BASIC PRINCIPLES (cont.

)
13) G.R. No. 87098 November 4, 1996
ENCYCLOPAEDIA
BRITANNICA
(PHILIPPINES),
INC.,
petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, HON. LABOR ARBITER
TEODORICO L. ROGELIO and BENJAMIN LIMJOCO, respondents.

TORRES, JR., J.:

Encyclopaedia Britannica (Philippines), Inc. filed this petition for certiorari to annul
and set aside the resolution of the National Labor Relations Commission, Third
Division, in NLRC Case No. RB IV-5158-76, dated December 28, 1988, the dispositive
portion of which reads:
WHEREFORE, in view of all the foregoing, the decision dated December
7, 1982 of then Labor Arbiter Teodorico L. Dogelio is hereby AFFIRMED,
and the instant appeal is hereby DISMISSED for lack of merit.
SO ORDERED. 1
Private respondent Benjamin Limjoco was a Sales Division Manager of petitioner
Encyclopaedia Britannica and was in charge of selling petitioner's products through
some sales representatives. As compensation, private respondent received
commissions from the products sold by his agents. He was also allowed to use
petitioner's name, goodwill and logo. It was, however, agreed upon that office
expenses would be deducted from private respondent's commissions. Petitioner
would also be informed about appointments, promotions, and transfers of
employees in private respondent's district.

On June 14, 1974, private respondent Limjoco resigned from office to pursue his
private business. Then on October 30, 1975, he filed a complaint against petitioner
Encyclopaedia Britannica with the Department of Labor and Employment, claiming
for non-payment of separation pay and other benefits, and also illegal deduction
from his sales commissions.

Petitioner Encyclopaedia Britannica alleged that complainant Benjamin Limjoco

(Limjoco, for brevity) was not its employee but an independent dealer authorized to
promote and sell its products and in return, received commissions therefrom.
Limjoco did not have any salary and his income from the petitioner company was

dependent on the volume of sales accomplished. He also had his own separate
office, financed the business expenses, and maintained his own workforce. The
salaries of his secretary, utility man, and sales representatives were chargeable to
his commissions. Thus, petitioner argued that it had no control and supervision over
the complainant as to the manner and means he conducted his business operations.
The latter did not even report to the office of the petitioner and did not observe
fixed office hours. Consequently, there was no employer-employee relationship.

Limjoco maintained otherwise. He alleged that he was hired by the petitioner in July
1970, was assigned in the sales department, and was earning an average of
P4,000.00 monthly as his sales commission. He was under the supervision of the
petitioner's officials who issued to him and his other personnel, memoranda,
guidelines on company policies, instructions and other orders. He was, however,
dismissed by the petitioner when the Laurel-Langley Agreement expired. As a result
thereof, Limjoco asserts that in accordance with the established company practice
and the provisions of the collective bargaining agreement, he was entitled to
termination pay equivalent to one month salary, the unpaid benefits (Christmas
bonus, midyear bonus, clothing allowance, vacation leave, and sick leave), and the
amounts illegally deducted from his commissions which were then used for the
payments of office supplies, office space, and overhead expenses.
On December 7, 1982, Labor Arbiter Teodorico Dogelio, in a decision ruled that
Limjoco was an employee of the petitioner company. Petitioner had control over
Limjoco since the latter was required to make periodic reports of his sales activities
to the company. All transactions were subject to the final approval of the petitioner,
an evidence that petitioner company had active control on the sales activities.
There was therefore, an employer-employee relationship and necessarily, Limjoco
was entitled to his claims. The decision also ordered petitioner company to pay the
following:
1. To pay complainant his separation pay in the total amount of
P16,000.00;
2. To pay complainant his unpaid Christmas bonus for three years or
the amount of 12,000.00;
3. To pay complainant his unpaid mid-year bonus equivalent to one-half
month pay or the total amount of P6,000.00;
4. To pay complainant his accrued vacation leave equivalent to 15 days
per year of service, or the total amount of P6,000.00;
5. To pay complainant his unpaid clothing allowance in the total
amount of P600.00; and

6. To pay complainant his accrued sick leave equivalent to 15 days per

year of service or the total amount of P6,000.00. 2

On appeal, the Third Division of the National Labor Relations Commission affirmed
the assailed decision. The Commission opined that there was no evidence
supporting the allegation that Limjoco was an independent contractor or dealer. The
petitioner still exercised control over Limjoco through its memoranda and guidelines
and even prohibitions on the sale of products other than those authorized by it. In
short, the petitioner company dictated how and where to sell its products. Aside
from that fact, Limjoco passed the costs to the petitioner chargeable against his
future commissions. Such practice proved that he was not an independent dealer or
contractor for it is required by law that an independent contractor should have
substantial capital or investment.

Dissatisfied with the outcome of the case, petitioner Encyclopaedia Britannica now
comes to us in this petition for certiorari and injunction with prayer for preliminary
injunction. On April 3, 1989, this Court issued a temporary restraining order
enjoining the enforcement of the decision dated December 7, 1982.
The following are the arguments raised by the petitioner:
I
The respondent NLRC gravely abused its discretion in holding that
"appellant's contention that appellee was an independent contractor is
not supported by evidence on record".
II
Respondent NLRC committed grave abuse of discretion in not passing
upon the validity of the pronouncement of the respondent Labor
Arbiter granting private respondent's claim for payment of Christmas
bonus, Mid-year bonus, clothing allowance and the money equivalent
of accrued and unused vacation and sick leave.

The NLRC ruled that there existed an employer-employee relationship and petitioner
failed to disprove this finding. We do not agree.
In determining the existence of an employer-employee relationship the following
elements must be present: 1) selection and engagement of the employee; 2)

payment of wages; 3) power of dismissal; and 4) the power to control the

employee's conduct. Of the above, control of employee's conduct is commonly
regarded as the most crucial and determinative indicator of the presence or
absence of an employer-employee relationship. 3 Under the control test, an
employer-employee relationship exists where the person for whom the services are
performed reserves the right to control not only the end to be achieved, but also the
manner and means to used in reaching that end. 4
The fact that petitioner issued memoranda to private respondents and to other
division sales managers did not prove that petitioner had actual control over them.
The different memoranda were merely guidelines on company policies which the
sales managers follow and impose on their respective agents. It should be noted
that in petitioner's business of selling encyclopedias and books, the marketing of
these products was done through dealership agreements. The sales operations were
primarily conducted by independent authorized agents who did not receive regular
compensations but only commissions based on the sales of the products. These
independent agents hired their own sales representatives, financed their own office
expenses, and maintained their own staff. Thus, there was a need for the petitioner
to issue memoranda to private respondent so that the latter would be apprised of
the company policies and procedures. Nevertheless, private respondent Limjoco and
the other agents were free to conduct and promote their sales operations. The
periodic reports to the petitioner by the agents were but necessary to update the
company of the latter's performance and business income.

Private respondent was not an employee of the petitioner company. While it was
true that the petitioner had fixed the prices of the products for reason of uniformity
and private respondent could not alter them, the latter, nevertheless, had free rein
in the means and methods for conducting the marketing operations. He selected his
own personnel and the only reason why he had to notify the petitioner about such
appointments was for purpose of deducting the employees' salaries from his
commissions. This he admitted in his testimonies, thus:
Q. Yes, in other words you were on what is known as P&L basis or profit and
loss basis?
A. That is right.
Q. If for an instance, just example your sales representative in any period
did not produce any sales, you would not get any money from Britannica,
would you?
A. No, sir.

Q. In fact, Britannica by doing the accounting for you as division manager

was merely making it easy for you to concentrate all your effort in selling
and you don't worry about accounting, isn't that so?
A. Yes, sir.
Q. In fact whenever you hire a secretary or trainer you merely hire that
person and notify Britannica so that Encyclopaedia Britannica will give the
salaries and deduct it from your earnings, isn't that so?
A. In certain cases I just hired people previously employed by Encyclopaedia
Britannica.
xxx xxx xxx
Q. In this Exhibit "2" you were informing Encyclopaedia Britannica that you
have hired a certain person and you were telling Britannica how her salary
was going to be taken cared of, is it not?
A. Yes, sir.
Q. You said here, "please be informed that we have appointed Miss Luz Villan
as division trainer effective May 1, 1971 at P550.00 per month her salary
will be chargeable to the Katipunan and Bayanihan Districts", signed by
yourself. What is the Katipunan and Bayanihan District?
A. Those were districts under my division.
Q. In effect you were telling Britannica that you have hired this person and
"you should charge her salary to me," is that right?
A. Yes, sir. 5
Private respondent was merely an agent or an independent dealer of the petitioner.
He was free to conduct his work and he was free to engage in other means of
livelihood. At the time he was connected with the petitioner company, private
respondent was also a director and later the president of the Farmers' Rural Bank.
Had he been an employee of the company, he could not be employed elsewhere
and he would be required to devote full time for petitioner. If private respondent
was indeed an employee, it was rather unusual for him to wait for more than a year
from his separation from work before he decided to file his claims. Significantly,
when Limjoco tendered his resignation to petitioner on June 14, 1974, he stated,
thus:
Re: Resignation

I am resigning as manager of the EB Capitol Division effective 16 June 1974.

This decision was brought about by conflict with other interests which lately
have increasingly required my personal attention. I feel that in fairness to the
company and to the people under my supervision I should relinquish the
position to someone who can devote full-time to the Division.
I wish to thank you for all the encouragement and assistance you have
extended to me and to my group during my long association with Britannica.
Evidently, Limjoco was aware of "conflict with other interests which . . . have
increasingly required my personal attention" (p. 118, Records). At the very least, it
would indicate that petitioner has no effective control over the personal activities of
Limjoco, who as admitted by the latter had other "conflict of interest" requiring his
personal attention.
In ascertaining whether the relationship is that of employer-employee or one of
independent contractor, each case must be determined by its own facts and all
features of the relationship are to be considered. 6 The records of the case at bar
showed that there was no such employer-employee relationship.

As stated earlier, "the element of control is absent; where a person who works for
another does so more or less at his own pleasure and is not subject to definite hours
or conditions of work, and in turn is compensated according to the result of his
efforts and not the amount thereof, we should not find that the relationship of
employer and employee exists. 7 In fine, there is nothing in the records to show or
would "indicate that complainant was under the control of the petitioner" in respect
of the means and methods 8 in the performance of complainant's work.
Consequently, private respondent is not entitled to the benefits prayed for.
In view of the foregoing premises, the petition is hereby GRANTED, and the decision
of the NLRC is hereby REVERSED AND SET ASIDE.
SO ORDERED.
Regalado, Romero, Puno and Mendoza, JJ., concur.

14) G.R. No. 119930 March 12, 1998

INSULAR
LIFE
ASSURANCE
CO.,
LTD.,
petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (Fourth Division, Cebu City),

LABOR ARBITER NICASIO P. ANINON and PANTALEON DE LOS REYES,

respondents.
BELLOSILLO, J.:
On 17 June 1994 respondent Labor Arbiter dismissed for lack of jurisdiction NLRC
RAB-VII Case No. 03-0309-94 filed by private respondent Pantaleon de los Reyes
against petitioner Insular Life Assurance Co., Ltd. (INSULAR LIFE), for illegal
dismissal and nonpayment of salaries and back wages after finding no employeremployee relationship between De los Reyes and petitioner INSULAR LIFE. 1 On
appeal by private respondent, the order of dismissal was reversed by the National
Labor Relations Commission (NLRC) which ruled that respondent De los Reyes was
an employee of petitioner.2 Petitioner's motion for reconsideration having been
denied, the NLRC remanded the case to the Labor Arbiter for hearing on the merits.
Seeking relief through this special civil action for certiorari with prayer for a
restraining order and/or preliminary injunction, petitioner now comes to us praying
for annulment of the decision of respondent NLRC dated 3 March 1995 and its Order
dated 6 April 1995 denying the motion for reconsideration of the decision. It faults
NLRC for acting without jurisdiction and/or with grave abuse of discretion when,
contrary to established facts and pertinent law and jurisprudence, it reversed the
decision of the Labor Arbiter and held instead that the complaint was properly filed
as an employer-employee relationship existed between petitioner and private
respondent.
Petitioner reprises the stand it assumed below that it never had any employeremployee relationship with private respondent, this being an express agreement
between them in the agency contracts, particularly reinforced by the stipulation
therein that De los Reyes was allowed discretion to devise ways and means to fulfill
his obligations as agent and would be paid commission fees based on his actual
output. It further insists that the nature of this work status as described in the
contracts had already been squarely resolved by the Court in the earlier case of
Insular Life Assurance Co., Ltd. v. NLRC and Basiao 3 where the complainant
therein, Melecio Basiao, was similarly situated as respondent De los Reyes in that he
was appointed first as an agent and then promoted as agency manager, and the
contracts under which he was appointed contained terms and conditions identical to
those of Delos Reyes. Petitioner concludes that since Basiao was declared by the
Court to be an independent contractor and not an employee of petitioner, there
should be no reason why the status of De los Reyes herein vis-a-vis petitioner
should not be similarly determined.
We reject the submissions of petitioner and hold that respondent NLRC acted
appropriately within the bounds of the law. The records of the case are replete with
telltale indicators of an existing employer-employee relationship between the two
parties despite written contractual disavowals.
These facts are undisputed: on 21 August 1992 petitioner entered into an agency
contract with respondent Pantaleon de los Reyes4 authorizing the latter to solicit
within the Philippines applications for life insurance and annuities for which he
would be paid compensation in the form of commissions. The contract was prepared
by petitioner in its entirety and De los Reyes merely signed his conformity thereto. It
contained the stipulation that no employer-employee relationship shall be created

between the parties and that the agent shall be free to exercise his own judgment
as to time, place and means of soliciting insurance. De los Reyes however was
prohibited by petitioner from working for any other life insurance company, and
violation of this stipulation was sufficient ground for termination of the contract.
Aside from soliciting insurance for the petitioner, private respondent was required to
submit to the former all completed applications for insurance within ninety (90)
consecutive days, deliver policies, receive and collect initial premiums and balances
of first year premiums, renewal premiums, deposits on applications and payments
on policy loans. Private respondent was also bound to turn over to the company
immediately any and all sums of money collected by him. In a written
communication by petitioner to respondent De los Reyes, the latter was urged to
register with the Social Security System as a self-employed individual as provided
under PD No. 1636. 5
On 1 March 1993 petitioner and private respondent entered into another contract 6
where the latter was appointed as Acting Unit Manager under its office the Cebu
DSO V (157). As such, the duties and responsibilities of De los Reyes included the
recruitment, training, organization and development within his designated territory
of a sufficient number of qualified, competent and trustworthy underwriters, and to
supervise and coordinate the sales efforts of the underwriters in the active
solicitation of new business and in the furtherance of the agency's assigned goals. It
was similarly provided in the management contract that the relation of the acting
unit manager and/or the agents of his unit to the company shall be that of
independent contractor. If the appointment was terminated for any reason other
than for cause, the acting unit manager would be reverted to agent status and
assigned to any unit. As in the previous agency contract, De los Reyes together with
his unit force was granted freedom to exercise judgment as to time, place and
means of soliciting insurance. Aside from being granted override commissions, the
acting unit manager was given production bonus, development allowance and a unit
development financing scheme euphemistically termed "financial assistance"
consisting of payment to him of a free portion of P300.00 per month and a validate
portion of P1,200.00. While the latter amount was deemed as an advance against
expected commissions, the former was not and would be freely given to the unit
manager by the company only upon fulfillment by him of certain manpower and
premium quota requirements. The agents and underwriters recruited and trained by
the acting unit manager would be attached to the unit but petitioner reserved the
right to determine if such assignment would be made or, for any reason, to reassign
them elsewhere.
Aside from soliciting insurance, De los Reyes was also expressly obliged to
participate in the company's conservation program, i.e., preservation and
maintenance of existing insurance policies, and to accept moneys duly receipted on
agent's receipts provided the same were turned over to the company. As long as he
was unit manager in an acting capacity, De los Reyes was prohibited from working
for other life insurance companies or with the government. He could not also accept
a managerial or supervisory position in any firm doing business in the Philippines
without the written consent of petitioner.
Private respondent worked concurrently as agent and Acting Unit Manager until he
was notified by petitioner on 18 November 1993 that his services were terminated
effective 18 December 1993. On 7 March 1994 he filed a complaint before the Labor

Arbiter on the ground that he was illegally dismissed and that he was not paid his
salaries and separation pay.
Petitioner filed a motion to dismiss the complaint of De los Reyes for lack of
jurisdiction, citing the absence of employer-employee relationship. It reasoned out
that based on the criteria for determining the existence of such relationship or the
so-called "four-fold test," i.e., (a) selection and engagement of employee, (b)
payment of wages, (c) power of dismissal, and, (d) power of control, De los Reyes
was not an employee but an independent contractor.
On 17 June 1994 the motion of petitioner was granted by the Labor Arbiter and the
case was dismissed on the ground that the element of control was not sufficiently
established since the rules and guidelines set by petitioner in its agency agreement
with respondent Delos Reyes were formulated only to achieve the desired result
without dictating the means or methods of attaining it.
Respondent NLRC however appreciated the evidence from a different perspective. It
determined that respondent De los Reyes was under the effective control of
petitioner in the critical and most important aspects of his work as Unit Manager.
This conclusion was derived from the provisions in the contract which appointed
private respondent as Acting Unit Manager, to wit: (a) De los Reyes was to serve
exclusively the company, therefore, he was not an independent contractor; (b) he
was required to meet certain manpower and production quota; and, (c) petitioner
controlled the assignment to and removal of soliciting agents from his unit.
The NLRC also took into account other circumstances showing that petitioner
exercised employer's prerogatives over De los Reyes, e.g., (a) limiting the work of
respondent De los Reyes to selling a life insurance policy known as "Salary
Deduction Insurance" only to members of the Philippine National Police, public and
private school teachers and other employees of private companies; (b) assigning
private respondent to a particular place and table where he worked whenever he
was not in the field; (c) paying private respondent during the period of twelve (12)
months of his appointment as Acting Unit Manager the amount of P1,500.00 as Unit
Development Financing of which 20% formed his salary and the rest, i.e., 80%, as
advance of his expected commissions; and, (d) promising that upon completion of
certain requirements, he would be promoted to Unit Manager with the right of
petitioner to revert him to agent status when warranted.
Parenthetically, both petitioner and respondent NLRC treated the agency contract
and the management contract entered into between petitioner and De los Reyes as
contracts of agency. We however hold otherwise. Unquestionably there exist major
distinctions between the two agreements. While the first has the earmarks of an
agency contract, the second is far removed from the concept of agency in that
provided therein are conditionalities that indicate an employer-employee
relationship. The NLRC therefore was correct in finding that private respondent was
an employee of petitioner, but this holds true only insofar as the management
contract is concerned. In view thereof, the Labor Arbiter has jurisdiction over the
case..
It is axiomatic that the existence of an employer-employee relationship cannot be
negated by expressly repudiating it in the management contract and providing

therein that the "employee" is an independent contractor when the terms of the
agreement clearly show otherwise. For, the employment status of a person is
defined and prescribed by law and not by what the parties say it should be. 7 In
determining the status of the management contract, the "four-fold test" on
employment earlier mentioned has to be applied.
Petitioner contends that De los Reyes was never required to go through the preemployment procedures and that the probationary employment status was reserved
only to employees of petitioner. On this score, it insists that the first requirement of
selection and engagement of the employee was not met.
A look at the provisions of the contract shows that private respondent was
appointed as Acting Unit Manager only upon recommendation of the District
Manager. 8 This indicates that private respondent was hired by petitioner because
of the favorable endorsement of its duly authorized officer. But, this approbation
could only have been based on the performance of De los Reyes as agent under the
agency contract so that there can be no other conclusion arrived under this premise
than the fact that the agency or underwriter phase of the relationship of De los
Reyes with petitioner was nothing more than a trial or probationary period for his
eventual appointment as Acting Unit Manager of petitioner. Then, again, the very
designation of the appointment of private respondent as "acting" unit manager
obviously implies a temporary employment status which may be made permanent
only upon compliance with company standards such as those enumerated under
Sec. 6 of the management contract. 9
On the matter of payment of wages, petitioner points out that respondent was
compensated strictly on commission basis, the amount of which was totally
dependent on his total output. But, the manager's contract, speaks differently. Thus

4. Performance Requirements. To maintain your appointment as

Acting Unit Manager you must meet the following manpower and
production requirements:
Quarter
Active
Calendar
Year
Production
Agents
Cumulative
FYP
Production
1st
2
P
125,000
2nd
3
250,000
3rd
4
375,000
4th 5 500,000
5.4. Unit Development Financing (UDF). As an Acting Unit Manager
you shall be given during the first 12 months of your appointment a
financial assistance which is composed of two parts:
5.4.1. Free Portion amounting to P300 per month, subject
to your meeting prescribed minimum performance
requirement on manpower and premium production. The
free portion is not payable by you.
5.4.2. Validate Portion amounting to P1,200 per month,
also subject to meeting the same prescribed minimum
performance requirements on manpower and premium
production. The validated portion is an advance against

expected compensation during the UDF period and

thereafter as may be necessary.
The above provisions unquestionably demonstrate that the performance
requirement imposed on De los Reyes was applicable quarterly while his entitlement
to the free portion (P300) and the validated portion (P1,200) was monthly starting
on the first month of the twelve (12) months of the appointment. Thus, it has to be
admitted that even before the end of the first quarter and prior to the so-called
quarterly performance evaluation, private respondent was already entitled to be
paid both the free and validated portions of the UDF every month because his
production performance could not be determined until after the lapse of the quarter
involved. This indicates quite clearly that the unit manager's quarterly performance
had no bearing at all on his entitlement at least to the free portion of the UDF which
for all intents and purposes comprised the salary regularly paid to him by petitioner.
Thus it cannot be validly claimed that the financial assistance consisting of the free
portion of the UDF was purely dependent on the premium production of the agent.
Be that as it may, it is worth considering that the payment of compensation by way
of commission does not militate against the conclusion that private respondent was
an employee of petitioner. Under Art. 97 of the Labor Code, "wage" shall mean
"however designated, capable of being expressed in terms of money, whether fixed
or ascertained on a time, task, price or commission basis . . . ." 10
As to the matter involving the power of dismissal and control by the employer, the
latter of which is the most important of the test, petitioner asserts that its
termination of De los Reyes was but an exercise of its inherent right as principal
under the contracts and that the rules and guidelines it set forth in the contract
cannot, by any stretch of the imagination, be deemed as an exercise of control over
the private respondent as these were merely directives that fixed the desired result
without dictating the means or method to be employed in attaining it. The following
factual findings of the NLRC 11 however contradict such claims:
A perusal of the appointment of complainant as Acting Unit Manager
reveals that:
1. Complainant was to "exclusively" serve respondent company. Thus it
is
provided:
.
.
.
7..7
Other
causes
of
Termination:
This appointment may likewise be terminated for any of the following
causes: . . . 7..7..2. Your entering the service of the government or
another life insurance company; 7..7..3. Your accepting a managerial or
supervisory position in any firm doing business in the Philippines
without the written consent of the Company; . . .
2. Complainant was required to meet certain manpower and production
quotas.
3. Respondent (herein petitioner) controlled the assignment and
removal of soliciting agents to and from complainant's unit, thus: . . .
7..2. Assignment of Agents: Agents recruited and trained by you shall
be attached to your unit unless for reasons of Company policy, no such
assignment should be made. The Company retains the exclusive right
to assign new soliciting agents to the unit. It is agreed that the
Company may remove or transfer any soliciting agents appointed and
assigned to the said unit. . . .

It would not be amiss to state that respondent's duty to collect the company's
premiums using company receipts under Sec. 7.4 of the management contract is
further evidence of petitioner's control over respondent, thus:
xxx
xxx
xxx
7.4. Acceptance and Remittance of Premiums. . . . . the Company hereby
authorizes you to accept and to receive sums of money in payment of
premiums, loans, deposits on applications, with or without interest, due from
policyholders and applicants for insurance, and the like, specially from
policyholders of business solicited and sold by the agents attached to your
unit provided however, that all such payments shall be duly receipted by you
on the corresponding Company's "Agents' Receipt" to be provided you for this
purpose and to be covered by such rules and accounting regulations the
Company may issue from time to time on the matter. Payments received by
you shall be turned over to the Company's designated District or Service
Office clerk or directly to the Home Office not later than the next working day
from receipt thereof . . . .
Petitioner would have us apply our ruling in Insular Life Assurance Co., Ltd. v. NLRC
and Basiao12 to the instant case under the doctrine of stare decisis, postulating
that both cases involve parties similarly situated and facts which are almost
identical.
But we are not convinced that the cited case is on all fours with the case at bar. In
Basiao, the agent was appointed Agency Manager under an Agency Manager
Contract. To implement his end of the agreement, Melecio Basiao organized an
agency office to which he gave the name M. Basiao and Associates. The Agency
Manager Contract practically contained the same terms and conditions as the
Agency Contract earlier entered into, and the Court observed that, "drawn from the
terms of the contract they had entered into, (which) either expressly or by
necessary implication, Basiao (was) made the master of his own time and selling
methods, left to his own judgment the time, place and means of soliciting insurance,
set no accomplishment quotas and compensated him on the bases of results
obtained. He was not bound to observe any schedule of working hours or report to
any regular station; he could seek and work on his prospects anywhere and at
anytime he chose to and was free to adopt the selling methods he deemed most
effective." Upon these premises, Basiao was considered as agent an independent
contractor of petitioner INSULAR LIFE.
Unlike Basiao, herein respondent De los Reyes was appointed Acting Unit Manager,
not agency manager. There is no evidence that to implement his obligations under
the management contract, De los Reyes had organized an office. Petitioner in fact
has admitted that it provided De los Reyes a place and a table at its office where he
reported for and worked whenever he was not out in the field. Placed under
petitioner's Cebu District Service Office, the unit was given a name by petitioner
De los Reyes and Associates and assigned Code No. 11753 and Recruitment No.
109398. Under the managership contract, De los Reyes was obliged to work
exclusively for petitioner in life insurance solicitation and was imposed premium
production quotas. Of course, the acting unit manager could not underwrite other
lines of insurance because his Permanent Certificate of Authority was for life
insurance only and for no other. He was proscribed from accepting a managerial or
supervisory position in any other office including the government without the

written consent of petitioner. De los Reyes could only be promoted to permanent

unit manager if he met certain requirements and his promotion was recommended
by the petitioner's District Manager and Regional Manager and approved by its
Division Manager. As Acting Unit Manager, De los Reyes performed functions beyond
mere solicitation of insurance business for petitioner. As found by the NLRC, he
exercised administrative functions which were necessary and beneficial to the
business of INSULAR LIFE.
In Great Pacific Life Insurance Company v. NLRC 13 which is closer in application
than Basiao to this present controversy, we found that "the relationships of the Ruiz
brothers and Grepalife were those of employer-employee. First, their work at the
time of their dismissal as zone supervisor and district manager was necessary and
desirable to the usual business of the insurance company. They were entrusted with
supervisory, sales and other functions to guard Grepalife's business interests and to
bring in more clients to the company, and even with administrative functions to
ensure that all collections, reports and data are faithfully brought to the company . .
. . A cursory reading of their respective functions as enumerated in their contracts
reveals that the company practically dictates the manner by which their jobs are to
be carried out . . . ." We need elaborate no further.
Exclusivity of service, control of assignments and removal of agents under private
respondent's unit, collection of premiums, furnishing of company facilities and
materials as well as capital described as Unit Development Fund are but hallmarks
of the management system in which herein private respondent worked. This
obtaining, there is no escaping the conclusion that private respondent Pantaleon de
los Reyes was an employee of herein petitioner.
WHEREFORE, the petition of Insular Life Assurance Company, Ltd., is DENIED and
the Decision of the National Labor Relations Commission dated 3 March 1995 and its
Order of 6 April 1996 sustaining it are AFFIRMED. Let this case be REMANDED to the
Labor Arbiter a quo who is directed to hear and dispose of this case with deliberate
dispatch in light of the views expressed herein.
SO ORDERED.
Davide, Jr., Vitug, Panganiban and Quisumbing, JJ., concur.
15) G.R. No. 170087 August 31, 2006
ANGELINA
FRANCISCO,
Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION,
SEIICHIRO
TAKAHASHI,
TIMOTEO
ACEDO,
DELFIN
LIZA,
IRENE
BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, Respondents.

DECISION
YNARES-SANTIAGO, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court seeks to
annul and set aside the Decision and Resolution of the Court of Appeals dated
October 29, 2004 1 and October 7, 2005, 2 respectively, in CA-G.R. SP No. 78515
dismissing the complaint for constructive dismissal filed by herein petitioner
Angelina Francisco. The appellate court reversed and set aside the Decision of the
National Labor Relations Commission (NLRC) dated April 15, 2003, 3 in NLRC NCR CA
No. 032766-02 which affirmed with modification the decision of the Labor Arbiter
dated July 31, 2002, 4 in NLRC-NCR Case No. 30-10-0-489-01, finding that private
respondents were liable for constructive dismissal.

In 1995, petitioner was hired by Kasei Corporation during its incorporation stage.
She was designated as Accountant and Corporate Secretary and was assigned to
handle all the accounting needs of the company. She was also designated as Liaison
Officer to the City of Makati to secure business permits, construction permits and
other licenses for the initial operation of the company. 5
Although she was designated as Corporate Secretary, she was not entrusted with
the corporate documents; neither did she attend any board meeting nor required to
do so. She never prepared any legal document and never represented the company
as its Corporate Secretary. However, on some occasions, she was prevailed upon to
sign documentation for the company. 6

In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry
Nino as accountant in lieu of petitioner. As Acting Manager, petitioner was assigned
to handle recruitment of all employees and perform management administration
functions; represent the company in all dealings with government agencies,
especially with the Bureau of Internal Revenue (BIR), Social Security System (SSS)
and in the city government of Makati; and to administer all other matters pertaining
to the operation of Kasei Restaurant which is owned and operated by Kasei
Corporation. 7

For five years, petitioner performed the duties of Acting Manager. As of December
31, 2000 her salary was P27,500.00 plus P3,000.00 housing allowance and a 10%
share in the profit of Kasei Corporation. 8
In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner
alleged that she was required to sign a prepared resolution for her replacement but
she was assured that she would still be connected with Kasei Corporation. Timoteo
Acedo, the designated Treasurer, convened a meeting of all employees of Kasei
Corporation and announced that nothing had changed and that petitioner was still

connected with Kasei Corporation as Technical Assistant to Seiji Kamura and in

charge of all BIR matters. 9
Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning
January up to September 2001 for a total reduction of P22,500.00 as of September
2001. Petitioner was not paid her mid-year bonus allegedly because the company
was not earning well. On October 2001, petitioner did not receive her salary from
the company. She made repeated follow-ups with the company cashier but she was
advised that the company was not earning well. 10

On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the
officers but she was informed that she is no longer connected with the company. 11
Since she was no longer paid her salary, petitioner did not report for work and filed
an action for constructive dismissal before the labor arbiter.

Private respondents averred that petitioner is not an employee of Kasei Corporation.

They alleged that petitioner was hired in 1995 as one of its technical consultants on
accounting matters and act concurrently as Corporate Secretary. As technical
consultant, petitioner performed her work at her own discretion without control and
supervision of Kasei Corporation. Petitioner had no daily time record and she came
to the office any time she wanted. The company never interfered with her work
except that from time to time, the management would ask her opinion on matters
relating to her profession. Petitioner did not go through the usual procedure of
selection of employees, but her services were engaged through a Board Resolution
designating her as technical consultant. The money received by petitioner from the
corporation was her professional fee subject to the 10% expanded withholding tax
on professionals, and that she was not one of those reported to the BIR or SSS as
one of the companys employees. 12
Petitioners designation as technical consultant depended solely upon the will of
management. As such, her consultancy may be terminated any time considering
that her services were only temporary in nature and dependent on the needs of the
corporation.

To prove that petitioner was not an employee of the corporation, private

respondents submitted a list of employees for the years 1999 and 2000 duly
received by the BIR showing that petitioner was not among the employees reported
to the BIR, as well as a list of payees subject to expanded withholding tax which

included petitioner. SSS records were also submitted showing that petitioners latest
employer was Seiji Corporation. 13

The Labor Arbiter found that petitioner was illegally dismissed, thus:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. finding complainant an employee of respondent corporation;
2. declaring complainants dismissal as illegal;
3. ordering respondents to reinstate complainant to her former position without loss
of seniority rights and jointly and severally pay complainant her money claims in
accordance with the following computation:
a. Backwages 10/2001 07/2002 275,000.00
(27,500 x 10 mos.)
b. Salary Differentials (01/2001 09/2001) 22,500.00
c. Housing Allowance (01/2001 07/2002) 57,000.00
d. Midyear Bonus 2001 27,500.00
e. 13th Month Pay 27,500.00
f. 10% share in the profits of Kasei
Corp. from 1996-2001 361,175.00
g. Moral and exemplary damages 100,000.00
h. 10% Attorneys fees 87,076.50
P957,742.50

If reinstatement is no longer feasible, respondents are ordered to pay complainant

separation pay with additional backwages that would accrue up to actual payment
of separation pay.
SO ORDERED.

14

On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor
Arbiter, the dispositive portion of which reads:
PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as
follows:
1) Respondents are directed to pay complainant separation pay computed at one
month per year of service in addition to full backwages from October 2001 to July
31, 2002;
2) The awards representing moral and exemplary damages and 10% share in profit
in the respective accounts of P100,000.00 and P361,175.00 are deleted;
3) The award of 10% attorneys fees shall be based on salary differential award
only;
4) The awards representing salary differentials, housing allowance, mid year bonus
and 13th month pay are AFFIRMED.
SO ORDERED.

15

On appeal, the Court of Appeals reversed the NLRC decision, thus:

WHEREFORE, the instant petition is hereby GRANTED. The decision of the National
Labor Relations Commissions dated April 15, 2003 is hereby REVERSED and SET
ASIDE and a new one is hereby rendered dismissing the complaint filed by private
respondent against Kasei Corporation, et al. for constructive dismissal.
SO ORDERED.

16

The appellate court denied petitioners motion for reconsideration, hence, the
present recourse.
The core issues to be resolved in this case are (1) whether there was an employeremployee relationship between petitioner and private respondent Kasei
Corporation; and if in the affirmative, (2) whether petitioner was illegally dismissed.

Considering the conflicting findings by the Labor Arbiter and the National Labor
Relations Commission on one hand, and the Court of Appeals on the other, there is
a need to reexamine the records to determine which of the propositions espoused
by the contending parties is supported by substantial evidence. 17
We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there has been no
uniform test to determine the existence of an employer-employee relation.
Generally, courts 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. 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, can help in determining
the existence of an employer-employee relationship.

However, in certain cases the control test is not sufficient to give a complete picture
of the relationship between the parties, owing to the complexity of such a
relationship where several positions have been held by the worker. There are
instances when, aside from the employers power to control the employee with
respect to the means and methods by which the work is to be accomplished,
economic realities of the employment relations help provide a comprehensive
analysis of the true classification of the individual, whether as employee,
independent contractor, corporate officer or some other capacity.

The better approach would therefore be to adopt a two-tiered test involving: (1) the
putative employers power to control the employee with respect to the means and
methods by which the work is to be accomplished; and (2) the underlying economic
realities of the activity or relationship.
This two-tiered test would provide us with a framework of analysis, which would
take into consideration the totality of circumstances surrounding the true nature of
the relationship between the parties. This is especially appropriate in this case
where there is no written agreement or terms of reference to base the relationship
on; and due to the complexity of the relationship based on the various positions and
responsibilities given to the worker over the period of the latters employment.

The control test initially found application in the case of Viaa v. Al-Lagadan and
Piga, 19 and lately in Leonardo v. Court of Appeals, 20 where we held that there is an
employer-employee relationship when the person for whom the services are
performed reserves the right to control not only the end achieved but also the
manner and means used to achieve that end.

In Sevilla v. Court of Appeals, 21 we observed the need to consider the existing

economic conditions prevailing between the parties, in addition to the standard of
right-of-control like the inclusion of the employee in the payrolls, to give a clearer
picture in determining the existence of an employer-employee relationship based on
an analysis of the totality of economic circumstances of the worker.

Thus, the determination of the relationship between employer and employee

depends upon the circumstances of the whole economic activity, 22 such as: (1) the
extent to which the services performed are an integral part of the employers
business; (2) the extent of the workers investment in equipment and facilities; (3)
the nature and degree of control exercised by the employer; (4) the workers
opportunity for profit and loss; (5) the amount of initiative, skill, judgment or
foresight required for the success of the claimed independent enterprise; (6) the
permanency and duration of the relationship between the worker and the employer;
and (7) the degree of dependency of the worker upon the employer for his
continued employment in that line of business. 23

The proper standard of economic dependence is whether the worker is dependent

on the alleged employer for his continued employment in that line of business. 24 In
the United States, the touchstone of economic reality in analyzing possible
employment relationships for purposes of the Federal Labor Standards Act is
dependency. 25 By analogy, the benchmark of economic reality in analyzing possible
employment relationships for purposes of the Labor Code ought to be the economic
dependence of the worker on his employer.
By applying the control test, there is no doubt that petitioner is an employee of
Kasei Corporation because she was under the direct control and supervision of Seiji
Kamura, the corporations Technical Consultant. She reported for work regularly and
served in various capacities as Accountant, Liaison Officer, Technical Consultant,
Acting Manager and Corporate Secretary, with substantially the same job functions,
that is, rendering accounting and tax services to the company and performing
functions necessary and desirable for the proper operation of the corporation such
as securing business permits and other licenses over an indefinite period of
engagement.

Under the broader economic reality test, the petitioner can likewise be said to be an
employee of respondent corporation because she had served the company for six
years before her dismissal, receiving check vouchers indicating her salaries/wages,

benefits, 13th month pay, bonuses and allowances, as well as deductions and Social
Security contributions from August 1, 1999 to December 18, 2000. 26 When
petitioner was designated General Manager, respondent corporation made a report
to the SSS signed by Irene Ballesteros. Petitioners membership in the SSS as
manifested by a copy of the SSS specimen signature card which was signed by the
President of Kasei Corporation and the inclusion of her name in the on-line inquiry
system of the SSS evinces the existence of an employer-employee relationship
between petitioner and respondent corporation. 27

It is therefore apparent that petitioner is economically dependent on respondent

corporation for her continued employment in the latters line of business.
In Domasig v. National Labor Relations Commission, 28 we held that in a business
establishment, an identification card is 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, these matters constitute substantial evidence adequate to support a
conclusion that petitioner was an employee of private respondent.
We likewise ruled in Flores v. Nuestro 29 that a corporation who registers its workers
with the SSS is proof that the latter were the formers employees. The coverage of
Social Security Law is predicated on the existence of an employer-employee
relationship.

Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly
established that petitioner never acted as Corporate Secretary and that her
designation as such was only for convenience. The actual nature of petitioners job
was as Kamuras direct assistant with the duty of acting as Liaison Officer in
representing the company to secure construction permits, license to operate and
other requirements imposed by government agencies. Petitioner was never
entrusted with corporate documents of the company, nor required to attend the
meeting of the corporation. She was never privy to the preparation of any document
for the corporation, although once in a while she was required to sign prepared
documentation for the company. 30

The second affidavit of Kamura dated March 7, 2002 which repudiated the
December 5, 2001 affidavit has been allegedly withdrawn by Kamura himself from
the records of the case. 31 Regardless of this fact, we are convinced that the
allegations in the first affidavit are sufficient to establish that petitioner is an
employee of Kasei Corporation.

Granting arguendo, that the second affidavit validly repudiated the first one, courts
do not generally look with favor on any retraction or recanted testimony, for it could
have been secured by considerations other than to tell the truth and would make
solemn trials a mockery and place the investigation of the truth at the mercy of
unscrupulous witnesses. 32 A recantation does not necessarily cancel an earlier
declaration, but like any other testimony the same is subject to the test of credibility
and should be received with caution. 33
Based on the foregoing, there can be no other conclusion that petitioner is an
employee of respondent Kasei Corporation. She was selected and engaged by the
company for compensation, and is economically dependent upon respondent for her
continued employment in that line of business. Her main job function involved
accounting and tax services rendered to respondent corporation on a regular basis
over an indefinite period of engagement. Respondent corporation hired and
engaged petitioner for compensation, with the power to dismiss her for cause. More
importantly, respondent corporation had the power to control petitioner with the
means and methods by which the work is to be accomplished.
The corporation constructively dismissed petitioner when it reduced her salary by
P2,500 a month from January to September 2001. This amounts to an illegal
termination of employment, where the petitioner is entitled to full backwages. Since
the position of petitioner as accountant is one of trust and confidence, and under
the principle of strained relations, petitioner is further entitled to separation pay, in
lieu of reinstatement. 34

A diminution of pay is prejudicial to the employee and amounts to constructive

dismissal. Constructive dismissal is an involuntary resignation resulting in cessation
of work resorted to when continued employment becomes impossible, unreasonable
or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear
discrimination, insensibility or disdain by an employer becomes unbearable to an
employee. 35 In Globe Telecom, Inc. v. Florendo-Flores, 36 we ruled that where an
employee ceases to work due to a demotion of rank or a diminution of pay, an
unreasonable situation arises which creates an adverse working environment
rendering it impossible for such employee to continue working for her employer.
Hence, her severance from the company was not of her own making and therefore
amounted to an illegal termination of employment.

In affording full protection to labor, this Court must ensure equal work opportunities
regardless of sex, race or creed. Even as we, in every case, attempt to carefully
balance the fragile relationship between employees and employers, we are mindful
of the fact that the policy of the law is to apply the Labor Code to a greater number
of employees. This would enable employees to avail of the benefits accorded to

them by law, in line with the constitutional mandate giving maximum aid and
protection to labor, promoting their welfare and reaffirming it as a primary social
economic force in furtherance of social justice and national development.

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court
of Appeals dated October 29, 2004 and October 7, 2005, respectively, in CA-G.R. SP
No. 78515 are ANNULLED and SET ASIDE. The Decision of the National Labor
Relations Commission dated April 15, 2003 in NLRC NCR CA No. 032766-02, is
REINSTATED. The case is REMANDED to the Labor Arbiter for the recomputation
of petitioner Angelina Franciscos full backwages from the time she was illegally
terminated until the date of finality of this decision, and separation pay representing
one-half month pay for every year of service, where a fraction of at least six months
shall be considered as one whole year.
SO ORDERED.

16) G.R. No. 147816

May 9, 2003

EFREN
P.
PAGUIO,
petitioner,
vs.
NATIONAL
LABOR
RELATIONS
COMMISSION,
METROMEDIA
TIMES
CORPORATION, ROBINA Y. GOKONGWEI, LIBERATO GOMEZ, JR., YOLANDA E.
ARAGON, FREDERICK D. GO and ALDA IGLESIA, respondents.

VITUG, J.:
On 22 June 1992, respondent Metromedia Times Corporation entered, for the fifth
time, into an agreement with petitioner Efren P. Paguio, appointing the latter to be
an account executive of the firm. 1 Again, petitioner was to solicit advertisements for
"The Manila Times," a newspaper of general circulation, published by respondent
company. Petitioner, for his efforts, was to receive compensation consisting of a
15% commission on direct advertisements less withholding tax and a 10%
commission on agency advertisements based on gross revenues less agency
commission and the corresponding withholding tax. The commissions, released
every fifteen days of each month, were to be given to petitioner only after the
clients would have paid for the advertisements. Apart from commissions, petitioner
was also entitled to a monthly allowance of P2,000.00 as long as he met the
P30,000.00-monthly quota. Basically, the contentious points raised by the parties
had something to do with the following stipulations of the agreement; viz:

"12. You are not an employee of the Metromedia Times Corporation nor does
the company have any obligations towards anyone you may employ, nor any
responsibility for your operating expenses or for any liability you may incur.
The only rights and obligations between us are those set forth in this
agreement. This agreement cannot be amended or modified in any way
except with the duly authorized consent in writing of both parties.
"13. Either party may terminate this agreement at any time by giving written
notice to the other, thirty (30) days prior to effectivity of termination." 2
On 15 August 1992, barely two months after the renewal of his contract,
petitioner received the following notice from respondent firm "Dear Mr. Paguio,
"Please be advised of our decision to terminate your services as Account
Executive of Manila Times effective September 30, 1992.
"This is in accordance with our contract signed last July 1, 1992." 3

Apart from vague allegations of misconduct on which he was not given the
opportunity to defend himself, i.e., pirating clients from his co-executives and failing
to produce results, no definite cause for petitioner's termination was given.
Aggrieved, petitioner filed a case before the labor arbiter, asking that his dismissal
be declared unlawful and that his reinstatement, with entitlement to backwages
without loss of seniority rights, be ordered. Petitioner also prayed that respondent
company officials be held accountable for acts of unfair labor practice, for
P500,000.00 moral damages and for P200,000.00 exemplary damages.
In their defense, respondent Metromedia Times Corporation asserted that it did not
enter into any agreement with petitioner outside of the contract of services under
Articles 1642 and 1644 of the Civil Code of the Philippines. 4 Asserting their right to
terminate the contract with petitioner, respondents pointed to the last provision
thereof stating that both parties could opt to end the contract provided that either
party would serve, thirty days prior to the intended date of termination, the
corresponding notice to the other.

The labor arbiter found for petitioner and declared his dismissal illegal. The arbiter
ordered respondent
Metromedia Times Corporation and its officers to reinstate petitioner to his former
position, without loss of seniority rights, and to pay him his commissions and other

remuneration accruing from the date of dismissal on 15 August 1992 up until his
reinstatement. He likewise adjudged that Liberato I. Gomez, general manager of
respondent corporation, be held liable to petitioner for moral damages in the
amount of P20,000.00.

On appeal, the National Labor Relations Commission (NLRC) reversed the ruling of
the labor arbiter and declared the contractual relationship between the parties as
being for a fixed-term employment. The NLRC declared a fixed-term employment to
be lawful as long as "it was agreed upon knowingly and voluntarily by the parties,
without any force, duress or improper pressure being brought to bear upon the
worker and absent any other circumstances vitiating his consent." 5 The finding of
the NLRC was primarily hinged on the assumption that petitioner, on account of his
educated stature, having indeed personally prepared his pleadings without the aid
of counsel, was an unlikely victim of a lopsided contract. Rejecting the assertion of
petitioner that he was a regular employee, the NLRC held: "The decisive
determinant would not be the activities that the employee (was) called upon to
perform but rather, the day certain agreed upon by the parties for the
commencement and termination of their employment relationship, a day certain
being understood to be that which (would) necessarily come, although it (might) not
be known when."6

Petitioner appealed the ruling of the NLRC before the Court of Appeals which upheld
in toto the findings of the commission. In his petition for review on certiorari,
petitioner raised the following issues for resolution:
"WHETHER OR NOT PETITIONER'S CONTRACT WITH PRIVATE RESPONDENT'S
COMPANY IS FOR A FIXED PERIOD.
"WHETHER OR NOT PETITIONER'S DISMISSAL IS LEGAL.
"WHETHER OR NOT PETITIONER IS ENTITLED TO BACKWAGES AND MORAL
DAMAGES."7
The crux of the matter would entail the determination of the nature of contractual
relationship between petitioner and respondent company - was it or was it not one
of regular employment?
A "regular employment," whether it is one or not, is aptly gauged from the
concurrence, or the non-concurrence, of the following factors - a) the manner of
selection and engagement of the putative employee, b) the mode of payment of
wages, c) the presence or absence of the power of dismissal; and d) the presence or
absence of the power to control the conduct of the putative employee or the power

to control the employee with respect to the means or methods by which his work is
to be accomplished.8 The "control test" assumes primacy in the overall
consideration. Under this test, an employment relation obtains where work is
performed or services are rendered under the control and supervision of the party
contracting for the service, not only as to the result of the work but also as to the
manner and details of the performance desired. 9

An indicum of regular employment, rightly taken into account by the labor arbiter,
was the reservation by respondent Metromedia Times Corporation not only of the
right to control the results to be achieved but likewise the manner and the means
used in reaching that end.10 Metromedia Times Corporation exercised such control
by requiring petitioner, among other things, to submit a daily sales activity report
and also a monthly sales report as well. Various solicitation letters would indeed
show that Robina Gokongwei, company president, Alda Iglesia, the advertising
manager, and Frederick Go, the advertising director, directed and monitored the
sales activities of petitioner.
The Labor Code, in Article 280 thereof, 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.
"An employment shall be deemed to be casual if it is not covered by the
proceeding paragraph: Provided, That, any employee who has rendered at
least one year of service, whether such service is continuous or broken, shall
be considered a regular employee with respect to the activity in which he is
employed and his employment shall continue while such activity exists."

Thus defined, a regular employee is one who is engaged to perform activities which
are necessary and desirable in the usual business or trade of the employer as
against those which are undertaken for a specific project or are seasonal. Even in
these latter cases, where such person has rendered at least one year of service,
regardless of the nature of the activity performed or of whether it is continuous or
intermittent, the employment is considered regular as long as the activity exists, it

not being indispensable that he be first issued a regular appointment or be formally

declared as such before acquiring a regular status. 11

That petitioner performed activities which were necessary and desirable to the
business of the employer, and that the same went on for more than a year, could
hardly be denied. Petitioner was an account executive in soliciting advertisements,
clearly necessary and desirable, for the survival and continued operation of the
business of respondent corporation. Robina Gokongwei, its President, herself
admitted that the income generated from paid advertisements was the lifeblood of
the newspaper's existence. Implicitly, respondent corporation recognized
petitioner's invaluable contribution to the business when it renewed, not just once
but five times, its contract with petitioner.

Respondent company cannot seek refuge under the terms of the agreement it has
entered into with petitioner. The law, in defining their contractual relationship, does
so, not necessarily or exclusively upon the terms of their written or oral contract,
but also on the basis of the nature of the work petitioner has been called upon to
perform.12 The law affords protection to an employee, and it will not countenance
any attempt to subvert its spirit and intent. A stipulation in an agreement can be
ignored as and when it is utilized to deprive the employee of his security of tenure. 13
The sheer inequality that characterizes employer-employee relations, where the
scales generally tip against the employee, often scarcely provides him real and
better options.

The real question that should thus be posed is whether or not petitioner has been
justly dismissed from service. A lawful dismissal must meet both substantive and
procedural requirements; in fine, the dismissal must be for a just or authorized
cause and must comply with the rudimentary due process of notice and hearing. It
is not shown that respondent company has fully bothered itself with either of these
requirements in terminating the services of petitioner. The notice of termination
recites no valid or just cause for the dismissal of petitioner nor does it appear that
he has been given an opportunity to be heard in his defense.

The evidence, however, found by the appellate court is wanting that would indicate
bad faith or malice on the part of respondents, particularly by respondent Liberato I.
Gomez, and the award of moral damages must thus be deleted.

WHEREFORE, the instant petition is GRANTED. The decision of the Court of Appeals
in C.A. G.R. SP No. 527773 and that of the National Labor Relations Commission are
hereby SET ASIDE and that of the Labor Arbiter is REINSTATED except with respect
to the P20,000.00 moral damages adjudged against respondent Liberato I. Gomez
which award is deleted.
SO ORDERED.
Davide, Jr., C.J., Ynares-Santiago, Carpio, and Azcuna, JJ., concur.

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

GREAT PACIFIC LIFE ASSURANCE CORPORATION,
petitioner,
vs.
HONORATO JUDICO and NATIONAL LABOR RELATIONS COMMISSION,
respondents.
G.A. Fortun and Associates for petitioner.
Corsino B. Soco for private respondent.

PARAS J.:
Before us is a Petition for certiorari to review the decision of the National Labor
Relations Commission (NLRC, for brevity) dated September 9, 1985 reversing the
decision of Labor Arbiter Vito J. Minoria, dated June 9, 1983, by 1) ordering
petitioner insurance company, Great Pacific Life Assurance Corporation (Grepalife,
for brevity) to recognize private respondent Honorato Judico, as its regular
employee as defined under Art. 281 of the Labor Code and 2) remanding the case to
its origin for the determination of private respondent Judico's money claims.

The records of the case show that Honorato Judico filed a complaint for illegal
dismissal against Grepalife, a duly organized insurance firm, before the NLRC
Regional Arbitration Branch No. VII, Cebu City on August 27, 1982. Said complaint
prayed for award of money claims consisting of separation pay, unpaid salary and
13th month pay, refund of cash bond, moral and exemplary damages and attorney's
fees.
Both parties appealed to the NLRC when a decision was rendered by the Labor
Arbiter dismissing the complaint on the ground that the employer-employee

relations did not exist between the parties but ordered Grepalife to pay complainant
the sum of Pl,000.00 by reason of Christian Charity.

On appeal, said decision was reversed by the NLRC ruling that complainant is a
regular employee as defined under Art. 281 of the Labor Code and declaring the
appeal of Grepalife questioning the legality of the payment of Pl,000.00 to
complainant moot and academic. Nevertheless, for the purpose of revoking the
supersedeas bond of said company it ruled that the Labor Arbiter erred in awarding
Pl,000.00 to complainant in the absence of any legal or factual basis to support its
payment.

Petitioner company moved to reconsider, which was denied, hence this petition for
review raising four legal issues to wit:
I. Whether the relationship between insurance agents and their
principal, the insurance company, is that of agent and principal to be
governed by the Insurance Code and the Civil Code provisions on
agency, or one of employer-employee, to be governed by the Labor
Code.
II. Whether insurance agents are entitled to the employee benefits
prescribed by the Labor Code.
III. Whether the public respondent NLRC has jurisdiction to take
cognizance of a controversy between insurance agent and the
insurance company, arising from their agency relations.
IV. Whether the public respondent acted correctly in setting aside the
decision of Labor Arbiter Vito J. Minoria and in ordering the case
remanded to said Labor Arbiter for further proceedings.(p. 159, Rollo)

The crux of these issues boil down to the question of whether or not employeremployee relationship existed between petitioner and private respondent.
Petitioner admits that on June 9, 1976, private respondent Judico entered into an
agreement of agency with petitioner Grepalife to become a debit agent attached to
the industrial life agency in Cebu City. Petitioner defines a debit agent as "an
insurance agent selling/servicing industrial life plans and policy holders. Industrial
life plans are those whose premiums are payable either daily, weekly or monthly
and which are collectible by the debit agents at the home or any place designated

by the policy holder" (p. 156, Rollo). Such admission is in line with the findings of
public respondent that as such debit agent, private respondent Judico had definite
work assignments including but not limited to collection of premiums from policy
holders and selling insurance to prospective clients. Public respondent NLRC also
found out that complainant was initially paid P 200. 00 as allowance for thirteen
(13) weeks regardless of production and later a certain percentage denominated as
sales reserve of his total collections but not lesser than P 200.00. Sometime in
September 1981, complainant was promoted to the position of Zone Supervisor and
was given additional (supervisor's) allowance fixed at P110.00 per week. During the
third week of November 1981, he was reverted to his former position as debit agent
but, for unknown reasons, not paid so-called weekly sales reserve of at least P
200.00. Finally on June 28, 1982, complainant was dismissed by way of termination
of his agency contract.

Petitioner assails the findings of the NLRC that private respondent is an employee of
the former. Petitioner argues that Judico's compensation was not based on any fixed
number of hours he was required to devote to the service of petitioner company but
rather it was the production or result of his efforts or his work that was being
compensated and that the so-called allowance for the first thirteen weeks that
Judico worked as debit agent, cannot be construed as salary but as a subsidy or a
way of assistance for transportation and meal expenses of a new debit agent during
the initial period of his training which was fixed for thirteen (13) weeks. Stated
otherwise, petitioner contends that Judico's compensation, in the form of
commissions and bonuses, was based on actual production, (insurance plans sold
and premium collections).

Said contentions of petitioner are strongly rejected by private respondent. He

maintains that he received a definite amount as his Wage known as "sales reserve"
the failure to maintain the same would bring him back to a beginner's employment
with a fixed weekly wage of P 200.00 regardless of production. He was assigned a
definite place in the office to work on when he is not in the field; and in addition to
canvassing and making regular reports, he was burdened with the job of collection
and to make regular weekly report thereto for which an anemic performance would
mean dismissal. He earned out of his faithful and productive service, a promotion to
Zone Supervisor with additional supervisor's allowance, (a definite or fixed amount
of P110.00) that he was dismissed primarily because of anemic performance and
not because of the termination of the contract of agency substantiate the fact that
he was indeed an employee of the petitioner and not an insurance agent in the
ordinary meaning of the term.

That private respondent Judico was an agent of the petitioner is unquestionable.

But, as We have held in Investment Planning Corp. vs. SSS, 21 SCRA 294, an
insurance company may have two classes of agents who sell its insurance policies:
(1) salaried employees who keep definite hours and work under the control and
supervision of the company; and (2) registered representatives who work on
commission basis. The agents who belong to the second category are not required
to report for work at anytime, they do not have to devote their time exclusively to or
work solely for the company since the time and the effort they spend in their work
depend entirely upon their own will and initiative; they are not required to account
for their time nor submit a report of their activities; they shoulder their own selling
expenses as well as transportation; and they are paid their commission based on a
certain percentage of their sales. One salient point in the determination of
employer-employee relationship which cannot be easily ignored is the fact that the
compensation that these agents on commission received is not paid by the
insurance company but by the investor (or the person insured). After determining
the commission earned by an agent on his sales the agent directly deducts it from
the amount he received from the investor or the person insured and turns over to
the insurance company the amount invested after such deduction is made. The test
therefore is whether the "employer" controls or has reserved the right to control the
"employee" not only as to the result of the work to be done but also as to the
means and methods by which the same is to be accomplished.

Applying the aforementioned test to the case at bar, We can readily see that the
element of control by the petitioner on Judico was very much present. The record
shows that petitioner Judico received a definite minimum amount per week as his
wage known as "sales reserve" wherein the failure to maintain the same would
bring him back to a beginner's employment with a fixed weekly wage of P 200.00
for thirteen weeks regardless of production. He was assigned a definite place in the
office to work on when he is not in the field; and in addition to his canvassing work
he was burdened with the job of collection. In both cases he was required to make
regular report to the company regarding these duties, and for which an anemic
performance would mean a dismissal. Conversely faithful and productive service
earned him a promotion to Zone Supervisor with additional supervisor's allowance,
a definite amount of P110.00 aside from the regular P 200.00 weekly "allowance".
Furthermore, his contract of services with petitioner is not for a piece of work nor for
a definite period.

On the other hand, an ordinary commission insurance agent works at his own
volition or at his own leisure without fear of dismissal from the company and short
of committing acts detrimental to the business interest of the company or against
the latter, whether he produces or not is of no moment as his salary is based on his
production, his anemic performance or even dead result does not become a ground

for dismissal. Whereas, in private respondent's case, the undisputed facts show that
he was controlled by petitioner insurance company not only as to the kind of work;
the amount of results, the kind of performance but also the power of dismissal.
Undoubtedly, private respondent, by nature of his position and work, had been a
regular employee of petitioner and is therefore entitled to the protection of the law
and could not just be terminated without valid and justifiable cause.
Premises considered, the appealed decision is hereby AFFIRMED in toto.
SO ORDERED.

18) G.R. No. 165881

April 19, 2006

OSCAR VILLAMARIA, JR. Petitioner,

BUSTAMANTE, Respondents

vs. COURT OF APPEALS and JERRY V.

DECISION
CALLEJO, SR., J.:
Before us is a Petition for Review on Certiorari under Rule 65 of the Revised Rules of
Court assailing the Decision 1 and Resolution2 of the Court of Appeals (CA) in CA-G.R.
SP No. 78720 which set aside the Resolution 3 of the National Labor Relations
Commission (NLRC) in NCR-30-08-03247-00, which in turn affirmed the Decision 4 of
the Labor Arbiter dismissing the complaint filed by respondent Jerry V. Bustamante.

Petitioner Oscar Villamaria, Jr. was the owner of Villamaria Motors, a sole
proprietorship engaged in assembling passenger jeepneys with a public utility
franchise to operate along the Baclaran-Sucat route. By 1995, Villamaria stopped
assembling jeepneys and retained only nine, four of which he operated by
employing drivers on a "boundary basis." One of those drivers was respondent
Bustamante who drove the jeepney with Plate No. PVU-660. Bustamante remitted
P450.00 a day to Villamaria as boundary and kept the residue of his daily earnings
as compensation for driving the vehicle. In August 1997, Villamaria verbally agreed
to sell the jeepney to Bustamante under the "boundary-hulog scheme," where
Bustamante would remit to Villarama P550.00 a day for a period of four years;
Bustamante would then become the owner of the vehicle and continue to drive the
same under Villamarias franchise. It was also agreed that Bustamante would make
a downpayment of P10,000.00.

On August 7, 1997, Villamaria executed a contract entitled "Kasunduan ng Bilihan

ng Sasakyan sa Pamamagitan ng Boundary-Hulog" 5 over the passenger jeepney
with Plate No. PVU-660, Chassis No. EVER95-38168-C and Motor No. SL-26647. The
parties agreed that if Bustamante failed to pay the boundary-hulog for three days,
Villamaria Motors would hold on to the vehicle until Bustamante paid his arrears,
including a penalty of P50.00 a day; in case Bustamante failed to remit the daily
boundary-hulog for a period of one week, the Kasunduan would cease to have legal
effect and Bustamante would have to return the vehicle to Villamaria Motors.

Under the Kasunduan, Bustamante was prohibited from driving the vehicle without
prior authority from Villamaria Motors. Thus, Bustamante was authorized to operate
the vehicle to transport passengers only and not for other purposes. He was also
required to display an identification card in front of the windshield of the vehicle; in
case of failure to do so, any fine that may be imposed by government authorities
would be charged against his account. Bustamante further obliged himself to pay
for the cost of replacing any parts of the vehicle that would be lost or damaged due
to his negligence. In case the vehicle sustained serious damage, Bustamante was
obliged to notify Villamaria Motors before commencing repairs. Bustamante was not
allowed to wear slippers, short pants or undershirts while driving. He was required
to be polite and respectful towards the passengers. He was also obliged to notify
Villamaria Motors in case the vehicle was leased for two or more days and was
required to attend any meetings which may be called from time to time. Aside from
the boundary-hulog, Bustamante was also obliged to pay for the annual registration
fees of the vehicle and the premium for the vehicles comprehensive insurance.
Bustamante promised to strictly comply with the rules and regulations imposed by
Villamaria for the upkeep and maintenance of the jeepney.

Bustamante continued driving the jeepney under the supervision and control of
Villamaria. As agreed upon, he made daily remittances of P550.00 in payment of the
purchase price of the vehicle. Bustamante failed to pay for the annual registration
fees of the vehicle, but Villamaria allowed him to continue driving the jeepney.
In 1999, Bustamante and other drivers who also had the same arrangement with
Villamaria Motors failed to pay their respective boundary-hulog. This prompted
Villamaria to serve a "Paalala,"6 reminding them that under the Kasunduan, failure
to pay the daily boundary-hulog for one week, would mean their respective
jeepneys would be returned to him without any complaints. He warned the drivers
that the Kasunduan would henceforth be strictly enforced and urged them to
comply with their obligation to avoid litigation.

On July 24, 2000, Villamaria took back the jeepney driven by Bustamante and
barred the latter from driving the vehicle.
On August 15, 2000, Bustamante filed a Complaint 7 for Illegal Dismissal against
Villamaria and his wife Teresita. In his Position Paper, 8 Bustamante alleged that he
was employed by Villamaria in July 1996 under the boundary system, where he was
required to remit P450.00 a day. After one year of continuously working for them,
the spouses Villamaria presented the Kasunduan for his signature, with the
assurance that he (Bustamante) would own the jeepney by March 2001 after paying
P550.00 in daily installments and that he would thereafter continue driving the
vehicle along the same route under the same franchise. He further narrated that in
July 2000, he informed the Villamaria spouses that the surplus engine of the
jeepney needed to be replaced, and was assured that it would be done. However,
he was later arrested and his drivers license was confiscated because apparently,
the replacement engine that was installed was taken from a stolen vehicle. Due to
negotiations with the apprehending authorities, the jeepney was not impounded.
The Villamaria spouses took the jeepney from him on July 24, 2000, and he was no
longer allowed to drive the vehicle since then unless he paid them P70,000.00.
Bustamante prayed that judgment be rendered in his favor, thus:
WHEREFORE, in the light of the foregoing, it is most respectfully prayed that
judgment be rendered ordering the respondents, jointly and severally, the following:
1. Reinstate complainant to his former position without loss of seniority rights
and execute a Deed of Sale in favor of the complainant relative to the PUJ
with Plate No. PVU-660;
2. Ordering the respondents to pay backwages in the amount of P400.00 a
day and other benefits computed from July 24, 2000 up to the time of his
actual reinstatement;
3. Ordering respondents to return the amount of P10,000.00 and P180,000.00
for the expenses incurred by the complainant in the repair and maintenance
of the subject jeep;
4. Ordering the respondents to refund the amount of One Hundred (P100.00)
Pesos per day counted from August 7, 1997 up to June 2000 or a total of
P91,200.00;
5. To pay moral and exemplary damages of not less than P200,000.00;
6. Attorneys fee[s] of not less than 10% of the monetary award.
Other just and equitable reliefs under the premises are also being prayed for. 9

In their Position Paper,10 the spouses Villamaria admitted the existence of the
Kasunduan, but alleged that Bustamante failed to pay the P10,000.00
downpayment and the vehicles annual registration fees. They further alleged that
Bustamante eventually failed to remit the requisite boundary-hulog of P550.00 a
day, which prompted them to issue the Paalaala. Instead of complying with his
obligations, Bustamante stopped making his remittances despite his daily trips and
even brought the jeepney to the province without permission. Worse, the jeepney
figured in an accident and its license plate was confiscated; Bustamante even
abandoned the vehicle in a gasoline station in Sucat, Paraaque City for two weeks.
When the security guard at the gasoline station requested that the vehicle be
retrieved and Teresita Villamaria asked Bustamante for the keys, Bustamante told
her: "Di kunin ninyo." When the vehicle was finally retrieved, the tires were worn,
the alternator was gone, and the battery was no longer working.

Citing the cases of Cathedral School of Technology v. NLRC 11 and Canlubang Security
Agency Corporation v. NLRC,12 the spouses Villamaria argued that Bustamante was
not illegally dismissed since the Kasunduan executed on August 7, 1997
transformed the employer-employee relationship into that of vendor-vendee. Hence,
the spouses concluded, there was no legal basis to hold them liable for illegal
dismissal. They prayed that the case be dismissed for lack of jurisdiction and patent
lack of merit.

In his Reply,13 Bustamante claimed that Villamaria exercised control and supervision
over the conduct of his employment. He maintained that the rulings of the Court in
National Labor Union v. Dinglasan, 14 Magboo v. Bernardo,15 and Citizen's League of
Free Workers v. Abbas16 are germane to the issue as they define the nature of the
owner/operator-driver relationship under the boundary system. He further reiterated
that it was the Villamaria spouses who presented the Kasunduan to him and that he
conformed thereto only upon their representation that he would own the vehicle
after four years. Moreover, it appeared that the Paalala was duly received by him, as
he, together with other drivers, was made to affix his signature on a blank piece of
paper purporting to be an "attendance sheet."

On March 15, 2002, the Labor Arbiter rendered judgment 17 in favor of the spouses
Villamaria and ordered the complaint dismissed on the following ratiocination:
Respondents presented the contract of Boundary-Hulog, as well as the PAALALA, to
prove their claim that complainant violated the terms of their contract and

afterwards abandoned the vehicle assigned to him. As against the foregoing, [the]
complaints (sic) mere allegations to the contrary cannot prevail.
Not having been illegally dismissed, complainant is not entitled to damages and
attorney's fees.18
Bustamante appealed the decision to the NLRC, 19 insisting that the Kasunduan did
not extinguish the employer-employee relationship between him and Villamaria.
While he did not receive fixed wages, he kept only the excess of the boundary-hulog
which he was required to remit daily to Villamaria under the agreement.
Bustamante maintained that he remained an employee because he was engaged to
perform activities which were necessary or desirable to Villamarias trade or
business.

The NLRC rendered judgment20 dismissing the appeal for lack of merit, thus:
WHEREFORE, premises considered, complainant's appeal is hereby DISMISSED for
reasons not stated in the Labor Arbiter's decision but mainly on a jurisdictional
issue, there being none over the subject matter of the controversy. 21

The NLRC ruled that under the Kasunduan, the juridical relationship between
Bustamante and Villamaria was that of vendor and vendee, hence, the Labor Arbiter
had no jurisdiction over the complaint. Bustamante filed a Motion for
Reconsideration, which the NLRC resolved to deny on May 30, 2003. 22
Bustamante elevated the matter to the CA via Petition for Certiorari, alleging that
the NLRC erred
I
IN DISMISSING PETITIONERS APPEAL "FOR REASON NOT STATED IN THE LABOR
ARBITERS DECISION, BUT MAINLY ON JURISDICTIONAL ISSUE;"
II
IN DISREGARDING THE LAW AND PREVAILING JURISPRUDENCE WHEN IT DECLARED
THAT THE RELATIONSHIP WHICH WAS ESTABLISHED BETWEEN PETITIONER AND THE
PRIVATE RESPONDENT WAS DEFINITELY A MATTER WHICH IS BEYOND THE
PROTECTIVE MANTLE OF OUR LABOR LAWS.23
Bustamante insisted that despite the Kasunduan, the relationship between him and
Villamaria continued to be that of employer-employee and as such, the Labor

Arbiter had jurisdiction over his complaint. He further alleged that it is common
knowledge that operators of passenger jeepneys (including taxis) pay their drivers
not on a regular monthly basis but on commission or boundary basis, or even the
boundary-hulog system. Bustamante asserted that he was dismissed from
employment without any lawful or just cause and without due notice.

For his part, Villamaria averred that Bustamante failed to adduce proof of their
employer-employee relationship. He further pointed out that the Dinglasan case
pertains to the boundary system and not the boundary-hulog system, hence
inapplicable in the instant case. He argued that upon the execution of the
Kasunduan, the juridical tie between him and Bustamante was transformed into a
vendor-vendee relationship. Noting that he was engaged in the manufacture and
sale of jeepneys and not in the business of transporting passengers for
consideration, Villamaria contended that the daily fees which Bustmante paid were
actually periodic installments for the the vehicle and were not the same fees as
understood in the boundary system. He added that the boundary-hulog plan was
basically a scheme to help the driver-buyer earn money and eventually pay for the
unit in full, and for the owner to profit not from the daily earnings of the driver-buyer
but from the purchase price of the unit sold. Villamaria further asserted that the
apparently restrictive conditions in the Kasunduan did not mean that the means and
method of driver-buyers conduct was controlled, but were mere ways to preserve
the vehicle for the benefit of both parties: Villamaria would be able to collect the
agreed purchase price, while Bustamante would be assured that the vehicle would
still be in good running condition even after four years. Moreover, the right of
vendor to impose certain conditions on the buyer should be respected until full
ownership of the property is vested on the latter. Villamaria insisted that the parallel
circumstances obtaining in Singer Sewing Machine Company v. Drilon 24 has
analogous application to the instant issue.

In its Decision25 dated August 30, 2004, the CA reversed and set aside the NLRC
decision. The fallo of the decision reads:
UPON THE VIEW WE TAKE IN THIS CASE, THUS, the impugned resolutions of the
NLRC must be, as they are hereby are, REVERSED AND SET ASIDE, and judgment
entered in favor of petitioner:
1. Sentencing private respondent Oscar Villamaria, Jr. to pay petitioner Jerry
Bustamante separation pay computed from the time of his employment up to
the time of termination based on the prevailing minimum wage at the time of
termination; and,

2. Condemning private respondent Oscar Villamaria, Jr. to pay petitioner Jerry

Bustamante back wages computed from the time of his dismissal up to March
2001 based on the prevailing minimum wage at the time of his dismissal.
Without Costs.
SO ORDERED.26

The appellate court ruled that the Labor Arbiter had jurisdiction over Bustamantes
complaint. Under the Kasunduan, the relationship between him and Villamaria was
dual: that of vendor-vendee and employer-employee. The CA ratiocinated that
Villamarias exercise of control over Bustamantes conduct in operating the jeepney
is inconsistent with the formers claim that he was not engaged in the
transportation business. There was no evidence that petitioner was allowed to let
some other person drive the jeepney.

The CA further held that, while the power to dismiss was not mentioned in the
Kasunduan, it did not mean that Villamaria could not exercise it. It explained that
the existence of an employment relationship did not depend on how the worker was
paid but on the presence or absence of control over the means and method of the
employees work. In this case, Villamarias directives (to drive carefully, wear an
identification card, don decent attire, park the vehicle in his garage, and to inform
him about provincial trips, etc.) was a means to control the way in which
Bustamante was to go about his work. In view of Villamarias supervision and
control as employer, the fact that the "boundary" represented installment payments
of the purchase price on the jeepney did not remove the parties employeremployee relationship.

While the appellate court recognized that a weeks default in paying the boundaryhulog constituted an additional cause for terminating Bustamantes employment, it
held that the latter was illegally dismissed. According to the CA, assuming that
Bustamante failed to make the required payments as claimed by Villamaria, the
latter nevertheless failed to take steps to recover the unit and waited for
Bustamante to abandon it. It also pointed out that Villamaria neither submitted any
police report to support his claim that the vehicle figured in a mishap nor presented
the affidavit of the gas station guard to substantiate the claim that Bustamante
abandoned the unit.

Villamaria received a copy of the decision on September 8, 2004, and filed, on

September 17, 2004, a motion for reconsideration thereof. The CA denied the
motion in a Resolution27 dated November 2, 2004, and Villamaria received a copy
thereof on November 8, 2004.
Villamaria, now petitioner, seeks relief from this Court via petition for review on
certiorari under Rule 65 of the Rules of Court, alleging that the CA committed grave
abuse of its discretion amounting to excess or lack of jurisdiction in reversing the
decision of the Labor Arbiter and the NLRC. He claims that the CA erred in ruling
that the juridical relationship between him and respondent under the Kasunduan
was a combination of employer-employee and vendor-vendee relationships. The
terms and conditions of the Kasunduan clearly state that he and respondent
Bustamante had entered into a conditional deed of sale over the jeepney; as such,
their employer-employee relationship had been transformed into that of vendorvendee. Petitioner insists that he had the right to reserve his title on the jeepney
until after the purchase price thereof had been paid in full.

In his Comment on the petition, respondent avers that the appropriate remedy of
petitioner was an appeal via a petition for review on certiorari under Rule 45 of the
Rules of Court and not a special civil action of certiorari under Rule 65. He argues
that petitioner failed to establish that the CA committed grave abuse of its
discretion amounting to excess or lack of jurisdiction in its decision, as the said
ruling is in accord with law and the evidence on record.

Respondent further asserts that the Kasunduan presented to him by petitioner

which provides for a boundary-hulog scheme was a devious circumvention of the
Labor Code of the Philippines. Respondent insists that his juridical relationship with
petitioner is that of employer-employee because he was engaged to perform
activities which were necessary or desirable in the usual business of petitioner, his
employer.
In his Reply, petitioner avers that the Rules of Procedure should be liberally
construed in his favor; hence, it behooves the Court to resolve the merits of his
petition.

We agree with respondents contention that the remedy of petitioner from the CA
decision was to file a petition for review on certiorari under Rule 45 of the Rules of
Court and not the independent action of certiorari under Rule 65. Petitioner had 15
days from receipt of the CA resolution denying his motion for the reconsideration
within which to file the petition under Rule 45. 28 But instead of doing so, he filed a

petition for certiorari under Rule 65 on November 22, 2004, which did not, however,
suspend the running of the 15-day reglementary period; consequently, the CA
decision became final and executory upon the lapse of the reglementary period for
appeal. Thus, on this procedural lapse, the instant petition stands to be dismissed. 29

It must be stressed that the recourse to a special civil action under Rule 65 of the
Rules of Court is proscribed by the remedy of appeal under Rule 45. As the Court
elaborated in Tomas Claudio Memorial College, Inc. v. Court of Appeals: 30
We agree that the remedy of the aggrieved party from a decision or final resolution
of the CA is to file a petition for review on certiorari under Rule 45 of the Rules of
Court, as amended, on questions of facts or issues of law within fifteen days from
notice of the said resolution. Otherwise, the decision of the CA shall become final
and executory. The remedy under Rule 45 of the Rules of Court is a mode of appeal
to this Court from the decision of the CA. It is a continuation of the appellate process
over the original case. A review is not a matter of right but is a matter of judicial
discretion. The aggrieved party may, however, assail the decision of the CA via a
petition for certiorari under Rule 65 of the Rules of Court within sixty days from
notice of the decision of the CA or its resolution denying the motion for
reconsideration of the same. This is based on the premise that in issuing the
assailed decision and resolution, the CA acted with grave abuse of discretion,
amounting to excess or lack of jurisdiction and there is no plain, speedy and
adequate remedy in the ordinary course of law. A remedy is considered plain,
speedy and adequate if it will promptly relieve the petitioner from the injurious
effect of the judgment and the acts of the lower court.

The aggrieved party is proscribed from filing a petition for certiorari if appeal is
available, for the remedies of appeal and certiorari are mutually exclusive and not
alternative or successive. The aggrieved party is, likewise, barred from filing a
petition for certiorari if the remedy of appeal is lost through his negligence. A
petition for certiorari is an original action and does not interrupt the course of the
principal case unless a temporary restraining order or a writ of preliminary
injunction has been issued against the public respondent from further proceeding. A
petition for certiorari must be based on jurisdictional grounds because, as long as
the respondent court acted within its jurisdiction, any error committed by it will
amount to nothing more than an error of judgment which may be corrected or
reviewed only by appeal.31
However, we have also ruled that a petition for certiorari under Rule 65 may be
considered as filed under Rule 45, conformably with the principle that rules of
procedure are to be construed liberally, provided that the petition is filed within the
reglementary period under Section 2, Rule 45 of the Rules of Court, and where valid

and compelling circumstances warrant that the petition be resolved on its merits. 32
In this case, the petition was filed within the reglementary period and petitioner has
raised an issue of substance: whether the existence of a boundary-hulog agreement
negates the employer-employee relationship between the vendor and vendee, and,
as a corollary, whether the Labor Arbiter has jurisdiction over a complaint for illegal
dismissal in such case.

We resolve these issues in the affirmative.

The rule is that, the nature of an action and the subject matter thereof, as well as,
which court or agency of the government has jurisdiction over the same, are
determined by the material allegations of the complaint in relation to the law
involved and the character of the reliefs prayed for, whether or not the
complainant/plaintiff is entitled to any or all of such reliefs. 33 A prayer or demand for
relief is not part of the petition of the cause of action; nor does it enlarge the cause
of action stated or change the legal effect of what is alleged. 34 In determining which
body has jurisdiction over a case, the better policy is to consider not only the status
or relationship of the parties but also the nature of the action that is the subject of
their controversy.35

Article 217 of the Labor Code, as amended, vests on the Labor Arbiter exclusive
original jurisdiction only over the following:
x x x (a) Except as otherwise provided under this Code, the Labor Arbiters shall
have original and exclusive jurisdiction to hear and decide, within thirty (30)
calendar days after the submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the following cases involving
all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers
may file involving wage, rates of pay, hours of work, and other terms and
conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising
from the employer-employee relations;
5. Cases arising from violation of Article 264 of this Code, including questions
involving the legality of strikes and lockouts; and

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

maternity benefits, all other claims, arising from employer-employee
relationship, including those of persons in domestic or household service,
involving an amount exceeding five thousand pesos (P5,000.00) regardless of
whether accompanied with a claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over all
cases decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation of
collective bargaining agreements, and those arising from the
interpretation or enforcement of company personnel policies shall be
disposed of by the Labor Arbiter by referring the same to the grievance
machinery and voluntary arbitration as may be provided in said
agreements.

In the foregoing cases, an employer-employee relationship is an indispensable

jurisdictional requisite.36 The jurisdiction of Labor Arbiters and the NLRC under
Article 217 of the Labor Code is limited to disputes arising from an employeremployee relationship which can only be resolved by reference to the Labor Code,
other labor statutes or their collective bargaining agreement. 37 Not every dispute
between an employer and employee involves matters that only the Labor Arbiter
and the NLRC can resolve in the exercise of their adjudicatory or quasi-judicial
powers. Actions between employers and employees where the employer-employee
relationship is merely incidental is within the exclusive original jurisdiction of the
regular courts.38 When the principal relief is to be granted under labor legislation or
a collective bargaining agreement, the case falls within the exclusive jurisdiction of
the Labor Arbiter and the NLRC even though a claim for damages might be asserted
as an incident to such claim.39

We agree with the ruling of the CA that, under the boundary-hulog scheme
incorporated in the Kasunduan, a dual juridical relationship was created between
petitioner and respondent: that of employer-employee and vendor-vendee. The
Kasunduan did not extinguish the employer-employee relationship of the parties
extant before the execution of said deed.
As early as 1956, the Court ruled in National Labor Union v. Dinglasan 40 that the
jeepney owner/operator-driver relationship under the boundary system is that of
employer-employee and not lessor-lessee. This doctrine was affirmed, under similar
factual settings, in Magboo v. Bernardo41 and Lantaco, Sr. v. Llamas,42 and was
analogously applied to govern the relationships between auto-calesa

owner/operator and driver,43 bus owner/operator and conductor, 44 and taxi

owner/operator and driver.45

The boundary system is a scheme by an owner/operator engaged in transporting

passengers as a common carrier to primarily govern the compensation of the driver,
that is, the latters daily earnings are remitted to the owner/operator less the excess
of the boundary which represents the drivers compensation. Under this system, the
owner/operator exercises control and supervision over the driver. It is unlike in lease
of chattels where the lessor loses complete control over the chattel leased but the
lessee is still ultimately responsible for the consequences of its use. The
management of the business is still in the hands of the owner/operator, who, being
the holder of the certificate of public convenience, must see to it that the driver
follows the route prescribed by the franchising and regulatory authority, and the
rules promulgated with regard to the business operations. The fact that the driver
does not receive fixed wages but only the excess of the "boundary" given to the
owner/operator is not sufficient to change the relationship between them.
Indubitably, the driver performs activities which are usually necessary or desirable
in the usual business or trade of the owner/operator. 46

Under the Kasunduan, respondent was required to remit P550.00 daily to petitioner,
an amount which represented the boundary of petitioner as well as respondents
partial payment (hulog) of the purchase price of the jeepney.
Respondent was entitled to keep the excess of his daily earnings as his daily wage.
Thus, the daily remittances also had a dual purpose: that of petitioners boundary
and respondents partial payment (hulog) for the vehicle. This dual purpose was
expressly stated in the Kasunduan. The well-settled rule is that an obligation is not
novated by an instrument that expressly recognizes the old one, changes only the
terms of payment, and adds other obligations not incompatible with the old
provisions or where the new contract merely supplements the previous one. 47 The
two obligations of the respondent to remit to petitioner the boundary-hulog can
stand together.

In resolving an issue based on contract, this Court must first examine the contract
itself, keeping in mind that when the terms of the agreement are clear and leave no
doubt as to the intention of the contracting parties, the literal meaning of its
stipulations shall prevail.48 The intention of the contracting parties should be
ascertained by looking at the words used to project their intention, that is, all the
words, not just a particular word or two or more words standing alone. The various
stipulations of a contract shall be interpreted together, attributing to the doubtful

ones that sense which may result from all of them taken jointly. 49 The parts and
clauses must be interpreted in relation to one another to give effect to the whole.
The legal effect of a contract is to be determined from the whole read together. 50

Under the Kasunduan, petitioner retained supervision and control over the conduct
of the respondent as driver of the jeepney, thus:
Ang mga patakaran, kaugnay ng bilihang ito sa pamamagitan ng boundary hulog ay
ang mga sumusunod:
1. Pangangalagaan at pag-iingatan ng TAUHAN NG IKALAWANG PANIG ang
sasakyan ipinagkatiwala sa kanya ng TAUHAN NG UNANG PANIG.
2. Na ang sasakyan nabanggit ay gagamitin lamang ng TAUHAN NG
IKALAWANG PANIG sa paghahanapbuhay bilang pampasada o pangangalakal
sa malinis at maayos na pamamaraan.
3. Na ang sasakyan nabanggit ay hindi gagamitin ng TAUHAN NG IKALAWANG
PANIG sa mga bagay na makapagdudulot ng kahihiyan, kasiraan o
pananagutan sa TAUHAN NG UNANG PANIG.
4. Na hindi ito mamanehohin ng hindi awtorisado ng opisina ng UNANG
PANIG.
5. Na ang TAUHAN NG IKALAWANG PANIG ay kinakailangang maglagay ng ID
Card sa harap ng windshield upang sa pamamagitan nito ay madaliang
malaman kung ang nagmamaneho ay awtorisado ng VILLAMARIA MOTORS o
hindi.
6. Na sasagutin ng TAUHAN NG IKALAWANG PANIG ang [halaga ng] multa
kung sakaling mahuli ang sasakyang ito na hindi nakakabit ang ID card sa
wastong lugar o anuman kasalanan o kapabayaan.
7. Na sasagutin din ng TAUHAN NG IKALAWANG PANIG ang materyales o
piyesa na papalitan ng nasira o nawala ito dahil sa kanyang kapabayaan.
8. Kailangan sa VILLAMARIA MOTORS pa rin ang garahe habang hinuhulugan
pa rin ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan.
9. Na kung magkaroon ng mabigat na kasiraan ang sasakyang ipinagkaloob
ng TAUHAN NG UNANG PANIG, ang TAUHAN NG IKALAWANG PANIG ay
obligadong itawag ito muna sa VILLAMARIA MOTORS bago ipagawa sa alin
mang Motor Shop na awtorisado ng VILLAMARIA MOTORS.

10. Na hindi pahihintulutan ng TAUHAN NG IKALAWANG PANIG sa panahon ng

pamamasada na ang nagmamaneho ay naka-tsinelas, naka short pants at
nakasando lamang. Dapat ang nagmamaneho ay laging nasa maayos ang
kasuotan upang igalang ng mga pasahero.
11. Na ang TAUHAN NG IKALAWANG PANIG o ang awtorisado niyang driver ay
magpapakita ng magandang asal sa mga pasaheros at hindi dapat
magsasalita ng masama kung sakali man may pasaherong pilosopo upang
maiwasan ang anumang kaguluhan na maaaring kasangkutan.
12. Na kung sakaling hindi makapagbigay ng BOUNDARY HULOG ang TAUHAN
NG IKALAWANG PANIG sa loob ng tatlong (3) araw ay ang opisina ng
VILLAMARIA MOTORS ang may karapatang mangasiwa ng nasabing sasakyan
hanggang matugunan ang lahat ng responsibilidad. Ang halagang dapat
bayaran sa opisina ay may karagdagang multa ng P50.00 sa araw-araw na ito
ay nasa pangangasiwa ng VILLAMARIA MOTORS.
13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng
BOUNDARY HULOG sa loob ng isang linggo ay nangangahulugan na ang
kasunduang ito ay wala ng bisa at kusang ibabalik ng TAUHAN NG
IKALAWANG PANIG ang nasabing sasakyan sa TAUHAN NG UNANG PANIG.
14. Sasagutin ng TAUHAN NG IKALAWANG PANIG ang bayad sa rehistro,
comprehensive insurance taon-taon at kahit anong uri ng aksidente habang
ito ay hinuhulugan pa sa TAUHAN NG UNANG PANIG.
15. Na ang TAUHAN NG IKALAWANG PANIG ay obligadong dumalo sa
pangkalahatang pagpupulong ng VILLAMARIA MOTORS sa tuwing tatawag
ang mga tagapangasiwa nito upang maipaabot ang anumang mungkahi sa
ikasusulong ng samahan.
16. Na ang TAUHAN NG IKALAWANG PANIG ay makikiisa sa lahat ng mga
patakaran na magkakaroon ng pagbabago o karagdagan sa mga darating na
panahon at hindi magiging hadlang sa lahat ng mga balakin ng VILLAMARIA
MOTORS sa lalo pang ipagtatagumpay at ikakatibay ng Samahan.
17. Na ang TAUHAN NG IKALAWANG PANIG ay hindi magiging buwaya sa
pasahero upang hindi kainisan ng kapwa driver at maiwasan ang
pagkakasangkot sa anumang gulo.
18. Ang nasabing sasakyan ay hindi kalilimutang siyasatin ang kalagayan lalo
na sa umaga bago pumasada, at sa hapon o gabi naman ay sisikapin
mapanatili ang kalinisan nito.
19. Na kung sakaling ang nasabing sasakyan ay maaarkila at aabutin ng
dalawa o higit pang araw sa lalawigan ay dapat lamang na ipagbigay alam

muna ito sa VILLAMARIA MOTORS upang maiwasan ang mga anumang

suliranin.
20. Na ang TAUHAN NG IKALAWANG PANIG ay iiwasan ang pakikipag-unahan
sa kaninumang sasakyan upang maiwasan ang aksidente.
21. Na kung ang TAUHAN NG IKALAWANG PANIG ay mayroon sasabihin sa
VILLAMARIA MOTORS mabuti man or masama ay iparating agad ito sa
kinauukulan at iwasan na iparating ito kung [kani-kanino] lamang upang
maiwasan ang anumang usapin. Magsadya agad sa opisina ng VILLAMARIA
MOTORS.
22. Ang mga nasasaad sa KASUNDUAN ito ay buong galang at puso kong
sinasang-ayunan at buong sikap na pangangalagaan ng TAUHAN NG
IKALAWANG PANIG ang nasabing sasakyan at gagamitin lamang ito sa
paghahanapbuhay at wala nang iba pa. 51

The parties expressly agreed that petitioner, as vendor, and respondent, as vendee,
entered into a contract to sell the jeepney on a daily installment basis of P550.00
payable in four years and that petitioner would thereafter become its owner. A
contract is one of conditional sale, oftentimes referred to as contract to sell, if the
ownership or title over the
property sold is retained by the vendor, and is not passed to the vendee unless and
until there is full payment of the purchase price and/or upon faithful compliance
with the other terms and conditions that may lawfully be stipulated. 52 Such payment
or satisfaction of other preconditions, as the case may be, is a positive suspensive
condition, the failure of which is not a breach of contract, casual or serious, but
simply an event that would prevent the obligation of the vendor to convey title from
acquiring binding force.53 Stated differently, the efficacy or obligatory force of the
vendor's obligation to transfer title is subordinated to the happening of a future and
uncertain event so that if the suspensive condition does not take place, the parties
would stand as if the conditional obligation had never existed. 54 The vendor may
extrajudicially terminate the operation of the contract, refuse conveyance, and
retain the sums or installments already received, where such rights are expressly
provided for.55

Under the boundary-hulog scheme, petitioner retained ownership of the jeepney

although its material possession was vested in respondent as its driver. In case
respondent failed to make his P550.00 daily installment payment for a week, the
agreement would be of no force and effect and respondent would have to return the
jeepney to petitioner; the employer-employee relationship would likewise be

terminated unless petitioner would allow respondent to continue driving the jeepney
on a boundary basis of P550.00 daily despite the termination of their vendor-vendee
relationship.

The juridical relationship of employer-employee between petitioner and respondent

was not negated by the foregoing stipulation in the Kasunduan, considering that
petitioner retained control of respondents conduct as driver of the vehicle. As
correctly ruled by the CA:
The exercise of control by private respondent over petitioners conduct in operating
the jeepney he was driving is inconsistent with private respondents claim that he
is, or was, not engaged in the transportation business; that, even if petitioner was
allowed to let some other person drive the unit, it was not shown that he did so;
that the existence of an employment relation is not dependent on how the worker is
paid but on the presence or absence of control over the means and method of the
work; that the amount earned in excess of the "boundary hulog" is equivalent to
wages; and that the fact that the power of dismissal was not mentioned in the
Kasunduan did not mean that private respondent never exercised such power, or
could not exercise such power.

Moreover, requiring petitioner to drive the unit for commercial use, or to wear an
identification card, or to don a decent attire, or to park the vehicle in Villamaria
Motors garage, or to inform Villamaria Motors about the fact that the unit would be
going out to the province for two days of more, or to drive the unit carefully, etc.
necessarily related to control over the means by which the petitioner was to go
about his work; that the ruling applicable here is not Singer Sewing Machine but
National Labor Union since the latter case involved jeepney owners/operators and
jeepney drivers, and that the fact that the "boundary" here represented installment
payment of the purchase price on the jeepney did not withdraw the relationship
from that of employer-employee, in view of the overt presence of supervision and
control by the employer.56

Neither is such juridical relationship negated by petitioners claim that the terms
and conditions in the Kasunduan relative to respondents behavior and deportment
as driver was for his and respondents benefit: to insure that respondent would be
able to pay the requisite daily installment of P550.00, and that the vehicle would
still be in good condition despite the lapse of four years. What is primordial is that
petitioner retained control over the conduct of the respondent as driver of the
jeepney.

Indeed, petitioner, as the owner of the vehicle and the holder of the franchise, is
entitled to exercise supervision and control over the respondent, by seeing to it that
the route provided in his franchise, and the rules and regulations of the Land
Transportation Regulatory Board are duly complied with. Moreover, in a business
establishment, an identification card is usually provided not just as a security
measure but to mainly identify the holder thereof as a bona fide employee of the
firm who issues it.57
As respondents employer, it was the burden of petitioner to prove that
respondents termination from employment was for a lawful or just cause, or, at the
very least, that respondent failed to make his daily remittances of P550.00 as
boundary. However, petitioner failed to do so. As correctly ruled by the appellate
court:
It is basic of course that 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.

Parenthetically, given the peculiarity of the situation of the parties here, the default
in the remittance of the boundary hulog for one week or longer may be considered
an additional cause for termination of employment. The reason is because the
Kasunduan would be of no force and effect in the event that the purchaser failed to
remit the boundary hulog for one week. The Kasunduan in this case pertinently
stipulates:
13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng
BOUNDARY HULOG sa loob ng isang linggo ay NANGANGAHULUGAN na ang
kasunduang ito ay wala ng bisa at kusang ibabalik ng TAUHAN NG IKALAWANG
PANIG ang nasabing sasakyan sa TAUHAN NG UNANG PANIG na wala ng paghahabol
pa.
Moreover, well-settled is the rule that, the employer has the burden of proving that
the dismissal of an employee is for a just cause. The failure of the employer to
discharge this burden means that the dismissal is not justified and that the
employee is entitled to reinstatement and back wages.

In the case at bench, private respondent in his position paper before the Labor
Arbiter, alleged that petitioner failed to pay the miscellaneous fee of P10,000.00
and the yearly registration of the unit; that petitioner also stopped remitting the
"boundary hulog," prompting him (private respondent) to issue a "Paalala," which

petitioner however ignored; that petitioner even brought the unit to his
(petitioners) province without informing him (private respondent) about it; and that
petitioner eventually abandoned the vehicle at a gasoline station after figuring in an
accident. But private respondent failed to substantiate these allegations with solid,
sufficient proof. Notably, private respondents allegation viz, that he retrieved the
vehicle from the gas station, where petitioner abandoned it, contradicted his
statement in the Paalala that he would enforce the provision (in the Kasunduan) to
the effect that default in the remittance of the boundary hulog for one week would
result in the forfeiture of the unit. The Paalala reads as follows:
"Sa lahat ng mga kumukuha ng sasakyan
"Sa pamamagitan ng BOUNDARY HULOG
"Nais ko pong ipaalala sa inyo ang Kasunduan na inyong pinirmahan particular na
ang paragrapo 13 na nagsasaad na kung hindi kayo makapagbigay ng Boundary
Hulog sa loob ng isang linggo ay kusa ninyong ibabalik and nasabing sasakyan na
inyong hinuhulugan ng wala ng paghahabol pa.
"Mula po sa araw ng inyong pagkatanggap ng Paalala na ito ay akin na pong
ipatutupad ang nasabing Kasunduan kayat aking pinaaalala sa inyong lahat na
tuparin natin ang nakalagay sa kasunduan upang maiwasan natin ito.
"Hinihiling ko na sumunod kayo sa hinihingi ng paalalang ito upang hindi na tayo
makaabot pa sa korte kung sakaling hindi ninyo isasauli ang inyong sasakyan na
hinuhulugan na ang mga magagastos ay kayo pa ang magbabayad sapagkat ang
hindi ninyo pagtupad sa kasunduan ang naging dahilan ng pagsampa ng kaso.
"Sumasainyo
"Attendance: 8/27/99
"(The Signatures appearing herein
include (sic) that of petitioners) (Sgd.)
OSCAR VILLAMARIA, JR."
If it were true that petitioner did not remit the boundary hulog for one week or
more, why did private respondent not forthwith take steps to recover the unit, and
why did he have to wait for petitioner to abandon it?
On another point, private respondent did not submit any police report to support his
claim that petitioner really figured in a vehicular mishap. Neither did he present the
affidavit of the guard from the gas station to substantiate his claim that petitioner
abandoned the unit there.58

Petitioners claim that he opted not to terminate the employment of respondent

because of magnanimity is negated by his (petitioners) own evidence that he took
the jeepney from the respondent only on July 24, 2000.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision of the Court
of Appeals in CA-G.R. SP No. 78720 is AFFIRMED. Costs against petitioner.
SO ORDERED.

19) G.R. No. 142293

February 27, 2003

VICENTE SY, TRINIDAD PAULINO, 6BS TRUCKING CORPORATION, and SBT 1

TRUCKING CORPORATION, petitioners, vs. HON. COURT OF APPEALS and
JAIME SAHOT, respondents.

DECISION
QUISUMBING, J.:
This petition for review seeks the reversal of the decision 2 of the Court of Appeals
dated February 29, 2000, in CA-G.R. SP No. 52671, affirming with modification the
decision3 of the National Labor Relations Commission promulgated on June 20, 1996
in NLRC NCR CA No. 010526-96. Petitioners also pray for the reinstatement of the
decision4 of the Labor Arbiter in NLRC NCR Case No. 00-09-06717-94.

Culled from the records are the following facts of this case:
Sometime in 1958, private respondent Jaime Sahot 5 started working as a truck
helper for petitioners family-owned trucking business named Vicente Sy Trucking.
In 1965, he became a truck driver of the same family business, renamed T. Paulino
Trucking Service, later 6Bs Trucking Corporation in 1985, and thereafter known as
SBT Trucking Corporation since 1994. Throughout all these changes in names and
for 36 years, private respondent continuously served the trucking business of
petitioners.

In April 1994, Sahot was already 59 years old. He had been incurring absences as
he was suffering from various ailments. Particularly causing him pain was his left
thigh, which greatly affected the performance of his task as a driver. He inquired

about his medical and retirement benefits with the Social Security System (SSS) on
April 25, 1994, but discovered that his premium payments had not been remitted by
his employer.

Sahot had filed a week-long leave sometime in May 1994. On May 27th, he was
medically examined and treated for EOR, presleyopia, hypertensive retinopathy G II
(Annexes "G-5" and "G-3", pp. 48, 104, respectively), 6 HPM, UTI, Osteoarthritis
(Annex "G-4", p. 105),7 and heart enlargement (Annex G, p. 107). 8 On said grounds,
Belen Paulino of the SBT Trucking Service management told him to file a formal
request for extension of his leave. At the end of his week-long absence, Sahot
applied for extension of his leave for the whole month of June, 1994. It was at this
time when petitioners allegedly threatened to terminate his employment should he
refuse to go back to work.

At this point, Sahot found himself in a dilemma. He was facing dismissal if he

refused to work, But he could not retire on pension because petitioners never paid
his correct SSS premiums. The fact remained he could no longer work as his left
thigh hurt abominably. Petitioners ended his dilemma. They carried out their threat
and dismissed him from work, effective June 30, 1994. He ended up sick, jobless
and penniless.
On September 13, 1994, Sahot filed with the NLRC NCR Arbitration Branch, a
complaint for illegal dismissal, docketed as NLRC NCR Case No. 00-09-06717-94. He
prayed for the recovery of separation pay and attorneys fees against Vicente Sy and
Trinidad Paulino-Sy, Belen Paulino, Vicente Sy Trucking, T. Paulino Trucking Service,
6Bs Trucking and SBT Trucking, herein petitioners.

For their part, petitioners admitted they had a trucking business in the 1950s but
denied employing helpers and drivers. They contend that private respondent was
not illegally dismissed as a driver because he was in fact petitioners industrial
partner. They add that it was not until the year 1994, when SBT Trucking
Corporation was established, and only then did respondent Sahot become an
employee of the company, with a monthly salary that reached P4,160.00 at the time
of his separation.
Petitioners further claimed that sometime prior to June 1, 1994, Sahot went on leave
and was not able to report for work for almost seven days. On June 1, 1994, Sahot
asked permission to extend his leave of absence until June 30, 1994. It appeared
that from the expiration of his leave, private respondent never reported back to

work nor did he file an extension of his leave. Instead, he filed the complaint for
illegal dismissal against the trucking company and its owners.

Petitioners add that due to Sahots refusal to work after the expiration of his
authorized leave of absence, he should be deemed to have voluntarily resigned
from his work. They contended that Sahot had all the time to extend his leave or at
least inform petitioners of his health condition. Lastly, they cited NLRC Case No. RE4997-76, entitled "Manuelito Jimenez et al. vs. T. Paulino Trucking Service," as a
defense in view of the alleged similarity in the factual milieu and issues of said case
to that of Sahots, hence they are in pari material and Sahots complaint ought also
to be dismissed.

The NLRC NCR Arbitration Branch, through Labor Arbiter Ariel Cadiente Santos,
ruled that there was no illegal dismissal in Sahots case. Private respondent had
failed to report to work. Moreover, said the Labor Arbiter, petitioners and private
respondent were industrial partners before January 1994. The Labor Arbiter
concluded by ordering petitioners to pay "financial assistance" of P15,000 to Sahot
for having served the company as a regular employee since January 1994 only.

On appeal, the National Labor Relations Commission modified the judgment of the
Labor Arbiter. It declared that private respondent was an employee, not an
industrial partner, since the start. Private respondent Sahot did not abandon his job
but his employment was terminated on account of his illness, pursuant to Article
2849 of the Labor Code. Accordingly, the NLRC ordered petitioners to pay private
respondent separation pay in the amount of P60,320.00, at the rate of P2,080.00
per year for 29 years of service.

Petitioners assailed the decision of the NLRC before the Court of Appeals. In its
decision dated February 29, 2000, the appellate court affirmed with modification the
judgment of the NLRC. It held that private respondent was indeed an employee of
petitioners since 1958. It also increased the amount of separation pay awarded to
private respondent to P74,880, computed at the rate of P2,080 per year for 36
years of service from 1958 to 1994. It decreed:
WHEREFORE, the assailed decision is hereby AFFIRMED with MODIFICATION. SB
Trucking Corporation is hereby directed to pay complainant Jaime Sahot the sum of
SEVENTY-FOUR THOUSAND EIGHT HUNDRED EIGHTY (P74,880.00) PESOS as and for
his separation pay.10

Hence, the instant petition anchored on the following contentions:

I
RESPONDENT COURT OF APPEALS IN PROMULGATING THE QUESTION[ED] DECISION
AFFIRMING WITH MODIFICATION THE DECISION OF NATIONAL LABOR RELATIONS
COMMISSION DECIDED NOT IN ACCORD WITH LAW AND PUT AT NAUGHT ARTICLE
402 OF THE CIVIL CODE.11
II
RESPONDENT COURT OF APPEALS VIOLATED SUPREME COURT RULING THAT THE
NATIONAL LABOR RELATIONS COMMISSION IS BOUND BY THE FACTUAL FINDINGS OF
THE LABOR ARBITER AS THE LATTER WAS IN A BETTER POSITION TO OBSERVE THE
DEMEANOR AND DEPORTMENT OF THE WITNESSES IN THE CASE OF ASSOCIATION
OF INDEPENDENT UNIONS IN THE PHILIPPINES VERSUS NATIONAL CAPITAL REGION
(305 SCRA 233).12
III
PRIVATE RESPONDENT WAS NOT DISMISS[ED] BY RESPONDENT SBT TRUCKING
CORPORATION.13
Three issues are to be resolved: (1) Whether or not an employer-employee
relationship existed between petitioners and respondent Sahot; (2) Whether or not
there was valid dismissal; and (3) Whether or not respondent Sahot is entitled to
separation pay.
Crucial to the resolution of this case is the determination of the first issue. Before a
case for illegal dismissal can prosper, an employer-employee relationship must first
be established.14

Petitioners invoke the decision of the Labor Arbiter Ariel Cadiente Santos which
found that respondent Sahot was not an employee but was in fact, petitioners
industrial partner.15 It is contended that it was the Labor Arbiter who heard the case
and had the opportunity to observe the demeanor and deportment of the parties.
The same conclusion, aver petitioners, is supported by substantial evidence. 16
Moreover, it is argued that the findings of fact of the Labor Arbiter was wrongly
overturned by the NLRC when the latter made the following pronouncement:
We agree with complainant that there was error committed by the Labor Arbiter
when he concluded that complainant was an industrial partner prior to 1994. A

computation of the age of complainant shows that he was only twenty-three (23)
years when he started working with respondent as truck helper. How can we
entertain in our mind that a twenty-three (23) year old man, working as a truck
helper, be considered an industrial partner. Hence we rule that complainant was
only an employee, not a partner of respondents from the time complainant started
working for respondent.17
Because the Court of Appeals also found that an employer-employee relationship
existed, petitioners aver that the appellate courts decision gives an "imprimatur" to
the "illegal" finding and conclusion of the NLRC.

Private respondent, for his part, denies that he was ever an industrial partner of
petitioners. There was no written agreement, no proof that he received a share in
petitioners profits, nor was there anything to show he had any participation with
respect to the running of the business. 18
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 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 it.19

As found by the appellate court, petitioners owned and operated a trucking

business since the 1950s and by their own allegations, they determined private
respondents wages and rest day. 20 Records of the case show that private
respondent actually engaged in work as an employee. During the entire course of
his employment he did not have the freedom to determine where he would go, what
he would do, and how he would do it. He merely followed instructions of petitioners
and was content to do so, as long as he was paid his wages. Indeed, said the CA,
private respondent had worked as a truck helper and driver of petitioners not for his
own pleasure but under the latters control.

Article 176721 of the Civil Code states that in a contract of partnership two or more
persons bind themselves to contribute money, property or industry to a common
fund, with the intention of dividing the profits among themselves. 22 Not one of these
circumstances is present in this case. No written agreement exists to prove the
partnership between the parties. Private respondent did not contribute money,
property or industry for the purpose of engaging in the supposed business. There is
no proof that he was receiving a share in the profits as a matter of course, during

the period when the trucking business was under operation. Neither is there any
proof that he had actively participated in the management, administration and
adoption of policies of the business. Thus, the NLRC and the CA did not err in
reversing the finding of the Labor Arbiter that private respondent was an industrial
partner from 1958 to 1994.

On this point, we affirm the findings of the appellate court and the NLRC. Private
respondent Jaime Sahot was not an industrial partner but an employee of
petitioners from 1958 to 1994. The existence of an employer-employee relationship
is ultimately a question of fact23 and the findings thereon by the NLRC, as affirmed
by the Court of Appeals, deserve not only respect but finality when supported by
substantial evidence. Substantial evidence is such amount of relevant evidence
which a reasonable mind might accept as adequate to justify a conclusion. 24

Time and again this Court has said that "if doubt exists between the evidence
presented by the employer and the employee, the scales of justice must be tilted in
favor of the latter."25 Here, we entertain no doubt. Private respondent since the
beginning was an employee of, not an industrial partner in, the trucking business.

Coming now to the second issue, was private respondent validly dismissed by
petitioners?
Petitioners contend that it was private respondent who refused to go back to work.
The decision of the Labor Arbiter pointed out that during the conciliation
proceedings, petitioners requested respondent Sahot to report back for work.
However, in the same proceedings, Sahot stated that he was no longer fit to
continue working, and instead he demanded separation pay. Petitioners then
retorted that if Sahot did not like to work as a driver anymore, then he could be
given a job that was less strenuous, such as working as a checker. However, Sahot
declined that suggestion. Based on the foregoing recitals, petitioners assert that it is
clear that Sahot was not dismissed but it was of his own volition that he did not
report for work anymore.

In his decision, the Labor Arbiter concluded that:

While it may be true that respondents insisted that complainant continue working
with respondents despite his alleged illness, there is no direct evidence that will
prove that complainants illness prevents or incapacitates him from performing the

function of a driver. The fact remains that complainant suddenly stopped working
due to boredom or otherwise when he refused to work as a checker which certainly
is a much less strenuous job than a driver. 26
But dealing the Labor Arbiter a reversal on this score the NLRC, concurred in by the
Court of Appeals, held that:
While it was very obvious that complainant did not have any intention to report
back to work due to his illness which incapacitated him to perform his job, such
intention cannot be construed to be an abandonment. Instead, the same should
have been considered as one of those falling under the just causes of terminating
an employment. The insistence of respondent in making complainant work did not
change the scenario.
It is worthy to note that respondent is engaged in the trucking business where
physical strength is of utmost requirement (sic). Complainant started working with
respondent as truck helper at age twenty-three (23), then as truck driver since
1965. Complainant was already fifty-nine (59) when the complaint was filed and
suffering from various illness triggered by his work and age.
x x x27
In termination cases, the burden is upon the employer to show by substantial
evidence that the termination was for lawful cause and validly made. 28 Article
277(b) of the Labor Code puts the burden of proving that the dismissal of an
employee was for a valid or authorized cause on the employer, without distinction
whether the employer admits or does not admit the dismissal. 29 For an employees
dismissal to be valid, (a) the dismissal must be for a valid cause and (b) the
employee must be afforded due process.30
Article 284 of the Labor Code authorizes an employer to terminate an employee on
the ground of disease, viz:
Art. 284. Disease as a ground for termination- An employer may terminate the
services of an employee who has been found to be suffering from any disease and
whose continued employment is prohibited by law or prejudicial to his health as well
as the health of his co-employees: xxx
However, in order to validly terminate employment on this ground, Book VI, Rule I,
Section 8 of the Omnibus Implementing Rules of the Labor Code requires:
Sec. 8. Disease as a ground for dismissal- Where the employee suffers from a
disease and his continued employment is prohibited by law or prejudicial to his
health or to the health of his co-employees, the employer shall not terminate his
employment unless there is a certification by competent public health authority that
the disease is of such nature or at such a stage that it cannot be cured within a

period of six (6) months even with proper medical treatment. If the disease or
ailment can be cured within the period, the employer shall not terminate the
employee but shall ask the employee to take a leave. The employer shall reinstate
such employee to his former position immediately upon the restoration of his
normal health. (Italics supplied).

As this Court stated in Triple Eight integrated Services, Inc. vs. NLRC, 31 the
requirement for a medical certificate under Article 284 of the Labor Code cannot be
dispensed with; otherwise, it would sanction the unilateral and arbitrary
determination by the employer of the gravity or extent of the employees illness
and thus defeat the public policy in the protection of labor.
In the case at bar, the employer clearly did not comply with the medical certificate
requirement before Sahots dismissal was effected. In the same case of Sevillana vs.
I.T. (International) Corp., we ruled:
Since the burden of proving the validity of the dismissal of the employee rests on
the employer, the latter should likewise bear the burden of showing that the
requisites for a valid dismissal due to a disease have been complied with. In the
absence of the required certification by a competent public health authority, this
Court has ruled against the validity of the employees dismissal. It is therefore
incumbent upon the private respondents to prove by the quantum of evidence
required by law that petitioner was not dismissed, or if dismissed, that the dismissal
was not illegal; otherwise, the dismissal would be unjustified. This Court will not
sanction a dismissal premised on mere conjectures and suspicions, the evidence
must be substantial and not arbitrary and must be founded on clearly established
facts sufficient to warrant his separation from work. 32

In addition, we must likewise determine if the procedural aspect of due process had
been complied with by the employer.
From the records, it clearly appears that procedural due process was not observed
in the separation of private respondent by the management of the trucking
company. The employer is required to furnish an employee with two written notices
before the latter is dismissed: (1) the notice to apprise the employee of the
particular acts or omissions for which his dismissal is sought, which is the equivalent
of a charge; and (2) the notice informing the employee of his dismissal, to be issued
after the employee has been given reasonable opportunity to answer and to be
heard on his defense.33 These, the petitioners failed to do, even only for record
purposes. What management did was to threaten the employee with dismissal, then
actually implement the threat when the occasion presented itself because of private
respondents painful left thigh.

All told, both the substantive and procedural aspects of due process were violated.
Clearly, therefore, Sahots dismissal is tainted with invalidity.
On the last issue, as held by the Court of Appeals, respondent Jaime Sahot is
entitled to separation pay. The law is clear on the matter. An employee who is
terminated because of disease is entitled to "separation pay equivalent to at least
one month salary or to one-half month salary for every year of service, whichever is
greater xxx."34 Following the formula set in Art. 284 of the Labor Code, his
separation pay was computed by the appellate court at P2,080 times 36 years
(1958 to 1994) or P74,880. We agree with the computation, after noting that his last
monthly salary was P4,160.00 so that one-half thereof is P2,080.00. Finding no
reversible error nor grave abuse of discretion on the part of appellate court, we are
constrained to sustain its decision. To avoid further delay in the payment due the
separated worker, whose claim was filed way back in 1994, this decision is
immediately executory. Otherwise, six percent (6%) interest per annum should be
charged thereon, for any delay, pursuant to provisions of the Civil Code.

WHEREFORE, the petition is DENIED and the decision of the Court of Appeals dated
February 29, 2000 is AFFIRMED. Petitioners must pay private respondent Jaime
Sahot his separation pay for 36 years of service at the rate of one-half monthly pay
for every year of service, amounting to P74,880.00, with interest of six per centum
(6%) per annum from finality of this decision until fully paid.
Costs against petitioners.
SO ORDERED.

20) 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. 7-260384 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) nonpayment 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. 2428-85 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.

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 EMPLOYEREMPLOYEE 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
PELOBELLO AND ZAPATA WERE ILLEGALLY DISMISSED. 7

THAT

RESPONDENTS

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. ..." 12 No 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 selfdestruction of the employer. 17 More 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.

21) 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 FIMS, respondents.
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 to P450.00 in May 1990. In June
1991, he was promoted to the rank of Electrician with a weekly salary of P475.00,
which was increased to P539.00 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 supervisors, 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 association
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-tired "Narito
and 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 laboronly contractor and as such, acts as a mere agent of the real employer,
the herein respondent. 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 complainant 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 attorney's 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. 00619594). 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 was co-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 xxx 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 NLRC's 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 NLRC's 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 NLRC's 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 NLRC's
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 NLRC's 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 respondent further narrated that VIVA's 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 the 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. . . .
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 employer's power to control of the employee's conduct, the
most important element is the employer's control of the employee's conduct, not
only as to the result of the work to be done but also as to the means and methods
to accomplish 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 . . .
The ensure that qualify 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
Company's 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
PRODUCER's 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 plans to 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 supplied).
VIVA's 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 moviemaking 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
director's control, and not VIVA's direction. The director merely instructs petitioners
on how to better comply with VIVA's 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 "supervisors" and "Top Management" can only refer to the "supervisors"
and "Top Management" of VIVA. By commanding crew members to observe the rules
and regulations promulgated by VIVA, the appointment slips only emphasize VIVA's
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 VIVA's 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 VIVA's 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 if VIVA's 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 rehired 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
FILM

DATE
STARTED

DATE
COMPLETE
D

ASSOCIATE
PRODUCER

LOVE AT FIRST SIGHT

1/3/90

2/16/90

MARIVIC ONG

PAIKOT-IKOT

1/26/90

3/11/90

EDITH MANUEL

ROCKY & ROLLY

2/13/90

3/29/90

M. ONG

PAIKOT-IKOT (addl. 1/2)

3/12/90

4/3/90

E. MANUEL

ROCKY & ROLLY (2nd contract)

4/6/90

5/20/90

M. ONG

NARDONG TOOTHPICK

4/4/90

5/18/90

JUN CHING

BAKIT KAY TAGAL NG SANDALI

6/26/90

10/20/90

E. MANUEL

9/23/90

E. MANUEL

HINUKAY KO NA ANG LIBINGAN 9/6/90

MO

10/20/90

JUN CHING

MAGING SINO KA MAN

12/8/90

SANDY STA. MARIA

M. SINO KA MAN (2nd contract) 12/9/90

1/22/91

SANDY S

NOEL JUICO

1/29/91

3/14/90

JUN CHING

NOEL JUICO (2nd contract)

3/15/91

4/6/91

JUN CHING

ROBIN GOOD

5/7/91

6/20/91

M. ONG

UTOL KONG HOODLUM # 1

6/23/91

8/6/91

JUN CHING

KAPUTOL NG ISANG AWIT

8/18/91

10/2/91

SANDY S.

DARNA

10/4/91

11/18/91

E. MANUEL

DARNA (addl. 1/2)

11/20/91

12/12/91

E. MANUEL

MAGNONG REHAS

12/13/91

1/27/92

BOBBY GRIMALT

M. REHAS (2nd contract)

1/28/92

3/12/92

B. GRIMALT

BAKIT
KAY
contract)

TAGAL

(2nd 8/10/90

10/25/90

HIRAM NA MUKHA

3/15/92

4/29/92

M. ONG

HIRAM (2nd contract)

5/1/92

6/14/92

M. ONG

KAHIT AKO'Y BUSABOS

5/28/92

7/7/92

JERRY OHARA

SIGAW NG PUSO

7/1/92

8/4/92

M. ONG

SIGAW (addl. 1/2)

8/15/92

9/5/92

M. ONG

NGAYON AT KAILANMAN

9/6/92

10/20/92

SANDY STA. MARIA

While Maraguinot was a member of Shooting Unit III, which made the following
movies (Annex "4-A" of Respondents' Position Paper; OR, 29):
FILM
DATE
DATE
ASSOCIATE
STARTED
COMPLETED PRODUCER
GUMAPANG KA SA LUSAK
1/27/90
3/12/90
JUN CHING
PETRANG KABAYO
2/19/90
4/4/90
RUTH GRUTA
LUSAK (2nd contract)
3/14/90
4/27/90
JUN CHING
P. KABAYO (Addl 1/2 contract)
4/21/90
5/13/90
RUTH GRUTA
BADBOY
6/15/90
7/29/90
EDITH MANUEL
BADBOY (2nd contract)
7/30/90
8/21/90
E. MANUEL
ANAK NI BABY AMA
9/2/90
10/16/90
RUTH GRUTA
A.B. AMA (addl 1/2)
10/17/90
11/8/90
RUTH GRUTA
A.B. AMA (addl 2nd 1/2)
11/9/90
12/1/90
R. GRUTA
BOYONG MANALAC
11/30/90
1/14/91
MARIVIC ONG
HUMANAP KA NG PANGET
1/20/91
3/5/91
EDITH MANUEL
H. PANGET(2nd contract)
3/10/91
4/23/91
E. MANUEL
B. MANALAC (2nd contract)
5/22/91
7/5/91
M. ONG
ROBIN GOOD (2nd contract)
7/7/91
8/20/91
M. ONG
PITONG GAMOL
8/30/91
10/13/91
M. ONG
P. GAMOL (2nd contract)
10/14/91
11/27/91
M. ONG
GREASE GUN GANG
12/28/91
2/10/92
E. MANUEL
ALABANG GIRLS (1/2 contract) 3/4/92
3/26/92
M. ONG
BATANG RILES
3/9/92
3/30/92
BOBBY GRIMALT
UTOL KONG HOODLUM (part 2) 3/22/92
5/6/92
B. GRIMALT
UTOL (addl. 1/2 contract)
5/7/92
5/29/92
B. GRIMALT
MANDURUGAS (2nd contract)
5/25/92
7/8/92
JERRY OHARA
MAHIRAP MAGING POGI
7/2/92
8/15/92
M. ONG
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: . . .
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 of 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 vase of Industrial-Commercial-Agricultural
Workers Organization v. CIR [16 SCRA 526, 567-568 (1966)] which
deals with regular seasonal employees. There we held: . . .
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
(emphasis 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 employer's usual business or trade. Let
it not be said that this decision "coddles" labor, for as Lao has 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 Court's 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
employer's 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 01 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.
22) G.R. No. 129076 November 25, 1998
ORLANDO FARMS GROWERS ASSOCIATION/GLICERIO AOVER, petitioner, vs.
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION (FIFTH
DIVISION), ANTONIO PAQUIT, ESTHER BONGGOT, FRANCISCO BAUG,
LEOCADIO ORDONO, REBECCA MOREN, MARCELINA HONTIVEROS, MARTIN
ORDONO, TITO ORDONO, FE ORDONO, ERNIE COLON, EUSTIQUIO GELDO,
DANNY SAM, JOEL PIAMONTE, FEDERICO PASTOLERO, VIRGINIA BUSANO,
EDILMIRO ALDION, EUGENIO BETICAN, JR. and BERNARDO OPERIO,
respondents.

ROMERO, J.:
It is a settled doctrine that an employer-employee relationship can be deduced from
the existence of the following elements: (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.
The principal issue to be resolved in the instant petition is whether or not an
unregistered association may be an employer independent of the respective
members it represents.

The evidence reveals the ensuing facts:

Petitioner Orlando Farms Growers Association, with co-petitioner Glicerio Aover as
its President, is an association of landowners engaged in the production of export
quality bananas located in Kinamayan, Sto. Tomas, Davao del Norte, established for
the sole purpose of dealing collectively with Stanfilco on matters concerning
technical services, canal maintenance, irrigation and pest control, among others.
Respondents, on the other hand, were hired as farm workers by several member-

landowners but; nonetheless, were made to perform functions as packers and

harvesters in the plantation of petitioner association.

After respondents were dismissed on various dates from January 8, 1993 to July 30,
1994, several complaints were filed against petitioner for illegal dismissal and
monetary benefits. Based on similar grounds, the same were consolidated in the
office of Labor Arbiter Newton R. Sancho who, in a decision dated September 6,
1995, ordered their reinstatement, viz:
WHEREFORE, judgment is hereby rendered declaring the dismissal of the 20
above-named complainants ILLEGAL, and ordering respondents Orlando
Farms Growers Association/Glicerio Anover to REINSTATE them immediately to
their former or equivalent positions, and to PAY individual complainants their
respective backwages and other benefits (wage differentials, 13th month pay
and holiday pay) appearing opposite their names above set forth, including
moral damages and attorney's fees, in the total amount of P1,047,720.92
only.
All other claims are dismissed for lack of merit.
As becoming a collective association, respondents liabilities to complainants
are joint and solidary, with its responsible officers.
The case of Loran Paquit and Lovilla Dorlones
amicably settled.

is dropped for having been

In case of appeal, backwages and other benefits shall accrue but in no case
exceeding 3 years, without any qualification or deduction.
SO ORDERED.

On appeal, the National Labor Relations Commission (NLRC) affirmed the same in
toto in a decision dated December 26, 1996. Its motion for reconsideration having
been denied on February 25, 1997, petitioner filed the instant petition for certiorari.

Petitioner alleged that the NLRC erred in finding that respondents were its
employees and not of the individual landowners which fact can easily be deduced
from the payments made by the latter of respondent's Social Security System (SSS)
contributions. Moreover, it could have never exercised the power of control over
them with regard to the manner and method by which the work was to be

accomplished, which authority remain vested with the landowners despite

becoming members thereof.
The arguments adduced before us do not warrant the nullification of the findings
made by the Labor Arbiter and the NLRC as the determination of the existence of an
employer-employee relationship between the party-litigants, being a question of
fact, is amply supported by substantial evidence, as can be gathered from a
perfunctory reading, not only of the pleadings submitted, but from the assailed
decision, as well. Thus, the authority of this Court to review the findings of the NLRC
is limited to allegations of lack of jurisdiction or grave abuse of discretion.

The contention that petitioner, being an unregistered association and having been
formed solely to serve as an effective medium for dealing collectively with Stanfilco,
does not exist in law and, therefore, cannot be considered an employer, is
misleading. This assertion can easily be dismissed by reference to Article 212 (e) of
the Labor Code, as amended, which defines an employer as any person acting in
the interest of an employer, directly or indirectly. Following a careful scrutiny of the
said provision, the Court concludes that the law does not require an employer to be
registered before he may come within the purview of the Labor Code, consistent
with the established rule in statutory construction that when the law does not
distinguish, we should not distinguish. To do otherwise would bring about a situation
whereby employees are denied, not only redress of their grievances, but, more
importantly, the protection and benefits accorded to them by law if their employer
happens to be an unregistered association.

To reiterate, as held in the case of Filipinas Broadcasting Network, Inc. v. NLRC, 3 the
following are generally considered in the determination of the existence of an
employer-employee relationship; (1) the manner of selection and engagement; (2)
the payment of wages; (3) the presence or absence of the power of dismissal; and
(4) the presence or absence of the power of control; of these four, the last one
being the most important.

In the instant case, the following circumstances which support the existence of
employer-employee relations cannot be denied. During the subsistence of the
association, several circulars and memoranda were issued concerning, among other
things, absences without formal request, loitering in the work area and disciplinary
measures with which every worker is enjoined to comply. Furthermore, the
employees were issued identification cards which the Court, in the case of Domasig
v. NLRC, 4 construed, not only as a security measure but mainly to identify the
holder as a bonafide employee of the firm. However, what makes the relationship

explicit is the power of the petitioner to enter into compromise agreements

involving money claims filed by three of its employees, namely: Lorna Paquit,
Lovella Dorlones and Jasmine Espanola. If petitioner's disclaimer were to be
believed, what benefit would accrue to it in settling an employer-employee dispute
to which it allegedly lay no claim?

In spite of the overwhelming evidence sufficient to justify a conclusion that

respondents were indeed employees of petitioner, the latter, nevertheless, maintain
the preposterous claim that the ID card, circulars and memoranda were issued
merely to facilitate the efficient use of common resources, as well as to promote
uniform rules in the work establishment. On this score, we defer to the observations
made by the NLRC when it ruled that, while the original purpose of the formation of
the association was merely to provide the landowners a unified voice in dealing with
Stanfilco, petitioner however exceeded its avowed intentions when its subsequent
actions reenforced only too clearly its admitted role of employer. As reiterated all
too often, factual findings of the NLRC, particularly when they coincide with those of
the Labor Arbiter, are accorded respect, even finality, and will not be disturbed for
as long as such findings are supported by substantial evidence. 5

Prescinding from the foregoing, we now address the issue of whether or not
petitioner had a valid ground to dismiss respondents from their respective
employment.

It is settled that in termination disputes, the employer bears the burden of proving
that the dismissal is for just cause, failing which it would mean that the dismissal is
not justified and the employer is entitled to reinstatement. 6 The dismissal of
employees must be made within the parameters of the law and pursuant to the
basic tenets of equity, justice and fair play. 7 In Brahm Industries, Inc. v. NLRC, 8 the
Court explained that there are two (2) facets of valid termination of employment; (a)
the legality of the act of dismissal, i.e., the dismissal must be under any of the just
causes provided under Art. 282 9 of the Labor Code; and (b) the legality of the
manner of dismissal, which means that there must be observance of the
requirements of due process, otherwise known as the two-notice rule. Thus, "the
employer is required to furnish the employee with a written notice containing a
statement of the cause for termination and to afford said employee ample
opportunity to be heard and to defend himself with the assistance of his
representative, if he so desires. The employer is also required to notify the worker in
writing of the decision to dismiss him, stating clearly the reasons therefore." 10

In the instant case, petitioner severed employment relations when it whimsically

dismissed the respondents in utter disregard of the safeguards underscored in the
Constitution, as well as in the Labor Code. Petitioner failed to controvert the
allegation that it was responsible for the dismissal of the employees. Instead of
denying the same or otherwise imputing liability on its member-landowner by
naming the employees allegedly in his employ, petitioner was silent on the issue
and harped on the non-existence of employer-employee relationship between the
parties, which contention we find to be tangential. However related the issue might
seem, it would have been more relevant for the petitioner to have presented ample
evidence before the NLRC and this Court to justify its exoneration from liability.
Having failed in this respect, we deem it fatal to its defense.

For having been dismissed without a valid cause and for non-observance of the due
process requirement, respondents, consistent with recent jurisprudence laid down in
the case of Bustamante v. NLRC, 11 are entitled to receive full backwages from the
date of their dismissal up to the time of their reinstatement. The order, therefore, of
the labor arbiter limiting backwages to a period of three (3) years in the event of an
appeal, is erroneous.

WHEREFORE, in view of the foregoing, the petition is hereby DISMISSED and the
decision of the National Labor Relations Commission dated September 6, 1995 is
AFFIRMED subject to the deletion of the award of moral damages and attorney's
fees. The Court, however, is remanding this case to Labor Arbiter Newton R. Sancho
to specify in the dispositive portion of his decision the names of the respondents
and the amount that each is entitled to.
SO ORDERED.