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Contents
1. Insular Life v. Basiao ................................................................................................................ 1
2. Tongko vs. Manufacturers Life Insurance ......................................................................... 3
3. Indophil Textile Mills vs. Adviento ....................................................................................... 4
4. Philippine Journalist Inc. vs. Journal Employees Union............................................... 5
5. Julies bakeshop v arnaiz ............................................................................................................... 8
6. Gjt builders vs ambos ............................................................................................................. 12
7. Mirant Phils v Caro ................................................................................................................... 15
8. Benigno v ABS CBN ................................................................................................................. 19
10. Abbott vs Alcaraz.......................................................................................................................... 23
11. Colegio vs Rojo.............................................................................................................................. 26
12. AMA vs Austria .............................................................................................................................. 29
13. Tirol v NLRC .................................................................................................................................. 32
14. GOMA VS PAMPLONA .................................................................................................................. 35
15. GADIA VS SYKES ASIA............................................................................................................... 37
16. HACIENDA VS LORENZO ........................................................................................................... 42
17. TUNAY NA PAGKAKAISA VS ASIA BREWERY ..................................................................... 47
18. FUJI VS ESPIRITU ........................................................................................................................ 50
19. Goya v Goya ................................................................................................................................... 53
20. Alviado vs Procter and Gamble ............................................................................................... 56

1. Insular Life v. Basiao


Facts:

Since 1968, respondent Basiao has been an agent for Petitioner


Company, and is authorized to solicit within the Philippines applications for
insurance policies and annuities in accordance with the existing rules and
regulations of the company. In return, he would receive compensation, in
the form of commissions.
Some four years later, in April 1972, the parties entered into another
contract an Agency Manager's Contract and to implement his end of it,

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Basiao organized an agency or office to which he gave the name M. Basiao


and Associates, while concurrently fulfilling his commitments under the first
contract with the Company. In May, 1979, the Company terminated the
Agency Manager's Contract. After vainly seeking reconsideration, Basiao
sued the Company in a civil action and this prompted the latter to terminate
also his engagement under the first contract and to stop payment of his
commissions starting April 1, 1980.
Basiao thereafter filed with the then Ministry of Labor a complaint
against the Company and its president. The complaint sought to recover
commissions allegedly unpaid thereunder, plus attorney's fees. The
respondents disputed the Ministry's jurisdiction over Basiao's claim,
asserting that he was not the Company's employee, but an independent
contractor.

Issue:

Whether or not there exist an employer-employee relationship


between Insular Life and Basiao.

Held :

No.

Rules and regulations governing the conduct of the business are


provided for in the Insurance Code. These rules merely serve as guidelines
towards the achievement of the mutually desired result without dictating the
means or methods to be employed in attaining it. Its aim is only to promote
the result, thereby creating no employer-employee relationship. It is usual
and expected for an insurance company to promulgate a set of rules to guide
its commission agents in selling its policies which prescribe the qualifications
of persons who may be insured. None of these really invades the agents
contractual prerogative to adopt his own selling methods or to sell insurance
at his own time and convenience, hence cannot justifiable be said to
establish an employer-employee relationship between Basiao and the
company. The respondents limit themselves to pointing out that Basiaos
contract with the company bound him to observe and conform to such rules.
No showing that such rules were in fact promulgated which effectively
controlled or restricted his choice of methods of selling insurance. Therefore,
Basiao was not an employee of the petitioner, but a commission agent, an
independent contract whose claim for unpaid commissions should have been
litigated in an ordinary civil action. Wherefore, the complaint of Basiao is
dismissed.

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2. Tongko vs. Manufacturers Life Insurance


Facts:

The contractual relationship between Tongko and Manulife had two


basic phases. The first phase began on July 1, 1977, under a Career Agents
Agreement, which provided that the Agent is an independent contractor and
nothing contained herein shall be construed or interpreted as creating an
employer-employee relationship between the Company and the Agent.
The second phase started in 1983 when Tongko was named Unit
Manager in Manulifes Sales Agency Organization. In 1990, he became a
Branch Manager and a Regional Sales Manager by the year 1996. Tongkos
gross earnings consisted of commissions, persistency income, and
management overrides. Since the beginning, Tongko consistently declared
himself self-employed in his income tax returns. Under oath, he declared his
gross business income and deducted his business expenses to arrive at his
taxable business income.
Respondent Renato Vergel de Dios, sales manager, wrote Tongko a
letter dated November 6, 2001 on concerns that were brought up during the
Metro North Sales Managers Meeting, expressing dissatisfaction of Tongkos
performance in their agent recruiting business, which resulted in some
changes on how Tongko would conduct his duties, including that Tongko hire
at his expense a competent assistant to unload him of routine tasks, which
he had been complaining to be too taxing for him.
On December 18, 2001, de Dios wrote Tongko another letter which
served as notice of termination of his Agency Agreement with the company
effective fifteen days from the date of the letter. Tongko filed an illegal
dismissal complaint with the National Labor Relations Commission (NLRC) to
which the labor arbiter decreed that no employer-employee relationship
existed between the parties.
The NLRC reversed the labor arbiters decision on appeal. It found the
existence of an employer-employee relationship and concluded that Tongko
had been illegally dismissed. However, the Court of Appeals provided that
the NLRC gravely abused its discretion in its ruling and reverted to the labor
arbiters decision that no employer-employee relationship existed between
Tongko and Manulife.

ISSUE:

Whether or not there is an employer-employee relationship between


Tongko and Manulife.
.
HELD:
NO. In the determination of whether an employer-employee
relationship exists between 2 parties, this court applies the four-fold test to

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determine the existence of the elements of such relationship. Jurisprudence


is firmly settled that whenever the existence of an employment relationship
is in dispute, four elements constitute the reliable yardstick: (a) the selection
and engagement of the employee; (b) the payment of wages; (c) the power
of dismissal; and (d) the employers power to control the employees
conduct. It is the so-called control test which constitutes the most
important index of existence of the employer-employee relationship that is,
whether the employer controls or has reserved the right to control the
employee not only as to the result of the work to be done but also as to the
means and methods by which the same is to be accomplished. Stated
otherwise, an employer-employee relationship exists where the person for
whom the services are performed reserves the right to control not only the
end to be achieved but also the means to be used in reaching such end. In
the case at bar, the absence of evidence showing Manulifes control over
Tongkos contractual duties points to the absence of any employer-employee
relationship between Tongko and Manulife. In the context of the established
evidence, Tongko remained an agent all along; although his subsequent
duties made him a lead agent with leadership role, he was nevertheless only
an agent whose basic contract yields no evidence of means-and-manner
control. Claimant clearly failed to substantiate his claim of employment
relationship by the quantum of evidence the Labor Code requires.
Tongkos failure to comply with the guidelines of de Dios letter, as a
ground for termination of Tongkos agency, is a matter that the labor
tribunals cannot rule upon in the absence of an employer-employee
relationship. Jurisdiction over the matter belongs to the courts applying the
laws of insurance, agency and contracts.

3. Indophil Textile Mills vs. Adviento


Facts:

Adviento was hired as Civil Engineer for maintenance of facilities of


Indophil Textile Mills. The primary business of such company is the
manufacture of textiles.

During the span of his employment, Adviento developed a chronic


allergy on account of the textile dust. He was eventually dismissed from
employment, for which reason he filed two cases against the company, viz:
(a) NLRC for illegal termination; and (b) Regional Trial Court for damages
arising from gross negligence and failure of company to provide a safe,
workable and healthy environment.

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Company sought to dismiss the RTC case on account of litis pendencia


and lack of jurisdiction, considering that the claim arises from an employer-
employee relationship.

Issue:

Whether or not RTC has jurisdiction.

Held:

YES. No reasonable causal connection between claim and employer-


employee relationship.

Although Adviento contracted the occupational disease during his


employment with the company, there is no reasonable causal connection
between the claim asserted and the employer-employee relations. As such,
the case does not fall within the jurisdiction of the labor courts; but rather
with the regular courts that have jurisdiction.

While the maintenance of a safe and healthy workplace may be a


subject of a labor case, note that the cause of action is one for torts/quasi-
delict and that relief prayed for is the payment for damages arising from
alleged gross negligence on the part of the company to provide a safe,
healthy and workable environment for its employees.

4. Philippine Journalist Inc. vs. Journal Employees Union


Facts:

Complainant Judith Pulido, hired as a Proofreader by Philippine


Journalists, Inc. (PJI), alleged that she got dismissed because she was the
Union President who was very active in defending and pursuing the rights of
her union members, and in fighting against the abuses of respondent
Corporate Officers. She added that she got the ire of PJI when the
employees filed a complaint against the latter before the Office of the
President due to the assumed mismanagement of the PJI executives.

On the other hand, another complainant in the name of Michael L.


Alfante alleged that he started to work with PJI as computer technician at
Management Information System under manager Neri Torrecampo.
Sometime in 2001, Rico Pagkalinawan replaced Torrecampo, which was
opposed by complainant and three other co-employees. Pagkalinawan took
offense of their objection, triggering the sending of various memorandums
to Alfante regarding his work performance. He was then given a notice of
dismissal on the ground of poor performance and was dismissed effective

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July 28, 2003.

Complainant Alfante submitted that he was dismissed without just


cause. However, the respondents, in their position paper, averred that
complainants Pulido and Alfante were dismissed for cause and with due
process and maintained that they did not commit any act of unfair labor
practices. They further added that they did not commit acts tantamount to
interfering, restraining, or coercing employees in the exercise of their right
to self-organization.

With respect to the alleged non-adjustment of longevity pay and burial


aid, the respondent PJI pointed out that it complies with the provisions of
the CBA and that both complainants have not claimed for the burial aid.
They put forward the information that the alleged non-payment of rest days
every Monday for the past three (3) years is a matter that is still at issue
in NLRC Case No. 02-0402973-93, which case is still pending before this
Commission.
The Labor Arbiter then ruled in favor of Pulido. However, the complaint
of Alfante was dismissed for lack of merit. This prompted him to make a
partial appeal before the NLRC together with Journal Employees Union (JEU),
his labor organization.

The NLRC denied the partial appeal for lack of merit. It also rendered a
decision insofar as the funeral or bereavement aid is concerned, which is
hereby GRANTED, but only after submission of conclusive proofs that the
deceased is a parent, either father or mother, of the employees concerned,
as well as the death certificate to establish the fact of death of the deceased
legal dependent.

JEU and Alfante moved for reconsideration, but the CA denied such
motion. Furthermore, PJI sought the review of the CAs disposition in the
decision on the granting of the funeral and bereavement aid stipulated in the
CBA. They maintained that under Section 4, Article XIII of the CBA, funeral
and bereavement aid should be granted upon the death of a legal dependent
of a regular employee; that consistent with the definition provided by the
Social Security System (SSS), the term legal dependent referred to the
spouse and children of a married regular employee, and to the parents and
siblings, 18 years old and below, of a single regular employee; that the CBA
considered the term dependents to have the same meaning as beneficiaries,
as provided in Section 5, Article XIII of the CBA on the payment of death
benefits; that its earlier granting of claims for funeral and bereavement aid

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without regard to the foregoing definition of the legal dependents of married


or single regular employees did not ripen into a company policy whose
unilateral withdrawal would constitute a violation of Article 100 of the Labor
Code, the law disallowing the non-diminution of benefits; that it had
approved only four claims from 1999 to 2003 based on its mistaken
interpretation of the term legal dependents, but later corrected the same in
2000; that the grant of funeral and bereavement aid for the death of an
employees legal dependent, regardless of the employees civil status, did
not occur over a long period of time, was not consistent and deliberate, and
was partly due to its mistake in appreciating a doubtful question of law; and
that its denial of subsequent claims did not amount to a violation of the law
against the non-diminution of benefits.

In their comment, JEU and Alfante countered that the CBA was a
bilateral contractual agreement that could not be unilaterally changed by any
party during its lifetime; and that the grant of burial benefits had already
become a company practice favorable to the employees, and could not
anymore be reduced, diminished, discontinued or eliminated by PJI.

Issue:

Whether or not PJI may interpret legal dependent in accordance with


the SSS definition of beneficiary and hence, refuse payment of the benefit
in the availment of funeral and bereavement aid under the CBA.

Held:

No, the company cannot do so.

The coverage of the term legal dependent as used in a stipulation in a


collective bargaining agreement (CBA) granting funeral or bereavement
benefit to a regular employee for the death of a legal dependent, if the CBA
is silent about it, is to be construed as similar to the meaning that
contemporaneous social legislations have set. This is because the terms of
such social legislations are deemed incorporated in or adopted by the CBA.
The Court defined a dependent as "one who derives his or her main support
from another. Meaning, relying on, or subject to, someone else for support;
not able to exist or sustain oneself, or to perform anything without the will,
power, or aid of someone else."

Citing statutory definitions, the Supreme Court concluded that the civil
status of the employee as either married or single is not the controlling

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consideration in order that a person may qualify as the employees legal


dependent. What is rather decidedly controlling is the fact that the spouse,
child, or parent is actually dependent for support upon the employee.

Furthermore, pursuant to Article 100 of the Labor Code, petitioner as


the employer could not reduce, diminish, discontinue or eliminate any
benefit and supplement being enjoyed by or granted to its employees. This
prohibition against the diminution of benefits is founded on the constitutional
mandate to protect the rights of workers and to promote their welfare and to
afford labor full protection.

5. Julies bakeshop v arnaiz

G.R. No. 173882 February 15, 2012

FACTS: Julies Bakeshop and/or Edgar Reyes (Reyes) assail the decision of
the CA which reversed the Resolutions of the NLRC and ordered petitioners
to reinstate respondents Henry Arnaiz (Arnaiz), Edgar Napal (Napal) and
Jonathan Tolores (Tolores) and to pay them their backwages for having been
constructively dismissed, as well as their other monetary benefits.
Reyes hired respondents as chief bakers in his three franchise branches of
Julies Bakeshop in Sibalom and San Jose, Antique. Respondents filed
separate complaints against petitioners for underpayment of wages,
payment of premium pay for holiday and rest day, service incentive leave
pay, 13th month pay, cost of living allowance (COLA) and attorneys fees.
These complaints were later on consolidated.
Subsequently, in a memorandum dated February 16, 2000, Reyes
reassigned respondents as utility/security personnel tasked to clean the
outside vicinity of his bakeshops and to maintain peace and order in the
area. Upon service of the memo, respondents, however, refused to sign the
same and likewise refused to perform their new assignments by not
reporting for work.
LABOR ARBITER: expressed dismay over respondents lack of good faith in
negotiating a settlement. The Labor Arbiter denounced the way respondents
dealt with Atty. Delicana during their discussions for a possible settlement

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since respondents themselves later on informed the said tribunal that at the
time of the said discussions, they no longer considered Atty. Delicana as
their counsel. Despite this, the Labor Arbiter still required the parties to
submit their respective position papers. And as respondents position paper
was filed late and no evidence was attached to prove the allegations therein,
the Labor Arbiter resolved to dismiss the complaints.
NLRC overruled the Decision of the Labor Arbiter and held that the burden
of proof lies on herein petitioners as Reyes admitted being the employer of
Tolores. Hence, petitioners not Tolores, had the duty to advance proof. With
respect to Arnaiz and Napal, the NLRC noted that since their alleged
employer was not impleaded, said respondents cases should be remanded
to the Labor Arbiter, and tried as new and separate cases.
NLRC (MR) found merit in respondents Motion for Reconsideration. The
NLRC ruled that respondents demotion in rank from chief bakers to
utility/security personnel is tantamount to constructive dismissal
which entitles them to the reliefs available to illegally dismissed
employees. NLRC ratiocinated that the employer bears the burden of
proving that the employees received their wages and benefits. In this case,
however, no proof of such payment was presented by the petitioners.
CA ruled that respondents were constructively dismissed since their
designation from chief bakers to utility/security personnel is
undoubtedly a demotion in rank which involved a drastic change in
the nature of work resulting to a demeaning and humiliating work
condition. Further, respondents could not be held guilty of abandonment
of work as this was negated by their immediate filing of complaints to
specifically ask for reinstatement.
ISSUE: WAS THE TRANSFER/REASSIGNMENT OF RESPONDENTS TO
ANOTHER POSITION WITHOUT DIMINUTION IN PAY AND OTHER
PRIVILEGES TANTAMOUNT TO CONSTRUCTIVE DISMISSAL?
HELD: The Court of Appeals is correct in reviewing the findings of the
National Labor Relations Commission.

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( reinstatement without loss of seniority rights, full backwages, inclusive of


allowances, and other benefits or their monetary equivalent, computed from
the time their compensation was withheld up to the time of their actual
reinstatement, should be granted)
The transfer/reassignment of respondents constitutes constructive dismissal.
We have held that management is free to regulate, according to its own
discretion and judgment, all aspects of employment, including hiring, work
assignments, working methods, time, place and manner of work, processes
to be followed, supervision of workers, working regulations, transfer of
employees, work supervision, lay off of workers and discipline, dismissal and
recall of workers. The exercise of management prerogative, however, is not
absolute as it must be exercised in good faith and with due regard to the
rights of labor.
In constructive dismissal cases, the employer has the burden of
proving that the transfer of an employee is for just or valid ground,
such as genuine business necessity. The employer must demonstrate
that the transfer is not unreasonable, inconvenient, or prejudicial to
the employee and that the transfer does not involve a demotion in
rank or a diminution in salary and other benefits. If the employer
fails to overcome this burden of proof, the employees transfer is
tantamount to unlawful constructive dismissal.

In this case, petitioners insist that the transfer of respondents was a


measure of self-preservation and was prompted by a desire to protect the
health of the buying public, claiming that respondents should be transferred
to a position where they could not sabotage the business pending resolution
of their cases. According to petitioners, the possibility that respondents
might introduce harmful substances to the bread while in the performance of
their duties as chief bakers is not imaginary but real as borne out by what
Tolores did in one of the bakeshops in Culasi, Antique where he was
assigned as baker.

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This postulation is not well-taken. On the contrary, petitioners failed to


satisfy the burden of proving that the transfer was based on just or valid
ground. Petitioners bare assertions of imminent threat from the respondents
are mere accusations which are not substantiated by any proof. This Court is
proscribed from making conclusions based on mere presumptions or
suppositions. An employees fate cannot be justly hinged upon conjectures
and surmises.
The act attributed against Tolores does not even convince us as he was
merely a suspected culprit in the alleged sabotage for which no investigation
took place to establish his guilt or culpability. Besides, Reyes still retained
Tolores as an employee and chief baker when he could have dismissed him
for cause if the allegations were indeed found true. In view of these,
this Court finds no compelling reason to justify the transfer of
respondents from chief bakers to utility/security personnel. What
appears to this Court is that respondents transfer was an act of
retaliation on the part of petitioners due to the formers filing of
complaints against them, and thus, was clearly made in bad faith. In fact,
petitioner Reyes even admitted that he caused the reassignments due to the
pending complaints filed against him.
[D]emotion involves a situation in which an employee is relegated
to a subordinate or less important position constituting a reduction
to a lower grade or rank, with a corresponding decrease in duties
and responsibilities, and usually accompanied by a decrease in
salary.
Although there was no diminution in pay, there was undoubtedly a demotion
in titular rank. One cannot deny the disparity between the duties and
functions of a chief baker to that of a utility/security personnel tasked to
clean and manage the orderliness of the outside premises of the bakeshop.
Respondents were even prohibited from entering the bakeshop. The change
in the nature of their work undeniably resulted to a demeaning and
humiliating work condition.

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Respondents cannot be faulted for refusing to report for work as they were
compelled to quit their job due to a demotion without any just cause.
Moreover, we have consistently held that a charge of abandonment is
inconsistent with the filing of a complaint for constructive
dismissal. Respondents demand to maintain their positions as chief bakers
by filing a case and asking for the relief of reinstatement belies
abandonment.

6. Gjt builders vs ambos


To prove serious business losses, employers must present in evidence
financial statements showing the net losses suffered by the business within a
sufficient period of time. Generally, it cannot be based on a single financial
statement showing losses. Absent this proof, employers closing their
businesses must pay the dismissed employees separation pay equivalent to
one-month pay or to at least one-half-month pay for every year of service,
whichever is higher.

The Court of Appeals found that G.J.T. Rebuilders Machine Shop (G.J.T.
Rebuilders) failed to prove its alleged serious business losses. Thus, when it
closed its establishment on December 15, 1997, G.J.T. Rebuilders should
have paid the affected employees separation pay.4

G.J.T. Rebuilders is a single proprietorship owned by the Spouses Godofredo


and Juliana Trillana (Trillana spouses). It was engaged in steel works and
metal fabrication, employing Ricardo Ambos (Ricardo), Russell Ambos
(Russell), and Benjamin Putian (Benjamin) as machinists.

G.J.T. Rebuilders rented space in the Far East Asia (FEA) Building in Shaw
Boulevard, Mandaluyong City, which served as the site of its machine shop.
On September 8, 1996, a fire partially destroyed the FEA Building.6

Due to the damage sustained by the building, its owner notified its tenants
to vacate their rented units by the end of September 1996 "to avoid any
unforeseen accidents which may arise due to the damage."7

Despite the building owners notice to vacate, G.J.T. Rebuilders continued its
business in the condemned building. When the building owner finally refused

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to accommodate it, G.J.T. Rebuilders left its rented space and closed the
machine shop on December 15, 1997.8 It then filed an Affidavit of Closure
before the Department of Labor and Employment on February 16, 1998 and
a sworn application to retire its business operations before the Mandaluyong
City Treasurers Office on February 25, 1998.9

Having lost their employment without receiving separation pay, Ricardo,


Russell, and Benjamin filed a Complaint for illegal dismissal before the Labor
Arbiter. They prayed for payment of allowance, separation pay, and
attorneys fees.10

In their defense, G.J.T. Rebuilders and the Trillana spouses argued that
G.J.T. Rebuilders suffered serious business losses and financial reverses,
forcing it to close its machine shop. Therefore, Ricardo, Russell, and
Benjamin were not entitled to separation pay.11

Labor Arbiter Facundo L. Leda (Labor Arbiter Leda) decided the Complaint,
finding no convincing proof of G.J.T. Rebuilders alleged serious business
losses.

Labor Arbiter Leda, in the Decision12 dated December 28, 1999, found that
Ricardo, Russell, and Benjamin were entitled to separation pay under Article
283 of the Labor Code. In contrast with the Labor Arbiters finding, the
National Labor Relations Commission found G.J.T. Rebuilders to have
suffered serious business losses. Because of the fire that destroyed the
building where G.J.T. Rebuilders was renting space, the demand for its
services allegedly declined as "no same customer would dare to entrust
machine works to be done for them in a machine shop lying in a ruined and
condemned building."

the National Labor Relations Commission vacated and set aside Labor Arbiter
Ledas Decision and dismissed the Complaint for lack of merit. Since the
Commission found that G.J.T. Rebuilders ceased operations due to serious
business losses, it held that G.J.T. Rebuilders and the Trillana spouses need
not pay Ricardo, Russell, and Benjamin separation pay.

issue for our resolution is whether petitioners sufficiently proved that


G.J.T. Rebuilders suffered from serious business losses.

Ruling:

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G.J.T. Rebuilders must pay respondents their separation pay for failure to
prove its alleged serious business losses

Article 283 of the Labor Code allows an employer to dismiss an employee


due to the cessation of operation or closure of its establishment or
undertaking, thus:

Art. 283. Closure of establishment and reduction of personnel. The


employer may also terminate the employment of any employee due to the
installation of labor saving devices, redundancy, retrenchment to prevent
losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the
Department of Labor and Employment at least one (1) month before the
intended date thereof. In case of termination due to installation of labor
saving devices or redundancy, the worker affected thereby shall be entitled
to a separation pay equivalent to at least his one (1) month pay or to at
least one (1) month pay for every year of service, whichever is higher. In
case of retrenchment to prevent losses and in cases of closures or cessation
of operations of establishment or undertaking not due to serious business
losses or financial reverses, the separation pay shall be equivalent to one (1)
month pay or to at least one-half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be considered
one (1) whole year.

The decision to close ones business is a management prerogative that


courts cannot interfere with.35 Employers can "lawfully close shop at
anytime,"36 even for reasons of their own.

It would indeed be stretching the intent and spirit of the law if [courts] were
to unjustly interfere with the managements prerogative to close or cease its
business operations just because [the] business operation or undertaking is
not suffering from any loss or simply to provide the workers continued
employment.39

However, despite this management prerogative, employers closing their


businesses must pay the affected workers separation pay equivalent to
onemonth pay or to at least one-half-month pay for every year of service,
whichever is higher.40

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The only time employers are not compelled to pay separation pay is when
they closed their establishments or undertaking due to serious business
losses or financial reverses.42

Serious business losses are substantial losses, not de minimis.43 "Losses"


means that the business must have operated at a loss for a period of time
for the employer "to [have] perceived objectively and in good faith"44 that
the business financial standing is unlikely to improve in the future.

The burden of proving serious business losses is with the employer.45 The
employer must show losses on the basis of financial statements covering a
sufficient period of time.

Aside from the obligation to pay separation pay, employers must comply
with the notice requirement under Article 283 of the Labor Code. Employers
must serve a written notice on the affected employees and on the
Department of Labor and Employment at least one month before the
intended date of closure. Failure to comply with this requirement renders the
employer liable for nominal damages.55

We uphold G.J.T. Rebuilders decision to close its establishment as a valid


exercise of its management prerogative. G.J.T. Rebuilders closed its machine
shop, believing that its "former customers . . . seriously doubted [its]
capacity . . . to perform the same quality [of service]"56 after the fire had
partially damaged the building where it was renting space.

Nevertheless, we find that G.J.T. Rebuilders failed to sufficiently prove its


alleged serious business losses.

We find the two-year period covered by the financial statement insufficient


for G.J.T. Rebuilders to have objectively perceived that the business would
not recover from the loss. Considering that G.J.T. Rebuilders failed to prove
its alleged serious business losses, it must pay respondents their separation
pay equivalent to onemonth pay or at least one-half-month pay for every
year of service, whichever is higher. In computing the period of service, a
fraction of at least six months is considered a year.59

7. Mirant Phils v Caro


Petitioner corporation is organized and operating under and by virtue of the
laws of the Republic of the Philippines. It is a holding company that owns

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shares in project companies such as Mirant Sual Corporation and Mirant


Pagbilao Corporation (Mirant Pagbilao) which operate and maintain power
stations located in Sual, Pangasinan and Pagbilao, Quezon, respectively.
Petitioner corporation and its related companies maintain around 2,000
employees detailed in its main office and other sites. Petitioner corporation
had changed its name to CEPA Operations in 1996 and to Southern
Company in 2001. In 2002, Southern Company was sold to petitioner Mirant
whose corporate parent is an Atlanta-based power producer in the United
States of America.6 Petitioner corporation is now known as Team Energy
Corporation.7

Petitioner Edgardo A. Bautista (Bautista) was the President of petitioner


corporation when respondent was terminated from employment.8

Respondent was hired by Mirant Pagbilao on January 3, 1994 as its Logistics


Officer. In 2002, when Southern Company was sold to Mirant, respondent
was already a Supervisor of the Logistics and Purchasing Department of
petitioner. At the time of the severance of his employment, respondent was
the Procurement Supervisor of Mirant Pagbilao assigned at petitioner
corporations corporate office.

Respondent filed a complaint10 for illegal dismissal and money claims for
13th and 14th month pay, bonuses and other benefits, as well as the
payment of moral and exemplary damages and attorneys fees. Respondent
posits the following allegations in his Position Paper:11

On January 3, 1994, respondent was hired by petitioner corporation as its


Logistics Officer and was assigned at petitioner corporations corporate office
in Pasay City. At the time of the filing of the complaint, respondent was
already a Supervisor at the Logistics and Purchasing Department with a
monthly salary of P39,815.00.

On November 3, 2004, petitioner corporation conducted a random drug test


where respondent was randomly chosen among its employees who would be
tested for illegal drug use.

Respondent avers that at around 11:30 a.m. of the same day, he received a
phone call from his wifes colleague who informed him that a bombing
incident occurred near his wifes work station in Tel Aviv, Israel where his
wife was then working as a caregiver.

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 17 of 61

Respondent claims that after the said phone call, he proceeded to the Israeli
Embassy to confirm the news on the alleged bombing incident. Respondent
further claims that before he left the office on the day of the random drug
test, he first informed the secretary of his Department.

On that same day, at around 6:15 p.m., respondent returned to petitioner


corporations office. When he was finally able to charge his cellphone at the
office, he received a text message from Tina Cecilia (Cecilia), a member of
the Drug Watch Committee that conducted the drug test, informing him to
participate in the said drug test. He immediately called up Cecilia to explain
the reasons for his failure to submit himself to the random drug test that
day. He also proposed that he would submit to a drug test the following day
at his own expense. Respondent never heard from Cecilia again.

On November 8, 2004, respondent received a Show Cause Notice15 from


petitioner corporation through Jaime Dulot (Dulot), his immediate
supervisor, requiring him to explain in writing why he should not be charged
with "unjustified refusal to submit to random drug testing."

In a decision dated August 31, 2005, Labor Arbiter Aliman D. Mangandog


found respondent to have been illegally dismissed. The Labor Arbiter also
found that the quitclaim purportedly executed by respondent was not a bona
fide quitclaim which effectively discharged petitioners of all the claims of
respondent in the case at bar. If at all, the Labor Arbiter considered the
execution of the quitclaim as a clear attempt on the part of petitioners to
mislead its office into thinking that respondent no longer had any cause of
action against petitioner corporation. The decision stated, viz.:

WHEREFORE, premises considered, this Office finds respondents GUILTY of


illegal dismissal

The NLRC further stated that these circumstances have clearly established
the falsity of respondents claims and found no justifiable reason for
respondent to refuse to submit to the petitioner corporations random drug
test. While the NLRC acknowledged that it was petitioner corporations own
Investigating Panel that considered respondents failure to take the required
drug test as mere "avoidance" and not "unjustified refusal," it concluded that
such finding was merely recommendatory to guide top management on what
action to take.

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 18 of 61

Granting that you indeed received that alleged call, from your own account,
there was no compelling reason for you to act on it at the expense of your
scheduled drug testing. The call, as it were, merely stated that something
wrong happened (sic) in their neighborhood, where a bomb exploded near
her workstation. Nothing was said if your wife was affected. There is no
point in confirming it with extraordinary haste and forego the drug test
which would have taken only a few minutes to accomplish. If at all, you
should have undergone the drug testing first before proceeding to confirm
the news so as to leave your mind free from this obligation.

issue: whether the NLRC acted without or in excess of its jurisdiction, or with
grave abuse of discretion amounting to lack or excess of its jurisdiction when
it construed that the terms "failure," "avoidance," "refusal" and "unjustified
refusal" have similar meanings; reversed the factual findings of the Labor
Arbiter.

Ruling:

It is beyond debate that petitioner corporations enforcement of its


AntiDrugs Policy is an exercise of its management prerogative. It is also a
conceded fact that respondent "failed" to take the random drug test as
scheduled, and under the said company policy, such failure metes the
penalty of termination for the first offense.

It is the crux of petitioners argument that respondents omission amounted


to "unjust refusal" because he could not sufficiently support with convincing
proof and evidence his defenses for failing to take the random drug test.

While the adoption and enforcement by petitioner corporation of its


AntiDrugs Policy is recognized as a valid exercise of its management
prerogative as an employer, such exercise is not absolute and unbridled.
Managerial prerogatives are subject to limitations provided by law, collective
bargaining agreements, and the general principles of fair play and justice.46
In the exercise of its management prerogative, an employer must therefore
ensure that the policies, rules and regulations on work-related activities of
the employees must always be fair and reasonable and the corresponding
penalties, when prescribed, commensurate to the offense involved and to
the degree of the infraction.47 The Anti-Drugs Policy of Mirant fell short of
these requirements.

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 19 of 61

Petitioner corporations subject Anti-Drugs Policy fell short of being fair and
reasonable.

First. The policy was not clear on what constitutes "unjustified refusal" when
the subject drug policy prescribed that an employees "unjustified refusal" to
submit to a random drug test shall be punishable by the penalty of
termination for the first offense. To be sure, the term "unjustified refusal"
could not possibly cover all forms of "refusal" as the employees resistance,
to be punishable by termination, must be "unjustified."

Second. The penalty of termination imposed by petitioner corporation upon


respondent fell short of being reasonable.

Finally, the petition avers that petitioner Bautista should not be held
personally liable for respondents dismissal as he acted in good faith and
within the scope of his official functions as then president of petitioner
corporation. We agree with petitioners.1wphi1 Both decisions of the Labor
Arbiter and the CA did not discuss the basis of the personal liability of
petitioner Bautista, and yet the dispositive portion of the decision of the
Labor Arbiter - which was affirmed by the appellate court - held him jointly
and severally liable with petitioner corporation, viz.:

WHEREFORE, premises considered, this Office finds respondents GUILTY of


illegal dismissal, and hereby ordered to jointly and severally reinstate
complainant back to his former position without loss on seniority rights and
benefits and to pay him his backwages and other benefits from the date he
was illegally dismissed up to the time he is actually reinstated,

8. Benigno v ABS CBN


The Facts

Respondent ABS-CBN Corporation (formerly ABS-CBN Broadcasting


Corporation) is a television and radio broadcasting corporation which, for its
Regional Network Group in Naga City, employed respondent Amalia
Villafuerte (Villafuerte) as Manager. There is no dispute regarding the fact
that, thru Villafuerte, ABS-CBN engaged the services of petitioners Nelson
Begino (Begino) and Gener Del Valle (Del Valle) sometime in 1996 as
Cameramen/Editors for TV Broadcasting. Petitioners Ma. Cristina Sumayao
(Sumayao) and Monina Avila-Llorin (Llorin) were likewise similarly engaged
as reporters sometime in 1996 and 2002, respectively. With their services

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 20 of 61

engaged by respondents thru Talent Contracts which, though regularly


renewed over the years, provided terms ranging from three (3) months to
one (1) year, petitioners were given Project Assignment Forms which
detailed, among other matters, the duration of a particular project as well as
the budget and the daily technical requirements thereof. In the aforesaid
capacities, petitioners were tasked with coverage of news items for
subsequent daily airings in respondents TV Patrol Bicol Program.2

While specifically providing that nothing therein shall be deemed or


construed to establish an employer-employee relationship between the
parties.

Claiming that they were regular employees of ABS-CBN, petitioners filed


against respondents the complaint5docketed as Sub-RAB 05-04- 00041-07
before the National Labor Relations Commissions (NLRC) Sub-Regional
Arbitration Branch No. 5, Naga City. In support of their claims for
regularization, underpayment of overtime pay, holiday pay, 13th month pay,
service incentive leave pay, damages and attorney's fees, petitioners alleged
that they performed functions necessary and desirable in ABS-CBN's
business. Mandated to wear company IDs and provided all the equipment
they needed, petitioners averred that they worked under the direct control
and supervision of Villafuerte and, at the end of each day, were informed
about the news to be covered the following day, the routes they were to
take and, whenever the subject of their news coverage is quite distant, even
the start of their workday.

Aside from the constant evaluation of their actions, petitioners were


reportedly subjected to an annual competency assessment alongside other
ABS-CBN employees, as condition for their continued employment. Although
their work involved dealing with emergency situations at any time of the day
or night, petitioners claimed that they were not paid the labor standard
benefits the law extends to regular employees.

In refutation of the foregoing assertions, on the other hand, respondents


argued that, although it occasionally engages in production and generates
programs thru various means, ABS-CBN is primarily engaged in the business
of broadcasting television and radio content. Not having the full manpower
complement to produce its own program, the company had allegedly
resorted to engaging independent contractors like actors, directors, artists,

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 21 of 61

anchormen, reporters, scriptwriters and various production and technical


staff, who offered their services in relation to a particular program.

Labor Arbiter Jesus Orlando Quiones (Labor Arbiter Quiones) resolved


Sub-RAB 05-04-00041-07 in favor of petitioners who, having rendered
services necessary and related to ABS-CBNs business for more than a year,
were determined to be its regular employees.

WHEREFORE, finding merit in the causes of action set forth by the


complainants, judgment is hereby rendered declaring complainants MONINA
AVILA-LLORIN, GENER L. DEL VALLE, NELSON V. BEGINO and MA. CRISTINA
V. SUMAYAO, as regular employees of respondent company, ABS-CBN
BROADCASTING CORPORATION.

petitioners filed a third complaint against the former, for illegal dismissal,
regularization, nonpayment of salaries and 13th month pay, unfair labor
practice, damages and attorneys fees.

The Issue

Whether or not the CA seriously and reversibly erred in brushing aside the
determination made by both the Labor Arbiter and the NLRC of the existence
of an employer-employee relationship between the parties, despite
established jurisprudence supporting the same.

The Court's Ruling

The Court finds the petition impressed with merit.

To determine the existence of said relation, case law has consistently applied
the four-fold test, to wit: (a) the selection and engagement of the employee;
(b) the payment of wages;(c) the power of dismissal; and (d) the employer's
power to control the employee on the means and methods by which the
work is accomplished.23 Of these criteria, the so-called "control test" is
generally regarded as the most crucial and determinative indicator of the
presence or absence of an employer-employee relationship. Under this test,
an employer-employee relationship is said to exist where the person for
whom the services are performed reserves the right to control not only the
end result but also the manner and means utilized to achieve the same.

ART. 280. Regular and Casual Employment. The provisions of written


agreement to the contrary notwithstanding and regardless of the oral

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 22 of 61

agreement of the parties, an employment shall be deemed to be regular


where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the
work or service to be performed is seasonal in nature and the employment is
for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the


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

The Court finds that, notwithstanding the nomenclature of their Talent


Contracts and/or Project Assignment Forms and the terms and condition
embodied therein, petitioners are regular employees of ABS-CBN.

it has been ruled that the test to determine whether employment is regular
or not is the reasonable connection between the activity performed by the
employee in relation to the business or trade of the employer

the record shows that, from their initial engagement in the aforesaid
capacities, petitioners were continuously re-hired by respondents over the
years. To the mind of the Court, respondents repeated hiring of petitioners
for its long-running news program positively indicates that the latter were
ABS-CBNs regular employees.

If the employee has been performing the job for at least one year, even if
the performance is not continuous or merely intermittent, the law deems the
repeated or continuing performance as sufficient evidence of the necessity, if
not indispensability of that activity in the business.29 Indeed, an
employment stops being co-terminous with specific projects where the
employee is continuously re-hired due to the demands of the employers
business.

The nature of the employment depends, after all, on the nature of the
activities to be performed by the employee, considering the nature of the
employers business, the duration and scope to be done, and, in some cases,
even the length of time of the performance and its continued existence.32

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 23 of 61

it also appears that petitioners were subject to the control and supervision of
respondents which, first and foremost, provided them with the equipments
essential for the discharge of their functions. Prepared at the instance of
respondents, petitioners Talent Contracts tellingly provided that ABS-CBN
retained "all creative, administrative, financial and legal control" of the
program to which they were assigned

The presumption is that when the work done is an integral part of the
regular business of the employer and when the worker, relative to the
employer, does not furnish an independent business or professional service,
such work is a regular employment of such employee and not an
independent contractor. The Court will peruse beyond any such agreement
to examine the facts that typify the parties actual relationship.38 (Emphasis
omitted)

Rather than the project and/or independent contractors respondents claim


them to be, it is evident from the foregoing disquisition that petitioners are
regular employees of ABS-CBN. In the course of said employment,
petitioners were provided the equipments they needed, were required to
comply with the Company's policies which entailed prior approval and
evaluation of their performance.

the Court finds that the reinstatement of petitioners ordered by said labor
officer and tribunal should, as a relief provided in case of illegal dismissal, be
left for determination in said case.

WHEREFORE, the Court of Appeals' assailed Decision dated 29 June 2011


and Resolution dated 3 October 2011 in CA-G.R. SP No. 116928 are
REVERSED and SET ASIDE. Except for the reinstatement of Nelson V.
Begino, Gener Del Valle, Monina Avila-Llorin and Ma. Cristina Sumayao, the
National Labor and Relations Commission's 31 March 2010 Decision is,
accordingly, REINSTATED.

10. Abbott vs Alcaraz


Facts: Abbott Lab advertised a job opening for aRegulatory Affairs
Manager who will (1) be responsible fordrug safety
surveillance operations, staffing and budget; (2)lead the
development and implementation of
standardoperating procedures for drug safety surveillance; (3) act

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 24 of 61

asprimary interface with internal and external customersregarding


safety operations and queries.

Respondent Alcaraz then applied to respondent company and


she was placed under probationary status. When respondent was
already working respondent noticed some disciplinary problems with
the staff so she reprimanded them. However, her supervisor Walsh
considered the acts of respondent as too strict. The latter then
approached Misa the HR Director and she was told to lie low.

Respondent Alcaraz had a meeting with Cecille Terrible, former


HRdirector, to discuss certain issues regarding staff
performance standards. During which, Alcaraz accidentally saw a
printed copy of an email sent by Walsh to some staff asking about
Alcaraz job performance. Alcaraz asked if Walshs action was the
normal process of evaluation. Terrible said it was
not. Alcaraz was called to a meeting with Walsh and Terrible where she
was informed that she failed to meet the regularization standards for
the position. Thereafter, they asked her to tender her resignation, or
else they will be forced to terminate her services. She was also told
that regardless of her choice, she should no longer report to work.
Respondent then filed an illegal dismissal case against petitioner.

Issue: WON respondent was illegally dismissed.

Held: NO.

In this relation, it bears mentioning that the performance standard


contemplated by law should not, in all cases, be contained in a specialized
system of feedbacks or evaluation. The Court takes judicial notice of the fact
that not all employers, such as simple businesses or small-scale enterprises,
have a sophisticated form of human resource management, so much so that
the adoption of technical indicators as utilized through "comment cards" or
"appraisal" tools should not be treated as a prerequisite for every case of
probationary engagement. In fact, even if a system of such kind is employed
and the procedures for its implementation are not followed, once an
employer determines that the probationary employee fails to meet the
standards required for his regularization, the former is not precluded from
dismissing the latter. The rule is that when a valid cause for termination
exists, the procedural infirmity attending the termination only warrants the

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 25 of 61

payment of nominal damages. This was the principle laid down in the
landmark cases of Agabon v. NLRC9 (Agabon) and Jaka Food Processing
Corporation v. Pacot10 (Jaka). In the assailed Decision, the Court actually
extended the application of the Agabon and Jaka rulings to breaches of
company procedure, notwithstanding the employers compliance with the
statutory requirements under the Labor Code.11 Hence, although Abbott did
not comply with its own termination procedure, its non-compliance thereof
would not detract from the finding that there subsists a valid cause to
terminate Alcarazs employment. Abbott, however, was penalized for its
contractual breach and thereby ordered to pay nominal damages.

As a final point, Alcaraz cannot take refuge in Aliling v. Feliciano12 (Aliling)


since the same is not squarely applicable to the case at bar. The employee in
Aliling, a sales executive, was belatedly informed of his quota requirement.
Thus, considering the nature of his position, the fact that he was not
informed of his sales quota at the time of his engagement changed the
complexion of his employment. Contrarily, the nature of Alcaraz's duties and
responsibilities as Regulatory Affairs Manager negates the application of the
foregoing. Records show that Alcaraz was terminated because she (a) did
not manage her time effectively; (b) failed to gain the trust of her staff and
to build an effective rapport with them; (c) failed to train her staff
effectively; and (d) was not able to obtain the knowledge and ability to make
sound judgments on case processing and article review which were
necessary for the proper performance of her duties.13 Due to the nature and
variety of these managerial functions, the best that Abbott could have done,
at the time of Alcaraz's engagement, was to inform her of her duties and
responsibilities, the adequate performance of which, to repeat, is an inherent
and implied standard for regularization; this is unlike the circumstance in
Aliling where a quantitative regularization standard, in the term of a sales
quota, was readily articulable to the employee at the outset. Hence, since
the reasonableness of Alcaraz's assessment clearly appears from the
records, her termination was justified. Bear in mind that the quantum of
proof which the employer must discharge is only substantial evidence which,
as defined in case law, means that amount of relevant evidence as a
reasonable mind might accept as adequate to support a conclusion, even if
other minds, equally reasonable, might conceivably opine otherwise.14 To
the Court's mind, this threshold of evidence Abbott amply overcame in this
case.

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 26 of 61

11. Colegio vs Rojo


Facts: Petitioner Colegio del Santisimo Rosario (CSR) hired respondent as a
high school teacher on probationary basis for the school years 1992-1993,
1993-1994 and 1994-1995. library

On April 5, 1995, CSR, through petitioner Sr. Zenaida S. Mofada, OP


(Mofada), decided not to renew respondentsservices.crThus, on July 13,
1995, respondent filed a Complaint10 for illegal dismissal. He alleged that
since he had served three consecutive school years which is the maximum
number of terms allowed for probationary employment, he should be
extended permanent employment. Citing paragraph 75 of the 1970 Manual
of Regulations for Private Schools (1970 Manual), respondent asserted that
full- time teachers who have rendered three (3) consecutive years of
satisfactory services shall be considered permanent.

On the other hand, petitioners argued that respondent knew that his
Teachers Contract for school year 1994-1995 with CSR would expire on
March 31, 1995. Accordingly, respondent was not dismissed but his
probationary contract merely expired and was not renewed. Petitioners also
claimed that the three years mentioned in paragraph 75 of the 1970
Manual refer to 36 months, not three school years. And since respondent
served for only three school years of 10 months each or 30 months, then he
had not yet served the three years or 36 months mentioned in paragraph
75 of the 1970 Manual.

Labor Arbiter ruled that three school years means three years of 10
months, not 12 months.16Considering that respondent had already served
for three consecutive school years, then he has already attained regular
employment status. Thus, the non-renewal of his contract for school year
1995-1996 constitutes illegal dismissal.

NLRC affirmed the decision of the Labor Arbiter.

Issue: WON CA an error on ruling that the respondent already attained the
regular employee status for serving the petitioner school 3 consecutive
school years.

Held: NO.

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 27 of 61

However, for teachers on probationary employment, in which case a


fixed term contract is not specifically used for the fixed term it offers, it is
incumbent upon the school to have not only set reasonable
standards to be followed by said teachers in determining
qualification for regular employment, the same must have also been
communicated to the teachers at the start of the probationary
period, or at the very least, at the start of the period when they were
to be applied. These terms, in addition to those expressly provided by the
Labor Code, would serve as the just cause for the termination of the
probationary contract. The specific details of this finding of just cause must
be communicated to the affected teachers as a matter of due
process.Corollarily, should the teachers not have been apprised of such
reasonable standards at the time specified above, they shall be
deemed regular employees.

In Tamsons Enterprises, Inc. v. Court of Appeals, we held that [t]he law is


clear that in all cases of probationary employment, the employer shall
[convey] to the employee the standards under which he will qualify as a
regular employee at the time of his engagement. Where no standards are
made known to the employee at that time, he shall be deemed a regular
employee.

In this case, glaringly absent from petitioners evidence are the reasonable
standards that respondent was expected to meet that could have served as
proper guidelines for purposes of evaluating his performance. Nowhere in
the Teachers Contractcould such standards be found.Neither was it
mentioned that the same were ever conveyed to respondent. Even assuming
that respondent failed to meet the standards set forth by CSR and made
known to the former at the time he was engaged as a teacher on
probationary status, still, the termination was flawed for failure to give the
required notice to respondent. This is because Book VI, Rule I, Section 2 of
the IRR of the Labor Code provides:chanrobles virtua1aw 1ibrary

Section 2. Security of Tenure. (a) In cases of regular employment, the


employer shall not terminate the services of an employee except for just or
authorized causes as provided by law, and subject to the requirements of
due process.

(b) The foregoing shall also apply in cases of probationary


employment; provided, however, that in such cases, termination of
employment due to failure of the employee to qualify in accordance with the
standards of the employer made known to the former at the time of
engagement may also be a ground for termination of employment.

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 28 of 61

x x x x

(d) In all cases of termination of employment, the following standards of due


process shall be substantially observed:

x x x x

If the termination is brought about by the completion of a contract or


phase thereof, or by failure of an employee to meet the standards of
the employer in the case of probationary employment, it shall be
sufficient that a written notice is served the employee, within a
reasonable time from the effective date of termination. (Emphasis
supplied)
Curiously, despite the absence of standards, Mofada mentioned the
existence of alleged performance evaluations in respondents case. We are,
however, in a quandary as to what could have been the basis of such
evaluation, as no evidence were adduced to show the reasonable standards
with which respondents performance was to be assessed or that he was
informed thereof. Notably too, none of the supposed performance
evaluations were presented. These flaws violated respondents right to due
process. As such, his dismissal is, for all intents and purposes, illegal.

As a matter of due process, teachers on probationary employment, just like


all probationary employees, have the right to know whether they have met
the standards against which their performance was evaluated. Should they
fail, they also have the right to know the reasons therefor.

It should be pointed out that absent any showing of unsatisfactory


performance on the part of respondent, it can be presumed that his
performance was satisfactory, especially taking into consideration the fact
that even while he was still more than a year into his probationary
employment, he was already designated Prefect of Discipline. In such
capacity, he was able to uncover the existence of a drug syndicate within the
school and lessen the incidence of drug use therein. Yet despite respondents
substantial contribution to the school, petitioners chose to disregard the
same and instead terminated his services; while most of those who were
involved in drug activities within the school were punished with a slap on the
wrist as they were merely made to write letters promising that the incident
will not happen again.

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 29 of 61

12. AMA vs Austria


Facts: Petitioner AMA Computer College, Paraaque (AMA) is an educational
institution duly organized under the laws of the Philippines. The rest of the
petitioners are principal officers of AMA. Respondent Rolando A. Austria4
(respondent) was hired by AMA on probationary employment as a college
dean on April 24, 2000.5 On August 22, 2000, respondents appointment as
dean was confirmed by AMAs Officer-in-Charge (OIC), Academic Affairs, in
his Memorandum,6 which reads:

After a thorough evaluation of the performance of Mr. Rolando Austria as


Dean, we are happy to inform you that he is hereby officially confirmed as
Dean of AMA College Paraaque effective April 17, 2000 to September 17,
2000.

In view of this, he will be entitled to a transportation allowance of One


Thousand Five Hundred Sixty Pesos (P1,560.00).

In the event that Mr. Austria gives up the Dean position or fails to meet the
standards of the (sic) based on the evaluation of his immediate superior, he
shall be considered for a faculty position and the appointee agrees that he
shall lose the transportation allowance he enjoys as Dean and be entitled to
his faculty rate.

Sometime in August 2000, respondent was charged with violating AMAs


Employees Conduct and Discipline provided in its Orientation Handbook
(Handbook),7 as follows:

1) leaking of test questions;

2) failure to monitor general requirements vital to the operations of the


company; and

3) gross inefficiency.

Respondent file a complaint of illegal dismissal.

Issue:

1. What is the nature of respondent's employment?

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 30 of 61

2. Was he lawfully dismissed?

Held:

The instant case falls squarely within the aforesaid exception. The Labor
Arbiter held that, while petitioners did not prove the existence of just causes
in order to warrant respondent's dismissal, the latter's employment as dean
ceased to exist upon expiration of respondent's term of employment on
September 17, 2000. In sum, the Labor Arbiter held that the nature of
respondent's employment is one for a fixed term. On the other hand, the
NLRC and the CA both held that respondent is a regular employee because
respondent had fully served the three (3)-month probationary period
required in the Handbook, which the petitioners failed to deny or contravene
in the proceedings before the Labor Arbiter.

Prior to his dismissal, respondent held the position of college dean. The
letter of appointment states that he was officially confirmed as Dean of AMA
College, Paraaque, effective from April 17, 2000 to September 17, 2000.
Petitioners submit that the nature of respondent's employment as dean is
one with a fixed term.

We held that Article 280 of the Labor Code does not proscribe or prohibit an
employment contract with a fixed period. Even if the duties of the employee
consist of activities necessary or desirable in the usual business of the
employer, the parties are free to agree on a fixed period of time for the
performance of such activities. There is nothing essentially contradictory
between a definite period of employment and the nature of the employees
duties

First. The letter of appointment was clear. Respondent was confirmed as


Dean of AMA College, Paraaque, effective from April 17, 2000 to September
17, 2000. In numerous cases decided by this Court, we had taken notice,
that by way of practice and tradition, the position of dean is normally an
employment for a fixed term.36 Although it does not appear on record and
neither was it alleged by any of the parties that respondent, other than
holding the position of dean, concurrently occupied a teaching position, it
can be deduced from the last paragraph of said letter that the respondent
shall be considered for a faculty position in the event he gives up his
deanship or fails to meet AMA's standards. Such provision reasonably serves

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 31 of 61

the intention set forth in Brent School that the deanship may be rotated
among the other members of the faculty.

Second. The fact that respondent did not sign the letter of appointment is of
no moment.

The fact that respondent voluntarily accepted the employment, assumed the
position, and performed the functions of dean is clear indication that he
knowingly and voluntarily consented to the terms and conditions of the
appointment, including the fixed period of his deanship. Other than the
handwritten notes made in the letter of appointment, no evidence was ever
presented to show that respondents consent was vitiated, or that
respondent objected to the said appointment or to any of its conditions.
Furthermore, in his status as dean, there can be no valid inference that he
was shackled by any form of moral dominance exercised by AMA and the
rest of the petitioners.

Thus, the unanimous finding of the Labor Arbiter, the NLRC and the CA that
respondent adequately refuted all the charges against him assumes
relevance only insofar as respondents dismissal from the service was
effected by petitioners before expiration of the fixed period of employment.
True, petitioners erred in dismissing the respondent, acting on the mistaken
belief that respondent was liable for the charges leveled against him. But
respondent also cannot claim entitlement to any benefit flowing from such
employment after September 17, 2000, because the employment, which is
the source of the benefits, had, by then, already ceased to exist.

Finally, while this Court adheres to the principle of social justice and
protection to labor, the constitutional policy to provide such protection to
labor is not meant to be an instrument to oppress employers. The
commitment under the fundamental law is that the cause of labor does not
prevent us from sustaining the employer when the law is clearly on its side.

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 32 of 61

TIROL VS NLRC

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

13. Tirol v NLRC

The NLRC in this case affirmed the decision of Labor Arbiter Carreon in its
Decision with the modification that private respondent pay backwages
computed from the respective dates of dismissal until finality of the decision.

Private respondent filed a motion for reconsideration with the contention


that, since it has been found by the Labor Arbiter and affirmed in the
assailed decision that the employees were project employees, the
computation of backwages should be limited to the date of the
completion of the project and not to the finality of the decision.The
NLRC, however, denied the motion ruling that private respondent failed to
establish the date of the completion of the project.

Private respondent appealed to public respondent NLRC contending that the


computation for backwages must be only until the completion of the
project and not until the finality of the decision. But to no avail.

As a recourse, private respondent filed a petition for certiorari with the CA,
alleging that public respondent committed grave abuse of discretion in
promulgating its assailed decision and denying its motion for
reconsideration. The CA granted the petition, therefore, annulling and
setting aside the decision and resolution of the NLRC as to the award for
backwages and remanded the case to the same public respondent for the
proper computation of the backwages due to each of the petitioners herein.

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 33 of 61

ISSUE: WON THE RESPONDENT COURT COMMITTED GRAVE


ABUSE OF DISCRETION IN DECLARING THAT PETITIONERS ARE
PROJECT EMPLOYEES

According to the CA, petitioners are project employees as found by


Labor Arbiter Ernesto Carreon in his Decision because they were hired for
the construction of the Cordova Reef Village Resort in Cordova, Cebu, which
was later on affirmed by the NLRC.

The only discrepancy is the Order of the NLRC that petitioners are entitled to
backwages up to the finality of its decision, when as project employees,
private respondents are only entitled to payment of backwages until the
date of the completion of the project.

Article 280 of the Labor Code distinguishes a "project employee" from a


"regular employee," thus:

Article 280. Regular and Casual Employment The provisions of


written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an employment
shall be deemed to be regular where the employee has been
engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer, except
where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or
where the work or service to be performed is seasonal in nature
and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 34 of 61

by the preceding paragraph: Provided, That, any employee who


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

x x x [T]he principal test for determining whether particular


employees are properly characterized as "project employees" as
distinguished from "regular employees" is whether or not the
project employees were assigned to carry out a "specific project
or undertaking," the duration and scope of which were specified
at the time the employees were engaged for that project.[11]

Applying the above disquisition, this Court agrees with the findings
of the CA that petitioners were project employees. It is not disputed
that petitioners were hired for the construction of the Cordova Reef Village
Resort in Cordova, Cebu. By the nature of the contract alone, it is clear that
petitioners' employment was to carry out a specific project. Hence, the CA
did not commit grave abuse of discretion when it affirmed the findings of the
Labor Arbiter.

In grave abuse of its discretion, the public respondent refused


to consider the evidence presented before it as to the date of
completion of the Cordova Reef Village Resort project. The
records show that affidavits have been executed by the
petitioner's manager, corporate architect and project engineer
as to the fact of the completion of the project in October
1996. As these evidences [sic] were already a matter of record,
the public respondent should not have closed its eyes and
should have endeavored to render a correct and just judgment.

Furthermore, as earlier noted, private respondents did not


appeal from the Labor Arbiter's findings that they were

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 35 of 61

indubitably project employees. However, they were entitled


to the payment of separation pay only for the reason that
the date of the completion of the project for which they
were hired had not been clearly established. Thus, in
affirming the labor arbiter's decision, the public respondent in
effect sustained the finding that private respondents are project
employees. The statement, therefore, contained in the
resolution of the petitioner's motion for reconsideration of its
January 12, 1999 decision that repeated rehiring makes the
worker a regular employee, is at best an obiter, especially
considering that such conclusion had not been shown to apply
to the circumstances then obtaining with the private
respondents' employment with the petitioner.[17]

Therefore, being project employees, petitioners are only entitled to full


backwages, computed from the date of the termination of their employment
until the actual completion of the work. Illegally dismissed workers are
entitled to the payment of their salaries corresponding to the unexpired
portion of their employment where the employment is for a definite
period.[18] In this case, as found by the CA, the Cordova Reef Village Resort
project had been completed in October 1996 and private respondent herein
had signified its willingness, by way of concession to petitioners, to set the
date of completion of the project as March 18, 1997; hence, the latter date
should be considered as the date of completion of the project for purposes
of computing the full backwages of petitioners.

The decision of the Court of Appeals is hereby AFFIRMED in toto.

14. GOMA VS PAMPLONA

Facts:

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 36 of 61

Petitioner commenced the instant suit by filing a complaint for illegal


dismissal, underpayment of wages, non-payment of premium pay for holiday
and rest day, five (5) days incentive leave pay, damages and attorneys
fees, against the respondent. The case was filed with the Sub-Regional
Arbitration Branch No. VII of Dumaguete City. Petitioner claimed that he
worked as a carpenter at the Hacienda Pamplona since 1995; that he
worked from 7:30 a.m. to 12:00 noon and from 1:00 p.m. to 5:00 p.m.
daily with a salary rate of P90.00 a day paid weekly; and that he worked
continuously until 1997 when he was not given any work assignment. On a
claim that he was a regular employee, petitioner alleged to have been
illegally dismissed when the respondent refused without just cause to give
him work assignment. Thus, he prayed for backwages, salary differential,
service incentive leave pay, damages and attorneys fees.

On the other hand, respondent denied having hired the petitioner as its
regular employee. It instead argued that petitioner was hired by a certain
Antoy Caaveral, the manager of the hacienda at the time it was owned by
Mr. Bower and leased by Manuel Gonzales, a jai-alai pelotari known as
Ybarra. Respondent added that it was not obliged to absorb the employees
of the former owner.

Issue: WON petitioner is a regular employee.

Held: Article 280 of the Labor Code provides that there are two kinds of
REGULAR EMPLOYEES, namely:

Regular employees by nature of work Those who are engaged to


perform activities which are usually necessary or desirable in the usual
business or trade of the employer (regardless of length of service); and

Regular employees by years of service Those who have rendered at


least one year of service, whether continuous or broken, with respect to the
activity in which they are employed (regardless of nature of work).

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 37 of 61

If the law has been performing the job for at least a year, even if the
performance is not continuous or merely intermittent, the law deems the
repeated and continuing need for its performance as sufficient evidence of
the necessity, if not indispensability, of that activity to the business.

Petitioner was engaged to perform carpentry work. His services were needed
for a period of 2 years until such time that respondent decided not to give
him work assignment anymore. Owing to his length of service, petitioner
became a regular employee, by operation of law.

The principal test used to determine whether employees are PROJECT


EMPLOYEES as distinguished from REGULAR EMPLOYEES, is whether or not
the employees were assigned to carry out a specific project or undertaking,
the duration or scope of which was specified at the time the employees were
engaged for that project.

In this case, apart from the respondents bare allegation that petitioner was
a project employee, it had not shown that petitioner was informed that he
would be assigned to a specific project or undertaking. Neither was it
established that he was informed of the duration and scope of such project
or undertaking at the time of his engagement.

Petition granted.

15. GADIA VS SYKES ASIA

Sykes Asia is a corporation engaged in Business Process Outsourcing (BPO)


which provides support to its international clients from various sectors (e.g.,
technology, telecommunications, retail services) by carrying on some of their
operations, governed by service contracts that it enters with them.11 Alltel
Communications, Inc. (Alltel), a United States-based telecommunications

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 38 of 61

firm, contracted Sykes Asias services to accommodate the needs and


demands of Alltel clients for its postpaid and prepaid services (Alltel Project).
Thus, on different dates, Sykes Asia hired petitioners as customer service
representatives, team leaders, and trainers for the Alltel Project.13

Services for the said project went on smoothly until Alltel sent two (2)
letters to Sykes Asia informing the latter that it was terminating all support
services provided by Sykes Asia related to the Alltel Project. In view of this
development, Sykes Asia sent each of the petitioners end-of-life
notices,16 informing them of their dismissal from employment due to the
termination of the Alltel Project. Aggrieved, petitioners filed separate
complaints17 for illegal dismissal against respondents Sykes Asia, Chuck
Sykes, the President and Chief Operating Officer of Sykes Enterprise, Inc.,
and Mike Hinds and Michael Henderson, the President and Operations
Director, respectively, of Sykes Asia (respondents), praying for
reinstatement, backwages, 13th month pay, service incentive leave pay,
night shift differential, moral and exemplary damages, and attorneys fees.
In their complaints, petitioners alleged that their dismissal from service was
unjust as the same was effected without substantive and procedural due
process.18

In their defense,19 respondents averred that petitioners were not regular


employees but merely project-based employees, and as such, the
termination of the Alltel Project served as a valid ground for their
dismissal.20 In support of their position, respondents noted that it was
expressly indicated in petitioners respective employment contracts that their
positions are "project-based" and thus, "co-terminus to the
21
project." Respondents further maintained that they complied with the
requirements of procedural due process in dismissing petitioners by
furnishing each of them their notices of termination at least thirty (30) days
prior to their respective dates of dismissal.22

LA ruled in favor of respondents, and accordingly, dismissed petitioners


complaints for lack of merit.24 It found that petitioners are merely project-
based employees, as their respective employment contracts indubitably
provided for the duration and term of their employment, as well as the
specific project to which they were assigned, i.e., the Alltel Project. 25 Hence,
the LA concluded that the cessation of the Alltel Project naturally resulted in

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 39 of 61

the termination of petitioners employment in Sykes Asia.26 Dissatisfied,


petitioners appealed27 to the NLRC.

Contrary to the LAs finding, the NLRC found that petitioners could not be
properly characterized as project-based employees, ratiocinating that while
it was made known to petitioners that their employment would be co-
terminus to the Alltel Project, it was neither determined nor made known to
petitioners, at the time of hiring, when the said project would end, be
terminated, or be completed.32 In this relation, the NLRC concluded that
inasmuch as petitioners had been engaged to perform activities which are
necessary or desirable in respondents usual business or trade of BPO,
petitioners should be deemed regular employees of Sykes Asia.33 This
notwithstanding, and in view of the cessation of the Alltel Project, the NLRC
found petitioners employment with Sykes Asia to be redundant; hence,
declared that they were legally dismissed from service and were only
entitled to receive their respective separation pay.34

Respondents moved for reconsideration,35 which was, however, denied.


Unconvinced, Sykes Asia37 elevated the case to the CA on certiorari.38

CA annulled and set aside the ruling of the NLRC, and accordingly, reinstated
that of the LA.40 It held that a perusal of petitioners respective employment
contracts readily shows that they were hired exclusively for the Alltel Project
and that it was specifically stated therein that their employment would be
project-based.41 The CA further held that petitioners employment contracts
need not state an actual date as to when their employment would end,
opining that it is enough that such date is determinable.42

Petitioners moved for reconsideration,43 which was, however, denied, hence,


this petition.

ISSUE: Whether or not the CA correctly granted respondents petition for


certiorari, thereby setting aside the NLRCs decision holding that petitioners
were regular employees and reinstating the LA ruling that petitioners were
merely project-based employees, and thus, validly dismissed from service.

Article 29447 of the Labor Code,48 as amended, distinguishes a project-based


employee from a regular employee as follows:

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 40 of 61

Art. 294. Regular and casual employment.The provisions of written


agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the
work or services to be performed is seasonal in nature and the employment
is for the duration of the season.

In Omni Hauling Services, Inc. v. Bon,49 the Court extensively discussed how
to determine whether an employee may be properly deemed project-based
or regular, to wit:

A project employee is assigned to a project which begins and ends at


determined or determinable times.1wphi1 Unlike regular employees who
may only be dismissed for just and/or authorized causes under the Labor
Code, the services of employees who are hired as "project[-based]
employees" may be lawfully terminated at the completion of the project.

According to jurisprudence, the principal test for determining whether


particular employees are properly characterised as "project[-based]
employees" as distinguished from "regular employees," is whether or not the
employees were assigned to carry out a "specific project or undertaking,"
the duration (and scope) of which were specified at the time they were
engaged for that project. The project could either be (1) 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; or (2) a particular job or
undertaking that is not within the regular business of the corporation. In
order to safeguard the rights of workers against the arbitrary use of the
word "project" to prevent employees from attaining a regular status,
employers claiming that their workers are project[-based] employees should
not only prove that the duration and scope of the employment was specified
at the time they were engaged, but also, that there was indeed a
project.50(Emphases and underscoring supplied)

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 41 of 61

Verily, for an employee to be considered project-based, the employer must


show compliance with two (2) requisites, namely that: (a) the employee was
assigned to carry out a specific project or undertaking; and (b) the duration
and scope of which were specified at the time they were engaged for such
project.

In this case, records reveal that Sykes Asia adequately informed petitioners
of their employment status at the time of their engagement, as evidenced by
the latters employment contracts which similarly provide that they were
hired in connection with the Alltel Project, and that their positions were
"project-based and as such is co-terminus to the project." In this light, the
CA correctly ruled that petitioners were indeed project-based employees,
considering that: (a) they were hired to carry out a specific undertaking, i.e.,
the Alltel Project; and (b) the duration and scope of such project were made
known to them at the time of their engagement, i.e., "co-terminus with the
project."

As regards the second requisite, the CA correctly stressed that "[t]he law
and jurisprudence dictate that the duration of the undertaking begins and
ends at determined or determinable times" while clarifying that "[t]he
phrase determinable times simply means capable of being determined or
fixed."51 In this case, Sykes Asia substantially complied with this requisite
when it expressly indicated in petitioners employment contracts that their
positions were "co-terminus with the project." To the mind of the Court, this
caveat sufficiently apprised petitioners that their security of tenure with
Sykes Asia would only last as long as the Alltel Project was subsisting. In
other words, when the Alltel Project was terminated, petitioners no longer
had any project to work on, and hence, Sykes Asia may validly terminate
them from employment. Further, the Court likewise notes the fact that
Sykes Asia duly submitted an Establishment Employment Report52 and an
Establishment Termination Report53 to the Department of Labor and
Employment Makati-Pasay Field Office regarding the cessation of the Alltel
Project and the list of employees that would be affected by such cessation.
As correctly pointed out by the CA, case law deems such submission as an
indication that the employment was indeed project-based.54

In sum, respondents have shown by substantial evidence that petitioners


were merely project-based employees, and as such, their services were
lawfully terminated upon the cessation of the Alltel Project.

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 42 of 61

16. HACIENDA VS LORENZO

Respondent Rosario Lorenzo received, upon inquiry, a letter from the Social
Security System (SSS) Western Visayas Group informing her that she cannot
avail of their retirement benefits since per their record she has only paid 16
months. Such is 104 months short of the minimum requirement of 120
months payment to be entitle to the benefit. She was also informed that
their investigation of her alleged employment under employer Hda. Cataywa
could not be confirmed because Manuel Villanueva was permanently residing
in Manila and Joemarie Villanueva denied having managed the farm. She
was also advised of her options: continue paying contributions as voluntary
member; request for refund; leave her contributions in-trust with the
System, or file a petition before the Social Security Commission (SSC) so
that liabilities, if any, of her employer may be determined.3cralawred

Aggrieved, respondent then filed her Amended Petition before the SSC. She
alleged that she was employed as laborer in Hda. Cataywa managed by Jose
Marie Villanueva in 1970 but was reported to the SSS only in 1978. She
alleged that SSS contributions were deducted from her wages from 1970 to
1995, but not all were remitted to the SSS which, subsequently, caused the
rejection of her claim. She also impleaded Talisay Farms, Inc. by virtue of its
Investment Agreement with Mancy and Sons Enterprises.

Petitioners Manuel and Jose Villanueva refuted in their answer, the allegation
that not all contributions of respondent were remitted. Petitioners alleged
that all farm workers of Hda. Cataywa were reported, their contributions
were duly paid and remitted to SSS. It was the late Domingo Lizares, Jr.
who managed and administered the hacienda.5 While, Talisay Farms, Inc.
filed a motion to dismiss on the ground of lack of cause of action in the
absence of an allegation that there was an employer-employee relationship
between Talisay Farms and respondent.6cralawred

Consequently, the SSC rendered its Resolution thus:

this Commission finds, and so holds, that Rosario M. Lorezo was a regular
employee subject to compulsory coverage of Hda. Cataywa/Manuel
Villanueva/ Mancy and Sons Enterprises, Inc. within the period of 1970 to
February 25, 1990. In view thereof, the aforenamed respondents are hereby
ordered to pay jointly and severallyall delinquent contributions within the

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 43 of 61

proven employment period computed in accordance with the then prevailing


minimum wage (at 11 months per year)

The SSS, on the other hand, is ordered to pay (subject to existing rules and
regulations) petitioner Rosario M. Lorezo her retirement benefit, upon the
filing of the claim therefor, and to inform this Commission of its compliance
herewith.

The SSC denied petitioners' Motion for Reconsideration. The petitioner, then,
elevated the case before the CA where the case was dismissed outrightly
due to technicalities.

wlawlibrary

Petitioners are of the opinion that the SSC committed reversible error in
making conclusions founded on speculations and surmises that respondent
worked from 1970 to February 25, 1990. Petitioners argue that the SSC did
not give credence nor weight at all to the existing SSS Form R-1A and farm
bookkeeper Wilfredo Ibalobor. Petitioners insist that after thirty long years,
all the records of the farm were already destroyed by termites and elements,
thus, they relied on the SSS Form R-1A as the only remaining source of
information available. Petitioners also alleged that respondent was a very
casual worker.

ISSUE: WON the contention of petitioners is correct

This Court disagrees.

It was settled that there is no particular form of evidence required to Drove


the existence of the employer-employee relationship. Any competent and
relevant evidence to prove such relationship may be admitted. This may
entirely be testimonial.16 If only documentary evidence would be required to
demonstrate the relationship, no scheming employer would be brought
before the bar of justice.17 Petitioners erred in insisting that, due to passage
of time, SSS Form R-1A is the only remaining source of information available
to prove when respondent started working for them. However, such form

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 44 of 61

merely reflected the time in which the petitioners reported the respondent
for coverage of the SSS benefit. They failed to substantiate their claim that it
was only in 1978 that respondent reported for work.

The records are bereft of any showing that Demetria Denaga and Susano
Jugue harbored any ill will against the petitioners prompting them to execute
false affidavit. There lies no reason for this Court not to afford full faith and
credit to their testimonies. Denaga, in her Joint Affidavit with Jugue, stated
that she and respondent started working in Hda. Cataywa in 1970 and like
her, she was reported to the SSS on December 19, 1978.18 It was also
revealed in the records that the SSC found that Denaga was employed by
Manuel Villanueva at Hda. Cataywa from 1970 to December
1987.19cralawred

Jurisprudence has identified the three types of employees mentioned in the


provision20 of the Labor Code: (1) regular employees or those who have
been engaged to perform activities that are usually necessary or desirable in
the usual business or trade of the employer; (2) project employees or those
whose employment has been fixed for a specific project or undertaking, the
completion or termination of which has been determined at the time of their
engagement, or those whose work or service is seasonal in nature and is
performed for the duration of the season; and (3) casual employees or those
who are neither regular nor project employees.21cralawred

Farm workers generally fall under the definition of seasonal employees.22 It


was also consistently held that seasonal employees may be considered as
regular employees when they are called to work from time to time.23 They
are in regular employment because of the nature of the job, and not because
of the length of time they have worked. However, seasonal workers who
have worked for one season only may not be considered regular
employees.24cralawred

The nature of the services performed and not the duration thereof, is
determinative of coverage under the law.25 To be exempted on the basis of
casual employment, the services must not merely be irregular, temporary or
intermittent, but the same must not also be in connection with the business
or occupation of the employer.26 Thus, it is erroneous for the petitioners to
conclude that the respondent was a very casual worker simply because the

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 45 of 61

SSS form revealed that she had 16 months of contributions. It does not, in
any way, prove that the respondent performed a job which is not in
connection with the business or occupation of the employer to be considered
as casual employee.

The test for regular employees to be considered as such has been


thoroughly explained in De Leon v. NLRC,27viz.:chanRoblesvirtualLawlibrary

The primary standard, therefore, of determining a regular employment is the


reasonable connection between the particular activity performed by the
employee in relation to the usual business or trade of the employer. The test
is whether the former is usually necessary or desirable in the usual business
or trade of the employer. The connection can be determined by considering
the nature of the work performed and its relation to the scheme of the
particular business or trade in its entirety. Also, if the employee has been
performing the job for at least one year, even if the performance is not
continuous or merely intermittent, the law deems the repeated and
continuing need for its performance as sufficient evidence of the necessity if
not indispensability of that activity to the business. Hence, the employment
is also considered regular, but only with respect to such activity and while
such activity exists.28cralawred
cralawlawlibrary

A reading of the records would reveal that petitioners failed to dispute the
allegation that the respondent performed hacienda work, such as planting
sugarcane point, fertilizing, weeding, replanting dead sugarcane fields and
routine miscellaneous hacienda work.29 They merely alleged that respondent
was a very casual worker because she only rendered work for 16
months.30 Thus, respondent is considered a regular seasonal worker and not
a casual worker as the petitioners alleged.

Petitioners also assert that the sugarcane cultivation covers only a period of
six months, thus, disproving the allegation of the respondent that she
worked for 11 months a year for 25 years. This Court has classified farm
workers as regular seasonal employees who are called to work from time to
time and the nature of their relationship with the employer is such that

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 46 of 61

during the off season, they are temporarily laid off; but reemployed during
the summer season or when their services may be needed.31 Respondent,
therefore, as a farm worker is only a seasonal employee. Since petitioners
provided that the cultivation of sugarcane is only for six] months,
respondent cannot be considered as regular employee during the months
when there is no cultivation.

Based on the foregoing facts and evidence on record, petitioners are liable
for delinquent contributions. It being proven by sufficient evidence that
respondent started working for the hacienda in 1970, it follows that
petitioners are liable for deficiency in the SSS contributions.

The imposition upon and payment by the delinquent employer of the three
percent (3%) penalty for the late remittance of premium contributions is
mandatory and cannot be waived by the System. The law merely gives to
the Commission the power to prescribe the manner of paying the premiums.
Thus, the power to remit or condone the penalty for late remittance of
premium contributions is not embraced therein.32 Petitioners erred in
alleging that the imposition of penalty is not proper.

Petitioners also insist that the award of damages for misrepresentation is


without basis. This Court disagrees.

The law provides that should the employer misrepresent the true date of the
employment of the employee member, such employer shall pay to the SSS
damages equivalent to the difference between the amount of benefit to
which the employee member or his beneficiary is entitled had the proper
contributions been remitted to the SSS and the amount payable on the basis
of the contributions actually remitted. However, should the employee
member or his beneficiary is entitled to pension benefits, the damages shall
be equivalent to the accumulated pension due as of the date of settlement of
the claim or to the five years' pension, whichever is higher, including the
dependent's pension.33cralawred

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 47 of 61

17. TUNAY NA PAGKAKAISA VS ASIA BREWERY


FACTS:

Respondent Asia Brewery, Inc. (ABI) is engaged in the manufacture, sale


and distribution of beer, shandy, bottled water and glass products. ABI
entered into a Collective Bargaining Agreement (CBA), with Bisig at Lakas ng
mga Manggagawa sa Asia-Independent (BLMA-INDEPENDENT), the exclusive
bargaining representative of ABIs rank-and-file employees. On October 3,
2000, ABI and BLMA-INDEPENDENT signed a renegotiated CBA.

Article I of the CBA defined the scope of the bargaining unit, as follows:

Section 1. Recognition. The COMPANY recognizes


the UNION as the sole and exclusive bargaining representative of
all the regular rank-and-file daily paid employees within the
scope of the appropriate bargaining unit with respect to rates of
pay, hours of work and other terms and conditions of
employment. The UNION shall not represent or accept for
membership employees outside the scope of the
bargaining unit herein defined.

Section 2. Bargaining Unit. The bargaining unit shall be


comprised of all regular rank-and-file daily-paid employees of
the COMPANY. However, the following jobs/positions as herein
defined shall be excluded from the bargaining unit, to wit:

xxxxxxxx
6. Confidential and Executive Secretaries
xxxxxxxxx
12. Purchasing and Quality Control
[6]
Staff [EMPHASIS SUPPLIED.]

Subsequently, a dispute arose when ABIs management stopped deducting


union dues from eighty-one (81) employees, believing that their
membership in BLMA-INDEPENDENT violated the CBA. Eighteen (18) of
these affected employees are QA Sampling Inspectors/Inspectresses and

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 48 of 61

Machine Gauge Technician who formed part of the Quality Control Staff.
Twenty (20) checkers are assigned at the Materials Department of the
Administration Division, Full Goods Department of the Brewery Division and
Packaging Division. The rest are secretaries/clerks directly under their
respective division managers.

BLMA-INDEPENDENT claimed that ABIs actions restrained the employees


right to self-organization and brought the matter to the grievance
machinery. As the parties failed to amicably settle the controversy, BLMA-
INDEPENDENT lodged a complaint before the National Conciliation and
Mediation Board (NCMB).

Voluntary Arbitrator Bienvenido Devera sustained the BLMA-INDEPENDENT


after finding that the records submitted by ABI showed that the positions of
the subject employees qualify under the rank-and-file category because their
functions are merely routinary and clerical.

On appeal, the CA reversed the Voluntary Arbitrator. Hence the petition.

ISSUES:

1. Whether or not the 81 employees are confidential employees


and are not eligible for the inclusion in the bargaining unit.

2. Whether or not the 81 employees are deprived of their right to


self organization.

RULING:

1. NO.

We thus hold that the secretaries/clerks, numbering about forty (40), are
rank-and-file employees and not confidential employees.

the twenty (20) checkers are not confidential employees being quality
control staff entrusted with the handling and custody of company properties
and sensitive information assigned in the storeroom section of the Materials
Department, finishing section of the Packaging Department, and the
decorating and glass sections of the Production Department plainly showed

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 49 of 61

that they perform routine and mechanical tasks preparatory to the delivery
of the finished products. While it may be argued that quality control extends
to post-production phase -- proper packaging of the finished products -- no
evidence was presented by the respondent to prove that these daily-paid
checkers actually form part of the companys Quality Control Staff who as
such were exposed to sensitive, vital and confidential information about
[companys] products or have knowledge of mixtures of the products, their
defects, and even their formulas which are considered trade secrets.

Consequently, we hold that the twenty (20) checkers may not be


considered confidential employees under the category of Quality Control
Staff who were expressly excluded from the CBA of the rank-and-file
bargaining unit.

Confidential employees are defined as those who (1) assist or act in a


confidential capacity, (2) to persons who formulate, determine, and
effectuate management policies in the field of labor relations. The two
(2) criteria are cumulative, and both must be met if an employee is to
be considered a confidential employee that is, the confidential
relationship must exist between the employee and his supervisor, and
the supervisor must handle the prescribed responsibilities relating
to labor relations.

There is no showing in this case that the secretaries/clerks and


checkers assisted or acted in a confidential capacity to managerial
employees and obtained confidential information relating to labor
relations policies. And even assuming that they had exposure to internal
business operations of the company, respondent claimed, this is not per
se ground for their exclusion in the bargaining unit of the daily-paid
rank-and-file employees.

2. NO.

Considering that the herein dispute arose from a simple disagreement in the
interpretation of the CBA provision on excluded employees from the
bargaining unit, respondent cannot be said to have committed unfair labor
practice that restrained its employees in the exercise of their right to self-
organization, nor have thereby demonstrated an anti-union stance.

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 50 of 61

Unfair labor practice refers to acts that violate the workers right to organize.
The prohibited acts are related to the workers right to self organization and
to the observance of a CBA. For a charge of unfair labor practice to prosper,
it must be shown that ABI was motivated by ill will, bad faith, or fraud, or
was oppressive to labor, or done in a manner contrary to morals, good
customs, or public policy, and, of course, that social humiliation, wounded
feelings or grave anxiety resulted x x xfrom ABIs act in discontinuing the
union dues deduction from those employees it believed were excluded by the
CBA.

18. FUJI VS ESPIRITU


FACTS:

In 2005, Arlene S. Espiritu ("Arlene") was engaged by Fuji Television


Network, Inc. ("Fuji") as a news correspondent/producer4 "tasked to report
Philippine news to Fuji through its Manila Bureau field office." Arlenes
employment contract initially provided for a term of one (1) year but was
successively renewed on a yearly basis with salary adjustment upon every
renewal. Sometime in January 2009, Arlene was diagnosed with lung cancer.
She informed Fuji about her condition. In turn, the Chief of News Agency of
Fuji, Yoshiki Aoki, informed Arlene "that the company will have a problem
renewing her contract"8 since it would be difficult for her to perform her
job. She "insisted that she was still fit to work as certified by her attending
physician."

After several verbal and written communications, Arlene and Fuji signed a
non-renewal contract where it was stipulated that her contract would no
longer be renewed after its expiration. The contract also provided that the
parties release each other from liabilities and responsibilities under the
employment contract.

On May 6, 2009, the day after Arlene signed the non-renewal contract, she
filed a complaint for illegal dismissal and attorneys fees with the National
Capital Region Arbitration Branch of the National Labor Relations
Commission. She alleged that she was forced to sign the nonrenewal
contract when Fuji came to know of her illness and that Fuji withheld her

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 51 of 61

salaries and other benefits for March and April 2009 when she refused to
sign.

In the decision, Labor Arbiter Corazon C. Borbolla dismissed Arlenes


complaint applying the four-fold test, the Labor Arbiter held that Arlene was
not Fujis employee but an independent contractor.

The National Labor Relations Commission reversed the Labor Arbiters


decision. It held that Arlene was a regular employee with respect to the
activities for which she was employed since she continuously rendered
services that were deemed necessary and desirable to Fujis business.

ISSUE:

1. Whether or not an employer-employee relationship existed between


Fuji and Arlene.
2. Whether or not Arlene is a regular employee.

RULING:

1. Yes.

This court has often used the four-fold test to determine the existence of
an employer-employee relationship. Under the four-fold test, the "control
test" is the most important.134 As to how the elements in the four-fold
test are proven, this court has discussed that:

[t]here is no hard and fast rule designed to establish the aforesaid


elements. Any competent and relevant evidence to prove the
relationship may be admitted. Identification cards, cash vouchers,
social security registration, appointment letters or employment
contracts, payrolls, organization charts, and personnel lists, serve as
evidence of employee status.

Fujis argument that Arlene was an independent contractor under a fixed-


term contract is contradictory. Employees under fixed-term contracts cannot
be independent contractors because in fixed-term contracts, an employer-
employee relationship exists. The test in this kind of contract is not the
necessity and desirability of the employees activities, "but the day certain
agreed upon by the parties for the commencement and termination of the
employment relationship."

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 52 of 61

For regular employees, the necessity and desirability of their work in the
usual course of the employers business are the determining factors. On the
other hand, independent contractors do not have employer-employee
relationships with their principals. Hence, before the status of employment
can be determined, the existence of an employer-employee relationship
must be established.

The four-fold test can be used in determining whether an employeremployee


relationship exists. The elements of the four-fold test are the following: (1)
the selection and engagement of the employee; (2) the payment of wages;
(3) the power of dismissal; and (4) the power of control, which is the most
important element.

Thus, the Court of Appeals did not err when it upheld the findings of the
National Labor Relations Commission that Arlene was not an independent
contractor.

2.YES.

The test for determining regular employment is whether there is a


reasonable connection between the employees activities and the usual
business of the employer. Article 280 provides that the nature of work must
be "necessary or desirable in the usual business or trade of the employer" as
the test for determining regular employment.

Article 280 of the Labor Code provides that:

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.

This provision classifies employees into regular, project, seasonal, and


casual. It further classifies regular employees into two kinds: (1) those
"engaged to perform activities which are usually necessary or desirable in
the usual business or trade of the employer"; and (2) casual employees who
have "rendered at least one year of service, whether such service is
continuous or broken."

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 53 of 61

The Court of Appeals affirmed the finding of the National Labor Relations
Commission that the successive renewals of Arlenes contract indicated the
necessity and desirability of her work in the usual course of Fujis business.
Because of this, Arlene had become a regular employee with the right to
security of tenure.

Further, an employee can be a regular employee with a fixed-term contract.


The law does not preclude the possibility that a regular employee may opt to
have a fixed-term contract for valid reasons.

19. Goya v Goya

G.R. No. 170054 January 21, 2013


GOYA, INC., Petitioner, vs. GOYA, INC. EMPLOYEES UNION-FFW,
Respondent.

FACTS:

Sometime in January 2004, petitioner Goya, Inc. (Company), a domestic


corporation engaged in the manufacture, importation, and wholesale of top
quality food products, hired contractual employees from PESO Resources
Development Corporation (PESO) to perform temporary and occasional
services in its factory in Parang, Marikina City. This prompted respondent
Goya, Inc. Employees UnionFFW (Union) to request for a grievance
conference on the ground that the contractual workers do not belong to the
categories of employees stipulated in the existing Collective Bargaining
Agreement (CBA).5 When the matter remained unresolved, the grievance
was referred to the National Conciliation and Mediation Board (NCMB) for
voluntary arbitration.

Company and the Union manifested before Voluntary Arbitrator (VA)


Bienvenido E. Laguesma that amicable settlement was no longer possible;
hence, they agreed to submit for resolution the solitary issue of "[w]hether
or not the Company is guilty of unfair labor acts in engaging the services of
PESO, a third party service provider, under the existing CBA, laws, and
jurisprudence.

The Union asserted that the hiring of contractual employees from PESO is
not a management prerogative and in gross violation of the CBA tantamount
to unfair labor practice (ULP). It noted that the contractual workers engaged
have been assigned to work in positions previously handled by regular

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 54 of 61

workers and Union members, in effect violating Section 4, Article I of the


CBA.

The Union moreover advanced that sustaining the Company's position would
easily weaken and ultimately destroy the former with the latter's resort to
retrenchment and/or retirement of employees and not filling up the vacant
regular positions through the hiring of contractual workers from PESO, and
that a possible scenario could also be created by the Company wherein it
could "import" workers from PESO during an actual strike.

Company argued that: (a) the law expressly allows contracting and
subcontracting arrangements through Department of Labor and Employment
(DOLE) Order No. 18-02; (b) the engagement of contractual employees did
not, in any way, prejudice the Union, since not a single employee was
terminated and neither did it result in a reduction of working hours nor a
reduction or splitting of the bargaining unit; and (c) Section 4, Article I of
the CBA merely provides for the definition of the categories of employees
and does not put a limitation on the Company's right to engage the services
of job contractors or its management prerogative to address
temporary/occasional needs in its operation.

Issue: WON the Company is guilty of unfair labor acts in engaging the
services of PESO, in violation of the CBA. Yes.

Ruling:
A collective bargaining agreement is the law between the parties: It is
familiar and fundamental doctrine in labor law that the CBA is the law
between the parties and they are obliged to comply with its provisions.

We said so in Honda Phils., Inc. v. Samahan ng Malayang Manggagawa sa


Honda: A collective bargaining agreement or CBA refers to the negotiated
contract between a legitimate labor organization and the employer
concerning wages, hours of work and all other terms and conditions of
employment in a bargaining unit. As in all contracts, the parties in a CBA
may establish such stipulations, clauses, terms and conditions as they may
deem convenient provided these are not contrary to law, morals, good
customs, public order or public policy. Thus, where the CBA is clear and
unambiguous, it becomes the law between the parties and compliance
therewith is mandated by the express policy of the law. Moreover, if the
terms of a contract, as in a CBA, are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of their stipulations
shall control. x x x.

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 55 of 61

In this case, Section 4, Article I (on categories of employees) of the CBA


between the Company and the Union must be read in conjunction with its
Section 1, Article III (on union security). Both are interconnected and must
be given full force and effect. Also, these provisions are clear and
unambiguous. The terms are explicit and the language of the CBA is not
susceptible to any other interpretation. Hence, the literal meaning should
prevail. As repeatedly held, the exercise of management prerogative is not
unlimited; it is subject to the limitations found in law, collective and
bargaining agreement or the general principles of fair play and justice.
Evidently, this case has one of the restrictions- the presence of specific CBA
provisions.

Note:

Section 1, Article III (Union Security) of the CBA, which states: Section 1.
Condition of Employment. As a condition of continued employment in the
Company, all regular rank-and-file employees shall remain members of the
Union in good standing and that new employees covered by the appropriate
bargaining unit shall automatically become regular employees of the
Company and shall remain members of the Union in good standing as a
condition of continued employment.

CBA Section 4. Categories of Employees. The parties agree on the following


categories of employees: (a) Probationary Employee. One hired to occupy
a regular rank-and-file position in the Company and is serving a
probationary period. If the probationary employee is hired or comes from
outside the Company (non-Goya, Inc. employee), he shall be required to
undergo a probationary period of six (6) months, which period, in the sole
judgment of management, may be shortened if the employee has already
acquired the knowledge or skills required of the job. If the employee is hired
from the casual pool and has worked in the same position at any time during
the past two (2) years, the probationary period shall be three (3) months.
(b) Regular Employee. An employee who has satisfactorily completed his
probationary period and automatically granted regular employment status in
the Company. (c) Casual Employee, One hired by the Company to perform
occasional or seasonal work directly connected with the regular operations of
the Company, or one hired for specific projects of limited duration not
connected directly with the regular operations of the Company.

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 56 of 61

20. Alviado vs Procter and Gamble


G.R. No. 160506
March 9, 2010

FACTS:
Petitioners worked as merchandisers of P&G from various dates, allegedly
starting as early as 1982 or as late as June 1991, to either May 5, 1992 or
March 11, 1993,

They all individually signed employment contracts with either Promm-Gem


or SAPS for periods of more or less five months at a time. They were
assigned at different outlets, supermarkets and stores where they handled
all the products of P&G. They received their wages from Promm-Gem or
SAPS.

SAPS and Promm-Gem imposed disciplinary measures on erring


merchandisers for reasons such as habitual absenteeism, dishonesty or
changing day-off without prior notice.

In December 1991, petitioners filed a complaint against P&G for


regularization, service incentive leave pay and other benefits with damages.
The complaint was later amended to include the matter of their subsequent
dismissal.

Labor Arbiter dismissed the complaint for lack of merit and ruled that there
was no employer-employee relationship between petitioners and P&G.
Affirmed by NLRC and CA.

Petitioners insist that they are employees of P&G. They claim that they were
recruited by the salesmen of P&G and were engaged to undertake
merchandising chores for P&G long before the existence of Promm-Gem
and/or SAPS. They further claim that when the latter had its so-called re-
alignment program, petitioners were instructed to fill up application forms
and report to the agencies which P&G created.

Petitioners further assert that Promm-Gem and SAPS are labor-only


contractors providing services of manpower to their client. They claim that
the contractors have neither substantial capital nor tools and equipment to
undertake independent labor contracting. Petitioners insist that since they
had been engaged to perform activities which are necessary or desirable in
the usual business or trade of P&G, then they are its regular employees.

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 57 of 61

P&G further argues that there is no employment relationship between it and


petitioners. It was Promm-Gem or SAPS that (1) selected petitioners and
engaged their services; (2) paid their salaries; (3) wielded the power of
dismissal; and (4) had the power of control over their conduct of work.

P&G also contends that the Labor Code neither defines nor limits which
services or activities may be validly outsourced.Thus, an employer can farm
out any of its activities to an independent contractor, regardless of whether
such activity is peripheral or core in nature. It insists that the determination
of whether to engage the services of a job contractor or to engage in direct
hiring is within the ambit of management prerogative.

ISSUE 1: WON Promm-Gem and SAPS are labor-only contractors. Promm-


Gemm is a legitimate independent contractor. SAPS is a labor-only
contractor.

RULING 1:
ART. 106. Contractor or subcontractor. (Labor Code)

Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as
amended by Department Order No. 18-02,[24] distinguishes between
legitimate and labor-only contracting:

Clearly, the law and its implementing rules allow contracting arrangements
for the performance of specific jobs, works or services. Indeed, it is
management prerogative to farm out any of its activities, regardless of
whether such activity is peripheral or core in nature. However, in order for
such outsourcing to be valid, it must be made to an independent contractor
because the current labor rules expressly prohibit labor-only contracting.

To emphasize, there is labor-only contracting when the contractor or sub-


contractor merely recruits, supplies or places workers to perform a job, work
or service for a principal[25] and any of the following elements are present:

i) The contractor or subcontractor does not have substantial capital or


investment which relates to the job, work or service to be performed and the
employees recruited, supplied or placed by such contractor or subcontractor
are performing activities which are directly related to the main business of
the principal; or

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 58 of 61

ii) The contractor does not exercise the right to control over the performance
of the work of the contractual employee. (Underscoring supplied)

In the instant case, the financial statements[26] of Promm-Gem show that it


has authorized capital stock of P1 million and a paid-in capital, or capital
available for operations, of P500,000.00 as of 1990.[27] It also has long
term assets worth P432,895.28 and current assets of P719,042.32. Promm-
Gem has also proven that it maintained its own warehouse and office space
with a floor area of 870 square meters.[28] It also had under its name three
registered vehicles which were used for its promotional/merchandising
business.[29] Promm-Gem also has other clients[30] aside from
P&G.[31]Under the circumstances, we find that Promm-Gem has substantial
investment which relates to the work to be performed. These factors negate
the existence of the element specified in Section 5(i) of DOLE Department
Order No. 18-02.

The records also show that Promm-Gem supplied its complainant-workers


with the relevant materials, such as markers, tapes, liners and cutters,
necessary for them to perform their work. Promm-Gem also issued uniforms
to them. It is also relevant to mention that Promm-Gem already considered
the complainants working under it as its regular, not merely contractual or
project, employees. [32] This circumstance negates the existence of element
(ii) as stated in Section 5 of DOLE Department Order No. 18-02, which
speaks of contractual employees. This, furthermore, negates on the part of
Promm-Gem bad faith and intent to circumvent labor laws which factors
have often been tipping points that lead the Court to strike down the
employment practice or agreement concerned as contrary to public policy,
morals, good customs or public order.[33]

Under the circumstances, Promm-Gem cannot be considered as a labor-only


contractor. We find that it is a legitimate independent contractor.

On the other hand, the Articles of Incorporation of SAPS shows that it has a
paid-in capital of only P31,250.00. There is no other evidence presented to
show how much its working capital and assets are. Furthermore, there is no
showing of substantial investment in tools, equipment or other assets.

Furthermore, the petitioners have been charged with the merchandising and
promotion of the products of P&G, an activity that has already been
considered by the Court as doubtlessly directly related to the manufacturing
business,[38] which is the principal business of P&G. Considering that SAPS
has no substantial capital or investment and the workers it recruited are
performing activities which are directly related to the principal business of

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 59 of 61

P&G, we find that the former is engaged in labor-only contracting. Where


labor-only contracting exists, the Labor Code itself establishes an employer-
employee relationship between the employer and the employees of the
labor-only contractor.[39] The statute establishes this relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The
contractor is considered merely an agent of the principal employer and the
latter is responsible to the employees of the labor-only contractor as if such
employees had been directly employed by the principal employer.[40]

Consequently, the following petitioners, having been recruited and supplied


by SAPS[41] -- which engaged in labor-only contracting -- are considered as
the employees of P&G.

Other petitioners, having worked under, and been dismissed by Promm-


Gem, are considered the employees of Promm-Gem, not of P&G.

ISSUE2: WON petitioners were illegally dismissed. Yes.

RULING:

In cases of regular employment, the employer shall not terminate the


services of an employee except for a just[43] or authorized[44] cause.

In the instant case, the termination letters given by Promm-Gem to its


employees uniformly specified the cause of dismissal as grave misconduct
and breach of trust.

In order to constitute serious misconduct which will warrant the dismissal of


an employee under paragraph (a) of Article 282 of the Labor Code, it is not
sufficient that the act or conduct complained of has violated some
established rules or policies. It is equally important and required that the act
or conduct must have been performed with wrongful intent.

In the instant case, petitioners-employees of Promm-Gem may have


committed an error of judgment in claiming to be employees of P&G, but it
cannot be said that they were motivated by any wrongful intent in doing so.
As such, we find them guilty of only simple misconduct for assailing the
integrity of Promm-Gem as a legitimate and independent promotion firm. A
misconduct which is not serious or grave, as that existing in the instant
case, cannot be a valid basis for dismissing an employee.

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 60 of 61

Meanwhile, loss of trust and confidence, as a ground for dismissal, must be


based on the willful breach of the trust reposed in the employee by his
employer. Ordinary breach will not suffice. A breach of trust is willful if it is
done intentionally, knowingly and purposely, without justifiable excuse, as
distinguished from an act done carelessly, thoughtlessly, heedlessly or
inadvertently.

All told, we find no valid cause for the dismissal of petitioners-employees of


Promm-Gem.

While Promm-Gem had complied with the procedural aspect of due process
in terminating the employment of petitioners-employees, i.e., giving two
notices and in between such notices, an opportunity for the employees to
answer and rebut the charges against them, it failed to comply with the
substantive aspect of due process as the acts complained of neither
constitute serious misconduct nor breach of trust. Hence, the dismissal is
illegal.

With regard to the petitioners placed with P&G by SAPS, they were given no
written notice of dismissal. The records show that upon receipt by SAPS of
P&Gs letter terminating their Merchandising Services Contact effective March
11, 1993, they in turn verbally informed the concerned petitioners not to
report for work anymore.

Neither SAPS nor P&G dispute the existence of these circumstances.


Parenthetically, unlike Promm-Gem which dismissed its employees for grave
misconduct and breach of trust due to disloyalty, SAPS dismissed its
employees upon the initiation of P&G. It is evident that SAPS does not carry
on its own business because the termination of its contract with P&G
automatically meant for it also the termination of its employees services. It
is obvious from its act that SAPS had no other clients and had no intention of
seeking other clients in order to further its merchandising business. From all
indications SAPS, existed to cater solely to the need of P&G for the supply of
employees in the latters merchandising concerns only. Under the
circumstances prevailing in the instant case, we cannot consider SAPS as an
independent contractor.

Going back to the matter of dismissal, it must be emphasized that the onus
probandi to prove the lawfulness of the dismissal rests with the
employer.[53] In termination cases, the burden of proof rests upon the
employer to show that the dismissal is for just and valid cause.[54] In the
instant case, P&G failed to discharge the burden of proving the legality and
validity of the dismissals of those petitioners who are considered its

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira
Page 61 of 61

employees. Hence, the dismissals necessarily were not justified and are
therefore illegal.

Labrador Notes Labor law Review Case Digests Set 1 Atty. Beceira