Employment relationship as a condition precedent

G.R. No. L-48645 January 7, 1987

"BROTHERHOOD" LABOR UNITY MOVEMENT OF THE PHILIPPINES, ANTONIO
CASBADILLO, PROSPERO TABLADA, ERNESTO BENGSON, PATRICIO SERRANO,
ANTONIO B. BOBIAS, VIRGILIO ECHAS, DOMINGO PARINAS, NORBERTO GALANG,
JUANITO NAVARRO, NESTORIO MARCELLANA, TEOFILO B. CACATIAN, RUFO L. EGUIA,
CARLOS SUMOYAN, LAMBERTO RONQUILLO, ANGELITO AMANCIO, DANILO B. MATIAR,
ET AL., petitioners,
vs.
HON. RONALDO B. ZAMORA, PRESIDENTIAL ASSISTANT FOR LEGAL AFFAIRS, OFFICE
OF THE PRESIDENT, HON. AMADO G. INCIONG, UNDERSECRETARY OF LABOR, SAN
MIGUEL CORPORATION, GENARO OLIVES, ENRIQUE CAMAHORT, FEDERICO OATE,
ERNESTO VILLANUEVA, ANTONIO BOCALING and GODOFREDO CUETO, respondents.
Armando V. Ampil for petitioners.
Siguion Reyna, Montecillo and Ongsiako Law Office for private respondents.

GUTIERREZ, JR., J.:

The elemental question in labor law of whether or not an employer-employee relationship exists
between petitioners-members of the "Brotherhood Labor Unit Movement of the Philippines"
(BLUM) and respondent San Miguel Corporation, is the main issue in this petition. The disputed
decision of public respondent Ronaldo Zamora, Presidential Assistant for legal Affairs, contains a
brief summary of the facts involved:
1. The records disclose that on July 11, 1969, BLUM filed a complaint with the
now defunct Court of Industrial Relations, charging San Miguel Corporation, and
the following officers: Enrique Camahort, Federico Ofiate Feliciano Arceo,
Melencio Eugenia Jr., Ernesto Villanueva, Antonio Bocaling and Godofredo
Cueto of unfair labor practice as set forth in Section 4 (a), sub-sections (1) and
(4) of Republic Act No. 875 and of Legal dismissal. It was alleged that
respondents ordered the individual complainants to disaffiliate from the
complainant union; and that management dismissed the individual complainants
when they insisted on their union membership.
On their part, respondents moved for the dismissal of the complaint on the
grounds that the complainants are not and have never been employees of
respondent company but employees of the independent contractor; that
respondent company has never had control over the means and methods
followed by the independent contractor who enjoyed full authority to hire and
control said employees; and that the individual complainants are barred by
estoppel from asserting that they are employees of respondent company.
While pending with the Court of Industrial Relations CIR pleadings and
testimonial and documentary evidences were duly presented, although the actual
hearing was delayed by several postponements. The dispute was taken over by
the National Labor Relations Commission (NLRC) with the decreed abolition of
the CIR and the hearing of the case intransferably commenced on September 8,
1975.
On February 9, 1976, Labor Arbiter Nestor C. Lim found for complainants which
was concurred in by the NLRC in a decision dated June 28, 1976. The amount of
backwages awarded, however, was reduced by NLRC to the equivalent of one
(1) year salary.
On appeal, the Secretary in a decision dated June 1, 1977, set aside the NLRC
ruling, stressing the absence of an employer-mployee relationship as borne out
by the records of the case. ...

The petitioners strongly argue that there exists an employer-employee relationship between them
and the respondent company and that they were dismissed for unionism, an act constituting
unfair labor practice "for which respondents must be made to answer."
Unrebutted evidence and testimony on record establish that the petitioners are workers who have
been employed at the San Miguel Parola Glass Factory since 1961, averaging about seven (7)
years of service at the time of their termination. They worked as "cargadores" or "pahinante" at
the SMC Plant loading, unloading, piling or palleting empty bottles and woosen shells to and from
company trucks and warehouses. At times, they accompanied the company trucks on their
delivery routes.
The petitioners first reported for work to Superintendent-in-Charge Camahort. They were issued
gate passes signed by Camahort and were provided by the respondent company with the tools,
equipment and paraphernalia used in the loading, unloading, piling and hauling operation.
Job orders emanated from Camahort. The orders are then transmitted to an assistant-officer-incharge. In turn, the assistant informs the warehousemen and checkers regarding the same. The
latter, thereafter, relays said orders to the capatazes or group leaders who then give orders to the
workers as to where, when and what to load, unload, pile, pallet or clean.
Work in the glass factory was neither regular nor continuous, depending wholly on the volume of
bottles manufactured to be loaded and unloaded, as well as the business activity of the company.
Work did not necessarily mean a full eight (8) hour day for the petitioners. However, work,at
times, exceeded the eight (8) hour day and necessitated work on Sundays and holidays. For this,
they were neither paid overtime nor compensation for work on Sundays and holidays.
Petitioners were paid every ten (10) days on a piece rate basis, that is, according to the number
of cartons and wooden shells they were able to load, unload, or pile. The group leader notes
down the number or volume of work that each individual worker has accomplished. This is then
made the basis of a report or statement which is compared with the notes of the checker and
warehousemen as to whether or not they tally. Final approval of report is by officer-in-charge
Camahort. The pay check is given to the group leaders for encashment, distribution, and payment
to the petitioners in accordance with payrolls prepared by said leaders. From the total earnings of
the group, the group leader gets a participation or share of ten (10%) percent plus an additional
amount from the earnings of each individual.
The petitioners worked exclusive at the SMC plant, never having been assigned to other
companies or departments of SMC plant, even when the volume of work was at its minimum.
When any of the glass furnaces suffered a breakdown, making a shutdown necessary, the
petitioners work was temporarily suspended. Thereafter, the petitioners would return to work at
the glass plant.
Sometime in January, 1969, the petitioner workers numbering one hundred and forty (140)
organized and affiliated themselves with the petitioner union and engaged in union activities.
Believing themselves entitled to overtime and holiday pay, the petitioners pressed management,
airing other grievances such as being paid below the minimum wage law, inhuman treatment,
being forced to borrow at usurious rates of interest and to buy raffle tickets, coerced by
withholding their salaries, and salary deductions made without their consent. However, their
gripes and grievances were not heeded by the respondents.
On February 6, 1969, the petitioner union filed a notice of strike with the Bureau of Labor
Relations in connection with the dismissal of some of its members who were allegedly castigated
for their union membership and warned that should they persist in continuing with their union
activities they would be dismissed from their jobs. Several conciliation conferences were
scheduled in order to thresh out their differences, On February 12, 1969, union member Rogelio
Dipad was dismissed from work. At the scheduled conference on February 19, 1969, the
complainant union through its officers headed by National President Artemio Portugal Sr.,
presented a letter to the respondent company containing proposals and/or labor demands
together with a request for recognition and collective bargaining.
San Miguel refused to bargain with the petitioner union alleging that the workers are not their
employees.

On February 20, 1969, all the petitioners were dismissed from their jobs and, thereafter, denied
entrance to respondent company's glass factory despite their regularly reporting for work. A
complaint for illegal dismissal and unfair labor practice was filed by the petitioners.
The case reaches us now with the same issues to be resolved as when it had begun.
The question of whether an employer-employee relationship exists in a certain situation continues
to bedevil the courts. Some businessmen try to avoid the bringing about of an employeremployee relationship in their enterprises because that judicial relation spawns obligations
connected with workmen's compensation, social security, medicare, minimum wage, termination
pay, and unionism. (Mafinco Trading Corporation v. Ople, 70 SCRA 139).
In determining the existence of an employer-employee relationship, the elements that are
generally considered are the following: (a) the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the employer's power to control the
employee with respect to the means and methods by which the work is to be accomplished. It. is
the called "control test" that is the most important element (Investment Planning Corp. of the
Phils. v. The Social Security System, 21 SCRA 924; Mafinco Trading Corp. v. Ople, supra,and
Rosario Brothers, Inc. v. Ople, 131 SCRA 72).
Applying the above criteria, the evidence strongly indicates the existence of an employeremployee relationship between petitioner workers and respondent San Miguel Corporation. The
respondent asserts that the petitioners are employees of the Guaranteed Labor Contractor, an
independent labor contracting firm.
The facts and evidence on record negate respondent SMC's claim.
The existence of an independent 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" (56 CJS Master and Servant, Sec. 3(2), 46;
See also 27 AM. Jur. Independent Contractor, Sec. 5, 485 and Annex 75 ALR 7260727)
None of the above criteria exists in the case at bar.
Highly unusual and suspect is the absence of a written contract to specify the performance of a
specified piece of work, the nature and extent of the work and the term and duration of the
relationship. The records fail to show that a large commercial outfit, such as the San Miguel
Corporation, entered into mere oral agreements of employment or labor contracting where the
same would involve considerable expenses and dealings with a large number of workers over a
long period of time. Despite respondent company's allegations not an iota of evidence was
offered to prove the same or its particulars. Such failure makes respondent SMC's stand subject
to serious doubts.
Uncontroverted is the fact that for an average of seven (7) years, each of the petitioners had
worked continuously and exclusively for the respondent company's shipping and warehousing
department. Considering the length of time that the petitioners have worked with the respondent
company, there is justification to conclude that they were engaged to perform activities necessary
or desirable in the usual business or trade of the respondent, and the petitioners are, therefore
regular employees (Phil. Fishing Boat Officers and Engineers Union v. Court of Industrial
Relations, 112 SCRA 159 and RJL Martinez Fishing Corporation v. National Labor Relations
Commission, 127 SCRA 454).
As we have found in RJL Martinez Fishing Corporation v. National Labor Relations Commission
(supra):
... [T]he employer-employee relationship between the parties herein is not
coterminous with each loading and unloading job. As earlier shown, respondents
are engaged in the business of fishing. For this purpose, they have a fleet of
fishing vessels. Under this situation, respondents' activity of catching fish is a
continuous process and could hardly be considered as seasonal in nature. So
that the activities performed by herein complainants, i.e. unloading the catch of

tuna fish from respondents' vessels and then loading the same to refrigerated
vans, are necessary or desirable in the business of respondents. This
circumstance makes the employment of complainants a regular one, in the sense
that it does not depend on any specific project or seasonable activity. (NLRC
Decision, p. 94, Rollo).lwphl@it
so as it with petitioners in the case at bar. In fact, despite past shutdowns of the glass plant for
repairs, the petitioners, thereafter, promptly returned to their jobs, never having been replaced, or
assigned elsewhere until the present controversy arose. The term of the petitioners' employment
appears indefinite. The continuity and habituality of petitioners' work bolsters their claim of
employee status vis-a-vis respondent company,
Even under the assumption that a contract of employment had indeed been executed between
respondent SMC and the alleged labor contractor, respondent's case will, nevertheless, fail.
Section 8, Rule VIII, Book III of the Implementing Rules of the Labor Code provides:
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.
We find that Guaranteed and Reliable Labor contractors have neither substantial capital nor
investment to qualify as an independent contractor under the law. The premises, tools, equipment
and paraphernalia used by the petitioners in their jobs are admittedly all supplied by respondent
company. It is only the manpower or labor force which the alleged contractors supply, suggesting
the existence of a "labor only" contracting scheme prohibited by law (Article 106, 109 of the Labor
Code; Section 9(b), Rule VIII, Book III, Implementing Rules and Regulations of the Labor Code).
In fact, even the alleged contractor's office, which consists of a space at respondent company's
warehouse, table, chair, typewriter and cabinet, are provided for by respondent SMC. It is
therefore clear that the alleged contractors have no capital outlay involved in the conduct of its
business, in the maintenance thereof or in the payment of its workers' salaries.
The payment of the workers' wages is a critical factor in determining the actuality of an employeremployee relationship whether between respondent company and petitioners or between the
alleged independent contractor and petitioners. It is important to emphasize that in a truly
independent contractor-contractee relationship, the fees are paid directly to the manpower
agency in lump sum without indicating or implying that the basis of such lump sum is the salary
per worker multiplied by the number of workers assigned to the company. This is the rule
in Social Security System v. Court of Appeals (39 SCRA 629, 635).
The alleged independent contractors in the case at bar were paid a lump sum representing only
the salaries the workers were entitled to, arrived at by adding the salaries of each worker which
depend on the volume of work they. had accomplished individually. These are based on payrolls,
reports or statements prepared by the workers' group leader, warehousemen and checkers,
where they note down the number of cartons, wooden shells and bottles each worker was able to
load, unload, pile or pallet and see whether they tally. The amount paid by respondent company
to the alleged independent contractor considers no business expenses or capital outlay of the
latter. Nor is the profit or gain of the alleged contractor in the conduct of its business provided for
as an amount over and above the workers' wages. Instead, the alleged contractor receives a
percentage from the total earnings of all the workers plus an additional amount corresponding to
a percentage of the earnings of each individual worker, which, perhaps, accounts for the
petitioners' charge of unauthorized deductions from their salaries by the respondents.
Anent the argument that the petitioners are not employees as they worked on piece basis, we
merely have to cite our rulings in Dy Keh Beng v. International Labor and Marine Union of the
Philippines (90 SCRA 161), as follows:

"[C]ircumstances must be construed to determine indeed if payment by the piece

is just a method of compensation and does not define the essence of the relation.
Units of time . . . and units of work are in establishments like respondent (sic) just
yardsticks whereby to determine rate of compensation, to be applied whenever
agreed upon. We cannot construe payment by the piece where work is done in
such an establishment so as to put the worker completely at liberty to turn him
out and take in another at pleasure."
Article 106 of the Labor Code provides the legal effect of a labor only contracting scheme, to wit:
... 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.
Firmly establishing respondent SMC's role as employer is the control exercised by it over the
petitioners that is, control in the means and methods/manner by which petitioners are to go about
their work, as well as in disciplinary measures imposed by it.
Because of the nature of the petitioners' work as cargadores or pahinantes, supervision as to the
means and manner of performing the same is practically nil. For, how many ways are there to
load and unload bottles and wooden shells? The mere concern of both respondent SMC and the
alleged contractor is that the job of having the bottles and wooden shells brought to and from the
warehouse be done. More evident and pronounced is respondent company's right to control in
the discipline of petitioners. Documentary evidence presented by the petitioners establish
respondent SMC's right to impose disciplinary measures for violations or infractions of its rules
and regulations as well as its right to recommend transfers and dismissals of the piece workers.
The inter-office memoranda submitted in evidence prove the company's control over the
petitioners. That respondent SMC has the power to recommend penalties or dismissal of the
piece workers, even as to Abner Bungay who is alleged by SMC to be a representative of the
alleged labor contractor, is the strongest indication of respondent company's right of control over
the petitioners as direct employer. There is no evidence to show that the alleged labor contractor
had such right of control or much less had been there to supervise or deal with the petitioners.
The petitioners were dismissed allegedly because of the shutdown of the glass manufacturing
plant. Respondent company would have us believe that this was a case of retrenchment due to
the closure or cessation of operations of the establishment or undertaking. But such is not the
case here. The respondent's shutdown was merely temporary, one of its furnaces needing repair.
Operations continued after such repairs, but the petitioners had already been refused entry to the
premises and dismissed from respondent's service. New workers manned their positions. It is
apparent that the closure of respondent's warehouse was merely a ploy to get rid of the
petitioners, who were then agitating the respondent company for benefits, reforms and collective
bargaining as a union. There is no showing that petitioners had been remiss in their obligations
and inefficient in their jobs to warrant their separation.
As to the charge of unfair labor practice because of SMC's refusal to bargain with the petitioners,
it is clear that the respondent company had an existing collective bargaining agreement with the
IBM union which is the recognized collective bargaining representative at the respondent's glass
plant.
There being a recognized bargaining representative of all employees at the company's glass
plant, the petitioners cannot merely form a union and demand bargaining. The Labor Code
provides the proper procedure for the recognition of unions as sole bargaining representatives.
This must be followed.
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is GRANTED. The San Miguel
Corporation is hereby ordered to REINSTATE petitioners, with three (3) years backwages.
However, where reinstatement is no longer possible, the respondent SMC is ordered to pay the
petitioners separation pay equivalent to one (1) month pay for every year of service.
SO ORDERED.
G.R. No. L-41182-3 April 16, 1988
DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants,
vs.

THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO S.CANILAO, and
SEGUNDINA NOGUERA, respondents-appellees.

SARMIENTO , J.:
The petitioners invoke the provisions on human relations of the Civil Code in this appeal by
certiorari. The facts are beyond dispute:
xxx xxx xxx
On the strength of a contract (Exhibit A for the appellant Exhibit 2 for the
appellees) entered into on Oct. 19, 1960 by and between Mrs. Segundina
Noguera, party of the first part; the Tourist World Service, Inc., represented by Mr.
Eliseo Canilao as party of the second part, and hereinafter referred to as
appellants, the Tourist World Service, Inc. leased the premises belonging to the
party of the first part at Mabini St., Manila for the former-s use as a branch office.
In the said contract the party of the third part held herself solidarily liable with the
party of the part for the prompt payment of the monthly rental agreed on. When
the branch office was opened, the same was run by the herein appellant Una 0.
Sevilla payable to Tourist World Service Inc. by any airline for any fare brought in
on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3% was to be
withheld by the Tourist World Service, Inc.
On or about November 24, 1961 (Exhibit 16) the Tourist World Service, Inc.
appears to have been informed that Lina Sevilla was connected with a rival firm,
the Philippine Travel Bureau, and, since the branch office was anyhow losing, the
Tourist World Service considered closing down its office. This was firmed up by
two resolutions of the board of directors of Tourist World Service, Inc. dated Dec.
2, 1961 (Exhibits 12 and 13), the first abolishing the office of the manager and
vice-president of the Tourist World Service, Inc., Ermita Branch, and the
second,authorizing the corporate secretary to receive the properties of the Tourist
World Service then located at the said branch office. It further appears that on
Jan. 3, 1962, the contract with the appellees for the use of the Branch Office
premises was terminated and while the effectivity thereof was Jan. 31, 1962, the
appellees no longer used it. As a matter of fact appellants used it since Nov.
1961. Because of this, and to comply with the mandate of the Tourist World
Service, the corporate secretary Gabino Canilao went over to the branch office,
and, finding the premises locked, and, being unable to contact Lina Sevilla, he
padlocked the premises on June 4, 1962 to protect the interests of the Tourist
World Service. When neither the appellant Lina Sevilla nor any of her employees
could enter the locked premises, a complaint wall filed by the herein appellants
against the appellees with a prayer for the issuance of mandatory preliminary
injunction. Both appellees answered with counterclaims. For apparent lack of
interest of the parties therein, the trial court ordered the dismissal of the case
without prejudice.
The appellee Segundina Noguera sought reconsideration of the order dismissing
her counterclaim which the court a quo, in an order dated June 8, 1963, granted
permitting her to present evidence in support of her counterclaim.
On June 17,1963, appellant Lina Sevilla refiled her case against the herein
appellees and after the issues were joined, the reinstated counterclaim of
Segundina Noguera and the new complaint of appellant Lina Sevilla were jointly
heard following which the court a quo ordered both cases dismiss for lack of
merit, on the basis of which was elevated the instant appeal on the following
assignment of errors:
I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE NATURE OF
PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA'S COMPLAINT.
II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS. LINA 0.
SEVILA'S ARRANGEMENT (WITH APPELLEE TOURIST WORLD SERVICE,
INC.) WAS ONE MERELY OF EMPLOYER-EMPLOYEE RELATION AND IN

FAILING TO HOLD THAT THE SAID ARRANGEMENT WAS ONE OF JOINT

BUSINESS VENTURE.
III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLANT
MRS. LINA O. SEVILLA IS ESTOPPED FROM DENYING THAT SHE WAS A
MERE EMPLOYEE OF DEFENDANT-APPELLEE TOURIST WORLD SERVICE,
INC. EVEN AS AGAINST THE LATTER.
IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES HAD
NO RIGHT TO EVICT APPELLANT MRS. LINA O. SEVILLA FROM THE A.
MABINI OFFICE BY TAKING THE LAW INTO THEIR OWN HANDS.
V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL APPELLEE
NOGUERA'S RESPONSIBILITY FOR APPELLANT LINA O. SEVILLA'S
FORCIBLE DISPOSSESSION OF THE A. MABINI PREMISES.
VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT APPELLANT
MRS. LINA O. SEVILLA SIGNED MERELY AS GUARANTOR FOR RENTALS.
On the foregoing facts and in the light of the errors asigned the issues to be resolved are:
1. Whether the appellee Tourist World Service unilaterally disco the telephone
line at the branch office on Ermita;
2. Whether or not the padlocking of the office by the Tourist World Service was
actionable or not; and
3. Whether or not the lessee to the office premises belonging to the appellee
Noguera was appellees TWS or TWS and the appellant.
In this appeal, appealant Lina Sevilla claims that a joint bussiness venture was
entered into by and between her and appellee TWS with offices at the Ermita
branch office and that she was not an employee of the TWS to the end that her
relationship with TWS was one of a joint business venture appellant made
declarations showing:
1. Appellant Mrs. Lina 0. Sevilla, a prominent figure and wife of
an eminent eye, ear and nose specialist as well as a imediately
columnist had been in the travel business prior to the
establishment of the joint business venture with appellee Tourist
World Service, Inc. and appellee Eliseo Canilao, her compadre,
she being the godmother of one of his children, with her own
clientele, coming mostly from her own social circle (pp. 3-6 tsn.
February 16,1965).
2. Appellant Mrs. Sevilla was signatory to a lease agreement
dated 19 October 1960 (Exh. 'A') covering the premises at A.
Mabini St., she expressly warranting and holding [sic] herself
'solidarily' liable with appellee Tourist World Service, Inc. for the
prompt payment of the monthly rentals thereof to other appellee
Mrs. Noguera (pp. 14-15, tsn. Jan. 18,1964).
3. Appellant Mrs. Sevilla did not receive any salary from appellee
Tourist World Service, Inc., which had its own, separate office
located at the Trade & Commerce Building; nor was she an
employee thereof, having no participation in nor connection with
said business at the Trade & Commerce Building (pp. 16-18 tsn
Id.).
4. Appellant Mrs. Sevilla earned commissions for her own
passengers, her own bookings her own business (and not for
any of the business of appellee Tourist World Service, Inc.)
obtained from the airline companies. She shared the 7%
commissions given by the airline companies giving appellee

Tourist World Service, Lic. 3% thereof aid retaining 4% for

herself (pp. 18 tsn. Id.)
5. Appellant Mrs. Sevilla likewise shared in the expenses of
maintaining the A. Mabini St. office, paying for the salary of an
office secretary, Miss Obieta, and other sundry expenses, aside
from desicion the office furniture and supplying some of fice
furnishings (pp. 15,18 tsn. April 6,1965), appellee Tourist World
Service, Inc. shouldering the rental and other expenses in
consideration for the 3% split in the co procured by appellant
Mrs. Sevilla (p. 35 tsn Feb. 16,1965).
6. It was the understanding between them that appellant Mrs.
Sevilla would be given the title of branch manager for
appearance's sake only (p. 31 tsn. Id.), appellee Eliseo Canilao
admit that it was just a title for dignity (p. 36 tsn. June 18, 1965testimony of appellee Eliseo Canilao pp. 38-39 tsn April 61965testimony of corporate secretary Gabino Canilao (pp- 2-5,
Appellants' Reply Brief)
Upon the other hand, appellee TWS contend that the appellant was an employee
of the appellee Tourist World Service, Inc. and as such was designated
manager. 1
xxx xxx xxx
The trial court 2 held for the private respondent on the premise that the private respondent, Tourist
World Service, Inc., being the true lessee, it was within its prerogative to terminate the lease and
padlock the premises. 3 It likewise found the petitioner, Lina Sevilla, to be a mere employee of
said Tourist World Service, Inc. and as such, she was bound by the acts of her employer. 4 The
respondent Court of Appeal 5 rendered an affirmance.
The petitioners now claim that the respondent Court, in sustaining the lower court, erred.
Specifically, they state:
I
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS
DISCRETION IN HOLDING THAT "THE PADLOCKING OF THE PREMISES BY TOURIST
WORLD SERVICE INC. WITHOUT THE KNOWLEDGE AND CONSENT OF THE APPELLANT
LINA SEVILLA ... WITHOUT NOTIFYING MRS. LINA O. SEVILLA OR ANY OF HER
EMPLOYEES AND WITHOUT INFORMING COUNSEL FOR THE APPELLANT (SEVILIA), WHO
IMMEDIATELY BEFORE THE PADLOCKING INCIDENT, WAS IN CONFERENCE WITH THE
CORPORATE SECRETARY OF TOURIST WORLD SERVICE (ADMITTEDLY THE PERSON
WHO PADLOCKED THE SAID OFFICE), IN THEIR ATTEMP AMICABLY SETTLE THE
CONTROVERSY BETWEEN THE APPELLANT (SEVILLA) AND THE TOURIST WORLD
SERVICE ... (DID NOT) ENTITLE THE LATTER TO THE RELIEF OF DAMAGES" (ANNEX "A"
PP. 7,8 AND ANNEX "B" P. 2) DECISION AGAINST DUE PROCESS WHICH ADHERES TO THE
RULE OF LAW.
II
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS
DISCRETION IN DENYING APPELLANT SEVILLA RELIEF BECAUSE SHE HAD "OFFERED TO
WITHDRAW HER COMP PROVIDED THAT ALL CLAIMS AND COUNTERCLAIMS LODGED BY
BOTH APPELLEES WERE WITHDRAWN." (ANNEX "A" P. 8)
III
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS
DISCRETION IN DENYING-IN FACT NOT PASSING AND RESOLVING-APPELLANT SEVILLAS
CAUSE OF ACTION FOUNDED ON ARTICLES 19, 20 AND 21 OF THE CIVIL CODE ON
RELATIONS.

IV
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS
DISCRETION IN DENYING APPEAL APPELLANT SEVILLA RELIEF YET NOT RESOLVING
HER CLAIM THAT SHE WAS IN JOINT VENTURE WITH TOURIST WORLD SERVICE INC. OR
AT LEAST ITS AGENT COUPLED WITH AN INTEREST WHICH COULD NOT BE TERMINATED
OR REVOKED UNILATERALLY BY TOURIST WORLD SERVICE INC. 6
As a preliminary inquiry, the Court is asked to declare the true nature of the relation between Lina
Sevilla and Tourist World Service, Inc. The respondent Court of see fit to rule on the question, the
crucial issue, in its opinion being "whether or not the padlocking of the premises by the Tourist
World Service, Inc. without the knowledge and consent of the appellant Lina Sevilla entitled the
latter to the relief of damages prayed for and whether or not the evidence for the said appellant
supports the contention that the appellee Tourist World Service, Inc. unilaterally and without the
consent of the appellant disconnected the telephone lines of the Ermita branch office of the
appellee Tourist World Service, Inc. 7 Tourist World Service, Inc., insists, on the other hand, that
Lina SEVILLA was a mere employee, being "branch manager" of its Ermita "branch" office and
that inferentially, she had no say on the lease executed with the private respondent, Segundina
Noguera. The petitioners contend, however, that relation between the between parties was one of
joint venture, but concede that "whatever might have been the true relationship between Sevilla
and Tourist World Service," the Rule of Law enjoined Tourist World Service and Canilao from
taking the law into their own hands, 8 in reference to the padlocking now questioned.
The Court finds the resolution of the issue material, for if, as the private respondent, Tourist World
Service, Inc., maintains, that the relation between the parties was in the character of employer
and employee, the courts would have been without jurisdiction to try the case, labor disputes
being the exclusive domain of the Court of Industrial Relations, later, the Bureau Of Labor
Relations, pursuant to statutes then in force. 9
In this jurisdiction, there has been no uniform test to determine the evidence of an employeremployee relation. In general, we have relied on the so-called right of control test, "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." 10 Subsequently, however, we
have considered, in addition to the standard of right-of control, the existing economic conditions
prevailing between the parties, like the inclusion of the employee in the payrolls, in determining
the existence of an employer-employee relationship. 11
The records will show that the petitioner, Lina Sevilla, was not subject to control by the private
respondent Tourist World Service, Inc., either as to the result of the enterprise or as to the means
used in connection therewith. In the first place, under the contract of lease covering the Tourist
Worlds Ermita office, she had bound herself in solidumas and for rental payments, an
arrangement that would be like claims of a master-servant relationship. True the respondent
Court would later minimize her participation in the lease as one of mere guaranty, 12 that does not
make her an employee of Tourist World, since in any case, a true employee cannot be made to
part with his own money in pursuance of his employer's business, or otherwise, assume any
liability thereof. In that event, the parties must be bound by some other relation, but certainly not
employment.
In the second place, and as found by the Appellate Court, '[w]hen the branch office was opened,
the same was run by the herein appellant Lina O. Sevilla payable to Tourist World Service, Inc. by
any airline for any fare brought in on the effort of Mrs. Lina Sevilla. 13 Under these circumstances,
it cannot be said that Sevilla was under the control of Tourist World Service, Inc. "as to the means
used." Sevilla in pursuing the business, obviously relied on her own gifts and capabilities.
It is further admitted that Sevilla was not in the company's payroll. For her efforts, she retained
4% in commissions from airline bookings, the remaining 3% going to Tourist World. Unlike an
employee then, who earns a fixed salary usually, she earned compensation in fluctuating
amounts depending on her booking successes.
The fact that Sevilla had been designated 'branch manager" does not make her, ergo, Tourist
World's employee. As we said, employment is determined by the right-of-control test and certain
economic parameters. But titles are weak indicators.
In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a consequence,
accepting Lina Sevilla's own, that is, that the parties had embarked on a joint venture or

otherwise, a partnership. And apparently, Sevilla herself did not recognize the existence of such a
relation. In her letter of November 28, 1961, she expressly 'concedes your [Tourist World Service,
Inc.'s] right to stop the operation of your branch office 14 in effect, accepting Tourist World Service,
Inc.'s control over the manner in which the business was run. A joint venture, including a
partnership, presupposes generally a of standing between the joint co-venturers or partners, in
which each party has an equal proprietary interest in the capital or property contributed 15 and
where each party exercises equal rights in the conduct of the business. 16 furthermore, the parties
did not hold themselves out as partners, and the building itself was embellished with the electric
sign "Tourist World Service, Inc. 17in lieu of a distinct partnership name.
It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to (wo)man the
private respondent, Tourist World Service, Inc.'s Ermita office, she must have done so pursuant to
a contract of agency. It is the essence of this contract that the agent renders services "in
representation or on behalf of another. 18 In the case at bar, Sevilla solicited airline fares, but she
did so for and on behalf of her principal, Tourist World Service, Inc. As compensation, she
received 4% of the proceeds in the concept of commissions. And as we said, Sevilla herself
based on her letter of November 28, 1961, pre-assumed her principal's authority as owner of the
business undertaking. We are convinced, considering the circumstances and from the respondent
Court's recital of facts, that the ties had contemplated a principal agent relationship, rather than a
joint managament or a partnership..
But unlike simple grants of a power of attorney, the agency that we hereby declare to be
compatible with the intent of the parties, cannot be revoked at will. The reason is that it is one
coupled with an interest, the agency having been created for mutual interest, of the agent and the
principal. 19 It appears that Lina Sevilla is a bona fide travel agent herself, and as such, she had
acquired an interest in the business entrusted to her. Moreover, she had assumed a personal
obligation for the operation thereof, holding herself solidarily liable for the payment of rentals. She
continued the business, using her own name, after Tourist World had stopped further operations.
Her interest, obviously, is not to the commissions she earned as a result of her business
transactions, but one that extends to the very subject matter of the power of management
delegated to her. It is an agency that, as we said, cannot be revoked at the pleasure of the
principal. Accordingly, the revocation complained of should entitle the petitioner, Lina Sevilla, to
damages.
As we have stated, the respondent Court avoided this issue, confining itself to the telephone
disconnection and padlocking incidents. Anent the disconnection issue, it is the holding of the
Court of Appeals that there is 'no evidence showing that the Tourist World Service, Inc.
disconnected the telephone lines at the branch office. 20 Yet, what cannot be denied is the fact
that Tourist World Service, Inc. did not take pains to have them reconnected. Assuming, therefore,
that it had no hand in the disconnection now complained of, it had clearly condoned it, and as
owner of the telephone lines, it must shoulder responsibility therefor.
The Court of Appeals must likewise be held to be in error with respect to the padlocking incident.
For the fact that Tourist World Service, Inc. was the lessee named in the lease con-tract did not
accord it any authority to terminate that contract without notice to its actual occupant, and to
padlock the premises in such fashion. As this Court has ruled, the petitioner, Lina Sevilla, had
acquired a personal stake in the business itself, and necessarily, in the equipment pertaining
thereto. Furthermore, Sevilla was not a stranger to that contract having been explicitly named
therein as a third party in charge of rental payments (solidarily with Tourist World, Inc.). She could
not be ousted from possession as summarily as one would eject an interloper.
The Court is satisfied that from the chronicle of events, there was indeed some malevolent design
to put the petitioner, Lina Sevilla, in a bad light following disclosures that she had worked for a
rival firm. To be sure, the respondent court speaks of alleged business losses to justify the
closure '21 but there is no clear showing that Tourist World Ermita Branch had in fact sustained
such reverses, let alone, the fact that Sevilla had moonlit for another company. What the
evidence discloses, on the other hand, is that following such an information (that Sevilla was
working for another company), Tourist World's board of directors adopted two resolutions
abolishing the office of 'manager" and authorizing the corporate secretary, the respondent Eliseo
Canilao, to effect the takeover of its branch office properties. On January 3, 1962, the private
respondents ended the lease over the branch office premises, incidentally, without notice to her.
It was only on June 4, 1962, and after office hours significantly, that the Ermita office was
padlocked, personally by the respondent Canilao, on the pretext that it was necessary to Protect
the interests of the Tourist World Service. "22 It is strange indeed that Tourist World Service, Inc.
did not find such a need when it cancelled the lease five months earlier. While Tourist World

Service, Inc. would not pretend that it sought to locate Sevilla to inform her of the closure, but
surely, it was aware that after office hours, she could not have been anywhere near the premises.
Capping these series of "offensives," it cut the office's telephone lines, paralyzing completely its
business operations, and in the process, depriving Sevilla articipation therein.
This conduct on the part of Tourist World Service, Inc. betrays a sinister effort to punish Sevillsa it
had perceived to be disloyalty on her part. It is offensive, in any event, to elementary norms of
justice and fair play.
We rule therefore, that for its unwarranted revocation of the contract of agency, the private
respondent, Tourist World Service, Inc., should be sentenced to pay damages. Under the Civil
Code, moral damages may be awarded for "breaches of contract where the defendant acted ... in
bad faith. 23
We likewise condemn Tourist World Service, Inc. to pay further damages for the moral injury done
to Lina Sevilla from its brazen conduct subsequent to the cancellation of the power of attorney
granted to her on the authority of Article 21 of the Civil Code, in relation to Article 2219 (10)
thereof
ART. 21. Any person who wilfully causes loss or injury to another in a manner
that is contrary to morals, good customs or public policy shall compensate the
latter for the damage. 24
ART. 2219. Moral damages 25 may be recovered in the following and analogous
cases:
xxx xxx xxx
(10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34, and 35.
The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby ordered to respond for the
same damages in a solidary capacity.
Insofar, however, as the private respondent, Segundina Noguera is concerned, no evidence has
been shown that she had connived with Tourist World Service, Inc. in the disconnection and
padlocking incidents. She cannot therefore be held liable as a cotortfeasor.
The Court considers the sums of P25,000.00 as and for moral damages,24 P10,000.00 as
exemplary damages,25 and P5,000.00 as nominal 26 and/or temperate 27 damages, to be just, fair,
and reasonable under the circumstances.
WHEREFORE, the Decision promulgated on January 23, 1975 as well as the Resolution issued
on July 31, 1975, by the respondent Court of Appeals is hereby REVERSED and SET ASIDE.
The private respondent, Tourist World Service, Inc., and Eliseo Canilao, are ORDERED jointly
and severally to indemnify the petitioner, Lina Sevilla, the sum of 25,00.00 as and for moral
damages, the sum of P10,000.00, as and for exemplary damages, and the sum of P5,000.00, as
and for nominal and/or temperate damages.
Costs against said private respondents.
SO ORDERED.
[G.R. No. 118101. September 16, 1996]
EDDIE DOMASIG, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (SECOND
DIVISION), CATA GARMENTS CORPORATION and/or OTTO ONG and CATALINA
CO, respondents.
DECISION
PADILLA, J.:

This petition for certiorari under Rule 65 of the Rules of Court seeks to nullify and set aside
the Resolution[1] of respondent National Labor Relations Commission (NLRC) rendered on 20
September 1994 remanding the records of the case to the arbitration branch of origin for further
proceedings.
The antecedent facts as narrated by public respondent in the assailed resolution are as
follows:
The complaint was instituted by Eddie Domasig against respondents Cata Garments Corporation,
a company engaged in garments business and its owner/manager Otto Ong and Catalina Co for
illegal dismissal, unpaid commission and other monetary claim[s]. Complainant alleged that he
started working with the respondent on July 6, 1986 as Salesman when the company was still
named Cato Garments Corporation; that three (3) years ago, because of a complaint against
respondent by its workers, it changed its name to Cata Garments Corporation; and that on August
29, 1992, he was dismissed when respondent learned that he was being pirated by a rival
corporation which offer he refused. Prior to his dismissal, complainant alleged that he was
receiving a salary of P1,500.00 a month plus commission. On September 3, 1992 he filed the
instant complaint.
Respondent denied complainants claim that he is a regular employee contending that he is a
mere commission agent who receives a commission of P5.00 per piece of article sold at regular
price and P2.50 per piece sold in [sic] bargain price; that in addition to commission, complainant
received a fixed allowance of P1,500.00 a month; that he had no regular time schedule; and that
the company come [sic] into existence only on September 17, 1991. In support of its claim that
complainant is a commission agent, respondent submitted as Annexes B and B-1 the List of
Sales Collections, Computation of Commission due, expenses incurred, cash advances received
for the month of January and March 1992 (Rollo pp. 22-27). Respondent further contends that
complainant failed to turn over to the respondent his collection from two (2) buyers as per affidavit
executed by these buyers (Rollo pp. 28-29) and for which, according to respondent it initiated
criminal proceedings against the complainant.
The Labor Arbiter held that complainant was illegally dismissed and entitled to reinstatement and
backwages as well as underpayment of salary; 13th month pay; service incentive leave and legal
holiday. The Arbiter also awarded complainant his claim for unpaid commission in the amount
of P143,955.00.[2]
Private respondents appealed the decision of the labor arbiter to public respondent. As
aforesaid, the NLRC resolved to remand the case to the labor arbiter for further proceeding. It
declared as follows:
We find the decision of the Labor Arbiter not supported by evidence on record. The issue of
whether or not complainant was a commission agent was not fully resolved in the assailed
decision. It appears that the Labor Arbiter failed to appreciate the evidences submitted by
respondent as Annexes B and B-1 (Rollo pp. 22-27) in support of its allegation as regard[s] the
nature of complainants employment. Neither is there a showing that the parties were required to
adduce further evidence to support their respective claim. The resolution of the nature of
complainants employment is vital to the case at bar considering that it would be determinative to
his entitlement of monetary benefits. The same is similarly true as regard the claim [sic] for
unpaid commission. The amount being claim [sic] for unpaid commission as big as it is requires
substantial proof to establish the entitlement of the complainant to the same. We take note of the
respondents claim that while they admit that complainant has an unpaid commission due him, the
same is only for his additional sale of 4,027 pieces at regular price and 1,047 pieces at bargain
price for a total sum of (P20,135.00 + 2,655.00) or P22,820.00 as appearing in the list of Sales
and unpaid commission (Annex C and C-1' Appeal, Rollo pp. 100-102). Said amount according to
respondent is being withheld by them pending the accounting of money collected by complainant
from his two (2) buyers which was not remitted to them. Considering the conflicting version of the
parties regarding the issues on hand, it was incumbent on the Labor Arbiter to conduct further
proceedings thereon. The ends of justice would better be served if both parties are given the
opportunity to ventilate further their positions.[3]
In their comment on the petition at bar, private respondents agree with the finding of the
NLRC that the nature of petitioners employment with private respondents is vital to the case as it
will determine the monetary benefits to which he is entitled. They further aver that the evidence
presented upon which the labor arbiter based her decision is insufficient, so that the NLRC did
not commit grave abuse of discretion in remanding the case to the arbitration branch of origin for
further proceedings.

The comment of the Solicitor General is substantially the same as that of private
respondents, i.e., there is no sufficient evidence to prove employer-employee relationship
between the parties. Furthermore, he avers that the order of the NLRC to the labor arbiter for
further proceedings does not automatically translate to a protracted trial on the merits for such
can be faithfully complied with through the submission of additional documents or pleadings only.
The only issue to be resolved in this petition is whether or not the NLRC gravely abused its
discretion in vacating and setting aside the decision of the labor arbiter and remanding the case
to the arbitration branch of origin for further proceedings.
In essence, respondent NLRC was not convinced that the evidence presented by the
petitioner, consisting of the identification card issued to him by private respondent corporation and
the cash vouchers reflecting his monthly salaries covering the months stated therein, settled the
issue of employer-employee relationship between private respondents and petitioner.
It has long been established that in administrative and quasi-judicial proceedings, substantial
evidence is sufficient as a basis for judgment on the existence of employer-employee
relationship. No particular form of evidence is required to prove the existence of such employeremployee relationship.Any competent and relevant evidence to prove the relationship may be
admitted.[4]
Substantial evidence has been defined to be such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion, and its absence is not shown by stressing that
there is contrary evidence on record, direct or circumstantial, for the appellate court cannot
substitute its own judgment or criterion for that of the trial court in determining wherein lies the
weight of evidence or what evidence is entitled to belief. [5]
In a business establishment, an identification card is usually provided not only as a security
measure but mainly to identify the holder thereof as a bona fide employee of the firm that issues
it. Together with the cash vouchers covering petitioners salaries for the months stated therein, we
agree with the labor arbiter that these matters constitute substantial evidence adequate to
support a conclusion that petitioner was indeed an employee of private respondent.
Section 4, Rule V of the Rules of Procedure of the National Labor Relations Commission
provides thus:
Section 4. Determination of Necessity of Hearing. Immediately after the submission of the parties
of their position papers/memoranda, the Labor Arbiter shall motu propio determine whether there
is need for a formal trial or hearing. At this stage, he may, at his discretion and for the purpose of
making such determination, ask clarificatory questions to further elicit facts or information,
including but not limited to the subpoena of relevant documentary evidence, if any, from any party
or witness.
It is clear from the law that it is the arbiters who are authorized to determine whether or not there
is a necessity for conducting formal hearings in cases brought before them for adjudication. Such
determination is entitled to great respect in the absence of arbitrariness. [6]
In the case at bar, we do not believe that the labor arbiter acted arbitrarily. Contrary to the
finding of the NLRC, her decision at least on the existence of an employer-employee relationship
between private respondents and petitioner, is supported by substantial evidence on record.
The list of sales collection including computation of commissions due, expenses incurred
and cash advances received (Exhibits B and B-1) which, according to public respondent, the
labor arbiter failed to appreciate in support of private respondents allegation as regards the
nature of petitioners employment as a commission agent, cannot overcome the evidence of the
ID card and salary vouchers presented by petitioner which private respondents have not
denied. The list presented by private respondents would even support petitioners allegation that,
aside from a monthly salary ofP1,500.00, he also received commissions for his work as a
salesman of private respondents.
Having been in the employ of private respondents continuously for more than one year,
under the law, petitioner is considered a regular employee. Proof beyond reasonable doubt is not
required as a basis for judgment on the legality of an employers dismissal of an employee, nor
even preponderance of evidence for that matter, substantial evidence being sufficient.
[7]
Petitioners contention that private respondents terminated his employment due to their

suspicion that he was being enticed by another firm to work for it was not refuted by private
respondents. The labor arbiters conclusion that petitioners dismissal is therefore illegal, is not
necessarily arbitrary or erroneous. It is entitled to great weight and respect.
It was error and grave abuse of discretion for the NLRC to remand the case for further
proceedings to determine whether or not petitioner was private respondents employee. This
would only prolong the final disposition of the complaint. It is stressed that, in labor cases,
simplification of procedures, without regard to technicalities and without sacrificing the
fundamental requisites of due process, is mandated to ensure the speedy administration of
justice.[8]
After all, Article 218 of the Labor Code grants the Commission and the labor arbiter broad
powers, including issuance of subpoena, requiring the attendance and testimony of witnesses or
the production of such documentary evidence as may be material to a just determination of the
matter under investigation.
Additionally, the National Labor Relations Commission and the labor arbiter have authority
under the Labor Code to decide a case based on the position papers and documents submitted
without resorting to the technical rules of evidence. [9]
However, in view of the need for further and correct computation of the petitioners
commissions in the light of the exhibits presented and the dismissal of the criminal cases filed
against petitioner, the labor arbiter is required to undertake a new computation of the
commissions to which petitioner may be entitled, within thirty (30) days from submission by the
parties of all necessary documents.
WHEREFORE, the resolutions of the public respondent dated 20 September 1994 and 9
November 1994 are SET ASIDE. The decision of the labor arbiter dated 19 May 1993 is
REINSTATED and AFFIRMED subject to the modification above-stated as regards a recomputation by the labor arbiter of the commissions to which petitioner maybe actually entitled.
SO ORDERED.
G.R. No. L-66890 April 15, 1988
HERMINIO FLORES and HERMINIA FLORES, petitioners,
vs.
FUNERARIA NUESTRO and /or FORTUNATO NUESTRO and the NATIONAL LABOR
RELATIONS COMMISSION, respondents.

YAP, J.:
In this petition for certiorari, petitioners seek to annul and set aside the decision of the National
Labor Relations Commission (NLRC), dated December 6, 1983, dismissing their complaint for
illegal dismissal but ordering respondents to pay them their living allowances from October 1980
until October 1982 when their employment was terminated. Petitioners pray that judgment be
rendered ordering the respondents (1) to reinstate them to their former or equivalent positions,
with full backwages from the time of their illegal dismisss up to their actual reinstatement, or if
reinstatement should become impossible because of the strained relations between petitioners
and respondent, to pay them separation pay; and (b) to pay petitioners their unpaid benefits
provided for under all the labor standard laws invoked by them.
It appears from the record that petitioner spouses Herminio and Herminia Flores had worked for
respondent Fortunato Nuestro in his funeral parlor known as Funeraria Nuestro since June, 1976,
respectively, as helper- utility man and as bookkeeper, embalmer and cashier. On October 7,
1980, respondent Fortunato Nuestro registered the petitioner spouses with the Social Security
System, as his employees with a monthly salary of P200.00 each. Thereafter, Herminio Flores
was paid P750.00 a month, plus P200.00 monthly allowance, while Herminia's salary was
increased to P500.00 a month. The petitioners were given living quarters right inside the
compound of the funeral parlor.

On October 30,1982, Herminio Flores and respondent Fortunato Nuestro had an altercation,
during which the former was physically assaulted by the latter and suffered a punctured wound on
the lower and an abrasion in the scapular region (L). Herminio was treated at the Bataan
Provincial Hospital and subsequently, he filed an action for slight physical injuries against the
respondent, which was docketed as Criminal Case No. 2249 of the Municipal Court of Pilar,
Bataan. Respondent, however, claimed that he merely shoved the arm of Herminio when the
latter pointed a finger at him and uttered abusive remarks against him. As a result of the incident
and fearing for his safety, petitioner Herminio Flores, together with his family, was compelled to
vacate his living quarters at the funerall parlor and had to seek protection from the Integrated
National Police of Pilar, Bataan.
On November 15, 1982, petitioners filed a complaint against respondent for illegal dismissal,
underpayment of living allowances, non-payment of five (5) days incentive leave and nonpayment of overtime compensation. The respondent denied the existence of employer-employee
relation with the petitioners and further alleged that in any event the petitioners had abandoned
their work on October 30, 1982.
On May 23,1983, Labor Arbiter Federico Bernardo rendered a decision finding that no employeremployee relationship existed between the parties and dismissing the complaint. He held that
Herminio Flores was merely a contractual worker paid on a piece-work basis, while Herminia
Flores was a domestic helper; and that on October 30, 1982, they abandoned their work.
On appeal, the National Labor Relations Commission, while holding that an employer-employee
relationship existed between the parties, found that the petitioners had abandoned their work,
thus precluding them from seeking reinstatement with backwages. However, the Commission
ordered respondent to pay the petitioners their living allowances from October 1980 until October
1982 when the employment relations were severed.
In finding the distance of an employer-employee relationship between respondent and petitioners,
the NLRC committed no grave abuse of discretion. That the respondent had registered the
petitioners with the Social Security System is proof that they were indeed his employees. The
coverage of Social Security Law is predicated on the existence of an employer-employee
relationship. 1
On the issue of abandonment, however, we find the ruling of the NLRC that petitioners had
abandoned their employment to be contrary to the evidence. To constitute abandonment, there
must be a clear and deliberate intent to discontinue one's employment without any intention of
returning back . 2 The record shows that petitioners were only compelled to leave the premises,
which they regarded as their home, when the respondent inflicted physical injuries upon petitioner
Herminio Flores. Apparently, what they had given up was only their place of residence but not
their jobs. The immediate filing of a complaint for illegal dismissal against respondent with a
prayer for reinstatement shows that petitioners were not abandoning their work . 3 As aptly
observed by the Solicitor General, to uphold the ruling of the respondent Commission that the
petitioners abandoned their job "is to put a premium on the commission of a crime by an
employer against an employee to force the latter to leave his employment so as to preclude said
employee from seeking reinstatement with backwages."
Where there is a finding of illegal dismiss, the general principle is that an employee is entitled to
reinstatement and to receive backwages from the date of his dismissal up to the time of his
reinstatement. However, the circumstances in this case make the reinstatement of petitioners no
longer feasible; any possible confrontation between the parties in view of their already strained
relationship should be avoided. An award of six (6) months backwages based on their latest is a
reasonable alternative to reinstatement under the circumstances. 4 As found by the respondent
Commission, respondent should also pay the petitioners their living allowances from October
1980 until October 1982 when their employment relations were severed. As to petitioners' other
money claims, we find no reason to disturb the Commission's ruling disallowing them for
insufficiency of evidence.
WHEREFORE, the decision appealed from is modified, and respondent is hereby ordered to pay
each petitioner 1) backwages equivalent to six (6) months pay, and 2) cost of living allowances
from October 1980 until October 1982.
SO ORDERED.
[G.R. No. 102467. June 13, 1997]

EQUITABLE BANKING CORPORATION, Chairman MANUEL L. MORALES, President &

Director GEORGE L. GO, Vice-Chairman & Director RICARDO J. ROMULO, ViceChairman & Director JOHN C.B. GO, Director HERMINIO B. BANICO, Director
FRANCISCO C. CHUA, Director PETER GO PAILIAN, Director RICARDO C. LEONG,
Director JULIUS T. LIMPE and Director PEDRO A. ORTIZ, petitioners, vs. HON.
NATIONAL LABOR RELATIONS COMMISSION, First Division, and RICARDO L.
SADAC, respondents.
DECISION
VITUG, J.:
In the special civil action of certiorari, the petitioners, in order to have a reasonable chance
of success, must be able to come up with proof that the tribunal, board or officer against whom
the petition is brought has, in the exercise of judicial or quasi-judicial function, acted without or in
excess of jurisdiction or with grave abuse of discretion amounting to lack or excess of
jurisdiction. In the instant petition, the Court is asked to rule against the National Labor Relations
Commission (NLRC) in holding private respondent Ricardo L. Sadac, Vice-President for the Legal
Department and General Counsel of petitioner Equitable Banking Corporation, to have been a
regular employee of the bank whose services could only be terminated in accordance with the
Labor Code. Petitioner bank submits that the services of private respondent, its legal counsel,
could be dispensed with at anytime pursuant to the provision on the cessation of lawyer-client
relationship under Rule 138 of the Rules of Court.
The facts, essentially, do not appear to be in dispute.
Private respondent Sadac was appointed, effective 01 August 1981, Vice-President for the
Legal Department of petitioner bank by its then President, Manuel L. Morales, with a monthly
salary ofP8,000.00, plus an allowance of P4,500.00 and a Christmas bonus equivalent to a twomonth salary.[1]On 08 December 1981, private respondent was also designated as the banks
General Counsel.Private respondent had these functions:
"Duties & Responsibilities
- Provides legal advice to the Board of Directors and Management of the Bank.
- Takes charge of all Bank cases arising from bank transactions and rendering opinions
on legal questions in connection therewith.
- Insures effective conduct of litigation, collection of past due accounts, and
investigation of irregularities and other legal matters affecting the interest of the
Bank.
- Participates in action of major character, financing, amendments to the Articles of
Incorporation and By-laws of the Bank, changes in corporate structures
acquisition and disposal of important segments of enterprises or real estate,
determination of action to comply with statutory and other government
requirements.
- Directs, plans, coordinates and maintains supervision and control over the staff of the
Legal Department.
- Provides for and insures proper documentation and notarization of all Bank
transactions.
- Assumes primary responsibility in the account of continuing research and studies on
questions of law affecting the Bank and its subsidiary corporations and the
formulation and development of legal opinions.
- Recommends appointments, promotions, transfers and disciplinary actions involving
Legal Department personnel.
- Establishes and maintains effective discipline, work performances, high level of
morale and cooperation among the staff.

Performs such other duties as may be assigned from time to time by the President and
the Board of Directors."[2]

The turning point in the relationship among the parties surfaced, when, on 26 June 1989,
nine lawyers[3] of the banks Legal Department, who were all under private respondent, addressed
a letter-petition to the Chairman of the Board of Directors, accusing private respondent of abusive
conduct, inefficiency, mismanagement, ineffectiveness and indecisiveness. [4] The individual
written complaints of each of the nine lawyers were attached to the letter-petition. Private
respondent was furnished with a copy of the letter.
Private respondent promptly responded and manifested an intention to file criminal, civil and
administrative charges against the nine lawyers. Petitioner Morales, by now Chairman of the
Board of Directors, called the contending lawyers to a conference in his office in an attempt to
resolve their differences. The meeting held on 29 June 1989, in the presence of Vice-President
for Personnel and Human Relations Dean Alejandro C. Reyes, apparently did not amount to
much and only resulted, it would seem, in a broad commitment of the parties to implement the
existing procedures and practices in the Legal Department. [5] The dialogue was marked, in
fact, by rancorous and very heated altercation between private respondent and his
subordinates. Mr. Morales considered the problem serious enough to merit the Boards
attention. In its meeting on 11 July 1989, the Board of Directors, apprised of the situation,
adopted a resolution directing one of its directors, petitioner Herminio B. Banico, to look further
into the matter and to determine a course of action for the best interest of the bank.
Petitioner Banico met with the complaining nine lawyers on 17 July 1989. He was warned
that if private respondent were to be retained in his position, the lawyers would resign en
masse. The following day, Mr. Banico saw private respondent. The latter denied the charges
leveled against him.Although the two would appear to have explored various alternatives and
avenues to solve the crisis, nothing positive, however, came out of their meeting. Convinced that
reconciliation was out of the question, Mr. Banico, on 08 August 1989, submitted a report to the
Board of Directors with these findings:
a. ABUSIVE CONDUCT
There is no doubt at all, in my mind that the charge of `abusive conduct against Atty. Sadac, in his
treatment in varying degrees, of the complaining lawyers, is true, as this is supported by
overwhelming evidence. Atty. Sadac himself, in effect, admitted this when he proferred his
apologies in the presence of the Chairman in the `confrontation held in the latters office.
b. MISMANAGEMENT
In my study and investigation, I found abundant evidence to support a finding of mismanagement
of the Legal Department by Atty. Sadac.
c. INEFFICIENCY, INEFFECTIVENESS, AND INDECISIVENESS
The above specific charges are each proven and/or established by the same nature of evidence.
[6]

Two days later, or on 10 August 1989, Mr. Morales issued a memorandum to private
respondent which, among other things, pertinently stated:
"x x x. The Board, however, feels that because during all its existence of almost forty (40) years,
the Bank never had in its employ any senior officer who had compelled it to resort to the
unfortunate, sorry and nasty spectacle of conducting a formal hearing (which of course is
distasteful to all parties concerned) of whatever charge such as the one lodged against you just to
terminate your services, consonant with the due process requirements of the Constitution, the
Labor Code, the Implementing Regulations thereof and other pertinent laws, it has chosen the
more compassionate option of waiting for your voluntary resignation from your employ with the
Bank.
In the meantime, since all the lawyers under you, by petitioning for a change in leadership of the
department despite the fact that all these lawyers have all been hired and promoted to their
positions upon your recommendation, have thus shown lack of confidence in you, the Board feels
it has no reason to continue reposing confidence in you and therefore elected to exercise its
prerogative as your client, under the rules of client and lawyer relationship to direct Atty. William

R. Veto, Legal Counsel of the Bank these many years to appear in substitution of you in all the
cases in which you are presently appearing as counsel of record for the Bank. For this purpose,
the Bank as your client, therefore, instructs you to deliver the folders of pleadings and documents
of all cases you are now personally handling and submit a list of all the cases where you appear
as the counsel of record for the bank and the corresponding titles thereof not later than the close
of office hours on Tuesday, August 15, 1989 so that the Legal Counsel of the Bank, Atty. William
R. Veto, could file his substitution of appearance in all said cases where you are counsel of
record. Atty. Veto has already been instructed and authorized by the Board to take over from you
the functions that you are now performing in the Legal Department." [7]
Reacting to the above memorandum, private respondent, on 14 August 1989 addressed a
letter to Board Chairman Morales, furnishing the other members of the Board, to the effect that
the report of Mr. Banico contained libelous statements and that the implementation of the
chairmans memorandum would lead to an illegal dismissal. Pointing out that he could not now in
conscience resign in the face of Mr. Banicos baseless and libelous findings, private respondent
requested for a full hearing by the Board of Directors so that he could clear his name. [8]
On 17 August 1989, petitioner Ricardo J. Romulo, Board Vice-Chairman, answered private
respondent. Mr. Romulo stressed that private respondents services were not terminated by the
Board which, instead, was merely exercising its managerial prerogative to control, conduct (its)
business in the manner (it) deems fit and to regulate the same. In reply to private respondents
request for a formal hearing, Mr. Romulo reiterated the Boards decision that it would be to the
best interest of all concerned if the distasteful spectacle" of a hearing would not be resorted to "in
order to adhere to (the bank's) long standing compassionate policy." [9] Mr. Romulo also said:
"We would like to emphasize that our decision as a Board did not dismiss you from the service of
the Bank. All that the Board is saying to you is that it has lost its confidence in you and therefore it
is patiently awaiting your resignation of course with your right of retirement pay in accordance
with the policy adopted by the Bank under these situations. Trust or confidence like love are
feelings which emanate from the heart and, as the song goes, `once a heart is torn apart it is
never the same again.' So also, confidence like a tooth once pulled can never be restored." [10]
In his memorandum of 28 August 1989 to the members of the Board, private respondent
again made a request for a full hearing and cautioned that, under Section 31 of the Corporation
Code, individual members of the Board could be held accountable for voting or assenting to
patently unlawful acts of the corporation.
On 31 August 1989, Mr. Romulo wrote back expressing, in part, as follows:
"7. The charge that you have been constructively dismissed is likewise without basis because as
we said before, you are free to remain in the employ of the bank if you so wish, even if the bank
were to incur the tremendous expense of continuing to pay your high salary just so it can continue
to adhere to its compassionate policy of avoiding ruining the future of any of its officers by a
possible dismissal for cause which is certainly bound to leak to the public. It is believed, however,
that there is no law which can compel an employer to give any of his employees any particular
work at all."[11]
Mr. Romulo stated that the banks confidence on private respondent had been lost most especially
in the light of (his) threats and that the latter could bring the matter up in the appropriate forum. [12]
Undaunted, private respondent, in his memorandum of 07 September 1989 to the individual
members of the Board of Directors, persisted in his request for a formal investigation. [13] Having
been unheeded, private respondent, on 09 November 1989, filed with the Manila arbitration
branch of the NLRC, a complaint, docketed NLRC Case No. 00-11-05252-89, against herein
petitioners for illegal dismissal and damages.[14]
After learning of the filing of the complaint, the Board of Directors, on 21 November 1989,
adopted Resolution No. 5803 terminating the services of private respondent in view of his
belligerence" and the Board's "honest belief that the relationship" between private respondent
and petitioner bank was one of "client and lawyer." Private respondent was removed from his
office occupancy in the bank and ordered disentitled, starting 10 August 1989, to any
compensation and other benefits. The Board instructed management to take the necessary steps
to "defend itself and all the members of the Board of Directors" from private respondent's
complaint.[15]

Pursuing their stand that the association between the bank and private respondent was one
of a client-lawyer relationship, herein petitioners filed a motion to dismiss the complaint with the
NLRC on the ground of lack of jurisdiction. [16] Private respondent, opposing the motion, insisted
on the existence of an employer-employee relationship between them. [17] In their reply, petitioners
added another ground for seeking a dismissal of the complaint, i.e., that under the ruling in Besa
vs. PNB,[18] the rule governing the duration of private respondents term was provided for by the
Rules of Court and not by the Labor Code.[19]
Following an exchange of position papers and other pleadings, Labor Arbiter Jovencio Ll.
Mayor, Jr., on 02 October 1990, rendered a decision dismissing the complaint for lack of merit.
[20]
The Labor Arbiter was convinced that the relationship between petitioner bank and private
respondent was one of lawyer-client based on the functions of the latter which only a lawyer with
highly trained legal mind, can effectively discharge. [21] He distinguished the instant controversy
from the situation in Hydro Resources Contractors Corporation vs. Pagalilauan [22] in that
herein private respondent, he said, only performed functions encompassed by the practice of law
while in Hydro Resources, the involved lawyer was a mere legal assistant tasked with certain
duties not all that related to the practice of law.The Labor Arbiter concluded that the complaint
stated no cause of action because a lawyer-client relationship should instead be governed by
Section 26, Rule 138, of the Rules of Court. On whether or not there were valid grounds to
terminate the services of private respondent, the Labor Arbiter, noting the letter-petition of the
nine subordinate lawyers of private respondent, said:
"x x x. The truth and veracity of these complaints were respectively affirmed under oath by each
and every one of these nine subordinate lawyers in their individual affidavits (Annexes `1-J' to `1R', inclusive), (Ibid). From these individual statements, it can be culled that complainant has been
charged, among others, with committing such acts as shouting and insulting lawyers even in the
presence of clients, having frequent outbursts of temper, being indecisive even on simple and
fundamental questions, of devoting time to private and personal matters such that he is always
out of the office, of being closed and narrow minded to the ideas of subordinates, and other
similar acts. These charges were never refuted by herein complainant and instead narrated a
general refutation x x x."[23]
The Labor Arbiter brushed aside private respondents claim that he was denied due process,
holding that private respondent was heard exhaustively on the matter of the charge lodged
against him and that, for valid practical reasons, petitioners were not in a position to accede to the
demand for a formal hearing.[24]
On appeal, the NLRC concluded differently. On 24 September 1991, the First Division of the
NLRC rendered a resolution[25] reversing the decision of the Labor Arbiter. It held that private
respondent was an employee of petitioner bank which never stated that complainant was an
outside counsel for he was never so [26] as against the pronouncement of the Court in Hydro
Resources that distinguished between an in-house counsel and an outside counsel hired on a
retainer basis. Certain other circumstances that likewise did not escape NLRCs attention were
that petitioner George L. Go, the banks president, had enjoined private respondent to attend a
bank-sponsored symposium on Japanese investment on 08 September 1989 at the Hotel
Intercontinental; that in petitioners letter of 31 August 1989, private respondent was referred to as
an employee; that in another letter, dated 24 November 1989, petitioner admitted having
terminated private respondents employment and requested the return of the 1988 Mitsubishi
Galant 1800 which he had acquired through the banks car plan; and that, through a
communication of 02 January 1990 of the Personnel and HRD Department, the bank announced
that private respondents employment had been terminated effective 21 November 1989.
Turning to the issue of whether or not the employment of private respondent was terminated
for cause, the NLRC held that because he had not been afforded a hearing in accordance with
law, there was no factual basis to support the allegation of loss of confidence made by petitioners
who, instead, had relied on the doctrine of res ipsa loquitor.
The NLRC ruled that private respondent was denied the right to due process with the banks
failure to observe the twin requirements of notice and hearing. The 10th August 1989
memorandum could not have been a substitute for notice because it did not manifest petitioners
intention to dismiss him from employment, and neither the meeting between private respondent
and the complaining lawyers nor those held between private respondent and petitioner Banico
could be considered the investigations which private respondent had consistently sought.

For having been made to undergo unnecessary embarrassment by being stripped of his
functions and made to undergo the sad and painful experience of reporting to office every day
doing nothing, the NLRC, citing Sibal vs. Notre Dame of Greater Manila,[27] awarded damages.
The NLRC, thereby concluded:
"WHEREFORE, in view of all the foregoing considerations, let the Decision of October 2, 1990
be, as it is hereby, SET ASIDE and a new one ENTERED declaring the dismissal of the
complainant as illegal, and consequently ordering the respondents jointly and severally to
reinstate him to his former position as bank Vice-President and General Counsel without loss of
seniority rights and other privileges, and to pay him full backwages and other benefits from the
time his compensation was withheld to his actual reinstatement, as well as moral damages
of P100,000.00, exemplary damages of P50,000.00, and attorney's fees equivalent to Ten
Percent (10%) of the monetary award. Should reinstatement be no longer possible due to
strained relations, the respondents are ordered likewise jointly and severally to grant separation
pay at one (1) month per year of service in the total sum of P293,650.00 with backwages and
other benefits from November 16, 1989 to September 15, 1991 (cut-off date subject to
adjustment) computed at P1,055,740.48, plus damages ofP100,000.00 (moral
damages), P50,000.00 (exemplary damages) and attorney's fees equal to Ten Percent (10%) of
all the monetary award, or a grand total of P1,649,329.53.
SO ORDERED."[28]
Petitioners filed a motion,[29] opposed by private respondent, [30] for a reconsideration of the
resolution.
The motion for reconsideration was still pending when private respondent, following an
exchange of yet additional pleadings, filed an urgent ex-parte motion for immediate reinstatement
grounded on Article 223 of the Labor Code. [31] On 07 November 1991, NLRC Executive Clerk
Pascual Y. Reyes addressed a communication, with the letterhead of the First Division of the
NLRC, to Attys. Vicente Abad Santos and William R. Veto, counsel for petitioners, which read:
"G R E E T I N G S :
Consistent with the NLRC New Rules and Procedure on Appeal under Republic Act 6715,
amending Article 223 of the Labor Code, RESPONDENT(s) is/are hereby directed within ten (10)
calendar days from receipt of this Order:
To immediately reinstate complainant under the same terms and conditions prevailing prior to his
dismissal or separation or, at RESPONDENT(s) option to reinstate him in the payroll, and to
submit proof of compliance thereof, otherwise, a Writ of Execution shall issue." [32]
Petitioners filed a motion to quash the "untitled document" which was claimed to be "highly
irregular."Private respondent countered, on the strength of the ruling in Aris (Phil.) Inc. vs.
NLRC,[33] that even before its amendment by Section 12 of R.A. 6715, Article 223 of the Labor
Code already allowed execution of decisions of the NLRC pending their appeal to the Secretary
of Labor and Employment, and that, under Section 2, Rule XII, of the New Rules of Procedure of
the NLRC, Executive Clerk Reyes could be said to be performing a function similar or equivalent
to that discharged by the Clerk of Court of the Court of Appeals.
Petitioners, on their part filed an urgent motion for immediate resolution of their motion for
reconsideration,[34] on account of what was felt to be the "dubious legality" of the directive for
reinstatement.
Pending the above incidents, particularly the motion for reconsideration of NLRCs resolution
that has reversed the Labor Arbiters decision, petitioners have filed the instant petition
for certiorari, with prayer for the issuance of a writ of preliminary injunction, before this Court. The
petition questions the resolution of the NLRC finding that an employer-employee relationship
existed between petitioner bank and private respondent invoking the rulings in Besa vs.
PNB[35] and Asis vs. Minister of Labor and Employment,[36] against that of Hydro Resources
Contractors vs. Pagalilauan;[37] that the facts on record do support valid grounds for terminating
the employment of private respondent; and that due process has been duly observed. The
petition likewise assails the NLRC for its monetary awards and in omitting to resolve the
allegation of forum-shopping committed by private respondent.

This Court required petitioners to post a cash bond in the amount of P500,000.00 for the
issuance of a temporary restraining order.[38]
Prefatorily, the Court must state that the filing of a motion for reconsideration of a decision of
the NLRC is prerequisite to the elevation of the case to this Court on a petition for certiorari. The
rule is aimed at enabling the commission to look into and correct its error or mistake, if any has
been committed, without the precipitate intervention of this Court. [39] The failure to allow that
opportunity for whatever reason is ordinarily a fatal procedural defect that could warrant the
dismissal of the petition.[40]
In this case, petitioners, instead of waiting for the resolution by the NLRC of their motion for
reconsideration, posthaste filed the instant petition. Its prematurity notwithstanding, the instant
petition for certiorari was given due course in order not to unduly delay the final disposition of the
case considering that the issues involved [41] have heretofore been ventilated practically to the limit
by the parties.
While the Court agrees with private respondent that execution pending appeal may be
ordered by the NLRC,[42] it is equally true, however, that where the dismissed employee's
reinstatement would lead to a strained relation between the employer and the employee or to an
atmosphere of antipathy and antagonism, the exception to the twin remedies of reinstatement
and payment of backwages can be invoked and reinstatement, which might become anathema to
industrial peace, could be held back pending appeal. [43] Nevertheless, the Court is not prepared to
preempt the NLRC and conclude that the directive for reinstatement is of dubious character. [44] It
can be assumed that had petitioners waited for NLRCs resolution on the motion for
reconsideration, the question on the regularity in the issuance of the directive for reinstatement
could have perhaps properly been delved into.
The existence of an employer-employee relationship is, itself, a factual question [45] well within
the province of the NLRC. Considering, nevertheless, that its findings are at odds with the Labor
Arbiter, the Court sees it fit to dwell a bit into the issue. [46]
In determining the existence of an employer-employee relationship, the following elements
are considered: (1) the selection and engagement of the employee; (2) the payment of wages; (3)
the power of dismissal, and (4) the power to control the employee's conduct, with the control test
generally assuming primacy in the overall consideration. The power of control refers to the
existence of the power and not necessarily to the actual exercise thereof. It is not essential, in
other words, for the employer to actually supervise the performance of duties of the employee; it
is enough that the former has the right to wield the power.[47]
The NLRC, in the instant case, based its finding that there existed an employer-employee
relationship between petitioner bank and private respondent on these factual settings:
"It was complainant's understanding with respondent Morales that he would be appointed and
assigned to the Legal Department as vice President with the same salary, privileges and benefits
granted by the respondent bank to its ranking senior officers. He was not hired as lawyer on a
retainership basis but as an officer of the bank.
Thus, the complainant was given an appointment as Vice President, Legal Department, effective
August 1, 1981, with a monthly salary of P8,000.00, monthly allowance of P4,500.00, and the
usual two months Christmas bonus based on basic salary likewise enjoyed by the other officers
of the bank.
Then, as part of the ongoing organization of the Legal Department, the position of General
Counsel of the bank was created and extended to the complainant. In addition to his duties as
Vice President of the bank, the complainant's duties and responsibilities were so defined as to
prove that he was a bank officer working under the supervision of the President and the Board of
Directors of the respondent bank.
In his more than eight years employment with the respondent bank, the complainant was given
the usual payslips to evidence his monthly gross compensation. The respondent bank, as
employer, withheld taxes due to the Bureau of Internal Revenue from the complainant's salary as
employee. Moreover, the bank enrolled the complainant as its employee under the Social
Security System and Medicare programs. The complainant contributed to the bank Employees'
Provident Fund.

When the respondent bank changed its payroll accounting system in September 1988 by
appointing SGV & Co. to handle it and Far East Bank & Trust Company to pay the salaries and
other benefits of Equitable Banking Corporation officers, the complainant was included as one of
corporate officers. Specifically, that there were eleven Far East Bank and Trust Company credit
memos starting October 13, 1988 up to September 13, 1989 received by the complainant from
FBTC crediting his salary and Christmas bonus to his account with FBTC per instruction of the
respondent bank.
In as much as the complainant and the lawyers in the Legal Department were receiving salaries
and other benefits as other bank officers and employees, the attorney's fees, documentary and
notarial fees earned in the exercise of their profession as in-house lawyers were not given to or
even shared with them, instead all were credited to the income of the bank. In 1987 and 1988, the
complainant and his subordinate lawyers were able to generate by way of attorney's fees,
documentary and notarial fees a total income of P973,028.00 for the bank('s) benefit. In turn, the
respondent bank shouldered the professional tax and Integrated Bar of the Philippines dues of
the complainant and his subordinate lawyers. Further proofs that there existed employeremployee relationship between the respondent bank and the complainant are the following, to wit:
(1) Complainant's monthly attendance, like those of other bank officers, was recorded by the
Chief Security Officer and reported to the Office of the President with copy of the report furnished
to the bank Personnel and HRD Department.
(2) Complainant was authorized by the President to sign for and in behalf of the bank contracts
covering legal services of lawyers to be retained by the respondent bank for its branches on
periodical retainership basis.
(3) Complainant participated as part of management in annual Management Planning
Conferences which started in 1986 on objective-setting and long-range planning in response to
the requirement of the rapidly changing environment.
(4) Respondent bank extended to complainant the benefit (of) a car plan like any other qualified
senior officer of the bank.
(5) Respondent bank since 1982 continuously reported and included the complainant as one of
its senior officers in its statements of financial condition holding the position of Vice President.
These bank statements have been distributed and circularized to the public, including bank
clients and government entities.
(6) Complainant, like other bank officers, prepared his biographical data for submission to the
Central Bank after his assumption of duties in 1981. Thereafter, and pursuant to the regulations of
the Central Bank, he has been required to update annually his biographical data." [48]
It would virtually be foolhardy to so challenge the NLRC as having committed grave abuse of
discretion in coming up with its above findings. Just to the contrary, NLRC appears to have been
rather exhaustive in its examination of this particular question (existence or absence of an
employer-employee relationship between the parties). Substantial evidence, which is the
quantum of evidence required to establish a fact in cases before administrative and quasijudicial bodies, connotes merely that amount of relevant evidence which a reasonable mind might
accept to be adequate in justifying a conclusion. [49]
The rulings in Besa and Asis, cited by petitioners, could not be all that controlling in this
instance.In both cases, the question of whether or not the parties had an employer-employee
relationship was not the focal point of controversy. In Besa, the Court said:
Petitioners reliance on the constitutional provision against removal without cause is misplaced. It
is appropriate to invoke it when an officer or employee in the civil service enjoying a fixed term is
made to lose his position without warrant or justification. It certainly finds no application when the
duration of ones term depends on the will of the appointing power. That is so where the position
held is highly confidential in character. Such is the case of the Chief Legal Counsel of respondent
Philippine National Bank. That is our answer to the specific question before us. Our decision is
limited to the validity of the action taken by respondent Bank. We do not by any means intimate
an opinion as to the legal consequences attaching to an action similar in character taken by any
other office or agency of the government concerning a lawyer in its staff, especially one who was
not employed precisely because of the marked degree of confidence reposed in him, but rather
because of his technical competence.

As far as the petitioner is concerned, however, it is our conclusion that he could not plausibly
contend that there was a removal in the constitutional sense as what did take place was a
termination of official relation. Accepting as he did the position of chief legal adviser, the essence
of which is the utmost degree of confidence involving such `close intimacy which insures freedom
of intercourse without embarrassment or freedom from misgivings of betrayals whether of
personal trust or official matters, he could not have been unaware that his term could be cut short
any time without giving rise to any alleged infringement of the above constitutional
safeguard. There was no removal which according to such a mandate is only allowable for
cause. Hence the lack of persuasive character of petitioners plea. [50]
And in Asis, the Court held:
The Deputy Minister found that the evidence satisfactorily established that the Centrals
suspension of the petitioners and others monthly ration of gasoline and LPG, had been caused by
unavoidable financial constraints;that such a suspension, in line with its conservation and costsaving policy, did not in truth effect any significant diminution of said benefits, since the petitioner
was nevertheless entitled to reimbursement of the actual amount of gas consumed; that petitioner
had encouraged his co-employees to file complaints against the Central over the rations issue,
and this, as well as his institution of his own actions, had created an atmosphere of enmity in the
Central, and caused the loss by the Central of that trust and confidence in him so essential in a
lawyer-client relationship as that theretofore existing between them; and that under the
circumstances, petitioners discharge as the Centrals Legal Counsel and Head of the Manpower &
Services Department was justified. The Deputy Ministers order of dismissal was however
subsequently modified, at the petitioners instance, by decreeing the payment to the latter of
separation pay equivalent to one months salary for every year of service rendered. [51]
It was, in fact, Hydro Resources which directly confronted the issue; there, the Court ruled:
"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 inhouse 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."[52]
The existence of an employer-employee relationship, between the bank and private
respondent brings the case within the coverage of the Labor Code. Under the Code, an employee
may be validly dismissed if these requisites are attendant: (1) the dismissal is grounded on any of
the causes stated in Article 282 of the Labor Code, and (2) the employee has been notified in
writing and given the opportunity to be heard and to defend himself as so required by Section 2
and Section 5, Rule XIV, Book V, of the Implementing Rules of the Labor Code. [53]
Article 282(c) of the Labor Code provides that "willful breach by the employee of the trust
reposed in him by his employer" is a cause for the termination of employment by an employer.
Ordinary breach of trust will not suffice, it must be willful and without justifiable excuse. [54] This
ground must be founded on facts established by the employer who must clearly and convincingly
prove by substantial evidence [55] the facts and incidents upon which loss of confidence in the
employee may fairly be made to rest; otherwise, the dismissal will be rendered illegal. [56]
Petitioners' stated loss of trust and confidence on private respondent was spawned by the
complaints leveled against him by the lawyers in his department. The letter-complaint signed by
the nine lawyers read:
June 26, 1989
Mr. Manuel L. Morales
Chairman, Board of Directors
Equitable Banking Corporation
Sir:

With utmost respect, we have taken the liberty of seeking your intercession on the problems
besetting the Legal Department.
For a long time, we have kept silent, containing within us the abusive conduct and inefficiency of
our department head, Atty. Ricardo L. Sadac, if only to preserve cohesion among us. But we have
reached the breaking point where we could endure no more except to speak out. We realize the
gravity of our action and its possible repercussions but we only have ourselves to blame if we
remained silent.
Atty. Sadac's insults to the lawyers which are totally uncalled for and made even in the presence
of clients are simply too much for a fellow lawyer. His outburst of temper on inconsequential
matters have now become commonplace in the department. His mismanagement, ineffectiveness
as a head and indecisiveness on basic legal questions have adversely affected the smooth
operation of the department and the output of the lawyers. He berates rather than inspires, delays
rather than facilitates. Each lawyer's complaint are (sic) attached hereto attached (sic) as
Annexes `A', `A-1' to `A-8'.
At present, we are disgruntled on how he runs the department and our morale is at its ebb. While
our only desire is to work under an auspicious environment and under an effective head, we
could not do so because of the General Counsel.
We, therefore, respectfully pray for an immediate change in the department leadership in order to
pave the way for a more effective system, a new image for the department, and restore
professionalism and the dignity of the lawyers.
Please accept our assurances that the interest of the bank is primordial to us as we pledge our
total commitment and unflinching loyalty to this institution.
Thank you."[57]
Concededly, a wide latitude of discretion is given an employer in terminating the employment
of managerial employees on the ground of breach of trust and confidence. [58] In order to constitute
a just cause for dismissal, however, the act complained of must be related to the performance of
the duties of the employee such as would show him to be thereby unfit to continue working for the
employer.[59]Here, the grievances of the lawyers, in main, refer to what are perceived to be certain
objectionable character traits of private respondent. Although petitioners have charged private
respondent with allegedly mishandling two cases in his long service with the bank, it is quite
apparent that private respondent would not have been asked to resign had it not been for the
letter-complaint of his associates in the Legal Department.
Confident that no employer-employee existed between the bank and private respondent,
petitioners have put aside the procedural requirements for terminating ones employment, i.e., (a)
a notice apprising the employee of the particular acts or omissions for which his dismissal is
sought, and (b) another notice informing the employee of the employer's decision to dismiss him.
[60]
Failure to comply with these requirements taints the dismissal with illegality. This procedure is
mandatory, any judgment reached by management without that compliance can be considered
void and inexistent.[61]While it is true that the essence of due process is simply an opportunity to
be heard or, as applied in administrative proceedings, an opportunity to explain one's side,
[62]
meetings in the nature of consultation and conferences such as the case here, however, may
not be valid substitutes for the proper observance of notice and hearing. [63]
Moral damages are recoverable when the dismissal of an employee is attended by bad faith
or fraud or constitutes an act oppressive to labor, or is done in a manner contrary to good morals,
good customs or public policy. Exemplary damages may be awarded if the dismissal is effected in
a wanton, oppressive or malevolent manner.[64]
The Court has deliberated closely on this case and, after reviewing all the facts and
circumstances heretofore described, it is its considered view that petitioners have not been
motivated by malice or bad faith nor have they acted in wanton, oppressive or malevolent manner
such as to warrant a judgment against them for moral and exemplary damages. Malice or bad
faith, the lesser evil of the two, the Court has once said, implies a conscious and intentional
design to do a wrongful act for a dishonest purpose or moral obliquity; it is different from the
negative idea of negligence in that malice or bad faith contemplates a state of mind affirmatively
operating with furtive design or ill will.[65]

It, too, then follows that the individual petitioners may not be held solidarily liable with the
bank. InSantos vs. NLRC,[66] the Court has explained the rule quite elaborately; thus:
"A corporation is a juridical entity with legal personality separate and distinct from those acting for
and in its behalf and, in general, from the people comprising it. The rule is that obligations
incurred by the corporation, acting through its directors, officers and employees, are its sole
liabilities. Nevertheless, being a mere fiction of law, peculiar situations or valid grounds can exist
to warrant, albeit done sparingly, the disregard of its independent being and the lifting of the
corporate veil. As a rule, this situation might arise when a corporation is used to evade a just and
due obligation or to justify a wrong, to shield or perpetrate fraud, to carry out similar other
unjustifiable aims or intentions, or as a subterfuge to commit injustice and so circumvent the
law. InTramat Mercantile, Inc., vs. Court of Appeals [238 SCRA 14, 19], the Court has collated the
settled instances when, without necessarily piercing the veil of corporate fiction, personal civil
liability can also be said to lawfully attach to a corporate director, trustee or officer; to wit: When "`(1) He assents (a) to a patently unlawful act of the corporation, or (b) for bad faith or gross
negligence in directing its affairs, or (c) for conflict of interest, resulting in damages to the
corporation, its stockholders or other persons;
"`(2) He consents to the issuance of watered stocks or who, having knowledge thereof, does not
forthwith file with the corporate secretary his written objection thereto;
"`(3) He agrees to hold himself personally and solidarily liable with the corporation; or
"`(4) He is made, by a specific provision of law, to personally answer for his corporate action.
The case of petitioner is way off these exceptional instances. It is not even shown that petitioner
has had a direct hand in the dismissal of private respondent enough to attribute to him (petitioner)
a patently unlawful act while acting for the corporation. Neither can Article 289 of the Labor Code
be applied since this law specifically refers only to the imposition of penalties under the Code. x x
x.
It is true, there were various cases when corporate officers were themselves held by the Court to
be personally accountable for the payment of wages and money claims to its
employees. In A.C. Ransom Labor Union-CCLUvs. NLRC [142 SCRA 269], for instance, the
Court ruled that under the Minimum Wage Law, the responsible officer of an employer corporation
could be held personally liable for nonpayment of backwages for (i)f the policy of the law were
otherwise, the corporation employer (would) have devious ways for evading payment of back
wages." In the absence of a clear identification of the officer directly responsible for failure to pay
the backwages, the Court considered the President of the corporation as such officer. The case
was cited in Chua vs.NLRC [182 SCRA 353] in holding personally liable the vice-president of the
company, being the highest and most ranking official of the corporation next to the President who
was dismissed, for the latter's claim for unpaid wages.
A review of the above exceptional cases would readily disclose the attendance of facts and
circumstances that could rightly sanction personal liability on the part of the company
officer. In A.C. Ransom, the corporate entity was a family corporation and execution against it
could not be implemented because of the disposition posthaste of its leviable assets evidently in
order to evade its just and due obligations. The doctrine of piercing the veil of corporate fiction
was thus clearly appropriate. Chua likewise involved another family corporation, and this time the
conflict was between two brothers occupying the highest ranking positions in the company. There
were incontrovertible facts which pointed to extreme personal animosity that resulted, evidently in
bad faith, in the easing out from the company of one of the brothers by the other.
The basic rule is still that which can be deduced from the Courts pronouncement in Sunio vs.
National Labor Relations Commission [127 SCRA 390]; thus:
`We come now to the personal liability of petitioner, Sunio, who was made jointly and severally
responsible with petitioner company and CIPI for the payment of the backwages of private
respondents. This is reversible error.The Assistant Regional Directors Decision failed to disclose
the reason why he was made personally liable.Respondents, however, alleged as grounds
thereof, his the being owner of one-half (1/2) interest of said corporation, and his alleged arbitrary
dismissal of private respondents.

`Petitioner Sunio was impleaded in the Complaint in his capacity as General Manager of
petitioner corporation.There appears to be no evidence on record that he acted maliciously or in
bad faith in terminating the services of private respondents. His act, therefore, was within the
scope of his authority and was a corporate act.
`It is basic that a corporation is invested by law with a personality separate and distinct from those
of the persons composing it as well as from that of any other legal entity to which it may be
related. Mere ownership by a single stockholder or by another corporation of all or nearly all of
the capital stock of a corporation is not of itself sufficient ground for disregarding the separate
corporate personality. Petitioner Sunio, therefore, should not have been made personally
answerable for the payment of private respondents back salaries.
The Court, to be sure, did appear to have deviated somewhat in Gudez vs. NLRC [183 SCRA
644]; however, it should be clear from our recent pronouncement in Mam Realty Development
Corporation and Manuel Centeno vs. NLRC [244 SCRA 797] that the Sunio doctrine still prevails.
[67]

For having violated private respondents right to due process private respondent shall,
considering the attendant circumstances particularly his repeated, but unheeded, request for a
hearing, be entitled to an amount of P5,000.00.
The allegation that private respondent was guilty of forum-shopping deserves scant
consideration.Suffice it said that, for forum-shopping to exist, both actions should involve a
common transaction with essentially the same facts and circumstances and raise identical causes
of action, subject matter and issues. [68] Certainly, the filing by private respondent of a criminal
action for libel during the pendency of this illegal dismissal case could not constitute forumshopping.
The controversy spawning this case has generated not too little personal animosities.
Reinstatement, which is the consequence of illegal dismissal, has markedly been rendered
undesirable. Private respondent shall, instead, be entitled to backwages from the time of his
dismissal until reaching sixty (60) years of age (1995) [70] and, thereupon, to retirement benefits in
accordance with Article 287 of the Labor Code and Section 14, [71] Rule 1, Book VI, of the
Implementing Rules of the Labor Code.[72]
[69]

WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with the
following MODIFICATIONS: That private respondent shall be entitled to backwages from
termination of employment until turning sixty (60) years of age (in 1995) and, thereupon, to
retirement benefits in accordance with law; that private respondent shall be paid an additional
amount of P5,000.00; that the award of moral and exemplary damages are deleted; and that the
liability herein pronounced shall be due from petitioner bank alone, the other petitioners
being absolved from solidary liability. No costs.
SO ORDERED.
[G.R. No. 111501. March 5, 1996]
PHILIPPINE FUJI XEROX CORPORATION, JENNIFER A. BERNARDO, and ATTY.
VICTORINO LUIS, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION
(First Division), PAMBANSANG KILUSAN NG PAGGAWA, (KILUSAN)-TUCP,
PHILIPPINE
XEROX
EMPLOYEES
UNION-KILUSAN
and
PEDRO
GARADO, respondents.
DECISION
MENDOZA, J:
This is a petition for certiorari to set aside the decision of the NLRC, finding petitioner
Philippine Fuji Xerox Corporation (Fuji Xerox) guilty of illegally dismissing private respondent
Pedro Garado and ordering him reinstated. The NLRC decision reverses on appeal a decision of
the Labor Arbiter finding private respondent to be an employee of another firm, the Skillpower,
Inc., and not of petitioner Fuji Xerox.

The question raised in this case is whether private respondent is an employee of ,Fuji Xerox
(as the NLRC found) or of Skillpower, Inc. (as the Labor Arbiter found). For reasons to be
hereafter explained, we hold that private respondent is an employee of Fuji Xerox and
accordingly dismiss the petition for certiorari of Fuji Xerox.
The following are the facts.
On May 6, 1977, petitioner Fuji Xerox entered into an agreement under which Skillpower,
Inc. supplied workers to operate copier machines of Fuji Xerox as part of the latters Xerox Copier
Project in its sales offices. Private respondent Pedro Garado was assigned as key operator at
Fuji Xeroxs branch at Buendia, Makati, Metro Manila, in February of 1980.
In February of 1983, Garado went on leave and his place was taken over by a substitute.
Upon his return in March, he discovered that there was a spoilage of over 600 copies. Afraid that
he might be blamed for the spoilage, he tried to talk to a service technician of Fuji Xerox into
stopping the meter of the machine.
The technician refused Garados request, but this incident came to the knowledge of Fuji
Xerox which, on May 31, 1983, reported the matter to Skillpower, Inc. The next day, Skillpower,
Inc. wrote Garado, ordering him to explain. In the meantime, it suspended him from work. Garado
filed a complaint for illegal dismissal.
The Labor Arbiter found that Garado applied for work to Skillpower, Inc.; that in 1980 he was
employed and made to sign a contract; that although he received his salaries regularly from Fuji
Xerox, it was Skillpower, Inc. which exercised control and supervision over his work; that
Skillpower, Inc. had substantial capital and investments in machinery, equipment, and service
vehicles, and assets totalling P5,008,812.43. On the basis of these findings the Labor Arbiter held
in a decision rendered on October 30, 1986 that Garado was an employee of Skillpower, Inc., and
that he had merely been assigned by Skillpower, Inc. to Fuji Xerox. Hence, the Labor Arbiter
dismissed Garados complaint.
On the other hand, the NLRC found Garado to be in fact an employee of petitioner Fuji
Xerox and by it to have been illegally dismissed. The NLRC found that although Garados request
was wrongful, dismissal would be a disproportionate penalty. The NLRC held that although
Skillpower, Inc. had substantial capital assets, the fact was that the copier machines, which
Garado operated, belonged to petitioner Fuji Xerox, and that although it was Skillpower, Inc.
which had suspended Garado, the latter merely acted at the behest of Fuji Xerox. The NLRC
found that Garado worked under the control and supervision of Fuji Xerox, which paid his
salaries, and that Skilipower, Inc. merely acted as paymaster-agent of Fuji Xerox. The NLRC held
that Skilipower, Inc. was a labor-only contractor and Garado should be deemed to have been
directly employed by Fuji Xerox, regardless of the agreement between it and Skillpower, Inc.
Accordingly, the NLRC ordered:
WHEREFORE, premises considered, the respondents are hereby ordered to immediately
reinstate complainant Pedro Garado to his former position as key operator with three (3) years
backwages, without qualification or reduction whatsoever x x x. Except as herein above
MODIFIED, the appealed decision is hereby Affirmed.
Hence the present petition. Fuji Xerox argues that Skillpower, Inc. is an independent
contractor and that Garado is its employee for the following reasons:
(1) Garado was recruited by Skillpower, Inc.;
(2) The work done by Garado was not necessary to the conduct of the business of Fuji
Xerox;
(3) Garados salaries and benefits were paid directly by Skillpower, Inc.;
(4) Garado worked under the control of Skillpower, Inc.; and
(5) Skillpower, Inc. is a highly-capitalized business venture.
The contentions are without merit.

Fuji Xerox contends that Garado was actually recruited by Skillpower, Inc. as part of its
personnel pool and later merely assigned to it (petitioner). It is undisputed, however, that since
1980,[1] when Garado was first assigned to work at Fuji Xerox, he had never been assigned to
any other company so much so that by 1984, he was already a member of the union which
petitioned the company for his regularization. [2] From 1980 to 1984 he worked exclusively for
petitioner. Indeed, he was recruited by Skillpower, Inc. solely for assignment to Fuji Xerox to work
in the latters Xerox Copier Project.[3]
Petitioners claim that Skillpower, Inc. has other clients to whom it provided temporary
services. That, however, is irrelevant. What is important is that once employed, Garado was
never assigned to any other client of Skillpower, Inc. In fact, although under the agreement
Skillpower, Inc. was supposed to provide only temporary services, Skilipower, Inc. actually
supplied Fuji Xerox the labor which the latter needed for its Xerox Copier Project for seven (7)
years, from 1977 to 1984.
On January 1, 1983, private respondent signed a contract entitled Appointment as Contract
Worker, in which it was stated that private respondents status was that of a contract worker for a
definite period from January 1, 1983 to June 30, 1983. As such, private respondents employment
was considered temporary, to terminate automatically six (6) months afterwards, without
necessity of any notice and without entitling private respondent to separation or termination pay.
Private respondent was made to understand that he was an employee of Skillpower, Inc., and not
of the client to which he was assigned. Therefore, the termination of the contract or any renewal
or extension thereof did not entitle him to become an employee of the client and the latter was not
under any obligation to appoint him as such, notwithstanding the total duration of the contract or
any extension or renewal thereof.
This is nothing but a crude attempt to circumvent the law and undermine the security of
tenure of private respondent by employing workers under six-month contracts which are later
extended indefinitely through renewals. As this Court held in the Philippine Bank of
Communications v. NLRC:[4]
It is not difficult to see that to uphold the contractual arrangement between the bank and
CESI would in effect be to permit employers to avoid the necessity of hiring regular or permanent
employees and to enable them to keep their employees indefinitely on a temporary or casual
status, thus to deny them security of tenure in their jobs. Article 106 of the Labor Code is
precisely designed to prevent such a result.
Second. Petitioner contends that the service provided by Skillpower, Inc., namely, operating
petitioners xerox machine, is not directly related nor necessary to the business of selling and
leasing copier machines of petitioner. Petitioners claim that their Xerox Copier Project is just for
public service and is purely incidental to its business. What petitioners earn from the project is not
even sufficient to defray their expenses, let alone bring profits to them. As such, the project is no
different from other services which can legally be contracted out, such as security and janitorial
services. Petitioners contend that the copier service can be considered as part of their
housekeeping tasks which can be let to independent contractors. [5]
We disagree. As correctly held by the NLRC, at the very least, the Xerox Copier Project of
petitioners promotes goodwill for the company. It may not generate income for the company but
there are activities which a company may find necessary to engage in because they ultimately
redound to its benefit. Operating the companys copiers at its branches advertises the quality of
their products and promotes the companys reputation and public image. It also advertises the
utility and convenience of having a copier machine. It is noteworthy that while not operated for
profit the copying service is not intended either to be promotional, as, indeed, petitioner charged a
fee for the copies made.
It is wrong to say that if a task is not directly related to the employers business, or it falls
under what may be considered housekeeping activities, the one performing the task is a job
contractor. The determination of the existence of an employer-employee relationship is defined by
law according to the facts of each case, regardless of the nature of the activities involved.
Third. Petitioners contend that it never exercised control over the conduct of private
respondent. Petitioners allege that the salaries paid to Garado, as well as his employment
records, vouchers and loan checks from the SSS were coursed through Skillpower, Inc. In
addition private respondent applied for vacation leaves to Skilipower, Inc.

It is also contended that it was Skillpower, Inc. which twice required private respondent to
explain why he should not be dismissed for the spoilage in Fuji Xeroxs Buendia branch and
suspended him pending the result of the investigation. According to petitioners, although they
conducted an administrative investigation, the purpose was only to determine the complicity of
their own employees in the incident, if any, and any criminal liability of private respondent.
This claim is belied by two letters written by Atty. Victorino H. Luis, Legal and Industrial
Relations Officer of the company, to the union president, Nick Macaraig. The first letter, dated July
6, 1983, stated:
This has reference to your various letters dated today on administrative case concerning Messrs.
Crisostomo Cruz, Pedro Garado and Ms. Evelyn Abenes. In connection with the above and in the
case likewise of Mr. Dionisio Guyala, please be advised that the proceedings against them are
being carried out under the terms, and in accordance with the provisions of our Policy and
Procedure on Employment Termination as well as Policy on Disciplinary Actions dated October 1,
1982, and not under the Grievance Machinery under our CBA.
Your action apparently is premised on the assumption that we are now in the Grievance Stage,
which is premature. If we have allowed the Union to participate in our Investigation and
Administrative panels, it is only a concession on managements part in accordance with No. IV,
Section B, Paragraph 3 of the abovecited policy on the investigation, the
Personnel/Administrative Department may consult the Union whenever necessary.
We shall entertain grievances under our CBA Machinery only after decisions have been made on
the foregoing cases and should you find the penalties imposed, if any, as unjust, unduly harsh,
discriminating otherwise fit subject for grievance by the Union itself under the terms of our CBA.
Accordingly, we are proceeding with our investigations on the administrative charges with or
without your presence or that of the respondents if it is the latters preference, as in the case of
Crisostomo Cruz, to ignore the same. (Italics ours)
The second letter, dated July 13, 1983,[6] read:
You obviously persist in pursuing the misconception that our allowing your presence in the
administrative proceedings against Messrs. Guyala, Cruz, et al. has set the Grievance Machinery
under our CBA into play. We can only reiterate our statement in our letter of July 6 that we were
implementing Policy and Procedures on Termination dated October 1, 1982 and that your
presence in helping bolster the defense for the respondents was only with our forbearance in the
spirit of cooperation in order to better ferret out the truth.
The power or authority to impose discipline and disciplinary measures upon employees is a basic
prerogative of Management, something that cannot be abdicated, much less ceded to a CBA
Grievance Committee which is limited to settling disputes and misunderstanding as to
interpretation, application, or violation of any provisions of the CBA agreement x x x. As likewise
pointed out in our letter of July 6 recourse to Grievance may possibly be resorted to if in the
Unions opinion a penalty imposed upon a respondent Union member is discriminating to the
member or otherwise illegal, unduly harsh, and the like. Ultimately, the remedy lies in appeal to
the NLRC, as in similar cases in the past. (Italics ours)
These letters reveal the role which Fuji Xerox played in the dismissal of the private
respondent. They dispel any doubt that Fuji Xerox exercised disciplinary authority over Garado
and that Skillpower, Inc. issued the order of dismissal merely in obedience to the decision of
petitioner.
Fourth. Petitioner avers that Skillpower, Inc. is a highly-capitalized business venture,
registered as an independent employer with the Securities and Exchange Commission as well as
the Department of Labor and Employment. Skillpower, Inc. is a member of the Social Security
System. In 1984 it had assets exceeding P5 million pesos and at least 20 typewriters, office
equipment and service vehicles. It had employees of its own and a pool of 25 clerks assigned to
clients on a temporary basis.
Petitioners cite the case of Neri v. NLRC,[7] in which it was held that the Building Care
Corporation (BCC) was an independent contractor on the basis of finding that it had substantial
capital, although there was no evidence that it had investments in the form of tools, equipment,
machineries and work premises. But the Court in that case considered not only the capitalization

of the BCC but also the fact that BCC was providing specific special services (radio/telex operator
and janitor) to the employer; that in another case [8] the Court had already found that the BCC was
an independent contractor; that BCC retained control over the employees and the employer was
actually just concerned with the end-result; that BCC had the power to reassign the employees
and their deployment was not subject to the approval of the employer; and that BCC was paid in
lump sum for the services it rendered. These features of that case make it distinguishable from
the present one.
Here, the service being rendered by private respondent was not a specific or special skill
that Skillpower, Inc. was in the business of providing. Although in the Neri case the telex machine
operated by the employee belonged to the employer, the service was deemed permissible
because it was specific and technical. This cannot be said of the service rendered by private
respondent Garado.
The Rules to Implement of the Labor Code, Book III, Rule VIII, 8, provide that there is job
contracting when the following conditions are fulfilled:
(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.
Otherwise, according to Art. 106 of the Labor Code,
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.
Petitioner Fuji Xerox argues that Skillpower, Inc. had typewriters and service vehicles for the
conduct of its business independently of the petitioner. But typewriters and vehicles bear no direct
relationship to the job for which Skillpower, Inc. contracted its service of operating copier
machines and offering copying services to the public. The fact is that Skillpower, Inc. did not have
copying machines of its own. What it did was simply to supply manpower to Fuji Xerox. The
phrase substantial capital and investment in the form of tools, equipment, machineries, work
premises, and other materials which are necessary in the conduct of his business, in the
Implementing Rules clearly contemplates tools, equipment, etc., which are directly related to the
service it is being contracted to render. One who does not have an independent business for
undertaking the job contracted for is just an agent of the employer.
Fifth. The Agreement between petitioner Fuji Xerox and Skillpower, Inc. provides that
Skillpower, Inc. is an independent contractor and that the workers hired by it shall not, in any
manner and under any circumstances, be considered employees of [the] Company, and that the
Company has no control or supervision whatsoever over the conduct of the Contractor or any of
its workers in respect to how they accomplish their work or perform the Contractors obligations
under this AGREEMENT.
In Tabas v. California Manufacturing Company, Inc.,[9] this Court held on facts similar to those
in the case at bar:
There is no doubt that in the case at bar, Livi performs manpower services, meaning to say, it
contracts out labor in favor of clients. We hold that it is one notwithstanding its vehement claims
to the contrary, and notwithstanding the provision of the contract that it is an independent
contractor. The nature of ones business is not determined by self-serving appellations one
attaches thereto but by the tests provided by statute and prevailing case law. The bare fact that
Livi maintains a separate line of business does not extinguish the equal fact that it has
provided California with workers to pursue the latters own business. In this connection, we do not
agree that the petitioners had been made to perform activities which are not directly related to the
general business of manufacturing, Californias purported principal operation activity. The

petitioners had been charged with merchandising [sic] promotion or sale of the products of
[California] in the different sales outlets in Metro Manila including task and occasional [sic] price
tagging, an activity that is doubtless, an integral part of the manufacturing business. It is not, then,
as if Livi had served as its (Californias) promotions or sales arm or agents, or otherwise, rendered
a piece of work it (California) could not have itself done; Livi as a placement agency, had simply
supplied it with the manpower necessary to carry out its (Californias) merchandising activities,
using its (Californias) premises and equipment.
xxx xxx xxx
The fact that the petitioners have allegedly admitted being Livis direct employees in their
complaints is nothing conclusive. For one thing, the fact that the petitioners were (are), will not
absolve California since liability has been imposed by legal operation. For another, and as we
indicated, the relations of parties must be judged from case to case and the decree of law, and
not by declaration of parties.
Skilipower, Inc. is, therefore, a labor-only contractor and Garado is not its employee. No
grave abuse of discretion can thus be imputed to the NLRC for declaring petitioner Fuji Xerox
guilty of illegal dismissal of private respondent.
ACCORDINGLY, the petition for certiorari is DISMISSED for lack of merit.
SO ORDERED.
[G.R. No. 102199. January 28, 1997]
AFP MUTUAL BENEFIT ASSOCIATION, INC., petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION and EUTIQUIO BUSTAMANTE, respondents.
DECISION
PANGANIBAN, J.:
The determination of the proper forum is crucial because the filing of the petition or
complaint in the wrong court or tribunal is fatal, even for a patently meritorious claim. More
specifically, labor arbiters and the National Labor Relations Commission have no jurisdiction to
entertain and rule on money claims where no employer-employee relations is involved. Thus, any
such award rendered without jurisdiction is a nullity.
This petition for certiorari under Rule 65, Rules of Court seeks to annul the Resolution [1] of
the National Labor Relations Commission, promulgated September 27, 1991, in NLRC-NCR
Case No. 00-02-01196-90, entitled "Eutiquio Bustamante vs. AFP Mutual Benefit Association,
Inc.," affirming the decision of the labor arbiter which ordered payment of the amount
of P319,796.00 as insurance commissions to private respondent.
The Antecedent Facts
The facts are simple. Private respondent Eutiquio Bustamante had been an insurance
underwriter of petitioner AFP Mutual Benefit Association, Inc. since 1975. The Sales Agent's
Agreement between them provided:[2]
"B. Duties and Obligations:
1. During the lifetime of this Agreement, the SALES AGENT (private respondent) shall solicit
exclusively for AFPMBAI (petitioner), and shall be bound by the latter's policies, memo circulars,
rules and regulations which it may from time to time, revise, modify or cancel to serve its business
interests.
2. The SALES AGENT shall confine his business activities for AFPMBAI while inside any military
camp, installation or residence of military personnel. He is free to solicit in the area for which
he/she is licensed and as authorized, provided however, that AFPMBAI may from time to time,
assign him a specific area of responsibility and a production quota on a case to case basis.lex

xxxxxxxxx
C. Commission
1. The SALES AGENT shall be entitled to the commission due for all premiums actually due and
received by AFPMBAI out of life insurance policies solicited and obtained by the SALES AGENT
at the rates set forth in the applicant's commission schedules hereto attached.
xxxxxxxxx
D. General Provisions
1. There shall be no employer-employee relationship between the parties, the SALES AGENT
being hereby deemed an independent contractor."
As compensation, he received commissions based on the following percentages of the
premiums paid:[3]
"30% of premium paid within the first year;
10% of premium paid with the second year;
5% of the premium paid during the third year;
3% of the premium paid during the fourth year; and
1% of the premium paid during the fifth year up-to the tenth year.
On July 5, 1989, petitioner dismissed private respondent for misrepresentation and for
simultaneously selling insurance for another life insurance company in violation of said
agreement.
At the time of his dismissal, private respondent was entitled to accrued commissions
equivalent to twenty four (24) months per the Sales Agent Agreement and as stated in the
account summary dated July 5, 1989, approved by Retired Brig. Gen. Rosalino Alquiza, president
of petitioner-company. Said summary showed that private respondent had a total commission
receivable of P438,835.00, of which only P78,039.89 had been paid to him.
Private respondent wrote petitioner seeking the release of his commissions for said 24
months. Petitioner, through Marketing Manager Juan Concepcion, replied that he was entitled to
onlyP75,000.00 to P100,000.00. Hence, believing Concepcion's computations, private
respondent signed a quitclaim in favor of petitioner.
Sometime in October 1989, private respondent was informed that his check was ready for
release.In collecting his check, he discovered from a document (account summary) attached to
said check that his total commissions for the 24 months actually amounted to P354,796.09. Said
document stated:[4]
"6. The total receivable for Mr. Bustamante out of the renewals and old business generated since
1983 grossesP438,835.00 less his outstanding obligation in the amount of P78,039.89 as of June
30, 1989, total expected commission would amount to P354,796.09. From that figure at a 15%
compromise settlement this would meanP53,219.41 due him to settle his claim."
Private respondent, however, was paid only the amount of P35,000.00.
On November 23, 1989, private respondent filed a complaint with the Office of the Insurance
Commissioner praying for the payment of the correct amount of his commission. Atty. German C.
Alejandria, Chief of the Public Assistance and Information Division, Office of the Insurance
Commissioner, advised private respondent that it was the Department of Labor and Employment
that had jurisdiction over his complaint.
On February 26, 1990, private respondent filed his complaint with the Department of Labor
claiming: (1) commission for 2 years from termination of employment equivalent to 30% of

premiums remitted during employment; (2) P354,796.00 as commission earned from renewals
and old business generated since 1983; (3) P100,000.00 as moral damages; and
(4) P100,000.00 as exemplary damages.
After submission of position papers, Labor Arbiter Jose G. de Vera rendered his decision,
dated August 24, 1990, the dispositive portion of which reads: [5]
"WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered
declaring the dismissal of the complainant as just and valid, and consequently, his claim for
separation pay is denied. On his money claim, the respondent company is hereby ordered to pay
complainant the sum of P319,796.00 plus attorney's fees in the amount of P31,976.60.
All other claims of the complainant are dismissed for want of merit."
The labor arbiter relied on the Sales Agent's Agreement proviso that petitioner could assign
private respondent a specific area of responsibility and a production quota, and read it as
signaling the existence of employer-employee relationship between petitioner and private
respondent.
On appeal, the Second Division [6] of the respondent Commission affirmed the decision of the
Labor Arbiter. In the assailed Resolution, respondent Commission found no reason to disturb said
ruling of the labor arbiter and ruled:[7]
"WHEREFORE, in view of the foregoing considerations, the subject appeal should be as it is
hereby, denied and the decision appealed from affirmed.
SO ORDERED."
Hence, this petition.
The Issue
Petitioner contends that respondent Commission committed grave abuse of discretion in
ruling that the labor arbiter had jurisdiction over this case. At the heart of the controversy is the
issue of whether there existed an employer-employee relationship between petitioner and private
respondent.
Petitioner argues that, despite provisions B(1) and (2) of the Sales Agent's Agreement, there
is no employer-employee relationship between private respondent and itself. Hence, respondent
commission gravely abused its discretion when it held that the labor arbiter had jurisdiction over
the case.
The Court's Ruling
The petition is meritorious.
First Issue: Not All That Glitters Is Control
Well-settled is the doctrine that the existence of an employer-employee relationship is
ultimately a question of fact and that the findings thereon by the labor arbiter and the National
Labor Relations Commission shall be accorded not only respect but even finality when supported
by substantial evidence.[8] The determinative factor in such finality is the presence of substantial
evidence to support said finding, otherwise, such factual findings cannot bind this Court.
Respondent Commission concurred with the labor arbiter's findings that: [9]
"x x x The complainant's job as sales insurance agent is usually necessary and desirable in the
usual business of the respondent company. Under the Sales Agents Agreement, the complainant
was required to solicit exclusively for the respondent company, 'and he was bound by the
company policies, memo circulars, rules and regulations which were issued from time to time. By
such requirement to follow strictly management policies, orders, circulars, rules and regulations, it
only shows that the respondent had control or reserved the right to control the complainant's work

as solicitor. Complainant was not an independent contractor as he did not carry on an

independent business other than that of the company's x x x."
To this, respondent Commission added that the Sales Agent's Agreement specifically
provided that petitioner may assign private respondent a specific area of responsibility and a
production quota.From there, it concluded that apparently there is that exercise of control by the
employer which is the most important element in determining employer-employee relationship. [10]
We hold, however, that respondent Commission misappreciated the facts of the case. Time
and again, the Court has applied the "four-fold" test in determining the existence of employeremployee relationship. This test considers the following elements: (1) the power to hire; (2) the
payment of wages; (3) the power to dismiss; and (4) the power to control, the last being the most
important element.[11]
The difficulty lies in correctly assessing if certain factors or elements properly indicate the
presence of control. Anent the issue of exclusivity in the case at bar, the fact that private
respondent was required to solicit business exclusively for petitioner could hardly be considered
as control in labor jurisprudence. Under Memo Circulars No. 2-81[12] and 2-85, dated December
17, 1981 and August 7, 1985, respectively, issued by the Insurance Commissioner, insurance
agents are barred from serving more than one insurance company, in order to protect the public
and to enable insurance companies to exercise exclusive supervision over their agents in their
solicitation work. Thus, the exclusivity restriction clearly springs from a regulation issued by the
Insurance Commission, and not from an intention by petitioner to establish control over the
method and manner by which private respondent shall accomplish his work. This feature is not
meant to change the nature of the relationship between the parties, nor does it necessarily imbue
such relationship with the quality of control envisioned by the law.
So too, the fact that private respondent was bound by company policies, memo/circulars,
rules and regulations issued from time to time is also not indicative of control. In its Reply to
Complainant's Position Paper,[13] petitioner alleges that the policies, memo/circulars, and rules
and regulations referred to in provision B(1) of the Sales Agent's Agreement are only those
pertaining to payment of agents' accountabilities, availment by sales agents of cash advances for
sorties, circulars on incentives and awards to be given based on production, and other matters
concerning the selling of insurance, in accordance with the rules promulgated by the Insurance
Commission. According to the petitioner, insurance solicitors are never affected or covered by the
rules and regulations concerningemployee conduct and penalties for violations thereof, work
standards, performance appraisals, merit increases, promotions, absenteeism/attendance, leaves
of absence, management-union matters, employee benefits and the like. Since private
respondent failed to rebut these allegations, the same are deemed admitted, or at least proven,
thereby leaving nothing to support the respondent Commission's conclusion that the foregoing
elements signified an employment relationship between the parties.
In regard to the territorial assignments given to sales agents, this too cannot be held as
indicative of the exercise of control over an employee. First of all, the place of work in the
business of soliciting insurance does not figure prominently in the equation. And more
significantly, private respondent failed to rebut petitioner's allegation that it had never issued him
any territorial assignment at all.Obviously, this Court cannot draw the same inference from this
feature as did the respondent Commission.
To restate, the significant factor in determining the relationship of the parties is the presence
or absence of supervisory authority to control the method and the details of performance of the
service being rendered, and the degree to which the principal may intervene to exercise such
control. The presence of such power of control is indicative of an employment relationship, while
absence thereof is indicative of independent contractorship. In other words, 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 result of the work. [14] Such is exactly the
nature of the relationship between petitioner and private respondent.
Further, not every form of control that a party reserves to himself over the conduct of the
other party in relation to the services being rendered may be accorded the effect of establishing
an employer-employee relationship. The facts of this case fall squarely with the case of Insular
Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:

"Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be
employed in attaining it, and those that control or fix the methodology and bind or restrict the
party hired to the use of such means. The first, which aim only to promote the result, create no
employer-employee relationship unlike the second, which address both the result and the means
used to achieve it. The distinction acquires particular relevance in the case of an enterprise
affected with public interest, as is the business of insurance, and is on that account subject to
regulation by the State with respect, not only to the relations between insurer and insured but also
to the internal affairs of the insurance company. Rules and regulations governing the conduct of
the business are provided for in the Insurance Code and enforced by the Insurance
Commissioner. It is, therefore, usual and expected for an insurance company to promulgate a set
of rules to guide its commission agents in selling its policies that they may not run afoul of the law
and what it requires or prohibits. xxxx None of these really invades the agent's contractual
prerogative to adopt his own selling methods or to sell insurance at his own time and
convenience, hence cannot justifiably be said to establish an employer-employee relationship
between him and the company."[15]
Private respondent's contention that he was petitioner's employee is belied by the fact that
he was free to sell insurance at any time as he was not subject to definite hours or conditions of
work and in turn was compensated according to the result of his efforts. By the nature of the
business of soliciting insurance, agents are normally left free to devise ways and means of
persuading people to take out insurance. There is no prohibition, as contended by petitioner, for
private respondent to work for as long as he does not violate the Insurance Code. As petitioner
explains:
"(Private respondent) was free to solicit life insurance anywhere he wanted and he had free and
unfettered time to pursue his business. He did not have to punch in and punch out the bundy
clock as he was not required to report to the (petitioner's) office regularly. He was not covered by
any employee policies or regulations and not subject to the disciplinary action of management on
the basis of the Employee Code of Conduct. He could go out and sell insurance at his own
chosen time. He was entirely left to his own choices of areas or territories, with no definite, much
less supervised, time schedule.
(Private respondent) had complete control over his occupation and (petitioner) did not exercise
any right of Control and Supervision over his performance except as to the payment of
commission the amount of which entirely depends on the sole efforts of (private respondent). He
was free to engage in other occupation or practice other profession for as long as he did not
commit any violation of the ethical standards prescribed in the Sales Agent's Agreement." [16]
Although petitioner could have, theoretically, disapproved any of private respondent's
transactions, what could be disapproved was only the result of the work, and not the means by
which it was accomplished.
The "control" which the above factors indicate did not sum up to the power to control private
respondent's conduct in and mode of soliciting insurance. On the contrary, they clearly indicate
that the juridical element of control had been absent in this situation. Thus, the Court is
constrained to rule that no employment relationship had ever existed between the parties.
Second Issue: Jurisdiction of Respondent Commission & Labor Arbiter
Under the contract invoked, private respondent had never been petitioner's employee, but
only its commission agent. As an independent contractor, his claim for unpaid commission should
have been litigated in an ordinary civil action.[17]
The jurisdiction of labor arbiters and respondent Commission is set forth in Article 217 of the
Labor Code.[18] The unifying element running through paragraphs (1) - (6) of said provision is the
consistent reference to cases or disputes arising out of or in connection with an employeremployee relationship.Prior to its amendment by Batas Pambansa Blg. 227 on June 1, 1982, this
point was clear as the article included "all other cases arising from employer-employee relation
unless expressly excluded by this Code." [19] Without this critical element of employment
relationship, the labor arbiter and respondent Commission can never acquire jurisdiction over a
dispute. As in the case at bar. It was serious error on the part of the labor arbiter to have
assumed jurisdiction and adjudicated the claim.Likewise, the respondent Commission's
affirmance thereof.

Such lack of jurisdiction of a court or tribunal may be raised at any stage of the proceedings,
even on appeal. The doctrine of estoppel cannot be properly invoked by respondent Commission
to cure this fatal defect as it cannot confer jurisdiction upon a tribunal that to begin with, was
bereft of jurisdiction over a cause of action. [20] Moreover, in the proceedings below, petitioner
consistently challenged the jurisdiction of the labor arbiter [21] and respondent Commission.[22]
It remains a basic fact in law that the choice of the proper forum is crucial as the decision of
a court or tribunal without jurisdiction is a total nullity.[23] A void judgment for want of jurisdiction is
no judgment at all. It cannot be the source of any right nor the creator of any obligation. All acts
performed pursuant to it and all claims emanating from it have no legal effect. Hence, it can never
become final. "x x x (I)t may be said to be a lawless thing which can be treated as an outlaw and
slain at sight, or ignored wherever and whenever it exhibits its head." [24]
The way things stand, it becomes unnecessary to consider the merits of private respondent's
claim for unpaid commission. Be that as it may, this ruling is without prejudice to private
respondent's right to file a suit for collection of unpaid commissions against petitioner with the
proper forum and within the proper period.
WHEREFORE, the petition is hereby GRANTED, and the assailed Resolution is hereby SET
ASIDE.
SO ORDERED.

[G.R. No. L-21278. December 27, 1966.]

FEATI UNIVERSITY, Petitioner, v. HON. JOSE S. BAUTISTA, Presiding Judge of the Court of
Industrial Relations and FEATI UNIVERSITY FACULTY CLUB-PAFLU, Respondents.
[G.R. No. L-21462.]
FEATI UNIVERSITY, Petitioner-Appellant, v. FEATI UNIVERSITY FACULTY CLUBPAFLU,Respondent-Appellee.
[G.R. No. L-21500.]
FEATI UNIVERSITY, Petitioner-Appellant, v. FEATI FACULTY CLUB PAFLU, RespondentAppellee.
DECISION
ZALDIVAR, J.:
This Court, by resolution, ordered that these three cases be considered together, and the parties
were allowed to file only one brief for the three cases.
On January 14, 1963, the President of the respondent Feati University Faculty Club PAFLU
hereinafter referred to as Faculty Club wrote a letter to Mrs. Victoria L. Araneta, President of
petitioner Feati University hereinafter referred to as University informing her of the
organization of the Faculty Club into a registered labor union. The Faculty Club is composed of
members who are professors and/or instructors of the University. On January 22, 1963, the
President of the Faculty Club sent another letter containing twenty six demands that have
connection with the employment of the members of the Faculty Club by the University, and
requesting an answer within ten days from receipt thereof. The President of the University
answered the two letters, requesting that she be given at least thirty days to study thoroughly the
different phases of the demands. Meanwhile counsel for the University, to whom the demands
were referred, wrote a letter to the President of the Faculty Club demanding proof of its majority
status-and designation as a bargaining representative. On February 1, 1963, the President of the
Faculty Club again wrote the President of the University rejecting the latters request for extension
of time, and on the same day he filed a notice of strike with the Bureau of Labor alleging as
reason therefor the refusal of the University to bargain collectively. The parties were called to
conferences at the Conciliation Division of the Bureau of Labor but efforts to conciliate them
failed. On February 18, 1963, the members of the Faculty Club declared a strike and established
picket lines in the premises of the University, resulting in the disruption of classes in the

University. Despite further efforts of the officials from the Department of Labor to effect a
settlement of the differences between the management of the University and the striking faculty
members no satisfactory agreement was arrived at. On March 21, 1963, the President of the
Philippines certified to the Court of Industrial Relations the dispute between the management of
the University and the Faculty Club pursuant to the provisions of Section 10 of Republic Act No.
875.
In connection with the dispute between the University and the Faculty Club and certain incidents
related to said dispute, various cases were filed with the Court of Industrial Relations
hereinafter referred to as CIR. The three cases now before this Court stemmed from those cases
that were filed with the CIR.
CASE NO. G.R. NO. L-21278
On May 10, 1963, the University filed before this Court a "petition for certiorari and prohibition
with writ of preliminary injunction", docketed as G. R. No. L-21278, praying: (1) for the issuance of
a writ of preliminary injunction enjoining respondent Judge Jose S. Bautista of the CIR to desist
from proceeding in CIR Cases Nos. 41-IPA, 1183-MC, and V-30; (2) that the proceedings in
Cases Nos. 41-IPA and 1183-MC be annulled; (3) that the orders dated March 30, 1963 and April
6, 1963 in Case No. 41-IPA, the order dated April 6, 1963 in Case No. 1183-MC, and the order
dated April 29, 1963 in Case No. V-30, all be annulled; and (4) that the respondent Judge be
ordered to dismiss said cases Nos. 41-IPA, 1183-MC and V-30 of the CIR.
On May 10, 1963, this Court issued a writ of preliminary injunction, upon the Universitys filing a
bond of P1,000.00, ordering respondent Judge Jose S. Bautista, as Presiding Judge of the CIR,
until further order from this Court, "to desist and refrain from further proceeding in the premises
(Cases Nos. 41-IPA, 1183-MC and V-30 of the Court of Industrial Relations)." 1 On December 4,
1963, this Court ordered the injunction bond increased to P100, 000.00; but on January 23, 1964,
upon a motion for reconsideration by the University, this Court reduced the bond to P50,000 00.
A brief statement of the three cases CIR Cases 41-IPA, 1183-MC and V-30 involved in the
Case G. R. No. L-21278, is here necessary.
CIR Case No. 41-IPA, relates to the case in connection with the strike staged by the members of
the Faculty Club. As we have stated, the dispute between the University and the Faculty Club
was certified on March 21, 1963 by the President of the Philippines to the CIR. On the strength of
the presidential certification, respondent Judge Bautista set the case for hearing on March 23,
1963. During the hearing, the Judge endeavored to reconcile the parties, and it was agreed upon
that the striking faculty members would return to work and the University would readmit them
under a status quo arrangement. On that very same day, however, the University, thru counsel
filed a motion to dismiss the case upon the ground that the CIR has no jurisdiction over the case,
because (1) the Industrial Peace Act is not applicable to the University, it being an educational
institution, nor to the members of the Faculty Club, they being independent contractors; and (2)
the presidential certification is violative of Section 10 of the Industrial Peace Act, as the University
is not an industrial establishment and there was no industrial dispute which could be certified to
the CIR. On March 30, 1963 the respondent Judge issued an order denying the motion to dismiss
and declaring that the Industrial Peace Act is applicable to both parties in the case and that the
CIR had acquired jurisdiction over the case by virtue of the presidential certification. In the same
order, the respondent Judge, believing that the dispute could not be decided promptly, ordered
the strikers to return immediately to work and the University to take them back under the last
terms and conditions existing before the dispute arose, as per agreement had during the hearing
on March 23, 1963; and likewise enjoined the University, pending adjudication of the case, from
dismissing any employee or laborer without previous authorization from the CIR. The University
filed on April 1, 1963 a motion for reconsideration of the order of March 30, 1963 by the CIR en
banc, and at the same time asking that the motion for reconsideration be first heard by the CIR en
banc. Without the motion for reconsideration having been acted upon by the CIR en banc,
respondent Judge set the case for hearing on the merits for May 8, 1963. The University moved
for the cancellation of said hearing upon the ground that the court en banc should first hear the
motion for reconsideration and resolve the issues raised therein before the case is heard on the
merits. This motion for cancellation of the hearing was denied. The respondent Judge, however,
canceled the scheduled hearing when counsel for the University manifested that he would take
up before the Supreme Court, by a petition forcertiorari, the matter regarding the actuations of the
respondent Judge and the issues raised in the action for reconsideration, especially the issue
relating to the jurisdiction of the CIR. The order of March 30, 1963 in Case 41- IPA is one of the
orders sought to be annulled in the case, G.R. No. L-21278.
Before the above-mentioned order of March 30, 1963 was issued by the respondent Judge, the

University had employed professors and/or instructors to take the places of those professors
and/or instructors who had struck. On April 1, 1963, the Faculty Club filed with the CIR in Case
41-IPA a petition to declare in contempt of court certain parties, alleging that the University
refused to accept back to work the returning strikers, in violation of the return-to-work order of
March 30, 1963. The University filed, on April 5, 1963, its opposition to the petition for contempt,
denying the allegations of the Faculty Club and alleging by way of special defense that there was
still the motion for reconsideration of the order of March 30, 1963 which had not yet been acted
upon by the CIR en banc. On April 6, 1963, the respondent Judge issued an order stating that
"said replacements are hereby warned and cautioned, for the time being, not to disturb nor in any
manner commit any act tending to disrupt the effectivity of the order of March 30, 1963, pending
the final resolution of the same." 2 On April 8, 1963, the replacing professors and/or instructors
concerned filed, thru counsel, a motion for reconsideration by the CIR en banc of the order of
respondent Judge of April 6, 1963. This order of April 6, 1963 is one of the orders that are sought
to be annulled in case G. R. No. L-21278.
CIR Case No. 1183-MC relates to a petition for certification election filed by the Faculty Club on
March 8, 1963 before the CIR, praying that it be certified as the sole and exclusive bargaining
representative of all the employees of the University. The University filed an opposition to the
petition for certification election and at the same time a motion to dismiss said petition, raising the
very same issues raised in Case No. 41-IPA, claiming that the petition did not comply with the
rules promulgated by the CIR; that the Faculty Club is not a legitimate labor union; that the
members of the Faculty Club cannot unionize for collective bargaining purposes; that the terms of
the individual contracts of the professors, instructors, and teachers, who are members of the
Faculty Club, would expire on March 25 or 31, 1963; and that the CIR has no jurisdiction to take
cognizance of the petition because the Industrial Peace Act is not applicable to the members of
the Faculty Club nor to the University. This case was assigned to Judge Baltazar Villanueva of the
CIR. Before Judge Villanueva could act on the motion to dismiss, however, the Faculty Club filed
on April 3, 1963 a motion to withdraw the petition on the ground that the labor dispute (Case No.
41-IPA) had already been certified by the President to the CIR and the issues raised in Case No.
1183-MC were absorbed by Case No. 41-IPA. The University opposed the withdrawal, alleging
that the issues raised in Case No. 1183-MC were separate and distinct from the issues raised in
Case No. 41-IPA; that the questions of recognition and majority status in Case No. 1183-MC were
not absorbed by Case No. 41-IPA; and that the CIR could not exercise its power of compulsory
arbitration unless the legal issue regarding the existence of employer-employee relationship was
first resolved. The University prayed that the motion of the Faculty Club to withdraw the petition
for certification election be denied, and that its motion to dismiss the petition be heard. Judge
Baltazar Villanueva, finding that the reasons stated by the Faculty Club in the motion to withdraw
were well taken, on April 6, 1963, issued an order granting the withdrawal. The University filed, on
April 24, 1963, a motion for reconsideration of that order of April 6, 1963 by the CIR en banc. This
order of April 6, 1963 in Case No. 1183-MC is one of the orders sought to be annulled in the case,
G.R.-No. L-21278, now before Us.
CIR Case No. V-30 relates to a complaint for indirect contempt of court filed against the
administrative officials of the University. The Faculty Club, through the Acting Chief Prosecutor of
the CIR, filed with the CIR a complaint, docketed as Case No. V-30, charging President Victoria
L. Araneta, Dean Daniel Salcedo, Executive Vice President Rodolfo Maslog, and Assistant to the
President Jose Segovia, as officials of the University, with indirect contempt of court, reiterating
the same charges filed in Case No. 41-IPA for alleged violation of the order dated March 30,
1963. Based on the complaint thus filed by the Acting Chief Prosecutor of the CIR, respondent
Judge Bautista issued on April 29, 1963 an order commanding any officer of the law to arrest the
above named officials of the University so that they may be dealt with in accordance with law, and
at the same time fixed the bond for their release at P500.00 each. This order of April 29, 1963 is
also one of the orders sought to be annulled in the Case, G.R. No. L-21278.
The principal allegation of the University in its petition for certiorari and prohibition with
preliminary injunction in Case G.R. No. L-21278, now before Us, is that respondent Judge Jose
S. Bautista acted without, or in excess of, jurisdiction, or with grave abuse of discretion, in taking
cognizance of, and in issuing the questioned orders in, CIR Cases Nos. 41-IPA, 1183-MC and V30. Let it be noted that when the petition for certiorari and prohibition with preliminary injunction
was filed on May 10, 1963 in this case, the questioned orders in CIR Cases Nos. 41-IPA, 1183MC and V-30 were still pending action by the CIR en banc upon motions for reconsideration filed
by the University.
On June 10, 1963, the Faculty Club filed its answer to the petition for certiorari and prohibition
with preliminary injunction, admitting some allegations contained in the petition and denying
others, and alleging special defenses which boil down to the contentions that (1) the CIR had
acquired jurisdiction to take cognizance of Case No. 41-IPA by virtue of the presidential

certification, so that it had jurisdiction to issue the questioned orders in said Case No. 41-IPA; (2)
that the Industrial Peace Act (Republic Act 875) is applicable to the University as an employer and
to the members of the Faculty Club as employees who are affiliated with a duly registered labor
union, so that the Court of Industrial Relations had jurisdiction to take cognizance of Cases Nos.
1183-MC and V-30 and to issue the questioned orders in those two cases; and (3) that the
petition for certiorari and prohibition with preliminary injunction was prematurely filed because the
orders of the CIR sought to be annulled were still the subjects of pending motions for
reconsideration before the CIR en banc when said petition for certiorari and prohibition with
preliminary injunction was filed before this Court.
CASE G.R. NO. L-21462
This case, G.R. No. L-21462, involves also CIR Case No. 1183-MC. As already stated Case No.
1183-MC relates to a petition for certification election filed by the Faculty Club as a labor union,
praying that it be certified as the sole and exclusive bargaining representative of all employees of
the University. This petition was opposed by the University, and at the same time it filed a motion
to dismiss said petition. But before Judge Baltazar Villanueva could act on the petition for
certification election and the motion to dismiss the same, Faculty Club filed a motion to withdraw
said petition upon the ground that the issues raised in Case No. 1183-MC were absorbed by
Case No. 41-IPA which was certified by the President of the Philippines. Judge Baltazar
Villanueva, by order of April 6, 1963 granted the motion to withdraw. The University filed a motion
for reconsideration of that order of April 6, 1963 by the CIR en banc. That motion for
reconsideration was pending action by the CIR en banc when the petition for certiorari and
prohibition with preliminary injunction in Case G.R. No. L-21278 was filed on May 10, 1963. As
earlier stated this Court, in Case G.R. No. L-21278, issued a writ of preliminary injunction on May
10, 1963, ordering respondent Judge Bautista, until further order from this Court, to desist and
refrain from further proceeding in the premises (Cases Nos. 41-IPA, 1183-MC and V-30 of the
Court of Industrial Relations).
On June 5, 1963, that is, after this Court has issued the writ of preliminary injunction in Case G.R.
No. L-21278, the CIR en banc issued a resolution denying the motion for reconsideration of the
order of April 6, 1963 in Case No-1183-MC.
On July 8, 1963, the University filed before this Court a petition for certiorari, by way of an appeal
from the resolution of the CIR en banc, dated June 5, 1963, denying the motion for
reconsideration of the order of April 6, 1963 in Case No. 1183-MC. This petition was docketed as
G.R. No. L-21462. In its petition for certiorari, the University alleges (1) that the resolution of the
Court of Industrial Relations of June 5, 1963 was null and void because it was issued in violation
of the writ of preliminary injunction issued in Case G.R. No. L-21278; (2) that the issues of
employer-employee relationship, the alleged status as a labor union, majority representation and
designation as bargaining representative in an appropriate unit of the Faculty Club should have
been resolved first in Case No. 1183-MC prior to the determination of the issues in Case No. 41IPA and therefore the motion to withdraw the petition for certification election should not have
been granted upon the ground that the issues in the first case have been absorbed in the second
case; and (3) the lower court acted without or in excess of jurisdiction in taking cognizance of the
petition for certification election and that the same should have been dismissed instead of having
been ordered withdrawn. The University prayed that the proceedings in Case No. 1183-MC and
the order of April 6, 1963 and the resolution of June 5, 1963 issued therein be annulled, and that
the CIR be ordered to dismiss Case No. 1183-MC on the ground of lack of jurisdiction.
The Faculty Club filed its answer, admitting some, and denying other, allegations in the petition
forcertiorari; and specially alleging that the lower courts order granting the withdrawal of the
petition for certification election was in accordance with law, and that the resolution of the court en
banc on June 5, 1963 was not a violation of the writ of preliminary injunction issued in Case G.R.
No. L-21278 because said writ of injunction was issued against Judge Jose S. Bautista and not
against the Court of Industrial Relations, much less against Judge Baltazar Villanueva who was
the trial judge of Case No. 1183-MC.
CASE G.R. NO. L-21500
This case, G.R. No. L-21500, involves also CIR Case No. 41-IPA. As earlier stated, Case No. 41IPA relates to the strike staged by the members of the Faculty Club and the dispute was certified
by the President of the Philippines to the CIR. The University filed a motion to dismiss that case
upon the ground that the CIR has no jurisdiction over the case, and on March 30, 1963 Judge
Jose S. Bautista issued an order denying the motion to dismiss and declaring that the Industrial
Peace Act is applicable to both parties in the case and that the CIR had acquired jurisdiction over
the case by virtue of the presidential certification; and in that same order Judge Bautista ordered

the strikers to return to work and the University to take them back under the last terms and
conditions existing before the dispute arose; and enjoined the University from dismissing any
employee or laborer without previous authority from the court. On April 1, 1963, the University
filed a motion for reconsideration of the order of March 30, 1963 by the CIR en banc. That motion
for reconsideration was pending action by the CIR en banc when the petition for certiorari and
prohibition with preliminary injunction in Case G.R. No. L-21278 was filed on May 10, 1963. As
we have already stated, this Court in said case G.R. No. L-21278, issued a writ of preliminary
injunction on May 10, 1963 ordering respondent Judge Jose S. Bautista, until further order from
this Court, to desist and refrain from further proceeding in the premises (Cases No. 41-IPA, 1183MC and V-30 of the Court of Industrial Relations).
On July 2, 1963, the University received a copy of the resolution of the CIR en banc, dated May
7, 1963 but actually received and stamped at the Office of the Clerk of the CIR on June 28, 1963,
denying the motion for reconsideration of the order dated March 30, 1963 in Case No. 41-IPA.
On July 23, 1963, the University filed before this Court a petition for certiorari, by way of an
appeal from the resolution of the Court of Industrial Relations en banc dated May 7, 1963 (but
actually received by said petitioner on July 2, 1963) denying the motion for reconsideration of the
order of March 30, 1963 in Case No. 41-IPA. This petition was docketed as G.R. No. L-21500. In
its petition forcertiorari the University alleges (1) that the resolution of the CIR en banc, dated May
7, 1963 but filed with the Clerk of the CIR on June 28, 1963, in Case No. 41-IPA, is null and void
because it was issued in violation of the writ of preliminary injunction issued by this Court in G.R.
No. L-21278; (2) that the CIR, through its Presiding Judge, had no jurisdiction to take cognizance
of Case No. 41-IPA and the order of March 30, 1963 and the resolution dated May 7, 1963 issued
therein are null and void; (3) that the certification made by the President of the Philippines is not
authorized by Section 10 of Republic Act 895, but is violative thereof; (4) that the Faculty Club
has no right to unionize or organize as a labor union for collective bargaining purposes and to be
certified as a collective bargaining agent within the purview of the Industrial Peace Act, and
consequently it has no right to strike and picket on the ground of petitioners alleged refusal to
bargain collectively where such duty does not exist in law and is not enforceable against an
educational institution; and (5) that the return-to-work order of March 30, 1963 is improper and
illegal. The petition prayed that the proceedings in Case No. 41-IPA be annulled, that the order
dated March 30, 1963 and the resolution dated May 7, 1963 be revoked, and that the lower court
be ordered to dismiss Case 41-IPA on the ground of lack of jurisdiction.
On September 10, 1963, the Faculty Club, through counsel, filed a motion to dismiss the petition
forcertiorari on the ground that the petition being filed by way of an appeal from the orders of the
Court of Industrial Relations denying the motion to dismiss in Case No. 41- IPA, the petition
for certiorari is not proper because the orders appealed from are interlocutory in nature.
This Court, by resolution of September 26, 1963, ordered that these three cases (G.R. Nos. L21278, L-21462 and L-21500) be considered together and the motion to dismiss in Case G.R. No.
L-21500 be taken up when the cases are decided on the merits after the hearing.
Brushing aside certain technical questions raised by the parties in their pleadings, We proceed to
decide these three cases on the merits of the issues raised.
The University has raised several issues in the present cases, the pivotal one being its claim that
the Court of Industrial Relations has no jurisdiction over the parties and the subject matter in CIR
Cases 41-IPA, 1183-MC and V-30, brought before it, upon the ground that Republic Act No. 875 is
not applicable to the University because it is an educational institution and not an industrial
establishment and hence not an "employer" in contemplation of said Act; and neither is Republic
Act No. 875 applicable to the members of the Faculty Club because the latter are independent
contractors and, therefore, not employees within the purview of the said Act.
In support of the contention that being an educational institution it is beyond the scope of
Republic Act No. 875 the University cites cases decided by this Court: Boy Scouts of the
Philippines v. Juliana Araos, L-10091, Jan. 29, 1958; University of San Agustin v. CIR, Et Al., L12222, May 28, 1958; Cebu Chinese High School v. Philippine Land-Air-Sea Labor Union,
PLASLU, L-12015, April 22, 1959; La Consolacion College, Et. Al. v. CIR, Et Al., L 13282, April 22,
1960; University of the Philippines, Et. Al. v. CIR, Et Al., L-15416, April 28, 1960; Far Eastern
University v. CIR, L 17620, August 31, 1962. We have reviewed these cases, and also related
cases subsequent thereto, and We find that they do not sustain the contention of the University. It
is true that this Court has ruled that certain educational institutions, like the University of Santo
Tomas, University of San Agustin, La Consolacion College, and other juridical entities, like the
Boy Scouts of the Philippines and Manila Sanitarium, are beyond the purview of Republic Act No.
875 in the sense that the Court of Industrial Relations has no jurisdiction to take cognizance of

charges of unfair labor practice filed against them, but it is nonetheless true that the principal
reason of this Court in ruling in those cases that those institutions are excluded from the
operation of Republic Act 875 is that those entities are not organized, maintained and operated
for profit and do not declare dividends to stockholders. The decision in the case of University of
San Agustin v. Court of Industrial Relations, G.R. No. L-12222, May 28, 1958, is very pertinent.
We quote a portion of the decision:jgc:chanrobles.com.ph
"It appears that the University of San Agustin, petitioner herein, is an educational institution
conducted and managed by a religious non-stock corporation duly organized and existing under
the laws of the Philippines. It was organized not for profit or gain or division of the dividends
among its stockholders, but solely for religious and educational purposes. It likewise appears that
the Philippine Association of College and University Professors, respondent herein, is a non-stock
association composed of professors and teachers in different colleges and universities and that
since its organization two years ago, the university has adopted a hostile attitude to its formation
and has tried to discriminate, harass and intimidate its members for which reason the association
and the members affected filed the unfair labor practice complaint which initiated this proceeding.
To the complaint of unfair labor practice, petitioner filed an answer wherein it disputed the
jurisdiction of the Court of Industrial Relations over the controversy on the following
grounds:chanrob1es virtual 1aw library
(a) That complainants therein being college and/or university professors were not "industrial"
laborers or employees, and the Philippine Association of College and University Professors being
composed of persons engaged in the teaching profession, is not and cannot be a legitimate labor
organization within the meaning of the law creating the Court of Industrial Relations and defining
its powers and functions;
(b) That the University of San Agustin, respondent therein, is not an institution established for the
purpose of gain or division of profits, and, consequently, it is not an "industrial" enterprise and the
members of its teaching staff are not engaged in "industrial" employment (U.S.T. Hospital
Employees Association v. Sto. Tomas University Hospital, G.R. No. L-6988, 24 May 1954; and
San Beda College v. Court of Industrial Relations and National Labor Union, G.R. No. L-7649, 29
October 1955; 51 O.G. (Nov. 1955) 5636-5640);
(c) That, as a necessary consequence, alleged controversy between therein complainants and
respondent is not an "industrial" dispute, and the Court of Industrial Relations has no jurisdiction,
not only on the parties but also over the subject matter of the complaint.
"The issue now before us is: Since the University of San Agustin is not an institution established
for profit or gain, nor an industrial enterprise, but one established exclusively for educational
purposes, can it be said that its relation with its professors is one of employer and employee that
comes under the jurisdiction of the Court of Industrial Relations? In other words, do the provisions
of the Magna Carta on unfair labor practice apply to the relation between petitioner and members
of respondent association?"
"The issue is not new. Thus, in the case of Boy Scouts of the Philippines v. Juliana V. Araos, G.R.
No. L-10091, promulgated on January 29, 1958, this Court, speaking thru Mr. Justice
Montemayor, answered the query in the negative in the following wise:chanrob1es virtual 1aw
library
The main issue involved in the present case is whether or not a charitable institution or one
organized not for profit but for more elevated purposes, charitable, humanitarian, etc., like the
Boy Scouts of the Philippines, be included in the definition of "employer" contained in Republic
Act 875, and whether the employees of said institution fall under the definition of "employee" also
contained in the same Republic Act. If they are included, then any act which may be considered
unfair labor practice, within the meaning of said Republic Act, would come under the jurisdiction
of the Court of Industrial Relations; but if they do not fall within the scope of said Republic Act,
particularly, its definitions of employer and employee, then the Industrial Court would have no
jurisdiction at all.
x

On the basis of the foregoing considerations, there is every reason to believe that our labor
legislation from Commonwealth Act No. 103, creating the Court of Industrial Relations, down
through the Eight Hour Labor Law, to the Industrial Peace Act, was intended by the Legislature to
apply only to industrial employment and to govern the relations between employers engaged in
industry and occupations for purposes of profit and gain, and their industrial employees, but not to

organizations and entities which are organized, operated and maintained not for profit or gain, but
for elevated and lofty purposes, such as, charity, social service, education and instruction,
hospital and medical service, the encouragement and promotion of character, patriotism and
kindred virtues in youth of the nation, etc.
In conclusion, we find and hold that Republic Act No. 875, particularly, that portion thereof
regarding labor disputes and unfair labor practice, does not apply to the Boy Scouts of the
Philippines, end consequently, the Court of Industrial Relations had no jurisdiction to entertain
and decide the action or petition filed by respondent Araos. Wherefore, the appealed decision and
resolution of the CIR are hereby set aside, with costs against Respondent.
"There being a close analogy between the relation and facts involved in the two cases, we cannot
but conclude that the Court of Industrial Relations has no jurisdiction to entertain the complaint for
unfair labor practice lodged by respondent association against petitioner and, therefore, we
hereby set aside the order and resolution subject to the present petition, with costs against
respondent association."cralaw virtua1aw library
The same doctrine was confirmed in the case of University of Santo Tomas v. Hon. Baltazar
Villanueva, Et Al., G.R. No. L-13748, October 30, 1959, where this Court ruled
that:jgc:chanrobles.com.ph
"In the present case, the record reveals that the petitioner University of Santo Tomas is not an
industry organized for profit but an institution of learning devoted exclusively to the education of
the youth. The Court of First Instance of Manila in its decision in Civil Case No. 28870, which has
long become final and consequently the settled law in the case, found as established by the
evidence adduced by the parties therein (herein petitioner and respondent labor union) that while
the University collects fees from its students, all its income is used for the improvement end
enlargement of the institution. The University declares no dividend, and the members of the
corporation who founded it, as ordained in its articles of incorporation, receive no material
compensation for the time and sacrifice they render to the University and its students. The
respondent union itself in a case before the Industrial Court (Case No. 314-MC) has averred that
the University of Santo Tomas, like the San Beda College, is an educational institution operated
not for profit but for the sole purpose of educating young men. (See Annex B to petitioners
motion to dismiss.). It is apparent, therefore, that on the face of the record the University of Santo
Tomas is not a corporation created for profit but an educational institution and therefore not an
industrial or business organization."cralaw virtua1aw library
In the case of La Consolacion College Et. Al., v. CIR Et. Al., G.R. No. L-13282, April 22, 1960, this
Court repeated the same ruling when it said:jgc:chanrobles.com.ph
"The main issue in this appeal by petitioner is that the industrial court committed an error in
holding that it has jurisdiction to act in this case even if it involves unfair labor practice considering
that the La Consolacion College is not a business enterprise but an educational institution not
organized for profit.
"If the claim that petitioner is an educational institution not operated for profit is true, which
apparently is the case, because the very court a quo found that it has no stockholder, nor capital .
. . then we are of the opinion that the same does not come under the jurisdiction of the Court of
Industrial Relations in view of the ruling in the case of Boy Scouts of the Philippines v. Juliana V.
Araos, G.R. No. L-10091, decided on January 29, 1958."cralaw virtua1aw library
It is noteworthy that the cases of the University of San Agustin, the University of Santo Tomas,
and La Consolacion College, cited above, all involve charges of unfair labor practice under
Republic Act No. 875, and the uniform rulings of this Court are that the Court of Industrial
Relations has no jurisdiction over the charges because said Act does not apply to educational
institutions that are not operated or maintained for profit and do not declare dividends. On the
other hand, in the case of Far Eastern University v. CIR, Et Al., G.R. No. L-17620, August 31,
1962, this Court upheld the decision of the Court of Industrial Relations finding the Far Eastern
University, also an educational institution, guilty of unfair labor practice. Among the findings of fact
in said case was that the Far Eastern University made profits from the school year 1952-1953 to
1958-1959. In affirming the decision of the lower court, this Court had thereby ratified the ruling of
the Court of Industrial Relations which applied the Industrial Peace Act to educational institutions
that are organized, operated and maintained for profit.
It is also noteworthy that in the decisions in the cases of the Boy Scouts of the Philippines, the
University of San Agustin, the University of Sto. Tomas, and La Consolacion College, this Court
was not unanimous in the view that the Industrial Peace Act (Republic Act No. 875) is not

applicable to charitable, eleemosynary or non-profit organizations which include educational

institutions not operated for profit. There are members of this Court who hold the view that the
Industrial Peace Act would apply also to non-profit organizations or entities the only exception
being the Government, including any political subdivision or instrumentality thereof, in so far as
governmental functions are concerned. However, in the Far Eastern University case this Court is
unanimous in supporting the view that an educational institution that is operated for profit comes
within the scope of the Industrial Peace Act. We consider it a settled doctrine of this Court,
therefore, that the Industrial Peace Act is applicable to any organization or entity whatever may
its purpose when it was created that is operated for profit or gain.
Does the University operate as an educational institution for profit? Does it declare dividends for
its stockholders? If it does not, it must be declared beyond the purview of Republic Act No. 875;
but if it does, Republic Act No. 875 must apply to it. The University itself admits that it has
declared dividends. 3 The CIR in its order dated March 30, 1963 in CIR Case No. 41-IPA which
order was issued after evidence was heard also found that the University is not for strictly
educational purposes and that "It realizes profits and parts of such earning is distributed as
dividends to private stockholders or individuals (Exh. A and also 1 to 1-F, 2-x 3-x and 4-x)." 4
Under this circumstance, and in consonance with the rulings in the decisions of this Court, above
cited, it is obvious that Republic Act No. 875 is applicable to herein petitioner Feati University.
But the University claims that it is not an employer within the contemplation of Republic Act No.
875, because it is not an industrial establishment. At most, it says, it is only a lessee of the
services of its professors and/or instructors pursuant to a contract of services entered into
between them. We find no merit in this claim. Let us clarify who is an "employer" under the Act.
Section 2(c) of said Act provides:jgc:chanrobles.com.ph
"Sec. 2. Definitions. As used in this Act
(c) The term employer includes any person acting in the interest of an employer, directly or
indirectly, but shall not include any labor organization (otherwise than when acting as an
employer) or any one acting in the capacity or agent of such labor organization."cralaw virtua1aw
library
It will be noted that in defining the term "employer" the Act uses the word "includes", which it also
used in defining, "employee" (Sec. 2[d], and "representative" (Sec. 2[h]); and not the word
"means" which the Act uses in defining the terms "court" (See 2[a]), "labor organization" (Sec.
2[e]), "legitimate labor organization" (Sec. 2[f]), "company union" (Sec. 2[g]), "unfair labor
practice" (Sec. 2[i]), "supervisor" (Sec. 2[k]), "strike" (Sec. 2[l]) and "lockout" (Sec. 2[m]) A
methodical variation in terminology is manifest. This variation and distinction in terminology and
phraseology cannot be presumed to have been the inconsequential product of an oversight;
rather, it must have been the result of a deliberate and purposeful act, more so when we consider
that as legislative records show, Republic Act No. 875 had been meticulously and painstakingly
drafted and deliberated upon. In using the word "includes" and not "means", Congress did not
intend to give a complete definition of "employer", but rather that such definition should be
complementary to what is commonly understood as employer. Congress intended the term to be
understood in a broad meaning because, firstly, the statutory definition includes not only "a
principal employer but also a person acting in the interest of the employer" ; and secondly, the Act
itself specifically enumerates those who are not included in the term "employer", namely: (1) a
labor organization (otherwise than when acting as an employer), (2) anyone acting in the capacity
of officer or agent of such labor organization (Sec. 2[c]), and (3) the Government and any political
subdivision or instrumentality thereof insofar as the right to strike for the purpose of securing
changes or modifications in the terms and conditions of employment is concerned (Section 11).
Among these statutory exemptions, educational institutions are not included; hence, they can be
included in the term "employer." This Court, however, has ruled that those educational institutions
that are not operated for profit are not within the purview of Republic Act No. 875. 5
As stated above, Republic Act No. 875 does not give a comprehensive but only a complementary
definition of the term "employer." The term encompasses those that are in ordinary parlance
"employers." What is commonly meant by "employer" ? The term "employer" has been given
several acceptations. The lexical definition is "one who employs; one who uses; one who
engages or keeps in service;" and "to employ" is "to provide work and pay for; to engage ones
service; to hire. (Websters New Twentieth Century Dictionary, 2nd ed., 1960, p. 595). The
Workmens Compensation Act defines employer as including "every person or association of
persons, incorporated or not, public or private, and the legal representative of the deceased
employer" and "includes the owner or lessee of a factory or establishment or place of work or any
other person who is virtually the owner or manager of the business carried on in the
establishment or place of work but who, for reason that there is an independent contractor in the

same, or for any other reason, is not the direct employer of laborers employed there." (Sec. 39 (a)
of Act No. 3428). The Minimum Wage Law states that "employer includes any person acting
directly or indirectly in the interest of the employer in relation to an employee and shall include the
Government and the government corporations." (Rep. Act No. 602, Sec. 2[b]). The Social
Security Act defines employer as "any person, natural or juridical, domestic or foreign, who
carries in the Philippines any trade, business, industry, undertaking, or activity of any kind and
uses the services of another person who is under his orders as regards the employment, except
the Government and any of its political subdivisions, branches or instrumentalities, including
corporations owned or controlled by the Government." (Rep. Act No. 1161, Sec. 8[c]).
This Court, in the cases of the The Angat River Irrigation System, Et Al., v. Angat River Workers
Union (PLUM), Et Al., G.R. Nos. L-10934 and 10944, December 28, 1957, which cases involve
unfair labor practices and hence within the purview of Republic Act No. 875, defined the term
employer as follows:jgc:chanrobles.com.ph
"An employer is one who employs the services of others; one for whom employees work and who
pays their wages or salaries (Black Law Dictionary, 4th ed., p. 618).
"An employer includes any person acting in the interest of an employer, directly or indirectly (Sec.
2-c, Rep. Act 875)."cralaw virtua1aw library
Under none of the above definitions may the University be excluded, especially so if it is
considered that every professor, instructor or teacher in the teaching staff of the University, as per
allegation of the University itself, has a contract with the latter for teaching services, albeit for one
semester only. The University engaged the services of the professors, provided them work, and
paid them compensation or salary for their services. Even if the University may be considered as
a lessee of services under a contract between it and the members of its Faculty, still it is included
in the term "employer." "Running through the word "employ" is the thought that there has been an
agreement on the part of one person to perform a certain service in return for compensation to be
paid by an employer. When you ask how a man is employed, or what is his employment, the
thought that he is under agreement to perform some service or services for another is
predominant and paramount (Ballentine Law Dictionary, Philippine ed., p. 430, citing Pinkerton
National Detective Agency v. Walker, 157 Ga. 548, 35 A.L.P. 557, 560, 122 S.E. Rep. 202).
To bolster its claim of exemption from the application of Republic Act No. 875, the University
contends that it is not an industrial establishment within the scope of Sec. 2(c) of the Act. This
contention can not be sustained. In the first place, Sec. 2(c) of Republic Act No. 875 does not
state that the employers included in the definition of the term "employer" are only and exclusively
"industrial establishments" ; on the contrary, as stated above, the term "employer" encompasses
all employers except those specifically excluded by the Act. In the second place, even the Act
itself does not refer exclusively to industrial establishment and does not confine its application
thereto. This is patent inasmuch as several provisions of the Act are applicable to non-industrial
workers, such as Sec. 3, which deals with "employees right to self-organization" ; Sections 4 and
5 which enumerate unfair labor practices; Section 8 which nullifies private contracts contravening
employee rights; Section 9 which relates to injunctions in any case involving a labor dispute;
Section 11 which prohibits strikes in the government; Section 12 which provides for the exclusive
collective bargaining representation for labor organizations; Section 14 which deals with the
procedure for collective bargaining; Section 17 which treats of the rights and conditions of
membership in labor organizations; Sections 18, 19, 20 and 21 which provide respectively for the
establishment of conciliation service, compilation of collective bargaining contracts, advisory
labor-management relations; Section 22 which empowers the Secretary of Labor to make a study
of labor relations; and Section 24 which enumerates the rights of labor organizations. (See
Dissenting Opinion of Justice Concepcion in Boy Scouts of the Philippines v. Juliana Araos, G.R.
No. L-10091, January 29, 1958.)
This Court, in the case of Boy Scouts of the Philippines v. Araos, supra, had occasion to state that
the Industrial Peace Act "refers only to organizations and entities created and operated for profit,
engaged in a profitable trade, occupation or industry." It cannot be denied that running a
university engages time and attention; that it is an occupation or a business from which the one
engaged in it may derive profit or gain. The University is not an industrial establishment in the
sense that an industrial establishment is one that is engaged in manufacture or trade where raw
materials are changed or fashioned into finished products for use. But for the purposes of the
Industrial Peace Act the University is an industrial establishment because it is operated for profit
and it employs persons who work to earn a living. The term "industry", for the purposes of the
application of our labor laws should be given a broad meaning so as to cover all enterprises
which are operated for profit and which engage the services of persons who work to earn a living.

"The word industry within State Labor Relations Act controlling labor relations in industry, cover
labor conditions in any field of employment where the objective is earning a livelihood on one side
and gaining of a profit on the other. Labor Law, Sec. 700 et. seq. State Labor Relations Board v.
McChesney, 27 N.Y.S. 2d 266, 868." (Words and Phrases, Permanent Edition, Vol. 21, 1960
edition p. 510).
The University urges that even if it were an employer, still there would be no employer-employee
relationship between it and the striking members of the Faculty Club because the latter are not
employees within the purview of Sec. 2(d) of Republic Act No. 875 but are independent
contractors. This claim is untenable.
Section 2 (d) of Republic Act No. 875 provides:jgc:chanrobles.com.ph
"(d) The term employee shall include any employee end shall not be limited to the employee of a
particular employer unless the act explicitly states otherwise and shall include any individual
whose work has ceased as a consequence of, or in connection with, any current labor dispute or
because of any unfair labor practice and who has not obtained any other substantially equivalent
and regular employment."cralaw virtua1aw library
This definition is again, like the definition of the term "employer" [Sec. 2(c)], by the use of the term
"include", complementary. It embraces not only those who are usually and ordinarily considered
employees, but also those who have ceased as employees as a consequence of a labor dispute.
The term "employee", furthermore, is not limited to those of a particular employer. As already
stated, this Court in the cases of The Angat River Irrigation System, Et Al., v. Angat River
Workers Union (PLUM) Et. Al., supra, has defined the term "employer" as "one who employs the
services of others; one for whom employees work and who pays their wages or salaries."
Correlatively, an employee must be one who is engaged in the service of another; who performs
services for another; who works for salary or wages. It is admitted by the University that the
striking professors and/or instructors are under contract to teach particular courses and that they
are paid for their services. They are, therefore, employees of the University.
In support of its claim that the members of the Faculty Club are not employees of the University,
the latter cites as authority Franciscos Labor Laws, 2nd ed., p. 3, which
states:jgc:chanrobles.com.ph
"While the term workers as used in a particular statute, has been regarded as limited to those
performing physical labor, it has been held to embrace stenographers and bookkeepers.
Teachers are not included, however."cralaw virtua1aw library
It is evident from the above-quoted authority that "teachers" are not to be included among those
who perform "physical labor", but it does not mean that they are not employees. We have
checked the source of the authority, which is 31 Am. Jur., Sec. 3, p. 835, and the latter cites
Huntworth v. Tanner, 87 Wash 670, 152 P523, Ann Cas 1917 D 676. A reading of the last case
confirms Our view.
That teachers are "employees" has been held in a number of cases (Aebli v. Board of Education
of City and County of San Francisco, 145 P. 2d 601, 62 Col. App. 2d. 706; Lowe & Campbell
Sporting Goods Co. v. Tangipahoa Parish School Board, La. App., 15 So. 2d 98,100; Sister
Odelia v. Church of St. Andrew, 263 N. W. 111, 112, 195 Minn. 357, cited in Words and Phrases,
Permanent ed., Vol. 14, pp. 806-807). This Court in the Far Eastern University case, supra,
considered university instructors as employees and declared Republic Act No. 875 applicable to
them in their employment relations with their school. The professors and/or instructors of the
University neither ceased to be employees when they struck, for Section 2 of Rep. Act 875
includes among employees any individual whose work has ceased as a consequence of, or in
connection with a current labor dispute. Striking employees maintain their status as employees of
the employer. (Western Cartridge Co. v. NLRB, C.C.A. 7, 139 F 2d 855, 858).
The contention of the University that the professors and/or instructors are independent
contractors, because the University does not exercise control over their work, is likewise
untenable. This Court takes judicial notice that a university controls the work of the members of
its faculty; that a university prescribes the courses or subjects that professors teach, and when
and where to teach; that the professors work is characterized by regularity and continuity for a
fixed duration; that professors are compensated for their services by wages and salaries, rather
than by profits; that the professors and/or instructors cannot substitute others to do their work
without the consent of the university; and that the professors can be laid off if their work is found
not satisfactory. All these indicate that the university has control over their work; and professors
are, therefore, employees and not independent contractors. There are authorities in support of

this view.
"The principal consideration in determining whether a workman is an employee or an independent
contractor is the right to control the manner of doing the work, and it is not the actual exercise of
the right by interfering with the work, but the right to control, which constitutes the test.
(Amalgamated Roofing Co. v. Travelers Ins. Co., 133 N.E. 259, 261, 300 I11. 487, quoted in
Words and Phrases, Permanent ed., Vol. 14, p, 576).
"Where, under Employers Liability Act, A was instructed when and where to work . . . he is an
employee, and not a contractor, though paid specified sum per square." (Heine v. Hill, Harris &
Co., 2 La. App. 384, 390, in Words and Phrases, loc. cit.)
"Employees are those who are compensated for their labor or services by wages rather than by
profits." (People v. Distributors Division, Smoked Fish Workers Union, Local No. 20377, Sup. 7 N.
Y. S. 2d 185, 187 in Words and Phrases, loc. cit.)
"Services of employee or servant, as distinguished from those of a contractor, are usually
characterized by regularity and continuity of work for a fixed period or one of indefinite duration,
as contrasted with employment to do a single act or a series of isolated acts; by compensation on
a fixed salary rather than one regulated by value or amount of work; . . . Underwood v.
Commissioner of Internal Revenue, C.C.A., 66 F. 2d 67, 71 in Words and Phrases, op. cit., p.
579.)
"Independent contractors can employ others to work and accomplish contemplated result without
consent of contractee, while employee cannot substitute another in his place without consent of
his employer." (Luker Sand & Gravel Co. v. Industrial Commission, 23 P. 2d 225, 82 Utah, 188, in
Words and Phrases, Vol. 14 p. 576.)
Moreover, even if university professors are considered independent contractors, still they would
be covered by Rep. Act No. 875. In the case of the Boy Scouts of the Philippines v. Juliana Araos,
supra, this Court observed that Republic Act No. 875 was modeled after the Wagner Act, or the
National Labor Relations Act, of the United States, and this Act did not exclude "independent
contractors" from the orbit of "employees." It was in the subsequent legislation the Labor
Management Relation Act (Taft-Harley Act) that "independent contractors" together with
agricultural laborers, individuals in domestic service of the home, supervisors, and others were
excluded. (See Rothenberg on Labor Relations, 1949, pp. 330-331).
It having been shown that the members of the Faculty Club are employees, it follows that they
have a right to unionize in accordance with the provisions of Section 3 of the Magna Carta of
Labor (Republic Act No. 875) which provides as follows:jgc:chanrobles.com.ph
"Sec. 3. Employees right to self-organization. Employees shall have the right to selforganization and to form, join or assist labor organizations of their own choosing for the purpose
of collective bargaining through representatives of their own choosing and to engage in concerted
activities for the purpose of collective bargaining and other mutual aid or protection . . ."cralaw
virtua1aw library
We agree with the statement of the lower court, in its order of March 30, 1963 which is sought to
be set aside in the instant case, that the right of employees to self-organization is guaranteed by
the Constitution, that said right would exist even if Republic Act No. 875 is repealed, and that the
employees are entitled to that right regardless of whether their employers are engaged in
commerce or not. Indeed, it is Our considered view that the members of the faculty or teaching
staff of private universities, colleges, and schools in the Philippines, regardless of whether the
university, college or school is run for profit or not, are included in the term "employees" as
contemplated in Republic Act No. 875 and as such they may organize themselves pursuant to the
above-quoted provision of Section 3 of said Act. Certainly, professors, instructors or teachers of
private educational institutions who teach to earn a living are entitled to the protection of our labor
laws and one such law is Republic Act No. 875.
The contention of the University in the instant case that the members of the Faculty Club can not
unionize and the Faculty Club can not exist as a valid labor organization is, therefore, without
merit. The record shows that the Faculty Club is a duly registered labor organization, and this fact
is admitted by counsel for the University. 6
The other issue raised by the University is the validity of the Presidential certification. The
University contends that under Section 10 of Republic Act No. 875 the power of the President of
the Philippines to certify is subject to the following conditions, namely: (1) that there is a labor

dispute, and (2) that said labor dispute exists in an industry that is vital to the national interest.
The University maintains that those conditions do not obtain in the instant case. This contention
has also no merit.
We have previously stated that the University is an establishment or enterprise that is included in
the term "industry" and is covered by the provisions of Republic Act No. 875. Now, was there a
labor dispute between the University and the Faculty Club?
Republic Act No. 875 defines a labor dispute as follows:jgc:chanrobles.com.ph
"The term labor dispute includes any controversy concerning terms, tenure or conditions of
employment, or concerning the association or representation of persons in negotiating, fixing,
maintaining, changing, or seeking to arrange terms or conditions of employment regardless of
whether the disputants stand in proximate relation of employer and employee."cralaw virtua1aw
library
The test of whether a controversy comes within the definition of "labor dispute" depends on
whether the controversy involves or concerns "terms, tenure or condition of employment" or
"representation." It is admitted by the University, in the instant case, that on January 14, 1963 the
President of the Faculty Club wrote to the President of the University a letter informing the latter
of the organization of the Faculty Club as a labor union, duly registered with the Bureau of Labor
Relations; that again on January 22, 1963 another letter was sent, to which was attached a list of
demands consisting of 26 items, and asking the President of the University to answer within ten
days from date of receipt thereof; that the University questioned the right of the Faculty Club to be
the exclusive representative of the majority of the employees and asked proof that the Faculty
Club had been designated or selected as exclusive representative by the vote of the majority of
said employees; that on February 1, 1963 the Faculty Club filed with the Bureau of Labor
Relations a notice of strike alleging as reason therefor the refusal of the University to bargain
collectively with the representative of the faculty members; that on February 18, 1963 the
members of the Faculty Club went on strike and established picket lines in the premises of the
University, thereby disrupting the schedule of classes; that on March 1, 1963 the Faculty Club
filed Case No. 3666-ULP for unfair labor practice against the University, but which was later
dismissed (on April 2, 1963 after Case 41-IPA was certified to the CIR), and that on March 7,
1966 a petition for certification election, Case No. 1183-MC, was filed by the Faculty Club in the
CIR. 7 All these admitted facts show that the controversy between the University and the Faculty
Club involved terms and conditions of employment, and the question of representation. Hence,
there was a labor dispute between the University and the Faculty Club, as contemplated by
Republic Act No. 875. It having been shown that the University is an institution operated for profit,
that it is an employer, and that there is an employer-employee relationship, between the
University and the members of the Faculty Club, and it having been shown that a labor dispute
existed between the University and the Faculty Club, the contention of the University, that the
certification made by the President is not only not authorized by Section 10 of Republic Act 875
but is violative thereof, is groundless.
Section 10 of Republic Act No. 875 provides:jgc:chanrobles.com.ph
"When in the opinion of the President of the Philippines there exists a labor dispute in an industry
indispensable to the national interest and when such labor dispute is certified by the President to
the Court of Industrial Relations, said Court may cause to be issued a restraining order forbidding
the employees to strike or the employer to lockout the employees, and if no other solution to the
dispute is found, the Court may issue an order fixing the terms and conditions of
employment."cralaw virtua1aw library
This Court had occasion to rule on the application of the above quoted provision of Section 10 of
Republic Act No. 875. In the case of Pampanga Sugar Development Co. v. CIR, Et Al., G. R. No.
L-13178, March 24, 1961, it was held:jgc:chanrobles.com.ph
"It thus appears that when in the opinion of the President a labor dispute exists in an industry
indispensable to national interest and he certifies it to the Court of Industrial Relations the latter
acquires jurisdiction to act thereon in the manner provided by law. Thus the court may take either
of the following courses: it may issue an order forbidding employees to strike or the employer to
lockout its employees, or, failing in this, it may issue an order fixing the terms and conditions of
employment. It has no other alternative. It can throw the case out in the assumption that the
certification was erroneous.
x

". . . The fact, however, is that because of the strike declared by the members of the minority
union which threatens a major industry the President deemed it wise to certify the controversy to
the Court of Industrial Relations for adjudication. This is the power that the law gives to the
President the propriety of its exercise being a matter that only devolves upon him. The same is
not the concern of the industrial court. What matters is that by virtue of the certification made by
the President the case was placed under the jurisdiction of said court." (Emphasis supplied)
To certify a labor dispute to the CIR is the prerogative of the President under the law, and this
Court will not interfere in, much less curtail, the exercise of that prerogative. The jurisdiction of the
CIR in a certified case is exclusive (Rizal Cement Co., Inc. v. Rizal Cement Workers Union
(FFW), Et Al., G. R. L-12747, July 30, 1960). Once the jurisdiction is acquired pursuant to the
presidential certification, the CIR may exercise its broad powers as provided in Commonwealth
Act 103. All phases of the labor dispute and the employer-employee relationship may be threshed
out before the CIR, and the CIR may issue such order or orders as may be necessary to make
effective the exercise of its jurisdiction. The parties involved in the case may appeal to the
Supreme Court from the order or orders thus issued by the CIR.
And so, in the instant case, when the President took into consideration that the University "has
some 18,000 students and employed approximately 500 faculty members," that "the continued
disruption in the operation of the University will necessarily prejudice the thousand of students",
and that "the dispute affects the national interest", 8 and certified the dispute to the CIR, it is not
for the CIR nor this Court to pass upon the correctness of the reasons of the President in
certifying the labor dispute to the CIR.
The third issue raised by the University refers to the question of the legality of the return-to work
order (of March 30, 1963 in Case 41-IPA) and the order implementing the same (of April 6, 1963).
It alleges that the orders are illegal upon the grounds: (1) that Republic Act No. 875,
supplementing Commonwealth Act No. 103, has withdrawn from the CIR the power to issue a
return-to-work order; (2) that the only power granted by Section 10 of Republic Act No. 875 to the
CIR is to issue an order forbidding the employees to strike or forbidding the employer to lockout
the employees, as the case may be, before either contingency had become a fait accompli; (3)
that the taking in by the University of replacement professors was valid, and the return-to-work
order of March 30, 1963 constituted impairment of the obligation of contracts; and (4) the CIR
could not issue said order without having previously determined the legality or illegality of the
strike.
The contention of the University that Republic Act No. 875 has withdrawn the power of the Court
of Industrial Relations to issue a return-to-work order exercised by it under Commonwealth Act
No. 103 can not be sustained. When a case is certified by the President to the Court of Industrial
Relations the case thereby comes under the operation of Commonwealth Act No. 103, and the
Court may exercise the broad powers and jurisdiction granted to it by said Act. Section 10 of
Republic Act No. 875 empowers the Court of Industrial Relations to issue an order "fixing the
terms of employment. This clause is broad enough to authorize the Court to order the strikers to
return to work and the employer to readmit them. This Court, in the cases of the Philippine Marine
Officers Association v. The Court of Industrial Relations, Compaia Maritima, et al; and Compaia
Maritima, Et. Al. v. Philippine Marine Radio Officers Association and CIR Et. Al., G. R. Nos. L10095 and L-10115, October 31, 1957, declared:jgc:chanrobles.com.ph
"We cannot subscribe to the above contention. We agree with counsel for the Philippine * Radio
Officers Association that upon certification by the President under Section 10 of Republic Act 875
the case comes under the operation of Commonwealth Act 103, which enforces compulsory
arbitration in cases of labor disputes in industries indispensable to the national interest when the
President certifies the case to the Court of Industrial Relations. The evident intention of the law is
to empower the Court of Industrial Relations to act in such cases, not only in the manner
prescribed under Commonwealth Act 103, but with the same broad powers and jurisdiction
granted by that act. If the Court of Industrial Relations is granted authority to find a solution to an
industrial dispute and such solution consists in the ordering of employees to return back to work,
it cannot be contended that the Court of Industrial Relations does not have the power or
jurisdiction to carry that solution into effect. And of what use is its power of conciliation and
arbitration if it does not have the power and jurisdiction to carry into effect the solution it has
adopted? Lastly, if the said court has the power to fix the terms and conditions of employment, it
certainly can order the return of the workers with or without backpay as a term or condition of
employment."cralaw virtua1aw library
The foregoing ruling was reiterated by this Court in the case of Hind Sugar Co. v. CIR, Et Al., G.

R. No. L-13364, July 26, 1960.

When a case is certified to the CIR by the President of the Philippines pursuant to Section 10 of
Republic Act No. 875, the CIR is granted authority to find a solution to the industrial dispute; and
the solution which the CIR has found under the authority of the presidential certification and
conformable thereto cannot be questioned (Radio Operators Association of the Philippines v.
Philippine Marine Radio Officers Association, Et Al., L-10112, Nov. 29, 1957, 54 O.G. 3218).
Untenable also is the claim of the University that the CIR cannot issue a return-to-work order after
a strike has been declared, it being contended that under Section 10 of Republic Act No. 875 the
CIR can only prevent a strike or a lockout - when either of this situation had not yet occurred. But
in the case of Bisaya Land Transportation Co. Inc. v. Court of Industrial Relations, Et Al., No. L10114, Nov. 26, 1957, 50 O. G. 2518, this Court declared:jgc:chanrobles.com.ph
"There is no reason or ground for the contention that Presidential certification of labor dispute to
the CIR is limited to the prevention of strikes and lockouts. Even after a strike has been declared
where the President believes that public interest demands arbitration and conciliation, the
President may certify the case for that purpose. The practice has been for the Court of Industrial
Relations to order the strikers to work, pending the determination of the union demands that
impelled the strike. There is nothing in the law to indicate that this practice is abolished."
(Emphasis supplied)
Likewise untenable is the contention of the University that the taking in by it of replacements was
valid and the return-to-work order would be an impairment of its contract with the replacements.
As stated by the CIR in its order of March 30, 1963, it was agreed before the hearing of Case 41IPA on March 23, 1963 that the strikers would return to work under the status quo arrangement
and the University would readmit them, and the return-to-work order was a confirmation of that
agreement. This is a declaration of fact by the CIR which We cannot disregard. The faculty
members, by striking, have not abandoned their employment but, rather, they have only ceased
from their labor (Keith Theatre v. Vachon, Et Al., 187 A. 692). The striking faculty members have
not lost their right to go back to their positions, because the declaration of a strike is not a
renunciation of their employment and their employee relationship with the University (Rex Taxicab
Co. v. CIR, Et Al., 40 O.G., No. 13, 138). The employment of replacement was not authorized by
the CIR. At most, that was a temporary expedient resorted to by the University, which was subject
to the power of the CIR to allow to continue or not. The employment of replacements by the
University prior to the issuance of the order of March 30, 1963 did not vest in the replacements a
permanent right to the positions they held. Neither could such temporary employment bind the
University to retain permanently the replacements.
"Striking employees maintained their status as employees of the employer (Western Castridge
Co. v. National Labor Relations Board, C. C. A. 139 F. 2d 855, 858); that employees who took the
place of strikers do not displace them as employees." (National Labor Relations Board v. A
Sartorius & Co., C. C. A. 2, 140 F. 2d, 203, 206, 207.)
It is clear from what has been said that the return-to-work order cannot be considered as an
impairment of the contract entered into by petitioner with the replacements. Besides, labor
contracts must yield to the common good and such contracts are subject to the special laws on
labor unions, collective bargaining, strikes and similar subjects (Article 1700, Civil Code).
Likewise unsustainable is the contention of the university that the Court of Industrial Relations
could not issue the return-to-work order without having resolved previously the issue of the
legality or illegality of the strike, citing as authority therefor the case of Philippine Can Company v.
Court of Industrial Relations, G. R. No. L-3021, July 13, 1950. The ruling in said case is not
applicable to the case at bar, the facts and circumstances being very different. The Philippine Can
Company, case, unlike the instant case, did not involve the national interest and it was not
certified by the President. In that case the company no longer needed the services of the strikers,
nor did it need substitutes for the strikers, because the company was losing, and it was
imperative that it day off such laborers as were not necessary for its operation in order to save the
company from bankruptcy. This was the reason of this Court in ruling, in that case, that the
legality or illegality of the strike should have been decided first before the issuance of the returnto-work order. The University, in the case before Us, does not claim that it no longer needs the
services of professors and/or instructors; neither does it claim that it was imperative for it to lay off
the striking professors and instructors because of impending bankruptcy. On the contrary, it was
imperative for the University to hire replacements for the strikers. Therefore, the ruling in the
Philippine Can case that the legality of the strike should be decided first before the issuance of
the return- to-work order does not apply to the case at bar. Besides, as We have adverted to, the
return-to-work order of March 30, 1963, now in question, was a confirmation of an agreement

between the University and the Faculty Club during a pre-hearing conference on March 23, 1963.
The University also maintains that there was no more basis for the claim of the members of the
Faculty Club to return to their work, as their individual contracts for teaching had expired on
March 25 or 31, 1963, as the case may be, and consequently, there was also no basis for the
return-to-work order of the CIR because the contractual relationships having ceased there were
no positions to which the members of the Faculty Club could return to. This contention is not well
taken. This argument loses sight of the fact that when the professors and instructors struck on
February 18,1963, they continued to be employees of the University for the purposes of the labor
controversy notwithstanding the subsequent termination of their teaching contracts, for Section
2(d) of the Industrial Peace Act includes among employees "any individual whose work has
ceased as a consequence of, or in connection with, any current labor dispute or of any unfair
labor practice and who has not obtained any other substantially equivalent and regular
employment."cralaw virtua1aw library
The question raised by the University was resolved in a similar case in the United States. In the
case of Rapid Roller Co. v. NLRB, 126 F. 2d. 452, we read:jgc:chanrobles.com.ph
"On May 9, 1939 the striking employees, eighty-four in number, offered to the company to return
to their employment. The company, believing it had not committed any unfair labor practice,
refused the employees offer and claimed the right to employ others to take the place of the
strikers, as it might see fit. This constituted discrimination in the hiring and tenure of the striking
employees. When the employees went out on a strike because of the unfair labor practice of the
company, their status as employees for the purpose of any controversy growing out of that unfair
labor practice was fixed. Sec. 2 (3) of the Act. Phelps Dodge Corp. v. National Labor Relations
Board, 313 U.S. 177, 61 S. Ct. 845, 85 L. ed. 1271, 133 A. L. R 1217.
"For the purpose of such controversy they remained employees of the company. The company
contended that they could not be their employees in any event since the contract of their
employment expired by its own terms on April 23, 1939.
"In this we think the company is mistaken for the reason we have just pointed out, that the status
of the employees on strike became fixed under Sec. 2 (3) of the Act, because of the unfair labor
practice of the company which caused the strike."cralaw virtua1aw library
The University, furthermore, claims that the information for indirect contempt filed against the
officers of the University (Case No. V-30) as well as the order of April 29, 1963 for their arrest
were improper, irregular and illegal because (1) the officers of the University had complied in
good faith with the return-to-work order and in these cases that they did not, it was due to
circumstances beyond their control; (2) the return-to-work order and the order implementing the
same were illegal; and (3) even assuming that the order was legal, the same was not yet final
because there was a motion to reconsider it.
Again We find no merit in this claim of petitioner. We have already ruled that the CIR had
jurisdiction to issue the order of March 30, 1963 in CIR Case 41-IPA, and the return-to-work
provision of that order is valid and legal. Necessarily the order of April 6, 1963 implementing that
order of March 30, 1963 was also valid and legal.
Section 6 of Commonwealth Act No. 103 empowers the Court of Industrial Relations or any Judge
thereof to punish direct and indirect contempt as provided in Rule 64 (now Rule 71) of the Rules
of Court, under the same procedure and penalties provided therein. Section 3 of Rule 71
enumerates the acts which would constitute indirect contempt, among which is "disobedience or
resistance to lawful writ, process, order, judgment, or command or a court," and the person guilty
thereof can be punished after a written charge has been filed and the accused has been given an
opportunity to be heard. The last paragraph of said section provides:jgc:chanrobles.com.ph
"But nothing in this section shall be so construed as to prevent the court from issuing process to
bring the accused party into court, or from holding him in custody pending such
proceedings."cralaw virtua1aw library
The provision authorizes the judge to order the arrest of an alleged contemner (Francisco, Et. Al.
v. Enriquez, L-7058, March 20, 1954, 94 Phil., 603) and this, apparently, is the provision upon
which respondent Judge Bautista relied when he issued the questioned order of arrest.
The contention of petitioner that the order of arrest is illegal is unwarranted. The return-to-work
order allegedly violated was within the courts jurisdiction to issue.

Section 14 of Commonwealth Act No. 103 provides that in cases brought before the Court of
Industrial Relations under Section 4 of the Act (referring to strikes and lockouts) the appeal to the
Supreme Court from any award, order or decision shall not stay the execution of said award,
order or decision sought to be reviewed unless for special reason the court shall order that
execution be stayed. Any award, order or decision that is appealed is necessarily not final. Yet
under Section 14 of Commonwealth Act No. 103 that award, order or decision, even if not yet
final, is executory, and the stay of execution is discretionary with the Court of Industrial Relations.
In other words, the Court of Industrial Relations, in cases involving strikes and lockouts, may
compel compliance or obedience of its award, order or decision even if the award, order or
decision is not yet final because it is appealed, and it follows that any disobedience or noncompliance of the award, order or decision would constitute contempt against the Court of
Industrial Relations which the court may punish as provided in the Rules of Court. This power of
the Court of Industrial Relations to punish for contempt an act of non-compliance or disobedience
of an award, order or decision, even if not yet final, is a special one and is exercised only in cases
involving strikes and lockouts. And there is reason for this special power of the industrial court
because in the exercise of its jurisdiction over cases involving strikes and lockouts the court has
to issue orders or make decisions that are necessary to effect a prompt solution of the labor
dispute that caused the strike or the lockout, or to effect the prompt creation of a situation that
would be most beneficial to the management and the employees, and also to the public even if
the solution may be temporary, pending the final determination of the case. Otherwise, if the
effectiveness of any order, award, or decision of the industrial court in cases involving strikes and
lockouts would be suspended pending appeal then it can happen that the coercive powers of the
industrial court in the settlement of the labor disputes in those cases would be rendered useless
and nugatory.
The University points to Section 6 of Commonwealth Act No. 103 which provides that "Any
violation of any order, award, or decision of the Court of Industrial Relations shall after such order,
award or decision has become final, conclusive and executory constitute contempt of court", and
contends that only the disobedience of orders that are final (meaning one that is not appealed)
may be the subject of contempt proceedings. We believe that there is no inconsistency between
the above-quoted provision of Section 6 and the provision of Section 14 of Commonwealth Act
No. 103. It will be noted that Section 6 speaks of order, award or decision that is executory. By
the provision of Section 14 an order, award or decision of the Court of Industrial Relations in
cases involving strikes and lockouts are immediately executory so that a violation of that order
would constitute an indirect contempt of court.
We believe that the action of the CIR in issuing the order of arrest of April 29, 1963 is also
authorized under Section 19 of Commonwealth Act No. 103 which provides as
follows:jgc:chanrobles.com.ph
"SEC. 19. Implied condition in every contract of employment. In every contract of employment
whether verbal or written, it is an implied condition that when any dispute between the employer
and the employee or laborer has been submitted to the Court of Industrial Relations for
settlement or arbitration pursuant to the provisions of this Act . . . and pending award, or decision
by the Court of such dispute . . . the employee or laborer shall not strike or walk out of his
employment when so enjoined by the Court after hearing and when public interest so requires,
and if he has already done so, that he shall forthwith return to it, upon order of the Court, which
shall be issued only after hearing when public interest so requires or when the dispute cannot, in
its opinion, be promptly decided or settled; and if the employees or laborers fail to return to work,
the Court may authorize the employer to accept other employees or laborers. A condition shall
further be implied that while such dispute . . . is pending, the employer shall refrain from
accepting other employees or laborers, unless with the express authority of the Court, and shall
permit the continuation in the service of his employees or laborers under the last terms and
conditions existing before the dispute arose . . . A violation by the employer or by the employee or
laborer of such an order or the implied contractual condition set forth in this section shall
constitute contempt of the Court of Industrial Relations and shall be punished by the Court itself in
the same manner with the same penalties as in the case of contempt of a Court of First Instance .
. ."cralaw virtua1aw library
We hold that the CIR acted within its jurisdiction when it ordered the arrest of the officers of the
University upon a complaint for indirect contempt filed by the Acting Special Prosecutor of the CIR
in CIR Case V-30, and that order was valid. Besides those ordered arrested were not yet being
punished for contempt; but, having been charged, they were simply ordered arrested to be
brought before the Judge to be dealt with according to law. Whether they are guilty of the charge
or not is yet to be determined in a proper hearing.
Let it be noted that the order of arrest dated April 29, 1963 in CIR Case V-30 is being questioned

in Case G. R. No. L-21278 before this Court in a special civil action for certiorari. The University
did not appeal from that order. In other words, the only question to be resolved in connection with
that order in CIR Case V-30 is whether the CIR had jurisdiction, or had abused its discretion, in
issuing that order. We hold that the CIR had jurisdiction to issue that order, and neither did it
abuse its discretion when it issued that order.
In Case G. R. No. L 21462 the University appealed from the order of Judge Villanueva of the CIR
in Case No. 1183-MC, dated April 6, 1963, granting the motion of the Faculty Club to withdraw its
petition for certification election, and from resolution of the CIR en banc, dated June 5, 1963,
denying the motion to reconsider said order of April 6, 1963. The ground of the Faculty Club in
asking for the withdrawal of that petition for certification election was because the issues involved
in that petition were absorbed by the issues in Case 41-IPA. The University opposed the petition
for withdrawal, but at the same time it moved for the dismissal of the petition for certification
election.
It is contended by the University before this Court, in G. R. No. L-21462, that the issues of
employer-employee relationship between the University and the Faculty Club, the alleged status
of the Faculty Club as a labor union, its majority representation and designation as bargaining
representative in an appropriate unit of the Faculty Club should have been resolved first in Case
No. 1183-MC prior to the determination of the issues in Case No. 41-IPA, and, therefore, the
motion to withdraw the petition for certification election should not have been granted upon the
ground that the issues in the first case were absorbed in the second case.
We believe that these contentions of the University in Case G. R. No. L-21462 have been
sufficiently covered by the discussion in this decision of the main issues raised in the principal
case, which is Case G. R. No. L-21278. After all the University wanted CIR Case 1183- MC
dismissed, and the withdrawal of the petition for certification election had in a way produced the
situation desired by the University. After considering the arguments adduced by the University in
support of its petition forcertiorari by way of appeal in Case G. R. No. L-21278, We hold that the
CIR did not commit any error when it granted the withdrawal of the petition for certification
election in Case No. 1183-MC. The principal case before the CIR is Case No. 41-IPA and all the
questions relating to the labor disputes between the University and the Faculty Club may be
threshed out, and decided, in that case.
In case G. R. No. L-21500 the University appealed from the order of the CIR of March 30, 1963,
issued by Judge Bautista, and from the resolution of the CIR en banc promulgated on June 28,
1963, denying the motion for the reconsideration of that order of March 30, 1963, in CIR case No.
41-IPA. We have already ruled that the CIR has jurisdiction to issue that order of March 30, 1963,
and that order is valid, and We, therefore, hold that the CIR did not err in issuing that order of
March 30, 1963 and in issuing the resolution promulgated on June 28, 1963 (although dated May
7, 1963) denying the motion to reconsider that order of March 30, 1963.
IN VIEW OF THE FOREGOING, the petition for certiorari and prohibition with preliminary
injunction in Case G. R. No. L-21278 is dismissed and the writs prayed for therein are denied.
The writ of preliminary injunction issued in Case G. R. No. L-21278 is dissolved. The orders and
resolutions appealed from, in Cases Nos. L-21462 and L- 21500, are affirmed, with costs in these
three cases against the petitioner-appellant Feati University. It is so ordered.
Concepcion, C.J., Dizon, Regala, Makalintal, Bengzon, J. P., Sanchez and Castro., JJ., concur.
G.R. No. 119268
February 23, 2000
ANGEL JARDIN, DEMETRIO CALAGOS, URBANO MARCOS, ROSENDO MARCOS, LUIS DE
LOS ANGELES, JOEL ORDENIZA and AMADO CENTENO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC) and GOODMAN TAXI (PHILJAMA
INTERNATIONAL, INC.) respondents.
QUISUMBING, J.:
This special civil action for certiorari seeks to annul the decision1 of public respondent
promulgated on October 28, 1994, in NLRC NCR CA No. 003883-92, and its resolution 2 dated
December 13, 1994 which denied petitioners motion for reconsideration.
Petitioners were drivers of private respondent, Philjama International Inc., a domestic corporation
engaged in the operation of "Goodman Taxi." Petitioners used to drive private respondent's
taxicabs every other day on a 24-hour work schedule under the boundary system. Under this

arrangement, the petitioners earned an average of P400.00 daily. Nevertheless, private

respondent admittedly regularly deducts from petitioners, daily earnings the amount of P30.00
supposedly for the washing of the taxi units. Believing that the deduction is illegal, petitioners
decided to form a labor union to protect their rights and interests.
Upon learning about the plan of petitioners, private respondent refused to let petitioners drive
their taxicabs when they reported for work on August 6, 1991, and on succeeding days.
Petitioners suspected that they were singled out because they were the leaders and active
members of the proposed union. Aggrieved, petitioners filed with the labor arbiter a complaint
against private respondent for unfair labor practice, illegal dismissal and illegal deduction of
washing fees. In a decision3 dated August 31, 1992, the labor arbiter dismissed said complaint for
lack of merit.
On appeal, the NLRC (public respondent herein), in a decision dated April 28, 1994, reversed and
set aside the judgment of the labor arbiter. The labor tribunal declared that petitioners are
employees of private respondent, and, as such, their dismissal must be for just cause and after
due process. It disposed of the case as follows:
WHEREFORE, in view of all the foregoing considerations, the decision of the Labor
Arbiter appealed from is hereby SET ASIDE and another one entered:
1. Declaring the respondent company guilty of illegal dismissal and accordingly it is
directed to reinstate the complainants, namely, Alberto A. Gonzales, Joel T. Morato,
Gavino Panahon, Demetrio L. Calagos, Sonny M. Lustado, Romeo Q. Clariza, Luis de los
Angeles, Amado Centino, Angel Jardin, Rosendo Marcos, Urbano Marcos, Jr., and Joel
Ordeniza, to their former positions without loss of seniority and other privileges
appertaining thereto; to pay the complainants full backwages and other benefits, less
earnings elsewhere, and to reimburse the drivers the amount paid as washing charges;
and
2. Dismissing the charge of unfair [labor] practice for insufficiency of evidence.
SO ORDERED.4
Private respondent's first motion for reconsideration was denied. Remaining hopeful, private
respondent filed another motion for reconsideration. This time, public respondent, in its
decision5 dated October 28, 1994, granted aforesaid second motion for reconsideration. It ruled
that it lacks jurisdiction over the case as petitioners and private respondent have no employeremployee relationship. It held that the relationship of the parties is leasehold which is covered by
the Civil Code rather than the Labor Code, and disposed of the case as follows:
VIEWED IN THE LIGHT OF ALL THE FOREGOING, the Motion under reconsideration is
hereby given due course.
Accordingly, the Resolution of August 10, 1994, and the Decision of April 28, 1994 are
hereby SET ASIDE. The Decision of the Labor Arbiter subject of the appeal is likewise
SET ASIDE and a NEW ONE ENTERED dismissing the complaint for lack of jurisdiction.
No costs.
SO ORDERED.6
Expectedly, petitioners sought reconsideration of the labor tribunal's latest decision which was
denied. Hence, the instant petition.
In this recourse, petitioners allege that public respondent acted without or in excess of
jurisdiction, or with grave abuse of discretion in rendering the assailed decision, arguing that:
I
THE NLRC HAS NO JURISDICTION TO ENTERTAIN RESPONDENT'S SECOND MOTION FOR
RECONSIDERATION WHICH IS ADMITTEDLY A PLEADING PROHIBITED UNDER THE NLRC
RULES, AND TO GRANT THE SAME ON GROUNDS NOT EVEN INVOKED THEREIN.

II
THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES
IS ALREADY A SETTLED ISSUE CONSTITUTING RES JUDICATA, WHICH THE NLRC HAS NO
MORE JURISDICTION TO REVERSE, ALTER OR MODIFY.
III
IN ANY CASE, EXISTING JURISPRUDENCE ON THE MATTER SUPPORTS THE VIEW THAT
PETITIONERS-TAXI DRIVERS ARE EMPLOYEES OF RESPONDENT TAXI COMPANY.7
The petition is impressed with merit.
The phrase "grave abuse of discretion amounting to lack or excess of jurisdiction" has settled
meaning in the jurisprudence of procedure. It means such capricious and whimsical exercise of
judgment by the tribunal exercising judicial or quasi-judicial power as to amount to lack of
power.8 In labor cases, this Court has declared in several instances that disregarding rules it is
bound to observe constitutes grave abuse of discretion on the part of labor tribunal.
In Garcia vs. NLRC,9 private respondent therein, after receiving a copy of the labor arbiter's
decision, wrote the labor arbiter who rendered the decision and expressed dismay over the
judgment. Neither notice of appeal was filed nor cash or surety bond was posted by private
respondent. Nevertheless, the labor tribunal took cognizance of the letter from private respondent
and treated said letter as private respondent's appeal. In a certiorari action before this Court, we
ruled that the labor tribunal acted with grave abuse of discretion in treating a mere letter from
private respondent as private respondent's appeal in clear violation of the rules on appeal
prescribed under Section 3(a), Rule VI of the New Rules of Procedure of NLRC.
In Philippine Airlines Inc. vs. NLRC,10 we held that the labor arbiter committed grave abuse of
discretion when he failed to resolve immediately by written order a motion to dismiss on the
ground of lack of jurisdiction and the supplemental motion to dismiss as mandated by Section 15
of Rule V of the New Rules of Procedure of the NLRC.
In Unicane Workers Union-CLUP vs. NLRC,11 we held that the NLRC gravely abused its
discretion by allowing and deciding an appeal without an appeal bond having been filed as
required under Article 223 of the Labor Code.
In Maebo vs. NLRC,12 we declared that the labor arbiter gravely abused its discretion in
disregarding the rule governing position papers. In this case, the parties have already filed their
position papers and even agreed to consider the case submitted for decision, yet the labor arbiter
still admitted a supplemental position paper and memorandum, and by taking into consideration,
as basis for his decision, the alleged facts adduced therein and the documents attached thereto.
In Gesulgon vs. NLRC,13 we held that public respondent gravely abused its discretion in treating
the motion to set aside judgment and writ of execution as a petition for relief of judgment. In doing
so, public respondent had, without sufficient basis, extended the reglementary period for filing
petition for relief from judgment contrary to prevailing rule and case law.
In this case before us, private respondent exhausted administrative remedy available to it by
seeking reconsideration of public respondent's decision dated April 28, 1994, which public
respondent denied. With this motion for reconsideration, the labor tribunal had ample opportunity
to rectify errors or mistakes it may have committed before resort to courts of justice can be
had.14 Thus, when private respondent filed a second motion for reconsideration, public
respondent should have forthwith denied it in accordance with Rule 7, Section 14 of its New
Rules of Procedure which allows only one motion for reconsideration from the same party, thus:
Sec. 14. Motions for Reconsideration. Motions for reconsideration of any order,
resolution or decision of the Commission shall not be entertained except when based on
palpable or patent errors, provided that the motion is under oath and filed within ten (10)
calendar days from receipt of the order, resolution or decision with proof of service that a
copy of the same has been furnished within the reglementary period the adverse party
and provided further, that only one such motion from the same party shall be entertained.
[Emphasis supplied]

The rationale for allowing only one motion for reconsideration from the same party is to assist the
parties in obtaining an expeditious and inexpensive settlement of labor cases. For obvious
reasons, delays cannot be countenanced in the resolution of labor disputes. The dispute may
involve no less than the livelihood of an employee and that of his loved ones who are dependent
upon him for food, shelter, clothing, medicine, and education. It may as well involve the survival of
a business or an industry.15
As correctly pointed out by petitioner, the second motion for reconsideration filed by private
respondent is indubitably a prohibited pleading16 which should have not been entertained at all.
Public respondent cannot just disregard its own rules on the pretext of "satisfying the ends of
justice",17 especially when its disposition of a legal controversy ran afoul with a clear and long
standing jurisprudence in this jurisdiction as elucidated in the subsequent discussion. Clearly,
disregarding a settled legal doctrine enunciated by this Court is not a way of rectifying an error or
mistake. In our view, public respondent gravely abused its discretion in taking cognizance and
granting private respondent's second motion for reconsideration as it wrecks the orderly
procedure in seeking reliefs in labor cases.
But, there is another compelling reason why we cannot leave untouched the flip-flopping
decisions of the public respondent. As mentioned earlier, its October 28, 1994 judgment is not in
accord with the applicable decisions of this Court. The labor tribunal reasoned out as follows:
On the issue of whether or not employer-employee relationship exists, admitted is the
fact that complainants are taxi drivers purely on the "boundary system". Under this
system the driver takes out his unit and pays the owner/operator a fee commonly called
"boundary" for the use of the unit. Now, in the determination the existence of employeremployee relationship, the Supreme Court in the case of Sara, et al., vs. Agarrado, et al.
(G.R. No. 73199, 26 October 1988) has applied the following four-fold test: "(1) the
selection and engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power of control the employees conduct."
"Among the four (4) requisites", the Supreme Court stresses that "control is deemed the
most important that the other requisites may even be disregarded". Under the control
test, an employer-employee relationship exists if the "employer" has reserved the right to
control the "employee" not only as to the result of the work done but also as to the means
and methods by which the same is to be accomplished. Otherwise, no such relationship
exists. (Ibid.)
Applying the foregoing parameters to the case herein obtaining, it is clear that the
respondent does not pay the drivers, the complainants herein, their wages. Instead, the
drivers pay a certain fee for the use of the vehicle. On the matter of control, the drivers,
once they are out plying their trade, are free to choose whatever manner they conduct
their trade and are beyond the physical control of the owner/operator; they themselves
determine the amount of revenue they would want to earn in a day's driving; and, more
significantly aside from the fact that they pay for the gasoline they consume, they likewise
shoulder the cost of repairs on damages sustained by the vehicles they are driving.
Verily, all the foregoing attributes signify that the relationship of the parties is more of a
leasehold or one that is covered by a charter agreement under the Civil Code rather than
the Labor Code.18
The foregoing ratiocination goes against prevailing jurisprudence.
In a number of cases decided by this Court,19 we ruled that the relationship between jeepney
owners/operators on one hand and jeepney drivers on the other under the boundary system is
that of employer-employee and not of lessor-lessee. We explained that in the lease of chattels,
the lessor loses complete control over the chattel leased although the lessee cannot be reckless
in the use thereof, otherwise he would be responsible for the damages to the lessor. In the case
of jeepney owners/operators and jeepney drivers, the former exercise supervision and control
over the latter. The management of the business is in the owner's hands. The owner as holder of
the certificate of public convenience must see to it that the driver follows the route prescribed by
the franchising authority and the rules promulgated as regards its operation. Now, the fact that the
drivers do not receive fixed wages but get only that in excess of the so-called "boundary" they
pay to the owner/operator is not sufficient to withdraw the relationship between them from that of
employer and employee. We have applied by analogy the abovestated doctrine to the
relationships between bus owner/operator and bus conductor,20 auto-calesa owner/operator and

driver,21 and recently between taxi owners/operators and taxi drivers. 22 Hence, petitioners are
undoubtedly employees of private respondent because as taxi drivers they perform activities
which are usually necessary or desirable in the usual business or trade of their employer.
As consistently held by this Court, termination of employment must be effected in accordance
with law. The just and authorized causes for termination of employment are enumerated under
Articles 282, 283 and 284 of the Labor Code. The requirement of notice and hearing is set-out in
Article 277 (b) of the said Code. Hence, petitioners, being employees of private respondent, can
be dismissed only for just and authorized cause, and after affording them notice and hearing prior
to termination. In the instant case, private respondent had no valid cause to terminate the
employment of petitioners. Neither were there two (2) written notices sent by private respondent
informing each of the petitioners that they had been dismissed from work. These lack of valid
cause and failure on the part of private respondent to comply with the twin-notice requirement
underscored the illegality surrounding petitioners' dismissal.
Under the law, an employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time of his actual reinstatement. 23 It must
be emphasized, though, that recent judicial pronouncements 24 distinguish between employees
illegally dismissed prior to the effectivity of Republic Act No. 6715 on March 21, 1989, and those
whose illegal dismissals were effected after such date. Thus, employees illegally dismissed prior
to March 21, 1989, are entitled to backwages up to three (3) years without deduction or
qualification, while those illegally dismissed after that date are granted full backwages inclusive of
allowances and other benefits or their monetary equivalent from the time their actual
compensation was withheld from them up to the time of their actual reinstatement. The legislative
policy behind Republic Act No. 6715 points to "full backwages" as meaning exactly that, i.e.,
without deducting from backwages the earnings derived elsewhere by the concerned employee
during the period of his illegal dismissal. Considering that petitioners were terminated from work
on August 1, 1991, they are entitled to full backwages on the basis of their last daily earnings.
With regard to the amount deducted daily by private respondent from petitioners for washing of
the taxi units, we view the same as not illegal in the context of the law. We note that after a tour of
duty, it is incumbent upon the driver to restore the unit he has driven to the same clean condition
when he took it out. Car washing after a tour of duty is indeed a practice in the taxi industry and is
in fact dictated by fair play.25 Hence, the drivers are not entitled to reimbursement of washing
charges.1wphi1.nt
WHEREFORE, the instant petition is GRANTED. The assailed DECISION of public respondent
dated October 28, 1994, is hereby SET ASIDE. The DECISION of public respondent dated April
28, 1994, and its RESOLUTION dated December 13, 1994, are hereby REINSTATED subject to
MODIFICATION. Private respondent is directed to reinstate petitioners to their positions held at
the time of the complained dismissal. Private respondent is likewise ordered to pay petitioners
their full backwages, to be computed from the date of dismissal until their actual reinstatement.
However, the order of public respondent that petitioners be reimbursed the amount paid as
washing charges is deleted. Costs against private respondents.
SO ORDERED.
G.R. Nos. 83380-81 November 15, 1989
MAKATI HABERDASHERY, INC., JORGE LEDESMA and CECILIO G.
INOCENCIO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, CEFERINA J. DIOSANA (Labor Arbiter,
Department of Labor and Employment, National Capital Region), SANDIGAN NG
MANGGAGAWANG PILIPINO (SANDIGAN)-TUCP and its members, JACINTO GARCIANO,
ALFREDO C. BASCO, VICTORIO Y. LAURETO, ESTER NARVAEZ, EUGENIO L. ROBLES,
BELEN N. VISTA, ALEJANDRO A. ESTRABO, VEVENCIO TIRO, CASIMIRO ZAPATA,
GLORIA ESTRABO, LEONORA MENDOZA, MACARIA G. DIMPAS, MERILYN A. VIRAY, LILY
OPINA, JANET SANGDANG, JOSEFINA ALCOCEBA and MARIA ANGELES, respondents.
Ledesma, Saludo & Associates for petitioners.
Pablo S. Bernardo for private respondents.

FERNAN, C.J.:
This petition for certiorari involving two separate cases filed by private respondents against herein
petitioners assails the decision of respondent National Labor Relations Commission in NLRC
CASE No. 7-2603-84 entitled "Sandigan Ng Manggagawang Pilipino (SANDIGAN)-TUCP etc., et
al. v. Makati Haberdashery and/or Toppers Makati, et al." and NLRC CASE No. 2-428-85 entitled
"Sandigan Ng Manggagawang Pilipino (SANDIGAN)-TUCP etc., et al. v. Toppers Makati, et al.",
affirming the decision of the Labor Arbiter who jointly heard and decided aforesaid cases, finding:
(a) petitioners guilty of illegal dismissal and ordering them to reinstate the dismissed workers and
(b) the existence of employer-employee relationship and granting respondent workers by reason
thereof their various monetary claims.
The undisputed facts are as follows:
Individual complainants, private respondents herein, have been working for petitioner Makati
Haberdashery, Inc. as tailors, seamstress, sewers, basters (manlililip) and "plantsadoras". They
are paid on a piece-rate basis except Maria Angeles and Leonila Serafina who are paid on a
monthly basis. In addition to their piece-rate, they are given a daily allowance of three (P 3.00)
pesos provided they report for work before 9:30 a.m. everyday.
Private respondents are required to work from or before 9:30 a.m. up to 6:00 or 7:00 p.m. from
Monday to Saturday and during peak periods even on Sundays and holidays.
On July 20, 1984, the Sandigan ng Manggagawang Pilipino, a labor organization of the
respondent workers, filed a complaint docketed as NLRC NCR Case No. 7-2603-84 for (a)
underpayment of the basic wage; (b) underpayment of living allowance; (c) non-payment of
overtime work; (d) non-payment of holiday pay; (e) non-payment of service incentive pay; (f) 13th
month pay; and (g) benefits provided for under Wage Orders Nos. 1, 2, 3, 4 and 5. 1
During the pendency of NLRC NCR Case No. 7-2603-84, private respondent Dioscoro Pelobello
left with Salvador Rivera, a salesman of petitioner Haberdashery, an open package which was
discovered to contain a "jusi" barong tagalog. When confronted, Pelobello replied that the same
was ordered by respondent Casimiro Zapata for his customer. Zapata allegedly admitted that he
copied the design of petitioner Haberdashery. But in the afternoon, when again questioned about
said barong, Pelobello and Zapata denied ownership of the same. Consequently a memorandum
was issued to each of them to explain on or before February 4, 1985 why no action should be
taken against them for accepting a job order which is prejudicial and in direct competition with the
business of the company. 2 Both respondents allegedly did not submit their explanation and did
not report for work. 3 Hence, they were dismissed by petitioners on February 4, 1985. They
countered by filing a complaint for illegal dismissal docketed as NLRC NCR Case No. 2-428-85
on February 5, 1985. 4
On June 10, 1986, Labor Arbiter Ceferina J. Diosana rendered judgment, the dispositive portion
of which reads:
WHEREFORE, judgment is hereby rendered in NLRC NCR Case No. 2-428-85
finding respondents guilty of illegal dismissal and ordering them to reinstate
Dioscoro Pelobello and Casimiro Zapata to their respective or similar positions
without loss of seniority rights, with full backwages from July 4, 1985 up to actual
reinstatement. The charge of unfair labor practice is dismissed for lack of merit.
In NLRC NCR Case No. 7-26030-84, the complainants' claims for underpayment
re violation of the minimum wage law is hereby ordered dismissed for lack of
merit.
Respondents are hereby found to have violated the decrees on the cost of living
allowance, service incentive leave pay and the 13th Month Pay. In view thereof,
the economic analyst of the Commission is directed to compute the monetary
awards due each complainant based on the available records of the respondents
retroactive as of three years prior to the filing of the instant case.
SO ORDERED. 5

From the foregoing decision, petitioners appealed to the NLRC. The latter on March 30, 1988
affirmed said decision but limited the backwages awarded the Dioscoro Pelobello and Casimiro
Zapata to only one (1) year. 6
After their motion for reconsideration was denied, petitioners filed the instant petition raising the
following issues:
I
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT AN EMPLOYER-EMPLOYEE
RELATIONSHIP EXISTS BETWEEN PETITIONER HABERDASHERY AND RESPONDENTS
WORKERS.
II
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT RESPONDENTS WORKERS
ARE ENTITLED TO MONETARY CLAIMS DESPITE THE FINDING THAT THEY ARE NOT
ENTITLED TO MINIMUM WAGE.
III
THE SUBJECT DECISIONS ERRONEOUSLY CONCLUDED THAT RESPONDENTS
PELOBELLO AND ZAPATA WERE ILLEGALLY DISMISSED. 7
The first issue which is the pivotal issue in this case is resolved in favor of private respondents.
We have repeatedly held in countless decisions that the test of employer-employee relationship is
four-fold: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power to control the employee's conduct. It is the so called
"control test" that is the most important element. 8 This simply means the determination of
whether the employer controls or has reserved the right to control the employee not only as to the
result of the work but also as to the means and method by which the same is to be
accomplished. 9
The facts at bar indubitably reveal that the most important requisite of control is present. As
gleaned from the operations of petitioner, when a customer enters into a contract with the
haberdashery or its proprietor, the latter directs an employee who may be a tailor, pattern maker,
sewer or "plantsadora" to take the customer's measurements, and to sew the pants, coat or shirt
as specified by the customer. Supervision is actively manifested in all these aspects the
manner and quality of cutting, sewing and ironing.
Furthermore, the presence of control is immediately evident in this memorandum issued by
Assistant Manager Cecilio B. Inocencio, Jr. dated May 30, 1981 addressed to Topper's Makati
Tailors which reads in part:
4. Effective immediately, new procedures shall be followed:
A. To follow instruction and orders from the undersigned Roger Valderama,
Ruben Delos Reyes and Ofel Bautista. Other than this person (sic) must ask
permission to the above mentioned before giving orders or instructions to the
tailors.
B. Before accepting the job orders tailors must check the materials, job orders,
due dates and other things to maximize the efficiency of our production. The
materials should be checked (sic) if it is matched (sic) with the sample, together
with the number of the job order.
C. Effective immediately all job orders must be finished one day before the due
date. This can be done by proper scheduling of job order and if you will
cooperate with your supervisors. If you have many due dates for certain day,
advise Ruben or Ofel at once so that they can make necessary adjustment on
due dates.

D. Alteration-Before accepting alteration person attending on customs (sic) must

ask first or must advise the tailors regarding the due dates so that we can
eliminate what we call 'Bitin'.
E. If there is any problem regarding supervisors or co-tailor inside our shop,
consult with me at once settle the problem. Fighting inside the shop is strictly
prohibited. Any tailor violating this memorandum will be subject to disciplinary
action.
For strict compliance. 10
From this memorandum alone, it is evident that petitioner has reserved the right to control its
employees not only as to the result but also the means and methods by which the same are to be
accomplished. That private respondents are regular employees is further proven by the fact that
they have to report for work regularly from 9:30 a.m. to 6:00 or 7:00 p.m. and are paid an
additional allowance of P 3.00 daily if they report for work before 9:30 a.m. and which is forfeited
when they arrive at or after 9:30 a.m. 11
Since private respondents are regular employees, necessarily the argument that they are
independent contractors must fail. As established in the preceding paragraphs, private
respondents did not exercise independence in their own methods, but on the contrary were
subject to the control of petitioners from the beginning of their tasks to their completion. Unlike
independent contractors who generally rely on their own resources, the equipment, tools,
accessories, and paraphernalia used by private respondents are supplied and owned by
petitioners. Private respondents are totally dependent on petitioners in all these aspects.
Coming now to the second issue, there is no dispute that private respondents are entitled to the
Minimum Wage as mandated by Section 2(g) of Letter of Instruction No. 829, Rules Implementing
Presidential Decree No. 1614 and reiterated in Section 3(f), Rules Implementing Presidential
Decree 1713 which explicitly states that, "All employees paid by the result shall receive not less
than the applicable new minimum wage rates for eight (8) hours work a day, except where a
payment by result rate has been established by the Secretary of Labor. ..." 12No such rate has
been established in this case.
But all these notwithstanding, the question as to whether or not there is in fact an underpayment
of minimum wages to private respondents has already been resolved in the decision of the Labor
Arbiter where he stated: "Hence, for lack of sufficient evidence to support the claims of the
complainants for alleged violation of the minimum wage, their claims for underpayment re
violation of the Minimum Wage Law under Wage Orders Nos. 1, 2, 3, 4, and 5 must perforce
fall." 13
The records show that private respondents did not appeal the above ruling of the Labor Arbiter to
the NLRC; neither did they file any petition raising that issue in the Supreme Court. Accordingly,
insofar as this case is concerned, that issue has been laid to rest. As to private respondents, the
judgment may be said to have attained finality. For it is a well-settled rule in this jurisdiction that
"an appellee who has not himself appealed cannot obtain from the appellate court-, any
affirmative relief other than the ones granted in the decision of the court below. " 14
As a consequence of their status as regular employees of the petitioners, they can claim cost of
living allowance. This is apparent from the provision defining the employees entitled to said
allowance, thus: "... All workers in the private sector, regardless of their position, designation or
status, and irrespective of the method by which their wages are paid. " 15
Private respondents are also entitled to claim their 13th Month Pay under Section 3(e) of the
Rules and Regulations Implementing P.D. No. 851 which provides:
Section 3. Employers covered. The Decree shall apply to all employers except
to:
xxx xxx xxx
(e) Employers of those who are paid on purely commission, boundary, or task
basis, and those who are paid a fixed amount for performing a specific work,
irrespective of the time consumed in the performance thereof, except where the
workers are paid on piece-rate basis in which case the employer shall be

covered by this issuance insofar as such workers are concerned. (Emphasis

supplied.)
On the other hand, while private respondents are entitled to Minimum Wage, COLA and 13th
Month Pay, they are not entitled to service incentive leave pay because as piece-rate workers
being paid at a fixed amount for performing work irrespective of time consumed in the
performance thereof, they fall under one of the exceptions stated in Section 1(d), Rule V,
Implementing Regulations, Book III, Labor Code. For the same reason private respondents
cannot also claim holiday pay (Section 1(e), Rule IV, Implementing Regulations, Book III, Labor
Code).
With respect to the last issue, it is apparent that public respondents have misread the evidence,
for it does show that a violation of the employer's rules has been committed and the evidence of
such transgression, the copied barong tagalog, was in the possession of Pelobello who pointed to
Zapata as the owner. When required by their employer to explain in a memorandum issued to
each of them, they not only failed to do so but instead went on AWOL (absence without official
leave), waited for the period to explain to expire and for petitioner to dismiss them. They
thereafter filed an action for illegal dismissal on the far-fetched ground that they were dismissed
because of union activities. Assuming that such acts do not constitute abandonment of their jobs
as insisted by private respondents, their blatant disregard of their employer's memorandum is
undoubtedly an open defiance to the lawful orders of the latter, a justifiable ground for termination
of employment by the employer expressly provided for in Article 283(a) of the Labor Code as well
as a clear indication of guilt for the commission of acts inimical to the interests of the employer,
another justifiable ground for dismissal under the same Article of the Labor Code, paragraph (c).
Well established in our jurisprudence is the right of an employer to dismiss an employee whose
continuance in the service is inimical to the employer's interest. 16
In fact the Labor Arbiter himself to whom the explanation of private respondents was submitted
gave no credence to their version and found their excuses that said barong tagalog was the one
they got from the embroiderer for the Assistant Manager who was investigating them,
unbelievable.
Under the circumstances, it is evident that there is no illegal dismissal of said employees. Thus,
We have ruled that:
No employer may rationally be expected to continue in employment a person
whose lack of morals, respect and loyalty to his employer, regard for his
employer's rules, and appreciation of the dignity and responsibility of his office,
has so plainly and completely been bared.
That there should be concern, sympathy, and solicitude for the rights and welfare
of the working class, is meet and proper. That in controversies between a laborer
and his master, doubts reasonably arising from the evidence, or in the
interpretation of agreements and writings should be resolved in the former's
favor, is not an unreasonable or unfair rule. But that disregard of the employer's
own rights and interests can be justified by that concern and solicitude is unjust
and unacceptable. (Stanford Microsystems, Inc. v. NLRC, 157 SCRA 414-415
[1988] ).
The law is protecting the rights of the laborer authorizes neither oppression nor self-destruction of
the employer. 17More importantly, while the Constitution is committed to the policy of social justice
and the protection of the working class, it should not be supposed that every labor dispute will
automatically be decided in favor of labor. 18
Finally, it has been established that the right to dismiss or otherwise impose discriplinary
sanctions upon an employee for just and valid cause, pertains in the first place to the employer,
as well as the authority to determine the existence of said cause in accordance with the norms of
due process. 19
There is no evidence that the employer violated said norms. On the contrary, private respondents
who vigorously insist on the existence of employer-employee relationship, because of the
supervision and control of their employer over them, were the very ones who exhibited their lack
of respect and regard for their employer's rules.

Under the foregoing facts, it is evident that petitioner Haberdashery had valid grounds to
terminate the services of private respondents.
WHEREFORE, the decision of the National Labor Relations Commission dated March 30, 1988
and that of the Labor Arbiter dated June 10, 1986 are hereby modified. The complaint filed by
Pelobello and Zapata for illegal dismissal docketed as NLRC NCR Case No. 2-428-85 is
dismissed for lack of factual and legal bases. Award of service incentive leave pay to private
respondents is deleted.
SO ORDERED.

[G.R. No. 113542. February 24, 1998]

CAURDANETAAN PIECE WORKERS UNION, represented by JUANITO P. COSTALES, JR. in

his capacity as union president, petitioner, vs.UNDERSECRETARY BIENVENIDO E.
LAGUESMA and CORFARM GRAINS, INC., respondents.

[G.R. No. 114911. February 24, 1998]

CAURDANETAAN PIECE WORKERS ASSOCIATION as represented by JUANITO P.

COSTALES, JR., president, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION, CORFARM GRAINS, INC. and/or TEODY C. RAPISORA and
HERMINIO RABANG, respondents.
DECISION
PANGANIBAN, J.:
The Court reiterates some fundamental labor doctrines: (1) this Court may review factual
determinations where the findings of the med-arbiter conflict with those of the undersecretary of
labor; (2) an employer-employee relationship may be established by substantial evidence; (3)
procedural due process is satisfied by the grant of an opportunity to be heard and an actual
adversarial-type trial is not required; (4) the NLRC commits grave abuse of discretion when it
remands a case to the labor arbiter in spite of ample pieces of evidence on record which are
sufficient to decide the case directly; and (5) where illegal dismissal is proven, the workers are
entitled to back wages and other similar benefits without deductions or conditions.

Statement of the Case

These doctrines are used by the Court in resolving these consolidated petitions for certiorari
under Rule 65, challenging the resolutions of Undersecretary Bienvenido Laguesma and the
National Labor Relations Commission.

First Case
In G.R. No. 113542, hereafter referred to as the First Case, Petitioner Caurdanetaan Piece
Workers Union/Association (CPWU) prays for the nullification and reversal of Undersecretary
Laguesmas Order dated January 4, 1994 in OS-MA-A-8-119-93 (RO100-9207-RU-001), which
granted Respondent Corfarms motion for reconsideration and dismissed petitioners prayer for
certification election. The dispositive portion of the assailed Order reads as follows: [1]
WHEREFORE, the questioned Order is hereby set aside and a new one issued
dismissing the petition for certification election for lack of merit.

In his earlier Order dated September 7, 1993, Laguesma affirmed Med-Arbiter Sinamar E.
Limos order of March 18, 1993 which disposed as follows: [2]
IN VIEW OF ALL THE FOREGOING CONSIDERATIONS, the above-entitled petition is
hereby granted. Consequently, the motion to dismiss filed by Corfarm Grains, Inc. is
denied.
Let a certification election be conducted among the rank-and-file employees of Corfarm
Grains, Inc., within ten (10) days from receipt hereof, with the following choices:
1. Caurdanetaan Piece Workers Union;
2. No Union
A pre-election conference is hereby set on March 29, 1993 at 2:00 o clock in the
afternoon at the DOLE, Dagupan District Office, Mayombo District, Dagupan City to
thresh out the mechanics of the Certification Election. Employer Corfarm Grains, Inc. is
hereby directed to present its employment records for the period covering January to
June 1992 evidencing payment of salaries of its employees.
Let the parties be notified accordingly.
Aggrieved by Respondent Laguesmas subsequent Order dated January 27, 1994 [3] denying
its motion for reconsideration, petitioner filed this recourse before this Court.

Second Case
In G.R. No. 114911, hereafter referred to as the Second Case, petitioner assails the
Resolution promulgated on February 16, 1994 in NLRC CA No. L-001109 [4] by the National Labor
Relations Commission (Respondent NLRC),[5] the dispositive portion of which reads:[6]
WHEREFORE, the Decision of the Labor Arbiter dated 14 September 1993 is hereby
SET ASIDE. Let the records of the case be REMANDED to the Arbitration Branch of
origin for immediate appropriate proceedings.
The labor arbiters decision that was reversed by Respondent NLRC disposed as follows: [7]
WHEREFORE, judgment is hereby rendered as follows:
1. Declaring individual complainants dismissal illegal;
2. Declaring respondent guilty of unfair labor practice;
3. Ordering respondent to pay the 92[8] complainants the following:
a) 13th month pay limited to three years in the amount of P4,788.00 each;
b) service incentive leave pay in the amount of P855.00 each for three years;
c) underpaid wages covering the period June 1989 to June 1992 which
amount to P47,040.00 each;
d) backwages reckoned from June 1992, the date of dismissal[,] to
September 1993, the date of promulgation of the decision or a period of
14 months, in the amount of P22,344.00 each;
e) refund of P12.00/day deduction limited to three years which amounts to
P12,096 each; and
f) to pay the complainants P1,000.00 each as damages.
4. To reinstate the complainants to their former position[s] immediately.
All other claims are hereby dismissed for lack of merit.
In a Resolution promulgated on March 28, 1994, Respondent NLRC denied petitioners
motion for reconsideration.[9]

The Facts
In his Consolidated Memorandum, the solicitor general recited the following pertinent facts,
which we find amply supported by the records:[10]
Petitioner union has ninety-two (92) members who worked as cargador at the
warehouse and ricemills of private respondent [referring to Respondent Corfarm] at
Umingan, Pangasinan since 1982. As cargadores, they loaded, unloaded and piled
sacks of palay from the warehouse to the cargo trucks and those brought by cargo
trucks for delivery to different places. They were paid by private respondent on a piece
rate basis. When private respondent denied some benefits to these cargadores, the
latter organized petitioner union. Upon learning of its formation, private respondent
barred its members from working with them and replaced [them] with non-members of
the union sometime in the middle of 1992.
On July 9, 1992, petitioner filed [a petition] for certification election before the Regional
Office No. I of the Department of Labor and Employment, San Fernando, La Union
docketed as RO100-9207-RU-001.
While this petition for certification election was pending, petitioner also filed on
November 16, 1992, a complaint for illegal dismissal, unfair labor practice, refund of
illegal deductions, payment of wage differentials, various pecuniary benefits provided by
laws, damages, legal interest, reinstatement and attorneys fees, against private
respondent before the Regional Arbitration Branch No. 1 of Dagupan City, docketed as
NLRC RAB Case No. 01-117-0184-92.
On November 24, 1992, Labor Arbiter Ricardo Olairez in NLRC Case No. Sub-Rab 01117-0184-92, directed the parties to submit position paper on or before December 14,
1992, and to appear for hearing on the said date. Only the complainant petitioner
submitted its position paper on December 3, 1992.
Likewise in the scheduled hearing on December 14, 1992, private respondent did not
appear[;] thus Labor Arbiter Olairez allowed the president of petitioner union Juanito
Costales to testify and present its evidence ex-parte.
On December 16 1992, another notice was sent to the parties to appear on [the]
January 7, 1993 hearing by Labor Arbiter Emiliano de Asis.
Before the scheduled hearing on January 7, 1993, complainant petitioner filed a motion
to amend complaint and to admit amended complaint. It also filed the following:
1. Affidavit of Juanito Costales, Jr., dated November 24, 1992;
2. Joint affidavit of Ricardo Aban, Armando Casing, Benjamin Corpuz, Danny
Margadejas, Fidel Fortunato, Henry de los Reyes, Anthony de Luna,
Warlito Arguilles, Dominador Aguda, Marcelino Cayuda, Jr., Jaime
Costales and Juanito Mendenilla dated December 30, 1992;
3. Joint affidavit of Juanito Costales and Armando Casing dated January 7,
1993;
4. Affidavit signed by individual union members.
On March 18, 1993, Med-Arbiter Sinamar E. Limos issued an Order granting the
petition for certification election earlier filed.
Meanwhile, Labor Arbiter Rolando D. Gambito in the illegal dismissal case issued the
May 20, 1993 Order, the dispositive portion [of] which reads:
WHEREFORE, respondents are hereby ordered to submit their position
paper, together with their documentary evidence, if any, within TEN (10) days
from receipt of the order, otherwise we will be constrained to resolve this case
based on available evidence on record.
On September 7, 1993, public respondent Laguesma issued a Resolution denying the
appeal filed by private respondent against the order of Med-Arbiter Limos granting the
petition for certification election.
Acting on said denial, private respondent filed a motion for reconsideration which was
granted in an Order dated January 4, 1994 by public respondent Laguesma dismissing
the petition for certification election for lack of employer-employee relationship.

Petitioner in turn filed a motion for reconsideration of the January 4, 1994, Order but it
was denied by public respondent Laguesma in his January 27, 1994 Order which
reaffirmed the dismissal of petition for certification election.
Thus, the union filed its first petition for certiorari assailing the Orders of January 4 and
27, 1994 of public respondent Laguesma dismissing the petition for certification
election. The said petition is captioned as Caurdanetaan Piece Workers Union,
petitioner, vs. Hon. Bienvenido Laguesma, et al., respondents, docketed as G.R. No.
113542 and raffled to the Second Division of this Honorable Court.
On September 14, 1993, Labor Arbiter Rolando D. Gambito issued his decision finding the
dismissal of petitioners members illegal. On appeal by both parties, Respondent NLRC -- as
earlier stated -- set aside the appealed decision and remanded the case to the labor arbiter for
further proceedings. Petitioners motion for reconsideration was later denied.
The solicitor general, who was supposed to represent both public respondents, joined
petitioner and filed a Manifestation and Motion (In Lieu of Comment) dated July 25, 1994, praying
that the petition in the First Case be granted and that judgment be rendered annulling [11] the
assailed Orders of Respondent Laguesma. The Republics counsel likewise filed another
Manifestation and Motion (In Lieu of Comment) dated October 4, 1994 in the Second Case,
praying that judgment be rendered annulling the resolution of Public Respondent NLRC dated
February 16, 1994 and March 28, 1994 and order[ing] public respondent to proceed with the case
instead of remanding the same to the labor arbiter of origin. [12]
In a Resolution dated March 29, 1995, [13] this Court ordered the consolidation of the two
cases.[14]

Public Respondents Rulings

In the First Case

Public Respondent Laguesma premised the dismissal of the petition for certification election
on the absence of an employer-employee relationship between petitioners members and private
respondent. Professing reliance on the control test in determining employer-employee
relationship, his Order dated January 4, 1994[15] explained:
It is settled in this jurisdiction that the most important factor in determining the existence
of employer-employee relationship is the control test or the question of whether or not
the supposed employer exercises control over the means and methods by which the
work is to be done. In the instant case, it is not disputed that movant does not exercise
any degree of control over how the loading or unloading of cavans of palays to or from
the trucks, to or from the rice mills. Movants only concern is that said cavans of palay
are loaded/unloaded. Absent therefore, the power to control not only the end to be
achieved but also the means to be used in reaching such end, no employer-employee
relationship could be said to have been established. We also noted that some of
petitioners members including its president, Juanito Costales, Jr., admitted in separate
sworn statements that they offer and actually perform loading and unloading work for
various rice mills in Pangasinan and that the performance of said work depends on the
availability of work in said mills. They also categorically stated that there is no employeremployee relationship between petitioner and movant. To our mind, said declarations
being made against interest deserve much evidentiary weight. Considering therefore,
the foregoing, we have no alternative but to dismiss the petition for lack of employeremployee relationship.

In the Second Case

On the other hand, Respondent NLRC ordered the remand of the case to the arbitration
branch for further proceedings because the issues at hand need further threshing out. Stressing
the principle that allegations must be proved by competent and credible evidence, it held: [16]
There is no question that under the Rules of the Commission, complaints may be
resolved on the basis of the Position Papers submitted by the parties and that the
parties may be deemed to have waived their right to present evidence after they have

been given an opportunity to do so. These procedural rules, however should be read in
conjunction with the time[-]honored principle that allegations must be proved and
established by competent and credible evidence.In other words, mere allegations would
not suffice despite the absence of evidence to the contrary.
In subject case, complainants-appellants allegations that they are laborers of
respondents-appellants receiving P45.00 per days work of eight hours (p. 2, Amended
Position Paper dated December 14, 1992, p. 31 Records; p. 2 Amended Complaint
dated 16 December 1992, p. 70, Records) appears to be in conflict with their earlier
assertions that they are paid on the basis of the number of cavans of palay moved,
piled, hauled and unloaded from trucks or haulers multiplied by P0.12 [per] sack or
cavan. And for the days earning respondents used to be obliged to pay P57.00 per days
earning -- (p. 2, Position Paper dated 24 November 1992; p. 17, Records).
Similarly attached to the records is a narrative report of [the] DOLE inspector where it
was mentioned that Juanito Costales, Jr., is the owner of Carcado Contracting Services
and is not an employee of Corefarm [sic] Grains (Narrative Report dated August 4,
1992, p. 10 Records).
Another reason why subject case should be remanded to the Labor Arbiter below is the
fact that the personality of complainant union has been raised in issue before the proper
forum and adverse decision on the matter will definitely affect the whole proceedings.
Furthermore, records show that an Amended Complaint was filed on December 23,
1992. This amended complaint made no mention of the affidavits of Juanito Costales,
Jr. and the 92 other workers which documents were filed in January 1993. Likewise, the
amended complaint contains but a general statement that the 92 workers of Corefarm
[sic] Grains have been employed since 1982 which was adopted by the Labor Arbiter
below in his decision notwithstanding the fact that a number of these workers started
working with respondent after 1982. Some of whom worked with the company in 1990
(Joint Affidavit dated 7 January 1993, pp. 96-98, Records). Notwithstanding this fact, the
Labor Arbiter in the decision under consideration allowed refund of alleged deduction for
a period of three years. In the same manner, payment of salary differential was also
granted.
Indeed the issues at hand need further threshing out. Under the Rules, the Labor Arbiter
is authorized to thresh out issues (sec. 4, Rule V). As it is, we are not convinced by the
conclusions of the Labor Arbiter.
The ends of justice would better be served if all parties are granted further opportunity
to ventilate their respective positions.

The Issues
In its Consolidated Memorandum dated September 19, 1995 filed before us, petitioner raises
the following grounds in support of its petition:[17]
1. Grave abuse of discretion or acting in excess of jurisdiction, which is equivalent
to lack of jurisdiction on the part of public respondent in setting aside the
labor arbiters decision and in remanding this case to the office of origin for
further proceedings is not necessary when in fact the mandatory
requirements of due process have been observed by the labor arbiter in
rendering decision on the case;
2. Remand of the case to office of origin for further proceedings on matters already
passed upon properly by the labor arbiter is contrary to the rule of speedy
labor justice and the [sic] social justice and to afford protection to labor policy
of the Philippine Constitution, which is a command that should not be
disregarded by the courts in resolving labor cases;
3. Remand of the case to the labor arbiter would only prolong social unrest and the
suffering of injurious effects of illegal dismissal by the 92 illegally dismissed
workers[;] hence, said remand of the case without justification constitutes an
oppressive act committed by public respondent.
Simply put, the issues are as follows:
1. Whether Respondent Laguesma acted with grave abuse of discretion in ordering the
dismissal of the petition for certification election

2 Whether Respondent NLRC acted with grave abuse of discretion in remanding the
illegal dismissal case to the labor arbiter for further proceedings.
The present controversy hinges on whether an employer-employee relationship between the
CPWU members and Respondent Corfarm has been established by substantial evidence.

The Courts Ruling

The two petitions are meritorious.

Main Issue: Employer-Employee Relationship

First Case: Certification Election
Petitioner contends that Respondent Laguesma committed grave abuse of discretion in
dismissing the petition for certification election by relying on private respondents bare allegation,
in its motion for reconsideration, of lack of employer-employee relationship. [18] According to
petitioner, Respondent Laguesma cannot reverse his Decision in the absence of a concomitant
change in his factual findings. [19] Petitioner insists that all its members were employees of private
respondent, viz.:[20]
The 92 workers, who are all union members of petitioner herein, have been rendering
actual manual services as cargadores in the warehouse and rice mills of private
respondent, performing activities usually related to or desirable by [sic] the business or
trade of private respondent who is engaged in the buy and sell of palay as well as
warehousing of said commodity and milling the same for sale to customers in the form
of milled rice. The 92 workers have performed their activities for the last ten (10) years
prior to their having been illegally dismissed from employment on June 18, 1992 or
thereabouts.
Petitioner adds that many of its members received Christmas bonuses from private
respondent.[21]
On the other hand, Respondent Corfarm describes the contentions of petitioner as
off-tangent, if not irrelevant. -First, the authority of the DOLE Secretary to decide appeals in representation cases is
undeniable (see e.g., Sections 9 and 10 of Rule V, Book V, of the Implementing Rules
and Regulations of the Labor Code; also Art. 259, appeal from certification election
orders, labor code). Second, petitioner completely misses the point that the granting
and denial of a motion for reconsideration involves the exercise of discretion. As
submitted by the Public Respondent in its Comment, among the ends to which a Motion
for Reconsideration is addressed, one is precisely to convince the court that its ruling is
erroneous and improper, contrary to law or the evidence, x x x (Emphasis found in the
original.)
Corfarm insists that the challenged Order of Respondent Laguesma dated January 4, 1994
rests on solid findings of fact which should be accorded respect and finality.[22] It attacks the
petitioners allegation -- that it has 92 workers who worked as cargador at its warehouses -- as
gratuitous and not supported by any evidence x x x [because] as late as this time of day in the
litigation of this case, who exactly are those 92 workers cannot be known from the records.
[23]
(Emphasis in original.)
Private respondent further argues that RJL Martinez Fishing Corp. vs. NLRC, [24] cited by the
solicitor general, has a factual situation different from the case at bar. Waiting time, unlike that
in RJL Martinez Fishing Corp., does not obtain here.[25] Likewise allegedly inapplicable are the
rulings inVillavilla vs. Court of Appeals[26] and in Brotherhood Labor Unity Movement vs. Zamora.
[27]

Respondent Corfarm denies that it had the power of control, rationalizing that petitioners
members were street-hired workers engaged from time to time to do loading and unloading work
x x x[;] [t]here [was] no superintendent-in-charge x x x to give orders x x x[;] [and] there [were] no
gate passes issued, nor tools, equipment and paraphernalia issued by Corfarm for
loading/unloading x x x.[28] It attributes error to the solicitor generals reliance on Article 280 [29] of

the Labor Code. Citing Brent School, Inc. vs. Zamora,[30] private respondent asserts that a literal
application of such article will result in absurdity, where petitioners members will be regular
employees not only of respondents but also of several other rice mills, where they were allegedly
also under service. Finally, Corfarm submits that the OSGs position is negated by the fact that
petitioners members contracted for loading and unloading services with respondent company
when such work was available and when they felt like it x x x.[31]
We rule for petitioners. Section 5, Rule 133 of the Rules of Court mandates that in cases
filed before administrative or quasi-judicial bodies, like the Department of Labor, a fact may be
established by substantial evidence, i.e. that amount of evidence which a reasonable mind might
accept as adequate to justify a conclusion. [32] Also fundamental is the rule granting not only
respect but even finality to factual findings of the Department of Labor, if supported by substantial
evidence. Such findings are binding upon this Court, unless petitioner is able to show that the
secretary of labor (or the undersecretary acting in his place) has arbitrarily disregarded or
misapprehended evidence before him to such an extent as to compel a contrary conclusion if
such evidence were properly appreciated. This is rooted in the principle that this Court is not a
trier of facts, and that the determinations made by administrative bodies on matters falling within
their respective fields of specialization or expertise are accorded respect. [33] Also well-settled is
the doctrine that the existence of an employer-employee relationship is ultimately a question of
fact and that the findings thereon by the labor authorities shall be accorded not only respect but
even finality when supported by substantial evidence. [34] Finally, incertiorari proceedings under
Rule 65, this Court does not, as a rule, evaluate the sufficiency of evidence upon which the labor
officials based their determinations. The inquiry is essentially limited to whether they acted
without or in excess of jurisdiction or with grave abuse of discretion. [35] However, this doctrine is
not absolute. Where the labor officers findings are contrary to those of the med-arbiter, the Court
-- in the exercise of its equity jurisdiction -- may wade into and reevaluate such findings, [36]which
we now embark on in this case.[37]
To determine the existence of an employer-employee relation, this Court has consistently
applied the four-fold test which has the following elements: (1) the power to hire, (2) the payment
of wages, (3) the power to dismiss, and (4) the power to control -- the last being the most
important element.[38]
Our examination of the case records indubitably shows the presence of an employeremployee relationship. Relying on the evidence adduced by the petitioners, Respondent
Laguesma himself affirmed the presence of such connection. Thus, in his Order dated September
7, 1993, he astutely held:[39]
Anent the first issue, we find the annexes submitted by the respondent company not
enough to prove that herein petitioner is indeed an independent contractor. The
existence of an independent contractor relationship is generally established by the
following criteria. 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
over the workers; payment of the contractors workers; the control and the supervision
over the workers; the control of the premises; the duty to supply the premises, tools,
appliances, materials and laborers, and the mode, manner and terms of
payment. [Brotherhood Labor Unity Movement of the Philippines vs. Zamora, 147
SCRA 49 (198) [sic] ].
None of the above criteria exists in the case at bar. The absence of a written contract
which specifies the performance of a specified piece of work, the nature and extent of
the work and the term and duration of the relationship between herein petitioner and
respondent company belies the latters [sic] allegation that the former is indeed and [sic]
independent contractor.
Also, respondent failed to show by clear and convincing proof that herein respondent
has the substantial capital or investment to qualify as an independent contractor under
the law. The premises, tools, equipments [sic] and paraphernalia are all supplied by
respondent company.It is only the manpower or labor force which the alleged contractor
supplies, suggesting the existence of a labor only contracting scheme which is
prohibited by law. Further, if herein petitioner is indeed an independent contractor, it
should have offered its services to other companies and not to work [sic] exclusively for
the respondent company. It is therefore, clear that the alleged J.P. Costales, Jr.
Cargador Services cannot be considered as an independent contractor as defined by
law.
In his subsequent order, Respondent Laguesma inexplicably reversed his above ruling and
held that there was no employer-employee relationship on the ground that Respondent Corfarm
exercised no power of control over the alleged employees.

It may be asked, why the sudden change of mind on the part of Respondent Laguesma? No
additional pieces of evidence were adduced and no existing ones were identified by Laguesma to
support such strange reversal. The unblemished fact is that private respondent was the recruiter
and employer of petitioners members.
Shoppers Gain Supermart vs. NLRC[40] provides the standard to determine whether a worker
is an independent contractor:
The applicable law is not Article 280 of the Labor Code which is cited by petitioners, but
Art. 106, which provides:
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.
xxxxxxxxx
xxxxxxxxx
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.(emphasis supplied)
In accordance with the above provision, petitioner corporation is deemed the direct employer of
the private respondents and thus liable for all benefits to which such workers are entitled, like
wages, separation benefits and so forth. There is no denying the fact that private respondents
work as merchandisers, cashiers, baggers, check-out personnel, sales ladies, warehousemen
and so forth were directly related, necessary and vital to the day-to-day operations of the
supermarket; their jobs involved normal and regular functions in the ordinary business of the
petitioner corporation. Given the nature of their functions and responsibilities, it is improbable that
petitioner did not exercise direct control over their work. Moreover, there is no evidence--as in
fact, petitioners do not even allege--that aside from supplying the manpower, the labor agencies
have substantial capital or investment in the form of tools, equipment, machineries, work
premises, among others.
It is undeniable that petitioners members worked as cargadores for private respondent. They
loaded, unloaded and piled sacks of palay from the warehouses to the cargo trucks and from the
cargo trucks to the buyers. This work is directly related, necessary and vital to the operations of
Corfarm. Moreover, Corfarm did not even allege, much less prove, that petitioners members have
substantial capital or investment in the form of tools, equipment, machineries, [and] work
premises, among others. Furthermore, said respondent did not contradict petitioners allegation
that it paid wages directly to these workers without the intervention of any third-party independent
contractor. It also wielded the power of dismissal over petitioners; in fact, its exercise of this
power was the progenitor of the Second Case. Clearly, the workers are not independent
contractors.
Applying Article 280[41] of the Labor Code, we hold that the CPWU members were regular
employees of private respondent. Their tasks were essential in the usual business of private
respondent.
As we have ruled in an earlier case, the question of whether an employer-employee
relationship exists in a certain situation has bedevilled the courts. Businessmen, with the aid of
lawyers, have tried to avoid or sidestep such relationship, because that
juridical vinculum engenders obligations connected with workmens compensation, social security,
medicare, minimum wage, termination pay and unionism. [42] All too familiarly, Respondent
Corfarm sought refuge from these obligations.However, the records of this case clearly support
the existence of the juridical vinculum.
RJL Martinez Fishing Corporation,[43] cited by the solicitor general, is relevant because
petitioners members were also made to wait for loading and unloading of cavans of palay to and
from the storage areas and to and from the milling areas. [44] This waiting time does not denigrate
the regular employment of petitioners members. As ruled in that case:[45]

x x x Besides, the continuity of employment is not the determining factor, but rather
whether the work of the laborer is part of the regular business or occupation of the
employer.(fn: Article 281, Labor Code, as amended; Philippine Fishing Boat Officers
and Engineer[s] Union vs. Court of Industrial Relations, 112 SCRA 159 (1982). We are
thus in accord with the findings of respondent NLRC in this regard.
Although it may be that private respondents alternated their employment on different
vessels when they were not assigned to petitioners boats, that did not affect their
employee status.The evidence also establishes that petitioners had a fleet of fishing
vessels with about 65 ship captains, and as private respondents contended, when they
finished with one vessel they were instructed to wait for the next. As respondent NLRC
had found:
We further find that the employer-employee relationship between the parties
herein is not co-terminous with each loading and unloading job. As earlier
shown, respondents are engaged in the business of fishing. For this purpose,
they have a fleet of fishing vessels. Under this situation, respondents activity of
catching fish is a continuous process and could hardly be considered as
seasonal in nature. So that the activities performed by herein complainants,
i.e. unloading the catch of tuna fish from respondents vessels and then loading
the same to refrigerated vans, are necessary or desirable in the business of
respondents. This circumstance makes the employment of complainants a
regular one, in the sense that it does not depend on any specific project or
seasonal activity. (fn: NLRC Decision, p. 94, Rollo.)
Alleged Admission of Lack of
Employer-Employee Relationship
Respondent Corfarm argues that some of petitioners members including its president,
Juanito P. Costales, Jr.[,] admitted that they work for various rice mills in Pangasinan and that
there is no employer-employee relations between them and private respondents. It adds that the
solicitor general,by arguing that there was an employer-employee relationship, attempts to
substitute [his] judgment [with] that of public respondent undersecretary x x x who found such
admissions against self-interest on the part of petitioners members x x x. [46]
These arguments are negligible. The alleged admissions cannot be taken against petitioners
cause. First, the contents of the admissions are highly suspect. The records reveal that the
admissions of Juanito Costales, Jr.,[47] Carlito Costales[48] and Juanito Medenilla[49] were in the
form of affidavits[50] of adhesion which were identical in content, differentiated only by the
typewritten names and the signatures of the workers. Second, only three of the workers executed
such affidavits. Clearly, the admissions in such affidavits cannot work against petitioner unions
cause. Such pro forma and identical affidavits do not prove lack of employer-employee
relationship against all members of petitioner. Third, the employer-employee relationship is clearly
proven by substantial evidence.Corfarm sorely failed to show that petitioners members were
independent contractors. We rule that no particular form of proof is required to prove the
existence of an employer-employee relationship. Any competent and relevant evidence may
show the relationship. If only documentary evidence would be required to demonstrate that
relationship, no scheming employer would ever be brought before the bar of justice. [51] Fourth,
and in any event, the alleged admissions of the three workers that they worked with other rice
mills do not work against them. Assuming arguendo that they did work with other rice mills, this
was required by the imperative of meeting their basic needs. [52]
The employer-employee relationship having been duly established, the holding of a
certification election necessarily follows. It bears stressing that there should be no unnecessary
obstacle to the holding of such election, [53] for it is a statutory policy that should not be
circumvented.[54] We have held that, in the absence of a legal impediment, the holding of a
certification election is the most democratic method of determining the employees choice of their
bargaining representative. It is the best means to settle controversies and disputes involving
union representation. Indeed, it is the keystone of industrial democracy.[55]

Second Case: Illegal Dismissal

Petitioner assails the NLRC for setting aside the labor arbiters decision and remanding the
case for further proceedings. Petitioner argues that the order of remand will only prolong the
agony of the 92 union members and their families for living or existing without jobs and earnings
to give them support. Further, petitioner contends:[56]

The Labor Arbiter had rendered a decision (Annex D, Petition) on September 14, 1993
in favor of petitioner based on the available records of the case after giving more than
ample opportunities to private respondents herein to submit their position paper and
other pleadings alleging their evidences [sic] against the causes of action of petitioner
alleged in the complaint for illegal dismissal, unfair labor practice, non-payment of
various benefits granted by existing laws during their employment, illegal deductions or
diminution of their underpaid daily wages, non-payment of wage increases and other
causes of action pleaded by the complainant or herein petitioner.
In short, Labor Arbiter Rolando Gambito rendered his decision based on the records of
the case including evidence available on record and after observing due process of law.
To support his opposition against the remand of the case, petitioner recites the chronological
events of the case, viz::[57]
In the case at bar, private respondents were notified earlier in the latter part of 1992
regarding the pendency of the complaint for illegal dismissal, unfair labor practice,
damages, etc., but said respondents did not appear during the initial hearing of the case
[before] Labor Arbiter Ricardo Olairez, then the Arbiter handling the case. The case was
re-set for hearing at some other dates. On April 22, 1993, Atty. Alfonso C. Bince, Jr.
appeared as counsel for respondents at Dagupan City. Atty. Bince committed to the
Labor Arbiter that the former will file the position paper for his clients (Corfarm Grains,
Inc., et al.) within ten (10) days from April 22, 1993, but still private respondents Position
Paper was not filed.
On May 20, 1993, Labor Arbiter Rolando Gambito, who took over the case for illegal
dismissal, etc. filed by petitioner, issued an order to private respondents directing the
latter (respondents) to submit their Position Paper together with THEIR
DOCUMENTARY EXHIBITS, if any, within 10 days from receipt of the order. Still,
private respondents counsel failed to submit private respondents Position Paper relative
to the petitioners complaint for illegal dismissal, unfair labor practice, etc. which is
involved in G.R. No. 114911 pending action by this Honorable Court.
Thus, the Labor Arbiter rendered his decision on the case in favor of petitioner and/or
the 92 illegally dismissed workers based on the position paper filed by the latter and
available records of the case. (Emphasis in original.)
On the other hand, Respondent Corfarm submits that the labor arbiters decision should be
set aside not only for lack of competent and credible evidence but also for lack of procedural due
process. Corfarm further contends that in spite of the pendency of its motions to cross-examine
petitioners witnesses and to suspend proceedings, the labor arbiter ordered the submission of its
position paper and documentary evidence within ten (10) days. [58] Respondent Corfarm insists:[59]
Indeed, although proceedings before a Labor Arbiter are supposed to be non-litigious
and the technicalities in the courts of law need not be strictly applied, the proceedings
should nevertheless be subject to the requirements of due process as provided in
Section 7, Rule 7 of the NLRC Rules of Procedure. (See also Phil. Telegraph and
Telephone Corp. vs. NLRC, 183 SCRA 451).
We agree with petitioner. Private respondent was not denied procedural due process, and
the labor arbiters decision was based on competent, credible and substantial evidence.

Procedural Due Process Observed

Private respondent had been duly informed of the pendency of the illegal dismissal case, but
it chose not to participate therein without any known justifiable cause. The labor arbiter sent
notices of hearing or arbitration to the parties, requiring them to submit position papers at 1:30
p.m. on November 14, 1992.[60] Respondent Corfarm did not attend the hearing. According to
Respondent NLRC, there was no proof that Respondent Corfarm received such notice. In any
case, petitioner filed a Motion to Admit Amended Complaint on December 23, 1992. Again,
another notice for hearing or arbitration on January 7, 1993 was sent to the parties. [61] This was
received by petitioners counsel as evidenced by the registry return receipt duly signed by private
respondents counsel, Atty. Alfonso Bince, Jr. It was only on January 28, 1993, however, that Atty.
Bince entered his appearance as counsel for Respondent Corfarm. [62] On May 10, 1993, Corfarm
was again given a new period of ten (10) days within which to submit its position paper and
documentary evidence; otherwise, [the labor arbiter] will be constrained to resolve this case
based on available evidence on record. [63] As evidenced by a registry return receipt, a copy of
said directive was received by respondents counsel on May 25, 1993. Still and all, Corfarm failed

to file its position paper. Clearly, private respondent was given an opportunity to present its
evidence, but it failed or refused to avail itself of this opportunity without any legal reason. Due
process is not violated where a person is given the opportunity to be heard, but chooses not to
give his side of the case.[64]

Labor Arbiters Decision Based

on Credible, Competent and Substantial Evidence
Contrary to the conclusions of the NLRC and the arguments of private respondent, the
findings of the labor arbiter on the question of illegal dismissal were based on credible, competent
and substantial evidence.
It is to be borne in mind that proceedings before labor agencies merely require the parties to
submit their respective affidavits and position papers. Adversarial trial is addressed to the sound
discretion of the labor arbiter. To establish a cause of action, only substantial evidence is
necessary,i.e., such relevant evidence as a reasonable mind might accept as adequate to support
a conclusion, even if other minds equally reasonable might conceivably opine otherwise. [65] As
ruled in Manalo vs. Roldan-Confesor:[66]
Clear and convincing proof is x x x more than mere preponderance, but not to extent of
such certainty as is required beyond reasonable doubt as in criminal cases x x x (fn:
Blacks Law Dictionary, 5th Ed., p. 227, citing Fred C. Walker Agency, Inc. v. Lucas, 215
Va. 535, 211 S.E. 2d 88, 92) while substantial evidence x x x consists of more than a
mere scintilla of evidence but may be somewhat less than a preponderance x x x x
(fn: Ibid., p. 1281, citing Marker v.Finch, D.C. Del., 322 F. Supp. 905,
910) Consequently, in the hierarchy of evidentiary values, We find proof beyond
reasonable doubt at the highest level, followed by clear and convincing evidence,
preponderance of evidence, and substantial evidence, in that order.
Evidence to determine the validity of petitioners claims, which the labor arbiter relied upon,
was available to Respondent NLRC. These pieces of evidence are in the case records, as aptly
pointed out by the solicitor general:[67]
[Regarding] the quoted second sentence of public respondent NLRCs Resolution that
allegations must be proved and established by competent evidence, and that mere
allegations would not suffice despite the absence of evidence to the contrary, suffice it
to say that there is ample evidence on record to support the Labor Arbiters decision, to
wit: 1) Narrative report of DOLE inspector Crisanto Rey Dingle noting some violation of
underpayment of minimum wage and underpayment of 13th month pay (page 10,
record); 2) affidavit of union officers and individual union members, stating their various
claims (page 80-195, Record). Despite such evidence and an opportunity afforded to
private respondent to present its evidence and position paper as borne out by the notice
of hearing issued by Labor Arbiter Olairez dated November 14, 1992, with advice to the
parties to submit their position paper (p. 14 Record) and the Order issued by Labor
Arbiter Gambito dated May 20, 1993; requiring private respondents to submit their
position paper, together with their documentary evidence (p. 247, record), private
respondent failed to submit its position paper and countervailing evidence which should
have met squarely the allegations and evidence adduced by the petitioner. Thus, in the
absence of private respondents position paper and countervailing evidence, the Labor
Arbiter cannot be faulted in deciding the case based on the available evidence on
record.
It must be stressed that labor laws mandate the speedy administration of justice, with least
attention to technicalities but without sacrificing the fundamental requisites of due process. In this
light, the NLRC, like the labor arbiter, is authorized to decide cases based on the position papers
and other documents submitted, without resorting to the technical rules of evidence. [68] Verily,
Respondent NLRC noted several documentary evidence sufficient to arrive at a just
decision. Indeed, the evidence on record clearly supports the conclusion of the labor arbiter that
the petitioners were employees of respondent, and that they were illegally dismissed. [69]
The NLRC points to conflicts and inconsistencies in the evidence on record. We are not
convinced. These alleged inconsistencies are too flimsy and too tenuous to preclude a just
decision.The finding that Juanito Costales, Jr. was an employee of respondent was allegedly
inconsistent with his admission that he was the owner of Carcado Contracting Services. As earlier
observed, the inconsistency is irrelevant. Juan Costales, Jr. was an employee of
Corfarm. Owning this alleged outfit is not inconsistent with such employment. The NLRC also
questioned the amount of the employees compensation. In one instance, the workers stated that

they were receiving P45.00 per days work of eight hours. In another, they claimed that they were
paid P0.12 per sack or cavan. These allegedly differ from their allegation that Corfarm used to be
obliged to pay P57.00 per days earning. The alleged inconsistencies are more apparent than
real. Records reveal that the P57 was the promised compensation; however, there was an
unauthorized deduction of P12; thus, the amount of P45 per day.[70] The claim of P0.12 per sack
or cavan is the basic computation of how workers or haulers earn their wage for the day. [71] In any
event, the alleged inconsistencies do not affect or diminish the established fact that petitioners
members were regular employees who were illegally dismissed.
Why Respondent NLRC refused to rule directly on the appeal escapes us. The remand of a
case or an issue to the labor arbiter for further proceedings is unnecessary, considering that the
NLRC was in a position to resolve the dispute based on the records before it and particularly
where the ends of justice would be served thereby.[72] Remanding the case would needlessly
delay the resolution of the case which has been pending since 1992. [73] As already observed, the
evidence on record clearly supports the findings of the labor arbiter.
Pursuant to the doctrine that this Court has a duty to settle, whenever possible, the entire
controversy in a single proceeding, leaving no root or branch to bear the seeds of future litigation,
we now resolve all issues.[74]
It is axiomatic that in illegal dismissal cases, the employer always has the burden of proof,
and his failure to discharge this duty results in a finding that the dismissal was unjustified.
[76]
Having defaulted from filing its position paper, Respondent Corfarm is deemed to have waived
its right to present evidence and counter the allegations of petitioners members.
[75]

[77]

In the same light, we sustain the labor arbiters holding in respect of unfair labor practice.
As ruled by Labor Arbiter Rolando D. Gambito:[78]
The last issue: Instead of sitting down with the individual complainants or the union
officers to discuss their demands, respondents resorted to mass lay-off of all the
members of the union and replaced them with outsiders. This is clearly a case of union
busting which Art. 248 of the Labor Code prohibits. Art. 248 provides that It shall be
unlawful for an employer to commit any of the following unfair labor practice (a) To
interfere with, restrain or coerce employees in the exercise of their right to selforganization; (b) x x x (c) To contract out service or functions being performed by union
members when such will interfere with, restrain or coerce employees in the exercise of
their rights to self-organization.

In view of recent jurisprudence, [79] we are correcting some items in the labor arbiters
decision. The thirteenth month pay awarded should be computed for each year of service from
the time each employee was hired up to the date of his actual reinstatement. The same
computation applies to the award of the service incentive leave [80] and underpaid wages. Each
employee is to be paid the remaining underpaid wages from the date of his or her hiring in
accordance with the then prevailing wage legislations. Likewise, a refund of P12 shall be
computed for each day of service of each employee, to be reckoned from the date such
employee was hired. The damages awarded should be sustained because the employer acted in
bad faith.[81] Back wages are to be computed from the date of dismissal up to the date of actual
reinstatement without any deductions or conditions. This is in consonance with Fernandez, et al.
vs. National Labor Relations Commission:[82]
x x x Accordingly, the award to petitioners of backwages for three years should be
modified in accordance with Article 279 of the Labor Code, as amended by R.A. 6715,
by giving them full backwages without conditions and limitations, the dismissals having
occurred after the effectivity of the amendatory law on March 21, 1989. Thus, the Court
held in Bustamante:
The clear legislative intent of the amendment in Rep. Act No. 6715 is to give
more benefits to workers than was previously given them under the Mercury
Drug rule or the deduction of earnings elsewhere rule. Thus, a closer
adherence to the legislative policy behind Rep. Act No. 6715 points to full
backwages as meaning exactly that, i.e., without deducting from backwages
the earnings derived elsewhere by the concerned employee during the period
of his illegal dismissal.
WHEREFORE, both petitions are GRANTED. In G.R. No. 113542, Respondent Laguesmas
Orders dated January 4, 1994 and January 27, 1994 are REVERSED and SET ASIDE; whereas
his Order dated September 7, 1993 is REINSTATED. In G.R. No. 114911, Respondent NLRCs
Resolutions promulgated on February 16, 1994 and March 28, 1994 are likewise REVERSED
AND SET ASIDE. The Labor Arbiters decision dated September 14, 1993 is reinstated
withMODIFICATIONS as
set
out
in
this
Decision. Respondent
NLRC

is ORDERED to COMPUTE the monetary benefits awarded in accordance with this Decision and
to submit its compliance thereon within thirty days from notice of this Decision.
SO ORDERED.
G.R. No. L-72654-61 January 22, 1990
ALIPIO R. RUGA, JOSE PARMA, ELADIO CALDERON, LAURENTE BAUTU, JAIME BARBIN,
NICANOR FRANCISCO, PHILIP CERVANTES and ELEUTERIO BARBIN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and DE GUZMAN FISHING ENTERPRISES
and/or ARSENIO DE GUZMAN, respondents.
J.C. Espinas & Associates for petitioners.
Tomas A. Reyes for private respondent.

FERNAN, C.J.:
The issue to be resolved in the instant case is whether or not the fishermen-crew members of the
trawl fishing vessel 7/B Sandyman II are employees of its owner-operator, De Guzman Fishing
Enterprises, and if so, whether or not they were illegally dismissed from their employment.
Records show that the petitioners were the fishermen-crew members of 7/B Sandyman II, one of
several fishing vessels owned and operated by private respondent De Guzman Fishing
Enterprises which is primarily engaged in the fishing business with port and office at Camaligan,
Camarines Sur. Petitioners rendered service aboard said fishing vessel in various capacities, as
follows: Alipio Ruga and Jose Parma patron/pilot; Eladio Calderon, chief engineer; Laurente
Bautu, second engineer; Jaime Barbin, master fisherman; Nicanor Francisco, second fisherman;
Philip Cervantes and Eleuterio Barbin, fishermen.
For services rendered in the conduct of private respondent's regular business of "trawl" fishing,
petitioners were paid on percentage commission basis in cash by one Mrs. Pilar de Guzman,
cashier of private respondent. As agreed upon, they received thirteen percent (13%) of the
proceeds of the sale of the fish-catch if the total proceeds exceeded the cost of crude oil
consumed during the fishing trip, otherwise, they received ten percent (10%) of the total proceeds
of the sale. The patron/pilot, chief engineer and master fisherman received a minimum income of
P350.00 per week while the assistant engineer, second fisherman, and fisherman-winchman
received a minimum income of P260.00 per week. 1
On September 11, 1983 upon arrival at the fishing port, petitioners were told by Jorge de
Guzman, president of private respondent, to proceed to the police station at Camaligan,
Camarines Sur, for investigation on the report that they sold some of their fish-catch at midsea to
the prejudice of private respondent. Petitioners denied the charge claiming that the same was a
countermove to their having formed a labor union and becoming members of Defender of
Industrial Agricultural Labor Organizations and General Workers Union (DIALOGWU) on
September 3, 1983.
During the investigation, no witnesses were presented to prove the charge against petitioners,
and no criminal charges were formally filed against them. Notwithstanding, private respondent
refused to allow petitioners to return to the fishing vessel to resume their work on the same day,
September 11, 1983.
On September 22, 1983, petitioners individually filed their complaints for illegal dismissal and
non-payment of 13th month pay, emergency cost of living allowance and service incentive pay,
with the then Ministry (now Department) of Labor and Employment, Regional Arbitration Branch
No. V, Legaspi City, Albay, docketed as Cases Nos. 1449-83 to 1456-83. 2 They uniformly
contended that they were arbitrarily dismissed without being given ample time to look for a new
job.
On October 24, 1983, private respondent, thru its operations manager, Conrado S. de Guzman,
submitted its position paper denying the employer-employee relationship between private

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

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

private respondent thru the patron/pilot of 7/B Sandyman II who is responsible for disseminating
the instructions to the crew members.
The conclusion of public respondent that there had been no change in the situation of the parties
since 1968 when De Guzman Fishing Enterprises, private respondent herein, obtained a
favorable judgment in Case No. 708 exempting it from compulsory coverage of the SSS law is not
supported by evidence on record. It was erroneous for public respondent to apply the factual
situation of the parties in the 1968 case to the instant case in the light of the changes in the
conditions of employment agreed upon by the private respondent and petitioners as discussed
earlier.
Records show that in the instant case, as distinguished from the Pajarillo case where the crew
members are under no obligation to remain in the outfit for any definite period as one can be the
crew member of an outfit for one day and be the member of the crew of another vessel the next
day, the herein petitioners, on the other hand, were directly hired by private respondent, through
its general manager, Arsenio de Guzman, and its operations manager, Conrado de Guzman and
have been under the employ of private respondent for a period of 8-15 years in various
capacities, except for Laurente Bautu who was hired on August 3, 1983 as assistant engineer.
Petitioner Alipio Ruga was hired on September 29, 1974 as patron/captain of the fishing vessel;
Eladio Calderon started as a mechanic on April 16, 1968 until he was promoted as chief engineer
of the fishing vessel; Jose Parma was employed on September 29, 1974 as assistant engineer;
Jaime Barbin started as a pilot of the motor boat until he was transferred as a master fisherman
to the fishing vessel 7/B Sandyman II; Philip Cervantes was hired as winchman on August 1,
1972 while Eleuterio Barbin was hired as winchman on April 15, 1976.
While tenure or length of employment is not considered as the test of employment, nevertheless
the hiring of petitioners to perform work which is necessary or desirable in the usual business or
trade of private respondent for a period of 8-15 years since 1968 qualify them as regular
employees within the meaning of Article 281 of the Labor Code as they were indeed engaged to
perform activities usually necessary or desirable in the usual fishing business or occupation of
private respondent. 14
Aside from performing activities usually necessary and desirable in the business of private
respondent, it must be noted that petitioners received compensation on a percentage commission
based on the gross sale of the fish-catch i.e. 13% of the proceeds of the sale if the total proceeds
exceeded the cost of the crude oil consumed during the fishing trip, otherwise only 10% of the
proceeds of the sale. Such compensation falls within the scope and meaning of the term "wage"
as defined under Article 97(f) of the Labor Code, thus:
(f) "Wage" paid to any employee shall mean the remuneration or earnings,
however designated, capable of being expressed in terms of money, whether
fixed or ascertained on a time, task, piece or commission basis, or other method
of calculating the same, which is payable by an employer to an employee under
a written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered, and included the fair and reasonable value,
as determined by the Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee. . . .
The claim of private respondent, which was given credence by public respondent, that petitioners
get paid in the form of share in the fish-catch which the patron/pilot as head of the team
distributes to his crew members in accordance with their own understanding 15 is not supported
by recorded evidence. Except that such claim appears as an allegation in private respondent's
position paper, there is nothing in the records showing such a sharing scheme as preferred by
private respondent.
Furthermore, the fact that on mere suspicion based on the reports that petitioners allegedly sold
their fish-catch at midsea without the knowledge and consent of private respondent, petitioners
were unjustifiably not allowed to board the fishing vessel on September 11, 1983 to resume their
activities without giving them the opportunity to air their side on the accusation against them
unmistakably reveals the disciplinary power exercised by private respondent over them and the
corresponding sanction imposed in case of violation of any of its rules and regulations. The virtual
dismissal of petitioners from their employment was characterized by undue haste when less
extreme measures consistent with the requirements of due process should have been first
exhausted. In that sense, the dismissal of petitioners was tainted with illegality.

Even on the assumption that petitioners indeed sold the fish-catch at midsea the act of private
respondent virtually resulting in their dismissal evidently contradicts private respondent's theory of
"joint fishing venture" between the parties herein. A joint venture, including partnership,
presupposes generally a parity of standing between the joint co-venturers or partners, in which
each party has an equal proprietary interest in the capital or property contributed 16 and where
each party exercises equal lights in the conduct of the business. 17 It would be inconsistent with
the principle of parity of standing between the joint co-venturers as regards the conduct of
business, if private respondent would outrightly exclude petitioners from the conduct of the
business without first resorting to other measures consistent with the nature of a joint venture
undertaking, Instead of arbitrary unilateral action, private respondent should have discussed with
an open mind the advantages and disadvantages of petitioners' action with its joint co-venturers if
indeed there is a "joint fishing venture" between the parties. But this was not done in the instant
case. Petitioners were arbitrarily dismissed notwithstanding that no criminal complaints were filed
against them. The lame excuse of private respondent that the non-filing of the criminal complaints
against petitioners was for humanitarian reasons will not help its cause either.
We have examined the jurisprudence on the matter and find the same to be supportive of
petitioners' stand. InNegre vs. WCC 135 SCRA 653 (1985), we held that fishermen crew
members who were recruited by one master fisherman locally known as "maestro" in charge of
recruiting others to complete the crew members are considered employees, not industrial
partners, of the boat-owners. In an earlier case of Abong vs. WCC, 54 SCRA 379 (1973) where
petitioner therein, Dr. Agustin Abong, owner of the fishing boat, claimed that he was not the
employer of the fishermen crew members because of an alleged partnership agreement between
him, as financier, and Simplicio Panganiban, as his team leader in charge of recruiting said
fishermen to work for him, we affirmed the finding of the WCC that there existed an employeremployee relationship between the boat-owner and the fishermen crew members not only
because they worked for and in the interest of the business of the boat-owner but also because
they were subject to the control, supervision and dismissal of the boat-owner, thru its agent,
Simplicio Panganiban, the alleged "partner" of Dr. Abong; that while these fishermen crew
members were paid in kind, or by "pakiao basis" still that fact did not alter the character of their
relationship with Dr. Abong as employees of the latter.
In Philippine Fishing Boat Officers and Engineers Union vs. Court of Industrial Relations, 112
SCRA 159 (1982), we held that the employer-employee relationship between the crew members
and the owners of the fishing vessels engaged in deep sea fishing is merely suspended during
the time the vessels are drydocked or undergoing repairs or being loaded with the necessary
provisions for the next fishing trip. The said ruling is premised on the principle that all these
activities i.e., drydock, repairs, loading of necessary provisions, form part of the regular operation
of the company fishing business.
WHEREFORE, in view of the foregoing, the petition is GRANTED. The questioned resolution of
the National Labor Relations Commission dated May 30,1985 is hereby REVERSED and SET
ASIDE. Private respondent is ordered to reinstate petitioners to their former positions or any
equivalent positions with 3-year backwages and other monetary benefits under the law. No
pronouncement as to costs.
SO ORDERED.
G.R. Nos. 82823-24 July 31, 1989
AGRO COMMERCIAL SECURITY SERVICES AGENCY, INC., petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, HON. LABOR ARBITER BIENVENIDO
V. HERMOGENES and MANUEL JIMENEZ. ET AL., respondents.
San Juan, Gonzalez, San Agustin & Sinense for petitioner.
Mauricio Law Office for private respondents.

GANCAYCO, J.:
Is there an employer-employee relationship between a security agency and its security guards? Is
the so-called "floating status" of a security guard lawful and could such prolonged status amount

to illegal dismissal? These are the issues raised in this petition for certiorari and prohibition with
preliminary injunction questioning the resolution dated January 20, 1988 of public respondent
National Labor Relations Commission (NLRC) affirming the decision of public respondent labor
arbiter Bienvenido V. Hermogenes dated March 19, 1987 finding private respondents to have
been illegally dismissed and ordering petitioner to pay them separation pay of one-half (1/2)
month salary for every year of service, 13th month pay for the year 1986 and the money value of
their respective service incentive leave amounting to fifteen (15) days salary each with
allowances. The petition also assails the resolution of the respondent NLRC dated April 18, 1988
denying the motion for reconsideration filed by petitioner.
Private respondents, numbering forty-six (46) in all, worked as security guards and/or janitors
under individual contracts with petitioner. They were assigned to firms and offices where
petitioner had contracts providing security and janitorial services. Their service period and last
rates of salary are stated in the decision of the labor arbiter. 1Their individual contracts of
employment provide, among others, as follows:
3.d. That the security guard, agrees to temporary suspension of his employment
completely to include such changes in his employment status with the Agency, in
case of termination of contract between the Agency and its Client, or reduction in
force of same;
In the early part of 1986, petitioner's service contracts with various corporations and government
agencies to which private respondents were previously assigned had been terminated generally
due to the sequestration of the said offices by the Presidential Commission on Good
Government. Accordingly, many of the private respondents were placed on "floating status" on
September 16, 1986. A number of them had been put on that status even earlier. "Floating status"
means an indefinite period of time when private respondents do not receive any salary or
financial benefit provided by law. A number of them later obtained employment in other security
agencies.
On account of the uncertainty of their employment with the petitioner, on July 25, 1986, private
respondents filed a complaint for illegal dismissal in the Arbitration Branch of the Department of
Labor and Employment against petitioner. They sought the payment of their respective separation
pay, 13th month pay for 1986 and service incentive leave pay. After due' proceedings where the
parties were required to submit their position papers and stipulation of facts, the respondent labor
arbiter ruled in favor of the private respondents whose decision as above-related was affirmed by
the NLRC.
Hence, the herein petition alleging that the petitioner was denied due process of law by the NLRC
and it committed a grave abuse of discretion in considering private respondents as employees of
petitioner, in ruling that the "floating status" of private respondents amounted to an illegal
dismissal, and in causing the execution of the judgment pending a complete and full adjudication
of the issues.
Forthwith, the allegation of denial of due process is without basis. Petitioner was afforded the
opportunity to file its position paper. It even entered into a stipulation of facts with private
respondent.
As to the issue of employer-employee relationship, an examination of the records shows that
private respondents are regular employees of petitioner. Their individual length of service ranges
from four (4) to more than ten (10) years. In accordance with the stipulation of facts, it appears
that private respondents worked with petitioner as security guards/janitors Their employment
contracts provide, among others:
1. That the AGENCY hereby undertakes to look for, procure, and/or furnish the
services of the SECURITY GUARD, with any individual, business establishment,
residential houses or any entity whatsoever, and the SECURITY GUARD agrees
to supply his services, assignments, position and undertaking, subject to the
following conditions:
a) That the SECURITY GUARD upon
acceptance of his position or undertaking for
employment, shall observe, follow and obey all
rules, regulations, code of conduct required by
the AGENCY and any of its contracted client, in

accordance with the provisions of RA 5487 and

its implement Rules and Regulations;
b) That the AGENCY shall pay the SECURITY
GUARD a monthly salary of P _______/day
payable on the 5th and 20th of the month;
c) That the AGENCY shall have the exclusive
right to withdraw or re-assign the SECURITY
GUARD;
d) That the SECURITY GUARD, agrees to
temporary suspension of his employment
completely to include such changes; in bis
employment status with the AGENCY, in case of
termination of contract between the AGENCY
and its client, or reduction in force of same;
e) That the AGENCY may terminate or dismiss
the SECURITY GUARD, if, after proper and due
investigation it is shown that the SECURITY
GUARD has violated any rule, regulation, code
of conduct and discipline, imposed by the
AGENCY;
f) That the terms and conditions pertinent to
service and discipline embodied in the
Agreement executed between the AGENCY and
any person, establishment, or entity with whom
the SECURITY GUARD is going to serve or is
assigned shall be considered part of this
Agreement and therefore binding on SECURITY
GUARD. 2
It was petitioner who determined how much private respondents received as their monthly salary,
overtime/night differential pay, mid-year and Christmas bonus and 13th month pay, uniforms and
meal allowances and other benefits mandated by law. Private respondents were reported by the
petitioner as its employees for purposes of social security coverage. Petitioner remitted their
withholding taxes to the Bureau of Internal Revenue and made monthly contributions to the Pagibig fund for their benefit. It was petitioner who determined and decided on the assignments,
promotions and salary increases of private respondents, their working hours, the firearms to be
issued to them and janitorial devices and tools to be used. Likewise, it was petitioner who
imposed the appropriate disciplinary measures on private respondents by way of reprimand,
suspension and dismissal.
In determining the existence of an employee-employer relationship, the following elements are
generally considered:
1) the selection and engagement of the employees;
2) payment of wages;
3) the power of dismissal and
4) the power to control the employees' conduct .

It is clear, therefore, that private respondents are petitioner's regular employees who enjoy
security of tenure and who cannot be dismissed except for cause . 4
As to the alleged illegal dismissal of private respondents, the records show that they filed their
complaint against petitioner on July 25, 1986. At the time they filed their complaint, most of them
were still on the job or on assignments and it was only in September 1986 when most of them
were placed on "floating status."

Obviously, the filing of the complaint was premature. Apparently, this issue was not raised at all
and so it is deemed waived. Thus, when the labor arbiter rendered his decision, he considered
those who have been out of work or "floating status" for a period exceeding six (6) months to
have been terminated from the service without just cause thus entitling them to the corresponding
benefits for such separation. We agree.
Under Article 286 of the Labor Code it is provided as follows:
ART. 286. When employment not deemed terminated.
The bonafide suspension of the operation of a business or undertaking for a
period not exceeding six months, or the fulfillment by the employee of a military
or civic duty shall not terminate employment. In all such cases, the employer
shall reinstate the employee to his former position without loss of seniority rights
if he indicates his desire to resume his work not later than one month from the
resumption of operations of his employer or from his relief from the military or
civic duty.
From the foregoing it is clear that when the bonafide suspension of the operation
of a business or undertaking exceeds six (6) months then the employment of the
employee shall be deemed terminated. By the same token and applying the said
rule by analogy to security guards, if they remained without work or assignment
that is in "floating status" for a period exceeding six (6) months, then they are in
effect constructively dismissed.
The labor arbiter disagreed with the representations of petitioner that the private respondents who
accepted assignments in other security agencies without previously resigning should be
considered to have been dismissed with just cause. In the stipulation of facts, the parties admitted
that the disciplinary rules promulgated by petitioner for its employees provide that acceptance by
an employee of other employment without first resigning from the agency is a cause for dismissal.
In this case, it appears that twenty-seven (27) of the private respondents violated this rule by
accepting employment in other security agencies without previously resigning from employment
with petitioner. No doubt, this is a just cause for termination of their services and as such they are
not entitled to any separation pay. 5
As regards the other seventeen (17) private respondents, they admittedly remained in "floating
status" for more than six (6) months. Such a 'floating status" is not unusual for security guards
employed in security agencies as their assignments primarily depend on the contracts entered
into by the agency with third parties. Such a stipulated status is, therefore, lawful.
The "floating status" of such an employee should last only for a reasonable time. In this case,
respondent labor arbiter correctly held that when the "floating status" of said employees lasts for
more than six (6) months, they may be considered to have been illegally dismissed from the
service. Thus, they are entitled to the corresponding benefits for their separation.
WHEREFORE, the petition is GRANTED insofar as the twenty- seven (27) private respondents
are concerned who have accepted employment elsewhere. The questioned resolutions of the
NLRC dated January 29, 1988 and April 18, 1988 are hereby modified as to said twenty-seven
(27) private respondents in that their complaint is hereby dismissed for lack of merit. The
questioned resolutions are hereby affirmed in all other respects as to the other private
respondents. No pronouncement as to costs.
SO ORDERED.
[G.R. No. 120969. January 22, 1998]
ALEJANDRO MARAGUINOT, JR. and PAULINO ENERO, petitioners, vs.NATIONAL LABOR
RELATIONS COMMISSION (SECOND DIVISION) composed of Presiding
Commissioner RAUL T. AQUINO, Commissioner ROGELIO I. RAYALA and
Commissioner VICTORIANO R. CALAYCAY (Ponente), VIC DEL ROSARIO and VIVA
FILMS, respondents.
DECISION

DAVIDE, JR., J.:

By way of this special civil action for certiorari under Rule 65 of the Rules of Court,
petitioners seek to annul the 10 February 1995 Decision [1] of the National Labor Relations
Commission (hereafter NLRC), and its 6 April 1995 Resolution [2] denying the motion to reconsider
the former in NLRC-NCR-CA No. 006195-94. The decision reversed that of the Labor Arbiter in
NLRC-NCR-Case No. 00-07-03994-92.
The parties present conflicting sets of facts.
Petitioner Alejandro Maraguinot, Jr. maintains that he was employed by private respondents
on 18 July 1989 as part of the filming crew with a salary of P375.00 per week. About four months
later, he was designated Assistant Electrician with a weekly salary of P400.00, which was
increased toP450.00 in May 1990. In June 1991, he was promoted to the rank of Electrician with
a weekly salary ofP475.00, which was increased to P593.00 in September 1991.
Petitioner Paulino Enero, on his part, claims that private respondents employed him in June
1990 as a member of the shooting crew with a weekly salary of P375.00, which was increased
to P425.00 in May 1991, then to P475.00 on 21 December 1991.[3]
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.[4]
Sometime in May 1992, petitioners sought the assistance of their supervisor, Mrs. Alejandria
Cesario, to facilitate their request that private respondents adjust their salary in accordance with
the minimum wage law. In June 1992, Mrs. Cesario informed petitioners that Mr. Vic 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 in June 1992, then
refused to take him back when he reported for work on 20 July 1992. Meanwhile, Maraguinot was
dropped from the company payroll from 8 to 21 June 1992, but was returned on 22 June
1992. He was again asked to sign a blank employment contract, and when he still refused,
private respondents terminated his services on 20 July 1992. [5] Petitioners thus sued for illegal
dismissal[6] before the Labor Arbiter.
On the other hand, private respondents claim that Viva Films (hereafter VIVA) is the trade
name of Viva Productions, Inc., and that it 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. [7]
Private respondents assert that they contract persons called producers -- also referred to as
associate producers[8] -- 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, later re-titledNarito ang Puso. He went on vacation on 8 June 1992, and
by the time he reported for work on 20 July 1992, shooting for the movie had already been
completed.[9]
After considering both versions of the facts, the Labor Arbiter found as follows:
On the first issue, this Office rules that complainants are the employees of the respondents. The
producer cannot be considered as an independent contractor but should be considered only as a
labor-only contractor and as such, acts as a mere agent of the real employer, the herein
respondents. Respondents even failed to name and specify who are the producers. Also, it is an
admitted fact that the complainants received their salaries from the respondents. The case cited
by the respondents, Rosario Brothers, Inc. vs. Ople, 131 SCRA 72 does not apply in this case.

It is very clear also that complainants are doing activities which are necessary and essential to
the business of the respondents, that of movie-making. Complainant Maraguinot worked as an
electrician while complainant Enero worked as a crew [member]. [10]
Hence, the Labor Arbiter, in his decision of 20 December 1993, decreed as follows:
WHEREFORE, judgment is hereby rendered declaring that complainants were illegally
dismissed.
Respondents are hereby ordered to reinstate complainants to their former positions without loss
[of] seniority rights and pay their backwages starting July 21, 1992 to December 31, 1993
temporarily computed in the amount of P38,000.00 for complainant Paulino Enero and
P46,000.00 for complainant Alejandro Maraguinot, Jr. and thereafter until actually reinstated.
Respondents are ordered to pay also attorneys fees equivalent to ten (10%) and/or P8,400.00 on
top of the award.[11]
Private respondents appealed to the NLRC (docketed as NLRC NCR-CA No. 006195-94). In
its decision[12] of 10 February 1995, the NLRC found the following circumstances of petitioners
work clearly established:
1. Complainants [petitioners herein] were hired for specific movie projects and their employment
wasco-terminus with each movie project the completion/termination of which are pre-determined,
such fact being made known to complainants at the time of their engagement.
xxx
2. Each shooting unit works on one movie project at a time. And the work of the shooting units,
which work independently from each other, are not continuous in nature but depends on the
availability of movie projects.
3. As a consequence of the non-continuous work of the shooting units, the total working hours
logged by complainants in a month show extreme variations... For instance, complainant
Maraguinot worked for only 1.45 hours in June 1991 but logged a total of 183.25 hours in January
1992. Complainant Enero logged a total of only 31.57 hours in September 1991 but worked
for 183.35 hours the next month, October 1991.
4. Further shown by respondents is the irregular work schedule of complainants on a daily basis.
Complainant Maraguinot was supposed to report on 05 August 1991 but reported only on 30
August 1991, or a gap of 25 days. Complainant Enero worked on 10 September 1991 and his
next scheduled working day was 28 September 1991, a gap of 18 days.
5. The extremely irregular working days and hours of complainants work explain the lump sum
payment for complainants services for each movie project. Hence, complainants were paid a
standard weekly salary regardless of the number of working days and hours they logged in.
Otherwise, if the principle of no work no pay was strictly applied, complainants earnings for
certain weeks would be very negligible.
6. Respondents also alleged that complainants were not prohibited from working with such movie
companies like Regal, Seiko and FPJ Productions whenever they are not working for the
independent movie producers engaged by respondents... This allegation was never rebutted by
complainants and should be deemed admitted.
The NLRC, in reversing the Labor Arbiter, then concluded that these circumstances, taken
together, indicated that complainants (herein petitioners) were project employees.
After their motion for reconsideration was denied by the NLRC in its Resolution [13] of 6 April
1995, petitioners filed the instant petition, claiming that the NLRC committed grave abuse of
discretion amounting to lack or excess of jurisdiction in: (1) finding that petitioners were project
employees; (2) ruling that petitioners were not illegally dismissed; and (3) reversing the decision
of the Labor Arbiter.
To support their claim that they were regular (and not project) employees of private
respondents, petitioners cited their performance of activities that were necessary or desirable in

the usual trade or business of private respondents and added that their work was continuous, i.e.,
after one project was completed they were assigned to another project. Petitioners thus
considered themselves part of a work pool from which private respondents drew workers for
assignment to different projects.Petitioners lamented that there was no basis for the NLRCs
conclusion that they were project employees, while the associate producers were independent
contractors; and thus reasoned that as regular employees, their dismissal was illegal since the
same was premised on a false cause, namely, the completion of a project, which was not among
the causes for dismissal allowed by the Labor Code.
Private respondents reiterate their version of the facts and stress that their evidence
supports the view that petitioners are project employees; point to petitioners irregular work load
and work schedule; emphasize the NLRCs finding that petitioners never controverted the
allegation that they were not prohibited from working with other movie companies; and ask that
the facts be viewed in the context of the peculiar characteristics of the movie industry.
The Office of the Solicitor General (OSG) is convinced that this petition is improper since
petitioners raise questions of fact, particularly, the NLRCs finding that petitioners were project
employees, a finding supported by substantial evidence; and submits that petitioners reliance on
Article 280 of the Labor Code to support their contention that they should be deemed regular
employees is misplaced, as said section merely distinguishes between two types of
employees, i.e., regular employees and casual employees, for purposes of determining the right
of an employee to certain benefits.
The OSG likewise rejects petitioners contention that since they were hired not for one
project, but for a series of projects, they should be deemed regular employees. Citing Mamansag
v. NLRC,[14] the OSG asserts that what matters is that there was a time-frame for each movie
project made known to petitioners at the time of their hiring. In closing, the OSG disagrees with
petitioners claim that the NLRCs classification of the movie producers as independent contractors
had no basis in fact and in law, since, on the contrary, the NLRC took pains in explaining its basis
for its decision.
As regards the propriety of this action, which the Office of the Solicitor General takes issue
with, we rule that a special civil action for certiorari under Rule 65 of the Rules of Court is the
proper remedy for one who complains that the NLRC acted in total disregard of evidence material
to or decisive of the controversy.[15] In the instant case, petitioners allege that the NLRCs
conclusions have no basis in fact and in law, hence the petition may not be dismissed on
procedural or jurisdictional grounds.
The judicious resolution of this case hinges upon, first, the determination of whether an
employer-employee relationship existed between petitioners and private respondents or any one
of private respondents. If there was none, then this petition has no merit; conversely, if the
relationship existed, then petitioners could have been unjustly dismissed.
A related question is whether private respondents are engaged in the business of making
motion pictures. Del Rosario is necessarily engaged in such business as he finances the
production of movies. VIVA, on the other hand, alleges that it does not make movies, but merely
distributes and exhibits motion pictures. There being no further proof to this effect, we cannot rely
on this self-serving denial. At any rate, and as will be discussed below, private respondents
evidence even supports the view that VIVA is engaged in the business of making movies.
We now turn to the critical issues. Private respondents insist that petitioners are project
employees of associate producers who, in turn, act as independent contractors. It is settled that
the contracting out of labor is allowed only in case of job contracting. Section 8, Rule VIII, Book III
of the Omnibus Rules Implementing the Labor Code describes permissible job contracting in this
wise:
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,[16] cables and wooden
platforms,[17]cameras and shooting equipment; [18] in fact, VIVA likewise owns the trucks used to
transport the equipment.[19] It is thus clear that the associate producer merely leases the
equipment from VIVA.[20]Indeed, private respondents Formal Offer of Documentary Evidence
stated one of the purposes of Exhibit 148 as:
To prove further that the independent Producers rented Shooting Unit No. 2 from Viva to finish
their films.[21]
While the purpose of Exhibits 149, 149-A and 149-B was:
[T]o prove that the movies of Viva Films were contracted out to the different independent
Producers who rented Shooting Unit No. 3 with a fixed budget and time-frame of at least 30
shooting days or 45 days whichever comes first.[22]
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.[23] 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 as follows:
Art. 106. Contractor or subcontractor.-- x x x
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.
A more detailed description is provided by Section 9, Rule VIII, Book III of the Omnibus
Rules Implementing 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
free-lance workers which includes the complainants Maraguinot and Enero. [24] 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.... [25] 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,[26] 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.
The employer-employee relationship between petitioners and VIVA can further be
established by the control test. While four elements are usually considered in determining the
existence of an employment relationship, namely: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to
control the employees conduct, the most important element is the employers control of the
employees conduct, not only as to the result of the work to be done but also as to the means and
methods to accomplish the same.[27] These four elements are present here. In their position paper
submitted to the Labor Arbiter, private respondents narrated the following circumstances:
[T]he PRODUCER has to work within the limits of the budget he is given by the company, for as
long as the ultimate finish[ed] product is acceptable to the company...
To ensure that quality films are produced by the PRODUCER who is an independent contractor,
the company likewise employs a Supervising PRODUCER, a Project accountant and a Shooting
unit supervisor. The Companys Supervising PRODUCER is Mr. Eric Cuatico, the Project
accountant varies from time to time, and the Shooting Unit Supervisor is Ms. Alejandria Cesario.
The Supervising PRODUCER acts as the eyes and ears of the company and of the Executive
Producer to monitor the progress of the PRODUCERs work accomplishment. He is there usually
in the field doing the rounds of inspection to see if there is any problem that the PRODUCER is
encountering and to assist in threshing out the same so that the film project will be finished on
schedule. He supervises about 3 to 7 movie projects simultaneously [at] any given time by
coordinating with each film PRODUCER. The Project Accountant on the other hand assists the
PRODUCER in monitoring the actual expenses incurred because the company wants to insure
that any additional budget requested by the PRODUCER is really justified and warranted
especially when there is a change of original plansto suit the tast[e] of the company on how a
certain scene must be presented to make the film more interesting and more commercially viable.
(emphasis ours)
VIVAs control is evident in its mandate that the end result must be a quality film acceptable
to the company. The means and methods to accomplish the result are likewise controlled by
VIVA, viz., the movie project must be finished within schedule without exceeding the budget, and
additional expenses must be justified; certain scenes are subject to change to suit the taste of the
company; and the Supervising Producer, the eyes and ears of VIVA and del Rosario, intervenes
in the movie-making process by assisting the associate producer in solving problems
encountered in making the film.
It may not be validly argued then that petitioners are actually subject to the movie directors
control, and not VIVAs direction. The director merely instructs petitioners on how to better comply
with VIVAs requirements to ensure that a quality film is completed within schedule and without
exceeding the budget. At bottom, the director is akin to a supervisor who merely oversees the
activities of rank-and-file employees with control ultimately resting on the employer.
Moreover, appointment slips [28] issued to all crew members state:

During the term of this appointment you shall comply with the duties and responsibilities of your
position as well as observe the rules and regulations promulgated by your superiors and by Top
Management.
The words superiors and Top Management can only refer to the superiors and Top
Management of VIVA. By commanding crew members to observe the rules and regulations
promulgated by VIVA, the appointment slips only emphasize VIVAs control over petitioners.
Aside from control, the element of selection and engagement is likewise present in the
instant case and exercised by VIVA. A sample appointment slip offered by private respondents to
prove that members of the shooting crew except the driver are project employees of the
Independent Producers[29] reads as follows:
VIVA PRODUCTIONS, INC.
16 Sct. Albano St.
Diliman, Quezon City
PEDRO NICOLAS Date: June 15, 1992
__________________
APPOINTMENT SLIP
You are hereby appointed as SOUNDMAN for the film project entitled MANAMBIT. This
appointment shall be effective upon the commencement of the said project and shall continue to
be effective until the completion of the same.
For your services you shall receive the daily/weekly/monthly compensation of P812.50.
During the term of this appointment you shall comply with the duties and responsibilities of your
position as well as observe the rules and regulations promulgated by your superiors and by Top
Management.
Very truly yours,
(an illegible signature)
CONFORME:
___________________
Name of appointee
Signed in the presence of:
_____________________
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. [30]
All the circumstances indicate an employment relationship between petitioners and VIVA
alone, thus the inevitable conclusion is that petitioners are employees only of VIVA.
The next issue is whether petitioners were illegally dismissed. Private respondents contend
that petitioners were project employees whose employment was automatically terminated with the
completion of their respective projects. Petitioners assert that they were regular employees who
were illegally dismissed.

It may not be ignored, however, that private respondents expressly admitted that petitioners
were part of a work pool;[31] and, while petitioners were initially hired possibly as project
employees, they had attained the status of regular employees in view of VIVAs conduct.
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; [32] and
2) The tasks performed by the alleged project employee are vital, necessary and indispensable to
the usual business or trade of the employer.[33]
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. [34]
In the instant case, the evidence on record shows that petitioner Enero was employed for a
total of two (2) years and engaged in at least eighteen (18) projects, while petitioner Maraguinot
was employed for some three (3) years and worked on at least twenty-three (23) projects.
[35]
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.[36]
A recent pronouncement of this Court anent project or work pool employees who had
attained the status of regular employees proves most instructive:
The denial by petitioners of the existence of a work pool in the company because their projects
were not continuous is amply belied by petitioners themselves who admit that: xxx
A work pool may exist although the workers in the pool do not receive salaries and are free to
seek other employment during temporary breaks in the business, provided that the worker shall
be available when called to report for a project. Although primarily applicable to regular seasonal
workers, this set-up can likewise be applied to project workers insofar as the effect of temporary
cessation of work is concerned. This is beneficial to both the employer and employee for it
prevents the unjust situation of coddling labor at the expense of capital and at the same time
enables the workers to attain the status of regular employees. Clearly, the continuous rehiring of
the same set of employees within the framework of the Lao Group of Companies is strongly
indicative that private respondents were an integral part of a work pool from which petitioners
drew its workers for its various projects.
In a final attempt to convince the Court that private respondents were indeed project employees,
petitioners point out that the workers were not regularly maintained in the payroll and were free to
offer their services to other companies when there were no on-going projects. This argument
however cannot defeat the workers status of regularity. We apply by analogy the case
of Industrial-Commercial-Agricultural Workers Organization v. CIR [16 SCRA 562, 567-68 (1966)]
which deals with regular seasonal employees. There we held: xxx
Truly, the cessation of construction activities at the end of every project is a foreseeable
suspension of work. Of course, no compensation can be demanded from the employer because
the stoppage of operations at the end of a project and before the start of a new one is regular and
expected by both parties to the labor relations. Similar to the case of regular seasonal employees,
the employment relation is not severed by merely being suspended. [citing Manila Hotel Co. v.
CIR, 9 SCRA 186 (1963)] The employees are, strictly speaking, not separated from services but
merely on leave of absence without pay until they are reemployed. Thus we cannot affirm the
argument that non-payment of salary or non-inclusion in the payroll and the opportunity to seek
other employment denote project employment.[37] (underscoring supplied)
While Lao admittedly involved the construction industry, to which Policy Instruction No.
20/Department Order No. 19[38] regarding work pools specifically applies, there seems to be no
impediment to applying the underlying principles to industries other than the construction industry.
[39]
Neither may it be argued that a substantial distinction exists between the projects undertaken in

the construction industry and the motion picture industry. On the contrary, the raison d' etre of
both industries concern projects with a foreseeable suspension of work.
At this time, we wish to allay any fears that this decision unduly burdens an employer by
imposing a duty to re-hire a project employee even after completion of the project for which he
was hired. The import of this decision is not to impose a positive and sweeping obligation upon
the employer to re-hire project employees. What this decision merely accomplishes is a judicial
recognition of the employment status of a project or work pool employee in accordance with what
is fait accompli, i.e., the continuous re-hiring by the employer of project or work pool employees
who perform tasks necessary or desirable to the employers usual business or trade. Let it not be
said that this decision coddles labor, for as Laohas ruled, project or work pool employees who
have gained the status of regular employees are subject to the no work-no pay principle, to
repeat:
A work pool may exist although the workers in the pool do not receive salaries and are free to
seek other employment during temporary breaks in the business, provided that the worker shall
be available when called to report for a project. Although primarily applicable to regular seasonal
workers, this set-up can likewise be applied to project workers insofar as the effect of temporary
cessation of work is concerned. This is beneficial to both the employer and employee for it
prevents the unjust situation of coddling labor at the expense of capital and at the same time
enables the workers to attain the status of regular employees.
The Courts ruling here is meant precisely to give life to the constitutional policy of
strengthening the labor sector,[40] but, we stress, not at the expense of management. Lest it be
misunderstood, this ruling does not mean that simply because an employee is a project or work
pool employee even outside the construction industry, he is deemed, ipso jure, a regular
employee. All that we hold today is that once a project or work pool employee has been: (1)
continuously, as opposed to intermittently, re-hired by the same employer for the same tasks or
nature of tasks; and (2) these tasks are vital, necessary and indispensable to the usual business
or trade of the employer, then the employee must be deemed a regular employee, pursuant to
Article 280 of the Labor Code and jurisprudence. To rule otherwise would allow circumvention of
labor laws in industries not falling within the ambit of Policy Instruction No. 20/Department Order
No. 19, hence allowing the prevention of acquisition of tenurial security by project or work pool
employees who have already gained the status of regular employees by the employers conduct.
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.
[41]
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.
Petitioners were dismissed on 20 July 1992, at a time when Republic Act No. 6715 was
already in effect. Pursuant to Section 34 thereof which amended Section 279 of the Labor Code
of the Philippines and Bustamante v. NLRC,[42] petitioners are entitled to receive full back wages
from the date of their dismissal up to the time of their reinstatement, without deducting whatever
earnings derived elsewhere during the period of illegal dismissal, subject, however, to the above
observations.
WHEREFORE, the instant petition is GRANTED. The assailed decision of the National
Labor Relations Commission in NLRC NCR CA No. 006195-94 dated 10 February 1995, as well
as its Resolution dated 6 April 1995, are hereby ANNULLED and SET ASIDE for having been
rendered with grave abuse of discretion, and the decision of the Labor Arbiter in NLRC NCR
Case No. 00-07-03994-92 is REINSTATED, subject, however, to the modification above
mentioned in the computation of back wages.
No pronouncement as to costs.
SO ORDERED.
G.R. No. L-52824 March 16, 88

REYNALDO BAUTISTA, petitioner,

vs.
HON. AMADO C. INCIONG, in his capacity as Deputy Minister of Labor and ASSOCIATED
LABOR UNIONS (ALU), respondents.

GUTIERREZ, JR., J.:

This is an illegal dismissal case. The respondent Deputy Minister dismissed the complaint of
herein petitioner principally on the ground that no employer-employee relationship existed
between the petitioner and respondent Associated Labor Unions (ALU).
The facts as found by the National Capital Region Director of the then ministry of Labor (MOL)
Region IV are as follows:
Complainant (petitioner) was employed by ALU as 'Organizer' in 1972 with a
starting salary of P250.00 a month. As such he paid his monthly SSS
contributions, with the respondent as his employer. On March 15, 1979, He was
left in the office of ALU while his other co-organizers were in Cainta, Rizal
attending a certification election at Chrysler Philippines, as he was not the
organizer assigned in said company. On March 16, 1979, he went on sick leave
for ten (10) days. His SSS sickness benefit application form signed by ALU's
physician was given to ALU for submission to the SSS. On March 16, 1979,
complainant reported back for work upon expiration of his leave but was informed
by ALU's Area Vice-President for Luzon of his termination effective March 15,
1979. Hence, this complaint filed on March 28, 1979. On April 18, 1979, however,
ALU filed a clearance application to terminate complainant's services effective
March 16, 1979 on the ground of abandonment of work. (p. 48, Rollo)
Based on these findings, the Director ruled in favor of the petitioner and ordered the respondent
Union to reinstate the petitioner to his former position with full backwages and to pay him
emergency allowance, 13th month pay and to refund his Mutual Aid Fund Deposit in the amount
of P 370.00
Respondent ALU appealed to the Ministry of Labor. On October 23,1979, the respondent Deputy
Minister set aside the order of the Director and dismissed the petitioner's complaint for lack of
merit. In his order, the Deputy Minister found that the petitioner was merely accomodated by the
respondent union after he was dismissed by his former employer sometime in 1972 and that his
membership coverage with the SSS which shows that respondent ALU is the one paying the
employer's share in the premiums is not conclusive proof that respondent is the petitioner's
employer because such payments were performed by the respondent as a favor for all those who
were performing full time union activities with it to entitle them to SSS benefits. The Deputy
Minister further ruled that the non-existence of an employer-employee relationship between the
parties is bolstered by the fact that respondent ALU is not an entity for profit but a duly registered
labor union whose sole purpose is the representation of its bona fide organization units where it is
certified as such.
In this petition, the petitioner contends that the respondent Deputy minister committed grave
abuse of discretion in holding that there was no employer-employee relationship between him
and the respondent union so much so that he is not entitled to the benefits that he is praying for.
We agree with the petitioner.
There is nothing in the records which support the Deputy minister's conclusion that the petitioner
is not an employee of respondent ALU. The mere fact that the respondent is a labor union does
not mean that it cannot be considered an employer of the persons who work for it. Much less
should it be exempted from the very labor laws which it espouses as labor organization. In case
of es v. Brotherhood Labor Unity Movement in the Phillipines Zamora, , (147 SCRA 49, 54), we
outlined the factors in ascertaining an employer-employee realtionship:
In determining the existence of an employer-employee relationship, the elements
that are generally considered are the following : (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employer's power to control the employee with respect to

the means and methods by which the work is to be accomplished. It is the socalled 'control test' that is the most important element (Investment Planning Corp.
of the Phils. v. The Social Security System, 21 SCRA 492; Mafinco Trading Corp.
v. Ople, supra, and Rosario Brothers, Inc. v. Ople, 131 SCRA 72)
In the case at bar, the Regional director correctly found that the petitioner was an employee of the
respondent union as reflected in the latter's individual payroll sheets and shown by the petitioner's
membership with the Social Security System (SSS) and the respondent union's share of
remittances in the petitioner's favor. Even more significant, is the respondent union's act of filing a
clearance application with the MOL to terminate the petitioner's services. Bautista was selected
and hired by the Union. He was paid wages by the Union. ALU had the power to dismiss him as
indeed it dismissed him. And definitely, the Union tightly controlled the work of Bautista as one of
its organizers. There is absolutely no factual or legal basis got deputy Minister Inciong's decision.
We are, thus, constrained to reverse the findings of the respondent Deputy Minister. However, the
records show that antipathy and antagonism between the petitioner and the respondent union
militate against the former's reinstatement. ALU would not want to have a union organizer whom it
does not trust and who could sabotage its efforts to unionize commercial and industrial
establishments. Severance pay, therefore, is more proper in order. As we have ruled in the case
of Asiaworld Publishing House, Inc. v. Hon. Blas Ople, et al., (G.R. No. 56398, July 23, 1987)
quoting the cast of Balaquezon EWTU v. Zamora, (97 SCRA 5,8):
It should be underscored that the backwages are being awarded on the basis of
equity or in the nature of severance pay. This means that a monetary award is to
be paid to the employees as an alternative to reinstatement which can no longer
be effected in view of the long passage of time or because of the realities of the
situation. (Emphasis supplied)
WHEREFORE, the petition is hereby GRANTED and the decision of the respondent Deputy
Minister is ANNULLED and SET ASIDE. The Order of Regional Director Francisco L. Estrella is
REINSTATED and ordered executed but instead of returning the petitioner to his former position,
the private respondent is ordered to pay him an amount equal to his backwages for only three
years and the separation pay to which he may be entitled as of the end of the three year period
under the applicable law or collective bargaining agreement.
SO ORDERED.
G.R. No. 195466

July 2, 2014

ARIEL L. DAVID, doing business under the name and style "YIELS HOG
DEALER," Petitioner,
vs.
JOHN G. MACASIO, Respondent.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari 1 the challenge to the November 22, 2010
decision2 and the January 31, 2011 resolution3 of the Court of Appeals (CA) in CA-G.R. SP No.
116003. The CA decision annulled and set aside the May 26, 2010 decision 4 of the National Labor
Relations Commission (NLRC)5 which, in turn, affirmed the April 30, 2009 Decision6 of the Labor
Arbiter (LA). The LA's decision dismissed respondent John G. Macasio's monetary claims.
The Factual Antecedents
In January 2009, Macasio filed before the LA a complaint 7 against petitioner Ariel L. David, doing
business under the name and style "Yiels Hog Dealer," for non-payment of overtime pay, holiday
pay and 13th month pay. He also claimed payment for moral and exemplary damages and
attorneys fees. Macasio also claimed payment for service incentive leave (SIL). 8
Macasio alleged9 before the LA that he had been working as a butcher for David since January 6,
1995. Macasio claimed that David exercised effective control and supervision over his work,
pointing out that David: (1) set the work day, reporting time and hogs to be chopped, as well as

the manner by which he was to perform his work; (2) daily paid his salary of P700.00, which was
increased from P600.00 in 2007, P500.00 in 2006 and P400.00 in 2005; and (3) approved and
disapproved his leaves. Macasio added that David owned the hogs delivered for chopping, as
well as the work tools and implements; the latter also rented the workplace. Macasio further
claimed that David employs about twenty-five (25) butchers and delivery drivers.
In his defense,10 David claimed that he started his hog dealer business in 2005 and that he only
has ten employees. He alleged that he hired Macasio as a butcher or chopper on "pakyaw" or
task basis who is, therefore, not entitled to overtime pay, holiday pay and 13th month pay
pursuant to the provisions of the Implementing Rules and Regulations (IRR) of the Labor Code.
David pointed out that Macasio: (1) usually starts his work at 10:00 p.m. and ends at 2:00 a.m. of
the following day or earlier, depending on the volume of the delivered hogs; (2) received the fixed
amount of P700.00 per engagement, regardless of the actual number of hours that he spent
chopping the delivered hogs; and (3) was not engaged to report for work and, accordingly, did not
receive any fee when no hogs were delivered.
Macasio disputed Davids allegations.11 He argued that, first, David did not start his business only
in 2005. He pointed to the Certificate of Employment 12 that David issued in his favor which placed
the date of his employment, albeit erroneously, in January 2000. Second, he reported for work
every day which the payroll or time record could have easily proved had David submitted them in
evidence.
Refuting Macasios submissions,13 David claims that Macasio was not his employee as he hired
the latter on "pakyaw" or task basis. He also claimed that he issued the Certificate of
Employment, upon Macasios request, only for overseas employment purposes. He pointed to the
"Pinagsamang Sinumpaang Salaysay,"14 executed by Presbitero Solano and Christopher (Antonio
Macasios co-butchers), to corroborate his claims.
In the April 30, 2009 decision,15 the LA dismissed Macasios complaint for lack of merit. The LA
gave credence to Davids claim that he engaged Macasio on "pakyaw" or task basis. The LA
noted the following facts to support this finding: (1) Macasio received the fixed amount of P700.00
for every work done, regardless of the number of hours that he spent in completing the task and
of the volume or number of hogs that he had to chop per engagement; (2) Macasio usually
worked for only four hours, beginning from 10:00 p.m. up to 2:00 a.m. of the following day; and
(3) the P700.00 fixed wage far exceeds the then prevailing daily minimum wage of P382.00. The
LA added that the nature of Davids business as hog dealer supports this "pakyaw" or task basis
arrangement.
The LA concluded that as Macasio was engaged on "pakyaw" or task basis, he is not entitled to
overtime, holiday, SIL and 13th month pay.
The NLRCs Ruling
In its May 26, 2010 decision,16 the NLRC affirmed the LA ruling.17 The NLRC observed that David
did not require Macasio to observe an eight hour work schedule to earn the fixed P700.00 wage;
and that Macasio had been performing a non-time work, pointing out that Macasio was paid a
fixed amount for the completion of the assigned task, irrespective of the time consumed in its
performance. Since Macasio was paid by result and not in terms of the time that he spent in the
workplace, Macasio is not covered by the Labor Standards laws on overtime, SIL and holiday
pay, and 13th month pay under the Rules and Regulations Implementing the 13th month pay
law.18
Macasio moved for reconsideration19 but the NLRC denied his motion in its August 11, 2010
resolution,20prompting Macasio to elevate his case to the CA via a petition for certiorari. 21
The CAs Ruling
In its November 22, 2010 decision,22 the CA partly granted Macasios certiorari petition and
reversed the NLRCs ruling for having been rendered with grave abuse of discretion.
While the CA agreed with the LAand the NLRC that Macasio was a task basis employee, it
nevertheless found Macasio entitled to his monetary claims following the doctrine laid down in
Serrano v. Severino Santos Transit.23The CA explained that as a task basis employee, Macasio is
excluded from the coverage of holiday, SIL and 13th month pay only if he is likewise a "field
personnel." As defined by the Labor Code, a "field personnel" is one who performs the work away

from the office or place of work and whose regular work hours cannot be determined with
reasonable certainty. In Macasios case, the elements that characterize a "field personnel" are
evidently lacking as he had been working as a butcher at Davids "Yiels Hog Dealer" business in
Sta. Mesa, Manila under Davids supervision and control, and for a fixed working schedule that
starts at 10:00 p.m.
Accordingly, the CA awarded Macasios claim for holiday, SIL and 13th month pay for three years,
with 10% attorneys fees on the total monetary award. The CA, however, denied Macasios claim
for moral and exemplary damages for lack of basis.
David filed the present petition after the CA denied his motion for reconsideration 24 in the CAs
January 31, 2011 resolution.25
The Petition
In this petition,26 David maintains that Macasios engagement was on a "pakyaw" or task basis.
Hence, the latter is excluded from the coverage of holiday, SIL and 13th month pay. David
reiterates his submissions before the lower tribunals 27 and adds that he never had any control
over the manner by which Macasio performed his work and he simply looked on to the "endresult." He also contends that he never compelled Macasio to report for work and that under their
arrangement, Macasio was at liberty to choose whether to report for work or not as other butchers
could carry out his tasks. He points out that Solano and Antonio had, in fact, attested to their
(David and Macasios) established "pakyawan" arrangement that rendered a written contract
unnecessary. In as much as Macasio is a task basis employee who is paid the fixed amount
of P700.00 per engagement regardless of the time consumed in the performance David argues
that Macasio is not entitled to the benefits he claims. Also, he posits that because he engaged
Macasio on "pakyaw" or task basis then no employer-employee relationship exists between them.
Finally, David argues that factual findings of the LA, when affirmed by the NLRC, attain finality
especially when, as in this case, they are supported by substantial evidence. Hence, David posits
that the CA erred in reversing the labor tribunals findings and granting the prayed monetary
claims.
The Case for the Respondent
Macasio counters that he was not a task basis employee or a "field personnel" as David would
have this Court believe.28 He reiterates his arguments before the lower tribunals and adds that,
contrary to Davids position, theP700.00 fee that he was paid for each day that he reported for
work does not indicate a "pakyaw" or task basis employment as this amount was paid daily,
regardless of the number or pieces of hogs that he had to chop. Rather, it indicates a daily-wage
method of payment and affirms his regular employment status. He points out that David did not
allege or present any evidence as regards the quota or number of hogs that he had to chop as
basis for the "pakyaw" or task basis payment; neither did David present the time record or payroll
to prove that he worked for less than eight hours each day. Moreover, David did not present any
contract to prove that his employment was on task basis. As David failed to prove the alleged task
basis or "pakyawan" agreement, Macasio concludes that he was Davids employee. Procedurally,
Macasio points out that Davids submissions in the present petition raise purely factual issues that
are not proper for a petition for review on certiorari. These issues whether he (Macasio) was
paid by result or on "pakyaw" basis; whether he was a "field personnel"; whether an employeremployee relationship existed between him and David; and whether David exercised control and
supervision over his work are all factual in nature and are, therefore, proscribed in a Rule 45
petition. He argues that the CAs factual findings bind this Court, absent a showing that such
findings are not supported by the evidence or the CAs judgment was based on a
misapprehension of facts. He adds that the issue of whether an employer-employee relationship
existed between him and David had already been settled by the LA 29 and the NLRC30 (as well as
by the CA per Macasios manifestation before this Court dated November 15, 2012), 31 in his favor,
in the separate illegal case that he filed against David.
The Issue
The issue revolves around the proper application and interpretation of the labor law provisions on
holiday, SIL and 13th month pay to a worker engaged on "pakyaw" or task basis. In the context of
the Rule 65 petition before the CA, the issue is whether the CA correctly found the NLRC in grave
abuse of discretion in ruling that Macasio is entitled to these labor standards benefits.

The Courts Ruling

We partially grant the petition.
Preliminary considerations: the Montoya ruling and the factual-issue-bar rule
In this Rule 45 petition for review on certiorari of the CAs decision rendered under a Rule 65
proceeding, this Courts power of review is limited to resolving matters pertaining to any
perceived legal errors that the CA may have committed in issuing the assailed decision. This is in
contrast with the review for jurisdictional errors, which we undertake in an original certiorari
action. In reviewing the legal correctness of the CA decision, we examine the CA decision based
on how it determined the presence or absence of grave abuse of discretion in the NLRC decision
before it and not on the basis of whether the NLRC decision on the merits of the case was
correct.32 In other words, we have to be keenly aware that the CA undertook a Rule 65 review, not
a review on appeal, of the NLRC decision challenged before it. 33
Moreover, the Courts power in a Rule 45 petition limits us to a review of questions of law raised
against the assailed CA decision.34
In this petition, David essentially asks the question whether Macasio is entitled to holiday, SIL
and 13th month pay. This one is a question of law. The determination of this question of law
however is intertwined with the largely factual issue of whether Macasio falls within the rule on
entitlement to these claims or within the exception. In either case, the resolution of this factual
issue presupposes another factual matter, that is, the presence of an employer-employee
relationship between David and Macasio.
In insisting before this Court that Macasio was not his employee, David argues that he engaged
the latter on "pakyaw" or task basis. Very noticeably, David confuses engagement on "pakyaw" or
task basis with the lack of employment relationship. Impliedly, David asserts that their "pakyawan"
or task basis arrangement negates the existence of employment relationship.
At the outset, we reject this assertion of the petitioner. Engagement on "pakyaw" or task basis
does not characterize the relationship that may exist between the parties, i.e., whether one of
employment or independent contractorship. Article 97(6) of the Labor Code defines wages as
"xxx the remuneration or earnings, however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method
of calculating the same, which is payable by an employer to an employee under a written or
unwritten contract of employment for work done or to be done, or for services rendered or to be
rendered[.]"35 In relation to Article 97(6), Article 10136 of the Labor Code speaks of workers paid
by results or those whose pay is calculated in terms of the quantity or quality of their work output
which includes "pakyaw" work and other non-time work.
More importantly, by implicitly arguing that his engagement of Macasio on "pakyaw" or task basis
negates employer-employee relationship, David would want the Court to engage on a factual
appellate review of the entire case to determine the presence or existence of that relationship.
This approach however is not authorized under a Rule 45 petition for review of the CA decision
rendered under a Rule 65 proceeding.
First, the LA and the NLRC denied Macasios claim not because of the absence of an employeremployee but because of its finding that since Macasio is paid on pakyaw or task basis, then he
is not entitled to SIL, holiday and 13th month pay. Second, we consider it crucial, that in the
separate illegal dismissal case Macasio filed with the LA, the LA, the NLRC and the CA uniformly
found the existence of an employer-employee relationship. 37
In other words, aside from being factual in nature, the existence of an employer-employee
relationship is in fact a non-issue in this case. To reiterate, in deciding a Rule 45 petition for
review of a labor decision rendered by the CA under 65, the narrow scope of inquiry is whether
the CA correctly determined the presence or absence of grave abuse of discretion on the part of
the NLRC. In concrete question form, "did the NLRC gravely abuse its discretion in denying
Macasios claims simply because he is paid on a non-time basis?"
At any rate, even if we indulge the petitioner, we find his claim that no employer-employee
relationship exists baseless. Employing the control test, 38 we find that such a relationship exist in
the present case.

Even a factual review shows that Macasio is Davids employee

To determine the existence of an employer-employee relationship, four elements generally need
to be considered, namely: (1) the selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the power to control the employees conduct. These
elements or indicators comprise the so-called "four-fold" test of employment relationship.
Macasios relationship with David satisfies this test.
First, David engaged the services of Macasio, thus satisfying the element of "selection and
engagement of the employee." David categorically confirmed this fact when, in his "Sinumpaang
Salaysay," he stated that "nag apply po siya sa akin at kinuha ko siya na chopper[.]" 39 Also,
Solano and Antonio stated in their "Pinagsamang Sinumpaang Salaysay" 40 that "[k]ami po ay
nagtratrabaho sa Yiels xxx na pag-aari ni Ariel David bilang butcher" and "kilalanamin si xxx
Macasio na isa ring butcher xxx ni xxx David at kasama namin siya sa aming trabaho."
Second, David paid Macasios wages.Both David and Macasio categorically stated in their
respective pleadings before the lower tribunals and even before this Court that the former had
been paying the latter P700.00 each day after the latter had finished the days task. Solano and
Antonio also confirmed this fact of wage payment in their "Pinagsamang Sinumpaang
Salaysay."41 This satisfies the element of "payment of wages."
Third, David had been setting the day and time when Macasio should report for work. This power
to determine the work schedule obviously implies power of control. By having the power to control
Macasios work schedule, David could regulate Macasios work and could even refuse to give him
any assignment, thereby effectively dismissing him.
And fourth, David had the right and power to control and supervise Macasios work as to the
means and methods of performing it. In addition to setting the day and time when Macasio should
report for work, the established facts show that David rents the place where Macasio had been
performing his tasks. Moreover, Macasio would leave the workplace only after he had finished
chopping all of the hog meats given to him for the days task. Also, David would still engage
Macasios services and have him report for work even during the days when only few hogs were
delivered for butchering.
Under this overall setup, all those working for David, including Macasio, could naturally be
expected to observe certain rules and requirements and David would necessarily exercise some
degree of control as the chopping of the hog meats would be subject to his specifications. Also,
since Macasio performed his tasks at Davids workplace, David could easily exercise control and
supervision over the former. Accordingly, whether or not David actually exercised this right or
power to control is beside the point as the law simply requires the existence of this power to
control 4243 or, as in this case, the existence of the right and opportunity to control and supervise
Macasio.44
In sum, the totality of the surrounding circumstances of the present case sufficiently points to an
employer-employee relationship existing between David and Macasio.
Macasio is engaged on "pakyaw" or task basis
At this point, we note that all three tribunals the LA, the NLRC and the CA found that Macasio
was engaged or paid on "pakyaw" or task basis. This factual finding binds the Court under the
rule that factual findings of labor tribunals when supported by the established facts and in accord
with the laws, especially when affirmed by the CA, is binding on this Court.
A distinguishing characteristic of "pakyaw" or task basis engagement, as opposed to straight-hour
wage payment, is the non-consideration of the time spent in working. In a task-basis work, the
emphasis is on the task itself, in the sense that payment is reckoned in terms of completion of the
work, not in terms of the number of time spent in the completion of work. 45 Once the work or task
is completed, the worker receives a fixed amount as wage, without regard to the standard
measurements of time generally used in pay computation.
In Macasios case, the established facts show that he would usually start his work at 10:00 p.m.
Thereafter, regardless of the total hours that he spent at the workplace or of the total number of
the hogs assigned to him for chopping, Macasio would receive the fixed amount of P700.00 once
he had completed his task. Clearly, these circumstances show a "pakyaw" or task basis
engagement that all three tribunals uniformly found.

In sum, the existence of employment relationship between the parties is determined by applying
the "four-fold" test; engagement on "pakyaw" or task basis does not determine the parties
relationship as it is simply a method of pay computation. Accordingly, Macasio is Davids
employee, albeit engaged on "pakyaw" or task basis.
As an employee of David paid on pakyaw or task basis, we now go to the core issue of whether
Macasio is entitled to holiday, 13th month, and SIL pay.
On the issue of Macasios entitlement to holiday, SIL and 13th month pay
The LA dismissed Macasios claims pursuant to Article 94 of the Labor Code in relation to Section
1, Rule IV of the IRR of the Labor Code, and Article 95 of the Labor Code, as well as Presidential
Decree (PD) No. 851. The NLRC, on the other hand, relied on Article 82 of the Labor Code and
the Rules and Regulations Implementing PD No. 851. Uniformly, these provisions exempt
workers paid on "pakyaw" or task basis from the coverage of holiday, SIL and 13th month pay.
In reversing the labor tribunals rulings, the CA similarly relied on these provisions, as well as on
Section 1, Rule V of the IRR of the Labor Code and the Courts ruling in Serrano v. Severino
Santos Transit.46 These labor law provisions, when read together with the Serrano ruling, exempt
those engaged on "pakyaw" or task basis only if they qualify as "field personnel."
In other words, what we have before us is largely a question of law regarding the correct
interpretation of these labor code provisions and the implementing rules; although, to conclude
that the worker is exempted or covered depends on the facts and in this sense, is a question of
fact: first, whether Macasio is a "field personnel"; and second, whether those engaged on
"pakyaw" or task basis, but who are not "field personnel," are exempted from the coverage of
holiday, SIL and 13th month pay.
To put our discussion within the perspective of a Rule 45 petition for review of a CA decision
rendered under Rule 65 and framed in question form, the legal question is whether the CA
correctly ruled that it was grave abuse of discretion on the part of the NLRC to deny Macasios
monetary claims simply because he is paid on a non-time basis without determining whether he is
a field personnel or not.
To resolve these issues, we need tore-visit the provisions involved.
Provisions governing SIL and holiday pay
Article 82 of the Labor Code provides the exclusions from the coverage of Title I, Book III of the
Labor Code - provisions governing working conditions and rest periods.
Art. 82. Coverage. The provisions of [Title I] shall apply to employees in all establishments and
undertakings whether for profit or not, but not to government employees, managerial employees,
field personnel, members of the family of the employer who are dependent on him for support,
domestic helpers, persons in the personal service of another, and workers who are paid by
results as determined by the Secretary of Labor in appropriate regulations.
xxxx
"Field personnel" shall refer to non-agricultural employees who regularly perform their duties
away from the principal place of business or branch office of the employer and whose actual
hours of work in the field cannot be determined with reasonable certainty. [emphases and
underscores ours]
Among the Title I provisions are the provisions on holiday pay (under Article 94 of the Labor
Code) and SIL pay (under Article 95 of the Labor Code). Under Article 82,"field personnel" on one
hand and "workers who are paid by results" on the other hand, are not covered by the Title I
provisions. The wordings of Article82 of the Labor Code additionally categorize workers "paid by
results" and "field personnel" as separate and distinct types of employees who are exempted
from the Title I provisions of the Labor Code.
The pertinent portion of Article 94 of the Labor Code and its corresponding provision in the
IRR47 reads:

Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wage during regular
holidays, except in retail and service establishments regularly employing less than (10) workers[.]
[emphasis ours]
xxxx
SECTION 1. Coverage. This Rule shall apply to all employees except:
xxxx
(e)Field personnel and other employees whose time and performance is unsupervised by the
employer including those who are engaged on task or contract basis, purely commission basis, or
those who are paid a fixed amount for performing work irrespective of the time consumed in the
performance thereof. [emphases ours]
On the other hand, Article 95 of the Labor Code and its corresponding provision in the
IRR48 pertinently provides:
Art. 95. Right to service incentive. (a) Every employee who has rendered at least one year of
service shall be entitled to a yearly service incentive leave of five days with pay.
(b) This provision shall not apply to those who are already enjoying the benefit herein provided,
those enjoying vacation leave with pay of at least five days and those employed in establishments
regularly employing less than ten employees or in establishments exempted from granting this
benefit by the Secretary of Labor and Employment after considering the viability or financial
condition of such establishment. [emphases ours]
xxxx
Section 1. Coverage. This rule shall apply to all employees except:
xxxx
(e) Field personnel and other employees whose performance is unsupervised by the employer
including those who are engaged on task or contract basis, purely commission basis, or those
who are paid a fixed amount for performing work irrespective of the time consumed in the
performance thereof. [emphasis ours]
Under these provisions, the general rule is that holiday and SIL pay provisions cover all
employees. To be excluded from their coverage, an employee must be one of those that these
provisions expressly exempt, strictly in accordance with the exemption. Under the IRR, exemption
from the coverage of holiday and SIL pay refer to "field personnel and other employees whose
time and performance is unsupervised by the employer including those who are engaged on task
or contract basis[.]" Note that unlike Article 82 of the Labor Code, the IRR on holiday and SIL pay
do not exclude employees "engaged on task basis" as a separate and distinct category from
employees classified as "field personnel." Rather, these employees are altogether merged into
one classification of exempted employees.
Because of this difference, it may be argued that the Labor Code may be interpreted to mean that
those who are engaged on task basis, per se, are excluded from the SIL and holiday payment
since this is what the Labor Code provisions, in contrast with the IRR, strongly suggest. The
arguable interpretation of this rule may be conceded to be within the discretion granted to the LA
and NLRC as the quasi-judicial bodies with expertise on labor matters.
However, as early as 1987 in the case of Cebu Institute of Technology v. Ople 49 the phrase "those
who are engaged on task or contract basis" in the rule has already been interpreted to mean as
follows:
[the phrase] should however, be related with "field personnel" applying the rule on ejusdem
generis that general and unlimited terms are restrained and limited by the particular terms that
they follow xxx Clearly, petitioner's teaching personnel cannot be deemed field personnel which
refers "to non-agricultural employees who regularly perform their duties away from the principal
place of business or branch office of the employer and whose actual hours of work in the field
cannot be determined with reasonable certainty. [Par. 3, Article 82, Labor Code of the

Philippines]. Petitioner's claim that private respondents are not entitled to the service incentive
leave benefit cannot therefore be sustained.
In short, the payment of an employee on task or pakyaw basis alone is insufficient to exclude one
from the coverage of SIL and holiday pay. They are exempted from the coverage of Title I
(including the holiday and SIL pay) only if they qualify as "field personnel." The IRR therefore
validly qualifies and limits the general exclusion of "workers paid by results" found in Article 82
from the coverage of holiday and SIL pay. This is the only reasonable interpretation since the
determination of excluded workers who are paid by results from the coverage of Title I is
"determined by the Secretary of Labor in appropriate regulations."
The Cebu Institute Technology ruling was reiterated in 2005 in Auto Bus Transport Systems, Inc.,
v. Bautista:
A careful perusal of said provisions of law will result in the conclusion that the grant of service
incentive leave has been delimited by the Implementing Rules and Regulations of the Labor Code
to apply only to those employees not explicitly excluded by Section 1 of Rule V. According to the
Implementing Rules, Service Incentive Leave shall not apply to employees classified as "field
personnel." The phrase "other employees whose performance is unsupervised by the employer"
must not be understood as a separate classification of employees to which service incentive
leave shall not be granted. Rather, it serves as an amplification of the interpretation of the
definition of field personnel under the Labor Code as those "whose actual hours of work in the
field cannot be determined with reasonable certainty."
The same is true with respect to the phrase "those who are engaged on task or contract basis,
purely commission basis." Said phrase should be related with "field personnel," applying the rule
on ejusdem generis that general and unlimited terms are restrained and limited by the particular
terms that they follow.
The Autobus ruling was in turn the basis of Serrano v. Santos Transit which the CA cited in
support of granting Macasios petition.
In Serrano, the Court, applying the rule on ejusdem generis 50 declared that "employees engaged
on task or contract basis xxx are not automatically exempted from the grant of service incentive
leave, unless, they fall under the classification of field personnel." 51 The Court explained that the
phrase "including those who are engaged on task or contract basis, purely commission basis"
found in Section 1(d), Rule V of Book III of the IRR should not be understood as a separate
classification of employees to which SIL shall not be granted. Rather, as with its preceding phrase
- "other employees whose performance is unsupervised by the employer" - the phrase "including
those who are engaged on task or contract basis" serves to amplify the interpretation of the Labor
Code definition of "field personnel" as those "whose actual hours of work in the field cannot be
determined with reasonable certainty."
In contrast and in clear departure from settled case law, the LA and the NLRC still interpreted the
Labor Code provisions and the IRR as exempting an employee from the coverage of Title I of the
Labor Code based simply and solely on the mode of payment of an employee. The NLRCs utter
disregard of this consistent jurisprudential ruling is a clear act of grave abuse of discretion. 52 In
other words, by dismissing Macasios complaint without considering whether Macasio was a "field
personnel" or not, the NLRC proceeded based on a significantly incomplete consideration of the
case. This action clearly smacks of grave abuse of discretion.
Entitlement to holiday pay
Evidently, the Serrano ruling speaks only of SIL pay. However, if the LA and the NLRC had only
taken counsel from Serrano and earlier cases, they would have correctly reached a similar
conclusion regarding the payment of holiday pay since the rule exempting "field personnel" from
the grant of holiday pay is identically worded with the rule exempting "field personnel" from the
grant of SIL pay. To be clear, the phrase "employees engaged on task or contract basis "found in
the IRR on both SIL pay and holiday pay should be read together with the exemption of "field
personnel."
In short, in determining whether workers engaged on "pakyaw" or task basis" is entitled to holiday
and SIL pay, the presence (or absence) of employer supervision as regards the workers time and
performance is the key: if the worker is simply engaged on pakyaw or task basis, then the general
rule is that he is entitled to a holiday pay and SIL pay unless exempted from the exceptions

specifically provided under Article 94 (holiday pay) and Article95 (SIL pay) of the Labor Code.
However, if the worker engaged on pakyaw or task basis also falls within the meaning of "field
personnel" under the law, then he is not entitled to these monetary benefits.
Macasio does not fall under the classification of "field personnel"
Based on the definition of field personnel under Article 82, we agree with the CA that Macasio
does not fall under the definition of "field personnel." The CAs finding in this regard is supported
by the established facts of this case: first, Macasio regularly performed his duties at Davids
principal place of business; second, his actual hours of work could be determined with reasonable
certainty; and, third, David supervised his time and performance of duties. Since Macasio cannot
be considered a "field personnel," then he is not exempted from the grant of holiday, SIL pay even
as he was engaged on "pakyaw" or task basis.
Not being a "field personnel," we find the CA to be legally correct when it reversed the NLRCs
ruling dismissing Macasios complaint for holiday and SIL pay for having been rendered with
grave abuse of discretion.
Entitlement to 13th month pay
With respect to the payment of 13th month pay however, we find that the CA legally erred in
finding that the NLRC gravely abused its discretion in denying this benefit to Macasio.1wphi1
The governing law on 13th month pay is PD No. 851.53
As with holiday and SIL pay, 13th month pay benefits generally cover all employees; an employee
must be one of those expressly enumerated to be exempted. Section 3 of the Rules and
Regulations Implementing P.D. No. 85154enumerates the exemptions from the coverage of 13th
month pay benefits. Under Section 3(e), "employers of those who are paid on xxx task basis, and
those who are paid a fixed amount for performing a specific work, irrespective of the time
consumed in the performance thereof"55 are exempted.
Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of the Rules and
Regulations Implementing PD No. 851 exempts employees "paid on task basis" without any
reference to "field personnel." This could only mean that insofar as payment of the 13th month
pay is concerned, the law did not intend to qualify the exemption from its coverage with the
requirement that the task worker be a "field personnel" at the same time.
WHEREFORE, in light of these considerations, we hereby PARTIALLY GRANT the petition
insofar as the payment of 13th month pay to respondent is concerned. In all other aspects, we
AFFIRM the decision dated November 22, 2010 and the resolution dated January 31, 2011 of the
Court of Appeals in CA-G.R. SP No. 116003.
SO ORDERED.
FIRST DIVISION
G.R. No. L-53515 February 8, 1989
SAN MIGUEL BREWERY SALES FORCE UNION (PTGWO), petitioner,
vs.
HON. BLAS F. OPLE, as Minister of Labor and SAN MIGUEL CORPORATION, respondents.
Lorenzo F. Miravite for petitioner.
Isidro D. Amoroso for New San Miguel Corp. Sales Force Union.
Siguion Reyna, Montecillo & Ongsiako for private respondent.

GRIO-AQUINO, J.:

This is a petition for review of the Order dated February 28, 1980 of the Minister of Labor in Labor
Case No. AJML-069-79, approving the private respondent's marketing scheme, known as the
"Complementary Distribution System" (CDS) and dismissing the petitioner labor union's complaint
for unfair labor practice.
On April 17, 1978, a collective bargaining agreement (effective on May 1, 1978 until January 31,
1981) was entered into by petitioner San Miguel Corporation Sales Force Union (PTGWO), and
the private respondent, San Miguel Corporation, Section 1, of Article IV of which provided as
follows:
Art. IV, Section 1. Employees within the appropriate bargaining unit shall be
entitled to a basic monthly compensation plus commission based on their
respective sales. (p. 6, Annex A; p. 113, Rollo.)
In September 1979, the company introduced a marketing scheme known as the "Complementary
Distribution System" (CDS) whereby its beer products were offered for sale directly to
wholesalers through San Miguel's sales offices.
The labor union (herein petitioner) filed a complaint for unfair labor practice in the Ministry of
Labor, with a notice of strike on the ground that the CDS was contrary to the existing marketing
scheme whereby the Route Salesmen were assigned specific territories within which to sell their
stocks of beer, and wholesalers had to buy beer products from them, not from the company. It
was alleged that the new marketing scheme violates Section 1, Article IV of the collective
bargaining agreement because the introduction of the CDS would reduce the take-home pay of
the salesmen and their truck helpers for the company would be unfairly competing with them.
The complaint filed by the petitioner against the respondent company raised two issues: (1)
whether the CDS violates the collective bargaining agreement, and (2) whether it is an indirect
way of busting the union.
In its order of February 28, 1980, the Minister of Labor found:
... We see nothing in the record as to suggest that the unilateral action of the
employer in inaugurating the new sales scheme was designed to discourage
union organization or diminish its influence, but rather it is undisputable that the
establishment of such scheme was part of its overall plan to improve efficiency
and economy and at the same time gain profit to the highest. While it may be
admitted that the introduction of new sales plan somewhat disturbed the present
set-up, the change however was too insignificant as to convince this Office to
interpret that the innovation interferred with the worker's right to self-organization.
Petitioner's conjecture that the new plan will sow dissatisfaction from its ranks is
already a prejudgment of the plan's viability and effectiveness. It is like saying
that the plan will not work out to the workers' [benefit] and therefore management
must adopt a new system of marketing. But what the petitioner failed to consider
is the fact that corollary to the adoption of the assailed marketing technique is the
effort of the company to compensate whatever loss the workers may suffer
because of the new plan over and above than what has been provided in the
collective bargaining agreement. To us, this is one indication that the action of the
management is devoid of any anti-union hues. (pp. 24-25, Rollo.)
The dispositive part of the Minister's Order reads:
WHEREFORE, premises considered, the notice of strike filed by the petitioner,
San Miguel Brewery Sales Force Union-PTGWO is hereby dismissed.
Management however is hereby ordered to pay an additional three (3) months
back adjustment commissions over and above the adjusted commission under
the complementary distribution system. (p. 26, Rollo.)
The petition has no merit.
Public respondent was correct in holding that the CDS is a valid exercise of management
prerogatives:

Except as limited by special laws, an employer is free to regulate, according to

his own discretion and judgment, all aspects of employment, including hiring,
work assignments, working methods, time, place and manner of work, tools to be
used, processes to be followed, supervision of workers, working regulations,
transfer of employees, work supervision, lay-off of workers and the discipline,
dismissal and recall of work. ... (NLU vs. Insular La Yebana Co., 2 SCRA 924;
Republic Savings Bank vs. CIR 21 SCRA 226, 235.) (Perfecto V. Hernandez,
Labor Relations Law, 1985 Ed., p. 44.) (Emphasis ours.)
Every business enterprise endeavors to increase its profits. In the process, it may adopt or devise
means designed towards that goal. In Abbott Laboratories vs. NLRC, 154 SCRA 713, We ruled:
... Even as the law is solicitous of the welfare of the employees, it must also
protect the right of an employer to exercise what are clearly management
prerogatives. The free will of management to conduct its own business affairs to
achieve its purpose cannot be denied.
So long as a company's management prerogatives are exercised in good faith for the
advancement of the employer's interest and not for the purpose of defeating or circumventing the
rights of the employees under special laws or under valid agreements, this Court will uphold them
(LVN Pictures Workers vs. LVN, 35 SCRA 147; Phil. American Embroideries vs. Embroidery and
Garment Workers, 26 SCRA 634; Phil. Refining Co. vs. Garcia, 18 SCRA 110). San Miguel
Corporation's offer to compensate the members of its sales force who will be adversely affected
by the implementation of the CDS by paying them a so-called "back adjustment commission" to
make up for the commissions they might lose as a result of the CDS proves the company's good
faith and lack of intention to bust their union.
WHEREFORE, the petition for certiorari is dismissed for lack of merit.
SO ORDERED.
[G.R. No. 138051. June 10, 2004]
JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING CORPORATION,respondent.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari[1] assailing the 26 March
1999 Decision[2] of the Court of Appeals in CA-G.R. SP No. 49190 dismissing the petition filed by
Jose Y. Sonza (SONZA). The Court of Appeals affirmed the findings of the National Labor
Relations Commission (NLRC), which affirmed the Labor Arbiters dismissal of the case for lack of
jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation (ABS-CBN) signed an
Agreement (Agreement) with the Mel and Jay Management and Development Corporation
(MJMDC). ABS-CBN was represented by its corporate officers while MJMDC was represented by
SONZA, as President and General Manager, and Carmela Tiangco (TIANGCO), as EVP and
Treasurer. Referred to in the Agreement as AGENT, MJMDC agreed to provide SONZAs services
exclusively to ABS-CBN as talent for radio and television. The Agreement listed the services
SONZA would render to ABS-CBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.[3]
ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the first
year and P317,000 for the second and third year of the Agreement. ABS-CBN would pay the
talent fees on the 10th and 25th days of the month.

On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III, which
reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May 1994 entered into by your
goodself on behalf of ABS-CBN with our company relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his
programs and career. We consider these acts of the station violative of the Agreement and the
station as in breach thereof. In this connection, we hereby serve notice of rescission of said
Agreement at our instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount
stipulated in paragraph 7 of the Agreement but reserves the right to seek recovery of the other
benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y. SONZA
President and Gen. Manager[4]
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of
Labor and Employment, National Capital Region in Quezon City. SONZA complained that ABSCBN did not pay his salaries, separation pay, service incentive leave pay, 13 th month pay, signing
bonus, travel allowance and amounts due under the Employees Stock Option Plan (ESOP).
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employeremployee relationship existed between the parties. SONZA filed an Opposition to the motion
on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his account at
PCIBank, Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account
with the same bank where ABS-CBN deposited SONZAs talent fees and other payments due him
under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter[5] denied the motion to dismiss and
directed the parties to file their respective position papers. The Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was an employee of
respondent company until April 15, 1996 and that he was not paid certain claims, it is sufficient
enough as to confer jurisdiction over the instant case in this Office. And as to whether or not such
claim would entitle complainant to recover upon the causes of action asserted is a matter to be
resolved only after and as a result of a hearing. Thus, the respondents plea of lack of employeremployee relationship may be pleaded only as a matter of defense. It behooves upon it the duty
to prove that there really is no employer-employee relationship between it and the complainant.
The Labor Arbiter then considered the case submitted for resolution. The parties submitted
their position papers on 24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with Motion to
Expunge Respondents Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of
ABS-CBNs witnesses Soccoro Vidanes and Rolando V. Cruz. These witnesses stated in their
affidavits that the prevailing practice in the television and broadcast industry is to treat talents like
SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack
of jurisdiction.[6] The pertinent parts of the decision read as follows:

xxx
While Philippine jurisprudence has not yet, with certainty, touched on the true nature of the
contract of a talent, it stands to reason that a talent as above-described cannot be considered as
an employee by reason of the peculiar circumstances surrounding the engagement of his
services.
It must be noted that complainant was engaged by respondent by reason of his peculiar
skills and talent as a TV host and a radio broadcaster. Unlike an ordinary employee, he
was free to perform the services he undertook to render in accordance with his own
style. The benefits conferred to complainant under the May 1994 Agreement are certainly very
much higher than those generally given to employees. For one, complainant Sonzas monthly
talent fees amount to a staggering P317,000. Moreover, his engagement as a talent was covered
by a specific contract. Likewise, he was not bound to render eight (8) hours of work per day as he
worked only for such number of hours as may be necessary.
The fact that per the May 1994 Agreement complainant was accorded some benefits normally
given to an employee is inconsequential. Whatever benefits complainant enjoyed arose from
specific agreement by the parties and not by reason of employer-employee
relationship. As correctly put by the respondent, All these benefits are merely talent fees and
other contractual benefits and should not be deemed as salaries, wages and/or other
remuneration accorded to an employee, notwithstanding the nomenclature appended to these
benefits.Apropos to this is the rule that the term or nomenclature given to a stipulated benefit is
not controlling, but the intent of the parties to the Agreement conferring such benefit.
The fact that complainant was made subject to respondents Rules and Regulations,
likewise, does not detract from the absence of employer-employee relationship. As held by
the Supreme Court, The line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the means or methods to
be employed in attaining it, and those that control or fix the methodology and bind or restrict the
party hired to the use of such means. The first, which aim only to promote the result, create no
employer-employee relationship unlike the second, which address both the result and the means
to achieve it. (Insular Life Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15,
1989).
x x x (Emphasis supplied)[7]
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision
affirming the Labor Arbiters decision. SONZA filed a motion for reconsideration, which the NLRC
denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of
Appeals assailing the decision and resolution of the NLRC. On 26 March 1999, the Court of
Appeals rendered a Decision dismissing the case.[8]
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRCs finding that no employer-employee relationship
existed between SONZA and ABS-CBN. Adopting the NLRCs decision, the appellate court quoted
the following findings of the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as
an agent of complainant Sonza, the principal. By all indication and as the law puts it, the act of
the agent is the act of the principal itself. This fact is made particularly true in this case, as
admittedly MJMDC is a management company devoted exclusively to managing the careers of
Mr. Sonza and his broadcast partner, Mrs. Carmela C. Tiangco.(Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between complainant Sonza and
MJMDC, and not between ABS-CBN and MJMDC. This is clear from the provisions of the May
1994 Agreement which specifically referred to MJMDC as the AGENT. As a matter of fact, when
complainant herein unilaterally rescinded said May 1994 Agreement, it was MJMDC which issued
the notice of rescission in behalf of Mr. Sonza, who himself signed the same in his capacity as
President.

Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically,
the parties to the said agreements are ABS-CBN and Mr. Sonza. And it is only in the May 1994
Agreement, which is the latest Agreement executed between ABS-CBN and Mr. Sonza, that
MJMDC figured in the said Agreement as the agent of Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABS-CBN such that
there exist[s] employer-employee relationship between the latter and Mr. Sonza. On the contrary,
We find it indubitable, that MJMDC is an agent, not of ABS-CBN, but of the talent/contractor Mr.
Sonza, as expressly admitted by the latter and MJMDC in the May 1994 Agreement.
It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the
regular courts, the same being in the nature of an action for alleged breach of contractual
obligation on the part of respondent-appellee. As squarely apparent from complainant-appellants
Position Paper, his claims for compensation for services, 13 th month pay, signing bonus and travel
allowance against respondent-appellee are not based on the Labor Code but rather on the
provisions of the May 1994 Agreement, while his claims for proceeds under Stock Purchase
Agreement are based on the latter. A portion of the Position Paper of complainant-appellant bears
perusal:
Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound itself
to pay complainant a signing bonus consisting of shares of stockswith FIVE HUNDRED
THOUSAND PESOS (P500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay based on an amount not lower
than the amount he was receiving prior to effectivity of (the) Agreement.
Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travel
benefit amounting to at least One Hundred Fifty Thousand Pesos (P150,000.00) per year.
Thus, it is precisely because of complainant-appellants own recognition of the fact that his
contractual relations with ABS-CBN are founded on the New Civil Code, rather than the Labor
Code, that instead of merely resigning from ABS-CBN, complainant-appellant served upon the
latter a notice of rescission of Agreement with the station, per his letter dated April 1, 1996, which
asserted that instead of referring to unpaid employee benefits, he is waiving and renouncing
recovery of the remaining amount stipulated in paragraph 7 of the Agreement but reserves the
right to such recovery of the other benefits under said Agreement. (Annex 3 of the respondent
ABS-CBNs Motion to Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the
Stock Purchase Agreement by respondent-appellee that complainant-appellant filed his
complaint. Complainant-appellants claims being anchored on the alleged breach of contract on
the part of respondent-appellee, the same can be resolved by reference to civil law and not to
labor law. Consequently, they are within the realm of civil law and, thus, lie with the regular
courts. As held in the case of Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21
November 1994, an action for breach of contractual obligation is intrinsically a civil
dispute.[9] (Emphasis supplied)
The Court of Appeals ruled that the existence of an employer-employee relationship between
SONZA and ABS-CBN is a factual question that is within the jurisdiction of the NLRC to resolve.
[10]
A special civil action for certiorari extends only to issues of want or excess of jurisdiction of the
NLRC.[11]Such action cannot cover an inquiry into the correctness of the evaluation of the
evidence which served as basis of the NLRCs conclusion. [12] The Court of Appeals added that it
could not re-examine the parties evidence and substitute the factual findings of the NLRC with its
own.[13]
The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS DECISION AND
REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN
SONZA AND ABS-CBN, DESPITE THE WEIGHT OF CONTROLLING LAW, JURISPRUDENCE
AND EVIDENCE TO SUPPORT SUCH A FINDING.[14]
The Courts Ruling

We affirm the assailed decision.

No convincing reason exists to warrant a reversal of the decision of the Court of Appeals
affirming the NLRC ruling which upheld the Labor Arbiters dismissal of the case for lack of
jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws and
jurisprudence define clearly the elements of an employer-employee relationship, this is the first
time that the Court will resolve the nature of the relationship between a television and radio
station and one of its talents. There is no case law stating that a radio and television program
host is an employee of the broadcast station.
The instant case involves big names in the broadcast industry, namely Jose Jay Sonza, a
known television and radio personality, and ABS-CBN, one of the biggest television and radio
networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an
employee of ABS-CBN. On the other hand, ABS-CBN insists that the Labor Arbiter has no
jurisdiction because SONZA was an independent contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a question of fact. Appellate courts
accord the factual findings of the Labor Arbiter and the NLRC not only respect but also finality
when supported by substantial evidence. [15] Substantial evidence means such relevant evidence
as a reasonable mind might accept as adequate to support a conclusion. [16] A party cannot prove
the absence of substantial evidence by simply pointing out that there is contrary evidence on
record, direct or circumstantial. The Court does not substitute its own judgment for that of the
tribunal in determining where the weight of evidence lies or what evidence is credible. [17]
SONZA maintains that all essential elements of an employer-employee relationship are
present in this case. Case law has consistently held that the elements of an employer-employee
relationship are:(a) the selection and engagement of the employee; (b) the payment of wages; (c)
the power of dismissal; and (d) the employers power to control the employee on the means and
methods by which the work is accomplished. [18] The last element, the so-called control test, is
the most important element.[19]
A. Selection and Engagement of Employee
ABS-CBN engaged SONZAs services to co-host its television and radio programs because
of SONZAs peculiar skills, talent and celebrity status. SONZA contends that the discretion used
by respondent in specifically selecting and hiring complainant over other broadcasters of possibly
similar experience and qualification as complainant belies respondents claim of independent
contractorship.
Independent contractors often present themselves to possess unique skills, expertise or
talent to distinguish them from ordinary employees. The specific selection and hiring of
SONZA, because of his unique skills, talent and celebrity status not possessed by
ordinary employees, is a circumstance indicative, but not conclusive, of an independent
contractual relationship. If SONZA did not possess such unique skills, talent and celebrity status,
ABS-CBN would not have entered into the Agreement with SONZA but would have hired him
through its personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine
his status. We must consider all the circumstances of the relationship, with the control test being
the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to
MJMDC. SONZA asserts that this mode of fee payment shows that he was an employee of ABSCBN. SONZA also points out that ABS-CBN granted him benefits and privileges which he would
not have enjoyed if he were truly the subject of a valid job contract.

All the talent fees and benefits paid to SONZA were the result of negotiations that led to the
Agreement. If SONZA were ABS-CBNs employee, there would be no need for the parties to
stipulate on benefits such as SSS, Medicare, x x x and 13 th month pay[20] which the law
automatically incorporates into every employer-employee contract. [21] Whatever benefits SONZA
enjoyed arose from contract and not because of an employer-employee relationship. [22]
SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so
huge and out of the ordinary that they indicate more an independent contractual relationship
rather than an employer-employee relationship. ABS-CBN agreed to pay SONZA such huge
talent fees precisely because of SONZAs unique skills, talent and celebrity status not possessed
by ordinary employees. Obviously, SONZA acting alone possessed enough bargaining power to
demand and receive such huge talent fees for his services. The power to bargain talent fees way
above the salary scales of ordinary employees is a circumstance indicative, but not conclusive, of
an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status
of SONZA as an independent contractor. The parties expressly agreed on such mode of
payment. Under the Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would have
to turn over any talent fee accruing under the Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their
relationship.SONZA failed to show that ABS-CBN could terminate his services on grounds other
than breach of contract, such as retrenchment to prevent losses as provided under labor laws. [23]
During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as long as
AGENT and Jay Sonza shall faithfully and completely perform each condition of this Agreement.
[24]
Even if it suffered severe business losses, ABS-CBN could not retrench SONZA because ABSCBN remained obligated to pay SONZAs talent fees during the life of the Agreement. This
circumstance indicates an independent contractual relationship between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still
paid him his talent fees. Plainly, ABS-CBN adhered to its undertaking in the Agreement to
continue paying SONZAs talent fees during the remaining life of the Agreement even if ABS-CBN
cancelled SONZAs programs through no fault of SONZA. [25]
SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement as an
admission that he is not an employee of ABS-CBN. The Labor Arbiter stated that if it were true
that complainant was really an employee, he would merely resign, instead. SONZA did actually
resign from ABS-CBN but he also, as president of MJMDC, rescinded the Agreement. SONZAs
letter clearly bears this out.[26] However, the manner by which SONZA terminated his relationship
with ABS-CBN is immaterial. Whether SONZA rescinded the Agreement or resigned from work
does not determine his status as employee or independent contractor.
D. Power of Control
Since there is no local precedent on whether a radio and television program host is an
employee or an independent contractor, we refer to foreign case law in analyzing the present
case. The United States Court of Appeals, First Circuit, recently held in Alberty-Vlez v.
Corporacin De Puerto Rico Para La Difusin Pblica (WIPR) [27] that a television program host is
an independent contractor. We quote the following findings of the U.S. court:
Several factors favor classifying Alberty as an independent contractor. First, a television actress
is a skilled position requiring talent and training not available on-the-job. x x x In this
regard, Alberty possesses a masters degree in public communications and journalism; is trained
in dance, singing, and modeling; taught with the drama department at the University of Puerto
Rico; and acted in several theater and television productions prior to her affiliation with Desde Mi
Pueblo. Second, Alberty provided the tools and instrumentalities necessary for her to
perform. Specifically, she provided, or obtained sponsors to provide, the costumes, jewelry, and
other image-related supplies and services necessary for her appearance. Alberty disputes that
this factor favors independent contractor status because WIPR provided the equipment
necessary to tape the show.Albertys argument is misplaced. The equipment necessary for Alberty
to conduct her job as host of Desde Mi Pueblo related to her appearance on the show. Others
provided equipment for filming and producing the show, but these were not the primary tools that

Alberty used to perform her particular function. If we accepted this argument, independent
contractors could never work on collaborative projects because other individuals often provide the
equipment required for different aspects of the collaboration. x x x
Third, WIPR could not assign Alberty work in addition to filming Desde Mi Pueblo. Albertys
contracts with WIPR specifically provided that WIPR hired her professional services as Hostess
for the Program Desde Mi Pueblo. There is no evidence that WIPR assigned Alberty tasks in
addition to work related to these tapings. x x x[28] (Emphasis supplied)
Applying the control test to the present case, we find that SONZA is not an employee but
an independent contractor. The control test is the most important test our courts apply in
distinguishing an employee from an independent contractor.[29] This test is based on the extent of
control the hirer exercises over a worker. The greater the supervision and control the hirer
exercises, the more likely the worker is deemed an employee. The converse holds true as well
the less control the hirer exercises, the more likely the worker is considered an independent
contractor.[30]
First, SONZA contends that ABS-CBN exercised control over the means and methods of his
work.
SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically to cohost the Mel & Jay programs. ABS-CBN did not assign any other work to SONZA. To perform his
work, SONZA only needed his skills and talent. How SONZA delivered his lines, appeared on
television, and sounded on radio were outside ABS-CBNs control. SONZA did not have to render
eight hours of work per day. The Agreement required SONZA to attend only rehearsals and
tapings of the shows, as well as pre- and post-production staff meetings. [31] ABS-CBN could not
dictate the contents of SONZAs script. However, the Agreement prohibited SONZA from criticizing
in his shows ABS-CBN or its interests. [32] The clear implication is that SONZA had a free hand on
what to say or discuss in his shows provided he did not attack ABS-CBN or its interests.
We find that ABS-CBN was not involved in the actual performance that produced the finished
product of SONZAs work.[33] ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN
merely reserved the right to modify the program format and airtime schedule for more effective
programming.[34] ABS-CBNs sole concern was the quality of the shows and their standing in the
ratings. Clearly, ABS-CBN did not exercise control over the means and methods of performance
of SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs power
over the means and methods of the performance of his work. Although ABS-CBN did have the
option not to broadcast SONZAs show, ABS-CBN was still obligated to pay SONZAs talent
fees. Thus, even if ABS-CBN was completely dissatisfied with the means and methods of
SONZAs performance of his work, or even with the quality or product of his work, ABS-CBN could
not dismiss or even discipline SONZA. All that ABS-CBN could do is not to broadcast SONZAs
show but ABS-CBN must still pay his talent fees in full.[35]
Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the
obligation to continue paying in full SONZAs talent fees, did not amount to control over the means
and methods of the performance of SONZAs work. ABS-CBN could not terminate or discipline
SONZA even if the means and methods of performance of his work - how he delivered his lines
and appeared on television - did not meet ABS-CBNs approval. This proves that ABS-CBNs
control was limited only to the result of SONZAs work, whether to broadcast the final product or
not. In either case, ABS-CBN must still pay SONZAs talent fees in full until the expiry of the
Agreement.
In Vaughan, et al. v. Warner, et al.,[36] the United States Circuit Court of Appeals ruled that
vaudeville performers were independent contractors although the management reserved the right
to delete objectionable features in their shows. Since the management did not have control over
the manner of performance of the skills of the artists, it could only control the result of the work by
deleting objectionable features.[37]
SONZA further contends that ABS-CBN exercised control over his work by supplying all
equipment and crew. No doubt, ABS-CBN supplied the equipment, crew and airtime needed to
broadcast the Mel & Jay programs. However, the equipment, crew and airtime are not the tools
and instrumentalities SONZA needed to perform his job. What SONZA principally needed were
his talent or skills and the costumes necessary for his appearance. [38] Even though ABS-CBN

provided SONZA with the place of work and the necessary equipment, SONZA was still an
independent contractor since ABS-CBN did not supervise and control his work. ABS-CBNs sole
concern was for SONZA to display his talent during the airing of the programs. [39]
A radio broadcast specialist who works under minimal supervision is an independent
contractor.[40]SONZAs work as television and radio program host required special skills and talent,
which SONZA admittedly possesses. The records do not show that ABS-CBN exercised any
supervision and control over how SONZA utilized his skills and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBNs employee because ABS-CBN
subjected him to its rules and standards of performance. SONZA claims that this indicates ABSCBNs control not only [over] his manner of work but also the quality of his work.
The Agreement stipulates that SONZA shall abide with the rules and standards of
performancecovering talents[41] of ABS-CBN. The Agreement does not require SONZA to comply
with the rules and standards of performance prescribed for employees of ABS-CBN. The code of
conduct imposed on SONZA under the Agreement refers to the Television and Radio Code of the
Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY
(ABS-CBN) as its Code of Ethics. [42] The KBP code applies to broadcasters, not to employees of
radio and television stations.Broadcasters are not necessarily employees of radio and television
stations. Clearly, the rules and standards of performance referred to in the Agreement are those
applicable to talents and not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate that the
latter is an employee of the former.[43] In this case, SONZA failed to show that these rules
controlled his performance. We find that these general rules are merely guidelines towards the
achievement of the mutually desired result, which are top-rating television and radio programs
that comply with standards of the industry. We have ruled that:
Further, not every form of control that a party reserves to himself over the conduct of the other
party in relation to the services being rendered may be accorded the effect of establishing an
employer-employee relationship. The facts of this case fall squarely with the case of Insular Life
Assurance Co., Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be
employed in attaining it, and those that control or fix the methodology and bind or restrict the
party hired to the use of such means. The first, which aim only to promote the result, create no
employer-employee relationship unlike the second, which address both the result and the means
used to achieve it.[44]
The Vaughan case also held that one could still be an independent contractor although the
hirer reserved certain supervision to insure the attainment of the desired result. The hirer,
however, must not deprive the one hired from performing his services according to his own
initiative.[45]
Lastly, SONZA insists that the exclusivity clause in the Agreement is the most extreme form
of control which ABS-CBN exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an
employee of ABS-CBN. Even an independent contractor can validly provide his services
exclusively to the hiring party. In the broadcast industry, exclusivity is not necessarily the same as
control.
The hiring of exclusive talents is a widespread and accepted practice in the entertainment
industry.[46] This practice is not designed to control the means and methods of work of the talent,
but simply to protect the investment of the broadcast station. The broadcast station normally
spends substantial amounts of money, time and effort in building up its talents as well as the
programs they appear in and thus expects that said talents remain exclusive with the station for a
commensurate period of time.[47] Normally, a much higher fee is paid to talents who agree to work
exclusively for a particular radio or television station. In short, the huge talent fees partially
compensates for exclusivity, as in the present case.
MJMDC as Agent of SONZA

SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which contracted
out his services to ABS-CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not
an employee of ABS-CBN. SONZA insists that MJMDC is a labor-only contractor and ABS-CBN is
his employer.
In a labor-only contract, there are three parties involved: (1) the labor-only contractor; (2) the
employee who is ostensibly under the employ of the labor-only contractor; and (3) the principal
who is deemed the real employer. Under this scheme, the labor-only contractor is the agent of
the principal. 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. [48] These
circumstances are not present in this case.
There are essentially only two parties involved under the Agreement, namely, SONZA and
ABS-CBN. MJMDC merely acted as SONZAs agent. The Agreement expressly states that
MJMDC acted as the AGENT of SONZA. The records do not show that MJMDC acted as ABSCBNs agent. MJMDC, which stands for Mel and Jay Management and Development Corporation,
is a corporation organized and owned by SONZA and TIANGCO. The President and General
Manager of MJMDC is SONZA himself. It is absurd to hold that MJMDC, which is owned,
controlled, headed and managed by SONZA, acted as agent of ABS-CBN in entering into the
Agreement with SONZA, who himself is represented by MJMDC. That would make MJMDC the
agent of both ABS-CBN and SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to managing
the careers of SONZA and his broadcast partner, TIANGCO. MJMDC is not engaged in any other
business, not even job contracting. MJMDC does not have any other function apart from acting as
agent of SONZA or TIANGCO to promote their careers in the broadcast and television industry.[49]
Policy Instruction No. 40
SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8
January 1979 finally settled the status of workers in the broadcast industry. Under this policy, the
types of employees in the broadcast industry are the station and program employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the force and
effect of law. There is no legal presumption that Policy Instruction No. 40 determines SONZAs
status. A mere executive issuance cannot exclude independent contractors from the class of
service providers to the broadcast industry. The classification of workers in the broadcast industry
into only two groups under Policy Instruction No. 40 is not binding on this Court, especially when
the classification has no basis either in law or in fact.
Affidavits of ABS-CBNs Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and
Rolando Cruz without giving his counsel the opportunity to cross-examine these
witnesses. SONZA brands these witnesses as incompetent to attest on the prevailing practice in
the radio and television industry.SONZA views the affidavits of these witnesses as misleading and
irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses, he was never prevented from
denying or refuting the allegations in the affidavits. The Labor Arbiter has the discretion whether
to conduct a formal (trial-type) hearing after the submission of the position papers of the parties,
thus:
Section 3. Submission of Position Papers/Memorandum
xxx
These verified position papers shall cover only those claims and causes of action raised in the
complaint excluding those that may have been amicably settled, and shall be accompanied by all
supporting documents including the affidavits of their respective witnesses which shall take the
place of the latters direct testimony. x x x
Section 4. Determination of Necessity of Hearing. Immediately after the submission of the parties
of their position papers/memorandum, the Labor Arbiter shall motu propio determine whether

there is need for a formal trial or hearing. At this stage, he may, at his discretion and for the
purpose of making such determination, ask clarificatory questions to further elicit facts or
information, including but not limited to the subpoena of relevant documentary evidence, if any
from any party or witness.[50]
The Labor Arbiter can decide a case based solely on the position papers and the supporting
documents without a formal trial. [51] The holding of a formal hearing or trial is something that the
parties cannot demand as a matter of right. [52] If the Labor Arbiter is confident that he can rely on
the documents before him, he cannot be faulted for not conducting a formal trial, unless under the
particular circumstances of the case, the documents alone are insufficient. The proceedings
before a Labor Arbiter are non-litigious in nature. Subject to the requirements of due process, the
technicalities of law and the rules obtaining in the courts of law do not strictly apply in
proceedings before a Labor Arbiter.
Talents as Independent Contractors
ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment
industries to treat talents like SONZA as independent contractors. SONZA argues that if such
practice exists, it is void for violating the right of labor to security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution [53] arises only if there
is an employer-employee relationship under labor laws. Not every performance of services for a
fee creates an employer-employee relationship. To hold that every person who renders services
to another for a fee is an employee - to give meaning to the security of tenure clause - will lead to
absurd results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their services as
independent contractors. The right to life and livelihood guarantees this freedom to contract as
independent contractors. The right of labor to security of tenure cannot operate to deprive an
individual, possessed with special skills, expertise and talent, of his right to contract as an
independent contractor. An individual like an artist or talent has a right to render his services
without any one controlling the means and methods by which he performs his art or craft. This
Court will not interpret the right of labor to security of tenure to compel artists and talents to
render their services only as employees. If radio and television program hosts can render their
services only as employees, the station owners and managers can dictate to the radio and
television hosts what they say in their shows. This is not conducive to freedom of the press.
Different Tax Treatment of Talents and Broadcasters
The National Internal Revenue Code (NIRC)[54] in relation to Republic Act No. 7716, [55] as
amended by Republic Act No. 8241, [56] treats talents, television and radio broadcasters differently.
Under the NIRC, these professionals are subject to the 10% value-added tax (VAT) on services
they render. Exempted from the VAT are those under an employer-employee relationship. [57] This
different tax treatment accorded to talents and broadcasters bolters our conclusion that they are
independent contractors, provided all the basic elements of a contractual relationship are present
as in this case.
Nature of SONZAs Claims
SONZA seeks the recovery of allegedly unpaid talent fees, 13 th month pay, separation pay,
service incentive leave, signing bonus, travel allowance, and amounts due under the Employee
Stock Option Plan. We agree with the findings of the Labor Arbiter and the Court of Appeals that
SONZAs claims are all based on the May 1994 Agreement and stock option plan, and not on
the Labor Code. Clearly, the present case does not call for an application of the Labor Code
provisions but an interpretation and implementation of the May 1994 Agreement. In effect,
SONZAs cause of action is for breach of contract which is intrinsically a civil dispute cognizable
by the regular courts.[58]
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals
dated 26 March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. 164156

September 26, 2006

ABS-CBN BROADCASTING CORPORATION, petitioner,

vs.
MARLYN NAZARENO, MERLOU GERZON, JENNIFER DEIPARINE, and JOSEPHINE
LERASAN, respondents.
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari of the Decision 1 of the Court of Appeals (CA) in CAG.R. SP No. 76582 and the Resolution denying the motion for reconsideration thereof. The CA
affirmed the Decision2 and Resolution3 of the National Labor Relations Commission (NLRC) in
NLRC Case No. V-000762-2001 (RAB Case No. VII-10-1661-2001) which likewise affirmed, with
modification, the decision of the Labor Arbiter declaring the respondents Marlyn Nazareno,
Merlou Gerzon, Jennifer Deiparine and Josephine Lerasan as regular employees.
The Antecedents
Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the broadcasting
business and owns a network of television and radio stations, whose operations revolve around
the broadcast, transmission, and relay of telecommunication signals. It sells and deals in or
otherwise utilizes the airtime it generates from its radio and television operations. It has a
franchise as a broadcasting company, and was likewise issued a license and authority to operate
by the National Telecommunications Commission.
Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as production
assistants (PAs) on different dates. They were assigned at the news and public affairs, for various
radio programs in the Cebu Broadcasting Station, with a monthly compensation of P4,000. They
were issued ABS-CBN employees identification cards and were required to work for a minimum
of eight hours a day, including Sundays and holidays. They were made to perform the following
tasks and duties:
a) Prepare, arrange airing of commercial broadcasting based on the daily operations log and
digicart of respondent ABS-CBN;
b) Coordinate, arrange personalities for air interviews;
c) Coordinate, prepare schedule of reporters for scheduled news reporting and lead-in or
incoming reports;
d) Facilitate, prepare and arrange airtime schedule for public service announcement and
complaints;
e) Assist, anchor program interview, etc; and
f) Record, log clerical reports, man based control radio. 4
Their respective working hours were as follows:
Name Time No. of Hours
1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7
8:00 A.M.-12:00 noon
2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7
3. Joy Sanchez 1:00 P.M.-10:00 P.M.(Sunday) 9 hrs.
9:00 A.M.-6:00 P.M. (WF) 9 hrs.
4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs.5

The PAs were under the control and supervision of Assistant Station Manager Dante J. Luzon,
and News Manager Leo Lastimosa.
On December 19, 1996, petitioner and the ABS-CBN Rank-and-File Employees executed a
Collective Bargaining Agreement (CBA) to be effective during the period from December 11, 1996
to December 11, 1999. However, since petitioner refused to recognize PAs as part of the
bargaining unit, respondents were not included to the CBA. 6
On July 20, 2000, petitioner, through Dante Luzon, issued a Memorandum informing the PAs that
effective August 1, 2000, they would be assigned to non-drama programs, and that the DYAB
studio operations would be handled by the studio technician. Thus, their revised schedule and
other assignments would be as follows:
Monday Saturday
4:30 A.M. 8:00 A.M. Marlene Nazareno.
Miss Nazareno will then be assigned at the Research Dept.
From 8:00 A.M. to 12:00
4:30 P.M. 12:00 MN Jennifer Deiparine
Sunday
5:00 A.M. 1:00 P.M. Jennifer Deiparine
1:00 P.M. 10:00 P.M. Joy Sanchez
Respondent Gerzon was assigned as the full-time PA of the TV News Department reporting
directly to Leo Lastimosa.
On October 12, 2000, respondents filed a Complaint for Recognition of Regular Employment
Status, Underpayment of Overtime Pay, Holiday Pay, Premium Pay, Service Incentive Pay, Sick
Leave Pay, and 13th Month Pay with Damages against the petitioner before the NLRC. The Labor
Arbiter directed the parties to submit their respective position papers. Upon respondents failure to
file their position papers within the reglementary period, Labor Arbiter Jose G. Gutierrez issued an
Order dated April 30, 2001, dismissing the complaint without prejudice for lack of interest to
pursue the case. Respondents received a copy of the Order on May 16, 2001. 7Instead of re-filing
their complaint with the NLRC within 10 days from May 16, 2001, they filed, on June 11, 2001, an
Earnest Motion to Refile Complaint with Motion to Admit Position Paper and Motion to Submit
Case For Resolution.8 The Labor Arbiter granted this motion in an Order dated June 18, 2001,
and forthwith admitted the position paper of the complainants. Respondents made the following
allegations:
1. Complainants were engaged by respondent ABS-CBN as regular and full-time employees for a
continuous period of more than five (5) years with a monthly salary rate of Four Thousand
(P4,000.00) pesos beginning 1995 up until the filing of this complaint on November 20, 2000.
Machine copies of complainants ABS-CBN Employees Identification Card and salary vouchers
are hereto attached as follows, thus:
I. Jennifer Deiparine:
Exhibit "A" - ABS-CBN Employees Identification Card
Exhibit "B", - ABS-CBN Salary Voucher from Nov.
Exhibit "B-1" & 1999 to July 2000 at P4,000.00
Exhibit "B-2"
Date employed: September 15, 1995

Length of service: 5 years & nine (9) months

II. Merlou Gerzon - ABS-CBN Employees Identification Card
Exhibit "C"
Exhibit "D"
Exhibit "D-1" &
Exhibit "D-2" - ABS-CBN Salary Voucher from March
1999 to January 2001 at P4,000.00
Date employed: September 1, 1995
Length of service: 5 years & 10 months
III. Marlene Nazareno
Exhibit "E" - ABS-CBN Employees Identification Card
Exhibit "E" - ABS-CBN Salary Voucher from Nov.
Exhibit "E-1" & 1999 to December 2000
Exhibit :E-2"
Date employed: April 17, 1996
Length of service: 5 years and one (1) month
IV. Joy Sanchez Lerasan
Exhibit "F" - ABS-CBN Employees Identification Card
Exhibit "F-1" - ABS-CBN Salary Voucher from Aug.
Exhibit "F-2" & 2000 to Jan. 2001
Exhibit "F-3"
Exhibit "F-4" - Certification dated July 6, 2000
Acknowledging regular status of
Complainant Joy Sanchez Lerasan
Signed by ABS-CBN Administrative
Officer May Kima Hife
Date employed: April 15, 1998
Length of service: 3 yrs. and one (1) month9
Respondents insisted that they belonged to a "work pool" from which petitioner chose persons to
be given specific assignments at its discretion, and were thus under its direct supervision and
control regardless of nomenclature. They prayed that judgment be rendered in their favor, thus:

WHEREFORE, premises considered, this Honorable Arbiter is most respectfully prayed, to issue
an order compelling defendants to pay complainants the following:
1. One Hundred Thousand Pesos (P100,000.00) each
and by way of moral damages;
2. Minimum wage differential;
3. Thirteenth month pay differential;
4. Unpaid service incentive leave benefits;
5. Sick leave;
6. Holiday pay;
7. Premium pay;
8. Overtime pay;
9. Night shift differential.
Complainants further pray of this Arbiter to declare them regular and permanent employees of
respondent ABS-CBN as a condition precedent for their admission into the existing union and
collective bargaining unit of respondent company where they may as such acquire or otherwise
perform their obligations thereto or enjoy the benefits due therefrom.
Complainants pray for such other reliefs as are just and equitable under the premises. 10
For its part, petitioner alleged in its position paper that the respondents were PAs who basically
assist in the conduct of a particular program ran by an anchor or talent. Among their duties
include monitoring and receiving incoming calls from listeners and field reporters and calls of
news sources; generally, they perform leg work for the anchors during a program or a particular
production. They are considered in the industry as "program employees" in that, as distinguished
from regular or station employees, they are basically engaged by the station for a particular or
specific program broadcasted by the radio station. Petitioner asserted that as PAs, the
complainants were issued talent information sheets which are updated from time to time, and are
thus made the basis to determine the programs to which they shall later be called on to assist.
The program assignments of complainants were as follows:
a. Complainant Nazareno assists in the programs:
1) Nagbagang Balita (early morning edition)
2) Infor Hayupan
3) Arangkada (morning edition)
4) Nagbagang Balita (mid-day edition)
b. Complainant Deiparine assists in the programs:
1) Unzanith
2) Serbisyo de Arevalo
3) Arangkada (evening edition)
4) Balitang K (local version)
5) Abante Subu

6) Pangutana Lang
c. Complainant Gerzon assists in the program:
1) On Mondays and Tuesdays:
(a) Unzanith
(b) Serbisyo de Arevalo
(c) Arangkada (evening edition)
(d) Balitang K (local version)
(e) Abante Sugbu
(f) Pangutana Lang
2) On Thursdays
Nagbagang Balita
3) On Saturdays
(a) Nagbagang Balita
(b) Info Hayupan
(c) Arangkada (morning edition)
(d) Nagbagang Balita (mid-day edition)
4) On Sundays:
(a) Siesta Serenata
(b) Sunday Chismisan
(c) Timbangan sa Hustisya
(d) Sayri ang Lungsod
(e) Haranahan11
Petitioner maintained that PAs, reporters, anchors and talents occasionally "sideline" for other
programs they produce, such as drama talents in other productions. As program employees, a
PAs engagement is coterminous with the completion of the program, and may be
extended/renewed provided that the program is on-going; a PA may also be assigned to new
programs upon the cancellation of one program and the commencement of another. As such
program employees, their compensation is computed on a program basis, a fixed amount for
performance services irrespective of the time consumed. At any rate, petitioner claimed, as the
payroll will show, respondents were paid all salaries and benefits due them under the law.12
Petitioner also alleged that the Labor Arbiter had no jurisdiction to involve the CBA and interpret
the same, especially since respondents were not covered by the bargaining unit.
On July 30, 2001, the Labor Arbiter rendered judgment in favor of the respondents, and declared
that they were regular employees of petitioner; as such, they were awarded monetary benefits.
The fallo of the decision reads:

WHEREFORE, the foregoing premises considered, judgment is hereby rendered declaring the
complainants regular employees of the respondent ABS-CBN Broadcasting Corporation and
directing the same respondent to pay complainants as follows:
I - Merlou A. Gerzon P12,025.00
II - Marlyn Nazareno 12,025.00
III - Jennifer Deiparine 12,025.00
IV - Josephine Sanchez Lerazan 12,025.00
_________
P48,100.00
plus ten (10%) percent Attorneys Fees or a TOTAL aggregate amount of PESOS: FIFTY TWO
THOUSAND NINE HUNDRED TEN (P52,910.00).
Respondent Veneranda C. Sy is absolved from any liability.
SO ORDERED.13
However, the Labor Arbiter did not award money benefits as provided in the CBA on his belief that
he had no jurisdiction to interpret and apply the agreement, as the same was within the
jurisdiction of the Voluntary Arbitrator as provided in Article 261 of the Labor Code.
Respondents counsel received a copy of the decision on August 29, 2001. Respondent
Nazareno received her copy on August 27, 2001, while the other respondents received theirs on
September 8, 2001. Respondents signed and filed their Appeal Memorandum on September 18,
2001.
For its part, petitioner filed a motion for reconsideration, which the Labor Arbiter denied and
considered as an appeal, conformably with Section 5, Rule V, of the NLRC Rules of Procedure.
Petitioner forthwith appealed the decision to the NLRC, while respondents filed a partial appeal.
In its appeal, petitioner alleged the following:
1. That the Labor Arbiter erred in reviving or re-opening this case which had long been dismissed
without prejudice for more than thirty (30) calendar days;
2. That the Labor Arbiter erred in depriving the respondent of its Constitutional right to due
process of law;
3. That the Labor Arbiter erred in denying respondents Motion for Reconsideration on an
interlocutory order on the ground that the same is a prohibited pleading;
4. That the Labor Arbiter erred when he ruled that the complainants are regular employees of the
respondent;
5. That the Labor Arbiter erred when he ruled that the complainants are entitled to 13th month
pay, service incentive leave pay and salary differential; and
6. That the Labor Arbiter erred when he ruled that complainants are entitled to attorneys fees. 14
On November 14, 2002, the NLRC rendered judgment modifying the decision of the Labor Arbiter.
The fallo of the decision reads:
WHEREFORE, premises considered, the decision of Labor Arbiter Jose G. Gutierrez dated 30
July 2001 is SET ASIDE and VACATED and a new one is entered ORDERING respondent ABSCBN Broadcasting Corporation, as follows:

1. To pay complainants of their wage differentials and other benefits arising from the CBA as of 30
September 2002 in the aggregate amount of Two Million Five Hundred, Sixty-One Thousand Nine
Hundred Forty-Eight Pesos and 22/100 (P2,561,948.22), broken down as follows:
a. Deiparine, Jennifer - P 716,113.49
b. Gerzon, Merlou - 716,113.49
c. Nazareno, Marlyn - 716,113.49
d. Lerazan, Josephine Sanchez - 413,607.75
Total - P 2,561,948.22
2. To deliver to the complainants Two Hundred Thirty-Three (233) sacks of rice as of 30
September 2002 representing their rice subsidy in the CBA, broken down as follows:
a. Deiparine, Jennifer - 60 Sacks
b. Gerzon, Merlou - 60 Sacks
c. Nazareno, Marlyn - 60 Sacks
d. Lerazan, Josephine Sanchez - 53 Sacks
Total 233 Sacks; and
3. To grant to the complainants all the benefits of the CBA after 30 September 2002.
SO ORDERED.15
The NLRC declared that the Labor Arbiter acted conformably with the Labor Code when it
granted respondents motion to refile the complaint and admit their position paper. Although
respondents were not parties to the CBA between petitioner and the ABS-CBN Rank-and-File
Employees Union, the NLRC nevertheless granted and computed respondents monetary benefits
based on the 1999 CBA, which was effective until September 2002. The NLRC also ruled that the
Labor Arbiter had jurisdiction over the complaint of respondents because they acted in their
individual capacities and not as members of the union. Their claim for monetary benefits was
within the context of Article 217(6) of the Labor Code. The validity of respondents claim does not
depend upon the interpretation of the CBA.
The NLRC ruled that respondents were entitled to the benefits under the CBA because they were
regular employees who contributed to the profits of petitioner through their labor. The NLRC cited
the ruling of this Court in New Pacific Timber & Supply Company v. National Labor Relations
Commission.16
Petitioner filed a motion for reconsideration, which the NLRC denied.
Petitioner thus filed a petition for certiorari under Rule 65 of the Rules of Court before the CA,
raising both procedural and substantive issues, as follows: (a) whether the NLRC acted without
jurisdiction in admitting the appeal of respondents; (b) whether the NLRC committed palpable
error in scrutinizing the reopening and revival of the complaint of respondents with the Labor
Arbiter upon due notice despite the lapse of 10 days from their receipt of the July 30, 2001 Order
of the Labor Arbiter; (c) whether respondents were regular employees; (d) whether the NLRC
acted without jurisdiction in entertaining and resolving the claim of the respondents under the
CBA instead of referring the same to the Voluntary Arbitrators as provided in the CBA; and (e)
whether the NLRC acted with grave abuse of discretion when it awarded monetary benefits to
respondents under the CBA although they are not members of the appropriate bargaining unit.
On February 10, 2004, the CA rendered judgment dismissing the petition. It held that the
perfection of an appeal shall be upon the expiration of the last day to appeal by all parties, should
there be several parties to a case. Since respondents received their copies of the decision on
September 8, 2001 (except respondent Nazareno who received her copy of the decision on

August 27, 2001), they had until September 18, 2001 within which to file their Appeal
Memorandum. Moreover, the CA declared that respondents failure to submit their position paper
on time is not a ground to strike out the paper from the records, much less dismiss a complaint.
Anent the substantive issues, the appellate court stated that respondents are not mere project
employees, but regular employees who perform tasks necessary and desirable in the usual trade
and business of petitioner and not just its project employees. Moreover, the CA added, the award
of benefits accorded to rank-and-file employees under the 1996-1999 CBA is a necessary
consequence of the NLRC ruling that respondents, as PAs, are regular employees.
Finding no merit in petitioners motion for reconsideration, the CA denied the same in a
Resolution17 dated June 16, 2004.
Petitioner thus filed the instant petition for review on certiorari and raises the following
assignments of error:
1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT JURISDICTION AND GRAVELY
ERRED IN UPHOLDING THE NATIONAL LABOR RELATIONS COMMISSION
NOTWITHSTANDING THE PATENT NULLITY OF THE LATTERS DECISION AND
RESOLUTION.
2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING
OF THE NLRC FINDING RESPONDENTS REGULAR EMPLOYEES.
3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING
OF THE NLRC AWARDING CBA BENEFITS TO RESPONDENTS.18
Considering that the assignments of error are interrelated, the Court shall resolve them
simultaneously.
Petitioner asserts that the appellate court committed palpable and serious error of law when it
affirmed the rulings of the NLRC, and entertained respondents appeal from the decision of the
Labor Arbiter despite the admitted lapse of the reglementary period within which to perfect the
same. Petitioner likewise maintains that the 10-day period to appeal must be reckoned from
receipt of a partys counsel, not from the time the party learns of the decision, that is, notice to
counsel is notice to party and not the other way around. Finally, petitioner argues that the
reopening of a complaint which the Labor Arbiter has dismissed without prejudice is a clear
violation of Section 1, Rule V of the NLRC Rules; such order of dismissal had already attained
finality and can no longer be set aside.
Respondents, on the other hand, allege that their late appeal is a non-issue because it was
petitioners own timely appeal that empowered the NLRC to reopen the case. They assert that
although the appeal was filed 10 days late, it may still be given due course in the interest of
substantial justice as an exception to the general rule that the negligence of a counsel binds the
client. On the issue of the late filing of their position paper, they maintain that this is not a ground
to strike it out from the records or dismiss the complaint.
We find no merit in the petition.
We agree with petitioners contention that the perfection of an appeal within the statutory or
reglementary period is not only mandatory, but also jurisdictional; failure to do so renders the
assailed decision final and executory and deprives the appellate court or body of the legal
authority to alter the final judgment, much less entertain the appeal. However, this Court has time
and again ruled that in exceptional cases, a belated appeal may be given due course if greater
injustice may occur if an appeal is not given due course than if the reglementary period to appeal
were strictly followed.19 The Court resorted to this extraordinary measure even at the expense of
sacrificing order and efficiency if only to serve the greater principles of substantial justice and
equity.20
In the case at bar, the NLRC did not commit a grave abuse of its discretion in giving Article
22321 of the Labor Code a liberal application to prevent the miscarriage of justice. Technicality
should not be allowed to stand in the way of equitably and completely resolving the rights and
obligations of the parties.22 We have held in a catena of cases that technical rules are not binding
in labor cases and are not to be applied strictly if the result would be detrimental to the
workingman.23

Admittedly, respondents failed to perfect their appeal from the decision of the Labor Arbiter within
the reglementary period therefor. However, petitioner perfected its appeal within the period, and
since petitioner had filed a timely appeal, the NLRC acquired jurisdiction over the case to give
due course to its appeal and render the decision of November 14, 2002. Case law is that the
party who failed to appeal from the decision of the Labor Arbiter to the NLRC can still participate
in a separate appeal timely filed by the adverse party as the situation is considered to be of
greater benefit to both parties.24
We find no merit in petitioners contention that the Labor Arbiter abused his discretion when he
admitted respondents position paper which had been belatedly filed. It bears stressing that the
Labor Arbiter is mandated by law to use every reasonable means to ascertain the facts in each
case speedily and objectively, without technicalities of law or procedure, all in the interest of due
process.25 Indeed, as stressed by the appellate court, respondents failure to submit a position
paper on time is not a ground for striking out the paper from the records, much less for dismissing
a complaint.26 Likewise, there is simply no truth to petitioners assertion that it was denied due
process when the Labor Arbiter admitted respondents position paper without requiring it to file a
comment before admitting said position paper. The essence of due process in administrative
proceedings is simply an opportunity to explain ones side or an opportunity to seek
reconsideration of the action or ruling complained of. Obviously, there is nothing in the records
that would suggest that petitioner had absolute lack of opportunity to be heard. 27 Petitioner had
the right to file a motion for reconsideration of the Labor Arbiters admission of respondents
position paper, and even file a Reply thereto. In fact, petitioner filed its position paper on April 2,
2001. It must be stressed that Article 280 of the Labor Code was encoded in our statute books to
hinder the circumvention by unscrupulous employers of the employees right to security of tenure
by indiscriminately and absolutely ruling out all written and oral agreements inharmonious with
the concept of regular employment defined therein. 28
We quote with approval the following pronouncement of the NLRC:
The complainants, on the other hand, contend that respondents assailed the Labor Arbiters order
dated 18 June 2001 as violative of the NLRC Rules of Procedure and as such is violative of their
right to procedural due process. That while suggesting that an Order be instead issued by the
Labor Arbiter for complainants to refile this case, respondents impliedly submit that there is not
any substantial damage or prejudice upon the refiling, even so, respondents suggestion
acknowledges complainants right to prosecute this case, albeit with the burden of repeating the
same procedure, thus, entailing additional time, efforts, litigation cost and precious time for the
Arbiter to repeat the same process twice. Respondents suggestion, betrays its notion of
prolonging, rather than promoting the early resolution of the case.
Although the Labor Arbiter in his Order dated 18 June 2001 which revived and re-opened the
dismissed case without prejudice beyond the ten (10) day reglementary period had inadvertently
failed to follow Section 16, Rule V, Rules Procedure of the NLRC which states:
"A party may file a motion to revive or re-open a case dismissed without prejudice within ten (10)
calendar days from receipt of notice of the order dismissing the same; otherwise, his only remedy
shall be to re-file the case in the arbitration branch of origin."
the same is not a serious flaw that had prejudiced the respondents right to due process. The
case can still be refiled because it has not yet prescribed. Anyway, Article 221 of the Labor Code
provides:
"In any proceedings before the Commission or any of the Labor Arbiters, the rules of evidence
prevailing in courts of law or equity shall not be controlling and it is the spirit and intention of this
Code that the Commission and its members and the Labor Arbiters shall use every and all
reasonable means to ascertain the facts in each case speedily and objectively and without regard
to technicalities of law or procedure, all in the interest of due process."
The admission by the Labor Arbiter of the complainants Position Paper and Supplemental
Manifestation which were belatedly filed just only shows that he acted within his discretion as he
is enjoined by law to 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. Indeed, the failure to submit a position paper on time is not a ground for striking out the
paper from the records, much less for dismissing a complaint in the case of the complainant.
(University of Immaculate Conception vs. UIC Teaching and Non-Teaching Personnel Employees,
G.R. No. 144702, July 31, 2001).

"In admitting the respondents position paper albeit late, the Labor Arbiter acted within her
discretion. In fact, she is enjoined by law to use every reasonable means to ascertain the facts in
each case speedily and objectively, without technicalities of law or procedure, all in the interest of
due process". (Panlilio vs. NLRC, 281 SCRA 53).
The respondents were given by the Labor Arbiter the opportunity to submit position paper. In fact,
the respondents had filed their position paper on 2 April 2001. What is material in the compliance
of due process is the fact that the parties are given the opportunities to submit position papers.
"Due process requirements are satisfied where the parties are given the opportunities to submit
position papers". (Laurence vs. NLRC, 205 SCRA 737).
Thus, the respondent was not deprived of its Constitutional right to due process of law.29
We reject, as barren of factual basis, petitioners contention that respondents are considered as
its talents, hence, not regular employees of the broadcasting company. Petitioners claim that the
functions performed by the respondents are not at all necessary, desirable, or even vital to its
trade or business is belied by the evidence on record.
Case law is that this Court has always accorded respect and finality to the findings of fact of the
CA, particularly if they coincide with those of the Labor Arbiter and the National Labor Relations
Commission, when supported by substantial evidence. 30 The question of whether respondents
are regular or project employees or independent contractors is essentially factual in nature;
nonetheless, the Court is constrained to resolve it due to its tremendous effects to the legions of
production assistants working in the Philippine broadcasting industry.
We agree with respondents contention that where a person has rendered at least one year of
service, regardless of the nature of the activity performed, or where the work is continuous or
intermittent, the employment is considered regular as long as the activity exists, the reason being
that a customary appointment is not indispensable before one may be formally declared as
having attained regular status. Article 280 of the Labor Code provides:
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 services to be performed is seasonal in nature and the employment is for the duration of the
season.
In Universal Robina Corporation v. Catapang,31 the Court reiterated the test in determining
whether one is a regular employee:
The primary standard, therefore, of determining regular employment is the reasonable connection
between the particular activity performed by the employee in relation to the usual trade or
business of the employer. The test is whether the former is usually necessary or desirable in the
usual business or trade of the employer. The connection can be determined by considering the
nature of work performed and its relation to the scheme of the particular business or trade in its
entirety. Also, if the employee has been performing the job for at least a year, even if the
performance is not continuous and merely intermittent, the law deems repeated and continuing
need for its performance as sufficient evidence of the necessity if not indispensability of that
activity to the business. Hence, the employment is considered regular, but only with respect to
such activity and while such activity exists.32
As elaborated by this Court in Magsalin v. National Organization of Working Men: 33
Even while the language of law might have been more definitive, the clarity of its spirit and intent,
i.e., to ensure a "regular" workers security of tenure, however, can hardly be doubted. In
determining whether an employment should be considered regular or non-regular, the applicable
test is the reasonable connection between the particular activity performed by the employee in
relation to the usual business or trade of the employer. The standard, supplied by the law itself, is
whether the work undertaken is necessary or desirable in the usual business or trade of the
employer, a fact that can be assessed by looking into the nature of the services rendered and its
relation to the general scheme under which the business or trade is pursued in the usual course.

It is distinguished from a specific undertaking that is divorced from the normal activities required
in carrying on the particular business or trade. But, although the work to be performed is only for
a specific project or seasonal, where a person thus engaged has been performing the job for at
least one year, even if the performance is not continuous or is merely intermittent, the law deems
the repeated and continuing need for its performance as being sufficient to indicate the necessity
or desirability of that activity to the business or trade of the employer. The employment of such
person is also then deemed to be regular with respect to such activity and while such activity
exists.34
Not considered regular employees are "project employees," the completion or termination of
which is more or less determinable at the time of employment, such as those employed in
connection with a particular construction project, and "seasonal employees" whose employment
by its nature is only desirable for a limited period of time. Even then, any employee who has
rendered at least one year of service, whether continuous or intermittent, is deemed regular with
respect to the activity performed and while such activity actually exists.
It is of no moment that petitioner hired respondents as "talents." The fact that respondents
received pre-agreed "talent fees" instead of salaries, that they did not observe the required office
hours, and that they were permitted to join other productions during their free time are not
conclusive of the nature of their employment. Respondents cannot be considered "talents"
because they are not actors or actresses or radio specialists or mere clerks or utility employees.
They are regular employees who perform several different duties under the control and direction
of ABS-CBN executives and supervisors.
Thus, there are two kinds of regular employees under the law: (1) those engaged to perform
activities which are necessary or desirable in the usual business or trade of the employer; and (2)
those casual employees who have rendered at least one year of service, whether continuous or
broken, with respect to the activities in which they are employed. 35
The law overrides such conditions which are prejudicial to the interest of the worker whose weak
bargaining situation necessitates the succor of the State. What determines whether a certain
employment is regular or otherwise is not the will or word of the employer, to which the worker
oftentimes acquiesces, much less the procedure of hiring the employee or the manner of paying
the salary or the actual time spent at work. It is the character of the activities performed in relation
to the particular trade or business taking into account all the circumstances, and in some cases
the length of time of its performance and its continued existence. 36 It is obvious that one year after
they were employed by petitioner, respondents became regular employees by operation of law.37
Additionally, respondents cannot be considered as project or program employees because no
evidence was presented to show that the duration and scope of the project were determined or
specified at the time of their engagement. Under existing jurisprudence, project could refer to two
distinguishable types of activities. First, a project may refer to a particular job or undertaking that
is within the regular or usual business of the employer, but which is distinct and separate, and
identifiable as such, from the other undertakings of the company. Such job or undertaking begins
and ends at determined or determinable times. Second, the term project may also refer to a
particular job or undertaking that is not within the regular business of the employer. Such a job or
undertaking must also be identifiably separate and distinct from the ordinary or regular business
operations of the employer. The job or undertaking also begins and ends at determined or
determinable times.38
The principal test is whether or not the project employees were assigned to carry out a specific
project or undertaking, the duration and scope of which were specified at the time the employees
were engaged for that project.39
In this case, it is undisputed that respondents had continuously performed the same activities for
an average of five years. Their assigned tasks are necessary or desirable in the usual business
or trade of the petitioner. The persisting need for their services is sufficient evidence of the
necessity and indispensability of such services to petitioners business or trade. 40 While length of
time may not be a sole controlling test for project employment, it can be a strong factor to
determine whether the employee was hired for a specific undertaking or in fact tasked to perform
functions which are vital, necessary and indispensable to the usual trade or business of the
employer.41We note further that petitioner did not report the termination of respondents
employment in the particular "project" to the Department of Labor and Employment Regional
Office having jurisdiction over the workplace within 30 days following the date of their separation
from work, using the prescribed form on employees termination/ dismissals/suspensions. 42

As gleaned from the records of this case, petitioner itself is not certain how to categorize
respondents. In its earlier pleadings, petitioner classified respondents as program employees,
and in later pleadings, independent contractors. Program employees, or project employees, are
different from independent contractors because in the case of the latter, no employer-employee
relationship exists.
Petitioners reliance on the ruling of this Court in Sonza v. ABS-CBN Broadcasting
Corporation43 is misplaced. In that case, the Court explained why Jose Sonza, a well-known
television and radio personality, was an independent contractor and not a regular employee:
A. Selection and Engagement of Employee
ABS-CBN engaged SONZAS services to co-host its television and radio programs because of
SONZAS peculiar skills, talent and celebrity status. SONZA contends that the "discretion used by
respondent in specifically selecting and hiring complainant over other broadcasters of possibly
similar experience and qualification as complainant belies respondents claim of independent
contractorship."
Independent contractors often present themselves to possess unique skills, expertise or talent to
distinguish them from ordinary employees. The specific selection and hiring of SONZA, because
of his unique skills, talent and celebrity status not possessed by ordinary employees, is a
circumstance indicative, but not conclusive, of an independent contractual relationship. If SONZA
did not possess such unique skills, talent and celebrity status, ABS-CBN would not have entered
into the Agreement with SONZA but would have hired him through its personnel department just
like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine his
status. We must consider all the circumstances of the relationship, with the control test being the
most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC.
SONZA asserts that this mode of fee payment shows that he was an employee of ABS-CBN.
SONZA also points out that ABS-CBN granted him benefits and privileges "which he would not
have enjoyed if he were truly the subject of a valid job contract."
All the talent fees and benefits paid to SONZA were the result of negotiations that led to the
Agreement. If SONZA were ABS-CBNs employee, there would be no need for the parties to
stipulate on benefits such as "SSS, Medicare, x x x and 13th month pay which the law
automatically incorporates into every employer-employee contract. Whatever benefits SONZA
enjoyed arose from contract and not because of an employer-employee relationship.
SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so huge
and out of the ordinary that they indicate more an independent contractual relationship rather
than an employer-employee relationship. ABS-CBN agreed to pay SONZA such huge talent fees
precisely because of SONZAS unique skills, talent and celebrity status not possessed by
ordinary employees. Obviously, SONZA acting alone possessed enough bargaining power to
demand and receive such huge talent fees for his services. The power to bargain talent fees way
above the salary scales of ordinary employees is a circumstance indicative, but not conclusive, of
an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of
SONZA as an independent contractor. The parties expressly agreed on such mode of payment.
Under the Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would have to turn
over any talent fee accruing under the Agreement.44
In the case at bar, however, the employer-employee relationship between petitioner and
respondents has been proven.
First. In the selection and engagement of respondents, no peculiar or unique skill, talent or
celebrity status was required from them because they were merely hired through petitioners
personnel department just like any ordinary employee.

Second. The so-called "talent fees" of respondents correspond to wages given as a result of an
employer-employee relationship. Respondents did not have the power to bargain for huge talent
fees, a circumstance negating independent contractual relationship.
Third. Petitioner could always discharge respondents should it find their work unsatisfactory, and
respondents are highly dependent on the petitioner for continued work.
Fourth. The degree of control and supervision exercised by petitioner over respondents through
its supervisors negates the allegation that respondents are independent contractors.
The presumption is that when the work done is an integral part of the regular business of the
employer and when the worker, relative to the employer, does not furnish an independent
business or professional service, such work is a regular employment of such employee and not
an independent contractor.45 The Court will peruse beyond any such agreement to examine the
facts that typify the parties actual relationship. 46
It follows then that respondents are entitled to the benefits provided for in the existing CBA
between petitioner and its rank-and-file employees. As regular employees, respondents are
entitled to the benefits granted to all other regular employees of petitioner under the CBA. 47 We
quote with approval the ruling of the appellate court, that the reason why production assistants
were excluded from the CBA is precisely because they were erroneously classified and treated as
project employees by petitioner:
x x x The award in favor of private respondents of the benefits accorded to rank-and-file
employees of ABS-CBN under the 1996-1999 CBA is a necessary consequence of public
respondents ruling that private respondents as production assistants of petitioner are regular
employees. The monetary award is not considered as claims involving the interpretation or
implementation of the collective bargaining agreement. The reason why production assistants
were excluded from the said agreement is precisely because they were classified and treated as
project employees by petitioner.
As earlier stated, it is not the will or word of the employer which determines the nature of
employment of an employee but the nature of the activities performed by such employee in
relation to the particular business or trade of the employer. Considering that We have clearly
found that private respondents are regular employees of petitioner, their exclusion from the said
CBA on the misplaced belief of the parties to the said agreement that they are project employees,
is therefore not proper. Finding said private respondents as regular employees and not as mere
project employees, they must be accorded the benefits due under the said Collective Bargaining
Agreement.
A collective bargaining agreement is a contract entered into by the union representing the
employees and the employer. However, even the non-member employees are entitled to the
benefits of the contract. To accord its benefits only to members of the union without any valid
reason would constitute undue discrimination against non-members. A collective bargaining
agreement is binding on all employees of the company. Therefore, whatever benefits are given to
the other employees of ABS-CBN must likewise be accorded to private respondents who were
regular employees of petitioner.48
Besides, only talent-artists were excluded from the CBA and not production assistants who are
regular employees of the respondents. Moreover, under Article 1702 of the New Civil Code: "In
case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety
and decent living of the laborer."
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The assailed
Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 76582 are AFFIRMED. Costs
against petitioner.
SO ORDERED.

THELMA DUMPIT-MURILLO,
Petitioner,

SECOND DIVISION
G.R. No. 164652
Present:
QUISUMBING, J.,* Chairperson,

- versus -

CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.

COURT
OF
APPEALS,
ASSOCIATED Promulgated:
BROADCASTING COMPANY, JOSE JAVIER
AND EDWARD TAN,
Respondents.
June 8, 2007
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
QUISUMBING, J.:
This petition seeks to reverse and set aside both the Decision [1] dated January 30,
2004 of the Court of Appeals in CA-G.R. SP No. 63125 and its Resolution [2] dated June 23,
2004denying the motion for reconsideration. The Court of Appeals had overturned the
Resolution[3]dated August 30, 2000 of the National Labor Relations Commission (NLRC) ruling
that petitioner was illegally dismissed.
The facts of the case are as follows:
On October 2, 1995, under Talent Contract No. NT95-1805, [4] private respondent
Associated Broadcasting Company (ABC) hired petitioner Thelma Dumpit-Murillo as a
newscaster and co-anchor for Balitang-Balita, an early evening news program. The contract was
for a period of three months. It was renewed under Talent Contracts Nos. NT95-1915, NT963002, NT98-4984 and NT99-5649. [5] In addition, petitioners services were engaged for the
program Live on Five. On September 30, 1999, after four years of repeated renewals, petitioners
talent contract expired. Two weeks after the expiration of the last contract, petitioner sent a letter
to Mr. Jose Javier, Vice President for News and Public Affairs of ABC, informing the latter that she
was still interested in renewing her contract subject to a salary increase. Thereafter, petitioner
stopped reporting for work. On November 5, 1999, she wrote Mr. Javier another letter,[6] which we
quote verbatim:
xxxx
Dear Mr. Javier:
On October 20, 1999, I wrote you a letter in answer to your query by way of a
marginal note what terms and conditions in response to my first letter
dated October 13, 1999. To date, or for more than fifteen (15) days since then, I
have not received any formal written reply. xxx
In view hereof, should I not receive any formal response from you until Monday,
November 8, 1999, I will deem it as a constructive dismissal of my services.
xxxx
A month later, petitioner sent a demand letter [7] to ABC, demanding: (a) reinstatement to
her former position; (b) payment of unpaid wages for services rendered from September 1 to
October 20, 1999 and full backwages; (c) payment of 13 th month pay, vacation/sick/service
incentive leaves and other monetary benefits due to a regular employee starting March 31,
1996.ABC replied that a check covering petitioners talent fees for September 16 to October 20,
1999had been processed and prepared, but that the other claims of petitioner had no basis in fact
or in law.
On December 20, 1999, petitioner filed a complaint [8] against ABC, Mr. Javier and Mr.
Edward Tan, for illegal constructive dismissal, nonpayment of salaries, overtime pay, premium pay,
separation pay, holiday pay, service incentive leave pay, vacation/sick leaves and 13 th month pay in
NLRC-NCR Case No. 30-12-00985-99. She likewise demanded payment for moral, exemplary and
actual damages, as well as for attorneys fees.
The parties agreed to submit the case for resolution after settlement failed during the
mandatory conference/conciliation. On March 29, 2000, the Labor Arbiter dismissed the
complaint.[9]

On appeal, the NLRC reversed the Labor Arbiter in a Resolution dated August 30, 2000. The
NLRC held that an employer-employee relationship existed between petitioner and ABC; that the
subject talent contract was void; that the petitioner was a regular employee illegally dismissed; and
that she was entitled to reinstatement and backwages or separation pay, aside from 13 th month pay
and service incentive leave pay, moral and exemplary damages and attorneys fees. It held as
follows:
WHEREFORE, the Decision of the Arbiter dated 29 March 2000 is
herebyREVERSED/SET ASIDE and a NEW ONE promulgated:
1)
declaring respondents to have illegally dismissed complainant from
her regular work therein and thus, ordering them to reinstate her in her former
position without loss of seniority right[s] and other privileges and to pay her full
backwages, inclusive of allowances and other benefits, including 13 th month pay
based on her said latest rate of P28,000.00/mo. from the date of her illegal
dismissal on 21 October 1999 up to finality hereof, or at complainants option, to
pay her separation pay of one (1) month pay per year of service based on said
latest monthly rate, reckoned from date of hire on 30 September 1995 until
finality hereof;
2)
to pay complainants accrued SILP [Service Incentive Leave Pay] of
5 days pay per year and 13 th month pay for the years 1999, 1998 and 1997
of P19,236.00 and P84,000.00, respectively and her accrued salary from 16
September 1999 to 20 October 1999 of P32,760.00 plus legal interest at 12%
from date of judicial demand on 20 December 1999 until finality hereof;
3)
to pay complainant moral damages of P500,000.00, exemplary
damages ofP350,000.00 and 10% of the total of the adjudged monetary awards
as attorneys fees.
Other monetary claims of complainant are dismissed for lack of merit.
SO ORDERED.[10]
After its motion for reconsideration was denied, ABC elevated the case to the Court of
Appeals in a petition for certiorari under Rule 65. The petition was first dismissed for failure to
attach particular documents,[11] but was reinstated on grounds of the higher interest of justice. [12]
Thereafter, the appellate court ruled that the NLRC committed grave abuse of discretion,
and reversed the decision of the NLRC. [13] The appellate court reasoned that petitioner should not
be allowed to renege from the stipulations she had voluntarily and knowingly executed by
invoking the security of tenure under the Labor Code. According to the appellate court, petitioner
was a fixed-term employee and not a regular employee within the ambit of Article 280 [14] of the
Labor Code because her job, as anticipated and agreed upon, was only for a specified time. [15]
Aggrieved, petitioner now comes to this Court on a petition for review, raising issues as
follows:
I.
THIS HONORABLE COURT CAN REVIEW THE FINDINGS OF THE
HONORABLE COURT OF APPEALS, THE DECISION OF WHICH IS NOT IN
ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF THE
SUPREME COURT[;]
II.
THE PRO-FORMA TALENT CONTRACTS, AS CORRECTLY FOUND BY THE
NLRC FIRST DIVISION, ARE ANTI-REGULARIZATION DEVICES WHICH
MUST BE STRUCK DOWN FOR REASONS OF PUBLIC POLICY[;]

III.
BY REASON OF THE CONTINUOUS AND SUCCESSIVE RENEWALS OF THE
THREE-MONTH TALENT CONTRACTS, AN EMPLOYER-EMPLOYEE
RELATIONSHIP WAS CREATED AS PROVIDED FOR UNDER ARTICLE 280
OF THE LABOR CODE[;]
IV.
BY THE CONSTRUCTIVE DISMISSAL OF HEREIN PETITIONER, AS A
REGULAR EMPLOYEE, THERE WAS A DENIAL OF PETITIONERS RIGHT TO
DUE PROCESS THUS ENTITLING HER TO THE MONEY CLAIMS AS STATED
IN THE COMPLAINT[.][16]
The issues for our disposition are: (1) whether or not this Court can review the findings of
the Court of Appeals; and (2) whether or not under Rule 45 of the Rules of Court the Court of
Appeals committed a reversible error in its Decision.
On the first issue, private respondents contend that the issues raised in the instant
petition are mainly factual and that there is no showing that the said issues have been resolved
arbitrarily and without basis. They add that the findings of the Court of Appeals are supported by
overwhelming wealth of evidence on record as well as prevailing jurisprudence on the matter. [17]
Petitioner however contends that this Court can review the findings of the Court of
Appeals, since the appellate court erred in deciding a question of substance in a way which is not
in accord with law or with applicable decisions of this Court. [18]
We agree with petitioner. Decisions, final orders or resolutions of the Court of Appeals in
any case regardless of the nature of the action or proceeding involved may be appealed to this
Court through a petition for review. This remedy is a continuation of the appellate process over
the original case,[19] and considering there is no congruence in the findings of the NLRC and the
Court of Appeals regarding the status of employment of petitioner, an exception to the general
rule that this Court is bound by the findings of facts of the appellate court, [20] we can review such
findings.
On the second issue, private respondents contend that the Court of Appeals did not err
when it upheld the validity of the talent contracts voluntarily entered into by petitioner. It further
stated that prevailing jurisprudence has recognized and sustained the absence of employeremployee relationship between a talent and the media entity which engaged the talents services
on a per talent contract basis, citing the case of Sonza v. ABS-CBN Broadcasting Corporation.[21]
Petitioner avers however that an employer-employee relationship was created when the
private respondents started to merely renew the contracts repeatedly fifteen times or for four
consecutive years.[22]
Again, we agree with petitioner. The Court of Appeals committed reversible error when it
held that petitioner was a fixed-term employee. Petitioner was a regular employee under
contemplation of law. The practice of having fixed-term contracts in the industry does not
automatically make all talent contracts valid and compliant with labor law. The assertion that a talent
contract exists does not necessarily prevent a regular employment status.[23]
Further, the Sonza case is not applicable. In Sonza, the television station did not instruct
Sonza how to perform his job. How Sonza delivered his lines, appeared on television, and
sounded on radio were outside the television stations control. Sonza had a free hand on what to
say or discuss in his shows provided he did not attack the television station or its interests.
Clearly, the television station did not exercise control over the means and methods of the
performance of Sonzas work.[24] In the case at bar, ABC had control over the performance of
petitioners work. Noteworthy too, is the comparatively low P28,000 monthly pay of
petitioner[25] vis the P300,000 a month salary of Sonza,[26] that all the more bolsters the conclusion
that petitioner was not in the same situation as Sonza.
The contract of employment of petitioner with ABC had the following stipulations:
xxxx

1. SCOPE OF SERVICES TALENT agrees to devote his/her talent, time,

attention and best efforts in the performance of his/her duties and responsibilities
as Anchor/Program Host/Newscaster of the Program, in accordance with the
direction of ABC and/or its authorized representatives.
1.1. DUTIES AND RESPONSIBILITIES TALENT shall:
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.

Render his/her services as a newscaster on the Program;

Be involved in news-gathering operations by conducting interviews
on- and off-the-air;
Participate in live remote coverages when called upon;
Be available for any other news assignment, such as writing,
research or camera work;
Attend production meetings;
On assigned days, be at the studios at least one (1) hour before
the live telecasts;
Be present promptly at the studios and/or other place of
assignment at the time designated by ABC;
Keep abreast of the news;
Give his/her full cooperation to ABC and its duly authorized
representatives in the production and promotion of the Program; and
Perform such other functions as may be assigned to him/her from
time to time.

xxxx
1.3 COMPLIANCE WITH STANDARDS, INSTRUCTIONS AND OTHER
RULES AND REGULATIONS TALENT agrees that he/she will promptly
and faithfully comply with the requests and instructions, as well as the
program standards, policies, rules and regulations of ABC, the KBP and
the government or any of its agencies and instrumentalities. [27]
xxxx
In Manila Water Company, Inc. v. Pena,[28] we said that 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 employers power to control. The most important
element is the employers control of the employees conduct, not only as to the result of the work to be
done, but also as to the means and methods to accomplish it.[29]
The duties of petitioner as enumerated in her employment contract indicate that ABC had
control over the work of petitioner. Aside from control, ABC also dictated the work assignments
and payment of petitioners wages. ABC also had power to dismiss her. All these being present,
clearly, there existed an employment relationship between petitioner and ABC.
Concerning regular employment, the law provides for two kinds of employees, namely:(1)
those who are engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer; and (2) those who have rendered at least one year of service,
whether continuous or broken, with respect to the activity in which they are employed. [30] In other
words, regular status arises from either the nature of work of the employee or the duration of his
employment.[31] In Benares v. Pancho,[32] we very succinctly said:
[T]he primary standard for determining regular employment is the reasonable
connection between the particular activity performed by the employee vis--vis the
usual trade or business of the employer. This connection can be determined by
considering the nature of the work performed and its relation to the scheme of
the particular business or trade in its entirety. If the employee has been
performing the job for at least a year, even if the performance is not continuous
and merely intermittent, the law deems repeated and continuing need for its
performance as sufficient evidence of the necessity if not indispensability of that
activity to the business. Hence, the employment is considered regular, but only
with respect to such activity and while such activity exists. [33]
In our view, the requisites for regularity of employment have been met in the instant
case.Gleaned from the description of the scope of services aforementioned, petitioners work
wasnecessary or desirable in the usual business or trade of the employer which includes, as a
pre-condition for its enfranchisement, its participation in the governments news and public

information dissemination. In addition, her work was continuous for a period of four years. This
repeated engagement under contract of hire is indicative of the necessity and desirability of the
petitioners work in private respondent ABCs business.[34]
The contention of the appellate court that the contract was characterized by a valid fixedperiod employment is untenable. For such contract to be valid, it should be shown that the fixed period
was knowingly and voluntarily agreed upon by the parties. There should have been no force, duress
or improper pressure brought to bear upon the employee; neither should there be any other
circumstance that vitiates the employees consent.[35] It should satisfactorily appear that the employer
and the employee dealt with each other on more or less equal terms with no moral dominance being
exercised by the employer over the employee.[36] Moreover, fixed-term employment will not be
considered valid where, from the circumstances, it is apparent that periods have been imposed to
preclude acquisition of tenurial security by the employee.[37]
In the case at bar, it does not appear that the employer and employee dealt with each other on
equal terms. Understandably, the petitioner could not object to the terms of her employment contract
because she did not want to lose the job that she loved and the workplace that she had grown
accustomed to,[38] which is exactly what happened when she finally manifested her intention to
negotiate. Being one of the numerous newscasters/broadcasters of ABC and desiring to keep her job as
a broadcasting practitioner, petitioner was left with no choice but to affix her signature of conformity on
each renewal of her contract as already prepared by private respondents; otherwise, private
respondents would have simply refused to renew her contract. Patently, the petitioner occupieda position
of weakness vis--vis the employer. Moreover, private respondents practice of repeatedly extending
petitioners 3-month contract for four years is a circumvention of the acquisition of regular status. Hence,
there was no valid fixed-term employment between petitioner and private respondents.
While this Court has recognized the validity of fixed-term employment contracts in a
number of cases, it has consistently emphasized that when the circumstances of a case show
that the periods were imposed to block the acquisition of security of tenure, they should be struck
down for being contrary to law, morals, good customs, public order or public policy.[39]
As a regular employee, petitioner is entitled to security of tenure and can be dismissed only for
just cause and after due compliance with procedural due process. Since private respondents did not
observe due process in constructively dismissing the petitioner, we hold that there was an illegal
dismissal.
WHEREFORE, the challenged Decision dated January 30, 2004 and Resolution
datedJune 23, 2004 of the Court of Appeals in CA-G.R. SP No. 63125, which held that the
petitioner was a fixed-term employee, are REVERSED and SET ASIDE. The NLRC decision
isAFFIRMED.
Costs against private respondents.
SO ORDERED.