1

LABOR LAW CASES separation pay equal to one months salary for every year of service and likewise assails
the August 7, 2002 Resolution denying her Motion for Reconsideration.
Republic of the Philippines
Supreme Court The Facts
Manila
Petitioner Estrellita Salazar became Sales Representative of respondent
THIRD DIVISION company, Philippine Duplicators, Inc. (Duplicators for brevity), on May 1, 1987. She was
assigned at the Southern Section of Metro Manila under the direct supervision of
respondent Leonora Fontanilla. Petitioner received her last compensation in the amount
ESTRELLITA G. SALAZAR G.R. No. 154628 of PhP 14,095.73 which covered her basic salary and monthly commission. [1]
Petitioner,
On November 23, 1998, respondent Fontanilla went over the three (3)
accounts of Salazar, namely, ICLARM, Bengson Law Office, and D.M. Consunji,
Inc. The individual ledgers specified that Salazar visited the said customers; that she
talked with the contact persons identified in the ledgers; and that she reported that
Present: these customers would not, in the meantime, purchase the equipment because of
budgetary constraints.[2]

- versus QUISUMBING, J., Chairperson, During the last week of November 1998, respondent Fontanilla asked Salazar
CARPIO, whether she went to the aforementioned clients on November 20, 1998. The latter
CARPIO MORALES, answered in the affirmative as reflected in her Daily Sales Report (DSR) given to
TINGA, and Fontanilla. However, respondent Fontanilla told Salazar that upon verification, the said
PHILIPPINE DUPLICATORS, VELASCO, JR., JJ. clients alleged that they neither knew nor met the latter; but Salazar stood firm on her
INC., and /or LEONORA declaration that on the said date, she met all three (3) customers.
FONTANILLA,
Respondents. Petitioner claimed that on December 7, 1998, respondent Fontanilla called her
Promulgated: to the latters office and handed her a memorandum with a ball pen requesting her to
receive it. Petitioner refused to receive it because it stated her termination from
employment and asked Fontanilla why she should be terminated as she had done
nothing wrong.[3]
December 6, 2006
On December 9, 1998, respondent Fontanilla directed Salazar, through a
memorandum[4] to explain, within 72 hours from receipt of said document, why no
x-----------------------------------------------------------------------------------------x disciplinary action should be taken against her in violation of Section 8, Category V of
the companys Handbook on Constructive Discipline for falsifying company records, but
DECISION petitioner refused to receive the memorandum. Hence, on December 10, 1998, it was
sent through registered mail to Salazars residence.[5]

VELASCO, JR., J.:
Truth lives on in the midst of deception.
Friedrich von Schiller
The Case
This petition for review seeks the reversal of the March 15, 2002 Decision of
the Court of Appeals (CA) in CA-G.R. SP No. 62556, entitled Estrellita G. Salazar v.
National Labor Relations Commission, Philippine Duplicators, Inc. and/or Leonora
Fontanilla, which declared petitioner Salazars dismissal from employment lawful and
valid, but nevertheless ordered respondent Philippine Duplicators, Inc. liable for
Salazar claimed that on December 10, 1998, the union president also gave her
a copy of the December 9, 1998 memorandum charging her of falsification; and that the
memorandum was just a plan to comply with the procedural due process leading to her
termination which had already materialized when the first memorandum of termination
was allegedly shown to her on December 7, 1998. Consequently, she did not report to
work anymore and readily filed a complaint for illegal dismissal against the respondents
on December 15, 1998, docketed as NLRC-NCR Case No. 00-12-10174-98.
On December 16, 1998, through registered mail, Salazar eventually received a
copy of the December 9, 1998 memorandum about the charge of falsification.

Meanwhile, respondent company sought the dismissal of Salazars complaint
of illegal dismissal, claiming it was Salazar who abandoned work. Labor Arbiter
Eduardo J. Carpio dismissed the case without prejudice for lack of interest to prosecute
through his February 23, 1999 Order.[6]
On March 15, 1999, petitioner received the March 8,
1999 memorandum[7] which charged her with abandonment of work since December
15, 1998 in violation of Section 5, Category V of the Handbook on Constructive
Discipline. Petitioner replied through a letter addressed to Mr. Vicente O.
Reyes,[8] President of the respondent company, indicating her amazement since the
case for illegal dismissal she filed before the NLRC against the respondents was still
pending.[9]
On the other hand, respondents averred that on March 8, 1999, Mr. Eduardo
Melendres, Area Sales Manager of respondent Fontanilla, sent a letter of termination
addressed to Salazar through registered mail for falsifying company records punishable
under Category V, paragraph 8 of the company handbook.[10]
On May 31, 1999, Salazar refiled the labor case which was redocketed as NLRC Case
No. 00-05-06051-99 and was re-raffled to Labor Arbiter Manuel R. Caday. When there
was no settlement arrived at during the conferences, the contending parties were
subsequently directed to submit their respective position papers.[11] A copy of the March
8, 1999 termination letter addressed to Salazar was appended as Annex F to
respondents September 1, 1999 Position Paper.[12]
In her position paper, Salazar disputed Duplicators assertion that she abandoned her
employment.
With respect to the March 8, 1999 termination letter dismissing her from
employment for falsifying company records, she insisted that she did not receive said
letter. In support of her contention, she averred that the Muntinlupa City Post Office
certified that Registry Receipt No. 4299 attached to the letter was assigned to Norma
De Guia of Bacon, Sorsogon as addressee. Petitioner believed that said letter could
have been concocted to present a semblance of defense for respondents.
Duplicators vehemently denied the alleged fabrication of the March 8,
1999 termination letter and contended that if there had been an error, it was not
Duplicators fault.It stressed the presumed validity of the questioned registry receipt and
submitted a certification from the Postmaster of Bian, Laguna which indicated that the
mail matter addressed to Salazar was covered by Registry Receipt No. 4295 and was
in fact sent to Salazars residence at Block 3, Lot 12, Phase 36, Pacita Complex, Bian,
Laguna.
On December 8, 1999, Labor Arbiter Manuel R. Caday rendered his Decision
finding that petitioners dismissal was for a just cause, but respondent Duplicators
breached the twin-notice requirement for dismissal under Section 2 (c), Rule XXIII,
Book V of the Implementing Rules and Regulations of the Labor Code. Thus,
Duplicators was ordered to pay an indemnity of PhP 10,000.00 to petitioner Salazar.
The decretal portion reads:
2
WHEREFORE, premises considered, judgment is hereby
rendered ordering the respondent company to pay complainant the
amount of P10,000.00 by way of indemnity. x x x
All other claims are hereby dismissed for lack of merit.
SO ORDERED.[13]
On January 26, 2000, Salazar filed a Memorandum of Appeal[14] from the
adverse Decision. On August 28, 2000, the NLRC decided the appeal finding that there
was actually no termination of Salazars employment but considering that reinstatement
was not advisable due to the strained relationship between the parties, separation pay
was ordered paid to petitioner in lieu of reinstatement. The fallo of the August 28,
2000 Decision[15] reads:
WHEREFORE, the decision appealed from is hereby MODIFIED to
the extent that the respondent company is hereby ordered to pay the
complainant Php14,095.73 representing her one month separation
pay. The award of indemnity is hereby deleted. The other findings
stand Affirmed.
In its October 25, 2000 Resolution,[16] Salazars October 12, 2000 Motion for
Reconsideration[17] was subsequently denied for lack of merit.
Believing in the merits of her complaint, Salazar filed a Petition for Certiorari with the
CA on January 11, 2001, which was docketed as CA-G.R. SP No. 62556.
In its March 15, 2002 Decision,[18] the CA ruled this way:
WHEREFORE, on the basis of the dissertations that prescind, the
assailed issuances rendered by the NLRC are hereby AFFIRMED
with modification. The dismissal of the petitioner is perforce declared
lawful and valid. Nonetheless, as a measure of compassion and
social justice, she is hereby pronounced entitled to separation pay
equivalent to one months salary for every year of service rendered.
Simply stated, the CA ruled that the termination of Salazars employment was
legal and valid. While the dismissed employee was not entitled to separation pay, the
CA nonetheless awarded severance pay pursuant to settled jurisprudence and in the
interest of social justice. Lastly, it ruled that there was no breach of the due process
requirements prescribed for dismissal from employment.
On April 3, 2002, Salazar filed a Motion for Reconsideration, [19] but the CA
consequently denied said motion in its August 7, 2002 Resolution.[20]
Hence, this Petition for Review on Certiorari is before us.
The Issues

Petitioner interposed the following issues:
A. ON THE PRESUMPTION THAT PETITIIONER WAS
DISMISSED WITH JUST CAUSE, THE HONORABLE COURT OF
APPEALS COMMITTED REVERSIBLE ERROR WHEN IT
ALLOWED THE REVERSAL BY ERROR BY THE NATIONAL
LABOR RELATIONS COMMISSION (NLRC) OF THE LABOR
ARBITERS FINDING/RULING THAT SHE WAS DISMMISSED IN
VIOLATION OF THE PROCEDURAL ASPECT OF DISMISSAL TO
FAVOR RESPONDENTS WHO DID NOT APPEAL.
B. ON THE ASSUMPTION THAT A REVIEW OF THE FINDINGS
OF THE LABOR ARBITER ON PROCEDURAL ASPECT OF
PETITIIONERS DISMISSAL COULD BE MADE, THE HONORABLE
COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN
IT SAID THAT PEITIONER WAS SERVED NOTICE OF DISMISSAL
BASED ON CERTIFICATION OF THE POST OFFICE OF BIAN
LAGUNA, REFERRING TO A DIFFERENT MAIL MATTER.
C. THE HONORABLE COURT OF APPEALS COMMITTTED
REVERSIBLE ERROR WHEN IT DID NOT RULE THAT
RESPONDENTS DEFENSE IN THE ILLEGAL CASE IS
ABANDONMENT, WHICH IS UNTENABLE, AND THE ALLEGED
SUBSEQUENT DISMISSAL IS BUT AN AFTERTHOUGHT.
D. THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR WHICH IT SUSTAINED THAT PETITIONER
WAS DISMISSED WITH JUST CAUSE IN DISREGARD OF THE
SETTLED JURISPRUDENCE ON THE MATTER.[21]
Petition Salazar claims that the NLRC should not have deleted the award of
indemnity of PhP 10,000.00 in her favor since both Duplicators and Fontanilla did not
interpose any appeal from the Decision of Labor Arbiter Manuel Caday and hence, no
affirmative relief could be granted to said respondents.
This postulation is incorrect.
The Courts Ruling
As a general rule, a party who has not appealed cannot obtain from the
appellate court any affirmative relief other than the ones granted in the appealed
decision.[22]
The reason for this rule is that since parties did not appeal from the decision or
resolution, they are presumed to be satisfied with the adjudication. Furthermore, Rule
141 on Legal Fees provides that if the fee is not paid, then the court may refuse to
proceed with the action until they are paid and may dismiss the appeal or the action or
proceeding. The case or appeal is deemed filed only upon payment of the docket or
3
appeal fee considering that jurisdiction is acquired by the court over the case or the
appeal only upon full payment of the prescribed fee. Thus, the court has no jurisdiction
or authority to grant affirmative relief to the party who did not appeal as there is no
obligation to pay any fee. Furthermore, in the interest of fairness, it would not be proper
and just to award affirmative relief to the appellees since they did not comply with the
requirements of appeal. In this case, Rule VI, Section 3 of the NLRC Rules of
Procedure [2000][23] prescribes the following:
Section 3. REQUISITES FOR PERFECTION OF APPEAL. a) The
Appeal shall be filed within the reglementary period as provided in Section 1 of
this Rule; shall be under oath with proof of payment of the required appeal fee
and the posting of a cash or surety bond as provided in Section 6 of this Rule;
shall be accompanied by memorandum of appeal which shall state the
grounds relied upon and the arguments in support thereof; the relief prayed
for; and a statement of the date when the appellant received the appealed
decision, order or award and proof of service on the other party of such
appeal.
Complying with these specifications is a difficult and tedious process,
specifically the posting of cash or surety bond. It would be discriminatory and
inequitable if a party who has not complied with these requirements will be granted
affirmative relief.
In the instant case, did the NLRC violate the rule in labor cases that an
appellee cannot be awarded any affirmative relief?
We find no deviation from the doctrine.
The Labor Arbiter ruled that petitioner Salazars dismissal was for a just cause
but discovered an infraction of the two-notice requirement on the dismissal of an
employee for which he ordered Duplicators to pay the indemnity of PhP 10,000.00 to
Salazar. However, on petitioners appeal, the NLRC believed that there was after all no
dismissal of petitioner Salazar but due to strained relationship, the company was made
to pay separation pay of PhP 14,095.73 instead of paying the indemnity of PhP
10,000.00 imposed by the Labor Arbiter. It is the deletion of the PhP 10,000.00
indemnity that is being assailed by the petitioner as a grant of affirmative relief to
respondent Duplicators.
We are not persuaded.
Petitioners first ground in her Memorandum of Appeal before the NLRC stated
that Labor Arbiter Cadays rulingthat she was not illegally dismissed was erroneous. [24]In
resolving this issue, the NLRC overturned Cadays finding of petitioners valid dismissal,
and instead concluded that there was no termination of petitioners employment. As a
consequence, the NLRC had to recall the award of PhP 10,000.00 indemnity imposed
by Arbiter Caday although not prayed for by respondent Duplicators since the said
award was inconsistent with the finding that petitioners employment subsisted. Without
petitioners dismissal, there can be no legal basis for the indemnity; hence, Duplicators
is not obliged to comply with the two (2)notice requirement. In annulling the award, the
NLRC merely exercised its authority under Article 218 (d) of the Labor Code to correct
or amend any error committed by a labor arbiter in aid of its exclusive appellate
jurisdiction. Petitioner has no reason to complain that she was deprived of monetary

benefits since the NLRCs Decision did not actually benefit Duplicators as the PhP
14,095.76 separation pay granted to petitioner is certainly greater than the PhP
10,000.00 indemnity deleted by the NLRC.
Anent the second issue, petitioner claims that the CA committed reversible
error when it concluded that she was served with the dismissal notice based on a post
office certification that referred to a different mail matter.
It is clear that petitioner raised a question of fact which is not allowed by the factual
issue bar rule under Rule 45 considering that this Court is not a trier of facts.
Granting arguendo that the issue at bar is an exception to the proscription against
questions of fact, we find that the CA did not commit any serious misstep in ruling that
petitioner Salazar was actually served with the dismissal notice. The CA explained its
conclusion this way:
Proof exists to establish that the foregoing notice of
termination was served upon the petitioner by registered mail. The
Postmaster of [Bian], Laguna Mr. Fermin De Villa himself certified
that this mail matter was delivered to the petitioner in her residence in
Bian, Laguna and was received by a C.M. de Vera on March 23,
1999.[25]
In her petition, Salazar does not assail the veracity and accuracy of Fermin De
Villas certification that Mail Matter No. 4295 was received by C.M. de Vera on behalf of
petitioner. On the other hand, she claims that Mail Matter No. 4295 does not refer to the
alleged March 8, 1999 letter of termination based on falsification of company records
but to another Duplicators letter also dated March 8, 1999 signed by Duplicator Sales
Supervisor Leonora A. Fontanilla charging petitioner of abandonment of work.
To support her contention, petitioner presented a letter, [26] addressed to
Philippine Duplicators President Vicente O. Reyes, explaining her side of the
abandonment issue. Thus, she questions the CAs reliance on the De Villa certification
on the receipt of Mail Matter No. 4295 to refer to the termination letter based on
falsification of company records. She explains that the alleged termination letter x x x
dated March 8, 1999 likewise, was under Mail Matter No. 4299, as shown on the lower
portion of the photo copy of the alleged letter of termination itself attached to
respondents Position Paper.[27] Based on the Muntinlupa Post Offices
Certification,[28] Registry Receipt No. 4299 involves mail matter sent by Ricardo Lipata
and addressed to Norma De Sunia of Bacon, Sorsogon. Petitioner therefore concludes
that she was not served a copy of the March 8, 1999 termination letter grounded on her
alleged falsification of company records because Mail Matter no. 4299 was possibly
sent to Norma De Sunia of Bacon, Sorsogon while Mail Matter No. 4295 which
petitioner admittedly received, referred to the March 8, 1999 letter for her alleged work
abandonment.
To determine whether the March 8, 1999 termination letter was received by
petitioner, we first examine the documentary evidence, viz:
1. The Muntinlupa Post Office Record of Registered Mails reveal the following:
4
a. Registry Receipt No. 4295 was assigned to two (2) mail matters:
1.) Sender: Phil. Duplicators Inc.
Addressee: Estrellita Salazar
San Pedro, Laguna
2.) Sender: Janet Saduerte
Addressee: Corazon Saduerte
Buli, Camarines Sur[29]
b. Registry Receipt No. 4299
Sender: Ricardo Lipata
Addressee: Norma De Sunia
Bacon, Sorsogon[30]
c. Certification of Bian, Laguna Postmaster Fermin T. De Villa which
states that:
This is to certify that registered Letter No.4295 posted at Muntinlupa
Post Office on March 16, 1999 and addressed to Ms. Estrellita
Salazar of Block 3 Lot 12 Phase 3b, Pacita Complex, Bian, Laguna
was delivered to and received by Ms. C.M. de Vera on March 23,
1999.[31]
d. March 8, 1999 letter of Eduardo Z. Melendres to Estrellita G. Salazar
terminating her for falsifying company records with the Registry Receipt No.
4299 attached thereto at the lower right portion of the letter. [32]
From the foregoing pieces of documentary evidence, it appears that there were two (2)
mail matters sent by registered mail to petitioner Salazar, namely: one sent to her
address at San Pedro, Laguna covered by Registry Receipt No. 4295 as can be seen
from a copy of the Record of Registered Mails [33] and another covered by Registry
Receipt No. 4295 sent to her address at Block 3 Lot 12 Phase 3b, Pacita Complex,
Bian, Laguna which was received by C.M. de Vera per the certification of Bian
Postmaster De Villa.Moreover, Registry Receipt No. 4295 was assigned to two (2) mail
matters: the first sent by Philippine Duplicators to petitioner and the second sent by
Janet Saduerte to Corazon Saduerte. To further complicate the already confusing
situation, Registry Receipt No. 4299 was issued to the March 8, 1999 termination letter
and at the same time was assigned to the letter sent by Ricardo Lipata to Norma De
Sunia.
In this imbroglio, we rule that petitioner Salazar received the March 8, 1999 termination
letter for the following reasons, viz:
1. In its August 28, 2000 Decision, the NLRC ruled that the receipt of the March 8, 1999
letter on termination petitioners was confirmed based on the certification[34] issued by
Postmaster Fermin De Villa.
The CA upheld this finding by the NLRC when it observed that the Postmaster of [Bian]
Laguna, Mr. Fermin De Villa himself certified that this mail matter was delivered to the

petitioner in her residence in Bian, Laguna and was received by C.M. de Vera on March
23, 1999.[35]
The findings of fact of the NLRC are accorded with respect and even finality if based on
substantial evidence, and these findings are binding and conclusive upon this Court
when passed upon and upheld by the CA.[36]
2. In its Position Paper September 1, 1999 filed in NLRC NCR Case No. 00-05-06051-
99 before Labor Arbiter Caday, Duplicators stated that:
On March 8, 1999, Mr. Eduardo Z. Melendres, Area Sales
Manager of Respondent Leonora Fontanilla issued Private Complaint
thru registered mail a letter of termination for falsifying company
records punishable under Category V, Paragraph 8 of respondent
companys Handbook on Constructive Discipline. A copy of the
memorandum is hereto attached as Annex F.[37]
Even granting arguendo that the post office was not able to deliver the March
8, 1999 termination letter and serve it on petitioner, still it cannot be denied that Salazar
in fact got a copy of said termination letter when she received a copy of respondents
Position Paper with the said letters copy attached Annex F. It should be noted that
neither Article 277 of the Labor Code nor the Omnibus Rules implementing the Labor
Code prescribe a time frame within which the termination letter of the employee must
be served. Thus, there was compliance with the second required notice on termination
of petitioners.
3. Philippine Duplicators categorically stated that the March 8, 1999 termination latter
was assigned Registry Receipt No. 4295 based on the record of Registered Mails
although Registry Receipt No. 4299 was inadvertently issued for said mail
matter. Registry Receipt No. 4299 was attached to the termination letter appended as
Annex F to respondents Position Paper. It explained the discrepancy by presenting a
copy of the pertinent page in the record that indeed Registry Receipt No. 4295 was
assigned to the termination letter while Registry Receipt No. 4299
was actually assigned to the mail sent by Ricardo Lipata to Norma De Sunia of Bacon,
Sorsogon. This position was further buttressed by the Bian, Laguna Postmaster
Certification that the letter covered by Registry Receipt No. 4295 was actually received
by C.M. de Vera for petitioner. Such certification is supported by the presumption that
the postmasters official duty had been regularly performed and in the absence of proof
to the contrary, then such presumption stands.
On the other hand, petitioner claims that what she received was the March 8, 1999
letter from Duplicators requiring her to explain the charge of abandonment and not the
alleged March 8, 1999 termination letter, which is just a fabrication, considering that
Registry Receipt No. 4299 was assigned to another shipperMr. Ricardo Lipata and the
addressee is Norma de Sunia. However, other than her bare allegation and conclusion,
she was not able to substantiate the same. First of all, she could not explain how the
Registry Receipt No. 4295 was assigned to the March 8, 1999 show cause letter on the
charge of abandonment considering the registration of the mail with the post office was
not done by her but by respondent company. She never claimed that respondent forged
5
or falsified Registry Receipt No. 4299. More importantly, if she actually received
the March 8, 1999 letter on the charge of abandonment, then she could have submitted
the envelope with the registry receipt number stamped in the envelope which is the post
offices practice. Without such clear proof, we are not inclined to accept petitioners story
that she did not receive the March 8, 1999 termination letter sent by registered mail.
Petitioner was terminated for falsification of company records and not
abandonment
Petitioner Salazar asseverates that she had already been dismissed from service as
of December 7, 1998 allegedly based on a notice of termination issued on that day. She
explains that the show cause order charging her with falsification of company records
subsequently given to her was a belated attempt to show some semblance of
procedural due process preparatory to her removal from employment. Lastly, she
postulates that the real cause for her removal is abandonment and not falsification of
records.
We find such contentions without basis.
At the outset, the instant issue is a factual issue which should not be entertained under
Rule 45. Even if we consider said issue, relief is not availing. Petitioner merely relied on
her self-serving statements. No clear, convincing, and substantial evidence was
adduced to prove and support her version of the controversy.
The Labor Code and its implementing rules empower the Labor Arbiter to be the trier of
facts in labor cases. Much reliance is placed on the findings of facts of the arbiter
having had the opportunity to talk to and discuss with the parties and their witnesses
the factual matters of the case during the conciliation phase. Moreover, if hearing is
conducted, the arbiter is able to know first hand the demeanor and behavior of the
witnesses while they are giving their narratives. He has become an expertover the
years in such capacity as arbiterto weigh, analyze, and calibrate the value and credit
that should be assigned to parol evidence.
The factual conclusions of Labor Arbiter Caday were sustained by the NLRC, which
ruled that Salazars claims could not be said to be of unquestionable veracity. Thus, her
claim that her employment was terminated on December 7, 1998 before she was given
the December 9,1998 a show cause letter cannot be given much weight. Nary a proof
was presented that there was a December 7, 1998 memorandum terminating her for
abandonment or falsification. Other than her bare assertion, Salazar was not able to
adduce any corroborating testimony or documentary evidence to support her claim. She
miserably failed to prove what she alleged.
Lastly, the CA also adopted Labor Arbiter Cadays findings as affirmed by the NLRC,
that Salazar was not actually dismissed on December 7, 1998 without any evidence to
prop up her story. When the factual findings of the trier of facts (Labor Arbiter) have
been adopted by both the NLRC and the CA, then such conclusions automatically bind
this Court as a matter of course.
Petitioner was afforded due process

The procedure for terminating an employee is found in Book VI, Rule I, Section
2 (d) of the Omnibus Rules Implementing the Labor Code:
Standards of due process: requirements of notice. In all cases of
termination of employment, the following standards of due process
shall be substantially observed:
I. For termination of employment based on just
causes as defined in Article 282 of the Code:
(a) A written notice served on the employee
specifying the ground or grounds for termination,
and giving to said employee reasonable
opportunity within which to explain his side;
(b) A hearing or conference during which the
employee concerned, with the assistance of
counsel if the employee so desires, is given
opportunity to respond to the charge, present his
evidence or rebut the evidence presented against
him; and
(c) A written notice of termination served on the
employee indicating that upon due consideration
of all the circumstances, grounds have been
established to justify his termination.
In case of termination, the foregoing notices shall be served
on the employees last known address.
The aforelisted requirements have been met, thus:
1. Petitioner admitted that on December 10, 1998 she received from the union president
a copy of the December 9, 1998 memorandum charging her with falsification under
Category V of the companys handbook.[38]
2. The second requisitethat a hearing or conference is set to enable the employee to
respond to the charge and adduce evidenceis deemed substantially complied with. The
CA is correct in its observation that instead of utilizing the administrative inquiry as a
reasonable avenue to thresh out her claims and defenses, petitioner ignored the
same.[39]
3. Petitioner received a copy of the March 8, 1999 termination letter by registered mail
which she received on March 23, 1999, or at the latest, on September 1, 1999 when
she got a copy of respondents Position Paper where the letter was appended as Annex
F.[40]
Thus the twin notice requirement that constitutes due process has been satisfied.
Petitioner was dismissed for a just and valid cause
6
Petitioner was charged with falsifying company records. On this issue, Labor Arbiter
Caday made the following findings, viz:
A scrutiny of these documentary evidence reveals that on
November 20, 1998, at around 3:00 PM complainant Salazar visited
Juliet Alvarez of Banco-Filipino-Legal, Paseo de Roxas, Legaspi
Village, Makati City (Annex A and A-1 attached to Respondents
Rejoinder). This belies complainants claim that she visited the
respondents customer, D.M. Consunji, Inc. on November 20, 1998 at
around 3:00P.M. (Annex C attached to Complainants Reply).
Moreover, Mr. Enrique Patag signed the Certification on December
15, 1998 on the date when complainant (Salazar) was no longer
reporting for work and filed a case for illegal dismissal against
respondents docketed as NLRC Case No. 00-12-10174-98 which
was later ordered dismissed by Labor Arbiter Eduardo Carpio for lack
of interest to prosecute. Similarly, the certification issued by Mr.
Frederick Sison of the D.M. Consunji, Inc. attesting to complainants
visit on November 20, 1998, at 2:00 p.m. is confuted [sic] by the fact
that on November 20, 1998, complainant [Salazar] visited
Fely/Federico and Lilian at the Makati Medical Center as appearing in
customer ledger of Makati Medical Center. (Annex B and B-1
attached to Respondents Rejoinder). With the foregoing
observations, complainants pretensions [are] at once noticeable and
[merit] scant consideration.[41]
The findings of Arbiter Caday jibe with those of the NLRC, to wit:
Specifically, in a report she stated that she made a follow-up with
Leny Sambrano of Bengson Law Office on November 20, 1998.
However, in her Reply, she admitted that she saw, not Sambrano,
who was not around, but his secretary. It appears that [in] the report
in question, Sambrano wrote, there was no visit last Friday,11/20 and
then affixed [her] signature. In another report, she stated that she
made a follow-up with Jun of ICLARM on November 20, 1998, but it
appeared that Jun Fedrigon wrote on the same report, which he also
signed, that she did not visit his office on the date in question. In a
letter dated December 15, 1998, he stated that he had no memory of
seeing the complainant on the date in question.[42] x x x
The findings of both Arbiter Caday and the NLRC were sustained by the CA,
which ruled that there is ample proof to bear out that the petitioner knowingly recorded
erroneous entries in her Daily Sales Reports.
It is well-settled that the findings of fact of quasi-judicial agencies like the NLRC are
accorded not only respect but even finality if the findings are supported by substantial
evidence; more so when such findings were affirmed by the CA and such findings are
binding and conclusive upon this Court. Thus, we rule that petitioner committed fraud or
willful breach of the employers trust reposed in her under Article 282 of the Labor Code.

The constitutional policy to provide full protection to labor is not meant to be a sword 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.
WHEREFORE, the petition is DENIED and the March 15, 2002 Decision of the
Court of Appeals and the August 7, 2002 Resolution in CA-G.R. SP No. 62556
are AFFIRMED.
No costs. SO ORDERED.
DIGEST:
FACTS
Petitioner Estrellita Salazar became Sales Representative of respondent company,
Philippine Duplicators, Inc. on May 1, 1987. She was assigned at the Southern Section
of Metro Manila under the direct supervision of respondent Leonora Fontanilla.
Petitioner received her last compensation in the amount of PhP 14,095.73 which
covered her basic salary and monthly commission.
Petitioner alleged that on December 7, 1998, respondent Fontanilla called her to the
latters office and handed her a memorandum with a ball pen requesting her to receive
it. Petitioner refused to receive it because it stated her termination from employment
and asked Fontanilla why she should be terminated as she had done nothing wrong.
On December 9, 1998, respondent Fontanilla directed Salazar, through a memorandum
to explain, within 72 hours from receipt of said document, why no disciplinary action
should be taken against her in violation of Section 8, Category V of the companys
Handbook on Constructive Discipline for falsifying company records.
On December 8, 1999, Labor Arbiter Manuel R. Caday rendered his Decision finding
that petitioners dismissal was for a just cause, but respondent Duplicators breached
the twin-notice requirement for dismissal under Section 2 (c), Rule XXIII, Book V of the
Implementing Rules and Regulations of the Labor Code. Thus, Duplicators was ordered
to pay an indemnity of PhP 10,000.00 to petitioner Salazar.
On January 26, 2000, Salazar filed a Memorandum of Appeal from the adverse
Decision. On August 28, 2000, the NLRC decided the appeal finding that there was
actually no termination of Salazars employment but considering that reinstatement was
not advisable due to the strained relationship between the parties, separation pay was
ordered paid to petitioner in lieu of reinstatement.
The CA AFFIRMED the decision of the NLRC with modification. The dismissal of the
petitioner is perforce declared lawful and valid. Nonetheless, as a measure of
compassion and social justice, she is hereby pronounced entitled to separation pay
equivalent to one months salary for every year of service rendered.
Simply stated, the CA ruled that the termination of Salazars employment was legal and
valid. While the dismissed employee was not entitled to separation pay, the CA
nonetheless awarded severance pay pursuant to settled jurisprudence and in the
7
interest of social justice. Lastly, it ruled that there was no breach of the due process
requirements prescribed for dismissal from employment.
Under Petition for Review on Certiorari is before SC, Salazar contends that NLRC
should not have deleted the award of indemnity of PhP 10,000.00 in her favor since
both Duplicators and Fontanilla did not interpose any appeal from the Decision of Labor
Arbiter Manuel Caday and hence, no affirmative relief could be granted to said
respondents.
ISSUE
Whether or not the NLRC could validly delete the award of indemnity in Salazars favor
since respondents did not appeal.
HELD
As a general rule, a party who has not appealed cannot obtain from the appellate court
any affirmative relief other than the ones granted in the appealed decision.
The reason for this rule is that since parties did not appeal from the decision or
resolution, they are presumed to be satisfied with the adjudication. Furthermore, Rule
141 on Legal Fees provides that if the fee is not paid, then the court may refuse to
proceed with the action until they are paid and may dismiss the appeal or the action or
proceeding. The case or appeal is deemed filed only upon payment of the docket or
appeal fee considering that jurisdiction is acquired by the court over the case or the
appeal only upon full payment of the prescribed fee. Thus, the court has no jurisdiction
or authority to grant affirmative relief to the party who did not appeal as there is no
obligation to pay any fee. Furthermore, in the interest of fairness, it would not be proper
and just to award affirmative relief to the appellees since they did not comply with the
requirements of appeal. In this case, Rule VI, Section 3 of the NLRC Rules of
Procedure [2000] prescribes the following:
Section 3. REQUISITES FOR PERFECTION OF APPEAL. a) The Appeal shall be filed
within the reglementary period as provided in Section 1 of this Rule; shall be under oath
with proof of payment of the required appeal fee and the posting of a cash or surety
bond as provided in Section 6 of this Rule; shall be accompanied by memorandum of
appeal which shall state the grounds relied upon and the arguments in support thereof;
the relief prayed for; and a statement of the date when the appellant received the
appealed decision, order or award and proof of service on the other party of such
appeal.
Complying with these specifications is a difficult and tedious process, specifically the
posting of cash or surety bond. It would be discriminatory and inequitable if a party who
has not complied with these requirements will be granted affirmative relief.
In the instant case, did the NLRC violate the rule in labor cases that an appellee cannot
be awarded any affirmative relief?
We find no deviation from the doctrine.
 8

The Labor Arbiter ruled that petitioner Salazars dismissal was for a just cause but
discovered an infraction of the two-notice requirement on the dismissal of an employee
for which he ordered Duplicators to pay the indemnity of PhP 10,000.00 to Salazar.
However, on petitioners appeal, the NLRC believed that there was after all no dismissal
of petitioner Salazar but due to strained relationship, the company was made to pay
separation pay of PhP 14,095.73 instead of paying the indemnity of PhP 10,000.00
imposed by the Labor Arbiter. It is the deletion of the PhP 10,000.00 indemnity that is
being assailed by the petitioner as a grant of affirmative relief to respondent
Duplicators.

We are not persuaded.

Petitioners first ground in her Memorandum of Appeal before the NLRC stated that
Labor Arbiter Cadays rulingthat she was not illegally dismissed was erroneous. In
resolving this issue, the NLRC overturned Cadays finding of petitioners valid dismissal,
and instead concluded that there was no termination of petitioners employment. As a
consequence, the NLRC had to recall the award of PhP 10,000.00 indemnity imposed
by Arbiter Caday although not prayed for by respondent Duplicators since the said
award was inconsistent with the finding that petitioners employment subsisted. Without
petitioners dismissal, there can be no legal basis for the indemnity; hence, Duplicators
is not obliged to comply with the two (2)notice requirement. In annulling the award, the
NLRC merely exercised its authority under Article 218 (d) of the Labor Code to correct
or amend any error committed by a labor arbiter in aid of its exclusive appellate
jurisdiction. Petitioner has no reason to complain that she was deprived of monetary
benefits since the NLRCs Decision did not actually benefit Duplicators as the PhP
14,095.76 separation pay granted to petitioner is certainly greater than the PhP
10,000.00 indemnity deleted by the NLRC.

WHEREFORE, the petition is DENIED and the March 15, 2002 Decision of the Court of
Appeals and the August 7, 2002 Resolution in CA-G.R. SP No. 62556 are AFFIRMED.
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Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-12582 January 28, 1961
LVN PICTURES, INC., petitioner-appellant,
vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL
RELATIONS, respondents-appellees.
x---------------------------------------------------------x
G.R. No. L-12598 January 28, 1961
SAMPAGUITA PICTURES, INC., petitioner-appellant,
vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL
RELATIONS, respondents-appellees.
Nicanor S. Sison for petitioner-appellant.
Jaime E. Ilagan for respondent-appellee Court of Agrarian Relations.
Gerardo P. Cabo Chan for respondent-appellee Philippine Musicians Guild.
CONCEPCION, J.:
Petitioners herein, LVN Pictures, Inc. and Sampaguita Pictures, Inc. seek a review
by certiorari of an order of the Court of Industrial Relations in Case No. 306-MC thereof,
certifying the Philippine Musicians Guild (FFW), petitioner therein and respondent
herein, as the sole and exclusive bargaining agency of all musicians working with said
companies, as well as with the Premiere Productions, Inc., which has not appealed.
The appeal of LVN Pictures, Inc., has been docketed as G.R. No. L-12582, whereas
G.R. No. L-12598 is the appeal of Sampaguita Pictures, Inc. Involving as they do the
same order, the two cases have been jointly heard in this Court, and will similarly be
disposed of.
In its petition in the lower court, the Philippine Musicians Guild (FFW), hereafter referred
to as the Guild, averred that it is a duly registered legitimate labor organization; that
LVN Pictures, Inc., Sampaguita Pictures, Inc., and Premiere Productions, Inc. are
corporations, duly organized under the Philippine laws, engaged in the making of
motion pictures and in the processing and distribution thereof; that said companies
employ musicians for the purpose of making music recordings for title music,
background music, musical numbers, finale music and other incidental music, without
which a motion picture is incomplete; that ninety-five (95%) percent of all the musicians
9
playing for the musical recordings of said companies are members of the Guild; and
that the same has no knowledge of the existence of any other legitimate labor
organization representing musicians in said companies. Premised upon these
allegations, the Guild prayed that it be certified as the sole and exclusive bargaining
agency for all musicians working in the aforementioned companies. In their respective
answers, the latter denied that they have any musicians as employees, and alleged that
the musical numbers in the filing of the companies are furnished by independent
contractors. The lower court, however, rejected this pretense and sustained the theory
of the Guild, with the result already adverted to. A reconsideration of the order
complained of having been denied by the Court en banc, LVN Pictures, inc., and
Sampaguita Pictures, Inc., filed these petitions for review for certiorari.
Apart from impugning the conclusion of the lower court on the status of the Guild
members as alleged employees of the film companies, the LVN Pictures, Inc.,
maintains that a petition for certification cannot be entertained when the existence of
employer-employee relationship between the parties is contested. However, this claim
is neither borne out by any legal provision nor supported by any authority. So long as,
after due hearing, the parties are found to bear said relationship, as in the case at bar, it
is proper to pass upon the merits of the petition for certification.
It is next urged that a certification is improper in the present case, because, "(a) the
petition does not allege and no evidence was presented that the alleged musicians-
employees of the respondents constitute a proper bargaining unit, and (b) said alleged
musicians-employees represent a majority of the other numerous employees of the film
companies constituting a proper bargaining unit under section 12 (a) of Republic Act
No. 875."
The absence of an express allegation that the members of the Guild constitute a proper
bargaining unit is fatal proceeding, for the same is not a "litigation" in the sense in which
this term is commonly understood, but a mere investigation of a non-adversary, fact
finding character, in which the investigating agency plays the part of a disinterested
investigator seeking merely to ascertain the desires of employees as to the matter of
their representation. In connection therewith, the court enjoys a wide discretion in
determining the procedure necessary to insure the fair and free choice of bargaining
representatives by employees.1 Moreover, it is alleged in the petition that the Guild it a
duly registered legitimate labor organization and that ninety-five (95%) percent of the
musicians playing for all the musical recordings of the film companies involved in these
cases are members of the Guild. Although, in its answer, the LVN Pictures, Inc. denied
both allegations, it appears that, at the hearing in the lower court it was merely the
status of the musicians as its employees that the film companies really contested.
Besides, the substantial difference between the work performed by said musicians and
that of other persons who participate in the production of a film, and the peculiar
circumstances under which the services of that former are engaged and rendered,
suffice to show that they constitute a proper bargaining unit. At this juncture, it should
be noted that the action of the lower court in deciding upon an appropriate unit for
collective bargaining purposes is discretionary (N.L.R.B. v. May Dept. Store Co., 66
Sup. Ct. 468. 90 L. ed. 145) and that its judgment in this respect is entitled to almost
complete finality, unless its action is arbitrary or capricious (Marshall Field & Co. v.
N.L.R.B. [C.C.A. 19431, 135 F. 2d. 891), which is far from being so in the cases at bar.

Again, the Guild seeks to be, and was, certified as the sole and exclusive bargaining
agency for the musicians working in the aforesaid film companies. It does not intend to
represent the other employees therein. Hence, it was not necessary for the Guild to
allege that its members constitute a majority of all the employees of said film
companies, including those who are not musicians. The real issue in these cases, is
whether or not the musicians in question are employees of the film companies. In this
connection the lower court had the following to say:
As a normal and usual course of procedure employed by the companies when
a picture is to be made, the producer invariably chooses, from the musical
directors, one who will furnish the musical background for a film. A price is
agreed upon verbally between the producer and musical director for the cost of
furnishing such musical background. Thus, the musical director may compose
his own music specially written for or adapted to the picture. He engages his
own men and pays the corresponding compensation of the musicians under
him.
When the music is ready for recording, the musicians are summoned through
'call slips' in the name of the film company (Exh 'D'), which show the name of
the musician, his musical instrument, and the date, time and place where he
will be picked up by the truck of the film company. The film company provides
the studio for the use of the musicians for that particular recording. The
musicians are also provided transportation to and from the studio by the
company. Similarly, the company furnishes them meals at dinner time.
During the recording sessions, the motion picture director, who is an employee
of the company, supervises the recording of the musicians and tells what to do
in every detail. He solely directs the performance of the musicians before the
camera as director, he supervises the performance of all the action, including
the musicians who appear in the scenes so that in the actual performance to
be shown on the screen, the musical director's intervention has stopped.
And even in the recording sessions and during the actual shooting of a scene,
the technicians, soundmen and other employees of the company assist in the
operation. Hence, the work of the musicians is an integral part of the entire
motion picture since they not only furnish the music but are also called upon to
appear in the finished picture.
The question to be determined next is what legal relationship exits between
the musicians and the company in the light of the foregoing facts.
We are thus called upon to apply R.A. Act 875. which is substantially the same
as and patterned after the Wagner Act substantially the same as a Act and the
Taft-Hartley Law of the United States. Hence, reference to decisions of
American Courts on these laws on the point-at-issue is called for.
10
Statutes are to be construed in the light of purposes achieved and the evils
sought to be remedied. (U.S. vs. American Tracking Association, 310 U.S.
534, 84 L. ed. 1345.) .
In the case of National Labor Relations Board vs. Hearts Publication, 322 U.S.
111, the United States Supreme Court said the Wagner Act was designed to
avert the 'substantial obstruction to the free flow of commerce which results
from strikes and other forms of industrial unrest by eliminating the causes of
the unrest. Strikes and industrial unrest result from the refusal of employers' to
bargain collectively and the inability of workers to bargain successfully for
improvement in their working conditions. Hence, the purposes of the Act are to
encourage collective bargaining and to remedy the workers' inability to
bargaining power, by protecting the exercise of full freedom of association and
designation of representatives of their own choosing, for the purpose of
negotiating the terms and conditions of their employment.'
The mischief at which the Act is aimed and the remedies it offers are not
confined exclusively to 'employees' within the traditional legal distinctions,
separating them from 'independent contractor'. Myriad forms of service
relationship, with infinite and subtle variations in the term of employment,
blanket the nation's economy. Some are within this Act, others beyond its
coverage. Large numbers will fall clearly on one side or on the other, by
whatever test may be applied. Inequality of bargaining power in controversies
of their wages, hours and working conditions may characterize the status of
one group as of the other. The former, when acting alone may be as helpless
in dealing with the employer as dependent on his daily wage and as unable to
resist arbitrary and unfair treatment as the latter.'
To eliminate the causes of labor dispute and industrial strike, Congress
thought it necessary to create a balance of forces in certain types of economic
relationship. Congress recognized those economic relationships cannot be
fitted neatly into the containers designated as 'employee' and 'employer'.
Employers and employees not in proximate relationship may be drawn into
common controversies by economic forces and that the very dispute sought to
be avoided might involve 'employees' who are at times brought into an
economic relationship with 'employers', who are not their 'employers'. In this
light, the language of the Act's definition of 'employee' or 'employer' should be
determined broadly in doubtful situations, by underlying economic facts rather
than technically and exclusively established legal classifications. (NLRB vs.
Blount, 131 F [2d] 585.)
In other words, the scope of the term 'employee' must be understood with
reference to the purposes of the Act and the facts involved in the economic
relationship. Where all the conditions of relation require protection, protection
ought to be given .
By declaring a worker an employee of the person for whom he works and by
recognizing and protecting his rights as such, we eliminate the cause of

industrial unrest and consequently we promote industrial peace, because we
enable him to negotiate an agreement which will settle disputes regarding
conditions of employment, through the process of collective bargaining.
The statutory definition of the word 'employee' is of wide scope. As used in the
Act, the term embraces 'any employee' that is all employees in the
conventional as well in the legal sense expect those excluded by express
provision. (Connor Lumber Co., 11 NLRB 776.).
It is the purpose of the policy of Republic Act 875; (a) To eliminate the causes
of industrial unrest by protecting the exercise of their right to self-organization
for the purpose of collective bargaining. (b) To promote sound stable industrial
peace and the advancement of the general welfare, and the best interests of
employers and employees by the settlement of issues respecting terms and
conditions of employment through the process of collective bargaining
between employers and representatives of their employees.
The primary consideration is whether the declared policy and purpose of the
Act can be effectuated by securing for the individual worker the rights and
protection guaranteed by the Act. The matter is not conclusively determined by
a contract which purports to establish the status of the worker, not as an
employee.
The work of the musical director and musicians is a functional and integral part
of the enterprise performed at the same studio substantially under the direction
and control of the company.
In other words, to determine whether a person who performs work for another
is the latter's employee or an independent contractor, the National Labor
Relations relies on 'the right to control' test. Under this test an employer-
employee relationship exist where the person for whom the services are
performed reserves the right to control not only the end to be achieved, but
also the manner and means to be used in reaching the end. (United Insurance
Company, 108, NLRB No. 115.).
Thus, in said similar case of Connor Lumber Company, the Supreme Court
said:.
'We find that the independent contractors and persons working under
them are employees' within the meaning of Section 2 (3) of its Act.
However, we are of the opinion that the independent contractors have
sufficient authority over the persons working under their immediate
supervision to warrant their exclusion from the unit. We shall include
in the unit the employees working under the supervision of the
independent contractors, but exclude the contractors.'
11
'Notwithstanding that the employees are called independent contractors', the
Board will hold them to be employees under the Act where the extent of the
employer's control over them indicates that the relationship is in reality one of
employment. (John Hancock Insurance Co., 2375-D, 1940, Teller, Labor
Dispute Collective Bargaining, Vol.).
The right of control of the film company over the musicians is shown (1) by
calling the musicians through 'call slips' in 'the name of the company; (2) by
arranging schedules in its studio for recording sessions; (3) by furnishing
transportation and meals to musicians; and (4) by supervising and directing in
detail, through the motion picture director, the performance of the musicians
before the camera, in order to suit the music they are playing to the picture
which is being flashed on the screen.
Thus, in the application of Philippine statutes and pertinent decisions of the
United States Courts on the matter to the facts established in this case, we
cannot but conclude that to effectuate the policies of the Act and by virtue of
the 'right of control' test, the members of the Philippine Musicians Guild are
employees of the three film companies and, therefore, entitled to right of
collective bargaining under Republic Act No. 875.
In view of the fact that the three (3) film companies did not question the union's
majority, the Philippine Musicians Guild is hereby declared as the sole
collective bargaining representative for all the musicians employed by the film
companies."
We are fully in agreement with the foregoing conclusion and the reasons given in
support thereof. Both are substantially in line with the spirit of our decision
in Maligaya Ship Watchmen Agency vs. Associated Watchmen and Security Union, L-
12214-17 (May 28, 1958). In fact, the contention of the employers in
the Maligaya cases, to the effect that they had dealt with independent contractors, was
stronger than that of the film companies in these cases. The third parties with whom the
management and the workers contracted in the Maligaya cases were
agencies registered with the Bureau of Commerce and duly licensed by the City of
Manila to engage in the business of supplying watchmen to steamship companies, with
permits to engage in said business issued by the City Mayor and the Collector of
Customs. In the cases at bar, the musical directors with whom the film companies claim
to have dealt with had nothing comparable to the business standing of said watchmen
agencies. In this respect, the status of said musical directors is analogous to that of the
alleged independent contractor in Caro vs. Rilloraza, L-9569 (September 30, 1957),
with the particularity that the Caro case involved the enforcement of the liability of an
employer under the Workmen's Compensation Act, whereas the cases before us are
merely concerned with the right of the Guild to represent the musicians as a collective
bargaining unit. Hence, there is less reason to be legalistic and technical in these
cases, than in the Caro case.
Herein, petitioners-appellants cite, in support of their appeal, the cases of Sunripe
Coconut Product Co., Inc vs. CIR(46 Off. Gaz., 5506, 5509), Philippine Manufacturing

Co. vs. Santos Vda. de Geronimo, L-6968 (November 29, 1954), Viana vs. Al-
Lagadan, L-8967 (May 31, 1956), and Josefa Vda. de Cruz vs. The Manila Hotel
Co. (53 Off. Gaz., 8540). Instead of favoring the theory of said petitioners-appellants,
the case of the Sunripe Coconut Product Co., Inc. is authority for herein respondents-
appellees. It was held that, although engaged as piece-workers, under the "pakiao"
system, the "parers" and "shellers" in the case were, not independent contractor,
but employees of said company, because "the requirement imposed on the 'parers' to
the effect that 'the nuts are pared whole or that there is not much meat wasted,' in
effect limits or controls the means or details by which said workers are to accomplish
their services" as in the cases before us.
The nature of the relation between the parties was not settled in the Viana case, the
same having been remanded to the Workmen's Compensation Commission for further
evidence.
The case of the Philippine Manufacturing Co. involved a contract between said
company and Eliano Garcia, who undertook to paint a tank of the former. Garcia, in turn
engaged the services of Arcadio Geronimo, a laborer, who fell while painting the tank
and died in consequence of the injuries thus sustained by him. Inasmuch as the
company was engaged in the manufacture of soap, vegetable lard, cooking oil and
margarine, it was held that the connection between its business and the painting
aforementioned was purely casual; that Eliano Garcia was an independent contractor;
that Geronimo was not an employee of the company; and that the latter was not bound,
therefore, to pay the compensation provided in the Workmen's Compensation Act.
Unlike the Philippine Manufacturing case, the relation between the business of herein
petitioners-appellants and the work of the musicians is not casual. As held in the order
appealed from which, in this respect, is not contested by herein petitioners-appellants
"the work of the musicians is an integral part of the entire motion picture." Indeed,
one can hardly find modern films without music therein. Hence, in the Caro case
(supra), the owner and operator of buildings for rent was held bound to pay the
indemnity prescribed in the Workmen's Compensation Act for the injury suffered by a
carpenter while working as such in one of said buildings even though his services had
been allegedly engaged by a third party who had directly contracted with said owner. In
other words, the repair work had not merely a casual connection with the business of
said owner. It was a necessary incident thereof, just as music is in the production of
motion pictures.
The case of Josefa Vda. de Cruz vs. The Manila Hotel Co., L-9110 (April 30, 1957)
differs materially f rom the present cases. It involved the interpretation of Republic Act
No. 660, which amends the law creating and establishing the Government Service
Insurance System. No labor law was sought to be construed in that case. In act, the
same was originally heard in the Court of First Instance of Manila, the decision of which
was, on appeal, affirmed by the Supreme Court. The meaning or scope if the term
"employee," as used in the Industrial Peace Act (Republic Act No. 875), was not
touched therein. Moreover, the subject matter of said case was a contract between the
management of the Manila Hotel, on the one hand, and Tirso Cruz, on the other,
whereby the latter greed to furnish the former the services of his orchestra, consisting of
15 musicians, including Tirso Cruz, "from 7:30 p.m. to closing time daily." In the
language of this court in that case, "what pieces the orchestra shall play, and how the
12
music shall be arranged or directed, the intervals and other details such are left to
the leader's discretion."
This is not situation obtaining in the case at bar. The musical directors above referred to
have no such control over the musicians involved in the present case. Said musical
directors control neither the music to be played, nor the musicians playing it. The film
companies summon the musicians to work, through the musical directors. The film
companies, through the musical directors, fix the date, the time and the place of work.
The film companies, not the musical directors, provide the transportation to and from
the studio. The film companies furnish meal at dinner time.
What is more in the language of the order appealed from "during the recording
sessions, the motion picture director who is an employee of the company" not the
musical director "supervises the recording of the musicians and tells them what to do
in every detail". The motion picture director not the musical director "solely directs
and performance of the musicians before the camera". The motion picture director
"supervises the performance of all the actors, including the musicians who appear in the
scenes, so that in the actual performance to be shown in the screen, the musical
director's intervention has stopped." Or, as testified to in the lower court, "the movie
director tells the musical director what to do; tells the music to be cut or tells additional
music in this part or he eliminates the entire music he does not (want) or he may want
more drums or move violin or piano, as the case may be". The movie director "directly
controls the activities of the musicians." He "says he wants more drums and the
drummer plays more" or "if he wants more violin or he does not like that.".
It is well settled that "an employer-employee relationship exists . . .where the person for
whom the services are performed reserves a right to control not only the end to be
achieved but also the means to be used in reaching such end . . . ." (Alabama Highway
Express Co., Express Co., v. Local 612, 108S. 2d. 350.) The decisive nature of said
control over the "means to be used", is illustrated in the case of Gilchrist Timber Co., et
al., Local No. 2530 (73 NLRB No. 210, pp. 1197, 1199-1201), in which, by reason of
said control, the employer-employee relationship was held to exist between the
management and the workers, notwithstanding the intervention of an alleged
independent contractor, who had, and exercise, the power to hire and fire said workers.
The aforementioned control over the means to be used" in reading the desired end is
possessed and exercised by the film companies over the musicians in the cases before
us.
WHEREFORE, the order appealed from is hereby affirmed, with costs against
petitioners herein. It is so ordered
DIGEST:
FACTS: Respondent Philippine Musicians Guild (FFW) is a duly registered legitimate
labor organization. LVN Pictures, Inc., Sampaguita Pictures, Inc., and Premiere
Productions, Inc. are corporations, duly organized under the Philippine laws, engaged
in the making of motion pictures and in the processing and distribution thereof.
Petitioner companies employ musicians for the purpose of making music recordings for
 13

title music, background music, musical numbers, finale music and other incidental
music, without which a motion picture is incomplete. Ninety-five (95%) percent of all the
musicians playing for the musical recordings of said companies are members of the
Guild. The Guild has no knowledge of the existence of any other legitimate labor
organization representing musicians in said companies. Premised upon these
allegations, the Guild prayed that it be certified as the sole and exclusive bargaining
agency for all musicians working in the aforementioned companies. In their respective
answers, the latter denied that they have any musicians as employees, and alleged that
the musical numbers in the filing of the companies are furnished by independent
contractors. The lower court sustained the Guilds theory. A reconsideration of the order
complained of having been denied by the Court en banc,LVN Pictures, inc., and
Sampaguita Pictures, Inc., filed these petitions for review for certiorari.
said control, the employer-employee relationship was held to exist between the
management and the workers, notwithstanding the intervention of an alleged
independent contractor, who had, and exercise, the power to hire and fire said workers .
The aforementioned control over the means to be used" in reading the desired end is
possessed and exercised by the film companies over the musicians in the cases before
us. WHEREFORE, the order appealed from is hereby affirmed, with costs against
petitioners herein.
It is so ordered

ISSUE: Whether the musicians in question (Guild members) are employees of the
petitioner film companies.

RULING: YES The Court agreed with the lower courts decision, to wit: Lower court
resorted to apply R.A. 875 and US Laws and jurisprudence from which said Act was
patterned after. (Since statutes are to be construed in the light of purposes achieved
and the evils sought to be remedied). It ruled that the work of the musical director and
musicians is a functional and integral part of the enterprise performed at the same
studio substantially under the direction and control of the company. In other words, to
determine whether a person who performs work for another is the latter's employee or
an independent contractor, the National Labor Relations relies on 'the right to control'
test . Under this test an employer-employee relationship exist where the person for
whom the services are performed reserves the right to control not only the end to be
achieved, but also the manner and means to be used in reaching the end. (United
Insurance Company, 108, NLRB No. 115.). Notwithstanding that the employees are
called independent contractors', the Board will hold them to be employees under the Act
where the extent of the employer's control over them indicates that the relationship is in
reality one of employment. (John Hancock Insurance Co., 2375-D, 1940, Teller, Labor
Dispute Collective Bargaining, Vol.). The right of control of the film company over the
musicians is shown (1) by calling the musicians through 'call slips' in 'the name of the
company; (2) by arranging schedules in its studio for recording sessions; (3) by
furnishing transportation and meals to musicians; and(4) by supervising and directing in
detail, through the motion picture director, the performance of the musicians before the
camera, in order to suit the music they are playing to the picture which is being flashed
on the screen. The musical directors have no such control over the musicians involved
in the present case. Said musical directors control neither the music to be played, nor
the musicians playing it. The Premier Production did not appeal the decision of the
Court en banc (thats why its not one of the petitioners in the case) film companies
summon the musicians to work, through the musical directors. The film companies,
through the musical directors, fix the date, the time and the place of work. The film
companies, not the musical directors, provide the transportation to and from the studio.
The film companies furnish meal at dinner time. It is well settled that "an employer-
employee relationship exists . . .where the person for whom the services are performed
reserves a right to control not only the end to be achieved but also the means to be
used in reaching such end . . . ." The decisive nature of said control over the "means to
be used", is illustrated in the case of Gilchrist Timber Co., et al., in which, by reason of

Republic of the Philippines
SUPREME COURT
Manila
G.R. No. L-32245 May 25, 1979
DY KEH BENG, petitioner,
vs.
INTERNATIONAL LABOR and MARINE UNION OF THE PHILIPPINES, ET
AL., respondents.
DE CASTRO, J.:
Petitioner Dy Keh Beng seeks a review by certiorari of the decision of the Court of
Industrial Relations dated March 23, 1970 in Case No. 3019-ULP and the Court's
Resolution en banc of June 10, 1970 affirming said decision. The Court of Industrial
Relations in that case found Dy Keh Beng guilty of the unfair labor practice acts alleged
and order him to
reinstate Carlos Solano and Ricardo Tudla to their former jobs with backwages
from their respective dates of dismissal until fully reinstated without loss to their
right of seniority and of such other rights already acquired by them and/or allowed
by law. 1
Now, Dy Keh Beng assigns the following errors 2 as having been committed by the
Court of Industrial Relations:
I establishment was continuous although their services were compensated on piece
RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO
AND TUDLA WERE EMPLOYEES OF PETITIONERS.
II
RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO
AND TUDLA WERE DISMISSED FROM THEIR EMPLOYMENT BY
PETITIONER.
III
RESPONDENT COURT ERRED IN FINDING THAT THE TESTIMONIES
ADDUCED BY COMPLAINANT ARE CONVINCING AND DISCLOSES (SIC) A
PATTERN OF DISCRIMINATION BY THE PETITIONER HEREIN.
IV
RESPONDENT COURT ERRED IN DECLARING PETITIONER GUILTY OF
UNFAIR LABOR PRACTICE ACTS AS ALLEGED AND DESCRIBED IN THE
COMPLAINT.
V (6) Solano's work with Dy's establishment was not continuous. , 7
RESPONDENT COURT ERRED IN PETITIONER TO REINSTATE
RESPONDENTS TO THEIR FORMER JOBS WITH BACKWAGES FROM
THEIR RESPECTIVE DATES OF DISMISSALS UNTIL FINALLY REINSTATED
14
WITHOUT LOSS TO THEIR RIGHT OF SENIORITY AND OF SUCH OTHER
RIGHTS ALREADY ACQUIRED BY THEM AND/OR ALLOWED BY LAW.
The facts as found by the Hearing Examiner are as follows:
A charge of unfair labor practice was filed against Dy Keh Beng, proprietor of a basket
factory, for discriminatory acts within the meaning of Section 4(a), sub-paragraph (1)
and (4). Republic Act No. 875, 3 by dismissing on September 28 and 29, 1960,
respectively, Carlos N. Solano and Ricardo Tudla for their union activities. After
preliminary investigation was conducted, a case was filed in the Court of Industrial
Relations for in behalf of the International Labor and Marine Union of the Philippines
and two of its members, Solano and Tudla In his answer, Dy Keh Beng contended that
he did not know Tudla and that Solano was not his employee because the latter came
to the establishment only when there was work which he did on pakiaw basis, each
piece of work being done under a separate contract. Moreover, Dy Keh Beng countered
with a special defense of simple extortion committed by the head of the labor union,
Bienvenido Onayan.
After trial, the Hearing Examiner prepared a report which was subsequently adopted in
toto by the Court of Industrial Relations. An employee-employer relationship was found
to have existed between Dy Keh Beng and complainants Tudla and Solano, although
Solano was admitted to have worked on piece basis. 4 The issue therefore centered on
whether there existed an employee employer relation between petitioner Dy Keh Beng
and the respondents Solano and Tudla .
According to the Hearing Examiner, the evidence for the complainant Union tended to
show that Solano and Tudla became employees of Dy Keh Beng from May 2, 1953 and
July 15, 1955, 5 respectively, and that except in the event of illness, their work with the
basis. Evidence likewise showed that at times the establishment had eight (8) workers
and never less than five (5); including the complainants, and that complainants used to
receive ?5.00 a day. sometimes less. 6
According to Dy Keh Beng, however, Solano was not his employee for the following
reasons:
(1) Solano never stayed long enought at Dy's establishment;
(2) Solano had to leave as soon as he was through with the
(3) order given him by Dy;
(4) When there were no orders needing his services there was nothing for him to do;
(5) When orders came to the shop that his regular workers could not fill it was then
that Dy went to his address in Caloocan and fetched him for these orders; and
According to petitioner, these facts show that respondents Solano and Tudla are only
piece workers, not employees under Republic Act 875, where an employee 8 is referred
to as

shall include any employee and shag not be limited to the employee of a particular
employer unless the Act explicitly states otherwise and shall include any individual
whose work has ceased as a consequence of, or in connection with any current
labor dispute or because of any unfair labor practice and who has not obtained any
other substantially equivalent and regular employment.
while an employer 9
includes any person acting in the interest of an employer, directly or indirectly but
shall not include any labor organization (otherwise than when acting as an
employer) or anyone acting in the capacity of officer or agent of such labor
organization.
Petitioner really anchors his contention of the non-existence of employee-employer
relationship on the control test. He points to the case of Madrigal Shipping Co., Inc. v.
Nieves Baens del Rosario, et al., L-13130, October 31, 1959, where the Court ruled
that:
The test ... of the existence of employee and employer relationship is whether there
is an understanding between the parties that one is to render personal services to or
for the benefit of the other and recognition by them of the right of one to order and
control the other in the performance of the work and to direct the manner and
method of its performance.
Petitioner contends that the private respondents "did not meet the control test in the
fight of the ... definition of the terms employer and employee, because there was no
evidence to show that petitioner had the right to direct the manner and method of
respondent's work. 10 Moreover, it is argued that petitioner's evidence showed that
"Solano worked on a pakiaw basis" and that he stayed in the establishment only when
there was work.
While this Court upholds the control test 11 under which an employer-employee
relationship exists "where the person for whom the services are performed reserves a
right to control not only the end to be achieved but also the means to be used in
reaching such end," it finds no merit with petitioner's arguments as stated above. It
should be borne in mind that the control test calls merely for the existence of the right to
control the manner of doing the work, not the actual exercise of the right. 12 Considering
the finding by the Hearing Examiner that the establishment of Dy Keh Beng is "engaged
in the manufacture of baskets known as kaing, 13 it is natural to expect that those
working under Dy would have to observe, among others, Dy's requirements of size and
quality of the kaing. Some control would necessarily be exercised by Dy as the making
of the kaing would be subject to Dy's specifications. Parenthetically, since the work on
the baskets is done at Dy's establishments, it can be inferred that the proprietor Dy
could easily exercise control on the men he employed.
As to the contention that Solano was not an employee because he worked on piece
basis, this Court agrees with the Hearing Examiner that
15
circumstances must be construed to determine indeed if payment by the piece is
just a method of compensation and does not define the essence of the relation.
Units of time ... and units of work are in establishments like respondent (sic) just
yardsticks whereby to determine rate of compensation, to be applied whenever
agreed upon. We cannot construe payment by the piece where work is done in
such an establishment so as to put the worker completely at liberty to turn him
out and take in another at pleasure.
At this juncture, it is worthy to note that Justice Perfecto, concurring with Chief Justice
Ricardo Paras who penned the decision in "Sunrise Coconut Products Co. v. Court of
Industrial Relations" (83 Phil..518, 523), opined that
judicial notice of the fact that the so-called "pakyaw" system mentioned in this
case as generally practiced in our country, is, in fact, a labor contract -between
employers and employees, between capitalists and laborers.
Insofar as the other assignments of errors are concerned, there is no showing that the
Court of Industrial Relations abused its discretion when it concluded that the findings of
fact made by the Hearing Examiner were supported by evidence on the record. Section
6, Republic Act 875 provides that in unfair labor practice cases, the factual findings of
the Court of Industrial Relations are conclusive on the Supreme Court, if supported by
substantial evidence. This provision has been put into effect in a long line of decisions
where the Supreme Court did not reverse the findings of fact of the Court of Industrial
Relations when they were supported by substantial evidence. 14
Nevertheless, considering that about eighteen (18) years have already elapsed from the
time the complainants were dismissed, 15 and that the decision being appealed ordered
the payment of backwages to the employees from their respective dates of dismissal
until finally reinstated, it is fitting to apply in this connection the formula for backwages
worked out by Justice Claudio Teehankee in "cases not terminated sooner." 16 The
formula cans for fixing the award of backwages without qualification and deduction to
three years, "subject to deduction where there are mitigating circumstances in favor of
the employer but subject to increase by way of exemplary damages where there are
aggravating circumstances. 17 Considering there are no such circumstances in this
case, there is no reason why the Court should not apply the abovementioned formula in
this instance.
WHEREFORE; the award of backwages granted by the Court of Industrial Relations is
herein modified to an award of backwages for three years without qualification and
deduction at the respective rates of compensation the employees concerned were
receiving at the time of dismissal. The execution of this award is entrusted to the
National Labor Relations Commission. Costs against petitioner.
SO ORDERED.
 16

DIGEST: Hence, this petition for certiorari.

FACTS: ISSUE:

Petitioner, Dy Keh Beng, proprietor of basket factory, was charged with ULP
for discriminatory acts defined under Sec 4(a), subparagraph (1 & 4), R.A. No. 875 by
dismissing on September 28-29, 1960, respectively, Carlos N. Solano and Ricardo
Tudla for their union activities. After PI was conducted, a case was filed in the CIR for in
behalf of the ILMUP and two of its members, Solano and Tudla. Dy Keh Beng
contended that he did not know Tudla and that Solano was not his employee because
the latter came to the establishment only when there was work which he did on pakiaw
basis.
According to Dy Keh Beng, Solano was not his employee for the following
reasons: (1) (2) (3) (4) Solano never stayed long enough at Dy establishment; Solano
had to leave as soon as he was through with the order given him by Dy; When there
were no orders needing his services there was nothing for him to do; When orders
came to the shop that his regular workers could not fill it was then that Dy went to his
address in Caloocan and fetched him for these orders; and (5) Solano's work with Dy's
establishment was not continuous.
According to petitioner, these facts show that respondents Solano and Tudla
are only piece workers, not employees under Republic Act 875, where an employee is
referred to as shall include any employee and shag not be limited to the employee of a
particular employer unless the act explicitly states otherwise and shall include any
individual whose work has ceased as a consequence of, or in connection with any
current labor dispute or because of any ulp and who has not obtained any other
substantially equivalent and regular employment. While an employer includes any
person acting in the interest of an employer, directly or indirectly but shall not include
any labor organization (otherwise than when acting as an employer) or anyone acting in
the capacity of officer or agent of such labor organization.
Whether or not an employee employer relation existed between petitioner Dy
Keh Beng and the respondents Solano and Tudla.
HELD:
The SC also noted the decision of Justice Paras in the case of Sunrise
Coconut Products Co. Vs. CIR (83 Phil 518, 523) that judicial notice of the fact that the
so-called "pakyaw" system mentioned in this case as generally practiced in our country,
is, in fact, a labor contract -between employers and employees, between capitalists and
laborers.
With regard to the control test the SC said that It should be borne in mind that
the control test calls merely for the existence of the right to control the manner of doing
the work, not the actual exercise of the right. Considering the finding by the Hearing
Examiner that the establishment of Dy Keh Beng is "engaged in the manufacture of
baskets known as kaing, it is natural to expect that those working under Dy would have
to observe, among others, Dy's requirements of size and quality of the kaing. Some
control would necessarily be exercised by Dy as the making of the kaing would be
subject to Dy's specifications.
Parenthetically, since the work on the baskets is done at Dy's establishments,
it can be inferred that the proprietor Dy could easily exercise control on the men he
employed. The petition was dismissed. The Court affirmed the decision of the CIR.

Petitioner also contends that the private respondents "did not meet the control
test in the fight of the ... definition of the terms employer and employee, because there
was no evidence to show that petitioner had the right to direct the manner and method
of respondent's work. He points to the case of Madrigal Shipping Co., Inc. v. Nieves
Baens del Rosario, et al., L-13130, October 31, 1959, where the Court ruled that: The
test ... of the existence of employee and employer relationship is whether there is an
understanding between the parties that one is to render personal services to or for the
benefit of the other and recognition by them of the right of one to order and control the
other in the performance of the work and to direct the manner and method of its
performance.

The CIR found that there existed an employee-employer relationship between

Dy Keh Beng and complainants Tudla and Solano, although Solano was admitted to
have worked on piece basis.

SECOND DIVISION
[G.R. No. 129315. October 2, 2000]
OSIAS I. CORPORAL, SR., PEDRO TOLENTINO, MANUEL CAPARAS, ELPIDIO
LACAP, SIMPLICIO PEDELOS, PATRICIA NAS, and TERESITA
FLORES, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION,
LAO ENTENG COMPANY, INC. and/or TRINIDAD LAO ONG, respondents.
DECISION
QUISUMBING, J.:
This special civil action for certiorari seeks the review of the Resolution dated
October 17, 1996 of public respondent National Labor Relations Commission (First
Division),[1] in NLRC NCR Case No. 00-04-03163-95, and the Resolution dated March
5, 1997 denying the motion for reconsideration. The aforecited October 17th Resolution
affirmed the Decision dated September 28, 1996 of Labor Arbiter Potenciano S.
Caizares dismissing the petitioners' complaint for illegal dismissal and declaring that
petitioners are not regular employees of private respondent Lao Enteng Company, Inc..
The records of the case show that the five male petitioners, namely, Osias I.
Corporal, Sr., Pedro Tolentino, Manuel Caparas, Elpidio Lacap, and Simplicio Pedelos
worked as barbers, while the two female petitioners, Teresita Flores and Patricia Nas
worked as manicurists in New Look Barber Shop located at 651 P. Paterno Street,
Quiapo, Manila owned by private respondent Lao Enteng Co. Inc.. Petitioner Nas
alleged that she also worked as watcher and marketer of private respondent.
Petitioners claim that at the start of their employment with the New Look Barber
Shop, it was a single proprietorship owned and managed by Mr. Vicente Lao. In or
about January 1982, the children of Vicente Lao organized a corporation which was
registered with the Securities and Exchange Commission as Lao Enteng Co. Inc. with
Trinidad Ong as President of the said corporation. Upon its incorporation, the
respondent company took over the assets, equipment, and properties of the New Look
Barber Shop and continued the business. All the petitioners were allowed to continue
working with the new company until April 15, 1995 when respondent Trinidad Ong
informed them that the building wherein the New Look Barber Shop was located had
been sold and that their services were no longer needed. [2]
On April 28, 1995, petitioners filed with the Arbitration Branch of the NLRC, a
complaint for illegal dismissal, illegal deduction, separation pay, non-payment of 13th
month pay, and salary differentials. Only petitioner Nas asked for payment of salary
differentials as she alleged that she was paid a daily wage of P25.00 throughout her
period of employment. The petitioners also sought the refund of the P1.00 that the
respondent company collected from each of them daily as salary of the sweeper of the
barber shop.
Private respondent in its position paper averred that the petitioners were joint
venture partners and were receiving fifty percent commission of the amount charged to
customers.Thus, there was no employer-employee relationship between them and
petitioners. And assuming arguendo, that there was an employer-employee
17
relationship, still petitioners are not entitled to separation pay because the cessation of
operations of the barber shop was due to serious business losses.
Respondent Trinidad Lao Ong, President of respondent Lao Enteng Co. Inc.,
specifically stated in her affidavit dated September 06, 1995 that Lao Enteng Company,
Inc. did not take over the management of the New Look Barber Shop, that after the
death Lao Enteng petitioner were verbally informed time and again that the partnership
may fold up anytime because nobody in the family had the time to be at the barber shop
to look after their interest; that New Look Barber Shop had always been a joint venture
partnership and the operation and management of the barber shop was left entirely to
petitioners; that her father's contribution to the joint venture included the place of
business, payment for utilities including electricity, water, etc. while petitioners as
industrial partners, supplied the labor; and that the barber shop was allowed to remain
open up to April 1995 by the children because they wanted to give the partners a
chance at making it work. Eventually, they were forced to close the barber shop
because they continued to lose money while petitioners earned from it. Trinidad also
added that private respondents had no control over petitioners who were free to come
and go as they wished. Admittedly too by petitioners they received fifty percent to sixty
percent of the gross paid by customers. Trinidad explained that some of the petitioners
were allowed to register with the Social Security System as employees of Lao Enteng
Company, Inc. only as an act of accommodation. All the SSS contributions were made
by petitioners. Moreover, Osias Corporal, Elpidio Lacap and Teresita Flores were not
among those registered with the Social Security System. Lastly, Trinidad avers that
without any employee-employer relationship petitioners claim for 13th month pay and
separation pay have no basis in fact and in law.[3]
In a Decision dated September 28, 1995, Labor Arbiter Potenciano S. Caizares,
Jr. ordered the dismissal of the complaint on the basis of his findings that the
complainants and the respondents were engaged in a joint venture and that there
existed no employer-employee relation between them. The Labor Arbiter also found
that the barber shop was closed due to serious business losses or financial reverses
and consequently declared that the law does not compel the establishment to pay
separation pay to whoever were its employees.[4]
On appeal, NLRC affirmed the said findings of the Labor Arbiter and dismissed the
complaint for want of merit, ratiocinating thus:
Indeed, complainants failed to show the existence of employer-employee relationship
under the fourway test established by the Supreme Court. It is a common practice in the
Barber Shop industry that barbers supply their own scissors and razors and they split
their earnings with the owner of the barber shop. The only capital of the owner is the
place of work whereas the barbers provide the skill and expertise in servicing
customers. The only control exercised by the owner of the barber shop is to ascertain
the number of customers serviced by the barber in order to determine the sharing of
profits. The barbers maybe characterized as independent contractors because they are
under the control of the barber shop owner only with respect to the result of the work,
but not with respect to the details or manner of performance. The barbers are engaged
in an independent calling requiring special skills available to the public at large. [5]

Its motion for reconsideration denied in the Resolution[6] dated March 5, 1997,
petitioners filed the instant petition assigning that the NLRC committed grave abuse of
discretion in:
I. ARBITRARILY DISREGARDING SUBSTANTIAL EVIDENCE PROVING
THAT PETITIONERS WERE EMPLOYEES OF RESPONDENT
COMPANY IN RULING THAT PETITIONERS WERE INDEPENDENT
CONTRACTORS.
II. NOT HOLDING THAT PETITIONERS WERE ILLEGALLY DISMISSED
AND IN NOT AWARDING THEIR MONEY CLAIMS.[7]
Petitioners principally argue that public respondent NLRC gravely erred in
declaring that the petitioners were independent contractors. They contend that they
were employees of the respondent company and cannot be considered as independent
contractors because they did not carry on an independent business. They did not cut
hair, manicure, and do their work in their own manner and method. They insist they
were not free from the control and direction of private respondents in all matters, and
their services were engaged by the respondent company to attend to its customers in
its barber shop. Petitioners also stated that, individually or collectively, they do not have
substantial capital nor investments in tools, equipments, work premises and other
materials necessary in the conduct of the barber shop. What the barbers owned were
merely combs, scissors, and razors, while the manicurists owned only nail cutters, nail
polishes, nippers and cuticle removers. By no standard can these be considered
"substantial capital" necessary to operate a barbers shop.
Finally, petitioners fault the NLRC for arbitrarily disregarding substantial evidence
on record showing that petitioners Pedro Tolentino, Manuel Caparas, Simplicio
Pedelos, and Patricia Nas were registered with the Social Security System as regular
employees of the respondent company. The SSS employment records in common
show that the employer's ID No. of Vicente Lao/Barber and Pawn Shop was 03-
0606200-1 and that of the respondent company was 03-8740074-7. All the foregoing
entries in the SSS employment records were painstakingly detailed by the petitioners in
their position paper and in their memorandum appeal but were arbitrarily ignored first by
the Labor Arbiter and then by the respondent NLRC which did not even mention said
employment records in its questioned decision.
We found petition is impressed with merit.
In our view, this case is an exception to the general rule that findings of facts of
the NLRC are to be accorded respect and finality on appeal. We have long settled that
this Court will not uphold erroneous conclusions unsupported by substantial
evidence.[8] We must also stress that where the findings of the NLRC contradict those of
the labor arbiter, the Court, in the exercise of its equity jurisdiction, may look into the
records of the case and reexamine the questioned findings.[9]
The issues raised by petitioners boil down to whether or not an employer-
employee relationship existed between petitioners and private respondent Lao Enteng
Company, Inc. The Labor Arbiter has concluded that the petitioners and respondent
company were engaged in a joint venture. The NLRC concluded that the petitioners
were independent contractors.
18
The Labor Arbiter's findings that the parties were engaged in a joint venture is
unsupported by any documentary evidence. It should be noted that aside from the self-
serving affidavit of Trinidad Lao Ong, there were no other evidentiary documents, nor
written partnership agreements presented. We have ruled that even the sharing of
proceeds for every job of petitioners in the barber shop does not mean they were not
employees of the respondent company.[10]
Petitioner aver that NLRC was wrong when it concluded that petitioners were
independent contractors simply because they supplied their own working implements,
shared in the earnings of the barber shop with the owner and chose the manner of
performing their work. They stressed that as far as the result of their work was
concerned the barber shop owner controlled them.
An independent contractor is one who undertakes "job contracting", i.e., a person
who (a) carries on an independent business and undertakes the contract work on his
own account under his own responsibility according to his own manner and method,
free from the control and direction of his employer or principal in all matters connected
with the performance of the work except as to the results thereof, and (b) has
substantial capital or investment in the form of tools, equipment, machineries, work
premises, and other materials which are necessary in the conduct of the business. [11]
Juxtaposing this provision vis--vis the facts of this case, we are convinced that
petitioners are not "independent contractors". They did not carry on an independent
business. Neither did they undertake cutting hair and manicuring nails, on their own as
their responsibility, and in their own manner and method. The services of the petitioners
were engaged by the respondent company to attend to the needs of its customers in its
barber shop. More importantly, the petitioners, individually or collectively, did not have a
substantial capital or investment in the form of tools, equipment, work premises and
other materials which are necessary in the conduct of the business of the respondent
company. What the petitioners owned were only combs, scissors, razors, nail cutters,
nail polishes, the nippers - nothing else. By no standard can these be considered
substantial capital necessary to operate a barber shop. From the records, it can be
gleaned that petitioners were not given work assignments in any place other than at the
work premises of the New Look Barber Shop owned by the respondent company. Also,
petitioners were required to observe rules and regulations of the respondent company
pertaining, among other things, observance of daily attendance, job performance, and
regularity of job output. The nature of work performed by were clearly directly related to
private respondent's business of operating barber shops. Respondent company did not
dispute that it owned and operated three (3) barber shops. Hence, petitioners were not
independent contractors.
Did an employee-employer relationship exist between petitioners and private
respondent? The following elements must be present for an employer-employee
relationship to exist: (1) the selection and engagement of the workers; (2) power of
dismissal; (3) the payment of wages by whatever means; and (4) the power to control
the worker's conduct, with the latter assuming primacy in the overall
consideration. Records of the case show that the late Vicente Lao engaged the services
of the petitioners to work as barbers and manicurists in the New Look Barber Shop,
then a single proprietorship owned by him; that in January 1982, his children organized
a corporation which they registered with the Securities and Exchange Commission as
Lao Enteng Company, Inc.; that upon its incorporation, it took over the assets,
 19

equipment, and properties of the New Look Barber Shop and continued the business; to the benefit regardless of their designation or employment status, and irrespective of
that the respondent company retained the services of all the petitioners and the method by which their wages are paid, provided that they have worked for at least
continuously paid their wages. Clearly, all three elements exist in petitioners' and one (1) month during a calendar year" and so all the seven (7) petitioners who were not
private respondent's working arrangements. paid their 13th month pay must be paid accordingly.[16]
Private respondent claims it had no control over petitioners. The power to control Anent the other claims of the petitioners, such as the P10,000.00 as penalty for
refers to the existence of the power and not necessarily to the actual exercise thereof, non-compliance with procedural process; P10,000.00 as moral damages; refund of
nor is it essential for the employer to actually supervise the performance of duties of the P1.00 per day paid to the sweeper; salary differentials for petitioner Nas; attorney's
employee. It is enough that the employer has the right to wield that power. [12] As to the fees), we find them without basis.
"control test", the following facts indubitably reveal that respondent company wielded
control over the work performance of petitioners, in that: (1) they worked in the barber IN VIEW WHEREOF, the petition is GRANTED. The public respondent's Decision
shop owned and operated by the respondents; (2) they were required to report daily dated October 17, 1996 and Resolution dated March 05, 1997 are SET ASIDE. Private
and observe definite hours of work; (3) they were not free to accept other employment respondents are hereby ordered to pay, severally and jointly, the seven (7) petitioners
elsewhere but devoted their full time working in the New Look Barber Shop for all the their (1) 13th month pay and (2) separation pay equivalent to one month pay for every
fifteen (15) years they have worked until April 15, 1995; (4) that some have worked with year of service, to be computed at the then prevailing minimum wage at the time of their
respondents as early as in the 1960's; (5) that petitioner Patricia Nas was instructed by actual termination which was April 15, 1995.
the respondents to watch the other six (6) petitioners in their daily task. Certainly, Costs against private respondents.
respondent company was clothed with the power to dismiss any or all of them for just
and valid cause. Petitioners were unarguably performing work necessary and desirable SO ORDERED.
in the business of the respondent company.
While it is no longer true that membership to SSS is predicated on the existence of
an employee-employer relationship since the policy is now to encourage even the self-
employed dressmakers, manicurists and jeepney drivers to become SSS members, we
could not agree with private respondents that petitioners were registered with the Social
Security System as their employees only as an accommodation. As we have earlier
mentioned private respondent showed no proof to their claim that petitioners were the
ones who solely paid all SSS contributions. It is unlikely that respondents would report
certain persons as their workers, pay their SSS premium as well as their wages if it
were not true that they were indeed their employees.[13]
Finally, we agree with the labor arbiter that there was sufficient evidence that the
barber shop was closed due to serious business losses and respondent company
closed its barber shop because the building where the barber shop was located was
sold. An employer may adopt policies or changes or adjustments in its operations to
insure profit to itself or protect investment of its stockholders. In the exercise of such
management prerogative, the employer may merge or consolidate its business with
another, or sell or dispose all or substantially all of its assets and properties which may
bring about the dismissal or termination of its employees in the process. [14]
Prescinding from the above, we hold that the seven petitioners are employees of
the private respondent company; as such, they are to be accorded the benefits
provided under the Labor Code, specifically Article 283 which mandates the grant of
separation pay in case of closure or cessation of employer's business which is
equivalent to one (1) month pay for every year of service. [15] Likewise, they are entitled
to the protection of minimum wage statutes. Hence, the separation pay due them may
be computed on the basis of the minimum wage prevailing at the time their services
were terminated by the respondent company. The same is true with respect to the 13th
month pay. The Revised Guidelines on the Implementation of the 13th Month Pay Law
states that "all rank and file employees are now entitled to a 13th month pay regardless
of the amount of basic salary that they receive in a month. Such employees are entitled
 20

DIGEST: petitioners worked in the barbershop owned and operated by respondents,

Facts: 5 male barbers and 2 female manicurists (Petitioners) worked at New Look
Barbershop, a sole proprietorship owned and managed by Vicente Lao which in 1982
was taken over by Lao Enteng Co., Inc., (respondent corporation) a corporation formed
by Vicente Laos children. The petitioners were allowed to work there until April 1985
when they were told that the barbershop building was sold and their services are no
longer needed.
Petitioners filed with the Arbitration branch of NLRC a complaint for illegal dismissal,
illegal deduction, separation pay, non-payment of 13th month pay and salary differential.
Also they seek for refund of P1.00 collected from each of them daily as salary of the
barbershops sweeper.
Respondent Corporation alleged that petitioners were Joint Venture (JV) partners
receiving 50% commission (Petitioners admitted in receiving 50-60%), therefore no
employer-employee relationship existed. And assuming arguendo that employer-
employee relationship existed, petitioners were not entitled to separation pay since
cessation of the business was due to serious business losses. Also, they allege that the
barbershop had always been a JV partnership with the operation and management left
entirely to petitioners and that the former had no control over the latter who could freely
come and go as they wish. Lastly, they allege that some of the petitioners were allowed
to register in SSS only as an act of accommodation.
The Labor Arbiter dismissed the complaint and found that there was a JV and no
employer-employee relationship. Also that the business was closed due to serious
business losses or financial reverses and the law does not compel the establishment to
pay separation pay to whoever were its employees. On appeal, NLRC affirmed the
decision but held that petitioners were considered independent contractors and not
employees. The MR was also denied by NLRC, hence, this petition on certiorari.
and that they were required to report daily, observing definite hours of work,
they were not free to accept employment elsewhere and devoted their full time
working in the barbershop proves the existence of the power of control.
The petitioners are not independent contractors. An independent contractor
is one who undertakes "job contracting", i.e., a person who (a) carries on an
independent business and undertakes the contract work on his own account
under his own responsibility according to his own manner and method, free
from the control and direction of his employer or principal in all matters
connected with the performance of the work except as to the results thereof,
and (b) has substantial capital or investment in the form of tools, equipment,
machineries, work premises, and other materials which are necessary in the
conduct of the business. Petitioners have neither of the above since the tools
used such as scissors, razors, nail cutters, polishes, etc. cannot be considered
substantial capital or investment.
While it is no longer true that membership to SSS is predicated on the
existence of an employee-employer relationship since the policy is now to
encourage even the self-employed dressmakers, manicurists and jeepney
drivers to become SSS members, we could not agree with private respondents
that petitioners were registered with the Social Security System as their
employees only as an accommodation. As we have earlier mentioned private
respondent showed no proof to their claim that petitioners were the ones who
solely paid all SSS contributions. It is unlikely that respondents would report
certain persons as their workers, pay their SSS premium as well as their
wages if it were not true that they were indeed their employee.

Issue: WON there was an employer-employee relationship.

Held: YES. Petitioners are employees of Respondent Corporation and shall be

accorded the benefits given in Art. 283 of the Labor Code granting separation pay
equivalent to 1 month pay for every year of service and also to 13 th month pay. The
other claims of petitioners are found to be without basis.

No documentary evidence of the existence of JV other than the self-serving

affidavit of the company president.
The power of control in the 4-fold test (employer-employee relationship) refers
to the EXISTENCE and NOT THE EXERCISE of such power the following
elements must be present for an employer-employee relationship to exist: (1)
the selection and engagement of the workers; (2) power of dismissal; (3) the
payment of wages by whatever means; and (4) the power to control the
worker's conduct, with the latter assuming primacy in the overall consideration.

The records show that Vicente Lao engaged the petitioners to work for the
barbershop and retained them after it was taken over by the respondent
corporation who continuously paid their wages. Also, the fact that the

FIRST DIVISION
[G.R. No. 138051. June 10, 2004]
JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING
CORPORATION, respondent.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari[1] assailing the 26 March
1999 Decision[2] of the Court of Appeals in CA-G.R. SP No. 49190 dismissing the
petition filed by Jose Y. Sonza (SONZA). The Court of Appeals affirmed the findings of
the National Labor Relations Commission (NLRC), which affirmed the Labor Arbiters
dismissal of the case for lack of jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation (ABS-CBN) signed
an Agreement (Agreement) with the Mel and Jay Management and Development
Corporation (MJMDC). ABS-CBN was represented by its corporate officers while
MJMDC was represented by SONZA, as President and General Manager, and Carmela
Tiangco (TIANGCO), as EVP and Treasurer. Referred to in the Agreement as AGENT,
MJMDC agreed to provide SONZAs services exclusively to ABS-CBN as talent for radio
and television. The Agreement listed the services SONZA would render to ABS-CBN,
as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to
Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.[3]
ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000
for the first year and P317,000 for the second and third year of the Agreement. ABS-
CBN would pay the talent fees on the 10th and 25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III,
which reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May 1994 entered into by
your goodself on behalf of ABS-CBN with our company relative to our talent JOSE Y.
SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events
concerning his programs and career. We consider these acts of the station violative of
the Agreement and the station as in breach thereof. In this connection, we hereby serve
notice of rescission of said Agreement at our instance effective as of date.
21
Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining
amount stipulated in paragraph 7 of the Agreement but reserves the right to seek
recovery of the other benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y.
SONZA
President and Gen. Manager[4]
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the
Department of Labor and Employment, National Capital Region in Quezon City. SONZA
complained that ABS-CBN did not pay his salaries, separation pay, service incentive
leave pay, 13th month pay, signing bonus, travel allowance and amounts due under the
Employees Stock Option Plan (ESOP).
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no
employer-employee relationship existed between the parties. SONZA filed an
Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his
account at PCIBank, Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN
opened a new account with the same bank where ABS-CBN deposited SONZAs talent
fees and other payments due him under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter[5] denied the motion to
dismiss and directed the parties to file their respective position papers. The Labor
Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was an employee of
respondent company until April 15, 1996 and that he was not paid certain claims, it is
sufficient enough as to confer jurisdiction over the instant case in this Office. And as to
whether or not such claim would entitle complainant to recover upon the causes of
action asserted is a matter to be resolved only after and as a result of a hearing. Thus,
the respondents plea of lack of employer-employee relationship may be pleaded only
as a matter of defense. It behooves upon it the duty to prove that there really is no
employer-employee relationship between it and the complainant.
The Labor Arbiter then considered the case submitted for resolution. The parties
submitted their position papers on 24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with
Motion to Expunge Respondents Annex 4 and Annex 5 from the Records. Annexes 4
and 5 are affidavits of ABS-CBNs witnesses Soccoro Vidanes and Rolando V. Cruz.
These witnesses stated in their affidavits that the prevailing practice in the television
and broadcast industry is to treat talents like SONZA as independent contractors.

The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the
complaint for lack of jurisdiction.[6] The pertinent parts of the decision read as follows:
xxx
While Philippine jurisprudence has not yet, with certainty, touched on the true nature of
the contract of a talent, it stands to reason that a talent as above-described cannot be
considered as an employee by reason of the peculiar circumstances surrounding the
engagement of his services.
It must be noted that complainant was engaged by respondent by reason of his
peculiar skills and talent as a TV host and a radio broadcaster. Unlike an ordinary
employee, he was free to perform the services he undertook to render in
accordance with his own style. The benefits conferred to complainant under the May
1994 Agreement are certainly very much higher than those generally given to
employees. For one, complainant Sonzas monthly talent fees amount to a
staggering P317,000. Moreover, his engagement as a talent was covered by a specific
contract. Likewise, he was not bound to render eight (8) hours of work per day as he
worked only for such number of hours as may be necessary.
The fact that per the May 1994 Agreement complainant was accorded some benefits
normally given to an employee is inconsequential. Whatever benefits complainant
enjoyed arose from specific agreement by the parties and not by reason of
employer-employee relationship. As correctly put by the respondent, All these
benefits are merely talent fees and other contractual benefits and should not be
deemed as salaries, wages and/or other remuneration accorded to an employee,
notwithstanding the nomenclature appended to these benefits. Apropos to this is the
rule that the term or nomenclature given to a stipulated benefit is not controlling, but the
intent of the parties to the Agreement conferring such benefit.
The fact that complainant was made subject to respondents Rules and
Regulations, likewise, does not detract from the absence of employer-employee
relationship. As held by the Supreme Court, The line should be drawn between rules
that merely serve as guidelines towards the achievement of the mutually desired result
without dictating the means or methods to be employed in attaining it, and those that
control or fix the methodology and bind or restrict the party hired to the use of such
means. The first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means to achieve
it. (Insular Life Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15,
1989).
x x x (Emphasis supplied)[7]
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a
Decision affirming the Labor Arbiters decision. SONZA filed a motion for
reconsideration, which the NLRC denied in its Resolution dated 3 July 1998.
22
On 6 October 1998, SONZA filed a special civil action for certiorari before the
Court of Appeals assailing the decision and resolution of the NLRC. On 26 March 1999,
the Court of Appeals rendered a Decision dismissing the case.[8]
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRCs finding that no employer-employee
relationship existed between SONZA and ABS-CBN. Adopting the NLRCs decision, the
appellate court quoted the following findings of the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract
merely as an agent of complainant Sonza, the principal. By all indication and as the law
puts it, the act of the agent is the act of the principal itself. This fact is made particularly
true in this case, as admittedly MJMDC is a management company devoted exclusively
to managing the careers of Mr. Sonza and his broadcast partner, Mrs. Carmela C.
Tiangco. (Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between complainant Sonza
and MJMDC, and not between ABS-CBN and MJMDC. This is clear from the provisions
of the May 1994 Agreement which specifically referred to MJMDC as the AGENT. As a
matter of fact, when complainant herein unilaterally rescinded said May 1994
Agreement, it was MJMDC which issued the notice of rescission in behalf of Mr. Sonza,
who himself signed the same in his capacity as President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that
historically, the parties to the said agreements are ABS-CBN and Mr. Sonza. And it is
only in the May 1994 Agreement, which is the latest Agreement executed between
ABS-CBN and Mr. Sonza, that MJMDC figured in the said Agreement as the agent of
Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABS-CBN
such that there exist[s] employer-employee relationship between the latter and Mr.
Sonza. On the contrary, We find it indubitable, that MJMDC is an agent, not of ABS-
CBN, but of the talent/contractor Mr. Sonza, as expressly admitted by the latter and
MJMDC in the May 1994 Agreement.
It may not be amiss to state that jurisdiction over the instant controversy indeed belongs
to the regular courts, the same being in the nature of an action for alleged breach of
contractual obligation on the part of respondent-appellee. As squarely apparent from
complainant-appellants Position Paper, his claims for compensation for services,
13th month pay, signing bonus and travel allowance against respondent-appellee are
not based on the Labor Code but rather on the provisions of the May 1994 Agreement,
while his claims for proceeds under Stock Purchase Agreement are based on the
latter. A portion of the Position Paper of complainant-appellant bears perusal:

Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually
bound itself to pay complainant a signing bonus consisting of shares of stockswith FIVE
HUNDRED THOUSAND PESOS (P500,000.00).
Similarly, complainant is also entitled to be paid 13 th month pay based on an amount
not lower than the amount he was receiving prior to effectivity of (the) Agreement.
Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a
commutable travel benefit amounting to at least One Hundred Fifty Thousand Pesos
(P150,000.00) per year.
Thus, it is precisely because of complainant-appellants own recognition of the fact that
his contractual relations with ABS-CBN are founded on the New Civil Code, rather than
the Labor Code, that instead of merely resigning from ABS-CBN, complainant-appellant
served upon the latter a notice of rescission of Agreement with the station, per his letter
dated April 1, 1996, which asserted that instead of referring to unpaid employee
benefits, he is waiving and renouncing recovery of the remaining amount stipulated in
paragraph 7 of the Agreement but reserves the right to such recovery of the other
benefits under said Agreement. (Annex 3 of the respondent ABS-CBNs Motion to
Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement
and/or the Stock Purchase Agreement by respondent-appellee that complainant-
appellant filed his complaint.Complainant-appellants claims being anchored on the
alleged breach of contract on the part of respondent-appellee, the same can be
resolved by reference to civil law and not to labor law. Consequently, they are within the
realm of civil law and, thus, lie with the regular courts. As held in the case of Dai-Chi
Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21 November 1994, an action
for breach of contractual obligation is intrinsically a civil dispute.[9] (Emphasis
supplied)
The Court of Appeals ruled that the existence of an employer-employee
relationship between SONZA and ABS-CBN is a factual question that is within the
jurisdiction of the NLRC to resolve.[10] A special civil action for certiorari extends only to
issues of want or excess of jurisdiction of the NLRC. [11] Such action cannot cover an
inquiry into the correctness of the evaluation of the evidence which served as basis of
the NLRCs conclusion.[12] The Court of Appeals added that it could not re-examine the
parties evidence and substitute the factual findings of the NLRC with its own.[13]
The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS
DECISION AND REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE
RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN, DESPITE THE
WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO
SUPPORT SUCH A FINDING.[14]
23
The Courts Ruling
We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the decision of the Court of
Appeals affirming the NLRC ruling which upheld the Labor Arbiters dismissal of the
case for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws
and jurisprudence define clearly the elements of an employer-employee relationship,
this is the first time that the Court will resolve the nature of the relationship between a
television and radio station and one of its talents. There is no case law stating that a
radio and television program host is an employee of the broadcast station.
The instant case involves big names in the broadcast industry, namely Jose Jay
Sonza, a known television and radio personality, and ABS-CBN, one of the biggest
television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he
was an employee of ABS-CBN. On the other hand, ABS-CBN insists that the Labor
Arbiter has no jurisdiction because SONZA was an independent contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a question of
fact. Appellate courts accord the factual findings of the Labor Arbiter and the NLRC not
only respect but also finality when supported by substantial evidence. [15] Substantial
evidence means such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion.[16] A party cannot prove the absence of substantial
evidence by simply pointing out that there is contrary evidence on record, direct or
circumstantial. The Court does not substitute its own judgment for that of the tribunal in
determining where the weight of evidence lies or what evidence is credible. [17]
SONZA maintains that all essential elements of an employer-employee
relationship are present in this case. Case law has consistently held that the elements
of an employer-employee relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers
power to control the employee on the means and methods by which the work is
accomplished.[18] The last element, the so-called control test, is the most important
element.[19]
A. Selection and Engagement of Employee
ABS-CBN engaged SONZAs services to co-host its television and radio programs
because of SONZAs peculiar skills, talent and celebrity status. SONZA contends that
the discretion used by respondent in specifically selecting and hiring complainant over
other broadcasters of possibly similar experience and qualification as complainant
belies respondents claim of independent contractorship.
Independent contractors often present themselves to possess unique skills,
expertise or talent to distinguish them from ordinary employees. The specific selection
and hiring of SONZA, because of his unique skills, talent and celebrity status not
possessed by ordinary employees, is a circumstance indicative, but not conclusive,

of an independent contractual relationship. If SONZA did not possess such unique
skills, talent and celebrity status, ABS-CBN would not have entered into the Agreement
with SONZA but would have hired him through its personnel department just like any
other employee.
In any event, the method of selecting and engaging SONZA does not conclusively
determine his status. We must consider all the circumstances of the relationship, with
the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees
going to MJMDC. SONZA asserts that this mode of fee payment shows that he was an
employee of ABS-CBN. SONZA also points out that ABS-CBN granted him benefits and
privileges which he would not have enjoyed if he were truly the subject of a valid job
contract.
All the talent fees and benefits paid to SONZA were the result of negotiations that
led to the Agreement. If SONZA were ABS-CBNs employee, there would be no need for
the parties to stipulate on benefits such as SSS, Medicare, x x x and 13th month
pay[20] which the law automatically incorporates into every employer-employee
contract.[21] Whatever benefits SONZA enjoyed arose from contract and not because of
an employer-employee relationship.[22]
SONZAs talent fees, amounting to P317,000 monthly in the second and third year,
are so huge and out of the ordinary that they indicate more an independent contractual
relationship rather than an employer-employee relationship. ABS-CBN agreed to pay
SONZA such huge talent fees precisely because of SONZAs unique skills, talent and
celebrity status not possessed by ordinary employees. Obviously, SONZA acting alone
possessed enough bargaining power to demand and receive such huge talent fees for
his services. The power to bargain talent fees way above the salary scales of ordinary
employees is a circumstance indicative, but not conclusive, of an independent
contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate
the status of SONZA as an independent contractor. The parties expressly agreed on
such mode of payment. Under the Agreement, MJMDC is the AGENT of SONZA, to
whom MJMDC would have to turn over any talent fee accruing under the Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their
relationship. SONZA failed to show that ABS-CBN could terminate his services on
grounds other than breach of contract, such as retrenchment to prevent losses as
provided under labor laws.[23]
During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as
long as AGENT and Jay Sonza shall faithfully and completely perform each condition of
this Agreement.[24] Even if it suffered severe business losses, ABS-CBN could not
24
retrench SONZA because ABS-CBN remained obligated to pay SONZAs talent fees
during the life of the Agreement. This circumstance indicates an independent
contractual relationship between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs,
ABS-CBN still paid him his talent fees. Plainly, ABS-CBN adhered to its undertaking in
the Agreement to continue paying SONZAs talent fees during the remaining life of the
Agreement even if ABS-CBN cancelled SONZAs programs through no fault of
SONZA.[25]
SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement
as an admission that he is not an employee of ABS-CBN. The Labor Arbiter stated that
if it were true that complainant was really an employee, he would merely resign,
instead. SONZA did actually resign from ABS-CBN but he also, as president of
MJMDC, rescinded the Agreement.SONZAs letter clearly bears this out. [26] However,
the manner by which SONZA terminated his relationship with ABS-CBN is
immaterial. Whether SONZA rescinded the Agreement or resigned from work does not
determine his status as employee or independent contractor.
D. Power of Control
Since there is no local precedent on whether a radio and television program host
is an employee or an independent contractor, we refer to foreign case law in analyzing
the present case. The United States Court of Appeals, First Circuit, recently held
in Alberty-Vlez v. Corporacin De Puerto Rico Para La Difusin Pblica (WIPR)[27] that
a television program host is an independent contractor. We quote the following findings
of the U.S. court:
Several factors favor classifying Alberty as an independent contractor. First, a
television actress is a skilled position requiring talent and training not available
on-the-job. x x x In this regard, Alberty possesses a masters degree in public
communications and journalism; is trained in dance, singing, and modeling; taught with
the drama department at the University of Puerto Rico; and acted in several theater and
television productions prior to her affiliation with Desde Mi Pueblo. Second, Alberty
provided the tools and instrumentalities necessary for her to perform. Specifically,
she provided, or obtained sponsors to provide, the costumes, jewelry, and other image-
related supplies and services necessary for her appearance. Alberty disputes that this
factor favors independent contractor status because WIPR provided the equipment
necessary to tape the show. Albertys argument is misplaced. The equipment necessary
for Alberty to conduct her job as host of Desde Mi Pueblo related to her appearance on
the show. Others provided equipment for filming and producing the show, but these
were not the primary tools that Alberty used to perform her particular function. If we
accepted this argument, independent contractors could never work on collaborative
projects because other individuals often provide the equipment required for different
aspects of the collaboration. x x x
Third, WIPR could not assign Alberty work in addition to filming Desde Mi
Pueblo. Albertys contracts with WIPR specifically provided that WIPR hired her
professional services as Hostess for the Program Desde Mi Pueblo. There is no

evidence that WIPR assigned Alberty tasks in addition to work related to these
tapings. x x x[28] (Emphasis supplied)
Applying the control test to the present case, we find that SONZA is not an
employee but an independent contractor. The control test is the most important test
our courts apply in distinguishing an employee from an independent contractor. [29] This
test is based on the extent of control the hirer exercises over a worker. The greater the
supervision and control the hirer exercises, the more likely the worker is deemed an
employee. The converse holds true as well the less control the hirer exercises, the
more likely the worker is considered an independent contractor. [30]
First, SONZA contends that ABS-CBN exercised control over the means and
methods of his work.
SONZAs argument is misplaced. ABS-CBN engaged SONZAs services
specifically to co-host the Mel & Jay programs. ABS-CBN did not assign any other work
to SONZA. To perform his work, SONZA only needed his skills and talent. How SONZA
delivered his lines, appeared on television, and sounded on radio were outside ABS-
CBNs control. SONZA did not have to render eight hours of work per day. The
Agreement required SONZA to attend only rehearsals and tapings of the shows, as well
as pre- and post-production staff meetings.[31]ABS-CBN could not dictate the contents
of SONZAs script. However, the Agreement prohibited SONZA from criticizing in his
shows ABS-CBN or its interests.[32] The clear implication is that SONZA had a free hand
on what to say or discuss in his shows provided he did not attack ABS-CBN or its
interests.
We find that ABS-CBN was not involved in the actual performance that produced
the finished product of SONZAs work.[33] ABS-CBN did not instruct SONZA how to
perform his job.ABS-CBN merely reserved the right to modify the program format and
airtime schedule for more effective programming.[34] ABS-CBNs sole concern was the
quality of the shows and their standing in the ratings. Clearly, ABS-CBN did not
exercise control over the means and methods of performance of SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-
CBNs power over the means and methods of the performance of his work. Although
ABS-CBN did have the option not to broadcast SONZAs show, ABS-CBN was still
obligated to pay SONZAs talent fees. Thus, even if ABS-CBN was completely
dissatisfied with the means and methods of SONZAs performance of his work, or even
with the quality or product of his work, ABS-CBN could not dismiss or even discipline
SONZA. All that ABS-CBN could do is not to broadcast SONZAs show but ABS-CBN
must still pay his talent fees in full.[35]
Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by
the obligation to continue paying in full SONZAs talent fees, did not amount to control
over the means and methods of the performance of SONZAs work. ABS-CBN could not
terminate or discipline SONZA even if the means and methods of performance of his
work - how he delivered his lines and appeared on television - did not meet ABS-CBNs
approval. This proves that ABS-CBNs control was limited only to the result of SONZAs
work, whether to broadcast the final product or not. In either case, ABS-CBN must still
pay SONZAs talent fees in full until the expiry of the Agreement.
25
In Vaughan, et al. v. Warner, et al.,[36] the United States Circuit Court of Appeals
ruled that vaudeville performers were independent contractors although the
management reserved the right to delete objectionable features in their shows. Since
the management did not have control over the manner of performance of the skills of
the artists, it could only control the result of the work by deleting objectionable
features.[37]
SONZA further contends that ABS-CBN exercised control over his work by
supplying all equipment and crew. No doubt, ABS-CBN supplied the equipment, crew
and airtime needed to broadcast the Mel & Jay programs. However, the equipment,
crew and airtime are not the tools and instrumentalities SONZA needed to perform his
job. What SONZA principally needed were his talent or skills and the costumes
necessary for his appearance. [38] Even though ABS-CBN provided SONZA with the
place of work and the necessary equipment, SONZA was still an independent
contractor since ABS-CBN did not supervise and control his work. ABS-CBNs sole
concern was for SONZA to display his talent during the airing of the programs. [39]
A radio broadcast specialist who works under minimal supervision is an
independent contractor.[40] SONZAs work as television and radio program host required
special skills and talent, which SONZA admittedly possesses. The records do not show
that ABS-CBN exercised any supervision and control over how SONZA utilized his skills
and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBNs employee because ABS-
CBN subjected him to its rules and standards of performance. SONZA claims that this
indicates ABS-CBNs control not only [over] his manner of work but also the quality of
his work.
The Agreement stipulates that SONZA shall abide with the rules and standards of
performance covering talents[41] of ABS-CBN. The Agreement does not require
SONZA to comply with the rules and standards of performance prescribed for
employees of ABS-CBN. The code of conduct imposed on SONZA under the
Agreement refers to the Television and Radio Code of the Kapisanan ng mga
Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY (ABS-CBN)
as its Code of Ethics.[42] The KBP code applies to broadcasters, not to employees of
radio and television stations. Broadcasters are not necessarily employees of radio and
television stations. Clearly, the rules and standards of performance referred to in the
Agreement are those applicable to talents and not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate
that the latter is an employee of the former. [43] In this case, SONZA failed to show that
these rules controlled his performance. We find that these general rules are
merely guidelines towards the achievement of the mutually desired result, which are
top-rating television and radio programs that comply with standards of the industry. We
have ruled that:
Further, not every form of control that a party reserves to himself over the conduct of
the other party in relation to the services being rendered may be accorded the effect of
establishing an employer-employee relationship. The facts of this case fall squarely with
the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:

Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the means or
methods to be employed in attaining it, and those that control or fix the methodology
and bind or restrict the party hired to the use of such means. The first, which aim only to
promote the result, create no employer-employee relationship unlike the second, which
address both the result and the means used to achieve it. [44]
The Vaughan case also held that one could still be an independent contractor
although the hirer reserved certain supervision to insure the attainment of the desired
result. The hirer, however, must not deprive the one hired from performing his services
according to his own initiative.[45]
Lastly, SONZA insists that the exclusivity clause in the Agreement is the most
extreme form of control which ABS-CBN exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean that
SONZA is an employee of ABS-CBN. Even an independent contractor can validly
provide his services exclusively to the hiring party. In the broadcast industry, exclusivity
is not necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted practice in the
entertainment industry.[46] This practice is not designed to control the means and
methods of work of the talent, but simply to protect the investment of the broadcast
station. The broadcast station normally spends substantial amounts of money, time and
effort in building up its talents as well as the programs they appear in and thus expects
that said talents remain exclusive with the station for a commensurate period of
time.[47] Normally, a much higher fee is paid to talents who agree to work exclusively for
a particular radio or television station. In short, the huge talent fees partially
compensates for exclusivity, as in the present case.
MJMDC as Agent of SONZA
SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which
contracted out his services to ABS-CBN. The Labor Arbiter ruled that as a talent of
MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists that MJMDC is a
labor-only contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the labor-only
contractor; (2) the employee who is ostensibly under the employ of the labor-only
contractor; and (3) the principal who is deemed the real employer. Under this
scheme, the labor-only contractor is the agent of the principal. The law makes the
principal responsible to the employees of the labor-only contractor as if the principal
itself directly hired or employed the employees. [48] These circumstances are not present
in this case.
There are essentially only two parties involved under the Agreement, namely,
SONZA and ABS-CBN. MJMDC merely acted as SONZAs agent. The Agreement
expressly states that MJMDC acted as the AGENT of SONZA. The records do not show
that MJMDC acted as ABS-CBNs agent. MJMDC, which stands for Mel and Jay
Management and Development Corporation, is a corporation organized and owned by
SONZA and TIANGCO. The President and General Manager of MJMDC is SONZA
himself. It is absurd to hold that MJMDC, which is owned, controlled, headed and
26
managed by SONZA, acted as agent of ABS-CBN in entering into the Agreement with
SONZA, who himself is represented by MJMDC. That would make MJMDC the agent of
both ABS-CBN and SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to
managing the careers of SONZA and his broadcast partner, TIANGCO. MJMDC is not
engaged in any other business, not even job contracting. MJMDC does not have any
other function apart from acting as agent of SONZA or TIANGCO to promote their
careers in the broadcast and television industry.[49]
Policy Instruction No. 40
SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas
Ople on 8 January 1979 finally settled the status of workers in the broadcast
industry. Under this policy, the types of employees in the broadcast industry are the
station and program employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the
force and effect of law. There is no legal presumption that Policy Instruction No. 40
determines SONZAs status. A mere executive issuance cannot exclude independent
contractors from the class of service providers to the broadcast industry. The
classification of workers in the broadcast industry into only two groups under Policy
Instruction No. 40 is not binding on this Court, especially when the classification has no
basis either in law or in fact.
Affidavits of ABS-CBNs Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes
and Rolando Cruz without giving his counsel the opportunity to cross-examine these
witnesses.SONZA brands these witnesses as incompetent to attest on the prevailing
practice in the radio and television industry. SONZA views the affidavits of these
witnesses as misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses, he was never
prevented from denying or refuting the allegations in the affidavits. The Labor Arbiter
has the discretion whether to conduct a formal (trial-type) hearing after the submission
of the position papers of the parties, thus:
Section 3. Submission of Position Papers/Memorandum
xxx
These verified position papers shall cover only those claims and causes of action raised
in the complaint excluding those that may have been amicably settled, and shall be
accompanied by all supporting documents including the affidavits of their respective
witnesses which shall take the place of the latters direct testimony. x x x
Section 4. Determination of Necessity of Hearing. Immediately after the submission of
the parties of their position papers/memorandum, the Labor Arbiter shall motu propio
determine whether there is need for a formal trial or hearing. At this stage, he may, at
his discretion and for the purpose of making such determination, ask clarificatory

questions to further elicit facts or information, including but not limited to the subpoena
of relevant documentary evidence, if any from any party or witness. [50]
The Labor Arbiter can decide a case based solely on the position papers and the
supporting documents without a formal trial. [51] The holding of a formal hearing or trial is
something that the parties cannot demand as a matter of right. [52] If the Labor Arbiter is
confident that he can rely on the documents before him, he cannot be faulted for not
conducting a formal trial, unless under the particular circumstances of the case, the
documents alone are insufficient. The proceedings before a Labor Arbiter are non-
litigious in nature. Subject to the requirements of due process, the technicalities of law
and the rules obtaining in the courts of law do not strictly apply in proceedings before a
Labor Arbiter.
Talents as Independent Contractors
ABS-CBN claims that there exists a prevailing practice in the broadcast and
entertainment industries to treat talents like SONZA as independent contractors.
SONZA argues that if such practice exists, it is void for violating the right of labor to
security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution [53] arises
only if there is an employer-employee relationship under labor laws. Not every
performance of services for a fee creates an employer-employee relationship. To hold
that every person who renders services to another for a fee is an employee - to give
meaning to the security of tenure clause - will lead to absurd results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their
services as independent contractors. The right to life and livelihood guarantees this
freedom to contract as independent contractors. The right of labor to security of tenure
cannot operate to deprive an individual, possessed with special skills, expertise and
talent, of his right to contract as an independent contractor. An individual like an artist or
talent has a right to render his services without any one controlling the means and
methods by which he performs his art or craft. This Court will not interpret the right of
labor to security of tenure to compel artists and talents to render their services only as
employees. If radio and television program hosts can render their services only as
employees, the station owners and managers can dictate to the radio and television
hosts what they say in their shows. This is not conducive to freedom of the press.
Different Tax Treatment of Talents and Broadcasters
The National Internal Revenue Code (NIRC)[54] in relation to Republic Act No.
7716,[55] as amended by Republic Act No. 8241,[56] treats talents, television and radio
broadcasters differently. Under the NIRC, these professionals are subject to the 10%
value-added tax (VAT) on services they render. Exempted from the VAT are those
under an employer-employee relationship.[57] This different tax treatment accorded to
talents and broadcasters bolters our conclusion that they are independent contractors,
provided all the basic elements of a contractual relationship are present as in this case.
Nature of SONZAs Claims
SONZA seeks the recovery of allegedly unpaid talent fees, 13 th month pay,
separation pay, service incentive leave, signing bonus, travel allowance, and amounts
27
due under the Employee Stock Option Plan. We agree with the findings of the Labor
Arbiter and the Court of Appeals that SONZAs claims are all based on the May 1994
Agreement and stock option plan, and not on the Labor Code. Clearly, the present
case does not call for an application of the Labor Code provisions but an interpretation
and implementation of the May 1994 Agreement. In effect, SONZAs cause of action is
for breach of contract which is intrinsically a civil dispute cognizable by the regular
courts.[58]
WHEREFORE, we DENY the petition. The assailed Decision of the Court of
Appeals dated 26 March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against
petitioner. SO ORDERED.
DIGEST:
Facts: In May 1994, ABS-CBN signed an agreement with the Mel and Jay
Management and Development Corporation (MJMDC). ABS-CBN was represented by
its corporate officers while MJMDC was represented by Sonza, as President and
general manager, and Tiangco as its EVP and treasurer. Referred to in the agreement
as agent, MJMDC agreed to provide Sonzas services exclusively to ABS-CBN as talent
for radio and television. ABS-CBN agreed to pay Sonza a monthly talent fee of P310,
000 for the first year and P317, 000 for the second and third year.
On April 1996, Sonza wrote a letter to ABS-CBN where he irrevocably resigned in view
of the recent events concerning his program and career. After the said letter, Sonza
filed with the Department of Labor and Employment a complaint alleging that ABS-CBN
did not pay his salaries, separation pay, service incentive pay,13th month pay, signing
bonus, travel allowance and amounts under the Employees Stock Option Plan (ESOP).
ABS-CBN contended that no employee-employer relationship existed between the
parties. However, ABS-CBN continued to remit Sonzas monthly talent fees but opened
another account for the same purpose.
The Labor Arbiter dismissed the complaint and found that there is no employee-
employer relationship. NLRC affirmed the decision of the Labor Arbiter. CA also
affirmed the decision of NLRC.
Issue: Whether or not there was employer-employee relationship between the parties.
Ruling: Case law has consistently held that the elements of an employee-employer
relationship are selection and engagement of the employee, the payment of wages, the
power of dismissal and the employers power to control the employee on the means
and methods by which the work is accomplished. The last element, the so-called
"control test", is the most important element.
Sonzas services to co-host its television and radio programs are because of his
peculiar talents, skills and celebrity status. Independent contractors often present
themselves to possess unique skills, expertise or talent to distinguish them from
ordinary employees. The specific selection and hiring of SONZA, because of his unique
skills, talent and celebrity status not possessed by ordinary employees, is a
circumstance indicative, but not conclusive, of an independent contractual relationship.
 28

All the talent fees and benefits paid to SONZA were the result of negotiations that led to
the Agreement. For violation of any provision of the Agreement, either party may
terminate their relationship. Applying the control test to the present case, we find that
SONZA is not an employee but an independent contractor.

The control test is the most important test our courts apply in distinguishing an
employee from an independent contractor. This test is based on the extent of control
the hirer exercises over a worker. The greater the supervision and control the hirer
exercises, the more likely the worker is deemed an employee. The converse holds true
as well the less control the hirer exercises, the more likely the worker is considered an
independent contractor. To perform his work, SONZA only needed his skills and talent.
How SONZA delivered his lines, appeared on television, and sounded on radio were
outside ABS-CBNs control. ABS-CBN did not instruct SONZA how to perform his job.
ABS-CBN merely reserved the right to modify the program format and airtime schedule
"for more effective programming." ABS-CBNs sole concern was the quality of the
shows and their standing in the ratings.

Clearly, ABS-CBN did not exercise control over the means and methods of
performance of Sonzas work. A radio broadcast specialist who works under minimal
supervision is an independent contractor. Sonzas work as television and radio program
host required special skills and talent, which SONZA admittedly possesses.

ABS-CBN claims that there exists a prevailing practice in the broadcast and
entertainment industries to treat talents like Sonza as independent contractors. The
right of labor to security of tenure as guaranteed in the Constitution arises only if there
is an employer-employee relationship under labor laws. Individuals with special skills,
expertise or talent enjoy the freedom to offer their services as independent contractors.
The right to life and livelihood guarantees this freedom to contract as independent
contractors. The right of labor to security of tenure cannot operate to deprive an
individual, possessed with special skills, expertise and talent, of his right to contract as
an independent contractor.
 29

FIRST DIVISION b) Coordinate, arrange personalities for air interviews;

ABS-CBN BROADCASTING G.R. No. 164156 c) Coordinate, prepare schedule of reporters for scheduled news
CORPORATION, reporting and lead-in or incoming reports;
Petitioner, Present
d) Facilitate, prepare and arrange airtime schedule for public
PANGANIBAN, C.J., Chairperson, service announcement and complaints;
YNARES-SANTIAGO,
- versus - AUSTRIA-MARTINEZ, e) Assist, anchor program interview, etc; and
CALLEJO, SR., and
CHICO-NAZARIO, JJ. f) Record, log clerical reports, man based control radio.[4]
MARLYN NAZARENO, Promulgated:
MERLOU GERZON, Their respective working hours were as follows:
JENNIFER DEIPARINE,
and JOSEPHINE LERASAN, Name Time No. of Hours
Respondents. September 26, 2006 1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x 8:00 A.M.-12:00 noon
2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7
DECISION 3. Joy Sanchez 1:00 P.M.-10:00 P.M.(Sunday) 9 hrs.
9:00 A.M.-6:00 P.M. (WF) 9 hrs.
4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs.[5]
CALLEJO, SR., J.: The PAs were under the control and supervision of Assistant Station Manager
Dante J. Luzon, and News Manager Leo Lastimosa.
Before us is a petition for review on certiorari of the Decision[1] of the Court of Appeals
(CA) in CA-G.R. SP No. 76582 and the Resolution denying the motion for On December 19, 1996, petitioner and the ABS-CBN Rank-and-File
reconsideration thereof. The CA affirmed the Decision[2] and Resolution[3] of the Employees executed a Collective Bargaining Agreement (CBA) to be effective during
National Labor Relations Commission (NLRC) in NLRC Case No. V-000762-2001 (RAB the period from December 11, 1996 to December 11, 1999. However, since petitioner
Case No. VII-10-1661-2001) which likewise affirmed, with modification, the decision of refused to recognize PAs as part of the bargaining unit, respondents were not included
the Labor Arbiter declaring the respondents Marlyn Nazareno, Merlou Gerzon, Jennifer to the CBA.[6]
Deiparine and Josephine Lerasan as regular employees.
The Antecedents On July 20, 2000, petitioner, through Dante Luzon, issued a Memorandum
informing the PAs that effective August 1, 2000, they would be assigned to non-drama
Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the programs, and that the DYAB studio operations would be handled by the studio
broadcasting business and owns a network of television and radio stations, whose technician. Thus, their revised schedule and other assignments would be as follows:
operations revolve around the broadcast, transmission, and relay of telecommunication
signals. It sells and deals in or otherwise utilizes the airtime it generates from its radio Monday Saturday
and television operations. It has a franchise as a broadcasting company, and was 4:30 A.M. 8:00 A.M. Marlene Nazareno.
likewise issued a license and authority to operate by the National Telecommunications Miss Nazareno will then be assigned at the Research Dept.
Commission. From 8:00 A.M. to 12:00

Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan 4:30 P.M. 12:00 MN Jennifer Deiparine
as production assistants (PAs) on different dates. They were assigned at the news and
public affairs, for various radio programs in the Cebu Broadcasting Station, with a Sunday
monthly compensation of P4,000. They were issued ABS-CBN employees identification 5:00 A.M. 1:00 P.M. Jennifer Deiparine
cards and were required to work for a minimum of eight hours a day, including Sundays 1:00 P.M. 10:00 P.M. Joy Sanchez
and holidays. They were made to perform the following tasks and duties:

a) Prepare, arrange airing of commercial broadcasting based on Respondent Gerzon was assigned as the full-time PA of the TV News Department
the daily operations log and digicart of respondent ABS-CBN; reporting directly to Leo Lastimosa.
 30

On October 12, 2000, respondents filed a Complaint for Recognition of Exhibit F - ABS-CBN Employees Identification Card
Regular Employment Status, Underpayment of Overtime Pay, Holiday Pay, Premium Exhibit F-1 - ABS-CBN Salary Voucher from Aug.
Pay, Service Incentive Pay, Sick Leave Pay, and 13th Month Pay with Damages against Exhibit F-2 & 2000 to Jan. 2001
the petitioner before the NLRC. The Labor Arbiter directed the parties to submit their Exhibit F-3
respective position papers. Upon respondents failure to file their position papers within Exhibit F-4 - Certification dated July 6, 2000
the reglementary period, Labor Arbiter Jose G. Gutierrez issued an Order dated Acknowledging regular status of
Complainant Joy Sanchez Lerasan
April 30, 2001, dismissing the complaint without prejudice for lack of interest to pursue Signed by ABS-CBN Administrative
the case. Respondents received a copy of the Order on May 16, 2001.[7] Instead of re- Officer May Kima Hife
filing their complaint with the NLRC within 10 days from May 16, 2001, they filed, Date employed: April 15, 1998
on June 11, 2001, an Earnest Motion to Refile Complaint with Motion to Admit Position Length of service: 3 yrs. and one (1) month[9]
Paper and Motion to Submit Case For Resolution.[8] The Labor Arbiter granted this Respondents insisted that they belonged to a work pool from which petitioner
motion in an Order dated June 18, 2001, and forthwith admitted the position paper of chose persons to be given specific assignments at its discretion, and were thus under
the complainants. Respondents made the following allegations: its direct supervision and control regardless of nomenclature. They prayed that
judgment be rendered in their favor, thus:
1. Complainants were engaged by respondent ABS-CBN as regular
and full-time employees for a continuous period of more than five (5) WHEREFORE, premises considered, this Honorable Arbiter
years with a monthly salary rate of Four Thousand (P4,000.00) pesos is most respectfully prayed, to issue an order compelling defendants
beginning 1995 up until the filing of this complaint on November 20, to pay complainants the following:
2000.
1. One Hundred Thousand Pesos (P100,000.00) each
Machine copies of complainants ABS-CBN Employees Identification and by way of moral damages;
Card and salary vouchers are hereto attached as follows, thus: 2. Minimum wage differential;
3. Thirteenth month pay differential;
I. Jennifer Deiparine: 4. Unpaid service incentive leave benefits;
Exhibit A - ABS-CBN Employees Identification Card 5. Sick leave;
Exhibit B, - ABS-CBN Salary Voucher from Nov. 6. Holiday pay;
Exhibit B-1 & 1999 to July 2000 at P4,000.00 7. Premium pay;
Exhibit B-2 8. Overtime pay;
Date employed: September 15, 1995 9. Night shift differential.
Length of service: 5 years & nine (9) months
Complainants further pray of this Arbiter to declare them
II. Merlou Gerzon - ABS-CBN Employees Identification Card regular and permanent employees of respondent ABS-CBN as a
Exhibit C condition precedent for their admission into the existing union and
Exhibit D collective bargaining unit of respondent company where they may as
Exhibit D-1 & such acquire or otherwise perform their obligations thereto or enjoy
Exhibit D-2 - ABS-CBN Salary Voucher from March the benefits due therefrom.
1999 to January 2001 at P4,000.00
Date employed: September 1, 1995 Complainants pray for such other reliefs as are just and
Length of service: 5 years & 10 months equitable under the premises.[10]

III. Marlene Nazareno

Exhibit E - ABS-CBN Employees Identification Card For its part, petitioner alleged in its position paper that the respondents were
Exhibit E - ABS-CBN Salary Voucher from Nov. PAs who basically assist in the conduct of a particular program ran by an anchor or
Exhibit E-1 & 1999 to December 2000 talent.Among their duties include monitoring and receiving incoming calls from listeners
Exhibit :E-2 and field reporters and calls of news sources; generally, they perform leg work for the
Date employed: April 17, 1996 anchors during a program or a particular production. They are considered in the
Length of service: 5 years and one (1) month industry as program employees in that, as distinguished from regular or station
employees, they are basically engaged by the station for a particular or specific
IV. Joy Sanchez Lerasan program broadcasted by the radio station. Petitioner asserted that as PAs, the
 31

complainants were issued talent information sheets which are updated from time to as the payroll will show, respondents were paid all salaries and benefits due them
time, and are thus made the basis to determine the programs to which they shall later under the law.[12]
be called on to assist. The program assignments of complainants were as follows: Petitioner also alleged that the Labor Arbiter had no jurisdiction to involve the CBA and
interpret the same, especially since respondents were not covered by the bargaining
a. Complainant Nazareno assists in the programs: unit.
1) Nagbagang Balita (early morning edition)
2) Infor Hayupan On July 30, 2001, the Labor Arbiter rendered judgment in favor of the
3) Arangkada (morning edition) respondents, and declared that they were regular employees of petitioner; as such, they
4) Nagbagang Balita (mid-day edition) were awarded monetary benefits. The fallo of the decision reads:

b. Complainant Deiparine assists in the programs:

1) Unzanith WHEREFORE, the foregoing premises considered, judgment is
2) Serbisyo de Arevalo hereby rendered declaring the complainants regular employees of the
3) Arangkada (evening edition) respondent ABS-CBN Broadcasting Corporation and directing the
4) Balitang K (local version) same respondent to pay complainants as follows:
5) Abante Subu
6) Pangutana Lang
I - Merlou A. Gerzon P12,025.00
c. Complainant Gerzon assists in the program: II - Marlyn Nazareno 12,025.00
1) On Mondays and Tuesdays: III - Jennifer Deiparine 12,025.00
(a) Unzanith IV - Josephine Sanchez Lerazan 12,025.00
(b) Serbisyo de Arevalo _________
(c) Arangkada (evening edition) P48,100.00
(d) Balitang K (local version)
(e) Abante Sugbu plus ten (10%) percent Attorneys Fees or a TOTAL aggregate
(f) Pangutana Lang amount of PESOS: FIFTY TWO THOUSAND NINE HUNDRED TEN
2) On Thursdays (P52,910.00).
Nagbagang Balita
3) On Saturdays Respondent Veneranda C. Sy is absolved from any liability.
(a) Nagbagang Balita
(b) Info Hayupan SO ORDERED.[13]
(c) Arangkada (morning edition)
(d) Nagbagang Balita (mid-day edition)
4) On Sundays:
(a) Siesta Serenata However, the Labor Arbiter did not award money benefits as provided in the CBA on his
(b) Sunday Chismisan belief that he had no jurisdiction to interpret and apply the agreement, as the same was
(c) Timbangan sa Hustisya within the jurisdiction of the Voluntary Arbitrator as provided in Article 261 of the Labor
(d) Sayri ang Lungsod Code.
(e) Haranahan[11]
Respondents counsel received a copy of the decision on August 29,
2001. Respondent Nazareno received her copy on August 27, 2001, while the other
Petitioner maintained that PAs, reporters, anchors and talents occasionally respondents received theirs on September 8, 2001. Respondents signed and filed their
sideline for other programs they produce, such as drama Appeal Memorandum on September 18, 2001.

talents in other productions. As program employees, a PAs engagement is coterminous
with the completion of the program, and may be extended/renewed provided that the
program is on-going; a PA may also be assigned to new programs upon the
cancellation of one program and the commencement of another. As such program
employees, their compensation is computed on a program basis, a fixed amount for
performance services irrespective of the time consumed. At any rate, petitioner claimed,
For its part, petitioner filed a motion for reconsideration, which the Labor
Arbiter denied and considered as an appeal, conformably with Section 5, Rule V, of the
NLRC Rules of Procedure. Petitioner forthwith appealed the decision to the NLRC,
while respondents filed a partial appeal.
In its appeal, petitioner alleged the following:

1. That the Labor Arbiter erred in reviving or re-opening this case
which had long been dismissed without prejudice for more than
thirty (30) calendar days;
2. That the Labor Arbiter erred in depriving the respondent of its
Constitutional right to due process of law;
3. That the Labor Arbiter erred in denying respondents Motion
for Reconsideration on an interlocutory order on the ground that
the same is a prohibited pleading;
4. That the Labor Arbiter erred when he ruled that the
complainants are regular employees of the respondent;
5. That the Labor Arbiter erred when he ruled that the
complainants are entitled to 13th month pay, service incentive
leave pay and salary differential; and
6. That the Labor Arbiter erred when he ruled that complainants
are entitled to attorneys fees.[14]
On November 14, 2002, the NLRC rendered judgment modifying the decision of the
Labor Arbiter. The fallo of the decision reads:
WHEREFORE, premises considered, the decision of Labor
Arbiter Jose G. Gutierrez dated 30 July 2001 is SET ASIDE and
VACATED and a new one is entered ORDERINGrespondent ABS-
CBN Broadcasting Corporation, as follows:
1. To pay complainants of their wage differentials and other
benefits arising from the CBA as of 30 September 2002 in the
aggregate amount of Two Million Five Hundred, Sixty-One
Thousand Nine Hundred Forty-Eight Pesos and 22/100
(P2,561,948.22), broken down as follows:
a. Deiparine, Jennifer - P 716,113.49
b. Gerzon, Merlou - 716,113.49
c. Nazareno, Marlyn - 716,113.49
d. Lerazan, Josephine Sanchez - 413,607.75
Total - P 2,561,948.22
2. To deliver to the complainants Two Hundred Thirty-Three (233)
sacks of rice as of 30 September 2002 representing their rice
subsidy in the CBA, broken down as follows:
a. Deiparine, Jennifer - 60 Sacks
b. Gerzon, Merlou - 60 Sacks
c. Nazareno, Marlyn - 60 Sacks
d. Lerazan, Josephine Sanchez - 53 Sacks
Total 233 Sacks; and
32
3. To grant to the complainants all the benefits of the CBA after 30
September 2002.
SO ORDERED.[15]
The NLRC declared that the Labor Arbiter acted conformably with the Labor
Code when it granted respondents motion to refile the complaint and admit their
position paper. Although respondents were not parties to the CBA between petitioner
and the ABS-CBN Rank-and-File Employees Union, the NLRC nevertheless granted
and computed respondents monetary benefits based on the 1999 CBA, which was
effective until September 2002. The NLRC also ruled that the Labor Arbiter had
jurisdiction over the complaint of respondents because they acted in their individual
capacities and not as members of the union. Their claim for monetary benefits was
within the context of Article 217(6) of the Labor Code. The validity of respondents claim
does not depend upon the interpretation of the CBA.
The NLRC ruled that respondents were entitled to the benefits under the CBA
because they were regular employees who contributed to the profits of petitioner
through their labor. The NLRC cited the ruling of this Court in New Pacific Timber &
Supply Company v. National Labor Relations Commission.[16]
Petitioner filed a motion for reconsideration, which the NLRC denied.
Petitioner thus filed a petition for certiorari under Rule 65 of the Rules of Court
before the CA, raising both procedural and substantive issues, as follows: (a) whether
the NLRC acted without jurisdiction in admitting the appeal of respondents; (b) whether
the NLRC committed palpable error in scrutinizing the reopening and revival of the
complaint of respondents with the Labor Arbiter upon due notice despite the lapse of 10
days from their receipt of the July 30, 2001 Order of the Labor Arbiter; (c) whether
respondents were regular employees; (d) whether the NLRC acted without jurisdiction
in entertaining and resolving the claim of the respondents under the CBA instead of
referring the same to the Voluntary Arbitrators as provided in the CBA; and (e) whether
the NLRC acted with grave abuse of discretion when it awarded monetary benefits to
respondents under the CBA although they are not members of the appropriate
bargaining unit.
On February 10, 2004, the CA rendered judgment dismissing the petition. It
held that the perfection of an appeal shall be upon the expiration of the last day to
appeal by all parties, should there be several parties to a case. Since respondents
received their copies of the decision on September 8, 2001 (except respondent
Nazareno who received her copy of the decision on August 27, 2001), they had
until September 18, 2001 within which to file their Appeal Memorandum. Moreover, the
CA declared that respondents failure to submit their position paper on time is not a
ground to strike out the paper from the records, much less dismiss a complaint.
Anent the substantive issues, the appellate court stated that respondents are
not mere project employees, but regular employees who perform tasks necessary and
desirable in the usual trade and business of petitioner and not just its project

employees. Moreover, the CA added, the award of benefits accorded to rank-and-file
employees under the 1996-1999 CBA is a necessary consequence of the NLRC ruling
that respondents, as PAs, are regular employees.
Finding no merit in petitioners motion for reconsideration, the CA denied the
same in a Resolution[17] dated June 16, 2004.
Petitioner thus filed the instant petition for review on certiorari and raises the
following assignments of error:
1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT
JURISDICTION AND GRAVELY ERRED IN UPHOLDING THE
NATIONAL LABOR RELATIONS COMMISSION
NOTWITHSTANDING THE PATENT NULLITY OF THE LATTERS
DECISION AND RESOLUTION.
2. THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN AFFIRMING THE RULING OF THE NLRC FINDING
RESPONDENTS REGULAR EMPLOYEES.
3. THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN AFFIRMING THE RULING OF THE NLRC AWARDING
CBA BENEFITS TO RESPONDENTS.[18]
Considering that the assignments of error are interrelated, the Court shall
resolve them simultaneously.
Petitioner asserts that the appellate court committed palpable and serious
error of law when it affirmed the rulings of the NLRC, and entertained respondents
appeal from the decision of the Labor Arbiter despite the admitted lapse of the
reglementary period within which to perfect
the same. Petitioner likewise maintains that the 10-day period to appeal must be
reckoned from receipt of a partys counsel, not from the time the party learns of the
decision, that is, notice to counsel is notice to party and not the other way around.
Finally, petitioner argues that the reopening of a complaint which the Labor Arbiter has
dismissed without prejudice is a clear violation of Section 1, Rule V of the NLRC Rules;
such order of dismissal had already attained finality and can no longer be set aside.
Respondents, on the other hand, allege that their late appeal is a non-issue
because it was petitioners own timely appeal that empowered the NLRC to reopen the
case. They assert that although the appeal was filed 10 days late, it may still be given
due course in the interest of substantial justice as an exception to the general rule that
the negligence of a counsel binds the client. On the issue of the late filing of their
position paper, they maintain that this is not a ground to strike it out from the records or
dismiss the complaint.
We find no merit in the petition.
33
We agree with petitioners contention that the perfection of an appeal within the
statutory or reglementary period is not only mandatory, but also jurisdictional; failure to
do so renders the assailed decision final and executory and deprives the appellate court
or body of the legal authority to alter the final judgment, much less entertain the appeal.
However, this Court has time and again ruled that in exceptional cases, a belated
appeal may be given due course if greater injustice may occur if an appeal is not given
due course than if the reglementary period to appeal were strictly followed. [19] The Court
resorted to this extraordinary measure even at the expense of sacrificing order and
efficiency if only to serve the greater principles of substantial justice and equity. [20]
In the case at bar, the NLRC did not commit a grave abuse of its discretion in
giving Article 223[21] of the Labor Code a liberal application to prevent the miscarriage of
justice. Technicality should not be allowed to stand in the way of equitably and
completely resolving the rights and obligations of the parties. [22] We have held in a
catena of cases that technical rules are not binding in labor cases and are not to be
applied strictly if the result would be detrimental to the workingman.[23]
Admittedly, respondents failed to perfect their appeal from the decision of the
Labor Arbiter within the reglementary period therefor. However, petitioner perfected its
appeal within the period, and since petitioner had filed a timely appeal, the NLRC
acquired jurisdiction over the case to give due course to its appeal and render the
decision of November 14, 2002. Case law is that the party who failed to appeal from the
decision of the Labor Arbiter to the NLRC can still participate in a separate appeal
timely filed by the adverse party as the situation is considered to be of greater benefit to
both parties.[24]
We find no merit in petitioners contention that the Labor Arbiter abused his
discretion when he admitted respondents position paper which had been belatedly filed.
It bears stressing that the Labor Arbiter is mandated by law to use every reasonable
means to ascertain the facts in each case speedily and objectively, without
technicalities of law or procedure, all in the interest of due process.[25] Indeed, as
stressed by the appellate court, respondents failure to submit a position paper on time
is not a ground for striking out the paper from the records, much less for dismissing a
complaint.[26] Likewise, there is simply no truth to petitioners assertion that it was denied
due process when the Labor Arbiter admitted respondents position paper without
requiring it to file a comment before admitting said position paper. The essence of due
process in administrative proceedings is simply an opportunity to explain ones side or
an opportunity to seek reconsideration of the action or ruling complained of. Obviously,
there is nothing in the records that would suggest that petitioner had absolute lack of
opportunity to be heard.[27] Petitioner had the right to file a motion for reconsideration of
the Labor Arbiters admission of respondents position paper, and even file a Reply
thereto. In fact, petitioner filed its position paper on April 2, 2001. It must be stressed
that Article 280 of the Labor Code was encoded in our statute books to hinder the
circumvention by unscrupulous employers of the employees right to security of tenure
by indiscriminately and absolutely ruling out all written and oral agreements
inharmonious with the concept of regular employment defined therein. [28]
We quote with approval the following pronouncement of the NLRC:

The complainants, on the other hand, contend that
respondents assailed the Labor Arbiters order dated 18 June 2001 as
violative of the NLRC Rules of Procedure and as such is violative of
their right to procedural due process. That while suggesting that an
Order be instead issued by the Labor Arbiter for complainants to refile
this case, respondents impliedly submit that there is not any
substantial damage or prejudice upon the refiling, even so,
respondents suggestion acknowledges complainants right to
prosecute this case, albeit with the burden of repeating the same
procedure, thus, entailing additional time, efforts, litigation cost and
precious time for the Arbiter to repeat the same process
twice. Respondents suggestion, betrays its notion of prolonging,
rather than promoting the early resolution of the case.
Although the Labor Arbiter in his Order dated 18 June 2001 which revived and
re-opened the dismissed case without prejudice beyond the ten (10) day
reglementary period had inadvertently failed to follow Section 16, Rule V,
Rules Procedure of the NLRC which states:
A party may file a motion to revive or re-open a
case dismissed without prejudice within ten (10) calendar
days from receipt of notice of the order dismissing the same;
otherwise, his only remedy shall be to re-file the case in the
arbitration branch of origin.
the same is not a serious flaw that had prejudiced the respondents right to due
process. The case can still be refiled because it has not yet
prescribed. Anyway, Article 221 of the Labor Code provides:
In any proceedings before the Commission or any
of the Labor Arbiters, the rules of evidence prevailing in
courts of law or equity shall not be controlling and it is the
spirit and intention of this Code that the Commission and its
members and the Labor Arbiters shall use every and all
reasonable means to ascertain the facts in each case
speedily and objectively and without regard to technicalities
of law or procedure, all in the interest of due process.
The admission by the Labor Arbiter of the complainants Position
Paper and Supplemental Manifestation which were belatedly filed just
only shows that he acted within his discretion as he is enjoined by law
to use every reasonable means to ascertain the facts in each case
speedily and objectively, without regard to technicalities of law or
procedure, all in the interest of due process. Indeed, the failure to
submit a position paper on time is not a ground for striking out the
paper from the records, much less for dismissing a complaint in the
case of the complainant.(University of Immaculate Conception vs.
UIC Teaching and Non-Teaching Personnel Employees, G.R. No.
144702, July 31, 2001).
34
In admitting the respondents position paper albeit
late, the Labor Arbiter acted within her discretion. In fact,
she is enjoined by law to use every reasonable means to
ascertain the facts in each case speedily and objectively,
without technicalities of law or procedure, all in the interest
of due process. (Panlilio vs. NLRC, 281 SCRA 53).
The respondents were given by the Labor Arbiter the
opportunity to submit position paper. In fact, the respondents had
filed their position paper on 2 April 2001. What is material in the
compliance of due process is the fact that the parties are given the
opportunities to submit position papers.
Due process requirements are satisfied where the
parties are given the opportunities to submit position
papers. (Laurence vs. NLRC, 205 SCRA 737).
Thus, the respondent was not deprived of its Constitutional
right to due process of law.[29]
We reject, as barren of factual basis, petitioners contention that respondents
are considered as its talents, hence, not regular employees of the broadcasting
company. Petitioners claim that the functions performed by the respondents are not at
all necessary, desirable, or even vital to its trade or business is belied by the evidence
on record.
Case law is that this Court has always accorded respect and finality to the
findings of fact of the CA, particularly if they coincide with those of the Labor Arbiter and
the National Labor Relations Commission, when supported by substantial
evidence.[30] The question of whether respondents are regular or project employees or
independent contractors is essentially factual in nature; nonetheless, the Court is
constrained to resolve it due to its tremendous effects to the legions of production
assistants working in the Philippine broadcasting industry.
We agree with respondents contention that where a person has rendered at
least one year of service, regardless of the nature of the activity performed, or where
the work is continuous or intermittent, the employment is considered regular as long as
the activity exists, the reason being that a customary appointment is not indispensable
before one may be formally declared as having attained regular status. Article 280 of
the Labor Code provides:
ART. 280. REGULAR AND CASUAL EMPLOYMENT.The
provisions of written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an employment shall
be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the
usual business or trade of the employer except where the
employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time

of the engagement of the employee or where the work or services to
be performed is seasonal in nature and the employment is for the
duration of the season.
In Universal Robina Corporation v. Catapang,[31] the Court reiterated the test in
determining whether one is a regular employee:
The primary standard, therefore, of determining regular
employment is the reasonable connection between the particular activity
performed by the employee in relation to the usual trade or business of
the employer. The test is whether the former is usually necessary or
desirable in the usual business or trade of the employer. The connection
can be
determined by considering the nature of work performed and its relation
to the scheme of the particular business or trade in its entirety. Also, if the
employee has been performing the job for at least a year, even if the
performance is not continuous and merely intermittent, the law deems
repeated and continuing need for its performance as sufficient evidence
of the necessity if not indispensability of that activity to the business.
Hence, the employment is considered regular, but only with respect to
such activity and while such activity exists.[32]
As elaborated by this Court in Magsalin v. National Organization of Working
Men:[33]
Even while the language of law might have been more
definitive, the clarity of its spirit and intent, i.e., to ensure a regular
workers security of tenure, however, can hardly be doubted.In
determining whether an employment should be considered regular or
non-regular, the applicable test is the reasonable connection between the
particular activity performed by the employee in relation to the usual
business or trade of the employer. The standard, supplied by the law
itself, is whether the work undertaken is necessary or desirable in the
usual business or trade of the employer, a fact that can be assessed by
looking into the nature of the services rendered and its relation to the
general scheme under which the business or trade is pursued in the
usual course. It is distinguished from a specific undertaking that is
divorced from the normal activities required in carrying on the particular
business or trade. But, although the work to be performed is only for a
specific project or seasonal, where a person thus engaged has been
performing the job for at least one year, even if the performance is not
continuous or is merely intermittent, the law deems the repeated and
continuing need for its performance as being sufficient to indicate the
necessity or desirability of that activity to the business or trade of the
employer. The employment of such person is also then deemed to be
regular with respect to such activity and while such activity exists. [34]
35
Not considered regular employees are project employees, the completion or
termination of which is more or less determinable at the time of employment, such as
those employed in connection with a particular construction project, and seasonal
employees whose employment by its nature is only desirable for a limited period of
time. Even then, any employee who has rendered at least one year of service, whether
continuous or intermittent, is deemed regular with respect to the activity performed and
while such activity actually exists.
It is of no moment that petitioner hired respondents as talents. The fact that
respondents received pre-agreed talent fees instead of salaries, that they did not
observe the required office hours, and that they were permitted to join other productions
during their free time are not conclusive of the nature of their employment.
Respondents cannot be considered talents because they are not actors or actresses or
radio specialists or mere clerks or utility employees. They are regular employees who
perform several different duties under the control and direction of ABS-CBN executives
and supervisors.
Thus, there are two kinds of regular employees under the law: (1) those
engaged to perform activities which are necessary or desirable in the usual business
or trade of the employer; and (2) those casual employees who have rendered at least
one year of service, whether continuous or broken, with respect to the activities in
which they are employed.[35]
The law overrides such conditions which are prejudicial to the interest of the
worker whose weak bargaining situation necessitates the succor of the State. What
determines whether a certain employment is regular or otherwise is not the will or word
of the employer, to which the worker oftentimes acquiesces, much less the procedure of
hiring the employee or the manner of paying the salary or the actual time spent at
work. It is the character of the activities performed in relation to the particular trade or
business taking into account all the circumstances, and in some cases the length of
time of its performance and its continued existence.[36] It is obvious that one year after
they were employed by petitioner, respondents became regular employees by operation
of law.[37]
Additionally, respondents cannot be considered as project or program
employees because no evidence was presented to show that the duration and scope of
the project were determined or specified at the time of their engagement. Under existing
jurisprudence, project could refer to two distinguishable types of activities. First, a
project may refer to a particular job or undertaking that is within the regular or usual
business of the employer, but which is distinct and separate, and identifiable as such,
from the other undertakings of the company. Such job or undertaking begins and ends
at determined or determinable times. Second, the term project may also refer to a
particular job or undertaking that is not within the regular business of the employer.
Such a job or undertaking must also be identifiably separate and distinct from the
ordinary or regular business operations of the employer. The job or undertaking also
begins and ends at determined or determinable times.[38]
The principal test is whether or not the project employees were assigned to
carry out a specific project or undertaking, the duration and scope of which were
specified at the time the employees were engaged for that project. [39]

In this case, it is undisputed that respondents had continuously performed the
same activities for an average of five years. Their assigned tasks are necessary or
desirable in the usual business or trade of the petitioner. The persisting need for their
services is sufficient evidence of the necessity and indispensability of such services to
petitioners business or trade.[40] While length of time may not be a sole controlling test
for project employment, it can be a strong factor to determine whether the employee
was hired for a specific undertaking or in fact tasked to perform functions which are
vital, necessary and indispensable to the usual trade or business of the
employer.[41] We note further that petitioner did not report the termination of
respondents employment in the particular project to the Department of Labor and
Employment Regional Office having jurisdiction over the workplace within 30 days
following the date of their separation from work, using the prescribed form on
employees termination/ dismissals/suspensions.[42]
As gleaned from the records of this case, petitioner itself is not certain how to
categorize respondents. In its earlier pleadings, petitioner classified respondents
as program employees, and in later pleadings, independent contractors. Program
employees, or project employees, are different from independent contractors because
in the case of the latter, no employer-employee relationship exists.
Petitioners reliance on the ruling of this Court in Sonza v. ABS-CBN
Broadcasting Corporation[43] is misplaced. In that case, the Court explained why Jose
Sonza, a well-known television and radio personality, was an independent contractor
and not a regular employee:
A. Selection and Engagement of Employee
ABS-CBN engaged SONZAS services to co-host its television and
radio programs because of SONZAS peculiar skills, talent and celebrity
status. SONZA contends that the discretion used by respondent in
specifically selecting and hiring complainant over other broadcasters of
possibly similar experience and qualification as complainant belies
respondents claim of independent contractorship.
Independent contractors often present themselves to possess
unique skills, expertise or talent to distinguish them from ordinary
employees. The specific selection and hiring of SONZA, because of his
unique skills, talent and celebrity status not possessed by ordinary
employees, is a circumstance indicative, but not conclusive, of an
independent contractual relationship. If SONZA did not possess such
unique skills, talent and celebrity status, ABS-CBN would not have
entered into the Agreement with SONZA but would have hired him
through its personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA does
not conclusively determine his status. We must consider all the
circumstances of the relationship, with the control test being the most
important element.
36
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his
fees going to MJMDC. SONZA asserts that this mode of fee payment
shows that he was an employee of ABS-CBN. SONZA also points out
that ABS-CBN granted him benefits and privileges which he would not
have enjoyed if he were truly the subject of a valid job contract.
All the talent fees and benefits paid to SONZA were the result of
negotiations that led to the Agreement. If SONZA were ABS-CBNs
employee, there would be no need for the parties to stipulate on benefits
such as SSS, Medicare, x x x and 13 th month pay which the law
automatically incorporates into every employer-employee
contract. Whatever benefits SONZA enjoyed arose from contract and not
because of an employer-employee relationship.
SONZAs talent fees, amounting to P317,000 monthly in the second and
third year, are so huge and out of the ordinary that they indicate more an
independent contractual relationship rather than an employer-employee
relationship. ABS-CBN agreed to pay SONZA such huge talent fees
precisely because of SONZAS unique skills, talent and celebrity status
not possessed by ordinary employees. Obviously, SONZA acting alone
possessed enough bargaining power to demand and receive such huge
talent fees for his services. The power to bargain talent fees way above
the salary scales of ordinary employees is a circumstance indicative, but
not conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC
does not negate the status of SONZA as an independent
contractor. The parties expressly agreed on such mode of
payment.Under the Agreement, MJMDC is the AGENT of SONZA, to
whom MJMDC would have to turn over any talent fee accruing under
the Agreement.[44]
In the case at bar, however, the employer-employee relationship between
petitioner and respondents has been proven.
First. In the selection and engagement of respondents, no peculiar or unique skill, talent
or celebrity status was required from them because they were merely hired through
petitioners personnel department just like any ordinary employee.
Second. The so-called talent fees of respondents correspond to wages given as a result
of an employer-employee relationship. Respondents did not have the power to bargain
for huge talent fees, a circumstance negating independent contractual relationship.
Third. Petitioner could always discharge respondents should it find their work
unsatisfactory, and respondents are highly dependent on the petitioner for continued
work.

Fourth. The degree of control and supervision exercised by petitioner over respondents
through its supervisors negates the allegation that respondents are independent
contractors.
The presumption is that when the work done is an integral part of the
regular business of the employer and when the worker, relative to the employer,
does not furnish an independent business or professional service, such work is a
regular employment of such employee and not an independent contractor.[45] The
Court will peruse beyond any such agreement to examine the facts that typify the
parties actual relationship.[46]
It follows then that respondents are entitled to the benefits provided for in the
existing CBA between petitioner and its rank-and-file employees. As regular employees,
respondents are entitled to the benefits granted to all other regular employees of
petitioner under the CBA.[47] We quote with approval the ruling of the appellate court,
that the reason why production assistants were excluded from the CBA is precisely
because they were erroneously classified and treated as project employees by
petitioner:
x x x The award in favor of private respondents of the benefits accorded to rank-
and-file employees of ABS-CBN under the 1996-1999 CBA is a necessary
consequence of public respondents ruling that private respondents as production
assistants of petitioner are regular employees. The monetary award is not
considered as claims involving the interpretation or implementation of the collective
bargaining agreement. The reason why production assistants were excluded from
the said agreement is precisely because they were classified and treated as project
employees by petitioner.
As earlier stated, it is not the will or word of the employer which determines
the nature of employment of an employee but the nature of the activities
performed by such employee in relation to the particular business or trade
of the employer. Considering that We have clearly found that private
respondents are regular employees of petitioner, their exclusion from the
said CBA on the misplaced belief of the parties to the said agreement that
they are project employees, is therefore not proper. Finding said private
respondents as regular employees and not as mere project employees,
they must be accorded the benefits due under the said Collective
Bargaining Agreement.
A collective bargaining agreement is a contract entered into by the
union representing the employees and the employer. However, even the
non-member employees are entitled to the benefits of the contract. To
accord its benefits only to members of the union without any valid reason
would constitute undue discrimination against non-members. A collective
bargaining agreement is binding on all employees of the
company. Therefore, whatever benefits are given to the other employees of
ABS-CBN must likewise be accorded to private respondents who were
regular employees of petitioner.[48]
37
Besides, only talent-artists were excluded from the CBA and not production
assistants who are regular employees of the respondents. Moreover, under Article 1702
of the New Civil Code: In case of doubt, all labor legislation and all labor contracts shall
be construed in favor of the safety and decent living of the laborer.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of
merit. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No.
76582 are AFFIRMED. Costs against petitioner.
SO ORDERED.
DIGEST:
Facts: Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the
broadcasting business and owns a network of television and radio stations, whose
operations revolve around the broadcast, transmission, and relay of telecommunication
signals. It sells and deals in or otherwise utilizes the airtime it generates from its radio
and television operations. It has a franchise as a broadcasting company, and was
likewise issued a license and authority to operate by the National Telecommunications
Commission.
Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as
production assistants (PAs) on different dates. They were assigned at the news and
public affairs, for various radio programs in the Cebu Broadcasting Station. On
December 19, 1996, petitioner and the ABS-CBN Rank-and-File Employees executed a
Collective Bargaining Agreement (CBA) to be effective during the period from
December 11, 1996 to December 11, 1999. However, since petitioner refused to
recognize PAs as part of the bargaining unit, respondents were not included to the
CBA.
On October 12, 2000, respondents filed a Complaint for Recognition of Regular
Employment Status, Underpayment of Overtime Pay, Holiday Pay, Premium Pay,
Service Incentive Pay, Sick Leave Pay, and 13th Month Pay with Damages against the
petitioner before the NLRC. The Labor Arbiter rendered judgment in favor of the
respondents, and declared that they were regular employees of petitioner as such, they
were awarded monetary benefits. NLRC affirmed the decision of the Labor Arbiter.
Petitioner filed a motion for reconsideration but CA dismissed it.
Issue: Whether or not the respondents were considered regular employees of ABS-
CBN.
Ruling: The respondents are regular employees of ABS-CBN. It was held that where a
person has rendered at least one year of service, regardless of the nature of the activity
performed, or where the work is continuous or intermittent, the employment is
considered regular as long as the activity exists, the reason being that a customary
appointment is not indispensable before one may be formally declared as having
attained regular status.
 38

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

Additionally, respondents cannot be considered as project or program employees

because no evidence was presented to show that the duration and scope of the project
were determined or specified at the time of their engagement. In the case at bar,
however, the employer-employee relationship between petitioner and respondents has
been proven. In the selection and engagement of respondents, no peculiar or unique
skill, talent or celebrity status was required from them because they were merely hired
through petitioners personnel department just like any ordinary employee.
Respondents did not have the power to bargain for huge talent fees, a circumstance
negating independent contractual relationship. Respondents are highly dependent on
the petitioner for continued work. The degree of control and supervision exercised by
petitioner over respondents through its supervisors negates the allegation that
respondents are independent contractors.

The presumption is that when the work done is an integral part of the regular business
of the employer and when the worker, relative to the employer, does not furnish an
independent business or professional service, such work is a regular employment of
such employee and not an independent contractor. As regular employees, respondents
are entitled to the benefits granted to all other regular employees of petitioner under the
CBA . Besides, only talent-artists were excluded from the CBA and not production
assistants who are regular employees of the respondents. Moreover, under Article 1702
of the New Civil Code: In case of doubt, all labor legislation and all labor contracts shall
be construed in favor of the safety and decent living of the laborer.

FIRST DIVISION
SYCIP, GORRES, VELAYO G.R. No. 161366
& COMPANY,
Petitioner, Present:
PUNO, C.J., Chairperson,
CARPIO,
- versus - CORONA,
LEONARDO-DE CASTRO, and
BERSAMIN, JJ.
CAROL DE RAEDT, Promulgated:
Respondent. June 16, 2009
x-----------------------------------------------------------------------------------------x
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review[1] challenging the 7 October 2003
Decision[2] and 17 December 2003 Resolution[3] of the Court of Appeals in CA-G.R. SP
No. 59916. The Court of Appeals reversed the 16 February 2000 Decision [4] of the
National Labor Relations Commission and partially reinstated the 14 July 1999
Decision[5] of Labor Arbiter Monroe C. Tabingan holding that respondent Carol De
Raedt (De Raedt) was illegally dismissed by petitioner Sycip, Gorres, Velayo &
Company (SGV).
The Facts
Sometime in June 1989, the Philippine Government and the Commission for European
Communities (Commission) entered into a Financing Memorandum whereby the
Commission undertook to provide financial and technical assistance for the
implementation of rural micro projects in five provinces of the Cordillera area in
Northern Luzon.Consequently, the Central Cordillera Agricultural Programme (CECAP)
project was launched to be implemented by the Department of Agriculture (DA).
On 22 May 1989, the DA contracted Travers Morgan International Ltd. (TMI) to provide
the required technical assistance services for CECAP.
On 1 July 1989, TMI and SGV entered into a Sub-Consultancy Agreement for the latter
to undertake part of the technical assistance services requirements of the CECAP. SGV
would provide for the Technical Assistance Services. Hence, SGV proposed qualified
consultants as defined by the Terms of Reference.
The acceptance and appointment of the proposed consultants to the project were
subject to the unanimous approval of the TMI, the DA and the Commission. For the
39
position of Sociologist, SGV proposed Felino Lorente (Lorente). However, Thomas
Gimenez (Gimenez) of the DA disputed the qualifications of Lorente and recommended
instead De Raedt.
Martin Tull (Tull) of TMI replied to Gimenez that TMI would consider De Raedt for the
sociologist position. Thus, Gimenez volunteered to call De Raedt to advise her of a
possible assignment to the CECAP.
Eventually, the DA advised SGV that De Raedts nomination, among others, had been
approved by the Commission and the DA and that she was expected to start her
assignment on 3 July 1989.
On 6 July 1989, De Raedt wrote SGV expressing her conformity to the consultancy
contract, thus she was advised to sign the same. De Raedt signed the contract on 14
July1989 but her start-up date with the CECAP was moved to 15 August 1989 with the
approval of the DA because she was in Thailand to finish an assignment.
While the CECAP was in progress, TMI received verbal and written complaints from the
project staff regarding De Raedts performance and working relations with them.
An investigation was then conducted by the TMI on the above complaints. Thereafter,
the TMI confirmed that De Raedts retention would be counter-productive to the
progress of the project because a number of project staff found it difficult to work with
her. Thus, the TMI directed SGV to withdraw De Raedt from the CECAP.
In compliance with TMIs instructions, SGV facilitated De Raedts withdrawal from the
CECAP.
De Raedt filed a case against SGV for illegal dismissal and damages before the
Arbitration Branch of the NLRC.
The Labor Arbiter rendered a decision in favor of De Raedt.
SGV appealed the decision of the Labor Arbiter to the NLRC, which rendered judgment
in favor of SGV.
De Raedt filed a petition for certiorari with the Court of Appeals, which reversed the
NLRC in a Decision promulgated on 7 October 2003.
SGV filed a motion for reconsideration, which was denied by the Court of Appeals in its
Resolution dated 17 December 2003.
Hence, this petition.
The Ruling of the Labor Arbiter
The Labor Arbiter found De Raedt as an employee of SGV. How she conducted herself
and how she carried out the project were dependent on and prescribed by SGV and
TMI, respectively. The Labor Arbiter further ruled that SGV is considered as the

employer of De Raedt since it acted indirectly in the interest of TMI, the entity directly
in-charge of the CECAP project for which De Raedt was hired. Moreover, the Labor
Arbiter found SGV as the entity which is the source of De Raedts income and other
benefits.
The Labor Arbiter found no sufficient valid ground to terminate De Raedts services
although procedural due process was observed. The dispositive portion of the 14 July
1999 Decision of the Labor Arbiter reads:
WHEREFORE, judgment is hereby rendered declaring complainant to
have been illegally dismissed by respondent. Consequently, respondent
Sycip, Gorres & Velayo and Co. is hereby ordered to pay complainant the
following:
a) Unpaid salaries corresponding to the unexpired portion of the contract in
the amount of Eight Hundred Two Thousand (P802,000.00) Pesos;
b) Moral damages in the amount of Two Hundred Fifty Thousand
(P250,000.00) Pesos;
c) Exemplary damages in the amount of One Hundred
Thousand (P100,000.00) Pesos;
d) 10% of the total award as attorneys fees amounting to One Hundred
Fifteen Thousand Two Hundred Pesos (P115,200.00).
The computations of which are hereto attached as Annex A and made an
integral part hereof.
SO ORDERED.[6]
The Ruling of the NLRC
The NLRC reversed the ruling of the Labor Arbiter and found that there was no
employer-employee relationship between SGV and De Raedt.
The NLRC agreed with the Labor Arbiters finding that SGV had no discretion in the
selection of De Raedt for the position of Sociologist in the CECAP. The selection was
made by the TMI, upon recommendation of Gimenez of the DA, to be approved by the
DA and the Commission. The engagement of De Raedt was coursed through SGV.
The payment of De Raedts service fee was done through SGV but the funds came from
the TMI as shown by SGVs billings to TMI for De Raedts professional fee.
As regards the power of dismissal, SGV merely implemented TMIs instructions to
withdraw De Raedt from the CECAP.
The NLRC found that SGV did not exercise control over De Raedts work. The Sub-
Consultancy Agreement between TMI and SGV clearly required De Raedt to work
closely with and under the direction and supervision of both the Team leader and the
Project Coordinator.
40
Hence, SGVs participation is to merely monitor her attendance, through time records,
for the payment of her retainer fee and to validate the time she expended in the project
with her written reports.
The following circumstances also indicated that no employment relationship existed
between the parties: (1) De Raedt was engaged on a contract basis; (2) the letter-
agreement between the parties clearly states that there is no employer-employee
relationship between the parties and that De Raedt was at all times to be considered an
independent contractor; and (3) De Raedt was allowed to engage in other employment
during all the time she was connected with the project.
The dispositive portion of the 16 February 2000 Decision of the NLRC reads:
WHEREFORE, premises considered, the assailed decision of the Labor
Arbiter is REVERSED and SET ASIDE and the complaint is DISMISSED
for lack of jurisdiction.
SO ORDERED.[7]
The Ruling of the Court of Appeals
The Court of Appeals reversed the ruling of the NLRC and reinstated the decision of
the Labor Arbiter insofar as the latter found De Raedt as an employee of SGV.
The Court of Appeals found that based on the letter-agreement between the parties,
SGV engaged De Raedt for the project on a contract basis for 40 months over a period
of five years during which she was to work full time. She could not engage in any other
employment. In fact, she had to resign from her teaching job at the University of the
Philippines. She could not leave her place of assignment without SGVs consent. She
must maintain an accurate record of the time she spent on the job, and prepare reports
which may be required by her team leader and SGV. Whether actual supervision of her
work had turned out to be minimal or not, SGV reserved the right to exercise it at any
time. Further, SGV asserted its right to terminate her services.[8]
The Court of Appeals found that De Raedt was removed from the project because of
personality differences, which is not one of the grounds for a valid dismissal of an
employee.[9]
The dispositive portion of the 7 October 2003 Decision of the Court of Appeals reads:
IN VIEW OF THE FOREGOING, the assailed decision of the NLRC
dated February 16, 2000 is REVERSED, and a new one ENTERED
partially REINSTATING the Decision of Labor Arbiter Monroe Tabing[a]n
on July 14, 1999, by affirming paragraph (a) thereof, deleting paragraph
(b) and (c), and reducing the award of attorneys fees in paragraph (d) to
5% of the principal award. SO ORDERED.[10]

The Issue
The issue in this case is whether De Raedt was an employee of SGV. If so, whether
De Raedt was illegally dismissed by SGV.
The Ruling of the Court
The petition is meritorious.
The existence of an employer-employee relationship is ultimately a question of fact. As
a general rule, factual issues are beyond the province of this Court. However, this rule
admits of exceptions, one of which is where there are conflicting findings of fact, such
as in the present case. Consequently, this Court shall scrutinize the records to ascertain
the facts for itself.[11]
To determine the existence of an employer-employee relationship, 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 employers
power to control the employee on the means and methods by which the work is
accomplished. The so-called control test is the most important indicator of the
presence or absence of an employer-employee relationship.[12]
A. Selection and Engagement of the Employee
De Raedt was contracted by SGV as part of the latters obligation under the Sub-
Consultancy Agreement with TMI, which was in turn contracted by the DA to provide
the services required for the foreign-assisted CECAP project. De Raedt was neither
engaged by SGV as an ordinary employee, nor was she picked by SGV from a pool of
consultants already working for SGV. Hence, SGV engaged De Raedts services
precisely because SGV had an existing Sub-Consultancy Agreement with TMI to
provide such services.
The Labor Arbiter and the NLRC both agree that SGV had no discretion in the selection
of De Raedt for the position of Sociologist in the CECAP. The selection was made by
the TMI, upon recommendation of Gimenez of the DA, to be approved by the DA and
the Commission. The engagement of De Raedt was merely coursed through SGV.
Moreover, SGVs first choice for the Sociologist position was Lorente. However,
Gimenez recommended De Raedt to SGV. De Raedts testimony proves that her
appointment was ultimately the DAs decision, and not SGVs, thus:
Q Madam Witness, how did you come to know the vacancy here in CECAP
project for a position of project Sociologist?
A I was contacted when I was in Honolulu. I was contacted by the firm
Sarmiento and Company who asked me if I would list myself for the
position of project sociologist for the CECAP project in 1987 when it
was discussed by the NGOs in the Cordillera and finally I was
contacted by the SGV. They asked me if I am interested in the
position project sociologist. I was also contacted by Mr. Gimenez to
ask me if SGV had contacted me regarding the position.
41
Q So among the informants who gave you an idea that the position of project
sociologist is the project director himself, is it not?
A He informed me that I have been considered by the Department of
Agriculture for the position of project sociologist.
Q Before you were considered for the position of (sic) the Department of
Agriculture, did you give them an application?
A No, sir.
Q Do you know who gave your name to them?
A Not sure, may be the Department of Agriculture or Sarmiento, because I
was asked by the consultancy firm Sarmiento if I would be willing to
list with their business consultants for the CECAPproject and this was
before the bidding and Sarmiento did not make the bidding for the
project.
Q Sarmiento is different from SGV is that correct?
A Yes, sir.[13] (Emphasis supplied)
B. Payment of Wages
The letter-agreement between the parties specifies the consideration for De Raedts
services as a retainer fee payable for every day of completed service in the project. In
addition to this, monthly subsistence and housing allowances and medical insurance
were to be given to De Raedt. The retainer fees and privileges given to De Raedt are
not commonly given to ordinary employees, who receive basic monthly salaries and
other benefits under labor laws.
The Court notes that the retainer fees paid by SGV to De Raedt ultimately came from
its client, TMI. De Raedt was aware that the source of the funds was the grant from the
Commission. By the terms of the Sub-Consultancy Agreement, TMI paid SGV
remuneration of the fixed unit rate component of the part services.
However, whatever amount SGV received from TMI did not necessarily entitle De
Raedt to the entire amount. In the parties letter-agreement, SGV made it clear that
payments made by TMI should not be construed as being due [De Raedt] since these
items are intended for the administration, overhead expenses, and other related
expenses of [SGV] in the development, management, and supervision of [De Raedts]
assignment.
C. Power of Dismissal
Under the letter-agreement between the parties, SGV may terminate De Raedts
services at anytime that the contract between the Department of Agriculture
Government of the Philippines and Travers Morgan International, Consulting Engineers,
Planners and Management Consultants is terminated for any cause whatsoever.
De Raedt failed to show that SGV could terminate her services on grounds other than
the end of the contract between the DA as implementing agency of the CECAP and TMI
or the termination by TMI of the contract with SGV, such as retrenchment to prevent
losses as provided under labor laws.[14]
 42

Further, under the parties agreement, should De Raedt decide to leave the project for
any reason whatsoever other than a reasonable cause beyond her control which
prevents her from performing the required services, De Raedt shall be liable for
liquidated damages for breach of contract, in an amount equivalent to the retainer fee
for a period of one month. This pre-termination with penalty clause in the parties
agreement clearly negates the existence of an employment relationship between the
parties. If De Raedt were indeed SGVs employee, she should have been able to resign
for whatever professional or personal reason at anytime, even prior to the end of the
contract between the DA and TMI or between TMI and SGV, without incurring any
liability for such resignation.
Besides, it was TMI, through Tull, which instructed SGV to disengage De Raedt from
the project. Terminating De Raedts services was beyond SGVs control, as SGV had no
choice but to comply with the directive of its client (TMI). Clearly, De Raedts retention
as a Sociologist in the CECAP project was dependent on TMIs and DAs decisions. In
his letter dated 14 June 1991 addressed to SGV, Tull wrote the following:
terminated on the ground of end of contract between the DA and TMI, and not on
grounds under labor laws. Though the end of the contract between the DA and TMI was
not the ground for the withdrawal of De Raedt from the CECAP, De Raedt was
disengaged from the project upon the instruction of SGVs client, TMI. Most important of
all, SGV did not exercise control over the means and methods by which De Raedt
performed her duties as Sociologist. SGV did impose rules on De Raedt, but these
were necessary to ensure SGVs faithful compliance with the terms and conditions of
the Sub-Consultancy Agreement it entered into with TMI.
WHEREFORE, the Court GRANTS the petition. The Court SETS ASIDE the 7 October
2003 Decision and 17 December 2003 Resolution of the Court of Appeals in CA-G.R.
SP No. 59916 and REINSTATES the 16 February 2000 Decision of the National Labor
Relations Commission.
SO ORDERED.

Notwithstanding a number of staff on the project, all employed by the

Department of Agriculture, have confirmed that they have found it
difficult to work with Mrs de Raedt over the past few months which
supports the earlier advice from the Department of Agriculture.

In the circumstances I consider we have no alternative but to

replace Mrs de Raedt. Would you please make arrangement for her
to be withdrawn from the project by the end of June 1991. Payment of
staff fees and housing allowances under the project in respect of Mrs
de Raedt will be paid up to 30th June 1991.[15] (Emphasis supplied)

D. Power of Control

The letter-agreement between the parties required De Raedt to maintain an accurate

time record, notify SGV of delays in De Raedts schedule, secure a prior clearance to
leave place of assignment, and prepare reports. These requirements hardly show that
SGV exercises control over the means and methods in the performance of De Raedts
duties as a Sociologist of the CECAP. SGV was not concerned with De Raedts ways of
accomplishing her work as a Sociologist. Rather, SGV naturally expected to be updated
regularly of De Raedts work progress, if any, on the project for which she was
specifically engaged[16] to ensure SGVs compliance with the terms and conditions of the
Sub-Consultancy Agreement with TMI. The services to be performed by her specified
what she needed to achieve but not on how she was to go about it.[17]

In sum, there existed no employer-employee relationship between the parties. De

Raedt is an independent contractor, who was engaged by SGV to render services to
SGVs client TMI, and ultimately to DA on the CECAP project, regarding matters in the
field of her special knowledge and training for a specific period of time. Unlike an
ordinary employee, De Raedt received retainer fees and benefits such as housing and
subsistence allowances and medical insurance. De Raedts services could be
 43

Republic of the Philippines authority to enter into concession agreements allowing the private sector in its
Supreme Court operations. Petitioner Manila Water Company, Inc. (Manila Water) was one of two
Manila private concessionaires contracted by the MWSS to manage the water distribution
SECOND DIVISION system in the east zone of Metro Manila. The east service area included the following
towns and cities: Mandaluyong, Marikina, Pasig, Pateros, San Juan, Taguig, Makati,
G.R. No. 175501 parts of Quezon City and Manila, Angono, Antipolo, Baras, Binangonan, Cainta,
Cardona, Jala-Jala, Morong, Pililla, Rodriguez, Tanay, Taytay, Teresa, and San
MANILA WATER COMPANY, INC., Mateo.[3]
Present:
Petitioner, Under the concession agreement, Manila Water undertook to absorb the regular
employees of MWSS listed by the latter effective August 1, 1997. Individual
respondents, with the exception of Moises Zapatero (Zapatero) and Edgar Pamoraga
VELASCO, JR., J.,* (Pamoraga), were among the one hundred twenty-one (121) employees not included in
- versus - NACHURA,** the list of employees to be absorbed by Manila Water. Nevertheless, Manila Water
Acting Chairperson, engaged their services without written contract from August 1, 1997 to August 31,
PERALTA, 1997.[4]
MENDOZA, and
JOSE J. DALUMPINES, EMMANUEL CAPIT, ROMEO B. SERENO,*** JJ. On September 1, 1997, individual respondents signed a three (3)-month contract to
CASTOLONE, MELITANTE CASTRO, NONITO perform collection services on commission basis for Manila Waters branches in the east
FERNANDEZ, ARNULFO JAMISON, ARTHUR LAVISTE, zone.[5]
ESTEBAN LEGARTO, SUSANO MIRANDA, RAMON C.
REYES, JOSE SIERRA, BENJAMIN TALAVERA, On November 21, 1997, before the expiration of the contract of services, the 121 bill
MOISES ZAPATERO, EDGAR PAMORAGA, collectors formed a corporation duly registered with the Securities and Exchange
BERNARDO S. MEDINA, MELENCIO M. BAONGUIS, Commission (SEC) as the Association Collectors Group, Inc. (ACGI). ACGI was one of
JR., JOSE AGUILAR, ANGEL C. GARCIA, JOSE the entities engaged by Manila Water for its courier service. However, Manila Water
TEODY P. VELASCO, AUGUSTUS J. TANDOC, contracted ACGI for collection services only in its Balara Branch.[6]
ROBERTO DAGDAG, MIGUEL LOPEZ, GEORGE
CABRERA, ARMAN BORROMEO, RONITO R. FRIAS, In December 1997, Manila Water entered into a service agreement with respondent
ANTONIO VERGARA, RANDY CORTIGUERRA, and First Classic Courier Services, Inc. (FCCSI) also for its courier needs. The service
FIRST CLASSIC COURIER SERVICES, INC., agreements between Manila Water and FCCSI covered the periods 1997 to 1999 and
2000 to 2002.[7] Earlier, in a memorandum dated November 28, 1997, FCCSI gave a
Respondents. deadline for the bill collectors who were members of ACGI to submit applications and
Promulgated: letters of intent to transfer to FCCSI. The individual respondents in this case were
among the bill collectors who joined FCCSI and were hired effective December 1,
October 4, 2010 1997.[8]
x------------------------------------------------------------------------------------x On various dates between May and October 2002, individual respondents were
terminated from employment. Manila Water no longer renewed its contract with FCCSI
DECISION because it decided to implement a collectorless scheme whereby Manila Water
customers would instead remit payments through Bayad Centers. [9] The aggrieved bill
NACHURA, J.:
collectors individually filed complaints for illegal dismissal, unfair labor practice,
damages, and attorneys fees, with prayer for reinstatement and backwages against
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of
petitioner Manila Water and respondent FCCSI. The complaints were consolidated and
Court, assailing the Decision[1] dated September 12, 2006 and the Resolution[2] dated
jointly heard.[10]
November 17, 2006 of the Court of Appeals (CA) in CA-G.R. SP No. 94909.
Respondent bill collectors alleged that their employment under Manila Water had four
The facts of the case are as follows: (4) stages: (a) from August 1, 1997 to August 31, 1997; (b) from September 1, 1997 to
November 30, 1997; (c) in November 1997 when FCCSI was incorporated; and (d) after
By virtue of Republic Act No. 8041, otherwise known as the National Water Crisis Act of
November 1977 when FCCSI came in. While in MWSS, and thereafter in Manila Water
1995, the Metropolitan Waterworks and Sewerage System (MWSS) was given the
and FCCSI, respondent bill collectors were made to perform the following functions: (1)

delivery of bills to customers; (2) collection of payments from customers; and (3)
delivery of disconnection notice to customers. They were also allowed to effect
disconnection and were given tools for this purpose. [11]
Respondent bill collectors averred that when Manila Water issued their individual
contracts of service for three months in September 1997, there was already an attempt
to make it appear that respondent bill collectors were not its employees but
independent contractors. Respondent bill collectors stressed that they could not qualify
as independent contractors because they did not have an independent business of their
own, tools, equipment, and capitalization, but were purely dependent on the wages they
earned from Manila Water, which was termed as commission.[12]
Respondent bill collectors alleged that Manila Water had complete supervision over
their work and their collections, which they had to remit daily to the former. They also
maintained that the incorporation of ACGI did not mean that they were not employees
of Manila Water. Furthermore, they alleged that they suffered injustice when Manila
Water imposed upon them the work set-up that caused them to be emotionally
depressed because those who were not assigned to the Balara Branch under Manila
Waters contract with ACGI were forced to join FCCSI to retain their employment. They
argued that the entry of FCCSI did not change the employer-employee relationship of
respondent bill collectors with Manila Water.[13]
Respondent bill collectors insisted that they remained employees of Manila Water even
after the entry of FCCSI. The latter did not qualify as a legitimate labor contractor since
it had no substantial capital. FCCSI only had a paid-up capital of one hundred thousand
pesos (P100,000.00), out of the four hundred thousand pesos (P400,000.00) authorized
capital. FCCSI relied mainly on what Manila Water would pay, from which it deducted
an agency fee, and it had no other clients on collection. They were forced to transfer to
FCCSI when their service contracts with Manila Water was about to expire on
November 30, 1997. FCCSI was engaged in labor-only contracting which is prohibited
by law.[14]
Respondent bill collectors averred that even under the four-fold test of employer-
employee relationship, it appeared that Manila Water was their true employer based on
the following circumstances: (1) it was Manila Water who engaged their services as bill
collectors when it took over the operations of the east zone from MWSS on August 1,
1997; (2) it was Manila Water which paid their wages in the form of commissions every
fifteenth (15th) and thirtieth (30th) day of each month; (3) Manila Water exercised the
power of dismissal over them as bill collectors as evidenced by the instances
surrounding their termination as set forth in their respective affidavits, and by the
individual clearances issued to them not by FCCSI but by Manila Water, stating that the
same was issued in connection with his termination of contract as Contract Collector of
Manila Water Company; and (4) their work as bill collectors was clearly related to the
principal business of Manila Water.[15]
Respondent FCCSI, on the other hand, claimed that it is an independent contractor
engaged in the business of providing messengerial or courier services, and it fulfills the
criteria set forth under Department Order No. 10, Series of 1997. [16] It was issued a
certificate of registration by the Department of Labor and Employment (DOLE) as an
independent contractor. It was incorporated and registered with the SEC in November
44
1995. It was duly registered with the Department of Transportation and Communication
(DOTC) and the Office of the Mayor of Makati City for authority to operate. It has
sufficient capital in the form of tools, equipment, and machinery as attested to by the
Postal Regulation Committee of the DOTC after conducting an ocular inspection. It
provides similar services to Philippine Long Distance Telephone Company, Smart
Telecommunications, Inc., and Home Cable, Inc. Under the terms and conditions of its
service agreement with Manila Water, FCCSI has the power to hire, assign, discipline,
or dismiss its own employees, as well as control the means and methods of
accomplishing the assigned tasks, and it pays the wages of the employees. [17]
The termination of employment of respondent bill collectors upon the expiration of
FCCSIs contract with Manila Water did not mean the automatic termination or
suspension of the employer-employee relationship between FCCSI and respondent bill
collectors. Their termination after their six (6) month floating status, which was allowed
by law, was due to the non-renewal of FCCSIs agreement with Manila Water and its
inability to enter into a similar contract requiring the skills of respondent bill collectors. [18]
Petitioner Manila Water, for its part, denied that there was an employer-employee
relationship between its company and respondent bill collectors. Based on the
agreement between FCCSI and Manila Water, respondent bill collectors are the
employees of the former, as it is the former that has the right to select/hire, discipline,
supervise, and control. FCCSI has a separate and distinct legal personality from Manila
Water, and it was duly registered as an independent contractor before the DOLE. [19]
Petitioner further claimed that individual service contracts signed by respondent bill
collectors for a 3-month period with Manila Water were valid and legal. The fact that the
duration of the engagement was stated on the face of the contract dispels any bad faith
on the part of the company. Fixed term contracts are allowed by law. Furthermore,
respondent bill collectors allegation that the incorporation of ACGI was made as a
condition of their continued employment was unfounded. They transferred to FCCSI on
their own volition.[20]
Petitioner Manila Water also averred that, under its organizational structure, there was
no regular plantilla position of bill collector, which was the main reason why respondent
bill collectors were not included in the list of MWSS employees absorbed by the
company. The companys out-sourcing of courier needs to an independent contractor
was valid and legal.
On September 27, 2004, the Labor Arbiter (LA) rendered a decision, [21] the dispositive
portion of which reads:
WHEREFORE, premises considered, the complaints against
respondent Manila Water Company, Inc. is dismissed for lack of jurisdiction
due to want of employer-employee relationship. Respondent First Classic
Courier Services is hereby ordered to pay complainants separation pay
equivalent to one (1) month pay for every year of service, to wit:

1. JOSE P. DALUMPINES - - - - - - - - P36,400.00
2. SUSANO MIRANDA - - - - - - - - - P36,400.00
3. EDGAR PAMORAGA - - - - - - - - - P29,120.00
4. ARTHUR G. LAVISTI - - - - - - - - - P36,400.00
5. BENJAMIN TALAVERA, JR. - - - - P36,400.00
6. JOSE S.A. SIERRA - - - - - - - - - - - P36,400.00
7. MELITANTE D. CASTRO - - - - - - P36,400.00
8. BERNARDO S. MEDINA - - - - - - - P36,400.00
9. MELENCIO BAONGUIS - - - - - - - P36,400.00
10. NONITO V. FERNANDEZ - - - - - - P36,400.00
11. LEGARTO ESTEBAN - - - - - - - - - P36,400.00
12. ROMEO B. CASTALONE - - - - - - P36,400.00
13. RAMON C. REYES - - - - - - - - - - - P36,400.00
14. MOISES L. ZAPATERO - - - - - - - - P29,120.00
15. JOSE T. AGUILAR - - - - - - - - - - - P36,400.00
16. ARNULFO T. JAMISON - - - - - - - P36,400.00
17. ANGEL C. GARCIA - - - - - - - - - - - P36,400.00
18. JOSE TEODY P. VELASCO - - - - - P36,400.00
19. AUGUSTUS J. TANDOC - - - - - - - P36,400.00
20. EMMANUEL L. CAPIT - - - - - - - - P36,400.00
21. WILLIAM AGANON - - - - - - - - - - P87,360.00
22. ROBERTO S. DAGDAG - - - - - - - - P36,400.00
23 MIGUEL J. LOPEZ - - - - - - - - - - - - P36,400.00
24. GEORGE CABRERA - - - - - - - - - - P36,400.00
25. BORROMEO ARMAN - - - - - - - - - P36,400.00
26. RONITO R. FRIAS - - - - - - - - - - - - P36,400.00
27. ANTONIO A. VERGARA - - - - - - - P36,400.00
28. RANDY T. CORTIGUERRA - - - - - P36,400.00
TOTAL - - - - - - - P1,055,600.00
SO ORDERED.[22]
Respondent bill collectors and FCCSI filed their separate appeals with the
National Labor Relations Commission (NLRC). On March 15, 2006, the NLRC
rendered a decision[23] affirming in toto the decision of the LA. Respondent bill
collectors filed a motion for reconsideration, but the same was denied in a
resolution[24] dated April 28, 2006.
Disgruntled, respondent bill collectors filed a petition for certiorari under Rule
65 of the Rules of Court before the CA. On September 12, 2006, the CA
rendered a Decision, the dispositive portion of which reads:
WHEREFORE, premises considered, the present petition is hereby
GIVEN DUE COURSE and the writ prayed for accordingly GRANTED.
Consequently, the assailed Decision dated March 15, 2006 and Resolution
dated April 28, 2006 of the National Labor Relations Commission are
hereby ANNULED and SET ASIDE. A new judgment is hereby entered (a)
declaring the petitioners as employees of private respondent Manila Water
Company, Inc., and their termination as bill collectors as illegal; and (b)
ordering private respondent Manila Water Company, Inc. to pay the
petitioners separation pay equivalent to one (1) month for every year of
45
service. In addition, private respondent Manila Water Company, Inc. is
liable to pay ten percent (10%) of the total amount awarded as attorneys
fees.
No pronouncement as to costs. SO ORDERED.[25]
Petitioner Manila Water and respondent bill collectors filed a motion for reconsideration.
However, the CA denied their respective motions for reconsideration in a Resolution
dated November 17, 2006.
Hence, this petition.
Petitioner Manila Water presented the following issues for resolution, whether the CA
erred (1) in ruling that an employment relationship exists between respondent bill
collectors and petitioner Manila Water; (2) in its application of Manila Water Company,
Inc. v. Pea[26] to the instant case; and (3) in ruling that respondent FCCSI is not a bona
fide independent contractor.[27]
The petition is bereft of merit.
In this case, the LA, the NLRC, and the CA reached different conclusions of law albeit
agreeing on the same set of facts. It was in their interpretation and appreciation of the
evidence that they differed. The CA ruled that respondent FCCSI was a labor-only
contractor and that respondent bill collectors are employees of petitioner Manila Water,
while the LA and the NLRC ruled otherwise.
"Contracting" or "subcontracting" refers to an arrangement whereby a principal agrees
to put out or farm out with a contractor or subcontractor the performance or completion
of a specific job, work, or service within a definite or predetermined period, regardless
of whether such job, work, or service is to be performed or completed within or outside
the premises of the principal.[28]
Contracting and subcontracting arrangements are expressly allowed by law but are
subject to regulation for the promotion of employment and the observance of the rights
of workers to just and humane conditions of work, security of tenure, self-organization,
and collective bargaining.[29] In legitimate contracting, the trilateral relationship between
the parties in these arrangements involves the principal which decides to farm out a job
or service to a contractor or subcontractor, which has the capacity to independently
undertake the performance of the job, work, or service, and the contractual workers
engaged by the contractor or subcontractor to accomplish the job, work, or service.[30]
Job contracting is permissible only if the following conditions are met: 1) the contractor
carries on an independent business and undertakes the contract work on his own
account under his own responsibility according to his own manner and method, free
from the control and direction of his employer or principal in all matters connected with
the performance of the work except as to the results thereof; and 2) the contractor has
substantial capital or investment in the form of tools, equipment, machineries, work
premises, and other materials which are necessary in the conduct of the business. [31]
On the other hand, the Labor Code expressly prohibits labor-only contracting. Article
106 of the Code provides that there is labor-only contracting where the person

supplying workers to an employer does not have substantial capital or investment in the
form of tools, equipment, machineries, work premises, among others, and the workers
recruited and placed by such person are performing activities which are directly related
to the principal business of the employer. In such cases, the person or intermediary
shall be considered merely as an agent of the employer who shall be responsible to the
workers in the same manner and to the same extent as if the latter were directly
employed by him.[32]
Department Order No. 18-02, Series of 2002, enunciates that labor-only contracting
refers to an arrangement where the contractor or subcontractor merely recruits,
supplies, or places workers to perform a job, work, or service for a principal, 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 (ii) the contractor does not exercise the right to control the performance
of the work of the contractual employee.[33]
"Substantial capital or investment" refers to capital stocks and subscribed capitalization
in the case of corporations, tools, equipment, implements, machineries, and work
premises, actually and directly used by the contractor or subcontractor in the
performance or completion of the job, work, or service contracted out. The "right to
control" refers to the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but
also the manner and means to be used in reaching that end. [34]
In the instant case, the CA found that FCCSI is a labor-only contractor. Based on the
factual findings of the CA, FCCSI does not have substantial capital or investment to
qualify as an independent contractor, viz.:
FCCSI was incorporated on November 14, 1995, with an authorized
capital stock of P400,000.00, of which only P100,000.00 is actually
paid-in. Going by the pronouncement in Pea, such capitalization can
hardly be considered substantial. FCCSI and Manila Water make
much of the 17 April 1997 letter of Postal Regulation Committee
Chairman Francisco V. Ontalan, Jr. to DOTC Secretary Arturo T.
Enrile recommending the renewal and/or extension of authority to
FCCSI to operate private messengerial delivery services, which
states in part:
Ocular inspection conducted on its office premises and
evaluation of the documents submitted, the firm
during the six (6) months operation has generated
employment to thirty six (36) messengers, and four
(4) office personnel.
The office equipt [sic] with modern facilities such as
computers, printers, electric typewriter, working
table, telephone lines, airconditioning unit, pigeon
holes, working tables and delivery vehicles such as
46
a Suzuki van and three (3) motorcycles. The firms
audited financial statement for the period ending 31
December 1996 [shows] that it earned a net
income of P253,000.00. x x x.
The above document only proves that FCCSI has no
sufficient investment in the form of tools, equipment and machinery to
undertake contract services for Manila Water involving a fleet of
around 100 collectors assigned to several branches and covering the
service area of Manila Water customers spread out in several
cities/towns of the East Zone. The only rational conclusion is that it is
Manila Water that provides most if not all the logistics and equipment
including service vehicles in the performance of the contracted
service, notwithstanding that the contract between FCCSI and Manila
Water states that it is the Contractor which shall furnish at its own
expense all materials, tools and equipment needed to perform the
tasks of collectors. Moreover, it must be emphasized that petitioners
who are trained collectors performed tasks that cannot be simply
categorized as messengerial. In fact, these are the very functions
they were already discharging even before they joined FCCSI which
invited or solicited their placement just about the expiration of their
three (3)-month contract with Manila Water on November 28, 1997.
The Agreement between FCCSI and Manila Water provides that
FCCSI shall field the required number of trained collectors to the
following Customer Relations Branch Office: Cubao, Espaa, San
Juan-Mandaluyong, Marikina, Pasig, Taguig-Pateros and Makati.[35]
As correctly ruled by the CA, FCCSIs capitalization may not be considered substantial
considering that it had close to a hundred collectors covering the east zone service area
of Manila Water customers. The allegation in the position paper of FCCSI that it serves
other companies courier needs does not cure the fact that it has insufficient
capitalization to qualify as independent contractor. Neither did FCCSI prove its
allegation by substantial evidence other than by their self-serving declarations. What is
evident is that it was Manila Water that provided the equipment and service vehicles
needed in the performance of the contracted service, even if the contract between
FCCSI and Manila Water stated that it was the Contractor which shall furnish at its own
expense all materials, tools, and equipment needed to perform the tasks of collectors.
Based on the four-fold test of employer-employee relationship, Manila Water
emerges as the employer of respondent collectors. The elements to determine the
existence of an employment relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's
power to control the employee's conduct. The most important of these elements is the
employer's control of the employee's conduct, not only as to the result of the work to be
done, but also as to the means and methods to accomplish it. [36]
The factual circumstances in the instant case are essentially the same as those cited
in Manila Water Company, Inc. v. Hermio Pea.[37] In that case, 121 bill collectors,
headed by Pea, filed a complaint for illegal dismissal against Manila Water. The bill

collectors formed ACGI which was registered with the SEC. Manila Water, in opposing
the claim of the bill collectors, claimed that there was no employer-employee
relationship with the latter. It averred that the bill collectors were employees of ACGI, a
separate entity engaged in collection services, an independent contractor which entered
into a service contract for the collection of Manila Waters accounts. The Court ruled that
ACGI was not an independent contractor but was engaged in labor-only contracting,
and as such, is considered merely an agent of Manila Water.[38]
The Court ratiocinated that: First, ACGI does not have substantial capitalization or
investment in the form of tools, equipment, machineries, work premises, and other
materials to qualify as an independent contractor. Second, the work of the bill collectors
was directly related to the principal business or operation of Manila Water. Being in the
business of providing water to the consumers in the east zone, the collection of the
charges by the bill collectors for the company can only be categorized as related to, and
in the pursuit of, the latter's business. Lastly, ACGI did not carry on an independent
business or undertake the performance of its service contract in its own manner and
using its own methods, free from the control and supervision of its principal, Manila
Water. Since ACGI is obviously a labor-only contractor, the workers it supplied are
considered employees of the principal. Furthermore, the activities performed by the bill
collectors were necessary or desirable to Manila Water's principal trade or business;
thus, they are regular employees of the latter. Since Manila Water failed to comply with
the requirements of termination under the Labor Code, the dismissal of the bill
collectors was tainted with illegality.[39]
The similarity between the instant case and Pea is very evident. First, the work set-up
between the respondent contractor FCCSI and respondent bill collectors is the same as
in Pea. Respondent bill collectors were individually hired by the contractor, but were
under the direct control and supervision of the concessionaire. Second, they performed
the same function of courier and bill collection services. Third, the element of control
exercised by Manila Water over respondent bill collectors is essentially the same as
in Pea,manifested in the following circumstances, viz.: (a) respondent bill collectors
reported daily to the branch offices of Manila Water to remit their collections with the
specified monthly targets and comply with the collection reporting procedures
prescribed by the latter; (b) respondent bill collectors, except for Pamoraga and
Zapatero, were among the 121 collectors who incorporated ACGI; (c) Manila Water
continued to pay their wages in the form of commissions even after the employees
alleged transfer to FCCSI. Manila Water paid the respondent bill collectors their
individual commissions, and the lump sum paid by Manila Water to FCCSI merely
represented the agency fee; and (d) the certification or individual clearances issued by
Manila Water to respondent bill collectors upon the termination of the service contract
with FCCSI. The certification stated that respondents were contract collectors of Manila
Water and not of FCCSI. Thus, this Court agrees with the findings of the CA that if,
indeed, FCCSI was the true employer of the bill collectors, it should have been the one
to issue the certification or individual clearances.
It should be remembered that the control test merely calls for the existence of the right
to control, and not necessarily the exercise thereof. It is not essential that the employer
actually supervises the performance of duties of the employee. It is enough that the
former has a right to wield the power.[40]
47
Respondent bill collectors are, therefore, employees of petitioner Manila Water. It
cannot be denied that the tasks performed by respondent bill collectors are directly
related to the principal business or trade of Manila Water. Payments made by the
subscribers are the lifeblood of the company, and the respondent bill collectors are the
ones who collect these payments.
The primary standard of determining 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. In this case, the connection is obvious when we
consider the nature of the work performed and its relation to the scheme of the
particular business or trade in its entirety. Finally, the repeated and continuing need for
the performance of the job is sufficient evidence of the necessity, if not indispensability
of the activity to the business.[41]
WHEREFORE, in view of the foregoing, the Decision dated September 12, 2006 and
the Resolution dated November 17, 2006 of the Court of Appeals in CA-G.R. SP No.
94909 are hereby AFFIRMED.
Costs against petitioner. SO ORDERED.
DIGEST:
FACTS: Petitioner Manila Water Company, Inc. (Manila Water) was one of two private
concessionaires contracted by the MWSS to manage the water distribution system in
the east zone of Metro Manila.
Under the concession agreement, Manila Water undertook to absorb the regular
employees of MWSS listed by the latter effective August 1, 1997. Individual
respondents, with the exception of Moises Zapatero (Zapatero) and Edgar Pamoraga
(Pamoraga), were among the one hundred twenty-one (121) employees not included in
the list of employees to be absorbed by Manila Water. Nevertheless, Manila Water
engaged their services without written contract from August 1, 1997 to August 31, 1997.
On September 1, 1997, individual respondents signed a three (3)-month contract to
perform collection services on commission basis for Manila Waters branches in the east
zone.
Before the expiration of the contract of services, the 121 bill collectors formed a
corporation duly registered with the Securities and Exchange Commission (SEC) as the
"Association Collectors Group, Inc." (ACGI). ACGI was one of the entities engaged by
Manila Water for its courier service. Manila Water entered into a service agreement with
respondent First Classic Courier Services, Inc. (FCCSI) also for its courier needs. The
service agreements between Manila Water and FCCSI covered the periods 1997 to
1999 and 2000 to 2002. FCCSI gave a deadline for the bill collectors who were
members of ACGI to submit applications and letters of intent to transfer to FCCSI. The
individual respondents in this case were among the bill collectors who joined FCCSI
and were hired effective December 1, 1997.
On various dates between May and October 2002, individual respondents were
terminated from employment. Manila Water no longer renewed its contract with FCCSI
because it decided to implement a "collectorless" scheme whereby Manila Water

customers would instead remit payments through "Bayad Centers." Thus, aggrieved bill
collectors individually filed complaints for illegal dismissal, unfair labor practice,
damages, and attorneys fees, with prayer for reinstatement and backwages against
petitioner Manila Water and respondent FCCSI.
The LA rendered a decision dismissing the complaint for lack of employer-employee
relationship. Respondent bill collectors filed an appeal to the NLRC but the same was
denied. Respondents filed a petition for certiorari to the CA which reversed the decision
of the NLRC. Petitioners filed a motion for reconsideration but the same was denied.
Hence, this petition.
ISSUE:
Is there employer-employee relationship between respondent bill collectors and
petitioner Manila Water?
HELD: Job contracting is permissible only if the following conditions are met:
[1] The contractor carries on an independent business and undertakes the contract
work on his own account under his own responsibility according to his own manner and
method, free from the control and direction of his employer or principal in all matters
connected with the performance of the work except as to the results thereof; and,
[2] The contractor has substantial capital or investment in the form of tools, equipment,
machineries, work premises, and other materials which are necessary in the conduct of
the business.
Article 106 of the Code provides that there is labor-only contracting where the person
supplying workers to an employer does not have substantial capital or investment in the
form of tools, equipment, machineries, work premises, among others, and the workers
recruited and placed by such person are performing activities which are directly related
to the principal business of the employer. In such cases, the person or intermediary
shall be considered merely as an agent of the employer who shall be responsible to the
workers in the same manner and to the same extent as if the latter were directly
employed by him.
In the instant case, the CA found that FCCSI is a labor-only contractor. Based on the
factual findings of the CA, FCCSI does not have substantial capital or investment to
qualify as an independent contractor. FCCSI was incorporated on November 14, 1995,
with an authorized capital stock ofP400,000.00, of which onlyP100,000.00 is actually
paid-in. Going by the pronouncement in Pe, such capitalization can hardly be
considered substantial.
As correctly ruled by the CA, FCCSIs capitalization may not be considered substantial
considering that it had close to a hundred collectors covering the east zone service area
of Manila Water customers. The allegation in the position paper of FCCSI that it serves
other companies courier needs does not "cure" the fact that it has insufficient
capitalization to qualify as independent contractor. Neither did FCCSI prove its
allegation by substantial evidence other than by their self-serving declarations. What is
evident is that it was Manila Water that provided the equipment and service vehicles
needed in the performance of the contracted service, even if the contract between
48
FCCSI and Manila Water stated that it was the Contractor which shall furnish at its own
expense all materials, tools, and equipment needed to perform the tasks of collectors.
***
The elements to determine the existence of an employment relationship are:
(a) the selection and engagement of the employee;
(b) the payment of wages;
(c) the power of dismissal; and,
(d) the employer's power to control the employee's conduct.
The most important of these elements is the employer's control of the employee's
conduct, not only as to the result of the work to be done, but also as to the means and
methods to accomplish it.
First, respondent bill collectors were individually hired by the contractor, but were under
the direct control and supervision of the concessionaire. Second, they performed the
same function of courier and bill collection services. Third, the element of control
exercised by Manila Water over respondent bill collectors is manifested in the following
circumstances:
(a) respondent bill collectors reported daily to the branch offices of Manila Water to
remit their collections with the specified monthly targets and comply with the collection
reporting procedures prescribed by the latter;
(b) respondent bill collectors, except for Pamoraga and Zapatero, were among the 121
collectors who incorporated ACGI;
(c) Manila Water continued to pay their wages in the form of commissions even after
the employees alleged transfer to FCCSI. Manila Water paid the respondent bill
collectors their individual commissions, and the lump sum paid by Manila Water to
FCCSI merely represented the agency fee; and
(d) the certification or individual clearances issued by Manila Water to respondent bill
collectors upon the termination of the service contract with FCCSI.
The certification stated that respondents were contract collectors of Manila Water and
not of FCCSI. Thus, this Court agrees with the findings of the CA that if, indeed, FCCSI
was the true employer of the bill collectors, it should have been the one to issue the
certification or individual clearances.
DENIED
49