Table of Contents

12. JURISDICTION OF THE LABOR ARBITER.................................................................5

13. 2011 NLRC RULES OF PROCEDURE.......................................................................5
1) T/SGP Larkins vs. NLRC, G.R. No. 92432, February 23, 1995.........................5
2) UERM Memorial Medical Center vs. NLRC, G.R. No. 110419, March 3, 1997. .5
3) Phil Tranco Services vs. NLRC, G.R. No. 124100, April 1, 1998.......................7
4) St. Martin Funeral Homes vs. NLRC, G.R. No. 130866, September 16, 1998..9
5) Ludo & Luym Corp., vs. Saornido, G.R. No. 140960, January 20, 2003........10
6) Hansin Engineering & Construction vs. CA, G.R. No. 165910, April 10, 2006
11
7) Phil. Journalist Inc. vs. NLRC, G.R. No. 166421, Sept. 5, 2006......................12
8) Balagtas Multi-purpose Coop. Vs. CA, G.R. No. 159268, Oct. 27, 2006........14
9) St. Martin Funeral Homes vs. NLRC, G.R. No. 142351, Nov. 22, 2006..........16
10)

DOLE Phils. Vs. Esteva, G.R. No. 161115, Nov. 30, 2006..........................18

11) Intercontinental Broadcasting Corp., vs. Panganiban, G.R. No. 151407,

February 6, 2007................................................................................................ 19
12) Far East Agricutural Supply vs. Lebatigue, G.R. No. 162813, February 12,
2007 21
13) Letran Calamba Faculty & Employees Association vs. NLRC, G.R. No.
156225, January 29, 2008.................................................................................. 22
14) Metro Transit Organization vs. Piglas NFWU-KMU et al., G.R. No. 175460,
April 14, 2008..................................................................................................... 23
15) J.K. Mercado & Sons Agricultural Enterprises, Inc., vs Sto. Tomas, G.R.No.
158084, August 29, 2008................................................................................... 26
16) J. Phil. Marine Inc., vs. NLRC, G.R. No. 1753661, August 11, 2008; but see
Ilagan vs. Court of Appeals, G.R. No. 162089, July 9, 2008................................29
17)

Sy vs. ALC Industries, G.R. No. 168339, October 10, 2008.......................31

18)

PCI Travel Corp., vs. NLRC, G.R. No. 154379, October 31, 2008...............33

19)

Lopez vs. Q. C. Sports Club, G.R. No. 164032, January 19, 2009..............36

20)

Lockheed Detective & Watchman Agency, G.R. No. 185918, April 18, 2012
38

21)

Portillo vs. Rudolf Lietz, Inc. et al., G.R. No. 196539, October 10, 2012....41

22)

Building Care Corp. vs. Macaraeg, G.R. No. 198357, December 10, 2012 42

23) McBurnie vs. Ganzon, GR No. 178034/1718117, October 17, 2013,

En banc............................................................................................................. 43
24) Indophil Textile Mills Inc. vs. Engr. Adviento, GR No. 171212,
August 4, 2014................................................................................................ 45

25)

Manila Mining Corp., vs. Amor GR No. 182800, April 20, 2015.....48

14. OTHER IMPORTANT LABOR PROVISIONS.............................................................54

A.

CONTRACTING ARRANGEMENT.......................................................................54
1) PBCom vs. NLRC, 146 SCRA 347 [1986].......................................................54
2) Neri vs. NLRC, 224 SCRA 717 [1993]...........................................................54
3) Filipinas Synthetic Fiber Corp., vs. NLRC, 257 SCRA 336 [1996]..................55
4) Maraquinot vs. NLRC, 284 SCRA 539 [1998]................................................56
5) Urbanes Jr. vs. Sec. Of Labor, G.R. No. 122791, Feb. 19, 2003.....................58
6) San Miguel vs. Maerc Integrated Services, G.R. No. 144672, July 10, 2003. 61
7) Mariveles Shipyard vs. CA, G.R. No. 144134, Nov. 11, 2003........................64
8) New Golden City Builders vs. CA, G.R. No. 154715, Dec. 11, 2003..............65
9) National Food Authority vs. Maceda SecurIty Agency, G.R. No. 163448,
March 8, 2005.................................................................................................... 66
10)

Abella vs. PLDT, G.R. No. 159469, June 8, 2005........................................68

11)

San Miguel vs. Aballa, G.R. No. 149011, June 28, 2005............................69

12)

Manila Electric Co., vs. Benamira, G.R. No. 145271, July 14, 2005...........70

13) Granspan Development Corp., vs. Bernardo, G.R. No. 141464, Sept. 21,
2005 72
14)

Acevedo vs. Advanstar Co., G.R. No. 157656, Nov. 11, 2005....................77

15)

Big AA Manufacturer vs. Antonio, G.R. No. 1608504, March 3, 2006........78

16)

DOLE Phils. Vs. Esteva, G.R. No. 161115, Nov. 30, 2006..........................81

17) San Miguel Vs. NLRC, G.R. No. 147566, Dec. 6, 2006 citing Maerc
Integrated Services case.................................................................................... 83
18) Eparwa Security & Janitorial Services vs. Liceo De Cagayan Univ. G.R. No.
150402, Nov. 28, 2006, citing Eagle Security case............................................85
19)

Lapanday Agri Development Corp., vs. Court of Appeals, 324 SCRA 39...87

20)

Escario vs. NLRC, 333 SCRA 257 [2000]...................................................88

21)

Aboitiz Haulers vs. Dimapatoi, G.R. No. 148619, Sept. 19, 2006..............89

22) GSIS vs. NLRC, G.R. No. 157647, October 15, 2007, citing Rosewood
Processing vs. NLRC, 290 SCRA 408...................................................................91
23) Republic of the Phils/SSC/SSS vs. Asiapro Cooperative, G.R. No. 172101,
November 23, 2007........................................................................................... 93
24)

Almeda et al., vs. Asahi Glass, G.R. No. 177785, Sept 3, 2008.................96

25)

Sasan, Sr et al., vs. NLRC and EPCIB, G.R. No. 176240, October 17, 200899

26)

Purefoods Corp., vs. NLRC et al., G.R. No. 172241, November 20, 2008.102

27) Maranaw Hotels and Resort vs. Court of Appeals, et al., G.R. No. 149660,
Jan. 20, 2009.................................................................................................... 105
28)

CCBPI vs. Agito et al., G.R. No. 179546, Feb. 13, 2009...........................108

29) South Davao Development Company et al., vs. Gamo et al., GR No.
171814, May 8, 2009....................................................................................... 111
30) Traveno et al., vs. Bobongon Banana Growers Multi-purpose Cooperative
et al., GR No. 164205, Sept. 3, 2009................................................................114
31)

Locsin et al., vs. PLDT, GR No. 185251, Oct 2, 2009...............................116

32)

Aliviado et al vs. Procter & Gamble Phils GR No. 160506, March 9, 2010
119

33)

San Miguel Corp. vs. Semillano et al., GR No. 164257, July 5, 201.........121

34)

Manila Water Co. vs. Dalumpines, GR No. 175501, Oct. 4, 2010............123

35)

Teng vs. Pahagac, GR No. 169704, November 17, 2010.........................127

36)

GSIS vs. NLRC et al., GR No. 180045, Nov. 17, 2010...............................129

37) Sy et al., vs. Fairland Knitcraft Co Inc. G.R. No. 189658, December 12,
2011 132
38) Polyfoam-RGC International Corp., vs. Concepcion, G.R. No. 172349, June
13, 2012........................................................................................................... 134
39) Superior Packaging Corp., vs. Balagsay et al., G.R. No. 178909, October
10, 2012........................................................................................................... 139
40) Digital Telecommunications Phils Inc. vs. Digitel Employees Union et al.,
G.R. No. 184903-04, October 10, 2012............................................................140
41) Norkis Trading Corp., vs. Buenavista, et al., G.R. No. 182018, October 10,
2012 141
42) Goya Inc. vs. Goya Inc. Employees Union-FFW G.R. No. 170054, Jan. 21,
2013 144
43) Vigilla et al., vs. Phil. College of Criminology Inc., G.R. No. 200094, June
10, 2013........................................................................................................... 148
44) BPI Employees Union-Davao city-FUBU vs. Bank of the Phil Islands et al.,
G.R. No. 174912, July 24, 2013........................................................................150
45)

Alilin et al., vs. Petron Corp., GR No. 177592, June 9, 2014........153

46) Ampeleloquio vs. Jaka Distribution Inc., GR No. 196936, July 2,

2014 156
47) FVR Skills & Services Exponenets Inc. vs. Seva, et al., GR No.
200857, Oct. 22, 2014..................................................................................159
48) Fonterra Brand Phils vs. Largado et al., GR No. 205300, March 18,
2015 162
B.

WORKER'S PREFERENCE...............................................................................165
1) DBP vs. NLRC, 242 SCRA 59 [1995]...........................................................168

2) Batongbuhay Gold Mines vs. De la Serna, 312 SCRA 45............................168

3) Barayoga vs. Asset Privatization Trust, G.R. No. 160073, October 24, 2005
171
4) Phil. Airlines vs. Zamora, G.R. No. 166996, Feb. 6, 2007...........................175
5) Phil. Airlines vs. Phil. Airlines Employees Association, 525 SCRA 29 [2007],
citing Rubberworld vs. NLRC, 305 SCRA 721 [1999].........................................178
6) Rubberworld vs. NLRC, 305 SCRA 721 [1999]...................................180
7) Garcia vs. Phil Air Lines, G.R. No. 164856, January 20, 2009.....................183
C. ATTORNEY'S FEES & APPEARANCE OF LAWYERS...........................................188
1) Bank of the Philippines Island vs. NLRC, 171 SCRA 556.............................188
2) Traders Royal Bank Employees Union vs. NLRC, 269 SCRA 733 [1997].....188
3) Brahm Industries vs. NLRC, 280 SCRA 824 [1997].....................................190
4) Heirs of Aniban vs. NLRC, 282 SCRA 377 [1997]........................................194
5) Sapio vs. Undaloc Construction et al., G.R. No. 155034, May 22, 2008.....195
6) Atty. Ortiz vs. San Miguel Corp., G.R. No. 151983-84, July 31, 2008..........196
7) Masmud vs. NLRC et al., G.R. No. 183385, Feb. 13, 2009..........................198
8) Kaisahan at kapatiran ng mga Manggagawa at Kawani sa MWC-East Zone
Union vs. Manila Water Company, G.R. No. 174179, November 16, 2011........200
9) Malvar vs. Kraft Food Phils Inc. et al., G.R. No. 183952, Sept. 9, 2013.......202
10) T&H Shopfitters Corp., vs. T&H Shopfitters Corp Workers Union,
GR No. 191714, February 26, 2014............................................................204

12. JURISDICTION OF THE LABOR ARBITER

13. 2011 NLRC RULES OF PROCEDURE
1) T/SGP Larkins vs. NLRC, G.R. No. 92432, February 23, 1995
Facts:
Petitioner was a member of the United States Air Force (USAF) assigned to oversee
the dormitories of the Third Aircraft Generation Squadron (3 AGS) at Clark Air Base,
Pampanga.
On August 10, 1988, 3 AGS terminated the contract for the maintenance and
upkeep of the dormitories with the De Guzman Custodial Services. The employees
thereof, including private respondents, were allowed to continue working for 3 AGS.
It was left to the new contractor, the JAC Maintenance Services owned by Joselito
Cunanan, to decide whether it would retain their services.
Joselito Cunanan, however, chose to bring in his own workers. As a result, the
workers of the De Guzman Custodial Services were requested to surrender their
base passes to Lt. Col. Frankhauser or to petitioner.
On August 12, 1988, private respondents filed a complaint with the Regional
Arbitration Branch No. III of the NLRC, San Fernando, Pampanga, against petitioner,
Lt. Col. Frankhauser, and Cunanan for illegal dismissal and underpayment of wages.
On September 9, 1988, private respondents amended their complaint and added
therein claims for emergency cost of living allowance, thirteenth-month pay, service
incentive leave pay and holiday premiums.
Petitioner and Lt. Col. Frankhauser failed to answer the complaint and to appear at
the hearings. They, likewise, failed to submit their position paper, which the Labor
Arbiter deemed a waiver on their part to do so. The case was therefore submitted
for decision on the basis of private respondents' position paper and supporting
documents.
On November 21, 1988, the Labor Arbiter rendered a decision granting all the
claims of private respondents. He found both Lt. Col. Frankhauser and petitioner
"guilty of illegal dismissal" and ordered them to reinstate private respondents with
full back wages, or if that is no longer possible, to pay private respondents'
separation pay.
Petitioner appealed to the NLRC claiming that the Labor Arbiter never acquired
jurisdiction over her person because no summons or copies of the complaints, both
original and amended, were ever served on her.
Issue:
Whether or not Labor Arbiter acquired jurisdiction over petitioners person because
no summons or copies of the complaints, both original and amended, were ever
served.

Ruling:
Labor Arbiter acquired no jurisdiction over the case and the person of petitioner.
Firstly, the "Agreement Between the Republic of the Philippines and the United
States of America Concerning Military Bases," otherwise known as the R.P. U.S.
Military Bases Agreement, governed the rights, duties, authority, and the exercise
thereof by Philippine and American nationals inside the U.S. military bases in the
country.
Article XIV is the governing procedure for service of summons on persons inside U.S.
military bases.
Summonses and other processes issued by Philippine courts and administrative
agencies for United States Armed Forces personnel within any U.S. base in the
Philippines could be served therein only with the permission of the Base
Commander. If he withholds giving his permission, he should instead designate
another person to serve the process, and obtain the server's affidavit for filing with
the appropriate court.
Respondent Labor Arbiter did not follow said procedure. He instead, addressed the
summons to Lt. Col. Frankhauser and not the Base Commander.
Secondly, under Base Labor Agreement of May 27, 1968, any dispute or
disagreement between the United States Armed Forces and Filipino employees
should be settled under grievance or labor relations procedures established therein
(Art. II) or by the arbitration process provided in the Romualdez-Bosworth
Memorandum of Agreement dated September 5, 1985. If no agreement was
reached or if the grievance procedure failed, the dispute was appealable by either
party to a Joint Labor Committee established in Article III of the Base Labor
Agreement.
Therefore, no jurisdiction was ever acquired by the Labor Arbiter over the case and
the person of petitioner and the judgment rendered is null and void (Filmerco
Commercial Co. v. Intermediate Appellate Court,supra.; Sy v. Navarro, 81 SCRA 458
[1978]).
Lastly, notices of hearing are not summonses. It is basic that the Labor Arbiter
cannot acquire jurisdiction over the person without being served with summons. In
the absence of service of summons or a valid waiver thereof, the hearings and
judgment rendered by the Labor Arbiter are null and void (cf. Vda. de Macoy v.
Court of Appeals,supra.)
Petitioner, in the case at bench, appealed to the NLRC and participated in the oral
argument before the said body. This, however, does not constitute a waiver of the
lack of summons and a voluntary submission of her person to the jurisdiction of the
Labor Arbiter. If an appearance before the NLRC is precisely to question the
jurisdiction of the said agency over the person of the defendant, then this
appearance is not equivalent to service of summons (De los Santos v. Montera, 221
SCRA 15 [1993]).

The petition for certiorari is GRANTED.

2) UERM Memorial Medical Center vs. NLRC, G.R. No. 110419, March 3, 1997
FACTS:
On 14 December 1987 Republic Act No. 6640 took effect which
mandated a ten (P10.00) peso increase on the prevailing daily minimum wage of
P54.00. In applying said law, the petitioners granted salary increases to their
employees based on the following computation, to wit:
1. To members of the faculty who are non-union members, P304.17 per
month;
2. To rank-and-file employees (individual complainants who are union
members), P209.17 per month.
There was a difference of P95.00 in the salaries of the two classes of
employees. Private respondents who are rank and file employees demanded
payment of the difference. Before the parties could settle their dispute, Republic Act
No. 6727 took effect on 1 July 1989 which again increased the daily minimum wage
in the private sector (whether agricultural or non-agricultural) by P25.00. In
compliance, petitioners paid their employees using the following computation, to
wit:
1. To members of the faculty who are non-union members, P760.42 a month;
and
2. To rank-and-file employees (individual complainants who are union
members), P523.00 a month.
Again, there was a difference of P237.42 per month between the salaries of
union members and non-union members. In September 1987, petitioners increased
the hiring rate of the new employees to P188.00 per month. Private respondents
once more demanded from the petitioners payment of the salary differential
mandated by RA No. 6727 and correction of the wage distortion brought about by
the increase in the hiring rate of new employees.
On 12 April 1988, Policy Instruction No. 54 was issued by the then Secretary
of Labor Franklin Drilon, the pertinent provision of which reads:
. . . the personnel in subject hospitals and clinics are entitled to a full weekly
wage of seven days if they have completed the 40-hour/5-day workweek in
any given workweek.
All enforcement and adjudicatory agencies of this Department shall be guided
by this issuance in the disposition of cases involving the personnel of covered
hospitals and clinics.
Petitioners challenged the validity of said Policy Instruction and refused to
pay the salaries of the private respondents for Saturdays and Sundays.
Consequently, a complaint was filed by the private respondents, represented by the
Federation of Free Workers (FFW), claiming salary differentials under Republic Act
Nos. 6640 and 6727, correction of the wage distortion and the payment of salaries
for Saturdays and Sundays under Policy Instruction No. 54. Within the reglementary
period for appeal, the petitioners filed their Notice and Memorandum of Appeal with
a Real Estate Bond consisting of land and various improvements therein worth
P102,345,650. The private respondents moved to dismiss the appeal on the ground
that Article 223 of the Labor Code, as amended, requires the posting of a cash or
surety bond. The NLRC directed petitioners to post a cash or surety bond of
P17,082,448.56 with a warning that failure to do so would cause the dismissal of the
appeal. The petitioners filed a Motion for Reconsideration alleging it is not in a
viable financial condition to post a cash bond nor to pay the annual premium of

P700,000.00 for a surety bond. On 6 October 1992, the NLRC dismissed petitioners'
appeal.
The SC ruled a liberal interpretation to this provision. In YBL (Your Bus Line) v.
NLRC
. . . that while Article 223 of the Labor Code, as amended by Republic
Act No. 6715, requiring a cash or surety bond in the amount equivalent
to the monetary award in the judgment appealed from for the appeal
to be perfected, may be considered a jurisdictional requirement,
nevertheless, adhering to the principle that substantial justice is better
served by allowing the appeal on the merits threshed out by the NLRC,
the Court finds and so holds that the foregoing requirement of the law
should be given a liberal interpretation.
in Oriental Mindoro Electric Cooperative, Inc. v. National Labor Relations
Commission
The intention of the lawmakers to make the bond an
indispensable requisite for the perfection of an appeal by the employer
is underscored by the provision that an appeal by the employer may be
perfected "only upon the posting of a cash or surety bond." The word
"only" makes it perfectly clear, that the lawmakers intended the
posting of a cash or surety bond by the employer to be the exclusive
means by which an employer's appeal may be perfected. The
requirement is intended to discourage employers from using an appeal
to delay, or even evade, their obligation to satisfy their employees' just
and lawful claims.
Considering, however, that the current policy is not to strictly follow technical
rules but rather to take into account the spirit and intention of the Labor Code, it
would be prudent for us to look into the merits of the case, especially since
petitioner disputes the allegation that private respondent was illegally dismissed.
The SC reiterates the policy which stresses the importance of deciding cases
on the basis of their substantive merit and not on strict technical rules. In the case
at bar, the judgment involved is more than P17 million and its precipitate execution
can adversely affect the existence of petitioner medical center. Likewise, the issues
involved are not insignificant and they deserve a full discourse by our quasi-judicial
and judicial authorities. We are also confident that the real property bond posted by
the petitioners sufficiently protects the interests of private respondents should they
finally prevail. It is not disputed that the real property offered by petitioners is worth
P102,345,650. The judgment in favor of private respondent is only a little more than
P17 million.

3) Phil Tranco Services vs. NLRC, G.R. No. 124100, April 1, 1998
FACTS:
Nieva was employed as a driver by petitioner assigned to the Legaspi
City-Pasay City route.
Nieva sideswiped an owner-type jeep and a criminal
complaint was filed against him. Philtranco posted a bail bond for Nieva. After
having been suspended, he was told to wait until his case was settled. The case
was finally settled he was requested to file a new application as he was no longer
considered an employee of Philtranco, allegedly for being absent without leave from
October 19 to November 20, 1989.
Nieva filed a complaint for illegal dismissal and demanded for 13 th month pay
with the NLRCs National Capital Region Arbitration Branch in Manila. Philtranco
filed a motion to dismiss on the ground of improper venue, stating that the
complaint should have been lodged with the NLRCs Regional Arbitration Branch in
Legaspi City, not only because Nieva was a resident thereof, but also because the
latter was hired, assigned, and based in Legaspi City.
ISSUE:
Whether or not NLRCs NCR Arbitration Branch in Manila was a proper
venue for the filing of Nievas complaints for illegal dismissal
HELD:
The filing of the complaint with the National Capital Region Arbitration
Branch was proper, Manila being considered as part of Nievas workplace by reason
of his plying the Legaspi City-Pasay City route. In fact, Section 1(a), Rule IV of the
New Rules of Procedure of the NLRC is merely permissive. Provisions on venue are
intended to assure convenience for the employee and his witnesses and to promote
the ends of justice provided that it is not oppressive to the employer.

4) St. Martin Funeral Homes vs. NLRC, G.R. No. 130866, September 16, 1998

FACTS:
Private respondent alleges that he started working as Operations
Manager of petitioner St. Martin Funeral Home on February 6, 1995. Petitioner on
the other hand claims that private respondent was not its employee but only the
uncle of Amelita Malabed, the owner of petitioner St. Martin's Funeral Home. When
the mother of Amelita passed away, the latter then took over the management of
the business and made some changes in the business operation and private
respondent and his wife were no longer allowed to participate in the management
thereof. As a consequence, the latter filed a complaint charging that petitioner had
illegally terminated his employment.
The labor arbiter rendered a decision in favor of petitioner declaring that no
employer-employee relationship existed between the parties and, therefore, his
office had no jurisdiction over the case.
On June 13, 1997, the NLRC rendered a resolution setting aside the
questioned decision and remanding the case to the labor arbiter for immediate
appropriate proceedings. Petitioner then filed a motion for reconsideration which
was denied by the NLRC in its resolution dated August 18, 1997 for lack of merit

ISSUE:
NLRC.

Whether or not the Court has the power to review decisions of the

HELD:
When the issue was raised in an early case on the argument that this
Court has no jurisdiction to review the decisions of the NLRC, and formerly of the
Secretary of Labor, since there is no legal provision for appellate review thereof, the
Court nevertheless rejected that thesis. It held that there is an underlying power of
the courts to scrutinize the acts of such agencies on questions of law and
jurisdiction even though no right of review is given by statute; that the purpose of
judicial review is to keep the administrative agency within its jurisdiction and
protect the substantial rights of the parties; and that it is that part of the checks and
balances which restricts the separation of powers and forestalls arbitrary and unjust
adjudications.
Pursuant to such ruling, and as sanctioned by subsequent decisions of this
Court, the remedy of the aggrieved party is to timely file a motion for
reconsideration as a precondition for any further or subsequent remedy, and then
seasonably avail of the special civil action of certiorari under Rule 65, for which said
Rule has now fixed the reglementary period of sixty days from notice of the
decision. Curiously, although the 10-day period for finality of the decision of the
NLRC may already have lapsed as contemplated in Section 223 of the Labor Code, it

has been held that this Court may still take cognizance of the petition for certiorari
on jurisdictional and due process considerations if filed within the reglementary
period under Rule 65.
Sec. 9. Jurisdiction. The Court of Appeals shall exercise: (3) Exclusive
appellate jurisdiction over all final judgments, decisions, resolutions, orders or
awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards
or commissions, including the Securities and Exchange Commission, the Social
Security Commission, the Employees Compensation Commission and the Civil
Service Commission, except those falling within the appellate jurisdiction of the
Supreme Court in accordance with the Constitution, the Labor Code of the
Philippines under Presidential Decree No. 442, as amended, the provisions of this
Act, and of subparagraph (1) of the third paragraph and subparagraph (4) of the
fourth paragraph of Section 17 of the Judiciary Act of 1948.
Under the foregoing premises, the instant petition for certiorari is hereby
REMANDED, and all pertinent records thereof ordered to be FORWARDED, to the
Court of Appeals for appropriate action and disposition consistent with the views
and ruling herein set forth, without pronouncement as to costs.

5) Ludo & Luym Corp., vs. Saornido, G.R. No. 140960, January 20, 2003
FACTS:
LUDO engaged the arrastre services of Cresencio Lu Arrastre Services
(CLAS) for the loading and unloading of its finished products at the wharf.
Accordingly, several arrastre workers were deployed by CLAS to perform the
services needed by LUDO. These arrastre workers were subsequently hired, on
different dates, as regular rank-and-file employees of LUDO every time the latter
needed additional manpower services. Said employees thereafter joined respondent
union, the LUDO Employees Union (LEU), which acted as the exclusive bargaining
agent of the rank-and-file employees. Respondent union entered into a collective
bargaining agreement with LUDO which provides certain benefits to the employees,
the amount of which vary according to the length of service rendered by the
availing employee. Thereafter, the union requested LUDO to include in its members
period of service the time during which they rendered arrastre services to LUDO
through the CLAS so that they could get higher benefits. LUDO failed to act on the
request. Thus, the matter was submitted for voluntary arbitration. Voluntary
Arbitrator ruled that: (1) the respondent employees were engaged in activities
necessary and desirable to the business of petitioner, and (2) CLAS is a labor-only
contractor of petitioner. The Court of Appeals affirmed in toto the decision of the
Voluntary Arbitrator. Petitioner contends that the appellate court erred when it
upheld the award of benefits which were beyond the terms of submission
agreement and that the arbitrator must confine its adjudication to those issues
submitted by the parties for arbitration, which in this case is the sole issue of the
date of regularization of the workers. Hence, the award of benefits by the arbitrator
was done in excess of jurisdiction.
ISSUE:
Whether or not the appellate court gravely erred when it upheld the
award of benefits which were beyond the terms of submission agreement.
HELD:
Generally, the arbitrator is expected to decide only those questions
expressly delineated by the submission agreement. Nevertheless, the arbitrator can
assume that he has the necessary power to make a final settlement since
arbitration is the final resort for the adjudication of disputes. 13 The succinct
reasoning enunciated by the CA in support of its holding, that the Voluntary
Arbitrator in a labor controversy has jurisdiction to render the questioned arbitral
awards, deserves our concurrence, thus: In general, the arbitrator is expected to
decide those questions expressly stated and limited in the submission agreement.
However, since arbitration is the final resort for the adjudication of disputes, the
arbitrator can assume that he has the power to make a final settlement. Thus,
assuming that the submission empowers the arbitrator to decide whether an
employee was discharged for just cause, the arbitrator in this instance can
reasonable assume that his powers extended beyond giving a yes-or-no answer and
included the power to reinstate him with or without back pay.

6) Hansin Engineering & Construction vs. CA, G.R. No. 165910, April 10, 2006
Facts:
Hanjin is a construction company that had been contracted by the
Philippine Government for the construction of various foreign-financed projects.
Hanjin and the Philippine Government entered into contracts for the construction of
the Malinao Dam at Pilar, Bohol, with a projected completion period of 1,050
calendar days, including main canal and lateral projects for 750 days. From August
1995 to August 1996, Hanjin contracted the services of 712 carpenters, masons,
truck drivers, helpers, laborers, heavy equipment operators, leadmen, engineers,
steelmen, mechanics, electricians and others.
In April 1998, 712 employees filed complaints for illegal dismissal and for
payment of benefits against petitioners, before the NLRC. The complainants averred
that they were regular employees of Hanjin and that they were separated from
employment without any lawful or just cause. Only 521 of the complainants affixed
their signatures in the complaints.
Petitioners alleged that the complainants were mere project employees in its
Bohol Irrigation Project and that 2 of the worekers were charged with qualified theft
before the RTC. Some of the complainants had already migrated to USA or had died,
while 117 of them were still under the employ of Hanjin. Petitioner stated that some
of the complainants had voluntarily resigned; 14 were absent without prior
approved leave; 15 had signed a Motion to Withdraw from the complaint; and many
of the complainants were separated on account of the completion of the project.
However, petitioners failed to append any document to support their claim.
Labor Arbiter rendered judgment in favor of the 428 complainants, granting
separation pay and attorney's fees to each of them stating that the complainants
were regular employees of petitioner and their claims for underpayment, holiday
pay, premium pay for holiday and rest day, 13th month pay, and service incentive
leave would be computed after sufficient data were made available.
Petitioners appealed the decision to the NLRC, which affirmed with
modification the Labor Arbiter's ruling. Petitioners filed a Motion for the
Reconsideration of the decision (with a motion to conduct clarificatory hearings)
Petitioners appended to their motion machine copies of some of the
complainants' employment contracts, resignation letters of others who were given
monetary awards in the decision, and 11 folders consisting mostly of payrolls.
NLRC partially granted petitioners' motion. Unsatisfied, petitioners filed a
Petition for Certiorari under Rule 65 of the Revised Rules of Court in the CA. CA
dismissed the petition and affirmed the NLRC's ruling that the dismissed employees
were regular employees. The CA stressed that petitioners failed to refute the claim
of the respondents that they were regular employees. Petitioners moved to
reconsider the decision, which the CA denied.
ISSUE:

Whether or not respondents are project employees.

HELD:
While respondent alleged that "complainants all signed a contract of
employment at the time they were hired indicating therein the particular project
they will be working on, the period and other conditions provided in their contracts
which complainants fully knew and understood," nowhere in the records can the
said contracts be found. Moreover, let it be stressed that under DO No. 19, Series of
1993 on project employment, six (6) indicators are enumerated therein and one of

which is that:
"(T)he
termination
of
his
employment
in
the
particular
project/undertaking is reported to the Department of Labor and Employment
(DOLE) Regional Office having jurisdiction over the workplace within 30 days
following the date of his separation from work x x x."
In this particular case, the records do not show that a similar report was ever
made by respondent to the Department of Labor and Employment. Such failure of
respondent employer to report to the nearest employment office of the Department
of Labor, the termination of the workers it claimed as project employees at the time
it completed the project, is proof that complainants were not project employees.
The principal test for determining whether particular employees are properly
characterized as project employees is: whether or not the project employees were
assigned to carry out a specific project or undertaking, the duration of which were
specified at the time the employees were engaged for that project.
Predetermination of the duration or period of project employment is essential in
resolving whether one is a project employee or not. In the instant case, the
completion of the project for which the complainants were hired was not determined
at the start of their employment, there being no substantial proof thereof. The fact
that complainants had rendered more than one year of service at the time of their
dismissal and there being no substantial evidence to support that they were
engaged to work on a specific project or undertaking, overturns respondents
allegation that complainants were project employees hired for a specific fixed
project for a limited period of time.
Complainants herein were, therefore, non-project employees, but regular
employees. Admittedly, being a duly licensed contractor firm in the Philippines,
respondent is the awardee of several construction projects and in many occasions it
has been given the priority in the awarding of subsequent projects.
In the light of the above facts and circumstances, the respondent's main
defense that completion of the project worked on by the complainants constitutes a
valid cause of termination is unsustainable. To repeat, there is no substantial
evidence on record to sustain this contention. The mere allegation of the
respondents that under their employment contracts the complainants were made to
understand that they were project employees is definitely not persuasive or
unworthy of credence. The best evidence of which would have been the alleged
contracts.
These employees signed duly notarized waivers/quitclaims and who did not
recant later. In the absence of evidence showing the contrary, said quitclaims were
executed voluntarily and without any force or intimidation.
Petitioners submitted to the NLRC dubious machine copies of only some of
respondents? Contracts, including alleged employment termination reports
submitted to the DOLE. The NLRC found the contracts barren of probative weight
and utterly insufficient to buttress the contention of petitioners that respondents
were only project employees.
Contrary to the representation of respondent's counsel, the original copies of
the reports made to DOLE were never produced and submitted to this Commission.
Neither were they presented for comparison with the machine copies. These
machine copies were not also certified as true copies by the DOLE.
The actual continuous employment of complainants by respondent Hanjin
since 1991 until 1995 overcomes the piecemeal "appointments" covering for

periods of six (6) months or less. From these short term but repeated
"appointments," it is apparent that the periods have been imposed to preclude the
acquisition of tenurial security by the employee and which kind of employment
contracts should be disregarded for being contrary to public policy.
The appellate court, the NLRC and the Labor Arbiter are thus one in finding
that respondents were not project employees, and in sustaining respondents' claim
of illegal dismissal due to petitioners failure to adduce contrary evidence. Wellsettled is the rule that findings of fact of quasi-judicial agencies, like the NLRC, are
accorded not only respect but at times even finality if such findings are supported
by substantial evidence. Such findings of facts can only be set aside upon showing
of grave abuse of discretion, fraud or error of law, none of which have been shown
in this case.

7) Phil. Journalist Inc. vs. NLRC, G.R. No. 166421, Sept. 5, 2006
Facts: In NLRCs Resolution dated May 31, 2001, petitioner Philippine Journalists,
Inc. (PJI) was adjudged liable in the total amount of P6,447,008.57 for illegally
dismissing 31 complainants-employees and that there was no basis for the
implementation of petitioner's retrenchment program.
Thereafter, the parties executed a Compromise Agreement dated July 9, 2001,
where PJI undertook to reinstate the 31 complainant-employees effective July 1,
2001 without loss of seniority rights and benefits; 17 of them who were previously
retrenched were agreed to be given full and complete payment of their respective
monetary claims, while 14 others would be paid their monetary claims minus what
they received by way of separation pay.
The compromise agreement was submitted to the NLRC for approval. All the
employees mentioned in the agreement and in the NLRC Resolution affixed their
signatures thereon. They likewise signed the Joint Manifesto and Declaration of
Mutual Support and Cooperation which had also been submitted for the
consideration of the labor tribunal.
The NLRC forthwith issued another Resolution on July 25, 2002, which among others
declared that Thus, the compromise agreement was approved and NCMB-NCR-NS03-087-00 was deemed closed and terminated.
In the meantime, however, the Union filed another Notice of Strike on July 1, 2002.
In an Order dated September 16, 2002, the DOLE Secretary certified the case to the
Commission for compulsory arbitration. The case was docketed as NCMB-NCR- NS07-251-02.
In its Resolution dated July 31, 2003, the NLRC ruled that the complainants were not
illegally dismissed. The May 31, 2001 Resolution declaring the retrenchment
program illegal did not attain finality as "it had been academically mooted by the
compromise agreement entered into between both parties on July 9, 2001."
The Union assailed the ruling of the NLRC before the CA via petition for certiorari
under
Rule
65.
In its Decision dated August 17, 2004, the appellate court held that the NLRC
gravely abused its discretion in ruling for PJI. The compromise agreement referred
only to the award given by the NLRC to the complainants in the said case, that is,
the obligation of the employer to the complainants. The CA pointed out that the
NLRC Resolution nevertheless declared that respondent failed to prove the validity
of its retrenchment program, which according to it, stands even after the
compromise agreement was executed; it was the reason why the agreement was
reached in the first place.
Issues and Rulings:

I.

Whether or not the petitioners petition for certiorari under Rule 65 of

the Revised Rules of Civil Procedure is a proper remedy in this case.
At the outset, we note that this case was brought before us via petition for certiorari
under Rule 65 of the Revised Rules of Civil Procedure. The proper remedy, however,
was to file a petition under Rule 45. It must be stressed that certiorari under Rule 65
is "a remedy narrow in scope and inflexible in character. It is not a general utility
tool in the legal workshop." Moreover, the special civil action for certiorari will lie
only when a court has acted without or in excess of jurisdiction or with grave abuse
of discretion.
Be that as it may, a petition for certiorari may be treated as a petition for review
under Rule 45. Such move is in accordance with the liberal spirit pervading the
Rules of Court and in the interest of substantial justice. As the instant petition was
filed within the prescribed fifteen-day period, and in view of the substantial issues
raised, the Court resolves to give due course to the petition and treat the same as a
petition for review on certiorari.
II. Whether or not the the NLRC of the agreement forged between it and
the respondent Union did not render the NLRC resolution ineffectual,
nor rendered it "moot and academic.
Contrary to the allegation of petitioners, the execution and subsequent approval by
the NLRC of the agreement forged between it and the respondent Union did not
render the NLRC resolution ineffectual, nor rendered it "moot and academic." The
agreement becomes part of the judgment of the court or tribunal, and as a logical
consequence, there is an implicit waiver of the right to appeal.
In any event, the compromise agreement cannot bind a party who did not
voluntarily take part in the settlement itself and gave specific individual consent. It
must be remembered that a compromise agreement is also a contract; it requires
the consent of the parties, and it is only then that the agreement may be
considered as voluntarily entered into.
A careful perusal of the wordings of the compromise agreement will show that the
parties agreed that the only issue to be resolved was the question of the monetary
claim of several employees.
The agreement was later approved by the NLRC. The case was considered closed
and terminated and the Resolution dated May 31, 2001 fully implemented insofar as
the employees "mentioned in paragraphs 2c and 2d of the compromise agreement"
were concerned. Hence, the CA was correct in holding that the compromise
agreement pertained only to the "monetary obligation" of the employer to the
dismissed employees, and in no way affected the Resolution in NCMB-NCR-NS-03087-00 dated May 31, 2001 where the NLRC made the pronouncement that there
was no basis for the implementation of petitioners' retrenchment program.
To reiterate, the rule is that when judgment is rendered based on a compromise
agreement, the judgment becomes immediately executory, there being an implied

waiver of the parties' right to appeal from the decision. The judgment having
become final, the Court can no longer reverse, much less modify it.
III. Whether or not CA can review the factual findings or legal conclusions
of the labor tribunal.
Petitioners' argument that the CA is not a trier of facts is likewise erroneous. In the
exercise of its power to review decisions by the NLRC, the CA can review the factual
findings or legal conclusions of the labor tribunal. Thus, the CA is not proscribed
from "examining evidence anew to determine whether the factual findings of the
NLRC are supported by the evidence presented and the conclusions derived
therefrom accurately ascertained."

8) Balagtas Multi-purpose Coop. Vs. CA, G.R. No. 159268, Oct. 27, 2006
FACTS:
Balagtas Multi-Purpose Cooperative, Inc. is a duly organized and
existing cooperative under the laws of the Philippines. Sometime in April 1991,
Balagtas hired Josefina G. Hipolito-Herrero, as part time manager in its office.
Subsequently, Josefina made known of her intention to take a leave of absence. Her
proposal was immediately approved. However, after the lapse of her leave of
absence, Josefina did not report for work anymore. Later on, she filed her
resignation.
Consequently Josefina filed a complaint with the Provincial Office of the
Department of Labor in Malolos, Bulacan for illegal dismissal, and non-payment of
13th month pay or Christmas Bonus. She also prayed for reinstatement and paid
backwages as well as moral damages.
The Labor Arbiter rendered judgment in favor of complainant and against
respondents and ordered the latter to pay the former 13 th month pay, backwages
and separation pay.
Aggrieved, herein petitioners appealed the decision to NLRC but failed to post
either a cash or surety bond as required by Article 223 of the Labor Code. They filed
a manifestation and motion instead, stating, that under Republic Act No. 6938,
Article 62(7) of the Cooperative Code of the Philippines, petitioners are exempt from
putting up a bond in an appeal from the decision of the inferior court.
NLRC ordered respondents to post a cash or surety bond in the amount of
P218,000.00, within 10 inextendible days from receipt of the Order, failure of which
shall constitute a waiver and non-perfection of the appeal.
Balagtas appealed to CA, which dismissed the petition holding that the exemption
from putting up a bond by a cooperative applies to cases decided by inferior courts
only.
ISSUES:
1. Whether cooperatives are exempted from filing a cash or surety
bond required to perfect an employers appeal under Section 223 of Presidential
Decree No. 442 (the Labor Code); and,
2. Whether a certification issued by the Cooperative Development Authority
constitutes substantial compliance with the requirement for the posting of a bond.
HELD:
1. No. Petitioners argue that there are certain benefits and privileges
expressly granted to cooperative under the Cooperative Code. It invoked the
provision on Article 62 regarding the exemption from payment of an appeal bond, to
wit:
(7)All cooperatives shall be exempt from putting up a bond for bringing
an appeal against the decision of an inferior court or for seeking to set aside
any third party claim: Provided, That a certification of the Authority showing
that the net assets of the cooperative are in excess of the amount of the
bond required by the court in similar cases shall be accepted by the court as
a sufficient bond.
However, it is only one among a number of such privileges which appear
under the article entitled Tax and Other Exemptions of the code. The provision
cited by petitioners cannot be taken in isolation and must be interpreted in relation
to the Cooperative Code in its entirety. Exceptions are to be strictly but reasonably

construed; they extend only so far as their language warrants, and all doubts should
be resolved in favor of the general provision rather than the exceptions.
2. No. Article 119 of the Cooperative Code itself expressly embodies the
legislative intention to extend the coverage of labor statutes to cooperatives. For
this reason, petitioners must comply with the requirement set forth in Article 223 of
the Labor Code in order to perfect their appeal to the NLRC. It must be pointed out
that the right to appeal is not a constitutional, natural or inherent right. It is a
privilege of statutory origin and, therefore, available only if granted or provided by
statute. The law may validly provide limitations or qualifications thereto or relief to
the prevailing party in the event an appeal is interposed by the losing party.
In this case, the obvious and logical purpose of an appeal bond is to insure,
during the period of appeal, against any occurrence that would defeat or diminish
recovery by the employee under the judgment if the latter is subsequently affirmed.
Therefore, no error can be ascribed to the CA for holding that the phrase
inferior courts appearing in Article 62 paragraph (7) of the Cooperative Code does
not extend to quasi-judicial agencies and that, petitioners are not exempt from
posting the appeal bond required under Article 223 of the Labor Code.

9) St. Martin Funeral Homes vs. NLRC, G.R. No. 142351, Nov. 22, 2006
FACTS:
The owner of petitioner St. Martin Funeral Homes, Inc. (St. Martin) is
Amelita Malabed. Prior to January 1996, Amelitas mother managed the funeral
parlor. In 1995, Aricayos was granted financial assistance by Amelitas mother. As
a sign of appreciation, respondent extended assistance in managing St. Martin
without compensation and no written employment contract between Amelitas
mother and respondent Aricayos; furthermore, respondent Aricayos was not even
listed as an employee in the Companys payroll.
When Amelitas mother died in January 1996, Amelita took over as manager
of St. Martin. Much to her chagrin, she found out that St. Martin had arrearages in
the payment of BIR taxes and other fees owing to the government, but company
records tended to show that payments were made thereon. As a result, Amelita
removed the authority from respondent Aricayos and his wife from taking part in
managing St. Martins operations.
Aggrieved, respondent Aricayos accused St. Martin of his illegal dismissal as
Operations Manager of the company. He believed that the cause of his termination
was Amelitas suspicion that he pocketed PhP 38,000.00 which was set aside for
payment to the BIR of St. Martins valued added taxes.On October 25, 1996, the
Labor Arbiter rendered a Decision, in favor of petitioner declaring that his office had
no jurisdiction over the case.
NLRC issued a Resolution annulling the Arbiters Decision and remanded the
case to him for appropriate proceedings, to determine the factual issue of the
existence of employer-employee relationship between the parties. When its motion
for reconsideration was rejected by the NLRC, petitioner filed a petition for certiorari
under Rule 65 before this Court, docketed as G.R. No. 130866.
On September 16, 1998, this Court through Justice Jose Vitug, rendered the
landmark Decision in this case then docketed as G.R. No. 130866, holding for the
first time that all petitions for certiorari under Rule 65 assailing the decisions of the
NLRC should henceforth be filed with the CA
ISSUE:
Whether or not a petitioner can file his petition for certiorari under
Rule65 to assail the decision of a lower court like NLRC.
HELD:
A petition for certiorari under Rule65 must first be filed at the Court of
Appeals. Said court has a concurrent jurisdiction on petitions for certiorari,
mandamus, prohibitions. This is in consonance with the hierarchy of courts.

10)

DOLE Phils. Vs. Esteva, G.R. No. 161115, Nov. 30, 2006

FACTS:
Petitioner is a corporation engaged principally in the production and
processing of pineapple for the export market. Respondents are members of the
Cannery Multi-Purpose Cooperative (CAMPCO). CAMPCO was organized in
accordance with Republic Act No. 6938, otherwise known as the Cooperative Code
of the Philippines. Pursuant to the Service Contract, CAMPCO members rendered
services to petitioner. The number of CAMPCO members that report for work and
the type of service they performed depended on the needs of petitioner at any
given time. Although the Service Contract specifically stated that it shall only be for
a period of six months, i.e., from 1 July to 31 December 1993, the parties had
apparently extended or renewed the same for the succeeding years without
executing another written contract. It was under these circumstances that
respondents came to work for petitioner. DOLE organized a Task Force that
conducted an investigation into the alleged labor-only contracting activities of the
cooperatives. The Task Force identified six cooperatives that were engaged in laboronly contracting, one of which was CAMPCO. In this case, respondents alleged that
they started working for petitioner at various times in the years 1993 and 1994, by
virtue of the Service Contract executed between CAMPCO and petitioner. All of the
respondents had already rendered more than one year of service to petitioner.
While some of the respondents were still working for petitioner, others were put on
stay home status on varying dates in the years 1994, 1995, and 1996 and were
no longer furnished with work thereafter. Together, respondents filed a Complaint
with the NLRC for illegal dismissal, regularization, wage differentials, damages and
attorneys fees. Petitioner denied that respondents were its employees. It explained
that it found the need to engage external services to augment its regular workforce,
which was affected by peaks in operation, work backlogs, absenteeism, and
excessive leaves. It used to engage the services of individual workers for definite
periods specified in their employment contracts and never exceeding one year.
However, such an arrangement became the subject of a labor case, in which
petitioner was accused of preventing the regularization of such workers.
ISSUES:
Whether or not the court of appeals was correct when it made its own
factual findings and disregarded the factual findings of the labor arbiter and the
NLRC.
Whether or not CAMPCO was a mere labor-only contractor.
HELD:
The Court in the exercise of its equity jurisdiction may look into the
records of the case and re-examine the questioned findings. As a corollary, this
Court is clothed with ample authority to review matters, even if they are not
assigned as errors in their appeal, if it finds that their consideration is necessary to
arrive at a just decision of the case. The same principles are now necessarily
adhered to and are applied by the Court of Appeals in its expanded jurisdiction over
labor cases elevated through a petition for certiorari; thus, we see no error on its
part when it made anew a factual determination of the matters and on that basis
reversed the ruling of the NLRC.
On the second issue, CAMPCO was a mere labor-only contractor. First,
although petitioner touts the multi-million pesos assets of CAMPCO, it does well to
remember that such were amassed in the years following its establishment. In

1993, when CAMPCO was established and the Service Contract between petitioner
and CAMPCO was entered into, CAMPCO only had P6,600.00 paid-up capital, which
could hardly be considered substantial. It only managed to increase its capitalization
and assets in the succeeding years by continually and defiantly engaging in what
had been declared by authorized DOLE officials as labor-only contracting. Second,
CAMPCO did not carry out an independent business from petitioner. It was precisely
established to render services to petitioner to augment its workforce during peak
seasons. Petitioner was its only client. Even as CAMPCO had its own office and
office equipment, these were mainly used for administrative purposes; the tools,
machineries, and equipment actually used by CAMPCO members when rendering
services to the petitioner belonged to the latter. Third, petitioner exercised control
over the CAMPCO members, including respondents. Petitioner attempts to refute
control by alleging the presence of a CAMPCO supervisor in the work premises. Yet,
the mere presence within the premises of a supervisor from the cooperative did not
necessarily mean that CAMPCO had control over its members. Section 8(1), Rule
VIII, Book III of the implementing rules of the Labor Code, as amended, required for
permissible job contracting that the contractor undertakes the contract work on his
account, under his own responsibility, according to his own manner and method,
free from the control and direction of his employer or principal in all matters
connected with the performance of the work except as to the results thereof. As
alleged by the respondents, and unrebutted by petitioner, CAMPCO members,
before working for the petitioner, had to undergo instructions and pass the training
provided by petitioners personnel. It was petitioner who determined and prepared
the work assignments of the CAMPCO members. CAMPCO members worked within
petitioners plantation and processing plants alongside regular employees
performing identical jobs, a circumstance recognized as an indicium of a labor-only
contractorship. Fourth, CAMPCO was not engaged to perform a specific and special
job or service. In the Service Contract of 1993, CAMPCO agreed to assist petitioner
in its daily operations, and perform odd jobs as may be assigned. CAMPCO
complied with this venture by assigning members to petitioner. Apart from that, no
other particular job, work or service was required from CAMPCO, and it is apparent,
with such an arrangement, that CAMPCO merely acted as a recruitment agency for
petitioner. Since the undertaking of CAMPCO did not involve the performance of a
specific job, but rather the supply of manpower only, CAMPCO clearly conducted
itself as a labor-only contractor. Lastly, CAMPCO members, including respondents,
performed activities directly related to the principal business of petitioner. They
worked as can processing attendant, feeder of canned pineapple and pineapple
processing, nata de coco processing attendant, fruit cocktail processing attendant,
and etc., functions which were, not only directly related, but were very vital to
petitioners business of production and processing of pineapple products for export.
The declaration that CAMPCO is indeed engaged in the prohibited activities of
labor-only contracting, then consequently, an employer-employee relationship is
deemed to exist between petitioner and respondents, since CAMPCO shall be
considered as a mere agent or intermediary of petitioner.
Since respondents are now recognized as employees of petitioner, this Court
is tasked to determine the nature of their employment. In consideration of all the
attendant circumstances in this case, this Court concludes that respondents are
regular employees of petitioner. As such, they are entitled to security of tenure.
They could only be removed based on just and authorized causes as provided for in
the Labor Code, as amended, and after they are accorded procedural due process.

Therefore, petitioners acts of placing some of the respondents on stay home

status and not giving them work assignments for more than six months were
already tantamount to constructive and illegal dismissal.

11)
Intercontinental Broadcasting Corp., vs. Panganiban, G.R. No. 151407,
February 6, 2007
FACTS:
Ireneo Panganiban (respondent) was employed as Assistant General
Manager of the Intercontinental Broadcasting Corporation (petitioner) from May
1986 until his preventive suspension on August 26, 1988. Respondent resigned from
his employment on September 2, 1988.
On April 12, 1989, respondent filed a civil case with the RTC of Quezon City,
Branch 93 against the members of the Board of Administrators (BOA) of petitioner
alleging, among others, non-payment of his unpaid commissions. A motion to
dismiss was filed by Joselito Santiago, one of the defendants, on the ground of lack
of jurisdiction, as respondent's claim was a labor money claim, but this was denied
by the RTC. Thus, Santiago filed a petition for certiorari with the CA which granted
Santiago's petition for lack of jurisdiction and set aside the RTC's Orders.
Thereafter, respondent was elected by the BOA as Vice-President for
Marketing in July 1992. He resigned in April 1993. On July 24, 1996, respondent filed
against petitioner a complaint for illegal dismissal, separation pay, retirement
benefits, unpaid commissions, and damages. The Labor Arbiter (LA) ordered
respondent's reinstatement with full backwages, and the payment of his unpaid
commission, damages and attorney's fees. Petitioner appealed to the NLRC but due
to petitioner's failure to post a bond, the appeal was dismissed. The decision was
deemed final and executory.
ISSUE:
Whether or not respondent's claim for unpaid commissions has already
prescribed.
HELD:
Yes. Respondent's claim had already prescribed as of September 1991.
In addition, the claims of private respondent for reinstatement, backwages and
benefits in conjunction with his employment from 1986 to 1988 have prescribed.
The applicable law in this case is Article 291 of the Labor Code which
provides that "all money claims arising from employer-employee relations accruing
during the effectivity of this Code shall be filed within three (3) years from the time
the cause of action accrued; otherwise they shall be forever barred."
The term "money claims" covers all money claims arising from an employeremployee relation the prescription of an action is interrupted by (a) the filing of an
action, (b) a written extrajudicial demand by the creditor, and (c) a written
acknowledgment of the debt by the debtor.
On this point, the Court ruled that although the commencement of a civil
action stops the running of the statute of prescription or limitations, its dismissal or
voluntary abandonment by plaintiff leaves the parties in exactly the same position
as though no action had been commenced at all. Hence, while the filing of Civil
Case could have interrupted the running of the three-year prescriptive period, its
consequent dismissal by the CA due to lack of jurisdiction effectively canceled the
tolling of the prescriptive period within which to file his money claim, leaving
respondent in exactly the same position as though no civil case had been filed at all.
The running of the three-year prescriptive period not having been interrupted by the
filing of Civil Case respondent's cause of action had already prescribed on
September 2, 1991, three years after his cessation of employment on September 2,
1988. Consequently, when respondent filed his complaint for illegal dismissal,

separation pay, retirement benefits, and damages in July 24, 1996, his claim,
clearly, had already been barred by prescription.

12)
Far East Agricutural Supply vs. Lebatigue, G.R. No. 162813, February
12, 2007
FACTS:
Petitioner Far East Agricultural Supply hired private respondent Jimmy
Lebatique as truck driver tasked to deliver animal feeds. On January 24, 2000,
Lebatique complained of non-payment of overtime work particularly on January 22,
2000, when he was required to make a second delivery in Novaliches. That same
day Lebatique was suspended apparently for illegal use of company vehicle. He
reported for work the next day but was prohibited from entering the company
premises.
On January 26, 2000, Lebatique sought assistance concerning the nonpayment of his overtime pay. According to him, two days later, he received a
telegram from petitioners requiring him to report for work. He reported for work on
January 29, 2000 and was asked to explain why he was claiming overtime pay.
Later, Lebatique was terminated and was told to look for another job.
On March 20, 2000, Lebatique filed a complaint for illegal dismissal and nonpayment of overtime pay.
ISSUE:

What is the prescriptive period for money claims?

HELD:
All money claims arising from an employer-employee relationship shall
be filed within three years from the time the cause of action accrued; otherwise,
they shall be forever barred (Article 291, LC). If it is established that the benefits
being claimed have been withheld from the employee for a period longer than three
years, the amount pertaining to the period beyond the three-year prescriptive
period is therefore barred by prescription. The amount that can only be demanded
by the aggrieved employee shall be limited to the amount of the benefits withheld
within three years before the filing of the complaint.
Lebatique timely filed his claim for service incentive leave pay, considering
that in this situation, the prescriptive period commences at the time he was
terminated. On the other hand, his claim regarding non-payment of overtime pay
since he was hired in March 1996 is a different matter. In the case of overtime pay,
he can only demand for the overtime pay withheld for the period within three years
preceding the filing of the complaint on March 20, 2000. However, we find
insufficient the selected time records presented by petitioners to compute properly
his overtime pay. The Labor Arbiter should have required petitioners to present the
daily time records, payroll, or other documents in managements control to
determine
the
correct
payment
due
to
him.
It is immaterial that Lebatique had filed a complaint for non-payment of
overtime pay the day he was suspended by managements unilateral act. What
matters is that he filed the complaint for illegal dismissal on March 20, 2000, after
he was told not to report for work, and his filing was well within the prescriptive
period allowed under the law.

13)
Letran Calamba Faculty & Employees Association vs. NLRC, G.R. No.
156225, January 29, 2008
Facts: Three cases were consolidated involving petitioner Letran Calamba Faculty
and Employees Association and Colegio de San Juan de Letran, Calamba, for money
claims and a petition to declare the subject strike illegal filed by respondent .
On September 28, 1998, the Labor Arbiter (LA) handling the consolidated cases
rendered a Decision with the following dispositive portion:
WHEREFORE, premises considered, judgment is hereby rendered, as follows:
1. The money claims cases (RAB-IV-10-4560-92-L and RAB-IV-11-4624-92-L) are
hereby dismissed for lack of merit;
2. The petition to declare strike illegal (NLRC Case No. RAB-IV-3-6555-94-L) is
hereby dismissed, but the officers of the Union, particularly its President, Mr.
Edmundo F. Marifosque, Sr., are hereby reprimanded and sternly warned that
future conduct similar to what was displayed in this case will warrant a more
severe sanction from this Office.
Both parties appealed to the NLRC.
On July 28, 1999, the NLRC promulgated its Decision dismissing both appeals.
Petitioner filed a Motion for Reconsideration but the same was denied by the NLRC in
its Resolution dated June 21, 2000.
Petitioner then filed a special civil action for certiorari with the CA assailing the
above-mentioned NLRC Decision and Resolution.
On May 14, 2002, the CA rendered the presently assailed judgment dismissing the
petition.
Petitioner filed a Motion for Reconsideration but the CA denied it in its Resolution
promulgated on November 28, 2002.

Citing Agustilo v. Court of Appeals, petitioner contends that in a special civil action
for certiorari brought before the CA, the appellate court can review the factual
findings and the legal conclusions of the NLRC.

Petitioner avers that the CA, in concluding that the NLRC Decision was supported by
substantial evidence, failed to specify what constituted said evidence. Thus,
petitioner asserts that the CA acted arbitrarily in affirming the Decision of the NLRC.

In its Comment, respondent contends that the ruling in Agustilo is an exception

rather than the general rule; that the general rule is that in a petition for certiorari,
judicial review by this Court or by the CA in labor cases does not go so far as to
evaluate the sufficiency of the evidence upon which the proper labor officer or office
based his or its determination but is limited only to issues of jurisdiction or grave
abuse of discretion amounting to lack of jurisdiction; that before a party may ask
that the CA or this Court review the factual findings of the NLRC, there must first be
a convincing argument that the NLRC acted in a capricious, whimsical, arbitrary or
despotic manner; and that in its petition for certiorari filed with the CA, herein
petitioner failed to prove that the NLRC acted without or in excess of jurisdiction or
with grave abuse of discretion.
Respondent argues that Agustilo is not applicable to the present case because in
the former case, the findings of fact of the LA and the NLRC are at variance with
each other; while in the present case, the findings of fact and conclusions of law of
the LA and the NLRC are the same.
Respondent also avers that in a special civil action for certiorari, the discretionary
power to review factual findings of the NLRC rests upon the CA; and that absent any
findings by the CA of the need to resolve any unclear or ambiguous factual findings
of the NLRC, the grant of the writ of certiorari is not warranted.
Issue: Whether or not the Court of Appeals erred in holding that the factual findings
of the NLRC cannot be reviewed in certiorari proceedings.
Held: In the instant case, the Court finds no error in the ruling of the CA that since
nowhere in the petition is there any acceptable demonstration that the LA or the
NLRC acted either with grave abuse of discretion or without or in excess of its
jurisdiction, the appellate court has no reason to look into the correctness of the
evaluation of evidence which supports the labor tribunals' findings of fact.

This Court held in Odango v. National Labor Relations Commission that:

The appellate courts jurisdiction to review a decision of the NLRC in a

petition for certiorari is confined to issues of jurisdiction or grave abuse
of discretion. An extraordinary remedy, a petition for certiorari is
available only and restrictively in truly exceptional cases. The sole
office of the writ of certiorari is the correction of errors of jurisdiction
including the commission of grave abuse of discretion amounting to
lack or excess of jurisdiction. It does not include correction of the
NLRCs evaluation of the evidence or of its factual findings. Such
findings are generally accorded not only respect but also finality. A
party assailing such findings bears the burden of showing that the
tribunal acted capriciously and whimsically or in total disregard of

evidence material to the controversy, in order that the extraordinary

writ of certiorari will lie.
Settled is the rule that the findings of the LA, when affirmed by the NLRC and the
CA, are binding on the Supreme Court, unless patently erroneous. It is not the
function of the Supreme Court to analyze or weigh all over again the evidence
already considered in the proceedings below. In a petition for review on certiorari,
this Courts jurisdiction is limited to reviewing errors of law in the absence of any
showing that the factual findings complained of are devoid of support in the records
or are glaringly erroneous. Firm is the doctrine that this Court is not a trier of facts,
and this applies with greater force in labor cases. Findings of fact of administrative
agencies and quasi-judicial bodies, which have acquired expertise because their
jurisdiction is confined to specific matters, are generally accorded not only great
respect but even finality. They are binding upon this Court unless there is a showing
of grave abuse of discretion or where it is clearly shown that they were arrived at
arbitrarily or in utter disregard of the evidence on record. We find none of these
exceptions in the present case.
In petitions for review on certiorari like the instant case, the Court invariably
sustains the unanimous factual findings of the LA, the NLRC and the CA, Especially
when such findings are supported by substantial evidence and there is no cogent
basis to reverse the same, as in this case.

14)
Metro Transit Organization vs. Piglas NFWU-KMU et al., G.R. No.
175460, April 14, 2008
Facts: Petitioner Metro Transit Organization, Inc. (MTO) is a government owned and
controlled corporation which entered into a Management and Operations Agreement
(MOA) with the Light Rail Transit Authority (LRTA) for the operation of the Light Rail
Transit (LRT) Baclaran-Monumento Line. Petitioner Jose L. Cortez, Jr. was sued in his
official capacity as then Undersecretary of the Department of Transportation and
Communications and Chairman of the Board of Directors of petitioner MTO.
Respondents filed with the Labor Arbiter Complaints against petitioners and the
LRTA for the following: (1) illegal dismissal; (2) unfair labor practice for union
busting; (3) moral and exemplary damages; and (4) attorney's fees.
On 13 September 2004, the Labor Arbiter rendered judgment in favor of
respondents.
Petitioners appealed to the National Labor Relations Commission (NLRC). In a
Resolution dated 19 May 2006, the NLRC dismissed petitioners' appeal for nonperfection since it failed to post the required bond.
Without filing a Motion for Reconsideration of the afore-quoted NLRC Resolution,
petitioners filed a Petition for Certiorari with the Court of Appeals assailing the
same.
On 24 August 2006, the Court of Appeals issued a Resolution dismissing the
Petition. It ruled:
The petitioners have filed this petition for certiorari against the resolution of the
NLRC dated May 19, 2006 dismissing the appeal for non-perfection. They have not,
however, filed a motion for reconsideration of the ruling prior to filing the petition.
This renders the petition fatally defective. The motion for reconsideration has been
held to be a condition sine qua non for certiorari, the rationale being that the lower
court should be given the opportunity to correct its error before recourse to the
higher court is made.
Issue: Whether or not petitioner can directly file the extraordinary remedy of
certiorari without filing first a motion for reconsideration with the NLRC.
Held: The Court of Appeals correctly ruled that petitioners' failure to file a motion
for reconsideration against the assailed Resolution of the NLRC rendered its petition
for certiorari before the appellate court as fatally defective.

It must be primarily established that petitioners contravened the procedural rule for
the extraordinary remedy of certiorari. The rule is, for the writ to issue, it must be

shown that there is no appeal, nor any plain, speedy and adequate remedy in the
ordinary course of law.
The settled rule is that a motion for reconsideration is a condition sine qua non for
the filing of a petition for certiorari. Its purpose is to grant an opportunity for the
court to correct any actual or perceived error attributed to it by the re-examination
of the legal and factual circumstances of the case. The rationale of the rule rests
upon the presumption that the court or administrative body which issued the
assailed order or resolution may amend the same, if given the chance to correct its
mistake or error.
We have held that the "plain," "speedy," and "adequate remedy" referred to in
Section 1, Rule 65 of the Rules of Court is a motion for reconsideration of the
questioned Order or Resolution. As we consistently held in numerous cases, a
motion for reconsideration is indispensable for it affords the NLRC an opportunity to
rectify errors or mistakes it might have committed before resort to the courts can be
had.
In the case at bar, petitioners directly went to the Court of Appeals on certiorari
without filing a motion for reconsideration with the NLRC. The motion for
reconsideration would have aptly furnished a plain, speedy, and adequate remedy.
As a rule, the Court of Appeals, in the exercise of its original jurisdiction, will not
take cognizance of a petition for certiorari under Rule 65, unless the lower court has
been given the opportunity to correct the error imputed to it. The Court of Appeals
correctly ruled that petitioners' failure to file a motion for reconsideration against
the assailed Resolution of the NLRC rendered its petition for certiorari before the
appellate court as fatally defective.
We agree in the Court of Appeals' finding that petitioners' case does not fall under
any of the recognized exceptions to the filing of a motion for reconsideration, to wit:
(1) when the issue raised is purely of law; (2) when public interest is involved; (3) in
case of urgency; or when the questions raised are the same as those that have
already been squarely argued and exhaustively passed upon by the lower court. As
the Court of Appeals reasoned, the issue before the NLRC is both factual and legal
at the same time, involving as it does the requirements of the property bond for the
perfection of the appeal, as well as the finding that petitioners failed to perfect the
same. Evidently, the burden is on petitioners seeking exception to the rule to show
sufficient justification for dispensing with the requirement.
Certiorari cannot be resorted to as a shield from the adverse consequences of
petitioners' own omission of the filing of the required motion for reconsideration.
Nonetheless, even if we are to disregard the petitioners' procedural faux pas with
the Court of Appeals, and proceed to review the propriety of the 19 May 2006 NLRC
Resolution, we still arrive at the conclusion that the NLRC did not err in denying
petitioners' appeal for its failure to file a bond in accordance with the Rules of
Procedure of the NLRC.

In cases involving a monetary award, an employer seeking to appeal the decision of

the Labor Arbiter to the NLRC is unconditionally required by Article 223 of the Labor
Code to post a cash or surety bond equivalent to the amount of the monetary award
adjudged. It should be stressed that the intention of lawmakers to make the bond
an indispensable requisite for the perfection of an appeal by the employer is
underscored by the provision that an appeal by the employer may be perfected only
upon the posting of a cash or surety bond. The word "only" makes it perfectly clear
that the lawmakers intended the posting of a cash or surety bond by the employer
to be the exclusive means by which an employer's appeal may be perfected.
Moreover, it bears stressing that the perfection of an appeal in the manner and
within the period prescribed by law is not only mandatory but jurisdictional, and
failure to conform to the rules will render the judgment sought to be reviewed final
and unappeasable. It cannot be overemphasized that the NLRC Rules, akin to the
Rules of Court, promulgated by authority of law, have the force and effect of law.
As borne by the records, petitioners filed a property bond which was conditionally
accepted by the NLRC subject to the following conditions specified in its 24 February
2006 Order:
The conditional acceptance of petitioner's property bond was subject to the
submission of the following: 1) Certified copy of Board Resolution or a Certificate
from the Corporate Secretary of Light Rail Transit Authority stating that the
Corporation President is authorized by a Board Resolution to submit title as
guarantee of judgment award; 2) Certified Copy of the Titles issued by the Registry
of Deeds of Pasay City; 3) Certified Copy of the current tax declarations of Titles; 4)
Tax clearance from the City Treasurer of Pasay City; 5) Appraisal report of an
accredited appraisal company attesting to the fair market value of property within
ten (10) days from receipt of this Order. Failure to comply therewith will result in
the dismissal of the appeal for non-perfection thereof.
In the same Order, the NLRC warned that failure of the petitioners to comply with
the conditions would result in the dismissal of the appeal for non-perfection thereof.
Petitioners were directed to comply with its given conditions within 10 days from
receipt of the Order with a caveat that their failure will result in the dismissal of the
appeal. Subsequently, in its 19 May 2006 Resolution, the NLRC finally made a
factual finding that petitioners failed to comply with the conditions attached to their
posting of the property bond. Thus, the NLRC dismissed petitioners' appeal for nonperfection thereof.
Essentially, the failure of petitioners to comply with the conditions for the posting of
the property bond is tantamount to a failure to post the bond as required by law.
What is even more salient is the fact that the NLRC had stressed that petitioners
had, for more than a month from receipt of its 24 February 2006 Order, to comply
with the conditions set forth therein for the posting of the property bond. It cannot
be gainsaid that the NLRC had given petitioners a period of 10 days from receipt of
the Order with a warning that non-compliance would result in the dismissal of their
appeal for failure to perfect the same. Petitioners therefore disregarded the

rudiments of the law in the perfection of their appeal. We are without recourse but
to take petitioners' failure against their interest

15)
J.K. Mercado & Sons Agricultural Enterprises, Inc., vs Sto. Tomas,
G.R.No. 158084, August 29, 2008
Facts:
On December 3, 1993, the Regional Tripartite Wages and Productivity Board, Region
XI, issued Wage Order No. RTWPB-XI-03, granting a Cost of Living Allowance (COLA)
to covered workers.
On January 28, 1994, petitioner filed an application for exemption from the
coverage of the aforesaid wage order. Thus, however, was denied by the regional
wage board for lack of merit and ordered the petitioner to pay its covered workers
the allowance prescribed under said Wage Order.
Notwithstanding the said order, private respondents were not given the benefits due
them. Thus, private respondents filed an Urgent Motion for Writ of Execution, and
Writ of Garnishment seeking the enforcement of subject wage order against several
entities including herein petitioner.
The OIC-Regional Director, Region XI, issued a Writ of Execution for the enforcement
of the Order dated April 11, 1994 of the Regional Tripartite Wages and Productivity
Board.
On November 17, 1998 and November 23, 1998, respectively, petitioner filed a
Motion to Quash the Writ of Execution and a Supplemental Motion to the Motion to
Quash. Petitioner argued that herein private respondents' right had already
prescribed due to their failure to move for the execution of the April 11, 1994 Order
within the period provided under Article 291 of the Labor Code, as amended, or
within three (3) years from the finality of the said order. Regional Director denied
the motion, thus the petitioner filed a notice of appeal which was thereafter denied
for lack of merit. Hence a petition was filed in SC.
Issues:
Whether or not the Article 291 of the Labor Code is not applicable to recovery of
benefits under the subject Wage Order, which entitled respondents to a cost of
living allowance (COLA)?
Whether or not the claim of the private respondents for cost of living allowance
(COLA) pursuant to the Wage Order has already prescribed because of the failure of
the respondents to make the appropriate claim within the three (3) year prescriptive
period provided by Article 291 of the Labor Code, as amended.
Ruling:
Art. 291 of the Labor Code applies to money claims in general and provides for a 3year prescriptive period to file them.
On the other hand, respondent employees' money claims in this case had been
reduced to a judgment, in the form of a Wage Order, which has become final and
executory. The prescription applicable, therefore, is not the general one that applies

to money claims, but the specific one applying to judgments. Thus, the right to
enforce the judgment, having been exercised within five years, has not yet
prescribed.
Stated otherwise, a claimant has three years to press a money claim. Once
judgment is rendered in her favor, she has five years to ask for execution of the
judgment, counted from its finality. This is consistent with the rule on statutory
construction that a general provision should yield to a specific one and with the
mandate of social justice that doubts should be resolved in favor of labor.

WHEREFORE, the petition is DENIED

16)
J. Phil. Marine Inc., vs. NLRC, G.R. No. 1753661, August 11, 2008; but
see Ilagan vs. Court of Appeals, G.R. No. 162089, July 9, 2008
FACTS:
The herein respondent, was a cook aboard vessels plying overseas, filed
before the National Labor Relations Commission (NLRC) a pro-forma complaint
against petitioners for unpaid money claims, moral and exemplary damages, and
attorneys fees and thereafter filed two amended pro forma complaints praying for
the award of overtime pay, vacation leave pay, sick leave pay, and
disability/medical benefits, he having, by his claim, contracted enlargement of the
heart and severe thyroid enlargement in the discharge of his duties as cook which
rendered him disabled.
Labor Arbiter Fe Superiaso-Cellan dismissed respondents complaint for lack
of merit but the NLRC reversed the Labor Arbiters decision and awarded
US$50,000.00 disability benefit to respondent. The Court of Appeals dismissed
petitioners petition for, inter alia, failure to attach to the petition all material
documents, and for defective verification and certification. Petitioners Motion for
Reconsideration of the appellate courts Resolution was denied; hence, they filed
the present Petition for Review on Certiorari.
During the pendency of the case, against the advice of his counsel, entered
into a compromise agreement with petitioners. He thereupon signed a Quitclaim
and Release subscribed and sworn to before the Labor Arbiter. Petitioners filed
before this Court a Manifestation dated May 7, 2007 informing that, inter alia, they
and respondent had forged an amicable settlement.
Respondents counsel also filed before this Court, purportedly on behalf of
respondent, a Comment on the present petition. The parties having forged a
compromise agreement as respondent in fact has executed a Quitclaim and
Release, the Court dismisses the petition.

ISSUE: WON the compromise agreement/deed of quit claim entered by the parties
is valid?

Ruling:
Article 227 of the Labor Code provides:
Any compromise settlement, including those involving labor standard laws,
voluntarily agreed upon by the parties with the assistance of the Department of
Labor, shall be final and binding upon the parties. The National Labor
Relations Commission or any court shall not assume jurisdiction over issues
involved therein except in case of non-compliance thereof or if there is prima facie
evidence that the settlement was obtained through fraud, misrepresentation, or
coercion.

In Olaybar v. NLRC, the Court, recognizing the conclusiveness of

compromise settlements as a means to end labor disputes, held that Article 2037
of the Civil Code, which provides that [a] compromise has upon the parties the
effect and authority of res judicata, applies suppletorily to labor cases
even if the compromise is not judicially approved.
That respondent was not assisted by his counsel when he entered
into the compromise does not render it null and void. Eurotech Hair
Systems, Inc. v. Go so enlightens:
A compromise agreement is valid as long as the consideration is
reasonable and the employee signed the waiver voluntarily, with a full
understanding of what he was entering into. All that is required for the
compromise to be deemed voluntarily entered into is personal and specific
individual consent. Thus, contrary to respondents contention, the employees
counsel need not be present at the time of the signing of the compromise
agreement.
It bears noting that, as reflected earlier, the Quitclaim and Waiver was
subscribed and sworn to before the Labor Arbiter. Petition DISMISSED

17)

Sy vs. ALC Industries, G.R. No. 168339, October 10, 2008

FACTS:
Petitioner was hired by respondent corporation ALCII as a supervisor in its
purchasing office. She was thereafter assigned to ALCII's construction project in
Davao City as business manager and supervisor of the Administrative Division. Her
Davao assignment was from May 1997 to April 15, 1999.
Petitioner alleged that respondents refused to pay her salary beginning
August 1998 and allowances beginning June 1998, despite her almost weekly verbal
follow-up. Petitioner filed a complaint before the labor arbiter for unpaid salaries
and allowances. Despite several notices and warnings, respondents did not file a
position paper to controvert petitioner's claims. The case was submitted for
resolution based solely on petitioner's allegations and evidence.
In his June 30, 2000 decision, the labor arbiter ordered ALCII and/or Dexter
Ceriales to pay petitioner P282,560 representing her unpaid salary and allowance.
Respondents filed an appeal with motion for reduction of bond in the National
Labor Relations Commission (NLRC) without posting any cash or surety bond. In a
resolution dated September 6, 2001, the NLRC dismissed respondents' appeal. It
ruled that respondents failed to adduce substantial evidence to support their
arguments of non-liability. Moreover, it found no justifiable reason to grant a
reduction in the required bond.
Respondents were able to file a motion for reconsideration on time,
accompanied by a joint undertaking/declaration in lieu of the cash or surety bond.
Nevertheless, respondents' motion for reconsideration was denied.
On August 2, 2002, respondents filed a motion for clarification but this was
likewise denied. Respondents questioned the NLRC's denial of their motion for
clarification and reconsideration in the CA via a petition for certiorari and
prohibition.
In its March 30, 2005 decision, the CA set aside the resolutions of the NLRC
and the decision of the labor arbiter and dismissed petitioner's complaint.

Issue: WON the decision of the Labor Arbiter has become final and executory.

Ruling:
Article 223. APPEAL. - Decisions, awards, or orders of the Labor Arbiter
are final and executory unless appealed to the Commission by any or both
parties within ten calendar days from receipt of such decisions, awards, or
orders. xxx.
In case of a judgment involving a monetary award, an appeal by the
employer may be perfected only upon the posting of a cash or surety bond
issued by a reputable bonding company duly accredited by the Commission in

the amount equivalent to the monetary award in the judgment appealed

from. (emphasis supplied)
Section 1, Rule VI of the Rules of Procedure of the NLRC, as amended, likewise
provides that the appeal must be filed within ten days from receipt of the decision,
resolution or order of the labor arbiter. Moreover, Section 6 of the same rules
provides that an appeal by the employer may be perfected only upon the posting of
a cash or surety bond. As the right to appeal is merely a statutory privilege, it must
be exercised only in the manner and in accordance with the provisions of the law.
Otherwise, the right to appeal is lost.
In a long line of cases, we have ruled that the payment of the appeal bond is
a jurisdictional requisite for the perfection of an appeal to the NLRC. The lawmakers
intended to make the posting of a cash or surety bond by the employer the
exclusive means by which an employer's appeal may be perfected. The rationale for
this rule is:
The requirement that the employer post a cash or surety bond to perfect
its/his appeal is apparently intended to assure the workers that if they prevail
in the case, they will receive the money judgment in their favor upon the
dismissal of the employers' appeal. It was intended to discourage employers
from using an appeal to delay, or even evade, their obligation to satisfy their
employee's just and lawful claims.
The explanation advanced by respondents for their failure to pay the appeal bond
belies their claim. The NLRC found that respondents did not pay the appeal bond on
the mistaken notion that they were not liable for the monetary award and had
already ceased operations due to bankruptcy. Respondents belatedly filed a bond
with their motion for reconsideration of the NLRC's dismissal of their appeal. We
cannot countenance such flagrant disregard of established rules of procedure on
appeals.
Moreover, the filing of a joint undertaking/declaration, filed way beyond the
ten-day reglementary period for perfecting an appeal and as a substitute for the
cash or surety bond, did not operate to validate the lost appeal.
The decision of the labor arbiter therefore became final and executory for
failure of respondents to perfect their appeal within the reglementary period.
Clearly, the CA no longer had jurisdiction to entertain respondents' appeal from the
labor arbiter's decision.
Respondents point out that we have occasionally allowed exceptions to
mandatory and jurisdictional requirements in the perfection of appeals, such as
disregarding unintended lapses on the basis of strong and compelling reasons.
This is true. However, the obvious motive behind respondents' plea for liberality is
to thwart petitioner's claims. This we cannot allow. Respondents' lapses were far
from unintentional. They were deliberate attempts to circumvent established rules.
Respondents' other contention that they were deprived of due process is
likewise devoid of merit. Due process is satisfied when the parties are afforded fair
and reasonable opportunity to explain their respective sides of the controversy. In
Mariveles Shipyard Corp. v. CA, we held:

The requirements of due process in labor cases before a Labor

Arbiter is satisfied when the parties are given the opportunity to
submit their position papers to which they are supposed to attach all the
supporting documents or documentary evidence that would prove their
respective claims, in the event that the Labor Arbiter determines that no
formal hearing would be conducted or that such hearing was not necessary.
(emphasis supplied).
We ruled in Times Transportation Company, Inc. v. Sotelo:
To extend the period of appeal is to prolong the resolution of the case, a
circumstance which would give the employer the opportunity to wear out the
energy and meager resources of the workers to the point that they would be
constrained to give up for less than what they deserve in law.

18)

PCI Travel Corp., vs. NLRC, G.R. No. 154379, October 31, 2008

Facts:
A complaint for unfair labor practice was filed against petitioner by
respondent NUBE-AMEXPEA/PCI Travel Employees Union with the latter claiming that
the former had been filling up positions left by regular rank-and-file with contractual
employees, but were performing work which were usually necessary and desirable
in the usual business or trade of the petitioner. Petitioner moved to dismiss the
complaint on the ground that the Union was not the real party-in-interest and then
they manifested their readiness to prove that said employees were provided by
independent legitimate contractors and that it was not engaged in labor-only
contracting in position paper yet to be submitted, but the motion to dismiss is to be
resolved first.
However, the Labor Arbiter rendered a decision in favor of the respondent
ruling that a motion to dismiss was a prohibited pleading. The same was affirmed by
the NLRC but with modification deleting the awards of damages. Before the CA, the
petition was dismissed for failure to attach copies of pleadings and documents
relevant and pertinent to the same and the because of the absence of proof that
Elizabeth Legarda (petitioners president) was duly authorized to sign the
verification and certification of non-forum shopping.

Issue(s):
1. Whether the President of a corporation is authorized to sign the verification
and certification against non-forum shopping without need of a board
resolution.
2. Whether or not the appellate court has erred in dismissing the petition on a
single technicality.
Ruling:
While it must be borne in mind that under the Corporation Code, an individual
corporate officer cannot solely exercise any corporate power pertaining to the
corporation without the authority from the board of directors, the Supreme Court
however had ruled otherwise in a long line of cases before it. Summing it up, the
following officials or employees of the company can sign the verification and
certification without need of a board resolution: (1) Chairperson of the BOD, (2)
President, (3) General Manager or Acting GM, (4) Personnel Officer and (5) an
Employment Specialist in a labor case.
Thus, that the President of the corporation can sign the verification and
certification without need of a board resolution, there thus exists a compelling
reason for the reinstatement of the petition before the CA.
A perusal of the petition for certiorari would reveal that petitioner intended to
show the grave abuse of discretion committed by the labor tribunals in not allowing
the petitioner the ample opportunity to submit its position paper on the alleged
violation of the CBA. The Labor Arbiter and the NLRC viewed it as a waiver on its

part and hastened to rule that since the complainants allegations remain
unrebutted, they are deemed correct and valid. Due process dictates that a person
should be given the opportunity to be heard. Unfortunately, this was not accorded
to the petitioner and such right was even foreclosed when the appellate court
dismissed the petition before it on technical grounds.
The policy of our judicial system is to encourage full adjudication of the
merits of an appeal. Ends of justice are better served when both parties are heard
and the controversy decided on its merits. Thus, in the exercise of its equity
jurisdiction, the Court will not hesitate to reverse the dismissal of appeals that are
grounded merely on technicalities.

***Remanded to the CA for resolution based on the merits

19)

Lopez vs. Q. C. Sports Club, G.R. No. 164032, January 19, 2009

FACTS: Claiming that it is a registered independent labor organization and the

incumbent collective bargaining agent of Quezon City Sports Club (QCSC), the
Kasapiang Manggagawa sa Quezon City Sports Club (union) filed a complaint for
unfair labor practice against QCSC on 12 November 1997.
The Union averred that it was ordered to submit a new information sheet. It
immediately wrote a letter addressed to the general manager, Angel Sadang,
to inquire about the information sheet, only to be insulted by the latter. The
members of the union were not paid their salaries on 30 June 1997. A board
member, Antonio Chua allegedly harassed one of the employees and told him
not to join the strike and even promised a promotion. On 4 July 1997, the
union wrote a letter to the management for the release of the members
salaries for the period 16-30 June 1997, implementation of Wage Order No. 5,
and granting of wage increases mandated by the Collective Bargaining
Agreement (CBA). When its letter went unanswered, the union filed a notice of
strike on 10 July 1997 for violation of Article 248 (a)(c)(e) of the Labor Code,
nonpayment of overtime pay, refusal to hear its grievances, and malicious
refusal to comply with the economic provisions of the CBA. After conducting a
strike vote, it staged a strike on 12 August 1997. On 16 August 1997, the
QCSC placed some of its employees under temporary lay-off status due to
redundancy. It appears that on 22 December 1997, QCSC also filed a petition
for cancellation of registration against the union.
The Labor Arbiter (Lustria) found QCSC guilty of unfair labor practice. QCSC
appealed from the labor arbiters decision. It also filed a motion for reduction
of the appeal bond to P4,000,000.00. The NLRC ordered the posting of an
additional P6,000,000.00) .QCSC filed a supplement to its appeal, citing a
decision (Dinopol decision) dated 9 October 1998 of Labor Arbiter Ernesto
Dinopol declaring the strike of the union illegal. The dispositive portion reads:
WHEREFORE, in view of the Unions having violated the no-strikeno-lockout provision of the Collective Bargaining Agreement, the
strike it staged on August 12, 1998 is hereby declared illegal and
consequently, pursuant to Article 264 of the Labor Code, the
individual respondents, namely: RONILO C. LEE, EDUARDO V.
SANTIA, CECILLE C. PANGAN, ROMEO M. MORGA, GENARO C.
BANDO AND ALEX J. SANTIAGO, who admitted in paragraph 1 of
their position paper that they are officers/members of the
complaining Union are hereby declared to have lost their
employment status.
Meanwhile, the National Labor Relations Commission (NLRC) rendered a
decision granting the appeal and reversing the Lustria decision. It ratiocinated:
Be that as it may, We are of the view that the Decision in NLRC CASE NO.
00-09-0663-97 must perforce prevail over the appealed Decision and the
latter to yield to it. It must remain undisturbed following the established

doctrine on primacy and finality of decision. It bears stressing at this

juncture, at the risk of being repetitious, that in NLRC Case No. 00-090663-97 the employment status of herein individual complainants was
already declared lost or forfeited as of August 12, 1998, the day the
illegal strike was staged. From then on, they ceased to be employees of
respondent Sports Club. The forfeiture of their employment status
carries with it the extinction of their right to demand for and be entitled
to the economic benefits accorded them by law and the existing CBA.
For, such right is premised on the fact of employment.
The other complainants (petitioners) meanwhile filed a motion for
reconsideration which was denied by the NLRC. They filed a petition for
certiorari under Rule 65 before the Court of Appeals but was denied.
ISSUES:
1. Do the simultaneous filing of the motion to reduce the appeal bond and
posting of the reduced amount of bond within the reglementary period for
appeal constitute substantial compliance with Article 223 of the Labor Code?
2. Whether the NLRC erred in declaring them to have lost their employment
contrary to the Dinopol decision which only affected a few of the employees
who were union members.
RULING:
First issue:
Under the Rules, appeals involving monetary awards are perfected only upon
compliance with the following mandatory requisites, namely: (1) payment of
the appeal fees; (2) filing of the memorandum of appeal; and (3) payment of
the required cash or surety bond.
Thus, the posting of a bond is indispensable to the perfection of an appeal in
cases involving monetary awards from the decision of the labor arbiter. The
filing of the bond is not only mandatory but also a jurisdictional requirement
that must be complied with in order to confer jurisdiction upon the NLRC. Noncompliance with the requirement renders the decision of the labor arbiter final
and executory. This requirement is intended to assure the workers that if they
prevail in the case, they will receive the money judgment in their favor upon
the dismissal of the employer's appeal. It is intended to discourage employers
from using an appeal to delay or evade their obligation to satisfy their
employees' just and lawful claims.
However, Section 6 of the New Rules of Procedure of the NLRC also mandates,
among others, that no motion to reduce bond shall be entertained except on
meritorious grounds and upon the posting of a bond in a reasonable amount in
relation to the monetary award. Hence, the NLRC has the full discretion to
grant or deny the motion to reduce the amount of the appeal bond.

In the case of Nicol v. Footjoy Industrial Corporation ruled that the bond
requirement on appeals involving monetary awards had been and could be
relaxed in meritorious cases such as: (1) there was substantial compliance with
the Rules; (2) the surrounding facts and circumstances constitute meritorious
grounds to reduce the bond; (3) a liberal interpretation of the requirement of
an appeal bond would serve the desired objective of resolving controversies on
the merits; or (4) the appellants, at the very least, exhibited their willingness
and/or good faith by posting a partial bond during the reglementary period.
Applying these jurisprudential guidelines, we find and hold that the NLRC did
not err in reducing the amount of the appeal bond and considering the appeal
as having been filed within the reglementary period.
The posting of the amount of P4,000,000.00 simultaneously with the filing of
the motion to reduce the bond to that amount, as well as the filing of the
memorandum of appeal, all within the reglementary period, altogether
constitute substantial compliance with the Rules.
Second issue:
We rule in favor of petitioners.
The assailed Dinopol decision involves a complaint for illegal strike filed by
QCSC on the ground of a "no-strike no lockout" provision in the CBA. The
challenged decision was rendered in accordance with law and is supported by
factual evidence on record. In the notice of strike, the union did not state in
particular the acts which allegedly constitute unfair labor practice. Moreover,
by virtue of the "no-strike no lockout" provision in the CBA, the union was
prohibited from staging an economic strike, i.e., to force wage or other
concessions from the employer which he is not required by law to grant.
However, it should be noted that while the strike declared by the union was
held illegal, only the union officers were declared as having lost their
employment status. In effect, there was a ruling only with respect to some
union members while the status of all others had remained disputed.
There is no conflict between the Dinopol and the Lustria decisions. While both
rulings involve the same parties and same issues, there is a distinction
between the remedies sought by the parties in these two cases. In the Dinopol
decision, it was QCSC which filed a petition to declare the illegality of the 12
August 1997 strike by the union. The consequence of the declaration of an
illegal strike is termination from employment, which the Labor Arbiter did so
rule in said case. However, not all union members were terminated. In fact,
only a few union officers were validly dismissed in accordance with Article 264
of the Labor Code. Corollarily, the other union members who had merely
participated in the strike but had not committed any illegal acts were not
dismissed from employment. Hence, the NLRC erred in declaring the
employment status of all employees as having been lost or forfeited by virtue
of the Dinopol decision.
On the other hand, the Lustria decision involved the unfair labor practices

alleged by the union with particularity. In said case, Labor Arbiter Lustria sided
with the Union and found QCSC guilty of such practices. As a consequence, the
affected employees were granted backwages and separation pay. The grant of
backwages and separation pay however was not premised on the declaration
of the illegality of the strike but on the finding that these affected employees
were constructively dismissed from work, as evidenced by the layoffs effected
by the company.
Therefore, with respect to petitioners and union officers Alex J. Santiago, Ma.
Cecilia Pangan, Ronilo E. Lee, and Genaro Bando, who apparently had been
substituted by present petitioner Teresita Bando, the Dinopol decision
declaring them as having lost their employment status still stands.
To recapitulate, the NLRC erred in setting aside the Lustria decision, as well as
in deleting the award of backwages and separation pay, despite the finding
that the affected employees had been constructively dismissed.
Based on the foregoing, the Lustria decision should be upheld and therefore
reinstated except as regards the four petitioners

20)
Lockheed Detective & Watchman Agency, G.R. No. 185918, April 18,
2012
Facts: Petitioner entered into a contract for security services with respondent. An
NLRC Decision holding respondent solidarily liable with petitioner to security guards
for P12,142,522.69 became final and executory.
A writ of execution was issued by the Labor Arbiter, which was later on quashed
upon motion by respondent. The quashal was reversed by the NLRC. Upon
reconsideration, the NLRC reconsidered and modified that the satisfaction of the
award will be only against the funds of respondent which are not identified as public
funds. The NRLCs order and resolution having become final, an alias writ of
execution was issued. A notice of garnishment was served upon PNB Diliman
Branch. Upon learning of the notice, respondent filed an urgent motion to quash
garnishment which was dismissed by the Labor Arbiter. Funds from PNB were
withdrawn by the sheriff. Respondent filed a petition for certiorari with the Court of
Appeals. The CA dismissed the petition ruling that the funds are not public funds but
on reconsideration, amended its decision holding still that the funds are not public
funds but the petition is granted because of the case of National Electrification
Administration vs Morales(NEA case) that all money claims against the government
must be first filed with the Commission on Audit. Petitioner moved for
reconsideration but was denied. The Amended Decision and Resolution are now
being assailed in this petition for review on certiorari.
Issue: Whether or not the funds of respondent were properly garnished?
Ruling: No, the funds of respondent were not properly garnished. The Court ruled
that the CA correctly cited the NEA case. Respondent is a juridical personality
separate and distinct from the government and has the capacity to sue and be
sued. Thus, it cannot evade execution, and its funds may be subject to garnishment
or levy. However, before execution may be had, a claim for payment of the
judgment award must first be filed with COA pursuant to Commonwealth Act No.
327.

21)

Portillo vs. Rudolf Lietz, Inc. et al., G.R. No. 196539, October 10, 2012

Facts:
Portillo was a Sales Representative of Rudolf Lietz, Inc. pharmaceutical business.
Portillo signed an employment contract containing a Goodwill Clause as follows:
It remains understood and you agreed that, on the termination of your
employment by act of either you or [Lietz Inc.], and for a period of three (3) years
thereafter, you shall not engage directly or indirectly as employee, manager,
proprietor, or solicitor for yourself or others in a similar or competitive business or
the same character of work which you were employed by [Lietz Inc.] to do and
perform. Should you breach this good will clause of this Contract, you shall pay
[Lietz Inc.] as liquidated damages the amount of 100% of your gross compensation
over the last 12 months, it being agreed that this sum is reasonable and just.
Portillo subsequently resigned from her employment with Lietz. She demanded from
Lietz Inc. for the payment of her remaining salaries and commissions, which were
not paid to her upon such resignation. Later, and within the 3-year prohibitory
period, Lietz learned that Portillo was hired by Ed Keller Philippine as head of its
Pharma Raw Material Department. Ed Keller is direct competitor of Lietz.
As Portillos demand for remaining salaries and commissions from Lietz still went
unheeded, she filed a complaint with the NLRC for non-payment of 1 months
salary, 2 months commission, 13th month pay, plus moral, exemplary and actual
damages and attorneys fees.
In its position paper, Lietz admitted liability for Portillos money claims. However,
Lietz raised the defense of legal compensation: Portillos money claims should be
offset against her liability to Lietz for liquidated damages for Portillos breach of the
Goodwill Clause in the employment contract when she became employed with Ed
Keller.
Issue:
Should the claims of Portillo against Lietz for unpaid wages, commissions, etc. be
offset against her liability to Lietz for damages from breach of the Goodwill Clause
in the contract?
Ruling:
No, it should not be offset.
While Portillos claim for unpaid salaries is a money claim that arises out of or in
connection with an employer-employee relationship, Lietz claim against Portillo
for violation of the goodwill clause is a money claim based on an act done after the
cessation of the employment relationship. And, while the jurisdiction over
Portillos claim is vested in the labor arbiter, the jurisdiction over Lietz
Inc.s claim rests on the regular courts.
The difference in the nature of the credits that one has against the other,
conversely, the nature of the debt one owes another, which difference in turn
results in the difference of the forum where the different credits can be enforced,

prevents the application of compensation. The labor tribunal does not have
jurisdiction over the civil case of breach of contract.

22)
Building Care Corp. vs. Macaraeg, G.R. No. 198357, December 10,
2012
Petitioners are in the business of providing security services to their clients. They
hired respondent as a security guard beginning August 25, 1996, assigning her at
Genato Building in Caloocan City. However, on March 9, 2008, respondent was
relieved of her post. She was re-assigned to Bayview Park Hotel from March 9-13,
2008, but after said period, she was allegedly no longer given any assignment.
Thus, on September 9, 2008, respondent filed a complaint against petitioners for
illegal dismissal, underpayment of salaries, non-payment of separation pay and
refund of cash bond. Conciliation and mediation proceedings failed, so the parties
were ordered to submit their respective position papers.
Respondent claimed that petitioners failed to give her an assignment for more than
nine months, amounting to constructive dismissal, and this compelled her to file
the complaint for illegal dismissal.
On the other hand, petitioners that respondent was relieved from her post as
requested by the client because of her habitual tardiness, persistent borrowing of
money from employees and tenants of the client, and sleeping on the job.
Respondent filed a complaint for illegal dismissal with the Labor Arbiter.
The Labor Arbiter (LA) in favor of petitioners, holding that the dismissal of Macaraeg
was valid, but ordered the former to pay a certain sum as financial assistance. The
Appeal which respondent filed with the NLRC was for having been filed out of time.
Hence, NLRC declared that the LA's Decision had become final and executory on
June 16, 2009.
Respondent elevated the case to the CA via a petition for certiorari. The CA
reversed and set aside the decision of NLRC and declared Macaraeg to have been
illegally dismissed. Petitioners were ordered to reinstate petitioner without loss
of seniority rights, benefits and privileges; and to pay her backwages and other
monetary benefits during the period of her illegal dismissal up to
actual reinstatement. Petitioners' motion for reconsideration was denied. Hence, the
present petition.

ISSUE:
Whether the CA erred in liberally applying the rules of procedure and ruling that
respondent's appeal should be allowed and resolved on the merits despite having
been filed out of time.
RULING:
The Court cannot sustain the CA's Decision. It should be emphasized that the resort
to a liberal application, or suspension of the application of procedural rules,
must remain as the exception to the well-settled principle that rules must be
complied with for the orderly administration of justice. In Marohomsalic v. Cole, the

Court stated: While procedural rules may be relaxed in the interest of justice, it is
well-settled that these are tools designed to facilitate the adjudication of cases. The
relaxation of procedural rules in the interest of justice was never intended to be
a license for erring litigants to violate the rules with impunity. Liberality in the
interpretation and application of the rules can be invoked only in proper cases and
under justifiable causes and circumstances. While litigation is not a game of
technicalities, every case must be prosecuted in accordance with the prescribed
procedure to ensure an orderly and speedy administration of justice.
The later case of Daikoku Electronics Phils., Inc. v. Raza, further explained that:
To be sure, the relaxation of procedural rules cannot be made without any valid
reasons proffered for or underpinning it. To merit liberality, petitioner must show
reasonable cause justifying its non-compliance with the rules and must convince the
Court that the outright dismissal of the petition would defeat the administration of
substantial justice. x x x The desired leniency cannot be accorded absent valid and
compelling reasons for such a procedural lapse. x x x
In this case, the justifications given by the CA for its liberality by choosing to
overlook the belated filing of the appeal are, the importance of the issue raised, i.e.,
whether respondent was illegally dismissed; and the belief that respondent should
be "afforded the amplest opportunity for the proper and just determination of his
cause, free from the constraints of technicalities," considering that the belated filing
of respondent's appeal before the NLRC was the fault of respondent's former
counsel. Note, however, that neither respondent nor her former counsel gave any
explanation or reason citing extraordinary circumstances for her lawyer's failure to
abide by the rules for filing an appeal. Respondent merely insisted that she had not
been remiss in following up her case with said lawyer. It is, however, an oft-repeated
ruling that the negligence and mistakes of counsel bind the client. A departure from
this rule would bring about never-ending suits, so long as lawyers could allege their
own fault or negligence to support the clients case and obtain remedies and reliefs
already lost by the operation of law.
It should also be borne in mind that the right of the winning party to enjoy the
finality of the resolution of the case is also an essential part of public policy and the
orderly administration of justice. Hence, such right is just as weighty or equally
important as the right of the losing party to appeal or seek reconsideration within
the prescribed period.
When the Labor Arbiter's Decision became final, petitioners attained a vested right
to said judgment.

23)
McBurnie vs. Ganzon, GR No. 178034/1718117, October 17,
2013, En banc
FACTS:
On October 4, 2002, McBurnie, an Australian national, instituted a complaint for
illegal dismissal and other monetary claims against the respondents. McBurnie
claimed that on May 11, 1999, he signed a five-year employment agreement with
the company EGI as an Executive Vice-President who shall oversee the
management of the company's hotels and resorts within the Philippines. He
performed work for the company until sometime in November 1999, when he
figured in an accident that compelled him to go back to Australia while recuperating
from his injuries. While in Australia, he was informed by respondent Ganzon that his
services were no longer needed because their intended project would no longer
push through.
The respondents opposed the complaint, contending that their agreement with
McBurnie was to jointly invest in and establish a company for the management of
hotels. They did not intend to create an employer-employee relationship, and the
execution of the employment contract that was being invoked by McBurnie was
solely for the purpose of allowing McBurnie to obtain an alien work permit in the
Philippines. At the time McBurnie left for Australia for his medical treatment, he had
not yet obtained a work permit.
In a Decision dated September 30, 2004, the LA declared McBurnie as having been
illegally dismissed from employment, and thus entitled to receive from the
respondents the following amounts: (a) US$985,162.00 as salary and benefits for
the unexpired term of their employment contract, (b) P2,000,000.00 as moral and
exemplary damages, and (c) attorney's fees equivalent to 10% of the total
monetary award.
Feeling aggrieved, the respondents appealed the LA's Decision to the NLRC. On
November 5, 2004, they filed their Memorandum of Appeal and Motion to reduce
Bond, and posted an appeal bond in the amount of P100,000.00. The respondents
contended in their Motion to Reduce Bond, inter alia, that the monetary awards of
the LA were null and excessive, allegedly with the intention of rendering them
incapable of posting the necessary appeal bond. They claimed that an award of
"more than P60 Million Pesos to a single foreigner who had no work permit and who
left the country for good one month after the purported commencement of his
employment" was a patent nullity. Furthermore, they claimed that because of their
business losses that may be attributed to an economic crisis, they lacked the
capacity to pay the bond of almost P60 Million, or even the millions of pesos in
premium required for such bond.
On March 31, 2005, the NLRC denied the motion to reduce bond, explaining that "in
cases involving monetary award, an employer seeking to appeal the [LA's] decision
to the Commission is unconditionally required by Art. 223, Labor Code to post bond
in the amount equivalent to the monetary award.. Thus, the NLRC required from
the respondents the posting of an additional bond in the amount of P54,083,910.00.

When their motion for reconsideration was denied, the respondents decided to
elevate the matter to the Court of Appeals (CA) via the Petition for Certiorari and
Prohibition (With Extremely Urgent Prayer for the Issuance of a Preliminary
Injunction and/or Temporary Restraining Order)
ISSUE:
Whether the appeal bond was sufficient and whether McBurnie was illegally
dismissed.
RULING:
We emphasize that the crucial issue in this case concerns the sufficiency of the
appeal bond that was posted by the respondents. The present rule on the matter is
Section 6, Rule VI of the 2011 NLRC Rules of Procedure:
RULE VI APPEALS
Sec. 6. BOND. In case the decision of the Labor Arbiter or the Regional Director
involves a monetary award, an appeal by the employer may be perfected only upon
the posting of a cash or surety bond. The appeal bond shall either be in cash or
surety in an amount equivalent to the monetary award, exclusive of damages and
attorney's fees.
xxx xxx xxx
No motion to reduce bond shall be entertained except on meritorious
grounds and upon the posting of a bond in a reasonable amount in
relation to the monetary award. The filing of the motion to reduce bond without
compliance with the requisites in the preceding paragraph shall not stop the
running of the period to perfect an appeal.
The posting of a bond is indispensable to the perfection of an appeal in cases
involving monetary awards from the decision of the Labor Arbiter. Moreover, the
filing of the bond is not only mandatory but a jurisdictional requirement as well, that
must be complied with in order to confer jurisdiction upon the NLRC. Noncompliance therewith renders the decision of the Labor Arbiter final and executory.
It behooves the Court to give utmost regard to the legislative and administrative
intent to strictly require the employer to post a cash or surety bond securing the
full amount of the monetary award within the 10 day reglementary period.
Nothing in the Labor Code or the NLRC Rules of Procedure authorizes the
posting of a bond that is less than the monetary award in the judgment, or
would deem such insufficient posting as sufficient to perfect the appeal.
While the bond may be reduced upon motion by the employer, this is subject to the
conditions that (1) the motion to reduce the bond shall be based on meritorious
grounds; and (2) a reasonable amount in relation to the monetary award is
posted by the appellant, otherwise the filing of the motion to reduce bond shall not
stop the running of the period to perfect an appeal. The qualification effectively
requires that unless the NLRC grants the reduction of the cash bond within the 10
day reglementary period, the employer is still expected to post the cash or
surety bond securing the full amount within the said 10 day period. If the
NLRC does eventually grant the motion for reduction after the reglementary period

has elapsed, the correct relief would be to reduce the cash or surety bond already
posted by the employer within the 10-day period.
In order to give full effect to the provisions on motion to reduce bond, the
appellant must be allowed to wait for the ruling of the NLRC on the motion
even beyond the 10-day period to perfect an appeal. If the NLRC grants the
motion and rules that there is indeed meritorious ground and that the amount of the
bond posted is reasonable, then the appeal is perfected. If the NLRC denies the
motion, the appellant may still file a motion for reconsideration as provided under
Section 15, Rule VII of the Rules.
In any case, the rule that the filing of a motion to reduce bond shall not
stop the running of the period to perfect an appeal is not absolute. The
Court may relax the rule. In Intertranz Container Lines, Inc. v. Bautista, the Court
held: "Jurisprudence tells us that in labor cases, an appeal from a decision involving
a monetary award may be perfected only upon the posting of cash or surety bond.
The Court, however, has relaxed this requirement under certain exceptional
circumstances in order to resolve controversies on their merits. These
circumstances include: (1) fundamental consideration of substantial justice; (2)
prevention of miscarriage of justice or of unjust enrichment; and (3) special
circumstances of the case combined with its legal merits, and the amount and the
issue involved."
What constitutes a reasonable amount in the determination of the final
amount of appeal bond
As regards the requirement on the posting of a bond in a "reasonable amount," the
Court holds that the final determination thereof by the NLRC shall be based
primarily on the merits of the motion and the main appeal.
On issue of illegal dismissal
Considering that McBurnie, an Australian, alleged illegal dismissal and sought to
claim under our labor laws, it was necessary for him to establish, first and foremost,
that he was qualified and duly authorized to obtain employment within our
jurisdiction. A requirement for foreigners who intend to work within the country is an
employment permit, as provided under Article 40, Title II of the Labor Code.
All facts and circumstances prove that [McBurnie] was never an employee
of Eulalio Ganzon or the [respondent] companies, but a potential investor
in a project with a group including Eulalio Ganzon and Martinez but said
project did not take off because of lack of funds.
McBurnie failed to present a single evidence that [the respondents] paid his salaries
like payslip, check or cash vouchers duly signed by him or any document showing
proof of receipt of his compensation from [the respondents] or activity in
furtherance of the employment contract.
The NLRC's findings on the contractual relations between McBurnie and the
respondents are supported by the records. Mc Burnie was not illegally dismissed.

24)
Indophil Textile Mills Inc. vs. Engr. Adviento, GR No. 171212,
August 4, 2014
Facts: Petitioner Indophil Textile Mills, Inc. is a domestic corporation engaged in the
business of manufacturing thread for weaving. On August 21, 1990, petitioner hired
respondent Engr. Salvador Adviento as Civil Engineer to maintain its facilities in
Lambakin, Marilao, Bulacan.
Respondent was diagnosed with Chronic Poly Sinusitis, and thereafter, with
moderate, severe and persistent Allergic Rhinitis. Accordingly, he was advised by
his doctor to totally avoid house dust mite and textile dust as it will transmute into
health problems.Distressed, respondent filed a complaint against petitioner with the
National Labor Relations Commission (NLRC), San Fernando, Pampanga, for alleged
illegal dismissal and for the payment of backwages, separation pay, actual damages
and attorney's fees. The said case is still pending resolution with the NLRC at the
time the instant petition was filed.
Subsequently, respondent filed another Complaint with the Regional Trial Court
(RTC) of Aparri, Cagayan, alleging that he contracted such occupational disease by
reason of the gross negligence of petitioner to provide him with a safe, healthy and
workable environment. As part of his job description, he conducts regular
maintenance check on petitioner's facilities including its dye house area, which is
very hot and emits foul chemical odor with no adequate safety measures introduced
by petitioner. Respondent recommended to management to place roof insulation to
minimize, if not, eradicate the health hazards attendant in the work place. However,
said recommendation was turned down by management due to high cost. According
to respondent, health hazards have been the persistent complaints of most, if not
all, workers of petitioner. Nevertheless, said complaints fell on deaf ears as
petitioner callously ignored the health problems of its workers and even tended to
be apathetic to their plight.
Respondent averred that, being the only breadwinner in the family, he made several
attempts to apply for a new job, but to his dismay and frustration, employers who
knew of his present health condition discriminated against him and turned down his
application. By reason thereof, respondent suffered intense moral suffering, mental
anguish, serious anxiety and wounded feelings, praying for the recovery of the
following: (1) Five Million Pesos (P5,000,000.00) as moral damages; (2) Two Million
Pesos (P2,000,000.00) as exemplary damages; and (3) Seven Million Three
Thousand and Eight Pesos (P7,003,008.00) as compensatory damages.
Petitioner filed a Motion to Dismiss on the ground that: (1) the RTC has no
jurisdiction over the subject matter of the complaint because the same falls under
the original and exclusive jurisdiction of the Labor Arbiter (LA) under Article 217 (a)
(4) of the Labor Code; and (2) there is another action pending with the Regional
Arbitration Branch III of the NLRC in San Fernando City, Pampanga, involving the
same parties for the same cause.

RTC issued a Resolution denying the aforesaid Motion and sustaining its jurisdiction
over the instant case. It held that petitioner's alleged failure to provide its
employees with a safe, healthy and workable environment is an act of negligence, a
case of quasi-delict. As such, it is not within the jurisdiction of the LA under Article
217 of the Labor Code. On the matter of dismissal based on lis pendencia, the RTC
ruled that the complaint before the NLRC has a different cause of action which is for
illegal dismissal and prayer for backwages, actual damages, attorney's fees and
separation pay due to illegal dismissal while in the present case, the cause of action
is for quasi-delict.
Issue: Whether or not the RTC has jurisdiction over the subject matter of
respondent's complaint praying for moral damages, exemplary damages,
compensatory damages, anchored on petitioner's alleged gross negligence in failing
to provide a safe and healthy working environment for respondent
Petitioner's argument: Respondent's claim for damages is anchored on the alleged
gross negligence of petitioner as an employer to provide its employees, including
herein respondent, with a safe, healthy and workable environment; hence, it arose
from an employer-employee relationship. The fact of respondent's employment with
petitioner as a civil engineer is a necessary element of his cause of action because
without the same, respondent cannot claim to have a right to a safe, healthy and
workable environment. Thus, exclusive jurisdiction over the same should be vested
in the Labor Arbiter and the NLRC pursuant to Article 217 (a) (4) of the Labor Code
of the Philippines (Labor Code), as amended.
Ruling: We are not convinced. Here, we find that jurisdiction rests on the regular
courts.
The jurisdiction of the LA and the NLRC is outlined in Article 217 of the Labor Code,
as amended by Section 9 of Republic Act (R.A.) No. 6715, to wit:
ART. 217. Jurisdiction of Labor Arbiters and the Commission
(a) Except as otherwise provided under this Code the Labor Arbiter shall have
original and exclusive jurisdiction to hear and decide, within thirty (30) calendar
days after the submission of the case by the parties for decision without extension,
even in the absence of stenographic notes, the following cases involving all workers,
whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers
may file involving wages, rates of pay, hours of work and other terms and
conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising
from employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code including questions
involving the legality of strikes and lockouts; and

6. Except claims for Employees Compensation, Social Security, Medicare and

maternity benefits, all other claims, arising from employer-employee relations,
including those of persons in domestic or household service, involving an amount
exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with
a claim for reinstatement.
While we have upheld the present trend to refer worker-employer controversies to
labor courts in light of the aforequoted provision, we have also recognized that not
all claims involving employees can be resolved solely by our labor courts,
specifically when the law provides otherwise. For this reason, we have formulated
the "reasonable causal connection rule", wherein if there is a reasonable causal
connection between the claim asserted and the employer-employee relations, then
the case is within the jurisdiction of the labor courts; and in the absence thereof, it
is the regular courts that have jurisdiction. Such distinction is apt since it cannot be
presumed that money claims of workers which do not arise out of or in connection
with their employer-employee relationship, and which would therefore fall within the
general jurisdiction of the regular courts of justice, were intended by the legislative
authority to be taken away from the jurisdiction of the courts and lodged with Labor
Arbiters on an exclusive basis.
True, the maintenance of a safe and healthy workplace is ordinarily a subject of
labor cases. More, the acts complained of appear to constitute matters involving
employee-employer relations since respondent used to be the Civil Engineer of
petitioner. However, it should be stressed that respondent's claim for damages is
specifically grounded on petitioner's gross negligence to provide a safe, healthy and
workable environment for its employees a case of quasi-delict. This is easily
ascertained from a plain and cursory reading of the Complaint, which enumerates
the acts and/or omissions of petitioner relative to the conditions in the workplace. In
addition, respondent alleged that despite his earnest efforts to suggest to
management to place roof insulation to minimize, if not, eradicate the health
hazards attendant in the workplace, the same was not heeded.
It is a basic tenet that jurisdiction over the subject matter is determined upon the
allegations made in the complaint, irrespective of whether or not the plaintiff is
entitled to recover upon the claim asserted therein, which is a matter resolved only
after and as a result of a trial. Neither can jurisdiction of a court be made to depend
upon the defenses made by a defendant in his answer or motion to dismiss. In this
case, a perusal of the complaint would reveal that the subject matter is one of claim
for damages arising from quasi-delict, which is within the ambit of the regular
court's jurisdiction.
The pertinent provision of Article 2176 of the Civil Code which governs quasi-delict
provides that:
Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if
there is no pre-existing contractual relation between the parties, is called
quasi- delict.

Thus, to sustain a claim liability under quasi-delict, the following requisites must
concur: (a) damages suffered by the plaintiff; (b) fault or negligence of the
defendant, or some other person for whose acts he must respond; and (c) the
connection of cause and effect between the fault or negligence of the defendant
and the damages incurred by the plaintiff.
In the case at bar, respondent alleges that due to the continued and prolonged
exposure to textile dust seriously inimical to his health, he suffered work-contracted
disease which is now irreversible and incurable, and deprived him of job
opportunities. Clearly, injury and damages were allegedly suffered by respondent,
an element of quasi-delict. Secondly, the previous contract of employment between
petitioner and respondent cannot be used to counter the element of "no preexisting contractual relation" since petitioner's alleged gross negligence in
maintaining a hazardous work environment cannot be considered a mere breach of
such contract of employment, but falls squarely within the elements of quasi-delict
under Article 2176 of the Civil Code since the negligence is direct, substantive and
independent. Hence, we ruled in Yusen Air and Sea Services Phils.,Inc.v.Villamor
that:
When, as here, the cause of action is based on a quasi-delict or tort, which has no
reasonable causal connection with any of the claims provided for in Article 217,
jurisdiction over the action is with the regular courts.
It also bears stressing that respondent is not praying for any relief under the Labor
Code of the Philippines. He neither claims for reinstatement nor backwages or
separation pay resulting from an illegal termination. The cause of action herein
pertains to the consequence of petitioner's omission which led to a work-related
disease suffered by respondent, causing harm or damage to his person. Such cause
of action is within the realm of Civil Law, and jurisdiction over the controversy
belongs to the regular courts.
Further, it cannot be gainsaid that the claim for damages occurred after the
employer-employee relationship of petitioner and respondent has ceased. Given
that respondent no longer demands for any relief under the Labor Code as well as
the rules and regulations pertinent thereto, Article 217 (a) (4) of the Labor Code is
inapplicable to the instant case.
Where the resolution of the dispute requires expertise, not in labor management
relations nor in wage structures and other terms and conditions of employment, but
rather in the application of the general civil law, such claim falls outside the area of
competence of expertise ordinarily ascribed to the LA and the NLRC.
Guided by the aforequoted doctrines, we find no reason to reverse the findings of
the CA. The RTC has jurisdiction over the subject matter of respondent's complaint
praying for moral damages, exemplary damages, compensatory damages, anchored
on petitioner's alleged gross negligence in failing to provide a safe and healthy
working environment for respondent.

25)
FACTS

Manila Mining Corp., vs. Amor GR No. 182800, April 20, 2015

(Respondents) Lowito Amor et al. were regular employees of (Petitioner) Manila

Mining Corporation, a domestic corporation which operated a mining claim in
pursuit of its business of large-scale open-pit mining for gold and copper ore.
Petitioner maintained Tailing Pond No. 7 (TP No. 7), a tailings containment facility
required for the storage of waste materials generated by its mining operations.
When it reached the maximum level, petitioner temporarily shut down its mining
operations pending approval of its application to increase the capacity of the said
facility by the Department of Environment and Natural Resources-Environment
Management Bureau (DENR-EMB).
On 27 July 2001, petitioner served a notice, informing its employees and the
Department of Labor and Employment Regional Office (DOLE) of the temporary
suspension of its operations for six months and the temporary lay-off of two-thirds
of its employees. However, the suspension was extended for another six months.
Adversely affected by petitioners continued failure to resume its operations,
respondents filed the complaint for constructive dismissal and monetary claims.
Labor Arbiter Benjamin E. Pelaez rendered a Decision holding petitioner liable for
constructive dismissal.
Aggrieved, petitioner filed its memorandum of appeal before the NLRC and moved
for the reduction of the appeal bond on the ground that its financial losses in the
preceding years had rendered it unable to put up one in cash and/or surety
equivalent to the monetary award.
Respondents also argued that the appeal bond tendered by petitioner was so
grossly disproportionate to monetary award for the same to be considered
substantial compliance with the requirements for the perfection of an appeal from a
Labor Arbiters decision. However, the NLRC Fifth Division went on to render a
resolution, reversing the appealed decision and dismissing the complaint for lack of
merit (in favor of petitioner Mining Company).
Unfazed by the denial of their motion for reconsideration in the NLRCs Resolution,
respondents filed the Rule 65 petitionfor certiorari with the CA.
The CA then rendered the herein assailed decision, granting respondents petititon.
It applied the principle that the right to appeal is merely a statutory remedy and
that the party who seeks to avail of the same must strictly follow the requirements
therefor, the CA decreed that the Labor Arbiters Decision had already attained
finality and for said reason, had been placed beyond the NLRCs power of review.
Hence, this Rule 45 petition for review on certiorari.
ISSUE
Whether or not the Court of Appeals committed a grave abuse of discretion in
immediately setting aside the decision of the NLRC without reviewing the merits of
the case.

HELD
Time and again, it has been held that the right to appeal is not a natural right or a
part of due process; it is merely a statutory privilege, and may be exercised only in
the manner and in accordance with the provisions of law. A party who seeks to avail
of the right must, therefore, comply with the requirements of the rules, failing which
the right to appeal is invariably lost.
Having received the Labor Arbiters Decision on 24 November2004, petitioner had
ten (10) calendar days or until 4 December 2004 within which to perfect an appeal.
Our perusal of the record shows that, despite bearing the date 3 December 2004,
petitioners memorandum of appeal was subscribed only on 6 December 2004. The
CA discounted the timeliness of its filing in light of the established fact that the copy
thereof intended for respondents was only served by registered mail on 7 February
2005. which is way beyond the ten-day reglementary period to appeal.
The question regarding the appeal bond rises from the record which shows that,
petitioner filed a motion for the reduction of the appeal bond on the ground that the
cash equivalent of the monetary award and/or cost of the surety bond have proven
to be prohibitive in view of the tremendous business losses it allegedly sustained.
On the principle that substantial justice is better served by allowing appeals on the
merits, it has been ruled that the employer should comply with the following
conditions:
(1) the motion to reduce the bond shall be based on meritorious grounds; and
(2) a reasonable amount in relation to the monetary award is posted by the
appellant, otherwise the filing of the motion to reduce bond shall not stop the
running of the period to perfect an appeal
In this case, we see that with no proof to substantiate its claim, petitioner moved for
a reduction of the appeal bond on the proferred basis of serious losses and reverses
it supposedly sustained in the years prior to the rendition of the Labor Arbiter's
decision.
Since it is the posting of a cash or surety bond which confers jurisdiction upon the
NLRC, the rule is settled that non-compliance is fatal and has the effect of rendering
the award final and executory. Viewed in the light of the foregoing considerations,
the CA cannot be faulted for no longer discussing the merits of petitioners case.

14. OTHER IMPORTANT LABOR PROVISIONS

A. CONTRACTING ARRANGEMENT
1) PBCom vs. NLRC, 146 SCRA 347 [1986]
FACTS:
Petitioner Philippine Bank of Communications and the Corporate
Executive Search, Inc. (CESI) entered into an agreement under which CESI would
provide Temporary Services to petitioner consisting of eleven (11) messengers,
one of them was Orpiada. The contract period was described as from January 1976
although it appeared that Orpiada had been assigned to the bank since June 1975.
He rendered messengerial services to the bank, within its promises, together
with other the others doing a similar job. In or about October 1976, the bank
requested CESI to withdraw Orpiadas assignment because Orpiadas services were
no longer needed.
Orpiada filed a complaint against the bank for illegal dismissal and failure to
pay the 13th- month pay. The bank impleaded CESI as an additional respondent. The
Labor Arbiter ruled in favor of Orpiada. Hence, this petition for certiorari filed by the
bank.
ISSUE:
Whether or not an employer-employee relationship existed between
the bank and private respondent Orpiada.
HELD:
Yes. There is an employer-employee relationship that existed between
the bank and Orpiada. The fact that Orpiada worked or rendered services to the
bank for a period of about sixteen (16) months made him an employee of the bank.
Under the Labor Code, any employee who has rendered at least one (1) year of
service, whether such service is continuous or not, shall be considered a regular
employee. Thus, Orpiadas services may not be terminated by the bank except for a
just cause or when authorized under the Labor Code. CESI was engaged in laboronly contracting. Therefore, the petitioner bank is liable to Orpiada as if Orpiada had
been directly employed, not only by CESI but also by the bank.

2) Neri vs. NLRC, 224 SCRA 717 [1993]

FACTS:
Petitioners instituted complaints against FEBTC and BCC to compel the
bank to accept them as regular employees and for it to pay the differential between
the wages being paid them by BCC and those received by FEBTC employees with
similar length of service. They contended that BCC in engaged in labor-only
contracting because it failed to adduce evidence purporting to show that it invested
in the form of tools, equipment, machineries, work premises and other materials
which are necessary in the conduct of its business. Moreover, petitioners argue that
they perform duties which are directly related to the principal business or operation
of FEBTC.
It is well-settled that there is labor-only contracting where: (a) the person
supplying workers to an employer does not have substantial capital or investment in
the form of tools, equipment, machineries, work premises, among others; and, (b)
the workers recruited and placed by such person are performing activities which are
directly related to the principal business of the employer.
Ruling:
The Supreme Court ruled that respondent BCC need not prove that it
made investments in the form of tools, equipment, machineries, work premises,
among others, because it has established that it has sufficient capitalization. This
fact was both determined by the Labor Arbiter and the NLRC as BCC had a capital
stock of P1 million fully subscribed and paid for. BCC is therefore a highly capitalized
venture and cannot be deemed engaged in labor-only contracting.
While there may be no evidence that it has investment in the form of tools,
equipment, machineries, work premises, among others, it is enough that it has
substantial capital, as was established before the Labor Arbiter as well as the NLRC.
The law does not require both substantial capital and investment in the form of
tools, equipment, machineries, etc. This is clear from the use of the conjunction "or"
instead of "and".
Having established that it has substantial capital, it was no longer necessary
for BCC to further adduce evidence to prove that it does not fall within the purview
of "labor-only" contracting. There is even no need for it to refute petitioners'
contention that the activities they perform are directly related to the principal
business of respondent bank. On the other hand, the Court has already taken
judicial notice of the general practice adopted in several government and private
institutions and industries of hiring independent contractors to perform special
services.
These services range from janitorial, security and even technical or other
specific services such as those performed by petitioners Neri and Cabelin. While
these services may be considered directly related to the principal business of the
employer, nevertheless, they are not necessary in the conduct of the principal
business of the employer. Petition dismissed.

3) Filipinas Synthetic Fiber Corp., vs. NLRC, 257 SCRA 336 [1996]
FACTS:
On 4 April 1991 FILSYN, a domestic corporation engaged in the
manufacture of polyester fiber, contracted with De Lima Trading and General
Services (DE LIMA) for the performance of specific janitorial services Pursuant to the
agreement Felipe Loterte, among others, was deployed at FILSYN to take care of the
plants and maintain general cleanliness around the premises.
On 24 February 1992 Loterte sued FILSYN and DE LIMA as alternative
defendants for illegal dismissal, underpayment of wages, non-payment of legal
holiday pay, service incentive leave pay and 13th month pay alleging that he was
first assigned to perform janitorial work at FILSYN in 1981 by the La Saga General
Services; that the La Saga was changed to DE LIMA on August 1991; that when a
movement to demand increased wages and 13th month pay arose among the
workers on December 1991 he was accused by a certain Dodie La Flores of having
posted in the bulletin board at FILSYN an article attributing to management a secret
understanding to block the demand; and, for denying responsibility, his gate pass
was unceremoniously cancelled on 6 February 1992 and he was subsequently
dismissed.
Loterte was classified by the Labor Arbiter as a regular employee on the
ground that he performed tasks usually necessary or desirable in the main business
of FILSYN for more than ten (10) years or since 1981. FILSYN was declared to be the
real employer of Loterte and DE LIMA as a mere labor contractor. Hence, FILSYN was
adjudged liable for Loterte's reinstatement, payment of salary differentials and back
wages and other benefits. Hence, this petition for certiorari by FILSYN.
ISSUE:

Whether or not there exists an employer-employee relationship

between FILSYN and private respondent Felipe Loterte.
HELD: DE LIMA is an independent job contractor, therefore no direct employeremployee relationship exists between petitioner FILSYN and private respondent
Felipe Loterte. The relationship between petitioner Filipinas Synthetic Fiber
Corporation (FILSYN) and private respondent De Lima Trading and General Services
(DE LIMA) is one of job contractorship.
Under the Labor Code, two (2) elements must exist for a finding of labor-only
contracting: (a) the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work
premises, among others, and (b) the workers recruited and placed by such persons
are performing activities directly related to the principal business of such employer.
These two (2) elements do not exist in the instant case. As pointed out by
petitioner, private respondent DE LIMA is a going concern duly registered with the
Securities and Exchange Commission with substantial capitalization of
P1,600,000.00, P400,000.00 of which is actually subscribed. Hence, it cannot be
considered as engaged in labor-only contracting being a highly capitalized venture.
Moreover, while the janitorial services performed by Felipe Loterte pursuant to the
agreement between FILSYN and DE LIMA may be considered directly related to the
principal business of FILSYN which is the manufacture of polyester fiber,
nevertheless, they are not necessary in its operation. On the contrary, they are
merely incidental thereto, as opposed to being integral, without which production
and company sales will not suffer. Judicial notice has already been taken of the

general practice in private as well as in government institutions and industries of

hiring janitorial services on an independent contractor basis.
Respondent De Lima Trading and General Services (DE LIMA) are ordered to
reinstate private respondent FELIPE LOTERTE to his former position or its equivalent
without loss of seniority rights. And private respondent De Lima Trading and General
Services (DE LIMA) is ordered jointly and severally with petitioner Filipinas Synthetic
Fiber Corporation (FILSYN) to pay private respondent FELIPE LOTERTE hi salary
differentials, 13th month pay, service incentive leave pay, and backwages without
prejudice to FILSYN seeking reimbursement from DE LIMA for whatever amount the
former may pay or have paid the latter.

4) Maraquinot vs. NLRC, 284 SCRA 539 [1998]

FACTS:
Petitioner Maraguinot, Jr. maintains that he was employed by private
respondents as part of the filming crew. He was designated Assistant Electrician and
was promoted to the rank of Electrician. Petitioner Paulino Enero, on his part, claims
that private respondents employed him as a member of the shooting crew.
Petitioners tasks consisted of loading, unloading and arranging movie equipment in
the shooting area as instructed by the cameraman, returning the equipment to Viva
Films warehouse, assisting in the fixing of the lighting system, and performing
other tasks that the cameraman and/or director may assign. Petitioners sought the
assistance of their supervisor, Mrs. Cesario, to facilitate their request that private
respondents adjust their salary in accordance with the minimum wage law. Mrs.
Cesario informed petitioners that Mr. del Rosario would agree to increase their
salary only if they signed a blank employment contract. As petitioners refused to
sign, private respondents forced Enero to go on leave then refused to take him back
when he reported for work. Meanwhile, Maraguinot was dropped from the company
payroll but was returned on June 1992. He was again asked to sign a blank
employment contract, and when he still refused, private respondents terminated his
services on. Petitioners thus sued for illegal dismissal before the Labor Arbiter.
On the other hand, private respondents claim that VIVA is primarily engaged
in the distribution and exhibition of movies -- but not in the business of making
movies; in the same vein, private respondent Vic del Rosario is merely an executive
producer, i.e., the financier who invests a certain sum of money for the production
of movies distributed and exhibited by VIVA.
Private respondents assert that they contract persons called producers -also referred to as associate producers -- to produce or make movies for private
respondents; and contend that petitioners are project employees of the associate
producers who, in turn, act as independent contractors. As such, there is no
employer-employee relationship between petitioners and private respondents.
Private respondents further contend that it was the associate producer of the film
Mahirap Maging Pogi, who hired petitioner Maraguinot. The movie shot from 2
July up to 22 July 1992, and it was only then that Maraguinot was released upon
payment of his last salary, as his services were no longer needed. Anent petitioner
Enero, he was hired for the movie entitled Sigaw ng Puso,/Narito ang Puso. He
went on vacation and when he reported back for work on 20 July 1992, shooting for
the movie had already been completed.
ISSUES: Whether or not petitioners are project employees of associate producers
who, in turn, act as independent contractors.
Whether or not petitioners were illegally dismissed.
HELD:
It is settled that the contracting out of labor is allowed only in case of
job contracting. Sec. 8. Job contracting. -- There is job contracting permissible
under the Code if the following conditions are met: (1) The contractor carries on an
independent business and undertakes the contract work on his own account under
his own responsibility according to his own manner and method, free from the
control and direction of his employer or principal in all matters connected with the
performance of the work except as to the results thereof; and (2) The contractor has
substantial capital or investment in the form of tools, equipment, machineries, work

premises, and other materials which are necessary in the conduct of his business.
Assuming that the associate producers are job contractors, they must then be
engaged in the business of making motion pictures. As such, and to be a job
contractor under the preceding description, associate producers must have tools,
equipment, machinery, work premises, and other materials necessary to make
motion pictures. However, the associate producers here have none of these.
Private respondents evidence reveals that the movie-making equipment are
supplied to the producers and owned by VIVA. These include generators, cables and
wooden platforms, cameras and shooting equipment; in fact, VIVA likewise owns
the trucks used to transport the equipment. It is thus clear that the associate
producer merely leases the equipment from VIVA. Private respondents further
narrated that VIVAs generators broke down during petitioners last movie project,
which forced the associate producer concerned to rent generators, equipment and
crew from another company. This only shows that the associate producer did not
have substantial capital nor investment in the form of tools, equipment and other
materials necessary for making a movie. Private respondents in effect admit that
their producers, especially petitioners last producer, are not engaged in permissible
job contracting. If private respondents insist that their associate producers are labor
contractors, then these producers can only be labor-only contractors, defined by
the Labor Code. Sec. 9. Labor-only contracting. (a) Any person who undertakes to
supply workers to an employer shall be deemed to be engaged in labor-only
contracting where such person: (1) Does not have substantial capital or investment
in the form of tools, equipment, machineries, work premises and other materials;
and (2) The workers recruited and placed by such person are performing activities
which are directly related to the principal business or operations of the employer in
which workers are habitually employed. (b) Labor-only contracting as defined
herein is hereby prohibited and the person acting as contractor shall be considered
merely as an agent or intermediary of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by
him. (c) For cases not falling under this Article, the Secretary of Labor shall
determine through appropriate orders whether or not the contracting out of labor is
permissible in the light of the circumstances of each case and after considering the
operating needs of the employer and the rights of the workers involved. In such
case, he may prescribe conditions and restrictions to insure the protection and
welfare of the workers.
As labor-only contracting is prohibited, the law considers the person or entity
engaged in the same a mere agent or intermediary of the direct employer. But
even by the preceding standards, the associate producers of VIVA cannot be
considered labor-only contractors as they did not supply, recruit nor hire the
workers. In the instant case, it was Juanita Cesario, Shooting Unit Supervisor and an
employee of VIVA, who recruited crew members from an available group of freelance workers which includes the complainants Maraguinot and Enero. And in their
Memorandum, private respondents declared that the associate producer hires the
services of... 6) camera crew which includes (a) cameraman; (b) the utility crew; (c)
the technical staff; (d) generator man and electrician; (e) clapper; etc.... This
clearly showed that the associate producers did not supply the workers required by
the movie project. The relationship between VIVA and its producers or associate
producers seems to be that of agency, as the latter make movies on behalf of VIVA,
whose business is to make movies. As such, the employment relationship
between petitioners and producers is actually one between petitioners and VIVA,

with the latter being the direct employer. Notably, nowhere in the appointment slip
does it appear that it was the producer or associate producer who hired the crew
members; moreover, it is VIVAs corporate name which appears on the heading of
the appointment slip. What likewise tells against VIVA is that it paid petitioners
salaries as evidenced by vouchers, containing VIVAs letterhead, for that purpose.
A project employee or a member of a work pool may acquire the status of a
regular employee when the following concur: 1) There is a continuous rehiring of
project employees even after cessation of a project; and 2) The tasks performed by
the alleged project employee are vital, necessary and indispensable to the usual
business or trade of the employer. However, the length of time during which the
employee was continuously re-hired is not controlling, but merely serves as a badge
of regular employment. In the instant case, the evidence on record shows that
petitioner Enero was employed for a total of 2 years and engaged in at least 18
projects, while petitioner Maraguinot was employed for some 3 years and worked on
at least 23 projects. Moreover, as petitioners tasks involved, among other chores,
the loading, unloading and arranging of movie equipment in the shooting area as
instructed by the cameramen, returning the equipment to the Viva Films
warehouse, and assisting in the fixing of the lighting system, it may not be
gainsaid that these tasks were vital, necessary and indispensable to the usual
business or trade of the employer. As regards the underscored phrase, it has been
held that this is ascertained by considering the nature of the work performed and its
relation to the scheme of the particular business or trade in its entirety. In closing
then, as petitioners had already gained the status of regular employees, their
dismissal was unwarranted, for the cause invoked by private respondents for
petitioners dismissal, viz., completion of project, was not, as to them, a valid cause
for dismissal under Article 282 of the Labor Code. As such, petitioners are now
entitled to back wages and reinstatement, without loss of seniority rights and other
benefits that may have accrued. Nevertheless, following the principles of
suspension of work and no pay between the end of one project and the start of
a new one, in computing petitioners back wages, the amounts corresponding to
what could have been earned during the periods from the date petitioners were
dismissed until their reinstatement when petitioners respective Shooting Units were
not undertaking any movie projects, should be deducted.

5) Urbanes Jr. vs. Sec. Of Labor, G.R. No. 122791, Feb. 19, 2003
FACTS:
Petitioner Placido O. Urbanes, Jr., doing business under the name and
style of Catalina Security Agency, entered into an agreement to provide security
services to respondent Social Security System (SSS).
During the effectivity of the agreement, petitioner, by letter of May 16, 1994,
requested the SSS for the upward adjustment of their contract rate in view of Wage
Order No. NCR-03 which was issued by the Regional Tripartite Wages and
Productivity Board-NCR.
Petitioner sent several letters dated June 7 and June 8, 1994, reiterating the
request. On June 24, 1994, petitioner pulled out his agencys services from the
premises of the SSS. Petitioner, on June 29, 1994, filed a complaint with the DOLENCR against the SSS seeking the implementation of Wage Order No. NCR-03.
In its position paper, the SSS prayed for the dismissal of the complaint on the
ground that petitioner is not the real party in interest and has no legal capacity to
file the same. In any event, it argued that if it had any obligation, it was to the
security guards. Morever, it contended that the security guards assigned to the SSS
do not have any legal basis to file a complaint against it for lack of contractual
privity.
Finding for petitioner, the Regional Director of the DOLE-NCR ordered
respondent SSS to pay complainant the sum of P 1,600,858.46 representing the
wage differentials under Wage Order No. NCR-03 of the 168 Security Guards of
Catalina Security Agency covering the period from December 16, 1993 to June 24,
1994.
The SSS moved to reconsider the September 16, 1994 Order of the Regional
Director, praying that the computation be revised. By Order of December 9, 1994,
the Regional Director modified his September 16, 1994 Order by reducing the
amount payable by the SSS to petitioner. The amount was reduced to P
1,237,740.00.
The SSS appealed to the Secretary of Labor upon several assigned errors.
Thereafter, the Secretary of Labor, by Order of June 22, 1995, set aside the order of
the Regional Director and remanded the records of the case "for recomputation of
the wage differentials using P 5,281.00 as the basis of the wage adjustment." And
the Secretary held petitioners security agency "Jointly and severally liable for wage
differentials, the amount of which should be paid directly to the security guards
concerned."
ISSUES: 1. Whether or not the Secretary of Labor has jurisdiction to review appeals
from decisions of the Regional Directors.
2. Whether or not SSS is liable to pay petitioner for wage differentials.
Contentions:
Petitioner asserts that the Secretary of Labor does not have jurisdiction to
review appeals from decisions of the Regional Directors in complaints filed under
Article 129 of the Labor Code which provides:
ART. 129. RECOVERY OF WAGES, SIMPLE MONEY CLAIMS AND OTHER
BENEFITS. Upon complaint of any interested party, the regional director of
the Department of Labor and Employment or any duly authorized hearing
officers of the Department is empowered, through summary proceeding

and after due notice, to hear and decide any matter involving the
recovery of wages and other monetary claims and benefits, including
legal interest, owing to an employee or person employed in domestic or
household service or househelper under this Code, arising from employeremployee relations: Provided, That such complaint does not include a
claim for reinstatement; Provided, further, That the aggregate money
claim of each employee or househelper does not exceed Five Thousand
pesos (P5,000.00). The regional director or hearing officer shall decide or
resolve the complaint within thirty (30) calendar days from the date of the
filing of the same. Any sum thus recovered on behalf of any employee or
househelper pursuant to this Article shall be held in a special deposit
account by, and shall be paid on order of, the Secretary of Labor and
Employment or the regional director directly to the employee or
househelper concerned. Any such sum not paid to the employee or
househelper, because he cannot be located after diligent and reasonable
effort to locate him within a period of three (3) years, shall be held as a
special fund of the Department of Labor and Employment to be used
exclusively for the amelioration and benefit of workers.
Any decision or resolution of the regional director or officer pursuant to
this provision may be appealed on the same grounds provided in Article
223 of this Code, within five (5) calendar days from receipt of a copy of
said decision or resolution, to the National Labor Relations Commission
which shall resolve the appeal within ten (10) calendar days from
submission of the last pleading required or allowed under its rules.
xxx
Petitioner thus contends that as the appeal of SSS was filed with the wrong
forum, it should have been dismissed.
The SSS, on the other hand, contends that Article 128, not Article 129, is
applicable to the case. Article 128 provides:
ART. 128. VISITORIAL AND ENFORCEMENT POWERS
xxx
(b) Notwithstanding the provisions of Article 129 and 217 of this Code to
the contrary, and in cases where the relationship of employer-employee
still exists, the Secretary of Labor and Employment or his duly authorized
representatives shall have the power to issue compliance orders to give
effect to labor legislation based on the findings of labor employment and
enforcement officers or industrial safety engineers made in the course of
inspection.
xxx
An order issued by the duly authorized representative of the Secretary of
Labor and Employment under this article may be appealed to the latter.
x x x.
HELD:
Neither the petitioners contention nor the SSSs is impressed with
merit. Lapanday Agricultural Development Corporation v. Court of Appeals
instructs so. In that case, the security agency filed a complaint before the RTC
against the principal or client Lapanday for the upward adjustment of the
contract rate in accordance with Wage Order Nos. 5 and 6. Lapanday argued

that it is the National Labor Relations Commission, not the civil courts, which has
jurisdiction to resolve the issue in the case, it involving the enforcement of wage
adjustment and other benefits due the agencys security guards as mandated by
several wage orders. Holding that the RTC has jurisdiction over the controversy,
this Court ruled:
We agree with the respondent that the RTC has jurisdiction over the
subject matter of the present case. It is well settled in law and
jurisprudence that where no employer-employee relationship exists
between the parties and no issue is involved which may be resolved by
reference to the Labor Code, other labor statutes or any collective
bargaining agreement, it is the Regional Trial Court that has jurisdiction. In
its complaint, private respondent is not seeking any relief under the Labor
Code but seeks payment of a sum of money and damages on account of
petitioner's alleged breach of its obligation under their Guard Service
Contract. The action is within the realm of civil law hence jurisdiction over
the case belongs to the regular courts. While the resolution of the issue
involves the application of labor laws, reference to the labor code was
only for the determination of the solidary liability of the petitioner to the
respondent where no employer-employee relation exists.
In the case at bar, even if petitioner filed the complaint on his and also on
behalf of the security guards, the relief sought has to do with the enforcement of
the contract between him and the SSS which was deemed amended by virtue of
Wage Order No. NCR-03. The controversy subject of the case at bar is thus a civil
dispute, the proper forum for the resolution of which is the civil courts.
But even assuming arguendo that petitioners complaint were filed with the
proper forum, for lack of cause of action it must be dismissed. Articles 106, 107 and
109 of the Labor Code provide:
ART. 106. CONTRACTOR OR SUBCONTRACTOR. Whenever an employer
enters into contract with another person for the performance of the
formers work, the employees of the contractor and of the latters
subcontractor, if any, shall be paid in accordance with the provisions of
this Code.
In the event that the contractor or subcontractor fails to pay the
wage of his employees in accordance with this Code, the employer shall
be jointly and severally liable with his contractor or subcontractor to such
employees to the extent of the work performed under the contract, in the
same manner and extent that he is liable to employees directly employed
by him.
xxx
ART. 107 INDIRECT EMPLOYER. The provisions of the immediately
preceding Article shall likewise apply to any person, partnership,
association or corporation which, not being an employer, contracts with
an independent contractor for the performance of any work, task, job or
project.
ART. 109. SOLIDARY LIABILTY. The provisions of existing laws to the
contrary notwithstanding, every employer or indirect employer shall be
held responsible with his contractor or subcontractor for any violation of
any provision of this Code. For purposes of determining the extent of their

civil liability under this Chapter, they shall be considered as direct

employers.
As to the second issue, the liability of the SSS to reimburse petitioner arises
only if and when petitioner pays his employee-security guards "the increases"
mandated by Wage Order No. NCR-03.
The records do not show that petitioner has paid the mandated increases to the
security guards. The security guards in fact have filed a complaint with the NLRC
against petitioner relative to, among other things, underpayment of wages.

6) San Miguel vs. Maerc Integrated Services, G.R. No. 144672, July 10, 2003
FACTS:
Brought before this court is a petition seeking for a review of the Court
of Appeals' judgment. The facts are as follows.
291 workers filed complaints against San Miguel Corporation and Maerc
Integrated Services, Inc. for illegal dismissal, underpayment of wages, non-payment
of service incentive leave pays and other labor standards benefits, and for
separation pays from 25 June to 24 October 1991. The complainants alleged that
they were hired by SMC through its agent or intermediary Maerc. They were paid on
a per piece or pakiao basis except for a few who worked as checkers and were paid
on daily wage basis.
SMC denied liability for the claims and averred that the complainants were
not its employees but of MAERC.
When the service contract was terminated, complainants claimed that SMC
stopped them from performing their jobs; that this was tantamount to their being
illegally dismissed by SMC who was their real employer; and, that MAERC was
merely made a tool or a shield by SMC to avoid its liability under the Labor Code.
On 31 January 1995 the Labor Arbiter rendered a decision holding that MAERC
was an independent contractor. He dismissed the complaints for illegal dismissal but
held that MAERC and SMC were jointly and severally liable to pay complainants their
wage differentials.
The National Labor Relations Commission (NLRC) ruled in its 7 January 1997
decision that MAERC was a labor-only contractor and that complainants were
employees of SMC but still held SMC to be jointly and severally liable with MAERC
for complainants' separation benefits.
On 28 April 2000 the Court of Appeals denied the petition and affirmed the
decision of the NLRC.
ISSUE:
Whether or not the complainants are employees of petitioner SMC or
of respondent MAERC.
HELD:
Evidence discloses that petitioner played a large and indispensable
part in the hiring of MAERC's workers. It also appears that majority of the
complainants had already been working for SMC long before the signing of the
service contract between SMC and MAERC in 1988.
In labor-only contracting, the statute creates an employer-employee
relationship for a comprehensive purpose: to prevent a circumvention of labor laws.
The contractor is considered merely an agent of the principal employer and the
latter is responsible to the employees of the labor-only contractor as if such
employees had been directly employed by the principal employer. The principal
employer therefore becomes solidarily liable with the labor-only contractor for all
the rightful claims of the employees.
This distinction between job contractor and labor-only contractor, however,
will not discharge SMC from paying the separation benefits of the workers,
inasmuch as MAERC was shown to be a labor-only contractor; in which case,
petitioner's liability is that of a direct employer and thus solidarily liable with
MAERC.
Respondent Maerc Integrated Services, Inc. is declared to be a labor-only
contractor. Accordingly, both petitioner San Miguel Corporation and respondent

Maerc Integrated Services, Inc., are ordered to jointly and severally pay
complainants (private respondents herein) separation benefits and wage
differentials as may be finally recomputed by the Labor Arbiter as herein directed,
plus attorney's fees to be computed on the basis of ten percent (10%) of the
amounts which complainants may recover pursuant to Art. 111 of the Labor Code,
as well as an indemnity fee of P2,000.00 to each complainant.

7) Mariveles Shipyard vs. CA, G.R. No. 144134, Nov. 11, 2003
FACTS:
Sometime in October 1993, petitioner Mariveles Shipyard Corp.
engaged the services of Longest Force Investigation and Security Agency, Inc. to
render security services at its premises. Petitioner religiously complied with the
terms of the contract, promptly paying its bills and the contract rates. However, it
found the services unsatisfactory and inadequate causing it to terminate its
contract with Longest Force. Longest force in turn terminated the employment of
the security guards deployed to petitioner.
On September 2, 1996 private respondents filed a case of illegal dismissal,
underpayment of wages pursuant to the PNPSOSIA-PADPAO rates, nonpayment of
overtime pay, premium pay for holiday and rest day, service incentive leave pay,
13th month pay and attorneys fees against petitioner and Longest Force. Labor
Arbiter and NLRC ruled in favor of private respondents and declared Longest Force
and petitioner jointly and severally liable to pay the money claims of complainants.
ISSUE:
Force.

Whether or not petitioner is jointly and severally liable with Longest

HELD:
Petitioners liability is joint and several with Longest Force pursuant to
Art 106, 107 and 109 of the Labor Code. When petitioner contracted for security
services with Longest Force as the security agency that hired private respondents to
work as guards for the shipyard corporation, petitioner became indirect employer of
private respondents pursuant to Art 107. Following Art 106, when the agency as
contractor failed to pay the guards, the corporation as principal becomes jointly and
severally liable for the guards wages.
Petitioner cannot evade its liability by claiming that it had religiously paid the
compensation of the guards as stipulated under the contract. Labor Standards are
enacted by the legislature to alleviate the plight of workers whose wages barely
meet the costs of their basic needs.
However, petitioner has the right of reimbursement from his co-debtor.

8) New Golden City Builders vs. CA, G.R. No. 154715, Dec. 11, 2003
FACTS:
On April 4, 1995, petitioner New Golden City Builders and Development
Corporation, a corporation engaged in the construction business, entered into a
construction contract with Prince David Development Corporation for the
construction of a 17-storey office and residential condominium building. Petitioner
engaged the services of Nilo Layno Builders to do the specialized "concrete works,
form works and steel rebars works". Pursuant to the contract, Nilo Layno Builders
hired private respondents to perform work at the project. After the completion of the
phase for which Nilo Layno Builders was contracted sometime in 1996, private
respondents filed a complaint case against petitioner and its president, Manuel Sy,
with the Arbitration Branch of the NLRC for "unfair labor practice, non-payment of
13th month pay, non-payment of 5 days service incentive leave, illegal dismissal
and severance pay in lieu of reinstatement." The Labor Arbiter rendered a decision
finding that Nilo Layno Builders was a labor-only-contractor; thus, private
respondents were deemed employees of the petitioner.
ISSUES:
Whether Nilo Layno Builders was an "independent contractor" or a
"labor-only" contractor.
Whether or not there existed an employer-employee relationship between the
petitioner and the respondent.
HELD:
Section 8, Rule VIII, Book III, of the Omnibus Rules Implementing the
Labor Code, an independent contractor is one who undertakes "job contracting,"
i.e., a person who:
(a) carries on an independent business and undertakes the contract work on
his own account under his own responsibility according to his own manner and
method, free from the control and direction of his employer or principal in all
matters connected with the performance of the work except as to the results
thereof; and
(b) has substantial capital or investment in the form of tools, equipments,
machineries, work premises, and other materials which are necessary in the
conduct of the business.
Nilo Layno Builders is undertaking permissible labor or job contracting. Nilo
Layno Builders is a duly licensed labor contractor carrying on an independent
business for a specialized work that involves the use of some particular, unusual
and peculiar skills and expertise, like concrete works, form works and steel rebars
works. As a licensed labor contractor, it complied with the conditions set forth in
Section 5, Rule VII-A, Book III, Rules to Implement the Labor Code, among others,
proof of financial capability and list of equipment, tools, machineries and
implements to be used in the business. Further, it entered into a written contract
with the petitioner, a requirement under Section 3, Rule VII-A, Book III, Rules to
Implement the Labor Code to assure the employees of the minimum labor standards
and benefits provided by existing laws.
The test to determine the existence of independent contractorship is whether
one claiming to be an independent contractor has contracted to do the work
according to his own methods and without being subject to the control of the
employer, except only to the results of the work. This is exactly the situation

obtaining in the case at bar. Nilo Layno Builders hired its own employees, the
private respondents, to do specialized work in the Prince David Project of the
petitioner. The means and methods adopted by the private respondents were
directed by Nilo Layno Builders except that, from time to time, the engineers of the
petitioner visited the site to check whether the work was in accord with the plans
and specifications of the principal.
Second issue, we hold that there existed an employer-employee relationship
between petitioner and private respondents albeit for a limited purpose. In
legitimate job contracting, the law creates an employer-employee relationship for a
limited purpose, i.e., to ensure that the employees are paid their wages. The
principal employer becomes jointly and severally liable with the job contractor only
for the payment of the employees' wages whenever the contractor fails to pay the
same. Other than that, the principal employer is not responsible for any claim made
by the employees. From the foregoing disquisition, the petitioner did not, as it could
not, illegally dismiss the private complainants. Hence, it could not be held liable for
backwages and separation pay. Nevertheless, it is jointly and severally liable with
Nilo Layno Builders for the private complainants' wages, in the same manner and
extent that it is liable to its direct employees. The pertinent provisions of the Labor
Code read:
ART. 106. Contractor or subcontractor. Whenever an employer enters
into a contract with another person for the performance of the former's work,
the employees of the contractor and of the latter's subcontractor, if any, shall
be paid in accordance with the provisions of this Code. In the event that the
contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable
with his contractor or subcontractor to such employees to the extent of the
work performed under the contract, in the same manner and extent that he is
liable to employees directly employed by him.
ART. 107. Indirect employer. The provisions of the immediately
preceding Article shall likewise apply to any person, partnership, association
or corporation which, not being an employer, contracts with an independent
contractor for the performance of any work, task, job or project.

9) National Food Authority vs. Maceda SecurIty Agency, G.R. No. 163448, March
8, 2005
FACTS:
On September 17, 1996 respondent Masada Security Agency, Inc.
entered into a one year contract to provide security services to the offices,
warehouses and installations of NFA within Reg. I. Upon the expiration of the
contract, the parties extended the effectivity thereon on a monthly basis under the
same terms and conditions.
RTWPB issued several wage orders mandating increases in the daily wage
rates.
Accordingly, respondent requested NFA for a corresponding upward
adjustment in the monthly contract rate consisting of the increases in the daily
minimum wage of the security guards including the corresponding raise in their
overtime pay, holiday pay, 13th month pay, holiday and rest day pay. It also claimed
increases in SSS and Pag-ibig premiums including administrative cost and margin.
NFA granted the request only with respect to the daily wage and denied with
respect to the adjustments in the other benefits and remunerations.
Regional Director and DOLE Secretary sustained the claim of defendant. RTC
and CA also ruled in favor of defendant.
ISSUE:
Whether or not the liability of principals in service contracts under Sec
6 of RA6727 and wage orders issued by the RTWPB is limited only to the increment
in minimum wage.
HELD:
Yes, the principals liability is limited only to the payment of the
increment in the statutory minimum wage rate, that is, the rate for a regular 8-hour
work day.
The term wage as used in Sec 6 of RA6727 pertains to no other than the
statutory minimum wage which is defined in the implementing rules as the lowest
wage rate fixed by law that an employer can pay his worker. The basis under Sec 7
is the normal working hours which shall not exceed 8 hours a day.
Where a statute, by its terms, is expressly limited to certain matters, it may
not, by interpretation and construction, be extended to others. The principals in
service contracts cannot be made to pay the corresponding wage increase in the
overtime pay, night shift differential, holiday and rest day pay, premium pay and
other benefits granted to workers. While the basis of said remuneration and
benefits is the statutory minimum wage, the law cannot be unduly expanded as to
include those not stated in the subject provision.
The parties may enter into stipulations increasing the liability of the principal,
but as long as the minimum obligation is complied with, there is no violation of the
Wage Rationalization Act.

10)

Abella vs. PLDT, G.R. No. 159469, June 8, 2005

FACTS:
Respondent PSI entered into an agreement with PLDT to provide the
latter with security guards. Under the agreement, it was expressly provided that
there shall be no employer-employee relationship between PLDT and the security
guards, which may be supplied by PSI, and that the latter shall have exclusive
authorized to select, engage, and discharge its security guards, with full control
over their wages, salaries or compensation.
Consequently, respondent PSI deployed security guards to the PLDT. On June
5, 1995, 65 security guards supplied by PSI filed a complaint for regularization
against PLDT with the Labor Arbiter. They alleged that they have been employed by
the company for more than 1 year and that they were under the control and
supervision of PLDT through its Security Department, therefore they should be
considered as regular employees.
HELD: In determining which between PLDT and PSI is the employer of the security
guards, the existence of the following factors should be considered: (1) selection
and engagement of the employee; (2) payment of wages; (3) power to dismiss; and
(4) power to control employees conduct. The Supreme Court adopted the
consistent findings based on the evidence adduced that it was PSI which exercised
the abovementioned criteria. Furthermore, the court added PSI was, in fact, a
legitimate job contractor. It is a registered corporation duly licensed by the PNP to
engage in security business. It has substantial capital and investment in the form of
guns, ammunitions, equipments, vehicles, etc., and abase all, it is servicing other
clients like PCI Bank and Crown Triumph, among others. Indeed, said security guards
are already the employees of PSI prior to their assignment to PLDT.

11)

San Miguel vs. Aballa, G.R. No. 149011, June 28, 2005

FACTS:
Petitioner San Miguel Corporation (SMC) and Sunflower Multi-Purpose
Cooperative (Sunflower) entered into a one-year Contract of Services commencing
on January 1, 1993, to be renewed on a month to month basis until terminated by
either party.
Pursuant to the contract, Sunflower engaged private respondents to, as they
did, render services at SMCs Bacolod Shrimp Processing Plant at Sta. Fe, Bacolod
City. The contract was deemed renewed by the parties every month after its
expiration on January 1, 1994 and private respondents continued to perform their
tasks until September 11, 1995.
In July 1995, private respondents filed a complaint before the NLRC, praying
to be declared as regular employees of SMC, with claims for recovery of all benefits
and privileges enjoyed by SMC rank and file employees. Private respondents
subsequently filed on September 25, 1995 an Amended Complaint to include illegal
dismissal as additional cause of action following SMCs closure of its Bacolod Shrimp
Processing Plant on September 15, 1995 which resulted in the termination of their
services.
SMC filed a Motion for Leave to File Attached Third Party Complaint dated
November 27, 1995 to implead Sunflower as Third Party Defendant which was
granted by the Labor Arbiter. SMC insists that private respondents are the
employees of Sunflower, an independent contractor. On the other hand, private
respondents assert that Sunflower is a labor-only contractor.
ISSUE:
respondents are employees of SMC.

Whether

or

not

HELD:
There is labor-only contracting where the person supplying workers
to an employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and the workers recruited
and placed by such person are performing activities which are directly related to the
principal business of such employer. In such cases, the person or intermediary shall
be considered merely as an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by
him.
The test to determine the existence of independent contractorship is whether
one claiming to be an independent contractor has contracted to do the work
according to his own methods and without being subject to the control of the
employer, except only as to the results of the work.
The Contract of Services between SMC and Sunflower shows that the parties
clearly disavowed the existence of an employer-employee relationship between SMC
and private respondents. The language of a contract is not, however, determinative
of the parties relationship; rather it is the totality of the facts and surrounding
circumstances of the case.
What appears is that Sunflower does not have substantial capitalization or
investment in the form of tools, equipment, machineries, work premises and other
materials to qualify it as an independent contractor. On the other hand, it is
gathered that the lot, building, machineries and all other working tools utilized by
private respondents in carrying out their tasks were owned and provided by SMC.

And from the job description provided by SMC itself, the work assigned to private
respondents was directly related to the aquaculture operations of SMC.
Undoubtedly, the nature of the work performed by private respondents in shrimp
harvesting, receiving and packing formed an integral part of the shrimp processing
operations of SMC.
Furthermore, Sunflower did not carry on an independent business or
undertake the performance of its service contract according to its own manner and
method, free from the control and supervision of its principal, SMC, its apparent role
having been merely to recruit persons to work for SMC. Sunflower did not cater to
clients other than SMC, and with the closure of SMCs Bacolod Shrimp Processing
Plant, Sunflower likewise ceased to exist.
Since private respondents who were engaged in shrimp processing performed
tasks usually necessary or desirable in the aquaculture business of SMC, they
should be deemed regular employees of the latter and as such are entitled to all the
benefits and rights appurtenant to regular employment.
Those performing janitorial and messengerial services however acquired
regular status only after rendering one-year service pursuant to Article 280 of the
Labor Code. Although janitorial and messengerial services are considered directly
related to the aquaculture business of SMC, they are deemed unnecessary in the
conduct of its principal business.

12)

Manila Electric Co., vs. Benamira, G.R. No. 145271, July 14, 2005

FACTS:
The individual respondents are licensed security guards formerly
employed by Peoples Security, Inc. and deployed as such at MERALCOs head office
in Ortigas Avenue, Pasig, Metro Manila. On Nov. 30, 1990, the security service
agreement between PSI and MERALCO was terminated.
Immediately thereafter, 56 of PSIs security guards, including herein eight
individual respondents, filed a complaint for unpaid monetary benefits against PSI
and MERALCO.
Meanwhile, the security service agreement between respondent Armed
Security & Detective Agency, Inc., (ASDAI) and MERALCO took effect on Dec. 1,
1990. Subsequently, the individual respondents were absorbed by ASDAI and
retained at MERALCOs head office.
On June 29, 1992, the labor arbiter rendered a decision in favor of the former
PSI security guards, including the individual respondents. Less than a month later,
the individual respondents filed another complaint for unpaid monetary benefits,
this time against ASDAI and MERALCO.
On July 25, 1992, the security service agreement between respondent
Advance Forces Security & Investigation Services, Inc. (AFSISI) and MERALCO took
effect, terminating the previous security service agreement with ASDAI. Except as to
the number of security guards, the amount to be paid the agency, and the
effectivity of the agreement, the terms and conditions were substantially identical
with the security service agreement with ASDAI.
The individual respondents amended their complaint to implead AFSISI as
party respondent. They then again amended their complaint to allege that AFSISI
terminated their services on August 6, 1992 without notice and just cause and
therefore guilty of illegal dismissal.
The individual respondents alleged that: MERALCO and ASDAI never paid
their overtime pay, service incentive leave pay, premium pay for Sundays and
Holidays, P50.00 monthly uniform allowance and underpaid their 13 th month pay; on
July 24, 1992, when the security service agreement of ASDAI was terminated and
AFSISI took over the security functions of the former on July 25, 1992, respondent
security guard Benamira was no longer given any work assignment when AFSISI
learned that the former has a pending case against PSI, in effect, dismissing him
from the service without just cause; and, the rest of the individual respondents were
absorbed by AFSISI but were not given any assignments, thereby dismissing them
from the service without just cause.
ASDAI denied in general terms any liability for the claims of the individual
respondents, claiming that there is nothing due them in connection with their
services.
On the other hand, MERALCO denied liability on the ground of lack of
employer-employee relationship with individual respondents. It averred that the
individual respondents are the employees of the security agencies it contracted for
security services; and that it has no existing liability for the individual respondents
claims since said security agencies have been fully paid for their services per their
respective security service agreement.
For its part, AFSISI asserted that: it is not liable for illegal dismissal since it
did not absorb or hire the individual respondents, the latter were merely hold-over
guards from ASDAI; it is not obliged to employ or absorb the security guards of the

agency it replaced since there is no provision in its security service agreement with
MERALCO or in law requiring it to absorb and hire the guards of ASDAI as it has its
own guards duly trained to service its various clients.
On January 3, 1994, after the submission of their respective evidence and
position papers, the labor arbiter rendered a Decision holding ASDAI and MERALCO
jointly and solidarily liable to the monetary claims of individual respondents and
dismissing the complaint against AFSISI. All the parties, except AFSISI, appealed to
the NLRC. NLRC affirmed in toto the decision of the Labor Arbiter. The individual
respondents filed a motion for partial reconsideration but it was denied by the NLRC.
The individual respondents filed a petition for certiorari before the SC. They
insisted that they were absorbed by AFSISI and the latter effected their termination
without notice and just cause. After the submission of the responsive pleadings and
memoranda, SC referred the petition to the CA which, modified the decision of the
NLRC by declaring MERALCO as the direct employer of the individual respondents.
The CA held that: MERALCO changed the security agency manning its
premises three times while engaging the services of the same people, the individual
respondents; MERALCO employed a scheme of hiring guards through an agency and
periodically entering into service contract with one agency after another in order to
evade the security of tenure of individual respondents; individual respondents are
regular employees of MERALCO since their services as security guards are usually
necessary or desirable in the usual business or trade of MERALCO and they have
been in the service of MERALCO for no less than six years; an employer-employee
relationship exists between MERALCO and the individual respondents because: (a)
MERALCO had the final say in the selection and hiring of the guards, as when its
advice was proved to have carried weight in AFSISIs decision not to absorb the
individual respondents into its workforce; (b) MERALCO paid the wages of individual
respondents through ASDAI and AFSISI; (c) MERALCOs discretion on matters of
dismissal of guards was given great weight and even finality since the record shows
that the individual respondents were replaced upon the advice of MERALCO; and,
(d) MERALCO has the right, at any time, to inspect the guards, to require without
explanation the replacement of any guard whose behavior, conduct or appearance
is not satisfactory and ASDAI and AFSISI cannot pull out any security guard from
MERALCO without the latters consent; and, a labor-only contract existed between
ASDAI and AFSISI and MERALCO, such that MERALCO is guilty of illegal dismissal
without just cause and liable for reinstatement of individual respondents to its
workforce.
HELD:
At the outset, we note that the individual respondents never alleged in
their complaint in the Labor Arbiter, in their appeal in the NLRC and even in their
petition for certiorari in the CA that MERALCO was their employer. They have
always advanced the theory that AFSISI is their employer. A perusal of the records
shows it was only in their Memorandum in the CA that this thesis was presented and
discussed for the first time. We cannot ignore the fact that this position of
individual respondents runs contrary to their earlier submission in their pleadings
filed in the Labor Arbiter, NLRC and even in the petition for certiorari in the CA that
AFSISI is their employer and liable for their termination. As the object of the
pleadings is to draw the lines of battle, so to speak, between the litigants and to
indicate fairly the nature of the claims or defenses of both parties, a party cannot
subsequently take a position contrary to, or inconsistent, with his pleadings.

Moreover, it is a fundamental rule of procedure that higher courts are

precluded from entertaining matters neither alleged in the pleadings nor raised
during the proceedings below, but ventilated for the first time only in a motion for
reconsideration or on appeal. The individual respondents are bound by their
submissions that AFSISI is their employer and they should not be permitted to
change their theory. Such a change of theory cannot be tolerated on appeal, not
due to the strict application of procedural rules but as a matter of fairness. A
change of theory on appeal is objectionable because it is contrary to the rules of fair
play, justice and due process.
Thus, the CA should not have considered the new theory offered by the
individual respondents in their memorandum.
In this case, the terms and conditions embodied in the security service
agreement between MERALCO and ASDAI expressly recognized ASDAI as the
employer of individual respondents.
Under the security service agreement, it was ASDAI which (a) selected,
engaged or hired and discharged the security guards; (b) assigned them to
MERALCO according to the number agreed upon; (c) provided the uniform, firearms
and ammunition, nightsticks, flashlights, raincoats and other paraphernalia of the
security guards; (d) paid them salaries or wages; and, (e) disciplined and supervised
them or principally controlled their conduct. The agreement even explicitly
provided that [n]othing herein contained shall be understood to make the security
guards under this Agreement, employees of the COMPANY, it being clearly
understood that such security guards shall be considered as they are, employees of
the AGENCY alone. Clearly, the individual respondents are the employees of
ASDAI.
As to the provision in the agreement that MERALCO reserved the right to seek
replacement of any guard whose behavior, conduct or appearance is not
satisfactory, such merely confirms that the power to discipline lies with the agency.
It is a standard stipulation in security service agreements that the client may
request the replacement of the guards to it. Service-oriented enterprises, such as
the business of providing security services, generally adhere to the business adage
that the customer or client is always right and, thus, must satisfy the interests,
conform to the needs, and cater to the reasonable impositions of its clients.
Neither is the stipulation that the agency cannot pull out any security guard
from MERALCO without its consent an indication of control. It is simply a security
clause designed to prevent the agency from unilaterally removing its security
guards from their assigned posts at MERALCOs premises to the latters detriment.
The clause that MERALCO has the right at all times to inspect the guards of the
agency detailed in its premises is likewise not indicative of control as it is not a
unilateral right. The agreement provides that the agency is principally mandated to
conduct inspections, without prejudice to MERALCOs right to conduct its own
inspections.
Needless to stress, for the power of control to be present, the person for
whom the services are rendered must reserve the right to direct not only the end to
be achieved but also the means for reaching such end. Not all rules imposed by the
hiring party on the hired party indicate that the latter is an employee of the former.
Rules which serve as general guidelines towards the achievement of the mutually
desired result are not indicative of the power of control.
The security service agreements in the present case provided that all specific
instructions by MERALCO relating to the discharge by the security guards of their

duties shall be directed to the agency and not directly to the individual
respondents. The individual respondents failed to show that the rules of MERALCO
controlled their performance.
Moreover, ASDAI and AFSISI are not labor-only contractors. There is labor
only contract when the person acting as contractor is considered merely as an
agent or intermediary of the principal who is responsible to the workers in the same
manner and to the same extent as if they had been directly employed by him. On
the other hand, job (independent) contracting is present if the following conditions
are met: (a) the contractor carries on an independent business and undertakes the
contract work on his own account under his own responsibility according to his own
manner and method, free from the control and direction of his employer or principal
in all matters connected with the performance of the work except to the result
thereof; and (b) the contractor has substantial capital or investments in the form of
tools, equipment, machineries, work premises and other materials which are
necessary in the conduct of his business. Given the above distinction and the
provisions of the security service agreements entered into by petitioner with ASDAI
and AFSISI, we are convinced that ASDAI and AFSISI were engaged in job
contracting.
The individual respondents cannot be considered as regular employees of the
MERALCO for, although security services are necessary and desirable to the
business of MERALCO, it is not directly related to its principal business and may
even be considered unnecessary in the conduct of MERALCOs principal business,
which is the distribution of electricity.
Furthermore, the fact that the individual respondents filed their claim for
unpaid monetary benefits against ASDAI is a clear indication that the individual
respondents acknowledge that ASDAI is their employer.
We cannot give credence to individual respondents insistence that they were
absorbed by AFSISI when MERALCOs security service agreement with ASDAI was
terminated. The individual respondents failed to present any evidence to confirm
that AFSISI absorbed them into its workforce. Thus, respondent Benamira was not
retained in his post at MERALCO since July 25, 1992 due to the termination of the
security service agreement of MERALCO with ASDAI. As for the rest of the individual
respondents, they retained their post only as hold-over guards until the security
guards of AFSISI took over their post on August 6, 1992.
In the present case, respondent Benamira has been off-detail for seventeen
days while the rest of the individual respondents have only been off- detail for five
days when they amended their complaint on August 11, 1992 to include the charge
of illegal dismissal. The inclusion of the charge of illegal dismissal then was
premature. Nonetheless, bearing in mind that ASDAI simply stopped giving the
individual respondents any assignment and their inactivity clearly persisted beyond
the six-month period allowed by Article 286 of the Labor Code, the individual
respondents were, in effect, constructively dismissed by ASDAI from employment,
hence, they should be reinstated.
The fact that there is no actual and direct employer-employee relationship
between MERALCO and the individual respondents does not exonerate MERALCO
from liability as to the monetary claims of the individual respondents. When
MERALCO contracted for security services with ASDAI as the security agency that
hired individual respondents to work as guards for it, MERALCO became an indirect
employer of individual respondents pursuant to Article 107 of the Labor Code, which
reads: ART. 107. Indirect employer - The provisions of the immediately preceding

Article shall likewise apply to any person, partnership, association or corporation

which, not being an employer, contracts with an independent contractor for the
performance of any work, task, job or project.
When ASDAI as contractor failed to pay the individual respondents, MERALCO
as principal becomes jointly and severally liable for the individual respondents
wages, under Articles 106 and 109 of the Labor Code, which provide:
ART. 106. Contractor or subcontractor. - Whenever an employer enters
into a contract with another person for the performance of the former[s]
work, the employees of the contractor and of the latter[s] subcontractor, if
any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages
of his employees in accordance with this Code, the employer shall be jointly
and severally liable with his contractor or subcontractor to such employees to
the extent of the work performed under the contract, in the same manner
and extent that he is liable to employees directly employed by him. Xxx
ART. 109. Solidary liability - The provisions of existing laws to the
contrary notwithstanding, every employer or indirect employer shall be held
responsible with his contractor or subcontractor for any violation of any
provision of this Code. For purpose of determining the extent of their civil
liability under this Chapter, they shall be considered as direct employers.
ASDAI is held liable by virtue of its status as direct employer, while MERALCO
is deemed the indirect employer of the individual respondents for the purpose of
paying their wages in the event of failure of ASDAI to pay them. This statutory
scheme gives the workers the ample protection consonant with labor and social
justice provisions of the 1987 Constitution.
However, as held in Mariveles Shipyard Corp. vs. Court of Appeals, the
solidary liability of MERALCO with that of ASDAI does not preclude the application of
Article 1217 of the Civil Code on the right of reimbursement from his co-debtor by
the one who paid, which provides:
ART. 1217. Payment made by one of the solidary debtors extinguishes
the obligation. If two or more solidary debtors offer to pay, the creditor may
choose which offer to accept.
He who made the payment may claim from his co-debtors only the
share which corresponds to each, with the interest for the payment already
made. If the payment is made before the debt is due, no interest for the
intervening period may be demanded.
When one of the solidary debtors cannot, because of his insolvency,
reimburse his share to the debtor paying the obligation, such share shall be
borne by all his co-debtors, in proportion to the debt of each.
ASDAI may not seek exculpation by claiming that MERALCOs payments to it were
inadequate for the individual respondents lawful compensation. As an employer,
ASDAI is charged with knowledge of labor laws and the adequacy of the
compensation that it demands for contractual services is its principal concern and
not any others.

13)
Granspan Development Corp., vs. Bernardo, G.R. No. 141464, Sept. 21,
2005
FACTS:
A complaint for illegal dismissal and non-payment of benefits was filed
with the Labor Arbiter by respondents, against Grandspan Development
Corporation. Respondents alleged that they were employed as truck scale monitors
by petitioner. Eventually, they were assigned at its Truck Scale Section of the
Warehouse/Materials Department. They were issued identification cards signed by
Bonifacio Selmo, petitioners personnel manager. On October 28, 1992, petitioner
sent them a notice terminating their services effective October 29, 1992 for using
profane or offensive language, in violation of Article VI (2) (a) of the companys
Rules and Regulations. Petitioner denied the allegations of respondents in their
complaint, claiming that they are employees of J. Narag Construction. Sometime in
the third quarter of 1992, Canad Japan Co., Ltd. engaged petitioners services for
fabrication works of several round and rectangular steel tanks needed for the HCMG
or Sogo project due for completion in September, 1992. As a consequence,
petitioner subcontracted the services of J. Narag Construction which, in turn,
assigned its 3 helpers (herein respondents) to work for petitioners project. Labor
Arbiter rendered a Decision dismissing respondents complaint. National Labor
Relations Commission, however, issued a Resolution remanding the case to the
Labor Arbiter. The Appellate Court rendered a Decision setting aside the NLRCs
Resolutions and ordering petitioner (1) to reinstate respondents Bernardo and
Ceidoza to their former positions and pay, jointly and severally with J. Narag
Construction, their backwages and other benefits, and (2) to pay respondent Del
Prado his separation pay. The Court of Appeals found that respondents are
employees of petitioner; that they were non-project workers; and that they were
denied due process.
ISSUE:
Whether or not the Court of Appeals erred in holding that respondents
are employees of petitioner.
HELD:
On the basis of the records, we have no reason to deviate from the
Appellate Courts finding that J. Narag Construction is indeed a labor-only contractor.
The Court of Appeals found that J. Narag Construction assigned respondents to
perform activities directly related to the main business of petitioner. They worked
in petitioners premises, using its equipment, materials and supplies. J. Narag
Constructions payroll worksheets covering the period from December 21, 1990 to
July 31, 1991 show that the payment of their salaries was approved by petitioner.
The manager and supervisor of petitioners Warehouse Department supervised the
manner and results of their work. It was petitioner who terminated their services
after finding them guilty of using profane or offensive language in violation of Article
VI (2) (a) of the companys Rules and Regulations. The Appellate Court then
concluded that these circumstances confirm the existence of an employer-employee
relationship between petitioner and respondents. These are the reasons: (1) it is
not registered as a building contractor with the SEC; (2) it has no contract with
petitioner; and (3) there is no proof of its financial capability and has no list of
equipment, tools, machineries and implements used in the business. Clearly, J.
Narag Construction could not be respondents employer. Likewise, as correctly
observed by the Court of Appeals, petitioner failed to present any report terminating

the services of respondents when its projects were actually finished. Section 2.2
(e) of the Labor Department Order No. 19 expressly provides that the report of
termination is one of the indications of project employment. We, therefore, uphold
the finding of the Court of Appeals that respondents are petitioners regular
employees. As such, they are entitled to security of tenure and can only be
dismissed for a just or authorized cause, as provided by Article 279 of the Labor
Code.

14)

Acevedo vs. Advanstar Co., G.R. No. 157656, Nov. 11, 2005

FACTS:
The Advanstar Company Inc. (ACI) was engaged in the distribution and
sale of various brands of liquor and alcoholic spirits, including the Tanduay Brand.
Felipe Loi was employed as its manager. To effectively launch its vigorous
marketing operations, ACI hired several salesmen, one of whom was Tony
Jalapadan. On September 1, 1994, ACI executed an Agreement for the Sale of
Merchandise with Jalapadan for a period of one year, renewable for another year
under the same terms and conditions.
Under the agreement, the parties agreed, inter alia, that Jalapadan would
promote and sell products of ACI, solicit from customers and outlets within his
designated territory, collect payments from such customers and account the same
to ACI and was also authorized to employ and discharge a driver and other
assistants as he deemed necessary. It was stipulated, however, that the hired
hands would be considered his employees, and that he alone would be liable for
their compensation and actual expenses, including meals while on duty.
On August 5, 1997, Jalapadan hired Arnulfo Acevedo as the driver of the truck
assigned to him by ACI. On October 7, 1998, Acevedo failed to report for work. The
next day, Jalapadan inquired why he failed to check and wash the truck. Jalapadan
berated Acevedo and ordered him to get his personal belongings and leave.
Acevedo did as he was told. Later, Jalapadan urged Acevedo to go back to work,
stating that they were one big family, but Acevedo refused. He then signed a
Letter dated October 10, 1998, informing Jalapadan that he was resigning effective
that date. However, on October 26, 1998, Acevedo filed a complaint against
Jalapadan, ACI and its general manager, Felipe Loi, for illegal dismissal and for the
recovery of backwages and other monetary benefits.
ISSUES:
Whether or not the respondent ACI was the employer of respondent,
Jalapadan?
Whether or not the petitioner is the employee of respondent ACI?
Whether or not the petitioner resigned from his employment?
HELD:
On the first and second issues, the petitioner avers that respondent
Jalapadan was a labor-only contractor, not an independent contractor, hence,
merely an agent of respondent ACI. Consequently, the latter is responsible to the
employees hired by respondent Jalapadan as if such employees had been directly
employed by it, and, as such, the respondents are solidarily liable for their valid
claims. The petitioner is correct.
The pertinent provision of the Labor Code on labor-only contracting is
paragraph 4 of Article 106, which provides: There is labor-only contracting where
the person supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such persons are performing
activities which are directly related to the principal business of such employer. In
such cases, the person or intermediary shall be considered merely as an agent of
the employer who shall be responsible to the workers in the same manner and
extent as if the latter were directly employed by him.
Rule VIII-A, Book III, Section 4(f) of the Omnibus Rules Implementing the
Labor Code further defines labor-only contracting as an arrangement where the

contractor or subcontractor merely recruits, supplies or places workers to perform a

job, work or service for a principal. In labor-only contracting, the following elements
are present:
(a) The contractor or subcontractor does not have substantial capital or
investment to actually perform the job, work or service under its own account
and responsibility;
(b) The employees recruited, supplied or placed by such contractor or
subcontractor, are performing activities which are directly related to the main
business of the principal.
In such case, the law creates an employee-employer relationship so that
labor laws may not be circumvented. The principal employer becomes solidarily
liable with the labor-only contractor for all the rightful claims of the employees. The
labor-only contractor is considered merely as an agent of the employer, the
employer having been made, by law, responsible to the employees of the labor-only
contractor as if such employees had been directly employed by it.
On the other hand, permissible job contracting or subcontracting refers to an
arrangement whereby a principal agrees to put out or farm out with the contractor
or subcontractor the performance or completion of a specific job, work or service
within a definite or predetermined period regardless of whether such job, work or
service is to be performed or completed within or outside the premises of the
principal.
The test to determine the existence of an independent contractorship is
whether one who claims to be an independent contractor has contracted to do the
work according to his own methods and without being subject to the employers
control except only as to the results. Each case must be determined by its own
facts and all the features of the relationship are to be considered.
In the case of Vinoya v. NLRC, the Court declared that it is not enough to
show substantial capitalization or investment in the form of tools, equipment, etc. to
determine whether one is an independent contractor. Other factors that may be
considered include the following: whether or not the contractor is carrying on an
independent business; the nature and extent of the work; the skill required; the
term and duration of the relationship; the right to assign the performance of
specified pieces of work; the control and supervision of the work to another; the
employers power with respect to the hiring, firing and payment of the contractors
workers; the control of the premises; the duty to supply premises, tools, appliances,
materials and labor; and the mode and manner or terms of payment.
In the present case, the respondents failed to prove that respondent
Jalapadan was an independent contractor. Indeed, the substantial evidence on
record shows that he was merely a labor-only contractor based on the following
facts:
1.)
The respondents failed to adduce a scintilla of evidence that
respondent Jalapadan had any substantial capital or investment, such as tools
and equipment, to perform the work contracted for. There is even no
evidence that respondent Jalapadan had any assets, or that he maintained an
office, staff or a terminal for the truck entrusted to him by respondent ACI.
2.)
Respondent Jalapadan bound and obliged himself to work exclusively
for respondent ACI during the terms of the agreement.
3.)
Under the agreement, respondent ACI had the right to control not only
the end to be attained but also the manner and means to be used in

accomplishing that end or purpose. Aside from Jalapadans duties/obligations

as salesman, respondent ACI could require him to perform other duties and
obligations.
4.)
Respondent Jalapadan was obliged to pay the petitioners monthly
wage of P3,648.00, as well as that of his helper, another P4,000.00 a month,
totaling P7,648.00, exclusive of other expenses such as meals, gasoline, and
the upkeep of the vehicle. On the other hand, respondent Jalapadan received
from respondent ACI only P3,590.00 a month as compensation. He had no
other means of income because he was obliged, under the agreement, to
devote all his time for respondent ACI. Considering all these, the Court
concludes that the petitioners wages must have been paid for by respondent
ACI through respondent Jalapadan, its labor-only contractor.
On the third issue, the Supreme Court agrees with the rulings of the NLRC
and the CA that the petitioner was not dismissed from employment. Nevertheless,
assuming that complainant was a regular employee of Advanstar, this Commission
finds his claim that he was illegally dismissed to be nebulous. The only incident
from which complainant drew the conclusion that he was dismissed from work is
when he was allegedly told to disembark from the vehicle. Nothing on record shows
that he was terminated from work.The Court finds, however, that contrary to the
rulings of the NLRC and the CA, the petitioner did not resign from his employment.
Reliance on the handwritten letter of resignation signed and thumbmarked by the
petitioner is misplaced. The handwritten letter of resignation signed by the
petitioner is inconsistent with the respondents claim that respondent Jalapadan was
the petitioners employer. This is so because the said letter is addressed to Tanduay
Corporation, and not to respondent Jalapadan.
Neither the petitioner nor the respondents explained why the letter was addressed
to Tanduay Corporation. Significantly, respondent Jalapadan did not deny the
petitioners claim that the letter was handwritten by him (Jalapadan). If such claim
were true, there is neither rhyme nor reason why Tanduay Corporation was its
addressee. Moreover, it appears that the letter was coursed through respondent
Jalapadan as salesman of the said corporation, which is antithetical to the
respondents claim that he was the petitioners employer and an independent
contractor of respondent ACI.

15)

Big AA Manufacturer vs. Antonio, G.R. No. 1608504, March 3, 2006

FACTS:
Petitioner is a sole proprietorship registered in the name of its
proprietor, Enrico E. Alejo, with office address at 311 Barrio Santol, Balagtas,
Bulacan. On January 13, 2000, herein respondents Eutiquio Antonio, Jay Antonio,
Felicisimo Antonio, Leonardo Antonio, Sr. and Roberto Fabian filed a complaint for
illegal lay-off and illegal deductions before the NLRC's Regional Arbitration Branch
No. III. They claimed that they were dismissed on January 11, 2000 and sought
separation pay from petitioner. In respondents' position paper, they alleged that as
regular employees, they worked from 8:00 a.m. to 5:00 p.m. at petitioner's premises
using petitioner's tools and equipment and they received P250 per day. According to
respondents, they were dismissed without just cause and due process; hence, their
prayer for reinstatement and full backwages. On the other hand, in its position
paper, petitioner Big AA Manufacturer, affirmed it is a sole proprietorship registered
in the name of Enrico Alejo and engaged in manufacturing office furniture, but it
denied that respondents were its regular employees. Instead, petitioner claimed
that Eutiquio Antonio was one of its independent contractors who used the services
of the other respondents. According to petitioner, its independent contractors were
paid by results and were responsible for the salaries of their own workers. Allegedly,
there was no employer-employee relationship between petitioner and respondents.
However, petitioner stated it allowed respondents to use its facilities to meet job
orders. Petitioner also denied that respondents were laid-off by Big AA
Manufacturer, since they were project employees only.
ISSUES:
Are respondents regular employees of petitioner? Did they abandon
their work? Were they illegally dismissed by petitioner? If so, what benefits, if any,
are due them?
HELD:
Petitioner contends that employment for more than one year and
"performing carpentry works that were necessary and desirable" in petitioner's
usual trade and business are "not controlling" factors in determining whether
respondents are regular employees. Petitioner argues that Article 280 of the Labor
Code and the "circumstances which attended the relationship between" the parties
must be considered. The circumstances of the case, according to petitioner, show
that respondents were not its regular employees. Specifically, petitioner Eutiquio
was an independent businessman and was contracted to render particular job
orders using his own methods and style. Further, Eutiquio hired his own workers and
used his own house as his factory and work premises where he kept his own tools,
equipment and materials. At the outset, it should be stressed that whether
respondents are regular employees or project employees or independent
contractors is a question of fact. The unanimous finding of the Labor Arbiter, NLRC,
and Court of Appeals that respondents were petitioner's regular employees, not
independent contractors, binds this Court. Under Rule 45 of the Rules of Court, our
jurisdiction is limited to questions of law. Notably, petitioner not only urges us to reexamine the evidence presented below but to consider evidence not presented
before the Labor Arbiter. This practice of submitting evidence late is properly
rejected as it defeats the speedy administration of justice involving poor workers. It
is also unfair. Considering the submission of the parties, we are constrained to

agree with the unanimous ruling of the Court of Appeals, NLRC and Labor Arbiter
that respondents are petitioner's regular employees. Respondents were employed
for more than one year and their work as carpenters was necessary or desirable in
petitioner's usual trade or business of manufacturing office furniture. Under Article
280 of the Labor Code, the applicable test to determine whether an employment
should be considered regular or non-regular is the reasonable connection between
the particular activity performed by the employee in relation to the usual business
or trade of the employer. True, certain forms of employment require the
performance of usual or desirable functions and exceed one year but do not
necessarily result to regular employment under Article 280 of the Labor Code. Some
specific exceptions include project or seasonal employment. Yet, in this case,
respondents cannot be considered project employees. Petitioner had neither shown
that respondents were hired for a specific project the duration of which was
determined at the time of their hiring nor identified the specific project or phase
thereof for which respondents were hired. We also agree that Eutiquio was not an
independent contractor for he does not carry a distinct and independent business,
and he does not possess substantial capital or investment in tools, equipment,
machinery or work premises. He works within petitioner's premises using the latter's
tools and materials, as admitted by petitioner. Eutiquio is also under petitioner's
control and supervision. Attesting to this is petitioner's admission that it allowed
respondents to use its facilities for the "proper implementation" of job orders.
Moreover, the Implementing Guidelines regulating attendance, overtime, deadlines,
penalties; providing petitioner's right to fire employees or "contractors"; requiring
the carpentry division to join petitioner's exercise program; and providing rules on
machine maintenance, all reflect control and supervision over respondents. Having
ruled that respondents are regular employees, we shall proceed to determine
whether respondents have, as petitioner contends, abandoned their work, or they
have been illegally dismissed. For accusing respondents of abandonment, petitioner
must present evidence (1) not only of respondents' failure to report for work or
absence without valid reason, but (2) also of respondents' clear intention to sever
employer-employee relations as manifested by some overt acts. The second
element is the more determinative factor Here, petitioner's argument in support of
its abandonment charge was that respondents may have resented its issuance of
the Implementing Guidelines. This, in our view, fails to establish respondents'
intention to abandon their jobs. On the contrary, by filing the complaint for illegal
dismissal within two days of their dismissal on January 11, 2000 and by seeking
reinstatement in their position paper, respondents manifested their intention
against severing their employment relationship with petitioner and abandoning their
jobs. It is settled that an employee who forthwith protests his layoff cannot be said
to have abandoned his work. Finally, Article 279 of the Labor Code, provides that a
regular employee who is unjustly dismissed from work is 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. If reinstatement is no longer feasible, separation pay
equivalent to one month salary for every year of service should be awarded as an
alternative. This has been our consistent ruling in the award of separation pay to

illegally dismissed employees in lieu of reinstatement. Hence, the four respondents,

Eutiquio, Felicisimo, Jay and Leonardo, Sr., all surnamed Antonio, are entitled to
backwages and separation pay in case their reinstatement is no longer possible.
The petition is DENIED for lack of merit. Petitioner thru its sole proprietor, Enrico
Alejo, is ordered (1) to reinstate the four respondents to their former positions
without loss of seniority rights and other privileges or to pay them separation pay in
case reinstatement is no longer possible and (2) to pay them full backwages, in
either case, computed from the time their compensation was withheld from them up
to the time of their actual reinstatement or up to the time it is determined that
reinstatement is no longer possible. The NLRC is also ordered to RECOMPUTE
respondents' backwages and separation pay, as aforementioned, and execute the
payments to respondents. Costs against the petitioner.

16)

DOLE Phils. Vs. Esteva, G.R. No. 161115, Nov. 30, 2006

FACTS:
Petitioner is a corporation engaged principally in the production and
processing of pineapple for the export market. Respondents are members of the
Cannery Multi-Purpose Cooperative (CAMPCO). CAMPCO was organized in
accordance with Republic Act No. 6938, otherwise known as the Cooperative Code
of the Philippines. Pursuant to the Service Contract, CAMPCO members rendered
services to petitioner. The number of CAMPCO members that report for work and
the type of service they performed depended on the needs of petitioner at any
given time. Although the Service Contract specifically stated that it shall only be for
a period of six months, i.e., from 1 July to 31 December 1993, the parties had
apparently extended or renewed the same for the succeeding years without
executing another written contract. It was under these circumstances that
respondents came to work for petitioner. DOLE organized a Task Force that
conducted an investigation into the alleged labor-only contracting activities of the
cooperatives. The Task Force identified six cooperatives that were engaged in laboronly contracting, one of which was CAMPCO. In this case, respondents alleged that
they started working for petitioner at various times in the years 1993 and 1994, by
virtue of the Service Contract executed between CAMPCO and petitioner. All of the
respondents had already rendered more than one year of service to petitioner.
While some of the respondents were still working for petitioner, others were put on
stay home status on varying dates in the years 1994, 1995, and 1996 and were
no longer furnished with work thereafter. Together, respondents filed a Complaint
with the NLRC for illegal dismissal, regularization, wage differentials, damages and
attorneys fees. Petitioner denied that respondents were its employees. It explained
that it found the need to engage external services to augment its regular workforce,
which was affected by peaks in operation, work backlogs, absenteeism, and
excessive leaves. It used to engage the services of individual workers for definite
periods specified in their employment contracts and never exceeding one year.
However, such an arrangement became the subject of a labor case, in which
petitioner was accused of preventing the regularization of such workers.
ISSUES:
Whether or not the court of appeals was correct when it made its own
factual findings and disregarded the factual findings of the labor arbiter and the
NLRC.
Whether or not CAMPCO was a mere labor-only contractor.
HELD:
The Court in the exercise of its equity jurisdiction may look into the
records of the case and re-examine the questioned findings. As a corollary, this
Court is clothed with ample authority to review matters, even if they are not
assigned as errors in their appeal, if it finds that their consideration is necessary to
arrive at a just decision of the case. The same principles are now necessarily
adhered to and are applied by the Court of Appeals in its expanded jurisdiction over
labor cases elevated through a petition for certiorari; thus, we see no error on its
part when it made anew a factual determination of the matters and on that basis
reversed the ruling of the NLRC.

On the second issue, CAMPCO was a mere labor-only contractor. First,

although petitioner touts the multi-million pesos assets of CAMPCO, it does well to
remember that such were amassed in the years following its establishment. In
1993, when CAMPCO was established and the Service Contract between petitioner
and CAMPCO was entered into, CAMPCO only had P6,600.00 paid-up capital, which
could hardly be considered substantial. It only managed to increase its capitalization
and assets in the succeeding years by continually and defiantly engaging in what
had been declared by authorized DOLE officials as labor-only contracting. Second,
CAMPCO did not carry out an independent business from petitioner. It was precisely
established to render services to petitioner to augment its workforce during peak
seasons. Petitioner was its only client. Even as CAMPCO had its own office and
office equipment, these were mainly used for administrative purposes; the tools,
machineries, and equipment actually used by CAMPCO members when rendering
services to the petitioner belonged to the latter. Third, petitioner exercised control
over the CAMPCO members, including respondents. Petitioner attempts to refute
control by alleging the presence of a CAMPCO supervisor in the work premises. Yet,
the mere presence within the premises of a supervisor from the cooperative did not
necessarily mean that CAMPCO had control over its members. Section 8(1), Rule
VIII, Book III of the implementing rules of the Labor Code, as amended, required for
permissible job contracting that the contractor undertakes the contract work on his
account, under his own responsibility, according to his own manner and method,
free from the control and direction of his employer or principal in all matters
connected with the performance of the work except as to the results thereof. As
alleged by the respondents, and unrebutted by petitioner, CAMPCO members,
before working for the petitioner, had to undergo instructions and pass the training
provided by petitioners personnel. It was petitioner who determined and prepared
the work assignments of the CAMPCO members. CAMPCO members worked within
petitioners plantation and processing plants alongside regular employees
performing identical jobs, a circumstance recognized as an indicium of a labor-only
contractorship. Fourth, CAMPCO was not engaged to perform a specific and special
job or service. In the Service Contract of 1993, CAMPCO agreed to assist petitioner
in its daily operations, and perform odd jobs as may be assigned. CAMPCO
complied with this venture by assigning members to petitioner. Apart from that, no
other particular job, work or service was required from CAMPCO, and it is apparent,
with such an arrangement, that CAMPCO merely acted as a recruitment agency for
petitioner. Since the undertaking of CAMPCO did not involve the performance of a
specific job, but rather the supply of manpower only, CAMPCO clearly conducted
itself as a labor-only contractor. Lastly, CAMPCO members, including respondents,
performed activities directly related to the principal business of petitioner. They
worked as can processing attendant, feeder of canned pineapple and pineapple
processing, nata de coco processing attendant, fruit cocktail processing attendant,
and etc., functions which were, not only directly related, but were very vital to
petitioners business of production and processing of pineapple products for export.
The declaration that CAMPCO is indeed engaged in the prohibited activities of laboronly contracting, then consequently, an employer-employee relationship is deemed
to exist between petitioner and respondents, since CAMPCO shall be considered as a
mere agent or intermediary of petitioner.

Since respondents are now recognized as employees of petitioner, this Court is

tasked to determine the nature of their employment. In consideration of all the
attendant circumstances in this case, this Court concludes that respondents are
regular employees of petitioner. As such, they are entitled to security of tenure.
They could only be removed based on just and authorized causes as provided for in
the Labor Code, as amended, and after they are accorded procedural due process.
Therefore, petitioners acts of placing some of the respondents on stay home
status and not giving them work assignments for more than six months were
already tantamount to constructive and illegal dismissal.

17)
San Miguel Vs. NLRC, G.R. No. 147566, Dec. 6, 2006 citing Maerc
Integrated Services case

FACTS:
On 16 October 1990, Rafael M. Maliksi filed a complaint against the
San Miguel Corporation-Magnolia Division, herein referred to as SMC and Philippine
Software Services and Education Center (PHILSSEC) to compel the said respondents
to recognize him as a regular employee. Later this was amended to include the
charge of illegal dismissal because his services were terminated on 31 October
1990. The complainants employment record indicates that he rendered service with
Lipercon Services from 1 April 1981 to February 1982 as budget head assigned to
SMC-Beer Division, then from July 1983 to April 1985 with Skillpower, Inc., as
accounting clerk assigned to SMC-Magnolia Division, then from October 1988 to
1989 also with Skillpower, Inc. as acting clerk assigned to SMC-Magnolia Finance,
and from October 1989 to 31 October 1990 with PHILSSEC assigned to Magnolia
Finance as accounting clerk. The complainant considered himself as an employee of
SMC-Magnolia. Lipercon Services, Skillpower, Inc. and PHILSSEC are labor-only
contractors and any one of which had never been his employer. His dismissal,
according to him, was in retaliation for his filing of the complaint for regularization
in service. His dismissal was illegal there being no just cause for the action. He was
not accorded due process neither was his dismissal reported to the Department of
Labor and Employment. PHILSSEC disclaimed liability. As an entity catering to
computer systems and programs for business enterprises, it has contracted with
SMC-Magnolia to computerize the latters manual accounting reporting systems of
its provincial sales. Complainant Maliksi was one of those employed by PHILSSEC
whose principal function was the manual control of data needed during the
computerization. Like all assigned to the project, the complainants work was
controlled by PHILSSEC supervisors, his salary paid by the agency and he reported
directly to PHILSSEC. The computerization project was completed on 31 October
1990, and so, the complainant was terminated on the said date.

ISSUE: Whether or not Maliksi was a regular employee of San Miguel Corp.

HELD:
In all, it appears that, while under the employ of either Lipercon or
Skillpower, Maliksi has undisputedly rendered service with SMC for at least three
years and seven months. Indeed, having served SMC for an aggregate period of
more than three (3) years through employment contracts with these two labor
contractors, Maliksi should be considered as SMCs regular employee. The hard fact
is that he was hired and re-hired by SMC to perform administrative and clerical work
that was necessary to SMCs business on a daily basis.
We understand Maliksis desperation in making his point clear to SMC, which
unduly refuses to acknowledge his status as a regular employee. Instead, he was
juggled from one employment contract to another in a continuous bid to circumvent

labor laws. The act of hiring and re-hiring workers over a period of time without
considering them as regular employees evidences bad faith on the part of the
employer. Where, from the circumstances, it is apparent that periods have been
imposed to preclude the acquisition of tenurial security by the employee, the policy,
agreement or practice should be struck down as contrary to public policy, morals,
good customs or public order. In point of law, any person who willfully causes loss or
injury to another in a manner that is contrary to morals, good customs or public
policy shall be liable for the damage.

In San Miguel Corporation v. MAERC Integrated Services, Inc., we took note of

the practice of hiring employees through labor contractors that catered exclusively
to the employment needs of SMC or its divisions or other specific business interests,
such that after the specific SMC business or division ceases to do business, the
labor contractor likewise ceases its operations.

Considering, however, the supervening event that SMCs Magnolia Division has
been acquired by another entity, it appears that private respondents reinstatement
is no longer feasible. Instead, he should be awarded separation pay as an
alternative. Likewise, owing to petitioners bad faith, it should be held liable to pay
damages for causing undue injury and inconvenience to the private respondent in
its contractual hiring-firing-rehiring scheme.

18)
Eparwa Security & Janitorial Services vs. Liceo De Cagayan Univ. G.R.
No. 150402, Nov. 28, 2006, citing Eagle Security case
FACTS:
Eparwa and LDCU, through their representatives, entered into a
Contract for Security Services. Subsequently 11 security guards whom Eparwa
assigned to LDCU filed a complaint before the NLRC-RAB against both Eparwa and
LDCU for underpayment of salary, legal holiday pay, 13th month pay, rest day,
service incentive leave, night shift differential, overtime pay, and payment for
attorney's fees. LDCU made a cross-claim and prayed that Eparwa should reimburse
LDCU for any payment to the security guards.
The LA found that the security guards are entitled to wage differentials and
premium for holiday and rest day work. The LA held Eparwa and LDCU solidarily
liable pursuant to Article 109 of the Labor Code and likewise orderd Eparwa to
reimburse LDCU for whatever amount the latter may be required to pay the security
guards. On appeal to the NLRC, Eparwa and LDCU was held solidarily liable for the
wage differentials and premium for holiday and rest day work, but the NLRC did not
require Eparwa to reimburse LDCU for its payments to the security guards. Upon
motion for reconsideration, NLRC declared that although Eparwa and LDCU are
solidarily liable to the security guards for the monetary award, LDCU alone is
ultimately liable ordering it to reimburse Eparwa for payments made to the
contractual employees. Upon appeal to the CA, the appellate court allowed LDCU to
claim reimbursement from Eparwa. Eparwa then filed an action for certiorari before
the SC.
ISSUE:
Whether or not LDCU alone is ultimately liable to the security guards
for the wage differentials and premium for holiday and rest day pay without any
right of reimbursement from Eparwa.
HELD:
This joint and several liability of the contractor and the principal is
mandated by the Labor Code to assure compliance of the provisions therein
including the statutory minimum wage. The contractor is made liable by virtue of
his status as direct employer. The principal, on the other hand, is made the indirect
employer of the contractor's employees for purposes of paying the employees their
wages should the contractor be unable to pay them. This joint and several liability
facilitates, if not guarantees, payment of the workers' performance of any work,
task, job or project, thus giving the workers ample protection as mandated by the
1987 Constitution. For the security guards, the actual source of the payment of their
wage differentials and premium for holiday and rest day work does not matter as
long as they are paid. This is the import of Eparwa and LDCU's solidary liability.
Creditors, such as the security guards, may collect from anyone of the solidary
debtors. Solidary liability does not mean that, as between themselves, two solidary
debtors are liable for only half of the payment. LDCU's ultimate liability comes into
play because of the expiration of the Contract for Security Services. There is no
privity of contract between the security guards and LDCU, but LDCU's liability to the
security guards remains because of Articles 106, 107 and 109 of the Labor Code.
Eparwa is already precluded from asking LDCU for an adjustment in the contract
price because of the expiration of the contract, but Eparwa's liability to the security

guards remains because of their employer-employee relationship. In lieu of an

adjustment in the contract price, Eparwa may claim reimbursement from LDCU for
any payment it may make to the security guards. However, LDCU cannot claim any
reimbursement from Eparwa for any payment it may make to the security guards.

19)

Lapanday Agri Development Corp., vs. Court of Appeals, 324 SCRA 39

FACTS:
Private respondent Commando Security Service Agency, Inc. and
petitioner Lapanday Agricultural Development Corporation entered into a Guard
Service Contract. On June 16, 1984, Wage Order No. 5 was promulgated directing an
increase of P3.00 per day on the minimum wage of workers in the private sector
and a P5.00 increase on the ECOLA. This was followed on November 1, 1984 by
Wage Order No. 6 which further increased said minimum wage by P3.00 on the
ECOLA. Both Wage Orders contain the following provision: In the case of contract
for construction projects and for security, janitorial and similar services, the
increase in the minimum wage and allowances rates of the workers shall be borne
by the principal or client of the construction/service contractor and the contracts
shall be deemed amended accordingly, subject to the provisions of Sec. 3 (b) of this
order" (Sec. 6 and Sec. 9, Wage Orders No. 5 and 6, respectively). Private
respondent demanded that its Guard Service Contract with defendant be upgraded
in compliance with Wage Order Nos. 5 and 6. Defendant refused. Their Contract
expired on June 6, 1986 without the rate adjustment called for Wage Order Nos. 5
and 6 being implemented. A complaint was filed by private respondent which was
opposed by the petitioner contending among others that the rate adjustment is the
obligation of the private respondent as employer of the security guards. Labor
Arbiter Newton R. Sancho held both petitioner and private respondent jointly and
solidarily liable to the security guards.
ISSUE:
Whether or not petitioner is liable to the private respondent for the
wage adjustment provided under Wage Order Nos. 5 and 6.
HELD:
No. The Contract of Security Services expressly stipulated that the
security guards are employees of the Agency and not of the petitioner. Articles 106
and 107 of the Labor Code provides the rule governing the payment of wages of
employees in the event that the contractor fails to pay such wages as follows:
Whenever an employer enters into a contract with another person for the
performance of the formers work, the employees of the contractor and of the
latters subcontractor, if any, shall be paid in accordance with the provisions of this
Code. In the event that the contractor or subcontractor fails to pay the wages of his
employees in accordance with this Code, the employer shall be jointly and severally
liable with his contractor or subcontractor to such employees to the extent of the
work performed under the contract, in the same manner and extent that he is liable
to employees directly employed by him. It will be seen from the above provisions
that the principal (petitioner) and the contractor (respondent) are jointly and
severally liable to the employees for their wages. The liability of the petitioner to
reimburse the respondent only arises if and when respondent actually pays its
employees the increases granted by Wage Order Nos. 5 and 6. In the instant case, it
is not disputed that the private respondent has not actually paid the security guards
the wage increases granted under the Wage Orders in question. Neither is it alleged
that there is an extant claim for such wage adjustments from the security guards
concerned, whose services have already been terminated by the contractor.
Accordingly, private respondent has no cause of action against petitioner to recover
the wage increases.

20)

Escario vs. NLRC, 333 SCRA 257 [2000]

FACTS:
Private respondents California Marketing Co., Inc. is a domestic
corporation principally engaged in the manufacturing of food products and
distribution of such products to wholesalers and retailers. Private respondent Donna
Louis Advertising and Marketing Associates, Inc. is a duly registered promotional
firm.
Petitioners alleged that they were employed by CMC as merchandisers. They
alleged that the hiring, control and supervision of workers and the payment of the
salaries were all covered by CMC through its agent D.L Admark in order CMC to
avoid its liability under the law. Petitioners filed a case against CMC before the labor
arbiter for regularization of their employment status.
During the pendency of the case, D.L Admark terminated the services of the
petitioners. The complaint was amended to include alleged dismissal. CMC filed a
motion to implead as party-defendant D.L Admark, the latter filed a motion to
intervene. Both motions were granted. CMC denied being petitioners employer while
D.L Admark asserted it is the employer of the petitioners.
The labor arbiter found petitioners as employees of CMC as they were
engaged in activities that are necessary and desirable in the usual business/trade of
CMC. On appeal, the NLRC set aside the labor arbiters decision. But ordered the
reinstatement of the petitioners in D.L Admark petitioners filed a motion for
consideration before the NLRC which was denied for lack of merit. Hence the
petition.
ISSUE:
Whether or not D.L Admark is a labor-only contractor or as
independent contractor.
HELD:
The Supreme Court denied the petition.
There is labor-only contracting when the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work or service for a principal.
In labor only contracting, the following elements are present:
a.) The person supplying workers to an employer does not have substantial capital
or investment in the form of tools, equipments, machineries, wok premise,
among other tools.
b.) The workers recruited and placed by such person performing activities which are
directly related to the principal business of the employer.
In contract, there is permissible job contracting when a principal agrees to put
out or farm out with a contractor or a subcontractor the performance / completion of
a specific job, work or services within a definite or predetermined period, regardless
of whether such job/ services is to be performed or completed within or outside the
premises of the principal. In this arrangement, the following conditions must concur:
a.) The contractor carries on a distinct and independent business and undertakes
the contract work on his account under the responsibility according to his own
manual and methods, free from the control and direction of his employer or
principal in all matters connected with the performance of his employer work except
as to the results thereof; and

b.) The contractor has substantial capital / investment which are necessary in
the conduct of his business.
The court reiterated that it is not enough to show substantial capitalization on
investment. In addition the following factors need be considered: whether the
contractor is carrying on an independent business; the nature and extent of the
work; the skill required; the term and duration of the relationship; the right to assign
the performance of specified pieces of work; the control and supervision of the
workers; the power of the employer with respect to the hiring, firing and payment of
workers of the contractor; the control of the premises; the duty to supply premises,
tools, appliances, materials and labor; mode, manner and terms of payment.
Based on the foregoing criteria, the court found that D.L Admark is a
legitimate independent contractor. Applying the four-fold test, D.L Admark was
found to be the employer of the petitioners. The Supreme Court affirmed the NLRCs
ruling.

21)

Aboitiz Haulers vs. Dimapatoi, G.R. No. 148619, Sept. 19, 2006

FACTS:
Petitioner Aboitiz Haulers, Inc. is a domestic corporation principally
engaged in the nationwide and overseas forwarding and distribution of cargoes.
Private respondents Monaorai Dimapatoi, Cecilia Agawin, Raul Mamate, Emmanuel
Guerrero and Gemeniano Bigaw worked as checkers in the Mega Warehouse, which
is owned by the petitioner, located at the Tabacalera Compound, United Nations
Avenue, Manila
The parties rendered conflicting recital of facts.
Petitioner claims that respondents are not its employees, rather they are the
employees of Grigio Security Agency and General Services (Grigio), a manpower
agency that supplies security guards, checkers and stuffers. It allegedly entered
into a Written Contract of Service with Grigio on 1 March 1994. By virtue of the
aforementioned Written Contract of Service, Grigio supplied petitioner with security
guards, checkers and stuffers for petitioners Mega Warehouse. The respondents
were among the checkers that were assigned to the petitioners warehouse.
Petitioner emphasizes that Grigio retained control over the respondents by
providing their own supervisors to oversee Grigios personnel, as well as time cards
to monitor the attendance of its personnel. Petitioner also alleges that on 9 May
1996, the respondents left the warehouse and did not report to work thereafter. As
a result of the respondents sudden abandonment of their work, there was no
orderly and proper turnover of papers and other company property in connection
with the termination of the Written Contract for Services. Respondents, on the other
hand, claim that most of them worked as checkers in petitioners warehouse even
before 1 March 1994.
Respondents maintain that during their employment with the petitioner, they
were not paid their regular holiday pay, night shift differential, 5-day service
incentive leave, and overtime premium. They also averred that illegal deductions
were being made on their wages, particularly the contributions for a Mutual
Assistance Fund, a Cash Bond, and claims for damaged and misrouted cargoes
incurred by petitioner.
Respondents allege that on 15 May 1996, petitioner dismissed them on the
pretext that the Written Contract of Service between Grigio and the petitioner had
been terminated. To controvert the allegations of the petitioner that respondents
did not report for work starting 9 May 1996, the respondents presented a copy of
the pertinent pages of the logbook which served as their daily time record.
Respondents also presented a Certification issued by petitioners Warehouse
Supervisor in favor of respondent Monaorai Dimapatoi affirming that she worked
with the Petitioner as a Warehouse Checker and Document Clerk until 15 May 1996.
On 17 May 1996, respondent Raul Mamate filed a complaint before the
Department of Labor and Employment (DOLE) for nonpayment of wages and other
benefits, as well as illegal deductions. The other respondents filed their own
complaints. Since the claims of the respondents exceeded Five Thousand Pesos
(P5,000.00), the case was referred to the NLRC. Thereafter, respondents filed their
complaint for illegal dismissal and other money claims before the Arbitration Branch
of the NLRC.
ISSUE:
Whether or not the petitioner and its contractor engaged in a labor
only contracting arrangement.

HELD:
Petitioner and
contracting arrangement.

its

contractor

Grigio

committed

labor-onl;y

The allegation of the petitioner that Grigio is an independent job contractor,

and, therefore, this case is one of permissible job contracting, is without basis. In
this case, the respondents work, as warehouse checkers, is directly related to the
principal business of the petitioner. Petitioner also exercises the right to control and
determines not only the end to be achieved, but also the manner and means to be
used in reaching that end. Lastly, petitioner failed to sufficiently prove that Grigio
had substantial capital or investment.
The respondents, as checkers, were employed to check and inspect these
cargoes, a task which is clearly necessary for the petitioners business of forwarding
and distributing of cargoes. The petitioner did not dispute the fact that the
respondents were hired as checkers as early as 1992. The fact that they were
employed before the Written Contract of Services took effect on 24 February 1994,
and continued with their jobs until 1996, after the said contract had already expired
on 24 February 1995 indicates that the respondents work was indeed necessary for
the petitioners business. In addition, Grigio did not undertake the performance of
its service contract according to its own manner and method, free from the control
and supervision of its principal.
The work activities, work shifts, and schedules of the respondents, including
the time allowed for recess were set under the Written Contract of Services. This
clearly indicates that these matters, which consist of the means and methods by
which the work is to be accomplished, were not within the absolute control of
Grigio. By stipulating these matters in a contract, Grigio is constrained to follow
these provisions and would no longer be able to exercise the freedom to alter these
work shifts and schedules at its own convenience. Such being the case, Grigio
cannot be considered as an independent job contractor.
Petitioners allegation that Grigio retained control over the respondents by
providing supervisors to monitor the performance of the respondents cannot be
given much weight. Instead of exercising their own discretion or referring the
matter to the officers of Grigio, Grigios supervisors were obligated to refer to
petitioners supervisors any discrepancy in the performance of the respondents with
their specified duties.

22)
GSIS vs. NLRC, G.R. No. 157647, October 15, 2007, citing Rosewood
Processing vs. NLRC, 290 SCRA 408
Facts: Tomas Lanting, doing business under the name and style of Lanting Security
and Watchman Agency (LSWA) entered into a Security Service Contract to provide
security guards to the properties of the Government Service Insurance System
(GSIS) at the contract rate of P3,000.00 per guard per month.

During the effectivity of the contract, LSWA requested the GSIS for an upward
adjustment of the contract rate in view of Section 7 of Wage Order No. 1 and
Section 3 of Wage Order No. 2, which were issued by the Regional Tripartite Wages
and Productivity Board-NCR pursuant to Republic Act No. 6727, otherwise known as
the Wage Rationalization Act.

Acting on the request of LSWA, the GSIS, through its Board of Trustees and under
Board Resolution No. 207, dated May 24, 1991, approved the upward adjustments
of the contract price from P3,000.00 to P3,716.07 per guard, per month effective
November 1, 1990 to January 7, 1991, and P4,200.00 effective January 8, 1991 to
May 31, 1991.

LSWA assigned security guards Daniel Fanila, Hector Moreno, Isauro Ferrer, Rubin
Wilfredo, Jesus Delima Jr., Maria Legaspi, Santiago Noto Jr., and Virgilio Soriano
(hereafter complainants) to guard one of GSIS's properties.

On March 15, 1993, GSIS terminated the Security Service Contract with LSWA. All
the complainants, except Virgilio Soriano, were absorbed by the incoming security
agency.

On March 7, 1994, complainants filed separate complaints against LSWA for

underpayment of wages and non-payment of labor standard benefits from March
1991 to March 15, 1993. Virgilio Soriano also complained of illegal dismissal.

In its Position Paper, LSWA alleged that complainants were estopped from claiming
that they were underpaid because they were informed that the pay and benefits
given to them were based on the contract rate of P103.00 per eight hours of work or
about P3,100.00 per month.

On August 9, 1994, LSWA filed a Third-Party Complaint against GSIS for

underpayment of complainants' wages.

In its Position Paper, GSIS alleged that the Third-Party Complaint states no cause of
action against it; that LSWA obligated itself in the Security Service Contract to be
solely liable for the enforcement of and compliance with all existing labor laws, rules
and regulations; that the GSIS Board of Trustees approved the upward adjustment
on a month-to-month basis, at P4,200 per guard per month, effective January 8,
1991 to May 31, 1991, under Board Resolution No. 207 dated May 24, 1991, which
was incorporated in the Security Service Contract; that GSIS fully paid the services
of the security guards as agreed upon in the Security Service Contract.

Issues: Whether GSIS is solidarily liable for payment of complainants-respondnents'

salary differentials.
Held:
Yes. Articles 106 and 107 of the Labor Code provide:
ART. 106.
Contractor or subcontractor. Whenever an employer
enters into contract with another person for the performance of the
former's work, the employees of the contractor and of the latter's
subcontractor, if any, shall be paid in accordance with the provisions of
this Code.
In the event that the contractor or subcontractor fails to pay the wage
of his employees in accordance with this Code, the employer shall be
jointly and severally liable with his contractor or subcontractor to such
employees to the extent of the work performed under the contract, in
the same manner and extent that he is liable to employees directly
employed by him.
ART. 107
Indirect employer. The provisions of the immediately
preceding Article shall likewise apply to any person, partnership,
association or corporation which, not being an employer, contracts
with an independent contractor for the performance of any work, task,
job or project.
In this case, the GSIS cannot evade liability by claiming that it had fully paid
complainants' salaries by incorporating in the Security Service Contract the salary
rate increases mandated by Wage Order Nos. 1 and 2 by increasing the contract
price from P3,000.00 to P3,176.07 per guard per month effective November 1, 1990
to January 7, 1991, and P4,200.00 effective January 8, 1991 to May 31, 1991.
In Rosewood Processing, Inc. v. National Labor Relations Commission, 25 the Court
explained the rationale for the joint and several liability of the employer, thus:
The joint and several liability of the employer or principal was enacted to ensure
compliance with the provisions of the Code, principally those on statutory minimum
wage. The contractor or subcontractor is made liable by virtue of his or her status
as a direct employer, and the principal as the indirect employer of the contractor's
employees. This liability facilitates, if not guarantees, payment of the workers'
compensation, thus, giving the workers ample protection as mandated by the 1987
Constitution. This is not unduly burdensome to the employer. Should the indirect
employer be constrained to pay the workers, it can recover whatever amount it had

paid in accordance with the terms of the service contract between itself and the
contractor.
Thus, the Court does not agree with the GSIS's claim that a double burden would be
imposed upon the latter because it would be paying twice for complainants'
services. Such fears are unfounded. Under Article 1217 of the Civil Code, if the GSIS
should pay the money claims of complainants, it has the right to recover from LSWA
whatever amount it has paid in accordance with the terms of the service contract
between the LSWA and the GSIS.
Joint and solidary liability is simply meant to assure aggrieved workers of immediate
and sufficient payment of what is due them. This is in line with the policy of the
State to protect and alleviate the plight of the working class.

23)
Republic of the Phils/SSC/SSS vs. Asiapro Cooperative, G.R. No.
172101, November 23, 2007
Facts:
Before this Court is a Petition for Review on Certiorari under Rule 45 seeking
to annul and set aside the Decision and Resolution of the Court of Appeals which
annulled and set aside the Orders of the Social Security Commission (SSC) thereby
dismissing the petition-complaint filed by herein petitioner Social Security System
(SSS) against herein respondent.
Respondent Asiapro, a cooperative, is composed of owners-members. Its
primary objectives are to provide savings and credit facilities and to develop other
livelihood services for its owners-members. In the discharge of the aforesaid
primary objectives, respondent cooperative entered into several Service Contracts
with Stanfilco. The owners-members do not receive compensation or wages from
the respondent cooperative. Instead, they receive a share in the service surplus
which the respondent cooperative earns from different areas of trade it engages in,
such as the income derived from the said Service Contracts with Stanfilco. The
owners-members get their income from the service surplus generated by the quality
and amount of services they rendered, which is determined by the Board of
Directors of the respondent cooperative.
Owners-members of the respondent cooperative, who were assigned to
Stanfilco requested the services of the latter to register them with petitioner SSS as
self-employed and to remit their contributions as such. To comply with Section 19-A
of Republic Act No. 1161, as amended by Republic Act No. 8282, the SSS
contributions of the said owners-members were equal to the share of both the
employer and the employee.
Petitioner SSS sent a letter to the respondent cooperative informing the latter
that based on the Service Contracts it executed with Stanfilco, respondent
cooperative is actually a manpower contractor supplying employees to Stanfilco and
for that reason, it is an employer of its owners-members working with Stanfilco.
Thus, respondent cooperative should register itself with petitioner SSS as an
employer and make the corresponding report and remittance of premium
contributions in accordance with the Social Security Law of 1997. Respondent
cooperative sent an answer to petitioner asserting that it is not an employer
because its owners-members are the cooperative itself; hence, it cannot be its own
employer. Again, on 21 October 2002, SSS sent a letter to respondent cooperative
ordering the latter to register as an employer and report its owners-members as
employees for compulsory coverage with the petitioner SSS.
Respondent
cooperative continuously ignored the demand of petitioner SSS.
Accordingly, petitioner SSS, on 12 June 2003, filed a Petition before petitioner
SSC against the respondent cooperative and Stanfilco praying that the respondent
cooperative or, in the alternative, Stanfilco be directed to register as an employer
and to report respondent cooperatives owners-members as covered employees
under the compulsory coverage of SSS and to remit the necessary contributions in

accordance with the Social Security Law of 1997. On 17 February 2004, petitioner
SSC issued an Order denying the Motion to Dismiss filed by the respondent
cooperative. The respondent cooperative moved for the reconsideration of the said
Order, but it was likewise denied. Respondent cooperative filed a Petition for
Certiorari before the Court of Appeals wherein its petition was granted. SSS motion
for reconsideration having been denied now goes to the Supreme Court.
Issue: Whether or not an employee-employer relationship exists between
respondent cooperative and its owner-member?
Ruling:
Applying the four-fold test, SC held:
First. It is expressly provided in the Service Contracts that it is the respondent
cooperative which has the exclusive discretion in the selection and
engagement of the owners-members as well as its team leaders who will
be assigned at Stanfilco.
Second. Wages are defined as remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or
ascertained, on a time, task, piece or commission basis, or other method of
calculating the same, which is payable by an employer to an employee under
a written or unwritten contract of employment for work done or to be
done, or for service rendered or to be rendered.In this case, the weekly
stipends or the so-called shares in the service surplus given by the respondent
cooperative to its owners-members were in reality wages, as the same were
equivalent to an amount not lower than that prescribed by existing labor laws, rules
and regulations, including the wage order applicable to the area and industry; or the
same shall not be lower than the prevailing rates of wages.It cannot be doubted
then that those stipends or shares in the service surplus are indeed wages, because
these are given to the owners-members as compensation in rendering services to
respondent cooperatives client, Stanfilco.
Third. It is also stated in the above-mentioned Service Contracts that it is the
respondent cooperative which has the power to investigate, discipline and
remove the owners-members and its team leaders who were rendering
services at Stanfilco.
Fourth. As earlier opined, of the four elements of the employer-employee
relationship, the control test is the most important.In the case at bar, it is the
respondent cooperative which has the sole control over the manner and
means of performing the services under the Service Contracts with
Stanfilco as well as the means and methods of work.Also, the respondent
cooperative is solely and entirely responsible for its owners-members, team leaders
and other representatives at Stanfilco.All these clearly prove that, indeed, there is
an employer-employee relationship between the respondent cooperative and its
owners-members.

It is true that the Service Contracts executed between the respondent

cooperative and Stanfilco expressly provide that there shall be no employeremployee relationship between the respondent cooperative and its ownersmembers. This Court, however, cannot give the said provision force and effect.
As previously pointed out by this Court, an employee-employer relationship
actually exists between the respondent cooperative and its owners-members. The
four elements in the four-fold test for the existence of an employment relationship
have been complied with. The respondent cooperative must not be allowed to deny
its employment relationship with its owners-members by invoking the questionable
Service Contracts provision, when in actuality, it does exist. The existence of an
employer-employee relationship cannot be negated by expressly
repudiating it in a contract, when the terms and surrounding
circumstances show otherwise. The employment status of a person is
defined and prescribed by law and not by what the parties say it should
be.
It is settled that the contracting parties may establish such stipulations,
clauses, terms and conditions as they want, and their agreement would have the
force of law between them.However, the agreed terms and conditions must
not be contrary to law, morals, customs, public policy or public order.The
Service Contract provision in question must be struck down for being contrary to
law and public policy since it is apparently being used by the respondent
cooperative merely to circumvent the compulsory coverage of its employees, who
are also its owners-members, by the Social Security Law.
It bears stressing, too, that a cooperative acquires juridical personality upon
its registration with the Cooperative Development Authority. It has its Board of
Directors, which directs and supervises its business; meaning, its Board of Directors
is the one in charge in the conduct and management of its affairs. With that, a
cooperative can be likened to a corporation with a personality separate and distinct
from its owners-members. Consequently, an owner-member of a cooperative can
be an employee of the latter and an employer-employee relationship can exist
between them.
In the present case, it is not disputed that the respondent cooperative had
registered itself with the Cooperative Development Authority, as evidenced by its
Certificate of Registration No. 0-623-2460.In its by-laws, its Board of Directors
directs, controls, and supervises the business and manages the property of the
respondent cooperative. Clearly then, the management of the affairs of the
respondent cooperative is vested in its Board of Directors and not in its ownersmembers as a whole. Therefore, it is completely logical that the respondent
cooperative, as a juridical person represented by its Board of Directors, can enter
into an employment with its owners-members.
Having declared that there is an employer-employee relationship between the
respondent cooperative and its owners-member, we conclude that the petitioner
SSC has jurisdiction over the petition-complaint filed before it by the petitioner SSS.
WHEREFORE, premises considered, the instant Petition is hereby GRANTED.

24)

Almeda et al., vs. Asahi Glass, G.R. No. 177785, Sept 3, 2008

Facts:
Respondent Asahi Glass Phil., Inc, a domestic corporation engaged in glass
manufacturing business and San Sebastian Allied Services, Inc (SSASI) entered into
a service contract on 5 March 2002 whereby the latter undertook to provide the
former with the necessary manpower. Petitioners Almeda et. al as glass cutters and
glass quality controller were hired pursuant to such contract and assigned for
respondent. Petitioners worked for respondent for periods ranging from three to 11
years. On 1 December 2002, respondent terminated its service contract with SSASI,
which in turn, terminated the employment of petitioners on the same date. So,
petitioners filed a complaint of illegal dismissal asserting that they should be
considered regular employees where their work has been desirable to the business
of respondent working for three to 11 years and that SSASI is a labor-only
contractor. Petitioners asserted it is respondent who asserted control submitting a
copy of their work schedule containing the time and manner of performing their jobs
dictated by respondent; and that they worked in respondents premises only.
Respondent on one hand, averred that petitioners are not its employees but
of SSASI; and that petitioners were hired for intermittent services only pursuant to
an Accreditation Agreement, dated 5 March 2002. A certificate of registration issued
by DOLE on 3 January 2003 was presented purporting that SSASI is a legitimate job
contractor. Copy of opinions of DOLE dated18 February 2003 were also shown
authorizing respondent to contract out certain activities not necessary or desirable
to the business of the company.
The Labor Arbiter in view of the overwhelming documentary evidence of
respondents refuting the bare allegations of the petitioners, dismissed the
complaint. NLRC reversed the LAs decision stating that SSASI was engaged in laboronly contracting --since it did not have substantial capital and investment in the
form of tools, equipment and machineries making petitioners employees of
respondent. On appeal, CA reversed NLRCs findings. Now on petition for review on
certiorari before SC
Issues:
Whether petitioners are employees of respondent
Hinged on the issue: Whether or not it is established that SSASI was a labor-only
contractor
Ruling:
In labor-only contracting, the statutes create an employer-employee relationship for
a comprehensive purpose: to prevent circumvention of labor laws. The contractor is
considered as merely the agent of the principal employer and the latter is
responsible to the employees of the labor-only contractor as if such employees are
directly employed by the principal employer.
SSASI is a labor-only contractor, thus respondent shall be considered as the
employer of petitioners who must bear the liability for the dismissal of the latter, if

any. The following reasons/circumstances material to the case leading to such

conclusion are:
a. Respondent failed to prove that SSASI possessed substantial capital or
investment when respondent began contractual relations with it more than a
decade before 2003. No single financial statement or record to attest to the
economic status and financial capacity of SSASI to venture into and sustain its own
business independent from petitioner.
b. Petitioners were performing jobs that were directly related to respondents main
line of business. Respondent being engaged in glass manufacturing while
petitioners worked as quality controller and glass cutters clearly indicate a direct
relation between respondents business and petitioners work. Respondents
argument that petitioners were required only when there was an increase in the
markets demand with which respondent could not cope, only prove even more that
the services rendered by petitioners were indeed part of the main business of
respondent. Respindents argument that petitioners were hired only intermittently
depending on the market is negated by length and continuity of their performance,
lasting for periods ranging from three to 11 years. Thus, petitioners services are
indispensable.
c. The crucial element of control over petitioners rested in respondent. The power of
control refers to the authority of the employer to control the employee not only with
regard to the result of work to be done, but also to the means and methods by
which the work is to be accomplished. It should be borne in mind that the power of
control refers merely to the existence of the power and not 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 former has a right to wield the power.
Petitioners worked at the respondents premises, and nowhere else.
Petitioners followed the work schedule prepared by respondent. They were required
to observe all rules and regulations of the respondent pertaining to, among other
things, the quality of job performance, regularity of job output, and the manner and
method of accomplishing the jobs.
Evidence is lacking that SSASI exercised control over them or their work. The
fact that it was SSASI which dismissed petitioners from employment is irrelevant. It
is hardly proof of control, since it was demonstrated only at the end of petitioners
employmenta mere consequence of termination of contractual relations of SSASI
and respondent.
d. The Certificate of Registration presented to bolster the position that SSASI is a
duly registered job contractor was issued only on 3 January 2003. There is no
further proof that prior to said date, SSASI had already registered with and had been
recognized by the DOLE as a job contractor. The timing of SSASIs belated
registration is highly suspicious considering that SSASI was already providing
respondent with workers, including petitioners working for respondent for 11 years,
long before SSASI was registered with the DOLE as a job contractor. Petitioners were
also dismissed from service only a month prior to the issuance of the Certificate of
Registration of SSASI. The surrounding circumstances indicate that the certificate of

registration was merely secured in order to blanket the previous relations between
SSASI and respondent with legality.
The Certificate of Registration issued by the DOLE recognized that SSASI was a
legitimate job contractor only as of the date of its issuance, 3 January 2003. The
Certificate can only be used as reference by persons who would consider the
services offered by SSASI subsequent to its issuance. Respondent, who entered into
contractual relations with SSASI way before the said Certificate, cannot claim that it
relied thereon.
e. The Accreditation Agreement stipulating that petitioners were to remain
employees of SSASI and shall not become regular employees of the respondent
does not govern the status of petitioners. A party cannot dictate, by the mere
expedient of a unilateral declaration in a contract, the character of its business, i.e.,
whether as labor-only contractor or as job contractor, it being crucial that its
character be measured in terms of and determined by the criteria set by statute.

25)
Sasan, Sr et al., vs. NLRC and EPCIB, G.R. No. 176240, October 17,
2008
Facts:
Respondent E-PCIBank entered into a Contract for Services with HI, a domestic
corporation primarily engaged in the business of providing janitorial and
messengerial services. Pursuant to their contract, HI shall hire and assign workers to
E-PCIBank to perform janitorial/messengerial and maintenance services. The
contract was impliedly renewed year after year. Petitioners Rolando Sasan, Sr,
Leonilo Dayday, Modesto Aguirre, Alejandro Ardimer, Eleuterio Sacil, Wilfredo
Juegos, Petronilo Carcedo, and Cesar Peciencia were among those employed and
assigned to E-PCIBank at its branch at Lahug, Cebu City.
On 23 July 2001, petitioners filed with the Arbitration Branch of the NLRC in Cebu
City separate complaints against E-PCIBank and HI for illegal dismissal, with claims
for separation pay, service incentive leave pay, allowances, damages, attorney's
fees and costs. In its amended complaint, it included claims for 13th month pay.
Several conciliation hearings were scheduled by Labor Arbiter Gutierrez but the
parties still failed to arrive at a mutually beneficial settlement; hence, Labor Arbiter
ordered
that
they
submit
their
respective
position
papers.
Petitioners claimed that they had become regular employees of E-PCIBank with
respect to the activities for which they were employed, having continuously
rendered janitorial and messengerial services to the bank for more than one year;
that E-PCIBank had direct control and supervision over the means and methods by
which they were to perform their jobs; and that their dismissal by HI was null and
void because the latter had no power to do so since they had become regular
employees of E-PCIBank.
For its part, E-PCIBank averred that it entered into a Contract for Services with HI,
an independent job contractor which hired and assigned petitioners to the bank to
perform janitorial and messengerial services thereat. It was HI that paid petitioners'
wages, monitored petitioners' daily time records (DTR) and uniforms, and exercised
direct control and supervision over the petitioners and that therefore HI has every
right to terminate their services legally. E-PCIBank could not be held liable for
whatever misdeed HI had committed against its employees.
HI, on the other hand, asserted that it was an independent job contractor engaged
in the business of providing janitorial and related services to business
establishments, and E-PCIBank was one of its clients. Petitioners were its
employees, part of its pool of janitors/messengers assigned to E-PCIBank. The
Contract for Services between HI and E-PCIBank expired on 15 July 2000. E-PCIBank
no longer renewed said contract with HI and, instead, bidded out its janitorial
requirements to two other job contractors, Able Services and Puritan. HI designated
petitioners to new work assignments, but the latter refused to comply with the

same. Petitioners were not dismissed by HI, whether actually or constructively,

thus, petitioners' complaints before the NLRC were without basis.
Labor Arbiter rendered a Decision finding that HI was not a legitimate job contractor
on the ground that it did not possess the required substantial capital or investment
to actually perform the job, work, or service under its own account and
responsibility as required under the Labor Code. HI is therefore a labor-only
contractor and the real employer of petitioners is E-PCIBank which is held liable to
petitioners.
Judgment was rendered directing the respondents Equitable PCI Bank and
Helpmate, Inc. to pay jointly and solidarily the complainants.
E-PCIBank and HI appealed the same to the NLRC. The NLRC took into consideration
the documentary evidence presented by HI for the first time on appeal and, on the
basis thereof, declared HI as a highly capitalized venture with sufficient
capitalization, which cannot be considered engaged in "labor-only contracting. The
NLRC deleted Labor Arbiters award of backwages and separation pay, but affirmed
his award for 13th month pay and attorney's fees.
Court of Appeals affirmed the findings of the NLRC that HI was a legitimate job
contractor and that it did not illegally dismiss petitioners.
ISSUE: Whether or not NLRC erred in considering new evidence presented first time
on appeal. WON HI is legitimate contractor. WON the petitioners are illegally
dismissed.
RULING:
Our jurisprudence is already replete with cases allowing the NLRC to admit
evidence, not presented before the Labor Arbiter, and submitted to the NLRC for the
first time on appeal. Technical rules of evidence are not binding in labor cases.
Labor officials should use every reasonable means to ascertain the facts in each
case speedily and objectively, without regard to technicalities of law or procedure,
all in the interest of due process.
In the case at bar, we find substantial evidence to support the finding of the NLRC,
affirmed by the Court of Appeals, that HI is a legitimate job contractor.
We take note that HI has been issued by the Department of Labor and Employment
(DOLE) Certificate of Registration Numbered VII-859-1297-048. Having been issued
by a public officer, this certification carries with it the presumption that it was
issued in the regular performance of official duty. In the absence of proof,
petitioner's bare assertion cannot prevail over this presumption.
The evidence on record also shows that HI is carrying on a distinct and independent
business from E-PCIBank. The employees of HI are assigned to clients to perform
janitorial and messengerial services, clearly distinguishable from the banking
services in which E-PCIBank is engaged.

"Substantial capital or investment" refers to capital stocks and subscribed

capitalization in the case of corporations, tools, equipments, implements,
machineries and work premises, actually and directly used by the contractor or
subcontractor in the performance or completion of the job, work or service
contracted out. An independent contractor must have either substantial capital or
investment in the form of tools, equipment, machineries, work premises, among
others. The law does not require both substantial capital and investment in the form
of tools, equipment, machineries, etc. It is enough that it has substantial capital.

In the case of HI, it has proven both.

The services rendered by the petitioners as janitors, messengers and drivers are
considered not necessary in the conduct of its (E-PCIBANK's) principal business.
Etched in an unending stream of cases are four standards in determining the
existence of an employer-employee relationship, namely: (a) the manner of
selection and engagement of the putative employee; (b) the mode of payment of
wages; (c) the presence or absence of power of dismissal; and, (d) the presence or
absence of control of the putative employee's conduct. Most determinative among
these factors is the so-called "control test."

On the power to control the employee's conduct, and the fourth requisite regarding
the power of dismissal, again E-PCIBank did not have the power to control
petitioners with respect to the means and methods by which their work was to be
accomplished. It likewise had no power of dismissal over the petitioners. All that EPCIBank could do was to report to HI any untoward act, negligence, misconduct or
malfeasance of any employee assigned to the premises.
In view of the preceding conclusions, petitioners will never become regular
employees of E-PCIBank regardless of how long they were working for the latter.
We further rule that petitioners were not illegally dismissed by HI. Upon the
termination of the Contract of Service between HI and E-PCIBank, petitioners cannot
insist to continue to work for the latter. Their pull-out from E-PCIBank did not
constitute illegal dismissal since, first, petitioners were not employees of E-PCIBank;
and second, they were pulled out from said assignment due to the non-renewal of
the Contract of Service between HI and E-PCIBank. At the time they filed their
complaints with the Labor Arbiter, petitioners were not even dismissed by HI; they
were only "off-detail" pending their re-assignment by HI to another client. And
when they were actually given new assignments by HI with other clients, petitioners
even refused the same. As the NLRC pronounced, petitioners' complaint for illegal
dismissal is apparently premature.
Petition is DENIED for lack of merit. CA decision affirmed.

26)

Purefoods Corp., vs. NLRC et al., G.R. No. 172241, November 20, 2008

FACTS: Neri filed a claim for nonpayment of additional wage increase,

regularization, nonpayment of service incentive leave, underpayment of 13th month
pay, and nonpayment of premium pay for holiday and holiday pay against Purefoods
Corporation (Purefoods). Neri was thereafter dismissed from her work as a DeliAttendant. Subsequently, Neri filed an amended complaint charging Purefoods with
illegal dismissal. The Labor Arbiter then declared Neri as Purefoods' regular
employee; and Neri as having been illegally dismissed and entitled to reinstatement
with payment of backwages. Purefoods filed a partial appeal, praying that the case
be remanded for formal hearing on the merits and to implead D.L. Admark as a
party-respondent. The NLRC granted the appeal and remanded the case for further
hearings on the factual issues.
The case was remanded to a Labor Arbiter, who, after finding that Neri is not an
employee of petitioner, but rather of D.L. Admark, an independent labor contractor,
dismissed the complaint. Neri appealed to the NLRC, which ruled in complainants'
favor and reversed and set aside the labor arbiter's decision. Hence, Purefoods
recourse to the CA.
The CA held that D.L. Admark is a legitimate independent contractor. However, it
ruled that complainants are regular employees of Purefoods. Citing Art. 280 of the
Labor Code, the appellate court found that complainants were engaged to perform
activities which are usually necessary or desirable in the usual business or trade of
Purefoods, and that they were under the control and supervision of Purefoods'
supervisors, and not of D.L. Admark's. It noted that in the Promotions Agreements
between D.L. Admark and Purefoods, there was no mention of the list of D.L.
Admark employees who will handle particular promotions for petitioner, and that
complainants' periods of employment are not fully covered by the Promotions
Agreements.
Thus, this petition.
In the present petition for review, Purefoods maintains that Neri is not an employee
of Purefoods, but of D.L. Admark, an independent job contractor. Thus, it cannot be
held liable for illegal dismissal. Finally, it claims that Article 280 of the Labor Code is
not applicable in a trilateral relationship involving a principal, an independent job
contractor, and the latter's employees.
ISSUE: Whether or not Neri is an employee of Purefoods
HELD: Not an employee.
The Court agrees with Purefoods' argument that Art. 280 of the Labor Code finds no
application in a trilateral relationship involving a principal, an independent job
contractor, and the latter's employees. Indeed, the Court has ruled that said
provision is not the yardstick for determining the existence of an employment
relationship because it merely distinguishes between two kinds of employees, i.e.,
regular employees and casual employees, for purposes of determining the right of
an employee to certain benefits, to join or form a union, or to security of tenure; it
does not apply where the existence of an employment relationship is in dispute. It is
therefore erroneous on the part of the Court of Appeals to rely on Art. 280 in

determining whether an employer-employee relationship exists between respondent

Neri and Purefoods.
Permissible job contracting or subcontracting refers to an arrangement whereby a
principal agrees to put out or farm out with the contractor or subcontractor the
performance or completion of a specific job, work or service within a definite or
predetermined period regardless of whether such job, work or service is to be
performed or completed within or outside the premises of the principal. In this
arrangement, the following conditions must be met: (a) the contractor carries on a
distinct and independent business and undertakes the contract work on his account
under his own responsibility according to his own manner and method, free from the
control and direction of his employer or principal in all matters connected with the
performance of his work except as to the results thereof; (b) the contractor has
substantial capital or investment; and (c) the agreement between the principal and
contractor or subcontractor assures the contractual employees' entitlement to all
labor and occupational safety and health standards, free exercise of the right to selforganization, security of tenure, and social welfare benefits.
In the first place, D.L. Admark's status as a legitimate independent contractor has
already been established in Escario v. NLRC. In the said case, complainants, through
D.L. Admark, worked as merchandisers for California Manufacturing Corporation
(CMC). They filed a case before the labor arbiter for the regularization of their
employment status with CMC, and while the case was pending, D.L. Admark sent
termination letters to complainants. The complainants thereafter amended their
complaint to include illegal dismissal. The Court considered the following
circumstances as tending to establish D.L. Admark's status as a legitimate job
contractor:
1) The SEC registration certificate of D.L. Admark states that it is a firm engaged in
promotional, advertising, marketing and merchandising activities.
2) The service contract between CMC and D.L. Admark clearly provides that the
agreement is for the supply of sales promoting merchandising services rather than
one of manpower placement.
3) D.L. Admark was actually engaged in several activities, such as advertising,
publication, promotions, marketing and merchandising. It had several
merchandising contracts with companies like Purefoods, Corona Supply, Nabisco
Biscuits, and Licron. It was likewise engaged in the publication business as
evidenced by its magazine the "Phenomenon."
4) It had its own capital assets to carry out its promotion business. It then had
current assets amounting to P6 million and is therefore a highly capitalized venture.
It had an authorized capital stock of P500,000.00. It owned several motor vehicles
and other tools, materials and equipment to service its clients. It paid rentals of
P30,020 for the office space it occupied.

Moreover, applying the four-fold test used in determining employer-employee

relationship, the Court found that: the employees therein were selected and hired
by D.L. Admark; D.L. Admark paid their salaries, as evidenced by the payroll
prepared by D.L. Admark and sample contribution forms; D.L. Admark had the

power of dismissal as it admitted that it was the one who terminated the
employment of the employees; and finally, it was D.L. Admark who exercised control
and supervision over the employees.
Furthermore, it is evident from the Promotions Agreements entered into by
Purefoods that D.L. Admark is a legitimate labor contractor. The agreements confirm
that D.L. Admark is an independent contractor which Purefoods had engaged to
supply general promotion services, and not mere manpower services, to it. The
provisions expressly permit D.L. Admark to handle and implement Purefoods'
project, and categorically state that there shall be no employer-employee
relationship between D.L. Admark's employees and Purefoods. While it may be true
that complainants were required to submit regular reports and were introduced as
Purefoods merchandisers, these are not enough to establish Purefoods' control over
them. Even if the report requirements are somehow considered as control
measures, they were imposed only to ensure the effectiveness of the promotion
services rendered by D.L. Admark. 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. Indeed, it would be foolhardy for any
company to completely give the reins and totally ignore the operations it has
contracted out.
We also note that Neri herself admitted in her Sinumpaang Salaysay and in the
hearings that she applied with D.L. Admark and that she worked for Purefoods
through D.L. Admark. Neri was aware from the start that D.L. Admark was her
employer and not Purefoods. She had kept her contract with D.L. Admark, and
inquired about her employment status with D.L. Admark. It was D.L. Admark, as her
employer, which had the final say in, and which actually effected, her termination.

27)
Maranaw Hotels and Resort vs. Court of Appeals, et al., G.R. No.
149660, Jan. 20, 2009
FACTS:
The present proceedings emanate from a complaint for regularization, subsequently
converted into one for illegal dismissal, filed before Labor Arbiter Madjayran H. Ajan
by private respondent Sheryl Oabel.
It appears that private respondent Oabel was initially hired by petitioner as an extra
beverage attendant on April 24, 1995. This lasted until February 7, 1997.
Respondent worked in Century Park Hotel, an establishment owned by the
petitioner.
On September 16, 1996, petitioner contracted with Manila Resource Development
Corporation. Subsequently, private respondent Oabel was transferred to MANRED,
with the latter deporting itself as her employer. MANRED has intervened at all
stages of these proceedings and has consistently claimed to be the employer of
private respondent Oabel.
Private respondent filed before the Labor Arbiter a petition for regularization of
employment against the petitioner. On August 1, 1998, however, private respondent
Oabel was dismissed from employment. Respondent converted her petition for
regularization into a complaint for illegal dismissal.
LABOR ARBITERs decision: dismissing the complaint against the petitioner.
NLRCs decision: It reversed the ruling of the Labor Arbiter and held that: (1)
MANRED is a labor-only contractor, and (2) private respondent was illegally
dismissed. Of the first holding, the NLRC observed that under the very terms of the
service contract, MANRED shall provide the petitioner not specific jobs or services
but personnel and that MANRED had insufficient capitalization and was not
sufficiently equipped to provide specific jobs. The NLRC likewise observed that the
activities performed by the private respondent were directly related to and usually
necessary or desirable in the business of the petitioner. With respect to the
termination of private respondents employment, the NLRC held that it was not
effected for a valid or just cause and was therefore illegal.
CAs decision: The appellate court dismissed the petition on account of the failure of
the petitioner to append the board resolution authorizing the counsel for petitioner
to file the petition before the Court of Appeals.
ISSUES:
1. Whether there is a need of certification of non forum shopping which must be
signed by duly authorized officers of a corporation.
2. Whether there is employer-employee relationship between petitioner and private
respondent, Oabel.
SC RULING:
On the first issue

Well-settled is the rule that the certificate of non-forum shopping is a mandatory

requirement. Substantial compliance applies only with respect to the contents of the
certificate but not as to its presence in the pleading wherein it is required.
Petitioners contention that the filing of a motion for reconsideration with an
appended certificate of non forum-shopping suffices to cure the defect in the
pleading is absolutely specious. It negates the very purpose for which the
certification against forum shopping is required: to inform the Court of the pendency
of any other case which may present similar issues and involve similar parties as
the one before it. The requirement applies to both natural and juridical persons.
Petitioner relies upon this Courts ruling in Digital Microwave Corp. v. Court of
Appeals to show that its Personnel Director has been duly authorized to sign
pleadings for and in behalf of the petitioner. Petitioner, however, has taken the
ruling in Digital Microwave out of context. The portion of the ruling in Digital
Microwave upon which petitioner relies was in response to the issue of impossibility
of compliance by juridical persons with the requirements of Circular 28-91. The
Courts identification of duly authorized officers or directors as the proper
signatories of a certificate of non forum-shopping was in response to that issue. The
ruling does not, however, ipso facto clothe a corporate officer or director with
authority to execute a certificate of non-forum shopping by virtue of the formers
position alone.
Any doubt on the matter has been resolved by the Courts ruling in BPI Leasing
Corp. v. Court of Appeals where this Court emphasized that the lawyer acting for the
corporation must be specifically authorized to sign pleadings for the corporation.
Specific authorization, the Court held, could only come in the form of a board
resolution issued by the Board of Directors that specifically authorizes the counsel
to institute the petition and execute the certification, to make his actions binding on
his principal, i.e., the corporation.
This Court has not wavered in stressing the need for strict adherence to procedural
requirements. The rules of procedure exist to ensure the orderly administration of
justice. They are not to be trifled with lightly.
On the second issue
Petitioner posits that it has entered into a service agreement with intervenor
MANRED. The latter, in turn, maintains that private respondent Oabel is its
employee and subsequently holds itself out as the employer and offers the
reinstatement of private respondent.
Notably, private respondents purported employment with MANRED commenced
only in 1996, way after she was hired by the petitioner as extra beverage attendant
on April 24, 1995. There is thus much credence in the private respondents claim
that the service agreement executed between the petitioner and MANRED is a mere
ploy to circumvent the law on employment, in particular that which pertains on
regularization.

In this regard, it has not escaped the notice of the Court that the operations of the
hotel itself do not cease with the end of each event or function and that there is an
ever present need for individuals to perform certain tasks necessary in the
petitioners business. Thus, although the tasks themselves may vary, the need for
sufficient manpower to carry them out does not. In any event, as borne out by the
findings of the NLRC, the petitioner determines the nature of the tasks to be
performed by the private respondent, in the process exercising control.
This being so, the Court finds no difficulty in sustaining the finding of the NLRC that
MANRED is a labor-only contractor. Concordantly, the real employer of private
respondent Oabel is the petitioner.
It appears further that private respondent has already rendered more than one year
of service to the petitioner, for the period 1995-1998, for which she must already be
considered a regular employee, pursuant to Article 280 of the Labor Code:
Art. 280. Regular and casual employment. The provisions of written agreement to
the contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged
to perform activities which are usually necessary or desirable in the usual business
or trade of the employer, except where the employment has been fixed for a
specific project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the work or
service to be performed is seasonal in nature and the employment is for the
duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding
paragraph: Provided, That any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity in which he is employed and his employment
shall continue while such activity exists.
Petition denied.

28)

CCBPI vs. Agito et al., G.R. No. 179546, Feb. 13, 2009

FACTS:
Petitioner (Coke) is a domestic corporation engaged in manufacturing,
bottling and distributing soft drink beverages and other allied products.
Respondents were salesmen assigned at Coke Lagro Sales Office for years but were
not regularized. Coke averred that respondents were employees of Interserve who
were tasked to perform contracted services in accordance with the provisions of the
Contract of Services executed between Coke and Interserve on 23 March 2002. Said
Contract constituted legitimate job contracting, given that the latter was a bona fide
independent contractor with substantial capital or investment in the form of tools,
equipment, and machinery necessary in the conduct of its business.
To prove the status of Interserve as an independent contractor, petitioner presented
the following pieces of evidence: (1) the Articles of Incorporation of Interserve; (2)
the Certificate of Registration of Interserve with the Bureau of Internal Revenue; (3)
the Income Tax Return, with Audited Financial Statements, of Interserve for 2001;
and (4) the Certificate of Registration of Interserve as an independent job
contractor, issued by the Department of Labor and Employment (DOLE).
As a result, petitioner asserted that respondents were employees of
Interserve, since it was the latter which hired them, paid their wages, and
supervised their work, as proven by: (1) respondents Personal Data Files in the
records of Interserve; (2) respondents Contract of Temporary Employment with
Interserve; and (3) the payroll records of Interserve.
ISSUES:
1. Whether or not Inteserve is a labor-only contractor;
2. Whether or not an employer-employee relationship exists between
petitioner Coca-Cola Bottlers Phils. Inc. and respondents.
RULING:
At the outset, the Court clarifies that although Interserve has an authorized
capital stock amounting to P2,000,000.00, only P625,000.00 thereof was paid up as
of 31 December 2001. The Court does not set an absolute figure for what it
considers substantial capital for an independent job contractor, but it measures the
same against the type of work which the contractor is obligated to perform for the
principal. However, this is rendered impossible in this case since the Contract
between petitioner and Interserve does not even specify the work or the project that
needs to be performed or completed by the latters employees, and uses the
dubious phrase tasks and activities that are considered contractible under existing
laws and regulations. Even in its pleadings, petitioner carefully sidesteps
identifying or describing the exact nature of the services that Interserve was
obligated to render to petitioner. The importance of identifying with particularity the
work or task which Interserve was supposed to accomplish for petitioner becomes

even more evident, considering that the Articles of Incorporation of Interserve

states that its primary purpose is to operate, conduct, and maintain the business of
janitorial and allied services. But respondents were hired as salesmen and leadman
for petitioner. The Court cannot, under such ambiguous circumstances, make a
reasonable determination if Interserve had substantial capital or investment to
undertake the job it was contracting with petitioner.
[In] Vinoya v. NLRC, we clarified that it was not enough to show substantial
capitalization or investment in the form of tools, equipment, machinery and work
premises, etc., to be considered an independent contractor. In fact, jurisprudential
holdings were to the effect that in determining the existence of an independent
contractor relationship, several factors may be considered, such as, but not
necessarily confined to, whether the contractor was carrying on an independent
business; the nature and extent of the work; the skill required; the term and
duration of the relationship; the right to assign the performance of specified pieces
of work; the control and supervision of the workers; the power of the employer with
respect to the hiring, firing and payment of the workers of the contractor; the
control of the premises; the duty to supply premises, tools, appliances, materials
and labor; and the mode, manner and terms of payment.
In sum, Interserve did not have substantial capital or investment in the form
of tools, equipment, machineries, and work premises; and respondents, its
supposed employees, performed work which was directly related to the principal
business of petitioner. It is, thus, evident that Interserve falls under the definition of
a labor-only contractor, under Article 106 of the Labor Code; as well as Section
5(i) of the Rules Implementing Articles 106-109 of the Labor Code, as amended. It
is also apparent that Interserve is a labor-only contractor under Section 5(ii) of the
Rules Implementing Articles 106-109 of the Labor Code, as amended, since it did
not exercise the right to control the performance of the work of respondents.
The lack of control of Interserve over the respondents can be gleaned from
the Contract of Services between Interserve (as the CONTRACTOR) and petitioner
(as the CLIENT). The Contract of Services between Interserve and petitioner did not
identify the work needed to be performed and the final result required to be
accomplished. Instead, the Contract specified the type of workers Interserve must
provide petitioner (Route Helpers, Salesmen, Drivers, Clericals, Encoders & PD)
and their qualifications (technical/vocational course graduates, physically fit, of
good moral character, and have not been convicted of any crime). The Contract also
states that, to carry out the undertakings specified in the immediately preceding
paragraph, the CONTRACTOR shall employ the necessary personnel, thus,
acknowledging that Interserve did not yet have in its employ the personnel needed
by petitioner and would still pick out such personnel based on the criteria provided
by petitioner. In other words, Interserve did not obligate itself to perform an
identifiable job, work, or service for petitioner, but merely bound itself to provide
the latter with specific types of employees. These contractual provisions strongly
indicated that Interserve was merely a recruiting and manpower agency providing
petitioner with workers performing tasks directly related to the latters principal
business.

The certification issued by the DOLE stating that Interserve is an independent

job contractor does not sway this Court to take it at face value, since the primary
purpose stated in the Articles of Incorporation of Interserve is misleading. According
to its Articles of Incorporation, the principal business of Interserve is to provide
janitorial and allied services. The delivery and distribution of Coca-Cola products,
the work for which respondents were employed and assigned to petitioner, were in
no way allied to janitorial services. While the DOLE may have found that the capital
and/or investments in tools and equipment of Interserve were sufficient for an
independent contractor for janitorial services, this does not mean that such capital
and/or investments were likewise sufficient to maintain an independent contracting
business for the delivery and distribution of Coca-Cola products.
With the finding that Interserve was engaged in prohibited labor-only contracting,
petitioner shall be deemed the true employer of respondents. As regular employees
of petitioner, respondents cannot be dismissed except for just or authorized causes,
none of which were alleged or proven to exist in this case, the only defense of
petitioner against the charge of illegal dismissal being that respondents were not its
employees. Records also failed to show that petitioner afforded respondents the
twin requirements of procedural due process, i.e., notice and hearing, prior to their
dismissal. Respondents were not served notices informing them of the particular
acts for which their dismissal was sought. Nor were they required to give their side
regarding the charges made against them. Certainly, the respondents dismissal
was not carried out in accordance with law and, therefore, illegal.

29)
South Davao Development Company et al., vs. Gamo et al., GR No.
171814, May 8, 2009
FACTS:
South Davao Development Company (SDDC) is the operator of a coconut and
mango farm in Davao Oriental and Davao del Sur. In 1963, SDDC hired Sergio Gamo
(Gamo) as a foreman. Sometime in 1987, SDDC appointed Gamo as a copra
maker contractor. Some of the copra workers of SDDC were later transferred by
SDDC to Gamo as his copraceros.
From 1987 to 1999, Gamo and SDDC entered into a profit-sharing agreement
wherein 70% of the net proceeds of the sale of copra went to SDDC and 30% to
Gamo. In this arrangement, the copra workers were paid by Gamo from his 30%
share. Subsequently, SDDC wanted to standardize payments to its contractors in
its coconut farms. However, SDDC and Gamo were not able to agree on a new
payment scheme. Despite this, Gamo and his copraceros started to do harvesting
work. SDDC, upon notice, told them to stop. Eventually, Gamo and SDDC agreed
that Gamo may continue with the harvest provided that it would be his last
contract with SDDC. Gamo suggested to SDDC to look for a new contractor
since he was not amenable to the new payment scheme that it proposed.
Since SDDC did not renew the contract of Gamo, the latter and his copra workers
alleged that they were illegally dismissed. The labor arbiter dismissed the complaint
ruling that there was no employer-employee relationship between SDDC and Gamo
et al. The NLRC shared the position with the labor arbiter and ruled that the nature
of the job of Gamo et al. could not result in an employer-employee relationship. On
the other hand, the Court of Appeals ruled that an employer-employee relationship
existed.
SSDCs alleges that the current business practice 1 in the coconut industry treats
copraceros as independent contractors.
ISSUES:
(1) Whether or not the Court of Appeals failed to take judicial notice of the accepted
practice of independent contractors in the coconut industry.
(2) Whether or not Gamo is an independent contractor.
(3) Whether or not there is an employer-employee relationship between SDDC and
Gamo et al.
HELD:
(1) NO. According to Expertravel vs. CA,2 matters of judicial notice have three
material requisites: (i) the matter must be one of common and general knowledge;
(ii) it must be well and authoritatively settled and not doubtful or uncertain; and (iii)
it must be known to be within the limits of the jurisdiction of the court.
1
2

An invocation that the Court take judicial notice of certain facts should satisfy the
requisites, a mere prayer for its application shall not suffice. In this case, the Court
cannot take judicial notice of the alleged business practices in the copra industry.
The record is bereft of any indication that the matter is of common knowledge to
the public and that it has the characteristic of notoriety.
(2) NO. In Escario v. NLRC,3 it was held that to establish the existence of an
independent contractor, the following conditions must exist: (i) the contractor
carries on an independent business and undertakes the contract work on his own
account under his own responsibility according to his own manner and method, free
from the control and direction of his employer or principal in all matters connected
with the performance of the work except to the result thereof; and (ii) the contractor
has substantial capital or investments in the form of tools, equipment, machineries,
work premises and other materials which are necessary in the conduct of his
business.
The Implementing Rules of the Labor Code defines investment as tools, equipment,
implements, machineries and work premises, actually and directly used by the
contractor or subcontractor in the performance or completion of the job, work, or
service contracted out. The investment must be sufficient to carry out the job at
hand.
Gamo and the copra workers did not exercise independent judgment in the
performance of their tasks. The tools used by Gamo and his copra workers like the
karit, bolo, pangbunot, panglugit and pangtapok are not sufficient to enable them to
complete the job. Reliance on these primitive tools is not enough. In fact, the
accomplishment of their task required more expensive machineries and equipment,
like the trucks to haul the harvests and the drying facility, which SDDC owns.
(3) YES. In order to determine the existence of an employer-employee relationship,
the Court has frequently applied the four-fold test: (i) the selection and engagement
of the employee; (ii) the payment of wages; (iii) the power of dismissal; and (iv) the
power to control the employees conduct, or the so called control test, which is
considered the most important element.
From the time the copraceros were hired by SDDC up to the time that they were
reassigned to work under Gamos supervision, their status as SDDCs employees did
not cease. Likewise, payment of their wages was merely coursed through Gamo. As
to the power of control, it is sufficient that the power to control the manner of doing
the work exists, it does not require the actual exercise of such power.
In this case, SDDC was exercising its power of control when it transferred the copra
workers from their previous assignments to work as Gamos copraceros. It was also
in the exercise of the same power that SDDC put Gamo in charge of the copra
workers although under a different payment scheme. Thus, it is clear that an
employer-employee relationship has existed between SDDC and Gamo et al. since
the beginning and such relationship did not cease despite their reassignments and
the change of payment scheme.
3

30)
Traveno et al., vs. Bobongon Banana
Cooperative et al., GR No. 164205, Sept. 3, 2009

Growers

Multi-purpose

FACTS:
Petitioner Oldarico Traveo and his 16 co-petitioners worked at a banana plantation
at Bobongan Santo Tomas, Davao del Norte. Sometime in 2000, they filed three
separate complaints for illegal dismissal, individually and collectively, with the NLRC
against said respondents including respondent Dole Asia Philippines as it then
supposedly owned TACOR, for unpaid salaries, overtime pay, 13th month pay,
service incentive leave pay, damages, and attorneys fees. DFI answered for itself
and TACOR denied that they hired petitioners; That it had an arrangement with
several landowners for them to extend financial and technical assistance to them
for the development of their lands into a banana plantation on the condition that
the bananas produced therein would be sold exclusively to TACOR and it was the
landowners who worked on their own farms and hired laborers to assist them and
that the landowners themselves decided to form a cooperative in order to better
attain their business objectives; The Cooperative failed to file a position paper
despite due notice, prompting the Labor Arbiter to consider it to have waived its
right to adduce evidence in its defense. Nothing was heard from respondent Dole
Asia Philippines.
LABOR ARBITER:
Cooperative is guilty of illegal dismissal based on several Orders by the DOLE in an
earlier case declaring the Cooperative as the employer of the 341 workers in the
farms of its several members. It dropped the complaints against DFI, TACOR and
Dole Asia Philippines.
NLRC:
Sustained the Labor Arbiters ruling that the employer of petitioners is the
Cooperative. It partially granted petitioners appeal, however, by ordering the
Cooperative to pay them their unpaid wages, wage differentials, service incentive
leave pay, and 13th month pay. It thus remanded the case to the Labor Arbiter for
computation of those awards.
CA:
Dismissed petitioners petition for certiorari on the ground that the
accompanying verification and certification against forum shopping was defective, it
having been signed by only 19 of the 22 therein named petitioners.
ISSUES:
(1)WON the petition should be dismissed because of the non-signing of the
petitioners;
HELD:
NO. For the guidance of the bench and bar, the Court restates in capsule form
the jurisprudential pronouncements already reflected in Altres v Empleo above
respecting non-compliance with the requirements on, or submission of defective,
verification and certification against forum shopping:

1) A distinction must be made between non-compliance with the requirement

on or submission of defective verification, and non-compliance with the requirement
on or submission of defective certification against forum shopping.
2) As to verification, non-compliance therewith or a defect therein does not
necessarily render the pleading fatally defective. The court may order its
submission or correction or act on the pleading if the attending circumstances are
such that strict compliance with the Rule may be dispensed with in order that the
ends of justice may be served thereby.
3) Verification is deemed substantially complied with when one who has
ample knowledge to swear to the truth of the allegations in the complaint or petition
signs the verification, and when matters alleged in the petition have been made in
good faith or are true and correct.
4) As to certification against forum shopping, non-compliance therewith or a
defect therein, unlike in verification, is generally not curable by its subsequent
submission or correction thereof, unless there is a need to relax the Rule on the
ground of "substantial compliance" or presence of "special circumstances or
compelling reasons."
5) The certification against forum shopping must be signed by all the
plaintiffs or petitioners in a case; otherwise, those who did not sign will be dropped
as parties to the case. Under reasonable or justifiable circumstances, however, as
when all the plaintiffs or petitioners share a common interest and invoke a common
cause of action or defense, the signature of only one of them in the certification
against forum shopping substantially complies with the Rule.
6) Finally, the certification against forum shopping must be executed by the
party-pleader, not by his counsel. If, however, for reasonable or justifiable reasons,
the party-pleader is unable to sign, he must execute a Special Power of Attorney
designating his counsel of record to sign on his behalf. (Emphasis and underscoring
supplied)The foregoing restated pronouncements were lost in the challenged
Resolutions of the appellate court. Petitioners contention that the appellate court
should have dismissed the petition only as to the non-signing petitioners or merely
dropped them as parties to the case is thus in order. Instead of remanding the case
to the appellate court, however, the Court deems it more practical to decide the
substantive issue raised in this petition so as not to further delay the disposition of
this case.
ISSUE:
(2) won DFI and DPI should be held solidarily liable with Cooperative for
petitioners illegal dismissal and money claims.
HELD:
No they are not solidarily liable. Petition is dismissed. There is no ER-EE
relationship between petitioners and Cooperatives co-respondents. DFI did not farm
out to the Cooperative the performance of a specific job, work, or service. Instead, it
entered into a Banana Production and Purchase Agreement (Contract) with the
Cooperative, under which the Cooperative would handle and fund the production of
bananas and operation of the plantation covering lands owned by its members in
consideration of DFIs commitment to provide financial and technical assistance as
needed, including the supply of information and equipment in growing, packing, and
shipping bananas. The Cooperative would hire its own workers and pay their wages
and benefits, and sell exclusively to DFI all export quality bananas produced that

meet the specifications agreed upon. To the Court, the Contract between the
Cooperative and DFI, far from being a job contracting arrangement, is in essence a
business partnership that partakes of the nature of a joint venture.
The rules on job contracting are, therefore, inapposite. Further, petitioners
claim of employment relationship with the Cooperatives herein co-respondents
must be assessed on the basis of four standards, viz: (a) the manner of their
selection and engagement (No employment contract was; (b) the mode of payment
of their wages; (c) the presence or absence of the power of dismissal; and (d) the
presence or absence of control over their conduct. Most determinative among these
factors is the so-called "control test."
There is nothing in the records which indicates the presence of any of the foregoing
elements of an employer-employee relationship. While the Court commiserates with
petitioners on their loss of employment, especially now that the Cooperative is no
longer a going concern since it has been dissolved, it cannot simply, by default, hold
the Cooperatives co-respondents liable for their claims without any factual and
legal justification therefor. The social justice policy of labor laws and the
Constitution is not meant to be oppressive of capital. En passant, petitioners are not
precluded from pursuing any available remedies against the former members of the
defunct Cooperative as their individual circumstances may warrant.

31)

Locsin et al., vs. PLDT, GR No. 185251, Oct 2, 2009

Facts:
On November 1, 1990, respondent Philippine Long Distance Telephone
Company (PLDT) and the Security and Safety Corporation of the Philippines (SSCP)
entered into a Security Services Agreement (Agreement) whereby SSCP would
provide armed security guards to PLDT to be assigned to its various offices.
Pursuant to such agreement, petitioners Raul Locsin and Eddie Tomaquin, among
other security guards, were posted at a PLDT office.
On August 30, 2001, respondent issued a Letter dated August 30, 2001
terminating the Agreement effective October 1, 2001. Despite the termination of
the Agreement, however, petitioners continued to secure the premises of their
assigned office. They were allegedly directed to remain at their post by
representatives of respondent. In support of their contention, petitioners provided
the Labor Arbiter with copies of petitioner Locsins pay slips for the period of January
to September 2002.
Then, on September 30, 2002, petitioners services were terminated. Thus,
petitioners filed a complaint before the Labor Arbiter for illegal dismissal and
recovery of money claims such as overtime pay, holiday pay, premium pay for
holiday and rest day, service incentive leave pay, Emergency Cost of Living
Allowance, and moral and exemplary damages against PLDT.
The Labor Arbiter rendered a Decision finding PLDT liable for illegal dismissal. It
was explained in the Decision that petitioners were found to be employees of PLDT
and not of SSCP. Such conclusion was arrived at with the factual finding that
petitioners continued to serve as guards of PLDTs offices. As such employees,
petitioners were entitled to substantive and procedural due process before
termination of employment.
Issue:
Is there employer-employee relationship?
Ruling:
Yes. From the foregoing circumstances, reason dictates that we conclude that
petitioners remained at their post under the instructions of respondent. We can
further conclude that respondent dictated upon petitioners that the latter perform
their regular duties to secure the premises during operating hours. This, to our mind
and under the circumstances, is sufficient to establish the existence of an employeremployee relationship.
To reiterate, while respondent and SSCP no longer had any legal relationship
with the termination of the Agreement, petitioners remained at their post securing
the premises of respondent while receiving their salaries, allegedly from SSCP.
Clearly, such a situation makes no sense, and the denials proffered by respondent
do not shed any light to the situation. It is but reasonable to conclude that, with the
behest and, presumably, directive of respondent, petitioners continued with their

services. Evidently, such are indicia of control that respondent exercised over
petitioners.
Evidently, respondent having the power of control over petitioners must be
considered as petitioners employerfrom the termination of the Agreement
onwardsas this was the only time that any evidence of control was exhibited by
respondent over petitioners and in light of our ruling in Abella. Thus, as aptly
declared by the NLRC, petitioners were entitled to the rights and benefits of
employees of respondent, including due process requirements in the termination of
their services.
Both the Labor Arbiter and NLRC found that respondent did not observe such due
process requirements. Having failed to do so, respondent is guilty of illegal
dismissal.

32)

Aliviado et al vs. Procter & Gamble Phils GR No. 160506, March 9, 2010

Facts:
Petitioners worked as merchandisers of P&G. They all individually signed
employment contracts with either Promm-Gem or SAPS for periods of more or less
five months at a time.They were assigned at different outlets, supermarkets and
stores where they handled all the products of P&G. They received their wages from
Promm-Gem or SAPS. Subsequently, petitioners filed a complaintagainst P&G for
regularization, service incentive leave pay and other benefits with damages. The
complaint was later amendedto include the matter of their subsequent dismissal.
The Labor Arbiter dismissed the complaint for lack of merit and ruled that
there was no employer-employee relationship between petitioners and P&G. He
found that the selection and engagement of the petitioners, the payment of their
wages, the power of dismissal and control with respect to the means and methods
by which their work was accomplished, were all done and exercised by PrommGem/SAPS. He further found that Promm-Gem and SAPS were legitimate
independent job contractors. On appeal to the NLRC, the NlRC affirmed the decision
of the labor arbiter. Petitioners then filed a petition for certiorari with the CA,
alleging grave abuse of discretion amounting to lack or excess of jurisdiction on the
part of the Labor Arbiter and the NLRC. However, said petition was also denied by
the CA.
Issues:
1.) Is P&G the employer of petitioners?
2.) Were petitioners illegally dismissed?
Ruling:
Qualify. In order to determine whether P&G is the employer of petitioners, it is
necessary to first determine whether Promm-Gem and SAPS are labor-only
contractors or legitimate job contractors. There is "labor-only" contracting where
the person supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such person are performing
activities which are directly related to the principal business of such employer. In
such cases, the person or intermediary shall be considered merely as an agent of
the employer who shall be responsible to the workers in the same manner and
extent as if the latter were directly employed by him.
The Court held that Promm-Gem cannot be regarded as labor-only contractor
but a legitimate independent contractor because the financial statement of PrommGem shows that it has authorized capital stock of P1 million and a paid-in capital, or
capital available for operations, of P500,000.00 as of 1990. It also has long term
assets worth P432, 895.28 and current assets of P719, 042.32. Promm-Gem has
also proven that it maintained its own warehouse and office space with a floor area
of 870 square meters. It also had under its name three registered vehicles which
were used for its promotional/merchandising business. Promm-Gem also has other
clients aside from P&G.
On the other hand, the Articles of Incorporation of SAPS shows that it has a
paid-in capital of only P31, 250.00. There is no other evidence presented to show

how much its working capital and assets are. Furthermore, there is no showing of
substantial investment in tools, equipment or other assets. Considering that SAPS
has no substantial capital or investment and the workers it recruited are performing
activities which are directly related to the principal business of P&G, the court held
that SAPS is engaged in "labor-only contracting". The contractor is considered
merely an agent of the principal employer and the latter is responsible to the
employees of the labor-only contractor as if such employees had been directly
employed by the principal employer.
With regard to the termination letters given by Promm-Gem to its employees
uniformly specified the cause of dismissal as grave misconduct and breach of trust.
The court held that there were no valid causes for the dismissal of petitionersemployees of Promm-Gem.
Misconduct to be valid just cause for dismissal, such misconduct (a) must be
serious; (b) must relate to the performance of the employees duties; and (c) must
show that the employee has become unfit to continue working for the employer. In
the case, petitioners-employees of Promm-Gem may have committed an error of
judgment in claiming to be employees of P&G, but it cannot be said that they were
motivated by any wrongful intent in doing so. As such, they are guilty of only simple
misconduct for assailing the integrity of Promm-Gem as a legitimate and
independent promotion firm. A misconduct which is not serious or grave, as that
existing in the instant case, cannot be a valid basis for dismissing an employee.
Meanwhile, loss of trust and confidence, as a ground for dismissal, must be
based on the willful breach of the trust reposed in the employee by his employer.
Ordinary breach will not suffice. Loss of trust and confidence, as a cause for
termination of employment, is premised on the fact that the employee concerned
holds a position of responsibility or of trust and confidence. And, in order to
constitute a just cause for dismissal, the act complained of must be work-related
and must show that the employee is unfit to continue to work for the employer. In
the case at bar, In the instant case, the petitioners-employees of Promm-Gem have
not been shown to be occupying positions of responsibility or of trust and
confidence. Neither is there any evidence to show that they are unfit to continue to
work as merchandisers for Promm-Gem. Hence, no valid cause for dismissal by
Promm-Gem against petitioner-employees.
With regard to the petitioners placed with P&G by SAPS, they were given no
written notice of dismissal. The records show that upon receipt by SAPS of P&Gs
letter terminating their "Merchandising Services Contact", they in turn verbally
informed the concerned petitioners not to report for work anymore. It must be
emphasized that the onus probandi to prove the lawfulness of the dismissal rests
with the employer. In termination cases, the burden of proof rests upon the
employer to show that the dismissal is for just and valid cause. In the instant case,
P&G failed to discharge the burden of proving the legality and validity of the
dismissals of those petitioners who are considered its employees. Hence, the
dismissals necessarily were not justified and are therefore illegal.

33)

San Miguel Corp. vs. Semillano et al., GR No. 164257, July 5, 201

Facts:
It appears that AMPCO hired the services of Vicente et al. [Vicente Semillano,
Nelson Mondejar, Jovito Remada and Alex Hawod, respondents herein] on different
dates in December [of 1991 and] 1994. All of them were assigned to work in SMC's
Bottling Plant situated at Brgy. Granada Sta. Fe, Bacolod City, in order to perform
the following tasks: segregating bottles, removing dirt therefrom, filing them in
designated places, loading and unloading the bottles to and from the delivery
trucks, and performing other tasks as may be ordered by SMC's officers. [They]
were required to work inside the premises of SMC using [SMC's] equipment. [They]
rendered service with SMC for more than 6 months.
Subsequently, SMC entered into a Contract of Services 5 with AMPCO designating the
latter as the employer of Vicente, et al. As a result, Vicente et al. failed to claim the
rights and benefits ordinarily accorded a regular employee of SMC. In fact, they
were not paid their 13thmonth pay. On June 6, 1995, they were not allowed to enter
the premises of SMC. The project manager of AMPCO, Merlyn Polidario, told them to
wait for further instructions from the SMC's supervisor. Vicente et al. waited for one
month, unfortunately, they never heard a word from SMC.
Consequently, Vicente et al., as complainants, filed on July 17, 1995 a
COMPLAINT FOR ILLEGAL DISMISSAL with the Labor Arbiter against AMPCO, Merlyn
V. Polidario, SMC and Rufino I. Yatar [SMC Plant Manager], as respondents.
Issue: Whether or not AMPCO is a legitimate job contractor.
Held:
A claim that an action for regularization has no legal basis and is violative of
petitioner's constitutional and statutory rights is, therefore, dependent upon the
resolution of the issue posed above.
The petition fails.
Generally, the findings of fact made by the Labor Arbiter and the NLRC, as
the specialized agencies presumed to have the expertise on matters within their
respective fields, are accorded much respect and even finality, when supported by
ample evidence and affirmed by the CA. The fact that the NLRC, in its subsequent
resolution, reversed its original decision does not render the foregoing inapplicable
where the resolution itself is not supported by substantial evidence.
Department of Labor and Employment (DOLE) Department Order No. 10,
Series of 1997, defines "job contracting" and "labor-only contracting" as follows:
Sec. 8. Job contracting. - There is job contracting permissible under the Code
if the following conditions are met:
(1) The contractor carries on an independent business and undertakes the
contract work on his own account under his own responsibility according to his own
manner and method, free from the control and direction of his employer or principal
in all matters connected with the performance of the work except as to the results
thereof; and

(2) The contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are necessary in
the conduct of his business.
Sec. 9. Labor-only contracting. - (a) Any person who undertakes to supply
workers to an employer shall be deemed to be engaged in labor-only contracting
where such person:
(1) Does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials; and
(2) The workers recruited and placed by such persons are performing
activities which are directly related to the principal business or operations of the
employer in which workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the
person acting as contractor shall be considered merely as an agent or intermediary
of the employer who shall be responsible to the workers in the same manner and
extent as if the latter were directly employed by him.
(c) For cases not falling under this Article, the Secretary of Labor shall
determine through appropriate orders whether or not the contracting out of labor is
permissible in the light of the circumstances of each case and after considering the
operating needs of the employer and the rights of the workers involved. In such
case, he may prescribe conditions and restrictions to insure the protection and
welfare of the workers.
Section 5 of Department Order No. 18-02 (Series of 2002) of the Rules
Implementing Articles 106 to 109 of the Labor Code further provides that:
"Substantial capital or investment" refers to capital stocks and subscribed
capitalization in the case of corporations, tools, equipment, implements,
machineries and work premises,actually and directly used by the contractor or
subcontractor in the performance or completion of the job work or service
contracted out. (emphasis supplied)
The "right to control" shall refer to the right reserved to the person for whom
the services of the contractual workers are performed, to determine not only the
end to be achieved, but also the manner and means to be used in reaching that
end.
The test to determine the existence of independent contractorship is whether
or not the one claiming to be an independent contractor has contracted to do the
work according to his own methods and without being subject to the control of the
employer, except only as to the results of the work.
The existence of an independent and permissible contractor relationship is
generally established by the following criteria: whether or not the contractor is
carrying on an independent business; the nature and extent of the work; the skill
required; the term and duration of the relationship; the right to assign the
performance of a specified piece of work; the control and supervision of the work to
another; the employer's power with respect to the hiring, firing and payment of the
contractor's workers; the control of the premises; the duty to supply the premises,
tools, appliances, materials, and labor; and the mode, manner and terms of
payment.

Although there may be indications of an independent contractor arrangement

between petitioner and AMPCO, the most determinant of factors exists which
indicate otherwise.
Petitioner's averment that AMPCO had total assets amounting to P932,599.22
and income of P2,777,603.46 in 1994 was squarely debunked by the LA. Thus:
Furthermore, there are no pieces of evidence that AMPCO has substantial
capital or investment. An examination its "Statement of Income and Changes in
Undivided Savings" show that its income for the year 1994 was P2,777,603.46 while
its operating expenses for said year is P2,718,315.33 or a net income of P59,288.13
for the year 1994; that its cash on hand for 1994 is P22,154.80.
In fact, the NLRC in its original decision likewise stated as follows:
In contrast, the (sic) AMPCO's main business activity is trading, maintaining a
store catering to members and the public. Its job contracting with SMC is only a
minor activity or sideline. The component of AMPCO's substantial capital are [ sic ]in
fact invested and used in the trading business. This is palpably shown in the sizable
amount of its accounts receivables amounting to more than P.6M out of its
members' capital of only P.47M in 1994.
Neither did petitioner prove that AMPCO had substantial equipment, tools,
machineries, and supplies actually and directly used by it in the performance or
completion of the segregation and piling job. In fact, as correctly pointed out by the
NLRC in its original decision, there is nothing in AMPCO's list of fixed assets,
machineries, tools, and equipment which it could have used, actually and directly,
in the performance or completion of its contracted job, work or service with
petitioner. For said reason, there can be no other logical conclusion but that the
tools and equipment utilized by respondents are owned by petitioner SMC. It is
likewise noteworthy that neither petitioner nor AMPCO has shown that the latter had
clients other than petitioner. Therefore, AMPCO has no independent business.
In the case at bench, petitioner faults the CA for holding that the respondents
were under the control of petitioner whenever they performed the task of loading in
the delivery trucks and unloading from them. It, however, fails to show how AMPCO
took "entire charge, control and supervision of the work and service agreed upon."
AMPCO's Comment on the Petition is likewise utterly silent on this point. Notably,
both petitioner and AMPCO chose to ignore the uniform finding of the LA, NLRC (in
its original decision) and the CA that one of the assigned jobs of respondents was to
"perform other acts as may be ordered by SMC's officers." Significantly, AMPCO,
opted not to challenge the original decision of the NLRC that found it a mere laboronly contractor.
Moreover, the Court is not convinced that AMPCO wielded "exclusive
discretion in the discharge" of respondents. As the CA correctly pointed out, Merlyn
Polidario, AMPCO's project manager, even told respondents to "wait for further
instructions from the SMC's supervisor" after they were prevented from entering
petitioner SMC's premises. Based on the foregoing, no other logical conclusion can
be reached than that it was petitioner, not AMPCO, who wielded power of control.
Despite the fact that the service contracts contain stipulations which are
earmarks of independent contractorship, they do not make it legally so. The
language of a contract is neither determinative nor conclusive of the relationship
between the parties. Petitioner SMC and AMPCO cannot dictate, by a declaration in

a contract, the character of AMPCO's business, that is, whether as labor-only

contractor, or job contractor. AMPCO's character should be measured in terms of,
and determined by, the criteria set by statute. At a closer look, AMPCO's actual
status and participation regarding respondents' employment clearly belie the
contents of the written service contract.
Petitioner cannot rely either on AMPCO's Certificate of Registration as an
Independent Contractor issued by the proper Regional Office of the DOLE to prove
its claim. It is not conclusive evidence of such status. The fact of registration simply
prevents the legal presumption of being a mere labor-only contractor from
arising. In distinguishing between permissible job contracting and prohibited laboronly contracting, the totality of the facts and the surrounding circumstances of the
case are to be considered.
Petitioner also argues that among the permissible contracting arrangements
include "work or services not directly related or not integral to the main business or
operation of the principal including. work related to manufacturing processes of
manufacturing establishments." The Court is not persuaded. The evidence is clear
that respondents performed activities which were directly related to petitioner's
main line of business. Petitioner is primarily engaged in manufacturing and
marketing of beer products, and respondents' work of segregating and cleaning
bottles is unarguably an important part of its manufacturing and marketing process.
Lastly, petitioner claims that the present case is outside the jurisdiction of the
labor tribunals because respondent Vicente Semillano is a member of AMPCO, not
SMC. Precisely, he has joined the others in filing this complaint because it is his
position that petitioner SMC is his true employer and liable for all his claims under
the Labor Code.
Thus, petitioner SMC, as principal employer, is solidarily liable with AMPCO,
the labor-only contractor, for all the rightful claims of respondents. Under this setup, AMPCO, as the "labor-only" contractor, is deemed an agent of the principal
(SMC). The law makes the principal responsible over the employees of the "laboronly" contractor as if the principal itself directly hired the employees.

Test to Determine Independent Contractorship

Petitioner cannot rely either on AMPCOs Certificate of Registration as an

Independent Contractor issued by the proper Regional Office of the DOLE to prove
its claim. It is not conclusive evidence of such status. The fact of registration simply
prevents the legal presumption of being a mere labor-only contractor from arising.
In distinguishing between permissible job contracting and prohibited labor-only
contracting, the totality of the facts and the surrounding circumstances of the case
are to be considered.

Solidary Liability
Thus, petitioner SMC, as principal employer, is solidarily liable with AMPCO, the
labor-only contractor, for all the rightful claims of respondent. Under this set-up,
AMPCO, as the labor-only contractor, is deemed an agent of the principal (SMC).
The law makes the principal responsible over the employees of the labor-only
contractor as if the principal itself directly hired the employees.

34)

Manila Water Co. vs. Dalumpines, GR No. 175501, Oct. 4, 2010

Facts:
By virtue of Republic Act No. 8041, otherwise known as the "National Water
Crisis Act of 1995," the Metropolitan Waterworks and Sewerage System (MWSS) was
given the authority to enter into concession agreements allowing the private sector
in its operations. Petitioner Manila Water Company, Inc. (Manila Water) was one of
two private concessionaires contracted by the MWSS to manage the water
distribution system in the east zone of Metro Manila. The east service area included
the following towns and cities: Mandaluyong, Marikina, Pasig, Pateros, San Juan,
Taguig, Makati, parts of Quezon City and Manila, Angono, Antipolo, Baras,
Binangonan, Cainta, Cardona, Jala-Jala, Morong, Pililla, Rodriguez, Tanay, Taytay,
Teresa, and San Mateo.
Under the concession agreement, Manila Water undertook to absorb the
regular employees of MWSS listed by the latter effective August 1, 1997. Individual
respondents, with the exception of Moises Zapatero (Zapatero) and Edgar Pamoraga
(Pamoraga), were among the one hundred twenty-one (121) employees not
included in the list of employees to be absorbed by Manila Water. Nevertheless,
Manila Water engaged their services without written contract from August 1, 1997
to August 31, 1997.
On September 1, 1997, individual respondents signed a three (3)-month
contract to perform collection services on commission basis for Manila Waters
branches in the east zone.
On November 21, 1997, before the expiration of the contract of services, the
121 bill collectors formed a corporation duly registered with the Securities and
Exchange Commission (SEC) as the "Association Collectors Group, Inc." (ACGI).
ACGI was one of the entities engaged by Manila Water for its courier service.
However, Manila Water contracted ACGI for collection services only in its Balara
Branch.
In December 1997, Manila Water entered into a service agreement with
respondent First Classic Courier Services, Inc. (FCCSI) also for its courier needs. The
service agreements between Manila Water and FCCSI covered the periods 1997 to
1999 and 2000 to 2002.7 Earlier, in a memorandum dated November 28, 1997,
FCCSI gave a deadline for the bill collectors who were members of ACGI to submit
applications and letters of intent to transfer to FCCSI. The individual respondents in
this case were among the bill collectors who joined FCCSI and were hired effective
December 1, 1997.
On various dates between May and October 2002, individual respondents
were terminated from employment. Manila Water no longer renewed its contract
with FCCSI because it decided to implement a "collectorless" scheme whereby
Manila Water customers would instead remit payments through "Bayad
Centers." The aggrieved bill collectors individually filed complaints for illegal
dismissal, unfair labor practice, damages, and attorneys fees, with prayer for
reinstatement and backwages against petitioner Manila Water and respondent
FCCSI. The complaints were consolidated and jointly heard.
Issues: WON anemployment relationship exists between respondent bill collectors
and petitioner Manila Water
Held:

FCCSI has no sufficient investment in the form of tools, equipment and

machinery to undertake contract services for Manila Water involving a fleet of
around 100 collectors assigned to several branches and covering the service area of
Manila Water customers spread out in several cities/towns of the East Zone. The
only rational conclusion is that it is Manila Water that provides most if not all the
logistics and equipment including service vehicles in the performance of the
contracted service, notwithstanding that the contract between FCCSI and Manila
Water states that it is the Contractor which shall furnish at its own expense all
materials, tools and equipment needed to perform the tasks of collectors. Moreover,
it must be emphasized that petitioners who are "trained collectors" performed tasks
that cannot be simply categorized as "messengerial." In fact, these are the very
functions they were already discharging even before they joined FCCSI which
"invited" or "solicited" their placement just about the expiration of their three (3)month contract with Manila Water on November 28, 1997. The Agreement between
FCCSI and Manila Water provides that FCCSI shall "field the required number of
trained collectors to the following Customer Relations Branch Office": Cubao,
Espaa, San Juan-Mandaluyong, Marikina, Pasig, Taguig-Pateros and Makati.
As correctly ruled by the CA, FCCSIs capitalization may not be considered
substantial considering that it had close to a hundred collectors covering the east
zone service area of Manila Water customers. The allegation in the position paper of
FCCSI that it serves other companies courier needs does not "cure" the fact that it
has insufficient capitalization to qualify as independent contractor. Neither did FCCSI
prove its allegation by substantial evidence other than by their self-serving
declarations. What is evident is that it was Manila Water that provided the
equipment and service vehicles needed in the performance of the contracted
service, even if the contract between FCCSI and Manila Water stated that it was the
Contractor which shall furnish at its own expense all materials, tools, and equipment
needed to perform the tasks of collectors.
Based on the four-fold test of employer-employee relationship, Manila Water
emerges as the employer of respondent collectors. The elements to determine the
existence of an employment relationship are: (a) the selection and engagement of
the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employer's power to control the employee's conduct. The most important of these
elements is the employer's control of the employee's conduct, not only as to the
result of the work to be done, but also as to the means and methods to accomplish
it.
Respondent bill collectors are, therefore, employees of petitioner Manila
Water. It cannot be denied that the tasks performed by respondent bill collectors are
directly related to the principal business or trade of Manila Water. Payments made
by the subscribers are the lifeblood of the company, and the respondent bill
collectors are the ones who collect these payments.
The primary standard of determining regular employment is the reasonable
connection between the particular activity performed by the employee in relation to
the usual business or trade of the employer. In this case, the connection is obvious
when we consider the nature of the work performed and its relation to the scheme
of the particular business or trade in its entirety. Finally, the repeated and
continuing need for the performance of the job is sufficient evidence of the
necessity, if not indispensability of the activity to the business.

35)

Teng vs. Pahagac, GR No. 169704, November 17, 2010

Facts:
Albert Teng Fish Trading is engaged in deep sea fishing and, for this purpose,
owns boats (basnig), equipment, and other fishing paraphernalia. As owner of the
business, Teng claims that he customarily enters into joint venture agreements with
master fishermen (maestros) who are skilled and are experts in deep sea fishing;
they take charge of the management of each fishing venture, including the hiring of
the members of its complement. He avers that the maestros hired the respondent
workers as checkers to determine the volume of the fish caught in every fishing
voyage.
On February 20, 2003, the respondent workers filed a complaint for illegal
dismissal against Albert Teng Fish Trading, Teng, and Chua before the NCMB, Region
Branch No. IX, Zamboanga City.
Issues:
1. WON the VAs decision is not subject to a motion for reconsideration.
2. WON an employer-employee relationship existed between Teng and the
respondent workers.
Held: The petition is denied.
1. Article 262-A of the Labor Code does not prohibit the filing of a motion for
reconsideration.
On March 21, 1989, Republic Act No. 6715 took effect, amending,
among others, Article 263 of the Labor Code which was originally worded as:
Art. 263 x x x Voluntary arbitration awards or decisions shall be
final, unappealable, and executory.
As amended, Article 263 is now Article 262-A, which states:
Art. 262-A. x x x [T]he award or decision x x x shall contain the
facts and the law on which it is based. It shall be final and
executory after ten (10) calendar days from receipt of the copy
of the award or decision by the parties.
Notably, Article 262-A deleted the word "unappealable" from Article
263. The deliberate selection of the language in the amendatory act differing
from that of the original act indicates that the legislature intended a change
in the law, and the court should endeavor to give effect to such intent.We
recognized the intent of the change of phraseology in Imperial Textile Mills,
Inc. v. Sampang, where we ruled that:
It is true that the present rule [Art. 262-A] makes the voluntary
arbitration award final and executory after ten calendar days from receipt of
the copy of the award or decision by the parties. Presumably, the decision
may still be reconsidered by the Voluntary Arbitrator on the basis of a motion
for reconsideration duly filed during that period.
Tengs allegation that the VAs decision had become final and
executory by the time the respondent workers filed an appeal with the CA
thus fails. We consequently rule that the respondent workers seasonably filed

a motion for reconsideration of the VAs judgment, and the VA erred in

denying the motion because no motion for reconsideration is allowed.
2. There exists an employer-employee relationship between Teng and the
respondent workers.
While Teng alleged that it was the maestros who hired the respondent
workers, it was his company that issued to the respondent workers
identification cards (IDs) bearing their names as employees and Tengs
signature as the employer. Generally, in a business establishment, IDs are
issued to identify the holder as a bona fide employee of the issuing entity.
For the 13 years that the respondent workers worked for Teng, they
received wages on a regular basis, in addition to their shares in the fish
caught. The worksheet showed that the respondent workers received uniform
amounts within a given year, which amounts annually increased until the
termination of their employment in 2002. Tengs claim that the amounts
received by the respondent workers are mere commissions is incredulous, as
it would mean that the fish caught throughout the year is uniform and
increases in number each year.
More importantly, the element of control which we have ruled in a
number of cases to be a strong indicator of the existence of an employeremployee relationship is present in this case. Teng not only owned the tools
and equipment, he directed how the respondent workers were to perform
their job as checkers; they, in fact, acted as Tengs eyes and ears in every
fishing expedition.
Teng cannot hide behind his argument that the respondent workers
were hired by the maestros. To consider the respondent workers as
employees of the maestros would mean that Teng committed impermissible
labor-only contracting. As a policy, the Labor Code prohibits labor-only
contracting:
ART. 106. Contractor or Subcontractor x x x The Secretary of Labor
and Employment may, by appropriate regulations, restrict or prohibit the
contracting-out of labor.
xxxx
There is "labor-only" contracting where the person supplying
workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by
such persons are performing activities which are directly related to
the principal business of such employer. In such cases, the person or
intermediary shall be considered merely as an agent of the employer who
shall be responsible to the workers in the same manner and extent as if the
latter were directly employed by him.
Section 5 of the DO No. 18-02, which implements Article 106 of the
Labor Code, provides:
Section 5.Prohibition against labor-only contracting. Labor-only
contracting is hereby declared prohibited.For this purpose, labor-only

contracting shall refer to an arrangement where the contractor or

subcontractor merely recruits, supplies or places workers to perform a job,
work or service for a principal, and any of the following elements are present:
(i) The contractor or subcontractor does not have substantial capital or
investment which relates to the job, work or service to be performed and the
employees recruited, supplied or placed by such contractor or subcontractor
are performing activities which are directly related to the main business of
the principal; or
(ii) The contractor does not exercise the right to control over the
performance of the work of the contractual employee.
In the present case, the maestros did not have any substantial capital
or investment. Teng admitted that he solely provided the capital and
equipment, while the maestros supplied the workers. The power of control
over the respondent workers was lodged not with the maestros but with Teng.
As checkers, the respondent workers main tasks were to count and classify
the fish caught and report them to Teng. They performed tasks that were
necessary and desirable in Tengs fishing business. Taken together, these
incidents confirm the existence of a labor-only contracting which is prohibited
in our jurisdiction, as it is considered to be the employers attempt to evade
obligations afforded by law to employees.
Accordingly, we hold that employer-employee ties exist between Teng and the
respondent workers. A finding that the maestros are labor-only contractors is
equivalent to a finding that an employer-employee relationship exists between Teng
and the respondent workers. As regular employees, the respondent workers are
entitled to all the benefits and rights appurtenant to regular employment.

36)

GSIS vs. NLRC et al., GR No. 180045, Nov. 17, 2010

Facts:
Respondents Dionisio Banlasan, Alfredo T. Tafalla, Telesforo D. Rubia, Rogelio
A. Alvarez, Dominador A. Escobal, and Rosauro Panis were employed as security
guards by DNL Security Agency (DNL Security). By virtue of the service contract
entered into by DNL Security and petitioner Government Service Insurance System
on May 1, 1978, respondents were assigned to petitioners Tacloban City office,
each receiving a monthly income ofP1,400.00. Sometime in July 1989, petitioner
voluntarily increased respondents monthly salary to P3,000.00.3
In February 1993, DNL Security informed respondents that its service contract
with petitioner was terminated. This notwithstanding, DNL Security instructed
respondents to continue reporting for work to petitioner. Respondents worked as
instructed until April 20, 1993, but without receiving their wages; after which, they
were terminated from employment.4
On June 15, 1995, respondents filed with the National Labor Relations
Commission (NLRC), Regional Arbitration Branch No. VIII, Tacloban City, a complaint
against DNL Security and petitioner for illegal dismissal, separation pay, salary
differential, 13th month pay, and payment of unpaid salary.
Issue: WON GSIS is jointly and severally liable with DNL Security Agency for
payment of the unsubstantiated amounts of Salary Differentials and the 13th Month
Pay to the private respondent security guards.
Held:
The fact that there is no actual and direct employer-employee relationship
between petitioner and respondents does not absolve the former from liability for
the latters monetary claims. When petitioner contracted DNL Securitys services,
petitioner became an indirect employer of respondents, pursuant to Article 107 of
the Labor Code, which reads:
ART. 107. Indirect employer. The provisions of the immediately
preceding Article shall likewise apply to any person, partnership,
association or corporation which, not being an employer, contracts
with an independent contractor for the performance of any work, task,
job or project.
After DNL Security failed to pay respondents the correct wages and other monetary
benefits, petitioner, as principal, became jointly and severally liable, as provided in
Articles 106 and 109 of the Labor Code, which state:
ART. 106. Contractor or subcontractor. Whenever an employer enters
into a contract with another person for the performance of the formers
work, the employees of the contractor and of the latters
subcontractor, if any, shall be paid in accordance with the provisions of
this Code.
In the event that the contractor or subcontractor fails to pay the wages
of his employees in accordance with this Code, the employer shall be
jointly and severally liable with his contractor or subcontractor to such
employees to the extent of the work performed under the contract, in

the same manner and extent that he is liable to employees directly

employed by him. x x x.
xxxx
ART. 109. Solidary liability. The provisions of existing laws to the
contrary notwithstanding, every employer or indirect employer shall be
held responsible with his contractor or subcontractor for any violation
of any provision of this Code. For purposes of determining the extent of
their civil liability under this Chapter, they shall be considered as direct
employers.
This statutory scheme is designed to give the workers ample protection,
consonant with labor and social justice provisions of the 1987 Constitution.
Petitioners liability covers the payment of respondents salary differential
and 13th month pay during the time they worked for petitioner. In addition,
petitioner is solidarily liable with DNL Security for respondents unpaid wages from
February 1993 until April 20, 1993. While it is true that respondents continued
working for petitioner after the expiration of their contract, based on the instruction
of DNL Security, petitioner did not object to such assignment and allowed
respondents to render service. Thus, petitioner impliedly approved the extension of
respondents services. Accordingly, petitioner is bound by the provisions of the
Labor Code on indirect employment. Petitioner cannot be allowed to deny its
obligation to respondents after it had benefited from their services. So long as the
work, task, job, or project has been performed for petitioners benefit or on its
behalf, the liability accrues for such services. The principal is made liable to its
indirect employees because, after all, it can protect itself from irresponsible
contractors by withholding payment of such sums that are due the employees and
by paying the employees directly, or by requiring a bond from the contractor or
subcontractor for this purpose.
Petitioners liability, however, cannot extend to the payment of separation
pay. An order to pay separation pay is invested with a punitive character, such that
an indirect employer should not be made liable without a finding that it had
conspired in the illegal dismissal of the employees.
Lastly, we do not agree with petitioner that the enforcement of the decision is
impossible because its charter unequivocally exempts it from execution.
To be sure, petitioners charter should not be used to evade its liabilities to its
employees, even to its indirect employees, as mandated by the Labor Code.

37)
Sy et al., vs. Fairland Knitcraft Co Inc. G.R. No. 189658, December 12,
2011
Facts:
Fairland is a domestic corporation engaged in garments business, while Susan de
Leon (Susan) is the owner/proprietress of Weesan Garments (Weesan).
On the other hand, the complaining workers, Marialy Sy and 33 others (the workers)
are sewers, trimmers, helpers, a guard and a secretary who were hired by Weesan.
The workers filed separate complaints for underpayment and/or non-payment of
wages, overtime pay, premium pay, 13 th month pay and other monetary benefits
against Susan/Weesan. These complaints were then consolidated by the Arbitration
Branch of the NLRC in January 2003.
February 5, 2003, Weesan filed before the Department of Labor and EmploymentNational Capital Region (DOLE-NCR) a report on its temporary closure for a period of
not less than six months. On the same day, the workers were not anymore allowed
to work. So on February 18, 2003 they filed an Amended Complaint, and on March
13, 2003, another pleading entitled Amended Complaints and Position Paper for
Complainants, to include the charge of illegal dismissal and impleaded Fairland and
its manager, Debbie Manduabas (Debbie), as additional respondents.
At the Hearings set by the Labor Arbiter Ramon Valentin Reyes, Atty. Antonio
Geronimo represented both Susan/Weesan and Fairland. He submitted 2 position
papers for the two entities. The workers filed a Reply, to which Atty. Geronimo also
submitted a Consolidated Reply by Susan/Weesan and Fairland. Workers answered
back through a Rejoinder.
The Labor Arbiter dismissed the case for lack of merit, but ordered the respondent
companies to pay each complainant P5,000.00 by way of financial assistance.
The NLRC granted the workers appeal and set aside the Labor Arbiters decision.
The Commission declared the dismissal of the workers as illegal and ordered
reinstatement, will full backwages from February 5, 2003 and payment all the
unpaid benefits to be paid solidarily by Susan/Weesan and Fairland.
Atty. Geronimo filed a Motion for Reconsideration. However, Fairland filed another
Motion for Reconsideration through Atty. Melina O. Tecson (Atty. Tecson) assailing
the jurisdiction of the Labor Arbiter and the NLRC over it, claiming that it was never
summoned to appear, attend or participate in all the proceedings conducted
therein. It also denied that it engaged the services of Atty. Geronimo. These MRs
were denied by the NLRC.
Thus, Fairland and Susan/Weesan filed their petitions for certiorari before the Court
of Appeals.
CAs decision on Fairlands petition:

The CA denied Fairlands petition and affirmed the NLRC ruling which held Fairland
solidarily liable with Susan.
On MR, Fairland moved also for the voluntary inhibition of Justices Leagogo and
Maambong. The CA granted the motion for voluntary inhibition and transferred the
case from the First Division to the Ninth Division. The Ninth Division reversed the
earlier denial of Fairlands petition It held that the labor tribunals did not acquire
jurisdiction over the person of Fairland, and even assuming they did, Fairland is not
liable to the workers since Weesan is not a mere labor-only contractor but a bona
fide independent contractor. The Special Ninth Division thus annulled and set aside
the assailed NLRC Decision and Resolution insofar as Fairland is concerned and
excluded the latter therefrom.
Workers appealed this decision to the Supreme Court.
CAs decision on Susans petition:
Susans petition was denied due course and dismissed for lack of merit. The CA
affirmed the NLRC ruling with respect to Susan.
Her MR was denied by the CA.
Before the Supreme Court:
Susan filed a petition for review on certiorari with the SC, which was dismissed by
the Supreme Court on technicality and for failure to sufficiently show any reversible
error in the assailed judgment. Susan filed an appeal but before it could be resolved,
the Supreme Court consolidated Susans case with that the workers.
The Supreme Court granted Susans Motion for Reconsideration and reinstated her
petition for review on certiorari.
Issues:
1. Whether or not Susan/Weesan is a labor-only contracting agent acting as an
agent of Fairland?
2. Whether or not the individual private respondents (Sy, et al.) were illegal
dismissed?
Ruling:
G.R. No. 182915 (Susan de Leon vs. Fairland, Sy et al.)
1. Susan is a mere labor-only contractor.
There is labor-only contracting when the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work or service for a
principal. In labor-only contracting, the following elements are present:
(a) The person supplying workers to an employer does not have substantial capital
or investment in the form of tools, equipment, machineries, work premises, among
others; and

(b) The workers recruited and placed by such person are performing activities
which are directly related to the principal business of the employer.
The workers, majority of whom are sewers, were recruited by Susan/Weesan and
that they performed activities which are directly related to Fairlands principal
business of garments. Did Susan/Weesan have substantial capital or investment in
the form of tools, equipment, machineries, work premises, among others? The SC
said that there was nothing in the records that would show that Weesan has
investment in the form of tools, equipment or machineries. The records show that
Fairland has to furnish Weesan with sewing machines for it to be able to provide the
sewing needs of the former. Weesan was unable to show that apart from the
borrowed sewing machines, it owned and possessed any other tools, equipment,
and machineries necessary to its being a contractor or sub-contractor for
garments. Neither was Weesan able to prove that it has substantial capital for its
business.
Further, the work premises utilized by Weesan is owned by Fairland, which
significantly, was not in the business of renting properties. They also advanced that
there was no showing that Susan/Weesan paid any rentals for the use of the
premises. Instead of refuting the workers allegations, Susan instead claimed that
Weesan rented the premises from another entity, De Luxe. To support this, she
attached to her petition two Contracts of Lease purportedly entered into by her and
De Luxe for the lease of the premises covering the periods August 1, 1997 to July
31, 2000 and January 1, 2001 to December 31, 2004 as well as TCTs and Tax
declarations in De Luxes name but the SC found it wanting. There were no rental
receipts presented nor did the TCTs indicate with certainty that the registered
property is the same one used for Weesans work premises. Weesan does not have
its own workplace and is only utilizing the workplace of Fairland to whom it supplied
workers for its garment business.
Suffice it to say that [t]he presumption is that a contractor is a labor-only
contractor unless such contractor overcomes the burden of proving that it has
substantial capital, investment, tools and the like. As Susan/Weesan was not able
to adduce evidence that Weesan had any substantial capital, investment or assets
to perform the work contracted for, the presumption that Weesan is a labor-only
contractor stands.
2. Yes, the workers were illegally dismissed.
Susan relies on Article 283 of the Labor Code which allows as a mode of termination
of employment the closure or termination of business, which is a management
prerogative. The exercise of which requires: a) that the closure/cessation of business
is bona fide, i.e., its purpose is to advance the interest of the employer and not to
defeat or circumvent the rights of employees under the law or a valid agreement; b)
that written notice was served on the employees and the DOLE at least one month
before the intended date of closure or cessation of business; and c) in case of
closure/cessation of business not due to financial losses, that the employees
affected have been given separation pay equivalent to month pay for every year
of service or one month pay, whichever is higher.

The burden of proving that a temporary suspension is bona fide falls upon the
employer. Clearly here, Susan/Weesan was not able to discharge this burden. The
documents Weesan submitted to support its claim of severe business losses cannot
be considered as proof of financial crisis to justify the temporary suspension of its
operations since they clearly appear to have not been duly filed with the
BIR. Weesan failed to satisfactorily explain why the Income Tax Returns and
financial statements it submitted do not bear the signature of the receiving
officers. Also hard to ignore is the absence of the mandatory 30-day prior notice to
the workers.

Hence, the Court finds that Susan failed to prove that the suspension of operations
of Weesan was bona fide and that it complied with the mandatory requirement of
notice under the law. Susan likewise failed to discharge her burden of proving that
the termination of the workers was for a lawful cause. Therefore, the NLRC and the
CA, in CA-G.R. SP No. 93860, did not err in their findings that the workers were
illegally dismissed by Susan/Weesan.

The court also ruled that Fairlands claim of prescription does not deserve
consideration. Fairland says that they only engaged Weesans services 1996 to
1997, but in January 31, 2003, Fairland wrote Weesan requesting for the sewing
machines back.

G.R. No. 182915 (Sy vs. Fairland)

It is basic that the Labor Arbiter cannot acquire jurisdiction over the person of the
respondent without the latter being served with summons. However, if there is no
valid service of summons, the court can still acquire jurisdiction over the person of
the defendant by virtue of the latters voluntary appearance. Although not served
with summons, jurisdiction over Fairland and Debbie was acquired through their
voluntary appearance. When the workers complaint was before the Labor Arbiter, it
is confirmed that Fairland and Debbie were never summoned.
The crucial question now is: Did Fairland and Debbie voluntarily appear
before the Labor Arbiter as to submit themselves to its jurisdiction?
Fairland argued before the CA that it did not engage Atty. Geronimo as its
counsel. However, the Court held in Santos v. National Labor Relations
Commission viz:
Moreover, jurisdiction over the person of the defendant in civil cases is acquired not
only by service of summons but also by voluntary appearance in court and
submission to its authority. Appearance by a legal advocate is such voluntary
submission to a courts jurisdiction. It may be made not only by actual physical
appearance but likewise by the submission of pleadings in compliance with the
order of the court or tribunal.

The fact that Atty. Geronimo entered his appearance for Fairland and Debbie
and that he actively defended them before the Labor Arbiter raised the presumption
that he is authorized to appear for them. As held in Santos, it is unlikely that Atty.
Geronimo would have been so irresponsible as to represent Fairland and Debbie if
he were not in fact authorized. As an officer of the Court, Atty. Geronimo is
presumed to have acted with due propriety. Moreover, [i]t strains credulity that a
counsel who has no personal interest in the case would fight for and defend a case
with persistence and vigor if he has not been authorized or employed by the party
concerned.
The presumption of authority of counsel to appear on behalf of a client is
found both in the Rules of Court and in the New Rules of Procedure of the NLRC.
Sec. 8, Rule III of the New Rules of Procedure of the NLRC, which is the rules
prevailing at that time, states in part:
SECTION 8. APPEARANCES. - An attorney appearing for a party is presumed to be
properly authorized for that purpose. However, he shall be required to indicate in his
pleadings his PTR and IBP numbers for the current year.
As Atty. Geronimo consistently indicated his PTR and IBP numbers in the pleadings
he filed, there is no reason for the Labor Arbiter not to extend to Atty. Geronimo the
presumption that he is authorized to represent Fairland.
Moreover, the fact that Debbie signed the verification attached to the position paper
filed by Atty. Geronimo, without a secretarys certificate or board resolution
attached thereto, is not sufficient reason for the Labor Arbiter to be on his guard
and require Atty. Geronimo to prove his authority. Debbie, as General Manager of
Fairland is one of the officials of the company who can sign the verification without
need of a board resolution because as such, she is in a position to verify the
allegations in the petition.
Suffice it to say that an attorneys presumption of authority is a strong one . A mere
denial by a party that he authorized an attorney to appear for him, in the absence
of a compelling reason, is insufficient to overcome the presumption, especially when
the denial comes after the rendition of an adverse judgment, such as in the
present case.
To stress, Article 224 contemplates the furnishing of copies of final decisions, orders
or awards both to the parties and their counsel in connection with the execution of
such final decisions, orders or awards. However, for the purpose of computing the
period for filing an appeal from the NLRC to the CA, same shall be counted from
receipt of the decision, order or award by the counsel of record pursuant to the
established rule that notice to counsel is notice to party. In sum, we hold that
the Labor Arbiter had validly acquired jurisdiction over Fairland and its
manager, Debbie, through the appearance of Atty. Geronimo as their
counsel and likewise, through the latters filing of pleadings on their
behalf.

Further proof that Fairland is Weesans principal: (1) aside from sewing machines,
Fairland also lent Weesan other equipment such as fire extinguishers, office tables
and chairs, and plastic chairs; (2) no proof evidencing the contractual arrangement
between Weesan and Fairland was ever submitted by Fairland; (3) while both
Weesan and Fairland assert that the former had other clients aside from the latter,
no proof of Weesans contractual relationship with its other alleged client is extant
on the records; and (4) there is no showing that any of the workers were assigned to
other clients aside from Fairland. Moreover, the activities, the manner of work and
the movement of the workers were subject to Fairlands control.
Fairland, therefore, as the principal employer, is solidarily liable with Susan/Weesan,
the labor-only contractor, for the rightful claims of the employees. Under this set-up,
Susan/Weesan, as the "labor-only" contractor, is deemed an agent of the principal,
Fairland, and the law makes the principal responsible to the employees of the
"labor-only" contractor as if the principal itself directly hired or employed the
employees.
WHEREFORE, the Court,
1) in GR No. 189658 denies Susans Petition for Review on Certiorari. The CA
decision declaring her a labor-only contractor is affirmed.
2)
in
G.R.
No.
182915, grants
the
workers
Petition
for
Review
on Certiorari. Decision of the CA (ninth division) which excluded Fairland from being
solidarily liable is reversed and set aside. The Decision of the CA (first division)
which held Fairland as solidarily liable with Susan/Weesan is reinstated and
affirmed.

38)
Polyfoam-RGC International Corp., vs. Concepcion, G.R. No. 172349,
June 13, 2012
Facts: Respondent filed a complaint against petitioner Polyfoam for illegal dismissal
alleging that he was an all-around factory worker who served for almost six years.
He was illegally dismissed when he discovered that his time card was not in the rack
and that he was informed by the security guard that he can no longer punch his
card. Protesting to the supervisor, he found out that he was dismissed due to an
infraction of a company rule. A request was sent to Polyfoams manager asking for
respondents re-admittance but was unheeded.
Co-petitioner Gramaje filed a Motion for Intervention claiming to be the real
employer of respondent. She alleges that her business PAGES is a legitimate job
contractor. Polyfoam, then, filed a Motion to Dismiss since there was no employeremployee relationship between Polyfoam and respondent. Gramaje assert that
respondent was not illegally dismissed but rather, it was respondent that
abandoned work.
The Motion to Intervene was granted but the Motion to Dismiss was denied. In
denying the motion to dismiss, the Labor Arbiter ruled that the non-existence of the
relationship is a matter of defense. In deciding the case, the Labor Arbiter ruled in
favor of respondent finding him to be illegally dismissed and awarded his money
claims. It ruled that Polyfoam and Gramaje are solidarily liable to respondent. On
appeal the NLRC, the LAs decision was modified by exonerating Polyfoam from
responsibility and deleting some of the money awards. It ruled that Gramaje is an
independent contractor and was not illegally dismissed but abandoned work. On
appeal to the CA, the NLRCs decision was reversed and the LAs decision
reinstated. Aggrieved, petitioners filed this petition for review on ceritiorari.

Issues:
Whether
or
not
Polyfoam
is
Whether or not respondent was illegally dismissed?

solidarily

liable?

Ruling:
Yes, Polyfoam is solidarily liable. Yes, respondent was illegally dismissed. The Court
ruled that Gramaje was involved in labor-only contracting and that respondent did
not abandon work but was illegally dismissed.
In support of its conclusion that Polyfoam is involved in labor-only contracting, the
following were considered by the Court: (a) Gramaje has no substantial capital; and
(b) Gramaje did not carry on an independent business or undertake the
performance of its service contract according to its own manner and method, free
from the control and supervision of its principal, Polyfoam. On the first ground, it
was not able to prove ownership over the equipment in Polyfoams premises that is
allegedly owned by Gramaje.

Respondent was illegally dismissed. Credence was given to respondents narration

of facts. Several circumstance also negated the theory of abandonment like: (a) he
immediately inquired from his supervisor; (b) he wrote a letter asking to be readmitted and (c) he filed a case for illegal dismissal.

39)
Superior Packaging Corp., vs. Balagsay et al., G.R. No. 178909, October
10, 2012
Facts:
Superior Packaging Corporation (Superior) is involved in the manufacture and sale
of commercial and industrial corrugated boxes. It engaged the services of Lancer
Staffing & Services Network, Inc. (Lancer) to provide reliever services to its
business. The respondents in this case are the workers of Lancer assigned to
Superior for such reliever services.
The workers filed a complaint with the DOLE against Superior for underpayment of
wages, non- payment of premium pay for worked rest, overtime pay and nonpayment of salaries. The DOLE then conducted an inspection of the Superiors
premises and made a finding, among others, that Superior is engaged in labor-only
contracting and is consequently an indirect employer of the workers. Having found
that Superior committed the violations alleged by the workers, the DOLE issued an
Order finding in favor of the workers and ordering Superior to pay their claims.
Superior filed a motion for reconsideration on the ground that the workers are not
its employees but of Lancer. It objects to the finding that it is engaged in labor-only
contracting and is consequently an indirect employer, and alleges that it is beyond
the visitorial and enforcement power of the DOLE to make such conclusion.
According to Superior, such conclusion may be made only upon consideration of
evidentiary matters and cannot be determined solely through a labor inspection.
Issue:
Can the DOLE make a finding as to the existence or non-existence of employeremployee relationship in the course of an inspection conducted pursuant to its
visitorial and enforcement power?
Ruling:
Yes, the DOLE can.
Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully
empowered to make a determination as to the existence of an employer-employee
relationship in the exercise of its visitorial and enforcement power.
The expanded visitorial and enforcement power of the DOLE granted by RA 7730
would be rendered nugatory if the alleged employer could, by the simple expedient
of disputing the employer-employee relationship, force the referral of the matter to
the NLRC. At least a prima facie showing of the absence of an employer-employee
relationship be made to oust the DOLE of jurisdiction. But it is precisely the DOLE
that will be faced with that evidence, and it is the DOLE that will weigh it,
to see if the same does successfully refute the existence of an employeremployee relationship.
Here, the DOLE finding Lancer was not an independent contractor and that Superior
and Lancer were engaged in labor-only contracting is a finding as to the existence

of employer-employee relationship. Hence, Superior was considered an indirect

employer of the workers and liable to the latter for their unpaid money claims

40)
Digital Telecommunications Phils Inc. vs. Digitel Employees Union et
al., G.R. No. 184903-04, October 10, 2012
FACTS: By virtue of a certification election, Digitel Employees Union (Union) became
the exclusive bargaining agent of all rank and file employees of Digitel in 1994. The
Union and Digitel then commenced collective bargaining negotiations which
resulted in a bargaining deadlock. The Union threatened to go on strike, but then
the Labor Secretary assumed jurisdiction over the dispute and eventually directed
the parties to execute a CBA.
However, no CBA was forged between Digitel and the Union. Some Union members
abandoned their employment with Digitel. The Union later became dormant. Ten
(10) years thereafter or on 28 September 2004, Digitel received from Esplana, who
was President of the Union, a letter containing the list of officers, CBA proposals and
ground rules.
Digitel was reluctant to negotiate with the Union and demanded that the latter
Union show compliance with the provisions of the Unions Constitution and By -laws
on union membership and election of officers. On 4 November 2004, Esplana and
his group filed a case for Preventive Mediation before the National Conciliation and
Mediation Board based on Digitels violation of the duty to bargain. On 25 November
2004, Esplana filed a notice of strike. On 10 March 2005, the then Labor Secretary
issued an Order.
Assuming jurisdiction over the labor dispute. During the pendency of the
controversy, Digitel Service, Inc. (Digiserv), a non-profit enterprise engaged in call
center servicing, filed with the DOLE an Establishment Termination Report stating
that it will cease its business operation. The closure affected at least 100
employees, 42 of whom are members of the herein respondent Union. Alleging that
the affected employees are its members and in reaction to Digiservs action,
Esplana and his group filed another Notice of Strike for union busting, illegal lockout, and violation of the assumption order. On 23 May 2005, the Labor Secretary
ordered the second notice of strike subsumed by the previous Assumption Order.
Meanwhile, on 14 March 2005, Digitel filed a petition with the Bureau of Labor
Relations (BLR) seeking cancellation of the Unions registration. In a Decision dated
11 May 2005, the Regional Director of the DOLE dismissed the petition
forcancellation of union registration for lack of merit. The appeal filed by Digitel with
the BLR was eventually dismissed for lackof merit in a Resolution dated 9
March 2007. In an Order dated 13 July 2005, the Secretary of Labor directed Digitel
to commence the CBA negotiation with theUnion and certified for compulsory
arbitration before the NLRC the issue of unfair labor practice.In accordance with the
13 July 2005 Order of the Secretary of Labor, the unfair labor practice issue was
certified forcompulsory arbitration before the NLRC. On 31 January 2006, NLRC
rendered a Decision dismissing the unfair labor practicecharge against Digitel but
declaring the dismissal of the 13 employees of Digiserv as illegal and ordering their
reinstatement.

The Union manifested that out of 42 employees, only 13 remained, as most had
already accepted separation pay.In view of this unfavorable decision, Digitel filed
a petition on 9 June 2006 before the Court of Appeals, challenging theabove NLRC
Decision and Resolution and arguing mainly that Digiserv employees are not
employees of Digitel.On 18 June 2008, CA partially granted the case for ULP, thus
modifying the assailed NLRC dispositions. The CAlikewise sustained the finding
that Digiserv is engaged in labor-only contracting and that its employees are
actually employeesof Digitel.Digitel filed a motion for reconsideration but was
denied in a Resolution dated 9 October 2008. Hence, this petition forreview on
certiorari.

ISSUES:
1) Whether Digiserv is a legitimate contractor; and
2) Whether there was a valid dismissal.
RULING:
Digiserv is a labor-only contractor.
Labor-only contracting is expressly prohibited by our labor laws. After an exhaustive
review of the records, there is no showing that first, Digiserv has substantial
investment in the form of capital, equipment or tools. The NLRC, as echoed by the
CA, did not find substantial Digiservs authorized capital stock of P 1,000,000.00. It
pointed out that only P 250,000.00 of the authorized capital stock had been
subscribed and only P 62,500.00 had been paid up. There was no increase in
capitalization for the last 10 years.
Moreover, in the Amended Articles of Incorporation, as well as in the General
Information Sheets for the years 1994, 2001 and 2005, the primary purpose of
Digiserv is to provide manpower services. In PCI Automation Center, Inc.
v. National Labor Relations Commission the Court made the following distinction:
"the legitimate job contractor provides services while the labor-only contractor
provides only manpower. The legitimate job contractor undertakes to perform a
specific job for the principal employer while the labor-only contractor merely
provides the personnel to work for the principal employer."The services provided by
employees of Digiserv are directly related to the business of Digitel. It is undisputed
that as early as March 1994, the affected employees, except for two, were already
performing their job as Traffic Operator which was later renamed as Customer
Service Representative (CSR). It is equally undisputed that all throughout their
employment, their function as CSR remains the same until they were terminated
effective May 30, 2005. Their long period of employment as such is an indication
that their job is directly related to the main business of DIGITEL which is
telecommunications. Furthermore, Digiserv does not exercise control over the
affected employees. Digiserv shared the same Human Resources, Accounting, Audit
and Legal Departments with Digitel which manifested that it was Digitel who

exercised control over the performance of the affected employees. The NLRC also
relied on the letters of commendation, plaques of appreciation and certification
issued by Digitel to the Customer Service Representatives as evidence of control.
Considering that Digiserv has been found to be engaged in labor-only contracting,
the dismissed employees aredeemed employees of Digitel.
The affected employees were illegally dismissed.
In addition to finding that Digiserv is a labor-only contractor, records teemwith proof
that its dismissed employees are in fact employees of Digitel. The NLRC
enumerated these pieces of evidence, thus:
The remaining affected employees, except for two (2), were already hired by
DIGITEL even before the existence of DIGISERV. Likewise, the remaining affected
employees continuously held the position of Customer Service Representative,
which was earlier known as Traffic Operator, from the time they were appointed on
March 1, 1994until they were terminated on May 30, 2005.
Further, the Certificates issued to Customer Service Representative likewise show
that they are employees of DIGITEL, Take for example the "Service Award" issued to
Ma. Loretta C. Esen, one of the remaining affected employees. The "Service Award"
was signed by the officers of DIGITEL - the VP-Customer Services Division, the VPHuman Resources Division and the Group Head-Human Resources Division. It cannot
be gainsaid that it is only the employer that issues service award to its employees.
As an alternative argument, Digitel maintains that the affected employees were
validly dismissed on the grounds of closure of Digiserv, a department within Digitel.
In the recent case of Waterfront Cebu City Hotel v. Jimenez.
We reffered to the closure of a department or division of a company as
retrenchment. For a valid retrenchment, the following elements must be present:(1)
That retrenchment is reasonably necessary and likely to prevent business losses
which, if already incurred, must be substantial, serious, actual and real, or if only
expected, are reasonably imminent as perceived objectively and in good faith by
the employer;(2) That the employer served written notice both to the employees
and to the Department of Labor and Employment at least one month prior to the
intended date of retrenchment;(3) That the employer pays the retrenched
employees separation pay equivalent to one (1) month pay or at least month pay
for every year of service, whichever is higher;(4) That the employer exercises its
prerogative to retrench employees in good faith for the advancement of its interest
and not to defeat or circumvent the employees right to security of tenure; and
(5) That the employer used fair and reasonable criteria in ascertaining who would
be dismissed and who would be retained among the employees, such as status,
efficiency, seniority, physical fitness, age, and financial hardship for certain workers.
Only the 3 elements of a valid retrenchment had been here satisfied. Indeed, it is
management prerogative to close a department of the company. Digitels decision
to outsource the call center operation of the company is a valid reason to close
down the operations of a department under which the affected employees were

employed. The fifth element regarding the criteria to be observed by Digitel clearly
does not apply because all employees under Digiserv were dismissed. The instant
case is all about the fourth element, that is, whether or not the affected employees
were dismissed in good faith. We find that there was no good faith in the
retrenchment. Prior to the cessation of Digiservs operations, the Secretary of Labor
had issued the first and second assumption order. The effects of the assumption
order issued by the Secretary of Labor are two-fold. It enjoins an impending strike
on the part of the employees and orders the employer to maintain the status quo.
There is no doubt that Digitel defied the assumption order by abruptly closing down
Digiserv. The closure of a department is not illegal per se. What makes it unlawful is
when the closure is undertaken in bad faith. In St. John Colleges, Inc.v. St. John
Academy Faculty and Employees Union, bad faith was evidenced by the timing of
and reasons for the closure andthe timing of and reasons for the subsequent
opening

41)
Norkis Trading Corp., vs. Buenavista, et al., G.R. No. 182018, October
10, 2012
Facts
The respondents were hired by Norkis Trading, a domestic corporation engaged in
the business of manufacturing and marketing of Yamaha motorcycles and multipurpose vehicles, on separate dates and for various positions.
Although they worked for Norkis Trading as skilled workers assigned in the operation
of industrial and welding machines owned and used by Norkis Trading for its
business, they were not treated as regular employees by Norkis Trading. Instead,
they were regarded by Norkis Trading as members of PASAKA, a cooperative
organized under the Cooperative Code of the Philippines, and which was deemed an
independent contractor that merely deployed the respondents to render services for
Norkis Trading.4 The respondents nonetheless believed that they were regular
employees of Norkis Trading, citing in their Position Paper 5 the following
circumstances that allegedly characterized their employment with the company:
The work of the operators involves operating industrial machines, such as, press
machine, hydraulic machine, and spotweld machine. On the other hand, the welders
used the welding machines. The machines used by complainants herein
respondents in their work are all owned by respondent Norkis Trading herein
petitioner and these are installed and located in the working area of the
complainants inside the companys premises.
The salaries of complainants are paid inside the premises of respondent Norkis
Trading by Dalia Rojo and Belen Rubio, who are also employees of the said company
assigned at the accounting office.
Despite having served respondent Norkis Trading for many years and performing
the same functions as regular employees, complainants were not accorded regular
status. It was made to appear that complainants are not employees of said
company but that of respondent PASAKA. 6
Against the foregoing scenario, the respondents, together with several other
complainants,7 filed on June 9, 1999 with the Department of Labor and Employment
(DOLE) a complaint against Norkis Trading and PASAKA for labor-only contracting
and non-payment of minimum wage and overtime pay. The complaint was docketed
as LSED Case No. RO700-9906-CI-CS-168.
The filing of the complaint for labor-only contracting allegedly led to the suspension
of the respondents membership with PASAKA. On July 22, 1999, they were served
by PASAKA with memoranda charging them with a violation of the rule against
commission of acts injurious or prejudicial to the interest or welfare of the
cooperative. The memoranda cited that the respondents filing of a case against
Norkis Trading had greatly prejudiced the interest and welfare of the cooperative. 8 In
their answer9 to the memoranda, the respondents explained that they merely
wanted to be recognized as regular employees of Norkis Trading. The case records

include copies of the memoranda sent to respondents Buenavista, Fabroa and

Dondoyano.10
On August 16, 1999, the respondents received another set of memoranda from
PASAKA, now charging them with the following violations of the cooperatives rules
and regulations: (1) serious misconduct or willful disobedience of superiors
instructions or orders; (2) gross and habitual neglect of duties by abandoning work
without permission; (3) absences without filing leave of absence; and (4) wasting
time or loitering on companys time or leaving their post temporarily without
permission during office hours.11 Copies of the memoranda12 sent to Fabroa and
Cape form part of the records.
On August 26, 1999, PASAKA informed the respondents of the cooperatives
decision to suspend them for fifteen (15) working days, to be effective from
September 1 to 21, 1999, for violation of PASAKA rules.
The records include copies of the memoranda 13 sent to Fabroa and Cape. The
suspension prompted the respondents to file with the NLRC the complaint for illegal
suspension against Norkis Trading and PASAKA.
The 15-day suspension of the respondents was extended for another period of 15
days, from September 22, 1999 to October 12, 1999. 14 Copies of PASAKAs separate
letters15 to Buenavista, Fabroa, Cape and Dondoyano on the cooperatives decision
to extend the suspension form part of the records.
On October 13, 1999, the respondents were to report back to work but during the
hearing in their NLRC case, they were informed by PASAKA that they would be
transferred to NorkisTradings sister company, PortaCoeli Industrial Corporation
(PortaCoeli), as washers of Multicab vehicles.
The respondents opposed the transfer as it would allegedly result in a change of
employers, from Norkis Trading to PortaCoeli. The respondents also believed that
the transfer would result in a demotion since from being skilled workers in
NorkisTrading, they would be reduced to being utility workers.These circumstances
made the respondents amend their complaint for illegal suspension, to include the
charges of unfair labor practice, illegal dismissal, damages and attorneys fees.
For their part, both Norkis Trading and PASAKA claimed that the respondents were
not employees of Norkis Trading. They insisted that the respondents were members
of PASAKA, which served as an independent contractor that merely supplied
services to Norkis International Co., Inc. (Norkis International) pursuant to a job
contract16 which PASAKA and Norkis International executed on January 14, 1999 for
121,500 pieces of F/GF-Series Reinforcement Production. After PASAKA received
reports from its coordinator at Norkis International of the respondents low efficiency
and violation of the cooperatives rules, and after giving said respondents the
chance to present their side, a penalty of suspension was imposed upon them by
the cooperative. The illegal suspension being complained of was then not linked to
the respondents employment, but to their membership with PASAKA.

Norkis Trading stressed that the respondents were deployed by PASAKA to Norkis
International, a company that is entirely separate and distinct from Norkis Trading.
ISSUES:
1) THE COURT OF APPEALS HAS DEPARTED FROM THE USUAL COURSE OF JUDICIAL
PROCEEDINGS WHEN IT MADE ITS OWN FACTUAL FINDINGS AND DISREGARDED THE
UNIFORM AND CONSISTENT FACTUAL FINDINGS OF THE LABOR ARBITER AND THE
NLRC, WHICH MUST BE ACCORDED GREAT WEIGHT, RESPECT AND EVEN FINALITY. IN
SO DOING, THE COURT OF APPEALS EXCEEDED ITS AUTHORITY ON CERTIORARI
UNDER RULE 65 OF THE RULES OF COURT BECAUSE SUCH FACTUAL FINDINGS WERE
BASED ON SPECULATIONS AND NOT ON OTHER EVIDENCES [SIC] ON RECORD.
4) THE COURT OF APPEALS HAS DETERMINED A QUESTION OF SUBSTANCE NOT IN
ACCORD WITH LAW AND JURISPRUDENCE IN RULING THAT THE RESPONDENTS
WERE CONSTRUCTIVELY DISMISSED CONTRARY TO THE FACTUAL FINDINGS OF THE
LABOR ARBITER AND THE NLRC AND WITHOUT SHOWING ANY EVIDENCE TO
OVERTURN SUCH FINDING OF FACT.42
This Courts Ruling
The Court resolves to deny the petition.
Factual
findings
may
be
examined
when
there
is
a
were
arrived
at
disregard of evidence on record.

of

labor
by
the
showing
that
arbitrarily
or

officials
courts
they
in

As regards the first ground, the petitioner questions the CAs reversal of LA
Gutierrezs and the NLRCs rulings, and argues that said rulings should have been
accorded great weight and finality by the appellate court as these were allegedly
supported by substantial evidence.
On this matter, the settled rule is that factual findings of labor officials, who are
deemed to have acquired expertise in matters within their jurisdiction, are generally
accorded not only respect but even finality by the courts when supported by
substantial evidence, i.e., the amount of relevant evidence which a reasonable mind
might accept as adequate to support a conclusion. We emphasize, nonetheless, that
these findings are not infallible. When there is a showing that they were arrived at
arbitrarily or in disregard of the evidence on record, they may be examined by the
courts. The CA can then grant a petition for certiorari if it finds that the NLRC, in its
assailed decision or resolution, has made a factual finding that is not supported by
substantial evidence. It is within the jurisdiction of the CA, whose jurisdiction over
labor cases has been expanded to review the findings of the NLRC. 47
We have thus explained in Cocomangas Hotel Beach Resort v. Visca 48 that the CA
can take cognizance of a petition for certiorari if it finds that the NLRC committed
grave abuse of discretion by capriciously, whimsically, or arbitrarily disregarding
evidence which are material to or decisive of the controversy. The CA cannot make
this determination without looking into the evidence presented by the parties. The

appellate court needs to evaluate the materiality or significance of the evidence,

which are alleged to have been capriciously, whimsically, or arbitrarily disregarded
by the NLRC, in relation to all other evidence on record.
This case falls within the exception to the general rule that findings of fact of labor
officials are to be accorded respect and finality on appeal. As our discussions in the
other grounds that are raised in this petition will demonstrate, the CA has correctly
held that the NLRC has disregarded facts and evidence that are material to the
outcome of the respondents case. No error can be ascribed to the appellate court
for making its own assessment of the facts that are significant to the case to
determine the presence or absence of grave abuse of discretion on the part of the
NLRC, even if the CAs findings turn out to be different from the factual findings of
both the LA and NLRC.
Termination
of
no
just
or
amounts to an illegal dismissal.

an

employment
authorized

for
cause

As to the issue of whether the respondents were illegally dismissed by Norkis

Trading, we answer in the affirmative, although not by constructive dismissal as
declared by the CA, but by actual dismissal.
Where an entity is declared to be a labor-only contractor, the employees supplied
by said contractor to the principal employer become regular employees of the latter.
Having gained regular status, the employees are entitled to security of tenure and
can only be dismissed for just or authorized causes and after they had been
afforded due process.66 Termination of employment without just or authorized cause
and without observing procedural due process is illegal.1wphi1
In claiming that they were illegally dismissed from their employment, the
respondents alleged having been informed by PASAKA that they would be
transferred, upon the behest of Norkis Trading, as Multicab washers or utility
workers to PortaCoeli, a sister company of Norkis Trading. Norkis Trading does not
dispute that such job transfer was relayed by PASAKA unto the respondents,
although the company contends that the transfer was merely an "offer" that did not
constitute a dismissal. It bears mentioning, however, that the respondents were not
given any other option by PASAKA and Norkis Trading but to accede to said transfer.
In fact, there is no showing that Norkis Trading would still willingly accept the
respondents to work for the company. Worse, it still vehemently denies that the
respondents had ever worked for it. Again, all defenses of Norkis Trading that
anchor on the alleged lack of employer-employee relationship between it and the
respondents no longer merit any consideration, given that this Courts findings in
G.R. Nos. 180078-79 have become conclusive. Thus, the respondents transfer to
PortaCoeli, although relayed to the respondents by PASAKA was effectively an act of
Norkis Trading. Where labor-only contracting exists, the Labor Code itself
establishes an employer-employee relationship between the employer and the
employees of the labor-only contractor. The statute establishes this relationship for
a comprehensive purpose: to prevent a circumvention of labor laws. The contractor
is considered merely an agent of the principal employer and the latter is responsible

to the employees of the labor-only contractor as if such employees had been

directly employed by the principal employer. 67
No further evidence or document should then be required from the respondents to
prove such fact of dismissal, especially since Norkis Trading maintains that it has no
duty to admit and treat said respondents as its employees. Considering that
PortaCoeli is an entity separate and distinct from Norkis Trading, the respondents
employment with Norkis Trading was necessarily severed by the change in work
assignment. It then did not even matter whether or not the transfer involved a
demotion in the respondents rank and work functions; the intention to dismiss, and
the actual dismissal of the respondents were sufficiently established.
In the absence of a clear showing that the respondents dismissal was for just or
authorized causes, the termination of the respondents employment was illegal.
What may be reasonably deduced from the records was that Norkis Trading decided
on the transfer, after the respondents had earlier filed their complaint for labor-only
contracting against the company. Even Norkis Tradings contention that the transfer
may be deemed a valid exercise of management prerogative is misplaced. First, the
exercise of management prerogative presupposes that the transfer is only for
positions within the business establishment. Second, the exercise of management
prerogative by employers is not absolute, as it is limited by law and the general
principles of fair play and justice.
WHEREFORE, premises considered, the petition is DENIED

42)
Goya Inc. vs. Goya Inc. Employees Union-FFW G.R. No. 170054, Jan. 21,
2013
FACTS: Goya, Inc. (Company) is a domestic corporation engaged in the
manufacture, importation, and wholesale of top quality food products. Sometime in
January 2004, the company hired contractual employees from PESO Resources
Development Corporation (PESO) to perform temporary and occasional services.
Respondent Goya, Inc. Employees UnionFFW (Union) requested for a grievance
conference on the ground that the contractual workers do not belong to the
categories of employees stipulated in the existing CBA.
The hiring of contractual employees was in contravention to their CBA
agreement which has been applied since 1970 where there are only 3 kinds of
employees: regular employees, probationary employees and casual employees. The
Union asserted that the hiring of contractual employees from PESO is not a
management prerogative and in gross violation of the CBA tantamount to unfair
labor practice (ULP).
The Union moreover advanced that sustaining the Companys position would
easily weaken and ultimately destroy the former with the latters resort to
retrenchment and/or retirement of employees and not filling up the vacant regular
positions through the hiring of contractual workers from PESO, and that a possible
scenario could also be created by the Company wherein it could "import" workers
from PESO during an actual strike.
The case was brought before the NCMB when the matter remained unsolved
for voluntary arbitration. Voluntary Arbitrator Bienvenido E. Laguesma manifested
that amicable settlement was no longer possible; hence, they agreed to submit for
resolution the solitary issue of "[w]hether or not the Company is guilty of unfair
labor acts in engaging the services of PESO, a third party service provider, under
the existing CBA, laws, and jurisprudence."
ISSUE:
Whether or not the Company is guilty of unfair labor acts in engaging the
services of PESO, a third party service provider, under the existing CBA, laws, and
jurisprudence.
RULING:
The companys defense is that their act of hiring contractual
employees is a management prerogative and is a valid act thereof.
Declaring that a particular act falls within the concept of management prerogative
is significantly different from acknowledging that such act is a valid exercise thereof.
What the VA and the CA correctly ruled was that the Companys act of contracting
out/outsourcing is within the purview of management prerogative. Both did not say,
however, that such act is a valid exercise thereof. Obviously, this is due to the
recognition that the CBA provisions agreed upon by the Company and the Union
delimit the free exercise of management prerogative pertaining to the hiring of

contractual employees. Indeed, the VA opined that "the right of the management to
outsource parts of its operations is not totally eliminated but is merely limited by
the CBA," while the CA held that "this management prerogative of contracting out
services, however, is not without limitation. x x x These categories of employees
particularly with respect to casual employees serve as limitation to the Companys
prerogative to outsource parts of its operations especially when hiring contractual
employees.
A collective bargaining agreement is the law between the parties.
It is familiar and fundamental doctrine in labor law that the CBA is the law between
the parties and they are obliged to comply with its provisions.
A collective bargaining agreement or CBA refers to the negotiated contract between
a legitimate labor organization and the employer concerning wages, hours of work
and all other terms and conditions of employment in a bargaining unit. As in all
contracts, the parties in a CBA may establish such stipulations, clauses, terms and
conditions as they may deem convenient provided these are not contrary to law,
morals, good customs, public order or public policy. Thus, where the CBA is clear
and unambiguous, it becomes the law between the parties and compliance
therewith is mandated by the express policy of the law.
Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt upon
the intention of the contracting parties, the literal meaning of their stipulations shall
control.
On the power of the voluntary arbitrator:
In general, the arbitrator is expected to decide those questions expressly stated and
limited in the submission agreement. However, since arbitration is the final resort
for the adjudication of disputes, the arbitrator can assume that he has the power to
make a final settlement. Thus, assuming that the submission empowers the
arbitrator to decide whether an employee was discharged for just cause, the
arbitrator in this instance can reasonably assume that his powers extended beyond
giving a yes-or-no answer and included the power to reinstate him with or without
back pay

43)
Vigilla et al., vs. Phil. College of Criminology Inc., G.R. No. 200094, June
10, 2013
Facts:
PCCr is a non-stock educational institution, while the petitioners were janitors,
janitresses and supervisor in the Maintenance Department of PCCr under the
supervision and control of Atty. Florante A. Seril (Atty. Seril), PCCrs Senior Vice
President for Administration. The petitioners, however, were made to understand,
upon application with respondent school, that they were under MBMSI, a corporation
engaged in providing janitorial services to clients. Atty. Seril is also the President
and General Manager of MBMSI.
Sometime in 2008, PCCr discovered that the Certificate of Incorporation of MBMSI
had been revoked as of July 2, 2003. On March 16, 2009, PCCr, through its
President, respondent Gregory Alan F. Bautista (Bautista), citing the revocation,
terminated the schools relationship with MBMSI, resulting in the dismissal of the
employees or maintenance personnel under MBMSI, except Alfonso Bongot (Bongot)
who was retired.
In September, 2009, the dismissed employees, led by their supervisor, Benigno
Vigilla (Vigilla), filed their respective complaints for illegal dismissal, reinstatement,
back wages, separation pay (for Bongot), underpayment of salaries, overtime pay,
holiday pay, service incentive leave, and 13th month pay against MBMSI, Atty. Seril,
PCCr, and Bautista.
In their complaints, they alleged that it was the school, not MBMSI, which was their
real employer because (a) MBMSIs certification had been revoked; (b) PCCr had
direct control over MBMSIs operations; (c) there was no contract between MBMSI
and PCCr; and (d) the selection and hiring of employees were undertaken by PCCr.
On the other hand, PCCr and Bautista contended that (a) PCCr could not have
illegally dismissed the complainants because it was not their direct employer; (b)
MBMSI was the one who had complete and direct control over the complainants;
and (c) PCCr had a contractual agreement with MBMSI, thus, making the latter their
direct employer.
On September 11, 2009, PCCr submitted several documents before LA Ronaldo
Hernandez, including releases, waivers and quitclaims in favor of MBMSI executed
by the complainants to prove that they were employees of MBMSI and not PCCr.
Ruling of the Labor Arbiter
After due proceedings, the LA handed down his decision, finding that (a) PCCr was
the real principal employer of the complainants ; (b) MBMSI was a mere adjunct or
alter ego/labor-only contractor; (c) the complainants were regular employees of
PCCr; and (d) PCCr/Bautista were in bad faith in dismissing the complainants.
The LA explained that PCCr was actually the one which exercised control over the
means and methods of the work of the petitioners, thru Atty. Seril, who was acting,

throughout the time in his capacity as Senior Vice President for Administration of
PCCr, not in any way or time as the supposed employer/general manager or
president of MBMSI.
.Ruling of the NLRC
Not satisfied, the respondents filed an appeal before the NLRC. In its Resolution,
dated February 11, 2011, the NLRC affirmed the LAs findings. Nevertheless, the
respondents were excused from their liability by virtue of the releases, waivers and
quitclaims executed by the petitioners.
In their motion for reconsideration, petitioners attached as annexes their affidavits
denying that they had signed the releases, waivers, and quitclaims. They prayed for
the reinstatement in toto of the July 30, 2010 Decision of the LA. 8 MBMSI/Atty. Seril
also filed a motion for reconsideration 9 questioning the declaration of the NLRC that
he was solidarily liable with PCCr.
On April 28, 2011, NLRC modified its February 11, 2011 Resolution by affirming the
July 30, 2010 Decision10 of the LA only in so far as complainants Ernesto B. Ayento
and Eduardo B. Salonga were concerned. As for the other 17 complainants, the
NLRC ruled that their awards had been superseded by their respective releases,
waivers and quitclaims.
Ruling of the Court of Appeals
On September 16, 2011, the CA denied the petition and affirmed the two
Resolutions of the NLRC, dated February 11, 2011 and April 28, 2011. The CA
pointed out that based on the principle of solidary liability and Article 1217 11 of the
New Civil Code, petitioners respective releases, waivers and quitclaims in favor of
MBMSI and Atty. Seril redounded to the benefit of the respondents. The CA also
upheld the factual findings of the NLRC as to the authenticity and due execution of
the individual releases, waivers and quitclaims because of the failure of petitioners
to substantiate their claim of forgery and to overcome the presumption of regularity
of a notarized document. Petitioners motion for reconsideration was likewise denied
by the CA in its January 4, 2012 Resolution.
Hence, this petition under Rule 45 challenging the CA Decision
Issue:

Whether or not their claims against the respondents were amicably settled by
virtue of the releases, waivers and quitclaims which they had executed in
favor of MBMSI.
o

whether or not petitioners executed the said releases, waivers and

quitclaims

whether or not a labor-only contractor is solidarily liable with the

employer.

Ruling:
The petition fails.
The Releases, Waivers and Quitclaims are Valid
We noted that the individual quitclaims, waivers and releases executed by the
complainants showing that they received their separation pay from MBMSI were
duly notarized by a Notary Public. Such notarization gives prima facie evidence of
their due execution. Further, said releases, waivers, and quitclaims were not refuted
nor disputed by complainants herein, thus, we have no recourse but to uphold their
due execution
A Labor-only Contractor is Solidarily Liable with the Employer
The issue of whether there is solidary liability between the labor-only contractor and
the employer is crucial in this case. If a labor-only contractor is solidarily liable with
the employer, then the releases, waivers and quitclaims in favor of MBMSI will
redound to the benefit of PCCr. On the other hand, if a labor-only contractor is not
solidarily liable with the employer, the latter being directly liable, then the releases,
waivers and quitclaims in favor of MBMSI will not extinguish the liability of PCCr.
xxx
The NLRC and the CA correctly ruled that the releases, waivers and quitclaims
executed by petitioners in favor of MBMSI redounded to the benefit of PCCr
pursuant to Article 1217 of the New Civil Code. The reason is that MBMSI is solidarily
liable with the respondents for the valid claims of petitioners pursuant to Article 109
of the Labor Code.
As correctly pointed out by the respondents, the basis of the solidary liability of the
principal with those engaged in labor-only contracting is the last paragraph of
Article 106 of the Labor Code, which in part provides: "In such cases labor-only
contracting, the person or intermediary shall be considered merely as an agent of
the employer who shall be responsible to the workers in the same manner and
extent as if the latter were directly employed by him."
Xxx
Under the general rule set out in the first and second paragraphs of Article 106, an
employer who enters into a contract with a contractor for the performance of work
for the employer, does not thereby create an employer-employees relationship
between himself and the employees of the contractor. Thus, the employees of the
contractor remain the contractor's employees and his alone. Nonetheless when a
contractor fails to pay the wages of his employees in accordance with the Labor
Code, the employer who contracted out the job to the contractor becomes jointly
and severally liable with his contractor to the employees of the latter "to the extent
of the work performed under the contract" as such employer were the employer of
the contractor's employees. The law itself, in other words, establishes an employeremployee relationship between the employer and the job contractor's employees

for a limited purpose, i.e., in order to ensure that the latter get paid the wages due
to them.

A similar situation obtains where there is "labor only" contracting. The "labor-only"
contractor-i.e "the person or intermediary" - is considered "merely as an agent of
the employer." The employer is made by the statute responsible to the employees
of the "labor only" contractor as if such employees had been directly employed by
the employer. Thus, where "labor-only" contracting exists in a given case, the
statute itself implies or establishes an employer-employee relationship between the
employer (the owner of the project) and the employees of the "labor only"
contractor, this time for a comprehensive purpose: "employer for purposes of this
Code, to prevent any violation or circumvention of any provision of this Code." The
law in effect holds both the employer and the "laboronly" contractor responsible to
the latter's employees for the more effective safeguarding of the employees' rights
under the Labor Code

44)
BPI Employees Union-Davao city-FUBU vs. Bank of the Phil Islands et
al., G.R. No. 174912, July 24, 2013
Facts:
BOMC, which was created pursuant to Central Bank Circular No. 1388, Series of
1993 (CBP Circular No. 1388, 1993), and primarily engaged in providing and/or
handling support services for banks and other financial institutions, is a subsidiary
of the Bank of Philippine Islands (BPI) operating and functioning as an entirely
separate and distinct entity.
A service agreement between BPI and BOMC was initially implemented in BPIs
Metro Manila branches. In this agreement, BOMC undertook to provide services such
as check clearing, delivery of bank statements, fund transfers, card production,
operations accounting and control, and cash servicing, conformably with BSP
Circular No. 1388. Not a single BPI employee was displaced and those performing
the functions, which were transferred to BOMC, were given other assignments.
The Manila chapter of BPI Employees Union (BPIEU-Metro ManilaFUBU) then filed a
complaint for unfair labor practice (ULP). The Labor Arbiter (LA) decided the case in
favor of the union. The decision was, however, reversed on appeal by the NLRC.
BPIEU-Metro Manila-FUBU filed a petition for certiorari before the CA which denied it,
holding that BPI transferred the employees in the affected departments in the
pursuit of its legitimate business. The employees were neither demoted nor were
their salaries, benefits and other privileges diminished.
On January 1, 1996, the service agreement was likewise implemented in Davao City.
Later, a merger between BPI and Far East Bank and Trust Company (FEBTC) took
effect on April 10, 2000 with BPI as the surviving corporation. Thereafter, BPIs
cashiering function and FEBTCs cashiering, distribution and bookkeeping functions
were handled by BOMC. Consequently, twelve (12) former FEBTC employees were
transferred to BOMC to complete the latters service complement.
BPI Davaos rank and file collective bargaining agent, BPI Employees Union-Davao
City-FUBU (Union), objected to the transfer of the functions and the twelve (12)
personnel to BOMC contending that the functions rightfully belonged to the BPI
employees and that the Union was deprived of membership of former FEBTC
personnel who, by virtue of the merger, would have formed part of the bargaining
unit represented by the Union pursuant to its union shop provision in the CBA.7
The Union then filed a formal protest on June 14, 2000 addressed to BPI Vice
Presidents Claro M. Reyes and Cecil Conanan reiterating its objection. It requested
the BPI management to submit the BOMC issue to the grievance procedure under
the CBA, but BPI did not consider it as "grievable." Instead, BPI proposed a Labor
Management Conference (LMC) between the parties.
Thereafter, the Union demanded that the matter be submitted to the grievance
machinery as the resort to the LMC was unsuccessful. As BPI allegedly ignored the

demand, the Union filed a notice of strike before the National Conciliation and
Mediation Board (NCMB) on the following grounds:
a) Contracting out services/functions performed by union members that interfered
with, restrained and/or coerced the employees in the exercise of their right to selforganization;
b) Violation of duty to bargain; and
c) Union busting.
BPI then filed a petition for assumption of jurisdiction/certification with the Secretary
of the Department of Labor and Employment (DOLE), who subsequently issued an
order certifying the labor dispute to the NLRC for compulsory arbitration. The DOLE
Secretary directed the parties to cease and desist from committing any act that
might exacerbate the situation.
On October 27, 2000, a hearing was conducted. Thereafter, the parties were
required to submit their respective position papers
On December 21, 2001, the NLRC came out with a resolution upholding the validity
of the service agreement between BPI and BOMC and dismissing the charge of ULP.
It ruled that the engagement by BPI of BOMC to undertake some of its activities was
clearly a valid exercise of its management prerogative. It further stated that the
spinning off by BPI to BOMC of certain services and functions did not interfere with,
restrain or coerce employees in the exercise of their right to self-organization. The
Union did not present even an iota of evidence showing that BPI had terminated
employees, who were its members. In fact, BPI exerted utmost diligence, care and
effort to see to it that no union member was terminated.13 The NLRC also stressed
that Department Order (D.O.) No. 10 series of 1997, strongly relied upon by the
Union, did not apply in this case as BSP Circular No. 1388, series of 1993, was the
applicable rule.
After the denial of its motion for reconsideration, the Union elevated its grievance to
the CA via a petition for certiorari under Rule 65. The CA, however, affirmed the
NLRCs December 21, 2001 Resolution with modification that the enumeration of
functions listed under BSP Circular No. 1388 in the said resolution be deleted. The
CA noted at the outset that the petition must be dismissed as it merely touched on
factual matters which were beyond the ambit of the remedy availed of.14 Be that as
it may, the CA found that the factual findings of the NLRC were supported by
substantial evidence and, thus, entitled to great respect and finality. To the CA, the
NLRC did not act with grave abuse of discretion as to merit the reversal of the
resolution.
As to the applicability of D.O. No. 10, the CA agreed with the NLRC that the said
order did not apply as BPI, being a commercial bank, its transactions were subject
to the rules and regulations of the BSP.
Not satisfied, the Union filed a motion for reconsideration which was, however,
denied by the CA.

Hence, the present petition

Issue:

Whether or not the act of BPI to outsource the cashiering, distribution and
bookkeeping functions to BOMC is in conformity with the law and the existing
CBA. Particularly in dispute is the validity of the transfer of twelve (12) former
FEBTC employees to BOMC, instead of being absorbed in BPI after the corporate
merger.

Ruling:
ART. 261. Jurisdiction of Voluntary Arbitrators or panel of Voluntary Arbitrators. x x
x Accordingly, violations of a Collective Bargaining Agreement, except those which
are gross in character, shall no longer be treated as unfair labor practice and shall
be resolved as grievances under the Collective Bargaining Agreement. For purposes
of this article, gross violations of Collective Bargaining Agreement shall mean
flagrant and/or malicious refusal to comply with the economic provisions of such
agreement.
Clearly, only gross violations of the economic provisions of the CBA are treated as
ULP. Otherwise, they are mere grievances.
In the present case, the alleged violation of the union shop agreement in the CBA,
even assuming it was malicious and flagrant, is not a violation of an economic
provision in the agreement. The provisions relied upon by the Union were those
articles referring to the recognition of the union as the sole and exclusive bargaining
representative of all rank-and-file employees, as well as the articles on union
security, specifically, the maintenance of membership in good standing as a
condition for continued employment and the union shop clause.26 It failed to take
into consideration its recognition of the banks exclusive rights and prerogatives,
likewise provided in the CBA, which included the hiring of employees, promotion,
transfers, and dismissals for just cause and the maintenance of order, discipline and
efficiency in its operations
The Union, however, insists that jobs being outsourced to BOMC were included in
the existing bargaining unit, thus, resulting in a reduction of a number of positions
in such unit. The reduction interfered with the employees right to self-organization
because the power of a union primarily depends on its strength in number.28
It is incomprehensible how the "reduction of positions in the collective bargaining
unit" interferes with the employees right to self-organization because the
employees themselves were neither transferred nor dismissed from the service. As
the NLRC clearly stated:
In the case at hand, the union has not presented even an iota of evidence that
petitioner bank has started to terminate certain employees, members of the union.
In fact, what appears is that the Bank has exerted utmost diligence, care and effort
to see to it that no union member has been terminated. In the process of the
consolidation or merger of the two banks which resulted in increased diversification

of functions, some of these non-banking functions were merely transferred to the

BOMC without affecting the union membership

45)

Alilin et al., vs. Petron Corp., GR No. 177592, June 9, 2014

FACTS:
Petron is a domestic corporation engaged in the oil business. It owns several bulk
plants in the country for receiving, storing and distributing its petroleum products.
In 1968, Romualdo D. Gindang Contractor, which was owned and operated by
Romualdo, started recruiting laborers for fielding to Petron's Mandaue Bulk Plant.
When Romualdo died in 1989, his son Romeo, through Romeo D. Gindang Services
(RDG), took over the business and continued to provide manpower services to
Petron. Petitioners were among those recruited by Romualdo D. Gindang Contractor
and RDG to work in the premises of the said bulk plant.
On June 1, 2000, Petron and RDG entered into a Contract for Services for the period
from June 1, 2000 to May 31, 2002, whereby RDG undertook to provide Petron with
janitorial, maintenance, tanker receiving, packaging and other utility services in its
Mandaue Bulk Plant. This contract was extended on July 31, 2002 and further
extended until September 30, 2002. Upon expiration thereof, no further renewal of
the service contract was done.
Alleging that they were barred from continuing their services, petitioners filed a
Complaint for illegal dismissal, underpayment of wages, damages and attorney's
fees against Petron and RDG.
ISSUE: Whether or not an employer-employee relationship exists between the
parties as to make Petron liable for petitioners' dismissal.
HELD:
Employer-employee exists between petitioners as employees and Petron as their
employer. The Court finds that RDG is a labor-only contractor. As such, it is
considered merely as an agent of Petron. Petron therefore, being the principal
employer and RDG, being the labor-only contractor, are solidarily liable for
petitioners' illegal dismissal and monetary claims.
Labor-only contracting, distinguished from permissible job contracting.
"Permissible job contracting or subcontracting refers to an arrangement whereby a
principal agrees to farm out with a contractor or subcontractor the performance of a
specific job, work, or service within a definite or predetermined period, regardless of
whether such job, work or, service is to be performed or completed within or outside
the premises of the principal.
Under this arrangement, the following conditions must be met: (a) the contractor
carries on a distinct and independent business and undertakes the contract work on
his account under his own responsibility according to his own manner and method,
free from the control and direction of his employer or principal in all matters
connected with the performance of his work except as to the results thereof; (b) the
contractor has substantial capital or investment; and (c) the agreement between
the principal and contractor or subcontractor assures the contractual employees'
entitlement to all labor and occupational safety and health standards, free exercise
of the right to self-organization, security of tenure, and social welfare benefits."

Labor-only contracting, on the other hand, is a prohibited act, defined as "supplying

workers to an employer who does not have substantial capital or investment in the
form of tools, equipment, machineries, work premises, among others, and the
workers recruited and placed by such person are performing activities which are
directly related to the principal business of such employer." "[I]n distinguishing
between prohibited labor-only contracting and permissible job contracting, the
totality of the facts and the surrounding circumstances of the case shall be
considered."
Generally, the contractor is presumed to be a labor-only contractor, unless such
contractor overcomes the burden of proving that it has the substantial capital,
investment, tools and the like. However, where the principal is the one claiming that
the contractor is a legitimate contractor, as in the present case, said principal has
the burden of proving that supposed status. It is thus incumbent upon Petron, and
not upon petitioners as Petron insists, to prove that RDG is an independent
contractor.
Petron failed to discharge the burden of proving that RDG is a legitimate contractor.
Hence, the presumption that RDG is a labor-only contractor stands.
The evidence adduced merely proves that RDG was financially qualified as a
legitimate contractor but only with respect to its last service contract with Petron in
the year 2000. While Petron was able to establish that RDG was financially capable
as a legitimate contractor at the time of the execution of the service contract in
2000, it nevertheless failed to establish the financial capability of RDG at the time
when petitioners actually started to work for Petron in 1968, 1979, 1981, 1987,
1990, 1992 and 1993.
Sections 8 and 9, Rule VIII, Book III 51 of the implementing rules of the Labor Code,
in force since 1976 and prior to DOLE Department Order No. 10, series of 1997,
provide that for job contracting to be permissible, one of the conditions that has to
be met is that the contractor must have substantial capital or investment. Petron
having failed to show that this condition was met by RDG, it can be concluded, on
this score alone, that RDG is a mere labor-only contractor.
Petron's power of control over petitioners exists in this case.
The Court also finds that the works performed by petitioners were directly related to
Petron's business, another factor which negates Petron's claim that RDG is an
independent contractor.
"A finding that a contractor is a 'labor-only' contractor is equivalent to declaring that
there is an employer-employee relationship between the principal and the
employees of the supposed contractor." In this case, the employer-employee
relationship between Petron and petitioners becomes all the more apparent due to
the presence of the power of control on the part of the former over the latter.
The Court finds, however, that while the jobs performed by petitioners may be
menial and mechanical, they are nevertheless necessary and related to Petron's

business operations. If not for these tasks, Petron's products will not reach the
consumers in their proper. The engagement of petitioners for the same works for a
long period of time is a strong indication that such works were indeed necessary to
Petron's business.
In view of these, and considering further that petitioners' length of service entitles
them to become regular employees under the Labor Code, petitioners are deemed
by law to have already attained the status as Petron's regular employees. As such,
Petron could not terminate their services on the pretext that the service contract it
entered with RDG has already lapsed.
For one, and as previously discussed, such regular status had already attached to
them even before the execution of the service contract in 2000. For another, the
same does not constitute a just or authorized cause for a valid dismissal of regular
employees.

46)
Ampeloquio vs. Jaka Distribution Inc., GR No. 196936, July 2,
2014
Facts:
Monchito R. Ampeloquio (Ampeloquio) is a reinstated employee of respondent Jaka
Distribution, Inc. (JAKA), formerly RMI Marketing Corporation (RMI).
When Ampeloquio resumed work as merchandiser at JAKA, he received a daily wage
of PhP252.00, without meal and transportation allowance. While he was transferred
outside of Metro Manila, to Lucena City and subsequently to San Pablo City, he was
receiving the same daily wage of PhP252.00, without meal and transportation
allowance. Ampeloquio was given a monthly cost of living allowance (COLA) of
PhP720.00.
Ampeloquio requested for salary adjustment and benefits retroactive to the date of
his reinstatement, and an increase of salary differential. He based his request on
what other merchandisers of JAKA received. Because of the discrepancy in wages,
he filed before the NLRC, a complaint for underpayment of wages, COLA, nonpayment of meal and transportation allowances.
The Labor Arbiter granted Ampeloquio's complaint for underpayment of wages,
basic and COLA and non-payment of allowances, meal and transportation who used
the claim should be limited to the three (3) year prescriptive period.
On appeal by JAKA, the NLRC noted the exemption of JAKA from the pertinent Wage
Order Nos. 10 & 11, and consequently, modified the amounts ordered by the Labor
Arbiter to be paid by JAKA to Ampeloquio who is only entitled to a salary differential
applying the 12 months exemption or non-implementation of the P20.00 increase in
ECOLA, in which his basic salary remained at P250.00 but her ECOLA has increased
to P50.00 because of the expiration of the period for exemption amounting to a total
salary of P300.00. CETDHA
ISSUE: Whether the wages of reinstatement includes "without loss of seniority
rights and other privileges."
Whether or not wages entitled to Ampeloquio is the wages or salary scale that
governs the minimum wage rate the prevailing or his actual daily wage rate (not
equal to the wages and benefits received by co-employees)
Ruling:
He is not entitled to the same terms and conditions of employment as that which
was offered to the other regular employees (not merchandisers) subsequently hired
by JAKA.

Seniority rights refer to the creditable years of service in the employment record of
the illegally dismissed employee as if he or she never ceased working for the
employer. In other words, the employee's years of service is deemed continuous
and never interrupted. Such is likewise the rationale for reinstatement's twin relief
of full backwages.
Ampeloquio is correct in asserting that he is a senior employee compared to the
other merchandisers whom he himself designates as casual or contractual
merchandisers. However, his reinstatement was ordered when merchandisers like
him were no longer employed by JAKA. He cannot likewise compare his wages to
that received by "casual or contractual merchandisers" or merchandisers who are
admittedly outsourced from manpower agencies or those who are considered
seasonal employees hired only during peak season.
These merchandisers are not, strictly speaking, employees of JAKA, but of a service
provider company which has a service contract with JAKA who simply perform the
work at JAKA's outlets, wearing uniforms approved by JAKA but provided by the
service company who is actually their employer. There is no employer-employee
relationship between JAKA and these merchandisers.
The existence of an independent and permissible contractor relationship is generally
established by considering the following determinants: whether the contractor is
carrying on an independent business; the nature and extent of the work; the skill
required; the term and duration of the relationship; the right to assign the
performance of a specified piece of work; the control and supervision of the work to
another; the employer's power with respect to the hiring, firing and payment of the
contractor's workers; the control of the premises; the duty to supply the premises,
tools, appliances, materials and labor; and the mode, manner and terms of
payment.
On the other hand, existence of an employer-employee relationship is established
by the presence of the four-fold test.
Section 8 of DOLE Department Order No. 10, series of 1997, illuminate:
Sec. 8. Job contracting. There is job contracting permissible
under the Code if the following conditions are met:
(1) The contractor carries on an independent business and
undertakes the contract work on his own account under his own
responsibility according to his own manner and method, free from
the control and direction of his employer or principal in all matters
connected with the performance of the work except as to the
results thereof; and

(2) The contractor has substantial capital or investment in the form

of tools, equipment, machineries, work premises, and other
materials which are necessary in the conduct of his business.
In the same vein, seasonal employees hired only for the peak season do not have
the same status as regular employees and do not receive amounts considered as
part of a compensation and benefits scheme for regular employees. These seasonal
employees only receive payment for work rendered during the period for which they
were hired, i.e., peak season. The wages and other monies seasonal employees may
receive for the duration of their limited employment period constitute bulk or
wholesale payment for services rendered.
Seasonal employment involves work or service that is seasonal in nature or lasting
for the duration of the season. Seasonal employees differ from those classified as
regular employees, in that: (1) the employee must be performing work or services
that are seasonal in nature; and (2) he had been employed for the duration of the
season.
The phrase without loss of seniority rights applies with practical and real effect to
Ampeloquio upon his retirement because he will reach earlier than other regular
employees of JAKA the required number of years of service to qualify for retirement.
Reinstatement is the rule and such covers reinstatement to the same or
substantially equivalent position without loss of seniority rights and privileges.
We note that, specifically, JAKA could have claimed that the position of
merchandiser no longer exists and has been abolished with the contracting of this
job function. However, it merely opted to reinstate Ampeloquio to the same
position. There is no quarrel that with his reinstatement, Ampeloquio is now the lone
regular merchandiser of JAKA.
The option of reinstatement to a substantially equivalent position does not apply as
reinstatement to a substantially equivalent position entails the same or similar job
functions and not just same wages or salary. As applied to this case, Ampeloquio
cannot be reinstated to a messengerial position although such is a regular
employment enjoying the same employment benefits and privileges. His
employment cannot likewise be converted into a contractual employment as such is
actually a downgrade from his regular employment enjoying security of tenure with
JAKA.
As the sole regular merchandiser of JAKA, Ampeloquio's reinstatement entitles him,
at the minimum, to the standard minimum wage at the time of his employment and
to the wages he would have received had he not been illegally dismissed, as if there
was no cessation of employment. Ampeloquio is likewise entitled to any increase
which JAKA may have given across the board to all its regular employees. To
repeat, Ampeloquio is not entitled to all benefits or privileges received by

other employees subsequently hired by JAKA just by the fact of his

seniority in the service with JAKA.
The Court of Appeals was correct in its disquisition that:
. . . [W]ithout loss of seniority rights and benefits, this does not
necessarily mean equal or more rights than those employees hired
by JAKA prior or subsequent to his reinstatement. The rule on how
much pay a reinstated employee shall receive is governed by
paragraph 3 of Article 223 of the Labor Code which provides as
follows:
. . . In any event, the decision of the Labor Arbiter reinstating a
dismissed
or
separated
employee,
insofar
as
the
reinstatement aspect is concerned, shall immediately be
executory, even pending appeal. The employee shall either
be admitted back to work under the same terms and
conditions prevailing prior to his dismissal or separation
or, at the option of the employer, merely reinstated in the
payroll. The posting of a bond by the employer shall not stay
the execution for reinstatement provided therein.

47)
FVR Skills & Services Exponenets Inc. vs. Seva, et al., GR No.
200857, Oct. 22, 2014
FACTS
FVR Skills and Services is an independent contractor engaged in the business of
providing janitorial and other manpower services to its clients. Respondents were
employees of FVR as early as 1998. On April 21, 2008, FVR entered into a
contractual janitorial service (service contract) w/ Robinsons Land Corporation. Their
service contract stated that FVR will supply janitorial and sanitation services to
Robinsons Place Ermita Mall for a period of 1 year (January 1, 2008 to December 31,
2008). Because of this, the respondents were deployed to Robinsons. Halfway
through the service contract, FVR asked the respondents to execute individual
contracts which stipulated that their respective employments shall end on
December 31, 2008, unless earlier terminated.
After a year, when the contract expired, FVR and Robinsons no longer extended
their contract of janitorial services. Because of this, respondents were dismissed by
FVR, reasoning out that they were mere project employees and the project (service
contract w/ Robinsons) has ended. Respondents filed a case for illegal dismissal
against FVR w/ NLRC, stating that they were regular employees and not mere
project employees. They also asked for payment of their unpaid wage differential,
13th month pay differential, service incentive leave pay, holiday pay and separation
pay.
The Labor Arbiter ruled in favor of FVR. He held that the respondents were not
regular employees. They were project employees whose employment was
dependent on the petitioner's service contract with Robinsons. Since this contract
was not renewed, the respondents' employment contracts must also be terminated.
However, the Labor Arbiter granted the money claims for wage differential, 13 th
month pay and holiday pay, awarding respondents with an amount of P103,501.01.
The respondents appealed this decision to NLRC.
NLRC reversed LAs ruling, stating that the respondents were regular employees
because they have been employed by FVR for more than a year (some as early as
1998) thus the dismissal was illegal for they may only be dismissed for just or
authorized causes. The NLRC also awarded the respondents their separation pay of
1 month for every year of service as well as their full backwages from February 1,
2009 the date of their illegal dismissal, until the finality of the decision.
The CA affirmed the decision of NLRC reasoning out that the respondents were hired
since 1998 to 2007 as janitors, service crews and sanitation aids. Their jobs were
considered necessary to the business of FVR, and respondents services were
needed for more than a year. CA also found that the fixed term employment
contracts signed by the respondents were only executed when FVR felt that their
service contract will no longer be extended, and such contracts were only signed by

employees

after

they

were

threatened

with

witholding

of

wages.

issue won the respondents are regular employees, resulting to an illegal dismissal?
Held FVR lost
The respondents are regular employees and not project employees.
Under Art 280 (now 294) of the Labor Code, there are 2 kinds of regular employees:
(1) those who were engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer; and
(2) those casual employees who became regular after one year of service,
whether continuous or broken, but only with respect to the activity for which they
have
been
hired.
Meanwhile, a project employee is one whose employment was fixed for a specific
project or undertaking, whose completion or termination had been determined at
the
time
of
engagement.
The SC ruled that in determining regular employment, there must be reasonable
connection between the particular activity performed by the employee and the
employer's business or trade. This connection can be ascertained by considering
the nature of the work performed and its relation to the scheme of the particular
business, or the trade in its entirety. This was present in this case, since the
respondents' work as janitors, service crews and sanitation aides, are necessary or
desirable to the petitioner's business of providing janitorial and manpower services
to its clients as an independent contractor.
It is also important to note that respondents had already been working for the
petitioner as early as 1998. Even before the service contract with Robinsons,
the respondents were already under the petitioner's employ. They had
been doing the same type of work and occupying the same positions from
the time they were hired and until they were dismissed in January 2009.
Lastly, under Department Order (DO) 18-02, the applicable labor issuance to the
petitioner's case, the contractor or subcontractor is considered as the employer of
the contractual employee for purposes of enforcing the provisions of the Labor Code
and other social legislation. DO 18-02 grants contractual employees all the rights
and privileges due a regular employee, including the following: (a) safe and
healthful working conditions; (b) labor standards such as service incentive
leave, rest days, overtime pay, holiday pay, 13th month pay and
separation pay; (c) social security and welfare benefits; (d) self-organization,
collective bargaining and peaceful concerted action; and (e) security of tenure.
although the respondents were assigned as contractual employees to the
petitioner's various clients, under the law, they remain to be the
petitioner's regular employees, who are entitled to all the rights and
benefits of regular employment.

As for the fixed term employment contract, these were ruled by the court as
voidable. Under Article 1390 of the Civil Code, contracts where the consent of a
party was vitiated by mistake, violence, intimidation, undue influence or fraud, are
voidable or annullable. The petitioner's threat of nonpayment of the respondents'
salaries clearly amounted to intimidation.
For an employee to be validly categorized as a project employee, it is necessary
that the specific project or undertaking had been identified and its period
and completion date determined and made known to the employee at the
time of his engagement. This provision ensures that the employee is completely
apprised of the terms of his hiring and the corresponding rights and obligations
arising from his undertaking. Notably, the petitioner's service contract with
Robinsons was from January 1 to December 31, 2008. The respondents were only
asked to sign their employment contracts for their deployment with Robinsons
halfway through 2008, when the petitioner's service contract was about to expire.
We find the timing of the execution of the respondents' respective employment
contracts to be indicative of the petitioner's calculated plan to evade the
respondents' right to security of tenure, to ensure their easy dismissal as soon as
the Robinsons' contract expired. If the petitioner really intended the
respondents to be project employees, then the contracts should have
been executed right from the time of hiring, or when the respondents
were first assigned to Robinsons, not when the petitioner's service
contract was winding up.
Finally, SC ruled that the respondents were illegally dismissed. Because of this, the
court ruled that respondents must be awarded w/ separation pay instead of
reinstatement, the respondents should be paid their respective separation pays
equivalent to one (1) month pay for every year of service. As stated earlier, Section
7 of DO 18-02 treats contractual employees as the independent contractor's regular
employees for purposes of enforcing the Labor Code and other social legislation
laws.
However, the FVR officers are not Solidary liable. To hold an officer personally
liable for the debts of the corporation, and thus pierce the veil of
corporate fiction, it is necessary to clearly and convincingly establish the
bad faith or wrongdoing of such officer, since bad faith is never presumed.
Because the respondents were not able to clearly show the definite participation of
Burgos and Rana (Officeres of FVR) in their illegal dismissal, we uphold the
general rule that corporate officers are not personally liable for the money
claims of the discharged employees, unless they acted with evident malice
and bad faith in terminating their employment.

48)
Fonterra Brand Phils vs. Largado et al., GR No. 205300, March
18, 2015
Facts: Fonterra Brands Phils., Inc.(Fonterra) contracted the services of Zytron
Marketing Promotions Corp. (Zytron) for the promotions of their milk and dairy
products. Zytron provided Fonterra with Trade Merchandising Representatives
(TMR), Leonardo Lagrado and Teotimo Estrellado. The engagement services began
on September 15,2003 & May 27,2002,respectively,and ended on June 6,2006.
Fonterra terminated its contract with Zytron effective June 5,2006 and entered an
agreement with A.C. Sicat Marketing Promotional Services (A.C. Sicat).With the
respondents desire to continue their work with Fonterra they applied with A.C. Sicat.
They were hired for a fixed term of 5 months, beginning June 7, 2006 up to
November 6, 2006. When respondents 5-month contracts with A.C. Sicat were
about to expire, they allegedly sought renewal, but were allegedly refused. This
prompted respondents to file complaints for illegal dismissal, regularization, nonpayment of service incentive leave and 13th month pay, and actual and moral
damages, against petitioner, Zytron, and A.C. Sicat.
The LA dismissed the complaint and ruled that the respondents were not illegally
dismissed. They followed the requirements for their claim on their monetary
benefits with Zytron. They were consecutively employed by Zytron and A.C. Sicat,
not Fonterra. The NLRC affirmed the LA decision.
However, the CA reversed the decision. It said that A.C. Sicat is a legitimate job
contractor while Zytron is not. So respondents were Fonterras employee and were
illegally dismissed since Fonterra itself failed to prove that their dismissal is lawful.
The CA, thus, ruled that Fonterra is liable to respondents and ordered the
reinstatement of respondents without loss of seniority rights, with full backwages,
and other benefits from the time of their illegal dismissal up to the time of their
actual reinstatement.
Issues: 1) Whether or not Zytron and A.C. Sicat are labor-only contractors, making
Fonterra the employer of herein respondents
2) Whether or not the respondents were illegally dismissed.
Ruling: 1.) No. They are not labor-only contractors. A.C. Sicat is a legitimate job
contractor. It is consistent with the rules on job contracting and is sufficiently
supported by the evidence on record.
A person is considered engaged in legitimate job contracting or subcontracting if
the following conditions concur:
1. The contractor or subcontractor carries on a distinct and independent business
and undertakes to perform the job, work or service on its own account and under its
own responsibility according to its own manner and method, and free from the

control and direction of the principal in all matters connected with the performance
of the work except as to the results thereof;
2. The contractor or subcontractor has substantial capital or investment; and
3. The agreement between the principal and contractor or subcontractor assures
the contractual employees entitlement to all labor and occupational safety and
health standards, free exercise of the right to self-organization, security of tenure,
and social and welfare benefits.
On the other hand, contracting is prohibited when the contractor or subcontractor
merely recruits, supplies or places workers to perform a job, work or service for a
principal and if any of the following elements are present, thus:
1. The contractor or subcontractor does not have substantial capital or investment
which relates to the job, work or service to be performed and the employees
recruited, supplied or placed by such contractor or subcontractor are performing
activities which are directly related to the main business of the principal; or
2. The contractor does not exercise the right to control over the performance of the
work of the contractual employee.
The CA correctly found that A.C. Sicat is engaged in legitimate job contracting. It
duly noted that A.C. Sicat was able to prove its status as a legitimate job contractor
for having presented the following evidence, to wit:
1.
2.
3.
4.
5.
6.
7.

Certificate of Business Registration;

Certificate of Registration with the Bureau of Internal Revenue;
Mayors Permit;
Certificate of Membership with the Social Security System;
Certificate of Registration with the Department of Labor and Employment;
Company Profile; and
Certifications issued by its clients.

Furthermore, A.C. Sicat has substantial capital, its Agreement with Fonterra clearly
sets forth that A.C. Sicat shall be liable for the wages and salaries of its employees
or workers, including benefits, premiums, and protection due them, as well as
remittance to the proper government entities of all withholding taxes, Social
Security Service, and Medicare premiums, in accordance with relevant laws.
The appellate court further correctly held that Fonterras issuance of Merchandising
Guidelines, stock monitoring and inventory forms does not establish that Fonterra
exercises control over A.C. Sicat. We agree with the CAs conclusion that these were
imposed only to ensure the effectiveness of the promotion services to be rendered
by the merchandisers as it would be risky, if not imprudent, for any company to
completely entrust the performance of the operations it has contracted out. These
sufficiently show that A.C. Sicat carries out its merchandising and promotions
business, independent of Fonterras business.

2. No. The respondents were not illegally dismissed. We find that respondents
voluntarily terminated their employment with Zytron, contrary to their allegation
that their employment with Zytron was illegally terminated. The respondents
refused to renew their contracts with Zytron, effectively resigning from the latter
and they themselves acquiesced to their transfer to A.C. Sicat.
Resignation is the voluntary act of employees who are compelled by personal
reasons to dissociate themselves from their employment, done with the intention of
relinquishing an office, accompanied by the act of abandonment. The respondents
voluntary refusal to renew their contracts was brought about by their desire to
continue their assignment in Fonterra which could not happen in view of the
conclusion of Zytrons contract with Fonterra. Hence, to be able to continue with
their assignment, they applied for work with A.C. Sicat with the hope that they will
be able to continue rendering services as TMRs at Fonterra since A.C. Sicat is
Fonterras new manpower supplier.
It is well to mention that for obvious reasons, resignation is inconsistent with illegal
dismissal. This being the case, Zytron cannot be said to have illegally dismissed
respondents, contrary to the findings of the CA.
As for A.C. Sicat, the termination of respondents employment with them was simply
brought about by the expiration of their employment contracts. The respondents
were fixed-term employees. Fixed-term employment contracts are not limited, as
they are under the present Labor Code, to those by nature seasonal or for specific
projects with predetermined dates of completion. The determining factor of such
contracts is not the duty of the employee but the day certain agreed upon by the
parties for the commencement and termination of the employment relationship.
In the case at bar, it is clear that respondents were employed by A.C. Sicat as
project employees. It is clearly stated in their contract that [A.C. Sicat is]
temporarily employing [respondents] as TMR[s] effective June 6[, 2006] under the
following terms and conditions:
The need for your service being only for a specific project, your temporary
employment will be for the duration only of said project of our client, namely to
promote FONTERRA BRANDS products x x x which is expected to be finished on or
before Nov. 06, 2006.
Respondents, by accepting the conditions of the contract with A.C. Sicat, were well
aware of and even acceded to the condition that their employment thereat will end
on said pre-determined date of termination.
They cannot now argue that they were illegally dismissed by the latter when it
refused to renew their contracts after its expiration. This is so since the non-renewal
of their contracts by A.C. Sicat is a management prerogative, and failure of
respondents to prove that such was done in bad faith militates against their
contention that they were illegally dismissed.

B. WORKER'S PREFERENCE
1) DBP vs. NLRC, 242 SCRA 59 [1995]
Facts: In September 1983, petitioner Development Bank of the Philippines, as
mortgagee of TPWII, foreclosed its plant facilities and equipment. Nevertheless,
TPWII continued its business operations interrupted only by brief shutdowns for the
purpose of servicing its plant facilities and equipment. In January 1986 petitioner
took possession of the foreclosed properties. From then on the company ceased its
operations. As a consequence private respondent Leonor A. Ang was on 15 April
1986 verbally terminated from the service.
After hearing on a complaint for separation pay, 13th month pay, vacation
and sick leave pay, salaries and allowances against TPWII, its General Manager, and
petitioner, the Labor Arbiter found TPWII primarily liable to private respondent but
only for her separation pay and vacation and sick leave pay because her claims for
unpaid wages and 13th month pay were later paid after the complaint was filed. The
General Manager was absolved of any liability. But with respect to petitioner, it was
held subsidiarily liable in the event the company failed to satisfy the judgment. The
Labor Arbiter rationalized that the right of an employee to be paid benefits due him
from the properties of his employer is superior to the right of the latter's mortgagee,
citing this Court's resolution in PNB v. Delta Motor Workers Union.
On 16 November 1992 public respondent National Labor Relations
Commission affirmed the ruling of the Labor Arbiter.Petitioner argues that the
decision of public respondent runs counter to the consistent rulings of this Court in a
long line of cases emphasizing that the applicant of Art. 110 of the Labor Code is
contingent upon the institution of bankruptcy or judicial liquidation proceedings
against the employer.
Issue:
Whether or not Art. 110 of the Labor Code, as amended, which refers to
worker preference in case of bankruptcy or liquidation of an employer's business, is
applicable to the present case notwithstanding the absence of any formal
declaration of bankruptcy or judicial liquidation of TPWII. In other words, is
declaration of bankruptcy or judicial liquidation required before the worker's
preference may be invoked under Art. 110 of the Labor Code?
Ruling:
Article 110 is NOT applicable in the absence of any formal declaration of bankruptcy
or judicial liquidation of TPWII.We hold that public respondent gravely abused its
discretion in affirming the decision of the Labor Arbiter. Art. 110 should not be
treated apart from other laws but applied in conjunction with the pertinent
provisions of the Civil Code and the Insolvency Law to the extent that piece-meal
distribution of the assets of the debtor is avoided. Art. 110, then prevailing,
provides:

ARTICLE 110.
Worker preference in case of bankruptcy. In the event of
bankruptcy or liquidation of an employer's business, his workers shall enjoy first
preference as regards wages due them for services rendered during the period prior
to the bankruptcy or liquidation, any provision to the contrary notwithstanding.
Unpaid wages shall be paid in full before other creditors may establish any claim to
a share in the assets of the employer.
Complementing Art. 110, Sec. 10, Rule VIII, Book III, of the Revised Rules and
Regulations Implementing the Labor Code provides:
SECTION 10.
Payment of wages in case of bankruptcy. Unpaid wages
earned by the employees before the declaration of bankruptcy or judicial liquidation
of the employer's business shall be given first preference and shall be paid in full
before other creditors may establish any claim to a share in the assets of the
employer.
We interpreted this provision in Development Bank of the Philippines v.
Santos to mean that . . . a declaration of bankruptcy or a judicial liquidation must
be present before the worker's preference may be enforced. Thus, Article 110 of the
Labor Code and its implementing rule cannot be invoked by the respondents in this
case absent a formal declaration of bankruptcy or a liquidation order . . .
The rationale is that to hold Art. 110 to be applicable also to extrajudicial
proceedings would be putting the worker in a better position than the State which
could only assert its own prior preference in case of a judicial proceeding. Art. 110,
which was amended by R.A. 6715 effective 21 March 1989, now reads:
ARTICLE 110.
Worker preference in case of bankruptcy. In the event of
bankruptcy or liquidation of an employer's business, his workers shall enjoy first
preference as regards their unpaid wages and other monetary claims, any provision
of law to the contrary notwithstanding. Such unpaid wages and monetary claims
shall be paid in full before the claims of the Government and other creditors may be
paid.
Obviously, the amendment expanded the concept of "worker
preference" to cover not only unpaid wages but also other monetary
claims to which even claims of the Government must be deemed
subordinate. The Rules and Regulations Implementing R.A. 6715, approved 24 May
1989, also amended the corresponding implementing rule, and now reads:
SECTION 10.
Payment of wages and other monetary claims in case of
bankruptcy. In case of bankruptcy or liquidation of the employer's business, the
unpaid wages and other monetary claims of the employees shall be given first
preference and shall be paid in full before the claims of government and other
creditors may be paid.
Although the terms "declaration" (of bankruptcy) or "judicial" (liquidation)
have been notably eliminated, still in Development Bank of the Philippines v. NLRC ,
this Court did not alter its original position that the right to preference given to
workers under Art. 110 cannot exist in any effective way prior to the time of its

presentation in distribution proceedings. In effect, we reiterated our previous

interpretation in Development Bank of the Philippines v. Santos where we said:
It (worker preference) will find application when, in proceedings such as insolvency,
such unpaid wages shall be paid in full before the 'claims of the Government and
other creditors' may be paid. But, for an orderly settlement of a debtor's assets, all
creditors must be convened, their claims ascertained and inventoried, and
thereafter the preferences determined in the course of judicial proceedings which
have for their object the subjection of the property of the debtor to the payment of
his debts or other lawful obligations. Thereby, an orderly determination of
preference of creditors' claims is assured (Philippine Savings Bank vs. Lantin, No. L33929, September 2, 1983, 124 SCRA 476); the adjudication made will be binding
on all parties-in-interest since those proceedings are proceedings in rem; and the
legal scheme of classification, concurrence and preference of credits in the Civil
Code, the Insolvency Law, and the Labor Code is preserved in harmony.
In ruling, as we did, in Development Bank of the Philippines v. Santos, we
took into account the following pronouncements: In the event of insolvency, a
principal objective should be to effect an equitable distribution of the insolvent's
property among his creditors. To accomplish this there must first be some
proceeding where notice to all of the insolvent's creditors may be given and where
the claims of preferred creditors may be bindingly adjudicated.
The rationale therefore has been expressed in the recent case of DBP v. Secretary of
Labor (G.R. No. 79351, 28 November 1989), which we quote:
A preference of credit bestows upon the preferred creditor an advantage of
having his credit satisfied first ahead of other claims which may be established
against the debtor. Logically, it becomes material only when the properties and
assets of the debtors are insufficient to pay his debts in full; for if the debtor is
amply able to pay his various creditors in full, how can the necessity exist to
determine which of his creditors shall be paid first or whether they shall be paid out
of the proceeds of the sale (of) the debtor's specific property. Indubitably, the
preferential right of credit attains significance only after the properties of the debtor
have been inventoried and liquidated, and the claims held by his various creditors
have been established.
In the present case, there is as yet no declaration of bankruptcy nor judicial
liquidation of TPWII. Hence, it would be premature to enforce the worker's
preference. The additional ratiocination of public respondent that "under Article 110
of the Labor Code complainant enjoys a preference of credit over the properties of
TPWII being held in possession by DBP," is a dismal misconception of the nature of
preference of credit.
The DBP anchors its claims on a mortgage credit. A mortgage directly and
immediately subjects the property upon which it is imposed, whoever the possessor
may be, to the fulfillment of the obligation for whose security it was constituted
(Article 2176, Civil Code). It creates a real right which is enforceable against the
whole world. It is a lien on an identified immovable property, which a preference is
not. A recorded mortgage credit is a special preferred credit under Article 2242 (5)

of the Civil Code on classification of credits. The preference given by Article 110,
when not falling within Article 2241 (6) and Article 2242 (3) of the Civil Code and
not attached to any specific property, is an ordinary preferred credit although its
impact is to move it from second priority to first priority in order of preference
established by Article 2244 of the Civil Code.
The present controversy could have been easily settled by public respondent
had it referred to ample jurisprudence which already provides the solution. Stare
decisis et non quietamovere. Once a case is decided by this Court as the final
arbiter of any justiciable controversy one way, then another case involving exactly
the same point at issue should be decided in the same manner. Public respondent
had no choice on the matter. It could not have ruled any other way. This Court
having spoken in a string of cases against public respondent, its duty is simply to
obey judicial precedents. Any further disregard, if not defiance, of our rulings will
be considered a ground to hold public respondent in contempt.

2) Batongbuhay Gold Mines vs. De la Serna, 312 SCRA 45

Facts: On February 5, 1987, respondents Ty, Mendelebar, Reyes and 1,247 others
filed a complaint against BatongBuhay Gold Mines, Inc. for:
(1) Non-payment of their basic pay and allowances for the period of July 1983 to July
1984, inclusive, under Wage Order No. 2;
(2) Non-payment of their basic pay and allowances for the period June 1984 to
October 1986, inclusive under Wage Order No. 5;
(3) Non-payment of their salaries for the period March 1986 to the present;
(4) Non-payment of their 13th month pay for 1985, 1986 and 1987;
(5) Non-payment of their vacation and sick leave, and the compensatory leaves of
mine site employees; and
(6) Non-payment of the salaries of employees who were placed on forced leaves
since November, 1985 to the present, if this is not feasible, the affected employees
be awarded corresponding separation pay.
On February 27, 1987, the complainants filed a Motion for the issuance of an
inspection authority. After said inspection, the Labor Standards and Welfare Officers
submitted their report with the recommendations that an Order of Compliance be
issued directing BatongBuhay Gold Mines Inc. to pay complainants' Elsie Rosalina
Ty, et al. P4,818,746.40 by way of unpaid salaries of workers from March 16, 1987
to present, unpaid and ECOLA differentials under Wage Order Nos. 2 and 5 unpaid
13th months pay for 1985 and 1986, and unpaid (sic) vacation/sick/compensatory
leave benefits.

RD adopted recommendation of LSWOs. Complainant filed an ex-parte motion for

issuance of a writ of execution and appointment of special sheriff. The Regional
Director issued an Order directing BBGMI to put up a cash or surety bond otherwise
a writ of execution will be issued. Respondent, however, failed to do so and RD
appointed a special sheriff thereafter to collect amount from respondent. The
Special Sheriff proceeded to execute the order and seized properties by respondent
and sold them at public auction.
On December 1987, BBGMI finally posted a supersedeas bond which prompted this
Office to issue an Order restraining the complainants and Sheriff Ramos from
enforcing the writ of execution. Herein petitioner appealed the Order dated July 31,
1987 of Regional Director Luna C. Piezas to respondent Undersecretary Dionisio de
la Serna, contending that the Regional Director had no jurisdiction over the case.
But the respondent upheld the jurisdiction of the Regional Director and annulled all
the auction sales conducted by Special Sheriff John Ramos.
Issues:

Whether the Regional Director has jurisdiction over the complaint filed by the
employees of BBGMI
SC Ruling:
(1) YES. The Regional Director has jurisdiction over the BBGMI employees who are
the complainants in Case Number NCR-LSED-CI-2047-87. The subject labor
standards case of the petition arose from the visitorial and enforcement powers by
the Regional Director of Department of Labor and Employment (DOLE). Labor
standards cases are governed by Article 128(b) of the Labor Code. As can be
gleaned from the records on hand, subject labor standards case was filed on
February 5, 1987 at which time Article 128 (b) read as follows:
Art. 128 (b) Visitorial and enforcement powers.
(b) The Minister of Labor or his duly authorized representative shall have the power
to order and administer, after due notice and hearing, compliance with the labor
standards provisions of this Code based on the findings of labor regulation officers
or industrial safety engineers made in the course of inspection, and to issue writs of
execution to the appropriate authority for the enforcement of their order, except in
cases where the employer contests the findings of the labor regulations officers and
raises issues which cannot be resolved without considering evidentiary matters that
are not verifiable in the ordinary course of inspection.
Respondent Undersecretary Dionisio C. DelaSerna, upheld the jurisdiction of
Regional Director Luna C. Piezas by relying on Sec 2 of E.O. 111, which states:
The provisions of article 217 of this code to the contrary notwithstanding and in
cases where the relationship of employer-employee still exists, the Minister of Labor
and Employment or his duly authorized representative shall have the power to
order and administer, after due notice and hearing, compliance with the labor
standards provision of this Code based on the findings of the findings of labor
regulation officers or industrial safety engineers made in the course of inspection,
and to issue writs of execution to the appropriate authority for the enforcement of
their order, except in cases where the employer contests the findings of the labor
regulations officers and raises issues which cannot be resolved without considering
evidentiary matters that are not verifiable in the ordinary course of inspection.
The Court would have ruled differently had the petitioner shown that subject labor
standards case is within the purview of the exception clause in Article 128 (b) of the
Labor Code. Said provision requires the concurrence of the following elements in
order to divest the Regional Director or his representatives of jurisdiction, to wit: (a)
that the petitioner (employer) contests the findings of the labor regulations officer
and raises issues thereon; (b) that in order to resolve such issues, there is a need to
examine evidentiary matters; and (c) that such matters are not verifiable in the
normal course of inspection.
Nowhere in the records does it appear that the petitioner alleged any of the
aforestated grounds. The only instance when there was a semblance of raising the
aforestated grounds, was when they filed an Appeal Memorandum wherein

petitioner comes up with the defense that the Regional Director was without
jurisdiction, as employer-employee relationship was absent, since petitioner had
ceased doing business since 1985.

Records indicate that the Labor Standards and Welfare Officers, pursuant to
Complaint Inspection Authority No. CI-2-047-87, were not allowed to look into
records, vouchers and other related documents. The officers of the petitioner
alleged that the company is presently under receivership of the Development Bank
of the Philippines. In lieu of this, the Regional Director had ordered that a summary
investigation be conducted. Despite proper notices, the petitioner refused to appear
before the Regional Director. To give it another chance, an order to file its position
paper was issued to substantiate its defenses. Notwithstanding all these
opportunities to be heard, petitioner chose not to avail of such.
As held in the case of M. Ramirez Industries vs. Sec. of Labor and
Employment, . . .Under Art. 128(a) of the Labor Code, the Secretary of Labor of his
duly authorized representatives, such as the Regional Directors, has visitorial
powers which authorize him to inspect the records and premises of an employer at
any time of the day or night whenever work is being undertaken therein, to
question any employee and investigate any fact, condition or matter, and to
determine violations of labor laws, wage orders or rules and regulations. If the
employer refuses to attend the inspection or conference or to submit any record,
such as payrolls and daily time records, he will be deemed to have waived his right
to present evidence.
Petitioner's refusal to allow the Labor Standards and Welfare Officers to conduct
inspection in the premises of their head office in Makati and the failure to file their
position paper is equivalent to a waiver of its right to contest the claims of the
employees. This Court had occasion to hold there is no violation of due process
where the Regional Director merely required the submission of position papers and
resolved the case summarily thereafter. Furthermore, the issuance of the
compliance order was well within the jurisdiction of the Regional Director, as Section
14 of the Rules on the Disposition of Labor Standards Cases provides:
Sec. 14.Failure to Appear. Where the employer or the complainant fails or refuses to
appear during the investigation, despite proper notice, for two (2) consecutive
hearings without justifiable reasons, the hearing officer may recommend to the
Regional Director the issuance of a compliance order based on the evidence at hand
or an order of dismissal of the complaint as the case may be.
It bears stressing that this petition involves a labor standards case and it is in
keeping with the law that "the worker need not litigate to get what legally belongs
to him, for the whole enforcement machinery of the Department of Labor exists to
insure its expeditious delivery to him free of charge." Thus, their claim of closure for
business, among other things, are factual issues which cannot be brought here for
the first time. As petitioner refused to participate in the proceedings below where it
could have ventilated the appropriate defenses, to do so in this petition is
unavailing. The reason for this is that factual issues are not proper subjects of a

special civil action for certiorari to the Supreme Court. It is therefore abundantly
clear that at the time of the filing of the claims of petitioner's employees, the
Regional Director was already exercising visitorial and enforcement powers.
The present law, RA 7730, can be considered a curative statute to reinforce the
conclusion that the Regional Director has jurisdiction over the present labor
standards case. Republic Act 7730, the law governing the visitorial and enforcement
powers of the Labor Secretary and his representatives reads:
Art. 128 (b)Notwithstanding the provisions of Articles 129 and 217 of this Code to
the contrary, and in cases where the relationship of employer-employee still exists,
the Secretary of Labor and Employment or his duly authorized representatives shall
have the power to issue compliance orders to give effect to the labor standards
provisions of this Code and other labor legislation based on the findings of labor
employment and enforcement officers or industrial safety engineers made in the
course of inspection. The Secretary or his duly authorized representative shall issue
writs of execution to the appropriate authority for the enforcement of their orders,
except in cases where the employer contests the findings of the labor employment
and enforcement officer and raises issues supported by documentary proofs which
were not considered in the course of inspection.

3) Barayoga vs. Asset Privatization Trust, G.R. No. 160073, October 24, 2005
Facts: Bisudeco-Philsucor Corfarm Workers Union is composed of workers of
Bicolandia Sugar Development Corporation (BISUDECO), a sugar plantation mill
located in Himaao, Pili, Camarines Sur. Asset Privatization Trust (APT), a public trust
was created under Proclamation No. 50, as amended, mandated to take title to and
possession of, conserve, provisionally manage and dispose of non-performing assets
of the Philippine government identified for privatization or disposition. Pursuant to
Section 23 of Proclamation No. 50, former President Corazon Aquino issued
Administrative Order No. 14identifying certain assets of government institutions
that were to be transferred to the National Government. Among the assets
transferred was the financial claim of the Philippine National Bank against
BISUDECO in the form of a secured loan. Consequently, by virtue of a Trust
Agreement executed between the National Government and APT on February 27,
1987, APT was constituted as trustee over BISUDECOs account with the PNB.
Sometime later, BISUDECO contracted the services of Philippine Sugar Corporation
(Philsucor) to take over the management of the sugar plantation and milling
operations until August 31, 1992.Meanwhile, because of the continued failure of
BISUDECO to pay its outstanding loan with PNB, its mortgaged properties were
foreclosed and subsequently sold in a public auction to APT, as the sole bidder. On
April 2, 1991, APT was issued a Sheriffs Certificate of Sale.
The union filed a complaint for unfair labor practice, illegal dismissal, illegal
deduction and underpayment of wages and other labor standard benefits plus
damages. In the meantime, APTs Board of Trustees issued a resolution accepting
the offer of Bicol-Agro-Industrial Cooperative (BAPCI) to buy the sugar plantation
and mill. Again, on September 23, 1992, the board passed another resolution
authorizing the payment of separation benefits to BISUDECOs employees in the
event of the companys privatization.
Then, on October 30, 1992, BAPCI purchased the foreclosed assets of BISUDECO
from APT and took over its sugar milling operations under the trade name
Peafrancia Sugar Mill (Pensumil). The union alleged that when Philsucor initially took
over the operations of the company, it retained BISUDECOs existing
personnel under the same terms and conditions of employment. Nonetheless, at the
start of the season sometime in May1991, Philsucor started recalling workers back
to work, to the exception of the union members. Management told them thatthey
will be re-hired only if they resign from the union. Just the same, thereafter, the
company started to employ the services of outsiders under the pakyaw system.
Issue: whether APT is liable to pay petitioners monetary claims, including back
wages from May 1, 1991, to October 30, 1992 (the date of the sale of BISUDECO
assets to BAPCI).
Held: No. Pursuant to Administrative Order No. 14, Series of 1987, PNBs assets,
loans and receivables from its borrowers were transferred to APT as trustee of the
national government. Among the liabilities transferred to APT was PNBs financial

claim against BISUDECO, not the latters assets and chattel. BISUDECO remained
the owner of the mortgaged properties in August 1988, when the Philippine Sugar
Corporation (Philsucor) undertook the operation and management of the
sugar plantation until August 31, 1992, under a so-called Contract of Lease between
the two corporations. At the time, APT was merely a secured creditor of BISUDECO.

Philippine Airlines vs Zamora G.R. 166996

February 6, 2007

FACTS: Respondent Zamora had been in the employ of petitioner PAL since 9
February 1981 when the former was hired as a Cargo Representative at petitioner
PALs Import Operations Division. Respondent Zamora was then dismissed from
service for having been found by petitioner PALs management to be liable for
insubordination, neglect of customer, disrespect for authority and absence without
official leave.
On 12 March 1996, respondent Zamora filed a complaint against petitioners PAL and
Francisco X. Yngente IV before the NLRC for illegal dismissal, unfair labor practice,
non-payment of wages, damages and attorneys fees
On 1 February 2005, the Court of Appeals promulgated an Amended Decision
modifying its 13 August 2004 Decision but at the same time resolving petitioner
PAL's Motion for Reconsideration in this wise: WHEREFORE, this Court's August 13,
2004 decision is hereby AMENDED, the dispositive portion to read as follows:
WHEREFORE, in view of the foregoing, the petition is GRANTED. The NLRC resolution
dated April 27, 2001 is MODIFIED. Considering that petitioner is a detention prisoner
making reinstatement impossible, PAL is hereby ordered to pay petitioner Zamora
his separation pay, in lieu of reinstatement, to be computed at one month salary for
every year of service from February 9, 1981 and back wages to be computed from
December 19, 1995, both up to October 1, 2000, the date of his incarceration.
Considering that PAL is still under receivership, the monetary claims of petitioner
Zamora must be presented to the PAL Rehabilitation Receiver, subject to the rules
on preference of credits. The Court of Appeals took into account respondent
Zamora's incarceration when it recalled its order of reinstatement. Anent its earlier
pronouncement against the suspension of the proceedings of the case owing to the
present rehabilitation of petitioner PAL, the appellate court only had this to say:
However, since PAL is still under receivership, the provisions of PD 902-A, should
apply. The enforcement of the monetary claims of petitioner should be brought
before the PAL Rehabilitation Receiver for proper disposition.
ISSUE:
WON respondent Zamoras monetary claim should be presented to the PAL
rehabilitation receiver, subject to the rules on preference of credits
RULING:

No. The relevant law dealing with the suspension of actions for claims against
corporations is Presidential Decree No. 902-A, 52 as amended. The term "claim," as
contemplated in Sec. 6 (c) of Presidential Decree No. 902-A, refers "to debts or
demands of a pecuniary nature. It means 'the assertion of a right to have money
paid.
It is plain from the foregoing provisions of law that "upon the appointment [by the
SEC] of a management committee or a rehabilitation receiver" all actions for claims
against the corporation pending before any court, tribunal or board shall ipso jure
be suspended.
The law is clear: upon the creation of a management committee or the appointment
of a rehabilitation receiver, all claims for actions "shall be suspended accordingly."
No exception in favor of labor claims is mentioned in the law. Since the law makes
no distinction or exemptions, neither should this Court.
Otherwise stated, no other action may be taken in, including the rendition of
judgment during the state of suspension what are automatically stayed or
suspended are the proceedings of an action or suit and not just the payment of
claims during the execution stage after the case had become final and executory.
The suspension of action for claims against a corporation under rehabilitation
receiver or management committee embraces all phases of the suit, be it before the
trial court or any tribunal or before this Court. Furthermore, the actions that are
suspended cover all claims against a distressed corporation whether for damages
founded
on
a breach of contract of carriage,
labor
cases,
collection suits or any other claims of a pecuniary nature. As to the appellate court's
amended directive that "the monetary claims of petitioner Zamora must be
presented to the PAL Rehabilitation Receiver, subject to the rules on preference of
credits," the same is erroneous for there has been no declaration of bankruptcy or
judicial liquidation. Thus, the rules on preference of credits do not apply.

4) Phil. Airlines vs. Zamora, G.R. No. 166996, Feb. 6, 2007

FACTS: Respondent Zamora had been in the employ of petitioner PAL since 9
February 1981 when the former was hired as a Cargo Representative at petitioner
PALs Import Operations Division. Respondent Zamora was then dismissed from
service for having been found by petitioner PALs management to be liable for
insubordination, neglect of customer, disrespect for authority and absence without
official leave.
On 12 March 1996, respondent Zamora filed a complaint against petitioners PAL and
Francisco X. Yngente IV before the NLRC for illegal dismissal, unfair labor practice,
non-payment of wages, damages and attorneys fees
On 1 February 2005, the Court of Appeals promulgated an Amended Decision
modifying its 13 August 2004 Decision but at the same time resolving petitioner
PAL's Motion for Reconsideration in this wise: WHEREFORE, this Court's August 13,
2004 decision is hereby AMENDED, the dispositive portion to read as follows:
WHEREFORE, in view of the foregoing, the petition is GRANTED. The NLRC resolution
dated April 27, 2001 is MODIFIED. Considering that petitioner is a detention prisoner
making reinstatement impossible, PAL is hereby ordered to pay petitioner Zamora
his separation pay, in lieu of reinstatement, to be computed at one month salary for
every year of service from February 9, 1981 and back wages to be computed from
December 19, 1995, both up to October 1, 2000, the date of his incarceration.
Considering that PAL is still under receivership, the monetary claims of petitioner
Zamora must be presented to the PAL Rehabilitation Receiver, subject to the rules
on preference of credits. The Court of Appeals took into account respondent
Zamora's incarceration when it recalled its order of reinstatement. Anent its earlier
pronouncement against the suspension of the proceedings of the case owing to the
present rehabilitation of petitioner PAL, the appellate court only had this to say:
However, since PAL is still under receivership, the provisions of PD 902-A, should
apply. The enforcement of the monetary claims of petitioner should be brought
before the PAL Rehabilitation Receiver for proper disposition.
ISSUE:
WON respondent Zamoras monetary claim should be presented to the PAL
rehabilitation receiver, subject to the rules on preference of credits
RULING:
No. The relevant law dealing with the suspension of actions for claims against
corporations is Presidential Decree No. 902-A, 52 as amended. The term "claim," as
contemplated in Sec. 6 (c) of Presidential Decree No. 902-A, refers "to debts or
demands of a pecuniary nature. It means 'the assertion of a right to have money
paid.
It is plain from the foregoing provisions of law that "upon the appointment [by the
SEC] of a management committee or a rehabilitation receiver" all actions for claims

against the corporation pending before any court, tribunal or board shall ipso jure
be suspended.
The law is clear: upon the creation of a management committee or the appointment
of a rehabilitation receiver, all claims for actions "shall be suspended accordingly."
No exception in favor of labor claims is mentioned in the law. Since the law makes
no distinction or exemptions, neither should this Court.
Otherwise stated, no other action may be taken in, including the rendition of
judgment during the state of suspension what are automatically stayed or
suspended are the proceedings of an action or suit and not just the payment of
claims during the execution stage after the case had become final and executory.
The suspension of action for claims against a corporation under rehabilitation
receiver or management committee embraces all phases of the suit, be it before the
trial court or any tribunal or before this Court. Furthermore, the actions that are
suspended cover all claims against a distressed corporation whether for damages
founded
on
a breach of contract of carriage,
labor
cases,
collection suits or any other claims of a pecuniary nature. As to the appellate court's
amended directive that "the monetary claims of petitioner Zamora must be
presented to the PAL Rehabilitation Receiver, subject to the rules on preference of
credits," the same is erroneous for there has been no declaration of bankruptcy or
judicial liquidation. Thus, the rules on preference of credits do not apply.

5) Phil. Airlines vs. Phil. Airlines Employees Association, 525 SCRA 29 [2007],
citing Rubberworld vs. NLRC, 305 SCRA 721 [1999]
Facts:
This case arose from a labor Complaint, filed by herein PALEA against herein PAL
and one Mary Anne del Rosario, Director of Personnel, PAL, on 1 March 1989,
charging them with unfair labor practice for the non-payment of 13 th month pay of
employees who had not been regularized as of the 30 th of April 1988, as allegedly
stipulated in the Collective Bargaining Agreement (CBA) entered into by herein
parties. the facts are:
On 6 February 1987, herein parties, PAL and PALEA, the collective bargaining agent
of the rank and file employees of PAL, entered into a CBA that was to cover the
period of 1986 1989. Part of said agreement required PAL to pay its rank and file
employees the following bonuses:
Section 4 13th Month Pay (Mid-year Bonus)
A 13th month pay, equivalent to one month's current basic pay, consistent with the
existing practice shall be paid in advance in May.
Section 5 Christmas Bonus
The equivalent of one month's basic pay as of November 30, shall be paid in
December as a Christmas bonus. Payment may be staggered in two (2) stages. It is
distinctly understood that nothing herein contained shall be construed to mean that
the Company may not at its sole discretion give an additional amount or increase
the Christmas bonus.
Prior to the payment of the 13th month pay (mid year bonus), PAL released an
implementing guideline on 22 April 1988. It stated that:
1) Eligibility
a) Ground employees in the general payroll who are regular as of April 30, 1988;
b) Other ground employees in the general payroll, not falling within category a)
above shall receive their 13th Month Pay on or before December 24, 1988;
2) Amount
a) For category a) above, one month basic salary as of April 30, 1988;
b) Employees covered under 1 b) above shall be paid not less than 1/12 of their
basic salary for every month of service within the calendar year.
3) Payment Date: May 9, 1988 for category 1 a) above.
PALEA assailed the implementation of the foregoing guideline. In response to the
above, PAL informed PALEA that rank and file employees who were regularized after
30 April 1988 were not entitled to the 13 th month pay as they were already given

the Christmas bonus in December of 1988, per the Implementing Rules of

Presidential Decree No. 851.
PALEA, disagreeing with PAL, filed a Complaint for unfair labor practice before the
NLRC.
PAL answered that those rank and file employees who were not regularized by 30
April of a particular year are, in principle, not denied their 13 month pay,
considering they receive said mandatory bonus in the form of the Christmas Bonus.
The Labor Arbiter rendered his decision dismissing the complaint for lack of merit.
The Labor Arbiter ruled that PAL was not guilty of unfair labor practice in
withholding the grant of the 13th Month Pay or Mid-Year Bonus, as set out in
Section 4 of the CBA, to the concerned employees. The giving of the particular
bonus was said to be merely an additional practice made in the past, "such being
the case, it violated no agreement or existing practice or committed unfair labor
practice, as charged."
On appeal to the NLRC, the assailed decision of the Labor Arbiter was reversed.
Undaunted, PAL went to this Court via a Petition for Review on Certiorari, however,
the petition was referred to the Court of Appeals for proper resolution.
The Court of Appeals promulgated its Decision dismissing the petition filed by PAL. It
affirmed the 28 January 1998 NLRC Resolution.
Hence, this Petition for Review on Certiorari.
Issue:
Can a court or quasi-judicial agency amend or alter a Collective Bargaining
Agreement by expanding its coverage to non-regular employees who are not
covered by the bargaining unit?"
Ruling:
The Securities and Exchange Commission (SEC) had mandated the rehabilitation of
PAL. Thus, PAL is still undergoing rehabilitation.
The pertinent law concerning the suspension of actions for claims against
corporations due to its rehabilitation is Presidential Decree No. 902-A, as amended.
The aforementioned law provides that SEC assumes jurisdiction in cases where the
corporation is undergoing rehabilitation with pending money claims against the
corporation.
The underlying principle behind the suspension of claims pending rehabilitation
proceedings was explained in the case of BF Homes, Incorporated v. Court of
Appeals:
the real justification is to enable the management committee or rehabilitation
receiver to effectively exercise its/his powers free from any judicial or extra-judicial
interference that might unduly hinder or prevent the "rescue" of the debtor

company. To allow such other action to continue would only add to the burden of
the management committee or rehabilitation receiver, whose time, effort and
resources would be wasted in defending claims against the corporation instead of
being directed toward its restructuring and rehabilitation.
The Supreme Court citing Rubberworld vs. NLRC said:
we held that worker's claims before the NLRC and labor arbiters are included
among the actions suspended upon the placing under receivership of the employercorporations. Although strictly speaking, the ruling in Rubberworld dealt with actions
for claims pending before the NLRC and labor arbiters, we find that the rationale for
the automatic suspension therein set out would apply to the instant case where the
employee's claim was elevated on certiorari before this Court
In another PAL case, specifically, Philippine Airlines, Inc. v. Court of Appeal, the SC
held that:
that this Court is "not prepared to depart from the well-established doctrines"
essentially maintaining that all actions for claims against a corporation pending
before any court, tribunal or board shall ipso jure be suspended in whatever stage
such actions may be found upon the appointment by the SEC of a management
committee or a rehabilitation receiver.
In view of the ongoing rehabilitation of petitioner Philippine Airlines, Inc., herein
proceedings are heretoforeSUSPENDED

6) Rubberworld vs. NLRC, 305 SCRA 721 [1999]

Facts:
Rubberworld is a domestic corporation, which used to be in the business of
manufacturing footwear, bags and garments. It filed with the Securities and
Exchange Commission on November 24, 1994 a petition for suspension of payments
praying that it be declared in a state of suspension of payments and that the SEC
accordingly issue an order restraining its creditors from enforcing their claims
against petitioner corporation. It further prayed for the creation of a management
committee as well as for the approval of the proposed rehabilitation plan and
memorandum of agreement between petitioner corporation and its creditors. This is
pursuant to PD902-A, as amended "upon the appointment of a management
committee, rehabilitation receiver, board or body pursuant to this Decree, all
actions for claims against corporations, partnerships, or associations under
management or receivership pending before any court, tribunal, board or body shall
be suspended accordingly." The SEC granted their petition for suspension of
payments.
Consequently, private respondents who are employees of the corporation filed their
complains for illegal dismissal, unfair labor practice, damages, and payment of
separation pay, retirement benefits, 13th month pay and service incentive pay.
The petitioner corporation moved to suspend the proceedings because of the SEC
Order granting their petition for suspension of payments. But the Labor Arbiter
refused to suspend the proceedings involving money claims of the petitioners
employees.. The NLRC affirmed the LAs decision. Hence, this petition.
Issue:
Whether or not the NLRC acted without or in excess of jurisdiction in affirming the
order of the Labor Arbiter denying the petitioners motion to suspend proceedings
despite the SEC order?
Ruling:
No.
It is plain from the language of PD 902-A that all actions for claims against the
corporation pending before any court, tribunal or board shall ipso jure be
suspended. The reason behind this is that it would unduly hinder or prevent the
rescue of the debtor company.
Art. 110 of the Labor Code says that in the event of bankruptcy or liquidation of an
employers business, his workers shall enjoy first preference as regards their wages
and other monetary claims. They are to be paid in full before claims of the
government and other creditors are paid.

The private respondents contend that automatic stay under PD 902-A is not
applicable because it would violate Art 110 of the Labor Code. The Court disagrees
with this matter.
The preferential right of workers and employees under Article 110 of the Labor Code
may be invoked only upon the institution of insolvency or judicial liquidation
proceedings. Indeed, it is well-settled that "a declaration of bankruptcy or a judicial
liquidation must be present before preferences over various money claims may be
enforced." But debtors resort to preference of credit giving preferred creditors the
right to have their claims paid ahead of those of other claimants only when their
assets are insufficient to pay their debts fully. The purpose of rehabilitation
proceedings is precisely to enable the company to gain a new lease on life and
thereby allow creditors to be paid their claims from its earnings. In insolvency
proceedings, on the other hand, the company stops operating, and the claims of
creditors are satisfied from the assets of the insolvent corporation. The present case
involves the rehabilitation, not the liquidation, of petitioner corporation.
Hence, the preference of credit granted to workers or employees under Article 110
of the Labor Code is not applicable.

7) Garcia vs. Phil Air Lines, G.R. No. 164856, January 20, 2009
Facts: The case stemmed from the administrative charge filed by PAL against its
employees-herein petitioners3 after they were allegedly caught in the act of sniffing
shabu when a team of company security personnel and law enforcers raided the PAL
Technical Centers Toolroom Section on July 24, 1995.
After due notice, PAL dismissed petitioners on October 9, 1995 for transgressing the
PAL Code of Discipline, prompting them to file a complaint for illegal dismissal and
damages resolved by the Labor Arbiter in their favor, thus ordering PAL to, inter
alia, immediately comply with the reinstatement aspect of the decision.
Prior to the promulgation of the Labor Arbiters decision, the Securities and
Exchange Commission (SEC) placed PAL (hereafter referred to as respondent), which
was suffering from severe financial losses, under an Interim Rehabilitation Receiver,
who was subsequently replaced by a Permanent Rehabilitation Receiver on June 7,
1999.
The Labor Arbiter issued a Writ of Execution (Writ) respecting therein statement
aspect of his January 11, 1999 Decision, and on October 25, 2000, he issued a
Notice of Garnishment (Notice). Respondent thereupon moved to quash the Writ and
to lift the Notice while petitioners moved to release the garnished amount.
Issue:
1

Whether petitioners may collect their wages during the period between the
Labor Arbiters order of reinstatement pending appeal and the NLRC decision
overturning that of the Labor Arbiter, now that respondent has exited from
rehabilitation proceedings.

WON peculiar predicament of a corporate rehabilitation rendered

impossible for respondent to exercise its option under the circumstances.

it

Ruling:
1 The decision of the Labor Arbiter reinstating a dismissed or separated
employee, insofar as the reinstatement aspect is concerned, shall
immediately be executory, pending appeal. The employee shall either be
admitted back to work under the same terms and conditions prevailing prior
to his dismissal or separation or, at the option of the employer, merely
reinstated in the payroll. The posting of a bond by the employer shall not stay
the execution for reinstatement provided herein.
The view as maintained in a number of cases is that:
x x x [E]ven if the order of reinstatement of the Labor Arbiter is reversed
on appeal, it is obligatory on the part of the employer to reinstate and pay
the wages of the dismissed employee during the period of appeal until
reversal by the higher court. On the other hand, if the employee has been

reinstated during the appeal period and such reinstatement order is reversed with
finality, the employee is not required to reimburse whatever salary he received for
he is entitled to such, more so if he actually rendered services during the period.
In other words, a dismissed employee whose case was favorably decided by the
Labor Arbiter is entitled to receive wages pending appeal upon reinstatement,
which is immediately executory. Unless there is a restraining order, it is ministerial
upon the Labor Arbiter to implement the order of reinstatement and it is mandatory
on the employer to comply therewith.
The Court reaffirms the prevailing principle that even if the order of reinstatement of
the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer
to reinstate and pay the wages of the dismissed employee during the period of
appeal until reversal by the higher court. It settles the view that the Labor Arbiter's
order of reinstatement is immediately executory and the employer has to either readmit them to work under the same terms and conditions prevailing prior to their
dismissal, or to reinstate them in the payroll, and that failing to exercise the options
in the alternative, employer must pay the employees salaries.
2

The spirit of the rule on reinstatement pending appeal animates the

proceedings once the Labor Arbiter issues the decision containing an order of
reinstatement. The immediacy of its execution needs no further
elaboration.Reinstatement pending appeal necessitates its immediate
execution during the pendency of the appeal, if the law is to serve its noble
purpose. At the same time, any attempt on the part of the employer to evade
or delay its execution, as observed in Panuncillo and as what actually
transpired in Kimberly, Composite, Air Philippines, and Roquero, should not be
countenanced.

After the labor arbiters decision is reversed by a higher tribunal, the

employee may be barred from collecting the accrued wages, if it is shown
that the delay in enforcing the reinstatement pending appeal was without
fault on the part of the employer.
The test is two-fold: (1) there must be actual delay or the fact that the order of
reinstatement pending appeal was not executed prior to its reversal; and (2) the
delay must not be due to the employers unjustified act or omission. If the delay is
due to the employers unjustified refusal, the employer may still be required to pay
the salaries notwithstanding the reversal of the Labor Arbiters decision.
The new NLRC Rules of Procedure, which took effect on January 7, 2006, now require
the employer to submit areport of compliance within 10 calendar days from
receipt of the Labor Arbiters decision, disobedience to which clearly denotes a
refusal to reinstate. The employee need not file a motion for the issuance of the writ
of execution since the Labor Arbiter shall thereafter motu proprio issue the
writ. With the new rules in place, there is hardly any difficulty in
determining the employers intransigence in immediately complying with
the order.

In the case at bar, petitioners exerted efforts to execute the Labor Arbiters order of
reinstatement until they were able to secure a writ of execution, albeit issued on
October 5, 2000 after the reversal by the NLRC of the Labor Arbiters decision.
Technically, there was still actual delay which brings to the question of whether the
delay was due to respondents unjustified act or omission.
It is apparent that there was inaction on the part of respondent to reinstate them,
but whether such omission was justified depends on the onset of the exigency of
corporate rehabilitation.
It is settled that upon appointment by the SEC of a rehabilitation receiver, all
actions for claims before any court, tribunal or board against the corporation
shall ipso jure be suspended. As stated early on, during the pendency of petitioners
complaint before the Labor Arbiter, the SEC placed respondent under an Interim
Rehabilitation Receiver. After the Labor Arbiter rendered his decision, the SEC
replaced the Interim Rehabilitation Receiver with a Permanent Rehabilitation
Receiver.
Case law recognizes that unless there is a restraining order, the implementation of
the order of reinstatement is ministerial and mandatory. This injunction or
suspension of claims by legislative fiat partakes of the nature of a restraining order
that constitutes a legal justification for respondents non-compliance with the
reinstatement order. Respondents failure to exercise the alternative options of
actual reinstatement and payroll reinstatement was thus justified. Such being the
case, respondents obligation to pay the salaries pending appeal, as the normal
effect of the non-exercise of the options, did not attach.
While reinstatement pending appeal aims to avert the continuing threat or danger
to the survival or even the life of the dismissed employee and his family, it does not
contemplate the period when the employer-corporation itself is similarly in
a judicially monitored state of being resuscitated in order to survive.
The parallelism between a judicial order of corporation rehabilitation as a
justification for the non-exercise of its options, on the one hand, and a claim of
actual and imminent substantial losses as ground for retrenchment, on the other
hand, stops at the red line on the financial statements.
More importantly, there are legal effects arising from a judicial order placing a
corporation under rehabilitation. Respondent was, during the period material to the
case, effectively deprived of the alternative choices under Article 223 of the Labor
Code, not only by virtue of the statutory injunction but also in view of the interim
relinquishment of management control to give way to the full exercise of the powers
of the rehabilitation receiver. Had there been no need to rehabilitate, respondent
may have opted for actual physical reinstatement pending appeal to optimize the
utilization of resources. Then again, though the management may think this wise,
the rehabilitation receiver may decide otherwise, not to mention the subsistence of
the injunction on claims.

In sum, the obligation to pay the employees salaries upon the employers failure to
exercise the alternative options under Article 223 of the Labor Code is not a hard
and fast rule, considering the inherent constraints of corporate rehabilitation

C. ATTORNEY'S FEES & APPEARANCE OF LAWYERS

1) Bank of the Philippines Island vs. NLRC, 171 SCRA 556
Facts:
On March 22, 1983, the NLRC resolved the bargaining deadlock between BPI
and its employees by fixing the wage increases and other economic benefits and
ordering them to be embodied in a new collective bargaining agreement to be
concluded by BPIEU-Metro Manila and ALU with BPI. It did not decide the intra-union
dispute, however, holding that this was under the original jurisdiction of the medarbiter and the exclusive appellate jurisdiction of the Bureau of Labor Relations.
Following the promulgation by the NLRC of its decision of March 23, 1983, in
Certified Cases Nos. 0279 and 0281, private respondent Ignacio Lacsina filed a
motion for the entry of attorney's lien for legal services to be rendered by him as
counsel of BPIEU in the negotiation of the new collective bargaining agreement with
BPI.The basis of this motion was a resolution dated August 26, 1982, signed by
members of the BPI Employees Union, providing for the terms and conditions,
including attorneys fees and his authority to check-off with the company.
Accordingly, BPI deducted the amount of P200.00 from each of the
employees who had signed the authorization. Upon learning about this, the
petitioners (ALU and BPIEU-ALU) challenged the said order, on the ground that it
was not authorized under the Labor Code.
On April 15, 1983, the NLRC issued a resolution setting aside the order and
requiring BPI to safe-keep the amounts sought to be deducted "until the rights
thereto of the interested parties shall have been determined in appropriate
proceedings.
Subsequently, the NLRC issued an en banc resolution dated
September 27, 1983, ordering the release to Lacsina of the amounts deducted
"except with respect to any portion thereof as to which no individual signed
authorization has been given by the members concerned or where such
authorization has been withdrawn.
The petitioners now impugn this order as contrary to the provisions and spirit
of the Labor Code. While conceding that Lacsina is entitled to payment for his legal
services, they argue that this must be made not by the individual workers directly,
as this is prohibited by law, but by the union itself from its own funds. In support of
this contention, they invoke Article 222(b) of the Labor Code, providing as follows:
Art. 222.
Appearances and Fees.
(b)
No attorney's fees, negotiation fees or similar charges of any kind arising
from any collective bargaining negotiations or conclusions of the collective
agreement shall be imposed on any individual member of the contracting union:
Provided, however, that attorneys fees may be charged against union funds in an
amount to be agreed upon by the parties. Any contract, agreement or arrangement
of any sort to the contrary shall be null and void.
They also cite the case of Pacific Banking Corporation v. Clave, where the
lawyer's fee was taken not from the total economic benefits received by the workers
but from the funds of their labor union.
Issue: Is the mentioned Resolution signed by the BPI employees granting attorneys
fees to Lacsina to be deducted from the employees wages valid?
Ruling:

Yes. The Court reads the afore-cited provision as prohibiting the payment of
attorney's fees only when it is effected through forced contributions from the
workers from their own funds as distinguished from the union funds.
The purpose of the provision is to prevent imposition on the workers of the
duty to individually contribute their respective shares in the fee to be paid the
attorney for his services on behalf of the union in its negotiations with the
management. The obligation to pay the attorney's fees belongs to the union and
cannot be shunted to the workers as their direct responsibility. Neither the lawyer
nor the union itself may require the individual workers to assume the obligation to
pay the attorney's fees from their own pockets. So categorical is this intent that the
law also makes it clear that any agreement to the contrary shall be null and void ab
initio.
We see no such imposition in the case at bar. A reading of the above-cited
resolution will clearly show that the signatories thereof have not been in any
manner compelled to undertake the obligation they have there assumed. On the
contrary, it is plain that they were voluntarily authorizing the check-off of the
attorney's fees from their payment of benefits and the turnover to Lacsina of the
amounts deducted, conformably to their agreement with him. There is no
compulsion here. And significantly, the authorized deductions affected only the
workers who adopted and signed the resolution and who were the only ones from
whose benefits the deductions were made by BPI. No similar deductions were taken
from the other workers who did not sign the resolution and so were not bound by it.
That only those who signed the resolution could be subjected to the
authorized deductions was recognized and made clear by the order itself of the
NLRC. It was there categorically declared that the check-off could not be made
where "no individual signed authorization has been given by the members
concerned or where such authorization has been withdrawn."
The Pacific Banking Corporation case is not applicable to the present case
because there was there no similar agreement as that entered into between Lacsina
and the signatories of the resolution in question. Absent such an agreement, there
was no question that the basic proscription in Article 222 would have to operate. It
is noteworthy, though, that the Court there impliedly recognized arrangements such
as the one at bar with the following significant observation:
Moreover, the case is covered squarely by the mandatory and explicit
prescription of Art. 222 which is another guarantee intended to protect the
employee against unwarranted practices that would diminish his compensation
without his knowledge and consent.
A similar recognition was made in Galvadores v. Trajano, where the payment
of the attorney's fees from the wages of the employees was not allowed because:
"No check-offs from any amount due to employees may be effected without
individual written authorities duly signed by the employees specifically stating the
amount, purpose and beneficiary of the deduction. The required individual
authorizations in this case are wanting."
Finally, we hold that the agreement in question is in every respect a valid
contract as it satisfies all the elements thereof and does not contravene law,
morals, good customs, public order, or public policy. On the contrary, it enables the
workers to avail themselves of the services of the lawyer of their choice and
confidence under terms mutually acceptable to the parties and, hopefully, also for
their mutual benefit.

2) Traders Royal Bank Employees Union vs. NLRC, 269 SCRA 733 [1997]
Facts:
Petitioner Traders Royal Bank Employees Union and private respondent Atty.
Emmanuel Noel A. Cruz, head of the E.N.A. Cruz and Associates law firm, entered
into a retainer agreement on February 26, 1987 whereby the former obligated itself
to pay the latter a monthly retainer fee of P3,000.00 in consideration of the law
firm's undertaking to render the services enumerated in their contract. During the
existence of that agreement, petitioner union referred to private respondent the
claims of its members for holiday, mid-year and year-end bonuses against their
employer, Traders Royal Bank (TRB). These employees obtained favorable decision
from their complaint which went through the SC.
The Supreme Court, in its decision promulgated on August 30, 1990, modified
the decision of the NLRC by deleting the award of mid-year and year-end bonus
differentials while affirming the award of holiday pay differential. The bank
voluntarily complied with such final judgment and determined the holiday pay
differential to be in the amount of P175,794.32. Petitioner never contested the
amount thus found by TRB. The latter duly paid its concerned employees their
respective entitlement in said sum through their payroll. After private respondent
received the above decision of the Supreme Court on September 18, 1990, he
notified the petitioner union, the TRB management and the NLRC of his right to
exercise and enforce his attorney's lien over the award of holiday pay differential
through a letter dated October 8, 1990.
Thereafter, on July 2, 1991, private respondent filed a motion before Labor
Arbiter Lorenzo for the determination of his attorney's fees, praying that ten percent
(10%) of the total award for holiday pay differential computed by TRB at
P175,794.32, or the amount of P17,579.43, be declared as his attorney's fees, and
that petitioner union be ordered to pay and remit said amount to him. The LA and
the NLRC affirmed Atty. Cruz motion.
Petitioner union filed a comment and opposition to said motion on July 15,
1991. Petitioner maintains that the NLRC committed grave abuse of discretion
amounting to lack of jurisdiction in upholding the award of attorney's fees in the
amount of P17,574.43, or ten percent (10%) of the P175,794.32 granted as holiday
pay differential to its members, in violation of the retainer agreement; and that the
challenged resolution of the NLRC is null and void, for the reasons hereunder stated.
Although petitioner union concedes that the NLRC has jurisdiction to decide
claims for attorney's fees, it contends that the award for attorney' s fees should
have been incorporated in the main case and not after the Supreme Court had
already reviewed and passed upon the decision of the NLRC. Since the claim for
attorney's fees by private respondent was neither taken up nor approved by the
Supreme Court, no attorney's fees should have been allowed by the NLRC. Thus,
petitioner posits that the NLRC acted without jurisdiction in making the award of
attorney's fees, as said act constituted a modification of a final and executory
judgment of the Supreme Court which did not award attorney's fees. It then cited
decisions of the Court declaring that a decision which has become final and
executory can no longer be altered or modified even by the court which rendered
the same.

Issue: Whether or not Atty. Cruz is entitled to 10 % of the judgment award as his
attorneys fees even if it was not taken up in the main decision of the SC.
Ruling:
Yes, not in the concept contemplatedin Article 111 of the Labor Code. The
Labor Arbiter erroneously set the amount of attorney's fees on the basis of Art. 111
of the Labor Code; a hearing should have been conducted for the proper
determination of attorney's fees.
There are two commonly accepted concepts of attorney's fees, the so-called
ordinary and extraordinary. In its ordinary concept, an attorney's fee is the
reasonable compensation paid to a lawyer by his client for the legal services he has
rendered to the latter. The basis of this compensation is the fact of his employment
by and his agreement with the client.
In its extraordinary concept, an attorney's fee is an indemnity for damages
ordered by the court to be paid by the losing party in a litigation. The basis of this is
any of the cases provided by law where such award can be made, such as those
authorized in Article 2208, Civil Code, and is payable not to the lawyer but to the
client, unless they have agreed that the award shall pertain to the lawyer as
additional compensation or as part thereof.
It is the first type of attorney's fees which private respondent demanded
before the labor arbiter. Also, the present controversy stems from petitioner's
apparent misperception that the NLRC has jurisdiction over claims for attorney's
fees only before its judgment is reviewed and ruled upon by the Supreme Court, and
that thereafter the former may no longer entertain claims for attorney's fees. It will
be noted that no claim for attorney's fees was filed by private respondent before the
NLRC when it acted on the money claims of petitioner, nor before the Supreme
Court when it reviewed the decision of the NLRC. It was only after the High Tribunal
modified the judgment of the NLRC awarding the differentials that private
respondent filed his claim before the NLRC for a percentage thereof as attorney's
fees.
It would obviously have been impossible, if not improper, for the NLRC in the
first instance and for the Supreme Court thereafter to make an award for attorney's
fees when no claim therefor was pending before them. Courts generally rule only on
issues and claims presented to them for adjudication. Accordingly, when the labor
arbiter ordered the payment of attorney's fees, he did not in any way modify the
judgment of the Supreme Court.
A CLAIM FOR ATTORNEY'S FEES MAY BE ASSERTED EITHER IN THE VERY
ACTION IN WHICH THE SERVICES OF A LAWYER HAD BEEN RENDERED OR IN A
SEPARATE ACTION - It is well settled that a claim for attorney's fees may be asserted
either in the very action in which the services of a lawyer had been rendered or in a
separate action. Attorney's fees cannot be determined until after the main litigation
has been decided and the subject of the recovery is at the disposition of the court.
The issue over attorney's fees only arises when something has been recovered from
which the fee is to be paid. While a claim for attorney's fees may be filed before the
judgment is rendered, the determination as to the propriety of the fees or as to the
amount thereof will have to be held in abeyance until the main case from which the
lawyer's claim for attorney's fees may arise has become final. Otherwise, the
determination to be made by the courts will be premature. Of course, a petition for
attorney's fees may be filed before the judgment in favor of the client is satisfied or
the proceeds thereof delivered to the client. It is apparent from the foregoing

discussion that a lawyer has two options as to when to file his claim for professional
fees. Hence, private respondent was well within his rights when he made his claim
and waited for the finality of the judgment for holiday pay differential, instead of
filing it ahead of the award's complete resolution. To declare that a lawyer may file a
claim for fees in the same action only before the judgment is reviewed by a higher
tribunal would deprive him of his aforestated options and render ineffective the
foregoing pronouncements of this Court.
The provisions of the contract entered into between petitioner and
respondents are clear and need no further interpretation; all that is required to be
done in the instant controversy is its application. The P3,000.00 which petitioner
pays monthly to private respondent does not cover the services the latter actually
rendered before the labor arbiter and the NLRC in behalf of the former. As stipulated
in Part C of the agreement, the monthly fee is intended merely as a consideration
for the law firm's commitment to render the services enumerated in Part A (General
Services) and Part B (Special Legal Services) of the retainer agreement.
The difference between a compensation for a commitment to render legal
services and a remuneration for legal services actually rendered can better be
appreciated with a discussion of the two kinds of retainer fees a client may pay his
lawyer. These are a general retainer, or a retaining fee, and a special retainer.
RETAINER FEES, GENERAL RETAINER AND A SPECIAL RETAINER A general
retainer, or retaining fee, is the fee paid to a lawyer to secure his future services as
general counsel for any ordinary legal problem that may arise in the routinary
business of the client and referred to him for legal action. The future services of the
lawyer are secured and committed to the retaining client. For this, the client pays
the lawyer a fixed retainer fee which could be monthly or otherwise, depending
upon their arrangement. The fees are paid whether or not there are cases referred
to the lawyer. The reason for the remuneration is that the lawyer is deprived of the
opportunity of rendering services for a fee to the opposing party or other parties. In
fine, it is a compensation for lost opportunities. A special retainer is a fee for a
specific case handled or special service rendered by the lawyer for a client. A client
may have several cases demanding special or individual attention. If for every case
there is a separate and independent contract for attorney's fees, each fee is
considered a special retainer.
THE P3,000.00 MONTHLY FEE PROVIDED IN THE RETAINER AGREEMENT
BETWEEN THE UNION AND THE LAW FIRM REFERS TO A GENERAL RETAINER OR A
RETAINING FEE. The P3,000.00 which petitioner pays monthly to private
respondent does not cover the services the latter actually rendered before the labor
arbiter and the NLRC in behalf of the former. As stipulated in Part C of the
agreement, the monthly fee is intended merely as a consideration for the law firm's
commitment to render the services enumerated in Part A (General Services) and
Part B (Special Legal Services) of the retainer agreement. Evidently, the P3,000.00
monthly fee provided in the retainer agreement between the union and the law firm
refers to a general retainer, or a retaining fee, as said monthly fee covers only the
law firm's pledge, or as expressly stated therein, its "commitment to render the
legal services enumerated." The fee is not payment for private respondent's
execution or performance of the services listed in the contract, subject to some
particular qualifications or permutations stated there. We have already shown that
the P3,000.00 is independent and different from the compensation which private
respondent should receive in payment for his services. While petitioner and private
respondent were able to fix a fee for the latter's promise to extend services, they

were not able to come into agreement as to the law firm's actual performance of
services in favor of the union. Hence, the retainer agreement cannot control the
measure of remuneration for private respondent's services.
PRIVATE RESPONDENT'S ENTITLEMENT TO AN ADDITIONAL REMUNERATION
FOR SPECIAL SERVICES RENDERED IN THE INTEREST OF PETITIONER IS BASED ON
QUASI-CONTRACT. The fact that petitioner and private respondent failed to reach
a meeting of the minds with regard to the payment of professional fees for special
services will not absolve the former of civil liability for the corresponding
remuneration therefor in favor of the latter. Obligations do not emanate only from
contracts. One of the sources of extra-contractual obligations found in our Civil Code
is the quasi-contract premised on the Roman maxim that nemo cum alterius
detrimento locupletari protest. As embodied in our law, certain lawful, voluntary and
unilateral acts give rise to the juridical relation of quasi-contract to the end that no
one shall be unjustly enriched or benefited at the expense of another. A quasicontract between the parties in the case at bar arose from private respondent's
lawful, voluntary and unilateral prosecution of petitioner's cause without awaiting
the latter's consent and approval. Petitioner cannot deny that it did benefit from
private respondent's efforts as the law firm was able to obtain an award of holiday
pay differential in favor of the union. It cannot even hide behind the cloak of the
monthly retainer of P3,000.00 paid to private respondent because, as demonstrated
earlier, private respondent's actual rendition of legal services is not compensable
merely by said amount.
THE LABOR ARBITER ERRONEOUSLY SET THE AMOUNT OF ATTORNEY'S FEES
ON THE BASIS OF ART. 111 OF THE LABOR CODE; A HEARING SHOULD HAVE BEEN
CONDUCTED FOR THE PROPER DETERMINATION OF ATTORNEY'S FEES. - Here, then,
is the flaw we find in the award for attorney's fees in favor of private respondent.
Instead of adopting the above guidelines, the labor arbiter forthwith but erroneously
set the amount of attorney's fees on the basis of Article 111 of the Labor Code. He
completely relied on the operation of Article 111 when he fixed the amount of
attorney's fees at P17,574.43. As already stated, Article 111 of the Labor Code
regulates the amount recoverable as attorney's fees in the nature of damages
sustained by and awarded to the prevailing party. It may not be used therefore, as
the lone standard in fixing the exact amount payable to the lawyer by his client for
the legal services he rendered. Also, while it limits the maximum allowable amount
of attorney's fees, it does not direct instantaneous and automatic award of
attorney's fees in such maximum limit. It, therefore, behooves the adjudicator in
questions and circumstances similar to those in the case at bar, involving a conflict
between lawyer and client, to observe the above guidelines in cases calling for the
operation of the principles of quasi-contract and quantum meruit, and to conduct a
hearing for the proper determination of attorney's fees. The criteria found in the
Code of Professional Responsibility are to be considered, and not disregarded, in
assessing the proper amount. Here, the records do not reveal that the parties were
duly heard by the labor arbiter on the matter and for the resolution of private
respondent's fees.
As already stated, Article 111 of the Labor Code regulates the amount
recoverable as attorney's fees in the nature of damages sustained by and awarded
to the prevailing party. It may not be used therefore, as the lone standard in fixing
the exact amount payable to the lawyer by his client for the legal services he
rendered. Also, while it limits the maximum allowable amount of attorney's fees, it

does not direct the instantaneous and automatic award of attorney's fees in such
maximum limit.
It, therefore, behooves the adjudicator in questions and circumstances similar
to those in the case at bar, involving a conflict between lawyer and client, to
observe the above guidelines in cases calling for the operation of the principles of
quasi-contract and quantum meruit, and to conduct a hearing for the proper
determination of attorney's fees. The criteria found in the Code of Professional
Responsibility are to be considered, and not disregarded, in assessing the proper
amount. Here, the records do not reveal that the parties were duly heard by the
labor arbiter on the matter and for the resolution of private respondent's fees.
It is axiomatic that the reasonableness of attorney's fees is a question of fact.
Ordinarily, therefore, we would have remanded this case for further reception of
evidence as to the extent and value of the services rendered by private respondent
to petitioner. However, so as not to needlessly prolong the resolution of a
comparatively simple controversy, we deem it just and equitable to fix in the
present recourse a reasonable amount of attorney's fees in favor of private
respondent. For that purpose, we have duly taken into account the accepted
guidelines therefor and so much of the pertinent data as are extant in the records of
this case which are assistive in that regard. On such premises and in the exercise of
our sound discretion, we hold that the amount of P10,000.00 is a reasonable and
fair compensation for the legal services rendered by private respondent to
petitioner before the labor arbiter and the NLRC

3) Brahm Industries vs. NLRC, 280 SCRA 824 [1997]

Facts:
On 8 February 1994 Labor Arbiter Fatima J. Franco ruled that complainants
Roberto M. Durian and Jone M. Comendador were illegally dismissed by BRAHM and
accordingly ordered the latter to: (a) reinstate complainants to their former
positions or equivalent positions without loss of seniority rights, but if reinstatement
was no longer possible, to pay them separation pay equivalent to one (1) month for
every year of service; (b) pay Roberto M. Durian the amount of Forty-Eight
Thousand Thirty-Eight Pesos and Twenty-Five Centavos (P48,038.25) representing
his back wages; and, Jone M. Comendador the amount of Sixty Thousand Four
Hundred Seventy-Four Pesos and Ninety-Two Centavos (P60,474.92) representing his
back wages, 13th month pay and service incentive leave pay; and, (c) pay
complainants the amount equivalent to 10% of the total award as attorney's fees.
Upon appeal by BRAHM, the NLRC affirmed the decision of the Labor Arbiter,
subject to the modification that the attorney's fees awarded be reduced to five
percent (5%) of the total monetary award.BRAHM now argues that the NLRC gravely
abused its discretion when it held that: (a) private respondents Roberto M. Durian
and Jone M. Comendador were regular employees and not merely contractual
employees hired on a per project basis; (b) they were illegally dismissed; and, (c)
they were entitled to attorney's fees despite the fact that the award lacks factual
and legal basis.
Issue:
Whether or not private respondents are entitled to attorneys fees.
Ruling:
Yes. With regard to the propriety of the award of attorney's fees in favor of
private respondents, petitioner contends that it was erroneous for the NLRC to
merely reduce the award of attorney's fees when it should have been completely
deleted. Petitioner claims that the award is baseless since the matter of attorney's
fees was touched only once in the dispositive portion of the Labor Arbiter's decision
and no discussion or reason was stated therefor.
This argument is unfounded. A perusal of the decision shows that the reason
for the award of attorney's fees is clearly and unequivocally set forth in the body of
the Labor Arbiter's decision, to witHaving been compelled to litigate, complainants
should be paid an amount equivalent to ten percent (10%) of the total award as and
for attorney's fees." It used as basis Art. 2208 of the Civil Code which allows
attorney's fees to be awarded by a court 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 from whom it is sought.
However, nothing precludes the appellate courts from reducing the award of
attorney's fees when it is found to be unconscionable or excessive under the
circumstances. Thus, we agree with the NLRC's ruling that the award of attorney's
fees is proper on account of complainants' being compelled to litigate their claims
against respondent. The amount is however reduced to five percent (5%) of the
adjudged relief, it appearing that the substantial portion of the award refers to
complainants' back wages and not to withheld salaries.

Finally, this Court has consistently held that findings of fact of administrative
agencies and quasi-judicial bodies which have acquired expertise because their
jurisdiction is confined to specific matters are generally accorded not only respect
but even finality and are binding upon this Court unless there is grave abuse of
discretion or where it is clearly shown that they were arrived at arbitrarily or in
disregard of the evidence on record. Petitioner failed to convince us that we should
depart from this time-honored rule

4) Heirs of Aniban vs. NLRC, 282 SCRA 377 [1997]

Facts:
Reynaldo Aniban was employed by the Philippine Transmarine Carriers, Inc.
(TRANSMARINE) acting in behalf of its foreign principal Norwegian Ship Management
A/S (NORWEGIAN) as radio operator on board the vessel "Kassel." Aniban died due
to myocardial infarction during the period of his employment. A claim was made for
additional death benefits under the Collective Bargaining Agreement between
Associated Marine Officers and Seamen's Union of the Philippines and NORWEGIAN.
The claim was rejected on the ground that myocardial infarction was not an
occupational disease.
However, on 11 January 1994 the POEA ruled that myocardial infarction was
an occupational disease in the case of R/O Aniban and granted the prayer of his
heirs for payment of death benefits under the POEA Standard Employment Contract
as well as under the Collective Bargaining Agreement plus attorney's fees of
US$6,700.00 equivalent to 10% of the total award.
On appeal, the NLRC reversed the POEA and denied the claim on the ground
that it was the Employees' Compensation Commission (ECC) which had original
jurisdiction to hear and determine the claim for death benefits. NLRC likewise
deleted he award of attorneys fees on the ground that there was no unlawful
withholding of wages.
A motion to reconsider the decision of the NLRC was denied; hence, this
petition by the heirs of Aniban. The Supreme Court ruled that the Employees
Compensation Commission may not be considered as having jurisdiction over
money claims, albeit death compensation benefits of overseas contract workers.
Article 180 of the Labor Code provides that the Commission exercises appellate
jurisdiction only over decisions rendered either by the GSIS or the SSS in the
exercise of their respective original and exclusive jurisdictions. On the issue of
whether the death of Aniban due to myocardial infarction is compensable, the Court
ruled that it is compensable. Although the physical exertion involved in carrying out
the functions of a radio operator may have been quite minimal, the pressure and
strain that went with the position should be considered. Furthermore, the Court
stressed that probability and not the ultimate degree of certainty is the test of proof
in compensation.
Issue: Whether or not attorneys fees can be awarded in a case not involving
unlawful withholding of wages.
Ruling:
Yes. ARTICLE 111 OF THE LABOR CODE DOES NOT LIMIT THE AWARD OF
ATTORNEY'S FEES TO CASES OF UNLAWFUL WITHHOLDING OF WAGES ONLY; WHAT
THE PROVISION EXPLICITLY PROHIBITS IS THE AWARD OF ATTORNEY'S FEES WHICH
EXCEEDED 10% OF THE AMOUNT OF WAGES RECOVERED. On the award of
attorney's fees which NLRC deleted on the ground that there was no unlawful
withholding of wages, suffice it to say that Art.111 of the Labor Code does not limit
the award of attorney's fees to cases of unlawful withholding of wages only. What it
explicitly prohibits is the award of attorney's fees which exceed 10% of the amount
of wages recovered. Thus, under the circumstances, attorney's fees are recoverable
for the services rendered by petitioner's counsel to compel Aniban's employer to

pay its monetary obligations under the CBA. However the amount of P50,000.00
claimed as attorney's fees in this case is the reasonable compensation based on the
records and not the maximum 10% of the total award as granted by POEA. The
reduction of unreasonable attorney's fees is within our regulatory powers

5) Sapio vs. Undaloc Construction et al., G.R. No. 155034, May 22, 2008
Facts:
The controversy started with a complaint filed by petitioner against Undaloc
Construction and/or Engineer Cirilo Undaloc for illegal dismissal, underpayment of
wages and nonpayment of statutory benefits. Respondent Undaloc Construction, a
single proprietorship owned by Cirilo Undaloc, is engaged in road construction
business in Cebu City.
Petitioner avers that he was paid a daily salary way below the minimum wage
provided for by law. 14 His claim of salary differential represents the difference
between the daily wage he actually received and the statutory minimum wageTo
counter petitioner's assertions, respondents submitted typewritten and signed
payroll sheets from 2 September to 8 December 1996, from 26 May to 15 June
1997, and from 12 January to 31 May 1998. 15 These payroll sheets clearly indicate
that petitioner did receive a daily salary of P141.00.
Banking on the fact that the December 1995 payroll sheet was written in
pencil, the Labor Arbiter concluded that the entries were susceptible to change or
erasure and that that susceptibility in turn rendered the other payroll sheets though
typewritten less credible.
Thereupon, the Labor Arbiter proceeded to grant petitioner's salary
differential to the tune of P24,902.88. Attorney's fee of P3,000.00 was also awarded.
Respondents appealed the award of salary differential to the National Labor
Relations Commission (NLRC). In a Decision dated 28 August 2000, the NLRC
sustained the findings of the Labor Arbiter.
The Court of Appeals did not subscribe to the common findings of the Labor
Arbiter and the NLRC. The appellate court pointed out that allegations of fraud in
the preparation of payroll sheets must be substantiated by evidence and not by
mere suspicions or conjectures. Thus, it deleted the award of salary differential and
attorney's fees.
Issue: Whether or not the award petitioner-employee Saipo is entitled to salary
differential and attorneys fees.
Ruling:
Yes. It is elementary in this jurisdiction that whoever alleges fraud or mistake
affecting a transaction must substantiate his allegation, since it is presumed that a
person takes ordinary care of his concerns and private transactions have been fair
and regular. Persons are presumed to have taken care of their business.
Absent any indication sufficient enough to support a conclusion, we cannot
uphold the findings of the Labor Arbiter and the NLRC. The conclusion of the Labor
Arbiter that entries in the December 1995 payroll sheet could have been altered is
utterly baseless.
While we adhere to the position of the appellate court that the "tendency" to
alter the entries in the payrolls was not substantiated, we cannot however subscribe
to the total deletion of the award of salary differential and attorney's fees, as it so
ruled.The Labor Arbiter granted a salary differential of P24,902.88.
The Labor Arbiter erred in his computation. He fixed the daily wage rate
actually received by petitioner at P105.00 without taking into consideration the
P141.00 rate indicated in the typewritten payroll sheets submitted by respondents.

Moreover, the Labor Arbiter misapplied the wage orders when he wrongly
categorized respondent as falling within the first category. Based on the stipulated
number of employees and audited financial statements, respondents should have
been covered by the second category.
To avoid further delay in the disposition of this case which is not in
consonance with the objective of speedy justice, we have to adjudge the rightful
computation of the salary differential based on the applicable wage orders. After all,
the supporting records are complete.
The total salary differential that petitioner is lawfully entitled to amounts to
P6,578.00. However, pursuant to Section 12 of Republic Act (R.A.) No. 6727, as
amended by R.A. No. 8188. Respondents are required to pay double the amount
owed to petitioner, bringing their total liability to P13,156.00.
The award of attorney's fees is warranted under the circumstances of this
case. Under Article 2208 of the New Civil Code, attorney's fees can be recovered in
actions for the recovery of wages of laborers and actions for indemnity under
employer's liability laws but shall not exceed 10% of the amount awarded. The fees
may be deducted from the total amount due the winning party

6) Atty. Ortiz vs. San Miguel Corp., G.R. No. 151983-84, July 31, 2008
Facts:
Petitioner represented the complainants in 2 separate cases for illegal
dismissal with backwages and other benefits against respondent (1992 & 1993). In
both cases, the LA rule in favor of petitioners clients.
SMC elevated the matter to the NLRC then to the Court of Appeals. NLRC
rendered a decision modifying the award to 10 % attorney's fees of the total
monetary award or P198,296.95. While the private respondent's Petitions for
Certiorari were pending before the Court of Appeals, all but one of the remaining
complainants in both cases appeared on various dates before LAs and in the
presence of two witnesses, signed separate Deeds of Release, Waiver and Quitclaim
in favor of private respondent. Complainants agreed to settle their claims against
private respondent for amounts less than what the NLRC actually awarded. Private
respondent withheld 10% of the total amount agreed upon by the parties in the said
Deeds as attorney's fees and handed it over to petitioner.
CA rendered a Decision affirming the NLRC Decision only insofar as it
concerned complainant Alfredo Gadian, Jr. the only complainant who did not execute
a Deed of Release, Waiver and Quitclaim. With respect to the other complainants,
their complaints were dismissed on account of their duly executed Deeds of
Release, Waiver and Quitclaim.
Herein petitioner, for their part, likewise moved for the partial reconsideration
of the same Decision of the appellate court praying that the award of attorney's
fees of 10% should be based on the monetary awards adjudged by the NLRC.
Issues:
1) Basis of computing the 10% award of attorneys fees whether based:
on the decision of NLRC decision or
10% of the amounts actually paid to his clients, the complainants who
signed the Deeds of Release, Waiver and Quitclaim
2) validity of the Quitclaim
Ruling:
Article 111 of the Labor Code, as amended, specifically provides:
(a) In cases of unlawful withholding of wages the culpable party may be assessed
attorney's fees equivalent to ten percent of the amount of wages
recovered.
There are two commonly accepted concepts of attorney's fees, the socalledordinary and extraordinary. In its ordinary concept, an attorney's fee is the
reasonable compensation paid to a lawyer by his client for the legal services the
former has rendered to the latter. The basis of this compensation is the fact of the
attorney's employment by and his agreement with the client.
In its extraordinary concept, attorney's fees are deemed indemnity for
damages ordered by the court to be paid by the losing party in a litigation. It
ispayable not to the lawyer but to the client, unless they have agreed that the
award shall pertain to the lawyer as additional compensation or as part thereof.
Article 111 of the LC, as amended, contemplates the extraordinary concept of
attorney's fees.

Based on the foregoing, the attorney's fees awarded by the NLRC pertain to
the complainants, petitioner's clients, as indemnity for damages; and not to
petitioner as compensation for his legal services. Petitioner never proved that the
complainants willingly agreed that the award of attorney's fees would accrue to him
as an additional compensation or part thereof. The Deeds were executed between
complainants and private respondent, the petitioner was not even a party to the
said documents; and (2) private complainants' request that private respondent
withhold 10% attorney's fees to be payable to petitioner was in relation to the
amount of gross settlement under the Deeds and not to the amounts awarded by
the NLRC.
What the complainants explicitly agreed to in their individual Deeds of
Release, Waiver, and Quitclaim was that the 10% attorney's fees of the petitioner
shall be deducted from the amount of the gross settlement.
Petitioner is not the real party in interest. To reiterate, the award of attorney's
fees pertain to the prevailing parties in the NLRC cases, namely, the complainants,
all but one of whom no longer pursued their complaints against private respondent
after executing Deeds of Release, Waiver and Quitclaim.
On the second issue, the Deeds of Release, Waiver and Quitclaim individually
executed by the complainants is valid. The LC does not require the conformity of
petitioner for its validity. The only requisites for the validity of any Deed of Release,
Waiver and Quitclaim are the following: (1) that there was no fraud or deceit on the
part of any of the parties; (2) that the consideration for the quitclaim is credible and
reasonable; and (3) that the contract is not contrary to law, public order, public
policy, morals or good customs or prejudicial to a third person with a right
recognized by law

7) Masmud vs. NLRC et al., G.R. No. 183385, Feb. 13, 2009
Facts:
Evangelina Masmuds husband, the late Alexander Masmud filed a complaint
against First Victory Shipping Services and Angelakos for non-payment of
permanent disability benefits, medical expenses, sickness allowance, moral and
exemplary damages, and attorneys fees. Alexander engaged the services of Atty.
Rolando Go, Alexander agreed to pay attorneys fees on a contingent basis, as
follows: 20% of total monetary claims as settled or paid and an additional 10% in
case of appeal. It was likewise agreed that any award of attorneys fees shall pertain
to respondents law firm. The Labor Arbiter granted the monetary claims of
Alexander. Alexanders claim for payment of medical expenses is dismissed for lack
of basis. Alexanders employer filed an appeal before the NLRC. During the
pendency of the proceedings before the NLRC, Alexander died. After explaining the
terms of the lawyers fees to Evangelina, Atty. Go caused her substitution as
complainant. The NLRC dismissed the appeal of Alexanders employer. On appeal
before the CA, the award of moral and exemplary damages was deleted.
Alexanders employers filed a petition for certiorariwhich was dismissed Atty. Go
moved for the execution of the NLRC decision.
The LA directed the NLRC Cashier to release the amount of P3,454,079.20 to
Evangelina. Out of the said amount, Evangelina paid Atty. Go P680,000.00.
Dissatisfied, Atty. Go filed a motion to enforce the attorneys lien alleging that
Evangelina reneged on their contingent fee agreement. Evangelina paid only the
amount of P680,000.00, equivalent to 20% of the award as attorneys fees, leaving
a balance of 10%, plus the award pertaining to the counsel as attorneys fees.
Evangelina filed a motion to release the amount. Evangelina argued that Atty. Gos
attorneys fees of 40% of the total monetary award was void based on Article 111 of
the Labor Code.
Issue: Lawyers Claim of 40% of the monetary award in a labor case as attorneys
fees is valid.
Ruling:
There are two concepts of attorney's fees. In the ordinary sense, attorney's
fees represent the reasonable compensation paid to a lawyer by his client for the
legal services rendered to the latter. In its extraordinary concept, attorney's fees
may be awarded by the court as indemnity for damages to be paid by the losing
party to the prevailing party, such that, in any of the cases provided by law where
such award can be made. Here, we apply the ordinary concept of attorneys fees,
that Atty. Go is entitled to receive for representing Evangelina, in substitution of her
husband. Article 111 of the Labor Code deals with the extraordinary concept of
attorneys fees, it regulates the amount recoverable as attorney's fees in the nature
of damages sustained by and awarded to the prevailing party. It may not be used as
the standard in fixing the amount payable to the lawyer by his client for the legal
services he rendered.

The retainer contract between Atty. Go and Evangelina provides for a contingent
fee. The contract shall control in the determination of the amount to be paid, unless
found by the court to be unconscionable or unreasonable. Attorney's fees are
unconscionable if they affront one's sense of justice, decency or reasonableness.
The decree of unconscionability or unreasonableness of a stipulated amount in a
contingent fee contract will not preclude recovery. It merely justifies the fixing by
the court of a reasonable compensation for the lawyer's services. Contingent fee
contracts are subject to the supervision and close scrutiny of the court in order that
clients may be protected from unjust charges. The amount of contingent fees
agreed upon by the parties is subject to the stipulation that counsel will be paid for
his legal services only if the suit or litigation prospers. The Court finds nothing illegal
in the contingent fee

8) Kaisahan at kapatiran ng mga Manggagawa at Kawani sa MWC-East Zone

Union vs. Manila Water Company, G.R. No. 174179, November 16, 2011
FACTS:
The Union is the duly-recognized bargaining agent of the rank-and-file employees of
the respondent Manila Water Company, Inc. while Borela is the Union President. In
1997, the Metropolitan Waterworks and Sewerage System (MWSS) entered into a
Concession Agreement with the Company to privatize the operations of the MWSS.
The Agreement provides that the Concessionaire shall grant its employees benefits
no less favorable than those granted to MWSS employees at the time of their
separation from MWSS. Among the benefits enjoyed by the employees of the
MWSS were the amelioration allowance (AA) and the cost-of-living allowance
(COLA). The payment of the AA and the COLA was discontinued pursuant to
Republic Act No. 6758, otherwise known as the Salary Standardization Law, which
integrated the allowances into the standardized salary. The Company agreed to
reinstate them upon renegotiation of the parties CBA but however failed to give
them. As a result, the Union and Borela filed a complaint against the Company for
payment of the AA, COLA, moral and exemplary damages, legal interest, and
attorneys fees before the National Labor Relations Commission (NLRC). In his
decision of August 20, 2003, Labor Arbiter Aliman D. Mangandog ( LA) ruled in favor
of the petitioners and ordered the payment of ten percent (10%) attorneys fees in
addition to their benefits and interests. The award of attorneys fees was upheld by
NLRC. However, this was reversed by the CA. CAs Decision: The additional grant of
10% attorneys fees violates Article 111 of the Labor Code considering that the MOA
between the parties already ensured the payment of 10% attorneys fees,
deductible from the AA and CBA receivables of the Unions members.
ISSUE:
1.Whether or not the workers are entitled to attorneys fees.
RULING:
Yes.
In the present case, the ten percent (10%) attorneys fees awarded by the NLRC on
the basis of Article 111 of the Labor Code accrue to the Unions members as
indemnity for damages and not to the Unions counsel as compensation for his legal
services, unless, they agreed that the award shall be given to their counsel as
additional or part of his compensation; in this case the Union bound itself to pay
10% attorneys fees to its counsel under the MOA and also gave up the attorneys
fees awarded to the Unions members in favor of their counsel. This is supported by
Borelas affidavit which stated that [t]he 10% attorneys fees paid by the
members/employees is separate and distinct from the obligation of the company to
pay the 10% awarded attorneys fees which we also gave to our counsel as part of
our contingent fee agreement.[43] The limit to this agreement is that the
indemnity for damages imposed by the NLRC on the losing party (i.e., the Company)
cannot exceed ten percent (10%).

Properly viewed from this perspective, the award cannot be taken to mean an
additional grant of attorneys fees, in violation of the ten percent (10%) limit under
Article 111 of the Labor Code since it rests on an entirely different legal obligation
than the one contracted under the MOA. Simply stated, the attorneys fees
contracted under the MOA do not refer to the amount of attorneys fees awarded by
the NLRC; the MOA provision on attorneys fees does not have any bearing at all to
the attorneys fees awarded by the NLRC under Article 111 of the Labor Code.
Based on these considerations, it is clear that the CA erred in ruling that the LAs
award of attorneys fees violated the maximum limit of ten percent (10%) fixed by
Article 111 of the Labor Code.
Under this interpretation, the Companys argument that the attorneys fees are
unconscionable as they represent 20% of the amount due or about P21.4 million is
more apparent than real. Since the attorneys fees awarded by the LA pertained to
the Unions members as indemnity for damages, it was totally within their right to
waive the amount and give it to their counsel as part of their contingent fee
agreement. Beyond the limit fixed by Article 111 of the Labor Code, such as
between the lawyer and the client, the attorneys fees may exceed ten percent
(10%) on the basis of quantum meruit, as in the present case

9) Malvar vs. Kraft Food Phils Inc. et al., G.R. No. 183952, Sept. 9, 2013
Facts:
The case initially concerned the execution of a final decision of the Court of Appeals
(CA) in a labor litigation, but has mutated into a dispute over attorney's fees
between the winning employee and her attorney after she entered into a
compromise agreement with her employer under circumstances that the attorney
has bewailed as designed to prevent the recovery of just professional fees.
Antecedents
On August 1, 1988, Kraft Foods (Phils.), Inc. (KFPI) hired Czarina Malvar (Malvar) as
its Corporate Planning Manager. From then on, she gradually rose from the ranks,
becoming in 1996 the Vice President for Finance in the Southeast Asia Region of
Kraft Foods International (KFI),KFPIs mother company. On November 29, 1999,
respondent Bienvenido S. Bautista, as Chairman of the Board of KFPI and
concurrently the Vice President and Area Director for Southeast Asia of KFI, sent
Malvar a memo directing her to explain why no administrative sanctions should be
imposed on her for possible breach of trust and confidence and for willful violation
of company rules and regulations. Following the submission of her written
explanation, an investigating body was formed. In due time, she was placed under
preventive suspension with pay. Ultimately, on March 16, 2000, she was served a
notice of termination.
Obviously aggrieved, Malvar filed a complaint for illegal suspension and illegal
dismissal against KFPI and Bautista in the National Labor Relations Commission
(NLRC). In a decision dated April 30, 2001, the Labor Arbiter found and declared her
suspension and dismissal illegal, and ordered her reinstatement, and the payment
of her full backwages, inclusive of allowances and other benefits, plus attorneys
fees.
On October 22, 2001, the NLRC affirmed the decision of the Labor Arbiter but
additionally ruled that Malvar was entitled to "any and all stock options and bonuses
she was entitled to or would have been entitled to had she not been illegally
dismissed from her employment," as well as to moral and exemplary damages.
KFPI and Bautista sought the reconsideration of the NLRCs decision, but the NLRC
denied their motion to that effect.
Undaunted, KFPI and Bautista assailed the adverse outcome before the CA on
certiorari, contending that the NLRC thereby committed grave abuse of discretion.
However, the petition for certiorari was dismissed by the CA on December 22, 2004,
but with the CA reversing the order of reinstatement and instead directing the
payment of separation pay to Malvar, and also reducing the amounts awarded as
moral and exemplary damages.
After the judgment in her favor became final and executory on March14, 2006,
Malvar moved for the issuance of a writ of execution. The Executive Labor Arbiter
then referred the case to the Research and Computation Unit (RCU) of the NLRC for

the computation of the monetary awards under the judgment. The RCUs
computation ultimately arrived at the total sum of P41,627,593.75.
On November 9, 2006, however, Labor Arbiter Jaime M. Reyno issued an order,
finding that the RCUs computation lacked legal basis for including the salary
increases that the decision promulgated did not include. Hence, Labor Arbiter Reyno
reduced Malvars total monetary award to P27,786,378.11.
Both parties appealed the computation to the NLRC, which, on April19, 2007,
rendered its decision setting aside Labor Arbiter Reynos November 9, 2006 order,
and adopting the computation by the RCU.
In its resolution dated May 31, 2007, the NLRC denied the respondents motion for
reconsideration.
Malvar filed a second motion for the issuance of a writ of execution to enforce the
decision of the NLRC rendered on April 19, 2007. After the writ of execution was
issued, a partial enforcement as effected by garnishing the respondents funds
deposited with Citibank worth 37,391,696.06.
On July 27, 2007, the respondents went to the CA on certiorari (with prayer for the
issuance of a temporary restraining order (TRO) or writ of preliminary injunction),
assailing the NLRCs setting aside of the computation by Labor Arbiter Reyno (CAG.R. SP No. 99865). The petition mainly argued that the NLRC had gravely abused
its discretion in ruling that: (a) the inclusion of the salary increases and other
monetary benefits in the award to Malvar was final and executory; and (b) the
finality of the ruling in CA-G.R. SP No. 69660 precluded the respondents from
challenging the inclusion of the salary increases and other monetary benefits. The
CA issued a TRO, enjoining the NLRC and Malvar from implementing the NLRCs
decision.
On April 17, 2008, the CA rendered its decision reversing the NLRC decision.
The matter of computation of monetary awards for private respondent is hereby
REMANDED to the Labor Arbiter and he is DIRECTED to recompute the monetary
award due to private respondent based on her salary at the time of her termination,
without including projected salary increases.
Malvar sought reconsideration, but the CA denied her motion on July30, 2008.
Aggrieved, Malvar appealed to the Court, assailing the CAs decision.
On December 9, 2010, while her appeal was pending in this Court, Malvar and the
respondents entered into a compromise agreement, the pertinent dispositive
portion of which is quoted as follows:
The Compromise Payment includes full and complete payment and settlement of
Ms. Malvars salaries and wages up to the last day of her employment, allowances,
13th and 14th month pay, cash conversion of her accrued vacation, sick and
emergency leaves, separation pay, retirement pay and such other benefits,
entitlements, claims for stock, stock options or other forms of equity compensation
whether vested or otherwise and claims of any and all kinds against KFPI and KFI

and Altria Group, Inc., their predecessors-in-interest, their stockholders, officers,

directors, agents or successors-in-interest, affiliates and subsidiaries, up to the last
day of the aforesaid cessation of her employment.
Thereafter, Malvar filed an undated Motion to Dismiss/Withdraw Case, praying that
the appeal be immediately dismissed/withdrawn in view of the compromise
agreement, and that the case be considered closed and terminated.
Before the Court could act on Malvars Motion to Dismiss/Withdraw Case, the Court
received on February 15, 2011 a so-called Motion for Intervention to Protect
Attorneys Rights from The Law Firm of Dasal, Llasos and Associates, through its Of
Counsel Retired Supreme Court Associate Justice Josue N. Bellosillo (Intervenor),
whereby the Intervenor sought, among others, that both Malvar and KFPI be held
and ordered to pay jointly and severally the Intervenors contingent fees.
Upon execution of the Compromise Agreement and pursuant thereto, Petitioner
immediately received (supposedly) from RespondentsP40,000,000.00. But despite
the settlement between the parties, Petitioner did not pay Intervenor its just
compensation as set forth in their engagement agreement; instead, she
immediately moved to Dismiss/Withdraw the Present Petition On 15.
Opposing the Motion for Intervention,28 Malvar stresses that there was no truth to
the Intervenors claim to defraud it of its professional fees; that the Intervenor
lacked the legal capacity to intervene because it had ceased to exist after Atty.
Marwil N. Llasos resigned from the Intervenor and Atty. Richard B. Dasal became
barred from private practice upon his appointment as head of the Legal Department
of the Small Business Guarantee and Finance Corporation, a government subsidiary;
and that Atty. Llasos and Atty. Dasal had personally handled her case.
Issues
(a) Whether or not Malvars motion to dismiss the petition on the ground of the
execution of the compromise agreement was proper; and (b) whether or not the
Motion for Intervention to protect attorneys rights can prosper..
Ruling:
Clients
right
by
compromise
to terminate counsel; limitations

to

settle
agreement,

litigation
and

A compromise agreement is a contract, whereby the parties undertake reciprocal

obligations to avoid litigation, or put an end to one already commenced. The client
may enter into a compromise agreement with the adverse party to terminate the
litigation before a judgment is rendered therein. If the compromise agreement is
found to be in order and not contrary to law, morals, good customs and public
policy, its judicial approval is in order. Compromise agreement, once approved by
final order of the court, has the force of res judicata between the parties and will not
be disturbed except for vices of consent or forgery.

A client has an undoubted right to settle her litigation without the intervention of
the attorney, for the former is generally conceded to have exclusive control over the
subject matter of the litigation and may at anytime, if acting in good faith, settle
and adjust the cause of action out of court before judgment, even without the
attorneys intervention. It is important for the client to show, however, that the
compromise agreement does not adversely affect third persons who are not parties
to the agreement.
By the same token, a client has the absolute right to terminate the attorney-client
relationship at any time with or without cause. But this right of the client is not
unlimited because good faith is required in terminating the relationship. The right is
also subject to the right of the attorney to be compensated.
A client may at any time dismiss his attorney or substitute another in his place, but
if the contract between client and attorney has been reduced to writing and the
dismissal of the attorney was without justifiable cause, he shall be entitled to
recover from the client the full compensation stipulated in the contract. However,
the attorney may, in the discretion of the court, intervene in the case to protect his
rights. For the payment of his compensation the attorney shall have a lien upon all
judgments for the payment of money, and executions issued in pursuance of such
judgment, rendered in the case wherein his services had been retained by the
client. (Bold emphasis supplied)
In fine, it is basic that an attorney is entitled to have and to receive a just and
reasonable compensation for services performed at the special instance and
request of his client. The attorney who has acted in good faith and honesty in
representing and serving the interests of the client should be reasonably
compensated for his service.
2.
Compromise
agreement
despite
favorable
Intervenors Motion for Intervention

is

to
action

be
on

approved
the

On considerations of equity and fairness, the Court disapproves of the tendencies of

clients compromising their cases behind the backs of their attorneys for the purpose
of unreasonably reducing or completely setting to naught the stipulated contingent
fees. Thus, the Court grants the Intervenors Motion for Intervention to Protect
Attorneys Rights as a measure of protecting the Intervenors right to its stipulated
professional fees that would be denied under the compromise agreement. The Court
does so in the interest of protecting the rights of the practicing Bar rendering
professional services on contingent fee basis.
Nonetheless, the claim for attorneys fees does not void or nullify the compromise
agreement between Malvar and the respondents. There being no obstacles to its
approval, the Court approves the compromise agreement. The Court adds, however,
that the Intervenor is not left without a remedy, for the payment of its adequate and
reasonable compensation could not be annulled by the settlement of the litigation
without its participation and conformity. It remains entitled to the compensation,

and its right is safeguarded by the Court because its members are officers of the
Court who are as entitled to judicial protection against injustice or imposition of
fraud committed by the client as much as the client is against their abuses as her
counsel. In other words, the duty of the Court is not only to ensure that the attorney
acts in a proper and lawful manner, but also to see to it that the attorney is paid his
just fees. Even if the compensation of the attorney is dependent only on winning the
litigation, the subsequent withdrawal of the case upon the clients initiative would
not deprive the attorney of the legitimate compensation for professional services
rendered.40
The stipulations of the written agreement between Malvar and the Intervenors, not
being contrary to law, morals, public policy, public order or good customs, were
valid and binding on her. They expressly gave rise to the right of the Intervenor to
demand compensation. In a word, she could not simply walk away from her
contractual obligations towards the Intervenor, for Article 1159 of the Civil Code
provides that obligations arising from contracts have the force of law between the
parties and should be complied with in good faith.
As a final word, it is necessary to state that no court can shirk from enforcing the
contractual stipulations in the manner they have agreed upon and written. As a
rule, the courts, whether trial or appellate, have no power to make or modify
contracts between the parties. Nor can the courts save the parties from
disadvantageous provisions. The same precepts hold sway when it comes to
enforcing fee arrangements entered into in writing between clients and attorneys. In
the exercise of their supervisory authority over attorneys as officers of the Court,
the courts are bound to respect and protect the attorneys lien as a necessary
means to preserve the decorum and respectability of the Law Profession. Hence, the
Court must thwart any and every effort of clients already served by their attorneys
worthy services to deprive them of their hard-earned compensation. Truly, the duty
of the courts is not only to see to it that attorneys act in a proper and lawful
manner, but also to see to it that attorneys are paid their just and lawful fees. 61
WHEREFORE, the Court APPROVES the compromise agreement; GRANTS the Motion
for Intervention to Protect Attorney's Rights; and ORDERS Czarina T. Malvar and
respondents Kraft Food Philippines Inc. and Kraft Foods International to jointly and
severally pay to Intervenor Law Firm, represented by Retired Associate Justice Josue
N. Bellosillo, its stipulated contingent fees of 10% of P41,627,593.75, and the
further sum equivalent to 10% of the value of the stock option

10)
T&H Shopfitters Corp., vs. T&H Shopfitters Corp Workers
Union, GR No. 191714, February 26, 2014
Facts:
Respondents, who are officers and/or members of THS-GQ Union, filed a complaint
for Unfair Labor Practice (ULP) against T&H Shopfitters Corporation (T&H
Shopfitters) and Gin Queen Corporation (Gin Queen) before the Labor Arbiter.
(Respondents treated T&H Shopfitters and Gin Queen as a single entity and sole
employer.)
In their desire to improve working conditions, respondents and other employees of
petitioners held their first formal meeting to discuss the formation of a union. The
following day, or on November 24, 2003, seventeen (17) employees were barred
from entering petitioners factory premises located in Castillejos, Zambales, and
ordered to transfer to T&H Shopfitters warehouse at Subic Bay Freeport Zone
purportedly beause of its expansion. Afterwards, the said 17 employees were
repeatedly ordered to go on forced leave due to the unavailability of work.
On December 18, the DOLE issued a certificate of registration in favor of THS-GQ
Union.
Respondents contended that the affected employees were not given regular work
assignments, while subcontractors were continuously hired to perform functions.
This development prompted respondents to seek the assistance of the National
Conciliation and Mediation Board. Subsequently, an agreement was reached but
petitioners never complied with its commitment.
THS-GQ Union filed a petition for certification election. Meawhile, the Diector of Gin
Queen informed its employees of the expiration of the lease contract between Gin
Queen and its lessor in Castillejos, Zambales and announced the relocation of its
office and workers to Cabangan, Zambales. Some of the respondents, who visited
the site in Cabangan, discovered that it was a talahiban or grassland. Later, the
said union officers and members were made to work as grass cutters in Cabangan,
under the supervision of a certain Barangay captain.
Petitioners sponsored a field trip to Iba, Zambales for its emplyees. The officers and
members of the THS-GQ Union were purportedly excluded from the field trip. On the
evening of the field trip, a sales officer of petitioners campaigned against the union
in the forthcoming certification election. The employees were escorted from the
field trip to the polling center to cast their votes. Due to the heavy pressure exerted
by petitioners, the votes for no union prevailed.
On the other hand, the petitioners claim that T&H Shopfitters and Gin Queen are
corporation separate and distinct from each other. Consequently, petitioners allege
that they cannot be held liable for ULP for the reason that there is no employeremployee relationship between the former and respondents. Further, Gin Queen
avers that its decision to implement and enforced rotation of work assignments for
respondents was a management prerogative permitted by law, justified by the

decrease in the orders it received from its customers. It explains that its failure to
present concrete proof of its decreasing orders was due to the impossibility of
proving a negative assertion. It also asserts that the transfer from Castillejos to
Cabangan was made in good faith and solely because of the expiration of its lease
contract in Castillejos.
Issue: Whether ULP acts were
respondents in the case at bench.

committed

by

petitioners

against

Ruling:
In essence, ULP related to commission of acts that transgress the workers right to
organize. As specified in Art 248 [now 257] and 249 [now Article 258] of the Labor
Code, the prohibited acts must necessarily relate to the workers right to selforganization
In the case of Insular Life Assurance Co., Ltd. Employees Association --- this Court
had occasion to lay down the test of whether an employer has interfered with and
coerced employees in the exercise of their right to self-organization, that is, whether
the employer has engaged in conduct which, it may reasonably be said, tends to
interfere with the free exercise of employees rights; and that it is not necessary
that there be direct evidence that any employee was in fact intimidated or coerced
by statements of threats of the employer if there is a reasonable inference that antiunion conduct of the employer does have an adverse effect on self-organization and
collective bargaining.
The questioned acts of petitioners, namely: 1) sponsoring a field trip to Zambales
for its employees, to the exclusion of union members, before the scheduled
certification election; 2) the active campaign by the sales officer of petitioners
against the union prevailing as a bargaining agent during the field trip; 3) escorting
its employees after the field trip to the polling center; 4) continuous hiring of
subcontractors performing respondents function; 5) assigning union member to the
Bangan site to work as grass cutters; and 6) the enforcement of work on a rotational
basis for union members, all reek of interference on the part of petitioners.
Indubitably, the various acts of petitioners, taken together, reasonable support an
inference that, indeed such were all orchestrated to restrict respondents free
exercise of their right to self-organization. The Court is of the considered view that
petitioners undisputed actions prior and immediately before the scheduled
certification election, while seemingly innocuous, unduly meddled in the affairs of
its employees in selecting their exclusive bargaining representative.
Petitioners had no business persuading and/or assisting its employees in their
legally protected independent process of selecting their exclusive bargaining
representative. The fact and peculiar timing of the field trip sponsored by
petitioners for its employees not affiliated with THS-GQ Union, although a positive
enticement, was undoubtedly extraneous influence designed to impede
respondents in their quest to be certified.
WHEREFORE, AFFIRMED