PACIFIC CONSULTANTS INTERNATIONAL ASIA, INC.

and JENS PETER

HENRICHSEN vs. KLAUS K. SCHONFELD

Employment attached to his letter of employment, any employment-related dispute

should be brought before London Court of Arbitration.

G.R. No. 166920, February 19, 2007

The Labor Arbiter rendered a decision granting petitioners’ Motion to Dismiss. On

appeal, the NLRC agreed with the disquisitions of the Labor Arbiter and affirmed the
latter’s decision in toto. On the issue of venue, the appellate court declared that, even
under the January 7, 1998 contract of employment, the parties were not precluded from
bringing a case related thereto in other venues. While there was, indeed, an agreement
that issues between the parties were to be resolved in the London Court of Arbitration,
the venue is not exclusive, since there is no stipulation that the complaint cannot be
filed in any other forum other than in the Philippines. Hence, this petition.

FACTS:

Klaus Schonfeld is a Canadian citizen and resident of New Westminster, British

Columbia, Canada. He had been a consultant in the field of environmental engineering
and water supply and sanitation. PaciCon Philippines, Inc. (PPI) herein petitioner, is a
corporation duly established and incorporated in accordance with the laws of the
Philippines. The primary purpose of PPI is to engage in the business of providing
specialty and technical services both in and out of the Philippines. It is also a subsidiary
of Pacific Consultants International of Japan. Jens Peter Henrichsen, director of PCIJ, is
based in Tokyo, Japan. Henrichsen commuted from Japan to Manila and vice versa, as
well as in other countries where PCIJ had business. PCIJ decided to engage in
consultancy services for water and sanitation in the Philippines. In 1997, Schonfeld is
employed by PCIJ through Henrichsen, as Sector Manager of PPI in its Water and
Sanitation Department. However, PCIJ assigned him as PPI sector manager in the
Philippines. His salary is to be paid partly by PPI and PCIJ.

Respondent Schonfeld however received a letter from Henrichsen informing him that his
employment has been terminated for the reason that PCIJ and PPI has not been
successful in the water and sanitation sector in the Philippines. By electronic mail
however, Henrichsen subsequently informed him to stay put in his job after August 5,
1999 until such time that he would be able to report on certain projects and discuss all
the opportunities he had developed. Schonfeld then eventually filed money claims,
unpaid salary, leave pay air fare from Manila to Canada and cost of shipment of goods
to Canada. PPI partially settled the money claims but refused to pay the rest. This
prompted Schonfeld to file a complaint for illegal dismissal against petitioners PPI and
Henrichsen with the Labor Arbiter. In his complaint, he alleges that PPI failed to notify
DOLE of its decision to close one of its departments which resulted in his dismissal, and
that they failed to notify him that his employment was terminated after August 4, 1999.
PPI moved to dismiss on the following grounds: 1. The LA had no jurisdiction over the
subject matter, 2. the venue was improperly laid. Further, it averred that respondent
Schonfeld was a Canadian citizen, a transient expatriate who had left the Philippines.
He was also employed and dismissed by PCIJ, a foreign corporation with principal office
in Tokyo, Japan. Under lex loci contractus, the complaint should have been filed in
Tokyo. Lastly, under Section 12 of the General Conditions of

ISSUE:

Whether the proper venue for the present complaint is the Arbitration Branch of the
NLRC and not the Court of Arbitration in London
RULING:

The Court ruled in the affirmative. The settled rule on stipulations regarding venue, as
held by this Court in the vintage case of Philippine Banking Corporation v. Tensuan, is
that while they are considered valid and enforceable, venue stipulations in a contract do
not, as a rule, supersede the general rule set forth in Rule 4 of the Revised Rules of
Court in the absence of qualifying or restrictive words. They should be considered
merely as an agreement or additional forum, not as limiting venue to the specified place.
They are not exclusive but, rather permissive. If the intention of the parties were to
restrict venue, there must be accompanying language clearly and categorically
expressing their purpose and design that actions between them be litigated only at the
place named by them. In the instant case, no restrictive words like "only," "solely,"
"exclusively in this court," "in no other court save —," "particularly," "nowhere else
but/except —," or words of equal import were stated in the contract. It cannot be said
that the court of arbitration in London is an exclusive venue to bring forth any complaint
arising out of the employment contract. Petitioners contend that respondent should have
filed his Complaint in his place of permanent residence, or where the PCIJ holds its
principal office, at the place where the contract of employment was signed, in London
as stated in their contract. By enumerating possible venues where respondent could
have filed his complaint, however, petitioners themselves admitted that the provision on
venue in the employment contract is indeed merely permissive.

G.R. No. 138051             June 10, 2004

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

FACTS:

In May 1994, ABS-CBN signed an Agreement with the Mel and Jay Management and
Development Corporation (MJMDC). MJMDC agreed to provide Jay Sonza’s services
exclusively to ABS-CBN as talent for radio and television. ABS-CBN agreed to pay for Sonza's
services a monthly talent fee of ₱310,000 for the first year and ₱317,000 for the second and
third year of the Agreement.

On April 1, 1996, Sonza wrote a letter wrote a letter to ABS-CBN President Eugenio Lopez III,
accusing ABS-CBN of violating the Agreement.

On April 30, 1996, Sonza filed a complaint before the Department of Labor and Employment
(DOLE), alleging that  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.

ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship

existed between the parties.

LABOR ARBITER: Dismissed Sonza's complaint for lack of jurisdiction, ruling that because
Sonza is a "talent," he cannot be considered an employee.

NLRC: Dismissed Sonza's Motion for Reconsideration.

COURT OF APPEALS: Affirmed NLRC ruling. The CA ruled that the allegations of Sonza
against ABS-CBN did not constitute a labor dispute because there was no employer-employee
relationship to begin with. If anything, Sonza's allegations constitute an action for breach of
contractual obligation, which is intrinsically a civil dispute to be resolved by a civil court, not the
Labor Arbiter or the NLRC.

ISSUE:

Whether Jay Sonza was an employee of ABS-CBN? -- NO.

HELD:

The Supreme Court held that Sonza was not an employee of ABS-CBN. As a "talent," he was
an independent contractor. In coming up with this conclusion, the Court looked at the essential
elements of employer-employee relationship and applied the control test.

(a) Selection and engagement of employee

ABS-CBN engaged Sonza's services to co-host its television and radio programs because of his
peculiar skills, talent and celebrity status. These are indicative, but not conclusive, of an
independent contractual relationship

(b) Payment of wages

The Court held that whatever benefits Sonza enjoyed (SSS, Medicare, 13th month pay) arose
from contract and not because of an employer-employee relationship

(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.

(d) Power of control

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 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.

In Sonza's case, ABS-CBN did not exercise control over the means and methods of his work.
The Court found that ABS-CBN was not involved in the actual performance that produced the
finished product of Sonza's work.

Second, the fact that he was subjected to ABS-CBN's rules and standards of performance was
not determinative of control as it was under his contract that he " shall abide with the rules and
standards of performance covering talents of ABS-CBN."

Third, the "exclusivity" clause in the Agreement was not a form of control. 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
control the means and methods of work of the talent, but simply to protect the investment of the
broadcast station.

Finally, the Supreme Court held that 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."
G.R. No. 100665 February 13, 1995

ZANOTTE SHOES/LEONARDO LORENZO, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION, HON. BENIGNO C. VILLARENTE, JR.,
JOSEPH LLUZ, LOLITO LLUZ, NOEL ADARAYAN, ROGELIO SIRA, VIRGINIA HERESANO,
GENELITO HERESANO and CARMELITA DE DIOS, respondents.

FACTS:

Private respondents filed a complaint for illegal dismissal and for various monetary claims,
including the recovery of damages and attorney's fees, against petitioners. In their supplemental
position paper, the complainants subsequently confined themselves to the illegal dismissal
charge and abandoned the monetary claims. One of the original eight complainants, Virgilio
Alcunaba, decided to resume his work with petitioners, thus leaving the rest to pursue the case.
Private respondents averred that they started to work for petitioners on, respectively, the
following dates:

NAME DATE
1 Joseph Lluz March, 1985
2 Noel Adarayan Feb. 17, 1980
3 Rogelio Sira January, 1982
4 Lolito Lluz March, 1982
5 Virginia Heresano May, 1987
6 Genelito Heresano 20-Oct-87
7 Carmelita de Dios January, 1975 1

that they worked for a minimum of twelve hours daily, including Sundays and holidays when
needed; that they were paid on piece-work basis; that it "angered" petitioner Lorenzo when they
requested to be made members of the Social Security System ("SSS"); and that, when they
demanded an increase in their pay rates, they were prevented (starting 24 October 1988) from
entering the work premises.

Petitioners, in turn, claimed that their business operations were only seasonal, normally twice a
year, one in June (coinciding with the opening of school classes) and another in December
(during the Christmas holidays), when heavy job orders would come in. Private respondents,
according to petitioners, were engaged on purely contractual basis and paid the rates
conformably with their respective agreements.

After the labor Arbiter’s investigation, he rendered his findings in favor of the respondents
sustaining the claim that indeed there exists an employer-employee relationship and ordered
also the petitioner to pay respondents their respective separation pay. 

An appeal was interposed by petitioners. The NLRC, on 24 April 1991, sustained the findings of
the Labor Arbiter and dismissed the appeal. On 30 May 1991, the NLRC denied petitioners'
motion for reconsideration.

ISSUE:

Whether or not the NLRC erred in sustaining the decision of the Labor arbiter finding the
existence of employer-employee relationship and the award of separation pay.

RULING:
Once again, the Supreme Court emphasized, that factual findings of the NLRC, particularly
when they coincide with that of the Labor Arbiter, are accorded respect, if not finality, and will
not be disturbed absent any showing that substantial evidence which might otherwise affect the
result of the case has been discarded. 

There being no obvious manifestation that the NLRC committed a grave abuse of its discretion
in arriving at its conclusion.

In the case at bar, we see no reason for disturbing the findings of the Labor Arbiter and the
NLRC on the existence of an employer-employee relationship between herein private parties.
The work of private respondents is clearly related to, and in the pursuit of, the principal business
activity of petitioners. The criteria used for determining the existence of an employer-employee
relationship, all extant in the case at bench, include (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power
to control the employee with respect to the result of the work to be done and to the means and
methods by which the work to be done and to the means and methods by which the work is to
be accomplished. The reckoning point is the existence of the right to control but not the actual
exercise of the right to control. 

While the court sustained the finding of the NLRC, it did not however consider the award of
separation pay there being no actual dismissal nor abandonment. Where, in fact, petitioner has
insisted his willingness to rehire respondents but they have steadfastly refused the offer. 

G.R. No. 146881             February 5, 2007

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

vs.
DR. DEAN N. CLIMACO, Respondent.

This is a petition for review on certiorari of the Decision of the Court of Appeals 1 promulgated on
July 7, 2000, and its Resolution promulgated on January 30, 2001, denying petitioner’s motion
for reconsideration. The Court of Appeals ruled that an employer-employee relationship exists
between respondent Dr. Dean N. Climaco and petitioner Coca-Cola Bottlers Phils., Inc. (Coca-
Cola), and that respondent was illegally dismissed.

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

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

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

Petitioner company, however, did not take any action. Hence, respondent made another inquiry
directed to the Assistant Regional Director, Bacolod City District Office of the Department of
Labor and Employment (DOLE), who referred the inquiry to the Legal Service of the DOLE,
Manila. In his letter7 dated May 18, 1993, Director Dennis P. Ancheta, Legal Service, DOLE,
stated that he believed that an employer-employee relationship existed between petitioner and
respondent based on the Retainer Agreement and the Comprehensive Medical Plan, and the
application of the "four-fold" test.

Respondent inquired from the management of petitioner company whether it was agreeable to
recognizing him as a regular employee. The management refused to do so. On February 24,
1994, respondent filed a Complaint9 before the NLRC, Bacolod City, seeking recognition as a
regular employee of petitioner company and prayed for the payment of all benefits of a regular
employee, including 13th Month Pay, Cost of Living Allowance, Holiday Pay, Service Incentive
Leave Pay, and Christmas Bonus.

While the complaint was pending before the Labor Arbiter, respondent received a letter dated
March 9, 1995 from petitioner company concluding their retainership agreement effective thirty
(30) days from receipt thereof. This prompted respondent to file a complaint for illegal dismissal
against petitioner company with the NLRC, Bacolod City.

The Labor Arbiters in the 2 complaints both found for petitioner finding no employer-employee
relationship existed between the parties. NLRC tribunal affirmed. CA reversed the decision

Issue:

Whether or not employer-employee relationship exists between the parties.

Ruling: NO.

The Court, in determining the existence of an employer-employee relationship, has invariably

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

The Court agrees with the finding of the Labor Arbiter and the NLRC that the circumstances of
this case show that no employer-employee relationship exists between the parties. Petitioner
company lacked the power of control over the performance by respondent of his duties. The
Comprehensive Medical Plan which contains the respondent‘s objectives, duties and
obligations, does not tell respondent “how to conduct his physical examination, how to
immunize, or how to diagnose and treat his patients, employees of petitioner company, in each
case.” It provided guidelines merely to ensure that the end result was achieved, but did not
control the means and methods by which respondent performed his assigned tasks.

The Court finds that the schedule of work and the requirement to be on call for emergency
cases do not amount to such control, but are necessary incidents to the Retainership
Agreement. The provision that respondent was on call during emergency cases did not make
him a regular employee.

The Court also notes that the Retainership Agreement granted to both parties the power to
terminate their relationship upon giving a 30-day notice. Hence, petitioner company did not
wield the sole power of dismissal or termination.
G.R. No. 84484 November 15, 1989

INSULAR LIFE ASSURANCE CO., LTD., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO, respondents.

Tirol & Tirol for petitioner.

Enojas, Defensor & Teodosio Cabado Law Offices for private respondent.

FACTS:

On July 2, 1968, Insular Life Assurance Co. Ltd and Melecio T. Basiao entered into a contract
by which:

1. Basiao was “authorized to solicit within the Philippines applications for insurance policies
and annuities in accordance with the existing rules and regulations” of the company;
2. He would receive “compensation, in the form of commissions.. as provided in the
schedule of commissions” of the contract to “constitute a part of the consideration of
(said) agreement,” and;
3. The “rules in (the company) rate book and its agent’s manual as well as all circulars and
those which may from time to time be promulgated by it,” were made part of said
contract.

Four years later, in April 1972, the parties entered into another contract – An agency manager’s
contract – and to implement his end of it Basiao organized an agency or office to which he gave
the name M Basiao and Associates, while concurrently fulfilling this commitments under the first
contract with the company.

In May 1979, the company terminated the Agency Manager’s contract. After seeking a
reconsideration, Basiao sued the company in a civil action and this was later to claim, prompted
the latter to terminate also his engagement under the first contract and to stop payment of his
commission starting April 1, 1980.

Petitioner contends that Basiao is not an employee but an independent contractor for which they
have no obligation to pay said commissions. The Labor Arbiter found for Basiao ruling that there
exists employer-employee relationship between him and petitioner. NLRC affirmed.

Issue:

Whether or not employer-employee relationship existed between petitioner and Basiao.

Ruling: NO.

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 employees’
conduct — although the latter is the most important element. 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.
Rules and regulations governing the conduct of the business are provided for in the Insurance
Code and enforced by the Insurance Commissioner. It is, therefore, usual and expected for an
insurance company to promulgate a set of rules to guide its commission agents in selling its
policies that they may not run afoul of the law and what it requires or prohibits. None of these
really invades the agent’s contractual prerogative to adopt his own selling methods or to sell
insurance at his own time and convenience, hence cannot justifiably be said to establish an
employer-employee relationship between him and the company.

The Court, therefore, rules that under the contract invoked by him, Basiao was not an employee
of the petitioner, but a commission agent, an independent contractor whose claim for unpaid
commissions should have been litigated in an ordinary civil action.

RONILO SORREDA, PETITIONER, VS. CAMBRIDGE ELECTRONICS CORPORATION,

[1]
 RESPONDENT.

Facts:
This petition[2] seeks to reverse and set aside the May 26, 2005 decision[3] of the Court of
Appeals (CA) in CA-G.R. SP No. 77303 and its resolution denying reconsideration.[4] The CA
affirmed the resolution[5] of the National Labor Relations Commission (NLRC) in NLRC NCR CA
No. 028156-01 declaring that petitioner Ronilo Sorreda was not a regular employee of
respondent Cambridge Electronics Corporation.

On May 8, 1999, petitioner was hired by respondent as a technician for a period of 5 months at
minimum wage.[6] Five weeks into the job (on June 15, 1999), petitioner met an accident in
which his left arm was crushed by a machine and had to be amputated.[7]

Petitioner claimed that, shortly after his release from the hospital, officers of respondent
company called him to a meeting with his common-law wife, father and cousin. There he was
assured a place in the company as a regular employee for as long as the company existed and
as soon as he fully recovered from his injury.

In September 1999, after he recovered from his injury, petitioner reported for work. Instead of
giving him employment, they made him sign a memorandum of resignation to formalize his
separation from the company in the light of the expiration of his five-month contract.

On November 16, 1999, petitioner filed in the Regional Arbitration Branch of the NLRC of
Dasmarinas Cavite a complaint[8] for illegal dismissal (later changed to breach of contract).

LABOR ARBITER held that he had jurisdiction to hear and decide the case as it involved the
employer-employee relationship of the contending parties. that petitioner who had been
employed on a per-project basis became a regular employee by virtue of the contract of
perpetual employment. He stated that the positive declaration of the witnesses (common-law
wife, father and cousin) present at the meeting and the parole evidence rule was enough to
support the petitioner’s claim. he ruled that petitioner was employed by respondent for an
indefinite period of employment (that is, on regular status.) He ordered petitioner’s
reinstatement. Respondent appealed to the NLRC and asked for the reversal of the LA decision
based on grave abuse of discretion for assuming jurisdiction over the case.

NLRC agreed with respondent. It found that petitioner was not a regular employee; thus, he was
neither illegally dismissed nor entitled to reinstatement and back wages.

COURT OF APPEALS affirmed the decision of NLRC

Issue:

Whether or not the labor arbiter had the jurisdiction to take cognizance thereof.
Held:
In Pioneer Concrete Philippines, Inc. v. Todaro,The Court reiterated that where no employer-
employee relationship exists between the parties, and the Labor Code or any labor statute or
collective bargaining agreement is not needed to resolve any issue raised by them, it is the
Regional Trial Court which has jurisdiction. Thus it has been consistently held that the
determination of the existence of a contract as well as the payment of damages is inherently
civil in nature. A labor arbiter may only take cognizance of a case and award damages where
the claim for such damages arises out of an employer-employee relationship. In this instance,
petitioner was clearly a per-project employee of private respondent, resulting in an employer-
employee relationship. Consequently, questions or disputes arising out of this relationship fell
under the jurisdiction of the labor arbiter. However, based on petitioner’s allegations in his
position paper, his cause of action was based on an alleged second contract of employment
separate and distinct from the per-project employment contract. Thus, petitioner insisted that
there was a perfected contract of perpetual employment and that respondent was liable to pay
him damages. While there was an employer-employee relationship between the parties under
their five-month per-project contract of employment, the present dispute is neither rooted in the
a forestated contract nor is it one inherently linked to it. Petitioner insists on a right to be
employed again in respondent company and seeks a determination of the existence of a new
and separate contract that established that right.

As such, his case is within the jurisdiction not of the labor arbiter but of the regular
courts. The NLRC and the CA were therefore correct in ruling that the labor arbiter
erroneously took cognizance of the case.

While the Constitution recognizes the primacy of labor, it also recognizes the critical role of
private enterprise in nation-building and the prerogatives of management. A contract of
perpetual employment deprives management of its prerogative to decide whom to hire, fire and
promote, and renders inutile the basic precepts of labor relations. While management may
validly waive it prerogatives, such waiver should not be contrary to law, public order, public
policy, morals or good customs. An absolute and unqualified employment for life in the mold of
petitioner’s concept of perpetual employment is contrary to public policy and good customs, as it
unjustly forbids the employer from terminating the services of an employee despite the
existence of a just or valid cause. It likewise compels the employer to retain an employee
despite the attainment of the statutory retirement age,
even if the employee has become a “non-performing asset” or, worse, a liability to the employer.

Moreover, aside from the self-serving claim of petitioner, there was no concrete proof to
establish the existence of such agreement. Petitioner cannot validly force respondent to enter
into a permanent employment contract with him. Such stance is contrary to the consensually
principle of contracts as well as to the management prerogative of respondent company to
choose its employees.

WHEREFORE, the petition is hereby DENIED.