Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 100665 February 13, 1995

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

VITUG, J.:
This petition for certiorari assails the 24th April 1991 resolution of respondent
National Labor Relations Commission ("NLRC"), as well as its resolution of 30 May
1991 denying a motion for reconsideration, which has dismissed herein petitioners'
appeal of the 16th October 1989 decision of Labor Arbiter Benigno C. Villarente, Jr.
Private respondents filed a complaint for illegal dismissal and for various monetary
claims, including the recovery of damages and attorney's fees, against petitioners.
In their supplemental position paper, the complainants subsequently confined
themselves to the illegal dismissal charge and abandoned the monetary claims. One
of the original eight complainants, Virgilio Alcunaba, decided to resume his work
with petitioners, thus leaving the rest to pursue the case. Private respondents
averred that they started to work for petitioners on, respectively, the following
dates:
NAME

DATE

Joseph Lluz

March, 1985

Noel Adarayan

Feb. 17, 1980

Rogelio Sira

January, 1982

Lolito Lluz

March, 1982

Virginia Heresano

May, 1987

Genelito Heresano

20-Oct-87

Carmelita de Dios

January, 1975 1

that they worked for a minimum of twelve hours daily, including Sundays and
holidays when needed; that they were paid on piece-work basis; that it "angered"
petitioner Lorenzo when they requested to be made members of the Social Security
System ("SSS"); and that, when they demanded an increase in their pay rates, they
were prevented (starting 24 October 1988) from entering the work premises.
Petitioners, in turn, claimed that their business operations were only seasonal,
normally twice a year, one in June (coinciding with the opening of school classes)
and another in December (during the Christmas holidays), when heavy job orders
would come in. Private respondents, according to petitioners, were engaged on
purely contractual basis and paid the rates conformably with their respective
agreements.
On 16 October 1989, Labor Arbiter Benigno C. Villarente, Jr., rendered judgment in
favor of the complainants, thus:
WHEREFORE, judgment is hereby rendered declaring that there was an employeremployee relationship between complainants and respondents and that the former
were regular employees of the latter. Accordingly, respondents are hereby directed
to pay all complainants their respective separation pay based on their one-half
month's earnings per year of service, a fraction of at least six months to be
considered one whole year, or the following amounts:
1

Joseph Lluz

P 7,488.00

(3 yrs. & 7 mos.)

Noel Adarayan

12,636.00

(8 yrs. & 8 mos.)

Rogelio Sira

8,828.00

(6 yrs. & 9 mos.)

Lolito Lluz

8,828.00

(6 yrs. & 7 mos.)

Genelito Heresano 1,404.00

(1 year)

Virginia Heresano

665.00

(1 yr. & 5 mos.)

Carmelita de Dios

19,656.00

(13 yrs. & 9 mos.)

Total

P 59,515.002

Respondents are also hereby directed to pay complainants' counsel the amount of
P5,950.00 which is equivalent to 10% of the above total awards as attorney's fees.
SO ORDERED.

An appeal was interposed by petitioners. The NLRC, on 24 April 1991, sustained the
findings of the Labor Arbiter and dismissed the appeal. On 30 May 1991, the NLRC
denied petitioners' motion for reconsideration.
Hence, the instant petition.
In his comment, dated 14 October 1991, the Solicitor General moved for the
modification of NLRC's resolution of 24 April 1991. While conceding that an
employer-employee relationship existed between petitioners and private
respondents, the Solicitor General, nevertheless, expressed strong reservations on
the award of separation pay in view of the findings by both the Labor Arbiter and
the NLRC that there was neither dismissal nor abandonment in the case at bench.
The NLRC submitted its own comment on 11 February 1992.
Well-settled is the rule that factual findings of the NLRC, particularly when they
coincide with that of the Labor Arbiter, are accorded respect, if not finality, and will
not be disturbed absent any showing that substantial evidence which might
otherwise affect the result of the case has been discarded. We see no reason, in this
case at bench, for disturbing the findings of the Labor Arbiter and the NLRC on the
existence of an employer-employee relationship between herein private parties. The
work of private respondents is clearly related to, and in the pursuit of, the principal
business activity of petitioners. The indicia used for determining the existence of an
employer-employee relationship, all extant in the case at bench, include (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer's power to control the employee with
respect to the result of the work to be done and to the means and methods by
which the work to be done and to the means and methods by which the work is to
be accomplished. The requirement, so herein posed as an issue, refers to the
existence of the right to control and not necessarily to the actual exercise of the
right. In Dy Keh Beng v. International Labor and Marine Union of the Philippines, et
al., 4 the Court has held:
While this Court up holds the control test under which an employer-employee
relationship exists "where the person for whom the services are performed reserves
a right to control not only the end to be achieved but also the means to be used in
reaching such end," it finds no merit with petitioner's arguments as stated above. It
should be borne in mind that the control test calls merely for the existence of the
right to control the manner of doing the work, not the actual exercise of the right.
Considering the finding by the Hearing Examiner that the establishment of Dy Keh
Beng is "engaged in the manufacture of basket known as kaing," it is natural to
expect that those working under Dy would have to observe, among others, Dy's
requirements of size and quality of the kaing. Some control would necessarily be
exercised by Dy's specifications. Parenthetically, since the work on the baskets is
done at Dy's establishments, it can be inferred that the proprietor Dy could easily
exercise control on the men he employed.

We share the opinion of the Solicitor General that the award of separation pay to
private respondents appears, nonetheless, to be unwarranted.
The Labor Arbiter, sustained by the NLRC, concluded that there was neither
dismissal nor abandonment. The Labor Arbiter said
. . . At any rate, records show that even during the conciliation stage, respondents
had repeatedly indicated that they were willing to accept back all complainants
aside from denying complainants allegation. Hence, it is clear that there was no
dismissal to talk about in the first place which would have to be determined whether
legal or not. We also take particular note of complainants' desire to be given
separation pay instead of being ordered back to work. Considering all these factors
we hereby rule that there was neither dismissal nor abandonment but complainants
are simply out of job for reasons not attributable to either party. (Rollo, pp. 30-31.)
The NLRC, in nonetheless agreeing with the Labor Arbiter on the latter's award of
separation pay, ventured to say:
. . . It is not difficult to see the rationale behind the Labor Arbiter's disposition he
saw in respondents' offer of reinstatement the commanding advantage it had to
later force (by whatever unlawful means they may resort to) the complainants out
of job, just as the Labor Arbiter saw that fear on the part of complainants to enter
into a trap being laid before them for indeed, it is peculiar for an employer who
wants to get rid of its employees, to insist on reinstatement rather than a
separation pay scheme which the law allows them so they may be able to better
manage their business. (Rollo, p. 39.)
We find the above disquisition of the NLRC too peculative and conjectural to be
sustained. The fact of the matter is that petitioners have repeatedly indicated their
willingness to accept private respondents but the latter have steadfastly refused the
offer. For being without any clear legal basis, the award of separation pay must thus
be set aside. 5 There is nothing, however, that prevents petitioners from voluntarily
giving private respondents some amounts on ex gratia basis.
WHEREFORE, the questioned findings and resolutions of respondents Labor Arbiter
and NLRC are MODIFIED by deleting the award of separation pay and the
corresponding attorney's fees. No costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 111870 June 30, 1994

AIR MATERIAL WING SAVINGS AND LOAN ASSOCIATION, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, et al., respondents.
Jerry D. Banares for petitioner.
Perdrelito Q. Aquino for private respondent.

CRUZ, J.:
Private respondent Luis S. Salas was appointed "notarial and legal counsel" for
petitioner Air Material Wings Savings and Loan Association (AMWSLAI) in 1980. The
appointment was renewed for three years in an implementing order dated January
23, 1987, reading as follows:
SUBJECT: Implementing Order on the Reappointment of the Legal Officer
TO: ATTY. LUIS S. SALAS
Per approval of the Board en banc in a regular meeting held on January 21, 1987,
you are hereby reappointed as Notarial and Legal Counsel of this association for a
term of three (3) years effective March 1, 1987, unless sooner terminated from
office for cause or as may be deemed necessary by the Board for the interest and
protection of the association.
Aside from notarization of loan & other legal documents, your duties and
responsibilities are hereby enumerated in the attached sheet, per Articles IX,
Section 1-d of the by-laws and those approved by the Board en banc.
Your monthly compensation/retainer's fee remains the same.
This shall form part of your 201 file.
BY AUTHORITY OF THE BOARD:
LUVIN S. MANAY
President & Chief of the Board
On January 9, 1990, the petitioner issued another order reminding Salas of the
approaching termination of his legal services under their contract. This prompted
Salas to lodge a complaint against AMWSLAI for separation pay, vacation and sick
leave benefits, cost of living allowances, refund of SSS premiums, moral and

exemplary damages, payment of notarial services rendered from February 1, 1980

to March 2, 1990, and attorney's fees.
Instead of filing an answer, AMWSLAI moved to dismiss for lack of jurisdiction. It
averred that there was no employer-employee relationship between it and Salas and
that his monetary claims properly fell within the jurisdiction of the regular courts.
Salas opposed the motion and presented documentary evidence to show that he
was indeed an employee of AMWSLAI.
The motion was denied and both parties were required to submit their position
papers. AMWSLAI filed a motion for reconsideration ad cautelam, which was also
denied. The parties were again ordered to submit their position papers but AMWSLAI
did not comply. Nevertheless, most of Salas' claims were dismissed by the labor
arbiter in his decision dated November 21, 1991. 1
It was there held that Salas was not illegally dismissed and so not entitled to collect
separation benefits. His claims for vacation leave, sick leave, medical and dental
allowances and refund of SSS premiums were rejected on the ground that he was a
managerial employee. He was also denied moral and exemplary damages for lack of
evidence of bad faith on the part of AMWSLAI. Neither was he allowed to collect his
notarial fees from 1980 up to 1986 because the claim therefor had already
prescribed. However, the petitioner was ordered to pay Salas his notarial fees from
1987 up to March 2, 1990, and attorney's fee equivalent to 10% of the judgment
award.
On appeal, the decision was affirmed in toto by the respondent Commission,
prompting the petitioner to seek relief in this Court. 2
The threshold issue in this case is whether or not Salas can be considered an
employee of the petitioner company.
We have held in a long line of decisions that the elements of an employer-employee
relationship are: (1) selection and engagement of the employee; (2) payment of
wages; (3) power of dismissal; and (4) employer's own power to control employee's
conduct. 3
The existence of such a relationship is essentially a factual question. The findings of
the NLRC on this matter are accorded great respect and even finality when the
same are supported by substantial evidence. 4
The terms and conditions set out in the letter-contract entered into by the parties on
January 23, 1987, clearly show that Salas was an employee of the petitioner. His
selection as the company counsel was done by the board of directors in one of its
regular meetings. The petitioner paid him a monthly compensation/retainer's fee for
his services. Though his appointment was for a fixed term of three years, the
petitioner reserved its power of dismissal for cause or as it might deem necessary

for its interest and protection. No less importantly, AMWSLAI also exercised its
power of control over Salas by defining his duties and functions as its legal counsel,
to wit:
1. To act on all legal matters pertinent to his Office.
2. To seek remedies to effect collection of overdue accounts of members without
prejudice to initiating court action to protect the interest of the association.
3. To defend by all means all suit against the interest of the Association.

In the earlier case of Hydro Resources Contractors Corp. v.

Pagalilauan, 6 this Court observed that:
A lawyer, like any other professional, may very well be an employee of a private
corporation or even of the government. It is not unusual for a big corporation to hire
a staff of lawyers as its in-house counsel, pay them regular salaries, rank them in its
table of organization, and otherwise treat them like its other officers and
employees. At the same time, it may also contract with a law firm to act as outside
counsel on a retainer basis. The two classes of lawyers often work closely together
but one group is made up of employees while the other is not. A similar
arrangement may exist as to doctors, nurses, dentists, public relations practitioners
and other professionals.
We hold, therefore, that the public respondent committed no grave abuse of
discretion in ruling that an employer-employee relationship existed between the
petitioner and the private respondent.
We must disagree with the NLRC, however, on Salas' claims for notarial fees.
The petitioner contends that the public respondents are not empowered to
adjudicate claims for notarial fees. On the other hand, the Solicitor General believes
that the NLRC acted correctly when it took cognizance of the claim because it arose
out of Salas' employment contract with the petitioner which assigned him the duty
to notarize loan agreements and other legal documents. Moreover, Section 9 of Rule
141 of the Rules of Court does not restrict or prevent the labor arbiter and the NLRC
from determining claims for notarial fees.
Labor arbiters have the original and exclusive jurisdiction over money claims of
workers when such claims have some reasonable connection with the employeremployee relationship. The money claims of workers referred to in paragraph 3 of
Article 217 of the Labor Code are those arising out of or in connection with the
employer-employee relationship or some aspect or incident of such relationship.
Salas' claim for notarial fees is based on his employment as a notarial officer of the
petitioner and thus comes under the jurisdiction of the labor arbiter.

The public respondents agreed that Salas was entitled to collect notarial fees from
1987 to 1990 by virtue of his having been assigned as notarial officer. We feel,
however, that there is no substantial evidence to support this finding.
The letter-contract of January 23, 1987, does not contain any stipulation for the
separate payment of notarial fees to Salas in addition to his basic salary. On the
contrary, it would appear that his notarial services were part of his regular functions
and were thus already covered by his monthly compensation. It is true that the
notarial fees were paid by members-borrowers of the petitioner for its own account
and not of Salas. However, this is not a sufficient basis for his claim to such fees in
the absence of any agreement to that effect.
ACCORDINGLY, the appealed judgment of the NLRC is AFFIRMED, with the
modification that the award of notarial fees and attorney's fees is disallowed. It is so
ordered.
Davide, Jr., Bellosillo, Quiason and Kapunan, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-62909 April 18, 1989
HYDRO RESOURCES CONTRACTORS CORPORATION, petitioner,
vs.
LABOR ARBITER ADRIAN N. PAGALILAUAN and the NATIONAL LABOR
RELATIONS COMMISSION, public respondents, and ROGELIO A. ABAN, private
respondent,
G.E. Aragones & Associates for petitioner.
The Solicitor General for public respondents.
Cirilo A. Bravo for private respondent.

GUTIERREZ, JR., J.:

This is a petition to review on certiorari the resolution of the National Labor
Relations Commission (NLRC) which affirmed the labor arbiter's decision ordering
herein petitioner, Hydro Resources Contractors Corporation to reinstate Rogelio A.

Abanto his former position without loss of seniority rights, to pay him 12 months
backwages in the amount of P18,000.00 and to pay attorney's fees in the amount of
P1,800.00.
On October 24, 1978, petitioner corporation hired the private respondent Aban as
its "Legal Assistant." He received a basic monthly salary of Pl,500.00 plus an initial
living allowance of P50.00 which gradually increased to P320.00.
On September 4, 1980, Aban received a letter from the corporation informing him
that he would be considered terminated effective October 4, 1980 because of his
alleged failure to perform his duties well.
On October 6, 1980, Aban filed a complaint against the petitioner for illegal
dismissal.
The labor arbiter ruled that Aban was illegally dismissed.
This ruling was affirmed by the NLRC on appeal.
Hence, this present petition.
The only issue raised by the petitioner is whether or not there was an employeremployee relationship between the petitioner corporation and Aban. The petitioner
questions the jurisdiction of the public respondents considering the alleged absence
of an employer-employee relationship. The petitioner contends that its relationship
with Aban is that of a client with his lawyer. It is its position that "(a) lawyer as long
as he is acting as such, as long as he is performing acts constituting practice of law,
can never be considered an employee. His relationship with those to whom he
renders services, as such lawyer, can never be governed by the labor laws. For a
lawyer to so argue is not only demeaning to himself (sic), but also his profession
and to his brothers in the profession." Thus, the petitioner argues that the labor
arbiter and NLRC have no jurisdiction over the instant case.
The contention is without merit.
A lawyer, like any other professional, may very well be an employee of a private
corporation or even of the government. It is not unusual for a big corporation to hire
a staff of lawyers as its in-house counsel, pay them regular salaries, rank them in its
table of organization, and otherwise treat them like its other officers and
employees. At the same time, it may also contract with a law firm to act as outside
counsel on a retainer basis. The two classes of lawyers often work closely together
but one group is made up of employees while the other is not. A similar
arrangement may exist as to doctors, nurses, dentists, public relations practitioners,
and other professionals.

This Court is not without a guide in deciding whether or not an employer-employee

relation exists between the contending parties or whether or not the private
respondent was hired on a retainer basis.
As stated in the case of Tabas v. California Manufacturing Co., (G.R. No. 80680,
January 26, 1989):
This Court has consistently ruled that the determination of whether or not there is
an employer-employee relation depends upon four standards: (1) the manner of
selection and engagement of the putative employee; (2) the mode of payment of
wages; (3) the presence or absence of a power of dismissal; and (4) the presence or
absence of a power to control the putative employee's conduct. Of the four, the
right-of-control test has been held to be the decisive factor.
Aban was employed by the petitioner to be its Legal Assistant as evidenced by his
appointment paper (Exhibit "A"). The petitioner paid him a basic salary plus living
allowance. Thereafter, Aban was dismissed on his alleged failure to perform his
duties well. (Exhibit "B").
Aban worked solely for the petitioner and dealt only with legal matters involving the
said corporation and its employees. He also assisted the Personnel Officer in
processing appointment papers of employees. This latter duty is not an act of a
lawyer in the exercise of his profession but rather a duty for the benefit of the
corporation.
The above-mentioned facts show that the petitioner paid Aban's wages, exercised
its power to hire and fire the respondent employee and more important, exercised
control over Aban by defining the duties and functions of his work.
Moreover, estoppel lies against the petitioner. It may no longer question the
jurisdiction of the labor arbiter and NLRC .
The petitioner presented documents (Exhibits "2" to "19") before the Labor Arbiter
to prove that Aban was a managerial employee. Now, it is disclaiming that Aban
was ever its employee. The proper procedure was for the petitioner to prove its
allegations that Aban drank heavily, violated company policies, spent company
funds and properties for personal ends, and otherwise led the employer to lose trust
and confidence in him. The real issue was due process, not the specious argument
raised in this petition.
The new theory presented before this Court is a last-ditch effort by the petitioner to
cover up for the unwarranted dismissal of its employee. This Court frowns upon
such delaying tactics.
The findings of fact of the Labor Arbiter being supported by substantial evidence are
binding on this Court. (See Industrial limber Corp. v. National Labor Relations
Commission, G.R. No. 83616, January 20, 1989).

Considering that the private respondent was illegally dismissed from his
employment in 1980, he is entitled to reinstatement to his former or similar position
without loss of seniority rights, if it is still feasible, to backwages without
qualification or deduction for three years, (D.M. Consunji, Inc. v. Pucan 159 SCRA
107 (1988); Flores v. Nuestro, G.R. No. 66890, April 15, 1988), and to reasonable
attorney's fees in the amount of P5,000.00. Should reinstatement prove no longer
feasible, the petitioner will pay him separation pay in lieu of reinstatement. (City
Trust Finance Corp. v. NLRC, 157 SCRA 87; Santos v. NLRC, 154 SCRA 166; Metro
Drug v. NLRC, et al., 143 SCRA 132; Luzon Brokerage v. Luzon Labor Union, 7 SCRA
116). The amount of such separation pay as may be provided by law or the
collective bargaining agreement is to be computed based on the period from 24
October 1978 (date of first employment) to 4 October 1983 (three years after date
of illegal dismissal). [Manila Midtown Commercial Corporation v. Nuwhrain 159 SCRA
212 (1988)].
WHEREFORE, the petition is hereby DISMISSED for lack of merit. The petitioner is
ordered to reinstate the private respondent to his former or a similar position
without loss of seniority rights and to pay three (3) years backwages without
qualification or deduction and P5,000.00 in attorney's fees. Should reinstatement
not be feasible, the petitioner shall pay the private respondent termination benefits
in addition to the above stated three years backpay and P5,000.00 attorney's fees.
SO ORDERED.