS-CBN and SONZA. Petition denied.

7. Fuji Television v. Espiritu (2014)

Facts: Arlene Espiritu engaged by Fuji as news correspondent/producer in 2005 to report

Philippine news to Fuji through Manila Bureau field office. The employment contract initially
provided for 1-year term, but was successfully renewed yearly.
 Diagnosed with lung cancer in 2009, Fuji told her that it will have a problem renewing
her contract, but Arlene insisted that she was fit to work. Arlene and Fuji signed non-renewal
contract: no renewal after expiration in May 31, 2009. Arlene acknowledged receipt of USD
18050 (monthly salary from Mar-May, bonuses and separation pay), but signed under protest.

She thereafter filed a complaint for illegal dismissal. Labor Arbiter dismussed. NLRC
reversed, and Court of Appeals affirmed NLRC.

Issue: whether or not Arlene Espiritu is a regular or a fixed term contractual employee

Held: Arlene Espiritu must be considered a regular employee. An employee with fixed term
contract may still be considered as regular, as long as it was the employee who requested, or
bargained that contract shall have definite date or termination, or that it was freely entered
into by both parties.

The burden is on the employer to prove that person whose services it pays for is an
independent contractor, rather than a regular employee with or without a fixed term.

8. Nestle v. Puedan (2017)

Facts: On July 6, 2012, the respondents filed a complaint against the petitioner for illegal
dismissal and demanding for separation pay, nominal damages and attorney’s fees. The
respondents alleged that Ocho de Setiembre Inc. (ODSI) and Nestle Philippines Inc. (NPI) hired
them to sell various products of NPI in the assigned covered area. After sometime, the
respondents demanded that they be considered regular employees of NPI but they were
directed to sign contracts of employment with ODSI instead. However, the respondents refused
to comply with such directives resulting from their dismissal from their position. The contention
of the respondents is that ODSI is a labor-only contractor and, thus, they should be deemed
regular employees of NPI and there was no just or authorized cause for their dismissal. The
ODSI averred that it is a company engaged in the business of buying, selling, distributing, and
marketing of goods and commodities of every kind and it enters into all kinds of contracts for
the acquisition thereof. According to ODSI the respondents were hired as its employees to
execute the Distributorship Agreement with the NPI. Unfortunately, the business relationship
between the NPI and ODSI turned sour and eventually NPI downsized its marketing and
promotional support from ODSI and termination of the Distributorship Agreement. Meanwhile,
ODSI argues with the respondents that they were not dismissed but merely on floating status.
However, the NPI did not file any position paper or appear in the scheduled conferences.

The Labor Arbiter concluded that all the impleaded respondents therein (i.e. including NPI)
should be held liable for the payment of nominal damages plus attorney’s fees.
 The aggrieved respondents appealed to National Labor Relation Commission (NLRC) and
the NLRC reversed and set aside the Labor Arbiter ruling. The NLRC ordered ODSI and NPI to
pay each of the respondents and entitled to separation pay and to nominal damages. The
respondents moved for a partial reconsideration arguing since it was ODSI that closed down
operations and not the NPI, therefore NPI should reinstate them. However, the NLRC denied
the motion.

Moreover, the NPI was dissatisfied hence filed a petition for certiorari before the Court of
Appeals (CA) which the CA affirmed the NLRC ruling.

Issue: whether or not Nestle Philippines Inc. (NPI) and Ocho de Setiembre Inc. (ODSI) are
deemed jointly and severely liable for the respondent’s monetary claims.

Held: No. The Distributorship Agreement between the Nestle Philippines inc. (NPI) and Ocho
de Setiembre Inc. (ODSI) is not that of a principal and a contractor, but that of a seller and a
buyer/re-seller. Based on the stipulated in the Distributorship Agreement NPI agreed to sell its
products to ODSI at discounted prices. According to NPI the goods it manufactures are
distributed to the market through various distributor including ODSI, that in turn, re-sell the
same to the designated outlets through its own employees as the respondents. Therefore, the
reselling activities allegedly performed by the respondents properly pertain to ODSI only.

In effect, ODSI was not a labor-only contractor of NPI hence the NPI cannot be deemed the
true employer of the respondents. Therefore, NPI cannot be held jointly and severely liable to
ODSI’s monetary obligation towards the respondents.

9. Tongko v. Manulife (2010)

Facts: This case is an MR of a previous SC decision. First phase of contractual relationship

between Tongko and Manulife - Career Agents Agreement (1977) Pertinent clause: It is
understood and agreed that the Agent is an independent contractor and nothing contained
herein shall be construed or interpreted as creating an ER-EE rel. between the Company and
the Agent. Second phase - Tongko became a Unit Manager, then a Branch Manager, and finally
a Regional Sales Manager. Note: Tongko consistently declared himself self-employed in his ITRs.
Manulife withheld the corresponding 10% tax on his earnings. Nov. 2001 - Manulife instituted
manpower development programs at the regional sales management level. De Dios wrote to
Tongko re: concerns brought up during the Metro North Sales Managers Meeting. Gist: Tongkos
region was the lowest performer (on a per manager basis) in terms of recruiting in 2000 and
still continues to remain one of the laggards in the area. No Sales Manager confirmed Tongkos
statement that some of the managers are unhappy with their earnings and would want to
revert to the position of agents. Moreover, Tongko’s statement that Sales Managers are doing
what the company asks them to do but they earn less. De Dios was thus of the opinion that
Tongko has not been proactive all these years when it comes to agency growth. He thus
directed Tongko to hire at his expense a competent assistant, and told him that the rest of the
Agency operations will deal with the North Star Branch in autonomous fashion. The above
changes can end at this point, and they need not go any further. The following month, De Dios
issued a notice of termination of the Agency Agreement with Tongko. The latter thus filed a
complaint for illegal dismissal with the NLRC. Main contention - He was Manulifes EE before he
was illegally dismissed. TONGKOMANULIFE As Regional Sales Manager, he was given certain
allowances apart from his commissions. He was tasked with numerous administrative functions
and supervisory authority over Manulifes EEs aside from selling policies and recruiting agents.
He was assigned a definite place in Manulifes office He was required to follow at least 3 codes
of conduct. Tongko had no fixed wage or salary; he was paid commissions of varying amounts.
It deducted and withheld a 10% tax from all commissions Tongko received; the latter even
declared himself to be self-employed and consistently paid taxes as such. Tongko is not their EE
(citing Carungcong vs. NLRC) Labor Arbiter - No ER-EE rel.; NLRC - ER-EE rel.; CA - No ER-EE rel.
SC (1st Decision) - ER - EE rel. SCs ruling in 1st Insular Life case did not foreclose the possibility
of an insurance agent becoming an EE of an insurance company; if evidence exists showing that
the company promulgated rules effectively controlling or restricting an agents choice of
methods in selling insurance. Manulife had power of control over Tongko: Tongko undertook to
comply with Manulifes rules and regulations. Various affidavits of Manulifes insurance agents
and managers, showing that they performed administrative duties that established
employment with Manulife. Tongko was tasked to recruit some agents in addition to his other
administrative functions; his failure to follow this directive led to his termination.

Issue: whether or not an employer-employee relationship existed between Tongko and

Manulife

Held: No. SC reversed its Decision.

The Insurance and the Civil Code; the parties intent and established industry practices Since the
factual antecedents were set in the insurance industry, the Insurance Code (IC) primarily
governs (i.e. agent and broker relationship with the insurance company). But the same Code
does not wholly regulate the agency that it speaks of, as agency is a civil law matter governed
by the Civil Code (CC). Sec. 186, IC: No person, partnership, or association of persons shall
transact any insurance business in the Philippines except as agent of a person or corporation
authorized to do the business of insurance in the Phils. Sec. 299, IC: No insurance company
doing business in the Phils., nor any agent thereof, shall pay any commission or other
compensation to any person for services in obtaining insurance, unless such person shall have
first procured from the Commissioner a license to act as insurance agent of such company or as
insurance broker as hereinafter provided. Under the IC, the agent must, as a matter of
qualification, be licensed and must also act within the parameters of the authority granted
under the license and under the contract with the principal. Rules regarding the desired results
are built-in elements of control specific to an insurance agency and should not and cannot be
read as elements of control that attend an employment relationship under the Labor Code (LC).
Art. 1868, CC: An agent is a person who binds himself to render some service or to do
something in representation or on behalf of another, with the consent or authority of the
latter. The employer controls the employee both in the results and the means and manner of
achieving such result. The principal in an agency relationship also has the prerogative to
exercise control over the agent in undertaking the assigned task based on parameters outlined
in pertinent laws. General law on agency as applied to insurance - agency must be express in
light of need for license and designation by the insurance company. Here, the Agreement fully
serves as grant of authority to Tongko as Manulifes insurance agent. This is supplemented by
the companys agency practices and usages, duly accepted by the agent in carrying out the
agency. By authority of the IC (Sec. 299), an insurance agency is for compensation, a matter the
CC (Art. 1875) presumes in the absence of proof to the contrary. Particularly relevant is the
provision that in the execution of the agency, the agent shall act in accordance with the
instructions of the principal. (Art. 1887)The Cited Case Carungcong, Grepalife and Second
Insular cases dealt with the proper legal characterization of a subsequent management contract
that superseded the original agency contract between the insurance company and its agent. A
determination of the presence of the LC element of control was made on the basis of the
stipulations in the subsequent contracts. Here, the only contract or document extant and
submitted as evidence is the Agreement, a pure agency agreement in the CC context similar to
the original contract in the First Insular and AFPBMAI cases. While Tongko was later designated
to several positions, no formal contract regarding these undertakings appears in the records of
the case. Analysis of the evidence showed that the Agreement stood for more than two
decades, and based on the records of the case, was never modified or novated. It assumes
primacy because it directly dealt with the nature of the parties relationship up to the very end;
and both parties never disputed its authenticity or accuracy of its terms. By its express terms,
Tongko served as an insurance agent, not as an employee. This characterization by the parties
cannot be brushed aside, because it embodies their intent at the time they entered into the
Agreement, and they were governed by this understanding throughout their relationship. This
intent is reinforced by the system of compensation which the Agreement provides, which is in
accordance with the production-based sales commissions that the IC provides. Moreover, this
intent is not illegal or outside the contemplation of law. The IC expressly envisions a principal-
agent relationship between the insurance company and the insurance agent in the sale of
insurance to the public. Judicial notice that as a matter of IC based business practice, an agency
relationship prevails in the insurance industry for the purpose of selling insurance. Evidence
shows that Tongkos role as an insurance agent never changed during his relationship with
Manulife. He essentially remained an agent, but moved up thru Manulifes recognition that he
could use other agents approved by Manulife, but operating under his guidance and in whose
commissions he had a share. (lead agent) As an agent who was recruiting and guiding other
insurance agents, Tongko likewise moved up in terms of the reimbursement of expenses he
incurred in the course of his lead agency, a prerogative he enjoyed pursuant to Art. 1912 (CC).
What happened was a mere grant of an expanded sales agency role that recognized him as
leader amongst agents. Tongko consistently clung to the view that he was an independent
agent selling insurance products since he invariably declared himself a business or self-
employed person in his ITS. ( Never mentioned in the First SC Decision; it would have
constituted admissions against his interet. Estoppel - Tongkos previous admissions in several
years of ITRs as an independent agent, as against his belated claim that he was all along an
employee, are too diametrically opposed to be simply ignored. Dissent (Velasco) - Tongko had
dual roles: (1) agent insofar as he sold insurance, (2) employee in his capacity as a manager. SC -
there is lack of evidentiary support for the conclusion that Manulife exercised control over
Tongko in the sense understood in the LC; it is moreover devoid of jurisprudential basis.2. Other
evidence of alleged control Prior to De Dios letter, Manulife had practically left Tongko alone
not only in doing the business of selling insurance, but also in guiding the agents under his wing.
Mere presentation of codes of conduct is not per se indicative of labor law control. IC imposes
obligations on both the insurance company and its agents in the performance of their
respective obligations under the Code. The general law on agency expressly allows the principal
an element of control over the agent in a manner consistent with an agency relationship. First
Insular case: A commitment to abide by the rules and regulations of an insurance company
does not ipso facto make the insurance agent an employee. Guidelines indicative of labor law
control should not merely relate to the mutually desirable result intended by the contractual
relationship; they must have the nature of dictating the means or methods to be employed in
attaining the result, or of fixing the methodology and of binding or restricting the party hired to
the use of these means. Results-wise, the principal can impose production quotas and can
determine how many agents, with specific territories, ought to be employed to achieve the
companys objectives. These are management policy decisions that the labor law element of
control cannot reach. Here, Manulifes codes of conduct, all of which do not intrude into the
insurance agents means and manner of conducting their sales and only control them as to the
desired results and Insurance Code norms, cannot be used as basis for a finding that the labor
law concept of control existed between Tongko and Manulife. Dissent - Imposition of
administrative and managerial functions as indicative of labor law control; a substantive
alteration of Manulifes authority over Tongko and the performance of his end of the
relationship with Manulife. SC - Tongko and Manulife never altered the original Agreement.
Moreover, the operative words are the sales target, the methodology being left undefined
except to the extent of being coordinative. To coordinate is not so much a matter of control by
Manulife; it is a statement of a branch managers role in relation with his agents from the point
of view of Manulife whose business Tongkos sales group carries. The portion of the affidavits
suggesting labor law control were highlighted, while some portions were not brought out: ex. - I
have no fixed wages since my services are compensated by way of commissions; I employ my
own method in soliciting insurance at a time and place I see fit, etc. De Dios letter indicates the
least amount of intrusion into Tongkos exercise of his role as manager in guiding the sales
agents. It contained mere operational guidelines on how Tongko could align his operations with
Manulifes directed goal of being a big league player. This directive cannot strictly be
understood as an intrusion into Tongkos method of operating and supervising the group of
agents within his delineated territory; at most, it was a signal to Tongko that his results were
unsatisfactory, and was a suggestion on how his weakness in delivering results could be
remedied. Tongko was not supervising regular full-time employees of Manulife engaged in the
running of the insurance business; he was effectively guiding his corps of sales agents, who are
bound to Manulife through the same Agreement that he had with Manulife, all the while
sharing in these agents commissions through his overrides. Company aims and objectives were
simply relayed to him through the expansion of non-employee sales force. Dissent - Any doubt
in the existence of an ER-EE rel. should be resolved in favor of its existence. SC - Application of
Art. 4 (LC) is misplaced, as it applies only when doubt exists in the implementation and
application of LC and its IRR; it does not apply where no doubt exists as in a situation where the
claimant clearly failed to substantiate his claim of employment relationship by the quantum of
evidence that the LC requires.

10. Intel v. NLRC and Cabiles (2014)

Facts: Cabiles was initially hired by Intel Philippines as inventory analyst. He was then promoted
several times and was assigned at Intel Arizona and Intel Chengdu. He later on applied at Intel
Semiconductor Limited Hong Kong.

Cabiles was offered the position of Finance Manager. Before he accepted it, he emailed Intel
Phil., asking for the consequences of accepting the offer. Intel Philippines replied saying that he
would not be eligible to receive retirement benefits. Cabiles signed the job offer, but after
seven months, he resigned.

Two years later, Cabiles filed for non-payment of retirement benefits and for moral and
exemplary damages with NLRC. He insisted that he was employed by Intel Phils. For 10 years
and 5 months including his 7-month stint at Hong Kong. Labor Arbiter ordered Intel Philippines
to pay Cabiles retirement benefirs. NLRC affirmed and disregarded the waiver because it was
signed when the retirement pay had not yet accrued. Pending disposition, NLRC issued a writ of
execution. Court of Appeals affirmed.

Issue: whether or not Cabiles is entitled to retirement benefits

Held: No. Supreme Court agrees with Intel Philippines and reverses the decision of the Court of
Appeals. Resignation is the formal relinquishment of office, the overt act of which is coupled
with an intent to renounce. The communication between him and Intel Philippines expressed
two concerns: clearance procedures and his retirement pay. Despite a non-favorable reply as to
his retirement concerns, Cabiles accepted the offer.

Moreover, his theory of secondment must fail. The continuity, existence, or termination of an
employer-employee relationship in a typical secondment contract or any employment contract
for that matter is measured by the following yardsticks: 1. selection and engagement of
employee; 2. Payment of wages; 3. Power of dismissal; 4. Power to control employee’s conduct.
As applied, Intel Hong Kong became the new employer of Cabiles. Hence, he is not entitled to
retirement pay.

11. American Power Conversion Corporation v. Jayson Yu Lim (2018)

Facts: Jayson Yu Lim was hired to serve as the Country Manager of American Power Conversion
Philippine Sales Offjce, which was not registered with SEC. The only SEC registered corporation
then was American Power Conversion, Philippines, Inc.

During their stint with Kong, Lim and Shao discovered irregularities committed by Kong. They
reported the irregularities to Leanne Cunnold, General Manager for APC-South and Kong’s
immediate superior. Kong thereafter sent emails to Lim, six members of sales, and marketing
team, indicating his displeasure. He also arrived in the country and told Lim that his position as
regional manager would he redundant.

Issue: whether or not Lim was validly dismissed

Held: The Court declares the subject redundancy scheme a sham. To determine the existence of
employer-employee relationship, four elements are considered: 1. Selection and engagement
of employee; 2. Payment of wages; 3. Power of dismissal; 4. Power to control employee’s
conduct.

Here, we have a unique situation where respondent was hired directly by APCC of USA, but
being paid by a separate entity – APCP BV of the Philippines, and is supervised and controlled
by APCS from Singapore and APC Japan.

In cases of termination of an employee, it is the employer who has the burden of proving that
the termination is for a valid and authorized cause. To constitute a valid dismissal, two
requisites must concur: 1. Dismissal must be for any causes enumerated in Art. 282 of Labor
Code; and 2. Employee must be accorded due process, basis of which is the opportunity to be
heard and defend himself. Wherefore, petition is denied, and Lim must be reinstated to his
former position and must be awarded P 45,771.50.

12. Portillo v. Lietz (2012)

Facts: In a letter agreement dated 3 May 1991, signed by individual respondent Rudolf Lietz
(Rudolf) and conformed to by Portillo, the latter was hired by the former.
A copy of [Lietz Inc.’s] work rules and policies on personnel is enclosed and an inherent part of
the terms and conditions of employment.

We acknowledge your proposal in your application specifically to the effect that you will not
engage in any other gainful employment by yourself or with any other company either directly
or indirectly without written consent of [Lietz Inc.], and we hereby accept and henceforth
consider your proposal an undertaking on your part, a breach of which will render you liable to
[Lietz Inc.] for liquidated damages.

If you are in agreement with these terms and conditions of employment, please signify your
conformity below.

On her tenth (10th) year with Lietz Inc., specifically on 1 February 2002, Portillo was promoted
to Sales Representative and received a corresponding increase in basic monthly salary and sales
quota. In this regard, Portillo signed another letter agreement containing a "Goodwill Clause:"

It remains understood and you agreed that, on the termination of your employment by act of
either you or [Lietz Inc.], and for a period of three (3) years thereafter, you shall not engage
directly or indirectly as employee, manager, proprietor, or solicitor for yourself or others in a
similar or competitive business or the same character of work which you were employed by
[Lietz Inc.] to do and perform. Should you breach this good will clause of this Contract, you shall
pay [Lietz Inc.] as liquidated damages the amount of 100% of your gross compensation over the
last 12 months, it being agreed that this sum is reasonable and just.

Three (3) years thereafter, on 6 June 2005, Portillo resigned from Lietz Inc. During her exit
interview, Portillo declared that she intended to engage in business—a rice dealership, selling
rice in wholesale.

In a subsequent letter dated 21 June 2005, Lietz Inc. wrote Portillo and supposed that the
exchange of correspondence between them regarding the "Goodwill Clause" in the
employment contract was a moot exercise since Portillo’s articulated intention to go into
business, selling rice, will not compete with Lietz Inc.’s products.

Subsequently, Lietz Inc. learned that Portillo had been hired by Ed Keller Philippines, Limited to
head its Pharma Raw Material Department. Ed Keller Limited is purportedly a direct competitor
of Lietz Inc.

Issue: whether or not Portillo’s money claims for unpaid salaries may be offset against
respondents’ claim for liquidated damages
Held: It is clear, therefore, that while Portillo’s claim for unpaid salaries is a money claim that
arises out of or in connection with an employer-employee relationship, Lietz Inc.’s claim against
Portillo for violation of the goodwill clause is a money claim based on an act done after the
cessation of the employment relationship. And, while the jurisdiction over Portillo’s claim is
vested in the labor arbiter, the jurisdiction over Lietz Inc.’s claim rests on the regular courts.
Thus:As it is, petitioner does not ask for any relief under the Labor Code. It merely seeks to
recover damages based on the parties' contract of employment as redress for respondent's
breach thereof. Such cause of action is within the realm of Civil Law, and jurisdiction over the
controversy belongs to the regular courts. More so must this be in the present case, what with
the reality that the stipulation refers to the postemployment relations of the parties.

In the case at bar, the difference in the nature of the credits that one has against the other,
conversely, the nature of the debt one owes another, which difference in turn results in the
difference of the forum where the different credits can be enforced, prevents the application of
compensation. Simply, the labor tribunal in an employee’s claim for unpaid wages is without
authority to allow the compensation of such claims against the post employment claim of the
former employer for breach of a post employment condition. The labor tribunal does not have
jurisdiction over the civil case of breach of contract. There is no causal connection between the
petitioner employees’ claim for unpaid wages and the respondent employers’ claim for
damages for the alleged "Goodwill Clause" violation. Portillo’s claim for unpaid salaries did not
have anything to do with her alleged violation of the employment contract as, in fact, her
separation from employment is not "rooted" in the alleged contractual violation. She resigned
from her employment. She was not dismissed. Portillo’s entitlement to the unpaid salaries is
not even contested. Indeed, Lietz Inc.’s argument about legal compensation necessarily admits
that it owes the money claimed by Portillo. When, as here, the cause of action is based on a
quasi-delict or tort, which has no reasonable causal connection with any of the claims provided
for in Article 217, jurisdiction over the action is with the regular courts.

As it is, petitioner does not ask for any relief under the Labor Code. It merely seeks to recover
damages based on the parties’ contract of employment as redress for respondent’s breach
thereof. Such cause of action is within the realm of Civil Law, and jurisdiction over the
controversy belongs to the regular courts. More so must this be in the present case, what with
the reality that the stipulation refers to the postemployment relations of the parties.

For sure, a plain and cursory reading of the complaint will readily reveal that the subject matter
is one of claim for damages arising from a breach of contract, which is within the ambit of the
regular court’s jurisdiction.

It is basic that jurisdiction over the subject matter is determined upon the allegations made in
the complaint, irrespective of whether or not the plaintiff is entitled to recover upon the claim
asserted therein, which is a matter resolved only after and as a result of a trial. Neither can
jurisdiction of a court be made to depend upon the defenses made by a defendant in his
answer or motion to dismiss. If such were the rule, the question of jurisdiction would depend
almost entirely upon the defendant.

The error of the appellate court in its Resolution of 14 October 2010 is basic. The original
decision, the right ruling, should not have been reconsidered.1âwphi1

Indeed, the application of compensation in this case is effectively barred by Article 113 of the
Labor Code which prohibits wage deductions except in three circumstances:

ART. 113. Wage Deduction. – No employer, in his own behalf or in behalf of any person, shall
make any deduction from wages of his employees, except:

(a) In cases where the worker is insured with his consent by the employer, and the deduction is
to recompense the employer for the amount paid by him as premium on the insurance;

(b) For union dues, in cases where the right of the worker or his union to check-off has been
recognized by the employer or authorized in writing by the individual worker concerned; and

(c) In cases where the employer is authorized by law or regulations issued by the Secretary of
Labor.

13. Century Properties v. Babiano (2016)

Facts: Babiano was hired by CPI as director for sales who eventually was promoted for VP for
Sales. He is receiving a salary, allowance, and sales commission. His employment contract
contains a clause which bars him from disclosing confidential information to business
competing with CPI while he is employed and after one year from termination or resignation,
otherwise, his compensation will be forfeited. She signed two contracts stipulating that no
employer-employee relationship exists

After receiving that Babiano provided a competitor with information and being absent without
leave for five days, CPI sent a notice to allow him to explain his disloyalty, conflict of interest,
and breach of trust. He tendered his resignation but he was terminated eight days later.

Issues: whether or not there is employer-employee relationship and whether or not the CPI
would be liable for unpaid commissions

Held: Yes. There exists an employer-employee relationship. This is proven by a. CPI hired and
promoted Concepcion; b. the monthly subsidy and cash incentives received by Concepcion are
actually in the concept of wages; c. CPI had the power to discipline and dismiss him; d. CPI
possessed the power of control because in the performance of her duties as Project director,
the existence of employer-employee relations could not be negated by repudiation in a
contract. It nonetheless failed to include all of respondents’ earned commissions; thus,
necessitating the increase in award of unpaid commissions in Concepcion’s favor.

14. Tolosa v. NLRC (2003)

Facts: Captain Virgilio Tolosa was master of the vessel M/V Donna owned by Quana-Kaiun, and
was hired through its manning agent, Asia Bulk Transport Phils., Inc. (Asia Bulk). During
channeling activities upon the vessel’s departure from Yokohama on November 6, 1992, Capt.
Tolosa was drenched with rainwater. Subsequently, he contracted fever on November 11 which
was later on accompanied by loose bowel movement for the succeeding 12 days. His condition
was reported to Asia Bulk and the US Coast Guard Headquarters in Hawaii on November 15.
However, before he could be evacuated, he died on November 18, 1992.
Evelyn Tolosa, the widow, filed a complaint before the POEA for damages against Pedro Garate,
Chief Mate of the vessel, Mario Asis, Second Mate, Asia Bulk and Quana-Kaiun. The case was
transferred to the NLRC. The Labor Arbiter ruled in favor of the widow, awarding actual
damages plus legal interest, as well as moral and exemplary damages and attorney’s fees. On
appeal to the NLRC, the decision of the Labor Arbiter was vacated and the complaint was
dismissed for lack of jurisdiction over the subject matter of the action pursuant to the
provisions of the Labor Code, as amended. Sustaining the NLRC, the CA ruled that the labor
commission had no jurisdiction over the subject matter of the action filed by petitioner. Her
cause did not arise from an employer-employee relation, but from a quasi-delict or tort. Under
Article 217 (a)(4) of the Labor Code which allows an award of damages incident to an employer-
employee relation, the damages awarded were not proper as she is not an employee, but
merely the wife of an employee.

Issues: (1) Whether or not the Labor Arbiter and the NLRC had jurisdiction over petitioner’s
action.
(2) Whether or not the monetary award granted by the Labor arbiter has already reached
finality.

Held: (1) The Court affirmed that the claim for damages was filed not for claiming damages
under the Labor Code but under the Civil Code. The Court was convinced that the allegations
were based on a quasi-delict or tort. Also, she had claimed for actual damages for loss of
earning capacity based on a life expectancy of 65 years, which is cognizable under the Civil Code
and can be recovered in an action based on a quasi-delict. Though damages under a quasi-delict
may be recoverable under the jurisdiction of labor arbiters and the NLRC, the relief must be
based on an action that has reasonable casual connection with the Labor Code, labor statutes
or CBA’s. It must be noted that a worker’s loss of earning capacity and backlisting are not to be
equated with wages, overtime compensation or separation pay, and other labor benefits that
are generally cognized in labor disputes. The loss of earning capacity is a relief or claim resulting
from a quasi-delict or a similar cause within the realm of Civil Law. In the present case, Evelyn
Tolosa’s claim for damages is not related to any other claim under Article 217, other labor
statutes, or CBA’s. She cannot anchor her claim for damages to Article 161 of the Labor Code,
which does not grant or specify a claim or relief. This provision is only a safety and health
standard under Book IV of the same Code. The enforcement of this labor standard rests with
the labor secretary. It is not the NLRC but the regular courts that have jurisdiction over action
for damages, in which the employer-employee relation is merely incidental, and in which the
cause of action proceeds from a different source of obligation such as a tort.
(2) On the finality of the award, the Court ruled that issues not raised in the court below cannot
be raised for the first time on appeal. Thus, the issue being not brought to the attention of the
Court of Appeals first, this cannot be considered by the Supreme Court. It would be tantamount
to denial of the right to due process against the respondents to do so.

15. Eviota v. Court of Appeals (2003)

Facts: Respondent is a foreign banking institution authorized to do business in the Philippines,

while defendant Eduardo Eviota is a former employee of the bank. Eviota began negotiating
with the bank on his possible employment with the latter. The bank made sure that Eviota was
fully aware of all the terms and conditions. Eviota indicated his conformity through his
signature. Evota assumed his position. However, after leading the bank to believe that he had
come to stay, Eviota resigned with immediate effect to re-join his previous employer. He did
not comply with the 30-day notice rule. Aside from causing chaos, Eviota made off with a
computer diskette and other papers and documents containing confidential information on
employee compensation and bank matters.

The bank sent a written demand to Eviota, but to no avail. Eviota, on the other hand, filed a
motion to dismiss on the ground that the action for damages of the respondent bank was
within the exclusive jurisdiction of the Labor Arbiter under Art. 217(4) of Labor Code as
amended. He averred employer-employee relationship.

Issue: whether or not the action filed is within the jurisdiction of the Labor Arbiter or the
regular courts

Held: Not every controversy or money claim by an employee against the employer or vice versa
is within the exclusive jurisdiction of the labor code. Money claim by a worker against the
employer or vice versa is within the exclusive jurisdiction if the labor arbiter only if there is a
reasonable causal connection between the claim asserted and employee-employer relation.
Absent such a link, the complaint will be cognizable by the regular courts of justice.

Actions between employees and employer where the employer-employee relationship is

merely incidental and the cause of action precedes from a different source of obligation is
within the exclusive jurisdiction of the regular court.
16. Urbanes v. Secretary of Labor and SSS (2003)

Facts: Petitioner Placido O. Urbanes agreed to provide security services to Social Security
Systems (SSS). During the pendency of their agreement, Urbanes requested SSS for an upward
adjustment of their contract rate in compliance with the mandated wage increases. SSS ignored
the request which led Urbanes to pull out his agencys services and to subsequently file a
complaint against SSS for the implementation of the wage increase. The Regional Director of
the DOLE-NCR issued an order in favor of Urbanes. SSS filed an appeal to the Secretary of Labor
who later on set aside the order of the Regional Director. Urbanes filed an appeal by certiorari
to the Supreme Court stating that the Secretary of Labor does not have jurisdiction to review
appeals from decisions of the Regional Director over complaints for recovery of wages when it
should have been appealed to the National Labor Relations Commission. SSS, on the other
hand, contends that Art. 128, not Art. 129 of the Labor Code should be applied.

Issue: whether or not the DOLE Secretary can exercise jurisdiction over decisions of Regional
Directors involving complaints for recovery of wages

Held: When the relief sought is not under the Labor Code but for payment of a sum of money
and damages on a breach of contract, it is within the realm of civil law and jurisdiction belongs
to the regular courts. Neither the Ubanes contention nor the SSS is impressed with merit.
Lapanday Agricultural Development Corporation v. Court of Appeals instructs so. In that case,
the security agency filed a complaint before the Regional Trial Court (RTC) against the principal
or client Lapanday for the upward adjustment of the contract rate in accordance with Wage
Order Nos. 5 and 6. Lapanday argued that it is the National Labor Relations Commission, not
the civil courts, which has jurisdiction to resolve the issue in the case, it involving the
enforcement of wage adjustment and other benefits due the agencys security guards as
mandated by several wage orders. The Court ruled in Lapanday that the RTC has jurisdiction
over the subject matter of the present case. It is well settled in law and jurisprudence that
where no employer-employee relationship exists between the parties and no issue is involved
which may be resolved by reference to the Labor Code, other labor statutes or any collective
bargaining agreement, it is the Regional Trial Court that has jurisdiction. In its complaint,
private respondent is not seeking any relief under the Labor Code but seeks payment of a sum
of money and damages on account of petitioner's alleged breach of its obligation under their
Guard Service Contract. The action is within the realm of civil law hence jurisdiction over the
case belongs to the regular courts. While the resolution of the issue involves the application of
labor laws, reference to the labor code was only for the determination of the solidary liability of
the petitioner to the respondent where no employer-employee relation exists. In the case at
bar, even if Urbanes filed the complaint on his and also on behalf of the security guards, the
relief sought has to do with the enforcement of the contract between him and the SSS which
was deemed amended by virtue of Wage Order No. NCR-03. The controversy subject of the
case at bar is thus a civil dispute, the proper forum for the resolution of which is the civil courts.
But even assuming arguendo that Urbanes complaint were filed with the proper forum, for lack
of cause of action it must be dismissed. In fine, the liability of the SSS to reimburse Urbanes
arises only if and when Urbanes pays his employee-security guards the increases mandated by
Wage Order No. NCR-03. The Court in Lapanday Agricultural Development Corporation v. Court
of Appeals held that: It is only when the contractor pays the increases mandated that it can
claim an adjustment from the principal to cover the increases payable to the security guards.
The records do not show that Urbanes has paid the mandated increases to the security guards.
The security guards in fact have filed a complaint with the NLRC against Urbanes relative to,
among other things, underpayment of wages.