LABOR CASES

PRINCIPLE OF SOCIAL JUSTICE

CASE#1 JUSTA G. GUIDO, petitioner, vs. RURAL PROGRESS
ADMINISTRATION, c/o FAUSTINO AGUILAR, Manager,
Rural Progress Administration, respondent.
[No. L-2089. October 31, 1949]
-by Angelie

PRINCIPLE:
PROMOTION OF SOCIAL JUSTICE AS ORDAINED BY THE CONSTITUTION, ITS NATURE,
EXTENT AND SCOPE. — The promotion of social justice ordained by the Constitution does not supply
paramount basis for untrammeled expropriation of private land by the Rural Progress Administration or
any other government instrumentality. Social justice does not champion division of property or equality
of economic status; what it and the Constitution do guaranty are equality of opportunity, equality of
political rights, equality before the law, equality between values given and received, and equitable
sharing of the social and material goods on the basis of efforts exerted in their production.

FACTS

ORIGINAL ACTION in the Supreme Court. Prohibition.

Justa Guido, owner of the land being expropriated by the Rural Progress Administration (RPA), filed a
petition for prohibition to prevent RPA and Judge Oscar Castelo from proceeding with the expropriation.
Guido alleged, among others, that the land sought to be expropriated is commercial and therefore
excluded within the purview of the provisions of Act 539.Commonwealth Act No. 539 authorized the
President of the Philippines to acquire private lands or any interest therein through purchaser or farms
for resale at a reasonable price. The National Assembly approved this enactment on the authority of
section 4 of Article XIII of the Constitution which provides that the Congress may authorize, upon
payment of just compensation, the expropriation of lands to be subdivided into small lots and conveyed
at cost to individuals.

ISSUE:
Whether the Expropriation of Guido’s land is in conformity to the Principle of Social Justice.

RULING:
NO. The principle that no one shall be deprived of his property without the due process of law, herein
invoked, and that "the promotion of social justice to insure the well-being and economic security of all
the people should be the concern of the state," is a declaration, with which the former should be
reconciled, that "the Philippines is a Republican state" created to secure to the Filipino people "the
blessings of independence under a regime of justice, liberty and democracy."

Democracy, as a way of life enshrined in the Constitution, embraces as its necessary component
freedom and along with these freedoms are included economic freedom and freedom of enterprise
within reasonable bounds and under proper control. In paving the way for the breaking up of existing
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large estates, trust in perpetuity, feudalism, and their concomitant evils, the Constitution did not
propose to destroy or undermine the property right or to advocate equal distribution of wealth or to
authorize of what is in excess of one's personal needs and the giving of it to another. The promotion of
social justice ordained by the Constitution does not supply paramount basis for untrammeled
expropriation of private land by the Rural Progress Administration or any other government
instrumentality. Social justice does not champion division of property or equality of economic status;
what it and the Constitution do guaranty are equality of opportunity, equality of political rights, equality
before the law, equality between values given and received on the basis of efforts exerted in their
production.

The expropriation proceedings at bar have been instituted for the economic relief of a few
families devoid of any consideration of public health, public peace and order, or other public advantage.
What is proposed to be done is to take plaintiff's property, which for all we know she acquired by sweat
and sacrifice for her and her family's security, and sell it at cost to a few lessees who refuse to pay the
stipulated rent or leave the premises.

No fixed line of demarcation between what taking is for public use and what is not can be made; each
case has to be judged according to its peculiar circumstances. It suffices to say for the purpose of this
decision that the case under consideration is far wanting in those elements which make for public
convenience or public use. It is patterned upon an ideology far removed from that consecrated in our
system of government and embraced by the majority of the citizens of this country. If upheld, this case
would open the gates to more oppressive expropriations. If this expropriation be constitutional, we see
no reason why a 10-, 15-, or 25-hectare farm land might not be expropriated and subdivided, and sold to
those who want to own a portion of it. To make the analogy closer, we find no reason why the

Rural Progress Administration could not take by condemnation an urban lot containing an area of 1,000
or 2,000 square meters for subdivision into tiny lots for resale to its occupants or those who want to
build thereon.
The petition is granted without special findings as to costs.

Case 2: Cabatan vs. Court of Appeals

Nos. L-44875-76; No. L-45160; Nos. L-46211-12 *
January 22, 1980
-by Liza

Constitutional Law; The concept of “social justice” was not meant to perpetuate an injustice to the
landholder-lessor. — Finally, the reliance by the tenants-lessees on “social justice” as a reason to
support the continuance of an unjust and inequitable rental rate is not only improper but would
countenance and perpetuate an injustice against the landholder-lessor. This, the constitutional
precept of “social justice” was never meant to do.

Facts:

Carmen G. Vda. de Villareal was the owner of a vast tract of land known as Hacienda Esperanza situated
at Barrio Saman, Sta. Maria, Pangasinan. The hacienda is divided into several farm lots which are being
tilled by several tenants as early as 1920’s and long before the effectivity of the first rice-share Tenancy
LABOR CASES

Act. The foregoing rentals in tobacco and/or cash for palay harvest were arrived at or mutually agreed
upon by the land owner and/or her predecessors and the respective 15 tenants including Cabatan.
and/or their predecessors, before the enactment of the Tenancy Act fixing rentals on agri-tenanted
holdings.
Sometime in March, 1971, before the palay planting
season, plaintiff Carmen G. de Villareal, through her son
and farm administrator, Gen. Luis Villareal demanded from the defendants tenants in a series of
conferences that thenceforth, they shall pay a fixed rental in kind equivalent to the normal harvest of
each crop of palay or tobacco for the three agri-years in accordance with Sec. 34. The defendants-
tenants rejected the plaintiff’s demand and instead offered to pay the same annual rentals or that which
they have been paying prior to 1971-72. The landholder in turn refused to accept the tenants’ counter
offer. The lease rentals which the tenants were paying are not equivalent to or less than 25% of the
average normal net harvest from the landholdings of the past three agri-years immediately prior to
1971-72 and therefore were found by the CAR to be unfair/unjust to the landholder.

In view of the failure to agree as to the rental rates, the landholder filed the Petitions with the Court of
Agrarian Relations (CAR)

Issue:

May the CAR determine and fix the rentals to be paid by the tenants to the landholder in accordance
with Sec. 34, RA 3844, as amended in an amount not to exceed 25% of the net average normal
harvest of three preceeding agri-years? This is the core and common issue in these petitions.

Ruling:

Under the foregoing provision, there was no prohibition against a landholder-lessor demanding an
increase inconsideration if the same was less than that provided by the law. “In the absence of any
agreement between the parties as to the rental, the Court of Agrarian Relations shall summarily
determine a provisional rental in pursuance to existing laws, rules and regulations and production
records available in the different field units of the department, taking into account the extent of the
development of the land at the time of the conversion into leasehold and the participation of the lessee
in the development thereof. This provisional rental shall continue in force and effect until a fixed rental
is finally determined. The court shall determine the fixed rental within thirty days after the petition is
submitted for decision. The reliance by the tenants-lessees on “social justice” as a reason to support the
continuance of an unjust and inequitable rental rate is not only improper but would countenance and
perpetuate an injustice against the landholder-lessor. This, the constitutional precept of “social justice”
was never meant to do.

Explanation on Social Justice:

For while it is true that RA 3844 and its amendment—as are all agricultural tenancy and agrarian reform
acts—were enacted as social justice measures, “(t)he promotion
of social justice, however. . .”, in the very words of Justice Laurel, “. . .is to be achieved not thru a
mistaken sympathy towards any given group.” For “social justice means...the promotion of the welfare
of all the people, the adoption by the Government of measures calculated to insure economic stability
of all the competent elements of society, through the maintenance of a proper economic and social
equilibrium in the interrelations of (all) the members of the community, constitutionally, through the
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adoption of measures legally justifiable, or extra constitutionally through the exercise of powers
underlying the existence of all governments on the time-honored principle of salus poputi est suprema
lex. It “...must be founded on the recognition of the necessity of interdependence among divers and
diverse units of a society and of the protection that should be equally and evenly extended to all groups
as a combined force in our social and economic life, consistent with the fundamental and paramount
objective of the state of promoting the health, comfort, and quiet of all persons, and of bringing about
‘the greatest good to the greatest number.’ ”Social justice as thus defined and in its true meaning is not
meant to countenance, much less perpetuate, an injustice against any group—not even as against
landholders. For
the landholders as a component unit or element in our agro industrial society are entitled to “equal
justice under law” which our courts are, above everything else, under mandate of the Constitution to
dispense fairly, without fear nor favor. In our scheme of government, social justice as a fundamental
principle enshrined in the 1935, reiterated and revitalized in the 1973 Constitution, is formulated and
implemented by the legislative and the executive departments, respectively. It is the specific duty of the
judiciary in turn to examine and determine—in appropriate cases coming before the courts—the
intendment and scope—or the constitutionality, where raised—of tenancy, labor and other social
legislation.

and/or measures. This responsibility the judiciary has discharged, ever mindful and always aware in
proper cases that in the words of the famous grass-roots slogan of the late President Magsaysay “. . .
those who have less in life should have more in law.”

A cursory study of the long line of decisions on social justice will readily reveal, however, that the
concept has been fleshed out—the principle, conceptualized—as Justice Laurel enjoined in the
celebrated case of Calalang vs. Williams—not thru mistaken sympathy for or misplaced antipathy
against any group—whether labor or capital, landlord or tenant—but even-handedly and fairly, thru the
observance of the principle of “equal justice under law,” for all and each and every element of the body
politic.

Case # 3 Phil. Long Distance Telephone Co. vs. NLRC

No. L-80609. August 23, 1988.

The policy of social justice is not intended to countenance wrongdoing.—The policy of social justice is
not intended to countenance wrongdoing simply because
it is committed by the underprivileged. At best it may mitigate the penalty but it certainly will not
condone the offense. Compassion for the poor is an imperative of every humane society but only when
the recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be
the refuge of scoundrels any more than can equity be an impediment to the punishment of the
guilty. Those who invoke social justice may do so only if their hands are clean and their motives
blameless and not simply because they happen to be poor. This great policy of our Constitution is not
meant for the protection of those who have proved they are not worthy of it, like the workers who have
tainted the cause of labor with the blemishes of their own character.

Facts:
LABOR CASES

Marilyn Abucay, a traffic operator of the Philippine Long Distance Telephone Company, was accused by
two complainants of having demanded and received from them the total amount of P3,800.00 in
consideration of her promise to facilitate approval of their applications for telephone installation.

Investigated and heard, she was found guilty as charged and accordingly separated from the service. She
went to the Ministry of Labor and Employment claiming she had been illegally removed. The descision
was sustained and complaint was dismissed. However the labor arbiter’s decision declared that :

“Considering that Dr. Helen Bangayan and Mrs. Consolacion Martinez are not totally blameless
in the light of the fact that the deal happened outside the premises of respondent company and

that their act of giving P3,800.00 without any receipt is tantamount to corruption of public
officers, complainant must be given one month pay for every year of service as financial

assistance.”

Both the petitioner and the private respondent appealed to the National Labor Relations Board,
which upheld the said decision in toto and dismissed the appeals.

Issue: legality of

the award of financial assistance to an employee who had

been dismissed for cause as found by the public respondent (NLRC)

Ruling:

We hold that henceforth separation pay shall be allowed as a measure of social justice only in those
instances where the employee is validly dismissed for causes other than serious misconduct or those
reflecting on his moral character. Where the reason for the valid dismissal is, for example, habitual
intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a
fellow worker, the employer may not be required to give the dismissed employee separation pay, or
financial assistance, or whatever other name it is called, on the ground of social justice.
The policy of social justice is not intended to countenance wrongdoing simply because it is committed by
the underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense.
Compassion for the poor is an imperative of every humane society but only when the recipient is not a
rascal claiming an undeserved privilege. Social justice cannot be permitted to be refuge of scoundrels
any more than can equity be an impediment to the punishment of the guilty. Those who invoke social
justice may do so only if their hands are clean and their motives blameless and not simply because they
LABOR CASES

happen to be poor. This great policy of our Constitution is not meant for the protection of those who
have proved they are not worthy of it, like the workers who have tainted the cause of labor with the
blemishes of their own character.
Applying the above considerations, we hold that the grant of separation pay in the case at bar is
unjustified. The private respondent has been dismissed for dishonesty,

as found by the labor arbiter and affirmed by the NLRC and as she herself has impliedly admitted. The
fact that she has worked with the PLDT for more than a decade, if it is to be considered at all, should be
taken against her as it

reflects a regrettable lack of loyalty that she should have strengthened instead of betraying during all of
her 10 years of service with the company. If regarded as a justification for moderating the penalty of
dismissal, it will actually become a prize for disloyalty, perverting the meaning of social justice and
undermining the efforts of labor to cleanse its ranks of all undesirables.

Case #4UST vs. NLRC; as cited in Metrolab Industries, 254 SCRA 182; 1992

Metrolab Industries, Inc. vs. Roldan-Confesor

G. R. No. 108855. February 28, 1996.*

Labor Law; Dismissal; Exercise of management prerogatives is not absolute but subject to limitations
imposed by law.—This

Court recognizes the exercise of management prerogatives and often declines to interfere with the
legitimate business decisions of the employer. However, this privilege is not absolute but subject to
limitations imposed by law.

Facts

On 31 December 1990, the Collective Bargaining Agreement (CBA) between Metrolab and the Union
expired. The negotiations for a new CBA, however, ended in a deadlock.

The Union filed a notice of strike against Metrolab and Metro Drug, Inc. The parties failed to settle their
dispute despite the conciliation efforts of the National Conciliation and Mediation Board.

The Labor Secretary Torres issued an order resolving all the disputed items in the CBA and

ordered the parties involved to execute a new CBA. Thereafter, the Union filed a motion for
reconsideration.

On 27 January 1992, during the pendency of the motion for reconsideration, Metrolab laid
LABOR CASES

off 94 of its rank and file employees because the company would suffer a

yearly gross revenue loss of approximately sixty-six (66) million pesos and again on Oct 1992, Metrolab
laid off 73 of its employees due to lack of work.

Acting Labor Secretary Nieves Confessor issued a resolutions declaring the layoff of

Metrolab’s 94 rank and file workers illegal and ordered their reinstatement with full backwages and and
MII’s motion for reconsideration with respect to the consequences of the second wave of layoff
affecting 73 employees, is denied, and since the legality of the 73 employees layoff was not submitted
and no evidence had been adduced, it was referred to the NLRC for its appropriate action.

TRO was issued enjoining the Labor Secretary from enforcing and implementing the resolutions.

ISSUE:

THE PUBLIC RESPONDENT HON. SECRETARY OF LABOR AND EMPLOYMENT COMMITTED GRAVE ABUSE
OF DISCRETION AND EXCEEDED HER JURISDICTION IN DECLARING THE TEMPORARY LAYOFF ILLEGAL
AND ORDERING THE REINSTATEMENT AND PAYMENT OF BACKWAGES TO THE AFFECTED EMPLOYEES.

RULING:

We cannot give credence to Metrolab’s contention. This Court recognizes the exercise of management
prerogatives and often declines to interfere with the legitimate business decisions of the employer.
However, this privilege is not absolute but subject to limitations

imposed by law.

All this points to the conclusion that the exercise of managerial prerogatives is not unlimited. It is
circumscribed by limitations found in law, a collective bargaining agreement, or the general principles
of fair play and justice (University of Sto. Tomas v. NLRC, 190 SCRA 758 [1990]). . . . (Italics ours.)
LABOR CASES
LABOR CASES

Case #4.a University of Sto. Tomas vs. NLRC

G.R. No. 89920. October 18, 1990

Employer-Employee Relationship; Management prerogatives are not absolute prerogatives, but are
subject to limitations found in law, a collective bargaining agreement, or general principles of fair play
and justice.—

Facts:

On June 19,1989, the University of Sto. Tomas (UST), terminated the employment of all sixteen union
officers and directors of respondent UST Faculty Union on the ground that "in publishing or causing to
be published in Strike Bulletin No. 5 dated August 4, 1987, the libelous and defamatory attacks against
the Father Rector, (each of them) has committed the offenses of grave misconduct, serious disrespect to
a superior and conduct unbecoming a faculty member." As a result of the dismissal of said employees,
some faculty members staged mass leaves of absence, disrupting classes in all levels at the University.

The faculty union filed a complaint for illegal dismissal and unfair labor practice with the Department of
Labor and Employment.The labor arbiter, on a prima facie showing that the termination was causing a
serious labor dispute, certified the matter to the Secretary of Labor and Employment for a possible
suspension of the effects of termination.

DOLE Sec Drilon, in the interest of industrial peace and pursuant to Section 33 (b) of RA 6715, ordered
the suspension of the termination of the 16 employees; the management is likewise ordered to accept
them back to work under the same terms and conditions prevailing prior to their dismissal and all faculty
members are directed to immediately report back for work and for management to accept them back
under the same terms and conditions prevailing prior to the strike.
LABOR CASES

Petitioner UST filed a motion for reconsideration. Sec Drilon modified its decision and in structed the
the NLRC to immediately call the parties and expedite the resolution of the dispute. 'The directive to
reinstate the employees and to the parties to cease and desist from committing any act that will
aggravate the situation is reiterated."

The NLRC issued a resolution directing the the University to comply and faithfully abide with the Orders
of the Secretary of Labor and Employment by immediately reinstating or readmitting the following
faculty members under the same terms and conditions prevailing prior to the present dispute or merely
reinstate them in the payroll.

ISSUE:

THE HONORABLE NLRC GRAVELY ABUSED ITS DISCRETION WHEN IT ARROGATED UPON ITSELF THE
EXERCISE OF THE RIGHT AND PREROGATIVES REPOSED BY LAW TO THE PETITIONER UNIVERSITY IN THE
LATTER'S CAPACITY AS EMPLOYER.

RULING:

NO. The hiring, firing, transfer, demotion and promotion of employees are traditionally identified as
management prerogatives. However, these are not absolute prerogatives. They are subject to
limitations found in law, a collective bargaining agreement, or general principles of fair play and justice.
(Abbott Laboratories [Phil.] Inc. v. NLRC, 154 SCRA 713 [1987]) Article 263(g) is one such limitation
provided by law. To the extent that Art. 263(g) calls for the admission of all workers under the same
terms and conditions prevailing before the strike, the petitioner University is restricted from exercising
its generally unbounded right to transfer or reassign its employees. The public respondent NLRC is
notsubstituting its own judgment for that of the petitioner in the conduct of its own affairs and
operations; it is merely complying with the mandate of the law.

Case #5 Dole Philippines, Inc. vs. Pawis ng Makabayang Obrero

R. No. 146650. January 13, 2003

Labor Law; Exercise of management prerogative is not unlimited but subject to the limitations found in
law, a collective bargaining agreement or the general principles of fair play and justice.—

Facts
LABOR CASES

On February 22, 1996, a new five-year Collective Bargaining Agreement was executed by petitioner Dole
Philippines, Inc., and private respondent Pawis Ng Makabayang Obrero-NFL (PAMAO-NFL). Among the
provisions of the new CBA is the disputed section on meal allowance under Section 3 of Article XVIII on
Bonuses and Allowances, which reads:

Section 3. MEAL ALLOWANCE. The COMPANY agrees to grant a MEAL ALLOWANCE of TEN PESOS
(P10.00) to all employees who render at least TWO (2) hours or more of actual overtime work on a
workday, and FREE MEALS, as presently practiced, not exceeding TWENTY FIVE PESOS (P25.00) after
THREE (3) hours of actual overtime work.

Petitioner asserts that the phrase “after three (3) hours of actual overtime work” does not mean after
exactly three hours of actual overtime work; it means after more than three hours of actual overtime
work. Petitioner insists that this has been the interpretation and practice of Dole for the past thirteen
years. Respondent, on the other hand, maintains that “after three (3) hours of actual overtime work”
simply means after rendering exactly, or no less than, three hours of actual overtime work.

ISSUE: When can a DOLE employee be entitled free meals if he has rendered (a) exactly, or no less than,
three hours of actual overtime work or (b) more than three hours of actual overtime work?

Ruling:

The disputed provision of the CBA is clear and unambiguous. The terms are explicit and the language of
the CBA is not susceptible to any other interpretation. Hence, the literal meaning of “free meals after
three (3) hours of overtime work” shall prevail, which is simply that an employee shall be entitled to a
free meal if he has rendered exactly, or no less than, three hours of overtime work, not “after more
than” or “in excess of” three hours overtime work.

The exercise of management prerogative is not unlimited. It is subject to the limitations found in law, a
collective bargaining agreement or the general principles of fair play and justice.This situation
constitutes one of the limitations. The CBA is the norm of conduct between petitioner and private
respondent and compliance therewith is mandated by the express policy of the law.

Petitioner Dole cannot assail the voluntary arbitrator’s interpretation of the CBA for the supposed
impairment of its management prerogatives just because the same interpretation is contrary to its own.

WHEREFORE, petition is hereby denied.

LABOR CASES

CASE# 7 IMASEN PHILIPPINE MANUFACTURING

CORPORATION, petitioner, vs. RAMONCHITO T. ALCON
and JOANN S. PAPA, respondents.

PRINCIPLE: Labor Law; Security of Tenure; The law and jurisprudence guarantee to every employee
security of tenure. —The law and jurisprudence guarantee to every employee security of tenure. This
textual and the ensuing jurisprudential commitment to the cause and welfare of the working class
proceed from the social justice principles of the Constitution that the Court zealously implements out of
its concern for those with less in life. Thus, the Court will not hesitate to strike down as invalid any
employer act that attempts to undermine workers’ tenurial security. All these the State undertakes
under Article 279 (now Article 293) of the Labor Code which bar an employer from terminating the
services of an employee, except for just or authorized cause and upon observance of due process.
FACTS:

Petitioner Imasen Philippine Manufacturing Corporation is a domestic corporation engaged in the

manufacture of auto seat-recliners and slide-adjusters. It hired the respondents as manual welders in
2001.

On October 5, 2002, the respondents reported for work on the second shift – from 8:00 pm to 5:00 am
of the following day. At around 12:40
am, Cyrus A. Altiche, Imasen’s security guard on duty, went to patrol and inspect the production plant’s
premises. When Altiche reached Imasen’s Press Area, he heard the sound of a running industrial fan.

Intending to turn the fan off, he followed the sound that led him to the plant’s “Tool and Die” section.

At the “Tool and Die” section, Altiche saw the respondents having sexual intercourse on the floor, using
a piece of carton as mattress. Altiche immediately went back to the guard house and relayed what he
saw to Danilo S. Ogana, another security guard on duty.

On Altiche’s request, Ogana made a follow-up inspection. Ogana went to the “Tool and Die” section and
saw several employees, including the respondents, already leaving the area. He noticed, however, that
Alcon picked up the carton that Altiche claimed the respondents used as mattress during their sexual
act, and returned it to the place where the cartons were kept. Altiche then submitted a handwritten
report of the incident to Imasen’s Finance and Administration Manager.

On October 14, 2002, Imasen issued the respondents separate interoffice memoranda informing them
of Altiche’s report on the October 5, 2002 incident and directing them to submit their individual
explanation. The respondents complied with the directive; they
claimed that they were merely sleeping in the “Tool and Die” section at the time of the incident. They
also claimed that other employees were near the area, making the commission of the act charged
impossible.

On December 4, 2002, Imasen issued the respondents separate interoffice memoranda terminating their
services. It found the respondents guilty of the act charged which it considered as “gross misconduct
contrary to the existing policies, rules and regulations of the company.”
LABOR CASES

On December 5, 2002, the respondents filed before the LA the Complaint for illegal dismissal. The
respondents maintained their version of the incident.

In the December 10, 2004 decision, the LA dismissed the respondents’ complaint for lack of merit. The
LA found the respondents’ dismissal valid, i.e., for the just cause of gross misconduct and with due
process. In its December 24, 2008 decision, the NLRC dismissed the respondents’ appeal14 for lack of
merit. In its June 9, 2010 decision, the CA nullified the NLRC’s ruling. To the CA, the penalty of dismissal
is not commensurate to the respondents’ act, considering especially that the respondents had not
committed any infraction in the past. Imasen argues in this petition that the act of engaging in sexual
intercourse inside company premises during work hours is serious misconduct by whatever standard it is
measured. According to Imasen, the respondents’ infraction is an affront to its core values and high
ethical work standards, and justifies the dismissal.

The respondents argue in their comment that the elements of serious misconduct that justifies an
employee’s dismissal are absent in this case, adopting thereby the CA’s ruling.

ISSUE:

Whether or not sexual intercourse inside the company premises is a ground for dismissal of service.

RULING:

Yes. The just causes for dismissing an employee are provided under Article 282 (now Article 296) of the
Labor Code. Under Article 282(a), serious misconduct by the employee justifies the employer in
terminating his or her employment.

Misconduct is defined as an improper or wrong conduct. It is a transgression of some established and

definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful
intent and not mere error in judgment. To constitute a valid cause for the dismissal within the text and
meaning of Article 282 of the Labor Code, the employee’s misconduct must be serious, i.e., of such
grave and aggravated character and not merely trivial or unimportant. For misconduct or improper
behavior to be a just cause for dismissal, the following elements must concur: (a) the misconduct must
be serious; (b) it must relate to the performance of the employee’s duties showing that the employee
has become unfit to continue working for the employer; and (c) it must have been performed with
wrongful intent.

The respondents’ infraction amounts to serious misconduct within the terms of Article 282 (now
Article296) of the Labor Code justifying their dismissal. Dismissal situations (on the ground of serious
misconduct) involving sexual acts, particularly sexual intercourse committed by employees
inside company premises and during work hours, are not usual violations and are not found in
abundance under jurisprudence. Thus, in resolving the present petition, we are largely guided by the
principles we discussed above, as applied to the totality of the circumstances that surrounded the
petitioners’ dismissal.
LABOR CASES

Sexual acts and intimacies between two consenting adults belong, as a principled ideal, to the realm of
purely private relations. Whether aroused by lust or inflamed by sincere affection, sexual acts should be
carried out at such place, time and circumstance that, by the generally accepted norms of conduct, will
not offend public decency nor disturb the generally held or accepted social morals. Under these
parameters, sexual acts between two consenting adults do not have a place in the work environment.

Indisputably, the respondents engaged in sexual intercourse inside company premises and during work
hours. These circumstances, by themselves, are already punishable misconduct. Added to these
considerations, however, is the implication that the respondents did not only disregard company rules
but flaunted their disregard in a manner that could reflect adversely on the status of ethics and morality
in the company.

Additionally, the respondents engaged in sexual intercourse in an area where co-employees or other
company personnel have ready and available access. The respondents likewise committed their act at a
time when the employees were expected to be and had, in fact, been at their respective posts, and
when they themselves were supposed to be, as all other employees had in fact been, working.

Under these factual premises and in the context of legal parameters we discussed, we cannot help but
consider the respondents’ misconduct to be of grave and aggravated character so that the company was
justified in imposing the highest penalty available ― dismissal. Their infraction transgressed the bounds
of socially and morally accepted human public behavior, and at the same time showed brazen disregard
for the respect that their employer expected of them as employees. By their misconduct, the
respondents, in effect, issued an open invitation for others to commit the same infraction, with like
disregard for their employer’s rules, for the respect owed to their employer, and for their co-employees’
sensitivities. Taken together, these considerations reveal a depraved disposition that the Court cannot
but consider as a valid cause for dismissal. All told, the respondents’ misconduct, under the
circumstances of this case, fell within the terms of Article 282 (now Article 296) of the Labor Code.
Consequently, we reverse the CA’s decision for its failure to recognize that no grave abuse of discretion
attended the NLRC’s decision to support the respondents’ dismissal for serious misconduct.

WHEREFORE, in light of these considerations, we hereby GRANT the petition. We REVERSE the decision
dated June 9, 2010 and the resolution dated December 22, 2010 of the Court of Appeals in CA-G.R. SP
No. 110327 and REINSTATE the decision dated December 24, 2008 of the National Labor Relations
Commission in NLRC CA No. 043915-05 (NLRC Case No. RAB IV-12-1661-02-L).

9. G.R. No. 196201. June 19, 2012.* FRANCISCO T. DUQUE III, in his capacity as Chairman of the CIVIL
SERVICE COMMISSION, petitioner, vs. FLORENTINO VELOSO,

PRINCIPLE: The Constitution stresses that a public office is a public trust and public officers must at all
times be accountable to the people, serve them with utmost responsibility, integrity, loyalty, and
efficiency, act with patriotism and justice, and lead modest lives.—The Constitution stresses that a
public office is a public trust and public officers must at all times be accountable to the people, serve
them with utmost responsibility, integrity, loyalty, and efficiency, act with patriotism and justice, and
lead modest lives. These constitutionally-enshrined principles, oft-repeated in our case law, are not
LABOR CASES

mere rhetorical flourishes or idealistic sentiments. They should be taken as working standards by all in
the public service.

FACTS:

Respondent, then District Supervisor of Quedan and Rural Credit Guarantee Corporation (Quedancor),
Cagayan de Oro City, was administratively charged with three (3) counts of dishonesty in connection
with his unauthorized withdrawals of money deposited by Juanito Quino (complainant), a client of
Quedancor. The complainant applied for a restructuring of his loan with Quedancor and deposited the
amount of P50,000.00 to Quedancors cashier for his Manila account. In three (3) separate occasions, the
respondent, without notice and authority from the complainant and with the assistance of Quedancor's
cashier, managed to withdraw the P50,000.00 deposit. Upon the discovery of the withdrawals, the
complainant demanded the return of the money and called the attention of the manager of Quedancor
in Cagayan de Oro City, who issued to the respondent a memorandum requiring him to explain the
withdrawals and to return the money. From the established facts, the respondent was charged by
Quedancor with dishonesty, and was subsequently found guilty of the charges and dismissed from the
service. The CSC affirmed the findings and conclusions of Quedancor on appeal.

Dissatisfied with the adverse rulings of Quedancor and the CSC, the respondent elevated his case to the
CA which adjudged him guilty of dishonesty, but modified the penalty of dismissal to one (1) year
suspension from office without pay.

The CSC argues that the CA disregarded the applicable law and jurisprudence which penalize the offense
of dishonesty with dismissal from the service. The CSC also argues that there are no mitigating
circumstances to warrant a reduction of the penalty.

ISSUE: Whether dismissal is the proper administrative penalty to be imposed on the respondent?

RULING: YES. Court of Appeals decision is reversed and set aside. Dismissal from the service is the
prescribed penalty imposed by Section 52(A)(1), Rule IV of the Uniform Rules for the commission of
dishonesty even as a first offense. The aforesaid rule underscores the constitutional principle that public
office is a public trust and only those who can live up to such exacting standard deserve the honor of
continuing in public service.7 It is true that Section 53, Rule IV of the Uniform Rules provides the
application of mitigating, aggravating or alternative circumstances in the imposition of administrative
penalties. Section 53, Rule IV applies only when clear proof is shown, using the specific standards set by
law and jurisprudence, that the facts in a given case justify the mitigation of the prescribed penalty.

In appreciating the presence of mitigating, aggravating or alternative circumstances to a given case, two
constitutional principles come into play which the Court is tasked to balance. The first is public
accountability which requires the Court to consider the improvement of public service, and the
preservation of the public’s faith and confidence in the government by ensuring that only individuals
who possess good moral character, integrity and competence are employed in the government service.
The second relates to social justice which gives the Court the discretionary leeway to lessen the harsh
effects of the wrongdoing committed by an offender for equitable and humanitarian considerations.
LABOR CASES

All told, in reversing the CA’s decision, we emphasize that the principle of social justice cannot be
properly applied in the respondent’s case to shield him from the full consequences of his dishonesty.
The Court, in Philippine Long Distance Telephone Co. v. NLRC, clearly recognized the limitations in
invoking social justice: “The policy of social justice is not intended to countenance wrongdoing simply
because it is committed by the underprivileged. At best it may mitigate the penalty but it certainly will
not condone the offense. Compassion for the poor is an imperative of every humane society but only
when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to
be [the] refuge of scoundrels any more than can equity be an impediment to the punishment of the
guilty. Those who invoke social justice may do so only if their hands are clean and their motives
blameless and not simply because they happen to be poor. This great policy of our Constitution is not
meant for the protection of those who have proved they are not worthy of it, like the workers who have
tainted the cause of labor with the blemishes of their own character.”

Prejudice to the service is not only through wrongful disbursement of public funds or loss of public
property. Greater damage comes with the public’s perception of corruption and incompetence in the
government. Thus, the Constitution stresses that a public office is a public trust and public officers must
at all times be accountable to the people, serve them with utmost responsibility, integrity, loyalty, and
efficiency, act with patriotism and justice, and lead modest lives.24 These constitutionally-enshrined
principles, oft-repeated in our case law, are not mere rhetorical flourishes or idealistic sentiments. They
should be taken as working standards by all in the public service. WHEREFORE, premises considered, we
GRANT the petition, and REVERSE and SET ASIDE the decision dated August 20, 2010 and the resolution
dated March 8, 2011 issued by the Court of Appeals in CA-G.R. SP No. 01682-MIN. The resolutions of the
Civil Service Commission, affirming the decision dated August 11, 2004 of the Quedan and Rural Credit
Guarantee Corporation, imposing upon respondent Florentino Veloso the penalty of dismissal from the
service, with the accessory penalties of cancellation of eligibility, forfeiture of retirement benefits, and
perpetual disqualification for reemployment in the government service, for dishonesty, are hereby
REINSTATED.
LABOR CASES

ELEMENTS OF ER-EE RELATIONSHIP OR THE FOUR FOLD TEST

5. Insular Life Assurance v. NLRC

G.R. No. 84484

-ANGELIE

PRINCIPLE:

Employer-Employee Relationship; Independent Contractor; Control Test; Not every form of control over
the conduct of the party hired in relation to the service rendered establishes employer-employee
relationship. — It is true that the “control test” expressed in the following pronouncement of the Court
in the 1956 case of Viana vs. Alejo Al-Lagadan: In determining the existence of employer-employee
relationship, the following elements are generally considered, namely: (1) the selection and engagement
of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the
employee conduct—although the latter is the most important element has been followed and applied in
later cases, some fairly recent. Indeed, it is without question a valid test of the character of a contract or
agreement to render service. It should, however, be obvious that not every form of control that the
hiring party reserves to himself over the conduct of the party hired in relation to the services rendered
may be accorded the effect of establishing an employer-employee relationship between them in the
legal or technical sense of the term. A line must be drawn somewhere, if the recognized distinction
between an employee and an individual contractor is not to vanish altogether.

FACTS:

Petitioner Insular Life entered into a contract with respondent Basiao where the latter is authorized to
solicit for insurance policies. Sometime later, the parties entered into another contract which caused
Basiao to organize an agency in order to fulfill its terms. The contract being subsequently terminated by
petitioner, Basiao sued the latter which prompted also for the termination of their engagement under
the first contract. Basiao thus filed before the Ministry of Labor seeking to recover alleged unpaid
commissions. 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:
LABOR CASES

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.

Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be employed in
attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use
of such means. The first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means used to achieve it. The
distinction acquires particular relevance in the case of an enterprise affected with public interest, as is
the business of insurance, and is on that account subject to regulation by the State with respect, not
only to the relations between insurer and insured but also to the internal affairs of the insurance
company.

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. Of such a character are the rules which prescribe the
qualifications of persons who may be insured, subject insurance applications to processing and approval
by the Company, and also reserve to the Company the determination of the premiums to be paid and
the schedules of payment. 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 Labor Arbiter’s decision makes reference to Basiao’s claim of having been connected with the
Company for twenty-five years. Whatever this is meant to imply, the obvious reply would be that what is
germane here is Basiao’s status under the contract of July 2, 1968, not the length of his relationship with
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. The Labor Arbiter erred in taking
cognizance of, and adjudicating, said claim, being without jurisdiction to do so, as did the respondent
NLRC in affirming the Arbiter’s decision. This conclusion renders it unnecessary and premature to
consider Basiao’s claim for commissions on its merits. WHEREFORE, the appealed Resolution of the
National Labor Relations Commission is set aside, and that complaint of private respondent Melecio T.
Basiao in RAB Case No. VI-0010-83 is dismissed. No pronouncement as to costs. SO ORDERED.
LABOR CASES

6. RONILO SORREDA, vs. CAMBRIDGE ELECTRONICS CORPORATION

-ANGELIE

PRINCIPLE: Jurisdiction over the subject matter of a complaint is determined by the allegations
of the complaint. 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. —Jurisdiction over the subject matter of a
complaint is determined by the allegations of the complaint. In Pioneer Concrete Philippines,
Inc. v. Todaro, 524 SCRA 153 (2007) 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.

FACTS:

This petition seeks to reverse and set aside the May 26, 2005 decision of the Court of Appeals
(CA) in CA-G.R. SP No. 77303 and its resolution denying reconsideration. The CA affirmed the
resolution 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. 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. 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 Dasmarias, Cavite a complaint for illegal
dismissal (later changed to breach of contract).

ISSUE:

Whether the labor arbiter had the jurisdiction to take cognizance thereof.

RULING:

NO. SC affirms the CA. Jurisdiction over the subject matter of a complaint is determined by the
allegations of the complaint. 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. —Jurisdiction over the subject matter of a complaint is
LABOR CASES

determined by the allegations of the complaint. In Pioneer Concrete Philippines, Inc. v. Todaro, 524
SCRA 153 (2007) 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, from the period May 8, 1999 to October 8, 1999, 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. We note, however, that petitioner filed the case only
when respondent refused to rehire him. 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 aforestated 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.

Even assuming arguendo that the labor arbiter had the jurisdiction to decide the case, the Court cannot
countenance petitioner’s claim that a contract of perpetual employment was ever constituted. 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.24 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 consensuality principle of contracts as well as to the management prerogative of
respondent company to choose its employees. The petition is DENIED. Costs against petitioner.

7. Great Pacific Life Assurance Corporation V. R- Honorato Judico

LABOR CASES

G.R. No. 73887. December 21, 1989

-ANGELIE

PRINCIPLE: Employer-employee relationship; Test to determine employer-employee relationship. —One

salient point in the determination of employer-employee relationship which cannot be easily ignored is
the fact that the compensation that these agents on commission received is not paid by the insurance
company but by the investor (or the person insured). After determining the commission earned by an
agent on his sales the agent directly deducts it from the amount he received from the investor or the
person insured and turns over to the insurance company the amount invested after such deduction is
made. The test therefore is whether the “employer” controls or has reserved the right to control the
“employee” not only as to the result of the work to be done but also as to the means and methods by
which the same is to be accomplished.

FACTS: Honorato Judico filed a complaint for illegal dismissal against Grepalife, a duly
organized insurance firm, before the NLRC Regional Arbitration Branch No. VII, Cebu City on
August 27, 1982. Said complaint prayed for award of money claims consisting of separation
pay, unpaid salary and 13th month pay, refund of cash bond, moral and exemplary damages
and attorney’s fees. Both parties appealed to the NLRC when a decision was rendered by the
Labor Arbiter dismissing the complaint on the ground that the employer-employee relations did
not exist between the parties but ordered Grepalife to pay complainant the sum of P1,000.00 by
reason of Christian Charity. Both appealed to NLRC.

The NLRC reversed the LA ruling by declaring Judico a regular employee as defined under Art.
281 of the Labor Code.

Grepalife moved to reconsider, which was denied, hence this petition for review

ISSUE: Whether employer-employee relationship existed between the parties.

RULING:

Yes, there exists an er-ee relation between Grepalife and Judico because the element of control
by the former on the latter was present.

The test to determine whether employer-employee relationship exists is when the

“employee” was controlled by the “employer” not only as to the kind of work, the amount of
results, the kind of performance, but also the power of dismissal.

Applying the aforementioned test to the case at bar, we can readily see that the element
of control by the petitioner on Judico was very much present. The record shows that petitioner
Judico received a definite minimum amount per week as his wage known as “sales reserve”
wherein the failure to maintain the same would bring him back to a beginner’s employment with
a fixed weekly wage of P200.00 for thirteen weeks regardless of production. He was assigned a
definite place in the office to work on when he is not in the field; and in addition to his
canvassing work, he was burdened with the job of collection. In both cases he was required to
make regular report to the company regarding these duties, and for which an anemic
performance would mean a dismissal. Conversely faithful and productive service earned him a
LABOR CASES

promotion to Zone Supervisor with additional supervisor’s allowance, a definite amount of

P110.00 aside from the regular P200.00 weekly “allowance”. Furthermore, his contract of
services with the petitioner is not for a piece of work nor for a definite period.

On the other hand, an ordinary commission insurance agent works at his own volition or at his
own leisure without fear of dismissal from the company and short of committing acts
detrimental, to the business interest of the company or against the latter, whether he produces
or not is of no moment as his salary is based on his production, his anemic performance or even
dead result does not become a ground for dismissal. Whereas, in private respondent’s case, the
undisputed facts show that he was controlled by petitioner insurance company not only as to the
kind of work; the amount of results, the kind of performance but also the power of dismissal.
Undoubtedly, private respondent, by nature of his position and work, had been a regular
employee of petitioner and is therefore entitled to the protection of the law and could not just be
terminated without valid and justifiable cause. Thus, the appealed decision is hereby
AFFIRMED in toto.

8. Insular Life Assurance v. NLR; 179 S 459

-ANGELIE

PRINCIPLE:

Employer-Employee Relationship; Independent Contractor; Control Test; Not every form of control over
the conduct of the party hired in relation to the service rendered establishes employer-employee
relationship. — It is true that the “control test” expressed in the following pronouncement of the Court
in the 1956 case of Viana vs. Alejo Al-Lagadan: In determining the existence of employer-employee
relationship, the following elements are generally considered, namely: (1) the selection and engagement
of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the
employee conduct—although the latter is the most important element has been followed and applied in
later cases, some fairly recent. Indeed, it is without question a valid test of the character of a contract or
agreement to render service. It should, however, be obvious that not every form of control that the
hiring party reserves to himself over the conduct of the party hired in relation to the services rendered
may be accorded the effect of establishing an employer-employee relationship between them in the
legal or technical sense of the term. A line must be drawn somewhere, if the recognized distinction
between an employee and an individual contractor is not to vanish altogether.

FACTS:

Petitioner Insular Life entered into a contract with respondent Basiao where the latter is authorized to
solicit for insurance policies. Sometime later, the parties entered into another contract which caused
Basiao to organize an agency in order to fulfill its terms. The contract being subsequently terminated by
petitioner, Basiao sued the latter which prompted also for the termination of their engagement under
the first contract. Basiao thus filed before the Ministry of Labor seeking to recover alleged unpaid
commissions. 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.
LABOR CASES

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.

Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be employed in
attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use
of such means. The first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means used to achieve it. The
distinction acquires particular relevance in the case of an enterprise affected with public interest, as is
the business of insurance, and is on that account subject to regulation by the State with respect, not
only to the relations between insurer and insured but also to the internal affairs of the insurance
company.

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. Of such a character are the rules which prescribe the
qualifications of persons who may be insured, subject insurance applications to processing and approval
by the Company, and also reserve to the Company the determination of the premiums to be paid and
the schedules of payment. 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 Labor Arbiter’s decision makes reference to Basiao’s claim of having been connected with the
Company for twenty-five years. Whatever this is meant to imply, the obvious reply would be that what is
germane here is Basiao’s status under the contract of July 2, 1968, not the length of his relationship with
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. The Labor Arbiter erred in taking
cognizance of, and adjudicating, said claim, being without jurisdiction to do so, as did the respondent
NLRC in affirming the Arbiter’s decision. This conclusion renders it unnecessary and premature to
consider Basiao’s claim for commissions on its merits. WHEREFORE, the appealed Resolution of the
National Labor Relations Commission is set aside, and that complaint of private respondent Melecio T.
Basiao in RAB Case No. VI-0010-83 is dismissed. No pronouncement as to costs. SO ORDERED.
LABOR CASES