Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 73887 December 21, 1989
GREAT PACIFIC LIFE ASSURANCE CORPORATION, petitioner,
vs.
HONORATO JUDICO and NATIONAL LABOR RELATIONS COMMISSION, respondents.
G.A. Fortun and Associates for petitioner.
Corsino B. Soco for private respondent.

PARAS J.:
Before us is a Petition for certiorari to review the decision of the National Labor Relations Commission (NLRC,
for brevity) dated September 9, 1985 reversing the decision of Labor Arbiter Vito J. Minoria, dated June 9,
1983, by 1) ordering petitioner insurance company, Great Pacific Life Assurance Corporation (Grepalife, for
brevity) to recognize private respondent Honorato Judico, as its regular employee as defined under Art. 281 of
the Labor Code and 2) remanding the case to its origin for the determination of private respondent Judico's
money claims.
The records of the case show that 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 Pl,000.00 by reason of Christian Charity.
On appeal, said decision was reversed by the NLRC ruling that complainant is a regular employee as defined
under Art. 281 of the Labor Code and declaring the appeal of Grepalife questioning the legality of the payment
of Pl,000.00 to complainant moot and academic. Nevertheless, for the purpose of revoking the supersedeas
bond of said company it ruled that the Labor Arbiter erred in awarding Pl,000.00 to complainant in the absence
of any legal or factual basis to support its payment.
Petitioner company moved to reconsider, which was denied, hence this petition for review raising four legal
issues to wit:
I. Whether the relationship between insurance agents and their principal, the insurance
company, is that of agent and principal to be governed by the Insurance Code and the Civil
Code provisions on agency, or one of employer-employee, to be governed by the Labor Code.
II. Whether insurance agents are entitled to the employee benefits prescribed by the Labor
Code.
III. Whether the public respondent NLRC has jurisdiction to take cognizance of a controversy
between insurance agent and the insurance company, arising from their agency relations.
IV. Whether the public respondent acted correctly in setting aside the decision of Labor Arbiter
Vito J. Minoria and in ordering the case remanded to said Labor Arbiter for further proceedings.
(p. 159, Rollo)

The crux of these issues boil down to the question of whether or not employer-employee relationship existed
between petitioner and private respondent.
Petitioner admits that on June 9, 1976, private respondent Judico entered into an agreement of agency with
petitioner Grepalife to become a debit agent attached to the industrial life agency in Cebu City. Petitioner
defines a debit agent as "an insurance agent selling/servicing industrial life plans and policy holders. Industrial
life plans are those whose premiums are payable either daily, weekly or monthly and which are collectible by
the debit agents at the home or any place designated by the policy holder" (p. 156, Rollo). Such admission is in
line with the findings of public respondent that as such debit agent, private respondent Judico had definite work
assignments including but not limited to collection of premiums from policy holders and selling insurance to
prospective clients. Public respondent NLRC also found out that complainant was initially paid P 200. 00 as
allowance for thirteen (13) weeks regardless of production and later a certain percentage denominated as
sales reserve of his total collections but not lesser than P 200.00. Sometime in September 1981, complainant
was promoted to the position of Zone Supervisor and was given additional (supervisor's) allowance fixed at
P110.00 per week. During the third week of November 1981, he was reverted to his former position as debit
agent but, for unknown reasons, not paid so-called weekly sales reserve of at least P 200.00. Finally on June
28, 1982, complainant was dismissed by way of termination of his agency contract.
Petitioner assails the findings of the NLRC that private respondent is an employee of the former. Petitioner
argues that Judico's compensation was not based on any fixed number of hours he was required to devote to
the service of petitioner company but rather it was the production or result of his efforts or his work that was
being compensated and that the so-called allowance for the first thirteen weeks that Judico worked as debit
agent, cannot be construed as salary but as a subsidy or a way of assistance for transportation and meal
expenses of a new debit agent during the initial period of his training which was fixed for thirteen (13) weeks.
Stated otherwise, petitioner contends that Judico's compensation, in the form of commissions and bonuses,
was based on actual production, (insurance plans sold and premium collections).
Said contentions of petitioner are strongly rejected by private respondent. He maintains that he received a
definite amount as his Wage known as "sales reserve" the failure to maintain the same would bring him back to
a beginner's employment with a fixed weekly wage of P 200.00 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 canvassing and making
regular reports, he was burdened with the job of collection and to make regular weekly report thereto for which
an anemic performance would mean dismissal. He earned out of his faithful and productive service, a
promotion to Zone Supervisor with additional supervisor's allowance, (a definite or fixed amount of P110.00)
that he was dismissed primarily because of anemic performance and not because of the termination of the
contract of agency substantiate the fact that he was indeed an employee of the petitioner and not an insurance
agent in the ordinary meaning of the term.
That private respondent Judico was an agent of the petitioner is unquestionable. But, as We have held in
Investment Planning Corp. vs. SSS, 21 SCRA 294, an insurance company may have two classes of agents
who sell its insurance policies: (1) salaried employees who keep definite hours and work under the control and
supervision of the company; and (2) registered representatives who work on commission basis. The agents
who belong to the second category are not required to report for work at anytime, they do not have to devote
their time exclusively to or work solely for the company since the time and the effort they spend in their work
depend entirely upon their own will and initiative; they are not required to account for their time nor submit a
report of their activities; they shoulder their own selling expenses as well as transportation; and they are paid
their commission based on a certain percentage of their sales. 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.
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 P 200.00 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 promotion to Zone
Supervisor with additional supervisor's allowance, a definite amount of P110.00 aside from the regular P
200.00 weekly "allowance". Furthermore, his contract of services with 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.
Premises considered, the appealed decision is hereby AFFIRMED in toto.
SO ORDERED.
Melencio-Herrera (Chairperson), Padilla, Sarmiento and Regalado, JJ ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
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.

NARVASA, J.:
On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called the Company) and Melecio T.
Basiao entered into a contract 1 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's) Rate Book and its Agent's Manual, as well as all its
circulars ... and those which may from time to time be promulgated by it, ..." were made
part of said contract.
The contract also contained, among others, provisions governing the relations of the parties, the duties of the
Agent, the acts prohibited to him, and the modes of termination of the agreement, viz.:
RELATION WITH THE COMPANY. The Agent shall be free to exercise his own judgment
as to time, place and means of soliciting insurance. Nothing herein contained shall
therefore be construed to create the relationship of employee and employer between the
Agent and the Company. However, the Agent shall observe and conform to all rules and
regulations which the Company may from time to time prescribe.
ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from giving, directly or
indirectly, rebates in any form, or from making any misrepresentation or over-selling,
and, in general, from doing or committing acts prohibited in the Agent's Manual and in
circulars of the Office of the Insurance Commissioner.

TERMINATION. The Company may terminate the contract at will, without any previous
notice to the Agent, for or on account of ... (explicitly specified causes). ...
Either party may terminate this contract by giving to the other notice in writing to that
effect. It shall become ipso facto cancelled if the Insurance Commissioner should revoke
a Certificate of Authority previously issued or should the Agent fail to renew his existing
Certificate of Authority upon its expiration. The Agent shall not have any right to any
commission on renewal of premiums that may be paid after the termination of this
agreement for any cause whatsoever, except when the termination is due to disability or
death in line of service. As to commission corresponding to any balance of the first year's
premiums remaining unpaid at the termination of this agreement, the Agent shall be
entitled to it if the balance of the first year premium is paid, less actual cost of collection,
unless the termination is due to a violation of this contract, involving criminal liability or
breach of trust.
ASSIGNMENT. No Assignment of the Agency herein created or of commissions or other
compensations shall be valid without the prior consent in writing of the Company. ...
Some 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 his commitments under the first contract with the Company. 2
In May, 1979, the Company terminated the Agency Manager's Contract. After vainly seeking a reconsideration,
Basiao sued the Company in a civil action and this, he was later to claim, prompted the latter to terminate also
his engagement under the first contract and to stop payment of his commissions starting April 1, 1980. 3
Basiao thereafter filed with the then Ministry of Labor a complaint 4 against the Company and its president.
Without contesting the termination of the first contract, the complaint sought to recover commissions allegedly
unpaid thereunder, plus attorney's fees. The respondents disputed the Ministry's jurisdiction over Basiao's
claim, asserting that he was not the Company's employee, but an independent contractor and that the
Company had no obligation to him for unpaid commissions under the terms and conditions of his contract. 5
The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that the underwriting agreement
had established an employer-employee relationship between him and the Company, and this conferred
jurisdiction on the Ministry of Labor to adjudicate his claim. Said official's decision directed payment of his
unpaid commissions "... equivalent to the balance of the first year's premium remaining unpaid, at the time of
his termination, of all the insurance policies solicited by ... (him) in favor of the respondent company ..." plus
10% attorney's fees. 6
This decision was, on appeal by the Company, affirmed by the National Labor Relations Commission. 7 Hence,
the present petition for certiorari and prohibition.
The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become the Company's
employee by virtue of the contract invoked by him, thereby placing his claim for unpaid commissions within the
original and exclusive jurisdiction of the Labor Arbiter under the provisions of Section 217 of the Labor Code, 8
or, contrarily, as the Company would have it, that under said contract Basiao's status was that of an
independent contractor whose claim was thus cognizable, not by the Labor Arbiter in a labor case, but by the
regular courts in an ordinary civil action.
The Company's thesis, that no employer-employee relation in the legal and generally accepted sense existed
between it and Basiao, is drawn from the terms of the contract they had entered into, which, either expressly or
by necessary implication, made Basiao the master of his own time and selling methods, left to his judgment the
time, place and means of soliciting insurance, set no accomplishment quotas and compensated him on the
basis of results obtained. He was not bound to observe any schedule of working hours or report to any regular
station; he could seek and work on his prospects anywhere and at anytime he chose to, and was free to adopt
the selling methods he deemed most effective.
Without denying that the above were indeed the expressed implicit conditions of Basiao's contract with the
Company, the respondents contend that they do not constitute the decisive determinant of the nature of his
engagement, invoking precedents to the effect that the critical feature distinguishing the status of an employee
from that of an independent contractor is control, that is, whether or not the party who engages the services of
another has the power to control the latter's conduct in rendering such services. Pursuing the argument, the
respondents draw attention to the provisions of Basiao's contract obliging him to "... observe and conform to all
rules and regulations which the Company may from time to time prescribe ...," as well as to the fact that the
Company prescribed the qualifications of applicants for insurance, processed their applications and determined
the amounts of insurance cover to be issued as indicative of the control, which made Basiao, in legal
contemplation, an employee of the Company. 9

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 10
... 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 (35
Am. Jur. 445). ...
has been followed and applied in later cases, some fairly recent. 11 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. Realistically, it would be a rare contract of
service that gives untrammelled freedom to the party hired and eschews any intervention whatsoever in his
performance of the engagement.
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of
the mutually desired result without dictating the means or methods to be employed in attaining it, and those
that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which
aim only to promote the result, create no employer-employee relationship unlike the second, which address
both the result and the means used to achieve it. 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. 12 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.
There is no dearth of authority holding persons similarly placed as respondent Basiao to be independent
contractors, instead of employees of the parties for whom they worked. In Mafinco Trading Corporation vs.
Ople, 13 the Court ruled that a person engaged to sell soft drinks for another, using a truck supplied by the
latter, but with the right to employ his own workers, sell according to his own methods subject only to
prearranged routes, observing no working hours fixed by the other party and obliged to secure his own
licenses and defray his own selling expenses, all in consideration of a peddler's discount given by the other
party for at least 250 cases of soft drinks sold daily, was not an employee but an independent contractor.
In Investment Planning Corporation of the Philippines us. Social Security System 14 a case almost on all fours
with the present one, this Court held that there was no employer-employee relationship between a commission
agent and an investment company, but that the former was an independent contractor where said agent and
others similarly placed were: (a) paid compensation in the form of commissions based on percentages of their
sales, any balance of commissions earned being payable to their legal representatives in the event of death or
registration; (b) required to put up performance bonds; (c) subject to a set of rules and regulations governing
the performance of their duties under the agreement with the company and termination of their services for
certain causes; (d) not required to report for work at any time, nor to devote their time exclusively to working for
the company nor to submit a record of their activities, and who, finally, shouldered their own selling and
transportation expenses.
More recently, in Sara vs. NLRC, 15 it was held that one who had been engaged by a rice miller to buy and sell
rice and palay without compensation except a certain percentage of what he was able to buy or sell, did work
at his own pleasure without any supervision or control on the part of his principal and relied on his own
resources in the performance of his work, was a plain commission agent, an independent contractor and not
an employee.
The respondents limit themselves to pointing out that Basiao's contract with the Company bound him to
observe and conform to such rules and regulations as the latter might from time to time prescribe. No showing
has been made that any such rules or regulations were in fact promulgated, much less that any rules existed or
were issued which effectively controlled or restricted his choice of methods or the methods themselves of
selling insurance. Absent such showing, the Court will not speculate that any exceptions or qualifications were
imposed on the express provision of the contract leaving Basiao "... free to exercise his own judgment as to the
time, place and means of soliciting insurance."

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. Cruz, Gancayco, Grio-Aquino, and Medialdea, JJ., concur
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. L-72654-61 January 22, 1990

ALIPIO R. RUGA, JOSE PARMA, ELADIO CALDERON, LAURENTE BAUTU, JAIME BARBIN, NICANOR
FRANCISCO, PHILIP CERVANTES and ELEUTERIO BARBIN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and DE GUZMAN FISHING ENTERPRISES and/or
ARSENIO DE GUZMAN, respondents.
J.C. Espinas & Associates for petitioners.
Tomas A. Reyes for private respondent.

FERNAN, C.J.:
The issue to be resolved in the instant case is whether or not the fishermen-crew members of the trawl fishing
vessel 7/B Sandyman II are employees of its owner-operator, De Guzman Fishing Enterprises, and if so,
whether or not they were illegally dismissed from their employment.
Records show that the petitioners were the fishermen-crew members of 7/B Sandyman II, one of several
fishing vessels owned and operated by private respondent De Guzman Fishing Enterprises which is primarily
engaged in the fishing business with port and office at Camaligan, Camarines Sur. Petitioners rendered service
aboard said fishing vessel in various capacities, as follows: Alipio Ruga and Jose Parma patron/pilot; Eladio
Calderon, chief engineer; Laurente Bautu, second engineer; Jaime Barbin, master fisherman; Nicanor
Francisco, second fisherman; Philip Cervantes and Eleuterio Barbin, fishermen.
For services rendered in the conduct of private respondent's regular business of "trawl" fishing, petitioners
were paid on percentage commission basis in cash by one Mrs. Pilar de Guzman, cashier of private
respondent. As agreed upon, they received thirteen percent (13%) of the proceeds of the sale of the fish-catch
if the total proceeds exceeded the cost of crude oil consumed during the fishing trip, otherwise, they received
ten percent (10%) of the total proceeds of the sale. The patron/pilot, chief engineer and master fisherman
received a minimum income of P350.00 per week while the assistant engineer, second fisherman, and
fisherman-winchman received a minimum income of P260.00 per week. 1
On September 11, 1983 upon arrival at the fishing port, petitioners were told by Jorge de Guzman, president of
private respondent, to proceed to the police station at Camaligan, Camarines Sur, for investigation on the
report that they sold some of their fish-catch at midsea to the prejudice of private respondent. Petitioners
denied the charge claiming that the same was a countermove to their having formed a labor union and
becoming members of Defender of Industrial Agricultural Labor Organizations and General Workers Union
(DIALOGWU) on September 3, 1983.

During the investigation, no witnesses were presented to prove the charge against petitioners, and no criminal
charges were formally filed against them. Notwithstanding, private respondent refused to allow petitioners to
return to the fishing vessel to resume their work on the same day, September 11, 1983.
On September 22, 1983, petitioners individually filed their complaints for illegal dismissal and non-payment of
13th month pay, emergency cost of living allowance and service incentive pay, with the then Ministry (now
Department) of Labor and Employment, Regional Arbitration Branch No. V, Legaspi City, Albay, docketed as
Cases Nos. 1449-83 to 1456-83. 2 They uniformly contended that they were arbitrarily dismissed without being
given ample time to look for a new job.
On October 24, 1983, private respondent, thru its operations manager, Conrado S. de Guzman, submitted its
position paper denying the employer-employee relationship between private respondent and petitioners on the
theory that private respondent and petitioners were engaged in a joint venture. 3
After the parties failed to reach an amicable settlement, the Labor Arbiter scheduled the case for joint hearing
furnishing the parties with notice and summons. On December 27, 1983, after two (2) previously scheduled
joint hearings were postponed due to the absence of private respondent, one of the petitioners herein, Alipio
Ruga, the pilot/captain of the 7/B Sandyman II, testified, among others, on the manner the fishing operations
were conducted, mode of payment of compensation for services rendered by the fishermen-crew members,
and the circumstances leading to their dismissal. 4
On March 31, 1984, after the case was submitted for resolution, Labor Arbiter Asisclo S. Coralde rendered a
joint decision 5 dismissing all the complaints of petitioners on a finding that a "joint fishing venture" and not one
of employer-employee relationship existed between private respondent and petitioners.
From the adverse decision against them, petitioners appealed to the National Labor Relations Commission.
On May 30, 1985, the National Labor Relations Commission promulgated its resolution 6 affirming the decision
of the labor arbiter that a "joint fishing venture" relationship existed between private respondent and petitioners.
Hence, the instant petition.
Petitioners assail the ruling of the public respondent NLRC that what exists between private respondent and
petitioners is a joint venture arrangement and not an employer-employee relationship. To stress that there is an
employer-employee relationship between them and private respondent, petitioners invite attention to the
following: that they were directly hired by private respondent through its general manager, Arsenio de Guzman,
and its operations manager, Conrado de Guzman; that, except for Laurente Bautu, they had been employed by
private respondent from 8 to 15 years in various capacities; that private respondent, through its operations
manager, supervised and controlled the conduct of their fishing operations as to the fixing of the schedule of
the fishing trips, the direction of the fishing vessel, the volume or number of tubes of the fish-catch the time to
return to the fishing port, which were communicated to the patron/pilot by radio (single side band); that they
were not allowed to join other outfits even the other vessels owned by private respondent without the
permission of the operations manager; that they were compensated on percentage commission basis of the
gross sales of the fish-catch which were delivered to them in cash by private respondent's cashier, Mrs. Pilar
de Guzman; and that they have to follow company policies, rules and regulations imposed on them by private
respondent.
Disputing the finding of public respondent that a "joint fishing venture" exists between private respondent and
petitioners, petitioners claim that public respondent exceeded its jurisdiction and/or abused its discretion when
it added facts not contained in the records when it stated that the pilot-crew members do not receive
compensation from the boat-owners except their share in the catch produced by their own efforts; that public
respondent ignored the evidence of petitioners that private respondent controlled the fishing operations; that
public respondent did not take into account established jurisprudence that the relationship between the fishing
boat operators and their crew is one of direct employer and employee.
Aside from seeking the dismissal of the petition on the ground that the decision of the labor arbiter is now final
and executory for failure of petitioners to file their appeal with the NLRC within 10 calendar days from receipt of
said decision pursuant to the doctrine laid down in Vir-Jen Shipping and Marine Services, Inc. vs. NLRC, 115
SCRA 347 (1982), the Solicitor General claims that the ruling of public respondent that a "joint fishing venture"
exists between private respondent and petitioners rests on the resolution of the Social Security System (SSS)
in a 1968 case, Case No. 708 (De Guzman Fishing Enterprises vs. SSS), exempting De Guzman Fishing
Enterprises, private respondent herein, from compulsory coverage of the SSS on the ground that there is no
employer-employee relations between the boat-owner and the fishermen-crew members following the doctrine
laid down in Pajarillo vs. SSS, 17 SCRA 1014 (1966). In applying to the case at bar the doctrine in Pajarillo vs.
SSS, supra, that there is no employer-employee relationship between the boat-owner and the pilot and crew
members when the boat-owner supplies the boat and equipment while the pilot and crew members contribute
the corresponding labor and the parties get specific shares in the catch for their respective contribution to the

venture, the Solicitor General pointed out that the boat-owners in the Pajarillo case, as in the case at bar, did
not control the conduct of the fishing operations and the pilot and crew members shared in the catch.
We rule in favor of petitioners.
Fundamental considerations of substantial justice persuade Us to decide the instant case on the merits rather
than to dismiss it on a mere technicality. In so doing, we exercise the prerogative accorded to this Court
enunciated in Firestone Filipinas Employees Association, et al. vs. Firestone Tire and Rubber Co. of the
Philippines, Inc., 61 SCRA 340 (1974), thus "the well-settled doctrine is that in labor cases before this Tribunal,
no undue sympathy is to be accorded to any claim of a procedural misstep, the idea being that its power be
exercised according to justice and equity and substantial merits of the controversy."
Circumstances peculiar to some extent to fishermen-crew members of a fishing vessel regularly engaged in
trawl fishing, as in the case of petitioners herein, who spend one (1) whole week or more 7 in the open sea
performing their job to earn a living to support their families, convince Us to adopt a more liberal attitude in
applying to petitioners the 10-calendar day rule in the filing of appeals with the NLRC from the decision of the
labor arbiter.
Records reveal that petitioners were informed of the labor arbiter's decision of March 31, 1984 only on July
3,1984 by their non-lawyer representative during the arbitration proceedings, Jose Dialogo who received the
decision eight (8) days earlier, or on June 25, 1984. As adverted to earlier, the circumstances peculiar to
petitioners' occupation as fishermen-crew members, who during the pendency of the case understandably
have to earn a living by seeking employment elsewhere, impress upon Us that in the ordinary course of events,
the information as to the adverse decision against them would not reach them within such time frame as would
allow them to faithfully abide by the 10-calendar day appeal period. This peculiar circumstance and the fact
that their representative is a non-lawyer provide equitable justification to conclude that there is substantial
compliance with the ten-calendar day rule of filing of appeals with the NLRC when petitioners filed on July 10,
1984, or seven (7) days after receipt of the decision, their appeal with the NLRC through registered mail.
We have consistently ruled that in determining the existence of an employer-employee relationship, the
elements that are generally considered are the following (a) the selection and engagement of the employee;
(b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee
with respect to the means and methods by which the work is to be accomplished. 8 The employment relation
arises from contract of hire, express or implied. 9 In the absence of hiring, no actual employer-employee
relation could exist.
From the four (4) elements mentioned, We have generally relied on the so-called right-of-control test 10 where
the person for whom the services are performed reserves a right to control not only the end to be achieved but
also the means to be used in reaching such end. The test calls merely for the existence of the right to control
the manner of doing the work, not the actual exercise of the right. 11
The case of Pajarillo vs. SSS, supra, invoked by the public respondent as authority for the ruling that a "joint
fishing venture" existed between private respondent and petitioners is not applicable in the instant case. There
is neither light of control nor actual exercise of such right on the part of the boat-owners in the Pajarillo case,
where the Court found that the pilots therein are not under the order of the boat-owners as regards their
employment; that they go out to sea not upon directions of the boat-owners, but upon their own volition as to
when, how long and where to go fishing; that the boat-owners do not in any way control the crew-members
with whom the former have no relationship whatsoever; that they simply join every trip for which the pilots allow
them, without any reference to the owners of the vessel; and that they only share in their own catch produced
by their own efforts.
The aforementioned circumstances obtaining in Pajarillo case do not exist in the instant case. The conduct of
the fishing operations was undisputably shown by the testimony of Alipio Ruga, the patron/pilot of 7/B
Sandyman II, to be under the control and supervision of private respondent's operations manager. Matters
dealing on the fixing of the schedule of the fishing trip and the time to return to the fishing port were shown to
be the prerogative of private respondent. 12 While performing the fishing operations, petitioners received
instructions via a single-side band radio from private respondent's operations manager who called the
patron/pilot in the morning. They are told to report their activities, their position, and the number of tubes of
fish-catch in one day. 13 Clearly thus, the conduct of the fishing operations was monitored by private
respondent thru the patron/pilot of 7/B Sandyman II who is responsible for disseminating the instructions to the
crew members.
The conclusion of public respondent that there had been no change in the situation of the parties since 1968
when De Guzman Fishing Enterprises, private respondent herein, obtained a favorable judgment in Case No.
708 exempting it from compulsory coverage of the SSS law is not supported by evidence on record. It was
erroneous for public respondent to apply the factual situation of the parties in the 1968 case to the instant case

in the light of the changes in the conditions of employment agreed upon by the private respondent and
petitioners as discussed earlier.
Records show that in the instant case, as distinguished from the Pajarillo case where the crew members are
under no obligation to remain in the outfit for any definite period as one can be the crew member of an outfit for
one day and be the member of the crew of another vessel the next day, the herein petitioners, on the other
hand, were directly hired by private respondent, through its general manager, Arsenio de Guzman, and its
operations manager, Conrado de Guzman and have been under the employ of private respondent for a period
of 8-15 years in various capacities, except for Laurente Bautu who was hired on August 3, 1983 as assistant
engineer. Petitioner Alipio Ruga was hired on September 29, 1974 as patron/captain of the fishing vessel;
Eladio Calderon started as a mechanic on April 16, 1968 until he was promoted as chief engineer of the fishing
vessel; Jose Parma was employed on September 29, 1974 as assistant engineer; Jaime Barbin started as a
pilot of the motor boat until he was transferred as a master fisherman to the fishing vessel 7/B Sandyman II;
Philip Cervantes was hired as winchman on August 1, 1972 while Eleuterio Barbin was hired as winchman on
April 15, 1976.
While tenure or length of employment is not considered as the test of employment, nevertheless the hiring of
petitioners to perform work which is necessary or desirable in the usual business or trade of private respondent
for a period of 8-15 years since 1968 qualify them as regular employees within the meaning of Article 281 of
the Labor Code as they were indeed engaged to perform activities usually necessary or desirable in the usual
fishing business or occupation of private respondent. 14
Aside from performing activities usually necessary and desirable in the business of private respondent, it must
be noted that petitioners received compensation on a percentage commission based on the gross sale of the
fish-catch i.e. 13% of the proceeds of the sale if the total proceeds exceeded the cost of the crude oil
consumed during the fishing trip, otherwise only 10% of the proceeds of the sale. Such compensation falls
within the scope and meaning of the term "wage" as defined under Article 97(f) of the Labor Code, thus:
(f) "Wage" paid to any employee shall mean the remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or ascertained
on a time, task, piece or commission basis, or other method of calculating the same,
which is payable by an employer to an employee under a written or unwritten contract of
employment for work done or to be done, or for services rendered or to be rendered, and
included the fair and reasonable value, as determined by the Secretary of Labor, of
board, lodging, or other facilities customarily furnished by the employer to the
employee. . . .
The claim of private respondent, which was given credence by public respondent, that petitioners get paid in
the form of share in the fish-catch which the patron/pilot as head of the team distributes to his crew members in
accordance with their own understanding 15 is not supported by recorded evidence. Except that such claim
appears as an allegation in private respondent's position paper, there is nothing in the records showing such a
sharing scheme as preferred by private respondent.
Furthermore, the fact that on mere suspicion based on the reports that petitioners allegedly sold their fish-catch
at midsea without the knowledge and consent of private respondent, petitioners were unjustifiably not allowed
to board the fishing vessel on September 11, 1983 to resume their activities without giving them the opportunity
to air their side on the accusation against them unmistakably reveals the disciplinary power exercised by
private respondent over them and the corresponding sanction imposed in case of violation of any of its rules
and regulations. The virtual dismissal of petitioners from their employment was characterized by undue haste
when less extreme measures consistent with the requirements of due process should have been first
exhausted. In that sense, the dismissal of petitioners was tainted with illegality.
Even on the assumption that petitioners indeed sold the fish-catch at midsea the act of private respondent
virtually resulting in their dismissal evidently contradicts private respondent's theory of "joint fishing venture"
between the parties herein. A joint venture, including partnership, presupposes generally a parity of standing
between the joint co-venturers or partners, in which each party has an equal proprietary interest in the capital
or property contributed 16 and where each party exercises equal lights in the conduct of the business. 17 It
would be inconsistent with the principle of parity of standing between the joint co-venturers as regards the
conduct of business, if private respondent would outrightly exclude petitioners from the conduct of the business
without first resorting to other measures consistent with the nature of a joint venture undertaking, Instead of
arbitrary unilateral action, private respondent should have discussed with an open mind the advantages and
disadvantages of petitioners' action with its joint co-venturers if indeed there is a "joint fishing venture" between
the parties. But this was not done in the instant case. Petitioners were arbitrarily dismissed notwithstanding
that no criminal complaints were filed against them. The lame excuse of private respondent that the non-filing
of the criminal complaints against petitioners was for humanitarian reasons will not help its cause either.

We have examined the jurisprudence on the matter and find the same to be supportive of petitioners' stand. In
Negre vs. WCC 135 SCRA 653 (1985), we held that fishermen crew members who were recruited by one
master fisherman locally known as "maestro" in charge of recruiting others to complete the crew members are
considered employees, not industrial partners, of the boat-owners. In an earlier case of Abong vs. WCC, 54
SCRA 379 (1973) where petitioner therein, Dr. Agustin Abong, owner of the fishing boat, claimed that he was
not the employer of the fishermen crew members because of an alleged partnership agreement between him,
as financier, and Simplicio Panganiban, as his team leader in charge of recruiting said fishermen to work for
him, we affirmed the finding of the WCC that there existed an employer-employee relationship between the
boat-owner and the fishermen crew members not only because they worked for and in the interest of the
business of the boat-owner but also because they were subject to the control, supervision and dismissal of the
boat-owner, thru its agent, Simplicio Panganiban, the alleged "partner" of Dr. Abong; that while these fishermen
crew members were paid in kind, or by "pakiao basis" still that fact did not alter the character of their
relationship with Dr. Abong as employees of the latter.
In Philippine Fishing Boat Officers and Engineers Union vs. Court of Industrial Relations, 112 SCRA 159
(1982), we held that the employer-employee relationship between the crew members and the owners of the
fishing vessels engaged in deep sea fishing is merely suspended during the time the vessels are drydocked or
undergoing repairs or being loaded with the necessary provisions for the next fishing trip. The said ruling is
premised on the principle that all these activities i.e., drydock, repairs, loading of necessary provisions, form
part of the regular operation of the company fishing business.
WHEREFORE, in view of the foregoing, the petition is GRANTED. The questioned resolution of the National
Labor Relations Commission dated May 30,1985 is hereby REVERSED and SET ASIDE. Private respondent is
ordered to reinstate petitioners to their former positions or any equivalent positions with 3-year backwages and
other monetary benefits under the law. No pronouncement as to costs.
SO ORDERED.
Gutierrez, Jr., Bidin and Corts, JJ., concur.
Feliciano, J., concurs in the result.

G.R. No. 119500 August 28, 1998

PAGUIO TRANSPORT CORP. vs. NATIONAL LABOR RELATIONS COMMISSION, ET AL.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 119500 August 28, 1998

PAGUIO TRANSPORT CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and WILFREDO MELCHOR, respondents.

PANGANIBAN, J.:
In dismissing the petition, this Court reiterates the following doctrines: (1) the "boundary system" used in taxi
(and jeepney) operations presupposes an employer-employee relation; (2) the employer must prove just (or
authorized) cause and due process to justify dismissal of an employee; (3) strained relations must be
demonstrated as a fact; and (4) back wages and reinstatement are necessary consequences of illegal
dismissal.
The Case
Before us is a petition for certiorari and prohibition with preliminary injunction, assailing the December 16, 1994
Decision of the National Labor Relations Commission 1 in NLRC NCR Case No. 00-02-01564-94 entitled
"Wilfredo Melchor vs. Paguio Transport Corporation/Serafin Paguio." The dispositive portion of the challenged
Decision reads:
WHEREFORE, premises considered, the appeal insofar as it seeks reversal of the finding on
illegal dismissal is denied for lack of merit. The decision declaring that complainant was illegally
dismissed is affirmed. The decision is however partially modified insofar as liability therefor is
concerned. The liability shall inure against PAGUIO TRANSPORT CORPORATION, subject to

the provision of the Corporation Code and the Rules of Court on matters taken herein. The
backwages as computed in the assailed decision is set aside, and a new one is hereby provided
in the amount of P86,400.00 as computed in the immediately preceding paragraph.
Petitioner also impugns the February 21, 1995 NLRC Resolution 2 denying the motion for reconsideration.
The June 28, 1994 Decision of the labor arbiter, 3 which the NLRC modified as to the amount of back wages,
disposed as follows:
WHEREFORE, the respondents are hereby ordered to reinstate the complainant with full
backwages from the time his salaries were withheld from him until his actual reinstatement.
The respondents are further ordered to pay him his 13th month pay in the amount of P5,600.00.
Complainant's backwages up to the date of this Decision as computed by LEILANI E.
CALALANG of the Commission's NLRC NCR Branch is:
11/28/93 - 6/28/94 = 7 mos.
P800.00 x 3 days x 4 weeks = P9,600.00
P9,600.00 x 7 mos. = P67,200.00
The aspect of reinstatement either in the job or payroll at the option of the employers being
immediately executory pursuant to Article 223 of the Labor Code, the respondents are hereby
directed to so reinstate him when he reports for work by virtue of this Decision.
Other claims are hereby dismissed for lack of evidence.
The Facts
The facts, as summarized in the challenged Decision, are as follows:
Complainant Wilfredo Melchor was hired by respondent company as a taxi driver on 25
December 1992 under the "[b]oundary [s]ystem. He [was] engaged to drive the taxi unit
assigned to him on a 24-hour schedule per trip every two (2) days, for which he used to earn an
average income from P500 to P700 per trip, exclusive of the P650.00 boundary and other
deductions imposed on him. On 24 [sic] November 1993, complainant allegedly met a vehicular
accident along Quirino Avenue near the PNR Station and Plaza Dilao when he accidentally
bumped a car which stopped at the intersection even when the traffic light was green and go.
After he submitted the traffic accident report to the office of respondents, he was allegedly
advised to stop working and have a rest. After several days[,] he allegedly reported for work only
to be told that his service was no longer needed. Hence, the complaint for illegal dismissal,
among others.
Respondent[s] for their part maintained that complainant was not illegally dismissed, there being
in the first place no employer-employee relationship between them. In amplification, it was
argued that the element of control which [was] a paramount test to determine the existence of
such a relationship [was] lacking. So too, it argued the element of the payment of compensation.
Considering that in lieu of the latter, payment of boundary is instead made allegedly makes the
relationship between them of a "wase-agreement" [sic]. Respondents then argued that even if
an employer-employee relationship were to be presumed as present, still complainant's
termination arose out of a valid cause and after he refused to articulate his stand on the
investigation being conducted on him. Respondents then harped on the supposed three
occasions when complainant figured in a vehicular accident involving the taxi unit he was
driving, viz: On August 3, which resulted in damages to the respondent in the amount of
P150.00; On August 4 which again resulted [in] the damages to the respondent in the amount of
P615.00; and, again on 4 November 1993, the mishap costing the respondents this time
P25,370.00 in damages. As a result of the alleged compounded damages which the
respondents had to shoulder on account of the supposed reckless driving of the complainant,

the former was allegedly left with no alternative but to ask complainant's explanation why he
should still be allowed to drive. Complainant, despite several chances, allegedly failed to do so.
4
Ruling of the NLRC
The NLRC held that private respondent was an illegally dismissed employee of petitioner. Upholding the
existence of an employer-employee relationship, it cited Doce v. WCC, 5 in which the Supreme Court ruled that
"the relationship created between the parties operating under a 'boundary system' is one of an employer and
employee, and not of a lessor and a lessee." 6
The NLRC sustained the ruling of the labor arbiter that the private respondent was illegally dismissed, for he
"was not afforded the twin requirements of due process . . . ." 7 It rejected petitioner's claim that private
respondent had figured in three vehicular incidents because of his reckless driving. It found that "except for
petitioner's bare statements, no proof was presented to establish with particularity the circumstances being
claimed. . . . The guilt and culpability of [private respondent] which would give [petitioner] valid ground to effect
his dismissal cannot be established by a mere allegation of his reckless driving." 8
Public Respondent NLRC found petitioner liable for back wages in the amount of P86,400, and not P67,200 as
computed by the labor arbiter. It found, however, that this liability should be imposed on Petitioner Corporation
only, and not on its president who was also impleaded by private respondent.
Hence, this petition. 9
Issues
Petitioner raises the following issues:
a. Whether or not public respondent Commission acted in excess of jurisdiction and/or with
grave abuse of discretion amounting to lack of jurisdiction in ordering the reinstatement of
private respondent with full backwages, despite its strained relations with the petitioner and the
reinstatement would, in effect, be inimical to the interest of the latter in particular, and to the
riding public in general;
b. Whether or not public respondent acted in excess of jurisdiction and/or with grave abuse of
discretion in refusing to reconsider its decision and resolution complained of despite the facts
prevailing to support the reconsideration. 10
In resolving the petition, we shall address the following points: (1) employer-employee relation, (2) presence of
just cause, (3) due process, (4) strained relationship, and (5) propriety of reinstatement and backwages.
The Court's Ruling
The petition is not meritorious.
First Issue:
Employer-Employee Relation
Under the "boundary system," private respondent was engaged to drive petitioner's taxi unit on a 24-hour
schedule every two days. On each such trip, private respondent remitted to petitioner a "boundary" of P650.
Whatever he earned in excess of that amount was considered his income.
Petitioner argues that under said arrangement, he had no control over the number of hours private respondent
had to work and the routes he had to take. Therefore, he concludes that the employer-employee relationship
cannot be deemed to exist.
Petitioner's contention is not novel. In Martinez v. National Labor Relations Commission, 11 this Court already
ruled that the relationship of taxi owners and taxi drivers is the same as that between jeepney owners and
jeepney drivers under the "boundary system." In both cases, the employer-employee relationship was deemed
to exist, viz.:

The relationship between jeepney owners/operators on one hand and jeepney drivers on the
other under the boundary system is that of employer-employee and not of lessor-lessee. . . . In
the lease of chattels[,] the lessor loses complete control over the chattel leased . . . . In the case
of jeepney owners/operators and jeepney drivers, the former exercise supervision and control
over the latter. The fact that the drivers do not receive fixed wages but get only the excess of
that so-called boundary they pay to the owner/operator is not sufficient to withdraw the
relationship between them from that of employer and employee. The doctrine is applicable in
the present case. Thus, private respondents were employees. . . because they had been
engaged to perform activities which were usually necessary or desirable in the usual trade or
business of the employer. 12
Second Issue:
Just Cause
Petitioner also asserts that private respondent's involvement in three vehicular accidents within a span of
several months constitutes just cause for his dismissal. It alleges that, according to the police report
concerning the most recent and serious vehicular mishap, it was private respondent who was at fault and that
the "city prosecutor of Quezon City recommended that an Information for reckless imprudence resulting in
damage to property be filed against him." 13
Petitioner, however, did not submit any proof to support these allegations. Well-settled is the rule that the
employer has the burden of proving that the dismissal of an employee is for a just cause. The failure of the
employer to discharge this burden means that the dismissal is not justified and that the employee is entitled to
reinstatement and backwages. 14 In this case, petitioner failed to prove any just or authorized cause for his
dismissal. Private respondent, therefore, must be deemed illegally dismissed. 15
Petitioner contends that he "submitted and presented material and competent documentary evidence
consisting of police reports of vehicular accidents of taxicab units owned by petitioner and driven by private
respondent, the repairs and expenses suffered by the petitioner as a result thereof and the resolution of the
[c]ity [p]rosecutor of Quezon City finding private respondent at fault for the November 4, 1993 vehicular
accident caused by the latter." 16 Adding that the submission of these documents only on appeal does not
diminish their probative value, petitioner cites Article 221 of the Labor Code which reads:
Art. 221. Technical rules not binding and prior resort to amicable settlement. In any
proceeding before the Commission or any of the Labor Arbiters, the rules of procedure
prevailing in courts of law and equity shall not be controlling and it is the spirit and intention of
the Code that the Commission and its members and the Labor Arbiters shall use every and all
reasonable means to ascertain the facts in each case speedily and objectively without regard to
technicalities of law and procedure, all in the interest of due process. In any proceeding before
the Commission or any Labor Arbiter, the parties may be represented by legal counsel but it
shall be the duty of the Chairman, any Presiding Commissioner or Commissioner or any Labor
Arbiter to exercise complete control of the proceedings at all stages.
Any provision of law to the contrary notwithstanding, the Labor Arbiter shall exert all efforts
towards [t]he amicable settlement of a labor dispute within his jurisdiction on or before the first
hearing. The same rule shall apply to the Commission in the exercise of its original jurisdiction.
However, a careful examination of both the original Complaint and the Petitioner's Memorandum of Appeal
from the labor arbiter's Decision reveals that said pieces of documentary evidence were not mentioned or
included therein, 17 but were submitted by petitioner only when he filed his present petition with this Court.
These pieces of evidence were attached and referred to as Annexes "G", "H", "I", "J", "K" and "L" of the said
petition. Such factual issues cannot be resolved in a petition for certiorari like the present case, because the
Court's review of NLRC decisions is limited to questions of jurisdiction and grave abuse of discretion. In PMI
Colleges v. NLRC, 18 the Court held:
This Court is definitely not the proper venue to consider this matter for it is not a trier of
facts. . . . Certiorari is a remedy narrow in its scope and inflexible in character. It is not a general
utility tool in the legal workshop. Factual issues are not a proper subject for certiorari, as the

power of the Supreme Court to review labor cases is limited to the issue of jurisdiction and
grave abuse of discretion. . . . .
Of the same tenor was our disquisition in Ilocos Sur Electric Cooperative, Inc. v. NLRC where
we made plain that:
In certiorari proceedings under Rule 65 of the Rules of Court, judicial review by
this Court does not go so far as to evaluate the sufficiency of evidence upon
which the Labor Arbiter and the NLRC based their determinations, the inquiry
being limited essentially to whether or not said public respondents had acted
without or in excess of [their] jurisdiction or with grave abuse of discretion.
. . . Our deference to the expertise acquired by quasi-judicial agencies and the limited scope
granted us in the exercise of certiorari jurisdiction restrain us from going so far as to probe into
the correctness of a tribunal's evaluation of evidence, unless there is a palpable mistake and
complete disregard thereof in which case certiorari would be proper. In plain terms, in certiorari
proceedings, we are concerned with mere errors of jurisdiction and not errors of judgment.
Equally devoid of correctness is petitioner's claim that the documents should be considered, pursuant to Article
221 of the Labor Code which stares that technical rules are not binding in proceedings before the labor arbiters
and the NLRC. The Supreme Court is not a trier of facts; as earlier stated, its jurisdiction in a petition for
certiorari, like the present case, is confined to questions of jurisdiction and grave abuse of discretion. The
unexplained failure of petitioner to present its evidence before the labor arbiter and the NLRC cannot compel
this Court to expand the scope of its review. Indeed, petitioner has not proffered a sufficient reason for this
Court to do so.
Petitioner's reliance on Canete v. National Labor Relations Commission 19 is misplaced. In that case, the
documents were submitted to the NLRC before they were tackled by the Supreme Court.
Private respondent's admission that he was involved in the November 4, 1993 accident did not give petitioner a
just cause to dismiss him. Mere involvement in an accident, absent any showing of fault or recklessness on the
part of an employee, is not a valid ground for dismissal.
Third Issue:
No Due Process
Petitioner insists that private respondent was accorded due process, because he was allowed to explain his
side and to show cause why he should still be allowed to act as one of petitioner's drivers.
This does not persuade. The Court has consistently held that in the dismissal of employees, the twin
requirements of notice and hearing are essential elements of due process. The employer must furnish the
worker two written notices: (1) one to apprise him of the particular acts or omissions for which his dismissal is
sought and (2) the other to inform him of his employer's decision to dismiss him. As to the requirement of a
hearing, the essence of due process lies simply in an opportunity to be heard, and not always and
indispensably in an actual hearing. 20
In the present case, petitioner failed to present proof, other than its bare allegations, that it had complied with
these requirements. 21 We reiterate: the burden of proof rests on the employer. Private respondent, in fact,
was not given notice that he was being dismissed. When ordered to explain the vehicular accident that
happened on November 4, 1993, he was not informed that petitioner was contemplating his dismissal and that
his involvement in said vehicular accident was the cause thereof. Private respondent was merely asked to
explain the vehicular accident per se, not his defense against a charge of dismissal arising from the vehicular
accident. He became aware of his employer's intention to dismiss him only when he was actually told not to
report for work anymore.
Fourth Issue:
Strained Relations
Notwithstanding its failure to prove just cause and due process in the dismissal of private respondent,
petitioner seeks to bar his reinstatement by invoking the doctrine of strained relations. It contends that as a

result of private respondent's "reckless and incompetent manner of driving . . ., compounded by the damages
suffered by petitioner in terms of repairs, related expenses, and the institution of the instant case, the
relationship between the parties are so strained as to preclude a harmonious working atmosphere to the
prejudice of the petitioner as well as private respondent." 22
We are not persuaded. Strained relations must be demonstrated as a fact. Petitioner failed to do so. Its
allegation that private respondent was incompetent and reckless in his manner of driving, which led to the his
involvement in three vehicular accidents, is not supported by the records. As earlier noted, no evidence was
properly submitted by petitioner to prove or give credence to his assertions. Thus, Respondent NLRC ruled:
Despite allegation on the matter, not an iota of proof was presented to establish the claim. This
observation equally applies to the allegation that complainants, in three (3) occasions had
figured in [a] vehicular accident due to his reckless driving . . . . 23
Because the claim of petitioner has no factual basis, the doctrine on strained relations cannot be applied in this
case. Moreover, the filing of the Complaint for illegal dismissal does not by itself justify the invocation of this
doctrine. As the Court held in Capili vs. NLRC: 24
. . . [T]he doctrine on "strained relations" cannot be applied indiscriminately since every labor
dispute almost invariably results in "strained relations"; otherwise, reinstatement can never be
possible simply because some hostility is engendered between the parties as a result of their
disagreement. That is human nature.
Fifth Issue:
Reinstatement and Back Wages
Because he was illegally dismissed, private respondent is entitled to reinstatement and back wages pursuant
to Section 279 of the Labor Code, which reads:
Art. 279. Security of Tenure. In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized by this Title.
An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss
of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to
his other benefits or their monetary equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement.
Interpreting this provision, the Court held in Bustamante v. NLRC 25 that illegally dismissed employees are
entitled to full back wages without conditions or limitations, viz.:
. . . [A] closer adherence to the legislative policy behind Rep. Act No. 6715 points to "full
backwages" as meaning exactly that, i.e., without deducting from backwages the earnings
derived elsewhere by the concerned employee during the period of his illegal dismissal. In other
words, the provision calling for "full backwages" to illegally dismissed employees is clear, plain
and free from ambiguity and, therefore, must be applied without attempted or strained
interpretation.
The labor arbiter awarded back wages in the sum of P67,200 based on the following computation:
11/28/93 - 6/28/94 = 7 mos.
P800.00 x 3 days x 4 weeks = P6,600.00
P9,600 x 7 mos. = P67,200.00 26
In modifying the foregoing award, the NLRC relied on this other formula:
11/28/93 - 11/28/94 = 12 months
P600.00 x 3 days x 4 weeks = P 7,200.00

P7,200 x 12 months = P86,400.00. 27

Although the NLRC adjusted the amount of private respondent's monthly income and the period during which
back wages may be awarded, neither the petitioner nor the private respondent questioned the new
computation. Accordingly we sustain the award but stress that the back wages ought to be computed from the
time of the illegal dismissal to the time of reinstatement, either actual or in the payroll, without any deduction or
qualification.
WHEREFORE, the petition is hereby DISMISSED for utter lack merit, and the assailed Decision and
Resolution are hereby AFFIRMED. Costs against petitioners.
SO ORDERED.
Davide, Jr. and Vitug, JJ., concur.
Bellosillo, J., took no part.
Quisumbing, J., concurs in the result.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 121605

February 2, 2000

PAZ MARTIN JO and CESAR JO, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION and PETER MEJILA, respondents.

QUISUMBING, J.:
This petition for certiorari seeks to set aside the Decision1 of National Labor Relations Commission (Fifth
Division) promulgated on November 21, 1994, and its Resolution dated June 7, 1995, which denied petitioners'
motion for reconsideration.
Private respondent Peter Mejila worked as barber on a piece rate basis at Dina's Barber Shop. In 1970, the
owner, Dina Tan, sold the barbershop to petitioners Paz Martin Jo and Cesar Jo. All the employees, including
private respondent, were absorbed by the new owners. The name of the barbershop was changed to Windfield
Barber Shop.
The owners and the barbers shared in the earnings of the barber shop. The barbers got two-thirds (2/3) of the
fee paid for every haircut or shaving job done, while one-third (1/3) went to the owners of the shop.
In 1977, petitioners designated private respondent as caretaker of the shop because the former caretaker
became physically unfit. Private respondent's duties as caretaker, in addition to his being a barber, were: (1) to
report to the owners of the barbershop whenever the airconditioning units malfunctioned and/or whenever
water or electric power supply was interrupted, (2) to call the laundry woman to wash dirty linen; (3) to
recommend applicants for interview and hiring; (4) to attend to other needs of the shop. For this additional job,
he was given an honorarium equivalent to one-third (1/3) of the net income of the shop.1wphi1.nt
When the building occupied by the shop was demolished in 1986, the barbershop closed. But soon a place
nearby was rented by petitioners and the barbershop resumed operations as Cesar's Palace Barbershop and
Massage Clinic. In this new location, private respondent continued to be a barber and caretaker, but with a
fixed monthly honorarium as caretaker, to wit: from February 1986 to 1990 P700; from February 1990 to
March 1991 P800; and from July 1992 P1,300.
In November 1992, private respondent had an altercation with his co-barber, Jorge Tinoy. The bickerings,
characterized by constant exchange of personal insults during working hours, became serious so that private
respondent reported the matter to Atty. Allan Macaraya of the labor department. The labor official immediately
summoned private respondent and petitioners to a conference. Upon investigation, it was found out that the
dispute was not between private respondent and petitioners; rather, it was between the former and his fellow
barber. Accordingly, Atty. Macaraya directed petitioners' counsel, Atty. Prudencio Abragan, to thresh out the
problem.
During the mediation meeting held at Atty. Abragan's office a new twist was added. Despite the assurance that
he was not being driven out as caretaker-barber, private respondent demanded payment for several thousand
pesos as his separation pay and other monetary benefits. In order to give the parties enough time to cool off,
Atty. Abragan set another conference but private respondent did not appear in such meeting anymore.
Meanwhile, private respondent continued reporting for work at the barbershop. But, on January 2, 1993, he
turned over the duplicate keys of the shop to the cashier and took away all his belongings therefrom. On
January 8, 1993, he began working as a regular barber at the newly opened Goldilocks Barbershop also in
Iligan City.
On January 12, 1993, private respondent filed a complaint2 for illegal dismissal with prayer for payment of
separation pay, other monetary benefits, attorney's fees and damages. Significantly, the complaint did not seek
reinstatement as a positive relief.
In a Decision dated June 15, 1993, the Labor Arbiter found that private respondent was an employee of
petitioners, and that private respondent was not dismissed but had left his job voluntarily because of his
misunderstanding with his co-worker.3 The Labor Arbiter dismissed the complaint, but ordered petitioners to
pay private respondent his 13th month pay and attorney's fees.
Both parties appealed to the NLRC. In a Decision dated November 21, 1994, it set aside the labor arbiter's
judgment. The NLRC sustained the labor arbiter's finding as to the existence of employer-employee
relationship between petitioners and private respondent, but it ruled that private respondent was illegally
dismissed. Hence, the petitioners were ordered to reinstate private respondent and pay the latter's backwages,
13th month pay, separation pay and attorney's fees, thus:
For failure of respondents to observe due process before dismissing the complainant, We rule
and hold that he was illegally terminated. Consequently, he should be reinstated and paid his
backwages starting from January 1, 1993 up , the time of his reinstatement and payment of
separation pay, should reinstatement not be feasible on account of a strained employeremployee relationship.

As complainant's income was mixed, (commission and caretaker), he becomes entitled to 13th
month pay only in his capacity as caretaker at the last rate pay given to him.
With respect to separation pay, even workers paid on commission are given separation pay as
they are considered employees of the company. Complainant should be adjudged entitled to
separation pay reckoned from 1970 up to the time he was dismissed on December 31, 1992 at
one-half month pay of his earnings as a barbers; and as a caretaker the same should be
reckoned from 1977 up to December 31, 1992.
As complainant has been assisted by counsel not only in the preparation of the complaint,
position paper but in hearings before the Labor Arbiter a quo attorney's fees equivalent to 10%
of the money awards should likewise be paid to complainant.
WHEREFORE, the decision appealed from is Vacated and Set Aside and a new one entered in
accordance with the above-findings and awards.
SO ORDERED.4
Its motion for reconsideration having been denied in a Resolution dated June 7, 1995, petitioners filed the
instant petition.
The issues for resolution are as follows:
1. Whether or not there exists an employee-employee relationship between petitioners and
private respondent.
2. Whether or not private respondent was dismissed from or had abandoned his employment.
Petitioners contend that public respondent gravely erred in declaring that private respondent was their
employee. They claim that private respondent was their "partner in trade" whose compensation was based on
a sharing arrangement per haircut or shaving job done. They argue that private respondent's task as caretaker
could be considered an employment because the chores are very minimal.
At the outset, we reiterate the doctrine that the existence of an employer-employee relationship is ultimately a
question of fact and that the findings thereon by the labor arbiter and the NLRC shall be accorded not only
respect but even finality when supported by ample evidence.5
In determining the existence of an employer-employee relationship, the following elements are considered: (1)
the selection and engagement of the workers; (2) power of dismissal; (3) the payment of wages by whatever
means; and (4) the power to control the worker's conduct, with the latter assuming primacy in the overall
consideration. The power of control refers to the existence of the power and not necessarily to the actual
exercise thereof. It is not essential for the employer to actually supervise the performance of duties of the
employee; it is enough that the employer has the right to wield that power.6
Absent a clear showing that petitioners and private respondent had intended to pursue a relationship of
industrial partnership, we entertain no doubt that private respondent was employed by petitioners as caretakerbarber. Initially, petitioners, as new owners of the barbershop, hired private respondent as barber by absorbing
the latter in their employ. Undoubtedly, the services performed by private respondent as barber is related to,
and in the pursuit of the principal business activity of petitioners. Later on, petitioners tapped private
respondent to serve concurrently as caretaker of the shop. Certainly, petitioners had the power to dismiss
private respondent being the ones who engaged the services of the latter. In fact, private respondent sued
petitioners for illegal dismissal, albeit contested by the latter. As a caretaker, private respondent was paid by
petitioners wages in the form of honorarium, originally, at the rate of one-third (1/3) of the shop's net income
but subsequently pegged at a fixed amount per month. As a barber, private respondent earned two-thirds (2/3)
of the fee paid per haircut or shaving job done. Furthermore, the following facts indubitably reveal that
petitioners controlled private respondent's work performance, in that: (1) private respondent had to inform
petitioners of the things needed in the shop; (2) he could only recommend the hiring of barbers and
masseuses, with petitioners having the final decision; (3) he had to be at the shop at 9:00 a.m. and could leave
only at 9:00 p.m. because he was the one who opened and closed it, being the one entrusted with the key.7
These duties were complied with by the private respondent upon instructions of petitioners. Moreover, such
task was far from being negligible as claimed by petitioners. On the contrary, it was crucial to the business
operation of petitioners as shown in the preceding discussion. Hence, there was enough basis to declare
private respondent an employee of petitioners. Accordingly, there is no cogent reason to disturb the findings of
the labor arbiter and NLRC on the existence of employer-employee relationship between herein private parties.

With regard to the second issue, jurisprudence has laid out the rules and valid ground for termination of
employment. To constitute abandonment, there must be concurrence of the intention to abandon and some
overt acts from which it may be inferred that the employee concerned has no more interest in working.8 In other
words, there must be a clear, deliberate and unjustified refusal to resume employment and a clear intention to
sever the employer-employee relationship on the part of the employee.9
In the case at bar, the labor arbiter was convinced that private respondent was not dismissed but left his work
on his own volition because he could no longer bear the incessant squabbles with his co-worker. Nevertheless,
public respondent did not give credence to petitioners' claim that private respondent abandoned his job. On
this score, public respondent gravely erred as hereunder discussed.
At the outset, we must stress that where the findings of the NLRC contradict those of the labor arbiter, the
Court, in the exercise of its equity jurisdiction, may look into the records of the case and reexamine the
questioned findings.10
In this case, the following circumstances clearly manifest private respondent's intention to sever his ties with
petitioners. First, private respondent even bragged to his co-workers his plan to quit his job at Cesar's Palace
Barbershop and Massage Clinic as borne out by the affidavit executed by his former co-workers.11 Second, he
surrendered the shop's keys and took away all his things from the shop. Third, he did not report anymore to the
shop without giving any valid and justifiable reason for his absence. Fourth, he immediately sought a regular
employment in another barbershop, despite previous assurance that he could remain in petitioners' employ.
Fifth, he filed a complaint for illegal dismissal without praying for reinstatement.
Moreover, public respondent's assertion that the institution of the complaint for illegal dismissal manifests
private respondent's lack of intention to abandon his job12 is untenable. The rule that abandonment of work is
inconsistent with the filing of a complainant for illegal dismissal is not applicable in this case. Such rule applies
where the complainant seeks reinstatement as a relief. Corollarily, it has no application where the complainant
does not pray for reinstatement and just asks for separation pay instead13 as in the present case. It goes
without saying that the prayer for separation pay, being the alternative remedy to reinstatement,14 contradicts
private respondent's stance. That he was illegally dismissed is belied by his own pleadings as well as
contemporaneous conduct.
We are, therefore, constrained to agree with the findings of the Labor Arbiter that private respondent left his job
voluntarily for reasons not attributable to petitioners. It was error and grave abuse of discretion for the NLRC to
hold petitioners liable for illegal dismissal of private respondent.
WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of public respondent NLRC
are reversed and set aside. The decision of the Labor Arbiter dated June 15, 1993, is hereby reinstated. No
costs.
SO ORDERED.1wphi1.nt
Bellosillo, Mendoza, Buena and De Leon, Jr., JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 72409 December 29, 1986
MAMERTO S. BESA, doing business under the name and style of BESA'S CUSTOMBUILT SHOES,
petitioner,
vs.
THE HONORABLE CRESENCIANO B. TRAJANO, DIRECTOR OF THE BUREAU OF LABOR RELATIONS,

MINISTRY OF LABOR AND EMPLOYMENT, AND KAISAHAN NG MANGGAGAWANG PILIPINO (KAMPILKATIPUNAN), respondents.
De Asis and Hernando Law Office for petitioner.
Estebal M. Mendoza for private respondent.

PARAS, J.:
This petition questions the decision of the Director of the Bureau of Labor Relations in BLR Case No. A-8-16585, which affirmed the appealed order of the Med-Arbiter, Labor Relations Division, NCR in NCR-LRD-M-1044-85, a certification election case. More specifically, petitioner seeks the resolution of the question as to
whether or not an employer-employee relationship exists between herein petitioner and the seventeen (17)
shoeshiners-members of the respondent union, who, if the relationship does exist, should be entitled to the
rights, privileges and benefits of an employee as provided in the Labor Code.
Sometime in January, 1985, private respondent Kaisahan ng Mangagawang Pilipino KAMPIL for short) a
legitimate labor union duly registered with the Ministry of Labor and Employment (MOLE, for short), filed a
Petition for Certification Election, docketed as NCR-LRD-M-1-044-85 in the National Labor Relations Division
of the National Capital Region. Petitioner opposed it alleging that
1. There is no employer-employee relationship between Besa's and the petitioners-signatories
to the petition;
2. The subject of the present petition had previously been decided by the defunct Court of
Industrial Relations, and is therefore barred under the principle of res judicata;
3. The petition fails to comply with the mandatory formal requirements under Sec. 2, Book V, of
the Omnibus Rules Implementing the Labor Code; and
4. This Hon. Commission has no jurisdiction over the subject matter and parties to the petition.
Acting on the Petition, the Opposition thereto, and the Reply to the Opposition, the Med-Arbiter on June 27,
1985, issued an order declaring that there was an employer-employee relationship between the parties and
directed that an election be conducted.
Petitioner appealed the order to the Director of BLR citing among others the following reasons
1. That the subject of the present petition has previously been decided by the defunct Court of
Industrial Relations, and is therefore barred under the principle of res judicata (CIR Case Nos.
2783, 2751 and 2949 ULP December 21, 1965);
2. That on May 28, 1985, Director Severo Pucan of the Ministry of Labor and Employment, in
dismissing the case for underpayment of commissions and non-payment of ECOLA, filed by the
shoeshiners against Besas Custombuilt Shoes, for lack of jurisdiction petition, declared that
there was no employer-employee relationship between the shoeshiners and petitioner Besas
(Order in NCR-LSED1-020-85);
Director Pucan's findings were based on a letter-opinion of the Director of the Bureau of
Working Conditions of the MOLE (Annex "B-2", Petition for Certiorari). The legal ground therein
cited was res judicata.
xxx xxx xxx
Appeal was dismissed by the Director of BLR as contained in his decision dated Sept. 27, 1985 upholding the
finding of the Med-Arbiter that supervisors were appointed to oversee the bootblacks' performance. It declared
that such is a finding of fact that is entitled to respect and that res judicata does not he as the parties and the
causes of action in the certification election case are different from the parties and causes of action in CIR
Cases Nos. 2783-ULP 2751-ULP and 2949 ULP
Thus the Petition of the Union (KAMPIL) before the Med-Arbiter for the holding of the certification election was
granted. While the pre-election conference was in progress, petitioner herein BESAS filed with Us with petition
for certiorari with Prohibition and simultaneously filed with the Med-Arbiter a motion to suspend the pre-election

conference. The petition filed before Us was dismissed for lack of merit but was reconsidered upon Motion of
petitioner. In its Motion for Reconsideration, petitioner raised the following grounds:
I
THE INSTANT PETITION PRESENTS QUESTIONS OF LAW AND SUBSTANCE TO MERIT
THE CONSIDERATION OF THIS HONORABLE COURT.
II
THE QUESTIONED DECISION OF THE RESPONDENT DIRECTOR WAS NOT SUPPORTED
BY SUBSTANTIAL EVIDENCE AND THE SAME IS PURELY BASED ON SPECULATIONS,
SURMISES AND CONJECTURES.
III
THE QUESTIONED DECISION OF THE RESPONDENT DIRECTOR IS CONTRARY TO LAW
AND APPLICABLE DECI SIONS OF THE SUPREME COURT ON THE MATTER.
IV
THE PETITION FOR CERTIFICATION ELECTION FILED BY RESPONDENT UNION WITH
THE MINISTRY OF LABOR AND EMPLOYMENT FAILED TO COMPLY WITH THE
MANDATORY REQUIREMENTS UNDER ARTICLE 258 OF THE LABOR CODE, AS
AMENDED, AND ITS IMPLEMENTING RULES.
V
THE RESPONDENT DIRECTOR ACTED WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION IN DECIDING THAT THERE EXISTS AN
EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE PETITIONER AND THE
SHOESHINER-MEMBERS OF THE RESPONDENT UNION,
VI
THE RESPONDENT DIRECTOR ACTED WITHOUT JURISDICTION IN TAKING
COGNIZANCE OF THE BASIC PETITION CONSIDERING THAT THE SUBJECT MATTER
AND THE PARTIES THEREOF HAVE BEEN DECIDED BY THE DEFUNCT COURT OF
INDUSTRIAL RELATIONS AND IS THEREFORE BABRED BY THE PRINCIPLE OF RES
ADJUDICATA.
The main thrust of the instant petition is the question of employer-employee relationship between petitioner
BESAS and 17 of the members of the herein respondent Union who are designated as shoeshiners. During the
certification election held on Nov. 26, 1985 at BESAS of the 53 eligible voters, 49 cast their votes. 33 voted for
the union while 16 voted for no union. Among the 33 voters who opted for a union 17 persons are shoeshiners
while 16 persons are non-shoeshiners.
The question of employer-employee relationship became a primodial consideration in resolving whether or not
the subject shoeshiners have the juridical personality and standing to present a petition for certification election
as well as to vote i therein. It is the position of petitioner that if the shoeshiners are not considered as
employees of Besa's the basic petition for certification election must necessarily be dismissed for failure to
comply with the mandatory requirements of the Labor Code, as amended, that at least thirty (30%) percent of
the employees must support the petition for certification election and that in order to be certified as the sole
and exclusive bargaining agent, the union must be obtained a majority of the valid votes cast by eligible voters.
In the instant case, if the 17 shoeshiners are declared ineligible and their votes are consequently nullified the
result of the certification election would be 16 "Yes" votes (33 minus 17) and 16 "No" votes, which is a tie.
Since the respondent union did not obtain a clear majority for the "Yes" votes as required under Rule IV Sec.
8(f) of the Omnibus Rules of the Labor Code, it necessarily follows that the respondent union cannot be
certified as the sole and exclusive bargaining agent of the workers of Besa's.
The present petition merits Our consideration. The records of the case reveal that an employer-employee
relationship does not exist between the 17 shoeshiners and petitioner.
Be it noted that the defunct CIR in dismissing the cases for unfair labor practice filed by the shoeshiners
against herein petitioner BESA declared in its Decision dated December 21, 1965 that:

The shoe shiner is distinct from a piece worker because while the latter is paid for work
accomplished, he does not, however, contribute anything to the capital of the employer other
than his service. It is the employer of the piece worker who pays his wages, while the shoe
shiner in this instance is paid directly by his customer. The piece worker is paid for work
accomplished without regard or concern to the profit as derived by his employer, but in the case
of the shoe shiners, the proceeds derived from the trade are always divided share and share
alike with respondent BESA. The shoe shiner can take his share of the proceeds everyday if he
wanted to or weekly as is the practice of qqqBesas The employer of the piece worker
supervises and controls his work, but in the case of the shoe shiner, respondent BESA does not
exercise any degree of control or supervision over their person and their work. All these are not
obtaining in the case of a piece worker as he is in fact an employee in contemplation of law,
distinct from the shoe shiner in this instance who, in relation to respondent MAMERTO B.
BESA, is a partner in the trade. Consequently, employer-employee relationship between
members of the Petitioning union and respondent MAMERTO B. BESA being absent the latter
could not be held guilty of the unfair tabor practice acts imputed against him. (p. 6, Annex "B1 "
of said Decision).<re||an1w>
Then too on Dec. 27, 1983, then Director Augusto Sanchez of the Bureau of Working Conditions, MOLE, in
response to a letter of petitioner relative to the implementation of wage Order No. 2 which provided for an
increase both in minimum wage and cost of living allowance, opined as follows:
Entitlement of the minimum requirements of the law particularly on wages and allowances
presupposes the existence of employer-employee relationship which is determined by the
concurrence of the following conditions:
1. right to hire
2. payment of wages
3. right to fire; and
4. control and supervision
The most important condition to be considered is the exercise of control and supervision over
the employees, per our conversation, the persons concerned under your query are the shoe
shiners and based on the decision rendered by Associate Judge Emiliano Tabigne of the
defunct Court of Industrial Relations, these shoe shiners are not employees of the company, but
are partners instead. This is due to the fact that the owner/manager does not exercise control
and supervision over the shoe shiners. That the shiners have their own customers from whom
they charge the fee and divide the proceeds equally with the owner, which make the owner
categorized them as on purely commission basis. The attendant circumstances clearly show
that there is no employer-employee relationship existing, and such the owner/manager is not by
law, under obligation to extend to those on purely commission basis the benefit of Wage Order
No. 2. However, the law does not preclude the employer in giving such benefit to all its
employees including those which may not be covered by the mandate of the law.
(Letter dated December 27, 1985 addressed to petitioner Annex B-2, Petition)
The Office of the Solicitor General as counsel for public respondent agrees that in the present case, no
employer-employee relationship exists.
The Supreme Court in the Rosario Brothers case ruled that;
A basic factor underlying the exercise of rights under the Labor Code is the status of
employment. It is important in the determination of who shall be included in a proposed
bargaining unit because it is sine qua non. The fundamental and essential condition that a
bargaining unit be composed of employees. Failure to establish this juridical relationship
between the union members and the employer affects the legality of the union itself. It means
the ineligibility of the union members to present a petition for certification election as well as to
vote therein.
Existence of employer-employee relationship is determined by the following elements, namely,
a] selection and engagement of the employee; b] payment of wages; c] powers of dismissal;
and d] power to control the employee's conduct although the latter is the most important
element (Rosario Brothers Inc, vs. Ople, 131 SCRA 72, 1984)

WHEREFORE, judgment is hereby rendered giving due course to the Petition and declaring VOID the decision
of the Director of the Bureau of Labor Relations dated September 27, 1985. The Petition in BLR Case No. A-8165-85 (NCR-LRD-M1-044-85) is therefore hereby DISMISSED.
SO ORDERED.
Feria (Chairman), Fernan, Alampay, Gutierrez, Jr., JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 87098 November 4, 1996

ENCYCLOPAEDIA BRITANNICA (PHILIPPINES), INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, HON. LABOR ARBITER TEODORICO L. ROGELIO and
BENJAMIN LIMJOCO, respondents.

TORRES, JR., J.:

Encyclopaedia Britannica (Philippines), Inc. filed this petition for certiorari to annul and set aside the resolution
of the National Labor Relations Commission, Third Division, in NLRC Case No. RB IV-5158-76, dated
December 28, 1988, the dispositive portion of which reads:
WHEREFORE, in view of all the foregoing, the decision dated December 7, 1982 of then
Labor Arbiter Teodorico L. Dogelio is hereby AFFIRMED, and the instant appeal is
hereby DISMISSED for lack of merit.
SO ORDERED. 1
Private respondent Benjamin Limjoco was a Sales Division Manager of petitioner Encyclopaedia Britannica
and was in charge of selling petitioner's products through some sales representatives. As compensation,
private respondent received commissions from the products sold by his agents. He was also allowed to use
petitioner's name, goodwill and logo. It was, however, agreed upon that office expenses would be deducted
from private respondent's commissions. Petitioner would also be informed about appointments, promotions,
and transfers of employees in private respondent's district.
On June 14, 1974, private respondent Limjoco resigned from office to pursue his private business. Then on
October 30, 1975, he filed a complaint against petitioner Encyclopaedia Britannica with the Department of
Labor and Employment, claiming for non-payment of separation pay and other benefits, and also illegal
deduction from his sales commissions.
Petitioner Encyclopaedia Britannica alleged that complainant Benjamin Limjoco (Limjoco, for brevity) was not
its employee but an independent dealer authorized to promote and sell its products and in return, received
commissions therefrom. Limjoco did not have any salary and his income from the petitioner company was
dependent on the volume of sales accomplished. He also had his own separate office, financed the business
expenses, and maintained his own workforce. The salaries of his secretary, utility man, and sales
representatives were chargeable to his commissions. Thus, petitioner argued that it had no control and
supervision over the complainant as to the manner and means he conducted his business operations. The
latter did not even report to the office of the petitioner and did not observe fixed office hours. Consequently,
there was no employer-employee relationship.
Limjoco maintained otherwise. He alleged that he was hired by the petitioner in July 1970, was assigned in the
sales department, and was earning an average of P4,000.00 monthly as his sales commission. He was under
the supervision of the petitioner's officials who issued to him and his other personnel, memoranda, guidelines
on company policies, instructions and other orders. He was, however, dismissed by the petitioner when the
Laurel-Langley Agreement expired. As a result thereof, Limjoco asserts that in accordance with the established
company practice and the provisions of the collective bargaining agreement, he was entitled to termination pay
equivalent to one month salary, the unpaid benefits (Christmas bonus, midyear bonus, clothing allowance,
vacation leave, and sick leave), and the amounts illegally deducted from his commissions which were then
used for the payments of office supplies, office space, and overhead expenses.
On December 7, 1982, Labor Arbiter Teodorico Dogelio, in a decision ruled that Limjoco was an employee of
the petitioner company. Petitioner had control over Limjoco since the latter was required to make periodic
reports of his sales activities to the company. All transactions were subject to the final approval of the
petitioner, an evidence that petitioner company had active control on the sales activities. There was therefore,
an employer-employee relationship and necessarily, Limjoco was entitled to his claims. The decision also
ordered petitioner company to pay the following:
1. To pay complainant his separation pay in the total amount of P16,000.00;
2. To pay complainant his unpaid Christmas bonus for three years or the amount of
12,000.00;
3. To pay complainant his unpaid mid-year bonus equivalent to one-half month pay or
the total amount of P6,000.00;
4. To pay complainant his accrued vacation leave equivalent to 15 days per year of
service, or the total amount of P6,000.00;
5. To pay complainant his unpaid clothing allowance in the total amount of P600.00; and

6. To pay complainant his accrued sick leave equivalent to 15 days per year of service or
the total amount of P6,000.00. 2
On appeal, the Third Division of the National Labor Relations Commission affirmed the assailed decision. The
Commission opined that there was no evidence supporting the allegation that Limjoco was an independent
contractor or dealer. The petitioner still exercised control over Limjoco through its memoranda and guidelines
and even prohibitions on the sale of products other than those authorized by it. In short, the petitioner company
dictated how and where to sell its products. Aside from that fact, Limjoco passed the costs to the petitioner
chargeable against his future commissions. Such practice proved that he was not an independent dealer or
contractor for it is required by law that an independent contractor should have substantial capital or investment.
Dissatisfied with the outcome of the case, petitioner Encyclopaedia Britannica now comes to us in this petition
for certiorari and injunction with prayer for preliminary injunction. On April 3, 1989, this Court issued a
temporary restraining order enjoining the enforcement of the decision dated December 7, 1982.
The following are the arguments raised by the petitioner:
I
The respondent NLRC gravely abused its discretion in holding that "appellant's
contention that appellee was an independent contractor is not supported by evidence on
record".
II
Respondent NLRC committed grave abuse of discretion in not passing upon the validity
of the pronouncement of the respondent Labor Arbiter granting private respondent's
claim for payment of Christmas bonus, Mid-year bonus, clothing allowance and the
money equivalent of accrued and unused vacation and sick leave.
The NLRC ruled that there existed an employer-employee relationship and petitioner failed to disprove this
finding. We do not agree.
In determining the existence of an employer-employee relationship the following elements must be present: 1)
selection and engagement of the employee; 2) payment of wages; 3) power of dismissal; and 4) the power to
control the employee's conduct. Of the above, control of employee's conduct is commonly regarded as the
most crucial and determinative indicator of the presence or absence of an employer-employee relationship. 3
Under the control test, an employer-employee relationship exists where the person for whom the services are
performed reserves the right to control not only the end to be achieved, but also the manner and means to
used in reaching that end. 4
The fact that petitioner issued memoranda to private respondents and to other division sales managers did not
prove that petitioner had actual control over them. The different memoranda were merely guidelines on
company policies which the sales managers follow and impose on their respective agents. It should be noted
that in petitioner's business of selling encyclopedias and books, the marketing of these products was done
through dealership agreements. The sales operations were primarily conducted by independent authorized
agents who did not receive regular compensations but only commissions based on the sales of the products.
These independent agents hired their own sales representatives, financed their own office expenses, and
maintained their own staff. Thus, there was a need for the petitioner to issue memoranda to private respondent
so that the latter would be apprised of the company policies and procedures. Nevertheless, private respondent
Limjoco and the other agents were free to conduct and promote their sales operations. The periodic reports to
the petitioner by the agents were but necessary to update the company of the latter's performance and
business income.
Private respondent was not an employee of the petitioner company. While it was true that the petitioner had
fixed the prices of the products for reason of uniformity and private respondent could not alter them, the latter,
nevertheless, had free rein in the means and methods for conducting the marketing operations. He selected
his own personnel and the only reason why he had to notify the petitioner about such appointments was for
purpose of deducting the employees' salaries from his commissions. This he admitted in his testimonies, thus:
Q. Yes, in other words you were on what is known as P&L basis or profit
and loss basis?
A. That is right.

Q. If for an instance, just example your sales representative in any period

did not produce any sales, you would not get any money from Britannica,
would you?
A. No, sir.
Q. In fact, Britannica by doing the accounting for you as division manager
was merely making it easy for you to concentrate all your effort in selling
and you don't worry about accounting, isn't that so?
A. Yes, sir.
Q. In fact whenever you hire a secretary or trainer you merely hire that
person and notify Britannica so that Encyclopaedia Britannica will give the
salaries and deduct it from your earnings, isn't that so?
A. In certain cases I just hired people previously employed by
Encyclopaedia Britannica.
xxx xxx xxx
Q. In this Exhibit "2" you were informing Encyclopaedia Britannica that
you have hired a certain person and you were telling Britannica how her
salary was going to be taken cared of, is it not?
A. Yes, sir.
Q. You said here, "please be informed that we have appointed Miss Luz
Villan as division trainer effective May 1, 1971 at P550.00 per month her
salary will be chargeable to the Katipunan and Bayanihan Districts",
signed by yourself. What is the Katipunan and Bayanihan District?
A. Those were districts under my division.
Q. In effect you were telling Britannica that you have hired this person and
"you should charge her salary to me," is that right?
A. Yes, sir. 5
Private respondent was merely an agent or an independent dealer of the petitioner. He was free to conduct his
work and he was free to engage in other means of livelihood. At the time he was connected with the petitioner
company, private respondent was also a director and later the president of the Farmers' Rural Bank. Had he
been an employee of the company, he could not be employed elsewhere and he would be required to devote
full time for petitioner. If private respondent was indeed an employee, it was rather unusual for him to wait for
more than a year from his separation from work before he decided to file his claims. Significantly, when
Limjoco tendered his resignation to petitioner on June 14, 1974, he stated, thus:
Re: Resignation
I am resigning as manager of the EB Capitol Division effective 16 June 1974.
This decision was brought about by conflict with other interests which lately have
increasingly required my personal attention. I feel that in fairness to the company and to
the people under my supervision I should relinquish the position to someone who can
devote full-time to the Division.
I wish to thank you for all the encouragement and assistance you have extended to me
and to my group during my long association with Britannica.
Evidently, Limjoco was aware of "conflict with other interests which . . . have increasingly required my personal
attention" (p. 118, Records). At the very least, it would indicate that petitioner has no effective control over the
personal activities of Limjoco, who as admitted by the latter had other "conflict of interest" requiring his
personal attention.

In ascertaining whether the relationship is that of employer-employee or one of independent contractor, each
case must be determined by its own facts and all features of the relationship are to be considered. 6 The
records of the case at bar showed that there was no such employer-employee relationship.
As stated earlier, "the element of control is absent; where a person who works for another does so more or
less at his own pleasure and is not subject to definite hours or conditions of work, and in turn is compensated
according to the result of his efforts and not the amount thereof, we should not find that the relationship of
employer and employee exists. 7 In fine, there is nothing in the records to show or would "indicate that
complainant was under the control of the petitioner" in respect of the means and methods 8 in the performance
of complainant's work.
Consequently, private respondent is not entitled to the benefits prayed for.
In view of the foregoing premises, the petition is hereby GRANTED, and the decision of the NLRC is hereby
REVERSED AND SET ASIDE.
SO ORDERED.
Regalado, Romero, Puno and Mendoza, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 159890

May 28, 2004

EMPERMACO B. ABANTE, JR., petitioner,

vs.
LAMADRID BEARING & PARTS CORP. and JOSE LAMADRID, President, respondents.
DECISION
YNARES-SANTIAGO, J.:

This is a petition for review under Rule 45 of the 1997 Revised Rules of Civil Procedure assailing the Decision
dated March 7, 2003 of the Court of Appeals in CA-G.R. SP No. 73102 which affirmed the Resolution dated
April 2, 2002 of the National Labor Relations Commission.
Petitioner was employed by respondent company Lamadrid Bearing and Parts Corporation sometime in June
1985 as a salesman earning a commission of 3% of the total paid-up sales covering the whole area of
Mindanao. His average monthly income was more or less P16,000.00, but later was increased to
approximately P20,269.50. Aside from selling the merchandise of respondent corporation, he was also tasked
to collect payments from his various customers. Respondent corporation had complete control over his work
because its President, respondent Jose Lamadrid, frequently directed him to report to a particular area for his
sales and collection activities, and occasionally required him to go to Manila to attend conferences regarding
product competition, prices, and other market strategies.
Sometime in 1998, petitioner encountered five customers/clients with bad accounts, namely:
Customers/Clients

Amount

1) A&B Engineering Services

P 86,431.20

2) Emmanuel Engineering Services

126, 858.50

3) Panabo Empire Marketing

226,458.76

4) Southern Fortune Marketing

191,208.00

5) Alreg Marketing

56, 901.18

Less Returns: 691.02

56, 210.16

Total Bad Accounts

P 687,166.62

Petitioner was confronted by respondent Lamadrid over the bad accounts and warned that if he does not issue
his own checks to cover the said bad accounts, his commissions will not be released and he will lose his job.
Despite serious misgivings, he issued his personal checks in favor of respondent corporation on condition that
the same shall not be deposited for clearing and that they shall be offset against his periodic commissions.1
Not contented with the issuance of the foregoing checks as security for the bad accounts, respondents
"tricked" petitioner into signing two documents, which he later discovered to be a Promissory Note2 and a Deed
of Real Estate Mortgage.3
Pursuant to the parties agreement that the checks would not be deposited, as their corresponding values
would be offset from petitioners sales commissions, respondents returned the same to petitioner as evidenced
by the undeposited checks and respondent Lamadrids computations of petitioners commissions.4
Due to financial difficulties, petitioner inquired about his membership with the Social Security System in order
to apply for a salary loan. To his dismay, he learned that he was not covered by the SSS and therefore was not
entitled to any benefit. When he brought the matter of his SSS coverage to his employer, the latter berated and
hurled invectives at him and, contrary to their agreement, deposited the remaining checks which were
dishonored by the drawee bank due to "Account Closed."
On March 22, 2001, counsel for respondent corporation sent a letter to petitioner demanding that he make
good the dishonored checks or pay their cash equivalent. In response, petitioner sent a letter addressed to
Atty. Meneses, counsel for respondent corporation, which reads:5
This has reference to your demand letter dated March 22, 2001 which I received on March 30,
2001, relative to the checks I issued to my employer LAMADRID BEARING PARTS
CORPORATION.
May I respectfully request for a consideration as to the payment of the amount covered by the said checks, as
follows:
1. I have an earned commission in the amount of P33,412.39 as shown in the hereto attached
Summary of Sales as of February 28, 2001 (P22,748.60) and as of March 31, 2001
(P10,664.79), which I offer to be charged or deducted as partial payment thereof;
2. I hereby commit One Hundred Percent (100%) of all my commission to be directly charged or
deducted as payment, from date onward, until such time that payment will be completed;

Sir, kindly convey my good faith to your client and my employer, as is shown by my
willingness to continue working as Commission Salesman, having served the Company
for the last sixteen (16) years.
Im sincerely appealing to my employer, through you, Sir, to settle these accountabilities
which all resulted from the checks issued by my customers which bounced and later
charged to my account, in the manner afore-cited.
May this request merit your kindest consideration, Sirs.
Thank you very much.
On April 2, 2001, petitioner sent another letter to respondent Lamadrid, to wit:6
Dear Mr. Lamadrid,
This is to inform your good office that if you pursue the case against me, I may refer this
problem to Mr. Paul Dominguez and Atty. Jesus Dureza to solicit proper legal advice. I
may also file counter charges against your company of (sic) unfair labor practice and
unfair compensation of 3% commission to my sales and commissions of more or less
90,000,000.00 (all collected and covered with cleared check payments) for 16 years
working with your company up to the present year 2001.
If I am not wrong your company did not exactly declare the correct amount of
P90,000,000.00 more or less representing my sales and collections (all collected and
covered with cleared check payments to the Bureau of Internal Revenue [BIR] for tax
declaration purposes). In short your company profited large amount of money to (sic) the
above-mentioned sales and collections of P90,000,000.00 more or less for 16 years
working with your company.
I remember that upon my employment with your company last 1985 up to the present
year 2001 as commission basis salesman, I have not signed any contract with your
company stating that all uncollected accounts including bounced checks from Lamadrid
Bearing & Parts Corp. will be charged to me. I wonder why your company forcibly
instructed me to secure checking account to pay and issue check payment of
P15,000.00 per month to cover your companys bad accounts in which this amount is too
heavy on my part paying a total bad accounts of more than P650,000.00 for my 16 years
employment with your company as commission basis salesman.
Recalling your visit here at my Davao City residence, located at Zone 1 2nd Avenue,
San Vicente Buhangin Davao City, way back 1998, you even forced me to sign mortgage
contract of my house and lot located at Zone 1 2nd Avenue, San Vicente, Buhangin,
Davao City, according to Mr. Jose Lamadrid this mortgage contract of my house and lot
will serve as guarantee to the uncollected and bounced checks from Lamadrid Bearing
and Parts Corp., customers. I have asked 1 copy of the mortgage contract I have signed
but Mr. Jose C. Lamadrid never furnished me a copy.
Very truly yours,
(Sgd) Empermaco B. Abante, Jr.
While doing his usual rounds as commission salesman, petitioner was handed by his customers a letter from
the respondent company warning them not to deal with petitioner since it no longer recognized him as a
commission salesman.
In the interim, petitioner received a subpoena from the Office of the City Prosecutor of Manila for violations of
Batas Pambansa Blg. 22 filed by respondent Lamadrid.
Petitioner thus filed a complaint for illegal dismissal with money claims against respondent company and its
president, Jose Lamadrid, before the NLRC Regional Arbitration Branch No. XI, Davao City.
By way of defense, respondents countered that petitioner was not its employee but a freelance salesman on
commission basis, procuring and purchasing auto parts and supplies from the latter on credit, consignment and
installment basis and selling the same to his customers for profit and commission of 3% out of his total paid-up
sales. Respondents cite the following as indicators of the absence of an employer-employee relationship
between them:

(1) petitioner constantly admitted in all his acts, letters, communications with the respondents
that his relationship with the latter was strictly commission basis salesman;
(2) he does not have a monthly salary nor has he received any benefits accruing to regular
employment;
(3) he was not required to report for work on a daily basis but would occasionally drop by the
Manila office when he went to Manila for some other purpose;
(4) he was not given the usual pay-slip to show his monthly gross compensation;
(5) neither has the respondent withheld his taxes nor was he enrolled as an employee of the
respondent under the Social Security System and Philhealth;
(6) he was in fact working as commission salesman of five other companies, which are engaged
in the same line of business as that of respondent, as shown by certifications issued by the said
companies;7
(7) if respondent owed petitioner his alleged commissions, he should not have executed the
Promissory Note and the Deed of Real Estate Mortgage.8
Finding no necessity for further hearing the case after the parties submitted their respective position papers,
the Labor Arbiter rendered a decision dated November 29, 2001, the decretal portion of which reads:9
WHEREFORE, premises considered judgment is hereby rendered DECLARING respondents
LAMADRID BEARING & PARTS CORPORATION AND JOSE LAMADRID to pay jointly and
severally complainant EMPERMACO B. ABANTE, JR., the sum of PESOS ONE MILLION
THREE HUNDRED THIRTY SIX THOUSAND SEVEN HUNDRED TWENTY NINE AND 62/100
ONLY (P1,336,729.62) representing his awarded separation pay, back wages (partial) unpaid
commissions, refund of deductions, damages and attorneys fees.
SO ORDERED.
On appeal, the National Labor Relations Commission reversed the decision of the Labor Arbiter in a Resolution
dated April 5, 2002, the dispositive portion of which reads:10
WHEREFORE, the Appeal is GRANTED. Accordingly, the appealed decision is Set Aside and
Vacated. In lieu thereof, a new judgment is entered dismissing the instant case for lack of cause
of action.
SO ORDERED.
Petitioner challenged the decision of the NLRC before the Court of Appeals, which rendered the assailed
judgment on March 7, 2003, the dispositive portion of which reads:11
WHEREFORE, premises considered, petition is hereby DENIED. Let the supersedeas bond
dated 09 January 2002, issued the Philippine Charter Insurance Corporation be cancelled and
released.
SO ORDERED.
Upon denial of his motion for reconsideration, petitioner filed the instant appeal based on the following
grounds:
I
THE HONORABLE COURT OF APPEALS IN GRAVE ABUSE OF DISCRETION "MODIFIED"
THE IMPORT OF THE "RELEVANT ANTECEDENTS" AS ITS PREMISE IN ITS QUESTIONED
DECISION CAUSING IT TO ARRIVE AT ERRONEOUS CONCLUSIONS OF FACT AND LAW.
II
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN APPRECIATING THE TRUE
FACTS OF THIS CASE THEREBY IT MADE A WRONG CONCLUSION BY STATING THAT
THE FOURTH ELEMENT FOR DETERMINING EMPLOYER-EMPLOYEE RELATIONSHIP,
WHICH IS THE "CONTROL TEST," IS WANTING IN THIS CASE.

III
THE HONORABLE COURT OF APPEALS IS AT WAR WITH THE EVIDENCE PRESENTED IN
THIS CASE AS WELL AS WITH THE APPLICABLE LAW AND ESTABLISHED RULINGS OF
THIS HONORABLE COURT.
Initially, petitioner challenged the statement by the appellate court that "petitioner, who was contracted a 3% of
the total gross sales as his commission, was tasked to sell private respondents merchandise in the Mindanao
area and to collect payments of his sales from the customers." He argues that this statement, which suggests
contracting or subcontracting under Department Order No. 10-97 Amending the Rules Implementing Books III
and VI of the Labor Code, is erroneous because the circumstances to warrant such conclusion do not exist.
Not being an independent contractor, he must be a regular employee pursuant to Article 280 of the Labor Code
because an employment shall be deemed to be regular where the employee has been engaged to perform
activities which are usually necessary or desirable in the usual business or trade of the employer.
Petitioner likewise disputes the finding of the appellate court that no employer-employee relationship exists
between him and respondent corporation since the power of control, which is the most decisive element to
determine such relationship, is wanting. He argues that the following circumstances show that he was in truth
an employee of the respondent corporation:
(1) As salesman of the private respondents, petitioner was also the one collecting payment of
his sales from various customers. Thus, he was bringing with him Provisional Receipts, samples
of which are attached to his Position Paper filed with the Labor Arbiter.
(2) Private respondents had complete control over the work of the petitioner. From time to time,
respondent JOSE LAMADRID was directing him to report to a particular area in Mindanao for
his sales and collection activities, and sometimes he was required to go to Manila for a
conference regarding competitions, new prices (if any), special offer (if competitors gave special
offer or discounts), and other selling/marketing strategy. In other words, respondent JOSE
LAMADRID was closely monitoring the sales and collection activities of the petitioner.
Petitioner further contends that it was illogical for the appellate court to conclude that since he was not required
to report for work on a daily basis, the power of control is absent. He reasons that being a field personnel, as
defined under Article 82 of the Labor Code, who is covering the Mindanao area, it would be impractical for him
to report to the respondents office in Manila in order to keep tab of his actual working hours.
Well-entrenched is the doctrine that the existence of an employer-employee relationship is ultimately a
question of fact and that the findings thereon by the Labor Arbiter and the National Labor Relations
Commission shall be accorded not only respect but even finality when supported by substantial evidence. The
decisive factor in such finality is the presence of substantial evidence to support said finding, otherwise, such
factual findings cannot be accorded finality by this Court.12 Considering the conflicting findings of fact by the
Labor Arbiter and the NLRC as well as the Court of Appeals, there is a need to reexamine the records to
determine with certainty which of the propositions espoused by the contending parties is supported by
substantial evidence.
We are called upon to resolve the issue of whether or not petitioner, as a commission salesman, is an
employee of respondent corporation. To ascertain the existence of an employer-employee relationship,
jurisprudence has invariably applied the four-fold test, namely: (1) the manner of selection and engagement;
(2) the payment of wages; (3) the presence or absence of the power of dismissal; and (4) the presence or
absence of the power of control. Of these four, the last one is the most important.13 The so-called "control test"
is commonly regarded as the most crucial and determinative indicator of the presence or absence of an
employer-employee relationship. Under the control test, an employer-employee relationship exists where the
person for whom the services are performed reserves the right to control not only the end achieved, but also
the manner and means to be used in reaching that end.
Applying the aforementioned test, an employer-employee relationship is notably absent in this case. It is
undisputed that petitioner Abante was a commission salesman who received 3% commission of his gross
sales. Yet no quota was imposed on him by the respondent; such that a dismal performance or even a dead
result will not result in any sanction or provide a ground for dismissal. He was not required to report to the
office at any time or submit any periodic written report on his sales performance and activities. Although he had
the whole of Mindanao as his base of operation, he was not designated by respondent to conduct his sales
activities at any particular or specific place. He pursued his selling activities without interference or supervision
from respondent company and relied on his own resources to perform his functions. Respondent company did
not prescribe the manner of selling the merchandise; he was left alone to adopt any style or strategy to entice
his customers. While it is true that he occasionally reported to the Manila office to attend conferences on
marketing strategies, it was intended not to control the manner and means to be used in reaching the desired
end, but to serve as a guide and to upgrade his skills for a more efficient marketing performance. As correctly

observed by the appellate court, reports on sales, collection, competitors, market strategies, price listings and
new offers relayed by petitioner during his conferences to Manila do not indicate that he was under the control
of respondent.14 Moreover, petitioner was free to offer his services to other companies engaged in similar or
related marketing activities as evidenced by the certifications issued by various customers.15
In Encyclopedia Britannica (Philippines), Inc. v. NLRC,16 we reiterated the rule that there could be no employeremployee relationship where the element of control is absent. Where a person who works for another does so
more or less at his own pleasure and is not subject to definite hours or conditions of work, and in turn is
compensated according to the result of his efforts and not the amount thereof, no relationship of employeremployee exists.
We do not agree with petitioners contention that Article 28017 is a crucial factor in determining the existence of
an employment relationship. It merely distinguishes between two kinds of employees, i.e., regular employees
and casual employees, for purposes of determining their rights to certain benefits, such as to join or form a
union, or to security of tenure. Article 280 does not apply where the existence of an employment relationship is
in dispute.18
Neither can we subscribe to petitioners misplaced reliance on the case of Songco v. NLRC.19 While in that
case the term "commission" under Article 96 of the Labor Code was construed as being included in the
definition of the term "wage" available to employees, there is no categorical pronouncement that the payment
of compensation on commission basis is conclusive proof of the existence of an employer-employee
relationship. After all, commission, as a form of remuneration, may be availed of by both an employee or a
non-employee.
Petitioner decried the alleged intimidation and trickery employed by respondents to obtain from him a
Promissory Note and to issue forty-seven checks as security for the bad accounts incurred by five customers.
While petitioner may have been coerced into executing force to issue the said documents, it may equally be
true that petitioner did so in recognition of a valid financial obligation. He who claims that force or intimidation
was employed upon him lies the onus probandi. He who asserts must prove. It is therefore incumbent upon
petitioner to overcome the disputable presumption that private transactions have been prosecuted fairly and
regularly, and that there is sufficient consideration for every contract.20 A fortiori, it is difficult to imagine that
petitioner, a salesman of long standing, would accede without raising a protest to the patently capricious and
oppressive demand by respondent of requiring him to assume bad accounts which, as he contended, he had
not incurred. This lends credence to the respondents assertion that petitioner procured the goods from the
said company on credit, consignment or installment basis and then sold the same to various customers. In the
scheme of things, petitioner, having directly contracted with the respondent company, becomes responsible for
the amount of merchandise he took from the respondent, and in turn, the customer/s would be liable for their
respective accounts to the seller, i.e., the petitioner, with whom they contracted the sale.
All told, we sustain the factual and legal findings of the appellate court and accordingly, find no cogent reason
to overturn the same.
WHEREFORE, in view of the foregoing, the Decision of the Court of Appeals dated March 7, 2003 in CA-G.R.
SP No. 73102, which denied the petition of Empermaco B. Abante, is AFFIRMED in toto.
SO ORDERED. Davide, Jr.*, Panganiban**, Carpio, and Azcuna, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 118892 March 11, 1998

FILIPINAS BROADCASTING NETWORK, INC.,
vs.
NATIONAL LABOR RELATIONS COMMISSION and SIMEON MAPA JR., respondents.

PANGANIBAN, J.:

As a rule, factual findings of the NLRC are binding on this Court. However, when the findings of the NLRC and
the labor arbiter are contradictory, this Court may review questions of fact. Where the evidence clearly shows
the absence of an employer-employee relationship, a claim for unpaid wages, thirteenth month pay, holiday
and rest pay and other employment benefits must necessarily fail.
The Case
Before us is a petition for certiorari assailing the April 29, 1994 Decision of the National Labor Relations
Commission, 1 in Case No. 05-08-00348-92, entitled "Simeon M. Mapa Jr., v. DZRC Radio Station." The
dispositive portion of the challenged Decision reads:
WHEREFORE, premises considered, the appealed decision is set aside, and a new
judgement is entered, declaring that complainant is an employee of respondent and is
entitled to his claims for the payment of his services from March 11, 1990 to January 16,
1992. 2
Petitioner also impugns the November 9, 1994 Resolution 3 of the NLRC denying the motion for
reconsideration.
The October 13, 1993 decision of the labor arbiter, 4 which the NLRC reversed and set aside, disposed as
follows:
This Arbitration Branch, based on the facts and circumstances established by the parties
in this case is inclined to believe that complainant Simeon M. Mapa, Jr., had not been an
employee of the respondent DZRC Radio Station before February 16, 1992. 5 He was
but a volunteer reporter when accommodated to air his report on the respondent radio
station as his application for employment with the respondent as field reporter had not
been accepted yet or approved before February, 1992. There was no employeremployee relations that existed between the complainant and the respondent since
March 11, 1990 until February 16, 1992. The complainant is not entitled to his claim for
any salaries, premium pay for holiday and rest day, holiday pay and 13th month pay
against the respondent DZRC Radio Station/Salvio Fortuno.
WHEREFORE, in the light of the foregoing premises, judgment is hereby rendered
dismissing the complaint in this case for lack of merit. 6
The Facts
Version of Private Respondent
Petitioner and private respondent submitted different versions of the facts. The facts as viewed by private
respondent are as follows: 7
The complainant (herein private respondent) began to work for the respondent as a
radio reporter starting March 11, 1990. On May 14, 1990, upon being informed by then
respondent's Station Manager, Mr. Plaridel Brocales, that complainant's employment
with respondent is being blocked by Ms. Brenda Bayona of DZGB, complainant's
previous employer, the said complainant took a leave of absence. In the first week of
June, 1990, the respondent thru Mr. Antonio Llarena, then an employee of the
respondent, asked the complainant to return to work even as he was assured that his
salaries will be paid to him already. Thus, the complainant continued to work for the
respondent since then. On September 5, 1991, again the complainant took a leave of
absence because of his desperation over the failure of respondent to make good its
promise of payment of salaries. He was reinstated on January 16, 1992 and resigned on
February 27, 1992 when he decided to run for an elective office in the town of Daraga,
Albay. Unfortunately, the respondent paid salary to the complainant only for the period
from January 16, 1992 up to February 27, 1992. Respondent did not pay the
complainant for all the services rendered by the latter from March 11, 1990 up to
January 16, 1992.
As may be gleaned from its memorandum, 8 petitioner's version of the facts is as follows:
1. On or before April 1990, Mapa was dismissed from his employment with PBN-DZGB
Legaspi. At this time, Mapa filed a case for illegal dismissal against PBN-DZGB Legaspi
docketed as RAV V Case No. 05-04-00120-90 entitled "Simeon Mapa, Jr. v. People's
Broadcasting Network-DZGB Legaspi, Jorge Bayona and Arturo Osia";

2. On or about May 1990, Mapa sought employment from DZRC as a radio reporter.
However, DZRC required of private respondent the submission of a clearance from his
former employer. Otherwise, his application would not be acted upon;
3. On May 14, 1990, Mapa was informed by DZRC's then station manager, Mr. Plaridel
"Larry" Brocales, that his application for employment was "being blocked by Ms. Brenda
Bayona of DZGB, Mapa's former employer." This fact is supported by Mapa's position
paper before the Honorable Labor Arbiter . . . ;
4. Taking pity on Mapa and pending the issuance of the clearance from PBN-DZGB
Legaspi, Mr. Larry Brocales granted the request of Mapa to be accommodated only as a
volunteer reporter of DZRC on a part-time basis. As a volunteer reporter, Mapa was not
to be paid wages as an employee of DZRC but he was permitted to find sponsors whose
business establishments will be advertised every time he goes on the air. Most
importantly, Mapa's only work consisted of occasional newsbits or on-the-spot reporting
of incidents or newsworthy occurrences, which was very seldom.
5. Mapa's friends, who were also in the same situation as he was, declared in an
affidavit dated June 10, 1993 that:
WE, ALLAN ALMARIO and ELMER ANONUEVO, of legal age, single, with postal
address at Washington Drive, Legaspi City, under oath, depose and state:
1. We personally know Simeon "Jun" Mapa, a former volunteer reporter at DZRC just
like us;
2. As volunteer reporters we know that we will not receive any salary or allowance from
DZRC because our work was purely voluntary;
3. As incentive for us, the management of DZRC allowed us to get our own sponsors
whose business establishment we mention[ed] every after field report was made by us;
4. The management did not require or oblige us to render a report. We were on our own.
We ma[d]e or render[ed] a report as we [saw] fit;
5. During our stint as volunteer reporters we had several sponsors each who paid us
P300.00 per month (each).
xxx xxx xxx
6. Having no radio gadgets to begin with, DZRC loaned Mapa the necessary equipment
such as handheld radios and reporting gadgets. Mapa was to do occasional reporting
only, i.e., a few minutes each day at an irregular time period at Mapa's own convenience.
Mapa advertised his sponsors and pocketed the payment of these sponsors for his
advertising services. In addition, DZRC had no control over the manner by [sic] which he
was to make his reports. Nor were the said reports subject to editing by DZRC;
7. In an Affidavit dated June 10, 1993 executed by one of Mapa's sponsors, the same
reads as follows:
I, CARLITO V. BAYLON, of legal age, married, resident of Dona Maria Subdivision,
Daraga, Albay, under oath, depose and state:
1. I am a lawyer by profession. At the same time, I am owner of "Kusina ni Manoy" a
restaurant situated in Daraga, Albay;
2. I personally know Simeon "Jun" Mapa. Sometime in May, 1990 he went to me and
asked if I could be one of his sponsors because he was accommodated by DZRC as
volunteer reporter. He explained to me that, he will not be receiving any salary from
DZRC[;] hence, he was soliciting my support;
3. Taking pity on him, I agreed to be one of his sponsors. The condition was, I will have
to pay him P300.00/month. In exchange thereto, he will have to mention the name of my
restaurant every time he renders a report on the air;

4. My sponsorship lasted for about (5) months after which I discontinued it when I rarely
heard Jun Mapa in DZRC program.
xxx xxx xxx
8. On November 7, 1990, in his testimony against his former employer, Mapa declared
under oath, to wit:
ATTY. LOBRIGO:
On paragraph 14 of the same affidavit it states and I quote: 13. Having been left with an
empty stomach, I was compelled to apply for employment with another radio station. On
March 11, 1990, I applied for employment with DZRC. Unfortunately, my application
would not yet be acted [upon] favorably because of the malicious and oppressive
imputations to me by my former employer.
My question is what is now the status of your employment with DZRC?
WITNESS:
I am at present on a volunteer status because my former employer at DZGB did not give
me clearance and I am required to submit that clearance to DZRC. (Emphasis supplied).
See p. 2 of Position Paper of DZRC before the Labor Arbiter and pp. 4-5 of the
Transcript of Stenographer Notes dated November 7, 1990, attached and marked as
Annex "F" and Annex "F-1 ", Petition for Certiorari;
9. It cannot be overstressed that Mapa's application for employment could not have been
acted upon because of the lack of the pre-requisite clearance.
10. Lacking in sponsors, Mapa soon failed to provide petitioner with newsbits, finding it
unprofitable to continue since he had no available sources of funding. Sometime in
September 1991, Mapa quit his part-time endeavor with DZRC, as attested to by the
Office of Supervisor/Traffic Manager Ignacio Casi in an Affidavit dated June 10, 1992, to
wit:
1. I am the Office Supervisor/Traffic Manager of DZRC-AM;
2. Sometime in May, 1990 Simeon "Jun" Mapa went to my office inside our radio station.
He asked me if he could be accommodated as Radio Reporter of DZRC, as he was
dismissed from DZGB. I referred him to Larry Brocales, our Station Manager then;
3. Larry Brocales told Jun Mapa that he cannot be accommodated because he has no
clearance from DZGB. Jun Mapa, almost teary eyed, pleaded to Larry Brocales that he
be accommodated as volunteer reporter, that is, he will not receive any salary but that
he intimated that he be allowed to look for sponsors whose business establishment, for a
fee, will have to be mentioned after every report is made. Larry Brocales took pity on Jun
Mapa and accommodated him;
4. Jun Mapa, just like the other volunteer reporters, was not obliged to render field
reports, at a particular time and in a particular program. They render report as they wish
or see fit;
5. The management (DZRC) does not collect anything from the sponsors of Jun Mapa.
They (sponsors) pay directly to him;.
6. Being the Office Supervisor, I know for a fact that Jun Mapa seldom renders report on
the air. He has no assigned program either. He was on and off the air, so to speak;
7. Finally, some time in September, 1991, Jun Mapa told me that he is quitting already
because his sponsors were no longer paying him of his monthly contract with them.
(Emphasis supplied).
(See Annex "G", Petition for Certiorari);

11. Subsequently, Mapa sent a letter dated October 7, 1991 to Ms. Diana C. Gozum, General Manager of
petitioner FBN. In the said letter, Mapa wrote and admitted that:
I am [sic] Mr. Simeon Mapa, Jr. respectfully request your good office to reconsider my
previous application submitted last March 1990 as a reporter of DZRC AM.
May I inform you that since the submission of such application I worked until September
6, 1991 for free of services [sic]. Hoping that I'll be given the chance to be recognized as
a regular reporter.
With this, I respectfully wish to follow up my application for recognition.
May I also inform you that the case I have with my previous job with the other company
has commenced.
Attached herewith is my resume.
I am once again submitting myself for an interview with your office at a time convenient
to you.
Thank you.
(See Annex "H", Petition for Certiorari);
12. Reacting to the letter mentioned in the immediately preceding paragraph, DZRC
favorably acted upon the application of Mapa and accepted him as a radio reporter on
January 16, 1992;
13. On February 27, 1992, Mapa resigned as a radio reporter in order to run for an
elective office in the May 1992 elections and was paid all his salaries and benefits for the
period of his employment commencing from January 16, 1992 until February 27, 1992;
14. Having no work to do and no employment in sight, Mapa filed a complaint against
FBN-DZRC on August 1992, claiming the payment of salaries, premium pay, holiday pay
as well as 13th month pay for the period 28 February 1990 until January 16, 1992;
On October 13, 1993, Labor Arbiter Emeterio Ranola dismissed the complaint for lack of merit, finding that no
employer-employee relationship existed between Mapa and DZRC during the period March 11, 1990 to
February 16, 1992. 9
Findings of the NLRC
In holding that there was an employer-employee relationship, the NLRC set aside the labor arbiter's findings:
In his appeal, complainant insists that there was an employer-employee relationship
between him and the respondent. In support of his contention, he cites the payroll for
February 16 to 29, 1992, the ID card issued to him as employee and regular reporter by
the respondent: [sic] the program schedules of DZRC showing the regular program of
the station indicating his name: [sic] the affidavit of Antonio Llarena, program supervisor
of DZRC, stating that he [was] a regular reporter under his supervision and the list of
reporting gadgets issued to regular reporter.
The existence of employer employee relationship is determined by the following
elements, namely: 1) selection and engagement of the employee; 2) the payment of
wages; 3) the power of dismissal; and 4) the power to control employees' conduct
although the latter is the most important element. (Rosario Brothers, Inc. vs. Ople, 131
SCRA 72)
Considering the totality of the evidence adduced by the parties, we are of the opinion
that the complainant is a regular reporter of the respondent. Firstly, the work of the
complainant is being supervised by the program supervisor of the respondent; secondly,
the complainant uses the reporting gadgets of the respondent. Thirdly, he has no
reporting gadgets of his own; Fourthly, the program schedule is prepared by the
respondent; and Lastly, he was paid salary for the period from February 16 to 29, 1992
and covered under the Social Security System. There is no showing in the record that
his work from February 16, 1992 was different from his work before said period. 10

The NLRC subsequently denied petitioner's motion for reconsideration 11 on November 9, 1994. 12 Hence, this
petition. 13
Issue
Petitioner alleges that Public Respondent NLRC committed grave abuse of discretion as follows: 14
I
. . . in declaring Mapa as an employee of petitioner before January 16, 1992. The test of
an employer-employee relationship was erroneously applied to the facts of this case.
II
. . . in disregarding significant facts which clearly and convincingly show that the private
respondent was not an employee of the petitioner before 16 January 1992.
In the main, the issue in this case is whether private respondent was an employee of petitioner for the period
March 11, 1990 to January 15, 1992.
The Court's Ruling
The petition is meritorious.
Main Issue:
Private Respondent Was Not an Employee
During the Period in Controversy
As a rule, the NLRC's findings are accorded great respect, even finality, by this Court. This rule, however, is not
without qualification. This Court held Jimenez v. NLRC 15:
The review of labor cases elevated to us on certiorari is confined to questions of
jurisdiction or grave abuse of discretion. 16 As a rule, this Court does not review
supposed errors in the decision of the NLRC which raise factual issues, because factual
findings of agencies exercising quasi-judicial functions are accorded not only respect but
even finality, aside from the consideration that the Court is essentially not a trier of facts.
However, in the case at bar, a review of the records thereof with an assessment of the
facts is necessary since the factual findings of the NLRC and the labor arbiter are at
odds with each other. 17
In the present case, a review of the factual findings of the public respondent is in order, for said findings differ
from those of the labor arbiter. 18 Worse, the facts alleged by the private respondent and relied upon by the
public respondent do not prove an employer-employee relationship. 19 In this light, we will review and
overrule the findings of the NLRC.
The following are generally considered in the determination of the existence of an employer-employee
relationship: (1) the manner of selection and engagement, (2) the payment of wages, (3) the presence or
absence of the power of dismissal, and (4) the presence or absence of the power of control; of these four, the
last one is the most important. 20
Engagement and Payment of Wages
Let us consider the circumstances of the private respondent's engagement in DZRC before January 16, 1992.
Petitioner did not act on his application for employment as a radio reporter because private respondent
admittedly failed to present a clearance from his former employer. Nevertheless, private respondent
"volunteered" his services, knowing that he would not be paid wages, and that he had to rely on financial
sponsorships of business establishments that would be advertised in his reports. In other words, private
respondent willingly acted as a volunteer reporter, fully cognizant that he was not an employee and that he
would not receive any compensation directly from the petitioner, but only from his own advertising sponsors.
The nature of private respondent's engagement is evident from the affidavit of Allan Almario and Elmer
Anonuevo who served under identical circumstances. The two affirmed the following:
1. We personally know Simeon "Jun" Mapa, a volunteer reporter at DZRC just like us;

2. As volunteer reporters we know [sic] that we will not receive any salary or allowance
from DZRC because our work was purely voluntary;
3. As incentive for us, the management of DZRC allowed us to get our own sponsors
whose business establishments we mention every after [sic] field report was made by
us;
xxx xxx xxx
4. During our stint as volunteer reporters we had several sponsors each who paid us
P300.00 per month. 21
The above statement is corroborated by Carlito Baylon, one of private respondent's advertising sponsors. In
his affidavit dated June 10, 1993, he averred:
2. I personally know Simeon "Jun" Mapa.
Sometime in May, 1990 he went to me and asked if I could be one of his sponsors
because he was accommodated by DZRC as volunteer reporter. He explained to me
that, he will not be receiving any salary from DZRC[,] hence, he was soliciting my
support;
3. Taking pity on him, I agreed to be one of his sponsors. The condition was, I will have
to pay him P300.00/month. In exchange thereto, he will have to mention the name of my
restaurant everytime he renders a report on the air;
4. My sponsorship lasted for about five (5) months after which I discontinued it when I
rarely heard Jun Mapa in DZRC program. 22
Indeed, private respondent himself admitted that he worked under the said circumstances. The bio-data sheet
signed by Mapa himself, in which he acknowledged that he was not an employee, states in part:
Work experiences:
DWGW Reporter/Newscaster 1970-1980
DZGB Reporter 1983-1990
DZRC Reporter 1990-1991
for free not recognized due to no appointment. 23 (Emphasis supplied.)
In his letter dated October 7, 1991, which he sent to the general manager of Filipinas Broadcasting Network
(owner of DZRC), Mapa again acknowledged in the following words that he was not an employee:
I am [sic] Mr. Simeon Mapa, Jr. respectfully request your good office to reconsider my
previous application submitted last March 1990 as a reporter of DZRC AM.
May I inform you that since the submission of such application I worked until September
6, 1991 for free of services [sic]. Hoping that I'll be given the chance to be recognized as
a regular reporter.
With this, I respectfully wish to follow up my application for recognition. [Emphasis
supplied.]
There is no indication that these two admissions were made under duress. Indeed, private respondent himself
did not dispute their voluntariness or veracity. It is clear that he rendered services knowing that he was not an
employee. Aware that he would not be paid wages, he described himself as a "volunteer reporter" who was, as
evident from his letter, hoping for "the chance to be recognized as a regular reporter." In fact, petitioner acted
favorably on this letter and accepted his application as an employee effective on January 16, 1992.
Power of Dismissal
Likewise, the evidence on record shows that petitioner did not exercise the power to dismiss private
respondent during the period in question. In September 1991, Private Respondent Mapa ceased acting as a
volunteer reporter, not because he was fired, but because he stopped sending his reports. Ignacio Casi, Office

Supervisor of DZRC, declared in his affidavit that Mapa told him that "he [was] quitting already because his
sponsors were no longer paying him of [sic] his monthly contract with them." Mapa did not controvert this
statement. In fact, his aforesaid letter of October 17, 1991 expressed his hope of being "given the chance to be
recognized as a regular reporter." Private respondent's attitude in said letter is inconsistent with the notion that
he had been dismissed.
Mapa Was Not Subject
to Control of Petitioner
The most crucial test the control test demonstrates all too clearly the absence of an employer-employee
relationship. No one at the DZRC had the power to regulate or control private respondents' activities or inputs.
Unlike the regular reporters, he was not subject to any supervision by petitioner or its officials. Regular
reporters "are required by the petitioner to adhere to a program schedule which delineates the time when they
are to render their reports, as well as the topic to be reported upon. The substance of their reports are [sic]
oftentimes screened by the station prior to [their] actual airing. In contrast, volunteer reporters are never given
such a program schedule but are merely advised to inform the station of the reports they would make from
time to time." 24
Indeed, DZRC, the petitioner's radio station, exercised no editorial rights over his reports. He had no fixed day
or time for making his reports; in fact, he was not required to report anything at all. Whether he would air
anything depended entirely on him and his convenience.
The absence of petitioner's control over private respondent is manifest from the sworn statement of the traffic
manager of petitioner, Ignacio Casi, who deposed in part:
xxx xxx xxx
4. Jun Mapa, just like the other volunteer reporters, was not obliged to render field
reports, at a particular time and in a particular program. They render report as they wish
or see fit;
5. The management (DZRC) does not collect anything from the sponsors of Jun Mapa.
They (sponsors) pay directly to him;
6. Being the Office Supervisor, I Know for a fact that Jun Mapa seldom renders report on
the air. He has no assigned program either. He was on and off the air, so to speak;
7. Finally, some time in September, 1991, Jun Mapa told me that he is quitting already
because his sponsors were no longer paying him of his monthly contract with them.
In Encyclopedia Britannica (Philippines) Inc., v. NLRC, 25 we reiterated that there could be no employeremployee relationship where "the element of control is absent; where a person who works for another does so
more or less at his own pleasure and is not subject to definite hours or conditions of work[;] and in turn is
compensated according to the result of his efforts and not the, amount thereof, we should not find that the
relationship of employer-employee exists." In the present case, private respondent worked at his "own
pleasure and [was] not subject to definite hours or conditions of work."
"Evidence" Found by NLRC Not Applicable
In its two-page 26 holding that there was an employer-employee relationship, the NLRC relied on the following:
(1) the payroll for February 16 to 29, 1992,
(2) the ID card issued to him as employee and regular reporter by the respondent,
(3) the program schedules of DZRC showing the regular program of the station
indicating his name:
(4) the affidavit of Antonio Llarena, program supervisor of DZRC, stating that he [was]
under his supervision, and
(5) the list of reporting gadgets issued to regular reporter.
Other than the items enumerated above, no other document was considered by the NLRC. In other words, its
conclusion was based solely on these alleged pieces of evidence. It dearly committed grave abuse of
discretion in its factual findings, because all the above documents relate to the period January 16, 1992 to

February 28, 1992 and not to the period March 11, 1990 to January 15, 1992 which are the inclusive dates in
controversy.
The payroll 27 from February 16, 1992 to February 27, 1992 does not demonstrate that private respondent was
an employee prior to said period. Lest it be forgotten, the question in this case pertains to the status of private
respondent from March 11, 1990 to January 15, 1992. The said payroll may prove that private respondent was
an employee during said days in February 1992, but not for the period which is the subject of the present
controversy.
Furthermore, neither the identification cards nor the SSS number printed at the back thereof indicate the date
of issuance. Likewise, the SSS number does not show that he was a member during the period in controversy;
much less, that he became so by reason of his employment with petitioner.
Similarly inapplicable is the program schedule 28 which allegedly showed the regular program of the station and
indicated the name of private respondent as an employee. The document is a mere photocopy of a typewritten
schedule. There is absolutely no indicium of its authenticity. Moreover, it is undated; hence, it does not indicate
whether such schedule pertained to the period in dispute, that is, March 11, 1990 to January 15, 1992. Worse,
the heading thereof was entitled "Radio DZRC Programming Proposal. [emphasis supplied]" A proposal is "put
forth merely for consideration and acceptance." 29 It cannot, by itself, prove that such program was
implemented and that private respondent acted as an employee of petitioner.
Neither does the list of returned gadgets support the conclusion of the NLRC. It must be stressed that such
gadgets were essential to enable the private respondent to access the specific radio frequency and facilities of
the radio station. Being exclusive properties of the radio station, such, gadgets could not have been
purchased, as they were not commercially available. In any event, the list of returned gadgets was dated
February 27, 1992 again, a date not in controversy. Such document, by itself, does not prove that private
respondent was an employee from March 20, 1990 to January 15, 1992.
The affidavit of Antonio Llarena 30, an employee of DZRC, stating that the private respondent was under his
supervision, is vague, even misleading; it declared merely that Llarena was "in charge" of said respondent.
Such language could not be construed to mean that he exercised supervision and control over private
respondent.
Indubitably the NLRC based its findings of employer-employee relationship from the circumstances attendant
when the private respondent was already a regular employee. Uncontroverted is the statement that the private
respondent was a regular employee from January 16, 1992 to February 28, 1992, for which period he received
all employee benefits. But such period, it must be stressed again, is not covered by private respondent's
complaint.
In sum, the evidence, which Public Respondent NLRC, relies upon, does not justify the reversal of the labor
arbiter's ruling which, in turn, we find amply supported by the records. Clearly, private respondent was not an
employee during the period in question.
WHEREFORE, the petition is hereby GRANTED and the assailed Decision and Resolution are hereby SET
ASIDE. The Order of the Labor Arbiter dated October 13, 1993 dismissing the case for lack of merit is hereby
REINSTATED. No costs.
SO ORDERED. David, Jr., Bellosillo, Vitug and Quisumbing, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 97945 October 8, 1998

PRIME MARINE SERVICES, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, PHILIPPINE OVERSEAS EMPLOYMENT
ADMINISTRATION, R & R MANAGEMENT SERVICES INTERNATIONAL, and NAPOLEON CANUT,
respondents.

MENDOZA, J.:
This is a petition for certiorari to set aside the decision, dated February 21, 1991, of the National Labor
Relations Commission, dismissing the appeal of petitioner Prime Marine Services, Inc. from the decision of the
Philippine Overseas Employment Administration in POEA Case No. (L) 88-10-850, as well as the resolution,
dated March 26, 1991, of the NLRC, denying reconsideration.

Private respondent Napoleon Canut was recruited to work as a Tug Master for Arabian Gulf Mechanical
Services and Contracting Co., Ltd. (Arabian Gulf) by R & R Management Services International (R & R
Management) for a period of 18 months, commencing June 15, 1988. Private respondent's employment was,
however, preterminated allegedly on the ground that he was incompetent. He was repatriated to the Philippines
on September 26, 1988. 1
When private respondent reviewed his employment papers, he discovered that while R & R Management had
acted as recruitment agency in processing his application, it was actually petitioner Prime Marine Services,
Inc., as deployment agent, which had processed his papers and facilitated his going abroad. Further
investigation showed that R & R Management was not licensed to recruit workers for overseas employment.
Accordingly, private respondent filed a complaint before the Philippine Overseas Employment Agency for illegal
dismissal, underpayment of salaries, and recruitment violations against petitioner, R & R Management, and
Arabian Gulf. 2
Petitioner denied that there was any employer-employee relationship between it and private respondent. It
pointed out that private respondent admitted he had applied with and paid his placement fee to R & R
Management. Petitioner likewise denied that it had any part in the processing of private respondent's papers
and argued that only Arabian Gulf and R & R Management should be held liable to private respondent. For this
reason, petitioner filed a cross-claim against R & R Management seeking reimbursement for any amount which
petitioner may be held liable for to private respondent. 3
R & R Management, on the other hand, averred that it referred private respondent to petitioner in order for the
latter to facilitate private respondent's employment abroad and consequently worked in conjunction with
petitioner in processing private respondent's deployment. 4
On October 13, 1989, Deputy Administrator Cresencio M. Siddayao of the POEA rendered a decision
disposing of the case as follows:
WHEREFORE, in view of the foregoing, Prime Marine Services, Inc., R & R
Management Services, Int'l and Arabian Gulf Mechanical Services and Contracting Co.
Ltd., are hereby ordered, jointly and severally, to pay complainant the following in
Philippines Currency at the prevailing rate of exchange at the time of payment:
SR 33,750.00
representing salaries for the
unexpired portion of the
contract for 15 months at SR
2,250.00 a month;
350.00 representing salary differential;
5% percent Attorney's fees of the award.
Furthermore, R & R Management Services International is referred to the Anti-illegal
Recruitment Branch of this Office for appropriate action.
Finally, the cross claim of Prime Marine Services, Inc. against R & R Management
Services International is dismissed for lack of merit.
SO ORDERED.
Petitioner filed a motion for reconsideration with the National Labor Relations Commission which the latter
created as an appeal. In its decision, dated February 21, 1991, the NLRC affirmed in toto the POEA's decision.
On March 26, 1991, it denied petitioner's motion for reconsideration. Hence, this petition containing the
following assignment of errors:
I. Public respondent NLRC and/or POEA committed grave abuse of
discretion when they ignored existing jurisprudence.
II. Dismissal of the cross-claim (against private respondent R & R
Management) constitutes also grave abuse of discretion.
As to its first assignment of error, petitioner contends that the ruling of the NLRC goes against this Court's
decision in Ilas v. NLRC. 5

The contention has no merit. The case of Ilas simply held that a recruitment agency cannot be found liable for
unpaid wages and other claims of overseas workers who have been recruited by its agent without its
knowledge and consent. The Court's ruling denying liability against the recruitment agency (All Seasons
Manpower International Services) was based on the following factual findings of the POEA and the NLRC,
which the Court affirmed:
All evidence indicate that private respondent [All Seasons Manpower International
Services] cannot be held liable for the claims of petitioners.
Firstly, petitioners applied for overseas deployment with CBT/Shiek International through
spouses Francisco and Corazon Ngoho, Eddie Sumaway and Erlinda Espeno. They
never transacted their business with the office of private respondent.
Secondly, when they worked at Doha, Qatar, their employer as CBT/Shiek International
who failed to pay their wages.
Thirdly, in the TEPS provided by Espeno to enable them to travel, it was made to appear
that private respondent was their agency/contractor of petitioners and Yacoub Trading
Est. is their foreign employer. They were signed by petitioners knowing that private
respondent was not their recruiter. Apparently, Espeno conspired with petitioners and
Ngoho to enable petitioners to travel to the Middle East, ostensibly under the name of
private respondent as agent/recruiter.
Fourthly, it turned our that petitioners were recruited for Mabeco Trading and Contracting
Establishment, as the foreign principal and not Yacoub Trading Est., which is the
principal of private respondent.
Fifthly, in the very compliant filed by petitioners against private respondent they admitted
that they applied for overseas employment with the CBT/Shiek International under the
management of the Ngohos. 6
In contrast, both the POEA and the NLRC found that petitioner and R & R Management acted jointly in
recruiting and deploying private respondent abroad, to wit:
This contention cannot be sustained. The records show that while complainant applied
with respondent R & R, he was however deployed by herein movant Prime Marine and
this was not rebutted during the proceedings below. Consequently, We find no sufficient
reason to disturb the questioned decision. We, therefore, quote with approval and adopt
as Our own the following findings of the POEA Deputy Administrator.
We find respondent R & R and prime Marine jointly and severally liable
with complainant's foreign employer, Arabian Gulf Mechanical Services
and Contracting Co. Ltd. R & R is the recruiting agency while Prime
Marine is the deploying agency. Complainant alleged that he applied with
R & R and the latter admitted that it "has facilitated and contributed efforts
in conjunction with Prime Marine in sending the applicant complainant
abroad under a contract." Prime Marine did not rebut this allegation. It did
not even explain or touch on the matter why it appeared as the deploying
agent in the Crew Agreement exhibited by complainant. The foregoing
leads us to the inevitable conclusion that there is a collusion between R &
R and Prime Marine with respect to complainant's application and
deployment. Thus, its cross claim against R & R must necessarily fail
because it is held jointly and severally liable with R & R and the foreign
employer. 7
Although petitioner denied before the POEA and the NLRC any part in the processing of private respondent's
papers, it now admits that its general manager after all took part in the deployment of private respondent.
However, it claims that its general manager was not authorized to do so and that she was in collusion with
private respondent. 8
It is sufficient in order to dispose of this new contention to say that factual findings of administrative agencies
are generally held to be binding and even final so long as they are supported by substantial evidence in the
record of the case. 9 This is especially so where, as here, the agency and a subordinate one which heard the
case in the first instance are in full agreement as to the facts. 10 This rule was, in fact, reiterated in the Ilas case
which petitioner invokes:

No rule is more settled than that this Court is not a trier of facts and that the findings of
facts of administrative bodies, as public respondent, shall not disturbed on appeal unless
it is shown that it committed a grave abuse of discretion or otherwise acted without
jurisdiction or in excess of its jurisdiction. In this case, petitioners failed to discharge their
burden to warrant a departure from this rule. 11
It should be pointed out that petitioner belatedly claims that its general manager acted without authority and in
collusion with private respondent apparently to bring this case within the ambit of Ilas which held that a
recruitment agency is not liable for the unauthorized acts of its agents. This transparent effort to make the
present case fit the ruling in Ilas is done with out specifying the alleged evidence supporting such claim of
collusion. Neither does petitioner even attempt to controvert the express finding of both the POEA and the
NLRC that it failed to rebut R & R Management's allegation that both of these firms jointly processed private
respondent's employment.
As to petitioner's second assignment of error, such should be dismissed as its solidary liability with R & R
Management and Arabian Gulf for private respondent's claims is founded on the fact that both petitioner and R
& R Management, and not the latter alone, processed private respondent's recruitment and deployment
abroad.
There is no question that a private manning agency, such as petitioner, can be held liable for private
respondent's claims. The Rules and Regulations of the POEA expressly provide that every applicant seeking a
license or authority to operate a private employment, recruitment, or manning agency must submit, among
others:
d. A verified undertaking stating that the applicant:
xxx xxx xxx
(3) shall assume joint and solidary liability with the employer for all claims and liabilities
which may arise in connection with the implementation of the contract of employment; 12
WHEREFORE, the petition is DISMISSED.
SO ORDERED. Regalado, Melo, Puno and Martinez, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. Nos. 90394-97 February 7, 1991

HERMINIGILDO ILAS, GLICERIO BELARMINO, MARIO BARBOSA and TEODORO ENRIQUEZ,
petitioners,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION and ALL SEASONS MANPOWER INTERNATIONAL
SERVICES, respondents.
Cielo B. Pre for petitioners.
Horacio R. Viola, Sr. for private respondent.

GANCAYCO, J.:p

Can a recruitment agency be liable for unpaid wages and other claims of certain overseas workers who appear
to have been recruited by its agent without its knowledge and consent? This is the focal issue in this petition.
Petitioners applied for overseas employment in Doha, Qatar, with CBT/Shiek International, an unlicensed
recruitment agency, under the management of spouses Francisco Ngoho, Jr. and Corazon Ngoho. To enable
them to leave, they were assisted by Eddie Sumaway and Erlinda Espeno, the latter being a liaison officer of
private respondent All Seasons Manpower International Services, a licensed placement agency. Petitioners
filed their application papers and paid their placement fees with the Ngohos. However, it was Espeno who
processed their papers and gave them travel exit passes (TEPS). They were made to sign two-year contracts
of employment but they were not given copies thereof. Subsequently, they were deployed to Doha, Qatar,
where they worked for four (4) months without being paid. They sought the assistance of the Philippine
Embassy and were able to come home to the Philippines with the help of the Philippine Overseas Employment
Administration (POEA).
Hence, they filed a complaint to recover their unpaid salaries and for wages covering the unexpired portion of
their contracts against private respondent.
On June 30, 1989, the POEA rendered a decision, the dispositive part of which reads as follows:
WHEREFORE, judgment is hereby rendered, ordering the respondent to refund to
complainants Bonifacio Gagascas, Herminigildo Ilas, Diosdado Galang, Antonio Frias,
Perfecto Lora, Jr., Rolando Ernacio, Emmanuel Padilla, Andres Lontabo, Juanito Cueto,
Camilo Pastrana, Mario Barbosa, Romeo Muldong, Arnold Cresidio, Dominguez de la
Cruz, Samuel Leao, Teodoro Enriquez and Jaime Ramos, the amount of TWO
THOUSAND FIVE HUNDRED PESOS (P2,500.00) each, representing placement fees.
The claims for the salaries corresponding to the unexpired portion of the complainant's
contracts are hereby ordered DISMISSED for lack of merit.
The claims of Pedro Pabillonia, Glicerio Belarmino, Jaime Ramos, Rodolfo de Jesus,
Romeo Toledo, Pedro Sagayap, Macario Valdez, Benjamin Julio, Ernesto Yadao,
Severino Pilon are hereby ordered severed from the other complaints in view of
settlement.
SO ORDERED. 1
Both parties appealed to public respondent National Labor Relations Commission (NLRC) which in due course
rendered a decision on September 23, 1988 modifying the appealed decision to the effect that petitioners were
adjudged entitled to their four (4) months unpaid salaries to be paid by private respondent but the refund of
placement fees was deleted.
A motion for reconsideration thereof was filed by private respondent. On April 28, 1989, a decision was
rendered by public respondent setting aside the decision dated September 23, 1988 and dismissing the case
for lack of merit. 2 A motion for reconsideration filed by petitioners was denied in a resolution dated June 7,
1989. 3
Hence, the herein petition for certiorari wherein it is alleged that public respondent committed a grave abuse of
discretion in setting aside its decision dated September 23, 1988 and rendering the questioned decision dated
April 28, 1989.
The petition must fail.
No rule is more settled than that this Court is not a trier of facts and that the findings of facts of administrative
bodies, as public respondent, shall not be disturbed on appeal unless it is shown that it committed a grave
abuse of discretion or otherwise acted without jurisdiction or in excess of its jurisdiction. In this case, petitioners
failed to discharge their burden to warrant a departure from this rule.
All evidence indicate that private respondent cannot be held liable for the claims of petitioners.
Firstly, petitioners applied for overseas deployment with CBT/Shiek International through spouses Francisco
and Corazon Ngoho, Eddie Sumaway and Erlinda Espeno. They never transacted their business with the office
of private respondent.
Secondly, when they worked at Doha, Qatar, their employer was CBT/Shiek International who failed to pay
their wages.

Thirdly, in the TEPS provided by Espeno to enable them to travel, it was made to appear that private
respondent was their agency/contractor of petitioners and Yacoub Trading Est. is their foreign employer. They
were signed by petitioners knowing that private respondent was not their recruiter. Apparently, Espeno
conspired with petitioners and Ngoho to enable petitioners to travel to the Middle East, ostensively under the
name of private respondent as agent/recruiter.
Fourthly, it turned out that petitioners were recruited for Mabeco Trading and Contracting Establishment, as the
foreign principal and not Yacoub Trading Est., which is the principal of private respondent.
Fifthly, in the very complaints filed by petitioners against private respondent they admitted that they applied for
overseas employment with the CBT/Shiek International under the management of the Ngohos. 4
It is true that the rules and regulations of the POEA provide that the private employment or recruitment agency
is made to assume full and complete responsibility for all acts of its officials and representatives done in
connection with recruitment and placement. 5 However, when as in this case the recruitment was actually made
by Espeno in behalf of CBT/Shiek International, not the private respondent, and the name of private
respondent was only used as a means to enable petitioners to be issued TEPS for travel purposes, obviously
without the knowledge and consent of private respondent, the latter cannot be held liable for the claims of
petitioners.
The observation of public respondent that the documents used in the deployment abroad of petitioners were all
fake and that petitioners knew about it is borne by the records. They did not come to court with clean hands.
Thus, petitioners should suffer the consequences of their wrongful acts.
WHEREFORE, the petition is DISMISSED for lack of merit.
SO ORDERED.
Narvasa, Cruz, Grio-Aquino and Medialdea, JJ., concur

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 109835 November 22, 1993

JMM PROMOTIONS & MANAGEMENT, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ULPIANO L. DE LOS SANTOS, respondent.
Don P. Porciuncula for petitioner.
Eulogio Nones, Jr. for private respondent.

CRUZ, J.:

The sole issue submitted in this case is the validity of the order of respondent National Labor Relations
Commission dated October 30, 1992, dismissing the petitioner's appeal from a decision of the Philippine
Overseas Employment Administration on the ground of failure to post the required appeal bond. 1
The respondent cited the second paragraph of Article 223 of the Labor Code as amended, providing that:
In the case of a judgment involving a monetary award, an appeal by the employer may
be perfected only upon the posting of a cash or surety bond issued by a reputable
bonding company duly accredited by the Commission in an amount equivalent to the
monetary award in the judgment appealed from.
and Rule VI, Section 6 of the new Rules of Procedure of the NLRC, as amended, reading as follows:
Sec. 6. Bond In case the decision of a Labor Arbiter involves a monetary award, an
appeal by the employer shall be perfected only upon the posting of a cash or surety
bond issued by a reputable bonding company duly accredited by the Commission or the
Supreme Court in an amount equivalent to the monetary award.
The petitioner contends that the NLRC committed grave abuse of discretion in applying these rules to
decisions rendered by the POEA. It insists that the appeal bond is not necessary in the case of licensed
recruiters for overseas employment because they are already required under Section 4, Rule II, Book II of the
POEA Rules not only to pay a license fee of P30,000 but also to post a cash bond of P100,000 and a surety
bond of P50,000, thus:
Upon approval of the application, the applicant shall pay a license fee of P30,000. It shall
also post a cash bond of P100,000 and surety bond of P50,000 from a bonding company
acceptable to the Administration and duly accredited by the Insurance Commission. The
bonds shall answer for all valid and legal claims arising from violations of the conditions
for the grant and use of the license, and/or accreditation and contracts of employment.
The bonds shall likewise guarantee compliance with the provisions of the Code and its
implementing rules and regulations relating to recruitment and placement, the Rules of
the Administration and relevant issuances of the Department and all liabilities which the
Administration may impose. The surety bonds shall include the condition that the notice
to the principal is notice to the surety and that any judgment against the principal in
connection with matters falling under POEA's jurisdiction shall be binding and conclusive
on the surety. The surety bonds shall be co-terminus with the validity period of license.
(Emphasis supplied)
In addition, the petitioner claims it has placed in escrow the sum of P200,000 with the Philippine National Bank
in compliance with Section 17, Rule II, Book II of the same Rule, "to primarily answer for valid and legal claims
of recruited workers as a result of recruitment violations or money claims."
Required to comment, the Solicitor General sustains the appeal bond requirement but suggest that the rules
cited by the NLRC are applicable only to decisions of the Labor Arbiters and not of the POEA. Appeals from
decisions of the POEA, he says, are governed by the following provisions of Rule V, Book VII of the POEA
Rules:
Sec. 5. Requisites for Perfection of Appeal. The appeal shall be filed within the
reglementary period as provided in Section 1 of this Rule; shall be under oath with proof
of payment of the required appeal fee and the posting of a cash or surety bond as
provided in Section 6 of this Rule; shall be accompanied by a memorandum of appeal
which shall state the grounds relied upon and the arguments in support thereof; the relief
prayed for; and a statement of the date when the appellant received the appealed
decision and/or award and proof of service on the other party of such appeal.
A mere notice of appeal without complying with the other requisites aforestated shall not
stop the running of the period for perfecting an appeal.
Sec. 6. Bond. In case the decision of the Administration involves a monetary award, an
appeal by the employer shall be perfected only upon the posting of a cash or surety
bond issued by a reputable bonding company duly accredited by the Commission in an
amount equivalent to the monetary award. (Emphasis supplied)
The question is, having posted the total bond of P150,000 and placed in escrow the amount of P200,000 as
required by the POEA Rules, was the petitioner still required to post an appeal bond to perfect its appeal from
a decision of the POEA to the NLRC?

It was.
The POEA Rules are clear. A reading thereof readily shows that in addition to the cash and surety bonds and
the escrow money, an appeal bond in an amount equivalent to the monetary award is required to perfect an
appeal from a decision of the POEA. Obviously, the appeal bond is intended to further insure the payment of
the monetary award in favor of the employee if it is eventually affirmed on appeal to the NLRC.
It is true that the cash and surety bonds and the money placed in escrow are supposed to guarantee the
payment of all valid and legal claims against the employer, but these claims are not limited to monetary awards
to employees whose contracts of employment have been violated. The POEA can go against these bonds also
for violations by the recruiter of the conditions of its license, the provisions of the Labor Code and its
implementing rules, E.O. 247 (reorganizing POEA) and the POEA Rules, as well as the settlement of other
liabilities the recruiter may incur.
As for the escrow agreement, it was presumably intended to provide for a standing fund, as it were, to be used
only as a last resort and not to be reduced with the enforcement against it of every claim of recruited workers
that may be adjudged against the employer. This amount may not even be enough to cover such claims and,
even if it could initially, may eventually be exhausted after satisfying other subsequent claims.
As it happens, the decision sought to be appealed grants a monetary award of about P170,000 to the
dismissed employee, the herein private respondent. The standby guarantees required by the POEA Rules
would be depleted if this award were to be enforced not against the appeal bond but against the bonds and the
escrow money, making them inadequate for the satisfaction of the other obligations the recruiter may incur.
Indeed, it is possible for the monetary award in favor of the employee to exceed the amount of P350,000,
which is the sum of the bonds and escrow money required of the recruiter.
It is true that these standby guarantees are not imposed on local employers, as the petitioner observes, but
there is a simple explanation for this distinction. Overseas recruiters are subject to more stringent requirement
because of the special risks to which our workers abroad are subjected by their foreign employers, against
whom there is usually no direct or effective recourse. The overseas recruiter is solidarily liable with a foreign
employer. The bonds and the escrow money are intended to insure more care on the part of the local agent in
its choice of the foreign principal to whom our overseas workers are to be sent.
It is a principle of legal hermeneutics that in interpreting a statute (or a set of rules as in this case), care should
be taken that every part thereof be given effect, on the theory that it was enacted as an integrated measure
and not as a hodge-podge of conflicting provisions. Ut res magis valeat quam pereat. 2 Under the petitioner's
interpretation, the appeal bond required by Section 6 of the aforementioned POEA Rule should be disregarded
because of the earlier bonds and escrow money it has posted. The petitioner would in effect nullify Section 6
as a superfluity but we do not see any such redundancy; on the contrary, we find that Section 6 complements
Section 4 and Section 17. The rule is that a construction that would render a provision inoperative should be
avoided; instead, apparently inconsistent provisions should be reconciled whenever possible as parts of a
coordinated and harmonious whole.
Accordingly, we hold that in addition to the monetary obligations of the overseas recruiter prescribed in Section
4, Rule II, Book II of the POEA Rules and the escrow agreement under Section 17 of the same Rule, it is
necessary to post the appeal bond required under Section 6, Rule V, Book VII of the POEA Rules, as a
condition for perfecting an appeal from a decision of the POEA.
Every intendment of the law must be interpreted in favor of the working class, conformably to the mandate of
the Constitution. By sustaining rather than annulling the appeal bond as a further protection to the claimant
employee, this Court affirms once again its commitment to the interest of labor.
WHEREFORE, the petition is DISMISSED, with costs against the petitioner. It is so ordered.
Davide and Quiason, JJ., concur.
Bellosillo, J, is on leave.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 160952

August 20, 2004

MARCIAL GU-MIRO, petitioner,

vs.
ROLANDO C. ADORABLE and BERGESEN D.Y. MANILA, respondents.

DECISION

YNARES-SANTIAGO, J.:
Before us is a petition for review on certiorari of the decision of the Court of Appeals in CA-G.R. SP No. 66131
dated May 29, 2003,1 which modified the decision of the National Labor Relations Commission (NLRC) by
increasing the incentive bonus awarded to petitioner from US$594.56 to US$1189.12.

Petitioner Marcial Gu-Miro was formerly employed as a Radio Officer of respondent Bergesen D.Y. Philippines,
which acted for and in behalf of its principal Bergesen D.Y. ASA, on board its different vessels. A Certification
dated April 14, 1998 was issued by Bergesen D.Y. Philippines, Inc.'s President and General Manager Rolando
C. Adorable showing that petitioner served in the company on board its vessels starting 1988.2 The case before
us involves an employment contract signed by petitioner to commence service on board the M/V HEROS,
which stipulated a monthly salary of US$929.00 for a period of eight (8) months. It also provided for overtime
pay of US$495.00 per month and vacation leave with pay in the amount of US$201.00 per month equivalent to
six and a half days.3 The contract of employment was signed on March 18, 1996 and petitioner commenced
work on April 15, 1996.
Record shows that respondent company traditionally gives an incentive bonus termed as Re-employment
Bonus to employees who decide to rejoin the company after the expiration of their employment contracts. After
the expiration of petitioner's contract in December 1996, the same was renewed by respondent company until
September 9, 1997, as stated in the Certification issued by Bergesen D.Y. Philippines, Inc. In September 1997,
petitioner's services were terminated due to the installation of labor saving devices which made his services
redundant. Upon his forced separation from the company, petitioner requested that he be given the incentive
bonus plus the additional allowances he was entitled to. Respondent company, however, refused to accede to
his request.
Thus, in June 1999 petitioner filed a complaint with the NLRC, Regional Arbitration Branch of Cebu, for
payment of the incentive bonus from April 15, 1996 to September 15, 1997, 10% of the basic wage, unclaimed
payment for incentive bonus from September 1993 to June 1994, non-remittance of provident fund from July
1992 to June 1994, moral and exemplary damages as well as attorney's fees. On December 29, 1999, the
complaint was provisionally dismissed by the NLRC due to the failure of petitioner to file the required position
paper. Petitioner re-filed the complaint on March 2, 2000 accordingly.
In a Decision dated June 6, 2000, the Labor Arbiter dismissed the case for lack of merit,4 based on the
following findings:
x x x. "Incentive bonus" or reemployment bonus are benefits not found in the POEA approved
contract. These are benefits which are specifically granted pursuant to an internal memorandum
entitled "Employment Conditions for Filipino Seafarers serving on board vessels of Bergesen
D.Y. ASA". As stated in the said internal memorandum, entitlement to the benefits therein (is)
not automatic but (is) subject to some conditions. As clearly stated in the said memorandum, the
reemployment bonus is an "incentive bonus system for reemployment upon signing for a
subsequent period." x x x. In order that a seafarer, like the complainant, be entitled to
reemployment/incentive bonus, he must satisfy all of the following requirements, to wit:
1) He must be employed in a vessel under a principal who is a member of the
reemployment bonus scheme;
2) He must have been an officer of the principal member's vessel subject to the
additional conditions stated in page 2 of the aforementioned internal memorandum; and
3) After serving in a principal-member's vessel, he must be reemployed in another or the
same principal-member's vessel.
To avail of the benefits under this scheme, seafarers like the complainant has to prove that he
met all the foregoing conditions. It is, thus, his burden to prove that he is entitled to the said
benefit. Complainant, however, miserably failed to adduce evidence that he met all the
foregoing conditions for entitlement to the benefit. He relied on his unsubstantiated allegation
that a certain Captain D. Ramirez received an incentive bonus even if he did not sign up with
the Company. x x x.
xxx

xxx

xxx

For obvious reasons, complainant's claims for moral and exemplary damages as well as
attorney's fees are denied. x x x.5
Petitioner appealed to the NLRC, which set aside the Labor Arbiter's decision and ordered respondents to pay
petitioner the amount of US$594.56 in a Decision dated March 5, 2001. The pertinent portion of the NLRC's
decision states:
The Contract of Employment entered into between the complainant and the respondents
specifically set a term of eight (8) months which was supposed to be from April 15, 1996 up to
December 14, 1996. The complainant's length of service from December 15, 1996 to
September 9, 1997, or a period of nine (9) months, more or less, was an extended term of

employment. A closer look at the facts shows that the extended term was even longer than the
original term of the contract.
xxx

xxx

xxx

[W]e construe that the extended term of the contract of employment from December 15, 1996
up to September 9, 1997 was considered as re-employment of the complainant. And when there
was re-employment, it is presumed that all the conditions set forth by the respondents in their
established company written policy entitled "Employment Conditions for Filipino Seafarers
Serving Onboard Vessels of Bergesen D.Y. ASA" are deemed complied with. The pertinent
portion of the said company policy states:
2. Re-employment bonus
The company has established an incentive bonus system for re-employment upon
signing for a subsequent period.
The conditions are as follows:
xxx

xxx

xxx

Radio Officers/Electricians Serving onboard bulk carriers- 8% of basic wage per month of
actual service.
To do otherwise, we would allow the respondent to circumvent its own established policy to
merely extending the original contract of employment.6
Petitioner and respondents filed separate Motions for Reconsideration which were both denied by the NLRC in
its Resolution dated April 24, 2001.
Not satisfied with the monetary award, petitioner filed a petition for review with the Court of Appeals claiming
that there was an error in computing the amount of the incentive bonus he is entitled to. Petitioner argued that
he should be considered as a regular employee of respondent company and thus, entitled to backwages or, at
the very least, separation pay.
The Court of Appeals, on May 29, 2003, rendered the assailed Decision where it ruled:
WHEREFORE, the petition is GRANTED. The assailed Decision dated March 5, 2001 is hereby
MODIFIED increasing the award of incentive bonus from US$594.56 to US$1189.12.
SO ORDERED.7
In arriving at its decision, the appellate court made the following findings:
It is uncontroverted that the company grants incentive bonus for re-employment upon signing for
a subsequent period. For radio officers onboard bulk carriers, it shall be 8% of the basic wage
per month of actual service. In this case, we find nothing in the record to show that the
classification of the vessel to which the petitioner was deployed is a Gas/LPG Tanker, which
would make him entitled to 10% instead of 8% of the basic wage as incentive bonus. Thus, the
public respondent correctly applied the rate of 8% of the basic wage per month of actual
service, the basic wage in this case being the amount stipulated in the contract of employment,
i.e., US$929.00, and does not include the stipulated rate for overtime pay.
The question now is the application of the provision of the memorandum with respect to the
length of actual service. Record shows that after the expiration of the original eight-month
employment contract on December 15, 1996, the petitioner was in fact re-employed when his
service was extended for another nine (9) months or up to September 1997. This
unquestionably entitled him to the incentive bonus for the 8-month period covered by the
contract and which was correctly awarded to him by the public respondent NLRC. However, as
to the succeeding period, although it was not covered by a written contract, it is unrebutted that
the petitioner was actually made to suffer work during that period. Hence, there was a monthly
re-employment of the petitioner for the succeeding 9 months. Conformably, since the incentive
bonus is given for re-employment upon signing for a subsequent period, for purposes of
computing the same, the petitioner is deemed to have been re-employed not only for the 8
months covered by the contract but also for the succeeding 8 months preceding the last month
when he was terminated. x x x.

xxx

xxx

xxx

As for the claim for backwages or separation pay, we note that these claims were neither raised
in the petitioner's position paper nor in the motion for reconsideration filed before the NLRC;
hence, they can no longer be raised for the first time in this petition. x x x.8
Hence, the instant petition for certiorari based on the following grounds:
I. THE HONORABLE COURT OF APPEALS ERRED WHEN IT PLACED THE BURDEN UPON
PETITIONER TO PROVE THAT M/V HEROS IS AN LPG/GAS TANKER.
II. CONSIDERING THAT PETITIONER HAD WORKED FOR BERGESEN D.Y. PHILIPPINES
FOR AND IN BEHALF OF ITS PRINCIPAL BERGESEN D.Y. ASA FOR TEN (10) LONG YEARS
ABOARD ITS DIFFERENT VESSELS, PETITIONER SHOULD HAVE BEEN CONSIDERED AS
A REGULAR EMPLOYEE BY THE COURT OF APPEALS.
III. THE HONORABLE COURT OF APPEALS LIKEWISE ERRED WHEN IT SAID IN ITS
DECISION THAT PETITIONER FAILED TO RAISE THE ISSUE OF BACKWAGES AND
SEPARATION PAY IN THE MOTION FOR RECONSIDERATION FILED WITH THE NLRC.9
In this petition, we are called upon to resolve two basic issues: The first concerns what percentage to use in
computing the incentive bonus which petitioner is entitled to. In the memorandum entitled Employment
Conditions for Filipino Seafarers Serving Onboard Vessels of Bergesen D.Y. ASA (Employment Conditions
Memorandum), Radio Officers are entitled to re-employment bonus equivalent to a certain percentage of their
basic wage per month of actual service. If the employee served onboard a bulk carrier, he is entitled to 8% of
his basic wage per month of actual service. Alternatively, if service was done onboard a gas carrier tanker, the
employee is entitled to 10% of his basic wage per month of actual service.
The NLRC and the Court of Appeals both agree that petitioner failed to adduce concrete proof to show that
M/V HEROS is a Gas/LPG Tanker and not a bulk carrier. Hence, the Court of Appeals upheld the use of 8% by
the NLRC as multiplier to compute the incentive bonus. Respondent company argues that petitioner failed to
allege the nature of M/V HEROS at the earliest opportunity, belatedly alleging this information in the Motion for
Reconsideration with the NLRC. Petitioner insists that M/V HEROS is a Gas/LPG Tanker which entitles him to
10% of his basic wage as incentive bonus; and that the Court of Appeals erred in ruling that it was petitioner's
burden to prove the classification of M/V HEROS.
We rule in petitioner's favor. The registration papers, which contain the vessel classification of M/V HEROS,
are the conclusive evidence that petitioner needs to prove his allegation. However, these are in the custody of
respondent company or its mother company, Bergesen D.Y. ASA. Interestingly, respondent company never
presented the registration papers in evidence.
We find that respondent company's failure to controvert the allegation, when it had the opportunity and
resources to do so, works in favor of petitioner. Time and again we have held that should doubts exist between
the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the
latter.10 Moreover, the law creates the presumption that evidence willfully suppressed would be adverse if
produced.11
Consequently, the amount of incentive bonus termed as re-employment bonus which petitioner is entitled to
should be computed as follows:
Salary per month = US$929.00
No. of months of actual service = 16 months
Rate = 10% of basic wage
US$929.00/month x 16 months x 10% = US$1,486.40
The second and third grounds raised in this petition are related, based on petitioner's allegation that he should
be considered a regular employee of respondent company, having been employed onboard the latter's different
vessels for the span of 10 years. Hence, petitioner claims that he is entitled to backwages or at the very least
separation pay, invoking our decision in Millares, et al. v. NLRC12 where it was held that the repeated re-hiring of
a Chief Engineer of a shipping company for 20 years is sufficient evidence of the necessity and indispensability
of the employee's service to the employer's business or trade. Hence, applying the express provision of Article
280 of the Labor Code,13 such an employee should be considered as a regular employee.

Petitioner's argument is not well-taken. The decision of Millares, et al. v. NLRC was reconsidered and set aside
in a Resolution14 where it was held:
[I]t is clear that seafarers are considered contractual employees. They can not be considered as
regular employees under Article 280 of Labor Code. Their employment is governed by the
contracts they sign every time they are rehired and their employment is terminated when the
contract expires. Their employment is contractually fixed for a certain period of time. They fall
under the exception of Article 280 whose employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of the
engagement of the employee or where the nature of the work or services to be performed is
seasonal in nature and employment is for the duration of the season.
xxx

xxx

xxx

Moreover, it is an accepted maritime industry practice that employment of seafarers (is) for a
fixed period only. Constrained by the nature of their employment which is quite peculiar and
unique in itself, it is for the mutual interest of both the seafarer and the employer why
employment status must be contractual only or for a certain period of time. Seafarers spend
most of their time at sea and understandably, they cannot stay for a long and an indefinite
period of time at sea. Limited access to shore society during the employment will have an
adverse impact on the seafarer. The national, cultural and lingual diversity among the crew
during the [Contract of Enlistment] is a reality that necessitates the limitation of its period. 15
Clearly, petitioner cannot be considered as a regular employee notwithstanding that the work he performs is
necessary and desirable in the business of respondent company. As expounded in the above-mentioned
Millares Resolution, an exception is made in the situation of seafarers. The exigencies of their work
necessitates that they be employed on a contractual basis.
Thus, even with the continued re-hiring by respondent company of petitioner to serve as Radio Officer onboard
Bergesen's different vessels, this should be interpreted not as a basis for regularization but rather a series of
contract renewals sanctioned under the doctrine set down by the second Millares case. If at all, petitioner was
preferred because of practical considerationsnamely, his experience and qualifications. However, this does
not alter the status of his employment from being contractual.
With respect to the claim for backwages and separation pay, it is now well-settled that the award of backwages
and separation pay in lieu of reinstatement are reliefs that are awarded to an employee who is unjustly
dismissed.16 In the instant case, petitioner was separated from his employment due to the termination of an
impliedly renewed contract with respondent company. Hence, there is no illegal or unjust dismissal.
WHEREFORE, premises considered, the petition is GRANTED IN PART. The Decision of the Court of Appeals
in CA-G.R. SP No. 66131 dated May 29, 2003 is MODIFIED in that the award of incentive bonus is increased
from US$1189.12 to US$1,486.40. Petitioner's claim that he be declared a regular employee and awarded
backwages and separation pay is DENIED for lack of merit.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Quisumbing, Carpio, and Azcuna, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 107761 December 27, 1994

ASSOCIATION OF MARINE OFFICERS AND SEAMEN OF REYES AND LIM CO. (MANAGERS FOR
CARGO MARINE CORP.), petitioner,
vs.
HON. BIENVENIDO E. LAGUESMA, REYES AND LIM CO. INC. (MANAGERS FOR CARGO MARINE
CORP.), respondent.
Ruscius G. Zaragoza for petitioner.
Jonathan M. Polines for private respondent.

ROMERO, J.:
The question before us in this petition for certiorari is whether or not the major patron, minor patron, chief mate
and chief engineer of a vessel are managerial employees.
Public respondent Undersecretary of Labor has ruled that they are, contrary to petitioner labor organization's
contention that they are rank and file employees who may form part of the union.

The facts antecedent to this petition are as follows:

The Association of Marine Officers and Seamen of Reyes and Lim Co., a legitimate labor organization, filed a
petition for certification election on March 11, 1992. On June 1, 1992 the Med-Arbiter issued an Order for the
conduct of a certification election in the bargaining unit covering the entire complement of four vessels.
He ruled that even as private respondent company alleges certain employees to be managerial, supervisory
and confidential employees (master, chief mate, second mate, third mate, radio officer, chief engineer and
second engineer), the records is bereft of any showing that the marine officers are performing managerial,
supervisory, and confidential functions. 1
The dispositive portion of the Med-Arbiter's Order reads:
WHEREFORE, on the foregoing consideration, let a certification election be conducted
among the regular marine officers and seamen of Reyes and Lim Co., Inc. (Managers
for Cargo Marine Corp.) within twenty (20) days from receipt hereof, subject to the usual
pre-election conference of the parties to thresh out the mechanics and other details of
the election. The payroll of the company three (3) months prior to the filing of the petition
shall be used as the basis in determining the list of eligible voters.
The choices are:
a) Association of Marine Officers and Seamen of Reyes and Lim Co., Inc. (Managers for
Cargo Marine Corp.); and
b) No Union.
SO ORDERED. 2
Private respondent Reyes and Lim Co. Inc. appealed this Order to the Secretary of Labor and Employment on
the issues of employees' status as well as the composition of the bargaining unit. In a resolution dated October
8, 1992, Undersecretary Bienvenido E. Laguesma modified the order and held that:
PREMISES CONSIDERED, the Resolution of the Med-Arbiter dated 01 June 1992 is
hereby modified so as to exclude Major Patron, Minor Patron, and Chief (Mate) and
Chief Marine Engineer from the bargaining unit.
SO RESOLVED. 3
Their motion for reconsideration having been denied for lack of merit on November 5, 1992, 4 petitioner comes
to us seeking to have the Resolution of public respondent set aside and to have us rule that the major patron,
minor patron, chief mate and chief engineer are not managerial employees but rank and file. As members of
the rank and file, these employees would be eligible to form part of the union and take part in the certification
election.
To buttress their position that the aforementioned employees are not managerial but rank and file employees,
petitioner advances the following arguments.
Firstly, it is petitioner's belief that aside from having the power to execute management policies and to hire and
fire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees, a managerial employee should
also have the power and prerogative to lay down management policies. Petitioner claims that the major patron,
minor patron, and chief mate and chief engineer do not have the power to lay down management policies
because they merely navigate the bay and rivers of Pasig and Bataan hauling liquefied petroleum (gasul).
Moreover, private respondent's operations department has "high-tech maritime gadgets and equipment" in
order to monitor and direct the operations of the boats while en route to its destination. 5
Secondly, petitioner asserts that the job descriptions submitted by private respondent Reyes and Lim Co., Inc. 6
and relied upon by public respondent Undersecretary of Labor do not apply to the situation of the
aforementioned employees. Furthermore, the job descriptions were not acknowledged and even outrightly
denied by the workers themselves. 7 The employees of Reyes and Lim Co., Inc. possess no seamen's book, for
they do not traverse the high seas but merely the bay and rivers from Pasig to Bataan. They therefore, are not
covered by the job descriptions applicable to Filipino seafarers, but are ordinary workers. 8
Finally, public respondent's determination of who are managerial employees constitutes a deprivation of the
worker's right to self-organization and free collective bargaining since such resolution is made during preelection conference on "inclusion-exclusion" proceedings. 9

Petitioner's arguments fail to persuade.

The only question for resolution is whether or not the major patron, minor patron, chief mate and chief engineer
of the vessels, M/T Banak, M/T Butane, M/T Biya, and M/T Alkane are managerial employees, and as such,
not qualified, therefore, to join a union.
Public respondent opined in the following manner:
An evaluation of the afore-mentioned job descriptions submitted by respondent-appellant
vis-a-vis Article 212 (m) of the Labor Code, as amended, showed that the following are
managerial positions, namely: Major Patron, Minor Patron, Chief Mate and Chief Marine
Engineer. This must be so, because among the Major Patron's duties and functions are
to take complete charge and command of the ship and to perform the duties and
responsibilities of a ship captain; a Minor Patron commands a vessel, plying within limits
of inland waterways, ports and estuaries, while a Chief Mate acts as the executive officer
next in command to the captain on board a ship; and a Chief Marine Engineer plans,
coordinates the engine-room department including supervision of subordinates. In the
performance of said functions, it is clear that they are vested with powers or prerogatives
to lay down and execute management policies. 10
While petitioners assail public respondent for the use of the "Job Descriptions of Main Category of Particular
Ranks and Ratings of Filipino Seafarers" submitted by private respondent, they offer no other superior proof by
way of reliability and substance.
Such an attack on these job descriptions cannot be considered adequate. Apart from general claims made in a
joint affidavit executed by 18 employees, including the masters, chief mates and chief engineers of three
vessels, 11 there appears no other proof on record of the functions they actually perform on board the vessels
and of the functions performed by other marine officers of the same position.
To buttress their position, private respondents assert that these "Job Descriptions" have been adopted as
reference by the POEA and considered as matters of public knowledge in consonance with the provisions of
the Code of Commerce, Philippine Merchant Marine Rules and Regulations and customary maritime practice
with respect to the inherent and customary duties of captains, chief mates, and chief marine engineers on
board the vessels. 12 This declaration remaining unrebutted, we are led to the conclusion that the job
descriptions submitted constitute industry practice, at the very least.
More importantly, the credence accorded by public respondent to these job descriptions is worthy of due
respect. The factual findings of quasi-judicial agencies, such as the Department of Labor and Employment
which are supported by substantial evidence, are binding on us and entitled to great respect considering their
expertise in their respective fields. 13
Petitioner's failure to overcome the submissions of private respondent as regards these descriptions and to
rebut the same leaves us no alternative but to accept public respondent's evaluation of facts.
Furthermore, petitioner's arguments that the employees who work on board the vessels are not seamen bound
by the job descriptions, is untenable. The fact that they transport liquefied petroleum gas (LPG) and the
vessels operate for only five hours are immaterial for these do not remove them from the coverage of maritime
law. While they haul LPG, they continue to do so on board a vessel which traverses waters. Neither the length
of operating time nor the area traveled would alter the fact that the vessels are used as means of
transportation by water and within the sphere of maritime law to which the job descriptions are applicable. The
workers on board are not, as petitioners would have us believe, in the category of gasoline delivery helpers or
ordinary employees. 14
We next consider the law concerning managerial employees.
The second paragraph of Article 82 referring to managerial employees in the Labor Code reads, thus:
. . . "managerial employees" refers to those whose primary duty consists of the
management of the establishment in which they are employed or of a department or
subdivision thereof, and to other officers or members of the managerial staff. . . .
Article 212 (m) of the Code further defines managerial employees as:
(m) "Managerial employee" is one who is vested with powers or prerogatives to lay down
and execute management policies and/or to
hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees. . . ..

The implementing rules and regulations of the Labor Code further provide a more detailed definition of
managerial employees. Rule I, Book III, Section 2 states:
Sec. 2. Exemption. The provisions of this Rule shall not apply to the following persons
if they qualify for exemption under the conditions set forth herein:
(a) . . . .
(b) Managerial employees, if they meet all of the following conditions, namely:
(1) Their primary duty consists of the management of the establishment in which they
are employed or of a department or subdivision thereof;
(2) They customarily and regularly direct the work of two or more employees therein;
(3) They have the authority to hire or fire other employees of lower rank; or their
suggestions and recommendations as to the hiring and firing and as to the promotion or
any other change of status of other employees are given particular weight.
(c) . . . .
It is very significant to note that we are not dealing here with employees of an ordinary business establishment.
The business of a marine or shipping corporation is, by its very nature, different from other corporate concerns.
Petitioner claims that the marine officers in question must possess the power to lay down and formulate
management policies aside from just executing such policies.
Public respondent committed no error in concluding that the positions of major patron, minor patron, chief
mate, and chief engineer are managerial because the job descriptions on record disclose that the major
patron's duties include taking complete charge and command of the ship and performing the responsibilities
and duties of a ship captain; the minor patron also commands the vessel, plying the limits of inland waterways,
ports and estuaries; the chief mate performs the functions of an executive officer next in command to the
captain; and the chief marine engineer takes over-all charge of the operation of the ship's mechanical and
electrical equipment. Public respondent's assessment of these managerial functions of the subject officers has
adequate basis and should not be disturbed.
The functions which these officers discharge pertain to the navigation of the vessel. Even if there are advanced
communications equipment on board, the importance of the position of the officers in assessing risks and
evaluating the vessel's situation remains indisputable. The exercise of discretion and judgment in directing a
ship's course is as much managerial in nature as decisions arrived at in the confines of the more conventional
board room or executive office.
We find that there has been no grave abuse of discretion on the part of the respondent Undersecretary of
Labor when it ruled that the major patron, minor patron, chief mate and chief engineer are managerial
employees who are not allowed under Article 245 of the Labor Code to join, assist or form any labor
organization.
With regard to the next issue, petitioners content that the determination of whether or not said employees are
managerial should be done during the
pre-election conference on "inclusion-exclusion proceeding," and not during the processing of their petition for
certification election. We find this issue not a proper one for consideration since it is raised in this petition for
the first time. The well-settled principle that issues not raised in the court a quo cannot be raised for the first
time on appeal for being offensive to basic rules of fair play, justice, and due process applies even in labor
cases. 15
IN VIEW WHEREOF, the instant petition is DISMISSED. The challenged resolution of the Undersecretary of
Labor is AFFIRMED.
SO ORDERED.
Bidin, Melo and Vitug, JJ., concur.
Feliciano, J., is on leave.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 112574 October 8, 1998

MERCIDAR FISHING CORPORATION represented by its President DOMINGO B. NAVAL, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and FERMIN AGAO, JR., respondents.

MENDOZA, J.:
This is a petition for certiorari to set aside the decision, dated August 30, 1993, of the National Labor Relations
Commission dismissing the appeal of petitioner Mercidar Fishing Corporation from the decision of the Labor
Arbiter in NLRC NCR Case No. 09-05084-90, as well as the resolution dated October 25, 1993, of the NLRC
denying reconsideration.
This case originated from a complaint filed on September 20, 1990 by private respondent Fermin Agao, Jr.
against petitioner for illegal dismissal, violation of P.D. No. 851, and non-payment of five days service incentive
leave for 1990. Private respondent had been employed as a "bodegero" or ship's quartermaster on February
12, 1988. He complained that he had been constructively dismissed by petitioner when the latter refused him
assignments aboard its boats after he had reported to work on May 28, 1990. 1
Private respondent alleged that he had been sick and thus allowed to go on leave without pay for one month
from April 28, 1990 but that when he reported to work at the end of such period with a health clearance, he was

told to come back another time as he could not be reinstated immediately. Thereafter, petitioner refused to give
him work. For this reason, private respondent asked for a certificate of employment from petitioner on
September 6, 1990. However, when he came back for the certificate on September 10, petitioner refused to
issue the certificate unless he submitted his resignation. Since private respondent refused to submit such letter
unless he was given separation pay, petitioner prevented him from entering the premises. 2
Petitioner, on the other hand, alleged that it was private respondent who actually abandoned his work. It
claimed that the latter failed to report for work after his leave had expired and was, in fact, absent without leave
for three months until August 28, 1998. Petitioner further claims that, nonetheless, it assigned private
respondent to another vessel, but the latter was left behind on September 1, 1990. Thereafter, private
respondent asked for a certificate of employment on September 6 on the pretext that he was applying to
another fishing company. On September 10, 1990, he refused to get the certificate and resign unless he was
given separation pay. 3
On February 18, 1992, Labor Arbiter Arthur L. Amansec rendered a decision disposing of the case as follows:
ACCORDINGLY, respondents are ordered to reinstate complainant with backwages, pay
him his 13th month pay and incentive leave pay for 1990.
All other claims are dismissed.
SO ORDERED.
Petitioner appealed to the NLRC which, on August 30, 1993, dismissed the appeal for lack of merit. The NLRC
dismissed petitioner's claim that it cannot be held liable for service incentive leave pay by fishermen in its
employ as the latter supposedly are "field personnel" and thus not entitled to such pay under the Labor Code. 4
The NLRC likewise denied petitioner's motion for reconsideration of its decision in its order dated October 25,
1993.
Hence, this petition. Petitioner contends:
I
THE RESPONDENT COMMISSION PALPABLY ERRED IN RULING AND SUSTAINING
THE VIEW THAT FISHING CREW MEMBERS. LIKE FERMIN AGAO, JR., CANNOT BE
CLASSIFIED AS FIELD PERSONNEL UNDER ARTICLE 82 OF THE LABOR CODE.
II
THE RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION WHEN IT UPHELD THE FINDINGS OF
THE LABOR ARBITER THAT HEREIN PETITIONER HAD CONSTRUCTIVELY
DISMISSED FERMIN AGAO, JR., FROM EMPLOYMENT.
The petition has no merit.
Art. 82 of the Labor Code provides:
Art. 82. Coverage. The provisions of this Title [Working Conditions and Rest Periods]
shall apply to employees in all establishments and undertakings whether for profit or not,
but not to government employees, field personnel, members of the family of the
employer who are dependent on him for support, domestic helpers, persons in the
personal service of another, and workers who are paid by results as determined by the
Secretary of Labor in appropriate regulations.
xxx xxx xxx
"Field personnel" shall refer to non-agricultural employees who regularly perform their
duties away from the principal place of business or branch office of the employer and
whose actual hours of work in the field cannot be determined with reasonable certainty.
Petitioner argues essentially that since the work of private respondent is performed away from its principal
place of business, it has no way of verifying his actual hours of work on the vessel. It contends that private
respondent and other fishermen in its employ should be classified as "field personnel" who have no statutory
right to service incentive leave pay.

In the case of Union of Pilipro Employees (UFE) v. Vicar, 5 this Court explained the meaning of the phrase
"whose actual hours of work in the field cannot be determined with reasonable certainty" in Art. 82 of the Labor
Code, as follows:
Moreover, the requirement that "actual hours of work in the field cannot be determined
with reasonable certainty" must be read in conjunction with Rule IV, Book III of the
Implementing Rules which provides:
Rule IV Holidays with Pay
Sec. 1. Coverage This rule shall apply to all employees except:
xxx xxx xxx
(e) Field personnel and other employees whose time and performance is
unsupervised by the employer . . . (Emphasis supplied).
While contending that such rule added another element not found in the law (Rollo, p.
13), the petitioner nevertheless attempted to show that its affected members are not
covered by the abovementioned rule. The petitioner asserts that the company's sales
personnel are strictly supervised as shown by the SOD (Supervisor of the Day) schedule
and the company circular dated March 15, 1984 (Annexes 2 and 3, Rollo, pp. 53-55).
Contrary to the contention of the petitioner, the Court finds that the aforementioned rule
did not add another element to the Labor Code definition of field personnel. The clause
"whose time and performance is unsupervised by the employer" did not amplify but
merely interpreted and expounded the clause "whose actual hours of work in the field
cannot be determined with reasonable certainty." The former clause is still within the
scope and purview of Article 82 which defines field personnel. Hence, in deciding
whether or not an employee's actual working hours in the field can be determined with
reasonable certainty, query must be made as to whether or not such employee's time
and performance is constantly supervised by the employer. 6
Accordingly, it was held in the aforementioned case that salesmen of Nestle Philippines, Inc. were field
personnel:
It is undisputed that these sales personnel start their field work at 8:00 a.m. after having
reported to the office and come back to the office at 4:00 p.m. or 4:30 p.m. if they are
Makati-based.
The petitioner maintains that the period between 8:00 a.m. to 4:00 or 4:30 p.m.
comprises the sales personnel's working hours which can be determined with
reasonable certainty.
The Court does not agree. The law requires that the actual hours of work in the field be
reasonably ascertained. The company has no way of determining whether or not these
sales personnel, even if they report to the office before 8:00 a.m. prior to field work and
come back at 4:30 p.m., really spend the hours in between in actual field work. 7
In contrast, in the case at bar, during the entire course of their fishing voyage, fishermen employed by
petitioner have no choice but to remain on board its vessel. Although they perform non-agricultural work away
from petitioner's business offices, the fact remains that throughout the duration of their work they are under the
effective control and supervision of petitioner through the vessel's patron or master as the NLRC correctly held.
8

Neither did petitioner gravely abuse its discretion in ruling that private respondent had constructively been
dismissed by petitioner. Such factual finding of both the NLRC and the Labor Arbiter is based not only on the
pleadings of the parties but also on a medical certificate of fitness which, contrary to petitioner's claim private
respondent presented when he reported to work on May 28, 1990. 9 As the NLRC held:
Anent grounds (a) and (b) of the appeal, the respondent, in a nutshell, would like us to
believe that the Arbiter abused his discretion (or seriously erred in his findings of facts) in
giving credence to the factual version of the complainant. But it is settled that "(W)hen
confronted with conflicting versions of factual matters," the Labor Arbiter has the
"discretion to determine which party deserves credence on the basis of evidence
received." [Gelmart Industries (Phils.), Inc. vs. Leogardo, 155 SCRA 403, 309, L-70544,

November 5, 1987]. And besides, it is settled in this jurisdiction that "to constitute
abandonment of position, there must be concurrence of the intention to abandon and
some overt acts from which it may be inferred that the employee concerned has no more
interest in working" (Dagupan Bus Co., Inc. vs. NLRC, 191 SCRA 328), and that the
filing of the complaint which asked for reinstatement plus backwages (Record, p. 20) is
inconsistent with respondents' defense of abandonment (Hua Bee Shirt Factory vs.
NLRC, 188 SCRA 586). 10
It is trite to say that the factual findings of quasi-judicial bodies are generally binding as long as they are
supported substantially by evidence in the record of the case. 11 This is especially so where, as here, the
agency and its subordinate who heard the case in the first instance are in full agreement as to the facts. 12
As regards the labor arbiter's award which was affirmed by respondent NLRC, there is no reason to apply the
rule that reinstatement may not be ordered if, as a result of the case between the parties, their relation is
strained. 13 Even at this late stage of this dispute, petitioner continues to reiterate its offer to reinstate private
respondent. 14
WHEREFORE, the petition is DISMISSED.
SO ORDERED.
Regalado, Melo, Puno and Martinez, JJ., concur.

SECOND DIVISION
[G.R. No. 131656. October 12, 1998]
ASIAN

CENTER FOR CAREER AND

(ACCESS), petitioner, vs.NATIONAL
MEDIALES, respondents.

EMPLOYMENT SYSTEM AND SERVICES, INC.

LABOR
RELATIONS
COMMISSION
and
IBNO

DECISION
PUNO, J.:
In this petition for certiorari, petitioner ASIAN CENTER FOR CAREER & EMPLOYMENT SYSTEM &
SERVICES, INC. (ACCESS) seeks to modify the monetary awards against it in the Decision of respondent
National Labor Relations Commission (NLRC), dated October 14, 1997, a case for illegal dismissal.
The records disclose that petitioner hired respondent IBNO MEDIALES to work as a mason in Jeddah,
Saudi Arabia, with a monthly salary of 1,200 Saudi Riyals (SR). The term of his contract was two (2)
years, from February 28, 1995 until February 28, 1997.
On May 26, 1996, respondent applied with petitioner for vacation leave with pay which he earned after
working for more then a year. His application for leave was granted. While en route to the Philippines, his coworkers informed him that he has been dismissed from service. The information turned out to be true.
On June 17, 1996, respondent filed a complaint with the labor arbiter for illegal dismissal, non-payment of
overtime pay, refund of transportation fare, illegal deductions, non-payment of 13 th month pay and salary for
the unexpired portion of his employment contract.
On March 17, 1997, the labor arbiter found petitioner guilty of illegal dismissal.[1] The dispositive
portion reads:

IN VIEW OF THE FOREGOING, judgment is hereby rendered declaring the illegality of

complainants dismissal and ordering the respondent ACCESS and/or ABDULLAH LELINA to pay the
complainant the amount of SR 13,200 representing complainants payment for the unexpired
portion of his contract and refund of the illegality deducted amount less P5,000.00, the legally
allowed placement fee.
Respondent are further ordered to pay attorneys fees equivalent to ten percent (10%) of the
judgment award or the amount of SR 1,320, within ten (10) days from receipt hereof.
All other issues are dismissed for lack of merit.
SO ORDERD. (emphasis supplied)
It is noteworthy, however, that in the body of his decision, the labor arbiter applied Section 10 R.A. 8042,
the law relative to the protection of Filipino overseas-workers, and computed private respondents salary for
the unexpired portion of his contract as follows: SR1,200 x 3 months = SR3,600.
[2]

On appeal by petitioner, the NLRC affirmed the factual findings of the labor arbiter but modified the
appealed decision by deleting the order of refund of excessive placement fee for lack of jurisdiction.[3]
Petitioner moved for reconsideration with respect to the labor arbiters award of SR13,200 in the
dispositive portion of the decision, representing respondents salary for the unexpired portion of his
contract. invoking Section 10 R.A. 8042. Petitioner urged that its liability for respondents salary is for only
three (3) months. Petitioner claimed that it should pay only SR 3.600 (SR 1,200 x 3 months) for the unexpired
portion of respondents employment and SR360 (10% of SR3,600) for attorneys fees.[4]
The NLRC denied petitioners motion. It ruled that R.A. 8042 does not apply as respondents
employment which started in February 1995 occurred prior to its effectivity on July 15, 1995.[5]
Hence, this petition for certiorari.
In the case at bar, petitioners illegal dismissal from service is no longer disputed. Petitioner merely
impugns the monetary awards granted by the NLRC to private respondent. It submits that although the
unexpired portion of private respondents employment contract is eight (8) months, [6] it is liable to pay
respondent only three (3) months of his basic salary, pursuant to Section 10 of R.A. 8042, or SR1,200 (monthly
salary) multiplied by 3 months, for a total of SR3,600. Petitioner claims that the NLRC erred in ruling that as
private respondents employment started only on February 28, 1995, R.A. 8042, which took effect on July 15,
1995, would not apply to his case. Petitioner argues that it is not the date of employment but the date of
dismissal which should be considered in determining the applicability of R.A. 8042. Petitioner prays that the
award in the NLRC Decision dated October 14, 1997, be changed to SR3,600 instead of 13,200 and that
the award of attorneys fees be deleted.
We affirm with modifications.
As a rule, jurisdiction is determined by the law at the time of the commencement of the action. [7] In the
case at bar, private respondents cause of action did not accrue on the date of his date of his employment or
on February 28, 1995. His cause of action arose only from the-time he was illegally dismissed by petitioner
from service in June 1996, after his vacation leave expired. It is thus clear that R.A. 8042 which took effect
a year earlier in July 1995 applies to the case at bar.
Under Section 10 of R.A. 8042, a worker dismissed from overseas employment without just, valid or
authorized cause is entitled to his salary for the unexpired portion of his employment contract or for three (3)
months for every year of the unexpired term, whichever is less.
In the case at bar, the unexpired portion of private respondents employment contract is eight (8)
months. Private respondent should therefore be paid his basic salary corresponding to three (3)
months or a total of SR3,600.[8]

We note that this same computation was made by the labor arbiter in the body of his decision.[9] Despite
said computation in the body of the decision, however, the labor arbiter awarded higher sum (SR13,200) in
the dispositive portion.
The general rule is that where there is a conflict between the dispositive portion or the fallo and the body
of the decision, the fallo controls. This rule rests on the theory that the fallo is the final order while the opinion
in the body is merely a statement ordering nothing. However, where the inevitable conclusion from the
body of the decision is so clear as to show that there was a mistake in the dispositive portion, the body
of the decision will prevail.[10]
We find that the labor arbiters award of a higher amount in the dispositive portion was clearly an error for
there is nothing in the text of the decision which support the award of said higher amount. We reiterate that the
correct award to private respondent for the unexpired portion of his employment contract is SR3,600.
We come now to the award of attorneys fees in favor of private respondent. Article 2208 of the Civil Code
allows attorneys fees to be awarded when its claimant is compelled to litigate with third persons or to
incur expenses to protect his interest by reason of an unjustified act or omission of the party for whom it is
sought. Moreover, attorneys fees are recoverable when there is sufficient showing of bad faith.[11] The Labor
Code,[12] on the other hand, fixes the attorneys fees that may be recovered in an amount which should not
exceed 10% of the total amount of wages awarded.
In the case at bar, petitioners bad faith in dismissing private respondent is manifest. Respondent
was made to believe that he would be temporarily leaving Jeddah, Kingdom of Saudi Arabia, for a 30-day
vacation leave with pay. However, while on board the plane back to the Philippines, his co-employees told him
that he has been dismissed from his job as he was given only a one-way plane ticket by petitioner. True
enough, private respondent was not allowed to return to his jobsite in Jeddah after his vacation
leave. Thus, private respondent was compelled to file an action for illegal dismissal with the labor
arbiter and hence entitled to an award of attorneys fees.
IN VIEW OF THE FOREGOING, the decision of the public respondent National Labor Relations
Commission, dated October 14, 1997, is AFFIRMED with modifications: petitioner is ordered to pay private
respondent IBNO MEDIALES the peso equivalent of the amounts of SR3,600 for the unexpired portion of
his employment contract, and SR360 for attorneys fees. No costs.
SO ORDERED.
Regalado,(Chairman), Melo, Mendoza, and Martinez, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-12950

December 9, 1959

BENJAMIN CELESTIAL, ET AL., petitioners,

vs.
THE SOUTHERN MINDANAO EXPERIMENTAL STATION, ET AL., respondents.
S. Tomas de las Cruz for petitioners.
Assistant Solicitor General Jose P. Alejandro and Solicitor Dominador L. Quiroz for respondents.

MONTEMAYOR, J.:
This is a petition by Benjamin Celestial and 175 others for review of the decision of the Auditor General, dated September
9, 1957, denying their claim for differential pay under the Minimum Wage Law.
The record discloses that petitioner are employees and/or workers of the Southern Mindanao Experimental Station, later
referred to as Experimental Station, Bureau of Plant Industry in Davao City, and that since 1952 they had been paid each
a daily wage of P2.50; that some time in March 1957, petitioners filed with the Auditor General's Office their claims for
differential pay, alleging among other things that they were entitled to the minimum wage of P4.00 a day, instead of P2.50,
which was actually paid them by the Experimental Station; and that as already stated, on September 9, 1957, the Auditor

General rendered a decision, holding that petitioner were not entitled to the minimum daily wage of P4.00, but only to
P2.50.
The resolution of this case depends upon the interpretation and application of Section 3 (a), (b) and (c) of the Minimum
Wage Law, which we reproduce below for purposes of ready reference:
SEC. 3. Minimum wage. (a) Every employer shall pay to each of his employees who is employed by an
enterprise other than in agriculture wage at the rate of not less than
(1) . . . .
(2) Three pesos a day on the effective date of this Act and for one year after the effective date,
and thereafter P4.00 a day, for employees of establishment located outside of Manila or its
environs: . . . .
(b) Every employer who operates a farm enterprise comprising more than 12 hectares shall pay each of
his employees who is engaged in agriculture, wage at the rate of not less than
(1) . . .,
(2) . . .;
(3) One year thereafter, P2.50 a day and no allowance for board and lodging shall reduce this
wage below P2.25 in cash.1awphi1.net
(c) Effective on the first of July, nineteen hundred and fifty-two, the minimum wage rates for employees in
the Government service shall be those provided in subsection (a) and (b) of this section . . .
From the legal provisions above-reproduce, it will readily be seen that in order that an employee or laborer may be paid
the minimum wage of P2.50 a day, he must be employed by an enterprise (in this case, the Southern Mindanao
Experimental Station) engaged in agriculture; that said employer operates s farm comprising more than 12 hectares; and
that the employee or laborer is engaged in agriculture. The second condition is satisfied because the Experimental Station
is operating a farm comprising 960 hectares. The next question to be decided is whether or not said Experimental Station
is engaged in agriculture. To determine this, we have to go back to the function of the Bureau of Plant Industry (Section
1753, Revised Administrative Code) of which the Experimental Station is an agency or adjunction, said Experimental
Station being provided for in Section 1754 of the same Revised Administrative Code. Said two sections are reproduced
below for ready reference:
SEC. 1753. Function of Bureau of Plant Industry. It shall be the function of said Bureau to collect and
disseminate useful information pertaining to agriculture in the Philippines, to encourage the use of
improved agriculture methods; and, in general, to promote the development of the agriculture resources
of the Philippines, as follows:
(a) By the introduction of new domesticated animals, and the improvement of the breeds of
domesticated animal now found in the Philippines;
(b) By the control and eradication of diseases of live stock;
(c) By the investigation of soil and climate conditions, and the methods of producing and handling
agriculture products;
(d) By the introduction, production, and distribution of improved seeds and plants;
(e) By the control and eradication of diseases, insects, and other pests injurious to cultivated
plants;
(f) By the operation of a system of demonstration and agriculture extension work;
(g) By the collection of agricultural statistics; and
(h) By the publication and distribution of bulletins, circulars, and other printed matter.
SEC. 1754. Experiment station, farms, and stations for agricultural instruction. In such place in the
Philippines as may be considered suitable for the purpose, the Director of Plant Industry, with the
approval of the Head of the Department, shall be funds shall be available therefore, establish, equip,
maintain, and operate experiment stations, farms, stock farms, and station for practical agriculture
instruction.
(In the Bureau of Agriculture is also vested the supervision and control of American agriculture
colonies).lawphi1.net

On the basis of the legal provision above-reproduced, we are of the opinion that both the Bureau of Plant Industry and
Experimental Station, particularly the latter, are engaged in agriculture or are dedicated to agricultural functions, specially
when we take into consideration the definition of agriculture in Section 2 of the Minimum Wage Law itself, Republic Act
No. 602, which is as follow:
Agriculture includes faring in all its branches and among other things include the cultivation and things of
the soil, dairying, the production, cultivation, growing, and harvesting of any agricultural or horticular
commodities, the raising of livestock or poultry, and any practice performer by a farmer or on a farm as an
incident to or in conjunction with such farming operations, but does not include the manufacturing or
processing of sugar, coconut, abaca, tobacco, pineapples or other farm products.
And is a matter of public knowledge that experimental stations maintained by the Bureau of Plant Industry, specially when
done on a big scale like the Southern Mindanao Experimental Station that operates a farm comprising 960 hectares,
though its employees and laborers, actually till the soil, introduce and plant seeds of the best crop varieties found by it
after study and experiment, raise said crops in the best approved methods of cultivation, including the spacing of each
plant or seedling and the amount of water needed though irrigation, weeding, et., and the proper harvesting of the crop,
including the timing and method, all for the instruction and benefit of Philippine farmers, and to foster agriculture in the
country. Included in this cultivation is the discovery of plant pests and their eradication by means of treatment with the
proper insecticides. Thereafter, from the harvest are extracted the seeds which are called certified seeds, for sale and
distribution to farmers. There can be no question that all these acts and function fall within the definition of agriculture
provided in the Minimum Wage Law, and, consequently, are agricultural as distinguished from no-agricultural functions. It
follows that the laborers and farm workers who actually carry out and perform these functions are also engaged in
agriculture. It is possible that not all the laborers and employees in the Experimental Station are actually engaged in
preparing the land for planting, such as plowing, tilling, and planting the seeds or seedlings, in weeding the farm, in
treating plant diseases and harvesting crops. some employees may be engaged in office work, such as, clerks,
supervisors, maintenance workers, etc. But inasmuch as they are all employed by the Experimental Station, which is a
farm enterprise, and their work is incidental to agriculture, they may also be considered as agricultural workers and
employees. Interpretative Bulletin No. 14, issued by the United States Wage Administration Service, implementing the
provisions of the Fair Labor Standards Act of the United States of 1938, from which our Minimum Wage Law was copied
(Morave: Minimum Wage Law, p. 279), under the title "Office Workers, Etc.," says:
Office Workers, Etc.
12. We have received inquiries concerning office help secretaries, clerks, bookkeepers, etc., night
watchmen, maintenance workers, engineers, etc., who are employed by a farmer or a farm in connection
with the activities described in the definition of "agriculture" contained in section 3 (f). In our opinion such
employees are exempt. (Teller" Labor Disputes and Collective Bargaining, Vol. II, p. 1209)
The above-reproduced portion of the bulletin, applied in this jurisdiction, means that the employees mentioned therein are
not governed by our Minimum Wage Law, as regards the minimum wage of P4.00 a day for non-agricultural workers;
consequently, they may receive a only the minimum wage of P2.50 a day, prescribed for workers engaged in agriculture.
But petitioners contend that the Bureau of Plant Industry and Experimental Station could not be engaged in agriculture for
the reason that their farm enterprise is not for profit. In answer to this contention, it is enough to say that Minimum Wage
Law in defining agriculture, does not prescribe the condition that the person or entity is engaged in it for purposes of profit.
We can well imagine a person interested in research and scientific agriculture who proceeds to cultivate a little farm of,
say, one or two hectares, to put into practice the results of his research, introducing in the cultivation the most modern
methods, the most suitable fertilizers, etc., so that a hectare so cultivated can produce, say, from 250 to 300 cavans of
palay and incidentally to compete a prize or a medal offered by the Government or any of its agencies. The fact that he
does not cultivate the farm for purposes of profit, but rather in the interest of science and to prove his scientific and
agricultural theories, and incidentally enter the contest for a prize, does not make him less agriculturist and his activities
as agriculture.
Incidentally, it may be stated that the Secretary of Justice in an opinion rendered in connection with the different activities
of the Davao Regional Fiber Station, holds that the laborers and employees of said fiber experimental station are not
entitled to the minimum wage of P4.00.In view of the foregoing, the decision appealed from is hereby reversed affirmed.
No costs.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 122827 March 29, 1999

LIDUVINO M. MILLARES, J. CAPISTRANO CORDITA, SHIRLEY P. UY, DIONISIO J. REQUINA, GABRIEL A.
DEJERO, NELSON T. GOMONIT, IMELDA IMPEYNADO SULPICIO B. SUMILE, MA. CONSUELO AVIEL, SILVINO
S.GUEVARRA, FIDEL DUMANHOG, NELFA T.POLOTAN, LEMUEL C. RISMA, JUANITO M. GONZALES, ROGELIO B.
CABATUAN, EPIFANCIO E. GANANCIAL, DOMINADOR D. ATOK, CONRADO U. SERRANO, ISIDRO J. BARNAJA,
ROMEO VIRTUDAZO, AVELINO NABLE, EDGAR TAMPOS, ERNESTO ORIAS, DALMACIO LEGARAY, ROMEO R.
BULA ROBERTO G.GARCIA, RUDOLFO SUZON, JERRY S. DANO, AUGUST G. ESCUDERO, OSCAR B.
CATBAGAN, TEOFILO C. SISON, NARCISO BULASA, ALBERTO CORTEZ, LILIA C. CABRERA, NESTOR A.
ACASO, BIENVENIDO MOZO, ISIDORO A. ALMENDAREZ, VICENTE M. PILONGO, ROBERTO N. LUMPOT,
PATRICIO BANDOLA, MANUEL S. ESPINA, ISIDRO K. BALCITA, JR., EMMANUEL O. ABRAHAM, OLEGARIO A.
EPIS, NESTOR D. PEREGRINO, RAMON A.USANAGA, PRESTO BARTOLOME, BRADY EMPEYNADO, PORFERIO
N. CONDADO, AQUILLO V. CORDOVA, LEONARDO ESTOSI, PACIFICO B. DACORINA, PABLITO B. LLUBIT,
ANTONIO DOZA, LEONITO LABADIA, EDGARDO BELLIZA, FEDENCIO P. GEBERTAS, VIRGILIO D. GULBE,
MANUEL A. LERIO, JR., ROGELIO B. OCAMIA, RODOLFO A. CASTILLO, EDMUNDO L. PLAZA, ROBERTO D.
YAGONIA, JR., PETRONIO ESTELA, JR., CRISOLOGO A. LOGRONIO, ERNESTO T. MORIO, ROGELIO M. DAVID,

BENJAMIN U. ARLIGUE, APOLONIO MUNDO, JR., NENE M. ESPINOSA, NILO B. BALAORO, GERONIMO S.
CONVI, VICENTE R. TARAGOZA, YOLANDO A. SALAZAR, MANUEL A. NERI, ELIO C. TICAR, ROBERTO A.
MACALAM, MIGUEL MACARIOLA, WALTERIO DAPADAP, SILVERIO CUAMAG EUPARQUIO PLANOS, GILBERTO
M. MIRA, REYNALDO BACSARSA, DIOSDADO B. ABING, ARISTARCO V. SALON, TOMAS N. CATACTE, RODOLFO
MEMORIA, PAPENIANO CURIAS, JOSE S. CANDIA, DESIDERIO C. NAVARRO, EMMANUEL O. ABRAHAM,
JOSELITO D. ARLAN, FRANCISCO S. SANCHEZ, MANSUETO B. LINGGO, ISIDRO BARNAJA, ROMEO S.
CABRERA, LEODEGARIO CAINTIC, NESTOR G. BLANDO, FLORENCIO B. DELIZO, MILAN M. ETES, GONZALO C.
PADILLO, LEONARDO CAGAKIT, JOSEFINO E. DULGUIME, PEPITO G. ARREZA, AMADOR G. CAGALAWAN,
GAUDENCIO C. SARMIENTO, FLORENTINO J. BRACAMONTE, DOMINADOR H. TY, LEOPOLDO T. SUPIL, JOSE A.
DOHINOG, ANIANO T. REYES, CARLITO G. UY, PLACIDO D. PADILLO, TERESITA C. ADRIANO, CANDIDO S.
ADRIANO, and AVELINO G. VENERACION, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, (FIFTH DIVISION) and PAPER INDUSTRIES CORPORATION OF
THE PHILIPPINES (PICOP) respondents.

BELLOSILLO, J.:
Petitioners numbering one hundred sixteen (116) 1 occupied the position of Technical Staff, Unit Manager, Section
Manager, Department Manager, Division Manager and Vice President in the mill site of respondent Paper Industries
Corporation of the Philippines (PICOP) in Bislig, Surigao del Sur. In 1992 PICOP suffered a major financial setback
allegedly brought about by the joint impact of restrictive government regulations on logging and the economic crisis. To
avert further losses, it undertook a retrenchment program and terminated the services of petitioners. Accordingly,
petitioners received separation pay computed at the rate of one (1) month basic pay for every year of service. Believing
however that the allowances they allegedly regularly received on a monthly basis during their employment should have
been included in the computation thereof they lodged a complaint for separation pay differentials.
The allowances in question pertained to the following
1. Staff/Manager's Allowance
Respondent PICOP provides free housing facilities to supervisory and managerial
employees assigned in Bislig. The privilege includes free water and electric consumption.
Owing however to shortage of such facilities, it was constrained to grant Staff allowance
instead to those who live in rented houses outside but near the vicinity of the mill site. But
the allowance ceases whenever a vacancy occurs in the company's housing facilities.
The former grantee is then directed to fill the vacancy. For Unit, Section and Department
Managers, respondent PICOP gives an additional amount to meet the same kind of
expenses called Manager's allowance.
2. Transportation Allowance
To relieve respondent PICOP's motor pool in Bislig from a barrage of requests for
company vehicles and to stabilize company vehicle requirements it grants transportation
allowance to key officers and Managers assigned in the mill site who use their own
vehicles in the performance of their duties. It is a conditional grant such that when the
conditions no longer obtain, the privilege is discontinued. The recipients of this kind of
allowance are required to liquidate it by submitting a report with a detailed enumeration of
expenses incurred.
3. Bislig Allowance
The Bislig Allowance is given to Division Managers and corporate officers assigned in
Bislig on account of the hostile environment prevailing therein. But once the recipient is
transferred elsewhere outside Bislig, the allowance ceases.
Applying Art. 97, par. (f), of the Labor Code which defines "wage," the Executive Labor Arbiter opined that the subject
allowances, being customarily furnished by respondent PICOP and regularly received by petitioners, formed part of the
latter's wages. Resolving the controversy from another angle, on the strength of the ruling in Santos v. NLRC 2 and
Soriano v. NLRC 3 that in the computation of separation pay account should be taken not just of the basic salary but also
of the regular allowances that the employee had been receiving, he concluded that the allowances should be included in
petitioners' base pay. Thus respondent PICOP was ordered on 28 April 1994 to pay petitioners Four Million Four Hundred

Eighty-One Thousand Pesos P(4,481,000.00) representing separation pay differentials plus ten per cent (10%) thereof as
attorney's fees. 4
The National Labor Relations Commission (NLRC) did not the view of the Executive Labor Arbiter. On 7 October 1994 it
set aside the assailed decision by decreeing that the allowances did not form part of the salary base used in computing
separation pay. 5 Its ruling was based on the finding that the cases relied upon by the Executive Labor Arbiter were
inapplicable since they involved illegal dismissal where separation pay was granted in lieu of reinstatement which was no
longer feasible. Instead, what it considered in point was Estate of the late Eugene J. Kneebone v. NLRC 6 where the Court
held that representation and transportation allowances were deemed not part of salary and should therefore be excluded
in the computation of separation benefits. Relating the present case with Art. 97, par. (f), of the Labor Code, the NLRC
likewise found that petitioners' allowances were contingency-based and thus not included in their salaries. On 26
September 1995 reconsideration was denied. 7
In this petition for certiorari, petitioners submit that their allowances are included in the definition of "facilities" in Art. 97,
par. (f), of the Labor Code, being necessary and indispensable for their existence and subsistence. Furthermore they
claim that their availment of the monetary equivalent of those "facilities" on a monthly basis was characterized by
permanency, regularity and customariness. And to fortify their arguments they insist on the applicability of Santos, 8
Soriano, 9 The Insular Life Assurance Company, 10 Planters Products, Inc. 11 and Songco 12 which are all against the NLRC
holding that the salary base in computing separation pay includes not just the basic salary but also the regular
allowances.
There is no showing of grave abuse of discretion on the part of the NLRC. In case of retrenchment to prevent losses, Art.
283 of the Labor Code imposes on the employer an obligation to grant to the affected employees separation pay
equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. Since
the law speaks of "pay," the question arises, "What exactly does the term connote?" We correlate Art. 283 with Art. 97 of
the same Code on definition of terms. "Pay" is not defined therein but "wage." In Songco the Court explained that both
words (as well as salary) generally refer to one and the same meaning, i.e., a reward or recompense for services
performed. Specifically, "wage" is defined in letter (f) as the remuneration or earnings, however designated, capable of
being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other
method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of
employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable
value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer
to the employee.
We invite attention to the above-underlined clause. Stated differently, when an employer customarily furnishes his
employee board, lodging or other facilities, the fair and reasonable value thereof, as determined by the Secretary of Labor
and Employment, is included in "wage." In order to ascertain whether the subject allowances form part of petitioner's
"wages," we divide the discussion on the following "customarily furnished;" "board, lodging or other facilities;" and, "fair
reasonable value as determined by the Secretary of Labor."
"Customary" is founded on long-established and constant practice 13 connoting regularity. 14 The receipt of an allowance
on a monthly basis does not ipso facto characterize it as regular and forming part of salary 15 because the nature of the
grant is a factor worth considering. We agree with the observation of the Office of the Solicitor General that the subject
allowances were temporarily, not regularly, received by petitioners because
In the case of the housing allowance, once a vacancy occurs in the company-provided housing
accommodations, the employee concerned transfers to the company premises and his housing allowance
is discontinued . . . .
On the other hand, the transportation allowance is in the form of advances for actual transportation
expenses subject to liquidation . . . given only to employees who have personal cars.
The Bislig allowance is given to Division Managers and corporate officers assigned in Bislig, Surigao del
Norte. Once the officer is transferred outside Bislig, the allowance stops. 16
We add that in the availment of the transportation allowance, respondent PICOP set another requirement that the
personal cars be used by the employees in the performance of their duties. When the conditions for availment ceased to
exist, the allowance reached the cutoff point. The finding of the NLRC along the same line likewise merits concurrence,
i.e., petitioners' continuous enjoyment of the disputed allowances was based on contingencies the occurrence of which
wrote finis to such enjoyment.
Although it is quite easy to comprehend "board" and "lodging," it is not so with "facilities." Thus Sec. 5, Rule VII, Book III,
of the Rules Implementing the Labor Code gives meaning to the term as including articles or services for the benefit of the
employee or his family but excluding tools of the trade or articles or service primarily for the benefit of the employer or

necessary to the conduct of the employer's business. The Staff/Manager's allowance may fall under "lodging" but the
transportation and Bislig allowances are not embraced in "facilities" on the main consideration that they are granted as
well as the Staff/Manager's allowance for respondent PICOP's benefit and convenience, i.e., to insure that petitioners
render quality performance. In determining whether a privilege is a facility, the criterion is not so much its kind but its
purpose. 17 That the assailed allowances were for the benefit and convenience of respondent company was supported by
the circumstance that they were not subjected to withholding tax. Revenue Audit Memo Order No. 1-87 pertinently
provides
3.2. . . . transportation, representation or entertainment expenses shall not constitute taxable
compensation if:
(a) It is for necessary travelling and representation or entertainment expenses paid or incurred by the
employee in the pursuit of the trade or business of the employer, and
(b) The employee is required to, and does, make an accounting/liquidation for such expense in
accordance with the specific requirements of substantiation for such category or expense.
Board and lodging allowances furnished to an employee not in excess of the latter's needs and given free
of charge, constitute income to the latter except if such allowances or benefits are furnished to the
employee for the convenience of the employer and as necessary incident to proper performance of his
duties in which case such benefits or allowances do not constitute taxable income. 18
The Secretary of Labor and Employment under Sec. 6, Rule VII, Book III, of the Rules Implementing the Labor Code may
from time to time fix in appropriate issuances the "fair and reasonable value of board, lodging and other facilities
customarily furnished by an employer to his employees." Petitioners' allowances do not represent such fair and
reasonable value as determined by the proper authority simply because the Staff/Manager's allowance and transportation
allowance were amounts given by respondent company in lieu of actual provisions for housing and transportation needs
whereas the Bislig allowance was given in consideration of being assigned to the hostile environment then prevailing in
Bislig.
The inevitable conclusion is that, as reached by the NLRC, subject allowances did not form part of petitioners' wages.
In Santos 19 the Court decreed that in the computation of separation pay awarded in lieu of reinstatement, account must
be taken not only of the basic salary but also of transportation and emergency living allowances. Later, the Court in
Soriano, citing Santos, was general in its holding that the salary base properly used in computing separation pay where
reinstatement was no longer feasible should include not just the basic salary but also the regular allowances that the
employee had been receiving. Insular merely reiterated the aforementioned rulings. The rationale is not difficult to discern.
It is the obligation of the employer to pay an illegally dismissed employee the whole amount of his salaries plus all other
benefits, bonuses and general increases to which he would have been normally entitled had he not been dismissed and
had not stopped working. 20 The same holds true in case of retrenched employees. And thus we applied Insular and
Soriano in Planters in the computation of separation pay of retrenched employees. Songco likewise involved retrenchment
and was relied upon in Planters, Soriano and Santos in determining the proper amount of separation pay. As culled from
the foregoing jurisprudence, separation pay when awarded to an illegally dismissed employee in lieu of reinstatement or
to a retrenched employee should be computed based not only on the basic salary but also on the regular allowances that
the employee had been receiving. But in view of the previous discussion that the disputed allowances were not regularly
received by petitioners herein, there was no reason at all for petitioners to resort to the above cases.
Neither is Kneebone applicable, contrary to the finding of the NLRC, because of the difference in factual circumstances. In
Kneebone, the Court was tasked to resolve the issue whether there presentation and transportation allowances formed
part of salary as to be considered in the computation of retirement benefits. The ruling was in the negative on the main
ground that the retirement plan of the company expressly excluded such allowances from salary.
WHEREFORE, the petition is DISMISSED. The resolution of public respondent National Labor Relations Commission
dated 7 October 1994 holding that the Staff/Manager's, transportation and Bislig allowances did not form part of the salary
base used in computing the separation pay of petitioners, as well as its resolution dated 26 September 1995 denying
reconsideration, is AFFIRMED. No costs.
SO ORDERED.
Puno, Mendoza, Quisumbing and Buena, JJ., concur.