TERESITA MONTOYA, petitioner,

vs.
TERESITA ESCAYO, JOY ESCAYO, AIDA GANANCIAL, MARY ANN CAPE, CECILIA
CORREJADO, ERLINDA PAYPON and ROSALIE VERDE, AND NATIONAL LABOR
RELATIONS COMMISSION, respondents.

Rolando N. Medalla and Segundo Y Chua for petitioner.

The Solicitor General for public respondent.

Archie S. Baribar for private respondents.

SARMIENTO, J.:

This petition for certiorari seeks the annullment and setting aside of the resolution 1
9dated August 20, 1987 of the National Labor Relations Commission (NLRC), Third
Division, which reversed and set aside the order dated September 27, 1985 of Labor
Arbiter Ethelwoldo R. Ovejera of the NLRC's Regional Arbitration Branch No. VI,
Bacolod City, dismissing the complaint filed by the private respondents against the
petitioner. This petition raises a singular issue, i.e., the applicability of Presidential
Decree (P.D.) No. 1508, more commonly known as the Katarungang Pambarangay
Law, to labor disputes.

The chronology of events leading to the present controversy is as follows:

The private respondents were all formerly employed as salesgirls in the petitioner's
store, the "Terry's Dry Goods Store," in Bacolod City. On different dates, they
separately filed complaints for the collection of sums of money against the
petitioner for alleged unpaid overtime pay, holiday pay, 13th month pay, ECOLA,
and service leave pay: for violation of the minimum wage law, illegal dismissal, and
attorney's fees. The complaints, which were originally treated as separate cases,
were subsequently consolidated on account of the similarity in their nature. On
August 1, 1984, the petitioner-employer moved (Annex "C" of Petition) for the
dismissal of the complaints, claiming that among others, the private respondents
failed to refer the dispute to the Lupong Tagapayapa for possible settlement and to
secure the certification required from the Lupon Chairman prior to the filing of the
cases with the Labor Arbiter. These actions were allegedly violative of the provisions
of P.D. No. 1508, which apply to the parties who are all residents of Bacolod City.

Acting favorably on the petitioner's motion, Labor Arbiter Ethelwoldo R. Ovejera, on

September 27, 1985, ordered the dismissal of the complaints. The private
respondents sought the reversal of the Labor Arbiter's order before the respondent
NLRC. On August 20, 1987, the public respondent rendered the assailed resolution
reversing the order of Ovejera, and remanded the case to the Labor Arbiter for
further proceedings. A motion for reconsideration was filed by the petitioner but this
was denied for lack of merit on October 28, 1987. Hence, this petition.

It is the petitioner's contention that the provisions of the Katarungang Pambarangay

Law (P.D. No. 1508) relative to the prior amicable settlement proceedings before the
Lupong Tagapayapa as a jurisdictional requirement at the trial level apply to labor
cases. More particularly, the petitioner insists that the failure of the private
respondents to first submit their complaints for possible conciliation and amicable
settlement in the proper barangay court in Bacolod City and to secure a certification
from the Lupon Chairman prior to their filing with the Labor Arbiter, divests the
Labor Arbiter, as well as the respondent Commission itself, of jurisdiction over these
labor controversies and renders their judgments thereon null and void.

On the other hand, the Solicitor General, as counsel for the public respondent NLRC,
in his comment, strongly argues and convincingly against the applicability of P.D.
No. 1508 to labor cases.

We dismiss the petition for lack of merit, there being no satisfactory showing of any
grave abuse of discretion committed by the public respondent.

The provisions of P.D. No. 1508 requiring the submission of disputes before the
barangay Lupong Tagapayapa prior to their filing with the court or other
government offices are not applicable to labor cases.

For a better understanding of the issue in this case, the provisions of P.D. No. 1508
invoked by the petitioner are quoted:
SEC. 6. Conciliation pre-condition to filing of complaint. No complaint, petition,
action or proceeding involving any matter within the authority of the Lupon as
provided in Section 2 hereof shall be filed or instituted in court or any other
government office for adjudication unless there has been a confrontation of the
parties before the Lupon Chairman or the Pangkat and no conciliation or settlement
has been reached as certified by the Lupon Secretary or the Pangkat Secretary,
attested by the Lupon or Pangkat Chairman, or unless the settlement has been
repudiated. However, the parties may go directly to court in the following cases:

(1) Where the accused is under detention;

(2) Where a person has otherwise been deprived of per sonal liberty calling for
habeas corpus proceedings;

(3) Actions coupled with provisional remedies such as preliminary injunction,

attachment, delivery of personal property and support pendente lite; and

(4) Where the action may otherwise be barred by the Statute of Limitations.

As correctly pointed out by the Solicitor General in his comment to the petition,
even from the three "WHEREAS" clauses of P.D. No. 1508 can be gleaned clearly the
decree's intended applicability only to courts of justice, and not to labor relations
commissions or labor arbitrators' offices. The express reference to "judicial
resources", to "courts of justice", "court dockets", or simply to "courts" are
significant. On the other band, there is no mention at all of labor relations or
controversies and labor arbiters or commissions in the clauses involved.

These "WHEREAS" clauses state:

WHEREAS, the perpetuation and official recognition of the time-honored tradition of

amicably settling disputes among family and barangay members at the barangay
level without judicial resources would promote the speedy administration of justice
and implement the constitutional mandate to preserve and develop Filipino culture
and to strengthen the family as a basic social institution;
WHEREAS, the indiscriminate filing of cases in the courts of justice contributes
heavily and unjustifiably to the congestion of court dockets, thus causing a
deterioration in the quality of justice;

WHEREAS, in order to help relieve the courts of such docket congestion and thereby
enhance the quality of Justice dispensed by the courts, it is deemed desirable to
formally organize and institutionalize a system of amicably settling disputes at the
barangay level; (Emphasis supplied.)

In addition, Letter of Instructions No. 956 and Letter of Implementation No. 105,
both issued on November 12, 1979 by the former President in connection with the
implementation of the Katarungang Pambarangay Law, affirm this conclusion. These
Letters were addressed only to the following officials: all judges of the Courts of first
Instance, Circuit Criminal Courts, Juvenile and Domestic Relations Courts, Courts of
Agrarian Relations, City Courts and Municipal Courts, and all Fiscals and other
Prosecuting Officers. These presidential issuances make clear that the only official
directed to oversee the implementation of the provisions of the Katarungang
Pambarangay Law (P.D. No. 1508) are the then Minister of Justice, the then Minister
of Local Governments and Community Development, and the Chief Justice of the
Supreme Court. If the contention of the petitioner were correct, the then Minister
(now Secretary) of Labor and Employment would have been included in the list, and
the two presidential issuances also would have been addressed to the labor
relations officers, labor arbiters, and the members of the National Labor Relations
Commission. Expressio unius est exclusio alterius.

Nor can we accept the petitioner's contention that the "other government office"
referred to in Section 6 of P.D. No. 1508 includes the Office of the Labor Arbiter and
the Med-Arbiter. The declared concern of the Katarungan Pambarangay Law is "to
help relieve the courts of such docket congestion and thereby enhance the quality
of justice dispensed by the courts." Thus, the" other government office" mentioned
in Section 6 of P.D. No. 1508 refers only to such offices as the Fiscal's Office or, in
localities where there is no fiscal, the Municipal Trial Courts, where complaints for
crimes (such as those punishable by imprisonment of not more than 30 days or a,
fine of not more than P 200.00) falling under the jurisdiction of the barangay court
but which are not amicably settled, are subsequently filed for proper disposition.

But, the opinion of the Honorable Minister of Justice (Opinion No. 59, s. 1983) to the
contrary notwithstanding, all doubts on this score are dispelled by The Labor Code
Of The Philippines (Presidential Decree No. 442, as amended) itself. Article 226
thereof grants original and exclusive jurisdiction over the conciliation and mediation
of disputes, grievances, or problems in the regional offices of the Department of
Labor and Employ- ment. It is the said Bureau and its divisions, and not the
barangay Lupong Tagapayapa, which are vested by law with original and exclusive
authority to conduct conciliation and mediation proceedings on labor controversies
before their endorsement to the appropriate Labor Arbiter for adjudication. Article
226, previously adverted to is clear on this regard. It provides:

ART. 226. Bureau of Labor Relations.- The Bureau of Labor Relations and the Labor
relations divisions in the regional officer of the Department of Labor shall have
original and exclusive authority to act, at their own initiative or upon request of
either or both parties, on all inter-union and intra-union conflicts, and all disputes,
grievances or problems arising from or affecting labor-management relations in all
workplaces whether agricultural or non-agricultural, except those arising from the
implementation or interpretation of collective bargaining agreements which shall be
the subject of grievance procedure and/or voluntary arbitration.

The Bureau shall have fifteen (15) working days to act on all labor cases, subject to
extension by agreement of the parties, after which the Bureau shall certify the
cases to the appropriate Labor Arbiters. The 15-working day deadline, however,
shall not apply to cases involving deadlocks in collective bargaining which the
Bureau shall certify to the appropriate Labor Arbiters only after all possibilities of
voluntary settlement shall have been tried.

Requiring conciliation of labor disputes before the barangay courts would defeat the
very salutary purposes of the law. Instead of simplifying labor proceedings designed
at expeditious settlement or referral to the proper court or office to decide it finally,
the position taken by the petitioner would only duplicate the conciliation
proceedings and unduly delay the disposition of the labor case. The fallacy of the
petitioner's submission can readily be seen by following it to its logical conclusion.
For then, if the procedure suggested is complied with, the private respondent would
have to lodge first their complaint with the barangay court, and then if not settled
there, they would have to go to the labor relations division at the Regional Office of
Region VI of the Department of Labor and Employment, in Bacolod City, for another
round of conciliation proceedings. Failing there, their long travail would continue to
the Office of the Labor Arbiter, then to the NLRC, and finally to us. This suggested
procedure would destroy the salutary purposes of P.D. 1508 and of The Labor Code
Of The Philippines. And labor would then be given another unnecessary obstacle to
hurdle. We reject the petitioner's submission. It does violence to the constitutionally
mandated policy of the State to afford full protection to labor. 2

Finally, it is already well-settled that the ordinary rules on procedure are merely
suppletory in character vis-a-vis labor disputes which are primarily governed by
labor laws. 3 And "(A)ll doubts in the implementation and interpretation of this Code
(Labor), including its implementing rules and regulations, shall be resolved in favor
of labor. 4

WHEREFORE, the petition is DISMISSED. Costs against the petitioner.

SO ORDERED.

Melencio-Herrera, (Chairperson), Paras, Padilla and Regalado, JJ., concur.

FEDERICO S. ROBOSA, ROLANDO E. PANDY, NOEL D. ROXAS, ALEXANDER ANGELES,

VERONICA GUTIERREZ, FERNANDO EMBAT, and NANETTE H. PINTO,
Petitioners,

- versus -

NATIONAL LABOR RELATIONS COMMISSION (First Division), CHEMO-TECHNISCHE

MANUFACTURING, INC. and its responsible officials led by FRANKLIN R. DE
LUZURIAGA, and PROCTER & GAMBLE PHILIPPINES, INC.,
Respondents.
G.R. No. 176085

Present:

CARPIO, J., Chairperson,

BRION,
PEREZ,
SERENO, and
REYES, JJ.

Promulgated:

February 8, 2012

x------------------------------------------------------------------------------------------x

DECISION

BRION, J.:

We resolve the petition for review on certiorari[1] seeking the reversal of the
resolutions of the Court of Appeals (CA) rendered on February 24, 2006[2] and
December 14, 2006[3] in CA-G.R. SP No. 80436.

Factual Background

Federico S. Robosa, Rolando E. Pandy, Noel D. Roxas, Alexander Angeles, Veronica

Gutierrez, Fernando Embat and Nanette H. Pinto (petitioners) were rank-and-file
employees of respondent Chemo-Technische Manufacturing, Inc. (CTMI), the
manufacturer and distributor of Wella products. They were officers and members of
the CTMI Employees Union-DFA (union). Respondent Procter and Gamble Philippines,
Inc. (P & GPI) acquired all the interests, franchises and goodwill of CTMI during the
pendency of the dispute.
Sometime in the first semester of 1991, the union filed a petition for certification
election at CTMI. On June 10, 1991, Med-Arbiter Rasidali Abdullah of the Office of
the Department of Labor and Employment in the National Capital Region (DOLE-
NCR) granted the petition. The DOLE-NCR conducted a consent election on July 5,
1991, but the union failed to garner the votes required to be certified as the
exclusive bargaining agent of the company.

On July 15, 1991, CTMI, through its President and General Manager Franklin R. de
Luzuriaga, issued a memorandum[4] announcing that effective that day: (1) all sales
territories were demobilized; (2) all vehicles assigned to sales representatives
should be returned to the company and would be sold; (3) sales representatives
would continue to service their customers through public transportation and would
be given transportation allowance; (4) deliveries of customers orders would be
undertaken by the warehouses; and (5) revolving funds for ex-truck selling held by
sales representatives should be surrendered to the cashier (for Metro Manila) or to
the supervisor (for Visayas and Mindanao), and truck stocks should immediately be
surrendered to the warehouse.

On the same day, CTMI issued another memorandum[5] informing the companys
sales representatives and sales drivers of the new system in the Salon Business
Groups selling operations.

The union asked for the withdrawal and deferment of CTMIs directives, branding
them as union busting acts constituting unfair labor practice. CTMI ignored the
request. Instead, it issued on July 23, 1991 a notice of termination of employment to
the sales drivers, due to the abolition of the sales driver positions.[6]

On August 1, 1991, the union and its affected members filed a complaint for illegal
dismissal and unfair labor practice, with a claim for damages, against CTMI, De
Luzuriaga and other CTMI officers. The union also moved for the issuance of a writ
of preliminary injunction and/or temporary restraining order (TRO).

The Compulsory Arbitration Proceedings

The labor arbiter handling the case denied the unions motion for a stay order on the
ground that the issues raised by the petitioners can best be ventilated during the
trial on the merits of the case. This prompted the union to file on August 16, 1991
with the National Labor Relations Commission (NLRC), a petition for the issuance of
a preliminary mandatory injunction and/or TRO.[7]

On August 23, 1991, the NLRC issued a TRO.[8] It directed CTMI, De Luzuriaga and
other company executives to (1) cease and desist from dismissing any member of
the union and from implementing the July 23, 1991 memorandum terminating the
services of the sales drivers, and to immediately reinstate them if the dismissals
have been effected; (2) cease and desist from implementing the July 15, 1991
memorandum grounding the sales personnel; and (3) restore the status quo ante
prior to the formation of the union and the conduct of the consent election.

Allegedly, the respondents did not comply with the NLRCs August 23, 1991
resolution. They instead moved to dissolve the TRO and opposed the unions petition
for preliminary injunction.

On September 12, 1991, the NLRC upgraded the TRO to a writ of preliminary
injunction.[9] The respondents moved for reconsideration. The union opposed the
motion and urgently moved to cite the responsible CTMI officers in contempt of
court.

On August 25, 1993, the NLRC denied the respondents motion for reconsideration
and directed Labor Arbiter Cristeta Tamayo to hear the motion for contempt. In
reaction, the respondents questioned the NLRC orders before this Court through a
petition for certiorari and prohibition with preliminary injunction. The Court
dismissed the petition for being premature. It also denied the respondents motion
for reconsideration, as well as a second motion for reconsideration, with finality. This
notwithstanding, the respondents allegedly refused to obey the NLRC directives. The
respondents defiance, according to the petitioners, resulted in the loss of their
employment.

Meanwhile, the NLRC heard the contempt charge. On October 31, 2000, it issued a
resolution[10] dismissing the charge. It ordered the labor arbiter to proceed hearing
the main case on the merits.

The petitioners moved for, but failed to secure, a reconsideration from the NLRC on
the dismissal of the contempt charge. They then sought relief from the CA by way of
a petition for certiorari under Rule 65.
The CA Decision

The CA saw no need to dwell on the issues raised by the petitioners as the question
it deemed appropriate for resolution is whether the NLRCs dismissal of the contempt
charge against the respondents may be the proper subject of an appeal. It opined
that the dismissal is not subject to review by an appellate court. Accordingly, the CA
Special Sixth Division dismissed the petition in its resolution of February 24, 2006.
[11]

The CA considered the prayer of P & GPI to be dropped as party-respondent moot

and academic.

The petitioners sought a reconsideration, but the CA denied the motion in its
resolution of December 14, 2006.[12] Hence, the present Rule 45 petition.

The Petition

The petitioners charge the CA with grave abuse of discretion in upholding the NLRC
resolutions, despite the reversible errors the labor tribunal committed in dismissing
the contempt charge against the respondents. They contend that the respondents
were guilty of contempt for their failure (1) to observe strictly the NLRC status quo
order; and (2) to reinstate the dismissed petitioners and to pay them their lost
wages, sales commissions, per diems, allowances and other employee benefits.
They also claim that the NLRC, in effect, overturned this Courts affirmation of the
TRO and of the preliminary injunction.

The petitioners assail the CAs reliance on the Courts ruling that a contempt charge
partakes of a criminal proceeding where an acquittal is not subject to appeal. They
argue that the facts obtaining in the present case are different from the facts of the
cases where the Courts ruling was made. They further argue that by the nature of
this case, the Labor Code and its implementing rules and regulations should apply,
but in any event, the appellate court is not prevented from reviewing the factual
basis of the acquittal of the respondents from the contempt charges.

The petitioners lament that the NLRC, in issuing the challenged resolutions, had
unconstitutionally applied the law. They maintain that not only did the NLRC
unconscionably delay the disposition of the case for more than twelve (12) years; it
also rendered an unjust, unkind and dubious judgment. They bewail that [f]or some
strange reason, the respondent NLRC made a queer [somersault] from its earlier
rulings which favor the petitioners.[13]

The Case for the Respondents

Franklin K. De Luzuriaga

De Luzuriaga filed a Comment[14] on May 17, 2007 and a Memorandum on

December 4, 2008,[15] praying for a dismissal of the petition.

De Luzuriaga argues that the CA committed no error when it dismissed the petition
for certiorari since the dismissal of the contempt charge against the respondents
amounted to an acquittal where review by an appellate court will not lie. In any
event, he submits, the respondents were charged with indirect contempt which may
be initiated only in the appropriate regional trial court, pursuant to Section 12, Rule
71 of the Rules of Court. He posits that the NLRC has no jurisdiction over an indirect
contempt charge. He thus argues that the petitioners improperly brought the
contempt charge before the NLRC.

Additionally, De Luzuriaga points out that the petition raises only questions of facts
which, procedurally, is not allowed in a petition for review on certiorari. Be this as it
may, he submits that pursuant to Philippine Long Distance Telephone Company, Inc.
v. Tiamson,[16] factual findings of labor officials, who are deemed to have acquired
expertise in matters within their respective jurisdictions, are generally accorded not
only respect but even finality. He stresses that the CA committed no reversible error
in not reviewing the NLRCs factual findings.

Further, De Luzuriaga contends that the petitioners verification and certification

against forum shopping is defective because it was only Robosa and Pandy who
executed the document. There was no indication that they were authorized by
Roxas, Angeles, Gutierrez, Embat and Pinto to execute the required verification and
certification.

Lastly, De Luzuriaga maintains that the petitioners are guilty of forum shopping as
the reliefs prayed for in the petition before the CA, as well as in the present petition,
are the same reliefs that the petitioners may be entitled to in the complaint before
the labor arbiter.[17]
P & GPI

As it did with the CA when it was asked to comment on the petitioners motion for
reconsideration,[18] P & GPI prays in its Comment[19] and Memorandum[20] that it
be dropped as a party-respondent, and that it be excused from further participating
in the proceedings. It argues that inasmuch as the NLRC resolved the contempt
charge on the merits, an appeal from its dismissal through a petition for certiorari is
barred. Especially in its case, the dismissal of the petition for certiorari is correct
because it was never made a party to the contempt proceedings and, thus, it was
never afforded the opportunity to be heard. It adds that it is an entity separate from
CTMI. It submits that it cannot be made to assume any or all of CTMIs liabilities,
absent an agreement to that effect but even if it may be liable, the present
proceedings are not the proper venue to determine its liability, if any.

On December 16, 2008, the petitioners filed a Memorandum[21] raising essentially

the same issues and arguments laid down in the petition.

The Courts Ruling

Issues

The parties submissions raise the following issues:

(1) whether the NLRC has contempt powers;

(2) whether the dismissal of a contempt charge is appealable; and
(3) whether the NLRC committed grave abuse of discretion in dismissing the
contempt charge against the respondents.

On the first issue, we stress that under Article 218[22] of the Labor Code, the NLRC
(and the labor arbiters) may hold any offending party in contempt, directly or
indirectly, and impose appropriate penalties in accordance with law. The penalty for
direct contempt consists of either imprisonment or fine, the degree or amount
depends on whether the contempt is against the Commission or the labor arbiter.
The Labor Code, however, requires the labor arbiter or the Commission to deal with
indirect contempt in the manner prescribed under Rule 71 of the Rules of Court.[23]

Rule 71 of the Rules of Court does not require the labor arbiter or the NLRC to
initiate indirect contempt proceedings before the trial court. This mode is to be
observed only when there is no law granting them contempt powers.[24] As is clear
under Article 218(d) of the Labor Code, the labor arbiter or the Commission is
empowered or has jurisdiction to hold the offending party or parties in direct or
indirect contempt. The petitioners, therefore, have not improperly brought the
indirect contempt charges against the respondents before the NLRC.

The second issue pertains to the nature of contempt proceedings, especially with
respect to the remedy available to the party adjudged to have committed indirect
contempt or has been absolved of indirect contempt charges. In this regard, Section
11, Rule 71 of the Rules of Court states that the judgment or final order of a court in
a case of indirect contempt may be appealed to the proper court as in a criminal
case. This is not the point at issue, however, in this petition. It is rather the question
of whether the dismissal of a contempt charge, as in the present case, is
appealable. The CA held that the NLRCs dismissal of the contempt charges against
the respondents amounts to an acquittal in a criminal case and is not subject to
appeal.

The CA ruling is grounded on prevailing jurisprudence.

In Yasay, Jr. v. Recto,[25] the Court declared:

A distinction is made between a civil and [a] criminal contempt. Civil contempt is
the failure to do something ordered by a court to be done for the benefit of a party.
A criminal contempt is any conduct directed against the authority or dignity of the
court.[26]

The Court further explained in Remman Enterprises, Inc. v. Court of Appeals[27] and
People v. Godoy[28] the character of contempt proceedings, thus
The real character of the proceedings in contempt cases is to be determined by the
relief sought or by the dominant purpose. The proceedings are to be regarded as
criminal when the purpose is primarily punishment and civil when the purpose is
primarily compensatory or remedial.
Still further, the Court held in Santiago v. Anunciacion, Jr.[29] that:

But whether the first or the second, contempt is still a criminal proceeding in which
acquittal, for instance, is a bar to a second prosecution. The distinction is for the
purpose only of determining the character of punishment to be administered.

In the earlier case of The Insurance Commissioner v. Globe Assurance Co., Inc.,[30]
the Court dismissed the appeal from the ruling of the lower court denying a petition
to punish the respondent therein from contempt for lack of evidence. The Court said
in that case:

It is not the sole reason for dismissing this appeal. In the leading case of In re Mison,
Jr. v. Subido, it was stressed by Justice J.B.L. Reyes as ponente, that the contempt
proceeding far from being a civil action is of a criminal nature and of summary
character in which the court exercises but limited jurisdiction. It was then explicitly
held: Hence, as in criminal proceedings, an appeal would not lie from the order of
dismissal of, or an exoneration from, a charge of contempt of court. [footnote
omitted]

Is the NLRCs dismissal of the contempt charges against the respondents beyond
review by this Court? On this important question, we note that the petitioners, in
assailing the CA main decision, claim that the appellate court committed grave
abuse of discretion in not ruling on the dismissal by the NLRC of the contempt
charges.[31] They also charge the NLRC of having gravely abused its discretion and
having committed reversible errors in:

(1) setting aside its earlier resolutions and orders, including the writ of preliminary
injunction it issued, with its dismissal of the petition to cite the respondents in
contempt of court;
(2) overturning this Courts resolutions upholding the TRO and the writ of preliminary
injunction;
(3) failing to impose administrative fines upon the respondents for violation of the
TRO and the writ of preliminary injunction; and
(4) failing to order the reinstatement of the dismissed petitioners and the payment
of their accrued wages and other benefits.

In view of the grave abuse of discretion allegation in this case, we deem it

necessary to look into the NLRCs dismissal of the contempt charges against the
respondents. As the charges were rooted into the respondents alleged non-
compliance with the NLRC directives contained in the TRO[32] and the writ of
preliminary injunction,[33] we first inquire into what really happened to these
directives.

The assailed NLRC resolution of October 31, 2000[34] gave us the following account
on the matter -

On the first directive, x x x We find that there was no violation of the said order. A
perusal of the records would show that in compliance with the temporary restraining
order (TRO), respondents reinstated back to work the sales drivers who complained
of illegal dismissal (Memorandum of Respondents, page 4).

Petitioners allegation that there was only payroll reinstatement does not make the
respondents guilty of contempt of court. Even if the drivers were just in the garage
doing nothing, the same does not make respondents guilty of contempt nor does it
make them violators of the injunction order. What is important is that they were
reinstated and receiving their salaries.

As for petitioners Danilo Real, Roberto Sedano and Rolando Manalo, they have
resigned from their jobs and were paid their separation pay xxx (Exhibits 6, 6-A, 7,
7-A, 8, 8-A, Respondents Memorandum dated August 12, 1996). The issue of
whether they were illegally dismissed should be threshed out before the Labor
Arbiter in whose sala the case of unfair labor practice and illegal dismissal were (sic)
filed. Records also show that petitioner Antonio Desquitado during the pendency of
the case executed an affidavit of desistance asking that he be dropped as party
complainant in as much as he has already accepted separation benefits totaling to
P63,087.33.

With respect to the second directive ordering respondents to cease and desist from
implementing the memoranda dated July 15, 1991 designed to ground sales
personnel who are members of the union, respondents alleged that they can no
longer be restrained or enjoined and that the status quo can no longer be restored,
for implementation of the memorandum was already consummated or was a fait
accompli. x x x
All sales vehicles were ordered to be turned over to management and the same
were already sold[.] xxx [I]t would be hard to undo the sales transactions, the same
being valid and binding. The memorandum of July 15, 1991 authorized still all sales
representatives to continue servicing their customers using public transportation
and a transportation allowance would be issued.

xxxx

The third directive of the Commission is to preserve the status quo ante between
the parties.

Records reveal that WELLA AG of Germany terminated its Licensing Agreement with
respondent company effective December 31, 1991 (Exhibit 11, Respondents
Memorandum).

On January 31, 1992, individual petitioners together with the other employees were
terminated xxx. In fact, this event resulted to the closure of the respondent
company. The manufacturing and marketing operations ceased. This is evidenced
by the testimony of Rosalito del Rosario and her affidavit (Exh. 9, memorandum of
Respondents) as well as Employers Monthly Report on Employees
Termination/dismissals/suspension xxx (Exhibits 12-A to 12-F, ibid) as well as the
report that there is a permanent shutdown/total closure of all units of operations in
the establishment (Ibid). A letter was likewise sent to the Department of Labor and
Employment (Exh. 12, Ibid) in compliance with Article 283 of the Labor Code,
serving notice that it will cease business operations effective January 31, 1992.

The petitioners strongly dispute the above account. They maintain that the NLRC
failed to consider the following:

1. CTMI violated the status quo ante order when it did not restore to their former
work assignments the dismissed sales drivers. They lament that their being garaged
deprived them of benefits, and they were subjected to ridicule and psychological
abuse. They assail the NLRC for considering the payroll reinstatement of the drivers
as compliance with its stay order.
They also bewail the NLRCs recognition of the resignation of Danilo Real, Roberto
Sedano, Rolando Manalo and Antonio Desquitado as they were just compelled by
economic necessity to resign from their employment. The quitclaims they executed
were contrary to public policy and should not bar them from claiming the full
measure of their rights, including their counsel who was unduly deprived of his right
to collect attorneys fees.

2. It was error for the NLRC to rule that the memorandum, grounding the sales
drivers, could no longer be restrained or enjoined because all sales vehicles were
already sold. No substantial evidence was presented by the respondents to prove
their allegation, but even if there was a valid sale of the vehicles, it did not relieve
the respondents of responsibility under the stay order.

3. The alleged termination of the licensing agreement between CTMI and WELLA AG
of Germany, which allegedly resulted in the closure of CTMIs manufacturing and
marketing operations, occurred after the NLRCs issuance of the injunctive reliefs.
CTMI failed to present substantial evidence to support its contention that it folded
up its operations when the licensing agreement was terminated. Even assuming
that there was a valid closure of CTMIs business operations, they should have been
paid their lost wages, allowances, incentives, sales commissions, per diems and
other employee benefits from August 23, 1991 up to the date of the alleged
termination of CTMIs marketing operations.

Did the NLRC commit grave abuse of discretion in dismissing the contempt charges
against the respondents? An act of a court or tribunal may only be considered as
committed in grave abuse of discretion when it was performed in a capricious or
whimsical exercise of judgment which is equivalent to lack of jurisdiction. The abuse
of discretion must be so patent and gross as to amount to an evasion of a positive
duty enjoined by law, or to act at all in contemplation of law, as where the power is
exercised in an arbitrary and despotic manner by reason of passion or personal
hostility.[35]

The petitioners insist that the respondents violated the NLRC directives, especially
the status quo ante order, for their failure to reinstate the dismissed petitioners and
to pay them their benefits. In light of the facts of the case as drawn above, we
cannot see how the status quo ante or the employer-employee situation before the
formation of the union and the conduct of the consent election can be maintained.
As the NLRC explained, CTMI closed its manufacturing and marketing operations
after the termination of its licensing agreement with WELLA AG of Germany. In fact,
the closure resulted in the termination of CTMIs remaining employees on January
31, 1992, aside from the sales drivers who were earlier dismissed but reinstated in
the payroll, in compliance with the NLRC injunction. The petitioners termination of
employment, as well as all of their money claims, was the subject of the illegal
dismissal and unfair labor practice complaint before the labor arbiter. The latter was
ordered by the NLRC on October 31, 2000 to proceed hearing the case.[36] The
NLRC thus subsumed all other issues into the main illegal dismissal and unfair labor
practice case pending with the labor arbiter. On this point, the NLRC declared:

Note that when the injunction order was issued, WELLA AG of Germany was still
under licensing agreement with respondent company. However, the situation has
changed when WELLA AG of Germany terminated its licensing agreement with the
respondent, causing the latter to close its business.

Respondents could no longer be ordered to restore the status quo as far as the
individual petitioners are concerned as these matters regarding the termination of
the employees are now pending litigation with the Arbitration Branch of the
Commission. To resolve the incident now regarding the closure of the respondent
company and the matters alleged by petitioners such as the creations of three (3)
new corporations xxx as successor-corporations are matters best left to the Labor
Arbiter hearing the merits of the unfair labor practice and illegal dismissal cases.
[37]

We find no grave abuse of discretion in the assailed NLRC ruling. It rightly avoided
delving into issues which would clearly be in excess of its jurisdiction for they are
issues involving the merits of the case which are by law within the original and
exclusive jurisdiction of the labor arbiter.[38] To be sure, whether payroll
reinstatement of some of the petitioners is proper; whether the resignation of some
of them was compelled by dire economic necessity; whether the petitioners are
entitled to their money claims; and whether quitclaims are contrary to law or public
policy are issues that should be heard by the labor arbiter in the first instance. The
NLRC can inquire into them only on appeal after the merits of the case shall have
been adjudicated by the labor arbiter.

The NLRC correctly dismissed the contempt charges against the respondents. The
CA likewise committed no grave abuse of discretion in not disturbing the NLRC
resolution.

In light of the above discussion, we find no need to dwell into the other issues the
parties raised.

WHEREFORE, premises considered, we hereby DENY the petition for lack of merit
and AFFIRM the assailed resolutions of the Court of Appeals.
SAN MIGUEL CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION, THIRD DIVISION, and FRANCISCO DE GUZMAN, JR., respondents.
DECISION
QUISUMBING, J.:

Before us is the petition for certiorari under Rule 65 of the Revised Rules of Court
seeking to set aside the April 18, 1996 Decision[1] and the May 30, 1996
Resolution[2] of public respondent National Labor Relations Commission[3] in NLRC
CA No. 009490-95. Said decision reversed the June 30, 1995 judgment[4] of the
Labor Arbiter[5] in NLRC-NCR Case No. 00-08-05954-94, and ordered the
reinstatement of private respondent as follows:

WHEREFORE, premises considered, the assailed decision is hereby VACATED and

SET ASIDE. A new one is hereby entered ordering herein respondent San Miguel
Corporation to reinstate complainant to his former position with full backwages from
the time he was dismissed from work until he is actually reinstated without loss of
seniority rights and other benefits, less earnings elsewhere, if any.[6]

The facts on record show that in November 1990, private respondent was hired by
petitioner as helper/bricklayer for a specific project, the repair and upgrading of
furnace C at its Manila Glass Plant. His contract of employment provided that said
temporary employment was for a specific period of approximately four (4) months.

On April 30, 1991, private respondent was able to complete the repair and
upgrading of furnace C. Thus, his services were terminated on that same day as
there was no more work to be done. His employment contract also ended that day.

On May 10, 1991, private respondent was again hired for a specific job or
undertaking, which involved the draining/cooling down of furnace F and the
emergency repair of furnace E. This project was for a specific period of
approximately three (3) months.

After the completion of this task, namely the draining/cooling down of furnace F and
the emergency repair of furnace E, at the end of July 1991, private respondents
services were terminated.
On August 1, 1991, complainant saw his name in a Memorandum posted at the
Companys Bulletin Board as among those who were considered dismissed.

On August 12, 1994, or after the lapse of more than three (3) years from the
completion of the last undertaking for which private respondent was hired, private
respondent filed a complaint for illegal dismissal against petitioner, docketed as
NLRC NCR Case No. 08-05954-94.[7]

Both parties submitted their respective position papers, reply and rejoinder to Labor
Arbiter Felipe Garduque II. On June 30, 1995, he rendered the decision dismissing
said complaint for lack of merit. In his ruling Labor Arbiter Garduque sustained
petitioners argument that private respondent was a project employee. The position
of a helper does not fall within the classification of regular employees. Hence,
complainant never attained regular employment status. Moreover, his silence for
more than three (3) years without any reasonable explanation tended to weaken his
claim.[8]

Not satisfied with the decision, private respondent interposed his appeal with public
respondent NLRC on August 8, 1995. Petitioner filed its opposition thereto on August
29, 1995.

On April 18, 1996, public respondent NLRC, promulgated its assailed decision,
reversing Labor Arbiter Garduques decision. In its ruling, public respondent made
the following findings:

Respondents scheme of subsequently re-hiring complainant after only ten (10) days
from the last day of the expiration of his contract of employment for a specific
period, and giving him again another contract of employment for another specific
period cannot be countenanced. This is one way of doing violence to the employees
constitutional right to security of tenure under which even employees under
probationary status are amply protected.

Under the circumstances obtaining in the instant case we find that herein
complainant was indeed illegally dismissed. Respondent failed to adduce substantial
evidence to prove that Francisco de Guzman, Jr. was dismissed for a just or
authorized cause and after due process. The only reason they advanced is that his
contract of employment which is for a specific period had already expired. We,
however, find this scheme, as discussed earlier, not in accordance with law.[9]
Petitioner then moved for the reconsideration of said decision. This was, however,
denied by public respondent on May 30, 1996 as it found no cogent reason, or
patent or palpable error, that would warrant the disturbance of the decision sought
to be reconsidered.

Hence, this petition, based on the following grounds:

1. RESPONDENT NLRC GRAVELY ABUSED ITS DISCRETION IN FAILING TO RULE THAT

PRIVATE RESPONDENT IS A PROJECT OR A FIXED PERIOD EMPLOYEE.

2. RESPONDENT NLRC GRAVELY ABUSED ITS DISCRETION IN RULING THAT

PETITIONER VIOLATED PRIVATE RESPONDENTS RIGHT TO SECURITY OF TENURE AND
THAT PRIVATE RESPONDENT WAS ILLEGALLY DISMISSED.

3. RESPONDENT NLRC GRAVELY ABUSED ITS DISCRETION IN RULING THAT LACHES

OR SILENCE OR INACTION FOR AN UNREASONABLE LENGTH OF TIME DID NOT BAR
PRIVATE RESPONDENTS CLAIM.

Given these grounds, this petition may be resolved once the following issues are
clarified: (a) What is the nature of the employment of private respondent, that of a
project employee or a regular employee? and (b) Was he terminated legally or
dismissed illegally?

As a general rule, the factual findings and conclusions drawn by the National Labor
Relations Commission are accorded not only great weight and respect, but even
clothed with finality and deemed binding on the Court, as long as they are
supported by substantial evidence. However, when such findings and those of the
Labor Arbiter are in conflict, it behooves this Court to scrutinize the records of the
case, particularly the evidence presented, to arrive at a correct decision.[10]

Art. 280 of the Labor Code defines regular, project and casual employment as
follows:

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 preceding

paragraph: Provided, That, any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity in which he is employed and his employment
shall continue while such actually exists.

The above mentioned provision reinforces the Constitutional mandate to protect the
interest of labor as it sets the legal framework for ascertaining ones nature of
employment, and distinguishing different kinds of employees. Its language
manifests the intent to safeguard the tenurial interest of worker who may be denied
the enjoyment of the rights and benefits due to an employee, regardless of the
nature of his employment, by virtue of lopsided agreements with the economically
powerful employer who can maneuver to keep an employee on a casual or
contractual status for as long as it is convenient to the employer.

Thus, under Article 280 of the Labor Code, an employment is deemed regular when
the activities performed by the employee are usually necessary or desirable in the
usual business or trade of the employer even if the parties enter into an agreement
stating otherwise. But considered not regular under said Article are (1) the so-called
project employment the termination of which is more or less determinable at the
time of employment, such as those connected with a particular construction project;
and (2) seasonal employment, which by its nature is only for one season of the year
and the employment is limited for the duration of that season, such as the
Christmas holiday season. Nevertheless, an exception to this exception is made:
any employee who has rendered at least one (1) year of service, whether
continuous or intermittent, with respect to the activity he performed and while such
activity actually exists, must be deemed regular.

Following Article 280, whether one is employed as a project employee or not would
depend on whether he was hired to carry out a specific project or undertaking, the
duration and scope of which were specified at the time his services were engaged
for that particular project.[11] Another factor that may be considered is the
reasonable connection between the particular activity undertaken by the employee
in relation to the usual trade or business of the employer; if without specifying the
duration and scope, the work to be undertaken is usually necessary or desirable in
the usual business or trade of the employer, then it is regular employment and not
just project much less casual employment.

Thus, the nature of ones employment does not depend on the will or word of the
employer. Nor on the procedure of hiring and the manner of designating the
employee, but on the nature of the activities to be performed by the employee,
considering the employers nature of business[12] and the duration and scope of the
work to be done.

In ALU-TUCP vs. NLRC,[13] this Court discussed two types of projects:

In the realm of business and industry, we note that project could refer to one or the
other of at least two (2) distinguishable types of activities. Firstly, a project could
refer to a particular job or undertaking that is within the regular or usual business of
the employer company, but which is distinct and separate, and identifiable as such,
from the other undertakings of the company. Such job or undertaking begins and
ends at determined or determinable times. xxx

The term project could also refer to, secondly, a particular job or undertaking that is
not within the regular business of the corporation. Such a job or undertaking must
also be identifiably separate and distinct from the ordinary or regular business
operations of the employer. The job or undertaking also begins and ends at
determined or determinable times. x x x (Italics supplied)

Public respondent NLRCs findings that herein private respondent is a regular

employee is erroneous as the latters employment clearly falls within the definition
of project employees under paragraph 1 of Article 280 of the Labor Code and such is
a typical example of the second kind of project employment in the ALU-TUCP case
discussed above.

Note that the plant where private respondent was employed for only seven months
is engaged in the manufacture of glass, an integral component of the packaging and
manufacturing business of petitioner. The process of manufacturing glass requires a
furnace, which has a limited operating life. Petitioner resorted to hiring project or
fixed term employees in having said furnaces repaired since said activity is not
regularly performed. Said furnaces are to be repaired or overhauled only in case of
need and after being used continuously for a varying period of five (5) to ten (10)
years.
In 1990, one of the furnaces of petitioner required repair and upgrading. This was an
undertaking distinct and separate from petitioners business of manufacturing glass.
For this purpose, petitioner must hire workers to undertake the said repair and
upgrading. Private respondent was, thus, hired by petitioner on November 28, 1990
on a temporary status for a specific job for a determined period of approximately
four months.

Upon completion of the undertaking, or on April 30, 1991, private respondents

services were terminated. A few days, thereafter, two of petitioners furnaces
required draining/cooling down and emergency repair. Private respondent was again
hired on May 10, 1991 to help in the new undertaking, which would take
approximately three (3) months to accomplish. Upon completion of the second
undertaking, private respondents services were likewise terminated.[14] He was not
hired a third time, and his two engagements taken together did not total one full
year in order to qualify him as an exception to the exception falling under the cited
proviso in the second paragraph of Art. 280 of the Labor Code.

Clearly, private respondent was hired for a specific project that was not within the
regular business of the corporation. For petitioner is not engaged in the business of
repairing furnaces. Although the activity was necessary to enable petitioner to
continue manufacturing glass, the necessity therefor arose only when a particular
furnace reached the end of its life or operating cycle. Or, as in the second
undertaking, when a particular furnace required an emergency repair. In other
words, the undertakings where private respondent was hired primarily as
helper/bricklayer have specified goals and purposes which are fulfilled once the
designated work was completed. Moreover, such undertakings were also identifiably
separate and distinct from the usual, ordinary or regular business operations of
petitioner, which is glass manufacturing. These undertakings, the duration and
scope of which had been determined and made known to private respondent at the
time of his employment, clearly indicated the nature of his employment as a project
employee. Thus, his services were terminated legally after the completion of the
project.[15]

Public respondent NLRCs decision, if upheld, would amount to negating the

distinctions made in Article 280 of the Labor Code. It would shunt aside the rule that
since a project employees work depends on the availability of a project, necessarily,
the duration of his employment is coterminous with the project to which he is
assigned.[16] It would become a burden for an employer to retain an employee and
pay him his corresponding wages if there was no project for him to work on. Well to
remember is the language of the Court in the case of Mamansag v. NLRC:[17]
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 dispute will be
automatically decided in favor of labor. Management has also rights, which, as such,
are entitled to respect and enforcement in the interest of fair play. Although the
Supreme Court has inclined more often than not toward the worker and has upheld
his cause in his conflicts with the employer, such favoritism has not blinded the
Court to the rule that justice is in every case for the deserving, to be dispensed in
the light of the established facts and the applicable law and doctrine.

Considering that private respondent was a project employee whose employment,

the nature of which he was fully informed, related to a specific project, work or
undertaking, we find that the Labor Arbiter correctly ruled that said employment
legally ended upon completion of said project. Hence the termination of his
employment was not tantamount to an illegal dismissal; and it was a grave abuse of
discretion on public respondent's part to order his reinstatement by petitioner.

WHEREFORE, the instant petition is hereby GRANTED. The decision of respondent

NLRC is hereby REVERSED, and the judgment of the Labor Arbiter REINSTATED.

NO COSTS.

ROSARIO MANEJA, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and

MANILA MIDTOWN HOTEL, respondents.
DECISION
MARTINEZ, J.:

Assailed in this petition for certiorari under Rule 65 of the Revised Rules of Court are
the Resolution[1] dated June 3, 1994 of the respondent National Labor Relations
Commission in NLRC NCR-00-10-05297-90, entitled "Rosario Maneja, Complainant,
vs. Manila Midtown Hotel, Respondent," which dismissed the illegal dismissal case
filed by petitioner against private respondent company for lack of jurisdiction of the
Labor Arbiter over the case; and its Resolution[2] dated October 20, 1995 denying
petitioner's motion for reconsideration.

Petitioner Rosario Maneja worked with private respondent Manila Midtown Hotel
beginning January, 1985 as a telephone operator. She was a member of the National
Union of Workers in Hotels, Restaurants and Allied Industries (NUWHRAIN) with an
existing Collective Bargaining Agreement (CBA) with private respondent.
In the afternoon of February 13, 1990, a fellow telephone operator, Rowena Loleng
received a Request for Long Distance Call (RLDC) form and a deposit of P500.00
from a page boy of the hotel for a call by a Japanese guest named Hirota Ieda. The
call was unanswered. The P500.00 deposit was forwarded to the cashier. In the
evening, Ieda again made an RLDC and the page boy collected another P500.00
which was also given to the operator Loleng. The second call was also unanswered.
Loleng passed on the RLDC to petitioner for follow-up. Petitioner monitored the call.

On February 15, 1990, a hotel cashier inquired about the P1,000.00 deposit made
by Ieda. After a search, Loleng found the first deposit of P500.00 inserted in the
guest folio while the second deposit was eventually discovered inside the folder for
cancelled calls with deposit and official receipts.

When petitioner saw that the second RLDC form was not time-stamped, she
immediately placed it inside the machine which stamped the date February 15,
1990. Realizing that the RLDC was filed 2 days earlier, she wrote and changed the
date to February 13, 1990. Loleng then delivered the RLDC and the money to the
cashier. The second deposit of P500.00 by Ieda was later returned to him.

On March 7, 1990, the chief telephone operator issued a memorandum[3] to

petitioner and Loleng directing the two to explain the February 15 incident.
Petitioner and Loleng thereafter submitted their written explanation.[4]

On March 20, 1990, a written report[5] was submitted by the chief telephone
operator, with the recommendation that the offenses committed by the operators
concerned covered violations of the Offenses Subject to Disciplinary Actions (OSDA):
(1) OSDA 2.01: forging, falsifying official document(s), and (2) OSDA 1.11: culpable
carelessness - negligence or failure to follow specific instruction(s) or established
procedure(s).

On March 23, 1990, petitioner was served a notice of dismissal[6] effective April 1,
1990. Petitioner refused to sign the notice and wrote therein "under protest."

Meanwhile, a criminal case[7] for Falsification of Private Documents and Qualified

Theft was filed before the Office of the City Prosecutor of Manila by private
respondent against Loleng and petitioner. However, the resolution recommending
the filing of a case for estafa was reversed by 2nd Asst. City Prosecutor Virgilio M.
Patag.
On October 2, 1990, petitioner filed a complaint for illegal dismissal against private
respondent before the Labor Arbiter. The complaint was later amended to include a
claim for unpaid wages, unpaid vacation leave conversion and moral damages.

Position papers were filed by the parties. Thereafter, the motion to set the case for
hearing filed by private respondent was granted by the Labor Arbiter and trial on
the merits ensued.

In his decision[8] dated May 29, 1992, Labor Arbiter Oswald Lorenzo found that the
petitioner was illegally dismissed. However, in the decision, the Labor Arbiter stated
that:

Preliminarily, we hereby state that on the face of the instant complaint, it is one that
revolves on the matter of the implementation and interpretation of existing
company policies, which per the last par. of Art. 217 of the Labor Code, as amended,
is one within the jurisdictional ambit of the grievance procedure under the CBA and
thereafter, if unresolved, one proper for voluntary arbitration. This observation is re-
entrenched by the fact, that complainant claims she is a member of NUWHRAIN with
an existing CBA with respondent hotel.

On this score alone, this case should have been dismissed outright.[9]

Despite the aforequoted preliminary statement, the Labor Arbiter still assumed
jurisdiction since Labor Arbiters under Article 217 of the same Labor Code, are
conferred original and exclusive jurisdiction of all termination case(sic.). The
dispositive portion of the decision states that:

"WHEREFORE, premises considered, judgment is hereby rendered as follows:

Declaring complainant's dismissal by respondent hotel as illegally effected;

Ordering respondent to immediately reinstate complainant to her previous position

without loss of seniority rights;
Ordering further respondent to pay complainant the full backwages due her, which
is computed as follows:

3/23/90 - 10/31/90 = 7.26/mos.

P2,540 x 7.26/mos. P18,440.40

11/1/90 - 1/7/91 = 2.23/mos.

P3,224.16 x 2.23/mos. 7,189.87

1/8/91 - 4/29/92 = 15.7/mos.

P3,589.16 x 15.7/mos. 56,349.89

P81,980.08

Moreover, respondent is ordered to pay the 13th month pay due the complainant in
the amount of P6,831.67 including moral and exemplary damages of P15,000.00
and P10,000.00 respectively, as well as attorney's fees equivalent to ten (10)
percent of the total award herein in the amount of P11,381.17;

Finally, all other claims are hereby dismissed for lack of merit.

"SO ORDERED."

Private respondent appealed the decision to the respondent commission on the

ground inter alia that the Labor Arbiter erred in assuming jurisdiction over the illegal
dismissal case after finding that the case falls within the jurisdictional ambit of the
grievance procedure under the CBA, and if unresolved, proper for voluntary
arbitration.[10] An Opposition[11] was filed by petitioner.
In the assailed Resolution[12] dated June 3, 1994, respondent NLRC dismissed the
illegal dismissal case for lack of jurisdiction of the Labor Arbiter because the same
should have instead been subjected to voluntary arbitration.

Petitioners motion for reconsideration[13] was denied by respondent NLRC for lack
of merit.

In this petition for certiorari, petitioner ascribes to respondent NLRC grave abuse of
discretion in -

Ruling that the Labor Arbiter was without jurisdiction over the illegal dismissal case;

Not ruling that private respondent is estopped by laches from questioning the
jurisdiction of the Labor Arbiter over the illegal dismissal case;

Reversing the decision of the Labor Arbiter based on a technicality notwithstanding

the merits of the case.

Petitioner contends that Article 217(a)(2) and (c) relied upon by respondent NLRC in
divesting the labor arbiter of jurisdiction over the illegal dismissal case, should be
read in conjunction with Article 261[14] of the Labor Code. It is the view of
petitioner that termination cases arising from the interpretation or enforcement of
company personnel policies pertaining to violations of Offenses Subject to
Disciplinary Actions (OSDA), are under the jurisdiction of the voluntary arbitrator
only if these are unresolved in the plant-level grievance machinery. Petitioner insists
that her termination is not an unresolved grievance as there has been no grievance
meeting between the NUWHRAIN union and the management. The reason for this,
petitioner adds, is that it has been a company practice that termination cases are
not anymore referred to the grievance machinery but directly to the labor arbiter.

In its comment, private respondent argues that the Labor Arbiter should have
dismissed the illegal dismissal case outright after finding that it is within the
jurisdictional ambit of the grievance procedure. Moreover, private respondent states
that the issue of jurisdiction may be raised at any time and at any stage of the
proceedings even on appeal, and is not in estoppel by laches as contended by the
petitioner.
For its part, public respondent, through the Office of the Solicitor General, cited the
ruling of this Court in Sanyo Philippines Workers Union-PSSLU vs. Caizares[15] in
dismissing the case for lack of jurisdiction of the Labor Arbiter.

The legal issue in this case is whether or not the Labor Arbiter has jurisdiction over
the illegal dismissal case.

The respondent Commission, in holding that the Labor Arbiter lacks jurisdiction to
hear the illegal dismissal case, cited as basis therefor Article 217 of the Labor Code,
as amended by Republic Act No. 6715. It said:

While it is conceded that under Article 217(a), Labor Arbiters shall have original and
exclusive jurisdiction over cases involving termination disputes, the Supreme Court,
in a fairly recent case ruled:

The procedure introduced in RA 6715 of referring certain grievances originally and

exclusively to the grievance machinery, and when not settled at this level, to a
panel of voluntary arbitrators outlined in CBAs does not only include grievances
arising from the interpretation or implementation of the CBA but applies as well to
those arising from the implementation of company personnel policies. No other
body shall take cognizance of these cases. x x x. (Sanyo vs. Caizares, 211 SCRA
361, 372)[16]

We find that the respondent Commission has erroneously interpreted the

aforequoted portion of our ruling in the case of Sanyo, as divesting the Labor Arbiter
of jurisdiction in a termination dispute.

Article 217 of the Labor Code gives us the clue as to the jurisdiction of the Labor
Arbiter, to wit:

Article 217. Jurisdiction of Labor Arbiters and the Commission. 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 wages, rates of pay, hours of work and other terms and conditions of
employment;

4. Claims for actual, moral, exemplary and other forms of damages arising from the
employer-employee relations;

5. Cases arising from any violation of Article 264 of this Code, including questions
involving the legality of strikes and lockouts;

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

maternity benefits, all other claims, arising from employer-employee relations,
including those of persons in domestic or household service, involving an amount
exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with
a claim for reinstatement.

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.

As can be seen from the aforequoted Article, termination cases fall under the
original and exclusive jurisdiction of the Labor Arbiter. It should be noted, however,
that in the opening paragraph there appears the phrase: Except as otherwise
provided under this Code x x x. It is paragraph (c) of the same Article which
respondent Commission has erroneously interpreted as giving the voluntary
arbitrator jurisdiction over the illegal dismissal case.
However, Article 217 (c) should be read in conjunction with Article 261 of the Labor
Code which grants to voluntary arbitrators original and exclusive jurisdiction to hear
and decide all unresolved grievances arising from the interpretation or
implementation of the collective bargaining agreement and those arising from the
interpretation or enforcement of company personnel policies. Note the phrase
unresolved grievances. In the case at bar, the termination of petitioner is not an
unresolved grievance.

The stance of the Solicitor General in the Sanyo case is totally the reverse of its
posture in the case at bar. In Sanyo, the Solicitor General was of the view that a
distinction should be made between a case involving interpretation or
implementation of Collective Bargaining Agreement or interpretation or
enforcement of company personnel policies, on the one hand and a case involving
termination, on the other hand. It argued that the dismissal of the private
respondents does not involve an interpretation or implementation of a Collective
Bargaining Agreement or interpretation or enforcement of company personnel
policies but involves termination. The Solicitor General further said that where the
dispute is just in the interpretation, implementation or enforcement stage, it may be
referred to the grievance machinery set up in the Collective Bargaining Agreement
or by voluntary arbitration. Where there was already actual termination, i.e.,
violation of rights, it is already cognizable by the Labor Arbiter.[17] We fully agree
with the theory of the Solicitor General in the Sanyo case, which is radically
apposite to its position in this case.

Moreover, the dismissal of petitioner does not fall within the phrase grievances
arising from the interpretation or implementation of collective bargaining
agreement and those arising from the interpretation or enforcement of company
personnel policies, the jurisdiction of which pertains to the grievance machinery or
thereafter, to a voluntary arbitrator or panel of voluntary arbitrators. It is to be
stressed that under Article 260 of the Labor Code, which explains the function of the
grievance machinery and voluntary arbitrator, (T)he parties to a Collective
Bargaining Agreement shall include therein provisions that will ensure the mutual
observance of its terms and conditions. They shall establish a machinery for the
adjustment and resolution of grievances arising from the interpretation or
implementation of their Collective Bargaining Agreement and those arising from the
interpretation or enforcement of company personnel policies. Article 260 further
provides that the parties to a CBA shall name or designate their respective
representative to the grievance machinery and if the grievance is unsettled in that
level, it shall automatically be referred to the voluntary arbitrators designated in
advance by the parties to a CBA of the union and the company. It can thus be
deduced that only disputes involving the union and the company shall be referred to
the grievance machinery or voluntary arbitrators.[18]
In the case at bar, the union does not come into the picture, not having objected or
voiced any dissent to the dismissal of the herein petitioner. The reason for this,
according to petitioner is that the practice in said Hotel in cases of termination is
that the latter cases are not referred anymore to the grievance committee; and that
the terminated employee who wishes to question the legality of his termination
usually goes to the Labor Arbiter for arbitration, whether the termination arose from
the interpretation or enforcement of the company personnel policies or otherwise.
[19]

As we ruled in Sanyo, Since there has been an actual termination, the matter falls
within the jurisdiction of the Labor Arbiter. The aforequoted doctrine is applicable
foursquare in petitioners case. The dismissal of the petitioner does not call for the
interpretation or enforcement of company personnel policies but is a termination
dispute which comes under the jurisdiction of the Labor Arbiter.

It should be explained that company personnel policies are guiding principles stated
in broad, long-range terms that express the philosophy or beliefs of an organizations
top authority regarding personnel matters. They deal with matters affecting
efficiency and well-being of employees and include, among others, the procedure in
the administration of wages, benefits, promotions, transfer and other personnel
movements which are usually not spelled out in the collective agreement. The usual
source of grievances, however, are the rules and regulations governing disciplinary
actions.[20]

The case of Pantranco North Express, Inc. vs. NLRC[21] sheds further light on the
issue of jurisdiction where the Court cited the Sanyo case and quoted the decision
of therein Labor Arbiter Olairez in this manner:

In our honest opinion we have jurisdiction over the complaint on the following
grounds:

First, this is a complaint of illegal dismissal of which original and exclusive

jurisdiction under Article 217 has been conferred to the Labor Arbiters. The
interpretation of the CBA or enforcement of the company policy is only corollary to
the complaint of illegal dismissal. Otherwise, an employee who was on AWOL, or
who committed offenses contrary to the personnel policies(sic) can no longer file a
case of illegal dismissal because the discharge is premised on the interpretation or
enforcement of the company policies(sic).
Second. Respondent voluntarily submitted the case to the jurisdiction of this labor
tribunal. It adduced arguments to the legality of its act, whether such act may be
retirement and/or dismissal, and prayed for reliefs on the merits of the case. A
litigant cannot pray for reliefs on the merits and at the same time attacks(sic) the
jurisdiction of the tribunal. A person cannot have ones cake and eat it too. x x x.

As to the second ground, petitioner correctly points out that respondent NLRC
should have ruled that private respondent is estopped by laches in questioning the
jurisdiction of the Labor Arbiter.

Clearly, estoppel lies. The issue of jurisdiction was mooted by herein private
respondents active participation in the proceedings below. In Marquez vs. Secretary
of Labor,[22] the Court said:

x x x. The active participation of the party against whom the action was brought,
coupled with his failure to object to the jurisdiction of the court or quasi-judicial
body where the action is pending, is tantamount to an invocation of that jurisdiction
and a willingness to abide by the resolution of the case and will bar said party from
later on impugning the court or bodys jurisdiction.

In the assailed Resolution,[23] respondent NLRC cited La Naval Drug Corporation vs.
Court of Appeals[24] in holding that private respondent is not in estoppel. Thus,

The operation of the principle of estoppel on the question of jurisdiction seemingly

depends upon whether the lower court actually had jurisdiction or not. If it had no
jurisdiction, but the case was tried and decided upon the theory that it had
jurisdiction, the parties are not barred, on appeal, from assailing such jurisdiction,
for the same must exist as a matter of law, and may not be conferred by consent of
the parties or by estoppel (5 C.J.S., 861-863). However, if the lower court had
jurisdiction, and the case was heard and decided upon a given theory, such, for
instance, as that the court had no jurisdiction, the party who induced it to adopt
such theory will not be permitted, on appeal, to assume an inconsistent position
that the lower court had jurisdiction. Here, the principle of estoppel applies. The rule
that jurisdiction is conferred by law, and does not depend upon the will of the
parties, has no bearing thereon. (Underscoring ours)

Again, the respondent NLRC has erroneously interpreted our ruling in the La Naval
case. Under the said ruling, estoppel lies in this case. Private respondent is
estopped from questioning the jurisdiction of the Labor Arbiter before the
respondent NLRC having actively participated in the proceedings before the former.
At no time before or during the trial on the merits did private respondent assail the
jurisdiction of the Labor Arbiter. Private respondent took the cue only from the
preliminary statement in the decision of the Labor Arbiter, which was a mere obiter,
and raised the issue of jurisdiction before the Commission. It was then too late.
Estoppel had set in.

Turning now to the merits of the case, We uphold the ruling of the Labor Arbiter that
petitioner was illegally dismissed.

The requisites of a valid dismissal are (1) the dismissal must be for any of the
causes expressed in Article 282 of the Labor Code,[25] and (2) the employee must
be given an opportunity to be heard and to defend himself.[26] The substantive and
procedural laws must be strictly complied with before a worker can be dismissed
from his employment because what is at stake is not only the employees position
but his livelihood.[27]

Petitioners dismissal was grounded on culpable carelessness, negligence and failure

to follow specific instruction(s) or established procedure(s) under OSDA 1.11; and,
having forged or falsified official document(s) under OSDA 2.01.

Private respondent blames petitioner for failure to follow established procedure in

the hotel on a guests request for long distance calls. Petitioner, however, explained
that the usual or established procedures are not followed by the operators and hotel
employees when circumstances warrant. For instance, the RLDC forms and the
deposits are brought by the page boy directly to the operators instead of the
cashiers if the latter are busy and cannot attend to the same. Furthermore, she
avers that the telephone operators are not conscious of the serial numbers in the
RLDCs and at times, the used RLDCs are recycled. Even the page boys do not
actually check the serial numbers of all RLDCs in one batch, except for the first and
the last.

On the charge of taking of the money by petitioner, it is to be noted that the second
P500.00 deposit made by the Japanese guest Ieda was later discovered to be
inserted in the folder for cancelled calls with deposit and official receipts. Thus,
there exists no basis for personal appropriation by the petitioner of the money
involved. Another reason is the alleged tampering of RLDC No. 862406.[28] While
petitioner and her co-operator Loleng admitted that they indeed altered the date
appearing therein from February 15, 1990 to February 13, the same was purposely
made to reflect the true date of the transaction without any malice whatsoever on
their part.
As pointed out by Labor Arbiter Oswald B. Lorenzo, thus:

The specifics of the grounds relied by respondent hotels dismissal of complainant

are those stated in Annex F of the latters POSITION PAPER, which is the Notice of
Dismissal, notably:

OSDA 2.01 - Forging, falsifying official document(s)

OSDA 1.11 - Culpable negligence or failure to follow specific instruction(s) or

established procedure(s)

On this score, we are persuaded by the complainants arguments that under OSDA
1.11, infractions of this sort is not without qualifications, which is, that the alleged
culpable carelessness, negligence or failure to follow instruction(s) or established
procedure(s), RESULTING IN LOSS OR DAMAGE TO COMPANY PROPERTY. From the
facts obtaining in this case, there is no quantum of proof whatsoever, except the
general allegations in respondents POSITION PAPER and other pleadings that loss or
damage to company property resulted from the charged infraction. To our mind, this
is where labor tribunals should come in and help correct interpretation of company
policies which in the enforcement thereof wreaks havoc to the constitutional
guarantee of security of tenure. Apparently, the exercise of little flexibility by
complainant and co-employees which is predicated on good faith should not be
taken against them and more particularly against the complainant herein. In this
case, to sustain the generalized charge of respondent hotel under OSDA 1.11 would
unduly be sanctioning the imposition of too harsh a penalty - which is dismissal.

In the same tenor, the respondents charge under OSDA 1.11 on the alleged
falsification of private document is also with a qualification, in that the alleged act
of falsification must have been done IN SUCH A WAY AS TO MISLEAD THE USER(S)
THEREOF. Again, based on the facts of the complained act, there appeared no one
to have been misled on the change of date from RLDC #862406 FROM 15 TO 13
February 1990.

As a matter of fact, we are in agreement with the jurisprudence cited by VIRGILIO M.

PATAG, the 2nd Asst. City Prosecutor of the City of Manila, who exculpated
complainant MANEJA from the charges of falsification of private documents and
qualified theft under IS No. 90-11083 and marked Annex H of complainants
POSITION PAPER, when he ruled that an altercation which makes the document
speak the truth cannot be the foundation of a criminal action. As to the charge of
qualified theft, we too are of the finding, like the city prosecutor above-mentioned
that there was no evidence on the part of MANEJA to have unlawfully taken the
P500.00 either from the hotel or from guest IEDA on 13 February 1990 and
moreover, we too, find no evidence that complainant MANEJA had the intention to
profit thereby nor had misappropriated the P500.00 in question.[29]

Given the factual circumstances of the case, we cannot deduce dishonesty from the
act and omission of petitioner. Our norms of social justice demand that we credit
employees with the presumption of good faith in the performance of their duties,
[30] especially petitioner who has served private respondent since 1985 up to 1990
without any tinge of dishonesty and was even named Model Employee for the
month of April, 1989.[31]

Petitioner has been charged with a very serious offense - dishonesty. This can
irreparably wreck her life as an employee for no employer will take to its bosom a
dishonest employee. Dismissal is the supreme penalty that can be meted to an
employee and its imposition cannot be justified where the evidence is ambivalent.
[32] It must, therefore, be based on a clear and not on an ambiguous or ambivalent
ground. Any ambiguity or ambivalence on the ground relied upon by an employer in
terminating the services of an employee denies the latter his full right to contest its
legality. Fairness cannot countenance such ambiguity or ambivalence.[33]

An employer can terminate the services of an employee only for valid and just
causes which must be supported by clear and convincing evidence. The employer
has the burden of proving that the dismissal was indeed for a valid and just cause.
[34] Failure to do so results in a finding that the dismissal was unjustified.[35]

Finding that there was no just cause for dismissal of petitioner, we now determine if
the rudiments of due process have been duly accorded to her.

Well-settled is the dictum that the twin requirements of notice and hearing
constitute the essential elements of due process in the dismissal of employees. It is
a cardinal rule in our jurisdiction that the employer must furnish the employee with
two written notices before the termination of employment can be effected: (a) the
first apprises the employee of the particular acts or omissions for which his
dismissal is sought; and, (b) the second informs the employee of the employers
decision to dismiss him. The requirement of a hearing, on the other hand, is
complied with as long as there was an opportunity to be heard, and not necessarily
that an actual hearing was conducted.[36]
In the case at bar, petitioner and her co-operator Loleng were issued a
memorandum on March 7, 1990. On March 11, 1990, they submitted their written
explanation thereto. On March 20, 1990, a written report was made with a
recommendation that the offenses committed by them were covered by OSDA 1.11
and 2.01. Thereafter, on March 23, 1990, petitioner was served with a notice of
dismissal for said violations effective April 1, 1990.

An examination of the record reveals that no hearing was ever conducted by private
respondent before petitioner was dismissed. While it may be true that petitioner
submitted a written explanation, no hearing was actually conducted before her
employment was terminated. She was not accorded the opportunity to fully defend
herself.

Consultations or conferences may not be a substitute for the actual holding of a

hearing. Every opportunity and assistance must be accorded to the employee by
the management to enable him to prepare adequately for his defense, including
legal representation.[37] Considering that petitioner denied having allegedly taken
the second P500.00 deposit of the Japanese guest which was eventually found; and,
having made the alteration of the date on the second RLDC merely to reflect the
true date of the transaction, these circumstances should have at least warranted a
separate hearing to enable petitioner to fully ventilate her side. Absent such
hearing, petitioners right to due process was clearly violated.[38]

It bears stressing that a workers employment is property in the constitutional sense.

He cannot be deprived of his work without due process of law. Substantive due
process mandates that an employee can only be dismissed based on just or
authorized causes. Procedural due process requires further that he can only be
dismissed after he has been given an opportunity to be heard. The import of due
process necessitates the compliance of these two aspects.

Accordingly, we hold that the labor arbiter did not err in awarding full backwages in
view of his finding that petitioner was dismissed without just cause and without due
process.

We ruled in the case of Bustamante vs. NLRC[39] that the amount of backwages to
be awarded to an illegally dismissed employee must be computed from the time he
was dismissed to the time he is actually reinstated, without deducting the earnings
he derived elsewhere pending the resolution of the case.
Petitioner is likewise entitled to the thirteenth-month pay. Presidential Decree No.
851, as amended by Memorandum Order No. 28, provides that employees are
entitled to the thirteenth-month pay benefit regardless of their designation and
irrespective of the method by which their wages are paid.[40]

The award of moral and exemplary damages to petitioner is also warranted where
there is lack of due process in effecting the dismissal.

Where the termination of the services of an employee is attended by fraud or bad

faith on the part of the employer, as when the latter knowingly made false
allegations of a supposed valid cause when none existed, moral and exemplary
damages may be awarded in favor of the former.[41]

The anti-social and oppressive abuse of its right to investigate and dismiss its
employees constitute a violation of Article 1701 of the New Civil Code which
prohibits acts of oppression by either capital or labor against the other, and Article
21 on human relations. The grant of moral damages to the employees by reason of
such conduct on the part of the company is sanctioned by Article 2219, No. 10 of
the Civil Code, which allows recovery of such damages in actions referred to in
Article 21.[42]

The award of attorneys fees amounting to ten percent (10%) of the total award by
the labor arbiter is justified under Article 111 of the Labor Code.

WHEREFORE, premises considered, the petition is GRANTED and the assailed

resolutions of the respondent National Labor Relations Commission dated June 3,
1994 and October 20, 1995 are hereby REVERSED AND SET ASIDE. The decision
dated May 29, 1992 of the Labor Arbiter is therefore REINSTATED.

SO ORDERED.
JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING CORPORATION, respondent.
DECISION
CARPIO, J.:

The Case
Before this Court is a petition for review on certiorari[1] assailing the 26 March 1999
Decision[2] of the Court of Appeals in CA-G.R. SP No. 49190 dismissing the petition
filed by Jose Y. Sonza (SONZA). The Court of Appeals affirmed the findings of the
National Labor Relations Commission (NLRC), which affirmed the Labor Arbiters
dismissal of the case for lack of jurisdiction.

The Facts

In May 1994, respondent ABS-CBN Broadcasting Corporation (ABS-CBN) signed an

Agreement (Agreement) with the Mel and Jay Management and Development
Corporation (MJMDC). ABS-CBN was represented by its corporate officers while
MJMDC was represented by SONZA, as President and General Manager, and Carmela
Tiangco (TIANGCO), as EVP and Treasurer. Referred to in the Agreement as AGENT,
MJMDC agreed to provide SONZAs services exclusively to ABS-CBN as talent for
radio and television. The Agreement listed the services SONZA would render to ABS-
CBN, as follows:

a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;

b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.[3]

ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for
the first year and P317,000 for the second and third year of the Agreement. ABS-
CBN would pay the talent fees on the 10th and 25th days of the month.

On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III,
which reads:

Dear Mr. Lopez,

We would like to call your attention to the Agreement dated May 1994 entered into
by your goodself on behalf of ABS-CBN with our company relative to our talent JOSE
Y. SONZA.

As you are well aware, Mr. Sonza irrevocably resigned in view of recent events
concerning his programs and career. We consider these acts of the station violative
of the Agreement and the station as in breach thereof. In this connection, we hereby
serve notice of rescission of said Agreement at our instance effective as of date.

Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining
amount stipulated in paragraph 7 of the Agreement but reserves the right to seek
recovery of the other benefits under said Agreement.

Thank you for your attention.

Very truly yours,

(Sgd.)
JOSE Y. SONZA
President and Gen. Manager[4]

On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department
of Labor and Employment, National Capital Region in Quezon City. SONZA
complained that ABS-CBN did not pay his salaries, separation pay, service incentive
leave pay, 13th month pay, signing bonus, travel allowance and amounts due under
the Employees Stock Option Plan (ESOP).

On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-
employee relationship existed between the parties. SONZA filed an Opposition to
the motion on 19 July 1996.

Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his
account at PCIBank, Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN
opened a new account with the same bank where ABS-CBN deposited SONZAs
talent fees and other payments due him under the Agreement.

In his Order dated 2 December 1996, the Labor Arbiter[5] denied the motion to
dismiss and directed the parties to file their respective position papers. The Labor
Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was an
employee of respondent company until April 15, 1996 and that he was not paid
certain claims, it is sufficient enough as to confer jurisdiction over the instant case
in this Office. And as to whether or not such claim would entitle complainant to
recover upon the causes of action asserted is a matter to be resolved only after and
as a result of a hearing. Thus, the respondents plea of lack of employer-employee
relationship may be pleaded only as a matter of defense. It behooves upon it the
duty to prove that there really is no employer-employee relationship between it and
the complainant.

The Labor Arbiter then considered the case submitted for resolution. The parties
submitted their position papers on 24 February 1997.

On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with Motion
to Expunge Respondents Annex 4 and Annex 5 from the Records. Annexes 4 and 5
are affidavits of ABS-CBNs witnesses Soccoro Vidanes and Rolando V. Cruz. These
witnesses stated in their affidavits that the prevailing practice in the television and
broadcast industry is to treat talents like SONZA as independent contractors.

The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint
for lack of jurisdiction.[6] The pertinent parts of the decision read as follows:

xxx

While Philippine jurisprudence has not yet, with certainty, touched on the true
nature of the contract of a talent, it stands to reason that a talent as above-
described cannot be considered as an employee by reason of the peculiar
circumstances surrounding the engagement of his services.

It must be noted that complainant was engaged by respondent by reason of his

peculiar skills and talent as a TV host and a radio broadcaster. Unlike an ordinary
employee, he was free to perform the services he undertook to render in
accordance with his own style. The benefits conferred to complainant under the May
1994 Agreement are certainly very much higher than those generally given to
employees. For one, complainant Sonzas monthly talent fees amount to a
staggering P317,000. Moreover, his engagement as a talent was covered by a
specific contract. Likewise, he was not bound to render eight (8) hours of work per
day as he worked only for such number of hours as may be necessary.
The fact that per the May 1994 Agreement complainant was accorded some
benefits normally given to an employee is inconsequential. Whatever benefits
complainant enjoyed arose from specific agreement by the parties and not by
reason of employer-employee relationship. As correctly put by the respondent, All
these benefits are merely talent fees and other contractual benefits and should not
be deemed as salaries, wages and/or other remuneration accorded to an employee,
notwithstanding the nomenclature appended to these benefits. Apropos to this is
the rule that the term or nomenclature given to a stipulated benefit is not
controlling, but the intent of the parties to the Agreement conferring such benefit.

The fact that complainant was made subject to respondents Rules and Regulations,
likewise, does not detract from the absence of employer-employee relationship. As
held by the Supreme Court, The line should be drawn between rules that merely
serve as guidelines towards the achievement of the mutually desired result without
dictating the means or methods to be employed in attaining it, and those that
control or fix the methodology and bind or restrict the party hired to the use of such
means. The first, which aim only to promote the result, create no employer-
employee relationship unlike the second, which address both the result and the
means to achieve it. (Insular Life Assurance Co., Ltd. vs. NLRC, et al., G.R. No.
84484, November 15, 1989).

x x x (Emphasis supplied)[7]

SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision
affirming the Labor Arbiters decision. SONZA filed a motion for reconsideration,
which the NLRC denied in its Resolution dated 3 July 1998.

On 6 October 1998, SONZA filed a special civil action for certiorari before the Court
of Appeals assailing the decision and resolution of the NLRC. On 26 March 1999, the
Court of Appeals rendered a Decision dismissing the case.[8]

Hence, this petition.

The Rulings of the NLRC and Court of Appeals

The Court of Appeals affirmed the NLRCs finding that no employer-employee

relationship existed between SONZA and ABS-CBN. Adopting the NLRCs decision,
the appellate court quoted the following findings of the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered into the
contract merely as an agent of complainant Sonza, the principal. By all indication
and as the law puts it, the act of the agent is the act of the principal itself. This fact
is made particularly true in this case, as admittedly MJMDC is a management
company devoted exclusively to managing the careers of Mr. Sonza and his
broadcast partner, Mrs. Carmela C. Tiangco. (Opposition to Motion to Dismiss)

Clearly, the relations of principal and agent only accrues between complainant
Sonza and MJMDC, and not between ABS-CBN and MJMDC. This is clear from the
provisions of the May 1994 Agreement which specifically referred to MJMDC as the
AGENT. As a matter of fact, when complainant herein unilaterally rescinded said May
1994 Agreement, it was MJMDC which issued the notice of rescission in behalf of Mr.
Sonza, who himself signed the same in his capacity as President.

Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that
historically, the parties to the said agreements are ABS-CBN and Mr. Sonza. And it is
only in the May 1994 Agreement, which is the latest Agreement executed between
ABS-CBN and Mr. Sonza, that MJMDC figured in the said Agreement as the agent of
Mr. Sonza.

We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABS-

CBN such that there exist[s] employer-employee relationship between the latter and
Mr. Sonza. On the contrary, We find it indubitable, that MJMDC is an agent, not of
ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly admitted by the latter
and MJMDC in the May 1994 Agreement.

It may not be amiss to state that jurisdiction over the instant controversy indeed
belongs to the regular courts, the same being in the nature of an action for alleged
breach of contractual obligation on the part of respondent-appellee. As squarely
apparent from complainant-appellants Position Paper, his claims for compensation
for services, 13th month pay, signing bonus and travel allowance against
respondent-appellee are not based on the Labor Code but rather on the provisions
of the May 1994 Agreement, while his claims for proceeds under Stock Purchase
Agreement are based on the latter. A portion of the Position Paper of complainant-
appellant bears perusal:

Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually
bound itself to pay complainant a signing bonus consisting of shares of stockswith
FIVE HUNDRED THOUSAND PESOS (P500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay based on an
amount not lower than the amount he was receiving prior to effectivity of (the)
Agreement.

Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a

commutable travel benefit amounting to at least One Hundred Fifty Thousand Pesos
(P150,000.00) per year.

Thus, it is precisely because of complainant-appellants own recognition of the fact

that his contractual relations with ABS-CBN are founded on the New Civil Code,
rather than the Labor Code, that instead of merely resigning from ABS-CBN,
complainant-appellant served upon the latter a notice of rescission of Agreement
with the station, per his letter dated April 1, 1996, which asserted that instead of
referring to unpaid employee benefits, he is waiving and renouncing recovery of the
remaining amount stipulated in paragraph 7 of the Agreement but reserves the
right to such recovery of the other benefits under said Agreement. (Annex 3 of the
respondent ABS-CBNs Motion to Dismiss dated July 10, 1996).

Evidently, it is precisely by reason of the alleged violation of the May 1994

Agreement and/or the Stock Purchase Agreement by respondent-appellee that
complainant-appellant filed his complaint. Complainant-appellants claims being
anchored on the alleged breach of contract on the part of respondent-appellee, the
same can be resolved by reference to civil law and not to labor law. Consequently,
they are within the realm of civil law and, thus, lie with the regular courts. As held in
the case of Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21
November 1994, an action for breach of contractual obligation is intrinsically a civil
dispute.[9] (Emphasis supplied)

The Court of Appeals ruled that the existence of an employer-employee relationship

between SONZA and ABS-CBN is a factual question that is within the jurisdiction of
the NLRC to resolve.[10] A special civil action for certiorari extends only to issues of
want or excess of jurisdiction of the NLRC.[11] Such action cannot cover an inquiry
into the correctness of the evaluation of the evidence which served as basis of the
NLRCs conclusion.[12] The Court of Appeals added that it could not re-examine the
parties evidence and substitute the factual findings of the NLRC with its own.[13]

The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS DECISION AND
REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED
BETWEEN SONZA AND ABS-CBN, DESPITE THE WEIGHT OF CONTROLLING LAW,
JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH A FINDING.[14]

The Courts Ruling

We affirm the assailed decision.

No convincing reason exists to warrant a reversal of the decision of the Court of

Appeals affirming the NLRC ruling which upheld the Labor Arbiters dismissal of the
case for lack of jurisdiction.

The present controversy is one of first impression. Although Philippine labor laws
and jurisprudence define clearly the elements of an employer-employee
relationship, this is the first time that the Court will resolve the nature of the
relationship between a television and radio station and one of its talents. There is no
case law stating that a radio and television program host is an employee of the
broadcast station.

The instant case involves big names in the broadcast industry, namely Jose Jay
Sonza, a known television and radio personality, and ABS-CBN, one of the biggest
television and radio networks in the country.

SONZA contends that the Labor Arbiter has jurisdiction over the case because he
was an employee of ABS-CBN. On the other hand, ABS-CBN insists that the Labor
Arbiter has no jurisdiction because SONZA was an independent contractor.

Employee or Independent Contractor?

The existence of an employer-employee relationship is a question of fact. Appellate

courts accord the factual findings of the Labor Arbiter and the NLRC not only respect
but also finality when supported by substantial evidence.[15] Substantial evidence
means such relevant evidence as a reasonable mind might accept as adequate to
support a conclusion.[16] A party cannot prove the absence of substantial evidence
by simply pointing out that there is contrary evidence on record, direct or
circumstantial. The Court does not substitute its own judgment for that of the
tribunal in determining where the weight of evidence lies or what evidence is
credible.[17]

SONZA maintains that all essential elements of an employer-employee relationship

are present in this case. Case law has consistently held that the elements of an
employer-employee relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employers power to control the employee on the means and methods by which the
work is accomplished.[18] The last element, the so-called control test, is the most
important element.[19]

A. Selection and Engagement of Employee

ABS-CBN engaged SONZAs services to co-host its television and radio programs
because of SONZAs peculiar skills, talent and celebrity status. SONZA contends that
the discretion used by respondent in specifically selecting and hiring complainant
over other broadcasters of possibly similar experience and qualification as
complainant belies respondents claim of independent contractorship.

Independent contractors often present themselves to possess unique skills,

expertise or talent to distinguish them from ordinary employees. The specific
selection and hiring of SONZA, because of his unique skills, talent and celebrity
status not possessed by ordinary employees, is a circumstance indicative, but not
conclusive, of an independent contractual relationship. If SONZA did not possess
such unique skills, talent and celebrity status, ABS-CBN would not have entered into
the Agreement with SONZA but would have hired him through its personnel
department just like any other employee.

In any event, the method of selecting and engaging SONZA does not conclusively
determine his status. We must consider all the circumstances of the relationship,
with the control test being the most important element.

B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going
to MJMDC. SONZA asserts that this mode of fee payment shows that he was an
employee of ABS-CBN. SONZA also points out that ABS-CBN granted him benefits
and privileges which he would not have enjoyed if he were truly the subject of a
valid job contract.

All the talent fees and benefits paid to SONZA were the result of negotiations that
led to the Agreement. If SONZA were ABS-CBNs employee, there would be no need
for the parties to stipulate on benefits such as SSS, Medicare, x x x and 13th month
pay[20] which the law automatically incorporates into every employer-employee
contract.[21] Whatever benefits SONZA enjoyed arose from contract and not
because of an employer-employee relationship.[22]

SONZAs talent fees, amounting to P317,000 monthly in the second and third year,
are so huge and out of the ordinary that they indicate more an independent
contractual relationship rather than an employer-employee relationship. ABS-CBN
agreed to pay SONZA such huge talent fees precisely because of SONZAs unique
skills, talent and celebrity status not possessed by ordinary employees. Obviously,
SONZA acting alone possessed enough bargaining power to demand and receive
such huge talent fees for his services. The power to bargain talent fees way above
the salary scales of ordinary employees is a circumstance indicative, but not
conclusive, of an independent contractual relationship.

The payment of talent fees directly to SONZA and not to MJMDC does not negate the
status of SONZA as an independent contractor. The parties expressly agreed on
such mode of payment. Under the Agreement, MJMDC is the AGENT of SONZA, to
whom MJMDC would have to turn over any talent fee accruing under the Agreement.

C. Power of Dismissal

For violation of any provision of the Agreement, either party may terminate their
relationship. SONZA failed to show that ABS-CBN could terminate his services on
grounds other than breach of contract, such as retrenchment to prevent losses as
provided under labor laws.[23]

During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as
long as AGENT and Jay Sonza shall faithfully and completely perform each condition
of this Agreement.[24] Even if it suffered severe business losses, ABS-CBN could not
retrench SONZA because ABS-CBN remained obligated to pay SONZAs talent fees
during the life of the Agreement. This circumstance indicates an independent
contractual relationship between SONZA and ABS-CBN.

SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-
CBN still paid him his talent fees. Plainly, ABS-CBN adhered to its undertaking in the
Agreement to continue paying SONZAs talent fees during the remaining life of the
Agreement even if ABS-CBN cancelled SONZAs programs through no fault of SONZA.
[25]

SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement
as an admission that he is not an employee of ABS-CBN. The Labor Arbiter stated
that if it were true that complainant was really an employee, he would merely
resign, instead. SONZA did actually resign from ABS-CBN but he also, as president of
MJMDC, rescinded the Agreement. SONZAs letter clearly bears this out.[26]
However, the manner by which SONZA terminated his relationship with ABS-CBN is
immaterial. Whether SONZA rescinded the Agreement or resigned from work does
not determine his status as employee or independent contractor.

D. Power of Control

Since there is no local precedent on whether a radio and television program host is
an employee or an independent contractor, we refer to foreign case law in analyzing
the present case. The United States Court of Appeals, First Circuit, recently held in
Alberty-Vlez v. Corporacin De Puerto Rico Para La Difusin Pblica (WIPR)[27] that a
television program host is an independent contractor. We quote the following
findings of the U.S. court:

Several factors favor classifying Alberty as an independent contractor. First, a

television actress is a skilled position requiring talent and training not available on-
the-job. x x x In this regard, Alberty possesses a masters degree in public
communications and journalism; is trained in dance, singing, and modeling; taught
with the drama department at the University of Puerto Rico; and acted in several
theater and television productions prior to her affiliation with Desde Mi Pueblo.
Second, Alberty provided the tools and instrumentalities necessary for her to
perform. Specifically, she provided, or obtained sponsors to provide, the costumes,
jewelry, and other image-related supplies and services necessary for her
appearance. Alberty disputes that this factor favors independent contractor status
because WIPR provided the equipment necessary to tape the show. Albertys
argument is misplaced. The equipment necessary for Alberty to conduct her job as
host of Desde Mi Pueblo related to her appearance on the show. Others provided
equipment for filming and producing the show, but these were not the primary tools
that Alberty used to perform her particular function. If we accepted this argument,
independent contractors could never work on collaborative projects because other
individuals often provide the equipment required for different aspects of the
collaboration. x x x

Third, WIPR could not assign Alberty work in addition to filming Desde Mi Pueblo.
Albertys contracts with WIPR specifically provided that WIPR hired her professional
services as Hostess for the Program Desde Mi Pueblo. There is no evidence that
WIPR assigned Alberty tasks in addition to work related to these tapings. x x x[28]
(Emphasis supplied)

Applying the control test to the present case, we find that SONZA is not an
employee but an independent contractor. The control test is the most important test
our courts apply in distinguishing an employee from an independent contractor.[29]
This test is based on the extent of control the hirer exercises over a worker. The
greater the supervision and control the hirer exercises, the more likely the worker is
deemed an employee. The converse holds true as well the less control the hirer
exercises, the more likely the worker is considered an independent contractor.[30]

First, SONZA contends that ABS-CBN exercised control over the means and methods
of his work.

SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically to

co-host the Mel & Jay programs. ABS-CBN did not assign any other work to SONZA.
To perform his work, SONZA only needed his skills and talent. How SONZA delivered
his lines, appeared on television, and sounded on radio were outside ABS-CBNs
control. SONZA did not have to render eight hours of work per day. The Agreement
required SONZA to attend only rehearsals and tapings of the shows, as well as pre-
and post-production staff meetings.[31] ABS-CBN could not dictate the contents of
SONZAs script. However, the Agreement prohibited SONZA from criticizing in his
shows ABS-CBN or its interests.[32] The clear implication is that SONZA had a free
hand on what to say or discuss in his shows provided he did not attack ABS-CBN or
its interests.

We find that ABS-CBN was not involved in the actual performance that produced the
finished product of SONZAs work.[33] ABS-CBN did not instruct SONZA how to
perform his job. ABS-CBN merely reserved the right to modify the program format
and airtime schedule for more effective programming.[34] ABS-CBNs sole concern
was the quality of the shows and their standing in the ratings. Clearly, ABS-CBN did
not exercise control over the means and methods of performance of SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs
power over the means and methods of the performance of his work. Although ABS-
CBN did have the option not to broadcast SONZAs show, ABS-CBN was still obligated
to pay SONZAs talent fees. Thus, even if ABS-CBN was completely dissatisfied with
the means and methods of SONZAs performance of his work, or even with the
quality or product of his work, ABS-CBN could not dismiss or even discipline SONZA.
All that ABS-CBN could do is not to broadcast SONZAs show but ABS-CBN must still
pay his talent fees in full.[35]

Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the
obligation to continue paying in full SONZAs talent fees, did not amount to control
over the means and methods of the performance of SONZAs work. ABS-CBN could
not terminate or discipline SONZA even if the means and methods of performance
of his work - how he delivered his lines and appeared on television - did not meet
ABS-CBNs approval. This proves that ABS-CBNs control was limited only to the result
of SONZAs work, whether to broadcast the final product or not. In either case, ABS-
CBN must still pay SONZAs talent fees in full until the expiry of the Agreement.

In Vaughan, et al. v. Warner, et al.,[36] the United States Circuit Court of Appeals
ruled that vaudeville performers were independent contractors although the
management reserved the right to delete objectionable features in their shows.
Since the management did not have control over the manner of performance of the
skills of the artists, it could only control the result of the work by deleting
objectionable features.[37]

SONZA further contends that ABS-CBN exercised control over his work by supplying
all equipment and crew. No doubt, ABS-CBN supplied the equipment, crew and
airtime needed to broadcast the Mel & Jay programs. However, the equipment, crew
and airtime are not the tools and instrumentalities SONZA needed to perform his
job. What SONZA principally needed were his talent or skills and the costumes
necessary for his appearance. [38] Even though ABS-CBN provided SONZA with the
place of work and the necessary equipment, SONZA was still an independent
contractor since ABS-CBN did not supervise and control his work. ABS-CBNs sole
concern was for SONZA to display his talent during the airing of the programs.[39]

A radio broadcast specialist who works under minimal supervision is an independent

contractor.[40] SONZAs work as television and radio program host required special
skills and talent, which SONZA admittedly possesses. The records do not show that
ABS-CBN exercised any supervision and control over how SONZA utilized his skills
and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBNs employee because ABS-CBN
subjected him to its rules and standards of performance. SONZA claims that this
indicates ABS-CBNs control not only [over] his manner of work but also the quality
of his work.

The Agreement stipulates that SONZA shall abide with the rules and standards of
performance covering talents[41] of ABS-CBN. The Agreement does not require
SONZA to comply with the rules and standards of performance prescribed for
employees of ABS-CBN. The code of conduct imposed on SONZA under the
Agreement refers to the Television and Radio Code of the Kapisanan ng mga
Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY (ABS-CBN)
as its Code of Ethics.[42] The KBP code applies to broadcasters, not to employees of
radio and television stations. Broadcasters are not necessarily employees of radio
and television stations. Clearly, the rules and standards of performance referred to
in the Agreement are those applicable to talents and not to employees of ABS-CBN.

In any event, not all rules imposed by the hiring party on the hired party indicate
that the latter is an employee of the former.[43] In this case, SONZA failed to show
that these rules controlled his performance. We find that these general rules are
merely guidelines towards the achievement of the mutually desired result, which
are top-rating television and radio programs that comply with standards of the
industry. We have ruled that:

Further, not every form of control that a party reserves to himself over the conduct
of the other party in relation to the services being rendered may be accorded the
effect of establishing an employer-employee relationship. The facts of this case fall
squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we
held that:

Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the means
or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The first,
which aim only to promote the result, create no employer-employee relationship
unlike the second, which address both the result and the means used to achieve it.
[44]

The Vaughan case also held that one could still be an independent contractor
although the hirer reserved certain supervision to insure the attainment of the
desired result. The hirer, however, must not deprive the one hired from performing
his services according to his own initiative.[45]

Lastly, SONZA insists that the exclusivity clause in the Agreement is the most
extreme form of control which ABS-CBN exercised over him.

This argument is futile. Being an exclusive talent does not by itself mean that
SONZA is an employee of ABS-CBN. Even an independent contractor can validly
provide his services exclusively to the hiring party. In the broadcast industry,
exclusivity is not necessarily the same as control.

The hiring of exclusive talents is a widespread and accepted practice in the

entertainment industry.[46] This practice is not designed to control the means and
methods of work of the talent, but simply to protect the investment of the broadcast
station. The broadcast station normally spends substantial amounts of money, time
and effort in building up its talents as well as the programs they appear in and thus
expects that said talents remain exclusive with the station for a commensurate
period of time.[47] Normally, a much higher fee is paid to talents who agree to work
exclusively for a particular radio or television station. In short, the huge talent fees
partially compensates for exclusivity, as in the present case.

MJMDC as Agent of SONZA

SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which
contracted out his services to ABS-CBN. The Labor Arbiter ruled that as a talent of
MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists that MJMDC is a
labor-only contractor and ABS-CBN is his employer.

In a labor-only contract, there are three parties involved: (1) the labor-only
contractor; (2) the employee who is ostensibly under the employ of the labor-only
contractor; and (3) the principal who is deemed the real employer. Under this
scheme, the labor-only contractor is the agent of the principal. The law makes the
principal responsible to the employees of the labor-only contractor as if the principal
itself directly hired or employed the employees.[48] These circumstances are not
present in this case.

There are essentially only two parties involved under the Agreement, namely,
SONZA and ABS-CBN. MJMDC merely acted as SONZAs agent. The Agreement
expressly states that MJMDC acted as the AGENT of SONZA. The records do not
show that MJMDC acted as ABS-CBNs agent. MJMDC, which stands for Mel and Jay
Management and Development Corporation, is a corporation organized and owned
by SONZA and TIANGCO. The President and General Manager of MJMDC is SONZA
himself. It is absurd to hold that MJMDC, which is owned, controlled, headed and
managed by SONZA, acted as agent of ABS-CBN in entering into the Agreement
with SONZA, who himself is represented by MJMDC. That would make MJMDC the
agent of both ABS-CBN and SONZA.

As SONZA admits, MJMDC is a management company devoted exclusively to

managing the careers of SONZA and his broadcast partner, TIANGCO. MJMDC is not
engaged in any other business, not even job contracting. MJMDC does not have any
other function apart from acting as agent of SONZA or TIANGCO to promote their
careers in the broadcast and television industry.[49]

Policy Instruction No. 40

SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas
Ople on 8 January 1979 finally settled the status of workers in the broadcast
industry. Under this policy, the types of employees in the broadcast industry are the
station and program employees.

Policy Instruction No. 40 is a mere executive issuance which does not have the force
and effect of law. There is no legal presumption that Policy Instruction No. 40
determines SONZAs status. A mere executive issuance cannot exclude independent
contractors from the class of service providers to the broadcast industry. The
classification of workers in the broadcast industry into only two groups under Policy
Instruction No. 40 is not binding on this Court, especially when the classification has
no basis either in law or in fact.

Affidavits of ABS-CBNs Witnesses

SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes
and Rolando Cruz without giving his counsel the opportunity to cross-examine these
witnesses. SONZA brands these witnesses as incompetent to attest on the
prevailing practice in the radio and television industry. SONZA views the affidavits of
these witnesses as misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses, he was never prevented
from denying or refuting the allegations in the affidavits. The Labor Arbiter has the
discretion whether to conduct a formal (trial-type) hearing after the submission of
the position papers of the parties, thus:

Section 3. Submission of Position Papers/Memorandum

xxx

These verified position papers shall cover only those claims and causes of action
raised in the complaint excluding those that may have been amicably settled, and
shall be accompanied by all supporting documents including the affidavits of their
respective witnesses which shall take the place of the latters direct testimony. x x x

Section 4. Determination of Necessity of Hearing. Immediately after the submission

of the parties of their position papers/memorandum, the Labor Arbiter shall motu
propio determine whether there is need for a formal trial or hearing. At this stage,
he may, at his discretion and for the purpose of making such determination, ask
clarificatory questions to further elicit facts or information, including but not limited
to the subpoena of relevant documentary evidence, if any from any party or
witness.[50]

The Labor Arbiter can decide a case based solely on the position papers and the
supporting documents without a formal trial.[51] The holding of a formal hearing or
trial is something that the parties cannot demand as a matter of right.[52] If the
Labor Arbiter is confident that he can rely on the documents before him, he cannot
be faulted for not conducting a formal trial, unless under the particular
circumstances of the case, the documents alone are insufficient. The proceedings
before a Labor Arbiter are non-litigious in nature. Subject to the requirements of due
process, the technicalities of law and the rules obtaining in the courts of law do not
strictly apply in proceedings before a Labor Arbiter.

Talents as Independent Contractors

ABS-CBN claims that there exists a prevailing practice in the broadcast and
entertainment industries to treat talents like SONZA as independent contractors.
SONZA argues that if such practice exists, it is void for violating the right of labor to
security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution[53] arises
only if there is an employer-employee relationship under labor laws. Not every
performance of services for a fee creates an employer-employee relationship. To
hold that every person who renders services to another for a fee is an employee - to
give meaning to the security of tenure clause - will lead to absurd results.

Individuals with special skills, expertise or talent enjoy the freedom to offer their
services as independent contractors. The right to life and livelihood guarantees this
freedom to contract as independent contractors. The right of labor to security of
tenure cannot operate to deprive an individual, possessed with special skills,
expertise and talent, of his right to contract as an independent contractor. An
individual like an artist or talent has a right to render his services without any one
controlling the means and methods by which he performs his art or craft. This Court
will not interpret the right of labor to security of tenure to compel artists and talents
to render their services only as employees. If radio and television program hosts can
render their services only as employees, the station owners and managers can
dictate to the radio and television hosts what they say in their shows. This is not
conducive to freedom of the press.

Different Tax Treatment of Talents and Broadcasters

The National Internal Revenue Code (NIRC)[54] in relation to Republic Act No. 7716,
[55] as amended by Republic Act No. 8241,[56] treats talents, television and radio
broadcasters differently. Under the NIRC, these professionals are subject to the 10%
value-added tax (VAT) on services they render. Exempted from the VAT are those
under an employer-employee relationship.[57] This different tax treatment accorded
to talents and broadcasters bolters our conclusion that they are independent
contractors, provided all the basic elements of a contractual relationship are present
as in this case.

Nature of SONZAs Claims

SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay,
separation pay, service incentive leave, signing bonus, travel allowance, and
amounts due under the Employee Stock Option Plan. We agree with the findings of
the Labor Arbiter and the Court of Appeals that SONZAs claims are all based on the
May 1994 Agreement and stock option plan, and not on the Labor Code. Clearly, the
present case does not call for an application of the Labor Code provisions but an
interpretation and implementation of the May 1994 Agreement. In effect, SONZAs
cause of action is for breach of contract which is intrinsically a civil dispute
cognizable by the regular courts.[58]

WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals
dated 26 March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against petitioner.

SO ORDERED.