Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 172101               November 23, 2007

REPUBLIC OF THE PHILIPPINES, represented by the SOCIAL SECURITY

COMMISSION and SOCIAL SECURITY SYSTEM, Petitioners,
vs.
ASIAPRO COOPERATIVE, Respondent.

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules
of Civil Procedure seeking to annul and set aside the Decision1 and Resolution2 of the Court of
Appeals in CA-G.R. SP No. 87236, dated 5 January 2006 and 20 March 2006, respectively,
which annulled and set aside the Orders of the Social Security Commission (SSC) in SSC Case
No. 6-15507-03, dated 17 February 20043 and 16 September 2004,4 respectively, thereby
dismissing the petition-complaint dated 12 June 2003 filed by herein petitioner Social Security
System (SSS) against herein respondent.

Herein petitioner Republic of the Philippines is represented by the SSC, a quasi-judicial body
authorized by law to resolve disputes arising under Republic Act No. 1161, as amended by
Republic Act No. 8282.5 Petitioner SSS is a government corporation created by virtue of
Republic Act No. 1161, as amended. On the other hand, herein respondent Asiapro Cooperative
(Asiapro) is a multi-purpose cooperative created pursuant to Republic Act No. 69386 and duly
registered with the Cooperative Development Authority (CDA) on 23 November 1999 with
Registration Certificate No. 0-623-2460.7

The antecedents of this case are as follows:

Respondent Asiapro, as a cooperative, is composed of owners-members. Under its by-laws,

owners-members are of two categories, to wit: (1) regular member, who is entitled to all the
rights and privileges of membership; and (2) associate member, who has no right to vote and be
voted upon and shall be entitled only to such rights and privileges provided in its by-laws.8 Its
primary objectives are to provide savings and credit facilities and to develop other livelihood
services for its owners-members. In the discharge of the aforesaid primary objectives, respondent
cooperative entered into several Service Contracts9 with Stanfilco - a division of DOLE
Philippines, Inc. and a company based in Bukidnon. The owners-members do not receive
compensation or wages from the respondent cooperative. Instead, they receive a share in the
service surplus10 which the respondent cooperative earns from different areas of trade it engages
in, such as the income derived from the said Service Contracts with Stanfilco. The owners-
members get their income from the service surplus generated by the quality and amount of
services they rendered, which is determined by the Board of Directors of the respondent
cooperative.

In order to enjoy the benefits under the Social Security Law of 1997, the owners-members of the
respondent cooperative, who were assigned to Stanfilco requested the services of the latter to
register them with petitioner SSS as self-employed and to remit their contributions as such. Also,
to comply with Section 19-A of Republic Act No. 1161, as amended by Republic Act No. 8282,
the SSS contributions of the said owners-members were equal to the share of both the employer
and the employee.

On 26 September 2002, however, petitioner SSS through its Vice-President for Mindanao
Division, Atty. Eddie A. Jara, sent a letter11 to the respondent cooperative, addressed to its Chief
Executive Officer (CEO) and General Manager Leo G. Parma, informing the latter that based on
the Service Contracts it executed with Stanfilco, respondent cooperative is actually a manpower
contractor supplying employees to Stanfilco and for that reason, it is an employer of its owners-
members working with Stanfilco. Thus, respondent cooperative should register itself with
petitioner SSS as an employer and make the corresponding report and remittance of premium
contributions in accordance with the Social Security Law of 1997. On 9 October 2002,12
respondent cooperative, through its counsel, sent a reply to petitioner SSS’s letter asserting that it
is not an employer because its owners-members are the cooperative itself; hence, it cannot be its
own employer. Again, on 21 October 2002,13 petitioner SSS sent a letter to respondent
cooperative ordering the latter to register as an employer and report its owners-members as
employees for compulsory coverage with the petitioner SSS. Respondent cooperative
continuously ignored the demand of petitioner SSS.

Accordingly, petitioner SSS, on 12 June 2003, filed a Petition14 before petitioner SSC against the
respondent cooperative and Stanfilco praying that the respondent cooperative or, in the
alternative, Stanfilco be directed to register as an employer and to report respondent
cooperative’s owners-members as covered employees under the compulsory coverage of SSS
and to remit the necessary contributions in accordance with the Social Security Law of 1997. The
same was docketed as SSC Case No. 6-15507-03. Respondent cooperative filed its Answer with
Motion to Dismiss alleging that no employer-employee relationship exists between it and its
owners-members, thus, petitioner SSC has no jurisdiction over the respondent cooperative.
Stanfilco, on the other hand, filed an Answer with Cross-claim against the respondent
cooperative.

On 17 February 2004, petitioner SSC issued an Order denying the Motion to Dismiss filed by the
respondent cooperative. The respondent cooperative moved for the reconsideration of the said
Order, but it was likewise denied in another Order issued by the SSC dated 16 September 2004.

Intending to appeal the above Orders, respondent cooperative filed a Motion for Extension of
Time to File a Petition for Review before the Court of Appeals. Subsequently, respondent
cooperative filed a Manifestation stating that it was no longer filing a Petition for Review. In its
place, respondent cooperative filed a Petition for Certiorari before the Court of Appeals,
docketed as CA-G.R. SP No. 87236, with the following assignment of errors:
I. The Orders dated 17 February 2004 and 16 September 2004 of [herein petitioner] SSC were
issued with grave abuse of discretion amounting to a (sic) lack or excess of jurisdiction in that:

A. [Petitioner] SSC arbitrarily proceeded with the case as if it has jurisdiction over the
petition a quo, considering that it failed to first resolve the issue of the existence of an
employer-employee relationship between [respondent] cooperative and its owners-
members.

B. While indeed, the [petitioner] SSC has jurisdiction over all disputes arising under the
SSS Law with respect to coverage, benefits, contributions, and related matters, it is
respectfully submitted that [petitioner] SSC may only assume jurisdiction in cases where
there is no dispute as to the existence of an employer-employee relationship.

C. Contrary to the holding of the [petitioner] SSC, the legal issue of employer-employee
relationship raised in [respondent’s] Motion to Dismiss can be preliminarily resolved
through summary hearings prior to the hearing on the merits. However, any inquiry
beyond a preliminary determination, as what [petitioner SSC] wants to accomplish,
would be to encroach on the jurisdiction of the National Labor Relations Commission
[NLRC], which is the more competent body clothed with power to resolve issues relating
to the existence of an employment relationship.

II. At any rate, the [petitioner] SSC has no jurisdiction to take cognizance of the petition a quo.

A. [Respondent] is not an employer within the contemplation of the Labor Law but is a
multi-purpose cooperative created pursuant to Republic Act No. 6938 and composed of
owners-members, not employees.

B. The rights and obligations of the owners-members of [respondent] cooperative are

derived from their Membership Agreements, the Cooperatives By-Laws, and Republic
Act No. 6938, and not from any contract of employment or from the Labor Laws.
Moreover, said owners-members enjoy rights that are not consistent with being mere
employees of a company, such as the right to participate and vote in decision-making for
the cooperative.

C. As found by the Bureau of Internal Revenue [BIR], the owners-members of

[respondent] cooperative are not paid any compensation income.15 (Emphasis supplied.)

On 5 January 2006, the Court of Appeals rendered a Decision granting the petition filed by the
respondent cooperative. The decretal portion of the Decision reads:

WHEREFORE, the petition is GRANTED. The assailed Orders dated [17 February 2004] and
[16 September 2004], are ANNULLED and SET ASIDE and a new one is entered DISMISSING
the petition-complaint dated [12 June 2003] of [herein petitioner] Social Security System.16

Aggrieved by the aforesaid Decision, petitioner SSS moved for a reconsideration, but it was
denied by the appellate court in its Resolution dated 20 March 2006.
Hence, this Petition.

In its Memorandum, petitioners raise the issue of whether or not the Court of Appeals erred in
not finding that the SSC has jurisdiction over the subject matter and it has a valid basis in
denying respondent’s Motion to Dismiss. The said issue is supported by the following
arguments:

I. The [petitioner SSC] has jurisdiction over the petition-complaint filed before it by the
[petitioner SSS] under R.A. No. 8282.

II. Respondent [cooperative] is estopped from questioning the jurisdiction of petitioner

SSC after invoking its jurisdiction by filing an [A]nswer with [M]otion to [D]ismiss
before it.

III. The [petitioner SSC] did not act with grave abuse of discretion in denying respondent
[cooperative’s] [M]otion to [D]ismiss.

IV. The existence of an employer-employee relationship is a question of fact where

presentation of evidence is necessary.

V. There is an employer-employee relationship between [respondent cooperative] and its

[owners-members].

Petitioners claim that SSC has jurisdiction over the petition-complaint filed before it by
petitioner SSS as it involved an issue of whether or not a worker is entitled to compulsory
coverage under the SSS Law. Petitioners avow that Section 5 of Republic Act No. 1161, as
amended by Republic Act No. 8282, expressly confers upon petitioner SSC the power to settle
disputes on compulsory coverage, benefits, contributions and penalties thereon or any other
matter related thereto. Likewise, Section 9 of the same law clearly provides that SSS coverage is
compulsory upon all employees. Thus, when petitioner SSS filed a petition-complaint against the
respondent cooperative and Stanfilco before the petitioner SSC for the compulsory coverage of
respondent cooperative’s owners-members as well as for collection of unpaid SSS contributions,
it was very obvious that the subject matter of the aforesaid petition-complaint was within the
expertise and jurisdiction of the SSC.

Petitioners similarly assert that granting arguendo that there is a prior need to determine the
existence of an employer-employee relationship between the respondent cooperative and its
owners-members, said issue does not preclude petitioner SSC from taking cognizance of the
aforesaid petition-complaint. Considering that the principal relief sought in the said petition-
complaint has to be resolved by reference to the Social Security Law and not to the Labor Code
or other labor relations statutes, therefore, jurisdiction over the same solely belongs to petitioner
SSC.

Petitioners further claim that the denial of the respondent cooperative’s Motion to Dismiss
grounded on the alleged lack of employer-employee relationship does not constitute grave abuse
of discretion on the part of petitioner SSC because the latter has the authority and power to deny
the same. Moreover, the existence of an employer-employee relationship is a question of fact
where presentation of evidence is necessary. Petitioners also maintain that the respondent
cooperative is already estopped from assailing the jurisdiction of the petitioner SSC because it
has already filed its Answer before it, thus, respondent cooperative has already submitted itself to
the jurisdiction of the petitioner SSC.

Finally, petitioners contend that there is an employer-employee relationship between the

respondent cooperative and its owners-members. The respondent cooperative is the employer of
its owners-members considering that it undertook to provide services to Stanfilco, the
performance of which is under the full and sole control of the respondent cooperative.

On the other hand, respondent cooperative alleges that its owners-members own the cooperative,
thus, no employer-employee relationship can arise between them. The persons of the employer
and the employee are merged in the owners-members themselves. Likewise, respondent
cooperative’s owners-members even requested the respondent cooperative to register them with
the petitioner SSS as self-employed individuals. Hence, petitioner SSC has no jurisdiction over
the petition-complaint filed before it by petitioner SSS.

Respondent cooperative further avers that the Court of Appeals correctly ruled that petitioner
SSC acted with grave abuse of discretion when it assumed jurisdiction over the petition-
complaint without determining first if there was an employer-employee relationship between the
respondent cooperative and its owners-members. Respondent cooperative claims that the
question of whether an employer-employee relationship exists between it and its owners-
members is a legal and not a factual issue as the facts are undisputed and need only to be
interpreted by the applicable law and jurisprudence.

Lastly, respondent cooperative asserts that it cannot be considered estopped from assailing the
jurisdiction of petitioner SSC simply because it filed an Answer with Motion to Dismiss,
especially where the issue of jurisdiction is raised at the very first instance and where the only
relief being sought is the dismissal of the petition-complaint for lack of jurisdiction.

From the foregoing arguments of the parties, the issues may be summarized into:

I. Whether the petitioner SSC has jurisdiction over the petition-complaint filed before it
by petitioner SSS against the respondent cooperative.

II. Whether the respondent cooperative is estopped from assailing the jurisdiction of
petitioner SSC since it had already filed an Answer with Motion to Dismiss before the
said body.

Petitioner SSC’s jurisdiction is clearly stated in Section 5 of Republic Act No. 8282 as well as in
Section 1, Rule III of the 1997 SSS Revised Rules of Procedure.

Section 5 of Republic Act No. 8282 provides:

SEC. 5. Settlement of Disputes. – (a) Any dispute arising under this Act with respect to
coverage, benefits, contributions and penalties thereon or any other matter related thereto, shall
be cognizable by the Commission, x x x. (Emphasis supplied.)

Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of Procedure states:

Section 1. Jurisdiction. – Any dispute arising under the Social Security Act with respect to
coverage, entitlement of benefits, collection and settlement of contributions and penalties
thereon, or any other matter related thereto, shall be cognizable by the Commission after the SSS
through its President, Manager or Officer-in-charge of the Department/Branch/Representative
Office concerned had first taken action thereon in writing. (Emphasis supplied.)

It is clear then from the aforesaid provisions that any issue regarding the compulsory coverage of
the SSS is well within the exclusive domain of the petitioner SSC. It is important to note, though,
that the mandatory coverage under the SSS Law is premised on the existence of an employer-
employee relationship17 except in cases of compulsory coverage of the self-employed.

It is axiomatic that the allegations in the complaint, not the defenses set up in the Answer or in
the Motion to Dismiss, determine which court has jurisdiction over an action; otherwise, the
question of jurisdiction would depend almost entirely upon the defendant.18 Moreover, it is well-
settled that once jurisdiction is acquired by the court, it remains with it until the full termination
of the case.19 The said principle may be applied even to quasi-judicial bodies.

In this case, the petition-complaint filed by the petitioner SSS before the petitioner SSC against
the respondent cooperative and Stanfilco alleges that the owners-members of the respondent
cooperative are subject to the compulsory coverage of the SSS because they are employees of the
respondent cooperative. Consequently, the respondent cooperative being the employer of its
owners-members must register as employer and report its owners-members as covered members
of the SSS and remit the necessary premium contributions in accordance with the Social Security
Law of 1997. Accordingly, based on the aforesaid allegations in the petition-complaint filed
before the petitioner SSC, the case clearly falls within its jurisdiction. Although the Answer with
Motion to Dismiss filed by the respondent cooperative challenged the jurisdiction of the
petitioner SSC on the alleged lack of employer-employee relationship between itself and its
owners-members, the same is not enough to deprive the petitioner SSC of its jurisdiction over the
petition-complaint filed before it. Thus, the petitioner SSC cannot be faulted for initially
assuming jurisdiction over the petition-complaint of the petitioner SSS.

Nonetheless, since the existence of an employer-employee relationship between the respondent

cooperative and its owners-members was put in issue and considering that the compulsory
coverage of the SSS Law is predicated on the existence of such relationship, it behooves the
petitioner SSC to determine if there is really an employer-employee relationship that exists
between the respondent cooperative and its owners-members.

The question on the existence of an employer-employee relationship is not within the exclusive
jurisdiction of the National Labor Relations Commission (NLRC). Article 217 of the Labor Code
enumerating the jurisdiction of the Labor Arbiters and the NLRC provides that:
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. - (a) x x x.

xxxx

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
(₱5,000.00) regardless of whether accompanied with a claim for reinstatement.20

Although the aforesaid provision speaks merely of claims for Social Security, it would
necessarily include issues on the coverage thereof, because claims are undeniably rooted in the
coverage by the system. Hence, the question on the existence of an employer-employee
relationship for the purpose of determining the coverage of the Social Security System is
explicitly excluded from the jurisdiction of the NLRC and falls within the jurisdiction of the SSC
which is primarily charged with the duty of settling disputes arising under the Social Security
Law of 1997.

On the basis thereof, considering that the petition-complaint of the petitioner SSS involved the
issue of compulsory coverage of the owners-members of the respondent cooperative, this Court
agrees with the petitioner SSC when it declared in its Order dated 17 February 2004 that as an
incident to the issue of compulsory coverage, it may inquire into the presence or absence of an
employer-employee relationship without need of waiting for a prior pronouncement or
submitting the issue to the NLRC for prior determination. Since both the petitioner SSC and the
NLRC are independent bodies and their jurisdiction are well-defined by the separate statutes
creating them, petitioner SSC has the authority to inquire into the relationship existing between
the worker and the person or entity to whom he renders service to determine if the employment,
indeed, is one that is excepted by the Social Security Law of 1997 from compulsory coverage.21

Even before the petitioner SSC could make a determination of the existence of an employer-
employee relationship, however, the respondent cooperative already elevated the Order of the
petitioner SSC, denying its Motion to Dismiss, to the Court of Appeals by filing a Petition for
Certiorari. As a consequence thereof, the petitioner SSC became a party to the said Petition for
Certiorari pursuant to Section 5(b)22 of Republic Act No. 8282. The appellate court ruled in favor
of the respondent cooperative by declaring that the petitioner SSC has no jurisdiction over the
petition-complaint filed before it because there was no employer-employee relationship between
the respondent cooperative and its owners-members. Resultantly, the petitioners SSS and SSC,
representing the Republic of the Philippines, filed a Petition for Review before this Court.

Although as a rule, in the exercise of the Supreme Court’s power of review, the Court is not a
trier of facts and the findings of fact of the Court of Appeals are conclusive and binding on the
Court,23 said rule is not without exceptions. There are several recognized exceptions24 in which
factual issues may be resolved by this Court. One of these exceptions finds application in this
present case which is, when the findings of fact are conflicting. There are, indeed, conflicting
findings espoused by the petitioner SSC and the appellate court relative to the existence of
employer-employee relationship between the respondent cooperative and its owners-members,
which necessitates a departure from the oft-repeated rule that factual issues may not be the
subject of appeals to this Court.

In determining the existence of an employer-employee relationship, the following elements are

considered: (1) the selection and engagement of the workers; (2) the payment of wages by
whatever means; (3) the power of dismissal; and (4) the power to control the worker’s conduct,
with the latter assuming primacy in the overall consideration.25 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.26 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; it is enough that the
employer has the right to wield that power.27 All the aforesaid elements are present in this case.

First. It is expressly provided in the Service Contracts that it is the respondent cooperative which
has the exclusive discretion in the selection and engagement of the owners-members as well as
its team leaders who will be assigned at Stanfilco.28 Second. Wages are defined as "remuneration
or earnings, however designated, capable of being expressed in terms of money, whether fixed or
ascertained, on a time, task, piece or commission basis, or other method of calculating the same,
which is payable by an employer to an employee under a written or unwritten contract of
employment for work done or to be done, or for service rendered or to be rendered."29 In this
case, the weekly stipends or the so-called shares in the service surplus given by the respondent
cooperative to its owners-members were in reality wages, as the same were equivalent to an
amount not lower than that prescribed by existing labor laws, rules and regulations, including the
wage order applicable to the area and industry; or the same shall not be lower than the prevailing
rates of wages.30 It cannot be doubted then that those stipends or shares in the service surplus are
indeed wages, because these are given to the owners-members as compensation in rendering
services to respondent cooperative’s client, Stanfilco. Third. It is also stated in the above-
mentioned Service Contracts that it is the respondent cooperative which has the power to
investigate, discipline and remove the owners-members and its team leaders who were rendering
services at Stanfilco.31 Fourth. As earlier opined, of the four elements of the employer-employee
relationship, the "control test" is the most important. In the case at bar, it is the respondent
cooperative which has the sole control over the manner and means of performing the services
under the Service Contracts with Stanfilco as well as the means and methods of work.32 Also, the
respondent cooperative is solely and entirely responsible for its owners-members, team leaders
and other representatives at Stanfilco.33 All these clearly prove that, indeed, there is an employer-
employee relationship between the respondent cooperative and its owners-members.

It is true that the Service Contracts executed between the respondent cooperative and Stanfilco
expressly provide that there shall be no employer-employee relationship between the respondent
cooperative and its owners-members.34 This Court, however, cannot give the said provision force
and effect.

As previously pointed out by this Court, an employee-employer relationship actually exists

between the respondent cooperative and its owners-members. The four elements in the four-fold
test for the existence of an employment relationship have been complied with. The respondent
cooperative must not be allowed to deny its employment relationship with its owners-members
by invoking the questionable Service Contracts provision, when in actuality, it does exist. The
existence of an employer-employee relationship cannot be negated by expressly repudiating it in
a contract, when the terms and surrounding circumstances show otherwise. The employment
status of a person is defined and prescribed by law and not by what the parties say it should be.35

It is settled that the contracting parties may establish such stipulations, clauses, terms and
conditions as they want, and their agreement would have the force of law between them.
However, the agreed terms and conditions must not be contrary to law, morals, customs, public
policy or public order.36 The Service Contract provision in question must be struck down for
being contrary to law and public policy since it is apparently being used by the respondent
cooperative merely to circumvent the compulsory coverage of its employees, who are also its
owners-members, by the Social Security Law.

This Court is not unmindful of the pronouncement it made in Cooperative Rural Bank of Davao
City, Inc. v. Ferrer-Calleja37 wherein it held that:

A cooperative, therefore, is by its nature different from an ordinary business concern, being run
either by persons, partnerships, or corporations. Its owners and/or members are the ones who run
and operate the business while the others are its employees x x x.

An employee therefore of such a cooperative who is a member and co-owner thereof cannot
invoke the right to collective bargaining for certainly an owner cannot bargain with himself or
his co-owners. In the opinion of August 14, 1981 of the Solicitor General he correctly opined
that employees of cooperatives who are themselves members of the cooperative have no right to
form or join labor organizations for purposes of collective bargaining for being themselves co-
owners of the cooperative.1awp++i1

However, in so far as it involves cooperatives with employees who are not members or co-
owners thereof, certainly such employees are entitled to exercise the rights of all workers to
organization, collective bargaining, negotiations and others as are enshrined in the Constitution
and existing laws of the country.

The situation in the aforesaid case is very much different from the present case. The declaration
made by the Court in the aforesaid case was made in the context of whether an employee who is
also an owner-member of a cooperative can exercise the right to bargain collectively with the
employer who is the cooperative wherein he is an owner-member. Obviously, an owner-member
cannot bargain collectively with the cooperative of which he is also the owner because an owner
cannot bargain with himself. In the instant case, there is no issue regarding an owner-member’s
right to bargain collectively with the cooperative. The question involved here is whether an
employer-employee relationship can exist between the cooperative and an owner-member. In
fact, a closer look at Cooperative Rural Bank of Davao City, Inc. will show that it actually
recognized that an owner-member of a cooperative can be its own employee.

It bears stressing, too, that a cooperative acquires juridical personality upon its registration with
the Cooperative Development Authority.38 It has its Board of Directors, which directs and
supervises its business; meaning, its Board of Directors is the one in charge in the conduct and
management of its affairs.39 With that, a cooperative can be likened to a corporation with a
personality separate and distinct from its owners-members. Consequently, an owner-member of a
cooperative can be an employee of the latter and an employer-employee relationship can exist
between them.

In the present case, it is not disputed that the respondent cooperative had registered itself with the
Cooperative Development Authority, as evidenced by its Certificate of Registration No. 0-623-
2460.40 In its by-laws,41 its Board of Directors directs, controls, and supervises the business and
manages the property of the respondent cooperative. Clearly then, the management of the affairs
of the respondent cooperative is vested in its Board of Directors and not in its owners-members
as a whole. Therefore, it is completely logical that the respondent cooperative, as a juridical
person represented by its Board of Directors, can enter into an employment with its owners-
members.

In sum, having declared that there is an employer-employee relationship between the respondent
cooperative and its owners-member, we conclude that the petitioner SSC has jurisdiction over
the petition-complaint filed before it by the petitioner SSS. This being our conclusion, it is no
longer necessary to discuss the issue of whether the respondent cooperative was estopped from
assailing the jurisdiction of the petitioner SSC when it filed its Answer with Motion to Dismiss.

WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Decision
and the Resolution of the Court of Appeals in CA-G.R. SP No. 87236, dated 5 January 2006 and
20 March 2006, respectively, are hereby REVERSED and SET ASIDE. The Orders of the
petitioner SSC dated 17 February 2004 and 16 September 2004 are hereby REINSTATED. The
petitioner SSC is hereby DIRECTED to continue hearing the petition-complaint filed before it by
the petitioner SSS as regards the compulsory coverage of the respondent cooperative and its
owners-members. No costs.

SO ORDERED.

G.R. No. 153511               July 18, 2012

LEGEND HOTEL (MANILA), owned by TITANIUM CORPORATION, and/or, NELSON

NAPUD, in his capacity as the President of Petitioner Corporation, Petitioner,
vs.
HERNANI S. REALUYO, also known as JOEY ROA, Respondent.

DECISION

BERSAMIN, J.:

This labor case for illegal dismissal involves a pianist employed to perform in the restaurant of a
hotel. On August 9, 1999, respondent, whose stage name was Joey R. Roa, filed a complaint for
alleged unfair labor practice, constructive illegal dismissal, and the underpayment/nonpayment
of his premium pay for holidays, separation pay, service incentive leave pay, and 13111 month
pay. He prayed for attorney's fees, moral damages off P100,000.00 and exemplary damages for
P100,000.00.1

Respondent averred that he had worked as a pianist at the Legend Hotel’s Tanglaw Restaurant
from September 1992 with an initial rate of P400.00/night that was given to him after each
night’s performance; that his rate had increased to P750.00/night; and that during his
employment, he could not choose the time of performance, which had been fixed from 7:00 pm
to 10:00 pm for three to six times/week. He added that the Legend Hotel’s restaurant manager
had required him to conform with the venue’s motif; that he had been subjected to the rules on
employees’ representation checks and chits, a privilege granted to other employees; that on July
9, 1999, the management had notified him that as a cost-cutting measure his services as a pianist
would no longer be required effective July 30, 1999; that he disputed the excuse, insisting that
Legend Hotel had been lucratively operating as of the filing of his complaint; and that the loss of
his employment made him bring his complaint.2

In its defense, petitioner denied the existence of an employer-employee relationship with

respondent, insisting that he had been only a talent engaged to provide live music at Legend
Hotel’s Madison Coffee Shop for three hours/day on two days each week; and stated that the
economic crisis that had hit the country constrained management to dispense with his services.

On December 29, 1999, the Labor Arbiter (LA) dismissed the complaint for lack of merit upon
finding that the parties had no employer-employee relationship.3 The LA explained thusly:

xxx

On the pivotal issue of whether or not there existed an employer-employee relationship between
the parties, our finding is in the negative. The finding finds support in the service contract dated
September 1, 1992 xxx.

xxx

Even if we grant the initial non-existence of the service contract, as complainant suggests in his
reply (third paragraph, page 4), the picture would not change because of the admission by
complainant in his letter dated October 8, 1996 (Annex "C") that what he was receiving was
talent fee and not salary.

This is reinforced by the undisputed fact that complainant received his talent fee nightly, unlike
the regular employees of the hotel who are paid by monthly xxx.

xxx

And thus, absent the power to control with respect to the means and methods by which his work
was to be accomplished, there is no employer-employee relationship between the parties xxx.

xxx
WHEREFORE, this case must be, as it is hereby, DISMISSED for lack of merit.

SO ORDERED.4

Respondent appealed, but the National Labor Relations Commission (NLRC) affirmed the LA
on May 31, 2001.5

Respondent assailed the decision of the NLRC in the Court of Appeals (CA) on certiorari.

On February 11, 2002, the CA set aside the decision of the NLRC,6 holding:

xxx

Applying the above-enumerated elements of the employee-employer relationship in this case, the
question to be asked is, are those elements present in this case?

The answer to this question is in the affirmative.

xxx

Well settled is the rule that of the four (4) elements of employer-employee relationship, it is the
power of control that is more decisive.

In this regard, public respondent failed to take into consideration that in petitioner’s line of work,
he was supervised and controlled by respondent’s restaurant manager who at certain times would
require him to perform only tagalog songs or music, or wear barong tagalog to conform with
Filipiniana motif of the place and the time of his performance is fixed by the respondents from
7:00 pm to 10:00 pm, three to six times a week. Petitioner could not choose the time of his
performance. xxx.

As to the status of petitioner, he is considered a regular employee of private respondents since

the job of the petitioner was in furtherance of the restaurant business of respondent hotel.
Granting that petitioner was initially a contractual employee, by the sheer length of service he
had rendered for private respondents, he had been converted into a regular employee xxx.

xxx

xxx In other words, the dismissal was due to retrenchment in order to avoid or minimize business
losses, which is recognized by law under Article 283 of the Labor Code, xxx.

xxx

WHEREFORE, foregoing premises considered, this petition is GRANTED. xxx.7

Issues
In this appeal, petitioner contends that the CA erred:

I. XXX WHEN IT RULED THAT THERE IS THE EXISTENCE OF EMPLOYER-

EMPLOYEE RELATIONSHIP BETWEEN THE PETITIONER HOTEL AND
RESPONDENT ROA.

II. XXX IN FINDING THAT ROA IS A REGULAR EMPLOYEE AND THAT THE
TERMINATION OF HIS SERVICES WAS ILLEGAL. THE CA LIKEWISE ERRED
WHEN IT DECLARED THE REINSTATEMENT OF ROA TO HIS FORMER
POSITION OR BE GIVEN A SEPARATION PAY EQUIVALENT TO ONE MONTH
FOR EVERY YEAR OF SERVICE FROM SEPTEMBER 1999 UNTIL JULY 30, 1999
CONSIDERING THE ABSENCE OF AN EMPLOYMENT RELATIONSHIP
BETWEEN THE PARTIES.

III. XXX WHEN IT DECLARED THAT ROA IS ENTITLED TO BACKWAGES,

SERVICE INCENTIVE LEAVE AND OTHER BENEFITS CONSIDERING THAT
THERE IS NO EMPLOYER EMPLOYEE RELATIONSHIP BETWEEN THE
PARTIES.

IV. XXX WHEN IT NULLIFIED THE DECISION DATED MAY 31, 2001 IN NLRC
NCR CA NO. 023404-2000 OF THE NLRC AS WELL AS ITS RESOLUTION DATED
JUNE 29, 2001 IN FAVOR OF HEREIN PETITIONER HOTEL WHEN HEREIN
RESPONDENT ROA FAILED TO SHOW PROOF THAT THE NLRC AND THE
LABOR ARBITER HAVE COMMITTED GRAVE ABUSE OF DISCRETION OR
LACK OF JURISDICTION IN THEIR RESPECTIVE DECISIONS.

V. XXX WHEN IT OVERLOOKED THE FACT THAT THE PETITION WHICH ROA
FILED IS IMPROPER SINCE IT RAISED QUESTIONS OF FACT.

VI. XXX WHEN IT GAVE DUE COURSE TO THE PETITION FILED BY ROA
WHEN IT IS CLEARLY IMPROPER AND SHOULD HAVE BEEN DISMISSED
OUTRIGHT CONSIDERING THAT A PETITION FOR CERTIORARI UNDER RULE
65 IS LIMITED ONLY TO QUESTIONS OR ISSUES OF GRAVE ABUSE OF
DISCRETION OR LACK OF JURISDICTION COMMITTED BY THE NLRC OR
THE LABOR ARBITER, WHICH ISSUES ARE NOT PRESENT IN THE CASE AT
BAR.

The assigned errors are divided into the procedural issue of whether or not the petition for
certiorari filed in the CA was the proper recourse; and into two substantive issues, namely: (a)
whether or not respondent was an employee of petitioner; and (b) if respondent was petitioner’s
employee, whether he was validly terminated.

Ruling

The appeal fails.

Procedural Issue:

Certiorari was a proper recourse

Petitioner contends that respondent’s petition for certiorari was improper as a remedy against the
NLRC due to its raising mainly questions of fact and because it did not demonstrate that the
NLRC was guilty of grave abuse of discretion.

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

Substantive Issue No. 1:

Employer-employee relationship existed between the parties

We next ascertain if the CA correctly found that an employer-employee relationship existed

between the parties.

The issue of whether or not an employer-employee relationship existed between petitioner and
respondent is essentially a question of fact.9 The factors that determine the issue include who has
the power to select the employee, who pays the employee’s wages, who has the power to dismiss
the employee, and who exercises control of the methods and results by which the work of the
employee is accomplished.10 Although no particular form of evidence is required to prove the
existence of the relationship, and any competent and relevant evidence to prove the relationship
may be admitted,11 a finding that the relationship exists must nonetheless rest on substantial
evidence, which is that amount of relevant evidence that a reasonable mind might accept as
adequate to justify a conclusion.12

Generally, the Court does not review factual questions, primarily because the Court is not a trier
of facts. However, where, like here, there is a conflict between the factual findings of the Labor
Arbiter and the NLRC, on the one hand, and those of the CA, on the other hand, it becomes
proper for the Court, in the exercise of its equity jurisdiction, to review and re-evaluate the
factual issues and to look into the records of the case and re-examine the questioned findings.13

A review of the circumstances reveals that respondent was, indeed, petitioner’s employee. He
was undeniably employed as a pianist in petitioner’s Madison Coffee Shop/Tanglaw Restaurant
from September 1992 until his services were terminated on July 9, 1999.

First of all, petitioner actually wielded the power of selection at the time it entered into the
service contract dated September 1, 1992 with respondent. This is true, notwithstanding
petitioner’s insistence that respondent had only offered his services to provide live music at
petitioner’s Tanglaw Restaurant, and despite petitioner’s position that what had really transpired
was a negotiation of his rate and time of availability. The power of selection was firmly
evidenced by, among others, the express written recommendation dated January 12, 1998 by
Christine Velazco, petitioner’s restaurant manager, for the increase of his remuneration.14

Petitioner could not seek refuge behind the service contract entered into with respondent. It is the
law that defines and governs an employment relationship, whose terms are not restricted to those
fixed in the written contract, for other factors, like the nature of the work the employee has been
called upon to perform, are also considered. The law affords protection to an employee, and does
not countenance any attempt to subvert its spirit and intent. Any stipulation in writing can be
ignored when the employer utilizes the stipulation to deprive the employee of his security of
tenure. The inequality that characterizes employer-employee relations generally tips the scales in
favor of the employer, such that the employee is often scarcely provided real and better
options.15

Secondly, petitioner argues that whatever remuneration was given to respondent were only his
talent fees that were not included in the definition of wage under the Labor Code; and that such
talent fees were but the consideration for the service contract entered into between them.

The argument is baseless.

Respondent was paid P400.00 per three hours of performance from 7:00 pm to 10:00 pm, three
to six nights a week. Such rate of remuneration was later increased to P750.00 upon restaurant
manager Velazco’s recommendation. There is no denying that the remuneration denominated as
talent fees was fixed on the basis of his talent and skill and the quality of the music he played
during the hours of performance each night, taking into account the prevailing rate for similar
talents in the entertainment industry.16

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

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

Clearly, respondent received compensation for the services he rendered as a pianist in

petitioner’s hotel. Petitioner cannot use the service contract to rid itself of the consequences of its
employment of respondent. There is no denying that whatever amounts he received for his
performance, howsoever designated by petitioner, were his wages.
It is notable that under the Rules Implementing the Labor Code and as held in Tan v. Lagrama,17
every employer is required to pay his employees by means of a payroll, which should show in
each case, among others, the employee’s rate of pay, deductions made from such pay, and the
amounts actually paid to the employee. Yet, petitioner did not present the payroll of its
employees to bolster its insistence of respondent not being its employee.

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

Thirdly, the power of the employer to control the work of the employee is considered the most
significant determinant of the existence of an employer-employee relationship.18 This is the so-
called control test, and is premised on whether the person for whom the services are performed
reserves the right to control both the end achieved and the manner and means used to achieve
that end.19

Petitioner submits that it did not exercise the power of control over respondent and cites the
following to buttress its submission, namely: (a) respondent could beg off from his nightly
performances in the restaurant for other engagements; (b) he had the sole prerogative to play and
perform any musical arrangements that he wished; (c) although petitioner, through its manager,
required him to play at certain times a particular music or song, the music, songs, or
arrangements, including the beat or tempo, were under his discretion, control and direction; (d)
the requirement for him to wear barong Tagalog to conform with the Filipiniana motif of the
venue whenever he performed was by no means evidence of control; (e) petitioner could not
require him to do any other work in the restaurant or to play the piano in any other places, areas,
or establishments, whether or not owned or operated by petitioner, during the three hour period
from 7:00 pm to 10:00 pm, three to six times a week; and (f) respondent could not be required to
sing, dance or play another musical instrument.

A review of the records shows, however, that respondent performed his work as a pianist under
petitioner’s supervision and control. Specifically, petitioner’s control of both the end achieved
and the manner and means used to achieve that end was demonstrated by the following, to wit:

a. He could not choose the time of his performance, which petitioners had fixed from
7:00 pm to 10:00 pm, three to six times a week;

b. He could not choose the place of his performance;

c. The restaurant’s manager required him at certain times to perform only Tagalog songs
or music, or to wear barong Tagalog to conform to the Filipiniana motif; and

d. He was subjected to the rules on employees’ representation check and chits, a privilege
granted to other employees.
Relevantly, it is worth remembering that the employer need not actually supervise the
performance of duties by the employee, for it sufficed that the employer has the right to wield
that power.

Lastly, petitioner claims that it had no power to dismiss respondent due to his not being even
subject to its Code of Discipline, and that the power to terminate the working relationship was
mutually vested in the parties, in that either party might terminate at will, with or without cause.

The claim is contrary to the records. Indeed, the memorandum informing respondent of the
discontinuance of his service because of the present business or financial condition of
petitioner20 showed that the latter had the power to dismiss him from employment.21

Substantive Issue No. 2:

Validity of the Termination

Having established that respondent was an employee whom petitioner terminated to prevent
losses, the conclusion that his termination was by reason of retrenchment due to an authorized
cause under the Labor Code is inevitable.

Retrenchment is one of the authorized causes for the dismissal of employees recognized by the
Labor Code. It is a management prerogative resorted to by employers to avoid or to minimize
business losses. On this matter, Article 283 of the Labor Code states:

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

The Court has laid down the following standards that an employer should meet to justify
retrenchment and to foil abuse, namely:

(a) The expected losses should be substantial and not merely de minimis in extent;

(b) The substantial losses apprehended must be reasonably imminent;

(c) The retrenchment must be reasonably necessary and likely to effectively prevent the
expected losses; and
 (d) The alleged losses, if already incurred, and the expected imminent losses sought to be
forestalled must be proved by sufficient and convincing evidence.22

Anent the last standard of sufficient and convincing evidence, it ought to be pointed out that a
less exacting standard of proof would render too easy the abuse of retrenchment as a ground for
termination of services of employees.23

Was the retrenchment of respondent valid?

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

Indeed, not every loss incurred or expected to be incurred by an employer can justify
retrenchment.1âwphi1 The employer must prove, among others, that the losses are substantial
and that the retrenchment is reasonably necessary to avert such losses. Thus, by its failure to
present sufficient and convincing evidence to prove that retrenchment was necessary,
respondent’s termination due to retrenchment is not allowed.

The Court realizes that the lapse of time since the retrenchment might have rendered respondent's
reinstatement to his former job no longer feasible. If that should be true, then petitioner should
instead pay to him separation pay at the rate of one. month pay for every year of service
computed from September 1992 (when he commenced to work for the petitioners) until the
finality of this decision, and full backwages from the time his compensation was withheld until
the finality of this decision.

WHEREFORE, we DENY the petition for review on certiorari, and AFFIRM the decision of the
Court of Appeals promulgated on February 11, 2002, subject to the modification that should
reinstatement be no longer feasible, petitioner shall pay to respondent separation pay of one
month for every year of service computed from September 1992 until the finality of this
decision, and full backwages from the time his compensation was withheld until the finality of
this decision.

Costs of suit to be paid by the petitioners.

SO ORDERED.

G.R. No. 179654               September 22, 2014

HACIENDA LEDDY/RICARDO GAMBOA, JR., Petitioner,

vs.
PAQUITA VILLEGAS, Respondent.
 DECISION

PERALTA, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the
reversal of the Decision1 dated May 25, 2007 and Resolution2 dated August 10, 2007 of the
Court of Appeals in CA-G.R. SP No. 01923,3 which granted the Petition for Certiorari under
Rule 65 of the 1997 Rules of Civil Procedure filed by Villegas, and reversed the January 26,
2006 and March 31, 2006 Orders of the National Labor Relations Commission (NLRC). These
two Orders issued by the NLRC reversed the December 3, 2003 Decision of Executive Labor
Arbiter Danilo Acosta.

The facts, as culled from the records, are as follows:

Villegas is an employee at the Hacienda Leddy as early as 1960, when it was still named
Hacienda Teresa. Later on named Hacienda Leddy owned by Ricardo Gamboa Sr., the same was
succeeded by his son Ricardo Gamboa, Jr. During his employment up to the time of his
dismissal, Villegas performed sugar farming job 8 hours a day, 6 days a week work,
continuously for not less than 302 days a year, and for which services he was paid ₱45.00 per
day. He likewise worked in petitioner's coconut lumber business where he was paid ₱34.00 a day
for 8 hours work.

On June 9, 1993, Gamboa went toVillegas' house and told him that his services were no longer
needed without prior notice or valid reason. Hence, Villegas filed the instant complaint for illegal
dismissal.

Gamboa, on the other hand, denied having dismissed Villegas but admitted in his earlier position
paper thatVillegas indeed worked with the said farm owned by his father, doing casual and odd
jobs until the latter's death in 1993.4 He was even given the benefit of occupying a small portion
of the land where his house was erected. He, however, maintained that Villegas ceased working
at the farm as early as 1992, contrary to his allegation that he was dismissed.5

However, later, Gamboaapparently retracted and instead insisted that the farm records reveal that
the only time Villegas rendered service for the hacienda was only in the year 1993,specifically
February 9, 1993 and February 11, 1993 when he was contracted by the farm to cut coconut
lumber which were given to regular workers for the repairs of their houses.6 Gamboa added that
they informed Villegas that they need the property, hence, they requested that he vacateit, but he
refused. Thus, Gamboa surmised that Villegas filed the instant complaint to gain leverage so he
would not be evicted from the land he is occupying. He further argued that during his
employment, Villegas was paid in accordance with the rate mandated by law and that his claim
for illegal dismissal was merely a fabrication as he was the one who opted not to work. The
Labor Arbiter found thatthere was illegal dismissal.7 The dispositive portion of the decision
reads:

WHEREFORE, in view of all the foregoing, respondent Ricardo Gamboa, Jr., is hereby ordered
to pay complainant Paquito Villegas the amount of One Hundred Forty Thousand Three Hundred
Eight Pesos and Eighty-Four/00 (₱140,308.84), representing his wage differential, backwages
and separation pay, the award to be deposited with this office within ten (10) days from receipt
of this decision.

SO ORDERED.8

On appeal, on January 26, 2006, the NLRC set aside and vacated the Labor Arbiter's decision.9
Complainant moved for reconsideration, but was denied.10

Thus, viapetition for certiorariunder Rule 65 of the Rules of Court, raising grave abuse of
discretion as ground, Villegas appealed before the Court of Appeals and sought the annulment of
the Resolutions of the NLRC.

In the disputed Decision11 dated May 25, 2007, the Court of Appeals granted the petition and
annulled and set aside the NLRC Decision dated January 26, 2006 and Resolution dated March
31, 2006. It further reinstated the Labor Arbiter's Decision dated December 3, 2003.

Hence, this appeal anchored on the following grounds:

WHETHER THE COURT OFAPPEALS COMMITTED REVERSIBLE ERROR, BASED ON

SUBSTANTIAL QUESTIONS OF LAW, IN REVERSING THE DECISION OF THE NLRC
AND AFFIRMING THE DECISION OF the EXECUTIVE LABOR ARBITER DECLARING
THAT RESPONDENT IS A REGULAR WORKER, THE FINDINGS NOT BEING IN
ACCORD WITH LAW;

II

WHETHER THE COURT OFAPPEALS COMMITTED REVERSIBLE ERROR, BASED ON

SUBSTANTIAL QUESTIONS OF LAW, IN REVERSING THE DECISION OF THE NLRC
AND AFFIRMING THE DECISION OF THE EXECUTIVE LABOR ARBITER AND
FAILED TO CONSIDER THE MOTIVE OF THE RESPONDENT IN FILING THE CASE
AND THE CREDIBILITY OF HIS WITNESS;

III

THAT ASSUMING WITHOUT ADMITTING THAT RESPONDENT IS A REGULAR

WORKER, THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR, BASED ON SUBSTANTIAL QUESTIONS OF LAW, IN REVERSING THE
DECISION OF THE NLRC AND AFFIRMING THE DECISION OF THE EXECUTIVE
LABOR ARBITER IN DIRECTING A STRAIGHT COMPUTATION FOR WAGE
DIFFERENTIALS, BACKWAGES AND SEPARATION PAY, THE FINDINGS NOT BEING
INACCORD WITH LAW.
Petitioner disputed that there exists an employer-employee relationship between him and
Villegas. He claimed that respondent was paid on a piece-rate basis without supervision.12
Petitioner added that since his job was not necessary or desirable in the usual business or trade of
the hacienda, he cannot be considered as a regular employee. Petitioner insisted that it was
Villegas who has stopped working in the hacienda and that he was not dismissed.

We deny the petition.

The issue of Villegas' alleged illegal dismissal is anchored on the existence of an employer-
employee relationship between him and Gamboa; thus, essentially a question of fact. Generally,
the Court does not review errors that raise factual questions. However, when there is conflict
among the factual findings of the antecedent deciding bodies like the LA, the NLRC and the CA,
"it is proper, in the exercise of Our equity jurisdiction, to review and re-evaluate the factual
issues and to look into the records of the case and re-examine the questioned findings."13

A perusal of the records would show that respondent, having been employed in the subject
Hacienda while the same was still being managed by petitioner's father until the latter's death in
1993, is undisputed as the same was even admitted by Gamboa in his earlier pleadings.14 While
refuting that Villegas was a regular employee, petitioner however failed to categorically deny
that Villegas was indeed employed in their hacienda albeit he insisted that Villegas was merely a
casual employee doing odd jobs.

The rule is long and well settled that, in illegal dismissal cases like the one at bench, the burden
of proof is upon the employer to show that the employee’s termination from service is for a just
and valid cause. The employer’s case succeeds or fails on the strength of its evidence and not the
weakness of that adduced by the employee, in keeping with the principle that the scales of justice
should be tilted in favor of the latter in case of doubt in the evidence presented by them. Often
described as more than a mere scintilla, the quantum of proof is substantial evidence which is
understood as such relevant evidence as a reasonable mind might accept as adequate to support a
conclusion, even if other equally reasonable minds might conceivably opine otherwise.15

In the instant case, if we are to follow the length of time that Villegas had worked with the
Gamboas, it should be more than 20 years of service. Even Gamboa admitted that by act of
generosity and compassion, Villegas was given a privilege of erecting his house inside the
hacienda during his employment.16 While it may indeed be an act of good will on the part of the
Gamboas, still, such act is usually done by the employer either out of gratitude for the
employee’s service orfor the employer's convenience as the nature of the work calls for it.
Indeed, petitioner's length of service is an indication of the regularity of his employment. Even
assuming that he was doing odd jobs around the farm, such long period of doing said odd jobs is
indicative that the same was either necessary or desirable to petitioner's trade or business. Owing
to the length ofservice alone, he became a regular employee, by operation of law, one year after
he was employed.

Article 280 of the Labor Code, describes a regular employee as one who is either (1) engaged to
perform activities which are necessary or desirable in the usual business or trade of the
employer; and (2) those casual employees who have rendered at least one year of service,
whether continuous or broken, with respect to the activity in which he is employed.

In Integrated Contractor and Plumbing Works, Inc. v. National Labor Relations Commission,17
we held that the testto determine whether employment is regular or not is the reasonable
connection between the particular activity performed by the employee in relation to 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 to the business. Clearly,with more than 20 years of service,
Villegas, without doubt, passed this test to attain employment regularity.

While length of time may not be the controlling test to determine if Villegas is indeed a regular
employee, it is vital in establishing if he was hired to perform tasks which are necessary and
indispensable to the usual business or trade of the employer. If it was true that Villegas worked
in the hacienda only in the year 1993, specifically February 9,1993 and February 11, 1993, why
would then hebe given the benefit toconstruct his house in the hacienda? More significantly,
petitioner admitted that Villegas had worked in the hacienda until his father'sdemise. Clearly,
even assuming that Villegas' employment was only for a specific duration, the fact that he was
repeatedly re-hired over a long periodof time shows that his job is necessary and indispensable to
the usual business or trade of the employer.

Gamboa likewise argued that Villegas was paid on a piece-rate basis.18 However, payment on a
piece-ratebasis does not negate regular employment. "The term ‘wage’ is broadly defined in
Article 97 of the Labor Code as remuneration or earnings, capable of being expressed in terms of
money whether fixed or ascertained on a time, task, piece or commission basis. Payment by the
piece is just a method of compensation and does not define the essence of the relations."19

We are likewise unconvinced thatit was Villegas who suddenly stopped working. Considering
that hewas employed with the Gamboas for more than 20 years and was even given a place to
call his home, it does not make sense why Villegas would suddenly stop working therein for no
apparent reason. To justify a finding of abandonment of work, there must be proof of a deliberate
and unjustified refusal on the part of an employee to resume his employment. The burden of
proof is on the employer to show an unequivocal intent on the part of the employee to
discontinue employment. Mere absence is not sufficient. It must be accompanied by manifest
acts unerringly pointing to the fact that the employee simply does not want to work anymore.20

Petitioner failed to discharge this burden. Other than the self-serving declarations in the affidavit
of his employee, petitioner did not adduce proof of overt acts of Villegas showing his intention
to abandon his work. Abandonment is a matter of intention;it cannot be inferred or presumed
from equivocal acts. On the contrary, the filing of the instant illegal dismissal complaint negates
any intention on his part to sever their employment relationship. The delay of morethan 1 year
infiling the instant illegal dismissal case likewise is non-issue considering that the complaint was
filed within a reasonable period during the three-year period provided under Article 291 of the
Labor Code.21 As aptly observed by the appellate court, Villegas appeared tobe without
educational attainment. He could not have known that he has rights as a regular employee that is
protected by law.

The Labor Code draws a fine line between regular and casual employees to protect the interests
of labor. We ruled in Baguio Country Club Corporation v. NLRC22 that "its language evidently
manifests the intent to safeguard the tenurial interest of the worker who may be denied the rights
and benefits due a regular employee by virtue of lopsided agreements with the economically
powerful employer who can maneuver to keep an employee on a casual status for as long as
convenient." Thus, notwithstanding any agreements to the contrary, what determines whether a
certain employment is regular or casual is not the will and word of the employer, to which the
desperate worker often accedes, much less the procedure of hiring the employee or the manner of
paying his salary. It is the nature of the activities performed in relation to the particular business
or trades considering all circumstances, and in some cases the length of time of its performance
and itscontinued existence.23

All these having discussed, as a regular worker, Villegas is entitled to security of tenure under
Article 279 ofthe Labor Code and can only be removed for cause. We found no valid cause
attending to his dismissal and found also that his dismissal was without due process.

Article 277(b) of the Labor Code provides that:

x x x Subject to the constitutional right of workers to security of tenure and their right to be
protected against dismissal except for a just and authorized cause and without prejudice to the
requirement of notice under Article 283 of this Code, the employer shall furnish the worker
whose employment is sought to be terminated a written notice containing a statement of the
causes for termination and shall afford the latter ample opportunity to be heard and to defend
himself with the assistance of his representative if he so desires in accordance with company
rules and regulations promulgated pursuant to guidelines set by the Department of Labor and
Employment. x x x

The failure of the petitioner to comply with these procedural guidelines renders its dismissal of
Villegas illegal.1âwphi1 An illegally dismissed employee should be entitled to either
reinstatement - if viable, or separation pay if reinstatement is no longer viable, plus backwages in
either instance.24 Considering that reinstatement is no longer feasible because of strained
relations between the employee and the employer, separation pay should be granted. The basis
for computing separation pay is usually the length of the employee's past service, while that for
backwages is the actual period when the employee was unlawfully prevented from working.25 It
should be emphasized, however, that the finality of the illegal dismissal decision becomes the
reckoning point. In allowing separation pay, the final decision effectively declares that the
employment relationship ended so that separation pay and backwages are to be computed up to
that point. The decision also becomes a judgment for money from which another consequence
flows - the payment of interest in case of delay.26

WHEREFORE, premises considered, the Decision dated May 25, 2007 and Resolution dated
August 10, 2007 of the Court of Appeals are hereby AFFIRMED. The Decision dated December
3, 2003 of the Labor Arbiter in RAB Case No. 06-08-10480-94 is hereby REINSTATED. This
case is hereby REMANDED to the Labor Arbiter for the recomputation of respondent's
separation pay and backwages with legal interest.

SO ORDERED.