G.R. No.

178827               March 4, 2009

JEROMIE D. ESCASINAS and EVAN RIGOR SINGCO, Petitioners,

vs.
SHANGRI-LA'S MACTAN ISLAND RESORT and DR. JESSICA J.R. PEPITO, Respondents.

DECISION

CARPIO MORALES, J.:

Registered nurses JEROMIE D. ESCASINAS and EVAN RIGOR SINGCO (petitioners) were engaged in
1999 and 1996, respectively, by Dr. Jessica Joyce R. Pepito (respondent doctor) to work in her clinic at
respondent Shangri-la’s Mactan Island Resort (Shangri-la) in Cebu of which she was a retained
physician.

In late 2002, PETITIONERS filed with the National Labor Relations Commission (NLRC) Regional
Arbitration Branch No. VII (NLRC-RAB No. VII) a complaint1 for regularization, underpayment of wages,
non-payment of holiday pay, night shift differential and 13th month pay differential against respondents,
claiming that they are regular employees of Shangri-la. The case was docketed as RAB Case No. 07-11-
2089-02.

SHANGRI-LA claimed, however, that petitioners were not its employees but of respondent doctor whom it
retained via Memorandum of Agreement (MOA)2 pursuant to Article 157 of the Labor Code (Emergency
medical and dental services), as amended.

Respondent DOCTOR for her part claimed that petitioners were already working for the previous retained
physicians of Shangri-la before she was retained by Shangri-la; and that she maintained petitioners’
services upon their request.

By Decision3 of May 6, 2003, LABOR ARBITER ERNESTO F. CARREON declared petitioners to be

regular employees of Shangri-la. The Arbiter thus ordered Shangri-la to grant them the wages and
benefits due them as regular employees from the time their services were engaged.

In finding petitioners to be regular employees of Shangri-la, the Arbiter noted that (1) they usually perform
work which is necessary and desirable to Shangri-la’s business; that (2) they observe clinic hours and
render services only to Shangri-la’s guests and employees; that (3) payment for their salaries were
recommended to Shangri-la’s Human Resource Department (HRD); that (4) respondent doctor was
Shangri-la’s "in-house" physician, hence, also an employee; and that the (5) MOA between Shangri-la
and respondent doctor was an "insidious mechanism in order to circumvent [the doctor’s] tenurial security
and that of the employees under her."

SHANGRI-LA and RESPONDENT DOCTOR appealed to the NLRC. Petitioners appealed too, but only
with respect to the non-award to them of some of the benefits they were claiming.

By Decision4 dated March 31, 2005, the NLRC granted Shangri-la’s and respondent doctor’s appeal and
dismissed petitioners’ complaint for lack of merit, it finding that (1) no employer-employee relationship
exists between petitioner and Shangri-la. In so deciding, the NLRC held that the Arbiter erred in
interpreting Article 157 in relation to Article 280 of the Labor Code, as what is required under Article 157 is
that the employer should provide the services of medical personnel to its employees, but (2) nowhere in
said article is a provision that nurses are required to be employed; that contrary to the finding of the
Arbiter, (3) even if Article 280 states that if a worker performs work usually necessary or desirable in the
business of the employer, he cannot be automatically deemed a regular employee; and that (4) the MOA
amply shows that respondent doctor was in fact engaged by Shangri-la on a retainer basis, under which
she could hire her own nurses and other clinic personnel.

Brushing aside petitioners’ contention that since their application for employment was addressed to
Shangri-la, it was really Shangri-la which hired them and not respondent doctor, the NLRC noted that the
applications for employment were made by persons who are not parties to the case and were not shown
to have been actually hired by Shangri-la.

On the issue of payment of wages, the NLRC held that the fact that, for some months, payment of
petitioners’ wages were recommended by Shangri-la’s HRD did not prove that it was Shangri-la which
pays their wages. It thus credited respondent doctor’s explanation that the recommendations for payment
were based on the billings she prepared for salaries of additional nurses during Shangri-la’s peak months
of operation, in accordance with the retainership agreement, the guests’ payments for medical services
having been paid directly to Shanrgi-la.
PETITIONERS thereupon brought the case to the Court of Appeals which, by Decision5 of May 22, 2007,
affirmed the NLRC Decision that no employer-employee relationship exists between Shangri-la and
petitioners. The appellate court concluded that (1) all aspects of the employment of petitioners being
under the supervision and control of respondent doctor and (2) since Shangri-la is not principally engaged
in the business of providing medical or healthcare services, petitioners could not be regarded as regular
employees of Shangri-la.

Petitioners’ motion for reconsideration having been denied by Resolution6 of July 10, 2007, they
interposed the present recourse.

PETITIONERS insist that under Article 157 of the Labor Code, (1) Shangri-la is required to hire a full-time
registered nurse, apart from a physician, hence, their engagement should be deemed as regular
employment, the provisions of the MOA notwithstanding; and that (2) the MOA is contrary to public policy
as it circumvents tenurial security and, therefore, should be struck down as being void ab initio. At most,
they argue, the MOA is a mere job contract.

And petitioners maintain that (3) respondent doctor is a labor-only contractor for she has no license or
business permit and no business name registration, which is contrary to the requirements under Sec. 19
and 20 of the Implementing Rules and Regulations of the Labor Code on sub-contracting.

Petitioners add that respondent doctor cannot be a legitimate independent contractor, lacking as she
does in substantial capital, the clinic having been set-up and already operational when she took over as
retained physician; that respondent doctor has no control over how the clinic is being run, as shown by
the different orders issued by officers of Shangri-la forbidding her from receiving cash payments and
several purchase orders for medicines and supplies which were coursed thru Shangri-la’s Purchasing
Manager, circumstances indubitably showing that she is not an independent contractor but a mere agent
of Shangri-la.

In its Comment,7 Shangri-la questions the Special Powers of Attorneys (SPAs) appended to the petition
for being inadequate. On the merits, it prays for the disallowance of the petition, contending that it raises
factual issues, such as the validity of the MOA, which were never raised during the proceedings before
the Arbiter, albeit passed upon by him in his Decision; that Article 157 of the Labor Code does not make it
mandatory for a covered establishment to employ health personnel; that the services of nurses is not
germane nor indispensable to its operations; and that respondent doctor is a legitimate individual
independent contractor who has the power to hire, fire and supervise the work of the nurses under her.

The resolution of the case hinges, in the main, on the correct interpretation of Art. 157 vis a vis Art. 280
and the provisions on permissible job contracting of the Labor Code, as amended.

The Court holds that, contrary to petitioners’ postulation, Art. 157 does not require the engagement of
full-time nurses as regular employees of a company employing not less than 50 workers. Thus, the
Article provides:

ART. 157. Emergency medical and dental services. – It shall be the duty of every employer to furnish his
employees in any locality with free medical and dental attendance and facilities consisting of:

(a) The services of a full-time registered nurse when the number of employees exceeds fifty (50)
but not more than two hundred (200) except when the employer does not maintain hazardous
workplaces, in which case the services of a graduate first-aider shall be provided for the
protection of the workers, where no registered nurse is available. The Secretary of Labor shall
provide by appropriate regulations the services that shall be required where the number of
employees does not exceed fifty (50) and shall determine by appropriate order hazardous
workplaces for purposes of this Article;

(b) The services of a full-time registered nurse, a part-time physician and dentist, and an
emergency clinic, when the number of employees exceeds two hundred (200) but not more than
three hundred (300); and

(c) The services of a full-time physician, dentist and full-time registered nurse as well as a dental
clinic, and an infirmary or emergency hospital with one bed capacity for every one hundred (100)
employees when the number of employees exceeds three hundred (300).

In cases of hazardous workplaces, no employer shall engage the services of a physician or dentist who
cannot stay in the premises of the establishment for at least two (2) hours, in the case of those engaged
on part-time basis, and not less than eight (8) hours in the case of those employed on full-time basis.
Where the undertaking is nonhazardous in nature, the physician and dentist may be engaged on retained
basis, subject to such regulations as the Secretary of Labor may prescribe to insure immediate availability
of medical and dental treatment and attendance in case of emergency. (Emphasis and underscoring
supplied)

Under the foregoing provision, SHANGRI-LA, which employs more than 200 workers, is mandated to
"furnish" its employees with the services of a full-time registered nurse, a part-time physician and
dentist, and an emergency clinic which means that it should provide or make available such medical
and allied services to its employees, not necessarily to hire or employ a service provider. As held in
Philippine Global Communications vs. De Vera:8

x x x while it is true that the provision requires employers to engage the services of medical practitioners
in certain establishments depending on the number of their employees, nothing is there in the law
which says that medical practitioners so engaged be actually hired as employees, adding that the
law, as written, only requires the employer "to retain", not employ, a part-time physician who
needed to stay in the premises of the non-hazardous workplace for two (2) hours. (Emphasis and
underscoring supplied)1avvphi1

The term "full-time" in Art. 157 cannot be construed as referring to the type of employment of the
person engaged to provide the services, for Article 157 must not be read alongside Art. 2809 in
order to vest employer-employee relationship on the employer and the person so engaged. So De Vera
teaches:

x x x For, we take it that any agreement may provide that one party shall render services for and in behalf
of another, no matter how necessary for the latter’s business, even without being hired as an
employee. This set-up is precisely true in the case of an independent contractorship as well as in an
agency agreement. Indeed, Article 280 of the Labor Code, quoted by the appellate court, is not the
yardstick for determining the existence of an employment relationship. As it is, the provision merely
distinguishes between two (2) kinds of employees, i.e., regular and casual. x x x10 (Emphasis and
underscoring supplied)

The phrase "services of a full-time registered nurse" should thus be taken to refer to the kind of
services that the nurse will render in the company’s premises and to its employees, not the manner of
his engagement.

As to whether respondent doctor can be considered a legitimate independent contractor, the pertinent
sections of DOLE Department Order No. 10, series of 1997, illuminate:

Sec. 8. Job contracting. – There is job contracting permissible under the Code if the following conditions
are met:

(1) The contractor carries on an independent business and undertakes the contract work on his
own account under his own responsibility according to his own manner and method, free from the
control and direction of his employer or principal in all matters connected with the performance of
the work except as to the results thereof; and

(2) The contractor has substantial capital or investment in the form of tools, equipment,
machineries, work premises, and other materials which are necessary in the conduct of his
business.

Sec. 9. Labor-only contracting. – (a) Any person who undertakes to supply workers to an employer shall
be deemed to be engaged in labor-only contracting where such person:

(1) Does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises and other materials; and

(2) The workers recruited and placed by such persons are performing activities
which are directly related to the principal business or operations of the employer
in which workers are habitually employed.

(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as
contractor shall be considered merely as an agent or intermediary of the employer who shall be
responsible to the workers in the same manner and extent as if the latter were directly employed
by him.
 (c) For cases not falling under this Article, the Secretary of Labor shall determine through
appropriate orders whether or not the contracting out of labor is permissible in the light of the
circumstances of each case and after considering the operating needs of the employer and the
rights of the workers involved. In such case, he may prescribe conditions and restrictions to
insure the protection and welfare of the workers. (Emphasis supplied)

The existence of an independent and permissible contractor relationship is generally established by

considering the following determinants: whether the contractor is carrying on an independent business;
the nature and extent of the work; the skill required; the term and duration of the relationship; the right to
assign the performance of a specified piece of work; the control and supervision of the work to another;
the employer's power with respect to the hiring, firing and payment of the contractor's workers; the control
of the premises; the duty to supply the premises, tools, appliances, materials and labor; and the mode,
manner and terms of payment.11

On the other hand, existence of an employer- employee relationship is established by the presence of the
following determinants: (1) the selection and engagement of the workers; (2) power of dismissal; (3)
the payment of wages by whatever means; and (4) the power to control the worker's conduct, with
the latter assuming primacy in the overall consideration.12

Against the above-listed determinants, the Court holds that respondent doctor is a legitimate
independent contractor. That Shangri-la provides the clinic premises and medical supplies for use of its
employees and guests does not necessarily prove that respondent doctor lacks substantial capital
and investment. Besides, the maintenance of a clinic and provision of medical services to its employees
is required under Art. 157, which are not directly related to Shangri-la’s principal business –
operation of hotels and restaurants.

As to payment of wages, respondent doctor is the one who underwrites the following: salaries, SSS
contributions and other benefits of the staff13; group life, group personal accident insurance and life/death
insurance14 for the staff with minimum benefit payable at 12 times the employee’s last drawn salary, as
well as value added taxes and withholding taxes, sourced from her ₱60,000.00 monthly retainer fee and
70% share of the service charges from Shangri-la’s guests who avail of the clinic services. It is unlikely
that respondent doctor would report petitioners as workers, pay their SSS premium as well as their wages
if they were not indeed her employees.15

With respect to the supervision and control of the nurses and clinic staff, it is not disputed that a
document, "Clinic Policies and Employee Manual"16 claimed to have been prepared by respondent
doctor exists, to which petitioners gave their conformity17 and in which they acknowledged their co-
terminus employment status. It is thus presumed that said document, and not the employee manual
being followed by Shangri-la’s regular workers, governs how they perform their respective tasks and
responsibilities.

Contrary to petitioners’ contention, the various office directives issued by Shangri-la’s officers do not imply
that it is Shangri-la’s management and not respondent doctor who exercises control over them or that
Shangri-la has control over how the doctor and the nurses perform their work. The letter18 addressed to
respondent doctor dated February 7, 2003 from a certain Tata L. Reyes giving instructions regarding the
replenishment of emergency kits is, at most, administrative in nature, related as it is to safety matters;
while the letter19 dated May 17, 2004 from Shangri-la’s Assistant Financial Controller, Lotlot Dagat,
forbidding the clinic from receiving cash payments from the resort’s guests is a matter of financial policy in
order to ensure proper sharing of the proceeds, considering that Shangri-la and respondent doctor share
in the guests’ payments for medical services rendered. In fine, as Shangri-la does not control how the
work should be performed by petitioners, it is not petitioners’ employer.

WHEREFORE, the petition is hereby DENIED. The Decision of the Court of Appeals dated May 22,
2007 and the Resolution dated July 10, 2007 are AFFIRMED.

SO ORDERED.

CONCHITA CARPIO MORALES

Associate Justice

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

LVN PICTURES, INC., petitioner-appellant,

vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS, respondents-
appellees.
x---------------------------------------------------------x

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

SAMPAGUITA PICTURES, INC., petitioner-appellant,

vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS, respondents-
appellees.

Nicanor S. Sison for petitioner-appellant.

Jaime E. Ilagan for respondent-appellee Court of Agrarian Relations.
Gerardo P. Cabo Chan for respondent-appellee Philippine Musicians Guild.

CONCEPCION, J.:

Petitioners herein, LVN PICTURES, INC. and SAMPAGUITA PICTURES, INC. seek a review
by certiorari of an order of the Court of Industrial Relations in Case No. 306-MC thereof, certifying the
PHILIPPINE MUSICIANS GUILD (FFW), petitioner therein and respondent herein, as the sole and
exclusive bargaining agency of all musicians working with said companies, as well as with the
PREMIERE PRODUCTIONS, INC., which has not appealed. The appeal of LVN Pictures, Inc., has been
docketed as G.R. No. L-12582, whereas G.R. No. L-12598 is the appeal of Sampaguita Pictures, Inc.
Involving as they do the same order, the two cases have been jointly heard in this Court, and will similarly
be disposed of.

In its petition in the lower court, the PHILIPPINE MUSICIANS GUILD (FFW), hereafter referred to as the
Guild, averred that it is a duly registered legitimate labor organization; that LVN PICTURES, INC.,
SAMPAGUITA PICTURES, INC., and PREMIERE PRODUCTIONS, INC. are corporations, duly
organized under the Philippine laws, engaged in the making of motion pictures and in the processing and
distribution thereof; that said companies employ musicians for the purpose of making music recordings for
title music, background music, musical numbers, finale music and other incidental music, without which a
motion picture is incomplete; that ninety-five (95%) percent of all the musicians playing for the musical
recordings of said companies are members of the Guild; and that the same has no knowledge of the
existence of any other legitimate labor organization representing musicians in said companies. Premised
upon these allegations, the GUILD prayed that it be certified as the sole and exclusive bargaining agency
for all musicians working in the aforementioned companies. In their respective answers, the latter denied
that they have any musicians as employees, and alleged that the musical numbers in the filing of the
companies are furnished by independent contractors. The LOWER COURT, however, rejected this
pretense and sustained the theory of the Guild, with the result already adverted to. A reconsideration of
the order complained of having been DENIED by the Court en banc, LVN Pictures, inc., and Sampaguita
Pictures, Inc., filed these petitions for review for certiorari.

Apart from impugning the conclusion of the lower court on the status of the Guild members as alleged
employees of the film companies, the LVN PICTURES, INC., maintains that a petition for certification
cannot be entertained when the existence of employer-employee relationship between the parties
is contested. However, this claim is neither borne out by any legal provision nor supported by any
authority. So long as, after due hearing, the parties are found to bear said relationship, as in the case at
bar, it is proper to pass upon the merits of the petition for certification.

It is next urged that a certification is improper in the present case, because, "(a) the petition does not
allege and no evidence was presented that the alleged musicians-employees of the respondents
constitute a proper bargaining unit, and (b) said alleged musicians-employees represent a majority of the
other numerous employees of the film companies constituting a proper bargaining unit under section 12
(a) of Republic Act No. 875."

The absence of an express allegation that the members of the Guild constitute a proper bargaining unit is
fatal proceeding, for the same is not a "litigation" in the sense in which this term is commonly understood,
but a mere investigation of a non-adversary, fact finding character, in which the investigating agency
plays the part of a disinterested investigator seeking merely to ascertain the desires of employees as to
the matter of their representation. In connection therewith, the court enjoys a wide discretion in
determining the procedure necessary to insure the fair and free choice of bargaining representatives by
employees.1 Moreover, it is alleged in the petition that the Guild it a duly registered legitimate labor
organization and that ninety-five (95%) percent of the musicians playing for all the musical recordings of
the film companies involved in these cases are members of the Guild. Although, in its answer, the LVN
Pictures, Inc. denied both allegations, it appears that, at the hearing in the lower court it was merely the
status of the musicians as its employees that the film companies really contested. Besides, the
substantial difference between the work performed by said musicians and that of other persons who
participate in the production of a film, and the peculiar circumstances under which the services of that
former are engaged and rendered, suffice to show that they constitute a proper bargaining unit. At this
juncture, it should be noted that the action of the lower court in deciding upon an appropriate unit for
collective bargaining purposes is discretionary (N.L.R.B. v. May Dept. Store Co., 66 Sup. Ct. 468. 90 L.
ed. 145) and that its judgment in this respect is entitled to almost complete finality, unless its action is
arbitrary or capricious (Marshall Field & Co. v. N.L.R.B. [C.C.A. 19431, 135 F. 2d. 891), which is far from
being so in the cases at bar.

Again, the Guild seeks to be, and was, certified as the sole and exclusive bargaining agency for the
musicians working in the aforesaid film companies. It does not intend to represent the other employees
therein. Hence, it was not necessary for the Guild to allege that its members constitute a majority of all the
employees of said film companies, including those who are not musicians. The real issue in these cases,
is whether or not the musicians in question are employees of the film companies. In this connection the
lower court had the following to say:

As a normal and usual course of procedure employed by the companies when a picture is to be
made, the producer invariably chooses, from the musical directors, one who will furnish the
musical background for a film. A price is agreed upon verbally between the producer and musical
director for the cost of furnishing such musical background. Thus, the musical director may
compose his own music specially written for or adapted to the picture. He engages his own men
and pays the corresponding compensation of the musicians under him.

When the music is ready for recording, the musicians are summoned through 'call slips' in the
name of the film company (Exh 'D'), which show the name of the musician, his musical
instrument, and the date, time and place where he will be picked up by the truck of the film
company. The film company provides the studio for the use of the musicians for that particular
recording. The musicians are also provided transportation to and from the studio by the company.
Similarly, the company furnishes them meals at dinner time.

During the recording sessions, the motion picture director, who is an employee of the company,
supervises the recording of the musicians and tells what to do in every detail. He solely directs
the performance of the musicians before the camera as director, he supervises the performance
of all the action, including the musicians who appear in the scenes so that in the actual
performance to be shown on the screen, the musical director's intervention has stopped.

And even in the recording sessions and during the actual shooting of a scene, the technicians,
soundmen and other employees of the company assist in the operation. Hence, the work of the
musicians is an integral part of the entire motion picture since they not only furnish the
music but are also called upon to appear in the finished picture.

The question to be determined next is what legal relationship exits between the musicians and
the company in the light of the foregoing facts.

We are thus called upon to apply R.A. Act 875. which is substantially the same as and patterned
after the Wagner Act substantially the same as a Act and the Taft-Hartley Law of the United
States. Hence, reference to decisions of American Courts on these laws on the point-at-issue is
called for.

Statutes are to be construed in the light of purposes achieved and the evils sought to be
remedied. (U.S. vs. American Tracking Association, 310 U.S. 534, 84 L. ed. 1345.) .

In the case of National Labor Relations Board vs. Hearts Publication, 322 U.S. 111, the United
States Supreme Court said the Wagner Act was designed to avert the 'substantial obstruction to
the free flow of commerce which results from strikes and other forms of industrial unrest by
eliminating the causes of the unrest. Strikes and industrial unrest result from the refusal of
employers' to bargain collectively and the inability of workers to bargain successfully for
improvement in their working conditions. Hence, the purposes of the Act are to encourage
collective bargaining and to remedy the workers' inability to bargaining power, by protecting the
exercise of full freedom of association and designation of representatives of their own choosing,
for the purpose of negotiating the terms and conditions of their employment.'

The mischief at which the Act is aimed and the remedies it offers are not confined exclusively to
'employees' within the traditional legal distinctions, separating them from 'independent contractor'.
Myriad forms of service relationship, with infinite and subtle variations in the term of employment,
blanket the nation's economy. Some are within this Act, others beyond its coverage. Large
numbers will fall clearly on one side or on the other, by whatever test may be applied. Inequality
of bargaining power in controversies of their wages, hours and working conditions may
characterize the status of one group as of the other. The former, when acting alone may be as
helpless in dealing with the employer as dependent on his daily wage and as unable to resist
arbitrary and unfair treatment as the latter.'

To eliminate the causes of labor dispute and industrial strike, Congress thought it necessary to
create a balance of forces in certain types of economic relationship. Congress recognized those
economic relationships cannot be fitted neatly into the containers designated as 'employee' and
'employer'. Employers and employees not in proximate relationship may be drawn into common
controversies by economic forces and that the very dispute sought to be avoided might involve
'employees' who are at times brought into an economic relationship with 'employers', who are not
their 'employers'. In this light, the language of the Act's definition of 'employee' or 'employer'
should be determined broadly in doubtful situations, by underlying economic facts rather than
technically and exclusively established legal classifications. (NLRB vs. Blount, 131 F [2d] 585.)

In other words, the scope of the term 'employee' must be understood with reference to the
purposes of the Act and the facts involved in the economic relationship. Where all the conditions
of relation require protection, protection ought to be given .

By declaring a worker an employee of the person for whom he works and by recognizing and
protecting his rights as such, we eliminate the cause of industrial unrest and consequently we
promote industrial peace, because we enable him to negotiate an agreement which will settle
disputes regarding conditions of employment, through the process of collective bargaining.

The statutory definition of the word 'employee' is of wide scope. As used in the Act, the term
embraces 'any employee' that is all employees in the conventional as well in the legal sense
expect those excluded by express provision. (Connor Lumber Co., 11 NLRB 776.).

It is the purpose of the policy of Republic Act 875; (a) To eliminate the causes of industrial unrest
by protecting the exercise of their right to self-organization for the purpose of collective
bargaining. (b) To promote sound stable industrial peace and the advancement of the general
welfare, and the best interests of employers and employees by the settlement of issues
respecting terms and conditions of employment through the process of collective bargaining
between employers and representatives of their employees.

The primary consideration is whether the declared policy and purpose of the Act can be
effectuated by securing for the individual worker the rights and protection guaranteed by the Act.
The matter is not conclusively determined by a contract which purports to establish the status of
the worker, not as an employee.

The work of the musical director and musicians is a functional and integral part of the enterprise
performed at the same studio substantially under the direction and control of the company.

In other words, to determine whether a person who performs work for another is the latter's
employee or an independent contractor, the National Labor Relations relies on 'the right to
control' test. Under this test an employer-employee relationship exist where the person for
whom the services are performed reserves the right to control not only the end to be
achieved, but also the manner and means to be used in reaching the end. (United Insurance
Company, 108, NLRB No. 115.).

Thus, in said similar case of Connor Lumber Company, the Supreme Court said:.

'We find that the independent contractors and persons working under them are
employees' within the meaning of Section 2 (3) of its Act. However, we are of the opinion
that the independent contractors have sufficient authority over the persons working under
their immediate supervision to warrant their exclusion from the unit.  We shall include in
the unit the employees working under the supervision of the independent contractors, but
exclude the contractors.'

'Notwithstanding that the employees are called independent contractors', the Board will hold them
to be employees under the Act where the extent of the employer's control over them indicates
that the relationship is in reality one of employment. (John Hancock Insurance Co., 2375-D, 1940,
Teller, Labor Dispute Collective Bargaining, Vol.).

The right of control of the film company over the musicians is shown (1) by calling the
musicians through 'call slips' in 'the name of the company; (2) by arranging schedules in
 its studio for recording sessions; (3) by furnishing transportation and meals to musicians;
and (4) by supervising and directing in detail, through the motion picture director, the
performance of the musicians before the camera, in order to suit the music they are
playing to the picture which is being flashed on the screen.

Thus, in the application of Philippine statutes and pertinent decisions of the United States Courts
on the matter to the facts established in this case, we cannot but conclude that to effectuate the
policies of the Act and by virtue of the 'right of control' test, the members of the Philippine
Musicians Guild are employees of the three film companies and, therefore, entitled to right
of collective bargaining under Republic Act No. 875.

In view of the fact that the three (3) film companies did not question the union's majority, the
PHILIPPINE MUSICIANS GUILD is hereby declared as the sole collective bargaining
representative for all the musicians employed by the film companies."

We are fully in agreement with the foregoing conclusion and the reasons given in support thereof. Both
are substantially in line with the spirit of our decision in Maligaya Ship Watchmen Agency vs. Associated
Watchmen and Security Union, L-12214-17 (May 28, 1958). In fact, the contention of the employers in
the Maligaya cases, to the effect that they had dealt with independent contractors, was stronger than that
of the film companies in these cases. The third parties with whom the management and the workers
contracted in the Maligaya cases were agencies registered with the Bureau of Commerce and duly
licensed by the City of Manila to engage in the business of supplying watchmen to steamship
companies, with permits  to engage in said business issued by the City Mayor and the Collector of
Customs. In the cases at bar, the musical directors with whom the film companies claim to have dealt
with had nothing comparable to the business standing of said watchmen agencies. In this respect, the
status of said musical directors is analogous to that of the alleged independent contractor in Caro vs.
Rilloraza, L-9569 (September 30, 1957), with the particularity that the Caro case involved
the  enforcement of the liability of an employer under the Workmen's Compensation Act, whereas the
cases before us are merely concerned with the right of the Guild to represent the musicians as a
collective bargaining unit. Hence, there is less reason to be legalistic and technical in these cases, than in
the Caro case.

Herein, petitioners-appellants cite, in support of their appeal, the cases of Sunripe Coconut Product Co.,
Inc vs. CIR (46 Off. Gaz., 5506, 5509), Philippine Manufacturing Co. vs. Santos Vda. de Geronimo, L-
6968 (November 29, 1954), Viana vs. Al-Lagadan, L-8967 (May 31, 1956), and  Josefa Vda. de Cruz vs.
The Manila Hotel Co. (53 Off. Gaz., 8540). Instead of favoring the theory of said petitioners-appellants,
the case of the Sunripe Coconut Product Co., Inc. is authority for herein respondents-appellees. It was
held that, although engaged as piece-workers, under the "pakiao" system, the "parers" and "shellers" in
the case were, not independent contractor, but employees of said company, because "the requirement
imposed on the 'parers' to the effect that 'the nuts are pared whole or that there is not much meat wasted,'
in effect  limits or controls the means or details by which said workers are to accomplish their services" —
as in the cases before us.

The nature of the relation between the parties was not settled in the Viana case, the same having been
remanded to the Workmen's Compensation Commission for further evidence.

The case of the  Philippine Manufacturing Co. involved a contract between said company and Eliano
Garcia, who undertook to paint a tank of the former. Garcia, in turn engaged the services of Arcadio
Geronimo, a laborer, who fell while painting the tank and died in consequence of the injuries thus
sustained by him. Inasmuch as the company was engaged in the manufacture of soap, vegetable lard,
cooking oil and margarine, it was held that the connection between its business and the painting
aforementioned was purely casual; that Eliano Garcia was an independent contractor; that Geronimo was
not an employee of the company; and that the latter was not bound, therefore, to pay the compensation
provided in the Workmen's Compensation Act. Unlike the Philippine Manufacturing case, the relation
between the business of herein petitioners-appellants and the work of the musicians is not casual. As
held in the order appealed from which, in this respect, is not contested by herein petitioners-appellants —
"the work of the musicians is an integral part of the entire motion picture." Indeed, one can hardly find
modern films without music therein. Hence, in the Caro case (supra), the owner and operator of buildings
for rent was held bound to pay the indemnity prescribed in the Workmen's Compensation Act for the
injury suffered by a carpenter while working as such in one of said buildings even though his services had
been allegedly engaged by a third party who had directly contracted with said owner. In other words, the
repair work had not merely a casual connection with the business of said owner. It was a necessary
incident thereof, just as music is in the production of motion pictures.

The case of Josefa Vda. de Cruz vs. The Manila Hotel Co., L-9110 (April 30, 1957) differs materially from
the present cases. It involved the interpretation of Republic Act No. 660, which amends the law creating
and establishing the Government Service Insurance System. No labor law was sought to be construed in
that case. In act, the same was originally heard in the Court of First Instance of Manila, the decision of
which was, on appeal, affirmed by the Supreme Court. The meaning or scope if the term "employee," as
used in the Industrial Peace Act (Republic Act No. 875), was not touched therein. Moreover, the subject
matter of said case was a contract between the management of the Manila Hotel, on the one hand, and
Tirso Cruz, on the other, whereby the latter greed to furnish the former the services of his orchestra,
consisting of 15 musicians, including Tirso Cruz, "from 7:30 p.m. to closing time daily." In the language of
this court in that case, "what pieces the orchestra shall play, and how the music shall be arranged or
directed, the intervals and other details — such are left to the leader's discretion."

This is not situation obtaining in the case at bar. The musical directors above referred to have no such
control over the musicians involved in the present case. Said musical directors control neither the music
to be played, nor the musicians playing it. The film companies summon the musicians to work, through
the musical directors. The film companies, through the musical directors, fix the date, the time and
the place of work. The film companies, not the musical directors, provide the transportation to and from
the studio. The film companies furnish meal at dinner time.

What is more — in the language of the order appealed from — "during the recording sessions, the motion
picture director who is an employee of the company" — not the musical director — "supervises the
recording of the musicians and tells them what to do in every detail". The motion picture director — not
the musical director — "solely directs and performance of the musicians before the camera". The motion
picture director "supervises the performance of all the actors, including the musicians who appear in the
scenes, so that in the actual performance to be shown in the screen, the musical director's intervention
has stopped." Or, as testified to in the lower court, "the movie director tells the musical director what to
do; tells the music to be cut or tells additional music in this part or he eliminates the entire music he does
not (want) or he may want more drums or move violin or piano, as the case may be". The movie director
"directly controls the activities of the musicians." He "says he wants more drums and the drummer plays
more" or "if he wants more violin or he does not like that.".

It is well settled that "an employer-employee relationship exists . . .where the person for whom the
services are performed reserves a right to control not only the end to be achieved but also the
means  to be used in reaching such end . . . ." (Alabama Highway Express Co., Express Co., v. Local
612, 108S. 2d. 350.) The decisive nature of said control over the "means to be used", is illustrated in the
case of Gilchrist Timber Co., et al., Local No. 2530 (73 NLRB No. 210, pp. 1197, 1199-1201), in which, by
reason of said control, the employer-employee relationship was held to exist between the management
and the workers, notwithstanding the intervention of an alleged independent contractor, who had,
and exercise, the power to hire and fire said workers. The aforementioned control over the means
to be used" in reading the desired end is possessed and exercised by the film companies over the
musicians in the cases before us.

WHEREFORE, the order appealed from is hereby affirmed, with costs against petitioners herein. It is so
ordered.

Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera, Paredes and Dizon,
JJ., concur.
Gutierrez David, J., took no part.

[G.R. NO. 171814 : May 8, 2009]

SOUTH DAVAO DEVELOPMENT COMPANY, INC. (NOW SODACO AGRICULTURAL

CORPORATION) AND/OR MALONE PACQUIAO AND VICTOR A. CONSUNJI, Petitioners, v. SERGIO
L. GAMO, ERNESTO BELLEZA, FELIX TERONA, CARLOS ROJAS, MAXIMO MALINAO, VIRGILIO
COSEP, ELEONOR COSEP, MAXIMO TOLDA, NELSON BAGAAN, and TRADE UNION OF THE
PHILIPPINES and ALLIED SERVICES (TUPAS), Respondents.

D E C I S I ON

TINGA, J.:

Before us is a Rule 45 petition1 which seeks the reversal of the Court of Appeals' decision2 and
resolution3 in CA-G.R. SP No. 68511. The Court of Appeal's decision reinstated the NLRC's
Resolution4 dated 23 March 2001 which reversed the labor arbiter's decision.5

Petitioner SOUTH DAVAO DEVELOPMENT COMPANY (petitioner or petitioner corporation) is the

operator of a coconut and mango farm in San Isidro, Davao Oriental and Inawayan/Baracatan, Davao del
Sur. On August 1963 petitioner hired respondent SERGIO L. GAMO (Gamo) as a foreman. Sometime in
1987, petitioner appointed Gamo as a copra maker contractor. Respondents Ernesto Belleza, Carlos
Rojas, Maximo Malinao were all employees in petitioner's coconut farm, while respondents Felix Terona,
Virgilio Cosep, Maximo Tolda, and Nelson Bagaan were assigned to petitioner's mango farm. All of the
abovenamed respondents (copra workers) were later transferred by petitioner to Gamo as the latter's
copraceros. From 1987 to 1999, Gamo and petitioner entered into a profit-sharing agreement wherein
70% of the net proceeds of the sale of copra went to petitioner and 30% to Gamo. The copra workers
were paid by Gamo from his 30% share.

Petitioner wanted to standardize payments to its "contractors" in its coconut farms. On 2 October 1999,
petitioner proposed a new payment scheme to Gamo. The new scheme provided a specific price for each
copra making activity. Gamo submitted his counter proposal.6 Petitioner did not accept Gamo's counter
proposal since it was higher by at least fifty percent (50%) from its original offer. Without agreeing to the
new payment scheme, Gamo and his copra workers started to do harvesting work. Petitioner told them to
stop. Eventually, petitioner and Gamo agreed that the latter may continue with the harvest provided that it
would be his last "contract" with petitioner. Gamo suggested to petitioner to look for a new "contractor"
since he was not amenable to the new payment scheme.7

Gamo and petitioner failed to agree on a payment scheme, thus, petitioner did not renew the "contract" of
Gamo. Gamo and the copra workers alleged that they were illegally dismissed.

On the other hand, respondent Eleonor Cosep (Eleonor) was employed as a mango classifier in the
packing house of petitioner's mango farm in San Isidro, Davao Oriental. Sometime in October 1999, she
did not report for work as she had wanted to raise and sell pigs instead. Petitioner, through Malone
Pacquiao, tried to convince Eleonor to report for work but to no avail.

On 22 March 2000, respondents filed a complaint8 for illegal dismissal against petitioner. They alleged
that sometime in December 1999, petitioner verbally terminated them en masse.

The labor arbiter dismissed9 the complaint. He ruled that there was no employee-employer relationship
between petitioner and respondents. As to Eleonor, he ruled that she had voluntarily stopped working.

Respondents appealed to the National Labor Relations Commission (NLRC). The NLRC's
Resolution10 reversed the arbiter's decision and ruled that respondents were petitioner's employees.
Petitioner moved11 for reconsideration. The NLRC granted12 the motion for reconsideration and ruled that
the nature of the job of the respondents could not result in an employer-employee relationship.
Respondents moved for reconsideration which was denied.13

Respondents filed a petition for certiorari 14 under Rule 65 with the Court of Appeals. The Court of
Appeals ruled that there existed an employer-employee relationship. It declared that respondents were
regular seasonal employees who can be dismissed by the petitioner at the end of the season provided
due process is observed.15 With regard to Eleonor, the Court of Appeals ruled that she did not abandon
her work.

Hence this petition.

Petitioner raises the following issues: (1) whether the Court of Appeals failed to take judicial notice of the
accepted practice of independent contractors in the coconut industry; (2) whether there is a valid job
contracting between petitioner and Gamo; and (3) whether Eleonor had effectively abandoned her work.

The labor arbiter took judicial notice of the alleged prevailing business practices in the coconut industry
that copra making activities are done quarterly; that the workers can contract with other farms; and that
the workers are independent from the land owner on all work aspects. Petitioner wants this Court to take
judicial notice of the current business practice in the coconut industry which allegedly
treats copraceros as independent contractors. In Expertravel & Tours, Inc. v. Court of Appeals, 16 we
held, thus:

Generally speaking, matters of judicial notice have three material requisites: (1) the matter must be one of
common and general knowledge; (2) it must be well and authoritatively settled and not doubtful or
uncertain; and (3) it must be known to be within the limits of the jurisdiction of the court. The principal
guide in determining what facts may be assumed to be judicially known is that of notoriety.17 Hence, it can
be said that judicial notice is limited to facts evidenced by public records and facts of general notoriety.
Moreover, a judicially noticed fact must be one not subject to a reasonable dispute in that it is either: (1)
generally known within the territorial jurisdiction of the trial court; or (2) capable of accurate and ready
determination by resorting to sources whose accuracy cannot reasonably be questionable.18

Things of "common knowledge," of which courts take judicial matters coming to the knowledge of men
generally in the course of the ordinary experiences of life, or they may be matters which are generally
accepted by mankind as true and are capable of ready and unquestioned demonstration. Thus, facts
which are universally known, and which may be found in encyclopedias, dictionaries or other publications,
are judicially noticed, provided, they are of such universal notoriety and so generally understood that they
may be regarded as forming part of the common knowledge of every person. As the common knowledge
of man ranges far and wide, a wide variety of particular facts have been judicially noticed as being
matters of common knowledge. But a court cannot take judicial notice of any fact which, in part, is
dependent on the existence or non-existence of a fact of which the court has no constructive knowledge.19

An invocation that the Court take judicial notice of certain facts should satisfy the requisites set forth by
case law. A mere prayer for its application shall not suffice. Thus, in this case the Court cannot take
judicial notice of the alleged business practices in the copra industry since none of the material requisites
of matters of judicial notice is present in the instant petition. The record is bereft of any indication that the
matter is of common knowledge to the public and that it has the characteristic of notoriety, except
petitioners' self-serving claim.

A related issue is whether Gamo is an independent contractor. In Escario v. NLRC,20 we ruled that there
is permissible job contracting when a principal agrees to put out or farm out with a contractor or a
subcontractor the performance or completion of a specific job, work or service within a definite or
predetermined period, regardless of whether such job or work service is to be performed within or outside
the premises of the principal.21 To establish the existence of an independent contractor, we apply the
following conditions: first, 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 to the result thereof; and second, the contractor has substantial capital or investments in the
form of tools, equipment, machineries, work premises and other materials which are necessary in the
conduct of his business.22

The Implementing Rules and Regulation of the Labor Code defines investment as 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.23 The investment must be
sufficient to carry out the job at hand.

In the case at bar, Gamo and the copra workers did not exercise independent judgment in the
performance of their tasks. The tools used by Gamo and his copra workers like the karit, bolo, pangbunot,
panglugit and pangtapok are not sufficient to enable them to complete the job.24 Reliance on these
primitive tools is not enough. In fact, the accomplishment of their task required more expensive
machineries and equipment, like the trucks to haul the harvests and the drying facility, which petitioner
corporation owns.

In order to determine the existence of an employer-employee relationship, the Court has frequently
applied the four-fold test: (1) the selection and engagement of the employee; (2) the payment of wages;
(3) the power of dismissal; and (4) the power to control the employee's conduct, or the so called "control
test," which is considered the most important element.25 From the time they were hired by petitioner
corporation up to the time that they were reassigned to work under Gamo's supervision, their status as
petitioner corporation's employees did not cease. Likewise, payment of their wages was merely coursed
through Gamo. As to the most determinative test―the power of control, it is sufficient that the power to
control the manner of doing the work exists, it does not require the actual exercise of such power.26 In this
case, it was in the exercise of its power of control when petitioner corporation transferred the copra
workers from their previous assignments to work as copraceros. It was also in the exercise of the same
power that petitioner corporation put Gamo in charge of the copra workers although under a different
payment scheme. Thus, it is clear that an employer-employee relationship has existed between petitioner
corporation and respondents since the beginning and such relationship did not cease despite their
reassignments and the change of payment scheme.

As to the last issue, petitioner seeks our indulgence to declare that Eleonor has abandoned her work.
Petitioner admitted that Eleonor was its regular employee.27 However, it claimed that she abandoned her
work, preferring to sell and raise pigs instead.

It is well settled that abandonment as a just and valid ground for dismissal requires the deliberate and
unjustified refusal of the employee to return for work. Two elements must be present, namely: (1) the
failure to report for work or absence without valid or justifiable reason, and (2) a clear intention to sever
the employer-employee relationship. The second element is more determinative of the intent and must be
evinced by overt acts. Mere absence, not being sufficient, the burden of proof rests upon the

employer to show that the employee clearly and deliberately intended to discontinue her employment
without any intention of returning.28 In Samarca v. Arc-Men Industries, Inc, we held that abandonment is a
matter of intention and cannot lightly be presumed from certain equivocal acts.ςηαñrοblεš νιr†υ
αl lαω lιbrαrÿ

To constitute abandonment, there must be clear proof of deliberate and unjustified intent to sever the
employer-employee relationship. Clearly, the operative act is still the employee's ultimate act of putting an
end to his employment.29 However, an employee who takes steps to protest her layoff cannot be said to
have abandoned her work because 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.30 When
Eleonor filed the illegal dismissal complaint, it totally negated petitioner's theory of abandonment.

Also, to effectively dismiss an employee for abandonment, the employer must comply with the due
process requirement of sending notices to the employee. In Brahm Industries, Inc. v. NLRC,31 we ruled
that this requirement is not a mere formality that may be dispensed with at will. Its disregard is a matter of
serious concern since it constitutes a safeguard of the highest order in response to man's innate sense of
justice.32 Petitioner was not able to send the necessary notice requirement to Eleonor. Petitioner's belated
claim that it was not able to send the notice of infraction prior to the filing of the illegal dismissal case
cannot simply unacceptable.33 Based on the foregoing, Eleonor did not abandon her work.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals is AFFIRMED. Cost against
petitioner.

SO ORDERED.

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

DY KEH BENG, Petitioner, vs. INTERNATIONAL LABOR and MARINE UNION OF THE PHILIPPINES,

ET AL., Respondents.

A. M Sikat for petitioner.chanrobles virtual law library

D. A. Hernandez for respondents.

DE CASTRO, J.:

Petitioner Dy Keh Beng seeks a review by certiorari of the decision of the Court of Industrial Relations
dated March 23, 1970 in Case No. 3019-ULP and the Court's Resolution en banc of June 10, 1970
affirming said decision. The Court of Industrial Relations in that case found Dy Keh Beng guilty of the
unfair labor practice acts alleged and order him to

reinstate Carlos Solano and Ricardo Tudla to their former jobs with backwages from their respective
dates of dismissal until fully reinstated without loss to their right of seniority and of such other rights
already acquired by them and/or allowed by law. 1chanrobles virtual law library

Now, Dy Keh Beng assigns the following errors 2as having been committed by the Court of Industrial
Relations: chanrobles virtual law library

RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND TUDLA WERE
EMPLOYEES OF PETITIONERS.

II

RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND TUDLA WERE
DISMISSED FROM THEIR EMPLOYMENT BY PETITIONER.

III

RESPONDENT COURT ERRED IN FINDING THAT THE TESTIMONIES ADDUCED BY COMPLAINANT

ARE CONVINCING AND DISCLOSES (SIC) A PATTERN OF DISCRIMINATION BY THE PETITIONER
HEREIN.

IV
RESPONDENT COURT ERRED IN DECLARING PETITIONER GUILTY OF UNFAIR LABOR PRACTICE
ACTS AS ALLEGED AND DESCRIBED IN THE COMPLAINT.

RESPONDENT COURT ERRED IN PETITIONER TO REINSTATE RESPONDENTS TO THEIR

FORMER JOBS WITH BACKWAGES FROM THEIR RESPECTIVE DATES OF DISMISSALS UNTIL
FINALLY REINSTATED WITHOUT LOSS TO THEIR RIGHT OF SENIORITY AND OF SUCH OTHER
RIGHTS ALREADY ACQUIRED BY THEM AND/OR ALLOWED BY LAW.

The facts as found by the Hearing Examiner are as follows: chanrobles virtual law library

A charge of unfair labor practice was filed against Dy Keh Beng, proprietor of a basket factory, for
discriminatory acts within the meaning of Section 4(a), sub-paragraph (1) and (4). Republic Act No.
875, 3 by dismissing on September 28 and 29, 1960, respectively, Carlos N. Solano and Ricardo Tudla for
their union activities. After preliminary investigation was conducted, a case was filed in the Court of
Industrial Relations for in behalf of the International Labor and Marine Union of the Philippines and two of
its members, Solano and Tudla In his answer, Dy Keh Beng contended that he did not know Tudla and
that Solano was not his employee because the latter came to the establishment only when there was
work which he did on pakiaw  basis, each piece of work being done under a separate contract. Moreover,
Dy Keh Beng countered with a special defense of simple extortion committed by the head of the labor
union, Bienvenido Onayan.chanroblesvirtualawlibrary chanrobles virtual law library

After trial, the Hearing Examiner prepared a report which was subsequently adopted in toto  by the Court
of Industrial Relations. An employee-employer relationship was found to have existed between Dy Keh
Beng and complainants Tudla and Solano, although Solano was admitted to have worked on piece
basis. 4 The issue therefore centered on whether there existed an employee employer relation between
petitioner Dy Keh Beng and the respondents Solano and Tudla .chanroblesvirtualawlibrarychanrobles
virtual law library

According to the Hearing Examiner, the evidence for the complainant Union tended to show that Solano
and Tudla became employees of Dy Keh Beng from May 2, 1953 and July 15, 1955, 5 respectively, and
that except in the event of illness, their work with the establishment was continuous although their
services were compensated on piece basis. Evidence likewise showed that at times the establishment
had eight (8) workers and never less than five (5); including the complainants, and that complainants
used to receive ?5.00 a day. sometimes less. 6chanrobles virtual law library

According to Dy Keh Beng, however, Solano was not his employee for the following reasons:

(1) Solano never stayed long enought at Dy's establishment; chanrobles virtual law library

(2) Solano had to leave as soon as he was through with the chanrobles virtual law library

(3) order given him by Dy; chanrobles virtual law library

(4) When there were no orders needing his services there was nothing for him to do; chanrobles virtual
law library

(5) When orders came to the shop that his regular workers could not fill it was then that Dy went to his
address in Caloocan and fetched him for these orders; and chanrobles virtual law library

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

According to petitioner, these facts show that respondents Solano and Tudla are only piece workers, not
employees under Republic Act 875, where an employee 8 is referred to as

shall include any employee and shag not be limited to the employee of a particular employer unless the
Act explicitly states otherwise and shall include any individual whose work has ceased as a consequence
of, or in connection with any current labor dispute or because of any unfair labor practice and who has not
obtained any other substantially equivalent and regular employment.

while an employer 9
includes any person acting in the interest of an employer, directly or indirectly but shall not include any
labor organization (otherwise than when acting as an employer) or anyone acting in the capacity of officer
or agent of such labor organization.

Petitioner really anchors his contention of the non-existence of employee-employer relationship on the
control test. He points to the case of Madrigal Shipping Co., Inc. v. Nieves Baens del Rosario, et al., L-
13130, October 31, 1959, where the Court ruled that:

The test ... of the existence of employee and employer relationship is whether there is an understanding
between the parties that one is to render personal services to or for the benefit of the other and
recognition by them of the right of one to order and control the other in the performance of the work and to
direct the manner and method of its performance.

Petitioner contends that the private respondents "did not meet the control test in the fight of the ...
definition of the terms employer and employee, because there was no evidence to show that petitioner
had the right to direct the manner and method of respondent's work. 10 Moreover, it is argued that
petitioner's evidence showed that "Solano worked on a pakiaw basis" and that he stayed in the
establishment only when there was work.chanroblesvirtualawlibrary chanrobles virtual law library

While this Court upholds the control test 11 under which an employer-employee relationship exists "where
the person for whom the services are performed reserves a right to control not only the end to be
achieved but also the means to be used in reaching such end, " it finds no merit with petitioner's
arguments as stated above. It should be borne in mind that the control test calls merely for the existence
of the right to control the manner of doing the work, not the actual exercise of the right. 12Considering the
finding by the Hearing Examiner that the establishment of Dy Keh Beng is "engaged in the manufacture of
baskets known as kaing, 13it is natural to expect that those working under Dy would have to observe,
among others, Dy's requirements of size and quality of the kaing. Some control would necessarily be
exercised by Dy as the making of the kaing would be subject to Dy's specifications. Parenthetically, since
the work on the baskets is done at Dy's establishments, it can be inferred that the proprietor Dy could
easily exercise control on the men he employed.chanroblesvirtualawlibrary chanrobles virtual law library

As to the contention that Solano was not an employee because he worked on piece basis, this Court
agrees with the Hearing Examiner that

circumstances must be construed to determine indeed if payment by the piece is just a method of
compensation and does not define the essence of the relation. Units of time ... and units of work are in
establishments like respondent (sic) just yardsticks whereby to determine rate of compensation, to be
applied whenever agreed upon. We cannot construe payment by the piece where work is done in such an
establishment so as to put the worker completely at liberty to turn him out and take in another at pleasure.

At this juncture, it is worthy to note that Justice Perfecto, concurring with Chief Justice Ricardo Paras who
penned the decision in "Sunrise Coconut Products Co. v. Court of Industrial Relations" (83 Phil..518,
523), opined that

judicial notice of the fact that the so-called "pakyaw" system mentioned in this case as generally practiced
in our country, is, in fact, a labor contract -between employers and employees, between capitalists and
laborers.

Insofar as the other assignments of errors are concerned, there is no showing that the Court of Industrial
Relations abused its discretion when it concluded that the findings of fact made by the Hearing Examiner
were supported by evidence on the record. Section 6, Republic Act 875 provides that in unfair labor
practice cases, the factual findings of the Court of Industrial Relations are conclusive on the Supreme
Court, if supported by substantial evidence. This provision has been put into effect in a long line of
decisions where the Supreme Court did not reverse the findings of fact of the Court of Industrial Relations
when they were supported by substantial evidence. 14 chanrobles virtual law library

Nevertheless, considering that about eighteen (18) years have already elapsed from the time the
complainants were dismissed, 15and that the decision being appealed ordered the payment of backwages
to the employees from their respective dates of dismissal until finally reinstated, it is fitting to apply in this
connection the formula for backwages worked out by Justice Claudio Teehankee in "cases not terminated
sooner." 16 The formula cans for fixing the award of backwages without qualification and deduction to
three years, "subject to deduction where there are mitigating circumstances in favor of the employer but
subject to increase by way of exemplary damages where there are aggravating
circumstances. 17 Considering there are no such circumstances in this case, there is no reason why the
Court should not apply the abovementioned formula in this
instance.chanroblesvirtualawlibrary chanrobles virtual law library
WHEREFORE; the award of backwages granted by the Court of Industrial Relations is herein modified to
an award of backwages for three years without qualification and deduction at the respective rates of
compensation the employees concerned were receiving at the time of dismissal. The execution of this
award is entrusted to the National Labor Relations Commission. Costs against
petitioner.chanroblesvirtualawlibrary chanrobles virtual law library

SO ORDERED.

Teehankee, Makasiar, Guerrero, and Melencio-Herrera, JJ.,

concur.chanroblesvirtualawlibrary  chanrobles virtual law library

Fernandez, J., took no part.

G.R. No. 129315               October 2, 2000

OSIAS I. CORPORAL, SR., PEDRO TOLENTINO, MANUEL CAPARAS, ELPIDIO LACAP, SIMPLICIO
PEDELOS, PATRICIA NAS, and TERESITA FLORES, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LAO ENTENG COMPANY, INC. and/or TRINIDAD
LAO ONG, respondents.

DECISION

QUISUMBING, J.:

This special civil action for certiorari seeks the review of the Resolution dated October 17, 1996 of public
respondent National Labor Relations Commission (First Division),1 in NLRC NCR Case No. 00-04-03163-
95, and the Resolution dated March 5, 1997 denying the motion for reconsideration. The aforecited
October 17th Resolution affirmed the Decision dated September 28, 1996 of Labor Arbiter Potenciano S.
Cañizares dismissing the petitioners' complaint for illegal dismissal and declaring that petitioners are not
regular employees of private respondent Lao Enteng Company, Inc..

The records of the case show that the five male petitioners, namely, Osias I. Corporal, Sr., Pedro
Tolentino, Manuel Caparas, Elpidio Lacap, and Simplicio Pedelos worked as barbers, while the two
female petitioners, Teresita Flores and Patricia Nas worked as manicurists in New Look Barber Shop
located at 651 P. Paterno Street, Quiapo, Manila owned by private respondent Lao Enteng Co. Inc..
Petitioner Nas alleged that she also worked as watcher and marketer of private respondent.

Petitioners claim that at the start of their employment with the New Look Barber Shop, it was a single
proprietorship owned and managed by Mr. Vicente Lao. In or about January 1982, the children of Vicente
Lao organized a corporation which was registered with the Securities and Exchange Commission as Lao
Enteng Co. Inc. with Trinidad Ong as President of the said corporation. Upon its incorporation, the
respondent company took over the assets, equipment, and properties of the New Look Barber Shop and
continued the business. All the petitioners were allowed to continue working with the new company until
April 15, 1995 when respondent Trinidad Ong informed them that the building wherein the New Look
Barber Shop was located had been sold and that their services were no longer needed.2

On April 28, 1995, petitioners filed with the Arbitration Branch of the NLRC, a complaint for illegal
dismissal, illegal deduction, separation pay, non-payment of 13th month pay, and salary differentials. Only
petitioner Nas asked for payment of salary differentials as she alleged that she was paid a daily wage of
P25.00 throughout her period of employment. The petitioners also sought the refund of the P1.00 that the
respondent company collected from each of them daily as salary of the sweeper of the barber shop.

Private respondent in its position paper averred that the petitioners were joint venture partners and were
receiving fifty percent commission of the amount charged to customers. Thus, there was no employer-
employee relationship between them and petitioners. And assuming arguendo, that there was an
employer-employee relationship, still petitioners are not entitled to separation pay because the cessation
of operations of the barber shop was due to serious business losses.

Respondent Trinidad Lao Ong, President of respondent Lao Enteng Co. Inc., specifically stated in her
affidavit dated September 06, 1995 that Lao Enteng Company, Inc. did not take over the management of
the New Look Barber Shop, that after the death Lao Enteng petitioner were verbally informed time and
again that the partnership may fold up anytime because nobody in the family had the time to be at the
barber shop to look after their interest; that New Look Barber Shop had always been a joint venture
partnership and the operation and management of the barber shop was left entirely to petitioners; that her
father's contribution to the joint venture included the place of business, payment for utilities including
electricity, water, etc. while petitioners as industrial partners, supplied the labor; and that the barber shop
was allowed to remain open up to April 1995 by the children because they wanted to give the partners a
chance at making it work. Eventually, they were forced to close the barber shop because they continued
to lose money while petitioners earned from it. Trinidad also added that private respondents had no
control over petitioners who were free to come and go as they wished. Admittedly too by petitioners they
received fifty percent to sixty percent of the gross paid by customers. Trinidad explained that some of the
petitioners were allowed to register with the Social Security System as employees of Lao Enteng
Company, Inc. only as an act of accommodation. All the SSS contributions were made by petitioners.
Moreover, Osias Corporal, Elpidio Lacap and Teresita Flores were not among those registered with the
Social Security System. Lastly, Trinidad avers that without any employee-employer relationship
petitioners claim for 13th month pay and separation pay have no basis in fact and in law.3

In a Decision dated September 28, 1995, Labor Arbiter Potenciano S. Cañizares, Jr. ordered the
dismissal of the complaint on the basis of his findings that the complainants and the respondents were
engaged in a joint venture and that there existed no employer-employee relation between them. The
Labor Arbiter also found that the barber shop was closed due to serious business losses or financial
reverses and consequently declared that the law does not compel the establishment to pay separation
pay to whoever were its employees.4

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

Indeed, complainants failed to show the existence of employer-employee relationship under the fourway
test established by the Supreme Court. It is a common practice in the Barber Shop industry that barbers
supply their own scissors and razors and they split their earnings with the owner of the barber shop. The
only capital of the owner is the place of work whereas the barbers provide the skill and expertise in
servicing customers. The only control exercised by the owner of the barber shop is to ascertain the
number of customers serviced by the barber in order to determine the sharing of profits. The barbers
maybe characterized as independent contractors because they are under the control of the barber shop
owner only with respect to the result of the work, but not with respect to the details or manner of
performance. The barbers are engaged in an independent calling requiring special skills available to the
public at large.5

Its motion for reconsideration denied in the Resolution6 dated March 5, 1997, petitioners filed the instant
petition assigning that the NLRC committed grave abuse of discretion in:

I. ARBITRARILY DISREGARDING SUBSTANTIAL EVIDENCE PROVING THAT PETITIONERS

WERE EMPLOYEES OF RESPONDENT COMPANY IN RULING THAT PETITIONERS WERE
INDEPENDENT CONTRACTORS.

II. NOT HOLDING THAT PETITIONERS WERE ILLEGALLY DISMISSED AND IN NOT
AWARDING THEIR MONEY CLAIMS.7

Petitioners principally argue that public respondent NLRC gravely erred in declaring that the petitioners
were independent contractors. They contend that they were employees of the respondent company and
cannot be considered as independent contractors because they did not carry on an independent
business. They did not cut hair, manicure, and do their work in their own manner and method. They insist
they were not free from the control and direction of private respondents in all matters, and their services
were engaged by the respondent company to attend to its customers in its barber shop. Petitioners also
stated that, individually or collectively, they do not have substantial capital nor investments in tools,
equipments, work premises and other materials necessary in the conduct of the barber shop. What the
barbers owned were merely combs, scissors, and razors, while the manicurists owned only nail cutters,
nail polishes, nippers and cuticle removers. By no standard can these be considered "substantial capital"
necessary to operate a barbers shop.

Finally, petitioners fault the NLRC for arbitrarily disregarding substantial evidence on record showing that
petitioners Pedro Tolentino, Manuel Caparas, Simplicio Pedelos, and Patricia Nas were registered with
the Social Security System as regular employees of the respondent company. The SSS employment
records in common show that the employer's ID No. of Vicente Lao/Barber and Pawn Shop was 03-
0606200-1 and that of the respondent company was 03-8740074-7. All the foregoing entries in the SSS
employment records were painstakingly detailed by the petitioners in their position paper and in their
memorandum appeal but were arbitrarily ignored first by the Labor Arbiter and then by the respondent
NLRC which did not even mention said employment records in its questioned decision.

We found petition is impressed with merit.

In our view, this case is an exception to the general rule that findings of facts of the NLRC are to be
accorded respect and finality on appeal. We have long settled that this Court will not uphold erroneous
conclusions unsupported by substantial evidence.8 We must also stress that where the findings of the
NLRC contradict those of the labor arbiter, the Court, in the exercise of its equity jurisdiction, may look
into the records of the case and reexamine the questioned findings.9

The issues raised by petitioners boil down to whether or not an employer-employee relationship existed
between petitioners and private respondent Lao Enteng Company, Inc. The Labor Arbiter has concluded
that the petitioners and respondent company were engaged in a joint venture. The NLRC concluded that
the petitioners were independent contractors.

The Labor Arbiter's findings that the parties were engaged in a joint venture is unsupported by any
documentary evidence. It should be noted that aside from the self-serving affidavit of Trinidad Lao Ong,
there were no other evidentiary documents, nor written partnership agreements presented. We have ruled
that even the sharing of proceeds for every job of petitioners in the barber shop does not mean they were
not employees of the respondent company.10

Petitioner aver that NLRC was wrong when it concluded that petitioners were independent contractors
simply because they supplied their own working implements, shared in the earnings of the barber shop
with the owner and chose the manner of performing their work. They stressed that as far as the result of
their work was concerned the barber shop owner controlled them.

An independent contractor is one who undertakes "job contracting", i.e., a person who (a) carries on an
independent business and undertakes the contract work on his own account under his own responsibility
according to his own manner and method, free from the control and direction of his employer or principal
in all matters connected with the performance of the work except as to the results thereof, and (b) has
substantial capital or investment in the form of tools, equipment, machineries, work premises, and other
materials which are necessary in the conduct of the business.11

Juxtaposing this provision vis-à-vis the facts of this case, we are convinced that petitioners are not
"independent contractors". They did not carry on an independent business. Neither did they undertake
cutting hair and manicuring nails, on their own as their responsibility, and in their own manner and
method. The services of the petitioners were engaged by the respondent company to attend to the needs
of its customers in its barber shop. More importantly, the petitioners, individually or collectively, did not
have a substantial capital or investment in the form of tools, equipment, work premises and other
materials which are necessary in the conduct of the business of the respondent company. What the
petitioners owned were only combs, scissors, razors, nail cutters, nail polishes, the nippers - nothing else.
By no standard can these be considered substantial capital necessary to operate a barber shop. From the
records, it can be gleaned that petitioners were not given work assignments in any place other than at the
work premises of the New Look Barber Shop owned by the respondent company. Also, petitioners were
required to observe rules and regulations of the respondent company pertaining, among other things,
observance of daily attendance, job performance, and regularity of job output. The nature of work
performed by were clearly directly related to private respondent's business of operating barber shops.
Respondent company did not dispute that it owned and operated three (3) barber shops. Hence,
petitioners were not independent contractors.

Did an employee-employer relationship exist between petitioners and private respondent? The following
elements must be present for an employer-employee relationship to exist: (1) the selection and
engagement of the workers; (2) power of dismissal; (3) the payment of wages by whatever means; and
(4) the power to control the worker's conduct, with the latter assuming primacy in the overall
consideration. Records of the case show that the late Vicente Lao engaged the services of the petitioners
to work as barbers and manicurists in the New Look Barber Shop, then a single proprietorship owned by
him; that in January 1982, his children organized a corporation which they registered with the Securities
and Exchange Commission as Lao Enteng Company, Inc.; that upon its incorporation, it took over the
assets, equipment, and properties of the New Look Barber Shop and continued the business; that the
respondent company retained the services of all the petitioners and continuously paid their wages.
Clearly, all three elements exist in petitioners' and private respondent's working arrangements.

Private respondent claims it had no control over petitioners.1âwphi1 The power to control refers to the
existence of the power and not necessarily to the actual exercise thereof, nor is it essential for the
employer to actually supervise the performance of duties of the employee. It is enough that the employer
has the right to wield that power.12 As to the "control test", the following facts indubitably reveal that
respondent company wielded control over the work performance of petitioners, in that: (1) they worked in
the barber shop owned and operated by the respondents; (2) they were required to report daily and
observe definite hours of work; (3) they were not free to accept other employment elsewhere but devoted
their full time working in the New Look Barber Shop for all the fifteen (15) years they have worked until
April 15, 1995; (4) that some have worked with respondents as early as in the 1960's; (5) that petitioner
Patricia Nas was instructed by the respondents to watch the other six (6) petitioners in their daily task.
Certainly, respondent company was clothed with the power to dismiss any or all of them for just and valid
cause. Petitioners were unarguably performing work necessary and desirable in the business of the
respondent company.

While it is no longer true that membership to SSS is predicated on the existence of an employee-
employer relationship since the policy is now to encourage even the self-employed dressmakers,
manicurists and jeepney drivers to become SSS members, we could not agree with private respondents
that petitioners were registered with the Social Security System as their employees only as an
accommodation. As we have earlier mentioned private respondent showed no proof to their claim that
petitioners were the ones who solely paid all SSS contributions. It is unlikely that respondents would
report certain persons as their workers, pay their SSS premium as well as their wages if it were not true
that they were indeed their employees.13

Finally, we agree with the labor arbiter that there was sufficient evidence that the barber shop was closed
due to serious business losses and respondent company closed its barber shop because the building
where the barber shop was located was sold. An employer may adopt policies or changes or adjustments
in its operations to insure profit to itself or protect investment of its stockholders. In the exercise of such
management prerogative, the employer may merge or consolidate its business with another, or sell or
dispose all or substantially all of its assets and properties which may bring about the dismissal or
termination of its employees in the process.14

Prescinding from the above, we hold that the seven petitioners are employees of the private respondent
company; as such, they are to be accorded the benefits provided under the Labor Code, specifically
Article 283 which mandates the grant of separation pay in case of closure or cessation of employer's
business which is equivalent to one (1) month pay for every year of service.15 Likewise, they are entitled to
the protection of minimum wage statutes. Hence, the separation pay due them may be computed on the
basis of the minimum wage prevailing at the time their services were terminated by the respondent
company. The same is true with respect to the 13th month pay. The Revised Guidelines on the
Implementation of the 13th Month Pay Law states that "all rank and file employees are now entitled to a
13th month pay regardless of the amount of basic salary that they receive in a month. Such employees
are entitled to the benefit regardless of their designation or employment status, and irrespective of the
method by which their wages are paid, provided that they have worked for at least one (1) month during a
calendar year" and so all the seven (7) petitioners who were not paid their 13th month pay must be paid
accordingly.16

Anent the other claims of the petitioners, such as the P10,000.00 as penalty for non-compliance with
procedural process; P10,000.00 as moral damages; refund of P1.00 per day paid to the sweeper; salary
differentials for petitioner Nas; attorney's fees), we find them without basis.

IN VIEW WHEREOF, the petition is GRANTED. The public respondent's Decision dated October 17,
1996 and Resolution dated March 05, 1997 are SET ASIDE. Private respondents are hereby ordered to
pay, severally and jointly, the seven (7) petitioners their (1) 13th month pay and (2) separation pay
equivalent to one month pay for every year of service, to be computed at the then prevailing minimum
wage at the time of their actual termination which was April 15, 1995.

Costs against private respondents.

SO ORDERED.

Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.

G.R. No. 120969 January 22, 1998

ALEJANDRO MARAGUINOT, JR. and PAULINO ENERO, Petitioners, vs. NATIONAL LABOR

RELATIONS COMMISSION (SECOND DIVISION) composed of Presiding Commissioner RAUL T.
AQUINO, Commissioner ROGELIO I. RAYALA and Commissioner VICTORIANO R. CALAYCAY
(Ponente), VIC DEL ROSARIO and VIVA FIMS, Respondents.

DAVIDE, JR., J.:

By way of this special civil action for certiorari under Rule 65 of the Rules of Court, petitioners seek to
annul the 10 February 1995 Decision 1 of the National Labor Relations Commission (hereafter NLRC),
and its 6 April 1995 Resolution 2 denying the motion to reconsider the former in NLRC-NCR-CA No.
006195-94. The decision reversed that of the Labor Arbiter in NLRC-NCR-Case No. 00-07-03994-92.

The parties present conflicting sets of facts.

Petitioner Alejandro Maraguinot, Jr. maintains that he was employed by private respondents on 18 July
1989 as part of the filming crew with a salary of P375.00 per week. About four months later, he was
designated Assistant Electrician with a weekly salary of P400.00, which was increased to P450.00 in May
1990. In June 1991, he was promoted to the rank of Electrician with a weekly salary of P475.00, which
was increased to P539.00 in September 1991.

Petitioner Paulino Enero, on his part, claims that private respondents employed him in June 1990 as a
member of the shooting crew with a weekly salary of P375.00, which was increased to P425.00 in May
1991, then to P475.00 on 21 December 1991. 3

Petitioners' tasks consisted of loading, unloading and arranging movie equipment in the shooting area as
instructed by the cameraman, returning the equipment to Viva Films' warehouse, assisting in the "fixing"
of the lighting system, and performing other tasks that the cameraman and/or director may assign. 4

Sometime in May 1992, petitioners sought the assistance of their supervisors, Mrs. Alejandria Cesario, to
facilitate their request that private respondents adjust their salary in accordance with the minimum wage
law. In June 1992, Mrs. Cesario informed petitioners that Mr. Vic del Rosario would agree to increase
their salary only if they signed a blank employment contract. As petitioners refused to sign, private
respondents forced Enero to go on leave in June 1992, then refused to take him back when he reported
for work on 20 July 1992. Meanwhile, Maraguinot was dropped from the company payroll from 8 to 21
June 1992, but was returned on 22 June 1992. He was again asked to sign a blank employment contract,
and when he still refused, private respondents terminated his services on 20 July 1992. 5 Petitioners thus
sued for illegal dismissal 6 before the Labor Arbiter.

On the other hand, private respondents claim that Viva Films (hereafter VIVA) is the trade name of Viva
Productions, Inc., and that it is primarily engaged in the distribution and exhibition of movies - but not in
the business of making movies; in the same vein, private respondent Vic del Rosario is merely an
executive producer, i.e., the financier who invests a certain sum of money for the production of movies
distributed and exhibited by VIVA. 7

Private respondents assert that they contract persons called "producers" - also referred to as "associate
producers" 8 - to "produce" or make movies for private respondents; and contend that petitioners are
project employees of the association producers who, in turn, act as independent contractors. As such,
there is no employer-employee relationship between petitioners and private respondents.

Private respondents further contend that it was the associate producer of the film "Mahirap Maging Pogi,"
who hired petitioner Maraguinot. The movie shot from 2 July up to 22 July 1992, and it was only then that
Maraguinot was released upon payment of his last salary, as his services were no longer needed. Anent
petitioner Enero, he was hired for the movie entitled "Sigaw ng Puso," later re-tired "Narito and Puso." He
went on vacation on 8 June 1992, and by the time he reported for work on 20 July 1992, shooting for the
movie had already been completed. 9

After considering both versions of the facts, the Labor Arbiter found as follows:

On the first issue, this Office rules that complainants are the employees of the respondents. The producer
cannot be considered as an independent contractor but should be considered only as a labor-only
contractor and as such, acts as a mere agent of the real employer, the herein respondent. Respondents
even failed to name and specify who are the producers. Also, it is an admitted fact that the complainants
received their salaries from the respondents. The case cited by the respondents, Rosario Brothers,
Inc. v. Ople, 131 SCRA 72 does not apply in this case.

It is very clear also that complainants are doing activities which are necessary and essential to the
business of the respondents, that of movie-making. Complainant Maraguinot worked as an electrician
while complainant Enero worked as a crew [member]. 10

Hence, the Labor Arbiter, in his decision of 20 December 1993, decreed as follows:

WHEREFORE, judgment is hereby rendered declaring that complainants were illegally dismissed.
Respondents are hereby ordered to reinstate complainant to their former positions without loss [of]
seniority rights and pay their backwages starting July 21, 1992 to December 31, 1993 temporarily
computed in the amount of P38,000.00 for complainant Paulino Enero and P46,000.00 for complainant
Alejandro Maraguinot, Jr. and thereafter until actually reinstated.

Respondents are ordered to pay also attorney's fees equivalent to ten (10%) and/or P8,400.00 on top of
the award. 11

Private respondents appealed to the NLRC (docketed as NLRC NCR-CA No. 006195-94). In its
decision 12 of 10 February 1995, the NLRC found the following circumstances of petitioners' work "clearly
established:"

1. Complainants [petitioners herein] were hired for specific movie projects and their employment was co-
terminus with each movie project the completion/termination of which are pre-determined, such fact being
made known to complainants at the time of their engagement.

xxx xxx xxx

2 Each shooting unit works on one movie project at a time. And the work of the shooting units, which work
independently from each other, are not continuous in nature but depends on the availability of movie
projects.

3. As a consequence of the non-continuous work of the shooting units, the total working hours logged by
complainants in a month show extreme variations. . . For instance, complainant Maraguinot worked for
only 1.45 hours in June 1991 but logged a total of 183.25 hours in January 1992. Complainant Enero
logged a total of only 31.57 hours in September 1991 but worked for 183.35 hours the next month,
October 1991.

4. Further shown by respondents is the irregular work schedule of complainants on a daily basis.
Complainant Maraguinot was supposed to report on 05 August 1991 but reported only on 30 August
1991, or a gap of 25 days. Complainant Enero worked on 10 September 1991 and his next scheduled
working day was 28 September 1991, a gap of 18 days.

5. The extremely irregular working days and hours of complainants' work explain the lump sum payment
for complainants' services for each movie project. Hence, complainants were paid a standard weekly
salary regardless of the number of working days and hours they logged in. Otherwise, if the principle of
"no work no pay" was strictly applied, complainants' earnings for certain weeks would be very negligible.

6. Respondents also alleged that complainants were not prohibited from working with such movie
companies like Regal, Seiko and FPJ Productions whenever they are not working for the independent
movie producers engaged by respondents . . . This allegation was never rebutted by complainants and
should be deemed admitted.

The NLRC, in reversing the Labor Arbiter, then concluded that these circumstances, taken together,
indicated that complainants (herein petitioners) were "project employees."

After their motion for reconsideration was denied by the NLRC in its Resolution 13 of 6 April 1995,
petitioners filed the instant petition, claiming that the NLRC committed grave abuse of discretion
amounting to lack or excess of jurisdiction in: (1) finding that petitioners were project employees; (2) ruling
that petitioners were not illegally dismissed; and (3) reversing the decision of the Labor Arbiter.

To support their claim that they were regular (and not project) employees of private respondents,
petitioners cited their performance of activities that were necessary or desirable in the usual trade or
business of private respondents and added that their work was continuous, i.e., after one project was
completed they were assigned to another project. Petitioners thus considered themselves part of a work
pool from which private respondents drew workers for assignment to different projects. Petitioners
lamented that there was no basis for the NLRC's conclusion that they were project employees, while the
associate producers were independent contractors; and thus reasoned that as regular employees, their
dismissal was illegal since the same was premised on a "false cause," namely, the completion of a
project, which was not among the causes for dismissal allowed by the Labor Code.

Private respondents reiterate their version of the facts and stress that their evidence supports the view
that petitioners are project employees; point to petitioners' irregular work load and work schedule;
emphasize the NLRC's finding that petitioners never controverted the allegation that they were not
prohibited from working with other movie companies; and ask that the facts be viewed in the context of
the peculiar characteristics of the movie industry.
The Office of the Solicitor General (OSG) is convinced that this petition is improper since petitioners raise
questions of fact, particularly, the NLRC's finding that petitioners were project employees, a finding
supported by substantial evidence; and submits that petitioners' reliance on Article 280 of the Labor Code
to support their contention that they should be deemed regular employees is misplaced, as said section
"merely distinguishes between two types of employees, i.e., regular employees and casual employees,
for purposes of determining the right of an employee to certain benefits."

The OSG likewise rejects petitioners' contention that since they were hired not for one project, but for a
series of projects, they should be deemed regular employees. Citing Mamansag v. NLRC, 14 the OSG
asserts that what matters is that there was a time-frame for each movie project made known to petitioners
at the time of their hiring. In closing, the OSG disagrees with petitioners' claim that the NLRC's
classification of the movie producers as independent contractors had no basis in fact and in law, since, on
the contrary, the NLRC "took pains in explaining its basis" for its decision.

As regards the propriety of this action, which the Office of the Solicitor General takes issue with, we rule
that a special civil action for certiorari under Rule 65 of the Rules of Court is the proper remedy for one
who complains that the NLRC acted in total disregard of evidence material to or decisive of the
controversy. 15 In the instant case, petitioners allege that the NLRC's conclusions have no basis in fact
and in law, hence the petition may not be dismissed on procedural or jurisdictional grounds.

The judicious resolution of this case hinges upon, first, the determination of whether an employer-
employee relationship existed between petitioners and private respondents or any one of private
respondents. If there was none, then this petition has no merit; conversely, if the relationship existed, then
petitioners could have been unjustly dismissed.

A related question is whether private respondents are engaged in the business of making motion pictures.
Del Rosario is necessarily engaged in such business as he finances the production of movies. VIVA, on
the other hand, alleges that it does not "make" movies, but merely distributes and exhibits motion
pictures. There being no further proof to this effect, we cannot rely on this self-serving denial. At any rate,
and as will be discussed below, private respondents' evidence even supports the view that VIVA is
engaged in the business of making movies.

We now turn to the critical issues. Private respondents insist that petitioners are project employees of
associate producers who, in turn, act as independent contractors. It is settled that the contracting out of
labor is allowed only in case of job contracting. Section 8, Rule VIII, Book III of the Omnibus Rules
Implementing the Labor Code describes permissible job contracting in this wise:

Sec. 8. Job contracting. - There is job contracting permissible under the Code if the following conditions
are met:

(1) The contractor carries on an independent business and undertakes the contract work on his own
account under his own responsibility according to his own manner and method, free from the control and
direction of his employer or principal in all matters connected with the performance of the work except as
to the results thereof; and

(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work
premises, and other materials which are necessary in the conduct of his business.

Assuming that the associate producers are job contractors, they must then be engaged in the business of
making motion pictures. As such, and to be a job contractor under the preceding description, associate
producers must have tools, equipment, machinery, work premises, and other materials necessary to
make motion pictures. However, the associate producers here have none of these. Private respondents'
evidence reveals that the movie-making equipment are supplied to the producers and owned by VIVA.
These include generators, 16 cables and wooden platforms, 17 cameras and "shooting equipment;" 18 in
fact, VIVA likewise owns the trucks used to transport the equipment. 19 It is thus clear that the associate
producer merely leases the equipment from VIVA. 20 Indeed, private respondents' Formal Offer of
Documentary Evidence stated one of the purposes of Exhibit "148" as:

To prove further that the independent Producers rented Shooting Unit No. 2 from Viva to finish their
films. 21

While the purpose of Exhibits "149," "149-A" and "149-B" was:

[T]o prove that the movies of Viva Films were contracted out to the different independent Producers who
rented Shooting Unit No. 3 with a fixed budget and time-frame of at least 30 shooting days or 45 days
whichever comes first. 22
Private respondent further narrated that VIVA's generators broke down during petitioners' last movie
project, which forced the associate producer concerned to rent generators, equipment and crew from
another company. 23 This only shows that the associate producer did not have substantial capital nor
investment in the form of tools, equipment and other materials necessary for making a movie. Private
respondents in effect admit that their producers, especially petitioners' last producer, are not engaged in
permissible job contracting.

If private respondents insist that the associate producers are labor contractors, then these producers can
only be "labor-only" contractors, defined by the Labor Code as follows:

Art. 106. Contractor or subcontractor. - . . .

There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such persons are performing activities which are directly
related to the principal business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.

A more detailed description is provided by Section 9, Rule VIII, Book III of the Omnibus Rules
Implementing the Labor Code:

Sec. 9. Labor-only contracting. - (a) Any person who undertakes to supply workers to an employer shall
be deemed to be engaged in labor-only contracting where such person:

(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work
premises and other materials; and

(2) The workers recruited and placed by such person are performing activities which are directly related to
the principal business or operations of the employer in which workers are habitually employed.

(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall
be considered merely as an agent or intermediary of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by him.

(c) For cases not falling under this Article, the Secretary of Labor shall determine through appropriate
orders whether or not the contracting out of labor is permissible in the light of the circumstances of each
case and after considering the operating needs of the employer and the rights of the workers involved. In
such case, he may prescribe conditions and restrictions to insure the protection and welfare of the
workers.

As labor-only contracting is prohibited, the law considers the person or entity engaged in the same a mere
agent or intermediary of the direct employer. But even by the preceding standards, the associate
producers of VIVA cannot be considered labor-only contractors as they did not supply, recruit nor hire the
workers. In the instant case, it was Juanita Cesario, Shooting Unit Supervisor and an employee of VIVA,
who recruited crew members from an "available group of free-lance workers which includes the
complainants Maraguinot and Enero." 24 And in their Memorandum, private respondents declared that the
associate producer "hires the services of . . . 6) camera crew which includes (a) cameraman; (b) the utility
crew; (c) the technical staff; (d) generator man and electrician; (e) clapper; etc. . . . ." 25 This clearly
showed that the associate producers did not supply the workers required by the movie project.

The relationship between VIVA and its producers or associate producers seems to be that of
agency, 26 as the latter make movies on behalf of VIVA, whose business is to "make" movies. As such,
the employment relationship between petitioners and producers is actually one between petitioners and
VIVA, with the latter being the direct employer.

The employer-employee relationship between petitioners and VIVA can further be established by the
"control test." While four elements are usually considered in determining the existence of an employment
relationship, namely: (a) the selection and engagement of the employee; (b) the payment of wages; (c)
the power of dismissal; and (d) the employer's power to control of the employee's conduct, the most
important element is the employer's control of the employee's conduct, not only as to the result of the
work to be done but also as to the means and methods to accomplish the same. 27 These four elements
are present here. In their position paper submitted to the Labor Arbiter, private respondents narrated the
following circumstances:
[T]he PRODUCER has to work within the limits of the budget he is given by the company, for as long as
the ultimate finish[ed] product is acceptable to the company . . .

The ensure that qualify films are produced by the PRODUCER who is an independent contractor, the
company likewise employs a Supervising PRODUCER, a Project accountant and a Shooting unit
supervisor. The Company's Supervising PRODUCER is Mr. Eric Cuatico, the Project accountant varies
from time to time, and the Shooting Unit Supervisor is Ms. Alejandria Cesario.

The Supervising PRODUCER acts as the eyes and ears of the company and of the Executive Producer to
monitor the progress of the PRODUCER's work accomplishment. He is there usually in the field doing the
rounds of inspection to see if there is any problem that the PRODUCER is encountering and to assist in
threshing out the same so that the film project will be finished on schedule. He supervises about 3 to 7
movie projects simultaneously [at] any given time by coordinating with each film "PRODUCER". The
Project Accountant on the other hand assists the PRODUCER in monitoring the actual expenses incurred
because the company wants to insure that any additional budget requested by the PRODUCER is really
justified and warranted especially when there is a change of original plans to suit the tast[e] of the
company on how a certain scene must be presented to make the film more interesting and more
commercially viable. (emphasis supplied).

VIVA's control is evident in its mandate that the end result must be a "quality film acceptable to the
company." The means and methods to accomplish the result are likewise controlled by VIVA, viz., the
movie project must be finished within schedule without exceeding the budget, and additional expenses
must be justified; certain scenes are subject to change to suit the taste of the company; and the
Supervising Producer, the "eyes and ears" of VIVA and del Rosario, intervenes in the movie-making
process by assisting the associate producer in solving problems encountered in making the film.

It may not be validly argued then that petitioners are actually subject to the movie director's control, and
not VIVA's direction. The director merely instructs petitioners on how to better comply with VIVA's
requirements to ensure that a quality film is completed within schedule and without exceeding the budget.
At bottom, the director is akin to a supervisor who merely oversees the activities of rank-and-file
employees with control ultimately resting on the employer.

Moreover, appointment slips 28 issued to all crew members state:

During the term of this appointment you shall comply with the duties and responsibilities of your position
as well as observe the rules and regulations promulgated by your superiors and by Top Management.

The words "supervisors" and "Top Management" can only refer to the "supervisors" and "Top
Management" of VIVA. By commanding crew members to observe the rules and regulations promulgated
by VIVA, the appointment slips only emphasize VIVA's control over petitioners.

Aside from control, the element of selection and engagement is likewise present in the instant case and
exercised by VIVA. A sample appointment slip offered by private respondents "to prove that members of
the shooting crew except the driver are project employees of the Independent Producers" 29 reads as
follows:

VIVA PRODUCTIONS, INC.

16 Sct. Albano St.
Diliman, Quezon City

PEDRO NICOLAS Date: June 15, 1992

APPOINTMENT SLIP

You are hereby appointed as SOUNDMAN for the film project entitled "MANAMBIT". This appointment
shall be effective upon the commencement of the said project and shall continue to be effective until the
completion of the same.

For your services you shall receive the daily/weekly/monthly compensation of P812.50.

During the term of this appointment you shall comply with the duties and responsibilities of your position
as well as observe the rules and regulations promulgated by your superiors and by Top Management.
Very truly yours,

(an illegible signature)

CONFORME:

_________________

Name of appointee

Signed in the presence of:

___________________

Notably, nowhere in the appointment slip does it appear that it was the producer or associate producer
who hired the crew members; moreover, it is VIVA's corporate name which appears on the heading of the
appointment slip. What likewise tells against VIVA is that it paid petitioners' salaries as evidenced by
vouchers, containing VIVA's letterhead, for that purpose. 30

All the circumstances indicate an employment relationship between petitioners and VIVA alone, thus the
inevitable conclusion is that petitioners are employees only of VIVA.

The next issue is whether petitioners were illegally dismissed. Private respondents contend that
petitioners were project employees whose employment was automatically terminated with the completion
of their respective projects. Petitioners assert that they were regular employees who were illegally
dismissed.

It may not be ignored, however, that private respondents expressly admitted that petitioners were part of
a work pool; 31 and, while petitioners were initially hired possibly as project employees, they had attained
the status of regular employees in view if VIVA's conduct.

A project employee or a member of a work pool may acquire the status of a regular employee when the
following concur:

1) There is a continuous rehiring of project employees even after cessation of a project; 32 and

2) The tasks performed by the alleged "project employee" are vital, necessary and indispensable to the
usual business or trade of the employer. 33

However, the length of time during which the employee was continuously re-hired is not controlling, but
merely serves as a badge of regular employment. 34

In the instant case, the evidence on record shows that petitioner Enero was employed for a total of two (2)
years and engaged in at least eighteen (18) projects, while petitioner Maraguinot was employed for some
three (3) years and worked on at least twenty-three (23) projects. 35 Moreover, as petitioners' tasks
involved, among other chores, the loading, unloading and

FILM DATE DATE ASSOCIATE

STARTED COMPLETED PRODUCER
LOVE AT FIRST SIGHT 1/3/90 2/16/90 MARIVIC ONG
PAIKOT-IKOT 1/26/90 3/11/90 EDITH MANUEL
ROCKY & ROLLY 2/13/90 3/29/90 M. ONG
PAIKOT-IKOT (addl. 1/2) 3/12/90 4/3/90 E. MANUEL
ROCKY & ROLLY (2nd contract) 4/6/90 5/20/90 M. ONG
NARDONG TOOTHPICK 4/4/90 5/18/90 JUN CHING
BAKIT KAY TAGAL NG SANDALI 6/26/90 10/20/90 E. MANUEL
BAKIT KAY TAGAL (2nd contract) 8/10/90 9/23/90 E. MANUEL
HINUKAY KO NA ANG LIBINGAN MO 9/6/90 10/20/90 JUN CHING
 MAGING SINO KA MAN 10/25/90 12/8/90 SANDY STA. MARIA
M. SINO KA MAN (2nd contract) 12/9/90 1/22/91 SANDY S
NOEL JUICO 1/29/91 3/14/90 JUN CHING
NOEL JUICO (2nd contract) 3/15/91 4/6/91 JUN CHING
ROBIN GOOD 5/7/91 6/20/91 M. ONG
UTOL KONG HOODLUM # 1 6/23/91 8/6/91 JUN CHING
KAPUTOL NG ISANG AWIT 8/18/91 10/2/91 SANDY S.
DARNA 10/4/91 11/18/91 E. MANUEL
DARNA (addl. 1/2) 11/20/91 12/12/91 E. MANUEL
MAGNONG REHAS 12/13/91 1/27/92 BOBBY GRIMALT
M. REHAS (2nd contract) 1/28/92 3/12/92 B. GRIMALT
HIRAM NA MUKHA 3/15/92 4/29/92 M. ONG
HIRAM (2nd contract) 5/1/92 6/14/92 M. ONG
KAHIT AKO'Y BUSABOS 5/28/92 7/7/92 JERRY OHARA
SIGAW NG PUSO 7/1/92 8/4/92 M. ONG
SIGAW (addl. 1/2) 8/15/92 9/5/92 M. ONG
NGAYON AT KAILANMAN 9/6/92 10/20/92 SANDY STA. MARIA

While Maraguinot was a member of Shooting Unit III, which made the following movies (Annex "4-A" of
Respondents' Position Paper; OR, 29):

FILM DATE DATE ASSOCIATE PRODUCER

STARTED COMPLETED
GUMAPANG KA SA LUSAK 1/27/90 3/12/90 JUN CHING
PETRANG KABAYO 2/19/90 4/4/90 RUTH GRUTA
LUSAK (2nd contract) 3/14/90 4/27/90 JUN CHING
P. KABAYO (Addl 1/2 contract) 4/21/90 5/13/90 RUTH GRUTA
BADBOY 6/15/90 7/29/90 EDITH MANUEL
BADBOY (2nd contract) 7/30/90 8/21/90 E. MANUEL
ANAK NI BABY AMA 9/2/90 10/16/90 RUTH GRUTA
A.B. AMA (addl 1/2) 10/17/90 11/8/90 RUTH GRUTA
A.B. AMA (addl 2nd 1/2) 11/9/90 12/1/90 R. GRUTA
BOYONG MANALAC 11/30/90 1/14/91 MARIVIC ONG
HUMANAP KA NG PANGET 1/20/91 3/5/91 EDITH MANUEL
H. PANGET(2nd contract) 3/10/91 4/23/91 E. MANUEL
B. MANALAC (2nd contract) 5/22/91 7/5/91 M. ONG
ROBIN GOOD (2nd contract) 7/7/91 8/20/91 M. ONG
PITONG GAMOL 8/30/91 10/13/91 M. ONG
P. GAMOL (2nd contract) 10/14/91 11/27/91 M. ONG
GREASE GUN GANG 12/28/91 2/10/92 E. MANUEL
ALABANG GIRLS (1/2 contract) 3/4/92 3/26/92 M. ONG
BATANG RILES 3/9/92 3/30/92 BOBBY GRIMALT
UTOL KONG HOODLUM (part 2) 3/22/92 5/6/92 B. GRIMALT
UTOL (addl. 1/2 contract) 5/7/92 5/29/92 B. GRIMALT
MANDURUGAS (2nd contract) 5/25/92 7/8/92 JERRY OHARA
MAHIRAP MAGING POGI 7/2/92 8/15/92 M. ONG

arranging of movie equipment in the shooting area as instructed by the cameramen, returning the
equipment to the Viva Films' warehouse, and assisting in the "fixing" of the lighting system, it may not be
gainsaid that these tasks were vital, necessary and indispensable to the usual business or trade of the
employer. As regards the underscored phrase, it has been held that this is ascertained by considering the
nature of the work performed and its relation to the scheme of the particular business or trade in its
entirety. 36

A recent pronouncement of this Court anent project or work pool employees who had attained the status
of regular employees proves most instructive:

The denial by petitioners of the existence of a work pool in the company because their projects were not
continuous is amply belied by petitioners themselves who admit that: . . .

A work pool may exist although the workers in the pool do not receive salaries and are free to seek other
employment during temporary breaks in the business, provided that the worker shall be available when
called to report of a project. Although primarily applicable to regular seasonal workers, this set-up can
likewise be applied to project workers insofar as the effect of temporary cessation of work is
concerned.  This is beneficial to both the employer and employee for it prevents the unjust situation of
"coddling labor at the expense of capital" and at the same time enables the workers to attain the status of
regular employees. Clearly, the continuous rehiring of the same set of employees within the framework of
the Lao Group of Companies is strongly indicative that private respondents were an integral part of a work
pool from which petitioners drew its workers for its various projects.

In a final attempt to convince the Court that private respondents were indeed project employees,
petitioners point out that the workers were not regularly maintained in the payroll and were free to offer
their services to other companies when there were no on-going projects. This argument however cannot
defeat the workers' status of regularity. We apply by analogy the vase of Industrial-Commercial-
Agricultural Workers Organization v. CIR [16 SCRA 526, 567-568 (1966)] which deals with regular
seasonal employees. There we held: . . .

Truly, the cessation of construction activities at the end of every project is a foreseeable suspension of
work.  Of course, no compensation can be demanded from the employer because the stoppage of
operations at the end of a project and before the start of a new one is regular and expected by both
parties to the labor relations. Similar to the case of regular seasonal employees, the employment relation
is not severed by merely being suspended. [citing Manila Hotel Co. v.  CIR, 9 SCRA 186 (1963)] The
employees are, strictly speaking, not separated from services but merely on leave of absence without pay
until they are reemployed. Thus we cannot affirm the argument that non-payment of salary or non-
inclusion in the payroll and the opportunity to seek other employment denote project
employment. 37 (emphasis supplied)

While Lao admittedly involved the construction industry, to which Policy Instruction No. 20/Department
Order No. 19 38 regarding work pools specifically applies, there seems to be no impediment to applying
the underlying principles to industries other than the construction industry. 39 Neither may it be argued that
a substantial distinction exists between the projects undertaken in the construction industry and the
motion picture industry. On the contrary, the raison d' etre of both industries concern projects with a
foreseeable suspension of work.

At this time, we wish to allay any fears that this decision unduly burdens an employer by imposing a duty
to re-hire a project employee even after completion of the project for which he was hired. The import of
this decision is not to impose a positive and sweeping obligation upon the employer to re-hire project
employees. What this decision merely accomplishes is a judicial recognition of the employment status of
a project or work pool employee in accordance with what is fait accompli, i.e., the continuous re-hiring by
the employer of project or work pool employees who perform tasks necessary or desirable to the
employer's usual business or trade. Let it not be said that this decision "coddles" labor, for as Lao has
ruled, project or work pool employees who have gained the status of regular employees are subject to the
"no work-no pay" principle, to repeat:

A work pool may exist although the workers in the pool do not receive salaries and are free to seek other
employment during temporary breaks in the business, provided that the worker shall be available when
called to report for a project. Although primarily applicable to regular seasonal workers, this set-up can
likewise be applied to project workers insofar as the effect of temporary cessation of work is concerned.
This is beneficial to both the employer and employee for it prevents the unjust situation of "coddling labor
at the expense of capital" and at the same time enables the workers to attain the status of regular
employees.

The Court's ruling here is meant precisely to give life to the constitutional policy of strengthening the labor
sector, 40 but, we stress, not at the expense of management. Lest it be misunderstood, this ruling does not
mean that simply because an employee is a project or work pool employee even outside the construction
industry, he is deemed, ipso jure, a regular employee. All that we hold today is that once a project or work
pool employee has been: (1) continuously, as opposed to intermittently, re-hired by the same employer
for the same tasks or nature of tasks; and (2) these tasks are vital, necessary and indispensable to the
usual business or trade of the employer, then the employee must be deemed a regular employee,
pursuant to Article 280 of the Labor Code and jurisprudence. To rule otherwise would allow circumvention
of labor laws in industries not falling within the ambit of Policy Instruction No. 20/Department Order No.
19, hence allowing the prevention of acquisition of tenurial security by project or work pool employees
who have already gained the status of regular employees by the employer's conduct.

In closing then, as petitioners had already gained the status of regular employees, their dismissal was
unwarranted, for the cause invoked by private respondents for petitioners' dismissal, viz.: completion of
project, was not, as to them, a valid cause for dismissal under Article 282 of the Labor Code. As such,
petitioners are now entitled to back wages and reinstatement, without loss of seniority rights and other
benefits that may have accrued. 41 Nevertheless, following the principles of "suspension of work" and "no
pay" between the end of one project and the start of a new one, in computing petitioners' back wages, the
amounts corresponding to what could have been earned during the periods from the date petitioners were
dismissed until their reinstatement when petitioners' respective Shooting Units were not undertaking any
movie projects, should be deducted.

Petitioners were dismissed on 20 July 1992, at a time when Republic Act No. 6715 was already in effect.
Pursuant to Section 34 thereof which amended Section 279 of the Labor Code of the Philippines
and Bustamante v. NLRC, 42 petitioners are entitled to receive full back wages from the date of their
dismissal up to the time of their reinstatement, without deducting whatever earnings derived elsewhere
during the period of illegal dismissal, subject however, to the above observations.

WHEREFORE, the instant petition is GRANTED. The assailed decision of the National Labor Relations
Commission in NLRC NCR CA No. 006195-94 dated 01 February 1995, as well as its Resolution dated 6
April 1995, are hereby ANNULLED and SET ASIDE for having been rendered with grave abuse of
discretion, and the decision of the Labor Arbiter in NLRC NCR Case No. 00-07-03994-92 is
REINSTATED, subject, however, to the modification above mentioned in the computation of back wages.

No pronouncement as to costs.

SO ORDERED.

Bellosillo, Vitug and Kapunan,  JJ., concur.

[G.R. NO. 177664 : December 23, 2009]

CRC AGRICULTURAL TRADING and ROLANDO B. CATINDIG, Petitioners, v. NATIONAL LABOR

RELATIONS COMMISSION and ROBERTO OBIAS, Respondents.

DECISION

BRION, J.:

Before this Court is the Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the
Decision1 of the Court of Appeals (CA) dated February 20, 2007 and its related Resolution dated April 30,
20072 in CA-G.R. SP No. 95924. The assailed decision reversed and set aside the August 15, 2006
Resolution3 of the National Labor Relations Commission (NLRC), and reinstated the Labor Arbiter's April
15, 2005 Decision4 finding respondent Roberto Obias (respondent) illegally dismissed from his
employment.

ANTECEDENT FACTS

The present petition traces its roots to the complaint5 for illegal dismissal filed by the respondent against
petitioners CRC Agricultural Trading and its owner, Rolando B. Catindig (collectively, petitioners), before
the Labor Arbiter on June 22, 2004.

In his Sinumpaang Salaysay,6 the respondent alleged that the petitioners employed him as a driver
sometime in 1985. The respondent worked for the petitioners until he met an accident in 1989, after which
the petitioners no longer allowed him to work. After six years, or in February 1995, the petitioners again
hired the respondent as a driver and offered him to stay inside the company's premises. The petitioners
gave him a P3,000.00 loan to help him build a hut for his family.
Sometime in March 2003, the petitioners ordered respondent to have the alternator of one of its vehicles
repaired. The respondent brought the vehicle to a repair shop and subsequently gave the petitioners two
receipts issued by the repair shop. The latter suspected that the receipts were falsified and stopped
talking to him and giving him work assignments. The petitioners, however, still paid him P700.00
and P500.00 on April 15 and 30, 2004, respectively, but no longer gave him any salary after that. As a
result, the respondent and his family moved out of the petitioners' compound and relocated to a nearby
place. The respondent claimed that the petitioners paid him a daily wage of P175.00, but did not give him
service incentive leave, holiday pay, rest day pay, and overtime pay. He also alleged that the petitioners
did not send him a notice of termination.

In opposing the complaint, the petitioners claimed that the respondent was a seasonal driver; his work
was irregular and was not fixed. The petitioners paid the respondent P175.00 daily, but under a "no work
no pay" basis. The petitioners also gave him a daily allowance of P140.00 to P200.00. In April 2003, the
respondent worked only for 15 days for which he was paid the agreed wages. The petitioners maintained
that they did not anymore engage the respondent's services after April 2003, as they had already lost
trust and confidence in him after discovering that he had forged receipts for the vehicle parts he bought
for them. Since then, the respondent had been working as a driver for different jeepney operators.7

The Labor Arbiter Ruling

Labor Arbiter Rennell Joseph R. Dela Cruz, in his decision of April 15, 2005, ruled in the respondent's
favor declaring that he had been illegally dismissed. The labor arbiter held that as a regular employee, the
respondent's services could only be terminated after the observance of due process. The labor arbiter
likewise disregarded the petitioners' charge of abandonment against the respondent. He thus decreed:

WHEREFORE, premises considered, judgment is hereby rendered ordering respondents CRC

AGRICULTURAL TRADING and ROLANDO CATINDIG to pay complainant jointly and severally the
following:

Separation Pay - P64,740.00

Backwages

Basic pay - P146,491.80

13th month pay - 12,207.65

SIL - 2,347.63

Salary Differential - 47,944.00

Unpaid SIL - 3,467.00

__________

P277,198.08

10% attorney's fees - 27,719.80

__________

GRAND TOTAL - P304,917.80

SO ORDERED.8

The NLRC Ruling

The petitioners and the respondent both appealed the labor arbiter's decision to the NLRC. The
petitioners specifically questioned the ruling that the respondent was illegally dismissed. The respondent,
for his part, maintained that the labor arbiter erred when he ordered the payment of separation pay in lieu
of reinstatement.

The NLRC, in its resolution of August 15, 2006,9 modified the labor arbiter's decision. The NLRC ruled
that the respondent was not illegally dismissed and deleted the labor arbiter's award of backwages and
attorney's fees. The NLRC reasoned out that it was respondent himself who decided to move his family
out of the petitioners' lot; hence, no illegal dismissal occurred. Moreover, the respondent could not claim
wages for the days he did not work, as he was employed by the petitioners under a "no work no pay"
scheme.

The CA Decision

The petitioners filed on August 30, 2006 a petition for certiorari with the CA alleging that the NLRC erred
in awarding the respondent separation pay and salary differentials. They argued that an employee who
had abandoned his work, like the respondent, is no different from one who voluntarily resigned; both are
not entitled to separation pay and to salary differentials. The petitioners added that since they had already
four regular drivers, the respondent's job was already unnecessary and redundant. They further argued
that they could not be compelled to retain the services of a dishonest employee.

The CA, in its decision dated February 20, 2007, reversed and set aside the NLRC resolution dated
August 15, 2006, and reinstated the labor arbiter's April 15, 2005 decision.

The CA disregarded the petitioners' charge of abandonment against the respondent for their failure to
show that there was deliberate and unjustified refusal on the part of the respondent to resume his
employment. The CA also ruled that the respondent's filing of a complaint for illegal dismissal manifested
his desire to return to his job, thus negating the petitioners' charge of abandonment. Even assuming that
there had been abandonment, the petitioners denied the respondent due process when they did not serve
him with two written notices, i.e., (1) a notice which apprises the employee of the particular acts or
omissions for which his dismissal is sought; and (2) a subsequent notice which advises the employee of
the employer's decision to dismiss him. Thus, the respondent is entitled to full backwages without
deduction of earnings derived elsewhere from the time his compensation was withheld from him, up to the
time of his actual reinstatement. The CA added that reinstatement would no longer be beneficial to both
the petitioners and respondent, as the relationship between them had already been strained.

Petitioners moved to reconsider the decision, but the CA denied the motion for lack of merit in its
Resolution dated April 30, 2007.

In the present petition, the petitioners alleged that the CA erred when it awarded the respondent
separation pay, backwages, salary differentials, and attorney's fees. They reiterated their view that an
abandoning employee like respondent is not entitled to separation benefits because he is no different
from one who voluntarily resigns.

THE COURT'S RULING

We do not find the petition meritorious.

The existence of an employer-employee relationship

A paramount issue that needs to be resolved before we rule on the main issue of illegal dismissal is
whether there existed an employer-employee relationship between the petitioners and the respondent.
This determination has been rendered imperative by the petitioners' denial of the existence of employer-
employee relationship on the reasoning that they only called on the respondent when needed.

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. 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. All the four elements are present in this case.10

First, the petitioners engaged the services of the respondent in 1995. Second, the petitioners paid the
respondent a daily wage of P175.00, with allowances ranging from P140.00 to P200.00 per day. The fact
the respondent was paid under a "no work no pay" scheme, assuming this claim to be true, is not
significant. The "no work no pay" scheme is merely a method of computing compensation, not a basis for
determining the existence or absence of employer-employee relationship. Third, the petitioners' power to
dismiss the respondent was inherent in the fact that they engaged the services of the respondent as a
driver. Finally, a careful review of the record shows that the respondent performed his work as driver
under the petitioners' supervision and control. Petitioners determined how, where, and when the
respondent performed his task. They, in fact, requested the respondent to live inside their compound so
he (respondent) could be readily available when the petitioners needed his services. Undoubtedly, the
petitioners exercised control over the means and methods by which the respondent accomplished his
work as a driver.
We conclude from all these that an employer-employee relationship existed between the petitioners and
respondent.

The respondent did not abandon his job

In a dismissal situation, the burden of proof lies with the employer to show that the dismissal was for a
just cause. In the present case, the petitioners claim that there was no illegal dismissal, since the
respondent abandoned his job. The petitioners point out that the respondent freely quit his work as a
driver when he was suspected of forging vehicle parts receipts.

Abandonment of work, or the deliberate and unjustified refusal of an employee to resume his
employment, is a just cause for the termination of employment under paragraph (b) of Article 282 of the
Labor Code, since it constitutes neglect of duty.11 The jurisprudential rule is that abandonment is a matter
of intention that cannot be lightly presumed from equivocal acts. To constitute abandonment, two
elements must concur: (1) the failure to report for work or absence without valid or justifiable reason, and
(2) a clear intent, manifested through overt acts, to sever the employer-employee relationship. The
employer bears the burden of showing a deliberate and unjustified refusal by the employee to resume his
employment without any intention of returning.12

In the present case, the petitioners did not adduce any proof to show that the respondent clearly and
unequivocally intended to abandon his job or to sever the employer-employee relationship. Moreover, the
respondent's filing of the complaint for illegal dismissal on June 22, 2004 strongly speaks against the
petitioners' charge of abandonment; it is illogical for an employee to abandon his employment and,
thereafter, file a complaint for illegal dismissal. As we held in Samarca v. Arc-Men Industries, Inc.:13

Abandonment is a matter of intention and cannot lightly be presumed from certain equivocal acts. To
constitute abandonment, there must be clear proof of deliberate and unjustified intent to sever the
employer-employee relationship. Clearly, the operative act is still the employee's ultimate act of putting an
end to his employment. [Emphasis in the original]

Respondent was constructively dismissed

Case law defines constructive dismissal as a cessation of work because continued employment has been
rendered impossible, unreasonable, or unlikely, as when there is a demotion in rank or diminution in pay
or both or when a clear discrimination, insensibility, or disdain by an employer becomes unbearable to the
employee.14

The test of constructive dismissal is whether a reasonable person in the employee's position would have
felt compelled to give up his position under the circumstances. It is an act amounting to dismissal but is
made to appear as if it were not. In fact, the employee who is constructively dismissed might have been
allowed to keep coming to work. Constructive dismissal is therefore a dismissal in disguise.  The law
recognizes and resolves this situation in favor of employees in order to protect their rights and interests
from the coercive acts of the employer.15

In the present case, the petitioners ceased verbally communicating with the respondent and giving him
work assignment after suspecting that he had forged purchase receipts. Under this situation, the
respondent was forced to leave the petitioners' compound with his family and to transfer to a nearby
place. Thus, the respondent's act of leaving the petitioners' premises was in reality not his choice but a
situation the petitioners created.

The Due Process Requirement

Even assuming that a valid ground to dismiss the respondent exists, the petitioners failed to comply with
the twin requirements of notice and hearing under the Labor Code.

The long established jurisprudence holds that to justify the dismissal of an employee for a just cause, the
employer must furnish the worker with two written notices. The first is the notice to apprise the employee
of the particular acts or omissions for which his dismissal is sought. This may be loosely considered as
the charge against the employee. The second is the notice informing the employee of the employer's
decision to dismiss him. This decision, however, must come only after the employee is given a
reasonable period from receipt of the first notice within which to answer the charge, and ample
opportunity to be heard and defend himself with the assistance of his representative, if he so desires. The
requirement of notice is not a mere technicality, but a requirement of due process to which every
employee is entitled.
The petitioners clearly failed to comply with the two-notice requirement. Nothing in the records shows that
the petitioners ever sent the respondent a written notice informing him of the ground for which his
dismissal was sought. It does not also appear that the petitioners held a hearing where the respondent
was given the opportunity to answer the charges of abandonment. Neither did the petitioners send a
written notice to the respondent informing the latter that his service had been terminated and the reasons
for the termination of employment. Under these facts, the respondent's dismissal was illegal.16

Backwages, Separation Pay, and Attorney's Fees

The respondent's illegal dismissal carries the legal consequence defined under Article 279 of the Labor
Code: the illegally dismissed employee is entitled to reinstatement without loss of seniority rights and
other privileges and to his 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. Thus, an illegally dismissed employee is entitled to two reliefs: backwages and
reinstatement. Where reinstatement is no longer viable as an option, backwages shall be computed from
the time of the illegal termination up to the finality of the decision.17 Separation pay equivalent to one
month salary for every year of service should likewise be awarded as an alternative in case reinstatement
in not possible.18

In the present case, reinstatement is no longer feasible because of the strained relations between the
petitioners and the respondent. Time and again, this Court has recognized that strained relations between
the employer and employee is an exception to the rule requiring actual reinstatement for illegally
dismissed employees for the practical reason that the already existing antagonism will only fester and
deteriorate, and will only worsen with possible adverse effects on the parties, if we shall compel
reinstatement; thus, the use of a viable substitute that protects the interests of both parties while ensuring
that the law is respected.

In this case, the antagonism between the parties cannot be doubted, evidenced by the petitioners' refusal
to talk to the respondent after their suspicion of fraudulent misrepresentation was aroused, and by the
respondent's own decision to leave the petitioners' compound together with his family. Under these
undisputed facts, a peaceful working relationship between them is no longer possible and reinstatement is
not to the best interest of the parties. The payment of separation pay is the better alternative as it
liberates the respondent from what could be a highly hostile work environment, while releasing the
petitioners from the grossly unpalatable obligation of maintaining in their employ a worker they could no
longer trust.

The respondent having been compelled to litigate in order to seek redress, the CA correctly affirmed the
labor arbiter's grant of attorney's fees equivalent to 10% of the total monetary award.19

The records of this case, however, are incomplete for purposes of computing the exact monetary award
due to the respondent. Thus, it is necessary to remand this case to the Labor Arbiter for the sole purpose
of computing the proper monetary award.

WHEREFORE, premises considered, we hereby DENY the petition. The Decision of the Court of Appeals
dated February 20, 2007 and its Resolution dated April 30, 2007 in CA-G.R. SP No. 95924 are
AFFIRMED and the case is REMANDED to the Labor Arbiter for the sole purpose of computing the full
backwages, inclusive of allowances and other benefits of respondent Roberto Obias, computed from the
date of his dismissal up to the finality of the decision, and separation pay in lieu of reinstatement
equivalent to one month salary for every year of service, computed from the time of his engagement up to
the finality of this decision.

SO ORDERED.

G.R. No. 138051             June 10, 2004

JOSE Y. SONZA, petitioner,
vs.
ABS-CBN BROADCASTING CORPORATION, respondent.

DECISION

CARPIO, J.:

The Case
Before this Court is a petition for review on certiorari1 assailing the 26 March 1999 Decision2 of the Court
of Appeals in CA-G.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza ("SONZA"). The Court
of Appeals affirmed the findings of the National Labor Relations Commission ("NLRC"), which affirmed
the Labor Arbiter’s dismissal of the case for lack of jurisdiction.

The Facts

In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-CBN") signed an Agreement

("Agreement") with the Mel and Jay Management and Development Corporation ("MJMDC"). ABS-CBN
was represented by its corporate officers while MJMDC was represented by SONZA, as President and
General Manager, and Carmela Tiangco ("TIANGCO"), as EVP and Treasurer. Referred to in the
Agreement as "AGENT," MJMDC agreed to provide SONZA’s services exclusively to ABS-CBN as talent
for radio and television. The Agreement listed the services SONZA would render to ABS-CBN, as follows:

a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;

b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.3

ABS-CBN agreed to pay for SONZA’s services a monthly talent fee of ₱310,000 for the first year and
₱317,000 for the second and third year of the Agreement. ABS-CBN would pay the talent fees on the
10th and 25th days of the month.

On 1 April 1996, SONZA wrote a letter to ABS-CBN’s President, Eugenio Lopez III, which reads:

Dear Mr. Lopez,

We would like to call your attention to the Agreement dated May 1994 entered into by your
goodself on behalf of ABS-CBN with our company relative to our talent JOSE Y. SONZA.

As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his
programs and career. We consider these acts of the station violative of the Agreement and the
station as in breach thereof. In this connection, we hereby serve notice of rescission of said
Agreement at our instance effective as of date.

Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount
stipulated in paragraph 7 of the Agreement but reserves the right to seek recovery of the other
benefits under said Agreement.

Thank you for your attention.

Very truly yours,

(Sgd.)
JOSE Y. SONZA
President and Gen. Manager4

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

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

Meanwhile, ABS-CBN continued to remit SONZA’s monthly talent fees through his account at PCIBank,
Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account with the same
bank where ABS-CBN deposited SONZA’s talent fees and other payments due him under the Agreement.

In his Order dated 2 December 1996, the Labor Arbiter5 denied the motion to dismiss and directed the
parties to file their respective position papers. The Labor Arbiter ruled:

In this instant case, complainant for having invoked a claim that he was an employee of
respondent company until April 15, 1996 and that he was not paid certain claims, it is sufficient
enough as to confer jurisdiction over the instant case in this Office. And as to whether or not such
 claim would entitle complainant to recover upon the causes of action asserted is a matter to be
resolved only after and as a result of a hearing. Thus, the respondent’s plea of lack of employer-
employee relationship may be pleaded only as a matter of defense. It behooves upon it the duty
to prove that there really is no employer-employee relationship between it and the complainant.

The Labor Arbiter then considered the case submitted for resolution. The parties submitted their position
papers on 24 February 1997.

On 11 March 1997, SONZA filed a Reply to Respondent’s Position Paper with Motion to Expunge
Respondent’s Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBN’s
witnesses Soccoro Vidanes and Rolando V. Cruz. These witnesses stated in their affidavits that the
prevailing practice in the television and broadcast industry is to treat talents like SONZA as independent
contractors.

The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of
jurisdiction.6 The pertinent parts of the decision read as follows:

xxx

While Philippine jurisprudence has not yet, with certainty, touched on the "true nature of the
contract of a talent," it stands to reason that a "talent" as above-described cannot be considered
as an employee by reason of the peculiar circumstances surrounding the engagement of his
services.

It must be noted that complainant was engaged by respondent by reason of his peculiar

skills and talent as a TV host and a radio broadcaster. Unlike an ordinary employee, he
was free to perform the services he undertook to render in accordance with his own style.
The benefits conferred to complainant under the May 1994 Agreement are certainly very much
higher than those generally given to employees. For one, complainant Sonza’s monthly talent
fees amount to a staggering ₱317,000. Moreover, his engagement as a talent was covered by a
specific contract. Likewise, he was not bound to render eight (8) hours of work per day as he
worked only for such number of hours as may be necessary.

The fact that per the May 1994 Agreement complainant was accorded some benefits normally
given to an employee is inconsequential. Whatever benefits complainant enjoyed arose from
specific agreement by the parties and not by reason of employer-employee
relationship. As correctly put by the respondent, "All these benefits are merely talent fees and
other contractual benefits and should not be deemed as ‘salaries, wages and/or other
remuneration’ accorded to an employee, notwithstanding the nomenclature appended to these
benefits. Apropos to this is the rule that the term or nomenclature given to a stipulated benefit is
not controlling, but the intent of the parties to the Agreement conferring such benefit."

The fact that complainant was made subject to respondent’s Rules and Regulations,
likewise, does not detract from the absence of employer-employee relationship. As held by
the Supreme Court, "The line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the means or methods to
be employed in attaining it, and those that control or fix the methodology and bind or restrict the
party hired to the use of such means. The first, which aim only to promote the result, create no
employer-employee relationship unlike the second, which address both the result and the means
to achieve it." (Insular Life Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15,
1989).

x x x (Emphasis supplied)7

SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the Labor
Arbiter’s decision. SONZA filed a motion for reconsideration, which the NLRC denied in its Resolution
dated 3 July 1998.

On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals assailing
the decision and resolution of the NLRC. On 26 March 1999, the Court of Appeals rendered a Decision
dismissing the case.8

Hence, this petition.

The Rulings of the NLRC and Court of Appeals

The Court of Appeals affirmed the NLRC’s finding that no employer-employee relationship existed
between SONZA and ABS-CBN. Adopting the NLRC’s decision, the appellate court quoted the following
findings of the NLRC:

x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as
an agent of complainant Sonza, the principal. By all indication and as the law puts it, the act of
the agent is the act of the principal itself. This fact is made particularly true in this case, as
admittedly MJMDC ‘is a management company devoted exclusively to managing the careers of
Mr. Sonza and his broadcast partner, Mrs. Carmela C. Tiangco.’ (Opposition to Motion to
Dismiss)

Clearly, the relations of principal and agent only accrues between complainant Sonza and
MJMDC, and not between ABS-CBN and MJMDC. This is clear from the provisions of the May
1994 Agreement which specifically referred to MJMDC as the ‘AGENT’. As a matter of fact, when
complainant herein unilaterally rescinded said May 1994 Agreement, it was MJMDC which issued
the notice of rescission in behalf of Mr. Sonza, who himself signed the same in his capacity as
President.

Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically,
the parties to the said agreements are ABS-CBN and Mr. Sonza. And it is only in the May 1994
Agreement, which is the latest Agreement executed between ABS-CBN and Mr. Sonza, that
MJMDC figured in the said Agreement as the agent of Mr. Sonza.

We find it erroneous to assert that MJMDC is a mere ‘labor-only’ contractor of ABS-CBN such
that there exist[s] employer-employee relationship between the latter and Mr. Sonza. On the
contrary, We find it indubitable, that MJMDC is an agent, not of ABS-CBN, but of the
talent/contractor Mr. Sonza, as expressly admitted by the latter and MJMDC in the May 1994
Agreement.

It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the
regular courts, the same being in the nature of an action for alleged breach of contractual
obligation on the part of respondent-appellee. As squarely apparent from complainant-appellant’s
Position Paper, his claims for compensation for services, ‘13th month pay’, signing bonus and
travel allowance against respondent-appellee are not based on the Labor Code but rather on the
provisions of the May 1994 Agreement, while his claims for proceeds under Stock Purchase
Agreement are based on the latter. A portion of the Position Paper of complainant-appellant
bears perusal:

‘Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually
bound itself to pay complainant a signing bonus consisting of shares of stocks…with
FIVE HUNDRED THOUSAND PESOS (₱500,000.00).

Similarly, complainant is also entitled to be paid 13th month pay based on an amount not
lower than the amount he was receiving prior to effectivity of (the) Agreement’.

Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a

commutable travel benefit amounting to at least One Hundred Fifty Thousand Pesos
(₱150,000.00) per year.’

Thus, it is precisely because of complainant-appellant’s own recognition of the fact that his
contractual relations with ABS-CBN are founded on the New Civil Code, rather than the Labor
Code, that instead of merely resigning from ABS-CBN, complainant-appellant served upon the
latter a ‘notice of rescission’ of Agreement with the station, per his letter dated April 1, 1996,
which asserted that instead of referring to unpaid employee benefits, ‘he is waiving and
renouncing recovery of the remaining amount stipulated in paragraph 7 of the Agreement but
reserves the right to such recovery of the other benefits under said Agreement.’ (Annex 3 of the
respondent ABS-CBN’s Motion to Dismiss dated July 10, 1996).

Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the
Stock Purchase Agreement by respondent-appellee that complainant-appellant filed his
complaint. Complainant-appellant’s claims being anchored on the alleged breach of contract on
the part of respondent-appellee, the same can be resolved by reference to civil law and not to
labor law. Consequently, they are within the realm of civil law and, thus, lie with the regular
courts. As held in the case of Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21
November 1994, an action for breach of contractual obligation is intrinsically a civil
dispute.9 (Emphasis supplied)
The Court of Appeals ruled that the existence of an employer-employee relationship between SONZA and
ABS-CBN is a factual question that is within the jurisdiction of the NLRC to resolve.10 A special civil action
for certiorari extends only to issues of want or excess of jurisdiction of the NLRC.11 Such action cannot
cover an inquiry into the correctness of the evaluation of the evidence which served as basis of the
NLRC’s conclusion.12 The Court of Appeals added that it could not re-examine the parties’ evidence and
substitute the factual findings of the NLRC with its own.13

The Issue

In assailing the decision of the Court of Appeals, SONZA contends that:

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRC’S DECISION AND
REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN
SONZA AND ABS-CBN, DESPITE THE WEIGHT OF CONTROLLING LAW, JURISPRUDENCE
AND EVIDENCE TO SUPPORT SUCH A FINDING.14

The Court’s Ruling

We affirm the assailed decision.

No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming the
NLRC ruling which upheld the Labor Arbiter’s dismissal of the case for lack of jurisdiction.

The present controversy is one of first impression. Although Philippine labor laws and jurisprudence
define clearly the elements of an employer-employee relationship, this is the first time that the Court will
resolve the nature of the relationship between a television and radio station and one of its "talents." There
is no case law stating that a radio and television program host is an employee of the broadcast station.

The instant case involves big names in the broadcast industry, namely Jose "Jay" Sonza, a known
television and radio personality, and ABS-CBN, one of the biggest television and radio networks in the
country.

SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee of
ABS-CBN. On the other hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction because
SONZA was an independent contractor.

Employee or Independent Contractor?

The existence of an employer-employee relationship is a question of fact. Appellate courts accord the
factual findings of the Labor Arbiter and the NLRC not only respect but also finality when supported by
substantial evidence.15 Substantial evidence means such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion.16 A party cannot prove the absence of substantial evidence
by simply pointing out that there is contrary evidence on record, direct or circumstantial. The Court does
not substitute its own judgment for that of the tribunal in determining where the weight of evidence lies or
what evidence is credible.17

SONZA maintains that all essential elements of an employer-employee relationship are present in this
case. Case law has consistently held that the elements of an employer-employee relationship are: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d)
the employer’s power to control the employee on the means and methods by which the work is
accomplished.18 The last element, the so-called "control test", is the most important element.19

A. Selection and Engagement of Employee

ABS-CBN engaged SONZA’s services to co-host its television and radio programs because of SONZA’s
peculiar skills, talent and celebrity status. SONZA contends that the "discretion used by respondent in
specifically selecting and hiring complainant over other broadcasters of possibly similar experience and
qualification as complainant belies respondent’s claim of independent contractorship."

Independent contractors often present themselves to possess unique skills, expertise or talent to
distinguish them from ordinary employees. The specific selection and hiring of SONZA, because of his
unique skills, talent and celebrity status not possessed by ordinary employees, is a circumstance
indicative, but not conclusive, of an independent contractual relationship. If SONZA did not possess such
unique skills, talent and celebrity status, ABS-CBN would not have entered into the Agreement with
SONZA but would have hired him through its personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine his status.
We must consider all the circumstances of the relationship, with the control test being the most important
element.

B. Payment of Wages

ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA
asserts that this mode of fee payment shows that he was an employee of ABS-CBN. SONZA also points
out that ABS-CBN granted him benefits and privileges "which he would not have enjoyed if he were truly
the subject of a valid job contract."

All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If
SONZA were ABS-CBN’s employee, there would be no need for the parties to stipulate on benefits such
as "SSS, Medicare, x x x and 13th month pay"20 which the law automatically incorporates into every
employer-employee contract.21 Whatever benefits SONZA enjoyed arose from contract and not because
of an employer-employee relationship.22

SONZA’s talent fees, amounting to ₱317,000 monthly in the second and third year, are so huge and out
of the ordinary that they indicate more an independent contractual relationship rather than an employer-
employee relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely because of
SONZA’s unique skills, talent and celebrity status not possessed by ordinary employees. Obviously,
SONZA acting alone possessed enough bargaining power to demand and receive such huge talent fees
for his services. The power to bargain talent fees way above the salary scales of ordinary employees is a
circumstance indicative, but not conclusive, of an independent contractual relationship.

The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA
as an independent contractor. The parties expressly agreed on such mode of payment. Under the
Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would have to turn over any talent fee
accruing under the Agreement.

C. Power of Dismissal

For violation of any provision of the Agreement, either party may terminate their relationship. SONZA
failed to show that ABS-CBN could terminate his services on grounds other than breach of contract, such
as retrenchment to prevent losses as provided under labor laws.23

During the life of the Agreement, ABS-CBN agreed to pay SONZA’s talent fees as long as "AGENT and
Jay Sonza shall faithfully and completely perform each condition of this Agreement."24 Even if it suffered
severe business losses, ABS-CBN could not retrench SONZA because ABS-CBN remained obligated to
pay SONZA’s talent fees during the life of the Agreement. This circumstance indicates an independent
contractual relationship between SONZA and ABS-CBN.

SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him his
talent fees. Plainly, ABS-CBN adhered to its undertaking in the Agreement to continue paying SONZA’s
talent fees during the remaining life of the Agreement even if ABS-CBN cancelled SONZA’s programs
through no fault of SONZA.25

SONZA assails the Labor Arbiter’s interpretation of his rescission of the Agreement as an admission that
he is not an employee of ABS-CBN. The Labor Arbiter stated that "if it were true that complainant was
really an employee, he would merely resign, instead." SONZA did actually resign from ABS-CBN but he
also, as president of MJMDC, rescinded the Agreement. SONZA’s letter clearly bears this out.26 However,
the manner by which SONZA terminated his relationship with ABS-CBN is immaterial. Whether SONZA
rescinded the Agreement or resigned from work does not determine his status as employee or
independent contractor.

D. Power of Control

Since there is no local precedent on whether a radio and television program host is an employee or an
independent contractor, we refer to foreign case law in analyzing the present case. The United States
Court of Appeals, First Circuit, recently held in Alberty-Vélez v. Corporación De Puerto Rico Para La
Difusión Pública ("WIPR")27 that a television program host is an independent contractor. We quote the
following findings of the U.S. court:

Several factors favor classifying Alberty as an independent contractor. First, a television actress

is a skilled position requiring talent and training not available on-the-job. x x x In this
regard, Alberty possesses a master’s degree in public communications and journalism; is trained
 in dance, singing, and modeling; taught with the drama department at the University of Puerto
Rico; and acted in several theater and television productions prior to her affiliation with "Desde Mi
Pueblo." Second, Alberty provided the "tools and instrumentalities" necessary for her to
perform. Specifically, she provided, or obtained sponsors to provide, the costumes, jewelry, and
other image-related supplies and services necessary for her appearance. Alberty disputes that
this factor favors independent contractor status because WIPR provided the "equipment
necessary to tape the show." Alberty’s argument is misplaced. The equipment necessary for
Alberty to conduct her job as host of "Desde Mi Pueblo" related to her appearance on the show.
Others provided equipment for filming and producing the show, but these were not the primary
tools that Alberty used to perform her particular function. If we accepted this argument,
independent contractors could never work on collaborative projects because other individuals
often provide the equipment required for different aspects of the collaboration. x x x

Third, WIPR could not assign Alberty work in addition to filming "Desde Mi
Pueblo." Alberty’s contracts with WIPR specifically provided that WIPR hired her "professional
services as Hostess for the Program Desde Mi Pueblo." There is no evidence that WIPR
assigned Alberty tasks in addition to work related to these tapings. x x x28 (Emphasis supplied)

Applying the control test to the present case, we find that SONZA is not an employee but an
independent contractor. The control test is the most important test our courts apply in distinguishing an
employee from an independent contractor.29 This test is based on the extent of control the hirer exercises
over a worker. The greater the supervision and control the hirer exercises, the more likely the worker is
deemed an employee. The converse holds true as well – the less control the hirer exercises, the more
likely the worker is considered an independent contractor.30

First, SONZA contends that ABS-CBN exercised control over the means and methods of his work.

SONZA’s argument is misplaced. ABS-CBN engaged SONZA’s services specifically to co-host the "Mel &
Jay" programs. ABS-CBN did not assign any other work to SONZA. To perform his work, SONZA only
needed his skills and talent. How SONZA delivered his lines, appeared on television, and sounded on
radio were outside ABS-CBN’s control. SONZA did not have to render eight hours of work per day. The
Agreement required SONZA to attend only rehearsals and tapings of the shows, as well as pre- and post-
production staff meetings.31 ABS-CBN could not dictate the contents of SONZA’s script. However, the
Agreement prohibited SONZA from criticizing in his shows ABS-CBN or its interests.32 The clear
implication is that SONZA had a free hand on what to say or discuss in his shows provided he did not
attack ABS-CBN or its interests.

We find that ABS-CBN was not involved in the actual performance that produced the finished product of
SONZA’s work.33 ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN merely reserved
the right to modify the program format and airtime schedule "for more effective programming."34 ABS-
CBN’s sole concern was the quality of the shows and their standing in the ratings. Clearly, ABS-CBN did
not exercise control over the means and methods of performance of SONZA’s work.

SONZA claims that ABS-CBN’s power not to broadcast his shows proves ABS-CBN’s power over the
means and methods of the performance of his work. Although ABS-CBN did have the option not to
broadcast SONZA’s show, ABS-CBN was still obligated to pay SONZA’s talent fees... Thus, even if ABS-
CBN was completely dissatisfied with the means and methods of SONZA’s performance of his work, or
even with the quality or product of his work, ABS-CBN could not dismiss or even discipline SONZA. All
that ABS-CBN could do is not to broadcast SONZA’s show but ABS-CBN must still pay his talent fees in
full.35

Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened as it was by the obligation to
continue paying in full SONZA’s talent fees, did not amount to control over the means and methods of the
performance of SONZA’s work. ABS-CBN could not terminate or discipline SONZA even if the means and
methods of performance of his work - how he delivered his lines and appeared on television - did not
meet ABS-CBN’s approval. This proves that ABS-CBN’s control was limited only to the result of SONZA’s
work, whether to broadcast the final product or not. In either case, ABS-CBN must still pay SONZA’s
talent fees in full until the expiry of the Agreement.

In Vaughan, et al. v. Warner, et al.,36 the United States Circuit Court of Appeals ruled that vaudeville
performers were independent contractors although the management reserved the right to delete
objectionable features in their shows. Since the management did not have control over the manner of
performance of the skills of the artists, it could only control the result of the work by deleting objectionable
features.37
SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and
crew. No doubt, ABS-CBN supplied the equipment, crew and airtime needed to broadcast the "Mel & Jay"
programs. However, the equipment, crew and airtime are not the "tools and instrumentalities" SONZA
needed to perform his job. What SONZA principally needed were his talent or skills and the costumes
necessary for his appearance.38 Even though ABS-CBN provided SONZA with the place of work and the
necessary equipment, SONZA was still an independent contractor since ABS-CBN did not supervise and
control his work. ABS-CBN’s sole concern was for SONZA to display his talent during the airing of the
programs.39

A radio broadcast specialist who works under minimal supervision is an independent

contractor.40 SONZA’s work as television and radio program host required special skills and talent, which
SONZA admittedly possesses. The records do not show that ABS-CBN exercised any supervision and
control over how SONZA utilized his skills and talent in his shows.

Second, SONZA urges us to rule that he was ABS-CBN’s employee because ABS-CBN subjected him to
its rules and standards of performance. SONZA claims that this indicates ABS-CBN’s control "not only
[over] his manner of work but also the quality of his work."

The Agreement stipulates that SONZA shall abide with the rules and standards of performance "covering
talents"41 of ABS-CBN. The Agreement does not require SONZA to comply with the rules and standards
of performance prescribed for employees of ABS-CBN. The code of conduct imposed on SONZA under
the Agreement refers to the "Television and Radio Code of the Kapisanan ng mga Broadcaster sa
Pilipinas (KBP), which has been adopted by the COMPANY (ABS-CBN) as its Code of Ethics."42 The KBP
code applies to broadcasters, not to employees of radio and television stations. Broadcasters are not
necessarily employees of radio and television stations. Clearly, the rules and standards of performance
referred to in the Agreement are those applicable to talents and not to employees of ABS-CBN.

In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an
employee of the former.43 In this case, SONZA failed to show that these rules controlled his performance.
We find that these general rules are merely guidelines towards the achievement of the mutually desired
result, which are top-rating television and radio programs that comply with standards of the industry. We
have ruled that:

Further, not every form of control that a party reserves to himself over the conduct of the other party in
relation to the services being rendered may be accorded the effect of establishing an employer-employee
relationship. The facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd. vs.
NLRC. In said case, we held that:

Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be
employed in attaining it, and those that control or fix the methodology and bind or restrict the
party hired to the use of such means. The first, which aim only to promote the result, create no
employer-employee relationship unlike the second, which address both the result and the means
used to achieve it.44

The Vaughan case also held that one could still be an independent contractor although the hirer reserved
certain supervision to insure the attainment of the desired result. The hirer, however, must not deprive the
one hired from performing his services according to his own initiative.45

Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the most extreme form of control
which ABS-CBN exercised over him.

This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an employee of
ABS-CBN. Even an independent contractor can validly provide his services exclusively to the hiring party.
In the broadcast industry, exclusivity is not necessarily the same as control.

The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry.46 This
practice is not designed to control the means and methods of work of the talent, but simply to protect the
investment of the broadcast station. The broadcast station normally spends substantial amounts of
money, time and effort "in building up its talents as well as the programs they appear in and thus expects
that said talents remain exclusive with the station for a commensurate period of time."47 Normally, a much
higher fee is paid to talents who agree to work exclusively for a particular radio or television station. In
short, the huge talent fees partially compensates for exclusivity, as in the present case.

MJMDC as Agent of SONZA

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

In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2) the employee
who is ostensibly under the employ of the "labor-only" contractor; and (3) the principal who is deemed the
real employer. Under this scheme, the "labor-only" contractor is the agent of the principal. The law
makes the principal responsible to the employees of the "labor-only contractor" as if the principal itself
directly hired or employed the employees.48 These circumstances are not present in this case.

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

As SONZA admits, MJMDC is a management company devoted exclusively to managing the careers of

SONZA and his broadcast partner, TIANGCO. MJMDC is not engaged in any other business, not even
job contracting. MJMDC does not have any other function apart from acting as agent of SONZA or
TIANGCO to promote their careers in the broadcast and television industry.49

Policy Instruction No. 40

SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8 January
1979 finally settled the status of workers in the broadcast industry. Under this policy, the types of
employees in the broadcast industry are the station and program employees.

Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of law.
There is no legal presumption that Policy Instruction No. 40 determines SONZA’s status. A mere
executive issuance cannot exclude independent contractors from the class of service providers to the
broadcast industry. The classification of workers in the broadcast industry into only two groups under
Policy Instruction No. 40 is not binding on this Court, especially when the classification has no basis either
in law or in fact.

Affidavits of ABS-CBN’s Witnesses

SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando Cruz
without giving his counsel the

opportunity to cross-examine these witnesses. SONZA brands these witnesses as incompetent to attest
on the prevailing practice in the radio and television industry. SONZA views the affidavits of these
witnesses as misleading and irrelevant.

While SONZA failed to cross-examine ABS-CBN’s witnesses, he was never prevented from denying or
refuting the allegations in the affidavits. The Labor Arbiter has the discretion whether to conduct a formal
(trial-type) hearing after the submission of the position papers of the parties, thus:

Section 3. Submission of Position Papers/Memorandum

xxx

These verified position papers shall cover only those claims and causes of action raised in the
complaint excluding those that may have been amicably settled, and shall be accompanied by all
supporting documents including the affidavits of their respective witnesses which shall take the
place of the latter’s direct testimony. x x x

Section 4. Determination of Necessity of Hearing. – Immediately after the submission of the

parties of their position papers/memorandum, the Labor Arbiter shall motu propio determine
whether there is need for a formal trial or hearing. At this stage, he may, at his discretion and for
the purpose of making such determination, ask clarificatory questions to further elicit facts or
information, including but not limited to the subpoena of relevant documentary evidence, if any
from any party or witness.50
The Labor Arbiter can decide a case based solely on the position papers and the supporting documents
without a formal trial.51 The holding of a formal hearing or trial is something that the parties cannot
demand as a matter of right.52 If the Labor Arbiter is confident that he can rely on the documents before
him, he cannot be faulted for not conducting a formal trial, unless under the particular circumstances of
the case, the documents alone are insufficient. The proceedings before a Labor Arbiter are non-litigious in
nature. Subject to the requirements of due process, the technicalities of law and the rules obtaining in the
courts of law do not strictly apply in proceedings before a Labor Arbiter.

Talents as Independent Contractors

ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries to
treat talents like SONZA as independent contractors. SONZA argues that if such practice exists, it is void
for violating the right of labor to security of tenure.

The right of labor to security of tenure as guaranteed in the Constitution53 arises only if there is an
employer-employee relationship under labor laws. Not every performance of services for a fee creates an
employer-employee relationship. To hold that every person who renders services to another for a fee is
an employee - to give meaning to the security of tenure clause - will lead to absurd results.

Individuals with special skills, expertise or talent enjoy the freedom to offer their services as independent
contractors. The right to life and livelihood guarantees this freedom to contract as independent
contractors. The right of labor to security of tenure cannot operate to deprive an individual, possessed
with special skills, expertise and talent, of his right to contract as an independent contractor. An individual
like an artist or talent has a right to render his services without any one controlling the means and
methods by which he performs his art or craft. This Court will not interpret the right of labor to security of
tenure to compel artists and talents to render their services only as employees. If radio and television
program hosts can render their services only as employees, the station owners and managers can dictate
to the radio and television hosts what they say in their shows. This is not conducive to freedom of the
press.

Different Tax Treatment of Talents and Broadcasters

The National Internal Revenue Code ("NIRC")54 in relation to Republic Act No. 7716,55 as amended by
Republic Act No. 8241,56 treats talents, television and radio broadcasters differently. Under the NIRC,
these professionals are subject to the 10% value-added tax ("VAT") on services they render. Exempted
from the VAT are those under an employer-employee relationship.57 This different tax treatment accorded
to talents and broadcasters bolters our conclusion that they are independent contractors, provided all the
basic elements of a contractual relationship are present as in this case.

Nature of SONZA’s Claims

SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay, service
incentive leave, signing bonus, travel allowance, and amounts due under the Employee Stock Option
Plan. We agree with the findings of the Labor Arbiter and the Court of Appeals that SONZA’s claims
are all based on the May 1994 Agreement and stock option plan, and not on the Labor Code.
Clearly, the present case does not call for an application of the Labor Code provisions but an
interpretation and implementation of the May 1994 Agreement. In effect, SONZA’s cause of action is for
breach of contract which is intrinsically a civil dispute cognizable by the regular courts.58

WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26 March
1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against petitioner.

SO ORDERED.

Davide, Jr., Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.

G.R. No. 164156             September 26, 2006

ABS-CBN BROADCASTING CORPORATION, petitioner,

vs.
MARLYN NAZARENO, MERLOU GERZON, JENNIFER DEIPARINE, and JOSEPHINE
LERASAN, respondents.

DECISION
CALLEJO, SR., J.:

Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. SP
No. 76582 and the Resolution denying the motion for reconsideration thereof. The CA affirmed the
Decision2 and Resolution3 of the National Labor Relations Commission (NLRC) in NLRC Case No. V-
000762-2001 (RAB Case No. VII-10-1661-2001) which likewise affirmed, with modification, the decision
of the Labor Arbiter declaring the respondents Marlyn Nazareno, Merlou Gerzon, Jennifer Deiparine and
Josephine Lerasan as regular employees.

The Antecedents

Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the broadcasting business and
owns a network of television and radio stations, whose operations revolve around the broadcast,
transmission, and relay of telecommunication signals. It sells and deals in or otherwise utilizes the airtime
it generates from its radio and television operations. It has a franchise as a broadcasting company, and
was likewise issued a license and authority to operate by the National Telecommunications Commission.

Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as production assistants
(PAs) on different dates. They were assigned at the news and public affairs, for various radio programs in
the Cebu Broadcasting Station, with a monthly compensation of P4,000. They were issued ABS-CBN
employees’ identification cards and were required to work for a minimum of eight hours a day, including
Sundays and holidays. They were made to perform the following tasks and duties:

a) Prepare, arrange airing of commercial broadcasting based on the daily operations log and digicart of
respondent ABS-CBN;

b) Coordinate, arrange personalities for air interviews;

c) Coordinate, prepare schedule of reporters for scheduled news reporting and lead-in or incoming
reports;

d) Facilitate, prepare and arrange airtime schedule for public service announcement and complaints;

e) Assist, anchor program interview, etc; and

f) Record, log clerical reports, man based control radio.4

Their respective working hours were as follows:

Name Time No. of Hours

1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7 ½

8:00 A.M.-12:00 noon

2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7 ½

3. Joy Sanchez 1:00 P.M.-10:00 P.M.(Sunday) 9 hrs.

9:00 A.M.-6:00 P.M. (WF) 9 hrs.

4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs.5

The PAs were under the control and supervision of Assistant Station Manager Dante J. Luzon, and News
Manager Leo Lastimosa.

On December 19, 1996, petitioner and the ABS-CBN Rank-and-File Employees executed a Collective
Bargaining Agreement (CBA) to be effective during the period from December 11, 1996 to December 11,
1999. However, since petitioner refused to recognize PAs as part of the bargaining unit, respondents
were not included to the CBA.6

On July 20, 2000, petitioner, through Dante Luzon, issued a Memorandum informing the PAs that
effective August 1, 2000, they would be assigned to non-drama programs, and that the DYAB studio
operations would be handled by the studio technician. Thus, their revised schedule and other
assignments would be as follows:

Monday – Saturday

4:30 A.M. – 8:00 A.M. – Marlene Nazareno.

Miss Nazareno will then be assigned at the Research Dept.

From 8:00 A.M. to 12:00

4:30 P.M. – 12:00 MN – Jennifer Deiparine

Sunday

5:00 A.M. – 1:00 P.M. – Jennifer Deiparine

1:00 P.M. – 10:00 P.M. – Joy Sanchez

Respondent Gerzon was assigned as the full-time PA of the TV News Department reporting directly to
Leo Lastimosa.

On October 12, 2000, respondents filed a Complaint for Recognition of Regular Employment Status,
Underpayment of Overtime Pay, Holiday Pay, Premium Pay, Service Incentive Pay, Sick Leave Pay, and
13th Month Pay with Damages against the petitioner before the NLRC. The Labor Arbiter directed the
parties to submit their respective position papers. Upon respondents’ failure to file their position papers
within the reglementary period, Labor Arbiter Jose G. Gutierrez issued an Order dated April 30, 2001,
dismissing the complaint without prejudice for lack of interest to pursue the case. Respondents received a
copy of the Order on May 16, 2001.7 Instead of re-filing their complaint with the NLRC within 10 days from
May 16, 2001, they filed, on June 11, 2001, an Earnest Motion to Refile Complaint with Motion to Admit
Position Paper and Motion to Submit Case For Resolution.8 The Labor Arbiter granted this motion in an
Order dated June 18, 2001, and forthwith admitted the position paper of the complainants. Respondents
made the following allegations:

1. Complainants were engaged by respondent ABS-CBN as regular and full-time employees for a
continuous period of more than five (5) years with a monthly salary rate of Four Thousand (P4,000.00)
pesos beginning 1995 up until the filing of this complaint on November 20, 2000.

Machine copies of complainants’ ABS-CBN Employee’s Identification Card and salary vouchers are
hereto attached as follows, thus:

I. Jennifer Deiparine:

Exhibit "A" - ABS-CBN Employee’s Identification Card

Exhibit "B", - ABS-CBN Salary Voucher from Nov.

Exhibit "B-1" & 1999 to July 2000 at P4,000.00

Exhibit "B-2"

Date employed: September 15, 1995

Length of service: 5 years & nine (9) months

II. Merlou Gerzon - ABS-CBN Employee’s Identification Card

Exhibit "C"

Exhibit "D"

Exhibit "D-1" &

Exhibit "D-2" - ABS-CBN Salary Voucher from March

1999 to January 2001 at P4,000.00

Date employed: September 1, 1995

Length of service: 5 years & 10 months

III. Marlene Nazareno

Exhibit "E" - ABS-CBN Employee’s Identification Card

Exhibit "E" - ABS-CBN Salary Voucher from Nov.

Exhibit "E-1" & 1999 to December 2000

Exhibit :E-2"

Date employed: April 17, 1996

Length of service: 5 years and one (1) month

IV. Joy Sanchez Lerasan

Exhibit "F" - ABS-CBN Employee’s Identification Card

Exhibit "F-1" - ABS-CBN Salary Voucher from Aug.

Exhibit "F-2" & 2000 to Jan. 2001

Exhibit "F-3"

Exhibit "F-4" - Certification dated July 6, 2000

Acknowledging regular status of

Complainant Joy Sanchez Lerasan

Signed by ABS-CBN Administrative

Officer May Kima Hife

Date employed: April 15, 1998

Length of service: 3 yrs. and one (1) month9

Respondents insisted that they belonged to a "work pool" from which petitioner chose persons to be given
specific assignments at its discretion, and were thus under its direct supervision and control regardless of
nomenclature. They prayed that judgment be rendered in their favor, thus:

WHEREFORE, premises considered, this Honorable Arbiter is most respectfully prayed, to issue an order
compelling defendants to pay complainants the following:

1. One Hundred Thousand Pesos (P100,000.00) each

and by way of moral damages;

2. Minimum wage differential;

3. Thirteenth month pay differential;

4. Unpaid service incentive leave benefits;

5. Sick leave;

6. Holiday pay;

7. Premium pay;

8. Overtime pay;

9. Night shift differential.

Complainants further pray of this Arbiter to declare them regular and permanent employees of respondent
ABS-CBN as a condition precedent for their admission into the existing union and collective bargaining
unit of respondent company where they may as such acquire or otherwise perform their obligations
thereto or enjoy the benefits due therefrom.

Complainants pray for such other reliefs as are just and equitable under the premises.10

For its part, petitioner alleged in its position paper that the respondents were PAs who basically assist in
the conduct of a particular program ran by an anchor or talent. Among their duties include monitoring and
receiving incoming calls from listeners and field reporters and calls of news sources; generally, they
perform leg work for the anchors during a program or a particular production. They are considered in the
industry as "program employees" in that, as distinguished from regular or station employees, they are
basically engaged by the station for a particular or specific program broadcasted by the radio station.
Petitioner asserted that as PAs, the complainants were issued talent information sheets which are
updated from time to time, and are thus made the basis to determine the programs to which they shall
later be called on to assist. The program assignments of complainants were as follows:

a. Complainant Nazareno assists in the programs:

1) Nagbagang Balita (early morning edition)

2) Infor Hayupan

3) Arangkada (morning edition)

4) Nagbagang Balita (mid-day edition)

b. Complainant Deiparine assists in the programs:

1) Unzanith

2) Serbisyo de Arevalo

3) Arangkada (evening edition)

4) Balitang K (local version)

5) Abante Subu

6) Pangutana Lang

c. Complainant Gerzon assists in the program:

1) On Mondays and Tuesdays:

(a) Unzanith

(b) Serbisyo de Arevalo

(c) Arangkada (evening edition)

(d) Balitang K (local version)

(e) Abante Sugbu

(f) Pangutana Lang

2) On Thursdays

Nagbagang Balita

3) On Saturdays

(a) Nagbagang Balita

(b) Info Hayupan

(c) Arangkada (morning edition)

(d) Nagbagang Balita (mid-day edition)

4) On Sundays:

(a) Siesta Serenata

(b) Sunday Chismisan

(c) Timbangan sa Hustisya

(d) Sayri ang Lungsod

(e) Haranahan11

Petitioner maintained that PAs, reporters, anchors and talents occasionally "sideline" for other programs
they produce, such as drama talents in other productions. As program employees, a PA’s engagement is
coterminous with the completion of the program, and may be extended/renewed provided that the
program is on-going; a PA may also be assigned to new programs upon the cancellation of one program
and the commencement of another. As such program employees, their compensation is computed on a
program basis, a fixed amount for performance services irrespective of the time consumed. At any rate,
petitioner claimed, as the payroll will show, respondents were paid all salaries and benefits due them
under the law.12

Petitioner also alleged that the Labor Arbiter had no jurisdiction to involve the CBA and interpret the
same, especially since respondents were not covered by the bargaining unit.

On July 30, 2001, the Labor Arbiter rendered judgment in favor of the respondents, and declared that they
were regular employees of petitioner; as such, they were awarded monetary benefits. The fallo of the
decision reads:

WHEREFORE, the foregoing premises considered, judgment is hereby rendered declaring the
complainants regular employees of the respondent ABS-CBN Broadcasting Corporation and directing the
same respondent to pay complainants as follows:

I - Merlou A. Gerzon P12,025.00

II - Marlyn Nazareno 12,025.00

III - Jennifer Deiparine 12,025.00

IV - Josephine Sanchez Lerazan 12,025.00

_________

P48,100.00
plus ten (10%) percent Attorney’s Fees or a TOTAL aggregate amount of PESOS: FIFTY TWO
THOUSAND NINE HUNDRED TEN (P52,910.00).

Respondent Veneranda C. Sy is absolved from any liability.

SO ORDERED.13

However, the Labor Arbiter did not award money benefits as provided in the CBA on his belief that he had
no jurisdiction to interpret and apply the agreement, as the same was within the jurisdiction of the
Voluntary Arbitrator as provided in Article 261 of the Labor Code.

Respondents’ counsel received a copy of the decision on August 29, 2001. Respondent Nazareno
received her copy on August 27, 2001, while the other respondents received theirs on September 8,
2001. Respondents signed and filed their Appeal Memorandum on September 18, 2001.

For its part, petitioner filed a motion for reconsideration, which the Labor Arbiter denied and considered as
an appeal, conformably with Section 5, Rule V, of the NLRC Rules of Procedure. Petitioner forthwith
appealed the decision to the NLRC, while respondents filed a partial appeal.

In its appeal, petitioner alleged the following:

1. That the Labor Arbiter erred in reviving or re-opening this case which had long been dismissed without
prejudice for more than thirty (30) calendar days;

2. That the Labor Arbiter erred in depriving the respondent of its Constitutional right to due process of law;

3. That the Labor Arbiter erred in denying respondent’s Motion for Reconsideration on an interlocutory
order on the ground that the same is a prohibited pleading;

4. That the Labor Arbiter erred when he ruled that the complainants are regular employees of the
respondent;

5. That the Labor Arbiter erred when he ruled that the complainants are entitled to 13th month pay,
service incentive leave pay and salary differential; and

6. That the Labor Arbiter erred when he ruled that complainants are entitled to attorney’s fees.14

On November 14, 2002, the NLRC rendered judgment modifying the decision of the Labor Arbiter. The
fallo of the decision reads:

WHEREFORE, premises considered, the decision of Labor Arbiter Jose G. Gutierrez dated 30 July 2001
is SET ASIDE and VACATED and a new one is entered ORDERING respondent ABS-CBN Broadcasting
Corporation, as follows:

1. To pay complainants of their wage differentials and other benefits arising from the CBA as of 30
September 2002 in the aggregate amount of Two Million Five Hundred, Sixty-One Thousand Nine
Hundred Forty-Eight Pesos and 22/100 (P2,561,948.22), broken down as follows:

a. Deiparine, Jennifer - P 716,113.49

b. Gerzon, Merlou - 716,113.49

c. Nazareno, Marlyn - 716,113.49

d. Lerazan, Josephine Sanchez - 413,607.75

Total - P 2,561,948.22

2. To deliver to the complainants Two Hundred Thirty-Three (233) sacks of rice as of 30 September 2002
representing their rice subsidy in the CBA, broken down as follows:

a. Deiparine, Jennifer - 60 Sacks

b. Gerzon, Merlou - 60 Sacks

c. Nazareno, Marlyn - 60 Sacks

d. Lerazan, Josephine Sanchez - 53 Sacks

Total 233 Sacks; and

3. To grant to the complainants all the benefits of the CBA after 30 September 2002.

SO ORDERED.15

The NLRC declared that the Labor Arbiter acted conformably with the Labor Code when it granted
respondents’ motion to refile the complaint and admit their position paper. Although respondents were not
parties to the CBA between petitioner and the ABS-CBN Rank-and-File Employees Union, the NLRC
nevertheless granted and computed respondents’ monetary benefits based on the 1999 CBA, which was
effective until September 2002. The NLRC also ruled that the Labor Arbiter had jurisdiction over the
complaint of respondents because they acted in their individual capacities and not as members of the
union. Their claim for monetary benefits was within the context of Article 217(6) of the Labor Code. The
validity of respondents’ claim does not depend upon the interpretation of the CBA.

The NLRC ruled that respondents were entitled to the benefits under the CBA because they were regular
employees who contributed to the profits of petitioner through their labor. The NLRC cited the ruling of
this Court in New Pacific Timber & Supply Company v. National Labor Relations Commission.16

Petitioner filed a motion for reconsideration, which the NLRC denied.

Petitioner thus filed a petition for certiorari under Rule 65 of the Rules of Court before the CA, raising both
procedural and substantive issues, as follows: (a) whether the NLRC acted without jurisdiction in
admitting the appeal of respondents; (b) whether the NLRC committed palpable error in scrutinizing the
reopening and revival of the complaint of respondents with the Labor Arbiter upon due notice despite the
lapse of 10 days from their receipt of the July 30, 2001 Order of the Labor Arbiter; (c) whether
respondents were regular employees; (d) whether the NLRC acted without jurisdiction in entertaining and
resolving the claim of the respondents under the CBA instead of referring the same to the Voluntary
Arbitrators as provided in the CBA; and (e) whether the NLRC acted with grave abuse of discretion when
it awarded monetary benefits to respondents under the CBA although they are not members of the
appropriate bargaining unit.

On February 10, 2004, the CA rendered judgment dismissing the petition. It held that the perfection of an
appeal shall be upon the expiration of the last day to appeal by all parties, should there be several parties
to a case. Since respondents received their copies of the decision on September 8, 2001 (except
respondent Nazareno who received her copy of the decision on August 27, 2001), they had until
September 18, 2001 within which to file their Appeal Memorandum. Moreover, the CA declared that
respondents’ failure to submit their position paper on time is not a ground to strike out the paper from the
records, much less dismiss a complaint.

Anent the substantive issues, the appellate court stated that respondents are not mere project
employees, but regular employees who perform tasks necessary and desirable in the usual trade and
business of petitioner and not just its project employees. Moreover, the CA added, the award of benefits
accorded to rank-and-file employees under the 1996-1999 CBA is a necessary consequence of the NLRC
ruling that respondents, as PAs, are regular employees.

Finding no merit in petitioner’s motion for reconsideration, the CA denied the same in a Resolution17 dated
June 16, 2004.

Petitioner thus filed the instant petition for review on certiorari and raises the following assignments of
error:

1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT JURISDICTION AND GRAVELY

ERRED IN UPHOLDING THE NATIONAL LABOR RELATIONS COMMISSION NOTWITHSTANDING
THE PATENT NULLITY OF THE LATTER’S DECISION AND RESOLUTION.

2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE
NLRC FINDING RESPONDENTS REGULAR EMPLOYEES.
3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE
NLRC AWARDING CBA BENEFITS TO RESPONDENTS.18

Considering that the assignments of error are interrelated, the Court shall resolve them simultaneously.

Petitioner asserts that the appellate court committed palpable and serious error of law when it affirmed
the rulings of the NLRC, and entertained respondents’ appeal from the decision of the Labor Arbiter
despite the admitted lapse of the reglementary period within which to perfect the same. Petitioner likewise
maintains that the 10-day period to appeal must be reckoned from receipt of a party’s counsel, not from
the time the party learns of the decision, that is, notice to counsel is notice to party and not the other way
around. Finally, petitioner argues that the reopening of a complaint which the Labor Arbiter has dismissed
without prejudice is a clear violation of Section 1, Rule V of the NLRC Rules; such order of dismissal had
already attained finality and can no longer be set aside.

Respondents, on the other hand, allege that their late appeal is a non-issue because it was petitioner’s
own timely appeal that empowered the NLRC to reopen the case. They assert that although the appeal
was filed 10 days late, it may still be given due course in the interest of substantial justice as an exception
to the general rule that the negligence of a counsel binds the client. On the issue of the late filing of their
position paper, they maintain that this is not a ground to strike it out from the records or dismiss the
complaint.

We find no merit in the petition.

We agree with petitioner’s contention that the perfection of an appeal within the statutory or reglementary
period is not only mandatory, but also jurisdictional; failure to do so renders the assailed decision final and
executory and deprives the appellate court or body of the legal authority to alter the final judgment, much
less entertain the appeal. However, this Court has time and again ruled that in exceptional cases, a
belated appeal may be given due course if greater injustice may occur if an appeal is not given due
course than if the reglementary period to appeal were strictly followed.19 The Court resorted to this
extraordinary measure even at the expense of sacrificing order and efficiency if only to serve the greater
principles of substantial justice and equity.20

In the case at bar, the NLRC did not commit a grave abuse of its discretion in giving Article 22321 of the
Labor Code a liberal application to prevent the miscarriage of justice. Technicality should not be allowed
to stand in the way of equitably and completely resolving the rights and obligations of the parties.22 We
have held in a catena of cases that technical rules are not binding in labor cases and are not to be applied
strictly if the result would be detrimental to the workingman.23

Admittedly, respondents failed to perfect their appeal from the decision of the Labor Arbiter within the
reglementary period therefor. However, petitioner perfected its appeal within the period, and since
petitioner had filed a timely appeal, the NLRC acquired jurisdiction over the case to give due course to its
appeal and render the decision of November 14, 2002. Case law is that the party who failed to appeal
from the decision of the Labor Arbiter to the NLRC can still participate in a separate appeal timely filed by
the adverse party as the situation is considered to be of greater benefit to both parties.24

We find no merit in petitioner’s contention that the Labor Arbiter abused his discretion when he admitted
respondents’ position paper which had been belatedly filed. It bears stressing that the Labor Arbiter is
mandated by law to use every reasonable means to ascertain the facts in each case speedily and
objectively, without technicalities of law or procedure, all in the interest of due process.25 Indeed, as
stressed by the appellate court, respondents’ failure to submit a position paper on time is not a ground for
striking out the paper from the records, much less for dismissing a complaint.26 Likewise, there is simply
no truth to petitioner’s assertion that it was denied due process when the Labor Arbiter admitted
respondents’ position paper without requiring it to file a comment before admitting said position paper.
The essence of due process in administrative proceedings is simply an opportunity to explain one’s side
or an opportunity to seek reconsideration of the action or ruling complained of. Obviously, there is nothing
in the records that would suggest that petitioner had absolute lack of opportunity to be heard.27 Petitioner
had the right to file a motion for reconsideration of the Labor Arbiter’s admission of respondents’ position
paper, and even file a Reply thereto. In fact, petitioner filed its position paper on April 2, 2001. It must be
stressed that Article 280 of the Labor Code was encoded in our statute books to hinder the circumvention
by unscrupulous employers of the employees’ right to security of tenure by indiscriminately and absolutely
ruling out all written and oral agreements inharmonious with the concept of regular employment defined
therein.28

We quote with approval the following pronouncement of the NLRC:

The complainants, on the other hand, contend that respondents assailed the Labor Arbiter’s order dated
18 June 2001 as violative of the NLRC Rules of Procedure and as such is violative of their right to
procedural due process. That while suggesting that an Order be instead issued by the Labor Arbiter for
complainants to refile this case, respondents impliedly submit that there is not any substantial damage or
prejudice upon the refiling, even so, respondents’ suggestion acknowledges complainants right to
prosecute this case, albeit with the burden of repeating the same procedure, thus, entailing additional
time, efforts, litigation cost and precious time for the Arbiter to repeat the same process twice.
Respondent’s suggestion, betrays its notion of prolonging, rather than promoting the early resolution of
the case.

Although the Labor Arbiter in his Order dated 18 June 2001 which revived and re-opened the dismissed
case without prejudice beyond the ten (10) day reglementary period had inadvertently failed to follow
Section 16, Rule V, Rules Procedure of the NLRC which states:

"A party may file a motion to revive or re-open a case dismissed without prejudice within ten (10) calendar
days from receipt of notice of the order dismissing the same; otherwise, his only remedy shall be to re-file
the case in the arbitration branch of origin."

the same is not a serious flaw that had prejudiced the respondents’ right to due process. The case can
still be refiled because it has not yet prescribed. Anyway, Article 221 of the Labor Code provides:

"In any proceedings before the Commission or any of the Labor Arbiters, the rules of evidence prevailing
in courts of law or equity shall not be controlling and it is the spirit and intention of this Code that the
Commission and its members and the Labor Arbiters shall use every and all reasonable means to
ascertain the facts in each case speedily and objectively and without regard to technicalities of law or
procedure, all in the interest of due process."

The admission by the Labor Arbiter of the complainants’ Position Paper and Supplemental Manifestation
which were belatedly filed just only shows that he acted within his discretion as he is enjoined by law to
use every reasonable means to ascertain the facts in each case speedily and objectively, without regard
to technicalities of law or procedure, all in the interest of due process. Indeed, the failure to submit a
position paper on time is not a ground for striking out the paper from the records, much less for dismissing
a complaint in the case of the complainant. (University of Immaculate Conception vs. UIC Teaching and
Non-Teaching Personnel Employees, G.R. No. 144702, July 31, 2001).

"In admitting the respondents’ position paper albeit late, the Labor Arbiter acted within her discretion. In
fact, she is enjoined by law to use every reasonable means to ascertain the facts in each case speedily
and objectively, without technicalities of law or procedure, all in the interest of due process". (Panlilio vs.
NLRC, 281 SCRA 53).

The respondents were given by the Labor Arbiter the opportunity to submit position paper. In fact, the
respondents had filed their position paper on 2 April 2001. What is material in the compliance of due
process is the fact that the parties are given the opportunities to submit position papers.

"Due process requirements are satisfied where the parties are given the opportunities to submit position
papers". (Laurence vs. NLRC, 205 SCRA 737).

Thus, the respondent was not deprived of its Constitutional right to due process of law.29

We reject, as barren of factual basis, petitioner’s contention that respondents are considered as its
talents, hence, not regular employees of the broadcasting company. Petitioner’s claim that the functions
performed by the respondents are not at all necessary, desirable, or even vital to its trade or business is
belied by the evidence on record.

Case law is that this Court has always accorded respect and finality to the findings of fact of the CA,
particularly if they coincide with those of the Labor Arbiter and the National Labor Relations Commission,
when supported by substantial evidence.30 The question of whether respondents are regular or project
employees or independent contractors is essentially factual in nature; nonetheless, the Court is
constrained to resolve it due to its tremendous effects to the legions of production assistants working in
the Philippine broadcasting industry.

We agree with respondents’ contention that where a person has rendered at least one year of service,
regardless of the nature of the activity performed, or where the work is continuous or intermittent, the
employment is considered regular as long as the activity exists, the reason being that a customary
appointment is not indispensable before one may be formally declared as having attained regular status.
Article 280 of the Labor Code provides:
ART. 280. REGULAR AND CASUAL EMPLOYMENT.—The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be
deemed to be regular where the employee has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer except where the employment has
been fixed for a specific project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the work or services to be performed
is seasonal in nature and the employment is for the duration of the season.

In Universal Robina Corporation v. Catapang,31 the Court reiterated the test in determining whether one is
a regular employee:

The primary standard, therefore, of determining regular employment is the reasonable connection
between the particular activity performed by the employee in relation to the usual trade or business of the
employer. The test is whether the former is usually necessary or desirable in the usual business or trade
of the employer. The connection can be determined by considering the nature of work performed and its
relation to the scheme of the particular business or trade in its entirety. Also, if the employee has been
performing the job for at least a year, even if the performance is not continuous and merely intermittent,
the law deems repeated and continuing need for its performance as sufficient evidence of the necessity if
not indispensability of that activity to the business. Hence, the employment is considered regular, but only
with respect to such activity and while such activity exists.32

As elaborated by this Court in Magsalin v. National Organization of Working Men:33

Even while the language of law might have been more definitive, the clarity of its spirit and intent, i.e., to
ensure a "regular" worker’s security of tenure, however, can hardly be doubted. In determining whether
an employment should be considered regular or non-regular, the applicable test is the reasonable
connection between the particular activity performed by the employee in relation to the usual business or
trade of the employer. The standard, supplied by the law itself, is whether the work undertaken is
necessary or desirable in the usual business or trade of the employer, a fact that can be assessed by
looking into the nature of the services rendered and its relation to the general scheme under which the
business or trade is pursued in the usual course. It is distinguished from a specific undertaking that is
divorced from the normal activities required in carrying on the particular business or trade. But, although
the work to be performed is only for a specific project or seasonal, where a person thus engaged has
been performing the job for at least one year, even if the performance is not continuous or is merely
intermittent, the law deems the repeated and continuing need for its performance as being sufficient to
indicate the necessity or desirability of that activity to the business or trade of the employer. The
employment of such person is also then deemed to be regular with respect to such activity and while such
activity exists.34

Not considered regular employees are "project employees," the completion or termination of which is
more or less determinable at the time of employment, such as those employed in connection with a
particular construction project, and "seasonal employees" whose employment by its nature is only
desirable for a limited period of time. Even then, any employee who has rendered at least one year of
service, whether continuous or intermittent, is deemed regular with respect to the activity performed and
while such activity actually exists.

It is of no moment that petitioner hired respondents as "talents." The fact that respondents received pre-
agreed "talent fees" instead of salaries, that they did not observe the required office hours, and that they
were permitted to join other productions during their free time are not conclusive of the nature of their
employment. Respondents cannot be considered "talents" because they are not actors or actresses or
radio specialists or mere clerks or utility employees. They are regular employees who perform several
different duties under the control and direction of ABS-CBN executives and supervisors.

Thus, there are two kinds of regular employees under the law: (1) those engaged to perform activities
which are necessary or desirable in the usual business or trade of the employer; and (2) those casual
employees who have rendered at least one year of service, whether continuous or broken, with respect to
the activities in which they are employed.35

The law overrides such conditions which are prejudicial to the interest of the worker whose weak
bargaining situation necessitates the succor of the State. What determines whether a certain employment
is regular or otherwise is not the will or word of the employer, to which the worker oftentimes acquiesces,
much less the procedure of hiring the employee or the manner of paying the salary or the actual time
spent at work. It is the character of the activities performed in relation to the particular trade or business
taking into account all the circumstances, and in some cases the length of time of its performance and its
continued existence.36 It is obvious that one year after they were employed by petitioner, respondents
became regular employees by operation of law.37
Additionally, respondents cannot be considered as project or program employees because no evidence
was presented to show that the duration and scope of the project were determined or specified at the time
of their engagement. Under existing jurisprudence, project could refer to two distinguishable types of
activities. First, a project may refer to a particular job or undertaking that is within the regular or usual
business of the employer, but which is distinct and separate, and identifiable as such, from the other
undertakings of the company. Such job or undertaking begins and ends at determined or determinable
times. Second, the term project may also refer to a particular job or undertaking that is not within the
regular business of the employer. Such a job or undertaking must also be identifiably separate and
distinct from the ordinary or regular business operations of the employer. The job or undertaking also
begins and ends at determined or determinable times.38

The principal test is whether or not the project employees were assigned to carry out a specific project or
undertaking, the duration and scope of which were specified at the time the employees were engaged for
that project.39

In this case, it is undisputed that respondents had continuously performed the same activities for an
average of five years. Their assigned tasks are necessary or desirable in the usual business or trade of
the petitioner. The persisting need for their services is sufficient evidence of the necessity and
indispensability of such services to petitioner’s business or trade.40 While length of time may not be a sole
controlling test for project employment, it can be a strong factor to determine whether the employee was
hired for a specific undertaking or in fact tasked to perform functions which are vital, necessary and
indispensable to the usual trade or business of the employer.41 We note further that petitioner did not
report the termination of respondents’ employment in the particular "project" to the Department of Labor
and Employment Regional Office having jurisdiction over the workplace within 30 days following the date
of their separation from work, using the prescribed form on employees’ termination/
dismissals/suspensions.42

As gleaned from the records of this case, petitioner itself is not certain how to categorize respondents. In
its earlier pleadings, petitioner classified respondents as program employees, and in later pleadings,
independent contractors. Program employees, or project employees, are different from independent
contractors because in the case of the latter, no employer-employee relationship exists.

Petitioner’s reliance on the ruling of this Court in Sonza v. ABS-CBN Broadcasting Corporation43 is
misplaced. In that case, the Court explained why Jose Sonza, a well-known television and radio
personality, was an independent contractor and not a regular employee:

A. Selection and Engagement of Employee

ABS-CBN engaged SONZA’S services to co-host its television and radio programs because of SONZA’S
peculiar skills, talent and celebrity status. SONZA contends that the "discretion used by respondent in
specifically selecting and hiring complainant over other broadcasters of possibly similar experience and
qualification as complainant belies respondent’s claim of independent contractorship."

Independent contractors often present themselves to possess unique skills, expertise or talent to
distinguish them from ordinary employees. The specific selection and hiring of SONZA, because of his
unique skills, talent and celebrity status not possessed by ordinary employees, is a circumstance
indicative, but not conclusive, of an independent contractual relationship. If SONZA did not possess such
unique skills, talent and celebrity status, ABS-CBN would not have entered into the Agreement with
SONZA but would have hired him through its personnel department just like any other employee.

In any event, the method of selecting and engaging SONZA does not conclusively determine his status.
We must consider all the circumstances of the relationship, with the control test being the most important
element.

B. Payment of Wages

ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA
asserts that this mode of fee payment shows that he was an employee of ABS-CBN. SONZA also points
out that ABS-CBN granted him benefits and privileges "which he would not have enjoyed if he were truly
the subject of a valid job contract."

All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If
SONZA were ABS-CBN’s employee, there would be no need for the parties to stipulate on benefits such
as "SSS, Medicare, x x x and 13th month pay which the law automatically incorporates into every
employer-employee contract. Whatever benefits SONZA enjoyed arose from contract and not because of
an employer-employee relationship.
SONZA’s talent fees, amounting to P317,000 monthly in the second and third year, are so huge and out
of the ordinary that they indicate more an independent contractual relationship rather than an employer-
employee relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely because of
SONZA’S unique skills, talent and celebrity status not possessed by ordinary employees. Obviously,
SONZA acting alone possessed enough bargaining power to demand and receive such huge talent fees
for his services. The power to bargain talent fees way above the salary scales of ordinary employees is a
circumstance indicative, but not conclusive, of an independent contractual relationship.

The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA
as an independent contractor. The parties expressly agreed on such mode of payment. Under the
Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would have to turn over any talent fee
accruing under the Agreement.44

In the case at bar, however, the employer-employee relationship between petitioner and respondents has
been proven.

First. In the selection and engagement of respondents, no peculiar or unique skill, talent or celebrity
status was required from them because they were merely hired through petitioner’s personnel department
just like any ordinary employee.

Second. The so-called "talent fees" of respondents correspond to wages given as a result of an employer-
employee relationship. Respondents did not have the power to bargain for huge talent fees, a
circumstance negating independent contractual relationship.

Third. Petitioner could always discharge respondents should it find their work unsatisfactory, and
respondents are highly dependent on the petitioner for continued work.

Fourth. The degree of control and supervision exercised by petitioner over respondents through its
supervisors negates the allegation that respondents are independent contractors.

The presumption is that when the work done is an integral part of the regular business of the employer
and when the worker, relative to the employer, does not furnish an independent business or professional
service, such work is a regular employment of such employee and not an independent contractor.45 The
Court will peruse beyond any such agreement to examine the facts that typify the parties’ actual
relationship.46

It follows then that respondents are entitled to the benefits provided for in the existing CBA between
petitioner and its rank-and-file employees. As regular employees, respondents are entitled to the benefits
granted to all other regular employees of petitioner under the CBA.47 We quote with approval the ruling of
the appellate court, that the reason why production assistants were excluded from the CBA is precisely
because they were erroneously classified and treated as project employees by petitioner:

x x x The award in favor of private respondents of the benefits accorded to rank-and-file employees of
ABS-CBN under the 1996-1999 CBA is a necessary consequence of public respondent’s ruling that
private respondents as production assistants of petitioner are regular employees. The monetary award is
not considered as claims involving the interpretation or implementation of the collective bargaining
agreement. The reason why production assistants were excluded from the said agreement is precisely
because they were classified and treated as project employees by petitioner.

As earlier stated, it is not the will or word of the employer which determines the nature of employment of
an employee but the nature of the activities performed by such employee in relation to the particular
business or trade of the employer. Considering that We have clearly found that private respondents are
regular employees of petitioner, their exclusion from the said CBA on the misplaced belief of the parties to
the said agreement that they are project employees, is therefore not proper. Finding said private
respondents as regular employees and not as mere project employees, they must be accorded the
benefits due under the said Collective Bargaining Agreement.

A collective bargaining agreement is a contract entered into by the union representing the employees and
the employer. However, even the non-member employees are entitled to the benefits of the contract. To
accord its benefits only to members of the union without any valid reason would constitute undue
discrimination against non-members. A collective bargaining agreement is binding on all employees of the
company. Therefore, whatever benefits are given to the other employees of ABS-CBN must likewise be
accorded to private respondents who were regular employees of petitioner.48

Besides, only talent-artists were excluded from the CBA and not production assistants who are regular
employees of the respondents. Moreover, under Article 1702 of the New Civil Code: "In case of doubt, all
labor legislation and all labor contracts shall be construed in favor of the safety and decent living of the
laborer."

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The assailed Decision and
Resolution of the Court of Appeals in CA-G.R. SP No. 76582 are AFFIRMED. Costs against petitioner.

SO ORDERED.

Panganiban, C.J., Chairperson, Ynares-Santiago, Austria-Martinez, Chico-Nazario, J.J., concur.

G.R. No. 146881             February 5, 2007

COCA COLA BOTTLERS (PHILS.), INC./ERIC MONTINOLA, Manager, Petitioners,

vs.
DR. DEAN N. CLIMACO, Respondent.

DECISION

AZCUNA, J.:

This is a petition for review on certiorari of the Decision of the Court of Appeals1 promulgated on July 7,
2000, and its Resolution promulgated on January 30, 2001, denying petitioner’s motion for
reconsideration. The Court of Appeals ruled that an employer-employee relationship exists between
respondent Dr. Dean N. Climaco and petitioner Coca-Cola Bottlers Phils., Inc. (Coca-Cola), and that
respondent was illegally dismissed.

Respondent Dr. Dean N. Climaco is a medical doctor who was hired by petitioner Coca-Cola Bottlers
Phils., Inc. by virtue of a Retainer Agreement that stated:

WHEREAS, the COMPANY desires to engage on a retainer basis the services of a physician and the said
DOCTOR is accepting such engagement upon terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and the mutual agreement hereinafter contained,
the parties agree as follows:

1. This Agreement shall only be for a period of one (1) year beginning January 1, 1988 up
to December 31, 1988. The said term notwithstanding, either party may terminate the contract
upon giving a thirty (30)-day written notice to the other.

2. The compensation to be paid by the company for the services of the DOCTOR is hereby fixed
at PESOS: Three Thousand Eight Hundred (₱3,800.00) per month. The DOCTOR may charge
professional fee for hospital services rendered in line with his specialization. All payments in
connection with the Retainer Agreement shall be subject to a withholding tax of ten percent (10%)
to be withheld by the COMPANY under the Expanded Withholding Tax System. In the event the
withholding tax rate shall be increased or decreased by appropriate laws, then the rate herein
stipulated shall accordingly be increased or decreased pursuant to such laws.

3. That in consideration of the above mentioned retainer’s fee, the DOCTOR agrees to perform
the duties and obligations enumerated in the COMPREHENSIVE MEDICAL PLAN, hereto
attached as Annex "A" and made an integral part of this Retainer Agreement.

4. That the applicable provisions in the Occupational Safety and Health Standards, Ministry of
Labor and Employment shall be followed.

5. That the DOCTOR shall be directly responsible to the employee concerned and their
dependents for any injury inflicted on, harm done against or damage caused upon the employee
of the COMPANY or their dependents during the course of his examination, treatment or
consultation, if such injury, harm or damage was committed through professional negligence or
incompetence or due to the other valid causes for action.

6. That the DOCTOR shall observe clinic hours at the COMPANY’S premises from Monday to
Saturday of a minimum of two (2) hours each day or a maximum of TWO (2) hours each day or
treatment from 7:30 a.m. to 8:30 a.m. and 3:00 p.m. to 4:00 p.m., respectively unless such
schedule is otherwise changed by the COMPANY as [the] situation so warrants, subject to the
 Labor Code provisions on Occupational Safety and Health Standards as the COMPANY may
determine. It is understood that the DOCTOR shall stay at least two (2) hours a day in the
COMPANY clinic and that such two (2) hours be devoted to the workshift with the most number of
employees. It is further understood that the DOCTOR shall be on call at all times during the other
workshifts to attend to emergency case[s];

7. That no employee-employer relationship shall exist between the COMPANY and the DOCTOR
whilst this contract is in effect, and in case of its termination, the DOCTOR shall be entitled only
to such retainer fee as may be due him at the time of termination.2

The Comprehensive Medical Plan,3 which contains the duties and responsibilities of respondent, adverted
to in the Retainer Agreement, provided:

A. OBJECTIVE

These objectives have been set to give full consideration to [the] employees’ and dependents’ health:

1. Prompt and adequate treatment of occupational and non-occupational injuries and diseases.

2. To protect employees from any occupational health hazard by evaluating health factors related
to working conditions.

3. To encourage employees [to] maintain good personal health by setting up employee

orientation and education on health, hygiene and sanitation, nutrition, physical fitness, first aid
training, accident prevention and personnel safety.

4. To evaluate other matters relating to health such as absenteeism, leaves and termination.

5. To give family planning motivations.

B. COVERAGE

1. All employees and their dependents are embraced by this program.

2. The health program shall cover pre-employment and annual p.e., hygiene and sanitation,
immunizations, family planning, physical fitness and athletic programs and other activities such as
group health education program, safety and first aid classes, organization of health and safety
committees.

3. Periodically, this program will be reviewed and adjusted based on employees’ needs.

C. ACTIVITIES

1. Annual Physical Examination.

2. Consultations, diagnosis and treatment of occupational and non-occupational illnesses and

injuries.

3. Immunizations necessary for job conditions.

4. Periodic inspections for food services and rest rooms.

5. Conduct health education programs and present education materials.

6. Coordinate with Safety Committee in developing specific studies and program to minimize
environmental health hazards.

7. Give family planning motivations.

8. Coordinate with Personnel Department regarding physical fitness and athletic programs.

9. Visiting and follow-up treatment of Company employees and their dependents confined in the
hospital.
The Retainer Agreement, which began on January 1, 1988, was renewed annually. The last one expired
on December 31, 1993. Despite the non-renewal of the Retainer Agreement, respondent continued to
perform his functions as company doctor to Coca-Cola until he received a letter4 dated March 9, 1995
from petitioner company concluding their retainership agreement effective 30 days from receipt thereof.

It is noted that as early as September 1992, petitioner was already making inquiries regarding his status
with petitioner company. First, he wrote a letter addressed to Dr. Willie Sy, the Acting President and
Chairperson of the Committee on Membership, Philippine College of Occupational Medicine. In response,
Dr. Sy wrote a letter5 to the Personnel Officer of Coca-Cola Bottlers Phils., Bacolod City, stating that
respondent should be considered as a regular part-time physician, having served the company
continuously for four (4) years. He likewise stated that respondent must receive all the benefits and
privileges of an employee under Article 157 (b)6 of the Labor Code.

Petitioner company, however, did not take any action. Hence, respondent made another inquiry directed
to the Assistant Regional Director, Bacolod City District Office of the Department of Labor and
Employment (DOLE), who referred the inquiry to the Legal Service of the DOLE, Manila. In his
letter7 dated May 18, 1993, Director Dennis P. Ancheta, Legal Service, DOLE, stated that he believed that
an employer-employee relationship existed between petitioner and respondent based on the Retainer
Agreement and the Comprehensive Medical Plan, and the application of the "four-fold" test. However,
Director Ancheta emphasized that the existence of employer-employee relationship is a question of fact.
Hence, termination disputes or money claims arising from employer-employee relations exceeding
₱5,000 may be filed with the National Labor Relations Commission (NLRC). He stated that their opinion is
strictly advisory.

An inquiry was likewise addressed to the Social Security System (SSS). Thereafter, Mr. Romeo R. Tupas,
OIC-FID of SSS-Bacolod City, wrote a letter8 to the Personnel Officer of Coca-Cola Bottlers Phils., Inc.
informing the latter that the legal staff of his office was of the opinion that the services of respondent
partake of the nature of work of a regular company doctor and that he was, therefore, subject to social
security coverage.

Respondent inquired from the management of petitioner company whether it was agreeable to
recognizing him as a regular employee. The management refused to do so.

On February 24, 1994, respondent filed a Complaint9 before the NLRC, Bacolod City, seeking recognition
as a regular employee of petitioner company and prayed for the payment of all benefits of a regular
employee, including 13th Month Pay, Cost of Living Allowance, Holiday Pay, Service Incentive Leave
Pay, and Christmas Bonus. The case was docketed as RAB Case No. 06-02-10138-94.

While the complaint was pending before the Labor Arbiter, respondent received a letter dated March 9,
1995 from petitioner company concluding their retainership agreement effective thirty (30) days from
receipt thereof. This prompted respondent to file a complaint for illegal dismissal against petitioner
company with the NLRC, Bacolod City. The case was docketed as RAB Case No. 06-04-10177-95.

In a Decision10 dated November 28, 1996, Labor Arbiter Jesus N. Rodriguez, Jr. found that petitioner
company lacked the power of control over respondent’s performance of his duties, and recognized as
valid the Retainer Agreement between the parties. Thus, the Labor Arbiter dismissed respondent’s
complaint in the first case, RAB Case No. 06-02-10138-94. The dispositive portion of the Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered dismissing the instant complaint
seeking recognition as a regular employee.

SO ORDERED.11

In a Decision12 dated February 24, 1997, Labor Arbiter Benjamin Pelaez dismissed the case for illegal
dismissal (RAB Case No. 06-04-10177-95) in view of the previous finding of Labor Arbiter Jesus N.
Rodriguez, Jr. in RAB Case No. 06-02-10138-94 that complainant therein, Dr. Dean Climaco, is not an
employee of Coca-Cola Bottlers Phils., Inc.

Respondent appealed both decisions to the NLRC, Fourth Division, Cebu City.

In a Decision13 promulgated on November 28, 1997, the NLRC dismissed the appeal in both cases for
lack of merit. It declared that no employer-employee relationship existed between petitioner company and
respondent based on the provisions of the Retainer Agreement which contract governed respondent’s
employment.
Respondent’s motion for reconsideration was denied by the NLRC in a Resolution14 promulgated on
August 7, 1998.

Respondent filed a petition for review with the Court of Appeals.

In a Decision promulgated on July 7, 2000, the Court of Appeals ruled that an employer-employee
relationship existed between petitioner company and respondent after applying the four-fold test: (1) the
power to hire the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employer’s
power to control the employee with respect to the means and methods by which the work is to be
accomplished.

The Court of Appeals held:

The Retainer Agreement executed by and between the parties, when read together with the
Comprehensive Medical Plan which was made an integral part of the retainer agreements, coupled with
the actual services rendered by the petitioner, would show that all the elements of the above test are
present.

First, the agreements provide that "the COMPANY desires to engage on a retainer basis the services of a
physician and the said DOCTOR is accepting such engagement x x x" (Rollo, page 25). This clearly
shows that Coca-Cola exercised its power to hire the services of petitioner.

Secondly, paragraph (2) of the agreements showed that petitioner would be entitled to a final
compensation of Three Thousand Eight Hundred Pesos per month, which amount was later raised to
Seven Thousand Five Hundred on the latest contract. This would represent the element of payment of
wages.

Thirdly, it was provided in paragraph (1) of the agreements that the same shall be valid for a period of one
year. "The said term notwithstanding, either party may terminate the contract upon giving a thirty (30) day
written notice to the other." (Rollo, page 25). This would show that Coca-Cola had the power of
dismissing the petitioner, as it later on did, and this could be done for no particular reason, the sole
requirement being the former’s compliance with the 30-day notice requirement.

Lastly, paragraphs (3) and (6) of the agreements reveal that Coca-Cola exercised the most important
element of all, that is, control, over the conduct of petitioner in the latter’s performance of his duties as a
doctor for the company.

It was stated in paragraph (3) that the doctor agrees to perform the duties and obligations enumerated in
the Comprehensive Medical Plan referred to above. In paragraph (6), the fixed and definite hours during
which the petitioner must render service to the company is laid down.

We say that there exists Coca-Cola’s power to control petitioner because the particular objectives and
activities to be observed and accomplished by the latter are fixed and set under the Comprehensive
Medical Plan which was made an integral part of the retainer agreement. Moreover, the times for
accomplishing these objectives and activities are likewise controlled and determined by the company.
Petitioner is subject to definite hours of work, and due to this, he performs his duties to Coca-Cola not at
his own pleasure but according to the schedule dictated by the company.

In addition, petitioner was designated by Coca-Cola to be a member of its Bacolod Plant’s Safety
Committee. The minutes of the meeting of the said committee dated February 16, 1994 included the
name of petitioner, as plant physician, as among those comprising the committee.

It was averred by Coca-Cola in its comment that they exercised no control over petitioner for the reason
that the latter was not directed as to the procedure and manner of performing his assigned tasks. It went
as far as saying that "petitioner was not told how to immunize, inject, treat or diagnose the employees of
the respondent (Rollo, page 228). We believe that if the "control test" would be interpreted this strictly, it
would result in an absurd and ridiculous situation wherein we could declare that an entity exercises
control over another’s activities only in instances where the latter is directed by the former on each and
every stage of performance of the particular activity. Anything less than that would be tantamount to no
control at all.

To our minds, it is sufficient if the task or activity, as well as the means of accomplishing it, is dictated, as
in this case where the objectives and activities were laid out, and the specific time for performing them
was fixed by the controlling party.15
Moreover, the Court of Appeals declared that respondent should be classified as a regular employee
having rendered six years of service as plant physician by virtue of several renewed retainer agreements.
It underscored the provision in Article 28016 of the Labor Code stating 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." Further, it held that the termination of respondent’s services without any just or
authorized cause constituted illegal dismissal.

In addition, the Court of Appeals found that respondent’s dismissal was an act oppressive to labor and
was effected in a wanton, oppressive or malevolent manner which entitled respondent to moral and
exemplary damages.

The dispositive portion of the Decision reads:

WHEREFORE, in view of the foregoing, the Decision of the National Labor Relations Commission dated
November 28, 1997 and its Resolution dated August 7, 1998 are found to have been issued with grave
abuse of discretion in applying the law to the established facts, and are hereby REVERSED and SET
ASIDE, and private respondent Coca-Cola Bottlers, Phils.. Inc. is hereby ordered to:

1. Reinstate the petitioner with full backwages without loss of seniority rights from the time his
compensation was withheld up to the time he is actually reinstated; however, if reinstatement is
no longer possible, to pay the petitioner separation pay equivalent to one (1) month’s salary for
every year of service rendered, computed at the rate of his salary at the time he was dismissed,
plus backwages.

2. Pay petitioner moral damages in the amount of ₱50,000.00.

3. Pay petitioner exemplary damages in the amount of ₱50,000.00.

4. Give to petitioner all other benefits to which a regular employee of Coca-Cola is entitled from
the time petitioner became a regular employee (one year from effectivity date of employment)
until the time of actual payment.

SO ORDERED.17

Petitioner company filed a motion for reconsideration of the Decision of the Court of Appeals.

In a Resolution promulgated on January 30, 2001, the Court of Appeals stated that petitioner company
noted that its Decision failed to mention whether respondent was a full-time or part-time regular
employee. It also questioned how the benefits under their Collective Bargaining Agreement which the
Court awarded to respondent could be given to him considering that such benefits were given only to
regular employees who render a full day’s work of not less that eight hours. It was admitted that
respondent is only required to work for two hours per day.

The Court of Appeals clarified that respondent was a "regular part-time employee and should be
accorded all the proportionate benefits due to this category of employees of [petitioner] Corporation under
the CBA." It sustained its decision on all other matters sought to be reconsidered.

Hence, this petition filed by Coca-Cola Bottlers Phils., Inc.

The issues are:

1. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR,

BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE
LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, CONTRARY TO
THE DECISIONS OF THE HONORABLE SUPREME COURT ON THE MATTER.

2. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR,

BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE
LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND HOLDING
INSTEAD THAT THE WORK OF A PHYSICIAN IS NECESSARY AND DESIRABLE TO THE
BUSINESS OF SOFTDRINKS MANUFACTURING, CONTRARY TO THE RULINGS OF THE
SUPREME COURT IN ANALOGOUS CASES.
 3. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR,
BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE
LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND HOLDING
INSTEAD THAT THE PETITIONERS EXERCISED CONTROL OVER THE WORK OF THE
RESPONDENT.

4. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR,

BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE
LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING
THAT THERE IS EMPLOYER-EMPLOYEE RELATIONSHIP PURSUANT TO ARTICLE 280 OF
THE LABOR CODE.

5. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR,

BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE
LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING
THAT THERE EXISTED ILLEGAL DISMISSAL WHEN THE EMPLOYENT OF THE
RESPONDENT WAS TERMINATED WITHOUT JUST CAUSE.

6. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR,

BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE
LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING
THAT THE RESPONDENT IS A REGULAR PART TIME EMPLOYEE WHO IS ENTITLED TO
PROPORTIONATE BENEFITS AS A REGULAR PART TIME EMPLOYEE ACCORDING TO
THE PETITIONERS’ CBA.

7. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR,

BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE
LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING
THAT THE RESPONDENT IS ENTITLED TO MORAL AND EXEMPLARY DAMAGES.

The main issue in this case is whether or not there exists an employer-employee relationship between the
parties. The resolution of the main issue will determine whether the termination of respondent’s
employment is illegal.

The Court, in determining the existence of an employer-employee relationship, has invariably adhered to
the four-fold test: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power to control the employee’s conduct, or the so-called "control test,"
considered to be the most important element.18

The Court agrees with the finding of the Labor Arbiter and the NLRC that the circumstances of this case
show that no employer-employee relationship exists between the parties. The Labor Arbiter and the
NLRC correctly found that petitioner company lacked the power of control over the performance by
respondent of his duties. The Labor Arbiter reasoned that the Comprehensive Medical Plan, which
contains the respondent’s objectives, duties and obligations, does not tell respondent "how to conduct his
physical examination, how to immunize, or how to diagnose and treat his patients, employees of
[petitioner] company, in each case." He likened this case to that of Neri v. National Labor Relations
Commission,19 which held:

In the case of petitioner Neri, it is admitted that FEBTC issued a job description which detailed her
functions as a radio/telex operator. However, a cursory reading of the job description shows that what
was sought to be controlled by FEBTC was actually the end result of the task, e.g., that the daily incoming
and outgoing telegraphic transfer of funds received and relayed by her, respectively, tallies with that of the
register. The guidelines were laid down merely to ensure that the desired end result was achieved. It did
not, however, tell Neri how the radio/telex machine should be operated.

In effect, the Labor Arbiter held that petitioner company, through the Comprehensive Medical Plan,
provided guidelines merely to ensure that the end result was achieved, but did not control the means and
methods by which respondent performed his assigned tasks.

The NLRC affirmed the findings of the Labor Arbiter and stated that it is precisely because the company
lacks the power of control that the contract provides that respondent shall be directly responsible to the
employee concerned and their dependents for any injury, harm or damage caused through professional
negligence, incompetence or other valid causes of action.

The Labor Arbiter also correctly found that the provision in the Retainer Agreement that respondent was
on call during emergency cases did not make him a regular employee. He explained, thus:
Likewise, the allegation of complainant that since he is on call at anytime of the day and night makes him
a regular employee is off-tangent. Complainant does not dispute the fact that outside of the two (2) hours
that he is required to be at respondent company’s premises, he is not at all further required to just sit
around in the premises and wait for an emergency to occur so as to enable him from using such hours for
his own benefit and advantage. In fact, complainant maintains his own private clinic attending to his
private practice in the city, where he services his patients, bills them accordingly -- and if it is an employee
of respondent company who is attended to by him for special treatment that needs hospitalization or
operation, this is subject to a special billing. More often than not, an employee is required to stay in the
employer’s workplace or proximately close thereto that he cannot utilize his time effectively and gainfully
for his own purpose. Such is not the prevailing situation here.1awphi1.net

In addition, the Court finds that the schedule of work and the requirement to be on call for emergency
cases do not amount to such control, but are necessary incidents to the Retainership Agreement.

The Court also notes that the Retainership Agreement granted to both parties the power to terminate their
relationship upon giving a 30-day notice. Hence, petitioner company did not wield the sole power of
dismissal or termination.

The Court agrees with the Labor Arbiter and the NLRC that there is nothing wrong with the employment of
respondent as a retained physician of petitioner company and upholds the validity of the Retainership
Agreement which clearly stated that no employer-employee relationship existed between the parties. The
Agreement also stated that it was only for a period of 1 year beginning January 1, 1988 to December 31,
1998, but it was renewed on a yearly basis.

Considering that there is no employer-employee relationship between the parties, the termination of the
Retainership Agreement, which is in accordance with the provisions of the Agreement, does not constitute
illegal dismissal of respondent. Consequently, there is no basis for the moral and exemplary damages
granted by the Court of Appeals to respondent due to his alleged illegal dismissal.

WHEREFORE, the petition is GRANTED and the Decision and Resolution of the Court of Appeals are
REVERSED and SET ASIDE. The Decision and Resolution dated November 28, 1997 and August 7,
1998, respectively, of the National Labor Relations Commission are REINSTATED.

No costs.

SO ORDERED.

ADOLFO S. AZCUNA
Associate Justice

[G.R. No. 169207 : March 25, 2010]

WPP MARKETING COMMUNICATIONS, INC., JOHN STEEDMAN, MARK WEBSTER, AND

NOMINADA LANSANG, PETITIONERS, VS. JOCELYN M. GALERA, RESPONDENT.

[G.R. NO. 169239]

JOCELYN M. GALERA, PETITIONER, VS. WPP MARKETING COMMUNICATIONS, INC., JOHN

STEEDMAN, MARK WEBSTER, AND NOMINADA LANSANG, RESPONDENTS.

DECISION

CARPIO, ACTING CJ.:

The Case

G.R. Nos. 169207 and 169239 are petitions for review[1] assailing the Decision[2] promulgated on 14 April
2005 as well as the Resolution[3] promulgated on 1 August 2005 of the Court of Appeals (appellate court)
in CA-G.R. SP No. 78721. The appellate court granted and gave due course to the petition filed by
Jocelyn M. Galera (Galera). The appellate court's decision reversed and set aside that of the National
Labor Relations Commission (NLRC), and directed WPP Marketing Communications, Inc. (WPP) to pay
Galera backwages, separation pay, unpaid housing benefit, unpaid personal and accident insurance
benefits, cash value under the company's pension plan, 30 days paid holiday benefit, moral damages,
exemplary damages, 10% of the total judgment award as attorney's fees, and costs of the suit.

The Facts
The appellate court narrated the facts as follows:

Petitioner is Jocelyn Galera (GALERA), a [sic] American citizen who was recruited from the United States
of America by private respondent John Steedman, Chairman-WPP Worldwide and Chief Executive Officer
of Mindshare, Co., a corporation based in Hong Kong, China, to work in the Philippines for private
respondent WPP Marketing Communications, Inc. (WPP), a corporation registered and operating under
the laws of Philippines. GALERA accepted the offer and she signed an Employment Contract entitled
"Confirmation of Appointment and Statement of Terms and Conditions" (Annex B to Petition for
Certiorari). The relevant portions of the contract entered into between the parties are as follows:

Particulars:

Name: Jocelyn M. Galera

Address: 163 Mediterranean Avenue
Hayward, CA 94544

Position: Managing Director

Mindshare Philippines
Annual Salary: Peso 3,924,000
Start Date: 1 September 1999
Commencement Date: 1 September 1999
(for continuous service)
Office: Mindshare Manila

6. Housing Allowance
The Company will provide suitable housing in Manila at a maximum cost (including management fee and
other associated costs) of Peso 576,000 per annum.

7. Other benefits.
The Company will provide you with a fully maintained company car and a driver.

The Company will continue to provide medical, health, life and personal accident insurance plans, to an
amount not exceeding Peso 300,000 per annum, in accordance with the terms of the respective plans, as
provided by JWT Manila.

The Company will reimburse you and your spouse one way business class air tickets from USA to Manila
and the related shipping and relocation cost not exceeding US$5,000 supported by proper
documentation. If you leave the Company within one year, you will reimburse the Company in full for all
costs of the initial relocation as described therein.

You will participate in the JWT Pension Plan under the terms of this plan, the Company reserves the right
to transfer this benefit to a Mindshare Pension Plan in the future, if so required.

8. Holidays
You are entitled to 20 days paid holiday in addition to public holidays per calendar year to be taken at
times agreed with the Company. Carry-over of unused accrued holiday entitlement into a new holiday
year will not normally be allowed. No payment will be made for holidays not taken. On termination of your
employment, unless you have been summarily dismissed, you will be entitled to receive payment for
unused accrued holiday pay. Any holiday taken in excess of your entitlement shall be deducted from your
final salary payment.

9. Leave Due to Sickness or Injury

The maximum provision for sick leave is 15 working days per calendar year.

12. Invention/Know-How

Any discovery, invention, improvement in procedure, trademark, trade name, designs, copyrights or get-
ups made, discovered or created by you during the continuance of your employment hereunder relating to
the business of the Company shall belong to and shall be the absolute property of the Company. If
required to do so by the Company (whether during or after the termination of your employment) you shall
at the expense of the company execute all instruments and do all things necessary to vest in ownership
for all other rights, title and interests (including any registered rights therein) in such discovery, invention,
improvement in procedure, trademark, trade name, design, copyright or get-up in the Company (or its
Nominee) absolutely and as sole beneficial owner.

14. Notice.
The first three months of your employment will be a trial period during which either you or the Company
may terminate your employment on one week's notice. If at the end of that period, the Company is
satisfied with your performance, you will become a permanent employee. Thereafter you will give
Company and the Company will give you three months notice of termination of employment. The above is
always subject to the following: (1) the Company's right to terminate the contract of employment on no or
short notice where you are in breach of contract; (2) your employment will at any event cease without
notice on your retirement date when you are 60 years of age.

SIGNED JOCELYN M. GALERA 8-16-99

Date of Borth [sic] 12-25-55

Employment of GALERA with private respondent WPP became effective on September 1, 1999 solely on
the instruction of the CEO and upon signing of the contract, without any further action from the Board of
Directors of private. respondent. WPP.

Four months had passed when private respondent WPP filed before the Bureau of Immigration an
application for petitioner GALERA to receive a working visa, wherein she was designated as Vice
President of WPP. Petitioner alleged that she was constrained to sign the application in order that she
could remain in the Philippines and retain her employment.

Then, on December 14, 2000, petitioner GALERA alleged she was verbally notified by private respondent
STEEDMAN that her services had been terminated from private respondent WPP. A termination letter
followed the next day.[4]

On 3 January 2001, Galera filed a complaint for illegal dismissal, holiday pay, service incentive leave pay,
13th month pay, incentive plan, actual and moral damages, and attorney's fees against WPP and/or John
Steedman (Steedman), Mark Webster (Webster) and Nominada Lansang (Lansang). The case was
docketed as NLRC NCR Case No. 30-01-00044-01.

The Labor Arbiter's Ruling

In his Decision dated 31 January 2002, Labor Arbiter Edgardo M. Madriaga (Arbiter Madriaga) held WPP,
Steedman, Webster, and Lansang liable for illegal dismissal and damages. Arbiter Madriaga stated that
Galera was not only illegally dismissed but was also not accorded due process. Arbiter Madriaga
explained, thus:

[WPP] failed to observe the two-notice rule. [WPP] through respondent Steedman for a five (5) minute
meeting on December 14, 2000 where she was verbally told that as of that day, her employment was
being terminated. [WPP] did not give [Galera] an opportunity to defend herself and explain her side.
[Galera] was even prohibited from reporting for work that day and was told not to report for work the next
day as it would be awkward for her and respondent Steedman to be in the same premises after her
termination. [WPP] only served [Galera] her written notice of termination only on 15 December 2001, one
day after she was verbally apprised thereof.

The law mandates that the dismissal must be properly done otherwise, the termination is gravely
defective and may be declared unlawful as we hereby hold [Galera's] dismissal to be illegal and unlawful.
Where there is no showing of a clear, valid and legal cause for the termination of employment, the law
considers the matter a case of illegal dismissal and the burden is on the employer to prove that the
termination was for a valid or authorized cause. The law mandates that both the substantive and
procedural aspects of due process should be observed. The facts clearly show that respondents were
remiss on both aspects. Perforce, the dismissal is void and unlawful.

xxxx

Considering the work performance and achievements of [Galera] for the year 2000, we do not find any
basis for the alleged claim of incompetence by herein respondents. Had [Galera] been really incompetent,
she would not have been able to generate enormous amounts [sic] of revenues and business for [WPP].
She also appears to be well liked as a leader by her subordinates, who have come forth in support of
[Galera]. These facts remain undisputed by respondents.

A man's job being a property right duly protected by our laws, an employer who deprives an employee [of]
the right to defend himself is liable for damages consistent with Article 32 of the Civil Code. To allow an
employer to terminate the employment of his worker based merely on allegations without proof places the
[employee] in an uncertain situation. The unflinching rule in illegal dismissal cases is that the employer
bears the burden of proof.

In the instant case, respondents have not been able to muster evidence to counter [Galera's] allegations.
[Galera's] allegations remain and stand absent proof from respondents rebutting them. Hence, our finding
of illegal dismissal against respondents who clearly have conspired in bad faith to deprive [Galera] of her
right to substantive and procedural due process.[5]

The dispositive portion of Arbiter Madriaga's decision reads as follows:

WHEREFORE, premises considered, we hereby hold herein respondents liable for illegal dismissal and
damages, and award to [Galera], by virtue of her expatriate status, the following:

a. Reinstatement without loss of seniority rights.

b. Backwages amounting to $120,000 per year at P50.00 to US $1 exchange rate, 13th

c. Remuneration for business acquisitions amounting to Two Million Eight Hundred Fifty Thousand Pesos
(P2,850,000.00) and Media Plowback Incentive equivalent to Three Million Pesos (P3,000,000.00) or a
total of not less than One Hundred Thousand US Dollars ($100,000.00).

d. US Tax Protection of up to 35% coverage equivalent to Thirty Eight Thousand US Dollars ($38,000).

e. Moral damages including implied defamation and punitive damages equivalent to Two Million Dollars
(US$2,000,000.00).

f. Exemplary damages equivalent to One Million Dollars ($1,000,000.00).

g. Attorney's fees of 10% of the total award herein.

month pay, transportation and housing benefits.
SO ORDERED.[6]

The Ruling of the NLRC

The First Division of the NLRC reversed the ruling of Arbiter Madriaga. In its Decision[7] promulgated on
19 February 2003, the NLRC stressed that Galera was WPP's Vice-President, and therefore, a corporate
officer at the time she was removed by the Board of Directors on 14 December 2000. The NLRC stated
thus:

It matters not that her having been elected by the Board to an added position of being a member of the
Board of Directors did not take effect as her May 31, 2000 election to such added position was
conditioned to be effective upon approval by SEC of the Amended By-Laws, an approval which took place
only in February 21, 2001, i.e., after her removal on December 14, 2000. What counts is, at the time of
her removal, she continued to be WPP's Vice-President, a corporate officer, on hold over capacity.

Ms. Galera's claim that she was not a corporate officer at the time of her removal because her May 31,
2000 election as Vice President for Media, under WPP's Amended By-Laws, was subject to the approval
by the Securities and Exchange Commission and that the SEC approved the Amended By-Laws only in
February 2001. Such claim is unavailing. Even if Ms. Galera's subsequent election as Vice President for
Media on May 31, 2000 was subject to approval by the SEC, she continued to hold her previous position
as Vice President under the December 31, 1999 election until such time that her successor is duly elected
and qualified. It is a basic principle in corporation law, which principle is also embodied in WPP's by-laws,
that a corporate officer continues to hold his position as such until his successor has been duly elected
and qualified. When Ms. Galera was elected as Vice President on December 31, 1999, she was
supposed to have held that position until her successor has been duly elected and qualified. The record
shows that Ms. Galera was not replaced by anyone. She continued to be Vice President of WPP with the
same operational title of Managing Director for Mindshare and continued to perform the same functions
she was performing prior to her May 31, 2000 election.

In the recent case of Dily Dany Nacpil v. International Broadcasting Corp., the definition of corporate
officer for purposes of intra-corporate controversy was even broadened to include a Comptroller/Assistant
Manager who was appointed by the General Manager, and whose appointment was later approved by the
Board of Directors. In this case, the position of comptroller was not even expressly mentioned in the By-
Laws of the corporation, and yet, the Supreme Court found him to be a corporate officer. The Court ruled
that --

(since) petitioner's appointment as comptroller required the approval and formal action of IBC's Board of
Directors to become valid, it is clear therefore that petitioner is a corporate officer whose dismissal may
be the subject of a controversy cognizable by the SEC... Had the petitioner been an ordinary employee,
such board action would not have been required.
Such being the case, the imperatives of law require that we hold that the Arbiter below had no jurisdiction
over Galera's case as, again, she was a corporate officer at the time of her removal.

WHEREFORE, the appeals of petitioner from the Decision of Labor Arbiter Edgardo Madriaga dated
January 31, 2002 and his Order dated March 21, 2002, respectively, are granted. The January 31, 2002
decision of the Labor Arbiter is set aside for being null and void and the temporary restraining order we
issued on April 24, 2002 is hereby made permanent. The complaint of Jocelyn Galera is dismissed for
lack of jurisdiction.

SO ORDERED.[8]

In its Resolution[9] promulgated on 4 June 2003, the NLRC further stated:

We are fully convinced that this is indeed an intra-corporate dispute which is beyond the labor arbiter's
jurisdiction. These consolidated cases clearly [involve] the relationship between a corporation and its
officer and is properly within the definition of an intra-corporate relationship which, under P.D. No. 902-A,
is within the jurisdiction of the SEC (now the commercial courts). Such being the case, We are
constrained to rule that the Labor Arbiter below had no jurisdiction over Ms. Galera's complaint for illegal
dismissal.

WHEREFORE, the motion for reconsideration filed by Ms. Galera is hereby denied for lack of merit. We
reiterate our February 19, 2003 Decision setting aside the Labor Arbiter's Decision dated January 31,
2002 for being null and void.

SO ORDERED.[10]

Galera assailed the NLRC's decision and resolution before the appellate court and raised a lone
assignment of error.

The National Labor Relations Commission acted with grave abuse of discretion amounting to lack or
excess of jurisdiction when it reversed the decision of the Labor Arbiter not on the merits but for alleged
lack of jurisdiction.[11]

The Decision of the Appellate Court

The appellate court reversed and set aside the decision of the NLRC. The appellate court ruled that the
NLRC's dismissal of Galera's appeal is not in accord with jurisprudence. A person could be considered a
"corporate officer" only if appointed as such by a corporation's Board of Directors, or if pursuant to the
power given them by either the Articles of Incorporation or the By-Laws.[12]

The appellate court explained:

A corporation, through its board of directors, could only act in the manner and within the formalities, if any,
prescribed by its charter or by the general law. If the action of the Board is ultra vires such is motu  proprio
void ab initio and without legal effect whatsoever. The by-laws of a corporation are its own private laws
which substantially have the same effect as the laws of the corporation. They are, in effect, written into
the charter. In this sense, they beome part of the fundamental law of the corporation with which the
corporation and its directors and officers must comply.

Even if petitioner GALERA had been appointed by the Board of Directors on December 31, 1999, private
respondent WPP's By-Laws provided for only one Vice-President, a position already occupied by private
respondent Webster. The same defect also stains the Board of Directors' appointment of petitioner
GALERA as a Director of the corporation, because at that time the By-Laws provided for only five
directors. In addition, the By-laws only empowered the Board of Directors to appoint a general manager
and/or assistant general manager as corporate officers in addition to a chairman, president, vice-
president and treasurer. There is no mention of a corporate officer entitled "Managing Director."

Hence, when the Board of Directors enacted the Resolutions of December 31, 1999 and May 31, 2000, it
exceeded its authority under the By-Laws and are, therefore, ultra vires. Although private respondent
WPP sought to amend these defects by filing Amended By-Laws with the Securities and Exchange
Commission, they did not validate the ultra vires resolutions because the Amended By-Laws did not take
effect until February 16, 2001, when it was approved by the SEC. Since by-laws operate only
prospectively, they could not validate the ultra vires resolutions.[13]

The dispositive portion of the appellate court's decision reads:

WHEREFORE, the petition is hereby GRANTED and GIVEN DUE COURSE. The assailed Decision of
the National Labor Relations Commission is hereby REVERSED and SET ASIDE and a new one is
entered DIRECTING private respondent WPP MARKETING COMMUNICATIONS, INC. to:

1. Pay [Galera] backwages at the peso equivalent of US$120,000.00 per annum plus three
months from her summary December 14, 2000 dismissal up to March 14, 2001 because
three months notice is required under the contract, plus 13th month pay, bonuses and
general increases to which she would have been normally entitled, had she not been
dismissed and had she not been forced to stop working, including US tax protection of up
to 35% coverage which she had been enjoying as an expatriate;

2. Pay x x x GALERA the peso equivalent of US$185,000.00 separation pay (1 ½ years);

3. Pay x x x GALERA any unpaid housing benefit for the 18 ½ months of her employment
in the service to the Company as an expatriate in Manila, Philippines at the rate of
P576,000 per year; unpaid personal and accident insurance benefits for premiums at the
rate of P300,000.00 per year; whatever cash value in the JWT Pension Plan; and thirty
days paid holiday benefit under the contract for the 1 ½ calendar years with the
Company;

4. Pay x x x GALERA the reduced amount of PhP2,000,000.00 as moral damages;

5. Pay [Galera] the reduced amount of PhP1,000,000.00 as exemplary damages;

6. Pay [Galera] an amount equivalent to 10% of the judgment award as attorney's fees;

7. Pay the cost of the suit.

SO ORDERED.[14]

Respondents filed a motion for reconsideration on 5 May 2005. Galera filed a motion for partial
reconsideration and/or clarification on the same date. The appellate court found no reason to revise or
reverse its previous decision and subsequently denied the motions in a Resolution promulgated on 1
August 2005.[15]

The Issues

WPP, Steedman, Webster, and Lansang raised the following grounds in G.R. No. 169207:

I. The Court of Appeals seriously erred in ruling that the NLRC has jurisdiction over
[Galera's] complaint because she was not an employee. [Galera] was a corporate officer
of WPP from the beginning of her term until her removal from office.

II. Assuming arguendo that the Court of Appeals correctly ruled that the NLRC has
jurisdiction over [Galera's] complaint, it should have remanded the case to the Labor
Arbiter for reception of evidence on the merits of the case.

III. [Galera] is an alien, hence, can never attain a regular or permanent working status in the
Philippines.

IV. [Galera] is not entitled to recover backwages, other benefits and damages from WPP.[16]

On the other hand, in G.R. No. 169239, Galera raised the following grounds in support of her petition:

The CA decision should be consistent with Article 279 of the Labor Code and applicable jurisprudence,
that full backwages and separation pay (when in lieu of reinstatement), should be reckoned from time of
dismissal up to time of reinstatement (or payment of separation pay, in case separation instead of
reinstatement is awarded).

Accordingly, petitioner Galera should be awarded full backwages and separation pay for the period from
14 December 2000 until the finality of judgment by the respondents, or, at the very least, up to the
promulgation date of the CA decision.

The individual respondents Steedman, Webster and Lansang must be held solidarily liable with
respondent WPP for the wanton and summary dismissal of petitioner Galera, to be consistent with law
and jurisprudence as well as the specific finding of the CA of bad faith on the part of respondents.[17]

This Court ordered the consolidation of G.R. Nos. 169207 and 169239 in a resolution dated 16 January
2006.[18]

The Ruling of the Court

In its consolidated comment, the Office of the Solicitor General (OSG) recommended that (A) the
Decision dated 14 April 2005 of the appellate court finding (1) Galera to be a regular employee of WPP;
(2) the NLRC to have jurisdiction over the present case; and (3) WPP to have illegally dismissed Galera,
be affirmed; and (B) the case remanded to the Labor Arbiter for the computation of the correct monetary
award. Despite the OSG's recommendations, we see that Galera's failure to seek an employment permit
prior to her employment poses a serious problem in seeking relief before this Court. Hence, we settle the
various issues raised by the parties for the guidance of the bench and bar.

Whether Galera is an Employee or a Corporate Officer

Galera, on the belief that she is an employee, filed her complaint before the Labor Arbiter. On the other
hand, WPP, Steedman, Webster and Lansang contend that Galera is a corporate officer; hence, any
controversy regarding her dismissal is under the jurisdiction of the Regional Trial Court. We agree with
Galera.

Corporate officers are given such character either by the Corporation Code or by the corporation's by-
laws. Under Section 25 of the Corporation Code, the corporate officers are the president, secretary,
treasurer and such other officers as may be provided in the by-laws.[19] Other officers are sometimes
created by the charter or by-laws of a corporation, or the board of directors may be empowered under the
by-laws of a corporation to create additional offices as may be necessary.

An examination of WPP's by-laws resulted in a finding that Galera's appointment as a corporate officer
(Vice-President with the operational title of Managing Director of Mindshare) during a special meeting of
WPP's Board of Directors is an appointment to a non-existent corporate office. WPP's by-laws provided
for only one Vice-President. At the time of Galera's appointment on 31 December 1999, WPP already had
one Vice-President in the person of Webster. Galera cannot be said to be a director of WPP also because
all five directorship positions provided in the by-laws are already occupied. Finally, WPP cannot rely on its
Amended By-Laws to support its argument that Galera is a corporate officer. The Amended By-Laws
provided for more than one Vice-President and for two additional directors. Even though WPP's
stockholders voted for the amendment on 31 May 2000, the SEC approved the amendments only on 16
February 2001. Galera was dismissed on 14 December 2000. WPP, Steedman, Webster, and Lansang
did not present any evidence that Galera's dismissal took effect with the action of WPP's Board of
Directors.

The appellate court further justified that Galera was an employee and not a corporate officer by subjecting
WPP and Galera's relationship to the four-fold test: (a) the selection and engagement of the employee;
(b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the
employee with respect to the means and methods by which the work is to be accomplished. The appellate
court found:

x x x Sections 1 and 4 of the employment contract mandate where and how often she is to perform her
work; sections 3, 5, 6 and 7 show that wages she receives are completely controlled by x x x WPP; and
sections 10 and 11 clearly state that she is subject to the regular disciplinary procedures of x x x WPP.

Another indicator that she was a regular employee and not a corporate officer is Section 14 of the
contract, which clearly states that she is a permanent employee -- not a Vice-President or a member of
the Board of Directors.

xxxx

Another indication that the Employment Contract was one of regular employment is Section 12, which
states that the rights to any invention, discovery, improvement in procedure, trademark, or copyright
created or discovered by petitioner GALERA during her employment shall automatically belong to private
respondent WPP. Under Republic Act 8293, also known as the Intellectual Property Code, this condition
prevails if the creator of the work subject to the laws of patent or copyright is an employee of the one
entitled to the patent or copyright.

Another convincing indication that she was only a regular employee and not a corporate officer is the
disciplinary procedure under Sections 10 and 11 of the Employment Contract, which states that her right
of redress is through Mindshare's Chief Executive Officer for the Asia-Pacific. This implies that she was
not under the disciplinary control of private respondent WPP's Board of Directors (BOD), which should
have been the case if in fact she was a corporate officer because only the Board of Directors could
appoint and terminate such a corporate officer.

Although petitioner GALERA did sign the Alien Employment Permit from the Department of Labor and
Employment and the application for a 9(g) visa with the Bureau of Immigration - both of which stated that
she was private respondent's WPP' Vice President - these should not be considered against her.
Assurming arguendo that her appointment as Vice-President was a valid act, it must be noted that these
appointments occurred afater she was hired as a regular employee. After her appointments, there was no
appreciable change in her duties.[20]

Whether the Labor Arbiter and the NLRC

have jurisdiction over the present case

Galera being an employee, then the Labor Arbiter and the NLRC have jurisdiction over the present case.
Article 217 of the Labor Code provides:

Jurisdiction of Labor Arbiters and the Commission. -- (a) Except as otherwise provided under this Code,
the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide x x x the following
cases involving all workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates
of pay, hours of work and other terms and conditions of employment;

4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee
relations;

5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of
strikes and lockouts;

6. Except claims for Employees Compensation, Social Security, Medicare and other maternity benefits, all
other claims, arising from employer-employee relations, including those of persons in domestic or
household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of
whether accompanied with a claim for reinstatement.

(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.

(c) Cases arising from the interpretation of collective bargaining agreements and those arising from the
interpretation or enforcement of company personnel policies shall be disposed of by the Labor Arbiter by
referring the same to the grievance machinery and voluntary arbitration as may be provided in said
agreements.

In contrast, Section 5.2 of Republic Act No. 8799, or the Securities Regulation Code, states:

The Commission's jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-
A is hereby transferred to the courts of general jurisdiction or the appropriate Regional Trial Court:
Provided, That the Supreme Court in the exercise of its authority may designate the Regional Trial Court
branches that shall exercise jurisdiction over these cases. The Commission shall retain jurisdiction over
pending cases involving intra-corporate disputes submitted for final resolution which should be resolved
within one year from the enactment of this Code. The Commission shall retain jurisdiction over pending
suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally disposed.

The pertinent portions of Section 5 of Presidential Decree No. 902-A, mentioned above, states:

b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders,
members or associates; between any or all of them and the corporation, partnership or association of
which they are stockholders, members or associates, respectively; and between such corporation,
partnership or association and the state insofar as it concerns their individual franchise or right to exist as
such entity;

c) Controversies in the election or appointments of directors, trustees, officers or managers of such

corporations, partnerships or associations.
 Whether WPP illegally dismissed Galera

WPP's dismissal of Galera lacked both substantive and procedural due process.

Apart from Steedman's letter dated 15 December 2000 to Galera, WPP failed to prove any just or
authorized cause for Galera's dismissal. Steedman's letter to Galera reads:

The operations are currently in a shamble. There is lack of leadership and confidence in your abilities
from within, our agency partners and some clients.

Most of the staff I spoke with felt they got more guidance and direction from Minda than yourself. In your
role as Managing Director, that is just not acceptable.

I believe your priorities are mismanaged. The recent situation where you felt an internal strategy meeting
was more important than a new business pitch is a good example.

You failed to lead and advise on the two new business pitches. In both cases, those involved sort (sic)
Minda's input. As I discussed with you back in July, my directive was for you to lead and review all
business pitches. It is obvious [that] confusion existed internally right up until the day of the pitch.

The quality output is still not to an acceptable standard, which was also part of my directive that you
needed to focus on back in July.

I do not believe you understand the basic skills and industry knowledge required to run a media special
operation.[21]

WPP, Steedman, Webster, and Lansang, however, failed to substantiate the allegations in Steedman's
letter. Galera, on the other hand, presented documentary evidence[22] in the form of congratulatory letters,
including one from Steedman, which contents are diametrically opposed to the 15 December 2000 letter.

The law further requires that the employer must furnish the worker sought to be dismissed with two
written notices before termination of employment can be legally effected: (1) notice which apprises the
employee of the particular acts or omissions for which his dismissal is sought; and (2) the subsequent
notice which informs the employee of the employer's decision to dismiss him. Failure to comply with the
requirements taints the dismissal with illegality.[23] WPP's acts clearly show that Galera's dismissal did not
comply with the two-notice rule.

Whether Galera is entitled to the monetary award

WPP, Steedman, Webster, and Lansang argue that Galera is not entitled to backwages because she is
an alien. They further state that there is no guarantee that the Bureau of Immigration and the Department
of Labor and Employment will continue to grant favorable rulings on the applications for a 9(g) visa and an
Alien Employment Permit after the expiry of the validity of Galera's documents on 31 December 2000.
WPP's argument is a circular argument, and assumes what it attempts to prove. Had WPP not dismissed
Galera, there is no doubt in our minds that WPP would have taken action for the approval of documents
required for Galera's continued employment.

This is Galera's dilemma: Galera worked in the Philippines without a proper work permit but now wants to
claim employee's benefits under Philippine labor laws.

Employment of GALERA with private respondent WPP became effective on September 1, 1999 solely on
the instruction of the CEO and upon signing of the contract, without any further action from the Board of
Directors of private. respondent. WPP.

Four months had passed when private respondent WPP filed before the Bureau of Immigration an
application for petitioner GALERA to receive a working visa, wherein she was designated as Vice
President of WPP. Petitioner alleged that she was constrained to sign the application in order that she
could remain in the Philippines and retain her employment.[24]

The law and the rules are consistent in stating that the employment permit must be acquired prior to
employment. The Labor Code states: "Any alien seeking admission to the Philippines for employment
purposes and any domestic or foreign employer who desires to engage an alien for employment in the
Philippines shall obtain an employment permit from the Department of Labor."[25] Section 4, Rule XIV,
Book 1 of the Implementing Rules and Regulations provides:
Employment permit required for entry. -- No alien seeking employment, whether as a resident or non-
resident, may enter the Philippines without first securing an employment permit from the Ministry. If an
alien enters the country under a non-working visa and wishes to be employed thereafter, he may only be
allowed to be employed upon presentation of a duly approved employment permit.

Galera cannot come to this Court with unclean hands. To grant Galera's prayer is to sanction the violation
of the Philippine labor laws requiring aliens to secure work permits before their employment. We hold that
the status quo must prevail in the present case and we leave the parties where they are. This ruling,
however, does not bar Galera from seeking relief from other jurisdictions.

WHEREFORE, we PARTIALLY GRANT the petitions in G.R. Nos. 169207 and 169239. We SET ASIDE.

the Decision of the Court of Appeals promulgated on 14 April 2005 as well as the Resolution promulgated
on 1 August 2005 in CA-G.R. SP No. 78721.

SO ORDERED.

Brion, Del Castillo, Abad, and Perez, JJ., concur.

G.R. No. 167648             January 28, 2008

TELEVISION AND PRODUCTION EXPONENTS, INC. and/or ANTONIO P. TUVIERA, petitioners,

vs.
ROBERTO C. SERVAÑA, respondent.

DECISION

TINGA, J.:

This petition for review under Rule 45 assails the 21 December 2004 Decision1 and 8 April 2005
Resolution2 of the Court of Appeals declaring Roberto Servaña (respondent) a regular employee of
petitioner Television and Production Exponents, Inc. (TAPE). The appellate court likewise ordered TAPE
to pay nominal damages for its failure to observe statutory due process in the termination of respondent’s
employment for authorized cause.

TAPE is a domestic corporation engaged in the production of television programs, such as the long-
running variety program, "Eat Bulaga!". Its president is Antonio P. Tuviera (Tuviera). Respondent Roberto
C. Servaña had served as a security guard for TAPE from March 1987 until he was terminated on 3
March 2000.

Respondent filed a complaint for illegal dismissal and nonpayment of benefits against TAPE. He alleged
that he was first connected with Agro-Commercial Security Agency but was later on absorbed by TAPE
as a regular company guard. He was detailed at Broadway Centrum in Quezon City where "Eat Bulaga!"
regularly staged its productions. On 2 March 2000, respondent received a memorandum informing him of
his impending dismissal on account of TAPE’s decision to contract the services of a professional security
agency. At the time of his termination, respondent was receiving a monthly salary of P6,000.00. He
claimed that the holiday pay, unpaid vacation and sick leave benefits and other monetary considerations
were withheld from him. He further contended that his dismissal was undertaken without due process and
violative of existing labor laws, aggravated by nonpayment of separation pay.3

In a motion to dismiss which was treated as its position paper, TAPE countered that the labor arbiter had
no jurisdiction over the case in the absence of an employer-employee relationship between the parties.
TAPE made the following assertions: (1) that respondent was initially employed as a security guard for
Radio Philippines Network (RPN-9); (2) that he was tasked to assist TAPE during its live productions,
specifically, to control the crowd; (3) that when RPN-9 severed its relationship with the security agency,
TAPE engaged respondent’s services, as part of the support group and thus a talent, to provide security
service to production staff, stars and guests of "Eat Bulaga!" as well as to control the audience during the
one-and-a-half hour noontime program; (4) that it was agreed that complainant would render his services
until such time that respondent company shall have engaged the services of a professional security
agency; (5) that in 1995, when his contract with RPN-9 expired, respondent was retained as a talent and
a member of the support group, until such time that TAPE shall have engaged the services of a
professional security agency; (6) that respondent was not prevented from seeking other employment,
whether or not related to security services, before or after attending to his "Eat Bulaga!" functions; (7) that
sometime in late 1999, TAPE started negotiations for the engagement of a professional security agency,
the Sun Shield Security Agency; and (8) that on 2 March 2000, TAPE issued memoranda to all talents,
whose functions would be rendered redundant by the engagement of the security agency, informing them
of the management’s decision to terminate their services.4
TAPE averred that respondent was an independent contractor falling under the talent group category and
was working under a special arrangement which is recognized in the industry.5

Respondent for his part insisted that he was a regular employee having been engaged to perform an
activity that is necessary and desirable to TAPE’s business for thirteen (13) years.6

On 29 June 2001, Labor Arbiter Daisy G. Cauton-Barcelona declared respondent to be a regular

employee of TAPE. The Labor Arbiter relied on the nature of the work of respondent, which is securing
and maintaining order in the studio, as necessary and desirable in the usual business activity of TAPE.
The Labor Arbiter also ruled that the termination was valid on the ground of redundancy, and ordered the
payment of respondent’s separation pay equivalent to one (1)-month pay for every year of service. The
dispositive portion of the decision reads:

WHEREFORE, complainant’s position is hereby declared redundant. Accordingly, respondents

are hereby ordered to pay complainant his separation pay computed at the rate of one (1) month
pay for every year of service or in the total amount of P78,000.00.7

On appeal, the National Labor Relations Commission (NLRC) in a Decision8 dated 22 April 2002 reversed
the Labor Arbiter and considered respondent a mere program employee, thus:

We have scoured the records of this case and we find nothing to support the Labor Arbiter’s
conclusion that complainant was a regular employee.

xxxx

The primary standard to determine regularity of employment is the reasonable connection

between the particular activity performed by the employee in relation to the usual business or
trade of the employer. This connection can be determined by considering the nature and work
performed and its relation to the scheme of the particular business or trade in its entirety. x x x
Respondent company is engaged in the business of production of television shows. The records
of this case also show that complainant was employed by respondent company beginning 1995
after respondent company transferred from RPN-9 to GMA-7, a fact which complainant does not
dispute. His last salary was P5,444.44 per month. In such industry, security services may not be
deemed necessary and desirable in the usual business of the employer. Even without the
performance of such services on a regular basis, respondent’s company’s business will not grind
to a halt.

xxxx

Complainant was indubitably a program employee of respondent company. Unlike [a] regular
employee, he did not observe working hours x x x. He worked for other companies, such as M-
Zet TV Production, Inc. at the same time that he was working for respondent company. The
foregoing indubitably shows that complainant-appellee was a program employee. Otherwise, he
would have two (2) employers at the same time.9

Respondent filed a motion for reconsideration but it was denied in a Resolution10 dated 28 June 2002.

Respondent filed a petition for certiorari with the Court of Appeals contending that the NLRC acted with
grave abuse of discretion amounting to lack or excess of jurisdiction when it reversed the decision of the
Labor Arbiter. Respondent asserted that he was a regular employee considering the nature and length of
service rendered.11

Reversing the decision of the NLRC, the Court of Appeals found respondent to be a regular employee.
We quote the dispositive portion of the decision:

IN LIGHT OF THE FOREGOING, the petition is hereby GRANTED. The Decision dated 22 April
2002 of the public respondent NLRC reversing the Decision of the Labor Arbiter and its
Resolution dated 28 June 2002 denying petitioner’s motion for reconsideration
are REVERSED and SET ASIDE. The Decision dated 29 June 2001 of the Labor Arbiter
is REINSTATED with MODIFICATION in that private respondents are ordered to pay jointly and
severally petitioner the amount of P10,000.00 as nominal damages for non-compliance with the
statutory due process.

SO ORDERED.12
Finding TAPE’s motion for reconsideration without merit, the Court of Appeals issued a Resolution13 dated
8 April 2005 denying said motion.

TAPE filed the instant petition for review raising substantially the same grounds as those in its petition for
certiorari before the Court of Appeals. These matters may be summed up into one main issue: whether an
employer-employee relationship exists between TAPE and respondent.

On 27 September 2006, the Court gave due course to the petition and considered the case submitted for
decision.14

At the outset, it bears emphasis that the existence of employer-employee relationship is ultimately a
question of fact. Generally, only questions of law are entertained in appeals by certiorari to the Supreme
Court. This rule, however, is not absolute. Among the several recognized exceptions is when the findings
of the Court of Appeals and Labor Arbiters, on one hand, and that of the NLRC, on the other, are
conflicting,15 as obtaining in the case at bar.

Jurisprudence is abound with cases that recite the factors to be considered in determining the existence
of employer-employee relationship, namely: (a) the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee with
respect to the means and method by which the work is to be accomplished.16 The most important factor
involves the control test. Under the control test, there is an employer-employee relationship when the
person for whom the services are performed reserves the right to control not only the end achieved but
also the manner and means used to achieve that end.17

In concluding that respondent was an employee of TAPE, the Court of Appeals applied the "four-fold test"
in this wise:

First. The selection and hiring of petitioner was done by private respondents. In fact, private
respondents themselves admitted having engaged the services of petitioner only in 1995 after
TAPE severed its relations with RPN Channel 9.

By informing petitioner through the Memorandum dated 2 March 2000, that his services will be
terminated as soon as the services of the newly hired security agency begins, private
respondents in effect acknowledged petitioner to be their employee. For the right to hire and fire
is another important element of the employer-employee relationship.

Second. Payment of wages is one of the four factors to be considered in determining the
existence of employer-employee relation. . . Payment as admitted by private respondents was
given by them on a monthly basis at a rate of P5,444.44.

Third. Of the four elements of the employer-employee relationship, the "control test" is the most
important. x x x

The bundy cards representing the time petitioner had reported for work are evident proofs of
private respondents’ control over petitioner more particularly with the time he is required to report
for work during the noontime program of "Eat Bulaga!" If it were not so, petitioner would be free to
report for work anytime even not during the noontime program of "Eat Bulaga!" from 11:30 a.m. to
1:00 p.m. and still gets his compensation for being a "talent." Precisely, he is being paid for being
the security of "Eat Bulaga!" during the above-mentioned period. The daily time cards of petitioner
are not just for mere record purposes as claimed by private respondents. It is a form of control by
the management of private respondent TAPE.18

TAPE asseverates that the Court of Appeals erred in applying the "four-fold test" in determining the
existence of employer-employee relationship between it and respondent. With respect to the elements of
selection, wages and dismissal, TAPE proffers the following arguments: that it never hired respondent,
instead it was the latter who offered his services as a talent to TAPE; that the Memorandum dated 2
March 2000 served on respondent was for the discontinuance of the contract for security services and not
a termination letter; and that the talent fees given to respondent were the pre-agreed consideration for the
services rendered and should not be construed as wages. Anent the element of control, TAPE insists that
it had no control over respondent in that he was free to employ means and methods by which he is to
control and manage the live audiences, as well as the safety of TAPE’s stars and guests.19

The position of TAPE is untenable. Respondent was first connected with Agro-Commercial Security
Agency, which assigned him to assist TAPE in its live productions. When the security agency’s contract
with RPN-9 expired in 1995, respondent was absorbed by TAPE or, in the latter’s language, "retained as
talent."20 Clearly, respondent was hired by TAPE. Respondent presented his identification card21 to prove
that he is indeed an employee of TAPE. It has been in held that in a business establishment, an
identification card is usually provided not just as a security measure but to mainly identify the holder
thereof as a bona fide employee of the firm who issues it.22

Respondent claims to have been receiving P5,444.44 as his monthly salary while TAPE prefers to
designate such amount as talent fees. Wages, as defined in the Labor Code, are remuneration or
earnings, however designated, capable of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece or commission basis, or other method of calculating the same, which is
payable by an employer to an employee under a written or unwritten contract of employment for work
done or to be done, or for service rendered or to be rendered. It is beyond dispute that respondent
received a fixed amount as monthly compensation for the services he rendered to TAPE.

The Memorandum informing respondent of the discontinuance of his service proves that TAPE had the
power to dismiss respondent.

Control is manifested in the bundy cards submitted by respondent in evidence. He was required to report
daily and observe definite work hours. To negate the element of control, TAPE presented a certification
from M-Zet Productions to prove that respondent also worked as a studio security guard for said
company. Notably, the said certificate categorically stated that respondent reported for work on
Thursdays from 1992 to 1995. It can be recalled that during said period, respondent was still working for
RPN-9. As admitted by TAPE, it absorbed respondent in late 1995.23

TAPE further denies exercising control over respondent and maintains that the latter is an independent
contractor.24 Aside from possessing substantial capital or investment, a legitimate job contractor or
subcontractor carries on a distinct and independent business and undertakes to perform the job, work or
service on its own account and under its own responsibility according to its own manner and method, and
free from the control and direction of the principal in all matters connected with the performance of the
work except as to the results thereof.25 TAPE failed to establish that respondent is an independent
contractor. As found by the Court of Appeals:

We find the annexes submitted by the private respondents insufficient to prove that herein
petitioner is indeed an independent contractor. None of the above conditions exist in the case at
bar. Private respondents failed to show that petitioner has substantial capital or investment to be
qualified as an independent contractor. They likewise failed to present a written contract which
specifies the performance of a specified piece of work, the nature and extent of the work and the
term and duration of the relationship between herein petitioner and private respondent TAPE.26

TAPE relies on Policy Instruction No. 40, issued by the Department of Labor, in classifying respondent as
a program employee and equating him to be an independent contractor.

Policy Instruction No. 40 defines program employees as—

x x x those whose skills, talents or services are engaged by the station for a particular or specific
program or undertaking and who are not required to observe normal working hours such that on
some days they work for less than eight (8) hours and on other days beyond the normal work
hours observed by station employees and are allowed to enter into employment contracts with
other persons, stations, advertising agencies or sponsoring companies. The engagement of
program employees, including those hired by advertising or sponsoring companies, shall be
under a written contract specifying, among other things, the nature of the work to be performed,
rates of pay and the programs in which they will work. The contract shall be duly registered by the
station with the Broadcast Media Council within three (3) days from its consummation.27

TAPE failed to adduce any evidence to prove that it complied with the requirements laid down in the
policy instruction. It did not even present its contract with respondent. Neither did it comply with the
contract-registration requirement.

Even granting arguendo that respondent is a program employee, stills, classifying him as an independent

contractor is misplaced. The Court of Appeals had this to say:

We cannot subscribe to private respondents’ conflicting theories. The theory of private

respondents that petitioner is an independent contractor runs counter to their very own allegation
that petitioner is a talent or a program employee. An independent contractor is not an employee
of the employer, while a talent or program employee is an employee. The only difference between
a talent or program employee and a regular employee is the fact that a regular employee is
entitled to all the benefits that are being prayed for. This is the reason why private respondents try
to seek refuge under the concept of an independent contractor theory. For if petitioner were
 indeed an independent contractor, private respondents will not be liable to pay the benefits
prayed for in petitioner’s complaint.28

More importantly, respondent had been continuously under the employ of TAPE from 1995 until his
termination in March 2000, or for a span of 5 years. Regardless of whether or not respondent had been
performing work that is necessary or desirable to the usual business of TAPE, respondent is still
considered a regular employee under Article 280 of the Labor Code which provides:

Art. 280. Regular and Casual Employment.—The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be
deemed to be regular where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the employer, except where the
employment has been fixed for a specific project or undertaking the completion or termination of
which has been determined at the time of engagement of the employee or where the work or
service to be performed is seasonal in nature and employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph.

Provided, that, any employee who has rendered at least one year of service, whether such
service is continuous or broken, shall be considered a regular employee with respect to the
activity in which he is employed and his employment shall continue while such activity exists.

As a regular employee, respondent cannot be terminated except for just cause or when authorized by
law.29 It is clear from the tenor of the 2 March 2000 Memorandum that respondent’s termination was due
to redundancy. Thus, the Court of Appeals correctly disposed of this issue, viz:

Article 283 of the Labor Code provides that the employer may also terminate the employment of
any employee due to the installation of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless
the closing is for the purpose of circumventing the provisions of this Title, by serving a written
notice on the workers and the Ministry of Labor and Employment at least one (1) month before
the intended date thereof. In case of termination due to the installation of labor saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at
least his one (1) month pay or to at least one (1) month pay for every year or service, whichever
is higher.

xxxx

We uphold the finding of the Labor Arbiter that "complainant [herein petitioner] was terminated
upon [the] management’s option to professionalize the security services in its operations. x x x"
However, [we] find that although petitioner’s services [sic] was for an authorized cause, i.e.,
redundancy, private respondents failed to prove that it complied with service of written notice to
the Department of Labor and Employment at least one month prior to the intended date of
retrenchment. It bears stressing that although notice was served upon petitioner through a
Memorandum dated 2 March 2000, the effectivity of his dismissal is fifteen days from the start of
the agency’s take over which was on 3 March 2000. Petitioner’s services with private
respondents were severed less than the month requirement by the law.

Under prevailing jurisprudence the termination for an authorized cause requires payment of
separation pay. Procedurally, if the dismissal is based on authorized causes under Articles 283
and 284, the employer must give the employee and the Deparment of Labor and Employment
written notice 30 days prior to the effectivity of his separation. Where the dismissal is for an
authorized cause but due process was not observed, the dismissal should be upheld. While the
procedural infirmity cannot be cured, it should not invalidate the dismissal. However, the
employer should be liable for non-compliance with procedural requirements of due process.

xxxx

Under recent jurisprudence, the Supreme Court fixed the amount of P30,000.00 as nominal
damages. The basis of the violation of petitioners’ right to statutory due process by the private
respondents warrants the payment of indemnity in the form of nominal damages. The amount of
such damages is addressed to the sound discretion of the court, taking into account the relevant
circumstances. We believe this form of damages would serve to deter employer from future
violations of the statutory due process rights of the employees. At the very least, it provides a
vindication or recognition of this fundamental right granted to the latter under the Labor Code and
its Implementing Rules. Considering the circumstances in the case at bench, we deem it proper
to fix it at P10,000.00.30
In sum, we find no reversible error committed by the Court of Appeals in its assailed decision.

However, with respect to the liability of petitioner Tuviera, president of TAPE, absent any showing that he
acted with malice or bad faith in terminating respondent, he cannot be held solidarily liable with
TAPE.31 Thus, the Court of Appeals ruling on this point has to be modified.

WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are AFFIRMED with
MODIFICATION in that only petitioner Television and Production Exponents, Inc. is liable to pay
respondent the amount of P10,000.00 as nominal damages for non-compliance with the statutory due
process and petitioner Antonio P. Tuviera is accordingly absolved from liability.

SO ORDERED.

DANTE O. TINGA
Associate Justice