CLASS (2): DIGESTS

AURELIO SALINAS, JR., ARMANDO SAMULDE, ALEJANDRO ALONZO and AVELINO CORTEZ, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ATLANTIC GULF AND PACIFIC CO. of MANILA, INC., respondents.

This petition for review should have been properly initiated and is therefore treated as a special civil action for certiorari under
Rule 65. The herein petitioners, Aurelio Salinas, Jr., Armando Samulde, Alejandro Alonzo and Avelino Cortez, assail the
Resolution 1 dated January 31, 1994 of the National Labor Relations Commission (NLRC, for brevity) which dismissed their
complaint, and affirming, in effect, the Decision 2 of the Labor Arbiter declaring them project employees and not regular
employees of respondent Atlantic Gulf and Pacific Company of Manila, Inc. (hereinafter referred to as AG & P).

Petitioner Alejandro Alonzo had been employed with AG & P in the several construction projects of the latter from 1982 to
1989, in the course of which he essentially performed the same job, initially as a laborer, and later as bulk cement operator,
bulk cement plant/carrier operator, and crane driver. Under similar circumstances, petitioner Avelino Cortez had been
employed with AG & P from 1979 to 1988 as carpenter/forklift operator; petitioner Armando Samulde served as
lubeman/stationary operator from 1982 to 1989; while petitioner Aurelio Salinas, Jr., used to work as carpenter/finishing
carpenter from 1983 to 1988.

On May 29, June 6, July 4 and July 5 of 1989, respectively, petitioners Salinas, Samulde, Alonzo and Cortez filed against the
respondent corporation separate complaints for illegal dismissal, which cases were consolidated and jointly heard by Labor
Arbiter Manuel P. Asuncion.

In his Order of dismissal, Labor Arbiter Asuncion found that petitioners are project employees whose work contracts with AG
& P indicate that they were employed in such category; that they have been assigned to different work projects, not just to one
and that their work relation with AG & P, relative to termination, is governed by Policy Instruction No. 20.

On appeal, NLRC affirmed the said findings of the Labor Arbiter and dismissed the complaint for want of merit, ratiocinating
thus:

In the first place, examining the contract of employment of complainants herein presented as evidence by respondent, we
found that a) they were employed for a specific project and for a specific period; b) that they were assigned to different
projects and not just one as earlier claimed by them. In short, from the evidence adduced by respondent which complainants
miserably failed to rebut with their one page position paper containing sweeping statements, there appears to be no doubt that
they are project employees hired for a specific project. Their subsequent separation from service, therefore, as a result of the
completion of the project or its phase did not result in illegal dismissal. 3

Dissatisfied with the aforesaid disposition below, petitioners found their way to this Court via the present petition posing as the
sole issue whether they are regular or project employee.

Petitioners principally argue that following the ruling in the Caramol

case, 4 NLRC gravely erred in dismissing their complaint and declaring them project employees. According to them, they had
been covered by a number of contracts renewed continuously, with periods ranging from five (5) to nine (9) years, and they
performed the same kind of work through out their employment, and such was usually necessary and desirable in the trade or
business of the respondent corporation; and their work did not end on a project-to-project basis, although the contrary was
made to appear by the employer through the signing of separate employment contracts.

Petitioners emphatically stressed that no report even a single one, was ever submitted by the respondent corporation to the
nearest public employment office every time petitioners' employment was terminated pursuant to Policy Instruction No. 20.
There being no report, NLRC's insistence that they (petitioners) were respondents corporation's project employees is without
any legal basis; petitioners maintain.

In its Manifestation and Motion in Lieu of Comment, 5 the Office of the Solicitor General agrees with the contention of
petitioners, to wit:
5. Thus, since petitioners had continuously performed the same kind of work during the whole course of their employment . . .
their jobs were indeed necessary and desirable to the private respondent's main line of business. And this should be the main
consideration in classifying the nature of employment afforded the herein workers.

6. Furthermore, if private respondent really employed the herein petitioners on a project-to-project basis, it should have
submitted a series of reports to the nearest public employment office every time the employment of the workers were
terminated, in line with Policy Instruction No. 20 of the Department of Labor. (citation omitted) Private respondent miserably
failed to do its obligation under the set-up. This failure effectively belies its assertion that herein petitioners are project
employees. 6

Respondent corporation preliminary contends that the present petition for review should have been brought under Rule 65,
Rule 45 not being the proper remedy. Assuming arguendo that the petition should be treated under Rule 65, the petition would
still fail for failure of the petitioners to present a motion for reconsideration. It maintains that the instant petition should not be
given due course due to non-exhaustion of administrative remedies as required by Section 14, Rule VII (sic). It theorizes further
that the questioned Resolution had already become final and executory on March 20, 1994, ten days after receipt thereof by
petitioners on March 9, 1994. Respondent corporation also claims that the present petition is insufficient in form, for failure to
attach thereto a duplicate original or certified true copies of the complainants-petitioners' position paper, respondent
corporation's position paper, and the questioned resolution of the public respondent.

AG & P staunchly claims that the petitioners are mere project employees; that the questioned resolution of public respondent
is supported by substantial evidence and therefore, conclusive and binding. According to respondent corporation, factual
findings of the NLRC are generally accorded not only respect but, at times, finality as long as such findings are based on
substantial evidence; that the doctrinal cases cited by petitioners have no applicability in the case under scrutiny and that
the Magante case 7 does not apply because it was therein established that Magante was never deployed from project to
project but had been regularly assigned to perform carpentry work; and on the other hand, the Baguio Country Club
case 8 pertains to "entertainment-service."

Meanwhile the De Leon case, 9 claims the respondent corporation, bolsters instead, its position since it recognizes the
legality of project employment, which is not deemed regular but a separate and distinct category, particularly in the
construction business. It also attempts to create a chasm between the doctrinal case of Caramol and the present case,
allegedly due to different circumstances involved, and citing the implementation of Department Order No. 19, amending
Policy Instruction No. 20, which allows the rehiring of project workers on a project-to-project basis (Section 2.3.b), and which
considers the report of termination of employment a mere "indicator" of project employment. (Section 2.2)

RULING

The petition is impressed with merit.

The present case is on all fours with the cases of Caramol vs. NLRC (penned by Justice Bellosillo) and Samson vs.  NLRC 10 (with
Justice Regalado as ponente), both of which involved the same private respondent.

In the case of Caramol, petitioner Rogelio Caramol was hired as a rigger by AG & P on a "project-to-project" basis but whose
employment was renewed forty-four (44) times by the latter. In holding that Caramol was a regular worker, the Court
declared that the successive employment contracts where he was made to perform the same kind of work as a rigger, would
clearly manifest that Caramol's tasks were usually necessary or desirable in the usual trade or business of AG & P. 11

The Court likewise upheld the validity of a "project-to-project" basis contract of employment, provided that "the period was
agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure brought to bear upon the
employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the employer and
employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the
former . . .." 12 However, this Court warned, where from the circumstances it is apparent that periods have been imposed to
preclude the acquisition of tenurial security by the employee, they should be struck down as contrary to public policy, morals,
good custom or public
order. 13

The case of Samson  on the other hand, concerned Ismail Samson who served initially as a rigger, as a laborer and finally as a
rigger foreman for AG & P, for approximately 28 years. He was also covered by successive employment contracts with gaps of
from one (1) day up to one (1) week. Noting the successive contracts of employment, the repeated re-hiring, and petitioner's
performance of essentially the same tasks, this Court held that Samson was a regular employee, because these were
sufficient evidence that he was performing tasks usually necessary and desirable in the ordinary course of business of AG &
P. 14 Thus the Court pronounced:

The mandate in Article 281 of the Labor Code, which pertinently prescribes that 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" and 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," should apply in the case of petitioner
(Samson). 15

In the case under consideration, the Court likewise rules that failure to report the termination to Public Employment Office is
a clear indication that petitioners were not and are not project employees.

When these consolidated complaints were filed in 1989, and while petitioners were serving the respondent corporation, the
rule in force then was Policy Instruction (P.I.) No. 20, which required the employer company to report to the nearest Public
Employment Office the fact of termination of project employee as a result of the completion of the project or any phase
thereof, in which he is employed. Further, Department Order (D.O.) No. 19, which was issued on April 1, 1993, did not totally
dispense with the notice requirement but, instead, made provisions therefor, and considered it as one of the "indicators" that a
worker is a project employee. 16

It is significant to note that the notice of termination requirement has been retained under Section 6.1 of D.O. No. 19, viz: 17

6.1. Requirements of labor and social legislations. — (a) The construction company and the general contractor and/or
subcontractor referred to in Sec. 2.5 shall be responsible for the workers in its employ on matters of compliance with the
requirements of existing laws and regulations on hours of work, wages, wage-related benefits, health, safety and social welfare
benefits, including submission to the DOLE-Regional Office of Work Accident/Illness Report, Monthly Report on Employees'
Terminations/Dismissals/Suspensions and other reports. . . . (Emphasis supplied)

In light of the cases of Caramol  and Samson and the application of P.I. No. 20 as amended by D.O. No. 19, the retroactive or
prospective effect of D.O. No. 19 is of no moment. Nevertheless, it was held in Samson vs. NLRC that it is prospective in effect.
Otherwise, it would be prejudicial to the employees and would run counter to the constitutional mandate on social justice and
protection to labor and furthermore, such view is more in accord with the avowed purpose of said Department Order. 18

It is basic and irrefragable rule that in carrying out and interpreting the provisions of the Labor Code and its implementing
regulations, the workingman's welfare should be the primordial and paramount consideration. The interpretation herein
made gives meaning and substance to the liberal and compassionate spirit of the law enunciated in Article 4 of Labor Code that
"all doubts in the implementation and interpretation of the provisions of the Labor Code including its implementing rules
and regulations shall be resolved in favor of labor". 19

It is beyond cavil that petitioners had been providing the respondent corporation with continuous and uninterrupted
services, except for a day or so gap in their successive employment contracts. Their contracts had been renewed several
times, with the total length of their services ranging from five (5) to nine (9) years. Throughout the duration of their contracts,
they had been performing the same kinds of work (e.g., as lubeman, bulk cement operator and carpenter), which were usually
necessary and desirable in the construction business of AG & P, its usual trade or business.

Undoubtedly, periods in the present case have been imposed to preclude the acquisition of tenurial security by petitioners, and
must be struck down for being contrary to public policy, morals, good customs or public order.

Anent the issue that the petition should have been brought under Rule 65 and not under Rule 45 of the Revised Rules of Court,
this rule is not
inflexible. 20 In the interest of justice, often the Court has judiciously treated as special civil actions for certiorari petitions
erroneously captioned as petitions for review on certiorari. 21

With regard to the issue on non-exhaustion of administrative remedies, the Court hold that the failure of petitioners to
interpose a motion for reconsideration of the NLRC decision before coming to this Court was not a fatal omission. The
exhaustion of administrative remedies doctrine is not a hard and fast rule and does not apply where the issue is purely a legal
one. 22 A motion for reconsideration as a prerequisite for the bringing of an action under Rule 65 may be dispensed with where
the issue is purely of law, as in this case. 23 At all events and in the interest of substantial justice, especially in cases involving the
rights of workers, procedural lapses, if any, may be disregarded to enable the Court to examine and resolve the conflicting
rights and responsibilities of the parties. This liberality is warranted in the case at bar, especially since it has been shown that
the intervention of the Court is necessary for the protection of the herein petitioner(s). 24

WHEREFORE, the questioned Resolution of the NLRC in NLRC NCR Case No. 00-05-02489-89; NLRC NCR Case No. 00-06-02621-
89; NLRC NCR Case No. 00-06-02815-89; NLRC NCR Case No. 00-07-03095-89; and NLRC NCR Case No. 00-07-03129-89, is SET
ASIDE and another one is hereby ENTERED ordering the respondent corporation to reinstate petitioners without loss of
seniority and with full backwages. Costs against the respondent corporation.

DR. PEDRITO F. REYES, Petitioner,

vs.
COURT OF APPEALS, PHIL. MALAY POULTRY BREEDERS, INC. and LEONG HUP POULTRY FARM SDN, BHD., Mr. Francis T.N.
Lau, President and Chairman of the Board and Mr. Chor Tee Lim, Director, Respondents.

Assailed in this petition for review under Rule 45 of the Revised Rules of Court are the January 28, 2002 1 and July 22,
20022 Resolutions3 of the Court of Appeals in CA-G.R. SP No. 67431, which dismissed the petition for certiorari filed by petitioner
for failure to attach to the petition the duplicate original or certified true copy of the Labor Arbiter’s decision as well as the
relevant pleadings.

The facts show that on August 24, 1989, respondent Leong Hup Poultry Farms SDN. BHD (Leung Hup) of Malaysia, thru its
Managing Director Francis T. Lau, appointed petitioner Pedrito F. Reyes as Technical/Sales Manager with a net salary of
US$4,500.00 a month. His duties consisted of selling parent stock day-old chicks and providing technical assistance to clients of
the company in Malaysia and other Asian countries. 4 Sometime in 1992, the company formed Philippine Malay Poultry
Breeders, Inc., (Philmalay) in the Philippines. Petitioner was appointed General Manager thereof with a monthly salary of
US$5,500.00.

In 1996-1997, respondents suffered losses which caused them to reduce production and retrench employees in Philmalay. On
June 30, 1997, petitioner gave verbal notice to respondent Francis T. Lau that he will serve as General Manager of Philmalay
until December 31, 1997 only.5 In a letter dated January 12, 1998, petitioner confirmed his verbal notice of resignation and
requested that he be given the same benefits granted to retrenched and resigned employees of the company, consisting of
separation pay equivalent to 1 month salary for every year of service and the monetary equivalent of his sick leave and vacation
leave. He likewise requested for the following:

1. payment of underpaid salary for the period December 1989 – December 31, 1997 together with the additional one month
salary payable in December of every year which was paid at the rate of P26.00 instead of the floating rate;

2. brand new car (Galant Super Saloon) or its equivalent;

3. life insurance policy in the amount of US$100,000.00 from December 1, 1989 to December 31, 1997, or the premiums due
thereon;

4. office rentals at the rate of US$300.00 or its peso equivalent for the use of his residence as office of Philmalay for the period
December 1, 1989 to July 1996; and

5. retention of the services of the law firm Quasha Ancheta Pena and Nolasco Law Firm, which was hired by respondents to
defend him in the illegal recruitment case filed against him in connection with his employment with respondents. 6

In a letter dated January 19, 1998, respondent Philmalay retrenched petitioner effective January 20, 1998 and promised to
pay him separation benefits pursuant to the provisions of the Labor Code.7 He was, however, offered a separation pay
equivalent to four months only, or the total amount of P578,600.00 (P144,650 x 4). The offer was not accepted by petitioner
and efforts to settle the impasse proved futile.

Petitioner filed with the Arbitration Branch of the National Labor Relations Commission a complaint 8 for underpayment of
wages and non-payment of separation pay, sick leave, vacation leave and other benefits against respondents.

On December 22, 1999, the Labor Arbiter rendered a decision9 in favor of petitioner, the dispositive portion of which reads:
PREMISES CONSIDERED, judgment is hereby rendered in favor of the complainant and against the respondents, as follows:

1. To order respondents to pay jointly and severally the complainant, the following:

(a) Unpaid salary from January 1, 1998 to January 19, 1998, the same to be computed in the following manner:

19 = days % 31 days of January ‘98

= 0.613 month x US$5,500.00

= US$3,370.00

(b) Underpayment of salary, the same to be computed at net US$5,500.00 or its peso-equivalent from July 1, 1997 to December
31, 1997, together with the additional one (1) salary payable every year, the same to be paid at the rate of P26.30 instead of
the following rate computed as follows:

July 1997 - P27.66 – P1.36 - P7, 480.00

August 1997 - 29.33 – 3.02 - 16, 665.00

September - 32.39 - 6.09 - 33, 495.00

October 1997 - 34.46 - 8.16 - 44, 880.00

November 1997 - 34.51 - 8.21 - 45, 155.00

December 1997 - 37.17 - 10.57- 59, 785.00

P207,460.00

(c) 13th month pay for December 1997 computed as follows: December 1997 – P37.17 – P10.57 – P59,785.00.

2. To order respondents to pay jointly and severally the complainant the following:

(a) Unused vacation and sick leaves from December 01, 1989 to December 31, 1997 based on the same salary, to be computed
as follows:

i) Vacation Leave – Fifteen (15) days for every year of services x 9 years = 135 days

135 days % 26 working days a month

= 5.2 months

= US$28,600.00

ii) Sick Leave – Fifteen (15) Days for every [year] of service x 9 years = 135 days

135 days % 26 working days a month

= 5.2 months x US$5,500.00 / month

= US$28,600.00

3) To order respondents to pay jointly and severally the complainant his separation pay equivalent to one (1) month pay for
very year of service at the rate of US $5,500.00 or its peso equivalent from December 1, 1989 to January 19, 1998, computed as
follows:

9 years x US$5,500.00 = US$49,500.00

4) To order respondents to pay jointly and severally the complainant’s other claims and benefits:

a) A brand new car (Galant super saloon) or its equivalent in the sum of P945,100.00;
b) Office rentals for the use of his residence situated at No. 38 Don Wilfredo St., Don Enrique Heights Diliman, Quezon City,
[from] 01 December 1989 to July 1996 at the rate of US$300.00 or its peso equivalent to US$23,700.00;

c) Life insurance policy for US$100,000.00 from December 1, 1989 to December 31, 1997, or if the same was not secured the
premiums due thereon for the above period, the same to be computed as follows:

US$2,736.50 x 9 years = US$24,628.50

d) The services of the Law firm of Quasha Ancheta Peña and Nolasco be continued to be retained by the two (2) companies to
represent complainant in the illegal recruitment case before the Regional Trial Court of Quezon City, Branch 96, docketed as
Crim. Case No. Q-93-46421, entitled "People of the Philippines vs. Dr. Antonio B. Mangahas, et al.," filed against … him in
connection with his employment by Leong Hup, or in default thereof to pay the attorney’s fees of the new counsel, that may be
hired by the complainant to defend him in the said case estimated in the sum of P200,000.00, more or less;

5) To order the respondents to pay jointly and severally the complainant moral damages in the sum of P2.5 million and
exemplary damages of P2.5 million;

6) To order the respondents to pay jointly and severally the complainant in the sum equivalent to ten percent (10%) of the total
claim as and for attorney’s fees.

7) Respondents’ counterclaims are hereby dismissed for lack of merit.

SO ORDERED.10

On appeal by respondents to the National Labor Relations Commission (NLRC), the Decision of the Labor Arbiter was
modified by deleting the awards of – (1) US$3,370.00 representing unpaid salary for the period January 1, 1998 to January 19,
1998; (2) US$28,600.00 as vacation leave; (3) brand new car or its equivalent in the sum of P945,100.00; (4) US$23,700.00 as
office rentals for the period of December 1, 1989 to July 1996; (5) US$100,000.00 life insurance policy or the equivalent
premium in the amount of US$24,628.50; (6) P2.5 million as moral damages; and (7) P2.5 million as exemplary damages. The
NLRC likewise reduced the amount of petitioner’s separation pay to US$44,400.00 after adjusting its computation based on the
length of service of petitioner which it lowered from 9 years to 8 years; and by limiting the basis of the 10% attorneys fees to
the total of the awards of underpayment of salary (P207,460.00), 13th month pay differential (P59,785.00) and cash equivalent
of sick leave (US$28,600.00) only, and excluding therefrom the award of separation pay in the amount of US$44,400.00. The
decretal portion of the said decision11 states:

WHEREORE, premises considered, the Decision dated December 22, 1999 is hereby MODIFIED as follows:

Respondents are hereby ordered to pay jointly and severally the complainant, the following:

(a) underpayment of salary as computed in the appealed Decision in the amount of P207, 460.00;

(b) 13th month pay differential as computed in the appealed Decision in the amount of P59,785.00;

(c) monetary equivalent of complainant’s sick leave as computed in the appealed Decision in the amount of US$28,600.00;

(d) separation pay in the amount of US$44,000.00 as earlier computed in this Decision;

(e) attorney’s fees equivalent to ten (10%) percent of the total award based on the awards representing underpayment of
salary, 13th month pay, [and] cash equivalent of sick leave.

Respondents are likewise directed to provide legal counsel to complainant as defendant in Criminal Case No. Q-93-46421.

The awards of unpaid wages from June 1-19, 1998, vacation leave in the amount of US$28,600, P945,000 for car, US23,700.00,
for office rentals, life insurance policy in the amount of US$100,000.00 and moral and exemplary damages in the amount of 2.5
million pesos are hereby DELETED on grounds above-discussed.

SO ORDERED.12

Petitioner filed a motion for reconsideration, however, the same was denied. 13 Undaunted, petitioner filed a petition for
certiorari with the Court of Appeals, which was dismissed on January 28, 2002 for failure to attach to the petition the
following: "(1) complainant’s (petitioner) Position Paper filed before the Labor Arbiter; (2) Decision dated 22 December 1992
penned by Labor Arbiter Ariel Cadiente Santos; and (3) Memorandum of Appeal filed by the petitioner." 14

On February 21, 2002, petitioner filed a motion for reconsideration, attaching thereto a copy of the Labor Arbiter’s decision and
the pleadings he failed to attach to the petition. The Court of Appeals, however, denied petitioner’s motion for reconsideration.
Hence, the instant petition based on the following grounds:

1. COURT OF APPEALS COMMITTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF
JURISDICTION, IN ISSUING THE QUESTIONED RESOLUTION DISMISSING THE PETITION FOR CERTIORARI BASED ON
TECHNICALITIES, THAT PETITIONER FAILED TO COMPLY WITH SEC. 1, RULE 65, RULES OF CIVIL PROCEDURE FOR FAILURE TO
ATTACH THREE (3) DOCUMENTS CONSISTING OF:

Complainant’s (petitioner) Position Paper filed before the labor arbiter;

Decision dated 22 December 1999 penned by Labor Arbiter Ariel Cadiente Santos; and

Memorandum of Appeal filed by the petitioner.

WHICH RESPONDENT COURT OF APPEALS CONSIDERED AS MATERIAL PORTIONS OF THE RECORD DESPITE THE FACT THAT THE
SUBJECT DOCUMENTS SOUGHT TO BE PRODUCED HAVE ACTUALLY BEEN REPRODUCED OR SUBSTANTIALLY COVERED BY THE
QUESTIONED JUDGMENT, ORDER OR RESOLUTION FILED/SUBMITTED BEFORE IT.

2. COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION IN DISMISSING THE PETITION, AND IN DENYING THE
MOTION FOR RECONSIDERATION THEREOF ON THE GROUND THAT THERE IS NO COGENT REASON FOR IT TO OVERTURN ITS
DISMISSAL, DESPITE CLEAR AND CONVINCING EVIDENCE, EXTANT ON THE RECORDS SHOWING THAT THE NATIONAL LABOR
RELATIONS COMMISSION’S (NLRC) DECISION AND RESOLUTION WERE FLAWED, A PALPABLE OR PATENT ERROR, WHICH MAY
BE SUMMARIZED, TO WIT:

(A) IN DECLARING THAT PETITIONER HAD RESIGNED FROM HIS EMPLOYMENT, AND NOT RETRENCHED OR TERMINATED
DESPITE A DOCUMENTARY EVIDENCE EXTANT ON THE RECORD ISSUED BY PRIVATE RESPONDENTS DATED JANUARY 19, 1998
GIVING "FORMAL NOTICE TO YOU (PETITIONER) OF YOUR TERMINATION DUE TO RETRENCHMENT EFFECTIVE JANUARY 20,
1998".

(B) IN HOLDING AGAIN, AND DENYING PETITIONER’S VALID CLAIMS DESPITE DOCUMENTARY EVIDENCE OR THE EXISTENCE OF A
CONTRACT OF EMPLOYMENT STATING THAT:

(1) EMPLOYEES (INCLUDING PETITIONER AS GENERAL MANAGER) AS A MATTER OF COMPANY POLICY AND/OR PRACTICE) WHO
ARE RETRENCHED ARE ENTITLED TO INCENTIVES INCLUDING 15-DAYS VACATION LEAVE AND 15-DAYS SICK LEAVE WITH PAY; A
FACT ADMITTED NO LESS BY PRIVATE RESPONDENTS’ OWN WITNESS, MS. MA. ROWENA LOPEZ (FORMER PERSONNEL
MANAGER OR PHILMALAY) WHO EXECUTED AN AFFIDAVIT ADMITTING THE SAME.

(2) PETITIONER’S ENTITLEMENT AS PER CONTRACT TO A BRAND NEW CAR (OR AT LEAST TO THE CASH EQUIVALENT THEREOF);
$100,000.00 LIFE INSURANCE POLICY (OR IN DEFAULT THEREOF AT LEAST TO THE PREMIUMS THEREIN), AND OFFICE RENTALS
FOR THE USE OF THE PETITIONER’S PRIVATE RESIDENCE AS OFFICE OF RESPONDENTS.

(3) PETITIONER IS ENTITLED, TO MORAL AND EXEMPLARY DAMAGES DUE TO PRIVATE RESPONDENTS ACTS OF BAD FAITH IN
REQUIRING PETITIONER TO EXECUTE A LETTER OF RESIGNATION, WHEN IN FACT HE WAS ADMITTEDLY TERMINATED THRU
RETRENCHMENT, AND ITS REFUSAL TO PAY HIM HIS VALID CLAIMS, DESPITE HIS CONTRACT OF EMPLOYMENT, COMPANY
POLICY, AND LETTER OF TERMINATION ISSUED BY PRIVATE RESPONDENTS.

(4) PETITIONER’S ENTITLEMENT TO 10% OF THE TOTAL AMOUNT OF THE AWARD OF ATTORNEY’S FEES AS PROVIDED FOR BY
LAW AND AS PER PETITIONER’S CONTRACT WITH COUNSEL, AND NOT ONLY 10% OF THE TOTAL AWARD REPRESENTING UNDER
PAYMENT OF SALARY, 13th MONTH PAY, AND CASH EQUIVALENT OF SICK LEAVE AND IN ORDERING PRIVATE RESPONDENT TO
PROVIDE LEGAL COUNSEL TO PETITIONER IN CRIM. CASE NO. Q-93-46421, WHEN THE SUBJECT CASE HAD ALREADY BEEN
DISMISSED AT THE EXPENSE OF PETITIONER WHO HAD PREVIOUSLY HIRED HIS OWN COUNSEL OF CHOICE FOR THE PURPOSE.

The issues for resolution are: (1) whether or not the Court of Appeals erred in dismissing the petition; and (2) whether or not
the decision of the Labor Arbiter should be reinstated.
The allowance of the petition on the ground of substantial compliance with the Rules is not a novel occurrence in our
jurisdiction. As consistently held by the Court, rules of procedure should not be applied in a very technical sense, for they are
adopted to help secure, not override, substantial justice.15 In Ramos v. Court of Appeals,16 the Court of Appeals dismissed a
petition for review of the decision of the Regional Trial Court because the petitioner failed to attach to the petition a certified
true copy of the Metropolitan Trial Court’s decision in addition to the certified true copy of the assailed decision of the RTC.
Holding that the Court of Appeals should have given due course to the petition considering that petitioner subsequently
submitted a certified true copy of the decision of the MeTC, we held:

Petitioner is right that the MeTC’s decision cannot be considered a "disputed decision." The phrase is the equivalent of "ruling,
order or decision appealed from" in Rule 32, §2 of the 1964 Rules made applicable to appeals from decisions of the then Courts
of First Instance to the Court of Appeals by R.A. No. 296, as amended by R.A. No. 5433. Since petitioner was not appealing from
the decision of the MeTC in her favor, she was not required to attach a certified true copy – but only a true or plain copy – of
the aforesaid decision of the MeTC. The reason is that inclusion of the decision is part of the requirement to attach to the
petition for review "other material portion of the record as would support the allegations of the petition." Indeed, petitioner
referred to the MeTC decision in many parts of her petition for review in the Court of Appeals for support of her theory.

Nonetheless, the Court of Appeals should have reconsidered its dismissal of petitioner’s appeal after petitioner submitted a
certified true copy of the MeTC’s decision. It was clear from the petition for review that the RTC incurred serious errors in
awarding damages to private respondents which were made without evidence to support the award and without any
explanation…17

In Jaro v. Court of Appeals,18 we applied the rule on substantial compliance because the petitioner amended his defective
petition and attached thereto the relevant annexes certified according to the rules. Thus –

There is ample jurisprudence holding that the subsequent and substantial compliance of an appellant may call for the relaxation
of the rules of procedure. In Cusi-Hernandez vs. Diaz and Piglas-Kamao vs. National Labor Relations Commission, we ruled that
the subsequent submission of the missing documents with the motion for reconsideration amounts to substantial compliance.
The reasons behind the failure of the petitioners in these two cases to comply with the required attachments were no longer
scrutinized. What we found noteworthy in each case was the fact that the petitioners therein substantially complied with the
formal requirements…19

The same leniency should be applied to the instant case considering that petitioner subsequently submitted with his motion
for reconsideration the certified true copy of the Labor Arbiter’s decision, the complainant’s position paper and the
respondent’s memorandum of appeal. Clearly, petitioner had demonstrated willingness to comply with the requirements set by
the rules. If we are to apply the rules of procedure in a very rigid and technical sense, as the Court of Appeals did in this case,
the ends of justice would be defeated.

The pleadings and documents filed extensively discussed the issues raised by the parties. Such being the case, there is sufficient
basis to resolve the instant controversy. 20 Labor laws mandate the speedy disposition of cases, with the least attention to
technicalities but without sacrificing the fundamental requisites of due process.21 Remanding the case to the Court of Appeals
will only frustrate speedy justice and, in any event, would be a futile exercise, as in all probability the case would end up with
this Court.22 We shall thus rule on the substantial claims of the parties.

Was the termination of petitioner’s employment caused by retrenchment or by voluntary resignation?

The Court finds that petitioner’s dismissal from service was due to retrenchment. This is evident from the termination letter
sent by Philmalay to petitioner, to wit –

We regret to inform you that in view of the prevailing market conditions and the continuous losses being incurred by the
company, the management has decided to cut down on expenses and prevent further losses through retrenchment of some of
our personnel effective January 19, 1998.

In compliance with the requirement of the law, this will serve as a formal notice to you of your termination due to
retrenchment effective January 20, 1998. To provide you with sufficient time to seek alternative employment, you need not
report for work (unless otherwise requested) starting January 20, 1998. Notwithstanding the above mentioned affectivity date,
you may come down to the office and receive your separation benefits pursuant to the Labor Code… 23
While it is true that petitioner tendered his resignation letter to respondents requesting that he be given the same benefits
granted by the company to resigned/retrenched employees, there is no showing that respondents accepted his resignation.
Acceptance of a resignation tendered by an employee is necessary to make the resignation effective. 24 No such acceptance,
however, was shown in the instant case. What appears in the record is a letter terminating the services of petitioner due to
retrenchment effective January 20, 1998. Verily, said letter should be interpreted as a non-acceptance of petitioner’s
resignation effective December 31, 1997. As correctly pointed out by the Labor Arbiter, if respondents considered petitioner
resigned as of December 31, 1997, then there would be no need to retrench him.

The length of service of petitioner, which the NLRC correctly reduced to 8 years, as well as the solidary liability of respondent
corporations are no longer assailed here. Whether petitioner is considered resigned on December 31, 1997 or retrenched on
January 20, 1998, his length of employment reckoned from August 24, 1989 would still be 8 years. Moreover, respondents did
not appeal from the decision of the NLRC and in fact sought its affirmance in their Opposition to the motion for
reconsideration25 and Comment to the motion for reconsideration26 filed before the NLRC and the Court of Appeals,
respectively. So also, petitioner is estopped from claiming that he was illegally dismissed and that his retrenchment was without
basis. His request for benefits granted to retrenched employees during such time when respondent was in the process of
retrenching its employees is tantamount to a recognition of the existence of a valid cause for retrenchment. What remains to
be resolved by the Court is the validity of the NLRC’s deletion/modification of the awards of – (1) unpaid salary; (2) vacation
leave; (3) car and insurance policy/premiums; (4) moral and exemplary damages; (5) reimbursement for expenses for legal
services; (6) rental payment; and (7) attorney’s fees.

As regards the award of unpaid salary, the NLRC was correct in holding that petitioner is not entitled to compensation from
January 1, 1998 to January 19, 1998, because he was not able to prove that he rendered services during said period. In the
same vein, there is no basis in awarding moral and exemplary damages, inasmuch as respondents were not shown to have
acted in bad faith in initially refusing to award separation pay equivalent to 1 month salary for every year of service.
Respondents even offered to pay petitioner separation pay, albeit in an amount not acceptable to petitioner. Moral damages
are recoverable only where the act complained of is tainted by bad faith or fraud, or where it is oppressive to labor, and done in
a manner contrary to morals, good customs, or public policy. Exemplary damages may be awarded only if the act was done in a
wanton, oppressive, or malevolent manner.27 None of these circumstances exist in the present case.

The NLRC also correctly ruled that the car and insurance benefits are granted only during the course of employment; hence,
they should not be part of petitioner’s separation package. Likewise, petitioner’s claim for payment of rental for the use of
his house as office of Philmalay should be denied for having been ventilated in the wrong forum. Not all money claims that
may be asserted by an employee against his employer are within the jurisdiction of the NLRC. Money claims of workers which
fall within the jurisdiction of Labor Arbiters are those which arise out of employer-employee relationship. Obviously, the
demand for rental payment is not a labor dispute; rather, it is based on contractual relations independent of employer-
employee relationship. Hence, the jurisdiction thereon is with the regular courts. 28

Since respondents did not appeal from the decision of the NLRC, it is presumed that they are satisfied with the adjudications
therein, including the order of NLRC directing them to provide legal services to petitioner in the illegal recruitment case filed
against the latter while he was still employed by respondents. This is in accord with the doctrine that a party who has not
appealed cannot obtain from the appellate court any affirmative relief other than the ones granted in the appealed
decision.29 Nonetheless, respondents cannot be ordered to reimburse the amount of P200,000.00 for the legal services of the
law firm allegedly hired by petitioner because he failed to establish that he indeed hired the services of a law firm and that he
spent P200,000.00 as a consequence thereof.

Petitioner is, however, entitled to the award of vacation leave as part of respondents’ retrenchment incentives. In granting
sick leave but deleting vacation leave benefits, the NLRC based its ruling on the affidavit of one Ms. Rowena Lopez, a former
personnel of Philmalay, viz:

3. That based on company policy and/or practice the rank-and-file employees are entitled to 15-days vacation leave and 15-
days sick leaves. However, the vacation leave must be availed of within the year or applied to the remaining period of
employment for those who resigned or go on terminal leave. In case of sick leaves all unused sick leaves are also commutable
to cash;

4. That employees who were retrenched are entitled to the following incentives:

(a) One (1) month additional leave with pay effective after their last day of employment to enable them to look for a new job;
(b) Plus one (1) month separation pay for every year of service; and

(c) 15-days vacation leave and 15-days sick leave with pay as stated in paragraph 3 hereof. 30

The foregoing expressly states that a retrenched employee is entitled to 15-day vacation leave. Paragraph 4 is the
retrenchment package granted to retrenched employees, whereas paragraph 3 refers to the feasibility of commutation of
unused sick and vacation leaves. Except for the sentence entitling employees to vacation and sick leaves, the last 2 sentences in
paragraph 3 have nothing to do with the retrenchment benefits in paragraph 4. Note that the 15-day vacation and sick leave
with pay in paragraph 4(c) are not qualified by the word "unused". The 15-day vacation and sick leaves are granted to
retrenched employees as part of the retrenchment benefits regardless of whether or not they have unused sick and vacation
leaves at the time of the retrenchment. Moreover, the applicability of the said provisions to petitioner was not disputed by
respondents. They even invoked the same in manifesting conformity to the deletion by the NLRC of the award of 15-day
vacation leave for every year of service. At any rate, any ambiguity therein must be resolved strictly against the respondents,
who drafted these provisions.31 Hence, petitioner is entitled not only to 15 days sick leave but also to 15 days vacation leave
with pay

The Labor Arbiter’s computation of petitioner’s 15-day sick leave pay must be modified. The NLRC, which affirmed the Labor
Arbiter’s decision, reduced petitioner’s number of years of service from 9 to 8 years but it did not make the corresponding
adjustment in the determination of petitioner’s sick leave pay which used 9 years as the basis in the computation thereof.
Accordingly, the awards of 15-day sick leave and 15-day vacation leave for every year of service must be computed using 8
years as its basis.

Finally, the award of attorney’s fees must also be modified. In Traders Royal Bank Employees Union-Independent v. National
Labor Relations Commission,32 it was held that there are two commonly accepted concepts of attorney's fees, the so-called
ordinary and extraordinary. In its ordinary concept, an attorney’s fee is the reasonable compensation paid to a lawyer by his
client for the legal services he has rendered to the latter. The basis of this compensation is the fact of his employment by and
his agreement with the client. In its extraordinary concept, attorney’s fees are deemed indemnity for damages ordered by the
court to be paid by the losing party in a litigation. The instances where these may be awarded are those enumerated in Article
2208 of the Civil Code, specifically par. 7 thereof which pertains to actions for recovery of wages, and is payable not to the
lawyer but to the client, unless they have agreed that the award shall pertain to the lawyer as additional compensation or as
part thereof. The extraordinary concept of attorney’s fees is the one contemplated in Article 111 of the Labor Code, which
provides:

Art. 111. Attorney’s fees. – (a) In cases of unlawful withholding of wages, the culpable party may be assessed attorney’s fees
equivalent to ten percent of the amount of wages recovered…

The afore-quoted Article 111 is an exception to the declared policy of strict construction in the awarding of attorney’s fees.
Although an express finding of facts and law is still necessary to prove the merit of the award, there need not be any showing
that the employer acted maliciously or in bad faith when it withheld the wages. There need only be a showing that the
lawful wages were not paid accordingly, as in this case.33 1âwphi1

In carrying out and interpreting the Labor Code's provisions and its implementing regulations, the employee’s welfare should
be the primordial and paramount consideration. This kind of interpretation gives meaning and substance to the liberal and
compassionate spirit of the law as provided in Article 4 of the Labor Code which states that "[a]ll doubts in the
implementation and interpretation of the provisions of [the Labor] Code including its implementing rules and regulations,
shall be resolved in favor of labor", and Article 1702 of the Civil Code which provides that "[i]n case of doubt, all labor
legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer." 34

In the case at bar, what was withheld from petitioner was not only his salary, vacation and sick leave pay, and 13th month pay
differential, but also his separation pay. Hence, pursuant to current jurisprudence, separation pay must be included in the basis
for the computation of attorney’s fees. Petitioner is entitled to attorney’s fees equivalent to 10% of his total monetary award. 35

WHEREFORE, in view of all the foregoing, the instant petition is GRANTED. The assailed Resolutions dated January 28, 2002 and
July 22, 2002 of the Court of Appeals in CA-G.R. SP No. 67431, are REVERSED and SET ASIDE. The Decision of the National Labor
Relations Commission in NLRC NCR CA 023679-2000, is MODIFIED. In addition to the awards of underpayment of salary, 13th
month pay differential, sick leave pay and separation pay, respondents are ordered to pay petitioner vacation leave pay and
10% attorney’s fees, the basis of which shall be the total monetary award. Petitioner’s vacation leave and sick leave pay shall be
computed on the basis of his 8 years of service with respondents. For this purpose, the case is ordered REMANDED to the Labor
Arbiter for the computation of the amounts due petitioner.

G & M PHILIPPINES, INC., Petitioner,

vs.
ROMIL V. CUAMBOT,* Respondent.

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the Decision 1 of the Court of Appeals (CA)
in CA-G.R. SP No. 64744, as well as the Resolution 2 dated February 20, 2004 denying the motion for reconsideration thereof.

The antecedent facts are as follows:

On November 7, 1994, respondent Romil V. Cuambot applied for deployment to Saudi Arabia as a car body builder with
petitioner G & M Philippines, Inc., a duly licensed placement and recruitment agency. Respondent’s application was duly
processed and he later signed a two-year employment contract to work at the Al Waha Workshop in Unaizah City, Gassim,
Kingdom of Saudi Arabia. He left the country on January 5, 1995. However, respondent did not finish his contract and returned
to the Philippines barely six months later, on July 24, 1995. On July 26, 1995, he filed before the National Labor Relations
Commission (NLRC) a complaint for unpaid wages, withheld salaries, refund of plane ticket and repatriation bond, later
amended to include illegal dismissal, claim for the unexpired portion of his employment contract, actual, exemplary and
moral damages, and attorney’s fees. The complaint was docketed as NLRC-NCR Case No. 00-07-05252-95.

Respondent narrated that he began working for Mohd Al Motairi, 3 the President and General Manager of the Al Waha
Workshop, on January 8, 1995. Along with his Filipino co-workers, he was subjected to inhuman and unbearable working
conditions, to wit:

1. [He] was required to work from 7:00 o’clock in the morning to 10:00 o’clock in the evening everyday, except Friday, or six (6)
hours overtime work daily from the usual eight (8) working hours per day.

2. [He] was never paid x x x his monthly basic salary of 1,200 [Riyals] including his overtime pay for the six (6) hours overtime
work he rendered every working day during his work in Saudi Arabia except for the amount of 100 [Riyals] given every month
for his meal allowance;

3. [He] was subjected to serious insult by respondent Muthiri everytime he asked or demanded for his salary; and,

4. [S]ome of complainant’s letters that were sent by his family were not given by respondent Muthiri and/or his staff x x x. 4

When respondent asked Motairi for his salary, he was told that since a huge sum had been paid to the agency for his
recruitment and deployment, he would only be paid after the said amount had already been recovered. He was also told that
his salary was only 800 Saudi Riyals (SAR) per month, in contrast to the SAR1200 that was promised him under the contract.
Motairi warned that he would be sent home the next time he demanded for his salary. Due to his family’s incessant letters
asking for financial support, however, respondent mustered the courage to again demand for his salaries during the second
week of July 1996. True to his word, Motairi ordered him to pack up and leave. He was able to purchase his plane ticket only
through the contributions of his fellow Filipinos. Motairi even accompanied him to the airport when he bought his plane ticket.
In the meantime, his wife had been making inquiries about him.

To corroborate his claims, respondent submitted the following documents: an undated letter 5 he had written addressed to the
Philippine Labor Attaché in Riyadh, with Arabic translation; 6 his wife’s letter7 dated June 28, 1995 addressed to the "Gulangco
Monteverde Agency, Manila Head Office," asking for a "favor to help [her] husband to come home as early as possible;" a fax
message8 dated July 17, 1995 from a representative of the Land Bank of the Philippines (LBP) to a counterpart in Riyadh, asking
for assistance to locate respondent;9 and the reply10 from the Riyadh LBP representative requesting for contact numbers to
facilitate communication with respondent.1âwphi1

Respondent further claimed that his employer’s actuations violated Articles 83 and 103 of the Labor Code. While he was
entitled to terminate his employment in accordance with Article 285 (b) due to the treatment he received, he did not exercise
this right. He was nevertheless illegally dismissed by his employer when he tried to collect the salaries due him. Respondent
further claimed that the reduction of his monthly salary from SAR1,200 to SAR800 and petitioner’s failure to furnish him a copy
of the employment contract before his departure amounted to prohibited practices under Article 34 (i) and (k) of the Labor
Code.

Respondent prayed for the following relief:

WHEREFORE, premises considered, complainant most respectfully prays unto this Honorable Office that the instant complaint
be given due course and that a decision be rendered in his favor and against respondents G & M (Phils.), Inc., Alwaha (sic)
Workshop and/or Muhamd (sic) Muthiri, as follows:

(1) Ordering the respondents to pay, jointly and severally, complainant the unpaid salaries and overtime pay in the amounts of
₱61,560.00 and ₱66,484.80, respectively, including interests, until the same will be fully paid;

(2) Ordering the respondents to pay, jointly and severally, complainant[’s] salary for the unexpired portion of the contract in the
amount of ₱184,680.00, including interests, until the same will be fully paid;

(3) Ordering the respondents to pay, jointly and severally, complainant[’s] actual expenses which he incurred in applying for the
job, including expenses in leaving for the job, including expenses in leaving for Saudi Arabia and plane ticket, as well as
repatriation bond and incidental expenses in going home to the Philippines in the amounts of ₱49,000.00 and ₱20,000.00,
respectively, including interests, until the same will be fully paid;

(4) Ordering the respondents to pay, jointly and severally, complainant moral damages in the amount of ₱150,000.00 and
exemplary damages in the amount of ₱150,000.00, including interests, until the same will be fully paid;

(5) Ordering the respondents to pay, jointly and severally, complainant for and as attorney’s fees in the amount of ₱68,172.48
or the amount equivalent to 10% of the total amount of the foregoing claims and damages that may be awarded by the
Honorable Office to the complainant. 11

In its position paper, petitioner alleged that respondent was deployed "for overseas work as car body builder for its Principal
Golden Wings Est. for General Services and Recruitment in Saudi Arabia for an employment period of 24 months, with a
monthly salary of US$400.00."12 It insisted that respondent was religiously paid his salaries as they fell due. After working for a
little over seven months, respondent pleaded with his employer to be allowed to return home since there were family
problems he had to settle personally. Respondent even submitted a resignation letter13 dated July 23, 1995.

To support its claim that respondent had been paid his salaries as they fell due, petitioner submitted in evidence copies of
seven payslip14 authenticated by the Philippine Labor Attaché in Riyadh, Saudi Arabia. Petitioner asserted that since respondent
only worked for a little over seven months and did not finish his contract, he should pay the cost of the plane ticket. It pointed
out that according to the standard employment contract, the employer would provide the employee with a free plane ticket for
the flight home only if the worker finishes his contract.

Respondent countered that his signatures in the purported payslips were forged. He denied having received his salaries for
the said period, except only for the SAR100 as monthly allowance. He pointed out that the authentication of the alleged pay
slips and resignation letter before the labor attaché in Riyadh is immaterial, since the documents themselves were falsified.

Respondent further claimed that petitioner required him to pay a ₱10,000.00 placement fee and that he had to borrow
₱2,000.00 from a relative. He was then told that the amount would be considered as an advance payment and that the balance
would be deducted from his salary. He was not, however, given any receipt. He insisted that the employment contract which he
signed indicated that he was supposed to receive a monthly salary of SAR1,200 for working eight hours a day, excluding
overtime pay. He was repeatedly promised to be furnished a copy of the contract and was later told that it would be given to
his wife, Minda. However, she was also given the run-around and was told that the contract had already been given to her
husband.

To counter the allegation of forgery, petitioner claimed that there was a great possibility that respondent had changed his
signature while abroad so that he could file a complaint for illegal dismissal upon his return. The argument that the stroke and
handwriting on the payslip was written by one and the same person is mere conjecture, as respondent could have requested
someone, i.e., the cashier, to prepare the resignation letter for him. While it is the employer who fills up the pay slip,
respondent could have asked another employee to prepare the resignation letter, particularly if he (respondent) did not know
how to phrase it himself. Moreover, it could not be presumed that the payslip and resignation letter were prepared by one and
the same person, as respondent is not a handwriting expert. Petitioner further pointed out that respondent has different
signatures, not only in the pleadings submitted before the Labor Arbiter, but also in respondents’ personal documents.

On January 30, 1997, Labor Arbiter Jose De Vera ruled in favor of respondent on the following ratiocination:

What convinced this Arbitration Branch about the unreliability of the complainant’s signature in the payslip is the close
semblance of the handwritings in the payslips and the handwritings in the purported handwritten resignation of the
complainant. It unmistakably appears to this Arbitration Branch that the payslips as well as the handwritten letter-resignation
were prepared by one and the same person. If it were true that the handwritten letter-resignation was prepared by the
complainant, it follows that he also prepared the payslips because the handwritings in both documents are exactly the same
and identical. But [this] is quite unbelievable that complainant himself as the payee prepared the payslips with the
corresponding entries therein in his own handwriting. Under the circumstances, the only logical conclusion is that both the
payslips and the handwritten letter-resignation were prepared and signed by one and the same person definitely not the
complainant.

With the foregoing findings and conclusions, this Arbitration Branch is of the well-considered view that complainant was not
paid his salaries from January 5, 1995 up to July 23, 1995 and that he was unjustifiably dismissed from his employment when
he repeatedly demanded for his unpaid salaries. Respondents are, therefore, liable to pay the complainant his salaries from
January 5, 1995 up to July 23, 1995 which amount to US$2,640.00 (US$400 x 6.6 mos). Further, respondents are also liable to
the complainant for the latter’s salaries for the unexpired portion of his contract up to the maximum of three (3) months
pursuant to Section 10 of RA 8042, which amount to US$1,200.00. Respondents must also refund complainant’s plane fare for
his return flight. And finally, being compelled to litigate his claims, it is but just and x x x that complainant must be awarded
attorney’s fees at the rate of ten percent (10%) of the judgment award.

WHEREFORE, all the foregoing premises considered, judgment is hereby rendered ordering the respondents to pay complainant
the aggregate sum of US$3,840.00 or its equivalent in Philippine Currency at the exchange rate prevailing at the time of
payment, and to refund complainant’s plane fare for his return flight. Further, respondents are ordered to pay complainant
attorney’s fees at the rate of Ten percent (10%) of the foregoing judgment award. 15

Petitioner appealed the Decision of the Labor Arbiter to the NLRC, alleging that the Labor Arbiter, not being a handwriting
expert, committed grave abuse of discretion amounting to lack of jurisdiction in finding for respondent. In its Decision 16 dated
December 9, 1997, the NLRC upheld this contention (OF THE AGENCY/PETITIONER) and remanded the case "to the
Arbitration Branch of origin for referral to the government agency concerned for calligraphy examination of the questioned
documents."17

The case was then re-raffled to Labor Arbiter Enrico Angelo Portillo. On September 11, 1998, the parties agreed to a resetting to
enable petitioner to secure the original copies of documents from its foreign principal. However, on December 9, 1998, the
parties agreed to submit the case for resolution based on the pleadings and on the evidence on record.

This time, the complaint was dismissed for lack of merit. According to Labor Arbiter Portillo, aside from respondent’s bare
allegations, he failed to substantiate his claim of poor working conditions and long hours of employment. The fact that he
executed a handwritten resignation letter is enough evidence of the fact that he voluntarily resigned from work. Moreover,
respondent failed to submit any evidence to refute the pay slips duly signed and authenticated by the labor attaché in Saudi
Arabia, inasmuch as their probative value cannot be impugned by mere self-serving allegations. The Labor Arbiter concluded
that as between the oral allegations of workers that they were not paid monetary benefits and the documentary evidence
presented by employer, the latter should prevail. 18

Respondent appealed the decision before the NLRC, alleging that the Labor Arbiter failed to consider the genuineness of the
signature which appears in the purported resignation letter dated July 23, 1995, as well as those that appear in the seven pay
slips. He insisted that these documents should have been endorsed to the National Bureau of Investigation Questioned
Documents Division or the Philippine National Police Crime Laboratory for calligraphy examination.

The NLRC dismissed the appeal for lack of merit in a Resolution19 dated December 27, 2000. It held that the questioned
documents could not be endorsed to the agency concerned since mere photocopies had been submitted in evidence. The
records also revealed that petitioner had communicated to the foreign employer abroad, who sent the original copies, but
there was no response from respondent. It also stressed that during the December 9, 1998 hearing, the parties agreed to
submit the case for resolution on the basis of the pleadings and the evidence on record; if respondent had wanted to have the
documents endorsed to the NBI or the PNP, he should have insisted that the documents be examined by a handwriting expert
of the government. Thus, respondent was estopped from assailing the Labor Arbiter’s ruling.

Unsatisfied, respondent elevated the matter to the CA via petition for certiorari. He pointed out that he merely acceded to the
submission of the case for resolution due to the inordinate delays in the case. Moreover, the questioned documents were
within petitioner’s control, and it was petitioner that repeatedly failed to produce the original copies.

The CA reversed the ruling of the NLRC. According to the appellate court, a visual examination of the questioned signatures
would instantly reveal significant differences in the handwriting movement, stroke, and structure, as well as the quality of lines
of the signatures; Labor Arbiter Portillo committed patent error in examining the signatures, and it is the decision of Labor
Arbiter De Vera which must be upheld. The CA also pointed out the initial ruling of the NLRC (Second Division) dated December
9, 1997 which set aside the earlier decision of Labor Arbiter De Vera included a special directive to the Arbitration Branch of
origin to endorse the questioned documents for calligraphy examination. However, respondent Cuambot failed to produce
original copies of the documents; hence, Labor Arbiter Portillo proceeded with the case and ruled in favor of petitioner
G.M.Phils. The dispositive portion of the CA ruling reads:

IN VIEW OF ALL THE FOREGOING, the instant petition is hereby GRANTED. Accordingly, the assailed Resolutions dated 27
December 2000 and 12 February 2001, respectively, of the NLRC Second Division are hereby SET ASIDE and the Decision dated
20 February 1997 rendered by Labor Arbiter Jose De Vera is hereby REINSTATED. 20

Petitioner filed a motion for reconsideration, which the CA denied for lack of merit in its Resolution 21 dated February 20, 2004.

RULING

Hence, the present petition, where petitioner claims that –

THE COURT OF APPEALS GRAVELY ERRED ON A MATTER OF LAW IN HOLDING THAT LABOR ARBITER ENRICO PORTILLO GRAVELY
ABUSED HIS DISCRETION WHEN HE HELD THAT THE SIGNATURES APPEARING ON THE QUESTIONED DOCUMENTS ARE THOSE OF
THE PETITIONER.22

Petitioner points out that most of the signatures which Labor Arbiter De Vera used as standards for comparison with the
signatures appearing on the questioned documents were those in the pleadings filed by the respondent long after the
questioned documents had been supposedly signed by him. It claims that respondent affixed his signatures on the pleadings in
question and intentionally made them different from his true signature so that he could later on conveniently impugn their
authenticity. Petitioner claims that "had Labor Arbiter De Vera taken pains in considering these circumstances, he could have
determined that respondent may have actually intentionally given a different name and slightly changed his signature in his
application, which name and signature he used when he signed the questioned letter of resignation and payslips, only to
conveniently disown the same when he came back to the country to file the present case." 23 Thus, according to petitioner, the
CA clearly committed a palpable error of law when it reversed the ruling of the NLRC, which in turn affirmed Labor Arbiter
Portillo’s decision.

For his part, respondent contends that petitioner’s arguments were already raised in the pleadings filed before Labor Arbiter De
Vera which had already been passed upon squarely in the Labor Arbiter’s Decision of January 30, 1997.

The determinative issues in this case are essentially factual in nature - (a) whether the signatures of respondent in the payslips
are mere forgeries, and (b) whether respondent executed the resignation letter. Generally, it is not our function to review
findings of fact. However, in case of a divergence in the findings and conclusions of the NLRC on the one hand, and those of the
Labor Arbiter and the CA on the other, the Court may examine the evidence presented by the parties to determine whether or
not the employee was illegally dismissed or voluntarily resigned from employment. 24 The instant case thus falls within the
exception.

We have carefully examined the evidence on record and find that the petition must fail.

In its Decision25 dated December 9, 1997, the NLRC had ordered the case remanded to the Labor Arbiter precisely so that the
questioned documents purportedly signed/executed by respondent could be subjected to calligraphy examination by experts. It
is precisely where a judgment or ruling fails to make findings of fact that the case may be remanded to the lower tribunal to
enable it to determine them.26 However, instead of referring the questioned documents to the NBI or the PNP as mandated
by the Commission’s ruling, Labor Arbiter Portillo proceeded to rule in favor of petitioner, concluding that respondent’s
signatures were not forged, and as such, respondent’s separation from employment was purely voluntary. In fine, then, the
Labor Arbiter gravely abused his discretion when he ruled in favor of petitioner without abiding by the Commission’s
directive.

We note, however, that a remand of the case at this juncture would only result in unnecessary delay, especially considering
that this case has been pending since 1995. Indeed, it is this Court’s duty to settle, whenever possible, the entire controversy in
a single proceeding, "leaving no root or branch to bear the seeds of future litigation." 27 Hence, the case shall be fully resolved
on its merits.

We find that petitioner’s failure to submit the original copies of the pay slips and the resignation letter raises doubts as to
the veracity of its claim that they were actually signed/penned by respondent. The failure of a party to produce the original
copy of the document which is in issue has been taken against such party, and has even been considered as a mere "bargaining
chip," a dilatory tactic so that such party would be granted the opportunity to adduce controverting evidence. 28 In fact,
petitioner did not even present in evidence the original copy of the employment contract, much less a machine copy, giving
credence to respondent’s claim that he was not at all given a copy of the employment contract after he signed it. What
petitioner presented was a mere photocopy of the OCW Info Sheet29 issued by the Philippine Overseas Employment
Administration as well as the Personal Data Sheet 30 which respondent filled up. It bears stressing that the original copies of all
these documents, including the employment contract, were in the possession of petitioner, or, at the very least, petitioner’s
principal.

Moreover, as correctly noted by the CA, the opinions of handwriting experts, although helpful in the examination of forged
documents because of the technical procedure involved in the analysis, are not binding upon the courts. 31 As such, resort to
these experts is not mandatory or indispensable to the examination or the comparison of handwriting. A finding of forgery does
not depend entirely on the testimonies of handwriting experts, because the judge must conduct an independent examination of
the questioned signature in order to arrive at a reasonable conclusion as to its authenticity. 32 No less than Section 22, Rule 132
of the Rules of Court explicitly authorizes the court, by itself, to make a comparison of the disputed handwriting "with writings
admitted or treated as genuine by the party against whom the evidence is offered or proved to be genuine to the satisfaction of
the judge." Indeed, the authenticity of signatures is not a highly technical issue in the same sense that questions concerning,
e.g., quantum physics or topology, or molecular biology, would constitute matters of a highly technical nature. The opinion of a
handwriting expert on the genuineness of a questioned signature is certainly much less compelling upon a judge than an
opinion rendered by a specialist on a highly technical issue. 33

Even a cursory perusal of the resignation letter34 and the handwritten pay slips will readily show that they were written by
only one person. A mere layman will immediately notice that the strokes and letters in the documents are very similar, if not
identical, to one another. It is also quite apparent from a comparison of the signatures in the pay slips that they are
inconsistent, irregular, with uneven and faltering strokes.

We also find it unbelievable that after having waited for so long to be deployed to Saudi Arabia and with the hopes of
opportunity to earn a better living within his reach, respondent would just suddenly decide to abandon his work and go
home due to "family problems." At the very least, respondent could have at least specified the reason or elaborated on the
details of such an urgent matter so as not to jeopardize future employment opportunities.

That respondent also filed the complaint immediately gives more credence to his claim that he was illegally
dismissed.1âwphi1 He arrived in the Philippines on July 24, 1995, and immediately filed his complaint for illegal dismissal two
days later, on July 26, 1995.

We are not impervious of petitioner’s claim that respondent could have asked another person to execute the resignation
letter for him. However, petitioner failed to present even an affidavit from a representative of its foreign principal in order to
support this allegation.

Indeed, the rule is that all doubts in the implementation and the interpretation of the Labor Code shall be resolved in favor
of labor,35 in order to give effect to the policy of the State to "afford protection to labor, promote full employment, ensure
equal work opportunities regardless of sex, race or creed, and regulate the relations between workers and employers," and to
"assure the rights of workers to self-organization, collective bargaining, security of tenure, and just and humane conditions of
work."36 We reiterate the following pronouncement in Nicario v. National Labor Relations Commission: 37
It is a well-settled doctrine, that if doubts exist between the evidence presented by the employer and the employee, the
scales of justice must be tilted in favor of the latter. It is a time-honored rule that in controversies between a laborer and his
master, doubts reasonably arising from the evidence, or in the interpretation of agreements and writing should be resolved in
the former’s favor. The policy is to extend the doctrine to a greater number of employees who can avail of the benefits under
the law, which is in consonance with the avowed policy of the State to give maximum aid and protection of labor.

Moreover, one who pleads payment has the burden of proving it. The reason for the rule is that the pertinent personnel files,
payrolls, records, remittances and other similar documents – which will show that overtime, differentials, service incentive
leave, and other claims of workers have been paid – are not in the possession of the worker but in the custody and absolute
control of the employer. Thus, the burden of showing with legal certainty that the obligation has been discharged with payment
falls on the debtor, in accordance with the rule that one who pleads payment has the burden of proving it. 38 Only when the
debtor introduces evidence that the obligation has been extinguished does the burden shift to the creditor, who is then under a
duty of producing evidence to show why payment does not extinguish the obligation. 39 In this case, petitioner was unable to
present ample evidence to prove its claim that respondent had received all his salaries and benefits in full.1âwphi1

IN LIGHT OF ALL THE FOREGOING, the Petition is DENIED for lack of merit. The Decision of the Court of Appeals in CA-G.R. SP
No. 64744 is AFFIRMED. Costs against the petitioners.

KAPISANANG MANGGAGAWANG PINAGYAKAP, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and FRANKLIN BAKER COMPANY OF THE PHILIPPINES, respondents.

The Court grants the petition and, as prayed for also by the Office of the Solicitor General, sets aside the questioned decision of
the labor arbiter, which ruled (contrary to the controlling Philippine Apparel Workers Union case 1 ) that the negotiated
daily wage increase  of P1.33 granted and embodied in the parties' collective bargaining agreement of March 7, 1977,
retroactive to January 1, 1977, could be credited to and deducted from the P60.00 monthly or P2.00 daily living
allowance required by P.D. 1123 (issued on April 21, 1977, to take effect on May 1, 1977), which in effect nullified the
hardearned P1.33 daily wage increase negotiated and obtained by petitioners-workers in their collective bargaining agreement.
The resolution of respondent commission peremptorily dismissing petitioner's meritorious timely appeal on the mere
procedural technicality that it did not furnish the adverse party with a copy of its memorandum of appeal is likewise set aside.

The labor arbiter in rendering the questioned decision relied primarily on Section 1 (k) of the Labor Department's rules and
regulations implementing Presidential Decree No. 1123, which provides :

Section 1. Coverage. — These rules shall apply to all employees except the following.

x x x           x x x          x x x

(k) Those that have granted, in addition to the allowance under P.D. 525, at least P60.00 monthly wage increase on or after
January 1, 1977 provided that those who paid less than this amount shall pay the difference.

This exemption paragraph (k) was, however, declared void by this Court in Philippine Apparel Workers Union vs. National
Labor Relations Commission  2 ruling that:

... it must be pointed out that the Secretary of Labor has exceeded his authority when he included paragraph (k) in Section 1 of
the Rules Implementing P.D. 1123.

Section 1 of said decree spells out the scope of its benefits, as follows:

Section 1.  In the Private Sector. — In the private sector, an across-the-board increase of sixty pesos (P60.00) in emergency
allowance as provided in P.D. 525 shall be paid by all employers to their employees effective 1 May 1977. Accordingly, the
monthly emergency allowance under P.D. 525 is hereby amended as follows:

a) For workers being paid P50.00.P110.

b) For workers being paid P30.00-P90

c) For workers being paid P15.00-P75.

To implement the same, the then Secretary of Labor was authorized in Section 4 of the same decree to issue appropriate rules
and regulations. Such authority is quoted hereunder:

Section 4. The Secretary of Labor and the Commissioner of the Budget shall issue appropriate rules and regulations to
implement this Decree for their respective sectors. Under such rules and regulations, distressed employers whether public or
private may be exempted while in such condition in the interest of development and employment.

By virtue of such rule-making authority, the Secretary of Labor issued on May 1, 1977 a set of rules which exempts not only
distressed employers (see paragraph 1, Section 1 as well as Sections 6, 7, 8 and 9 of said rules) but also "those who have
granted in addition to the allowance under P.D. 525, at least P60.00 monthly wage increase on or after January 1, 1977,
provided that those who paid less than this amount shall pay the difference (see paragraph k of said rules)."

Clearly, the inclusion of paragraph k contravenes the statutory authority granted to the Secretary of Labor, and the same is
therefore void, as ruled by this Court in a long line of cases, ... .

The labor arbiter thus totally ignored petitioner's logical plea "that the said deduction is contrary to the spirit and intent of
P.D. 1123 which is to protect the wages against inflation; that the workers belong to the lowest income group; that what the
workers obtained through a CBA should be protected and not be deducted from the decreed additional P60.00 monthly (or
P2.00 daily) living allowance.

The questioned decision was appealed by petitioner to respondent commission which summarily dismissed the appeal on the
ground that the adverse party was not furnished with a copy of its memorandum of appeal.

The secondary issue of whether or not the failure of appellant to serve a copy of his memorandum of appeal upon the appellee
would warrant the dismissal of a meritorious appeal has been squarely raised and resolved by this Court in the case of Estrada
vs. National Labor Relations Commission.3 The Court therein ruled that the commission's dismissal of the employee's appeal, on
a motion for reconsideration (whereby it set aside its original decision on appeal in favor of the employee on the mere ground
of his failure to furnish employer-employee with a copy of his memorandum of appeal), was based on mere procedural
technicality and not a jurisdictional defect, as follows:

Considering that there is no basis for the dismissal of petitioner, it would be inconsistent with the requirement of social
justice to terminate his employment on mere grounds of technicality.

x x x           x x x          x x x

Neither can private respondent validly complain that it has been denied its right to due process by having been allegedly
deprived of the opportunity to answer petitioner's appeal on account of the latter's failure to furnish the former with a copy of
his memorandum of appeal. Since the entire record of the case on appeal is open for review by the NLRC, the absence of an
answer or opposition to the appeal would not really have a significant bearing on the adjudication of the case, as would
otherwise perhaps constitute a denial of private respondent's right to due process. Besides, private respondent had already the
opportunity to answer petitioner's appeal when he filed a motion for reconsideration of the earlier decision of the NLRC.
Significantly, however, said respondent never touched on the merits of the case in his aforementioned motion for
reconsideration.lawphi1 Instead, it relied solely on technicality to oppose petitioner's appeal which thereby reasonably creates
the impression that its case is weak as in fact it is."

Moreover, the dismissal of petitioner's appeal on a purely technical ground is inconsistent with the constitutional mandate
on protection to labor. Where the rules are applied to labor cases, the interpretation must proceed in accordance with the
liberal spirit of the labor laws. Indeed, the Court has stressed that "where a decision may be made to rest on informed
judgment rather than rigid rules, all the equities of the case must be accorded their due weight ... labor determinations ...
should be not only secundum rationem but also secundum caritatem."4 (according to reason –according to charity)

It certainly would work against reason and compassion to hold that the hard-earned Fl.33 daily wage increase finally
negotiated and secured by petitioners-workers in the collective bargaining agreement of March 7, 1977 was meant to be
wiped out by the later issuance of P.D. 1123 on April 21, 1977 recognizing the need to grant the workers a P2.00 daily cost of
living allowance (ECOLA).
What I had written in my separate opinion in the Philippine Apparel case is fully applicable here, mutatis mutandis: "Reason
and experience rebel against the contrary assertion. If after all, the negotiated wage increases in such a "munificent" total of
P49.50 for the third year of the CBA (and for a total of only P35.75/month for the 2nd year of the CBA) were to be charged
against the P60. — ECOLA increase, the long negotiations for the staggered wage increases for the three-year duration of the
CBA would be of no use or meaning, for the workers were already receiving the total P60.-increase from May 1, 1977, without
need of the CBA."5

In fine, to sustain respondent employer's claim that the negotiated wage increase should be credited against and deducted
from the decreed cost of living allowance would be to nullify the wage increase granted and enjoyed by the workers under
the collective bargaining agreement. P.D. 1123 did not authorize such a credit and deduction. Aside from the clear intent of the
decree, that the living allowance decreed therein is over and above any wage increase contracted and agreed by the parties, it
is quite clear that any regulation in plain contravention of the decree must fail, as held in the Philippine Apparel case.

It need only be pointed out that the Philippine Apparel declaration of nullity of the Labor Secretary's questioned exemption
regulation is controlling in the case at bar. The Court reaffirmed the same in American Wire & Cable Workers Union (TUPAS) vs.
National Labor Relations Commission6 and in  Insular Bank of Asia and America Employees Union (IBAAEU) vs. Inciong.7 The Court
reiterated in the first cited case that: "Paragraph (k) of the Rules Implementing P.D. 1123 being void, petitioner's claim must be
granted as private respondent would no longer have any basis for exemption." The Court stressed in the second cited case,
invoking the Philippine Apparel case ruling, that "It is elementary in the rules of statutory construction that when the language
of the law is clear and unequivocal the law must be taken to mean exactly what it says. ... All doubts in the implementation and
interpretation of the provisions of this Code, including its implementing rules and regulations, shall be resolved in favor of
labor."

ACCORDINGLY, the labor arbiter's questioned decision and respondent commission's questioned resolution dismissing the
appeal are hereby set aside and private respondent is hereby ordered to comply fully with the obligation imposed upon it by
P.D. 1123 and pay to all its workers the living allowance therein provided separately and distinctly from the wage increase
agreed by it and embodied in the collective bargaining agreement of March 7, 1977. This decision is IMMEDIATELY EXECUTORY.

HUNTINGTON STEEL PRODUCTS, INC. & SERAFIN NG, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION, JAIME ORBASE, REGINO JARDIN, PAULINO JAVIERTO, EDGAR JARDIN, RAMON
N. BANA, ANTONIO MAGNO, RICO JARDIN, CELESTINO JARDIN, JR., PEDRO JARDIN, JR., AGUSTIN GASTON, NAZARIO
JAVIERTO, JR., and MARCIANO GLINOGO, respondents.

For review on certiorari is the Decision,1 dated January 22, 2003, in CA-G.R. SP No. 72665, and the Resolution, 2 dated May 14,
2003, denying petitioners’ Motion for Reconsideration. The Court of Appeals affirmed the Order dated April 15, 2002 of the
National Labor Relations Commission (NLRC) Second Division reversing the Labor Arbiter’s Resolution dated June 13, 2001,
which had dismissed herein private respondents’ complaint for lack of a certificate of non-forum shopping.

The facts of the case are as follows:

The instant petition stemmed from the illegal dismissal complaint with claim for damages initiated by respondent Jaime
Orbase and eleven others against petitioners Huntington Steel Products, Inc. and its President, Serafin Ng. Private
respondents filed an amended complaint to include Everson Metal Works as a party, being the original employer of private
respondents before it changed its business name to Huntington Steel Products, Inc. Thereafter, private respondents filed their
position paper.

Petitioners also filed their Position Paper with Motion to Dismiss assailing the private respondents’ failure to comply with the
requirements of Revised Circular No. 28-913 as implemented by Supreme Court Administrative Circular No. 04-94. 4 They averred
that the Complaint which private respondents filed in the Arbitration Branch of the NLRC lacked a certification of non-forum
shopping.

Petitioners’ Motion to Dismiss was granted by the Labor Arbiter in his Decision5 dated June 13, 2001. Private respondents
appealed before the NLRC. On April 15, 2002, the NLRC promulgated an Order which reversed the Decision of the Labor
Arbiter as follows:
We are [of] the considered view therefore that defects should be corrected in the proceedings below, for which reason, the
instant case should be remanded to the Arbitration Branch of origin.

WHEREFORE, the instant case is hereby remanded to the Labor Arbiter of origin for further appropriate proceedings.

SO ORDERED.6

Aggrieved, petitioners moved for a reconsideration of the Order, but public respondent in its Resolution dated July 11, 2002,
denied the motion.

Petitioners filed a petition for certiorari before the Court of Appeals, alleging that the NLRC gravely abused its discretion
amounting to a lack or an excess of jurisdiction when the NLRC remanded the case for further proceedings, in effect reversing
the Labor Arbiter’s Order, dated July 13, 2001. Petitioners insisted that the requirement of certification of non-forum shopping
is mandatory, and non-compliance with said requirement warrants the dismissal of the case.

On January 22, 2003, the Court of Appeals promulgated its Decision denying the petition, to wit:

WHEREFORE, FOREGOING PREMISES CONSIDERED, this petition is DENIED. The Order dated April 15, 2002 of public respondent
in NLRC CA No. 028847-01 (NLRC NCR-00-03-02297-99) entitled "Jaime Orbase, et al. vs. Huntington Steel Product and/or
Serafin Ng – President" is affirmed in toto.

SO ORDERED.7

The Court of Appeals reasoned that the NLRC correctly applied Article 221 of the Labor Code.8 The appellate court said that
decisions in labor cases must be supported by substantial evidence, and disregarding technical rules of procedure, will not
sacrifice the fundamental requisites of due process. 9

Citing the landmark case of The New Valley Times Press v. NLRC,10 the Court of Appeals held that technical rules are not binding
in labor cases and are not to be applied strictly if the result would be detrimental to the working-man. The Court of Appeals
declared that private respondents should not be faulted because in filing their complaint, they merely filled up the blanks in the
complaint form provided for them in the docket section of the Arbitration Branch. The Court of Appeals added that private
respondents should not be punished for whatever defects found in the form provided by the Commission. 11

RULING

Dissatisfied, petitioners filed the instant petition praying that we resolve the question:

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN DISREGARDING SUPREME
COURT CIRCULAR NO. 04-94.12

Simply stated, the issue is whether the case should be dismissed for failure to comply with Supreme Court Administrative
Circular No. 04-94 on certification of non-forum shopping.

Petitioners claim that although technical rules of procedure in labor cases are not to be strictly applied, such cases must
nevertheless be prosecuted in accordance with the prescribed procedure to ensure an orderly and speedy administration of
justice. Petitioners contend that the certification of non-forum shopping as required by Supreme Court Administrative
Circular No. 04-94 is mandatory even in labor cases. It should accompany pleadings filed before the NLRC, since the NLRC is a
quasi-judicial agency. According to the petitioners, failure to comply with the Circular warrants dismissal because the defect
cannot be cured by amendment of the complaint, and the proper remedy was to file another complaint instead of an appeal.
Although jurisprudence allowed substantial compliance with the requirement, the inclusion of the statement of non-forum
shopping in the respondents’ position paper, according to petitioners, was not substantial compliance. Petitioners further
contend that the failure to comply with the requirement rendered the complaint a mere scrap of paper, and the Labor Arbiter
could not have acquired jurisdiction over the case.

Private respondents, for their part, claim that they had complied with the requirement of certification of non-forum
shopping upon filing of their Position Paper. The inclusion of the certificate of non-forum shopping in the Position Paper was
the best way to comply with the required undertaking under the Circular because the complaint form supplied by the Labor
Arbiter did not contain such undertaking. When they filed the complaint they merely filled up the blanks therein.
We note that the cited complaint was filed before the NLRC Resolution No. 01-02 amended the NLRC Rules of Procedure. 13 The
NLRC Rules of Procedure now requires a declaration of non-forum shopping in the complaint. But this is not to say that the
certificate of non-forum shopping was not required then. At the time the complaint was filed, the same was subject to Supreme
Court Administrative Circular No. 04-94, now Section 5 of Rule 7 of the Rules of Court. 14 We have established in previous
cases15 that compliance with the Circular was mandatory even in labor cases. In the landmark case of Maricalum Mining Corp.
v. NLRC16 we held that:

The certificate of non-forum shopping as provided by this Court Circular 04-94 is mandatory and should accompany pleadings
filed before the NLRC. Court Circular No. 04-94 is clear and needs no further interpretation, viz:

"…the following requirements, in addition to those in pertinent provisions of the Rules of Court and other existing circulars,
shall be strictly complied with in the filing of complaints, petitions, applications or other initiatory pleadings in all courts and
agencies other than the Supreme Court and the Court of Appeals, and shall be subject to the sanctions provided hereunder:

"1. The plaintiff, petitioner, applicant or principal party seeking relief in the complaint, petition, application or other initiatory
pleading shall certify under oath in such original pleading, or in a sworn certificate annexed thereto and simultaneously
therewith, to the truth of the following facts and undertakings: (a) he has not heretofore commenced any other action or
proceeding involving the same issues in the Supreme Court, the Court of Appeals, or any other tribunal or agency; (b) to the
best of his knowledge, no such action or proceeding is pending in the Supreme Court, the Court of Appeals, or any other
tribunal or agency; (c) if there is any such action or proceeding which is either pending or may have been terminated, he must
state the status thereof; and (d) if he should thereafter learn that a similar action or proceeding has been filed or is pending
before the Supreme Court, the Court of Appeals, or any other tribunal or agency, he undertakes to report the fact within five (5)
days therefrom to the court or agency wherein the original pleading and sworn certification contemplated herein have been
filed.

….

"2. Any violation of this Circular shall be a cause for the dismissal of the complaint, petition, application or other initiatory
pleading, upon motion and after hearing…."

The NLRC is a quasi-judicial agency, hence, initiatory pleadings filed before it should be accompanied by a certificate of non-
forum-shopping.

Nevertheless, in Loyola v. Court of Appeals, 17 we held that substantial compliance with the requirement of certificate of non-
forum shopping is sufficient. Here, we find that the certification of non-forum shopping was not filed simultaneously with the
initiatory pleading. But we held that the filing of the certification within the reglementary period of filing the initiatory pleading
was substantial compliance. The fact that the Circular requires strict compliance merely underscores its mandatory nature that
it cannot be dispensed with or its requirements altogether disregarded, but it does not thereby interdict substantial compliance
with its provisions under justifiable circumstances. 18

Additionally, Supreme Court Administrative Circular No. 04-94, now Section 5, Rule 7 of the Rules of Civil Procedure, must be
construed and applied to achieve its purpose. The Supreme Court promulgated the Circular to promote and facilitate the
orderly administration of justice. It should not be interpreted with such absolute literalness as to subvert its own ultimate
and legitimate objective which is the goal of all rules of procedure - that is, to achieve substantial justice as expeditiously as
possible.19

Meanwhile, in the case of Melo v. Court of Appeals, 20 we said that in those cases where we excused non-compliance with the
requirements of Supreme Court Administrative Circular No. 04-94, there were special circumstances or compelling reasons that
made the strict application of said Circular clearly unjustified. The rule is crystal clear and plainly unambiguous that the
certification is a mandatory part of an initiatory pleading, i.e., the complaint, and its omission may be excused only upon
manifest equitable grounds proving substantial compliance therewith. 21

In the present case, the respondents reasoned that they failed to comply with the Circular because the complaint form
supplied by the Labor Arbiter did not contain the required undertaking. They simply filled up the blanks therein. Hence, we
agree with the Court of Appeals’ conclusion that respondents should not be faulted for not having the certification of non-
forum shopping in their complaint.22
The strict application of the Circular in the instant case, in our view, would be contrary to the goals of the Rules of Civil
Procedure – that is, "just, speedy and inexpensive disposition of every action and proceeding." 23 Technical rules of procedure in
labor cases are not to be strictly applied if the result would be detrimental to the working-man.24 Thus, the NLRC did not err in
ordering that the corrections be made at the Arbitration Branch, since the NLRC has also the power to order corrections in case
of irregularities in the proceedings before it.25

Anent petitioners’ contention that the Labor Arbiter did not acquire jurisdiction over the case for failure to include the
certificate of non-forum shopping in the complaint, this contention finds no support in law and in jurisprudence. Supreme Court
Administrative Circular No. 04-94 is mandatory but not jurisdictional, as jurisdiction over the subject or nature of the cause of
action is conferred by law.26

WHEREFORE, the petition is DENIED. The Court of Appeals’ Decision dated January 22, 2003 and its Resolution dated May 14,
2003 as well as the Order of National Labor Relations Commission (Second Division) dated April 15, 2002 and its Resolution
dated July 11, 2002 are hereby AFFIRMED. Costs against petitioners.

RUTCHER T. DAGASDAS, Petitioner,
vs.
GRAND PLACEMENT AND GENERAL SERVICES CORPORATION, Respondent.

Before us is a Petition for Review on Certiorari assailing the September 26, 2012 Decision 1 of the Court of Appeals (CA) in CA-
G.R. SP No. 115396, which annulled and set aside the March 29, 2010 2 and June 2, 20103 Resolutions of the National Labor
Relations Commission (NLRC) in NLRC LAC OFW-L-02-000071-10, and concomitantly reinstated the November 27, 2009
Decision4 of the Labor Arbiter (LA) dismissing the Complaint for lack of merit.

Also challenged is the January 28, 2013 Resolution 5 denying the Motion for Reconsideration filed by Rutcher T. Dagasdas
(Dagasdas ).

Factual Antecedents

Grand Placement and General Services Corp. (GPGS) is a licensed recruitment or placement agency in the Philippines while
Saudi Aramco (Aramco) is its counterpart in Saudi Arabia. On the other hand, Industrial & Management Technology Methods
Co. Ltd. (ITM) is the principal of GPGS, a company existing in Saudi Arabia. 6

In November 2007, GPGS, for and on behalf of ITM, employed Dagasdas as Network Technician. He was to be deployed in
Saudi Arabia under a one-year contract7 with a monthly salary of Saudi Riyal (SR) 5,112.00. Before leaving the Philippines,
Dagasdas underwent skill training8 and pre-departure orientation as Network Technician.9 Nonetheless, his Job
Offer10 indicated that he was accepted by Aramco and ITM for the position of "Supt."

Dagasdas contended that although his position under his contract was as a Network Technician, he actually applied for and was
engaged as a Civil Engineer considering that his transcript of records, 11 diploma 12 as well as his curriculum vitae 13 showed that
he had a degree in Civil Engineering, and his work experiences were all related to this field. Purportedly9 the position of
Network Technician was only for the purpose of securing a visa for Saudi Arabia because ITM could not support visa
application for Civil Engineers. 14

On February 8, 2008, Dagasdas arrived in Saudi Arabia.15 Thereafter, he signed with ITM a new employment contract 16 which
stipulated that the latter contracted him as Superintendent or in any capacity within the scope of his abilities with salary of
SR5,112.00 and allowance of SR2,045.00 per month. Under this contract, Dagasdas shall be placed under a three-month
probationary period; and, this new contract shall cancel all contracts prior to its date from any source.

On February 11, 2008, Dagasdas reported at ITM's worksite in Khurais, Saudi Arabia. 17 There, he was allegedly given tasks
suited for a Mechanical Engineer, which were foreign to the job he applied for and to his work experience. Seeing that he
would not be able to perform well in his work, Dagasdas raised his conce1n to his Supervisor in the Mechanical Engineering
Department. Consequently, he was transferred to the Civil Engineering Department, was temporarily given a position as Civil
Construction Engineer, and was issued anidentification card good for one month. Dagasdas averred that on March 9, 2008, he
was directed to exit the worksite but Rashid H. Siddiqui (Siddiqui), the Site Coordinator Manager, advised him to remain in the
premises, and promised to secure him the position he applied for. However, before Dagasdas' case was investigated, Siddiqui
had severed his employment with ITM. 18

In April 2008, Dagasdas returned to Al-Khobar and stayed at the ITM Office. 19 Later, 11M gave him a termination
notice20 indicating that his last day of work was on April 30, 2008, and he was dismissed pursuant to clause 17.4.3 of his
contract, which provided that ITM reserved the right to terminate any employee within the three-month probationary
period without need of any notice to the employee.21

Before his repatriation, Dagasdas signed a Statement of Quitclaim22 with Final Settlement23 stating that ITM paid him all the
salaries and benefits for his services from February 11, 2008 to April 30, 2008 in the total amow1t of SR7,156.80, and ITM was
relieved from all financial obligations due to Dagasdas.

On June 24, 2008, Dagasdas returned to the Philippines. 24 Thereafter, he filed an illegal dismissal case against GPGS, ITM, and
Aramco.

Dagasdas accused GPGS, ITM, and Aramco of misrepresentation, which resulted in the mismatch in the work assigned to
him. He contended that such claim was supported by exchanges of electronic mail (e-mail) establishing that GPGS, ITM, and
Aramco were aware of the job 1nismatch that had befallen him. 25 He also argued that although he was engaged as a project
employee, he was still entitled to security of tenure for the duration of his contract. He maintained that GPGS, ITM, and Aramco
merely invented "imaginary cause/s" to terminate him. Thus, he claimed that he was dismissed without cause and due process
of law.26

GPGS, ITM, and Aramco countered that Dagasdas was legally dismissed. They explained that Dagasdas was aware that he was
employed as Network Technician but he could not perform his work in accordance with the standards of his employer. They
added that Dagasdas was informed of his poor performance, and he conformed to his termination as evidenced by his
quitclaim. 27 They also stressed that Dagasdas was only a probationary employee since he worked for ITM for less than three
months.28

Ruling of the Labor Arbiter

On November 27, 2009, the LA dismissed the case for lack of merit. The LA pointed out that when Dagasdas signed his new
employment contract in Saudi Arabia, he accepted its stipulations, including the fact that he had to undergo probationary
status. She declared that this new contract was more advantageous for Dagasdas as his position was upgraded to that of a
Superintendent, and he was likewise given an allowance ofSR2,045.00 aside from his salary of SR5,112.00 per month. According
to the LA, for being more favorable, this new contract was not prohibited by law. She also decreed that Dagasdas fell short of
the expected work performance; as such, his employer dismissed him as part of its management prerogative.

Consequently, Dagasdas appealed to the NLRC.

Ruling of the National Labor Relations Commission

On March 29, 2010, the NLRC issued a Resolution finding Dagasdas' dismissal illegal. The decretal portion of the NLRC
Resolution reads:

WHEREFORE, the decision appealed from is hereby REVERSED, and the respondent[s] are hereby ordered to pay the
complainant the salaries corresponding to the unexpired p01tion of his contract amounting to SR46,008 (SR5112 x 9 months, or
from May 1, 2008 to January 31, 2009), plus ten percent (10%) thereof as attorney's foes. The respondents are jointly and
severally liable for the judgment awards, which are payable in Philippine currency converted on the basis of the exchange rate
prevailing at the time of actual payment.

SO ORDERED.29

The NLRC stated that Dagasdas, who was a Civil Engineering graduate, was "recruited on paper" by GPGS as Network Technician
but the real understanding between the parties was to hire him as Superintendent. It held that GPGS erroneously recruited
Dagasdas, and failed to inform him that he was hired as a "Mechanical Superintendent" meant for a Mechanical Engineer. It
declared that while ITM has the prerogative to continue the employment of individuals only if they were qualified, Dagasdas'
dismissal amounted to illegal termination since the mismatch between his qualifications and the job given him was no fault
of his.
The NLRC added that Dagasdas should not be made to suffer the consequences of the miscommunication between GPGS and
ITM considering that the government obligates employment agencies recruiting Filipinos for overseas work to "select only
medically and technically qualified recruits." 30

On June 2, 2010, the NLRC denied the Motion for Reconsideration of its Resolution dated March 29, 2010.

Undeterred, GPGS filed a Petition for Certiorari  with the CA ascribing grave abuse of discretion on the part of the NLRC in ruling
that Dagasdas was illegally dismissed.

Ruling of the Court of Appeals

On September 26, 2012, the CA set aside the NLRC Resolutions and reinstated the LA Decision dismissing the case for lack of
merit.

The CA could not accede to the conclusion that the real agreement between the parties was to employ Dagasdas as
Superintendent. It stressed that Dagasdas left the Philippines pursuant to his employment contract indicating that he was to
work as a Network Technician; when he arrived in Saudi Arabia and signed a new contract for the position of a Superintendent,
the agreement was with no participation of GPGS, and said new contract was only between Dagasdas and ITM. It emphasized
that after commencing work as Superintendent, Dagasdas realized that he could not perform his tasks, and "[s]eemingly, it was
[Dagasdas] himself who voluntarily withdrew from his assigned work for lack of competence." 31 It faulted the NLRC for falling to
consider that Dagasdas backed out as Superintendent on the excuse that the same required the skills of a Mechanical Engineer.

In holding that Dagasdas' dismissal was legal, the CA gave credence to Dagasdas' Statement of Quitclaim and Final Settlement.
It ruled that for having voluntarily accepted money from his employer, Dagasdas accepted his termination and released his
employer from future financial obligations arising from his past employment with it.

On January 28, 2013, the CA denied Dagasdas' Motion for Reconsideration.

Hence, Dagasdas filed this Petition raising these grounds:

[1] THE HONORABLE COURT OF APPEALS COMMITIED A REVERSIBLE ERROR WHEN TT Rt. VERSED THE FACTUAL FINDINGS OF
THE NATIONAL LABOR RELATION’S COMMISSION.32

[2] THE HONORABLE COURT OF APPEALS PATENTLY ERRED WITH ITS FINDINGS THAT THE CONTRACT SIGNED BY DAGASDAS IN
ALKHOBAR IS MORE ADVANTAGEOUS TO THE LATTER AND THAT IT WAS [H]IS PERSONAL ACT OR DECISION [TO SIGN] THE
SAME.33

[3] THE HONORABLE COURT OF APPEALS ALSO GRAVELY ERRED IN FAULTING THE NLRC FOR ITS FAILURE TO INVALIDATE OR
DISCUSS THE FINAL SETTLEMENT AND STATEMENT OF QUITCLAIM SIGNED BY [DAGASDAS]. 34

Dagasdas reiterates that he was only recruited "on paper" as a Network Technician but the real agreement between him and
his employer was to engage him as Superintendent in t'1e field of Civil Engineering, he being a Civil Engineering graduate with
vast experience in said field. He stresses that he was terminated because of a "discipline mismatch" as his employer actually
needed a Mechanical (Engineer) Superintendent, not a Civil Engineer.

In addition, Dagasdas insists that he did not voluntarily back out from his work. If not for the discipline mismatch, he could
have performed his job as was expected of him. He also denies that the new employment contract he signed while in Saudi
Arabia was more advant1geous to him since the basic salary and allowance stipulated therein are just the same with that in his
Job Offer. He argues that the new contract was even disadvantageous because it was inserted therein that he still had to
undergo probationary status for three months.

Finally, Dagasdas contends that the new contract he signed while in Saudi Arabia was void because it was not approved by
the Philippine Overseas Employment Administration (POEA). He also claims that CA should have closely examined his
quitclaim because he only signed it to afford his plane ticket for his repatriation.

On the other hand, G PGS maintains that Dagasdas was fully aware that he applied for and was accepted as Network
Technician. It also stresses that it was Dagasdas himself who decided to accept from ITM a new job offer when he arrived in
Saudi Arabia. It further declares that Dagasdas' quitclaim is valid as there is no showing that he was compelled to sign it.
Issue

Was Dagasdas validly dismissed from work? ------ YES

Our Ruling

The Petition is with merit.

As a rule, only questions of law may be raised in a petition under Rule 45 of the Rules of Court. However, this rule allows certain
exceptions, including a situation where the findings of fact of the courts or tribunals below are conflicting. 35 In this case, the CA
and the NLRC arrived at divergent factual findings anent Dagasdas' termination. As such, the Court deems it necessary to re-
examine these findings and detemline whether the CA has sufficient basis to annul the NLRC Decision, and set aside its finding
that Dagasdas was illegally dismissed from work.

Moreover, it is well-settled that employers have the prerogative to impose standards on the work quantity and quality of their
employees and provide measures to ensure compliance therewith. Non-compliance with work standards may thus be a valid
cause for dismissing an employee. Nonetheless, to ensure that employers will not abuse their prerogatives, the same is
tempered by security of tenure whereby the employees are guaranteed substantive and procedural due process before they
are dismissed from work. 36

Security of tenure remains even if employees, particularly the overseas Filipino workers (OFW), work in a different jurisdiction.
Since the employment contracts of OFWs are perfected in the Philippines, and following the principle of lex loci contractus (the
law of the place where the contract is made), these contracts are governed by our laws, prin1arily the Labor Code of the
Philippines and its implementing rules and regulations. 37 At the same time, our laws generally apply even to employment
contracts of OFWs as our Constitution explicitly provides that the State shall afford full protection to labor, whether local or
overseas.38 Thus, even if a Filipino is employed abroad, he or she is entitled to security of tenure, among other constitutional
rights.39

In this case, prior to his deployment and while still in the Philippines, Dagasdas was made to sign a POEA-approved contract
with GPGS, on behalf of ITM; and, upon arrival in Saudi Arabia, ITM made him sign a new employment contract. Nonetheless,
this new contract, which was used as basis for dismissing Dagasdas, is void.

First, Dagasdas' new contract is in clear violation of his right to security of tenure.

Under the Labor Code of the Philippines the following are the just causes for dismissing an employee:

ARTICLE 297. [282] Termination by Employer. - An employer may terminate an employment for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in
connection with his work;

(b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;

(d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his
family or his duly authorized representative; and

(e) Other causes analogous to the foregoing. 40

However, per the notice of termination given to Dagasdas, ITM terminated him for violating clause 17.4.3 of his new
contract, viz.:

17.4 The Company reserves the right to terminate this agreement without serving any notice to the Consultant in the following
cases:

xxxx

17.4.3 If the Consultant is terminated by company or its client within the probation period of 3 months. 41
Based on the foregoing, there is no clear justification for the dismissal of Dagasdas other than the exercise of ITM's right to
terminate him within the probationary period. While our Civil Code recognizes that parties may stipulate in their contracts
such terms and conditions as they may deem convenient, these terms and conditions must not be contrary to law, morals, good
customs, public order or policy.42 The above-cited clause is contrary to law because as discussed, our Constitution guarantees
that employees, local or overseas, are entitled to security of tenure. To allow employers to reserve a right to terminate
employees without cause is violative of this guarantee of security of tenure.

Moreover, even assuming that Dagasdas was still a probationary employee when he was terminated, his dismissal must still be
with a valid cause. As regards a probationary employee, his or her dismissal may be allowed only if there is just cause or such
reason to conclude that the employee fails to qualify as regular employee pursuant to reasonable standards made known to the
employee at the time of engagement.43

Here, ITM failed to prove that it informed Dagasdas of any predetermined standards from which his work will be gauged. 44 In
the contract he signed while still in the Philippines, Dagsadas was employed as Network Technician; on the other hand, his new
contract indicated that he was employed as Superintendent. However, no job description - or such duties and responsibilities
attached to either position - was adduced in evidence. It thus means that the job for which Dagasdas was hired was not
definite from the beginning.

Indeed, Dagasdas was not sufficiently informed of the work standards for which his performance will be measured. Even his
position based on the job title given him was not fully explained by his employer. Simply put, ITM failed to show that it set and
communicated work standards for Dagasdas to follow, and on which his efficiency (or the lack thereof) may be determined.

Second, the new contract was not shown to have been processed through the POEA. Under our Labor Code, employers hiring
OFWs may only do so through entities authorized by the Secretary of the Department of Labor and Employment. 45 Unless the
employment contract of an OFW is processed through the POEA, the same does not bind the concerned OFW because if the
contract is not reviewed by the POEA, certainly the State has no means of determining the suitability of foreign laws to our
overseas workers. 46

This new contract also breached Dagasdas' original contract as it was entered into even before the expiration of the original
contract approved by the POEA. Therefore, it cannot supersede the original contract; its terms and conditions, including
reserving in favor of the employer the right to terminate an employee without notice during the probationary period, are void. 47

Third, under this new contract, Dagasdas was not afforded procedural due process when he was dismissed from work.

As cited above, a valid dismissal requires substantive and procedural due process. As regards the latter, the employer must give
the concerned employee at least two notices before his or her tem1ination. Specifically, the employer must inform the
employee of the cause or causes for his or her termination, and thereafter, the employer's decision to dismiss him. Aside from
the notice requirement, the employee must be accorded the opportunity to be heard. 48

Here, no prior notice of purported infraction, and such opportunity to explain on any accusation against him was given to
Dagasdas.1âwphi1 He was simply given a notice of termination. In fact, it appears that ITM intended not to comply with the
twin notice requirement. As above-quoted, under the new contract, ITM reserved in its favor the right to terminate the
contract without serving any notice to Dagasdas in specified cases, which included such situation where the employer decides
to dismiss the employee within the probationary period. Without doubt, ITM violated the due process requirement in
dismissing an employee.

Lastly, while it is shown that Dagasdas executed a waiver in favor of his employer, the same does not preclude him from filing
this suit.

Generally, the employee's waiver or quitclaim cannot prevent the employee from demanding benefits to which he or she is
entitled, and from filing an illegal dismissal case. This is because waiver or quitclaim is looked upon with disfavor, and is
frowned upon for being contrary to public policy. Unless it can be established that the person executing the waiver voluntarily
did so, with full understanding of its contents, and with reasonable and credible consideration, the same is not a valid and
binding undertaking. Moreover, the burden to prove that the waiver or quitclaim was voluntarily executed is with the
employer.49

In this case, however, neither did GPGS nor its principal, ITM, successfully discharged its burden. GPGS and/or ITM failed to
show that Dagasdas indeed voluntarily waived his claims against the employer.
Indeed, even if Dagasdas signed a quitclaim, it does not necessarily follow that he freely and voluntarily agreed to waive all his
claims against his employer.1âwphi1 Besides, there was no reasonable consideration stipulated in said quitclaim considering
that it only determined the actual payment due to Dagasdas from February 11, 2008 to April 30, 2008. Verily, this quitclaim,
under the semblance of a final settlement, cannot absolve GPGS nor ITM from liability arising from the employment contract of
Dagasdas.50

All told, the dismissal of Dagasdas was without any valid cause and due process of law. Hence, the NLRC properly ruled that
Dagasdas was illegally dismissed. Evidently, it was an error on the part of the CA to hold that the NLRC committed grave abuse
of discretion amounting to lack or excess of jurisdiction when the NLRC ruled for Dagasdas.

WHEREFORE, the Petition is GRANTED. The Decision dated September 26, 2012 and Resolution dated January 28, 2013 of the
Court of Appeals in CA-G.R. SP No. 115396 are REVERSED and SET ASIDE. Accordingly, the March 29, 2010 and June 2, 2010
Resolutions of the National Labor Relations Commission in NLRC LAC OFW-L-02-000071-10 are REINSTATED.

HORTENCIA SALAZAR, petitioner,
vs.
HON. TOMAS D. ACHACOSO, in his capacity as Administrator of the Philippine Overseas Employment Administration, and
FERDIE MARQUEZ, respondents.

This concerns the validity of the power of the Secretary of Labor to issue warrants of arrest and seizure under Article 38 of the
Labor Code, prohibiting illegal recruitment.

The facts are as follows:

x x x           x x x          x x x

1. On October 21, 1987, Rosalie Tesoro of 177 Tupaz Street, Leveriza, Pasay City, in a sworn statement filed with the Philippine
Overseas Employment Administration (POEA for brevity) charged petitioner Hortencia Salazar, viz:

04. T: Ano ba ang dahilan at ikaw ngayon ay narito at

nagbibigay ng salaysay.

S: Upang ireklamo sa dahilan ang aking PECC Card ay

ayaw ibigay sa akin ng dati kong manager. — Horty
Salazar — 615 R.O. Santos, Mandaluyong, Mla.

05. T: Kailan at saan naganap and ginawang panloloko sa

iyo ng tao/mga taong inireklamo mo?

S. Sa bahay ni Horty Salazar.

06. T: Paano naman naganap ang pangyayari?

S. Pagkagaling ko sa Japan ipinatawag niya ako. Kinuha

ang PECC Card ko at sinabing hahanapan ako ng
booking sa Japan. Mag 9 month's na ako sa Phils. ay
hindi pa niya ako napa-alis. So lumipat ako ng ibang
company pero ayaw niyang ibigay and PECC Card
ko.

2. On November 3, 1987, public respondent Atty. Ferdinand Marquez to whom said complaint was assigned, sent to the
petitioner the following telegram:

YOU ARE HEREBY DIRECTED TO APPEAR BEFORE FERDIE MARQUEZ POEA ANTI ILLEGAL RECRUITMENT UNIT 6TH FLR. POEA
BLDG. EDSA COR. ORTIGAS AVE. MANDALUYONG MM ON NOVEMBER 6, 1987 AT 10 AM RE CASE FILED AGAINST YOU. FAIL NOT
UNDER PENALTY OF LAW.
4. On the same day, having ascertained that the petitioner had no license to operate a recruitment agency, public
respondent Administrator Tomas D. Achacoso issued his challenged CLOSURE AND SEIZURE ORDER NO. 1205 which reads:

HORTY SALAZAR
No. 615 R.O. Santos St.
Mandaluyong, Metro Manila

Pursuant to the powers vested in me under Presidential Decree No. 1920 and Executive Order No. 1022, I hereby order the
CLOSURE of your recruitment agency being operated at No. 615 R.O. Santos St., Mandaluyong, Metro Manila and the seizure of
the documents and paraphernalia being used or intended to be used as the means of committing illegal recruitment, it having
verified that you have —

(1) No valid license or authority from the Department of Labor and Employment to recruit and deploy workers for overseas
employment;

(2) Committed/are committing acts prohibited under Article 34 of the New Labor Code in relation to Article 38 of the same
code.

This ORDER is without prejudice to your criminal prosecution under existing laws.

Done in the City of Manila, this 3th day of November, 1987.

5. On January 26, 1988 POEA Director on Licensing and Regulation Atty. Estelita B. Espiritu issued an office order designating
respondents Atty. Marquez, Atty. Jovencio Abara and Atty. Ernesto Vistro as members of a team tasked to implement Closure
and Seizure Order No. 1205. Doing so, the group assisted by Mandaluyong policemen and mediamen Lito Castillo of the
People's Journal and Ernie Baluyot of News Today proceeded to the residence of the petitioner at 615 R.O. Santos St.,
Mandaluyong, Metro Manila. There it was found that petitioner was operating Hannalie Dance Studio. Before entering the
place, the team served said Closure and Seizure order on a certain Mrs. Flora Salazar who voluntarily allowed them entry into
the premises. Mrs. Flora Salazar informed the team that Hannalie Dance Studio was accredited with Moreman Development
(Phil.). However, when required to show credentials, she was unable to produce any. Inside the studio, the team chanced upon
twelve talent performers — practicing a dance number and saw about twenty more waiting outside, The team confiscated
assorted costumes which were duly receipted for by Mrs. Asuncion Maguelan and witnessed by Mrs. Flora Salazar.

6. On January 28, 1988, petitioner filed with POEA the following letter:

Gentlemen:

On behalf of Ms. Horty Salazar of 615 R.O. Santos, Mandaluyong, Metro Manila, we respectfully request that the personal
properties seized at her residence last January 26, 1988 be immediately returned on the ground that said seizure was contrary
to law and against the will of the owner thereof. Among our reasons are the following:

1. Our client has not been given any prior notice or hearing, hence the Closure and Seizure Order No. 1205 dated November 3,
1987 violates "due process of law" guaranteed under Sec. 1, Art. III, of the Philippine Constitution.

2. Your acts also violate Sec. 2, Art. III of the Philippine Constitution which guarantees right of the people "to be secure in their
persons, houses, papers, and effects against unreasonable searches and seizures of whatever nature and for any purpose."

3. The premises invaded by your Mr. Ferdi Marquez and five (5) others (including 2 policemen) are the private residence of the
Salazar family, and the entry, search as well as the seizure of the personal properties belonging to our client were without her
consent and were done with unreasonable force and intimidation, together with grave abuse of the color of authority, and
constitute robbery and violation of domicile under Arts. 293 and 128 of the Revised Penal Code.

Unless said personal properties worth around TEN THOUSAND PESOS (P10,000.00) in all (and which were already due for
shipment to Japan) are returned within twenty-four (24) hours from your receipt hereof, we shall feel free to take all legal
action, civil and criminal, to protect our client's interests.

We trust that you will give due attention to these important matters.
7. On February 2, 1988, before POEA could answer the letter, petitioner filed the instant petition; on even date, POEA filed a
criminal complaint against her with the Pasig Provincial Fiscal, docketed as IS-88-836.1

On February 2, 1988, the petitioner filed this suit for prohibition. Although the acts sought to be barred are already  fait
accompli, thereby making prohibition too late, we consider the petition as one for certiorari in view of the grave public interest
involved.

ISSUE:

The Court finds that a lone issue confronts it: May the Philippine Overseas Employment Administration (or the Secretary of
Labor) validly issue warrants of search and seizure (or arrest) under Article 38 of the Labor Code? It is also an issue squarely
raised by the petitioner for the Court's resolution.

Under the new Constitution, which states:

. . . no search warrant or warrant of arrest shall issue except upon probable cause to be determined personally by the judge
after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing
the place to be searched and the persons or things to be seized. 2

it is only a judge who may issue warrants of search and arrest. 3 In one case, it was declared that mayors may not exercise this
power:

x x x           x x x          x x x

But it must be emphasized here and now that what has just been described is the state of the law as it was in September, 1985.
The law has since been altered. No longer does the mayor have at this time the power to conduct preliminary investigations,
much less issue orders of arrest. Section 143 of the Local Government Code, conferring this power on the mayor has been
abrogated, rendered functus officio by the 1987 Constitution which took effect on February 2, 1987, the date of its ratification
by the Filipino people. Section 2, Article III of the 1987 Constitution pertinently provides that "no search warrant or warrant of
arrest shall issue except upon probable cause to be determined personally by the judge after examination under oath or
affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the
person or things to be seized." The constitutional proscription has thereby been manifested that thenceforth, the function of
determining probable cause and issuing, on the basis thereof, warrants of arrest or search warrants, may be validly exercised
only by judges, this being evidenced by the elimination in the present Constitution of the phrase, "such other responsible officer
as may be authorized by law" found in the counterpart provision of said 1973 Constitution, who, aside from judges, might
conduct preliminary investigations and issue warrants of arrest or search warrants. 4

Neither may it be done by a mere prosecuting body:

We agree that the Presidential Anti-Dollar Salting Task Force exercises, or was meant to exercise, prosecutorial powers, and on
that ground, it cannot be said to be a neutral and detached "judge" to determine the existence of probable cause for purposes
of arrest or search. Unlike a magistrate, a prosecutor is naturally interested in the success of his case. Although his office "is to
see that justice is done and not necessarily to secure the conviction of the person accused," he stands, invariably, as the
accused's adversary and his accuser. To permit him to issue search warrants and indeed, warrants of arrest, is to make him both
judge and jury in his own right, when he is neither. That makes, to our mind and to that extent, Presidential Decree No. 1936 as
amended by Presidential Decree No. 2002, unconstitutional. 5

Section 38, paragraph (c), of the Labor Code, as now written, was entered as an amendment by Presidential Decrees Nos. 1920
and 2018 of the late President Ferdinand Marcos, to Presidential Decree No. 1693, in the exercise of his legislative powers
under Amendment No. 6 of the 1973 Constitution. Under the latter, the then Minister of Labor merely exercised
recommendatory powers:

(c) The Minister of Labor or his duly authorized representative shall have the power to recommend the arrest and detention of
any person engaged in illegal recruitment. 6

On May 1, 1984, Mr. Marcos promulgated Presidential Decree No. 1920, with the avowed purpose of giving more teeth to the
campaign against illegal recruitment. The Decree gave the Minister of Labor arrest and closure powers:
(b) The Minister of Labor and Employment shall have the power to cause the arrest and detention of such non-licensee or non-
holder of authority if after proper investigation it is determined that his activities constitute a danger to national security and
public order or will lead to further exploitation of job-seekers. The Minister shall order the closure of companies, establishment
and entities found to be engaged in the recruitment of workers for overseas employment, without having been licensed or
authorized to do so. 7

On January 26, 1986, he, Mr. Marcos, promulgated Presidential Decree No. 2018, giving the Labor Minister search and seizure
powers as well:

(c) The Minister of Labor and Employment or his duly authorized representatives shall have the power to cause the arrest and
detention of such non-licensee or non-holder of authority if after investigation it is determined that his activities constitute a
danger to national security and public order or will lead to further exploitation of job-seekers. The Minister shall order the
search of the office or premises and seizure of documents, paraphernalia, properties and other implements used in illegal
recruitment activities and the closure of companies, establishment and entities found to be engaged in the recruitment of
workers for overseas employment, without having been licensed or authorized to do so. 8

The above has now been etched as Article 38, paragraph (c) of the Labor Code.

The decrees in question, it is well to note, stand as the dying vestiges of authoritarian rule in its twilight moments.

We reiterate that the Secretary of Labor, not being a judge, may no longer issue search or arrest warrants. Hence, the
authorities must go through the judicial process. To that extent, we declare Article 38, paragraph (c), of the Labor Code,
unconstitutional and of no force and effect.

The Solicitor General's reliance on the case of Morano v.  Vivo 9 is not well-taken. Vivo involved a deportation case, governed by
Section 69 of the defunct Revised Administrative Code and by Section 37 of the Immigration Law. We have ruled that in
deportation cases, an arrest (of an undesirable alien) ordered by the President or his duly authorized representatives, in order
to carry out a final decision of deportation is valid. 10 It is valid, however, because of the recognized supremacy of the Executive
in matters involving foreign affairs. We have held: 11

x x x           x x x          x x x

The State has the inherent power to deport undesirable aliens (Chuoco Tiaco vs. Forbes, 228 U.S. 549, 57 L. Ed. 960, 40 Phil.
1122, 1125). That power may be exercised by the Chief Executive "when he deems such action necessary for the peace and
domestic tranquility of the nation." Justice Johnson's opinion is that when the Chief Executive finds that there are aliens whose
continued presence in the country is injurious to the public interest, "he may, even in the absence of express law, deport
them". (Forbes vs. Chuoco Tiaco and Crossfield, 16 Phil. 534, 568, 569; In re McCulloch Dick, 38 Phil. 41).

The right of a country to expel or deport aliens because their continued presence is detrimental to public welfare is absolute
and unqualified (Tiu Chun Hai and Go Tam vs. Commissioner of Immigration and the Director of NBI, 104 Phil. 949, 956). 12

The power of the President to order the arrest of aliens for deportation is, obviously, exceptional. It (the power to order arrests)
can not be made to extend to other cases, like the one at bar. Under the Constitution, it is the sole domain of the courts.

Moreover, the search and seizure order in question, assuming, ex gratia argumenti, that it was validly issued, is clearly in the
nature of a general warrant:

Pursuant to the powers vested in me under Presidential Decree No. 1920 and Executive Order No. 1022, I hereby order the
CLOSURE of your recruitment agency being operated at No. 615 R.O. Santos St., Mandaluyong, Metro Manila and the seizure of
the documents and paraphernalia being used or intended to be used as the means of committing illegal recruitment, it having
verified that you have —

(1) No valid license or authority from the Department of Labor and Employment to recruit and deploy workers for overseas
employment;

(2) Committed/are committing acts prohibited under Article 34 of the New Labor Code in relation to Article 38 of the same
code.

This ORDER is without prejudice to your criminal prosecution under existing laws. 13
We have held that a warrant must identify clearly the things to be seized, otherwise, it is null and void, thus:

x x x           x x x          x x x

Another factor which makes the search warrants under consideration constitutionally objectionable is that they are in the
nature of general warrants. The search warrants describe the articles sought to be seized in this wise:

1) All printing equipment, paraphernalia, paper, ink, photo equipment, typewriters, cabinets, tables, communications/
recording equipment, tape recorders, dictaphone and the like used and/or connected in the printing of the "WE FORUM"
newspaper and any and all documents/communications, letters and facsimile of prints related to the "WE FORUM" newspaper.

2) Subversive documents, pamphlets, leaflets, books, and other publications to promote the objectives and purposes of the
subversive organizations known as Movement for Free Philippines, Light-a-Fire Movement and April 6 Movement; and

3) Motor vehicles used in the distribution/circulation of the "WE FORUM" and other subversive materials and propaganda,
more particularly,

1) Toyota-Corolla, colored yellow with Plate No. NKA 892;

2) DATSUN, pick-up colored white with Plate No. NKV 969;

3) A delivery truck with Plate No. NBS 542;

4) TOYOTA-TAMARAW, colored white with Plate No. PBP 665; and

5) TOYOTA Hi-Lux, pick-up truck with Plate No. NGV 472 with marking "Bagong Silang."

In Stanford v.  State of Texas, the search warrant which authorized the search for "books, records, pamphlets, cards, receipts,
lists, memoranda, pictures, recordings and other written instruments concerning the Communist Parties of Texas, and the
operations of the Community Party in Texas," was declared void by the U.S. Supreme Court for being too general. In like
manner, directions to "seize any evidence in connection with the violation of SDC 13-3703 or otherwise" have been held too
general, and that portion of a search warrant which authorized the seizure of any "paraphernalia which could be used to violate
Sec. 54-197 of the Connecticut General Statutes (the statute dealing with the crime of conspiracy)" was held to be a general
warrant, and therefore invalid. The description of the articles sought to be seized under the search warrants in question cannot
be characterized differently.

In the Stanford case, the U.S. Supreme court calls to mind a notable chapter in English history; the era of disaccord between the
Tudor Government and the English Press, when "Officers of the Crown were given roving commissions to search where they
pleased in order to suppress and destroy the literature of dissent both Catholic and Puritan." Reference herein to such historical
episode would not be relevant for it is not the policy of our government to suppress any newspaper or publication that speaks
with "the voice of non-conformity" but poses no clear and imminent danger to state security. 14

For the guidance of the bench and the bar, we reaffirm the following principles:

1. Under Article III, Section 2, of the l987 Constitution, it is only judges, and no other, who may issue warrants of arrest and
search:

2. The exception is in cases of deportation of illegal and undesirable aliens, whom the President or the Commissioner of
Immigration may order arrested, following a final order of deportation, for the purpose of deportation.

WHEREFORE, the petition is GRANTED. Article 38, paragraph (c) of the Labor Code is declared UNCONSTITUTIONAL and null and
void. The respondents are ORDERED to return all materials seized as a result of the implementation of Search and Seizure Order
No. 1205.

FARLE P. ALMODIEL, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), RAYTHEON PHILS., INC., respondents.

Subject of this petition for certiorari  is the decision dated March 21, 1991 of the National Labor Relations Commission in NLRC
Case No.
00-00645-89 which reversed and set aside the Labor Arbiter's decision dated September 27, 1989 and ordered instead the
payment of separation pay and financial assistance of P100,000.00. Petitioner imputes grave abuse of discretion on the part of
the Commission and prays for the reinstatement of the Labor Arbiter's decision which declared his termination on the ground
of redundancy illegal.

Petitioner Farle P. Almodiel is a certified public accountant who was hired in October, 1987 as Cost Accounting Manager of
respondent Raytheon Philippines, Inc. through a reputable placement firm, John Clements Consultants, Inc. with a starting
monthly salary of P18,000.00. Before said employment, he was the accounts executive of Integrated Microelectronics, Inc. for
several years. He left his lucrative job therein in view of the promising career offered by Raytheon. He started as a probationary
or temporary employee. As Cost Accounting Manager, his major duties were: (1) plan, coordinate and carry out year and
physical inventory; (2) formulate and issue out hard copies of Standard Product costing and other cost/pricing analysis if
needed and required and (3) set up the written Cost Accounting System for the whole company. After a few months, he was
given a regularization increase of P1,600.00 a month. Not long thereafter, his salary was increased to P21,600.00 a month.

On August 17, 1988, he recommended and submitted a Cost Accounting/Finance Reorganization, affecting the whole finance
group but the same was disapproved by the Controller. However, he was assured by the Controller that should his position or
department which was apparently a one-man department with no staff becomes untenable or unable to deliver the needed
service due to manpower constraint, he would be given a three (3) year advance notice.

In the meantime, the standard cost accounting system was installed and used at the Raytheon plants and subsidiaries
worldwide. It was likewise adopted and installed in the Philippine operations. As a consequence, the services of a Cost
Accounting Manager allegedly entailed only the submission of periodic reports that would use computerized forms prescribed
and designed by the international head office of the Raytheon Company in California, USA.

On January 27, 1989, petitioner was summoned by his immediate boss and in the presence of IRD Manager, Mr. Rolando
Estrada, he was told of the abolition of his position on the ground of redundancy. He pleaded with management to defer its
action or transfer him to another department, but he was told that the decision of management was final and that the same
has been conveyed to the Department of Labor and Employment. Thus, he was constrained to file the complaint for illegal
dismissal before the Arbitration Branch of the National Capital Region, NLRC, Department of Labor and Employment.

On September 27, 1989, Labor Arbiter Daisy Cauton-Barcelona rendered a decision, the dispositive portion of which reads as
follows:

WHEREFORE, judgment is hereby rendered declaring that complainant's termination on the ground of redundancy is highly
irregular and without legal and factual basis, thus ordering the respondents to reinstate complainant to his former position
with full backwages without lost of seniority rights and other benefits. Respondents are further ordered to pay complainant
P200,000.00 as moral damages and P20,000.00 as exemplary damages, plus ten percent (10%) of the total award as attorney's
fees.1

Raytheon appealed therefrom on the grounds that the Labor Arbiter committed grave abuse of discretion in denying its rights
to dismiss petitioner on the ground of redundancy, in relying on baseless surmises and self-serving assertions of the petitioner
that its act was tainted with malice and bad faith and in awarding moral and exemplary damages and attorney's fees.

On March 21, 1991, the NLRC reversed the decision and directed Raytheon to pay petitioner the total sum of P100,000.00 as
separation pay/financial assistance. The dispositive portion of which is hereby quoted as follows:

WHEREFORE, the appealed decision is hereby set aside. In its stead, Order is hereby issued directing respondent to pay
complainant the total separation pay/financial assistance of One Hundred Thousand Pesos (P100,000.00).

SO ORDERED.2

From this decision, petitioner filed the instant petition averring that:

The public respondent committed grave abuse of discretion amounting to (lack of) or in excess of jurisdiction in declaring as
valid and justified the termination of petitioner on the ground of redundancy in the face of clearly established finding that
petitioner's termination was tainted with malice, bad faith and irregularity. 3

RULING
Termination of an employee's services because of redundancy is governed by Article 283 of the Labor Code which provides as
follows:

Art. 283. Closure of establishment and reduction of personnel. — The employer may also terminate the employment of any
employee due to installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of
operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title,
by serving a written notice on the worker and the Department of Labor and Employment at least one (1) month before the
intended date thereof. In case of termination due to installation of labor-saving devices or redundancy, the worker affected
thereby shall be entitled to a separation pay equivalent to at least one (1) month pay for every year of service, whichever is
higher. In case of retrenchment to prevent losses and in cases of closure or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to at least one (1)
month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6)
months shall be considered as one (1) whole year.

There is no dispute that petitioner was duly advised, one (1) month before, of the termination of his employment on the
ground of redundancy in a written notice by his immediate superior, Mrs. Magdalena B.D. Lopez sometime in the afternoon of
January 27, 1989. He was issued a check for P54,863.00 representing separation pay but in view of his refusal to acknowledge
the notice and the check, they were sent to him thru registered mail on January 30, 1989. The Department of Labor and
Employment was served a copy of the notice of termination of petitioner in accordance with the pertinent provisions of the
Labor Code and the implementing rules.

The crux of the controversy lies on whether bad faith, malice and irregularity crept in the abolition of petitioner's position of
Cost Accounting Manager on the ground of redundancy. Petitioner claims that the functions of his position were absorbed by
the Payroll/Mis/Finance Department under the management of Danny Ang Tan Chai, a resident alien without any working
permit from the Department of Labor and Employment as required by law. Petitioner relies on the testimony of Raytheon's
witness to the effect that corollary functions appertaining to cost accounting were dispersed to other units in the Finance
Department. And granting that his department has to be declared redundant, he claims that he should have been the Manager
of the Payroll/Mis/Finance Department which handled general accounting, payroll and encoding. As a B. S. Accounting
graduate, a CPA with M.B.A. units, 21 years of work experience, and a natural born Filipino, he claims that he is better qualified
than Ang Tan Chai, a B.S. Industrial Engineer, hired merely as a Systems Analyst Programmer or its equivalent in early 1987,
promoted as MIS Manager only during the middle part of 1988 and a resident alien.

On the other hand, Raytheon insists that petitioner's functions as Cost Accounting Manager had not been absorbed by Ang Tan
Chai, a permanent resident born in this country. It claims to have established below that Ang Tan Chai did not displace
petitioner or absorb his functions and duties as they were occupying entirely different and distinct positions requiring different
sets of expertise or qualifications and discharging functions altogether different and foreign from that of petitioner's abolished
position. Raytheon debunks petitioner's reliance on the testimony of Mr. Estrada saying that the same witness testified under
oath that the functions of the Cost Accounting Manager had been completely dispensed with and the position itself had been
totally abolished.

Whether petitioner's functions as Cost Accounting Manager have been dispensed with or merely absorbed by another is
however immaterial. Thus, notwithstanding the dearth of evidence on the said question, a resolution of this case can be arrived
at without delving into this matter. For even conceding that the functions of petitioner's position were merely transferred, no
malice or bad faith can be imputed from said act. A survey of existing case law will disclose that in Wiltshire File Co., Inc. v.
NLRC,4 the position of Sales Manager was abolished on the ground of redundancy as the duties previously discharged by the
Sales Manager simply added to the duties of the General Manager to whom the Sales Manager used to report. In adjudging said
termination as legal, this Court said that redundancy, for purposes of our Labor Code, exists where the services of an employee
are in excess of what is reasonably demanded by the actual requirements of the enterprise. The characterization of an
employee's services as no longer necessary or sustainable, and therefore, properly terminable, was an exercise of business
judgment on the part of the employer. The wisdom or soundness of such characterization or decision was not subject to
discretionary review on the part of the Labor Arbiter nor of the NLRC so long, of course, as violation of law or merely arbitrary
and malicious action is not shown.

In the case of International Macleod, Inc. v. Intermediate Appellate Court,5 this Court also considered the position of
Government Relations Officer to have become redundant in view of the appointment of the International Heavy Equipment
Corporation as the company's dealer with the government. It held therein that the determination of the need for the phasing
out of a department as a labor and cost saving device because it was no longer economical to retain said services is a
management prerogative and the courts will not interfere with the exercise thereof as long as no abuse of discretion or merely
arbitrary or malicious action on the part of management is shown.

In the same vein, this Court ruled in Bondoc v. People's Bank and Trust Co.,6 that the bank's board of directors possessed the
power to remove a department manager whose position depended on the retention of the trust and confidence of
management and whether there was need for his services. Although some vindictive motivation might have impelled the
abolition of his position, this Court expounded that it is undeniable that the bank's board of directors possessed the power to
remove him and to determine whether the interest of the bank justified the existence of his department.

Indeed, an employer has no legal obligation to keep more employees than are necessary for the operation of its business.
Petitioner does not dispute the fact that a cost accounting system was installed and used at Raytheon subsidiaries and plants
worldwide; and that the functions of his position involve the submission of periodic reports utilizing computerized forms
designed and prescribed by the head office with the installation of said accounting system. Petitioner attempts to controvert
these realities by alleging that some of the functions of his position were still indispensable and were actually dispersed to
another department. What these indispensable functions that were dispersed, he failed however, to specify and point out.
Besides, the fact that the functions of a position were simply added to the duties of another does not affect the legitimacy of
the employer's right to abolish a position when done in the normal exercise of its prerogative to adopt sound business practices
in the management of its affairs.

Considering further that petitioner herein held a position which was definitely managerial in character, Raytheon had a broad
latitude of discretion in abolishing his position. An employer has a much wider discretion in terminating employment
relationship of managerial personnel compared to rank and file employees.7 The reason obviously is that officers in such key
positions perform not only functions which by nature require the employer's full trust and confidence but also functions that
spell the success or failure of an enterprise.

Likewise destitute of merit is petitioner's imputation of unlawful discrimination when Raytheon caused corollary functions
appertaining to cost accounting to be absorbed by Danny Ang Tan Chai, a resident alien without a working permit. Article 40 of
the Labor Code which requires employment permit refers to non-resident aliens. The employment permit is required for entry
into the country for employment purposes and is issued after determination of the non-availability of a person in the
Philippines who is competent, able and willing at the time of application to perform the services for which the alien is desired.
Since Ang Tan Chai is a resident alien, he does not fall within the ambit of the provision.

Petitioner also assails Raytheon's choice of Ang Tan Chai to head the Payroll/Mis/Finance Department, claiming that he is better
qualified for the position. It should be noted, however, that Ang Tan Chai was promoted to the position during the middle part
of 1988 or before the abolition of petitioner's position in early 1989. Besides the fact that Ang Tan Chai's promotion thereto is a
settled matter, it has been consistently held that an objection founded on the ground that one has better credentials over the
appointee is frowned upon so long as the latter possesses the minimum qualifications for the position. In the case at bar, since
petitioner does not allege that Ang Tan Chai does not qualify for the position, the Court cannot substitute its discretion and
judgment for that which is clearly and exclusively management prerogative. To do so would take away from the employer what
rightly belongs to him as aptly explained in National Federation of Labor Unions v. NLRC:8

It is a well-settled rule that labor laws do not authorize interference with the employer's judgment in the conduct of his
business. The determination of the qualification and fitness of workers for hiring and firing, promotion or reassignment are
exclusive prerogatives of management. The Labor Code and its implementing Rules do not vest in the Labor Arbiters nor in the
different Divisions of the NLRC (nor in the courts) managerial authority. The employer is free to determine, using his own
discretion and business judgment, all elements of employment, "from hiring to firing" except in cases of unlawful discrimination
or those which may be provided by law. There is none in the instant case.

Finding no grave abuse of discretion on the part of the National Labor Relations Commission in reversing and annulling the
decision of the Labor Arbiter and that on the contrary, the termination of petitioner's employment was anchored on a valid and
authorized cause under Article 283 of the Labor Code, the instant petition for certiorari  must fail.

SO ORDERED.

GENERAL MILLING CORPORATION and EARL TIMOTHY CONE, petitioners,

vs.
HON. RUBEN D. TORRES, in his capacity as Secretary of Labor and Employment, HON. BIENVENIDO E. LAGUESMA, in his
capacity as Acting Secretary of Labor and Employment, and BASKETBALL COACHES ASSOCIATION OF THE
PHILIPPINES, respondents.

On 1 May 1989, the National Capital Region of the Department of Labor and Employment issued Alien Employment Permit No.
M-0689-3-535 in favor of petitioner Earl Timothy Cone, a United States citizen, as sports consultant and assistant coach for
petitioner General Milling Corporation ("GMC").

On 27 December 1989, petitioners GMC and Cone entered into a contract of employment whereby the latter undertook to
coach GMC's basketball team.

On 15 January 1990, the Board of Special Inquiry of the Commission on Immigration and Deportation approved petitioner
Cone's application for a change of admission status from temporary visitor to pre-arranged employee.

On 9 February 1990, petitioner GMC requested renewal of petitioner Cone's alien employment permit. GMC also requested
that it be allowed to employ Cone as full-fledged coach. The DOLE Regional Director, Luna Piezas, granted the request on 15
February 1990.

On 18 February 1990, Alien Employment Permit No. M-02903-881, valid until 25 December 1990, was issued.

Private respondent Basketball Coaches Association of the Philippines ("BCAP") appealed the issuance of said alien
employment permit to the respondent Secretary of Labor who, on 23 April 1990, issued a decision ordering cancellation of
petitioner Cone's employment permit on the ground that there was no showing that there is no person in the Philippines who
is competent, able and willing to perform the services required nor that the hiring of petitioner Cone would redound to the
national interest.

Petitioner GMC filed a Motion for Reconsideration and two (2) Supplemental Motions for Reconsideration but said Motions
were denied by Acting Secretary of Labor Bienvenido E. Laguesma in an Order dated 8 June 1990.

Petitioners are now before the Court on a Petition for Certiorari, dated 14 June 1990, alleging that:

1. respondent Secretary of Labor gravely abused his discretion when he revoked petitioner Cone's alien employment permit;
and

2. Section 6 (c), Rule XIV, Book I of the Omnibus Rules Implementing the Labor Code is null and void as it is in violation of the
enabling law as the Labor Code does not empower respondent Secretary to determine if the employment of an alien would
redound to national interest.

Deliberating on the present Petition for Certiorari, the Court considers that petitioners have failed to show any grave abuse of
discretion or any act without or in excess of jurisdiction on the part of respondent Secretary of Labor in rendering his decision,
dated 23 April 1990, revoking petitioner Cone's Alien Employment Permit.

The alleged failure to notify petitioners of the appeal filed by private respondent BCAP was cured when petitioners were
allowed to file their Motion for Reconsideration before respondent Secretary of Labor. 1

Petitioner GMC's claim that hiring of a foreign coach is an employer's prerogative has no legal basis at all. Under Article 40 of
the Labor Code, an employer seeking employment of an alien must first obtain an employment permit from the Department
of Labor. Petitioner GMC's right to choose whom to employ is, of course, limited by the statutory requirement of an alien
employment permit.

Petitioners will not find solace in the equal protection clause of the Constitution. As pointed out by the Solicitor-General, no
comparison can be made between petitioner Cone and Mr. Norman Black as the latter is "a long time resident of the country,"
and thus, not subject to the provisions of Article 40 of the Labor Code which apply only to "non-resident aliens." In any case, the
term "non-resident alien" and its obverse "resident alien," here must be given their technical connotation under our law on
immigration.

Neither can petitioners validly claim that implementation of respondent Secretary's decision would amount to an impairment
of the obligations of contracts. The provisions of the Labor Code and its Implementing Rules and Regulations requiring alien
employment permits were in existence long before petitioners entered into their contract of employment. It is firmly settled
that provisions of applicable laws, especially provisions relating to matters affected with public policy, are deemed written into
contracts.2 Private parties cannot constitutionally contract away the otherwise applicable provisions of law.

Petitioners' contention that respondent Secretary of Labor should have deferred to the findings of Commission on Immigration
and Deportation as to the necessity of employing petitioner Cone, is, again, bereft of legal basis. The Labor Code itself
specifically empowers respondent Secretary to make a determination as to the availability of the services of a "person in the
Philippines who is competent, able and willing at the time of application to perform the services for which an alien is desired." 3

In short, the Department of Labor is the agency vested with jurisdiction to determine the question of availability of local
workers. The constitutional validity of legal provisions granting such jurisdiction and authority and requiring proof of non-
availability of local nationals able to carry out the duties of the position involved, cannot be seriously questioned.

Petitioners apparently also question the validity of the Implementing Rules and Regulations, specifically Section 6 (c), Rule XIV,
Book I of the Implementing Rules, as imposing a condition not found in the Labor Code itself. Section 6 (c), Rule XIV, Book I of
the Implementing Rules, provides as follows:

Section 6. Issuance of Employment Permit –– the Secretary of Labor may issue an employment permit to the applicant based
on:

a) Compliance by the applicant and his employer with the requirements of Section 2 hereof;

b) Report of the Bureau Director as to the availability or non-availability of any person in the Philippines who is competent and
willing to do the job for which the services of the applicant are desired.

(c) His assessment as to whether or not the employment of the applicant will redound to the national interest;

(d) Admissibility of the alien as certified by the Commission on Immigration and Deportation;

(e) The recommendation of the Board of Investments or other appropriate government agencies if the applicant will be
employed in preferred areas of investments or in accordance with the imperative of economic development;

x x x           x x x          x x x

(Emphasis supplied)

Article 40 of the Labor Code reads as follows:

Art. 40. Employment per unit of non-resident aliens. –– Any alien seeking admission to the Philippines for employment purposes
and any domestic or foreign employer who desires to engage an alien for employment in the Philippines shall obtain an
employment permit from the Department of Labor.

The employment permit may be issued to a non-resident alien or to the applicant employer after a determination of the non-
availability of a person in the Philippines who is competent, able and willing at the time of application to perform the services
for which the alien is desired.

For an enterprise registered in preferred areas of investments, said employment permit may be issued upon recommendation
of the government agency charged with the supervision of said registered enterprise. (Emphasis supplied)

Petitioners apparently suggest that the Secretary of Labor is not authorized to take into account the question of whether or not
employment of an alien applicant would "redound to the national interest" because Article 40 does not explicitly refer to such
assessment. This argument (which seems impliedly to concede that the relationship of basketball coaching and the national
interest is tenuous and unreal) is not persuasive. In the first place, the second paragraph of Article 40 says: "[t]he employment
permit may be issued to a non-resident alien or to the applicant employer after a determination of the non-availability of a
person in the Philippines who is competent, able and willing at the time of application to perform the services for which the
alien is desired." The permissive language employed in the Labor Code indicates that the authority granted involves the
exercise of discretion on the part of the issuing authority. In the second place, Article 12 of the Labor Code sets forth a
statement of objectives that the Secretary of Labor should, and indeed must, take into account in exercising his authority and
jurisdiction granted by the Labor Code,

Art. 12. Statement of Objectives. –– It is the policy of the State:

a) To promote and maintain a state of full employment through improved manpower training, allocation and utilization;

x x x           x x x          x x x

c) To facilitate a free choice of available employment by persons seeking work in conformity with the national interest;

d) To facilitate and regulate the movement of workers in conformity with the national interest;

e) To regulate the employment of aliens, including the establishment of a registration and/or work permit system;

x x x           x x x          x x x

Thus, we find petitioners' arguments on the above points of constitutional law too insubstantial to require further
consideration.1avvphi1

Petitioners have very recently manifested to this Court that public respondent Secretary of Labor has reversed his earlier
decision and has issued an Employment Permit to petitioner Cone. Petitioners seek to withdraw their Petition for Certiorari on
the ground that it has become moot and academic.

While ordinarily this Court would dismiss a petition that clearly appears to have become moot and academic, the circumstances
of this case and the nature of the questions raised by petitioners are such that we do not feel justified in leaving those
questions unanswered.4

Moreover, assuming that an alien employment permit has in fact been issued to petitioner Cone, the basis of the reversal by
the Secretary of Labor of his earlier decision does not appear in the record. If such reversal is based on some view of
constitutional law or labor law different from those here set out, then such employment permit, if one has been issued, would
appear open to serious legal objections.

ACCORDINGLY, the Court Resolved to DISMISS the Petition for certiorari for lack of merit. Costs against petitioners.

ALIPIO R. RUGA, JOSE PARMA, ELADIO CALDERON, LAURENTE BAUTU, JAIME BARBIN, NICANOR FRANCISCO, PHILIP
CERVANTES and ELEUTERIO BARBIN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and DE GUZMAN FISHING ENTERPRISES and/or ARSENIO DE
GUZMAN, respondents.

The issue to be resolved in the instant case is whether or not the fishermen-crew members of the trawl fishing vessel 7/B
Sandyman II are employees of its owner-operator, De Guzman Fishing Enterprises, and if so, whether or not they were illegally
dismissed from their employment.

Records show that the petitioners were the fishermen-crew members of 7/B Sandyman II, one of several fishing vessels
owned and operated by private respondent De Guzman Fishing Enterprises which is primarily engaged in the fishing business
with port and office at Camaligan, Camarines Sur. Petitioners rendered service aboard said fishing vessel in various capacities,
as follows: Alipio Ruga and Jose Parma patron/pilot; Eladio Calderon, chief engineer; Laurente Bautu, second engineer; Jaime
Barbin, master fisherman; Nicanor Francisco, second fisherman; Philip Cervantes and Eleuterio Barbin, fishermen.

For services rendered in the conduct of private respondent's regular business of "trawl" fishing, petitioners were paid on
percentage commission basis in cash by one Mrs. Pilar de Guzman, cashier of private respondent. As agreed upon, they
received thirteen percent (13%) of the proceeds of the sale of the fish-catch if the total proceeds exceeded the cost of crude oil
consumed during the fishing trip, otherwise, they received ten percent (10%) of the total proceeds of the sale. The patron/pilot,
chief engineer and master fisherman received a minimum income of P350.00 per week while the assistant engineer, second
fisherman, and fisherman-winchman received a minimum income of P260.00 per week. 1

On September 11, 1983 upon arrival at the fishing port, petitioners were told by Jorge de Guzman, president of private
respondent, to proceed to the police station at Camaligan, Camarines Sur, for investigation on the report that they sold some of
their fish-catch at midsea to the prejudice of private respondent. Petitioners denied the charge claiming that the same was a
countermove to their having formed a labor union and becoming members of Defender of Industrial Agricultural Labor
Organizations and General Workers Union (DIALOGWU) on September 3, 1983.

During the investigation, no witnesses were presented to prove the charge against petitioners, and no criminal charges were
formally filed against them. Notwithstanding, private respondent refused to allow petitioners to return to the fishing vessel to
resume their work on the same day, September 11, 1983.

On September 22, 1983, petitioners individually filed their complaints for illegal dismissal and non-payment of 13th month
pay, emergency cost of living allowance and service incentive pay, with the then Ministry (now Department) of Labor and
Employment, Regional Arbitration Branch No. V, Legaspi City, Albay, docketed as Cases Nos. 1449-83 to 1456-83. 2 They
uniformly contended that they were arbitrarily dismissed without being given ample time to look for a new job.

On October 24, 1983, private respondent, thru its operations manager, Conrado S. de Guzman, submitted its position paper
denying the employer-employee relationship between private respondent and petitioners on the theory that private
respondent and petitioners were engaged in a joint venture. 3

After the parties failed to reach an amicable settlement, the Labor Arbiter scheduled the case for joint hearing furnishing the
parties with notice and summons. On December 27, 1983, after two (2) previously scheduled joint hearings were postponed
due to the absence of private respondent, one of the petitioners herein, Alipio Ruga, the pilot/captain of the 7/B Sandyman II,
testified, among others, on the manner the fishing operations were conducted, mode of payment of compensation for services
rendered by the fishermen-crew members, and the circumstances leading to their dismissal. 4

On March 31, 1984, after the case was submitted for resolution, Labor Arbiter Asisclo S. Coralde rendered a joint
decision 5 dismissing all the complaints of petitioners on a finding that a "joint fishing venture" and not one of employer-
employee relationship existed between private respondent and petitioners.

From the adverse decision against them, petitioners appealed to the National Labor Relations Commission.

On May 30, 1985, the National Labor Relations Commission promulgated its resolution 6 affirming the decision of the labor
arbiter that a "joint fishing venture" relationship existed between private respondent and petitioners.

Hence, the instant petition.

Petitioners assail the ruling of the public respondent NLRC that what exists between private respondent and petitioners is a
joint venture arrangement and not an employer-employee relationship. To stress that there is an employer-employee
relationship between them and private respondent, petitioners invite attention to the following: that they were directly hired
by private respondent through its general manager, Arsenio de Guzman, and its operations manager, Conrado de Guzman; that,
except for Laurente Bautu, they had been employed by private respondent from 8 to 15 years in various capacities; that private
respondent, through its operations manager, supervised and controlled the conduct of their fishing operations as to the fixing
of the schedule of the fishing trips, the direction of the fishing vessel, the volume or number of tubes of the fish-catch the time
to return to the fishing port, which were communicated to the patron/pilot by radio (single side band); that they were not
allowed to join other outfits even the other vessels owned by private respondent without the permission of the operations
manager; that they were compensated on percentage commission basis of the gross sales of the fish-catch which were
delivered to them in cash by private respondent's cashier, Mrs. Pilar de Guzman; and that they have to follow company policies,
rules and regulations imposed on them by private respondent.

Disputing the finding of public respondent that a "joint fishing venture" exists between private respondent and petitioners,
petitioners claim that public respondent exceeded its jurisdiction and/or abused its discretion when it added facts not
contained in the records when it stated that the pilot-crew members do not receive compensation from the boat-owners
except their share in the catch produced by their own efforts; that public respondent ignored the evidence of petitioners that
private respondent controlled the fishing operations; that public respondent did not take into account established
jurisprudence that the relationship between the fishing boat operators and their crew is one of direct employer and employee.

Aside from seeking the dismissal of the petition on the ground that the decision of the labor arbiter is now final and executory
for failure of petitioners to file their appeal with the NLRC within 10 calendar days from receipt of said decision pursuant to the
doctrine laid down in Vir-Jen Shipping and Marine Services, Inc. vs. NLRC, 115 SCRA 347 (1982), the Solicitor General claims that
the ruling of public respondent that a "joint fishing venture" exists between private respondent and petitioners rests on the
resolution of the Social Security System (SSS) in a 1968 case, Case No. 708 (De Guzman Fishing Enterprises vs. SSS), exempting
De Guzman Fishing Enterprises, private respondent herein, from compulsory coverage of the SSS on the ground that there is no
employer-employee relations between the boat-owner and the fishermen-crew members following the doctrine laid down
in Pajarillo vs. SSS, 17 SCRA 1014 (1966). In applying to the case at bar the doctrine in Pajarillo vs. SSS, supra, that there is no
employer-employee relationship between the boat-owner and the pilot and crew members when the boat-owner supplies the
boat and equipment while the pilot and crew members contribute the corresponding labor and the parties get specific shares in
the catch for their respective contribution to the venture, the Solicitor General pointed out that the boat-owners in
the Pajarillo case, as in the case at bar, did not control the conduct of the fishing operations and the pilot and crew members
shared in the catch.

We rule in favor of petitioners. ----- there is employer-employee relationship

Fundamental considerations of substantial justice persuade Us to decide the instant case on the merits rather than to dismiss it
on a mere technicality. In so doing, we exercise the prerogative accorded to this Court enunciated in Firestone Filipinas
Employees Association, et al. vs.  Firestone Tire and Rubber Co.  of the Philippines,  Inc., 61 SCRA 340 (1974), thus "the well-
settled doctrine is that in labor cases before this Tribunal, no undue sympathy is to be accorded to any claim of a procedural
misstep, the idea being that its power be exercised according to justice and equity and substantial merits of the controversy."

Circumstances peculiar to some extent to fishermen-crew members of a fishing vessel regularly engaged in trawl fishing, as in
the case of petitioners herein, who spend one (1) whole week or more 7 in the open sea performing their job to earn a living to
support their families, convince Us to adopt a more liberal attitude in applying to petitioners the 10-calendar day rule in the
filing of appeals with the NLRC from the decision of the labor arbiter.

Records reveal that petitioners were informed of the labor arbiter's decision of March 31, 1984 only on July 3,1984 by their
non-lawyer representative during the arbitration proceedings, Jose Dialogo who received the decision eight (8) days earlier, or
on June 25, 1984. As adverted to earlier, the circumstances peculiar to petitioners' occupation as fishermen-crew members,
who during the pendency of the case understandably have to earn a living by seeking employment elsewhere, impress upon Us
that in the ordinary course of events, the information as to the adverse decision against them would not reach them within
such time frame as would allow them to faithfully abide by the 10-calendar day appeal period. This peculiar circumstance and
the fact that their representative is a non-lawyer provide equitable justification to conclude that there is substantial compliance
with the ten-calendar day rule of filing of appeals with the NLRC when petitioners filed on July 10, 1984, or seven (7) days after
receipt of the decision, their appeal with the NLRC through registered mail.

We have consistently ruled that in determining the existence of an employer-employee relationship, the elements that are
generally considered are the following (a) the selection and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer's power to control the employee with respect to the means and methods by which
the work is to be accomplished. 8 The employment relation arises from contract of hire, express or implied. 9 In the absence of
hiring, no actual employer-employee relation could exist.

From the four (4) elements mentioned, We have generally relied on the so-called right-of-control test 10 where the person for
whom the services are performed reserves a right to control not only the end to be achieved but also the means to be used in
reaching such end. The test calls merely for the existence of the right to control the manner of doing the work, not the actual
exercise of the right. 11

The case of Pajarillo vs. SSS, supra, invoked by the public respondent as authority for the ruling that a "joint fishing venture"
existed between private respondent and petitioners is not applicable in the instant case. There is neither right of control nor
actual exercise of such right on the part of the boat-owners in the Pajarillo case, where the Court found that the pilots therein
are not under the order of the boat-owners as regards their employment; that they go out to sea not upon directions of the
boat-owners, but upon their own volition as to when, how long and where to go fishing; that the boat-owners do not in any
way control the crew-members with whom the former have no relationship whatsoever; that they simply join every trip for
which the pilots allow them, without any reference to the owners of the vessel; and that they only share in their own catch
produced by their own efforts.

The aforementioned circumstances obtaining in Pajarillo case do not exist in the instant case. The conduct of the fishing
operations was undisputably shown by the testimony of Alipio Ruga, the patron/pilot of 7/B Sandyman II, to be under the
control and supervision of private respondent's operations manager. Matters dealing on the fixing of the schedule of the fishing
trip and the time to return to the fishing port were shown to be the prerogative of private respondent. 12 While performing the
fishing operations, petitioners received instructions via a single-side band radio from private respondent's operations manager
who called the patron/pilot in the morning. They are told to report their activities, their position, and the number of tubes of
fish-catch in one day. 13 Clearly thus, the conduct of the fishing operations was monitored by private respondent thru the
patron/pilot of 7/B Sandyman II who is responsible for disseminating the instructions to the crew members.

The conclusion of public respondent that there had been no change in the situation of the parties since 1968 when De Guzman
Fishing Enterprises, private respondent herein, obtained a favorable judgment in Case No. 708 exempting it from compulsory
coverage of the SSS law is not supported by evidence on record. It was erroneous for public respondent to apply the factual
situation of the parties in the 1968 case to the instant case in the light of the changes in the conditions of employment agreed
upon by the private respondent and petitioners as discussed earlier.

Records show that in the instant case, as distinguished from the Pajarillo case where the crew members are under no obligation
to remain in the outfit for any definite period as one can be the crew member of an outfit for one day and be the member of
the crew of another vessel the next day, the herein petitioners, on the other hand, were directly hired by private respondent,
through its general manager, Arsenio de Guzman, and its operations manager, Conrado de Guzman and have been under the
employ of private respondent for a period of 8-15 years in various capacities, except for Laurente Bautu who was hired on
August 3, 1983 as assistant engineer. Petitioner Alipio Ruga was hired on September 29, 1974 as patron/captain of the fishing
vessel; Eladio Calderon started as a mechanic on April 16, 1968 until he was promoted as chief engineer of the fishing vessel;
Jose Parma was employed on September 29, 1974 as assistant engineer; Jaime Barbin started as a pilot of the motor boat until
he was transferred as a master fisherman to the fishing vessel 7/B Sandyman II; Philip Cervantes was hired as winchman on
August 1, 1972 while Eleuterio Barbin was hired as winchman on April 15, 1976.

While tenure or length of employment is not considered as the test of employment, nevertheless the hiring of petitioners to
perform work which is necessary or desirable in the usual business or trade of private respondent for a period of 8-15 years
since 1968 qualify them as regular employees within the meaning of Article 281 of the Labor Code as they were indeed
engaged to perform activities usually necessary or desirable in the usual fishing business or occupation of private respondent.  14

Aside from performing activities usually necessary and desirable in the business of private respondent, it must be noted that
petitioners received compensation on a percentage commission based on the gross sale of the fish-catch i.e. 13% of the
proceeds of the sale if the total proceeds exceeded the cost of the crude oil consumed during the fishing trip, otherwise only
10% of the proceeds of the sale. Such compensation falls within the scope and meaning of the term "wage" as defined under
Article 97(f) of the Labor Code, thus:

(f) "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 included 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. . . .

The claim of private respondent, which was given credence by public respondent, that petitioners get paid in the form of share
in the fish-catch which the patron/pilot as head of the team distributes to his crew members in accordance with their own
understanding 15 is not supported by recorded evidence. Except that such claim appears as an allegation in private respondent's
position paper, there is nothing in the records showing such a sharing scheme as preferred by private respondent.

Furthermore, the fact that on mere suspicion based on the reports that petitioners allegedly sold their fish-catch at midsea
without the knowledge and consent of private respondent, petitioners were unjustifiably not allowed to board the fishing
vessel on September 11, 1983 to resume their activities without giving them the opportunity to air their side on the accusation
against them unmistakably reveals the disciplinary power exercised by private respondent over them and the corresponding
sanction imposed in case of violation of any of its rules and regulations. The virtual dismissal of petitioners from their
employment was characterized by undue haste when less extreme measures consistent with the requirements of due process
should have been first exhausted. In that sense, the dismissal of petitioners was tainted with illegality.

Even on the assumption that petitioners indeed sold the fish-catch at midsea the act of private respondent virtually resulting in
their dismissal evidently contradicts private respondent's theory of "joint fishing venture" between the parties herein. A joint
venture, including partnership, presupposes generally a  parity of standing between the joint co-venturers or partners, in which
each party has an equal proprietary interest in the capital or property contributed  16 and where each party exercises equal lights
in the conduct of the business. 17 It would be inconsistent with the principle of parity of standing between the joint co-venturers
as regards the conduct of business, if private respondent would outrightly exclude petitioners from the conduct of the business
without first resorting to other measures consistent with the nature of a joint venture undertaking, Instead of arbitrary
unilateral action, private respondent should have discussed with an open mind the advantages and disadvantages of
petitioners' action with its joint co-venturers if indeed there is a "joint fishing venture" between the parties. But this was not
done in the instant case. Petitioners were arbitrarily dismissed notwithstanding that no criminal complaints were filed against
them. The lame excuse of private respondent that the non-filing of the criminal complaints against petitioners was for
humanitarian reasons will not help its cause either.

We have examined the jurisprudence on the matter and find the same to be supportive of petitioners' stand. In Negre
vs. WCC 135 SCRA 653 (1985), we held that fishermen crew members who were recruited by one master fisherman locally
known as "maestro" in charge of recruiting others to complete the crew members are considered employees, not industrial
partners, of the boat-owners. In an earlier case of Abong vs. WCC, 54 SCRA 379 (1973) where petitioner therein, Dr. Agustin
Abong, owner of the fishing boat, claimed that he was not the employer of the fishermen crew members because of an alleged
partnership agreement between him, as financier, and Simplicio Panganiban, as his team leader in charge of recruiting said
fishermen to work for him, we affirmed the finding of the WCC that there existed an employer-employee relationship between
the boat-owner and the fishermen crew members not only because they worked for and in the interest of the business of the
boat-owner but also because they were subject to the control, supervision and dismissal of the boat-owner, thru its agent,
Simplicio Panganiban, the alleged "partner" of Dr. Abong; that while these fishermen crew members were paid in kind, or by
"pakiao basis" still that fact did not alter the character of their relationship with Dr. Abong as employees of the latter.

In Philippine Fishing Boat Officers and Engineers Union vs. Court of Industrial Relations, 112 SCRA 159 (1982), we held that the
employer-employee relationship between the crew members and the owners of the fishing vessels engaged in deep sea fishing
is merely suspended during the time the vessels are drydocked or undergoing repairs or being loaded with the necessary
provisions for the next fishing trip. The said ruling is premised on the principle that all these activities i.e., drydock, repairs,
loading of necessary provisions, form part of the regular operation of the company fishing business.

WHEREFORE, in view of the foregoing, the petition is GRANTED. The questioned resolution of the National Labor Relations
Commission dated May 30,1985 is hereby REVERSED and SET ASIDE. Private respondent is ordered to reinstate petitioners to
their former positions or any equivalent positions with 3-year backwages and other monetary benefits under the law. No
pronouncement as to costs.

PERPETUAL HELP CREDIT COOPERATIVE, INC., Petitioner, v. BENEDICTO FABURADA, SISINITA VILLAR, IMELDA TAMAYO,
HAROLD CATIPAY, and the NATIONAL LABOR RELATIONS COMMISSION, Fourth Division, Cebu City, Respondents.

On January 3, 1990, Benedicto Faburada, Sisinita Vilar, Imelda Tamayo and Harold Catipay, private respondents, filed a
complaint against the Perpetual Help Credit Cooperative, Inc. (PHCCI), Petitioner, with the Arbitration Branch, Department of
Labor and Employment (DOLE), Dumaguete City, for illegal dismissal, premium pay on holidays and rest days, separation pay,
wage differential, moral damages, and attorney’s fees.

Forthwith, petitioner PHCCI filed a motion to dismiss the complaint on the ground that there is no employer-employee
relationship between them as private respondents are all members and co-owners of the cooperative. Furthermore, private
respondents have not exhausted the remedies provided in the cooperative by-laws.chanrob1es virtua1 1aw 1ibrary

On September 3, 1990, petitioner filed a supplemental motion to dismiss alleging that Article 121 of R.A. No. 6939, otherwise
known as the Cooperative Development Authority Law which took effect on March 26, 1990, requires conciliation or mediation
within the cooperative before a resort to judicial proceeding.

On the same date, the Labor Arbiter denied petitioner’s motion to dismiss, holding that the case is impressed with employer-
employee relationship and that the law on cooperatives is subservient to the Labor Code.

On November 23, 1993, the Labor Arbiter rendered a decision, the dispositive portion of which reads:chanrob1es virtual 1aw
library

WHEREFORE, premises considered, judgment is hereby rendered declaring complainants illegally dismissed, thus respondent
is directed to pay Complainants backwages computed from the time they were illegally dismissed up to the actual
reinstatement but subject to the three year backwages rule, separation pay for one month for every year of service since
reinstatement is evidently not feasible anymore, to pay complainants 13th month pay, wage differentials and Ten Percent
(10%) attorney’s fees from the aggregate monetary award. However, complainant Benedicto Faburada shall only be awarded
what are due him in proportion to the nine and a half months that he had served the respondent, he being a part-time
employee. All other claims are hereby dismissed for lack of merit.

The computation of the foregoing awards is hereto attached and forms an integral part of this decision."cralaw virtua1aw
library

On appeal, 1 the NLRC affirmed the Labor Arbiter’s decision.

Hence, this petition by the PHCCI.

The issue for our resolution is whether or not respondent judge committed grave abuse of discretion in ruling that there is an
employer-employee relationship between the parties and that private respondents were illegally dismissed.

Petitioner PHCCI contends that private respondents are its members and are working for it as volunteers. Not being regular
employees, they cannot sue petitioner.chanrob1es virtua1 1aw 1ibrary

In determining the existence of an employer-employee relationship, the following elements are considered: (1) the selection
and engagement of the worker or the power to hire; (2) the power to dismiss; (3) the payment of wages by whatever means;
and (4) the power to control the worker’s conduct, with the latter assuming primacy in the overall consideration. No particular
form of proof is required to prove the existence of an employer-employee relationship. Any competent and relevant evidence
may show the relationship. 2

The above elements are present here. Petitioner PHCCI, through Mr. Edilberto Lantaca, Jr., its Manager, hired private
respondents to work for it. They worked regularly on regular working hours, were assigned specific duties, were paid regular
wages and made to accomplish daily time records just like any other regular employee. They worked under the supervision of
the cooperative manager. But unfortunately, they were dismissed.

That an employer-employee exists between the parties is shown by the averments of private respondents in their respective
affidavits, carefully considered by respondent NLRC in affirming the Labor Arbiter’s decision, thus:chanrob1es virtual 1aw
library

Benedicto Faburada —Regular part-time Computer programmer/ operator. Worked with the Cooperative since June 1, 1988 up
to December 29, 1989. Work schedule: Tuesdays and Thursdays, from 1:00 p.m. to 5:30 p.m. and every Saturday from 8:00 to
11:30 a.m. and 1:00 to 4:00 p.m. and for at least three (3) hours during Sundays. Monthly salary: P1,000.00 — from June to
December 1988; P1,350.00 - from January to June 1989; and P1,500.00 from July to December 1989. Duties: Among others, —
Enter data into the computer; compute interests on savings deposits, effect mortuary deductions and dividends on fixed
deposits; maintain the masterlist of the cooperative members; perform various forms for mimeographing; and perform such
other duties as may be assigned from time to time.

Sisinita Vilar — Clerk. Worked with the Cooperative since December 1, 1987 up to December 29, 1989. Work schedule: Regular
working hours. Monthly salary: P500.00 — from December 1, 1987 to December 31, 1988; P1,000.00 — from January 1, 1989 to
June 30, 1989; and P1,150.00 — from July 1, 1989 to December 31, 1989. Duties: Among others, Prepare summary of salary
advances, journal vouchers, daily summary of disbursements to respective classifications; schedule loans; prepare checks and
cash vouchers for regular and emergency loans; reconcile bank statements to the daily summary of disbursements; post the
monthly balance of fixed and savings deposits in preparation for the computation of interests, dividends, mortuary and
patronage funds; disburse checks during regular and emergency loans; and perform such other bookkeeping and accounting
duties as may be assigned to her from time to time.

Imelda C. Tamayo — Clerk. Worked with the Cooperative since October 19, 1987 up to December 29, 1989. Work schedule:
Monday to Friday - 8:00 to 11:30 a.m and 2:00 to 5:30 p.m.; every Saturday — 8:00 to 11:30 a.m and 1:00 to 4:00 p.m; and for
one Sunday each month - for at least three (3) hours. Monthly salary: P60.00 — from October to November 1987; P250.00 for
December 1987; P500.00 — from January to December 1988; P950 — from January to June 1989; and P1,000.00 from July to
December 1989. Duties: Among others, pick up balances for the computation of interests on savings deposit, mortuary,
dividends and patronage funds; prepare cash vouchers; check petty cash vouchers; take charge of the preparation of new
passbooks and ledgers for new applicants; fill up members logbook of regular depositors, junior depositors and special
accounts; take charge of loan releases every Monday morning; assist in the posting and preparation of deposit slips; receive
deposits from members; and perform such other bookkeeping and accounting duties as may be assigned her from time to time.

Harold D. Catipay — Clerk. Worked with the Cooperative since March 3 to December 29, 1989. Work schedule: — Monday to
Friday — 8:00 to 11:30 a.m. and 2:00 to 5:30 p.m.; Saturday — 8:00 to 11:30 a.m. and 1:00 to 4:00 p.m.; and one Sunday each
month — for at least three (3) hours. Monthly salary: P900.00 — from March to June 1989; P1,050.00 - from July to December
1989. Duties: Among others, Bookkeeping, accounting and collecting duties, such as, post daily collections from the two (2)
collectors in the market; reconcile passbooks and ledgers of members in the market; and assist the other clerks in their duties.

All of them were given a memorandum of termination on January 2, 1990, effective December 29, 1989.

We are not prepared to disregard the findings of both the Labor Arbiter and respondent NLRC, the same being supported by
substantial evidence, that quantum of evidence required in quasi judicial proceedings, like this one..

Necessarily, this leads us to the issue of whether or not private respondents are regular employees. Article 280 of the Labor
Code provides for three kinds of employees: (1) regular employees or those who have been engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the employer; (2) project employees or those whose
employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined
at the time of the engagement of the employee or where the work or service to be performed is seasonal in nature and the
employment is for the duration of the season; and (3) casual employees or those who are neither regular nor project
employees. 3 The employees who are deemed regular are: (a) those who have been engaged to perform activities which are
usually necessary or desirable in the usual trade or business of the employer; and (b) those casual employees who have
rendered at least one (1) year of service, whether such service is continuous or broken, with respect to the activity in which
they are employed. 4 Undeniably, private respondents were rendering services necessary to the day-to-day operations of
petitioner PHCCI. This fact alone qualified them as regular employees.chanrob1es virtua1 1aw 1ibrary

All of them, except Harold D. Catipay, worked with petitioner for more than one (1) year: Benedicto Faburada, for one and a
half (1 1/2) years; Sisinita Vilar, for two (2) years; and Imelda C. Tamayo, for two (2) years and two (2) months. That Benedicto
Faburada worked only on a part-time basis, does not mean that he is not a regular employee. One’s regularity of employment is
not determined by the number of hours one works but by the nature and by the length of time one has been in that particular
job. 5 Petitioner’s contention that private respondents are mere volunteer workers, not regular employees, must necessarily
fail. Its invocation of San Jose City Electric Cooperative v. Ministry of Labor and Employment (173 SCRA 697, 703 (1989) is
misplaced. The issue in this case is whether or not the employees-members of a cooperative can organize themselves for
purposes of collective bargaining, not whether or not the members can be employees. Petitioner missed the point

As regular employees or workers, private respondents are entitled to security of tenure. Thus, their services may be
terminated only for a valid cause, with observance of due process.

The valid causes are categorized into two groups: the just causes under Articles 282 of the Labor Code and the authorized
causes under Articles 283 and 284 of the same Code.

The just causes are: (1) serious misconduct or willful disobedience of lawful orders in connection with the employee’s work; (2)
gross or habitual neglect of duties; (3) fraud or willful breach of trust; (4) commission of a crime or an offense against the
person of the employer or his immediate family member or representative; and, analogous cases.

The authorized causes are: (1) the installation of labor-saving devices; (2) redundancy; (3) retrenchment to prevent losses; and
(4) closing or cessation of operations of the establishment or undertaking, unless the closing is for the purpose of circumventing
the provisions of law. Article 284 provides that an employer would be authorized to terminate the services of an employee
found to be suffering from any disease if the employee’s continued employment is prohibited by law or is prejudicial to his
health or to the health of his fellow employees 6

Private respondents were dismissed not for any of the above causes. They were dismissed because petitioner considered
them to be mere voluntary workers, being its members, and as such work at its pleasure. Petitioner thus vehemently insists
that their dismissal is not against the law.

Procedural due process requires that the employer serve the employees to be dismissed two (2) written notices before the
termination of their employment is effected: (a) the first, to apprise them of the particular acts or omissions for which their
dismissal is sought and (b) the second, to inform them of the decision of the employer that they are being dismissed. 7 In this
case, only one notice was served upon private respondents by petitioner. It was in the form of a Memorandum signed by the
Manager of the Cooperative dated January 2, 1990 terminating their services effective December 29, 1989. Clearly, petitioner
failed to comply with the twin requisites of a valid notice.

We hold that private respondents have been illegally dismissed.

Petitioner contends that the labor arbiter has no jurisdiction to take cognizance of the complaint of private respondents
considering that they failed to submit their dispute to the grievance machinery as required by P.D. 175 (strengthening the
Cooperative Movement) 8 and its implementing rules and regulations under LOI 23. Likewise, the Cooperative Development
Authority did not issue a Certificate of Non-Resolution pursuant to Section 8 of R.A. 6939 or the Cooperative Development
Authority Law.

As aptly stated by the Solicitor General in his comment, P.D. 175 does not provide for a grievance machinery where a dispute or
claim may first be submitted. LOI 23 refers to instructions to the Secretary of Public Works and Communications to implement
immediately the recommendation of the Postmaster General for the dismissal of some employees of the Bureau of Post.
Obviously, this LOI has no relevance to the instant case.

Article 121 of Republic Act No. 6938 (Cooperative Code of the Philippines) provides the procedure how cooperative disputes
are to be resolved, thus:chanrob1es virtual 1aw library

ART. 121. Settlement of Disputes. — Disputes among members, officers, directors, and committee members, and intra-
cooperative disputes shall, as far as practicable, be settled amicably in accordance with the conciliation or mediation
mechanisms embodied in the by-laws of the cooperative, and in applicable laws.

Should such a conciliation/mediation proceeding fail, the matter shall be settled in a court of competent jurisdiction."cralaw
virtua1aw library

Complementing this Article is Section 8 of R.A. No. 6939 (Cooperative Development Authority Law) which reads:chanrob1es
virtual 1aw library

SEC. 8 Mediation and Conciliation. — Upon request of either or both parties, the Authority shall mediate and conciliate disputes
within a cooperative or between cooperatives: Provided, That if no mediation or conciliation succeeds within three (3) months
from request thereof, a certificate of non-resolution shall be issued by the Commission prior to the filing of appropriate action
before the proper courts.

The above provisions apply to members, officers and directors of the cooperative involved in disputes within a cooperative or
between cooperatives.

There is no evidence that private respondents are members of petitioner PHCCI and even if they are, the dispute is about
payment of wages, overtime pay, rest day and termination of employment. Under Art. 217 of the Labor Code, these disputes
are within the original and exclusive jurisdiction of the Labor Arbiter.

As illegally dismissed employees, private respondents are therefore entitled to reinstatement without loss of seniority rights
and other privileges and to full backwages, inclusive of allowances, plus other benefits or their monetary equivalent computed
from the time their compensation was withheld from them up to the time of their actual reinstatement. 9 Since they were
dismissed after March 21, 1989, the effectivity date of R.A. 6715 10 they are granted full backwages, meaning, without
deducting from their backwages the earnings derived by them elsewhere during the period of their illegal dismissal. 11 If
reinstatement is no longer feasible, as when the relationship between petitioner and private respondents has become strained,
payment of their separation pay in lieu of reinstatement is in order. 12chanrob1es virtua1 1aw 1ibrary

WHEREFORE, the petition is hereby DENIED. The decision of respondent NLRC is AFFIRMED, with modification in the sense that
the backwages due private respondents shall be paid in full, computed from the time they were illegally dismissed up to the
time of the finality of this Decision. 13

VICENTE SY, TRINIDAD PAULINO, 6B’S TRUCKING CORPORATION, and SBT 1 TRUCKING CORPORATION, Petitioners, v. HON.
COURT OF APPEALS, and JAIME SAHOT, Respondents.

This petition for review seeks the reversal of the decision 2 of the Court of Appeals dated February 29, 2000, in CA-G.R. SP No.
52671, affirming with modification the decision 3 of the National Labor Relations Commission promulgated on June 20, 1996 in
NLRC NCR CA No. 010526-96. Petitioners also pray for the reinstatement of the decision 4 of the Labor Arbiter in NLRC NCR
Case No. 00-09-06717-94.chanrob1es virtua1 1aw 1ibrary

Culled from the records are the following facts of this case:chanrob1es virtual 1aw library

Sometime in 1958, private respondent Jaime Sahot 5 started working as a truck helper for petitioners’ family-owned trucking
business named Vicente Sy Trucking. In 1965, he became a truck driver of the same family business, renamed T. Paulino
Trucking Service, later 6B’s Trucking Corporation in 1985, and thereafter known as SBT Trucking Corporation since 1994.
Throughout all these changes in names and for 36 years, private respondent continuously served the trucking business of
petitioners.

In April 1994, Sahot was already 59 years old. He had been incurring absences as he was suffering from various ailments.
Particularly causing him pain was his left thigh, which greatly affected the performance of his task as a driver. He inquired about
his medical and retirement benefits with the Social Security System (SSS) on April 25, 1994, but discovered that his premium
payments had not been remitted by his employer.

Sahot had filed a week-long leave sometime in May 1994. On May 27th, he was medically examined and treated for EOR,
presleyopia, hypertensive retinopathy G II (Annexes "G-5" and "G-3", pp. 48, 104, respectively), 6 HPM, UTI, Osteoarthritis
(Annex "G-4", p. 105), 7 and heart enlargement (Annex G, p. 107). 8 On said grounds, Belen Paulino of the SBT Trucking Service
management told him to file a formal request for extension of his leave. At the end of his week-long absence, Sahot applied
for extension of his leave for the whole month of June, 1994. It was at this time when petitioners allegedly threatened to
terminate his employment should he refuse to go back to work.

At this point, Sahot found himself in a dilemma. He was facing dismissal if he refused to work. But he could not retire on
pension because petitioners never paid his correct SSS premiums. The fact remained he could no longer work as his left thigh
hurt abominably. Petitioners ended his dilemma. They carried out their threat and dismissed him from work, effective June
30, 1994. He ended up sick, jobless and penniless.

On September 13, 1994, Sahot filed with the NLRC NCR Arbitration Branch, a complaint for illegal dismissal, docketed as NLRC
NCR Case No. 00-09-06717-94. He prayed for the recovery of separation pay and attorneys fees against Vicente Sy and Trinidad
Paulino-Sy, Belen Paulino, Vicente Sy Trucking, T. Paulino Trucking Service, 6B’s Trucking and SBT Trucking, herein petitioners.

For their part, petitioners admitted they had a trucking business in the 1950s but denied employing helpers and drivers. They
contend that private respondent was not illegally dismissed as a driver because he was in fact petitioners’ industrial partner.
They add that it was not until the year 1994, when SBT Trucking Corporation was established, and only then did respondent
Sahot become an employee of the company, with a monthly salary that reached P4,160.00 at the time of his
separation.chanrob1es virtua1 1aw 1ibrary

Petitioners further claimed that sometime prior to June 1, 1994, Sahot went on leave and was not able to report for work for
almost seven days. On June 1, 1994, Sahot asked permission to extend his leave of absence until June 30, 1994. It appeared that
from the expiration of his leave, private respondent never reported back to work nor did he file an extension of his leave.
Instead, he filed the complaint for illegal dismissal against the trucking company and its owners.

Petitioners add that due to Sahot’s refusal to work after the expiration of his authorized leave of absence, he should be
deemed to have voluntarily resigned from his work. They contended that Sahot had all the time to extend his leave or at least
inform petitioners of his health condition. Lastly, they cited NLRC Case No. RE-4997-76, entitled "Manuelito Jimenez Et. Al. v. T.
Paulino Trucking Service," as a defense in view of the alleged similarity in the factual milieu and issues of said case to that of
Sahot’s, hence they are in pari materia and Sahot’s complaint ought also to be dismissed.

DECISIONS

The NLRC NCR Arbitration Branch, through Labor Arbiter Ariel Cadiente Santos, ruled that there was no illegal dismissal in
Sahot’s case. Private respondent had failed to report to work. Moreover, said the Labor Arbiter, petitioners and private
respondent were industrial partners before January 1994. The Labor Arbiter concluded by ordering petitioners to pay
"financial assistance" of P15,000 to Sahot for having served the company as a regular employee since January 1994 only.

On appeal, the National Labor Relations Commission modified the judgment of the Labor Arbiter. It declared that private
respondent was an employee, not an industrial partner, since the start. Private respondent Sahot did not abandon his job but
his employment was terminated on account of his illness, pursuant to Article 284 9 of the Labor Code. Accordingly, the NLRC
ordered petitioners to pay private respondent separation pay in the amount of P60,320.00, at the rate of P2,080.00 per year for
29 years of service.

Petitioners assailed the decision of the NLRC before the Court of Appeals. In its decision dated February 29, 2000, the appellate
court affirmed with modification the judgment of the NLRC. It held that private respondent was indeed an employee of
petitioners since 1958. It also increased the amount of separation pay awarded to private respondent to P74,880, computed at
the rate of P2,080 per year for 36 years of service from 1958 to 1994. It decreed:chanrob1es virtual 1aw library

WHEREFORE, the assailed decision is hereby AFFIRMED with MODIFICATION. SB Trucking Corporation is hereby directed to pay
complainant Jaime Sahot the sum of SEVENTY-FOUR THOUSAND EIGHT HUNDRED EIGHTY (P74,880.00) PESOS as and for his
separation pay. 10

Hence, the instant petition anchored on the following contentions:chanrob1es virtual 1aw library

RESPONDENT COURT OF APPEALS IN PROMULGATING THE QUESTION[ED] DECISION AFFIRMING WITH MODIFICATION THE
DECISION OF NATIONAL LABOR RELATIONS COMMISSION DECIDED NOT IN ACCORD WITH LAW AND PUT AT NAUGHT ARTICLE
402 OF THE CIVIL CODE. 11

II

RESPONDENT COURT OF APPEALS VIOLATED SUPREME COURT RULING THAT THE NATIONAL LABOR RELATIONS COMMISSION IS
BOUND BY THE FACTUAL FINDINGS OF THE LABOR ARBITER AS THE LATTER WAS IN A BETTER POSITION TO OBSERVE THE
DEMEANOR AND DEPORTMENT OF THE WITNESSES IN THE CASE OF ASSOCIATION OF INDEPENDENT UNIONS IN THE
PHILIPPINES VERSUS NATIONAL CAPITAL REGION (305 SCRA 233). 12

III

PRIVATE RESPONDENT WAS NOT DISMISS[ED] BY RESPONDENT SBT TRUCKING CORPORATION. 13

Three issues are to be resolved: (1) Whether or not an employer-employee relationship existed between petitioners and
respondent Sahot; (2) Whether or not there was valid dismissal; and (3) Whether or not respondent Sahot is entitled to
separation pay.chanrob1es virtua1 1aw 1ibrary
Crucial to the resolution of this case is the determination of the first issue. Before a case for illegal dismissal can prosper, an
employer-employee relationship must first be established. 14

Petitioners invoke the decision of the Labor Arbiter Ariel Cadiente Santos which found that respondent Sahot was not an
employee but was in fact, petitioners’ industrial partner. 15 It is contended that it was the Labor Arbiter who heard the case
and had the opportunity to observe the demeanor and deportment of the parties. The same conclusion, aver petitioners, is
supported by substantial evidence. 16 Moreover, it is argued that the findings of fact of the Labor Arbiter was wrongly
overturned by the NLRC when the latter made the following pronouncement:chanrob1es virtual 1aw library

We agree with complainant that there was error committed by the Labor Arbiter when he concluded that complainant was
an industrial partner prior to 1994. A computation of the age of complainant shows that he was only twenty-three (23) years
when he started working with respondent as truck helper. How can we entertain in our mind that a twenty-three (23) year old
man, working as a truck helper, be considered an industrial partner. Hence we rule that complainant was only an employee,
not a partner of respondents from the time complainant started working for Respondent. 17

Because the Court of Appeals also found that an employer-employee relationship existed, petitioners aver that the appellate
court’s decision gives an "imprimatur" to the "illegal" finding and conclusion of the NLRC.

Private respondent, for his part, denies that he was ever an industrial partner of petitioners. There was no written agreement,
no proof that he received a share in petitioners’ profits, nor was there anything to show he had any participation with respect
to the running of the business. 18

The elements to determine the existence of an employment relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to control the employee’s
conduct. The most important element is the employer’s control of the employee’s conduct, not only as to the result of the work
to be done, but also as to the means and methods to accomplish it. 19

As found by the appellate court, petitioners owned and operated a trucking business since the 1950s and by their own
allegations, they determined private respondent’s wages and rest day. 20 Records of the case show that private respondent
actually engaged in work as an employee. During the entire course of his employment he did not have the freedom to
determine where he would go, what he would do, and how he would do it. He merely followed instructions of petitioners and
was content to do so, as long as he was paid his wages. Indeed, said the CA, private respondent had worked as a truck helper
and driver of petitioners not for his own pleasure but under the latter’s control.

Article 1767 21 of the Civil Code states that in a contract of partnership two or more persons bind themselves to contribute
money, property or industry to a common fund, with the intention of dividing the profits among themselves. 22 Not one of
these circumstances is present in this case. No written agreement exists to prove the partnership between the parties.
Private respondent did not contribute money, property or industry for the purpose of engaging in the supposed business.
There is no proof that he was receiving a share in the profits as a matter of course, during the period when the trucking
business was under operation. Neither is there any proof that he had actively participated in the management,
administration and adoption of policies of the business. Thus, the NLRC and the CA did not err in reversing the finding of the
Labor Arbiter that private respondent was an industrial partner from 1958 to 1994.chanrob1es virtua1 1aw 1ibrary

On this point, we affirm the findings of the appellate court and the NLRC. Private respondent Jaime Sahot was not an industrial
partner but an employee of petitioners from 1958 to 1994. The existence of an employer-employee relationship is ultimately a
question of fact 23 and the findings thereon by the NLRC, as affirmed by the Court of Appeals, deserve not only respect but
finality when supported by substantial evidence. Substantial evidence is such amount of relevant evidence which a reasonable
mind might accept as adequate to justify a conclusion. 24

Time and again this Court has said that "if doubt exists between the evidence presented by the employer and the employee,
the scales of justice must be tilted in favor of the latter." 25 Here, we entertain no doubt. Private respondent since the
beginning was an employee of, not an industrial partner in, the trucking business.
Coming now to the second issue, was private respondent validly dismissed by petitioners?

Petitioners contend that it was private respondent who refused to go back to work. The decision of the Labor Arbiter pointed
out that during the conciliation proceedings, petitioners requested respondent Sahot to report back for work. However, in the
same proceedings, Sahot stated that he was no longer fit to continue working, and instead he demanded separation pay.
Petitioners then retorted that if Sahot did not like to work as a driver anymore, then he could be given a job that was less
strenuous, such as working as a checker. However, Sahot declined that suggestion. Based on the foregoing recitals, petitioners
assert that it is clear that Sahot was not dismissed but it was of his own volition that he did not report for work anymore.

In his decision, the Labor Arbiter concluded that:chanrob1es virtual 1aw library

While it may be true that respondents insisted that complainant continue working with respondents despite his alleged illness,
there is no direct evidence that will prove that complainant’s illness prevents or incapacitates him from performing the function
of a driver. The fact remains that complainant suddenly stopped working due to boredom or otherwise when he refused to
work as a checker which certainly is a much less strenuous job than a driver. 26

But dealing the Labor Arbiter a reversal on this score the NLRC, concurred in by the Court of Appeals, held that:chanrob1es
virtual 1aw library

While it was very obvious that complainant did not have any intention to report back to work due to his illness which
incapacitated him to perform his job, such intention cannot be construed to be an abandonment. Instead, the same should
have been considered as one of those falling under the just causes of terminating an employment. The insistence of respondent
in making complainant work did not change the scenario.

It is worthy to note that respondent is engaged in the trucking business where physical strength is of utmost requirement (sic).
Complainant started working with respondent as truck helper at age twenty-three (23), then as truck driver since 1965.
Complainant was already fifty-nine (59) when the complaint was filed and suffering from various illness triggered by his work
and age.chanrob1es virtua1 1aw 1ibrary

x       x       x 27

In termination cases, the burden is upon the employer to show by substantial evidence that the termination was for lawful
cause and validly made. 28 Article 277(b) of the Labor Code puts the burden of proving that the dismissal of an employee was
for a valid or authorized cause on the employer, without distinction whether the employer admits or does not admit the
dismissal. 29 For an employee’s dismissal to be valid, (a) the dismissal must be for a valid cause and (b) the employee must
be afforded due process. 30

Article 284 of the Labor Code authorizes an employer to terminate an employee on the ground of disease, viz:chanrob1es
virtual 1aw library

Art. 284. Disease as a ground for termination. — An employer may terminate the services of an employee who has been found
to be suffering from any disease and whose continued employment is prohibited by law or prejudicial to his health as well as
the health of his co-employees: . . .

However, in order to validly terminate employment on this ground, Book VI, Rule I, Section 8 of the Omnibus Implementing
Rules of the Labor Code requires:chanrob1es virtual 1aw library

Sec. 8. Disease as a ground for dismissal. — Where the employee suffers from a disease and his continued employment is
prohibited by law or prejudicial to his health or to the health of his co-employees, the employer shall not terminate his
employment unless there is a certification by competent public health authority that the disease is of such nature or at such a
stage that it cannot be cured within a period of six (6) months even with proper medical treatment. If the disease or ailment
can be cured within the period, the employer shall not terminate the employee but shall ask the employee to take a leave. The
employer shall reinstate such employee to his former position immediately upon the restoration of his normal health. (Italics
supplied).
As this Court stated in Triple Eight Integrated Services, Inc. v. NLRC, 31 the requirement for a medical certificate under Article
284 of the Labor Code cannot be dispensed with; otherwise, it would sanction the unilateral and arbitrary determination by the
employer of the gravity or extent of the employee’s illness and thus defeat the public policy in the protection of labor.

In the case at bar, the employer clearly did not comply with the medical certificate requirement before Sahot’s dismissal was
effected. In the same case of Sevillana v. I. T. (International) Corp., we ruled:chanrob1es virtual 1aw library

Since the burden of proving the validity of the dismissal of the employee rests on the employer, the latter should likewise bear
the burden of showing that the requisites for a valid dismissal due to a disease have been complied with. In the absence of the
required certification by a competent public health authority, this Court has ruled against the validity of the employee’s
dismissal. It is therefore incumbent upon the private respondents to prove by the quantum of evidence required by law that
petitioner was not dismissed, or if dismissed, that the dismissal was not illegal; otherwise, the dismissal would be unjustified.
This Court will not sanction a dismissal premised on mere conjectures and suspicions, the evidence must be substantial and not
arbitrary and must be founded on clearly established facts sufficient to warrant his separation from work. 32

In addition, we must likewise determine if the procedural aspect of due process had been complied with by the employer.

From the records, it clearly appears that procedural due process was not observed in the separation of private respondent by
the management of the trucking company. The employer is required to furnish an employee with two written notices before
the latter is dismissed: (1) the notice to apprise the employee of the particular acts or omissions for which his dismissal is
sought, which is the equivalent of a charge; and (2) the notice informing the employee of his dismissal, to be issued after the
employee has been given reasonable opportunity to answer and to be heard on his defense. 33 These, the petitioners failed to
do, even only for record purposes. What management did was to threaten the employee with dismissal, then actually
implement the threat when the occasion presented itself because of private respondent’s painful left thigh.

All told, both the substantive and procedural aspects of due process were violated. Clearly, therefore, Sahot’s dismissal is
tainted with invalidity.

On the last issue, as held by the Court of Appeals, respondent Jaime Sahot is entitled to separation pay. The law is clear on the
matter. An employee who is terminated because of disease is entitled to "separation pay equivalent to at least one month
salary or to one-half month salary for every year of service, whichever is greater . . .. 34 Following the formula set in Art. 284 of
the Labor Code, his separation pay was computed by the appellate court at P2,080 times 36 years (1958 to 1994) or P74,880.
We agree with the computation, after noting that his last monthly salary was P4,160.00 so that one-half thereof is P2,080.00.
Finding no reversible error nor grave abuse of discretion on the part of appellate court, we are constrained to sustain its
decision. To avoid further delay in the payment due the separated worker, whose claim was filed way back in 1994, this
decision is immediately executory. Otherwise, six percent (6%) interest per annum should be charged thereon, for any delay,
pursuant to provisions of the Civil Code.chanrob1es virtua1 1aw 1ibrary

WHEREFORE, the petition is DENIED and the decision of the Court of Appeals dated February 29, 2000 is AFFIRMED. Petitioners
must pay private respondent Jaime Sahot his separation pay for 36 years of service at the rate of one-half monthly pay for every
year of service, amounting to P74,880.00, with interest of six per centum (6%) per annum from finality of this decision until fully
paid.

PEDRO CHAVEZ, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, SUPREME PACKAGING, INC. and ALVIN LEE, Plant Manager, respondents.

Before the Court is the petition for review on certiorari of the Resolution 1 dated December 15, 2000 of the Court of Appeals
(CA) reversing its Decision dated April 28, 2000 in CA-G.R. SP No. 52485. The assailed resolution reinstated the Decision dated
July 10, 1998 of the National Labor Relations Commission (NLRC), dismissing the complaint for illegal dismissal filed by herein
petitioner Pedro Chavez. The said NLRC decision similarly reversed its earlier Decision dated January 27, 1998 which, affirming
that of the Labor Arbiter, ruled that the petitioner had been illegally dismissed by respondents Supreme Packaging, Inc. and Mr.
Alvin Lee.
The case stemmed from the following facts:

The respondent company, Supreme Packaging, Inc., is in the business of manufacturing cartons and other packaging materials
for export and distribution. It engaged the services of the petitioner, Pedro Chavez, as truck driver on October 25, 1984. As
such, the petitioner was tasked to deliver the respondent company’s products from its factory in Mariveles, Bataan, to its
various customers, mostly in Metro Manila. The respondent company furnished the petitioner with a truck. Most of the
petitioner’s delivery trips were made at nighttime, commencing at 6:00 p.m. from Mariveles, and returning thereto in the
afternoon two or three days after. The deliveries were made in accordance with the routing slips issued by respondent
company indicating the order, time and urgency of delivery. Initially, the petitioner was paid the sum of ₱350.00 per trip. This
was later adjusted to ₱480.00 per trip and, at the time of his alleged dismissal, the petitioner was receiving ₱900.00 per trip.

Sometime in 1992, the petitioner expressed to respondent Alvin Lee, respondent company’s plant manager, his (the
petitioner’s) desire to avail himself of the benefits that the regular employees were receiving such as overtime pay, nightshift
differential pay, and 13th month pay, among others. Although he promised to extend these benefits to the petitioner,
respondent Lee failed to actually do so.

On February 20, 1995, the petitioner filed a complaint for regularization with the Regional Arbitration Branch No. III of the
NLRC in San Fernando, Pampanga. Before the case could be heard, respondent company terminated the services of the
petitioner. Consequently, on May 25, 1995, the petitioner filed an amended complaint against the respondents for illegal
dismissal, unfair labor practice and non-payment of overtime pay, nightshift differential pay, 13th month pay, among others.
The case was docketed as NLRC Case No. RAB-III-02-6181-95.

The respondents, for their part, denied the existence of an employer-employee relationship between the respondent
company and the petitioner. They averred that the petitioner was an independent contractor as evidenced by the contract of
service which he and the respondent company entered into. The said contract provided as follows:

That the Principal [referring to Supreme Packaging, Inc.], by these presents, agrees to hire and the Contractor [referring to
Pedro Chavez], by nature of their specialized line or service jobs, accepts the services to be rendered to the Principal, under the
following terms and covenants heretofore mentioned:

1. That the inland transport delivery/hauling activities to be performed by the contractor to the principal, shall only cover travel
route from Mariveles to Metro Manila. Otherwise, any change to this travel route shall be subject to further agreement by the
parties concerned.

2. That the payment to be made by the Principal for any hauling or delivery transport services fully rendered by the Contractor
shall be on a per trip basis depending on the size or classification of the truck being used in the transport service, to wit:

a) If the hauling or delivery service shall require a truck of six wheeler, the payment on a per trip basis from Mariveles to Metro
Manila shall be THREE HUNDRED PESOS (₱300.00) and EFFECTIVE December 15, 1984.

b) If the hauling or delivery service require a truck of ten wheeler, the payment on a per trip basis, following the same route
mentioned, shall be THREE HUNDRED FIFTY (₱350.00) Pesos and Effective December 15, 1984.

3. That for the amount involved, the Contractor will be to [sic] provide for [sic] at least two (2) helpers;

4. The Contractor shall exercise direct control and shall be responsible to the Principal for the cost of any damage to, loss of any
goods, cargoes, finished products or the like, while the same are in transit, or due to reckless [sic] of its men utilized for the
purpose above mentioned;

5. That the Contractor shall have absolute control and disciplinary power over its men working for him subject to this
agreement, and that the Contractor shall hold the Principal free and harmless from any liability or claim that may arise by virtue
of the Contractor’s non-compliance to the existing provisions of the Minimum Wage Law, the Employees Compensation Act,
the Social Security System Act, or any other such law or decree that may hereafter be enacted, it being clearly understood that
any truck drivers, helpers or men working with and for the Contractor, are not employees who will be indemnified by the
Principal for any such claim, including damages incurred in connection therewith;

6. This contract shall take effect immediately upon the signing by the parties, subject to renewal on a year-to-year basis. 2
This contract of service was dated December 12, 1984. It was subsequently renewed twice, on July 10, 1989 and September 28,
1992. Except for the rates to be paid to the petitioner, the terms of the contracts were substantially the same. The relationship
of the respondent company and the petitioner was allegedly governed by this contract of service.

The respondents insisted that the petitioner had the sole control over the means and methods by which his work was
accomplished. He paid the wages of his helpers and exercised control over them. As such, the petitioner was not entitled to
regularization because he was not an employee of the respondent company. The respondents, likewise, maintained that
they did not dismiss the petitioner. Rather, the severance of his contractual relation with the respondent company was due to
his violation of the terms and conditions of their contract. The petitioner allegedly failed to observe the minimum degree of
diligence in the proper maintenance of the truck he was using, thereby exposing respondent company to unnecessary
significant expenses of overhauling the said truck.

After the parties had filed their respective pleadings, the Labor Arbiter rendered the Decision dated February 3, 1997, finding
the respondents guilty of illegal dismissal. The Labor Arbiter declared that the petitioner was a regular employee of the
respondent company as he was performing a service that was necessary and desirable to the latter’s business. Moreover, it was
noted that the petitioner had discharged his duties as truck driver for the respondent company for a continuous and
uninterrupted period of more than ten years.

The contract of service invoked by the respondents was declared null and void as it constituted a circumvention of the
constitutional provision affording full protection to labor and security of tenure. The Labor Arbiter found that the petitioner’s
dismissal was anchored on his insistent demand to be regularized. Hence, for lack of a valid and just cause therefor and for their
failure to observe the due process requirements, the respondents were found guilty of illegal dismissal. The dispositive portion
of the Labor Arbiter’s decision states:

WHEREFORE, in the light of the foregoing, judgment is hereby rendered declaring respondent SUPREME PACKAGING, INC.
and/or MR. ALVIN LEE, Plant Manager, with business address at BEPZ, Mariveles, Bataan guilty of illegal dismissal, ordering said
respondent to pay complainant his separation pay equivalent to one (1) month pay per year of service based on the average
monthly pay of ₱10,800.00 in lieu of reinstatement as his reinstatement back to work will not do any good between the parties
as the employment relationship has already become strained and full backwages from the time his compensation was withheld
on February 23, 1995 up to January 31, 1997 (cut-off date) until compliance, otherwise, his backwages shall continue to run.
Also to pay complainant his 13th month pay, night shift differential pay and service incentive leave pay hereunder computed as
follows:

a) Backwages ………………….. ₱248,400.00

b) Separation Pay ………….…... ₱140,400.00

c) 13th month pay ………….……₱ 10,800.00

d) Service Incentive Leave Pay .. 2,040.00

TOTAL ₱401,640.00

Respondent is also ordered to pay ten (10%) of the amount due the complainant as attorney’s fees.

SO ORDERED.3

The respondents seasonably interposed an appeal with the NLRC. However, the appeal was dismissed by the NLRC in its
Decision4 dated January 27, 1998, as it affirmed in toto the decision of the Labor Arbiter. In the said decision, the NLRC
characterized the contract of service between the respondent company and the petitioner as a "scheme" that was resorted to
by the respondents who, taking advantage of the petitioner’s unfamiliarity with the English language and/or legal niceties,
wanted to evade the effects and implications of his becoming a regularized employee. 5

The respondents sought reconsideration of the January 27, 1998 Decision of the NLRC. Acting thereon, the NLRC rendered
another Decision6 dated July 10, 1998, reversing its earlier decision and, this time, holding that no employer-employee
relationship existed between the respondent company and the petitioner. In reconsidering its earlier decision, the NLRC
stated that the respondents did not exercise control over the means and methods by which the petitioner accomplished his
delivery services. It upheld the validity of the contract of service as it pointed out that said contract was silent as to the time by
which the petitioner was to make the deliveries and that the petitioner could hire his own helpers whose wages would be paid
from his own account. These factors indicated that the petitioner was an independent contractor, not an employee of the
respondent company.

The NLRC ruled that the contract of service was not intended to circumvent Article 280 of the Labor Code on the regularization
of employees. Said contract, including the fixed period of employment contained therein, having been knowingly and
voluntarily entered into by the parties thereto was declared valid citing Brent School, Inc. v. Zamora.7 The NLRC, thus, dismissed
the petitioner’s complaint for illegal dismissal.

The petitioner sought reconsideration of the July 10, 1998 Decision but it was denied by the NLRC in its Resolution dated
September 7, 1998. He then filed with this Court a petition for certiorari, which was referred to the CA following the ruling in St.
Martin Funeral Home v. NLRC .8

The appellate court COURT OF APPEALS rendered the Decision dated April 28, 2000, reversing the July 10, 1998 Decision of
the NLRC and reinstating the decision of the Labor Arbiter. In the said decision, the CA ruled that the petitioner was a regular
employee of the respondent company because as its truck driver, he performed a service that was indispensable to the latter’s
business. Further, he had been the respondent company’s truck driver for ten continuous years. The CA also reasoned that the
petitioner could not be considered an independent contractor since he had no substantial capital in the form of tools and
machinery. In fact, the truck that he drove belonged to the respondent company. The CA also observed that the routing slips
that the respondent company issued to the petitioner showed that it exercised control over the latter. The routing slips
indicated the chronological order and priority of delivery, the urgency of certain deliveries and the time when the goods were
to be delivered to the customers.

The CA, likewise, disbelieved the respondents’ claim that the petitioner abandoned his job noting that he just filed a complaint
for regularization. This actuation of the petitioner negated the respondents’ allegation that he abandoned his job. The CA held
that the respondents failed to discharge their burden to show that the petitioner’s dismissal was for a valid and just cause.
Accordingly, the respondents were declared guilty of illegal dismissal and the decision of the Labor Arbiter was reinstated.

In its April 28, 2000 Decision, the CA denounced the contract of service between the respondent company and the petitioner in
this wise:

In summation, we rule that with the proliferation of contracts seeking to prevent workers from attaining the status of regular
employment, it is but necessary for the courts to scrutinize with extreme caution their legality and justness. Where from the
circumstances it is apparent that a contract has been entered into to preclude acquisition of tenurial security by the employee,
they should be struck down and disregarded as contrary to public policy and morals. In this case, the "contract of service" is just
another attempt to exploit the unwitting employee and deprive him of the protection of the Labor Code by making it appear
that the stipulations of the parties were governed by the Civil Code as in ordinary transactions. 9

However, on motion for reconsideration by the respondents, the CA made a complete turn around as it rendered the
assailed Resolution dated December 15, 2000 upholding the contract of service between the petitioner and the respondent
company. In reconsidering its decision, the CA explained that the extent of control exercised by the respondents over the
petitioner was only with respect to the result but not to the means and methods used by him. The CA cited the following
circumstances: (1) the respondents had no say on how the goods were to be delivered to the customers; (2) the petitioner had
the right to employ workers who would be under his direct control; and (3) the petitioner had no working time.

The fact that the petitioner had been with the respondent company for more than ten years was, according to the CA, of no
moment because his status was determined not by the length of service but by the contract of service. This contract, not being
contrary to morals, good customs, public order or public policy, should be given the force and effect of law as between the
respondent company and the petitioner. Consequently, the CA reinstated the July 10, 1998 Decision of the NLRC dismissing the
petitioner’s complaint for illegal dismissal.

Hence, the recourse to this Court by the petitioner. He assails the December 15, 2000 Resolution of the appellate court alleging
that:

(A)

THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OF JURISDICTION IN GIVING
MORE CONSIDERATION TO THE "CONTRACT OF SERVICE" ENTERED INTO BY PETITIONER AND PRIVATE RESPONDENT THAN
ARTICLE 280 OF THE LABOR CODE OF THE PHILIPPINES WHICH CATEGORICALLY DEFINES A REGULAR EMPLOYMENT
NOTWITHSTANDING ANY WRITTEN AGREEMENT TO THE CONTRARY AND REGARDLESS OF THE ORAL AGREEMENT OF THE
PARTIES;

(B)

THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OF JURISDICTION IN REVERSING
ITS OWN FINDINGS THAT PETITIONER IS A REGULAR EMPLOYEE AND IN HOLDING THAT THERE EXISTED NO EMPLOYER-
EMPLOYEE RELATIONSHIP BETWEEN PRIVATE RESPONDENT AND PETITIONER IN AS MUCH AS THE "CONTROL TEST" WHICH IS
CONSIDERED THE MOST ESSENTIAL CRITERION IN DETERMINING THE EXISTENCE OF SAID RELATIONSHIP IS NOT PRESENT. 10

RULING

The threshold issue that needs to be resolved is whether there existed an employer-employee relationship between the
respondent company and the petitioner. We rule in the affirmative.

The elements to determine the existence of an employment relationship are: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employer’s power to control the employee’s
conduct.11 The most important element is the employer’s control of the employee’s conduct, not only as to the result of the
work to be done, but also as to the means and methods to accomplish it.12 All the four elements are present in this case.

First. Undeniably, it was the respondents who engaged the services of the petitioner without the intervention of a third party.

Second. Wages are defined as "remuneration or earnings, however designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece or commission basis, or other method of calculating the same, which is
payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or
for service rendered or to be rendered."13 That the petitioner was paid on a per trip basis is not significant. This is merely a
method of computing compensation and not a basis for determining the existence or absence of employer-employee
relationship. One may be paid on the basis of results or time expended on the work, and may or may not acquire an
employment status, depending on whether the elements of an employer-employee relationship are present or not. 14 In this
case, it cannot be gainsaid that the petitioner received compensation from the respondent company for the services that he
rendered to the latter.

Moreover, under the Rules Implementing the Labor Code, every employer is required to pay his employees by means of
payroll.15 The payroll should show, among other things, the employee’s rate of pay, deductions made, and the amount actually
paid to the employee. Interestingly, the respondents did not present the payroll to support their claim that the petitioner was
not their employee, raising speculations whether this omission proves that its presentation would be adverse to their case. 16

Third. The respondents’ power to dismiss the petitioner was inherent in the fact that they engaged the services of the
petitioner as truck driver. They exercised this power by terminating the petitioner’s services albeit in the guise of "severance of
contractual relation" due allegedly to the latter’s breach of his contractual obligation.

Fourth. As earlier opined, of the four elements of the employer-employee relationship, the "control test" is the most
important. Compared to an employee, an independent contractor is one who carries on a distinct and independent business
and undertakes to perform the job, work, or service on its own account and under its own responsibility according to its own
manner and method, free from the control and direction of the principal in all matters connected with the performance of the
work except as to the results thereof. 17 Hence, while an independent contractor enjoys independence and freedom from the
control and supervision of his principal, an employee is subject to the employer’s power to control the means and methods
by which the employee’s work is to be performed and accomplished.18

Although the respondents denied that they exercised control over the manner and methods by which the petitioner
accomplished his work, a careful review of the records shows that the latter performed his work as truck driver under the
respondents’ supervision and control. Their right of control was manifested by the following attendant circumstances:

1. The truck driven by the petitioner belonged to respondent company;

2. There was an express instruction from the respondents that the truck shall be used exclusively to deliver respondent
company’s goods; 19
3. Respondents directed the petitioner, after completion of each delivery, to park the truck in either of two specific places only,
to wit: at its office in Metro Manila at 2320 Osmeña Street, Makati City or at BEPZ, Mariveles, Bataan; 20 and

4. Respondents determined how, where and when the petitioner would perform his task by issuing to him gate passes and
routing slips. 21

a. The routing slips indicated on the column REMARKS, the chronological order and priority of delivery such as 1st drop, 2nd
drop, 3rd drop, etc. This meant that the petitioner had to deliver the same according to the order of priority indicated therein.

b. The routing slips, likewise, showed whether the goods were to be delivered urgently or not by the word RUSH printed
thereon.

c. The routing slips also indicated the exact time as to when the goods were to be delivered to the customers as, for example,
the words "tomorrow morning" was written on slip no. 2776.

These circumstances, to the Court’s mind, prove that the respondents exercised control over the means and methods by which
the petitioner accomplished his work as truck driver of the respondent company. On the other hand, the Court is hard put to
believe the respondents’ allegation that the petitioner was an independent contractor engaged in providing delivery or hauling
services when he did not even own the truck used for such services. Evidently, he did not possess substantial capitalization or
investment in the form of tools, machinery and work premises. Moreover, the petitioner performed the delivery services
exclusively for the respondent company for a continuous and uninterrupted period of ten years.

The contract of service to the contrary notwithstanding, the factual circumstances earlier discussed indubitably establish the
existence of an employer-employee relationship between the respondent company and the petitioner. It bears stressing that
the existence of an employer-employee relationship cannot be negated by expressly repudiating it in a contract and
providing therein that the employee is an independent contractor when, as in this case, the facts clearly show otherwise.
Indeed, the employment status of a person is defined and prescribed by law and not by what the parties say it should be. 22

Having established that there existed an employer-employee relationship between the respondent company and the petitioner,
the Court shall now determine whether the respondents validly dismissed the petitioner.

As a rule, the employer bears the burden to prove that the dismissal was for a valid and just cause. 23 In this case, the
respondents failed to prove any such cause for the petitioner’s dismissal. They insinuated that the petitioner abandoned his
job.

To constitute abandonment , these two factors must concur: (1) the failure to report for work or absence without valid or
justifiable reason; and (2) a clear intention to sever employer-employee relationship.24 Obviously, the petitioner did not
intend to sever his relationship with the respondent company for at the time that he allegedly abandoned his job, the petitioner
just filed a complaint for regularization, which was forthwith amended to one for illegal dismissal. A charge of abandonment is
totally inconsistent with the immediate filing of a complaint for illegal dismissal, more so when it includes a prayer for
reinstatement.25

Neither can the respondents’ claim that the petitioner was guilty of gross negligence in the proper maintenance of the truck
constitute a valid and just cause for his dismissal. Gross negligence implies a want or absence of or failure to exercise slight care
or diligence, or the entire absence of care. It evinces a thoughtless disregard of consequences without exerting any effort to
avoid them.26 The negligence, to warrant removal from service, should not merely be gross but also habitual.27 The single and
isolated act of the petitioner’s negligence in the proper maintenance of the truck alleged by the respondents does not amount
to "gross and habitual neglect" warranting his dismissal.

The Court agrees with the following findings and conclusion of the Labor Arbiter:

… As against the gratuitous allegation of the respondent that complainant was not dismissed from the service but due to
complainant’s breach of their contractual relation, i.e., his violation of the terms and conditions of the contract, we are very
much inclined to believe complainant’s story that his dismissal from the service was anchored on his insistent demand that he
be considered a regular employee. Because complainant in his right senses will not just abandon for that reason alone his work
especially so that it is only his job where he depends chiefly his existence and support for his family if he was not aggrieved by
the respondent when he was told that his services as driver will be terminated on February 23, 1995. 28
Thus, the lack of a valid and just cause in terminating the services of the petitioner renders his dismissal illegal. Under Article
279 of the Labor Code, an employee who is unjustly dismissed is entitled to reinstatement, without loss of seniority rights and
other privileges, and to the payment of full backwages, inclusive of allowances, and other benefits or their monetary
equivalent, computed from the time his compensation was withheld from him up to the time of his actual
reinstatement.29 However, as found by the Labor Arbiter, the circumstances obtaining in this case do not warrant the
petitioner’s reinstatement. A more equitable disposition, as held by the Labor Arbiter, would be an award of separation pay
equivalent to one month for every year of service from the time of his illegal dismissal up to the finality of this judgment in
addition to his full backwages, allowances and other benefits.

WHEREFORE, the instant petition is GRANTED. The Resolution dated December 15, 2000 of the Court of Appeals reversing its
Decision dated April 28, 2000 in CA-G.R. SP No. 52485 is REVERSED and SET ASIDE. The Decision dated February 3, 1997 of the
Labor Arbiter in NLRC Case No. RAB-III-02-6181-5, finding the respondents guilty of illegally terminating the employment of
petitioner Pedro Chavez, is REINSTATED.

ANGELINA FRANCISCO, Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA,
IRENE BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, Respondents.

This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul and set aside the Decision and
Resolution of the Court of Appeals dated October 29, 2004 1 and October 7, 2005, 2 respectively, in CA-G.R. SP No. 78515
dismissing the complaint for constructive dismissal filed by herein petitioner Angelina Francisco. The appellate court reversed
and set aside the Decision of the National Labor Relations Commission (NLRC) dated April 15, 2003, 3 in NLRC NCR CA No.
032766-02 which affirmed with modification the decision of the Labor Arbiter dated July 31, 2002, 4 in NLRC-NCR Case No. 30-
10-0-489-01, finding that private respondents were liable for constructive dismissal.

In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as Accountant and
Corporate Secretary and was assigned to handle all the accounting needs of the company. She was also designated as Liaison
Officer to the City of Makati to secure business permits, construction permits and other licenses for the initial operation of the
company. 5

Although she was designated as Corporate Secretary, she was not entrusted with the corporate documents; neither did she
attend any board meeting nor required to do so. She never prepared any legal document and never represented the company
as its Corporate Secretary. However, on some occasions, she was prevailed upon to sign documentation for the company. 6

In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as accountant in lieu of petitioner.
As Acting Manager, petitioner was assigned to handle recruitment of all employees and perform management administration
functions; represent the company in all dealings with government agencies, especially with the Bureau of Internal Revenue
(BIR), Social Security System (SSS) and in the city government of Makati; and to administer all other matters pertaining to the
operation of Kasei Restaurant which is owned and operated by Kasei Corporation. 7

For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her salary was P27,500.00 plus
P3,000.00 housing allowance and a 10% share in the profit of Kasei Corporation. 8

In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was required to sign a
prepared resolution for her replacement but she was assured that she would still be connected with Kasei Corporation.
Timoteo Acedo, the designated Treasurer, convened a meeting of all employees of Kasei Corporation and announced that
nothing had changed and that petitioner was still connected with Kasei Corporation as Technical Assistant to Seiji Kamura and
in charge of all BIR matters. 9

Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to September 2001 for a total
reduction of P22,500.00 as of September 2001. Petitioner was not paid her mid-year bonus allegedly because the company was
not earning well. On October 2001, petitioner did not receive her salary from the company. She made repeated follow-ups with
the company cashier but she was advised that the company was not earning well. 10

On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but she was informed that she is no
longer connected with the company. 11
Since she was no longer paid her salary, petitioner did not report for work and filed an action for constructive dismissal
before the labor arbiter.

Private respondents averred that petitioner is not an employee of Kasei Corporation. They alleged that petitioner was hired
in 1995 as one of its technical consultants on accounting matters and act concurrently as Corporate Secretary. As technical
consultant, petitioner performed her work at her own discretion without control and supervision of Kasei Corporation.
Petitioner had no daily time record and she came to the office any time she wanted. The company never interfered with her
work except that from time to time, the management would ask her opinion on matters relating to her profession. Petitioner
did not go through the usual procedure of selection of employees, but her services were engaged through a Board Resolution
designating her as technical consultant. The money received by petitioner from the corporation was her professional fee
subject to the 10% expanded withholding tax on professionals, and that she was not one of those reported to the BIR or SSS as
one of the company’s employees. 12

Petitioner’s designation as technical consultant depended solely upon the will of management. As such, her consultancy may
be terminated any time considering that her services were only temporary in nature and dependent on the needs of the
corporation.

To prove that petitioner was not an employee of the corporation, private respondents submitted a list of employees for the
years 1999 and 2000 duly received by the BIR showing that petitioner was not among the employees reported to the BIR, as
well as a list of payees subject to expanded withholding tax which included petitioner. SSS records were also submitted showing
that petitioner’s latest employer was Seiji Corporation. 13

The Labor Arbiter found that petitioner was illegally dismissed, thus:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. finding complainant an employee of respondent corporation;

2. declaring complainant’s dismissal as illegal;

3. ordering respondents to reinstate complainant to her former position without loss of seniority rights and jointly and severally
pay complainant her money claims in accordance with the following computation:

a. Backwages 10/2001 – 07/2002 275,000.00

(27,500 x 10 mos.)

b. Salary Differentials (01/2001 – 09/2001) 22,500.00

c. Housing Allowance (01/2001 – 07/2002) 57,000.00

d. Midyear Bonus 2001 27,500.00

e. 13th Month Pay 27,500.00

f. 10% share in the profits of Kasei

Corp. from 1996-2001 361,175.00

g. Moral and exemplary damages 100,000.00

h. 10% Attorney’s fees 87,076.50

P957,742.50

If reinstatement is no longer feasible, respondents are ordered to pay complainant separation pay with additional backwages
that would accrue up to actual payment of separation pay.

SO ORDERED. 14
On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter, the dispositive portion of which
reads:

PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as follows:

1) Respondents are directed to pay complainant separation pay computed at one month per year of service in addition to full
backwages from October 2001 to July 31, 2002;

2) The awards representing moral and exemplary damages and 10% share in profit in the respective accounts of P100,000.00
and P361,175.00 are deleted;

3) The award of 10% attorney’s fees shall be based on salary differential award only;

4) The awards representing salary differentials, housing allowance, mid year bonus and 13th month pay are AFFIRMED.

SO ORDERED. 15

On appeal, the Court of Appeals reversed the NLRC decision, thus:

WHEREFORE, the instant petition is hereby GRANTED. The decision of the National Labor Relations Commissions dated April 15,
2003 is hereby REVERSED and SET ASIDE and a new one is hereby rendered dismissing the complaint filed by private
respondent against Kasei Corporation, et al. for constructive dismissal.

SO ORDERED. 16

The appellate court denied petitioner’s motion for reconsideration, hence, the present recourse.

RULING

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 employer’s power to control the employee with respect to the means and methods by which the work is
to be accomplished, economic realities of the employment relations help provide a comprehensive analysis of the true
classification of the individual, whether as employee, independent contractor, corporate officer or some other capacity.

The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employer’s power to control the
employee with respect to the means and methods by which the work is to be accomplished; and (2) the underlying economic
realities of the activity or relationship.

This two-tiered test would provide us with a framework of analysis, which would take into consideration the totality of
circumstances surrounding the true nature of the relationship between the parties. This is especially appropriate in this case
where there is no written agreement or terms of reference to base the relationship on; and due to the complexity of the
relationship based on the various positions and responsibilities given to the worker over the period of the latter’s employment.
The control test initially found application in the case of Viaña v. Al-Lagadan and Piga, 19 and lately in Leonardo v. Court of
Appeals, 20 where we held that there is an employer-employee relationship when the person for whom the services are
performed reserves the right to control not only the end achieved but also the manner and means used to achieve that end.

In Sevilla v. Court of Appeals, 21 we observed the need to consider the existing economic conditions prevailing between the
parties, in addition to the standard of right-of-control like the inclusion of the employee in the payrolls, to give a clearer picture
in determining the existence of an employer-employee relationship based on an analysis of the totality of economic
circumstances of the worker.

Thus, the determination of the relationship between employer and employee depends upon the circumstances of the whole
economic activity, 22 such as: (1) the extent to which the services performed are an integral part of the employer’s business; (2)
the extent of the worker’s investment in equipment and facilities; (3) the nature and degree of control exercised by the
employer; (4) the worker’s opportunity for profit and loss; (5) the amount of initiative, skill, judgment or foresight required for
the success of the claimed independent enterprise; (6) the permanency and duration of the relationship between the worker
and the employer; and (7) the degree of dependency of the worker upon the employer for his continued employment in that
line of business. 23

The proper standard of economic dependence is whether the worker is dependent on the alleged employer for his continued
employment in that line of business. 24 In the United States, the touchstone of economic reality in analyzing possible
employment relationships for purposes of the Federal Labor Standards Act is dependency. 25 By analogy, the benchmark of
economic reality in analyzing possible employment relationships for purposes of the Labor Code ought to be the economic
dependence of the worker on his employer.

By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation because she was under
the direct control and supervision of Seiji Kamura, the corporation’s Technical Consultant. She reported for work regularly
and served in various capacities as Accountant, Liaison Officer, Technical Consultant, Acting Manager and Corporate Secretary,
with substantially the same job functions, that is, rendering accounting and tax services to the company and performing
functions necessary and desirable for the proper operation of the corporation such as securing business permits and other
licenses over an indefinite period of engagement.

Under the broader economic reality test, the petitioner can likewise be said to be an employee of respondent corporation
because she had served the company for six years before her dismissal, receiving check vouchers indicating her salaries/wages,
benefits, 13th month pay, bonuses and allowances, as well as deductions and Social Security contributions from August 1, 1999
to December 18, 2000. 26 When petitioner was designated General Manager, respondent corporation made a report to the SSS
signed by Irene Ballesteros. Petitioner’s membership in the SSS as manifested by a copy of the SSS specimen signature card
which was signed by the President of Kasei Corporation and the inclusion of her name in the on-line inquiry system of the SSS
evinces the existence of an employer-employee relationship between petitioner and respondent corporation. 27

It is therefore apparent that petitioner is economically dependent on respondent corporation for her continued employment
in the latter’s line of business.

In Domasig v. National Labor Relations Commission, 28 we held that in a business establishment, an identification card is
provided not only as a security measure but mainly to identify the holder thereof as a bona fide employee of the firm that
issues it. Together with the cash vouchers covering petitioner’s salaries for the months stated therein, these matters constitute
substantial evidence adequate to support a conclusion that petitioner was an employee of private respondent.

We likewise ruled in Flores v. Nuestro 29 that a corporation who registers its workers with the SSS is proof that the latter were
the former’s employees. The coverage of Social Security Law is predicated on the existence of an employer-employee
relationship.

Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established that petitioner never acted as
Corporate Secretary and that her designation as such was only for convenience. The actual nature of petitioner’s job was as
Kamura’s direct assistant with the duty of acting as Liaison Officer in representing the company to secure construction permits,
license to operate and other requirements imposed by government agencies. Petitioner was never entrusted with corporate
documents of the company, nor required to attend the meeting of the corporation. She was never privy to the preparation of
any document for the corporation, although once in a while she was required to sign prepared documentation for the
company. 30
The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001 affidavit has been allegedly
withdrawn by Kamura himself from the records of the case. 31 Regardless of this fact, we are convinced that the allegations in
the first affidavit are sufficient to establish that petitioner is an employee of Kasei Corporation.

Granting arguendo, that the second affidavit validly repudiated the first one, courts do not generally look with favor on any
retraction or recanted testimony, for it could have been secured by considerations other than to tell the truth and would make
solemn trials a mockery and place the investigation of the truth at the mercy of unscrupulous witnesses. 32 A recantation does
not necessarily cancel an earlier declaration, but like any other testimony the same is subject to the test of credibility and
should be received with caution. 33

Based on the foregoing, there can be no other conclusion that petitioner is an employee of respondent Kasei Corporation. She
was selected and engaged by the company for compensation, and is economically dependent upon respondent for her
continued employment in that line of business. Her main job function involved accounting and tax services rendered to
respondent corporation on a regular basis over an indefinite period of engagement. Respondent corporation hired and engaged
petitioner for compensation, with the power to dismiss her for cause. More importantly, respondent corporation had the
power to control petitioner with the means and methods by which the work is to be accomplished.

The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a month from January to September
2001. This amounts to an illegal termination of employment, where the petitioner is entitled to full backwages. Since the
position of petitioner as accountant is one of trust and confidence, and under the principle of strained relations, petitioner is
further entitled to separation pay, in lieu of reinstatement. 34

A diminution of pay is prejudicial to the employee and amounts to constructive dismissal. Constructive dismissal is an
involuntary resignation resulting in cessation of work resorted to when continued employment becomes impossible,
unreasonable or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear discrimination,
insensibility or disdain by an employer becomes unbearable to an employee. 35 In Globe Telecom, Inc. v. Florendo-Flores, 36 we
ruled that where an employee ceases to work due to a demotion of rank or a diminution of pay, an unreasonable situation
arises which creates an adverse working environment rendering it impossible for such employee to continue working for her
employer. Hence, her severance from the company was not of her own making and therefore amounted to an illegal
termination of employment.

In affording full protection to labor, this Court must ensure equal work opportunities regardless of sex, race or creed. Even as
we, in every case, attempt to carefully balance the fragile relationship between employees and employers, we are mindful of
the fact that the policy of the law is to apply the Labor Code to a greater number of employees. This would enable employees
to avail of the benefits accorded to them by law, in line with the constitutional mandate giving maximum aid and protection to
labor, promoting their welfare and reaffirming it as a primary social economic force in furtherance of social justice and national
development.

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals dated October 29, 2004 and
October 7, 2005, respectively, in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE. The Decision of the National Labor
Relations Commission dated April 15, 2003 in NLRC NCR CA No. 032766-02, is REINSTATED. The case is REMANDED to the Labor
Arbiter for the recomputation of petitioner Angelina Francisco’s full backwages from the time she was illegally terminated until
the date of finality of this decision, and separation pay representing one-half month pay for every year of service, where a
fraction of at least six months shall be considered as one whole year.

PAMPLONA PLANTATION COMPANY, INC. and/or JOSE LUIS BONDOC, petitioners,

vs.
RODEL TINGHIL, MARYGLENN SABIHON, ESTANISLAO BOBON, CARLITO TINGHIL, BONIFACIO TINGHIL, NOLI TINGHIL, EDGAR
TINGHIL, ERNESTO ESTOMANTE, SALLY TOROY, BENIGNO TINGHIL JR., ROSE ANN NAPAO, DIOSDADO TINGHIL, ALBERTO
TINGHIL, ANALIE TINGHIL, and ANTONIO ESTOMANTE, respondents.

To protect the rights of labor, two corporations with identical directors, management, office and payroll should be treated as
one entity only. A suit by the employees against one corporation should be deemed as a suit against the other. Also, the rights
and claims of workers should not be prejudiced by the acts of the employer that tend to confuse them about its corporate
identity. The corporate fiction must yield to truth and justice.
The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to annul the January 31, 2003 Decision 2 and the
June 17, 2003 Resolution3 of the Court of Appeals (CA) in CA-GR SP No. 62813. The assailed Decision disposed as follows:

"WHEREFORE, in view of the foregoing, the petition is GRANTED. The assailed decision of public respondent NLRC dated 19 July
2000 [is] REVERSED and SET ASIDE and a new one entered DIRECTING private respondents to reinstate petitioners, except
Rufino Bacubac, Felix Torres and Antonio Canolas, to their former positions without loss of seniority rights plus payment of full
backwages. However, if reinstatement is no longer feasible, a one-month salary for every year of service shall be paid the
petitioners as ordered by the Labor Arbiter in his decision dated 31 August 1998 plus payment of full backwages computed
from date of illegal dismissal to the finality of this decision." 4

The Decision5 of the National Labor Relations Commission (NLRC),6 reversed by the CA, disposed as follows:

"WHEREFORE, premises considered, the decision appealed from is hereby REVERSED, and another one entered DISMISSING the
complaint."7

The June 17, 2003 Resolution denied petitioners’ Motion for Reconsideration.

The Facts

The CA summarized the antecedents as follows:

"Sometime in 1993, [Petitioner] Pamplona Plantations Company, Inc. (company for brevity) was organized for the purpose of
taking over the operations of the coconut and sugar plantation of Hacienda Pamplona located in Pamplona, Negros Oriental.
It appears that Hacienda Pamplona was formerly owned by a certain Mr. Bower who had in his employ several agricultural
workers.

"When the company took over the operation of Hacienda Pamplona in 1993, it did not absorb all the workers of Hacienda
Pamplona. Some, however, were hired by the company during harvest season as coconut hookers or ‘sakador,’ coconut filers,
coconut haulers, coconut scoopers or ‘lugiteros,’ and charcoal makers.

"Sometime in 1995, Pamplona Plantation Leisure Corporation was established for the purpose of engaging in the business of
operating tourist resorts, hotels, and inns, with complementary facilities, such as restaurants, bars, boutiques, service shops,
entertainment, golf courses, tennis courts, and other land and aquatic sports and leisure facilities.

"On 15 December 1996, the Pamplona Plantation Labor Independent Union (PAPLIU) conducted an organizational meeting
wherein several [respondents] who are either union members or officers participated in said meeting.

"Upon learning that some of the [respondents] attended the said meeting, [Petitioner] Jose Luis Bondoc, manager of the
company, did not allow [respondents] to work anymore in the plantation.

"Thereafter, on various dates, [respondents] filed their respective complaints with the NLRC, Sub-Regional Arbitration Branch
No. VII, Dumaguete City against [petitioners] for unfair labor practice, illegal dismissal, underpayment, overtime pay, premium
pay for rest day and holidays, service incentive leave pay, damages, attorney’s fees and 13th month pay.

"On 09 October 1997, [respondent] Carlito Tinghil amended his complaint to implead Pamplona Plantation Leisure
Corporation x x x.

"On 31 August 1998, Labor Arbiter Jose G. Gutierrez rendered a decision finding [respondents], except Rufino Bacubac,
Antonio Cañolas and Felix Torres who were complainants in another case, to be entitled to separation pay.

xxxxxxxxx

"[Petitioners] appealed the Labor Arbiter’s decision to [the] NLRC. In the assailed decision dated 19 July 2000, the NLRC’s
Fourth Division reversed the Labor Arbiter, ruling that [respondents], except Carlito Tinghil, failed to implead Pamplona
Plantation Leisure Corporation, an indispensable party and that ‘there exist no employer-employee relation between the
parties.’

xxxxxxxxx
"[Respondents] filed a motion for reconsideration which was denied by [the] NLRC in a Resolution dated 06 December 2000." 8

Respondents elevated the case to the CA via a Petition for Certiorari under Rule 65 of the Rules of Court.

Ruling of the Court of Appeals

Guided by the fourfold test for determining the existence of an employer-employee relationship, the CA held that respondents
were employees of petitioner-company. Finding there was a "power to hire," the appellate court considered the admission of
petitioners in their Comment that they had hired respondents as coconut filers, coconut scoopers, charcoal makers, or as
pieceworkers. The fact that respondents were paid by piecework did not mean that they were not employees of the company.
Further, the CA ruled that petitioners necessarily exercised control over the work they performed, since the latter were
working within the premises of the plantation. According to the CA, the mere existence -- not necessarily the actual exercise --
of the right to control the manner of doing work sufficed to meet the fourth element of an employer-employee relation.

The appellate court also held that respondents were regular employees, because the tasks they performed were necessary and
indispensable to the operation of the company. Since there was no compliance with the twin requirements of a valid and/or
authorized cause and of procedural due process, their dismissal was illegal.

Hence, this Petition.9

Issues

In their Memorandum, petitioners submit the following issues for our consideration:

"1. Whether or not the finding of the Court of Appeals that herein respondents are employees of Petitioner Pamplona
Plantation Company, Inc. is contrary to the admissions of the respondents themselves.

"2. Whether or not the Court of Appeals has decided in a way not in accord with law and jurisprudence, and with grave abuse of
discretion, in not dismissing the respondents’ complaint for failure to implead Pamplona Plantation Leisure Corp., which is an
indispensable party to this case.

"3. Whether or not the Court of Appeals has decided in a way not in accord with law and jurisprudence, and with grave abuse of
discretion in ordering reinstatement or payment of separation pay and backwages to the respondents, considering the lack of
employer-employee relationship between petitioner and respondents." 10

The main issue raised is whether the case should be dismissed for the non-joinder of the Pamplona Plantation Leisure
Corporation. The other issues will be taken up in the discussion of the main question.

The Court’s Ruling

The Petition OF RESPONDENTS lacks merit. IN OTHER WORDS, THE PETITION OF WORKERS SHOULD NOT BE DISMISSED DUE TO
NON-PLEADING OF PARTY.

Preliminary Issue:

Factual Matters

Section 1 of Rule 45 of the Rules of Court states that only questions of law are entertained in appeals by certiorari to the
Supreme Court. However, jurisprudence has recognized several exceptions in which factual issues may be resolved by this
Court:11 (1) the legal conclusions made by the lower tribunal are speculative; 12 (2) its inferences are manifestly
mistaken,13 absurd, or impossible; (3) the lower court committed grave abuse of discretion; (4) the judgment is based on a
misapprehension of facts;14 (5) the findings of fact of the lower tribunals are conflicting; 15 (6) the CA went beyond the issues; (7)
the CA’s findings are contrary to the admissions of the parties; 16 (8) the CA manifestly overlooked facts not disputed which, if
considered, would justify a different conclusion; (9) the findings of fact are conclusions without citation of the specific evidence
on which they are based; and (10) when the findings of fact of the CA are premised on the absence of evidence but such
findings are contradicted by the evidence on record. 17

The very same reason that constrained the appellate court to review the factual findings of the NLRC impels this Court to take
its own look at the facts. Normally, the Supreme Court is not a trier of facts. 18 However, since the findings of the CA and the
NLRC on this point were conflicting, we waded through the records to find out if there was basis for the former’s reversal of the
NLRC’s Decision. We shall discuss our factual findings together with our review of the main issue.

Main Issue:

Piercing the Corporate Veil

Petitioners contend that the CA should have dismissed the case for the failure of respondents (except Carlito Tinghil) to implead
the Pamplona Plantation Leisure Corporation, an indispensable party, for being the true and real employer. Allegedly,
respondents admitted in their Affidavits dated February 3, 1998,19 that they had been employed by the leisure corporation
and/or engaged to perform activities that pertained to its business.

Further, as the NLRC allegedly noted in their individual Complaints, respondents specifically averred that they had worked in
the "golf course" and performed related jobs in the "recreational facilities" of the leisure corporation. Hence, petitioners claim
that, as a sugar and coconut plantation company separate and distinct from the Pamplona Plantation Leisure Corporation, the
petitioner-company is not the real party in interest.

We are not persuaded.

An examination of the facts reveals that, for both the coconut plantation and the golf course, there is only one management
which the laborers deal with regarding their work.20 A portion of the plantation (also called Hacienda Pamplona) had actually
been converted into a golf course and other recreational facilities. The weekly payrolls issued by petitioner-company bore the
name "Pamplona Plantation Co., Inc."21 It is also a fact that respondents all received their pay from the same person, Petitioner
Bondoc -- the managing director of the company. Since the workers were working for a firm known as Pamplona Plantation Co.,
Inc., the reason they sued their employer through that name was natural and understandable.

True, the Petitioner Pamplona Plantation Co., Inc., and the Pamplona Plantation Leisure Corporation appear to be separate
corporate entities. But it is settled that this fiction of law cannot be invoked to further an end subversive of justice. 22

The principle requiring the piercing of the corporate veil mandates courts to see through the protective shroud that
distinguishes one corporation from a seemingly separate one. 23 The corporate mask may be removed and the corporate veil
pierced when a corporation is the mere alter ego of another.24 Where badges of fraud exist, where public convenience is
defeated, where a wrong is sought to be justified thereby, or where a separate corporate identity is used to evade financial
obligations to employees or to third parties, 25 the notion of separate legal entity should be set aside26 and the factual truth
upheld. When that happens, the corporate character is not necessarily abrogated. 27 It continues for other legitimate objectives.
However, it may be pierced in any of the instances cited in order to promote substantial justice.

In the present case, the corporations have basically the same incorporators and directors and are headed by the same official.
Both use only one office and one payroll and are under one management. In their individual Affidavits, respondents allege that
they worked under the supervision and control of Petitioner Bondoc -- the common managing director of both the petitioner-
company and the leisure corporation. Some of the laborers of the plantation also work in the golf course. 28 Thus, the attempt to
make the two corporations appear as two separate entities, insofar as the workers are concerned, should be viewed as a
devious but obvious means to defeat the ends of the law. Such a ploy should not be permitted to cloud the truth and
perpetrate an injustice.

We note that this defense of separate corporate identity was not raised during the proceedings before the labor arbiter. The
main argument therein raised by petitioners was their alleged lack of employer-employee relationship with, and power of
control over, the means and methods of work of respondents because of the seasonal nature of the latter’s work. 29

Neither was the issue of non-joinder of indispensable parties raised in petitioners’ appeal before the NLRC. 30 Nevertheless, in its
Decision31 dated July 19, 2000, the Commission concluded that the plantation company and the leisure corporation were two
separate and distinct corporations, and that the latter was an indispensable party that should have been impleaded. We quote
below pertinent portions of that Decision:

"Respondent posits that it is engaged in operating and maintaining sugar and coconut plantation. The positions of complainants
could only be determined through their individual complaints. Yet all complainants alleged in their affidavits x x x that they
were working at the ‘golf course.’ Worthy to note that only Carlito Tinghil amended his complaint to include Pamplona Leisure
Corporation, which respondents maintain is a separate corporation established in 1995. Thus, xxx Pamplona Plantation Co., Inc.
and Pamplona Leisure Corporation are two separate and distinct corporations. Except for Carlito Tinghil the complainants have
the wrong party respondent. Pamplona Leisure Corporation is an indispensable party without which there could be no final
determination of the case."32

Indeed, it was only after this NLRC Decision was issued that the petitioners harped on the separate personality of the Pamplona
Plantation Co., Inc., vis-à-vis the Pamplona Plantation Leisure Corporation.

As cited above, the NLRC dismissed the Complaints because of the alleged admission of respondents in their Affidavits that they
had been working at the golf course. However, it failed to appreciate the rest of their averments. Just because they worked at
the golf course did not necessarily mean that they were not employed to do other tasks, especially since the golf course was
merely a portion of the coconut plantation. Even petitioners admitted that respondents had been hired as coconut filers,
coconut scoopers or charcoal makers.33 Consequently, NLRC’s conclusion derived from the Affidavits of respondents stating that
they were employees of the Pamplona Plantation Leisure Corporation alone was the result of an improper selective
appreciation of the entire evidence.

Furthermore, we note that, contrary to the NLRC’s findings, some respondents indicated that their employer was the Pamplona
Plantation Leisure Corporation, while others said that it was the Pamplona Plantation Co., Inc. But in all these Affidavits, both
the leisure corporation and petitioner-company were identified or described as entities engaged in the development and
operation of sugar and coconut plantations, as well as recreational facilities such as a golf course. These allegations reveal that
petitioner successfully confused the workers as to who their true and real employer was. All things considered, their faulty
belief that the plantation company and the leisure corporation were one and the same can be attributed solely to petitioners. It
would certainly be unjust to prejudice the claims of the workers because of the misleading actions of their employer.

Non-Joinder of Parties

Granting for the sake of argument that the Pamplona Plantation Leisure Corporation is an indispensable party that should be
impleaded, NLRC’s outright dismissal of the Complaints was still erroneous.

The non-joinder of indispensable parties is not a ground for the dismissal of an action.34 At any stage of a judicial proceeding
and/or at such times as are just, parties may be added on the motion of a party or on the initiative of the tribunal concerned.35 If
the plaintiff refuses to implead an indispensable party despite the order of the court, that court may dismiss the complaint for
the plaintiff’s failure to comply with the order. The remedy is to implead the non-party claimed to be indispensable. 36 In this
case, the NLRC did not require respondents to implead the Pamplona Plantation Leisure Corporation as respondent; instead,
the Commission summarily dismissed the Complaints.

In any event, there is no need to implead the leisure corporation because, insofar as respondents are concerned, the leisure
corporation and petitioner-company are one and the same entity. Salvador v. Court of Appeals37 has held that this Court has
"full powers, apart from that power and authority which is inherent, to amend the processes, pleadings, proceedings and
decisions by substituting as party-plaintiff the real party-in-interest."

In Alonso v. Villamor,38 we had the occasion to state thus:

"There is nothing sacred about processes or pleadings, their forms or contents. Their sole purpose is to facilitate the application
of justice to the rival claims of contending parties. They were created, not to hinder and delay, but to facilitate and promote,
the administration of justice. They do not constitute the thing itself, which courts are always striving to secure to litigants. They
are designed as the means best adapted to obtain that thing. In other words, they are a means to an end. When they lose the
character of the one and become the other, the administration of justice is at fault and courts are correspondingly remiss in the
performance of their obvious duty."

The controlling principle in the interpretation of procedural rules is liberality, so that they may promote their object and assist
the parties in obtaining just, speedy and inexpensive determination of every action and proceeding. 39 When the rules are
applied to labor cases, this liberal interpretation must be upheld with even greater vigor. 40 Without in any way depriving the
employer of its legal rights, the thrust of statutes and rules governing labor cases has been to benefit workers and avoid
subjecting them to great delays and hardships. This intent holds especially in this case, in which the plaintiffs are poor laborers.

Employer-Employee Relationship
Petitioners insist that respondents are not their employees, because the former exercised no control over the latter’s work
hours and method of performing tasks. Thus, petitioners contend that under the "control test," the workers were independent
contractors.

We disagree. As shown by the evidence on record, petitioners hired respondents, who performed tasks assigned by their
respective officers-in-charge, who in turn were all under the direct supervision and control of Petitioner Bondoc. These
allegations are contained in the workers’ Affidavits, which were never disputed by petitioners. Also uncontroverted are the
payrolls bearing the name of the plantation company and signed by Petitioner Bondoc. Some of these payrolls include the time
records of the employees. These documents prove that petitioner-company exercised control and supervision over them.

To operate against the employer, the power of control need not have been actually exercised. Proof of the existence of such
power is enough.41 Certainly, petitioners wielded that power to hire or dismiss, as well as to check on the progress and the
quality of work of the laborers.

Jurisprudence provides other equally important considerations 42 that support the conclusion that respondents were not
independent contractors. First, they cannot be said to have carried on an independent business or occupation.43 They are not
engaged in the business of filing, scooping and hauling coconuts and/or operating and maintaining a plantation and a golf
course. Second, they do not have substantial capital or investment in the form of tools, equipment, machinery, work premises,
and other implements needed to perform the job, work or service under their own account or responsibility. 44 Third, they have
been working exclusively for petitioners for several years. Fourth, there is no dispute that petitioners are in the business of
growing coconut trees for commercial purposes. There is no question, either, that a portion of the plantation was converted
into a golf course and other recreational facilities. Clearly, respondents performed usual, regular and necessary services for
petitioners’ business.

WHEREFORE, the Petition is DENIED, and the assailed Decision AFFIRMED. Costs against the petitioners.

SAN MIGUEL CORPORATION, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and RAFAEL MALIKSI, respondents.

In this petition for review under Rule 45 of the Rules of Court, petitioner San Miguel Corporation (SMC) seeks the reversal and
setting aside of the Decision1 dated September 30, 1999 of the Court of Appeals (CA) in CA-G.R. SP No. 50321, as reiterated in
its Resolution2 of March 20, 2001, affirming in toto an earlier decision of the National Labor Relations Commission (NLRC) in
NLRC NCR CA No. 005478-93, entitled "Rafael C. Maliksi v. San Miguel Corporation and/or Philippine Software Services &
Education Center." The affirmed NLRC decision overturned that of the Labor Arbiter and declared the herein private
respondent Rafael Maliksi (Maliksi) a regular employee of the petitioner and ordered the latter to reinstate him with benefits.

As found by the NLRC and subsequently adopted by the CA, the facts are as follows:

On 16 October 1990, Rafael M. Maliksi filed a complaint against the San Miguel Corporation-Magnolia Division, herein
referred to as SMC and Philippine Software Services and Education Center herein referred to as PHILSSEC to compel the said
respondents to recognize him as a regular employee. He amended the complaint on 12 November 1990 to include the charge
of illegal dismissal because his services were terminated on 31 October 1990.

The complainant’s employment record indicates that he rendered service with Lipercon Services from 1 April 1981 to February
1982 as budget head assigned to SMC-Beer Division, then from July 1983 to April 1985 with Skillpower, Inc., as accounting clerk
assigned to SMC-Magnolia Division, then from October 1988 to 1989 also with Skillpower, Inc. as acting clerk assigned to SMC-
Magnolia Finance, and from October 1989 to 31 October 1990 with PHILSSEC assigned to Magnolia Finance as accounting clerk.
The complainant considered himself as an employee of SMC-Magnolia. Lipercon Services, Skillpower, Inc. and PHILSSEC are
labor-only contractors and any one of which had never been his employer. His dismissal, according to him, was in retaliation
for his filing of the complaint for regularization in service. His dismissal was illegal there being no just cause for the action. He
was not accorded due process neither was his dismissal reported to the Department of Labor and Employment.

PHILSSEC disclaimed liability. As an entity catering (sic) computer systems and program for business enterprises, it has
contracted with SMC-Magnolia to computerize the latter’s manual accounting reporting systems of its provincial sales.
PHILSSEC then conducted a three phase analysis of SMC–Magnolia set up: first the computer needs of the firm was (sic)
determined; then, the development of computer systems or program suitable; and, finally, set up the systems and train the
employees to operate the same. In all these phases, PHILSSEC uses its computer system and technology and provided the
necessary manpower to compliment the transfer of the technology to SMC-Magnolia. Complainant Maliksi was one of those
employed by PHILSSEC whose principal function was the manual control of data needed during the computerization. Like all
assigned to the project, the complainant’s work was controlled by PHILSSEC supervisors, his salary paid by the agency and he
reported directly to PHILSSEC. The computerization project was completed on 31 October 1990, and so, the complainant was
terminated on the said date.

SMC, on the other hand, submitted its position. In the contract SMC entered with PHILSSEC, the latter undertook to set up the
computerization of the provincial sales reporting system of Magnolia Division. To carry out the task, PHILSSEC utilized 3
computer programmers and the rest were data encoders. The complainant being one of the compliments (sic) performed the
following functions:

xxx xxx xxx

SMC likewise contends that PHILSSEC exercised exclusive managerial prerogative over the complainant as to hiring, payment
of salary, dismissal and most importantly, the control over his work. SMC was interested only in the result of the work
specified in the contract but not as to the means and methods of accomplishing the same. Moreover, PHILSSEC has
substantial capital of its own. It has an IBM system, 3 computers, 17 IBM or IBM-compatible computers; it has a building where
the computer training center and main office are located. What it markets to clients are computer programs and training
systems on computer technology and not the usual labor or manpower supply to establishment concerns. Moreover, what
PHILSSEC set up employing the complainant, among others, has no relation to the principal business of SMC, which is food
and beverage. It was a single relationship between the people utilized by PHILSSEC and SMC…’ 3

The Labor Arbiter declared Maliksi a regular employee of PHILSSEC and absolved SMC from liability. Dispositively, the Labor
Arbiter’s decision reads:

WHEREFORE, the complainant, Rafael Maliksi, is recognized as a regular employee of Philippine Software Services and
Education Center which respondent is ordered to reinstate him to a job of the same level as his previous position in any of the
projects where there is a vacancy and without loss of seniority rights. A five months backwages is awarded because the
prolonged suspension from his work was brought about by his refusal to take any job offered by PHILSSEC earlier in the
proceedings of this case. The respondent, SMC-Magnolia Division, is exempted from any liability as the complaint against the
said corporation is dismissed for lack of merit.

SO ORDERED.4

Maliksi appealed to the NLRC. In turn, in a decision dated January 26, 1998, the NLRC reversed that of the Labor Arbiter by
declaring Maliksi a regular employee of the petitioner and ordering the latter to reinstate him without loss of seniority rights
and with full benefits, to wit:

WHEREFORE, as recommended, the decision below is hereby SET ASIDE. Accordingly, judgment is hereby rendered directing
respondent SMC-Magnolia Division to reinstate complainant as a regular employee without loss of seniority rights and other
privileges and to pay complainant full backwages, inclusive of allowances and other benefits or their monetary equivalent,
computed from the time his compensation was withheld from him up to time of his actual reinstatement, plus 10% of the total
money award for and attorney’s fees.

SO ORDERED.5

From the aforementioned decision of the NLRC, SMC went on certiorari to the CA in CA-G.R. SP No. 50321.

As stated at the outset, the CA, in the herein assailed Decision6 dated September 30, 1999, affirmed in toto that of the NLRC.
In so doing, the CA found SMC to have utilized PHILSSEC, Lipercon Services, Inc. (Lipercon) and Skillpower, Inc. (Skillpower) as
conduits to circumvent Article 280 of the Labor Code, employing Maliksi as contractual or project employee through these
entities, thereby undermining his right to gain regular employment status under the law. The appellate court echoed the
NLRC’s assessment that Maliksi’s work was necessary or desirable in the business of SMC in its Magnolia Division, for more
than the required one-year period. It affirmed the NLRC’s finding that the three (3) conduit entities adverted to, Lipercon and
Skillpower, are labor-only contractors such that Maliksi’s previous employment contracts with SMC, through these two entities,
are deemed to have been entered into in violation of labor laws. Consequently, Maliksi’s employment with SMC became
permanent and regular after the statutory period of one year of service through these entities. The CA concluded that on
account of his past employment contracts with SMC under Lipercon and Skillpower, Maliksi was already a regular employee of
SMC when he entered into SMC’s computerization project as part of the PHILSSEC project complement.

With its motion for reconsideration having been denied by the CA in its Resolution of March 20, 2001, SMC is now with this
Court via the present recourse on the following assigned errors:

The Court of Appeals gravely erred in declaring private respondent a regular employee of petitioner SMC despite its findings
that PHILSSEC, the contractor that employed private respondent, is an independent job contractor.

Corollarily, the declaration of the Honorable Court of Appeals that private respondent is a regular employee of petitioner SMC
proceeds from the erroneous premise that private respondent was already a regular employee of SMC when he was hired by
the independent contractor PHILSSEC. Having been placed in petitioner SMC by a supposed labor-only contractor, for just five
months and for a different job, three years after his last assignment therein, private respondent had not thereby become a
regular employee of petitioner SMC.

II

The Court of Appeals gravely erred in ultimately resolving the case upon the principle that "all doubts must be resolved in favor
of labor"; certainly, protection to labor does not imply sanctioning a plain injustice to the employer, particularly where private
respondent was shown to have stated falsehoods and committed malicious intercalations and misrepresentations.

III

The Court of Appeals gravely erred in declaring that private respondent was not part of the of the personnel group in the
computerization program of petitioner SMC under PHILSSEC.

We DENY. RULED AGAINST SAN MIGUEL

SMC concedes that Maliksi, before his employment with PHILSSEC, worked in SMC from November 1988 to April 1990, but as
employee of Skillpower7 and that he was previously assigned to SMC between 1981 up to February 1985, "for periods spread
apart."8 The Labor Arbiter found, as earlier stated, that Maliksi rendered service with Lipercon from 1 April 1981 to February
1982 as budget head assigned to SMC-Beer Division; from July 1983 to April 1985 with Skillpower as accounting clerk assigned
to SMC-Magnolia Division, then from October 1988 to 19899 also with Skillpower as acting clerk assigned to SMC-Magnolia
Finance, and from October 1989 to 31 October 1990 with PHILSSEC assigned to Magnolia Finance as accounting clerk. In all, it
appears that, while under the employ of either Lipercon or Skillpower, Maliksi has undisputedly rendered service with SMC
for at least three years and seven months.10

The Court takes judicial notice of the fact that Lipercon and Skillpower were declared to be labor-only
contractors,11 providing as they do manpower services to the public for a fee. The existence of an employer-employee
relationship is factual and we give due deference to the factual findings of both the NLRC and the CA that an employer-
employee relationship existed between SMC (or its subsidiaries) and Maliksi. Indeed, having served SMC for an aggregate
period of more than three (3) years through employment contracts with these two labor contractors, Maliksi should be
considered as SMC’s regular employee. The hard fact is that he was hired and re-hired by SMC to perform administrative and
clerical work that was necessary to SMC’s business on a daily basis. In Bustamante v. National Labor Relations
Commission, 12 we ruled:

In the case at bar, petitioners were employed at various periods from 1985 to 1989 for the same kind of work they were hired
to perform in September 1989. Both the labor arbiter and the respondent NLRC agree that petitioners were employees
engaged to perform activities necessary in the usual business of the employer . As laborers, harvesters or sprayers in an
agricultural establishment which produces high grade bananas, petitioners’ tasks are indispensable to the year-round
operations of respondent company. This belies the theory of respondent company that the employment of petitioners was
terminated due to the expiration of their probationary period in June 1990. If at all significant, the contract for probationary
employment was utilized by respondent company as a chicanery to deny petitioners their status as regular employees and to
evade paying them the benefits attached to such status. Some of the petitioners were hired as far back as 1985, although the
hiring was not continuous. They were hired and re-hired in a span of from two to four years to do the same type of work which
conclusively shows the necessity of petitioners’ service to the respondent company’s business. Petitioners have, therefore,
become regular employees after performing activities which are necessary in the usual business of their employer. But, even
assuming that the activities of petitioners in respondent company’s plantation were not necessary or desirable to its business,
we affirm the public respondent’s finding that all of the complainants (petitioners) have rendered non-continuous or broken
service for more than one (1) year and are consequently considered regular employees.

We do not sustain public respondent’s theory that private respondent should not be made to compensate petitioners for
backwages because its termination of their employment was not made in bad faith. The act of hiring and re-hiring the
petitioners over a period of time without considering them as regular employees evidences bad faith on the part of private
respondent. The public respondent made a finding to this effect when it stated that the subsequent re-hiring of petitioners on a
probationary status "clearly appears to be a convenient subterfuge on the part of management to prevent complainants
(petitioners) from becoming regular employees." (Emphasis supplied)

It is worth noting that, except for the computerization project of PHILSSEC, petitioner did not make any insinuation at all that
the services of Maliksi with SMC was project-related such that an employment contract with Lipercon and Skillpower was
necessary.

In Madriaga v. Court of Appeals,13 the Court, confronted with the same issue now being addressed, declared that regularization
of employmentin SMC should extend to those whose situation is similar to the complainants in said case. We wrote:

This is the third time that the parties have invoked the power of this Court to decide the labor dispute involved in this case. The
generative facts of the case are as follows:

On 04 March 1988, the NOWM and a number of workers-complainants filed with the Arbitration Branch of the NCR, NLRC,
Manila, against San Miguel Corporation, Philippine Dairy Products Corporation, Magnolia Dairy Products, Skillpower
Corporation and Lipercon Services, Inc. for illegal dismissal.

xxx xxx xxx

The Voluntary Arbitrator rendered a decision on 29 July 1988, the dispositive of which states:

WHEREFORE, it is hereby declared that complainants are regular employees of SMC and PDPC. Accordingly, SMC and PDPC are
hereby ordered to reinstate the dismissed 85 complainants to their former positions as their regular employees effective from
the date of the filing of their complaints with full backwages less the daily financial assistance of P30.00 per day each, extended
to them by Lipercon and Skillpower.

Aggrieved by the said decision of the Voluntary Arbitrator, SMC and PDPC filed a petition for certiorari before the Supreme
Court.

It was upon the filing of the said petition for certiorari that the Court had the first opportunity to pass upon the controversies
involved in this case. In a Resolution dated 30 August 1989, the Court dismissed G.R. No. 85577 entitled, "Philippine Dairy
Products Corporation and San Miguel Corporation – Magnolia Dairy Products Division v. Voluntary Arbitrator Tito F. Genilo of
the Department of Labor and Employment (DOLE) and the National Organization of Workingmen (NOWM)" for lack of merit.
The Court held in full:

Individual private respondents are xxx [SMC, et al.] laborers supplied to petitioners by Skillpower Corporation and Lipercon
Services, Inc., on the basis of contracts of services. Upon expiration of the said contracts, individual private respondents were
denied entry to petitioners' premises. Individual private respondents and respondent union thus filed separate complaints for
illegal dismissal against petitioners San Miguel Corp., Skillpower Corporation and Lipercon Services, Inc., in the [NLRC, NCR]
After consolidation and voluntary arbitration, respondent Labor Arbiter Tito F. Genilo rendered a decision xxx declaring
individual private respondents regular employees of petitioners and ordering the latter to reinstate the former and to pay them
backwages. On motion for execution filed by private respondents, Labor Arbiter Genilo issued on October 20, 1988 an order
directing, among others, the regularization of "all the complainants which include those still working and those already
terminated." Hence, this petition for certiorari with injunction.

Petitioners contend that prior to reinstatement, individual private respondents should first comply with certain requirements,
like submission of NBI and police clearances and submission to physical and medical examinations, since petitioners are
deemed to be direct employers and have the right to ascertain the physical fitness and moral uprightness of its employees by
requiring the latter to undergo periodic examinations, and that petitioners may not be ordered to employ on regular basis the
other workers rendering services to petitioners by virtue of a similar contract of services between petitioners and Skillpower
Corporation and Lipercon Services, Inc. because such other workers were not parties to or were not impleaded in the voluntary
arbitration case.

Considering that the clearances and examinations sought by petitioners from private respondents are not 'periodic' in nature
but are made preconditions for reinstatement, as in fact the petition filed alleged that reinstatement shall be effective upon
compliance with such requirements, (pp. 5-6 thereof) which should not be the case because this is not a case of initial hiring,
the workers concerned having rendered years of service to petitioners who are considered direct employers, and that
regularization is a labor benefit that should apply to all qualified employees similarly situated and may not be denied merely
because some employees were allegedly not parties to or were not impleaded in the voluntary arbitration case, even as the
finding of Labor Arbiter Genilo is to the contrary, this Court finds no grave abuse of discretion committed by Labor Arbiter
Genilo in issuing the questioned order of October 20, 1988.

ACCORDINGLY, the Court Resolved to Dismiss the petition for lack of merit.

In fine, the Court affirmed the ruling of the Voluntary Arbitrator and declared that therein complainants are regular employees
of San Miguel Corporation (SMC) and PDPC. It must be noted that in the abovequoted Resolution, the Court extended the
benefit of regularization not only to the original complainants but also to those workers who are "similarly situated" to therein
complainants. Herein petitioners are among those who are "similarly situated." 14 (Emphasis supplied)

We find respondent Maliksi to be similarly situated with those of the complainants in Madriaga. Indeed, Lipercon and
Skillpower have figured in not just a few of our decisions, 15 so much so that we are inclined to believe that these two were
involved in labor-only contracting with respect to Maliksi. We hold that the finding of the NLRC and the CA as to SMC’s
resorting to labor-only contracting is entitled to consideration in its full weight.

With respect to PHILSSEC, there was no need for Maliksi to be employed under the former’s computerization program to be
considered a regular employee of SMC at the time. Moreover, SMC itself admits that Maliksi’s work under the computerization
program did "not require the operation of a computer system, such as the software program being developed by
PHILSSEC."16 Given this admission, we are simply at a loss to understand why Maliksi should be included in the computerization
project as a project employee. Not being a computer expert, Maliksi’s inclusion in the project was uncalled for. To our mind, his
placement in the project was for the purpose of circumventing labor laws. The evidence shows that immediately before he
entered the PHILSSEC project in October 1989, Maliksi was fresh out of his employment with SMC (through Skillpower) as
acting clerk assigned to SMC-Magnolia Finance (from October 1988 to 1989).

Maliksi’s work under the PHILSSEC project was mainly administrative in nature and necessary to the development of SMC’s
business. These were:

a. posting manually the daily account balances in the workset;

b. fitting the daily totals into the monthly totals;

c. comparing the manual totals with the computer generated totals;

d. locating the differences between the totals; and,

e. adjusting and correcting errors.

Simply put, the data gathered by SMC on a daily basis through Maliksi’s work would be submitted for analysis and evaluation,
thereby allowing SMC to make the necessary business decisions that would enable it to market its products better, or monitor
its sales and collection with efficiency. Without the data gatherer or encoder, no analysis could occur. SMC would then, for the
most part, be kept in the dark.

As to the petitioner’s second assigned error, we hold that there is no need to resolve the present case under the principle
that all doubts should be resolved in favor of the workingman. The perceived doubt does not obtain in the first place.

We understand Maliksi’s desperation in making his point clear to SMC, which unduly refuses to acknowledge his status as a
regular employee. Instead, he was juggled from one employment contract to another in a continuous bid to circumvent labor
laws. The act of hiring and re-hiring workers over a period of time without considering them as regular employees evidences
bad faith on the part of the employer. 17 Where, from the circumstances, it is apparent that periods have been imposed to
preclude the acquisition of tenurial security by the employee, the policy, agreement or practice should be struck down as
contrary to public policy, morals, good customs or public order. 18 In point of law, any person who willfully causes loss or injury
to another in a manner that is contrary to morals, good customs or public policy shall be liable for the damage. 19

Ways and means contrived by employers to countermand labor laws granting regular employment status to their workers
are numerous and long. For instance, they toss the poor workers from one job contractor to another, make them go through
endless applications, lining up, paperwork, documentation, and physical examinations; make them sign five- or ten-month-only
job contracts, yet re-hire them after brief "rest periods," but not after requiring them to go through the whole application and
selection process once again; prepare and have them sign waivers, quitclaims, and the like; refuse to issue them identification
cards, receipts or any other concrete proof of employment or documentary proof of payment of their salaries; fail to enroll
them for entitlement to social security and other benefits; give them positions, titles or designations that connote short-term
employment.

Others are more creative: they set up "distributors" or "dealers" which are, in reality, shell or dummy companies. In this
manner, the mother company avoids the employer-employee relations, and is thus shielded from liability from employee claims
in case of illegal dismissal, closure, unfair labor practices and the like. In those instances, the poor employees, finding the shell
or dummy company to be without assets, often end up confused and without recourse as to whom to run after. They sue the
mother company which conveniently sets up the defense of absence of employer-employee relations. In San Miguel
Corporation v. MAERC Integrated Services, Inc.,20 we took note of the practice of hiring employees through labor contractors
that catered exclusively to the employment needs of SMC or its divisions or other specific business interests, such that after the
specific SMC business or division ceases to do business, the labor contractor likewise ceases its operations.

The contrivances may be many and the schemes ingenious and imaginative. But this Court will not hesitate to put pen to a line
and defend the worker’s right to be secure in his (or her) proprietary right to regular employment and his right to a secure
employment, viz, one that is free from fear and doubt, that anytime he could be removed, retrenched, his contract not
renewed or he might not be re-hired. The ramifications may seem trivial, but we cannot allow the ordinary Filipino worker’s
right to tenurial security to be put in jeopardy by recurrent but abhorrent practices that threaten the very lives of those that
depend on him.

Considering, however, the supervening event that SMC’s Magnolia Division has been acquired by another entity, it appears that
private respondent’s reinstatement is no longer feasible. Instead, he should be awarded separation pay as an
alternative.21 Likewise, owing to petitioner’s bad faith, it should be held liable to pay damages for causing undue injury and
inconvenience to the private respondent in its contractual hiring-firing-rehiring scheme.

WHEREFORE, the instant petition is DENIED and the assailed CA decision dated September 30, 1999 is AFFIRMED, with
the MODIFICATION that if the reinstatement of private respondent is no longer practicable or feasible, then petitioner SMC is
ordered to pay him, in addition to the other monetary awards, separation pay for the period from October 31, 1990 when he
was dismissed until he shall have been actually paid at the rate of one (1) month salary for every year of his employment, with a
fraction of at least six (6) months being considered as one (1) year, or the rate of separation pay awarded by petitioner to its
other regular employees as provided by written agreement, policy or practice, whichever is higher or most beneficial to private
respondent.

In addition, petitioner is hereby suffered to indemnify private respondent the amount of P50,000.00 as nominal damages for its
bad faith in juggling the latter from one labor contractor to another and causing him unnecessary injury and inconvenience, and
for denying him his proprietary right to regular employment.

Let this case be REMANDED to the Labor Arbiter for the computation of private respondent’s backwages, proportionate 13th
month pay, separation pay, attorneys’ fees and other monetary awards; and for immediate execution.

LAKAS SA INDUSTRIYA NG KAPATIRANG HALIGI NG ALYANSA-PINAGBUKLOD NG MANGGAGAWANG PROMO NG

BURLINGAME, petitioner,
vs.
BURLINGAME CORPORATION, respondent.

This is an appeal to reverse and set aside both the Decision 1 dated August 29, 2003 of the Court of Appeals and its
Resolution2 dated March 15, 2004 in CA-G.R. SP No. 69639. The appellate court had reversed the decision 3 dated December 29,
2000 of the Secretary of Labor and Employment which ordered the holding of a certification election among the rank-and-file
promo employees of respondent Burlingame Corporation.

The facts are undisputed.

On January 17, 2000, the petitioner Lakas sa Industriya ng Kapatirang Haligi ng Alyansa-Pinagbuklod ng Manggagawang
Promo ng Burlingame (LIKHA-PMPB) filed a petition for certification election before the Department of Labor and
Employment (DOLE). LIKHA-PMPB sought to represent all rank-and-file promo employees of respondent numbering about 70 in
all. The petitioner claimed that there was no existing union in the aforementioned establishment representing the regular rank-
and-file promo employees. It prayed that it be voluntarily recognized by the respondent to be the collective bargaining agent,
or, in the alternative, that a certification/consent election be held among said regular rank-and-file promo employees.

The respondent filed a motion to dismiss the petition. It argued that there exists no employer-employee relationship between
it and the petitioner’s members. It further alleged that the petitioner’s members are actually employees of F. Garil Manpower
Services (F. Garil), a duly licensed local employment agency. To prove such contention, respondent presented a copy of its
contract for manpower services with F. Garil.

On June 29, 2000, Med-Arbiter Renato D. Parungo dismissed4 the petition for lack of employer-employee relationship,
prompting the petitioner to file an appeal5 before the Secretary of Labor and Employment.

On December 29, 2000, the Secretary of Labor and Employment ordered the immediate conduct of a certification election. 6

A motion for reconsideration of the said decision was filed by the respondent on January 19, 2001, but the same was denied in
the Resolution7 of February 19, 2002 of the Secretary of Labor and Employment.

Respondent then filed a complaint with the Court of Appeals, which then reversed8 the decision of the Secretary. The
petitioner then filed a motion for reconsideration, 9 which the Court of Appeals denied10 on March 15, 2004.

Hence the instant petition for review on certiorari.

The issue raised in the petition is:

WHETHER THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN DECLARING THAT THERE IS NO EMPLOYER-EMPLOYEE
RELATIONSHIP BETWEEN PETITIONER’S MEMBERS AND BURLINGAME BECAUSE F. GARIL MANPOWER SERVICES IS AN
INDEPENDENT CONTRACTOR.11

Respondent contends that there is no employer-employee relationship between the parties. 12 Petitioner, on the other hand,
insists that there is.13

The resolution of this issue boils down to a determination of the true status of F. Garil, i.e., whether it is an independent
contractor or a labor-only contractor.

RULING

The case of De Los Santos v. NLRC14 succinctly enunciates the statutory criteria:

Job contracting is permissible only 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 the business.15

According to Section 5 of DOLE Department Order No. 18-02, Series of 2002: 16

Section 5. Prohibition against labor-only contracting. – Labor-only contracting is hereby declared prohibited. For this purpose,
labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a principal, and any of the following elements are [is] present:

i) The contractor or sub-contractor does not have substantial capital or investment which relates to the job, work or service to
be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities
which are directly related to the main business of the principal; or

ii) The contractor does not exercise the right to control over the performance of the work of the contractual employee.

The foregoing provisions shall be without prejudice to the application of Article 248(C) of the Labor Code, as amended.

"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations, tools,
equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the
performance or completion of the job, work or service contracted out.

The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers are
performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that end.

Given the above criteria, we agree with the Secretary that F. Garil is not an independent contractor.

First, F. Garil does not have substantial capitalization or investment in the form of tools, equipment, machineries, work
premises, and other materials, to qualify as an independent contractor. No proof was adduced to show F. Garil’s capitalization.

Second, the work of the promo-girls was directly related to the principal business or operation of Burlingame. Marketing and
selling of products is an essential activity to the main business of the principal.

Lastly, F. Garil did not carry on an independent business or undertake the performance of its service contract according to its
own manner and method, free from the control and supervision of its principal, Burlingame.

The "four-fold test" will show that respondent is the employer of petitioner’s members. The elements to determine the
existence of an employment relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c)
the power of dismissal; and (d) the employer’s power to control the employee’s conduct. The most important element is the
employer’s control of the employee’s conduct, not only as to the result of the work to be done, but also as to the means and
methods to accomplish it.17

A perusal of the contractual stipulations between Burlingame and F. Garil shows the following:

1. The AGENCY shall provide Burlingame Corporation or the CLIENT, with sufficient number of screened, tested and pre-
selected personnel (professionals, highly-skilled, skilled, semi-skilled and unskilled) who will be deployed in establishment
selling products manufactured by the CLIENT.

2. The AGENCY shall be responsible in paying its workers under this contract in accordance with the new minimum wage
including the daily living allowances and shall pay them overtime or remuneration that which is authorized by law.

3. It is expressly understood and agreed that the worker(s) supplied shall be considered or treated as employee(s) of the
AGENCY. Consequently, there shall be no employer-employee relationship between the worker(s) and the CLIENT and as such,
the AGENCY shall be responsible to the benefits mandated by law.

4. For and in consideration of the service to be rendered by the AGENCY to the CLIENT, the latter shall during the terms of
agreement pay to the AGENCY the sum of Seven Thousand Five Hundred Pesos Only (P7,500.00) per month per worker on the
basis of Eight (8) hours work payable up-to-date, semi-monthly, every 15th and 30th of each calendar month. However, these
rates may be subject to change proportionately in the event that there will be revisions in the Minimum Wage Law or any law
related to salaries and wages.

5. The CLIENT shall report to the AGENCY any of its personnel assigned to it if those personnel are found to be inefficient,
troublesome, uncooperative and not observing the rules and regulations set forth by the CLIENT. It is understood and agreed
that the CLIENT may request any time the immediate replacement of any personnel(s) assigned to them. 18
It is patent that the involvement of F. Garil in the hiring process was only with respect to the recruitment aspect, i.e. the
screening, testing and pre-selection of the personnel it provided to Burlingame. The actual hiring itself was done through the
deployment of personnel to establishments by Burlingame.

The contract states that Burlingame would pay the workers through F. Garil, stipulating that Burlingame shall pay F. Garil a
certain sum per worker on the basis of eight-hour work every 15 th and 30th of each calendar month. This evinces the fact that F.
Garil merely served as conduit in the payment of wages to the deployed personnel. The interpretation would have been
different if the payment was for the job, project, or services rendered during the month and not on a per worker basis.
In Vinoya v. National Labor Relations Commission,19 we held:

The Court takes judicial notice of the practice of employers who, in order to evade the liabilities under the Labor Code, do not
issue payslips directly to their employees. Under the current practice, a third person, usually the purported contractor (service
or manpower placement agency), assumes the act of paying the wage. For this reason, the lowly worker is unable to show proof
that it was directly paid by the true employer. Nevertheless, for the workers, it is enough that they actually receive their pay,
oblivious of the need for payslips, unaware of its legal implications. Applying this principle to the case at bar, even though the
wages were coursed through PMCI, we note that the funds actually came from the pockets of RFC. Thus, in the end, RFC is still
the one who paid the wages of petitioner albeit indirectly. 20

The contract also provides that "any personnel found to be inefficient, troublesome, uncooperative and not observing the rules
and regulations set forth by Burlingame shall be reported to F. Garil and may be replaced upon request." Corollary to this
circumstance would be the exercise of control and supervision by Burlingame over workers supplied by F. Garil in order to
establish the inefficient, troublesome, and uncooperative nature of undesirable personnel. Also implied in the provision on
replacement of personnel carried upon request by Burlingame is the power to fire personnel.

These are indications that F. Garil was not left alone in the supervision and control of its alleged employees. Consequently, it
can be concluded that F. Garil was not an independent contractor since it did not carry a distinct business free from the
control and supervision of Burlingame.

It goes without saying that the contractual stipulation on the nonexistence of an employer-employee relationship between
Burlingame and the personnel provided by F. Garil has no legal effect. While the parties may freely stipulate terms and
conditions of a contract, such contractual stipulations should not be contrary to law, morals, good customs, public order or
public policy. A contractual stipulation to the contrary cannot override factual circumstances firmly establishing the legal
existence of an employer-employee relationship.

Under this circumstance, there is no doubt that F. Garil was engaged in labor-only contracting, and as such, is considered
merely an agent of Burlingame. In labor-only contracting, the law creates an employer-employee relationship to prevent a
circumvention of labor laws. The contractor is considered merely an agent of the principal employer and the latter is
responsible to the employees of the labor-only contractor as if such employees had been directly employed by the principal
employer.21 Since F. Garil is a labor-only contractor, the workers it supplied should be considered as employees of
Burlingame in the eyes of the law.

WHEREFORE, the challenged Decision of the Court of Appeals dated August 29, 2003 and the Resolution dated March 15, 2004
denying the motion for reconsideration are REVERSED and SET ASIDE. The decision of the Secretary of Labor and Employment
ordering the holding of a certification election among the rank-and-file promo employees of Burlingame is reinstated.

COCA COLA BOTTLERS PHILS., INC., Petitioners, v. NATIONAL LABOR RELATIONS COMMISSION and RAMON B.
CANONICATO, Respondents. (NOT A REGULAR EMPLOYEE)

This petition for certiorari under Rule 65 of the Revised Rules of Court assails the 3 January 1995 decision 1 of the National
Labor Relations Commission (NLRC) holding that private respondent Ramon B. Canonicato is a regular employee of petitioner
Coca Cola Bottlers Phils. Inc. (COCA COLA) entitled to reinstatement and back wages. The NLRC reversed the decision of the
Labor Arbiter of 28 April 1994 2 which declared that no employer-employee relationship existed between COCA COLA and
Canonicato thereby foreclosing entitlement to reinstatement and back wages.

On 7 April 1986 COCA COLA entered into a contract of janitorial services with Bacolod Janitorial Services (BJS) stipulating 3
among others —

That the First Party (COCA COLA) desires to engage the services of the Second Party (BJS), as an Independent Contractor, to
perform and provide for the maintenance, sanitation and cleaning services for the areas hereinbelow mentioned, all located
within the aforesaid building of the First Party . . .

1. The scope of work of the Second Party includes all floors, walls, doors, vertical and horizontal areas, ceiling, all windows, glass
surfaces, partitions, furniture, fixtures and other interiors within the aforestated covered areas.

2. Except holidays which are rest days, the Second Party will undertake daily the following: 1) Sweeping, damp-mopping, spot
scrubbing and polishing of floors; 2) Cleaning, sanitizing and disinfecting agents to be used on commodes, urinals and
washbasins, water spots on chrome and other fixtures to be checked; 3) Cleaning of glass surfaces, windows and glass partitions
that require daily attention; 4) Cleaning and dusting of horizontal and vertical surfaces; 5) Cleaning of fixtures, counters, panels
and sills; 6) Clean, pick-up cigarette butts from sandburns and ashtrays and trash receptacles; 7) Trash and rubbish disposal and
burning.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

In addition, the Second Party will also do the following once a week, to wit: 1) Cleaning, waxing and polishing of lobbies and
offices; 2) Washing of windows, glasses that require cleaning; 3) Thorough disinfecting and cleaning of toilets and washrooms.

3. The Second Party shall supply the necessary utensils, equipment and supervision, and it shall only employ the services of
fifteen (15) honest, reliable, carefully screened, cooperative and trained personnel, who are in good faith, in the performance of
its herein undertaking . . .

4. The Second Party hereby guarantees against unsatisfactory workmanship. Minor repair of comfort rooms are free of charge
provided the First Party will supply the necessary materials for such repairs at its expense. As may be necessary, the Second
Party shall also report on such part or areas of the premises covered by this contract which may require repairs from time to
time . . . (Emphasis supplied).

Every year thereafter a service contract was entered into between the parties under similar terms and conditions until about
May 1994. 4

On 26 October 1989 COCA COLA hired private respondent Ramon Canonicato as a casual employee and assigned him to the
bottling crew as a substitute for absent employees. In April 1990 COCA COLA terminated Canonicato’s casual employment.
Later that year COCA COLA availed of Canonicato’s services, this time as a painter in contractual projects which lasted from
fifteen (15) to thirty (30) days. 5

On 1 April 1991 Canonicato was hired as a janitor by BJS 6 which assigned him to COCA COLA considering his familiarity with
its premises. On 5 and 7 March 1992 Canonicato started painting the facilities of COCA COLA and continued doing so several
months thereafter or so for a few days every time until 6 to 25 June 1993. 7

Goaded by information that COCA COLA employed previous BJS employees who filed a complaint against the company for
regularization pursuant to a compromise agreement, Canonicato submitted a similar complaint against COCA COLA to the
Labor Arbiter on 8 June 1993. 9 The complaint was docketed as RAB Case No. 06-06-10337-93.chanrobles law library

Without notifying BJS, Canonicato no longer reported to his COCA COLA assignment starting 29 June 1993. On 15 July 1993 he
sent his sister Rowena to collect his salary from BJS. 10 BJS released his salary but advised Rowena to tell Canonicato to report
for work. Claiming that he was barred from entering the premises of COCA COLA on either 14 or 15 July 1993, Canonicato met
with the proprietress of BJS, Gloria Lacson, who offered him assignments in other firms which he however refused. 11

On 23 July 1993 Canonicato amended his complaint against COCA COLA by citing instead as grounds therefor illegal dismissal
and underpayment of wages. He included BJS therein as a co-respondent. 12 On 28 September 1993 BJS sent him a letter
advising him to report for work within three (3) days from receipt, otherwise, he would be considered to have abandoned his
job. 13
On 28 April 1994 the Labor Arbiter ruled that: (a) there was no employer-employee relationship between COCA COLA and
Ramon Canonicato because BJS was Canonicato’s real employer; (b) BJS was a legitimate job contractor, hence, any liability of
COCA COLA as to Canonicato’s salary or wage differentials was solidary with BJS in accordance with pars. 1 and 2 of Art. 106,
Labor Code; (c) COCA COLA and BJS must jointly and severally pay Canonicato his wage differentials amounting to P2,776.80
and his 13th month salary of P1,068.00, including ten (10%) percent attorney’s fees in the sum of P384.48. The Labor Arbiter
also ordered that all other claims by Canonicato against COCA COLA be dismissed for lack of employer-employee relationship;
that the complaint for illegal dismissal as well as all the other claims be likewise dismissed for lack of merit; and that COCA
COLA and BJS deposit P4,429.28 with the Department of Labor Regional Arbitration Branch Office within ten (10) days from
receipt of the decision. 14

The NLRC rejected on appeal the decision of the Labor Arbiter on the ground that the janitorial services of Canonicato were
found to be necessary or desirable in the usual business or trade of COCA COLA. The NLRC accepted Canonicato’s proposition
that his work with the BJS was the same as what he did while still a casual employee of COCA COLA. In so holding the NLRC
applied Art. 280 of the Labor Code and declared that Canonicato was a regular employee of COCA COLA and entitled to
reinstatement and payment of P18,105.10 in back wages. 15

On 26 May 1995 the NLRC denied COCA COLA’s motion for reconsideration for lack of merit. 16 Hence, this petition, assigning
as errors: (a) NLRC’s finding that janitorial services were necessary and desirable in COCA COLA’s trade and business; (b) NLRC’s
application of Art. 280 of the Labor Code in resolving the issue of whether an employment relationship existed between the
parties; (c) NLRC’s ruling that there was an employer-employee relationship between petitioner and Canonicato despite its
virtual affirmance that BJS was a legitimate job contractor; (d) NLRC’s declaration that Canonicato was a regular employee of
petitioner although he had rendered the company only five (5) months of casual employment; and, (e) NLRC’s order directing
the reinstatement of Canonicato and the payment to him of six (6) months back wages. 17

RULING – in favor of Coca-Cola

We find good cause to sustain petitioner. Findings of fact of administrative offices are generally accorded respect by us and no
longer reviewed for the reason that such factual findings are considered to be within their field of expertise. Exception however
is made, as in this case, when the NLRC and the Labor Arbiter made contradictory findings.

We perceive at the outset the disposition of the NLRC that janitorial services are necessary and desirable to the trade or
business of petitioner COCA COLA. But this is inconsistent with our pronouncement in Kimberly Independent Labor Union v.
Drilon 18 where the Court took judicial notice of the practice adopted in several government and private institutions and
industries of hiring janitorial services on an "independent contractor basis." In this respect, although janitorial services may be
considered directly related to the principal business of an employer, as with every business, we deemed them unnecessary in
the conduct of the employer’s principal business. 19

This judicial notice, of course, rests on the assumption that the independent contractor is a legitimate job contractor so that
there can be no doubt as to the existence of an employer-employee relationship between the contractor and the worker. In this
situation, the only pertinent question that may arise will no longer deal with whether there exists an employment bond but
whether the employee may be considered regular or casual as to deserve the application of Art. 280 of the Labor
Code.chanroblesvirtuallawlibrary:red

It is an altogether different matter when the very existence of an employment relationship is in question. This was the issue
generated by Canonicato’s application for regularization of his employment with COCA COLA and the subsequent denial by
the latter of an employer-employee relationship with the applicant. It was error therefore for the NLRC to apply Art. 280 of
the Labor Code in determining the existence of an employment relationship of the parties herein, especially in light of our
explicit holding in Singer Sewing Machine Company v. Drilon 20 that —

. . . [t]he definition that regular employees are those who perform activities which are desirable and necessary for the business
of the employer is not determinative in this case. Any agreement may provide that one party shall render services for and in
behalf of another for a consideration (no matter how necessary for the latter’s business) even without being hired as an
employee. This is precisely true in the case of an independent contractorship as well as in an agency agreement. The Court
agrees with the petitioner’s argument that Article 280 is not the yardstick for determining the existence of an employment
relationship because it merely distinguishes between two kinds of employees, i.e., regular employees and casual employees,
for purposes of determining the right of an employee to certain benefits, to join or form a union, or to security of tenure.
Article 280 does not apply where the existence of an employment relationship is in dispute.

In determining the existence of an employer-employee relationship it is necessary to determine whether the following factors
are present: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power to dismiss; and, (d)
the power to control the employee’s conduct. 21 Notably, these are all found in the relationship between BJS and Canonicato
and not between Canonicato and petitioner COCA COLA. As the Solicitor-General manifested 22 —

In the instant case, the selection and engagement of the janitors for petitioner were done by BJS. The application form and
letter submitted by private respondent (Canonicato) to BJS show that he acknowledged the fact that it was BJS who did the
hiring and not petitioner . . .

BJS paid the wages of private respondent, as evidenced by the fact that on July 15, 1993, private respondent sent his sister to
BJS with a note authorizing her to receive his pay.

Power of dismissal is also exercised by BJS and not petitioner. BJS is the one that assigns the janitors to its clients and transfers
them when it sees fit. Since BJS is the one who engages their services, then it only follows that it also has the power to dismiss
them when justified under the circumstances.

Lastly, BJS has the power to control the conduct of the janitors. The supervisors of petitioner, being interested in the result of
the work of the janitors, also give suggestions as to the performance of the janitors, but this does not mean that BJS has no
control over them. The interest of petitioner is only with respect to the result of their work. On the other hand, BJS oversees
the totality of their performance.

The power of the employer to control the work of the employee is said to be the most significant determinant. Canonicato
disputed this power of BJS over him by asserting that his employment with COCA COLA was not interrupted by his application
with BJS since his duties before and after he applied for regularization were the same, involving as they did, working in the
maintenance department and doing painting tasks within its facilities. Canonicato cited the Labor Utilization Reports of COCA
COLA showing his painting assignments. These reports, however, are not expressive of the true nature of the relationship
between Canonicato and COCA COLA; neither do they detract from the fact that BJS exercised real authority over Canonicato as
its employee.

Moreover, a closer scrutiny of the reports reveals that the painting jobs were performed by Canonicato sporadically, either in
a few days within a month and only for a few months in a year. 23 This infrequency or irregularity of assignments countervails
Canonicato’s submission that he was assigned specifically to undertake the task of painting the whole year round. If anything, it
hews closely to the assertion of BJS that it assigned Canonicato to these jobs to maintain and sanitize the premises of petitioner
COCA COLA pursuant to its contract of services with the company. 24

It is clear from these established circumstances that NLRC should have recognized BJS as the employer of Canonicato and not
COCA COLA. This is demanded by the fact that it did not disturb, and therefore it upheld, the finding of the Labor Arbiter that
BJS was truly a legitimate job-contractor and could by itself hire its own employees. The Commission could not have reached
any other legitimate conclusion considering that BJS satisfied all the requirements of a job-contractor under the law, namely,
(a) the ability to carry on an independent business and undertake the contract work on its own account under its own
responsibility according to its own manner and method, free from the control and direction of its principal or client in all
matters connected with the performance of the work except as to the results thereof; and, (b) the substantial capital or
investment in the form of tools, equipment, machinery, work premises, and other materials which are necessary in the conduct
of its business.25cralaw:red

It is to be noted that COCA COLA is not the only client of BJS which has its roster of clients like San Miguel Corporation,
Distilleria Bago Incorporated, University of Negros Occidental-Recolletos, University of St. La Salle, Riverside College, College
Assurance Plan Phil., Inc., and Negros Consolidated Farmers Association, Inc. 26 This is proof enough that BJS has the capability
to carry on its business of janitorial services with big establishments aside from petitioner and has sufficient capital or materials
necessary therefor. 27 All told, there being no employer-employee relationship between Canonicato and COCA COLA, the latter
cannot be validly ordered to reinstate the former and pay him back wages.
WHEREFORE, the petition is GRANTED. The NLRC decision of 3 January 1995 declaring Ramon B. Canonicato a regular employee
of petitioner Coca Cola Bottlers Phils., Inc., entitled to reinstatement and back wages is REVERSED and SET ASIDE. The decision
of the Labor Arbiter of 28 April 1994 finding no employer-employee relationship between petitioner and private respondent but
directing petitioner Coca Cola Bottlers Phils., Inc., instead and Bacolod Janitorial Services to pay jointly and severally Ramon B.
Canonicato P2,776.80 as wage differentials, P1,068.00 as 13th month pay and P384.48 as attorney’s fees, is REINSTATED.

MANILA WATER COMPANY, INC., petitioner,

vs.
HERMINIO D. PENA, ESTEBAN B. BALDOZA, JORGE D. CANONIGO, JR., IKE S. DELFIN, RIZALINO M. INTAL, REY T. MANLEGRO,
JOHN L. MARTEJA, MARLON B. MORADA, ALLAN D. ESPINA, EDUARDO ONG, AGNESIO D. QUEBRAL, EDMUNDO B. VICTA,
VICTOR C. ZAFARALLA, EDILBERTO C. PINGUL and FEDERICO M. RIVERA, respondents.

This petition assails the decision1 of the Court of Appeals dated November 29, 2002, in CA-G.R. SP No. 67134, which reversed
the decision of the National Labor Relations Commission and reinstated the decision of the Labor Arbiter with modification.

Petitioner Manila Water Company, Inc. is one of the two private concessionaires contracted by the Metropolitan
Waterworks and Sewerage System (MWSS) to manage the water distribution system in the East Zone of Metro Manila,
pursuant to Republic Act No. 8041, otherwise known as the National Water Crisis Act of 1995. Under the Concession
Agreement, petitioner undertook to absorb former employees of the MWSS whose names and positions were in the list
furnished by the latter, while the employment of those not in the list was terminated on the day petitioner took over the
operation of the East Zone, which was on August 1, 1997. Private respondents, being contractual collectors of the MWSS,
were among the 121 employees not included in the list; nevertheless, petitioner engaged their services without written
contract from August 1, 1997 to August 31, 1997. Thereafter, on September 1, 1997, they signed a three-month contract to
perform collection services for eight branches of petitioner in the East Zone. 2

Before the end of the three-month contract, the 121 collectors incorporated the Association Collectors Group, Inc.
(ACGI),3 which was contracted by petitioner to collect charges for the Balara Branch. Subsequently, most of the 121 collectors
were asked by the petitioner to transfer to the First Classic Courier Services, a newly registered corporation. Only private
respondents herein remained with ACGI. Petitioner continued to transact with ACGI to do its collection needs until February
8, 1999, when petitioner terminated its contract with ACGI.4

Private respondents filed a complaint for illegal dismissal and money claims against petitioner, contending that they were
petitioner’s employees as all the methods and procedures of their collections were controlled by the latter.

On the other hand, petitioner asserts that private respondents were employees of ACGI, an independent contractor. It
maintained that it had no control and supervision over private respondents’ manner of performing their work except as to the
results. Thus, petitioner did not have an employer-employee relationship with the private respondents, but only a service
contractor-client relationship with ACGI.

On May 31, 2000, Labor Arbiter Eduardo J. Carpio rendered a decision finding the dismissal of private respondents illegal. He
held that private respondents were regular employees of petitioner not only because the tasks performed by them were
controlled by it but, also, the tasks were obviously necessary and desirable to petitioner’s principal business. The dispositive
portion of the decision reads:

WHEREFORE, premises considered, judgment is hereby rendered, finding that complainants were employees of respondent
[petitioner herein], that they were illegally dismissed, and respondent [petitioner herein] is hereby ordered to pay their
separation pay based on the following computed amounts:

HERMINIO D. PENA P15,000.00

ESTEBAN BALDOZA P12,000.00

JORGE D. CANONIGO, JR. P16,000.00

 IKE S. DELFIN P12,000.00

RIZALINO M. INTAL P16,000.00

REY T. MANLEGRO P16,000.00

JOHN L. MARTEJA P12,000.00

MARLON B. MORADA P16,000.00

ALLAN D. ESPINA P14,000.00

EDUARDO ONG P15,000.00

AGNESIO D. QUEBRAL P16,000.00

EDMUNDO B. VICTA P13,000.00

VICTOR P. ZAFARALLA P15,000.00

EDILBERTO C. PINGUL P19,500.00

FEDERICO M. RIVERA   P15,000.00

      TOTAL P222,500.00

Respondent [petitioner herein] is further directed to pay ten (10%) percent of the total award as attorney’s fee or the sum of
P22,250.00.

SO ORDERED.5

Both parties appealed to the NLRC, which reversed the decision of the Labor Arbiter and ruled that the documentary
evidence, e.g., letters and memoranda by the petitioner to ACGI regarding the poor performance of the collectors, did not
constitute proof of control since these documents merely identified the erring collectors; the appropriate disciplinary actions
were left to the corporation to impose.6 Further, there was no evidence showing that the incorporation of ACGI was irregular.

Private respondents filed a petition for certiorari with the Court of Appeals, contending that the NLRC acted with grave abuse of
discretion amounting to lack or excess of jurisdiction when it reversed the decision of the Labor Arbiter.

The Court of Appeals reversed the decision of the NLRC and reinstated with modification the decision of the Labor Arbiter. 7 It
held that petitioner deliberately prevented the creation of an employment relationship with the private respondents; and that
ACGI was not an independent contractor. It likewise denied petitioner’s motion for reconsideration. 8

Hence, this petition for review raising the following errors:

THE HONORABLE COURT OF APPEALS IN RENDERING THE ASSAILED DECISION AND RESOLUTION COMMITTED GRAVE
REVERSIBLE ERRORS:

A. IN GOING BEYOND ITS JURISDICTION AND PROCEEDING TO GIVE DUE COURSE TO RESPONDENTS’ PETITION FOR CERTIORARI
UNDER RULE 65 OF THE RULES OF COURT, NOTWITHSTANDING THE ABSENCE OF ANY PROOF OF GRAVE ABUSE OF DISCRETION
ON THE PART OF THE NATIONAL LABOR RELATIONS COMMISSION WHEN IT RENDERED THE DECISION ASSAILED BY HEREIN
RESPONDENTS.

B. WHEN IT MANIFESTLY OVERLOOKED THE EVIDENCE PRESENTED BY THE PETITIONER COMPANY AND RULING THAT THE
PETITIONER’S DEFENSE OF LACK OF EMPLOYER-EMPLOYEE RELATIONS IS WITHOUT MERIT.

C. IN CONCLUDING THAT PETITIONER COMPANY REQUIRED RESPONDENTS TO INCORPORATE THE ASSOCIATED COLLECTORS
GROUP, INC. ["ACGI"] NOTWITHSTANDING ABSENCE OF ANY SPECIFIC EVIDENCE IN SUPPORT OF THE SAME.

D. IN FINDING PETITIONER COMPANY GUILTY OF BAD FAITH NOTWITHSTANDING ABSENCE OF ANY SPECIFIC EVIDENCE IN
SUPPORT OF THE SAME, AND AWARDING MORAL AND EXEMPLARY DAMAGES TO HEREIN RESPONDENTS. 9

The pivotal issue to be resolved in this petition is whether or not there exists an employer-employee relationship between
petitioner and private respondents. Corollary thereto is the issue of whether or not private respondents were illegally
dismissed by petitioner.

The issue of whether or not an employer-employee relationship exists in a given case is essentially a question of fact. 10 As a rule,
the Supreme Court is not a trier of facts, and this applies with greater force in labor cases. Hence, factual findings of quasi-
judicial bodies like the NLRC, particularly when they coincide with those of the Labor Arbiter and if supported by substantial
evidence, are accorded respect and even finality by this Court. 11 However, a disharmony between the factual findings of the
Labor Arbiter and the National Labor Relations Commission opens the door to a review thereof by this Court. Factual findings of
administrative agencies are not infallible and will be set aside when they fail the test of arbitrariness. Moreover, when the
findings of the National Labor Relations Commission contradict with those of the labor arbiter, this Court, in the exercise of its
equity jurisdiction, may look into the records of the case and reexamine the questioned findings. 12

The resolution of the foregoing issues initially boils down to a determination of the true status of ACGI, i.e., whether it is an
independent contractor or a labor-only contractor.

Petitioner asserts that ACGI, a duly organized corporation primarily engaged in collection services, is an independent contractor
which entered into a service contract for the collection of petitioner’s accounts starting November 30, 1997 until the early part
of February 1999. Thus, it has no employment relationship with private respondents, being employees of ACGI.

The existence of an employment relationship between petitioner and private respondents cannot be negated by simply alleging
that the latter are employees of ACGI as an independent contractor, it being crucial that ACGI’s status, whether as "labor-only
contractor" or "independent contractor", be measured in terms of and determined by the criteria set by statute.

The case of De los Santos v. NLRC13 succinctly enunciates this statutory criteria –

Job contracting is permissible only 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 the business.

"Labor-only contracting" as defined in Section 5, Department Order No. 18-02, Rules Implementing Articles 106-109 of the
Labor Code14 refers to an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to
perform job, work or service for a principal, and any of the following elements is present:

(i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to
be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities
which are directly related to the main business of the principal; or

(ii) The contractor does not exercise the right to control over the performance of the work of the contractual employee.

Given the above criteria, we agree with the Labor Arbiter that ACGI was not an independent contractor.

First, ACGI does not have substantial capitalization or investment in the form of tools, equipment, machineries, work
premises, and other materials, to qualify as an independent contractor. While it has an authorized capital stock of
P1,000,000.00, only P62,500.00 is actually paid-in, which cannot be considered substantial capitalization. The 121 collectors
subscribed to four shares each and paid only the amount of P625.00 in order to comply with the incorporation
requirements.15 Further, private respondents reported daily to the branch office of the petitioner because ACGI has no office or
work premises. In fact, the corporate address of ACGI was the residence of its president, Mr. Herminio D. Peña. 16 Moreover, in
dealing with the consumers, private respondents used the receipts and identification cards issued by petitioner. 17

Second, the work of the private respondents was directly related to the principal business or operation of the petitioner.
Being in the business of providing water to the consumers in the East Zone, the collection of the charges therefor by private
respondents for the petitioner can only be categorized as clearly related to, and in the pursuit of the latter’s business.

Lastly, ACGI did not carry on an independent business or undertake the performance of its service contract according to its
own manner and method, free from the control and supervision of its principal, petitioner. Prior to private respondents’
alleged employment with ACGI, they were already working for petitioner, subject to its rules and regulations in regard to the
manner and method of performing their tasks. This form of control and supervision never changed although they were already
under the seeming employ of ACGI. Petitioner issued memoranda regarding the billing methods and distribution of books to the
collectors;18 it required private respondents to report daily and to remit their collections on the same day to the branch office or
to deposit them with Bank of the Philippine Islands; it monitored strictly their attendance as when a collector cannot perform
his daily collection, he must notify petitioner or the branch office in the morning of the day that he will be absent; and although
it was ACGI which ultimately disciplined private respondents, the penalty to be imposed was dictated by petitioner as shown in
the letters it sent to ACGI specifying the penalties to be meted on the erring private respondents. 19 These are indications that
ACGI was not left alone in the supervision and control of its alleged employees. Consequently, it can be concluded that ACGI
was not an independent contractor since it did not carry a distinct business free from the control and supervision of petitioner.

Under this factual milieu, there is no doubt that ACGI was engaged in labor-only contracting, and as such, is considered
merely an agent of the petitioner. In labor-only contracting, the statute creates an employer-employee relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the
principal employer and the latter is responsible to the employees of the labor-only contractor as if such employees had been
directly employed by the principal employer. 20 Since ACGI is only a labor-only contractor, the workers it supplied should be
considered as employees of the petitioner.

Even the "four-fold test" will show that petitioner is the employer of private respondents. The elements to determine the
existence of an employment relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c)
the power of dismissal; and (d) the employer’s power to control the employee’s conduct. The most important element is the
employer’s control of the employee’s conduct, not only as to the result of the work to be done, but also as to the means and
methods to accomplish it.21

We agree with the Labor Arbiter that in the three stages of private respondents’ services with the petitioner, i.e., (1) from
August 1, 1997 to August 31, 1997; (2) from September 1, 1997 to November 30, 1997; and (3) from December 1, 1997 to
February 8, 1999, the latter exercised control and supervision over the formers’ conduct.

Petitioner contends that the employment of private respondents from August 1, 1997 to August 30, 1997 was only temporary
and done to accommodate their request to be absorbed since petitioner was still undergoing a transition period. It was only
when its business became settled that petitioner employed private respondents for a fixed term of three months.

Although petitioner was not obliged to absorb the private respondents, by engaging their services, paying their wages in the
form of commission, subjecting them to its rules and imposing punishment in case of breach thereof, and controlling not only
the end result but the manner of achieving the same as well, an employment relationship existed between them.

Notably, private respondents performed activities which were necessary or desirable to its principal trade or business. Thus,
they were regular employees of petitioner, regardless of whether the engagement was merely an accommodation of their
request, pursuant to Article 280 of the Labor Code which reads:

The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a
specific project or undertaking the completion or termination of which has been determined at the time of the engagement of
the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of
the season.
As such, regular employees, private respondents are entitled to security of tenure which may not be circumvented by mere
stipulation in a subsequent contract that their employment is one with a fixed period. While this Court has upheld the legality
of fixed-term employment, where from the circumstances it is apparent that the periods have been imposed to preclude
acquisition of tenurial security by the employee, they should be struck down or disregarded as contrary to public policy and
morals.22

In the case at bar, we find that the term fixed in the subsequent contract was used to defeat the tenurial security which
private respondents already enjoy. Thus, we concur with the Labor Arbiter, as affirmed by the Court of Appeals, when it held
that:

The next question is whether, with respect to the period, the individual contracts are valid. Not all contracts of employment
fixing a period are invalid. Under Article 280, the evil sought to be prevented is singled out: agreements entered into precisely
to circumvent security of tenure. It has no application where a fixed period of employment was agreed upon knowingly and
voluntarily by the parties, without any force, duress or improper pressure being brought upon the employee and absent any
circumstances vitiating his consent, or where it satisfactorily appears that the employer and employee dealt with each other on
more or less terms with no moral dominance whatever being exercised by the former over the latter. That is the doctrine in
Brent School, Inc. v. Zamora, 181 SCRA 702. The individual contracts in question were prepared by MWC in the form of the
letter addressed to complainants. The letter-contract is dated September 1, 1997, when complainants were already working for
MWC as collectors. With their employment as their means of survival, there was no room then for complainants to disagree
with the presented letter-contracts. Their choice then was not to negotiate for the terms of the contract but to lose or not to
lose their employment – employment which they already had at that time. The choice is obvious, as what they did, to sign the
ready made letter-contract to retain their employment, and survive. It is a defiance of the teaching in Brent School, Inc. v.
Zamora if this Office rules that the individual contracts in question are valid, so, in deference to Brent School ruling, this Office
rules they are null and void.23

In view of the foregoing, we hold that an employment relationship exists between petitioner and private respondents.

We now proceed to ascertain whether private respondents were dismissed in accordance with law.

As private respondents’ employer, petitioner has the burden of proving that the dismissal was for a cause allowed under the
law and that they were afforded procedural due process. 24 Petitioner failed to discharge this burden by substantial evidence as
it maintained the defense that it was not the employer of private respondents. Having established that the schemes employed
by petitioner were devious attempts to defeat the tenurial rights of private respondents and that it failed to comply with the
requirements of termination under the Labor Code, the dismissal of the private respondent is tainted with illegality.

Under Article 279 of the Labor Code, an employee who is unjustly dismissed from work is entitled to reinstatement without loss
of seniority rights and other privileges, and to his full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual
reinstatement. However, if reinstatement is no longer possible, the employer has the alternative of paying the employee his
separation pay in lieu of reinstatement.25

This Court however cannot sustain the award of moral and exemplary damages in favor of private respondents. Such an award
cannot be justified solely upon the premise that the employer dismissed his employee without just cause or due process.
Additional facts must be pleaded and proved to warrant the grant of moral damages under the Civil Code. The act of dismissal
must be attended with bad faith, or fraud, or was oppressive to labor or done in a manner contrary to morals, good customs or
public policy and, of course, that social humiliation, wounded feelings, or grave anxiety resulted therefrom. Similarly, exemplary
damages are recoverable only when the dismissal was effected in a wanton, oppressive or malevolent manner. 26 Those
circumstances have not been adequately established.

However, private respondents are entitled to attorney’s fees as they were compelled to litigate with petitioners and incur
expenses to enforce and protect their interests. 27 The award by the Labor Arbiter of P22,250.00 as attorney’s fees to private
respondents, being reasonable, is sustained.

WHEREFORE, in view of the foregoing, the decision of the Court of Appeals dated November 29, 2002, in CA-G.R. SP No. 67134,
reversing the decision of the National Labor Relations Commission and reinstating the decision of the Labor Arbiter is AFFIRMED
with the MODIFICATION that the awards of P10,000.00 as moral damages and P5,000.00 as exemplary damages are DELETED
for lack of evidentiary basis.
SAN MIGUEL CORPORATION, petitioner
vs.
PROSPERO A. ABALLA, ET. AL.

Petitioner San Miguel Corporation (SMC), represented by its Assistant Vice President and Visayas Area Manager for
Aquaculture Operations Leopoldo S. Titular, and Sunflower Multi-Purpose Cooperative (Sunflower), represented by the
Chairman of its Board of Directors Roy G. Asong, entered into a one-year Contract of Services1 commencing on January 1,
1993, to be renewed on a month to month basis until terminated by either party. The pertinent provisions of the contract
read:

1. The cooperative agrees and undertakes to perform and/or provide for the company, on a non-exclusive basis for a period of
one year the following services for the Bacolod Shrimp Processing Plant:

A. Messengerial/Janitorial

B. Shrimp Harvesting/Receiving

C. Sanitation/Washing/Cold Storage 2

2. To carry out the undertaking specified in the immediately preceding paragraph, the cooperative shall employ the necessary
personnel and provide adequate equipment, materials, tools and apparatus, to efficiently, fully and speedily accomplish the
work and services undertaken by the cooperative. xxx

3. In consideration of the above undertaking the company expressly agrees to pay the cooperative the following rates per
activity:

A. Messengerial/Janitorial Monthly Fixed Service Charge of: Nineteen Thousand Five Hundred Pesos Only (P19,500.00)

B. Harvesting/Shrimp Receiving. – Piece rate of P0.34/kg. Or P100.00 minimum per person/activity whichever is higher, with
provisions as follows:

P25.00 Fixed Fee per person

Additional meal allowance P15.00 every meal time in case harvest duration exceeds one meal.

This will be pre-set every harvest based on harvest plan approved by the Senior Buyer.

C. Sanitation/Washing and Cold Storage P125.00/person for 3 shifts.

One-half of the payment for all services rendered shall be payable on the fifteenth and the other half, on the end of each
month. The cooperative shall pay taxes, fees, dues and other impositions that shall become due as a result of this contract.

The cooperative shall have the entire charge, control and supervision of the work and services herein agreed upon. xxx

4. There is no employer-employee relationship between the company and the cooperative, or the cooperative and any of its
members, or the company and any members of the cooperative. The cooperative is an association of self-employed members,
an independent contractor, and an entrepreneur. It is subject to the control and direction of the company only as to the result
to be accomplished by the work or services herein specified, and not as to the work herein contracted. The cooperative and its
members recognize that it is taking a business risk in accepting a fixed service fee to provide the services contracted for and its
realization of profit or loss from its undertaking, in relation to all its other undertakings, will depend on how efficiently it
deploys and fields its members and how they perform the work and manage its operations.

5. The cooperative shall, whenever possible, maintain and keep under its control the premises where the work under this
contract shall be performed.

6. The cooperative shall have exclusive discretion in the selection, engagement and discharge of its member-workers or
otherwise in the direction and control thereof. The determination of the wages, salaries and compensation of the member-
workers of the cooperative shall be within its full control. It is further understood that the cooperative is an independent
contractor, and as such, the cooperative agrees to comply with all the requirements of all pertinent laws and ordinances, rules
and regulations. Although it is understood and agreed between the parties hereto that the cooperative, in the performance of
its obligations, is subject to the control or direction of the company merely as a (sic) result to be accomplished by the work or
services herein specified, and not as to the means and methods of accomplishing such result, the cooperative hereby warrants
that it will perform such work or services in such manner as will be consistent with the achievement of the result herein
contracted for.

xxx

8. The cooperative undertakes to pay the wages or salaries of its member-workers, as well as all benefits, premiums and
protection in accordance with the provisions of the labor code, cooperative code and other applicable laws and decrees and the
rules and regulations promulgated by competent authorities, assuming all responsibility therefor.

The cooperative further undertakes to submit to the company within the first ten (10) days of every month, a statement made,
signed and sworn to by its duly authorized representative before a notary public or other officer authorized by law to
administer oaths, to the effect that the cooperative has paid all wages or salaries due to its employees or personnel for services
rendered by them during the month immediately preceding, including overtime, if any, and that such payments were all in
accordance with the requirements of law.

xxx

12. Unless sooner terminated for the reasons stated in paragraph 9 this contract shall be for a period of one (1) year
commencing on January 1, 1993. Thereafter, this Contract will be deemed renewed on a month-to-month basis until
terminated by either party by sending a written notice to the other at least thirty (30) days prior to the intended date of
termination.

xxx3 (Underscoring supplied)

Pursuant to the contract, Sunflower engaged private respondents to, as they did, render services at SMC’s Bacolod Shrimp
Processing Plant at Sta. Fe, Bacolod City. The contract was deemed renewed by the parties every month after its expiration on
January 1, 1994 and private respondents continued to perform their tasks until September 11, 1995.

In July 1995, private respondents filed a complaint before the NLRC, Regional Arbitration Branch No. VI, Bacolod City, praying
to be declared as regular employees of SMC, with claims for recovery of all benefits and privileges enjoyed by SMC rank and
file employees.

Private respondents subsequently filed on September 25, 1995 an Amended Complaint4 to include illegal dismissal as
additional cause of action following SMC’s closure of its Bacolod Shrimp Processing Plant on September 15, 1995 5 which
resulted in the termination of their services.

SMC filed a Motion for Leave to File Attached Third Party Complaint 6 dated November 27, 1995 to implead Sunflower as Third
Party Defendant which was, by Order7 of December 11, 1995, granted by Labor Arbiter Ray Alan T. Drilon.

In the meantime, on September 30, 1996, SMC filed before the Regional Office at Iloilo City of the Department of Labor and
Employment (DOLE) a Notice of Closure 8 of its aquaculture operations effective on even date, citing serious business losses.

By Decision of September 23, 1997, Labor Arbiter Drilon dismissed private respondents’ complaint for lack of merit,
ratiocinating as follows:

We sustain the stand of the respondent SMC that it could properly exercise its management prerogative to contract out the
preparation and processing aspects of its aquaculture operations. Judicial notice has already been taken regarding the general
practice adopted in government and private institutions and industries of hiring independent contractors to perform special
services. xxx

xxx

Indeed, the law allows job contracting. Job contracting is permissible under the Labor Code under specific conditions and we do
not see how this activity could not be legally undertaken by an independent service cooperative like the third-party respondent
herein.
There is no basis to the demand for regularization simply on the theory that complainants performed activities which are
necessary and desirable in the business of respondent. It has been held that the definition of regular employees as those who
perform activities which are necessary and desirable for the business of the employer is not always determinative because any
agreement may provide for one (1) party to render services for and in behalf of another for a consideration even without being
hired as an employee.

The charge of the complainants that third-party respondent is a mere labor-only contractor is a sweeping generalization and
completely unsubstantiated. xxx In the absence of clear and convincing evidence showing that third-party respondent acted
merely as a labor only contractor, we are firmly convinced of the legitimacy and the integrity of its service contract with
respondent SMC.

In the same vein, the closure of the Bacolod Shrimp Processing Plant was a management decision purely dictated by economic
factors which was (sic) mainly serious business losses. The law recognizes the right of the employer to close his business or
cease his operations for bonafide reasons, as much as it recognizes the right of the employer to terminate the employment of
any employee due to closure or cessation of business operations, unless the closing is for the purpose of circumventing the
provisions of the law on security of tenure. The decision of respondent SMC to close its Bacolod Shrimp Processing Plant, due to
serious business losses which has (sic) clearly been established, is a management prerogative which could hardly be interfered
with.

xxx The closure did affect the regular employees and workers of the Bacolod Processing Plant, who were accordingly
terminated following the legal requisites prescribed by law. The closure, however, in so far as the complainants are concerned,
resulted in the termination of SMC’s service contract with their cooperative xxx9 (Underscoring supplied)

Private respondents appealed to the NLRC.

By Decision of December 29, 1998, the NLRC dismissed the appeal for lack of merit, it finding that third party respondent
Sunflower was an independent contractor in light of its observation that "[i]n all the activities of private respondents, they
were under the actual direction, control and supervision of third party respondent Sunflower, as well as the payment of wages,
and power of dismissal."10

Private respondents’ Motion for Reconsideration 11 having been denied by the NLRC for lack of merit by Resolution of
September 10, 1999, they filed a petition for certiorari 12 before the Court of Appeals (CA).

Before the CA, SMC filed a Motion to Dismiss13 private respondents’ petition for non-compliance with the Rules on Civil
Procedure and failure to show grave abuse of discretion on the part of the NLRC.

SMC subsequently filed its Comment14 to the petition on March 30, 2000.

By Decision of February 7, 2001, the appellate court reversed the NLRC decision and accordingly found for private
respondents, disposing as follows:

WHEREFORE, the petition is GRANTED. Accordingly, judgment is hereby RENDERED: (1) REVERSING and SETTING ASIDE both the
29 December 1998 decision and 10 September 1999 resolution of the National Labor Relations Commission (NLRC), Fourth
Division, Cebu City in NLRC Case No. V-0361-97 as well as the 23 September 1997 decision of the labor arbiter in RAB Case No.
06-07-10316-95; (2) ORDERING the respondent, San Miguel Corporation, to GRANT petitioners: (a) separation pay  in
accordance with the computation given to the regular SMC employees working at its Bacolod Shrimp Processing Plant with full
backwages, inclusive of allowances and other benefits or their monetary equivalent, from 11 September 1995, the time their
actual compensation was withheld from them, up to the time of the finality of this decision; (b) differentials pays (sic) effective
as of and from the time petitioners acquired regular employment status pursuant to the disquisition mentioned above, and all
such other and further benefits as provided by applicable collective bargaining agreement(s) or other relations, or by law,
beginning such time up to their termination from employment on 11 September 1995; and ORDERING private respondent SMC
to PAY unto the petitioners attorney’s fees equivalent to ten (10%) percent of the total award.

No pronouncement as to costs.

SO ORDERED.15 (Underscoring supplied)

Justifying its reversal of the findings of the labor arbiter and the NLRC, the appellate court reasoned:
Although the terms of the non-exclusive contract of service between SMC and [Sunflower] showed a clear intent to abstain
from establishing an employer-employee relationship between SMC and [Sunflower] or the latter’s members, the extent to
which the parties successfully realized this intent in the light of the applicable law is the controlling factor in determining the
real and actual relationship between or among the parties.

xxx

With respect to the power to control petitioners’ conduct, it appears that petitioners were under the direct control and
supervision of SMC supervisors both as to the manner they performed their functions and as to the end results thereof. It was
only after petitioners lodged a complaint to have their status declared as regular employees of SMC that certain members of
[Sunflower] began to countersign petitioners’ daily time records to make it appear that they (petitioners) were under the
control and supervision of [Sunflower] team leaders (rollo, pp. 523-527). xxx

Even without these instances indicative of control by SMC over the petitioners, it is safe to assume that SMC would never have
allowed the petitioners to work within its premises, using its own facilities, equipment and tools, alongside SMC employees
discharging similar or identical activities unless it exercised a substantial degree of control and supervision over the
petitioners not only as to the manner they performed their functions but also as to the end results of such functions.

xxx

xxx it becomes apparent that [Sunflower] and the petitioners do not qualify as independent contractors. [Sunflower] and the
petitioners did not have substantial capital or investment in the form of tools, equipment, implements, work premises, et
cetera necessary to actually perform the service under their own account, responsibility, and method. The only "work
premises" maintained by [Sunflower] was a small office within the confines of a small "carinderia" or refreshment parlor owned
by the mother of its chair, Roy Asong; the only equipment it owned was a typewriter (rollo, pp. 525-525) and, the only assets it
provided SMC were the bare bodies of its members, the petitioners herein (rollo, p. 523).

In addition, as shown earlier, petitioners, who worked inside the premises of SMC, were under the control and supervision of
SMC both as to the manner and method in discharging their functions and as to the results thereof.

Besides, it should be taken into account that the activities undertaken by the petitioners as cleaners, janitors, messengers and
shrimp harvesters, packers and handlers were directly related to the aquaculture business of SMC (See Guarin vs. NLRC, 198
SCRA 267, 273). This is confirmed by the renewal of the service contract from January 1993 to September 1995, a period of
close to three (3) years.

Moreover, the petitioners here numbering ninety seven (97), by itself, is a considerable workforce and raises the suspicion that
the non-exclusive service contract between SMC and [Sunflower] was "designed to evade the obligations inherent in an
employer-employee relationship" (See Rhone-Poulenc Agrochemicals Philippines, Inc. vs. NLRC, 217 SCRA 249, 259).

Equally suspicious is the fact that the notary public who signed the by-laws of [Sunflower] and its [Sunflower] retained
counsel are both partners of the local counsel of SMC (rollo, p. 9).

xxx

With these observations, no other logical conclusion can be reached except that [Sunflower] acted as an agent of SMC,
facilitating the manpower requirements of the latter, the real employer of the petitioners. We simply cannot allow these two
entities through the convenience of a non-exclusive service contract to stipulate on the existence of employer-employee
relation. Such existence is a question of law which cannot be made the subject of agreement to the detriment of the petitioners
(Tabas vs. California Manufacturing, Inc., 169 SCRA 497, 500).

xxx

There being a finding of "labor-only" contracting, liability must be shouldered either by SMC or [Sunflower] or shared by both
(See Tabas vs. California Manufacturing, Inc., supra, p. 502). SMC however should be held solely liable for [Sunflower] became
non-existent with the closure of the aquaculture business of SMC.

Furthermore, since the closure of the aquaculture operations of SMC appears to be valid, reinstatement is no longer feasible.
Consistent with the pronouncement in Bustamante, et al., vs. NLRC, G.R. No. 111651, 28 November 1996, petitioners are thus
entitled to separation pay (in the computation similar to those given to regular SMC employees at its Bacolod Shrimp
Processing Plant) "with full backwages, inclusive of allowances and other benefits or their monetary equivalent, from the time
their actual compensation was withheld from them" up to the time of the finality of this decision. This is without prejudice to
differentials pays (sic) effective as of and from the time petitioners acquired regular employment status pursuant to the
discussion mentioned above, and all such other and further benefits as provided by applicable collective bargaining
agreement(s) or other relations, or by law, beginning such time up to their termination from employment on 11 September
1995.16 (Emphasis and underscoring supplied)

SMC’s Motion for Reconsideration 17 having been denied for lack of merit by Resolution of July 11, 2001, it comes before this
Court via the present petition for review on certiorari assigning to the CA the following errors:

THE COURT OF APPEALS GRAVELY ERRED IN GIVING DUE COURSE AND GRANTING RESPONDENTS’ PATENTLY DEFECTIVE
PETITION FOR CERTIORARI. IN DOING SO, THE COURT OF APPEALS DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF
JUDICIAL PROCEEDINGS.

II

THE COURT OF APPEALS GRAVELY ERRED IN RECOGNIZING ALL THE RESPONDENTS AS COMPLAINANTS IN THE CASE BEFORE
THE LABOR ARBITER. IN DOING SO, THE COURT OF APPEALS DECIDED THIS CASE IN A MANNER NOT IN ACCORD WITH LAW OR
WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT.

III

THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RESPONDENTS ARE EMPLOYEES OF SMC.

IV

THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDNG (sic) THAT RESPONDENTS ARE NOT ENTITLED TO ANY RELIEF. THE
CLOSURE OF THE BACOLOD SHRIMP PROCESSING PLANT WAS DUE TO SERIOUS BUSINESS LOSSES. 18 (Underscoring supplied)

SMC bewails the failure of the appellate court to outrightly dismiss the petition for certiorari as only three out of the ninety
seven named petitioners signed the verification and certification against forum-shopping.

While the general rule is that the certificate of non-forum shopping must be signed by all the plaintiffs or petitioners in a case
and the signature of only one of them is insufficient, 19 this Court has stressed that the rules on forum shopping, which were
designed to promote and facilitate the orderly administration of justice, should not be interpreted with such absolute
literalness as to subvert its own ultimate and legitimate objective. 20 Strict compliance with the provisions regarding the
certificate of non-forum shopping merely underscores its mandatory nature in that the certification cannot be altogether
dispensed with or its requirements completely disregarded. 21 It does not, however, thereby interdict substantial compliance
with its provisions under justifiable circumstances. 22

Thus in the recent case of HLC Construction and Development Corporation v. Emily Homes Subdivision Homeowners
Association,23 this Court held:

Respondents (who were plaintiffs in the trial court) filed the complaint against petitioners as a group, represented by their
homeowners’ association president who was likewise one of the plaintiffs, Mr. Samaon M. Buat. Respondents raised one cause
of action which was the breach of contractual obligations and payment of damages. They shared a common interest in the
subject matter of the case, being the aggrieved residents of the poorly constructed and developed Emily Homes
Subdivision. Due to the collective nature of the case, there was no doubt that Mr. Samaon M. Buat could validly sign the
certificate of non-forum shopping in behalf of all his co-plaintiffs. In cases therefore where it is highly impractical to require all
the plaintiffs to sign the certificate of non-forum shopping, it is sufficient, in order not to defeat the ends of justice, for one of
the plaintiffs, acting as representative, to sign the certificate provided that xxx the  plaintiffs share a common interest in the
subject matter of the case or filed the case as a "collective," raising only one common cause of action or defense.24 (Emphasis
and underscoring supplied)

Given the collective nature of the petition filed before the appellate court by herein private respondents, raising one common
cause of action against SMC, the execution by private respondents Winifredo Talite, Renelito Deon and Jose Temporosa in
behalf of all the other private respondents of the certificate of non-forum shopping constitutes substantial compliance with the
Rules.25 That the three indeed represented their co-petitioners before the appellate court is, as it correctly found,
"subsequently proven to be true as shown by the signatures of the majority of the petitioners appearing in their memorandum
filed before Us."26

Additionally, the merits of the substantive aspects of the case may also be deemed as "special circumstance" or "compelling
reason" to take cognizance of a petition although the certification against forum shopping was not executed and signed by all of
the petitioners.27

SMC goes on to argue that the petition filed before the CA is fatally defective as it was not accompanied by "copies of all
pleadings and documents relevant and pertinent thereto" in contravention of Section 1, Rule 65 of the Rules of Court. 28

This Court is not persuaded. The records show that private respondents appended the following documents to their petition
before the appellate court: the September 23, 1997 Decision of the Labor Arbiter,29 their Notice of Appeal with Appeal
Memorandum dated October 16, 1997 filed before the NLRC, 30 the December 29, 1998 NLRC D E C I S I O
N,31 their Motion for Reconsideration dated March 26, 1999 filed with the NLRC32 and the September 10,
1999 NLRC Resolution.33

It bears stressing at any rate that it is the appellate court which ultimately determines if the supporting documents are
sufficient to make out a prima facie case.34 It discerns whether on the basis of what have been submitted it could already
judiciously determine the merits of the petition. 35 In the case at bar, the CA found that the petition was adequately supported
by relevant and pertinent documents.

At all events, this Court has allowed a liberal construction of the rule on the accomplishment of a certificate of non-forum
shopping in the following cases: (1) where a rigid application will result in manifest failure or miscarriage of justice; (2) where
the interest of substantial justice will be served; (3) where the resolution of the motion is addressed solely to the sound and
judicious discretion of the court; and (4) where the injustice to the adverse party is not commensurate with the degree of his
thoughtlessness in not complying with the procedure prescribed. 36

Rules of procedure should indeed be viewed as mere tools designed to facilitate the attainment of justice. Their strict and rigid
application, which would result in technicalities that tend to frustrate rather than promote substantial justice, must always be
eschewed.37

SMC further argues that the appellate court exceeded its jurisdiction in reversing the decisions of the labor arbiter and the
NLRC as "findings of facts of quasi-judicial bodies like the NLRC are accorded great respect and finality," and that this principle
acquires greater weight and application in the case at bar as the labor arbiter and the NLRC have the same factual findings.

The general rule, no doubt, is that findings of facts of an administrative agency which has acquired expertise in the particular
field of its endeavor are accorded great weight on appeal. 38 The rule is not absolute and admits of certain well-recognized
exceptions, however. Thus, when the findings of fact of the labor arbiter and the NLRC are not supported by substantial
evidence or their judgment was based on a misapprehension of facts, the appellate court may make an independent evaluation
of the facts of the case.39

SMC further faults the appellate court in giving due course to private respondents’ petition despite the fact that the complaint
filed before the labor arbiter was signed and verified only by private respondent Winifredo Talite; that private respondents’
position paper40 was verified by only six41 out of the ninety seven complainants; and that their Joint-Affidavit 42 was executed
only by twelve43 of the complainants.

Specifically with respect to the Joint-Affidavit of private respondents, SMC asserts that it should not have been considered by
the appellate court in establishing the claims of those who did not sign the same, citing this Court’s ruling in Southern Cotabato
Development and Construction, Inc. v. NLRC.44

SMC’s position does not lie.

A perusal of the complaint shows that the ninety seven complainants were being represented by their counsel of choice. Thus
the first sentence of their complaint alleges: "xxx complainants, by counsel and unto this Honorable Office respectfully state
xxx." And the complaint was signed by Atty. Jose Max S. Ortiz as "counsel for the complainants." Following Section 6, Rule III of
the 1990 Rules of Procedure of the NLRC, now Section 7, Rule III of the 1999 NLRC Rules, Atty. Ortiz is presumed to be properly
authorized by private respondents in filing the complaint.
That the verification wherein it is manifested that private respondent Talite was one of the complainants and was causing the
preparation of the complaint "with the authority of my co-complainants" indubitably shows that Talite was representing the
rest of his co-complainants in signing the verification in accordance with Section 7, Rule III of the 1990 NLRC Rules, now Section
8, Rule 3 of the 1999 NLRC Rules, which states:

Section 7. Authority to bind party. – Attorneys and other representatives of parties shall have authority to bind their clients in
all matters of procedure; but they cannot, without a special power of attorney or express consent, enter into a compromise
agreement with the opposing party in full or partial discharge of a client’s claim. (Underscoring supplied)

As regards private respondents’ position paper which bore the signatures of only six of them, appended to it was an
Authority/Confirmation of Authority 45 signed by the ninety one others conferring authority to their counsel "to file RAB Case
No. 06-07-10316-95, entitled Winifredo Talite et al. v. San Miguel Corporation presently pending before the sala of Labor
Arbiter Ray Alan Drilon at the NLRC Regional Arbitration Branch No. VI in Bacolod City" and appointing him as their retained
counsel to represent them in the said case.

That there has been substantial compliance with the requirement on verification of position papers under Section 3, Rule V of
the 1990 NLRC Rules of Procedure 46 is not difficult to appreciate in light of the provision of Section 7, Rule V of the 1990 NLRC
Rules, now Section 9, Rule V of the 1999 NLRC Rules which reads:

Section 7. Nature of Proceedings. – The proceedings before a Labor Arbiter shall be non-litigious in nature. Subject to the
requirements of due process, the technicalities of law and procedure and the rules obtaining in the courts of law shall not
strictly apply thereto. The Labor Arbiter may avail himself of all reasonable means to ascertain the facts of the controversy
speedily, including ocular inspection and examination of well-informed persons. (underscoring supplied)

As regards private respondents’ Joint-Affidavit which is being assailed in view of the failure of some complainants to affix their
signatures thereon, this Court quotes with approval the appellate court’s ratiocinations:

A perusal of the Southern Cotabato Development Case would reveal that movant did not quote the whole text of paragraph 5
on page 865 of 280 SCRA. The whole paragraph reads:

"Clearly then, as to those who opted to move for the dismissal of their complaints, or did not submit their affidavits nor appear
during trial and in whose favor no other independent evidence was adduced, no award for back wages could have been validly
and properly made for want of factual basis. There is no showing at all that any of the affidavits of the thirty-four (34)
complainants were offered as evidence for those who did not submit their affidavits, or that such affidavits had any bearing at
all on the rights and interest of the latter. In the same vein, private respondent’s position paper was not of any help to these
delinquent complainants.

The implication is that as long as the affidavits of the complainants were offered as evidence for those who did not submit
theirs, or the affidavits were material and relevant to the rights and interest of the latter, such affidavits may be sufficient to
establish the claims of those who did not give their affidavits.

Here, a reading of the joint affidavit signed by twelve (12) of the ninety-seven (97) complainants (petitioners herein) would
readily reveal that the affidavit was offered as evidence not only for the signatories therein but for all of the complainants.
(These ninety-seven (97) individuals were previously identified during the mandatory conference as the only complainants in
the proceedings before the labor arbiter) Moreover, the affidavit touched on the common interest of all of the complainants as
it supported their claim of the existence of an employer-employee relationship between them and respondent SMC. Thus, the
said affidavit was enough to prove the claims of the rest of the complainants. 47 (Emphasis supplied, underscoring in the original)

In any event, SMC is reminded that the rules of evidence prevailing in courts of law or equity do not control proceedings before
the Labor Arbiter. So Article 221 of the Labor Code enjoins:

ART. 221. Technical rules not binding and prior resort to amicable settlement. – In any proceeding before the Commission or
any of the Labor Arbiters, the rules of evidence prevailing in courts of law or equity shall not be controlling and it is the spirit
and intention of this Code that the Commission and its members and the Labor Arbiters shall use every and all reasonable
means to ascertain the facts in each case speedily and objectively and without regard to technicalities of law or procedure, all in
the interest of due process. xxx

As such, their application may be relaxed to serve the demands of substantial justice. 48
On the merits, the petition just the same fails.

SMC insists that private respondents are the employees of Sunflower, an independent contractor. On the other hand, private
respondents assert that Sunflower is a labor-only contractor.

Article 106 of the Labor Code provides:

ART. 106. Contractor or subcontracting. – Whenever an employer enters into a contract with another person for the
performance of the former’s work, the employees of the contractor and of the latter’s subcontractor, if any shall be paid in
accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work
performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.

The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of
workers established under the Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only
contracting and job contracting as well as differentiations within these types of contracting and determine who among the
parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.

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 person 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.

Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by Department Order No. 18,
distinguishes between legitimate and labor-only contracting:

Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists a trilateral relationship
under which there is a contract for a specific job, work or service between the principal and the contractor or subcontractor,
and a contract of employment between the contractor or subcontractor and its workers. Hence, there are three parties
involved in these arrangements, the principal which decides to farm out a job or service to a contractor or subcontractor, the
contractor or subcontractor which has the capacity to independently undertake the performance of the job, work or service,
and the contractual workers engaged by the contractor or subcontractor to accomplish the job, work or service.

Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For this purpose,
labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a principal, and any of the following elements are present:

i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to
be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities
which are directly related to the main business of the principal, or

ii) The contractor does not exercise the right to control over the performance of the work of the contractual employee.

The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor Code, as amended.

"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations, tools,
equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the
performance or completion of the job, work or service contracted out.

The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers are
performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that end.

The test to determine the existence of independent contractorship is whether one claiming to be an independent contractor
has contracted to do the work according to his own methods and without being subject to the control of the employer,
except only as to the results of the work.49
In legitimate labor contracting, the law creates an employer-employee relationship for a limited purpose, i.e., to ensure that
the employees are paid their wages. The principal employer becomes jointly and severally liable with the job contractor, only
for the payment of the employees’ wages whenever the contractor fails to pay the same. Other than that, the principal
employer is not responsible for any claim made by the employees. 50

In labor-only contracting, the statute creates an employer-employee relationship for a comprehensive purpose: to prevent a
circumvention of labor laws. The contractor is considered merely an agent of the principal employer and the latter is
responsible to the employees of the labor-only contractor as if such employees had been directly employed by the principal
employer.51

The Contract of Services between SMC and Sunflower shows that the parties clearly disavowed the existence of an employer-
employee relationship between SMC and private respondents. The language of a contract is not, however, determinative of
the parties’ relationship; rather it is the totality of the facts and surrounding circumstances of the case.52 A party cannot
dictate, by the mere expedient of a unilateral declaration in a contract, the character of its business, i.e., whether as labor-only
contractor or job contractor, it being crucial that its character be measured in terms of and determined by the criteria set by
statute.53

SMC argues that Sunflower could not have been issued a certificate of registration as a cooperative if it had no substantial
capital.54

While indeed Sunflower was issued Certificate of Registration No. IL0-875 55 on February 10, 1992 by the Cooperative
Development Authority, this merely shows that it had at least ₱2,000.00 in paid-up share capital as mandated by Section 5 of
Article 1456 of Republic Act No. 6938, otherwise known as the Cooperative Code, which amount cannot be considered
substantial capitalization.

What appears is that Sunflower does not have substantial capitalization or investment in the form of tools, equipment,
machineries, work premises and other materials to qualify it as an independent contractor.

On the other hand, it is gathered that the lot, building, machineries and all other working tools utilized by private respondents
in carrying out their tasks were owned and provided by SMC. Consider the following uncontroverted allegations of private
respondents in the Joint Affidavit:

[Sunflower], during the existence of its service contract with respondent SMC, did not own a single machinery, equipment, or
working tool used in the processing plant. Everything was owned and provided by respondent SMC. The lot, the building, and
working facilities are owned by respondent SMC. The machineries and equipments (sic) like washer machine, oven or cooking
machine, sizer machine, freezer, storage, and chilling tanks, push carts, hydrolic (sic) jack, tables, and chairs were all owned by
respondent SMC. All the boxes, trays, molding pan used in the processing are also owned by respondent SMC. The gloves and
boots used by the complainants were also owned by respondent SMC. Even the mops, electric floor cleaners, brush, hoose (sic),
soaps, floor waxes, chlorine, liquid stain removers, lysol and the like used by the complainants assigned as cleaners were all
owned and provided by respondent SMC.

Simply stated, third-party respondent did not own even a small capital in the form of tools, machineries, or facilities used in said
prawn processing

xxx

The alleged office of [Sunflower] is found within the confines of a small "carinderia" or "refreshment" (sic) owned by the
mother of the Cooperative Chairman Roy Asong.

xxx In said . . . office, the only equipment used and owned by [Sunflower] was a typewriter. 57

And from the job description provided by SMC itself, the work assigned to private respondents was directly related to the
aquaculture operations of SMC. Undoubtedly, the nature of the work performed by private respondents in shrimp harvesting,
receiving and packing formed an integral part of the shrimp processing operations of SMC. As for janitorial and messengerial
services, that they are considered directly related to the principal business of the employer 58 has been jurisprudentially
recognized.
Furthermore, Sunflower did not carry on an independent business or undertake the performance of its service contract
according to its own manner and method, free from the control and supervision of its principal, SMC, its apparent role having
been merely to recruit persons to work for SMC.

Thus, it is gathered from the evidence adduced by private respondents before the labor arbiter that their daily time records
were signed by SMC supervisors Ike Puentebella, Joemel Haro, Joemari Raca, Erwin Tumonong, Edison Arguello, and Stephen
Palabrica, which fact shows that SMC exercised the power of control and supervision over its employees.59 And control of the
premises in which private respondents worked was by SMC. These tend to disprove the independence of the contractor. 60

More. Private respondents had been working in the aqua processing plant inside the SMC compound alongside regular SMC
shrimp processing workers performing identical jobs under the same SMC supervisors. 61 This circumstance is another indicium
of the existence of a labor-only contractorship. 62

And as private respondents alleged in their Joint Affidavit which did not escape the observation of the CA, no showing to the
contrary having been proffered by SMC, Sunflower did not cater to clients other than SMC,63 and with the closure of SMC’s
Bacolod Shrimp Processing Plant, Sunflower likewise ceased to exist. This Court’s ruling in San Miguel Corporation v. MAERC
Integrated Services, Inc.64 is thus instructive.

xxx Nor do we believe MAERC to have an independent business. Not only was it set up to specifically meet the pressing needs
of SMC which was then having labor problems in its segregation division, none of its workers was also ever assigned to any
other establishment, thus convincing us that it was created solely to service the needs of SMC. Naturally, with the severance of
relationship between MAERC and SMC followed MAERC’s cessation of operations, the loss of jobs for the whole MAERC
workforce and the resulting actions instituted by the workers. 65 (Underscoring supplied)

All the foregoing considerations affirm by more than substantial evidence the existence of an employer-employee
relationship between SMC and private respondents.

EFFECTS OF FINDING

Since private respondents who were engaged in shrimp processing performed tasks usually necessary or desirable in the
aquaculture business of SMC, they should be deemed regular employees of the latter 66 and as such are entitled to all the
benefits and rights appurtenant to regular employment.67 They should thus be awarded differential pay corresponding to the
difference between the wages and benefits given them and those accorded SMC’s other regular employees.1awphi1.zw+

Respecting the private respondents who were tasked with janitorial and messengerial duties, this Court quotes with approval
the appellate court’s ruling thereon:

Those performing janitorial and messengerial services however acquired regular status only after rendering one-year
service pursuant to Article 280 of the Labor Code. Although janitorial and messengerial services are considered directly related
to the aquaculture business of SMC, they are deemed unnecessary in the conduct of its principal business; hence, the
distinction (See Coca Cola Bottlers Phils., Inc. v. NLRC, 307 SCRA 131, 136-137 and Philippine Bank of Communications v.
NLRC, supra, p. 359).68

The law of course provides for two kinds of regular employees, namely: (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
year of service, whether continuous or broken, with respect to the activity in which they are employed. 69

As for those of private respondents who were engaged in janitorial and messengerial tasks, they fall under the second category
and are thus entitled to differential pay and benefits extended to other SMC regular employees from the day immediately
following their first year of service.70

Regarding the closure of SMC’s aquaculture operations and the consequent termination of private respondents, Article 283 of
the Labor Code provides:

ART. 283. Closure of establishment and reduction of personnel. – The employer may also terminate the employment of any
employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions
of this Title, by serving a written notice on the workers and the Department of Labor and Employment at least one (1) month
before the intended date thereof. In case of termination due to the installation of labor saving devices or redundancy, the
worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1)
month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or to at least one-half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year. (Underscoring supplied)

In the case at bar, a particular department under the SMC group of companies was closed allegedly due to serious business
reverses. This constitutes retrenchment by, and not closure of, the enterprise or the company itself as SMC has not totally
ceased operations but is still very much an on-going and highly viable business concern. 71

Retrenchment is a management prerogative consistently recognized and affirmed by this Court. It is, however, subject to
faithful compliance with the substantive and procedural requirements laid down by law and jurisprudence. 72

For retrenchment to be considered valid the following substantial requirements must be met: (a) the losses expected should
be substantial and not merely de minimis in extent; (b) the substantial losses apprehended must be reasonably imminent such
as can be perceived objectively and in good faith by the employer; (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.73

In the discharge of these requirements, it is the employer who has the onus, being in the nature of an affirmative defense. 74

Normally, the condition of business losses is shown by audited financial documents like yearly balance sheets, profit and loss
statements and annual income tax returns. The financial statements must be prepared and signed by independent auditors
failing which they can be assailed as self-serving documents. 75

In the case at bar, company losses were duly established by financial documents audited by Joaquin Cunanan & Co. showing
that the aquaculture operations of SMC’s Agribusiness Division accumulated losses amounting to ₱145,848,172.00 in 1992
resulting in the closure of its Calatrava Aquaculture Center in Negros Occidental, ₱11,393,071.00 in 1993 and ₱80,325,608.00 in
1994 which led to the closure of its San Fernando Shrimp Processing Plant in Pampanga and the Bacolod Shrimp Processing
Plant in 1995.

SMC has thus proven substantial business reverses justifying retrenchment of its employees.

For termination due to retrenchment to be valid, however, the law requires that written notices of the intended retrenchment
be served by the employer on the worker and on the DOLE at least one (1) month before the actual date of the
retrenchment,76 in order to give employees some time to prepare for the eventual loss of their jobs, as well as to give DOLE the
opportunity to ascertain the verity of the alleged cause of termination. 77

Private respondents, however, were merely verbally informed on September 10, 1995 by SMC Prawn Manager Ponciano
Capay that effective the following day or on September 11, 1995, they were no longer to report for work as SMC would be
closing its operations.78

Where the dismissal is based on an authorized cause under Article 283 of the Labor Code but the employer failed to comply
with the notice requirement, the sanction should be stiff as the dismissal process was initiated by the employer’s exercise of
his management prerogative, as opposed to a dismissal based on a just cause under Article 282 with the same procedural
infirmity where the sanction to be imposed upon the employer should be tempered as the dismissal process was, in effect,
initiated by an act imputable to the employee.79

In light of the factual circumstances of the case at bar, this Court awards ₱50,000.00 to each private respondent as nominal
damages.

The grant of separation pay as an incidence of termination of employment due to retrenchment to prevent losses is a
statutory obligation on the part of the employer and a demandable right on the part of the employee. Private respondents
should thus be awarded separation pay equivalent to at least one (1) month pay or to at least one-half month pay for every
year of service, whichever is higher, as mandated by Article 283 of the Labor Code or the separation pay awarded by SMC to
other regular SMC employees that were terminated as a result of the retrenchment, depending on which is most beneficial to
private respondents.
Considering that private respondents were not illegally dismissed, however, no backwages need be awarded. It is well settled
that backwages may be granted only when there is a finding of illegal dismissal. 80 The appellate court thus erred in awarding
backwages to private respondents upon the authority of Bustamante v. NLRC,81 what was involved in that case being one of
illegal dismissal.

With respect to attorney’s fees, in actions for recovery of wages or where an employee was forced to litigate and thus
incurred expenses to protect his rights and interests, 82 a maximum of ten percent (10%) of the total monetary award 83 by
way of attorney’s fees is justifiable under Article 111 of the Labor Code,84 Section 8, Rule VIII, Book III of its Implementing
Rules,85 and paragraph 7, Article 2208 of the Civil Code .86 Although an express finding of facts and law is still necessary to prove
the merit of the award, there need not be any showing that the employer acted maliciously or in bad faith when it withheld the
wages. There need only be a showing that the lawful wages were not paid accordingly, as in this case. 87

Absent any evidence showing that Sunflower has been dissolved in accordance with law, pursuant to Rule VIII-A, Section 19 88 of
the Omnibus Rules Implementing the Labor Code, Sunflower is held solidarily liable with SMC for all the rightful claims of
private respondents.

WHEREFORE, the petition is DENIED. The assailed Decision dated February 7, 2001 and Resolution dated July 11, 2001 of the
Court of Appeals are AFFIRMED with MODIFICATION.

Petitioner San Miguel Corporation and Sunflower Multi-Purpose Cooperative are hereby ORDERED to jointly and severally pay
each private respondent differential pay from the time they became regular employees up to the date of their termination;
separation pay equivalent to at least one (1) month pay or to at least one-half month pay for every year of service, whichever is
higher, as mandated by Article 283 of the Labor Code or the separation pay awarded by SMC to other regular SMC employees
that were terminated as a result of the retrenchment, depending on which is most beneficial to private respondents; and ten
percent (10%) attorney’s fees based on the herein modified award.

Petitioner San Miguel Corporation is further ORDERED to pay each private respondent the amount of ₱50,000.00, representing
nominal damages for non-compliance with statutory due process.

The award of backwages is DELETED.

PRISCO LANZADERAS, SAMUEL SADICON, ANGELO MABANTA, VICENTE GIBERSON, LONGINO NAMBATAC, ELENO ACERON,
and SALVADOR VIRTUDAZO, Petitioners,
vs.
AMETHYST SECURITY AND GENERAL SERVICES, INC. (Formerly CALMAR SECURITY AGENCY), RESIN INDUSTRIAL CHEMICAL
CORP., ENGR. ROBERTO TOGLE, Resident Manager, AND/OR PHIL. IRON CONSTRUCTION AND MARINE WORKS,
INC., Respondents.

This petition for review assails the resolutions dated January 05, 2000 1 and May 19, 2000,2 of the Court of Appeals in CA-G.R. SP
No. 56347. Said resolutions had dismissed the petition under Rule 43 of the 1997 Rules of Civil Procedure, earlier filed by
petitioners in the appellate court to challenge the resolution dated March 19, 1999 3 of the National Labor Relations Commission
in NLRC CA No. M-004619-98.

Petitioners were the complainants in RAB CASES NO. 10-03-00233-98, 10-03-00234-98, and 10-04-00254-98. These were
consolidated cases for alleged illegal dismissal with money claims against sister companies Resin Industrial Chemical Corp.,
(RICC) and Philippine Iron Construction and Marine Works, Inc., (PICMW) and their security services provider, Amethyst
Security and General Services Inc. (formerly Calmar Security Agency). The Labor Arbiter in a decision4 dated November 27,
1998 found in favor of complainants (herein petitioners). Respondents herein filed their appeal with the NLRC. And the NLRC in
a resolution5 dated March 19, 1999 reversed and set aside the ruling of the Labor Arbiter. Then in a resolution 6 dated October
29, 1999, the NLRC denied herein petitioners’ motion for reconsideration.

The factual antecedents of the instant petition, as culled from the records of the case, are as follows:

Respondent RICC is engaged in the manufacture of industrial glue at Nahalinan, Jasaan, Misamis Oriental. It leased a portion of
its compound to its sister company, PICMW, which operated a shipbuilding and repair facility. To secure their properties and
personnel, RICC and PICMW entered into separate service contracts for detailing of security guards with respondent
Amethyst Security. Amethyst had been RICC/PICMW’s security contractor since 1968.

One of the conditions of the service contracts between Amethyst and RICC/PICMW was for Amethyst to supply the latter
companies with security guards who must be between 25 to 45 years of age. The aforesaid condition was maintained with
every renewal of the service contracts. 7 Per payrolls submitted by Amethyst, the petitioners who signed therein were paid the
minimum wage and benefits provided for by law, to wit: regular wage, nightshift differentials, 5-day incentive leave pay, cost of
living allowance, overtime pay, and holiday pay.8

When RICC/PICMW renewed their service contract with Amethyst in January 1998, respondent RICC in a letter dated January
15, 1998, reminded Amethyst of their stipulated age limit for the latter’s guards detailed at the RICC/PICMW compound. 9 This
prompted respondent Amethyst to issue an order on January 23, 1998, directing all security guards to submit copies of their
respective Birth Certificates. On January 30, 1998, petitioners who were at that time over 45 years of age received
Memorandum/Relief Orders10 relieving them from their existing postings as security guards of Amethyst with RICC/PICMW,
effective February 1, 1998. Petitioners were instructed to report to the main office of Amethyst for reassignment. The order
further stated that the failure of petitioners to comply with the directive would be construed as a manifestation of their lack of
interest to continue working as security personnel and Amethyst would consider them absent without official leave (AWOL). 11

On April 21, 1998, Amethyst issued a Detail Order informing petitioners that it had been able to renegotiate their assignments
with RICC/PICMW. They were ordered to report to one Jose Pitas, Detachment Head of RICC/PICMW for their new assignment
as firewatch guards. Petitioners were again warned that failure to report to Pitas on May 1, 1998, would mean that they were
no longer interested in working as security guards and would be considered AWOL. 12 According to respondent Amethyst, it
gave petitioners the option to either continue working for PICMW as firewatchers or be transferred to Cagayan de Oro for
new assignments. The respondents alleged that the petitioners chose neither option but instead failed to report for work on
February 1, 1998. Thereafter, petitioners filed on March 23, 1998 and April 2, 1998, their separate complaints for illegal
dismissal.13

On November 27, 1998, the Labor Arbiter ruled that the petitioners had been constructively dismissed from their
employment. He stated that the change of assignments from security guards to firewatch guards was tantamount to a
demotion, as the latter posting was of a lower category with corresponding diminution in pay. He also opined that although no
employer-employee relationship existed between petitioners and respondents RICC/PICMW, the latter were considered
indirect employers of petitioners, and thus, solidarily liable with respondent security agency pursuant to Article 107 14 of the
Labor Code.15 The decretal portion of the Labor Arbiter’s decision reads:

WHEREFORE, judgment is hereby rendered:

1. declaring complainants Prisco Lanzaderas, Samuel Sadicon, Angelo Mabanta, Eleno Aceron, Vicente Giberson, Longino
Mambatac, and Salvador Virtudazo, illegally dismissed from their respective jobs;

2. directing respondents Amethyst Security and General Services, Inc., (Formerly Calmar Security Agency), Philippine Iron
Construction and Marine Works, Inc. (PICMW) and Resin Industrial Chemical Corporation, to pay the above named
complainants jointly and severally, the total sum of One Million Two Hundred Fifty One Thousand Six Hundred Sixty Four Pesos
and 41/100 (₱1,251,664.41) representing complainants total awarded monetary benefits.

Complainants’ other claims are dismissed for lack of merit.

SO ORDERED.16

The respondents appealed to the NLRC alleging grave abuse of discretion on the part of the Labor Arbiter. The NLRC reversed
and set aside the decision of the Labor Arbiter on the ground that the relief of the petitioners from their posts was a
legitimate exercise of business prerogative by RICC/PICMW. According to the NLRC, such exercise cannot be challenged for
being malicious, capricious, or illegal. The NLRC resolution limited the monetary award to petitioners for salary differential,
thus:

WHEREFORE, premises considered, the decision appealed from is hereby REVERSED and SET ASIDE. Respondents are hereby
ordered to pay jointly and severally complainants’ salary differential for the period from December 18, 1997 to January 31,
1998 as follows:
 Prisco Lanzaderas - ₱289.86

Samuel Sedicon - 289.86

Angelo Mabanta - 289.86

Vicente Giberson - 366.24

Longino Mambatac - 366.24

Salvador Virtudazo - 366.24

Eleno Aceron - 366.24

₱2,334.54

SO ORDERED.17

The petitioners moved for reconsideration, but this was denied by the NLRC in its resolution dated October 29, 1999. The NLRC
pointed out that the grounds for reconsideration raised by the petitioners involved the very issues already passed upon on
appeal.

The petitioners elevated the matter to the Court of Appeals under Rule 43 of the 1997 Rules of Civil Procedure, as CA-G.R. SP
No. 56347.

In a resolution dated January 5, 2000, the Court of Appeals dismissed the petition outright for the following reasons:

1. Error in the choice of remedy. In St. Martin Funeral Home vs. NLRC and Bienvenido Aricayos, G.R. No. 130866, September 16,
1998, the Supreme Court ruled that all references in the amended Sec. 9 of B.P. No. 129 to suppose(d) appeals from the NLRC
to the Supreme Court must be interpreted and hereby declared to mean and refer to petitions for certiorari under Rule 65 and
all such petitions should be initially filed with the Court of Appeals as the appropriate forum for the relief desired. In the instant
case, petitioners assigned four (4) alleged errors allegedly committed by the 5th Division of the NLRC (p. 7 of Petition). Nowhere
is there an allegation or claim in the petition as required by Rule 65 that the respondent NLRC had acted without or in excess of
its jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any plain,
speedy, and adequate remedy in the ordinary course of law.

2. Failure to state the material dates showing that the petition was filed on time, including the date when the motion for
reconsideration was filed. As it is, there is no way to determine the period of interruption and the remaining period within
which to file the petition in accordance with Section 4 Rule 65, as amended by Supreme Court Circular No. 39-98 on Bar Matter
No. 803 which took effect on September 1, 1998. This if We liberally consider the present petition as one for certiorari, which
[it] is not.

3. There is non-submission, as accompanying documents to support the petition, the motion for reconsideration filed and
copies of all pleadings and documents relevant and pertinent thereto as required by the Rules. [Emphasis supplied]

SO ORDERED.18

Petitioners moved for reconsideration, but on May 19, 2000, it was denied in this wise:

…[T]he Court Resolved to DENY the aforesaid motion for reconsideration, as the decision or final resolution or order of the
National Labor Relations Commission is not a proper subject of appeal to this Court except by petition for certiorari under Rule
65 of the 1997 Rules of Civil Procedure. Thus, Rule 43 does not apply to judgments or final orders of the NLRC and may only be
brought to this Court under Rule 65. Nor can the petition at bench be treated as a petition for certiorari under the most liberal
policy since it does not comply with the requirements specified in said Rule 65. To rule otherwise would render Section 5 (f),
Rule 56, 1997 Rules of Civil Procedure, inutile. [Emphasis supplied]

SO ORDERED. 19

Hence this petition for review, which raises the following issues for our resolution:

1. WHETHER OR NOT THE PETITION FOR REVIEW CAN BE TREATED AS A PETITION FOR CERTIORARI UNDER RULE 65 TO ENABLE
THE PETITIONERS TO OBTAIN A FAIR, EXPEDITIOUS AND REASONABLE DETERMINATION OF THEIR RIGHTS INSTEAD OF
SUBJECTING THEM TO RIGID AND TECHNICAL RULE ON APPEAL OF THE RULES OF COURT.

2. WHETHER OR NOT THE PETITION FOR REVIEW OF THE DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION FILED
WITH THE COURT OF APPEALS INSTEAD OF PETITION FOR CERTIORARI UNDER RULE 65 CAN BE AMENDED WITHIN A PERIOD OF
SIXTY (60) DAYS TO CONFORM TO PETITION FOR CERTIORARI UNDER RULE 65 AS REQUIRED IN THE ST. MARTIN FUNERAL
HOMES CASE.

3. WHETHER OR NOT THE DISMISSAL OF THE PETITION FOR REVIEW BY THE HONORABLE COURT AND THE DENIAL OF THE
MOTION FOR RECONSIDERATION PURELY ON TECHNICALITIES CONFORMS TO THE LIBERAL POSTURE ADOPTED BY THE
HONORABLE SUPREME COURT IN A LONG LINE OF CASES TO DISREGARD TECHNICALITIES SO THAT CASES MAY BE DECIDED ON
THE MERITS.

4. WHETHER OR NOT THE TERMINATION OF PETITIONERS’ SERVICES BY THE RESPONDENTS BY VIRTUE OF THE CONTRACT OF
SECURITY SERVICES AND THE SUBSEQUENT ASSIGNMENT AS FIREWATCH AT PICMW CONSTITUTES CONSTRUCTIVE DISMISSAL. 20

Simply stated, the issues in this petition now are (1) whether the Court of Appeals erred in dismissing the petition filed under
Rule 43 of the Rules of Court for being the wrong mode of appeal pursuant to the provision of Sec. 5 (f) 21 of Rule 56 of the
Revised Rules of Court, and (2) whether petitioners were constructively dismissed, thus, entitling them to their claims and other
monetary benefits.

On the first issue, it appears that there was a serious procedural lapse when petitioners filed an appeal with the Court of
Appeals. Section 2 of Rule 43 of the 1997 Rules of Civil Procedure 22 expressly provides that it shall not apply to judgments or
final orders issued under the Labor Code of the Philippines. A cursory look at Rule 43 could have averted this lapse. To our
mind, an appeal from a decision of the NLRC to the Court of Appeals may be done only by way of special civil action
for certiorari under Rule 65 of the 1997 Rules of Civil Procedure. Having opted for the wrong mode, petitioners’ appeal was
properly denied.

Petitioners now urge this Court to ignore technicalities and brush aside the procedural requirements so this case may be
decided "on the merits." Although technical rules of procedure are not ends in themselves, they are necessary, however, for an
effective and expeditious administration of justice. It is settled that a party who seeks to avail of certiorari must observe the
rules thereon and non-observance of said rules may not be brushed aside as "mere technicality." 23 While litigation is not a game
of technicalities, and that the rules of procedure should not be enforced strictly at the cost of substantial justice, still it does not
follow that the Rules of Court may be ignored at will and at random to the prejudice of the orderly presentation, assessment
and just resolution of the issues.24 Procedural rules should not be belittled or dismissed simply because they may have resulted
in prejudice to a party’s substantial rights. Like all rules, they are required to be followed except only for compelling reasons. 25

On the postulate that dismissal of appeals based on mere technicalities 26 is frowned upon, petitioners would have us treat their
petition filed under Rule 43 as having been filed under Rule 65, or otherwise allow them to amend their petition to conform to
said rule. They invoke the case of Tuazon v. Court of Appeals27 where a special civil action for certiorari was filed with the Court
of Appeals under Rule 65 when it should have been filed as a petition for review.

In Tuazon, we ruled that the allegation "lack of jurisdiction and grave abuse of discretion amounting to lack of jurisdiction, and
there is no other plain, speedy or adequate remedy" in the petition filed with the Court of Appeals to be mere surplusage. Thus,
it could not detract from a consideration of the petition as one for review under Section 22 28 of the Judiciary Reorganization Act
of 1980, Section 22 (b) of the Interim Rules and Circular 2-90. 29 The petition filed in Tuazon complied with the requirements of a
petition for review, albeit captioned as one for certiorari, but with the cited surplusage. Tuazon  clearly shows the Court looks
beyond the form and considers substance as circumstances warrant.
Resort to judicial review of the decisions of the NLRC, a quasi-judicial body, under Rule 65 of the Rules of Court is confined only
to issues of want or excess of jurisdiction and grave abuse of discretion resulting thereto, on the part of the tribunal rendering
them.30 In the instant case, the petitioners a quo  failed to allege before the appellate court "grave abuse of discretion resulting
thereto," thus amounting to lack or excess of jurisdiction on the part of the NLRC. That failure was fatal to the petitioners’
cause. Their appeal was properly denied, hence their present petition lacks merit, and ought to be likewise denied.

Moreover, on the second issue, which we now consider only for the purpose of resolving this matter completely, petitioners
aver that the age requirement for posting of guards at RICC/PICMW was a new provision in the service contract. This averment
is inaccurate. Admittedly, the security services contract between Amethyst (formerly Calmar) Security Agency and RICC/PICMW
had continuously been renewed since 1968 and featured the particular provision on the age limit (not exceeding 45 years) of
the security guards with each renewal.31 Petitioners could not claim ignorance of the said provision. They could not claim to be
have been caught by surprise when Amethyst relieved them from their posting at RICC/PICMW due to their failure to meet the
stipulated age limits. Petitioners acted in bad faith when they tried to mislead Amethyst as to their respective actual age.

Lastly, petitioners’ claims of constructive dismissal could not be sustained.1âwphi1 Their averments fall short of what this
Court considers as constructive dismissal. Petitioners could not fairly claim involuntary resignation on the ground that their
continued employment was rendered impossible, unreasonable or unlikely.32 Neither could they show persuasively that their
transfer or assignment from security guards to firewatch guards involved diminution in pay or demotion in rank. Nor was
there a clear showing of an act of clear discrimination, insensibility or disdain by their employer - Amethyst - that made their
employment so unbearable that it could foreclose any option by them except to forego their continued employment. 33

The condition imposed by respondent RICC/PICMW, as a principal or client of the contractor Amethyst, regarding the age
requirement of the security guards to be designated in its compound, is a valid contractual stipulation. It is an inherent right
of RICC/PICMW, as the principal or client, to specify the qualifications of the guards who shall render service pursuant to a
service contract. It stands to reason that in a service contract, the client may require from the service contractor that the
personnel assigned to the client should meet certain standards and possess certain qualifications, conformably to the client’s
needs.

Security of tenure, although provided in the Constitution, 34 does not give an employee an absolute vested right in a position
as would deprive the company of its prerogative to change their assignment or transfer them where they will be most useful.
When a transfer is not unreasonable, nor inconvenient, nor prejudicial to an employee; and it does not involve a demotion in
rank or diminution of his pay, benefits, and other privileges, the employee may not complain that it amounts to a constructive
dismissal.35

Case law recognizes the employer’s right to transfer or assign employees from one area of operation to another, 36 or one office
to another or in pursuit of its legitimate business interest, provided there is no demotion in rank or diminution of salary,
benefits and other privileges and not motivated by discrimination or made in bad faith, or effected as a form of punishment or
demotion without sufficient cause.37 This matter is a prerogative inherent in the employer’s right to effectively control and
manage the enterprise.38

We note that Amethyst gave petitioners an option as to their new deployment.1âwphi1 They could stay on with RICC/PICMW
as firewatch guards, pursuant to negotiated agreement between Amethyst and RICC/PICMW to accommodate the displaced
security guards. Or they could be transferred to another locality, Cagayan de Oro City, but in the same role as security guards.
Petitioners, however, refused to report to Amethyst headquarters, despite knowledge that they were being called to receive
instructions regarding new deployment. Petitioners’ action not to report for work is a form of defiant action that petitioners
failed to justify. Even if it could be argued that their collective action stemmed from their resentment against the age rule being
enforced by Amethyst, we find nothing in the circumstances of this case to show sufficient reason to excuse petitioners’ failure
to heed management’s exercise of a management prerogative.

LIABILITY

Thus, we agree with respondents that there is no reason to hold Amethyst liable for violations claimed by petitioners. It
follows also that we find no ground to hold co-respondents RICC/PICMW liable, except for salary differential ordered in the
NLRC decision. The only time the indirect employer may be made solidarily liable with the contractor is when the contractor
fails to pay his employees their wages and other benefits claimed.

WHEREFORE, the petition is DENIED. The assailed resolutions of the Court of Appeals in CA-G.R. SP No. 56347 are AFFIRMED. As
ordered in the NLRC decision dated November 27, 1998, respondents must pay jointly and severally petitioners’ salary
differential only for the period December 18, 1997 to January 31, 1998, as follows: ₱289.86 each to petitioners Prisco
Lanzaderas, Samuel Sadicon, and Angelo Mabanta; and ₱366.24 each to petitioners Vicente Giberson, Longino Nambatac,
Salvador Virtudazo, and Eleno Aceron. No pronouncement as to costs.

NITTO ENTERPRISES, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ROBERTO CAPILI, respondents.

This petition for certiorari under Rule 65 of the Rules of Court seeking to annul the decision 1 rendered by public respondent
National Labor Relations Commission, which reversed the decision of the Labor Arbiter.

Briefly, the facts of the case are as follows:

Petitioner Nitto Enterprises, a company engaged in the sale of glass and aluminum products, hired Roberto Capili sometime
in May 1990 as an apprentice machinist, molder and core maker as evidenced by an apprenticeship agreement2 for a period of
six (6) months from May 28, 1990 to November 28, 1990 with a daily wage rate of P66.75 which was 75% of the applicable
minimum wage.

At around 1:00 p.m. of August 2, 1990, Roberto Capili who was handling a piece of glass which he was working on, accidentally
hit and injured the leg of an office secretary who was treated at a nearby hospital.

Later that same day, after office hours, private respondent entered a workshop within the office premises which was not his
work station. There, he operated one of the power press machines without authority and in the process injured his left thumb.
Petitioner spent the amount of P1,023.04 to cover the medication of private respondent.

The following day, Roberto Capili was asked to resign in a letter3 which reads:

August 2, 1990

Wala siyang tanggap ng utos mula sa superbisor at wala siyang experiensa kung papaano gamitin and "TOOL" sa pagbuhat ng
salamin, sarili niyang desisyon ang paggamit ng tool at may disgrasya at nadamay pa ang isang sekretarya ng kompanya.

Sa araw ding ito limang (5) minute ang nakakalipas mula alas-singko ng hapon siya ay pumasok sa shop na hindi naman sakop
ng kanyang trabaho. Pinakialaman at kinalikot ang makina at nadisgrasya niya ang kanyang sariling kamay.

Nakagastos ang kompanya ng mga sumusunod:

Emergency and doctor fee P715.00

Medecines (sic) and others 317.04

Bibigyan siya ng kompanya ng Siyam na araw na libreng sahod hanggang matanggal ang tahi ng kanyang kamay.

Tatanggapin niya ang sahod niyang anim na araw, mula ika-30 ng Hulyo at ika-4 ng Agosto, 1990.

Ang kompanya ang magbabayad ng lahat ng gastos pagtanggal ng tahi ng kanyang kamay, pagkatapos ng siyam na araw mula
ika-2 ng Agosto.

Sa lahat ng nakasulat sa itaas, hinihingi ng kompanya ang kanyang resignasyon, kasama ng kanyang comfirmasyon at pag-ayon
na ang lahat sa itaas ay totoo.

Naiintindihan ko ang lahat ng nakasulat sa itaas, at ang lahat ng ito ay aking pagkakasala sa hindi pagsunod sa alintuntunin ng
kompanya.
(Sgd.) Roberto Capili
Roberto Capili

On August 3, 1990 private respondent executed a Quitclaim and Release in favor of petitioner for and in consideration of the
sum of P1,912.79.4

Three days after, or on August 6, 1990, private respondent formally filed before the NLRC Arbitration Branch, National Capital
Region a complaint for illegal dismissal and payment of other monetary benefits.

On October 9, 1991, the Labor Arbiter rendered his decision finding the termination of private respondent as valid and
dismissing the money claim for lack of merit. The dispositive portion of the ruling reads:

WHEREFORE, premises considered, the termination is valid and for cause, and the money claims dismissed for lack of merit.

The respondent however is ordered to pay the complainant the amount of P500.00 as financial assistance.

SO ORDERED.5

Labor Arbiter Patricio P. Libo-on gave two reasons for ruling that the dismissal of Roberto Capilian was valid. First, private
respondent who was hired as an apprentice violated the terms of their agreement when he acted with gross negligence
resulting in the injury not only to himself but also to his fellow worker. Second, private respondent had shown that "he does not
have the proper attitude in employment particularly the handling of machines without authority and proper training. 6

On July 26, 1993, the National Labor Relations Commission issued an order reversing the decision of the Labor Arbiter, the
dispositive portion of which reads:

WHEREFORE, the appealed decision is hereby set aside. The respondent is hereby directed to reinstate complainant to his work
last performed with backwages computed from the time his wages were withheld up to the time he is actually reinstated. The
Arbiter of origin is hereby directed to further hear complainant's money claims and to dispose them on the basis of law and
evidence obtaining.

SO ORDERED.7

The NLRC declared that private respondent was a regular employee of petitioner by ruling thus:

As correctly pointed out by the complainant, we cannot understand how an apprenticeship agreement filed with the
Department of Labor only on June 7, 1990 could be validly used by the Labor Arbiter as basis to conclude that the complainant
was hired by respondent as a plain "apprentice" on May 28, 1990. Clearly, therefore, the complainant was respondent's regular
employee under Article 280 of the Labor Code, as early as May 28,1990, who thus enjoyed the security of tenure guaranteed in
Section 3, Article XIII of our 1987 Constitution.

The complainant being for illegal dismissal (among others) it then behooves upon respondent, pursuant to Art. 227(b) and as
ruled in Edwin Gesulgon vs. NLRC, et al. (G.R. No. 90349, March 5, 1993, 3rd Div., Feliciano, J.) to prove that the dismissal of
complainant was for a valid cause. Absent such proof, we cannot but rule that the complainant was illegally dismissed. 8

On January 28, 1994, Labor Arbiter Libo-on called for a conference at which only private respondent's representative was
present.

On April 22, 1994, a Writ of Execution was issued, which reads:

NOW, THEREFORE, finding merit in [private respondent's] Motion for Issuance of the Writ, you are hereby commanded to
proceed to the premises of [petitioner] Nitto Enterprises and Jovy Foster located at No. l 74 Araneta Avenue, Portero, Malabon,
Metro Manila or at any other places where their properties are located and effect the reinstatement of herein [private
respondent] to his work last performed or at the option of the respondent by payroll reinstatement.

You are also to collect the amount of P122,690.85 representing his backwages as called for in the dispositive portion, and turn
over such amount to this Office for proper disposition.

Petitioner filed a motion for reconsideration but the same was denied.
Hence, the instant petition — for certiorari.

The issues raised before us are the following:

WHETHER OR NOT PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN HOLDING THAT PRIVATE
RESPONDENT WAS NOT AN APPRENTICE.

II

WHETHER OR NOT PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN HOLDING THAT PETITIONER HAD
NOT ADEQUATELY PROVEN THE EXISTENCE OF A VALID CAUSE IN TERMINATING THE SERVICE OF PRIVATE RESPONDENT.

We find no merit in the petition. CAPILI IS NOT AN APPRENTICE. BUT A REGULAR EMPLOYEE.

Petitioner assails the NLRC's finding that private respondent Roberto Capili cannot plainly be considered an apprentice since no
apprenticeship program had yet been filed and approved at the time the agreement was executed.

Petitioner further insists that the mere signing of the apprenticeship agreement already established an employer-apprentice
relationship.

Petitioner's argument is erroneous.

The law is clear on this matter. Article 61 of the Labor Code provides:

Contents of apprenticeship agreement. — Apprenticeship agreements, including the main rates of apprentices, shall conform to
the rules issued by the Minister of Labor and Employment. The period of apprenticeship shall not exceed six months.
Apprenticeship agreements providing for wage rates below the legal minimum wage, which in no case shall start below 75% per
cent of the applicable minimum wage, may be entered into only in accordance with apprenticeship program duly approved by
the Minister of Labor and Employment. The Ministry shall develop standard model programs of apprenticeship. (emphasis
supplied)

In the case at bench, the apprenticeship agreement between petitioner and private respondent was executed on May 28, 1990
allegedly employing the latter as an apprentice in the trade of "care maker/molder." On the same date, an apprenticeship
program was prepared by petitioner and submitted to the Department of Labor and Employment. However, the apprenticeship
Agreement was filed only on June 7, 1990. Notwithstanding the absence of approval by the Department of Labor and
Employment, the apprenticeship agreement was enforced the day it was signed.

Based on the evidence before us, petitioner did not comply with the requirements of the law. It is mandated that
apprenticeship agreements entered into by the employer and apprentice shall be entered only in accordance with the
apprenticeship program duly approved by the Minister of Labor and Employment.

Prior approval by the Department of Labor and Employment of the proposed apprenticeship program is, therefore, a
condition sine quo non before an apprenticeship agreement can be validly entered into.

The act of filing the proposed apprenticeship program with the Department of Labor and Employment is a preliminary step
towards its final approval and does not instantaneously give rise to an employer-apprentice relationship.

Article 57 of the Labor Code provides that the State aims to "establish a national apprenticeship program through the
participation of employers, workers and government and non-government agencies" and "to establish apprenticeship standards
for the protection of apprentices." To translate such objectives into existence, prior approval of the DOLE to any apprenticeship
program has to be secured as a condition  sine qua non before any such apprenticeship agreement can be fully enforced. The
role of the DOLE in apprenticeship programs and agreements cannot be debased.

Hence, since the apprenticeship agreement between petitioner and private respondent has no force and effect in the absence
of a valid apprenticeship program duly approved by the DOLE, private respondent's assertion that he was hired not as an
apprentice but as a delivery boy ("kargador" or "pahinante") deserves credence. He should rightly be considered as a regular
employee of petitioner as defined by Article 280 of the Labor Code:
Art. 280. Regular and Casual Employment. — The provisions of written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been
engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except
where the employment has been fixed for a specific project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in
nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who
has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his employment shall continue while such activity exists. (Emphasis
supplied)

and pursuant to the constitutional mandate to "protect the rights of workers and promote their welfare." 9

Petitioner further argues that, there is a valid cause for the dismissal of private respondent.

There is an abundance of cases wherein the Court ruled that the twin requirements of due process, substantive and procedural,
must be complied with, before valid dismissal exists. 10 Without which, the dismissal becomes void.

The twin requirements of notice and hearing constitute the essential elements of due process. This simply means that the
employer shall afford the worker ample opportunity to be heard and to defend himself with the assistance of his
representative, if he so desires.

Ample opportunity connotes every kind of assistance that management must accord the employee to enable him to prepare
adequately for his defense including legal representation. 11

As held in the case of Pepsi-Cola Bottling Co., Inc. v. NLRC: 12

The law requires that the employer must furnish the worker sought to be dismissed with two (2) written notices before
termination of employee can be legally effected: (1) notice which apprises the employee of the particular acts or omissions for
which his dismissal is sought; and (2) the subsequent notice which informs the employee of the employer's decision to dismiss
him (Sec. 13, BP 130; Sec. 2-6 Rule XIV, Book V, Rules and Regulations Implementing the Labor Code as amended). Failure to
comply with the requirements taints the dismissal with illegality. This procedure is mandatory, in the absence of which, any
judgment reached by management is void and in existent (Tingson, Jr. vs. NLRC, 185 SCRA 498 [1990]; National Service Corp. vs.
NLRC, 168 SCRA 122; Ruffy vs. NLRC. 182 SCRA 365 [1990]).

The fact is private respondent filed a case of illegal dismissal with the Labor Arbiter only three days after he was made to sign a
Quitclaim, a clear indication that such resignation was not voluntary and deliberate.

Private respondent averred that he was actually employed by petitioner as a delivery boy ("kargador" or "pahinante").

He further asserted that petitioner "strong-armed" him into signing the aforementioned resignation letter and quitclaim
without explaining to him the contents thereof. Petitioner made it clear to him that anyway, he did not have a choice. 13

Petitioner cannot disguise the summary dismissal of private respondent by orchestrating the latter's alleged resignation and
subsequent execution of a Quitclaim and Release. A judicious examination of both events belies any spontaneity on private
respondent's part.

WHEREFORE, finding no abuse of discretion committed by public respondent National Labor Relations Commission, the
appealed decision is hereby AFFIRMED.

MARITES BERNARDO, ET. AL petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION and FAR EAST BANK AND TRUST COMPANY, respondents.

PANGANIBAN, J.:
The  Magna Carta for Disabled Persons mandates that qualified disabled persons be granted the same terms and conditions of
employment as qualified able-bodied employees. Once they have attained the status of regular workers, they should be
accorded all the benefits granted by law, notwithstanding written or verbal contracts to the contrary. This treatment is rooted
not merely on charity or accomodation, but on justice for all.

The Case

Challenged in the Petition for Certiorari 1 before us is the June 20, 1995 Decision2 of the National Labor Relations Commission
(NLRC), 3 which affirmed the August, 22 1994 ruling of Labor Arbiter Cornelio L. Linsangan. The labor arbiter's Decision disposed
as follows: 4

WHEREFORE, judgment is hereby rendered dismissing the above-mentioned complaint for lack of merit.

Also assailed is the August 4, 1995 Resolution 5 of the NLRC, which denied the Motion for Reconsideration.

The Facts

The facts were summarized by the NLRC in this wise: 6

Complainants numbering 43 (p. 176, Records) are deaf-mutes who were hired on various periods from 1988 to 1993 by
respondent Far East Bank and Trust Co. as Money Sorters and Counters through a uniformly worded agreement called
"Employment Contract for Handicapped Workers". (pp. 68 & 69, Records) The full text of said agreement is quoted below:

EMPLOYMENT CONTRACT FOR

HANDICAPPED WORKERS

This Contract, entered into by and between:

FAR EAST BANK AND TRUST COMPANY, a universal banking corporation duly organized and existing under and by virtue of the
laws of the Philippines, with business address at FEBTC Building, Muralla, Intramuros, Manila, represented herein by its
Assistant Vice President, MR. FLORENDO G. MARANAN, (hereinafter referred to as the "BANK");

-and-

—————, ————— years old, of legal age, ————, and residing at (hereinafter referred to as the ("EMPLOYEE").

WITNESSETH : That

WHEREAS, the BANK, cognizant of its social responsibility, realizes that there is a need to provide disabled and handicapped
persons gainful employment and opportunities to realize their potentials, uplift their socio-economic well being and welfare
and make them productive, self-reliant and useful citizens to enable them to fully integrate in the mainstream of society;

WHEREAS, there are certain positions in the BANK which may be filled-up by disabled and handicapped persons, particularly
deaf-mutes, and the BANK ha[s] been approached by some civic-minded citizens and authorized government agencies
[regarding] the possibility of hiring handicapped workers for these positions;

WHEREAS, the EMPLOYEE is one of those handicapped workers who [were] recommended for possible employment with the
BANK;

NOW, THEREFORE, for and in consideration of the foregoing premises and in compliance with Article 80 of the Labor Code of
the Philippines as amended, the BANK and the EMPLOYEE have entered into this Employment Contract as follows:

1. The BANK agrees to employ and train the EMPLOYEE, and the EMPLOYEE agrees to diligently and faithfully work with the
BANK, as Money Sorter  and Counter.

2. The EMPLOYEE shall perform among others, the following duties and responsibilities:

i. Sort out bills according to color;

ii. Count each denomination per hundred, either manually or with the aid of a counting machine;
iii. Wrap and label bills per hundred;

iv. Put the wrapped bills into bundles; and

v. Submit bundled bills to the bank teller for verification.

3. The EMPLOYEE shall undergo a training period of one (1) month, after which the BANK shall determine whether or not
he/she should be allowed to finish the remaining term of this Contract.

4. The EMPLOYEE shall be entitled to an initial compensation of P118.00 per day, subject to adjustment in the sole judgment of
the BANK, payable every 15th and end of the month.1âwphi1.nêt

5. The regular work schedule of the EMPLOYEE shall be five (5) days per week, from Mondays thru Fridays, at eight (8) hours a
day. The EMPLOYEE may be required to perform overtime work as circumstance may warrant, for which overtime work he/she
[shall] be paid an additional compensation of 125% of his daily rate if performed during ordinary days and 130% if performed
during Saturday or [a] rest day.

6. The EMPLOYEE shall likewise be entitled to the following benefits:

i. Proportionate 13th month pay based on his basic daily wage.

ii. Five (5) days incentive leave.

iii. SSS premium payment.

7. The EMPLOYEE binds himself/herself to abide [by] and comply with all the BANK Rules and Regulations and Policies, and to
conduct himself/herself in a manner expected of all employees of the BANK.

8. The EMPLOYEE acknowledges the fact that he/she had been employed under a special employment program of the BANK, for
which reason the standard hiring requirements of the BANK were not applied in his/her case. Consequently, the EMPLOYEE
acknowledges and accepts the fact that the terms and conditions of the employment generally observed by the BANK with
respect to the BANK's regular employee are not applicable to the EMPLOYEE, and that therefore, the terms and conditions of
the EMPLOYEE's employment with the BANK shall be governed solely and exclusively by this Contract and by the applicable
rules and regulations that the Department of Labor and Employment may issue in connection with the employment
of disabled  and handicapped workers. More specifically, the EMPLOYEE hereby acknowledges that the provisions of Book Six of
the Labor Code of the Philippines as amended, particularly on regulation of employment and separation pay are not applicable
to him/her.

9. The Employment Contract shall be for a period of six (6) months or from —— to —— unless earlier terminated by the BANK
for any just or reasonable cause. Any continuation or extension of this Contract shall be in writing and therefore this Contract
will automatically expire at the end of its terms unless renewed in writing by the BANK.

IN WITNESS WHEREOF, the parties, have hereunto affixed their signature[s] this —— day of ———, ——— at Intramuros,
Manila, Philippines.

In 1988, two (2) deaf-mutes were hired under this Agreement; in 1989 another two (2); in 1990, nineteen (19); in 1991 six (6); in
1992, six (6) and in 1993, twenty-one (21). Their employment[s] were renewed every six months such that by the time this
case arose, there were fifty-six (56) deaf-mutes who were employed by respondent under the said employment agreement.
The last one was Thelma Malindoy who was employed in 1992 and whose contract expired on July 1993.

xxx xxx xxx

Disclaiming that complainants were regular employees, respondent Far East Bank and Trust Company maintained that
complainants who are a special class of workers — the hearing impaired employees were hired temporarily under [a] special
employment arrangement which was a result of overtures made by some civic and political personalities to the respondent
Bank; that complainant[s] were hired due to "pakiusap" which must be considered in the light of the context career and
working environment which is to maintain and strengthen a corps of professionals trained and qualified officers and regular
employees who are baccalaureate degree holders from excellent schools which is an unbending policy in the hiring of regular
employees; that in addition to this, training continues so that the regular employee grows in the corporate ladder; that the idea
of hiring handicapped workers was acceptable to them only on a special arrangement basis; that it was adopted the special
program to help tide over a group of workers such as deaf-mutes like the complainants who could do manual work for the
respondent Bank; that the task of counting and sorting of bills which was being performed by tellers could be assigned to deaf-
mutes that the counting and sorting of money are tellering works which were always logically and naturally part and parcel of
the tellers' normal functions; that from the beginning there have been no separate items in the respondent Bank plantilla for
sortes or counters; that the tellers themselves already did the sorting and counting chore as a regular feature and integral part
of their duties (p. 97, Records); that through the "pakiusap" of Arturo Borjal, the tellers were relieved of this task of counting
and sorting bills in favor of deaf-mutes without creating new positions as there is no position either in the respondent or in any
other bank in the Philippines which deals with purely counting and sorting of bills in banking operations.

Petitioners specified when each of them was hired and dimissed, viz: 7

NAME OF PETITIONER WORKPLACE Date Hired Date Dismissed

1. MARITES BERNARDO Intramuros 12-Nov-90 17-Nov-93

2. ELVIRA GO DIAMANTE Intramuros 24-Jan-90 11-Jan-94

3. REBECCA E. DAVID Intramuros 16-Apr-90 23-Oct-93

4. DAVID P. PASCUAL Bel-Air 15-Oct-88 21-Nov-94

5. RAQUEL ESTILLER Intramuros 2-Jul-92 4-Jan-94

6. ALBERT HALLARE West 4-Jan-91 9-Jan-94

7. EDMUND M. CORTEZ Bel-Air 15-Jan-91 3-Dec-93

8. JOSELITO O. AGDON Intramuros 5-Nov-90 17-Nov-93

9. GEORGE P. LIGUTAN JR. Intramuros 6-Sep-89 19-Jan-94

10. CELSO M. YAZAR Intramuros 8-Feb-93 8-Aug-93

11. ALEX G. CORPUZ Intramuros 15-Feb-93 15-Aug-93

12. RONALD M. DELFIN Intramuros 22-Feb-93 22-Aug-93

13. ROWENA M. TABAQUERO Intramuros 22-Feb-93 22-Aug-93

14. CORAZON C. DELOS REYES Intramuros 8-Feb-93 8-Aug-93

15. ROBERT G. NOORA Intramuros 15-Feb-93 15-Aug-93

16. MILAGROS O. LEQUIGAN Intramuros 1-Feb-93 1-Aug-93

17. ADRIANA F. TATLONGHARI Intramuros 22-Jan-93 22-Jul-93

18. IKE CABUNDUCOS Intramuros 24-Feb-93 24-Aug-93

19. COCOY NOBELLO Intramuros 22-Feb-93 22-Aug-93

20. DORENDA CATIMBUHAN Intramuros 15-Feb-93 15-Aug-93

21. ROBERT MARCELO West 31 JUL 93 8 1-Aug-93

22. LILIBETH Q. MARMOLEJO West 15-Jun-90 21-Nov-93

 23. JOSE E. SALES West 6-Aug-92 12-Oct-93

24. ISABEL MAMAUAG West 8-May-92 10-Nov-93

25. VIOLETA G. MONTES Intramuros 2-Feb-90 15-Jan-94

26. ALBINO TECSON Intramuros 7-Nov-91 10-Nov-93

27. MELODY B. GRUELA West 28-Oct-91 3-Nov-93

28. BERNADETH D. AGERO West 19-Dec-90 27-Dec-93

29. CYNTHIA DE VERA Bel-Air 26-Jun-90 3-Dec-93

30. LANI R. CORTEZ Bel-Air 15-Oct-88 10-Dec-93

31. MARIA ISABEL B.CONCEPCION West 6-Sep-90 6-Feb-94

32. DINDO VALERIO Intramuros 30-May-93 30-Nov-93

33. ZENAIDA MATA Intramuros 10-Feb-93 10-Aug-93

34. ARIEL DEL PILAR Intramuros 24-Feb-93 24-Aug-93

35. MARGARET CECILIA CANOZA Intramuros 27-Jul-90 4-Feb-94

36. THELMA SEBASTIAN Intramuros 12-Nov-90 17-Nov-93

37. MA. JEANETTE CERVANTES West 6-Jun-92 7-Dec-93

38. JEANNIE RAMIL Intramuros 23-Apr-90 12-Oct-93

39. ROZAIDA PASCUAL Bel-Air 20-Apr-89 29-Oct-93

40. PINKY BALOLOA West 3-Jun-91 2-Dec-93

41. ELIZABETH VENTURA West 12-Mar-90 FEB 94 [sic]

42. GRACE S. PARDO West 4-Apr-90 13-Mar-94

43. RICO TIMOSA Intramuros 28-Apr-93 28-Oct-93

As earlier noted, the labor arbiter and, on appeal, the NLRC ruled against herein petitioners. Hence, this recourse to this
Court. 9

The Ruling of the NLRC

In affirming the ruling of the labor arbiter that herein petitioners could not be deemed regular employees under Article 280 of
the Labor Code, as amended, Respondent Commission ratiocinated as follows:

We agree that Art. 280 is not controlling herein. We give due credence to the conclusion that complainants were hired as an
accommodation to [the] recommendation of civic oriented personalities whose employment[s] were covered by . . .
Employment Contract[s] with special provisions on duration of contract as specified under Art. 80. Hence, as correctly held by
the Labor Arbiter a quo, the terms of the contract shall be the law between the parties. 10

The NLRC also declared that the Magna Carta for Disabled Persons was not applicable, "considering the prevailing
circumstances/milieu of the case."

Issues

In their Memorandum, petitioners cite the following grounds in support of their cause:

I. The Honorable Commission committed grave abuse of discretion in holding that the petitioners — money sorters and
counters working in a bank — were not regular employees.

II. The Honorable Commission committed grave abuse of discretion in holding that the employment contracts signed and
renewed by the petitioners — which provide for a period of six (6) months — were valid.

III. The Honorable Commission committed grave abuse of discretion in not applying the provisions of the Magna Carta for the
Disabled (Republic Act No. 7277), on proscription against discrimination against disabled persons. 11

In the main, the Court will resolve whether petitioners have become regular employees.

This Court's Ruling

The petition is meritorious. However, only the employees, who worked for more than six months and whose contracts were
renewed are deemed regular. Hence, their dismissal from employement was illegal.

Preliminary Matter:

Propriety of Certiorari

Respondent Far East Bank and Trust Company argues that a review of the findings of facts of the NLRC is not allowed in a
petition for certiorari. Specifically, it maintains that the Court cannot pass upon the findings of public respondent that
petitioners were not regular employees.

True, the Court, as a rule, does not review the factual findings of public respondents in a certiorari proceeding. In resolving
whether the petitioners have become regular employees, we shall not change the facts found by the public respondent. Our
task is merely to determine whether the NLRC committed grave abuse of discretion in applying the law to the established facts,
as above-quoted from the assailed Decision.

Main Issue

Are Petitioners Regular Employee?

Petitioners maintain that they should be considered regular employees, because their task as money sorters and counters was
necessary and desirable to the business of respondent bank. They further allege that their contracts served merely to preclude
the application of Article 280 and to bar them from becoming regular employees.

Private respondent, on the other hand, submits that petitioners were hired only as "special workers and should not in any way
be considered as part of the regular complement of the Bank." 12 Rather, they were "special" workers under Article 80 of the
Labor Code. Private respondent contends that it never solicited the services of petitioners, whose employment was merely an
"accommodation" in response to the requests of government officials and civic-minded citizens. They were told from the start,
"with the assistance of government representatives," that they could not become regular employees because there were no
plantilla positions for "money sorters," whose task used to be performed by tellers. Their contracts were renewed several
times, not because of need "but merely for humanitarian reasons." Respondent submits that "as of the present, the "special
position" that was created for the petitioners no longer exist[s] in private respondent [bank], after the latter had decided not to
renew anymore their special employment contracts."

At the outset, let it be known that this Court appreciates the nobility of private respondent's effort to provide employment to
physically impaired individuals and to make them more productive members of society. However, we cannot allow it to elude
the legal consequences of that effort, simply because it now deems their employment irrelevant. The facts, viewed in light of
the Labor Code and the Magna Carta for Disabled Persons, indubitably show that the petitioners, except sixteen of them,
should be deemed regular employees. As such, they have acquired legal rights that this Court is duty-bound to protect and
uphold, not as a matter of compassion but as a consequence of law and justice.

The uniform employment contracts of the petitioners stipulated that they shall be trained for a period of one month, after
which the employer shall determine whether or not they should be allowed to finish the 6-month term of the contract.
Furthermore, the employer may terminate the contract at any time for a just and reasonable cause. Unless renewed in writing
by the employer, the contract shall automatically expire at the end of the term.1âwphi1.nêt

According to private respondent, the employment contracts were prepared in accordance with Article 80 of the Labor code,
which provides;

Art. 80. Employment agreement. — Any employer who employs handicapped workers shall enter into an employment
agreement with them, which agreement shall include:

(a) The names and addresses of the handicapped workers to be employed;

(b) The rate to be paid the handicapped workers which shall be not less than seventy five (75%) per cent of the applicable legal
minimum wage;

(c) The duration of employment period; and

(d) The work to be performed by handicapped workers.

The employment agreement shall be subject to inspection by the Secretary of Labor or his duly authorized representatives.

The stipulations in the employment contracts indubitably conform with the aforecited provision. Succeeding events and the
enactment of RA No. 7277 (the Magna Carta for Disabled Persons), 13 however, justify the application of Article 280 of the Labor
Code.

Respondent bank entered into the aforesaid contract with a total of 56 handicapped workers and renewed the contracts of
37 of them. In fact, two of them worked from 1988 to 1993. Verily, the renewal of the contracts of the handicapped workers
and the hiring of others lead to the conclusion that their tasks were beneficial and necessary to the bank. More important,
these facts show that they were qualified to perform the responsibilities of their positions. In other words, their disability did
not render them unqualified or unfit for the tasks assigned to them.

In this light, the Magna Carta for Disabled Persons mandates that a qualified disabled employee should be given the same
terms and conditions of employment as a qualified able-bodied person. Section 5 of the Magna Carta provides:

Sec. 5. Equal Opportunity for Employment. — No disabled person shall be denied access to opportunities for suitable
employment. A qualified disabled employee shall be subject to the same terms and conditions of employment and the same
compensation, privileges, benefits, fringe benefits, incentives or allowances as a qualified able bodied person.

The fact that the employees were qualified disabled persons necessarily removes the employment contracts from the ambit
of Article 80. Since the Magna Carta accords them the rights of qualified able-bodied persons, they are thus covered by Article
280 of the Labor Code, which provides:

Art. 280. Regular and Casual Employment. — The provisions of written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been
engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except
where the employment has been fixed for a specific project or undertaking the completion or termination of which has been
determined at the time of 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 as regular
employee with respect to the activity in which he is employed and his employment shall continue while such activity exists.

The test of whether an employee is regular was laid down in De Leon v. NLRC, 14 in which this Court held:
The primary standard, therefore, of determining regular employment is the reasonable connection between the particular
activity performed by the employee in relation to the usual trade or business of the employer. The test is whether the former is
usually necessary or desirable in the usual business or trade of the employer. The connection can be determined by considering
the nature of 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 and merely intermittent,
the law deems repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensibility of
that activity to the business. Hence, the employment is considered regular, but only with respect to such activity, and while
such activity exists.

Without a doubt, the task of counting and sorting bills is necessary and desirable to the business of respondent bank. With
the exception of sixteen of them, petitioners performed these tasks for more than six months. Thus, the following twenty-seven
petitioners should be deemed regular employees: Marites Bernardo, Elvira Go Diamante, Rebecca E. David, David P. Pascual,
Raquel Estiller, Albert Hallare, Edmund M. Cortez, Joselito O. Agdon, George P. Ligutan Jr., Lilibeth Q. Marmolejo, Jose E. Sales,
Isabel Mamauag, Violeta G. Montes, Albino Tecson, Melody V. Gruela, Bernadeth D. Agero, Cynthia de Vera, Lani R. Cortez, Ma.
Isabel B. Concepcion, Margaret Cecilia Canoza, Thelma Sebastian, Ma. Jeanette Cervantes, Jeannie Ramil, Rozaida Pascual, Pinky
Baloloa, Elizabeth Ventura and Grace S. Pardo.

As held by the Court, "Articles 280 and 281 of the Labor Code put an end to the pernicious practice of making permanent
casuals of our lowly employees by the simple expedient of extending to them probationary appointments, ad infinitum."15 The
contract signed by petitioners is akin to a probationary employment, during which the bank determined the employees' fitness
for the job. When the bank renewed the contract after the lapse of the six-month probationary period, the employees
thereby became regular employees. 16 No employer is allowed to determine indefinitely the fitness of its employees.

As regular employees, the twenty-seven petitioners are entitled to security of tenure; that is, their services may be
terminated only for a just or authorized cause. Because respondent failed to show such cause, 17 these twenty-seven
petitioners are deemed illegally dismissed and therefore entitled to back wages and reinstatement without loss of seniority
rights and other privileges. 18 Considering the allegation of respondent that the job of money sorting is no longer available
because it has been assigned back to the tellers to whom it originally belonged, 18 petitioners are hereby awarded separation
pay in lieu of reinstatement. 20

Because the other sixteen worked only for six months, they are not deemed regular employees and hence not entitled to the
same benefits.

Applicability of the

Brent Ruling

Respondent bank, citing Brent School v. Zamora 21 in which the Court upheld the validity of an employment contract with a
fixed term, argues that the parties entered into the contract on equal footing. It adds that the petitioners had in fact an
advantage, because they were backed by then DSWD Secretary Mita Pardo de Tavera and Representative Arturo Borjal.

We are not persuaded. The term limit in the contract was premised on the fact that the petitioners were disabled, and that the
bank had to determine their fitness for the position. Indeed, its validity is based on Article 80 of the Labor Code. But as noted
earlier, petitioners proved themselves to be qualified disabled persons who, under the Magna Carta for Disabled Persons, are
entitled to terms and conditions of employment enjoyed by qualified able-bodied individuals; hence, Article 80 does not apply
because petitioners are qualified  for their positions. The validation of the limit imposed on their contracts, imposed by reason
of their disability, was a glaring instance of the very mischief sought to be addressed by the new law.

Moreover, it must be emphasized that a contract of employment is impressed with public interest. 22 Provisions of applicable
statutes are deemed written into the contract, and the "parties are not at liberty to insulate themselves and their relationships
from the impact of labor laws and regulations by simply contracting with each other." 23 Clearly, the agreement of the parties
regarding the period of employment cannot prevail over the provisions of the Magna Carta for Disabled Persons, which
mandate that petitioners must be treated as qualified able-bodied employees.

Respondent's reason for terminating the employment of petitioners is instructive. Because the Bangko Sentral ng Pilipinas (BSP)
required that cash in the bank be turned over to the BSP during business hours from 8:00 a.m. to 5:00 p.m., respondent
resorted to nighttime sorting and counting of money. Thus, it reasons that this task "could not be done by deaf mutes because
of their physical limitations as it is very risky for them to travel at night." 24 We find no basis for this argument. Travelling at
night involves risks to handicapped and able-bodied persons alike. This excuse cannot justify the termination of their
employment.

Other Grounds Cited by Respondent

Respondent argues that petitioners were merely "accommodated" employees. This fact does not change the nature of their
employment. As earlier noted, an employee is regular because of the nature of work and the length of service, not because of
the mode or even the reason for hiring them.

Equally unavailing are private respondent's arguments that it did not go out of its way to recruit petitioners, and that its
plantilla did not contain their positions. In L. T. Datu v. NLRC, 25 the Court held that "the determination of whether employment
is casual or regular does not depend on the will or word of the employer, and the procedure of hiring . . . but on the nature of
the activities performed by the employee, and to some extent, the length of performance and its continued existence."

Private respondent argues that the petitioners were informed from the start that they could not become regular employees. In
fact, the bank adds, they agreed with the stipulation in the contract regarding this point. Still, we are not persuaded. The well-
settled rule is that the character of employment is determined not by stipulations in the contract, but by the nature of the
work performed. 26 Otherwise, no employee can become regular by the simple expedient of incorporating this condition in the
contract of employment.

In this light, we iterate our ruling in Romares v. NLRC: 27

Art. 280 was emplaced in our statute books to prevent the circumvention of the employee's right to be secure in his tenure by
indiscriminately and completely ruling out all written and oral agreements inconsistent with the concept of regular employment
defined therein. Where an employee has been engaged to perform activities which are usually necessary or desirable in the
usual business of the employer, such employee is deemed a regular employee and is entitled to security of tenure
notwithstanding the contrary provisions of his contract of employment.

xxx xxx xxx

At this juncture, the leading case of Brent School, Inc. v.  Zamora proves instructive. As reaffirmed in subsequent cases, this
Court has upheld the legality of fixed-term employment. It ruled that the decisive determinant in "term employment" should
not be the activities that the employee is called upon to perform but the day certain agreed upon the parties for the
commencement and termination of their employment relationship. But this Court went on to say that where from the
circumstances it is apparent that the periods have been imposed to preclude acquisition of tenurial security by the
employee, they should be struck down or disregarded as contrary to public policy and morals.

In rendering this Decision, the Court emphasizes not only the constitutional bias in favor of the working class, but also the
concern of the State for the plight of the disabled. The noble objectives of Magna Carta for Disabled Persons are not based
merely on charity or accommodation, but on justice and the equal treatment of qualified persons, disabled or not. In the
present case, the handicap of petitioners (deaf-mutes) is not a hindrance to their work. The eloquent proof of this statement is
the repeated renewal of their employment contracts. Why then should they be dismissed, simply because they are physically
impaired? The Court believes, that, after showing their fitness for the work assigned to them, they should be treated and
granted the same rights like any other regular employees.

In this light, we note the Office of the Solicitor General's prayer joining the petitioners' cause. 28

WHEREFORE, premises considered, the Petition is hereby GRANTED. The June 20, 1995 Decision and the August 4, 1995
Resolution of the NLRC are REVERSED and SET ASIDE. Respondent Far East Bank and Trust Company is hereby ORDERED to pay
back wages and separation pay to each of the following twenty-seven (27) petitioners.