WHAT IS SOCIAL JUSTICE
public convenience and welfare. It was inspired by a desire to relieve
———————
[No. 47800. December 2, 1940]
Maximo Calalang, petitioner, vs. A. D. Williams, et al., respondents.
1.Constitutional Law; Constitutionality of Commonwealth Act No. 548;
Delegation op Legislative Power; Authority of Director of Public Works
and Secretary of Public Works and Communications to Promulgate Rules
and Regulations.—The provisions of section 1 of Commonwealth Act No.
548 do not confer legislative power upon the Director of Public Works
and the Secretary of Public Works and Communications. The authority
therein conferred upon them and under which they promulgated the
rules and regulations now complained of is not to determine what public
policy demands but merely to carry out the legislative policy laid down
by the National Assembly in said Act, to wit, "to promote safe transit
upon, and avoid obstructions on, roads and streets designated as
national roads by acts of the National Assembly or by executive orders of
the President of the Philippines" and to close them temporarily to any or
all classes of traffic "whenever the condition of the road or the traffic
thereon makes such action necessary or advisable in the public con-
venience and interest." The delegated power, if at all, therefore, is not
the determination of what the law shall be, but merely the ascertainment
of the facts and circumstances upon which the application of said law is
to be predicated. To promulgate rules and regulations on the use of
national roads and to determine when and how long a national road
should be closed to traffic, in view of the condition of the road or the
traffic thereon and the requirements of public convenience and interest,
is an administrative function which cannot be directly discharged by the
National Assembly. It must depend on the discretion of some other
government official to whom is confided the duty of determining
whether the proper occasion exists for executing the law. But it cannot
be said that the exercise of such discretion is the making of the law.
2.Id.; Id.; Police Power; Personal Liberty; Governmental Authority.—
Commonwealth Act No. 548 was passed by the National Assembly in the
exercise of the paramount police power of the state. Said Act, by virtue of
which the rules and regulations complained of were promulgated, aims
to promote safe transit upon and avoid obstructions on national roads,
in the interest and convenience of the public. In enacting said law,
therefore, the National Assembly was prompted by considerations of
congestion of traffic, which is, to say the least, a menace to public safety.
Public welfare, then, lies at the bottom of the enactment of said law, and
the state in order to promote the general welfare may interfere with
personal liberty, with property, and with business and occupations.
Persons and property may be subjected to all kinds of restraints and
burdens, in order to secure the general comfort, health, and prosperity of
the state (U. S. vs. Gomez Jesus, 31 Phil., 218). To this fundamental aim of
our Government the rights of the individual are subordinated. Liberty is
a blessing without which life is a misery, but liberty should not be made
to prevail over authority because then society will fall into anarchy.
Neither should authority be made to prevail over liberty because then
the individual will fall into slavery. The citizen should achieve the
required balance of liberty and authority in his mind through education
and, personal discipline, so that there may be established the resultant
equilibrium, which means peace and order and happiness for all. The
moment greater authority is conferred upon the government, logically so
much is withdrawn from the residuum of liberty which resides in the
people. The paradox lies in the fact that the apparent curtailment of lib-
erty is precisely the very means of insuring its preservation.
3.Id.; Id.; Social Justice.—Social justice is "neither communism nor
despotism, nor atomism, nor anarchy," but the humanization of laws and
the equalization of social and economic forces by the State so that justice
in its rational and objectively secular conception may at least be
approximated. Social justice means the promotion of the welfare of all
the people, the adoption by the Government of measures calculated to
insure economic stability of all the competent elements of society,
through the maintenance of a proper economic and social equilibrium in
the interrelations of the members of the community, constitutionally,
through the adoption of measures legally justifiable, or extra-
constitutionally, through the exercise of powers underlying the existence
of all governments on the time-honored principle of salus populi est
supremo, lex. Social justice, therefore, must be founded on the
recognition of the necessity of interdependence among divers and
diverse units of a society and of the protection that should be equally
and evenly extended to all groups as a combined force in our social and
economic life, consistent with the fundamental and paramount objective
1
of the state of promoting the health, comfort, and quiet of all persons,
and of bringing about "the greatest good to the greatest number."
ORIGINAL ACTION in the Supreme Court. Prohibition.
The facts are stated in the opinion of the court.
Maximo Calalang in his own behalf.
Solicitor-General Ozaeta and Assistant Solicitor-General Amparo for
respondents Williams, Fragante and Bayan.
City Fiscal Mabanag for the other respondents.
Laurel, J.:
Maximo Calalang, in his capacity as a private citizen and as a taxpayer of
Manila, brought before this court this petition for a writ of prohibition
against the respondents, A. D. Williams, as Chairman of the National
Traffic Commission; Vicente Fragante, as Director of Public Works; Ser-
gio Bayan, as Acting Secretary of Public Works and Communications;
Eulogio Rodriguez, as Mayor of the City of Manila; and Juan Dominguez,
as Acting Chief of Police of Manila.
It is alleged in the petition that the National Traffic Commission, in its
resolution of July 17, 1940, resolved to recommend to the Director of
Public Works and to the Secretary of Public Works and Communications
that animal-drawn vehicles be prohibited from passing along Rosario
Street extending from Plaza Calderon de la Barca to Dasmarinas Street,
from 7:30 a. m. to 12:30 p. m. and from 1:30 p. m. to 5:30 p. m.; and along
Rizal Avenue extending from the railroad crossing at Antipolo Street to
Echague Street, from 7 a. m. to 11 p.m., for a period of one year from the
date of the opening of the Colgante Bridge to traffic; that the Chairman of
the National Traffic Commission, on July 18, 1940, recommended to the
Director of Public Works the adoption of the measure proposed in the
resolution aforementioned, in pursuance of the provisions of
Commonwealth Act No. 548 which authorizes said Director of Public
Works, with the approval of the Secretary of Public Works and
Communications, to promulgate rules and regulations to regulate and
control the use of and traffic on national roads; that on August 2, 1940,
the Director of Public Works, in his first endorsement to the Secretary of
Public Works and Communications, recommended to the latter the
approval of the recommendation made by the Chairman of the National
Traffic Commission as aforesaid, with the modification that the closing of
Rizal Avenue to traffic of animal-drawn vehicles be limited to the portion
thereof extending from the railroad crossing at Antipolo Street to
Azcarraga Street; that on August 10, 1940, the Secretary of Public Works
and Communications, in his second indorsement addressed to the
Director of Public Works, approved the recommendation of the latter
that Rosario Street and Rizal Avenue be closed to traffic of animal-drawn
vehicles, between the points and during the hours as above indicated, for
a period of one year from the date of the opening of the Colgante Bridge
to traffic; that the Mayor of Manila and the Acting Chief of Police of
Manila have enforced and caused to be enforced the rules and
regulations thus adopted; that as a consequence of such enforcement, all
animal-drawn vehicles are not now allowed to pass and pick up passen
gers in the places above-mentioned to the detriment not only of their
owners but of the riding public as well.
It is contended by the petitioner that Commonwealth Act No. 548 by
which the Director of Public Works, with the approval of the Secretary of
Public Works and Communications, is authorized to promulgate rules
and regulations for the regulation and control of the use of and traffic on
national roads and streets is unconstitutional because it constitutes an
undue delegation of legislative power. This contention is untenable. As
was observed by this court in Rubi vs. Provincial Board of Mindoro (39
Phil, 660, 700), "The rule has nowhere been better stated than in the
early Ohio case decided by Judge Ranney, and since followed in a
multitude of cases, namely: 'The true distinction therefore is between
the delegation of power to make the law, which necessarily involves a
discretion as to what it shall be, and conferring an authority or dis-
cretion as to its execution, to be exercised under and in pursuance of the
law. The first cannot be done; to the latter no valid objection can be
made.' (Cincinnati, W. & Z. R. Co. vs. Comm'rs. Clinton County, 1 Ohio St.,
88.) Discretion, as held by Chief Justice Marshall in Wayman vs. Southard
(10 Wheat., 1) may be committed by the Legislature to an executive
department or official. The Legislature may make decisions of executive
departments or subordinate officials thereof, to whom it has committed
the execution of certain acts, final on questions of fact. (U. S. vs. Kinkead,
248 Fed., 141.) The growing tendency in the decisions is to give
prominence to the 'necessity' of the case."
Section 1 of Commonwealth Act No. 548 reads as follows:
"Section 1. To promote safe transit upon, and avoid obstructions on,
roads and streets designated as national roads by acts of the National
Assembly or by executive orders of the President of the Philippines, the
Director of Public Works, with the approval of the Secretary of Public
Works and Communications, shall promulgate the necessary rules and
2
regulations to regulate and control the use of and traffic on such roads
and streets. Such rules and regulations, with the approval of the
President, may contain provisions controlling or regulating the construc-
tion of buildings or other structures within a reasonable distance from
along the national roads. Such roads may be temporarily closed to any or
all classes of traffic by the Director of Public Works and his duly
authorized representatives whenever the condition of the road or the
traffic thereon makes such action necessary or advisable in the public
convenience and interest, or for a specified period, with the approval of
the Secretary of Public Works and Communications."
The above provisions of law do not confer legislative power upon the
Director of Public Works and the Secretary of Public Works and
Communications. The authority therein conferred upon them and under
which they promulgated the rules and regulations now complained of is
not to determine what public policy demands but merely to carry out the
legislative policy laid down by the National Assembly in said Act, to wit,
"to promote safe transit upon and avoid obstructions on, roads and
streets designated as national roads by acts of the National Assembly or
by executive orders of the President of the Philippines" and to close
them temporarily to any or all classes of traffic "whenever the condition
of the road or the traffic makes such action necessary or advisable in the
public convenience and interest." The delegated power, if at all,
therefore, is not the determination of what the law shall be, but merely
the ascertainment of the facts and circumstances upon which the
application of said law is to be predicated. To promulgate rules and
regulations on the use of national roads and to determine when and how
long a national road should be closed to traffic, in view of the condition
of the road or the traffic thereon and the requirements of public
convenience and interest, is an administrative function which cannot be
directly discharged by the National Assembly. It must depend on the
discre tion of some other government official to whom is confided the
duty of determining whether the proper occasion exists for executing the
law. But it cannot be said that the exercise of such discretion is the
making of the law. As was said in Locke's Appeal (72 Pa. 491): "To assert
that a law is less than a law, because it is made to depend on a future
event or act, is to rob the Legislature of the power to act wisely for the
public welfare whenever a law is passed relating to a state of affairs not
yet developed, or to things future and impossible to fully know." The
proper distinction the court said was this: "The Legislature cannot
delegate its power to make the law; but it can make a law to delegate a
power to determine some fact or state of things upon which the law
makes, or intends to make, its own action depend. To deny this would be
to stop the wheels of government. There are many things upon which
wise and useful legislation must depend which cannot be known to the
law-making power, and, must, therefore, be a subject of inquiry and
determination outside of the halls of legislation." (Field v. Clark, 143 U. S.
649, 694; 36 L. Ed. 294.)
In the case of People vs. Rosenthal and Osmena, G. R. Nos. 46076 and
46077, promulgated June 12, 1939, and in Pangasinan
Transportation vs. The Public Service Commission, G. R. No. 47065,
promulgated June 26, 1940, this Court had occasion to observe that the
principle of separation of powers has been made to adapt itself to the
complexities of modern governments, giving rise to the adoption, within
certain limits, of the principle of "subordinate legislation," not only in the
United States and England but in practically all modern governments.
Accordingly, with the growing complexity of modern life, the
multiplication of the subjects of governmental regulations, and the
increased difficulty of administering the laws, the rigidity of the theory
of separation of governmental powers has, to a large extent, been
relaxed by permitting the delegation of greater powers by the legislative
and vesting a larger amount of discretion in administrative and
executive officials, not only in the execution of the laws, but also in the
promulgation of certain rules and regulations calculated to promote
public interest.
The petitioner further contends that the rules and regulations
promulgated by the respondents pursuant to the provisions of
Commonwealth Act No. 548 constitute an unlawful interference with
legitimate business or trade and abridge the right to personal liberty and
freedom of locomotion. Commonwealth Act No. 548 was passed by the
National Assembly in the exercise of the paramount police power of the
state.
Said Act, by virtue of which the rules and regulations complained of were
promulgated, aims to promote safe transit upon and avoid obstructions
on national roads, in the interest and convenience of the public. In
enacting said law, therefore, the National Assembly was prompted by
considerations of public convenience and welfare. It was inspired by a
desire to relieve congestion of traffic. which is, to say the least, a menace
to public safety. Public welfare, then, lies at the bottom of the enactment
of said law, and the state in order to promote the general welfare may
interfere with personal liberty, with property, and with business and
3
occupations. Persons and property may be subjected to all kinds of promotion of the welfare of all the people, the adoption by the
restraints and burdens, in order to secure the general comfort, health, Government of measures calculated to insure economic stability of all
and prosperity of the state (U. S. vs. Gomez Jesus, 31 Phil., 218). To this the competent elements of society, through the maintenance of a proper
fundamental aim of our Government the rights of the individual are economic and social equilibrium in the interrelations of
subordinated. Liberty is a blessing without which life is a misery, but
liberty should not be made to prevail over authority because then © Copyright 2020 Central Book Supply, Inc. All rights reserved.
society will fall into anarchy.   Neither should authority be made to
prevail over liberty because then the individual will fall into slavery. The
citizen should achieve the required balance of liberty and authority in
his mind through education and personal discipline, so that there may be
established the resultant equilibrium, which means peace and order and
happiness for all. The moment greater authority is conferred upon the
government, logically so much is withdrawn from the residuum of liber-
ty which resides in the people. The paradox lies in the fact that the
apparent curtailment of liberty is precisely the very means of insuring its
preservation.
The scope of police power keeps expanding as civilization advances. As
was said in the case of Dobbins vs. Los Angeles (195 U. S. 223, 238; 49 L.
ed. 169), "the right to exercise the police power is a continuing one, and
a business lawful today may in the future, because of the changed
situation, the growth of population or other causes, become a menace to
the public health and welfare, and be required to yield to the public
good." And in People vs. Pomar (46 Phil., 440), it was observed that
"advancing civilization is bringing within the police power of the state
today things which were not thought of as being within such power
yesterday. The development of civilization, the rapidly increasing
population, the growth of public opinion, with an increasing desire on
the part of the masses and of the government to look after and care for
the interests of the individuals of the state, have brought within the
police power many questions for regulation which formerly were not so
considered."
The petitioner finally avers that the rules and regulations complained of
infringe upon the constitutional precept regarding the promotion of
social justice to insure the well-being and economic security of all the
people. The promotion of social justice, however, is to be achieved not
through a mistaken sympathy towards any given group. Social justice is
"neither communism, nor despotism, nor atomism, nor anarchy," but the
humanization of laws and the equalization of social and economic forces
by the State so that justice in its rational and objectively secular
conception may at least be approximated. Social justice means the

4
ARE LABOR DETERMINATIONS MADE PURELY ACCORDING TO
REASON
G.R. No. 199554. February 18, 2015.*
 
ZENAIDA PAZ, petitioner, vs. NORTHERN TOBACCO REDRYING CO., INC.,
and/or ANGELO ANG, respondents.
Labor Law; Article 280 of the Labor Code and jurisprudence identified
three (3) types of employees.—Article 280 of the Labor Code and
jurisprudence identified three types of employees, namely: “(1) regular
employees or those who have been engaged to perform activities which
are usually necessary or desirable in the usual business or trade of the
employer; (2) project employees or those whose employment has been
fixed for a specific project or undertaking, the completion or termination
of which has been determined at the time of the engagement of the
employee or where the work or service to be performed is seasonal in
nature and the employment is for the duration of the season; and (3)
casual employees or those who are neither regular nor project
employees.”
Same; Regular Seasonal Employees; The workers of La Union Tobacco
Redrying Corporation in Abasolo v. National Labor Relations Commission,
346 SCRA 293 (2000), were considered regular seasonal employees since
they performed services necessary and indispensable to the business for
over twenty (20) years, even if their work was only during tobacco season.
—Mercado, Sr. v. National Labor Relations Commission, 201 SCRA 332
(1991), did not consider as regular employees the rice and sugar
farmland workers who were paid with daily wages. This was anchored
on the Labor Arbiter’s findings that “petitioners were required to
perform phases of agricultural work for a definite period, after which
their services [were] available to any farm owner.” This court explained
that the proviso in the second paragraph of Article 280 in 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”
applies only to “casual” employees and not “project” and regular
employees in the first paragraph of Article 280. On the other hand, the
workers of La Union Tobacco Redrying Corporation in Abasolo v.
National Labor Relations Commission, 346 SCRA 293 (2000), were
Same; Termination of Employment; Retirement; Retirement is the result of
a bilateral act of the parties, a voluntary agreement between the employer
and the employee whereby the latter, after reaching a certain age, agrees
to sever his or her employment with the former.—“Retirement is the
result of a bilateral act of the parties, a voluntary agreement between the
employer and the employee whereby the latter, after reaching a certain
age, agrees to sever his or her employment with the former.” Article 287,
as amended, allows for optional retirement at the age of at least 60 years
old. Consequently, if “the intent to retire is not clearly established or if
the retirement is involuntary, it is to be treated as a discharge.”
Same; Same; Backwages; An award of full backwages is inclusive of
allowances and other benefits or their monetary equivalent, from the time
their actual compensation was withheld.—An award of full backwages is
“inclusive of allowances and other benefits or their monetary equivalent,
from the time their actual compensation was withheld. . . .” Backwages,
considered as actual damages, requires proof of the loss suffered. The
Court of Appeals found “no positive proof of the total number of months
that she actually rendered work.” Nevertheless, petitioner Paz’s daily
pay of P185.00 was established. She also alleged that her employment
periods ranged from three to seven months.
Same; Same; An employer may provide for retirement benefits in an
agreement with its employees such as in a Collective Bargaining
Agreement (CBA).—An employer may provide for retirement benefits in
an agreement with its employees such as in a Collective Bargaining
Agreement. Otherwise, Article 287 of the Labor Code, as amended,
governs. Since respondent NTRCI failed to present a copy of a Collective
Bargaining Agreement on the alleged retirement policy, we apply Article
287 of the Labor Code, as amended by Republic Act No. 7641.
Same; Same; Separation Pay; The amount of separation pay is based on
two (2) factors: the amount of monthly salary and the number of years of
service.—This court in Philippine Tobacco Flue-Curing & Redrying Corp. v.
National Labor Relations Commission, 300 SCRA 37 (1998), explained its
computation of separation pay as follows: The amount of separation pay
is based on two (2) factors: the amount of monthly salary and the
number of years of service. Although the Labor Code provides different
definitions as to what constitutes “one year of service,” Book Six does not
specifically define “one year of service” for purposes of computing
separation pay. However, Articles 283 and 284 both state in connection
with separation pay that a fraction of at least six months shall be
5
considered one whole year. Applying this to the case at bar, we hold that
the amount of separation pay which respondent members of the Lubat
and Luris groups should receive is one-half (1/2) their respective
average monthly pay during the last season they worked multiplied by
the number of years they actually rendered service, provided that they
worked for at least six months during a given year. The formula that
petitioner proposes, wherein a year of work is equivalent to actual work
rendered for 303 days, is both unfair and inapplicable, considering that
Articles 283 and 284 provide that in connection with separation pay, a
fraction of at least six months shall be considered one whole year. Under
these provisions, an employee who worked for only six months in a
given year — which is certainly less than 303 days — is considered to
have worked for one whole year. . . . Finally, Manila Hotel Company v.
CIR did not rule that seasonal workers are considered at work during
off-season with regard to the computation of separation pay. Said case
merely held that, in regard to seasonal workers, the employer-employee
relationship is not severed during off-season but merely suspended.
Remedial Law; Civil Procedure; Appeals; Petition for Review on Certiorari;
Petitions for review pursuant to Rule 45 of the Rules of Court can raise
only questions of law.—Petitions for review pursuant to Rule 45 of the
Rules of Court can raise only questions of law. Generally, this court
accords great respect for factual findings by quasi-judicial bodies, even
according such findings with finality when supported by substantial
evidence.
Labor Law; The Supreme Court (SC) has discussed that “labor law
determinations are not only secundum rationem but also secun-dum
caritatem.”—We agree with the Court of Appeals that petitioner Paz’s
circumstances “indubitably merit equitable concessions, via the
principle of ‘compassionate justice’ for the working class.” Petitioner Paz
worked for respondent NTRCI for close to three decades. She had no
record of any malfeasance or violation of company rules in her long
years of service. Her advanced age has rendered her weak and lessened
her employment opportunities. Eastern Shipping Lines, Inc. v. Sedan, 486
SCRA 565 (2006), awarded Sedan with financial assistance equal to one-
half-month pay for every year of service. Sedan was hired as a
3rd marine engineer and oiler from 1973 until his last voyage in 1997.
On the other hand, petitioner Paz was a seasonal employee who worked
for periods ranging from three to seven months a year. This court thus
finds the following Court of Appeals formula for financial assistance as
equitable: one-half-month pay multiplied by 29 years in service and then
divided by 2. This court has discussed that “labor law determinations are
not only secundum rationem but also secundum caritatem.” The award of
P60,356.25 as financial assistance will serve its purpose in providing
petitioner Paz sustenance and comfort after her long years of service.
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
  Verzosa, Gutierrez, Nolasco, Montenegro & Associatesfor petitioner.
  Figueroa, Tuanquin & Associates for respondent Northern Tobacco
Redrying Co., Inc. (NTRCI).
 
LEONEN, J.:
 
Zenaida Paz filed this Petition1 praying that “the computation of
Petitioner’s Retirement Pay as determined by the National Labor
Relations Commission in its Decision dated 08 December 2008 be
reinstated.”2
Northern Tobacco Redrying Co., Inc. (NTRCI), a flue-curing and redrying
of tobacco leaves business,3 employs approximately 100 employees with
seasonal workers “tasked to sort, process, store and transport tobacco
leaves during the tobacco season of March to September.” 4
NTRCI hired Zenaida Paz (Paz) sometime in 1974 as a seasonal sorter,
paid P185.00 daily. NTRCI regularly rehired her every tobacco season
since then. She signed a seasonal job contract at the start of her
employment and a pro forma application letter prepared by NTRCI in
order to qualify for the next season. 5
On May 18, 2003,6 Paz was 63 years old when NTRCI informed her that
she was considered retired under company policy.7 A year later, NTRCI
told her she would receive P12,000.00 as retirement pay.8
Paz, with two other complainants, filed a Complaint for illegal dismissal
against NTRCI on March 4, 2004.9 She amended her Complaint on April
27, 2004 into a Complaint for payment of retirement benefits, damages,
and attorney’s fees10 as P12,000.00 seemed inadequate for her 29 years
of service.11 The Complaint impleaded NTRCI’s Plant Manager, Angelo
Ang, as respondent.12 The Complaint was part of the consolidated
Complaints of 17 NTRCI workers.13
NTRCI countered that no Collective Bargaining Agreement (CBA) existed
between NTRCI and its workers. Thus, it computed the retirement pay of
its seasonal workers based on Article 287 of the Labor Code. 14
6
NTRCI raised the requirement of at least six months of service a year for
that year to be considered in the retirement pay computation. It claimed
that Paz only worked for at least six months in 1995, 1999, and 2000 out
of the 29 years she rendered service. Thus, Paz’s retirement pay
amounted to P12,487.50 after multiplying her P185.00 daily salary by 22
1/2 working days in a month, for three years.15
The Labor Arbiter in his Decision16 dated July 26, 2005 “[c]onfirm[ed]
that the correct retirement pay of Zenaida M. Paz [was] P12,487.50.” 17
The National Labor Relations Commission in its Decision 18 dated
December 8, 2008 modified the Labor Arbiter’s Decision. It likewise
denied reconsideration. The Decision’s dispositive portion reads:
WHEREFORE, premises considered, the decision of the labor arbiter is
hereby MODIFIED. Complainant Appellant Zenaida Paz[’s] retirement
pay should be computed pursuant to RA 7641 and that all the months
she was engaged to work for respondent for the last twenty-eight (28)
years should be added and divide[d] by six (for a fraction of six months
is considered as one year) to get the number of years [for] her
retirement pay[.] Complainant Teresa Lopez is hereby entitled to her
separation pay computed at one-half-month pay for every year of
service, a fraction of six months shall be considered as one year, plus
backwages from the time she was illegally dismissed up to the filing of
her complaint.
The rest of the decision stays.
SO ORDERED.19
 
The Court of Appeals in its Decision20 dated May 25, 2011 dismissed the
Petition and modified the National Labor Relations Commission’s
Decision in that “financial assistance is awarded to . . . Zenaida Paz in the
amount of P60,356.25”:21
WHEREFORE, the Petition is hereby DISMISSED. The Decision dated 8
December 2008 and Resolution dated 16 September 2009 of the
National Labor Relations Commission in NLRC CA No. 046642-05(5)
are MODIFIED in that (1) financial assistance is awarded to private
respondent Zenaida Paz in the amount of P60,356.25; and (2) the
dismissal of private respondent Teresa Lopez is declared illegal, and
thus, she is awarded backwages and separation pay, in accordance with
the foregoing discussion.
SO ORDERED.22
 
The Court of Appeals found that while applying the clear text of Article
287 resulted in the amount of P12,487.50 as retirement pay, “this
amount [was] so meager that it could hardly support . . . Paz, now that
she is weak and old, unable
.
to find employment.”23 It discussed jurisprudence on financial assistance
and deemed it appropriate to apply the formula: One-half-month pay
multiplied by 29 years of service divided by two yielded P60,356.25 as
Paz’s retirement pay.24
Paz comes before this court seeking to reinstate the National Labor
Relations Commission’s computation.25NTRCI filed its Comment,26 and
this court deemed waived the filing of a Reply.27
Petitioner Paz contends that respondent NTRCI failed to prove the
alleged company policy on compulsory retirement for employees who
reached 60 years of age or who rendered 30 years of service, whichever
came first.28 Consequently, Article 287, as amended by Republic Act No.
7641,29applies and entitles her to “retirement pay . . . equivalent to [at
least] one-half-month salary for every year of service, a fraction of at
least six (6) months being considered as one whole year.”30 She adds that
she was then 63 years old, and while one may opt to retire at 60 years
old, the compulsory retirement age is 65 years old under Article 287, as
amended.31
Petitioner Paz then argues respondent NTRCI’s misplaced reliance
on Philippine Tobacco Flue-Curing & Redrying Corp. v. National Labor
Relations Commission32 as that case involved separation pay
computation.33
Lastly, petitioner Paz contends lack of legal basis that “an employee
should have at least worked for six (6) months for a particular season for
that season to be included in the computation of retirement pay[.]” 34 She
submits that regular seasonal employees are still considered employees
during off- season, and length of service determination should be applied
in retiree’s favor.35
Respondent NTRCI counters that in retirement pay computation this
court should consider its ruling in Philippine Tobacco on computing
separation pay of seasonal employees. It submits that the proviso “a
fraction of at least six (6) months being considered as one (1) whole
year” appears in both Article 287 on retirement pay and Articles 283 and
284 on separation pay.36
Respondent NTRCI argues that unlike regular employees, seasonal
workers like petitioner Paz can offer their services to other employers
7
during off-season. Thus, the six-month rule avoids the situation where
seasonal workers receive retirement pay twice — an even more
favorable position compared with regular employees.37
Both parties appear to agree on petitioner Paz’s entitlement to
retirement pay. The issue before this court involves its proper
computation. We also resolve whether there was illegal dismissal.
We affirm the Court of Appeals’ decision with modification.
Regular seasonal employees
 
Article 28038 of the Labor Code and jurisprudence identified three types
of employees, namely: “(1) regular employees or those who have been
engaged to perform activities which are usually necessary or desirable in
the usual business or trade of the employer; (2) project employees or
those whose employment has been fixed for a specific project or
undertaking, the completion or termination of which has been
determined at the time of the engagement of the employee or where the
work or service to be performed is seasonal in nature and the
employment is for the duration of the season; and (3) casual employees
or those who are neither regular nor project employees.”39
Art. 280. Regular and casual employment.—The provisions of written
agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the
work or service to be performed is seasonal in nature and the
employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the
preceding paragraph: 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.
Mercado, Sr. v. National Labor Relations Commission 41did not consider as
regular employees the rice and sugar farmland workers who were paid
with daily wages. This was anchored on the Labor Arbiter’s findings that
“petitioners were required to perform phases of agricultural work for a
definite period, after which their services [were] available to any farm
owner.”42
This court explained that the proviso in the second paragraph of Article
280 in 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” applies only to “casual” employees and not “project”
and regular employees in the first paragraph of Article 280. 43
On the other hand, the workers of La Union Tobacco Redrying
Corporation in Abasolo v. National Labor Relations Commission 44 were
considered regular seasonal employees since they performed services
necessary and indispensable to the business for over 20 years, even if
their work was only during tobacco season.45 This court applied the test
laid down in De Leon v. National Labor Relations Commission 46 for
determining regular employment status:
[T]he test of whether or not an employee is a regular employee has been
laid down in De Leon v. NLRC, in which this Court held:
The primary standard, therefore, of determining regular employment is
the reasonable connection between the particular activity performed by
the employee in relation to the usual trade or business of the employer.
The test is whether the former is usually necessary or desirable in the
usual business or trade of the employer. The connection can be
determined by considering the nature of the work performed and its
relation to the scheme of the particular business or trade in its entirety.
Also if the employee has been performing the job for at least 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.
Thus, the nature of one’s employment does not depend solely on the will
or word of the employer. Nor on the procedure for hiring and the
manner of designating the employee, but on the nature of the activities
to be performed by the employee, considering the employer’s nature of
business and the duration and scope of work to be done.
In the case at bar, while it may appear that the work of petitioners is
seasonal, inasmuch as petitioners have served the company for many
years, some for over 20 years, performing services necessary and
indispensable to LUTORCO’s business, serve as badges of regular
employment. Moreover, the fact that petitioners do not work
8
continuously for one whole year but only for the duration of the
tobacco season does not detract from considering them in regular
employment since in a litany of cases this Court has already settled that
seasonal workers who are called to work from time to time and are
temporarily laid off during off-season are not separated from service in
said period, but are merely considered on leave until reemployed.
Private respondent’s reliance on the case of Mercado v. NLRCis misplaced
considering that since in said case of Mercado, although the respondent
company therein consistently availed of the services of the petitioners
therein from year to year, it was clear that petitioners therein were not
in respondent company’s regular employ. Petitioners therein performed
different phases of agricultural work in a given year. However, during
that period, they were free to contract their services to work for other
farm owners, as in fact they did. Thus, the Court ruled in that case that
their employment would naturally end upon the completion of each
project or phase of farm work for which they have been
contracted.47 (Emphasis supplied, citations omitted)
 
The sugarcane workers in Hacienda Fatima v. National Federation of
Sugarcane Workers-Food and General Trade 48 were also considered as
regular employees since they performed the same tasks every season for
several years:
For respondents to be excluded from those classified as regular
employees, it is not enough that they perform work or services that are
seasonal in nature. They must have also been employed only for the
duration of one season. . . . Evidently, petitioners employed respondents
for more than one season. Therefore, the general rule of regular
employment is applicable.
The CA did not err when it ruled that Mercado v. NLRC was not
applicable to the case at bar. In the earlier case, the workers were
required to perform phases of agricultural work for a definite period of
time, after which their services would be available to any other farm
owner. They were not hired regularly and repeatedly for the same
phase/s of agricultural work, but on and off for any single phase thereof.
On the other hand, herein respondents, having performed the same
tasks for petitioners every season for several years, are considered
the latter’s regular employees for their respective tasks. Petitioners’
eventual refusal to use their services — even if they were ready, able and
willing to perform their usual duties whenever these were available —
and hiring of other workers to perform the tasks originally assigned to
respondents amounted to illegal dismissal of the latter. 49 (Emphasis
supplied, citation omitted)
 
Respondent NTRCI engaged the services of petitioner Paz as a seasonal
sorter50 and had been regularly rehired from 1974,51 until she was
informed in 2003 that she was being retired under company policy. 52
The services petitioner Paz performed as a sorter were necessary and
indispensable to respondent NTRCI’s business of flue-curing and
redrying tobacco leaves. She was also regularly rehired as a sorter
during the tobacco seasons for 29 years since 1974. These
considerations taken together allowed the conclusion that petitioner Paz
was a regular seasonal employee, entitled to rights under Article 279 53 of
the Labor Code:
Art. 279. Security of Tenure.—In cases of regular employment, the
employer shall not terminate the services of an employee except for a
just cause or when authorized by this Title. An employee who is unjustly
dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full backwages, inclusive
of allowances, and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from him up to
the time of his actual reinstatement.
Illegal dismissal and backwages
 
Petitioner Paz initially filed a Complaint for illegal dismissal seeking
separation pay, but later amended her Complaint into one for payment
of retirement pay.54Despite the amendment, she maintained in her
subsequent pleadings that she had been made to retire even before she
reached the compulsory retirement age of 65 under Article 287, as
amended.55
Petitioner Paz alleged that respondent NTRCI required her to report on
March 18, 2003 for the 2003 tobacco season, but she suffered a mild
stroke sometime in April. Nevertheless, respondent NTRCI extended her
employment contract until May 18, 2003 when she was informed that
she was retired under company policy.56
Since petitioner Paz was “unlearned and not knowledgeable in law, [she]
just accepted such fact and waited to be paid her separation/retirement
benefit as promised by . . . NTRCI.”57 Unfortunately, after a year of
waiting, respondent NTRCI only offered her around P12,000.00 for all
her services since 1974.58
9

The National Labor Relations Commission recognized that like the other
complainants against respondent NTRCI, petitioner Paz “was at a loss in
what cause of action to take — whether illegal dismissal or payment of
retirement pay.”59
Petitioner Paz’s amendment of her Complaint was not fatal to her cause
of action for illegal dismissal.
First, petitioner Paz never abandoned her argument that she had not
reached the compulsory retirement age of 65 pursuant to Article 287, as
amended, when respondent NTRCI made her retire on May 18, 2003.
Second, the National Labor Relations Commission found that respondent
NTRCI failed to prove a valid company retirement policy, yet it required
its workers to retire after they had reached the age of 60. 60 The Court of
Appeals also discussed that while respondent NTRCI produced
guidelines on its retirement policy for seasonal employees, it never
submitted a copy of its Collective Bargaining Agreement and even
alleged in its Position Paper that none existed.61
Petitioner Paz was only 63 years old on May 18, 2003 with two more
years remaining before she would reach the compulsory retirement age
of 65.
“Retirement is the result of a bilateral act of the parties,
a voluntary agreement between the employer and the employee
whereby the latter, after reaching a certain age, agrees to sever his or
her employment with the former.”62Article 287, as amended, allows for
optional retirement at the age of at least 60 years old.
Consequently, if “the intent to retire is not clearly established or if the
retirement is involuntary, it is to be treated as a discharge.”63
The National Labor Relations Commission considered petitioner Paz’s
amendment of her Complaint on April 27, 2004 akin to an optional
retirement when it determined her as illegally dismissed from May 18,
2003 to April 27, 2004, thus being entitled to full backwages from May
19, 2003 until April 26, 2004.64
Again, petitioner Paz never abandoned her argument of illegal dismissal
despite the amendment of her Complaint. This implied lack of intent to
retire until she reached the compulsory age of 65. Thus, she should be
considered as illegally dismissed from May 18, 2003 until she reached
the compulsory retirement age of 65 in 2005 and should be entitled to
full backwages for this period.
An award of full backwages is “inclusive of allowances and other benefits
or their monetary equivalent, from the time their actual compensation
was withheld. . . .”65
Backwages, considered as actual damages,66 requires proof of the loss
suffered. The Court of Appeals found “no positive proof of the total
number of months that she actually rendered work.” 67 Nevertheless,
petitioner Paz’s daily pay of P185.00 was established. She also alleged
that her employment periods ranged from three to seven months. 68
Since the exact number of days petitioner Paz would have worked
between May 18, 2003 until she would turn 65 in 2005 could not be
determined with specificity, this court thus awards full backwages in the
amount of P22,200.00 computed by multiplying P185.00 by 20 days,
then by three months, then by two years.
 
Due process and nominal damages
 
The Labor Code requires employers to comply with both procedural and
substantive due process in dismissing employees. Agabon v. National
Labor Relations Commission69 discussed these rules and enumerated the
four possible situations considering these rules:
Dismissals based on just causes contemplate acts or omissions
attributable to the employee while dismissals based on authorized
causes involve grounds under the Labor Code which allow the employer
to terminate employees. A termination for an authorized cause requires
payment of separation pay. When the termination of employment is
declared illegal, reinstatement and full backwages are mandated under
Article 279. If reinstatement is no longer possible where the dismissal
was unjust, separation pay may be granted.
Procedurally, (1) if the dismissal is based on a just cause under Article
282, the employer must give the employee two written notices and a
hearing or opportunity to be heard if requested by the employee before
terminating the employment: a notice specifying the grounds for which
dismissal is sought a hearing or an opportunity to be heard and after
hearing or opportunity to be heard, a notice of the decision to dismiss;
and (2) if the dismissal is based on authorized causes under Articles 283
and 284, the employer must give the employee and the Department of
Labor and Employment written notices 30 days prior to the effectivity of
his separation.
From the foregoing rules four possible situations may be derived: (1) the
dismissal is for a just cause under Article 282 of the Labor Code, for an
10
authorized cause under Article 283, or for health reasons under Article
284, and due process was observed; (2) the dismissal is without just or
authorized cause but due process was observed; (3) the dismissal is
without just or authorized cause and there was no due process; and (4)
the dismissal is for just or authorized cause but due process was not
observed.
In the first situation, the dismissal is undoubtedly valid and the
employer will not suffer any liability.
In the second and third situations where the dismissals are illegal,
Article 279 mandates that the employee is entitled to reinstatement
without loss of seniority rights and other privileges and full backwages,
inclusive of allowances, and other benefits or their monetary equivalent
computed from the time the compensation was not paid up to the time of
actual reinstatement.
In the fourth situation, the dismissal should be upheld. While the
procedural infirmity cannot be cured, it should not invalidate the
dismissal. However, the employer should be held liable for
noncompliance with the procedural requirements of due
process.70(Emphasis in the original)
 
Agabon focused on the fourth situation when dismissal was for just or
authorized cause, but due process was not observed. 71 Agabon involved a
dismissal for just cause, and this court awarded P30,000.00 as nominal
damages for the employer’s noncompliance with statutory due
process.72Jaka Food Processing Corporation v. Pacot73 involved a
dismissal for authorized cause, and this court awarded P50,000.00 as
nominal damages for the employer’s noncompliance with statutory due
process.74 The difference in amounts is based on the difference in
dismissal ground.75 Nevertheless, this court has sound discretion in
determining the amount based on the relevant circumstances. 76 In De
Jesus v. Aquino,77 this court awarded P50,000.00 as nominal damages
albeit the dismissal was for just cause.78
Petitioner Paz’s case does not fall under the fourth situation but under
the third situation on illegal dismissal for having no just or authorized
cause and violation of due process.
Respondent NTRCI had considered petitioner Paz retired at the age of 63
before she reached the compulsory age of 65. This does not fall under
the just causes for termination in Article 282 of the Labor Code, the
authorized causes for termination in Article 283, or disease as a ground
for termination in Article 284.
As regards due process, the Omnibus Rules Implementing the Labor
Code provides:
Section 2. Standard of due process: requirements of notice.—In all cases
of termination of employment, the following standards of due process
shall be substantially observed.
I. For termination of employment based on just causes as defined in
Article 282 of the Code:
(a) A written notice served on the employee specifying the ground or
grounds for termination, and giving to said employee reasonable
opportunity within which to explain his side;
(b) A hearing or conference during which the employee concerned,
with the assistance of counsel if the employee so desires, is given
opportunity to respond to the charge, present his evidence or rebut the
evidence presented against him; and
(c) A written notice [of] termination served on the employee indicating
that upon due consideration of all the circumstance, grounds have been
established to justify his termination. . .79
 
There was no showing that respondent NTRCI complied with these due
process requisites. Thus, consistent with jurisprudence,80 petitioner Paz
should be awarded P30,000.00 as nominal damages.
Retirement pay
 
An employer may provide for retirement benefits in an agreement with
its employees such as in a Collective Bargaining Agreement. Otherwise,
Article 287 of the Labor Code, as amended, governs.
Since respondent NTRCI failed to present a copy of a Collective
Bargaining Agreement on the alleged retirement policy,81 we apply
Article 287 of the Labor Code, as amended by Republic Act No. 7641.
This provides for the proper computation of retirement benefits in the
absence of a retirement plan or agreement:82
In the absence of a retirement plan or agreement providing for
retirement benefits of employees in the establishment, an employee
upon reaching the age of sixty (60) years or more, but not beyond sixty-
five (65) years which is hereby declared the compulsory retirement age,
who has served at least five (5) years in the said establishment, may
retire and shall be entitled to retirement pay equivalent to at least one-
half (1/2) month salary for every year of service, a fraction of at least
six (6) months being considered as one whole year.
11
Unless the parties provide for broader inclusions, the term ‘one-half
(1/2) month salary’ shall mean fifteen (15) days plus one-twelfth (1/12)
of the 13th month pay and the cash equivalent of not more than five (5)
days of service incentive leaves.83(Emphasis supplied)
Respondent NTRCI followed the formula in Article 287 and offered
petitioner Paz the amount of P12,487.5084 as retirement pay based on
the three years she worked for at least six months in 1995, 1999, and
2000.85
The Labor Arbiter agreed with respondent NTRCI’s computation based
on these three years and reached the same amount as petitioner Paz’s
retirement pay.86
On appeal, the National Labor Relations Commission found that
petitioner Paz “became a regular seasonal employee by virtue of her long
years of service and the repetitive hiring of her services by respondent
NTRCI every season.”87 It then considered her as having worked for
every tobacco season from 1974 to 2003 or for a total of 29 years. 88
The National Labor Relations Commission discussed that “[i]t would be a
great injustice if [petitioner Paz’s] services which did not last long for six
months be disregarded in computing her retirement pay especially so
that it is upon the sole discretion of the respondent company on how
long her services for a given season was required.”89 Thus, it explained
that “Zenaida Paz’s retirement pay should be computed pursuant to RA
7641 and that all the months she was engaged to work for respondent
for the last twenty-eight (28) years should be added and divide[d] by six
(for a fraction of six months is considered as one year) to get the number
of years her retirement pay should be computed.” 90
The National Labor Relations Commission also discussed that applying
the computation of separation pay in Philippine Tobacco to this case
“would render nugatory the very purpose of RA No. 7641, which seeks to
reward employees of their long and dedicated service to their employer,
as well as its humanitarian purpose to provide for the retiree’s
sustenance and hopefully even comfort, when he no longer has the
stamina to continue earning his livelihood.”91
This court in Philippine Tobacco explained its computation of separation
pay as follows:
The amount of separation pay is based on two factors: the amount of
monthly salary and the number of years of service. Although the Labor
Code provides different definitions as to what constitutes “one year of
service,” Book Six does not specifically define “one year of service” for
purposes of computing separation pay. However, Articles 283 and 284
both state in connection with separation pay that a fraction of at least six
months shall be considered one whole year. Applying this to the case at
bar, we hold that the amount of separation pay which respondent
members of the Lubat and Luris groups should receive is one-half (1/2)
their respective average monthly pay during the last season they worked
multiplied by the number of years they actually rendered service,
provided that they worked for at least six months during a given year.
The formula that petitioner proposes, wherein a year of work is
equivalent to actual work rendered for 303 days, is both unfair and
inapplicable, considering that Articles 283 and 284 provide that in
connection with separation pay, a fraction of at least six months shall be
considered one whole year. Under these provisions, an employee who
worked for only six months in a given year — which is certainly less than
303 days — is considered to have worked for one whole year.
. . . . Finally, Manila Hotel Company v. CIR did not rule that seasonal
workers are considered at work during off-season with regard to the
computation of separation pay. Said case merely held that, in regard to
seasonal workers, the employer-employee relationship is not severed
during off-season but merely suspended.92 (Citations omitted)
 
Philippine Tobacco considered Articles 283 and 284 of the Labor Code on
separation pay, and these articles include the proviso “a fraction of at
least six (6) months shall be considered one (1) whole year.”
While the present case involves retirement pay and not separation pay,
Article 287 of the Labor Code on retirement pay similarly provides that
“a fraction of at least six (6) months being considered as one whole
year.”
Thus, this court’s reading of this proviso in the Labor Code in Philippine
Tobacco applies in this case. An employee must have rendered at least
six months in a year for said year to be considered in the computation.
Petitions for review pursuant to Rule 45 of the Rules of Court can raise
only questions of law.93 Generally, this court accords great respect for
factual findings by quasi-judicial bodies, even according such findings
with finality when supported by substantial evidence.94
The Court of Appeals found “no positive proof o[n] the total number of
months [petitioner Paz] actually rendered work [for respondent
NTRCI].”95 On the other hand, both the Labor Arbiter and the Court of
Appeals established from the records
12
that she rendered at least six months of service for 1995, 1999, and 2000
only.96
Based on these factual findings, retirement pay pursuant to Article 287
of the Labor Code was correctly computed at P12,487.50 and was
awarded to petitioner Paz.
 
Financial assistance
In addition, this court agrees with the Court of Appeals’ award of
financial assistance in the amount of P60,356.2597by applying the
following formula: one-half-month pay98multiplied by 29 years in service
and then divided by 2.99
The amount of P12,487.50 is indeed too meager to support petitioner
Paz who has become old, weak, and unable to find employment. 100
Republic Act No. 7641 is a social legislation101 with the purpose of
“provid[ing] for the retiree’s sustenance and hopefully even comfort,
when he [or she] no longer has the stamina to continue earning his [or
her] livelihood.”102
The Court of Appeals recognized and emphasized petitioner Paz’s three
decades of hard work and service with respondent NTRCI. However, it
disagreed with the National Labor Relations Commission’s retirement
pay computation for lack of factual basis:
Private respondent Paz rendered almost three decades of dedicated
service to petitioner, and to that, she gave away the prime of her life. In
those long years of hard work, not a single transgression or malfeasance
of any company rule or regulation was ever reported against her. Old age
and infirmity now weaken her chances of employment. Veritably, We can
call upon the same “social and compassionate justice” allowing financial
assistance in special circumstances. These circumstances indubitably
merit equitable concessions, via the principle of “compassionate justice”
for the working class.
In awarding retirement benefits, the NLRC deemed it proper to add
all the months of service rendered by private respondent Paz, then
divide it by six to arrive at the number of years of service. We cannot,
however, subscribe to this computation because there is no positive
proof of the total number of months that she actually rendered
work.103(Emphasis supplied, citations omitted)
 
At most, the Petition alleges that “[p]etitioner [was] regularly hired
every season by respondents, her employment periods ranging from
three (3) to seven (7) months.”104 None of the lower courts, not even the
National Labor Relations Commission that proposed the formula, made a
factual determination on the total number of months petitioner Paz
rendered actual service.
In any event, this court has awarded financial assistance “as a measure of
social justice [in] exceptional circumstances, and as an equitable
concession.”105
In Eastern Shipping Lines, Inc. v. Sedan,106 Sedan was granted equitable
assistance equal to one-half-month pay for each year of his 23 years of
service with no derogatory record.107 This court discussed jurisprudence
on the grant of financial assistance:
We are not unmindful of the rule that financial assistance is allowed only
in instances where the employee is validly dismissed for causes other
than serious misconduct or those reflecting on his moral character.
Neither are we unmindful of this Court’s pronouncements in Arc-Men
Food Industries Corporation v. NLRC, and Lemery Savings and Loan Bank
v. NLRC, where the Court ruled that when there is no dismissal to speak
of, an award of financial assistance is not in order.
But we must stress that this Court did allow, in several instances, the
grant of financial assistance. In the words of Justice Sabino de Leon, Jr.,
now deceased, financial assistance may be allowed as a measure of social
justice and exceptional circumstances, and as an equitable concession.
The instant case equally calls for balancing the interests of the employer
with those of the worker, if only to approximate what Justice Laurel calls
justice in its secular sense.
In this instance, our attention has been called to the following
circumstances: that private respondent joined the company when he
was a young man of 25 years and stayed on until he was 48 years old;
that he had given to the company the best years of his youth, working
onboard ship for almost 24 years; that in those years there was not a
single report of him transgressing any of the company rules and
regulations; that he applied for optional retirement under the company’s
noncontributory plan when his daughter died and for his own health
reasons; and that it would appear that he had served the company well,
since even the company said that the reason it refused his application for
optional retirement was that it still needed his services; that he denies
receiving the telegram asking him to report back to work; but that
considering his age and health, he preferred to stay home rather than
risk further working in a ship at sea.
13
In our view, with these special circumstances, we can call upon the same (4) P60,356.25 as financial assistance; and
“social and compassionate justice” cited in several cases allowing * * Designated acting member per S.O. No. 1910 dated January 12, 2015.
financial assistance. These circumstances indubitably merit equitable
concessions, via the principle of “compassionate justice” for the working © Copyright 2020 Central Book Supply, Inc. All rights reserved.
class. Thus, we agree with the Court of Appeals to grant financial
assistance to private respondent.108(Citations omitted)
 
We agree with the Court of Appeals that petitioner Paz’s circumstances
“indubitably merit equitable concessions, viathe principle of
‘compassionate justice’ for the working class.”109
Petitioner Paz worked for respondent NTRCI for close to three decades.
She had no record of any malfeasance or violation of company rules in
her long years of service.110Her advanced age has rendered her weak and
lessened her employment opportunities.
Eastern Shipping Lines awarded Sedan with financial assistance equal to
one-half-month pay for every year of service. Sedan was hired as a
3rd marine engineer and oiler from 1973 until his last voyage in
1997.111 On the other hand, petitioner Paz was a seasonal employee who
worked for periods ranging
from three to seven months a year.112 This court thus finds the following
Court of Appeals formula for financial assistance as equitable: one-half-
month pay multiplied by 29 years in service and then divided by 2.
This court has discussed that “labor law determinations are not
only secundum rationem but also secundum caritatem.”113 The award of
P60,356.25 as financial assistance will serve its purpose in providing
petitioner Paz sustenance and comfort after her long years of service.
Finally, legal interest of 6% per annum shall be imposed on the award of
full backwages beginning May 18, 2003 when petitioner Paz was deemed
retired, until 2005 when she reached compulsory retirement age, in the
amount of P2,664.00114 Legal interest of 6% per annum shall also be
imposed on the award of retirement pay beginning 2005 until full
satisfaction.
WHEREFORE, the Court of Appeals’ Decision
is AFFIRMED with MODIFICATION in that respondent Northern
Tobacco Redrying Co., Inc. is hereby ordered to pay petitioner Zenaida
Paz the following:
(1) P22,200.00 as full backwages;
(2) P30,000.00 as nominal damages for noncompliance with due
process;
(3) P12,487.50 as retirement pay;

14
WHY DO WE NEED TO PROTECT LABOR?
[No. L-2779. October 18, 1950]
DANIEL SANCHEZ ET AL., plaintiffs and
appellees, vs.HARRY LYONS CONSTRUCTION, INC., ET AL., defendants
and appellants.
1.EMPLOYER AND EMPLOYEE; CONTRACT OF SERVICE WITHOUT
FIXED DURATION; RlGHT TO CANCEL UPON GlVING ONE MONTH
NOTICE.—In a mercantile contract of service in which no special time is
fixed, any one of the parties may cancel said contract upon the giving of a
one-month notice, called a mesada, to the other party, under article 302
of the Code of Commerce. The law gives an added proviso that in the
case of factors or shop clerks, these shall be entitled to salary during this
one month of standing notice. In any case, the one-month notice must be
given to any employee, whether factor, shop clerk or otherwise, so long
as the two conditions concur, namely, that no special time is fixed in the
contract of service, and that said employee is a commercial employee.
And when such notice is not given under these conditions, not only the
factor or shop clerk but any employee discharged without cause, is
entitled to indemnity which may be one month's salary.
2.ID.; ID.; MANNER OF PAYMENT OF SALARY DOES NOT DETERMINE
SPECIAL TIME OF EMPLOYMENT.—The computation of payment,
whether monthly or daily, does not represent nor determine a special
time of employment. A commercial employee may be employed for one
year and yet received his salary on the daily or monthly or other basis.
3.ID.; ID.; USE OF WORD "TEMPORARY" IN CONTRACT OF SERVICE
DOES NOT MEAN PERIOD OF EMPLOYMENT UNDER ARTICLE 302,
CODE OF COMMERCE.—The word "temporary" as used in the contract of
employment does not mean the special time fixed in the contracts
referred to in article 302 of the Code of Commerce.
4.ID. ; ID.; WAIVER OF EMPLOYEES OF BENEFITS UNDER ARTICLE 302,
CODE OF COMMERCE MADE IN ADVANCE IS AGAINST PUBLIC POLICY.
—Employees' waiver of the benefits given them by article 302 of the
Code of Commerce, made in advance, is void as being contrary to public
policy.
5.ID.; ID.; ID.; ARTICLE 302 MUST BE APPLIED IN CONSONANCE WITH
CONSTITUTION.—Article 302 of the Code of Commerce must be applied
in consonance with the provisions of our Constitution. In the matter of
employment bargaining, there is no doubt that the employer stands on
higher footing than the employee. First of all, there is greater supply than
demand for labor. Secondly, the need for employment by labor comes
from vital and even desperate, necessity. Consequently, the law must
protect labor, at least, to the extent of raising him to equal footing in
bargaining relations with capital and to shield him from abuses brought
about by the necessity for survival. It is safe to presume therefore, that
an employee or laborer who waives in advance any benefit granted him
by law does so, certainly not in his interest or through generosity but
under the forceful intimidation of urgent need, and hence, he could not
have so acted freely and voluntarily.
APPEAL from a judgment of the Court of First Instance of
Manila. Sanchez, J.
The facts are stated in the opinion of the Court.
Gibbs, Gibbs, Chuidian & Quasha, for
appellant HarryLyons Construction, Inc.
Cecilio I. Lim and Antonio M. Castro for appellees.
MORAN, C. J.:
This case originated in the Municipal Court of Manila upon a complaint
filed on March 9, 1948, by the herein appellees as plaintiffs, against the
herein appellants as defendants, for the sum of P2,210 plus interest,
which plaintiffs claimed as one month advance pay due them. On April
28, 1948, the parties entered into a stipulation of facts upon which said
municipal court rendered judgment for the plaintiffs. Upon denial of
their motion for reconsideration of this judgment, the defendants filed
an appeal to the Court of First Instance of Manila, wherein the parties
submitted the case upon the same facts agreed upon in the Municipal
Court. On October 2, 1948, the Court of First Instance of Manila rendered
its decision holding for plaintiffs, as follows:
"Wherefore, judgment is hereby rendered—
1. "1.Ordering defendant Material Distributors, Inc. to pay plaintiff
Enrique Ramirez the sum of P360 and plaintiff Juan Ramirez the
sum of P250 with legal interest on each of the said sums from the
15
 date of the filing of the complaint in the Municipal Court of "2.That in said contracts of employment the plaintiff agreed as
Manila until the date of full payment thereof; and follows:
2. "2.Ordering defendant Harry Lyons Construction, Inc. to pay 'I accept the foregoing appointment, and in consideration thereof I
plaintiff Daniel Sanchez the sum of P250, and plaintiff Mariano hereby agree that such employment may be terminated at any time,
Javier, Venancio Diaz, Esteban Bautista, Faustino Aquillo, without previous notice, and I further agree that salary and wages, shall
Godofredo Diamante, Marcial Lazaro, Ambrosio de la Cruz and be computed and paid at the rate specified up to the date of such
Marcelino Maceda the sum of P150 each, with legal interest on termination.
each of the said sums from the date of the filing of the complaint 'Also in consideration of such employment I hereby expressly waive the
in the Municipal Court of Manila until the date of full payment benefit of article 302 of the Code of Commerce and that of any other law,
thereof. ruling, or custom which might require notice of discharge or payment of
"One-half of the costs is to be paid by Material Distributors, Inc. and the salary or wages after date of the termination of such employment.'
other half by Harry Lyons Construction, Inc." "3.That the plaintiffs were dismissed by the defendants on
From this judgment, defendants filed an appeal with this court purely December 31, 1947 without one months' previous notice.
upon a question of law. The stipulation of facts entered into by the "4.That each of the plaintiffs demanded payment of one month's
parties on April 28, 1948, is as f ollows: salary from the defendants and that the latter refused to pay the
"STIPULATION OF FACTS same.
"Come now the plaintiffs and the defendants, by their respective "WHEREFORE, it is respectfully prayed that judgment on the foregoing
undersigned attorneys and to this Honorable Court, respectfully submit stipulation of facts be rendered by this Honorable Court."
the following stipulation of facts: The points in issue herein are: first, whether plaintiffs, both those paid
1. "1.That the plaintiffs were respectively employed as follows: on a monthly and daily basis, are entitled to the benefit granted in article
EMPLOYED BY DEFENDANT MATERIAL DISTRIBUTORS, INC. 302 of the Code of Commerce; and secondly, if they are so entitled, was
Name Date of employment Position Salary their waiver of such benefits legal and valid?
Enrique Ramirez 12|16|46 Warehouseman P450 a mo. Article 302 of the Code of Commerce reads as f ollows:
Juan Ramirez .............do............. do.... 250 a mo. "ART. 302. In cases in which no special time is fixed in the contracts of
NOTE.—The salary of Enrique Ramirez was later reduced to P360 per service, any one of the parties thereto may cancel it, advising the other
month. This was the amount he was receiving at the time of. his party thereof one month in advance.
dismissal.
EMPLOYED BY DEFENDANT HARRY LYONSCONSTRUCTION, INC. "The factor or shop clerk shall be entitled, in such case, to the salary due
Daniel Sanchez 1 |1|47 Carpenter Foreman P250 a mo. f or said month."
Mariano Javier .... do .... Guard.... 5 a day It is a clear doctrine, as gleaned from the provision of the law and settled
Venancio Diaz … do .... do 5 a day jurisprudence,1 that in a mercantile contract of service in which no
Esteban Bautista … do .... do 5 a day special time is fixed, any one of the parties may cancel said contract upon
Faustino Aquillo … do .... do 5 a day the giving of a one-month notice, called a mesada, to the other party. The
Godofredo Diamante … do .... do 5 a day law gives an added proviso that in the case of factors or shop clerks,
Marcial Lazaro … do .... do 5 a day these shall be entitled to salary during this one month of standing notice.
Ambrosio de la Cruz … do .... do 5 a day In any case, the one-month notice must be given to any employee,
Marcelino Maceda … do .... do 5 a day whether factor, shop clerk or otherwise, so long as the two conditions
as per contracts of employment, copies of which are attached to concur, namely, that no special time is fixed in the contract of service,
defendants' answer marked Exhibits 1 to 11 inclusive. and that said employee is a commercial employee. And when such notice
is not given under these conditions, not only the f actor or shop clerk but

16
any employee discharged without cause, is entitled to indemnity which Article 302 of the Code of Commerce must be applied in consonance with
may be one month's salary.2 these provisions of our constitution. In the matter of employment
In the instant case, there lies no doubt that plaintiffs are commercial bargaining, there is no doubt that the employer stands on higher footing
employees of appellant corporations, rendering service as than the employee. First of all, there is greater supply than demand for
warehousemen, carpenter-foreman and guards. There is likewise no labor. Secondly, the need for employment by labor comes from vital and
doubt as can be seen f rom the contracts of employment submitted as even desperate, necessity. Consequently, the law must protect labor, at
exhibits, that no special time has been fixed in the contracts of services least, to the extent of raising him to equal footing in bargaining relations
between plaintiffsappellees and defendants-appellants. The stated with capital and to shield him from abuses brought about by the
computation or manner of payment, whether monthly or daily, does not necessity for survival. It is safe to presume therefore, that an employee
represent nor determine a special time of employment. Thus, a or laborer who waives in advance any benefit granted him by law does
commercial employee may be employed f or one year and yet receive his so, certainly not in his interest or through generosity but under the
salary on the daily or weekly or monthly or other basis. forceful intimidation of urgent need, and hence, he could not have so
Appellants allege that the use of the word "temporary" in the contracts acted freely and voluntarily.
of services of some of the plaintiffs shows that their employment was
with a term, and the term was "temporary, on a day to day basis." The For all the foregoing, this court hereby affirms the decision of the lower
record discloses that this conclusion is unwarranted. The contracts court, with costs against appellants.
simply say—"You are hereby employed as temporary guard with a Ozaeta, Parás, Feria, Pablo, Tuason, Bengzon, and Reyes, JJ., concur.
compensation at the rate of P5 a day * * *." The word "temporary" as Judgment affirmed.
used herein does not mean the special time fixed in the contracts ________________
referred to in article 302 of the Code of Commerce. The daily basis
therein stipulated is for the computation of pay, and is not necessarily
the period of employment. Hence, this Court holds that
plaintiffsappellants come within the purview of article 302 of the Code of
Commerce.
Now, as to the second question, namely, the validity of plaintiffs' waiver
of the benefits given them by said article 302. This court holds that such
a waiver, made in advance, is void as being contrary to public policy.
Granting that the "mesada" given in article 302 of the Code of Commerce,
is for the bilateral benefit of both employer and employee, nevertheless,
this does not preclude the finding that a waiver of such "mesada" in
advance by the employee is contrary to public policy.
Public policy, with regard to labor, is clearly stated in article II, section 5,
of the Philippine Constitution, which reads—
"The promotion of social justice to insure the well-being and economic
security of all the people should be the concern of the State."
and article XIV, section 6, which reads—
"The State shall afford protection to labor, especially to working women
and minors, and shall regulate the relations between landowner and
tenant, and between labor and capital in industry and in agriculture. * *
*"

17

HOW ARE DOUBTS RESOLVED IN LABOR CASES?
G.R. No. 184520. March 13, 2013.*
ROLANDO DS. TORRES, petitioner, vs. RURAL BANK OF SAN JUAN, INC.,
ANDRES CANO CHUA, JOBEL GO CHUA, JESUS CANO CHUA, MEINRADO
DALISAY, JOSE MANALANSAN III, OFELIA GINABE and NATY ASTRERO,
respondents.
Remedial Law; Civil Procedure; Appeals; By way of exception, the Supreme
Court will exercise its equity jurisdiction and re-evaluate, review and re-
examine the factual findings of the Court of Appeals when the same are
contradicting with the findings of the Court of Appeals when the same are
contradicting with the findings of the labor tribunals.—Settled is the rule
that when supported by substantial evidence, the findings of fact of the
CA are conclusive and binding on the parties and are not reviewable by
this Court. As such, only errors of law are reviewed by the Court in
petitions for review of CA decisions. By way of exception, however, the
Court will exercise its equity jurisdiction and re-evaluate, review and re-
examine the factual findings of the CA when, as in this case, the same are
contradicting with the findings of the labor tribunals.
Labor Law; Termination of Employment; Loss of Trust and Confidence; As
provided in Article 282 of the Labor Code and as firmly entrenched in
jurisprudence, an employer has the right to dismiss an employee by reason
of willful breach of the trust and confidence reposed in him.—As provided
in Article 282 of the Labor Code and as firmly entrenched in
jurisprudence, an employer has the right to dismiss an employee by
reason of willful breach of the trust and confidence reposed in him. To
temper the exercise of such prerogative and to reconcile the same with
the employee’s Constitutional guarantee of security of tenure, the law
imposes the burden of proof upon the employer to show that the
dismissal of the employee is for just cause failing which would mean that
the dismissal is not justified. Proof beyond reasonable doubt is not
necessary but the factual basis for the dismissal must be clearly and
convincingly established. Further, the law mandates that before validity
can be accorded to a dismissal premised on loss of trust and confidence,
two requisites must concur, viz.: (1) the employee concerned must be
holding a position of trust; and (2) the loss of trust must be based on
willful breach of trust founded on clearly established facts.
Same; Same; Same; The Supreme Court has repeatedly emphasized that
the act that breached the trust must be willful such that it was done
intentionally, knowingly, and purposely, without justifiable excuse, as
distinguished from an act done carelessly, thoughtlessly, heedlessly or
inadvertently.—The Court has repeatedly emphasized that the act that
breached the trust must be willful such that it was done intentionally,
knowingly, and purposely, without justifiable excuse, as distinguished
from an act done carelessly, thoughtlessly, heedlessly or inadvertently.
The conditions under which the clearance was issued exclude any
finding of deliberate or conscious effort on the part of the petitioner to
prejudice his employer. Also, the petitioner did not commit an irregular
or prohibited act. He did not falsify or misrepresent any company record
as it was officially confirmed by Lily that the items covered by the
clearance were truly settled by Jacinto. Hence, the respondents had no
factual basis in declaring that the petitioner violated Category B Grave
Offense No. 1 of the Company Code of Conduct and Discipline.
Same; Same; Same; Loss of trust and confidence as a ground for dismissal
has never been intended to afford an occasion for abuse because of its
subjective nature.—Loss of trust and confidence as a ground for
dismissal has never been intended to afford an occasion for abuse
because of its subjective nature. It should not be used as a subterfuge for
causes which are illegal, improper and unjustified. It must be genuine,
not a mere afterthought intended to justify an earlier action taken in bad
faith.
Same; Separation Pay; Strained Relations; The award of separation pay in
case of strained relations is more beneficial to both parties in that it
liberates the employee from what could be a highly oppressive work
environment in as much as it releases the employer from the grossly
unpalatable obligation of maintaining in its employ a worker it could no
longer trust.—In accordance with current jurisprudence, the award of
back wages shall earn legal interest at the rate of six percent (6%) per
annum from the date of the petitioner’s illegal dismissal until the finality
of this decision. Thereafter, it shall earn 12% legal interest until fully
paid in accordance with the guidelines in Eastern Shipping Lines, Inc. v.
Court of Appeals, 234 SCRA 78 (1994). In addition to his back wages, the
petitioner is also entitled to separation pay. It cannot be gainsaid that
animosity and antagonism have been brewing between the parties since
the petitioner was gradually eased out of key positions in RBSJI and to
reinstate him will only intensify their hostile working atmosphere. Thus,
18
based on strained relations, separation pay equivalent to one (1) month
salary for every year of service, with a fraction of a year of at least six (6)
months to be considered as one (1) whole year, should be awarded in
lieu of reinstatement, to be computed from date of his engagement by
RBSJI up to the finality of this decision. The award of separation pay in
case of strained relations is more beneficial to both parties in that it
liberates the employee from what could be a highly oppressive work
environment in as much as it releases the employer from the grossly
unpalatable obligation of maintaining in its employ a worker it could no
longer trust.
Same; Same; Moral Damages; In M+W Zander Philippines, Inc. v. Enriquez,
588 SCRA 590, the Court decreed that illegal dismissal, by itself alone, does
not entitle the dismissed employee to moral damages; additional facts
must be pleaded and proven to warrant the grant of moral damages.—
In M+W Zander Philippines, Inc. v. Enriquez, 588 SCRA 590 (2009), the
Court decreed that illegal dismissal, by itself alone, does not entitle the
dismissed employee to moral damages; additional facts must be pleaded
and proven to warrant the grant of moral damages, thus: [M]oral
damages are recoverable only where the dismissal of the employee was
attended by bad faith or fraud, or constituted an act oppressive to labor,
or was done in a manner contrary to morals, good customs or public
policy. Such an award cannot be justified solely upon the premise that
the employer fired his employee without just cause or due process.
Additional facts must be pleaded and proven to warrant the grant of
moral damages under the Civil Code, i.e., that the act of dismissal was
attended by bad faith or fraud, or constituted an act oppressive to labor,
or was done in a manner contrary to morals, good customs or public
policy; and, of course, that social humiliation, wounded feelings, grave
anxiety, and similar injury resulted therefrom.
Bad Faith; Words and Phrases; Bad faith does not connote bad judgment
or negligence; it imports a dishonest purpose or some moral obliquity and
conscious doing of wrong; it means breach of a known duty through some
motive or interest or ill will; it partakes of the nature of fraud.—Bad faith
does not connote bad judgment or negligence; it imports a dishonest
purpose or some moral obliquity and conscious doing of wrong; it means
breach of a known duty through some motive or interest or ill will; it
partakes of the nature of fraud. Here, the petitioner failed to prove that
his dismissal was attended by explicit oppressive, humiliating or
demeaning acts. The following events merely sketch the struggle for
power within the upper management of RBSJI between the “old guys”
and the “new guys”; they do not convincingly prove that the respondents
schemed to gradually ease the petitioner out, viz.: (1) his promotion as
Vice-President; (2) his replacement by Jobel as Personnel and Marketing
Manager; (2) his designation as Acting Manager of N. Domingo branch
and the recall thereof on the very next day; (3) the presence of Andres,
Jose and Ofelia at the N. Domingo branch in the morning of September
27, 1996; and (4) George’s inaction on the petitioner’s request to be
transferred to the operations or marketing department. As disagreeable
as they may seem, these acts cannot be equated with bad faith that can
justify an award of damages. Since no moral damages can be granted
under the facts of the case, exemplary damages cannot also be awarded.
Corporation Law; Liability of Corporate Officers; Time and again, the
Supreme Court has held that a corporation has its own legal personality
separate and distinct from those of its stockholders, directors or officers.
Hence, absent any evidence that they have exceeded their authority,
corporate officers are not personally liable for their official acts.—In the
same vein, the individual respondents cannot be made solidarily liable
with RBSJI for the illegal dismissal. Time and again, the Court has held
that a corporation has its own legal personality separate and distinct
from those of its stockholders, directors or officers. Hence, absent any
evidence that they have exceeded their authority, corporate officers are
not personally liable for their official acts. Corporate directors and
officers may be held solidarily liable with the corporation for the
termination of employment only if done with malice or in bad faith. As
discussed above, the acts imputed to the respondents do not support a
finding of bad faith. In addition, the lack of a valid cause for the dismissal
of an employee does not ipso facto mean that the corporate officers
acted with malice or bad faith. There must be an independent proof of
malice or bad faith, which is absent in the case at bar.
Labor Law; 13th Month Pay; Managerial Employees; Pursuant to
Memorandum Order No. 28, as implemented by the Revised Guidelines on
the Implementation of the 13th Month Pay Law dated November 16, 1987,
managerial employees are exempt from receiving such benefit without
prejudice to the granting of other bonuses, in lieu of the 13th month pay,
to managerial employees upon the employer’s discretion.—Being a
managerial employee, the petitioner is not entitled to 13th month pay.
19
Pursuant to Memorandum Order No. 28, as implemented by the Revised
Guidelines on the Implementation of the 13th Month Pay Law dated
November 16, 1987, managerial employees are exempt from receiving
such benefit without prejudice to the granting of other bonuses, in lieu of
the 13th month pay, to managerial employees upon the employer’s
discretion.
Same; Attorney’s Fees; Pursuant to Article 111 of the Labor Code, ten
percent (10%) of the total award is the reasonable amount of attorney’s
fees that can be awarded.—It is settled that where an employee was
forced to litigate and, thus, incur expenses to protect his rights and
interest, the award of attorney’s fees is legally and morally justifiable.
Pursuant to Article 111 of the Labor Code, ten percent (10%) of the total
award is the reasonable amount of attorney’s fees that can be awarded.
PETITION for review on certiorari of the decision and resolution of the
Court of Appeals.
   The facts are stated in the opinion of the Court.
  Catherine C. Canonigo-Gan for petitioner.
  Florante M. Yambot for respondents.
REYES, J.:
This Petition for Review on Certiorari,1 under Rule 45 of the Rules of
Court, seeks to reverse and set aside the Decision 2 dated February 21,
2008 of the Court of Appeals (CA) in CA-G.R. SP No. 94690 dismissing the
complaint for illegal dismissal filed by petitioner Rolando DS. Torres
(petitioner) against respondent Rural Bank of San Juan, Inc. (RBSJI) and
its officers who are the herein individual respondents, namely: Andres
Cano Chua (Andres), Jobel Go Chua (Jobel), Jesus Cano Chua (Jesus),
Meinrado Dalisay, Jose Manalansan III (Jose), Ofelia Ginabe (Ofelia) and
Naty Astrero (collectively referred to as respondents). 3
Likewise assailed is the CA Resolution4 dated June 3, 2008 which denied
reconsideration.
The antecedents
Culled from the rulings of the labor tribunals and the appellate court are
the ensuing factual milieu:5
The petitioner was initially hired by RBSJI as Personnel and Marketing
Manager in 1991. After a six-month probationary period and finding his
performance to be satisfactory, RBSJI renewed his employment for the
same post to a permanent/regular status. In June 1996, the petitioner
was offered the position of Vice-President for RBSJI’s newly created
department, Allied Business Ventures. He accepted the offer and
concomitantly relinquished his post. The vacancy created was filled by
respondent Jobel who temporarily held the position concurrently as a
Corporate Planning and Human Resources Development Head.
On September 24, 1996, the petitioner was temporarily assigned as the
manager of RBSJI’s N. Domingo branch in view of the resignation of
Jacinto Figueroa (Jacinto).
On September 27, 1996, Jacinto requested the petitioner to sign a
standard employment clearance pertaining to his accountabilities with
RBSJI. When the petitioner declined his request, Jacinto threw a fit and
shouted foul invectives. To pacify him, the petitioner bargained to issue a
clearance but only for Jacinto’s paid cash advances and salary loan.
About seven months later or on April 17, 1997, respondent Jesus issued
a memorandum to the petitioner requiring him to explain why no
administrative action should be imposed on him for his unauthorized
issuance of a clearance to Jacinto whose accountabilities were yet to be
audited. Jacinto was later found to have unliquidated cash advances and
was responsible for a questionable transaction involving P11 million for
which RBSJI is being sued by a certain Actives Builders Manufacturing
Corporation. The memorandum stressed that the clearance petitioner
issued effectively barred RBSJI from running after Jacinto. 6
The petitioner submitted his explanation on the same day clarifying that
the clearance was limited only to Jacinto’s paid cash advances and salary
loan based on the receipts presented by Lily Aguilar (Lily), the cashier of
N. Domingo branch. He emphasized that he had no foreknowledge nor
was he forewarned of Jacinto’s unliquidated cash advances and
questionable transactions and that the clearance did not extend to those
matters.7
After conducting an investigation, RBSJI’s Human Resources Department
recommended the petitioner’s termination from employment for the
following reasons, to wit:
1. The issuance of clearance to Mr. Jacinto Figueroa by the [petitioner]
have been prejudicial to the Bank considering that damages [sic] found
caused by Mr. Figueroa during his stay with the bank;
2. [The petitioner] is not in any authority to issue said clearance which
is a violation of the Company Code of Conduct and Discipline under
20
Category B Grave Offense No. 1 (falsifying or misrepresenting persons or
other company records, documents or papers) equivalent to
termination; [and]
3. The nature of his participation in the issuance of the said clearance
could be a reasonable ground for the Management to believe that he is
unworthy of the trust and confidence demanded by his position which is
also a ground for termination under Article [282] of the Labor Code. 8
On May 19, 1997, RBSJI’s Board of Directors adopted the above
recommendation and issued Resolution No. 97-102 terminating the
petitioner from employment, the import of which was communicated to
him in a Memorandum dated May 30, 1997.9
Feeling aggrieved, the petitioner filed the herein complaint for illegal
dismissal, illegal deduction, non-payment of service incentive, leave pay
and retirement benefits.10 The petitioner averred that the supposed loss
of trust and confidence on him was a sham as it is in fact the calculated
result of the respondents’ dubious plot to conveniently oust him from
RBSJI.
He claimed that he was deceived to accept a Vice-President position,
which turned out to be a mere clerical and menial work, so the
respondents can install Jobel, the son of a major stockholder of RBSJI, as
Personnel and Marketing Manager. The plot to oust the petitioner
allegedly began in 1996 when Jobel annexed the Personnel and
Marketing Departments to the Business Development and Corporate
Planning Department thus usurping the functions of and displacing the
petitioner, who was put on a floating status and stripped of managerial
privileges and allowances.
The petitioner further alleged that he was cunningly assigned at N.
Domingo branch so he can be implicated in the anomalous transaction
perpetrated by Jacinto. He narrated that on September 27, 1996, the
officers of RBSJI, namely: Jobel, Andres, Jose and Ofelia, were actually at
the N. Domingo branch but they all suspiciously left him to face the
predicament caused by Jacinto.
He recounted that the next day he was assigned back at the Tarlac
extension office and thereafter repeatedly harassed and forced to resign.
He tolerated such treatment and pleaded that he be allowed to at least
reach his retirement age. On March 7, 1996, he wrote a letter to George
Cano Chua (George) expressing his detestation of how the “new guys”
are dominating the operations of the company by destroying the image
of pioneer employees, like him, who have worked hard for the good
image and market acceptability of RBSJI. The petitioner requested for his
transfer to the operations or marketing department. His request was,
however, not acted upon.
The petitioner claimed that on March 19, 1997, respondent Jesus
verbally terminated him from employment but he later on retracted the
same and instead asked the petitioner to tender a resignation letter. The
petitioner refused. A month thereafter, the petitioner received the
memorandum asking him to explain why he cleared Jacinto of financial
accountabilities and thereafter another memorandum terminating him
from employment.
For their part, the respondents maintained that the petitioner was
validly dismissed for loss of trust and confidence precipitated by his
unauthorized issuance of a financial accountability clearance sans audit
to a resigned employee. They averred that a copy of the clearance
mysteriously disappeared from RBSJI’s records hence, the petitioner’s
claim that it pertained only to Jacinto’s paid cash advances and salary
loan cannot stand for being uncorroborated.
Attempts at an amicable settlement were made but the same proved
futile hence, the Labor Arbiter11 (LA) proceeded to rule on the complaint.
Ruling of LA
In its Decision12 dated November 27, 1998, the LA sustained the claims
of the petitioner as against the factually unsubstantiated allegation of
loss of trust and confidence propounded by the respondents. The LA
observed that the petitioner’s selfless dedication to his job and efforts to
achieve RBSJI’s stability, which the respondents failed to dispute, negate
any finding of bad faith on his part when he issued a clearance of
accountabilities in favor of Jacinto. As such, the said act cannot serve as a
valid and justifiable ground for the respondents to lose trust and
confidence in him.
The LA further held that the failure of both parties to present a copy of
the subject clearance amidst the petitioner’s explanation that it did not
absolutely release Jacinto from liability, should work against the
respondents since it is the proof that will provide basis for their
supposed loss of trust and confidence.
The LA upheld the petitioner’s contention that the loss of trust and
confidence in him was indeed a mere afterthought to justify the
respondents’ premeditated plan to ease him out of RBSJI. The LA’s
conclusion was premised on the convergence of the following
circumstances: (1) the petitioner’s stint from 1991-1996 was not marred
with any controversy or complaint regarding his performance; (2) when
21
Jobel joined RBSJI in the latter part of 1996, he took over the department
led by the petitioner thus placing the latter in a floating status; and (3)
the petitioner’s temporary transfer to the N. Domingo branch was
designed to deliberately put him in a bind and blame him on whatever
course of action he may take to resolve the same.
Accordingly, the petitioner was found to have been illegally dismissed
and thus accorded the following reliefs in the decretal portion of the LA
Decision, viz.:
WHEREFORE, premises considered, judgment is hereby rendered
ordering respondent Bank and individual respondents, to reinstate [the
petitioner] to his previous or equivalent position, without loss of
seniority rights and other benefits and privileges appertaining [sic] to
him, and to pay [the petitioner] the following:
1. [The petitioner’s] partial backwages and other emoluments in the
form of allowances, as gasoline, maintenance, representation, uniform
and membership allowances, from the time of his dismissal up to his
actual date of reinstatement, which as of this date amount to:
  Backwages (Partial)................................. [P]244,800.00
  Gasoline Allowances .................................     63,000.00
  Maintenance Allowance ............................    45,000.00
  Representation Allowance .........................    54,000.00
  Membership Allowance ............................     12,000.00
  Uniform Allowance .................................        8,000.00
        Total................................... [P]426,800.00
2. [The petitioner’s] 13th month pay from the time of his dismissal up
to actual date of reinstatement, which as of this date amounts to
Twenty[-]Seven Thousand Two Hundred ([P]27,200.00) Pesos;
3. Moral and exemplary damages in the amount of Fifty Thousand
([P]50,000.00) Pesos each, respectively; and
4. Attorney’s fees amounting to ten percent (10%) of the total award,
specifically amounting to Fifty[-]Five Thousand Nine Hundred
Twenty[-]Three Pesos and Eight ([P]55,923.08) Centavos.
All other claims are hereby Dismissed for lack of merit.
Ruling of the National Labor Relations
Commission (NLRC)
In its Resolution14 dated April 14, 2000, the NLRC disagreed with the
LA’s conclusion and opined that it was anchored on irrelevant matters
such as the petitioner’s performance and the preferential treatment
given to relatives of RBSJI’s stockholders. The NLRC held that the legality
of the petitioner’s dismissal must be based on an appreciation of the
facts and the proof directly related to the offense charged, which NLRC
found to have weighed heavily in favor of the respondents.
The NLRC remarked that the petitioner was indisputably not authorized
to issue the clearance. Also, the tantrums and furious attitude exhibited
by Jacinto are not valid reasons to submit to his demands. The fact that
the N. Domingo branch had been sued civilly on February 25, 1997 for a
tax scam while under Jacinto’s leadership, should have alerted the
petitioner into issuing him a clearance. The action taken by the
petitioner lacked the prudence expected from a man of his stature thus
prejudicing the interests of RBSJI. Accordingly, the dispositive portion of
the decision reads:
WHEREFORE, the decision appealed from is hereby REVERSED and SET
ASIDE. Let a new one [sic] entered DISMISSING the instant case for lack
of merit. However, respondent should pay [the petitioner] his
proportionate 13th month pay for 1997 as he was dismissed on May 30,
1997.
SO ORDERED.15
The petitioner sought reconsideration 16 which was admitted by the
NLRC in an Order dated September 30, 2005. From such Order, the
respondents filed a motion for reconsideration on the ground that the
petitioner failed to present a copy of his purported motion bearing the
requisite proof of filing.17
Traversing both motions, the NLRC issued its Decision 18dated March 3,
2006: (1) granting the petitioner’s plea for the reconsideration of its
Resolution dated April 14, 2000 thus effectively reversing and nullifying
the same; and (2) denying the respondents’ motion for reconsideration
of the Order dated September 30, 2005.
Anent the first disposition, the NLRC accorded weight to the
explanations proffered by the petitioner that the clearance issued to
Jacinto was limited only to his paid cash advances and salary loan. The
NLRC further held that the offense imputed to the petitioner is not
covered by Category B, Grave Offense No. 1 of RBSJI’s Code of Conduct
and Discipline as it does not appear that he falsified or misrepresented
personal or other company records, documents or papers. 19
Taking an entirely opposite stance, the NLRC declared that the clearance
issued by the petitioner did not prejudice RBSJI’s interest as it was
limited in scope and did not entirely clear Jacinto from all his financial
accountabilities. Also, the petitioner was only “a day old” at the N.
22
Domingo branch and thus he cannot be reasonably expected to be aware
of the misdeeds purportedly committed by Jacinto.20
For the foregoing reasons, the NLRC reversed its earlier ruling and
reinstated the LA’s Decision dated November 27, 1998, thus:
WHEREFORE, the Arbiter’s decision of 27 November 1998 is hereby
AFFIRMED and REINSTATED.
Accordingly, the Resolution of 14 April 2000 is REVERSED and SET
ASIDE.
Finally, [the respondents’] Motion for Reconsideration dated 2
November 2005 is DENIED for lack of merit.
SO ORDERED.21
Ruling of the CA
The respondents sought recourse with the CA,22 which in its
Decision23 dated February 21, 2008 reversed and set aside the NLRC
Decision dated March 3, 2006 and ruled that the petitioner was
dismissed for a just cause. The appellate court articulated that as the
Acting Manager of RBSJI’s N. Domingo branch, the petitioner held a
highly sensitive and critical position which entailed the conscientious
observance of company procedures. Not only was he unauthorized to
issue the clearance, he also failed to exercise prudence in clearing Jacinto
of his accountabilities given the fact that the same were yet to be
audited. Such omission financially prejudiced RBSJI and it amounted to
gross negligence and incompetence sufficient to sow in his employer the
seed of mistrust and loss of confidence.24 The decretal portion of the CA
Decision thus reads:
IN VIEW OF ALL THE FOREGOING, the petition is GRANTED. The
March 03, 2006 Decision of the National Labor Relations Commission
is REVERSED and SET ASIDE. The April 14, 2000 Decision of the
National Labor Relations Commission is hereby REINSTATED. No costs.
SO ORDERED.25
The petitioner moved for reconsideration26 but the motion was denied in
the CA Resolution27 dated June 3, 2008. Hence, the present appeal.
Arguments of the parties
The petitioner avers that the respondents’ claim of loss of trust and
confidence is not worthy of credence since they failed to present a copy
of the clearance purportedly showing that he cleared Jacinto of all his
financial accountabilities and not merely as to his paid cash advances
and salary loan. He points out that RBSJI must be in custody thereof
considering that it is a vital official record.
The petitioner insists that the alleged loss of trust and confidence in him
is a mere subterfuge to cover the respondents’ ploy to oust him out of
RBSJI. He asserts that the seven-month gap between the date when he
issued the subject clearance and the date when he was sent a
memorandum for the said act shows that the respondents’ supposed loss
of trust and confidence was a mere afterthought.28
On the other hand, the respondents invoke the ratiocinations of the CA
that they were justified in losing the trust and confidence reposed on the
petitioner since he failed to exercise the degree of care expected of his
managerial position. They reiterate the petitioner’s admission that no
audit was yet conducted as to the accountabilities of Jacinto when he
issued the clearance.
The respondents further assert that as a former Personnel Manager, the
petitioner is well-aware of RBSJI’s policy that before a resigned
employee can be cleared of accountabilities, he must be first examined
or audited. However, the petitioner opted to violate this policy and yield
to Jacinto’s tantrums.29
The above arguments yield the focal issue of whether or not the
petitioner was validly dismissed from employment.
The Court’s Ruling
The petition is impressed with merit.
Settled is the rule that when supported by substantial evidence, the
findings of fact of the CA are conclusive and binding on the parties and
are not reviewable by this Court.30 As such, only errors of law are
reviewed by the Court in petitions for review of CA decisions. By way of
exception, however, the Court will exercise its equity jurisdiction and re-
evaluate, review and re-examine the factual findings of the CA when, as
in this case, the same are contradicting31 with the findings of the labor
tribunals.
The respondents failed to prove 
that the petitioner was dismissed 
for a just cause.
As provided in Article 28232 of the Labor Code and as firmly
Article 282. TERMINATION BY EMPLOYER.―An employer may
terminate an employment for any of the following causes:
23
(a)  Serious misconduct or willful disobedience by the employee of the
lawful orders of his employer or representative in connection with his
work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in
him by his employer or duly authorized representative;
(d)  Commission of a crime or offense by the employee against the
person of his employer or any immediate member of his family or his
duly authorized representative; and entrenched in jurisprudence, 33 an
employer has the right to dismiss an employee by reason of willful
breach of the trust and confidence reposed in him.
To temper the exercise of such prerogative and to reconcile the same
with the employee’s Constitutional guarantee of security of tenure, the
law imposes the burden of proof upon the employer to show that the
dismissal of the employee is for just cause failing which would mean that
the dismissal is not justified. Proof beyond reasonable doubt is not
necessary but the factual basis for the dismissal must be clearly and
convincingly established.34
Further, the law mandates that before validity can be accorded to a
dismissal premised on loss of trust and confidence, two requisites must
concur, viz.: (1) the employee concerned must be holding a position of
trust; and (2) the loss of trust must be based on willful breach of trust
founded on clearly established facts.35
There is no arguing that the petitioner was part of the upper echelons of
RBSJI’s management from whom greater fidelity to trust is expected. At
the time when he committed the act which allegedly led to the loss of
RBSJI’s trust and confidence in him, he was the Acting Manager of N.
Domingo branch. It was part of the petitioner’s responsibilities to effect a
smooth turn-over of pending transactions and to sign and approve
instructions within the limits assigned to the position under existing
regulations.36 Prior thereto and ever since he was employed, he has
occupied positions that entail the power or prerogative to dictate
management policies―as Personnel and Marketing Manager and
thereafter as Vice-President.
The presence of the first requisite is thus certain. Anent the second
requisite, the Court finds that the respondents failed to meet their
burden of proving that the petitioner’s dismissal was for a just cause.
The act alleged to have caused the loss of trust and confidence of the
respondents in the petitioner was his issuance, without prior authority
and audit, of a clearance to Jacinto who turned out to be still liable for
unpaid cash advances and for an P11-million fraudulent transaction that
exposed RBSJI to suit. According to the respondents, the clearance
barred RBSJI from running after Jacinto. The records are, however,
barren of any evidence in support of these claims.
As correctly argued by the petitioner and as above set forth, the onus of
submitting a copy of the clearance allegedly exonerating Jacinto from all
his accountabilities fell on the respondents. It was the single and
absolute evidence of the petitioner’s act that purportedly kindled the
respondents’ loss of trust. Without it, the respondents’ allegation of loss
of trust and confidence has no leg to stand on and must thus be rejected.
Moreover, one can reasonably expect that a copy of the clearance, an
essential personnel document, is with the respondents. Their failure to
present it and the lack of explanation for such failure or the document’s
unavailability props up the presumption that its contents are
unfavorable to the respondents’ assertions.
At any rate, the absence of the clearance upon which the contradicting
claims of the parties could ideally be resolved, should work against the
respondents. With only sworn pleadings as proof of their opposite
claims on the true contents of the clearance, the Court is bound to apply
the principle thatthe scales of justice should be tilted in favor of labor in
case of doubt in the evidence presented.37
RBSJI also failed to substantiate its claim that the petitioner’s act
estopped them from pursuing Jacinto for his standing obligations. There
is no proof that RBSJI attempted or at least considered to demand from
Jacinto the payment of his unpaid cash advances. Neither was RBSJI able
to show that it filed a civil or criminal suit against Jacinto to make him
responsible for the alleged fraud. There is thus no factual basis for
RBSJI’s allegation that it incurred damages or was financially prejudiced
by the clearance issued by the petitioner.
More importantly, the complained act of the petitioner did not evince
intentional breach of the respondents’ trust and confidence. Neither was
the petitioner grossly negligent or unjustified in pursuing the course of
action he took.
It must be pointed out that the petitioner was caught in the quandary of
signing on the spot a standard employment clearance for the furious
Jacinto sans any information on his outstanding accountabilities, and
refusing to so sign but risk alarming or scandalizing RBSJI, its employees
and clients. Contrary to the respondents’ allegation, the petitioner did
not concede to Jacinto’s demands. He was, in fact, able to equalize two
24
equally undesirable options by bargaining to instead clear Jacinto only of
his settled financial obligations after proper verification with branch
cashier Lily. It was only after Lily confirmed Jacinto’s recorded payments
that the petitioner signed the clearance. The absence of an audit was
precisely what impelled the petitioner to decline signing a standard
employment clearance to Jacinto and instead issue a different one
pertaining only to his paid accountabilities.
Under these circumstances, it cannot be concluded that the petitioner
was in any way prompted by malicious motive in issuing the clearance.
He was also able to ensure that RBSJI’s interests are protected and that
Jacinto is pacified. He did what any person placed in a similar situation
can prudently do. He was able to competently evaluate and control
Jacinto’s demands and thus prevent compromising RBSJI’s image,
employees and clients to an alarming scene.
The Court has repeatedly emphasized that the act that breached the
trust must be willful such that it was done intentionally, knowingly, and
purposely, without justifiable excuse, as distinguished from an act done
carelessly, thoughtlessly, heedlessly or inadvertently. 38 The conditions
under which the clearance was issued exclude any finding of deliberate
or conscious effort on the part of the petitioner to prejudice his
employer.
Also, the petitioner did not commit an irregular or prohibited act. He did
not falsify or misrepresent any company record as it was officially
confirmed by Lily that the items covered by the clearance were truly
settled by Jacinto. Hence, the respondents had no factual basis in
declaring that the petitioner violated Category B Grave Offense No. 1 of
the Company Code of Conduct and Discipline.
The respondents cannot capitalize on the petitioner’s lack of authority to
issue a clearance to resigned employees. First, it remains but an
unsubstantiated allegation despite the several opportunities for them in
the proceedings below to show, through bank documents, that the
petitioner is not among those officers so authorized. Second, it is the
Court’s considered view that by virtue of the petitioner’s stature in
respondent bank, it was well-within his discretion to sign or certify the
truthfulness of facts as they appear in RBSJI’s records. Here, the records
of RBSJI cashier Lily clearly showed that Jacinto paid the cash advances
and salary loan covered by the clearance issued by the petitioner.
Lastly, the seven-month gap between the clearance incident and the
April 17, 1997 memorandum asking the petitioner to explain his action
is too lengthy to be ignored. It likewise remains uncontroverted that
during such period, respondent Jesus verbally terminated the petitioner
only to recall the same and instead ask the latter to tender a resignation
letter. When the petitioner refused, he was sent the memorandum
questioning his issuance of a clearance to Jacinto seven months earlier.
The confluence of these undisputed circumstances supports the
inference that the clearance incident was a mere afterthought used to
gain ground for the petitioner’s dismissal.
Loss of trust and confidence as a ground for dismissal has never been
intended to afford an occasion for abuse because of its subjective nature.
It should not be used as a subterfuge for causes which are illegal,
improper and unjustified. It must be genuine, not a mere afterthought
intended to justify an earlier action taken in bad faith. 39
All told, the unsubstantiated claims of the respondents fall short of the
standard proof required for valid termination of employment. They
failed to clearly and convincingly establish that the petitioner’s act of
issuing a clearance to Jacinto rendered him unfit to continue working for
RBSJI. The petitioner was illegally dismissed from employment and is
entitled to back wages, to be computed from the date he was illegally
dismissed until the finality of this decision.40
The disposition of the case made by the LA in its Decision dated
November 27, 1998, as affirmed by the NLRC in its Decision dated March
6, 2006, is most in accord with the above disquisitions hence, must be
reinstated. However, the monetary awards therein should be clarified.
The petitioner is entitled to sepa-
ration pay in lieu of reinstatement
and his back wages shall earn 
legal interest.
In accordance with current jurisprudence, the award of back wages shall
earn legal interest at the rate of six percent (6%) per annum from the
date of the petitioner’s illegal dismissal until the finality of this
decision.41Thereafter, it shall earn 12% legal interest until fully paid42 in
accordance with the guidelines in Eastern Shipping Lines, Inc., v. Court of
Appeals.43
In addition to his back wages, the petitioner is also entitled to separation
pay. It cannot be gainsaid that animosity and antagonism have been
brewing between the parties since the petitioner was gradually eased
out of key positions in RBSJI and to reinstate him will only intensify their
hostile working atmosphere.44 Thus, based on strained relations,
separation pay equivalent to one (1) month salary for every year of
25
service, with a fraction of a year of at least six (6) months to be
considered as one (1) whole year, should be awarded in lieu of
reinstatement, to be computed from date of his engagement by RBSJI up
to the finality of this decision.45
The award of separation pay in case of strained relations is more
beneficial to both parties in that it liberates the employee from what
could be a highly oppressive work environment in as much as it releases
the employer from the grossly unpalatable obligation of maintaining in
its employ a worker it could no longer trust. 46
The award of moral and exemplary  respondents as corporate officers
damages is not warranted.
In M+W Zander Philippines, Inc. v. Enriquez,47 the Court decreed that
illegal dismissal, by itself alone, does not entitle the dismissed employee
to moral damages; additional facts must be pleaded and proven to
warrant the grant of moral damages, thus:
[M]oral damages are recoverable only where the dismissal of the
employee was attended by bad faith or fraud, or constituted an act
oppressive to labor, or was done in a manner contrary to morals, good
customs or public policy. Such an award cannot be justified solely upon
the premise that the employer fired his employee without just cause or
due process. Additional facts must be pleaded and proven to warrant the
grant of moral damages under the Civil Code, i.e., that the act of dismissal
was attended by bad faith or fraud, or constituted an act oppressive to
labor, or was done in a manner contrary to morals, good customs or
public policy; and, of course, that social humiliation, wounded feelings,
grave anxiety, and similar injury resulted therefrom.48 (Citations
omitted)
Bad faith does not connote bad judgment or negligence; it imports a
dishonest purpose or some moral obliquity and conscious doing of
wrong; it means breach of a known duty through some motive or
interest or ill will; it partakes of the nature of fraud. 49
Here, the petitioner failed to prove that his dismissal was attended by
explicit oppressive, humiliating or demeaning acts. The following events
merely sketch the struggle for power within the upper management of
RBSJI between the “old guys” and the “new guys”; they do not
convincingly prove that the respondents schemed to gradually ease the
petitioner out, viz.: (1) his promotion as Vice-President; (2) his
replacement by Jobel as Personnel and Marketing Manager; (2) his
designation as Acting Manager of N. Domingo branch and the recall
thereof on the very next day; (3) the presence of Andres, Jose and Ofelia
at the N. Domingo branch in the morning of September 27, 1996; and (4)
George’s inaction on the petitioner’s request to be transferred to the
operations or marketing department. As disagreeable as they may seem,
these acts cannot be equated with bad faith that can justify an award of
damages.
Since no moral damages can be granted under the facts of the case,
exemplary damages cannot also be awarded.50
The solidary liability of individual
must be recalled.
In the same vein, the individual respondents cannot be made solidarily
liable with RBSJI for the illegal dismissal. Time and again, the Court has
held that a corporation has its own legal personality separate and
distinct from those of its stockholders, directors or officers. Hence,
absent any evidence that they have exceeded their authority, corporate
officers are not personally liable for their official acts. Corporate
directors and officers may be held solidarily liable with the corporation
for the termination of employment only if done with malice or in bad
faith.51 As discussed above, the acts imputed to the respondents do not
support a finding of bad faith.
In addition, the lack of a valid cause for the dismissal of an employee
does not ipso facto mean that the corporate officers acted with malice or
bad faith. There must be an independent proof of malice or bad
faith,52 which is absent in the case at bar.
The award of 13th month pay is
incorrect.
Being a managerial employee, the petitioner is not entitled to 13th
month pay. Pursuant to Memorandum Order No. 28, as implemented by
the Revised Guidelines on the Implementation of the 13th Month Pay
Law dated November 16, 1987, managerial employees are exempt from
receiving such benefit without prejudice to the granting of other
bonuses, in lieu of the 13th month pay, to managerial employees upon
the employer’s discretion.53
The award of attorney’s fees is proper.
It is settled that where an employee was forced to litigate and, thus,
incur expenses to protect his rights and interest, the award of attorney’s
fees is legally and morally justifiable.54 Pursuant to Article 111 of the
26
Labor Code, ten percent (10%) of the total award is the reasonable
amount of attorney’s fees that can be awarded.
WHEREFORE, the petition is GRANTED. The Decision dated February 21,
2008 and Resolution dated June 3, 2008 of the Court of Appeals in CA-
G.R. SP No. 94690 are REVERSED and SET ASIDE. The Decision of the
Labor Arbiter dated November 27, 1998 is REINSTATED with the
following MODIFICATIONS/CLARIFICATIONS: Petitioner Rolando
DS. Torres is entitled to the payment of: (a) back wages reckoned from
May 30, 1997 up to the finality of this Decision, with interest at six
percent (6%) per annum, and 12% legal interest thereafter until fully
paid; and (b) in lieu of reinstatement, separation pay equivalent to one
(1) month salary for every year of service, with a fraction of at least six
(6) months to be considered as one (1) whole year, to be computed from
the date of his employment up to the finality of this decision.
The amounts awarded as moral damages, exemplary damages and 13th
month pay are DELETED. Only respondent Rural Bank of San Juan, Inc. is
liable for the illegal dismissal and the consequential monetary awards
arising therefrom. The other portions of and monetary awards in the
Labor Arbiter’s Decision dated November 27, 1998 are AFFIRMED.
SO ORDERED.
Sereno (C.J., Chairperson), Leonardo-De Castro, Bersamin and Villarama,
Jr., JJ., concur.
Petition granted, judgment and resolution reversed and set aside.
Notes.―Where the findings of the National Labor Relations Commission
(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. (Abel vs. Philex Mining Corporation,
594 SCRA 683 [2009])
Law and jurisprudence have long recognized the right of employers to
dismiss employees by reason of loss of trust and confidence; In order to
constitute a just cause for dismissal, the act complained of must be
“work-related” such as would show the employee concerned to be unfit
to continue working for the employer. (Jerusalem vs. Keppel Monte Bank,
647 SCRA 313 [2011])
――o0o――  the reasonable connection between the particular activity performed by
G.R. No. 185556. March 28, 2011.*
SUPREME STEEL CORPORATION, petitioner, vs.NAGKAKAISANG
MANGGAGAWA NG SUPREME INDEPENDENT UNION (NMS-IND-APL),
respondent.
Labor Law; Collective Bargaining Agreements; It is a familiar and
fundamental doctrine in labor law that the Collective Bargaining
Agreement (CBA) is the law between the parties and compliance therewith
is mandated by the express policy of the law.—It is a familiar and
fundamental doctrine in labor law that the CBA is the law between the
parties and compliance therewith is mandated by the express policy of
the law. If the terms of a CBA are clear and there is no doubt as to the
intention of the contracting parties, the literal meaning of its stipulation
shall prevail. Moreover, the CBA must be construed liberally rather than
narrowly and technically and the Court must place a practical and
realistic construction upon it. Any doubt in the interpretation of any law
or provision affecting labor should be resolved in favor of labor.
Same; Management Prerogative; Managerial prerogatives are subject to
limitations provided by law, collective bargaining agreements, and
general principles of fair play and justice.—Jurisprudence recognizes the
right to exercise management prerogative. Labor laws also discourage
interference with an employer’s judgment in the conduct of its business.
For this reason, the Court often declines to interfere in legitimate
business decisions of employers. The law must protect not only the
welfare of employees, but also the right of employers. However, the
exercise of management prerogative is not unlimited. Managerial
prerogatives are subject to limitations provided by law, collective
bargaining agreements, and general principles of fair play and justice.
Same; Regular Employees; The primary standard to determine a regular
employment is the reasonable connection between the particular activity
performed by the employee in relation to the business or trade of the
employer.—The primary standard to determine a regular employment is
the employee in relation to the business or trade of the employer. The
test is whether the former is usually necessary or desirable in the usual
business or trade of the employer. If the employee has been performing
the job for at least one year, even if the performance is not continuous or
merely intermittent, the law deems the repeated and continuing need for
27
its performance as sufficient evidence of the necessity, if not
indispensability, of that activity to the business of the employer. Hence,
the employment is also considered regular, but only with respect to such
activity and while such activity exists.
PETITION for review on certiorari of the decision and resolution of the
Court of Appeals.
   The facts are stated in the opinion of the Court.
  Batino Law Offices for petitioner.
  Sentro ng Alternatibong Lingap Panligal [SALIGAN]for respondent.
NACHURA, J.:
This petition for review on certiorari assails the Court of Appeals (CA)
Decision1 dated September 30, 2008, and Resolution dated December 4,
2008, which affirmed the finding of the National Labor Relations
Commission (NLRC) that petitioner violated certain provisions of the
Collective Bargaining Agreement (CBA).
Petitioner Supreme Steel Pipe Corporation is a domestic corporation
engaged in the business of manufacturing steel pipes for domestic and
foreign markets. Respondent Nagkakaisang Manggagawa ng Supreme
Independent Union is the certified bargaining agent of petitioner’s rank-
and-file employees. The CBA2 in question was executed by the parties to
cover the period from June 1, 2003 to May 31, 2008.
The Case
On July 27, 2005, respondent filed a notice of strike with the National
Conciliation and Mediation Board (NCMB) on the ground that petitioner
violated certain provisions of the CBA. The parties failed to settle their
dispute. Consequently, the Secretary of Labor certified the case to the
NLRC for compulsory arbitration pursuant to Article 263(g) of the Labor
Code.
Respondent alleged eleven CBA violations, delineated as follows:
A. Denial to four employees of  outside this section, whether direct or agency-hired, was absolutely
the CBA – provided wage increase
Article XII, Section 1 of the CBA provides:
“Section 1. The COMPANY shall grant a general wage increase, over
and above to all employees, according to the following schedule:
A. Effective June 1, 2003P14.00 per working day;
B. Effective June 1, 2004P12.00 per working day; and
C. Effective June 1, 2005P12.00 per working day.”3
Respondent alleged that petitioner has repeatedly denied the annual
CBA increases to at least four individuals: Juan Niñ o, Reynaldo Acosta,
Rommel Talavera, and Eddie Dalagon. According to respondent,
petitioner gives an anniversary increase to its employees upon reaching
their first year of employment. The four employees received their
respective anniversary increases and petitioner used such anniversary
increase to justify the denial of their CBA increase for the year. 4
Petitioner explained that it has been the company’s long standing
practice that upon reaching one year of service, a wage adjustment is
granted, and, once wages are adjusted, the increase provided for in the
CBA for that year is no longer implemented. Petitioner claimed that this
practice was not objected to by respondent as evidenced by the
employees’ pay slips.5
Respondent countered that petitioner failed to prove that, as a matter of
company practice, the anniversary increase took the place of the CBA
increase. It contended that all employees should receive the CBA
stipulated increase for the years 2003 to 2005.6
B. Contracting-out labor
Article II, Section 6 of the CBA provides:
“Section 6. Prohibition of Contracting Out of Work of Members of
Bargaining Unit.—Thirty (30) days from the signing of this CBA,
contractual employees in all departments, except Warehouse and
Packing Section, shall be phased out. Those contractual employees who
are presently in the workforce of the COMPANY shall no longer be
allowed to work after the expiration of their contracts without prejudice
to being hired as probationary employees of the COMPANY.” 7
Respondent claimed that, contrary to this provision, petitioner hired
temporary workers for five months based on uniformly worded
employment contracts, renewable for five months, and assigned them to
almost all of the departments in the company. It pointed out that, under
the CBA, temporary workers are allowed only in the Warehouse and
Packing Section; consequently, employment of contractual employees
prohibited. Worse, petitioner never regularized them even if the position
they occupied and the services they performed were necessary and
desirable to its business. Upon the expiration of their contracts, these
workers would be replaced with other workers with the same
employment status. This scheme is a clear circumvention of the laws on
regular employment.8
28
Respondent argued that the right to self-organization goes beyond the
maintenance of union membership. It emphasized that the CBA
maintains a union shop clause which gives the regular employees 30
days within which to join respondent as a condition for their continued
employment. Respondent maintained that petitioner’s persistent refusal
to grant regular status to its employees, such as Dindo Buella, who is
assigned in the Galvanizing Department, violates the employees’ right to
self-organization in two ways: (1) they are deprived of a representative
for collective bargaining purposes; and (2) respondent is deprived the
right to expand its membership. Respondent contended that a union’s
strength lies in its number, which becomes crucial especially during
negotiations; after all, an employer will not bargain seriously with a
union whose membership constitutes a minority of the total workforce
of the company. According to respondent, out of the 500 employees of
the company, only 147 are union members, and at least 60 employees
would have been eligible for union membership had they been
recognized as regular employees.9
For its part, petitioner admitted that it hired temporary workers. It
purportedly did so to cope with the seasonal increase of the job orders
from abroad. In order to comply with the job orders, petitioner hired the
temporary workers to help
the regular workers in the production of steel pipes. Petitioner
maintained that these workers do not affect respondent’s membership.
Petitioner claimed that it agreed to terminate these temporary
employees on the condition that the regular employees would have to
perform the work that these employees were performing, but
respondent refused. Respondent’s refusal allegedly proved that
petitioner was not contracting out the services being performed by
union members. Finally, petitioner insisted that the hiring of temporary
workers is a management prerogative.10
C. Failure to provide shuttle service
Petitioner has allegedly reneged on its obligation to provide shuttle
service for its employees pursuant to Article XIV, Section 7 of the CBA,
which provides:
“Section 7. Shuttle Service.—As per company practice, once the
company vehicle used for the purpose has been reconditioned.”11
Respondent claimed that the company vehicle which would be used as
shuttle service for its employees has not been reconditioned by
petitioner since the signing of the CBA on February 26, 2004. 12 Petitioner
explained that it is difficult to implement this provision and simply
denied that it has reneged on its obligation.13
D. Refusal to answer for the
medical expenses incurred by
three employees
Respondent asserted that petitioner is liable for the expenses incurred
by three employees who were injured while in the company premises.
This liability allegedly stems from Article VIII, Section 4 of the CBA which
provides:
“Section 4. The COMPANY agrees to provide first aid medicine and
first aid service and consultation free of charge to all its employees.” 14
According to respondent, petitioner’s definition of what constitutes first
aid service is limited to the bare minimum of treating injured employees
while still within the company premises and referring the injured
employee to the Chinese General Hospital for treatment, but the travel
expense in going to the hospital is charged to the employee. Thus, when
Alberto Guevarra and Job Canizares, union members, were injured, they
had to pay P90.00 each for transportation expenses in going to the
hospital for treatment and going back to the company thereafter. In the
case of Rodrigo Solitario, petitioner did not even shoulder the cost of the
first aid medicine, amounting to P2,113.00, even if he was injured during
the company sportsfest, but the amount was deducted, instead, from his
salary. Respondent insisted that this violates the above cited provision of
the CBA.15
Petitioner insisted that it provided medicine and first aid assistance to
Rodrigo Solitario. It alleged that the latter cannot claim hospitalization
benefits under Article VIII, Section 116 of the CBA because he was not
confined in a hospital.17
E. Failure to comply with the
time-off with pay provision
Article II, Section 8 of the CBA provides:
“Section 8. Time-Off with Pay.—The COMPANY shall grant to the
UNION’s duly authorized representative/s or to any employee who are
on duty, if summoned by the UNION to testify, if his/her presence is
necessary, a paid time-off for the handling of grievances, cases,
investigations, labor-management conferences provided that if the
venue of the case is outside Company premises involving [the]
implementation and interpretation of the CBA, two (2) representatives
of the UNION who will attend the said hearing shall be considered time-
off with pay. If an employee on a night shift attends grievance on labor-
29
related cases and could not report for work due to physical condition, he
may avail of union leave without need of the two (2) days prior notice.” 18
Respondent contended that under the said provision, petitioner was
obliged to grant a paid time-off to respondent’s duly authorized
representative or to any employee who was on duty, when summoned
by respondent to testify or when the employee’s presence was necessary
in the grievance hearings, meetings, or investigations. 19
Petitioner admitted that it did not honor the claim for wages of the union
officers who attended the grievance meetings because these meetings
were initiated by respondent itself. It argued that since the union officers
were performing their functions as such, and not as employees of the
company, extended to any worker covered by the Agreement shall not
exceed EIGHT THOUSAND PESOS (P8,000.00) and shall be availed only
after the Philhealth Benefits have been exhausted. It is understood that
the EIGHT THOUSAND PESOS (P8,000.00) assistance is to include fees of
the specialist upon proper certification by the Company Physician.
the latter should not be liable. Petitioner further asserted that it is not
liable to pay the wages of the union officers when the meetings are held
beyond company time (3:00 p.m.). It claimed that time-off with pay is
allowed only if the venue of the meeting is outside company premises
and the meeting involves the implementation and interpretation of the
CBA.20
In reply, respondent averred that the above quoted provision does not
make a qualification that the meetings should be held during office hours
(7:00 a.m. to 3:00 p.m.); hence, for as long as the presence of the
employee is needed, time spent during the grievance meeting should be
paid.21
F. Visitors’ free access to
company premises
Respondent charged petitioner with violation of Article II, Section 7 of
the CBA which provides:
“Section 7. Free Access to Company Premises.—Local Union and
Federation officers (subject to company’s security measure) shall be
allowed during working hours to enter the COMPANY premises for the
following reasons:
a. To investigate grievances that have arisen;
b. To interview Union Officers, Stewards and members during
reasonable hours; and
c. To attend to any meeting called by the Management or the UNION.” 22
G. Failure to comply with reporting time-off provision
Respondent maintained that a brownout is covered by Article XII,
Section 3 of the CBA which states:
“Section 3. Reporting Time-Off.—The employees who have reported
for work but are unable to continue working because of emergencies
such as typhoons, flood, earthquake, transportation strike, where the
COMPANY is affected and in case of fire which occurs in the block where
the home of the employee is situated and not just across the street and
serious illness of an immediate member of the family of the employee
living with him/her and no one in the house can bring the sick family
member to the hospital, shall be paid as follows:
a. At least half day if the work stoppage occurs within the first four (4)
hours of work; and
b. A whole day if the work stoppage occurs after four (4) hours of
work.”23
Respondent averred that petitioner paid the employees’ salaries for one
hour only of the four-hour brownout that occurred on July 25, 2005 and
refused to pay for the remaining three hours. In defense, petitioner
simply insisted that brownouts are not included in the above list of
emergencies.24
Respondent rejoined that, under the principle of ejusdem generis,
brownouts or power outages come within the “emergencies”
contemplated by the CBA provision. Although brownouts were not
specifically identified as one of the emergencies listed in the said CBA
provision, it cannot be denied that brownouts fall within the same kind
or class of the enumerated emergencies. Respondent maintained that the
intention of the provision was to compensate the employees for
occurrences which are beyond their control, and power outage is one of
such occurrences. It insisted that the list of emergencies is not an
exhaustive list but merely gives an idea as to what constitutes an actual
emergency that is beyond the control of the employee.25
H. Dismissal of Diosdado Madayag
Diosdado Madayag was employed as welder by petitioner. He was
served a Notice of Termination dated March 14, 2005 which read:
“Please consider this as a Notice of Termination of employment effective
March 14, 2005 under Art. 284 of the Labor Code and its Implementing
Rules.
This is based on the medical certificate submitted by your attending
physician, Lucy Anne E. Mamba, M.D., Jose R. Reyes Memorial Medical
Center dated March 7, 2005 with the following diagnosis:
‘Diabetes Mellitus Type 2’
30
Please be guided accordingly.”26
Respondent contended that Madayag’s dismissal from employment is
illegal because petitioner failed to obtain a certification from a
competent public authority that his disease is of such nature or at such
stage that it cannot be cured within six months even after proper
medical treatment. Petitioner also failed to prove that Madayag’s
continued employment was prejudicial to his health or that of his
colleagues.27
Petitioner, on the other hand, alleged that Madayag was validly
terminated under Art. 28428 of the Labor Code and
that his leg was amputated by reason of diabetes, which disease is not
work-related. Petitioner claimed that it was willing to pay Madayag 13
days for every year of service but respondent was asking for additional
benefits.29
I. Denial of paternity leave  discrepancies because it appeared that non-taxable items were included
benefit to two employees
Article XV, Section 2 of the CBA provides:
“Section 2. Paternity Leave.—As per law[,] [t]he Company shall, as
much as possible, pay paternity leave within 2 weeks from submission of
documents.”30
Petitioner admitted that it denied this benefit to the claimants for failure
to observe the requirement provided in the Implementing Rules and
Regulations of Republic Act No. 8187 (Paternity Leave Act of 1995), that
is, to notify the employer of the pregnancy of their wives and the
expected date of delivery.31
Respondent argued that petitioner is relying on technicalities by
insisting that the denial was due to the two employees’ failure to notify it
of the pregnancy of their respective spouses. It maintained that the
notification requirement runs counter to the spirit of the law.
Respondent averred that, on grounds of social justice, the oversight to
notify petitioner should not be dealt with severely by denying the two
claimants this benefit.32
J. Discrimination and
harassment
According to respondent, petitioner was contemptuous over union
officers for protecting the rights of union members. In an affidavit
executed by Chito Guadañ a, union secretary, he narrated that Alfred
Navarro, Officer-in-Charge of the Packing Department, had been harsh in
dealing with his fellow employees and would even challenge some
workers to a fight. He averred that Navarro had an overbearing attitude
during work and grievance meetings. In November 2004, Navarro
removed Guadañ a, a foreman, from his position and installed another
foreman from another section. The action was allegedly brought about
by earlier grievances against Navarro’s abuse. Petitioner confirmed his
transfer to another section in violation of Article VI, Section 6 of the
CBA,33 which states in part:
“Section 6. Transfer of Employment.—No permanent positional
transfer outside can be effected by the COMPANY without discussing the
grounds before the Grievance Committee. All transfer shall be with
advance notice of two (2) weeks. No transfer shall interfere with the
employee’s exercise of the right to self-organization.” 34
Respondent also alleged that Ariel Marigondon, union president, was
also penalized for working for his fellow employees. One time,
Marigondon inquired from management about matters concerning tax
as part of taxable income. Thereafter, Marigondon was transferred from
one area of operation to another until he was allegedly forced to accept
menial jobs of putting control tags on steel pipes, akind of job which did
not require his 16 years of expertise in examining steel pipes. 35
Edgardo Masangcay, respondent’s Second Vice President, executed an
affidavit wherein he cited three instances when his salary was withheld
by petitioner. The first incident happened on May 28, 2005 when
petitioner refused to give his salary to his wife despite presentation of a
proof of identification (ID) and letter of authorization. On June 18, 2005,
petitioner also refused to release his salary to Pascual Lazaro despite
submission of a letter of authority and his ID and, as a result, he was
unable to buy medicine for his child who was suffering from asthma
attack. The third instance happened on June 25, 2005 when his salary
was short of P450.00; this amount was however released the following
week.36
Petitioner explained that the transfer of the employee from one
department to another was the result of downsizing the Warehouse
Department, which is a valid exercise of management prerogative. In
Guadañ a’s case, Navarro denied that he was being harsh but claimed that
he merely wanted to stress some points. Petitioner explained that
Guadañ a was transferred when the section where he was assigned was
phased out due to the installation of new machines. Petitioner pointed
out that the other workers assigned in said section were also
transferred.37
31
For the petitioner, Emmanuel Mendiola, Production Superintendent, also
executed an affidavit attesting that the allegation of Ariel Marigondon,
that he was harassed and was a victim of discrimination for being
respondent’s President, had no basis. Marigondon pointed out that after
the job order was completed, he was reassigned to his original shift and
group.38
Petitioner also submitted the affidavits of Elizabeth Llaneta Aguilar,
disbursement clerk and hiring staff, and Romeo T. Sy, Assistant
Personnel Manager. Aguilar explained that she did not mean to harass
Masangcay, but she merely wanted to make sure that he would receive
his salary. Affiant Sy admitted that he refused to release Masangcay’s
salary to a woman who presented herself as his (Masangcay’s) wife since
nobody could attest to it. He claimed that such is not an act of
harassment but a precautionary measure to protect Masangcay’s
interest.39
K. Non-implementation of  1) implement general wage increase to Juan Niñ o, Eddie Dalagon and
COLA in Wage Order Nos.
RBIII-10 and 11
Respondent posited that any form of wage increase granted through the
CBA should not be treated as compliance with the wage increase given
through the wage boards. Respondent claimed that, for a number of
years, petitioner has complied with Article XII, Section 2 of the CBA
which provides:
“Section 2. All salary increase granted by the COMPANY shall not be
credited to any future contractual or legislated wage increases. Both
increases shall be implemented separate and distinct from the increases
stated in this Agreement. It should be understood by both parties that
contractual salary increase are separate and distinct from legislated
wage increases, thus the increase brought by the latter shall be enjoyed
also by all covered employees.”40
Respondent maintained that for every wage order that was issued in
Region 3, petitioner never hesitated to comply and grant a similar
increase. Specifically, respondent cited petitioner’s compliance with
Wage Order No. RBIII-10 and grant of the mandated P15.00 cost of living
allowance (COLA) to all its employees. Petitioner, however, stopped
implementing it to non-minimum wage earners on July 24, 2005. It
contended that this violates Article 100 of the Labor Code which
prohibits the diminution of benefits already enjoyed by the workers and
that such grant of benefits had already ripened into a company
practice.41
Petitioner explained that the COLA provided under Wage Order No.
RBIII-10 applies to minimum wage earners only and that, by mistake, it
implemented the same across the board or to all its employees. After
realizing its mistake, it stopped integrating the COLA to the basic pay of
the workers who were earning above the minimum wage.42
The NLRC’s Ruling
Out of the eleven issues raised by respondent, eight were decided in its
favor; two (denial of paternity leave benefit and discrimination of union
members) were decided in favor of petitioner; while the issue on
visitor’s free access to company premises was deemed settled during the
mandatory conference. The dispositive portion of the NLRC Decision
dated March 30, 2007 reads:
“WHEREFORE, Supreme Steel Pipe Corporation (the Company) is hereby
ordered to:
Rommel Talavera pursuant to the CBA in June 2003, 2004 and 2005;
2) regularize workers Dindo Buella and 60 other workers and to
respect CBA provision on contracting-out labor;
3) recondition the company vehicle pursuant to the CBA;
4) answer for expenses involved in providing first aid services
including transportation expenses for this purpose, as well as to
reimburse Rodrigo Solitario the sum of P2,113.00;
5) pay wages of union members/officers who attended grievance
meetings as follows:
1) D. Serenilla               -   P115.24375
2) D. Miralpes                -   P115.80625
3) E. Mallari                  -   P108.7625
4) C. Cruz                      -   P114.65313
5) J. Patalbo                   -   P161.0625
6) J.J. Muñ oz                  -   P111.19375
7) C. Guadañ a                 -   P56.94375
8) J. Patalbo                    -   P161.0625
9) E. Mallari                    -   P108.7625
10) C. Guadañ a                -   P113.8875
11) A. Marigondon            -   P170.30625
12) A. Marigondon           -   P181.66
13) A. Marigondon           -   P181.66
14) E. Masangcay            -   P175.75
15) A. Marigondon           -   P181.66
32
16) E. Masangcay            -   P175.75
17) A. Marigondon           -   P181.66
18) F. Servano                 -   P174.02
19) R. Estrella                  -   P181.50
20) A. Marigondon            -   P181.66
6) pay workers their salary for the 3 hours of the 4 hour brownout as
follows:
1) Alagon, Jr., Pedro          -   P130.0875
2) Aliwalas, Cristeto           -   P108.5625
3) Baltazar, Roderick          -   P 90.1875
4) Bañ ez, Oliver                 -   P 90.9375
5) Prucal, Eduardo             -   P126.015
6) Calimquin, Rodillo          -   P131.0362
7) Clave, Arturo                  -   P125.64
8) Cadavero, Rey                -   P108.5625
9) De Leon, Romulo            -   P124.35
10) Lactao, Noli                 -   P126.015
11) Layco, Jr., Dandino      -   P130.5375
12) Legaspi, Melencio         -   P127.63
13) Quiachon, Rogelio        -   P130.5525518
14) Sacmar, Roberto          -   P108.9375
15) Tagle, Farian              -   P129.3375
16) Villavicencio, Victor     -   P126.015
17) Agra, Romale              -   P126.015
18) Basabe, Luis               -   P128.5575
19) Bornasal, Joel             -   P127.53
20) Casitas, Santiago        -   P128.5575
21) Celajes, Bonifacio        -   P128.1825
22) Avenido, Jerry            -   P133.2487
23) Gagarin, Alfredo         -   P108.9375
24) Layson, Paulo             -   P131.745
25) Lledo, Asalem             -   P128.5575
26) Marigondon, Ariel       -   P131.745
27) Orcena, Sonnie           -   P126.015
28) Servano, Fernando      -   P126.015
29) Versola, Rodrigo          -   P126.015
7) reinstate Diosdado Madayag to his former position without loss of
seniority rights and to pay full backwages and other benefits from 14
March 2005, date of dismissal, until the date of this Decision; if
reinstatement is impossible[,] to pay separation pay of one month pay
for every year of service in addition to backwages;
8) dismiss the claim for paternity leave for failure of claimants to
observe the requirements;
9) dismiss the charge of harassment and discrimination for lack of
merit; and to
10) continue to implement COLA under Wage Order Nos. [RBIII]-10 &
11 across the board.
The issue on Visitors’ Free Access to Company Premises is dismissed for
being moot and academic after it was settled during the scheduled
conferences.
SO ORDERED.”43
Forthwith, petitioner elevated the case to the CA, reiterating its
arguments on the eight issues resolved by the NLRC in respondent’s
favor.
The CA’s Ruling
On September 30, 2008, the CA rendered a decision dismissing the
petition, thus:
“WHEREFORE, premises considered, the present petition is hereby
DENIED DUE COURSE and accordingly DISMISSED, for lack of merit. The
assailed Decision dated March 30, 2007 and Resolution dated April 28,
2008 of the National Labor Relations Commission in NLRC NCR CC No.
000305-05 are hereby AFFIRMED.
With costs against the petitioner.
SO ORDERED.”44
According to the CA, petitioner failed to show that the NLRC committed
grave abuse of discretion in finding that it violated certain provisions of
the CBA. The NLRC correctly held that every employee is entitled to the
wage increase under the CBA despite receipt of an anniversary increase.
The CA concluded that, based on the wording of the CBA, which uses the
words “general increase” and “over and above,” it cannot be said that the
parties have intended the anniversary increase to be given in lieu of the
CBA wage increase.45
The CA declared that the withdrawal of the COLA under Wage Order No.
RBIII-10 from the employees who were not minimum wage earners
amounted to a diminution of benefits because such grant has already
ripened into a company practice. It pointed out that there was no
ambiguity or doubt as to who were covered by the wage order.
33
Petitioner, therefore, may not invoke error or mistake in extending the
COLA to all employees and such act can only be construed as “as a
voluntary act on the part of the employer.”46 The CA opined that,
considering the foregoing, the ruling in Globe Mackay Cable and Radio
Corp. v. NLRC47 clearly did not apply as there was no doubtful or difficult
question involved in the present case.48
The CA sustained the NLRC’s interpretation of Art. VIII, Section 4 of the
CBA as including the expenses for first aid medicine and transportation
cost in going to the hospital. The CA stressed that the CBA should be
construed liberally rather than narrowly and technically, and the courts
must place a practical and realistic construction upon it, giving due
consideration to the context in which it was negotiated and the purpose
which it intended to serve.49
Based on the principle of liberal construction of the CBA, the CA likewise
sustained the NLRC’s rulings on the issues pertaining to the shuttle
service, time-off for attendance in grievance meetings/hearings, and
time-off due to brownouts.50
The CA further held that management prerogative is not unlimited: it is
subject to limitations found in law, a CBA, or the general principles of fair
play and justice. It stressed that the CBA provided such limitation on
management prerogative to contract-out labor, and compliance with the
CBA is mandated by the express policy of the law.51
Finally, the CA affirmed the NLRC’s finding that Madayag’s dismissal was
illegal. It emphasized that the burden to prove that the employee’s
disease is of such nature or at such stage that it cannot be cured within a
period of six months rests on the employer. Petitioner failed to submit a
certification from a competent public authority attesting to such fact;
hence, Madayag’s dismissal is illegal.52
Petitioner moved for a reconsideration of the CA’s decision. On
December 4, 2008, the CA denied the motion for lack of merit. 53
Dissatisfied, petitioner filed this petition for review on certiorari,
contending that the CA erred in finding that it violated certain provisions
of the CBA.
The Court’s Ruling
The petition is partly meritorious.
It is a familiar and fundamental doctrine in labor law that the CBA is the
law between the parties and compliance therewith is mandated by the
express policy of the law. If the terms of a CBA are clear and there is no
doubt as to the intention of the contracting parties, the literal meaning of
its stipulation shall prevail.54 Moreover, the CBA must be construed
liberally rather than narrowly and technically and the Court must place a
practical and realistic construction upon it.55 Any doubt in the
interpretation of any law or provision affecting labor should be resolved
in favor of labor.56
Upon these well-established precepts, we sustain the CA’s findings and
conclusions on all the issues, except the issue pertaining to the denial of
the COLA under Wage Order No. RBIII-10 and 11 to the employees who
are not minimum wage earners.
The wording of the CBA on general wage increase cannot be interpreted
any other way: The CBA increase should be given to all employees “over
and above” the amount they are receiving, even if that amount already
includes an anniversary increase. Stipulations in a contract must be read
together, not in isolation from one another.57Consideration of Article
XIII, Section 2 (non-crediting provision), bolsters such interpretation.
Section 2 states that “[a]ll salary increase granted by the company shall
not be credited to any future contractual or legislated wage increases.”
Clearly then, even if petitioner had already awarded an anniversary
increase to its employees, such increase cannot be credited to the
“contractual” increase as provided in the CBA, which is considered
“separate and distinct.”
Petitioner claims that it has been the company practice to offset the
anniversary increase with the CBA increase. It however failed to prove
such material fact. Company practice, just like any other fact, habits,
customs, usage or patterns of conduct must be proven. The offering
party must allege and prove specific, repetitive conduct that might
constitute evidence of habit,58 or company practice. Evidently, the pay
slips of the four employees do not serve as sufficient proof.
Petitioner’s excuse in not providing a shuttle service to its employees is
unacceptable. In fact, it can hardly be considered as an excuse. Petitioner
simply says that it is difficult to implement the provision. It relies on the
fact that “no time element [is] explicitly stated [in the CBA] within which
to fulfill the undertaking.” We cannot allow petitioner to dillydally in
complying with its obligation and take undue advantage of
the fact that no period is provided in the CBA. Petitioner should
recondition the company vehicle at once, lest it be charged with and
found guilty of unfair labor practice.
Petitioner gave a narrow construction to the wording of the CBA when it
denied (a) reimbursement for the first-aid medicines taken by Rodrigo
Solitario when he was injured during the company sportsfest and the
34
transportation cost incurred by Alberto Guevara and Job Canizares in
going to the hospital, (b) payment of the wages of certain employees
during the time they spent at the grievance meetings, and (c) payment of
the employees’ wages during the brownout that occurred on July 25,
2002. As previously stated, the CBA must be construed liberally rather
than narrowly and technically. It is the duty of the courts to place a
practical and realistic construction upon the CBA, giving due
consideration to the context in which it is negotiated and the purpose
which it is intended to serve. Absurd and illogical interpretations should
be avoided.59 A CBA, like any other contract, must be interpreted
according to the intention of the parties.60
The CA was correct in pointing out that the concerned employees were
not seeking hospitalization benefits under Article VIII, Section 1 of the
CBA, but under Section 4 thereof; hence, confinement in a hospital is not
a prerequisite for the claim. Petitioner should reimburse Solitario for the
first aid medicines; after all, it is the duty of the employer to maintain
first-aid medicines in its premises.61 Similarly, Guevara and
Canizares should also be reimbursed for the transportation cost incurred
in going to the hospital. The Omnibus Rules Implementing the Labor
Code provides that, where the employer does not have an emergency
hospital in its premises, the employer is obliged to transport an
employee to the nearest hospital or clinic in case of emergency. 62
We likewise agree with the CA on the issue of nonpayment of the time-
off for attending grievance meetings. The intention of the parties is
obviously to compensate the employees for the time that they spend in a
grievance meeting as the CBA provision categorically states that the
company will pay the employee “a paid time-off for handling of
grievances, investigations, labor-management conferences.” It does not
make a qualification that such meeting should be held during office
hours or within the company premises.
The employees should also be compensated for the time they were
prevented from working due to the brownout. The CBA enumerates
some of the instances considered as “emergencies” and these are
“typhoons, flood earthquake, transportation strike.” As correctly argued
by respondent, the CBA does not exclusively enumerate the situations
which are considered “emergencies.” Obviously, the key element of the
provision is that employees “who have reported for work are unable to
continue working” because of the incident. It is therefore reasonable to
conclude that brownout or power outage is considered an “emergency”
situation.
Again, on the issue of contracting-out labor, we sustain the CA.
Petitioner, in effect, admits having hired “temporary” employees, but it
maintains that it was an exercise of management prerogative,
necessitated by the increase in demand for its product.
Indeed, jurisprudence recognizes the right to exercise management
prerogative. Labor laws also discourage interference with an employer’s
judgment in the conduct of its business. For this reason, the Court often
declines to interfere in legitimate business decisions of employers. The
law must protect not only the welfare of employees, but also the right of
employers.63 However, the exercise of management prerogative is not
unlimited. Managerial prerogatives are subject to limitations provided
by law, collective bargaining agreements, and general principles of fair
play and justice.64 The CBA is the norm of conduct between the parties
and, as previously stated, compliance therewith is mandated by the
express policy of the law.65
The CBA is clear in providing that temporary employees will no longer
be allowed in the company except in the Warehouse and Packing
Section. Petitioner is bound by this provision. It cannot exempt itself
from compliance by invoking management prerogative. Management
prerogative must take a backseat when faced with a CBA provision. If
petitioner needed additional personnel to meet the increase in demand,
it could have taken measures without violating the CBA.
Respondent claims that the temporary employees were hired on five-
month contracts, renewable for another five months. After the expiration
of the contracts, petitioner would hire other persons for the same work,
with the same employment status.
Plainly, petitioner’s scheme seeks to prevent employees from acquiring
the status of regular employees. But the Court has already held that,
where from the circumstances it is apparent that the periods of
employment have been imposed to preclude acquisition of security of
tenure by the employee, they should be struck down or disregarded as
contrary to public policy and morals.66 The primary standard to
determine a regular employment is the reasonable connection between
the particular activity performed by the employee in relation to the
business or trade of the employer. The test is whether the former is
usually necessary or desirable in the usual business or trade of the
employer. If the employee has been performing the job for at least one
year, even if the performance is not continuous or merely intermittent,
the law deems the repeated and continuing need for its performance as
sufficient evidence of the necessity, if not indispensability, of that activity
35
to the business of the employer. Hence, the employment is also
considered regular, but only with respect to such activity and while such
activity exists.67
We also uphold the CA’s finding that Madayag’s dismissal was illegal. It is
already settled that the burden to prove the validity of the dismissal
rests upon the employer. Dismissal based on Article 284 of the Labor
Code is no different, thus:
“The law is unequivocal: the employer, before it can legally dismiss its
employee on the ground of disease, must adduce a certification from a
competent public authority that the disease of which its employee is
suffering is of such nature or at such a stage that it cannot be cured
within a period of six months even with proper treatment.
x x x x
In Triple Eight Integrated Services, Inc. v. NLRC, the Court explains why
the submission of the requisite medical certificate is for the employer’s
compliance, thus:
The requirement for a medical certificate under Article 284 of the Labor
Code cannot be dispensed with; otherwise, it would sanction the
unilateral and arbitrary determination by the employer of the gravity or
extent of the employee’s illness and thus defeat the public policy on the
protection of labor.
x x x x68
However, with respect to the issue of whether the COLA under Wage
Order Nos. RBIII-10 and 11 should be implemented across the board, we
hold a different view from that of the CA. No diminution of benefits
would result if the wage orders are not implemented across the board,
as no such company practice has been established.
Diminution of benefits is the unilateral withdrawal by the employer of
benefits already enjoyed by the employees. There is diminution of
benefits when it is shown that: (1) the grant or benefit is founded on a
policy or has ripened into a practice over a long period of time; (2) the
practice is consistent and deliberate; (3) the practice is not due to error
in the construction or application of a doubtful or difficult question of
law; and (4) the diminution or discontinuance is done unilaterally by the
employer.69
To recall, the CA arrived at its ruling by relying on the fact that there was
no ambiguity in the wording of the wage order as to the employees
covered by it. From this, the CA concluded that petitioner actually made
no error or mistake, but acted voluntarily, in granting the COLA to all its
employees. It therefore took exception to the Globe Mackay case which,
according to it, applies only when there is a doubtful or difficult question
involved.
The CA failed to note that Globe Mackay primarily emphasized that, for
the grant of the benefit to be considered voluntary, “it should have been
practiced over a long period of time, and must be shown to have been
consistent and deliberate.”70 The fact that the practice must not have
been due to error in the construction or application of a doubtful or
difficult question of law is a distinct requirement.
The implementation of the COLA under Wage Order No. RBIII-10 across
the board, which only lasted for less than a year, cannot be considered as
having been practiced “over a long period of time.” While it is true that
jurisprudence has not laid down any rule requiring a specific minimum
number of years in order for a practice to be considered as a voluntary
act of the employer, under existing jurisprudence on this matter, an act
carried out within less than a year would certainly not qualify as such.
Hence, the withdrawal of the COLA Wage Order No. RBIII-10 from the
salaries of non-minimum wage earners did not amount to a “diminution
of benefits” under the law.
There is also no basis in enjoining petitioner to implement Wage Order
No. RBIII-11 across the board. Similarly, no proof was presented
showing that the implementation of wage orders across the board has
ripened into a company practice. In the same way that we required
petitioner to prove the existence of a company practice when it alleged
the same as defense, at this instance, we also require respondent to
show proof of the company practice as it is now the party claiming its
existence. Absent any proof of specific, repetitive conduct that might
constitute evidence of the practice, we cannot give credence to
respondent’s claim. The isolated act of implementing a wage order
across the board can hardly be considered a company practice, 71 more so
when such implementation was erroneously made.
WHEREFORE, premises considered, the petition is PARTIALLY
GRANTED. The CA Decision September 30, 2008 and Resolution dated
December 4, 2008 are AFFIRMED with MODIFICATION that the order for
petitioner to continue implementing Wage Order No. RBIII-10 and 11
across the board is SET ASIDE. Accordingly, item 10 of the NLRC
Decision dated March 30, 2007 is modified to read “dismiss the claim for
implementation of Wage Order Nos. RBIII-10 and 11 to the employees
who are not minimum wage earners.”
SO ORDERED.
Carpio (Chairperson), Peralta, Abad and Mendoza, JJ., concur.
36
Petition partially granted, judgment and resolution affirmed with
modification.
Note.—To constitute ULP, violations of the CBA must be gross. Gross
violation of the CBA, under Article 261 of the Labor Code, means flagrant
and/or malicious refusal to comply with the economic provisions
thereof. (Arellano University Employees and Workers Union vs. Court of
Appeals, 502 SCRA 219 [2006])
——o0o——
_______________
71 Pag-Asa Steel Works, Inc. v. Court of Appeals, note 58 at 499.
© Copyright 2020 Central Book Supply, Inc. All rights reserved.

37

ARE ALL CASES AUTOMATICALLY RESOLVED IN FAVOR OF LABOR?
____________________
G.R. No. 202961. February 4, 2015.*
 
EMER MILAN, RANDY MASANGKAY, WILFREDO JAVIER, RONALDO
DAVID, BONIFACIO MATUNDAN, NORA MENDOZA, et al.,
petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, SOLID
MILLS, INC., and/or PHILIP ANG, respondents.
Labor Law; Employer-Employee Relationship; National Labor Relations
Commission; Jurisdiction; Article 217 of the Labor Code provides that the
Labor Arbiter (LA), in his or her original jurisdiction, and the National
Labor Relations Commission (NLRC), in its appellate jurisdiction, may
determine issues involving claims arising from employer-employee
relations.—The National Labor Relations Commission has jurisdiction to
determine, preliminarily, the parties’ rights over a property, when it is
necessary to determine an issue related to rights or claims arising from
an employer-employee relationship. Article 217 provides that the Labor
Arbiter, in his or her original jurisdiction, and the National Labor
Relations Commission, in its appellate jurisdiction, may determine issues
involving claims arising from employer-employee relations.
Same; Same; Claims arising from an employer-employee relationship are
not limited to claims by an employee. Employers may also have claims
against the employee, which arise from the same relationship.—Claims
arising from an employer-employee relationship are not limited to
claims by an employee. Employers may also have claims against the
employee, which arise from the same relationship. In Bañez v. Valdevilla,
331 SCRA 584 (2000), this court ruled that Article 217 of the Labor Code
also applies to employers’ claim for damages, which arises from or is
connected with the labor issue. Thus: Whereas this Court in a number of
occasions had applied the jurisdictional provisions of Article 217 to
claims for damages filed by employees, we hold that by the designating
clause “arising from the employer-employee relations” Article 217
should apply with equal force to the claim of an employer for actual
damages against its dismissed employee, where the basis for the claim
arises from or is necessarily connected with the fact of termination, and
should be entered as a counterclaim in the illegal dismissal case.
Same; Same; Clearance Procedures; Clearance procedures are instituted to
ensure that the properties, real or personal, belonging to the employer but
are in the possession of the separated employee, are returned to the
employer before the employee’s departure.—Requiring clearance before
the release of last payments to the employee is a standard procedure
among employers, whether public or private. Clearance procedures are
instituted to ensure that the properties, real or personal, belonging to
the employer but are in the possession of the separated employee, are
returned to the employer before the employee’s departure.
Same; Same; Wages; Withholding Wages; As a general rule, employers are
prohibited from withholding wages from employees.—As a general rule,
employers are prohibited from withholding wages from employees. The
Labor Code provides: Art. 116. Withholding of wages and kickbacks
prohibited.—It shall be unlawful for any person, directly or indirectly, to
withhold any amount from the wages of a worker or induce him to give
up any part of his wages by force, stealth, intimidation, threat or by any
other means whatsoever without the worker’s consent.
Same; Same; Non-Diminution of Benefits; The Labor Code prohibits the
elimination or diminution of benefits.—The Labor Code also prohibits the
elimination or diminution of benefits. Thus: Art. 100. Prohibition
against elimination or diminution of benefits.—Nothing in this Book
shall be construed to eliminate or in any way diminish supplements, or
other employee benefits being enjoyed at the time of promulgation of
this Code. However, our law supports the employers’ institution of
clearance procedures before the release of wages. As an exception to the
general rule that wages may not be withheld and benefits may not be
diminished, the Labor Code provides: Art.113. Wage deduction.—No
employer, in his own behalf or in behalf of any person, shall make any
deduction from the wages of his employees, except: 1. In cases where the
worker is insured with his consent by the employer, and the deduction is
to recompense the employer for the amount paid by him as premium on
the insurance; 2. For union dues, in cases where the right of the worker
or his union to check off has been recognized by the employer or
authorized in writing by the individual worker concerned; and 3. In
cases where the employer is authorized by law or regulations issued by the
Secretary of Labor and Employment.
38
Same; Same; The return of the property’s possession became an obligation
or liability on the part of the employees when the employer-employee
relationship ceased.—The return of the property’s possession became an
obligation or liability on the part of the employees when the employer-
employee relationship ceased. Thus, respondent Solid Mills has the right
to withhold petitioners’ wages and benefits because of this existing debt
or liability. In Solas v. Power and Telephone Supply Phils., Inc., et al., 563
SCRA 522 (2008), this court recognized this right of the employer when
it ruled that the employee in that case was not constructively dismissed.
Thus: There was valid reason for respondents’ withholding of
petitioner’s salary for the month of February 2000. Petitioner does not
deny that he is indebted to his employer in the amount of around
P95,000.00. Re-spondents explained that petitioner’s salary for the
period of February 1-15, 2000 was applied as partial payment for his
debt and for withholding taxes on his income; while for the period of
February 15-28, 2000, petitioner was already on absence without leave,
hence, was not entitled to any pay.
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
  Grace Carmel Paredes-Bravo for petitioners.
  Castillo, Laman, Tan, Pantaleon & San Jose for respondent.
 
LEONEN, J.:
 
An employer is allowed to withhold terminal pay and benefits pending
the employee’s return of its properties.
Petitioners are respondent Solid Mills, Inc.’s (Solid Mills)
employees.1 They are represented by the National Federation of Labor
Unions (NAFLU), their collective bargaining agent.2
As Solid Mills’ employees, petitioners and their families were allowed to
occupy SMI Village, a property owned by Solid Mills.3 According to Solid
Mills, this was “[o]ut of liberality and for the convenience of its
employees . . . [and] on the condition that the employees . . . would vacate
the premises anytime the Company deems fit.”4
In September 2003, petitioners were informed that effective October 10,
2003, Solid Mills would cease its operations due to serious business
losses.5 NAFLU recognized Solid Mills’ closure due to serious business
losses in the memorandum of agreement dated September 1, 2003. 6 The
memorandum of agreement provided for Solid Mills’ grant of separation
pay less accountabilities, accrued sick leave benefits, vacation leave
benefits, and 13th month pay to the employees.7 Pertinent portions of the
agreement provide:
WHEREAS, the COMPANY has incurred substantial financial losses and
is currently experiencing further severe financial losses;
WHEREAS, in view of such irreversible financial losses,
the COMPANY will cease its operations on October 10, 2003;
WHEREAS, all employees of the COMPANY on account of irreversible
financial losses, will be dismissed from employment effective October
10, 2003;
In view thereof, the parties agree as follows:
1. That UNION acknowledges that the COMPANY is experiencing severe
financial losses and as a consequence of which, management is
constrained to cease the company’s operations.
2. The UNION acknowledges that under Article 283 of the Labor Code,
separation pay is granted to employees who are dismissed due to
closures or cessation of operations NOT DUE to serious business losses.
3. The UNION acknowledges that in view of the serious business losses
the Company has been experiencing as seen in their audited financial
statements, employees ARE NOT granted separation benefits under the
law.
4. The COMPANY, by way of goodwill and in the spirit of
generosity agrees to grant fi-nancial assistance
less accountabilities to members of the Union based on length of
service to be computed as follows: (Italics in this paragraph supplied)
Number of days – 12.625 for every year of service
5. In view of the above, the members of the UNION will receive such
financial assistance on an equal monthly installments basis based on the
following schedule:
First Check due on January 5, 2004 and every 5th of the month
thereafter until December 5, 2004.
6. The COMPANY commits to pay any accrued benefits the Union
members are entitled to, specifically those arising from sick and vacation
leave benefits and 13th month pay, less accountabilities based on the
following schedule:
One Time Cash Payment to be distributed anywhere from.
...
....
8. The foregoing agreement is entered into with full knowledge by the
parties of their rights under the law and they hereby bind themselves
39
not to conduct any concerted action of whatsoever kind, otherwise the
grant of financial assistance as discussed above will be
withheld.8 (Emphasis in the original)
 
Solid Mills filed its Department of Labor and Employment termination
report on September 2, 2003.9 Later, Solid Mills, through Alfredo Jingco,
sent to petitioners individual notices to vacate SMI Village. 10
Petitioners were no longer allowed to report for work by October 10,
2003.11 They were required to sign a memorandum of agreement with
release and quitclaim before their vacation and sick leave benefits,
13th month pay, and separation pay would be released.12 Employees
who signed the memorandum of agreement were considered to have
agreed to vacate SMI Village, and to the demolition of the constructed
houses inside as condition for the release of their termination benefits
and separation pay.13 Petitioners refused to sign the documents and
demanded to be paid their benefits and separation pay.14
Hence, petitioners filed complaints before the Labor Arbiter for alleged
nonpayment of separation pay, accrued sick and vacation leaves, and
13th month pay.15 They argued that their accrued benefits and
separation pay should not be withheld because their payment is based
on company policy and practice.16 Moreover, the 13th month pay is
based on law, specifically, Presidential Decree No. 851. 17 Their
possession of Solid Mills property is not an accountability that is subject
to clearance procedures.18They had already turned over to Solid Mills
their uniforms and equipment when Solid Mills ceased operations. 19
On the other hand, Solid Mills argued that petitioners’ complaint was
premature because they had not vacated its property. 20
The Labor Arbiter ruled in favor of petitioners. 21According to the Labor
Arbiter, Solid Mills illegally withheld petitioners’ benefits and separation
pay.22Petitioners’ right to the payment of their benefits and separation
pay was vested by law and contract.23 The memorandum of agreement
dated September 1, 2003 stated no condition to the effect that
petitioners must vacate Solid Mills’ property before their benefits could
be given to them.24 Petitioners’ possession should not be construed as
petitioners’ “accountabilities” that must be cleared first before the
release of benefits.25 Their possession “is not by virtue of any employer-
employee relationship.”26 It is a civil issue, which is outside the
jurisdiction of the Labor Arbiter.27
The dispositive portion of the Labor Arbiter’s decision reads:
WHEREFORE, premises considered, judgment is
entered ORDERING respondents SOLID MILLS, INC. and/or PHILIP
ANG (President), in solido to pay the remaining 21 complainants:
1) 19 of which, namely EMER MILAN, RAMON MASANGKAY, ALFREDO
JAVIER, RONALDO DAVID, BONIFACIO MATUNDAN, NORA MENDOZA,
MYRNA IGCAS, RAUL DE LAS ALAS, RENATO ESTOLANO, REX S.
DIMAFELIX, MAURA MILAN, JESSICA BAYBAYON, ALFREDO MENDOZA,
ROBERTO IGCAS, ISMAEL MATA, CARLITO DAMIAN, TEODORA
MAHILOM, MARILOU LINGA, RENATO LINGA their separation pay of
12.625 days’ pay per year of service, prorated 13th month pay for 2003
and accrued vacation and sick leaves, plus 12% interest p.a. from date of
filing of the lead case/judicial demand on 12/08/03 until actual payment
and/or finality;
2) The remaining 2 of which, complainants CLEOPATRA ZACARIAS, as
she already received on 12/19/03 her accrued 13thmonth pay for 2003,
accrued VL/SL total amount of P15,435.16, likewise, complainant Jerry
L. Sesma as he already received his accrued 13th month pay for 2003,
SL/VL in the total amount of P10,974.97, shall be paid only their
separation pay of 12.625 days’ pay per year of service but also with 12%
interest p.a. from date of filing of the lead case/judicial demand on
12/08/03 until actual payment and/or finality, which computation as of
date, amount to as shown in the attached computation sheet.
3) Nine (9) individual complaints viz., of Maria Agojo, Joey Suarez,
Ronaldo Vergara, Ronnie Vergara, Antonio R. Dulo, Sr., Bryan D. Durano,
Silverio P. Durano, Sr., Elizabeth Duarte and Purificacion Malabanan
are DISMISSED WITH PREJUDICEdue to amicable settlement, whereas,
that of [RONIE ARANAS], [EMILITO NAVARRO], [NONILON PASCO],
[GENOVEVA PASCO], [OLIMPIO A. PASCO] are DISMISSED WITHOUT
PREJUDICE, for lack of interest and/or failure to prosecute.
The Computation and Examination unit is directed to cause the
computation of the award in pars. 2 and 3 above.28 (Emphasis in the
original)
 
Solid Mills appealed to the National Labor Relations Commission. 29 It
prayed for, among others, the dismissal of the complaints against it and
the reversal of the Labor Arbiter’s decision.30
The National Labor Relations Commission affirmed paragraph 3 of the
Labor Arbiter’s dispositive portion, but reversed paragraphs 1 and 2.
Thus:
40
WHEREFORE, the Decision of Labor Arbiter Renaldo O. Hernandez dated
10/17/05 is AFFIRMED insofar as par. 3 thereof is concerned but
modified in that paragraphs 1 and 2 thereof are REVERSED and SET
ASIDE. Accordingly, the following complainants, namely: Emir Milan,
Ramon Masangkay, Alfredo Javier, Ronaldo David, Bonifacio Matundan,
Nora Mendoza, Myrna Igcas, Raul De Las Alas, Renato Estolano, Rex S.
Dimaf[e]lix, Maura Milan, Jessica Baybayon, Alfredo Mendoza, Roberto
Igcas, Cleopatra Zacarias and Jerry L. Sesma’s monetary claims in the
form of separation pay, accrued 13th month pay for 2003, accrued
vacation and sick leave pays are held in abeyance pending compliance of
their accountabilities to respondent company by turning over the
subject lots they respectively occupy at SMI Village Sucat, Muntinlupa
City, Metro Manila to herein respondent company. 31
 
The National Labor Relations Commission noted that complainants
Marilou Linga, Renato Linga, Ismael Mata, and Carlito Damian were
already paid their respective separationpays and benefits.32 Meanwhile,
Teodora Mahilom already retired long before Solid Mills’ closure. 33 She
was already given her retirement benefits.34
The National Labor Relations Commission ruled that because of
petitioners’ failure to vacate Solid Mills’ property, Solid Mills was
justified in withholding their benefits and separation pay. 35 Solid Mills
granted the petitioners the privilege to occupy its property on account of
petitioners’ employment.36 It had the prerogative to terminate such
privilege.37 The termination of Solid Mills and petitioners’ employer-
employee relationship made it incumbent upon petitioners to turn over
the property to Solid Mills.38
Petitioners filed a motion for partial reconsideration on October 18,
2010,39 but this was denied in the November 30, 2010 resolution. 40
Petitioners, thus, filed a petition for certiorari41 before the Court of
Appeals to assail the National Labor Relations Commission decision of
August 31, 2010 and resolution of November 30, 2010. 42
On January 31, 2012, the Court of Appeals issued a decision dismissing
petitioners’ petition,43 thus:
WHEREFORE, the petition is hereby ordered DISMISSED.44
 
The Court of Appeals ruled that Solid Mills’ act of allowing its employees
to make temporary dwellings in its property was a liberality on its part.
It may be revoked any time at its discretion. 45 As a consequence of Solid
Mills’ closure and the resulting termination of petitioners, the employer-
employee relationship between them ceased to exist. There was no more
reason for them to stay in Solid Mills’ property. 46 Moreover, the
memorandum of agreement between Solid Mills and the union
representing petitioners provided that Solid Mills’ payment of
employees’ benefits should be “less accountabilities.”47
On petitioners’ claim that there was no evidence that Teodora Mahilom
already received her retirement pay, the Court of Appeals ruled that her
complaint filed before the Labor Arbiter did not include a claim for
retirement pay. The issue was also raised for the first time on appeal,
which is not allowed.48 In any case, she already retired before Solid Mills
ceased its operations.49
The Court of Appeals agreed with the National Labor Relations
Commission’s deletion of interest since it found that Solid Mills’ act of
withholding payment of benefits and separation pay was proper.
Petitioners’ terminal benefits and pay were withheld because of
petitioners’ failure to vacate Solid Mills’ property. 50
Finally, the Court of Appeals noted that Carlito Damian already received
his separation pay and benefits.51 Hence, he should no longer be
awarded these claims.52
In the resolution promulgated on July 16, 2012, the Court of Appeals
denied petitioners’ motion for reconsideration. 53
Petitioners raise in this petition the following errors:
I
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR WHEN IT RULED THAT PAYMENT OF THE
MONETARY CLAIMS OF PETITIONERS SHOULD BE HELD IN ABEYANCE
PENDING COMPLIANCE OF THEIR ACCOUNTABILITIES TO
RESPONDENT SOLID MILLS BY TURNING OVER THE SUBJECT LOTS
THEY RESPECTIVELY OCCUPY AT SMI VILLAGE, SUCAT, MUNTINLUPA
CITY.
II
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR WHEN IT UPHELD THE RULING OF THE NLRC
DELETING THE INTEREST OF 12% PER ANNUM IMPOSED BY THE
HONORABLE LABOR ARBITER HERNANDEZ ON THE AMOUNT DUE
FROM THE DATE OF FILING OF THE LEAD CASE/JUDICIAL DEMAND ON
DECEMBER 8, 2003 UNTIL ACTUAL PAYMENT AND/OR FINALITY.
III
41
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR WHEN IT UPHELD THE RULING OF THE NLRC
DENYING THE CLAIM OF TEODORA MAHILOM FOR PAYMENT OF
RETIREMENT BENEFITS DESPITE LACK OF ANY EVIDENCE THAT SHE
RECEIVED THE SAME.
IV
WHETHER OR NOT PETITIONER CARLITO DAMIAN IS ENTITLED TO HIS
MONETARY BENEFITS FROM RESPONDENT SOLID MILLS.54
 
Petitioners argue that respondent Solid Mills and NAFLU’s memorandum
of agreement has no provision stating that benefits shall be paid only
upon return of the possession of respondent Solid Mills’ property. 55 It
only provides that the benefits shall be “less accountabilities,” which
should not be interpreted to include such possession. 56 The fact that
majority of NAFLU’s members were not occupants of respondent Solid
Mills’ property is evidence that possession of the property was not
contemplated in the agreement.57 “Accountabilities” should be
interpreted to refer only to accountabilities that were incurred by
petitioners while they were performing their duties as employees at the
worksite.58 Moreover, appli-cable laws, company practice, or policies do
not provide that 13th month pay, and sick and vacation leave pay
benefits, may be withheld pending satisfaction of liabilities by the
employee.59
Petitioners also point out that the National Labor Relations Commission
and the Court of Appeals have no jurisdiction to declare that petitioners’
act of withholding possession of respondent Solid Mills’ property is
illegal.60The regular courts have jurisdiction over this issue. 61 It is
independent from the issue of payment of petitioners’ monetary
benefits.62
For these reasons, and because, according to petitioners, the amount of
monetary award is no longer in question, petitioners are entitled to 12%
interest per annum.63
Petitioners also argue that Teodora Mahilom and Carlito Damian are
entitled to their claims. They insist that Teodora Mahilom did not receive
her retirement benefits and that Carlito Damian did not receive his
separation benefits.64
 Respondents Solid Mills and Philip Ang, in their joint comment, argue
that petitioners’ failure to turn over respondent Solid Mills’ property
“constituted an unsatisfied accountability” for which reason “petitioners’
benefits could rightfully be withheld.”65 The term “accountability” should
be given its natural and ordinary meaning.66 Thus, it should be
interpreted as “a state of being liable or responsible,” or
“obligation.”67 Petitioners’ differentiation between accountabilities
incurred while performing jobs at the worksite and accountabilities
incurred outside the worksite is baseless because the agreement with
NAFLU merely stated “accountabilities,” without qualification. 68
On the removal of the award of 12% interest per annum, respondents
argue that such removal was proper since respondent Solid Mills was
justified in withholding the monetary claims.69
Respondents argue that Teodora Mahilom had no more cause of action
for retirement benefits claim.70 She had already retired more than a
decade before Solid Mills’ closure. She also already received her
retirement benefits in 1991.71 Teodora Mahilom’s claim was also not
included in the complaint filed before the Labor Arbiter. It was improper
to raise this claim for the first time on appeal. In any case, Teodora
Mahilom’s claim was asserted long after the three-year prescriptive
period provided in Article 291 of the Labor Code.72
Lastly, according to respondents, it would be unjust if Carlito Damian
would be allowed to receive monetary benefits again, which he,
admittedly, already received from Solid Mills.73
 
I
 
The National Labor Relations Commission may
preliminarily determine issues related to rightsarising from an
employer-employee relationship
 
The National Labor Relations Commission has jurisdiction to determine,
preliminarily, the parties’ rights over a property, when it is necessary to
determine an issue related to rights or claims arising from an employer-
employee relationship.
Article 217 provides that the Labor Arbiter, in his or her original
jurisdiction, and the National Labor Relations Commission, in its
appellate jurisdiction, may determine issues involving claims arising
from employer-employee relations. Thus:
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION.
—(1) Except as otherwise provided under this Code, the Labor Arbiters
shall have original and exclusive jurisdiction to hear and decide within
thirty (30) calendar days after the submission of the case by the parties
for decision without extension, even in the absence of stenographic
42
notes, the following cases involving workers, whether agricultural or
nonagricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that
workers may file involving wages, rates of pay, hours of work and other
terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages
arising from the employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including
questions involving the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare
and maternity benefits, all other claims, arising from employer-employee
relations including those of persons in domestic or household service,
involving an amount exceeding five thousand pesos (P5,000.00), regardless
of whether accompanied with a claim for reinstatement.
(2) The Commission shall have exclusive appellate jurisdiction over all
cases decided by Labor Arbiters. (Emphasis supplied)
 
Petitioners’ claim that they have the right to the immediate release of
their benefits as employees separated from respondent Solid Mills is a
question arising from the employer-employee relationship between the
parties.
Claims arising from an employer-employee relationship are not limited
to claims by an employee. Employers may also have claims against the
employee, which arise from the same relationship.
In Bañez v. Valdevilla,74 this court ruled that Article 217 of the Labor
Code also applies to employers’ claim for damages, which arises from or
is connected with the labor issue. Thus:
Whereas this Court in a number of occasions had applied the
jurisdictional provisions of Article 217 to claims for damages filed by
employees, we hold that by the designating clause “arising from the
employer-employee relations” Article 217 should apply with equal force
to the claim of an employer for actual damages against its dismissed
employee, where the basis for the claim arises from or is necessarily
connected with the fact of termination, and should be entered as a
counterclaim in the illegal dismissal case.75
Bañez was cited in Domondon v. National Labor Relations
Commission.76 One of the issues in Domondon is whether the Labor
Arbiter has jurisdiction to decide an issue on the transfer of ownership
of a vehicle assigned to the employee. It was argued that only regular
courts have jurisdiction to decide the issue.77
This court ruled that since the transfer of ownership of the vehicle to the
employee was connected to his separation from the employer and arose
from the employer-employee relationship of the parties, the employer’s
claim fell within the Labor Arbiter’s jurisdiction. 78
As a general rule, therefore, a claim only needs to be sufficiently connected
to the labor issue raised and must arise from an employer-employee
relationship for the labor tribunals to have jurisdiction.
In this case, respondent Solid Mills claims that its properties are in
petitioners’ possession by virtue of their status as its employees.
Respondent Solid Mills allowed petitioners to use its property as an act
of liberality. Put in other words, it would not have allowed petitioners to
use its property had they not been its employees. The return of its
properties in petitioners’ possession by virtue of their status as
employees is an issue that must be resolved to determine whether
benefits can be released immediately. The issue raised by the employer
is, therefore, connected to petitioners’ claim for benefits and is
sufficiently intertwined with the parties’ employer-employee
relationship. Thus, it is properly within the labor tribunals’ jurisdiction.
 
II
 
Institution of clearance procedures has legal bases
 
Requiring clearance before the release of last payments to the employee
is a standard procedure among employers, whether public or private.
Clearance procedures are instituted to ensure that the properties, real or
personal, belonging to the employer but are in the possession of the
separated employee, are returned to the employer before the employee’s
departure.
As a general rule, employers are prohibited from withholding wages
from employees. The Labor Code provides:
Art. 116. Withholding of wages and kickbacks prohibited.—It shall
be unlawful for any person, directly or indirectly, to withhold any
amount from the wages of a worker or induce him to give up any part of
43
his wages by force, stealth, intimidation, threat or by any other means
whatsoever without the worker’s consent.
 
The Labor Code also prohibits the elimination or diminution of benefits.
Thus:
Art. 100. Prohibition against elimination or diminution of benefits.
—Nothing in this Book shall be construed to eliminate or in any way
diminish supplements, or other employee benefits being enjoyed at the
time of promulgation of this Code.
 
However, our law supports the employers’ institution of clearance
procedures before the release of wages. As an exception to the general
rule that wages may not be withheld and benefits may not be
diminished, the Labor Code provides:
Art. 113. Wage deduction.—No employer, in his own behalf or in
behalf of any person, shall make any deduction from the wages of his
employees, except:
1. In cases where the worker is insured with his consent by the
employer, and the deduction is to recompense the employer for the
amount paid by him as premium on the insurance;
2. For union dues, in cases where the right of the worker or his union
to check off has been recognized by the employer or authorized in
writing by the individual worker concerned; and
3. In cases where the employer is authorized by law or regulations issued
by the Secretary of Labor and Employment. (Emphasis supplied)
 
The Civil Code provides that the employer is authorized to withhold
wages for debts due:
Article 1706. Withholding of the wages, except for a debt due, shall not
be made by the employer.
 
“Debt” in this case refers to any obligation due from the employee to the
employer. It includes any accountability that the employee may have to
the employer. There is no reason to limit its scope to uniforms and
equipment, as petitioners would argue.
More importantly, respondent Solid Mills and NAFLU, the union
representing petitioners, agreed that the release of petitioners’ benefits
shall be “less accountabilities.”
“Accountability,” in its ordinary sense, means obligation or debt. The
ordinary meaning of the term “accountability” does not limit the
definition of accountability to those incurred in the worksite. As long as
the debt or obligation was incurred by virtue of the employer-employee
relationship, generally, it shall be included in the employee’s
accountabilities that are subject to clearance procedures.
It may be true that not all employees enjoyed the privilege of staying in
respondent Solid Mills’ property. However, this alone does not imply
that this privilege when enjoyed was not a result of the employer-
employee relationship. Those who did avail of the privilege were
employees of respondent Solid Mills. Petitioners’ possession should,
therefore, be included in the term “accountability.”
Accountabilities of employees are personal. They need not be uniform
among all employees in order to be included in accountabilities incurred
by virtue of an employer-employee relationship.
Petitioners do not categorically deny respondent Solid Mills’ ownership
of the property, and they do not claim superior right to it. What can be
gathered from the findings of the Labor Arbiter, National Labor
Relations Commission, and the Court of Appeals is that respondent Solid
Mills allowed the use of its property for the benefit of petitioners as its
employees. Petitioners were merely allowed to possess and use it out of
respondent Solid Mills’ liberality. The employer may, therefore, demand
the property at will.79
The return of the property’s possession became an obligation or liability
on the part of the employees when the employer-employee relationship
ceased. Thus, respondent Solid Mills has the right to withhold
petitioners’ wages and benefits because of this existing debt or liability.
In Solas v. Power and Telephone Supply Phils., Inc., et al., this court
recognized this right of the employer when it ruled that the employee in
that case was not constructively dismissed.80Thus:
There was valid reason for respondents’ withholding of petitioner’s
salary for the month of February 2000. Petitioner does not deny that he
is indebted to his employer in the amount of around P95,000.00.
Respondents explained that petitioner’s salary for the period of
February 1-15, 2000 was applied as partial payment for his debt and for
withholding taxes on his income; while for the period of February 15-28,
2000, petitioner was already on absence without leave, hence, was not
entitled to any pay.81
 
The law does not sanction a situation where employees who do not even
assert any claim over the employer’s property are allowed to take all the
44
benefits out of their employment while they simultaneously withhold
possession of their employer’s property for no rightful reason.
Withholding of payment by the employer does not mean that the
employer may renege on its obligation to pay employees their wages,
termination payments, and due benefits. The employees’ benefits are
also not being reduced. It is only subjected to the condition that the
employees return properties properly belonging to the employer. This is
only consistent with the equitable principle that “no one shall be
unjustly enriched or benefited at the expense of another.” 82
For these reasons, we cannot hold that petitioners are entitled to
interest of their withheld separation benefits. These benefits were
properly withheld by respondent Solid Mills because of their refusal to
return its property.
 
III
 
Mahilom and Damian are not entitled to the benefits claimed
 
Teodora Mahilom is not entitled to separation benefits.
Both the National Labor Relations Commission and the Court of Appeals
found that Teodora Mahilom already retired long before respondent
Solid Mills’ closure. They found that she already received her retirement
benefits. We have no reason to disturb this finding. This court is not a
trier of facts. Findings of the National Labor Relations Commission,
especially when affirmed by the Court of Appeals, are binding upon this
court.83
Moreover, Teodora Mahilom’s claim for retirement benefits was not
included in her complaint filed before the Labor Arbiter. Hence, it may
not be raised in the appeal.
Similarly, the National Labor Relations Commission and the Court of
Appeals found that Carlito Damian already received his terminal
benefits. Hence, he may no longer claim terminal benefits.
The fact that respondent Solid Mills has not yet demolished Carlito
Damian’s house in SMI Village is not evidence that he did not receive his
benefits. Both the National Labor Relations Commission and the Court of
Appeals found that he executed an affidavit stating that he already
received the benefits.
Absent any showing that the National Labor Relations Commission and
the Court of Appeals misconstrued these facts, we will not reverse these
findings.
Our laws provide for a clear preference for labor. This is in recognition of
the asymmetrical power of those with capital when they are left to
negotiate with their workers without the standards and protection of
law. In cases such as these, the collective bargaining unit of workers is
able to get more benefits and in exchange, the owners are able to
continue with the program of cutting their losses or wind down their
operations due to serious business losses. The company in this case did
all that was required by law.
The preferential treatment given by our law to labor, however, is not a
license for abuse.84 It is not a signal to commit acts of unfairness that will
unreasonably infringe on the property rights of the company. Both labor
and employer have social utility, and the law is not so biased that it does
not find a middle ground to give each their due.
Clearly, in this case, it is for the workers to return their housing in
exchange for the release of their benefits. This is what they agreed upon.
It is what is fair in the premises.
WHEREFORE, the petition is DENIED. The Court of Appeals’ decision
is AFFIRMED.
Carpio (Chairperson), Velasco, Jr.,** Del Castillo and Mendoza, JJ., concur.
Petition denied, judgment affirmed.
Notes.—The Secretary of Labor has no jurisdiction in cases where
employer-employee relationship has been terminated. We thus sustain
the Labor Arbiter’s award of double indemnity. (Grand Asian Shipping
Lines, Inc. vs. Galvez, 715 SCRA 1 [2014])
The Non-Diminution Rule found in Article 100 of the Labor Code
explicitly prohibits employers from eliminating or reducing the benefits
received by their employees. This rule, however, applies only if the
benefit is based on an express policy, a written contract, or has ripened
into a practice. (Wesleyan University-Philippines vs. Wesleyan University-
Philippines Faculty and Staff Association, 718 SCRA 601 [2014])
——o0o——
45

MANAGEMENT PREROGRATIVE
WHAT IS THE SCOPE OF MANAGEMENT PREROGATIVE?
 
 
G.R. No. 194765. April 23, 2018.*
 
MARSMAN & COMPANY, INC., petitioner, vs. RODIL C. STA. RITA,
respondent.
Labor Law; Employer-Employee Relationship; The issue of whether or not
an employer-employee relationship exists in a given case is essentially a
question of fact.—The issue of whether or not an employer-employee
relationship exists in a given case is essentially a question of fact. As a
rule, this Court is not a trier of facts and this applies with greater force in
labor cases. This petition however falls under the exception because of
variance in the factual findings of the Labor Arbiter, the NLRC and the
Court of Appeals. Indeed, on occasion, the Court is constrained to wade
into factual matters when there is insufficient or insubstantial evidence
on record to support those factual findings; or when too much is
concluded, inferred or deduced from the bare or incomplete facts
appearing on record.
Same; Termination of Employment; Illegal Dismissals; Before a case for
illegal dismissal can prosper, an employer-employee relationship must first
be established.—Settled is the tenet that allegations in the complaint
must be duly proven by competent evidence and the burden of proof is
on the party making the allegation. In an illegal dismissal case, the onus
probandi rests on the employer to prove that its dismissal of an
employee was for a valid cause. However, before a case for illegal
dismissal can prosper, an employer-employee relationship must first be
established. In this instance, it was incumbent upon Sta. Rita as the
complainant to prove the employer-employee relationship by
substantial evidence. Unfortunately, Sta. Rita failed to discharge the
burden to prove his allegations.
Mercantile Law; Corporations; Corporate Spin-Off; In business parlance, a
corporate spin-off occurs when a department, division or portions of the
corporate business enterprise is sold off or assigned to a new corporation
that will arise by the process which may constitute it into a subsidiary of
the original corporation.—It is imperative to point out that the
integration and transfer was a necessary consequence of the business
transition or corporate reorganization that Marsman and CPDSI had
undertaken, which had the characteristics of a corporate spin-off. To
recall, a proviso in the Memorandum of Agreement limited Marsman’s
function into that of a holding company and transformed CPDSI as its
main operating company. In business parlance, a corporate spin-off
occurs when a department, division or portions of the corporate
business enterprise is sold off or assigned to a new corporation that will
arise by the process which may constitute it into a subsidiary of the
original corporation.
Labor Law; Employer-Employee Relationship; The Four (4)-Fold Test to
Determine the Existence of Employer-Employee Relationship.—Sta. Rita
also failed to satisfy the four-fold test which determines the existence of
an employer-employee relationship. The elements of the four-fold test
are: 1) the selection and engagement of the employees; 2) the payment
of wages; 3) the power of dismissal; and 4) the power to control the
employee’s conduct. There is no hard-and-fast rule designed to establish
the aforesaid elements. Any competent and relevant evidence to prove
the relationship may be admitted. Identification cards, cash vouchers,
social security registration, appointment letters or employment
contracts, payrolls, organization charts, and personnel lists, serve as
evidence of employee status.
Same; Employment Contracts; A labor contract merely creates an
action in personam and does not create any real right which should be
respected by third parties.—A labor contract merely creates an action in
personam and does not create any real right which should be respected
by third parties. This conclusion draws its force from the right of an
employer to select his/her employees and equally, the right of the
employee to refuse or voluntarily terminate his/her employment with
his/her new employer by resigning or retiring. That CPDSI took Sta. Rita
into its employ and assigned him to one of its clients signified the
former’s acquiescence to the transfer.
PETITION for review on certiorari of the decision and resolution of the
Court of Appeals.
The facts are stated in the opinion of the Court.
  Laguesma, Magsalin, Consulta & Gastardo for petitioner.
     Arthur P. Rivera for respondent.
46
LEONARDO-DE CASTRO,**   J.:
 
Before Us is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court filed by Marsman & Company, Inc. (Marsman), now
Metro Alliance Holdings & Equities Corporation, seeking the annulment
and reversal of the Decision1 dated June 25, 2010 and the
Resolution2 dated December 9, 2010 of the Court of Appeals in C.A.-G.R.
S.P. No. 106516. The appellate court’s issuances reversed the
Decision3 dated July 31, 2008 of the National Labor Relations
Commission (NLRC) in NLRC NCR Case No. 30-01-00362-00 (NLRC CA
No. 032892-02) dismissing respondent Rodil C. Sta. Rita’s (Sta. Rita’s)
complaint and the Resolution4 denying his motion for reconsideration.
The Court of Appeals instead found Marsman guilty of illegal dismissal
and ordered the company to pay for backwages, separation pay, moral
damages, exemplary damages and attorney’s fees.
Marsman, a domestic corporation, was formerly engaged in the business
of distribution and sale of pharmaceutical and consumer products for
different manufacturers within the country. 5 Marsman purchased Metro
Drug Distribution, Inc. (Metro Drug), now Consumer Products
Distribution Services, Inc. (CPDSI), which later became its business
successor-in-interest. The business transition from Marsman to CPDSI
generated confusion as to the actual employer of Sta. Rita at the time of
his dismissal.
Marsman temporarily hired Sta. Rita on November 16, 1993 as a
warehouse helper with a contract that was set to expire on April 16,
1994, and paid him a monthly wage of P2,577.00. After the contract
expired, Marsman rehired Sta. Rita as a warehouseman and placed him
on probationary status on April 18, 1994 with a monthly salary of
P3,166.00.6 Marsman then confirmed Sta. Rita’s status as a regular
employee on September 18, 1994 and adjusted his monthly wage to the
recognized sole and exclusive bargaining representative of Marsman’s
employees.7
Marsman administered Sta. Rita’s warehouse assignments. Initially,
Marsman assigned Sta. Rita to work in its GMA warehouse. Marsman
then transferred Sta. Rita to Warehouses C and E of Kraft General Foods,
Inc. on September 5, 1995. Thereafter, Marsman reassigned Sta. Rita to
Marsman Consumer Product Division Warehouse D in ACSIE,
Parañ aque.8
Sometime in July 1995, Marsman purchased Metro Drug, a company that
was also engaged in the distribution and sale of pharmaceutical and
consumer products, from Metro Pacific, Inc. The similarity in Marsman’s
and Metro Drug’s business led to the integration of their employees
which was formalized in a Memorandum of Agreement,9 dated June
1996, which provides:
MARSMAN & COMPANY, INC.
City of Makati
 
MEMORANDUM OF AGREEMENT
 
MARSMAN AND CO., INC. hereinafter referred to as the MANAGEMENT,
represented by MR. JOVEN D. REYES, Group President and Chief
Executive Officer and the MARSMAN EMPLOYEES UNION-PSMM/DFA as
the Union, represented hereinafter by MR. BONIFACIO M. PANALIGAN,
PSMM President,
WITNESSETH, THAT:
WHEREAS, Marsman Employees Union-PSMM/DFA is the recognized
sole and exclusive bargaining representative of Marsman & Co., Inc.
regular employees in the rank-and-file and nonmanagerial category
except those excluded in Article I, Section 2 of their existing CBA signed
last June 1995;
WHEREAS, Marsman & Co., Inc. bought Metro Drug Distribution, Inc.
from Metro Pacific, Inc. last July 1995;
WHEREAS, the Management of Marsman & Co., Inc. decided to limit
Marsman & Co., Inc.’s, functions to those of a holding company and
run Metro Drug Distribution, Inc. as the main operating company;
WHEREAS, in view of this, Management decided to integrate the
employees of Marsman & Co., Inc. and Metro Drug Distribution, Inc.
effective July 1, 1996 under the Metro Drug legal entity;
THEREFORE, Management and Marsman Employees Union PSMM/DFA
agree:
1. That, the Union acknowledges Management’s decision to
transfer all employees of Marsman, including members of MEU-
PSMM/DFA, to Metro Drug Distribution, Inc.
2. That, the Management recognizes the Marsman Employees Union-
PSMM/DFA as the exclusive bargaining representative of all the rank-
and-file employees transferred from Marsman & Co., Inc. to Metro Drug
Distribution, Inc. and the other employees who may join the Union later.
3. That, the name of Marsman Employees Union-PSMM/DFA is
retained.
47
4. That, the tenure or service years of all employees transferred shall
be recognized and carried over and will be included in the
computation/consideration of their retirement and other benefits.
5. That, the provisions of the existing Collective Bargaining Agreement
signed last June 1995 and the Memorandum of Agreement signed also
last June 1995 will be respected, honored and continue to be
implemented until expiry or until superseded as per item 8 below.
6. That, there will be no diminution of present salaries and benefits
being enjoyed even after the transfer.
7. That, upon transfer of MCI employees to Metro Drug Distribution,
Inc. all employees covered by the CBA or otherwise shall enjoy the same
terms and conditions of employment prior to transfer and shall continue
to enjoy the same including company practice until a new CBA is
concluded.
8. That, all of the above rights and obligations of the parties pertaining
to the recognition of the union as exclusive bargaining representative,
the effectivity, coverage and validity of the CBA and all other issues
relative to the representation of the former Marsman employees are
subject to and be superseded by the result of a Certification Election
between Marsman Employees Union-PSMM/DFA and Metro Drug Corp.
Employees Association-FFW in 1996 or at a date to be agreed upon by
MEU and MDCEA as coordinated by the DOLE, and by any agreement
that may be entered into by management and the winner in said
certification election.
9. That, upon transfer, the Management agrees to address all
pending/unresolved grievances and issues lodged by Marsman
Employees Union-PSMM/DFA.
10. That, also upon transfer, the Management agrees to continue
negotiation of Truckers and Forwarders issue as stipulated in the MOA
signed last June, 1995.
11. That, Management and Union may continue to negotiate/discuss
other concerns/issues with regard to the transfer and integration.
IN WITNESS WHEREOF, the parties have caused this document to be
executed by their authorized representatives this ______ day of June, 1996
at Makati City. [Emphases supplied]
 
MARSMAN & COMPANY, INC.
        (signed)
JOVED D. REYES
President & Chief Exec. Officer
 
MARSMAN EMPLOYEES UNION-PSSM/DFA
                 (signed)
BONIFACIO M. PANALIGAN
                 President
 
Witnessed by:
    (signed)                                        (signed)
  LUISITO N. REYES         JOSE MILO M. GILLESANIA
  Vice-President                      1st Vice President
Finance & Administration         MEU-PSMM/DFA
 
Attested by:
(signed)
ABNER M. PADILLA
Conciliator-Mediator
NCMB, DOLE
 
Concomitant to the integration of employees is the transfer of all office,
sales and warehouse personnel of Marsman to Metro Drug and the
latter’s assumption of obligation with regard to the affected employees’
labor contracts and Collective Bargaining Agreement. The integration
and transfer of employees ensued out of the transitions of Marsman and
CPDSI into, respectively, a holding company and an operating company.
Thereafter, on November 7, 1997, Metro Drug amended its Articles of
Incorporation by changing its name to “Consumer Products Distribution
Services, Inc.” (CPDSI) which was approved by the Securities and
Exchange Commission.10
In the meantime, on an unspecified date, CPDSI contracted its logistic
services to EAC Distributors (EAC). CPDSI and EAC agreed that CPDSI
would provide warehousemen to EAC’s tobacco business which
operated in EAC-Libis Warehouse. A letter issued by Marsman confirmed
Sta. Rita’s appointment as one of the warehousemen for EAC-Libis
Warehouse, effective October 13, 1997, which also stated that the
assignment was a “transfer that is part of our cross-training program.” 11
Parenthetically, EAC’s use of the EAC-Libis Warehouse was dependent
upon the lease contract between EAC and Valiant Distribution (Valiant),
owner of the EAC-Libis Warehouse. Hence, EAC’s operations were
affected when Valiant decided to terminate their contract of lease on
January 31, 2000. In response to the cessation of the contract of lease,
48
EAC transferred their stocks into their own warehouse and decided to
operate the business by themselves, thereby ending their logistic service
agreement with CPDSI.12
This sequence of events left CPDSI with no other option but to terminate
the employment of those assigned to EAC-Libis Warehouse, including
Sta. Rita. A letter13 dated January 14, 2000, issued by Michael Leo T.
Luna, CPDSI’s Vice President and General Manager, notified Sta. Rita that
his services would be terminated on February 28, 2000 due to
redundancy. CPDSI rationalised that they could no longer accommodate
Sta. Rita to another work or position. CPDSI however guaranteed Sta.
Rita’s separation pay and other employment benefits. The letter is
reproduced in full as follows:
 
MARSMAN CONSUMER PRODUCTS DISTRIBUTION
   SERVICES, INC.
       January 14, 2000
 
MR. RODIL STA. RITA
Warehouse Supervisor
EAC Libis Operation
Libis, Quezon City
Dear Rodil,
 
As we have earlier informed you, EAC Distributors, Inc. has advised us
that their Lessor, Valiant Distribution has terminated their lease contract
effective January 31, 2000.
Accordingly, we were informed by EAC Distributors, Inc., that they will
no longer need our services effective on the same date. As a result
thereof, your position as warehouseman will become redundant
thereafter.
We have exerted efforts to find other work for you to do or other
positions where you could be accommodated. Unfortunately, our efforts
proved futile.
In view thereof, we regret to inform you that your services will be
terminated effective upon the close of business hours on the 28 th of
February, 2000.
You will be paid separation pay and other employment benefits in
accordance with the company policies and the law, the details of which
shall be discussed with you by your immediate superior.
In order to cushion the impact of your separation from the service and to
give you ample time to look for other employment elsewhere, you need
not report for work from the 18th of January up the end of February,
2000, although you will remain in the payroll of the company and will be
paid the salary corresponding to this period.
We thank you for your contribution to this organization and we wish you
well in your future endeavors.
Sincerely,
(signed)
MICHAEL LEO T. TUNA
          Vice President & General Manager14
CPDSI thereafter reported the matter of redundancy to the Department
of Labor and Employment in a letter15 dated January 17, 2000, conveying
therein Sta. Rita’s impending termination. The letter stated:
 
The Regional Director
Department of Labor & Employment
National Capital Region
Palacio De Gobernador
Intramuros, Manila
Dear Sir:
In compliance with the provisions of Article 283 of the Labor Code, as
amended, Consumer Products Distribution Services, Inc. (CPDSI)
“Company” hereby gives notice that our company is implementing a
comprehensive streamlining program affecting levels of employment
with the objective of further reducing operating expenses and to cope
with the current economic difficulties. The employment of the
employees occupying such positions and whose names are enumerated
in the attachment list of (Annex “A”) will be terminated.
In accordance with law, the above enumerated employees will be paid
their separation pay in due course. Individual notices of the termination
of employment of said employees have already been served upon them.
 
Very truly yours,
 
CONSUMER PRODUCTS DISTRIBUTION
SERVICES, INC.
 
49
BY:
(signed)
MICHAEL LEO T. LUNA
Vice President and General Manager
 
x x x x
Aggrieved, Sta. Rita filed a complaint in the NLRC, National Capital
Region-Quezon City against Marsman on January 25, 2000 for illegal
dismissal with damages in the form of moral, exemplary, and actual
damages and attorney’s fees. Sta. Rita alleged that his dismissal was
without just or authorized cause and without compliance with
procedural due process. His affidavit-complaint reads:
 
RODIL C. STA. RITA, of legal age, single, Filipino citizen, with residence
and postal address at 1128 R. Papa Street, Bo. Obrero, Tondo, Manila
being under oath hereby deposes and says:
1. He was employed with Marsman on November 16, 1993, with offices
and address at Manalac Avenue, Taguig, Metro Manila, as warehouseman
with a basic salary P3,790.00 more (sic);
2. As a regular employee, his salary was increased by P1,600.00 in 1995;
in 1996 was increased by P1,300.00; in 1997 was increased by
P1,050.00, making a total of P7,740.00 up to his separation from
employment on January 18, 2000 x x x;
3. He cannot fathom to know why he was terminated from employment,
save the better (sic) of Mr. Michael Leo T. Luna, Vice President and
General Manager of Marsman Company (Consumer Products
Distribution Services, Inc.) on January 14, 2000;
4. His termination from employment is in diametric opposition to Art VI.
Sec. 3(d) of the CBA and to Art. 282 of the Labor Code, as amended, i.e.,
he was no[t] given the 30-day period prior to his termination, making his
dismissal as illegal per se;
5. In the absence of any derogatory record of Mr. Rodil Sta. Rita for six
(6) years, he is entitled to moral and exemplary damages, in addition to
backwages and separation pay, short of reinstatement and without loss
of seniority rights.17
Marsman filed a Motion to Dismiss18 on March 16, 2000 on the premise
that the Labor Arbiter had no jurisdiction over the complaint for illegal
dismissal because Marsman is not Sta. Rita’s employer. Marsman
averred that the Memorandum of Agreement effectively transferred Sta.
Rita’s employment from Marsman and Company, Inc. to CPDSI. Said
transfer was further verified by Sta. Rita’s: 1) continued work in CPDSI’s
premises; 2) adherence to CPDSI’s rules and regulations; and 3) receipt
of salaries from CPDSI. Moreover, Marsman asserted that CPDSI
terminated Sta. Rita.
Labor Arbiter Gaudencio P. Demaisip, Jr. (Demaisip) rendered his
Decision19 on April 10, 2002 finding Marsman guilty of illegal dismissal,
thus:
This Office finds in favor of the complainant.
Article 167 of the Labor Code defines employer, to wit:
“Employer means any person, natural or juridical, employing the
services of the employee.”
Likewise, Article 212 of the Labor Code defines employer in this wise:
“Employer includes any person acting in the interest of an employer
directly or indirectly.”
 
Consumer did not perform any act, thru its responsible officer, to show
that it had employed the complainant. Nevertheless, Marsman acted in
the interest of Consumer because “sometime in 1996, for purposes of
efficiency and economy Marsman integrated its distribution business
with the business operations of Consumer Products Distribution
Services, Inc. x x x” and “in line with the integration of the distribution
businesses of Marsman and CPDSI, the employment of all Marsman
office, sales, and warehouse personnel was transferred to CPDSI. x x x”
 Thusly, Marsman qualifies as the employer of the complainant under the
aforequoted provisions of the Labor Code.
The MOA was concluded between Marsman and Co., Inc. and Marsman
Employees Union-PSMM/DFA. A perusal of its contents show that
50
matters, concerning terms and conditions of employment, were
contracted and concluded.
On the contrary, the MOA is a piece of evidence that Marsman is the
employer of complainant because it is solely the employer who can
negotiate and conclude the terms and conditions of employment of the
workers.
Ironically, the MOA does not establish the contention that Consumer is
the employer of the complainant.
Rule XVI of Department Order No. 9, Series of 1997, which took effect on
June 21, 1997, requires among others, the ratification by the majority of
all workers in the Collective Bargaining Unit of the Agreement. The
noncompliance of the requirement, under said Department Order,
renders the MOA ineffective.
Further, it may be concluded that the Consumer is an agent of
respondent Marsman, because the former does “[t]he employment of all
Marsman office sales, and warehouse personnel x x x.”
Nevertheless, the employer of the complainant is Marsman and
Company, Inc.
In illegal dismissal, the burden, to establish the just cause of termination,
rest on the employer. The records of this case [are] devoid of the
existence of such cause. Indeed, the respondent Marsman and Company,
Inc. failed to show the cause of complainant’s dismissal, warranting the
twin remedies of reinstatement and backwages. However, insofar as
reinstatement is concerned, this remedy appears to be impractical
because, as gleaned from the position paper of [Sta. Rita], there is
uncertainty in the availability of assignment for the complainant.
Instead, the payment of separation pay equivalent to one half month for
every year or a fraction of at least six (6) months be considered as one
year, would be equitable.
The rest of the claims are dismissed for lack of merit.
WHEREFORE, premises considered, the complainant is herein declared
to have been illegally dismissed. Marsman and Company, Inc. is directed
to pay the complainant backwages and separation pay on the total
amount of P152,757.55.20
Marsman appealed the foregoing Decision arguing that the Labor Arbiter
had no jurisdiction over the complaint because an employer-employee
relationship did not exist between the party-litigants at the time of Sta.
Rita’s termination. Furthermore, Marsman stated that the ratification
requirement under Rule XVI of Department Order No. 9, Series of
199721 applied only to Collective Bargaining Agreements, and the
Memorandum of Agreement was certainly not a replacement for the
Collective Bargaining Agreement which Marsman and MEU entered into
in the immediately succeeding year prior to the ratification of the
Memorandum of Agreement. Marsman also maintained that it had a
personality that was separate and distinct from CPDSI thus it may not be
made liable to answer for acts or liabilities of CPDSI and vice versa.
Finally, Marsman claimed that Sta. Rita was validly declared redundant
when CPDSI’s logistics agreement with EAC was not renewed.22
Sta. Rita filed his own appeal, contesting the failure of the Labor Arbiter
to award him moral and exemplary damages, and attorney’s fees.
REGISTRATION OF COLLECTIVE BARGAINING AGREEMENTS
Section 1. Registration of collective bargaining agreement.—The
parties to a collective bargaining agreement shall submit to the
appropriate Regional Office two (2) duly signed copies thereof within
thirty (30) calendar days from execution. Such copies of the agreement
shall be accompanied with verified proof of posting in two conspicuous
places in the work place and of ratification by the majority of all the
workers in the bargaining unit. 
Such proof shall consist of copies of the following documents certified
under oath by the union secretary and attested to by the union
president:
(a) Statement that the collective bargaining agreement was posted in
at least two conspicuous places in the establishment at least five (5) days
before its ratification; and
(b) Statement that the collective bargaining agreement was ratified by
the majority of the employees in the bargaining unit.
22  Records, p. 149.
 The NLRC in its Decision dated July 31, 2008, reversed Labor Arbiter
Demaisip’s Decision and found that there was no employer-employee
relationship between Marsman and Sta. Rita. The NLRC held:
Applying the four-fold test in determining the existence of employer-
employee relationship fails to convince Us that complainant is
respondent Marsman’s employee.
On selection and engagement, by complainant’s transfer to CPDSI, he had
become the employee of CPDSI. It should be emphasized that respondent
Marsman and CPDSI are corporate entities which are separate and
distinct from one another.
51
On payment of wages, it was CPDSI which paid complainant’s salaries
and benefits. Complainant never claimed that it was still respondent
Marsman which paid his salaries.
On the power of dismissal, after EAC’s lease contract expired deciding to
transfer its stock to its own warehouse and handle its warehousing
operations, complainant was left without any work. CPDSI decided to
terminate his services by issuing him a termination notice on January 14,
2000.
On the employer’s power to control the employee with respect to the
means and methods by which his work is to be accomplished,
complainant was under the control and supervision of CPDSI
concomitant to the logistic services which respondent Marsman had
integrated to that of CPDSI. CPDSI saw to it that its obligation to provide
logistic services to its client EAC is carried out with complainant working
as warehouseman in the warehouse rented by EAC. The power of control
is the most decisive factor in determining the existence of an employer-
employee relationship. x x x.
Having determined that employer-employee relationship does not exist
between complainant and respondent Marsman, complainant has no
cause of action for illegal dismissal against the latter. There is no
necessity to resolve the [other] issues.
WHEREFORE, premises considered, the Decision of the Labor Arbiter is
VACATED and SET ASIDE. A NEW decision is entered dismissing the
complaint for lack of employer-employee relationship.23
In a Resolution dated November 11, 2008, the NLRC denied Sta. Rita’s
motion for reconsideration because his motion “raised no new matters
of substance which would warrant reconsideration of the Decision of
[the] Commission.”24
Sta. Rita filed before the Court of Appeals a Petition
for Certiorari25 imputing grave abuse of discretion on the part of the
NLRC for 1) finding a lack of employer-employee relationship between
the party-litigants; and 2) not awarding backwages, separation pay,
damages and attorney’s fees.
The Court of Appeals promulgated its Decision on June 25, 2010,
reversing the NLRC’s Decision. The Court of Appeals held that Marsman
was Sta. Rita’s employer because Sta. Rita was allegedly not part of the
integration of employees between Marsman and CPDSI. The Court gave
credence to Sta. Rita’s contention that he purposely refused to sign the
Memorandum of Agreement because such indicated his willingness to be
transferred to CPDSI. In addition, the appellate court considered Sta.
Rita’s assignment to the EAC-Libis Warehouse as part of Marsman’s
cross-training program, concluding that only Sta. Rita’s work assignment
was transferred and not his employment.
The appellate court also found no merit in the NLRC’s contention that
CPDSI paid Sta. Rita’s salaries and that it exercised control over the
means and methods by which Sta. Rita performed his tasks. On the
contrary, the Court of Appeals observed that Sta. Rita filed his
applications for leave of absence with Marsman. Finally, the Court of
Appeals adjudged that CPDSI, on the assumption that it had the authority
to dismiss Sta. Rita, did not comply with the requirements for the valid
implementation of the redundancy program.
The dispositive portion of the Court of Appeals’ Decision reads:
WHEREFORE, the instant petition for certiorari is GRANTED. The
assailed Decision and Resolution of the public respondent National
Labor Relations Commission are ANNULLED and SET ASIDE. Judgment is
rendered declaring petitioner Rodil C. [Sta. Rita’s] dismissal from work
as illegal and accordingly, private respondent Marsman and Company,
Inc. is ordered to pay said [respondent] the following:
1. backwages computed from 18 January 2000 up to the finality of this
Decision;
2. separation pay in lieu of reinstatement computed at the rate of one (1)
month pay for every year of service from 16 November 1993 up to the
finality of this Decision;
3. the amount of P15,000.00 as moral damages;
4. the amount of P15,000.00 as exemplary damages; and
5. the amount equivalent to 10% of his total monetary award, as and for
attorney’s fees.
 
Let this case be REMANDED to the Labor Arbiter for the purpose of
computing, with reasonable dispatch, petitioner’s monetary awards as
above discussed.26
 
Hence, Marsman lodged the petition before us raising the lone issue:
WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS
SERIOUSLY ERRED IN DECIDING A QUESTION OF SUBSTANCE IN A
MANNER NOT IN ACCORD WITH THE LAW, APPLICABLE DECISIONS OF
THIS HONORABLE COURT AND EVIDENCE ON RECORD WHEN IT
ANNULLED AND SET ASIDE THE NLRC’S DECISION AND RESOLUTION
EFFECTIVELY RULING THAT [STA. RITA] WAS ILLEGALLY DISMISSED
FROM SERVICE WHEN THE LATTER COULD NOT HAVE BEEN
52
DISMISSED AT ALL ON ACCOUNT OF THE ABSENCE OF EMPLOYER-
EMPLOYEE RELATIONSHIP BETWEEN SAID [STA. RITA] AND THE
COMPANY.27
 
Simply stated, the issue to be resolved is whether or not an employer-
employee relationship existed between Marsman and Sta. Rita at the
time of Sta. Rita’s dismissal.
This petition is impressed with merit.
The issue of whether or not an employer-employee relationship exists in
a given case is essentially a question of fact. As a rule, this Court is not a
trier of facts and this applies with greater force in labor cases. 28 This
petition however falls under the exception because of variance in the
factual findings of the Labor Arbiter, the NLRC and the Court of Appeals.
Indeed, on occasion, the Court is constrained to wade into factual
matters when there is insufficient or insubstantial evidence on record to
support those factual findings; or when too much is concluded, inferred
or deduced from the bare or incomplete facts appearing on record. 29The
Court in the case of South Cotabato Communications Corporation v. Sto.
Tomas30 held that:
The findings of fact should, however, be supported by substantial
evidence from which the said tribunals can make their own independent
evaluation of the facts. In labor cases, as in other administrative and
quasi-judicial proceedings, the quantum of proof necessary is substantial
evidence, or such amount of relevant evidence which a reasonable mind
might accept as adequate to justify a conclusion. Although no particular
form of evidence is required to prove the existence of an employer-
employee relationship, and any competent and relevant evidence to
prove the relationship may be admitted, a finding that the relationship
exists must nonetheless rest on substantial evidence. (Citations omitted)
Settled is the tenet that allegations in the complaint must be duly proven
by competent evidence and the burden of proof is on the party making
the allegation.31 In an illegal dismissal case, the onus probandi rests on
the employer to prove that its dismissal of an employee was for a valid
cause. However, before a case for illegal dismissal can prosper, an
employer-employee relationship must first be established. 32 In this
instance, it was incumbent upon Sta. Rita as the complainant to prove
the employer-employee relationship by substantial evidence.
Unfortunately, Sta. Rita failed to discharge the burden to prove his
allegations.
To reiterate the facts, undisputed and relevant to the disposition of this
case, Marsman hired Sta. Rita as a warehouseman when it was still
engaged in the business of distribution and sale of pharmaceutical and
consumer products. Marsman paid Sta. Rita’s wages and controlled his
warehouse assignments, acts which can only be attributed to a bona
fide employer. Marsman thereafter purchased Metro Drug, now CPDSI,
which at that time, was engaged in a similar business. Marsman then
entered into a Memorandum of Agreement with MEU, its bargaining
representative, integrating its employees with CPDSI and transferring its
employees, their respective employment contracts and the attendant
employment obligation to CPDSI. The planned integration was then
carried out sometime in 1996, as admitted by Sta. Rita in his pleading. 33
It is imperative to point out that the integration and transfer was a
necessary consequence of the business transition or corporate
reorganization that Marsman and CPDSI had undertaken, which had the
characteristics of a corporate spin-off. To recall, a proviso in the
Memorandum of Agreement limited Marsman’s function into that of a
holding company and transformed CPDSI as its main operating company.
In business parlance, a corporate spin-off occurs when a department,
division or portions of the corporate business enterprise is sold off or
assigned to a new corporation that will arise by the process which may
constitute it into a subsidiary of the original corporation. 34
The spin-off and the attendant transfer of employees are legitimate
business interests of Marsman. The transfer of employees through the
Memorandum of Agreement was proper and did not violate any existing
law or jurisprudence.
Jurisprudence has long recognized what are termed as “management
prerogatives.” In SCA Hygiene Products Corporation Employees
Association-FFW v. SCA Hygiene Products Corporation,35 we held that:
The hiring, firing, transfer, demotion, and promotion of employees have
been traditionally identified as a management prerogative subject to
limitations found in the law, a collective bargaining agreement, or in
general principles of fair play and justice. This is a function associated
with the employer’s inherent right to control and manage effectively its
enterprise. Even as the law is solicitous of the welfare of employees, it
must also protect the right of an employer to exercise what are clearly
management prerogatives. The free will of management to conduct its
own business affairs to achieve its purpose cannot be denied. x x x.
 
53
Tinio v. Court of Appeals36 also acknowledged management’s prerogative
to transfer its employees within the same business establishment, to wit:
This Court has consistently recognized and upheld the prerogative of
management to transfer an employee from one office to another within
the business establishment, provided there is no demotion in rank or a
diminution of salary, benefits and other privileges. As a rule, the Court
will not interfere with an employer’s prerogative to regulate all aspects
of employment which include among others, work assignment, working
methods and place and manner of work. Labor laws discourage
interference with an employer’s judgment in the conduct of his business.
x x x x
But, like other rights, there are limits thereto. The managerial
prerogative to transfer personnel must be exercised without grave abuse
of discretion, bearing in mind the basic elements of justice and fair play.
Having the right should not be confused with the manner in which the
right is exercised. Thus, it cannot be used as a subterfuge by the
employer to rid himself of an undesirable worker. The employer must be
able to show that the transfer is not unreasonable, inconvenient, or
prejudicial to the employee; nor does it involve a demotion in rank or a
diminution of his salaries, privileges, and other benefits. x x x (Citations
omitted)
 
Analogously, the Court has upheld the transfer/absorption of employees
from one company to another, as successor employer, as long
as the transferor was not in bad faith37 and the employees absorbed by a
successor-employer enjoy the continuity of their employment status and
their rights and privileges with their former employer. 38
Sta. Rita’s contention that the absence of his signature on the
Memorandum of Agreement meant that his employment remained with
Marsman is merely an allegation that is neither proof nor evidence. It
cannot prevail over Marsman’s evident intention to transfer its
employees.
To assert that Marsman remained as Sta. Rita’s employer even after the
corporate spin-off disregards the separate personality of Marsman and
CPDSI. It is a fundamental principle of law that a corporation has a
personality that is separate and distinct from that composing it as well
as from that of any other legal entity to which it may be related. 39 Other
than Sta. Rita’s bare allegation that Michael Leo T. Luna was Marsman’s
and CPDSI’s Vice President and General Manager, Sta. Rita failed to
support his claim that both companies were managed and operated by
the same persons, or that Marsman still had complete control over
CPDSI’s operations. Moreover, the existence of interlocking directors,
corporate officers and shareholders without more, is not enough
justification to pierce the veil of corporate fiction in the absence of fraud
or other public policy considerations.40
Verily, the doctrine of piercing the corporate veil also finds no
application in this case because bad faith cannot be imputed to
Marsman.41 On the contrary, the Memorandum of Agreement guaranteed
the tenure of the employees, the honoring of the Collective Bargaining
Agreement signed in June 1995, the preservation of salaries and benefits,
and the enjoyment of the same terms and conditions of employment by
the affected employees.
Sta. Rita also failed to satisfy the four-fold test which determines the
existence of an employer-employee relationship. The elements of the
four-fold test are: 1) the selection and engagement of the employees; 2)
the payment of wages; 3) the power of dismissal; and 4) the power to
control the employee’s conduct.42 There is no hard-and-fast rule
designed to establish the aforesaid elements. Any competent and
relevant evidence to prove the relationship may be admitted.
Identification cards, cash vouchers, social security registration,
appointment letters or employment contracts, payrolls, organization
charts, and personnel lists, serve as evidence of employee status. 43
The Memorandum of Agreement effectively transferred Marsman’s
employees to CPDSI. However, there was nothing in the agreement to
negate CPDSI’s power to select its employees and to decide when to
engage them. This is in line with Article 1700 of the Civil Code which
provides that:
Art. 1700. The relations between capital and labor are not merely
contractual. They are so impressed with public interest that labor
contracts must yield to the common good. Therefore, such contracts are
subject to the special laws on labor unions, collective bargaining, strikes
and lockouts, closed shop, wages, working conditions, hours of labor and
similar subjects.
 
A labor contract merely creates an action in personam and does not
create any real right which should be respected by third parties. 44 This
conclusion draws its force from the right of an employer to select
his/her employees and equally, the right of the employee to refuse or
voluntarily terminate his/her employment with his/her new employer
54
by resigning or retiring. That CPDSI took Sta. Rita into its employ and
assigned him to one of its clients signified the former’s acquiescence to
the transfer.
Marsman’s letter45 to Sta. Rita dated September 29, 1997 neither
assumed nor disturbed CPDSI’s power of selection. The letter reads:
MARSMAN & COMPANY, INC.
 
TO: MR. RODIL STA. RITA
 
RE: TRANSFER OF ASSIGNMENT                                    contributions, and the name and address of his employer. 47 Thus, Sta.
This is to confirm in writing your appointment as warehouseman for
EAC-Libis Warehouse and Mercury Drug effective 13 October 1997. This
transfer is part of our cross-training program.
Prior to the effectivity of your appointment, you may be instructed to
proceed to EAC-Libis Warehouse for work familiarization and other
operational matters related to the job.
You will directly report to Mr. Eusebio Paisaje, warehouse supervisor.
 
Good luck.
(signed)
Irene C. Nagrampa
 
cc: EDB/QRI
LRP/Noynoy Paisaje
HRG-201 file
file
 
It would be amiss to read this letter independent of the Memorandum of
Agreement because the Memorandum of Agreement clearly reflected
Marsman’s intention to transfer all employees to CPDSI. When read in
isolation, the use of “cross-training program” may be subject to a
different interpretation but reading it together with the MOA indicates
that the “cross training program” was in relation to the transition phase
that Marsman and CPDSI were then undergoing. It is clear under the
terms of the Memorandum of Agreement that Marsman may continue to
negotiate and address issues with the Union even after the signing and
execution of said agreement in the course of fully implementing the
transfer to, and the integration of operations with, CPDSI.
To prove the element on the payment of wages, Sta. Rita submitted
forms for leave application, with either Marsman’s logo or CPDSI’s logo.
Significantly, the earlier leave forms bore Marsman’s logo but the latest
leave application of Sta. Rita already had CPDSI’s logo. In any event, the
forms for leave application did not sufficiently establish that Marsman
paid Sta. Rita’s wages. Sta. Rita could have presented pay slips, salary
vouchers, payrolls, certificates of withholding tax on compensation
income or testimonies of his witnesses. 46 The submission of his Social
Security System (SSS) identification card (ID) only proved his
membership in the social insurance program. Sta. Rita should have
instead presented his SSS records which could have reflected his
Rita fell short in his claim that Marsman still had him in its payroll at the
time of his dismissal.
As to the power of dismissal, the letter dated January 14, 2000 clearly
indicated that CPDSI, and not Marsman, terminated Sta. Rita’s services
by reason of redundancy.
Finally, Sta. Rita failed to prove that Marsman had the power of control
over his employment at the time of his dismissal. The power of an
employer to control the work of the employee is considered the most
significant determinant of the existence of an employer-employee
relationship.48 Control in such relationships addresses the details of day
to day work like assigning the particular task that has to be done,
monitoring the way tasks are done and their results, and determining
the time during which the employee must report for work or accomplish
his/her assigned task.49 The Court likewise takes notice of the company
IDs attached in Sta. Rita’s pleading. The “old” ID bore Marsman’s logo
while the “new” ID carried Metro Drug’s logo. The Court has held that in
a business establishment, an identification card is usually provided not
only as a security measure but mainly to identify the holder thereof
as a bona fide employee of the firm that issues it.50 Thus the “new” ID
confirmed that Sta. Rita was an employee of Metro Drug, which, to
reiterate, later changed its name to CPDSI.
Having established that an employer-employee relationship did not exist
between Marsman and Sta. Rita at the time of his dismissal, Sta. Rita’s
original complaint must be dismissed for want of jurisdiction on the part
of the Labor Arbiter to take cognizance of the case. For this reason, there
is no need for the Court to pass upon the other issues raised.
WHEREFORE, premises considered, the petition is GRANTED. The Court
of Appeals’ assailed Decision dated June 25, 2010 and Resolution dated
December 9, 2010 in C.A.-G.R. S.P. No. 106516 are,
accordingly, REVERSED and SET ASIDE. The NLRC’s Decision dated July
55
31, 2008 in NLRC NCR Case No. 30-01-00362-00 (NLRC CA No. 032892-
02) is REINSTATED.
SO ORDERED.
Del Castillo, Jardeleza and Tijam, JJ., concur.
Sereno, CJ., On Leave.
Petition granted, judgment and resolution reversed and set aside. NLRC’s
decision reinstated.
Notes.—The so-called “control test” is commonly regarded the most
crucial and determinative indicator of the presence or absence of an
employer-employee relationship. (Atok Big Wedge Company, Inc. vs.
Gison, 655 SCRA 193 [2011])
Should there be ambiguity in the provisions of the contract, the rule is
that all doubts, uncertainties, ambiguities and insufficiencies should be
resolved in favor of labor. (Manalo vs. TNS Philippines, Inc., 743 SCRA 201
[2014])
 
——o0o——
_______________
50  Domasig v. National Labor Relations Commission, 330 Phil. 518, 524;
261 SCRA 779, 785 (1996).
SECOND DIVISION
[G.R. No. 233999. February 18, 2019.]
TELEPHILIPPINES, INC., * petitioner, vs. FERRANDO
H. JACOLBE, respondent.
DECISION
PERLAS-BERNABE, J p:
Assailed in this petition for review on certiorari 1 are the
Decision 2 dated September 8, 2016 and the Resolution 3 dated August
7, 2017 of the Court of Appeals (CA) in CA-G.R. SP No. 08600 which set
aside the Decision 4 dated March 31, 2014 and the Resolution 5 dated
May 20, 2014 of the National Labor Relations Commission (NLRC) in
NLRC Case No. VAC-02-000080-2014 and accordingly, reinstated the
Decision 6 dated November 25, 2013 of the Labor Arbiter (LA) finding
respondent Ferrando H. Jacolbe (Jacolbe) to have been illegally
dismissed by petitioner Telephilippines, Inc. (TP).
The Facts
TP 7 is a corporation engaged in the business of providing contact center
services to its various offshore corporate clients through its customer
service representatives (CSRs). 8 On June 18, 2007, TP hired Jacolbe as a
CSR tasked to resolve customer's questions and issues promptly and
efficiently, among others, in accordance with set performance standards
and protocol. 9
Sometime in May 2009, TP assigned Jacolbe to its Priceline account. For
TP to properly assess his work performance, Jacolbe was required to
meet the key performance metric targets 10 of, among others, an
Average Handle Time (AHT) of 7.0 minutes or below. 11 The AHT refers
to the average time spent by a CSR with the customer on the phone; it is
computed using the formula: (Average Talk Time + Hold Time)/Number
of Calls = AHT, and is recorded on a daily and weekly basis. 12
On January 22, 2013, Jacolbe's supervisor, Mr. Philip Charles Go, issued
an Incident Report 13 for failure of Jacolbe to hit the 7-minute AHT goal
agreed upon for the 3rd week of January while he was under TP's
Performance Improvement Plan (PIP). 14 Records show
that Jacolbe was placed under the PIP after he failed to meet the 7-
minute AHT target in two (2) previous instances, i.e., January 5 and 12,
2013. 15
56
Subsequently, TP's Human Resources Department (HRD) sent Jacolbe a
letter 16 dated February 13, 2013 (Notice to Explain) informing him of
its receipt of the Incident Report, and further stating that his "work
performance for the last 6 months is unsatisfactory due to [his] consistent
failure to meet the [AHT] Goal in spite of being enrolled in [its
PIP]," 17 which, if proven true, would constitute as an offense against its
code of conduct warranting the termination of his employment. The
Notice also directed him to explain, in writing, why he should not be
subjected to appropriate corrective action.
In compliance with the directive, Jacolbe submitted letters 18 dated
February 19 and 25, 2013, explaining that since he was hired in 2007, he
had never intentionally disconnected a call to meet the prescribed AHT
mark. Unsatisfied with his explanations, TP issued Jacolbe a
Letter 19 dated March 18, 2013 (Notice of Termination) dismissing him
from work for failure to meet account specific performance metrics or
certification requirements under Section V.B.4 of its Code of Conduct and
Zero Tolerance Policy. DaIAcC
Aggrieved, Jacolbe filed a complaint 20 for illegal dismissal and
monetary claims 21 against TP, pointing out that while the Incident
Report noted his failure to hit the 7-minute AHT mark in two (2)
instances, TP dismissed him allegedly for unsatisfactory work
performance for the last six (6) months based on the HRD's Notice to
Explain. He argued that if indeed he committed the said infractions, the
same did not constitute serious misconduct warranting his dismissal,
citing his award as Top Agent for December 2012, 22 which negated the
alleged unsatisfactory work performance for the last six (6) months. 23
In its defense, TP argued that Jacolbe's actual AHT scores 24 from
January 2012 up to his dismissal in March 2013 were consistently
beyond the 7-minute AHT mark, despite his enrollment in its PIP and
SMART Action Plan programs. 25 TP explained that the PIP and SMART
Action Plan programs are the company's tools designed to help "poor
performing" CSRs improve their work performance. 26 Under these
programs, the enrolled CSRs are given "step goals" or targets that are
considerably lower (or higher, as the case may be) than the prescribed
metrics which are then gradually increased (or decreased) until they
meet the same. Thus, under these circumstances, TP argued
that Jacolbe's consistent failure to meet the 7-minute AHT mark over a
prolonged period of time undoubtedly showed inefficient and poor call
handling justifying his dismissal under its code of conduct. 27
The LA Ruling
In a Decision 28 dated November 25, 2013, the LA found Jacolbe to have
been illegally dismissed and ordered TP to pay the latter P319,089.09,
representing his backwages, separation pay in lieu of reinstatement,
moral and exemplary damages, as well as attorney's fees. 29
The LA held that Jacolbe's failure to meet the 7-minute AHT mark in two
(2) instances could hardly be considered as habitual and gross neglect of
duties that would warrant his dismissal, especially since Jacolbe was
awarded as Top Agent in December 2012. 30 Moreover, the LA found
that TP failed to fully apprise Jacolbe of the specific violation of company
rules he had committed, explaining that while the Incident Report cited
only two (2) instances that he failed to meet the AHT target, the Notice
to Explain, on the other hand, pointed to a six (6)-month unsatisfactory
work performance. Finally, it observed that Jacolbe had been working
for TP as a CSR for over five (5) years without any record of
infractions. 31 Accordingly, it held thatJacolbe's failure to meet the AHT
target in the two (2) cited instances cannot be construed to have been
done habitually and grossly so as to warrant the imposition of the
penalty of dismissal. 32
Dissatisfied, TP appealed 33 to the NLRC.
The NLRC Ruling
In a Decision 34 dated March 31, 2014, the NLRC reversed and set aside
the LA ruling and held Jacolbe's dismissal valid. Contrary to the LA's
findings, the NLRC found that Jacolbe had, in fact, consistently failed to
meet the 7-minute AHT mark, starting from January 2012 up to his
dismissal in March 2013, in violation of company-prescribed work
standards. The NLRC noted that under TP's classification of offenses,
such violation is considered gross negligence punishable by termination
of employment on the fourth offense. 35 Notwithstanding this company
rule, the NLRC pointed out that TP had in fact afforded Jacolbe with
some measures of leniency by continuing his employment and even
enrolling him in its coaching and performance improvement programs,
under the PIP and SMART Action Plan during the 3rd quarter of 2012
and again in January of 2013, to help him improve his AHT
scores. 36 Despite TP's assistance and leniency, however, Jacolbe still
failed to meet the prescribed AHT mark. Thus, the NLRC held
that Jacolbe's consistent failure to meet the reasonable work standards
set by TP for a prolonged period of time exhibited incompetence,
57
inefficiency, and inability to proficiently resolve customer's problems
that justified his dismissal. 37 TAacHE
Aggrieved, Jacolbe sought reconsideration 38 which the NLRC denied in
a Resolution 39 dated May 20, 2014. Thus, he filed a petition
for certiorari 40before the CA.
The CA Ruling
In a Decision 41 dated September 8, 2016, the CA set aside the NLRC
ruling, and accordingly, ordered TP to reinstate Jacolbe or pay him
separation pay in lieu thereof, as well as full backwages, inclusive of
allowances, 13th month pay, salary differentials, holiday and rest day
premium pays, as well as service incentive leaves. It also remanded the
case to the LA for the computation of the monetary awards. 42
According to the CA, meeting the prescribed AHT metric is only one of
the determining factors in evaluating a CSR's performance and, in
fact,Jacolbe was awarded as Top Agent in December 2012 which thus
contradicts the charge of poor performance. In any case, assuming that
his failure to meet the 7-minute AHT mark from January 2012 to March
2013 showed inefficiency, the CA held that the same does not appear to
be gross and habitual so as to warrant dismissal from employment. 43
Determined, TP sought reconsideration 44 which the CA denied in a
Resolution 45 dated August 7, 2017; hence, this petition.
The Issue before the Court
The essential issue for the Court's resolution is whether or not the CA
correctly set aside the NLRC ruling, and accordingly, held
that Jacolbe was illegally dismissed.
The Court's Ruling
The petition is meritorious.
At the outset, the Court stresses that the review in this Rule 45 petition
of the CA's ruling in a labor case via a Rule 65 petition carries a distinct
approach. In a Rule 45 review, the Court examines the correctness of the
CA's decision in contrast with the review of jurisdictional errors under
Rule 65.46 Further, Rule 45 limits the review to questions of law. 47 In
ruling for legal correctness, the Court views the CA decision in the same
context that the petition for certiorari was presented to the
CA. 48 Hence, the Court has to examine the CA Decision from the prism
of whether the CA correctly determined the presence or absence of grave
abuse of discretion in the NLRC Decision. 49
Grave abuse of discretion, amounting to lack or excess of jurisdiction,
has been defined as the capricious and whimsical exercise of judgment,
done in a despotic manner by reason of passion or personal hostility, the
character of which being so patent and gross as to amount to an evasion
of positive duty or to a virtual refusal to perform the duty enjoined by or
to act at all in contemplation of law. 50
In labor cases, grave abuse of discretion may be ascribed to the NLRC
when its findings and conclusions are not supported by substantial
evidence, which refers to that amount of relevant evidence that a
reasonable mind might accept as adequate to justify a
conclusion. 51 Thus, if the NLRC's ruling has basis in the evidence and
the applicable law and jurisprudence, then no grave abuse of discretion
exists and the CA should so declare and accordingly, dismiss the
petition. 52
With these standards in mind, the Court finds that the NLRC Decision in
this case was supported by substantial evidence and is consistent with
law and jurisprudence as to the issues raised in the petition. Hence, the
CA erroneously ascribed grave abuse of discretion on the part of the
NLRC in declaring that Jacolbe was validly dismissed. Accordingly, the
NLRC's ruling must be reinstated.
In its petition, TP maintains that the CA erred in declaring Jacolbe's
dismissal invalid, ratiocinating that the latter had consistently failed to
meet the reasonable company-imposed performance targets, specifically
the 7-minute AHT mark, for sixty-two (62) consecutive weeks despite
the opportunities and assistance extended to him to improve his
performance. It argues that Jacolbe's continued and persistent failure to
meet the key performance metrics clearly illustrated gross inefficiency
which is analogous to gross and habitual neglect of duties justifying his
dismissal. 53 Moreover, it stresses that Jacolbe's isolated Top Agent
award which is completely unrelated to his AHT scores — as it merely
recognized him as having achieved a satisfactory score based on a
survey feedback from one customer in one day and during one call only
— could not negate nor override his repeated poor work performance
for the 62 consecutive weeks that led to his dismissal. 54 For his
part, Jacolbe simply maintains that there was no valid ground for his
dismissal. 55
A valid dismissal necessitates compliance with both substantive and
procedural due process requirements. Substantive due process
mandates that an employee may be dismissed based only on just or
authorized causes under Articles 297, 298, and 299 (formerly Articles
58
282, 283, and 284) of theLabor Code, as amended. 56 On the other hand,
procedural due process requires the employer to comply with the
requirements of notice and hearing before effecting the dismissal. In all
cases involving termination of employment, the burden of proving the
existence of the above valid causes rests upon the employer. 57 The
quantum of proof required in these cases is substantial evidence as
discussed above.
In this relation, jurisprudence 58 instructs that gross inefficiency is
analogous to gross and habitual neglect of duty 59 under Article 297 (e)
in relation to Article 297 (b) of the Labor Code, as amended, 60 for both
involve specific acts of omission on the part of the employee resulting in
damage to the employer or to his business, and constituting, therefore,
just cause to dismiss an employee, thus: HDICSa
"[G]ross inefficiency" falls within the purview of "other causes analogous
to the foregoing," [and] constitutes, therefore, just cause to terminate an
employee under Article 282 [now under Article 297] of the Labor Code[,
as amended]. One is analogous to another if it is susceptible of
comparison with the latter either in general or in some specific detail; or
has a close relationship with the latter. "Gross inefficiency" is closely
related to "gross neglect," for both involve specific acts of omission
on the part of the employee resulting in damage to the employer or
to his business. 61(Emphasis supplied)
In Buiser  v. Leogardo, Jr., 62 the Court explained that such inefficiency is
understood to mean failure to attain work goals or work quotas, either
by failing to complete the same within the allotted reasonable period, or
by producing unsatisfactory results. 63 Further, in San Miguel
Corporation  v. NLRC,64 the Court held that an employer is entitled to
prescribe reasonable work standards, rules, and regulations necessary
for the conduct of its business, to provide certain disciplinary measures
in order to implement them, and to assure that the same would be
complied with. 65 This management prerogative of requiring standards
may be availed of so long as they are exercised in good faith for the
advancement of the employer's interest. 66
In this case, records reveal that Jacolbe's AHT scores for 62 consecutive
weeks, or from January 2012 up to his dismissal in March 2013, were
well above the 7 minutes or lower AHT mark. 67 As he had been having
difficulty meeting the same, TP allowed him to continue in its employ
and even enrolled him in its SMART Action and Performance
Improvement Plans 68 twice — in July to August 2012 and again in
January 2013 — to help him improve his AHT scores. 69 This
notwithstanding, Jacolbe's AHT scores remained well above the 7-
minute AHT mark. 70 Undoubtedly, Jacolbe's repeated and consistent
failure to meet the prescribed AHT mark over a prolonged period of time
falls squarely under the concept of gross inefficiency and is analogous to
gross and habitual neglect of duty under Article 297 of the Labor
Code which justified his dismissal.
Moreover, the Court observes that the 7-minute AHT metric is not
unique to Jacolbe as it is in fact a key performance metric, which
measures the effectivity and efficiency of a CSR in handling customer's
concerns in each call. It applies to all employees assigned to the Priceline
account who, save for a few including Jacolbe, have all been able to meet
the same. 71 Along with the other key performance metrics, it was
employed by TP to properly and reasonably assess the overall work
performance of its employees. Notably, the AHT metric per se is also
used by TP for all employees in its other accounts, 72 and is in fact
considered an established work performance evaluation metric within
the business process outsourcing industry where TP belongs. Jacolbe's
insistence that his Top Agent award for December 2012 contradicts the
charge of inefficiency and poor performance does not deserve
consideration. As records show, the Top Agent award is not a sufficient
measure of an employee's overall work performance since it proceeded
solely from a single customer's feedback in one call on one given day. All
told, the 7-minute AHT metric does not appear to be arbitrary and
unreasonable. On the contrary, the Court finds it necessary and relevant
to the achievement of TP's objectives and a reasonable work standard
imposed by TP in the exercise of its management prerogative.
Anent the matter of procedural due process, Section 2 (1), Rule XXIII,
Book V of the Omnibus Rules Implementing the Labor Code, 73 as well
as jurisprudence, 74 requires the employer to give the employee two (2)
written notices and a hearing or opportunity to be heard. The notices
must consist of the following: first, a notice specifying the ground or
grounds for termination, and giving to said employee reasonable
opportunity within which to explain his side; and second, a notice of
termination indicating that upon due consideration of all the
circumstances, grounds have been established to justify his dismissal.
Applying the above parameters to this case, the Court finds that TP
sufficiently observed the standards of procedural due process in
effectingJacolbe's dismissal. First, TP issued Jacolbe a Notice to Explain
specifying the ground for his possible dismissal, i.e., that his "work
performance for the last 6 months is unsatisfactory due to [his] consistent
59
failure to meet the [AHT] Goal in spite of being enrolled in [its PIP]," which,
if proven true, would constitute as an offense against its code of conduct
warranting the termination of his employment. The Notice also
directed Jacolbe to explain, in writing, why he should not be subjected to
appropriate corrective action. Second, Jacolbe was able to submit
letters 75 explaining his side, albeit he did not fully address the charge of
consistently failing to meet the AHT metric. Third, a disciplinary
conference was held on February 26, 2013 which
provided Jacolbe another opportunity to explain his side. 76 And fourth,
TP served a written Notice of Termination after verifying the violation
committed under Section V.B.4 of its Code of Conduct and Zero
Tolerance Policy, i.e., failure to meet account specific performance
metrics or certification requirements.
In fine, the Court finds ample evidence to support the findings of the
NLRC that Jacolbe's dismissal was valid. Accordingly, the CA committed
reversible error in substituting its own judgment with that of the NLRC.
While security of tenure is indeed constitutionally guaranteed, this
should not be indiscriminately invoked to deprive an employer of its
management prerogatives and right to shield itself from incompetence,
inefficiency, and disobedience displayed by its employees, 77 as the
Court finds in this case.
WHEREFORE, the petition is GRANTED. The Decision dated September
8, 2016 and the Resolution dated August 7, 2017 of the Court of Appeals
in CA-G.R. SP No. 08600 are hereby REVERSED and SET ASIDE.
Accordingly, the Decision dated March 31, 2014 and the Resolution
dated May 20, 2014 of the National Labor Relations Commission in NLRC
Case No. VAC-02-000080-2014 are REINSTATED. IDaEHC
SO ORDERED.
Carpio, Caguioa, J.C. Reyes, Jr. and Hernando, ** JJ., concur.
||| (Telephilippines, Inc. v. Jacolbe, G.R. No. 233999, [February 18, 2019])
G.R. No. 85985. August 13, 1993.*
PHILIPPINE AIRLINES, INC. (PAL), petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION, LABOR ARBITER ISABEL P. ORTIGUERRA,
and PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION (PALEA),
respondents.
Labor Laws; Company rules on discipline; Management prerogative not
boundless.—PAL asserts that when it revised its Code on March 15, 1985,
there was no law which mandated the sharing of responsibility therefor
between employer and employee. Indeed, it was only onMarch 2, 1989,
with the approval of Republic Act No. 6715, amending Article 211 of the
Labor Code, that the law explicitly considered it a State policy “(t)o
ensure the participation of workers in decision and policy-making
processes affecting their rights, duties and welfare.” However, even in
the absence of said clear provision of law, the exercise of management
prerogatives was never considered boundless. Thus, in Cruz vs.
Medina (177 SCRA 565 [1989]), it was held that management’s
prerogatives must be without abuse of discretion.
Same; Same; Same; Line drawn between policies which are purely
business-oriented and those which affect rights of employees.—A close
scrutiny of the objectionable provisions of the Code reveals that they are
not purely business-oriented nor do they concern the management
aspect of the business of the company as in the San Miguel case. The
provisions of the Code clearly have repercusions on the employees’ right
to security of tenure. The implementation of the provisions may result in
the deprivation of an employee’s means of livelihood which, as correctly
pointed out by the NLRC, is a property right (Callanta vs. Carnation
Philippines, Inc., 145 SCRA 268 [1986]). In view of these aspects of the
case which border on infringement of constitutional rights, we must
uphold the constitutional requirements for the protection of labor and
the promotion of social justice, for these factors, according to Justice
Isagani Cruz, tilt “the scales of justice when there is doubt, in favor of the
worker” (Employees Association of the Philippine American Life Insurance
Company vs. NLRC, 199 SCRA 628 [1991] 635). Verily, a line must be
drawn between management prerogatives regarding business
operations per se and those which affect the rights of the employees. In
treating the latter, management should see to it that its employees are at
least properly informed of its decisions or modes of action. xxx xxx.
60
Same; Same; Same; Employee’s right to participate in policymaking
upheld.—Indeed, industrial peace cannot be achieved if the employees
are denied their just participation in the discussion of matters affecting
their rights. Thus, even before Article 211 of the Labor Code (P.D. 442)
was amended by Republic Act No. 6715, it was already declared a policy
of the State: “(d) To promote the enlightenment of workers concerning
their rights and obligations . . . as employees.” This was, of course,
amplified by Republic Act No. 6715 when it decreed the “participation of
workers in decision and policy making processes affecting their rights,
duties and welfare.” PAL’s position that it cannot be saddled with the
“obligation” of sharing management prerogatives as during the
formulation of the Code, Republic Act No. 6715 had not yet been enacted
, cannot thus be sustained. While such “obligation” was not yet founded
in law when the Code was formulated, the attainment of a harmonious
labor-management relationship and the then already existing state
policy of enlightening workers concerning their rights as employees
demand no less than the observance of transparency in managerial
moves affecting employees’ rights.
PETITION for certiorari to review the decision of the National Labor
Relations Commission.
The facts are stated in the opinion of the Court.
     Solon Garcia for petitioner.
     Adolpho M. Guerzon for respondent PALEA.
MELO, J.:
In the instant petition for certiorari, the Court is presented the issue of
whether or not the formulation of a Code of Discipline among employees
is a shared responsibility of the employer and the employees.
On March 15, 1985, the Philippine Airlines, Inc. (PAL) completely revised
its 1966 Code of Discipline. The Code was circulated among the
employees and was immediately implemented, and some employees
were forthwith subjected to the disciplinary measures embodied
therein.
Thus, on August 20, 1985, the Philippine Airlines Employees Association
(PALEA) filed a complaint before the National Labor Relations
Commission (NLRC) for unfair labor practice (Case No. NCR-7-2051-85)
with the following remarks: “ULP with arbitrary implementation of
PAL’s Code of Discipline without notice and prior discussion with Union
by Management” (Rollo, p. 41). In its position paper, PALEA contended
that PAL, by its unilateral implementation of the Code, was guilty of
unfair labor practice, specifically Paragraphs E and G of Article 249 and
Article 253 of the Labor Code. PALEA alleged that copies of the Code had
been circulated in limited numbers; that being penal in nature the Code
must conform with the requirements of sufficient publication, and that
the Code was arbitrary, oppressive, and prejudicial to the rights of the
employees. It prayed that implementation of the Code be held in
abeyance; that PAL should discuss the substance of the Code with
PALEA; that employees dismissed under the Code be reinstated and
their cases subjected to further hearing; and that PAL be declared guilty
of unfair labor practice and be ordered to pay damages (pp. 7-14,
Record.)
PAL filed a motion to dismiss the complaint, asserting its prerogative as
an employer to prescribe rules and regulations regarding employees’
conduct in carrying out their duties and functions, and alleging that by
implementing the Code, it had not violated the collective bargaining
agreement (CBA) or any provision of the Labor Code. Assailing the
complaint as unsupported by evidence, PAL maintained that Article 253
of the Labor Code cited by PALEA referred to the requirements for
negotiating a CBA which was inapplicable as indeed the current CBA had
been negotiated.
In its reply to PAL’s position paper, PALEA maintained that Article 249
(E) of the Labor Code was violated when PAL unilaterally implemented
the Code, and cited provisions of Articles IV and I of Chapter II of the
Code as defective for, respectively, running counter to the construction
of penal laws and making punishable any offense within PAL’s
contemplation. These provisions are the following:
Section 2. Non-exclusivity.—This Code does not contain the entirety of
the rules and regulations of the company. Every employee is bound to
comply with all applicable rules, regulations, policies, procedures and
standards, including standards of quality, productivity, and behavior, as
issued and promulgated by the company through its duly authorized
officials. Any violations thereof shall be punishable with a penalty to be
determined by the gravity and/or frequency the offense.
Section 7. Cumulative Record.—An employee’s record of offenses shall be
cumulative. The penalty for an offense shall be determined on the basis
of his past record of offenses of any nature or the absence thereof. The
more habitual an offender has been, the greater shall be the penalty for
the latest offense. Thus, an employee may be dismissed if the number of
his past offenses warrants such penalty in the judgment of management
61
even if each offense considered separately may not warrant dismissal.
Habitual offenders or recidivists have no place in PAL. On the other
hand, due regard shall be given to the length of time between
commission of individual offenses to determine whether the employee’s
conduct may indicate occasional lapses (which may nevertheless require
sterner disciplinary action) or a pattern of incorrigibility.
Labor Arbiter Isabel P. Ortiguerra handling the case called the parties to
a conference but they failed to appear at the scheduled date. Interpreting
such failure as a waiver of the parties’ right to present evidence, the
labor arbiter considered the case submitted for decision. On November
7, 1986, a decision was rendered finding no bad faith on the part of PAL
in adopting the Code and ruling that no unfair labor practice had been
committed. However, the arbiter held that PAL was “not totally fault
free” considering that while the issuance of rules and regulations
governing the conduct of employees is a “legitimate management
prerogative” such rules and regulations must meet the test of
“reasonableness, propriety and fairness.” She found Section 1 of the Code
aforequoted as “an all embracing and all encompassing provision that
makes punishable any offense one can think of in the company”; while
Section 7, likewise quoted above, is “objectionable for it violates the rule
against double jeopardy thereby ushering in two or more punishment
for the same misdemeanor.” (pp. 38-39, Rollo.)
The labor arbiter also found that PAL “failed to prove that the new Code
was amply circulated.” Noting that PAL’s assertion that it had furnished
all its employees copies of the Code is unsupported by documentary
evidence, she stated that such “failure” on the part of PAL resulted in the
imposition of penalties on employees who thought all the while that the
1966 Code was still being followed. Thus, the arbiter concluded that
“(t)he phrase ignorance of the law excuses no one from compliance . . .
finds application only after it has been conclusively shown that the law
was circulated to all the parties concerned and efforts to disseminate
information regarding the new law have been exerted.” (p. 39, Rollo.)
She thereupon disposed:
WHEREFORE, premises considered, respondent PAL is hereby ordered
as follows:
1. 1.Furnish all employees with the new Code of Discipline;
2. 2.Reconsider the cases of employees meted with penalties under
the New Code of Discipline and remand the same for further
hearing; and
3. 3.Discuss with PALEA the objectionable provisions specifically
tackled in the body of the decision.
All other claims of the complainant union (is) [are] hereby dismissed for
lack of merit.
SO ORDERED. (p. 40, Rollo.)
PAL appealed to the NLRC. On August 19, 1988, the NLRC through
Commissioner Encarnacion, with Presiding Commissioner Bonto-Perez
and Commissioner Maglaya concurring, found no evidence of unfair
labor practice committed by PAL and affirmed the dismissal of PALEA’s
charge. Nonetheless, the NLRC made the following observations:
Indeed, failure of management to discuss the provisions of a
contemplated code of discipline which shall govern the conduct of its
employees would result in the erosion and deterioration of an otherwise
harmonious and smooth relationship between them as did happen in the
instant case. There is no dispute that adoption of rules of conduct or
discipline is a prerogative of management and is imperative and
essential if an industry has to survive in a competitive world. But labor
climate has progressed, too. In the Philippine scene, at no time in our
contemporary history is the need for a cooperative, supportive and
smooth relationship between labor and management more keenly felt if
we are to survive economically. Management can no longer exclude
labor in the deliberation and adoption of rules and regulations that will
affect them.
The complainant union in this case has the right to feel isolated in the
adoption of the New Code of Discipline. The Code of Discipline involves
security of tenure and loss of employment—a property right! It is time
that management realizes that to attain effectiveness in its conduct rules,
there should be candidness and openness by Management and
participation by the union, representing its members. In fact, our
Constitution has recognized the principle of “shared responsibility”
between employers and workers and has likewise recognized the right
of workers to participate in “policy and decision-making process
affecting their rights . . .” The latter provision was interpreted by the
Constitutional Commissioners to mean participation in “management”
(Record of the Constitutional Commission, Vol. II).
In a sense, participation by the union in the adoption of the code of
conduct could have accelerated and enhanced their feelings of belonging
and would have resulted in cooperation rather than resistance to the
62
Code. In fact, labor-management cooperation is now “the thing.” (pp. 3-4,
NLRC Decision ff. p. 149, Original Record.)
Respondent Commission thereupon disposed:
WHEREFORE, premises considered, we modify the appealed decision in
the sense that the New Code of Discipline should be reviewed and
discussed with complainant union, particularly the disputed provisions
[.] [T]hereafter, respondent is directed to furnish each employee with a
copy of the appealed Code of Discipline. The pending cases adverted to
in the appealed decision if still in the arbitral level, should be
reconsidered by the respondent Philippine Air Lines. Other dispositions
of the Labor Arbiter are sustained.
SO ORDERED. (p. 5, NLRC Decision.)
PAL then filed the instant petition for certiorari charging public
respondents with grave abuse of discretion in: (a) directing PAL “to
share its management prerogative of formulating a Code of Discipline”;
(b) engaging in quasi-judicial legislation in ordering PAL to share said
prerogative with the union; (c) deciding beyond the issue of unfair labor
practice, and (d) requiring PAL to reconsider pending cases still in the
arbitral level (p. 7, Petition; p. 8, Rollo.)
As stated above, the principal issue submitted for resolution in the
instant petition is whether management may be compelled to share with
the union or its employees its prerogative of formulating a code of
discipline.
PAL asserts that when it revised its Code on March 15, 1985, there was
no law which mandated the sharing of responsibility therefor between
employer and employee.
Indeed, it was only on March 2, 1989, with the approval of Republic Act
No. 6715, amending Article 211 of the Labor Code, that the law explicitly
considered it a State policy “(t)o ensure the participation of workers in
decision and policy-making processes affecting their rights, duties and
welfare.” However, even in the absence of said clear provision of law, the
exercise of management prerogatives was never considered boundless.
Thus, in Cruz vs. Medina(177 SCRA 565 [1989]), it was held that
management’s prerogatives must be without abuse of discretion.
In San Miguel Brewery Sales Force Union (PTGWO) vs. Ople (170 SCRA
25 [1989]), we upheld the company’s right to implement a new system
of distributing its products, but gave the following caveat:
So long as a company’s management prerogatives are exercised in good
faith for the advancement of the employer’s interest and not forthe
purpose of defeating or circumventing the rights of the employees under
special laws or under valid agreements, this Court will uphold them. (at
p. 28.)
All this points to the conclusion that the exercise of managerial
prerogatives is not unlimited. It is circumscribed by limitations found in
law, a collective bargaining agreement, or the general principles of fair
play and justice (University of Sto. Tomas vs. NLRC, 190 SCRA
758 [1990]). Moreover, as enunciated in Abbott Laboratories (Phil.), Inc.
vs. NLRC (154 SCRA 713 [1987]), it must be duly established that the
prerogative being invoked is clearly a managerial one.
A close scrutiny of the objectionable provisions of the Code reveals that
they are not purely business-oriented nor do they concern the
management aspect of the business of the company as in the San
Miguel case. The provisions of the Code clearly have repercusions on the
employees’ right to security of tenure. The implementation of the
provisions may result in the deprivation of an employee’s means of
livelihood which, as correctly pointed out by the NLRC, is a property
right (Callanta vs. Carnation Philippines, Inc.,145 SCRA 268 [1986]). In
view of these aspects of the case which border on infringement of
constitutional rights, we must uphold the constitutional requirements
for the protection of labor and the promotion of social justice, for these
factors, according to Justice Isagani Cruz, tilt “the scales of justice when
there is doubt, in favor of the worker” (Employees Association of the
Philippine American Life Insurance Company vs. NLRC, 199 SCRA
628 [1991] 635).
Verily, a line must be drawn between management prerogatives
regarding business operations per se and those which affect the rights of
the employees. In treating the latter, management should see to it that
its employees are at least properly informed of its decisions or modes of
action. PAL asserts that all its employees have been furnished copies of
the Code. Public respondents found to the contrary, which finding, to say
the least is entitled to great respect.
PAL posits the view that by signing the 1989-1991 collective bargaining
agreement, on June 27, 1990, PALEA in effect recognized PAL’s
“exclusive right to make and enforce company rules and regulations to
carry out the functions of management without having to discuss the
same with PALEA and much less, obtain the latter’s conformity
thereto” (pp. 11-12, Petitioner’s Memorandum; pp. 180-181, Rollo.)
Petitioner’s view is based on the following provision of the agreement:
63
The Association recognizes the right of the Company to determine employees. Such cooperation cannot be attained if the employees are
matters of management policy and Company operations and to direct its restive on account of their being left out in the determination of cardinal
manpower. Management of the Company includes the right to organize, and fundamental matters affecting their employment.
plan, direct and control operations, to hire, assign employees to work, WHEREFORE, the petition is DISMISSED and the questioned decision
transfer employees from one department to another, to promote, AFFIRMED. No special pronouncement is made as to costs.
demote, discipline, suspend or discharge employees for just cause; to SO ORDERED.
lay-off employees for valid and legal causes, to introduce new or      Feliciano (Chairman), Bidin, Romero and Vitug, JJ., concur.
improved methods or facilities or to change existing methods or facilities Petition dismissed. Questioned decision affirmed.
and the right to make and enforce Company rules and regulations to Note.—The employer’s prerogative to dismiss an employee must not be
carry out the functions of management. exercised arbitrarily and without just cause, otherwise, the
The exercise by management of its prerogative shall be done in a just, constitutional guarantee of security of tenure would be rendered
reasonable, humane and/or lawful manner. nugatory (Llosa-Tan v. Silahis International Hotel, 181 SCRA 738).
Such provision in the collective bargaining agreement may not be ——o0o——
interpreted as cession of employees’ rights to participate in the 311
deliberation of matters which may affect their rights and the formulation
of policies relative thereto. And one such matter is the formulation of a
code of discipline.
Indeed, industrial peace cannot be achieved if the employees are denied
their just participation in the discussion of matters affecting their rights.
Thus, even before Article 211 of the Labor Code (P.D. 442) was amended
by Republic Act No. 6715, it was already declared a policy of the State:
“(d) To promote the enlightenment of workers concerning their rights
and obligations . . . as employees.” This was, of course, amplified by
Republic Act No. 6715 when it decreed the “participation of workers in
decision and policy making processes affecting their rights, duties and
welfare.” PAL’s position that it cannot be saddled with the “obligation” of
sharing management prerogatives as during the formulation of the Code,
Republic Act No. 6715 had not yet been enacted (Petitioner’s
Memorandum, p. 44; Rollo, p. 212), cannot thus be sustained. While such
“obligation” was not yet founded in law when the Code was formulated,
the attainment of a harmonious labor-management relationship and the
then already existing state policy of enlightening workers concerning
their rights as employees demand no less than the observance of
transparency in managerial moves affecting employees’ rights.
Petitioner’s assertion that it needed the implementation of a new Code of
Discipline considering the nature of its business cannot be
overemphasized. In fact, its being a local monopoly in the business
demands the most stringent of measures to attain safe travel for its
patrons. Nonetheless, whatever disciplinary measures are adopted
cannot be properly implemented in the absence of full cooperation of the

64

DETERMINING THE EXISTENCE OF AND EMPLOYER-EMPLOYEE
RELATIONSHIP
WHAT IS THE IMPORTANCE OF DETERMINING WHETHER AN
EMPLOYER-EMPLOYEE RELATIONSHIP EXISTS?
VOL. 147. JANUARY 7, 1987 49
Brotherhood Labor Unity Movement of the Philippines vs. Zamora
No. L-48645. January 7, 1987.*
“BROTHERHOOD" LABOR UNITY MOVEMENT OFTHE PHILIPPINES,
ANTONIO CASBADILLO, PROSPERO TABLADA, ERNESTO BENGSON,
PATRICIO SERRANO, ANTONIO B. BOBIAS, VIRGILIO ECHAS, DOMINGO
PARINAS, NORBERTO GALANG, JUANITO NAVARRO, NESTORIO
MARCELLANA, TEOFILO B. CACATIAN, RUFO L. EGUIA, CARLOS
SUMOYAN, LAMBERTO RONQUILLO, ANGELITO AMANCIO, DANILO B.
MATIAR, ET AL., petitioners, vs.HON. RONALDO B. ZAMORA,
PRESIDENTIAL ASSISTANT FOR LEGAL AFFAIRS,
OFFICE OF THEPRESIDENT, HON. AMADO G. INCIONG,
UNDERSECRETARY OF LABOR, SAN MIGUEL CORPORATION, GENARO
OLIVES, ENRIQUE CAMAHORT, FEDERICO OÑ ATE, ERNESTO
VILLANUEVA, ANTONIO BOCALING and GODOFREDO CUETO,
respondents.
Labor Relations; Factors considered in determining employeremployee
relationship.—In determining the existence of an employeremployee
relationship, the elements that are generally considered are the
following: (a) the selection and engagement of the employee; (b) the
payment of wages; (Q) 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. It is the socalled “control test”
that is the most important element.
Labor Relations; Criteria for determining existence of independent
contractor relationship.—The existence of an independent contractor
relationship is generally estabished by the following criteria: “whether
or not 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 laborer; and the mode, manner, and
terms of payment.
Ibid; Unfair Labor Practice; Where there is an existing CBA, a group of
employees who wish to form another union must follow Labor Code
procedures.—The respondent company had an existing collective
bargaining agreement with the IBM Union which is the recognized
collective bargaining representative at the respondent’s glass placed
there being a recognized bargaining representative of all employees at
the company’s glass plant, the petitioners cannot merely form a union
and demand bargaining. The Labor Code provides the proper procedure
for the recognition of unions as sale bargaining representatives. This
must be followed.
PETITION to review the order of the Bureau of LaborRelations.
The facts are stated in the opinion of the Court.
     Armando V. Ampil for petitioners.
     Siguion Reyna, Montecillo and Ongsiako Law Officefor private
respondents.
GUTIERREZ, JR., J.:
The elemental question in labor law of whether or not an employer-
employee relationship exists between
petitionersmembers of the “Brotherhood Labor Unit Movement of the 
Philippines” (BLUM) and respondent San Miguel Corporation,
is the main issue in this petition. The disputed decision of public
respondent Ronaldo Zamora, Presidential Assistant for Legal Affairs,
contains a brief summary of the facts involved:
“1. The records disclose that on July 11, 1969, BLUM filed a complaint
with the now defunct Court of Industrial Relations, charging San Miguel
Corporation, and the following officers: Enrique Camahort, Federico
Oñ ate, Feliciano Arceo, Melencio Eugenio, Jr., Ernesto Villanueva,
Antonio Bocaling and Godofredo Cueto of unfair labor practice as set
forth in Section 4 (a), sub-sections (1) and (4) of Republic Act No. 875
and of illegal dismissal. It was alleged that respondents
ordered the individual complainants to disaffiliate from the complainant
union; and that management dismissed the individual complainants
when they insisted on their union membership.
“On their part, respondents moved for the dismissal of thecomplaint
on the grounds that the complainants are not and have never been
65
employees of respondent company but employees of the independent
contractor; that respondent company has never had control
over the means and methods followed by theindependent contractor
who enjoyed full authority to hire and control said employees; and
that the individual complainants are barred by estoppel from asserting
that they are employees ofrespondent company.
“While pending with the Court of Industrial Relations (CIR), pleadings
and testimonial and documentary evidences were duly presented,
although the actual hearing was delayed by several
postponements. The dispute was taken over
by the National Labor Relations Commission (NLRC) with the decreed
abolition of the CIR and the hearing of the case intransferably
commenced on September 8, 1975.
“On February 9, 1976, Labor Arbiter Nestor C. Lim found for
complainants which was concurred in by the NLRC in a decision dated
June 28, 1976. The amount of backwages awarded, however, was
reduced by NLRC to the equivalent of one (1) year salary.
“On appeal, the Secretary in a decision dated June 1, 1977, set
aside the NLRC ruling, stressing the absence of an employeremployee
relationship as borne out by the records of thecase. x x x.”
The petitioners strongly argue that there exists an employer-employee
relationship between them and therespondent company and that they
were dismissed for unionism, an act constituting unfair labor practice
“for which respondents must be made to answer.”
Unrebutted evidence and testimony on record establish
that the petitioners are workers who have been employed at the San
Miguel Parola Glass Factory since 1961, averaging about seven (7)
years of service at the time oftheir termination. They worked as
“cargadores” or “pahinantes” at the SMC Plant loading, unloading, piling
or palleting empty bottles and wooden shells to and from company
trucks and warehouses. At times, they accompanied the company trucks
on their delivery routes.
The petitioners first reported for work to Superintendent-inCharge
Camahort. They were issued gate passes signed by Camahort and were
provided by therespondent company with the tools, equipment and
paraphernalia used in the loading, unloading, piling and hauling
operation.
Job orders emanated from Camahort. The orders are then transmitted to
an assistant-officer-in-charge. In turn, the assistant
informs the warehousemen and checkers
regarding the same. The latter, thereafter, relays said orders
to the capatazes or group leaders who then give orders to the workers
as to where, when and what to load, unload, pile, pallet or clean.
Work in the glass factory was neither regular nor continuous, depending
wholly on the volume of bottles manufactured to be loaded and
unloaded, as well as thebusiness activity of the company. Work did not
necessarily mean a full eight (8) hour day for the petitioners. However,
work, at times, exceeded the eight (8) hour day and necessitated work
on Sundays and holidays. For this, they were neither paid overtime nor
compensation f or work on Sundays and holidays.
Petitioners were paid every ten (10) days on a piece rate basis, that is,
according to the number of cartons and wooden shells they were able to
load, unload, or pile. Thegroup leader notes down the number or
volume of work that each individual worker has accomplished. This is
then made the basis of a report or statement which is compared
with the notes of the checker and warehousemen as to whether or not
they tally. Final approval of report is by officer-in-charge Camahort. The
pay check is given to the group leaders for encashment, distribution, and
payment to the petitioners in accordance with payrolls prepared by said
leaders. From the total earnings of the group, the group leader gets a
participation or share of ten (10%) percent plus an additional amount
from the earnings of each individual.
The petitioners worked exclusively at the SMC plant, never having been
assigned to other companies or departments of SMC plant, even
when the volume of work was at its minimum. When any of the glass
furnaces suffered a breakdown, making a shutdown
necessary, thepetitioners’ work was temporarily suspended.
Thereafter, the petitioners would return to work at the glass plant.
Sometime in January, 1969, the petitioner workers—numbering one
hundred and forty (140) organized and affiliated themselves
with the petitioner union and engaged in union activities. Believing
themselves entitled to overtime and holiday pay, the petitioners pressed
management, airing other grievances such as being paid
below the minimum wage law, inhuman treatment, being forced to
borrow at usurious rates of interest and to buy raffle tickets, coerced by
withholding their salaries, and salary deductions made without their
consent. However, their gripes and grievances were not heeded
by therespondents.
On February 6, 1969, the petitioner union filed a notice of strike
with the Bureau of Labor Relations in connection
66
with the dismissal of some of its members who were allegedly employees of the Guaranteed LaborContractor, an
castigated for their union membership and warned that should they independent labor contracting firm.
persist in continuing with their union activities they would be dismissed The facts and evidence on record negate respondent SMC’s -claim.
from their jobs. Several conciliation conferences were scheduled in .The existence of an independent contractor relationship is generally
order to thresh out their differences. On February 12, 1969, union established by the following criteria: “whether or not the contractor is
member Rogelio Dipad was dismissed from work. At thescheduled carrying on an independent business; thenature and
conference on February 19, 1969, thecomplainant union through its extent of the work; the skill required; theterm and
officers headed by National President Artemio Portugal, Sr., presented a duration of the relationship; the right to assign the performance of a
letter to therespondent company containing proposals specified piece of work; the control and supervision of the work to
and/or labordemands together with a request for recognition and another; the employer’s power with respect to the hiring, firing and
collective bargaining. payment ofthe contractor’s
San Miguel refused to bargain with the petitioner union alleging workers; the control of the premises; theduty to supply the premises
that the workers are not their employees. tools, appliances, materials and labor; and the mode, manner and
On February 20, 1969, all the petitioners were dismissed from their jobs terms of payment (56 CJS Master and Servant, Sec. 3(2), 46; See also 27
and, thereafter, denied entrance to respondent company’s glass factory AM. Jur. Independent Contractor, Sec. 5, 485 and Anne., 75 ALR
despite their regularly reporting for work. A complaint for illegal 7260727).
dismissal and unfair labor practice was filed by thepetitioners. None of the above criteria exists in the case at bar.
The case reaches us now with the same issues to be resolved as when it Highly unusual and suspect is the absence of a written contract to
had begun. specify the performance of a specified piece ofwork, the nature and
The question of whether an employer-employee relationship exists in a extent of the work and the term and
certain situation continues to bedevil the courts. Some businessmen try duration of the relationship. The records fail to show that a large
to avoid thebringing about of an employer-employee relationship in commercial outfit, such as the San Miguel Corporation, entered into
their enterprises because that judicial relation spawns obligations mere oral agreements ofemployment or labor contracting
connected with workmen’s compensation, social security, medicare, where the same would involve considerable expenses and dealings with
minimum wage, termination pay, and unionism. (Mafinco Trading a large number of workers over a long period of time. Despite
Corporation v. Ople, 70 SCRA 139). respondent company’s allegations not an iota of evidence was offered to
In determining the existence of an employer-employee prove the same or its particulars. Such failure makes respondent SMC’s
relationship, the elements that are generally considered stand subject to serious doubts.
are the following: (a) the selection and engagement of theemployee; Uncontroverted is the fact that for an average of seven (7) years,
(b) the payment of wages; (c) the power ofdismissal; and each of the petitioners had worked continuously and exclusively
(d) the employer’s power to control theemployee with respect for the respondent company’s shipping and warehousing department.
to the means and methods by which the work is to be accomplished. It Considering the length of time that the petitioners have worked
is the so-called “control test” that is the most important element with the respondent company, there is justification to conclude that they
(Investment Planning Corp. of the Phils. v. The Social Security were engaged to perform activities necessary or desirable in theusual
System, 21 SCRA 924; Mafinco Trading Corp. v. Ople, supra, and Rosario business or trade of the respondent, and thepetitioners are, therefore
Brothers, Inc. v. Ople, 131 SCRA 72). regular employees (Phil. Fishing Boat Officers and Engineers Union v.
Applying the above criteria, the evidence strongly Court of Industrial Relations, 112 SCRA 159 and RJL Martinez Fishing
indicates the existence of an employer-employee relationship between Corporation v. National Labor Relations Commission, 127 SCRA 454).
petitioner workers and respondent San Miguel As we have found in RJL Martinez Fishing Corporation v.
Corporation. The respondent asserts that thepetitioners are National Labor Relations Commission, (supra):

67
 “x x x [T]he employer-employee relationship between the parties herein
is not co-terminous with each loading and unloading job. As earlier
shown, respondents are engaged in the business offishing. For this
purpose, they have a fleet of fishing vessels. Under this situation,
respondents’ activity of catching fish is a continuous process and could
hardly be considered as seasonal in nature. So that the activities
performed by herein complainants, i.e. unloading the catch of tuna fish
from respondents’ vessels and then loading the same to refrigerated
vans, are necessary or desirable in the business of respondents. This
circumstance makes the employment of complainants a regular one,
in thesense that it does not depend on any specific project or seasonable
activity. (NLRC Decision, p. 94, Rollo)."
so is it with petitioners in the case at bar. In fact, despite past
shutdowns of the glass plant for repairs, thepetitioners, thereafter,
promptly returned to their jobs, never having been replaced, or assigned
elsewhere until the present controversy
arose. The term of the petitioners’ employment appears
indefinite. The continuity and habituality of petitioners’ work bolsters
their claim ofemployee status vis-a-vis respondent company.
Even under the assumption that a contract ofemployment had indeed
been executed between respondent SMC
and the alleged labor contractor, respondent’s case will, nevertheless,
faiL
Section 8, Rule VIII, Book III of the Implementing
Rules of the Labor Code provides:
“Job contracting.—There is job contracting permissible under theCode
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.”
We find that Guaranteed and Reliable Labor contractors have neither
substantial capital nor investment to qualify as an independent
contractor under the law. Thepremises, tools, equipment and
paraphernalia used by thepetitioners in their jobs are admittedly all
supplied by respondent company. It is only the manpower or laborforce
which the alleged contractors supply, suggesting theexistence of a
“labor-only” contracting scheme prohibited by law (Article 106,
109 of the Labor Code; Section 9(b), Rule VIII, Book III, Implementing
Rules and Regulations of the Labor Code). In fact, even the alleged
contractor’s office, which consists of a space at respondent company’s
warehouse, table, chair, typewriter and cabinet, are provided for by
respondent SMC. It is therefore clear that the alleged contractors have
no capital outlay involved in the conduct of its business,
in the maintenance thereof or in the payment of its workers’ salaries.
The payment of the workers’ wages is a critical factor in
determining the actuality of an employer-employee relationship
whether between respondent company and petitioners or
between the alleged independent contractor and petitioners. It is
important to emphasize that in a truly independent contractor-
contractee relationship, the fees are paid directly to the manpower
agency in lump sum without indicating or implying that the basis of such
lump sum is the salary per worker multiplied by the number ofworkers
assigned to the company. This is the rule in Social Security System v.
Court of Appeals (39 SCRA 629, 635).
The alleged independent contractors in the case at bar were paid a lump
sum representing only the salaries theworkers were entitled to, arrived
at by adding the salaries of each worker which depend
on the volume of work they had accomplished individually. These are
based on payrolls, reports or statements prepared by the workers’
group leader, warehousemen and checkers, where they note
down the number of cartons, wooden shells and bottles each worker
was able to load, unload, pile or pallet and see whether they
tally. The amount paid by respondent company to the alleged
independent contractor considers no business expenses or capital
outlay of the latter. Nor is the profit or gain of the alleged contractor
in the conduct of its business provided for as an amount over and
above the workers’ wages. Instead, the alleged contractor receives a
percentage from the total earnings ofall the workers plus an additional
amount corresponding to a percentage of the earnings of each
individual worker, which, perhaps, accounts for the petitioners’
charge ofunauthorized deductions from their salaries
by therespondents.
Anent the argument that the petitioners are not employees as they
worked on piece basis, we merely have to cite our rulings in Dy Keh Beng
68
v. International Laborand Marine Union of the Philippines (90 SCRA
161), as follows:
“'[C]ircumstances 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 theworker completely at liberty to turn
him out and take in another at pleasure.’ "
Article 106 of the Labor Code provides the legal effect ofa labor-only
contracting scheme, to wit:
“x x x 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.”
Firmly establishing respondent SMC’s role as employer is the control
exercised by it over the petitioners—that is, control in the means and
methods/manner by which petitioners are to go about their work, as
well as in disciplinary measures imposed by it.
Because of the nature of the petitioners’ work as cargadores or
pahinantes, supervision as to the means and
manner of performing the same is practically nil. For, how many ways
are there to load and unload bottles and wooden shells? The mere
concern of both respondent SMC and the alleged contractor is
that the job of having the bottles and wooden shells brought to and
from the warehouse be done. More evident and pronounced is
respondent company’s right to control in the discipline of petitioners.
Documentary evidence presented by the petitioners establish
respondent SMC’s right to impose disciplinary measures for violations or
infractions of its rules and regulations as well as its right to recommend
transfers and dismissals of the piece workers. The inter-office
memoranda submitted in evidence prove the company’s control
over the petitioners. That respondent SMC has the power to recommend
penalties or dismissal of the piece workers, even as to Abner Bungay
who is alleged by SMC to be a Note.—Where it appears that the questioned employees were never
representative of the alleged labor contractor, is thestrongest
indication of respondent company’s right ofcontrol over the petitioners
as direct employer. There is no evidence to show
that the alleged labor contractor had such right of control or much less
had been there to supervise or deal with the petitioners.
The petitioners were dismissed allegedly
because of theshutdown of the glass manufacturing plant. Respondent
company would have us believe that this was a case ofretrenchment due
to the closure or cessation of operations of the establishment or
undertaking. But such is not thecase here. The respondent’s shutdown
was merely temporary, one of its furnaces needing repair. Operations
continued after such repairs, but the petitioners had already been
refused entry to the premises and dismissed from respondent’s service.
New workers manned their positions. It is apparent
that the closure of respondent’s warehouse was merely a ploy to get
rid of the petitioners, who were then agitating the respondent company
for benefits, reforms and collective bargaining as a union. There is no
showing that petitioners had been remiss in their obligations and
inefficient in their jobs to warrant their separation.
As to the charge of unfair labor practice because ofSMC’s refusal to
bargain with the petitioners, it is clear that the respondent company had
an existing collective bargaining agreement with the IBM union which
is therecognized collective bargaining representative
at the respondent’s glass plant.
There being a recognized bargaining representative ofall employees
at the company’s glass plant, the petitioners cannot merely form a union
and demand bargaining. TheLabor Code provides the proper procedure
for therecognition of unions as sole bargaining representatives. This
must be followed.
WHEREFORE, IN VIEW OF THE FOREGOING, thepetition is
GRANTED. The San Miguel Corporation is hereby ordered to REINSTATE
petitioners, with three (3) years back-wages. However, where
reinstatement is no longer possible, the respondent SMC is ordered to
pay thepetitioners separation pay equivalent to one (1) month pay for
every year of service.
SO ORDERED.
     Feria (Chairman), Fernan, Alampay and Paras, JJ.,concur.
Petition granted.
separated from the service but their status is that of regular seasonable
employees who are called to work from time to time mostly during
summer season, and the nature of their relationship with the hotel is
such that during off season they are temporarily laid off but during
69
summer season they are re-employed or when their services are needed,
and they are not strictly speaking separated from the service but are
merely considered as on leave of absence without pay until they are
reemployed, it is held that their employment relationship is never
severed but only suspended, and, as such, they can be considered as in
regular employment of the hotel. (Manila Hotel Company vs. Court of
Industrial Relations, 9 SCRA 184.)
——o0o——
61
VOL. 324, JANUARY 31, 2000 39
Lapanday Agricultural Development Corporation vs. Court of Appeals
G.R. No. 112139. January 31, 2000.*
LAPANDAY AGRICULTURAL DEVELOPMENT CORPORATION,
petitioner, vs. THE HONORABLE COURT OF APPEALS (Former Eighth
Division) and COMMANDO SECURITY SERVICE AGENCY, INC.,
respondents.
Labor Law; Wages; Jurisdiction; It is well settled in law and jurisprudence
that where no employer-employee relationship exists between the parties
and no issue is involved which may be resolved by reference to the Labor
Code, other labor statutes or any collective bargaining agreement, it is the
Regional Trial Court that has jurisdiction.—We agree with the
respondent that the RTC has jurisdiction over the subject matter of the
present case. It is well settled in law and jurisprudence that where no
employer-employee relationship exists between the parties and no issue
is involved which may be resolved by reference to the Labor Code, other
labor statutes or any collective bargaining agreement, it is the Regional
Trial Court that has jurisdiction. In its complaint, private respondent is
not seeking any relief under the Labor Code but seeks payment of a sum
of money and damages on account of petitioner’s alleged breach of its
obligation under their Guard Service Contract. The action iswithin the
realm of civil law hence jurisdiction over the case belongs to the regular
courts.
Same; Same; The principal and the contractor are jointly and severally
liable to the employees for their wages.—Private respondent admits that
there is no employer-employee relationship between it and the
petitioner. The private respondent is an independent/job contractor
who assigned security guards at the petitioner’s premises for a
stipulated amount per guard per month. The Contract of Security
Services expressly stipulated that the security guards are employees of
the Agency and not of the petitioner. Articles 106 and 107 of the Labor
Code provides the rule governing the payment of wages of employees in
the event that the contractor fails to pay such wages, x x x It will be seen
from the above provisions that the principal (petitioner) and the
contractor (respondent) are jointly and severally liable to the employees
for their wages. This Court held in Eagle Security, Inc. vs.
NLRC and Spartan Security and Detective Agency, Inc. vs. NLRC that the
joint and several liability of the contractor and the principal is mandated
70
by the Labor Code to assure compliance with the provisions therein
including the minimum wage. The contractor is made liable by virtue of
his status as direct employer. The principal, on the other hand, is made
the indirect employer of the contractor’s employees to secure payment
of their wages should the contractor be unable to pay them. Even in the
absence of an employer-employee relationship, the law itself establishes
one between the principal and the employees of the agency for a limited
purpose i.e. in order to ensure that the employees are paid the wages
due them. In the above-mentioned cases, the solidary liability of the
principal and contractor was held to apply to the aforementioned Wage
Order Nos. 5 and 6.
Same; Same; The right of the contractor to recover from the principal
arises only if he has paid the amounts for which both of them are jointly
and severally liable in line with Article 1217 of the Civil Code.—It is clear
also from the foregoing that it is only when contractor pays the increases
mandated that it can claim an adjustment from the principal to cover the
increases payable to the security guards. The conclusion that the right of
the contractor (as principal debtor) to recover from the principal (as
solidary co-debtor) arises only if he has paid the amounts for which both
of them are jointly and severally liable is in line with Article 1217 of the
Civil Code, x x x Pursuant to the above provision, the right of
reimbursement from a co-debtor is recognized in favor of the one who
paid.
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
     J.V. Yap Law Office for petitioner.
     David O. Montana, Sr. for private respondent.
GONZAGA-REYES, J.:
Before us is a Petition for Review on Certiorari of the decision 1 of the
Court of Appeals2 in CA-G.R. CV No. 33893entitled COMMANDO
SECURITY SERVICE AGENCY, INCORPORATED vs. LAPANDAY
AGRICULTURAL DEVELOPMENT CORPORATION which affirmed the
decision3 of the Regional Trial Court, 11th Judicial Region, Branch 9,
Davao City in Civil Case No. 19203-88.
The pertinent facts as found by the Court of Appeals are as follows:
“The evidence shows that in June 1986, plaintiff Commando Security
Service Agency, Inc., and defendant Lapanday Agricultural Development
Corporation entered into a Guard Service Contract. Plaintiff provided
security guards in defendant’s banana plantation. The contract called for
the payment to a guard of P754.28 on a daily 8-hour basis and an
additional P565.72 for a four hour overtime while the shift-in-charge
was to be paid P811.40 on a daily 8-hour basis and P808.60 for the 4-
hour overtime.
Wage Orders increasing the minimum wage in 1983 were complied with
by the defendant. On June 16, 1984, Wage Order No. 5 was promulgated
directing an increase of P3.00 per day on the minimum wage of workers
in the private sector and a P5.00 increase on the ECOLA. This was
followed on November 1, 1984 by Wage Order No. 6 which further
increased said minimum wage by P3.00 on the ECOLA. Both Wage
Orders contain the following provision:
“In the case of contract for construction projects and for security,
janitorial and similar services, the increase in the minimum wage and
allowances rates of the workers shall be borne by the principal or client
of the construction/service contractor and the contracts shall be deemed
amended accordingly, subject to the provisions of Sec. 3 (b) of this
order” (Sec. 6 and Sec. 9, Wage Orders No. 5 and 6, respectively).”
Plaintiff demanded that its Guard Service Contract with defendant be
upgraded in compliance with Wage Order Nos. 5 and 6. Defendant
refused. Their Contract expired on June 6, 1986 without the rate
adjustment called for Wage Order Nos. 5 and 6 being implemented. By
the time of the filing of plaintiffs Complaint, the rate adjustment payable
by defendant amounted to P462,346.25. Defendant opposed the
Complaint by raising the following defenses: (1) the rate adjustment is
the obligation of the plaintiff as employer of the security guards; (2)
assuming its liability, the sum it should pay is less in amount; and (3) the
Wage Orders violate the impairment clause of the Constitution.
The trial court decided in favor of the plaintiff. It held:
xxx
“However, in order for the security agency to pay the security guards,
the Wage Orders made specific provisions to amend existing contracts
for security services by allowing the adjustment of the consideration
paid by the principal to the security agency concerned. (Eagle Security
Agency, Inc. vs. NLRC; Phil. Tuberculosis Society, Inc. vs. NLRC, et al., May
18, 1989, 173 SCRA 479).
The Wage Orders require the amendment of the contract as to the
consideration to cover the service contractor’s payment of the increases
mandated. However, in the case at bar, the contract for security services
had earlier been terminated without the corresponding amendment.
71
Plaintiff now demands adjustment in the contract price as the same was
deemed amended by Wage Order Nos. 5 and 6.
Before the plaintiff could pay the minimum wage as mandated by law,
adjustments must be paid by the principal to the security agency
concerned.
“Given these circumstances, if PTS pays the security guards, it cannot
claim reimbursements from Eagle. But if its Eagle that pays them, the
latter can claim reimbursement from PTS in lieu of an adjustment,
considering that the contract had expired and had not been renewed.
(Eagle Security Agency vs. NLRC and Phil. Tuberculosis Society, Inc. vs.
NLRC, et al., 18 May 1989, supra).
“As to the issue that Wage Orders Nos. 5 and 6 constitute impairments of
contracts in violation of constitutional guarantees, the High Court ruled”
The Supreme Court has rejected the impairment of contract argument in
sustaining the validity and constitutionality of labor and social
legislation like the Blue Sunday Law, compulsory coverage of private
sector employees in the Social Security System, and the abolition of
share tenancy enacted pursuant to the police power of the state (Eagle
Security Agency, Inc. vs. National Labor Relations Commission and Phil.
Tuberculosis Society, Inc. vs. NLRC, et al., May 18, 1989, supra).”
Petitioner’s motion for reconsideration was denied; 4 hence this petition
where petitioner cites the following grounds to support the instant
petition for review:
1. “1.THE WAGE INCREASES PROVIDED FOR IN THE WAGE
ORDERS WERE DUE TO THE GUARDS AND NOT THE SECURITY
AGENCY;
2. 2.A SECURITY AGENCY WHO DID NOT PAY WAGE INCREASE TO
ITS GUARDS IT HAD ALREADY TERMINATED AND WITHOUT
THEIR AUTHORIZATION CANNOT INSTITUTE AN ACTION TO
RECOVER SAID WAGE INCREASE FOR ITS BENEFIT;
3. 3.IN THE ABSENCE OF BAD FAITH AND WITHOUT THE TRIAL
COURT CORRECTLY ESTABLISHING THE BASIS FOR
ATTORNEYS FEES, THE SAME MAY NOT BE AWARDED.
4. 4.THE NATIONAL LABOR RELATIONS (SIC) IS THE PROPER
FORUM THAT HAS THE JURISDICTION TO RESOLVE THE ISSUE
OF WHETHER OR NOT THE PETITIONER IS LIABLE TO PAY THE
PRIVATE RESPONDENT THE WAGE AND ALLOWANCE
INCREASES MANDATED UNDER WAGE ORDER NOS. 5 AND 6.”5
Reiterating its position below, petitioner asserts that private respondent
has no factual and legal basis to collect the benefits under subject Wage
Order Nos. 5 and 6 intended for the security guards without the
authorization of the security guards concerned. Inasmuch as the services
of the forty-two (42) security guards were already terminated at the
time the complaint was filed on August 15, 1988, private respondent’s
complaint partakes of the nature of an action for recovery of what was
supposedly due the guards under said Wage Orders, amounts that they
claim were never paid by private respondent and therefore not
collectible by the latter from the petitioner. Petitioner also assails the
award of attorney’s fees in the amount of P115,585.31 or 25% of the
total adjustment claim of P462,341.25 for lack of basis and for being
unconscionable.
Moreover, petitioner submits that it is the National Labor Relations
Commission (NLRC) and not the civil courts that has jurisdiction to
resolve the issue involved in this case for it refers to the enforcement of
wage adjustment and other benefits due to private respondent’s security
guards mandated under Wage Order Nos. 5 and 6. Considering that the
RTC has no jurisdiction, its decision is without force and effect. 6
On the other hand, private respondent contends that the basis of its
action against petitioner-appellant is the enforcement of the Guard
Service Contract entered into by them, which is deemed amended by
Section 6 of Wage Order No. 5 and Section 9 of Wage Order No. 6; that
pursuant to their amended Guard Service Contract, the
increases/adjustments in wages and ECOLA are due to private
respondent and not to the security guards who are not parties to the said
contract. It is therefore immaterial whether or not private respondent
paid its security guards their wages as adjusted by said Wage Orders and
that since the forty-two (42) security guards are not parties to the Guard
Service Contract, there is no need for them to authorize the filing of, or
be joined in, this suit.
As regards the award to private respondent of the amount of
P115,585.31 as attorney’s fees, private respondent maintains that there
is enough evidence and/or basis for the grant thereof, considering that
the adamant attitude of the petitioner (in implementing the questioned
Wage Orders) compelled the herein private respondent, to litigate in
court. Furthermore, since the legal fee payable by private respondent to
its counsel is essentially on contingent basis, the amount of P115,583.31
granted by the trial court which is 25% of the total claim is not
unconscionable.
As regards the jurisdiction of the RTC, private respondent alleges that
the suit filed before the trial court is for the purpose of securing the
72
upgrading of the Guard Service Contract entered into by herein
petitioner and private respondent in June 1983. The enforcement of this
written contract does not fall under the jurisdiction of the NLRC because
the money claims involved therein did not arise from employer-
employee relations between the parties and is intrinsically a civil
dispute. Thus, jurisdiction lies with the regular courts. Private
respondent further contends that petitioner is estopped or barred from
raising the question of jurisdiction for the first time before the Supreme
Court after having voluntarily submitted to the jurisdiction of the regular
courts below and having lost its case therein.7
We resolve to grant the petition.
We resolve first the issue of jurisdiction. We agree with the respondent
that the RTC has jurisdiction over the subject matter of the present case.
It is well settled in law and jurisprudence that where no employer-
employee relationship exists between the parties and no issue is
involved which may be resolved by reference to the Labor Code, other
labor statutes or any collective bargaining agreement, it is the Regional
Trial Court that has jurisdiction. 8 In its complaint, private respondent is
not seeking any relief under the Labor Code but seeks payment of a sum
of money and damages on account of petitioner’s alleged breach of its
obligation under their Guard Service Contract. The action is within the
realm of civil law hence jurisdiction over the case belongs to the regular
courts.9 While the resolution of the issue involves the application of
labor laws, reference to the labor code was only for the determination of
the solidary liability of the petitioner to the respondent where no
employer-employee relation exists. Article 217 of the Labor Code as
amended vests upon the labor arbiters exclusive original jurisdiction
only over the following:
1. 1.Unfair labor practices;
2. 2.Termination disputes;
3. 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. 4.Claims for actual, moral exemplary and other forms of damages
arising from employer-employee relations;
5. 5.Cases arising from any violation of Article 264 of this Code,
including questions involving legality of strikes and lockouts; and
6. 6.Except claims for Employees Compensation, Social Security,
Medicare and maternity benefits, all other claims, arising from
employer-employee relations, including those of persons in
domestic or household service, involving an amount exceeding
five thousand pesos (P5,000.00) regardless of whether
accompanied with a claim for reinstatement.
In all these cases, an employer-employee relationship is an
indispensable jurisdictional requisite;10 and there is none in this case.
On the merits, the core issue involved in the present petition is whether
or not petitioner is liable to the private respondent for the wage
adjustments provided under Wage Order Nos. 5 and 6 and for attorney’s
fees.
Private respondent admits that there is no employer-employee
relationship between it and the petitioner. The private respondent is an
independent/job contractor11 who assigned security guards at the
petitioner’s premises for a stipulated amount per guard per month. The
Contract of Security Services expressly stipulated that the security
guards are employees of the Agency and not of the petitioner. 12 Articles
106 and 107 of the Labor Code provides the rule governing the payment
of wages of employees in the event that the contractor fails to pay such
wages as follows:
“Art. 106. Contractor or subcontractor.—Whenever an employer enters
into a contract with another person for the performance of the former’s
work, the employees of the contractor and of the
latter’s subcontractor, if any, shall be paid in accordance with the
provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages
of his employees in accordance with this Code, the employer shall be
jointly and severally liable with his contractor or subcontractor to such
employees to the extent of the work performed under the contract, in
the same manner and extent that he is liable to employees directly
employed by him.
xxx
ART. 107. Indirect employer.—The provisions of the immediately
preceding Article shall likewise apply to any person, partnership,
association or corporation which, not being an employer, contracts with
an independent contractor for the performance of any work, task, job or
project.”
It will be seen from the above provisions that the principal (petitioner)
and the contractor (respondent) are jointly and severally liable to the
employees for their wages. This Court held in Eagle Security, Inc. vs.
NLRC13 and Spartan Security and Detective Agency, Inc. vs. NLRC 14 that the
joint and several liability of the contractor and the principal is mandated
73
by the Labor Code to assure compliance with the provisions therein
including the minimum wage. The contractor is made liable by virtue of
his status as direct employer. The principal, on the other hand, is made
the indirect employer of the contractor’s employees to secure payment
of their wages should the contractor be unable to pay them. 15 Even in the
absence of an employer-employee relationship, the law itself establishes
one between the principal and the employees of the agency for a limited
purpose i.e. in order to ensure that the employees are paid the wages
due them. In the above-mentioned cases, the solidary liability of the
principal and contractor was held to apply to the aforementioned Wage
Order Nos. 5 and 6.16In ruling that under the Wage Orders, existing
security guard services contracts are amended to allow adjustment of
the consideration in order to cover payment of mandated increases, and
that the principal is ultimately liable for the said increases, this Court
stated:
The Wage Orders are explicit that payment of the increases are ‘to be
borne’ by the principal or client. To be borne,’ however, does not mean
that the principal, PTSI in this case, would directly pay the security
guards the wage and allowance increases because there is no privity of
contract between them. The security guards’ contractual relationship is
with their immediate employer, EAGLE. As an employer, EAGLE is
tasked, among others, with the payment of their wages [See Article VII
Sec. 3 of the Contract for Security Services, supra and Bautista vs.
Inciong, G.R. No. 52824, March 16, 1988, 158 SCRA 665].
On the other hand, there existed a contractual agreement between PTSI
and EAGLE wherein the former availed of the security services provided
by the latter. In return, the security agency collects from its client
payment for its security services. This payment covers the wages for the
security guards and also expenses for their supervision and training, the
guards bonds, firearms with ammunitions, uniforms and other
equipments, accessories, tools, materials and supplies necessary for the
maintenance of a security force.
Premises considered, the security guards’ immediate recourse for the
payment of the increases is with their direct employer, EAGLE. However,
in order for the security agency to comply with the new wage and
allowance rates it has to pay the security guards, the Wage Orders made
specific provision to amend existing contracts for security services by
allowing the adjustment of the consideration paid by the principal to the
security agency concerned. What the Wage Orders require, therefore, is
the amendment of the contracts as to the consideration to cover the
service contractors’ payment of the increases mandated. In the end,
therefore, ultimate liability for the payment of the increases rests with
the principal.
In view of the foregoing, the security guards should claim the amount of
the increases from EAGLE. Under the Labor Code, incase the agency fails
to pay them the amounts claimed, PTSI should be held solidarily liable
with EAGLE [Articles 106, 107 and 109]. Should EAGLE pay, it can claim
an adjustment from PTSI for an increase in consideration to cover the
increases payable to the security guards.”17
It is clear also from the foregoing that it is only when contractor pays the
increases mandated that it can claim an adjustment from the principal to
cover the increases payable to the security guards. The conclusion that
the right of the contractor (as principal debtor) to recover from the
principal (as solidary co-debtor) arises only if he has paid the amounts
for which both of them are jointly and severally liable is in line with
Article 1217 of the Civil Code which provides:
“Art. 1217. Payment made by one of the solidary debtors extinguishes
the obligation. If two or more solidary debtors offer to pay, the creditor
may choose which offer to accept.
He who made payment may claim from his codebtors only the share
which corresponds to each, with interest for the payment already made.
If the payment is made before the debt is due, no interest for the
intervening period may be demanded, x x x”
Pursuant to the above provision, the right of reimbursement from a co-
debtor is recognized in favor of the one who paid.
It will be seen that the liability of the petitioner to reimburse the
respondent only arises if and when respondent actually pays its
employees the increases granted by Wage Order Nos. 5 and 6. Payment,
which means not only the delivery of money but also the performance, in
any other manner, of the obligation, 18 is the operative fact which will
entitle either of the solidary debtors to seek reimbursement for the
share which corresponds to each of the debtors.
The records show that judgment was rendered by Labor Arbiter Newton
R. Sancho holding both petitioner and private respondent jointly and
solidarily liable to the security guards in a Decision 19 dated October 17,
1986 (NLRC Case No. 2849-MC-XI-86). 20 However, it is not disputed that
the private respondent has not actually paid the security guards the
wage increases granted under the Wage Orders in question. Neither is it
alleged that there is an extant claim for such wage adjustments from the
security guards concerned, whose services have already been
74
terminated by the contractor. Accordingly, private respondent has no
cause of action against petitioner to recover the wage increases.
Needless to stress, the increases in wages are intended for the benefit of
the laborers and the contractor may not assert a claim against the
principal for salary wage adjustments that it has not actually paid.
Otherwise, as correctly put by the petitioner, the contractor would be
unduly enriching itself by recovering wage increases for its own benefit.
Finally, considering that the private respondent has no cause of action
against the petitioner, private respondent is not entitled to attorney’s
fees.

WHEREFORE, the petition is GRANTED. The decision of the Court of

Appeals dated May 24, 1993 is REVERSED and SET ASIDE. The complaint
of private respondent COMMANDO SECURITY SERVICE AGENCY, INC. is
hereby DISMISSED.
SO ORDERED.
     Melo (Chairman), Vitug, Panganiban and Purisima, JJ., concur.
Petition granted.
Note.—The principal and the contractor are jointly and severally liable
to the employees for the latter’s money claims.(Helpmate Inc. vs.
National Labor Relations Commission, 276 SCRA 315 [1997])
——o0o——

75

WHAT ARE THE TESTS TO DETERMINE THE EXISTENCE OF AN
EMPLOYMENT RELATIONSHIP?
WHAT IS THE-FOUR FOLD TEST?
[No. 8967. May 31, 1956]
ANASTACIO VIANA, petitioner, vs. ALEJO AL-LAGADAN and FILOMENA
PIGA, respondents.
1. 1.WORKMEN'S COMPENSATION; NON-APPLICABILITY OF ACT
No. 3428 SHOULD BE PLEADED IN THE EMPLOYER'S ANSWER.
—The nonapplicability of Act No. 3428 to employers whose
gross income does not reach P20,000 is however a matter of
defense, which cannot be availed of unless pieaded in the
employer's answer to the claim for compensation filed by the
employee or his heirs.
1. 2.EMPLOYER AND EMPLOYEE; ELEMENTS IN DETERMINING
EXISTENCE OF RELATIONSHIP.—In dt-termining the existence
of employer-employee relationship, the following' elements are
generally considered namely: (1) the selection and engagement
of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power to control the employee's conduct
—although the latter is the most important element (35 A. Jur.
445.)
PETITION for review by certiorari of a decision of the Workmen's
Compensation Commission.
The facts are stated in the opinion of the Court.
Ang & Abeleda for petitioner.
Ildefonso de Guzman for respondents.
CONCEPCION, J.:
Petitioner Anastacio Viana owned the fishing sailboat "Magkapatid",
which, in the night of September 3, 1948, sunk in the waters between the
province of Bataan and the island of Corregidor, as a consequence of a
collision with the USS "TINGLES", a vessel of the U.S. Navy. In- asmuch as
Alejandro Al-Lagadan, a member of the crew of the "Magkapatid",
disappeared with the craft, his parents, respondent Alejo Al-Lagadan and
Filomena Piga, filed the corresponding claim for compensation under Act
No. 3428. After appropriate proceedings, a Referee of the Workmen's
Compensation Commission rendered a decision, dated February 23,
1953:
"1. Ordering Mr. Anastacio Viana to pay the above-named claimants
through the Workmen's Compensation Commission, Manila, the sum of
Fl,560 in lump sum with interest at 6 per cent from September 3, 1948
until fully paid; and
"To pay the sum of P16 to the Workmen's Compensation Commission as
costs."
Said decision was, on petition for review filed by Viafia, affirmed by the
Workmen's Compensation Commissioner, on or about October 22, 1954,
"with additional fee of P5.00". Said Commissioner, having subsequently
denied a reconsideration of this action, Viana has brought the matter to
us, for review by certiorari, upon the ground that this case does not fall
within the purview of Act No. 3428, because the gross income of his
business for the year 1947 was allegedly less than P10,000, and because
Alejandro AI-Lagadan was, at the time of his death, his (petitioner's)
industrial partner, not his employee.
The first ground is untenable, petitioner not having invoked it before the
rendition of the Referee's decision on February 23, 1953. The objection
to the application of Act No. 3428, upon said ground, was made for the
first time when petitioner sought a review of said decision by the
Workmen's Compensation Commissioner. The nonapplicability of said
Act to employers whose gross income does not reach P20,000 is,
however, a matter of defense, which cannot be availed of unless pleaded
in the employer's answer to the claim for compensation filed by the
employee or his heirs. Petitioner herein having failed to do so, said
defense may not now be entertained (Rolan vs.Perez, 63 Phil., 80, 85-86).
As regards the second ground, petitioner maintains, contrary to the
finding of the Referee and said Commissioner, that the deceased was his
industrial partner, not employee. In this connection, it is alleged in
paragraph (6) of the petition:
"That the practice observed then and now in engaging the services of
crewmen of sailboats plying between Mindoro and Manila is on a
partnership basis, to wit: that the owner of the vessel, on one hand
receives one-half of the earnings of the sailboat after deducting the
expenses for the maintenance of the crew, the other half is divided pro
rata among the members of the crew, the 'patron' or captain receiving
four parts, the 'piloto' or next in command three parts, the wheelsman or
'timonel' 1½ parts and the rest of the members of the crew one part
each, as per Annex 'B' hereof."
It appears that, before rendering his aforementioned decision, the
Referee requested Mr. Manuel O. Morente, an attorney of the Workmen's
76
Compensation Commission, "to look into and inquire and determine the
method of and the basis of engaging the services of crewmen for
sailboats (batel) of twenty (20) tons or more plying between Manila and
Mariveles and moored along Manila North Harbor", and that, thereafter,
said Atty. Morente reported:
"The basis of engaging the services of crewmen of a batel is determined
in accordance with the contract executed between the owner and the
patron. The contract commonly followed is on a share basis after
deducting ali the expenses incurred on the voyage. One half goes to the
owner of the batel and the other half goes to the patron and the
members of the crew and divided among themselves on a share basis
also in accordance with their agreement with the patron getting the
lion's share. The hiring of the crew is done by the patron himself.
Usually, when a patron enters into a contract with the owner of the
batel, he has a crew ready with him" (Italics supplied.)
In sustaining the Referee's finding to the effect that the deceased was an
employee of Viafia, the Workmen's Compensation Commissioner said:
"The trial referee found that there was an employer-employee relation
between the respondent and the deceased, Alejandro AlLagadan, and the
share which the deceased received at the end of each trip was in the
nature of 'wages' which is defined under section 39 of the Compensation
Act. This is so because such share could be reckoned in terms of money. In
other words, there existed the relation of employer and employee
between the respondent and Alejandro Al-Lagadan at the time of the
latter's death.
"We believe that the trial referee did not err in finding the deceased an
employee of the respondent. We cite the following cases which illustrate
the point at issue:
'The officers and crews of whaling and other fishing vessels who are to
receive certain proportions of produce of the voyage in lieu of wages;
(Rice vs. Austin, 17 Mass. 206; 2Y & C. 61); Captains of merchant ships
who, instead of wages, receive shares in the profits of the adventure; (4
Maule & C. 240); or who take vessels under an agreement to pay certain
charges and receive a share of the earnings; (Tagard vs. Loring, 16 Mass.
336, 8 Am. Dec. 140; Winsor vs. Cutts, 7 Greenl. Me. 261) have generally
been held not to be partners with the respondent, and the like. Running
a steamboat on shares does not make the owners partners in respect to
the vessel (The Daniel Koine, 35 Fed. 785); so of an agreement between
two parties to farm on shares; (Hooloway vs. Brinkley, 42 Ga. 226); A
seaman who is to receive pay in proportion to the amount of fish caught
is not a partner; (Holdren vs. French, 68 Me. 241); sharing profits in lieu
of wages is not a partnership. There is no true contribution;
(Crawford vs.Austin, 34 Md. 49; Whitehill vs. Shickle, 43 Mo.
538; Sankey vs.Iron Works, 44 Ga. 228.)'" (Italics supplied.)
In other words, in the opinion of the Referee, as well as of said
Commissioner, the mere fact that Alejandro's share in the understanding
"could be reckoned in terms of money", sufficed to characterize him as
an employee of Viaiia. We do not share this view. Neither can we accept,
however, petitioner's theory to the effect that the deceased was his
partner, not an employee, simply because he (the deceased) shared in
the profits, not in the losses. In determining the existence of employer-
employee relationship, the following elements are generally considered,
namely: (1) the selection and engagement of the employee;
(2) the payment of wages; (3) the power of dismissal; and (4) the power
to controi the employees' conduct—although the latter is the mcst
important element (35 Am. Jnr. 445). Assuming that the share received
by the deceased could partake of the nature of wages—on which we
need not, and do not, express our view—and that the second element,
therefore, exists in the case at bar, the record does not contain any
specific data regarding the third and fourth elements.
With respect to the first element, the facts before us are insufficient to
warrant a reasonable conclusion, one way or the other. On the one hand,
Atty. Morente said, in his aforementioned report, that "the
contract commonly followed is on a share basis. * * * The hiring of a crew
is done by the patron himself. Usuully, when a patron enters into a
contract with the owner of the batel, he has a crew ready with him". This
statement suggests that the members of the crew are chosen by
the patron, seemingly, upon his sole responsibility and authority. It is
noteworthy, however, that said report referred to a practice commonly
and "usually" observed in a given place. The record is silent on whether
such practice had been followed in the case under consideration. More
important still, the language used in said report may be construed as
intimating, not only that the "patron" selects and engages the crew, but,
also, that the members thereof are subject to his control and may be
dismissed by him. To put it differently, the literal import of said report is
open to the conclusion that the crew has a contractual relation, not with
the owner of the vessel, but with the patron, and that the latter, not the
former, is either their employer or their partner.
Upon the other hand, the very allegations of the petition show otherwise,
for petitioner explicitly averred therein that the deceased Alejandro Al-
77
Lagadan was his "industrial partner". This implies that a contract of
partnership existedbetween them and that, accordingly, if the crew was
selected and engaged by the "patron", the latter did so merely as agent
or representative of petitioner herein. Again, if petitioner were a partner
of the crew members, then neither the former nor the patron eould
control or dismiss the latter.
In the interest of justice and equity, and considering that a decision on
the merits of the issue before us may establish an important precedent,
it would be better to remand the case to the Workmen's Compensation
Commission for further evidence and findings on the following
questions: (1) who selected the crew of the "Magkapatid" and engaged
their services; (2) if selected and engaged by the "patron", did the latter
act in his own name and for his own account, or on behalf and for the
account of Viana; (3) could Viaiia have refused to accept any of the crew
members chosen and engaged by the "patron"; (4) did petitioner have
authority to determine the time when, the place where and/or the
manner or conditions in or under which the crew would work; and (5)
who could dismiss its members.
Wherefore, let the case be remanded to the Workmen's Compensation
Commission, for further proceedings in conformity with this decision,
without special pronouncement as to costs. So ordered.
Pards, C. J., Bengzon, Padilla, Montemayor, Reyes, A.,Bautista
Angelo, Reyes, J. B. L., and Endencia, JJ., concur.
Case remanded to Workmeris Compensation Commission for further
proceedings.
______________

78

SELECTION AND ENGAGEMENT:
IS THE STILPULATION OF THE PARTIES CONTROLLING?
VOL. 169, JANUARY 26, 1989 497
Tabas vs. California Manufacturing Co., Inc.
G.R. No. 80680. January 26, 1989.*
DANILO B. TABAS, EDUARDO A. BONDOC, RAMON M. BRIONES,
EDUARDO R. ERISPE, JOEL MADRIAGA, ARTHUR M. ESPINO, AMARO
BONA, FERDINAND CRUZ, FEDERICO A BELITA, ROBERTO P. ISLES,
ELMER ARMADA, EDUARDO UDOG, PETER TIANSING, MIGUELITA
QUIAMBOA, NOMER MATAGA, VIOLY ESTEBAN and LYDIA ORTEGA,
petitioners, vs. CALIFORNIA MANUFACTURING COMPANY, INC., LILY-
VICTORIA A. AZARCON, NATIONAL LABOR RELATIONS COMMISSION,
and HON. EMERSON C. TUMANON, respondents.
Labor Law; Labor Relations; Employer-Employee Relationship; The
existence of an employer-employee relation cannot be made the subject of
an agreement.—The existence of an employer-employee relation is a
question of law and being such, it cannot be made the subject of
agreement. Hence, the fact that the manpower supply agreement
between Livi and California had specifically designated the former as the
petitioners’ employer and had absolved the latter from any liability as an
employer, will not erase either party’s obligations as an employer, if an
employer-employee relation otherwise exists between the workers and
either firm. At any rate, since the agreement was between Livi and
California, they alone are bound by it, and the petitioners cannot be
made to suffer from its adverse consequences.
Same; Same; Same; “Labor Only” Contracting; The “labor only” contractor
is considered merely an agent of the employer, liability therefore must be
shouldered by either one or shared by both.—On the other hand, we have
likewise held, based on Article 106 of the Labor Code. xxx that
notwithstanding the absence of a direct employeremployee relationship
between the employer in whose favor work had been contracted out by a
“labor-only” contractor, and the employees, the former has the
responsibility, together with the “labor-only” contractor for any valid
labor claims, by operation of law. The reason, so we held, is that the
“labor-only” contractor is considered “merely an agent of the employer,
and liability must be shouldered by either one or shared by both.
Same; Same; Same; Casual Employees; A temporary or casual employee
becomes regular after service of one year, unless he has been contracted
for a specific project.—The fact that the petitioners have been hired on a
“temporary or seasonal” basis merely is no argument either. As we held
in Philippine Bank of Communications v. NLRC, a temporary or casual
employee, under Article 281 of the Labor Code, becomes regular after
service of one year, unless he has been contracted for a specific project.
And we cannot say that merchandising is a specific project for the
obvious reason that it is an activity related to the day-to-day operations
of California.
PETITION to review the decision and resolution of the National Labor
Relations Commission.
The facts are stated in the opinion of the Court.
     V.E. Del Rosario & Associates for respondent CMC.
     The Solicitor General for public respondent.
     Banzuela, Flores, Miralles, Raneses, Sy, Taquio and Associates for
petitioners.
     Mildred A. Ramos for respondent Lily-Victoria A. Azarcon.
SARMIENTO, J.:
On July 21, 1986, July 23, 1986, and July 28, 1986, the petitioners
petitioned the National Labor Relations Commission for reinstatement
and payment of various benefits, including minimum wage, overtime
pay, holiday pay, thirteenmonth pay, and emergency cost of living
allowance pay, against the respondent, the California Manufacturing
Company.1
On October 7, 1986, after the cases had been consolidated, the California
Manufacturing Company (California) filed a motion to dismiss as well as
a position paper denying the existence of an employer-employee relation
between the petitioners and the company and, consequently, any
liability for payment of money claims. 2On motion of the petitioners, Livi
Manpower Services, Inc. was impleaded as a party-respondent.
It appears that the petitioners were, prior to their stint with California,
employees of Livi Manpower Services, Inc. (Livi),which subsequently
assigned them to work as “promotional merchandisers" 3 for the former
firm pursuant to a manpower supply agreement. Among other things,
the agreement provided that California “has no control or supervisions
whatsoever over [Livi’s] workers with respect to how they accomplish
their work or perform [California’s] obligation"; 4 the Livi “is an
79
independent contractor and nothing herein contained shall be construed
as creating between [California] and [Livi] . . . the relationship of
principal[-]agent or employer[-]employee";5 that “it is hereby agreed
that it is the sole responsibility of [Livi] to comply with all existing as
well as future laws, rules and regulations pertinent to employment of
labor";6 and that "[California] is free and harmless from any liability
arising from such laws or from any accident that may befall workers and
employees of [Livi] while in the performance of their duties for
[California]."7
It was further expressly stipulated that the asignment of workers to
California shall be on a “seasonal and contractual basis”; that "[c]ost of
living allowance and the 10 legal holidays will be charged directly to
[California] at cost”; and that "[p]ayroll for the preceeding [sic] week
[shall] be delivered by [Livi] at [California’s] premises."8
The petitioners were then made to sign employment contracts with
durations of six months, upon the expiration of which they signed new
agreements with the same period, and so on. Unlike regular California
employees, who received not less than P2,823.00 a month in addition to
a host of fringe benefits and bonuses, they received P38.56 plus P15.00
in allowance daily.
The petitioners now allege that they had become regular California
employees and demand, as a consequence whereof, similar benefits.
They likewise claim that pending further proceedings below, they were
notified by California that they would not be rehired. As a result, they
filed an amended complaint charging California with illegal dismissal.
California admits having refused to accept the petitioners back to work
but deny liability therefor for the reason that it is not, to begin with, the
petitioners’ employer and that the “retrenchment” had been forced by
business losses as well as expiration of contracts. 9 It appears that
thereafter, Livi reabsorbed them into its labor pool on a “wait-in or
standby” status.10
Amid these factual antecedents, the Court finds the single most
important issue to be: Whether the petitioners are California’s or Livi’s
employees.
The labor arbiter’s decision,11 a decision affirmed on appeal,12 ruled
against the existence of any employer-employee relation between the
petitioners and California ostensibly in the light of the manpower supply
contract, supra, and consequently, against the latter’s liability as and for
the money claims demanded. In the same breath, however, the labor
arbiter absolved Livi from any obligation because the “retrenchment” in
question was allegedly “beyond its control."13
He assessed against the firm, nevertheless, separation pay and attorney’s
fees.
We reverse.
The existence of an employer-employees relation is a question of law
and being such, it cannot be made the subject of agreement. Hence, the
fact that the manpower supply agreement between Livi and California
had specifically designated the former as the petitioners’ employer and
had absolved the latter from any liability as an employer, will not erase
either party’s obligations as an employer, if an employer-employee
relation otherwise exists between the workers and either firm. At any
rate, since the agreement was between Livi and California, they alone are
bound by it, and the petitioners cannot bemade to suffer from its adverse
consequences.
This Court has consistently ruled that the determination of whether or
not there is an employer-employee relation depends upon four
standards: (1) the manner of selection and engagement of the putative
employee; (2) the mode of payment of wages; (3) the presence or
absence of a power of dismissal; and (4) the presence or absence of a
power to control the putative employee’s conduct. 14 Of the four, the
right-of-control test has been held to be the decisive factor. 15
On the other hand, we have likewise held, based on Article 106 of the
Labor Code, hereinbelow reproduced:
ART. 106. Contractor or subcontractor.—Whenever an employee enters
into a contract with another person for the performance of the former’s
work, the employees of the contractor and of the latter’s subcontractor,
if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay wages of his
employees in accordance with this Code, the employer shall be jointly
and severally liable with his contractor or subcontractor to such
employees to the extent of the work performed under the contract, in
the same manner and extent that he is liable to employees directly
employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or
prohibit the contracting out of labor to protect the rights of workers
established under this Code. In so prohibiting or restricting, he may
make appropriate distinctions between labor-only contracting and job
contracting as well as differentiations within these types of contracting
and determine who among the parties involved shall be considered the
80
employer for purposes of this Code, to prevent any violation or
circumvention of any provisions of this Code.
There is “labor-only” contracting where the person supplying workers to
an employer does not have substantial capital or investment in the form
of tools, equipment, machineries, work premises, among others, and the
workers recruited and placed by such person are performing activities
which are directly related to the principal business of such employer. In
such cases, the person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the workers in the
same manner and extent as if the latter were directly employed by him.
that notwithstanding the absence of a direct employer-employee
relationship between the employer in whose favor work had been
contracted out by a “labor-only” contractor, and the employees, the
former has the responsibility, together with the “labor-only” contractor,
for any valid labor claims, 16 by operation of law. The reason, so we held,
is that the “labor-only” contractor is considered “merely an agent of the
employer,"17 and liability must be shouldered by either one or shared by
both.18
There is no doubt that in the case at bar, Livi performs “manpower
services,"19 meaning to say, it contracts out labor in favor of clients. We
hold that it is one notwithstanding its vehement claims to the contrary,
and notwithstanding the provision of the contract that it is “an
independent contractor."20 The nature of one’s business is not
determined by selfserving appellations one attaches thereto but by the
tests provided by statute and prevailing case law. 21 The bare fact that
Livi maintains a separate line of business does not extinguish the equal
fact that it has provided California with workers to pursue the latter’s
own business. In this connection, we do not agree that the petitioners
had been made to perform activities “which are not directly related to
the general business of manufacturing," 22 California’s purported
“principal operation activity."23 The petitioner’s had been charged with
“merchandizing [sic] promotion or sale of the products of [California] in
the different sales outlets in Metro Manila including task and occational
[sic] price tagging,"24 an activity that is doubtless, an integral part of the
manufacturing business. It is not, then, as if Livi had served as its
(California’s) promotions or sales arm or agent, or otherwise, rendered a
piece of work it (California) could not have itself done; Livi, as a
placement agency, had simply supplied it with the manpower necessary
to carry out its (California’s) merchandising activities, using its
(California’s) premises and equipment.25
Neither Livi nor California can therefore escape liability, that is,
assuming one exists,
The fact that the petitioners have allegedly admitted being Livi’s “direct
employees"26 in their complaints is nothing conclusive. For one thing, the
fact that the petitioners were (are), will not absolve California since
liability has been imposed by legal operation. For another, and as we
indicated, the relations of parties must be judged from case to case and
the decree of law, and not by declarations of parties.
The fact that the petitioners have been hired on a “temporary or
seasonal” basis merely is no argument either. As we held in Philippine
Bank of Communications v. NLRC, 27 a temporary or casual employee,
under Article 218 of the Labor Code, becomes regular after service of
one year, unless he has been contracted for a specific project. And we
cannot say that merchandising is a specific project for the obvious
reason that it is an activity related to the day-to-day operations of
California.
It would have been different, we believe, had Livi been discretely a
promotions firm, and that California had hired it to perform the latter’s
merchandising activities. For then, Livi would have been truly the
employer of its employees, and California, its client. The client, in that
case, would have been a mere patron, and not an employer. The
employees would not in that event be unlike waiters, who, although at
the service of customers, are not the latter’s employees, but of the
restaurant. As we pointed out in the Philippine Bank of Communica-
tions case:
xxx      xxx      xxx
x x x The undertaking given by CESI in favor of the bank was not the
performance of a specific job—for instance, the carriage and delivery of
documents and parcels to the addresses thereof. There appear to be
many companies today which perform this discrete service, companies
with their own personnel who pick up documents and packages from the
offices of a client or customer, and who deliver such materials utilizing
their own delivery vans or motorcycles to the addressees. In the present
case, the undertaking of CESI was to provide its client-the bank-with a
certain number of persons able to carry out the work of messengers.
Such undertaking of CESI was complied with when the requisite number
of persons were assigned or seconded to the petitioner bank. Orpiada
utilized the premises and office equipment of the bank and not those of
CESI. Messengerial work-the delivery of documents to designated
persons whether within or without the bank premises—is of course
81
directly related to the dayto-day operations of the bank. Section 9(2)
quoted above does not require for its applicability that the petitioner
must be engaged in the delivery of items as a distinct and separate line of
business.
Succinctly put, CESI is not a parcel delivery company: as its name
indicates, it is a recruitment and placement corporation placing bodies,
as it were, in different client companies for longer or shorter periods of
time, x x x28
In the case at bar, Livi is admittedly an “independent contractor
providing temporary services of manpower to its client."29 When it thus
provided California with manpower, it supplied California with
personnel, as if such personnel had been directly hired by California.
Hence, Article 106 of the Code applies.
The Court need not therefore consider whether it is Livi or California
which exercises control over the petitioner vis-a-vis the four barometers
reffered to earlier, since by fiction of law, either or both shoulder
responsibility.
It is not that by dismissing the terms and conditions of the manpower
supply agreement, we have, hence, considered it illegal. Under the Labor
Code, genuine job contracts are permissible, provided they are genuine
job contracts. But, as we held in Philippine Bank of Communications,
supra,when such arrangements are resorted to “in anticipation of, and
for the very purpose of making possible, the secondment" 30 of the
employees from the true employer, the Court will be justified in
expressing its concern. For then that would compromise the rights of the
workers, especially their right to security of tenure.
This brings us to the question: What is the liability of either Livi or
California?
The records show that the petitioners had been given an initial six-
month contract, renewed for another six months. Accordingly, under
Article 281 of the Code, they had become regular employees—of
California—and had acquired a secure tenure. Hence, they cannot be
separated without due process of law.
California resists reinstatement on the ground, first, and as we said, that
the petitioners are not its employees, and second, by reason of financial
distress brought about by “unfavorable political and economic
atmosphere,"31“coupled by the February Revolution."32 As to the first
objection, we reiterate that the petitioners are its employees and who,
by virtue of the required one-year length-of-service, have acquired a
regular status. As to the second, we are not convinced that California has
shown enough evidence, other than its bare say-so, that it had in fact
suffered serious business reverses as a result alone of the prevailing
political and economic climate. We further find the attribution to the
February Revolution as a cause for its alleged losses to be gratuitous and
without basis in fact;
California should be warned that retrenchment of workers, unless
clearly warranted, has serious consequences not only on the State’s
initiatives to maintain a stable employment record for the country, but
more so, on the workingman himself, amid an environment that is
desperately scarce in jobs.
And, the National Labor Relations Commission should have known
better than to fall for such unwarranted excuses and nebulous claims.
WHEREFORE, the petition is GRANTED. Judgment is hereby RENDERED:
(1) SETTING ASIDE the decision, dated March 20, 1987, and the
resolution, dated August 19, 1987; (2) ORDERING the respondent, the
California Manufacturing Company, to REINSTATE the petitioners with
full status and rights of regular employees; and (3) ORDERING the
respondent, the California Manufacturing Company, and the
respondents, Livi Manpower Service, Inc. and/or Lily-Victoria A.
Azarcon, to PAY, jointly and severally, unto the petitioners: (a)
backwages and differential pays effective as and from the time they had
acquired a regular status under the second paragraph, of Section 281, of
the Labor Code, but not to exceed three (3) years, and (b) all such other
and further benefits as may be provided by existing collective bargaining
agreement(s) or other relations, or by law, beginning such time; and (4)
ORDERING the private respondents to PAY unto the petitioners
attorney’s fees equivalent to ten (10%) percent of all money claims
hereby awarded, in addition to those money claims.
The private respondents are likewise ORDERED to PAY the costs of this
suit.
IT IS SO ORDERED.
     Melencio-Herrera, (Chairman), Paras, Padilla and Regalado, JJ., concur.
Petition granted; decision and resolution set aside.
Note.—The test of the existence of “employer and employee
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 performance. (National Mines and Allied Workers’ Union
(NAMAWUMIF) vs. Valero, 132 SCRA 578.)
82
G.R. No. 202015. July 13, 2016.*
 
ANTONIO VALEROSO and ALLAN LEGATONA,
petitioners, vs. SKYCABLE CORPORATION, respondent.
Labor Law; Employer-Employee Relationship; Factual
Findings; Considering the conflicting findings of fact by the Labor Arbiter
(LA), the National Labor Relations Commission (NLRC) and the Court of
Appeals (CA), the Supreme Court (SC) is impelled to reexamine the records
and resolve this factual issue.—Well-entrenched is the doctrine that the
existence of an employer-employee relationship is ultimately a question
of fact and that the findings thereon by the Labor Arbiter and NLRC shall
be accorded not only respect but even finality when supported by
substantial evidence. However, considering the conflicting findings of
fact by the Labor Arbiter, the NLRC and the CA, the Court is impelled to
reexamine the records and resolve this factual issue.
Same; Same; Control Test; Among the four (4), the most determinative
factor in ascertaining the existence of employer-employee relationship is
the “right of control test.”—To prove the claim of an employer-employee
relationship, the following should be established by competent evidence:
(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 with respect to the means and methods by which
the work is to be accomplished. Among the four, the most determinative
factor in ascertaining the existence of employer-employee relationship is
the “right of control test.” Under this control test, the person for whom
the services are performed reserves the right to control not only the end
to be achieved, but also the means by which such end is reached.
Same; Same; Same; Absent any intrusion by respondent into the means
and manner of conducting petitioners’ tasks, bare assertion that
petitioners’ work was supervised and monitored does not suffice to
establish employer-employee relationship.—We, further, find no merit in
petitioners’ assertion that respondent’s control over them was
demonstrated. “[G]uidelines indicative of labor law ‘control’ do not
merely relate to the mutually desirable result intended by the
contractual relationship; they must have the nature of dictating the
means and methods to be  employed in attaining the result.” Here, we
find that respondent’s act of regularly updating petitioners of new
promos, new price listings, meetings and trainings of new account
executives; imposing quotas and penalties; and giving commendations
for meritorious performance do not pertain to the means and methods of
how petitioners were to perform and accomplish their task of soliciting
cable subscriptions. At most, these indicate that respondent regularly
monitors the result of petitioners’ work but in no way dictate upon them
the manner in which they should perform their duties. Absent any
intrusion by respondent into the means and manner of conducting
petitioners’ tasks, bare assertion that petitioners’ work was supervised
and monitored does not suffice to establish employer-employee
relationship.
Same; Independent Contractors; Evidence on record reveals the existence
of independent contractorship between the parties. As mentioned, the
Sales Agency Agreement provided the primary evidence of such
relationship.—Indeed, “[t]he presence of [the] power of control is
indicative of an employment relationship while the absence thereof is
indicative of independent contractorship.” Moreover, evidence on record
reveals the existence of independent contractorship between the parties.
As mentioned, the Sales Agency Agreement provided the primary
evidence of such relationship. “While the existence of  employer-
employee relationship is a matter of  law, the characterization made by
the parties in their contract as to the nature of their juridical relationship
cannot be simply ignored, particularly in this case where the parties’
written contract unequivocally states their intention” to be strictly
bound by independent contractorship. Petitioner Legatona, in fact, in his
Release and Quitclaim, acknowledged that he was performing sales
activities as sales agent/independent contractor and not an employee of
respondent. In the same token, De la Cuesta and Navasa, made sworn
testimonies that petitioners are employees of Armada which is an
independent contractor engaged to provide marketing services for
respondent.
Same; Employer-Employee Relationship; The legal relation of petitioners
as sales account executives to respondent can be that of an independent
contractor. There was no showing that respondent had control with
respect to the details of how petitioners must conduct their sales activity of
soliciting cable subscriptions from the public.—Evidently, the legal
relation of petitioners as sales account executives to respondent can be
that of an independent contractor. There was no showing that
respondent had control with respect to the details of how petitioners
83
must conduct their sales activity of soliciting cable subscriptions from
the public. In the case of Abante, Jr. v. Lamadrid Bearing & Parts
Corporation, 430 SCRA 368 (2004), Empermaco Abante, Jr., a
commission salesman who pursued his selling activities without
interference or supervision from respondent company and relied on his
own resources to perform his functions, was held to be an independent
contractor. Similarly, in Sandigan Savings and Loan Bank, Inc. v. National
Labor Relations Com-mission, 254 SCRA 126 (1996), Anita Javier was also
held to be an independent contractor as the Court found that Sandigan
Realty Development Corporation had no control over her conduct as a
realty sales agent since its only concern or interest was in the result of
her work and not in how it was achieved.
PETITION for review on certiorari of the decision and resolution of the
Court of Appeals.
The facts are stated in the opinion of the Court.
   Santos, Parungao, Aquino and Santos Law Offices for respondent.
 
DEL CASTILLO, J.:
 
By this Petition for Review on Certiorari,1 Antonio Valeroso and Allan
Legatona (petitioners) assail the November 11, 2011 Decision 2 and May
18, 2012 Resolution3of the Court of Appeals (CA) in C.A.-G.R. S.P. No.
116296, which reversed the May 24, 2010 Decision4 of the National
Labor Relations Commission (NLRC) and consequently dismissed their
Complaint for illegal dismissal and money claims against Skycable
Corporation (respondent).
 
Antecedent Facts
 
This case arose from a Complaint5 for illegal dismissal, nonpayment of
13th month pay, separation pay and illegal deduction filed by petitioners
against respondent on February 25, 2009 before the Labor Arbiter,
docketed as NLRC NCR Case No. 02-03439-09. The Complaint was
subsequently amended to include regularization and payment of moral
and exemplary damages as additional causes of action. 6
Petitioners Valeroso and Legatona alleged that they started working on
November 1, 1998 and July 13, 1998, respectively, as account executives
tasked to solicit cable subscriptions for respondent, as evidenced by
Certifications7 issued by Michael T. De la Cuesta (De la Cuesta),
respondent’s Sales Territory Manager. As shown in their payslips8 for
the years 2001 to 2006, they received commissions ranging from
P15,000.00 to P30,000.00 each upon reaching a specific quota every
month and an allowance of P6,500.00 to P7,000.00 per month. From
being direct hires of respondent, they were transferred on January 1,
2007 to Skill Plus Manpower Services sans any agreement for their
transfer. In February 2009, they were informed that their commissions
would be reduced due to the introduction of prepaid cards sold to cable
subscribers resulting in lower monthly cable subscriptions. Dismayed,
they notified their manager, Marlon Pasta (Pasta), of their intention to
file a labor case with the NLRC, which they did on February 25, 2009.
Pasta then informed them that they will be dropped from the roster of
its account executives, which act, petitioners claimed, constitutes unfair
labor practice.
Further, petitioners claimed that they did not receive 13th month pay for
2006 and were underpaid of such benefit for the years 2007 and 2008;
and that in January 2008, petitioner Legatona signed a Release and
Quitclaim9in consideration of the amount of P25,000.00 as loyalty bonus
from respondent.
Respondent, on the other hand, claimed that it did not terminate the
services of petitioners for there was never an employer-employee
relationship to begin with. It averred that in 1998, respondent (then
Central CATV, Inc.) engaged petitioners as independent contractors
under a Sales Agency Agreement.10 In 2007, respondents decided to
streamline its operations and instead of contracting with numerous
independent account executives such as petitioners, respondent engaged
the services of an independent contractor, Armada Resources &
Marketing Solutions, Inc. (Armada, for brevity; formerly Skill Plus
Manpower Services) under a Sales Agency Agreement.11 As a result,
petitioners’ contracts were terminated but they, together with other
sales account executives, were referred for transfer to Armada.
Petitioners then became employees of Armada. In 2009, respondent and
Armada again entered into a Sales Agency Agreement, 12 wherein
petitioners were again tasked to solicit accounts/generate sales for
respondent.
Respondent insisted that in hiring petitioners and Armada as
independent contractors, it engaged in legitimate job contracting where
no employer-employee relation exists between them. In an affidavit, 13 De
la Cuesta stated that the certifications he issued are not employment
certifications but are mere accommodations, requested by petitioners
84
themselves, for their credit card and loan applications. Moreover,
Armada’s President, Francisco Navasa (Navasa), in his
affidavit,14 verified that Armada is an independent contractor which
selected and engaged the services of petitioners, paid their
compensation, exercised the power to control their conduct and
discipline or dismiss them. Therefore, when petitioners filed their
Complaint in February 2009, they were employees of Armada and as
such, had no cause of action against respondent.
Petitioners, however, assailed the allegation that they were employees of
Armada, claiming that they were directly hired, paid and dismissed by
respondent. They cited the following as indicators that they are under
the direct control and supervision of respondent: 1) respondent’s
officers supervise their area of work, monitor them daily, update them of
new promos and installations they need to work on, inform them of
meetings and penalize them for nonattendance, ask them to train new
agents/account executives, and inform them of new prices and
expiration dates of product promos; 2) respondent’s supervisors
delegate to them authority to investigate, campaign against and legalize
unlawful cable connections; 3) respondent’s supervisors monitor their
quota production and impose guaranteed charges as penalty for failing
to meet their quota; and 4) respondent consistently gives trophies to
award them of their outstanding performance.
 
Ruling of the Labor Arbiter
 
In a Decision15 dated August 26, 2009, the Labor Arbiter dismissed the
Complaint since petitioners failed to establish by substantial evidence
that respondent was their employer. The Labor Arbiter observed that
petitioners failed to identify and specify the person who allegedly hired
them, paid their wages and exercised supervision and control over the
manner and means of performing their work. There was neither any
evidence to prove that Pasta, who allegedly dismissed them, is an officer
of respondent with an authority to dismiss them. The dispositive portion
of the Decision reads:
WHEREFORE, premises considered, the complaint filed in the instant
case is dismissed as discussed in the body hereof.
SO ORDERED.16
Ruling of the National Labor
Relations Commission
 
Petitioners filed an appeal with the NLRC attributing reversible error on
the Labor Arbiter in dismissing their Complaint on the ground of no
employer-employee relationship.
In a Decision17 dated May 24, 2010, the NLRC reversed the Labor
Arbiter’s ruling. It found that petitioners are regular employees of
respondent having performed their job as account executives for more
than one year, even if not continuous and merely intermittent, and
considering the indispensability and continuing need of petitioners’
tasks to the business. The NLRC observed that there was no evidence
that petitioners have substantial capitalization or investment to consider
them as independent contractors. On the other hand, the certifications
and the payslips presented by petitioners constitute substantial
evidence of employer-employee relationship. The NLRC held that upon
termination of the Sales Agency Agreement with Armada in 2009,
petitioners were considered dismissed without just cause and due
process. The dispositive portion of the NLRC Decision reads:
WHEREFORE, premises considered, the instant appeal is GRANTED and
the assailed Decision of Labor Arbiter Gaudencio P. Demaisip, Jr. dated
August 26, 2009, is REVERSED and SET ASIDE, and a new one entered
declaring complainants to have been illegally dismissed. Accordingly,
respondent Skycable Corporation/Central CATV, Inc. is hereby directed
to immediately reinstate complainants to their former position[s] and to
pay each of the complainants their full backwages reckoned from
February 25, 2009 up to the actual payroll reinstatement, (tentatively
computed at P607,200.00), in addition to the amount of P58,500.00
representing 13th month pay differentials and pro rata 13th month pay
for 2009.
SO ORDERED.18
 
With the NLRC’s ruling in favor of petitioners, respondent filed a motion
for reconsideration. This motion was, however, denied by the NLRC in its
Resolution19 of July 27, 2010.
 
85

Ruling of the Court of Appeals
 
Respondent filed a Petition for Certiorari20 with the CA, attributing grave
abuse of discretion on the part of the NLRC in holding it liable for the
alleged illegal dismissal of petitioners.
The CA rendered a Decision21 on November 11, 2011 granting
respondent’s Petition for Certiorari and reversing the NLRC Decision.
The CA sustained the Labor Arbiter’s finding that there was no evidence
to substantiate the bare allegation of employer-employee relationship
between the parties. The dispositive portion of the CA Decision reads:
WHEREFORE, premises considered, the instant petition is GRANTED and
the Decision dated May 24, 2010 of the National Labor Relations
Commission in NLRC NCR Case No. 02-03439-09 is hereby REVERSED
and SET ASIDE.
SO ORDERED.22
 Petitioners moved for reconsideration which was denied by the CA in its
Resolution23 dated May 18, 2012.
 
Issues
 
Hence, this Petition raising the following issues:
I.
WHETHER THE COURT OF APPEALS GRAVELY ERRED IN RENDERING
ITS DECISION DATED NOVEMBER 11, 2011.
II.
WHETHER THE PETITIONERS WERE RESPONDENT’S REGULAR
EMPLOYEES, WHOSE DISMISSAL FROM EMPLOYMENT WAS ILLEGAL.24
 
Petitioners maintain that respondent failed to discharge the burden of
disproving the employer-employee relationship through competent
evidence of independent contractorship. They assert that the nature of
their work and length of service with respondent made them regular
employees as defined in Article 28025 of the Labor Code. Consequently,
the CA gravely erred in dismissing their Complaint for illegal dismissal
against respondent.
 
Our Ruling
 
The Petition has no merit.
The pivotal issue to be resolved in this case is whether petitioners were
employees of respondent.
Well-entrenched is the doctrine that the existence of an employer-
employee relationship is ultimately a question of fact and that the
findings thereon by the Labor Arbiter and NLRC shall be accorded not
only respect but even finality when supported by substantial
evidence.26 However, considering the conflicting findings of fact by the
Labor Arbiter, the NLRC and the CA, the Court is impelled to reexamine
the records and resolve this factual issue.
To prove the claim of an employer-employee relationship, the following
should be established by competent evidence: (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 with
respect to the means and methods by which the work is to be
accomplished.27 Among the four, the most determinative factor in
ascertaining the existence of employer-employee relationship is the
“right of control test.”28 Under this control test, the person for whom the
services are performed reserves the right to control not only the end to
be achieved, but also the means by which such end is reached. 29
We rule that an employer-employee relationship is absent in this case.
The evidence presented by petitioners did not prove their claim that
they were employees of respondent. The certifications issued by De la
Cuesta are not competent evidence of employer-employee relation as
these merely certified that respondent had engaged the services of
petitioners without specifying the true nature of such engagement.
These documents did not certify that petitioners were employees but
were only issued to accommodate petitioners’ request for loan
applications, which fact was not refuted by petitioners. As for the
payslips presented, it appears that only the payslips for the years 2001
to 2006 were submitted. No payslips for the years material to this case
(2007 to 2009) were submitted. It is undisputed that petitioners were
transferred to Armada in 2007, thus, we cannot give much credence to
the payslips issued before this period.
We, further, find no merit in petitioners’ assertion that respondent’s
control over them was demonstrated. “[G]uidelines indicative of labor
law ‘control’ do not merely relate to the mutually desirable result
intended by the contractual relationship; they must have the nature of
dictating the means and methods to be  employed in attaining the
result.”30 Here, we find that respondent’s act of regularly updating
petitioners of new promos, new price listings, meetings and trainings of
86
new account executives; imposing quotas and penalties; and giving
commendations for meritorious performance do not pertain to the
means and methods of how petitioners were to perform and accomplish
their task of soliciting cable subscriptions. At most, these indicate that
respondent regularly monitors the result of petitioners’ work but in no
way dictate upon them the manner in which they should perform their
duties. Absent any intrusion by respondent into the means and manner
of conducting petitioners’ tasks, bare assertion that petitioners’ work
was supervised and monitored does not suffice to establish employer-
employee relationship.
Reliance by petitioners on the case of Francisco v. National Labor
Relations Commission31 is misplaced. In that case, the Court adopted a
two-tiered test in order to determine the true relationship between the
employer and employee. This two-tiered test, which involves: “(1) the
putative employer’s power to control the employee with respect to the
means and methods by which the work is to be accomplished; and (2)
the underlying economic realities of the activity or relationship,” has
been made especially appropriate in cases where there is no written
agreement to base the relationship on and where the various tasks
performed by the worker brings complexity to the relationship with the
employer.32 Thus, in addition to the control test, the totality of the
economic circumstances of the worker is taken into light to determine
the existence of employment relationship.
In the present case, there is a written contract, i.e., the Sales Agency
Agreement, which served as the primary evidence of the nature of the
parties’ relationship. In this duly executed and signed agreement,
petitioners and respondent unequivocally agreed that petitioners’
services were to be engaged on an agency basis as sales account
executives and that no employer-employee relationship is created but an
independent contractorship. It is therefore clear that the intention at the
time of the signing of the agreement is not to be bound by an employer-
employee relationship. At any rate, even if we are to apply the two-tiered
test pronounced in the Francisco case, there can still be no employer-
employee relationship since, as discussed, the element of control is
already absent.
Indeed, “[t]he presence of [the] power of control is indicative of an
employment relationship while the absence thereof is indicative of
independent contractorship.”33Moreover, evidence on record reveals the
existence of independent contractorship between the parties. As
mentioned, the Sales Agency Agreement provided the primary evidence
of such relationship. “While the existence of  employer-employee
relationship is a matter of  law, the characterization made by the parties
in their contract as to the nature of their juridical relationship cannot be
simply ignored, particularly in this case where the parties’ written
contract unequivocally states their intention” 34 to be strictly bound by
independent contractorship. Petitioner Legatona, in fact, in his Release
and Quitclaim, acknowledged that he was performing sales activities as
sales agent/independent contractor and not an employee of respondent.
In the same token, De la Cuesta and Navasa, made sworn testimonies
that petitioners are employees of Armada which is an independent
contractor engaged to provide marketing services for respondent.
Neither can we subscribe to petitioners’ contention that they are
considered regular employees of respondent for they perform functions
necessary and desirable to the business operation of respondent in
consonance with Article 280 of the Labor Code. We have held that
“Article 280 is not the yardstick for determining the existence of an
employment relationship because it merely distinguishes between two
kinds of employees, i.e., regular employees and casual employees, for
purposes of determining [their rights] to certain benefits, [such as] to
join or form a union, or to security of tenure. Article 280 does not apply
where the existence of an employment relationship is in dispute,”35 as in
this case.
Evidently, the legal relation of petitioners as sales account executives to
respondent can be that of an independent contractor. There was no
showing that respondent had control with respect to the details of how
petitioners must conduct their sales activity of soliciting cable
subscriptions from the public. In the case of Abante, Jr. v. Lamadrid
Bearing & Parts Corporation,36Empermaco Abante, Jr., a commission
salesman who pursued his selling activities without interference or
supervision from respondent company and relied on his own resources
to perform his functions, was held to be an independent contractor.
Similarly, in Sandigan Savings and Loan Bank, Inc. v. National Labor
Relations Commission,37 Anita Javier was also held to be an independent
contractor as the Court found that Sandigan Realty Development
Corporation had no control over her conduct as a realty sales agent since
its only concern or interest was in the result of her work and not in how
it was achieved.
All told, we sustain the CA’s factual findings and conclusion and
accordingly, find no cogent reason to overturn the dismissal of
petitioners’ Complaint against respondent.
87
WHEREFORE, the Petition is DENIED. The November 11, 2011 Decision
and May 18, 2012 Resolution of the Court of Appeals in C.A.-G.R. S.P. No.
116296 are AFFIRMED.
SO ORDERED.
Carpio (Chairperson), Brion and Leonen, JJ., concur.
Mendoza, J., On Official Leave.
Petition denied, judgment and resolution affirmed.
Notes.—As a rule, hospitals are not liable for the negligence of its
independent contractors. (Casumpang vs. Cortejo, 752 SCRA 379 [2015])
The test of independent contractorship is whether one claiming to be an
independent contractor has contracted to do the work according to his
own methods and without being subject to the control of the employer,
except only as to the results of the work. (Convoy Marketing Corporation
vs. Albia, 772 SCRA 162 [2015])
——o0o——
 
 
 
 
 
 
 

88

ARE THE JOB TITLES CONTROLLING?
VOL. 160, APRIL 15, 1988 171
Sevilla us. Court ofAppeals
Nos. L-41182–3. April 15, 1988.*
DR. CARLOS L. SEVILLA and LINA O. SEVILLA,
petitionersappellants, vs. THE COURT OF APPEALS, TOURIST
WORLD SERVICE, INC., ELISEO S. CANILAO, and SEGUNDINA
NOGUERA, respondents-appellees.
Labor; Employer-employee relation; No uniform test to determine the
existence of an employer-employee relation; Court relied on the socalled
right of control test, the existing economic conditions prevailing between
the parties.—In this jurisdiction, there has been no uniform test to
determine the existence of an employer-employee relation. In general,
we have relied on the so-called right of control test, “where the person
for whom the services are performed reserves a right to control not only
the end to be achieved but also the means to be used in reaching such
end.” Subsequently, however, we have considered, in addition to the
standard or right-of-control, the existing economic conditions prevailing
between the parties, like the inclusion of the employee in the payrolls, in
determining the existence of an employeremployee relationship.
Same;Same; Not a case of employer-employee relation.—The records will
show that the petitioner, Lina Sevilla, was not subject to control by the
private respondent Tourist World Service, Inc.,either as to the result of
the enterprise or as to the means used in connection therewith. In the
first place, under the contract of lease covering the Tourist World’s
Ermita office, she had bound herself in solidum as and for rental
payments, an arrangement that would belie claims of a master-servant
relationship. True, the respondent Court would later minimize her
participation in the lease as one of mere guaranty, that does not make
her an employee of Toiirist World, since in any case, a true employee
cannot be made to part with his own money in pursuance of his
employer’s business, or otherwise, assume any liability thereof. In that
event, the parties must be bound by some other relation, but certainly
not employment.
Same; Same; Same; it cannot be said that Sevilla was under the control of
Tourist World Service, Inc.—In the second place, and as found by the
Appellate Court, "[w]hen the branch office was opened, the same was
run by the herein appellant Lina O. Sevilla payable to Tourist World
Service, Inc. by any airline for any fare brought in on the effort of Mrs.
Lina Sevilla.” Under these circumstances, it cannot be said that Sevilla
was under the control of Tounst World Service. Inc. “as to the means
used.” Sevilla in pursuing the business, obviously relied on her own gifts
and capabilities.
Same; Same; Same; Same; Fact that Sevilla was not in the company’s
payroll admitted.—It is further admitted that Sevilla was not in the
company’s payroll. For her efforts, she retained 4% in commissions from
airline bookings, the remaining 3% going to Tourist World. Unlike an
employee then, who earns a fixed salary usually, she earned
compensation in fluctuating amounts depending on her booking
successes.
Same; Same; Same; Same; Fact that Sevilla was designated “branch
manager” does not make her Tourist World’s employee.—The fact that
Sevilla had been designated “branch manager” does not make her, ergo,
Tounst World’s employee. As we said, employment is determined by the
right-of-control test and certain economic parameters. But titles are
weak indicators.
Civil Law; Partnership; Lina Sevilla’s own argument that the par-ties had
embarked on a joint venture or otherwise a partnership rejected.—In
rejecting Tourist World Service, Inc.'s arguments however, we are not, as
a consequence, accepting Lina Seviila’s own, that is, that the parties had
embarked on a joint venture or otherwise, a partnership. And
apparently, Sevilla herself did not recognize the existence of such a
relation. In her letter of November 28, 1961, she expressly “concedes
your [Tourist World Service, Inc.'s] right to stop the operation of your
branch office,” in effect, accepting Tourist World Service, Inc.'s control
over the manner in which the business was run. A joint venture,
including a partnership, presupposes generally a parity of standing
between the joint co-venturers or partners, in which each party has an
equal proprietary interest in the capital or property contributed and
where each party exercises equal rights in the conduct of the business.
Furthermore, the parties did not hold themselves out as partners, and
89
the building itself was embellished with the electric sign “Toimst World
Service, Inc.," in lieu of a distinct partnership name.
Same;Agency; The parties had contemplated a principal-agent
relationship rather than a joint management or a partnership.—It is the
Court’s considered opinion, that when the petitioner, Lina Sevilla, agreed
to (wo)man the private respondent, Tourist World Service, Inc.'s Ermita
office, she must have done so pursuant to a contract of agency. It is the
essence of this contract that the agent renders services “in
representation or on behalf of another.” In the case at bar, Sevilla
solicited airline fares, but she did so for and on behalf of her principal,
Touriat World Servioe, Inc. As compensation, she received 4% of the
proceeds in the concept of commissions. And as we said, Sevilla herself,
based on her letter of November 28,1961, presumed her printipaTs
authority as owner of the business undertaking. We are convinced,
considering the circumstances and from the respondent Court’s recital of
facts, that the parties had contemplated a principalagent relationship,
rather than a joint management or a partnership.
Same; Same; Same; The agency being one coupled with an interest cannot
be revoked at wilL—But unlike simple grants of a power of attorney, the
agency that we hereby declare to be compatible witJb the intent of the
parties, cannot be revoked at will. The reason is that it is one coupled
with an interest, the agency having been created for the mutual interest
of the agent and the principal. It appears that Lina Sevilla is a bona fide
travel agent herself, and as such, she had acquired an interest in the
business entrusted to her. Moreover, she had assumed a personal
obligation for the operation thereof, holding herself solidarily liable for
the payment of rentals. She continued the business, using her own name,
after Tourist World had stopped further operations. Her interest,
obviously, is not limited to the commissions she earned as a result of her
business transactions. but one that extendB to the very subject matter of
the power of management delegated to her. It is an agency that, as we
said, cannot be revoked at the pleasure of the principal. Accordingly, the
revocation complained of should entitle the petitioner, Lina Sevilla, to
damages.
Same; Same; Damages; For unwarranted revocation of the contract of
agency, Tourist World Service, Inc. should be sentenced to pay damages. —
We rule, therefore, that for its unwarranted revocation of the contract of
agency, the private respondent, Tourist Worid Service, Inc., should be
sentenced to pay damages. Under the CivU Code, moral damages may be
awarded for “breaches of contract where the defendant acted ... in bad
faith.”
Same; Same; Same; Same; Respondeni Eliseo Canilao likewise ordered to
respond for the same damages in a solidary capacity.—The respondent,
Eliseo Canilao, as a joint tortfeasor, is likewise hereby ordered to
respond for the same damages in a solidary capacity.
APPEAL by certiorari to review the decision of the Court of Appeals.
The facts are stated in the opinion of theCuwrt.
     Roman P. Mosqueda for petitioners-appellants.
     Felipe Magat for respondents-appellees.
SARMIENTO, J.:
The petitioners invoke the provisions on human relations of the Civil
Code in this appeal by certiorari. The facts are beyond dispute:
x x x      x x x      x x x
On the strength of a contract (Exhibit A for the appellant Exhibit 2 for the
appellees) entered into on Oct. 19,1960 by and betweenMrs. Segundina
Noguera, party of the first part; the Tourist World Service, Inc.,
represented by Mr. Eliseo Canilao as party of the second part, and
hereinafter reJerred to as appellants, the Tourist Woxid Service, Inc.
leased the premises belonging to the party of the first part at Mabini St.,
Manila for the former’s use as a branch office. In the said contract the
party of the third part held herself solidarily liable with the party of the
second part for the prompt payment of the monthly rental agreed on.
When the branch office was opened, the same was run by the herein
appellant Lina O. Sevilla payable to Tonrist World Service Inc. by any
airline for any fare brought in on the efforts of Mrs. Lina Sevilla, 4% was
to go to Lina Sevilla and 3% was to be withheld by the Tourist World
Service, Inc.
On or about November 24,1961 (Exhibit 16) the Tourist World Service,
Inc. appears to have been informed that Lina Sevilla was connected with
a rival firm, the Philippine Travel Bureau, and, since the branch office
was anyhow losing, the Tourist World Service considered closing down
its office. This was firmed up by two resolutions of the board of directors
of Tourist World Service, Inc. dated Dec; 2, 1961 (Exhibits 12 and 13),
the first abolishing the office of the manager and vice-president of the
90
Tourist World Service, Inc,, Ermita Branch, and the second, authorizing
the corporate secretary to receive the proper-ties of the Tonrist World
Service then located at the said branch office. It further appears that on
Jan. 3,1962, the contract with the appellees for the use of the Branch
Office premises was terminated and while the effectivity thereof was Jan.
31,1962, the appellees no longer used it. As a matter of fact appellants
used it since Nov. 1961. Because of this, and to comply with the mandate
of the Tourist World Service, the corporate secretary Gabino Canilao
went over to the branch office, and, finding the premises locked, and,
being unable to contact Lina Sevilla, he padlocked the premises on June
4, 1962 to protect the interests of the Tourist World Service. When
neither the appellant Lina Sevilla nor any of her employees could enter
the locked premises, a complaint was filed ,by the herein appellants
against the appellees with a prayer for the issuance of mandatory
preliminary injunction. Both appellees answered with counterclaims.
For apparent lack of interest of the parties therein, the trial court
ordered the dismissal of the case without prejudice.
The appellee Segundina Noguera sought reconsideration of the order
dismissing her counterclaim which the court M. quo, in an order dated
June 8, 1963, granted permitting her to present evidence in support of
her counterclaim.
On June 17,1963, appellant Lina Sevilla refiled her case against the
herein appellees and after the issues were joined, the reinstated
counterclaim of Segundina Noguera and the new complaint of appellant
Lina Sevilla were jointly heard following which the court a quo ordered
both cases dismissed for lack of merit, on the basis of which was
elevated the instant appeal on the following assignment of errors:
1. “I.THE LOWER COURT ERRED EVEN IN APPRECIATING THE
NATURE OF PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA’S
COMPLAINT.
2. “II.THE LOWER COURT ERRED IN HOLDING THAT APPELLANT
MRS. LINA O. SEVILLA’S ARRANGEMENT (WITH APPELLEE
TOURIST WORLD SERVICE, INC.) WAS ONE MERELY OF
EMPLOYER-EMPLOYEE RELATION AND IN FAILING TO HOLD
THAT THE SAID ARRANGEMENT WAS ONE OF JOINT BUSINESS
VENTURE.
3. “III.THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-
APPELLANT MRS. LINA O. SEVILLA IS ESTOPPED FROM
DENYING THAT SHE WAS A MERE EMPLOYEE OF DEFENDANT-
APPELLEE TOURIST WORLD SERVICE, INC. EVEN AS AGAINST
THE LATTER.
4. “IV.THE LOWER COURT ERRED IN NOT HOLDING THAT
APPELLEES HAD NO RIGHT TO EVICT APPELLANT MRS. LINA O.
SEVILLA FROM THE A. MABINI OFFICE BY TAKING THE LAW
INTO THEIR OWN HANDS.
5. “V.THE LOWER COURT ERRED IN NOT CONSIDERING AT ALL
APPELLEE NOGUERA’S RESPONSIBILITY FOR APPELLANT MRS.
LINA O. SEVILLA’S FORCIBLE DISPOSSESSION OF THE A. MABINI
PREMISES.
6. “VI.THE LOWER COURT ERRED IN FINDING THAT APPELLANT
MRS. LINA O. SEVILLA SIGNED MERELY AS GUARANTOR FOR
RENTALS."
On the foregoing facts and in the light of the errors assigned the issues to
be resolved are:
1. 1.Whether the appellee Tourist World Service unilaterally
disconnected the telephone line at the branch office on Ermita;
2. 2.Whether or not the padlocking of the office by the Tourist
World Servioe was actionable or not; and
3. 3.Whether or not the lessee to the office premises belonging to
the appeUee Noguera was appeUee TWS or TWS and the
appellant.
In this appeal, appellant Lina Sevilla claims that a joint business venture
was entered into by and between her and appellee TWS with offices at
the Ermita branch office and that she was not an employee of the TWS to
the end that her relationship with TWS was one of a joint business
venture appeUant made declarations showing:
“1. Appellant Mrs. Lina O. Sevilla, a prominent social figure and wife of an
eminent eye, ear and nose specialist as well as a society columnist, had
been in the travel business prior to the establishment of the joint
business venture with appellee Tourist World Service, Inc. and appellee
Eliseo Canilao, her compadre, she being the godmother of one of his
children, with her own clientele, coming mostly from her own social
circle (pp. 3–6 tsn. February 16,1965).
“2. Appellant Mrs. Sevilla was signatory to a lease agreement dated 19
October 1960 (Exh. “A") covering the premises at A, Mabini St., she
expressly warranting and holding [sic] herself ‘solidarily’ liable with
appellee Tourist World Service, Inc. for the prompt payment of the
monthly rentals thereof to other appellee Mrs. Noguera (pp. 14–15, tsn.
Jan. 18,1964).
91
“3. Appellant Mrs. Sevilla did not receive any salary from appellee
Totuist World Service, Inc., which had its own separate office located at
the Trade & Commerce Building; nor was she an employee thereof,
having no participation in nor connection with said business at the
Trade & Commerce Building (pp. 16–18 tsn. id.).
“4. Appellant Mrs. Sevilla earned commissions for her own passengers,
her own bookings, her own business (and not for any of the business of
appeUee Tourist World Service, Inc.) obtained from the airline
companies. She shared the 7% commissions given by the airline
companies, giving appellee Tourist World Service, Inc. 3% thereof and
retaining 4% for herself (pp. 18 tsn. id.)
“5, Appellant Mrs. Sevilla likewise shared in the expenses of maintaining
the A. Mabini St. office, paying for the salary of an office secretary, Miss
Obieta, and other sundry expenses, aside from designing the office
furniture and supplying some office furnishings (pp. 15, 18 tsn. April 6,
19650, appelle Tourist World Service, Inc., shouldering the rental and
other expenses in apeellant Mrs. Sevilla (p. 35 tsn. Feb. 16, 19650.
“6. It was the understanding between them that appellant Mrs. Sevilla
would be given the title of branch manager for appearance’s sake only
(p. 31 tsn. id.), appellee Eliseo Canilao admitting that it was just a title for
dignity (p. 36 tsn. June 18, 1965—testimony of appellee Eliseo Canilao;
pp. 38–39 tsn. April 6, 1965—testimony of corporate secretary Gabino
Canilao). "(pp. 2–5, Appellnat’s Reply Brief)
Upon the other hand, Appelle TWS contend that the appellant was an
employee of the appellee Tourist Worls Service, Inc., and as such was
designated manager."1
x x x      x x x      x x x
The trial court2 geld for the private respondents on the premise that the
private respondent, Tourist World Service, Inc., being the true lessee, it
was within its prerogative to terminate the lease and padlock the
premises.3 It likewise found the petitioner. Lina Sevilla, to be a mere
employee of said Tourist World Service, Inc., and as much, she was
bound by the acts of her employer. 4 The respondent Court of
Appeals5 rendered an affirmance.
The petitioner now claim that the respondent Court, in sustaining the
lower court, erred. Specially, they state:
I.
THE COURT OF APPLEAS ERRED ON A QUESTION OF LAW AND
GRAVELY ABUSED ITS DISCRETION IN HOLDING THAT “THE
PADLOCKING OF THE PREMISES BY TOURIST WORLD SERVICE, INC.,
WITHOUT THE KNOWLEDGE AND CONSENT OF THE APPELLANT LINE
SEVILLA X X X WITHOUT NOTIFYING MRS. LINA O. SEVILLA OR ANY OF
HER EMPLOYEES AND WITHOUT INFORMING COUNSEL FOR THE
APPELLANT (SEVILLA), WHO IMMEDIATELY BEFORE THE
PADLOCKING INCIDENT, WAS IN CONFERENCE WITH THE CORPORATE
SECRETARY OF TOURIST WORLD SERVICE (ADMITTEDLY THE PERSON
WHO PADLOCKED THE SAID OFFICE), IN THEIR ATTEMPT TO
AMICABLY SETTLE THE CONTROVERSY BETWEEN THE APPELLANT
(SEVILLA) AND THE TOURIST WORLD SERVICE X X X (DID NOT)
ENTITLE THE LATTER TO THE RELIEF OF DAMAGES" (ANNEX “A" PP. 7,
8 AND ANNEX “B" P. 2)—A DECISION AGAINST DUE PROCESS WHICH
ADHERES TO THE RULE OF LAW.
II.
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND
GRAVELY ABUSED ITS DISCRETION IN DENYING APPELLANT SEVILLA
RELIEF BECAUSE SHE HAD “OFFERED TO WITHDRAW HER
COMPLAINT PROVIDED THAT ALL CLAIMS AND COUNTERCLAIMS
LODGED BY BOTH APPELLEES WERE WITHDRAWN." (ANNEX “A" P. 8)
III.
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND
GRAVELY ABUSED ITS DISCRETION IN DENYING—IN FACT NOT
PASSING AND RESOLVING—APPELLANT SEVILLA’S CAUSE OF ACTION
FOUNDED ON ARTICLES 19, 20 AND 21 OF THE CIVIL CODE ON HUMAN
RELATIONS.
IV.
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND
GRAVELY ABUSED ITS DISCRETION IN DENYING APPELLANT SEVILLA
RELIEF YET NOT RESOLVING HER CLAIM THAT SHE WAS IN JOINT
VENTURE WITH TOURIST WORLD SERVICE INC. OR AT LEAST ITS
AGENT COUPLED WITH AN INTEREST WfflCH COULD NOT BE
TERMINATED OR REVOKED UNILATERALLY BY TOURIST WORLD
SERVICE INC.6
As a preliminary inquiry, the Court is asked to declare the true nature of
the relation between Lina Sevilla and Tourist World Service, Inc. The
respondent Court of Appeals did not see fit to rule on the question, the
crucial issue, in its opinion being “whether or not the padlocking of the
premises by the Tourist World Service, Inc. without the knowledge and
consent of the appellant Lina Sevilla entitled the latter to the relief of
damages prayed for and whether or not the evidence for the said
appellant supports the contention that the appellee Tourist World
92
Service, Inc. unilaterally and without the consent of the appellant
disconnected the telephone lines of the Ermita branch office of the
appellee Tourist World Service, Inc."7 Tourist World Service, Inc., insists,
on the other hand, that Lina Sevilla was a mere employee, being “branch
manager” of its Ermita “branch” office and that inferentially, she had no
say on the lease executed with the private respondent, Segundina
Noguera. The petitioners contend, however, that relation between the
parties was one of joint venture, but concede that “whatever might have
been the true relationship betwemSeviila and Tourist World Service,” the
Rule of Law enjoined Tourist World Service and Canilao from taking the
law into their own hands,"8 in reference to the padlocking now
questioned.
The Court finds the resolution of the issue material, for if, as the private
respondent, Tourist World Service, Inc., maintains, that the relation
between the parties was in the character of employer and employee, the
courts would have been without jurisdiction to try the case, labor
disputes being the exclusive domain of the Court of Industrial Relations,
later, the Bureau of Labor Relations, pursuant to statutes then in force. 9
In this jurisdiction, there has been no uniform test to determine the
existence of an employer-employee relation. In general, we have relied
on the so-caUed right of control test, “where the person for whom the
services are performed reserves a right to control not only the end to be
achieved but also the means to be used in reaching such
end.10 Subsequently, however, we have considered, in addition to the
standard of right-of-control, the existing economic conditions prevailing
between the parties, like the inclusion of the employee in the payrolls, in
determining the existence of an employer-employee relationship. 11
The records will show that the petitioner, Lina Sevilla, was not subject to
control by the private respondent Tourist World Service, Inc., either as
to the result of the enterprise or as to the means used in connection
therewith. In the first place, under the contract of lease covering the
Tourist World’s Ermita office, she had bound herself in solidum as and
for rental payments, an arrangement that would belie claims of a master-
servant relationship. True, the respondent Court would later minimize
her participation in the lease as one of mere guaranty, 12 that does not
make her an employee of Tourist World, since in any case, a true
employee cannot be made to part with his own money in pursuance of
his employer’s business, or otherwise, assume any liability thereof. In
that event, the parties must be bound by some other relation, but
certainly not employment.
In the second place, and as found by the Appellate Court, "[w]hen the
branch office was opened, the same was run by the herein appellant Lina
O. Sevilla payable to Tourist World Service, Inc. by any airline for any
fare brought in on the eSbrt of Mrs. Lina Sevilla." 13 Under these
circumstances, it cannot be said that Sevilla was under the control of
Tourist World Service, Inc. “as to the means used.” Sevilla in pursuing the
business, obviously relied on her own gifts and capabilities.
It is further admitted that Sevilla was not in the company’s payroll. For
her efforts, she retained 4% in commissions from airline bookings, the
remaining 3% going to Tourist World. Unlike an employee then, who
earns a fixed salary usually, she earned compensation in fluctuating
amounts depending on her booking successes.
The fact that Sevilla had been designated “branch manager” does not
make her. ergo, Tourist World’s employee. As we said, employment is
determined by the right-of-control test and certain economic
parameters. But titles are weak indicators.
In rejecting Tourist World Service, Inc.'s arguments however, we are not,
as a consequence, accepting Lina Sevilla’s own, that is, that the parties
had embarked on a joint venture or otherwise, a partnership. And
apparently, Sevilla herself did not recognize the existence of such a
relation. In her letter of November 28, 1961, she expressly “concedes
your [Tourist World Service, Inc.'s] right to stop the operation of your
branch office,"14 in effect, accepting Tourist World Service, Inc.'s control
over the manner in which the business was run. A joint venture,
including a partnership, presupposes generally a parity of standing
between the joint co-venturers or partners, in which each party has an
equal proprietary interest in the capital or property contributed 15 and
where each party exercises equal rights in the conduct of the
business.16 Furthermore, the parties did not hold themselves out as
partners, and the building itself was embellished with the electric sign
“Tourist World Service, Inc.,"17 in lieu of a distinct partnership name. It is
the Court’s considered opinion, that when the petitioner, Lina Sevilla,
agreed to (wo)man the private respondent, Tourist World Service, Inc.'s
Ermita office, she must have done so pursuant to a contract of agency. It
is the essence of this contract that the agent renders services “in
representation or on behalf of another." 18 In the case at bar, Sevilla
solicited airline fares, but she did so for and on behalf of her principal,
Tourist World Service, Inc. As compensation, she received 4% of the
proceeds in the concept of commissions. And as we said, Sevilla herself,
based on her letter of November 28,1961, presumed her principal’s
93
authority as owner of the business undertaking. We are convinced,
considering the circumstances and from the respondent Court’s recital of
facts, that the parties had contemplated a principal-agent relationship,
rather than a joint management or a partnership.
But unlike simple grants of a power of attorney, the agency that we
hereby declare to be compatible with the intent of the parties, cannot be
revoked at will. The reason is that it is one coupled with an interest, the
agency having been created for the mutual interest of the agent and the
prinripal.19 It appears that Lina Sevilla is a bona fide travel agent herself,
and as such, she had acquired an interest in the business entrusted to
her. Moreover, she had assumed a personal obligation for the operation
thereof, holding herself solidarily liable for the payment of rentals. She
continued the business, using her own name, after Tourist World had
stopped further operations. Her interest, obviously, is not limited to the
commissions she earned as a result of her business transactions, but one
that extends to the very subject matter of the power of management
delegated to her. It is an agency that, as we said, cannot be revoked at the
pleasure of the principal Accordingly, the revocation complained of
should entitle the petitioner, Lina Sevilla, to damages.
As we have stated, the respondent Court avoided this issue, confining
itself to the telephone disconnection and padlocking incidents. Anent the
disconnection issue, it is the holding of the Court of Appeals that there is
“no evidence showing that the Tourist World Service, Inc. disconnected
the telephone lines at the branch office." 20 Yet, what cannot be denied is
the fact that Tourigt World Service, Inc. did not take pains to have them
reconnected. Assuming, therefore, that it had no hand in the
disconnection now complained of, it had clearly condoned it, and as
owner of the telephone lines, it must shoulder responsibility therefor.
The Court of Appeals must likewise be held to be in error with respect to
the padlocking incident. For the fact that Tourist World Service, Inc. was
the lessee named in the lease contract did not accord it any authority to
terminate that contract without notice to its actual occupant, and to
padlock the premises in such blitzkrieg fashion. As this Court has ruled,
the petitioner, Lina Sevilla, had acquired a personal stake in the business
itself, and necessarily, in the equipment pertaining thereto. Furthermore,
Sevilla was not a stranger to that contract having been explicitly named
therein as a third party in charge of rental payments (solidarily with
Tourist World, Inc.). She could not be ousted from possession as
summarily as one would eject an interloper.
The Court is satisfied that from the chronicle of events, there was indeed
some malevolent design to put the petitioner, Lina Sevilla, in a bad light
following disclosures that she had worked for a rival firm. To be sure, the
respondent court speaks of alleged business losses to justify the
closure,21 but there is no clear showing that Tourist World Ermita
Branch had in fact sustained such reverses, let alone, the fact that Sevilla
had moonlit for another company. What the evidence discloses, on the
other hand, is that following such an information (that Sevilla was
working for another company), Tourist WorlcTs board of directors
adopted two resolutions abolishing the office of “manager” and
authorizing the corporate secretary, the respondent Eliseo Canilao, to
effect the takeover of its branch office properties. On January 3,1962, the
private respondents ended the lease over the branch office premises,
incidentally, without notice to her.
It was only on June 4, 1962, and after office hours significantly, that the
Ermita office was padlocked, personally by the respondent Canilao, on
the pretext that it was necessary “to protect the interests of the Tourist
World Service."22 It is strange indeed that Tourist World Service, Inc. did
not find such a need when it cancelled the lease five months earlier.
While Tourist World Service, Inc. would not pretend that it sought to
locate Sevilla to inform her of the closure, but surely, it was aware that
after office hours, she could not have been anywhere near the premises.
Capping these series of “offensives, ” it cut the office’s telephone lines,
paralyzing completely its business operations, and in the process,
depriving Sevilla of her participation therein.
This conduct on the part of Tourist World Service, Inc. betrays a sinister
effort to punish Sevilla for what it had perceived to be disloyalty on her
part. It is offensive, in any event, to elementary norms of justice and fair
play.
We rule, therefore, that for its unwarranted revocation of the contract of
agency, the private respondent, Tourist World Service, Inc., should be
sentenced to pay damages. Under the Civil Code, moral damages may be
awarded for “breaches of contract where the defendant acted ... in bad
faith."23
We likewise condemn Tourist World Service, Inc. to pay further damages
for the moral injury done to Lina Sevilla arising from its brazen conduct
subsequent to the cancellation of the power of attorney granted to her
on the authority of Article 21 of the Civil Code, in relation to Article 2219
(10) thereof:
94
ART. 21. Any person who wilfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage.
ART. 2219. Moral damages may be recovered in the following and
analogouB cases:
x x x      x x x      x x x
(10) Acts and actions referred to in articles 21 , 21, 26,27,28,29,30,
32,34, and 35.
The respondent, Eliseo Canilao, as a joint tortfeasor, is likewise hereby
ordered to respond for the same damages in a solidary capacity.
Insofar, however, as the private respondent, Segundina Noguera is
concerned, no evidence has been shown that she had connived with
Tourist Worid Service, Inc. in the disconnection and padlocking
incidents. She cannot therefore be held liable as a co-tortfeasor.
The Court considers the sums of P25,000.00 as and for moral
damages,24 P10,000.00 as exemplary damages,25 and P5,000.00 as
nominal26 and/or temperaie27 damages, to be just, fair, and reasonable
under the circumstances.
WHEREFORE, the Decision promulgated on January 23, 1975 as well as
the Resolution issued on July 31,1975, by the respondent Court of
Appeals is hereby REVERSED and SET ASIDE. The private respondent,
Tourist World Service, Inc., and Eliseo Canilao, are ORDERED jointly and
severally to indemnify the petitioner, Lina Sevilla, the sum of P25,000.00
as and for moral damages, the sum of P10,000.00, as and for exemplary
damages, and the sum of P5,000.00, as and for nominal and/or
temperate damages.
Costs against said private respondents.
SO ORDERED.
     Yap (Chairman), Melencio-Herrera, Paras and Padilla, JJ., concur.
Decision and resolution reversed and set aside.
Note.—In determining the existence of employer-employee relationship,
the following elements are generally considered, namely: (1) the
selection and engagement of the employee; (2) the payment of wages;
(3) the power of dismissal; and (4) the power to control the employee’s
conduct. (Shipside, Incorporated vs. National LaborRelations
Commission, 118 SCRA 99.)

95

IS THE NATURE AND SERVICES PERFORMED CONTROLLING?
260 SUPREME COURT REPORTS ANNOTATED
Philippine Global Communications, Inc. vs. De Vera
G.R. No. 157214. June 7, 2005.*
PHILIPPINE GLOBAL COMMUNICATIONS, INC.,
petitioner, vs. RICARDO DE VERA, respondent.
Actions; Appeals; Under Rule 45 of the Rules of Court, only questions of
law may be reviewed by the Supreme Court in decisions rendered by the
Court of Appeals.—Under Rule 45 of the Rules of Court, only questions of
law may be reviewed by this Court in decisions rendered by the Court of
Appeals. There are instances, however, where the Court departs from
this rule and reviews findings of fact so that substantial justice may be
served. The exceptional instances are where: “x x x x x x x x x (1) the
conclusion is a finding grounded entirely on speculation, surmise and
conjecture; (2) the inference made is manifestly mistaken; (3) there is
grave abuse of discretion; (4) the judgment is based on a
misapprehension of facts; (5) the findings of fact are conflicting; (6) the
Court of Appeals went beyond the issues of the case and its findings are
contrary to the admissions of both appellant and appellees; (7) the
findings of fact of the Court of Appeals are contrary to those of the trial
court; (8) said findings of facts are conclusions without citation of
specific evidence on which they are based; (9) the facts set forth in the
petition as well as in the petitioner’s main and reply briefs are not
disputed by the respondents; and (10) the findings of fact of theCourt of
Appeals are premised on the supposed absence of evidence and
contradicted by the evidence on record.”
Same; Same; Labor Law; Where the NLRC’s findings are at odds with
those of the labor arbiter, the Supreme Court, consistent with its ruling in
Jimenez v. National Labor Relations Commission, 256 SCRA 84 (1996), is
constrained to look deeper into the attendant circumstances obtaining in
the case, as appearing on record.—The parties’ respective submissions
revolve on the primordial issue of whether an employer-employee
relationship exists between petitioner and respondent, the existence of
which is, in itself, a question of fact well within the province of the NLRC.
Nonetheless, given the reality that the NLRC’s findings are at odds with
those of the labor arbiter, the Court, consistent with its ruling in Jimenez
vs. National Labor Relations Commission, is constrained to look deeper
into the attendant circumstances obtaining in this case, as appearing on
record.
Labor Law; Employer-Employee Relationship; Four-Fold Test.—In a long
line of decisions, the Court, in determining the existence of an employer-
employee relationship, has invariably adhered to the four-fold test, to
wit: [1] the selection and engagement of the employee; [2] the payment
of wages; [3] the power of dismissal; and [4] the power to control the
employee’s conduct, or the so-called “control test,” considered to be the
most important element.
Same; Same; It simply runs against the grain of common experience to
imagine that an ordinary employee has yet to bill his employer to receive
his salary.—The elements of an employer-employee relationship are
wanting in this case. We may add that the records are replete with
evidence showing that respondent had to bill petitioner for his monthly
professional fees. It simply runs against the grain of common experience
to imagine that an ordinary employee has yet to bill his employer to
receive his salary.
Same; Same; Control Test; Retainer Agreements; Company
Physicians; Where the company and the physician practically agreed on
every term and condition of the latter’s engagement, the same negates the
element of control in their relationship.—Remarkably absent from the
parties’ arrangement is the element of control, whereby the employer
has reserved the right to control the employee not only as to the result of
the work done but also as to the means and methods by which the same
is to be accomplished. Here, petitioner had no control over the means
and methods by which respondent went about performing his work at
the company premises. He could even embark in the private practice of
his profession, not to mention the fact that respondent’s work hours and
the additional compensation therefor were negotiated upon by the
parties. In fine, the parties themselves practically agreed on every terms
and conditions of respondent’s engagement, which thereby negates the
element of control in their relationship. For sure, respondent has never
cited even a single instance when petitioner interfered with his work.
96
Same; Same; Same; Same; Same; Independent Contractors; The Court
takes 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, a set-up
precisely true in the case of an independent contractorship as well as in
agency agreement; Art. 280 of the Labor Code is not the yardstick for
determining the existence of an employment relationship—the provision
merely distinguishes between two (2) kinds of employees, i.e., regular and
casual, and does not apply where the very existence of an employment
relationship is in dispute.—The appellate court’s premise that regular
employees are those who perform activities which are desirable and
necessary for the business of the employer is not determinative in this
case. 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. It does not
apply where, as here, the very existence of an employment relationship
is in dispute.
Same; Same; Same; Same; Same; Statutory Construction; Courts may not
construe a statute that is free from doubt—where the law is clear and
unambiguous, it must be taken to mean exactly what it says, and courts
have no choice but to see to it that the mandate is obeyed.—Deeply
embedded in our jurisprudence is the rule that courts may not construe
a statute that is free from doubt. Where the law is clear and
unambiguous, it must be taken to mean exactly what it says, and courts
have no choice but to see to it that the mandate is obeyed. As it is, Article
157 of the Labor Code clearly and unequivocally allows employers in
non-hazardous establishments to engage “on retained basis” the service
of a dentist or physician. Nowhere does the law provide that the
physician or dentist so engaged thereby becomes a regular employee.
The very phrase that they may be engaged “on retained basis,” revolts
against the idea that this engagement gives rise to an employer-
employee relationship.
PETITION for review on certiorari of the decision and resolution of the
Court of Appeals.
The facts are stated in the opinion of the Court.
     Siguion Reyna, Montecillo & Ongsiako for petitioner.
     Aladdin F. Trinidad for De Vera.
     Filio & Filio collaborating counsel for respondent.
GARCIA, J.:
Before us is this appeal by way of a petition for review on certiorari from
the 12 September 2002 Decision 1 and the 13 February 2003
Resolution2 of the Court of Appeals in CA-G.R. SP No. 65178, upholding
the finding of illegal dismissal by the National Labor Relations
Commission against petitioner.
As culled from the records, the pertinent facts are:
Petitioner Philippine Global Communications, Inc. (PhilCom), is a
corporation engaged in the business of communication services and
allied activities, while respondent Ricardo De Vera is a physician by
profession whom petitioner enlisted to attend to the medical needs of its
employees. At the crux of the controversy is Dr. De Vera’s status vis-a-
vis petitioner when the latter terminated his engagement.
It appears that on 15 May 1981, De Vera, via a letter dated 15 May
1981,3 offered his services to the petitioner, therein proposing his plan
of works required of a practitioner in industrial medicine, to include the
following:
1. 1.Application of preventive medicine including periodic check-up
of employees;
2. 2.Holding of clinic hours in the morning and afternoon for a total
of five (5) hours daily for consultation services to employees;
3. 3.Management and treatment of employees that may necessitate
hospitalization including emergency cases and accidents;
4. 4.Conduct pre-employment physical check-up of prospective
employees with no additional medical fee;
5. 5.Conduct home visits whenever necessary;
6. 6.Attend to certain medical administrative function such as
accomplishing medical forms, evaluating conditions of
employees applying for sick leave of absence and subsequently
issuing proper certification, and all matters referred which are
medical in nature.
97
The parties agreed and formalized respondent’s proposal in a document
denominated as RETAINERSHIP CONTRACT4 which will be for a period
of one year subject to renewal, it being made clear therein that
respondent will cover “the retainership the Company previously had
with Dr. K. Eulau” and that respondent’s “retainer fee” will be at
P4,000.00 a month. Said contract was renewed yearly. 5The retainership
arrangement went on from 1981 to 1994 with changes in the retainer’s
fee. However, for the years 1995 and 1996, renewal of the contract was
only made verbally.
The turning point in the parties’ relationship surfaced in December 1996
when Philcom, thru a letter6 bearing on the subject boldly written as
“TERMINATION-RETAINERSHIP CONTRACT,” informed De Vera of its
decision to discontinue the latter’s “retainer’s contract with the
Company effective at the close of business hours of December 31, 1996”
because management has decided that it would be more practical to
provide medical services to its employees through accredited hospitals
near the company premises.
On 22 January 1997, De Vera filed a complaint for illegal dismissal before
the National Labor Relations Commission (NLRC), alleging that that he
had been actually employed by Philcom as its company physician since
1981 and was dismissed without due process. He averred that he was
designated as a “company physician on retainer basis” for reasons
allegedly known only to Philcom. He likewise professed that since he
was not conversant with labor laws, he did not give much attention to
the designation as anyway he worked on a full-time basis and was paid a
basic monthly salary plus fringe benefits, like any other regular
employees of Philcom.
On 21 December 1998, Labor Arbiter Ramon Valentin C. Reyes came out
with a decision7 dismissing De Vera’s complaint for lack of merit, on the
rationale that as a “retained physician” under a valid contract mutually
agreed upon by the parties, De Vera was an “independent contractor”
and that he “was not dismissed but rather his contract with [PHILCOM]
ended when said contract was not renewed after December 31, 1996”.
On De Vera’s appeal to the NLRC, the latter, in a decision 8 dated 23
October 2000, reversed (the word used is “modified”) that of the Labor
Arbiter, on a finding that De Vera is Philcom’s “regular employee” and
accordingly directed the company to reinstate him to his former position
without loss of seniority rights and privileges and with full backwages
from the date of his dismissal until actual reinstatement. We quote the
dispositive portion of the decision:
“WHEREFORE, the assailed decision is modified in that respondent is
ordered to reinstate complainant to his former position without loss of
seniority rights and privileges with full backwages from the date of his
dismissal until his actual reinstatement computed as follows:
_______________
Backwages:
a) Basic Salary  
  From Dec. 31, 1996 to Apr. 10, 2000 = 39.33 mos.  
  P44,400.00 x 39.33 mos. P1,750,185.00
b) 13th Month Pay:  
  1/12 of P1,750,185.00 145,848.75
c) Travelling allowance:  
  P1,000.00 x 39.33 mos. 39,330.00
       GRAND TOTAL P1,935,363.75
The decision stands in other aspects.
SO ORDERED.”
With its motion for reconsideration having been denied by the NLRC in
its order of 27 February 2001,9 Philcom then went to the Court of
Appeals on a petition for certiorari, thereat docketed as CA-G.R. SP No.
65178, imputing grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of the NLRC when it reversed the findings of the
labor arbiter and awarded thirteenth month pay and traveling allowance
to De Vera even as such award had no basis in fact and in law.
On 12 September 2002, the Court of Appeals rendered a
decision,10 modifying that of the NLRC by deleting the award of traveling
allowance, and ordering payment of separation pay to De Vera in lieu of
reinstatement, thus:
“WHEREFORE, premises considered, the assailed judgment of public
respondent, dated 23 October 2000, is MODIFIED. The award of
traveling allowance is deleted as the same is hereby DELETED. Instead of
reinstatement, private respondent shall be paid separation pay
computed at one (1) month salary for every year of service computed
from the time private respondent commenced his employment in 1981
up to the actual payment of the backwages and separation pay. The
awards of backwages and 13th month pay STAND.
SO ORDERED.”
In time, Philcom filed a motion for reconsideration but was denied by the
appellate court in its resolution of 13 February 2003. 11
Hence, Philcom’s present recourse on its main submission that—
98
THE COURT OF APPEALS ERRED IN SUSTAINING THE DECISION OF THE
NATIONAL LABOR RELATIONS COMMISSION AND RENDERING THE
QUESTIONED DECISION AND RESOLUTION IN A WAY THAT IS NOT IN
ACCORD WITH THE FACTS AND APPLICABLE LAWS AND
JURISPRUDENCE WHICH DISTINGUISH LEGITIMATE JOB CONTRACTING
AGREEMENTS FROM THE EMPLOYER-EMPLOYEE RELATIONSHIP.
We GRANT.
Under Rule 45 of the Rules of Court, only questions of law may be
reviewed by this Court in decisions rendered by the Court of Appeals.
There are instances, however, where the Court departs from this rule
and reviews findings of fact so that substantial justice may be served.
The exceptional instances are where:
“x x x      x x x      x x x (1) the conclusion is a finding grounded entirely on
speculation, surmise and conjecture; (2) the inference made is
manifestly mistaken; (3) there is grave abuse of discretion; (4) the
judgment is based on a misapprehension of facts; (5) the findings of fact
are conflicting; (6) the Court of Appeals went beyond the issues of the
case and its findings are contrary to the admissions of both appellant
and appellees; (7) the findings of fact of the Court of Appeals are
contrary to those of the trial court; (8) said findings of facts are
conclusions without citation of specific evidence on which they are
based; (9) the facts set forth in the petition as well as in the petitioner’s
main and reply briefs are not disputed by the respondents; and (10) the
findings of fact of the Court of Appeals are premised on the supposed
absence of evidence and contradicted by the evidence on record.” 12
As we see it, the parties’ respective submissions revolve on the
primordial issue of whether an employer-employee relationship exists
between petitioner and respondent, the existence of which is, in itself, a
question of fact13 well within the province of the NLRC. Nonetheless,
given the reality that the NLRC’s findings are at odds with those of the
labor arbiter, the Court, consistent with its ruling in Jimenez vs. National
Labor Relations Commission,14 is constrained to look deeper into the
attendant circumstances obtaining in this case, as appearing on record.
In a long line of decisions, 15 the Court, in determining the existence of an
employer-employee relationship, has invariably adhered to the four-fold
test, to wit: [1] the selection and engagement of the employee; [2] the
payment of wages; [3] the power of dismissal; and [4] the power to
control the employee’s conduct, or the so-called “control test,”
considered to be the most important element.
Applying the four-fold test to this case, we initially find that it was
respondent himself who sets the parameters of what his duties would be
in offering his services to petitioner. This is borne by no less than his 15
May 1981 letter16 which, in full, reads:
Mrs. Adela L. Vicente 
Vice President, Industrial Relations 
PhilCom, Paseo de Roxas 
Makati, Metro Manila
Madam:
I shall have the time and effort for the position of Company physician
with your corporation if you deemed it necessary. I have the necessary
qualifications, training and experience required by such position and I
am confident that I can serve the best interests of your employees,
medically.
My plan of works and targets shall cover the duties and responsibilities
required of a practitioner in industrial medicine which includes the
following:
     1. Application of preventive medicine including periodic check-up of
employees;
     2. Holding of clinic hours in the morning and afternoon for a total of
five (5) hours daily for consultation services to employees;
     3. Management and treatment of employees that may necessitate
hospitalization including emergency cases and accidents;
     4. Conduct pre-employment physical check-up of prospective
employees with no additional medical fee;
     5. Conduct home visits whenever necessary;
     6. Attend to certain medical administrative functions such as
accomplishing medical forms, evaluating conditions of employees
applying for sick leave of absence and subsequently issuing proper
certification, and all matters referred which are medical in nature.
On the subject of compensation for the services that I propose to render
to the corporation, you may state an offer based on your belief that I can
very well qualify for the job having worked with your organization for
sometime now.
I shall be very grateful for whatever kind attention you may extend on
this matter and hoping that it will merit acceptance, I remain
99
Very truly yours,  complainant himself (Annex ‘C’ of Respondent’s Position Paper), it
(signed)  clearly states that is a retainership contract. The retainer fee is indicated
RICARDO V. DE VERA, M.D.”
Significantly, the foregoing letter was substantially the basis of the labor
arbiter’s finding that there existed no employer-employee relationship
between petitioner and respondent, in addition to the following factual
settings:
The fact that the complainant was not considered an employee was
recognized by the complainant himself in a signed letter to the
respondent dated April 21, 1982 attached as Annex “G” to the
respondent’s Reply and Rejoinder. Quoting the pertinent portion of said
letter:
‘To carry out your memo effectively and to provide a systematic and
workable time schedule which will serve the best interests of both the
present and absent employee, may I propose an extended two-hour
service (1:00-3:00 P.M.) during which period I can devote ample time to
both groups depending upon the urgency of the situation. I shall readjust
my private schedule to be available for the herein proposed extended
hours, should you consider this proposal.
As regards compensation for the additional time and services that I shall
render to the employees, it is dependent on your evaluation of the merit
of my proposal and your confidence on my ability to carry out efficiently
said proposal.’
The tenor of this letter indicates that the complainant was proposing to
extend his time with the respondent and seeking additional
compensation for said extension. This shows that the respondent
PHILCOM did not have control over the schedule of the complainant as it
[is] the complainant who is proposing his own schedule and asking to be
paid for the same. This is proof that the complainant understood that his
relationship with the respondent PHILCOM was a retained physician and
not as an employee. If he were an employee he could not negotiate as to
his hours of work.
The complainant is a Doctor of Medicine, and presumably, a well-
educated person. Yet, the complainant, in his position paper, is claiming
that he is not conversant with the law and did not give much attention to
his job title—on a ‘retainer basis’. But the same complainant admits in
his affidavit that his service for the respondent was covered by a
retainership contract [which] was renewed every year from 1982 to
1994. Upon reading the contract dated September 6, 1982, signed by the
thereon and the duration of the contract for one year is also clearly
indicated in paragraph 5 of the Retainership Contract. The complainant
cannot claim that he was unaware that the ‘contract’ was good only for
one year, as he signed the same without any objections. The complainant
also accepted its renewal every year thereafter until 1994. As a literate
person and educated person, the complainant cannot claim that he does
not know what contract he signed and that it was renewed on a year to
year basis.17
The labor arbiter added the indicia, not disputed by respondent, that
from the time he started to work with petitioner, he never was included
in its payroll; was never deducted any contribution for remittance to the
Social Security System (SSS); and was in fact subjected by petitioner to
the ten (10%) percent withholding tax for his professional fee, in
accordance with the National Internal Revenue Code, matters which are
simply inconsistent with an employer-employee relationship. In the
precise words of the labor arbiter:
“x x x      x x x      x x x After more than ten years of services to PHILCOM,
the complainant would have noticed that no SSS deductions were made
on his remuneration or that the respondent was deducting the 10% tax
for his fees and he surely would have complained about them if he had
considered himself an employee of PHILCOM. But he never raised those
issues. An ordinary employee would consider the SSS payments
important and thus make sure they would be paid. The complainant
never bothered to ask the respondent to remit his SSS contributions.
This clearly shows that the complainant never considered himself an
employee of PHILCOM and thus, respondent need not remit anything to
the SSS in favor of the complainant.”18
Clearly, the elements of an employer-employee relationship are wanting
in this case. We may add that the records are replete with evidence
showing that respondent had to bill petitioner for his monthly
professional fees.19 It simply runs against the grain of common
experience to imagine that an ordinary employee has yet to bill his
employer to receive his salary.
We note, too, that the power to terminate the parties’ relationship was
mutually vested on both. Either may terminate the arrangement at will,
with or without cause.20
Finally, remarkably absent from the parties’ arrangement is the element
of control, whereby the employer has reserved the right to control the
100
employee not only as to the result of the work done but also as to the
means and methods by which the same is to be accomplished. 21
Here, petitioner had no control over the means and methods by which
respondent went about performing his work at the company premises.
He could even embark in the private practice of his profession, not to
mention the fact that respondent’s work hours and the additional
compensation therefor were negotiated upon by the parties. 22 In fine, the
parties themselves practically agreed on every terms and conditions of
respondent’s engagement, which thereby negates the element of control
in their relationship. For sure, respondent has never cited even a single
instance when petitioner interfered with his work.
Yet, despite the foregoing, all of which are extant on record, both the
NLRC and the Court of Appeals ruled that respondent is petitioner’s
regular employee at the time of his separation.
Partly says the appellate court in its assailed decision:
Be that as it may, it is admitted that private respondent’s written
‘retainer contract’ was renewed annually from 1981 to 1994 and the
alleged ‘renewal’ for 1995 and 1996, when it was allegedly terminated,
was verbal.
Article 280 of the Labor code (sic) provides:
‘The provisions of written agreement to the contrary notwithstanding
and regardless of the oral agreements of the parties, an employment
shall be deemed to be regular where the employee has been engaged to
perform in the usual business or trade of the employer, except where the
employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of
the engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration
of the season.’
‘An employment shall be deemed to be casual if it is not covered by
the preceding paragraph: Provided, That, any employee who has
rendered at least one (1) year of service, whether such is continuous
or broken, shall be considered a regular with respect to the activity
in which he is employed and his employment shall continue while such
activity exists.’
Parenthetically, the position of company physician, in the case of
petitioner, is usually necessary and desirable because the need for
medical attention of employees cannot be foreseen, hence, it is necessary
to have a physician at hand. In fact, the importance and desirability of a
physician in a company premises is recognized by Art. 157 of the Labor
Code, which requires the presence of a physician depending on the
number of employees and in the case at bench, in petitioner’s case, as
found by public respondent, petitioner employs more than 500
employees.
Going back to Art. 280 of the Labor Code, it was made therein clear that
the provisions of a written agreement to the contrary notwithstanding
or the existence of a mere oral agreement, if the employee is engaged in
the usual business or trade of the employer, more so, that he rendered
service for at least one year, such employee shall be considered as
a regular employee. Private respondent herein has been with petitioner
since 1981 and his employment was not for a specific project or
undertaking, the period of which was pre-determined and neither the
work or service of private respondent seasonal. (Emphasis by the CA
itself).
We disagree to the foregoing ratiocination.
The appellate court’s premise that regular employees are those who
perform activities which are desirable and necessary for the business of
the employer is not determinative in this case. 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. It does not
apply where, as here, the very existence of an employment relationship
is in dispute.23
Buttressing his contention that he is a regular employee of petitioner,
respondent invokes Article 157 of the Labor Code, and argues that he
satisfies all the requirements thereunder. The provision relied upon
reads:
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:
1. (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
101
 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;
2. (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.
Had only respondent read carefully the very statutory provision invoked
by him, he would have noticed that in non-hazardous workplaces, the
employer may engage the services of a physician “on retained basis.” As
correctly observed by the petitioner, 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, 24 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.25
Respondent takes no issue on the fact that petitioner’s business of
telecommunications is not hazardous in nature. As such, what applies
here is the last paragraph of Article 157 which, to stress, provides that
the employer may engage the services of a physician and dentist “on
retained basis,” subject to such regulations as the Secretary of Labor may
prescribe. The successive “retainership” agreements of the parties
definitely hue to the very statutory provision relied upon by respondent.
Deeply embedded in our jurisprudence is the rule that courts may not
construe a statute that is free from doubt. Where the law is clear and
unambiguous, it must be taken to mean exactly what it says, and courts
have no choice but to see to it that the mandate is obeyed. 26 As it is,
Article 157 of the Labor Code clearly and unequivocally allows
employers in non-hazardous establishments to engage “on retained
basis” the service of a dentist or physician. Nowhere does the law
provide that the physician or dentist so engaged thereby becomes a
regular employee. The very phrase that they may be engaged “on
retained basis,” revolts against the idea that this engagement gives rise
to an employer-employee relationship.
With the recognition of the fact that petitioner consistently engaged the
services of respondent on a retainer basis, as shown by their various
“retainership contracts,” so can petitioner put an end, with or without
cause, to their retainership agreement as therein provided. 27
We note, however, that even as the contracts entered into by the parties
invariably provide for a 60-day notice requirement prior to termination,
the same was not complied with by petitioner when it terminated on 17
December 1996 the verbally-renewed retainership agreement, effective
at the close of business hours of 31 December 1996.
Be that as it may, the record shows, and this is admitted by both
parties,28 that execution of the NLRC decision had already been made at
the NLRC despite the pendency of the present recourse. For sure,
accounts of petitioner had already been garnished and released to
respondent despite the previous Status Quo Order29
issued by this Court. To all intents and purposes, therefore, the 60-day
notice requirement has become moot and academic if not waived by the
respondent himself.
WHEREFORE, the petition is GRANTED and the challenged decision of
the Court of Appeals REVERSED and SET ASIDE. The 21 December 1998
decision of the labor arbiter is REINSTATED.
No pronouncement as to costs.
SO ORDERED.
     Panganiban (Chairman), Corona and Carpio-Morales, JJ., concur.
     Sandoval-Gutierrez, J., On Official Leave.
102
Petition granted, challenged decision reversed and set aside. That of the
Labor Arbiter reinstated.

Notes.—The “control test” only requires the existence of the right to

control the manner of doing the work not necessarily the actual exercise
of the power, which can be delegated. (Religious of the Virgin Mary vs.
National Labor Relations Commission, 316 SCRA 614 [1999])
The right to life and livelihood guarantees the freedom of individuals
with special skills, expertise or talent to offer their services as
independent contractors and not merely as employees. (Sonza vs. ABS-
CBN Broadcasting Corporation, 431 SCRA 583 [2004])

103

IS THE ABILITY TO NEGOTIATE CONTROLLING?
VOL. 431, JUNE 10, 2004 583
Sonza vs. ABS-CBN Broadcasting Corporation
G.R. No. 138051. June 10, 2004. *
JOSE Y. SONZA, petitioner,vs. ABS-CBN BROADCASTING
CORPORATION, respondent.
Labor Law; Labor Code; Employer-Employee Relationship; 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; 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.—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. Substantial
evidence means such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion. 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.
Same; Same; Same; Essential Elements of an Employer-Employee
Relationship; The so-called “control test” is the most important element.—
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. The last element, the so-called “control test,” is the most
important element.
Same; Same; Same; Independent Contractor; 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 independent contractual relationship; The method of selecting
and engaging SONZA does not conclusively determine his status.—
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.
Same; Same; Same; Same; Whatever benefits SONZA enjoyed arose
from contract and not because of an employer-employee relationship.—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.
Same; Same; Same; Same; 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.—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.
Same; Same; Same; Same; The greater the supervision and control the
hirer exercises, the more likely the worker is deemed an employee; The less
control the hirer exercises, the more likely the worker is considered an
independent contractor; Applying the control test, SONZA is not an
employee but an independent contractor.—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
104
distinguishing an employee from an independent contractor. 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.
Same; Same; Same; Same; ABS-CBN did not exercise control over the
means and methods of performance of SONZA’s work.—We find that ABS-
CBN was not involved in the actual performance that produced the finished
product of SONZA’s work. ABS-CBN did not instruct SONZA how to
perform his job. ABS-CBN merely reserved the right to modify the program
format and airtime schedule “for more effective programming.” ABS-CBN’s
sole concern was the quality of the shows and their standing in the ratings.
Clearly, ABS-CBN did not exercise control over the means and methods of
performance of SONZA’s work.
Same; Same; Same; Same; A radio broadcast specialist who works
under minimal supervision is an independent contractor.—A radio broadcast
specialist who works under minimal supervision is an independent
contractor. SONZA’s work as television and radio program host required
special skills and talent, which SONZA admittedly possesses. The records do
not show that ABS-CBN exercised any supervision and control over how
SONZA utilized his skills and talent in his shows.
Same; Same; Same; Same; In the broadcast industry, exclusivity is not
necessarily the same as control.—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.
Same; Same; Same; Same; Policy Instruction No. 40 is a mere
issuance which does not have the force and effect of law.—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.
Same; Same; Same; Same; The right of labor to security of tenure as
guaranteed in the Constitution 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.—The right of labor to security
of tenure as guaranteed in the Constitution 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.
Same; Same; Labor Arbiter; The Labor Arbiter can decide a case
based solely on the position papers and the supporting documents without a
formal trial; The holding of a formal hearing or trial is something that the
parties cannot demand as a matter of right; 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.—The Labor
Arbiter can decide a case based solely on the position papers and the
supporting documents without a formal trial. The holding of a formal hearing
or trial is something that the parties cannot demand as a matter of right. 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.
PETITION for review on certiorari of a decision of the Court of
Appeals.
The facts are stated in the opinion of the Court.
     Theodore O. Te for petitioner.
     Abello, Concepcion, Regala and Cruz for respondent ABS-
CBN.
CARPIO, J.:
105
The Case
Before this Court is a petition for review on certiorari assailing the 26
1 of the remaining amount stipulated in paragraph 7 of the Agreement
March 1999 Decision  of the Court of Appeals in CA-G.R. SP No.
2 but reserves the right to seek recovery of the other benefits under said
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
P310,000 for the first year and P317,000 for the second and third year
of the Agreement. ABS-CBN would pay the talent fees on the 10th and
25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-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
Agreement.
Thank you for your attention.
Very truly yours,     
(Sgd.)      
JOSE Y. SONZA      
President and Gen. Manager       4
On 30 April 1996, SONZA filed a complaint against ABS-CBN before
the Department of Labor and Employment, National Capital Region in
Quezon City. SONZA complained that ABS-CBN did not pay his
salaries, separation pay, service incentive leave pay, 13th month pay,
signing bonus, travel allowance and amounts due under the Employees
Stock Option Plan (“ESOP”).
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 Arbiter denied the 5
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.
106
 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.  The pertinent parts of
6
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 P317,000. Moreover, his engagement as a talent was covered by a
specific contract. Likewise, he was not bound to render eight (8) hours of work per day as he
worked only for such number of hours as may be necessary.
The fact that per the May 1994 Agreement complainant was accorded some benefits
normally given to an employee is inconsequential. Whatever benefits complainant enjoyed
arose from specific agreement by the parties and not by reason of employer-employee
relationship. As correctly put by the respondent, “All these benefits are merely talent fees and
other contractual benefits and should not be deemed as ‘salaries, wages and/or other
remuneration’ accorded to an employee, notwithstanding the nomenclature appended to these
benefits. Apropos to this is the rule that the term or nomenclature given to a stipulated benefit
is not controlling, but the intent of the parties to the Agreement conferring such benefit.”
The fact that complainant was made subject to 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 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 (P500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay based on an amount not lower than
the amount he was receiving prior to effectivity of (the) Agreement’.
Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travel
benefit amounting to at least One Hundred Fifty Thousand Pesos (P150,000.00) per year.’
Thus, it is precisely because of complainant-appellant’s own recognition of the fact that
his contractual relations with ABS-CBN are founded on the New Civil Code, rather than the
107
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.  (Emphasis supplied)
9
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.  A 10
special civil action for certiorari extends only to issues of want or
excess of jurisdiction of the NLRC.  Such action cannot cover an
11
inquiry into the correctness of the evaluation of the evidence which
served as basis of the NLRC’s conclusion.  The Court of Appeals12
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.  Substantial evidence means such relevant
15
evidence as a reasonable mind might accept as adequate to support a
conclusion.  A party cannot prove the absence of substantial evidence
16
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.  The last element, the socalled
18
“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.
108
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
20
the law automatically incorporates into every employer-employee
contract. Whatever benefits SONZA enjoyed arose from contract and
21
not because of an employer-employee relationship. 22
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.
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.”  Even if it suffered severe business losses, ABS-CBN
24
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.  However, the manner by which SONZA terminated his
26
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
109
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”)  that a television program host is an independent
27
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 x  (Emphasis
28
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.  This test is based on the extent of
29
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.  ABS-CBN could not dictate the contents of SONZA’s
31
script. However, the Agreement prohibited SONZA from criticizing in
his shows ABS-CBN or its interests.  The clear implication is that
32
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.  ABS-CBN did
33
not instruct SONZA how to perform his job. ABS-CBN merely
reserved the right to modify the program format and airtime schedule
“for more effective programming.”  ABS-CBN’s sole concern was the
34
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.,  the United States Circuit Court
36
of Appeals ruled that vaudeville performers were independent
110
contractors although the management reserved the right to delete
objectionable features in their shows. Since the management did not
have control over the manner of performance of the skills of the artists,
it could only control the result of the work by deleting objectionable
features.
SONZA further contends that ABS-CBN exercised control over his
work by supplying all equipment and crew. No doubt, ABS-CBN
supplied the equipment, crew and airtime needed to broadcast the “Mel
& Jay” programs. However, the equipment, crew and airtime are not
the “tools and instrumentalities” SONZA needed to perform his job.
What SONZA principally needed were his talent or skills and the
costumes necessary for his appearance.  Even though ABS-CBN
38
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.  SONZA’s work as television and radio
40
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” of ABS-CBN. The
41
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.”  The KBP code applies to broadcasters,
42
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.  In this case, 43
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.  This practice is not designed to
46
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.”  Normally, a much higher fee is paid to
47
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.
111
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. These 48
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
propiodetermine 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.  The 51
holding of a formal hearing or trial is something that the parties cannot
demand as a matter of right.  If the Labor Arbiter is confident that he
52
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
112
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
Constitution  arises only if there is an employer-employee relationship
53
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”)  in relation to Republic
54
Act No. 7716,  as amended by Republic Act No.
55
8241,  treats talents, television and radio broadcasters differently.
56
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.  This different tax
57
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.  (C.J., Chairman), Panganiban,  Ynares-
Santiago, and Azcuna, JJ., concur.
Petition denied, assailed decision affirmed.
Note.—The power of control refers to the authority of the employer
to control the employee not only with regard to the result of work to be
done but also to the means and methods by which the work is to be
accomplished (Vinoya vs. National Labor Relations Commission, 324
SCRA 469[2000])
——o0o——
113
PAYMENT OF WAGES:
G.R. No. 118101. September 16, 1996.*
EDDIE DOMASIG, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION (SECOND DIVISION), CATA ‘GARMENTS CORPORATION
and/or OTTO ONG and CATALINA CO, respondents.
Labor Law; Administrative Law; Evidence; Substantial Evidence; In
administrative and quasi-judicial proceedings, substantial evidence is
sufficient as a basis for judgment on the existence of employer-employee
relationship.—It has long been established that in administrative and
quasi-judicial proceedings, substantial evidence is sufficient as a basis
for judgment on the existence of employeremployee relationship. No
particular form of evidence is required to prove the existence of such
employer-employee relationship. Any competent and relevant evidence
to prove the relationship may be admitted.
Same; Same; Same; Same; Words and Phrases; Substantial evidence has
been defined to be such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion.—Substantial evidence has
been defined to be such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion, and its absence is not shown
by stressing that there is contrary evidence on record, direct or
circumstantial, for the appellate court cannot substitute its own
judgment or criterion for that of the trial court in determining wherein
lies the weight of evidence or what evidence is entitled to belief.
Same; Employer-Employee Relationship; ID Cards; In a business
establishment, an identification card is usually provided not only as a
security measure but mainly to identify the holder thereof as a bona fide
employee of the firm that issues it; An ID card together with cash vouchers
covering an employee’s salaries for the months stated therein constitute
substantial evidence adequate to support a conclusion that a person was
indeed an employee.—In a business establishment, an identification card
is usually provided not only as a security measure but mainly to identify
the holder thereof as a bona fide employee of the firm that issues it.
Together with the cash vouchers covering petitioner’s salaries for the
months stated therein, we agree with the labor arbiter that these
matters constitute substantial evidence adequate to support a
conclusion that petitioner was indeed an employee of private
respondent.
Same; Same; Same; The list of sales collections including computation of
commissions due, expenses incurred and cash advances received, presented
in support of the employer’s allegation as regards the nature of a person’s
employment as a commission agent cannot overcome the evidence of the
ID card and salary vouchers.—The list of sales collection including
computation of commissions due, expenses incurred and cash advances
received (Exhibits “B" and “B-1") which, according to public respondent,
the labor arbiter failed to appreciate in support of private respondents’
allegation as regards the nature of petitioner’s employment as a
commission agent, cannot overcome the evidence of the ID card and
salary vouchers presented by petitioner which private respondents have
not denied. The list presented by private respondents would even
support petitioner’s allegation that, aside from. a monthly salary of
P1,500.00, he also received commissions for his work as a salesman of
private respondents.
Same; Same; Illegal Dismissal; Proof beyond reasonable doubt is not
required as basis for judgment on the legality of an employer’s dismissal of
an employee, nor even preponderance of evidence for that matter,
substantial evidence being sufficient.—Having been in the employ of
private respondents continuously for more than one year, under the law,
petitioner is considered a regular employee. Proof beyond reasonable
doubt is not required as a basis for judgment on the legality of an
employer’s dismissal of an employee, nor even preponderance of
evidence for that matter, substantial evidence being sufficient.
Petitioner’s contention that private respondents terminated his
employment due to their suspicion that he was being enticed by another
firm to work for it was not refuted by private respondents. The labor
arbiter’s conclusion that petitioner’s dismissal is therefore illegal, is not
necessarily arbitrary or erroneous. It is entitled to great weight and
respect.
Same; Same; It is error and grave abuse of discretion for the NLRC to
remand the case for further proceedings to determine whether or not a
person is an employee, after all Article 218 of the Labor Code grants the
Commission and the labor arbiter broad powers, including issuance of
subpoena, requiring the attendance and testimony of witnesses or the
production of such documentary evidence as may be material to a just
determination of the matter under investigation.—It was error and grave
abuse of discretion for the NLRC to remand the case for further
114
proceedings to determine whether or not petitioner was private
respondents’ employee. This would only prolong the final disposition of
the complaint. It is stressed that, in labor cases, simplification of
procedures, without regard to technicalities and without sacrificing the
fundamental requisites of due process, is mandated to ensure the speedy
administration of justice. After all, Article 218 of the Labor Code grants
the Commission and the labor arbiter broad powers, including issuance
of subpoena, requiring the attendance and testimony of witnesses or the
production of such documentary evidence as may be material to a just
determination of the matter under investigation.
Same; Same; The NLRC and the labor arbiter may decide a case based on
the position papers and documents submitted without resorting to the
technical rules of evidence.—Additionally, the National Labor Relations
Commission and the labor arbiter have authority under the Labor Code
to decide a case based on the position papers and documents submitted
without resorting to the technical rules of evidence.
SPECIAL CIVIL ACTION in the Supreme Court Certiorari.
The facts are stated in the opinion of the Court.
     The Law Firm of Ross B. Bautista for petitioner.
     Tristan Zoleta for private respondent.
PADILLA, J.:
This petition for certiorari under Rule 65 of the Rules of Court seeks to
nullify and set aside the Resolution 1 of respondent National Labor
Relations Commission (NLRC) rendered on 20 September 1994
remanding the records of the case to the arbitration branch of origin for
further proceedings.
The antecedent facts as narrated by public respondent in the assailed
resolution are as follows:
“The complaint was instituted by Eddie Domasig against respondent
Cata Garments Corporation, a company engaged in garments business
and its owner/manager Otto Ong and Catalina Co for illegal dismissal,
unpaid commission and other monetary claim[s]. Complainant alleged
that he started working with the respondent on July 6, 1986 as Salesman
when the Company was still named Cato Garments Corporation; that
three (3) years ago, because of a complaint against respondent by its
workers, it changed its name to Cata Garments Corporation; and that on
August 29, 1992, he was dismissed when respondent learned that he
was being pirated by a rival corporation which offer he refused. Prior to
his dismissal, complainant alleged that he was receiving a salary of
P1,500.00 a month plus commission. On September 3, 1992 he filed the
instant complaint.
Respondent denied complainant’s claim that he is a regular employee
contending that he is a mere commission agent who receives a
commission of P5.00 per piece of article sold at regular price and P2.50
per piece sold in [sic] bargain price; that in addition to commission,
complainant receives a fixed allowance of P1,500.00 a month; that he
has no regular time schedule; and that the company come [sic] into
existence only on September 17, 1991. In support of its claim that
complainant is a commission agent, respondent submitted as Annexes
‘B' and ‘B-1' the List of Sales Collections, Computation of Commission
due, expenses incurred, cash advances received for the month of January
and March 1992 (Rollo p. 22–27). Respondent further contends that
complainant failed to turn over to the respondent his collection from two
(2) buyers as per affidavit executed by these buyers (Rollo p. 28–29) and
for which, according to respondent it initiated criminal proceedings
against the complainant.
The Labor Arbiter held that complainant was illegally dismissed and
entitled to reinstatement and backwages as well as underpayment of
salary; 13th month pay; service incentive leave and legal holiday. The
Arbiter also awarded complainant his claim for unpaid commission in
the amount of P143,955.00."2
Private respondents appealed the decision of the labor arbiter to public
respondent. As aforesaid, the NLRC resolved to remand the case to the
labor arbiter for further proceeding. It declared as follows:
“We find the decision of the Labor Arbiter not supported by evidence on
record. The issue of whether or not complainant was a commission
agent was not fully resolved in the assailed decision. It appears that the
Labor Arbiter failed to appreciate the evidences submitted by
respondent as Annexes “B" and “B-1" (Rollo, p. 22–27) in support of its
allegation as regard[s] the nature of complainant’s employment. Neither
is there a showing that the parties were required to adduce further
evidence to support their respective claim. The resolution of the nature
of complainant’s employment is vital to the case at bar considering that
it would be determinative to his entitlement of monetary benefits. The
same is similarly true as regard the claim [sic] for unpaid commission.
The amount being claim [sic] for unpaid commission as big as it requires
115
substantial proof to establish the entitlement of the complainant to the
same. We take note of the respondent’s claim that ‘while they admit that
complainant has an unpaid commission due him, the same is only for his
additional sale of 4,027 pieces of regular price and 1,047 pieces at
bargain price for a total sum of (P20,135.00+2,655.00) or P22,820.00 as
appearing in the list of Sales and unpaid commission’ (Annex ‘C' and ‘C-1'
Appeal, Rollo, p. 100–102). Said amount according to respondent is
being withheld by them pending the accounting of money collected by
complainant from his two (2) buyers which was not remitted to them.
Considering the conflicting version of the parties regarding the issues on
hand, it was incumbent on the Labor Arbiter to conduct further
proceedings thereon. The ends of justice would better be served if both
parties are given the opportunity to ventilate further their positions." 3
In their comment on the petition at bar, private respondents agree with
the finding of the NLRC that the nature of petitioner’s employment with
private respondents is vital to the case as it will determine the monetary
benefits to which he is entitled. They further aver that the evidence
presented upon which the labor arbiter based her decision is
insufficient, so that the NLRC did not commit grave abuse of discretion in
remanding the case to the arbitration branch of origin for further
proceedings.
The comment of the Solicitor General is substantially the same as that of
private respondents, i.e., there is no sufficient evidence to prove
employer-employee relationship between the parties. Furthermore, he
avers that the order of the NLRC to the labor arbiter for further
proceedings does not automatically translate to a protracted trial on the
merits for such can be faithfully complied with through the submission
of additional documents or pleadings only.
The only issue to be resolved in this petition is whether or not the NLRC
gravely abused its discretion in vacating and setting aside the decision of
the labor arbiter and remanding the case to the arbitration branch of
origin for further proceedings.
In essence, respondent NLRC was not convinced that the evidence
presented by the petitioner, consisting of the identification card issued
to him by private respondent corporation and the cash vouchers
reflecting his monthly salaries covering the months stated therein,
settled the issue of employer-employee relationship between private
respondents and petitioner.
It has long been established that in administrative and quasi-judicial
proceedings, substantial evidence is sufficient as a basis for judgment on
the existence of employer-employee relationship. No particular form of
evidence is required to prove the existence of such employer-employee
relationship. Any competent and relevant evidence to prove the
relationship may be admitted.4
Substantial evidence has been defined to be such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion, and
its absence is not shown by stressing that there is contrary evidence on
record, direct or circumstantial, for the appellate court cannot substitute
its own judgment or criterion for that of the trial court in determining
wherein lies the weight of evidence or what evidence is entitled to
belief.5
In a business establishment, an identification card is usually provided
not only as a security measure but mainly to identify the holder thereof
as a bona fide employee of the firm that issues it. Together with the cash
vouchers covering petitioner’s salaries for the months stated therein, we
agree with the labor arbiter that these matters constitute substantial
evidence adequate to support a conclusion that petitioner was indeed an
employee of private respondent.
Section 4, Rule V of the Rules of Procedure of the National Labor
Relations Commission provides thus:
“Section 4. Determination of Necessity of Hearing.—Immediately after the
submission of the parties of their position papers/memoranda, the
Labor Arbiter shall motu propiodetermine 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.”
“It is clear from the law that it is the arbiters who are authorized to
determine whether or not there is a necessity for conducting formal
hearings in cases brought before them for adjudication. Such
determination is entitled to great respect in the absence of
arbitrariness."6
In the case at bar, we do not believe that the labor arbiter acted
arbitrarily. Contrary to the finding of the NLRC, her decision at least on
the existence of an employer-employee relationship between private
respondents and petitioner, is supported by substantial evidence on
record.
The list of sales collection including computation of commissions due,
expenses incurred and cash advances received (Exhibits “B" and “B-1")
116
which, according to public respondent, the labor arbiter failed to which petitioner may be entitled, within thirty (30) days from
appreciate in support of private respondents’ allegation as regards the submission by the parties of all necessary documents.
nature of petitioner’s employment as a commission agent, cannot WHEREFORE, the resolutions of the public respondent dated 20
overcome the evidence of the ID card and salary vouchers presented by September 1994 and 9 November 1994 are SET ASIDE. The decision of
petitioner which private respondents have not denied. The list presented the labor arbiter dated 19 May 1993 is REINSTATED and AFFIRMED
by private respondents would even support petitioner’s allegation that, subject to the modification above-stated as regards a re-computation by
aside from a monthly salary of P1,500.00, he also received commissions the labor arbiter of the commissions to which petitioner maybe actually
for his work as a salesman of private respondents. entitled.
‘Having been in the employ of private respondents continuously for SO ORDERED.
more than one year, under the law, petitioner is considered a regular      Bellosillo, Vitug, Kapunan and Hermosisima, Jr., JJ., concur.
employee. Proof beyond reasonable doubt is not required as a basis for Resolution set aside, judgment of Labor Arbiter reinstated and affirmed
judgment on the legality of an employer’s dismissal of an employee, nor with modification.
even preponderance of evidence for that matter, substantial evidence Notes.—In the hierarchy of evidentiary values, proof beyond reasonable
being sufficient.7 Petitioner’s contention that private respondents doubt is at the highest level, followed by clear and convincing evidence,
terminated his employment due to their suspicion that he was being preponderance of evidence, and substantial evidence, in that
enticed by another firm to work for it was not refuted by private order. (Manalo vs. RoldanConfesor, 215 SCRA 808 [1992])
respondents. The labor arbiter’s conclusion that petitioner’s dismissal is The minimum requirement of due process in termination proceedings
therefore illegal, is not necessarily arbitrary or erroneous. It is entitled consists of notice to the employees intended to be dismissed and the
to great weight and respect. grant to them of an opportunity to present their own side. (Klaveness
It was error and grave abuse of discretion for the NLRC to remand the Maritime Agency, Inc. vs. Palmos, 232 SCRA 448 [1994])
case for further proceedings to determine whether or not petitioner was ——o0o——
private respondents’ employee. This would only prolong the final
disposition of the complaint. It is stressed that, in labor cases,
simplification of procedures, without regard to technicalities and
without sacrificing the fundamental requisites of due process, is
mandated to ensure the speedy administration of justice.8
After all, Article 218 of the Labor Code grants the Commission and the
labor arbiter broad powers, including issuance of subpoena, requiring
the attendance and testimony of witnesses or the production of such
documentary evidence as may be material to a just determination of the
matter under investigation.
Additionally, the National Labor Relations Commission and the labor
arbiter have authority under the Labor Code to decide a case based on
the position papers and documents submitted without resorting to the
technical rules of evidence.9
However, in view of the need for further and correct computation of the
petitioner’s commissions in the light of the exhibits presented and the
dismissal of the criminal cases filed -against petitioner, the labor arbiter
is required to undertake a new computation of the commissions to

117
Phil. Global Communications, Inc. v. De Vera; GR No.
157214, June 7, 2005

See page 96

118

POWER OF DISMISSAL:
VOL. 387, AUGUST 15, 2002 393
Tan vs. Lagrama
G.R. No. 151228. August 15, 2002.*
ROLANDO Y. TAN, petitioner, vs. LEOVIGILDO LAGRAMA and THE
HONORABLE COURT OF APPEALS, respondents.
Labor Law; Employer-Employee Relationship; Four-Fold Test to
Determine the Existence of an Employer-Employee Relationship.—In
determining whether there is an employer-employee relationship, we
have applied a “four-fold test,” to wit: (1) whether the alleged employer
has the power of selection and engagement of employees; (2) whether
he has control of the employee with respect to the means and methods
by which work is to be accomplished; (3) whether he has the power to
dismiss; and (4) whether the employee was paid wages.
Same; Same; Same; Of the four elements of the employer-employee
relationship, the “control test” is the most important; Independent
Contractor Defined.—Of the four elements of the employer-employee
relationship, the “control test” is the most important. Compared to an
employee, an independent contractor is one who carries on a distinct
and independent business and undertakes to perform the job, work, or
service on its own account and under its own responsibility according to
its own manner and method, free from the control and direction of the
principal in all matters connected with the performance of the work
except as to the results thereof. Hence, while an independent contractor
enjoys independence and freedom from the control and supervision of
his principal, an employee is subject to the employer’s power to control
the means and methods by which the employee’s work is to be
performed and accomplished.
Same; Same; Same; Evidence shows that the employee performed his work
as painter under the supervision and control of petitioner.—In the case at
bar, albeit petitioner Tan claims that private respondent Lagrama was an
independent contractor and never his employee, the evidence shows
that the latter performed his work as painter under the supervision and
control of petitioner. Lagrama worked in a designated work area inside
the Crown Theater of petitioner, for the use of which petitioner
prescribed rules. The rules included the observance of cleanliness and
hygiene and a prohibition against urinating in the work area and any
place other than the toilet or the rest rooms. Petitioner’s control over
Lagrama’s work extended not only to the use of the work area, but also
tothe result of Lagrama’s work, and the manner and means by which the
work was to be accomplished.
Same; Same; Same; The right to hire and fire is another important
element of the employer-employee relationship.—By stating that he had
the right to fire Lagrama, petitioner in effect acknowledged Lagrama to
be his employee. For the right to hire and fire is another important
element of the employer-employee relationship. Indeed, the fact that, as
petitioner himself said, he waited for Lagrama to report for work but the
latter simply stopped reporting for work reinforces the conviction that
Lagrama was indeed an employee of petitioner.
Same; Same; Same; The primary standard for 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 primary standard for 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. In this case, there is such a connection between the job of
Lagrama painting billboards and murals and the business of petitioner.
To let the people know what movie was to be shown in a movie theater
requires billboards. Petitioner in fact admits that the billboards are
important to his business.
Same; Dismissals; Abandonment; Two Elements of Abandonment; The
burden is on the employer to show a deliberate and unjustified refusal on
the part of the employee to resume his employment without any intention
of returning; Mere absence is not sufficient.—Abandonment requires two
elements: (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, with the second element as the more
determinative factor and being manifested by some overt acts. Mere
absence is not sufficient. What is more, the burden is on the employer to
show a deliberate and unjustified refusal on the part of the employee to
resume his employment without any intention of returning.
Same; Same; The employer has the burden of proving the lawfulness of his
employee’s dismissal; No worker shall be dismissed except for a just or
119
authorized cause provided by law and after due process; The illegality of
the act of dismissal constitutes discharge without just cause, while
illegality in the manner of dismissal is dismissal without due process.—The
second issue is whether private respondent Lagrama was illegally
dismissed. To begin, the employer has the burden of proving the
lawfulness of his employee’s dismissal. The validity of the charge must
be clearly established in a manner consistent with due process. The
Implementing Rules of the Labor Code provide that no worker shall be
dismissed except for a just or authorized cause provided by law and
after due process. This provision has two aspects: (1) the legality of the
act of dismissal, that is, dismissal under the grounds provided for under
Article 282 of the Labor Code and (2) the legality in the manner of
dismissal. The illegality of the act of dismissal constitutes discharge
without just cause, while illegality in the manner of dismissal is dismissal
without due process.
PETITION for review on certiorari of the decision and resolution of the
Court of Appeals.
The facts are stated in the opinion of the Court.
     Wilfredo D. Asis for petitioner.
     Public Attorney’s Office for private respondent.
MENDOZA, J.:
This is a petition for review on certiorari of the decision, 1dated May 31,
2001, and the resolution,2 dated November 27, 2001, of the Court of
Appeals in C.A.-G.R. SP. No. 63160, annulling the resolutions of the
National Labor Relations Commission (NLRC) and reinstating the ruling
of the Labor Arbiter which found petitioner Rolando Tan guilty of
illegally dismissing private respondent Leovigildo Lagrama and ordering
him to pay the latter the amount of P136,849.99 by way of separation
pay, backwages, and damages.
The following are the facts.
Petitioner Rolando Tan is the president of Supreme Theater Corporation
and the general manager of Crown and Empire Theaters in Butuan City.
Private respondent Leovigildo Lagrama is a painter, making ad
billboards and murals for the motion pictures shown at the Empress,
Supreme, and Crown Theaters for more than 10 years, from September
1, 1988 to October 17, 1998.
On October 17, 1998, private respondent Lagrama was summoned by
Tan and upbraided: “Nangihi na naman ka sulod sa imong area.”) When
Lagrama asked what Tan was saying, Tan told him, “Ayaw daghang
estorya. Dili ko gusto nga mo-drawing ka pa. Guikan karon, wala nay
drawing. Gawas.”(“Don’t say anything further. I don’t want you to draw
anymore. From now on, no more drawing. Get out.”)
Lagrama denied the charge against him. He claimed that he was not the
only one who entered the drawing area and that, even if the charge was
true, it was a minor infraction to warrant his dismissal. However,
everytime he spoke, Tan shouted “Gawas” (“Get out”), leaving him with
no other choice but to leave the premises.
Lagrama filed a complaint with the Sub-Regional Arbitration Branch No.
X of the National Labor Relations Commission (NLRC) in Butuan City. He
alleged that he had been illegally dismissed and sought reinvestigation
and payment of 13th month pay, service incentive leave pay, salary
differential, and damages.
Petitioner Tan denied that Lagrama was his employee. He asserted that
Lagrama was an independent contractor who did his work according to
his methods, while he (petitioner) was only interested in the result
thereof. He cited the admission of Lagrama during the conferences
before the Labor Arbiter that he was paid on a fixed piece-work
basis, i.e., that he was paid for every painting turned out as ad billboard
or mural for the pictures shown in the three theaters, on the basis of a
“no mural/billboard drawn, no pay” policy. He submitted the affidavits
of other cinema owners, an amusement park owner, and those
supervising the construction of a church to prove that the services of
Lagrama were contracted by them. He denied having dismissed Lagrama
and alleged that it was the latter who refused to paint for him after he
was scolded for his habits.
As no amicable settlement had been reached, Labor Arbiter Rogelio P.
Legaspi directed the parties to file their position papers. On June 17,
1999, he rendered a decision, the dispositive portion of which reads:
“WHEREFORE, premises considered judgment is hereby ordered:
1. Declaring complainant’s [Lagrama’s] dismissal illegal and
2. Ordering respondents [Tan] to pay complainant the following:
A Separation Pay — P 59,000.00
.
B. Backwages — 47,200.00
  (from 17 October 1998    
to 17 June 1999)
C. 13th month pay (3 — 17,700.00
years)
D. Service Incentive Leave — 2, 949.99
Pay (3 years)
120
E. Damages — 10,000.00
       TOTAL   [P136,849.99]
Complainant’s other claims are dismissed for lack of merit.” 3
Petitioner Rolando Tan appealed to the NLRC Fifth Division, Cagayan de
Oro City, which, on June 30, 2000, rendered a decision4 finding Lagrama
to be an independent contractor, and for this reason reversing the
decision of the Labor Arbiter.
Respondent Lagrama filed a motion for reconsideration, but it was
denied for lack of merit by the NLRC in a resolution of September 29,
2000. He then filed a petition for certiorari under Rule 65 before the
Court of Appeals.
The Court of Appeals found that petitioner exercised control over
Lagrama’s work by dictating the time when Lagrama should submit his
billboards and murals and setting rules on the use of the work area and
rest room. Although it found that Lagrama did work for other cinema
owners, the appeals court held it to be a mere sideline insufficient to
prove that he was not an employee of Tan. The appeals court also found
no evidence of any intention on the part of Lagrama to leave his job or
sever his employment relationship with Tan. Accordingly, on May 31,
2001, the Court of Appeals rendered a decision, the dispositive portion
of which reads:
“IN THE LIGHT OF ALL THE FOREGOING, the Petition is hereby
GRANTED. The Resolutions of the Public Respondent issued on June 30,
2000 and September 29, 2000 are ANNULLED. The Decision of the
Honorable Labor Arbiter Rogelio P. Legaspi on June 17, 1999 is hereby
REINSTATED.”
Petitioner moved for a reconsideration, but the Court of Appeals found
no reason to reverse its decision and so denied his motion for lack of
merit.5 Hence, this petition for review on certiorari based on the
following assignments of errors:
1. I.With all due respect, the decision of respondent Court of
Appeals in CA-G.R. SP NO. 63160 is bereft of any finding that
Public Respondent NLRC, 5th Division, had no jurisdiction or
exceeded it or otherwise gravely abused its discretion in its
Resolution of 30 June 2000 in NLRC CA-No. M-004950-99.
2. II.With all due respect, respondent Court of Appeals, absent any
positive finding on its part that the Resolution of 30 June 2000 of
the NLRC is not supported by substantial evidence, is without
authority to substitute its conclusion for that of said NLRC.
3. III.With all due respect, respondent Court of Appeals’ discourse
on “freelance artists and painters” in the decision in question is
misplaced or has no factual or legal basis in the record.
4. IV.With all due respect, respondent Court of Appeals’ opening
statement in its decision as to “employment,” “monthly salary of
P1,475.00” and “work schedule from Monday to Saturday, from
8:00 o’clock in the morning up to 5:00 o’clock in the afternoon”
as “facts” is not supported by the evidence on record.
5. V.With all due respect, the case of Lambo, et al. v. NLRC, et al., 317
SCRA 420 [G.R. No. 111042, October 26, 1999] relied upon by
respondent Court of Appeals is not applicable to the peculiar
circumstances of this case.6
The issues raised boil down to whether or not an employer-employee
relationship existed between petitioner and private respondent, and
whether petitioner is guilty of illegally dismissing private respondent.
We find the answers to these issues to be in the affirmative.
I.
In determining whether there is an employer-employee relationship, we
have applied a “four-fold test,” to wit: (1) whether the alleged employer
has the power of selection and engagement of employees; (2) whether
he has control of the employee with respect to the means and methods
by which work is to be accomplished; (3) whether he has the power to
dismiss; and (4) whether the employee was paid wages. 7 These elements
of the employer-employee relationship are present in this case.
First. The existence in this case of the first element is undisputed. It was
petitioner who engaged the services of Lagrama without the
intervention of a third party. It is the existence of the second element,
the power of control, that requires discussion here.
Of the four elements of the employer-employee relationship, the “control
test” is the most important. Compared to an employee, an independent
contractor is one who carries on a distinct and independent business
and undertakes to perform the job, work, or service on its own account
and under its own responsibility according to its own manner and
method, free from the control and direction of the principal in all matters
connected with the performance of the work except as to the results
thereof.8Hence, while an independent contractor enjoys independence
and freedom from the control and supervision of his principal, an
employee is subject to the employer’s power to control the means and
121
methods by which the employee’s work is to be performed and
accomplished.
In the case at bar, albeit petitioner Tan claims that private respondent
Lagrama was an independent contractor and never his employee, the
evidence shows that the latter performed his work as painter under the
supervision and control of petitioner. Lagrama worked in a designated
work area inside the Crown Theater of petitioner, for the use of which
petitioner prescribed rules. The rules included the observance of
cleanliness and hygiene and a prohibition against urinating in the work
area and any place other than the toilet or the rest rooms. 9 Petitioner’s
control over Lagrama’s work extended not only to the use of the work
area, but also to the result of Lagrama’s work, and the manner and
means by which the work was to be accomplished.
Moreover, it would appear that petitioner not only provided the
workplace, but supplied as well the materials used for the paintings,
because he admitted that he paid Lagrama only for the latter’s services. 10
Private respondent Lagrama claimed that he worked daily, from 8
o’clock in the morning to 5 o’clock in the afternoon. Petitioner disputed
this allegation and maintained that he paid Lagrama P1,475.00 per week
for the murals for the three theaters which the latter usually finished in
3 to 4 days in one week.11 Even assuming this to be true, the fact that
Lagrama worked for at least 3 to 4 days a week proves regularity in his
employment by petitioner.
Second. That petitioner had the right to hire and fire was admitted by
him in his position paper submitted to the NLRC, the pertinent portions
of which stated:
Complainant did not know how to use the available comfort rooms or
toilets in and about his work premises. He was urinating right at
the place where he was working when it was so easy for him, as
everybody else did and had he only wanted to, to go to the comfort
rooms. But no, the complainant had to make a virtual urinal out of
his work place! The place then stunk to high heavens, naturally, to the
consternation of respondents and everyone who could smell the
malodor.
....
Given such circumstances, the respondents had every right, nay all the
compelling reason, to fire him from his painting job upon discovery and
his admission of such acts. Nonetheless, though thoroughly scolded, he
was not fired. It was he who stopped to paint for respondents. 12
By stating that he had the right to fire Lagrama, petitioner in effect
acknowledged Lagrama to be his employee. For the right to hire and fire
is another important element of the employer-employee
relationship.13 Indeed, the fact that, as petitioner himself said, he waited
for Lagrama to report for work but the latter simply stopped reporting
for work reinforces the conviction that Lagrama was indeed an
employee of petitioner. For only an employee can nurture such an
expectancy, the frustration of which, unless satisfactorily explained, can
bring about some disciplinary action on the part of the employer.
Third. Payment of wages is one of the four factors to be considered in
determining the existence of employer-employee relation. Wages are
defined as “remuneration or earnings, however designated, capable of
being expressed in terms of money, whether fixed or ascertained on a
time, task, piece, or commission basis, or other method of calculating the
same, which is payable by an employer to an employee under a written
or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered.” 14 That Lagrama worked for Tan on
a fixed piece-work basis is of no moment. Payment by result is a method
of compensation and does not define the essence of the relation. 15 It is a
method of computing compensation, not a basis for determining the
existence or absence of employer-employee relationship. One may be
paid on the basis of results or time expended on the work, and may or
may not acquire an employment status, depending on whether the
elements of an employer-employee relationship are present or not. 16
The Rules Implementing the Labor Code require every employer to pay
his employees by means of payroll. 17 The payroll should show among
other things, the employee’s rate of pay, deductions made, and the
amount actually paid to the employee. In the case at bar, petitioner did
not present the payroll to support his claim that Lagrama was not his
employee, raising speculations whether his failure to do so proves that
its presentation would be adverse to his case.18
The primary standard for 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. 19 In
this case, there is such a connection between the job of Lagrama painting
billboards and murals and the business of petitioner. To let the people
know what movie was to be shown in a movie theater requires
billboards. Petitioner in fact admits that the billboards are important to
his business.20
122
The fact that Lagrama was not reported as an employee to the SSS is not
conclusive on the question of whether he was an employee of
petitioner.21 Otherwise, an employer would be rewarded for his failure
or even neglect to perform his obligation.22
Neither does the fact that Lagrama painted for other persons affect or
alter his employment relationship with petitioner. That he did so only
during weekends has not been denied by petitioner. On the other hand,
Samuel Villalba, for whom Lagrama had rendered service, admitted in a
sworn statement that he was told by Lagrama that the latter worked for
petitioner.23
Lagrama had been employed by petitioner since 1988. Under the law,
therefore, he is deemed a regular employee and is thus entitled to
security of tenure, as provided in Art. 279 of Labor Code:
ART. 279. Security of Tenure.—In cases of regular employment, the
employer shall not terminate the services of an employee except for a
just cause or when authorized by this Title. An employee who is unjustly
dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full backwages, inclusive
of allowances, and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from him up to
the time of his actual reinstatement.
This Court has held that if the employee has been performing the job for
at least one year, even if not continuously but intermittently, the
repeated and continuing need for its performance is sufficient evidence
of the necessity, if not indispensability, of that activity to the business of
his employer. Hence, the employment is also considered regular,
although with respect only to such activity, and while such activity
exists.24
It is claimed that Lagrama abandoned his work. There is no evidence to
show this. Abandonment requires two elements: (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, with the second
element as the more determinative factor and being manifested by some
overt acts.25 Mere absence is not sufficient. What is more, the burden is
on the employer to show a deliberate and unjustified refusal on the part
of the employee to resume his employment without any intention of
returning.26 In the case at bar, the Court of Appeals correctly ruled:
Neither do we agree that Petitioner abandoned his job. In order for
abandonment to be a just and valid ground for dismissal, the employer
must show, by clear proof, the intention of the employee to abandon his
job. . . .
In the present recourse, the Private Respondent has not established
clear proof of the intention of the Petitioner to abandon his job or to
sever the employment relationship between him and the Private
Respondent. On the contrary, it was Private Respondent who told
Petitioner that he did not want the latter to draw for him and thereafter
refused to give him work to do or any mural or billboard to paint or
draw on.
More, after the repeated refusal of the Private Respondent to give
Petitioner murals or billboards to work on, the Petitioner filed, with the
Sub-Regional Arbitration Branch No. X of the National Labor Relations
Commission, a Complaint for “Illegal Dismissal and Money Claims.” Such
act has, as the Supreme Court declared, negate any intention to sever
employment relationship. . . .27
II.
The second issue is whether private respondent Lagrama was illegally
dismissed. To begin, the employer has the burden of proving the
lawfulness of his employee’s dismissal. 28 The validity of the charge must
be clearly established in a manner consistent with due process. The
Implementing Rules of the Labor Code 29 provide that no worker shall be
dismissed except for a just or authorized cause provided by law and
after due process. This provision has two aspects: (1) the legality of the
act of dismissal, that is, dismissal under the grounds provided for under
Article 282 of the Labor Code and (2) the legality in the manner of
dismissal. The illegality of the act of dismissal constitutes discharge
without just cause, while illegality in the manner of dismissal is dismissal
without due process.30
In this case, by his refusal to give Lagrama work to do and ordering
Lagrama to get out of his sight as the latter tried to explain his side,
petitioner made it plain that Lagrama was dismissed.
Urinating in a work place other than the one designated for the purpose
by the employer constitutes violation of reasonable regulations intended
to promote a healthy environment under Art. 282(1) of the Labor Code
for purposes of terminating employment, but the same must be shown
by evidence. Here there is no evidence that Lagrama did urinate in a
place other than a rest room in the premises of his work.
Instead of ordering his reinstatement as provided in Art. 279 of the
Labor Code, the Labor Arbiter found that the relationship between the
employer and the employee has been so strained that the latter’s
123
reinstatement would no longer serve any purpose. The parties do not Chavez v. NLRC, et al.; GR No. 146530
dispute this finding. Hence, the grant of separation pay in lieu of *see page ___
reinstatement is appropriate. This is of course in addition to the
payment of backwages which, in accordance with the ruling
in Bustamante v. NLRC,31 should be computed from the time of Lagrama’s
dismissal up to the time of the finality of this decision, without any
deduction or qualification.
The Bureau of Working Conditions 32 classifies workers paid by results
into two groups, namely; (1) those whose time and performance is
supervised by the employer, and (2) those whose time and performance
is unsupervised by the employer. The first involves an element of control
and supervision over the manner the work is to be performed, while the
second does not. If a piece worker is supervised, there is an employer-
employee relationship, as in this case. However, such an employee is not
entitled to service incentive leave pay since, as pointed out in Makati
Haberdashery v. NLRC,33 and Mark Roche International v. NLRC, 34 he is
paid a fixed amount for work done, regardless of the time he spent in
accomplishing such work.

WHEREFORE, based on the foregoing, the petition is DENIED for lack of

showing that the Court of Appeals committed any reversible error. The
decision of the Court of Appeals, reversing the decision of the National
Labor Relations Commission and reinstating the decision of the Labor
Arbiter, is AFFIRMED with the MODIFICATION that the backwages and
other benefits awarded to private respondent Leovigildo Lagrama
should be computed from the time of his dismissal up to the time of the
finality of this decision, without any deduction and qualification.
However, the service incentive leave pay awarded to him is DELETED.
SO ORDERED.
     Bellosillo (Chairman), Quisumbing and Corona, JJ., concur.
Judgment affirmed with modification.
Note.—The power of control is the most decisive factor in determining
the existence of an employer-employee relationship. (Religious of the
Virgin Mary vs. National Labor Relations Commission, 316 SCRA
614 [1999])
——o0o——

124
Sonza v. ABS-CBN Broadcasting Corp.; GR No. 138051, June 10,
2004
*see page_______

125

POWER OF CONTROL:
VOL. 156, DECEMBER 14, 1987 383
Social Security System vs. Court of Appeals
No. L-46058. December 14, 1987.*
SOCIAL SECURITY SYSTEM, petitioner, vs. COURT OF APPEALS and the
QUALITY TOBACCO CORPORATION, respondents.
Labor Relations; Elements considered in determining employeremployee
relationship.—For this reason, in order to put the issue at rest, this Court
has laid down in a formidable line of decisions the elements to be
generally considered in determining the existence of an employer-
employee relationship, as follows: a) 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. The last which is
the so-called "control test" is the most important element (Brotherhood
Labor vs. Labor Unity Movement of the Phils., 147 SCRA 49 [1987]; Dy
Ke Beng vs. International Labor and Marine Union of the Phil., 90 SCRA
162 [1979]; Mafinco Trading Corp. vs. Ople, 70 SCRA 141 [1976]; Social
Security System vs. Court of Appeals, 37 SCRA 579 [1971]).
Same; Same; Control test, i.e., whether the employer controls or has
reserved the right to control the employee not only as to the result of the
work but also as to the means and method by which the same is to be
accomplished.—Applying the control test, that is, whether the employer
controls or has reserved the right to control the employee not only as to
the result of the work to be done but also as to the means and method by
which the same is to be accomplished, the question of whether or not
there is an employer-employee relationship for purposes of the Social
Security Act has been settled in this jurisdiction in the case of
Investment Planning Corp. vs. SSS, 21 SCRA 924 (1967). In other words,
where the element of control is absent; where a person who works for
another does so more or less at his own pleasure and is not subject to
definite hours or conditions of work, and in turn is compensated
according to the result of his effort, the relationship of employer-
employee does not exist. (SSS vs. Courtof Appeals, 30 SCRA 210 [1969]).
Same; Same; Same; Mafinco case is not applicable in the instant petition,
there being no substantial parallelism between said contract and the
contract of purchase and sale in this case.—It is the contention of
petitioner that the Mafinco case which has been the sole basis of the
Court of Appeals' finding that Romeo Carreon is an independent
contractor is not applicable in the instant petition, there being no
substantial parallelism between said contract and the contract of
purchase and sale in this case. It pointed out that there are in the
Mafinco contract provisions which by express implication point to the
status of the peddler as an independent contractor such as: a) that
should the peddler employ a driver or helpers, the latter shall be his
employee/s and his/their compensation shall be for the peddler's
account; that the peddler shall comply with the provisions of the Social
Security Act and all applicable laws (par. 2); b) peddler is responsible for
damage to property, death or injuries to persons covered by his own acts
or omissions or those of his driver or helpers (par. 3); c) peddler is
required to secure at his own expense all necessary licenses and permits
and to bear all expenses which may be incurred in the sale of soft drinks
(par. 5); d) the peddler is to furnish a performance bond of P1,000.00 in
favor of Mafinco to assure performance by the peddler of his obligation
to his employee under the Social Security Act (par. 11), which provisions
are notably absent in the contract in the case at bar (Rollo, pp. 103-104).
Same; Same; Findings of fact of the CA is conclusive on the parties.—In the
case at bar, it is evident that the basic contention is what the law is in the
given state of facts. More than that, the wellsettled rule that the finding
of facts of the Court of Appeals is conclusive on the parties, admits of
exceptions among which are: (1) when the findings of fact of the Court of
Appeals are contrary to those of the trial court and (2) when the findings
of fact of the Court of Appeals are premised on the supposed absence of
evidence and are contradicted by evidence on record (Sacay vs.
Sandiganbayan, 142 SCRA 609 [1986]; Manlapaz vs. Court of Appeals,
147 SCRA 239 [1987]).
Same; Same; Same; Distinction between Question of Law and Question of
fact, explained.—The distinction between a question of law and a
question of fact is explained in our jurisprudence in Ramos vs. Pepsi Cola
Bottling Co. (19 SCRA 289, 292 [1967]), to wit: "For a question to be one
of law it must involve no examination of the probative value of the
evidence presented by the litigants or any of them and the distinction is
126
well-known. There is a question of law in a given case when the doubt or
difference arises as to what the law is in a certain state of facts; there is a
question of fact when the doubt arises as to the truth or the falsehood of
alleged facts." cited in G.R. No. L-39767, Lorenzo Hernandez vs. The
Court of Appeals, March 31, 1987.
Same; Same; Elementary rule that findings of administrative agencies are
generally accorded respect and finality.—Moreover, it is elementary that
findings of administrative agencies are generally accorded not only
respect but also of finality (Rosario Bros. Inc. vs. Ople, 131 SCRA 72
[1984]).
PETITION for certiorari to review the decision of the Court of Appeals.
Agrava, J.
The facts are stated in the opinion of the Court.
PARAS, J.:
This is a petition for review on certiorari of the decision of the Court of
Appeals** dated March 16, 1977 in CA-G.R. No. 05087-SP entitled Romeo
Carreon, petitioner-appellee vs. Quality Tobacco Corporation,
respondent-appellant and Social Security System, intervenor-appellee,
reversing the Resolution dated January 21, 1976 of the Social Security
System and dismissing the petition filed by Romeo Carreon.
The facts are found by the Court of Appeals are as follows:
"QTC, formerly U.S. Tobacco Corporation, is a firm engaged in the
manufacture and sale of cigarettes. On August 12, 1972, QTC, as
VENDOR, entered into an agreement with CARREON, as VENDEE, the
salient provisions of which are as follows:
1. '2.The VENDEE shall purchase one or more brands of cigarettes
of the VENDOR on cash basis only, subject to the discretion of the
VENDOR as to the brand and quantity thereof;  venue of actions is hereby agreed to be in the City of Manila and
x      x      x      x      x      x      x      x      x
2. '3.The VENDEE shall sell the cigarettes herein mentioned only
within Quezon Province and or such other places as
1. may be designated and or limited thereafter by the VENDOR and
only to residents of, or retailers or jobbers doing, and having
their place of business in, said assigned territory, strictly, at such
prices set by the VENDOR from time to time for the
aforementioned respective brands of cigarettes in the sale
thereof by the VENDEE in said assigned territory. The VENDEE is
fully aware that a violation of this particular paragraph will
cause grave and serious consequences to the VENDOR and that
he shall be liable for all damages caused by said violation.
2. '4.The VENDEE shall be solely responsible for the cigarettes
delivered to him by the VENDOR as well as for the
aforementioned proceeds from the sale thereof, and any loss
thereof due to any cause shall be solely for his own risk and
account. 
x      x      x      x      x      x      x      x      x
3. '6.The VENDOR may loan a delivery truck or trucks to the
VENDEE, which truck or trucks shall be used by the VENDEE
exclusively in connection with this contract and at all time
maintained by the said VENDEE in good condition; and for as
long as the VENDEE may be allowed the use of the VENDOR's
truck or trucks, the VENDEE shall pay all the expenses for
gasoline, oil, repairs, operating costs, maintenance, tires, spare
parts, etc., but the VENDOR may at its discretion assume the
payment of major or repair. 
x      x      x      x      x      x      x      x      x
4. '9.This contract, may, however, be terminated upon one (1)
week's notice of either party at any time.
5. '10.In the event a court litigation should be necessary to recover
from the VENDEE any amount due to the VENDOR, the VENDEE
shall pay to the VENDOR all such damages that the VENDOR may
suffer arising from the violation by the VENDEE of any of the
terms and conditions of this contract and/or implementation
and/or instructions mentioned in Paragraph 7 hereof plus the
cost of suit and attorney's fees of at least 20% of the amount
sought to be recovered, which in no case shall be less than Five
Hundred Pesos (P500.00) for the purposes of this paragraph,
the VENDEE hereby waives any other proper venue in any action
which may be brought by or against him in connection with this
contract or in connection with other actions which may be
brought incident thereto.'
"The contract with CARREON was terminated by QTC on December 18,
1972.
"On April 29, 1974, CARREON filed a petition with the Social Security
Commission alleging that he was an employee of QTC, and asking that
QTC be ordered to report him for coverage under the Social Security
Law. QTC answered claiming that CARREON has not been an employee
but was an 'lndependent businessman.' The Social Security System
intervened and, taking the side of CARREON, also asked that QTC be
127
ordered to pay Social Security contributions in respect of CARREON. On
January 21, 1976, the Social Security Commission resolved CARREON's
petition, finding him to be an employee of QTC. The rulings in U.S.
Tobacco Corporation vs. Benjamin Serna, et al., CA-G.R. No. 32041,
September 5, 1967, and The Shell Co. Phil. Ltd. vs. Fireman's Insurance
Co. of Newark, et al., 100 Phil. 757, were inter alia, relied upon."
Cognizant of the striking similarities obtaining in the case before it and
the Mafinco vs. Ople case decided by this Court on March 25, 1976, and
relying solely on the doctrine laid down in said case, the Court of Appeals
issued the herein assailed decision dated March 16, 1977, the dispositive
part of which reads:
"WHEREFORE, the Resolution of the Social Security Commission of
January 21, 1976 in its Case No. 2543 is hereby REVERSED and the
petition filed in said case by Romeo Carreon is dismissed."
In a Motion for Reconsideration dated March 25, 1977, the Social
Security System sought the reconsideration of the aforequoted decision
(Rollo, pp. 43-49). However, finding no merit in said motion, the Court of
Appeals denied the same in its resolution dated April 14, 1977 (Rollo, pp.
50-51).
Hence this petition.
The First Division of this Court without giving due course to said petition
resolved to require the respondents to comment (Rollo, p. 64). Private
respondent filed its Comment on August 9, 1977 (Rollo, p. 69).
Thereafter, this Court resolved to give due course to the petition and
required the parties to submit simultaneous memoranda (Rollo, p. 74).
On September 23, 1977, private respondent and petitioner filed their
respective memoranda (Rollo, pp. 80-118).
The issue raised by the petitioner before this Court is the very same
issue resolved by the Court of Appeals—that is, whether or not Romeo
Carreon is an employee or an independent contractor under the contract
aforequoted. Corollary thereto the question as to whether or not the
Mafinco case is applicable to this case was raised by the parties.
The Court took cognizance of the fact that the question of whether or not
an employer-employee relationship exists in a certain situation
continues to bedevil the courts. Some businessmen with the aid of
lawyers have tried to avoid the bringing about of an employer-employee
relationship in some of their enterprises because that juridical relation
spawns obligations connected with workmen's compensation, social
security, medicare, minimum wage, termination pay and unionism.
For this reason, in order to put the issue at rest, this Court has laid down
in a formidable line of decisions the elements to be generally considered
in determining the existence of an employer-employee relationship, as
follows: a) 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. The last which is the so-called "control test" is the
most important element (Brotherhood Labor Unity Movement of the
Phils. vs. Zamora, 147 SCRA 49 [1987]; Dy Ke Beng vs. International
Labor and Marine Union of the Phil., 90 SCRA 162 [1979]; Mafinco
Trading Corp. vs. Ople, 70 SCRA 141 [1976]; Social Security System vs.
Court of Appeals, 37 SCRA 579 [1971]).
Applying the control test, that is, whether the employer controls or has
reserved the right to control the employee not only as to the result of the
work to be done but also as to the means and method by which the same
is to be accomplished, the question of whether or not there is an
employer-employee relationship for purposes of the Social Security Act
has been settled in this jurisdiction in the case of Investment Planning
Corp. vs. SSS, 21 SCRA 924 (1967). In other words, where the element of
control is absent; where a person who works for another does so more
or less at his own pleasure and is not subject to definite hours or
conditions of work, and in turn is compensated according to the result of
his effort, the relationship of employer-employee does not exist. (SSS vs.
Court of Appeals, 30 SCRA 210 [1969]).
It is the contention of petitioner that the Mafinco case which has been
the sole basis of the Court of Appeals' finding that Romeo Carreon is an
independent contractor is not applicable in the instant petition, there
being nosubstantial parallelism between said contract and the contract
of purchase and sale in this case. It pointed out that there are in the
Mafinco contract provisions which by express implication point to the
status of the peddler as an independent contractor such as: a) that
should the peddler employ a driver or helpers, the latter shall be his
employee/s and his/their compensation shall be for the peddler's
account; that the peddler shall comply with the provisions of the Social
Security Act and all applicable laws (par. 2); b) peddler is responsible for
damage to property, death or injuries to persons covered by his own acts
or omissions or those of his driver or helpers (par. 3); c) peddler is
required to secure at his own expense all necessary licenses and permits
and to bear all expenses which may be incurred in the sale of soft drinks
(par. 5); d) the peddler is to furnish a performance bond of P1,000.00 in
128
favor of Mafincoto assure performance by the peddler of his obligation
to his employee under the Social Security Act (par. 11), which provisions
are notably absent in the contract in the case at bar (Rollo, pp. 103-104).
It further contends that the Court of Appeals in an effort to justify its
holding picked out only paragraphs 1, 2, 4,6 and 9 of the Mafinco
contract and thereafter concluded that the two contracts are similar.
Private respondent on the other hand, avers that the Mafinco contract is
applicable to the case at bar. The two contracts need not embody almost
the same provisions in order that they may be considered similar. It is
enough that the aspect of similarity arising from the terms and condition
be considered because of their relevance to the issue, is relatively much
stronger than the dissimilarity.
Private respondent likewise maintains that the decision was correctly
concluded not only on the similarity of the two contracts but also on
factual evidence adduced at the trial and since respondent Court has
already examined the facts and passed judgment on the basis thereof, its
decision is nolonger subject to review. Stated otherwise, the Court of
Appeals "looked behind the contract" but found the evidence insufficient
to justify a finding that the terms of the contract were not followed. That
the evidence for Carreon and SSS failed to "pierce" 'pierce'' the contract
(Rollo, p. 83).
Private respondent's contention is untenable.
The distinction between a question of law and a question of fact is
explained in our jurisprudence in Ramos vs. Pepsi Cola Bottling Co. (19
SCRA 289, 292 [1967]), to wit:
"For a question to be one of law it must involve no examination of the
probative value of the evidence presented by the litigants or any of them
and the distinction is well-known. There is a question of law in a given
case when the doubt or difference arises as to what the law is in a certain
state of facts; there is a question of fact when the doubt arises as to the
truth or the falsehood of alleged facts.''
cited in G.R. No. L-39767, Lorenzo Hernandez vs. The Court of Appeals,
March 31, 1987.
In the case at bar, it is evident that the basic contention is what the law is
in the given state of facts. More than that, the well-settled rule that the
finding of facts of the Court of Appeals is conclusive on the parties,
admits of exceptions among which are: (1) when the findings of fact of
the Court of Appeals are contrary to those of the trial court and (2) when
the findings of fact of the Court of Appeals are premised on the supposed
absence of evidence and are contradicted by evidence on record (Sacay
vs. Sandiganbayan, 142 SCRA 609 [1986]; Manlapaz vs. Court of
Appeals, 147 SCRA 239 [1987]).
In this case, the Court of Appeals ruled that there is not enough evidence
to show that the contract between Carreon and QTC was not reflective of
their agreement to warrant reformation. As earlier pointed out, the
Court of Appeals did not consider the entirety of the contract but only
portions thereof which led to the conclusion that Carreon was an
independent contractor.
Thus, after a study of the records and applying the "control tests," there
appears to be no question that the existence of an employer-employee
relationship between Romeo Carreon and QTC has been established,
based on the following "undisputed" facts as pointed out by the Solicitor
General, to wit: (a) QTC assigned a definite sales territory for Romeo
Carreon; (b) QTC provided Romeo Carreon with a delivery truck for the
exclusive use of the latter in his sales activities; (c) QTC dictated the
price of the cigarettes sold by Romeo Carreon; (d) QTC prescribed what
brand of cigarettes Romeo Carreon could sell; (e) QTC determined the
persons to whom Romeo Carreon could sell, (f) QTC issued circulars and
memoranda relative to Romeo Carreon's sales activities; (g) QTC
required Romeo Carreon to submit to it daily, weekly and monthly
reports; (h) QTC grounded Romeo Carreon for six months in 1966; (i)
Romeo Carreon was supervised by sales coordinators of QTC; (j) Romeo
Carreon was subject to payment of damages and loss even of accrued
rights for any violation of instructions made by QTC in relation to his
sales activities; and (k) Romeo Carreon was paid an allowance by QTC.
All these indicate control and supervision over Carreon's work.
Moreover, it is elementary that findings of administrative agencies are
generally accorded not only respect but also of finality (Rosario Bros,
Inc. vs. Ople, 131 SCRA 72 [1984]).
PREMISES CONSIDERED, the decision of the Court of Appeals dated
March 16, 1987 and its resolution of April 14, 1977 are hereby
REVERSED and SET ASIDE, and the resolution of the Social Security
Commission dated January 21, 1976 is AFFIRMED and REINSTATED.
SO ORDERED.
     Teehankee (C.J.), Narvasa, Cruz and Gancayco, JJ.,concur.
Decision and resolution reversed and set aside.
Notes.—Issue regarding the relationship between employer and
employee is a question of fact. (Egyptian us. NLRC, 148 SCRA 125.)
General rule that finding of fact of quasi-judicial bodies are binding OR
the Supreme Court. (Soco vs. Mercantile Corporation, 148 SCRA 526.)
129
G.R. No. 195190. July 28, 2014.*
ROYALE HOMES MARKETING CORPORATION, petitioner, vs. FIDEL
P. ALCANTARA [deceased], substituted by his heirs, respondent.
Labor Law; Employer-Employee Relationship; While the existence of
employer-employee relationship is a matter of law, the characterization
made by the parties in their contract as to the nature of their juridical
relationship cannot be simply ignored.—The primary evidence of the
nature of the parties’ relationship in this case is the written contract that
they signed and executed in pursuance of their mutual agreement. While
the existence of employer-employee relationship is a matter of law, the
characterization made by the parties in their contract as to the nature of
their juridical relationship cannot be simply ignored, particularly in this
case where the parties’ written contract unequivocally states their
intention at the time they entered into it. In Tongko v. The Manufacturers
Life Insurance Co. (Phils.), Inc., 622 SCRA 58 (2010), it was held that: To
be sure, the Agreement’s legal characterization of the nature of the
relationship cannot be conclusive and binding on the courts; x x x the
characterization of the juridical relationship the Agreement embodied is
a matter of law that is for the courts to determine. At the same time,
though, the characterization the parties gave to their relationship in the
Agreement cannot simply be brushed aside because it embodies their
intent at the time they entered the Agreement, and they were governed
by this understanding throughout their relationship. At the very least,
the provision on the absence of employer-employee relationship
between the parties can be an aid in considering the Agreement and its
implementation, and in appreciating the other evidence on record.
Same; Same; In determining the existence of an employer-employee
relationship, the Supreme Court (SC) has generally relied on the four-fold
test, to wit: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the employer’s
power to control the employee with respect to the means and methods by
which the work is to be accomplished.—In determining the existence of
an employer-employee relationship, this Court has generally relied on
the four-fold test, to wit: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4)
the employer’s power to control the employee with respect to the means
and methods by which the work is to be accomplished. Among the four,
the most determinative factor in ascertaining the existence of employer-
employee relationship is the “right of control test.” “It is deemed to be
such an important factor that the other requisites may even be
disregarded.” This holds true where the issues to be resolved is whether
a person who performs work for another is the latter’s employee or is an
independent contractor, as in this case. For where the person for whom
the services are performed reserves the right to control not only the end
to be achieved, but also the means by which such end is reached,
employer-employee relationship is deemed to exist.
Same; Same; As long as the level of control does not interfere with the
means and methods of accomplishing the assigned tasks, the rules imposed
by the hiring party on the hired party do not amount to the labor law
concept of control that is indicative of employer-employee relationship.—
Not every form of control is indicative of employer-employee
relationship. A person who performs work for another and is subjected
to its rules, regulations, and code of ethics does not necessarily become
an employee. As long as the level of control does not interfere with the
means and methods of accomplishing the assigned tasks, the rules
imposed by the hiring party on the hired party do not amount to the
labor law concept of control that is indicative of employer-employee
relationship. In Insular Life Assurance Co., Ltd. v. National Labor Relations
Commission, 179 SCRA 459 (1989), it was pronounced 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.
Same; Same; Neither does the repeated hiring of Alcantara prove the
existence of employer-employee relationship; Nor does the exclusivity
clause of contract establish the existence of the labor law concept of
control.—Neither does the repeated hiring of Alcantara prove the
existence of employer-employee relationship. As discussed above, the
absence of control over the means and methods disproves employer-
employee relationship. The continuous rehiring of Alcantara simply
signifies the renewal of his contract with Royale Homes, and highlights
his satisfactory services warranting the renewal of such contract. Nor
does the exclusivity clause of contract establish the existence of the labor
130
law concept of control. In Consulta v. Court of Appeals, 453 SCRA 732
(2005), it was held that exclusivity of contract does not necessarily
result in employer-employee relationship, viz.: x x x However, the fact
that the appointment required Consulta to solicit business exclusively
for Pamana did not mean that Pamana exercised control over the means
and methods of Consulta’s work as the term control is understood in
labor jurisprudence. Neither did it make Consulta an employee of
Pamana. Pamana did not prohibit Consulta from engaging in any other
business, or from being connected with any other company, for as long
as the business [of the] company did not compete with Pamana’s
business. The same scenario obtains in this case. Alcantara was not
prohibited from engaging in any other business as long as he does not
sell projects of Royale Homes’ competitors. He can engage in selling
various other products or engage in unrelated businesses.
Same; Same; Independent Contractors; The element of payment of wages
is also absent in this case. As provided in the contract, Alcantara’s
remunerations consist only of commission override of 0.5%, budget
allocation, sales incentive and other forms of company support. There is no
proof that he received fixed monthly salary. No payslip or payroll was ever
presented and there is no proof that Royale Homes deducted from his
supposed salary withholding tax or that it registered him with the Social
Security System (SSS), Philippine Health Insurance Corporation, or Pag-
Ibig Fund. In fact, his Complaint merely states a ballpark figure of his
alleged salary of P100,000.00, more or less. All of these indicate an
independent contractual relationship.—The element of payment of wages
is also absent in this case. As provided in the contract, Alcantara’s
remunerations consist only of commission override of 0.5%, budget
allocation, sales incentive and other forms of company support. There is
no proof that he received fixed monthly salary. No payslip or payroll was
ever presented and there is no proof that Royale Homes deducted from
his supposed salary withholding tax or that it registered him with the
Social Security System, Philippine Health Insurance Corporation, or Pag-
Ibig Fund. In fact, his Complaint merely states a ballpark figure of his
alleged salary of P100,000.00, more or less. All of these indicate an
independent contractual relationship. Besides, if Alcantara indeed
considered himself an employee of Royale Homes, then he, an
experienced and professional broker, would have complained that he
was being denied statutorily mandated benefits. But for nine consecutive
years, he kept mum about it, signifying that he has agreed, consented,
and accepted the fact that he is not entitled to those employee benefits
because he is an independent contractor. This Court is, therefore,
convinced that Alcantara is not an employee of Royale Homes, but a
mere independent contractor. The NLRC is, therefore, correct in
concluding that the Labor Arbiter has no jurisdiction over the case and
that the same is cognizable by the regular courts.
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Ines & Villacarlos Law Offices for petitioner.
Samson S. Alcantara for respondent.
DEL CASTILLO, J.:
Not every form of control that a hiring party imposes on the hired party
is indicative of employee-employer relationship. Rules and regulations
that merely serve as guidelines towards the achievement of a mutually
desired result without dictating the means and methods of
accomplishing it do not establish employer-employee relationship    
This Petition for Review on Certiorari[2] assails the June 23, 2010
Decision[3] of the Court of Appeals (CA) in C.A.-G.R. S.P. No. 109998
which (i) reversed and set aside the February 23, 2009 Decision[4] of
the National Labor Relations Commission (NLRC), (ii) ordered petitioner
Royale Homes Marketing Corporation (Royale Homes) to pay
respondent Fidel P. Alcantara (Alcantara) backwages and separation
pay, and (iii) remanded the case to the Labor Arbiter for the proper
determination and computation of said monetary awards.
Also assailed in this Petition is the January 18, 2011 Resolution[5] of the
CA denying Royale Homes’ Motion for Reconsideration,[6] as well as its
Supplemental[7] thereto.
Factual Antecedents
In 1994, Royale Homes, a corporation engaged in marketing real estates,
appointed Alcantara as its Marketing Director for a fixed period of one
year. His work consisted mainly of marketing Royale Homes’ real estate
inventories on an exclusive basis. Royale Homes reappointed him for
several consecutive years, the last of which covered the period January 1
to December 31, 2003 where he held the position of Division 5 Vice
President-Sales.[8]
131
Proceedings before the Labor Arbiter
On December 17, 2003, Alcantara filed a Complaint for Illegal
Dismissal[9] against Royale Homes and its President Matilde Robles,
Executive Vice President for Administration and Finance Ma. Melinda
Bernardino, and Executive Vice President for Sales Carmina Sotto.
Alcantara alleged that he is a regular employee of Royale Homes since he
is performing tasks that are necessary and desirable to its business; that
in 2003 the company gave him P1.2 million for the services he rendered
to it; that in the first week of November 2003, however, the executive
officers of Royale Homes told him that they were wondering why he still
had the gall to come to office and sit at his table;[10] and that the acts of
the executive officers of Royale Homes amounted to his dismissal from
work without any valid or just cause and in gross disregard of the proper
procedure for dismissing employees. Thus, he also impleaded the
corporate officers who, he averred, effected his dismissal in bad faith and
in an oppressive manner.
Alcantara prayed to be reinstated to his former position without loss of
seniority rights and other privileges, as well as to be paid backwages,
moral and exemplary damages, and attorney’s fees. He further sought
that the ownership of the Mitsubishi Adventure with Plate No. WHD-945
be transferred to his name.
Royale Homes, on the other hand, vehemently denied that Alcantara is
its employee. It argued that the appointment paper of Alcantara is clear
that it engaged his services as an independent sales contractor for a fixed
term of one year only. He never received any salary, 13 th month pay,
overtime pay or holiday pay from Royale Homes as he was paid purely
on commission basis. In addition, Royale Homes had no control on how
Alcantara would accomplish his tasks and responsibilities as he was free
to solicit sales at any time and by any manner which he may deem
appropriate and necessary. He is even free to recruit his own sales
personnel to assist him in pursuance of his sales target.
According to Royale Homes, Alcantara decided to leave the company
after his wife, who was once connected with it as a sales agent, had
formed a brokerage company that directly competed with its business,
and even recruited some of its sales agents. Although this was against
the exclusivity clause of the contract, Royale Homes still offered to
accept Alcantara’s wife back so she could continue to engage in real
estate brokerage, albeit exclusively for Royale Homes. In a special
management committee meeting on October 8, 2003, however,
Alcantara announced publicly and openly that he would leave the
company by the end of October 2003 and that he would no longer finish
the unexpired term of his contract. He has decided to join his wife and
pursue their own brokerage business. Royale Homes accepted
Alcantara’s decision. It then threw a despedida party in his honor and,
subsequently, appointed a new independent contractor.
Two months after he relinquished his post, however, Alcantara appeared
in Royale Homes and submitted a letter claiming that he was illegally
dismissed.
Ruling of the Labor Arbiter
On September 7, 2005, the Labor Arbiter rendered a
Decision[11] holding that Alcantara is an employee of Royale Homes
with a fixed-term employment period from January 1 to December 31,
2003 and that the pretermination of his contract was against the law.
Hence, Alcantara is entitled to an amount which he may have earned on
the average for the unexpired portion of the contract. With regard to the
impleaded corporate officers, the Labor Arbiter absolved them from any
liability.
The dispositive portion of the Labor Arbiter’s Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered
ordering the respondent Royale Homes Marketing Corp. to pay the
complainant the total amount of TWO HUNDRED SEVENTY-SEVEN
THOUSAND PESOS (P277,000.00) representing his
compensation/commission for the unexpired term of his contract.
All other claims are dismissed for lack of merit.
SO ORDERED.[12]
    Both parties appealed the Labor Arbiter’s Decision to the NLRC. Royale
Homes claimed that the Labor Arbiter grievously erred in ruling that
there exists an employer-employee relationship between the parties. It
insisted that the contract between them expressly states that Alcantara
is an independent contractor and not an ordinary employee. It had no
control over the means and methods by which he performed his work.
Royale Homes likewise assailed the award of P277,000.00 for lack of
basis as it did not pre-terminate the contract. It was Alcantara who chose
not to finish the contract.
Alcantara, for his part, argued that the Labor Arbiter erred in ruling that
his employment was for a fixed-term and that he is not entitled to
backwages, reinstatement, unpaid commissions, and damages.
132
Ruling of the National Labor Relations Commission
On February 23, 2009, the NLRC rendered its Decision,[13] ruling that
Alcantara is not an employee but a mere independent contractor of
Royale Homes. It based its ruling mainly on the contract which does not
require Alcantara to observe regular working hours. He was also free to
adopt the selling methods he deemed most effective and can even recruit
sales agents to assist him in marketing the inventories of Royale Homes.
The NLRC also considered the fact that Alcantara was not receiving
monthly salary, but was being paid on commission basis as stipulated in
the contract. Being an independent contractor, the NLRC concluded that
Alcantara’s Complaint is cognizable by the regular courts.
The fallo of the NLRC Decision reads:
WHEREFORE, premises considered, the Decision of Labor Arbiter
Dolores Peralta-Beley dated September 5, 2005 is REVERSED and SET
ASIDE and a NEW ONE rendered dismissing the complaint for lack of
jurisdiction.
SO ORDERED.[14]
     Alcantara moved for reconsideration.[15] In a Resolution[16] dated
May 29, 2009, however, the NLRC denied his motion.
Alcantara thus filed a Petition for Certiorari[17] with the CA imputing
grave abuse of discretion on the part of the NLRC in ruling that he is not
an employee of Royale Homes and that it is the regular courts which
have jurisdiction over the issue of whether the pretermination of the
contract is valid.
Ruling of the Court of Appeals
On June 23, 2010, the CA promulgated its Decision[18]granting
Alcantara’s Petition and reversing the NLRC’s Decision. Applying the
four-fold and economic reality tests, it held that Alcantara is an
employee of Royale Homes. Royale Homes exercised some degree of
control over Alcantara since his job, as observed by the CA, is subject to
company rules, regulations, and periodic evaluations. He was also bound
by the company code of ethics. Moreover, the exclusivity clause of the
contract has made Alcantara economically dependent on Royale Homes,
supporting the theory that he is an employee of said company.
The CA further held that Alcantara’s termination from employment was
without any valid or just cause, and it was carried out in violation of his
right to procedural due process. Thus, the CA ruled that he is entitled to
backwages and separation pay, in lieu of reinstatement. Considering,
however, that the CA was not satisfied with the proof adduced to
establish the amount of Alcantara’s annual salary, it remanded the case
to the Labor Arbiter to determine the same and the monetary award he
is entitled to. With regard to the corporate officers, the CA absolved them
from any liability for want of clear proof that they assented to the
patently unlawful acts or that they are guilty of bad faith or gross
negligence. Thus:
WHEREFORE, in view of the foregoing, the instant PETITION is
GRANTED. The assailed decision of the National Labor Relations
Commission in NLRC NCR CASE NO. 00-12-14311-03 NLRC CA NO.
046104-05 dated February 23, 2009 as well as the Resolution dated May
29, 2009 are hereby SET ASIDE and a new one is entered ordering the
respondent company to pay petitioner backwages which shall be
computed from the time of his illegal termination in October 2003 up to
the finality of this decision, plus separation pay equivalent to one month
salary for every year of service. This case is REMANDED to the Labor
Arbiter for the proper determination and computation of backwages,
separation pay and other monetary benefits that petitioner is entitled to.
SO ORDERED.[19]
 Royale Homes filed a Motion for Reconsideration[20]and a
Supplemental Motion for Reconsideration.[21] In a Resolution[22] dated
January 18, 2011, however, the CA denied said motions.
Issues
Hence, this Petition where Royale Homes submits before this Court the
following issues for resolution: 
A.
WHETHER THE COURT OF APPEALS HAS DECIDED THE INSTANT CASE
NOT IN ACCORD WITH LAW AND APPLICABLE DECISIONS OF THE
SUPREME COURT WHEN IT REVERSED THE RULING OF THE NLRC
DISMISSING THE COMPLAINT OF RESPONDENT FOR LACK OF
JURISDICTION AND CONSEQUENTLY, IN FINDING THAT RESPONDENT
WAS ILLEGALLY DISMISSED[.]
B.
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF
LAW IN DISREGARDING THE EN BANCRULING OF THIS HONORABLE
COURT IN THE CASE OF TONGKO VS. MANULIFE, AND IN BRUSHING
ASIDE THE APPLICABLE RULINGS OF SONZA VS. ABS-
CBN AND CONSULTA VS. CA[.]
C.
133
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF
LAW IN DENYING THE MOTION FOR RECONSIDERATION OF
PETITIONER AND IN REFUSING TO CORRECT ITSELF[.][23]
    Royale Homes contends that its contract with Alcantara is clear and
unambiguous — it engaged his services as an independent contractor.
This can be readily seen from the contract stating that no employer-
employee relationship exists between the parties; that Alcantara was
free to solicit sales at any time and by any manner he may deem
appropriate; that he may recruit sales personnel to assist him in
marketing Royale Homes’ inventories; and, that his remunerations are
dependent on his sales performance.
Royale Homes likewise argues that the CA grievously erred in ruling that
it exercised control over Alcantara based on a shallow ground that his
performance is subject to company rules and regulations, code of ethics,
periodic evaluation, and exclusivity clause of contract. Royale Homes
maintains that it is expected to exercise some degree of control over its
independent contractors, but that does not automatically result in the
existence of employer-employee relationship. For control to be
considered as a proof tending to establish employer-employee
relationship, the same must pertain to the means and method of
performing the work; not on the relationship of the independent
contractors among themselves or their persons or their source of living.
Royale Homes further asserts that it neither hired nor wielded the
power to dismiss Alcantara. It was Alcantara who openly and publicly
declared that he was pre-terminating his fixed-term contract.
The pivotal issue to be resolved in this case is whether Alcantara was an
independent contractor or an employee of Royale Homes.
Our Ruling
The Petition is impressed with merit.
The determination of whether a party who renders services to another is
an employee or an independent contractor involves an evaluation of
factual matters which, ordinarily, is not within the province of this Court.
In view of the conflicting findings of the tribunals below, however, this
Court is constrained to go over the factual matters involved in this case.
[24]
The juridical relationship of the parties
based on their written contract
The primary evidence of the nature of the parties’ relationship in this
case is the written contract that they signed and executed in pursuance
of their mutual agreement. While the existence of employer-employee
relationship is a matter of law, the characterization made by the parties
in their contract as to the nature of their juridical relationship cannot be
simply ignored, particularly in this case where the parties’ written
contract unequivocally states their intention at the time they entered
into it. In Tongko v. The Manufacturers Life Insurance Co. (Phils.), Inc.,
[25] it was held that:
To be sure, the Agreement’s legal characterization of the nature of the
relationship cannot be conclusive and binding on the courts; x x x the
characterization of the juridical relationship the Agreement embodied is
a matter of law that is for the courts to determine. At the same time,
though, the characterization the parties gave to their relationship in the
Agreement cannot simply be brushed aside because it embodies their
intent at the time they entered the Agreement, and they were governed
by this understanding throughout their relationship. At the very least,
the provision on the absence of employer-employee relationship
between the parties can be an aid in considering the Agreement and its
implementation, and in appreciating the other evidence on record.[26]
    In this case, the contract,[27] duly signed and not disputed by the
parties, conspicuously provides that “no employer-employee
relationship exists between” Royale Homes and Alcantara, as well as his
sales agents. It is clear that they did not want to be bound by employer-
employee relationship at the time of the signing of the contract. Thus:
January 24, 2003
MR. FIDEL P. ALCANTARA
13 Rancho I
Marikina City
Dear Mr. Alcantara,
This will confirm your appointment as Division 5 VICE[-]PRESIDENT-
SALES of ROYALE HOMES MARKETING CORPORATION effective January
1, 2003 to December 31, 2003.
Your appointment entails marketing our real estate inventories on an
EXCLUSIVE BASIS under such price, terms and condition to be provided
to you from time to time.
As such, you can solicit sales at any time and by any manner which you
deem appropriate and necessary to market our real estate inventories
subject to rules, regulations and code of ethics promulgated by the
134
company. Further, you are free to recruit sales personnel/agents to
assist you in marketing of our inventories provided that your
personnel/agents shall first attend the required seminars and briefing to
be conducted by us from time to time for the purpose of familiarizing
them of terms and conditions of sale, the nature of property sold, etc.,
attendance of which shall be a condition precedent for their
accreditation by us.
That as such Division 5 VICE[-]PRESIDENT-SALES you shall be entitled
to:
1. Commission override of 0.5% for all option sales beginning January
1, 2003 booked by your sales agents.
2. Budget allocation depending on your division’s sale performance as
per our budget guidelines.
3. Sales incentive and other forms of company support which may be
granted from time to time.
It is understood, however, that no employer-employee relationship
exists between us, that of your sales personnel/agents, and that you
shall hold our company x x x, its officers and directors, free and harmless
from any and all claims of liability and damages arising from and/or
incident to the marketing of our real estate inventories.
We reserve, however, our right to terminate this agreement in case of
violation of any company rules and regulations, policies and code of
ethics upon notice for justifiable reason.
Your performance shall be subject to periodic evaluation based on
factors which shall be determined by the management.
If you are amenable to the foregoing terms and conditions, please
indicate your conformity by signing on the space provided below and
return [to] us a duplicate copy of this letter, duly accomplished, to
constitute as our agreement on the matter. (Emphasis ours)
     Since “the terms of the contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulations
should control.”[28] No construction is even needed as they already
expressly state their intention. Also, this Court adopts the observation of
the NLRC that it is rather strange on the part of Alcantara, an educated
man and a veteran sales broker who claimed to be receiving P1.2 million
as his annual salary, not to have contested the portion of the contract
expressly indicating that he is not an employee of Royale Homes if their
true intention were otherwise.
The juridical relationship of the parties based on Control Test
In determining the existence of an employer-employee relationship, this
Court has generally relied on the four-fold test, to wit: (1) the selection
and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the employer’s power to control the
employee with respect to the means and methods by which the work is
to be accomplished.[29] Among the four, the most determinative factor
in ascertaining the existence of employer-employee relationship is the
“right of control test.”[30] “It is deemed to be such an important factor
that the other requisites may even be disregarded.”[31] This holds true
where the issues to be resolved is whether a person who performs work
for another is the latter’s employee or is an independent contractor,
[32] as in this case. For where the person for whom the services are
performed reserves the right to control not only the end to be achieved,
but also the means by which such end is reached, employer-employee
relationship is deemed to exist.[33]
In concluding that Alcantara is an employee of Royale Homes, the CA
ratiocinated that since the performance of his tasks is subject to
company rules, regulations, code of ethics, and periodic evaluation, the
element of control is present.
The Court disagrees.
Not every form of control is indicative of employer-employee
relationship. A person who performs work for another and is subjected
to its rules, regulations, and code of ethics does not necessarily become
an employee.[34] As long as the level of control does not interfere with
the means and methods of accomplishing the assigned tasks, the rules
imposed by the hiring party on the hired party do not amount to the
labor law concept of control that is indicative of employer-employee
relationship. In Insular Life Assurance Co., Ltd. v. National Labor
Relations Commission[35] it was pronounced 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.
x x x[36]
     In this case, the Court agrees with Royale Homes that the rules,
regulations, code of ethics, and periodic evaluation alluded to by
Alcantara do not involve control over the means and methods by which
135
he was to perform his job. Understandably, Royale Homes has to fix the
price, impose requirements on prospective buyers, and lay down the
terms and conditions of the sale, including the mode of payment, which
the independent contractors must follow. It is also necessary for Royale
Homes to allocate its inventories among its independent contractors,
determine who has priority in selling the same, grant commission or
allowance based on predetermined criteria, and regularly monitor the
result of their marketing and sales efforts. But to the mind of this Court,
these do not pertain to the means and methods of how Alcantara was to
perform and accomplish his task of soliciting sales. They do not dictate
upon him the details of how he would solicit sales or the manner as to
how he would transact business with prospective clients. In Tongko, this
Court held that guidelines or rules and regulations that do not pertain to
the means or methods to be employed in attaining the result are not
indicative of control as understood in labor law. Thus:
From jurisprudence, an important lesson that the first Insular Life case
teaches us is that a commitment to abide by the rules and regulations of
an insurance company does not ipso facto make the insurance agent an
employee. Neither do guidelines somehow restrictive of the insurance
agent’s conduct necessarily indicate “control” as this term is defined in
jurisprudence. Guidelines indicative of labor law “control,” as
the first Insular Lifecase tells us, should not merely relate to the
mutually desirable result intended by the contractual relationship;
they must have the nature of dictating the means or methods to be
employed in attaining the result, or of fixing the methodology and
of binding or restricting the party hired to the use of these
means. In fact, results-wise, the principal can impose production quotas
and can determine how many agents, with specific territories, ought to
be employed to achieve the company’s objectives. These are
management policy decisions that the labor law element of control
cannot reach. Our ruling in these respects in the first Insular Life case
was practically reiterated in Carungcong. Thus, as will be shown more
fully below, Manulife’s codes of conduct, all of which do not intrude into
the insurance agents’ means and manner of conducting their sales and
only control them as to the desired results and Insurance Code norms,
cannot be used as basis for a finding that the labor law concept of control
existed between Manulife and Tongko.[37] (Emphases in the original)
As the party claiming the existence of employer-employee relationship,
it behoved upon Alcantara to prove the elements thereof, particularly
Royale Homes’ power of control over the means and methods of
accomplishing the work.[38] He, however, failed to cite specific rules,
regulations or codes of ethics that supposedly imposed control on his
means and methods of soliciting sales and dealing with prospective
clients. On the other hand, this case is replete with instances that negate
the element of control and the existence of employer-employee
relationship. Notably, Alcantara was not required to observe definite
working hours.[39] Except for soliciting sales, Royale Homes did not
assign other tasks to him. He had full control over the means and
methods of accomplishing his tasks as he can “solicit sales at any time
and by any manner which [he may] deem appropriate and necessary.”
He performed his tasks on his own account free from the control and
direction of Royale Homes in all matters connected therewith, except as
to the results thereof.[40]
Neither does the repeated hiring of Alcantara prove the existence of
employer-employee relationship.[41] As discussed above, the absence of
control over the means and methods disproves employer-employee
relationship. The continuous rehiring of Alcantara simply signifies the
renewal of his contract with Royale Homes, and highlights his
satisfactory services warranting the renewal of such contract. Nor does
the exclusivity clause of contract establish the existence of the labor law
concept of control. In Consulta v. Court of Appeals,[42] it was held that
exclusivity of contract does not necessarily result in employer-employee
relationship, viz.:
x x x However, the fact that the appointment required Consulta to solicit
business exclusively for Pamana did not mean that Pamana exercised
control over the means and methods of Consulta’s work as the term
control is understood in labor jurisprudence. Neither did it make
Consulta an employee of Pamana. Pamana did not prohibit Consulta
from engaging in any other business, or from being connected with any
other company, for as long as the business [of the] company did not
compete with Pamana’s business.[43]
     The same scenario obtains in this case. Alcantara was not prohibited
from engaging in any other business as long as he does not sell projects
of Royale Homes’ competitors. He can engage in selling various other
products or engage in unrelated businesses.
Payment of Wages
The element of payment of wages is also absent in this case. As provided
in the contract, Alcantara’s remunerations consist only of commission
override of 0.5%, budget allocation, sales incentive and other forms of
136
company support. There is no proof that he received fixed monthly  
salary. No payslip or payroll was ever presented and there is no proof
that Royale Homes deducted from his supposed salary withholding tax  
or that it registered him with the Social Security System, Philippine Brotherhood Labor Unity Movement of the Philippines, et al. vs.
Health Insurance Corporation, or Pag-Ibig Fund. In fact, his Complaint Zamora, et al., supra.
merely states a ballpark figure of his alleged salary of P100,000.00, more
or less. All of these indicate an independent contractual relationship. *see page ________
[44] Besides, if Alcantara indeed considered himself an employee of
Royale Homes, then he, an experienced and professional broker, would
have complained that he was being denied statutorily mandated
benefits. But for nine consecutive years, he kept mum about it, signifying
that he has agreed, consented, and accepted the fact that he is not
entitled to those employee benefits because he is an independent
contractor.
This Court is, therefore, convinced that Alcantara is not an employee of
Royale Homes, but a mere independent contractor. The NLRC is,
therefore, correct in concluding that the Labor Arbiter has no
jurisdiction over the case and that the same is cognizable by the regular
courts.
WHEREFORE, the instant Petition is hereby GRANTED. The June 23,
2010 Decision of the Court of Appeals in C.A.-G.R. S.P. No. 109998
is REVERSED andSET ASIDE. The February 23, 2009 Decision of the
National Labor Relations Commission is REINSTATED and AFFIRMED.

SO ORDERED.
Carpio (Chairperson), Brion, Perez and Perlas-Bernabe, JJ., concur.
Petition granted, judgment reversed and set aside.
Notes.—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. (South Davao Development Company, Inc. vs. Gamo,
587 SCRA 524 [2009])
The established criteria for the determination of an employer-employee
relationship, are: (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. (McBurnie vs. Ganzon, 707 SCRA 646
[2013])
——o0o——

137
 G.R. No. 155207. August 13, 2008.*
Tan v. Lagrama, et al.; GR No. 151228, August 15, 2002 WILHELMINA S. OROZCO, petitioner, vs. THE FIFTH DIVISION OF
THE HONORABLE COURT OF APPEALS, PHILIPPINE DAILY
*see page __________ INQUIRER, and LETICIA JIMENEZ MAGSANOC, respondents.

Labor Law; Employer-Employee Relationship; The existence of an

employer-employee relationship is essentially a question of fact; The
employment status of a person is defined and prescribed by law and not by
what the parties say it should be.—The existence of an employer-
employee relationship is essentially a question of fact. Factual findings of
quasi-judicial agencies like the NLRC are generally accorded respect and
finality if supported by substantial evidence. Considering, however, that
the CA’s findings are in direct conflict with those of the Labor Arbiter
and NLRC, this Court must now make its own examination and
evaluation of the facts of this case. It is true that petitioner herself
admitted that she “was not, and [had] never been considered
respondent’s employee because the terms of works were arbitrarily
decided upon by the respondent.” However, the employment status of a
person is defined and prescribed by law and not by what the parties say
it should be.

Same; Same; Control Test; Four-Fold Test; The test is whether the
employer controls or has reserved the right to control the employee, not
only as to the work done, but also as to the means and methods by which
the same is accomplished.—This Court has constantly adhered to the
“four-fold test” to determine whether there exists an employer-
employee relationship between parties. The four elements of an
employment relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d)
the employer’s power to control the employee’s conduct. Of these four
elements, it is the power of control which is the most crucial and most
determinative factor, so important, in fact, that the other elements may
even be disregarded. As this Court has previously held: the significant
factor in determining the relationship of the parties is the presence or
absence of supervisory authority to control the method and the details of
performance of the service being rendered, and the degree to which the
principal may intervene to exercise such control. In other words, the test
is whether the employer controls or has reserved the right to control the
employee, not only as to the work done, but also as to the means and
methods by which the same is accomplished.

138

Same; Same; Same; Not all rules imposed by the hiring party on the
hired party indicate that the latter is an employee of the former—rules
which serve as general guidelines towards the achievement of the
mutually desired result are not indicative of the power of control.—
Petitioner has misconstrued the “control test,” as did the Labor Arbiter
and the NLRC. Not all rules imposed by the hiring party on the hired
party indicate that the latter is an employee of the former. Rules which
serve as general guidelinestowards the achievement of the mutually
desired result are not indicative of the power of control. Thus, this Court
has explained: It should, however, be obvious that not every form of
control that the hiring party reserves to himself over the conduct of the
party hired in relation to the services rendered may be accorded the
effect of establishing an employer-employee relationship between them
in the legal or technical sense of the term. A line must be drawn
somewhere, if the recognized distinction between an employee and an
individual contractor is not to vanish altogether. Realistically, it would
be a rare contract of service that gives untrammelled freedom to the
party hired and eschews any intervention whatsoever in his
performance of the engagement. 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. x x x.
Same; Same; Same; Newspapers; Columnists; Reporters; The
newspaper’s power to approve or reject publication of any specific article
a columnist writes for her column cannot be the control contemplated in
the “control test,” as it is but logical that one who commissions another to
do a piece of work should have the right to accept or reject the product; A
regular reporter is not as independent in doing his or her work for the
newspaper.—The newspaper’s power to approve or reject publication of
any specific article she wrote for her column cannot be the control
contemplated in the “control test,” as it is but logical that one who
commissions another to do a piece of work should have the right to
accept or reject the product. The important factor to consider in the
“control test” is still the element of control over how the work itself is
done, not just the end result thereof. In contrast, a regular reporter is not
as independent in doing his or her work for the newspaper. We note the
common practice in the newspaper business of assigning its regular
reporters to cover specific subjects, geographical locations, government
agencies, or areas of concern, more commonly referred to as “beats.” A
reporter must produce stories within his or her particular beat and
cannot switch to another beat without permission from the editor. In
most newspapers also, a reporter must inform the editor about the story
that he or she is working on for the day. The story or article must also be
submitted to the editor at a specified time. Moreover, the editor can
easily pull out a reporter from one beat and ask him or her to cover
another beat, if the need arises.
Same; Same; Same; Same; Where a person who works for another
performs his job more or less at his own pleasure, in the manner he sees fit,
not subject to definite hours or conditions of work, and is compensated
according to the result of his efforts and not the amount thereof, no
employer-employee relationship exists.—Although petitioner had a
weekly deadline to meet, she was not precluded from submitting her
column ahead of time or from submitting columns to be published at a
later time. More importantly, respondents did not dictate upon
petitioner the subject matter of her columns, but only imposed the
general guideline that the article should conform to the standards of the
newspaper and the general tone of the particular section. Where a
person who works for another performs his job more or less at his own
pleasure, in the manner he sees fit, not subject to definite hours or
conditions of work, and is compensated according to the result of his
efforts and not the amount thereof, no employer-employee relationship
exists.
Same; Same; Same; Same; Economic Reality Test; In our jurisdiction,
the benchmark of economic reality in analyzing possible employment
relationships for purposes of applying the Labor Code ought to be the
economic dependence of the worker on his employer.—Aside from the
control test, this Court has also used the economic reality test. The
economic realities prevailing within the activity or between the parties
are examined, taking into consideration the totality of circumstances
surrounding the true nature of the relationship between the parties. This
is especially appropriate when, as in this case, there is no written
agreement or contract on which to base the relationship. In our
jurisdiction, the benchmark of economic reality in analyzing possible
139
employment relationships for purposes of applying the Labor Code
ought to be the economic dependence of the worker on his employer.
Same; Same; Same; Same; Same; The inevitable conclusion is that
petitioner columnist was not an employee of respondent newspaper but an
independent contractor, engaged to do independent work.—Petitioner’s
main occupation is not as a columnist for respondent but as a women’s
rights advocate working in various women’s organizations. Likewise, she
herself admits that she also contributes articles to other publications.
Thus, it cannot be said that petitioner was dependent on respondent PDI
for her continued employment in respondent’s line of business. The
inevitable conclusion is that petitioner was not respondent PDI’s
employee but an independent contractor, engaged to do independent
work.
Same; Same; Same; Same; It is a reality in the newspaper business
that space constraints often dictate the length of articles and columns,
even those that regularly appear therein.—The instant case presents a
parallel to Sonza. Petitioner was engaged as a columnist for her talent,
skill, experience, and her unique viewpoint as a feminist advocate. How
she utilized all these in writing her column was not subject to dictation
by respondent. As in Sonza, respondent PDI was not involved in the
actual performance that produced the finished product. It only reserved
the right to shorten petitioner’s articles based on the newspaper’s
capacity to accommodate the same. This fact, we note, was not unique to
petitioner’s column. It is a reality in the newspaper business that space
constraints often dictate the length of articles and columns, even those
that regularly appear therein.
PETITION for review on certiorari of the decision and resolution of the
Court of Appeals.
The facts are stated in the opinion of the Court.
   Movement of Attorneys for Brotherhood, Integrity & Nationalism,
Inc. (MABINI) for petitioner.
   Ortega, Del Castillo, Bacorro, Odulio, Calma & Carbonell for private
respondent.
NACHURA, J.:
The case before this Court raises a novel question never before
decided in our jurisdiction—whether a newspaper columnist is an
employee of the newspaper which publishes the column.
In this Petition for Review under Rule 45 of the Revised Rules on Civil
Procedure, petitioner Wilhelmina S. Orozco assails the Decision 1 of the
Court of Appeals (CA) in CA-G.R. SP No. 50970 dated June 11, 2002 and
its Resolution2dated September 11, 2002 denying her Motion for
Reconsideration. The CA reversed and set aside the Decision 3 of the
National Labor Relations Commission (NLRC), which in turn had
affirmed the Decision4 of the Labor Arbiter finding that Orozco was an
employee of private respondent Philippine Daily Inquirer (PDI) and was
illegally dismissed as columnist of said newspaper.
In March 1990, PDI engaged the services of petitioner to write a
weekly column for its Lifestyle section. She religiously submitted her
articles every week, except for a six-month stint in New York City when
she, nonetheless, sent several articles through mail. She received
compensation of P250.00—later increased to P300.00—for every
column published.5
On November 7, 1992, petitioner’s column appeared in the PDI for
the last time. Petitioner claims that her then editor, Ms. Lita T. Logarta,6
told her that respondent Leticia Jimenez Magsanoc, PDI Editor in Chief,
wanted to stop publishing her column for no reason at all and advised
petitioner to talk to Magsanoc herself. Petitioner narrates that when she
talked to Magsanoc, the latter informed her that it was PDI Chairperson
Eugenia Apostol who had asked to stop publication of her column, but
that in a telephone conversation with Apostol, the latter said that
Magsanoc informed her (Apostol) that the Lifestyle section already had
many columnists.7
On the other hand, PDI claims that in June 1991, Magsanoc met with
the Lifestyle section editor to discuss how to improve said section. They
agreed to cut down the number of columnists by keeping only those
whose columns were well-written, with regular feedback and following.
In their judgment, petitioner’s column failed to improve, continued to be
superficially and poorly written, and failed to meet the high standards of
the newspaper. Hence, they decided to terminate petitioner’s column. 8
Aggrieved by the newspaper’s action, petitioner filed a complaint for
illegal dismissal, backwages, moral and exemplary damages, and other
money claims before the NLRC.
On October 29, 1993, Labor Arbiter Arthur Amansec rendered a
Decision in favor of petitioner, the dispositive portion of which reads:
“WHEREFORE, judgment is hereby rendered, finding complainant to
be an employee of respondent company; ordering respondent company
to reinstate her to her former or equivalent position, with backwages.
Respondent company is also ordered to pay her 13th month pay and
service incentive leave pay.
Other claims are hereby dismissed for lack of merit.
140
 SO ORDERED.”9
The Labor Arbiter found that:
“[R]espondent company exercised full and complete control over the
means and method by which complainant’s work—that of a regular
columnist—had to be accomplished. This control might not be found in
an instruction, verbal or oral, given to complainant defining the means
and method she should write her column. Rather, this control is
manifested and certained (sic) in respondents’ admitted prerogative to
reject any article submitted by complainant for publication.”
By virtue of this power, complainant was helplessly constrained to
adopt her subjects and style of writing to suit the editorial taste of her
editor. Otherwise, off to the trash can went her articles.
Moreover, this control is already manifested in column title,
“Feminist Reflection” allotted complainant. Under this title,
complainant’s writing was controlled and limited to a woman’s
perspective on matters of feminine interests. That respondent had no
control over the subject matter written by complainant is strongly belied
by this observation. Even the length of complainant’s articles were set by
respondents.
Inevitably, respondents would have no control over when or where
complainant wrote her articles as she was a columnist who could
produce an article in thirty (3) (sic) months or three (3) days, depending
on her mood or the amount of research required for an article but her
actions were controlled by her obligation to produce an article a week. If
complainant did not have to report for work eight (8) hours a day, six (6)
days a week, it is because her task was mainly mental. Lastly, the fact
that her articles were (sic) published weekly for three (3) years show
that she was respondents’ regular employee, not a once-in-a-blue-moon
contributor who was not under any pressure or obligation to produce
regular articles and who wrote at his own whim and leisure.” 10
PDI appealed the Decision to the NLRC. In a Decision dated August
23, 1994, the NLRC Second Division dismissed the appeal thereby
affirming the Labor Arbiter’s Decision. The NLRC initially noted that PDI
failed to perfect its appeal, under Article 223 of the Labor Code, due to
non-filing of a cash or surety bond. The NLRC said that the reason
proffered by PDI for not filing the bond—that it was difficult or
impossible to determine the amount of the bond since the Labor Arbiter
did not specify the amount of the judgment award—was not persuasive.
It said that all PDI had to do was compute based on the amount it was
paying petitioner, counting the number of weeks from November 7,
1992 up to promulgation of the Labor Arbiter’s decision. 11
The NLRC also resolved the appeal on its merits. It found no error in
the Labor Arbiter’s findings of fact and law. It sustained the Labor
Arbiter’s reasoning that respondent PDI exercised control over
petitioner’s work.
PDI then filed a Petition for Review 12 before this Court seeking the
reversal of the NLRC Decision. However, in a Resolution 13 dated
December 2, 1998, this Court referred the case to the Court of Appeals,
pursuant to our ruling in St. Martin Funeral Home v. National Labor
Relations Commission.14
The CA rendered its assailed Decision on June 11, 2002. It set aside
the NLRC Decision and dismissed petitioner’s Complaint. It held that the
NLRC misappreciated the facts and rendered a ruling wanting in
substantial evidence. The CA said:
“The Court does not agree with public respondent NLRC’s
conclusion. First, private respondent admitted that she was and [had]
never been considered by petitioner PDI as its employee. Second, it is not
disputed that private respondent had no employment contract with
petitioner PDI. In fact, her engagement to contribute articles for
publication was based on a verbal agreement between her and the
petitioner’s Lifestyle Section Editor. Moreover, it was evident that
private respondent was not required to report to the office eight (8)
hours a day. Further, it is not disputed that she stayed in New York for
six (6) months without petitioner’s permission as to her leave of absence
nor was she given any disciplinary action for the same. These
undisputed facts negate private respondent’s claim that she is an
employee of petitioner.
Moreover, with regards (sic) to the control test, the public
respondent NLRC’s ruling that the guidelines given by petitioner PDI for
private respondent to follow, e.g. in terms of space allocation and length
of article, is not the form of control envisioned by the guidelines set by
the Supreme Court. The length of the article is obviously limited so that
all the articles to be featured in the paper can be accommodated. As to
the topic of the article to be published, it is but logical that private
respondent should not write morbid topics such as death because she is
contributing to the lifestyle section. Other than said given limitations, if
the same could be considered limitations, the topics of the articles
submitted by private respondent were all her choices. Thus, the
petitioner PDI in deciding to publish private respondent’s articles only
141
controls the result of the work and not the means by which said articles
were written.
As such, the above facts failed to measure up to the control test
necessary for an employer-employee relationship to exist.”15
Petitioner’s Motion for Reconsideration was denied in a Resolution
dated September 11, 2002. She then filed the present Petition for
Review.
In a Resolution dated April 29, 2005, the Court, without giving due
course to the petition, ordered the Labor Arbiter to clarify the amount of
the award due petitioner and, thereafter, ordered PDI to post the
requisite bond. Upon compliance therewith, the petition would be given
due course. Labor Arbiter Amansec clarified that the award under the
Decision amounted to P15,350.00. Thus, PDI posted the requisite bond
on January 25, 2007.16
We shall initially dispose of the procedural issue raised in the
Petition.
Petitioner argues that the CA erred in not dismissing outright PDI’s
Petition for Certiorari for PDI’s failure to post a cash or surety bond in
violation of Article 223 of the Labor Code.
This issue was settled by this Court in its Resolution dated April 29,
2005.17 There, the Court held:
“But while the posting of a cash or surety bond is jurisdictional and is
a condition sine qua non to the perfection of an appeal, there is a
plethora of jurisprudence recognizing exceptional instances wherein the
Court relaxed the bond requirement as a condition for posting the
appeal.
xxxx
In the case of Taberrah v. NLRC, the Court made note of the fact that
the assailed decision of the Labor Arbiter concerned did not contain a
computation of the monetary award due the employees, a circumstance
which is likewise present in this case. In said case, the Court stated,
As a rule, compliance with the requirements for the perfection
of an appeal within the reglamentary (sic) period is mandatory
and jurisdictional. However, in National Federation of Labor
Unions v. Ladrido as well as in several other cases, this Court
relaxed the requirement of the posting of an appeal bond within
the reglementary period as a condition for perfecting the appeal.
This is in line with the principle that substantial justice is better
served by allowing the appeal to be resolved on the merits rather
than dismissing it based on a technicality.
The judgment of the Labor Arbiter in this case merely stated that
petitioner was entitled to backwages, 13th month pay and service
incentive leave pay without however including a computation of the
alleged amounts.
xxxx
In the case of NFLU v. Ladrido III, this Court postulated that “private
respondents cannot be expected to post such appeal bond equivalent to
the amount of the monetary award when the amount thereof was not
included in the decision of the labor arbiter.” The computation of the
amount awarded to petitioner not having been clearly stated in the
decision of the labor arbiter, private respondents had no basis for
determining the amount of the bond to be posted.
Thus, while the requirements for perfecting an appeal must be
strictly followed as they are considered indispensable interdictions
against needless delays and for orderly discharge of judicial business,
the law does admit of exceptions when warranted by the circumstances.
Technicality should not be allowed to stand in the way of equitably and
completely resolving the rights and obligations of the parties. But while
this Court may relax the observance of reglementary periods and
technical rules to achieve substantial justice, it is not prepared to give
due course to this petition and make a pronouncement on the weighty
issue obtaining in this case until the law has been duly complied with
and the requisite appeal bond duly paid by private respondents.” 18
Records show that PDI has complied with the Court’s directive for the
posting of the bond;19 thus, that issue has been laid to rest.
We now proceed to rule on the merits of this case.
The main issue we must resolve is whether petitioner is an employee
of PDI, and if the answer be in the affirmative, whether she was illegally
dismissed.
We rule for the respondents.
The existence of an employer-employee relationship is essentially a
question of fact.20 Factual findings of quasi-judicial agencies like the
NLRC are generally accorded respect and finality if supported by
substantial evidence.21
 Considering, however, that the CA’s findings are in direct conflict
with those of the Labor Arbiter and NLRC, this Court must now make its
own examination and evaluation of the facts of this case.
It is true that petitioner herself admitted that she “was not, and [had]
never been considered respondent’s employee because the terms of
works were arbitrarily decided upon by the respondent.” 22 However, the
142
employment status of a person is defined and prescribed by law and not
by what the parties say it should be.23
This Court has constantly adhered to the “four-fold test” to determine
whether there exists an employer-employee relationship between
parties.24 The four elements of an employment relationship are: (a) the
selection and engagement of the employee; (b) the payment of wages;
(c) the power of dismissal; and (d) the employer’s power to control the
employee’s conduct.25
Of these four elements, it is the power of control which is the most
crucial26 and most determinative factor, 27 so important, in fact, that the
other elements may even be disregarded. 28 As this Court has previously
held:
“the significant factor in determining the relationship of the parties is the
presence or absence of supervisory authority to control the method and
the details of performance of the service being rendered, and the degree
to which the principal may intervene to exercise such control.” 29
In other words, the test is whether the employer controls or has
reserved the right to control the employee, not only as to the work done,
but also as to the means and methods by which the same is
accomplished.30
Petitioner argues that several factors exist to prove that respondents
exercised control over her and her work, namely:
a. As to the Contents of her Column—The PETITIONER had to
insure that the contents of her column hewed closely to the objectives of
its Lifestyle Section and the over-all principles that the newspaper
projects itself to stand for. As admitted, she wanted to write about death
in relation to All Souls Day but was advised not to.
b. As to Time Control—The PETITIONER, as a columnist, had to
observe the deadlines of the newspaper for her articles to be published.
These deadlines were usually that time period when the Section Editor
has to “close the pages” of the Lifestyle Section where the column in
located. “To close the pages” means to prepare them for printing and
publication.
As a columnist, the PETITIONER’s writings had a definite day on
which it was going to appear. So she submitted her articles two days
before the designated day on which the column would come out.
This is the usual routine of newspaper work. Deadlines are set to
fulfill the newspapers’ obligations to the readers with regard to
timeliness and freshness of ideas.
c. As to Control of Space—The PETITIONER was told to submit only
two or three pages of article for the column, (sic) “Feminist Reflections”
per week. To go beyond that, the Lifestyle editor would already chop off
the article and publish the rest for the next week. This shows that
PRIVATE RESPONDENTS had control over the space that the
PETITIONER was assigned to fill.
d.  As to Discipline—Over time, the newspaper readers’ eyes are
trained or habituated to look for and read the works of their favorite
regular writers and columnists. They are conditioned, based on their
daily purchase of the newspaper, to look for specific spaces in the
newspapers for their favorite write-ups/or opinions on matters relevant
and significant issues aside from not being late or amiss in the
responsibility of timely submission of their articles.
The PETITIONER was disciplined to submit her articles on highly
relevant and significant issues on time by the PRIVATE RESPONDENTS
who have a say on whether the topics belong to those considered as
highly relevant and significant, through the Lifestyle Section Editor. The
PETITIONER had to discuss the topics first and submit the articles two
days before publication date to keep her column in the newspaper space
regularly as expected or without miss by its readers.” 31
Given this discussion by petitioner, we then ask the question: Is this
the form of control that our labor laws contemplate such as to establish an
employer-employee relationship between petitioner and respondent PDI?
It is not.
Petitioner has misconstrued the “control test,” as did the Labor
Arbiter and the NLRC.
Not all rules imposed by the hiring party on the hired party indicate
that the latter is an employee of the former. Rules which serve as general
guidelines towards the achievement of the mutually desired result are
not indicative of the power of control. 32 Thus, this Court has explained:
“It should, however, be obvious that not every form of control that the
hiring party reserves to himself over the conduct of the party hired in
relation to the services rendered may be accorded the effect of
establishing an employer-employee relationship between them in the
legal or technical sense of the term. A line must be drawn somewhere, if
the recognized distinction between an employee and an individual
contractor is not to vanish altogether. Realistically, it would be a rare
contract of service that gives untrammelled freedom to the party hired
and eschews any intervention whatsoever in his performance of the
engagement.
143
 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. x
x x.”33
The main determinant therefore is whether the rules set by the
employer are meant to control not just the results of the work but also
the means and method to be used by the hired party in order to achieve
such results. Thus, in this case, we are to examine the factors
enumerated by petitioner to see if these are merely guidelines or if they
indeed fulfill the requirements of the control test.
Petitioner believes that respondents’ acts are meant to control how
she executes her work. We do not agree. A careful examination reveals
that the factors enumerated by the petitioner are inherent conditions in
running a newspaper. In other words, the so-called control as to time,
space, and discipline are dictated by the very nature of the newspaper
business itself.
We agree with the observations of the Office of the Solicitor General
that:
“The Inquirer is the publisher of a newspaper of general circulation
which is widely read throughout the country. As such, public interest
dictates that every article appearing in the newspaper should subscribe
to the standards set by the Inquirer, with its thousands of readers in
mind. It is not, therefore, unusual for the Inquirer to control what would
be published in the newspaper. What is important is the fact that such
control pertains only to the end result, i.e., the submitted articles. The
Inquirer has no control over [petitioner] as to the means or method used
by her in the preparation of her articles. The articles are done by
[petitioner] herself without any intervention from the Inquirer.”34
Petitioner has not shown that PDI, acting through its editors, dictated
how she was to write or produce her articles each week. Aside from the
constraints presented by the space allocation of her column, there were
no restraints on her creativity; petitioner was free to write her column in
the manner and style she was accustomed to and to use whatever
research method she deemed suitable for her purpose. The apparent
limitation that she had to write only on subjects that befitted the
Lifestyle section did not translate to control, but was simply a logical
consequence of the fact that her column appeared in that section and
therefore had to cater to the preference of the readers of that section.
The perceived constraint on petitioner’s column was dictated by her
own choice of her column’s perspective. The column title “Feminist
Reflections” was of her own choosing, as she herself admitted, since she
had been known as a feminist writer. 35 Thus, respondent PDI, as well as
her readers, could reasonably expect her columns to speak from such
perspective.
Contrary to petitioner’s protestations, it does not appear that there
was any actual restraint or limitation on the subject matter—within the
Lifestyle section—that she could write about. Respondent PDI did not
dictate how she wrote or what she wrote in her column. Neither did
PDI’s guidelines dictate the kind of research, time, and effort she put into
each column. In fact, petitioner herself said that she received “no
comments on her articles…except for her to shorten them to fit into the
box allotted to her column.” Therefore, the control that PDI exercised
over petitioner was only as to the finished product of her efforts,  i.e., the
column itself, by way of either shortening or outright rejection of the
column.
The newspaper’s power to approve or reject publication of any
specific article she wrote for her column cannot be the control
contemplated in the “control test,” as it is but logical that one who
commissions another to do a piece of work should have the right to
accept or reject the product. The important factor to consider in the
“control test” is still the element of control over how the work itself is
done, not just the end result thereof.
In contrast, a regular reporter is not as independent in doing his or
her work for the newspaper. We note the common practice in the
newspaper business of assigning its regular reporters to cover specific
subjects, geographical locations, government agencies, or areas of
concern, more commonly referred to as “beats.” A reporter must
produce stories within his or her particular beat and cannot switch to
another beat without permission from the editor. In most newspapers
also, a reporter must inform the editor about the story that he or she is
working on for the day. The story or article must also be submitted to
the editor at a specified time. Moreover, the editor can easily pull out a
reporter from one beat and ask him or her to cover another beat, if the
need arises.
This is not the case for petitioner. Although petitioner had a weekly
deadline to meet, she was not precluded from submitting her column
144
ahead of time or from submitting columns to be published at a later time.
More importantly, respondents did not dictate upon petitioner the
subject matter of her columns, but only imposed the general guideline
that the article should conform to the standards of the newspaper and
the general tone of the particular section.
Where a person who works for another performs his job more or less
at his own pleasure, in the manner he sees fit, not subject to definite
hours or conditions of work, and is compensated according to the result
of his efforts and not the amount thereof, no employer-employee
relationship exists.36
Aside from the control test, this Court has also used the economic
reality test. The economic realities prevailing within the activity or
between the parties are examined, taking into consideration the totality
of circumstances surrounding the true nature of the relationship
between the parties.37 This is especially appropriate when, as in this
case, there is no written agreement or contract on which to base the
relationship. In our jurisdiction, the benchmark of economic reality in
analyzing possible employment relationships for purposes of applying
the Labor Code ought to be the economic dependence of the worker on
his employer.38
Petitioner’s main occupation is not as a columnist for respondent but
as a women’s rights advocate working in various women’s
organizations.39 Likewise, she herself admits that she also contributes
articles to other publications. 40 Thus, it cannot be said that petitioner
was dependent on respondent PDI for her continued employment in
respondent’s line of business.41
The inevitable conclusion is that petitioner was not respondent PDI’s
employee but an independent contractor, engaged to do independent
work.
There is no inflexible rule to determine if a person is an employee or
an independent contractor; thus, the characterization of the relationship
must be made based on the particular circumstances of each
case.42 There are several factors43 that may be considered by the courts,
but as we already said, the right to control is the dominant factor in
determining whether one is an employee or an independent contractor. 44
In our jurisdiction, the Court has held that an independent contractor
is one who carries on a distinct and independent business and
undertakes to perform the job, work, or service on one’s own account
and under one’s own responsibility according to one’s own manner and
method, free from the control and direction of the principal in all matters
connected with the performance of the work except as to the results
thereof.45
On this point, Sonza v. ABS-CBN Broadcasting Corporation 46 is
enlightening. In that case, the Court found, using the four-fold test, that
petitioner, Jose Y. Sonza, was not an employee of ABS-CBN, but an
independent contractor. Sonza was hired by ABS-CBN due to his “unique
skills, talent and celebrity status not possessed by ordinary employees,”
a circumstance that, the Court said, was indicative, though not
conclusive, of an independent contractual relationship. Independent
contractors often present themselves to possess unique skills, expertise
or talent to distinguish them from ordinary employees.47 The Court also
found that, as to payment of wages, Sonza’s talent fees were the result of
negotiations between him and ABS-CBN. 48 As to the power of dismissal,
the Court found that the terms of Sonza’s engagement were dictated by
the contract he entered into with ABS-CBN, and the same contract
provided that either party may terminate the contract in case of breach
by the other of the terms thereof. 49 However, the Court held that the
foregoing are not determinative of an employer-employee relationship.
Instead, it is still the power of control that is most important.
On the power of control, the Court found that in performing his work,
Sonza only needed his skills and talent—how he delivered his lines,
appeared on television, and sounded on radio were outside ABS-CBN’s
control.50Thus:
“We find that ABS-CBN was not involved in the actual performance
that produced the finished product of SONZA’s work. ABS-CBN did not
instruct SONZA how to perform his job. ABS-CBN merely reserved the
right to modify the program format and airtime schedule “for more
effective programming.” ABS-CBN’s sole concern was the quality of the
shows and their standing in the ratings. Clearly, ABS-CBN did not
exercise control over the means and methods of performance of SONZA’s
work.
SONZA claims that ABS-CBN’s power not to broadcast his shows
proves ABS-CBN’s power over the means and methods of the
performance of his work. Although ABS-CBN did have the option not to
broadcast SONZA’s show, ABS-CBN was still obligated to pay SONZA’s
talent fees... Thus, even if ABS-CBN was completely dissatisfied with the
means and methods of SONZA’s performance of his work, or even with
the quality or product of his work, ABS-CBN could not dismiss or even
discipline SONZA. All that ABS-CBN could do is not to broadcast SONZA’s
show but ABS-CBN must still pay his talent fees in full.
145
 Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened as
it was by the obligation to continue paying in full SONZA’s talent fees, did
not amount to control over the means and methods of the performance
of SONZA’s work. ABS-CBN could not terminate or discipline SONZA
even if the means and methods of performance of his work—how he
delivered his lines and appeared on television—did not meet ABS-CBN’s
approval. This proves that ABS-CBN’s control was limited only to the
result of SONZA’s work, whether to broadcast the final product or not. In
either case, ABS-CBN must still pay SONZA’s talent fees in full until the
expiry of the Agreement.
In Vaughan, et al. v. Warner, et al., the United States Circuit Court of
Appeals ruled that vaudeville performers were independent contractors
although the management reserved the right to delete objectionable
features in their shows. Since the management did not have control over
the manner of performance of the skills of the artists, it could only
control the result of the work by deleting objectionable features.
SONZA further contends that ABS-CBN exercised control over his
work by supplying all equipment and crew. No doubt, ABS-CBN supplied
the equipment, crew and airtime needed to broadcast the “Mel & Jay”
programs. However, the equipment, crew and airtime are not the “tools
and instrumentalities” SONZA needed to perform his job. What SONZA
principally needed were his talent or skills and the costumes necessary
for his appearance. Even though ABS-CBN provided SONZA with the
place of work and the necessary equipment, SONZA was still an
independent contractor since ABS-CBN did not supervise and control his
work. ABS-CBN’s sole concern was for SONZA to display his talent during
the airing of the programs.
A radio broadcast specialist who works under minimal supervision is
an independent contractor. SONZA’s work as television and radio
program host required special skills and talent, which SONZA admittedly
possesses. The records do not show that ABS-CBN exercised any
supervision and control over how SONZA utilized his skills and talent in
his shows.”51
The instant case presents a parallel to Sonza. Petitioner was engaged as a
columnist for her talent, skill, experience, and her unique viewpoint as a
feminist advocate. How she utilized all these in writing her column was
not subject to dictation by respondent. As in Sonza, respondent PDI was
not involved in the actual performance that produced the finished
product. It only reserved the right to shorten petitioner’s articles based
on the newspaper’s capacity to accommodate the same. This fact, we
note, was not unique to petitioner’s column. It is a reality in the
newspaper business that space constraints often dictate the length of
articles and columns, even those that regularly appear therein.
Furthermore, respondent PDI did not supply petitioner with the tools
and instrumentalities she needed to perform her work. Petitioner only
needed her talent and skill to come up with a column every week. As
such, she had all the tools she needed to perform her work.
Considering that respondent PDI was not petitioner’s employer, it
cannot be held guilty of illegal dismissal.
WHEREFORE, the foregoing premises considered, the Petition is
DISMISSED. The Decision and Resolution of the Court of Appeals in CA-
G.R. SP No. 50970 are hereby AFFIRMED.
SO ORDERED.
Ynares-Santiago (Chairperson), Austria-Martinez, Chico-
Nazario and Reyes, JJ., concur.
Petition dismissed, judgment and resolution affirmed.
Notes.—The practice of having fixed-term contracts in the broadcast
industry does not automatically make all talent contracts valid and
compliant with labor law—the assertion that a talent contract exists
does not necessarily prevent a regular employment status. (Dumpit-
Murillo vs. Court of Appeals, 524 SCRA 290 [2007])
© Copyright 2020 Central Book Supply, Inc. All rights reserved.
146
 G.R. No. 192084. September 14, 2011.*
Valeroso v. Skycable Corp.; G.R. No. 202015, July 13, 2016 JOSE MEL BERNARTE, petitioner, vs. PHILIPPINE BASKETBALL
ASSOCIATION (PBA), JOSE EMMANUEL M. EALA, and   PERRY
*see page ___ MARTINEZ, respondents.

Remedial Law; Service by Registered Mail; Situations Contemplated

or Service by Registered Mail.—The rule on service by registered mail
contemplates two situations:  (1) actual service the completeness of
which is determined upon receipt by the addressee of the registered
mail; and (2) constructive service the completeness of which is
determined upon expiration of five days from the date the addressee
received the first notice of the postmaster.

Same; Same; Insofar as constructive service is concerned, there must

be conclusive proof that a first notice was duly sent by the postmaster to
the addressee; It is required that notice of the registered mail be issued but
that it should also be delivered to and received by the addressee; It is
incumbent upon a party who relies on constructive service to prove that
the notice was sent to, and received by, the addressee.—Insofar as
constructive service is concerned, there must be conclusive proof that a
first notice was duly sent by the postmaster to the addressee. Not only is
it required that notice of the registered mail be issued but that it should
also be delivered to and received by the addressee. Notably, the
presumption that official duty has been regularly performed is not
applicable in this situation. It is incumbent upon a party who relies on
constructive service to prove that the notice was sent to, and received
by, the addressee.

Same; Same; The best evidence to prove that notice was sent would
be a certification from the postmaster; Mailman may also testify that the
notice was actually delivered.—The best evidence to prove that notice
was sent would be a certification from the postmaster, who should
certify not only that the notice was issued or sent but also as to how,
when and to whom the delivery and receipt was made. The mailman
may also testify that the notice was actually delivered.

Same; Same; The issuance of the notices by the post office is not
equivalent to delivery to and receipt by the addressee of the registered
mail.—Petitioner failed to present any concrete proof as to how, when
and to whom the delivery and receipt of the three notices issued by the

147
post office was made. There is no conclusive evidence showing that the
post office notices were actually received by respondents, negating
petitioner’s claim of constructive service of the Labor Arbiter’s decision
on respondents. The Postmaster’s Certification does not sufficiently
prove that the three notices were delivered to and received by
respondents; it only indicates that the post office issued the three
notices. Simply put, the issuance of the notices by the post office is not
equivalent to delivery to and receipt by the addressee of the registered
mail. Thus, there is no proof of completed constructive service of the
Labor Arbiter’s decision on respondents.
Labor Law; Employer-Employee Relationship; Four-fold test to
determine the existence of an employer-employee relationship; The so-
called “control test” is the most important indicator of the presence or
absence of an employer-employee relationship.—To determine the
existence of an employer-employee relationship, case law has
consistently applied the four-fold test, to wit: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employer’s power to control the employee on the
means and methods by which the work is accomplished. The so-called
“control test” is the most important indicator of the presence or
absence of an employer-employee relationship.
Same; Same; The very nature of petitioner’s job of officiating a
professional basketball game undoubtedly calls for freedom of control by
respondents.—With respondents that once in the playing court, the
referees exercise their own independent judgment, based on the rules of
the game, as to when and how a call or decision is to be made. The
referees decide whether an infraction was committed, and the PBA
cannot overrule them once the decision is made on the playing court.
The referees are the only, absolute, and final authority on the playing
court. Respondents or any of the PBA officers cannot and do not
determine which calls to make or not to make and cannot control the
referee when he blows the whistle because such authority exclusively
belongs to the referees. The very nature of petitioner’s job of officiating a
professional basketball game undoubtedly calls for freedom of control
by respondents
Same; Same; Applicable foreign case law declares that a referee is an
independent contractor, whose special skills and independent judgment
are required specifically for such position and cannot possibly be
controlled by the hiring party.—The applicable foreign case law declares
that a referee is an independent contractor, whose special skills and
independent judgment are required specifically for such position and
cannot possibly be controlled by the hiring party.
PETITION for review on certiorari of the decision and resolution of the
Court of Appeals.
   The facts are stated in the opinion of the Court.
  Marcos L. Estrada, Jr. for petitioner.
  Sayuno, Mendoza & San Jose Law Offices for respondents.
CARPIO, J.:
The Case
This is a petition for review1 of the 17 December 2009 Decision 2 and
5 April 2010 Resolution3 of the Court of Appeals in CA-G.R. SP No.
105406. The Court of Appeals set aside the decision of the National
Labor Relations Commission (NLRC), which affirmed the decision of the
Labor Arbiter, and held that petitioner Jose Mel Bernarte is an
independent contractor, and not an employee of respondents Philippine
Basketball Association (PBA), Jose Emmanuel M. Eala, and Perry Mar-
denied the motion for reconsideration.
The Facts
The facts, as summarized by the NLRC and quoted by the Court of
Appeals, are as follows:
“Complainants (Jose Mel Bernarte and Renato Guevarra) aver that
they were invited to join the PBA as referees. During the leadership of
Commissioner Emilio Bernardino, they were made to sign contracts on a
year-to-year basis. During the term of Commissioner Eala, however,
changes were made on the terms of their employment.
Complainant Bernarte, for instance, was not made to sign a contract
during the first conference of the All-Filipino Cup which was from
February 23, 2003 to June 2003. It was only during the second
conference when he was made to sign a one and a half month contract
for the period July 1 to August 5, 2003.
On January 15, 2004, Bernarte received a letter from the Office of the
Commissioner advising him that his contract would not be renewed
citing his unsatisfactory performance on and off the court. It was a total
148
shock for Bernarte who was awarded Referee of the year in 2003. He felt
that the dismissal was caused by his refusal to fix a game upon order of
Ernie De Leon.
On the other hand, complainant Guevarra alleges that he was invited
to join the PBA pool of referees in February 2001. On March 1, 2001, he
signed a contract as trainee. Beginning 2002, he signed a yearly contract
as Regular Class C referee. On May 6, 2003, respondent Martinez issued a
memorandum to Guevarra expressing dissatisfaction over his
questioning on the assignment of referees officiating out-of-town games.
Beginning February 2004, he was no longer made to sign a contract.
Respondents aver, on the other hand, that complainants entered into
two contracts of retainer with the PBA in the year 2003. The first
contract was for the period January 1, 2003 to July 15, 2003; and the
second was for September 1 to December 2003. After the lapse of the
latter period, PBA decided not to renew their contracts.750
SUPREME COURT REPORTS ANNOTATED
Complainants were not illegally dismissed because they were not
employees of the PBA. Their respective contracts of retainer were simply
not renewed. PBA had the prerogative of whether or not to renew their
contracts, which they knew were fixed.”4
In her 31 March 2005 Decision,5 the Labor Arbiter6declared
petitioner an employee whose dismissal by respondents was illegal.
Accordingly, the Labor Arbiter ordered the reinstatement of petitioner
and the payment of backwages, moral and exemplary damages and
attorney’s fees, to wit:
“WHEREFORE, premises considered all respondents who are here
found to have illegally dismissed complainants are hereby ordered to (a)
reinstate complainants within thirty (30) days from the date of receipt of
this decision and to solidarily pay complainants:
  JOSE MEL RENATO
BERNARTE GUEVARRA
1. backwages from January 1, 2004  P536,250.00 P211,250.00
up to the finality of this Decision,
which to date is
2. moral damages    100,000.00   100,000.00
3. exemplary damages      50,000.00     50,000.00
4. 10% attorney’s fees      68,625.00     36,125.00
TOTAL P754,875.00 P397,375.00
or a total of P1,152,250.00    
The rest of the claims are hereby dismissed for lack of merit or basis.
SO ORDERED.”7
In its 28 January 2008 Decision, 8 the NLRC affirmed the Labor
Arbiter’s judgment. The dispositive portion of the NLRC’s decision reads:
“WHEREFORE, the appeal is hereby DISMISSED. The Decision of
Labor Arbiter Teresita D. Castillon-Lora dated March 31, 2005 is
AFFIRMED.
SO ORDERED.”9
Respondents filed a petition for certiorari with the Court of Appeals,
which overturned the decisions of the NLRC and Labor Arbiter. The
dispositive portion of the Court of Appeals’ decision reads:
“WHEREFORE, the petition is hereby GRANTED. The
assailed Decision dated January 28, 2008 and Resolution dated August
26, 2008 of the National Labor Relations Commission
are ANNULLED and SET ASIDE. Private respondents’ complaint before
the Labor Arbiter is DISMISSED.
SO ORDERED.”10
The Court of Appeals’ Ruling
The Court of Appeals found petitioner an independent contractor
since respondents did not exercise any form of control over the means
and methods by which petitioner performed his work as a basketball
referee. The Court of Appeals held:
“While the NLRC agreed that the PBA has no control over the
referees’ acts of blowing the whistle and making calls during basketball
games, it, nevertheless, theorized that the said acts refer to the means
and methods employed by the referees in officiating basketball games
for the illogical reason that said acts refer only to the referees’ skills.
How could a skilled referee perform his job without blowing a whistle
and making calls? Worse, how can the PBA control the performance of
work of a referee without controlling his acts of blowing the whistle and
making calls?
Moreover, this Court disagrees with the Labor Arbiter’s finding (as
affirmed by the NLRC) that the Contracts of Retainer show that
petitioners have control over private respondents.
x x x x
Neither do We agree with the NLRC’s affirmance of the Labor
Arbiter’s conclusion that private respondents’ repeated hiring made
them regular employees by operation of law.”11
149
The Issues
The main issue in this case is whether petitioner is an employee of
respondents, which in turn determines whether petitioner was illegally
dismissed.
Petitioner raises the procedural issue of whether the Labor Arbiter’s
decision has become final and executory for failure of respondents to
appeal with the NLRC within the reglementary period.
The Ruling of the Court
The petition is bereft of merit.
The Court shall first resolve the procedural issue posed by petitioner.
Petitioner contends that the Labor Arbiter’s Decision of 31 March
2005 became final and executory for failure of respondents to appeal
with the NLRC within the prescribed period. Petitioner claims that the
Labor Arbiter’s decision was constructively served on respondents as
early as August 2005 while respondents appealed the Arbiter’s decision
only on 31 March 2006, way beyond the reglementary period to appeal.
Petitioner points out that service of an unclaimed registered mail is
deemed complete five days from the date of first notice of the post
master. In this case three notices were issued by the post office, the last
being on 1 August 2005. The unclaimed registered mail was
consequently returned to sender. Petitioner presents the Postmaster’s
Certification to prove constructive service of the Labor Arbiter’s decision
on respondents. The Postmaster certified:
“x x x
That upon receipt of said registered mail matter, our registry in
charge, Vicente Asis, Jr., immediately issued the first registry notice to
claim on July 12, 2005 by the addressee. The second and third notices
were issued on July 21 and August 1, 2005, respectively.
That the subject registered letter was returned to the sender (RTS)
because the addressee failed to claim it after our one month retention
period elapsed. Said registered letter was dispatched from this office to
Manila CPO (RTS) under bill #6, line 7, page1, column 1, on September 8,
2005.”12
Section 10, Rule 13 of the Rules of Court provides:
“SEC. 10. Completeness of service.—Personal service is complete
upon actual delivery. Service by ordinary mail is complete upon the
expiration of ten (10) days after mailing, unless the court otherwise
provides. Service by registered mail is complete upon actual receipt by
the addressee, or after five (5) days from the date he received the first
notice of the postmaster, whichever date is earlier.”
The rule on service by registered mail contemplates two situations:
(1) actual service the completeness of which is determined upon receipt
by the addressee of the registered mail; and (2) constructive service the
completeness of which is determined upon expiration of five days from
the date the addressee received the first notice of the postmaster. 13
Insofar as constructive service is concerned, there must be conclusive
proof that a first notice was duly sent by the postmaster to the
addressee.14 Not only is it required that notice of the registered mail be
issued but that it should also be delivered to and received by the
addressee.15Notably, the presumption that official duty has been
regularly performed is not applicable in this situation. It is incumbent
upon a party who relies on constructive service to prove that the notice
was sent to, and received by, the addressee.16
The best evidence to prove that notice was sent would be a
certification from the postmaster, who should certify not only that the
notice was issued or sent but also as to how, when and to whom the
delivery and receipt was made. The mailman may also testify that the
notice was actually delivered.17
In this case, petitioner failed to present any concrete proof as to how,
when and to whom the delivery and receipt of the three notices issued
by the post office was made. There is no conclusive evidence showing
that the post office notices were actually received by respondents,
negating petitioner’s claim of constructive service of the Labor Arbiter’s
decision on respondents. The Postmaster’s Certification does not
sufficiently prove that the three notices were delivered to and received
by respondents; it only indicates that the post office issued the three
notices. Simply put, the issuance of the notices by the post office is not
equivalent to delivery to and receipt by the addressee of the registered
mail. Thus, there is no proof of completed constructive service of the
Labor Arbiter’s decision on respondents.
At any rate, the NLRC declared the issue on the finality of the Labor
Arbiter’s decision moot as respondents’ appeal was considered in the
interest of substantial justice. We agree with the NLRC. The ends of
justice will be better served if we resolve the instant case on the merits
rather than allowing the substantial issue of whether petitioner is an
independent contractor or an employee linger and remain unsettled due
to procedural technicalities.
150
 The existence of an employer-employee relationship is ultimately a
question of fact. As a general rule, factual issues are beyond the province
of this Court. However, this rule admits of exceptions, one of which is
where there are conflicting findings of fact between the Court of Appeals,
on one hand, and the NLRC and Labor Arbiter, on the other, such as in
the present case.18
To determine the existence of an employer-employee relationship,
case law has consistently applied the four-fold test, to wit: (a) the
selection and engagement of the employee; (b) the payment of wages;
(c) the power of dismissal; and (d) the employer’s power to control the
employee on the means and methods by which the work is
accomplished. The so-called “control test” is the most important
indicator of the presence or absence of an employer-employee
relationship.19
In this case, PBA admits repeatedly engaging petitioner’s services, as
shown in the retainer contracts. PBA pays petitioner a retainer fee,
exclusive of per diem or allowances, as stipulated in the retainer
contract. PBA can terminate the retainer contract for petitioner’s
violation of its terms and conditions.
However, respondents argue that the all-important element of
control is lacking in this case, making petitioner an independent
contractor and not an employee of respondents.
Petitioner contends otherwise. Petitioner asserts that he is an
employee of respondents since the latter exercise control over the
performance of his work. Petitioner cites the following stipulations in
the retainer contract which evidence control: (1) respondents classify or
rate a referee; (2) respondents require referees to attend all basketball
games organized or authorized by the PBA, at least one hour before the
start of the first game of each day; (3) respondents assign petitioner to
officiate ballgames, or to act as alternate referee or substitute; (4)
referee agrees to observe and comply with all the requirements of the
PBA governing the conduct of the referees whether on or off the court;
(5) referee agrees (a) to keep himself in good physical, mental, and
emotional condition during the life of the contract; (b) to give always his
best effort and service, and loyalty to the PBA, and not to officiate as
referee in any basketball game outside of the PBA, without written prior
consent of the Commissioner; (c) always to conduct himself on and off
the court according to the highest standards of honesty or morality; and
(6) imposition of various sanctions for violation of the terms and
conditions of the contract.
The foregoing stipulations hardly demonstrate control over the
means and methods by which petitioner performs his work as a referee
officiating a PBA basketball game. The contractual stipulations do not
pertain to, much less dictate, how and when petitioner will blow the
whistle and make calls. On the contrary, they merely serve as rules of
conduct or guidelines in order to maintain the integrity of the
professional basketball league. As correctly observed by the Court of
Appeals, “how could a skilled referee perform his job without blowing a
whistle and making calls? x x x [H]ow can the PBA control the
performance of work of a referee without controlling his acts of blowing
the whistle and making calls?”20
In Sonza v. ABS-CBN Broadcasting Corporation,21which determined
the relationship between a television and radio station and one of its
talents, the Court held that not all rules imposed by the hiring party on
the hired party indicate that the latter is an employee of the former. The
Court held:
“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. v. 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.” 22
We agree with respondents that once in the playing court, the
referees exercise their own independent judgment, based on the rules of
the game, as to when and how a call or decision is to be made. The
referees decide whether an infraction was committed, and the PBA
cannot overrule them once the decision is made on the playing court.
The referees are the only, absolute, and final authority on the playing
court. Respondents or any of the PBA officers cannot and do not
151
determine which calls to make or not to make and cannot control the
referee when he blows the whistle because such authority exclusively
belongs to the referees. The very nature of petitioner’s job of officiating a
professional basketball game undoubtedly calls for freedom of control
by respondents.
Moreover, the following circumstances indicate that petitioner is an
independent contractor: (1) the referees are required to report for work
only when PBA games are scheduled, which is three times a week spread
over an average of only 105 playing days a year, and they officiate games
at an average of two hours per game; and (2) the only deductions from
the fees received by the referees are withholding taxes.
In other words, unlike regular employees who ordinarily report for
work eight hours per day for five days a week, petitioner is required to
report for work only when PBA games are scheduled or three times a
week at two hours per game. In addition, there are no deductions for
contributions to the Social Security System, Philhealth or Pag-Ibig, which
are the usual deductions from employees’ salaries. These undisputed
circumstances buttress the fact that petitioner is an independent
contractor, and not an employee of respondents.
Furthermore, the applicable foreign case law declares that a referee
is an independent contractor, whose special skills and independent
judgment are required specifically for such position and cannot possibly
be controlled by the hiring party.
In Yonan v. United States Soccer Federation, Inc.,23 the United States
District Court of Illinois held that plaintiff, a soccer referee, is an
independent contractor, and not an employee of defendant which is the
statutory body that governs soccer in the United States. As such, plaintiff
was not entitled to protection by the Age Discrimination in Employment
Act. The U.S. District Court ruled:
“Generally, “if an employer has the right to control and direct the
work of an individual, not only as to the result to be achieved, but also as
to details by which the result is achieved, an employer/employee
relationship is likely to exist.” The Court must be careful to distinguish
between “control[ling] the conduct of another party contracting party by
setting out in detail his obligations” consistent with the freedom of
contract, on the one hand, and “the discretionary control an employer
daily exercises over its employee’s conduct” on the other.
Yonan asserts that the Federation “closely supervised” his
performance at each soccer game he officiated by giving him an assessor,
discussing his performance, and controlling what clothes he wore while
on the field and traveling. Putting aside that the Federation did not, for
the most part, control what clothes he wore, the Federation did not
supervise Yonan, but rather evaluated his performance after matches.
That the Federation evaluated Yonan as a referee does not mean that he
was an employee. There is no question that parties retaining
independent contractors may judge the performance of those
contractors to determine if the contractual relationship should continue.
x x x
It is undisputed that the Federation did not control the way Yonan
refereed his games. He had full discretion and authority, under the Laws
of the Game, to call the game as he saw fit. x x x In a similar vein,
subjecting Yonan to qualification standards and procedures like the
Federation’s registration and training requirements does not create an
employer/employee relationship. x x x
A position that requires special skills and independent judgment
weights in favor of independent contractor status. x x x Unskilled work,
on the other hand, suggests an employment relationship. x x x Here, it is
undisputed that soccer refereeing, especially at the professional and
international level, requires “a great deal of skill and natural ability.”
Yonan asserts that it was the Federation’s training that made him a top
referee, and that suggests he was an employee. Though substantial
training supports an employment inference, that inference is dulled
significantly or negated when the putative employer’s activity is the
result of a statutory requirement, not the employer’s choice. x x x”
In McInturff v. Battle Ground Academy of Franklin,24 it was held that
the umpire was not an agent of the Tennessee Secondary School Athletic
Association (TSSAA), so the player’s vicarious liability claim against the
association should be dismissed. In finding that the umpire is an
independent contractor, the Court of Appeals of Tennesse ruled:
“The TSSAA deals with umpires to achieve a result-uniform rules for
all baseball games played between TSSAA member schools. The TSSAA
does not supervise regular season games. It does not tell an official how
to conduct the game beyond the framework established by the rules. The
TSSAA does not, in the vernacular of the case law, control the means and
method by which the umpires work.”
In addition, the fact that PBA repeatedly hired petitioner does not by
itself prove that petitioner is an employee of the former. For a hired
party to be considered an employee, the hiring party must have control
over the means and methods by which the hired party is to perform his
work, which is absent in this case. The continuous rehiring by PBA of
152
petitioner simply signifies the renewal of the contract between PBA and
petitioner, and highlights the satisfactory services rendered by
petitioner warranting such contract renewal. Conversely, if PBA decides
to discontinue petitioner’s services at the end of the term fixed in the
contract, whether for unsatisfactory services, or violation of the terms
and conditions of the contract, or for whatever other reason, the same
merely results in the non-renewal of the contract, as in the present case.
The non-renewal of the contract between the parties does not constitute
illegal dismissal of petitioner by respondents.
WHEREFORE, we DENY the petition and AFFIRM the assailed
decision of the Court of Appeals.
SO ORDERED.
Brion, Del Castillo,** Perez and Sereno, JJ., concur. 
Petition denied, judgment affirmed.
Note.—The Rules of Court provide that service by registered mail is
deemed completed upon actual receipt by the addressee or after five (5)
days from the date the addressee received the first notice of the
postmaster, whichever date is earlier. (Rivera vs. Court of Appeals, 544
SCRA 434 [2008])
——o0o—— 
592 SUPREME COURT REPORTS ANNOTATED
Air Material Wing Savings and Loan Asso., Inc. vs. NLRC
G.R. No. 111870. June 30, 1994.*
AIR MATERIAL WING SAVINGS AND LOAN ASSOCIATION, INC.,
petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, et al.,
respondents.
Labor Law; Employer-employee Relationship; Elements of an
employer-employee relationship are: (1) selection and engagement of the
employee; (2) payment of wages; (3) power of dismissal; and (4)
employer’s own power to control employee’s conduct.—We have held in a
long line of decisions that the elements of an employer-employee
relationship are: (1) selection and engagement of the employee; (2)
payment of wages; (3) power of dismissal; and (4) employer’s own
power to control employee’s conduct. The existence of such a
relationship is essentially a factual question. The findings of the NLRC on
this matter are accorded great respect and even finality when the same
are supported by substantial evidence. The terms and conditions set out
in the letter-contract entered into by the parties on January 23, 1987,
clearly show that Salas was an employee of the petitioner. His selection
as the company counsel was done by the board of directors in one of its
regular meetings. The petitioner paid him a monthly
compensation/retainer’s fee for his services. Though his appointment
was for a fixed term of three years, the petitioner reserved its power of
dismissal for cause or as it might deem necessary for its interest and
protection. No less importantly, AMWSLAI also exercised its power of
control over Salas by defining his duties and functions as its legal
counsel, to wit: 1. To act on all legal matters pertinent to his Office. 2. To
seek remedies to effect collection of overdue accounts of members
without prejudice to initiating court action to protect the interest of the
association. 3. To defend by all means all suit against the interest of the
Association.
Same; Jurisdiction of Labor Arbiters.—Labor arbiters have the
original and exclusive jurisdiction over money claims of workers when
such claims have some reasonable connection with the employer-
employee relationship. The money claims of workers referred to in
paragraph 3 of Article 217 of the Labor Code are those arising out of or
in connection with the employer-employee relationship or some aspect
or incident of such relationship.
153
PETITION for certiorari to set aside a judgment of the National Labor
Relations Commission.
The facts are stated in the opinion of the Court.
     Jerry D. Banares for petitioner.
     Pedrelito Q. Aquino for private respondent.
CRUZ, J.:
Private respondent Luis S. Salas was appointed “notarial and legal
counsel” for petitioner Air Material Wings Savings and Loan Association
(AMWSLAI) in 1980. The appointment was renewed for three years in
an implementing order dated January 23, 1987, reading as follows:
SUBJECT: Implementing Order on the Reappointment of the Legal
Officer
TO: ATTY. LUIS S. SALAS
Per approval of the Board en banc in a regular meeting held on January
21, 1987, you are hereby reappointed as Notarial and Legal Counsel of
this association for a term of three (3) years effective March 1, 1987,
unless sooner terminated from office for cause or as may be deemed
necessary by the Board for the interest and protection of the association.
Aside from notarization of loan & other legal documents, your duties
and responsibilities are hereby enumerated in the attached sheet, per
Articles IX, Section 1-d of the by-laws and those approved by the Board
en banc.
Your monthly compensation/retainer’s fee remains the same.
This shall form part of your 201 file.
BY AUTHORITY OF THE BOARD:       The existence of such a relationship is essentially a factual question.
LUVIN S. MANAY       The findings of the NLRC on this matter are accorded great respect and
President & Chief of the Board      even finality when the same are supported by substantial evidence. 4
On January 9, 1990, the petitioner issued another order reminding Salas
of the approaching termination of his legal services under their contract.
This prompted Salas to lodge a complaint against AMWSLAI for
separation pay, vacation and sick leave benefits, cost of living
allowances, refund of SSS premiums, moral and exemplary damages,
payment of notarial services rendered from February 1, 1980 to March
2, 1990, and attorney’s fees.
Instead of filing an answer, AMWSLAI moved to dismiss for lack of
jurisdiction. It averred that there was no employer-employee
relationship between it and Salas and that his monetary claims properly
fell within the jurisdiction of the regular courts. Salas opposed the
motion and presented documentary evidence to show that he was
indeed an employee of AMWSLAI.
The motion was denied and both parties were required to submit
their position papers. AMWSLAI filed a motion for reconsideration ad
cautelam, which was also denied. The parties were again ordered to
submit their position papers but AMWSLAI did not comply.
Nevertheless, most of Salas’ claims were dismissed by the labor arbiter
in his decision dated November 21, 1991.1
It was there held that Salas was not illegally dismissed and so not
entitled to collect separation benefits. His claims for vacation leave, sick
leave, medical and dental allowances and refund of SSS premiums were
rejected on the ground that he was a managerial employee. He was also
denied moral and exemplary damages for lack of evidence of bad faith on
the part of AMWSLAI. Neither was he allowed to collect his notarial fees
from 1980 up to 1986 because the claim therefor had already
prescribed. However, the petitioner was ordered to pay Salas his notarial
fees from 1987 up to March 2, 1990, and attorney’s fee equivalent to
10% of the judgment award.
On appeal, the decision was affirmed in toto by the respondent
Commission, prompting the petitioner to seek relief in this Court. 2
The threshold issue in this case is whether or not Salas can be
considered an employee of the petitioner company.
We have held in a long line of decisions that the elements of an
employer-employee relationship are: (1) selection and engagement of
the employee; (2) payment of wages; (3) power of dismissal; and (4)
employer’s own power to control employee’s conduct. 3
The terms and conditions set out in the letter-contract entered into
by the parties on January 23, 1987, clearly show that Salas was an
employee of the petitioner. His selection as the company counsel was
done by the board of directors in one of its regular meetings. The
petitioner paid him a monthly compensation/ retainer’s fee for his
services. Though his appointment was for a fixed term of three years, the
petitioner reserved its power of dismissal for cause or as it might deem
necessary for its interest and protection. No less importantly, AMWSLAI
also exercised its power of control over Salas by defining his duties and
functions as its legal counsel, to wit:
154
 1. 1.To act on all legal matters pertinent to his Office.
2. 2.To seek remedies to effect collection of overdue accounts of
members without prejudice to initiating court action to protect
the interest of the association.
3. 3.To defend by all means all suit against the interest of the
Association.5
In the earlier case of Hydro Resources Contractors Corp. v.
Pagalilauan,6 this Court observed that:
A lawyer, like any other professional, may very well be an employee of a
private corporation or even of the government. It is not unusual for a big
corporation to hire a staff of lawyers as its in-house counsel, pay them
regular salaries, rank them in its table of organization, and otherwise
treat them like its other officers and employees. At the same time, it may
also contract with a law firm to act as outside counsel on a retainer basis.
The two classes of lawyers often work closely together but one group is
made up of employees while the other is not. A similar arrangement may
exist as to doctors, nurses, dentists, public relations practitioners and
other professionals.
We hold, therefore, that the public respondent committed no grave
abuse of discretion in ruling that an employer-employee relationship
existed between the petitioner and the private respondent.
We must disagree with the NLRC, however, on Salas’ claims for
notarial fees.
The petitioner contends that the public respondents are not
empowered to adjudicate claims for notarial fees. On the other hand, the
Solicitor General believes that the NLRC acted correctly when it took
cognizance of the claim because it arose out of Salas’ employment
contract with the petitioner which assigned him the duty to notarize
loan agreements and other legal documents. Moreover, Section 9 of Rule
141 of the Rules of Court does not restrict or prevent the labor arbiter
and the NLRC from determining claims for notarial fees.
Labor arbiters have the original and exclusive jurisdiction over
money claims of workers when such claims have some reasonable
connection with the employer-employee relationship. The money claims
of workers referred to in paragraph 3 of Article 217 of the Labor Code
are those arising out of or in connection with the employer-employee
relationship or some aspect or incident of such relationship.
Salas’ claim for notarial fees is based on his employment as a notarial
officer of the petitioner and thus comes under the jurisdiction of the
labor arbiter.
The public respondents agreed that Salas was entitled to collect
notarial fees from 1987 to 1990 by virtue of his having been assigned as
notarial officer. We feel, however, that there is no substantial evidence to
support this finding.
The letter-contract of January 23, 1987, does not contain any
stipulation for the separate payment of notarial fees to Salas in addition
to his basic salary. On the contrary, it would appear that his notarial
services were part of his regular functions and were thus already
covered by his monthly compensation. It is true that the notarial fees
were paid by members-borrowers of the petitioner for its own account
and not of Salas. However, this is not a sufficient basis for his claim to
such fees in the absence of any agreement to that effect.
ACCORDINGLY, the appealed judgment of the NLRC is AFFIRMED,
with the modification that the award of notarial fees and attorney’s fees
is disallowed. It is so ordered.
     Davide, Jr., Bellosillo, Quiason and Kapunan, JJ.,concur.
Appealed judgment affirmed with modification.
Notes.—The existence of an employer-employee relation cannot be
made the subject of an agreement (Industrial Timber Corporation vs.
National Labor Relations Commission, 169 SCRA 341).
Not every form of control over the conduct of the party hired in
relation to the service rendered establishes employer-employee
relationship (Insular Life Assurance Co., Ltd. vs. National Labor Relations
Commission, 179 SCRA 459).
——o0o——
© Copyright 2020 Central Book Supply, Inc. All rights reserved.
155
Phil. Global Communications, Inc. v. De Vera; GR No. 157214, June 7,
2005 VOL. 224, JULY 30, 1993 781
Vallum Security Services vs. NLRC
*see page 96
G.R. Nos. 97320-27. July 30, 1993.*
VALLUM SECURITY SERVICES and BAGUIO LEISURE CORPORATION
(HYATT TERRACES BAGUIO), petitioners, vs. THE NATIONAL LABOR
RELATIONS COMMISSION, RUBEN ABELLERA, MANUEL GANANCIAL,
SAMSON ALEJERA, ROMEO BAUTISTA, CARLOS BANIAGO, GABRIEL
CABASAL, ARTEMIO CARIÑO, BENJAMIN LARON, SANTIAGO
PACULAN, FRANCISCO OBEDOZA, CEFERINO GARCIA, ARNOLD
PAMINLAN, ROMAN PALIMA, JOSEFINO LOZANO, PEDRO DULAY, JR.,
CLAUDIO PANGANIBAN, RONNIE BALDERAS, AVELINO PINTO, BEN
ENRIQUE ESTOCAPIO, ESABELITO ANGARA, ROBERT AGUIMBAG,
WILSON ESTAVILLO, FELIXBERTO NARVASA, PABLITO ROSARIO,
EDGAR PALISOC, DONIE PERALTA, WILLY QUESADA, MARIO
URBANO, EDWIN JACOB, JOSE VIRGILIO LUSTERIO, MA. NESTOR
LABADOR, ROMEO LOPEZ, MANOLO MAGAT, MARIANO MARCENA,
WILSON MUNAR, ROSEMARIE DUMLAO, FLORENTINO CASTANEDA,
RUBEN PANTERIA, JOHNNY VILLANUEVA, DELIA ROSARIO, GARY
JAVATE, DEAN PASAMIC, VALERIE BRIONES, NEMENCIO CUTCHON,
PHILIP MORIS, VINCENT NOEL CABRERA and JAIME GIMENO,
respondents.

Labor Law; Employer-Employee Relationships; The elements in

determining the existence of an employer-employee relationship are (1)
The selection and engagement of the employee; (2) The payment of wages;
(3) The power of dismissal; and (4) The power to control the employees’
conduct.—In determining whether a given set of circumstances
constitute or exhibit an employer-employee relationship, the accepted
rule is that the elements or circumstances relating to the following
matters shall be examined and considered: 1. the selection and
engagement of the employees; 2. the payment of wages; 3. the power of
dismissal; and 4. the power to control the employees’ conduct.

Same; Same; Control of the employees’ conduct is commonly

regarded as the most crucial and determinative indicator of the presence
or absence of an employer-employee relationship.—Of the above, control
of the employees’ conduct is commonly regarded as the most crucial and
determinative indicator of the presence or absence of an employer-
employee relationship.
156
 Same; Same; Labor-only Contractor; Court finds no basis for
overturning the conclusions reached by the NLRC that Vallum was not an
independent contractor but was rather a “labor-only” contractor.—We
find no basis for overturning the conclusions reached by the NLRC that
Vallum, in the specific circumstances of this case, was not an
independent contractor but was, rather, a “labor-only” contractor.
Same; Same; Where labor-only contracting exists the law implies or
establishes an employer-employee relationship between the employer and
the employees of the labor-only contractor to prevent any violation or
circumvention of provisions of the Labor Code.—Where labor-only
contracting exists in a given case, the law itself implies or establishes an
employer-employee relationship between the employer (the owner of
the project or establishment) (here, Hyatt Baguio) and the employees of
the labor-only contractor (here, Vallum) to prevent any violation or
circumvention of provisions of the Labor Code.
PETITION for certiorari of the resolutions of the National Labor
Relations Commission.
The facts are stated in the opinion of the Court.
     Sanidad Law Offices for petitioners.
     Cabato Law Office for respondents.
FELICIANO, J.:
On 1 September 1986, petitioner Baguio Leisure Corporation (Hyatt
Terraces Baguio) (“Hyatt Baguio”) and petitioner Vallum Security
Services (“Vallum”) entered into a contract for security services under
the terms of which Vallum agreed to protect the properties and premises
of Hyatt Baguio by providing fifty (50) security guards, on a 24-hour
basis, a day.
On 1 June 1988, Heinrich L. Maulbecker, Hyatt Baguio’s General
Manager, wrote to Domingo A. Inocentes, President of Vallum advising
that effective 1 July 1988, the contract of security services would be
terminated.
Vallum informed Mr. Maulbecker, on 22 June 1988, that it was
agreeable to the termination of the contract.
On 30 June 1988, private respondents, who were security guards
provided by Vallum to Hyatt Baguio, were informed by Vallum’s
Personnel Officer that the contract between the two (2) had already
expired. Private respondents were directed to report to Vallum’s head
office at Sucat Road, in Muntinlupa, Metropolitan Manila, not later than
15 July 1988 for re-assignment. They were also told that failure to report
at Sucat would be taken to mean that they were no longer interested in
being re-assigned to some other client of Vallum.
None of the private respondents reported at Sucat for reassignment.
Instead, between July and September, 1988, private respondents filed
several complaints against petitioners in the National Labor Relations
Commission’s Office (“NLRC”) in Baguio City for illegal dismissal and
unfair labor practices; for violation of labor standards relating to
underpayment of wages, premium holiday and restday pay, uniform
allowances and meal allowances. They prayed for reinstatement with
full backwages. The several cases were consolidated together.
On 19 May 1989, the Labor Arbiter rendered a decision dismissing
the complaints. He found Vallum to be an independent contractor and,
consequently, declined to hold Hyatt Baguio liable for dismissal of
private respondents. He also held that the termination of services of
private respondents by Vallum did not constitute an unfair labor
practice, considering that such termination had been brought about by
lack of work. Furthermore, the Labor Arbiter held that private
respondents were not entitled to backwages or separation pay, in line
with the “no work, no pay” principle. Lastly, he found no violation of the
labor standard provisions on payment of wages and other employee
benefits.1
Private respondents appealed the Labor Arbiter’s decision to the
NLRC. On 31 July 1990, the NLRC promulgated a resolution reversing the
Labor Arbiter’s decision, the dispositive portion of which resolution
reads as follows:
“WHEREFORE, the decision appealed from is hereby REVERSED and set
aside and a new one entered ordering the respondent Hyatt Terraces
Baguio to reinstate the complainants to their former positions with full
backwages limited to one (1) year. In view of supervening event which
makes the reinstatement impossible, respondents Hyatt Terraces Baguio
and Vallum Security Services Corporation, are directed, jointly and
severally to pay complainants, in lieu of reinstatement, separation pay
equal to one (1) month per year of service. Service of six month shall be
considered a year for the purpose of the same.” 2
Petitioners moved for reconsideration, without success.
Vallum and Hyatt Baguio are hence before this Court on certiorari
seeking to: (a) reverse and annul the Resolutions of the NLRC of 31 July
157
1990 and 31 January 1991; and (b) reinstate the decision of the Labor
Arbiter dated 19 May 1989. Petitioners assert that the NLRC’s finding
that an employer-employee relationship had existed between Hyatt
Baguio and private respondents, is tainted with arbitrariness.
The main issue here presented and addressed below is whether or not
private respondent security guards are indeed employees of petitioner
Hyatt Baguio.
In determining whether a given set of circumstances constitute or
exhibit an employer-employee relationship, the accepted rule is that the
elements or circumstances relating to the following matters shall be
examined and considered:
1. 1.the selection and engagement of the employees;
2. 2.the payment of wages;
3. 3.the power of dismissal; and
4. 4.the power to control the employees’ conduct.3
Of the above, control of the employees’ conduct is commonly regarded as
the most crucial and determinative indicator of the presence or absence
of an employer-employee relationship.4 We examine below the
circumstances of the relationship between petitioners and private
respondents under the above four (4) rubrics.
In respect of the selection and engagement of the employees, the
records here show that private respondents filled up Hyatt employment
application forms and submitted the executed forms directly to the
Security Department of Hyatt Baguio.5 It appears that these executed
application forms were returned to the respective
applicants;6 nonetheless, however, a few days after the applications to
Hyatt Baguio were submitted, Vallum sent letters of acceptance to
private respondents. Petitioners do not deny that private respondents
had applied for employment at Hyatt’s Security Department and that
that Security Department was used to process the applications.
Petitioners argue that because the premises to be secured were located
in Baguio, Vallum found it more advantageous to recruit security guards
from the Baguio area. It would have been most inconvenient for
applicants from the Baguio area to have gone all the way to Sucat in
Makati to file and follow-up their applications; accordingly, Vallum was
provided with its own office at Hyatt Baguio and there the applications,
with the assistance of Hyatt Baguio’s Security Department, were
processed.7Petitioners’ argument here, while understandable, does not
negate the fact that the process of selection and engagement of private
respondents had been carried out in Hyatt Baguio and subject to the
scrutiny of officers and employees of Hyatt Baguio.
In respect of the mode or manner of payment of wages, private
respondents submitted in evidence four hundred twenty-three (423)
pay slips (Exhibits “A” for complainants-private respondents), which
bore Hyatt Baguio’s logo. 8 These pay slips show that it was Hyatt Baguio
which paid their wages directly and that Hyatt Baguio deducted
therefrom the necessary amounts for SSS premiums, internal revenue
withholding taxes, and medicare contributions. The Labor Arbiter had
found that a separate payroll was maintained for Vallum by Hyatt
Baguio; the NLRC, however, held that this finding had no factual basis,
and we are compelled to agree with this finding. It is true that a
subsequent agreement (10 September 1986) between Vallum and Hyatt
Baguio had provided:
“1. That for the purposes of facilitating and prevention of delays in the
distribution of payroll to all Security Guards assigned at the premises of
the company and as embraced in the contract of Security Services, the
[Vallum] shall herewith authorize the [Hyatt Baguio] to undertake the
distribution of the payroll directly to the guards as mentioned
herein. (Emphasis supplied)
2. That for purposes of the payroll distribution as stated above, the
company shall devise ways to ensure the efficient and prompt
distribution to the guards of their respective salaries.” 9 (Emphasis
supplied)
The fact that this agreement had stipulated for direct payment by Hyatt
Baguio of private respondents’ wages did not, of course, dissolve the
relevance of such direct payment as an indicator of an employer-
employee relationship between Hyatt Baguio and private respondents.
Vallum did not even provide Hyatt Baguio with Vallum’s own pay slips or
payroll vouchers for such direct payments. What clearly emerges is that
Hyatt Baguio discharged a function which was properly a function of the
employer.
Turning to the matter of location of the power of dismissal, we note
that the contract provided that upon loss of confidence on the part of
Hyatt Baguio vis-a-vis any security guard furnished by Vallum, such
security guard “may be changed immediately upon the request to
[Vallum] by [Hyatt Baguio].” Notwithstanding the terms of the formal
contract between petitioners, the NLRC found that, in operative fact, it
was Hyatt Baguio’s Chief Security Officer who exercised the power of
158
enforcing disciplinary measures over the security guards. 10 In the matter
of termination of services of particular security guards, Hyatt Baguio had
merely used Vallum as a channel to implement its decisions, much as it
had done in the process of selection and recruitment of the guards.
Coming then to the location of the power of control over the activities
of the security guards, the following factors lead us to the conclusion that
that power was effectively located in Hyatt Baguio rather than in Vallum:
(a) the assignments of particular security guards was subject to the
approval of Hyatt Baguio’s Chief Security Officer; 11
1. (b)promotions of the security guards from casual to regular
employees were approved or ratified by the Chief Security
Officer of Hyatt Baguio;12
2. (c)Hyatt Baguio’s Chief Security Officer decided who among the
various security guards should be on duty or on call, as well as
who, in cases of disciplinary matters, should be suspended or
dismissed;13
3. (d)the petitioners themselves admitted that Hyatt Baguio,
through its Chief Security Officer, awarded citations to
individual security guards for meritorious services. 14
Petitioners contend that what existed between Vallum and Hyatt Baguio
was simply close coordination and dove-tailing of operations, rather
than control and supervision by one over the operations of the other,
and that Hyatt Baguio’s Chief Security Officer had acted as the conduit
between Hyatt Baguio and Vallum in respect of the implementation of
the contract of security services. That is not, however, the
characterization given by the NLRC to the details of the factual
relationships between Hyatt Baguio (acting through its Chief Security
Officer) and Vallum and private respondent security guards and it is
clear to the Court that the characterization reached by the NLRC is not
without the support of substantial evidence of record. We agree with the
NLRC’s characterization.
One final circumstance seems worthy of note: orders received by
private respondent security guards were set forth on paper bearing the
letterheads of both Hyatt Baguio and Vallum.15 It appears to us,
therefore, that Hyatt Baguio explicitly purported, at the very least,
to share with Vallum the exercise of the power of control and
supervision with Vallum over the security guards, if indeed Vallum was
not functioning merely as an alter ego of Hyatt Baguio in respect of the
operations of the security guards. In the ordinary course of business,
security guard agencies are engaged because of their specialized
capabilities in the matter of physical security. It is a security agency’s
business to know the most efficacious manner of protecting and securing
a particular place at a particular time. In the case at bar, the functions
performed by Hyatt Baguio’s Chief Security Officer were precisely the
duties which the head or senior officer of a legitimate security agency
would be exercising over its own employees.
Finally, we note that the contract for security services between
Vallum and Hyatt Baguio contained the following provisions:
“xxx      xxx      xxx
1. 3.The AGENCY shall exercise discipline, supervision, control and
administration over the security guard so assigned to the
premises of the COMPANY in accordance with the Rules and
Regulations of the PCSUSIA, the Local Police Departments, the
AGENCY and the COMPANY.
2. 4.The AGENCY shall provide at its own expense all necessary,
proper and duly licensed firearms, ammunitions, nightsticks,
and other paraphernalia for security purposes, to the guards it
assigns to the COMPANY and shall shoulder all taxes and
licenses relating to the Security Services referred to in this
agreement.
3. 5.It is expressly understood and mutually agreed by the parties
hereto that the AGENCY shall be held solely liable for any claim
for security guards’ wages and/or damages arising out of
personal injury including death caused, either by the AGENCY’S
guard upon a third party or by the AGENCY’s guard or third
party upon a guard assigned by the AGENCY to the COMPANY,
and should the COMPANY be held liable therefore, the AGENCY
shall reimburse the COMPANY for any and all amounts that it
may have been called upon to pay.
xxx      xxx      xxx
1. 7.The AGENCY shall always detail within the hours the period
provided for and in the paragraph 1 of this contract, an
authorized representative who shall handle for the AGENCY all
matters regarding security and enforcement which the
COMPANY may wish to implement.”
159
The thrust of the foregoing discussion, however, is that the relationship
between Vallum and Hyatt Baguio as actually conducted departed
significantly from the formal written terms of their agreement. It is to us
self-evident that the characterization in law of such relationship cannot
conclusively be made in terms alone of the written agreement—which
constitutes but one factor out of many that the Court must take into
account—but must rest upon an examination of the detailed facts of such
relationship in the world of time and space.
We find no basis for overturning the conclusions reached by the NLRC
that Vallum, in the specific circumstances of this case, was not an
independent contractor but was, rather, a “labor-only” contractor.
Section 9 of Rule VII of Book III entitled “Conditions of Employment” of
the Omnibus Rules Implementing the Labor Code provides as follows:
“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. (1)Does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises and other
materials; and
2. (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.
xxx      xxx      xxx
Sec. 8. Job contracting.—There is job contracting permissible under
the Code if the following conditions are met:
1. (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. (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.”
In the case at bar, we noted that Vallum did not have a branch office in
Baguio City and that Hyatt Baguio provided Vallum with offices at
Hyatt’s own premises and allowed Vallum to use its Security Department
in the processing of applications. That was the reason too why Vallum
had stipulated that Hyatt Baguio was to distribute the salaries of the
security guards directly to them and that Hyatt had used its own
corporate forms and pay slips in doing so. The security guards were
clearly performing activities directly related to the business operations
of Hyatt Baguio, since the undertaking to safeguard the person and
belongings of hotel guests is one of the obligations of a hotel vis-a-vis its
guests and the general public.
Where labor-only contracting exists in a given case, the law itself
implies or establishes an employer-employee relationship between the
employer (the owner of the project or establishment) (here, Hyatt
Baguio) and the employees of the labor-only contractor (here, Vallum) to
prevent any violation or circumvention of provisions of the Labor Code. 16
The issue of illegal dismissal need not detain us for long. It has not
been alleged by petitioners that a just or authorized cause for
terminating private respondents’ services had existed. And even if such
lawful cause existed, it is not alleged that private respondents’ rights to
procedural due process in that connection had been appropriately
observed.
We conclude that petitioners have not shown any grave abuse of
discretion or any act without or any in excess of jurisdiction on the part
of the National Labor Relations Commission in rendering its Resolutions
dated 31 July 1990 and 31 January 1991.
WHEREFORE, premises considered, the Petition for Certiorari is
hereby DISMISSED for lack of merit. Costs against petitioners.
SO ORDERED.
     Bidin, Romero, Melo and Vitug, JJ., concur.
Petition dismissed.
Note.—Finding that a contractor was a labor-only contractor is
equivalent to a finding of employer-employee relationship between
owner and labor-only contractor including the latter’s workers
160
(Associated Anglo-American Tobacco Corporation vs. Clave, 189 SCRA
127). Sonza v. ABS-CBN Broadcasting Corp.; GR No. 138051, June 10, 2004

——o0o—— *see page _____

_______________
16
 Phil. Bank Communications v. National Labor Relations
Commission, 146 SCRA 347 (1986); Ecal v. National Labor Relations
Commission, 195 SCRA 224 (1991); Associated Anglo-American Tobacco
Corporation v. Clave, 189 SCRA (1990).
792
© Copyright 2020 Central Book Supply, Inc. All rights reserved.

161
290 SUPREME COURT REPORTS ANNOTATED control. The most important element is the employer’s control of the
Dumpit-Murillo vs. Court of Appeals 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.
G.R. No. 164652. June 8, 2007.*
THELMA DUMPIT-MURILLO, petitioner, vs. COURT OF APPEALS,
Same; Same; Regular Employment; Regular status arises from either
ASSOCIATED BROADCASTING COMPANY, JOSE JAVIER AND EDWARD
the nature of the work of the employee or the duration of his employment.
TAN, respondents.
—Concerning regular employment, the law provides for two kinds of
employees, namely: (1) those who are engaged to perform activities
Appeals; Pleadings and Practice; Decisions, final orders or
which are usually necessary or desirable in the usual business or trade
resolutions of the Court of Appeals in any case—regardless of the nature of
of the employer; and (2) those who have rendered at least one year of
the action or proceeding involved—may be appealed to the Supreme Court
service, whether continuous or broken, with respect to the activity in
through a petition for review.—Petitioner however contends that this
which they are employed. In other words, regular status arises from
Court can review the findings of the Court of Appeals, since the appellate
either the nature of work of the employee or the duration of his
court erred in deciding a question of substance in a way which is not in
employment. In Benares v. Pancho, 457 SCRA 652 (2005), we very
accord with law or with applicable decisions of this Court. We agree with
succinctly said: . . . [T]he primary standard for determining regular
petitioner. Decisions, final orders or resolutions of the Court of Appeals
employment is the reasonable connection between the particular
in any case—regardless of the nature of the action or proceeding
activity performed by the employee vis-à-vis the usual trade or business
involved—may be appealed to this Court through a petition for review.
of the employer. This connection can be determined by considering the
This remedy is a continuation of the appellate process over the original
nature of the work performed and its relation to the scheme of the
case, and considering there is no congruence in the findings of the NLRC
particular business or trade in its entirety. If the employee has been
and the Court of Appeals regarding the status of employment of
performing the job for at least a year, even if the performance is not
petitioner, an exception to the general rule that this Court is bound by
continuous and merely intermittent, the law deems repeated and
the findings of facts of the appellate court, we can review such findings.
continuing need for its performance as sufficient evidence of the
necessity if not indispensability of that activity to the business. Hence,
Labor Law; Fixed-Term Contracts; Broadcast Industry; The practice
the employment is considered regular, but only with respect to such
of having fixed-term contracts in the broadcast industry does not
activity and while such activity exists.
automatically make all talent contracts valid and compliant with labor
law—the assertion that a talent contract exists does not necessarily
Same; Same; Same; For a fixed-term contract to be valid, it should be
prevent a regular employment status.—The Court of Appeals committed
shown that the fixed period was knowingly and voluntarily agreed upon by
reversible error when it held that petitioner was a fixedterm employee.
the parties—there should have been no force, duress or improper pressure
Petitioner was a regular employee under contemplation of law. The
brought to bear upon the employee, neither should there be any other
practice of having fixed-term contracts in the industry does not
circumstance that vitiates the employee’s consent.—The contention of the
automatically make all talent contracts valid and compliant with labor
appellate court that the contract was characterized by a valid fixed-
law. The assertion that a talent contract exists does not necessarily
period employment is untenable. For such contract to be valid, it should
prevent a regular employment status.
be shown that the fixed period was knowingly and voluntarily agreed
upon by the parties. There should have been no force, duress or
Same; Same; Employer-Employee Relationship; Elements.—
improper pressure brought to bear upon the employee; neither should
In Manila Water Company, Inc. v. Pena, 434 SCRA 53 (2004), we said that
there be any other circumstance that vitiates the employee’s consent. It
the elements to determine the existence of an employment relationship
should satisfactorily appear that the employer and the employee dealt
are: (a) the selection and engagement of the employee, (b) the payment
with each other on more or less equal terms with no moral dominance
of wages, (c) the power of dismissal, and (d) the employer’s power to
162
being exercised by the employer over the employee. Moreover, fixed-
term employment will not be considered valid where, from the
circumstances, it is apparent that periods have been imposed to
preclude acquisition of tenurial security by the employee.
Same; Same; Same; While the Supreme Court has recognized the
validity of fixed-term employment contracts in a number of cases, it has
consistently emphasized that when the circumstances of a case show that
the periods were imposed to block the acquisition of security of tenure,
they should be struck down for being contrary to law, morals, good
customs, public order or public policy.—In the case at bar, it does not
appear that the employer and employee dealt with each other on equal
terms. Understandably, the petitioner could not object to the terms of
her employment contract because she did not want to lose the job that
she loved and the workplace that she had grown accustomed to, which is
exactly what happened when she finally manifested her intention to
negotiate. Being one of the numerous newscasters/broadcasters of ABC
and desiring to keep her job as a broadcasting practitioner, petitioner
was left with no choice but to affix her signature of conformity on each
renewal of her contract as already prepared by private respondents;
otherwise, private respondents would have simply refused to renew her
contract. Patently, the petitioner occupied a position of weakness vis-à-
visthe employer. Moreover, private respondents’ practice of repeatedly
extending petitioner’s 3-month contract for four years is a
circumvention of the acquisition of regular status. Hence, there was no
for respondents.
QUISUMBING,** J.:
This petition seeks to reverse and set aside both the Decision 1 dated
January 30, 2004 of the Court of Appeals in CA-G.R. SP No. 63125 and its
Resolution2 dated June 23, 2004 denying the motion for reconsideration.
The Court of Appeals had overturned the Resolution 3 dated August 30,
2000 of the National Labor Relations Commission (NLRC) ruling that
petitioner was illegally dismissed.
The facts of the case are as follows:
On October 2, 1995, under Talent Contract No. NT95-1805, 4 private
respondent Associated Broadcasting Company (ABC) hired petitioner
Thelma Dumpit-Murillo as a newscaster and co-anchor for Balitang-
Balita, an early evening news program. The contract was for a period of
three months. It was renewed under Talent Contracts Nos. NT95-1915,
NT96-3002, NT98-4984 and NT99-5649.5 In addition, petitioner’s
services were engaged for the program “Live on Five.” On September 30,
1999, after four years of repeated renewals, petitioner’s talent contract
expired. Two weeks after the expiration of the last contract, petitioner
sent a letter to Mr. Jose Javier, Vice President for News and Public Affairs
of ABC, informing the latter that she was still interested in renewing her
contract subject to a salary increase. Thereafter, petitioner stopped
reporting for work. On November 5, 1999, she wrote Mr. Javier another
letter,6which we quote verbatim:
xxxx
Dear Mr. Javier:
On October 20, 1999, I wrote you a letter in answer to your query by
way of a marginal note “what terms and conditions” in response to my
first letter dated October 13, 1999. To date, or for more than fifteen (15)
days since then, I have not received any formal written reply. x x x
In view hereof, should I not receive any formal response from you
until Monday, November 8, 1999, I will deem it as a constructive
dismissal of my services.
xxxx
A month later, petitioner sent a demand letter 7 to ABC, demanding: (a)
reinstatement to her former position; (b) payment of unpaid wages for
services rendered from September 1 to October 20, 1999 and full
backwages; (c) payment of 13th month pay, vacation/sick/service
incentive leaves and other monetary benefits due to a regular employee
starting March 31, 1996. ABC replied that a check covering petitioner’s
talent fees for September 16 to October 20, 1999 had been processed
and prepared, but that the other claims of petitioner had no basis in fact
or in law.
On December 20, 1999, petitioner filed a complaint 8 against ABC, Mr.
Javier and Mr. Edward Tan, for illegal constructive dismissal,
nonpayment of salaries, overtime pay, premium pay, separation pay,
holiday pay, service incentive leave pay, vacation/sick leaves and 13th
month pay in NLRC-NCR Case No. 30-12-00985-99. She likewise
163
demanded payment for moral, exemplary and actual damages, as well as
for attorney’s fees.
The parties agreed to submit the case for resolution after settlement
failed during the mandatory conference/conciliation. On March 29,
2000, the Labor Arbiter dismissed the complaint.9
On appeal, the NLRC reversed the Labor Arbiter in a Resolution dated
August 30, 2000. The NLRC held that an employer-employee
relationship existed between petitioner and ABC; that the subject talent
contract was void; that the petitioner was a regular employee illegally
dismissed; and that she was entitled to reinstatement and backwages or
separation pay, aside from 13th month pay and service incentive leave
pay, moral and exemplary damages and attorney’s fees. It held as
follows:
“WHEREFORE, the Decision of the Arbiter dated 29 March 2000 is
hereby REVERSED/SET ASIDE and a NEW ONEpromulgated:
1. 1)declaring respondents to have illegally dismissed complainant
from her regular work therein and thus, ordering them to
reinstate her in her former position without loss of seniority
right[s] and other privileges and to pay her full backwages,
inclusive of allowances and other benefits, including 13th
month pay based on her said latest rate of P28,000.00/mo. from
the date of her illegal dismissal on 21 October 1999 up to
finality hereof, or at complainant’s option, to pay her separation
pay of one (1) month pay per year of service based on said
latest monthly rate, reckoned from date of hire on 30
September 1995 until finality hereof;
1. 2)to pay complainant’s accrued SILP [Service Incentive Leave
Pay] of 5 days pay per year and 13th month pay for the years
1999, 1998 and 1997 of P19,236.00 and P84,000.00,
respectively and her accrued salary from 16 September 1999 to
20 October 1999 of P32,760.00 plus legal interest at 12% from
date of judicial demand on 20 December 1999 until finality
hereof;
2. 3)to pay complainant moral damages of P500,000.00, exemplary
damages of P350,000.00 and 10% of the total of the adjudged
monetary awards as attorney’s fees.
Other monetary claims of complainant are dismissed for lack of merit.
SO ORDERED.”10
After its motion for reconsideration was denied, ABC elevated the case to
the Court of Appeals in a petition for certiorari under Rule 65. The
petition was first dismissed for failure to attach particular
documents,11 but was reinstated on grounds of the higher interest of
justice.12
Thereafter, the appellate court ruled that the NLRC committed grave
abuse of discretion, and reversed the decision of the NLRC. 13 The
appellate court reasoned that petitioner should not be allowed to renege
from the stipulations she had voluntarily and knowingly executed by
invoking the security of tenure under the Labor Code. According to the
appellate court, petitioner was a fixed-term employee and not a regular
employee within the ambit of Article 280 14 of the Labor Code because
her job, as anticipated and agreed upon, was only for a specified time. 15
Aggrieved, petitioner now comes to this Court on a petition for
review, raising issues as follows:
I.
THIS HONORABLE COURT CAN REVIEW THE FINDINGS OF THE
HONORABLE COURT OF APPEALS, THE DECISION OF WHICH IS NOT IN
ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF THE
SUPREME COURT[;]
II.
THE PRO FORMA TALENT CONTRACTS, AS CORRECTLY FOUND BY
THE NLRC—FIRST DIVISION, ARE “ANTIREGULARIZATION DEVICES”
WHICH MUST BE STRUCK DOWN FOR REASONS OF PUBLIC POLICY[;]
III.
BY REASON OF THE CONTINUOUS AND SUCCESSIVE RENEWALS OF
THE THREE-MONTH TALENT CONTRACTS, AN EMPLOYER-EMPLOYEE
RELATIONSHIP WAS CREATED AS PROVIDED FOR UNDER ARTICLE 280
OF THE LABOR CODE[;]
IV.
BY THE CONSTRUCTIVE DISMISSAL OF HEREIN PETITIONER, AS A
REGULAR EMPLOYEE, THERE WAS A DENIAL OF PETITIONER’S RIGHT
164
TO DUE PROCESS THUS ENTITLING HER TO THE MONEY CLAIMS AS
STATED IN THE COMPLAINT[.]16
The issues for our disposition are: (1) whether or not this Court can
review the findings of the Court of Appeals; and (2) whether or not
under Rule 45 of the Rules of Court the Court of Appeals committed a
reversible error in its Decision.
On the first issue, private respondents contend that the issues raised
in the instant petition are mainly factual and that there is no showing
that the said issues have been resolved arbitrarily and without basis.
They add that the findings of the Court of Appeals are supported by
overwhelming wealth of evidence on record as well as prevailing
jurisprudence on the matter.17
Petitioner however contends that this Court can review the findings
of the Court of Appeals, since the appellate court erred in deciding a
question of substance in a way which is not in accord with law or with
applicable decisions of this Court.18
We agree with petitioner. Decisions, final orders or resolutions of the
Court of Appeals in any case—regardless of the nature of the action or
proceeding involved—may be appealed to this Court through a petition
for review. This remedy is a continuation of the appellate process over
the original case,19 and considering there is no congruence in the
findings of the NLRC and the Court of Appeals regarding the status of
employment of petitioner, an exception to the general rule that this
Court is bound by the findings of facts of the appellate court, 20 we can
review such findings.
On the second issue, private respondents contend that the Court of
Appeals did not err when it upheld the validity of the talent contracts
voluntarily entered into by petitioner. It further stated that prevailing
jurisprudence has recognized and sustained the absence of employer-
employee relationship between a talent and the media entity which
engaged the talent’s services on a per talent contract basis, citing the
case of Sonza v. ABS-CBN Broadcasting Corporation.21
Petitioner avers however that an employer-employee relationship
was created when the private respondents started to merely renew the
contracts repeatedly fifteen times or for four consecutive years. 22
Again, we agree with petitioner. The Court of Appeals committed
reversible error when it held that petitioner was a fixed-term employee.
Petitioner was a regular employee under contemplation of law. The
practice of having fixed-term contracts in the industry does not
automatically make all talent contracts valid and compliant with labor
law. The assertion that a talent contract exists does not necessarily
prevent a regular employment status.23
Further, the Sonza case is not applicable. In Sonza, the television
station did not instruct Sonza how to perform his job. How Sonza
delivered his lines, appeared on television, and sounded on radio were
outside the television station’s control. Sonza had a free hand on what to
say or discuss in his shows provided he did not attack the television
station or its interests. Clearly, the television station did not exercise
control over the means and methods of the performance of Sonza’s
work.24 In the case at bar, ABC had control over the performance of
petitioner’s work. Noteworthy too, is the comparatively low P28,000
monthly pay of petitioner25 vis the P300,000 a month salary of
Sonza,26 that all the more bolsters the conclusion that petitioner was not
in the same situation as Sonza.
The contract of employment of petitioner with ABC had the following
stipulations:
“x x x x
1. 1.SCOPE OF SERVICES—TALENT agrees to devote his/her talent,
time, attention and best efforts in the performance of his/her
duties and responsibilities as Anchor/Program
Host/Newscaster of the Program, in accordance with the
direction of ABC and/or its authorized representatives.
2. 1.1.DUTIES AND RESPONSIBILITIES—TALENT shall:
1. a.Render his/her services as a newscaster on the Program;
2. b.Be involved in news-gathering operations by conducting
interviews on- and off-the-air;
3. c.Participate in live remote coverages when called upon;
4. d.Be available for any other news assignment, such as writing,
research or camera work;
5. e.Attend production meetings;
6. f.On assigned days, be at the studios at least one (1) hour before
the live telecasts;
7. g.Be present promptly at the studios and/or other place of
assignment at the time designated by ABC;
8. h.Keep abreast of the news;
165
 9. i.Give his/her full cooperation to ABC and its duly authorized
representatives in the production and promotion of the
Program; and
10. j.Perform such other functions as may be assigned to him/her
from time to time.
xxxx
1. 1.3COMPLIANCE WITH STANDARDS, INSTRUCTIONS AND
OTHER RULES AND REGULATIONS—TALENT agrees that
he/she will promptly and faithfully comply with the requests
and instructions, as well as the program standards, policies,
rules and regulations of ABC, the KBP and the government or
any of its agencies and instrumentalities.27
x x x x”
In Manila Water Company, Inc. v. Pena,28 we said that the elements to
determine the existence of an employment relationship are: (a) the
selection and engagement of the employee, (b) the payment of wages, (c)
the power of dismissal, and (d) the employer’s power to control. The
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.29
The duties of petitioner as enumerated in her employment contract
indicate that ABC had control over the work of petitioner. Aside from
control, ABC also dictated the work assignments and payment of
petitioner’s wages. ABC also had power to dismiss her. All these being
present, clearly, there existed an employment relationship between
petitioner and ABC.
Concerning regular employment, the law provides for two kinds of
employees, namely: (1) those who are engaged to perform activities
which are usually necessary or desirable in the usual business or trade
of the employer; and (2) those who have rendered at least one year of
service, whether continuous or broken, with respect to the activity in
which they are employed.30 In other words, regular status arises from
either the nature of work of the employee or the duration of his
employment.31 In Benares v. Pancho,32 we very succinctly said:
“. . . [T]he primary standard for determining regular employment is the
reasonable connection between the particular activity performed by the
employee vis-à-vis the usual trade or business of the employer. This
connection can be determined by considering the nature
of the work performed and its relation to the scheme of the particular
business or trade in its entirety. 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.”33
In our view, the requisites for regularity of employment have been met
in the instant case. Gleaned from the description of the scope of services
aforementioned, petitioner’s work was necessary or desirable in the
usual business or trade of the employer which includes, as a pre-
condition for its enfranchisement, its participation in the government’s
news and public information dissemination. In addition, her work was
continuous for a period of four years. This repeated engagement under
contract of hire is indicative of the necessity and desirability of the
petitioner’s work in private respondent ABC’s business.34
The contention of the appellate court that the contract was
characterized by a valid fixed-period employment is untenable. For such
contract to be valid, it should be shown that the fixed period was
knowingly and voluntarily agreed upon by the parties. There should
have been no force, duress or improper pressure brought to bear upon
the employee; neither should there be any other circumstance that
vitiates the employee’s consent. 35 It should satisfactorily appear that the
employer and the employee dealt with each other on more or less equal
terms with no moral dominance being exercised by the employer over
the employee.36 Moreover, fixed-term employment will not be
considered valid where, from the circumstances, it is apparent that
periods have been imposed to preclude acquisition of tenurial security
by the employee.37
In the case at bar, it does not appear that the employer and employee
dealt with each other on equal terms. Understandably, the petitioner
could not object to the terms of her employment contract because she
did not want to lose the job that she loved and the workplace that she
had grown accustomed to,38 which is exactly what happened when she
finally manifested her intention to negotiate. Being one of the numerous
newscasters/broadcasters of ABC and desiring to keep her job as a
broadcasting practitioner, petitioner was left with no choice but to affix
166
her signature of conformity on each renewal of her contract as already ——o0o——
prepared by private respondents; otherwise, private respondents would
have simply refused to renew her contract. Patently, the petitioner 306
occupied a position of weakness vis-à-vis the employer. Moreover, © Copyright 2020 Central Book Supply, Inc. All rights reserved.
private respondents’ practice of repeatedly extending petitioner’s 3-
month contract for four years is a circumvention of the acquisition of
regular status. Hence, there was no valid fixed-term employment
between petitioner and private respondents.
While this Court has recognized the validity of fixed-term
employment contracts in a number of cases, it has consistently
emphasized that when the circumstances of a case show that the periods
were imposed to block the acquisition of security of tenure, they should
be struck down for being contrary to law, morals, good customs, public
order or public policy.39
As a regular employee, petitioner is entitled to security of tenure and
can be dismissed only for just cause and after due compliance with
procedural due process. Since private respondents did not observe due
process in constructively dismissing the petitioner, we hold that there
was an illegal dismissal.
WHEREFORE, the challenged Decision dated January 30, 2004 and
Resolution dated June 23, 2004 of the Court of Appeals in CA-G.R. SP No.
63125, which held that the petitioner was a fixed-term employee, are
REVERSED and SET ASIDE. The NLRC decision is AFFIRMED.
Costs against private respondents.
SO ORDERED.
     Carpio, Carpio-Morales, Tinga and Velasco, Jr., JJ., concur.
Challenged decision and resolution reversed and set aside.
Notes.—The NLRC commits grave abuse of discretion when, in
reversing the findings of fact of the Labor Arbiter, it gives undue, if not
unwarranted, emphasis on the dates fixed in the contract and fails to
consider the rest of the terms of the contract as well as the attendant
circumstances surrounding an employee’s employment. (Villanueva vs.
National Labor Relations Commission, 295 SCRA 326 [1998])
There is contradiction in a contract of employment where the initial
statements show that the employee was for a fixed period but the
succeeding provisions thereof provide that the employee shall be under
probationary status for a six-month period. (Phil. Federation of Credit
Cooperatives, Inc. [PFCCI] vs. National Labor Relations Commission, 300
SCRA 72 [1998])

167

614 SUPREME COURT REPORTS ANNOTATED
Religious of the Virgin Mary vs. NLRC
G.R. No. 103606. October 13, 1999.*
RELIGIOUS OF THE VIRGIN MARY, petitioner, vs. THE NATIONAL
LABOR RELATIONS COMMISSION, COLEGIO DE SAN PASCUAL
BAYLON (Girls’ Department), AUREA EVANGELISTA, CLARITA ALEJO,
JOCELYN ANSELMO, BENITA APOLONIO, JULITA BERNARDO,
JOSEFINA CASTRO, ELENITA CONTRERAS, NARCELITA DELA CRUZ,
PATRICIA ESPINA, VERONICA ESPINOSA, MARIZA FAUSTINO,
ERLINDA MALAY, CONSOLACION MANALAYSAY, NENISCA
RAYMUNDO, PRIMA SABALBERINO, MERCEDITA SANCHEZ, AURORA
SAN DIEGO, NILDA TALAG, ERLINDA VALERA, GLENDORA VICTORIO,
LOURDES CRISOSTOMO, SUSAN DEL MUNDO, SOCORRO FERNANDEZ,
CYNTHIA GARCIA, CELERINA IGNACIO, TERESITA LIWANAG, DIOSA
MAGAT, EMILINO MAKISIG, WINEFREDA MARTIN, ANGELITA MILAD,
TERESITA SAN ANTONIO, ISMAEL SANTIAGO III, CIPRIANA SIGUA,
MARTINIANO VENTURA, TEODORA SIOSON, MA. CLARA BIGCAS,
JUDILYN ESPIRITU, LOLITA MERCADO, ROSALINA MANALAYSAY,
PERLITA SANTOS, ESPERANZA TERMULO, LINDA WONG, GERONIMO
FORNAL, FELIX LABAY, JOSE LATORZA, and VIRGINIA MARTIN,
respondents.
Labor Law; Employer-Employee Relationship; Control Test; The
power of control is the most decisive factor in determining the existence of
an employer-employee relationship.—As this Court has consistently
ruled, the power of control is the most decisive factor in determining the
existence of an employer-employee relationship. In Encyclopedia
Britannica (Phils.), Inc. v. NLRC, we held: In determining the existence of
an employer-employee relationship the following elements must be
present: (1) selection and engagement of the employee; (2) payment of
wages; (3) power of dismissal; and (4) the power to control the
employee’s conduct. Of the above, control of employee’s conduct is
commonly regarded as the most crucial and determinative indicator of
the presence or absence of an employer-
employee relationship. Under the control test, an employer-
employee relationship exists where the person for whom the services
are performed reserves the right to control not only the end to be
achieved, but also the manner and means to be used in reaching that
end.
Same; Same; Same; The “control-test” only requires the existence of
the right to control the manner of doing the work not necessarily the
actual exercise of the power, which can be delegated.—Nor is there any
merit in the claim that “actual and effective control” was exercised by
petitioner since the designation of the parish priest as director was “a
mere formality, as he did perform functions which are purely ministerial
and figurative in nature.” Time and again we have held that “the ‘control
test’ only requires the existence of the right to control the manner of
doing the work not necessarily the actual exercise of the power by him,
which he can delegate.” Indeed, although the letters of appointment
were signed by the princi-pal/representative of petitioner, they bore the
name/letterhead of CDSPB and clearly indicated therein that the
employees were hired as teachers/personnel by CDSPB, and not by RVM.
Moreover, CDSPB itself admits that its name—not petitioner’s—appears
in the employees’ payroll ledger cards.
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.
The facts are stated in the opinion of the Court.
     Padilla Law Office for petitioner.
     Samonte, Millares & Associates for Colegio de San Pascual Baylon.
     Liberato C. Teneza for private respondents.
MENDOZA, J.:
This is a petition for certiorari of the decision,1 dated November 18,
1991, of the National Labor Relations Commission, affirming the
decision of then Labor Arbiter Ireneo B. Bernardo, dated April 28, 1989,
the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of complainants,
directing respondents R.V.M. and CDSPB to pay jointly and severally to
complainants their unpaid salaries and wages due them for the month of
May 1987, amounting to P67,139.84, plus 10% thereof or P6,713.98 as
attorney’s fees for the complainants’ counsel of record.
The facts are as follows:
Private respondent Colegio de San Pascual Baylon (CDSPB) 2 is a
religious educational institution owned by the Diocese of Malolos,
Bulacan, which operates two high school departments (the Boys’ and the
Girls’ departments) in Obando, Meycauayan, Bulacan.
On July 18, 1983, CDSPB, represented by the Bishop of Malolos,
entered into an Agreement3 with petitioner Religious of the Virgin Mary
168
(RVM), a religious congregation, whereby the latter was designated to
“run, administer and operate the [CDSPB] Girls’ Department.” The
Agreement was for a term of 10 years, commencing in the school year
1983-1984. The Agreement provided:
AGREEMENT
KNOW ALL MEN BY THESE PRESENTS
This instrument is made and entered into by and between—
THE ROMAN CATHOLIC BISHOP OF MALOLOS, INC., a corporation sole
duly registered and existing under and by virtue of the laws of the
Philippines with principal office of Malolos, Bulacan, represented by His
Excellency, the MOST REVEREND CIRILO R. ALMARIO, JR., D.D., Bishop of
Malolos, herein-after referred to as the BISHOP,
- and -
THE RELIGIOUS OF THE VIRGIN MARY, a religious corporation duly
organized and existing under the laws of the Philippines, with address at
214 N. Domingo St., Quezon City, represented by REV. M. MARIA
JOSEFINA C. YAMZON, R.V.M., Superior General, hereinafter referred to
as the CONGREGATION,
W I T N E S S E T H : THAT—
WHEREAS, the Parish of Obando, Bulacan, under and within the
jurisdiction of the BISHOP, has and owns a parochial school called ST.
PASCUAL INSTITUTION, with a Boys’ and Girls’ Department occupying
separate quarters and premises;
WHEREAS, the Girls Department of ST. PASCUAL INSTITUTION is
situated at and occupies a parcel of land in Obando, Bulacan, owned by
the BISHOP and more particularly described as follows:
Parcel 357—part of lot No. 11, situated in the Municipality of Obando,
Province of Bulacan, containing an area of FOUR THOUSAND ONE
HUNDRED EIGHTY SIX (4,186) SQUARE METERS, more or less, (Full
technical Description of which in Original Certificate of Title No. 361 of
the Register of Deeds for the Province of Bulacan, which is hereby made
an integral part thereof, by way of reference) including the building
connected to the Parish Church of Obando, and the Home Economics
Building.
WHEREAS, the CONGREGATION is competent to run, administer and
operate an educational institution, and the CONGREGATION has the
BISHOP’s permission to reside in Obando, Bulacan, where the
CONGREGATION is engaged in educational work;
NOW, THEREFORE, for and in consideration of the foregoing
premises and the covenants and stipulations, terms and conditions
hereunder set forth, the parties have agreed, as they hereby agree as
follows:
1.The BISHOP has appointed and designated, as he hereby appoints
and designates, and the CONGREGATION has accepted, as it hereby
accepts, the aforesaid appointment and designation, to run,
administer and operate the Girls’ Department of ST. PASCUAL
INSTITUTION; PROVIDED, however, that during the entire period of
this Agreement, the parish Priest of Obando, Bulacan, shall remain as
and be the DIRECTOR of the ST. PASCUAL INSTITUTION, including
the Girls’ Department;
2.By virtue of, in connection with and in furtherance of the purposes
of the aforesaid appointment and designation of the
CONGREGATION, by the BISHOP, to run, administer and operate the
Girls’ Department of the ST. PASCUAL INSTITUTION, the BISHOP
does hereby entrust and cede into the CONGREGATION, and the
CONGREGATION does hereby accept, the use and care of the parcel
of land mentioned in the Second WHEREAS above, including the
buildings mentioned therein;
3.The CONGREGATION undertakes as its sole responsibility and
expense the administration, management and operation of the
Girls’ Department of ST. PASCUAL INSTITUTION, (Hereinafter, the
word “School” shall refer to the Girls’ Department of St. Pascual
Institution);
4.The CONGREGATION shall provide the school with Sisters qualified
to handle the direction and the teaching of the different courses and
classes of the school, and if necessary, employ other qualified
teachers;
5.The expenses of operating and maintaining the school including,
but not limited to, the upkeep of equipment, buildings and other
169
property located in the school; salaries, allowances and other
benefits due to teachers and other personnel of the school; repairs
and improvements of the school; and all expenses relative to the
school shall be for the exclusive account and responsibility of the
CONGREGATION;
6.The school shall be operated at all times with a view to serving the
needs of the ordinary children of the parish and its vicinity and for
that reason, the tuition and other school fees should be as moderate
as possible;
other than the buildings and improvements belonging to the
BISHOP according to their value, taking into consideration the
depreciation of such constructions or improvements, at the time of
departure of the CONGREGATION;
c.Should the CONGREGATION not agree to the appraisal of the
BISHOP, both parties shall appoint their respective experts to make
a re-appraisal. The decision of those experts may be appealed to the
competent Sacred Congregation in Rome, and the decision of the
latter shall be final and unappealable;

7.The CONGREGATION shall at its sole expenses, comply with all d.The amount to be indemnified by the BISHOP to the
laws, ordinances, regulations or circulars of the government, CONGREGATION shall be payable in five (5) equal and successive
whether national, provincial or municipal, and instrumentalities yearly installments.
thereof, relating to the land, school and its building and
improvements; Pursuant to the terms of the above agreement, petitioner hired teachers
and administrative personnel for the Girls’ Department under pro
8.Whatever net profit that may result from the operation of the forma appointment papers, viz.:
school, after deducting the expenses of management, administration
and supervision, as above-mentioned shall belong exclusively to the COLEGIO DE SAN PASCUAL BAYLON 
CONGREGATION, except as herein under provided; and any loss shall Girls’ Department 
be borne by the CONGREGATION exclusively; Obando, Bulacan

9.Upon failure of the CONGREGATION to comply with the provisions July 14, 1986
of this Agreement, the BISHOP may declare this contract terminated;
APPOINTMENT
10.Unless otherwise earlier terminated under the provisions of
MRS. SUSAN V. DEL MUNDO 
paragraph 8 above, this Agreement shall be valid and effective for a
Malanday, Val. Metro Mla.
period of ten (10) school years, commencing with the school year
Dear Mrs. Del Mundo,
1983-1984;
You are hereby appointed classroom teacher in the Colegio de San
Pascual Baylon at the rate of Eighteen thousand five hundred forty eight
11.Upon the termination or expiration of this contract, or of its
and forty centavos (P18,548.40) per annum.
renewal, it is agreed:
This appointment shall be deemed in full force and subsisting unless
expressly terminated by either party for a valid cause or causes and after
a.The CONGREGATION shall deliver the land herein above due process, and approved by the Regional Director.
mentioned, together with all the buildings and improvements (Sgd.) Mila Loredo, RVM 
existing thereat, to the BISHOP; (Signature of Principal)

b.The BISHOP shall indemnify the CONGREGATION for any CONFORME:

constructions or improvements introduced by the CONGREGATION
170
(Sgd.) Susan V. Del Mundo
For Permanent employment only.
Other conditions: I hereby voluntarily and willingly conform to the
following conditions:
1. 1.To carry out the objectives of the school and my department in
my area(s) of responsibility.
2. 2.To fulfill and carry out my rules and functions as specified in
the Faculty Handbook.
3. 3.To attend all official school functions such as meetings,
seminars, conferences, programs, etc.
4. 4.To be regular and punctual in the admission of requirements.
5. 5.To follow faithfully the provisions of the Faculty Handbook.
As likewise provided in the Agreement, petitioner received all the
income from the Girls’ Department, in the form of tuition fees and other
charges, and paid all the expenses for the operation of the department. 4
On April 10, 1987, the Bishop of Malolos pre-terminated the
Agreement. As a result, petitioner moved out of the school premises, and
CDSPB, through the Bishop of Malolos and his representatives, took over
the administration of the Girls’ Department. 5 Apparently, the teaching
and non-teaching personnel hired by petitioner for school year 1986-
1987 continued to render services even after the Agreement was
terminated, but they were not paid their salaries for the month of May
1987. Hence, they filed a complaint6 for unpaid salaries with the NLRC-
Regional Arbitration Branch III, naming CDSPB and petitioner as
respondents. After the parties had submitted their respective position
papers, Labor Arbiter Cresencio J. Ramos rendered a decision, 7 dated
October 20, 1987, in favor of the complainant-teachers and ordered
CDSPB to pay them their claim for salaries. Petitioner was absolved from
any liability. The dispositive portion of the decision reads:
WHEREFORE, judgment is hereby rendered in favor of the complainants,
ordering respondent Colegio de San Pascual Baylon to pay the sum of
P67,139.84, to the complainants plus ten per cent (10%) attorney’s fees
in the amount of P6,713.98 [in] favor of Atty. Liberato C. Taneza, counsel
of the complainants.
CDSPB appealed the decision to the NLRC on the ground that it was
denied due process since it was not notified of the hearings set by the
labor arbiter.8
On May 31, 1988, the NLRC set aside the decision of the Labor Arbiter
and remanded the case for further proceedings.
The case was subsequently assigned to then Labor Arbiter Ireneo B.
Bernardo. When called to a hearing for the reception of further evidence,
the parties asked to be allowed instead to file supplemental memoranda.
Their request was granted. After the parties had submitted their
memoranda, Labor Arbiter Bernardo rendered a decision 9on April 28,
1989, holding CDSPB and petitioner jointly and severally liable to
complainants for the payment of their salaries for May 1987. He
explained:
From the standpoint of this Office, respondent RVM, may, in the wider
spectrum of labor relations, be considered an independent contractor. It
exercised greater degree of autonomy and independence in running the
affairs of respondent CDSPB, with whose real owner/operator it had an
Agreement. The hiring and paying of salaries of the complainants
primarily rest on it and eventually, the substantial attributes of a direct
employer were exercised by it. The respondent CDSPB had actually
exercised minimal supervision although it could exercise substantial
supervision and control over respondent RVM, as it did when the former
preterminated the Agreement it had with the latter. Thus, respondent
CDSPB may be considered the statutory or indirect employer of the
complainants, insofar as the operation of that institution of learning is
concerned. As indirect employer, CDSPB shall be jointly and severally
liable with its contractor, the respondent RVM, for the unpaid wages and
salaries of the latter’s employees, the herein complainants. It is for this
reason that the indirect employer is allowed to require the contractor or
sub-contractor to post/furnish a bond at least equal to the cost of labor
under contract on condition that the bond will answer for the wages due
the employees should the contractor or subcontractor fail to pay the
same.10
On appeal, the NLRC adopted the findings of the labor arbiter and
affirmed his decision. Hence, this petition. Petitioner assigns the
following errors:
1. 1.THE COMPLAINT A QUO BEING A REMANDED CASE ON THE
GROUND THAT THE OTHER RESPONDENT BELOW COLEGIO
DE SAN PASCUAL BAYLON WAS DENIED DUE PROCESS OF
LAW AND THE PARTIES HAVE NOT PRESENTED ANY NEW
EVIDENCE BEFORE SECOND LABOR ARBITER IRENEO B.
BERNARDO, IT WAS GRAVE ERROR ON THE PART OF THE
171
 NLRC TO AFFIRM THE DECISION OF ARBITER BERNARDO
WHICH DISREGARDED THE EARLIER DECISION OF THIS CASE
RENDERED BY FIRST LABOR ARBITER CRESENCIO J. RAMOS
DATED OCTOBER 20, 1987.
2. 2.THE OTHER RESPONDENT BELOW COLEGIO DE SAN PASCUAL
BAYLON IS THE EMPLOYER OF THE PRIVATE RESPONDENTS
HEREIN AND NOT THE PETITIONER HEREIN RVM
CONGREGATION WHICH WAS MERELY THE ADMINISTRATOR
OR MANAGER OF THE GIRLS’ DEPARTMENT OF THE SCHOOL
DULY APPOINTED BY THE BISHOP OF MALOLOS AS OWNER OF
THE SCHOOL.
3. 3.THE RVM CONGREGATION’S APPOINTMENT AS
ADMINISTRATOR OR MANAGER FOR THE GIRLS’
DEPARTMENT OF THE SCHOOL WAS REVOKED OR
TERMINATED ON APRIL 10, 1987 AND SO, IT HAD NO MORE
ACCESS TO THE INCOME OF THE GIRL’S DEPARTMENT FOR
THE MONTHS OF APRIL AND MAY 1987 WITH WHICH TO PAY
THE MAY 1987 SALARIES OF THE HEREIN PRIVATE
RESPONDENTS.
4. 4.THE RVM CONGREGATION IS NOT AN INDEPENDENT
CONTRACTOR.
CDSPB likewise questions the decision of the NLRC. It argues: 11
1.RESPONDENT CDSPB ALSO ASSAILS THE DECISION DATED 18
NOVEMBER 1991 OF THE THIRD DIVISION OF THE NLRC.
2.PETITIONER RVM CONGREGATION, BEING THE EMPLOYER OF
THE COMPLAINANTS, IS SOLELY RESPONSIBLE FOR THE LATTER’S
PAY FOR MAY 1987.
3.PETITIONER RVM CONGREGATION, NONETHELESS, RECOGNIZES
ITS LEGAL AND MORAL OBLIGATIONS TO PAY THE
COMPLAINANTS’ SALARIES FOR MAY 1987.
4.TO HOLD RESPONDENT CDSPB JOINTLY AND SEVERALLY LIABLE
WITH PETITIONER RVM CONGREGATION IS CLEARLY UNJUST AND
PREJUDICIAL TO THE FORMER.
The parties agree that private respondents have not been paid their
salaries for the month of May 1987 and that they are entitled to the
payment thereof. The only question in this case is the liability of either
or both of them for payment of private respondents’ salaries. It is thus
necessary to determine the relationship between petitioner and CDSPB
under the Agreement.
Petitioner contends that CDSPB is the employer of complainants. It
maintains that it is not an independent contractor but merely the
manager or administrator of the Girls’ Department, and that after the
Agreement was terminated on April 10, 1987, it no longer had any
access to the income of the school to entitle and enable it to pay the
salaries of complainants.12
CDSPB, on the other hand, contends that petitioner is not an
independent contractor but the sole employer of private respondents-
complainants. It further argues that the payment of salaries for the
month of May 1987 should come from the fees collected by petitioner
during the school year 1986-1987.13
For its part, the Solicitor General, representing the NLRC, contends
that, as regards private respondents-complainants, petitioner and
CDSPB are employer and contractor, respectively, under Article 106 of
the Labor Code. They should, therefore, be held solidarily liable for
payment of private respondents’ salaries under Article 109 of the Code. 14
We find petitioner’s arguments to be meritorious and the position of
CDSPB and the ruling of the NLRC untenable.
The Agreement shows that petitioner entered into the same not as an
independent contractor but, as it claims, a manager or administrator of
the school. It is true that under the Agreement, petitioner had the “sole
responsibility and expense [over] the administration, management and
operation of the Girls’ Department,” as well as the authority to employ
teachers needed by the school, impose and collect tuition fees, and pay
the expenses of operations. However, control and supervision over the
school’s operations remained in the hands of the Diocese of Malolos,
owner of CDSPB, represented by the Parish Priest of Obando, Bulacan,
who acted as school director. The extent of his authority over the
management and operations of the school is clearly shown in a
memorandum,15 dated September 30, 1986, issued by the Bishop of
Malolos, which reads:
COLEGIO DE SAN PASCUAL BAYLON 
Pag-Asa, Obando, Bulacan
172
THE DIRECTOR
1.He shall have general control and supervision over all academic
and administrative matters.
2.All officers, faculty members and employees of the institution shall
be responsible to and shall be under the direction of the Director.
3.He shall determine and prepare the agenda of all meetings of the
Board without prejudice to the right of any member of the Board to
have any matter included therein.
4.He shall preside at commencement exercises and other functions of
the Colegio.
5.All letters, appeal, complaints, etc. by the dean, principals, faculty
members, employees, and students of the Colegio shall be coursed
through him, otherwise they shall not be recognized by the Board;
provided, however, that the Director may not withhold from the
Board any communication addressed to it.
6.Upon consultation with the dean and principals concerned as the
case may be, he shall appoint qualified persons to fill vacancies.
7.More specifically, as academic and administrative head, the
Director shall exercise the following powers, subject to confirmation
by the Board of Trustees.
a.To accept the resignation of faculty members and employees;
b.To grant or deny leaves of absence with or without pay and/or
extend such leaves;
c.To recommend to the Board of Trustees the retirement of the
members of the faculty and employees;
d.To make interim appointments;
e.To renew appointments for not more than one year if the
budget permits and the services are necessary.
f.To supervise and control, through the Coordinator of Student
Affairs, all extra-curricular activities of the students and to
promulgate rules for the organization and operation of student
organization and for the election and qualifications of the officers
thereof.
The Director shall inform the Board of Trustees of all actions taken
by him in accordance with these functions.
8.He shall hold officers, faculty members, and employees, to the full
discharge of their duties; if in his judgment the necessity arises, he
shall, after consultation with the dean or principal concerned, in
proper cases, initiate the necessary proceedings, for the separation
from service of any of them.
9.He shall submit through the Board, an annual report of the
operation of the Colegio at the close of the school year, and make
recommendations thereto, said report to be given to MECS.
10.He shall submit to the Board of Trustees the annual budget of the
Colegio with estimates of income and expenses as prepared by the
dean, the principals and the treasurer.
11.He shall make, sign, deliver, and execute contracts, agreements
and other documents wherein the Colegio is a party in the name and
in behalf of the school.
12.He shall sign all checks, negotiable instruments, and other
evidence of payments in the name of the school.
13.He shall have the power to authorize expenses from the
miscellaneous items in the budget for maintenance and repairs or
remodeling and modification of buildings and grounds and
equipment without prior action by the Board of Trustees, provided
the total amount does not exceed ____________ pesos (P _______)
173
 14.As the academic leader of the Colegio, he shall represent it in
meetings, conferences, conventions in which the Colegio may be
interested and speak when occasion arises.
15.Within the limits of the law and proper decorum, he shall try to
secure for the Colegio, aside from the parish appropriation,
additional funds and/or property in the form of prizes, scholarships,
donations, and endowments and land grants to enable the Colegio to
accomplish better the purpose of its establishment.
16.For the proper conduct of the business of the Colegio, for the
implementation of all resolutions of the Board, for the maintenance
of the highest possible standard of instruction in the Colegio, for the
promotion of peace and order, for the development of cordial
relations among the three components of the Colegio—
Administration, Faculty and Student Body—the Director shall have
such other powers as specially authorized by the Board of Trustees
and such as are inherent in or usually pertaining to the Office of the
Director of a Colegio. He is also authorized to delegate in writing any
of his specific functions to any office under his control and
supervision, provided that he shall, at all times, be responsible for
the acts of his delegates to the Board of Trustees.
This memorandum leaves no room for doubt that CDSPB, as represented
by the director, exercised absolute control and supervision over the
school’s administration. Under it, the authority to hire, discipline and
terminate the employment of personnel is vested in the director, as
academic and administrative head of the school.
CDSPB contends, however, that—
. . . [T]he designation of the parish priest as director was not unilateral
but by mutual agreement between the diocese of Malolos and
[petitioner]. This being the case, the parish priest’s designation as such
director merely makes him, in effect, a member of the
schooladministration which is under the actual and direct control and
supervision of the congregation. 16
The argument has no merit. As this Court has consistently ruled, the
power of control is the most decisive factor 17 in determining the
existence of an employer-employee relationship. In Encyclopedia
Britannica (Phils.), Inc. v. NLRC,18 we held:
In determining the existence of an employer-employee relationship the
following elements must be present: (1) selection and engagement of the
employee; (2) payment of wages; (3) power of dismissal; and (4) the
power to control the employee’s conduct. Of the above, control of
employee’s conduct is commonly regarded as the most crucial and
determinative indicator of the presence or absence of an employer-
employee relationship. Under the control test, an employer-employee
relationship exists where the person for whom the services are
performed reserves the right to control not only the end to be achieved,
but also the manner and means to be used in reaching that end.
In this case, CDSPB reserved the right to control and supervise the
operations of the Girls’ Department. As noted by the labor arbiter
himself and affirmed by the NLRC, although CDSPB “actually exercised
minimal supervision over petitioner, [it] could exercise substantial
supervision and control as it did when [it] preterminated the
Agreement.” There was, therefore, no basis in finding that petitioner had
a “greater degree of autonomy and independence in running the affairs”
of the school. The presence of the school director, whose vast powers
have already been noted, negates any suggestion or semblance of
autonomy.
Nor is there any merit in the claim that “actual and effective control” was
exercised by petitioner since the designation of the parish priest as
director was “a mere formality, as he did perform functions which are
purely ministerial and figurative in nature.”19 Time and again we have
held that “the ‘control test’ only requires the existence of the right to
control the manner of doing the work not necessarily the actual exercise
of the power by him, which he can delegate.” 20 Indeed, although the
letters of appointment were signed by the principal/representative of
petitioner, they bore the name/letterhead of CDSPB and clearly
indicated therein that the employees were hired as teachers/personnel
by CDSPB, and not by RVM. Moreover, CDSPB itself admits that its name
—not petitioner’s—appears in the employees’ payroll ledger cards. 21
One other crucial fact to consider is that private respon-dents-
complainants continued to render services beyond April 10, 1987, the
termination date of the Agreement. If they were employees of petitioner
and not of CDSPB, their services should have been terminated the
moment the Agreement was no longer in effect. Instead, CDSPB
continued to honor their respective employment contracts/appointment
papers and avail of their services even after petitioner turned over the
school’s administration to CDSPB. Indeed, it does not appear that there
174
was a break or change in the employment status of private respondents-
complainants, neither are they claiming separation pay from petitioner,
unlike in cases where there is a supposed change in employers. 22
Based on the Agreement and other evidence on record, it thus
appears that petitioner was merely the agent or administrator of CDSPB,
and that private respondents are its employees. In Ponce v. NLRC,23 this
Court held:
Under Section 8, Rule VIII, Book III, of the Omnibus Rules Implementing
the Labor Code, 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. Jurisprudential
holdings are to the effect that in determining the existence of an
independent contractor relationship, several factors might be
considered such as, but not necessarily confined to, whether or not 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 specified pieces 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 premises, tools,
appliances, materials and labor; and the mode, manner and terms of
payment.
As above stated, petitioner was subject to the control and supervision of
CDSPB in running the Girls’ Department. Petitioner has not been shown
to have substantial capital or investment necessary in the conduct of the
business. Under the Agreement, the ownership of the parcel of land and
the building thereon remained with CDSPB. Tested by the standards
announced in Ponce, petitioner cannot be considered an independent
contractor.
CDSPB nonetheless argues that petitioner should be made liable to
pay the salaries for the month of May 1987 since petitioner collected the
revenues for school year 1986-1987 from which said salaries should be
sourced.24Petitioner, on the other hand, claims that it has been its
“uniform and traditional practice in its administration of various schools
throughout the Philippines to fix the school budget from May 1 to April
30.”25
It is unnecessary to pass upon this claim. The fact that CDSPB is the
direct and only employer of private respondents makes it solely liable to
pay the salaries for the month of May 1987 to the concerned employees.
Whether or not said salaries should come from the fees collected by its
agent (petitioner) for the previous year is a matter to be litigated
between CDSPB and RVM. Here, the only issue is who is the employer of
private respondents.
WHEREFORE, the petition is hereby GRANTED and the decision,
dated November 18, 1991, of the National Labor Relations Commission
is SET ASIDE. Colegio de San Pascual Baylon is ORDERED to pay private
respondents their salaries for the month of May 1987, in the amount of
P67,139.84, and P6,713.98 as attorney’s fees.
SO ORDERED.
     Quisumbing, Buena and De Leon, Jr., JJ., concur.
     Bellosillo (Chairman), J., On leave, on official business.
Petition granted; Challenged decision set aside.
Notes.—There is no employer-employee relationship where a person
who works for another does so more or less at his own pleasure and is
not subject to definite hours or conditions of work, and in turn is
compensated according to the result of his efforts and not the amount
thereof. (Encyclopaedia Britannica [Philippines], Inc. vs. National Labor
Relations Commission, 264 SCRA 1 [1996])
The fact that an insurance underwriter was required to solicit
business exclusively for a mutual benefit association could hardly be
considered as control in labor jurisprudence. (Armed Forces of the
Philippines Mutual Benefit Association, Inc. vs. National Labor Relations
Commission, 267 SCRA 47 [1997])
The power of control refers to the existence of the power and not
necessarily to the actual exercise thereof—it is not essential for the
employer to actually supervise the performance of duties of the
employee as it is enough that the former has the right to wield the
power. (Equitable Banking Corporation vs. National Labor Relations
Commission, 273 SCRA 352 [1997])
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 an
end. (Algon Engineering Construction Corporation vs. National Labor
Relations Commission, 280 SCRA 188 [1997])
175
G.R. No. 152459. June 15, 2006.*
EMELITA LEONARDO, CONRADO BARGAMENTO, EMELITA NUÑEZ,
RODOLFO GRABAN, and ROBERTO GRABAN, petitioners, vs. COURT
OF APPEALS and DIGITAL TELECOMMUNICATIONS PHILIPPINES,
INC., respondents.
Labor Law; Certiorari; The power of the Court of Appeals to review
NLRC decisions via a Rule 65 petition is now a settled issue.—The Court of
Appeals has the power to review the decisions of the NLRC and to pass
upon factual issues raised by the parties. In R & E Transport, Inc. v. Latag,
422 SCRA 698 (2004), this Court held: The power of the CA to review
NLRC decisions via a Rule 65 petition is now a settled issue. As early
as St. Martin Funeral Home v. NLRC, 295 SCRA 494 (1998), we have
definitively ruled that the proper remedy to ask for the review of a
decision of the NLRC is a special civil action for certiorari under Rule 65
of the Rules of Court, and that such petition should be filed with the CA
in strict observance of the doctrine on the hierarchy of courts. Moreover,
it has already been explained that under Section 9 of Batas
Pambansa (BP) 129, as amended by Republic Act 7902, the CA—
pursuant to the exercise of its original jurisdiction over petitions
for certiorari—was specifically given the power to pass upon the
evidence, if and when necessary, to resolve factual issues.
Same; Same; Administrative Law; Factual findings of quasi-judicial
and administrative bodies accorded great respect and even finality by the
courts, but when there is a showing that the factual findings of
administrative bodies were arrived at arbitrarily or in disregard of the
evidence on record, they may be examined by the courts.—We agree with
petitioners that factual findings of quasi-judicial and administrative
bodies are accorded great respect and even finality by the courts.
However, this rule is not absolute. When there is a showing that the
factual findings of administrative bodies were arrived at arbitrarily or in
disregard of the evidence on record, they may be examined by the
courts. In this case, the Court of Appeals found “nothing in the records
[to support] the conclusion that DIGITEL became the ‘absolute owner’ of
BALTEL or that the former ‘absorbed’ the latter’s employees.” Hence, the
Court of Appeals is justified in reviewing the factual findings of both the
Labor Arbiter and the NLRC.
Same; Employer-Employee Relationship; Control Test; To determine
the existence of an employer-employee relationship, the Court has to
resolve who has the power to select the employees, who pays for their
wages, who has the power to dismiss them, and who exercises control in
the methods and the results by which the work is accomplished.—To
determine the existence of an employer-employee relationship, the
Court has to resolve who has the power to select the employees, who
pays for their wages, who has the power to dismiss them, and who
exercises control in the methods and the results by which the work is
accomplished. The most important element of an employer-employee
relationship is 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. In this case,
DIGITEL undoubtedly has the power of control. However, DIGITEL’s
exercise of the power of control necessarily flows from the exercise of its
responsibilities under the management contract which includes
providing for personnel, consultancy and technical expertise in the
management, administration, and operation of the telephone system.
Thus, the control test has no application in this case.
PETITION for review on certiorari of the decision and resolution of the
Court of Appeals.
The facts are stated in the opinion of the Court.
     Armando San Antonio for petitioners.
     Christopher B. Arpon for private respondent.
CARPIO, J.:
The Case
Before the Court is a petition for review assailing the 29 June 2001
Decision1 and20February2002Resolution2 of the Court of Appeals in CA-
G.R. SP No. 51160. The Court of Appeals set aside the Decision of the
National Labor Relations Commission (NLRC) which sustained the Labor
Arbiter’s Decision holding Digital Telecommunications Philippines, Inc.
(DIGITEL) jointly and severally liable with Balagtas Telephone Company
(BALTEL) and its proprietor Domingo de Asis.3
The Antecedent Facts
BALTEL holds the franchise from the Municipality of Balagtas, Bulacan to
operate a telephone service in the municipality. BALTEL also has
176
authority from the National Telecommunications Commission (NTC) to
operate in the municipality.
BALTEL hired Emelita Leonardo, Conrado Bargamento, Emelita
Nuñ ez, Rodolfo Graban, and Roberto Graban (“petitioners”) for various
positions4 in the company. On 22 April
_______________
1
 Penned by Associate Justice Edgardo P. Cruz with Associate Justices
Ramon Mabutas, Jr. and Roberto A. Barrios, concurring. Rollo, pp. 315-
324.
2
 Penned by Associate Justice Edgardo P. Cruz with Associate Justices
Delilah Vidallon-Magtolis and Roberto A. Barrios, concurring. Id., at p. 34.
3
 Also referred to as Domingo Asis.
4
 Emelita Leonardo was hired in 1988 as telephone operator;
Conrado Bargamento was hired in 1977 as collector; Emelita Nuñ ez was
hired in 1984 as telephone operator; Rodolfo Graban was hired in 1971
as telephone lineman and Roberto Graban was hired in 1990 as
telephone lineman. Rollo, pp. 315-316.
1991,5 BALTEL6 and DIGITEL entered into a management
contract.7 Under the terms of the contract, DIGITEL was to provide
personnel, consultancy and technical expertise in the management,
administration, and operation of BALTEL’s telephone service in Balagtas,
Bulacan. DIGITEL also undertook to improve the internal and external
plants of BALTEL’s telephone system and to handle customer relations
and such other matters necessary for the efficient management and
operation of the telephone system.
In a letter8 dated 27 January 1994, BALTEL informed the NTC that it
would cease to operate effective 28 February 1994 because it was no
longer in a financial position to continue its operations. On 17 February
1994, BALTEL assigned to DIGITEL its buildings and other
improvements on a parcel of land in Balagtas, Bulacan covered by OCT
No. O-7280 where BALTEL conducted its business operations. The
assignment was in partial payment of BALTEL’s obligation to DIGITEL
which as of 31 December 1993 amounted to P712,471.74.
On 28 February 1994, petitioners’ employment ceased. They
executed separate, undated and similarly worded quitclaims
acknowledging receipt of various amounts representing their claims
from BALTEL. In their quitclaims, petitioners absolved and released
BALTEL from all monetary claims that arose out of their employer-
employee relationship with the company. Petitioners also acknowledged
that BALTEL closed its operations due to serious business losses.
On 1 March 1994, petitioners filed a complaint against BALTEL and
Domingo De Asis for recovery of salary differential and attorney’s fees.
Petitioners later filed a supplemental complaint to include illegal
dismissal as additional cause of action and to implead DIGITEL as
additional respondent. DIGITEL denied having any liability on the
ground that it was not petitioners’ employer. In its 29 May 1995
Decision,9abor Arbiter Dominador B. Saludares ruled as follows:
“WHEREFORE, premises considered, judgment is hereby entered in
favor of the complainants and against respondents Balagtas Telephone
System and/or Domingo de Asis and Digital Telecommunications Phils.,
Inc. ordering the latter, jointly and severally as follows:
1.To pay the sum of P14,950.00 representing the unpaid salaries of
all the five (5) complainants for the month of February 1994;
2.To pay another sum of P4,486.44 representing the unpaid overtime
pay of complainants Emelita Leonardo, Conrado Bargamento and
Emelita Nuñ ez for February 1994;
3.To pay the sum of P71,400.00 as salary differential of the
complainants;
4.To pay the backwages of all complainants from the date they were
dismissed on February 28, 1994 up to this writing computed in the
sum total of P224,250.00, less their separation pay which they have
received;
5.To pay the sum of P31,508.64 as attorney’s fees which is
equivalent to ten (10%) percent of the amount of the award; and
6.To immediately reinstate all the complainants to their former or
equivalent positions under the same terms and conditions prevailing
prior to their dismissal or separation including payment of their
prevailing basic salaries and all other benefits or at the option of the
employer merely reinstate in the payroll also with the payment of
their salaries and all other benefits in accordance with Article 223 of
the Labor Code, as amended by R.A. No. 6715. Respondents are
177
 further ordered to submit upon receipt hereof their compliance with
the reinstatement aspect.
SO DECIDED.”10
DIGITEL appealed the Labor Arbiter’s Decision before the NLRC. In its 29
December 1997 Decision,11 the NLRC dismissed the appeal. DIGITEL
moved for the reconsideration of the NLRC Decision. In its 29 July 1998
Decision,12 the NLRC denied DIGITEL’s motion for reconsideration.
DIGITEL filed a petition for review before this Court. In its 2
December 1998 Resolution, this Court referred the case to the Court of
Appeals pursuant to St. Martin Funeral Home v. NLRC.13
The Ruling of the Court of Appeals
In its 29 June 2001 Decision, the Court of Appeals reversed and set aside
the NLRC Decision insofar as it held DIGITEL severally liable with
BALTEL and Domingo de Asis. The Court of Appeals ruled that DIGITEL
is not the successor-in-interest of BALTEL. The Court of Appeals held
that the records do not show that DIGITEL became the absolute owner of
BALTEL, or that DIGITEL absorbed BALTEL’s employees. The Court of
Appeals further ruled that there was no showing that DIGITEL acquired
BALTEL’s franchise. The Court of Appeals ruled:
“WHEREFORE, the petition is GRANTED. The assailed decision of the
National Labor Relations Commission is ANNULLED and SET ASIDE
insofar as it held petitioner jointly and severally liable with Balagtas
Telephone Company and Domingo de Asis for the obligations of the two
to private respondents, with the result that private respondents’
complaint against petitioner before the labor arbiter is DISMISSED.
SO ORDERED.”14
Petitioners moved for the reconsideration of the Court of Appeals’
Decision. In its 20 February 2002 Resolution, the Court of Appeals
denied petitioners’ motion for reconsideration for lack of merit.
Hence, the petition before this Court.
Petitioners allege that the Court of Appeals erred in disregarding the
factual findings of both the Labor Arbiter and the NLRC which should
have been given more weight by appellate tribunals.
The Issues
The petition raises the following issues:
1. 1.Whether DIGITEL is the successor-in-interest of BALTEL; and
2. 2.Whether an employer-employee relationship exists between
petitioners and DIGITEL.
The Ruling of This Court
The petition has no merit.
The Court of Appeals has the power to review the decisions of the
NLRC and to pass upon factual issues raised by the parties. In R & E
Transport, Inc. v. Latag,15this Court held:
“The power of the CA to review NLRC decisions via aRule65 petition is
now a settled issue. As early as St. Martin Funeral Home v. NLRC, we have
definitively ruled that the proper remedy to ask for the review of a
decision of the NLRC is a special civil action for certiorari under Rule 65
of the Rules of Court, and that such petition should be filed with the CA
in strict observance of the doctrine on the hierarchy of courts. Moreover,
it has already been explained that under Section 9 of Batas
Pambansa (BP) 129, as amended by Republic Act 7902, the CA—
pursuant to the exercise of its original jurisdiction over petitions
for certiorari—was specifically given the power to pass upon the
evidence, if and when necessary, to resolve factual issues.”
We agree with petitioners that factual findings of quasi-judicial and
administrative bodies are accorded great respect and even finality by the
courts. However, this rule is not absolute. When there is a showing that
the factual findings of administrative bodies were arrived at arbitrarily
or in disregard of the evidence on record, they may be examined by the
courts.16 In this case, the Court of Appeals found “nothing in the records
[to support] the conclusion that DIGITEL became the ‘absolute owner’ of
BALTEL or that the former ‘absorbed’ the latter’s employees.” Hence, the
Court of Appeals is justified in reviewing the factual findings of both the
Labor Arbiter and the NLRC.
DIGITEL is not BALTEL’s Successor-in-Interest
Petitioners allege that DIGITEL took over the ownership of BALTEL, and
as the new owner, DIGITEL then absorbed petitioners as employees.
The Court of Appeals correctly held that DIGITEL is not BALTEL’s
successor-in-interest.
It is not disputed that BALTEL has the franchise to operate a
telephone system in Balagtas, Bulacan. It is also not disputed that on 21
April 1991, BALTEL and DIGITEL entered into a management contract
which:
178
 2.Appoints and contracts Digital Telecommunications Philippines,
Inc. (Digitel for short), a corporation organized and existing under
the laws of the Philippines, to provide personnel, consultancy and
technical expertise in the management, administration and
operation of the telephone service/system in Balagtas, Bulacan; to
improve the internal and external plants of such system, provided
that any improvement, whether by addition or replacement, shall
belong to Digitel unless such improvement(s) is fully reimbursed; to
handle customer relations and such other matters necessary for the
efficient management and operation of said telephone
service/system.
3.Subject to paragraph B, defines the terms of this Appointment and
Agreement to one (1) year from date hereof unless renewed for
another term at the option of Digitel.
4.Agrees to reimburse Digitel for all expenses incurred in the
performance of its aforesaid services provided that such expenses do
not exceed the net operating cash revenues of said telephone
service/system unless otherwise mutually agreed upon by the herein
parties in writing.
5.Grants Digitel the right of first option to buy the franchise and the
telephone system, provided that the purchase shall be subject to the
prior approval of the Municipal Council of Balagtas, Bula-can, the
NTC and the DOTC. For this purpose, Digitel shall remit to Estela de
Asis as attorney-in-fact of Domingo de Asis the amount of
P415,000.00, as option money, which shall be deducted from a
mutually agreed purchase price in the event Digitel exercises the
option by written notice to Estela or Domingo de Asis within 180
days from date hereof. In the event there is no agreement on the
purchase price, then such price shall be the net asset value (original
cost less depreciation) of all the serviceable equipment as of the date
hereof.17
The contract gives DIGITEL the option to buy BALTEL’s franchise.
However, the records do not show that DIGITEL exercised the option.
Petitioners failed to show that DIGITEL eventually purchased BALTEL’s
franchise and telephone system. The Court also notes that the purchase
shall be subject to the prior approval of the Municipal Council of
Balagtas, Bulacan, the NTC and the Department of Transportation and
Communications (DOTC). The records do not show that DIGITEL sought
the approval of the Municipal Council of Balagtas, Bulacan, the NTC or
the DOTC to purchase BALTEL’s franchise. When BALTEL eventually
discontinued its operations, Estela de Asis informed the NTC of the
cessation of its operations.
On DIGITEL’s continued operations in Balagtas, Bulacan, we adopt
the findings of the Court of Appeals that it is pursuant to a Financial
Lease Agreement18 entered into by DOTC and DIGITEL. Under the
Financial Lease Agreement, the DOTC grants DIGITEL the exclusive right
to lease, operate, and develop DOTC’s local exchange facilities and to
perform the telecommunications services in the cities or municipalities
covered by the Financial Lease Agreement. Under Project NTP I-
1,19 Balagtas, Bulacan is among the municipalities covered by the
Financial Lease Agreement.
There is No Employer-Employee Relationship Between DIGITEL and
Petitioners
To determine the existence of an employer-employee relationship, the
Court has to resolve who has the power to select the employees, who
pays for their wages, who has the power to dismiss them, and who
exercises control in the methods and the results by which the work is
accomplished.20 The most important element of an employer-employee
relationship is 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. 21 In this case,
DIGITEL undoubtedly has the power of control. However, DIGITEL’s
exercise of the power of control necessarily flows from the exercise of its
responsibilities under the management contract which includes
providing for personnel, consultancy and technical expertise in the
management, administration, and operation of the telephone system.
Thus, the control test has no application in this case.
The Court notes that DIGITEL did not hire petitioners. BALTEL had
already employed petitioners when BALTEL entered into the
management contract with DIGITEL. We also agree with the Court of
Appeals that the fact that DIGITEL uses its payslips does not necessarily
imply that DIGITEL pays petitioners’ salaries. As pointed out by the
Court of Appeals, DIGITEL introduced its own financial and accounting
systems to BALTEL and it included the use of DIGITEL’s payslips for
179
accounting purposes. The management contract provides that BALTEL
shall reimburse DIGITEL for all expenses incurred in the performance of
its services and this includes reimbursement of whatever amount
DIGITEL paid or advanced to BALTEL’s employees.
Finally, DIGITEL has no power to dismiss BALTEL’s employees. When
DIGITEL wanted to dismiss Roberto Graban for habitual tardiness,
BALTEL did not approve DIGITEL’s recommendation. In the end,
Roberto Graban was just suspended from work.
In sum, no employer-employee relationship exists between
petitioners and DIGITEL. Hence, DIGITEL is not solidarily liable with
BALTEL and Domingo de Asis to petitioners.
WHEREFORE, we DENY the petition. We AFFIRM the 29 June 2001
Decision and 20 February 2002 Resolution of the Court of Appeals in CA-
G.R. SP No. 51160.
SO ORDERED.
     Quisumbing (Chairperson), Carpio-Morales, Tingaand Velasco, Jr.,
JJ., concur.
Petition denied, judgment and resolution affirmed.
Notes.—The existence of an employer-employee relationship is
ultimately a question of fact and the findings thereon by the labor arbiter
and the NLRC shall be accorded not only respect but even finality when
supported by ample evidence. (Jo vs. National Labor Relations
Commission, 324 SCRA 437 [2000])
Before execution against an employer for his subsidiary liability
ensues, there must be a determination, in a hearing set for the purpose
of (1) the existence of an employer-employee relationship, (2) that the
employer is engaged in some kind of industry, (3) that the employee is
adjudged guilty of the wrongful act and found to have committed the
offense in the discharge of his duties (not necessarily any offense he
commits “while” in discharge of such duties), and (4) that said employee
is insolvent. (Basilio vs. Court of Appeals, 328 SCRA 341 [2000])

——o0o——

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180
 Dismissals; Constructive Dismissals; A diminution of pay is
prejudicial to the employee and amounts to constructive dismissal.—A
WHAT IS THE TWO TIERED TEST? diminution of pay is prejudicial to the employee and amounts to
690 SUPREME COURT REPORTS ANNOTATED constructive dismissal. Constructive dismissal is an involuntary
Francisco vs. National Labor Relations Commission resignation resulting in cessation of work resorted to when continued
employment becomes impossible, unreasonable or unlikely; when there
G.R. No. 170087. August 31, 2006.*
is a demotion in rank or a diminution in pay; or when a clear
ANGELINA FRANCISCO, petitioner, vs. NATIONAL LABOR RELATIONS
discrimination, insensibility or disdain by an employer becomes
COMMISSION, KASEI CORPORATION, SEIICHIRO TAKAHASHI,
unbearable to an employee. In Globe Telecom, Inc. v. Florendo-Flores, 390
TIMOTEO ACEDO, DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD
SCRA 201 (2002), we ruled that where an employee ceases to work due
LIZA and RAMON ESCUETA, respondents.
to a demotion of rank or a diminution of pay, an unreasonable situation
arises which creates an adverse working environment rendering it
Labor Law; Employment; Control Test; The better approach would
impossible for such employee to continue working for her employer.
therefore be to adopt a two-tiered test.—The better approach would
Hence, her severance from the company was not of her own making and
therefore be to adopt a two-tiered test involving: (1) the putative
therefore amounted to an illegal termination of employment.
employer’s power to control the employee with respect to the means
and methods by which the work is to be accomplished; and (2) the
Labor Law; Equal Work Opportunity; In affording full protection to
underlying economic realities of the activity or relationship. This two-
labor, this Court must ensure equal work opportunities regardless of sex,
tiered test would provide us with a framework of analysis, which would
race or creed.—In affording full protection to labor, this Court must
take into consideration the totality of circumstances surrounding the
ensure equal work opportunities regardless of sex, race or creed. Even as
true nature of the relationship between the parties. This is especially
we, in every case, attempt to carefully balance the fragile relationship
appropriate in this case where there is no written agreement or terms of
between employees and employers, we are mindful of the fact that the
reference to base the relationship on; and due to the complexity of the
policy of the law is to apply the Labor Code to a greater number of
relationship based on the various positions and responsibilities given to
employees. This would enable employees to avail of the benefits
the worker over the period of the latter’s employment.
accorded to them by law, in line with the constitutional mandate giving
maximum aid and protection to labor, promoting their welfare and
Same; Same; Same; Economic Activity; The determination of the
reaffirming it as a primary social economic force in furtherance of social
relationship between employer and employee depends upon the
justice and national development.
circumstances of the whole economic activity.—The determination of the
relationship between employer and employee depends upon the
PETITION for review on certiorari of the decision and resolution of the
circumstances of the whole economic activity, such as: (1) the extent to
Court of Appeals.
which the services performed are an integral part of the employer’s
business; (2) the extent of the worker’s investment in equipment and The facts are stated in the opinion of the Court.
facilities; (3) the nature and degree of control exercised by the employer;      Conrado S. Dar Santos for petitioner.
(4) the worker’s opportunity for profit and loss; (5) the amount of      Ramon P. Gutierrez for private respondents.
initiative, skill, judgment or foresight required for the success of the
claimed independent enterprise; (6) the permanency and duration of the YNARES-SANTIAGO, J.:
relationship between the worker and the employer; and (7) the degree
of dependency of the worker upon the employer for his continued This petition for review on certiorari under Rule 45 of the Rules of Court
employment in that line of business. seeks to annul and set aside the Decision and Resolution of the Court of
Appeals dated October 29, 20041 and October 7, 2005,2 respectively,
181
in CA-G.R. SP No. 78515 dismissing the complaint for constructive
dismissal filed by herein petitioner Angelina Francisco. The appellate
court reversed and set aside the Decision of the National Labor Relations
Commission (NLRC) dated April 15, 2003, 3in NLRC NCR CA No. 032766-
02 which affirmed with modification the decision of the Labor Arbiter
dated July 31, 2002,4 in NLRC-NCR Case No. 30-10-0-489-01, finding that
private respondents were liable for constructive dismissal.
In 1995, petitioner was hired by Kasei Corporation during its
incorporation stage. She was designated as Accountant and Corporate
Secretary and was assigned to handle all the accounting needs of the
company. She was also designated as Liaison Officer to the City of Makati
to secure business permits, construction permits and other licenses for
the initial operation of the company.5
Although she was designated as Corporate Secretary, she was not
entrusted with the corporate documents; neither did she attend any
board meeting nor required to do so. She never prepared any legal
document and never represented the company as its Corporate
Secretary. However, on some occasions, she was prevailed upon to sign
documentation for the company.6
In 1996, petitioner was designated Acting Manager. The corporation
also hired Gerry Nino as accountant in lieu of petitioner. As Acting
Manager, petitioner was assigned to handle recruitment of all employees
and perform management administration functions; represent the
company in all dealings with government agencies, especially with the
Bureau of Internal Revenue (BIR), Social Security System (SSS) and in
the city government of Makati; and to administer all other matters
pertaining to the operation of Kasei Restaurant which is owned and
operated by Kasei Corporation. 7
For five years, petitioner performed the duties of Acting Manager. As
of December 31, 2000 her salary was P27,500.00 plus P3,000.00 housing
allowance and a 10% share in the profit of Kasei Corporation. 8
In January 2001, petitioner was replaced by Liza R. Fuentes as
Manager. Petitioner alleged that she was required to sign a prepared
resolution for her replacement but she was assured that she would still
be connected with Kasei Corporation. Timoteo Acedo, the designated
Treasurer, convened a meeting of all employees of Kasei Corporation
and announced that nothing had changed and that petitioner was still
connected with Kasei Corporation as Technical Assistant to Seiji Kamura
and in charge of all BIR matters.9
Thereafter, Kasei Corporation reduced her salary by P2,500.00 a
month beginning January up to September 2001 for a total reduction of
P22,500.00 as of September 2001. Petitioner was not paid her mid-year
bonus allegedly because the company was not earning well. On October
2001, petitioner did not receive her salary from the company. She made
repeated follow-ups with the company cashier but she was advised that
the company was not earning well.10
On October 15, 2001, petitioner asked for her salary from Acedo and
the rest of the officers but she was informed that she is no longer
connected with the company.11
Since she was no longer paid her salary, petitioner did not report for
work and filed an action for constructive dismissal before the labor
arbiter.
Private respondents averred that petitioner is not an employee of
Kasei Corporation. They alleged that petitioner was hired in 1995 as one
of its technical consultants on accounting matters and act concurrently
as Corporate Secretary. As technical consultant, petitioner performed
her work at her own discretion without control and supervision of Kasei
Corporation. Petitioner had no daily time record and she came to the
office any time she wanted. The company never interfered with her work
except that from time to time, the management would ask her opinion on
matters relating to her profession. Petitioner did not go through the
usual procedure of selection of employees, but her services were
engaged through a Board Resolution designating her as technical
consultant. The money received by petitioner from the corporation was
her professional fee subject to the 10% expanded withholding tax on
professionals, and that she was not one of those reported to the BIR or
SSS as one of the company’s employees.12
Petitioner’s designation as technical consultant depended solely upon
the will of management. As such, her consultancy may be terminated any
time considering that her services were only temporary in nature and
dependent on the needs of the corporation.
To prove that petitioner was not an employee of the corporation,
private respondents submitted a list of employees for the years 1999
and 2000 duly received by the BIR showing that petitioner was not
among the employees reported to the BIR, as well as a list of payees
subject to expanded withholding tax which included petitioner. SSS
records were also submitted showing that petitioner’s latest employer
was Seiji Corporation. 13
The Labor Arbiter found that petitioner was illegally dismissed, thus:
182
“WHEREFORE, premises considered, judgment is hereby rendered as 4. 4)The awards representing salary differentials, housing
follows: allowance, mid year bonus and 13th month pay are AFFIRMED.

1. 1.finding complainant an employee of respondent corporation; SO ORDERED.”15

2. 2.declaring complainant’s dismissal as illegal; On appeal, the Court of Appeals reversed the NLRC decision, thus:
3. 3.ordering respondents to reinstate complainant to her former “WHEREFORE, the instant petition is hereby GRANTED. The decision of
position without loss of seniority rights and jointly and the National Labor Relations Commissions dated April 15, 2003 is
severally pay complainant her money claims in accordance with hereby REVERSED and SET ASIDE and a new one is hereby rendered
the following computation: dismissing the complaint filed by private respondent against Kasei
Corporation, et al. for constructive dismissal.
a. Backwages 10/2001—07/2002  275,000.00 SO ORDERED.”16
(27,500 x 10 mos.) The appellate court denied petitioner’s motion for reconsideration,
hence, the present recourse.
b. Salary Differentials (01/2001—09/2001) 22,500.00
The core issues to be resolved in this case are (1) whether there was
c. Housing Allowance (01/2001—07/2002) 57,000.00
an employer-employee relationship between petitioner and private
d. Midyear Bonus 2001 27,500.00 respondent Kasei Corporation; and if in the affirmative, (2) whether
e. 13th Month Pay 27,500.00 petitioner was illegally dismissed.
f. 10% share in the profits of Kasei  361,175.00 Considering the conflicting findings by the Labor Arbiter and the
Corp. from 1996-2001 National Labor Relations Commission on one hand, and the Court of
g. Moral and exemplary damages 100,000.00 Appeals on the other, there is a need to reexamine the records to
h. 0% Attorney’s fees 87,076.50 determine which of the propositions espoused by the contending parties
    P957,742.50 is supported by substantial evidence.17
If reinstatement is no longer feasible, respondents are ordered to pay We held in Sevilla v. Court of Appeals18 that in this jurisdiction, there
complainant separation pay with additional backwages that would has been no uniform test to determine the existence of an employer-
accrue up to actual payment of separation pay. employee relation. Generally, courts have relied on the so-called right of
SO ORDERED.”14 control test where the person for whom the services are performed
reserves a right to control not only the end to be achieved but also the
On April 15, 2003, the NLRC affirmed with modification the Decision of means to be used in reaching such end. In addition to the standard of
the Labor Arbiter, the dispositive portion of which reads: right-of-control, the existing economic conditions prevailing between
PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby the parties, like the inclusion of the employee in the payrolls, can help in
MODIFIED as follows: determining the existence of an employer-employee relationship.
However, in certain cases the control test is not sufficient to give a
complete picture of the relationship between the parties, owing to the
1. 1)Respondents are directed to pay complainant separation pay
complexity of such a relationship where several positions have been held
computed at one month per year of service in addition to full
by the worker. There are instances when, aside from the employer’s
backwages from October 2001 to July 31, 2002;
power to control the employee with respect to the means and methods
2. 2)The awards representing moral and exemplary damages and
by which the work is to be accomplished, economic realities of the
10% share in profit in the respective accounts of P100,000.00
employment relations help provide a comprehensive analysis of the true
and P361,175.00 are deleted;
classification of the individual, whether as employee, independent
3. 3)The award of 10% attorney’s fees shall be based on salary
contractor, corporate officer or some other capacity.
differential award only;
183
 The better approach would therefore be to adopt a two-tiered test
involving: (1) the putative employer’s power to control the employee
with respect to the means and methods by which the work is to be
accomplished; and (2) the underlying economic realities of the activity
or relationship.
This two-tiered test would provide us with a framework of analysis,
which would take into consideration the totality of circumstances
surrounding the true nature of the relationship between the parties. This
is especially appropriate in this case where there is no written
agreement or terms of reference to base the relationship on; and due to
the complexity of the relationship based on the various positions and
responsibilities given to the worker over the period of the latter’s
employment.
The control test initially found application in the case of Viaña v. Al-
Lagadan and Piga,19 and lately in Leonardo v. Court of Appeals,20 where
we held that there is an employer-employee relationship when the
person for whom the services are performed reserves the right to
control not only the end achieved but also the manner and means used
to achieve that end.
In Sevilla v. Court of Appeals,21 we observed the need to consider the
existing economic conditions prevailing between the parties, in addition
to the standard of right-of-control like the inclusion of the employee in
the payrolls, to give a clearer picture in determining the existence of an
employer-employee relationship based on an analysis of the totality of
economic circumstances of the worker.
Thus, the determination of the relationship between employer and
employee depends upon the circumstances of the whole economic
activity,22 such as: (1) the extent to which the services performed are an
integral part of the employer’s business; (2) the extent of the worker’s
investment in equipment and facilities; (3) the nature and degree of
control exercised by the employer; (4) the worker’s opportunity for
profit and loss; (5) the amount of initiative, skill, judgment or foresight
required for the success of the claimed independent enterprise; (6) the
permanency and duration of the relationship between the worker and
the employer; and (7) the degree of dependency of the worker upon the
employer for his continued employment in that line of business. 23
The proper standard of economic dependence is whether the worker
is dependent on the alleged employer for his continued employment in
that line of business.24 In the United States, the touchstone of economic
reality in analyzing possible employment relationships for purposes of
the Federal Labor Standards Act is dependency. 25 By analogy, the
benchmark of economic reality in analyzing possible employment
relationships for purposes of the Labor Code ought to be the economic
dependence of the worker on his employer.
By applying the control test, there is no doubt that petitioner is an
employee of Kasei Corporation because she was under the direct control
and supervision of Seiji Kamura, the corporation’s Technical Consultant.
She reported for work regularly and served in various capacities as
Accountant, Liaison Officer, Technical Consultant, Acting Manager and
Corporate Secretary, with substantially the same job functions, that is,
rendering accounting and tax services to the company and performing
functions necessary and desirable for the proper operation of the
corporation such as securing business permits and other licenses over
an indefinite period of engagement.
Under the broader economic reality test, the petitioner can likewise
be said to be an employee of respondent corporation because she had
served the company for six years before her dismissal, receiving check
vouchers indicating her salaries/ wages, benefits, 13th month pay,
bonuses and allowances, as well as deductions and Social Security
contributions from August 1, 1999 to December 18, 2000. 26 When
petitioner was designated General Manager, respondent corporation
made a report to the SSS signed by Irene Ballesteros. Petitioner’s
membership in the SSS as manifested by a copy of the SSS specimen
signature card which was signed by the President of Kasei Corporation
and the inclusion of her name in the online inquiry system of the SSS
evinces the existence of an employer-employee relationship between
petitioner and respondent corporation.27
It is therefore apparent that petitioner is economically dependent on
respondent corporation for her continued employment in the latter’s
line of business.
In Domasig v. National Labor Relations Commission,28we held that in a
business establishment, an identification card is provided not only as a
security measure but mainly to identify the holder thereof as a bona fide
employee of the firm that issues it. Together with the cash vouchers
covering petitioner’s salaries for the months stated therein, these
matters constitute substantial evidence adequate to support a
conclusion that petitioner was an employee of private respondent.
We likewise ruled in Flores v. Nuestro29 that a corporation who
registers its workers with the SSS is proof that the latter were the
184
former’s employees. The coverage of Social Security Law is predicated
on the existence of an employer-employee relationship.
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001
has clearly established that petitioner never acted as Corporate
Secretary and that her designation as such was only for convenience.
The actual nature of petitioner’s job was as Kamura’s direct assistant
with the duty of acting as Liaison Officer in representing the company to
secure construction permits, license to operate and other requirements
imposed by government agencies. Petitioner was never entrusted with
corporate documents of the company, nor required to attend the
meeting of the corporation. She was never privy to the preparation of
any document for the corporation, although once in a while she was
required to sign prepared documentation for the company.30
The second affidavit of Kamura dated March 7, 2002 which
repudiated the December 5, 2001 affidavit has been allegedly withdrawn
by Kamura himself from the records of the case. 31 Regardless of this fact,
we are convinced that the allegations in the first affidavit are sufficient
to establish that petitioner is an employee of Kasei Corporation.
Granting arguendo, that the second affidavit validly repudiated the
first one, courts do not generally look with favor on any retraction or
recanted testimony, for it could have been secured by considerations
other than to tell the truth and would make solemn trials a mockery and
place the investigation of the truth at the mercy of unscrupulous
witnesses.32 A recantation does not necessarily cancel an earlier
declaration, but like any other testimony the same is subject to the test
of credibility and should be received with caution. 33
Based on the foregoing, there can be no other conclusion that
petitioner is an employee of respondent Kasei Corporation. She was
selected and engaged by the company for compensation, and is
economically dependent upon respondent for her continued
employment in that line of business. Her main job function involved
accounting and tax services rendered to respondent corporation on a
regular basis over an indefinite period of engagement. Respondent
corporation hired and engaged petitioner for compensation, with the
power to dismiss her for cause. More importantly, respondent
corporation had the power to control petitioner with the means and
methods by which the work is to be accomplished.
The corporation constructively dismissed petitioner when it reduced
her salary by P2,500 a month from January to September 2001. This
amounts to an illegal termination of employment, where the petitioner is
entitled to full backwages. Since the position of petitioner as accountant
is one of trust and confidence, and under the principle of strained
relations, petitioner is further entitled to separation pay, in lieu of
reinstatement.34
A diminution of pay is prejudicial to the employee and amounts to
constructive dismissal. Constructive dismissal is an involuntary
resignation resulting in cessation of work resorted to when continued
employment becomes impossible, unreasonable or unlikely; when there
is a demotion in rank or a diminution in pay; or when a clear
discrimination, insensibility or disdain by an employer becomes
unbearable to an employee.35 In Globe Telecom, Inc. v. Florendo-
Flores,36 we ruled that where an employee ceases to work due to a
demotion of rank or a diminution of pay, an unreasonable situation
arises which creates an adverse working environment rendering it
impossible for such employee to continue working for her employer.
Hence, her severance from the company was not of her own making and
therefore amounted to an illegal termination of employment.
In affording full protection to labor, this Court must ensure equal
work opportunities regardless of sex, race or creed. Even as we, in every
case, attempt to carefully balance the fragile relationship between
employees and employers, we are mindful of the fact that the policy of
the law is to apply the Labor Code to a greater number of employees.
This would enable employees to avail of the benefits accorded to them
by law, in line with the constitutional mandate giving maximum aid and
protection to labor, promoting their welfare and reaffirming it as a
primary social economic force in furtherance of social justice and
national development.
WHEREFORE, the petition is GRANTED. The Decision and Resolution
of the Court of Appeals dated October 29, 2004 and October 7, 2005,
respectively, in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE.
The Decision of the National Labor Relations Commission dated April 15,
2003 in NLRC NCR CA No. 032766-02, is REINSTATED. The case is
REMANDED to the Labor Arbiter for the recomputation of petitioner
Angelina Francisco’s full backwages from the time she was illegally
terminated until the date of finality of this decision, and separation pay
representing one-half month pay for every year of service, where a
fraction of at least six months shall be considered as one whole year.
SO ORDERED.
     Panganiban (C.J., Chairperson), Austria-Martinez,Callejo,
Sr. and Chico-Nazario, JJ., concur.
185
 Petition granted, judgment and resolution annulled and set aside.
Note.—Factors to be considered in ascertaining an employer-
employee relationship. (San Miguel Corporation vs. MAERC Integrated
Services, Inc., 405 SCRA 579 [2003])

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186

ARE CORPORATE OFFICERS EMPLOYERS?
The Court directs the immediate payment of the balance to him,
unless lawful grounds warrant the continued retention of the balance in
relation to other cases involving him.
SO ORDERED.
Carpio-Morales (Chairperson), Brion, Villarama, Jr.and Sereno, JJ.,
concur.
Judge Damaso Herrera meted with P11,000 fine.
Note.—Judges are enjoined to dispose of the court’s business
promptly and expeditiously and decide cases within the period fixed by
law. (Salvador vs. Limsiaco, Jr., 551 SCRA 373 [2008])
——o0o——
G.R. No. 157802. October 13, 2010.*
MATLING INDUSTRIAL AND COMMERCIAL CORPORATION, RICHARD
K. SPENCER, CATHERINE SPENCER, AND ALEX MANCILLA,
petitioners, vs. RICARDO R. COROS, respondent.
Labor Law; Labor Arbiters; Illegal Dismissals; As a rule, the illegal
dismissal of an officer or other employee of a private employer is properly
cognizable by the Labor Arbiter (LA).—As a rule, the illegal dismissal of
an officer or other employee of a private employer is properly
cognizable by the LA. This is pursuant to Article 217 (a) 2 of the Labor
Code, as amended.
Same; Same; Same; Where the complaint for illegal dismissal
concerns a corporate officer, however, the controversy falls under the
jurisdiction of the Securities and Exchange Commission (SEC).—Where
the complaint for illegal dismissal concerns a corporate officer, however,
the controversy falls under the jurisdiction of the Securities and
Exchange Commission (SEC), because the controversy arises out of intra-
corporate or partnership relations between and among stockholders,
members, or associates, or between any or all of them and the
corporation, partnership, or association of which they are stockholders,
members, or associates, respectively; and between such corporation,
partnership, or association and the State insofar as the controversy
concerns their individual franchise or right to exist as such entity; or
because the controversy involves the election or appointment of a
director, trustee, officer, or manager of such corporation, partnership, or
association. Such controversy, among others, is known as an intra-
corporate dispute.
Same; Same; Same; Upon the passage of Republic Act No. 8799,
otherwise known as The Securities Regulation Code, the Securities and
Exchange Commission’s (SEC’s) jurisdiction over all intra-corporate
disputes was transferred to the Regional Trial Court (RTC).—Effective on
August 8, 2000, upon the passage of Republic Act No. 8799, otherwise
known as The Securities Regulation Code, the SEC’s jurisdiction over all
intra-corporate disputes was transferred to the RTC, pursuant to Section
5.2 of RA No. 8799, to wit: “5.2. The Commission’s jurisdiction over all
cases enumerated under Section 5 of Presidential Decree No. 902-A is
hereby transferred to the Courts of general jurisdiction or the
appropriate Regional Trial Court: Provided, that the Supreme Court in
the exercise of its authority may designate the Regional Trial Court
branches that shall exercise jurisdiction over these cases. The
Commission shall retain jurisdiction over pending cases involving
intra-corporate disputes submitted for final resolution which
should be resolved within one (1) year from the enactment of this
Code. The Commission shall retain jurisdiction over pending suspension
of payments/rehabilitation cases filed as of 30 June 2000 until finally
disposed.”
Same; Corporation Code; Corporate Officers; The creation of an office
pursuant to or under a By-Law enabling provision is not enough to make a
position a corporate office.—Conformably with Section 25, a position
must be expressly mentioned in the By-Laws in order to be considered
as a corporate office. Thus, the creation of an office pursuant to or under
a By-Law enabling provision is not enough to make a position a
corporate office. Guerrea v. Lezama, 103 Phil. 553 (1958), the first ruling
on the matter, held that the only officers of a corporation were those
given that character either by the Corporation Code or by the By-Laws;
the rest of the corporate officers could be considered only as employees
or subordinate officials.
Same; Same; Same; The power to elect the corporate officers was a
discretionary power that the law exclusively vested in the Board of
Directors, and could not be delegated to subordinate officers or agents.—
The Board of Directors of Matling could not validly delegate the power to
187
create a corporate office to the President, in light of Section 25 of
the Corporation Code requiring the Board of Directors itself to elect the
corporate officers. Verily, the power to elect the corporate officers was a
discretionary power that the law exclusively vested in the Board of
Directors, and could not be delegated to subordinate officers or agents.
The office of Vice President for Finance and Administration created by
Matling’s President pursuant to By-Law No. V was an ordinary, not a
corporate, office.
Same; Same; Same; The statement in Tabang, to the effect that offices
not expressly mentioned in the By-Laws but were created pursuant to a
By-Law enabling provision were also considered corporate offices, was
plainly obiter dictum.—The petitioners’ reliance on Tabang, supra, is
misplaced. The statement in Tabang, to the effect that offices not
expressly mentioned in the By-Laws but were created pursuant to a By-
Law enabling provision were also considered corporate offices, was
plainly obiter dictum due to the position subject of the controversy being
mentioned in the By-Laws. Thus, the Court held therein that the position
was a corporate office, and that the determination of the rights and
liabilities arising from the ouster from the position was an intra-
corporate controversy within the SEC’s jurisdiction.
Same; Same; Same; Elements in order to determine whether a
dispute constitutes an intra-corporate controversy or not.—True it is that
the Court pronounced in Tabang as follows: “Also, an intra-corporate
controversy is one which arises between a stockholder and the
corporation. There is no distinction, qualification or any exemption
whatsoever. The provision is broad and covers all kinds of controversies
between stockholders and corporations.” However,
the Tabang pronouncement is not controlling because it is too sweeping
and does not accord with reason, justice, and fair play. In order to
determine whether a dispute constitutes an intra-corporate controversy
or not, the Court considers two elements instead, namely: (a) the status
or relationship of the parties; and (b) the nature of the question that is
the subject of their controversy.
PETITION for review on certiorari of the decision and resolution of the
Court of Appeals.
   The facts are stated in the opinion of the Court.
  Reyes & Reyes Law Offices for petitioners.
  Antonio R. Bacalso II for respondent.
BERSAMIN, J.:
This case reprises the jurisdictional conundrum of whether a
complaint for illegal dismissal is cognizable by the Labor Arbiter (LA) or
by the Regional Trial Court (RTC). The determination of whether the
dismissed officer was a regular employee or a corporate officer unravels
the conundrum. In the case of the regular employee, the LA has
jurisdiction; otherwise, the RTC exercises the legal authority to
adjudicate.
In this appeal via petition for review on certiorari, the petitioners
challenge the decision dated September 13, 2002 1 and the resolution
dated April 2, 2003,2 both promulgated in CA-G.R. SP No. 65714
entitled Matling Industrial and Commercial Corporation, et al. v. Ricardo
R. Coros and National Labor Relations Commission, whereby by the Court
of Appeals (CA) sustained the ruling of the National Labor Relations
Commission (NLRC) to the effect that the LA had jurisdiction because the
respondent was not a corporate officer of petitioner Matling Industrial
and Commercial Corporation (Matling).
Antecedents
After his dismissal by Matling as its Vice President for Finance and
Administration, the respondent filed on August 10, 2000 a complaint for
illegal suspension and illegal dismissal against Matling and some of its
corporate officers (petitioners) in the NLRC, Sub-Regional Arbitration
Branch XII, Iligan City.3
The petitioners moved to dismiss the complaint,4 raising the ground,
among others, that the complaint pertained to the jurisdiction of the
Securities and Exchange Commission (SEC) due to the controversy being
intra-corporate inasmuch as the respondent was a member of Matling’s
Board of Directors aside from being its Vice President for Finance and
Administration prior to his termination.
The respondent opposed the petitioners’ motion to dismiss,5 insisting
that his status as a member of Matling’s Board of Directors was doubtful,
considering that he had not been formally elected as such; that he did
not own a single share of stock in Matling, considering that he had been
made to sign in blank an undated indorsement of the certificate of stock
he had been given in 1992; that Matling had taken back and retained the
certificate of stock in its custody; and that even assuming that he had
been a Director of Matling, he had been removed as the Vice President
188
for Finance and Administration, not as a Director, a fact that the notice of
his termination dated April 10, 2000 showed.
On October 16, 2000, the LA granted the petitioners’ motion to
dismiss,6 ruling that the respondent was a corporate officer because he
was occupying the position of Vice President for Finance and
Administration and at the same time was a Member of the Board of
Directors of Matling; and that, consequently, his removal was a
corporate act of Matling and the controversy resulting from such
removal was under the jurisdiction of the SEC, pursuant to Section 5,
paragraph (c) of Presidential Decree No. 902.
Ruling of the NLRC
The respondent appealed to the NLRC,7 urging that:
I.
THE HONORABLE LABOR ARBITER COMMITTED GRAVE ABUSE OF
DISCRETION GRANTING APPELLEE’S MOTION TO DISMISS WITHOUT
GIVING THE APPELLANT AN OPPORTUNITY TO FILE HIS OPPOSITION
THERETO THEREBY VIOLATING THE BASIC PRINCIPLE OF DUE
PROCESS.
II
THE HONORABLE LABOR ARBITER COMMITTED AN ERROR IN
DISMISSING THE CASE FOR LACK OF JURISDICTION.
On March 13, 2001, the NLRC set aside the dismissal, concluding that
the respondent’s complaint for illegal dismissal was properly cognizable
by the LA, not by the SEC, because he was not a corporate officer by
virtue of his position in Matling, albeit high ranking and managerial, not
being among the positions listed in Matling’s Constitution and By-
Laws.8 The NLRC disposed thuswise:
“WHEREFORE, the Order appealed from is SET ASIDE. A new one is
entered declaring and holding that the case at bench does not involve
any intracorporate matter. Hence, jurisdiction to hear and act on said
case is vested with the Labor Arbiter, not the SEC, considering that the
position of Vice-President for Finance and Administration being held by
complainant-appellant is not listed as among respondent’s corporate
officers.
Accordingly, let the records of this case be REMANDED to the
Arbitration Branch of origin in order that the Labor Arbiter below could
act on the case at bench, hear both parties, receive their respective
evidence and position papers fully observing the requirements of due
process, and resolve the same with reasonable dispatch.
SO ORDERED.”
The petitioners sought reconsideration, 9 reiterating that the
respondent, being a member of the Board of Directors, was a corporate
officer whose removal was not within the LA’s jurisdiction.
The petitioners later submitted to the NLRC in support of the motion
for reconsideration the certified machine copies of Matling’s Amended
Articles of Incorporation and By-Laws to prove that the President of
Matling was thereby granted “full power to create new offices and
appoint the officers thereto, and the minutes of special meeting held on
June 7, 1999 by Matling’s Board of Directors to prove that the
respondent was, indeed, a Member of the Board of Directors. 10
Nonetheless, on April 30, 2001, the NLRC denied the
petitioners’ motion for reconsideration.11
Ruling of the CA
The petitioners elevated the issue to the CA by petition for certiorari,
docketed as CA-G.R. No. SP 65714, contending that the NLRC committed
grave abuse of discretion amounting to lack of jurisdiction in reversing
the correct decision of the LA.
In its assailed decision promulgated on September 13, 2002, 12 the CA
dismissed the petition for certiorari, explaining:
 “For a position to be considered as a corporate office, or, for that
matter, for one to be considered as a corporate officer, the position must,
if not listed in the by-laws, have been created by the corporation’s board
of directors, and the occupant thereof appointed or elected by the same
board of directors or stockholders. This is the implication of the ruling
in Tabang v. National Labor Relations Commission, which reads:
“The president, vice president, secretary and treasurer are
commonly regarded as the principal or executive officers of a
corporation, and modern corporation statutes usually designate
them as the officers of the corporation. However,other offices are
sometimes created by the charter or by-laws of a corporation, or
the board of directors may be empowered under the by-laws of a
corporation to create additional offices as may be necessary.
It has been held that an ‘office’ is created by the charter of the
corporation and the officer is elected by the directors or
stockholders. On the other hand, an ‘employee’ usually occupies
189
 no office and generally is employed not by action of the directors
or stockholders but by the managing officer of the corporation
who also determines the compensation to be paid to such
employee.”
This ruling was reiterated in the subsequent cases of Ongkingco v.
National Labor Relations Commission and De Rossi v. National Labor
Relations Commission.
The position of vice-president for administration and finance, which
Coros used to hold in the corporation, was not created by the
corporation’s board of directors but only by its president or executive
vice-president pursuant to the by-laws of the corporation. Moreover,
Coros’ appointment to said position was not made through any act of the
board of directors or stockholders of the corporation. Consequently, the
position to which Coros was appointed and later on removed from, is not
a corporate office despite its nomenclature, but an ordinary office in the
corporation.
Coros’ alleged illegal dismissal therefrom is, therefore, within the
jurisdiction of the labor arbiter.
WHEREFORE, the petition for certiorari is hereby DISMISSED.20
SO ORDERED.”
The CA denied the petitioners’ motion for reconsideration on April 2,
2003.13
Issue
Thus, the petitioners are now before the Court for a review
on certiorari, positing that the respondent was a stockholder/member of
the Matling’s Board of Directors as well as its Vice President for Finance
and Administration; and that the CA consequently erred in holding that
the LA had jurisdiction.
The decisive issue is whether the respondent was a corporate officer
of Matling or not. The resolution of the issue determines whether the LA
or the RTC had jurisdiction over his complaint for illegal dismissal.
Ruling
The appeal fails.
I among stockholders, members, or associates, or between any or all of
The Law on Jurisdiction in Dismissal Cases
As a rule, the illegal dismissal of an officer or other employee of a
private employer is properly cognizable by the LA. This is pursuant to
Article 217 (a) 2 of the Labor Code, as amended, which provides as
follows:
“Article 217. Jurisdiction of the Labor Arbiters and the Commission.
—(a) Except as otherwise provided under this Code, the Labor
Arbiters shall have original and exclusive jurisdiction to hear and
decide, within thirty (30) calendar days after the submission of the case
by the parties for decision without extension, even in the absence of
stenographic notes, the following cases involving all workers,
whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3.  If accompanied with a claim for reinstatement, those cases that
workers may file involving wages, rates of pay, hours of work and other
terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of
damages arising from the employer-employee relations;
5.  Cases arising from any violation of Article 264 of this Code,
including questions involving the legality of strikes and lockouts; and
6.  Except claims for Employees Compensation, Social Security,
Medicare and maternity benefits, all other claims arising from employer-
employee relations, including those of persons in domestic or household
service, involving an amount exceeding five thousand pesos (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 or implementation of
collective bargaining agreements and those arising from the
interpretation or enforcement of company personnel policies shall be
disposed of by the Labor Arbiter by referring the same to the grievance
machinery and voluntary arbitration as may be provided in said
agreements. (As amended by Section 9, Republic Act No. 6715, March 21,
1989).”
Where the complaint for illegal dismissal concerns a corporate
officer, however, the controversy falls under the jurisdiction of the
Securities and Exchange Commission (SEC), because the controversy
arises out of intra-corporate or partnership relations between and
them and the corporation, partnership, or association of which they are
190
stockholders, members, or associates, respectively; and between such
corporation, partnership, or association and the State insofar as the
controversy concerns their individual franchise or right to exist as such
entity; or because the controversy involves the election or appointment
of a director, trustee, officer, or manager of such corporation,
partnership, or association.14Such controversy, among others, is known
as an intra-corporate dispute.
Effective on August 8, 2000, upon the passage of Republic Act No.
8799,15 otherwise known as The Securities Regulation Code, the SEC’s
jurisdiction over all intra-corporate disputes was transferred to the RTC,
pursuant to Section 5.2 of RA No. 8799, to wit:
“5.2. The Commission’s jurisdiction over all cases enumerated
under Section 5 of Presidential Decree No. 902-A is hereby transferred
to the Courts of general jurisdiction or the appropriate Regional
Trial Court: Provided, that the Supreme Court in the exercise of its
authority may designate the Regional Trial Court branches that shall
exercise jurisdiction over these cases. The Commission shall retain
jurisdiction over pending cases involving intra-corporate disputes
submitted for final resolution which should be resolved within one
(1) year from the enactment of this Code. The Commission shall
retain jurisdiction over pending suspension of payments/rehabilitation
cases filed as of 30 June 2000 until finally disposed.”
Considering that the respondent’s complaint for illegal dismissal was
commenced on August 10, 2000, it might come under the coverage of
Section 5.2 of RA No. 8799, supra, should it turn out that the respondent
was a corporate, not a regular, officer of Matling.
II
Was the Respondent’s Position of Vice President
for Administration and Finance a Corporate Office?
We must first resolve whether or not the respondent’s position as
Vice President for Finance and Administration was a corporate office. If
it was, his dismissal by the Board of Directors rendered the matter an
intra-corporate dispute cognizable by the RTC pursuant to RA No. 8799.
The petitioners contend that the position of Vice President for
Finance and Administration was a corporate office, having been created
by Matling’s President pursuant to By-Law No. V, as amended, 16 to wit:
BY-LAW NO. V diems as may be allowed by the stockholders.
Officers
“The President shall be the executive head of the corporation; shall
preside over the meetings of the stockholders and directors; shall
countersign all certificates, contracts and other instruments of the
corporation as authorized by the Board of Directors; shall have full
power to hire and discharge any or all employees of the
corporation; shall have full power to create new offices and to
appoint the officers thereto as he may deem proper and necessary
in the operations of the corporation and as the progress of the
business and welfare of the corporation may demand; shall make
reports to the directors and stockholders and perform all such other
duties and functions as are incident to his office or are properly required
of him by the Board of Directors. In case of the absence or disability of
the President, the Executive Vice President shall have the power to
exercise his functions.”
The petitioners argue that the power to create corporate offices and
to appoint the individuals to assume the offices was delegated by
Matling’s Board of Directors to its President through By-Law No. V, as
amended; and that any office the President created, like the position of
the respondent, was as valid and effective a creation as that made by the
Board of Directors, making the office a corporate office. In justification,
they cite Tabang v. National Labor Relations Commission,17 which held
that “other offices are sometimes created by the charter or by-laws of a
corporation, or the board of directors may be empowered under the by-
laws of a corporation to create additional officers as may be necessary.”
The respondent counters that Matling’s By-Laws did not list his
position as Vice President for Finance and Administration as one of the
corporate offices; that Matling’s By-Law No. III listed only four corporate
officers, namely: President, Executive Vice President, Secretary, and
Treasurer; 18 that the Directors and Officers
The directors shall be elected by the stockholders at their annual
meeting and shall hold their respective offices for a term of one year or
until their successors are duly elected and qualified unless they shall be
sooner removed as hereinafter provided; Provided, however, that the
foregoing provisions shall not apply to the first Board of Directors who
are appointed to serve until the next annual meeting of the stockholders.
Absence from two successive meetings of the Board of Directors may in
the discretion of the Board terminate the membership of the director.
Directors shall receive no compensation for their services except per
191
 18The officers of the corporation shall be the President, Executive
Vice President, Secretary and Treasurer, each of whom may hold his
office until his successor is elected and qualified, unless sooner removed
by the Board of Directors; Provided, That for the convenience of the
corporation, the office of the Secretary and Treasurer my be held by one
and the same person. Officers shall be designated by the stockholders’
meeting at the time they elect the members of the Board of Directors.
Any vacancy occurring among the officers of the Corporation on account
of removal or resignation shall be filled by a stockholders’ meeting.
Stockholders holding one half or corporate offices contemplated in the
phrase “and such other officers as may be provided for in the by-laws”
found in Section 25 of the Corporation Code should be clearly and
expressly stated in the By-Laws; that the fact that Matling’s By-Law No.
III dealt with Directors & Officerswhile its By-Law No. V dealt
with Officers proved that there was a differentiation between the officers
mentioned in the two provisions, with those classified under By-Law No.
V being ordinary or non-corporate officers; and that the officer, to be
considered as a corporate officer, must be elected by the Board of
Directors or the stockholders, for the President could only appoint an
employee to a position pursuant to By-Law No. V.
We agree with respondent.
Section 25 of the Corporation Code provides:
“Section 25. Corporate officers, quorum.—Immediately after their
election, the directors of a corporation must formally organize by the
election of a president, who shall be a director, a treasurer who may or
may not be a director, a secretary who shall be a resident and citizen of
the Philippines, and such other officers as may be provided for in the
by-laws. Any two (2) or more positions may be held concurrently by the
same person, except that no one shall act as president and secretary or
as president and treasurer at the same time.
The directors or trustees and officers to be elected shall perform the
duties enjoined on them by law and the by-laws of the corporation.
Unless the articles of incorporation or the by-laws provide for a greater
majority, a majority of the number of directors or trustees as fixed in the
articles of incorporation shall constitute a quorum for the transaction of
corporate business, and every decision of at least a majority of the
directors or trustees present at a meeting at which there is a quorum
shall be valid as a corporate act, except for the election of officers which
shall require the vote of a majority of all the members of the board.
Directors or trustees cannot attend or vote by proxy at board
meetings.”
Conformably with Section 25, a position must be expressly
mentioned in the By-Laws in order to be considered as a corporate
office. Thus, the creation of an office pursuant to or under a By-Law
enabling provision is not enough to make a position a corporate
office. Guerrea v. Lezama,19 the first ruling on the matter, held that the
only officers of a corporation were those given that character either by
the Corporation Code or by the By-Laws; the rest of the corporate officers
could be considered only as employees or subordinate officials. Thus, it
was held in Easycall Communications Phils., Inc. v. King:20
 “An “office” is created by the charter of the corporation and the
officer is elected by the directors or stockholders. On the other hand, an
employee occupies no office and generally is employed not by the action
of the directors or stockholders but by the managing officer of the
corporation who also determines the compensation to be paid to such
employee.
In this case, respondent was appointed vice president for nationwide
expansion by Malonzo, petitioner’’s general manager, not by the board of
directors of petitioner. It was also Malonzo who determined the
compensation package of respondent. Thus, respondent was an
employee, not a “corporate officer.” The CA was therefore correct in
ruling that jurisdiction over the case was properly with the NLRC, not
the SEC (now the RTC).”
This interpretation is the correct application of Section 25 of
the Corporation Code, which plainly states that the corporate officers are
the President, Secretary, Treasurer and such other officers as may be
provided for in the By-Laws. Accordingly, the corporate officers in the
context of PD No. 902-A are exclusively those who are given that
character either by the Corporation Code or by the corporation’s By-
Laws.
A different interpretation can easily leave the way open for the Board
of Directors to circumvent the constitutionally guaranteed security of
tenure of the employee by the expedient inclusion in the By-Laws of an
enabling clause on the creation of just any corporate officer position.
It is relevant to state in this connection that the SEC, the primary
agency administering the Corporation Code, adopted a similar
interpretation of Section 25 of the Corporation Code in its Opinion dated
November 25, 1993,21 to wit:
192
 “Thus, pursuant to the above provision (Section 25 of the
Corporation Code), whoever are the corporate officers enumerated
in the by-laws are the exclusive Officers of the corporation and the
Board has no power to create other Offices without amending first
the corporate By-laws. However, the Board may create appointive
positions other than the positions of corporate Officers, but the
persons occupying such positions are not considered as corporate
officers within the meaning of Section 25 of the Corporation Code
and are not empowered to exercise the functions of the corporate
Officers, except those functions lawfully delegated to them. Their
functions and duties are to be determined by the Board of
Directors/Trustees.”
Moreover, the Board of Directors of Matling could not validly
delegate the power to create a corporate office to the President, in light
of Section 25 of the Corporation Coderequiring the Board of Directors
itself to elect the corporate officers. Verily, the power to elect
the corporate officers was a discretionary power that the law exclusively
vested in the Board of Directors, and could not be delegated to
subordinate officers or agents.22 The office of Vice President for Finance
and Administration created by Matling’s President pursuant to By-Law
No. V was an ordinary, not a corporate, office.
To emphasize, the power to create new offices and the power to
appoint the officers to occupy them vested by By-Law No. V merely
allowed Matling’s President to create non-corporate offices to be
occupied by ordinary employees of Matling. Such powers were
incidental to the President’s duties as the executive head of Matling to
assist him in the daily operations of the business.
The petitioners’ reliance on Tabang, supra, is misplaced. The
statement in Tabang, to the effect that offices not expressly mentioned in
the By-Laws but were created pursuant to a By-Law enabling provision
were also considered corporate offices, was plainly obiter dictum due to
the position subject of the controversy being mentioned in the By-Laws.
Thus, the Court held therein that the position was a corporate office, and
that the determination of the rights and liabilities arising from the ouster
from the position was an intra-corporate controversy within the SEC’s
jurisdiction.
In Nacpil v. Intercontinental Broadcasting Corporation,23 which may
be the more appropriate ruling, the position subject of the controversy
was not expressly mentioned in the By-Laws, but was created pursuant
to a By-Law enabling provision authorizing the Board of Directors to
create other offices that the Board of Directors might see fit to create.
The Court held there that the position was a corporate office, relying on
the obiter dictum in Tabang.
Considering that the observations earlier made herein show that the
soundness of their dicta is not unassailable, Tabang and Nacpil should
no longer be controlling.
III
Did Respondent’s Status as Director and
Stockholder Automatically Convert his Dismissal
into an Intra-Corporate Dispute?
Yet, the petitioners insist that because the respondent was a
Director/stockholder of Matling, and relying on Paguio v. National Labor
Relations Commission24 and Ongkingko v. National Labor Relations
Commission,25 the NLRC had no jurisdiction over his complaint,
considering that any case for illegal dismissal brought by a
stockholder/officer against the corporation was an intra-corporate
matter that must fall under the jurisdiction of the SEC conformably with
the context of PD No. 902-A.
The petitioners’ insistence is bereft of basis.
To begin with, the reliance on Paguio and Ongkingko is misplaced. In
both rulings, the complainants were undeniably corporate officers due
to their positions being expressly mentioned in the By-Laws, aside from
the fact that both of them had been duly elected by the respective Boards
of Directors. But the herein respondent’s position of Vice President for
Finance and Administration was not expressly mentioned in the By-
Laws; neither was the position of Vice President for Finance and
Administration created by Matling’s Board of Directors. Lastly, the
President, not the Board of Directors, appointed him.
True it is that the Court pronounced in Tabang as follows:
“Also, an intra-corporate controversy is one which arises between a
stockholder and the corporation. There is no distinction, qualification or
any exemption whatsoever. The provision is broad and covers all kinds
of controversies between stockholders and corporations.” 26
However, the Tabang pronouncement is not controlling because it is
too sweeping and does not accord with reason, justice, and fair play. In
order to determine whether a dispute constitutes an intra-corporate
controversy or not, the Court considers two elements instead, namely:
(a) the status or relationship of the parties; and (b) the nature of the
193
question that is the subject of their controversy. This was our thrust
in Viray v. Court of Appeals:27
“The establishment of any of the relationships mentioned above will
not necessarily always confer jurisdiction over the dispute on the SEC to
the exclusion of regular courts. The statement made in one case that the
rule admits of no exceptions or distinctions is not that absolute. The
better policy in determining which body has jurisdiction over a case
would be to consider not only the status or relationship of the parties
but also the nature of the question that is the subject of their
controversy.
Not every conflict between a corporation and its stockholders
involves corporate matters that only the SEC can resolve in the exercise
of its adjudicatory or quasi-judicial powers. If, for example, a person
leases an apartment owned by a corporation of which he is a
stockholder, there should be no question that a complaint for his
ejectment for non-payment of rentals would still come under the
jurisdiction of the regular courts and not of the SEC. By the same token, if
one person injures another in a vehicular accident, the complaint for
damages filed by the victim will not come under the jurisdiction of the
SEC simply because of the happenstance that both parties are
stockholders of the same corporation. A contrary interpretation would
dissipate the powers of the regular courts and distort the meaning and
intent of PD No. 902-A.”
In another case, Mainland Construction Co., Inc. v. Movilla,28 the Court
reiterated these determinants thuswise:
“In order that the SEC (now the regular courts) can take cognizance
of a case, the controversy must pertain to any of the following
relationships:
a) between the corporation, partnership or association and the
public;
b) between the corporation, partnership or association and its
stockholders, partners, members or officers;
c)  between the corporation, partnership or association and the
State as far as its franchise, permit or license to operate is
concerned; and
d) among the stockholders, partners or associates themselves.
The fact that the parties involved in the controversy are all
stockholders or that the parties involved are the stockholders and the
corporation does not necessarily place the dispute within the ambit of
the jurisdiction of SEC. The better policy to be followed in determining
jurisdiction over a case should be to consider concurrent factors such as
the status or relationship of the parties or the nature of the question that
is the subject of their controversy. In the absence of any one of these
factors, the SEC will not have jurisdiction. Furthermore, it does not
necessarily follow that every conflict between the corporation and its
stockholders would involve such corporate matters as only the SEC can
resolve in the exercise of its adjudicatory or quasi-judicial powers.” 29
The criteria for distinguishing between corporate officers who may
be ousted from office at will, on one hand, and ordinary corporate
employees who may only be terminated for just cause, on the other
hand, do not depend on the nature of the services performed, but on the
manner of creation of the office. In the respondent’s case, he was
supposedly at once an employee, a stockholder, and a Director of
Matling. The circumstances surrounding his appointment to office must
be fully considered to determine whether the dismissal constituted an
intra-corporate controversy or a labor termination dispute. We must
also consider whether his status as Director and stockholder had any
relation at all to his appointment and subsequent dismissal as Vice
President for Finance and Administration.
Obviously enough, the respondent was not appointed as Vice
President for Finance and Administration because of his being a
stockholder or Director of Matling. He had started working for Matling
on September 8, 1966, and had been employed continuously for 33 years
until his termination on April 17, 2000, first as a bookkeeper, and his
climb in 1987 to his last position as Vice President for Finance and
Administration had been gradual but steady, as the following sequence
indicates:
1966—Bookkeeper
1968—Senior Accountant
1969—Chief Accountant
1972—Office Supervisor
1973—Assistant Treasurer
1978—Special Assistant for Finance
1980—Assistant Comptroller
1983—Finance and Administrative Manager
1985—Asst. Vice President for Finance and Administration
1987 to April 17, 2000—Vice President for Finance and
Administration
Even though he might have become a stockholder of Matling in 1992,
his promotion to the position of Vice President for Finance and
194
Administration in 1987 was by virtue of the length of quality service he
had rendered as an employee of Matling. His subsequent acquisition of
the status of Director/stockholder had no relation to his promotion.
Besides, his status of Director/stockholder was unaffected by his
dismissal from employment as Vice President for Finance and
Administration.33
In Prudential Bank and Trust Company v. Reyes, 30 a case involving a
lady bank manager who had risen from the ranks but was dismissed, the
Court held that her complaint for illegal dismissal was correctly brought
to the NLRC, because she was deemed a regular employee of the bank.
The Court observed thus:
“It appears that private respondent was appointed Accounting Clerk
by the Bank on July 14, 1963. From that position she rose to become
supervisor. Then in 1982, she was appointed Assistant Vice-President
which she occupied until her illegal dismissal on July 19, 1991. The
bank’s contention that she merely holds an elective position and
that in effect she is not a regular employee is belied by the nature of
her work and her length of service with the Bank. As earlier stated,
she rose from the ranks and has been employed with the Bank since
1963 until the termination of her employment in 1991. As Assistant Vice
President of the Foreign Department of the Bank, she is tasked, among
others, to collect checks drawn against overseas banks payable in
foreign currency and to ensure the collection of foreign bills or checks
purchased, including the signing of transmittal letters covering the same.
It has been stated that “the primary standard of determining regular
employment is the reasonable connection between the particular
activity performed by the employee in relation to the usual trade or
business of the employer. Additionally, “an employee is regular because
of the nature of work and the length of service, not because of the mode
or even the reason for hiring them.” As Assistant Vice-President of the
Foreign Department of the Bank she performs tasks integral to the
operations of the bank and her length of service with the bank totaling
28 years speaks volumes of her status as a regular employee of the bank.
In fine, as a regular employee, she is entitled to security of tenure; that is,
her services may be terminated only for a just or authorized cause. This
being in truth a case of illegal dismissal, it is no wonder then that the
Bank endeavored to the very end to establish loss of trust and
confidence and serious misconduct on the part of private respondent
but, as will be discussed later, to no avail.”  exclusive jurisdiction over termination disputes between an employer
G.R. No. 209085. June 6, 2018.*
 
NICANOR F. MALCABA, CHRISTIAN C. NEPOMUCENO, and LAURA
MAE FATIMA F. PALIT-ANG, petitioners, vs. PROHEALTH PHARMA
PHILIPPINES, INC., GENEROSO R. DEL CASTILLO, JR., and DANTE M.
BUSTO, respondents.
Labor Law; Appeals; Appeal Bonds; In labor cases, an appeal by an
employer is perfected only by filing a bond equivalent to the monetary
award.—Appeal is not a matter of right. Courts and tribunals have the
discretion whether to give due course to an appeal or to dismiss it
outright. The perfection of an appeal is, thus, jurisdictional.
Noncompliance with the manner in which to file an appeal renders the
judgment final and executory. In labor cases, an appeal by an employer is
perfected only by filing a bond equivalent to the monetary award.
Same; Same; Same; The purpose of requiring an appeal bond is “to
guarantee the payment of valid and legal claims against the employer.”—
The purpose of requiring an appeal bond is “to guarantee the payment of
valid and legal claims against the employer.” It is a measure of financial
security granted to an illegally dismissed employee since the resolution
of the employer’s appeal may take an indeterminable amount of time. In
particular: The requirement that the employer post a cash or surety
bond to perfect its/his appeal is apparently intended to assure the
workers that if they prevail in the case, they will receive the money
judgment in their favor upon the dismissal of the employer’s appeal. It
was intended to discourage employers from using an appeal to delay, or
even evade, their obligation to satisfy their employees’ just and lawful
claims. Procedural rules require that the appeal bond filed be “genuine.”
An appeal bond determined by the National Labor Relations Commission
to be “irregular or not genuine” shall cause the immediate dismissal of
the appeal.
Same; Labor Arbiters; National Labor Relations Commission;
Jurisdiction; Under the Labor Code, the Labor Arbiter (LA) exercises
original and exclusive jurisdiction over termination disputes between an
employer and an employee while the National Labor Relations
Commission (NLRC) exercises exclusive appellate jurisdiction over these
cases.—Under the Labor Code, the Labor Arbiter exercises original and
and an employee while the National Labor Relations Commission
195
exercises exclusive appellate jurisdiction over these cases: Article 224.
[217] Jurisdiction of the Labor Arbiters and the Commission.—(a) Except
as otherwise provided under this Code, the Labor Arbiters shall have
original and exclusive jurisdiction to hear and decide, within thirty (30)
calendar days after the submission of the case by the parties for decision
without extension, even in the absence of stenographic notes, the
following cases involving all workers, whether agricultural or
nonagricultural: . . . (2) Termination disputes; . . . (b) The Commission
shall have exclusive appellate jurisdiction over all cases decided by
Labor Arbiters. The presumption under this provision is that the parties
have an employer-employee relationship. Otherwise, the case would be
cognizable in different tribunals even if the action involves a termination
dispute.
Same; Corporations; Corporate Officers; Intra-Corporate Disputes;
Under Section 25 of the Corporation Code, the President of a corporation
is considered a corporate officer. The dismissal of a corporate officer is
considered an intra-corporate dispute, not a labor dispute.—Under
Section 25 of the Corporation Code, the President of a corporation is
considered a corporate officer. The dismissal of a corporate officer is
considered an intra-corporate dispute, not a labor dispute. Thus,
in Tabang v. National Labor Relations Commission, 266 SCRA 462 (1997):
A corporate officer’s dismissal is always a corporate act, or an intra-
corporate controversy, and the nature is not altered by the reason or
wisdom with which the Board of Directors may have in taking such
action. Also, an intra-corporate controversy is one which arises between
a stockholder and the corporation. There is no distinction, qualification,
nor any exemption whatsoever. The provision is broad and covers all
kinds of controversies between stockholders and corporations.
Corporations; Intra-Corporate Disputes; Regional Trial Courts;
Jurisdiction; Corporate Officers; Effective on August 8, 2000, upon the
passage of Republic Act (RA) No. 8799, otherwise known as The Securities
Regulation Code, the Securities and Exchange Commission’s (SEC’s)
jurisdiction over all intra-corporate disputes was transferred to the
Regional Trial Court (RTC), pursuant to Section 5.2 of RA No. 8799.—
Effective on August 8, 2000, upon the passage of Republic Act No. 8799,
otherwise known as The Securities Regulation Code, the SEC’s
jurisdiction over all intra-corporate disputes was transferred to the RTC,
pursuant to Section 5.2 of RA No. 8799, to wit: 5.2. The Commission’s
jurisdiction over all cases enumerated under Section 5 of Presidential
Decree No. 902-A is hereby transferred to the Courts of general
jurisdiction or the appropriate Regional Trial Court: Provided, that the
Supreme Court in the exercise of its authority may designate the
Regional Trial Court branches that shall exercise jurisdiction over these
cases. The Commission shall retain jurisdiction over pending cases
involving intra-corporate disputes submitted for final resolution which
should be resolved within one (1) year from the enactment of this Code.
The Commission shall retain jurisdiction over pending suspension of
payments/rehabilitation cases filed as of 30 June 2000 until finally
disposed.
Same; Same; Corporate Officers; The clear weight of jurisprudence
clarifies that to be considered a corporate officer, first, the office must be
created by the charter of the corporation, and second, the officer must be
elected by the board of directors or by the stockholders.—The clear weight
of jurisprudence clarifies that to be considered a corporate officer, first,
the office must be created by the charter of the corporation, and second,
the officer must be elected by the board of directors or by the
stockholders. Petitioner Malcaba was an incorporator of the corporation
and a member of the Board of Directors. Respondent corporation’s By-
Laws creates the office of the President.
Labor Law; Termination of Employment; Loss of Trust and
Confidence; Loss of trust and confidence is a just cause to terminate either
managerial employees or rank-and-file employees who regularly handle
large amounts of money or property in the regular exercise of their
functions.—Article 294 [279] of the Labor Code provides that an
employer may terminate the services of an employee only upon just or
authorized causes. Article 297 [282] enumerates the just causes for
termination, among which is “[f]raud or willful breach by the employee
of the trust reposed in him by his employer or duly authorized
representative[.]” Loss of trust and confidence is a just cause to
terminate either managerial employees or rank-and-file employees who
regularly handle large amounts of money or property in the regular
exercise of their functions. For an act to be considered a loss of trust and
confidence, it must be first, work-related, and second, founded on clearly
established facts: The complained act must be work-related such as
would show the employee concerned to be unfit to continue working for
the employer and it must be based on a willful breach of trust and
founded on clearly established facts. The basis for the dismissal must be
196
clearly and convincingly established but proof beyond reasonable doubt
is not necessary. The breach of trust must likewise be willful, that is, “it is
done intentionally, knowingly and purposely, without justifiable excuse,
as distinguished from an act done carelessly, thoughtlessly, heedlessly or
inadvertently.”
Same; Management Prerogatives; While an employer is free to
regulate all aspects of employment, the exercise of management
prerogatives must be in good faith and must not defeat or circumvent the
rights of its employees.—While an employer is free to regulate all aspects
of employment, the exercise of management prerogatives must be in
good faith and must not defeat or circumvent the rights of its employees.
In industries that mainly rely on sales, employers are free to discipline
errant employees who deliberately fail to report for work during a
crucial sales period. It would have been reasonable for respondents to
discipline petitioner Nepomuceno had he been a problematic employee
who unceremoniously refused to do his work. However, as found by the
Labor Arbiter and the National Labor Relations Commission, petitioner
Nepomuceno turned over all of his pending work to a reliever before he
left for Malaysia. He was able to reach his sales quota and surpass his
sales target even before taking his vacation leave. Respondents did not
suffer any financial damage as a result of his absence. This was also
petitioner Nepomuceno’s first infraction in his nine (9) years of service
with respondents. None of these circumstances constitutes
a willful breach of trust on his part. The penalty of dismissal, thus, was
too severe for this kind of infraction.
 
 Same; Termination of Employment; Illegal Dismissals; Reinstatement;
Backwages; Separation Pay; Strained Relations Doctrine; Considering that
petitioner Nepomuceno’s dismissal was done without just cause, he is
entitled to reinstatement and full backwages. If reinstatement is not
possible due to strained relations between the parties, he shall be awarded
separation pay at the rate of one (1) month for every year of service.—
Petitioner Nepomuceno received a memorandum on April 23, 2008,
asking him to explain why no administrative investigation should be
held against him. He submitted an explanation on the same day and
another explanation on May 2, 2008. On May 7, 2008, he was given his
notice of termination, which had already taken effect two (2) days
earlier, or on May 5, 2008. It is true that “[t]he essence of due process is
simply an opportunity to be heard.”Petitioner Nepomuceno had two (2)
opportunities within which to explain his actions. This would have been
sufficient to satisfy the requirement. The delay in handing him his notice
of termination, however, appears to have been an afterthought. While
strictly not a violation of procedural due process, respondents should
have been more circumspect in complying with the due process
requirements under the law. Considering that petitioner Nepomuceno’s
dismissal was done without just cause, he is entitled to reinstatement
and full backwages. If reinstatement is not possible due to strained
relations between the parties, he shall be awarded separation pay at the
rate of one (1) month for every year of service.
Same; Same; Willful Disobedience; For disobedience to be considered
as just cause for termination, two (2) requisites must concur: first, “the
employee’s assailed conduct must have been wilful or intentional,”
and second, “the order violated must have been reasonable, lawful, made
known to the employee and must pertain to the duties which he [or she]
had been engaged to discharge.”—For disobedience to be considered as
just cause for termination, two (2) requisites must concur: first, “the
employee’s assailed conduct must have been wilful or intentional,”
and second, “the order violated must have been reasonable, lawful, made
known to the employee and must pertain to the duties which he [or she]
had been engaged to discharge.” For disobedience to be willful, it must
be “characterized by a wrongful and perverse mental attitude rendering
the employee’s act inconsistent with proper subordination.” The conduct
complained of must also constitute “harmful behavior against the
business interest or person of his [or her] employer.” Thus, it is implied
in every case of willful disobedience that “the erring employee obtains
undue advantage detrimental to the business interest of the employer.”
Petitioner Palit-Ang, as Finance Officer, was instructed by respondent
Del Castillo to give a cash advance of P3,000.00 to District Branch
Manager Gamboa on November 26, 2007. This order was reasonable,
lawful, made known to petitioner Palit-Ang, and pertains to her duties.
What is left to be determined, therefore, is whether petitioner Palit-Ang
intentionally and willfully violated it as to amount to insubordination.
When Gamboa went to collect the money from petitioner Palit-Ang, he
was told to return the next day as she was still busy. When petitioner
Palit-Ang found out that the money was to be used for a car tune-up, she
suggested to Gamboa to just get the money from his mobilization fund
and that she just would reimburse it after. The Court of Appeals found
that these circumstances characterized petitioner Palit-Ang’s “arrogance
197
and hostility,” in failing to comply with respondent Del Castillo’s order,
and thus, warranted her dismissal.
Due Process; “The essence of due process is simply an opportunity to
be heard,” not that the employee must be accompanied by counsel at all
times.—Petitioner Palit-Ang likewise assails the failure of respondents to
inform her of her right to counsel when she was being investigated for
her infraction. As previously discussed, “[t]he essence of due process is
simply an opportunity to be heard,” not that the employee must be
accompanied by counsel at all times. A hearing was conducted and she
was furnished a notice of termination explaining the grounds for her
dismissal. She was not denied due process. Petitioner Palit-Ang,
nonetheless, is considered to have been illegally dismissed, her penalty
not having been proportionate to the infraction committed. Thus, she is
entitled to reinstatement and full backwages. If reinstatement is not
possible due to strained relations between the parties, she shall be
awarded separation pay at the rate of one (1) month for every year of
service.
PETITION for review on certiorari of the decision and resolution of the
Court of Appeals.
The facts are stated in the opinion of the Court.
   Poblador, Bautista & Reyes for petitioners.
  Atienza, Madrid & Formento for respondents.
 Pizarras & Associates Law Offices for respondents.
 
LEONEN, J.:
 
This case involves fundamental principles in labor cases.
First, in appeals of illegal dismissal cases, employers are strictly
mandated to file an appeal bond to perfect their appeals. Substantial
compliance, however, may merit liberality in its application.
Second, before any labor tribunal takes cognizance of termination
disputes, it must first have jurisdiction over the action. The Labor
Arbiter and the National Labor Relations Commission only exercise
jurisdiction over termination disputes between an employer and an
employee. They do not exercise jurisdiction over termination disputes
between a corporation and a corporate officer.
Third, while this Court recognizes the inherent right of employers to
discipline their employees, the penalties imposed must be
commensurate to the infractions committed. Dismissal of employees for
minor and negligible offenses may be considered as illegal dismissal.
This is a Petition for Review on Certiorari1 assailing the Court of
Appeals’ February 19, 2013 Decision2 and September 10, 2013
Resolution3 in C.A.-G.R. S.P. No. 119093, which reversed the judgments of
the Labor Arbiter and of the National Labor Relations Commission. The
Court of Appeals found that Nicanor F. Malcaba (Malcaba), a corporate
officer, should have questioned his dismissal before the Regional Trial
Court, not before the Labor Arbiter. It likewise held that Christian C.
Nepomuceno (Nepomuceno) and Laura Mae Fatima F. Palit-Ang (Palit-
Ang) were validly dismissed from service for loss of trust and
confidence, and insubordination, respectively.
ProHealth Pharma Philippines, Inc. (ProHealth) is a corporation
engaged in the sale of pharmaceutical products and health food on a
wholesale and retail basis. Generoso Del Castillo (Del Castillo) is the
Chair of the Board of Directors and Chief Executive Officer while Dante
Busto (Busto) is the Executive Vice President. Malcaba, Tomas Adona, Jr.
(Adona), Nepomuceno, and Palit-Ang were employed as its President,
Marketing Manager, Business Manager, and Finance Officer,
respectively.4
Malcaba had been employed with ProHealth since it started in 1997.
He was one of its incorporators together with Del Castillo and Busto, and
they were all members of the Board of Directors in 2004. He held
1,000,000 shares in the corporation. He was initially the Vice President
for Sales then became President in 2005.5
Malcaba alleged that Del Castillo did acts that made his job difficult.
He asked to take a leave on October 23, 2007. When he attempted to
return on November 5, 2007, Del Castillo insisted that he had already
resigned and had his things removed from his office. He attested that he
was paid a lower salary in December 2007 and his benefits were
withheld.6 On January 7, 2008, Malcaba tendered his resignation
effective February 1, 2008.7
Nepomuceno, for his part, alleged that he was initially hired as a
medical representative in 1999 but was eventually promoted to District
Business Manager for South Luzon. On March 24, 2008, he applied for
vacation leave for the dates April 24, 25, and 28, 2008, which Busto
approved. When he left for Malaysia on April 23, 2008, ProHealth sent
him a Memorandum dated April 24, 2008 asking him to explain his
absence. He replied through e-mail that he tried to call ProHealth to
inform them that his flight was on April 22, 2008 at 9:00 p.m. and not on
198
April 23, 2008 but was unable to connect on the phone. He tried to
explain again on May 2, 2008 and requested for a personal dialogue with
Del Castillo.8
On May 7, 2008, Nepomuceno was given a notice of termination,
which was effective May 5, 2008, on the ground of fraud and willful
breach of trust.9
Palit-Ang, on the other hand, was hired to join ProHealth’s audit team
in 2007. She was later promoted to Finance Officer. 10 On November 26,
2007, Del Castillo instructed Palit-Ang to give P3,000.00 from the
training funds to Johnmer Gamboa (Gamboa), a District Business
Manager, to serve as cash advance.11
On November 27, 2007, Busto issued a show cause memorandum for
Palit-Ang’s failure to release the cash advance. Palit-Ang was also
relieved of her duties and reassigned to the Office of the Personnel and
Administration Manager.12
In her explanation, Palit-Ang alleged that when Gamboa saw that she
was busy receiving cash sales from another District Business Manager,
he told her that he would just return the next day to collect his cash
advance.13 When he told her that the cash advance was for car repairs,
Palit-Ang told him to get the cash from his revolving fund, which she
would reimburse after the repairs were done. Del Castillo was
dissatisfied with her explanation and transferred her to another office. 14
On December 3, 2007, Palit-Ang was invited to a fact-finding
investigation,15 which was held on December 10, 2007, where Palit-Ang
was again asked to explain her actions. 16
On December 17, 2007, she was handed a notice of termination
effective December 31, 2007, for disobeying the order of ProHealth’s
highest official.17
Malcaba, Nepomuceno, Palit-Ang, and Adona separately filed
Complaints18 before the Labor Arbiter for illegal dismissal, nonpayment
of salaries and 13th month pay, damages, and attorney’s fees.
The Labor Arbiter found that Malcaba was constructively dismissed.
He found that ProHealth never controverted the allegation that Del
Castillo made it difficult for Malcaba to effectively fulfill his duties. He
likewise ruled that ProHealth’s insistence that Malcaba’s leave of
absence in October 2007 was an act of resignation was false since
Malcaba continued to perform his duties as President through December
2007.19
The Labor Arbiter declared that Nepomuceno’s failure to state the
actual date of his flight was an excusable mistake on his part, considering
that this was his first infraction in his nine (9) years of service. He noted
that no administrative proceedings were conducted before
Nepomuceno’s dismissal, thereby violating his right to due process. 20
Palit-Ang’s dismissal was also found to have been illegal as delay in
complying with a lawful order was not tantamount to disobedience. The
Labor Arbiter further noted that delay in giving a cash advance for car
maintenance would not have affected the company’s operations. He
declared that Palit-Ang’s dismissal was too harsh of a penalty. 21
The dispositive portion of the Labor Arbiter’s April 5, 2009
Decision22 read:
 
WHEREFORE, premises considered, judgment is hereby
rendered declaring that complainants were illegally dismissed by
respondents. Accordingly, respondents are directed solidarily to
pay complainants the following:
1. Complainant Nicanor F. Malcaba:
a. Separation pay of P1,800,000.00;
b. Full backwages from the time of his illegal dismissal
[o]n 11 November 2007 until the finality of this
decision, which as of this date amounts to
P2,810,795.40;
c. 13th month pay for the years 2007 and 2008
amounting to P126,625.00;
2. Complainant Christian C. Nepomuceno:
a. Separation pay of P190,000.00;
b. Full backwages from the time of his illegal dismissal
[i]n May 2007 until the finality of this decision, which
as of this date amounts to P568,827.45;
c. 13th month pay for 2008 amounting to P6,333.33;
3. Complainant Laura Mae Fatima F. Palit-Ang:
a. Separation pay of P30,000.00;
b. Full backwages from the time of her illegal dismissal
on 1 January 2008 until the finality of this decision,
which as of [t]his date amounts to P266,694.63;
c. 13th month pay for 2008 of P18,000.00; and
4. Complainant Tomas C. Adona, Jr.:
a. Separation pay of P75,000.00;
b. Full backwages from time of his illegal dismissal [i]n
June 2007 until the finality of this decision, which as
of this date amounts to P609,832.37;
199
 c. 13th month pay for 2008 of P10,416.66.
 
Complainants are further awarded moral damages of
Php100,000.00 each and exemplary damages of Php100,000.00
each.
Finally, respondents are assessed the sum equivalent to ten
percent (10%) of the total monetary award as and for attorney’s
fees.
All other claims are dismissed for lack of merit.
SO ORDERED.23
 
ProHealth appealed to the National Labor Relations
Commission.24 On September 29, 2010, the National Labor Relations
Commission rendered its Decision,25 affirming the Labor Arbiter’s April
5, 2009 Decision with modifications. The dispositive portion of this
Decision read:
WHEREFORE, premises considered, the appeal is partially
granted. The assailed Decision is modified in that: a) complainant
Adona is declared to have voluntarily resigned and is entitled only
to his 13th month pay; b) the award of moral and, exemplary
damages in favor of complainants Nepomuceno and Palit-Ang are
deleted; and c) respondents del Castillo and Busto are held jointly
and severally liable with ProHealth for the claims of complainant
Malcaba.
All dispositions not affected by the modifications stay.
SO ORDERED.26
ProHealth moved for reconsideration27 but was denied by the
National Labor Relations Commission in its January 31, 2011
Resolution.28 Thus, ProHealth, Del Castillo, and Busto filed a Petition
for Certiorari29 before the Court of Appeals.
On February 19, 2013, the Court of Appeals rendered its
Decision30 reversing and setting aside the National Labor Relations
Commission’s September 29, 2010 Decision.
On the procedural issues, the Court of Appeals found that ProHealth
substantially complied with the requirement of an appeal bond despite it
not appearing in the records of the surety company since ProHealth
believed in good faith that the bond it secured was genuine. 31
On the substantive issues, the Court of Appeals held that there was no
employer-employee relationship between Malcaba and ProHealth since
he was a corporate officer. Thus, he should have filed his complaint with
the Regional Trial Court, not with the Labor Arbiter, since his dismissal
from service was an intra-corporate dispute.32
The Court of Appeals likewise concluded that ProHealth was justified
in dismissing Nepomuceno and Palit-Ang since both were given
opportunities to fully explain their sides. 33 It found that Nepomuceno’s
failure to diligently check the true schedule of his flight abroad and his
subsequent lack of effort to inform his superiors were enough for his
employer to lose its trust and confidence in him. 34 It likewise found that
Palit-Ang displayed “arrogance and hostility” when she defied the lawful
orders of the company’s highest ranking officer; thus, her
insubordination was just cause to terminate her services. 35
While the Court of Appeals ordered the return of the amounts given
to Malcaba, it allowed Nepomuceno and Palit-Ang to keep the amounts
given considering that even if the finding of illegal dismissal were
reversed on appeal, the employer was still obliged to reinstate and pay
the wages of a dismissed employee during the period of appeal. 36 The
dispositive portion of the Court of Appeals’ February 19, 2013 Decision
read:
 
WHEREFORE, premises considered, it is hereby ruled:
(a) that the September 29, 2010 Decision and January 31, 2011
Resolution of the National Labor Relations Commission are
REVERSED and SET ASIDE for being issued with grave
abuse of discretion;
(b) that Our Decision is without prejudice to Mr. Nicanor F.
Malcaba’s available recourse for relief through the
appropriate remedy in the proper forum;
(c) that all the amounts released in favor of Mr. Nicanor F.
Malcaba amounting to Four Million Nine Hundred
Thirty[-]Seven Thousand Four Hundred Twenty pesos and
40/100 (P4,937,420.[40]) be RETURNED to herein
petitioners;
(d) that NO REFUND will be ordered by this Court against Mr.
Christian Nepomuceno and Ms. Laura Mae Fatima Palit-Ang.
SO ORDERED.37
 
Malcaba, Nepomuceno, and Palit-Ang moved for reconsideration but
were denied in a Resolution 38 dated September 10, 2013. Hence, this
Petition39 was filed before this Court.
200
 Petitioners argue that the Court of Appeals should have dismissed
outright the Petition for Certiorari since respondents failed to post a
genuine appeal bond before the National Labor Relations Commission.
They allege that when Sheriff Ramon Nonato P. Dayao attempted to
enforce the judgment award against the appeal bond, he was informed
that the appeal bond procured by respondents did not appear in the
records of Alpha Insurance and Surety Company, Inc. (Alpha Insurance).
They also claim that respondents were notified by the National Labor
Relations Commission four (4) times that  their appeal bond was not
genuine, showing that respondents did not comply with the requirement
in good faith.40
Petitioners contend that petitioner Malcaba properly filed his
Complaint before the Labor Arbiter since he was an employee of
respondent ProHealth, albeit a high-ranking one. They argue that
respondents merely alleged that petitioner Malcaba is a corporate officer
but failed to substantiate this allegation. 41 They maintain that petitioner
Malcaba did not resign on September 24, 2007 considering that the
General Information Sheet for 2007 submitted on October 11, 2007
listed him as respondent ProHealth’s President. They submit that
respondent Del Castillo’s action took a toll on petitioner Malcaba’s well-
being; hence, the latter merely took a leave of absence and returned to
work in November 2007. They claim that respondents made it difficult
for petitioner Malcaba to continue his work upon his return, resulting in
his resignation in January 2008. Thus, they argue that petitioner Malcaba
was constructively dismissed.42
Petitioners likewise argue that petitioners Nepomuceno and Palit-
Ang were illegally dismissed. They claim that petitioner Nepomuceno
committed an “honest and negligible mistake” 43 that should not have
warranted dismissal considering his loyal service for nine (9) years.
They contend that petitioner Nepomuceno’s absence did not injure
respondent ProHealth’s business since he turned over all pending work
to a reliever before he left and even surpassed his sales quota for the
month.44 They likewise claim that his dismissal was done in violation of
his right to due process since he was not given any opportunity to
explain his side and was only given a notice of termination two (2) days
after he was actually dismissed.45
Petitioners maintain that petitioner Palit-Ang believed in good faith
that Gamboa would just claim his cash advance the day after he tried to
claim it and that there was nothing in her actions that would prove that
she intended to disobey or defy respondent Del Castillo’s instructions.
They insist that delay in complying with orders is not tantamount to
disobedience and would not constitute just cause for petitioner Palit-
Ang’s dismissal. They likewise submit that while petitioner Palit-Ang
was subjected to a fact-finding investigation, respondents failed to
inform her of her right to be assisted by counsel.46
Respondents, on the other hand, counter that a liberal application of
the procedural rules was necessary in their case since they acted in good
faith in posting their appeal bond. 47 They likewise contend that the issue
should have already been considered moot since petitioners “were able
to garnish and collect the amounts allegedly due to them.”48
Respondents likewise insist that petitioner Malcaba was a corporate
officer considering that he was not only an incorporator and
stockholder, but also an elected Director and President of respondent
ProHealth.49 They also point out that he filed his labor complaint seven
(7) months after his resignation and that his voluntary resignation
already disproves his claim of constructive dismissal. 50
Respondents argue that they were justified in dismissing petitioners
Nepomuceno and Palit-Ang. They contend that petitioner Nepomuceno’s
abandonment of his duties at a critical sales period and his failure to
immediately advise his superiors of his whereabouts was ground for
respondents to lose their trust and confidence in him. 51 They likewise
maintain that petitioner Palit-Ang was correctly found by the Court of
Appeals to have defied the lawful instructions of respondent Del Castillo
and illustrated her “grave disrespect towards authority.” 52
From the arguments and allegations of the parties, it is clear that this
case involves three (3) different illegal dismissal complaints, with three
(3) different complainants in three (3) different factual situations during
three (3) different time periods. The only commonality is that they
involve the same respondents.
While this Court commends the economy by which the National
Labor Relations Commission resolved these cases, the three (3)
complaints should have been resolved separately since the three (3)
petitioners raise vastly different substantive issues. This leaves this
Court with the predicament of having to resolve three (3) different cases
of illegal dismissal in one (1) Petition for Review. Thus, each petitioner’s
case will have to be resolved separately within this Decision. This Court’s
ruling over one (1) petitioner may not necessarily affect the other co-
petitioners. The National Labor Relations Commission’s zeal for
economy and convenience should never prejudice the individual rights
of each party. The National Labor Relations Commission should know
201
the rule that joinder of parties53 or causes of action54 applies suppletorily
in appeals55 and for good reason.56
Petitioners raise the common procedural issue of whether or not
respondents failed to perfect their appeal when it was discovered that
their appeal bond was a forged bond, which this Court will address
before proceeding with the substantive issues. The substantive issues
raised, however, are dependent on the factual circumstances applicable
to each petitioner. This Court tackles these substantive issues in order:
First, whether or not the Labor Arbiter and National Labor Relations
Commission had jurisdiction over petitioner Nicanor F. Malcaba’s
termination dispute considering the allegation that he was a corporate
officer, and not a mere employee;
Second, whether or not petitioner Christian C. Nepomuceno was
validly dismissed for willful breach of trust when he failed to inform
respondents ProHealth Pharma Philippines, Inc., Generoso R. Del
Castillo, Jr., and Dante M. Busto of the actual dates of his vacation leave;
and
Finally, whether or not petitioner Laura Mae Fatima F. Palit-Ang was
validly dismissed for willful disobedience when she failed to
immediately comply with an order of her superior.
 
I the bond posted is genuine, and shall be in effect until final
 
Appeal is not a matter of right. 57 Courts and tribunals have the
discretion whether to give due course to an appeal or to  dismiss it
outright. The perfection of an appeal is, thus, jurisdictional.
Noncompliance with the manner in which to file an appeal renders the
judgment final and executory.58
In labor cases, an appeal by an employer is perfected only by filing a
bond equivalent to the monetary award. Thus, Article 229[223] 59 of the
Labor Code provides:
Article 229[223]. Appeal.—
. . . .
In case of a judgment involving a monetary award, an appeal by
the employer may be perfected only upon the posting of a cash or
surety bond issued by a reputable bonding company duly
accredited by the Commission in the amount equivalent to the
monetary award in the judgment appealed from.
 
This requirement is again repeated in the 2011 National Labor
Relations Commission Rules of Procedure:
Section 4. Requisites for Perfection of Appeal.—(a) The appeal
shall be:
. . . .
(5) accompanied by:
. . . .
(ii) posting of a cash or surety bond as provided in Section 6 of
this Rule[.]
. . . .
Section 6. Bond.—In case the decision of the Labor Arbiter or
the Regional Director involves a monetary award, an appeal by the
employer may be perfected only upon the posting of a bond, which
shall either be in the form of cash deposit or surety bond
equivalent in the amount to the monetary award, exclusive of
damages and attorney’s fees.
In case of surety bond, the same shall be issued by a reputable
bonding company duly accredited by the Commission and shall be
accompanied by original or certified true copies of the following:
(a) a joint declaration under oath by the employer,
his/her counsel, and the bonding company, attesting that
disposition of the case;
(b) an indemnity agreement between the employer
appellant and bonding company;
(c) proof of security deposit or collateral securing the
bond: provided, that a check shall not be considered as an
acceptable security; and,
(d) notarized board resolution or secretary’s certificate
from the bonding company showing its authorized
signatories and their specimen signatures.
The Commission through the Chairman may on justifiable
grounds blacklist an accredited bonding company.
A cash or surety bond shall be valid and effective from the date
of deposit or posting, until the case is finally decided, resolved or
terminated, or the award satisfied. This condition shall be deemed
incorporated in the terms and conditions of the surety bond, and
shall be binding on the appellants and the bonding company.
The appellant shall furnish the appellee with a certified true
copy of the said surety bond with all the above mentioned
202
 supporting documents. The appellee shall verify the regularity and
genuineness thereof and immediately report any irregularity to
the Commission.
Upon verification by the Commission that the bond is irregular
or not genuine, the Commission shall cause the immediate
dismissal of the appeal, and censure the responsible parties and
their counsels, or subject them to reasonable fine or penalty, and
the bonding company may be blacklisted.
No motion to reduce bond shall be entertained except on
meritorious grounds, and only upon the posting of a bond in a
reasonable amount in relation to the monetary award.
The mere filing of a motion to reduce bond without complying
with the requisites in the preceding paragraphs shall not stop the
running of the period to perfect an appeal.60
The purpose of requiring an appeal bond is “to guarantee the
payment of valid and legal claims against the employer.” 61 It is a measure
of financial security granted to an illegally dismissed employee since the
resolution of the employer’s appeal may take an indeterminable amount
of time. In particular:
The requirement that the employer post a cash or surety bond
to perfect its/his appeal is apparently intended to assure the
workers that if they prevail in the case, they will receive the
money judgment in their favor upon the dismissal of the
employer’s appeal. It was intended to discourage employers from
using an appeal to delay, or even evade, their obligation to satisfy
their employees’ just and lawful claims.62
 
Procedural rules require that the appeal bond filed be “genuine.” An
appeal bond determined by the National Labor Relations Commission to
be “irregular or not genuine” shall cause the immediate dismissal of the
appeal.63
In this case, petitioners allege that respondents’ appeal should not
have been given due course by the National Labor Relations Commission
since the appeal bond they filed “[did] not appear in the records of
[Alpha Insurance]”64 and was, therefore, not genuine. As evidence, they
presented a certification from Alpha Insurance, which read:
This is to certify that the bond being presented by MR. JOSEPH
D. DE JESUS is allegedly a Surety Bond filed with the NATIONAL
LABOR RELATIONS COMMISSION, identified as Bond No.
G(16)00358/2009 on an alleged case NLRC NCR Case No. 08-
12090-08, is a faked and forged bond, and it was not issued by
ALPHA INSURANCE & SURETY COMPANY, INC.65
 
This Court in Navarro v. National Labor Relations Commission 66 found
that an employer failed to perfect its appeal as it submitted an appeal
bond that was “bogus[,] having been issued by an officer no longer
connected for a long time with the bonding company.” 67 The mere
fictitiousness of the bond, however, was not the only factor taken into
consideration. This Court likewise took note of the employer’s failure to
sufficiently explain this irregularity and its failure to file the bond within
the reglementary period.
In Quiambao v. National Labor Relations Commission,68 this Court held
that the mandatory and jurisdictional requirement of the filing of an
appeal bond could be relaxed if there was substantial
compliance. Quiambao proceeded to outline situations that could be
considered as substantial compliance, such as late payment, failure of
the Labor Arbiter to state the exact amount of money judgment due, and
reliance on a notice of judgment that failed to state that a bond must first
be filed in order to appeal. 69 Rosewood Processing v. National Labor
Relations Commission70 likewise enumerated other instances where there
would be a liberal application of the procedural rules:
Some of these cases include: (a) counsel’s reliance on the footnote
of the notice of the decision of the labor arbiter that the aggrieved
party may appeal . . . within ten (10) working days; (b)
fundamental consideration of substantial justice; (c) prevention of
miscarriage of justice or of unjust enrichment, as where the tardy
appeal is from a decision granting separation pay which was
already granted in an earlier final decision; and (d) special
circumstances of the case combined with its legal merits or the
amount and the issue involved.71
 
Thus, while the procedural rules strictly require the employer to
submit a genuine bond, an appeal could still be perfected if there was
substantial compliance with the requirement.
In this instance, the National Labor Relations Commission certified
that respondents filed a security deposit in the amount of P6,512,524.84
under Security Bank check no. 0000045245, 72 showing that the premium
for the appeal bond  was duly paid and that there was willingness to post
it.73 Respondents likewise attached documents proving that Alpha
Insurance was a legitimate and accredited bonding company. 74
203
 Despite their failure to collect on the appeal bond, petitioners do not
deny that they were eventually able to garnish the amount from
respondents’ bank deposits.75 This fulfills the purpose of the bond, that
is, “to guarantee the payment of valid and legal claims against the
employer[.]”76 Respondents are considered to have substantially
complied with the requirements on the posting of an appeal bond.
 
II
 
Under the Labor Code, the Labor Arbiter exercises original and
exclusive jurisdiction over termination disputes between an employer
and an employee while the National Labor Relations Commission
exercises exclusive appellate jurisdiction over these cases:
Article 224[217]. Jurisdiction of the Labor Arbiters and the
Commission.—(a) Except as otherwise provided under this Code,
the Labor Arbiters shall have original and exclusive jurisdiction to
hear and decide, within thirty (30) calendar days after the
submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the following
cases involving all workers, whether agricultural or
nonagricultural:
. . .
(2) Termination disputes;
. . .
(b) The Commission shall have exclusive appellate jurisdiction
over all cases decided by Labor Arbiters. 77
The presumption under this provision is that the parties have an
employer-employee relationship. Otherwise, the case would be
cognizable in different tribunals even if the action involves a termination
dispute.
Petitioner Malcaba alleges that the Court of Appeals erred in
dismissing his complaint for lack of jurisdiction, insisting that he was an
employee of respondent, not a corporate officer.
At the time of his alleged dismissal, petitioner Malcaba was the
President of respondent corporation. Strangely, this same petitioner
disputes this position as respondents’ bare assertion, 78 yet he also insists
that his name appears as President in the corporation’s General
Information Sheet for 2007.79
Under Section 25 of the Corporation Code, 80 the President of a
corporation is considered a corporate officer. The dismissal of a
corporate officer is considered an intra-corporate dispute, not a labor
dispute. Thus, in Tabang v. National Labor Relations Commission:81
A corporate officer’s dismissal is always a corporate act, or an
intra-corporate controversy, and the nature is not altered by the
reason or wisdom with which the Board of Directors may have in
taking such action. Also, an intra-corporate controversy is one
which arises between a stockholder and the corporation. There is
no distinction, qualification, nor any exemption whatsoever. The
provision is broad and covers all kinds of controversies between
stockholders and corporations.82
 
Further, in Matling Industrial and Commercial Corporation v.
Coros,83 this Court stated that jurisdiction over intra-corporate disputes
involving the illegal dismissal of corporate officers was with the Regional
Trial Court, not with the Labor Arbiter:
Where the complaint for illegal dismissal concerns a corporate
officer, however, the controversy falls under the jurisdiction of the
Securities and Exchange Commission (SEC), because the controversy
arises out of intra-corporate or partnership relations between and
among stockholders, members, or associates, or between any or all of
them and the corporation, partnership, or association of which they are
stockholders, members, or associates, respectively; and between such
corporation, partnership, or association and the State insofar as the
controversy concerns their individual franchise or right to exist as such
entity; or because the controversy involves the election or appointment
of a director, trustee, officer, or manager of such corporation,
partnership, or association. Such controversy, among others, is known as
an intra-corporate dispute.
Effective on August 8, 2000, upon the passage of Republic Act
No. 8799, otherwise known as The Securities Regulation Code, the
SEC’s jurisdiction over all intra-corporate disputes was
transferred to the RTC, pursuant to Section 5.2 of RA No. 8799, to
wit:
5.2. The Commission’s jurisdiction over all cases
enumerated under Section 5 of Presidential Decree No. 902-
A is hereby transferred to the Courts of general jurisdiction
or the appropriate Regional Trial Court: Provided, that the
Supreme Court in the exercise of its authority may
designate the Regional Trial Court branches that shall
exercise jurisdiction over these cases. The Commission shall
204
 retain jurisdiction over pending cases involving intra-
corporate disputes submitted for final resolution which
should be resolved within one (1) year from the enactment
of this Code. The Commission shall retain jurisdiction over
pending suspension of payments/rehabilitation cases filed
as of 30 June 2000 until finally disposed. 84
The mere designation as a high-ranking employee, however, is not
enough to consider one as a corporate officer. In Tabang, this Court
discussed the distinction between an employee and a corporate officer,
regardless of designation:
The president, vice president, secretary and treasurer are
commonly regarded as the principal or executive officers of a
corporation, and modern corporation statutes  provided for in the bylaws.89 (Emphasis in the original)
usually designate them as the officers of the corporation.
However, other offices are sometimes created by the charter or
bylaws of a corporation, or the board of directors may be
empowered under the bylaws of a corporation to create additional
offices as may be necessary.
It has been held that an “office” is created by the charter of the
corporation and the officer is elected by the directors or
stockholders. On the other hand, an “employee” usually occupies
no office and generally is employed not by action of the directors
or stockholders but by the managing officer of the corporation
who also determines the compensation to be paid to such
employee.85
The clear weight of jurisprudence clarifies that to be considered a
corporate officer, first, the office must be created by the charter of the
corporation, and second, the officer must be elected by the board of
directors or by the stockholders.
Petitioner Malcaba was an incorporator of the corporation and a
member of the Board of Directors. 86 Respondent corporation’s By-Laws
creates the office of the President. That foundational document also
states that the President is elected by the Board of Directors:
     ARTICLE IV
OFFICER
 
Section 1. Election/Appointment.—Immediately after their
election, the Board of Directors shall formally organize by electing
the President, the Vice President, the Treasurer, and the Secretary
at said meeting.87
This case is similar to Locsin v. Nissan Lease Philippines:88
Locsin was undeniably Chairman and President, and was
elected to these positions by the Nissan board pursuant to its
Bylaws. As such, he was a corporate officer, not an employee. The
CA reached this conclusion by relying on the submitted facts and
on Presidential Decree 902-A, which defines corporate officers as
“those officers of a corporation who are given that character
either by the Corporation Code or by the corporation’s bylaws.”
Likewise, Section 25 of Batas Pambansa Blg. 69, or the
Corporation Code of the Philippines (Corporation Code) provides
that corporate officers are the president,
secretary, treasurer and such other officers as may be
 
Petitioners cite Prudential Bank and Trust Company v. Reyes 90 as basis
that even high-ranking officers may be considered regular employees,
not corporate officers.91 Prudential Bank, however, is not applicable to
this case.
In Prudential Bank, an employer was considered estopped from
raising the argument of an intra-corporate dispute since this was only
raised when the case was filed with this Court. This Court also noted that
an employee rose from the ranks and was regularly performing tasks
integral to the business of the employer throughout the length of her
tenure, thus:
It appears that private respondent was appointed Accounting
Clerk by the Bank on July 14, 1963. From that position she rose to
become supervisor. Then in 1982, she was appointed Assistant
Vice President which she occupied until her illegal dismissal on
July 19, 1991. The bank’s contention that she merely holds an
elective position and that in effect she is not a regular employee is
belied by the nature of her work and her length of service with the
Bank. As earlier stated, she rose from the ranks and has been
employed with the Bank since 1963 until the termination of her
employment in 1991. As Assistant Vice President of the foreign
department of the Bank, she is tasked, among others, to collect
checks drawn against overseas banks payable in foreign currency
and to ensure the collection of foreign bills or checks purchased,
including the signing of transmittal letters covering the same. It
has been stated that “the primary standard of determining regular
employment is the reasonable connection between the particular
205
 activity performed by the employee in relation to the usual trade
or business of the employer.[”] Additionally, “an employee is
regular because of the nature of work and the length of service,
not because of the mode or even the reason for hiring them.” As
Assistant Vice President of the Foreign Department of the Bank
she performs tasks integral to the operations of the bank and her
length of service with the bank totaling 28 years speaks volumes
of her status as a regular employee of the bank. In fine, as a
regular employee, she is entitled to security of tenure; that is, her
services may be terminated only for a just or authorized cause.
This being in truth a case of illegal dismissal, it is no wonder then
that the Bank endeavored to the very end to establish loss of trust
and confidence and serious misconduct on the part of private
respondent but, as will be discussed later, to no avail. 92
An “Assistant Vice President” is not among the officers stated in
Section 25 of the Corporation Code.93 A corporation’s President,
however, is explicitly stated as a corporate officer.
Finding that petitioner Malcaba is the President of respondent
corporation and a corporate officer, any issue on his alleged dismissal is
beyond the jurisdiction of the Labor Arbiter or the National Labor
Relations Commission. Their adjudication on his money claims is void
for lack of jurisdiction. As a matter of equity, petitioner Malcaba must,
therefore, return all amounts received as judgment award pending final
adjudication of his claims. This Court’s dismissal of petitioner Malcaba’s
claims, however, is without prejudice to his filing of the appropriate case
in the proper forum.
 
III
 
Article 294[279] of the Labor Code provides that an employer may
terminate the services of an employee only upon just or authorized
causes.94 Article 297[282] enumerates the just causes for termination,
among which is “[f]raud or willful breach by the employee of the trust
reposed in him by his employer or duly authorized representative[.]”
Loss of trust and confidence is a just cause to terminate either
managerial employees or rank-and-file employees who regularly handle
large amounts of money or property in the regular exercise of their
functions.95
For an act to be considered a loss of trust and confidence, it must
be first, work-related, and second, founded on clearly established facts:
The complained act must be work-related such as would show
the employee concerned to be unfit to continue working for the
employer and it must be based on a willful breach of trust and
founded on clearly established facts. The basis for the dismissal
must be clearly and convincingly established but proof beyond
reasonable doubt is not necessary.96
 
The breach of trust must likewise be willful, that is, “it is done
intentionally, knowingly and purposely, without justifiable excuse, as
distinguished from an act done carelessly, thoughtlessly, heedlessly or
inadvertently.”97
Petitioner Nepomuceno alleges that he was illegally dismissed merely
for his failure to inform his superiors of the actual dates of his vacation
leave. Respondents, however, contend that as District Business Manager,
petitioner Nepomuceno lost the corporation’s trust and confidence by
failing to report for work during a crucial sales period.
As found by the National Labor Relations Commission, petitioner
Nepomuceno had filed for leave, which was approved, for April 24, 25,
and 28, 2008 to go on vacation in Malaysia. However, he left for Malaysia
on the evening of April 22, 2008, and thus, failed to report for work on
April 23, 2008.
Petitioner Nepomuceno claims that he only knew that his flight was
for the evening of April 22, 2008 on the day of his flight. Respondents,
however, insist that he “deliberately concealed the actual date of
departure as he knows that he would be out of the country on a crucial
period of sales generation and bookings. . . [and] therefore knew that his
application for leave would be denied.”98Otherwise stated, respondents
contend that his dismissal was a valid exercise of their management
prerogative to discipline and dismiss managerial employees unworthy of
their trust and confidence.
The concept of a management prerogative was already passed upon
by this Court in San Miguel Brewery Sales Force Union v. Ople:99
Except as limited by special laws, an employer is free to
regulate, according to his own discretion and judgment, all aspects
of employment, including hiring, work assignments, working
methods, time, place and manner of work, tools to be used,
processes to be followed, supervision of workers, working
regulations, transfer of employees, work supervision, lay-off of
workers and the discipline, dismissal and recall of work. . .
206
 Every business enterprise endeavors to increase its profits. In
the process, it may adopt or devise means designed towards that
goal. In Abott Laboratories v. NLRC . . .  We ruled:
. . . Even as the law is solicitous of the welfare of the
employees, it must also protect the right of an employer to
exercise what are clearly management prerogatives. The
free will of management to conduct its own business affairs
to achieve its purpose cannot be denied.
So long as a company’s management prerogatives are
exercised in good faith for the advancement of the employer’s
interest and not for the purpose of defeating or circumventing the
rights of the employees under special laws or under valid
agreements, this Court will uphold them.100
While an employer is free to regulate all aspects of employment, the
exercise of management prerogatives must be in good faith and must not
defeat or circumvent the rights of its employees.
In industries that mainly rely on sales, employers are free to
discipline errant employees who deliberately fail to report for work
during a crucial sales period. It would have been reasonable for
respondents to discipline petitioner Nepomuceno had he been a
problematic employee who unceremoniously refused to do his work.
However, as found by the Labor Arbiter and the National Labor
Relations Commission, petitioner Nepomuceno turned over all of his
pending work to a reliever before he left for Malaysia. He was able to
reach his sales quota and surpass his sales target even before taking his
vacation leave. Respondents did not suffer any financial damage as a
result of his absence. This was also petitioner Nepomuceno’s first
infraction in his nine (9) years of service with respondents. 101 None of
these circumstances constitutes a willful breach of trust on his part. The
penalty of dismissal, thus, was too severe for this kind of infraction.
The manner of petitioner Nepomuceno’s dismissal was likewise
suspicious. In all cases of employment termination, the employee must
be granted due process. The manner by which this is accomplished is
stated in Book V, Rule XXIII, Section 2 of the Rules Implementing the
Labor Code:
Section 2. Standard of due process: requirements of notice.—
— In all cases of termination of employment, the following
standards of due process shall be substantially observed.
I. For termination of employment based on just causes as
defined in Article 282 of the Code:
(a) A written notice served on the employee specifying the
ground or grounds for termination, and giving to said employee
reasonable opportunity within which to explain his side;
(b) A hearing or conference during which the employee
concerned, with the assistance of counsel if the employee so
desires, is given opportunity to respond to the charge, present his
evidence or rebut the evidence presented against him; and
(c) A written notice of termination served on the employee
indicating that upon due consideration of all the circumstance,
grounds have been established to justify his termination.
 
Here, petitioner Nepomuceno received a memorandum on April 23,
2008, asking him to explain why no administrative investigation should
be held against him. He submitted an explanation on the same day and
another explanation on May 2, 2008. On May 7, 2008, he was given his
notice of termination, which had already taken effect two (2) days
earlier, or on May 5, 2008.102
It is true that “[t]he essence of due process is simply an opportunity
to be heard.”103 Petitioner Nepomuceno had two (2) opportunities within
which to explain his actions. This would have been sufficient to satisfy
the requirement. The delay in handing him his notice of termination,
however, appears to have been an afterthought. While strictly not a
violation of procedural due process, respondents should have been more
circumspect in complying with the due process requirements under the
law.
Considering that petitioner Nepomuceno’s dismissal was done
without just cause, he is entitled to reinstatement and full
backwages.104 If reinstatement is not possible due to strained relations
between the parties, he shall be awarded separation pay at the rate of
one (1) month for every year of service.105
 
IV
 
Under Article 297[282] of the Labor Code, an employer may
terminate the services of an employee who commits willful disobedience
of the lawful orders of the employer:
Article 297[282]. Termination by Employer.—An employer may
terminate an employment for any of the following causes:
207
 (a) Serious misconduct or willful disobedience by the
employee of the lawful orders of his employer or representative in
connection with his work[.]
 
For disobedience to be considered as just cause for termination, two
(2) requisites must concur: first, “the employee’s assailed conduct must
have been wilful or intentional,” and second, “the order violated must
have been reasonable, lawful, made known to the employee and must
pertain to the duties which he [or she] had been engaged to
discharge.”106 For disobedience to be willful, it must be “characterized by
a wrongful and perverse mental attitude rendering the employee’s act
inconsistent with proper subordination.” 107
The conduct complained of must also constitute “harmful behavior
against the business interest or person of his [or her] employer.” 108 Thus,
it is implied in every case of willful disobedience that “the erring
employee obtains undue advantage detrimental to the business interest
of the employer.”109
Petitioner Palit-Ang, as Finance Officer, was instructed by respondent
Del Castillo to give a cash advance of P3,000.00 to District Branch
Manager Gamboa on November 26, 2007. This order was reasonable,
lawful, made known to petitioner Palit-Ang, and pertains to her
duties.110 What is left to be determined, therefore, is whether petitioner
Palit-Ang intentionally and willfully violated it as to amount to
insubordination.
When Gamboa went to collect the money from petitioner Palit-Ang,
he was told to return the next day as she was still busy. When petitioner
Palit-Ang found out that the money was to be used for a car tune-up, she
suggested to Gamboa to just get the money from his mobilization fund
and that she just would reimburse it after. 111 The Court of Appeals found
that these circumstances characterized petitioner Palit-Ang’s  “arrogance
and hostility,”112 in failing to comply with respondent Del Castillo’s order,
and thus, warranted her dismissal.
On the contrary, there was no ill will between Gamboa and petitioner
Palit-Ang. Petitioner Palit-Ang’s failure to immediately give the money to
Gamboa was not the result of a perverse mental attitude but was merely
because she was busy at the time. Neither did she profit from her failure
to immediately give the cash advance for the car tune-up nor did
respondents suffer financial damage by her failure to comply. The severe
penalty of dismissal was not commensurate to her infraction. In Dongon
v. Rapid Movers and Forwarders:113
To us, dismissal should only be a last resort, a penalty to be
meted only after all the relevant circumstances have been
appreciated and evaluated with the goal of ensuring that the
ground for dismissal was not only serious but true. The cause of
termination, to be lawful, must be a serious and grave malfeasance
to justify the deprivation of a means of livelihood. This
requirement is in keeping with the spirit of our Constitution and
laws to lean over backwards in favor of the working class, and
with the mandate that every doubt must be resolved in their favor.
Although we recognize the inherent right of the employer to
discipline its employees, we should still ensure that the employer
exercises the prerogative to discipline humanely and
considerately, and that the sanction imposed is commensurate to
the offense involved and to the degree of the infraction. The
discipline exacted by the employer should further consider the
employee’s length of service and the number of infractions during
his employment. The employer should never forget that always at
stake in disciplining its employee are not only his position but also
his livelihood, and that he may also have a family entirely
dependent on his earnings.114
Petitioner Palit-Ang likewise assails the failure of respondents to
inform her of her right to counsel when she was being investigated for
her infraction. As previously discussed, “[t]he essence of due process is
simply an opportunity to be heard,” 115 not that the employee must be
accompanied by counsel at all times. A hearing was conducted and she
was furnished a notice of termination explaining the grounds for her
dismissal.116 She was not denied due process.
Petitioner Palit-Ang, nonetheless, is considered to have been illegally
dismissed, her penalty not having been proportionate to the infraction
committed. Thus, she is entitled to reinstatement and full
backwages.117 If reinstatement is not possible due to strained relations
between the parties, she shall be awarded separation pay at the rate of
one (1) month for every year of service.118
WHEREFORE, the Petition is PARTIALLY GRANTED. Petitioner
Christian C. Nepomuceno and petitioner Laura Mae Fatima F. Palit-Ang
are DECLARED to have been illegally dismissed. They are, therefore,
entitled to reinstatement without loss of seniority rights, or in lieu
thereof, separation pay; and the payment of backwages from the filing of
their Complaints until finality of this Decision.
208
 The Court of Appeals’ February 19, 2013 Decision and September 10,
2013 Resolution in C.A.-G.R. S.P. No. 119093, finding that the National
Labor Relations Commission had no jurisdiction to adjudicate petitioner
Nicanor F. Malcaba’s claims is SUSTAINED. Petitioner Malcaba is further
ordered to RETURN the amount of P4,937,420.40 to respondents for
having been erroneously awarded. This shall be without prejudice to the
filing of petitioner Malcaba’s claims in the proper forum.
This case is hereby REMANDED to the Labor Arbiter for the proper
computation of petitioners Christian C. Nepo-muceno’s and Laura Mae
Fatima F. Palit-Ang’s money claims.
SO ORDERED.
Velasco, Jr. (Chairperson), Bersamin, Martires and Gesmundo, JJ.,
concur.
Petition partially granted, petitioner Christian C. Nepomuceno and
petitioner Laura Mae Fatima F. Palit-Ang declared to have been illegally
dismissed. Case remanded to Labor Arbiter for computation of money
claims.
Notes.—Under Article 282 of the Labor Code, the employer may
terminate the services of its employee for the latter’s serious misconduct
or willful disobedience of its or its representative’s lawful orders.
(Tabuk Multi-Purpose Cooperative, Inc. [TAMPCO] vs. Duclan, 787
SCRA 329 [2016])
Upon the enactment of Republic Act (RA) No. 8799, jurisdiction over
intra-corporate disputes, including derivatives suits, is now vested in the
Regional Trial Courts (RTCs) designated as special commercial courts
(SCCs) by the Supreme Court (SC) pursuant to A.M. No. 00-11-03-SC
promulgated on November 21, 2000. (Forest Hills Golf and Country Club,
Inc. vs. Fil-Estate Properties, Inc., 797 SCRA 655 [2016])
 
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