G.R. No.

155098 September 16, 2005 Please be formally advised that the hospital management has decided to abolish CMC’s
Industrial Service Unit as of April 30, 1992 in view of the almost extinct demand for
CAPITOL MEDICAL CENTER, INC. and DR. THELMA NAVARETTE- direct medical services by the private and semi-government corporations in providing
CLEMENTE, Petitioners, health care for their employees. Such a decision was arrived at, after considering the
vs. existing trend of industrial companies allocating their health care requirements to
DR. CESAR E. MERIS, Respondent. Health Maintenance Organizations (HMOs) or thru a tripartite arrangement with
medical insurance carriers and designated hospitals.
DECISION
As a consequence thereof, all positions in the unit will be decommissioned at the same time
industrial services [are] deactivated. In that event, you shall be entitled to return to your
CARPIO MORALES, J.:
private practice as a consultant staff of the institution and will become eligible to
receive your retirement benefits as a former hospital employee. Miss Jane Telan on the
Subject of the present appeal is the Court of Appeals Decision 1 dated February 15, 2002 other hand will be transferred back to Nursing Service for reassignment at the CSR.
reversing the NLRC Resolution2 dated January 19, 1999 and Labor Arbiter Decision3 dated
April 28, 1998 which both held that the closure of the Industrial Service Unit of the
We wish to thank you for your long and faithful service to the institution and hope that our
partnership in health care delivery to our people will continue throughout the future. Best
Capitol Medical Center, Inc., resulting to the termination of the services of herein respondent regards.
Dr. Cesar Meris as Chief thereof, was valid.
Very truly yours,
On January 16, 1974, petitioner Capitol Medical Center, Inc. (Capitol) hired Dr. Cesar Meris
(Dr. Meris),4 one of its stockholders,5 as in charge of its Industrial Service Unit (ISU) at a
(SGD.) DR. THELMA NAVARETTE-CLEMENTE9 (Emphasis and underscoring supplied)
monthly salary of ₱10,270.00.

Dr. Meris, doubting the reason behind the management’s decision to close the ISU and
Until the closure of the ISU on April 30, 1992,6 Dr. Meris performed dual functions of
believing that the ISU was not in fact abolished as it continued to operate and offer services
providing medical services to Capitol’s more than 500 employees and health workers as well
to the client companies with Dr. Clemente as its head and the notice of closure was a mere
as to employees and workers of companies having retainer contracts with it. 7
ploy for his ouster in view of his refusal to retire despite Dr. Clemente’s previous prodding for
him to do so,10 sought his reinstatement but it was unheeded.
On March 31, 1992, Dr. Meris received from Capitol’s president and chairman of the board,
Dr. Thelma Navarette-Clemente (Dr. Clemente), a notice advising him of the management’s
Dr. Meris thus filed on September 7, 1992 a complaint against Capitol and Dr. Clemente for
decision to close or abolish the ISU and the consequent termination of his services as Chief
illegal dismissal and reinstatement with claims for backwages, moral and exemplary
thereof, effective April 30, 1992.8 The notice reads as follows:
damages, plus attorney’s fees.11
March 31, 1992
Finding for Capitol and Dr. Clemente, the Labor Arbiter held that the abolition of the ISU was
a valid and lawful exercise of management prerogatives and there was convincing evidence
Dr. Cesar E. Meris to show that ISU was being operated at a loss.12 The decretal text of the decision reads:

Chief, Industrial Service Unit WHEREFORE, judgment is hereby rendered dismissing the complaint. Respondents are
however ordered to pay complainant all sums due him under the hospital retirement plan.
Capitol Medical Center
SO ORDERED.13 (Emphasis supplied)
Dear Dr. Meris:
On appeal by Dr. Meris, the National Labor Relations Commission (NLRC) modified the
Greetings! Labor Arbiter’s decision. It held that in the exercise of Capitol’s management prerogatives, it
had the right to close the ISU even if it was not suffering business losses in light of Article 283
of the Labor Code and jurisprudence.14
And the NLRC set aside the Labor Arbiter’s directive for the payment of retirement benefits to
Dr. Meris because he did not retire. Instead, it ordered the payment of separation pay as
provided under Article 283 as he was discharged due to closure of ISU, to be charged against
the retirement fund.15
Undaunted, Dr. Meris elevated the case to the Court of Appeals via petition for
review16 which, in the interest of substantial justice, was treated as one for certiorari. 17
Discrediting Capitol’s assertion that the ISU was operating at a loss as the evidence showed
a continuous trend of increase in its revenue for three years immediately preceding Dr.
Meris’s dismissal on April 30, 1992,18 and finding that the ISU’s "Analysis of Income and
Expenses" which was prepared long after Dr. Meris’s dismissal, hence, not yet available, on
or before April 1992, was tainted with irregular entries, the appellate court held that Capitol’s
evidence failed to meet the standard of a sufficient and adequate proof of loss necessary to
justify the abolition of the ISU.19
The appellate court went on to hold that the ISU was not in fact abolished, its operation and
management having merely changed hands from Dr. Meris to Dr. Clemente; and that there
was a procedural lapse in terminating the services of Dr. Meris, no written notice to the
Department of Labor and Employment (DOLE) of the ISU abolition having been made,
thereby violating the requirement embodied in Article 283.20
The appellate court, concluding that Capitol failed to strictly comply with both procedural and
substantive due process, a condition sine qua non for the validity of a case of
termination,21 held that Dr. Meris was illegally dismissed. It accordingly reversed the NLRC
Resolution and disposed as follows:
IN VIEW OF ALL THE FOREGOING, the assailed resolutions of the NLRC are hereby set
aside, and another one entered –
1 – declaring illegal the dismissal of petitioner as Chief of the Industrial Service Unit of
respondent Medical Center;
2 – ordering respondents to pay petitioner
a) backwages from the date of his separation in April 1992 until this decision has attained
finality;
b) separation pay in lieu of reinstatement computed at the rate of one (1) month salary for
every year of service with a fraction of at least six (6) months being considered as one year;
c) other benefits due him or their money equivalent;
d) moral damages in the sum of ₱50,000.00;
e) exemplary damages in the sum of ₱50,000.00; and
f) attorney’s fees of 10% of the total monetary award payable to petitioner.
SO ORDERED.22
Hence, the present petition for review assigning to the appellate court the following errors:
I
. . . IN OVERTURNING THE FACTUAL FINDINGS AND CONCLUSIONS OF BOTH THE
NATIONAL LABOR RELATIONS COMMISSION (NLRC) AND THE LABOR ARBITER.
II
. . . IN HOLDING, CONTRARY TO THE FINDINGS OF BOTH THE LABOR ARBITER AND
THE NATIONAL LABOR RELATIONS COMMISSION, THAT THE INDUSTRIAL UNIT (ISU)
WAS NOT INCURRING LOSSES AND THAT IT WAS NOT IN FACT ABOLISHED.
III
. . . IN NOT UPHOLDING PETITIONERS’ MANAGEMENT PREROGATIVE TO ABOLISH
THE INDUSTRIAL SERVICE UNIT (ISU).
IV
. . . IN REQUIRING PETITIONERS TO PAY RESPONDENT BACKWAGES AS WELL AS
DAMAGES AND ATTORNEY’S FEES.23
Capitol questions the appellate court’s deciding of the petition of Dr. Meris on the merits,
instead of merely determining whether the administrative bodies acted with grave abuse of
discretion amounting to lack or excess of jurisdiction.
The province of a special civil action for certiorari under Rule 65, no doubt the appropriate
mode of review by the Court of Appeals of the NLRC decision,24 is limited only to correct
errors of jurisdiction or grave abuse of discretion amounting to lack or excess of
jurisdiction.25 In light of the merits of Dr. Meris’ claim, however, the relaxation by the appellate
court of procedural technicality to give way to a substantive determination of a case, as this
Court has held in several cases,26 to subserve the interest of justice, is in order.
Capitol argues that the factual findings of the NLRC, particularly when they coincide with
those of the Labor Arbiter, as in the present case, should be accorded respect, even finality. 27
For factual findings of the NLRC which affirm those of the Labor Arbiter to be accorded
respect, if not finality, however, the same must be sufficiently supported by evidence on
record.28 Where there is a showing that such findings are devoid of support, or that the
judgment is based on a misapprehension of facts,29 the lower tribunals’ factual findings will
not be upheld.
As will be reflected in the following discussions, this Court finds that the Labor Arbiter and the
NLRC overlooked some material facts decisive of the instant controversy.
Capitol further argues that the appellate court’s conclusion that the ISU was not incurring
losses is arbitrary as it was based solely on the supposed increase in revenues of the unit
from 1989-1991, without taking into account the "Analysis of Income and Expenses" of ISU
from July 1, 1990 to July 1, 1991 which shows that the unit operated at a loss; 30 and that the
demand for the services of ISU became almost extinct in view of the affiliation of industrial
establishments with HMOs such as Fortunecare, Maxicare, Health Maintenance, Inc. and
Philamcare and of tripartite arrangements with medical insurance carriers and designated
hospitals,31 and the trend resulted in losses in the operation of the ISU.
Besides, Capitol stresses, the health care needs of the hospital employees had been taken
over by other units without added expense to it;32 the appellate court’s decision is at best an
undue interference with, and curtailment of, the exercise by an employer of its management
prerogatives;33 at the time of the closure of the ISU, Dr. Meris was already eligible for
retirement under the Capitol’s retirement plan; and the appellate court adverted to the alleged
lack of notice to the DOLE regarding Dr. Meris’s dismissal but the latter never raised such
issue in his appeal to the NLRC or even in his petition for review before the Court of Appeals,
hence, the latter did not have authority to pass on the matter. 34
Work is a necessity that has economic significance deserving legal protection. The social
justice and protection to labor provisions in the Constitution dictate so.
Employers are also accorded rights and privileges to assure their self-determination and
independence and reasonable return of capital. This mass of privileges comprises the so-
called management prerogatives. Although they may be broad and unlimited in scope, the
State has the right to determine whether an employer’s privilege is exercised in a manner that
complies with the legal requirements and does not offend the protected rights of labor. One of
the rights accorded an employer is the right to close an establishment or undertaking.
The right to close the operation of an establishment or undertaking is explicitly recognized
under the Labor Code as one of the authorized causes in terminating employment of workers,
the only limitation being that the closure must not be for the purpose of circumventing the
provisions on termination of employment embodied in the Labor Code.
ART. 283. Closure of establishment and reduction of personnel. – The employer may also
terminate the employment of any employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of
the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the workers and
the Ministry of Labor and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor saving devices or redundancy,
the worker affected shall be entitled to a separation pay equivalent to at least his one (1)
month pay or to at least one (1) month pay for every year of service, whichever is higher. In
case retrenchment to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious business losses or financial
reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half
(1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6)
months shall be considered one (1) whole year. (Emphasis and underscoring supplied)
The phrase "closures or cessation of operations of establishment or undertaking" includes a
partial or total closure or cessation.35
x x x Ordinarily, the closing of a warehouse facility and the termination of the services of
employees there assigned is a matter that is left to the determination of the employer in the
good faith exercise of its management prerogatives. The applicable law in such a case is
Article 283 of the Labor Code which permits ‘closure or cessation of operation of an
establishment or undertaking not due to serious business losses or financial reverses,’ which,
in our reading includes both the complete cessation of operations and the cessation of
only part of a company’s business. (Emphasis supplied)
And the phrase "closures or cessation x x x not due to serious business losses or financial
reverses" recognizes the right of the employer to close or cease his business operations or
undertaking even if he is not suffering from serious business losses or financial reverses, as
long as he pays his employees their termination pay in the amount corresponding to their
length of service.36
It would indeed be stretching the intent and spirit of the law if a court were to unjustly interfere
in management’s prerogative to close or cease its business operations just because said
business operation or undertaking is not suffering from any loss.37 As long as the company’s
exercise of the same is in good faith to advance its interest and not for the purpose of
defeating or circumventing the rights of employees under the law or a valid
agreement, such exercise will be upheld.38
Clearly then, the right to close an establishment or undertaking may be justified on grounds
other than business losses but it cannot be an unbridled prerogative to suit the whims of the
employer.
The ultimate test of the validity of closure or cessation of establishment or undertaking is that
it must be bona fide in character.39 And the burden of proving such falls upon the employer.40
In the case at bar, Capitol failed to sufficiently prove its good faith in closing the ISU. TOTAL EXPENSES ₱225, 583.70 ₱169,244.34

From the letter of Dr. Clemente to Dr. Meris, it is gathered that the abolition of the ISU was NET LOSS ₱(208,811.70) ₱(134,008.34),42
due to the "almost extinct demand for
direct medical service by the private and semi-government corporations in providing health was prepared by its internal auditor Vicenta Fernandez,43 a relative of Dr. Clemente, and not
care for their employees;" and that such extinct demand was brought about by "the existing by an independent external auditor, hence, not beyond doubt. It is the financial statements
trend of industrial companies allocating their health care requirements to Health Maintenance audited by independent external auditors which constitute the normal method of proof of the
Organizations (HMOs) or thru a tripartite arrangement with medical insurance carriers and profit and loss performance of a company.44
designated hospitals."
At all events, the claimed losses are contradicted by the accounting records of Capitol itself
The records of the case, however, fail to impress that there was indeed extinct demand for which show that ISU had increasing revenue from 1989 to 1991.
the medical services rendered by the ISU. The ISU’s Annual Report for the fiscal years 1986
to 1991, submitted by Dr. Meris to Dr. Clemente, and uncontroverted by Capitol, shows the
Year In-Patient Out-Patient Total Income
following:
1989 ₱230,316.38 ₱ 79,477.50 ₱309,793.88
Fiscal Year No. of Industrial No of No. of Capitol
1990 ₱278,438.10 ₱124,256.65 ₱402,694.75
Patients Companies Employees
1991 ₱305,126.35 ₱152,920.15 ₱458,046.5045
1986-1987 466 11 1445
The foregoing disquisition notwithstanding, as reflected above, the existence of business
1987-1988 580 17 1707
losses is not required to justify the closure or cessation of establishment or undertaking as a
ground to terminate employment of employees. Even if the ISU were not incurring losses, its
1988-1989 676 14 1888 abolition or closure could be justified on other grounds like that proffered by Capitol – extinct
demand. Capitol failed, however, to present sufficient and convincing evidence to support
1989-1990 571 16 2731 such claim of extinct demand. In fact, the employees of Capitol submitted a petition46 dated
April 21, 1992 addressed to Dr. Clemente opposing the abolition of the ISU.
1990-1991 759 18 232041
The closure of ISU then surfaces to be contrary to the provisions of the Labor Code on
If there was extinct demand for the ISU medical services as what Capitol and Dr. Clemente termination of employment.
purport to convey, why the number of client companies of the ISU increased from 11 to 18
from 1986 to 1991, as well as the number of patients from both industrial corporations and The termination of the services of Dr. Meris not having been premised on a just or authorized
Capitol employees, they did not explain. cause, he is entitled to either reinstatement or separation pay if reinstatement is no longer
viable, and to backwages.
The "Analysis of Income and Expenses" adduced by Capitol showing that the ISU incurred
losses from July 1990 to February 1992, to wit: Reinstatement, however, is not feasible in case of a strained employer-employee relationship
or when the work or position formerly held by the dismissed employee no longer exists, as in
July 1, 1990 to July 1, 1991 to the instant case.47 Dr. Meris is thus entitled to payment of separation pay at the rate of one
(1) month salary for every year of his employment, with a fraction of at least six (6) months
being considered as one(1) year,48 and full backwages from the time of his dismissal from
June 30, 1991 February 29, 1992
April 30, 1992 until the expiration of his term as Chief of ISU or his mandatory retirement,
whichever comes first.
INCOME ₱16, 772.00 ₱35, 236.00
The award by the appellate court of moral damages,49 however, cannot be sustained, solely
upon the premise that the employer fired his employee without just cause or due process.
Additional facts must be pleaded and proven to warrant the grant of moral damages under
the Civil Code, such as that the act of dismissal was attended by bad faith or fraud, or was
oppressive to labor, or done in a manner contrary to morals, good customs, or public policy;
and of course, that social humiliation, wounded feelings, grave anxiety, etc., resulted
therefrom.50 Such circumstances, however, do not obtain in the instant case. More
specifically on bad faith, lack of it is mirrored in Dr. Clemente’s offer to Dr. Meris to be a
consultant of Capitol, despite the abolition of the ISU.
There being no moral damages, the award of exemplary damages does not lie.51
The award for attorney’s fees, however, remains.52
WHEREFORE, the decision of the Court of Appeals dated February 15, 2002 is
hereby AFFIRMED with MODIFICATION. As modified, judgment is hereby rendered ordering
Capitol Medical Center, Inc. to pay Dr. Cesar Meris separation pay at the rate of One (1)
Month salary for every year of his employment, with a fraction of at least Six (6) Months being
considered as One (1) Year, full backwages from the time of his dismissal from April 30, 1992
until the expiration of his term as Chief of the ISU or his mandatory retirement, whichever
comes first; other benefits due him or their money equivalent; and attorney’s fees.
Costs against petitioners.
SO ORDERED.
G.R. No. 192558 February 15, 2012
BITOY JAVIER (DANILO P. JAVIER), Petitioner,
vs.
FLY ACE CORPORATION/FLORDELYN CASTILLO, Respondents.
DECISION
MENDOZA, J.:
This is a petition under Rule 45 of the Rules of Civil Procedure assailing the March 18, 2010
Decision1 of the Court of Appeals (CA) and its June 7, 2010 Resolution,2 in CA-G.R. SP No.
109975, which reversed the May 28, 2009 Decision3 of the National Labor Relations
Commission (NLRC) in the case entitled Bitoy Javier v. Fly Ace/Flordelyn Castillo,4 holding
that petitioner Bitoy Javier (Javier) was illegally dismissed from employment and ordering Fly
Ace Corporation (Fly Ace) to pay backwages and separation pay in lieu of reinstatement.
Antecedent Facts
On May 23, 2008, Javier filed a complaint before the NLRC for underpayment of salaries and
other labor standard benefits. He alleged that he was an employee of Fly Ace since
September 2007, performing various tasks at the respondent’s warehouse such as cleaning
and arranging the canned items before their delivery to certain locations, except in instances
when he would be ordered to accompany the company’s delivery vehicles, as pahinante; that
he reported for work from Monday to Saturday from 7:00 o’clock in the morning to 5:00
o’clock in the afternoon; that during his employment, he was not issued an identification card
and payslips by the company; that on May 6, 2008, he reported for work but he was no longer
allowed to enter the company premises by the security guard upon the instruction of Ruben
Ong (Mr. Ong), his superior;5 that after several minutes of begging to the guard to allow him
to enter, he saw Ong whom he approached and asked why he was being barred from
entering the premises; that Ong replied by saying, "Tanungin mo anak mo;" 6 that he then
went home and discussed the matter with his family; that he discovered that Ong had been
courting his daughter Annalyn after the two met at a fiesta celebration in Malabon City; that
Annalyn tried to talk to Ong and convince him to spare her father from trouble but he refused
to accede; that thereafter, Javier was terminated from his employment without notice; and
that he was neither given the opportunity to refute the cause/s of his dismissal from work.
To support his allegations, Javier presented an affidavit of one Bengie Valenzuela who
alleged that Javier was a stevedore or pahinante of Fly Ace from September 2007 to January
2008. The said affidavit was subscribed before the Labor Arbiter (LA).7
For its part, Fly Ace averred that it was engaged in the business of importation and sales of
groceries. Sometime in December 2007, Javier was contracted by its employee, Mr. Ong, as
extra helper on a pakyaw basis at an agreed rate of ₱ 300.00 per trip, which was later
increased to ₱ 325.00 in January 2008. Mr. Ong contracted Javier roughly 5 to 6 times only in
a month whenever the vehicle of its contracted hauler, Milmar Hauling Services, was not
available. On April 30, 2008, Fly Ace no longer needed the services of Javier. Denying that
he was their employee, Fly Ace insisted that there was no illegal dismissal. 8 Fly Ace
submitted a copy of its agreement with Milmar Hauling Services and copies of
acknowledgment receipts evidencing payment to Javier for his contracted services bearing
the words, "daily manpower (pakyaw/piece rate pay)" and the latter’s signatures/initials.
Ruling of the Labor Arbiter
On November 28, 2008, the LA dismissed the complaint for lack of merit on the ground that
Javier failed to present proof that he was a regular employee of Fly Ace. He wrote:
Complainant has no employee ID showing his employment with the Respondent nor any
document showing that he received the benefits accorded to regular employees of the
Respondents. His contention that Respondent failed to give him said ID and payslips implies
that indeed he was not a regular employee of Fly Ace considering that complainant was a
helper and that Respondent company has contracted a regular trucking for the delivery of its
products.
Respondent Fly Ace is not engaged in trucking business but in the importation and sales of
groceries. Since there is a regular hauler to deliver its products, we give credence to
Respondents’ claim that complainant was contracted on "pakiao" basis.
As to the claim for underpayment of salaries, the payroll presented by the Respondents
showing salaries of workers on "pakiao" basis has evidentiary weight because although the
signature of the complainant appearing thereon are not uniform, they appeared to be his true
signature.
xxxx
Hence, as complainant received the rightful salary as shown by the above described payrolls,
Respondents are not liable for salary differentials. 9
Ruling of the NLRC
On appeal with the NLRC, Javier was favored. It ruled that the LA skirted the argument of
Javier and immediately concluded that he was not a regular employee simply because he
failed to present proof. It was of the view that a pakyaw-basis arrangement did not preclude
the existence of employer-employee relationship. "Payment by result x x x is a method of
compensation and does not define the essence of the relation. It is a mere method of
computing compensation, not a basis for determining the existence or absence of an
employer-employee relationship.10 " The NLRC further averred that it did not follow that a
worker was a job contractor and not an employee, just because the work he was doing was
not directly related to the employer’s trade or business or the work may be considered as
"extra" helper as in this case; and that the relationship of an employer and an employee was
determined by law and the same would prevail whatever the parties may call it. In this case,
the NLRC held that substantial evidence was sufficient basis for judgment on the existence of
the employer-employee relationship. Javier was a regular employee of Fly Ace because there
was reasonable connection between the particular activity performed by the employee (as a
"pahinante") in relation to the usual business or trade of the employer (importation, sales and
delivery of groceries). He may not be considered as an independent contractor because he
could not exercise any judgment in the delivery of company products. He was only engaged
as a "helper."
Finding Javier to be a regular employee, the NLRC ruled that he was entitled to a security of
tenure. For failing to present proof of a valid cause for his termination, Fly Ace was found to
be liable for illegal dismissal of Javier who was likewise entitled to backwages and separation
pay in lieu of reinstatement. The NLRC thus ordered:
WHEREFORE, premises considered, complainant’s appeal is partially GRANTED. The
assailed Decision of the labor arbiter is VACATED and a new one is hereby entered holding
respondent FLY ACE CORPORATION guilty of illegal dismissal and non-payment of 13th
month pay. Consequently, it is hereby ordered to pay complainant DANILO "Bitoy" JAVIER
the following:
1. Backwages -₱ 45,770.83
2. Separation pay, in lieu of reinstatement - 8,450.00
3. Unpaid 13th month pay (proportionate) - 5,633.33
TOTAL -₱ 59,854.16
All other claims are dismissed for lack of merit.
SO ORDERED.11
Ruling of the Court of Appeals
On March 18, 2010, the CA annulled the NLRC findings that Javier was indeed a former
employee of Fly Ace and reinstated the dismissal of Javier’s complaint as ordered by the LA.
The CA exercised its authority to make its own factual determination anent the issue of the
existence of an employer-employee relationship between the parties. According to the CA:
xxx
In an illegal dismissal case the onus probandi rests on the employer to prove that its
dismissal was for a valid cause. However, before a case for illegal dismissal can prosper, an
employer-employee relationship must first be established. x x x it is incumbent upon private
respondent to prove the employee-employer relationship by substantial evidence.
xxx
It is incumbent upon private respondent to prove, by substantial evidence, that he is an
employee of petitioners, but he failed to discharge his burden. The non-issuance of a
company-issued identification card to private respondent supports petitioners’ contention that
private respondent was not its employee.12
The CA likewise added that Javier’s failure to present salary vouchers, payslips, or other
pieces of evidence to bolster his contention, pointed to the inescapable conclusion that he
was not an employee of Fly Ace. Further, it found that Javier’s work was not necessary and
desirable to the business or trade of the company, as it was only when there were scheduled
deliveries, which a regular hauling service could not deliver, that Fly Ace would contract the
services of Javier as an extra helper. Lastly, the CA declared that the facts alleged by Javier
did not pass the "control test."
He contracted work outside the company premises; he was not required to observe definite
hours of work; he was not required to report daily; and he was free to accept other work
elsewhere as there was no exclusivity of his contracted service to the company, the same
being co-terminous with the trip only.13 Since no substantial evidence was presented to
establish an employer-employee relationship, the case for illegal dismissal could not prosper.
The petitioners moved for reconsideration, but to no avail.
Hence, this appeal anchored on the following grounds:
I.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE
PETITIONER WAS NOT A REGULAR EMPLOYEE OF FLY ACE.
II.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE
PETITIONER IS NOT ENTITLED TO HIS MONETARY CLAIMS.14
The petitioner contends that other than its bare allegations and self-serving affidavits of the
other employees, Fly Ace has nothing to substantiate its claim that Javier was engaged on
a pakyaw basis. Assuming that Javier was indeed hired on a pakyaw basis, it does not
preclude his regular employment with the company. Even the acknowledgment receipts
bearing his signature and the confirming receipt of his salaries will not show the true nature of
his employment as they do not reflect the necessary details of the commissioned task.
Besides, Javier’s tasks as pahinante are related, necessary and desirable to the line of
business by Fly Ace which is engaged in the importation and sale of grocery items. "On days
when there were no scheduled deliveries, he worked in petitioners’ warehouse, arranging and
cleaning the stored cans for delivery to clients."15 More importantly, Javier was subject to the
control and supervision of the company, as he was made to report to the office from Monday
to Saturday, from 7:00 o’clock in the morning until 5:00 o’clock in the afternoon. The list of
deliverable goods, together with the corresponding clients and their respective purchases and
addresses, would necessarily have been prepared by Fly Ace. Clearly, he was subjected to
compliance with company rules and regulations as regards working hours, delivery schedule
and output, and his other duties in the warehouse.16
The petitioner chiefly relied on Chavez v. NLRC,17 where the Court ruled that payment to a
worker on a per trip basis is not significant because "this is merely a method of computing
compensation and not a basis for determining the existence of employer-employee
relationship." Javier likewise invokes the rule that, "in controversies between a laborer and his
master, x x x doubts reasonably arising from the evidence should be resolved in the former’s
favour. The policy is reflected is no less than the Constitution, Labor Code and Civil Code." 18
Claiming to be an employee of Fly Ace, petitioner asserts that he was illegally dismissed by
the latter’s failure to observe substantive and procedural due process. Since his dismissal
was not based on any of the causes recognized by law, and was implemented without notice,
Javier is entitled to separation pay and backwages.
In its Comment,19 Fly Ace insists that there was no substantial evidence to prove employer-
employee relationship. Having a service contract with Milmar Hauling Services for the
purpose of transporting and delivering company products to customers, Fly Ace contracted
Javier as an extra helper or pahinante on a mere "per trip basis." Javier, who was actually a
loiterer in the area, only accompanied and assisted the company driver when Milmar could
not deliver or when the exigency of extra deliveries arises for roughly five to six times a
month. Before making a delivery, Fly Ace would turn over to the driver and Javier the delivery
vehicle with its loaded company products. With the vehicle and products in their custody, the
driver and Javier "would leave the company premises using their own means, method, best
judgment and discretion on how to deliver, time to deliver, where and [when] to start, and
manner of delivering the products."20
Fly Ace dismisses Javier’s claims of employment as baseless assertions. Aside from his bare
allegations, he presented nothing to substantiate his status as an employee. "It is a basic rule
of evidence that each party must prove his affirmative allegation. If he claims a right granted
by law, he must prove his claim by competent evidence, relying on the strength of his own
evidence and not upon the weakness of his opponent."21 Invoking the case of Lopez v.
Bodega City,22 Fly Ace insists that in an illegal dismissal case, the burden of proof is upon the
complainant who claims to be an employee. It is essential that an employer-employee
relationship be proved by substantial evidence. Thus, it cites:
In an illegal dismissal case, the onus probandi rests on the employer to prove that its
dismissal of an employee was for a valid cause. However, before a case for illegal dismissal
can prosper, an employer-employee relationship must first be established.
Fly Ace points out that Javier merely offers factual assertions that he was an employee of Fly
Ace, "which are unfortunately not supported by proof, documentary or otherwise."23 Javier
simply assumed that he was an employee of Fly Ace, absent any competent or relevant
evidence to support it. "He performed his contracted work outside the premises of the
respondent; he was not even required to report to work at regular hours; he was not made to
register his time in and time out every time he was contracted to work; he was not subjected
to any disciplinary sanction imposed to other employees for company violations; he was not
issued a company I.D.; he was not accorded the same benefits given to other employees; he
was not registered with the Social Security System (SSS)as petitioner’s employee; and, he
was free to leave, accept and engage in other means of livelihood as there is no exclusivity of
his contracted services with the petitioner, his services being co-terminus with the trip only.
All these lead to the conclusion that petitioner is not an employee of the respondents." 24
Moreover, Fly Ace claims that it had "no right to control the result, means, manner and
methods by which Javier would perform his work or by which the same is to be
accomplished."25 In other words, Javier and the company driver were given a free hand as to
how they would perform their contracted services and neither were they subjected to definite
hours or condition of work.
Fly Ace likewise claims that Javier’s function as a pahinante was not directly related or
necessary to its principal business of importation and sales of groceries. Even without Javier,
the business could operate its usual course as it did not involve the business of inland
transportation. Lastly, the acknowledgment receipts bearing Javier’s signature and words
"pakiao rate," referring to his earned salaries on a per trip basis, have evidentiary weight that
the LA correctly considered in arriving at the conclusion that Javier was not an employee of
the company.
The Court affirms the assailed CA decision.
It must be noted that the issue of Javier’s alleged illegal dismissal is anchored on the
existence of an employer-employee relationship between him and Fly Ace. This is essentially
a question of fact. Generally, the Court does not review errors that raise factual questions.
However, when there is conflict among the factual findings of the antecedent deciding bodies
like the LA, the NLRC and the CA, "it is proper, in the exercise of Our equity jurisdiction, to
review and re-evaluate the factual issues and to look into the records of the case and re-
examine the questioned findings."26 In dealing with factual issues in labor cases, "substantial
evidence – that amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion – is sufficient."27
As the records bear out, the LA and the CA found Javier’s claim of employment with Fly Ace
as wanting and deficient. The Court is constrained to agree. Although Section 10, Rule VII of
the New Rules of Procedure of the NLRC28 allows a relaxation of the rules of procedure and
evidence in labor cases, this rule of liberality does not mean a complete dispensation of
proof. Labor officials are enjoined to use reasonable means to ascertain the facts speedily
and objectively with little regard to technicalities or formalities but nowhere in the rules are
they provided a license to completely discount evidence, or the lack of it. The quantum of
proof required, however, must still be satisfied. Hence, "when confronted with conflicting
versions on factual matters, it is for them in the exercise of discretion to determine which
party deserves credence on the basis of evidence received, subject only to the requirement
that their decision must be supported by substantial evidence."29 Accordingly, the petitioner
needs to show by substantial evidence that he was indeed an employee of the company
against which he claims illegal dismissal.
Expectedly, opposing parties would stand poles apart and proffer allegations as different as
chalk and cheese. It is, therefore, incumbent upon the Court to determine whether the party
on whom the burden to prove lies was able to hurdle the same. "No particular form of
evidence is required to prove the existence of such employer-employee relationship. Any
competent and relevant evidence to prove the relationship may be
admitted.http://www.lawphil.net/judjuris/juri2009/may2009/gr_179652_2009.html -
fnt31 Hence, while no particular form of evidence is required, a finding that such relationship
exists must still rest on some substantial evidence. Moreover, the substantiality of the
evidence depends on its quantitative as well as its qualitative aspects."30 Although substantial
evidence is not a function of quantity but rather of quality, the x x x circumstances of the
instant case demand that something more should have been proffered. Had there been other
proofs of employment, such as x x x inclusion in petitioner’s payroll, or a clear exercise of
control, the Court would have affirmed the finding of employer-employee relationship."31
In sum, the rule of thumb remains: the onus probandi falls on petitioner to establish or
substantiate such claim by the requisite quantum of evidence.32 "Whoever claims entitlement
to the benefits provided by law should establish his or her right thereto x x x." 33 Sadly, Javier
failed to adduce substantial evidence as basis for the grant of relief.
In this case, the LA and the CA both concluded that Javier failed to establish his employment
with Fly Ace. By way of evidence on this point, all that Javier presented were his self-serving
statements purportedly showing his activities as an employee of Fly Ace. Clearly, Javier failed
to pass the substantiality requirement to support his claim. Hence, the Court sees no reason
to depart from the findings of the CA.
While Javier remains firm in his position that as an employed stevedore of Fly Ace, he was
made to work in the company premises during weekdays arranging and cleaning grocery
items for delivery to clients, no other proof was submitted to fortify his claim. The lone affidavit
executed by one Bengie Valenzuela was unsuccessful in strengthening Javier’s cause. In
said document, all Valenzuela attested to was that he would frequently see Javier at the
workplace where the latter was also hired as stevedore.34 Certainly, in gauging the evidence
presented by Javier, the Court cannot ignore the inescapable conclusion that his mere
presence at the workplace falls short in proving employment therein. The supporting affidavit
could have, to an extent, bolstered Javier’s claim of being tasked to clean grocery items when
there were no scheduled delivery trips, but no information was offered in this subject simply
because the witness had no personal knowledge of Javier’s employment status in the
company. Verily, the Court cannot accept Javier’s statements, hook, line and sinker.
The Court is of the considerable view that on Javier lies the burden to pass the well-settled
tests to determine the existence of an employer-employee relationship, viz: (1) the selection
and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and
(4) the power to control the employee’s conduct. Of these elements, the most important
criterion is whether the employer controls or has reserved the right to control the employee
not only as to the result of the work but also as to the means and methods by which the result
is to be accomplished.35
In this case, Javier was not able to persuade the Court that the above elements exist in his
case.1avvphi1 He could not submit competent proof that Fly Ace engaged his services as a
regular employee; that Fly Ace paid his wages as an employee, or that Fly Ace could dictate
what his conduct should be while at work. In other words, Javier’s allegations did not
establish that his relationship with Fly Ace had the attributes of an employer-employee
relationship on the basis of the above-mentioned four-fold test. Worse, Javier was not able to
refute Fly Ace’s assertion that it had an agreement with a hauling company to undertake the
delivery of its goods. It was also baffling to realize that Javier did not dispute Fly Ace’s denial
of his services’ exclusivity to the company. In short, all that Javier laid down were bare
allegations without corroborative proof.
Fly Ace does not dispute having contracted Javier and paid him on a "per trip" rate as a
stevedore, albeit on a pakyaw basis. The Court cannot fail to note that Fly Ace presented
documentary proof that Javier was indeed paid on a pakyaw basis per the acknowledgment
receipts admitted as competent evidence by the LA. Unfortunately for Javier, his mere denial
of the signatures affixed therein cannot automatically sway us to ignore the documents
because "forgery cannot be presumed and must be proved by clear, positive and convincing
evidence and the burden of proof lies on the party alleging forgery."36
Considering the above findings, the Court does not see the necessity to resolve the second
issue presented.
One final note. The Court’s decision does not contradict the settled rule that "payment by the
piece is just a method of compensation and does not define the essence of the
relation."37 Payment on a piece-rate basis does not negate regular employment. "The term
‘wage’ is broadly defined in Article 97 of the Labor Code as remuneration or earnings,
capable of being expressed in terms of money whether fixed or ascertained on a time, task,
piece or commission basis. Payment by the piece is just a method of compensation and does
not define the essence of the relations. Nor does the fact that the petitioner is not covered by
the SSS affect the employer-employee relationship. However, in determining whether the
relationship is that of employer and employee or one of an independent contractor, each case
must be determined on its own facts and all the features of the relationship are to be
considered."38 Unfortunately for Javier, the attendant facts and circumstances of the instant
case do not provide the Court with sufficient reason to uphold his claimed status as employee
of Fly Ace.
While the Constitution is committed to the policy of social justice and the protection of the
working class, it should not be supposed that every labor dispute will be automatically
decided in favor of labor. Management also has its rights which are entitled to respect and
enforcement in the interest of simple fair play. Out of its concern for the less privileged in life,
the Court has inclined, more often than not, toward the worker and upheld his cause in his
conflicts with the employer. Such favoritism, however, has not blinded the Court to the rule
that justice is in every case for the deserving, to be dispensed in the light of the established
facts and the applicable law and doctrine.39
WHEREFORE, the petition is DENIED. The March 18, 2010 Decision of the Court of Appeals
and its June 7, 2010 Resolution, in CA-G.R. SP No. 109975, are hereby AFFIRMED.
SO ORDERED.
G.R. No. 192998 April 2, 2014
BERNARD A. TENAZAS, JAIME M. FRANCISCO and ISIDRO G. ENDRACA, Petitioners,
vs.
R. VILLEGAS TAXI TRANSPORT and ROMUALDO VILLEGAS, Respondents.
DECISION
REYES, J.:
This is a petition for review on certiorari1 filed under Rule 45 of the Rules of Court, assailing
the Decision2 dated March 11, 2010 and Resolution3 dated June 28, 2010 of the Court of
Appeals (CA) in CA-G.R. SP No. 111150, which affirmed with modification the
Decision4 dated June 23, 2009 of the National Labor Relations Commission (NLRC) in NLRC
LAC Case No. 07-002648-08.
The Antecedent Facts
On July 4, 2007, Bernard A. Tenazas (Tenazas) and Jaime M. Francisco (Francisco) filed a
complaint for illegal dismissal against R. Villegas Taxi Transport and/or Romualdo Villegas
(Romualdo) and Andy Villegas (Andy) (respondents). At that time, a similar case had already
been filed by Isidro G. Endraca (Endraca) against the same respondents. The two (2) cases
were subsequently consolidated.5
In their position paper,6 Tenazas, Francisco and Endraca (petitioners) alleged that they were
hired and dismissed by the respondents on the following dates:
Name Date of Hiring Date of Dismissal Salary
Bernard A. Tenazas 10/1997 07/03/07 Boundary System
Jaime M. Francisco 04/10/04 06/04/07 Boundary System
Isidro G. Endraca 04/2000 03/06/06 Boundary System7
Relaying the circumstances of his dismissal, Tenazas alleged that on July 1, 2007, the taxi
unit assigned to him was sideswiped by another vehicle, causing a dent on the left fender
near the driver seat. The cost of repair for the damage was estimated at ₱500.00. Upon
reporting the incident to the company, he was scolded by respondents Romualdo and Andy
and was told to leave the garage for he is already fired. He was even threatened with physical
harm should he ever be seen in the company’s premises again. Despite the warning,
Tenazas reported for work on the following day but was told that he can no longer drive any
of the company’s units as he is already fired.8
Francisco, on the other hand, averred that his dismissal was brought about by the company’s
unfounded suspicion that he was organizing a labor union. He was instantaneously
terminated, without the benefit of procedural due process, on June 4, 2007. 9
Endraca, for his part, alleged that his dismissal was instigated by an occasion when he fell
short of the required boundary for his taxi unit. He related that before he was dismissed, he
brought his taxi unit to an auto shop for an urgent repair. He was charged the amount of
₱700.00 for the repair services and the replacement parts. As a result, he was not able to
meet his boundary for the day. Upon returning to the company garage and informing the
management of the incident, his driver’s license was confiscated and was told to settle the
deficiency in his boundary first before his license will be returned to him. He was no longer
allowed to drive a taxi unit despite his persistent pleas.10
For their part, the respondents admitted that Tenazas and Endraca were employees of the
company, the former being a regular driver and the latter a spare driver. The respondents,
however, denied that Francisco was an employee of the company or that he was able to drive
one of the company’s units at any point in time.11
The respondents further alleged that Tenazas was never terminated by the company. They
claimed that on July 3, 2007, Tenazas went to the company garage to get his taxi unit but
was informed that it is due for overhaul because of some mechanical defects reported by the
other driver who takes turns with him in using the same. He was thus advised to wait for
further notice from the company if his unit has already been fixed. On July 8, 2007, however,
upon being informed that his unit is ready for release, Tenazas failed to report back to work
for no apparent reason.12
As regards Endraca, the respondents alleged that they hired him as a spare driver in
February 2001. They allow him to drive a taxi unit whenever their regular driver will not be
able to report for work. In July 2003, however, Endraca stopped reporting for work without
informing the company of his reason. Subsequently, the respondents learned that a complaint
for illegal dismissal was filed by Endraca against them. They strongly maintained, however,
that they could never have terminated Endraca in March 2006 since he already stopped
reporting for work as early as July 2003. Even then, they expressed willingness to
accommodate Endraca should he wish to work as a spare driver for the company again since
he was never really dismissed from employment anyway.13
On May 29, 2008, the petitioners, by registered mail, filed a Motion to Admit Additional
Evidence.14 They alleged that after diligent efforts, they were able to discover new pieces of
evidence that will substantiate the allegations in their position paper. Attached with the motion
are the following: (a) Joint Affidavit of the petitioners;15 (2) Affidavit of Good Faith of Aloney
Rivera, a co-driver;16 (3) pictures of the petitioners wearing company shirts;17 and (4)
Tenazas’ Certification/Record of Social Security System (SSS) contributions. 18
The Ruling of the Labor Arbiter
On May 30, 2008, the Labor Arbiter (LA) rendered a Decision,19 which pertinently states,
thus:
In the case of complainant Jaime Francisco, respondents categorically denied the existence
of an employer-employee relationship. In this situation, the burden of proof shifts to the
complainant to prove the existence of a regular employment. Complainant Francisco failed to
present evidence of regular employment available to all regular employees, such as an
employment contract, company ID, SSS, withholding tax certificates, SSS membership and
the like.
In the case of complainant Isidro Endraca, respondents claim that he was only an extra driver
who stopped reporting to queue for available taxi units which he could drive. In fact,
respondents offered him in their Position Paper on record, immediate reinstatement as extra
taxi driver which offer he refused.
In case of Bernard Tenazas, he was told to wait while his taxi was under repair but he did not
report for work after the taxi was repaired. Respondents[,] in their Position Paper, on record
likewise, offered him immediate reinstatement, which offer he refused.
We must bear in mind that the complaint herein is one of actual dismissal. But there was no
formal investigations, no show cause memos, suspension memos or termination memos
were never issued. Otherwise stated, there is no proof of overt act of dismissal committed by
herein respondents.
We are therefore constrained to rule that there was no illegal dismissal in the case at bar.
The situations contemplated by law for entitlement to separation pay does [sic] not apply.
WHEREFORE, premises considered, instant consolidated complaints are hereby dismissed
for lack of merit.
SO ORDERED.20
The Ruling of the NLRC
Unyielding, the petitioners appealed the decision of the LA to the NLRC. Subsequently, on
June 23, 2009, the NLRC rendered a Decision,21 reversing the appealed decision of the LA,
holding that the additional pieces of evidence belatedly submitted by the petitioners sufficed
to establish the existence of employer-employee relationship and their illegal dismissal. It
held, thus:
In the challenged decision, the Labor Arbiter found that it cannot be said that the
complainants were illegally dismissed, there being no showing, in the first place, that the
respondent [sic] terminated their services. A portion thereof reads:
"We must bear in mind that the complaint herein is one of actual dismissal. But there were no
formal investigations, no show cause memos, suspension memos or termination memos
were never issued. Otherwise stated, there is no proof of overt act of dismissal committed by
herein respondents.
We are therefore constrained to rule that there was no illegal dismissal in the case at bar."
Issue: [W]hether or not the complainants were illegally dismissed from employment.
It is possible that the complainants’ Motion to Admit Additional Evidence did not reach the
Labor Arbiter’s attention because he had drafted the challenged decision even before they
submitted it, and thereafter, his staff attended only to clerical matters, and failed to bring the
motion in question to his attention. It is now up to this Commission to consider the
complainants’ additional evidence. Anyway, if this Commission must consider evidence
submitted for the first time on appeal (Andaya vs. NLRC, G.R. No. 157371, July 15, 2005),
much more so must it consider evidence that was simply overlooked by the Labor Arbiter.
Among the additional pieces of evidence submitted by the complainants are the following: (1)
joint affidavit (records, p. 51-52) of the three (3) complainants; (2) affidavit (records, p. 53) of
Aloney Rivera y Aldo; and (3) three (3) pictures (records, p. 54) referred to by the
complainant in their joint affidavit showing them wearing t-shirts bearing the name and logo of
the respondent’s company.
xxxx
WHEREFORE, the decision appealed from is hereby REVERSED. Respondent Rom[u]aldo
Villegas doing business under the name and style Villegas Taxi Transport is hereby ordered
to pay the complainants the following (1) full backwages from the date of their dismissal (July
3, 2007 for Tena[z]as, June 4, 2004 for Francisco, and March 6, 2006 for Endraca[)] up to the
date of the finality of this decision[;] (2) separation pay equivalent to one month for every year
of service; and (3) attorney’s fees equivalent to ten percent (10%) of the total judgment
awards.
SO ORDERED.22
On July 24, 2009, the respondents filed a motion for reconsideration but the NLRC denied the
same in its Resolution23 dated September 23, 2009.
The Ruling of the CA
Unperturbed, the respondents filed a petition for certiorari with the CA. On March 11, 2010,
the CA rendered a Decision,24 affirming with modification the Decision dated June 23, 2009 of
the NLRC. The CA agreed with the NLRC’s finding that Tenazas and Endraca were
employees of the company, but ruled otherwise in the case of Francisco for failing to
establish his relationship with the company. It also deleted the award of separation pay and
ordered for reinstatement of Tenazas and Endraca. The pertinent portions of the decision
read as follows:
At the outset, We declare that respondent Francisco failed to prove that an employer-
employee relationship exists between him and R. Transport. If there is no employer-employee
relationship in the first place, the duty of R. Transport to adhere to the labor standards
provisions of the Labor Code with respect to Francisco is questionable.
xxxx
Although substantial evidence is not a function of quantity but rather of quality, the peculiar
environmental circumstances of the instant case demand that something more should have
been proffered. Had there been other proofs of employment, such as Francisco’s inclusion in
R.R.
Transport’s payroll, this Court would have affirmed the finding of employer-employee
relationship.1âwphi1 The NLRC, therefore, committed grievous error in ordering R. Transport
to answer for Francisco’s claims.
We now tackle R. Transport’s petition with respect to Tenazas and Endraca, who are both
admitted to be R. Transport’s employees. In its petition, R. Transport puts forth the theory that
it did not terminate the services of respondents but that the latter deliberately abandoned their
work. We cannot subscribe to this theory.
xxxx
Considering that the complaints for illegal dismissal were filed soon after the alleged dates of
dismissal, it cannot be inferred that respondents Tenazas and Endraca intended to abandon
their employment. The complainants for dismissal are, in themselves, pleas for the
continuance of employment. They are incompatible with the allegation of abandonment. x x x.
For R. Transport’s failure to discharge the burden of proving that the dismissal of respondents
Tenazas and Endraca was for a just cause, We are constrained to uphold the NLRC’s
conclusion that their dismissal was not justified and that they are entitled to back wages.
Because they were illegally dismissed, private respondents Tenazas and Endraca are entitled
to reinstatement and back wages x x x.
xxxx
However, R. Transport is correct in its contention that separation pay should not be awarded
because reinstatement is still possible and has been offered. It is well[-]settled that separation
pay is granted only in instances where reinstatement is no longer feasible or appropriate,
which is not the case here.
xxxx
WHEREFORE, the Decision of the National Labor Relations Commission dated 23 June
2009, in NLRC LAC Case No. 07-002648-08, and its Resolution dated 23 September 2009
denying reconsideration thereof are AFFIRMED with MODIFICATION in that the award of
Jaime Francisco’s claims is DELETED. The separation pay granted in favor of Bernard
Tenazas and Isidro Endraca is, likewise, DELETED and their reinstatement is ordered
instead.
SO ORDERED.25 (Citations omitted)
On March 19, 2010, the petitioners filed a motion for reconsideration but the same was
denied by the CA in its Resolution26 dated June 28, 2010.
Undeterred, the petitioners filed the instant petition for review on certiorari before this Court
on July 15, 2010.
The Ruling of this Court
The petition lacks merit.
Pivotal to the resolution of the instant case is the determination of the existence of employer-
employee relationship and whether there was an illegal dismissal. Remarkably, the LA, NLRC
and the CA had varying assessment on the matters at hand. The LA believed that, with the
admission of the respondents, there is no longer any question regarding the status of both
Tenazas and Endraca being employees of the company. However, he ruled that the same
conclusion does not hold with respect to Francisco whom the respondents denied to have
ever employed or known. With the respondents’ denial, the burden of proof shifts to Francisco
to establish his regular employment. Unfortunately, the LA found that Francisco failed to
present sufficient evidence to prove regular employment such as company ID, SSS
membership, withholding tax certificates or similar articles. Thus, he was not considered an
employee of the company. Even then, the LA held that Tenazas and Endraca could not have
been illegally dismissed since there was no overt act of dismissal committed by the
respondents.27
On appeal, the NLRC reversed the ruling of the LA and ruled that the petitioners were all
employees of the company. The NLRC premised its conclusion on the additional pieces of
evidence belatedly submitted by the petitioners, which it supposed, have been overlooked by
the LA owing to the time when it was received by the said office. It opined that the said pieces
of evidence are sufficient to establish the circumstances of their illegal termination. In
particular, it noted that in the affidavit of the petitioners, there were allegations about the
company’s practice of not issuing employment records and this was not rebutted by the
respondents. It underscored that in a situation where doubt exists between evidence
presented by the employer and the employee, the scales of justice must be tilted in favor of
the employee. It awarded the petitioners with: (1) full backwages from the date of their
dismissal up to the finality of the decision; (2) separation pay equivalent to one month of
salary for every year of service; and (3) attorney’s fees.
On petition for certiorari, the CA affirmed with modification the decision of the NLRC, holding
that there was indeed an illegal dismissal on the part of Tenazas and Endraca but not with
respect to Francisco who failed to present substantial evidence, proving that he was an
employee of the respondents. The CA likewise dismissed the respondents’ claim that
Tenazas and Endraca abandoned their work, asseverating that immediate filing of a
complaint for illegal dismissal and persistent pleas for continuance of employment are
incompatible with abandonment. It also deleted the NLRC’s award of separation pay and
instead ordered that Tenazas and Endraca be reinstated.28
"Well-settled is the rule that the jurisdiction of this Court in a petition for review on certiorari
under Rule 45 of the Revised Rules of Court is limited to reviewing only errors of law, not of
fact, unless the factual findings complained of are completely devoid of support from the
evidence on record, or the assailed judgment is based on a gross misapprehension of
facts."29 The Court finds that none of the mentioned circumstances is present in this case.
In reviewing the decision of the NLRC, the CA found that no substantial evidence was
presented to support the conclusion that Francisco was an employee of the respondents and
accordingly modified the NLRC decision. It stressed that with the respondents’ denial of
employer-employee relationship, it behooved Francisco to present substantial evidence to
prove that he is an employee before any question on the legality of his supposed dismissal
becomes appropriate for discussion. Francisco, however, did not offer evidence to
substantiate his claim of employment with the respondents. Short of the required quantum of
proof, the CA correctly ruled that the NLRC’s finding of illegal dismissal and the monetary
awards which necessarily follow such ruling lacked factual and legal basis and must therefore
be deleted.
The action of the CA finds support in Anonas Construction and Industrial Supply Corp., et al.
v. NLRC, et al.,30where the Court reiterated:
[J]udicial review of decisions of the NLRC via petition for certiorari under Rule 65, as a
general rule, is confined only to issues of lack or excess of jurisdiction and grave abuse of
discretion on the part of the NLRC. The CA does not assess and weigh the sufficiency of
evidence upon which the LA and the NLRC based their conclusions. The issue is limited to
the determination of whether or not the NLRC acted without or in excess of its jurisdiction, or
with grave abuse of discretion in rendering the resolution, except if the findings of the NLRC
are not supported by substantial evidence.31 (Citation omitted and emphasis ours)
It is an oft-repeated rule that in labor cases, as in other administrative and quasi-judicial
proceedings, "the quantum of proof necessary is substantial evidence, or such amount of
relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion."32 "[T]he burden of proof rests upon the party who asserts the affirmative of an
issue."33 Corollarily, as Francisco was claiming to be an employee of the respondents, it is
incumbent upon him to proffer evidence to prove the existence of said relationship.
"[I]n determining the presence or absence of an employer-employee relationship, the Court
has consistently looked for the following incidents, to wit: (a) the selection and engagement of
the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s
power to control the employee on the means and methods by which the work is
accomplished. The last element, the so-called control test, is the most important element."34
There is no hard and fast rule designed to establish the aforesaid elements. Any competent
and relevant evidence to prove the relationship may be admitted. Identification cards, cash
vouchers, social security registration, appointment letters or employment contracts, payrolls,
organization charts, and personnel lists, serve as evidence of employee status.35
In this case, however, Francisco failed to present any proof substantial enough to establish
his relationship with the respondents. He failed to present documentary evidence like
attendance logbook, payroll, SSS record or any personnel file that could somehow depict his
status as an employee. Anent his claim that he was not issued with employment records, he
could have, at least, produced his social security records which state his contributions, name
and address of his employer, as his co-petitioner Tenazas did. He could have also presented
testimonial evidence showing the respondents’ exercise of control over the means and
methods by which he undertakes his work. This is imperative in light of the respondents’
denial of his employment and the claim of another taxi operator, Emmanuel Villegas
(Emmanuel), that he was his employer. Specifically, in his Affidavit,36 Emmanuel alleged that
Francisco was employed as a spare driver in his taxi garage from January 2006 to December
2006, a fact that the latter failed to deny or question in any of the pleadings attached to the
records of this case. The utter lack of evidence is fatal to Francisco’s case especially in cases
like his present predicament when the law has been very lenient in not requiring any
particular form of evidence or manner of proving the presence of employer-employee
relationship.
In Opulencia Ice Plant and Storage v. NLRC,37 this Court emphasized, thus:
No particular form of evidence is required to prove the existence of an employer-employee
relationship. Any competent and relevant evidence to prove the relationship may be admitted.
For, if only documentary evidence would be required to show that relationship, no scheming
employer would ever be brought before the bar of justice, as no employer would wish to come
out with any trace of the illegality he has authored considering that it should take much
weightier proof to invalidate a written instrument.38
Here, Francisco simply relied on his allegation that he was an employee of the company
without any other evidence supporting his claim. Unfortunately for him, a mere allegation in
the position paper is not tantamount to evidence.39Bereft of any evidence, the CA correctly
ruled that Francisco could not be considered an employee of the respondents.
The CA’s order of reinstatement of Tenazas and Endraca, instead of the payment of
separation pay, is also well in accordance with prevailing jurisprudence. In Macasero v.
Southern Industrial Gases Philippines,40 the Court reiterated, thus:
[A]n illegally dismissed employee is entitled to two reliefs: backwages and
reinstatement.1âwphi1 The two reliefs provided are separate and distinct. In instances where
reinstatement is no longer feasible because of strained relations between the employee and
the employer, separation pay is granted. In effect, an illegally dismissed employee is entitled
to either reinstatement, if viable, or separation pay if reinstatement is no longer viable, and
backwages.
The normal consequences of respondents’ illegal dismissal, then, are reinstatement without
loss of seniority rights, and payment of backwages computed from the time compensation
was withheld up to the date of actual reinstatement. Where reinstatement is no longer viable
as an option, separation pay equivalent to one (1) month salary for every year of service
should be awarded as an alternative. The payment of separation pay is in addition to
payment of backwages.41 (Emphasis supplied)
Clearly, it is only when reinstatement is no longer feasible that the payment of separation pay
is ordered in lieu thereof. For instance, if reinstatement would only exacerbate the tension
and strained relations between the parties, or where the relationship between the employer
and the employee has been unduly strained by reason of their irreconcilable differences, it
would be more prudent to order payment of separation pay instead of reinstatement.42
This doctrine of strained relations, however, should not be used recklessly or applied
loosely43 nor be based on impression alone. "It bears to stress that reinstatement is the rule
and, for the exception of strained relations to apply, it should be proved that it is likely that if
reinstated, an atmosphere of antipathy and antagonism would be generated as to adversely
affect the efficiency and productivity of the employee concerned."44
Moreover, the existence of strained relations, it must be emphasized, is a question of fact. In
Golden Ace Builders v. Talde,45 the Court underscored:
Strained relations must be demonstrated as a fact, however, to be adequately supported by
evidence—substantial evidence to show that the relationship between the employer and the
employee is indeed strained as a necessary consequence of the judicial
controversy.46 (Citations omitted and emphasis ours)
After a perusal of the NLRC decision, this Court failed to find the factual basis of the award of
separation pay to the petitioners. The NLRC decision did not state the facts which
demonstrate that reinstatement is no longer a feasible option that could have justified the
alternative relief of granting separation pay instead.
The petitioners themselves likewise overlooked to allege circumstances which may have
rendered their reinstatement unlikely or unwise and even prayed for reinstatement alongside
the payment of separation pay in their position paper.47 A bare claim of strained relations by
reason of termination is insufficient to warrant the granting of separation pay. Likewise, the
filing of the complaint by the petitioners does not necessarily translate to strained relations
between the parties. As a rule, no strained relations should arise from a valid and legal act
asserting one’s right.48 Although litigation may also engender a certain degree of hostility, the
understandable strain in the parties’ relation would not necessarily rule out reinstatement
which would, otherwise, become the rule rather the exception in illegal dismissal
cases.49 Thus, it was a prudent call for the CA to delete the award of separation pay and
order for reinstatement instead, in accordance with the general rule stated in Article 279 50 of
the Labor Code.
Finally, the Court finds the computation of the petitioners' backwages at the rate of ₱800.00
daily reasonable and just under the circumstances. The said rate is consistent with the ruling
of this Court in Hyatt Taxi Services, Inc. v. Catinoy, 51 which dealt with the same matter.
WHEREFORE, in view of the foregoing disquisition, the petition for review on certiorari is
DENIED. The Decision dated March 11, 2010 and Resolution dated June 28, 2010 of the
Court of Appeals in CA-G.R. SP No. 111150 are AFFIRMED.
SO ORDERED.
G.R. No. 173489 : February 25, 2013
ALILEM CREDIT COOPERATIVE, INC., now known as ALILEM MULTIPURPOSE
COOPERATIVE, INC., Petitioner, v .SALVADOR M. BANDIOLA, JR., Respondent.

PERALTA, J.:
FACTS:
Respondent was employed by petitioner as bookkeeper. Petitioner's Board of Directors (the
Board) received a letter from a certain Napoleon Gao-ay (Napoleon) reporting the alleged
immoral conduct and unbecoming behavior of respondent by having an illicit relationship with
Napoleon sister, Thelma G. Palma (Thelma). This prompted the Board to conduct a
preliminary investigation. During the preliminary investigation, the Board received evidence of
respondent alleged extramarital affair.
Respondent, on the other hand, denied the accusation against him. He, instead, claimed that
the accusation was a result of the insecurity felt by some members of the cooperative and of
the Board because of his growing popularity owing to his exemplary record as an
employee.Thelma executed an affidavit likewise denying the allegations of extra-marital affair.
Meanwhile, on June 7, 1997, the Board received a petition from about fifty members of the
cooperative asking the relief of respondent due to his illicit affair with Thelma.
In its Summary Investigation Report, the Ad Hoc Committee of petitioner concluded that
respondent was involved in an extra-marital affair with Thelma. On July 10, 1997, the
Chairman of the Board sent a letterto respondent informing him of the existence of a prima
facie case against him for "illicit marital affair, an act that brings discredit to the cooperative
organization and a cause for termination per AMPC (Alilem Multi-Purpose Cooperative)
Personnel Policy. Respondent was directed to appear and be present at the AMPC office for
a hearing. He was likewise advised of his right to be assisted by counsel.
On the day of the hearing, respondent requested for postponement on the ground that his
lawyer was not available. The request was, however, denied and the hearing proceeded as
scheduled.
In a Memorandum dated July 16, 1997, respondent was informed of Board Resolution No.
05, series of 1997 embodying the Board decision to terminate his services as bookkeeper of
petitioner, effective July 31, 1997, without any compensation or benefit except the unpaid
balance of his regular salary for services actually rendered.
Aggrieved, respondent filed a Complaint for Illegal Dismissal against petitioner before the
Regional Arbitration Branch of the NLRC.
On April 30, 1998, the Labor Arbiter (LA) dismissed respondent complaint for lack of merit.
The LA concluded that respondent had been or might still be carrying on an affair with a
married woman. The LA found it unforgiving in the case of a married employee who sleeps
with or has illicit relations with another married person for in such case, the employee sullies
not only the reputation of his spouse and his family but the reputation as well of the spouse of
his paramour and the latter family. As opposed to respondent claim that the accusation is a
mere fabrication of some of the directors or cooperative members who were allegedly
envious of his growing popularity, the LA gave more credence to the testimonies of petitioner
witnesses who were relatives of Thelma and who had no motive to falsely testify because
their family reputation was likewise at a risk of being tarnished. The LA, thus, found
respondent to have been validly dismissed from employment for violation of the cooperative
Personnel Policy. The LA also found no violation of respondent right to due process as he
was given ample opportunity to defend himself from the accusation against him.
On appeal, the NLRC set aside the LA decision. The NLRC found petitioner Personnel Policy
to be of questionable existence and validity because it was unnumbered. It held that even
assuming that respondent had an extra-marital affair with a married woman, the latter is not
his fellow worker in petitioner business establishment.It, thus, concluded that respondent
dismissal was not founded on any of the just causes for termination of employment under
Article 282 of the Labor Code, as amended.
Petitioner elevated the matter to the CA, but it failed to obtain a favorable decision. Petitioner
now comes before the Court in this petition for review on certiorari insisting on the validity of
respondent dismissal from employment.
ISSUE: Whether or not petitioner illegally dismissed respondent.
HELD: The Court of Appeals decision is reversed and set aside.
It is undisputed that respondent was dismissed from employment for engaging in extramarital
affairs, a ground for termination of employment stated in petitioner Personnel Policy. This
basis of termination was made known to respondent as early as the first communication
made by petitioner. In its June 20, 1997 letter, petitioner directed respondent to explain in
writing or personal confrontation why he should not be terminated for violation of Section
4.1.4 of the Personnel Policy. Respondent merely denied the accusation against him and did
not question the basis of such termination. When the LA was called upon to decide the illegal
dismissal case, it ruled in favor of petitioner and upheld the basis of such dismissal which is
the cited Personnel Policy. The NLRC, however, refused to recognize the existence and
validity of petitioner Personnel Policy on which the ground for termination was embodied.
The existence of the Personnel Policy containing provisions on the grounds for termination of
employees was not questioned by respondent. In his position paper, respondent only
assailed the effectivity of the policy, as for him as it was amended on the same date as the
letter-complaints against him. In other words, he claimed that the policy was amended in
order to include therein the ground for his termination to make sure that he is removed from
his position.

Contrary to respondent claim, with the amendment of the Personnel Policy, petitioner did not
create a new ground for the termination of employment to make sure that respondent is
removed from his position. The ground under the old policy is similar to that provided for in
the new policy. The enumeration containing the specific act of "illicit marital affairs" is not an
additional ground, but an example of an act that brings discredit to the cooperative. It is
merely an interpretation of what petitioner considers as such. It is, thus, clear from the
foregoing that engaging in extra-marital affairs is a ground for termination of employment not
only under the new but even under the old Personnel Policy of petitioner. The effectivity of the
policy as to respondent cannot, therefore, be questioned.
To be sure, an employer is free to regulate all aspects of employment.It may make
reasonable rules and regulations for the government of its employees which become part of
the contract of employment provided they are made known to the employee.In the event of a
violation, an employee may be validly terminated from employment on the ground that an
employer cannot rationally be expected to retain the employment of a person whose lack of
morals, respect and loyalty to his employer, regard for his employer rules and application of
the dignity and responsibility, has so plainly and completely been bared.
Applying now the above-discussed ground for termination, we now determine whether
respondent was properly dismissed from employment. In other words, did petitioner
adequately prove that respondent indeed engaged in extra-marital affairs, an act which
petitioner considers as would bring discredit to the cooperative?
We answer in the affirmative.
The employer evidence consists of sworn statements of either relatives or friends of Thelma
and respondent. They either had direct personal knowledge of the illicit relationship or
revealed circumstances indicating the existence of such relationship.
There is also no reason to doubt the statement of Melanie Gao-ay, the wife of Napoleon, who
witnessed the embarrassing "encounter", to borrow the term she used, between [respondent]
and Thelma in her own boarding house.
While respondent act of engaging in extra--marital affairs may be considered personal to him
and does not directly affect the performance of his assigned task as bookkeeper, aside from
the fact that the act was specifically provided for by petitioner Personnel Policy as one of the
grounds for termination of employment, said act raised concerns to petitioner as the Board
received numerous complaints and petitions from the cooperative members themselves
asking for the removal of respondent because of his immoral conduct.
The next question is whether procedural due process was observed in the termination of
respondent services. "Before the services of an employee can be validly terminated, the
employer must furnish him two written notices: (a) a written notice served on the employee
specifying the ground or grounds for termination, and giving the employee reasonable
opportunity to explain his side; and (b) 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."The employer must inform the employee of the charges
against him and to hear his defenses. A full adversarial proceeding is not necessary as the
parties may be heard through pleadings, written explanations, position papers, memorandum
or oral argument.
In this case, respondent was adequately afforded the opportunity to defend himself and
explain the accusation against him. Upon receipt of the complaint, petitioner conducted a
preliminary investigation and even created an Ad Hoc Committee to investigate the matter.
Respondent was directed to explain either in writing or by a personal confrontation with the
Board why he should not be terminated for engaging in illicit affair. Not only did petitioner give
him the opportunity but respondent in fact informed petitioner that he opted to present his
side orally and did so as promised when he specifically denied such allegations. Moreover,
respondent was also allowed to peruse the investigation report prepared by the Ad Hoc
Committee and was advised that he was entitled to assistance of counsel.Afterwhich, hearing
was conducted. It was only after thorough investigation and proper notice and hearing to
respondent that petitioner decided whether to dismiss the former or not. The decision to
terminate respondent from employment was embodied in Board Resolution No. 05, series of
1997 a copy of which was furnished respondent. With this resolution, respondent was
adequately notified of petitioner decision to remove him from his position. Respondent cannot
now claim that his right to due process was infringed upon.
GRANTED
G.R. No. 178505 September 30, 2008
CHERRY J. PRICE, STEPHANIE G. DOMINGO AND LOLITA ARBILERA, Petitioners,
- versus -
INNODATA PHILS. INC.,/ INNODATA CORPORATION, LEO RABANG AND JANE
NAVARETTE, Respondents.CHICO-NAZARIO, J.:
This Petition for Review on Certiorari under Rule 45 of the Rules of Court assails the
Decision1 dated 25 September 2006 and Resolution2 dated 15 June 2007 of the Court of
Appeals in CA-G.R. SP No. 72795, which affirmed the Decision dated 14 December 2001 of
the National Labor Relations Commission (NLRC) in NLRC NCR Case No. 30-03-01274-
2000 finding that petitioners were not illegally dismissed by respondents.
The factual antecedents of the case are as follows:
Respondent Innodata Philippines, Inc./Innodata Corporation (INNODATA) was a domestic
corporation engaged in the data encoding and data conversion business. It employed
encoders, indexers, formatters, programmers, quality/quantity staff, and others, to maintain its
business and accomplish the job orders of its clients. Respondent Leo Rabang was its
Human Resources and Development (HRAD) Manager, while respondent Jane Navarette
was its Project Manager. INNODATA had since ceased operations due to business losses in
June 2002.
Petitioners Cherry J. Price, Stephanie G. Domingo, and Lolita Arbilera were employed as
formatters by INNODATA. The parties executed an employment contract denominated as a
"Contract of Employment for a Fixed Period," stipulating that the contract shall be for a period
of one year,3 to wit:
CONTRACT OF EMPLOYMENT FOR A FIXED PERIOD
xxxx
WITNESSETH: That
WHEREAS, the EMPLOYEE has applied for the position of FORMATTER and in the course
thereof and represented himself/herself to be fully qualified and skilled for the said position;
WHEREAS, the EMPLOYER, by reason of the aforesaid representations, is desirous of
engaging that the (sic) services of the EMPLOYEE for a fixed period;
NOW, THEREFORE, for and in consideration of the foregoing premises, the parties have
mutually agreed as follows:
TERM/DURATION
The EMPLOYER hereby employs, engages and hires the EMPLOYEE and the EMPLOYEE
hereby accepts such appointment as FORMATTER effective FEB. 16, 1999 to FEB. 16, 2000
a period of ONE YEAR.
xxxx
TERMINATION
6.1 In the event that EMPLOYER shall discontinue operating its business, this CONTRACT
shall also ipso facto terminate on the last day of the month on which the EMPLOYER ceases
operations with the same force and effect as is such last day of the month were originally set
as the termination date of this Contract. Further should the Company have no more need for
the EMPLOYEE’s services on account of completion of the project, lack of work (sic)
business losses, introduction of new production processes and techniques, which will negate
the need for personnel, and/or overstaffing, this contract maybe pre-terminated by the
EMPLOYER upon giving of three (3) days notice to the employee.
6.2 In the event period stipulated in item 1.2 occurs first vis-à-vis the completion of the
project, this contract shall automatically terminate.
6.3 COMPANY’s Policy on monthly productivity shall also apply to the EMPLOYEE.
6.4 The EMPLOYEE or the EMPLOYER may pre-terminate this CONTRACT, with or without
cause, by giving at least Fifteen – (15) notice to that effect. Provided, that such pre-
termination shall be effective only upon issuance of the appropriate clearance in favor of the
said EMPLOYEE.
6.5 Either of the parties may terminate this Contract by reason of the breach or violation of
the terms and conditions hereof by giving at least Fifteen (15) days written notice.
Termination with cause under this paragraph shall be effective without need of judicial action
or approval.4
During their employment as formatters, petitioners were assigned to handle jobs for various
clients of INNODATA, among which were CAS, Retro, Meridian, Adobe, Netlib, PSM, and
Earthweb. Once they finished the job for one client, they were immediately assigned to do a
new job for another client.
On 16 February 2000, the HRAD Manager of INNODATA wrote petitioners informing them of
their last day of work. The letter reads:
RE: End of Contract
Date: February 16, 2000
Please be informed that your employment ceases effective at the end of the close of business
hours on February 16, 2000.5
According to INNODATA, petitioners’ employment already ceased due to the end of their
contract.
On 22 May 2000, petitioners filed a Complaint6 for illegal dismissal and damages against
respondents. Petitioners claimed that they should be considered regular employees since
their positions as formatters were necessary and desirable to the usual business of
INNODATA as an encoding, conversion and data processing company. Petitioners also
averred that the decisions in Villanueva v. National Labor Relations Commission7 and
Servidad v. National Labor Relations Commission,8 in which the Court already purportedly
ruled "that the nature of employment at Innodata Phils., Inc. is regular,"9 constituted stare
decisis to the present case. Petitioners finally argued that they could not be considered
project employees considering that their employment was not coterminous with any project or
undertaking, the termination of which was predetermined.
On the other hand, respondents explained that INNODATA was engaged in the business of
data processing, typesetting, indexing, and abstracting for its foreign clients. The bulk of the
work was data processing, which involved data encoding. Data encoding, or the typing of
data into the computer, included pre-encoding, encoding 1 and 2, editing, proofreading, and
scanning. Almost half of the employees of INNODATA did data encoding work, while the
other half monitored quality control. Due to the wide range of services rendered to its clients,
INNODATA was constrained to hire new employees for a fixed period of not more than one
year. Respondents asserted that petitioners were not illegally dismissed, for their employment
was terminated due to the expiration of their terms of employment. Petitioners’ contracts of
employment with INNODATA were for a limited period only, commencing on 6 September
1999 and ending on 16 February 2000.10 Respondents further argued that petitioners were
estopped from asserting a position contrary to the contracts which they had knowingly,
voluntarily, and willfully agreed to or entered into. There being no illegal dismissal,
respondents likewise maintained that petitioners were not entitled to reinstatement and
backwages.
On 17 October 2000, the Labor Arbiter11 issued its Decision12 finding petitioners’ complaint for
illegal dismissal and damages meritorious. The Labor Arbiter held that as formatters,
petitioners occupied jobs that were necessary, desirable, and indispensable to the data
processing and encoding business of INNODATA. By the very nature of their work as
formatters, petitioners should be considered regular employees of INNODATA, who were
entitled to security of tenure. Thus, their termination for no just or authorized cause was
illegal. In the end, the Labor Arbiter decreed:
FOREGOING PREMISES CONSIDERED, judgment is hereby rendered declaring
complainants’ dismissal illegal and ordering respondent INNODATA PHILS. INC./INNODATA
CORPORATION to reinstate them to their former or equivalent position without loss of
seniority rights and benefits. Respondent company is further ordered to pay complainants
their full backwages plus ten percent (10%) of the totality thereof as attorney’s fees. The
monetary awards due the complainants as of the date of this decision are as follows:
A. Backwages
1. Cherry J. Price
2/17/2000 – 10/17/2000 at 223.50/day
P5,811.00/mo/ x 8 mos. P46,488.00
2. Stephanie Domingo 46,488.00
(same computation)
3. Lolita Arbilera 46,488.00
(same computation)
Total Backwages P139,464.00
B. Attorney’s fees (10% of total award) 13,946.40
Total Award P153,410.40
Respondent INNODATA appealed the Labor Arbiter’s Decision to the NLRC. The NLRC, in
its Decision dated 14 December 2001, reversed the Labor Arbiter’s Decision dated 17
October 2000, and absolved INNODATA of the charge of illegal dismissal.
The NLRC found that petitioners were not regular employees, but were fixed-term employees
as stipulated in their respective contracts of employment. The NLRC applied Brent School,
Inc. v. Zamora13 and St. Theresa’s School of Novaliches Foundation v. National Labor
Relations Commission,14 in which this Court upheld the validity of fixed-term contracts. The
determining factor of such contracts is not the duty of the employee but the day certain
agreed upon by the parties for the commencement and termination of the employment
relationship. The NLRC observed that the petitioners freely and voluntarily entered into the
fixed-term employment contracts with INNODATA. Hence, INNODATA was not guilty of
illegal dismissal when it terminated petitioners’ employment upon the expiration of their
contracts on 16 February 2000.
The dispositive portion of the NLRC Decision thus reads:
WHEREFORE, premises considered, the decision appealed from is hereby REVERSED and
SET ASIDE and a new one entered DISMISSING the instant complaint for lack of merit.15
The NLRC denied petitioners’ Motion for Reconsideration in a Resolution dated 28 June
2002.16
In a Petition for Certiorari under Rule 65 of the Rules of Court filed before the Court of
Appeals, petitioners prayed for the annulment, reversal, modification, or setting aside of the
Decision dated 14 December 2001 and Resolution dated 28 June 2002 of the
NLRC.lawphil.net
On 25 September 2006, the Court of Appeals promulgated its Decision sustaining the ruling
of the NLRC that petitioners were not illegally dismissed.
The Court of Appeals ratiocinated that although this Court declared in Villanueva and
Servidad that the employees of INNODATA working as data encoders and abstractors were
regular, and not contractual, petitioners admitted entering into contracts of employment with
INNODATA for a term of only one year and for a project called Earthweb. According to the
Court of Appeals, there was no showing that petitioners entered into the fixed-term contracts
unknowingly and involuntarily, or because INNODATA applied force, duress or improper
pressure on them. The appellate court also observed that INNODATA and petitioners dealt
with each other on more or less equal terms, with no moral dominance exercised by the
former on latter. Petitioners were therefore bound by the stipulations in their contracts
terminating their employment after the lapse of the fixed term.
The Court of Appeals further expounded that in fixed-term contracts, the stipulated period of
employment is governing and not the nature thereof. Consequently, even though petitioners
were performing functions that are necessary or desirable in the usual business or trade of
the employer, petitioners did not become regular employees because their employment was
for a fixed term, which began on 16 February 1999 and was predetermined to end on 16
February 2000.
The appellate court concluded that the periods in petitioners’ contracts of employment were
not imposed to preclude petitioners from acquiring security of tenure; and, applying the ruling
of this Court in Brent, declared that petitioners’ fixed-term employment contracts were valid.
INNODATA did not commit illegal dismissal for terminating petitioners’ employment upon the
expiration of their contracts.
The Court of Appeals adjudged:
WHEREFORE, the instant petition is hereby DENIED and the Resolution dated December
14, 2001 of the National Labor Relations Commission declaring petitioners were not illegally
dismissed is AFFIRMED.17
The petitioners filed a Motion for Reconsideration of the afore-mentioned Decision of the
Court of Appeals, which was denied by the same court in a Resolution dated 15 June 2007.
Petitioners are now before this Court via the present Petition for Review on Certiorari, based
on the following assignment of errors:
I.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR OF
LAW AND GRAVE ABUSE OF DISCRETION WHEN IT DID NOT APPLY THE
SUPREME COURT RULING IN THE CASE OF NATIVIDAD & QUEJADA THAT THE
NATURE OF EMPLOYMENT OF RESPONDENTS IS REGULAR NOT FIXED, AND
AS SO RULED IN AT LEAST TWO OTHER CASES AGAINST INNODATA PHILS.
INC.
II.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR OF
LAW IN RULING THAT THE STIPULATION OF CONTRACT IS GOVERNING AND
NOT THE NATURE OF EMPLOYMENT AS DEFINED BY LAW.
III.
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN IT DID NOT
CONSIDER THE EVIDENCE ON RECORD SHOWING THAT THERE IS CLEAR
CIRCUMVENTION OF THE LAW ON SECURITY OF TENURE THROUGH
CONTRACT MANIPULATION.18
The issue of whether petitioners were illegally dismissed by respondents is ultimately
dependent on the question of whether petitioners were hired by INNODATA under valid fixed-
term employment contracts.
After a painstaking review of the arguments and evidences of the parties, the Court finds
merit in the present Petition. There were no valid fixed-term contracts and petitioners were
regular employees of the INNODATA who could not be dismissed except for just or
authorized cause.
The employment status of a person is defined and prescribed by law and not by what the
parties say it should be.19 Equally important to consider is that a contract of employment is
impressed with public interest such that labor contracts must yield to the common
good.20 Thus, provisions of applicable statutes are deemed written into the contract, and the
parties are not at liberty to insulate themselves and their relationships from the impact of
labor laws and regulations by simply contracting with each other. 21
Regular employment has been defined by Article 280 of the Labor Code, as amended, which
reads:
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 engagement of the
employee or where the work or services to be performed is seasonal in nature and
employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph.
Provided, That, any employee who has rendered at least one year of service, whether such
service is continuous or broken, shall be considered a regular employee with respect to the
activity in which he is employed and his employment shall continue while such activity exists.
(Underscoring ours).
Based on the afore-quoted provision, the following employees are accorded regular status:
(1) those who are engaged to perform activities which are necessary or desirable in the usual
business or trade of the employer, regardless of the length of their employment; and (2) those
who were initially hired as casual employees, but have rendered at least one year of service,
whether continuous or broken, with respect to the activity in which they are employed.
Undoubtedly, petitioners belong to the first type of regular employees.
Under Article 280 of the Labor Code, the applicable test to determine whether an employment
should be considered regular or non-regular is the reasonable connection between the
particular activity performed by the employee in relation to the usual business or trade of the
employer.22
In the case at bar, petitioners were employed by INNODATA on 17 February 1999 as
formatters. The primary business of INNODATA is data encoding, and the formatting of the
data entered into the computers is an essential part of the process of data encoding.
Formatting organizes the data encoded, making it easier to understand for the clients and/or
the intended end users thereof. Undeniably, the work performed by petitioners was necessary
or desirable in the business or trade of INNODATA.
However, it is also true that while certain forms of employment require the performance of
usual or desirable functions and exceed one year, these do not necessarily result in regular
employment under Article 280 of the Labor Code.23 Under the Civil Code, fixed-term
employment contracts are not limited, as they are under the present Labor Code, to those by
nature seasonal or for specific projects with predetermined dates of completion; they also
include those to which the parties by free choice have assigned a specific date of
termination.24
The decisive determinant in term employment is the day certain agreed upon by the parties
for the commencement and termination of their employment relationship, a day certain being
understood to be that which must necessarily come, although it may not be known when.
Seasonal employment and employment for a particular project are instances of employment
in which a period, where not expressly set down, is necessarily implied. 25
Respondents maintain that the contracts of employment entered into by petitioners with
INNDOATA were valid fixed-term employment contracts which were automatically terminated
at the expiry of the period stipulated therein, i.e., 16 February 2000.
The Court disagrees.
While this Court has recognized the validity of fixed-term employment contracts, it has
consistently held that this is the exception rather than the general rule. More importantly, a
fixed-term employment is valid only under certain circumstances. In Brent, the very same
case invoked by respondents, the Court identified several circumstances wherein a fixed-
term is an essential and natural appurtenance, to wit:
Some familiar examples may be cited of employment contracts which may be neither for
seasonal work nor for specific projects, but to which a fixed term is an essential and natural
appurtenance: overseas employment contracts, for one, to which, whatever the nature of the
engagement, the concept of regular employment with all that it implies does not appear ever
to have been applied, Article 280 of the Labor Code notwithstanding; also appointments to
the positions of dean, assistant dean, college secretary, principal, and other administrative
offices in educational institutions, which are by practice or tradition rotated among the faculty
members, and where fixed terms are a necessity without which no reasonable rotation would
be possible. Similarly, despite the provisions of Article 280, Policy Instructions No. 8 of the
Minister of Labor implicitly recognize that certain company officials may be elected for what
would amount to fixed periods, at the expiration of which they would have to stand down, in
providing that these officials, "x x may lose their jobs as president, executive vice-president or
vice president, etc. because the stockholders or the board of directors for one reason or
another did not reelect them."26
As a matter of fact, the Court, in its oft-quoted decision in Brent, also issued a stern
admonition that where, from the circumstances, it is apparent that the period was imposed to
preclude the acquisition of tenurial security by the employee, then it should be struck down as
being contrary to law, morals, good customs, public order and public policy.27
After considering petitioners’ contracts in their entirety, as well as the circumstances
surrounding petitioners’ employment at INNODATA, the Court is convinced that the terms
fixed therein were meant only to circumvent petitioners’ right to security of tenure and are,
therefore, invalid.
The contracts of employment submitted by respondents are highly suspect for not only being
ambiguous, but also for appearing to be tampered with.
Petitioners alleged that their employment contracts with INNODATA became effective 16
February 1999, and the first day they reported for work was on 17 February 1999. The
Certificate of Employment issued by the HRAD Manager of INNODATA also indicated that
petitioners Price and Domingo were employed by INNODATA on 17 February 1999.
However, respondents asserted before the Labor Arbiter that petitioners’ employment
contracts were effective only on 6 September 1999. They later on admitted in their
Memorandum filed with this Court that petitioners were originally hired on 16 February 1999
but the project for which they were employed was completed before the expiration of one
year. Petitioners were merely rehired on 6 September 1999 for a new project. While
respondents submitted employment contracts with 6 September 1999 as beginning date of
effectivity, it is obvious that in one of them, the original beginning date of effectivity, 16
February 1999, was merely crossed out and replaced with 6 September 1999. The copies of
the employment contracts submitted by petitioners bore similar alterations.
The Court notes that the attempt to change the beginning date of effectivity of petitioners’
contracts was very crudely done. The alterations are very obvious, and they have not been
initialed by the petitioners to indicate their assent to the same. If the contracts were truly
fixed-term contracts, then a change in the term or period agreed upon is material and would
already constitute a novation of the original contract.
Such modification and denial by respondents as to the real beginning date of petitioners’
employment contracts render the said contracts ambiguous. The contracts themselves state
that they would be effective until 16 February 2000 for a period of one year. If the contracts
took effect only on 6 September 1999, then its period of effectivity would obviously be less
than one year, or for a period of only about five months.
Obviously, respondents wanted to make it appear that petitioners worked for INNODATA for
a period of less than one year. The only reason the Court can discern from such a move on
respondents’ part is so that they can preclude petitioners from acquiring regular status based
on their employment for one year. Nonetheless, the Court emphasizes that it has already
found that petitioners should be considered regular employees of INNODATA by the nature of
the work they performed as formatters, which was necessary in the business or trade of
INNODATA. Hence, the total period of their employment becomes irrelevant.
Even assuming that petitioners’ length of employment is material, given respondents’
muddled assertions, this Court adheres to its pronouncement in Villanueva v. National Labor
Relations Commission,28 to the effect that where a contract of employment, being a contract
of adhesion, is ambiguous, any ambiguity therein should be construed strictly against the
party who prepared it. The Court is, thus, compelled to conclude that petitioners’ contracts of
employment became effective on 16 February 1999, and that they were already working
continuously for INNODATA for a year.
Further attempting to exonerate itself from any liability for illegal dismissal, INNODATA
contends that petitioners were project employees whose employment ceased at the end of a
specific project or undertaking. This contention is specious and devoid of merit.
In Philex Mining Corp. v. National Labor Relations Commission, 29 the Court defined "project
employees" as those workers hired (1) for a specific project or undertaking, and wherein (2)
the completion or termination of such project has been determined at the time of the
engagement of the employee.
Scrutinizing petitioners’ employment contracts with INNODATA, however, failed to reveal any
mention therein of what specific project or undertaking petitioners were hired for. Although the
contracts made general references to a "project," such project was neither named nor
described at all therein. The conclusion by the Court of Appeals that petitioners were hired for
the Earthweb project is not supported by any evidence on record. The one-year period for
which petitioners were hired was simply fixed in the employment contracts without reference
or connection to the period required for the completion of a project. More importantly, there is
also a dearth of evidence that such project or undertaking had already been completed or
terminated to justify the dismissal of petitioners. In fact, petitioners alleged - and respondents
failed to dispute that petitioners did not work on just one project, but continuously worked for
a series of projects for various clients of INNODATA.
In Magcalas v. National Labor Relations Commission,30 the Court struck down a similar claim
by the employer therein that the dismissed employees were fixed-term and project
employees. The Court here reiterates the rule that all doubts, uncertainties, ambiguities and
insufficiencies should be resolved in favor of labor. It is a well-entrenched doctrine that in
illegal dismissal cases, the employer has the burden of proof. This burden was not
discharged in the present case.
As a final observation, the Court also takes note of several other provisions in petitioners’
employment contracts that display utter disregard for their security of tenure. Despite fixing a
period or term of employment, i.e., one year, INNODATA reserved the right to pre-terminate
petitioners’ employment under the following circumstances:
6.1 x x x Further should the Company have no more need for the EMPLOYEE’s services on
account of completion of the project, lack of work (sic) business losses, introduction of new
production processes and techniques, which will negate the need for personnel, and/or
overstaffing, this contract maybe pre-terminated by the EMPLOYER upon giving of three (3)
days notice to the employee.
xxxx
6.4 The EMPLOYEE or the EMPLOYER may pre-terminate this CONTRACT, with or without
cause, by giving at least Fifteen – (15) [day] notice to that effect. Provided, that such pre-
termination shall be effective only upon issuance of the appropriate clearance in favor of the
said EMPLOYEE. (Emphasis ours.)
Pursuant to the afore-quoted provisions, petitioners have no right at all to expect security of
tenure, even for the supposedly one-year period of employment provided in their contracts,
because they can still be pre-terminated (1) upon the completion of an unspecified project; or
(2) with or without cause, for as long as they are given a three-day notice. Such contract
provisions are repugnant to the basic tenet in labor law that no employee may be terminated
except for just or authorized cause.
Under Section 3, Article XVI of the Constitution, it is the policy of the State to assure the
workers of security of tenure and free them from the bondage of uncertainty of tenure woven
by some employers into their contracts of employment. This was exactly the purpose of the
legislators in drafting Article 280 of the Labor Code – to prevent the circumvention by
unscrupulous employers of the employee’s right to be secure in his tenure by indiscriminately
and completely ruling out all written and oral agreements inconsistent with the concept of
regular employment.
In all, respondents’ insistence that it can legally dismiss petitioners on the ground that their
term of employment has expired is untenable. To reiterate, petitioners, being regular
employees of INNODATA, are entitled to security of tenure. In the words of Article 279 of the
Labor Code:
ART. 279. Security of Tenure. – In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized by this
Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual reinstatement.
By virtue of the foregoing, an illegally dismissed employee is entitled to reinstatement without
loss of seniority rights and other privileges, with full back wages computed from the time of
dismissal up to the time of actual reinstatement.
Considering that reinstatement is no longer possible on the ground that INNODATA had
ceased its operations in June 2002 due to business losses, the proper award is separation
pay equivalent to one month pay31 for every year of service, to be computed from the
commencement of their employment up to the closure of INNODATA.
The amount of back wages awarded to petitioners must be computed from the time
petitioners were illegally dismissed until the time INNODATA ceased its operations in June
2002.32
Petitioners are further entitled to attorney’s fees equivalent to 10% of the total monetary
award herein, for having been forced to litigate and incur expenses to protect their rights and
interests herein.
Finally, unless they have exceeded their authority, corporate officers are, as a general rule,
not personally liable for their official acts, because a corporation, by legal fiction, has a
personality separate and distinct from its officers, stockholders and members. Although as an
exception, corporate directors and officers are solidarily held liable with the corporation,
where terminations of employment are done with malice or in bad faith,33 in the absence of
evidence that they acted with malice or bad faith herein, the Court exempts the individual
respondents, Leo Rabang and Jane Navarette, from any personal liability for the illegal
dismissal of petitioners.
WHEREFORE, the Petition for Review on Certiorari is GRANTED. The Decision dated 25
September 2006 and Resolution dated 15 June 2007 of the Court of Appeals in CA-G.R. SP
No. 72795are hereby REVERSED and SET ASIDE. RespondentInnodata Philippines,
Inc./Innodata Corporation is ORDERED to pay petitioners Cherry J. Price, Stephanie G.
Domingo, and Lolita Arbilera: (a) separation pay, in lieu of reinstatement, equivalent to one
month pay for every year of service, to be computed from the commencement of their
employment up to the date respondent Innodata Philippines, Inc./Innodata Corporation
ceased operations; (b) full backwages, computed from the time petitioners’ compensation
was withheld from them up to the time respondent Innodata Philippines, Inc./Innodata
Corporation ceased operations; and (3) 10% of the total monetary award as attorney’s fees.
Costs against respondent Innodata Philippines, Inc./Innodata Corporation.
SO ORDERED.
G.R. No. 192601, June 03, 2013
PHILIPPINE JOURNALISTS, INC., Petitioner, v. JOURNAL EMPLOYEES
UNION (JEU), FOR ITS UNION MEMBER, MICHAEL ALFANTE, Respondents.
DECISION
BERSAMIN, J.:
The coverage of the term legal dependent as used in a stipulation in a collective
bargaining agreement (CBA) granting funeral or bereavement benefit to a regular
employee for the death of a legal dependent, if the CBA is silent about it, is to be
construed as similar to the meaning that contemporaneous social legislations
have set. This is because the terms of such social legislations are deemed
incorporated in or adopted by the CBA.
The decision of the Court of Appeals (CA) under review summarizes the factual
and procedural antecedents, as follows:cralavvonlinelawlibrary
Complainant Judith Pulido alleged that she was hired by respondent as
proofreader on 10 January 1991; that she was receiving a monthly basic salary of
P15,493.66 plus P155.00 longevity pay plus other benefits provided by law and
their Collective Bargaining Agreement; that on 21 February 2003, as union
president, she sent two letters to President Gloria Arroyo, regarding their
complaint of mismanagement being committed by PIJ executive; that sometime
in May 2003, the union was furnished with a letter by Secretary Silvestre Afable,
Jr. head of Presidential Management Staff (PMS), endorsing their letter-complaint
to Ombudsman Simeon V. Marcelo; that respondents took offense and started
harassments to complainant union president; that on 30 May 2003, complainant
received a letter from respondent Fundador Soriano, International Edition
managing editor, regarding complainant’s attendance record; that complainant
submitted her reply to said memo on 02 June 2003; that on 06 June 2003,
complainant received a memorandum of reprimand; that on 04 July 2003,
complainant received another memo from Mr. Soriano, for not wearing her
company ID, which she replied the next day 05 July 2003; that on 04 August
2003, complainant again received a memo regarding complainant’s tardiness;
that on 05 August 2003, complainant received another memorandum asking her
to explain why she should not be accused of fraud, which she replied to on 07
August 2003; and that on the same day between 3:00 to 4:00 P.M., Mr. Ernesto
“Estong” San Agustin, a staff of HRD handed her termination paper.
Complainant added that in her thirteen (13) years with the company and after so
many changes in its management and executives, she had never done anything
that will cause them to issue a memorandum against her or her work attitude,
more so, reasons to terminate her services; that she got dismissed because she
was the Union President who was very active in defending and pursuing the
rights of her union members, and in fighting against the abuses of respondent
Corporate Officers; and that she got the ire of respondents when the employees
filed a complaint against the Corporate Officers before Malacañang and which was
later indorsed to the Office of the Ombudsman.
The second complainant Michael L. Alfante alleged that he started to work with
respondents as computer technician at Management Information System under
manager Neri Torrecampo on 16 May 2000; that on 15 July 2001, he was
regularized receiving a monthly salary of P9,070.00 plus other monetary
benefits; that sometime in 2001, Rico Pagkalinawan replaced Torrecampo, which
was opposed by complainant and three other co-employees; that Pagkalinawan
took offense of their objection; that on 22 October 2002, complainant Alfante
received a memorandum from Pagkalinawan regarding his excessive tardiness;
that on 10 June 2003, complainant Alfante received a memorandum from
Executive Vice-President Arnold Banares, requiring him to explain his side on the
evaluation of his performance submitted by manager Pagkalinawan; that one
week after complainant submitted his explanation, he was handed his notice of
dismissal on the ground of “poor performance”; and that complainant was
dismissed effective 28 July 2003.
Complainant Alfante submitted that he was dismissed without just cause.
Respondents, in their position paper, averred that complainants Pulido and
Alfante were dismissed for cause and with due process.
With regard to complainant Pulido, respondents averred that in a memorandum
dated 30 May 2003, directed complainant to explain her habitual tardiness, at
least 75 times from January to May of 2003. In a memorandum, dated 06 June
2003, directed complainant to observe the 3 p.m. rule to avoid grammatical
lapses, use of stale stories just to beat the 10:00 p.m. deadline. In the same
memorandum complainant was given the warning that any repeated violation of
the rules shall be dealt with more severely. Once again, in a memorandum, dated
04 August 2003, complainant Pulido was required to explain why no disciplinary
action should be taken against her for habitual tardiness – 18 times out of the 23
reporting days during the period from 27 June – 27 July 2003 and on 05 August
2003, complainant was directed to explain in writing why complainant should not
be administratively sanctioned for committing fraud or attempting to commit
fraud against respondents. Respondents found complainant’s explanations
unsatisfactory. On 07 August 2003, respondents dismissed complainant Pulido for
habitual tardiness, gross insubordination, utter disrespect for superiors, and
committing fraud or attempting to commit fraud which led to the respondents’
loss of confidence upon complainant Pulido.
In case of complainant Alfante, respondents averred in defense that complainant
was dismissed for “poor performance” after an evaluation by his superior, and
after being forewarned that complainant may be removed if there was no
showing of improvement in his skills and knowledge on current technology.
In both instances, respondents maintained that they did not commit any act of
unfair labor practices; that they did not commit acts tantamount to interfering,
restraining, or coercing employees in the exercise of their right to self-
organization.
Respondents deny liabilities as far as complainants’ monetary claims are
concerned. Concerning violations of the provision on wage distortion under Wage
Order No. 9, respondents stressed that complainants were not affected since
their salary is way over the minimum wage.
With respect to the alleged non-adjustment of longevity pay and burial aid,
respondent PJI pointed out that it complies with the provisions of the CBA and
that both complainants have not claimed for the burial aid.
Respondents put forward the information that the alleged non-payment of rest
days – every Monday for the past three (3) years is a matter that is still at issue
in NLRC Case No. 02-0402973-93, which case is still pending before this
Commission.
Respondents asserted that the respondents Arturo Dela Cruz, Bobby Capco,
Arnold Banares, Ruby Ruiz-Bruno and Fundador Soriano should not be held liable
on account of complainants’ dismissal as they merely acted as agents of
respondent PJI.1
Upon the foregoing backdrop, Labor Arbiter Corazon C. Borbolla rendered her
decision on March 29, 2006, disposing thusly:cralavvonlinelawlibrary
WHEREFORE, foregoing premises considered, judgment is hereby rendered,
finding complainant Judith Pulido to have been illegally dismissed. As such, she is
entitled to reinstatement and backwages from 07 August 2003 up to her actual or
payroll reinstatement. To date, complainant’s backwages is P294,379.54.
Respondent Philippine Journalist, Inc. is hereby ordered to pay complainant
Judith Pulido her backwages from 07 August 2003 up to her actual or payroll
reinstatement and to reinstate her to her former position without loss of seniority
right.
Respondent is further ordered to submit a report to this Office on complainant’s
reinstatement ten (10) days from receipt of this decision.
The charge of illegal dismissal by Michael Alfante is hereby dismissed for lack of
merit.
The charge of unfair labor practice is dismissed for lack of basis.
SO ORDERED.2
Complainant Michael Alfante (Alfante), joined by his labor organization, Journal
Employees Union (JEU), filed a partial appeal in the National Labor Relations
Commission (NLRC).3
In the meantime, on May 10, 2006, petitioner and Judith Pulido (Pulido), the
other complainant, jointly manifested to the NLRC that the decision of March 29,
2006 had been fully satisfied as to Pulido under the following terms, namely: (a)
she would be reinstated to her former position as editorial staffmember, or an
equivalent position, without loss of seniority rights, effective May 15, 2006; (b)
she would go on maternity leave, and report to work after giving birth; (c) she
would be entitled to backwages of P130,000.00; and (d) she would execute the
quitclaim and release on May 11, 2006 in favor of petitioner. 4 This left Alfante as
the remaining complainant.
On January 31, 2007, the NLRC rendered its decision dismissing the partial
appeal for lack of merit.5
JEU and Alfante moved for the reconsideration of the decision, but the NLRC
denied their motion on April 24, 2007.6
Thereafter, JEU and Alfante assailed the decision of the NLRC before the CA
on certiorari (C.A.-G.R. SP No. 99407).
On February 5, 2010, the CA promulgated its decision in C.A.-G.R. SP No.
99407,7 decreeing:cralavvonlinelawlibrary
WHEREFORE, premises considered, the instant petition is PARTLY GRANTED.
The twin Resolutions dated January 31, 2007 and April 24, 2007, respectively, of
the Third Division of the National Labor Relations Commission (NLRC), in NLRC
NCR CA No. 048785-06 (NLRC NCR Case No. 00-10-11413-04), are MODIFIED
insofar as the funeral or bereavement aid is concerned, which is hereby
GRANTED, but only after submission of conclusive proofs that the deceased is a
parent, either father or mother, of the employees concerned, as well as the death
certificate to establish the fact of death of the deceased legal dependent.
The rest of the findings of fact and law in the assailed Resolutions are hereby
AFFIRMED.
SO ORDERED.
Both parties moved for reconsideration, but the CA denied their respective
motions for reconsideration on June 2, 2010.8
JEU and Alfante appealed to the Court (G.R. No. 192478) to challenge the CA’s
dispositions regarding the legality of: (a) Alfante’s dismissal; (b) the non-
compliance with Minimum Wage Order No. 9; and (c) the non-payment of the
rest day.9
On August 18, 2010, the Court denied due course to the petition in G.R. No.
192478 for failure of petitioners to sufficiently show that the CA had committed
any reversible error to warrant the Court’s exercise of its discretionary appellate
jurisdiction.10
The Court denied with finality JEU and Alfante’s ensuing motion for
reconsideration through the resolution of December 8, 2010. 11 The entry of
judgment in G.R. No. 192478 issued in due course on February 1, 2011.12
On its part, petitioner likewise appealed (G.R. No. 192601), seeking the review of
the CA’s disposition in the decision of February 5, 2010 on the granting of the
funeral and bereavement aid stipulated in the CBA.
In its petition for review, petitioner maintained that under Section 4, Article XIII
of the CBA, funeral and bereavement aid should be granted upon the death of
a legal dependent of a regular employee; that consistent with the definition
provided by the Social Security System (SSS), the term legal dependentreferred
to the spouse and children of a married regular employee, and to the parents and
siblings, 18 years old and below, of a single regular employee; 13 that the CBA
considered the term dependents to have the same meaning as beneficiaries, as
provided in Section 5, Article XIII of the CBA on the payment of death
benefits;14 that its earlier granting of claims for funeral and bereavement aid
without regard to the foregoing definition of the legal dependents of married or
single regular employees did not ripen into a company policy whose unilateral
withdrawal would constitute a violation of Article 100 of the Labor Code,15 the law
disallowing the non-diminution of benefits;16 that it had approved only four claims
from 1999 to 2003 based on its mistaken interpretation of the term legal
dependents, but later corrected the same in 2000;17 that the grant of funeral and
bereavement aid for the death of an employee’s legal dependent, regardless of
the employee’s civil status, did not occur over a long period of time, was not
consistent and deliberate, and was partly due to its mistake in appreciating a
doubtful question of law; and that its denial of subsequent claims did not amount
to a violation of the law against the non-diminution of benefits.18
In their comment,19 JEU and Alfante countered that the CBA was a bilateral
contractual agreement that could not be unilaterally changed by any party during
its lifetime; and that the grant of burial benefits had already become a company
practice favorable to the employees, and could not anymore be reduced,
diminished, discontinued or eliminated by petitioner.
Issue
In view of the entry of judgment issued in G.R. No. 192478, JEU and Alfante’s
submissions on the illegality of his dismissal, the non-payment of his rest days,
and the violation of Minimum Wage Order No. 9 shall no longer be considered
and passed upon.
The sole remaining issue is whether or not petitioner’s denial of respondents’
claims for funeral and bereavement aid granted under Section 4, Article XIII of
their CBA constituted a diminution of benefits in violation of Article 100 of
the Labor Code.
Ruling
The petition for review lacks merit.
The nature and force of a CBA are delineated in Honda Phils., Inc. v. Samahan ng
Malayang Manggagawa sa Honda,20 thuswise:cralavvonlinelawlibrary
A collective bargaining agreement (or CBA) refers to the negotiated contract
between a legitimate labor organization and the employer concerning wages,
hours of work and all other terms and conditions of employment in a bargaining
unit. As in all contracts, the parties in a CBA may establish such stipulations,
clauses, terms and conditions as they may deem convenient provided these are
not contrary to law, morals, good customs, public order or public policy. Thus,
where the CBA is clear and unambiguous, it becomes the law between the parties
and compliance therewith is mandated by the express policy of the law.
Accordingly, the stipulations, clauses, terms and conditions of the CBA, being the
law between the parties, must be complied with by them.21 The literal meaning of
the stipulations of the CBA, as with every other contract, control if they are clear
and leave no doubt upon the intention of the contracting parties.22
Here, a conflict has arisen regarding the interpretation of the term legal
dependent in connection with the grant of funeral and bereavement aid to a
regular employee under Section 4, Article XIII of the CBA,23 which stipulates as
follows:cralavvonlinelawlibrary
SECTION 4. Funeral/Bereavement Aid. The COMPANY agrees to grant a
funeral/bereavement aid in the following instances:cralavvonlinelawlibrary
a. Death of a regular employee in line of duty – P50,000
b. Death of a regular employee not in line of duty – P40,000
c. Death of legal dependent of a regular employee – P15,000. (Emphasis
supplied)
Petitioner insists that notwithstanding the silence of the CBA, the term legal
dependent should follow the definition of it under Republic Act (R.A.) No. 8282
(Social Security Law),24 so that in the case of a married regular employee, his or
her legal dependents include only his or her spouse and children, and in the case
of a single regular employee, his or her legal dependents include only his or her
parents and siblings, 18 years old and below; and that the term dependents has
the same meaning as beneficiariesas used in Section 5, Article XIII of the CBA.
We cannot agree with petitioner’s insistence.
Social legislations contemporaneous with the execution of the CBA have given a
meaning to the term legal dependent. First of all, Section 8(e) of the Social
Security Law provides that a dependent shall be the following, namely: (a) the
legal spouse entitled by law to receive support from the member; (b) the
legitimate, legitimated, or legally adopted, and illegitimate child who is
unmarried, not gainfully employed and has not reached 21 of age, or, if over 21
years of age, is congenitally or while still a minor has been permanently
incapacitated and incapable of self-support, physically or mentally; and (c) the
parent who is receiving regular support from the member. Secondly, Section 4(f)
of R.A. No. 7875, as amended by R.A. No. 9241,25 enumerates who are the legal
dependents, to wit: (a) the legitimate spouse who is not a member; (b) the
unmarried and unemployed legitimate, legitimated, illegitimate, acknowledged
children as appearing in the birth certificate; legally adopted or step-children
below 21 years of age; (c) children who are 21 years old and order but suffering
from congenital disability, either physical or mental, or any disability acquired
that renders them totally dependent on the member of our support; and (d) the The obvious conclusion then is that a wife who is already separated de factofrom
parents who are 60 years old or older whose monthly income is below an amount her husband cannot be said to be “dependent for support” upon the husband,
to be determined by the Philippine Health Insurance Corporation in accordance absent any showing to the contrary. Conversely, if it is proved that the husband
with the guiding principles set forth in Article I of R.A. No. 7875. And, thirdly, and wife were still living together at the time of his death, it would be safe to
Section 2(f) of Presidential Decree No. 1146, as amended by R.A. No. presume that she was dependent on the husband for support, unless it is shown
8291,26 states that dependents shall include: (a) the legitimate spouse dependent that she is capable of providing for herself.
for support upon the member or pensioner; (b) the legitimate, legitimated,
legally adopted child, including the illegitimate child, who is unmarried, not
Considering that existing laws always form part of any contract, and are deemed
gainfully employed, not over the age of majority, or is over the age of majority
incorporated in each and every contract,28 the definition of legal
but incapacitated and incapable of self-support due to a mental or physical defect
dependents under the aforecited social legislations applies herein in the absence
acquired prior to age of majority; and (c) the parents dependent upon the of a contrary or different definition mutually intended and adopted by the parties
member for support.
in the CBA. Accordingly, the concurrence of a legitimate spouse does not
disqualify a child or a parent of the employee from being a legal dependent
It is clear from these statutory definitions of dependent that the civil status of the provided substantial evidence is adduced to prove the actual dependency of the
employee as either married or single is not the controlling consideration in order
child or parent on the support of the employee.
that a person may qualify as the employee’s legal dependent. What is rather
decidedly controlling is the fact that the spouse, child, or parent is actually
In this regard, the differentiation among the legal dependents is significant only
dependent for support upon the employee. Indeed, the Court has adopted this in the event the CBA has prescribed a hierarchy among them for the granting of a
understanding of the term dependent in Social Security System v. De Los
benefit; hence, the use of the terms primary beneficiaries and secondary
Santos,27 viz:cralavvonlinelawlibrary
beneficiaries for that purpose. But considering that Section 4, Article XIII of the
CBA has not included that differentiation, petitioner had no basis to deny the
Social Security System v. Aguas is instructive in determining the extent of the
claim for funeral and bereavement aid of Alfante for the death of his parent
required “dependency” under the SS Law. In Aguas, the Court ruled that
whose death and fact of legal dependency on him could be substantially proved.
although a husband and wife are obliged to support each other, whether one is
actually dependent for support upon the other cannot be presumed from the fact
Pursuant to Article 100 of the Labor Code, petitioner as the employer could not
of marriage alone.
reduce, diminish, discontinue or eliminate any benefit and supplement being
enjoyed by or granted to its employees. This prohibition against the diminution of
Further, Aguas pointed out that a wife who left her family until her husband died
benefits is founded on the constitutional mandate to protect the rights of workers
and lived with other men, was not dependent upon her husband for support,
and to promote their welfare and to afford labor full protection.29 The application
financial or otherwise, during the entire period.
of the prohibition against the diminution of benefits presupposes that a company
practice, policy or tradition favorable to the employees has been clearly
Said the Court:cralavvonlinelawlibrary
established; and that the payments made by the employer pursuant to the
practice, policy, or tradition have ripened into benefits enjoyed by them.30 To be
In a parallel case involving a claim for benefits under the GSIS law, the Court
considered as a practice, policy or tradition, however, the giving of the benefits
defined a dependent as “one who derives his or her main support from another.
should have been done over a long period of time, and must be shown to have
Meaning, relying on, or subject to, someone else for support; not able to exist or
been consistent and deliberate.31 It is relevant to mention that we have not yet
sustain oneself, or to perform anything without the will, power, or aid of someone
settled on the specific minimum number of years as the length of time sufficient
else.” It should be noted that the GSIS law likewise defines a dependent
to ripen the practice, policy or tradition into a benefit that the employer cannot
spouse as “the legitimate spouse dependent for support upon the member or
unilaterally withdraw.32
pensioner.” In that case, the Court found it obvious that a wife who abandoned
the family for more than 17 years until her husband died, and lived with other
The argument of petitioner that the grant of the funeral and bereavement benefit
men, was not dependent on her husband for support, financial or otherwise,
was not voluntary but resulted from its mistaken interpretation as to who was
during that entire period. Hence, the Court denied her claim for death benefits.
considered a legal dependent of a regular employee deserves scant consideration.
To be sure, no doubtful or difficult question of law was involved inasmuch as the
several cogent statutes existing at the time the CBA was entered into already
defined who were qualified as the legal dependents of another. Moreover, the
voluntariness of the grant of the benefit became even manifest from petitioner’s
admission that, despite the memorandum it issued in 200033 in order to “correct”
the interpretation of the term legal dependent, it still approved in 2003 the claims
for funeral and bereavement aid of two employees, namely: (a) Cecille Bulacan,
for the death of her father; and (b) Charito Cartel, for the death of her mother,
based on its supposedly mistaken interpretation.34
It is further worthy to note that petitioner granted claims for funeral and
bereavement aid as early as 1999, then issued a memorandum in 2000 to correct
its erroneous interpretation of legal dependentunder Section 4, Article XIII of the
CBA. This notwithstanding, the 2001-2004 CBA35 still contained the same
provision granting funeral or bereavement aid in case of the death of a legal
dependent of a regular employee without differentiating the legal dependents
according to the employee’s civil status as married or single. The continuity in the
grant of the funeral and bereavement aid to regular employees for the death of
their legal dependents has undoubtedly ripened into a company policy. With that,
the denial of Alfante’s qualified claim for such benefit pursuant to Section 4,
Article XIII of the CBA violated the law prohibiting the diminution of benefits.
WHEREFORE, the Court AFFIRMS the decision promulgated on February 5,
2010; and ORDERSpetitioner to pay the costs of suit.
SO ORDERED.
G.R. No. 177524, July 23, 2014
NATIONAL UNION OF WORKERS IN HOTEL RESTAURANT AND ALLIED
INDUSTRIES (NUWHRAIN-APL-IUF), PHILIPPINE PLAZA
CHAPTER, Petitioner, v. PHILIPPINE PLAZA HOLDINGS, INC., Respondent.
DECISION
BRION, J.:
We resolve the petition for review on certiorari,1 challenging the January 31,
2007 decision2 and the April 20, 2007 resolution3 of the Court of Appeals (CA) in
CA-G.R. SP No. 93698.
This CA decision reversed the July 4, 2005 decision4 of the National Labor
Relations Commission (NLRC) in NLRC NCR CA No. 031977-02 (NLRC NCR-30-05-
02011-01) that in turn, reversed and set aside the April 30, 2002 decision 5 of the
Labor Arbiter (LA).
The LA dismissed the complaint for non-payment of service charges filed by
petitioner National Union of Workers in Hotel Restaurant and Allied Industries
(NUWHRAIN-APL-IUF), Philippine Plaza Chapter (Union).
The Factual Antecedents
The Union is the collective bargaining agent of the rank-and-file employees of
respondent Philippine Plaza Holdings, Inc. (PPHI).
On November 24, 1998, the PPHI and the Union executed the “Third Rank-and-
File Collective Bargaining Agreement as Amended”6 (CBA). The CBA provided,
among others, for the collection, by the PPHI, of a ten percent (10%) service
charge on the sale of food, beverage, transportation, laundry and rooms. The
pertinent CBA provisions read:chanroblesvirtuallawlibrary
SECTION 68. COLLECTION. The HOTEL shall continue to collect ten percent
(10%) service charge on the sale of food, beverage, transportation, laundry and
rooms except on negotiated contracts and special rates. [Emphasis
supplied]
SECTION 69. DISTRIBUTION. The service charge to be distributed shall consist
of the following:
Effective Food & Beverage Room, Transportation & valet
1998 95% 100%
1997 95% 100%
The distributable amount will be shared equally by all HOTEL employees,
including managerial employees but excluding expatriates, with three shares to
be given to PPHI Staff and three shares to the UNION (one for the national and
two for the local funds) that may be utilized by them for purposes for which the
UNION may decide.
These provisions merely reiterated similar provisions found in the PPHI-Union’s
earlier collective bargaining agreement executed on August 29, 1995.7
On February 25, 1999, the Union’s Service Charge Committee informed the Union
President, through an audit report (1st audit report),8 of uncollected service
charges for the last quarter of 1998 amounting to ?2,952,467.61. Specifically,
the audit report referred to the service charges from the following items: (1)
“Journal Vouchers;” (2) “Banquet Other Revenue;” and (3) “Staff and
Promo.” The Union presented this audit report to the PPHI’s management
during the February 26, 1999 Labor Management Cooperation Meeting
(LMCM).9 The PPHI’s management responded that the Hotel Financial Controller
would need to verify the audit report.
Through a letter dated June 9, 1999,10 the PPHI admitted liability for
P80,063.88 out of the P2,952,467.61 that the Union claimed as uncollected
service charges. The PPHI denied the rest of the Union’s claims because: (1)
they were exempted from the service charge being revenues from “special
promotions” (revenue from the Westin Gold Card sales) or “negotiated contracts”
(alleged revenue from the Maxi-Media contract); (2) the revenues did not belong
to the PPHI but to third-party suppliers; and (3) no revenue was realized from
these transactions as they were actually expenses incurred for the benefit of
executives or by way of good-will to clients and government officials.
During the July 12, 1999 LMCM,11 the Union maintained its position on
uncollected service charges so that a deadlock on the issue ensued. The parties
agreed to refer the matter to a third party for the solution. They considered two
options – voluntary arbitration or court action – and promised to get back to each
other on their chosen option.
In its formal reply (to the PPHI’s June 9, 1999 letter) dated July 21, 1999
(2nd audit report),12 the Union modified its claims. It claimed uncollected service
charges from: (1) “Journal Vouchers - Westin Gold Revenue and Maxi-
Media” (F&B and Rooms Barter); (2) “Banquet and Other Revenue;” and (3)
“Staff and Promo.”
On August 10, 2000, the Union’s Service Charge Committee made another
service charge audit report for the years 1997, 1998 and 1999 (3rd audit
report).13 This 3rd audit report reflected total uncollected service charges of
P5,566,007.62 from the following entries: (1) “Journal Vouchers;” (2)
“Guaranteed No Show;” (3) “Promotions;” and (4) “F & B Revenue.” The
Union President presented the 3rd audit report to the PPHI on August 29, 2000.
When the parties failed to reach an agreement, the Union, on May 3, 2001, filed
before the LA (Regional Arbitration Branch of the NLRC) a complaint 14 for non-
payment of specified service charges. The Union additionally charged the
PPHI with unfair labor practice (ULP) under Article 248 of the Labor Code, i.e., for
violation of their collective bargaining agreement.
In its decision15 dated April 30, 2002, the LA dismissed the Union’s complaint for
lack of merit. The LA declared that the Union failed to show, by law, contract and
practice, its entitlement to the payment of service charges from the entries
specified in its audit reports (specified entries/transactions).
The LA pointed out that Section 68 of the CBA explicitly requires, as a
precondition for the distribution of service charges in favor of the covered
employees, the collection of the 10% service charge on the “sale of food,
beverage, transportation, laundry and rooms;” at the same time, the provision
exempts from its coverage “negotiated contracts” and “special rates” that the LA
deemed as non-revenue generating transactions involving “food, beverage,
transportation, laundry and rooms.” The Union failed to prove that the PPHI
collected 10% service charges on the specified entries/transactions that could
have triggered the PPHI’s obligation under this provision.
Particularly, the LA pointed out that, first, the only evidence on record that could
have formed the basis of the Union’s claim for service charges was the PPHI’s
admission that, as a matter of policy, it has been charging, collecting and
distributing to the covered employees 10% service charge on the fifty percent
(50%) of the total selling price of the “Maxi-Media F & B” and on the “Average
House” rate of the “Maxi-Media Rooms.” And it did so, notwithstanding the fact
that the “Maxi-Media F & B and Rooms Barter” is a “negotiated contract” and/or
“special rate” that Section 68 explicitly excludes from the service charge
coverage.
Second, while the PPHI derived revenues from the sale of the Westin Gold Cards
(Westin Gold Revenue), the PPHI did not and could not have collected a 10%
service charge as these transactions could not be considered as sale of food,
beverage, transportation, laundry and rooms that Section 68 contemplates.
Third, the “Staff and Business Promotion and Banquet” entry refers to the
expenses incurred by the PPHI’s Marketing Department and Department Heads
and Hotel executives either as part of their perks or the PPHI’s marketing
tool/public relations. These are special rates that are essentially non-revenue
generating items.
Fourth, the “Backdrop” entry refers to services undertaken by third parties
payment for which were made of course to them; hence, this entry/transaction
could not likewise be considered as sale of services by PPHI for which collection
of the 10% service charge was warranted.
Lastly, the LA equally brushed aside the Union’s claim of ULP declaring that the
PPHI was well within its legal and contractual right to refuse payment of service
charges for entries from which it did not collect any service charge pursuant to
the provision of their CBA.
The NLRC’s ruling
In its decision16 of July 4, 2005, the NLRC reversed the LA’s decision and
considered the specified entries/transactions as “service chargeable.” As the
PPHI failed to prove that it paid or remitted the required service charges, the
NLRC held the PPHI liable to pay the Union P5,566,007.62 representing the
claimed uncollected service charges for the years 1997, 1998 and 1999 per the
3rd audit report.
The PHHI went to the CA on a petition for certiorari17 after the NLRC denied its
motion for reconsideration.18
The CA’s ruling
The CA granted the PPHI’s petition in its January 31, 2007 decision.19 It affirmed
the LA’s decision but ordered the PPHI to pay the Union the amount of
P80,063.88 as service charges that it found was due under the
circumstances. The CA declared that no service charges were due from the
specified entries/transactions; either these constituted “negotiated contracts” and
“special rates” that Section 68 of the CBA explicitly excludes from the coverage of
service charges, or they were cited bases that the Union failed to sufficiently
prove.
The CA pointed out that: one, the “Westin Gold Card Revenues” entry involved
the sale, not of food, beverage, transportation, laundry and rooms, but of a
“contractual right” to be charged a lesser rate for the products and services that
the Hotel and the stores within it provide. At any rate, the PPHI charges, collects
and distributes to the covered employees the CBA-agreed service charges
whenever any Westin Gold Card member purchases food, beverage, etc. Two,
the “Maxi-Media F & B and Rooms and Barter” entry did not involve any sale
transaction that Section 68 contemplates. The CA pointed out that the
arrangement20 between the PPHI and Maxi-Media International, Inc. was not one
of sale but an innominate contract of facio ut des, i.e., in exchange for the
professional entertainment services provided by Maxi-Media, the Hotel agreed to
give the former P2,800,000.00 worth of products and services. The CA added
that this agreement falls under “negotiated contracts” that Section 68 explicitly
exempts. Three, the sale of “Gift Certificates” does not involve the CBA-
contemplated “sale of food, beverage, etc.” Four, the Union failed to show the
source of its computations for its “Guaranteed No Show” and “F & B Revenue”
claims. Five, the “Business Promotions” entry likewise did not involve any sale;
these were part of the PPHI’s business expenses in the form of either signing
benefits for the PPHI’s executives or as marketing tool used by the PPHI’s
marketing personnel to generate goodwill. And six, the Union’s claims for service
charges that the PPHI allegedly collected prior to May 3, 1998 or three years
before the Union filed its complaint on May 3, 2001 had already prescribed per
Article 291 of the Labor Code.
The Union filed the present petition after the CA denied its motion for
reconsideration21 in the CA’s April 20, 2007 resolution.22
The Petition
The Union argues that the CA clearly misapprehended and misappreciated, with
grave abuse of discretion, the facts and evidence on record. It maintains that the
specified entries/transactions are revenue based transactions which, per Section
68 and 69 of the CBA, clearly called for the collection and distribution of a 10%
service charge in favor of the covered employees.
Particularly, the Union argues that: (1) the “Westin Gold Cards” serve not only as
a discount card but also as a “pre-paid” card that provide its purchasing members
complimentary amenities for which the Hotel employees rendered services and
should, therefore, had been subjected to the 10% service charge; (2) the PPHI
failed to prove that it had paid and distributed to the covered employees the
service charge due on the actual discounted sales of food, beverage, etc.,
generated by the “Westin Gold Cards;” (3) the Hotel employees likewise rendered
services whenever the Maxi-Media International, Inc. consumed or availed part
of the P2,800,000.00 worth of goods and services pursuant to its agreement with
the PPHI; (4) the “Maxi-Media” discounts should be charged to the PPHI as part
of its expenses and not the Union’s share in the service charges; (5) the PPHI has
a separate budget for promotions, hence the “Business Promotions” entry should
likewise had been subjected to the 10% service charge; (6) the sale of “Gift
Certificates,” recorded in the PPHI’s “Journal Vouchers” as “other
revenue/income,” constituted a revenue transaction for which service charges
were due; (7) the PPHI admitted that service charges from “Guaranteed No
Show” were due; and (8) it properly identified through reference numbers the
uncollected service charges from “Food and Beverage Revenue.” The Union
contends that in refusing to collect and remit the CBA-mandated service charges
that the PPHI insists were non-revenue transactions falling under “Negotiated
Contracts” and/or “Special Rates,” the PPHI, in effect, contravened the
employees’ rights to service charges under the law and the CBA.
The Union also contends that the term “Negotiated Contracts” should be applied
to “airline contracts” only that they (the Union and the PPHI) intended when they
executed the CBA. It points out that at the time the CBA was executed, the PPHI
had an existing agreement with Northwest Airlines to which the term “Negotiated
Contracts” clearly referred to.
Further, the Union argues that its claim for unpaid services charges for the year
1997 and part of 1998 had not yet prescribed. Applying Article 1155 of the Civil
Code in relation to Article 291 of the Labor Code, the Union points out that the
running of the prescriptive period for the filing of its claim was interrupted when
it presented to the PPHI its 1st audit report during the February 26, 1999 LMCM
and when the PPHI admitted the service charges due to the Union in the PPHI’s
June 9, 1999 letter.
The Union additionally argues that the PPHI failed to conform to the generally
accepted accounting standards when it reclassified the revenue items as expense
items.
Finally, the Union contends that the PPHI’s refusal, despite repeated demands, to
distribute the unremitted service charges and recognize its right to service
charges on the specified entries; the PPHI’s deliberate failure to disclose its
financial transactions and audit reports; and the PPHI’s reclassification of the
revenues into expense items constitute gross violation of the CBA that amounts
to what the law considers as ULP.
The Case for the Respondent
The PPHI primarily counters, in its comment,23that the Union’s call for the Court
to thoroughly re-examine the records violates the Rule 45 proscription against
questions of facts. The PPHI points out that Rule 45 of the Rules of Court under
which the petition is filed requires that only questions of law be raised. In
addition, the factual findings of the LA that had been affirmed by the CA deserve
not only respect but even finality.
On the petition’s merits, the PPHI argues that the specified entries/transactions
for which the Union claims service charges: (1) were not revenue generating
transactions; (2) that did not involve a sale of food, beverage, rooms,
transportation or laundry; and/or (3) were in the nature of negotiated contracts
and special rates that Section 68 of the CBA specifically excepts from the
collection of service charges. Correlatively, Article 96 of the Labor Code requires
the collection of service charges as a condition precedent to its distribution or
payment. Thus, as no service charges were collected on the specified
entries/transactions that the CBA expressly excepts, the Union’s claim for unpaid
service charges clearly had no basis.
To be precise, the PPHI points out that, first, the sale per se of the “Westin Gold
Cards” did not involve a sale of food, beverage, etc. that Section 68 of the CBA
contemplates. The discounted sales of food, beverage, etc. to Westin Gold Card
holders, on the other hand, had already been subjected to service charges
inclusive of the discount, i.e., computed on the gross sales of food, beverage,
etc. to the card holders, and which service charges it had already distributed to
the covered employees. Second, its agreement with Maxi-Media involved an
exchange or barter transaction, i.e., its food and Hotel services in exchange for
Maxi-Media’s entertainment services that did not generate income. This
agreement likewise falls under “Negotiated Contracts” that Section 68 clearly
excepts. And, in any case, it had already collected, and distributed to the
covered employees, the service charges on the food, beverage, etc. that Maxi-
Media consumed based on the monthly average rate of the rooms and on the
50% rate of the price of the consumed food and beverage. Third, the Union
failed to prove its claims for uncollected service charges from “Guaranteed No
Show” and “Business Promotions.” Fourth, the “Food and Beverage other
Revenue” entry refers to the PPHI’s transactions with external service providers
the payment for whose services could not be considered as the PPHI’s
revenue. Fifth, the sale per se of the “Gift Certificates” also did not involve the
Section 68-contemplated sale of food, beverage, etc. and the Union failed to
prove that the presented Gift Certificates had actually been consumed, i.e., used
within the Hotel premises for food, beverage, etc. And sixth, it had never been
its practice to collect service charges on the specified entries/transactions that
could have otherwise resulted in what the Union considers as “partial abolition of
service charges” when it refused to collect service charges from them.
The PPHI also disputes what it considers as the Union’s strained interpretation of
the CBA exception of “Negotiated Contracts” as applicable to airline contracts
only. It points out that the clear wordings of Section 68 of the CBA plainly show
the intent to except, in a general and broad sense, “Negotiated Contracts” and
“Special Rates” as to include the “Westin Gold Cards” and “Maxi-Media” barter
agreement. The PPHI additionally argues that the CBA’s exception of “Negotiated
Contracts” and “Special Rates” from the collection of service charges does not
violate Article 96 of the Labor Code. It points out that Article 96 merely provides
for the minimum percentage distribution, between it (the PPHI) as the employer
and the Hotel’s covered employees, of the collected service charges which their
CBA more than satisfied. It also points out that Article 96 does not prohibit the
exception of certain transactions from the coverage and/or collection of service
charges that it (as the employer) and the Union (in behalf of the covered Hotel
employees) had voluntarily and mutually agreed on in their CBA. And in fact, the
Union’s refusal to recognize these clear and express exceptions constituted a
violation of their agreement.
Further, the PPHI maintains that the Union’s claim for the alleged uncollected
service charges for the year 1997 and the early months of 1998 had already
prescribed per Article 291 of the Labor Code.
Finally, the PPHI points out that the issue in this case is not whether service
charges had been paid. Rather, the clear issue is whether or not service charges
should have been collected (and distributed to the covered employees) for the
specified entries/transactions that the LA and the CA correctly addressed and
which the NLRC clearly missed as it rendered a decision without any factual or
legal basis.
The Court’s Ruling
We find the petition unmeritorious.
Preliminary considerations: jurisdictional
limitations of the Court’s Rule 45 review of
the CA’s Rule 65 decision in labor cases; the
Montoya ruling and factual-issue-bar-rule
In a petition for review on certiorari under Rule 45 of the Rules of Court, we
review the legal errors that the CA may have committed in the assailed decision,
in contrast with the review for jurisdictional errors that we undertake in an
original certiorari action. In reviewing the legal correctness of the CA decision in
a labor case taken under Rule 65 of the Rules of Court, we examine the CA
decision in the context that it determined the presence or the absence of grave
abuse of discretion in the NLRC decision before it and not on the basis of whether
the NLRC decision, on the merits of the case, was correct. In other words, we
proceed from the premise that the CA undertook a Rule 65 review, not a review
on appeal, of the NLRC decision challenged before it. Within this limited scope of
our Rule 45 review, the question that we ask is: Did the CA correctly determine
whether the NLRC committed grave abuse of discretion in ruling on the case? 24
In addition, the Court’s jurisdiction in a Rule 45 petition for review on certiorari is
limited to resolving only questions of law. A question of law arises when the
doubt or controversy exists as to what law pertains to a particular set of facts;
and a question of fact arises when the doubt or controversy pertains to the truth
or falsity of the alleged facts.25
The present petition essentially raises the question – whether the Union may
collect from the PPHI, under the terms of the CBA, its share of the service
charges. This is a clear question of law that falls well within the Court’s power in
a Rule 45 petition.
Resolution of this question of law, however, is inextricably linked with the largely
factual issue of whether the specified entries/transactions fall within the generally
covered sale of food, beverage, transportation, etc. from which service charges
are due or within the CBA excepted “Negotiated Contracts” and “Special
Rates.” It also unavoidably requires resolution of another factual issue, i.e.,
whether the Union’s claim for service charges collected for the year 1997 and the
early months of 1998 had already prescribed. As questions of fact, they are
proscribed by our Rule 45 jurisdiction; we generally cannot address these factual
issues except to the extent necessary to determine whether the CA correctly
found the NLRC in grave abuse of discretion in granting the Union’s claim for
service charges from the specified entries/transactions.
The jurisdictional limitations of our Rule 45 review of the CA’s Rule 65 decision in
labor cases constrain us to deny the present petition for clear lack of legal error
in the CA’s decision. Our consideration of the facts taken within this limited
scope of our factual review power, convinces us that grave abuse of discretion
attended the NLRC’s decision. At what point and to what extent the NLRC
gravely abused its discretion is the matter we shall discuss below.
The NLRC’s patently erroneous appreciation
of the real issue in the present controversy,
along with the facts and the evidence, amounted
to grave abuse of discretion
In granting the Union’s claim, the NLRC simply declared that the PPHI “has not
shown any proof that it paid or remitted what is due to the Union and its
members” and concluded that the specified entries/transactions were “service
chargeable.” This NLRC conclusion plainly failed to appreciate that it involved
only the alleged uncollected service charges from the specified
entries/transactions. The NLRC likewise, in the course of its ruling, did not point
to any evidence supporting its conclusion.
In deciding as it did, the NLRC patently proceeded from the wrong premise, i.e.,
that the PPHI did not at all distribute to the Hotel’s covered employees their
share in the collected service charges. It likewise erroneously assumed that all
the specified entries/transactions were subject to service charges and that the
PPHI collected service charges from them as its ruling was patently silent on this
point. The NLRC also erroneously assumed that each and every transaction that
the PPHI entered into was subject to a service charge.
What the NLRC clearly and conveniently overlooked was the underlying issue of
whether service charges are due from the specified
entries/transactions, i.e., whether the specified entries/transactions are covered
by the CBA’s general-rule provisions on the collection of service charges or
whether they are excepted because they fall within the excepted “Negotiated
Contracts” and “Special Rates” or simply did not involve a “sale of food,
beverage, etc.” from which service charges are due. This understanding of this
case’s real issue is an indispensable requisite in the proper resolution of the
controversy and a task that the NLRC, as a tribunal exercising quasi-judicial
power, must perform with circumspection and utmost diligence. The patent
failure led to its manifestly flawed conclusions that were belied by the underlying
facts. By so doing, the NLRC acted outside the clear contemplation of the law. 26
Accordingly, we affirm the CA’s decision to be legally correct as it correctly
reversed the NLRC decision for grave abuse of discretion.
Nature of a CBA; rules in the interpretation of CBA provisions
A collective bargaining agreement, as used in Article 252 (now Article 262) 27 of
the Labor Code, is a contract executed at the request of either the employer or
the employees’ exclusive bargaining representative with respect to wages, hours
of work and all other terms and conditions of employment, including proposals for
adjusting any grievances or questions under such agreement.28 Jurisprudence
settles that a CBA is the law between the contracting parties who are obliged
under the law to comply with its provisions.29
As a contract and the governing law between the parties, the general rules of
statutory construction apply in the interpretation of its provisions. Thus, if the
terms of the CBA are plain, clear and leave no doubt on the intention of the
contracting parties, the literal meaning of its stipulations, as they appear on the
face of the contract, shall prevail.30 Only when the words used are ambiguous
and doubtful or leading to several interpretations of the parties’ agreement that a
resort to interpretation and construction is called for.31
No service charges were due from the specified
entries/transactions; they either fall within the
CBA-excepted “Negotiated Contracts” and
“Special Rates” or did not involve “a sale
of food, beverage, etc.”
The Union anchors its claim for services charges on Sections 68 and 69 of the
CBA, in relation with Article 96 of the Labor Code. Section 68 states that the sale
of food, beverage, transportation, laundry and rooms are subject to service
charge at the rate of ten percent (10%). Excepted from the coverage of the 10%
service charge are the so-called “negotiated contracts” and “special rates.”
Following the wordings of Section 68 of the CBA, three requisites must be present
for the provisions on service charges to operate: (1) the transaction from which
service charge is sought to be collected is a sale; (2) the sale transaction
covers food, beverage, transportation, laundry and rooms; and (3) the sale
does not result from negotiated contracts and/or at special rates.
In plain terms, all transactions involving a “sale of food, beverage,
transportation, laundry and rooms” are generally covered. Excepted from the
coverage are, first, non-sale transactions or transactions that do not involve any
sale even though they involve “food, beverage, etc.” Second, transactions that
involve a sale but do not involve “food, beverage, etc.” And third, transactions
involving “negotiated contracts” and “special rates” i.e., a “sale of food,
beverage, etc.” resulting from “negotiated contracts” or at “special rates;” non-
sale transactions involving “food, beverage, etc.” resulting from “negotiated
contracts” and/or “special rates;” and sale transactions, but not involving “food,
beverage, etc.,” resulting from “negotiated contracts” and “special rates.”
Notably, the CBA does not specifically define the terms “negotiated contracts”
and “special rates.” Nonetheless, the CBA likewise does not explicitly limit the
use of these terms to specified transactions. With particular reference to
“negotiated contracts,” the CBA does not confine its application to “airline
contracts” as argued by the Union. Thus, as correctly declared by the CA, the
term “negotiated contracts” should be read as applying to all types of negotiated
contracts and not to “airlines contracts” only. This is in line with the basic rule of
construction that when the terms are clear and leave no doubt upon the intention
of the contracting parties, the literal meaning of its stipulations shall prevail. A
constricted interpretation of this term, i.e., as applicable to “airlines contracts”
only, must be positively shown either by the wordings of the CBA or by sufficient
evidence of the parties’ intention to limit its application. The Union completely
failed to provide support for its constricted reading of the term “negotiated
contracts,” either from the wordings of the CBA or from the evidence.
In reversing the NLRC’s ruling and denying the Union’s claim, the CA found the
specified entries/transactions as either falling under the excepted negotiated
contracts and/or special rates or not involving a sale of food, beverage,
etc. Specifically, it considered the entries “Westin Gold Cards Revenue” and
“Maxi Media Barter” to be negotiated contracts or contracts under special rates,
and the entries “Business Promotions” and “Gift Certificates” as contracts that did
not involve a sale of food, beverage, etc. The CA also found no factual and
evidentiary basis to support the Union’s claim for service charges on the entries
“Guaranteed No show” and “F & B Revenue.”
Our consideration of the records taken under our limited factual review power
convinces us that these specified entries/transactions are indeed not subject to a
10% service charge. We thus see no reason to disturb the CA’s findings on these
points.
The PPHI did not violate Article 96 of the
Labor Code when they refused the Union’s
claim for service charges on the
specified entries/transactions
Article 96 of the Labor Code provides for the minimum percentage distribution
between the employer and the employees of the collected service charges, and
its integration in the covered employees’ wages in the event the employer
terminates its policy of providing for its collection. It pertinently reads:
Art. 96. Service Charges.
x x x In case the service charge is abolished, the share of the covered employees
shall be considered integrated in their wages.
This last paragraph of Article 96 of the Labor Code presumes the practice of
collecting service charges and the employer’s termination of this practice. When
this happens, Article 96 requires the employer to incorporate the amount that the
employees had been receiving as share of the collected service charges into their
wages. In cases where no service charges had previously been collected (as
where the employer never had any policy providing for collection of service
charges or had never imposed the collection of service charges on certain
specified transactions), Article 96 will not operate.
In this case, the CA found that the PPHI had not in fact been collecting services
charges on the specified entries/transactions that we pointed out as either falling
under “negotiated contracts” and/or “special rates” or did not involve a “sale of
food, beverage, etc.” Accordingly, Article 96 of the Labor Code finds no
application in this case; the PPHI did not abolish or terminate the implementation
of any company policy providing for the collection of service charges on specified
entries/transactions that could have otherwise rendered it liable to pay an
amount representing the covered employees’ share in the alleged abolished
service charges.
The Union’s claim for service charges for the year
1997 and the early months of 1998 could not have
yet prescribed at the time it filed its complaint on
May 3, 2001; Article 1155 of the Civil Code applies
suppletorily to Article 291 of the Labor Code
Article 291 (now Article 305)32 of the Labor Code states that “all money claims
arising from employer-employee relations x x x shall be filed within three (3)
years from the time the cause of action accrued; otherwise, they shall
forever be barred.” [Emphasis supplied]
Like other causes of action, the prescriptive period for money claims under Article
291 of the Labor Code is subject to interruption. And, in the absence of an
equivalent Labor Code provision for determining whether Article 291’s three-year
prescriptive period may be interrupted, Article 1155 of the Civil Code33may be
applied. Thus, the period of prescription of money claims under Article 291 is
interrupted by: (1) the filing of an action; (2) a written extrajudicial demand by
the creditor; and (3) a written acknowledgment of the debt by the debtor.
In the present petition, the facts indisputably showed that as early as 1998, the
Union demanded, via the 1st audit report, from the PPHI the payment and/or
distribution of the alleged uncollected service charges for the year 1997. From
thereon, the parties went through negotiations (LCMC) to settle and reconcile on
their respective positions and claims.
Under these facts – the Union’s written extrajudicial demand through its 1st audit
report and the successive negotiation meetings between the Union and the PPHI
– the running of the three-year prescriptive period under Article 291 of the Labor
Code could have effectively been interrupted. Consequently, the Union’s claims
for the alleged uncollected service charges for the year 1997 could not have yet
prescribed at the time it filed its complaint on May 3, 2001.
This non-barring effect of prescription, notwithstanding (i.e., that the running of
the three-year prescriptive period had effectively been interrupted – by the
Union’s written extrajudicial demand on the PPHI), the CA, as it affirmed the LA,
still correctly denied the Union’s claims for the alleged uncollected and/or
undistributed service charges on the specified entries/transactions for the year
1997 and the early part of 1998. As the CA found and discussed in its decision,
and with which we agree as amply supported by factual and legal bases, the
nature of these specified entries/transactions as either excepted from the
collection of service charges or not constituting a “sale of food, beverage, etc.,”
and the Union’s failure to support its claims by sufficient evidence warranted,
without doubt, the denial of the Union’s action.
In sum, we find the CA’s denial of the Union’s claim for service charges from the
specified entries/transactions legally correct and to be well supported by the facts
and the law. The CA correctly reversed for grave abuse of discretion the NLRC’s
decision.
WHEREFORE, in light of these considerations, we hereby DENY the
petition. We AFFIRM the decision dated January 31, 2007 and resolution dated
April 20, 2007 of the Court of Appeals in CA-G.R. Sp No. 93698.
SO ORDERED.
G.R. No. 175773 June 17, 2013
MITSUBISHI MOTORS PHILIPPINES SALARIED EMPLOYEES UNION
(MMPSEU), Petitioner,
vs.
MITSUBISHI MOTORS PHILIPPINES CORPORATION, Respondent.
 DECISION
DEL CASTILLO, J.:
The Collective Bargaining Agreement (CBA) of the parties in this case provides that the
company shoulder the hospitalization expenses of the dependents of covered employees
subject to certain limitations and restrictions. Accordingly, covered employees pay part of the
hospitalization insurance premium through monthly salary deduction while the company,
upon hospitalization of the covered employees' dependents, shall pay the hospitalization
expenses incurred for the same. The conflict arose when a portion of the hospitalization
expenses of the covered employees' dependents were paid/shouldered by the dependent's
own health insurance. While the company refused to pay the portion of the hospital expenses
already shouldered by the dependents' own health insurance, the union insists that the
covered employees are entitled to the whole and undiminished amount of said hospital
expenses.
By this Petition for Review on Certiorari,1 petitioner Mitsubishi Motors Philippines Salaried
Employees Union (MMPSEU) assails the March 31, 2006 Decision2 and December 5, 2006
Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 75630, which reversed and set
aside the Voluntary Arbitrator’s December 3, 2002 Decision 4 and declared respondent
Mitsubishi Motors Philippines Corporation (MMPC) to be under no legal obligation to pay its
covered employees’ dependents’ hospitalization expenses which were already shouldered by
other health insurance companies.
Factual Antecedents
The parties’ CBA5 covering the period August 1, 1996 to July 31, 1999 provides for the
hospitalization insurance benefits for the covered dependents, thus:
SECTION 4. DEPENDENTS’ GROUP HOSPITALIZATION INSURANCE – The COMPANY
shall obtain group hospitalization insurance coverage or assume under a self-insurance basis
hospitalization for the dependents of regular employees up to a maximum amount of forty
thousand pesos (₱40,000.00) per confinement subject to the following:
a. The room and board must not exceed three hundred pesos (₱300.00) per day up
to a maximum of thirty-one (31) days. Similarly, Doctor’s Call fees must not exceed
three hundred pesos (₱300.00) per day for a maximum of thirty-one (31) days. Any
excess of this amount shall be borne by the employee.
b. Confinement must be in a hospital designated by the COMPANY. For this purpose,
the COMPANY shall designate hospitals in different convenient places to be availed
of by the dependents of employees. In cases of emergency where the dependent is
confined without the recommendation of the company doctor or in a hospital not
designated by the COMPANY, the COMPANY shall look into the circumstances of
such confinement and arrange for the payment of the amount to the extent of the
hospitalization benefit.
c. The limitations and restrictions listed in Annex "B" must be observed.
d. Payment shall be direct to the hospital and doctor and must be covered by actual
billings.
Each employee shall pay one hundred pesos (₱100.00) per month through salary deduction
as his share in the payment of the insurance premium for the above coverage with the
balance of the premium to be paid by the COMPANY. If the COMPANY is self-insured the
one hundred pesos (₱100.00) per employee monthly contribution shall be given to the
COMPANY which shall shoulder the expenses subject to the above level of benefits and
subject to the same limitations and restrictions provided for in Annex "B" hereof.
The hospitalization expenses must be covered by actual hospital and doctor’s bills and any
amount in excess of the above mentioned level of benefits will be for the account of the
employee.
For purposes of this provision, eligible dependents are the covered employees’ natural
parents, legal spouse and legitimate or legally adopted or step children who are unmarried,
unemployed who have not attained twenty-one (21) years of age and wholly dependent upon
the employee for support.
This provision applies only in cases of actual confinement in the hospital for at least six (6)
hours.
Maternity cases are not covered by this section but will be under the next succeeding section
on maternity benefits.6
When the CBA expired on July 31, 1999, the parties executed another CBA7 effective August
1, 1999 to July 31, 2002 incorporating the same provisions on dependents’ hospitalization
insurance benefits but in the increased amount of ₱50,000.00. The room and board
expenses, as well as the doctor’s call fees, were also increased to ₱375.00.
On separate occasions, three members of MMPSEU, namely, Ernesto Calida (Calida),
Hermie Juan Oabel (Oabel) and Jocelyn Martin (Martin), filed claims for reimbursement of
hospitalization expenses of their dependents.
MMPC paid only a portion of their hospitalization insurance claims, not the full amount. In the
case of Calida, his wife, Lanie, was confined at Sto. Tomas University Hospital from
September 4 to 9, 1998 due to Thyroidectomy. The medical expenses incurred totalled
₱29,967.10. Of this amount, ₱9,000.00 representing professional fees was paid by
MEDICard Philippines, Inc. (MEDICard) which provides health maintenance to Lanie.8 MMPC
only paid ₱12,148.63.9 It did not pay the ₱9,000.00 already paid by MEDICard and the
₱6,278.47 not covered by official receipts. It refused to give to Calida the difference between
the amount of medical expenses of ₱27,427.1010 which he claimed to be entitled to under the
CBA and the ₱12,148.63 which MMPC directly paid to the hospital.
In the case of Martin, his father, Jose, was admitted at The Medical City from March 26 to 27,
2000 due to Acid Peptic Disease and incurred medical expenses amounting to
₱9,101.30.14 MEDICard paid ₱8,496.00.15Consequently, MMPC only paid ₱288.40,16 after
deducting from the total medical expenses the amount paid by MEDICard and the ₱316.90
discount given by the hospital.
Claiming that under the CBA, they are entitled to hospital benefits amounting to ₱27,427.10,
₱6,769.35 and ₱8,123.80, respectively, which should not be reduced by the amounts paid by
MEDICard and by Prosper, Calida, Oabel and Martin asked for reimbursement from MMPC.
However, MMPC denied the claims contending that double insurance would result if the said
employees would receive from the company the full amount of hospitalization expenses
despite having already received payment of portions thereof from other health insurance
providers.
This prompted the MMPSEU President to write the MMPC President 17 demanding full
payment of the hospitalization benefits. Alleging discrimination against MMPSEU union
members, she pointed out that full reimbursement was given in a similar claim filed by Luisito
Cruz (Cruz), a member of the Hourly Union. In a letter-reply,18 MMPC, through its Vice-
President for Industrial Relations Division, clarified that the claims of the said MMPSEU
members have already been paid on the basis of official receipts submitted. It also denied the
charge of discrimination and explained that the case of Cruz involved an entirely different
matter since it concerned the admissibility of certified true copies of documents for
reimbursement purposes, which case had been settled through voluntary arbitration.
On August 28, 2000, MMPSEU referred the dispute to the National Conciliation and
Mediation Board and requested for preventive mediation.19
Proceedings before the Voluntary Arbitrator
On October 3, 2000, the case was referred to Voluntary Arbitrator Rolando Capocyan for
resolution of the issue involving the interpretation of the subject CBA provision. 20
MMPSEU alleged that there is nothing in the CBA which prohibits an employee from
obtaining other insurance or declares that medical expenses can be reimbursed only upon
presentation of original official receipts. It stressed that the hospitalization benefits should be
computed based on the formula indicated in the CBA without deducting the benefits derived
from other insurance providers. Besides, if reduction is permitted, MMPC would be unjustly
benefited from the monthly premium contributed by the employees through salary deduction.
MMPSEU added that its members had legitimate claims under the CBA and that any doubt
as to any of its provisions should be resolved in favor of its members. Moreover, any
ambiguity should be resolved in favor of labor.21
On the other hand, MMPC argued that the reimbursement of the entire amounts being
claimed by the covered employees, including those already paid by other insurance
companies, would constitute double indemnity or double insurance, which is circumscribed
under the Insurance Code. Moreover, a contract of insurance is a contract of indemnity and
the employees cannot be allowed to profit from their dependents’ loss.22
Meanwhile, the parties separately sought for a legal opinion from the Insurance Commission
relative to the issue at hand. In its letter23 to the Insurance Commission, MMPC requested for
confirmation of its position that the covered employees cannot claim insurance benefits for a
loss that had already been covered or paid by another insurance company. However, the
Office of the Insurance Commission opted not to render an opinion on the matter as the same
may become the subject of a formal complaint before it.24 On the other hand, when queried
by MMPSEU,25the Insurance Commission, through Atty. Richard David C. Funk II (Atty. Funk)
of the Claims Adjudication Division, rendered an opinion contained in a letter, 26 viz:
Ms. Cecilia L. ParasPresident
Mitsubishi Motors Phils.
[Salaried] Employees Union
Ortigas Avenue Extension,
Cainta, Rizal
Madam:
We acknowledge receipt of your letter which, to our impression, basically poses the question
of whether or not recovery of medical expenses from a Health Maintenance Organization
bars recovery of the same reimbursable amount of medical expenses under a contract of
health or medical insurance.
We wish to opine that in cases of claims for reimbursement of medical expenses where there
are two contracts providing benefits to that effect, recovery may be had on both
simultaneously. In the absence of an Other Insurance provision in these coverages, the
courts have uniformly held that an insured is entitled to receive the insurance benefits without
regard to the amount of total benefits provided by other insurance. (INSURANCE LAW, A
Guide to Fundamental Principles, Legal Doctrines, and Commercial Practices; Robert E.
Keeton, Alau I. Widiss, p. 261). The result is consistent with the public policy underlying the
collateral source rule – that is, x x x the courts have usually concluded that the liability of a
health or accident insurer is not reduced by other possible sources of indemnification or
compensation. (ibid).
Very truly yours,
RICHARD DAVID C. FUNK II
Officer-in-Charge
Claims Adjudication Division
(SGD.)
Attorney IV
On December 3, 2002, the Voluntary Arbitrator rendered a Decision27 finding MMPC liable to
pay or reimburse the amount of hospitalization expenses already paid by other health
insurance companies. The Voluntary Arbitrator held that the employees may demand
simultaneous payment from both the CBA and their dependents’ separate health insurance
without resulting to double insurance, since separate premiums were paid for each contract.
He also noted that the CBA does not prohibit reimbursement in case there are other health
insurers.
Proceedings before the Court of Appeals
MMPC filed a Petition for Review with Prayer for the Issuance of a Temporary Restraining
Order and/or Writ of Preliminary Injunction28 before the CA. It claimed that the Voluntary
Arbitrator committed grave abuse of discretion in not finding that recovery under both
insurance policies constitutes double insurance as both had the same subject matter, interest
insured and risk or peril insured against; in relying solely on the unauthorized legal opinion of
Atty. Funk; and in not finding that the employees will be benefited twice for the same loss. In
its Comment,29 MMPSEU countered that MMPC will unjustly enrich itself and profit from the
monthly premiums paid if full reimbursement is not made.
On March 31, 2006, the CA found merit in MMPC’s Petition. It ruled that despite the lack of a
provision which bars recovery in case of payment by other insurers, the wordings of the
subject provision of the CBA showed that the parties intended to make MMPC liable only for
expenses actually incurred by an employee’s qualified dependent. In particular, the provision
stipulates that payment should be made directly to the hospital and that the claim should be
supported by actual hospital and doctor’s bills. These mean that the employees shall only be
paid amounts not covered by other health insurance and is more in keeping with the principle
of indemnity in insurance contracts. Besides, a contrary interpretation would "allow
unscrupulous employees to unduly profit from the x x x benefits" and shall "open the
floodgates to questionable claims x x x."30
The dispositive portion of the CA Decision31 reads:
WHEREFORE, the instant petition is GRANTED. The decision of the voluntary arbitrator
dated December 3, 2002 is REVERSED and SET ASIDE and judgment is rendered declaring
that under Art. XI, Sec. 4 of the Collective Bargaining Agreement between petitioner and
respondent effective August 1, 1999 to July 31, 2002, the former’s obligation to reimburse the
Union members for the hospitalization expenses incurred by their dependents is exclusive of
those paid by the Union members to the hospital.
SO ORDERED.
G.R. No. 191281 December 5, 2012
BEST WEAR GARMENTS and/or WARREN PARDILLA, Petitioners,
vs.
ADELAIDA B. DE LEMOS and CECILE M. OCUBILLO, Respondents.
DECISION
VILLARAMA, J.:
This is a petition for review on certiorari under Rule 45 assailing the Decision1 dated February
24, 2009 and Resolution2 dated February 10, 2010 of the Court of Appeals (CA) in CA-G.R.
SP No. 102002. TheCA reversed the Decision3 dated August 28, 2007 of the National Labor
Relations Commission (NLRC) and reinstated the September 5, 2005 Decision 4 of the Labor
Arbiter.
Petitioner Best Wear Garments is a sole proprietorship represented by its General Manager
Alex Sitosta. Respondents Cecile M. Ocubillo and Adelaida B. De Lemos were hired as
sewers on piece-rate basis by petitioners on October 27, 1993 andJuly 12, 1994,
respectively.
On May 20, 2004, De Lemos filed a complaint5 for illegal dismissal with prayer for backwages
and other accrued benefits, separation pay, service incentive leave pay and attorney’s fees. A
similar complaint6 was filed by Ocubillo on June 10, 2004. Both alleged in their position paper
that in August 2003, Sitosta arbitrarily transferred them to other areas of operation of
petitioner’s garments company, which they said amounted to constructive dismissal as it
resulted in less earnings for them.
De Lemos claimed that after two months in her new assignment, she was able to adjust but
Sitosta again transferred her to a "different operation where she could not earn [as] much as
before because by-products require long period of time to finish." She averred that the reason
for her transfer was her refusal "to render [overtime work] up to 7:00 p.m." Her request to be
returned to her previous assignment was rejected and she was "constrained not to report for
work as Sitosta had become indifferent to her since said transfer of operation." She further
alleged that her last salary was withheld by petitioner company.7
On her part, Ocubillo alleged that her transfer was precipitated by her having "incurred
excessive absences since 2001." Her absences were due to the fact that her father became
very sick since 2001 until his untimely demise on November 9, 2003; aside from this, she
herself became very sickly. She claimed that from September to October 2003, Sitosta
assigned her to different machines "whichever is available" and that "there were times, she
could not earn for a day because there was no available machine to work for [sic]." Sitosta
also allegedly required her to render overtime work up to 7:00 p.m. which she refused
"because she was only paid up to 6:25 p.m."8
Petitioners denied having terminated the employment of respondents who supposedly
committed numerous absences without leave (AWOL). They claimed that sometime in
February 2004, De Lemos informed Sitosta that due to personal problem, she intends to
resign from the company. She then demanded the payment of separation pay. In March
2004, Ocubillo likewise intimated her intention to resign and demanded separation pay.
Sitosta explained to both De Lemos and Ocubillo that the company had no existing policy on
granting separation pay, and hence he could not act on their request. De Lemos never
reported back to work since March 2004, while Ocubillo failed to report for work from October
2004 to the present.
As to the allegation of respondents that the reason for their transfer was their refusal to
render overtime work until 7:00 p.m., petitioners asserted that respondents are piece-rate
workers and hence they are not paid according to the number of hours worked.
On September 5, 2005, Labor Arbiter Arden S. Anni rendered a Decision granting
respondents’ claims, as follows:
WHEREFORE, ALL THE FOREGOING CONSIDERED, judgment is rendered, as follows:
1. Declaring that complainants were constructively, nay, illegally dismissed from
employment;
2. Ordering respondents to pay each of the complainants SEPARATION PAY
equivalent to one-month salary for every year of service, a fraction of at least six (6)
months being considered as one (1) whole year;
3. Ordering respondents to pay each of the complainants BACKWAGES computed
from the time of their dismissal up to the finality of this decision.
For this purpose, both parties are directed to submit their respective computations of the total
amount awarded for approval by this office.
All other claims are dismissed for lack of merit.
SO ORDERED.9
Labor Arbiter Anni ruled that since respondents neither resigned nor abandoned their jobs,
the ambiguities in the circumstances surrounding their dismissal are resolved in favor of the
workers. It was emphasized that respondents could no longer be deemed terminated for
reason of AWOL because this prerogative should have been exercised before the dismissals
have been effected. Moreover, it would have been illogical for respondents to resign and then
file a complaint for illegal dismissal.
Petitioners appealed to the NLRC which reversed the Labor Arbiter’s decision and dismissed
respondents’ complaints. The NLRC found no basis for the charge of constructive dismissal,
thus:
Complainants’ alleged demotion is vague. They simply allege that by reason of their transfer
in August 2003, they did not earn as much as they earned in their previous
assignments. They failed to state how much they earned before and after their transfer, if only
to determine whether or not there was indeed a diminution in their earnings. Further, it is to
be stressed that complainants were paid on a piece rate basis, which simply means that the
more output, they produced the more earnings they will have. In other words, the earning is
dependent upon complainants.
We find more credible respondents’ assertion that complainants’ transfer was a valid
exercise of management prerogative. Respondent company points out that it is engaged in
the business of garments manufacturing as a sub-contractor. That, the kind of work it
performs is dependent into with its client which specifies the work it has to perform.
And, that corollary thereto, the work to be performed by its employees will depend on the
work specifications in the contract. Thus, if complainants have been assigned to
different operations, it was pursuant to the requirements of its contracts. x x x.
In furtherance of their defense that complainants were not dismissed, either actual or
constructive in August 2003, respondents allege that complainants continued to report for
work until February 2004 for complainant De Lemos and August 2004 for complainant
Ocubillo. We lend credence to this allegation of respondents because it remains unrebutted
by complainants.
It is to be noted that it was only [on] May 20, 2004 and June 10, 2004 that the instant
consolidated cases were filed by complainant De Lemos and Ocubillo, respectively. It may
not be amiss to state that the date of filing jibe with respondents’ allegation that sometime in
February and March 2004, complainants intimated their intention to resign and demanded for
payment of separation pay but was not favorably acted upon by management.
Be that as it may, considering that complainants were not dismissed by respondents, they
should be ordered to report back to work without backwages and for the respondents to
accept them.
WHEREFORE, premises considered, the Decision dated September 5, 2005 is hereby SET
ASIDE and a new one entered dismissing complainants’ charge of illegal dismissal for lack of
merit. However, there being no dismissal, complainants Adelaida B. De Lemos and Cecile M.
Ocubillo are hereby directed to report back to work without backwages within ten (10) days
from receipt of this Resolution and for the respondent Company to accept them under the
same terms and conditions at the time of their employment.
SO ORDERED.10 (Italics in the original; emphasis supplied)
Respondents filed a motion for reconsideration which the NLRC denied. Thus, they elevated
the case to the CA alleging grave abuse of discretion on the part of the NLRC.
By Decision dated February 24, 2009, the CA granted the petition for certiorari, reversed the
ruling of the NLRC and reinstated the Labor Arbiter’s decision with modification that the
service incentive leave pay shall be excluded in the computation of the monetary award. The
CA found no valid and legitimate business reason for the transfer order which entailed the
reduction of respondents’ earnings. Because respondents’ plea to be returned to their former
posts was not heeded by petitioners, no other conclusion "is discernible from the attendant
circumstances except the fact that [respondents’] transfer was unreasonable, inconvenient
and prejudicial to them which [is] tantamount to a constructive dismissal."11 Moreover, the
unauthorized absences of respondents did not warrant a finding of abandonment in view of
the length of their service with petitioner company and the difficulty in finding similar
employment. The CA further invoked the rule that an employee who forthwith takes steps to
protest his layoff cannot by any logic be said to have abandoned his work.
Petitioners filed a motion for partial reconsideration which was denied by the CA.
Hence, this petition alleging that the CA has glaringly overlooked and clearly erred in its
findings of fact and in applying the law on constructive dismissal.
At the outset, it must bestated that the main issue in this case involves a question of fact. It is
an established rule that the jurisdiction of the Supreme Court in cases brought before it from
the CA via Rule 45 of the 1997 Rules of Civil Procedure is generally limited to reviewing
errors of law. This Court is not a trier of facts. In the exercise of its power of review, the
findings of fact of the CA are conclusive and binding and consequently, it is not our function
to analyze or weigh evidence all over again.12
There are, however, recognized exceptions13 to this rule such as when there is a divergence
between the findings of facts of the NLRC and that of the CA.14 In this case, the CA’s findings
are contrary to those of the NLRC. There is, therefore, a need to review the records to
determine which of them should be preferred as more conformable to evidentiary facts.15
The right of employees to security of tenure does not give them vested rights to their
positions to the extent of depriving management of its prerogative to change their
assignments or to transfer them. Thus, an employer may transfer or assign employees from
one office or area of operation to another, provided there is no demotion in rank or diminution
of salary, benefits, and other privileges, and the action is not motivated by discrimination,
made in bad faith, or effected as a form of punishment or demotion without sufficient cause. 16
In Blue Dairy Corporation v. NLRC,17 we held that:
x x x. The managerial prerogative to transfer personnel must be exercised without grave
abuse of discretion, bearing in mind the basic elements of justice and fair play. Having the
right should not be confused with the manner in which that right is exercised. Thus, it cannot
be used as a subterfuge by the employer to rid himself of an undesirable worker. In particular,
the employer must be able to show that the transfer is not unreasonable, inconvenient or
prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his
salaries, privileges and other benefits. Should the employer fail to overcome this burden of
proof, the employee’s transfer shall be tantamount to constructive dismissal, which has been
defined as a quitting because continued employment is rendered impossible, unreasonable or
unlikely; as an offer involving a demotion in rank and diminution in pay. Likewise, constructive
dismissal exists when an act of clear discrimination, insensibility or disdain by an employer
has become so unbearable to the employee leaving him with no option but to forego with his
continued employment.18
With the foregoing as guidepost, we hold that the CA erred in reversing the NLRC’s ruling
that respondents were not constructively dismissed.
Being piece-rate workers assigned to individual sewing machines, respondents’ earnings
depended on the quality and quantity of finished products. That their work output might have
been affected by the change in their specific work assignments does not necessarily
implythat any resultingreduction in payis tantamount to constructive dismissal. Workers under
piece-rate employment have no fixed salaries and their compensation is computed on the
basis of accomplished tasks. As admitted by respondent De Lemos, some garments or by-
products took a longer time to finish so they could not earn as much as before. Also,the type
of sewing jobs available would depend on the specifications made by the clients of petitioner
company. Under these circumstances, it cannot be said that the transfer was unreasonable,
inconvenient or prejudicial to the respondents. Such deployment of sewers to work on
different types of garments as dictated by present business necessity is within the ambit of
management prerogative which, in the absence of bad faith, ill motive or discrimination,
should not be interfered with by the courts.
The records are bereft of any showing of clear discrimination, insensibility or disdain on the
part of petitioners in transferring respondents to perform a different type of sewing job.It is
unfair to charge petitioners with constructive dismissal simply because the respondents insist
that their transfer to a new work assignment was against their will. We have long stated that
"the objection to the transfer being grounded on solely upon the personal inconvenience or
hardship that will be caused to the employee by reason of the transfer is not a valid reason to
disobey an order of transfer."19 That respondents eventually discontinued reporting for work
after their plea to be returned to their former work assignment was their personal decision, for
which the petitioners should not be held liable particularly as the latter did not, in fact, dismiss
them.
Indeed, there was no evidence that respondents were dismissed from
employment.1âwphi1 In fact, petitioners expressed willingness to accept them back to work.
There being no termination of employment by the employer, the award of backwages cannot
be sustained. It is well settled that backwages may be granted only when there is a finding of
illegal dismissal.20 In cases where there is no evidence of dismissal, the remedy is
reinstatement but without backwages.21
The constitutional policy of providing full protection to labor is not intended to oppress or
destroy management.22While the Constitution is committed to the policy of social justice and
the protection of the working class, it should not be supposed that every labor dispute will be
automatically decided in favor of labor. Management also has its rights which are entitled to
respect and enforcement in the interest of simple fair play.23 Thus, where management
prerogative to transfer employees is validly exercised, as in this case, courts will decline to
interfere.
WHEREFORE, the petition for review on certiorari is GRANTED. The Decision dated
February 24, 2009 and Resolution dated February 10, 2010 of the Court of Appeals in CA-
G.R. SP No. 102002 are SET ASIDE. The Decision dated August 28, 2007 of the National
Labor Relations Commission is hereby REINSTATED and UPHELD.
No pronouncement as to costs.
SO ORDERED.
TOYOTA MOTOR PHILS. CORP. WORKERS ASSOC. (TMPCWA) NLRC, TOYOTA
MOTOR PHIL CORP et al
G.R. Nos. 158786 & 158789
October 19, 2007
FACTS: The Union filed a petition for certification election among the Toyota rank and file
employees with the National Conciliation and Mediation Board (NCMB). The Med-Arbiter denied the
petition, but, on appeal, the DOLE Secretary granted the Union’s prayer, and, through an Order,
directed the immediate holding of the certification election.
After Toyota’s plea for reconsideration was denied, the certification election was conducted. The Med-
Arbiter’s Order certified the Union as the sole and exclusive bargaining agent of all the Toyota rank
and file employees. Toyota challenged said Order via an appeal to the DOLE
Secretary.
-STRIKE-
In the meantime, the Union submitted its CBA proposals to Toyota, but the latter refused to
negotiate in view of its pending appeal. Consequently, the Union filed a notice of
strike with the NCMB based on Toyota’s refusal to bargain. In connection with Toyota’s appeal,
Toyota and the Union were required to attend a hearing on before the Bureau of Labor Relations
(BLR). The February 21, 2001 hearing was cancelled and reset to February 22.
STRIKE 1: On February 21, 135 Union officers and members failed to render the required
overtime work, and instead marched to and staged a picket in front of the BLR office. The Union, in a
letter of the same date, also requested that its members be allowed to be absent on February 22 to
attend the hearing and instead work on their next scheduled rest day. This request however
was denied by Toyota.
Despite denial of the Union’s request, more than 200 employees staged mass actions on
February 22 and 23 in front of the BLR and the DOLE offices, to protest the partisan and anti-union
stance of Toyota. Due to the deliberate absence of a considerable number of employees on February 22
to 23, Toyota experienced acute lack of manpower in its manufacturing and production lines, and was
unable to meet its production goals resulting in huge losses.
On February 27, Toyota sent individual letters to some 360 employees requiring them to explain
within 24 hours why they should not be dismissed for their obstinate defiance of the company’s
directive to render overtime work on February 21, for their failure to report for work on February 22
and 23, and for their participation in the concerted actions which severely disrupted and paralyzed the
plant’s operations. These letters specifically cited Section D, paragraph 6 of the Company’s Code of
Conduct, to wit:
xx
Inciting or participating in riots, disorders, alleged strikes, or concerted actions detrimental to
[Toyota’s] interest.
1st offense – dismissal.11
xx
On the next day, the Union filed with the NCMB another notice of strike for union busting
amounting to unfair labor practice.
On March 1, the Union nonetheless submitted an explanation in compliance with the February 27
notices sent by Toyota to the erring employees. Consequently, on March 2 and 5, Toyota issued 2
memoranda to the concerned employees to clarify whether or not they are adopting the March 1, 2001
Union’s explanation as their own. The employees were also required to attend an investigative
interview, but they refused to do so.
On March 16, Toyota terminated the employment of 227 employees for participation in concerted
actions in violation of its Code of Conduct and for misconduct under Article 282 of the Labor Code.
STRIKE 2: In reaction to the dismissal of its union members and officers, the Union went on strike
on March 17. Subsequently, from March 28 to April 12, the Union intensified its strike by barricading
the gates of Toyota’s Bicutan and Sta. Rosa plants. The strikers prevented workers who reported for
work from entering the plants.
On March 29, Toyota filed a petition for injunction with a prayer for the issuance of a TRO with the
NLRC. It sought free ingress to and egress from its Bicutan and Sta. Rosa manufacturing plants.
Acting on said petition, the NLRC issued a TRO against the Union, ordering its leaders and members
as well as its sympathizers to remove their barricades and all forms of obstruction to ensure free
ingress to and egress from the company’s premises.
Meanwhile, Toyota filed a petition to declare the strike illegal with the NLRC arbitration branch, , and
prayed that the erring Union officers, directors, and members be dismissed.
On April 10, the DOLE Secretary assumed jurisdiction over the labor dispute
and issued an Order certifying the labor dispute to the NLRC. In said Order, the
DOLE Secretary directed all striking workers to return to work at their regular shifts by April 16. On
the other hand, it ordered Toyota to accept the returning employees under the same terms and
conditions obtaining prior to the strike or at its option, put them under payroll reinstatement. The
parties were also enjoined from committing acts that may worsen the situation.
The Union ended the strike on April 12. The union members and officers tried to return to work on
April 16 but were told that Toyota opted for payroll-reinstatement authorized by the Order of the
DOLE Secretary.
STRIKE 3: Meanwhile, on May 23, despite the issuance of the DOLE Secretary’s
certification Order, several payroll-reinstated members of the Union staged a protest
rally in front of Toyota’s Bicutan Plant bearing placards and streamers in defiance of the April
10 Order. Then, on May 28, around Union members staged another protest action in front of the
Bicutan Plant. At the same time, some payroll-reinstated employees picketed in front of the Santa Rosa
Plant’s main entrance, and were later joined by other Union members.
On June 5, notwithstanding the certification Order, the Union filed another notice of strike.
— 1. YES, THERE IS ILLEGAL STRIKE
In the meantime, the NLRC ordered both parties to submit their respective position papers on June 8.
The union, however, requested for abeyance of the proceedings considering that there is a
pending petition for certiorari with the CA assailing the validity of the DOLE
Secretary’s Assumption of Jurisdiction Order.
Thereafter, on June 19, the NLRC issued an Order, reiterating its previous order for both parties to
submit their respective position papers on or before June 2, 2001. Only Toyota submitted its position
paper. During the August 3, 2001 hearing, the Union, despite several accommodations, still failed to
submit its position paper. Later that day, the Union claimed it filed its position paper by registered
mail.
NLRC decision
Subsequently, the NLRC, in its August 9 Decision, declared the strikes staged by the Union
on February 21 to 23 (as the Union failed to comply with the procedural requirements of a valid
strike under Art. 263 of the Labor Code) and May 23 and 28 as illegal and Declared that
the dismissal of the 227 who participated in the illegal strike on February 21-23 is legal. Lastly,
award of severance compensation was given to the dismissed Union members
After the DOLE Secretary assumed jurisdiction over the Toyota dispute on April 10, the Union again
staged strikes on May 23 and 28. The NLRC found the strikes illegal as they violated Art. 264 of
the Labor Code which proscribes any strike or lockout after jurisdiction is assumed over the
dispute by the President or the DOLE Secretary.
The NLRC held that both parties must have maintained the status quo after the DOLE Secretary issued
the assumption/certification Order, and ruled that the Union did not respect the DOLE Secretary’s
directive.
Accordingly, both Toyota and the Union filed MRs, which the NLRC denied. Consequently, both
parties questioned the Resolutions of the NLRC in separate petitions for certiorari filed with the CA.
The CA then consolidated the petitions.
[In its February 27, 2003 Decision, the CA ruled that the Union’s petition is defective in form for its
failure to append a proper verification and certificate of non-forum shopping, given that, out of the 227
petitioners, only 159 signed the verification and certificate of non-forum shopping. Despite the flaw,
the CA proceeded to resolve the petitions on the merits and affirmed the assailed NLRC Decision and
Resolution with a modification, however, of deleting the award of severance compensation to the
dismissed Union members.
However, in its June 20, 2003 Resolution, the CA modified its February 27, 2003 Decision by
reinstating severance compensation to the dismissed employees based on social justice.]
ISSUE:
(1) Whether the mass actions committed by the Union on different occasions are illegal strikes; and
(2) Whether separation pay should be awarded to the Union members who participated in the illegal
strikes.
HELD: WHEREFORE, the petitions in G.R. Nos. 158786 and 158789 are DENIED while those in
G.R. Nos. 158798-99 are GRANTED.
The June 20, 2003 CA Resolution restoring the grant of severance compensation is ANNULLED and
SET ASIDE.
The February 27, 2003 CA Decision which affirmed the August 9, 2001 Decision of the NLRC but
deleted the grant of severance compensation, is REINSTATED and AFFIRMED.
A strike means any temporary stoppage of work by the concerted action of
employees as a result of an industrial or labor dispute. A labor dispute, in turn,
includes any controversy or matter concerning terms or conditions of
employment or the association or representation of persons in negotiating,
fixing, maintaining, changing, or arranging the terms and conditions of
employment, regardless of whether the disputants stand in the proximate
relation of the employer and the employee
Noted authority on labor law, Ludwig Teller, lists six (6) categories of an illegal strike, viz:
(1) [when it] is contrary to a specific prohibition of law, such as strike by employees performing
governmental functions; or
(2) [when it] violates a specific requirement of law[, such as Article 263 of the Labor Code on the
requisites of a valid strike]; or
(3) [when it] is declared for an unlawful purpose, such as inducing the employer to commit an unfair
labor practice against non-union employees; or
(4) [when it] employs unlawful means in the pursuit of its objective, such as a widespread terrorism of
non-strikers [for example, prohibited acts under Art. 264(e) of the Labor Code]; or
(5) [when it] is declared in violation of an existing injunction[, such as injunction, prohibition, or order
issued by the DOLE Secretary and the NLRC under Art. 263 of the Labor Code]; or
(6) [when it] is contrary to an existing agreement, such as a no-strike clause or conclusive arbitration
clause
Petitioner Union contends that the protests or rallies conducted on February 21 and 23 are not within
the ambit of strikes as defined in the Labor Code, since they were legitimate exercises of their right to
peaceably assemble and petition the government for redress of grievances. The Union’s position fails
to convince us.
Applying pertinent legal provisions and jurisprudence, we rule that the protest actions undertaken by
the Union officials and members on February 21 to 23 are not valid and proper exercises of their right
to assemble and ask government for redress of their complaints, but are illegal strikes in breach of the
Labor Code. The Union’s position is weakened by the lack of permit from the City of Manila to hold
“rallies.” Shrouded as demonstrations, they were in reality temporary stoppages of work perpetrated
through the concerted action of the employees who deliberately failed to report for work on the
convenient excuse that they will hold a rally at the BLR and DOLE offices on February 21 to 23. The
purported reason for these protest actions was to safeguard their rights against any abuse which the
med-arbiter may commit against their cause. However, the Union failed to advance convincing proof
that the med-arbiter was biased against them. The acts of the med-arbiter in the performance of his
duties are presumed regular. Sans ample evidence to the contrary, the Union was unable to justify the
February 2001 mass actions. What comes to the fore is that the decision not to work for two days
was designed and calculated to cripple the manufacturing arm of Toyota. It
becomes obvious that the real and ultimate goal of the Union is to coerce Toyota to finally
acknowledge the Union as the sole bargaining agent of the company. This is not a legal and valid
exercise of the right of assembly and to demand redress of grievance.
It is obvious that the February 21 to 23 concerted actions were undertaken without satisfying
the prerequisites for a valid strike under Art. 263 of the Labor Code. The Union
failed to comply with the following requirements:
(1) a notice of strike filed with the DOLE 30 days before the intended date of strike, or 15 days in case
of unfair labor practice;
(2) strike vote approved by a majority of the total union membership in the bargaining unit concerned
obtained by secret ballot in a meeting called for that purpose; and
(3) notice given to the DOLE of the results of the voting at least seven days before the intended strike.
These requirements are mandatory and the failure of a union to comply with them renders the strike
illegal.
The evident intention of the law in requiring the strike notice and the strike-vote report is to reasonably
regulate the right to strike, which is essential to the attainment of legitimate policy objectives embodied
in the law. As they failed to conform to the law, the strikes on February 21, 22, and 23 (STRIKE 1)
were illegal.
With respect to the strikes committed from March 17 to April 12 (STRIKE 2), those were initially
legal as the legal requirements were met. However, on March 28 to April 12, the
Union barricaded the gates of the Bicutan and Sta. Rosa plants and blocked the free ingress to and
egress from the company premises. Toyota employees, customers, and other people having business
with the company were intimidated and were refused entry to the plants. As earlier explained, these
strikes were illegal because unlawful means were employed. The acts of the Union officers and
members are in palpable violation of Art. 264(e), which proscribes acts of violence, coercion, or
intimidation, or which obstruct the free ingress to and egress from the company premises. Undeniably,
the strikes from March 28 to April 12 (STRIKE 2) were illegal.
Petitioner Union also posits that strikes were not committed on May 23 and 28 (STRIKE 3). The
Union asserts that the rallies held on May 23 and 28 could not be considered strikes, as the participants
were the dismissed employees who were on payroll reinstatement. It concludes that there was no work
stoppage.
This contention has no basis. It is clear that once the DOLE Secretary assumes jurisdiction over the
labor dispute and certifies the case for compulsory arbitration with the NLRC, the parties have to revert
to the status quo ante (the state of things as it was before).
This was not heeded by the Union and the individual respondents who staged illegal concerted actions
on May 23 and 28, in contravention of the Order of the DOLE Secretary that no acts should be
undertaken by them to aggravate the “already deteriorated situation.”
2. Anent the grant of severance compensation to legally dismissed union members:
The general rule is that when just causes for terminating the services of an employee under Art. 282 of
the Labor Code exist, the employee is not entitled to separation pay.
As in any rule, there are exceptions. One exception where separation pay is given even though an
employee is validly dismissed is when the court finds justification in applying the principle of social
justice well entrenched in the 1987 Constitution. In one case, the Court laid down the rule that
severance compensation shall be allowed only when the cause of the dismissal is other than serious
misconduct or that which reflects adversely on the employee’s moral character.
Explicit in PLDT ase are two exceptions when the NLRC or the courts should not grant separation pay
based on social justice:
1. serious misconduct (which is the first ground for dismissal under Art. 282) or
2. acts that reflect on the moral character of the employee.
Considering that the dismissal of the employees was due to their participation in the illegal strikes as
well as violation of the Code of Conduct of the company, the same constitutes serious misconduct. A
serious misconduct is a transgression of some established and definite rule of action, a forbidden act, a
dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment.
Based on existing jurisprudence, the award of separation pay to the Union officials and members in the
instant petitions cannot be sustained.
NOTES:
1. The Union contends that the NLRC violated its right to due process when it disregarded its
position paper in deciding Toyota’s petition to declare the strike illegal.
We rule otherwise.
It is entirely the Union’s fault that its position paper was not considered by the NLRC. Records readily
reveal that the NLRC was even too generous in affording due process to the Union. It issued no less
than 3 orders for the parties to submit its position papers, which the Union ignored until the last
minute. No sufficient justification was offered why the Union belatedly filed its position paper. In Datu
Eduardo Ampo v. The Hon. Court of Appeals, it was explained that a party cannot complain of
deprivation of due process if he was afforded an opportunity to participate in the proceedings but failed
to do so. If he does not avail himself of the chance to be heard, then it is deemed waived or forfeited
without violating the constitutional guarantee. Thus, there was no violation of the Union’s right to due
process on the part of the NLRC.
2. CIVIL PROCEDURE GUYS! HEHE
On a procedural aspect, the Union faults the CA for treating its petition as an unsigned pleading and
posits that the verification signed by 159 out of the 227 petitioners has already substantially complied
with and satisfied the requirements under Secs. 4 and 5 of Rule 7 of the ROC.
The Union’s proposition is partly correct.
Sec. 4 of Rule 7 of the ROC states:
Sec. 4. Verification.—Except when otherwise specifically required by law or rule, pleadings need not
be under oath, verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations
therein are true and correct of his personal knowledge or based on authentic records.
A pleading required to be verified which contains a verification based on “information and belief” or
upon “knowledge, information and belief,” or lacks a proper verification, shall be treated as an
unsigned pleading.
The verification requirement is significant, as it is intended to secure an assurance that the allegations
in the pleading are true and correct and not the product of the imagination or a matter
of speculation.30 This requirement is simply a condition affecting the form of pleadings, and
noncompliance with the requirement does not necessarily render it fatally defective. Indeed,
verification is only a formal and not a jurisdictional requirement.
In this case, the problem is not the absence but the adequacy of the Union’s verification, since only 159
out of the 227 petitioners executed the verification. Undeniably, the petition meets the requirement on
the verification with respect to the 159 petitioners who executed the verification, attesting that they
have sufficient knowledge of the truth and correctness of the allegations of the petition. However, their
signatures cannot be considered as verification of the petition by the other 68 named petitioners unless
the latter gave written authorization to the 159 petitioners to sign the verification on their behalf. Thus,
in Loquias v. Office of the Ombudsman, we ruled that the petition satisfies the formal requirements
only with regard to the petitioner who signed the petition but not his co-petitioner who did not sign nor
authorize the other petitioner to sign it on his behalf. The proper ruling in this situation is to consider
the petition as compliant with the formal requirements with respect to the parties who signed it and,
therefore, can be given due course only with regard to them. The other petitioners who did not sign the
verification and certificate against forum shopping cannot be recognized as petitioners have no legal
standing before the Court. The petition should be dismissed outright with respect to the non-
conforming petitioners.
In the case at bench, however, the CA, in the exercise of sound discretion, did not strictly apply the
ruling in Loquias and instead proceeded to decide the case on the merits.
3. Union officers are liable for unlawful strikes or illegal acts during a strike. Art. 264(a) sanctions
the dismissal of a union officer who knowingly participates in an illegal strike or who knowingly
participates in the commission of illegal acts during a lawful strike.
4. The rule is well entrenched in this jurisdiction that factual findings of the labor tribunal, when
affirmed by the appellate court, are generally accorded great respect, even finality
5. Member’s liability depends on participation in illegal acts. Art. 264(a) of the Labor Code provides
that a member is liable when he knowingly participates in an illegal act “during a strike.” While
the provision is silent on whether the strike is legal or illegal, we find that the same is irrelevant.
Now, what are considered “illegal acts” under Art. 264(a)?
No precise meaning was given to the phrase “illegal acts.” It may encompass a number of acts that
violate existing labor or criminal laws, such as the following:
(1) Violation of Art. 264(e) of the Labor Code which provides that “[n]o person engaged in picketing
shall commit any act of violence, coercion or intimidation or obstruct the free ingress to or egress from
the employer’s premises for lawful purposes, or obstruct public thoroughfares”;
(2) Commission of crimes and other unlawful acts in carrying out the strike;54 and
(3) Violation of any order, prohibition, or injunction issued by the DOLE Secretary or NLRC in
connection with the assumption of jurisdiction/certification Order under Art. 263(g) of the Labor Code.
As earlier explained, this enumeration is not exclusive and it may cover other breaches of existing
laws.
However, There must be proof that he committed illegal acts during the strike and the striker who
participated in the commission of illegal act[s] must be identified. But proof beyond reasonable doubt
is not required. Substantial evidence available under the circumstances, which may justify the
imposition of the penalty of dismissal, may suffice.
6. Noted labor law expert, Professor Cesario A. Azucena, Jr., traced the history relating to the
liability of a union member in an illegal strike, starting with the “rule of vicarious liability,” thus:
Under [the rule of vicarious liability], mere membership in a labor union serves as basis of liability for
acts of individuals, or for a labor activity, done on behalf of the union. The union member is made
liable on the theory that all the members are engaged in a general conspiracy, and the unlawful acts of
the particular members are viewed as necessary incidents of the conspiracy. It has been said that in the
absence of statute providing otherwise, the rule of vicarious liability applies.
Even the Industrial Peace Act, however, which was in effect from 1953 to 1974, did not adopt the
vicarious liability concept. It expressly provided that:
No officer or member of any association or organization, and no association or organization
participating or interested in a labor dispute shall be held responsible or liable for the unlawful acts of
individual officers, members, or agents, except upon proof of actual participation in, or actual
authorization of, such acts or of ratifying of such acts after actual knowledge thereof.
Replacing the Industrial Peace Act, the Labor Code has not adopted the vicarious liability rule
G.R. No. 169712 March 14, 2008
MA. WENELITA TIRAZONA, Petitioner,
vs.
COURT OF APPEALS, PHILIPPINE EDS-TECHNO SERVICE INC. (PET INC.) AND/OR
KEN KUBOTA, MAMORU ONO and JUNICHI HIROSE, Respondents.
DECISION
CHICO-NAZARIO, J.:
Assailed in this Special Civil Action for Certiorari1 under Rule 65 of the Rules of Court are the
Decision2 and Resolution3 of the Court of Appeals dated 24 May 2005 and 7 September
2005, respectively, in CA-G.R. SP No. 85065. The appellate court’s Decision dismissed
petitioner Ma. Wenelita Tirazona’s Special Civil Action for Certiorariand affirmed the
Decision4 dated 30 January 2004 of the National Labor Relations Commission (NLRC) in
NLRC CA No. 034872-03, which ruled that petitioner’s dismissal from employment was legal;
and its Resolution which denied petitioner’s Motion for Reconsideration.
The factual and procedural antecedents of the case are as follows:
Private respondent Philippine EDS-Techno Services Inc. (PET) is a corporation duly
registered under Philippine laws and is engaged in the business of designing automotive
wiring harnesses for automobile manufacturers. Private respondents Ken Kubota, Mamoru
Ono and Junichi Hirose are all Japanese nationals, the first being the President and the latter
two being the directors of PET.
On 21 July 1999, PET employed Ma. Wenelita S. Tirazona (Tirazona) as Administrative
Manager. Being the top-ranking Filipino Manager, she acted as the liaison between the
Japanese management and the Filipino staff.
On 15 January 2002, Fe Balonzo, a rank-and-file employee, wrote a letter5 that was
addressed to nobody in particular, but was later acquired by PET management. In her letter,
Balonzo complained that Tirazona humiliated her while she was reporting back to work after
recuperating from a bout of tuberculosis. Balonzo explained that Tirazona insinuated, in a
manner loud enough to be heard from the outside, that Balonzo still had the disease. This
allegedly occurred despite Balonzo’s possession of a medical clearance that proved her
fitness to return to work. Balonzo thus requested that the necessary action be undertaken to
address the said incident.
Upon receiving the letter, the PET management directed Tirazona to file her comment.
Tirazona replied accordingly in a letter6 wherein she denied the accusations against her.
Tirazona stated that her only intention was to orient Balonzo about the latter’s rights as a sick
employee, i.e., that under the law, if the latter planned to resign, the company can give her
separation pay. Tirazona likewise asked for an independent investigation and threatened to
file a libel case against Balonzo for allegedly trying to destroy her reputation and credibility.
After weighing the situation, PET director Ono sent a memorandum to Tirazona, which reads:
February 8, 2002
To: Mrs. W. Tirazona
Re: Letter-Complaint of Fe S. Balonzo
This is to advise you that Management is satisfied that you did not intend to humiliate or
embarrass Ms. Balonzo during the incident on January 14, 2002. It also appreciates the
concern you profess for the welfare of PET employees.
Nonetheless, Management finds your handling of the situation less than ideal. Considering
the sensitive nature of the issue, a little more circumspection could have readily avoided the
incident which it cannot be denied caused unnecessary discomfort and hurt feelings to Ms.
Balonzo. Certainly, you could have discussed the matter in private and allowed her to first
deliver her piece rather than pre-empt her declaration. As it turned out, your assumption (that
Ms. Balonzo would request for a leave extension) was in fact wrong and she had a medical
certificate attesting her fitness to return to work.
Management therefore would like to remind you of the high expectations of your position.
Management considers this matter closed, and finds it appropriate to convey to you that it
does not view with favor your notice to file legal action. Management believes that you share
the idea that issues regarding employee relations are best threshed out within the Company.
Resorting to legal action is unlikely to solve but on the contrary would only exacerbate such
problems.
We trust that, after emotions have calmed down, you would still see it that way.
(Sgd.)
Mamoru Ono
Director7
On 6 March 2002, Tirazona’s counsels sent demand letters 8 to PET’s business address,
directed separately to Ono and Balonzo. The letter to Ono states:
February 27, 2002
MR. MAMORU ONO
Director
PET, Inc.
20/F 6788 Ayala Avenue
Oledan Square, Makati City
Dear Mr. Ono:
We are writing in [sic] behalf of our client, Ms. MA. WENELITA S. TIRAZONA, Administrative
Manager of your corporation.
We regret that on February 8, 2002, you delivered to our client a letter containing among
others, your conclusion that Ms. Tirazona was guilty of the unfounded and baseless charges
presented by Ms. Fe Balonzo in her letter-complaint dated January 15, 2002. You may please
recall that in Ms. Tirazona’s letter to Mr. Junichi Hirose, she presented point by point, her side
on the allegations made by the complainant. In the same letter, Ms. Tirazona requested for
an independent investigation of the case in order to thresh out all issues, ferret out the truth
and give her the opportunity to be heard and confront her accuser. These were all denied our
client.
As a result of the foregoing, Ms. Tirazona’s constitutional right to due process was violated
and judgment was rendered by you on mere allegations expressed in a letter-complaint to an
unknown addressee.
Considering the position and stature of Mrs. Tirazona in the community and business circles,
we are constrained to formally demand payment of P2,000,000.00 in damages, injured
feelings, serious anxiety and besmirched reputation that she is now suffering.
We are giving you five (5) days from receipt hereof to make favorable response, otherwise,
much to our regret, we will institute legal procedures to protect our client’s interests.
Please give this matter the attention it deserves.
Very truly yours,
PRINCIPE, VILLANO, VILLACORTA & CLEMENTE
By:
(Sgd.)
PEDRO S. PRINCIPE
(Sgd.)
GLICERIO E. VILLANO
The letter sent to Balonzo likewise sought the same amount of damages for her allegedly
baseless and unfounded accusations against Tirazona.
Because of Tirazona’s obstinate demand for compensation, PET sent her a Notice of
Charge,9 which informed her that they were considering her termination from employment by
reason of serious misconduct and breach of trust. According to the management, they found
her letter libelous, since it falsely accused the company of finding her guilty of the charges of
Balonzo and depriving her of due process.
On 26 March 2002, Tirazona explained in a letter10 that her counsels’ demand letter was
brought about by the denial of her repeated requests for reinvestigation of the Balonzo
incident, and that the same was personally addressed to Mamoru Ono and not to the
company. She also reiterated her request for an investigation and/or an open hearing to be
conducted on the matter.
The PET management replied11 that the Balonzo incident was already deemed a closed
matter, and that the only issue for consideration was Tirazona’s "ill-advised response to the
Management’s disposition to the Fe Balonzo incident," for which an administrative hearing
was scheduled on 4 April 2002.
On 3 April 2002, Tirazona submitted a written demand12 to PET that the Balonzo incident be
included in the scheduled hearing. She further stated that since the management had already
prejudged her case, she would only participate in the proceedings if the investigating panel
would be composed of three employees, one each from the rank-and-file, supervisory, and
managerial levels, plus a representative from the Department of Labor and Employment
(DOLE).
The PET management rejected Tirazona’s demands in a letter 13 and informed her that the
hearing was reset to 10 April 2002, which would be presided by PET’s external counsel.
On 10 April 2002, Tirazona and her counsel did not appear at the administrative hearing. The
PET management informed them through a memorandum 14 dated 12 April 2002 that the
hearing was carried out despite their absence. Nevertheless, Tirazona was granted a final
chance to submit a supplemental written explanation or additional documents to substantiate
her claims.
Tirazona’s written explanation15 dated 17 April 2002 merely reiterated, without further details,
her previous claims, to wit: that Balonzo’s charges were unfounded and baseless; that she
had been denied due process; and that she would not submit herself to an investigating panel
that had already prejudged her case. Tirazona also stated that her claim for damages would
be justified at the proper forum, and that she admitted to reading a confidential letter
addressed to PET directors Ono and Fukuoka, containing the legal opinion of PET’s counsel
regarding her case.
After finding the explanations unsatisfactory, PET sent Tirazona a Notice of
Termination,16 which found her guilty of serious misconduct and breach of trust because of
her demand against the company and her invasion of PET’s right to privileged
communication.
Tirazona then instituted with the NLRC a complaint for illegal dismissal, non-payment of
salaries, and damages against PET, docketed as NLRC-CA No. 034872-03.
In the Decision17 dated 22 January 2003, Labor Arbiter Veneranda C. Guerrero ruled in favor
of Tirazona, holding that the latter’s termination from employment was illegal.
The Arbiter declared that there was no breach of trust when Tirazona sent the demand letter,
as the same was against Ono in his personal capacity, not against the company. The
decision also ruled that PET failed to discharge the burden of proving that the alleged breach
of trust was fraudulent and willful, and that the company was careless in handling its
communications. The Arbiter further stated that Tirazona was deprived of her right to due
process when she was denied a fair hearing.
On appeal by PET, the NLRC reversed the rulings of the Labor Arbiter in a Decision dated 30
January 2004, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered SETTING ASIDE the Decision of the Labor
Arbiter dated January 27, 2003 and a new one is entered DISMISSING the complaint for lack
of merit.18
Contrary to the Labor Arbiter’s findings, the NLRC concluded that Tirazona’s termination from
employment was in accordance with law. It ruled that Tirazona’s demand letter addressed to
Ono constituted a just cause for dismissal, as the same was "an openly hostile act" by a high-
ranking managerial employee against the company.19 The NLRC likewise found that PET
complied with the notice and hearing requirements of due process, inasmuch as Tirazona’s
demand for a special panel was without any legal basis. Furthermore, petitioner breached the
company’s trust when she read the confidential legal opinion of PET’s counsel without
permission.
The Motion for Reconsideration filed by Tirazona was denied by the NLRC in a Resolution
dated 31 May 2004, the dispositive portion of which reads:
WHEREFORE, in view of the foregoing, Complainant-Appellee’s Motion for Reconsideration
is hereby DISMISSED for lack of merit and our Decision dated 30 January 2004 is thus
AFFIRMED with finality.20
Aggrieved, Tirazona instituted with the Court of Appeals a Special Civil Action
for Certiorari under Rule 65, alleging grave abuse of discretion on the part of the NLRC,
docketed as CA-G.R. SP No. 85065.
In a Decision dated 24 May 2005, the appellate court affirmed the NLRC and ruled thus:
WHEREFORE, in consideration of the foregoing, the petition is perforce dismissed. 21
Her Motion for Reconsideration having been denied by the appellate court in a Resolution
dated 7 September 2005, Tirazona now impugns before this Court the Court of Appeals
Decision dated 24 May 2005, raising the following issues:
I.
WHETHER THERE WAS BREACH OF TRUST ON THE PART OF PETITIONER TIRAZONA
WHEN SHE WROTE THE TWO MILLION PESO DEMAND LETTER FOR DAMAGES,
WARRANTING HER DISMISSAL FROM EMPLOYMENT.
II.
WHETHER DUE PROCESS WAS SUFFICIENTLY AND FAITHFULLY OBSERVED BY
RESPONDENTS IN THE DISMISSAL OF PETITIONER TIRAZONA FROM EMPLOYMENT.
In essence, the issue that has been brought before this Court for consideration is whether or
not Tirazona was legally dismissed from employment.
Prefatorily, the Court notes that Tirazona elevated her case to this Court via a Petition
for Certiorari under Rule 65 of the Rules of Court. The appropriate remedy would have been
for Tirazona to file an appeal through a Petition for Review on Certiorari under Rule 45.
For a Petition for Certiorari under Rule 65 of the Rules of Court to prosper, the following
requisites must be present: (1) the writ is directed against a tribunal, a board or an officer
exercising judicial or quasi-judicial functions: (2) such tribunal, board or officer has acted
without or in excess of jurisdiction or with grave abuse of discretion amounting to lack or
excess of jurisdiction; and (3) there is no appeal or any plain, speedy and adequate remedy
in the ordinary course of law.22
There is grave abuse of discretion "when there is a capricious and whimsical exercise of
judgment as is equivalent to lack of jurisdiction, such as where the power is exercised in an
arbitrary or despotic manner by reason of passion or personal hostility, and it must be so
patent and gross so as to amount to an evasion of positive duty or to a virtual refusal to
perform the duty enjoined or to act at all in contemplation of law."23
The Petition for Certiorari shall be filed not later than sixty (60) days from notice of the
judgment, order or resolution. In case a motion for reconsideration is timely filed, the sixty
(60)-day period shall be counted from notice of the denial of the said motion. 24
On the other hand, Rule 45 of the Rules of Court pertains to a Petition for Review
on Certiorari whereby "a party desiring to appeal by certiorari from a judgment or final order
or resolution of the Court of Appeals x x x may file with the Supreme Court a verified petition
for review on certiorari. The petition shall raise only questions of law which must be distinctly
set forth."25
The petition shall be filed within fifteen (15) days from notice of the judgment or final order or
resolution appealed from, or of the denial of the petitioner’s motion for new trial or
reconsideration filed in due time after notice of the judgment.26
In the present case, the assailed Decision is the dismissal by the Court of Appeals of
Tirazona’s Petition for Certiorari under Rule 65. Said Decision partakes of the nature of a
judgment or final order, thus, is reviewable only through an appeal by certiorari under Rule
45.
As aptly declared by the Court in National Irrigation Administration v. Court of Appeals 27:
[s]ince the Court of Appeals had jurisdiction over the petition under Rule 65, any alleged
errors committed by it in the exercise of its jurisdiction would be errors of judgment
which are reviewable by timely appeal and not by a special civil action of certiorari. If
the aggrieved party fails to do so within the reglementary period, and the decision accordingly
becomes final and executory, he cannot avail himself of the writ of certiorari, his predicament
being the effect of his deliberate inaction. [Emphasis ours.]
Even just a cursory glance at the issues raised by Tirazona before this Court readily reveals
that these pertain to purported errors of judgment committed by the appellate court in its
appreciation of the allegations, evidence, and arguments presented by the parties. There is
no question here of the Court of Appeals acting on Tirazona’s Petition in CA-G.R. No.
85065 without or in excess of jurisdiction or with grave abuse of discretion amounting to lack
or excess of jurisdiction.
A review of the rollo of the Petition at bar divulges even further that Tirazona’s resort to a
wrong remedy was not an innocent mistake but a deliberate choice.
On 5 October 2005, Tirazona filed with this Court a Petition for Extension of Time to File a
Petition for Review on Certiorari.28 Tirazona stated therein that she received the notice of the
Court of Appeals Resolution denying her Motion for Reconsideration on 23 September 2005.
Since she only had fifteen (15) days after the said date to file a Petition for Review
on Certiorari, or until 8 October 2005, Tirazona prayed for an extension of thirty (30) days,
with her counsel citing extreme pressures of work.
In a Resolution29 dated 19 October 2005, the Court granted Tirazona’s Motion for Extension.
The extended period was to end on 7 November 2005. However, Tirazona failed to file a
Petition for Review on Certiorari within the said period. Instead, she filed the present Petition
for Certiorari on 5 December 2005, seventy-three (73) days after notice of the Court of
Appeals Resolution denying her Motion for Reconsideration.
From the foregoing, it is fairly obvious that Tirazona was aware that she was supposed to file
an appeal through a Petition for Review on Certiorari under Rule 45. That she filed the instant
Petition for Certiorari under Rule 65 and only after an inexplicably long period of time leads to
the inescapable conclusion that the same was merely an afterthought, nothing more than a
desperate attempt to revive a lost appeal.
The special civil action of certiorari under Rule 65 is an independent action that cannot be
availed of as a substitute for the lost remedy of an ordinary appeal, including that under Rule
45, especially if such loss or lapse was occasioned by one’s own neglect or error in the
choice of remedies.30 It also bears to stress the well-settled principle that the remedies of
appeal and certiorari are mutually exclusive and not alternative or successive. Under Rule 56,
Sec. 5(f) of the Revised Rules of Court, a wrong or inappropriate mode of appeal merits an
outright dismissal.31
Tirazona, in her Reply32 before this Court, even admits that although the instant Petition is
one of special civil action of certiorari under Rule 65, her petition is in reality an appeal under
Rule 45 as her petition raises pure questions of law. Tirazona herself acknowledges the
formal defects of her own Petition and attributes the same to the haste and inadvertence of
her former counsel, who allegedly prepared the instant Petition without her
participation.33 She thus urges this Court to suspend the application of its own rules on
grounds of equity and substantial justice, considering that it is her employment that is at stake
in this case.
In this regard, it needs to be emphasized that before the Court may treat the present petition
as having been filed under Rule 45, the same must comply with the reglementary period for
filing an appeal. This requirement is not only mandatory but also jurisdictional such that
failure to do so renders the assailed decision final and executory, and deprives this Court of
jurisdiction to alter the final judgment, much less to entertain the appeal.34 Since the instant
petition was filed after the lapse of the extended period for filing an appeal, the same should
be dismissed outright.
Nevertheless, the Court finds it essential that we discuss the case on its merits, bearing in
mind that the paramount consideration in this case is an employee’s right to security of
tenure, and in order to provide Tirazona the amplest opportunity to know how the Court
arrived at a proper and just determination of her case.
Even if the Court were to ignore the conspicuous procedural defects committed by Tirazona
and treat her Petition as an appeal under Rule 45, it still finds that the Petition must be denied
for lack of merit.
Petitioner contends that, contrary to the findings of the Court of Appeals, her dismissal from
employment was illegal for having lacked both a legal basis and the observance of due
process.
In employee termination cases, the well-entrenched policy is that no worker shall be
dismissed except for a just or authorized cause provided by law and after due process.
Clearly, dismissals have two facets: first, the legality of the act of dismissal, which constitutes
substantive due process; and second, the legality in the manner of dismissal, which
constitutes procedural due process.35
Under Article 282(c)36 of the Labor Code, loss of trust and confidence is one of the just
causes for dismissing an employee. It is an established principle that loss of confidence must
be premised on the fact that the employee concerned holds a position of trust and
confidence. This situation obtains where a person is entrusted with confidence on delicate
matters, such as care and protection, handling or custody of the employer’s property. But, in
order to constitute a just cause for dismissal, the act complained of must be "work-related"
such as would show the employee concerned to be unfit to continue working for the
employer. Besides, for loss of confidence to be a valid ground for dismissal, such loss of
confidence must arise from particular proven facts.37
Tirazona claims that her demand letter was merely an expression of indignation by a
disgruntled employee against a director, not against the company and, by itself, cannot
constitute a breach of trust and confidence. The company’s notice of charge allegedly
insinuated Tirazona’s guilt in the Balonzo incident; hence, the need to defend herself.
Tirazona likewise asserts that she is an ordinary rank-and-file employee as she is not vested
with the powers and prerogatives stated in Article 212(m) 38 of the Labor Code. As such, her
alleged hostility towards her co-workers and the PET management is not a violation of trust
and confidence that would warrant her termination from employment.
At the outset, the Court notes that the issues set forth above are factual in nature. As the
Court is asked to consider the instant Petition as an appeal under Rule 45, then only pure
questions of law will be entertained.39
A question of law arises when there is doubt as to what the law is on a certain state of facts,
while there is a question of fact when the doubt arises as to the truth or falsity of the alleged
facts. For a question to be one of law, the same must not involve an examination of the
probative value of the evidence presented by the litigants or any of them. The resolution of
the issue must rest solely on what the law provides on the given set of circumstances. Once it
is clear that the issue invites a review of the evidence presented, the question posed is one of
fact.40
In the instant case, Tirazona would have the Court examine the actual wording, tenor, and
contextual background of both her demand letter and the PET’s notice of charge against her.
Similarly, the determination of whether Tirazona is a managerial or rank-and-file employee
would require the Court to review the evidence that pertains to Tirazona’s duties and
obligations in the company. Also, in order to ascertain whether the breach of trust was clearly
established against Tirazona, the Court will have to sift through and evaluate the respective
evidence of the parties as well. These tasks are not for the Court to accomplish.
The Court is not a trier of facts. It is not the function of this Court to analyze or weigh
evidence all over again, unless there is a showing that the findings of the lower court are
totally devoid of support or are glaringly erroneous as to constitute palpable error or grave
abuse of discretion.41
In its assailed decision, the Court of Appeals affirmed the ruling of the NLRC and adopted as
its own the latter’s factual findings. Long established is the doctrine that findings of fact of
quasi-judicial bodies like the NLRC are accorded with respect, even finality, if supported by
substantial evidence. When passed upon and upheld by the Court of Appeals, they are
binding and conclusive upon the Supreme Court and will not normally be disturbed. 42Though
this doctrine is not without exceptions,43 the Court finds that none are applicable to the
present case.
Thus, on the matter of Tirazona’s demand letter, this Court is bound by the following findings
of the Court of Appeals:
Clearly, petitioner Tirazona’s letter to respondent Ono dated 27 February 2002, as
DIRECTOR of PET was addressed to an officer and representative of the corporation. The
accusations in the aforesaid demand letter were directed against respondent Ono’s official
act as a representative of respondent PET. Suffice it to stress, an attack on the integrity of his
(Ono) corporate act is necessarily aimed at respondent PET because a corporation can only
act through its officers, agents and representatives.
xxxx
A thorough and judicious examination of the facts and evidence obtaining in the instant case
as could be found in the records, would clearly show that petitioner Tirazona has absolutely
no basis for a P2 million demand, coupled with lawsuit if the same was not paid within the five
(5) days [sic] period. Her justification for the demand of money is that she was allegedly found
by the respondent PET through respondent Ono guilty of the charges filed by Ms. Balonzo.
As the records would indubitably show, petitioner Tirazona was never charged of any offense
with respect to the Fe Balonzo’s [sic] incident. She was never issued a Notice of Charge,
much less a Notice of Disciplinary Action. What was issued to her by respondent Ono in his
letter x x x was a gentle and sound reminder to be more circumspect in handling the incident
or situation like this [sic]. As fully evidenced in the last paragraph of the said letter, it states
that:
xxxx
Management considers this matter closed, and finds it appropriate to convey to you that it
does not view with favor your notice to file legal action. Management believes that you share
the idea that issues regarding employee relations are best threshed out within the Company.
Resorting to legal action is unlikely to solve but on the contrary would only exacerbate such
problems.
But for reasons only known to petitioner Tirazona, she treated respondent Ono’s letter as an
affront to her honor and dignity. This, instead of seeking a dialogue with respondent PET on
her felt grievance, petitioner Tirazona through her lawyer sent the questioned demand letter
to respondent Ono. Suffice it to state, this act of petitioner bared animosity in the company
and was definitely not a proper response of a top level manager like her over a trivial matter.
xxxx
In fine, the confluence of events and circumstances surrounding the petitioner Tirazona’s
actions or omissions affecting her employer’s rights and interest, would undoubtedly show
that she is no longer worthy of being a recipient of the trust and confidence of her employer. x
x x.44
Likewise conclusive upon this Court is the Court of Appeals’ pronouncement that Tirazona is
in fact a managerial employee, to wit:
The records would indubitably show that it is only now that petitioner Tirazona is asserting
that she is not a managerial employee of respondent PET. From the very start, her dismissal
was premised on the fact that she is a managerial and confidential employee, and she never
denied that fact. It was never an issue at all before the Labor Arbiter and the public
respondent NLRC. Therefore, she is estopped to claim now that she is [just a] rank and file
employee of respondent PET, especially that she herself admitted in her pleading that she is
a managerial employee:
xxxx
If the respondent Company has to protect Respondent Mamoru Ono, the Complainant
[petitioner] has also the right to be protected from the baseless accusations of a Rank and
File Employee for she [petitioner] is a part of the management like Mr. Mamoru Ono" (par. 5,
Complainant’s Rejoinder [to Respondent’s Reply] dated 2 September 2002 (note: unattached
to the petitioner [sic]) [attached as Annex "1" hereof]. (p. 263, Rollo). 45
Tirazona next argues that she was deprived of procedural due process as she was neither
served with two written notices, nor was she afforded a hearing with her participation prior to
her dismissal.
Tirazona’s arguments are baseless.
Procedural due process is simply defined as giving an opportunity to be heard before
judgment is rendered. The twin requirements of notice and hearing constitute the essential
elements of due process, and neither of those elements can be eliminated without running
afoul of the constitutional guaranty.46
The employer must furnish the employee two written notices before termination may be
effected. The first notice apprises the employee of the particular acts or omissions for which
his dismissal is sought, while the second notice informs the employee of the employer’s
decision to dismiss him.47
It is fairly obvious in this case that Tirazona was served with the required twin notices. The
first was embodied in the Notice of Charge dated 25 March 2002 where PET informed
Tirazona that it was considering her termination from employment and required her to submit
a written explanation. In the said Notice, PET apprised Tirazona of the ground upon which it
was considering her dismissal: (1) her letter that contained false accusations against the
company, and (2) her demand for two million pesos in damages, with a threat of a lawsuit if
the said amount was not paid. The Notice of Termination dated 22 April 2002 given to
Tirazona constitutes the second notice whereby the company informed her that it found her
guilty of breach of trust warranting her dismissal from service.
Equally bereft of merit is Tirazona’s allegation that she was not given the benefit of a fair
hearing before she was dismissed.
It needs to be pointed out that it was Tirazona herself and her counsel who declined to take
part in the administrative hearing set by PET 10 April 2002. Tirazona rejected the company’s
appointment of its external counsel as the investigating panel’s presiding officer, because her
own demands on the panel’s composition were denied. As correctly held by the NLRC and
the Court of Appeals, Tirazona’s stance is without any legal basis. On the contrary, this
Court’s ruling in Foster Parents Plan International/Bicol v. Demetriou48 is controlling:
The right to dismiss or otherwise impose disciplinary sanctions upon an employee for just and
valid cause, pertains in the first place to the employer, as well as the authority to determine
the existence of said cause in accordance with the norms of due process. In the very nature
of things, any investigation by the employer of any alleged cause for disciplinary punishment
of an employee will have to be conducted by the employer himself or his duly designated
representative; and the investigation cannot be thwarted or nullified by arguing that it
is the employer who is accuser, prosecutor and judge at the same time. x x x Of course,
the decision of the employer meting out sanctions against an employee and the evidentiary
and procedural bases thereof may subsequently be passed upon by the corresponding labor
arbiter (and the NLRC on appeal) upon the filing by the aggrieved employee of the
appropriate complaint. [Emphasis ours.]1avvphi1
This Court has held that there is no violation of due process even if no hearing was
conducted, where the party was given a chance to explain his side of the controversy. What
is frowned upon is the denial of the opportunity to be heard.49 Tirazona in this case has been
afforded a number of opportunities to defend her actions. Even when Tirazona failed to attend
the scheduled hearing, PET still informed Tirazona about what happened therein and gave
her the chance to submit a supplemental written explanation. Only when Tirazona again
failed to comply with the same did PET terminate her employment.
As a final plea for her case, Tirazona asserts that her dismissal from employment was too
harsh and arbitrary a penalty to mete out for whatever violation that she has committed, if
indeed there was one.
Tirazona ought to bear in mind this Court’s pronouncement in Metro Drug Corporation v.
NLRC50 that:
When an employee accepts a promotion to a managerial position or to an office requiring full
trust and confidence, she gives up some of the rigid guaranties available to ordinary workers.
Infractions which if committed by others would be overlooked or condoned or penalties
mitigated may be visited with more severe disciplinary action. A company’s resort to acts of
self-defense would be more easily justified. x x x.
Tirazona, in this case, has given PET more than enough reasons to distrust her. The
arrogance and hostility she has shown towards the company and her stubborn,
uncompromising stance in almost all instances justify the company’s termination of her
employment. Moreover, Tirazona’s reading of what was supposed to be a confidential letter
between the counsel and directors of the PET, even if it concerns her, only further supports
her employer’s view that she cannot be trusted. In fine, the Court cannot fault the actions of
PET in dismissing petitioner.
WHEREFORE, premises considered, the instant petition is hereby DENIED for lack of merit
and the Decision of the Court of Appeals dated 24 May 2005 is hereby AFFIRMED. Costs
against the petitioner.
SO ORDERED.
G.R. No. 184011 September 18, 2013
REYNALDO HAYAN MOYA, Petitioner,
vs.
FIRST SOLID RUBBER INDUSTRIES, INC., Respondent.
DECISION
PEREZ, J.:
Before the Court is a Petition for Review on Certiorari1 from the Decision2 of the Special Third
Division of the Court of Appeals in CA-G.R. SP No. 99500 dated 30 April 2008, modifying the
Decision of the National Labor Relations Commission (NLRC) by deleting the award of
separation pay in favor of Reynaldo Hayan Moya (Moya). The dispositive portion of the
assailed decision reads:
WHEREFORE, premises considered, the petition is hereby GRANTED. The Resolutions
dated January 31, 2007 and April 24, 2007 of the National Labor Relations Commission in
NLRC NCR CA No. 048653-06 (NLRC NCR Case No. 00-11-12626 2004) affirming the
Decision dated February 28, 2006 of the Labor Arbiter Pablo C. Espiritu, Jr. is MODIFIED by
deleting the award for separation pay in favor of private respondent Reynaldo Hayan Moya.3
The facts as gathered by this Court follow:
On 25 January 2005, Moya filed before the NLRC-National Capital Region a complaint for
illegal dismissal against First Solid Rubber Industries, Inc. (First Solid) and its President
Edward Lee Sumulong. In his complaint-affidavit,4Moya alleged that:
1. Sometime in May 1993, he was hired by the company First Solid, a business
engaged in manufacturing of tires and rubbers, as a machine operator;
2. Through years of dedication to his job, he was promoted as head of the Tire
Curing Department of the company;
3. On October 15, 2004, he reported an incident about an under curing of tires within
his department which led to the damage of five tires;
4. The company conducted an investigation of the incident and he was later required
to explain;
5. In his explanation, he stated that the damage was caused by machine failure and
the incident was without any fault of the operator;
6. Despite his explanation of what transpired, he was terminated by the company
through a letter dated November 9, 2004.
From the foregoing, he prayed that payment of backwages, separation pay, moral damages
and exemplary damages be adjudged in his favor due to the illegal dismissal he suffered from
the company.
Moya, through his Reply,5 added that his termination fell short of any of the just causes of
serious misconduct, gross and habitual neglect of duties and willful breach of trust. He
pointed out that the company failed to prove that his act fell within the purview of improper or
wrong misconduct, and that a single act of negligence as compared to eleven (11) years of
service of good record with the company will not justify his dismissal.
First Solid, in its Position Paper,6 Reply7 and Memorandum,8 admitted that Moya was a
former employee of the company and was holding the position of Officer-in-Charge of the Tire
Curing Department until his valid dismissal. However, it denied that it illegally dismissed Moya
and maintained that his severance from the company was due to a valid exercise of
management prerogative.9 The company insisted on its right to validly dismiss an employee
in good faith if it has a reasonable ground to believe that its employee is responsible of
misconduct, and the nature of his participation therein renders him absolutely unworthy of the
trust and confidence demanded by his position.10
Opposing the story of Moya, the company countered that Moya, who was exercising
supervision and control over the employees as a department head, failed to exercise the
diligence required of him to see to it that the machine operator, Melandro Autor, properly
operated the machine. This act is considered as a gross and habitual neglect of duty which
caused actual losses to the company.11
During the initial investigation, Moya, in his Explanation Letter 12 dated 15 October 2004,
insisted that the cause of the damage of five (5) tires was due to premature hauling of the
tires below curing time. Unsatisfied with the explanation, the company sent Moya a
Letter13 dated 26 October 2004 stating that he failed to explain what really transpired in the
under curing of tires. The company informed Moya that the damage was caused by the
operator’s unlawful setting of the timer from manual to automatic without Moya’s permission.
To make the matter worse, Moya failed to disclose the real situation that the operator was at
fault.
Moya was given twenty-four (24) hours to defend himself and explain the matter. In response,
Moya admitted in a letter dated 29 October 2004 his mistake of not disclosing the true
incident and explained that he found it more considerate to just let the operator be suspended
and be fined for the damage committed. He denied any willful intention to conceal the truth or
cover up the mistake of his employee. Finally, he asked for the company’s forgiveness for the
fault he had committed.14 In a letter dated 3 November 2004, Moya reiterated his plea for
forgiveness and asked for another chance to continue his employment with the company. 15
Procedural due process, through issuance of twin notices, was also complied with by the
company. Moya was informed of the charges against him through a
memorandum16 indicating his violation and was given an opportunity to answer or rebut the
charges. After giving his explanation through several letters to the company, a notice was
sent informing him of the management’s decision of his dismissal and termination from
services on9 November 2004 based on serious misconduct, gross and habitual neglect of
duty and willful breach of trust reposed upon him by the company.17
On 28 February 2006, Labor Arbiter Pablo C. Espiritu, Jr. rendered a judgment18 finding
sufficient and valid grounds to dismiss Moya for concealing and lying to First Solid about the
factual circumstances leading to the damage of five (5) tires on 15 October 2004. However, it
ruled that the dismissal from service of the complainant was too harsh as a penalty since it
was a first offense and there was no willful and malicious intention on his part to cause
damage. The dispositive portion reads:
WHEREFORE, judgment is hereby rendered ordering Respondents First Solid Rubber
Industrial, Inc. and Edward Lee Sumulong to jointly and severally pay complainant separation
pay in lieu of reinstatement the amount of ₱63, 654.00.
All other claims whether monetary or otherwise are hereby DISMISSED for lack of merit. 19
In justifying his decision, the Labor Arbiter explained that the length of time during which the
complainant was deprived of employment was sufficient penalty for the act he had committed
against the company. As a result, his reinstatement without backwages to his former position
was in order. However, since the employment was already strained and Moya was no longer
seeking to be reinstated, he decided that it was for the best interest of both parties to award
instead a separation pay of one (1) month salary for every year of credited service less the
total of cash advances of the complainant amounting to ₱19,000.00.20
Not in total accord with the outcome of the decision, First Solid filed its partial appeal before
the NLRC on 13 April 2006. The company assailed as error on the part of the Labor Arbiter
the grant of separation pay in favor of Moya despite the finding that there was a just cause for
the employee’s dismissal from service. It was submitted that the complainant’s length of
service to the company cannot be invoked to justify the award. It was argued that Moya was
dismissed for just causes; hence, to award separation pay would be tantamount to giving a
prize for disloyalty and breach of trust.21
On 31 January 2007, the NLRC affirmed the Decision of the Labor Arbiter in its entirety. 22
The NLRC affirmed the finding of the Labor Arbiter that a separation pay should be given to
Moya in lieu of reinstatement citing primarily his length of service and years of contribution to
the profitable business operation of the company. It also noted that this transgression was the
first mistake of Moya in the performance of his functions. Finally, it cited as justification the
Court’s ruling in St. Michael’s Institute v. Santos,23 wherein the Court held that "even when an
employee is found to have transgressed the employer’s rules, in the actual imposition of
penalties upon the erring employee, due consideration must still be given to his length of
service and the number of violations committed during his employment."24
Reconsideration,25
In its Motion for First Solid insisted that length of service cannot mitigate
breach of trust which is penalized with dismissal.
On 24 April 2007, the NLRC denied the motion of First Solid as it found no compelling
justification to overturn its findings.26
In its Petition for Certiorari before the Court of Appeals, the company reiterated its previous
arguments that separation pay cannot be awarded to validly dismissed employees and that
length of service was not a ground to reduce the penalty of dismissal due to breach of trust. 27
In his Comment28 and Memorandum,29 Moya capitalized on the pronouncement of the Labor
Arbiter that his alleged infraction does not merit a penalty of dismissal from service given his
length of service to the company as well as the failure of the company to prove that he acted
maliciously and with the intention to cause damage.
First Solid, in its Reply30 and Memorandum,31 argued that Moya, being a supervisor, the
company reposed on him its trust and confidence. He was expected to remain loyal and
trustworthy and promote the best interest of the company. His act of concealing, by making a
fraudulent report to the company regarding the transgression of the machine operator under
him, is a valid basis for dismissal based on breach of trust and confidence. The company
further contended that the award of separation pay made by the labor tribunals was contrary
to law and jurisprudence.
In its Decision,32 the Court of Appeals ruled in favor of the company and reversed the
decisions of the labor tribunals. The dispositive portions reads:
WHEREFORE, premises considered, the petition is GRANTED. The Resolutions dated
January 31, 2007 and April 24, 2007 of the National Labor Relations Commission in NLRC
NCR CA No. 048653-06(NLRC NCR Case No. 00-11-12626-2004) affirming the Decision
dated February 28, 2006 of the Labor Arbiter Pablo C. Espiritu, Jr. is MODIFIED by deleting
the award for separation pay in favor of private respondent Reynaldo Hayan Moya. 33
The appellate court ruled that an employee found to be guilty of serious misconduct or other
acts reflecting his moral character is not entitled to separation pay. Moya who held a
supervisory position as the Head of the Curing Department breached the trust reposed upon
him when he did not disclose what was actually done by the machine operator which
eventually caused the damage. It was only when the company discovered that the report was
not in accordance with what really transpired that Moya admitted its mistake. In sum, the
appellate court agreed that First Solid presented substantial proof to consider Moya as
dishonest and disloyal to the company.
It took the position that instead of being a basis for the award of separation pay, Moya’s
length of service should have been taken against him. The reason for his dismissal was his
lack of integrity and loyalty to the company reflecting upon his moral character.
The appellate court emphasized that while the law is considerate to the welfare of the
employees whenever there is a labor conflict, it also protects the right of an employer to
exercise its management prerogative in good faith.
The Court’s Ruling
That there is a valid ground for the dismissal of Moya based on breach and loss of trust and
confidence is no longer at issue. The Labor Arbiter, NLRC and the appellate court were
unanimous in their rulings on this matter. The remaining question is whether or not petitioner
employee is entitled to separation pay based on his length of service.
Petitioner is not entitled to separation pay. Payment of separation pay cannot be justified by
his length of service.
It must be stressed that Moya was not an ordinary rank-and-file employee. He was holding a
supervisory rank being an Officer-in-Charge of the Tire Curing Department. The position,
naturally one of trust, required of him abiding honesty as compared to ordinary rank-and-file
employees. When he made a false report attributing the damage of five tires to machine
failure, he breached the trust and confidence reposed upon him by the company.
In a number of cases,34 this Court put emphasis on the right of an employer to exercise its
management prerogative in dealing with its company’s affairs including its right to dismiss its
erring employees. We recognized the right of the employer to regulate all aspects of
employment, such as the freedom to prescribe work assignments, working methods,
processes to be followed, regulation regarding transfer of employees, supervision of their
work, lay-off and discipline, and dismissal and recall of workers.35 It is a general principle of
labor law to discourage interference with an employer’s judgment in the conduct of his
business. As already noted, even as the law is solicitous of the welfare of the employees, it
also recognizes employer’s exercise of management prerogatives. As long as the company’s
exercise of judgment is in good faith to advance its interest and not for the purpose of
defeating or circumventing the rights of employees under the laws or valid agreements, such
exercise will be upheld.36
Following the ruling in The Coca-Cola Export Corporation v. Gacayan,37 the employers have
a right to impose a penalty of dismissal on employees by reason of loss of trust and
confidence. More so, in the case of supervisors or personnel occupying positions of
responsibility, does loss of trust justify termination. Loss of confidence as a just cause for
termination of employment is premised on the fact that an employee concerned holds a
position of trust and confidence. This situation holds where a person is entrusted with
confidence on delicate matters, such as the custody, handling, or care and protection of the
employer’s property. But, in order to constitute a just cause for dismissal, the act complained
of must be "work-related" such as would show the employee concerned to be unfit to
continue working for the employer.38
The foregoing as viewpoint, the right of First Solid to handle its own affairs in managing its
business must be respected. The clear consequence is the denial of the grant of separation
pay in favor of Moya.
As pronounced in the recent case of Unilever Philippines, Inc., v. Rivera, 39 an employee who
has been dismissed for any of the just causes enumerated under Article 282 40 of the Labor
Code, including breach of trust, is not entitled to separation pay.41 This is further bolstered by
Section 7,Rule I, Book VI of the Omnibus Rules Implementing the Labor Code which provides
that:
Sec. 7. Termination of employment by employer. — The just causes for terminating the
services of an employee shall be those provided in Article 282 of the Code. The separation
from work of an employee for a just cause does not entitle him to the termination pay
provided in the Code, without prejudice, however, to whatever rights, benefits and privileges
he may have under the applicable individual or collective agreement with the employer or
voluntary employer policy or practice.1âwphi1
However, this Court also provides exceptions to the rule based on "social justice" or on
"equitable grounds" following the ruling in Philippine Long Distance Telephone Co. v.
NLRC,42 stating that separation pay shall be allowed as a measure of social justice only in
those instances where the employee is validly dismissed for causes other than serious
misconduct or those reflecting on his moral character. Where the reason for the valid
dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like
theft or illicit sexual relations with a fellow worker, the employer may not be required to give
the dismissed employee separation pay, or financial assistance, or whatever other name it is
called, on the ground of social justice.43
The PLDT case further elucidates why an erring employee could not benefit under the cloak
of social justice in the award of separation pay, we quote:
The policy of social justice is not intended to countenance wrongdoing simply because it is
committed by the underprivileged. At best it may mitigate the penalty but it certainly will not
condone the offense. Compassion for the poor is an imperative of every humane society but
only when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot
be permitted to be refuge of scoundrels any more than can equity be an impediment to the
punishment of the guilty. Those who invoke social justice may do so only if their hands are
clean and their motives blameless and not simply because they happen to be poor. This great
policy of our Constitution is not meant for the protection of those who have proved they are
not worthy of it, like the workers who have tainted the cause of labor with the blemishes of
their own character.44
Moya’s dismissal is based on one of the grounds under Art. 282 of the Labor Code which is
willful breach by the employee of the trust reposed in him by his employer. Also, he is outside
the protective mantle of the principle of social justice as his act of concealing the truth from
the company is clear disloyalty to the company which has long employed him.1âwphi1
Indeed, as found below, Moya’s length of service should be taken against him. The
pronouncement in Reno Foods, Inc. v. Nagkakaisang Lakas ng Manggagawa (NLM)
Katipunan45 is instructive on the matter:
x x x Length of service is not a bargaining chip that can simply be stacked against the
employer. After all, an employer-employee relationship is symbiotic where both parties benefit
from mutual loyalty and dedicated service. If an employer had treated his employee well, has
accorded him fairness and adequate compensation as determined by law, it is only fair to
expect a long-time employee to return such fairness with at least some respect and honesty.
Thus, it may be said that betrayal by a long-time employee is more insulting and odious for a
fair employer.46(Emphasis supplied).
WHEREFORE, we DENY the petition for review on certiorari. The Decision dated 30 April
2008 and Resolution dated 1 August 2008 of the Special Third Division of the Court of
Appeals in CA-G.R. SP No. 99500 are hereby AFFIRMED.
G.R. No. 172101 November 23, 2007
REPUBLIC OF THE PHILIPPINES, represented by the SOCIAL SECURITY COMMISSION
and SOCIAL SECURITY SYSTEM, Petitioners,
vs.
ASIAPRO COOPERATIVE, Respondent.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised
Rules of Civil Procedure seeking to annul and set aside the Decision 1 and Resolution2 of the
Court of Appeals in CA-G.R. SP No. 87236, dated 5 January 2006 and 20 March 2006,
respectively, which annulled and set aside the Orders of the Social Security Commission
(SSC) in SSC Case No. 6-15507-03, dated 17 February 20043 and 16 September
2004,4respectively, thereby dismissing the petition-complaint dated 12 June 2003 filed by
herein petitioner Social Security System (SSS) against herein respondent.
Herein petitioner Republic of the Philippines is represented by the SSC, a quasi-judicial body
authorized by law to resolve disputes arising under Republic Act No. 1161, as amended by
Republic Act No. 8282.5 Petitioner SSS is a government corporation created by virtue of
Republic Act No. 1161, as amended. On the other hand, herein respondent Asiapro
Cooperative (Asiapro) is a multi-purpose cooperative created pursuant to Republic Act No.
69386 and duly registered with the Cooperative Development Authority (CDA) on 23
November 1999 with Registration Certificate No. 0-623-2460.7
The antecedents of this case are as follows:
Respondent Asiapro, as a cooperative, is composed of owners-members. Under its by-laws,
owners-members are of two categories, to wit: (1) regular member, who is entitled to all the
rights and privileges of membership; and (2) associate member, who has no right to vote and
be voted upon and shall be entitled only to such rights and privileges provided in its by-
laws.8 Its primary objectives are to provide savings and credit facilities and to develop other
livelihood services for its owners-members. In the discharge of the aforesaid primary
objectives, respondent cooperative entered into several Service Contracts9 with Stanfilco - a
division of DOLE Philippines, Inc. and a company based in Bukidnon. The owners-members
do not receive compensation or wages from the respondent cooperative. Instead, they
receive a share in the service surplus10 which the respondent cooperative earns from different
areas of trade it engages in, such as the income derived from the said Service Contracts with
Stanfilco. The owners-members get their income from the service surplus generated by the
quality and amount of services they rendered, which is determined by the Board of Directors
of the respondent cooperative.
In order to enjoy the benefits under the Social Security Law of 1997, the owners-members of
the respondent cooperative, who were assigned to Stanfilco requested the services of the
latter to register them with petitioner SSS as self-employed and to remit their contributions as
such. Also, to comply with Section 19-A of Republic Act No. 1161, as amended by Republic
Act No. 8282, the SSS contributions of the said owners-members were equal to the share of
both the employer and the employee.
On 26 September 2002, however, petitioner SSS through its Vice-President for Mindanao
Division, Atty. Eddie A. Jara, sent a letter11 to the respondent cooperative, addressed to its
Chief Executive Officer (CEO) and General Manager Leo G. Parma, informing the latter that
based on the Service Contracts it executed with Stanfilco, respondent cooperative is actually
a manpower contractor supplying employees to Stanfilco and for that reason, it is an
employer of its owners-members working with Stanfilco. Thus, respondent cooperative should
register itself with petitioner SSS as an employer and make the corresponding report and
remittance of premium contributions in accordance with the Social Security Law of 1997. On
9 October 2002,12 respondent cooperative, through its counsel, sent a reply to petitioner
SSS’s letter asserting that it is not an employer because its owners-members are the
cooperative itself; hence, it cannot be its own employer. Again, on 21 October
2002,13 petitioner SSS sent a letter to respondent cooperative ordering the latter to register as
an employer and report its owners-members as employees for compulsory coverage with the
petitioner SSS. Respondent cooperative continuously ignored the demand of petitioner SSS.
Accordingly, petitioner SSS, on 12 June 2003, filed a Petition 14 before petitioner SSC against
the respondent cooperative and Stanfilco praying that the respondent cooperative or, in the
alternative, Stanfilco be directed to register as an employer and to report respondent
cooperative’s owners-members as covered employees under the compulsory coverage of
SSS and to remit the necessary contributions in accordance with the Social Security Law of
1997. The same was docketed as SSC Case No. 6-15507-03. Respondent cooperative filed
its Answer with Motion to Dismiss alleging that no employer-employee relationship exists
between it and its owners-members, thus, petitioner SSC has no jurisdiction over the
respondent cooperative. Stanfilco, on the other hand, filed an Answer with Cross-claim
against the respondent cooperative.
On 17 February 2004, petitioner SSC issued an Order denying the Motion to Dismiss filed by
the respondent cooperative. The respondent cooperative moved for the reconsideration of the
said Order, but it was likewise denied in another Order issued by the SSC dated 16
September 2004.
Intending to appeal the above Orders, respondent cooperative filed a Motion for Extension of
Time to File a Petition for Review before the Court of Appeals. Subsequently, respondent
cooperative filed a Manifestation stating that it was no longer filing a Petition for Review. In its
place, respondent cooperative filed a Petition for Certiorari before the Court of Appeals,
docketed as CA-G.R. SP No. 87236, with the following assignment of errors:
I. The Orders dated 17 February 2004 and 16 September 2004 of [herein petitioner] SSC
were issued with grave abuse of discretion amounting to a (sic) lack or excess of jurisdiction
in that:
A. [Petitioner] SSC arbitrarily proceeded with the case as if it has jurisdiction over the
petition a quo, considering that it failed to first resolve the issue of the existence of an
employer-employee relationship between [respondent] cooperative and its owners-
members.
B. While indeed, the [petitioner] SSC has jurisdiction over all disputes arising under
the SSS Law with respect to coverage, benefits, contributions, and related matters, it
is respectfully submitted that [petitioner] SSC may only assume jurisdiction in cases
where there is no dispute as to the existence of an employer-employee relationship.
C. Contrary to the holding of the [petitioner] SSC, the legal issue of employer-
employee relationship raised in [respondent’s] Motion to Dismiss can be preliminarily
resolved through summary hearings prior to the hearing on the merits. However, any
inquiry beyond a preliminary determination, as what [petitioner SSC] wants to
accomplish, would be to encroach on the jurisdiction of the National Labor Relations
Commission [NLRC], which is the more competent body clothed with power to
resolve issues relating to the existence of an employment relationship.
II. At any rate, the [petitioner] SSC has no jurisdiction to take cognizance of the petition a quo.
A. [Respondent] is not an employer within the contemplation of the Labor Law but is
a multi-purpose cooperative created pursuant to Republic Act No. 6938 and
composed of owners-members, not employees.
B. The rights and obligations of the owners-members of [respondent] cooperative are
derived from their Membership Agreements, the Cooperatives By-Laws, and
Republic Act No. 6938, and not from any contract of employment or from the Labor
Laws. Moreover, said owners-members enjoy rights that are not consistent with being
mere employees of a company, such as the right to participate and vote in decision-
making for the cooperative.
C. As found by the Bureau of Internal Revenue [BIR], the owners-members of
[respondent] cooperative are not paid any compensation income.15 (Emphasis
supplied.)
On 5 January 2006, the Court of Appeals rendered a Decision granting the petition filed by
the respondent cooperative. The decretal portion of the Decision reads:
WHEREFORE, the petition is GRANTED. The assailed Orders dated [17 February 2004] and
[16 September 2004], are ANNULLED and SET ASIDE and a new one is entered
DISMISSING the petition-complaint dated [12 June 2003] of [herein petitioner] Social Security
System.16
Aggrieved by the aforesaid Decision, petitioner SSS moved for a reconsideration, but it was
denied by the appellate court in its Resolution dated 20 March 2006.
Hence, this Petition.
In its Memorandum, petitioners raise the issue of whether or not the Court of Appeals erred in
not finding that the SSC has jurisdiction over the subject matter and it has a valid basis in
denying respondent’s Motion to Dismiss. The said issue is supported by the following
arguments:
I. The [petitioner SSC] has jurisdiction over the petition-complaint filed before it by the
[petitioner SSS] under R.A. No. 8282.
II. Respondent [cooperative] is estopped from questioning the jurisdiction of petitioner
SSC after invoking its jurisdiction by filing an [A]nswer with [M]otion to [D]ismiss
before it.
III. The [petitioner SSC] did not act with grave abuse of discretion in denying
respondent [cooperative’s] [M]otion to [D]ismiss.
IV. The existence of an employer-employee relationship is a question of fact where
presentation of evidence is necessary.
V. There is an employer-employee relationship between [respondent cooperative]
and its [owners-members].
Petitioners claim that SSC has jurisdiction over the petition-complaint filed before it by
petitioner SSS as it involved an issue of whether or not a worker is entitled to compulsory
coverage under the SSS Law. Petitioners avow that Section 5 of Republic Act No. 1161, as
amended by Republic Act No. 8282, expressly confers upon petitioner SSC the power to
settle disputes on compulsory coverage, benefits, contributions and penalties thereon or any
other matter related thereto. Likewise, Section 9 of the same law clearly provides that SSS
coverage is compulsory upon all employees. Thus, when petitioner SSS filed a petition-
complaint against the respondent cooperative and Stanfilco before the petitioner SSC for the
compulsory coverage of respondent cooperative’s owners-members as well as for collection
of unpaid SSS contributions, it was very obvious that the subject matter of the aforesaid
petition-complaint was within the expertise and jurisdiction of the SSC.
Petitioners similarly assert that granting arguendo that there is a prior need to determine the
existence of an employer-employee relationship between the respondent cooperative and its
owners-members, said issue does not preclude petitioner SSC from taking cognizance of the
aforesaid petition-complaint. Considering that the principal relief sought in the said petition-
complaint has to be resolved by reference to the Social Security Law and not to the Labor
Code or other labor relations statutes, therefore, jurisdiction over the same solely belongs to
petitioner SSC.
Petitioners further claim that the denial of the respondent cooperative’s Motion to Dismiss
grounded on the alleged lack of employer-employee relationship does not constitute grave
abuse of discretion on the part of petitioner SSC because the latter has the authority and
power to deny the same. Moreover, the existence of an employer-employee relationship is a
question of fact where presentation of evidence is necessary. Petitioners also maintain that
the respondent cooperative is already estopped from assailing the jurisdiction of the petitioner
SSC because it has already filed its Answer before it, thus, respondent cooperative has
already submitted itself to the jurisdiction of the petitioner SSC.
Finally, petitioners contend that there is an employer-employee relationship between the
respondent cooperative and its owners-members. The respondent cooperative is the
employer of its owners-members considering that it undertook to provide services to
Stanfilco, the performance of which is under the full and sole control of the respondent
cooperative.
On the other hand, respondent cooperative alleges that its owners-members own the
cooperative, thus, no employer-employee relationship can arise between them. The persons
of the employer and the employee are merged in the owners-members themselves. Likewise,
respondent cooperative’s owners-members even requested the respondent cooperative to
register them with the petitioner SSS as self-employed individuals. Hence, petitioner SSC has
no jurisdiction over the petition-complaint filed before it by petitioner SSS.
Respondent cooperative further avers that the Court of Appeals correctly ruled that petitioner
SSC acted with grave abuse of discretion when it assumed jurisdiction over the petition-
complaint without determining first if there was an employer-employee relationship between
the respondent cooperative and its owners-members. Respondent cooperative claims that
the question of whether an employer-employee relationship exists between it and its owners-
members is a legal and not a factual issue as the facts are undisputed and need only to be
interpreted by the applicable law and jurisprudence.
Lastly, respondent cooperative asserts that it cannot be considered estopped from assailing
the jurisdiction of petitioner SSC simply because it filed an Answer with Motion to Dismiss,
especially where the issue of jurisdiction is raised at the very first instance and where the only
relief being sought is the dismissal of the petition-complaint for lack of jurisdiction.
From the foregoing arguments of the parties, the issues may be summarized into:
I. Whether the petitioner SSC has jurisdiction over the petition-complaint filed before
it by petitioner SSS against the respondent cooperative.
II. Whether the respondent cooperative is estopped from assailing the jurisdiction of
petitioner SSC since it had already filed an Answer with Motion to Dismiss before the
said body.
Petitioner SSC’s jurisdiction is clearly stated in Section 5 of Republic Act No. 8282 as well as
in Section 1, Rule III of the 1997 SSS Revised Rules of Procedure.
Section 5 of Republic Act No. 8282 provides:
SEC. 5. Settlement of Disputes. – (a) Any dispute arising under this Act with respect to
coverage, benefits, contributions and penalties thereon or any other matter related thereto,
shall be cognizable by the Commission, x x x. (Emphasis supplied.)
Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of Procedure states:
Section 1. Jurisdiction. – Any dispute arising under the Social Security Act with respect to
coverage, entitlement of benefits, collection and settlement of contributions and penalties
thereon, or any other matter related thereto, shall be cognizable by the Commission after the
SSS through its President, Manager or Officer-in-charge of the
Department/Branch/Representative Office concerned had first taken action thereon in writing.
(Emphasis supplied.)
It is clear then from the aforesaid provisions that any issue regarding the compulsory
coverage of the SSS is well within the exclusive domain of the petitioner SSC. It is important
to note, though, that the mandatory coverage under the SSS Law is premised on the
existence of an employer-employee relationship17 except in cases of compulsory coverage of
the self-employed.
It is axiomatic that the allegations in the complaint, not the defenses set up in the Answer or
in the Motion to Dismiss, determine which court has jurisdiction over an action; otherwise, the
question of jurisdiction would depend almost entirely upon the defendant. 18 Moreover, it is
well-settled that once jurisdiction is acquired by the court, it remains with it until the full
termination of the case.19 The said principle may be applied even to quasi-judicial bodies.
In this case, the petition-complaint filed by the petitioner SSS before the petitioner SSC
against the respondent cooperative and Stanfilco alleges that the owners-members of the
respondent cooperative are subject to the compulsory coverage of the SSS because they are
employees of the respondent cooperative. Consequently, the respondent cooperative being
the employer of its owners-members must register as employer and report its owners-
members as covered members of the SSS and remit the necessary premium contributions in
accordance with the Social Security Law of 1997. Accordingly, based on the aforesaid
allegations in the petition-complaint filed before the petitioner SSC, the case clearly falls
within its jurisdiction. Although the Answer with Motion to Dismiss filed by the respondent
cooperative challenged the jurisdiction of the petitioner SSC on the alleged lack of employer-
employee relationship between itself and its owners-members, the same is not enough to
deprive the petitioner SSC of its jurisdiction over the petition-complaint filed before it. Thus,
the petitioner SSC cannot be faulted for initially assuming jurisdiction over the petition-
complaint of the petitioner SSS.
Nonetheless, since the existence of an employer-employee relationship between the
respondent cooperative and its owners-members was put in issue and considering that the
compulsory coverage of the SSS Law is predicated on the existence of such relationship, it
behooves the petitioner SSC to determine if there is really an employer-employee relationship
that exists between the respondent cooperative and its owners-members.
The question on the existence of an employer-employee relationship is not within the
exclusive jurisdiction of the National Labor Relations Commission (NLRC). Article 217 of the
Labor Code enumerating the jurisdiction of the Labor Arbiters and the NLRC provides that:
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. - (a) x x x.
xxxx
6. Except claims for Employees Compensation, Social Security, Medicare and maternity
benefits, all other claims, arising from employer-employee relations, including those of
persons in domestic or household service, involving an amount exceeding five thousand
pesos (₱5,000.00) regardless of whether accompanied with a claim for reinstatement. 20
Although the aforesaid provision speaks merely of claims for Social Security, it would
necessarily include issues on the coverage thereof, because claims are undeniably rooted in
the coverage by the system. Hence, the question on the existence of an employer-employee
relationship for the purpose of determining the coverage of the Social Security System is
explicitly excluded from the jurisdiction of the NLRC and falls within the jurisdiction of the SSC
which is primarily charged with the duty of settling disputes arising under the Social Security
Law of 1997.
On the basis thereof, considering that the petition-complaint of the petitioner SSS involved
the issue of compulsory coverage of the owners-members of the respondent cooperative, this
Court agrees with the petitioner SSC when it declared in its Order dated 17 February 2004
that as an incident to the issue of compulsory coverage, it may inquire into the presence or
absence of an employer-employee relationship without need of waiting for a prior
pronouncement or submitting the issue to the NLRC for prior determination. Since both the
petitioner SSC and the NLRC are independent bodies and their jurisdiction are well-defined
by the separate statutes creating them, petitioner SSC has the authority to inquire into the
relationship existing between the worker and the person or entity to whom he renders service
to determine if the employment, indeed, is one that is excepted by the Social Security Law of
1997 from compulsory coverage.21
Even before the petitioner SSC could make a determination of the existence of an employer-
employee relationship, however, the respondent cooperative already elevated the Order of
the petitioner SSC, denying its Motion to Dismiss, to the Court of Appeals by filing a Petition
for Certiorari. As a consequence thereof, the petitioner SSC became a party to the said
Petition for Certiorari pursuant to Section 5(b)22 of Republic Act No. 8282. The appellate court
ruled in favor of the respondent cooperative by declaring that the petitioner SSC has no
jurisdiction over the petition-complaint filed before it because there was no employer-
employee relationship between the respondent cooperative and its owners-members.
Resultantly, the petitioners SSS and SSC, representing the Republic of the Philippines, filed a
Petition for Review before this Court.
Although as a rule, in the exercise of the Supreme Court’s power of review, the Court is not a
trier of facts and the findings of fact of the Court of Appeals are conclusive and binding on the
Court,23 said rule is not without exceptions. There are several recognized exceptions 24 in
which factual issues may be resolved by this Court. One of these exceptions finds application
in this present case which is, when the findings of fact are conflicting. There are, indeed,
conflicting findings espoused by the petitioner SSC and the appellate court relative to the
existence of employer-employee relationship between the respondent cooperative and its
owners-members, which necessitates a departure from the oft-repeated rule that factual
issues may not be the subject of appeals to this Court.
In determining the existence of an employer-employee relationship, the following elements
are considered: (1) the selection and engagement of the workers; (2) the payment of wages
by whatever means; (3) the power of dismissal; and (4) the power to control the worker’s
conduct, with the latter assuming primacy in the overall consideration.25The most important
element is the employer’s control of the employee’s conduct, not only as to the result of the
work to be done, but also as to the means and methods to accomplish.26 The power of control
refers to the existence of the power and not necessarily to the actual exercise thereof. It is not
essential for the employer to actually supervise the performance of duties of the employee; it
is enough that the employer has the right to wield that power.27 All the aforesaid elements are
present in this case.
First. It is expressly provided in the Service Contracts that it is the respondent cooperative
which has the exclusive discretion in the selection and engagement of the owners-members
as well as its team leaders who will be assigned at Stanfilco.28 Second. Wages are defined as
"remuneration or earnings, however designated, capable of being expressed in terms of
money, whether fixed or ascertained, on a time, task, piece or commission basis, or other
method of calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done, or for service
rendered or to be rendered."29 In this case, the weekly stipends or the so-called shares in the
service surplus given by the respondent cooperative to its owners-members were in reality
wages, as the same were equivalent to an amount not lower than that prescribed by existing
labor laws, rules and regulations, including the wage order applicable to the area and
industry; or the same shall not be lower than the prevailing rates of wages.30 It cannot be
doubted then that those stipends or shares in the service surplus are indeed wages, because
these are given to the owners-members as compensation in rendering services to respondent
cooperative’s client, Stanfilco. Third. It is also stated in the above-mentioned Service
Contracts that it is the respondent cooperative which has the power to investigate, discipline
and remove the owners-members and its team leaders who were rendering services at
Stanfilco.31 Fourth. As earlier opined, of the four elements of the employer-employee
relationship, the "control test" is the most important. In the case at bar, it is the respondent
cooperative which has the sole control over the manner and means of performing the
services under the Service Contracts with Stanfilco as well as the means and methods of
work.32 Also, the respondent cooperative is solely and entirely responsible for its owners-
members, team leaders and other representatives at Stanfilco.33 All these clearly prove that,
indeed, there is an employer-employee relationship between the respondent cooperative and
its owners-members.
It is true that the Service Contracts executed between the respondent cooperative and
Stanfilco expressly provide that there shall be no employer-employee relationship between
the respondent cooperative and its owners-members.34 This Court, however, cannot give the
said provision force and effect.
As previously pointed out by this Court, an employee-employer relationship actually exists
between the respondent cooperative and its owners-members. The four elements in the four-
fold test for the existence of an employment relationship have been complied with. The
respondent cooperative must not be allowed to deny its employment relationship with its
owners-members by invoking the questionable Service Contracts provision, when in actuality,
it does exist. The existence of an employer-employee relationship cannot be negated by
expressly repudiating it in a contract, when the terms and surrounding circumstances show
otherwise. The employment status of a person is defined and prescribed by law and not by
what the parties say it should be.35
It is settled that the contracting parties may establish such stipulations, clauses, terms and
conditions as they want, and their agreement would have the force of law between them.
However, the agreed terms and conditions must not be contrary to law, morals, customs,
public policy or public order.36 The Service Contract provision in question must be struck
down for being contrary to law and public policy since it is apparently being used by the
respondent cooperative merely to circumvent the compulsory coverage of its employees, who
are also its owners-members, by the Social Security Law.
This Court is not unmindful of the pronouncement it made in Cooperative Rural Bank of
Davao City, Inc. v. Ferrer-Calleja37 wherein it held that:
A cooperative, therefore, is by its nature different from an ordinary business concern, being
run either by persons, partnerships, or corporations. Its owners and/or members are the ones
who run and operate the business while the others are its employees x x x.
An employee therefore of such a cooperative who is a member and co-owner thereof cannot
invoke the right to collective bargaining for certainly an owner cannot bargain with himself or
his co-owners. In the opinion of August 14, 1981 of the Solicitor General he correctly opined
that employees of cooperatives who are themselves members of the cooperative have no
right to form or join labor organizations for purposes of collective bargaining for being
themselves co-owners of the cooperative.1awp++i1
However, in so far as it involves cooperatives with employees who are not members or co-
owners thereof, certainly such employees are entitled to exercise the rights of all workers to
organization, collective bargaining, negotiations and others as are enshrined in the
Constitution and existing laws of the country.
The situation in the aforesaid case is very much different from the present case. The
declaration made by the Court in the aforesaid case was made in the context of whether an
employee who is also an owner-member of a cooperative can exercise the right to bargain
collectively with the employer who is the cooperative wherein he is an owner-member.
Obviously, an owner-member cannot bargain collectively with the cooperative of which he is
also the owner because an owner cannot bargain with himself. In the instant case, there is no
issue regarding an owner-member’s right to bargain collectively with the cooperative. The
question involved here is whether an employer-employee relationship can exist between the
cooperative and an owner-member. In fact, a closer look at Cooperative Rural Bank of Davao
City, Inc. will show that it actually recognized that an owner-member of a cooperative can be
its own employee.
It bears stressing, too, that a cooperative acquires juridical personality upon its registration
with the Cooperative Development Authority.38 It has its Board of Directors, which directs and
supervises its business; meaning, its Board of Directors is the one in charge in the conduct
and management of its affairs.39 With that, a cooperative can be likened to a corporation with
a personality separate and distinct from its owners-members. Consequently, an owner-
member of a cooperative can be an employee of the latter and an employer-employee
relationship can exist between them.
In the present case, it is not disputed that the respondent cooperative had registered itself
with the Cooperative Development Authority, as evidenced by its Certificate of Registration
No. 0-623-2460.40 In its by-laws,41 its Board of Directors directs, controls, and supervises the
business and manages the property of the respondent cooperative. Clearly then, the
management of the affairs of the respondent cooperative is vested in its Board of Directors
and not in its owners-members as a whole. Therefore, it is completely logical that the
respondent cooperative, as a juridical person represented by its Board of Directors, can enter
into an employment with its owners-members.
In sum, having declared that there is an employer-employee relationship between the
respondent cooperative and its owners-member, we conclude that the petitioner SSC has
jurisdiction over the petition-complaint filed before it by the petitioner SSS. This being our
conclusion, it is no longer necessary to discuss the issue of whether the respondent
cooperative was estopped from assailing the jurisdiction of the petitioner SSC when it filed its
Answer with Motion to Dismiss.
WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Decision
and the Resolution of the Court of Appeals in CA-G.R. SP No. 87236, dated 5 January 2006
and 20 March 2006, respectively, are hereby REVERSED and SET ASIDE. The Orders of the
petitioner SSC dated 17 February 2004 and 16 September 2004 are hereby REINSTATED.
The petitioner SSC is hereby DIRECTED to continue hearing the petition-complaint filed
before it by the petitioner SSS as regards the compulsory coverage of the respondent
cooperative and its owners-members. No costs.
SO ORDERED.
G.R. No. 153511 July 18, 2012
LEGEND HOTEL (MANILA), owned by TITANIUM CORPORATION, and/or, NELSON
NAPUD, in his capacity as the President of Petitioner Corporation, Petitioner,
vs.
HERNANI S. REALUYO, also known as JOEY ROA, Respondent.
DECISION
BERSAMIN, J.:
This labor case for illegal dismissal involves a pianist employed to perform in the restaurant of
a hotel. On August 9, 1999, respondent, whose stage name was Joey R. Roa, filed a
complaint for alleged unfair labor practice, constructive illegal dismissal, and the
underpayment/nonpayment of his premium pay for holidays, separation pay, service incentive
leave pay, and 13111 month pay. He prayed for attorney's fees, moral damages off
P100,000.00 and exemplary damages for P100,000.00.1
Respondent averred that he had worked as a pianist at the Legend Hotel’s Tanglaw
Restaurant from September 1992 with an initial rate of P400.00/night that was given to him
after each night’s performance; that his rate had increased to P750.00/night; and that during
his employment, he could not choose the time of performance, which had been fixed from
7:00 pm to 10:00 pm for three to six times/week. He added that the Legend Hotel’s restaurant
manager had required him to conform with the venue’s motif; that he had been subjected to
the rules on employees’ representation checks and chits, a privilege granted to other
employees; that on July 9, 1999, the management had notified him that as a cost-cutting
measure his services as a pianist would no longer be required effective July 30, 1999; that he
disputed the excuse, insisting that Legend Hotel had been lucratively operating as of the filing
of his complaint; and that the loss of his employment made him bring his complaint.2
In its defense, petitioner denied the existence of an employer-employee relationship with
respondent, insisting that he had been only a talent engaged to provide live music at Legend
Hotel’s Madison Coffee Shop for three hours/day on two days each week; and stated that the
economic crisis that had hit the country constrained management to dispense with his
services.
On December 29, 1999, the Labor Arbiter (LA) dismissed the complaint for lack of merit upon
finding that the parties had no employer-employee relationship.3 The LA explained thusly:
xxx
On the pivotal issue of whether or not there existed an employer-employee relationship
between the parties, our finding is in the negative. The finding finds support in the service
contract dated September 1, 1992 xxx.
xxx
Even if we grant the initial non-existence of the service contract, as complainant suggests in
his reply (third paragraph, page 4), the picture would not change because of the admission by
complainant in his letter dated October 8, 1996 (Annex "C") that what he was receiving was
talent fee and not salary.
This is reinforced by the undisputed fact that complainant received his talent fee nightly,
unlike the regular employees of the hotel who are paid by monthly xxx.
xxx
And thus, absent the power to control with respect to the means and methods by which his
work was to be accomplished, there is no employer-employee relationship between the
parties xxx.
xxx
WHEREFORE, this case must be, as it is hereby, DISMISSED for lack of merit.
SO ORDERED.4
Respondent appealed, but the National Labor Relations Commission (NLRC) affirmed the LA
on May 31, 2001.5
Respondent assailed the decision of the NLRC in the Court of Appeals (CA) on certiorari.
On February 11, 2002, the CA set aside the decision of the NLRC, 6 holding:
xxx
Applying the above-enumerated elements of the employee-employer relationship in this case,
the question to be asked is, are those elements present in this case?
The answer to this question is in the affirmative.
xxx
Well settled is the rule that of the four (4) elements of employer-employee relationship, it is
the power of control that is more decisive.
In this regard, public respondent failed to take into consideration that in petitioner’s line of
work, he was supervised and controlled by respondent’s restaurant manager who at certain
times would require him to perform only tagalog songs or music, or wear barong tagalog to
conform with Filipiniana motif of the place and the time of his performance is fixed by the
respondents from 7:00 pm to 10:00 pm, three to six times a week. Petitioner could not choose
the time of his performance. xxx.
As to the status of petitioner, he is considered a regular employee of private respondents
since the job of the petitioner was in furtherance of the restaurant business of respondent
hotel. Granting that petitioner was initially a contractual employee, by the sheer length of
service he had rendered for private respondents, he had been converted into a regular
employee xxx.
xxx
xxx In other words, the dismissal was due to retrenchment in order to avoid or minimize
business losses, which is recognized by law under Article 283 of the Labor Code, xxx.
xxx
WHEREFORE, foregoing premises considered, this petition is GRANTED. xxx.7
Issues
In this appeal, petitioner contends that the CA erred:
I. XXX WHEN IT RULED THAT THERE IS THE EXISTENCE OF EMPLOYER-
EMPLOYEE RELATIONSHIP BETWEEN THE PETITIONER HOTEL AND
RESPONDENT ROA.
II. XXX IN FINDING THAT ROA IS A REGULAR EMPLOYEE AND THAT THE
TERMINATION OF HIS SERVICES WAS ILLEGAL. THE CA LIKEWISE ERRED
WHEN IT DECLARED THE REINSTATEMENT OF ROA TO HIS FORMER
POSITION OR BE GIVEN A SEPARATION PAY EQUIVALENT TO ONE MONTH
FOR EVERY YEAR OF SERVICE FROM SEPTEMBER 1999 UNTIL JULY 30, 1999
CONSIDERING THE ABSENCE OF AN EMPLOYMENT RELATIONSHIP
BETWEEN THE PARTIES.
III. XXX WHEN IT DECLARED THAT ROA IS ENTITLED TO BACKWAGES,
SERVICE INCENTIVE LEAVE AND OTHER BENEFITS CONSIDERING THAT
THERE IS NO EMPLOYER EMPLOYEE RELATIONSHIP BETWEEN THE
PARTIES.
IV. XXX WHEN IT NULLIFIED THE DECISION DATED MAY 31, 2001 IN NLRC NCR
CA NO. 023404-2000 OF THE NLRC AS WELL AS ITS RESOLUTION DATED
JUNE 29, 2001 IN FAVOR OF HEREIN PETITIONER HOTEL WHEN HEREIN
RESPONDENT ROA FAILED TO SHOW PROOF THAT THE NLRC AND THE
LABOR ARBITER HAVE COMMITTED GRAVE ABUSE OF DISCRETION OR LACK
OF JURISDICTION IN THEIR RESPECTIVE DECISIONS.
V. XXX WHEN IT OVERLOOKED THE FACT THAT THE PETITION WHICH ROA
FILED IS IMPROPER SINCE IT RAISED QUESTIONS OF FACT.
VI. XXX WHEN IT GAVE DUE COURSE TO THE PETITION FILED BY ROA WHEN
IT IS CLEARLY IMPROPER AND SHOULD HAVE BEEN DISMISSED OUTRIGHT
CONSIDERING THAT A PETITION FOR CERTIORARI UNDER RULE 65 IS
LIMITED ONLY TO QUESTIONS OR ISSUES OF GRAVE ABUSE OF DISCRETION
OR LACK OF JURISDICTION COMMITTED BY THE NLRC OR THE LABOR
ARBITER, WHICH ISSUES ARE NOT PRESENT IN THE CASE AT BAR.
The assigned errors are divided into the procedural issue of whether or not the petition for
certiorari filed in the CA was the proper recourse; and into two substantive issues, namely: (a)
whether or not respondent was an employee of petitioner; and (b) if respondent was
petitioner’s employee, whether he was validly terminated.
Ruling
The appeal fails.
Procedural Issue:
Certiorari was a proper recourse
Petitioner contends that respondent’s petition for certiorari was improper as a remedy against
the NLRC due to its raising mainly questions of fact and because it did not demonstrate that
the NLRC was guilty of grave abuse of discretion.
The contention is unwarranted. There is no longer any doubt that a petition for certiorari
brought to assail the decision of the NLRC may raise factual issues, and the CA may then
review the decision of the NLRC and pass upon such factual issues in the process.8 The
power of the CA to review factual issues in the exercise of its original jurisdiction to issue
writs of certiorari is based on Section 9 of Batas Pambansa Blg. 129, which pertinently
provides that the CA "shall have the power to try cases and conduct hearings, receive
evidence and perform any and all acts necessary to resolve factual issues raised in cases
falling within its original and appellate jurisdiction, including the power to grant and conduct
new trials or further proceedings."
Substantive Issue No. 1:
Employer-employee relationship existed between the parties
We next ascertain if the CA correctly found that an employer-employee relationship existed
between the parties.
The issue of whether or not an employer-employee relationship existed between petitioner
and respondent is essentially a question of fact.9 The factors that determine the issue include
who has the power to select the employee, who pays the employee’s wages, who has the
power to dismiss the employee, and who exercises control of the methods and results by
which the work of the employee is accomplished.10 Although no particular form of evidence is
required to prove the existence of the relationship, and any competent and relevant evidence
to prove the relationship may be admitted,11 a finding that the relationship exists must
nonetheless rest on substantial evidence, which is that amount of relevant evidence that a
reasonable mind might accept as adequate to justify a conclusion. 12
Generally, the Court does not review factual questions, primarily because the Court is not a
trier of facts. However, where, like here, there is a conflict between the factual findings of the
Labor Arbiter and the NLRC, on the one hand, and those of the CA, on the other hand, it
becomes proper for the Court, in the exercise of its equity jurisdiction, to review and re-
evaluate the factual issues and to look into the records of the case and re-examine the
questioned findings.13
A review of the circumstances reveals that respondent was, indeed, petitioner’s employee.
He was undeniably employed as a pianist in petitioner’s Madison Coffee Shop/Tanglaw
Restaurant from September 1992 until his services were terminated on July 9, 1999.
First of all, petitioner actually wielded the power of selection at the time it entered into the
service contract dated September 1, 1992 with respondent. This is true, notwithstanding
petitioner’s insistence that respondent had only offered his services to provide live music at
petitioner’s Tanglaw Restaurant, and despite petitioner’s position that what had really
transpired was a negotiation of his rate and time of availability. The power of selection was
firmly evidenced by, among others, the express written recommendation dated January 12,
1998 by Christine Velazco, petitioner’s restaurant manager, for the increase of his
remuneration.14
Petitioner could not seek refuge behind the service contract entered into with respondent. It is
the law that defines and governs an employment relationship, whose terms are not restricted
to those fixed in the written contract, for other factors, like the nature of the work the
employee has been called upon to perform, are also considered. The law affords protection to
an employee, and does not countenance any attempt to subvert its spirit and intent. Any
stipulation in writing can be ignored when the employer utilizes the stipulation to deprive the
employee of his security of tenure. The inequality that characterizes employer-employee
relations generally tips the scales in favor of the employer, such that the employee is often
scarcely provided real and better options.15
Secondly, petitioner argues that whatever remuneration was given to respondent were only
his talent fees that were not included in the definition of wage under the Labor Code; and that
such talent fees were but the consideration for the service contract entered into between
them.
The argument is baseless.
Respondent was paid P400.00 per three hours of performance from 7:00 pm to 10:00 pm,
three to six nights a week. Such rate of remuneration was later increased to P750.00 upon
restaurant manager Velazco’s recommendation. There is no denying that the remuneration
denominated as talent fees was fixed on the basis of his talent and skill and the quality of the
music he played during the hours of performance each night, taking into account the
prevailing rate for similar talents in the entertainment industry.16
Respondent’s remuneration, albeit denominated as talent fees, was still considered as
included in the term wage in the sense and context of the Labor Code, regardless of how
petitioner chose to designate the remuneration. Anent this, Article 97(f) of the Labor Code
clearly states:
xxx wage paid to any employee shall mean the remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or ascertained on a
time, task, piece, or commission basis, or other method of calculating the same, which is
payable by an employer to an employee under a written or unwritten contract of employment
for work done or to be done, or for services rendered or to be rendered, and includes the fair
and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other
facilities customarily furnished by the employer to the employee.
Clearly, respondent received compensation for the services he rendered as a pianist in
petitioner’s hotel. Petitioner cannot use the service contract to rid itself of the consequences
of its employment of respondent. There is no denying that whatever amounts he received for
his performance, howsoever designated by petitioner, were his wages.
It is notable that under the Rules Implementing the Labor Code and as held in Tan v.
Lagrama,17 every employer is required to pay his employees by means of a payroll, which
should show in each case, among others, the employee’s rate of pay, deductions made from
such pay, and the amounts actually paid to the employee. Yet, petitioner did not present the
payroll of its employees to bolster its insistence of respondent not being its employee.
That respondent worked for less than eight hours/day was of no consequence and did not
detract from the CA’s finding on the existence of the employer-employee relationship. In
providing that the " normal hours of work of any employee shall not exceed eight (8) hours a
day," Article 83 of the Labor Code only set a maximum of number of hours as "normal hours
of work" but did not prohibit work of less than eight hours.
Thirdly, the power of the employer to control the work of the employee is considered the most
significant determinant of the existence of an employer-employee relationship.18 This is the
so-called control test, and is premised on whether the person for whom the services are
performed reserves the right to control both the end achieved and the manner and means
used to achieve that end.19
Petitioner submits that it did not exercise the power of control over respondent and cites the
following to buttress its submission, namely: (a) respondent could beg off from his nightly
performances in the restaurant for other engagements; (b) he had the sole prerogative to play
and perform any musical arrangements that he wished; (c) although petitioner, through its
manager, required him to play at certain times a particular music or song, the music, songs,
or arrangements, including the beat or tempo, were under his discretion, control and
direction; (d) the requirement for him to wear barong Tagalog to conform with the Filipiniana
motif of the venue whenever he performed was by no means evidence of control; (e)
petitioner could not require him to do any other work in the restaurant or to play the piano in
any other places, areas, or establishments, whether or not owned or operated by petitioner,
during the three hour period from 7:00 pm to 10:00 pm, three to six times a week; and (f)
respondent could not be required to sing, dance or play another musical instrument.
A review of the records shows, however, that respondent performed his work as a pianist
under petitioner’s supervision and control. Specifically, petitioner’s control of both the end
achieved and the manner and means used to achieve that end was demonstrated by the
following, to wit:
a. He could not choose the time of his performance, which petitioners had fixed from
7:00 pm to 10:00 pm, three to six times a week;
b. He could not choose the place of his performance;
c. The restaurant’s manager required him at certain times to perform only Tagalog
songs or music, or to wear barong Tagalog to conform to the Filipiniana motif; and
d. He was subjected to the rules on employees’ representation check and chits, a
privilege granted to other employees.
Relevantly, it is worth remembering that the employer need not actually supervise the
performance of duties by the employee, for it sufficed that the employer has the right to wield
that power.
Lastly, petitioner claims that it had no power to dismiss respondent due to his not being even
subject to its Code of Discipline, and that the power to terminate the working relationship was
mutually vested in the parties, in that either party might terminate at will, with or without
cause.
The claim is contrary to the records. Indeed, the memorandum informing respondent of the
discontinuance of his service because of the present business or financial condition of
petitioner20 showed that the latter had the power to dismiss him from employment. 21
Substantive Issue No. 2:
Validity of the Termination
Having established that respondent was an employee whom petitioner terminated to prevent
losses, the conclusion that his termination was by reason of retrenchment due to an
authorized cause under the Labor Code is inevitable.
Retrenchment is one of the authorized causes for the dismissal of employees recognized by
the Labor Code. It is a management prerogative resorted to by employers to avoid or to
minimize business losses. On this matter, Article 283 of the Labor Code states:
Article 283. Closure of establishment and reduction of personnel. – The employer may also
terminate the employment of any employee due to the installation of labor-saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Ministry of Labor
and Employment at least one (1) month before the intended date thereof. xxx. In case of
retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay
for every year of service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year.
The Court has laid down the following standards that an employer should meet to justify
retrenchment and to foil abuse, namely:
(a) The expected losses should be substantial and not merely de minimis in extent;
(b) The substantial losses apprehended must be reasonably imminent;
(c) The retrenchment must be reasonably necessary and likely to effectively prevent
the expected losses; and
 (d) The alleged losses, if already incurred, and the expected imminent losses sought
to be forestalled must be proved by sufficient and convincing evidence.22
Anent the last standard of sufficient and convincing evidence, it ought to be pointed out that a
less exacting standard of proof would render too easy the abuse of retrenchment as a ground
for termination of services of employees.23
Was the retrenchment of respondent valid?
In termination cases, the burden of proving that the dismissal was for a valid or authorized
cause rests upon the employer. Here, petitioner did not submit evidence of the losses to its
business operations and the economic havoc it would thereby imminently sustain. It only
claimed that respondent’s termination was due to its "present business/financial condition."
This bare statement fell short of the norm to show a valid retrenchment. Hence, we hold that
there was no valid cause for the retrenchment of respondent.
Indeed, not every loss incurred or expected to be incurred by an employer can justify
retrenchment.1âwphi1 The employer must prove, among others, that the losses are
substantial and that the retrenchment is reasonably necessary to avert such losses. Thus, by
its failure to present sufficient and convincing evidence to prove that retrenchment was
necessary, respondent’s termination due to retrenchment is not allowed.
The Court realizes that the lapse of time since the retrenchment might have rendered
respondent's reinstatement to his former job no longer feasible. If that should be true, then
petitioner should instead pay to him separation pay at the rate of one. month pay for every
year of service computed from September 1992 (when he commenced to work for the
petitioners) until the finality of this decision, and full backwages from the time his
compensation was withheld until the finality of this decision.
WHEREFORE, we DENY the petition for review on certiorari, and AFFIRM the decision of the
Court of Appeals promulgated on February 11, 2002, subject to the modification that should
reinstatement be no longer feasible, petitioner shall pay to respondent separation pay of one
month for every year of service computed from September 1992 until the finality of this
decision, and full backwages from the time his compensation was withheld until the finality of
this decision.
Costs of suit to be paid by the petitioners.
SO ORDERED.
G.R. No. 179654 September 22, 2014
HACIENDA LEDDY/RICARDO GAMBOA, JR., Petitioner,
vs.
PAQUITA VILLEGAS, Respondent.
DECISION
PERALTA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the
reversal of the Decision1dated May 25, 2007 and Resolution2 dated August 10, 2007 of the
Court of Appeals in CA-G.R. SP No. 01923,3which granted the Petition for Certiorari under
Rule 65 of the 1997 Rules of Civil Procedure filed by Villegas, and reversed the January 26,
2006 and March 31, 2006 Orders of the National Labor Relations Commission (NLRC).
These two Orders issued by the NLRC reversed the December 3, 2003 Decision of Executive
Labor Arbiter Danilo Acosta.
The facts, as culled from the records, are as follows:
Villegas is an employee at the Hacienda Leddy as early as 1960, when it was still named
Hacienda Teresa. Later on named Hacienda Leddy owned by Ricardo Gamboa Sr., the same
was succeeded by his son Ricardo Gamboa, Jr. During his employment up to the time of his
dismissal, Villegas performed sugar farming job 8 hours a day, 6 days a week work,
continuously for not less than 302 days a year, and for which services he was paid ₱45.00
per day. He likewise worked in petitioner's coconut lumber business where he was paid
₱34.00 a day for 8 hours work.
On June 9, 1993, Gamboa went toVillegas' house and told him that his services were no
longer needed without prior notice or valid reason. Hence, Villegas filed the instant complaint
for illegal dismissal.
Gamboa, on the other hand, denied having dismissed Villegas but admitted in his earlier
position paper thatVillegas indeed worked with the said farm owned by his father, doing
casual and odd jobs until the latter's death in 1993.4 He was even given the benefit of
occupying a small portion of the land where his house was erected. He, however, maintained
that Villegas ceased working at the farm as early as 1992, contrary to his allegation that he
was dismissed.5
However, later, Gamboaapparently retracted and instead insisted that the farm records reveal
that the only time Villegas rendered service for the hacienda was only in the year
1993,specifically February 9, 1993 and February 11, 1993 when he was contracted by the
farm to cut coconut lumber which were given to regular workers for the repairs of their
houses.6 Gamboa added that they informed Villegas that they need the property, hence, they
requested that he vacateit, but he refused. Thus, Gamboa surmised that Villegas filed the
instant complaint to gain leverage so he would not be evicted from the land he is occupying.
He further argued that during his employment, Villegas was paid in accordance with the rate
mandated by law and that his claim for illegal dismissal was merely a fabrication as he was
the one who opted not to work. The Labor Arbiter found thatthere was illegal dismissal. 7 The
dispositive portion of the decision reads:
WHEREFORE, in view of all the foregoing, respondent Ricardo Gamboa, Jr., is hereby
ordered to pay complainant Paquito Villegas the amount of One Hundred Forty Thousand
Three Hundred Eight Pesos and Eighty-Four/00 (₱140,308.84), representing his wage
differential, backwages and separation pay, the award to be deposited with this office within
ten (10) days from receipt of this decision.
SO ORDERED.8
On appeal, on January 26, 2006, the NLRC set aside and vacated the Labor Arbiter's
decision.9 Complainant moved for reconsideration, but was denied.10
Thus, viapetition for certiorariunder Rule 65 of the Rules of Court, raising grave abuse of
discretion as ground, Villegas appealed before the Court of Appeals and sought the
annulment of the Resolutions of the NLRC.
In the disputed Decision11 dated May 25, 2007, the Court of Appeals granted the petition and
annulled and set aside the NLRC Decision dated January 26, 2006 and Resolution dated
March 31, 2006. It further reinstated the Labor Arbiter's Decision dated December 3, 2003.
Hence, this appeal anchored on the following grounds:
I in 1993, is undisputed as the same was even admitted by Gamboa in his earlier
WHETHER THE COURT OFAPPEALS COMMITTED REVERSIBLE ERROR, BASED ON
SUBSTANTIAL QUESTIONS OF LAW, IN REVERSING THE DECISION OF THE NLRC
AND AFFIRMING THE DECISION OF the EXECUTIVE LABOR ARBITER DECLARING
THAT RESPONDENT IS A REGULAR WORKER, THE FINDINGS NOT BEING IN ACCORD
WITH LAW;
II
WHETHER THE COURT OFAPPEALS COMMITTED REVERSIBLE ERROR, BASED ON
SUBSTANTIAL QUESTIONS OF LAW, IN REVERSING THE DECISION OF THE NLRC
AND AFFIRMING THE DECISION OF THE EXECUTIVE LABOR ARBITER AND FAILED TO
CONSIDER THE MOTIVE OF THE RESPONDENT IN FILING THE CASE AND THE
CREDIBILITY OF HIS WITNESS;
III
THAT ASSUMING WITHOUT ADMITTING THAT RESPONDENT IS A REGULAR WORKER,
THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON
SUBSTANTIAL QUESTIONS OF LAW, IN REVERSING THE DECISION OF THE NLRC
AND AFFIRMING THE DECISION OF THE EXECUTIVE LABOR ARBITER IN DIRECTING
A STRAIGHT COMPUTATION FOR WAGE DIFFERENTIALS, BACKWAGES AND
SEPARATION PAY, THE FINDINGS NOT BEING INACCORD WITH LAW.
Petitioner disputed that there exists an employer-employee relationship between him and
Villegas. He claimed that respondent was paid on a piece-rate basis without
supervision.12 Petitioner added that since his job was not necessary or desirable in the usual
business or trade of the hacienda, he cannot be considered as a regular employee. Petitioner
insisted that it was Villegas who has stopped working in the hacienda and that he was not
dismissed.
We deny the petition.
The issue of Villegas' alleged illegal dismissal is anchored on the existence of an employer-
employee relationship between him and Gamboa; thus, essentially a question of fact.
Generally, the Court does not review errors that raise factual questions. However, when there
is conflict among the factual findings of the antecedent deciding bodies like the LA, the NLRC
and the CA, "it is proper, in the exercise of Our equity jurisdiction, to review and re-evaluate
the factual issues and to look into the records of the case and re-examine the questioned
findings."13
A perusal of the records would show that respondent, having been employed in the subject
Hacienda while the same was still being managed by petitioner's father until the latter's death
pleadings.14 While refuting that Villegas was a regular employee, petitioner however failed to
categorically deny that Villegas was indeed employed in their hacienda albeit he insisted that
Villegas was merely a casual employee doing odd jobs.
The rule is long and well settled that, in illegal dismissal cases like the one at bench, the
burden of proof is upon the employer to show that the employee’s termination from service is
for a just and valid cause. The employer’s case succeeds or fails on the strength of its
evidence and not the weakness of that adduced by the employee, in keeping with the
principle that the scales of justice should be tilted in favor of the latter in case of doubt in the
evidence presented by them. Often described as more than a mere scintilla, the quantum of
proof is substantial evidence which is understood as such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion, even if other equally reasonable
minds might conceivably opine otherwise.15
In the instant case, if we are to follow the length of time that Villegas had worked with the
Gamboas, it should be more than 20 years of service. Even Gamboa admitted that by act of
generosity and compassion, Villegas was given a privilege of erecting his house inside the
hacienda during his employment.16 While it may indeed be an act of good will on the part of
the Gamboas, still, such act is usually done by the employer either out of gratitude for the
employee’s service orfor the employer's convenience as the nature of the work calls for it.
Indeed, petitioner's length of service is an indication of the regularity of his employment. Even
assuming that he was doing odd jobs around the farm, such long period of doing said odd
jobs is indicative that the same was either necessary or desirable to petitioner's trade or
business. Owing to the length ofservice alone, he became a regular employee, by operation
of law, one year after he was employed.
Article 280 of the Labor Code, describes a regular employee as one who is either (1)
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 activity in which he is employed.
In Integrated Contractor and Plumbing Works, Inc. v. National Labor Relations
Commission,17 we held that the testto determine whether employment is regular or not is the
reasonable connection between the particular activity performed by the employee in relation
to the usual business or trade of the employer. If the employee has been performing the job
for at least one year, even if the performance is not continuous or merely intermittent, the law
deems the repeated and continuing need for its performance as sufficient evidence of the
necessity, if not indispensability of that activity to the business. Clearly,with more than 20
years of service, Villegas, without doubt, passed this test to attain employment regularity.
While length of time may not be the controlling test to determine if Villegas is indeed a regular
employee, it is vital in establishing if he was hired to perform tasks which are necessary and
indispensable to the usual business or trade of the employer. If it was true that Villegas
worked in the hacienda only in the year 1993, specifically February 9,1993 and February 11,
1993, why would then hebe given the benefit toconstruct his house in the hacienda? More
significantly, petitioner admitted that Villegas had worked in the hacienda until his
father'sdemise. Clearly, even assuming that Villegas' employment was only for a specific
duration, the fact that he was repeatedly re-hired over a long periodof time shows that his job
is necessary and indispensable to the usual business or trade of the employer.
Gamboa likewise argued that Villegas was paid on a piece-rate basis.18 However, payment
on a piece-ratebasis does not negate regular employment. "The term ‘wage’ is broadly
defined in Article 97 of the Labor Code as remuneration or earnings, capable of being
expressed in terms of money whether fixed or ascertained on a time, task, piece or
commission basis. Payment by the piece is just a method of compensation and does not
define the essence of the relations."19
We are likewise unconvinced thatit was Villegas who suddenly stopped working. Considering
that hewas employed with the Gamboas for more than 20 years and was even given a place
to call his home, it does not make sense why Villegas would suddenly stop working therein
for no apparent reason. To justify a finding of abandonment of work, there must be proof of a
deliberate and unjustified refusal on the part of an employee to resume his employment. The
burden of proof is on the employer to show an unequivocal intent on the part of the employee
to discontinue employment. Mere absence is not sufficient. It must be accompanied by
manifest acts unerringly pointing to the fact that the employee simply does not want to work
anymore.20
Petitioner failed to discharge this burden. Other than the self-serving declarations in the
affidavit of his employee, petitioner did not adduce proof of overt acts of Villegas showing his
intention to abandon his work. Abandonment is a matter of intention;it cannot be inferred or
presumed from equivocal acts. On the contrary, the filing of the instant illegal dismissal
complaint negates any intention on his part to sever their employment relationship. The delay
of morethan 1 year infiling the instant illegal dismissal case likewise is non-issue considering
that the complaint was filed within a reasonable period during the three-year period provided
under Article 291 of the Labor Code.21 As aptly observed by the appellate court, Villegas
appeared tobe without educational attainment. He could not have known that he has rights as
a regular employee that is protected by law.
The Labor Code draws a fine line between regular and casual employees to protect the
interests of labor. We ruled in Baguio Country Club Corporation v. NLRC22 that "its language
evidently manifests the intent to safeguard the tenurial interest of the worker who may be
denied the rights and benefits due a regular employee by virtue of lopsided agreements with
the economically powerful employer who can maneuver to keep an employee on a casual
status for as long as convenient." Thus, notwithstanding any agreements to the contrary,
what determines whether a certain employment is regular or casual is not the will and word of
the employer, to which the desperate worker often accedes, much less the procedure of
hiring the employee or the manner of paying his salary. It is the nature of the activities
performed in relation to the particular business or trades considering all circumstances, and in
some cases the length of time of its performance and itscontinued existence. 23
All these having discussed, as a regular worker, Villegas is entitled to security of tenure under
Article 279 ofthe Labor Code and can only be removed for cause. We found no valid cause
attending to his dismissal and found also that his dismissal was without due process.
Article 277(b) of the Labor Code provides that:
x x x Subject to the constitutional right of workers to security of tenure and their right to be
protected against dismissal except for a just and authorized cause and without prejudice to
the requirement of notice under Article 283 of this Code, the employer shall furnish the worker
whose employment is sought to be terminated a written notice containing a statement of the
causes for termination and shall afford the latter ample opportunity to be heard and to defend
himself with the assistance of his representative if he so desires in accordance with company
rules and regulations promulgated pursuant to guidelines set by the Department of Labor and
Employment. x x x
The failure of the petitioner to comply with these procedural guidelines renders its dismissal
of Villegas illegal.1âwphi1 An illegally dismissed employee should be entitled to either
reinstatement - if viable, or separation pay if reinstatement is no longer viable, plus
backwages in either instance.24 Considering that reinstatement is no longer feasible because
of strained relations between the employee and the employer, separation pay should be
granted. The basis for computing separation pay is usually the length of the employee's past
service, while that for backwages is the actual period when the employee was unlawfully
prevented from working.25 It should be emphasized, however, that the finality of the illegal
dismissal decision becomes the reckoning point. In allowing separation pay, the final decision
effectively declares that the employment relationship ended so that separation pay and
backwages are to be computed up to that point. The decision also becomes a judgment for
money from which another consequence flows - the payment of interest in case of delay. 26
WHEREFORE, premises considered, the Decision dated May 25, 2007 and Resolution dated
August 10, 2007 of the Court of Appeals are hereby AFFIRMED. The Decision dated
December 3, 2003 of the Labor Arbiter in RAB Case No. 06-08-10480-94 is hereby
REINSTATED. This case is hereby REMANDED to the Labor Arbiter for the recomputation of
respondent's separation pay and backwages with legal interest.
SO ORDERED.
G.R. No. 179652 May 8, 2009
PEOPLE'S BROADCASTING (BOMBO RADYO PHILS., INC.), Petitioner,
vs.
THE SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT, THE
REGIONAL DIRECTOR, DOLE REGION VII, and JANDELEON JUEZAN, Respondents.
DECISION
TINGA, J.:
The present controversy concerns a matter of first impression, requiring as it does the
determination of the demarcation line between the prerogative of the Department of Labor
and Employment (DOLE) Secretary and his duly authorized representatives, on the one
hand, and the jurisdiction of the National Labor Relations Commission, on the other, under
Article 128 (b) of the Labor Code in an instance where the employer has challenged the
jurisdiction of the DOLE at the very first level on the ground that no employer-employee
relationship ever existed between the parties.
I.
The instant petition for certiorari under Rule 65 assails the decision and the resolution of the
Court of Appeals dated 26 October 2006 and 26 June 2007, respectively, in C.A. G.R. CEB-
SP No. 00855.1
The petition traces its origins to a complaint filed by Jandeleon Juezan (respondent) against
People’s Broadcasting Service, Inc. (Bombo Radyo Phils., Inc) (petitioner) for illegal
deduction, non-payment of service incentive leave, 13th month pay, premium pay for holiday
and rest day and illegal diminution of benefits, delayed payment of wages and non-coverage
of SSS, PAG-IBIG and Philhealth before the Department of Labor and Employment (DOLE)
Regional Office No. VII, Cebu City.2 On the basis of the complaint, the DOLE conducted a
plant level inspection on 23 September 2003. In the Inspection Report Form, 3 the Labor
Inspector wrote under the heading "Findings/Recommendations" "non-diminution of benefits"
and "Note: Respondent deny employer-employee relationship with the complainant- see
Notice of Inspection results." In the Notice of Inspection Results4 also bearing the date 23
September 2003, the Labor Inspector made the following notations:
Management representative informed that complainant is a drama talent hired on a per
drama " participation basis" hence no employer-employeeship [sic] existed between them. As
proof of this, management presented photocopies of cash vouchers, billing statement,
employments of specific undertaking (a contract between the talent director & the
complainant), summary of billing of drama production etc. They (mgt.) has [sic] not control of
the talent if he ventures into another contract w/ other broadcasting industries.
On the other hand, complainant Juezan’s alleged violation of non-diminution of benefits is
computed as follows:
@ P 2,000/15 days + 1.5 mos = ₱ 6,000
(August 1/03 to Sept 15/03)
Note: Recommend for summary investigation or whatever action deem proper. 5
Petitioner was required to rectify/restitute the violations within five (5) days from receipt. No
rectification was effected by petitioner; thus, summary investigations were conducted, with
the parties eventually ordered to submit their respective position papers.6
In his Order dated 27 February 2004,7 DOLE Regional Director Atty. Rodolfo M. Sabulao
(Regional Director) ruled that respondent is an employee of petitioner, and that the former is
entitled to his money claims amounting to ₱203,726.30. Petitioner sought reconsideration of
the Order, claiming that the Regional Director gave credence to the documents offered by
respondent without examining the originals, but at the same time he missed or failed to
consider petitioner’s evidence. Petitioner’s motion for reconsideration was denied. 8 On appeal
to the DOLE Secretary, petitioner denied once more the existence of employer-employee
relationship. In its Order dated 27 January 2005, the Acting DOLE Secretary dismissed the
appeal on the ground that petitioner did not post a cash or surety bond and instead submitted
a Deed of Assignment of Bank Deposit.9
Petitioner elevated the case to the Court of Appeals, claiming that it was denied due process
when the DOLE Secretary disregarded the evidence it presented and failed to give it the
opportunity to refute the claims of respondent. Petitioner maintained that there is no
employer-employee relationship had ever existed between it and respondent because it was
the drama directors and producers who paid, supervised and disciplined respondent. It also
added that the case was beyond the jurisdiction of the DOLE and should have been
considered by the labor arbiter because respondent’s claim exceeded ₱5,000.00.
The Court of Appeals held that petitioner was not deprived of due process as the essence
thereof is only an opportunity to be heard, which petitioner had when it filed a motion for
reconsideration with the DOLE Secretary. It further ruled that the latter had the power to order
and enforce compliance with labor standard laws irrespective of the amount of individual
claims because the limitation imposed by Article 29 of the Labor Code had been repealed by
Republic Act No. 7730.10 Petitioner sought reconsideration of the decision but its motion was
denied.11
Before this Court, petitioner argues that the National Labor Relations Commission (NLRC),
and not the DOLE Secretary, has jurisdiction over respondent’s claim, in view of Articles 217
and 128 of the Labor Code.12 It adds that the Court of Appeals committed grave abuse of
discretion when it dismissed petitioner’s appeal without delving on the issues raised therein,
particularly the claim that no employer-employee relationship had ever existed between
petitioner and respondent. Finally, petitioner avers that there is no appeal, or any plain,
speedy and adequate remedy in the ordinary course of law available to it.
On the other hand, respondent posits that the Court of Appeals did not abuse its discretion.
He invokes Republic Act No. 7730, which "removes the jurisdiction of the Secretary of Labor
and Employment or his duly authorized representatives, from the effects of the restrictive
provisions of Article 129 and 217 of the Labor Code, regarding the confinement of jurisdiction
based on the amount of claims."13 Respondent also claims that petitioner was not denied due
process since even when the case was with the Regional Director, a hearing was conducted
and pieces of evidence were presented. Respondent stands by the propriety of the Court of
Appeals’ ruling that there exists an employer-employee relationship between him and
petitioner. Finally, respondent argues that the instant petition for certiorari is a wrong mode of
appeal considering that petitioner had earlier filed a Petition for Certiorari, Mandamus and
Prohibition with the Court of Appeals; petitioner, instead, should have filed a Petition for
Review.14
II.
The significance of this case may be reduced to one simple question—does the Secretary of
Labor have the power to determine the existence of an employer-employee relationship?
To resolve this pivotal issue, one must look into the extent of the visitorial and enforcement
power of the DOLE found in Article 128 (b) of the Labor Code, as amended by Republic Act
7730. It reads:
Article 128 (b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the
contrary, and in cases where the relationship of employer-employee still exists, the Secretary
of Labor and Employment or his duly authorized representatives shall have the power to
issue compliance orders to give effect to the labor standards provisions of this Code and
other labor legislation based on the findings of labor employment and enforcement officers or
industrial safety engineers made in the course of inspection. The Secretary or his duly
authorized representative shall issue writs of execution to the appropriate authority for the
enforcement of their orders, except in cases where the employer contests the findings of the
labor employment and enforcement officer and raises issues supported by documentary
proofs which were not considered in the course of inspection. (emphasis supplied)
xxx
The provision is quite explicit that the visitorial and enforcement power of the DOLE comes
into play only "in cases when the relationship of employer-employee still exists." It also
underscores the avowed objective underlying the grant of power to the DOLE which is "to
give effect to the labor standard provision of this Code and other labor legislation." Of course,
a person’s entitlement to labor standard benefits under the labor laws presupposes the
existence of employer-employee relationship in the first place.
The clause "in cases where the relationship of employer-employee still exists" signifies that
the employer-employee relationship must have existed even before the emergence of the
controversy. Necessarily, the DOLE’s power does not apply in two instances, namely: (a)
where the employer-employee relationship has ceased; and (b) where no such relationship
has ever existed.
The first situation is categorically covered by Sec. 3, Rule 11 of the Rules on the Disposition
of Labor Standards Cases15 issued by the DOLE Secretary. It reads:
Rule II MONEY CLAIMS ARISING FROM COMPLAINT/ROUTINE INSPECTION
Sec. 3. Complaints where no employer-employee relationship actually exists. Where
employer-employee relationship no longer exists by reason of the fact that it has already
been severed, claims for payment of monetary benefits fall within the exclusive and original
jurisdiction of the labor arbiters. Accordingly, if on the face of the complaint, it can be
ascertained that employer-employee relationship no longer exists, the case, whether
accompanied by an allegation of illegal dismissal, shall immediately be endorsed by the
Regional Director to the appropriate branch of the National Labor Relations Commission
(NLRC).
In the recent case of Bay Haven, Inc. v. Abuan,16 this Court recognized the first situation and
accordingly ruled that a complainant’s allegation of his illegal dismissal had deprived the
DOLE of jurisdiction as per Article 217 of the Labor Code.17
In the first situation, the claim has to be referred to the NLRC because it is the NLRC which
has jurisdiction in view of the termination of the employer-employee relationship. The same
procedure has to be followed in the second situation since it is the NLRC that has jurisdiction
in view of the absence of employer-employee relationship between the evidentiary parties
from the start.
Clearly the law accords a prerogative to the NLRC over the claim when the employer-
employee relationship has terminated or such relationship has not arisen at all. The reason is
obvious. In the second situation especially, the existence of an employer-employee
relationship is a matter which is not easily determinable from an ordinary inspection,
necessarily so, because the elements of such a relationship are not verifiable from a mere
ocular examination. The intricacies and implications of an employer-employee relationship
demand that the level of scrutiny should be far above the cursory and the mechanical. While
documents, particularly documents found in the employer’s
office are the primary source materials, what may prove decisive are factors related to the
history of the employer’s business operations, its current state as well as accepted
contemporary practices in the industry. More often than not, the question of employer-
employee relationship becomes a battle of evidence, the determination of which should be
comprehensive and intensive and therefore best left to the specialized quasi-judicial body that
is the NLRC.
It can be assumed that the DOLE in the exercise of its visitorial and enforcement power
somehow has to make a determination of the existence of an employer-employee
relationship. Such prerogatival determination, however, cannot be coextensive with the
visitorial and enforcement power itself. Indeed, such determination is merely preliminary,
incidental and collateral to the DOLE’s primary function of enforcing labor standards
provisions. The determination of the existence of employer-employee relationship is still
primarily lodged with the NLRC. This is the meaning of the clause "in cases where the
relationship of employer-employee still exists" in Art. 128 (b).
Thus, before the DOLE may exercise its powers under Article 128, two important questions
must be resolved: (1) Does the employer-employee relationship still exist, or alternatively,
was there ever an employer-employee relationship to speak of; and (2) Are there violations of
the Labor Code or of any labor law?
The existence of an employer-employee relationship is a statutory prerequisite to and a
limitation on the power of the Secretary of Labor, one which the legislative branch is entitled
to impose. The rationale underlying this limitation is to eliminate the prospect of competing
conclusions of the Secretary of Labor and the NLRC, on a matter fraught with questions of
fact and law, which is best resolved by the quasi-judicial body, which is the NRLC, rather than
an administrative official of the executive branch of the government. If the Secretary of Labor
proceeds to exercise his visitorial and enforcement powers absent the first requisite, as the
dissent proposes, his office confers jurisdiction on itself which it cannot otherwise acquire.
The approach suggested by the dissent is frowned upon by common law. To wit:
[I]t is a general rule, that no court of limited jurisdiction can give itself jurisdiction by a wrong
decision on a point collateral to the merits of the case upon which the limit to its jurisdiction
depends; and however its decision may be final on all particulars, making up together that
subject matter which, if true, is within its jurisdiction, and however necessary in many cases it
may be for it to make a preliminary inquiry, whether some collateral matter be or be not within
the limits, yet, upon this preliminary question, its decision must always be open to inquiry in
the superior court.18
A more liberal interpretative mode, "pragmatic or functional analysis," has also emerged in
ascertaining the jurisdictional boundaries of administrative agencies whose jurisdiction is
established by statute. Under this approach, the Court examines the intended function of the
tribunal and decides whether a particular provision falls within or outside that function, rather
than making the provision itself the determining centerpiece of the analysis. 19Yet even under
this more expansive approach, the dissent fails.
A reading of Art. 128 of the Labor Code reveals that the Secretary of Labor or his authorized
representatives was granted visitorial and enforcement powers for the purpose of determining
violations of, and enforcing, the Labor Code and any labor law, wage order, or rules and
regulations issued pursuant thereto. Necessarily, the actual existence of an employer-
employee relationship affects the complexion of the putative findings that the Secretary of
Labor may determine, since employees are entitled to a different set of rights under the Labor
Code from the employer as opposed to non-employees. Among these differentiated rights are
those accorded by the "labor standards" provisions of the Labor Code, which the Secretary of
Labor is mandated to enforce. If there is no employer-employee relationship in the first place,
the duty of the employer to adhere to those labor standards with respect to the non-
employees is questionable.
This decision should not be considered as placing an undue burden on the Secretary of
Labor in the exercise of visitorial and enforcement powers, nor seen as an unprecedented
diminution of the same, but rather a recognition of the statutory limitations thereon. A mere
assertion of absence of employer-employee relationship does not deprive the DOLE of
jurisdiction over the claim under Article 128 of the Labor Code. At least a prima facie showing
of such absence of relationship, as in this case, is needed to preclude the DOLE from the
exercise of its power. The Secretary of Labor would not have been precluded from exercising
the powers under Article 128 (b) over petitioner if another person with better-grounded claim
of employment than that which respondent had. Respondent, especially if he were an
employee, could have very well enjoined other employees to complain with the DOLE, and, at
the same time, petitioner could ill-afford to disclaim an employment relationship with all of the
people under its aegis.
Without a doubt, petitioner, since the inception of this case had been consistent in
maintaining that respondent is not its employee. Certainly, a preliminary determination, based
on the evidence offered, and noted by the Labor Inspector during the inspection as well as
submitted during the proceedings before the Regional Director puts in genuine doubt the
existence of employer-employee relationship. From that point on, the prudent recourse on the
part of the DOLE should have been to refer respondent to the NLRC for the proper
dispensation of his claims. Furthermore, as discussed earlier, even the evidence relied on by
the Regional Director in his order are mere self-serving declarations of respondent, and
hence cannot be relied upon as proof of employer-employee relationship.
III.
Aside from lack of jurisdiction, there is another cogent reason to to set aside the Regional
Director’s 27 February 2004 Order. A careful study of the case reveals that the said Order,
which found respondent as an employee of petitioner and directed the payment of
respondent’s money claims, is not supported by substantial evidence, and was even made in
disregard of the evidence on record.
It is not enough that the evidence be simply considered. The standard is substantial evidence
as in all other quasi-judicial agencies. The standard employed in the last sentence of Article
128(b) of the Labor Code that the documentary proofs be "considered in the course of
inspection" does not apply. It applies only to issues other than the fundamental issue of
existence of employer-employee relationship. A contrary rule would lead to controversies on
the part of labor officials in resolving the issue of employer-employee relationship. The onset
of arbitrariness is the advent of denial of substantive due process.
As a general rule, the Supreme Court is not a trier of facts. This applies with greater force in
cases before quasi-judicial agencies whose findings of fact are accorded great respect and
even finality. To be sure, the same findings should be supported by substantial evidence from
which the said tribunals can make its own independent evaluation of the facts. Likewise, it
must not be rendered with grave abuse of discretion; otherwise, this Court will not uphold the
tribunals’ conclusion.20 In the same manner, this Court will not hesitate to set aside the labor
tribunal’s findings of fact when it is clearly shown that they were arrived at arbitrarily or in
disregard of the evidence on record or when there is showing of fraud or error of law.21
At the onset, it is the Court’s considered view that the existence of employer- employee
relationship could have been easily resolved, or at least prima facie determined by the labor
inspector, during the inspection by looking at the records of petitioner which can be found in
the work premises. Nevertheless, even if the labor inspector had noted petitioner’s
manifestation and documents in the Notice of Inspection Results, it is clear that he did not
give much credence to said evidence, as he did not find the need to investigate the matter
further. Considering that the documents shown by petitioner, namely: cash vouchers, checks
and statements of account, summary billings evidencing payment to the alleged real
employer of respondent, letter-contracts denominated as "Employment for a Specific
Undertaking," prima facie negate the existence of employer-employee relationship, the labor
inspector could have exerted a bit more effort and looked into petitioner’s payroll, for
example, or its roll of employees, or interviewed other employees in the premises. After all,
the labor inspector, as a labor regulation officer is given "access to employer’s records and
premises at any time of day or night whenever work is being undertaken therein, and the right
to copy therefrom, to question any employee and investigate any fact, condition or matter
which may be necessary to determine violations or which may aid in the enforcement of this
Code and of any labor law, wage order or rules and regulations pursuant thereto." 22 Despite
these far-reaching powers of labor regulation officers, records reveal that no additional efforts
were exerted in the course of the inspection.
The Court further examined the records and discovered to its dismay that even the Regional
Director turned a blind eye to the evidence presented by petitioner and relied instead on the
self-serving claims of respondent.
In his position paper, respondent claimed that he was hired by petitioner in September 1996
as a radio talent/spinner, working from 8:00 am until 5 p.m., six days a week, on a gross rate
of ₱60.00 per script, earning an average of ₱15,0000.00 per month, payable on a semi-
monthly basis. He added that the payment of wages was delayed; that he was not given any
service incentive leave or its monetary commutation, or his 13th month pay; and that he was
not made a member of the Social Security System (SSS), Pag-Ibig and PhilHealth. By
January 2001, the number of radio programs of which respondent was a talent/spinner was
reduced, resulting in the reduction of his monthly income from ₱15,000.00 to only ₱4,000.00,
an amount he could barely live on. Anent the claim of petitioner that no employer-employee
relationship ever existed, respondent argued that that he was hired by petitioner, his wages
were paid under the payroll of the latter, he was under the control of petitioner and its agents,
and it was petitioner who had the power to dismiss him from his employment. 23 In support of
his position paper, respondent attached a photocopy of an identification card purportedly
issued by petitioner, bearing respondent’s picture and name with the designation "Spinner";
at the back of the I.D., the following is written: " This certifies that the card holder is a duly
Authorized MEDIA Representative of BOMBO RADYO PHILIPPINES … THE NO.1 Radio
Network in the Country ***BASTA RADYO BOMBO***"24 Respondent likewise included a
Certification which reads:
This is to certify that MR. JANDELEON JUEZAN is a program employee of PEOPLE’S
BROADCASTING SERVICES, INC. (DYMF- Bombo Radyo Cebu) since 1990 up to the
present.
Furtherly certifies that Mr. Juezan is receiving a monthly salary of FIFTEEN THOUSAND
(₱15,000.00) PESOS.
This certification is issued upon the request of the above stated name to substantiate loan
requirement.
Given this 18th day of April 2000, Cebu City , Philippines.
(signed)
GREMAN B. SOLANTE
Station Manager
On the other hand, petitioner maintained in its position paper that respondent had never been
its employee. Attached as annexes to its position paper are photocopies of cash vouchers it
issued to drama producers, as well as letters of employment captioned "Employment for a
Specific Undertaking", wherein respondent was appointed by different drama directors as
spinner/narrator for specific radio programs.25
In his Order, the Regional Director merely made a passing remark on petitioner’s claim of
lack of employer-employee relationship—a token paragraph—and proceeded to a detailed
recitation of respondent’s allegations. The documents introduced by petitioner in its position
paper and even those presented during the inspection were not given an iota of credibility.
Instead, full recognition and acceptance was accorded to the claims of respondent—from the
hours of work to his monthly salary, to his alleged actual duties, as well as to his alleged
"evidence." In fact, the findings are anchored almost verbatim on the self-serving allegations
of respondent.
Furthermore, respondent’s pieces of evidence—the identification card and the certification
issued by petitioner’s Greman Solante— are not even determinative of an employer-
employee relationship. The certification, issued upon the request of respondent, specifically
stated that "MR. JANDELEON JUEZAN is a program employee of PEOPLE’S
BROADCASTING SERVICES, INC. (DYMF- Bombo Radyo Cebu)," it is not therefore "crystal
clear that complainant is a station employee rather than a program employee hence entitled
to all the benefits appurtenant thereto,"26 as found by the DOLE Regional Director.
Respondent should be bound by his own evidence. Moreover, the classification as to whether
one is a "station employee" and "program employee," as lifted from Policy Instruction No.
40,27 dividing the workers in the broadcast industry into only two groups is not binding on this
Court, especially when the classification has no basis either in law or in fact.28
Even the identification card purportedly issued by petitioner is not proof of employer-
employee relationship since it only identified respondent as an "Authorized Representative of
Bombo Radyo…," and not as an employee. The phrase gains significance when compared
vis a vis the following notation in the sample identification cards presented by petitioner in its
motion for reconsideration:
1. This is to certify that the person whose picture and signature appear hereon is an
employee of Bombo Radio Philippines.
2. This ID must be worn at all times within Bombo Radyo Philippines premises for
proper identification and security. Furthermore, this is the property of Bombo Radyo
Philippines and must be surrendered upon separation from the company.
HUMAN RESOURCE DEPARMENT
(Signed)
JENALIN D. PALER
HRD HEAD
Respondent tried to address the discrepancy between his identification card and the standard
identification cards issued by petitioner to its employees by arguing that what he annexed to
his position paper was the old identification card issued to him by petitioner. He then
presented a photocopy of another "old" identification card, this time purportedly issued to one
of the employees who was issued the new identification card presented by
petitioner.29Respondent’s argument does not convince. If it were true that he is an employee
of petitioner, he would have been issued a new identification card similar to the ones
presented by petitioner, and he should have presented a copy of such new identification card.
His failure to show a new identification card merely demonstrates that what he has is only his
"Media" ID, which does not constitute proof of his employment with petitioner.
It has long been established that in administrative and quasi-judicial proceedings, substantial
evidence is sufficient as a basis for judgment on the existence of employer-employee
relationship. Substantial evidence, which is the quantum of proof required in labor cases, is
"that amount of relevant evidence which a reasonable mind might accept as adequate to
justify a conclusion."30 No particular form of evidence is required to prove the existence of
such employer-employee relationship. Any competent and relevant evidence to prove the
relationship may be admitted.31 Hence, while no particular form of evidence is required, a
finding that such relationship exists must still rest on some substantial evidence. Moreover,
the substantiality of the evidence depends on its quantitative as well as
its qualitative aspects.32
In the instant case, save for respondent’s self-serving allegations and self-defeating
evidence, there is no substantial basis to warrant the Regional Director’s finding that
respondent is an employee of petitioner. Interestingly, the Order of the Secretary of Labor
denying petitioner’s appeal dated 27 January 2005, as well as the decision of the Court of
Appeals dismissing the petition for certiorari, are silent on the issue of the existence of an
employer-employee relationship, which further suggests that no real and proper
determination the existence of such relationship was ever made by these tribunals. Even the
dissent skirted away from the issue of the existence of employer-employee relationship and
conveniently ignored the dearth of evidence presented by respondent.
Although substantial evidence is not a function of quantity but rather of quality, the peculiar
environmental circumstances of the instant case demand that something more should have
been proffered.33 Had there been other proofs of employment, such as respondent’s inclusion
in petitioner’s payroll, or a clear exercise of control, the Court would have affirmed the finding
of employer-employee relationship. The Regional Director, therefore, committed grievous
error in ordering petitioner to answer for respondent’s claims. Moreover, with the conclusion
that no employer-employee relationship has ever existed between petitioner and respondent,
it is crystal-clear that the DOLE Regional Director had no jurisdiction over respondent’s
complaint. Thus, the improvident exercise of power by the Secretary of Labor and the
Regional Director behooves the court to subject their actions for review and to invalidate all
the subsequent orders they issued.
IV.
The records show that petitioner’s appeal was denied because it had allegedly failed to post a
cash or surety bond. What it attached instead to its appeal was the Letter
Agreement34 executed by petitioner and its bank, the cash voucher,35 and the Deed of
Assignment of Bank Deposits.36 According to the DOLE, these documents do not constitute
the cash or surety bond contemplated by law; thus, it is as if no cash or surety bond was
posted when it filed its appeal.
The Court does not agree.
The provision on appeals from the DOLE Regional Offices to the DOLE Secretary is in the
last paragraph of Art. 128 (b) of the Labor Code, which reads:
An order issued by the duly authorized representative of the Secretary of Labor and
Employment under this article may be appealed to the latter. In case said order involves a
monetary award, an appeal by the employer may be perfected only upon the posting of a
cash or surety bond issued by a reputable bonding company duly accredited by the Secretary
of Labor and Employment in the amount equivalent to the monetary award in the order
appealed from. (emphasis supplied)
While the requirements for perfecting an appeal must be strictly followed as they are
considered indispensable interdictions against needless delays and for orderly discharge of
judicial business, the law does admit exceptions when warranted by the circumstances.
Technicality should not be allowed to stand in the way of equitably and completely resolving
the rights and obligations of the parties.37 Thus, in some cases, the bond requirement on
appeals involving monetary awards had been relaxed, such as when (i) there was substantial
compliance with the Rules; (ii) the surrounding facts and circumstances constitute meritorious
ground to reduce the bond; (iii) a liberal interpretation of the requirement of an appeal bond
would serve the desired objective of resolving controversies on the merits; or (iv) the
appellants, at the very least exhibited their willingness and/or good faith by posting a partial
bond during the reglementary period.38
A review of the documents submitted by petitioner is called for to determine whether they
should have been admitted as or in lieu of the surety or cash bond to sustain the appeal and
serve the ends of substantial justice.
The Deed of Assignment reads:
DEED OF ASSIGNMENT OF BANK DEPOSIT
WITH SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, GREMAN B. SOLANTE in my capacity as Station Manager of DYMF Cebu City,
PEOPLE’S BROADCASTING SERVICES, INC., a corporation duly authorized and existing
under and by virtue of the laws of the Philippines, for and in consideration of the sum of
PESOS: TWO HUNDRED THREE THOUSAND SEVEN HUNDRED TWENTY SIX PESOS &
30/100 ONLY (₱203,726.30) Phil. Currency, as CASH BOND GUARANTEE for the monetary
award in favor to the Plaintiff in the Labor Case docketed as LSED Case No. R0700-2003-09-
CI-09, now pending appeal.
That Respondent-Appellant do hereby undertake to guarantee available and sufficient funds
covered by Platinum Savings Deposit (PSD) No. 010-8-00038-4 of PEOPLE’S
BROADCASTING SERVICES, INC. in the amount of PESOS: TWO HUNDRED THREE
THOUSAND SEVEN HUNDRED TWENTY SIX PESOS & 30/100 ONLY (₱203,726.30)
payable to Plaintiff-Appellee/Department of Labor and Employment Regional Office VII at
Queen City Development Bank, Cebu Branch, Sanciangko St. Cebu City.
It is understood that the said bank has the full control of Platinum Savings Deposit (PSD) No.
010-8-00038-4 from and after this date and that said sum cannot be withdrawn by the
Plaintiff-Appellee/ Department of Labor and Employment Regional Office VII until such time
that a Writ of Execution shall be ordered by the Appellate Office.
FURTHER, this Deed of Assignment is limited to the principal amount of PESOS: TWO
HUNDRED THREE THOUSAND SEVEN HUNDRED TWENTY SIX PESOS & 30/100 ONLY
(₱203,726.30) Phil. Currency, therefore, any interest to be earned from the said Deposit will
be for the account holder.
IN WITNESS WHEREOF, I have hereunto affixed my signature this 18th day if June, 2004, in
the City of Cebu, Philippines.
PEOPLE’S BROADCASTING SERVICES, INC.
By:
(Signed)
GREMAN B. SOLANTE
Station Manager
As priorly mentioned, the Deed of Assignment was accompanied by a Letter Agreement
between Queen City Development Bank and petitioner concerning Platinum Savings Deposit
(PSD) No. 010-8-00038-4,39 and a Cash Voucher issued by petitioner showing the amount of
₱203,726.30 deposited at the said bank.
Casting aside the technical imprecision and inaptness of words that mark the three
documents, a liberal reading reveals the documents petitioner did assign, as cash bond for
the monetary award in favor of respondent in LSED Case NO. RO700-2003-CI-09, the
amount of ₱203,726.30 covered by petitioner’s PSD Account No. 010-8-00038-4 with the
Queen City Development Bank at Sanciangko St. Cebu City, with the depositary bank
authorized to remit the amount to, and upon withdrawal by respondent and or the Department
of Labor and Employment Regional Office VII, on the basis of the proper writ of execution.
The Court finds that the Deed of Assignment constitutes substantial compliance with the bond
requirement.
The purpose of an appeal bond is to ensure, during the period of appeal, against any
occurrence that would defeat or diminish recovery by the aggrieved employees under the
judgment if subsequently affirmed.40 The Deed of Assignment in the instant case, like a cash
or surety bond, serves the same purpose. First, the Deed of Assignment constitutes not just a
partial amount, but rather the entire award in the appealed Order. Second, it is clear from the
Deed of Assignment that the entire amount is under the full control of the bank, and not of
petitioner, and is in fact payable to the DOLE Regional Office, to be withdrawn by the same
office after it had issued a writ of execution. For all intents and purposes, the Deed of
Assignment in tandem with the Letter Agreement and Cash Voucher is as good as cash.
Third, the Court finds that the execution of the Deed of Assignment, the Letter Agreement
and the Cash Voucher were made in good faith, and constituted clear manifestation of
petitioner’s willingness to pay the judgment amount.
The Deed of Assignment must be distinguished from the type of bank certification submitted
by appellants in Cordova v. Keysa’s Boutique,41 wherein this Court found that such bank
certification did not come close to the cash or surety bond required by law. The bank
certification in Cordova merely stated that the employer maintains a depository account with a
balance of ₱23,008.19, and that the certification was issued upon the depositor’s request for
whatever legal purposes it may serve. There was no indication that the said deposit was
made specifically for the pending appeal, as in the instant case. Thus, the Court ruled that the
bank certification had not in any way ensured that the award would be paid should the appeal
fail. Neither was the appellee in the case prevented from making withdrawals from the
savings account. Finally, the amount deposited was measly compared to the total monetary
award in the judgment.42
V.
Another question of technicality was posed against the instant petition in the hope that it
would not be given due course. Respondent asserts that petitioner pursued the wrong mode
of appeal and thus the instant petition must be dismissed.1avvphi1.zw+ Once more, the
Court is not convinced.
A petition for certiorari is the proper remedy when any tribunal, board or officer exercising
judicial or quasi-judicial functions has acted without or in excess of its jurisdiction, or with
grave abuse of discretion amounting to lack or excess of jurisdiction and there is no appeal,
nor any plain speedy, and adequate remedy at law. There is "grave abuse of discretion" when
respondent acts in a capricious or whimsical manner in the exercise of its judgment as to be
equivalent to lack of jurisdiction.43
Respondent may have a point in asserting that in this case a Rule 65 petition is a wrong
mode of appeal, as indeed the writ of certiorari is an extraordinary remedy, and certiorari
jurisdiction is not to be equated with appellate jurisdiction. Nevertheless, it is settled, as a
general proposition, that the availability of an appeal does not foreclose recourse to the
extraordinary remedies, such as certiorari and prohibition, where appeal is not adequate or
equally beneficial, speedy and sufficient, as where the orders of the trial court were issued in
excess of or without jurisdiction, or there is need to promptly relieve the aggrieved party from
the injurious effects of the acts of an inferior court or tribunal, e.g., the court has authorized
execution of the judgment.44 This Court has even recognized that a recourse to certiorari is
proper not only where there is a clear deprivation of petitioner’s fundamental right to due
process, but so also where other special circumstances warrant immediate and more direct
action.45
In one case, it was held that the extraordinary writ of certiorari will lie if it is satisfactorily
established that the tribunal acted capriciously and whimsically in total disregard of evidence
material to or even decisive of the controversy,46and if it is shown that the refusal to allow a
Rule 65 petition would result in the infliction of an injustice on a party by a judgment that
evidently was rendered whimsically and capriciously, ignoring and disregarding
uncontroverted facts and familiar legal principles without any valid cause whatsoever. 47
It must be remembered that a wide breadth of discretion is granted a court of justice in
certiorari proceedings.48 The Court has not too infrequently given due course to a petition for
certiorari, even when the proper remedy would have been an appeal, where valid and
compelling considerations would warrant such a recourse.49 Moreover, the Court allowed a
Rule 65 petition, despite the availability of plain, speedy or adequate remedy, in view of the
importance of the issues raised
therein.50 The rules were also relaxed by the Court after considering the public interest
involved in the case;51 when public welfare and the advancement of public policy dictates;
when the broader interest of justice so requires; when the writs issued are null and void; or
when the questioned order amounts to an oppressive exercise of judicial authority. 52
"The peculiar circumstances of this case warrant, as we held in Republic v. Court of Appeals,
107 SCRA 504, 524, the ‘exercise once more of our exclusive prerogative to suspend our
own rules or to exempt a particular case from its operation as in x x Republic of the
Philippines v. Court of Appeals, et al., (83 SCRA 453, 478-480 [1978]), thus: ‘ x x The Rules
have been drafted with the primary objective of enhancing fair trials and expediting justice. As
a corollary, if their applications and operation tend to subvert and defeat instead of promote
and enhance it, their suspension is justified."53
The Regional Director fully relied on the self-serving allegations of respondent and
misinterpreted the documents presented as evidence by respondent. To make matters worse,
DOLE denied petitioner’s appeal based solely on petitioner’s alleged failure to file a cash or
surety bond, without any discussion on the merits of the case. Since the petition for certiorari
before the Court of Appeals sought the reversal of the two aforesaid orders, the appellate
court necessarily had to examine the evidence anew to determine whether the conclusions of
the DOLE were supported by the evidence presented. It appears, however, that the Court of
Appeals did not even review the assailed orders and focused instead on a general discussion
of due process and the jurisdiction of the Regional Director. Had the appellate court truly
reviewed the records of the case, it would have seen that there existed valid and sufficient
grounds for finding grave abuse of discretion on the part of the DOLE Secretary as well the
Regional Director. In ruling and acting as it did, the Court finds that the Court of Appeals may
be properly subjected to its certiorari jurisdiction. After all, this Court has previously ruled that
the extraordinary writ of certiorari will lie if it is satisfactorily1avvphi1
established that the tribunal had acted capriciously and whimsically in total disregard of
evidence material to or even decisive of the controversy. 54
The most important consideration for the allowance of the instant petition is the opportunity
for the Court not only to set the demarcation between the NLRC’s jurisdiction and the DOLE’s
prerogative but also the procedure when the case involves the fundamental challenge on the
DOLE’s prerogative based on lack of employer-employee relationship. As exhaustively
discussed here, the DOLE’s prerogative hinges on the existence of employer-employee
relationship, the issue is which is at the very heart of this case. And the evidence clearly
indicates private respondent has never been petitioner’s employee. But the DOLE did not
address, while the Court of Appeals glossed over, the issue. The peremptory dismissal of the
instant petition on a technicality would deprive the Court of the opportunity to resolve the
novel controversy.1avvphi1
WHEREFORE, the petition is GRANTED. The Decision dated 26 October 2006 and the
Resolution dated 26 June 2007 of the Court of Appeals in C.A. G.R. CEB-SP No. 00855 are
REVERSED and SET ASIDE. The Order of the then Acting Secretary of the Department of
Labor and Employment dated 27 January 2005 denying petitioner’s appeal, and the Orders of
the Director, DOLE Regional Office No. VII, dated 24 May 2004 and 27 February 2004,
respectively, are ANNULLED. The complaint against petitioner is DISMISSED.
SO ORDERED.
G.R. No. 171212 August 4, 2014
INDOPHIL TEXTILE MILLS, INC., Petitioner,
vs.
ENGR. SALVADOR ADVIENTO, Respondents.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Revised Rules of
Court which seeks to review, reverse and set-aside the Decision1 of the Court of Appeals
(CA), dated May 30, 2005, and its Resolution2dated January 10, 2006 in the case entitled
Jndophil Textile Mills, Inc. v. Hon. Rolando R. Velasco and Engr. Salvador Adviento,
docketed as CA-G.R. SP No. 83099.
The facts are not disputed.
Petitioner Indophil Textile Mills, Inc. is a domestic corporation engaged in the business of
manufacturing thread for weaving.3 On August 21, 1990, petitioner hired respondent Engr.
Salvador Adviento as Civil Engineer to maintain its facilities in Lambakin, Marilao,
Bulacan.4 On August 7, 2002, respondent consulted a physician due to recurring weakness
and dizziness.5 Few days later, he was diagnosed with Chronic Poly Sinusitis, and thereafter,
with moderate, severe and persistent Allergic Rhinitis.6 Accordingly, respondent was advised
by his doctor to totally avoid house dust mite and textile dust as it will transmute into health
problems.7
Distressed, respondent filed a complaint against petitioner with the National Labor Relations
Commission (NLRC), San Fernando, Pampanga, for alleged illegal dismissal and for the
payment of backwages, separation pay, actual damages and attorney’s fees. The said case,
docketed as NLRC Case No. RAB-III-05-5834-03, is still pending resolution with the NLRC at
the time the instant petition was filed.8
Subsequently, respondent filed another Complaint9 with the Regional Trial Court (RTC) of
Aparri, Cagayan, alleging that he contracted such occupational disease by reason of the
gross negligence of petitioner to provide him with a safe, healthy and workable environment.
In his Complaint, respondent alleged that as part of his job description, he conductsregular
maintenance check on petitioner’s facilities including its dye house area, which is very hot
and emits foul chemical odor with no adequate safety measures introduced by
petitioner.10 According to respondent, the air washer dampers and all roof exhaust vests are
blown into open air, carrying dust thereto.11 Concerned, respondent recommended to
management to place roof insulation to minimize, if not, eradicate the health hazards
attendant in the work place.12 However, said recommendation was turned down by
management due to high cost.13 Respondent further suggested to petitioner’s management
that the engineering office be relocated because ofits dent prone location, such that even if
the door of the office is sealed, accumulated dust creeps in outside the office. 14 This was
further aggravated by the installation of new filters fronting the office.15 However, no action
was taken by management.16 According to respondent, these healthhazards have been the
persistent complaints of most, if not all, workers of petitioner.17 Nevertheless, said complaints
fell on deaf ears as petitioner callously ignored the health problems of its workers and even
tended to be apathetic to their plight, including respondent.18
Respondent averred that, being the only breadwinner in the family, he made several attempts
to apply for a new job, but to his dismay and frustration, employers who knew ofhis present
health condition discriminated against him and turned down his application. 19 By reason
thereof, respondent suffered intense moral suffering, mental anguish, serious anxiety and
wounded feelings, praying for the recovery of the following: (1) Five Million Pesos
(₱5,000,000.00) asmoral damages; (2) Two Million Pesos (₱2,000,000.00) as exemplary
damages; and (3) Seven Million Three Thousand and Eight Pesos (₱7,003,008.00) as
compensatory damages.20 Claiming to be a pauper litigant, respondent was not required to
pay any filing fee.21
In reply, petitioner filed a Motion to Dismiss22 on the ground that: (1) the RTC has no
jurisdiction over the subject matter of the complaint because the same falls under the original
and exclusive jurisdiction of the Labor Arbiter (LA) under Article 217(a)(4) of the Labor Code;
and (2) there is another action pending with the Regional Arbitration Branch III of the NLRC in
San Fernando City, Pampanga, involving the same parties for the same cause.
On December 29, 2003, the RTC issued a Resolution23 denying the aforesaid Motion and
sustaining its jurisdiction over the instant case. It held that petitioner’s alleged failure to
provide its employees with a safe, healthy and workable environment is an act of negligence,
a case of quasi-delict. As such, it is not within the jurisdiction of the LA under Article 217 of
the Labor Code. On the matter of dismissal based on lis pendencia, the RTC ruled that the
complaint before the NLRC has a different cause of action which is for illegal dismissal and
prayer for backwages, actual damages, attorney’s fees and separation pay due to illegal
dismissal while in the present case, the cause of action is for quasi-delict.24 The falloof the
Resolution is quoted below:
WHEREFORE, finding the motion to dismiss to be without merit, the Court deniesthe motion
to dismiss.
SO ORDERED.25
On February 9, 2004, petitioner filed a motion for reconsideration thereto, which was likewise
denied in an Order issued on even date.
Expectedly, petitioner then filed a Petition for Certiorariwith the CA on the ground that the
RTC committed grave abuse of discretion amounting to lack or excess of jurisdiction in
upholding that it has jurisdiction over the subject matter of the complaint despite the broad
and clear terms of Article 217 of the Labor Code, as amended.26
After the submission by the parties of their respective Memoranda, the CA rendered a
Decision27 dated May 30, 2005 dismissing petitioner’s Petition for lack of merit, the dispositive
portion of which states:
WHEREFORE, premises considered, petition for certiorari is hereby DISMISSEDfor lack of
merit. SO ORDERED.28
From the aforesaid Decision, petitioner filed a Motion for Reconsideration which was
nevertheless denied for lack of merit in the CA’s Resolution29 dated January 10, 2006. Hence,
petitioner interposed the instant petition upon the solitary ground that "THE HONORABLE
COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN
ACCORD WITH LAW AND WITH APPLICABLE DECISIONS OF THE HONORABLE
SUPREME COURT."30 Simply, the issue presented before us is whether or not the RTC has
jurisdiction over the subject matter of respondent’s complaint praying for moral
damages,exemplary damages, compensatory damages, anchored on petitioner’s alleged
gross negligence in failing to provide a safe and healthy working environment for respondent.
The delineation between the jurisdiction of regular courts and labor courts over cases
involving workers and their employers has always been a matter of dispute.31 It is up to the
Courts to lay the line after careful scrutiny of the factual milieu of each case. Here, we find
that jurisdiction rests on the regular courts.
In its attempt to overturn the assailed Decision and Resolution of the CA, petitioner argues
that respondent’sclaim for damages is anchored on the alleged gross negligence of petitioner
as an employer to provide its employees, including herein respondent, with a safe, healthy
and workable environment; hence, it arose from an employer-employee relationship.32 The
fact of respondent’s employment withpetitioner as a civil engineer is a necessary element of
his cause ofaction because without the same, respondent cannot claim to have a rightto a
safe, healthy and workable environment.33 Thus, exclusive jurisdiction over the same should
be vested in the Labor Arbiter and the NLRC pursuant to Article 217(a)(4) of the Labor Code
of the Philippines (Labor Code), as amended.34
We are not convinced.
The jurisdiction of the LA and the NLRC is outlined in Article 217 of the Labor Code, as
amended by Section 9 of Republic Act (R.A.) No. 6715, to wit:
ART. 217. Jurisdiction of Labor Arbiters and the Commission-- (a) Except as otherwise
provided under this Code the Labor Arbiter shall have original and exclusive jurisdiction to
hear and decide, within thirty (30) calendar days after the submission of the case by the
parties for decision without extension, even in the absence of stenographic notes, the
following cases involving all workers, whether agricultural or nonagricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file
involvingwages, rates of pay, hours of work and other terms and conditions of
employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from
employer-employee relations;
 5. Cases arising from any violation of Article 264 of this Code including questions
involving the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and
maternity benefits, all other claims, arising from employer-employee relations,
including those of persons in domestic or household service,involving an amount
exceeding five thousand pesos (₱5,000.00) regardless of whether accompanied with
a claim for reinstatement.
x x x.35
While we have upheld the present trend to refer worker-employer controversies to labor
courts in light of the aforequoted provision, we have also recognized that not all claims
involving employees can be resolved solely by our labor courts, specifically when the law
provides otherwise.36 For this reason, we have formulated the "reasonable causal connection
rule," wherein if there is a reasonable causal connection between the claim asserted and the
employer-employee relations, then the case is within the jurisdiction of the labor courts; and
in the absence thereof, it is the regular courts that have jurisdiction. 37 Such distinction is apt
since it cannot be presumed that money claims of workers which do not arise out of or in
connection with their employer-employee relationship, and which would therefore fall within
the general jurisdiction of the regular courts of justice, were intended by the legislative
authority to be taken away from the jurisdiction of the courts and lodged with Labor Arbiters
on an exclusive basis.38
In fact, as early as Medina vs. Hon. Castro-Bartolome,39 in negating the jurisdiction of the LA,
although the parties involved were an employer and two employees, the Court succinctly held
that:
The pivotal question to Our mind iswhether or not the Labor Code has any relevance to the
reliefs sought by the plaintiffs. For if the Labor Code has no relevance, any discussion
concerning the statutes amending it and whether or not they have retroactive effect is
unnecessary.
It is obvious from the complaint that the plaintiffs have not alleged any unfair labor practice.
Theirs is a simple action for damages for tortious acts allegedly committed by the defendants.
Such being the case, the governing statute is the Civil Code and not the Labor Code. It
results that the orders under revieware based on a wrong premise.40
Similarly, we ruled in the recent case of Portillo v. Rudolf Lietz, Inc.41 that not all disputes
between an employer and his employees fall within the jurisdiction of the labor tribunals
suchthat when the claim for damages is grounded on the "wanton failure and refusal" without
just cause of an employee to report for duty despite repeated notices served upon him of the
disapproval of his application for leave ofabsence, the same falls within the purview of Civil
Law, to wit:
As early as Singapore Airlines Limited v. Paño, we established that not all disputes between
an employer and his employee(s) fall within the jurisdiction of the labor tribunals. We
differentiated between abandonment per seand the manner and consequent effects of such
abandonment and ruled that the first, is a labor case, while the second, is a civil law case.
Upon the facts and issues involved, jurisdiction over the present controversy must be held to
belong to the civil Courts. While seemingly petitioner's claim for damages arises from
employer-employee relations, and the latest amendment to Article 217 of the Labor Code
under PD No. 1691 and BP Blg. 130 provides that all other claimsarising from employer-
employee relationship are cognizable by Labor Arbiters [citation omitted], in essence,
petitioner's claim for damages is grounded on the "wanton failure and refusal"without just
cause of private respondent Cruz to report for duty despite repeated notices served upon him
of the disapproval of his application for leave of absence without pay. This, coupled with the
further averment that Cruz "maliciously and with bad faith" violated the terms and conditions
of the conversion training course agreement to the damage of petitioner removes the present
controversy from the coverage of the Labor Code and brings it within the purview of Civil Law.
Clearly, the complaint was anchored not on the abandonment per seby private respondent
Cruz of his job—as the latter was not required in the Complaint to report back to work—but
on the manner and consequent effects of such abandonmentof work translated in terms of
the damages which petitioner had to suffer. x x x.42
Indeed, jurisprudence has evolved the rule that claims for damages under Article 217(a)(4) of
the Labor Code, to be cognizable by the LA, must have a reasonable causal connection
withany of the claims provided for in that article.43Only if there is such a connection with the
other claims can a claim for damages be considered as arising from employer-employee
relations.44
In the case at bench, we find that such connection is nil.
True, the maintenance of a safe and healthy workplace is ordinarily a subject of labor cases.
More, the acts complained of appear to constitute matters involving employee-employer
relations since respondent used to be the Civil Engineer of petitioner. However, it should be
stressed that respondent’s claim for damages is specifically grounded on petitioner’s gross
negligenceto provide a safe, healthy and workable environment for its employees −a case of
quasi-delict. This is easily ascertained from a plain and cursory reading of the
Complaint,45 which enumerates the acts and/or omissions of petitioner relative to the
conditions in the workplace, to wit:
1. Petitioner’s textile mills have excessive flying textile dust and waste in its
operations and no effort was exerted by petitioner to minimize or totally eradicate it;
2. Petitioner failed to provide adequate and sufficient dust suction facilities;
 3. Textile machines are cleaned with air compressors aggravating the dusty work
place;
4. Petitioner has no physician specializing in respiratoryrelated illness considering it
is a textile company;
5. Petitioner has no device to detectthe presence or density of dust which is airborne;
6. The chemical and color room are not equipped with proper safety chemical nose
mask; and
7. The power and boiler plant emit too much smoke with solid particles blown to the
air from the smoke stack of the power plant emitting a brown rust color which engulfs
the entire compound.46
In addition, respondent alleged that despite his earnest efforts to suggest to management to
place roof insulation to minimize, if not, eradicate the health hazards attendant in the
workplace, the same was not heeded.47
It is a basic tenet that jurisdiction over the subject matter is determined upon the allegations
made in the complaint, irrespective of whether or not the plaintiff is entitled to recover upon
the claim asserted therein, which is a matter resolved only after and as a result of a
trial.48 Neither can jurisdiction of a court bemade to depend upon the defenses made by a
defendant in his answer or motion to dismiss.49 In this case, a perusal of the complaint would
reveal that the subject matter is one of claim for damages arising from quasi-delict, which is
within the ambit of the regular court's jurisdiction.
The pertinent provision of Article 2176 of the Civil Code which governs quasi-delictprovides
that: Whoever by act or omissioncauses damageto another, there being fault or negligence, is
obliged to pay for the damagedone. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called quasi-delict.50
Thus, to sustain a claim liability under quasi-delict, the following requisites must concur: (a)
damages suffered by the plaintiff; (b) fault or negligence of the defendant, or someother
person for whose acts he must respond; and (c) the connection of causeand effect between
the fault or negligence of the defendant and the damages incurred by the plaintiff. 51
In the case at bar, respondent alleges that due to the continued and prolonged exposure to
textile dust seriously inimical to his health, he suffered work-contracted disease which is now
irreversible and incurable, and deprived him of job opportunities.52 Clearly, injury and
damages were allegedly suffered by respondent, an element of quasi-delict. Secondly, the
previous contract of employment between petitioner and respondent cannot be used to
counter the element of "no pre-existing contractual relation" since petitioner’s alleged gross
negligence in maintaining a hazardous work environment cannot be considered a mere
breach of such contract of employment, but falls squarely within the elements of quasi-
delictunder Article 2176 of the Civil Code since the negligence is direct, substantive and
independent.53 Hence, we ruled in Yusen Air and Sea Services Phils., Inc. v. Villamor54 that:
When, as here, the cause of action is based on a quasi-delictor tort, which has no reasonable
causal connection with any of the claims provided for in Article 217, jurisdiction over the
action is with the regular courts.55
It also bears stressing that respondent is not praying for any relief under the Labor Code of
the Philippines. He neither claims for reinstatement nor backwages or separation pay
resulting from an illegal termination. The cause of action herein pertains to the consequence
of petitioner’s omission which led to a work-related disease suffered by respondent, causing
harm or damage to his person. Such cause of action is within the realm of Civil Law, and
jurisdiction over the controversy belongs to the regular courts.56
Our ruling in Portillo, is instructive, thus:
There is no causal connection between private respondent’s claim for damages and the
respondent employers’ claim for damages for the alleged "Goodwill Clause" violation.
Portillo’s claim for unpaid salaries did not have anything to do with her alleged violation of the
employment contract as, in fact, her separation from employmentis not "rooted" in the alleged
contractual violation. She resigned from her employment. She was not dismissed. Portillo’s
entitlementto the unpaid salaries is not even contested. Indeed, Lietz Inc.’s argument about
legal compensation necessarily admits that it owesthe money claimed by Portillo. 57
Further, it cannot be gainsaid that the claim for damages occurred afterthe employer-
employee relationship of petitioner and respondent has ceased. Given that respondent no
longer demands for any relief under the Labor Code as well as the rules and regulations
pertinent thereto, Article 217(a)(4) of the Labor Code is inapplicable to the instant case, as
emphatically held in Portillo, to wit:
It is clear, therefore, that while Portillo’s claim for unpaid salaries is a money claim that arises
out ofor in connection with an employeremployee relationship, Lietz Inc.’s claim against
Portillo for violation of the goodwill clause is a money claim based on an act done after the
cessation of the employment relationship. And, while the jurisdiction over Portillo’s claim is
vested in the labor arbiter, the jurisdiction over Lietz Inc.’s claim rests on the regular courts.
Thus:
As it is, petitioner does not ask for any relief under the Labor Code. It merely seeks to recover
damages based on the parties' contract of employment as redress for respondent's breach
thereof. Such cause of action is within the realm of Civil Law, and jurisdiction over the
controversy belongs to the regular courts. More so must this be in the present case, what with
the reality that the stipulation refers to the post-employment relations of the parties.58
Where the resolution of the dispute requires expertise, not in labor management relations nor
in wage structures and other terms and conditions of employment, but rather in the
application of the general civil law, such claim falls outside the area of competence of
expertise ordinarily ascribed to the LA and the NLRC.59
Guided by the aforequoted doctrines, we find no reason to reverse the findings of the
CA.1âwphi1 The RTC has jurisdiction over the subject matter of respondent's complaint
praying for moral damages, exemplary damages, compensatory damages, anchored on
petitioner's alleged gross negligence in failing to provide a safe and healthy working
environment for respondent. WHEREFORE, the petition is DENIED. The Decision of the
Court of Appeals, dated May 30, 2005, and its Resolution dated January 10, 2006 in CA-G.R.
SP No. 83099 are hereby AFFIRMED.
SO ORDERED
G.R. No. 151372 January 28, 2008
REGINA M. ASTORGA, petitioner,
vs.
SMART COMMUNICATIONS, INC. and ANN MARGARET V. SANTIAGO, respondents.
DECISION
NACHURA, J.:
For the resolution of the Court are three consolidated petitions for review on certiorari under
Rule 45 of the Rules of Court. G.R. No. 148132 assails the February 28, 2000 Decision 1 and
the May 7, 2001 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP. No. 53831. G.R.
Nos. 151079 and 151372 question the June 11, 2001 Decision3 and the December 18, 2001
Resolution4 in CA-G.R. SP. No. 57065.
Regina M. Astorga (Astorga) was employed by respondent Smart Communications,
Incorporated (SMART) on May 8, 1997 as District Sales Manager of the Corporate Sales
Marketing Group/ Fixed Services Division (CSMG/FSD). She was receiving a monthly salary
of P33,650.00. As District Sales Manager, Astorga enjoyed additional benefits, namely,
annual performance incentive equivalent to 30% of her annual gross salary, a group life and
hospitalization insurance coverage, and a car plan in the amount of P455,000.00.5
In February 1998, SMART launched an organizational realignment to achieve more efficient
operations. This was made known to the employees on February 27, 1998. 6 Part of the
reorganization was the outsourcing of the marketing and sales force. Thus, SMART entered
into a joint venture agreement with NTT of Japan, and formed SMART-NTT Multimedia,
Incorporated (SNMI). Since SNMI was formed to do the sales and marketing work, SMART
abolished the CSMG/FSD, Astorga’s division.
To soften the blow of the realignment, SNMI agreed to absorb the CSMG personnel who
would be recommended by SMART. SMART then conducted a performance evaluation of
CSMG personnel and those who garnered the highest ratings were favorably recommended
to SNMI. Astorga landed last in the performance evaluation, thus, she was not recommended
by SMART. SMART, nonetheless, offered her a supervisory position in the Customer Care
Department, but she refused the offer because the position carried lower salary rank and
rate.
Despite the abolition of the CSMG/FSD, Astorga continued reporting for work. But on March
3, 1998, SMART issued a memorandum advising Astorga of the termination of her
employment on ground of redundancy, effective April 3, 1998. Astorga received it on March
16, 1998.7
The termination of her employment prompted Astorga to file a Complaint8 for illegal dismissal,
non-payment of salaries and other benefits with prayer for moral and exemplary damages
against SMART and Ann Margaret V. Santiago (Santiago). She claimed that abolishing
CSMG and, consequently, terminating her employment was illegal for it violated her right to
security of tenure. She also posited that it was illegal for an employer, like SMART, to
contract out services which will displace the employees, especially if the contractor is an in-
house agency.9
SMART responded that there was valid termination. It argued that Astorga was dismissed by
reason of redundancy, which is an authorized cause for termination of employment, and the
dismissal was effected in accordance with the requirements of the Labor Code. The
redundancy of Astorga’s position was the result of the abolition of CSMG and the creation of
a specialized and more technically equipped SNMI, which is a valid and legitimate exercise of
management prerogative.10
In the meantime, on May 18, 1998, SMART sent a letter to Astorga demanding that she pay
the current market value of the Honda Civic Sedan which was given to her under the
company’s car plan program, or to surrender the same to the company for proper
disposition.11 Astorga, however, failed and refused to do either, thus prompting SMART to file
a suit for replevin with the Regional Trial Court of Makati (RTC) on August 10, 1998. The
case was docketed as Civil Case No. 98-1936 and was raffled to Branch 57.12
Astorga moved to dismiss the complaint on grounds of (i) lack of jurisdiction; (ii) failure to
state a cause of action; (iii) litis pendentia; and (iv) forum-shopping. Astorga posited that the
regular courts have no jurisdiction over the complaint because the subject thereof pertains to
a benefit arising from an employment contract; hence, jurisdiction over the same is vested in
the labor tribunal and not in regular courts.13
Pending resolution of Astorga’s motion to dismiss the replevin case, the Labor Arbiter
rendered a Decision14 dated August 20, 1998, declaring Astorga’s dismissal from
employment illegal. While recognizing SMART’s right to abolish any of its departments, the
Labor Arbiter held that such right should be exercised in good faith and for causes beyond its
control. The Arbiter found the abolition of CSMG done neither in good faith nor for causes
beyond the control of SMART, but a ploy to terminate Astorga’s employment. The Arbiter also
ruled that contracting out the functions performed by Astorga to an in-house agency like
SNMI was illegal, citing Section 7(e), Rule VIII-A of the Rules Implementing the Labor Code.
Accordingly, the Labor Arbiter ordered:
WHEREFORE, judgment is hereby rendered declaring the dismissal of [Astorga] to
be illegal and unjust. [SMART and Santiago] are hereby ordered to:
1. Reinstate [Astorga] to [her] former position or to a substantially equivalent position,
without loss of seniority rights and other privileges, with full backwages, inclusive of
allowances and other benefits from the time of [her] dismissal to the date of
reinstatement, which computed as of this date, are as follows:
(a) Astorga
BACKWAGES; (P33,650.00 x 4 months) = P134,600.00
Subsequently, on March 29, 1999, the RTC issued an Order 16 denying Astorga’s motion to
dismiss the replevin case. In so ruling, the RTC ratiocinated that:
Assessing the [submission] of the parties, the Court finds no merit in the motion to
dismiss.
As correctly pointed out, this case is to enforce a right of possession over a company
car assigned to the defendant under a car plan privilege arrangement. The car is
registered in the name of the plaintiff. Recovery thereof via replevin suit is allowed by
Rule 60 of the 1997 Rules of Civil Procedure, which is undoubtedly within the
jurisdiction of the Regional Trial Court.
In the Complaint, plaintiff claims to be the owner of the company car and despite
demand, defendant refused to return said car. This is clearly sufficient statement of
plaintiff’s cause of action.
Neither is there forum shopping. The element of litis penden[t]ia does not appear to
exist because the judgment in the labor dispute will not constitute res judicata to bar
the filing of this case.
WHEREFORE, the Motion to Dismiss is hereby denied for lack of merit.

UNPAID SALARIES (February 15, 1998-April 3,

SO ORDERED.17
1998
February 15-28, 1998 = P 16,823.00 Astorga filed a motion for reconsideration, but the RTC denied it on June 18, 1999. 18
March 1-31, [1998] = P 33,650.00
April 1-3, 1998 = P 3,882.69 Astorga elevated the denial of her motion via certiorari to the CA, which, in its February 28,
2000 Decision,19reversed the RTC ruling. Granting the petition and, consequently, dismissing
CAR MAINTENANCE ALLOWANCE = P 8,000.00 the replevin case, the CA held that the case is intertwined with Astorga’s complaint for illegal
(P2,000.00 x 4) dismissal; thus, it is the labor tribunal that has rightful jurisdiction over the complaint.
FUEL ALLOWANCE = P 14,457.83 SMART’s motion for reconsideration having been denied,20 it elevated the case to this Court,
(300 liters/mo. x 4 mos. at P12.04/liter) now docketed as G.R. No. 148132.
TOTAL = P211,415.52
Meanwhile, SMART also appealed the unfavorable ruling of the Labor Arbiter in the illegal
dismissal case to the National Labor Relations Commission (NLRC). In its September 27,
xxxx 1999 Decision,21 the NLRC sustained Astorga’s dismissal. Reversing the Labor Arbiter, the
NLRC declared the abolition of CSMG and the creation of SNMI to do the sales and
3. Jointly and severally pay moral damages in the amount of P500,000.00 x x x and marketing services for SMART a valid organizational action. It overruled the Labor Arbiter’s
exemplary damages in the amount of P300,000.00. x x x ruling that SNMI is an in-house agency, holding that it lacked legal basis. It also declared that
contracting, subcontracting and streamlining of operations for the purpose of increasing
4. Jointly and severally pay 10% of the amount due as attorney’s fees. efficiency are allowed under the law. The NLRC further found erroneous the Labor Arbiter’s
disquisition that redundancy to be valid must be impelled by economic reasons, and upheld
SO ORDERED.15 the redundancy measures undertaken by SMART.
The NLRC disposed, thus:
WHEREFORE, the Decision of the Labor Arbiter is hereby reversed and set aside.
[Astorga] is further ordered to immediately return the company vehicle assigned to
her. [Smart and Santiago] are hereby ordered to pay the final wages of [Astorga] after
[she] had submitted the required supporting papers therefor.
SO ORDERED.22
Astorga filed a motion for reconsideration, but the NLRC denied it on December 21, 1999. 23
Astorga then went to the CA via certiorari. On June 11, 2001, the CA rendered a
Decision24 affirming with modification the resolutions of the NLRC. In gist, the CA agreed with
the NLRC that the reorganization undertaken by SMART resulting in the abolition of CSMG
was a legitimate exercise of management prerogative. It rejected Astorga’s posturing that her
non-absorption into SNMI was tainted with bad faith. However, the CA found that SMART
failed to comply with the mandatory one-month notice prior to the intended termination.
Accordingly, the CA imposed a penalty equivalent to Astorga’s one-month salary for this non-
compliance. The CA also set aside the NLRC’s order for the return of the company vehicle
holding that this issue is not essentially a labor concern, but is civil in nature, and thus, within
the competence of the regular court to decide. It added that the matter had not been fully
ventilated before the NLRC, but in the regular court.
Astorga filed a motion for reconsideration, while SMART sought partial reconsideration, of the
Decision. On December 18, 2001, the CA resolved the motions, viz.:
WHEREFORE, [Astorga’s] motion for reconsideration is hereby PARTIALLY
GRANTED. [Smart] is hereby ordered to pay [Astorga] her backwages from 15
February 1998 to 06 November 1998. [Smart’s] motion for reconsideration is
outrightly DENIED.
SO ORDERED.25
Astorga and SMART came to us with their respective petitions for review assailing the CA
ruling, docketed as G.R Nos. 151079 and 151372. On February 27, 2002, this Court ordered
the consolidation of these petitions with G.R. No. 148132.26
In her Memorandum, Astorga argues:
I CONSIDERING THAT IN THE SERRANO CASE THERE WAS ABSOLUTELY NO
THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF
ASTORGA’S DISMISSAL DESPITE THE FACT THAT HER DISMISSAL WAS
EFFECTED IN CLEAR VIOLATION OF THE CONSTITUTIONAL RIGHT TO
SECURITY OF TENURE, CONSIDERING THAT THERE WAS NO GENUINE
GROUND FOR HER DISMISSAL.
II
SMART’S REFUSAL TO REINSTATE ASTORGA DURING THE PENDENCY OF
THE APPEAL AS REQUIRED BY ARTICLE 223 OF THE LABOR CODE, ENTITLES
ASTORGA TO HER SALARIES DURING THE PENDENCY OF THE APPEAL.
III
THE COURT OF APPEALS WAS CORRECT IN HOLDING THAT THE REGIONAL
TRIAL COURT HAS NO JURISDICTION OVER THE COMPLAINT FOR
RECOVERY OF A CAR WHICH ASTORGA ACQUIRED AS PART OF HER
EMPLOYEE (sic) BENEFIT.27
On the other hand, Smart in its Memoranda raises the following issues:
I
WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION
OF SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD WITH LAW OR WITH
APPLICABLE DECISION OF THE HONORABLE SUPREME COURT AND HAS SO
FAR DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE POWER OF
SUPERVISION WHEN IT RULED THAT SMART DID NOT COMPLY WITH THE
NOTICE REQUIREMENTS PRIOR TO TERMINATING ASTORGA ON THE
GROUND OF REDUNDANCY.
II
WHETHER THE NOTICES GIVEN BY SMART TO ASTORGA AND THE
DEPARTMENT OF LABOR AND EMPLOYMENT ARE SUBSTANTIAL
COMPLIANCE WITH THE NOTICE REQUIREMENTS BEFORE TERMINATION.
III
WHETHER THE RULE ENUNCIATED IN SERRANO VS. NATIONAL LABOR
RELATIONS COMMISSION FINDS APPLICATION IN THE CASE AT BAR
NOTICE AT ALL.28
IV
 WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION
OF SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD WITH LAW OR WITH
APPLICABLE DECISION[S] OF THE HONORABLE SUPREME COURT AND HAS
SO FAR DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE POWER OF
SUPERVISION WHEN IT RULED THAT THE REGIONAL TRIAL COURT DOES
NOT HAVE JURISDICTION OVER THE COMPLAINT FOR REPLEVIN FILED BY
SMART TO RECOVER ITS OWN COMPANY VEHICLE FROM A FORMER
EMPLOYEE WHO WAS LEGALLY DISMISSED.
V
WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO
APPRECIATE THAT THE SUBJECT OF THE REPLEVIN CASE IS NOT THE
ENFORCEMENT OF A CAR PLAN PRIVILEGE BUT SIMPLY THE RECOVERY OF
A COMPANY CAR.
VI
WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO
APPRECIATE THAT ASTORGA CAN NO LONGER BE CONSIDERED AS AN
EMPLOYEE OF SMART UNDER THE LABOR CODE.29
The Court shall first deal with the propriety of dismissing the replevin case filed with the RTC
of Makati City allegedly for lack of jurisdiction, which is the issue raised in G.R. No. 148132.
Replevin is an action whereby the owner or person entitled to repossession of goods or
chattels may recover those goods or chattels from one who has wrongfully distrained or
taken, or who wrongfully detains such goods or chattels. It is designed to permit one having
right to possession to recover property in specie from one who has wrongfully taken or
detained the property.30 The term may refer either to the action itself, for the recovery of
personalty, or to the provisional remedy traditionally associated with it, by which possession
of the property may be obtained by the plaintiff and retained during the pendency of the
action.31
That the action commenced by SMART against Astorga in the RTC of Makati City was one
for replevin hardly admits of doubt.
In reversing the RTC ruling and consequently dismissing the case for lack of jurisdiction, the
CA made the following disquisition, viz.:
[I]t is plain to see that the vehicle was issued to [Astorga] by [Smart] as part of the
employment package. We doubt that [SMART] would extend [to Astorga] the same
car plan privilege were it not for her employment as district sales manager of the
company. Furthermore, there is no civil contract for a loan between [Astorga] and
[Smart]. Consequently, We find that the car plan privilege is a benefit arising out of
employer-employee relationship. Thus, the claim for such falls squarely within the
original and exclusive jurisdiction of the labor arbiters and the NLRC.32
We do not agree. Contrary to the CA’s ratiocination, the RTC rightfully assumed jurisdiction
over the suit and acted well within its discretion in denying Astorga’s motion to dismiss.
SMART’s demand for payment of the market value of the car or, in the alternative, the
surrender of the car, is not a labor, but a civil, dispute. It involves the relationship of debtor
and creditor rather than employee-employer relations.33 As such, the dispute falls within the
jurisdiction of the regular courts.
In Basaya, Jr. v. Militante,34 this Court, in upholding the jurisdiction of the RTC over the
replevin suit, explained:
Replevin is a possessory action, the gist of which is the right of possession in the
plaintiff. The primary relief sought therein is the return of the property in specie
wrongfully detained by another person. It is an ordinary statutory proceeding to
adjudicate rights to the title or possession of personal property. The question of
whether or not a party has the right of possession over the property involved and if
so, whether or not the adverse party has wrongfully taken and detained said property
as to require its return to plaintiff, is outside the pale of competence of a labor tribunal
and beyond the field of specialization of Labor Arbiters.
xxxx
The labor dispute involved is not intertwined with the issue in the Replevin Case. The
respective issues raised in each forum can be resolved independently on the other.
In fact in 18 November 1986, the NLRC in the case before it had issued an Injunctive
Writ enjoining the petitioners from blocking the free ingress and egress to the Vessel
and ordering the petitioners to disembark and vacate. That aspect of the controversy
is properly settled under the Labor Code. So also with petitioners’ right to picket. But
the determination of the question of who has the better right to take possession of the
Vessel and whether petitioners can deprive the Charterer, as the legal possessor of
the Vessel, of that right to possess in addressed to the competence of Civil Courts.
In thus ruling, this Court is not sanctioning split jurisdiction but defining avenues of
jurisdiction as laid down by pertinent laws.
The CA, therefore, committed reversible error when it overturned the RTC ruling and ordered
the dismissal of the replevin case for lack of jurisdiction.
Having resolved that issue, we proceed to rule on the validity of Astorga’s dismissal.
Astorga was terminated due to redundancy, which is one of the authorized causes for the
dismissal of an employee. The nature of redundancy as an authorized cause for dismissal is
explained in the leading case of Wiltshire File Co., Inc. v. National Labor Relations
Commission,35 viz:
x x x redundancy in an employer’s personnel force necessarily or even ordinarily
refers to duplication of work. That no other person was holding the same position that
private respondent held prior to termination of his services does not show that his
position had not become redundant. Indeed, in any well organized business
enterprise, it would be surprising to find duplication of work and two (2) or more
people doing the work of one person. We believe that redundancy, for purposes of
the Labor Code, exists where the services of an employee are in excess of what is
reasonably demanded by the actual requirements of the enterprise. Succinctly put, a
position is redundant where it is superfluous, and superfluity of a position or positions
may be the outcome of a number of factors, such as overhiring of workers,
decreased volume of business, or dropping of a particular product line or service
activity previously manufactured or undertaken by the enterprise.
The characterization of an employee’s services as superfluous or no longer necessary and,
therefore, properly terminable, is an exercise of business judgment on the part of the
employer. The wisdom and soundness of such characterization or decision is not subject to
discretionary review provided, of course, that a violation of law or arbitrary or malicious action
is not shown.36
Astorga claims that the termination of her employment was illegal and tainted with bad faith.
She asserts that the reorganization was done in order to get rid of her. But except for her
barefaced allegation, no convincing evidence was offered to prove it. This Court finds it
extremely difficult to believe that SMART would enter into a joint venture agreement with
NTT, form SNMI and abolish CSMG/FSD simply for the sole purpose of easing out a
particular employee, such as Astorga. Moreover, Astorga never denied that SMART offered
her a supervisory position in the Customer Care Department, but she refused the offer
because the position carried a lower salary rank and rate. If indeed SMART simply wanted to
get rid of her, it would not have offered her a position in any department in the enterprise.
Astorga also states that the justification advanced by SMART is not true because there was
no compelling economic reason for redundancy. But contrary to her claim, an employer is not
precluded from adopting a new policy conducive to a more economical and effective
management even if it is not experiencing economic reverses. Neither does the law require
that the employer should suffer financial losses before he can terminate the services of the
employee on the ground of redundancy. 37
We agree with the CA that the organizational realignment introduced by SMART, which
culminated in the abolition of CSMG/FSD and termination of Astorga’s employment was an
honest effort to make SMART’s sales and marketing departments more efficient and
competitive. As the CA had taken pains to elucidate:
x x x a careful and assiduous review of the records will yield no other conclusion than
that the reorganization undertaken by SMART is for no purpose other than its
declared objective – as a labor and cost savings device. Indeed, this Court finds no
fault in SMART’s decision to outsource the corporate sales market to SNMI in order
to attain greater productivity. [Astorga] belonged to the Sales Marketing Group under
the Fixed Services Division (CSMG/FSD), a distinct sales force of SMART in charge
of selling SMART’s telecommunications services to the corporate market. SMART, to
ensure it can respond quickly, efficiently and flexibly to its customer’s requirement,
abolished CSMG/FSD and shortly thereafter assigned its functions to newly-created
SNMI Multimedia Incorporated, a joint venture company of SMART and NTT of
Japan, for the reason that CSMG/FSD does not have the necessary technical
expertise required for the value added services. By transferring the duties of
CSMG/FSD to SNMI, SMART has created a more competent and specialized
organization to perform the work required for corporate accounts. It is also relieved
SMART of all administrative costs – management, time and money-needed in
maintaining the CSMG/FSD. The determination to outsource the duties of the
CSMG/FSD to SNMI was, to Our mind, a sound business judgment based on
relevant criteria and is therefore a legitimate exercise of management prerogative.
Indeed, out of our concern for those lesser circumstanced in life, this Court has inclined
towards the worker and upheld his cause in most of his conflicts with his employer. This
favored treatment is consonant with the social justice policy of the Constitution. But while
tilting the scales of justice in favor of workers, the fundamental law also guarantees the right
of the employer to reasonable returns for his investment.38 In this light, we must acknowledge
the prerogative of the employer to adopt such measures as will promote greater efficiency,
reduce overhead costs and enhance prospects of economic gains, albeit always within the
framework of existing laws. Accordingly, we sustain the reorganization and redundancy
program undertaken by SMART.
However, as aptly found by the CA, SMART failed to comply with the mandated one (1)
month notice prior to termination. The record is clear that Astorga received the notice of
termination only on March 16, 199839 or less than a month prior to its effectivity on April 3,
1998. Likewise, the Department of Labor and Employment was notified of the redundancy
program only on March 6, 1998.40
Article 283 of the Labor Code clearly provides:
Art. 283. Closure of establishment and reduction of personnel. — The employer may
also terminate the employment of any employee due to the installation of labor saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of
operation of the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the workers
and the Ministry of Labor and Employment at least one (1) month before the intended
date thereof x x x.
SMART’s assertion that Astorga cannot complain of lack of notice because the organizational
realignment was made known to all the employees as early as February 1998 fails to
persuade. Astorga’s actual knowledge of the reorganization cannot replace the formal and
written notice required by the law. In the written notice, the employees are informed of the
specific date of the termination, at least a month prior to the effectivity of such termination, to
give them sufficient time to find other suitable employment or to make whatever
arrangements are needed to cushion the impact of termination. In this case, notwithstanding
Astorga’s knowledge of the reorganization, she remained uncertain about the status of her
employment until SMART gave her formal notice of termination. But such notice was received
by Astorga barely two (2) weeks before the effective date of termination, a period very much
shorter than that required by law.
Be that as it may, this procedural infirmity would not render the termination of Astorga’s
employment illegal. The validity of termination can exist independently of the procedural
infirmity of the dismissal.41 In DAP Corporation v. CA,42 we found the dismissal of the
employees therein valid and for authorized cause even if the employer failed to comply with
the notice requirement under Article 283 of the Labor Code. This Court upheld the dismissal,
but held the employer liable for non-compliance with the procedural requirements.
The CA, therefore, committed no reversible error in sustaining Astorga’s dismissal and at the
same time, awarding indemnity for violation of Astorga's statutory rights.
However, we find the need to modify, by increasing, the indemnity awarded by the CA to
Astorga, as a sanction on SMART for non-compliance with the one-month mandatory notice
requirement, in light of our ruling in Jaka Food Processing Corporation v. Pacot,43 viz.:
[I]f the dismissal is based on a just cause under Article 282 but the employer failed to
comply with the notice requirement, the sanction to be imposed upon him should
be tempered because the dismissal process was, in effect, initiated by an act
imputable to the employee, and (2) if the dismissal is based on an authorized cause
under Article 283 but the employer failed to comply with the notice requirement, the
sanction should be stiffer because the dismissal process was initiated by the
employer’s exercise of his management prerogative.
We deem it proper to increase the amount of the penalty on SMART to P50,000.00.
As provided in Article 283 of the Labor Code, Astorga is, likewise, entitled to separation pay
equivalent to at least one (1) month salary or to at least one (1) month’s pay for every year of
service, whichever is higher. The records show that Astorga’s length of service is less than a
year. She is, therefore, also entitled to separation pay equivalent to one (1) month pay.
Finally, we note that Astorga claimed non-payment of wages from February 15, 1998. This
assertion was never rebutted by SMART in the proceedings a quo. No proof of payment was
presented by SMART to disprove the allegation. It is settled that in labor cases, the burden of
proving payment of monetary claims rests on the employer.44 SMART failed to discharge
the onus probandi. Accordingly, it must be held liable for Astorga’s salary from February 15,
1998 until the effective date of her termination, on April 3, 1998.
However, the award of backwages to Astorga by the CA should be deleted for lack of basis.
Backwages is a relief given to an illegally dismissed employee. Thus, before backwages may
be granted, there must be a finding of unjust or illegal dismissal from work. 45 The Labor
Arbiter ruled that Astorga was illegally dismissed. But on appeal, the NLRC reversed the
Labor Arbiter’s ruling and categorically declared Astorga’s dismissal valid. This ruling was
affirmed by the CA in its assailed Decision. Since Astorga’s dismissal is for an authorized
cause, she is not entitled to backwages. The CA’s award of backwages is totally inconsistent
with its finding of valid dismissal.
WHEREFORE, the petition of SMART docketed as G.R. No. 148132 is GRANTED. The
February 28, 2000 Decision and the May 7, 2001 Resolution of the Court of Appeals in CA-
G.R. SP. No. 53831 are SET ASIDE. The Regional Trial Court of Makati City, Branch 57
is DIRECTED to proceed with the trial of Civil Case No. 98-1936 and render its Decision with
reasonable dispatch.
On the other hand, the petitions of SMART and Astorga docketed as G.R. Nos. 151079 and
151372 are DENIED. The June 11, 2001 Decision and the December 18, 2001 Resolution in
CA-G.R. SP. No. 57065, are AFFIRMED with MODIFICATION. Astorga is declared validly
dismissed. However, SMART is ordered to pay Astorga P50,000.00 as indemnity for its non-
compliance with procedural due process, her separation pay equivalent to one (1) month pay,
and her salary from February 15, 1998 until the effective date of her termination on April 3,
1998. The award of backwages is DELETED for lack of basis.
SO ORDERED.
G.R. No. 181393 July 28, 2009
GRANDTEQ INDUSTRIAL STEEL PRODUCTS, INC. and ABELARDO M.
GONZALES, Petitioners,
vs.
EDNA MARGALLO, Respondent.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the b) 2 pcs. tool steel 4140 – 1"x 2’ x 3’
Decision1 dated 21 January 2008 of the Court of Appeals in CA-G.R. SP No. 100012, which
affirmed the Decision2 dated 18 October 2006, as modified by the Resolution3 dated 21 May 3) That you are working with JVM Industrial Supply and Allied Services
2007, of the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 045888-05. concurrent with your being employed with Grandteq Industrial Steel
The NLRC effectively reversed the Decision4 dated 11 July 2005 of the Labor Arbiter in NLRC Products, Inc.
NCR Case No. 00-09-10803-04, which entirely dismissed the Complaint filed by respondent
Edna Margallo (Margallo) against petitioners Grandteq Industrial Steel Products, Inc.
4) That JVM Industrial Supply and Allied Services are supplying steel
(Grandteq) and Abelardo M. Gonzales (Gonzales); and, instead, ordered Grandteq and products to Moog Control Corp. Phils. Branch which is also a client of
Gonzales to refund to Margallo her car loan payments, as well as to pay the latter sales Grandteq and which you are the authorized salesman of the company.
commission and attorney’s fees.
Because of this, you are given a (sic) twenty-four (24) hours upon receipt of this letter to
Grandteq is a domestic corporation engaged in the business of selling welding electrodes,
submit a written explanation on why you should not be given a disciplinary action for allegedly
alloy steels, aluminum and copper alloys.5 Gonzales is the President/Owner of violating/committing:
Grandteq.6 Grandteq employed Margallo as Sales Engineer beginning 3 August 1999.7
a) Moonlighting
Margallo claimed that on an unstated date, she availed herself of the car loan program
offered to her by Grandteq as a reward for being "Salesman of the Year." She paid the down
payment on a brand new Toyota Corolla,8amounting to ₱201,000.00, out of her own pocket. b) Sabotage
The monthly amortization for the car was ₱10,302.00, of which ₱5,302.00 was to be her
share and ₱5,000.00 was to be the share of Grandteq. c) Breach of trust and confidence (labor code).

On 29 December 2003, Margallo received a letter9 signed by Gonzales and Rolando de Leon You are also invited to attend a meeting with regards to the allegations on Jan. 5, 2004 at
(De Leon), Vice-President for Administration of Grandteq, which reads: 10:00 a.m. You may bring with you a lawyer or any representative to assist you on (sic) the
said meeting.
Mrs. Edna E. Margallo
c/o Grandteq Industrial Failure on your part to submit a written explanation on the specified period and failure to
Steel Products, Inc. attend the hearing would mean that you are waiving your rights to be heard and the
#2 Cooper St., cor. Benitez appropriate action will be taken against you.
SFDM, Quezon City
Moreover, to protect the evidences and witnesses against you, management has decided to
Dear Mrs. Margallo: place you under preventive suspension effective December 29, 2003.

This is to inform you that our records show the following: Very truly yours,

1) That, last December 18, 2003, you instructed our company driver and (Signed) (Signed)
helper to load 4 pcs. tool steel to be delivered at circle freight. Abelardo M. Gonzales Ronaldo A. de Leon
President VP - Administration
2) That together with Mr. Steve Rivera, on or about 12:00 noon, you went at
(sic) Eagle Global Logistics at Circle Freight, NAIA, Parañaque City to ship Responding to the foregoing letter, Margallo wrote the following letter-reply dated 30
the following items to Moog Control Corp. Phils. Branch located at Baguio December 2003:
Ecozone, Baguio City, using the Sales Invoice of JVM Industrial Supply and
Allied Services.
December 30, 2003

a) 2 pcs. tool steel 4140 – ¾" x 2’x 3’


To: Mr. Abelardo M. Gonzales
President
Thru: Mr. Ronald A. de Leon
VP – Administration
Dear Sir,
Last December 18, 2003, Mr. Steve D. Rivera instructed me to tell to our delivery people to
bring the said item to circle freight. Which I did that (sic) I thought it was ok because it was
inside the company. Sir I was just following orders from Mr. D. Rivera who is one of my boss
(sic). Sir, what I did is the same thing that I’ve been doing with my other bosses. That i[f] they
instructed me to do things I immediately follow. Because I am only an employee. Sir never
that I work with JVM (sic).
Sir im (sic) sorry if I did wrong by not asking what to do. Which I think an ordinary employee
like me would do is to follow orders from my superiors.
IM SO SORRY SIR IF I FAIL YOU.
(Signed)
Edna E. Margallo10
Margallo then averred that in January 2004, De Leon asked her to just resign, promising that
if she did, she would still be paid her commissions and other benefits, as well as be
reimbursed her car loan payments. Relying on De Leon’s promise, Margallo tendered on 13
January 2004, her irrevocable resignation, effective immediately. 11
Margallo, however, alleged that she was never paid her money claims. Grandteq failed to pay
her commissions in the sum of ₱87,508.00, equivalent to 5% of the total sales that she
collected as of January 2004, which amounted to ₱1,750,148.84. Grandteq likewise failed to
refund the "sales accommodations" or advances she gave her customers. In addition, after
Margallo’s resignation, Grandteq sold her car to Annaliza Estrella, another employee, for
₱550,000.00.12 These events prompted her to file before the Labor Arbiter a
Complaint13 against Grandteq and Gonzales, for recovery of sales commission, cash
incentive and car loan payment, damages and attorney fees, which was docketed as NLRC
Case No. 0009-108-03-04.
Grandteq and Gonzales opposed Margallo’s claims. They maintained that Margallo was not
entitled to sales commissions because the computation thereof, according to company policy,
should be based on actual collections within 180 days from invoice date. All of Margallo’s
credit sales transactions were unpaid, outstanding, and past due. Margallo was also not
entitled to any sales incentive, because said benefit was intended for customers, and not for
the sales personnel.14 Grandteq and Gonzales further insisted that Margallo had no right to
the refund of her car loan payments under the car loan agreement she executed with
Grandteq, which expressly provided that in the event that Margallo resigned or was
terminated for cause during the effectivity of said agreement, her car loan payments would be
forfeited in favor of Grandteq, and Grandteq would regain possession of the car.
The Labor Arbiter rendered a Decision on 11 July 2005, dismissing all of Margallo’s claims,
thus:
WHEREFORE, premises considered, judgment is hereby rendered dismissing the instant
case for lack of merit.15
The Labor Arbiter held that Margallo was not able to prove by substantial evidence her
entitlement to the sales commission:
After a careful review of the records, this Office finds that considering [Margallo] already
receives a basic salary plus allowances, her claim for sales commission is therefore an added
benefit wholly dependent upon her sales performance based on existing company policy. As
such, it is an affirmative allegation or claim that is not normally included in the regular course
of business and for which law presumes that an employee is generally not entitled to. Thus, it
behooves, upon the employee to prove that he is entitled to said affirmative allegations and
the onus is upon him to establish his right thereto (see Eternit Employees and Workers
Unions vs. De Veyra, 189 SCRA 752 and Nucum vs. Inciong, 204 SCRA 697).
In the instant case, this Office finds [Margallo] to have failed to substantially discharge her
burden of proving that she is entitled to the ₱87,508.00 in sales commissions since other than
her bare allegations, [Margallo] did not show any other proof, including prior payment of said
sales commissions, to justify her claim.
And, quite noteworthy too is that under the [Grandteq]’s policy, rules and regulations on the
grant of sales commissions, the computation thereof shall be based on actual collection
against all sales on credit and the validity of the said commission shall be 180 days from
invoice dates; otherwise, the salesman shall not be entitled thereto and forfeits any right to
demand payment of the commission thereon as the sales are considered bad debts as
uncollectible. Since the records of [Grandteq] showed that [Margallo]’s credit sales remain
unpaid and outstanding for over 180 days, [Margallo] is therefore not entitled to sales
commissions.
No denial whatsoever of the above-discussed company policy was made by [Margallo] in her
Reply.
Thus, having failed to establish entitlement to said sales commission, the same is hereby
denied.16
For a similar reason, the Labor Arbiter denied Margallo’s claim for payment of cash incentive:
As regards to cash incentives, once again this Office finds that the same is also an affirmative
allegation and the burden of proving entitlement thereto rests upon the employee. And having
failed to even mention how much of the alleged cash incentive she is entitled to in Annexes
"A" and "2-a" of her position paper, the same is hereby denied.17
Finally, the Labor Arbiter found that Margallo had no right to the reimbursement of her car
loan payments under her car loan agreement with Grandteq:
And as regards of (sic) the car loan, the same should be governed by the undisputed terms
and conditions of the Agreement between complainant and respondent company (Annex "A"
of respondents’ position paper). And page 2 of said Agreement clearly stipulates that in case
of resignation, all payments made by the personnel shall be forfeited in favor of the company.
Thus, the claim for refund of the car loan should likewise be denied.18
Margallo filed an appeal with the NLRC, docketed as NLRC NCR CA No. 045888-05.
Although the NLRC, in its Decision dated 18 October 2006, stated that it merely "modified"
the Decision dated 11 July 2005 of the Labor Arbiter, it effectively reversed the same by
granting Margallo her claims for sales commission, reimbursement of her car loan payments,
and attorney’s fees. The fallo of the NLRC Decision is quoted below:
WHEREFORE, the decision appealed from is hereby MODIFIED. [Herein petitioners]
Grandteq Industrial Products, Inc. and/or its President/General Manager, [petitioner] Abelardo
M. Gonzales, are hereby ordered to refund to the [herein respondent Margallo] her car loan
payments amounting to ₱217,815.94 and to pay her the amount of ₱10,870.79 representing
her unpaid sales commissions plus ten percent (10%) of the total monetary award as
attorney’s fees.19
In ordering that Grandteq and Gonzales reimburse the car loan payments made by Margallo,
the NLRC reasoned:
It is unlikely for an employee who has invested his time and industry in a particular job to
simply give it up after being accused of violating company rules and regulations. It is more
likely that he did so upon the expectation that she would derive a certain benefit from it. Thus,
the claim that the [herein respondent Margalllo] resigned because she was promised that she
would be paid her money claims if she did, is more credible than the contention that she did
so without any prodding from the [herein petitioners Grandteq and Gonzales].
It would therefore appear that the provision, in the agreement (records, pp. 32-340) executed
by the parties, that "in case of resignation of the PERSONNEL from the COMPANY, all
payments made by the PERSONNEL shall be forfeited in favor of the COMPANY" has been
superseded by the above-mentioned subsequent agreement between the parties.
Besides, it is uncontroverted that the car loan program was offered to the complainant as a
reward for being the "Salesman of the Year." Moreover, nowhere in their pleadings did the
[petitioners Grandteq and Gonzales] controvert the claim that the [respondent Margallo] paid
the down payment, entire first amortization, insurance, and her share in the monthly
amortizations for seventeen months, or the total amount of ₱214,395.90 for the car. It is also
uncontroverted that after the [respondent Margallo]’s negotiated resignation, her car was
resold to another employee for the original price. Under the circumstances, the above-quoted
contractual provision is null and void for being contrary to morals, good customs, and public
policy. The law overrides contracts which are prepared by employers to circumvent the rights
of their employees (Baguio Country Club vs. NLRC, 206 SCRA 643). Thus, the above-quoted
contractual provision does not bar the [respondent Margallo] from recovering her car loan
payments from the [petitioners Grandteq and Gonzales].20
As for Margallo’s other claims, the NLRC affirmed her entitlement to the unpaid sales
commission, but not to the cash incentive:
Insofar as the [respondent Margallo]’s claim for unpaid sales commission is concerned, it is
noteworthy that in the list (records, pp. 16-18) of sales she adduced in evidence, the column
bearing the heading "collected" indicates that, as of January 2004, the total collections from
her sales amount to only ₱217,815.94. Since it is undisputed hat her sales commission are
equivalent to 5% of her collections, she may recover unpaid sales commissions amounting to
₱10,890.79. Finally, since there is no showing that the [respondent Margallo]’s claim for cash
incentive is based on a particular contract or company practice, it was correctly dismissed for
lack of merit.21
Grandteq and Gonzales filed a Motion for Reconsideration,22 while Margallo also filed an
Omnibus Motion for Partial Reconsideration and Issuance of Subpoena.23 The NLRC denied
the Motions for Reconsideration of all parties in a Resolution dated 21 May 2007, but
modified the NLRC Decision dated 18 October 2006 by slightly reducing the amount of car
loan payments to be refunded to Margallo:
WHEREFORE, the Motions for Reconsideration are hereby DENIED for lack of merit.
However, the dispositive portion of this Commission’s (2nd Division) October 18, 2006
Decision is hereby corrected to read:
WHEREFORE, the decision appealed from is hereby MODIFIED. [Herein petitioners]
Grandteq Industrial Products, Inc. and/or its President/General Manager, [petitioner] Abelardo
M. Gonzales, are hereby ordered to refund to [herein respondent Margallo] her car loan
payments amounting to ₱214,395.90 and to pay her the amount of ₱10,870.79 representing
her unpaid sales commissions plus ten percent (10%) of the total monetary award as
attorney’s fees.24
Grandteq and Gonzales elevated the case to the Court of Appeals by way of a Petition for
Certiorari, under Rule 65 of the Rules of Court, which was docketed as CA-G.R. SP No.
100012.lawphil
In its Decision dated 21 January 2008, the Court of Appeals agreed with the NLRC,
dismissing the therein Petition of Grandteq and Gonzales in this wise:
WHEREFORE, premises considered, the Petition is DENIED for lack of merit. Costs against
petitioners.25
Like the NLRC, the Court of Appeals found that Margallo had a right to be reimbursed her car
loan payments, and the terms of the car loan agreement between Margallo and Grandteq
should not be applied for being highly prejudicial to the employee’s interest:
Truly, the contracting parties may establish such stipulations, clauses, terms and conditions
as they want, and their agreement would have the force of law between them. However,
those terms and conditions agreed upon must not be contrary to law, morals, customs, public
policy or public order. Precisely, the law overrides such conditions which are prejudicial to the
interest of the worker. The law affords protection to an employee, and it will not countenance
any attempt to subvert its spirit and intent. The sheer inequality that characterizes employer-
employee relations, where the scales generally tip against the employee, often scarcely
provides him real and better options. Moreover, in controversies between a laborer and his
master, doubts reasonably arising from the evidence, or in the interpretation of agreements
and writing should be resolved in the former’s favor.26
The Court of Appeals likewise affirmed the order of the NLRC that Grandteq and Gonzales
pay Margallo her sales commission, placing the burden upon the employer to prove that the
employee’s money claims had been paid:
With respect to the unpaid sales commissions of ₱10,870.79 to be paid by petitioners in favor
of private respondent, it is incumbent upon petitioner employer to prove that said money
claim has been paid. This is in tune with the general precept that: "one who pleads payment
has the burden of proving it, and even where the employees must allege nonpayment, the
general rule is that the burden rests on the defendant to prove (payment), rather than on the
plaintiff to prove non-payment." The reason for the rule is that the pertinent personnel files,
payrolls, records, remittances and other similar documents – which will show that overtime,
differentials, service incentive leave and other claims of workers have been paid – are not in
the possession of the worker but in the custody and absolute control of the employer. In the
present case, petitioners [Grandteq and Gonzales] failed to discharge the burden of proving
that the amount of ₱10,870.79 representing [herein respondent Margallo]’s sales
commissions has already been paid to the latter. Thus, the NLRC (Second Division) did not
commit grave abuse of discretion in awarding said money claim in favor of [respondent
Margallo].27
Assiduous, Grandteq and Gonzales are now before this Court via the Petition at bar.
Grandteq and Gonzales assert that the Court of Appeals erred in declaring the car loan
agreement between Grandteq and Margallo, particularly the provision therein on the forfeiture
of car loan payments in favor of Grandteq should Margallo resign from the company, as null
and void.28
The Court, however, is in agreement with the Court of Appeals and the NLRC.
Generally speaking, contracts are respected as the law between the contracting parties. The
contracting parties may establish such stipulations, clauses, terms and conditions as they
may deem convenient, provided they are not contrary to law, morals, good customs, public
order or public policy.29
The questionable provision in the car loan agreement between Grandteq and Margallo
provides: "In case of resignation, of the personnel from the company, all payments made by
the personnel shall be forfeited in favor of the company."30 Connected thereto is the provision
in the same car loan agreement, which reads:
1. The COMPANY shall have the right to regain the possession of the car before the
expiration of the term of the loan in the event of any of the following:
a. The PERSONNEL resigns from the COMPANY during the effectivity of this agreement. 31
Said provisions plainly are contrary to the fundamental principles of justice and fairness. It
must be remembered that Margallo herself paid for the down payment and her share in the
monthly amortization of the car. However, she did not get to leave with the car when she
resigned from Grandteq. In effect, Margallo parted with her hard-earned money for nothing,
being left, as she is, with an empty bag. The inequitableness in the conduct of Grandteq and
Gonzales is heightened by the fact that after they regained possession of the car, they resold
the same to another employee under a similar contract bearing the same terms and
conditions signed by Margallo.
The principle that no person may unjustly enrich oneself at the expense of another (Nemo
cum alteris detrimento locupletari potest) is embodied in Article 22 of the New Civil Code, to
wit:
ART. 22. Every person who through an act of performance by another, or any other means,
acquires or comes into possession of something at the expense of the latter without just or
legal ground, shall return the same to him.
The above-quoted article is part of the chapter of the Civil Code on Human Relations, the
provisions of which were formulated as "basic principles to be observed for the rightful
relationship between human beings and for the stability of the social order; designed to
indicate certain norms that spring from the fountain of good conscience; [are] guides for
human conduct that should run as golden threads through society to the end that law may
approach its supreme ideal, which is the sway and dominance of justice." There is unjust
enrichment when a person unjustly retains a benefit at the loss of another, or when a person
retains the money or property of another against the fundamental principles of justice, equity
and good conscience.32
As can be gleaned from the foregoing, there is unjust enrichment when (1) a person is
unjustly benefited, and (2) such benefit is derived at the expense of or with damages to
another. The main objective of the principle of unjust enrichment is to prevent one from
enriching oneself at the expense of another. It is commonly accepted that this doctrine simply
means that a person shall not be allowed to profit or enrich himself inequitably at another’s
expense. One condition for invoking this principle is that the aggrieved party has no other
action based on a contract, quasi-contract, crime, quasi-delict, or any other provision of law.
This is not a case of equity overruling or supplanting a positive provision of law or judicial
rule. Rather, equity is exercised in this case "as the complement of legal jurisdiction [that]
seeks to reach and to complete justice where courts of law, through the inflexibility of their
rules and want of power to adapt their judgments to the special circumstances of cases, are
incompetent to do so."33
The principle against unjust enrichment obliges Grandteq and Gonzales to refund to Margallo
the car loan payments she had made, since she has not actually acquired the car. To relieve
Grandteq and Gonzales of their obligation to reimburse Margallo would, indeed, be to
sanction unjust enrichment in favor of the first two and cause unjust poverty to the latter.34
The Court rigorously disapproves contracts that demonstrate a clear attempt to exploit the
employee and deprive him of the protection sanctioned by both the Constitution and the
Labor Code.
The Constitution and the Labor Code mandate the protection of labor. Hence, as a matter of
judicial policy, this Court has, in a number of instances, leaned backwards to protect labor
and the working class against the machinations and incursions of their more financially
entrenched employers.35
Although not strictly a labor contract, the car loan agreement herein involves a benefit
extended by the employers, Grandteq and Gonzales, to their employee, Margallo. It should
benefit, and not unduly burden, Margallo. The Court cannot, in any way, uphold a car loan
agreement that threatens the employee with the forfeiture of all the car loan payments he/she
had previously made, plus loss of the possession of the car, should the employee wish to
resign; otherwise, said agreement can then be used by the employer as an instrument to
either hold said employee hostage to the job or punish him/her for resigning.
The Court further finds no error in the grant by the Court of Appeals and the NLRC of
Margallo’s claim for sales commission.
In cases involving money claims of employees, the employer has the burden of proving that
the employees did receive their wages and benefits and that the same were paid in
accordance with law.36
It is settled that once the employee has set out with particularity in his complaint, position
paper, affidavits and other documents the labor standard benefits he is entitled to, and which
the employer allegedly failed to pay him, it becomes the employer’s burden to prove that it
has paid these money claims. One who pleads payment has the burden of proving it; and
even where the employees must allege nonpayment, the general rule is that the burden rests
on the defendant to prove payment, rather than on the plaintiff to prove nonpayment. 37
Under the terms and conditions of Margallo’s employment with Grandteq, it is provided that
she "will do field sales with commission on sales made after a month’s training."38 On this
basis, Margallo’s entitlement to sales commission is unrebutted.
Hence, it was actually the Labor Arbiter who erred in denying Margallo’s claim for sales
commission "for failure to state the particulars to substantiate the same." Grandteq and
Gonzales have the burden of proof to show, by substantial evidence, their claim that Margallo
was not entitled to sales commissions because the sales made by the latter remained
outstanding and unpaid, rendering these sales as bad debts and thus nullifying Margallo’s
right to this monetary benefit. Grandteq and Gonzales could have presented pertinent
company records to prove this claim. It is a rule that failure of employers to submit the
necessary documents that are in their possession as employers gives rise to the presumption
that the presentation thereof is prejudicial to its cause.39
WHEREFORE, premises considered, the Petition is DENIED for lack of merit. The Decision
dated 21 January 2008 of the Court of Appeals in CA-GR SP No. 100012 is AFFIRMED.
Costs against petitioners Grandteq Industrial Steel Products, Inc. and Abelardo M. Gonzales.
SO ORDERED.
G.R. No. 141093 February 20, 2001
PRUDENTIAL BANK and TRUST COMPANY, petitioner,
vs.
CLARITA T. REYES, respondent.
GONZAGA-REYES, J.:
Before the Court is a petition for review on certiorari of the Decision,1 dated October 15, 1999
of the Court of Appeals in C.A.-G.R. SP No. 30607 and of its Resolution, dated December 6,
1999 denying petitioner's motion for reconsideration of said decision. The Court of Appeals
reversed and set aside the resolution2 of the National Labor Relations Commission (NLRC) in
NLRC NCR CA No.009364-95, reversing and setting aside the labor arbiter's decision and
dismissing for lack of merit private respondent's complaint.3
The case stems from NLRC NCR Case No.00-06-03462-92, which is a complaint for illegal
suspension and illegal dismissal with prayer for moral and exemplary damages, gratuity,
fringe benefits and attorney's fees filed by Clarita Tan Reyes against Prudential Bank and
Trust Company (the Bank) before the labor arbiter. Prior to her dismissal, private respondent
Reyes held the position of Assistant Vice President in the foreign department of the Bank,
tasked with the duties, among others, to collect checks drawn against overseas banks
payable in foreign currency and to ensure the collection of foreign bills or checks purchased,
including the signing of transmittal letters covering the same.
After proceedings duly undertaken by the parties, judgment was rendered by labor Arbiter
Cornelio L. Linsangan, the dispositive portion of which reads:
"WHEREFORE, finding the dismissal of complainant to be without factual and legal
basis, judgment is hereby rendered ordering the respondent bank to pay her back
wages for three (3) years in the amount of P540,000.00 (P15,000.00 x 36 mos.). In
lieu of reinstatement, the respondent is also ordered to pay complainant separation
pay equivalent to one month salary for every year of service, in the amount of
P420,000.00 (P15,000 x 28 mos.). In addition, the respondent should. also pay
complainant profit sharing and unpaid fringe benefits. Attorney's fees equivalent to
ten (10%) percent of the total award should likewise be paid by respondent.
SO ORDERED."4
Not satisfied, the Bank appealed to the NLRC which, as mentioned at the outset, reversed
the Labor Arbiter's decision in its Resolution dated 24 March 1997. Private respondent sought
reconsideration which, however, was denied by the NLRC in its Resolution of 28 July 1998.
Aggrieved, private respondent commenced on October 28, 1998, a petition for certiorari
before the Supreme Court.5 The subject petition was referred to the Court of Appeals for
appropriate action and disposition per resolution of this Court dated November 25, 1998, in
accordance with the ruling in St. Marlin Funeral Homes vs. NLRC.6
In its assailed decision, the Court of Appeals adopted the following antecedent facts leading
to Reyes's dismissal as summarized by the NLRC:
"The auditors of the Bank discovered that two checks, No.011728-7232-146, in the
amount of US$109,650.00, and No. 011730-7232-146, in the amount of
US$115,000.00, received by the Bank on April 6, 1989, drawn ,by the Sanford
Trading against Hongkong and Shanghai Banking Corporation, Jurong Branch,
Singapore, in favor of Filipinas Tyrom, were not sent out for collection to Hongkong
Shanghai Banking Corporation on the alleged order of the complainant until the said
checks became stale.
The Bank created a committee to investigate the findings of the auditors involving the
two checks which were not collected and became stale.
On March 8, 1991, the president of the Bank issued a memorandum to the
complainant informing her of the findings of the auditors and asked her to give her
side. In reply, complainant requested for an extension of one week to submit her
explanation. In a "subsequent letter, dated March 14, 1991, to the president,
complainant stated that in view of the refusal of the Bank that she be furnished
copies of the pertinent documents she is requesting and the refusal to grant her a
reasonable period to prepare her answer, she was constrained to make a general
denial of any misfeasance or malfeasance on her part and asked that a formal
investigation be made.
As the complainant failed to attend and participate in the formal investigation
conducted by the Committee on May 24, 1991, despite due notice, the Committee
proceeded with its hearings and heard the testimonies of several witnesses.
The Committee's findings were:
'a) The two (2) HSBC checks were received by the Foreign Department on 6
April 1989. On the same day, complainant authorized the crediting of the
account of Filipinas Tyrom in the amount of P4,780,102.70 corresponding to
the face value of the checks, (Exhibits 6, 22 to 22-A and 23 to 23-A). On the
following day, a transmittal letter was prepared by Ms. Cecilia Joven, a
remittance clerk then assigned in the Foreign Department, for the purpose of
sending out the two (2) HSBC checks for collection. She then requested
complainant to sign the said transmittal letters (Exhibits 1, 7 and 25; TSN, 11
March 1993, pp. 42-52), as it is complainant who gives her instructions
directly concerning the transmittal of foreign bills purchased. All other
transmittal letters are in fact signed by complainant.
b) After Ms. Joven delivered the transmittal letters and the checks to the
Accounting Section of the Foreign Department, complainant instructed her to
withdraw the same for the purpose of changing the addressee thereon from
American Express Bank to Bank of Hawaii (ibid.) under a special collection
scheme (Exhibits 4 and 5 to 5-B).
c) After complying with complainant's instruction, Ms. Joven then returned to
complainant for the latter to sign the new transmittal letters. However,
complainant told Ms. Joven to just hold on to the letters and checks and
await further instructions (ibid.). Thus, the new transmittal letters remained
unsigned. (See Exhibits 5 to 5-B).
d) In June 1989, Ms. Joven was transferred to another department. Hence,
her duties, responsibilities and functions, including the responsibility over the
two (2) HSBC checks, were turned over to another remittance clerk, Ms.
Analisa Castillo (Exhibit 14; TSN, 4 June 1993, pp. 27-29).
e) When asked by Ms. Castillo about the two (2) HSBC checks, Ms. Joven
relayed to the latter complainant's instruction (Exhibit 14; TSN, 4 June 1993,
p. 42).
f) About fifteen (15) months after the HSBC checks were received by the
Bank, the said checks were discovered in the course of an audit conducted
 by the Bank's auditors. Atty. Pablo Magno, the Bank's legal counsel, advised
complainant to send the checks for collection despite the lapse of fifteen (15)
months.
g) Complainant, however, deliberately withheld Atty. Magno's advice from her
superior, the Senior Vice-President, Mr. Renato Santos and falsely informed
the latter that Atty . Magno advised that a demand letter be sent instead,
thereby further delaying the collection of the HSBC checks.
h) On 10 July 1990, the HSBC checks were finally sent for collection, but
were returned on 16 July 1990 for the reason 'account closed' (Exhibits 2-A
and 3-A).'
After a review of the Committee's findings, the Board of Directors of the Bank
resolved not to re-elect complainant any longer to the position of assistant president
pursuant to the Bank's By-laws.
On July 19, 1991, complainant was informed of her termination of employment from
the Bank by Senior Vice President Benedicto L. Santos, in a letter the text of which is
quoted in full:
'Dear Mrs. Reyes:
After a thorough investigation and appreciation of the charges against you as
contained in the Memorandum of the President dated March 8, 1991, the
Fact Finding Committee which was created to investigate the commission
and/or omission of the acts alluded therein, has found the following:
1. You have deliberately held the clearing of Checks Nos. 11728 and 11730
of Hongkong and Shanghai Banking Corporation in the total amount of
US$224,650.00 by giving instructions to the collection clerk not to send the
checks for collection. In view thereof, when the said checks were finally sent
to clearing after the lapse of 15 months from receipt of said checks, they
were returned for the reason 'Account closed.' To date, the value of said
checks have not been paid by Filipinas Tyrom, which as payee of the checks,
had been credited with their peso equivalent;
2. You tried to influence the decision of Atty. Pablo P. Magno, Bank legal
counsel, by asking him to do something allegedly upon instructions of a
Senior Vice President of the Bank or else lose his job when in truth and in
fact no such instructions was given; and
3. You deliberately withheld from Mr. Santos, Senior Vice President, the
advice given by the legal counsel of the Bank which Mr. Santos had asked
you to seek. As a matter of fact, you even relayed a false advice which
delayed further the sending of the two checks for collection. Likewise, you
refused to heed the advice of the Bank's legal counsel to send the checks for
collection.
These findings have given rise to the Bank's loss of trust and confidence in
you, the same being acts of serious misconduct in the performance of your
duties resulting in monetary loss to the Bank. In view thereof, the Board has
resolved not to re-elect you to the position of Assistant Vice President of the
Bank. Accordingly, your services are terminated effective immediately. In
relation thereto, your monetary and retirement benefits are forfeited except
those that have vested in you.'
In her position paper, complainant alleged that the real reason for her dismissal was
her filing of the criminal cases against the bank president, the vice president and the
auditors of the Bank, such filing not being a valid ground for her dismissal.
Furthermore, she alleged that it would be self-serving for the respondent to state that
she was found guilty of gross misconduct in deliberately withholding the clearing of
the two dollar checks. She further alleged that she was not afforded due process as
she was not given the chance to refute the charges mentioned in the letter of
dismissal. Hence, she was illegally dismissed.
On the other hand, respondent argues that there were substantial bases for the bank
to lose its trust and confidence on the complainant and, accordingly, had just cause
for terminating her services. Moreover, for filing the clearly unfounded suit against the
respondent's officers, complainant is liable to pay moral and exemplary damages and
attorney's fees."7
The Court of Appeals found that the NLRC committed grave abuse of discretion in ruling that
the dismissal of Reyes is valid. In effect, the Court of Appeals reinstated the judgment of the
labor arbiter with modification as follows:
"WHEREFORE, in the light of the foregoing, the decision appealed from is hereby
REVERSED and SET ASIDE. In lieu thereof, judgment is hereby rendered ordering
respondent Bank as follows:
1. To pay petitioner full backwages and other benefits from July 19, 1991 up
to the finality of this judgment;
2. To pay petitioner separation pay equivalent to one (1) month salary for
every year of service in lieu of reinstatement; and
3. To pay attorney's fee equivalent to ten (10%) percent of the total award.
SO ORDERED."8
Hence, the Bank's recourse to this Court contending in its memorandum that:
"IN SETTING ASIDE THE DECISION DATED 24 MARCH 1997 AND THE
RESOLUTION DATED 28 JULY 1998 OF THE NLRC AND REINSTATING WITH
MODIFICATION THE DECISION DATED 20 JULY 1995 OF LABOR ARBITER
CORNELIO L. LINSANGAN, THE HONORABLE COURT OF APPEALS
SERIOUSLY ERRED, IN VIEW OF THE FOLLOWING:
I.
IT IS THE SEC (NOW THE REGIONAL TRIAL COURT) AND NOT THE NLRC
WHICH HAS ORIGINAL AND EXCLUSIVE JURISDICTION OVER CASES
INVOLVING THE REMOVAL FROM OFFICE OF CORPORATE OFFICERS.
II.
EVEN ASSUMING ARGUENDO THAT THE NLRC HAS JURISDICTION, THERE
WAS SUBSTANTIAL EVIDENCE OF RESPONDENT'S MISCONDUCT JUSTIFYING
THE BANK'S LOSS OF TRUST AND CONFIDENCE ON (sic) HER.
III.
EVEN ASSUMING ARGUENDO THAT RESPONDENT WAS ENTITLED TO
BACKWAGES, THE HONORABLE COURT OF APPEALS ERRED IN AWARDING
UNLIMITED AND UNQUALIFIED BACKWAGES THEREBY GOING FAR BEYOND
THE LABOR ARBITER'S DECISION LIMITING THE SAME TO THREE YEARS,
WHICH DECISION RESPONDENT HERSELF SOUGHT TO EXECUTE."9
In sum, the resolution of this petition hinges on (1) whether the NLRC has jurisdiction over the
complaint for illegal dismissal; (2) whether complainant Reyes was illegally dismissed; and (3)
whether the amount of back wages awarded was proper.
On the first issue, petitioner seeks refuge behind the argument that the dispute is an intra-
corporate controversy concerning as it does the non-election of private respondent to the
position of Assistant Vice-President of the Bank which falls under the exclusive and original,
jurisdiction of the Securities and Exchange Commission (now the Regional Trial Court) under
Section 5 of Presidential Decree No. 902-A. More specifically, petitioner contends that
complainant is a corporate officer, an elective position under the corporate by-laws and her
non-election is an intra-corporate controversy cognizable by the SEC invoking lengthily a
number of this Court's decisions.10
Petitioner Bank can no longer raise the issue of jurisdiction under the principle of estoppel.
The Bank participated in the proceedings from start to finish. It filed its position paper with the
Labor Arbiter. When the decision of the Labor Arbiter was adverse to it, the Bank appealed to
the NLRC. When the NLRC decided in its favor, the bank said nothing about jurisdiction.
Even before the Court of Appeals, it never questioned the proceedings on the ground of lack
of jurisdiction. It was only when the Court of Appeals ruled in favor of private respondent did it
raise the issue of jurisdiction. The Bank actively participated in the proceedings before the
Labor Arbiter, the NLRC and the Court of Appeals. While it is true that jurisdiction over the
subject matter of a case may be raised at any time of the proceedings, this rule presupposes
that laches or estoppel has not supervened. In this regard, Bañaga vs. Commission on the
Settlement of Land Problems,11 is most enlightening. The Court therein stated:
"This Court has time and again frowned upon the undesirable practice of a party
submitting his case for decision and then accepting the judgment, only if favorable,
and attacking it for lack of jurisdiction when adverse. Here, the principle of estoppel
lies. Hence, a party may be estopped or barred from raising the question of
jurisdiction for the first time in a petition before the Supreme Court when it failed to do
so in the early stages of the proceedings."
Undeterred, the Bank also contends that estoppel cannot lie considering that "from the
beginning, petitioner Bank has consistently asserted in all its pleadings at all stages of the
proceedings that respondent held the position of Assistant Vice President, an elective
position which she held by virtue of her having been elected as such by the Board of
Directors." As far as the records before this Court reveal however, such an assertion was
made only in the appeal to the NLRC and raised again before the Court of Appeals, not for
purposes of questioning jurisdiction but to establish that private respondent's tenure was
subject to the discretion of the Board of Directors and that her non-reelection was a mere
expiration of her term. The Bank insists that private respondent was elected Assistant Vice
President sometime in 1990 to serve as such for only one year. This argument will not do
either and must be rejected.
It appears that private respondent was appointed Accounting Clerk by the Bank on July 14,
1963. From that position she rose to become supervisor. Then in 1982, she was appointed
Assistant Vice-President which she occupied until her illegal dismissal on July 19, 1991. The
bank's contention that she merely holds an elective position and that in effect she is not a
regular employee is belied by the nature of her work and her length of service with the Bank.
As earlier stated, she rose from the ranks and has been employed with the Bank since 1963
until the termination of her employment in 1991. As Assistant Vice President of the foreign
department of the Bank, she is tasked, among others, to collect checks drawn against
overseas banks payable in foreign currency and to ensure the collection of foreign bills or
checks purchased, including the signing of transmittal letters covering the same. It has been
stated that "the primary standard 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.12 Additionally, "an employee is regular because of the
nature of work and the length of service, not because of the mode or even the reason for
hiring them."13 As Assistant Vice-President of the Foreign Department of the Bank she
performs tasks integral to the operations of the bank and her length of service with the bank
totaling 28 years speaks volumes of her status as a regular employee of the bank. In fine, as
a regular employee, she is entitled to security of tenure; that is, her services may be
terminated only for a just or authorized cause.14 This being in truth a case of illegal dismissal,
it is no wonder then that the Bank endeavored to the very end to establish loss of trust and
confidence and serious misconduct on the part of private respondent but, as will be discussed
later, to no avail.
This brings us to the second issue wherein the Bank insists that it has presented substantial
evidence to prove the breach of trust on the part of private respondent warranting her
dismissal. On this point, the Court of Appeals disagreed and set aside the findings of the
NLRC that Reyes deliberately withheld the release of the two dollar checks; that she is guilty
of conflict of interest that she waived her right to due process for not attending the hearing;
and that she was dismissed based on loss of trust and confidence. We quote pertinent
portions of the decision, to wit:
"FIRST: Respondent Bank heavily relied on the testimony and affidavit of Remittance
Clerk Joven' in trying to establish loss of confidence. However, Joven's allegation that
petitioner instructed her to hold the subject two dollar checks amounting to
$224,650.00 falls short of the requisite proof to warrant petitioner's dismissal. Except
for Joven's bare assertion to withhold the dollar checks per petitioner's instruction,
respondent Bank failed to adduce convincing evidence to prove bad faith and malice.
It bears emphasizing that respondent Bank's witnesses merely corroborate Joven's
testimony.
Upon this point, the rule that proof beyond reasonable doubt is not required to
terminate an employee on the charge of loss of confidence and that it is sufficient that
there is some basis for such loss of confidence, is not absolute. The right of an
employer to dismiss employees on the ground that it has lost its trust and confidence
in him must not be exercised arbitrarily and without just cause. For loss of trust and
confidence to be valid ground for an employee's dismissal, it must be substantial and
not arbitrary, and must be founded on clearly established facts sufficient to warrant
the employee's separation from work (Labor vs. NLRC, 248 SCRA 183).
SECOND. Respondent Bank's charge of deliberate withholding of the two dollar
checks finds no support in the testimony of Atty. Jocson, Chairman of the
Investigating Committee. On cross examination, Atty. Jocson testified that the
documents themselves do not show any direct withholding (pp. 186-187, Rollo).
There being conflict in the statement of witnesses, the court must adopt the testimony
which it believes to be true (U.S. vs. Losada, 18 Phil. 90).
THIRD. Settled is the rule that when the conclusions of the Labor Arbiter are
sufficiently substantiated by the evidence on record, the same should be respected
by appellate tribunals since he is in a better position to assess and evaluate the
credibility of the contending parties (Ala Mode Garments, Inc. vs. NLRC, 268 SCRA
497). In this regard, the Court quotes with approval the following disquisition of Labor
Arbiter Linsangan, thus:
This Office has repeatedly gone over the records of the case and
painstakingly examined the testimonies of respondent bank's witnesses. One
thing was clearly established: that the legality of complainant's dismissal
based on the first ground stated in respondent's letter of termination (exh. 25-
J, supra) will rise or fall on the credibility of Miss Joven who undisputedly is
the star witness for the bank. It will be observed that the testimonies of the
bank's other witnesses, Analiza Castillo, Dante Castor and Antonio Ragasa
pertaining to the non-release of the dollar checks and their corresponding
transmittal letters were all anchored on what was told them by Ms. Joven,
that is: she was instructed by complainant to hold the release of subject
checks. In a nutshell, therefore, the issue boils down to who between
complainant and Ms. Joven is more credible.
After painstakingly examining the testimonies of Ms. Joven and respondent's
other witnesses' this Office finds the evidence still wanting in proof of
complainant's guilt. This Office had closely observed the demeanor of Ms.
Joven while testifying on the witness stand and was not impressed by her
assertions. The allegation of Ms. Joven in that her non-release of the dollar
checks was upon the instruction of complainant Reyes is extremely doubtful.
In the first place, the said instruction constitutes a gross violation of the
bank's standard operating procedure. Moreover, Ms. Joven was fully aware
that the instruction, if carried out, will greatly prejudice her employer bank. It
was incumbent upon Ms. Joven not only to disobey the instruction but even
to report the matter to management, if same was really given to her by
complainant.
Our doubt on the veracity of Ms. Joven's allegation even deepens as we
consider the fact that when the non-release of the checks was discovered by
Ms. Castillo the former contented herself by continuously not taking any
action on the two dollar checks. Worse, Ms. Joven even impliedly told by Ms.
Castillo (sic) to ignore the two checks and just withhold their release. In her
affidavit Ms. Castillo said:
'4. When I asked Cecille Joven what I was supposed to do with those
checks, she said the same should be held as per instruction of Mrs.
Reyes.' (Exh. "14", supra).
The evidence shows that it was only on 16 May 1990 that Ms. Joven broke
her silence on the matter despite the fact that on 15 November 1989, at
about 8:00 p.m. the complainant, accompanied by driver Celestino Banito,
went to her residence and confronted her regarding the non-release of the
dollar checks. It took Ms. Joven eighteen (18) months before she explained
her side on the controversy. As to what prompted her to make her letter of
explanation was not even mentioned.
On the other hand, the actions taken by the complainant were spontaneous.
When complainant was informed by Mr. Castor and Ms. Castillo regarding
the non-release of the checks sometime in November, 1989 she immediately
reported the matter to Vice President Santos, Head of the Foreign
Department. And as earlier mentioned, complainant went to the residence of
Ms. Joven to confront her. In this regard, Celestino Bonito, complainant's
driver, stated in his affidavit, thus:
'1. Sometime on November 15, 1989 at about 7:00 o'clock in the
evening, Mrs. Clarita Tan Reyes and I were in the residence of one
Ms. Cecille Joven, then a Processing Clerk in the Foreign
Department of Prudential Bank;
2. Ms. Cecille Joven, her mother, myself, and Mrs. Clarita Tan Reyes
were seated in the sala when the latter asked the former, Ms. Cecille
Joven, how it came about that the two dollar checks which she was
then holding with the transmittal letters, were found in a plastic
envelope kept day-to-day by the former;
3. Hesitatingly, Cecille Joven said: "Eh, Mother (Mrs. Tan Reyes had
been intimately called Mother in the Bank) akala ko bouncing checks
yon mga yon.
4. Mrs. Clarita Tan Reyes, upon hearing those words, was surprised
and she said: "Ano, papaano mong alam na bouncing na hindi mo pa
pinadadala:
5. Mrs. Cecille Joven turned pale and was not able to answer.'
There are other factors that constrain this Office to doubt even more the
legality of complainant's dismissal based on the first ground stated in the
letter of dismissal. The non-release of the dollar checks was reported to top
management sometime on 15 November 1989 when complainant,
accompanied by Supervisor Dante Castor and Analiza Castillo, reported the
matter to Vice President Santos. And yet, it was only on 08 March 1991, after
a lapse of sixteen (16) months from the time the non-release of the checks
was reported to the Vice President, that complainant was issued a
memorandum directing her to submit an explanation. And it took the bank
another four (4) months before it dismissed complainant.
The delayed action taken by respondent against complainant lends credence
to the assertion of the latter that her dismissal was a mere retaliation to the
criminal complaints she filed against the bank's top officials.
It clearly appears from the foregoing that the complainant herein has no
knowledge of, much less participation in, the non-release of the dollar checks
under discussion. Ms. Joven is solely responsible for the same. Incidentally,
she was not even reprimanded by the bank.
FOURTH. Respondent Bank having failed to furnish petitioner necessary documents
imputing loss of confidence, petitioner was not amply afforded opportunity to prepare
an intelligent answer. The Court finds nothing confidential in the auditor's report and
the affidavit of Transmittal Clerk Joven. Due process dictates that management
accord the employees every kind of assistance to enable him to prepare adequately
for his defense, including legal representation.
The issue of conflict of interest not having been covered by the investigation, the
Court finds it irrelevant to the charge."15
We uphold the findings of the Court of Appeals that the dismissal of private respondent on the
ground of loss of trust and confidence was without basis. The charge was predicated on the
testimony of Ms. Joven and we defer to the findings of the Labor Arbiter as confirmed and
adopted by the Court of Appeals on the credibility of said witness. This Court is not a trier of
facts and will not weigh anew the evidence already passed upon by the Court of Appeals. 16
On the third issue, the Bank questions the award of full backwages and other benefits from
July 19, 1991 up to the finality of this judgment; separation pay equivalent to one (1) month
salary for every year of service in lieu of reinstatement; and attorney's fees equivalent to ten
(10%) percent of the total award. The Bank argues, in the main, that private respondent is not
entitled to full backwages in view of the fact that she did not bother to appeal that portion of
the labor arbiter's judgment awarding back wages limited to three years. It must be stressed
that private respondent filed a special civil action for certiorari to review the decision of the
NLRC17 and not an ordinary appeal. An ordinary appeal is distinguished from the remedy of
certiorari under Rule 65 of the Revised Rules of Court in that in ordinary appeals it is settled
that a party who did not appeal cannot seek affirmative relief other than the ones granted in
the decision of the court below.18 On the other hand, resort to a judicial review of the
decisions of the National Labor Relations Commission in a petition for certiorari under Rule
65 of Rules of Court is confined to issues of want or excess of jurisdiction and grave abuse of
discretion.19 In the instant case, the Court of Appeals found that the NLRC gravely abused its
discretion in finding that the private respondent's dismissal was valid and so reversed the
same. Corollary to the foregoing, the appellate court awarded backwages in accordance with
current jurisprudence.
Indeed, jurisprudence is clear on the amount of backwages recoverable in cases of illegal
dismissal. Employees illegally dismissed prior to the effectivity of Republic Act No. 6715 on
March 21, 1989 are entitled to backwages up to three (3) years without deduction or
qualification, while those illegally dismissed after are granted full backwages inclusive of
allowances and other benefits or their monetary equivalent from the time their actual
compensation was withheld from them up to the time of their actual
reinstatement.20 Considering that private respondent was terminated on July 19, 1991, she is
entitled to full backwages from the time her actual compensation was withheld from her
(which, as a rule, is from the time of her illegal dismissal) up to the finality of this judgment
(instead of reinstatement) considering that reinstatement is no longer feasible as correctly
pointed out by the Court of Appeals on account of the strained relations brought about by the
litigation in this case. Since reinstatement is no longer viable, she is also entitled to
separation pay equivalent to one (1) month salary for every year of service.21 Lastly, since
private respondent was compelled to file an action for illegal dismissal with the labor arbiter,
she is likewise entitled to attorney's fees22 at the rate above-mentioned. There is no room to
argue, as the Bank does here, that its liability should be mitigated on account of its good faith
and that private respondent is not entirely blameless. There is no showing that private
respondent is partly at fault or that the Bank acted in good faith in terminating an employee of
twenty-eight years. In any event, Article 279 of Republic Act No. 671523 clearly and plainly
provides for "full backwages" to illegally dismissed employees.1âwphi1.nêt
WHEREFORE, the instant petition for review on certiorari is DENIED, and the assailed
Decision of the Court of Appeals, dated October 15, 1999, is AFFIRMED.
SO ORDERED.
G.R. No. 185567 October 20, 2010
ARSENIO Z. LOCSIN, Petitioner,
vs.
NISSAN LEASE PHILS. INC. and LUIS BANSON, Respondents.
DECISION
BRION, J.:
Through a petition for review on certiorari,1 petitioner Arsenio Z. Locsin (Locsin) seeks the
reversal of the Decision2of the Court of Appeals (CA) dated August 28, 2008,3 in "Arsenio Z.
Locsin v. Nissan Car Lease Phils., Inc. and Luis Banson," docketed as CA-G.R. SP No.
103720 and the Resolution dated December 9, 2008,4 denying Locsin’s Motion for
Reconsideration. The assailed ruling of the CA reversed and set aside the Decision 5 of the
Hon. Labor Arbiter Thelma Concepcion (Labor Arbiter Concepcion) which denied Nissan
Lease Phils. Inc.’s (NCLPI) and Luis T. Banson’s (Banson) Motion to Dismiss.
THE FACTUAL ANTECEDENTS
On January 1, 1992, Locsin was elected Executive Vice President and Treasurer
(EVP/Treasurer) of NCLPI. As EVP/Treasurer, his duties and responsibilities included: (1) the
management of the finances of the company; (2) carrying out the directions of the President
and/or the Board of Directors regarding financial management; and (3) the preparation of
financial reports to advise the officers and directors of the financial condition of
NCLPI.6 Locsin held this position for 13 years, having been re-elected every year since 1992,
until January 21, 2005, when he was nominated and elected Chairman of NCLPI’s Board of
Directors.7
On August 5, 2005, a little over seven (7) months after his election as Chairman of the Board,
the NCLPI Board held a special meeting at the Manila Polo Club. One of the items of the
agenda was the election of a new set of officers. Unfortunately, Locsin was neither re-elected
Chairman nor reinstated to his previous position as EVP/Treasurer.8
Aggrieved, on June 19, 2007, Locsin filed a complaint for illegal dismissal with prayer for
reinstatement, payment of backwages, damages and attorney’s fees before the Labor Arbiter
against NCLPI and Banson, who was then President of NCLPI.9
The Compulsory Arbitration Proceedings before the Labor Arbiter.
On July 11, 2007, instead of filing their position paper, NCLPI and Banson filed a Motion to
Dismiss,10 on the ground that the Labor Arbiter did not have jurisdiction over the case since
the issue of Locsin’s removal as EVP/Treasurer involves an intra-corporate dispute.
On August 16, 2007, Locsin submitted his opposition to the motion to dismiss, maintaining his
position that he is an employee of NCLPI.
On March 10, 2008, Labor Arbiter Concepcion issued an Order denying the Motion to
Dismiss, holding that her office acquired "jurisdiction to arbitrate and/or decide the instant
complaint finding extant in the case an employer-employee relationship."11
NCLPI, on June 3, 2008, elevated the case to the CA through a Petition for Certiorari under
Rule 65 of the Rules of Court.12 NCLPI raised the issue on whether the Labor Arbiter
committed grave abuse of discretion by denying the Motion to Dismiss and holding that her
office had jurisdiction over the dispute.
The CA Decision - Locsin was a corporate officer; the issue of his removal as EVP/Treasurer
is an intra-corporate dispute under the RTC’s jurisdiction.
On August 28, 2008,13 the CA reversed and set aside the Labor Arbiter’s Order denying the
Motion to Dismiss and ruled that Locsin was a corporate officer.
Citing PD 902-A, the CA defined "corporate officers as those officers of a corporation who are
given that character either by the Corporation Code or by the corporations’ by-laws." In this
regard, the CA held:
Scrutinizing the records, We hold that petitioners successfully discharged their onus of
establishing that private respondent was a corporate officer who held the position of
Executive Vice-President/Treasurer as provided in the by-laws of petitioner corporation and
that he held such position by virtue of election by the Board of Directors.
That private respondent is a corporate officer cannot be disputed. The position of Executive
Vice-President/Treasurer is specifically included in the roster of officers provided for by the
(Amended) By-Laws of petitioner corporation, his duties and responsibilities, as well as
compensation as such officer are likewise set forth therein.14
Article 280 of the Labor Code, the receipt of salaries by Locsin, SSS deductions on that
salary, and the element of control in the performance of work duties – indicia used by the
Labor Arbiter to conclude that Locsin was a regular employee – were held inapplicable by the
CA.15 The CA noted the Labor Arbiter’s failure to address the fact that the position of
EVP/Treasurer is specifically enumerated as an "office" in the corporation’s by-laws.16
Further, the CA pointed out Locsin’s failure to "state any circumstance by which NCLPI
engaged his services as a corporate officer that would make him an employee." The CA
found, in this regard, that Locsin’s assumption and retention as EVP/Treasurer was based on
his election and subsequent re-elections from 1992 until 2005. Further, he performed only
those functions that were "specifically set forth in the By-Laws or required of him by the Board
of Directors.17"
With respect to the suit Locsin filed with the Labor Arbiter, the CA held that:
Private respondent, in belatedly filing this suit before the Labor Arbiter, questioned the legality
of his "dismissal" but in essence, he raises the issue of whether or not the Board of Directors
had the authority to remove him from the corporate office to which he was elected pursuant to
the By-Laws of the petitioner corporation. Indeed, had private respondent been an ordinary
employee, an election conducted by the Board of Directors would not have been necessary to
remove him as Executive Vice-President/Treasurer. However, in an obvious attempt to
preclude the application of settled jurisprudence that corporate officers whose position is
provided in the by-laws, their election, removal or dismissal is subject to Section 5 of P.D. No.
902-A (now R.A. No. 8799), private respondent would even claim in his Position Paper, that
since his responsibilities were akin to that of the company’s Executive Vice-
President/Treasurer, he was "hired under the pretext that he was being ‘elected’ into said
post.18 [Emphasis supplied.]
As a consequence, the CA concluded that Locsin does not have any recourse with the Labor
Arbiter or the NLRC since the removal of a corporate officer, whether elected or appointed, is
an intra-corporate controversy over which the NLRC has no jurisdiction.19 Instead, according
to the CA, Locsin’s complaint for "illegal dismissal" should have been filed in the Regional
Trial Court (RTC), pursuant to Rule 6 of the Interim Rules of Procedure Governing Intra-
Corporate Controversies.20
Finally, the CA addressed Locsin’s invocation of Article 4 of the Labor Code. Dismissing the
application of the provision, the CA cited Dean Cesar Villanueva of the Ateneo School of Law,
as follows:
x x x the non-coverage of corporate officers from the security of tenure clause under the
Constitution is now well-established principle by numerous decisions upholding such doctrine
under the aegis of the 1987 Constitution in the face of contemporary decisions of the same
Supreme Court likewise confirming that security of tenure covers all employees or workers
including managerial employees.21
THE PETITIONER’S ARGUMENTS
Failing to obtain a reconsideration of the CA’s decision, Locsin filed the present petition on
January 28, 2009, raising the following procedural and substantive issues:
(1) Whether the CA has original jurisdiction to review decision of the Labor Arbiter
under Rule 65?
(2) Whether he is a regular employee of NCLPI under the definition of Article 280 of
the Labor Code? and
(3) Whether Locsin’s position as Executive Vice-President/Treasurer makes him a
corporate officer thereby excluding him from the coverage of the Labor Code?
Procedurally, Locsin essentially submits that NCLPI wrongfully filed a petition for certiorari
before the CA, as the latter’s remedy is to proceed with the arbitration, and to appeal to the
NLRC after the Labor Arbiter shall have ruled on the merits of the case. Locsin cites, in this
regard, Rule V, Section 6 of the Revised Rules of the National Labor Relations Commission
(NLRC Rules), which provides that a denial of a motion to dismiss by the Labor Arbiter is not
subject to an appeal. Locsin also argues that even if the Labor Arbiter committed grave abuse
of discretion in denying the NCLPI motion, a special civil action for certiorari, filed with the CA
was not the appropriate remedy, since this was a breach of the doctrine of exhaustion of
administrative remedies.
Substantively, Locsin submits that he is a regular employee of NCLPI since - as he argued
before the Labor Arbiter and the CA - his relationship with the company meets the "four-fold
test."
First, Locsin contends that NCLPI had the power to engage his services as EVP/Treasurer.
Second, he received regular wages from NCLPI, from which his SSS and Philhealth
contributions, as well as his withholding taxes were deducted. Third, NCLPI had the power to
terminate his employment.22 Lastly, Nissan had control over the manner of the performance
of his functions as EVP/Treasurer, as shown by the 13 years of faithful execution of his job,
which he carried out in accordance with the standards and expectations set by
NCLPI.23 Further, Locsin maintains that even after his election as Chairman, he essentially
performed the functions of EVP/Treasurer – handling the financial and administrative
operations of the Corporation – thus making him a regular employee.24
Under these claimed facts, Locsin concludes that the Labor Arbiter and the NLRC – not the
RTC (as NCLPI posits) – has jurisdiction to decide the controversy. Parenthetically, Locsin
clarifies that he does not dispute the validity of his election as Chairman of the Board on
January 1, 2005. Instead, he theorizes that he never lost his position as EVP/Treasurer
having continuously performed the functions appurtenant thereto. 25 Thus, he questions his
"unceremonious removal" as EVP/Treasurer during the August 5, 2005 special Board
meeting.
THE RESPONDENT’S ARGUMENTS
It its April 17, 2009 Comment,26 Nissan prays for the denial of the petition for lack of merit.
Nissan submits that the CA correctly ruled that the Labor Arbiter does not have jurisdiction
over Locsin’s complaint for illegal dismissal. In support, Nissan maintains that Locsin is a
corporate officer and not an employee. In addressing the procedural defect Locsin raised,
Nissan brushes the issue aside, stating that (1) this issue was belatedly raised in the Motion
for Reconsideration, and that (2) in any case, Rule VI, Section 2(1) of the NLRC does not
apply since only appealable decisions, resolutions and orders are covered under the rule.
THE COURT’S RULING
We resolve to deny the petition for lack of merit.
At the outset, we stress that there are two (2) important considerations in the final
determination of this case. On the one hand, Locsin raises a procedural issue that, if proven
correct, will require the Court to dismiss the instant petition for using an improper remedy. On
the other hand, there is the substantive issue that will be disregarded if a strict
implementation of the rules of procedure is upheld.
Prefatorily, we agree with Locsin’s submission that the NCLPI incorrectly elevated the Labor
Arbiter’s denial of the Motion to Dismiss to the CA. Locsin is correct in positing that the denial
of a motion to dismiss is unappealable. As a general rule, an aggrieved party’s proper
recourse to the denial is to file his position paper, interpose the grounds relied upon in the
motion to dismiss before the labor arbiter, and actively participate in the proceedings.
Thereafter, the labor arbiter’s decision can be appealed to the NLRC, not to the CA.
As a rule, we strictly adhere to the rules of procedure and do everything we can, to the point
of penalizing violators, to encourage respect for these rules. We take exception to this
general rule, however, when a strict implementation of these rules would cause substantial
injustice to the parties.
We see it appropriate to apply the exception to this case for the reasons discussed below;
hence, we are compelled to go beyond procedure and rule on the merits of the case. In the
context of this case, we see sufficient justification to rule on the employer-employee
relationship issue raised by NCLPI, even though the Labor Arbiter’s interlocutory order was
incorrectly brought to the CA under Rule 65.
The NLRC Rules are clear: the denial by the labor arbiter of the motion to dismiss is not
appealable because the denial is merely an interlocutory order.
In Metro Drug v. Metro Drug Employees,27 we definitively stated that the denial of a motion to
dismiss by a labor arbiter is not immediately appealable.28
We similarly ruled in Texon Manufacturing v. Millena,29 in Sime Darby Employees Association
v. National Labor Relations Commission30 and in Westmont Pharmaceuticals v.
Samaniego.31 In Texon, we specifically said:
The Order of the Labor Arbiter denying petitioners’ motion to dismiss is interlocutory. It is
well-settled that a denial of a motion to dismiss a complaint is an interlocutory order and
hence, cannot be appealed, until a final judgment on the merits of the case is rendered.
[Emphasis supplied.]32
and indicated the appropriate recourse in Metro Drug, as follows:33
x x x The NLRC rule proscribing appeal from a denial of a motion to dismiss is similar to the
general rule observed in civil procedure that an order denying a motion to dismiss is
interlocutory and, hence, not appealable until final judgment or order is rendered [1 Feria and
Noche, Civil Procedure Annotated 453 (2001 ed.)]. The remedy of the aggrieved party in case
of denial of the motion to dismiss is to file an answer and interpose, as a defense or
defenses, the ground or grounds relied upon in the motion to dismiss, proceed to trial and, in
case of adverse judgment, to elevate the entire case by appeal in due course [Mendoza v.
Court of Appeals, G.R. No. 81909, September 5, 1991, 201 SCRA 343]. In order to avail of
the extraordinary writ of certiorari, it is incumbent upon petitioner to establish that the denial
of the motion to dismiss was tainted with grave abuse of discretion. [Macawiwili Gold Mining
and Development Co., Inc. v. Court of Appeals, G.R. No. 115104, October 12, 1998, 297
SCRA 602]
In so citing Feria and Noche, the Court was referring to Sec. 1 (b), Rule 41 of the Rules of
Court, which specifically enumerates interlocutory orders as one of the court actions that
cannot be appealed. In the same rule, as amended by A.M. No. 07-7-12-SC, the aggrieved
party is allowed to file an appropriate special civil action under Rule 65. The latter rule,
however, also contains limitations for its application, clearly outlined in its Section 1 which
provides:
Section 1. Petition for certiorari.
When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted
without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to
lack or excess of jurisdiction, and there is no appeal, or any plain, speedy, and adequate
remedy in the ordinary course of law, a person aggrieved thereby may file a verified
petition in the proper court, alleging the facts with certainty and praying that judgment be
rendered annulling or modifying the proceedings of such tribunal, board or officer, and
granting such incidental reliefs as law and justice may require.
In the labor law setting, a plain, speedy and adequate remedy is still open to the aggrieved
party when a labor arbiter denies a motion to dismiss. This is Article 223 of Presidential
Decree No. 442, as amended (Labor Code), 34which states:
ART. 223. APPEAL
Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to
the Commission by any or both parties within ten (10) calendar days from receipt of such
decisions, awards, or orders. Such appeal may be entertained only on any of the following
grounds:
(a) If there is prima facie evidence of abuse of discretion on the part of the Labor Arbiter; x
x x [Emphasis supplied.]
Pursuant to this Article, we held in Metro Drug (citing Air Services Cooperative, et al. v. Court
of Appeals35) that the NLRC is clothed with sufficient authority to correct any claimed
"erroneous assumption of jurisdiction" by labor arbiters:
In Air Services Cooperative, et al. v. The Court of Appeals, et al., a case where the
jurisdiction of the labor arbiter was put in issue and was assailed through a petition
for certiorari, prohibition and annulment of judgment before a regional trial court, this Court
had the opportunity to expound on the nature of appeal as embodied in Article 223 of the
Labor Code, thus:
x x x Also, while the title of the Article 223 seems to provide only for the remedy of appeal as
that term is understood in procedural law and as distinguished from the office of certiorari,
nonetheless, a closer reading thereof reveals that it is not as limited as understood by the
petitioners x x x.
Abuse of discretion is admittedly within the ambit of certiorari and its grant of review thereof to
the NLRC indicates the lawmakers’ intention to broaden the meaning of appeal as that term is
used in the Code. For this reason, petitioners cannot argue now that the NLRC is devoid of
any corrective power to rectify a supposed erroneous assumption of jurisdiction by the Labor
Arbiter x x x. [Air Services Cooperative, et al. v. The Court of Appeals, et al. G.R. No. 118693,
23 July 1998, 293 SCRA 101]
Since the legislature had clothed the NLRC with the appellate authority to correct a claimed
"erroneous assumption of jurisdiction" on the part of the labor arbiter – a case of grave abuse
of discretion - the remedy availed of by petitioner in this case is patently erroneous as
recourse in this case is lodged, under the law, with the NLRC.
In Metro Drug, as in the present case, the defect imputed through the NLCPI Motion to
Dismiss is the labor arbiter’s lack of jurisdiction since Locsin is alleged to be a corporate
officer, not an employee. Parallelisms between the two cases is undeniable, as they are
similar on the following points: (1) in Metro Drug, as in this case, the Labor Arbiter issued an
Order denying the Motion to Dismiss by one of the parties; (2) the basis of the Motion to
Dismiss is also the alleged lack of jurisdiction by the Labor Arbiter to settle the dispute; and
(3) dissatisfied with the Order of the Labor Arbiter, the aggrieved party likewise elevated the
case to the CA via Rule 65.
The similarities end there, however. Unlike in the present case, the CA denied the petition for
certiorari and the subsequent Motion for Reconsideration in Metro Drug; the CA correctly
found that the proper appellate mechanism was an appeal to the NLRC and not a petition for
certiorari under Rule 65. In the present case, the CA took a different position despite our clear
ruling in Metro Drug, and allowed, not only the use of Rule 65, but also ruled on the merits.
From this perspective, the CA clearly erred in the application of the procedural rules by
disregarding the relevant provisions of the NLRC Rules, as well as the requirements for a
petition for certiorari under the Rules of Court. To reiterate, the proper action of an aggrieved
party faced with the labor arbiter’s denial of his motion to dismiss is to submit his position
paper and raise therein the supposed lack of jurisdiction. The aggrieved party cannot
immediately appeal the denial since it is an interlocutory order; the appropriate remedial
recourse is the procedure outlined in Article 223 of the Labor Code, not a petition for certiorari
under Rule 65.
A strict implementation of the NLRC Rules and the Rules of Court would cause injustice to
the parties because the Labor Arbiter clearly has no jurisdiction over the present intra-
corporate dispute.
Our ruling in Mejillano v. Lucillo36 stands for the proposition that we should strictly apply the
rules of procedure. We said:
Time and again, we have ruled that procedural rules do not exist for the convenience of the
litigants. Rules of Procedure exist for a purpose, and to disregard such rules in the guise of
liberal construction would be to defeat such purpose. Procedural rules were established
primarily to provide order to and enhance the efficiency of our judicial system. [Emphasis
supplied.]
An exception to this rule is our ruling in Lazaro v. Court of Appeals37 where we held that the
strict enforcement of the rules of procedure may be relaxed in exceptionally meritorious
cases:
x x x Procedural rules are not to be belittled or dismissed simply because their non-
observance may have resulted in prejudice to a party's substantive rights. Like all rules, they
are required to be followed except only for the most persuasive of reasons when they may be
relaxed to relieve a litigant of an injustice not commensurate with the degree of his
thoughtlessness in not complying with the procedure prescribed. The Court reiterates that
rules of procedure, especially those prescribing the time within which certain acts must be
done, "have oft been held as absolutely indispensable to the prevention of needless delays
and to the orderly and speedy discharge of business. x x x The reason for rules of this nature
is because the dispatch of business by courts would be impossible, and intolerable delays
would result, without rules governing practice x x x. Such rules are a necessary incident to
the proper, efficient and orderly discharge of judicial functions." Indeed, in no uncertain terms,
the Court held that the said rules may be relaxed only in exceptionally meritorious cases.
[Emphasis supplied.]
Whether a case involves an exceptionally meritorious circumstance can be tested under the
guidelines we established in Sanchez v. Court of Appeals,38 as follows:
Aside from matters of life, liberty, honor or property which would warrant the suspension of
the Rules of the most mandatory character and an examination and review by the appellate
court of the lower court’s findings of fact, the other elements that should be considered are
the following: (a) the existence of special or compelling circumstances, (b) the merits of the
case, (c) a cause not entirely attributable to the fault or negligence of the party favored by the
suspension of the rules, (d) a lack of any showing that the review sought is merely frivolous
and dilatory, and (e) the other party will not be unjustly prejudiced thereby. [Emphasis
supplied.]
Under these standards, we hold that exceptional circumstances exist in the present case to
merit the relaxation of the applicable rules of procedure.
Due to existing exceptional circumstances, the ruling on the merits that Locsin is an officer
and not an employee of Nissan must take precedence over procedural considerations.
We arrived at the conclusion that we should go beyond the procedural rules and immediately
take a look at the intrinsic merits of the case based on several considerations.
First, the parties have sufficiently ventilated their positions on the disputed employer-
employee relationship and have, in fact, submitted the matter for the CA’s consideration.
Second, the CA correctly ruled that no employer-employee relationship exists between Locsin
and Nissan.
Locsin was undeniably Chairman and President, and was elected to these positions by the
Nissan board pursuant to its By-laws.39 As such, he was a corporate officer, not an employee.
The CA reached this conclusion by relying on the submitted facts and on Presidential Decree
902-A, which defines corporate officers as "those officers of a corporation who are given that
character either by the Corporation Code or by the corporation’s by-laws." Likewise, Section
25 of Batas Pambansa Blg. 69, or the Corporation Code of the Philippines (Corporation
Code) provides that corporate officers are the president, secretary, treasurer and such other
officers as may be provided for in the by-laws.
Third. Even as Executive Vice-President/Treasurer, Locsin already acted as a corporate
officer because the position of Executive Vice-President/Treasurer is provided for in Nissan’s
By-Laws. Article IV, Section 4 of these By-Laws specifically provides for this position, as
follows:
ARTICLE IV
Officers
Section 1. Election and Appointment – The Board of Directors at their first meeting, annually
thereafter, shall elect as officers of the Corporation a Chairman of the Board, a President, an
Executive Vice-President/Treasurer, a Vice-President/General Manager and a Corporate
Secretary. The other Senior Operating Officers of the Corporation shall be appointed by the
Board upon the recommendation of the President.
xxxx
Section 4. Executive Vice-President/Treasurer – The Executive Vice-President/Treasurer
shall have such powers and perform such duties as are prescribed by these By-Laws, and as
may be required of him by the Board of Directors. As the concurrent Treasurer of the
Corporation, he shall have the charge of the funds, securities, receipts, and disbursements of
the Corporation. He shall deposit, or cause to be deposited, the credit of the Corporation in
such banks or trust companies, or with such banks of other depositories, as the Board of
Directors may from time to time designate. He shall tender to the President or to the Board of
Directors whenever required an account of the financial condition of the corporation and of all
his transactions as Treasurer. As soon as practicable after the close of each fiscal year, he
shall make and submit to the Board of Directors a like report of such fiscal year. He shall
keep correct books of account of all the business and transactions of the Corporation.
In Okol v. Slimmers World International,40 citing Tabang v. National Labor Relations
Commission,41 we held that –
x x x an "office" is created by the charter of the corporation and the officer is elected by
the directors or stockholders. On the other hand, an "employee" usually occupies no office
and generally is employed not by action of the directors or stockholders but by the managing
officer of the corporation who also determines the compensation to be paid to such
employee. [Emphasis supplied.]
In this case, Locsin was elected by the NCLPI Board, in accordance with the Amended By-
Laws of the corporation. The following factual determination by the CA is elucidating:
More important, private respondent failed to state any such "circumstance" by which the
petitioner corporation "engaged his services" as corporate officer that would make him an
employee. In the first place, the Vice-President/Treasurer was elected on an annual basis as
provided in the By-Laws, and no duties and responsibilities were stated by private respondent
which he discharged while occupying said position other than those specifically set forth in
the By-Laws or required of him by the Board of Directors. The unrebutted fact remains that
private respondent held the position of Executive Vice-President/Treasurer of petitioner
corporation, a position provided for in the latter’s by-laws, by virtue of election by the Board of
Directors, and has functioned as such Executive Vice-President/Treasurer pursuant to the
provisions of the said By-Laws. Private respondent knew very well that he was simply not re-
elected to the said position during the August 5, 2005 board meeting, but he had objected to
the election of a new set of officers held at the time upon the advice of his lawyer that he
cannot be "terminated" or replaced as Executive Vice-President/Treasurer as he had attained
tenurial security.42
We fully agree with this factual determination which we find to be sufficiently supported by
evidence. We likewise rule, based on law and established jurisprudence, that Locsin, at the
time of his severance from NCLPI, was the latter’s corporate officer.
a. The Question of Jurisdiction
Given Locsin’s status as a corporate officer, the RTC, not the Labor Arbiter or the NLRC, has
jurisdiction to hear the legality of the termination of his relationship with Nissan. As we also
held in Okol, a corporate officer’s dismissal from service is an intra-corporate dispute:
In a number of cases [Estrada v. National Labor Relations Commission, G.R. No. 106722, 4
October 1996, 262 SCRA 709; Lozon v. National Labor Relations Commission, 310 Phil. 1
(1995); Espino v. National Labor Relations Commission, 310 Phil. 61 (1995); Fortune Cement
Corporation v. National Labor Relations Commission, G.R. No. 79762, 24 January 1991, 193
SCRA 258], we have held that a corporate officer’s dismissal is always a corporate act, or an
intra-corporate controversy which arises between a stockholder and a
corporation.43 [Emphasis supplied.]
so that the RTC should exercise jurisdiction based on the following legal reasoning:
Prior to its amendment, Section 5(c) of Presidential Decree No. 902-A (PD 902-A) provided
that intra-corporate disputes fall within the jurisdiction of the Securities and Exchange
Commission (SEC):
Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange
Commission over corporations, partnerships and other forms of associations registered with it
as expressly granted under existing laws and decrees, it shall have original and exclusive
jurisdiction to hear and decide cases involving:
xxxx
c) Controversies in the election or appointments of directors, trustees, officers or managers of
such corporations, partnerships or associations.
Subsection 5.2, Section 5 of Republic Act No. 8799, which took effect on 8 August 2000,
transferred to regional trial courts the SEC’s jurisdiction over all cases listed in Section 5 of
PD 902-A:
5.2. The Commission’s jurisdiction over all cases enumerated under Section 5 of Presidential
Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate
Regional Trial Court. [Emphasis supplied.]
b. Precedence of Substantive Merits;
Primacy of Element of Jurisdiction
Based on the above jurisdictional considerations, we would be forced to remand the case to
the Labor Arbiter for further proceedings if we were to dismiss the petition outright due to the
wrongful use of Rule 65.44 We cannot close our eyes, however, to the factual and legal
reality, established by evidence already on record, that Locsin is a corporate officer whose
termination of relationship is outside a labor arbiter’s jurisdiction to rule upon.
Under these circumstances, we have to give precedence to the merits of the case, and
primacy to the element of jurisdiction. Jurisdiction is the power to hear and rule on a case and
is the threshold element that must exist before any quasi-judicial officer can act. In the
context of the present case, the Labor Arbiter does not have jurisdiction over the termination
dispute Locsin brought, and should not be allowed to continue to act on the case after the
absence of jurisdiction has become obvious, based on the records and the law. In more
practical terms, a contrary ruling will only cause substantial delay and inconvenience as well
as unnecessary expenses, to the point of injustice, to the parties. This conclusion, of course,
does not go into the merits of termination of relationship and is without prejudice to the filing
of an intra-corporate dispute on this point before the appropriate RTC.
WHEREFORE, we DISMISS the petitioner’s petition for review on certiorari, and AFFIRM the
Decision of the Court of Appeals, in CA-G.R. SP No. 103720, promulgated on August 28,
2008, as well as its Resolution of December 9, 2008, which reversed and set aside the March
10, 2008 Order of Labor Arbiter Concepcion in NLRC NCR Case No. 00-06-06165-07. This
Decision is without prejudice to petitioner Locsin’s available recourse for relief through the
appropriate remedy in the proper forum.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 168757 January 19, 2011
RENATO REAL, Petitioner,
vs.
SANGU PHILIPPINES, INC. and/ or KIICHI ABE, Respondents.
DECISION
DEL CASTILLO, J.:
The perennial question of whether a complaint for illegal dismissal is intra-corporate and thus
beyond the jurisdiction of the Labor Arbiter is the core issue up for consideration in this case.
This Petition for Review on Certiorari assails the Decision1 dated June 28, 2005 of the Court
of Appeals (CA) in CA-G.R. SP. No. 86017 which dismissed the petition for certiorari filed
before it.
Factual Antecedents
Petitioner Renato Real was the Manager of respondent corporation Sangu Philippines, Inc., a
corporation engaged in the business of providing manpower for general services, like janitors,
janitresses and other maintenance personnel, to various clients. In 2001, petitioner, together
with 29 others who were either janitors, janitresses, leadmen and maintenance men, all
employed by respondent corporation, filed their respective Complaints 2 for illegal dismissal
against the latter and respondent Kiichi Abe, the corporation’s Vice-President and General
Manager. These complaints were later on consolidated.
With regard to petitioner, he was removed from his position as Manager through Board
Resolution 2001-033adopted by respondent corporation’s Board of Directors. Petitioner
complained that he was neither notified of the Board Meeting during which said board
resolution was passed nor formally charged with any infraction. He just received from
respondents a letter4 dated March 26, 2001 stating that he has been terminated from service
effective March 25, 2001 for the following reasons: (1) continuous absences at his post at
Ogino Philippines Inc. for several months which was detrimental to the corporation’s
operation; (2) loss of trust and confidence; and, (3) to cut down operational expenses to
reduce further losses being experienced by respondent corporation.
Respondents, on the other hand, refuted petitioner’s claim of illegal dismissal by alleging that
after petitioner was appointed Manager, he committed gross acts of misconduct detrimental
to the company since 2000. According to them, petitioner would almost always absent himself
from work without informing the corporation of his whereabouts and that he would come to
the office only to collect his salaries. As he was almost always absent, petitioner neglected to
supervise the employees resulting in complaints from various clients about employees’
performance. In one instance, petitioner together with a few others, while apparently drunk,
went to the premises of one of respondents’ clients, Epson Precision (Phils.) Inc., and
engaged in a heated argument with the employees therein. Because of this, respondent Abe
allegedly received a complaint from Epson’s Personnel Manager concerning petitioner’s
conduct. Respondents likewise averred that petitioner established a company engaged in the
same business as respondent corporation’s and even submitted proposals for janitorial
services to two of the latter’s clients. Because of all these, the Board of Directors of
respondent corporation met on March 24, 2001 and adopted Board Resolution No. 2001-03
removing petitioner as Manager. Petitioner was thereafter informed of his removal through a
letter dated March 26, 2001 which he, however, refused to receive.
Further, in what respondents believed to be an act of retaliation, petitioner allegedly
encouraged the employees who had been placed in the manpower pool to file a complaint for
illegal dismissal against respondents. Worse, he later incited those assigned in Epson
Precision (Phils.) Inc., Ogino Philippines Corporation, Hitachi Cable Philippines Inc. and
Philippine TRC Inc. to stage a strike on April 10 to 16, 2001. Not satisfied, petitioner together
with other employees also barricaded the premises of respondent corporation. Such acts
respondents posited constitute just cause for petitioner’s dismissal and that same was validly
effected.
Rulings of the Labor Arbiter and the National Labor Relations Commission
The Labor Arbiter in a Decision5 dated June 5, 2003 declared petitioner and his co-
complainants as having been illegally dismissed and ordered respondents to reinstate
complainants to their former positions without loss of seniority rights and other privileges and
to pay their full backwages from the time of their dismissal until actually reinstated and
furthermore, to pay them attorney’s fees. The Labor Arbiter found no convincing proof of the
causes for which petitioner was terminated and noted that there was complete absence of
due process in the manner of his termination.
Respondents thus appealed to the National Labor Relations Commission (NLRC) and raised
therein as one of the issues the lack of jurisdiction of the Labor Arbiter over petitioner’s
complaint. Respondents claimed that petitioner is both a stockholder and a corporate officer
of respondent corporation, hence, his action against respondents is an intra-corporate
controversy over which the Labor Arbiter has no jurisdiction.
The NLRC found such contention of respondents to be meritorious. Aside from petitioner’s
own admission in the pleadings that he is a stockholder and at the same time occupying a
managerial position, the NLRC also gave weight to the corporation’s General Information
Sheet6 (GIS) dated October 27, 1999 listing petitioner as one of its stockholders,
consequently his termination had to be effected through a board resolution. These, the NLRC
opined, clearly established petitioner’s status as a stockholder and as a corporate officer and
hence, his action against respondent corporation is an intra-corporate controversy over which
the Labor Arbiter has no jurisdiction. As to the other complainants, the NLRC ruled that there
was no dismissal. The NLRC however, modified the appealed decision of the Labor Arbiter in
a Decision7 dated February 13, 2004, the dispositive portion of which reads:
WHEREFORE, all foregoing premises considered, the appealed Decision dated June 5, 2003
is hereby MODIFIED. Accordingly, judgment is hereby rendered DISMISSING the complaint
of Renato Real for lack of jurisdiction. As to the rest of the complainants, they are hereby
ordered to immediately report back to work but without the payment of backwages.
All other claims against respondents including attorney’s fees are DISMISSED for lack of
merit.
SO ORDERED.
Still joined by his co-complainants, petitioner brought the case to the CA by way of petition
for certiorari.
Ruling of the Court of Appeals
Before the CA, petitioner imputed upon the NLRC grave abuse of discretion amounting to
lack or excess of jurisdiction in declaring him a corporate officer and in holding that his action
against respondents is an intra-corporate controversy and thus beyond the jurisdiction of the
Labor Arbiter.
While admitting that he is indeed a stockholder of respondent corporation, petitioner
nevertheless disputed the declaration of the NLRC that he is a corporate officer thereof. He
posited that his being a stockholder and his being a managerial employee do not ipso
facto confer upon him the status of a corporate officer. To support this contention, petitioner
called the CA’s attention to the same GIS relied upon by the NLRC when it declared him to
be a corporate officer. He pointed out that although said information sheet clearly indicates
that he is a stockholder of respondent corporation, he is not an officer thereof as shown by
the entry "N/A" or "not applicable" opposite his name in the officer column. Said column
requires that the particular position be indicated if the person is an officer and if not, the entry
"N/A". Petitioner further argued that the fact that his dismissal was effected through a board
resolution does not likewise mean that he is a corporate officer. Otherwise, all that an
employer has to do in order to avoid compliance with the requisites of a valid dismissal under
the Labor Code is to dismiss a managerial employee through a board resolution. Moreover,
he insisted that his action for illegal dismissal is not an intra-corporate controversy as same
stemmed from employee-employer relationship which is well within the jurisdiction of the
Labor Arbiter. This can be deduced and is bolstered by the last paragraph of the termination
letter sent to him by respondents stating that he is entitled to benefits under the Labor Code,
to wit:
In this connection (his dismissal) you are entitled to separation pay and other benefits
provided for under the Labor Code of the Philippines.8 (Emphasis supplied)
In contrast, respondents stood firm that the action against them is an intra-corporate
controversy. It cited Tabang v. National Labor Relations Commission9 wherein this Court
declared that "an intra-corporate controversy is one which arises between a stockholder and
the corporation;" that "[t]here is no distinction, qualification, nor any exemption whatsoever;"
and that it is "broad and covers all kinds of controversies between stockholders and
corporations." In view of this ruling and since petitioner is undisputedly a stockholder of the
corporation, respondents contended that the action instituted by petitioner against them is an
intra-corporate controversy cognizable only by the appropriate regional trial court. Hence, the
NLRC correctly dismissed petitioner’s complaint for lack of jurisdiction.
In the assailed Decision10 dated June 28, 2005, the CA sided with respondents and affirmed
the NLRC’s finding that aside from being a stockholder of respondent corporation, petitioner
is also a corporate officer thereof and consequently, his complaint is an intra-corporate
controversy over which the labor arbiter has no jurisdiction. Said court opined that if it was
true that petitioner is a mere employee, the respondent corporation would not have called a
board meeting to pass a resolution for petitioner’s dismissal considering that it was very
tedious for the Board of Directors to convene and to adopt a resolution every time they decide
to dismiss their managerial employees. To support its finding, the CA likewise
cited Tabang. As to petitioner’s co-complainants, the CA likewise affirmed the NLRC’S finding
that they were never dismissed from the service. The dispositive portion of the CA Decision
reads:
WHEREFORE, the instant petition is hereby DISMISSED. Accordingly, the assailed decision
and resolution of the public respondent National Labor Relations Commission in NLRC NCR
CA No. 036128-03 NLRC SRAB-IV-05-6618-01-B/05-6619-02-B/05-6620-02-B/10-6637-01-
B/10-6833-01-B, STANDS.
SO ORDERED.
Now alone but still undeterred, petitioner elevated the case to us through this Petition for
Review on Certiorari.
The Parties’ Arguments
Petitioner continues to insist that he is not a corporate officer. He argues that a corporate
officer is one who holds an elective position as provided in the Articles of Incorporation or one
who is appointed to such other positions by the Board of Directors as specifically authorized
by its By-Laws. And, since he was neither elected nor is there any showing that he was
appointed by the Board of Directors to his position as Manager, petitioner maintains that he is
not a corporate officer contrary to the findings of the NLRC and the CA.
Petitioner likewise contends that his complaint for illegal dismissal against respondents is not
an intra-corporate controversy. He avers that for an action or suit between a stockholder and
a corporation to be considered an intra-corporate controversy, same must arise from intra-
corporate relations, i.e., an action involving the status of a stockholder as such. He believes
that his action against the respondents does not arise from intra-corporate relations but rather
from employer-employee relations. This, according to him, was even impliedly recognized by
respondents as shown by the earlier quoted portion of the termination letter they sent to him.
For their part, respondents posit that what petitioner is essentially assailing before this Court Issues
is the finding of the NLRC and the CA that he is a corporate officer of respondent corporation.
To the respondents, the question of whether petitioner is a corporate officer is a question of From the foregoing and as earlier mentioned, the core issue to be resolved in this case is
fact which, as held in a long line of jurisprudence, cannot be the subject of review under this whether petitioner’s complaint for illegal dismissal constitutes an intra-corporate controversy
Petition for Review on Certiorari. At any rate, respondents insist that petitioner who is and thus, beyond the jurisdiction of the Labor Arbiter.
undisputedly a stockholder of respondent corporation is likewise a corporate officer and that
his action against them is an intra-corporate dispute beyond the jurisdiction of the labor Our Ruling
tribunals. To support this, they cited several jurisprudence such as Pearson & George (S.E.
Asia), Inc. v. National Labor Relations Commission,11 Philippine School of Business
Administration v. Leano,12 Fortune Cement Corporation v. National Labor Relations Two-tier test in determining the existence of intra-corporate controversy
Commission13 and again, Tabang v. National Labor Relations Commission.14
Respondents strongly rely on this Court’s pronouncement in the 1997 case of Tabang v.
Moreover, in an attempt to demolish petitioner’s claim that the present controversy concerns National Labor Relations Commission, to wit:
employer-employee relations, respondents enumerated the following facts and
circumstances: (1) Petitioner was an incorporator, stockholder and manager of respondent [A]n intra-corporate controversy is one which arises between a stockholder and the
company; (2) As an incorporator, he was one of only seven incorporators of respondent corporation. There is no distinction, qualification nor any exemption whatsoever. The
corporation and one of only four Filipino members of the Board of Directors; (3) As provision is broad and covers all kinds of controversies between stockholders and
stockholder, he has One Thousand (1,000) of the Ten Thousand Eight Hundred (10,800) corporations.16
common shares held by Filipino stockholders, with a par-value of One Hundred Thousand
Pesos (₱100,000.00); (4) His appointment as manager was by virtue of Section 1, Article IV In view of this, respondents contend that even if petitioner challenges his being a corporate
of respondent corporation’s By-Laws; (5) As manager, he had direct management and officer, the present case still constitutes an intra-corporate controversy as petitioner is
authority over all of respondent corporation’s skilled employees; (6) Petitioner has shown undisputedly a stockholder and a director of respondent corporation.
himself to be an incompetent manager, unable to properly supervise the employees and even
causing friction with the corporation’s clients by engaging in unruly behavior while in client’s It is worthy to note, however, that before the promulgation of the Tabang case, the Court
premises; (7) As if his incompetence was not enough, in a blatant and palpable act of provided in Mainland Construction Co., Inc. v. Movilla17 a "better policy" in determining which
disloyalty, he established another company engaged in the same line of business as between the Securities and Exchange Commission (SEC) and the Labor Arbiter has
respondent corporation; (8) Because of these acts of incompetence and disloyalty, jurisdiction over termination disputes,18 or similarly, whether they are intra-corporate or
respondent corporation through a Resolution adopted by its Board of Directors was finally not, viz:
constrained to remove petitioner as Manager and declare his office vacant; (9) After his
removal, petitioner urged the employees under him to stage an unlawful strike by leading
The fact that the parties involved in the controversy are all stockholders or that the parties
them to believe that they have been illegally dismissed from employment. 15 Apparently,
involved are the stockholders and the corporation does not necessarily place the dispute
respondents intended to show from this enumeration that petitioner’s removal pertains to his
within the ambit of the jurisdiction of the SEC (now the Regional Trial Court 19). The better
relationship with respondent corporation, that is, his utter failure to advance its interest and
policy to be followed in determining jurisdiction over a case should be to consider
the prejudice caused by his acts of disloyalty. For this reason, respondents see the action
concurrent factors such as the status or relationship of the parties or the nature of the
against them not as a case between an employer and an employee as what petitioner
question that is subject of their controversy. In the absence of any one of these factors,
alleges, but one by an officer and at same time a major stockholder seeking to be reinstated
the SEC will not have jurisdiction. Furthermore, it does not necessarily follow that every
to his former office against the corporation that declared his position vacant.
conflict between the corporation and its stockholders would involve such corporate matters as
only SEC (now the Regional Trial Court20) can resolve in the exercise of its adjudicatory or
Finally, respondents state that the fact that petitioner is being given benefits under the Labor quasi-judicial powers. (Emphasis ours)
Code as stated in his termination letter does not mean that they are recognizing the
employer-employee relations between them. They explain that the benefits provided under
And, while Tabang was promulgated later than Mainland Construction Co., Inc., the "better
the Labor Code were merely made by respondent corporation as the basis in determining
policy" enunciated in the latter appears to have developed into a standard approach in
petitioner’s compensation package and that same are merely part of the perquisites of
classifying what constitutes an intra-corporate controversy. This is explained lengthily
petitioner’s office as a director and manager. It does not and it cannot change the intra-
in Reyes v. Regional Trial Court of Makati, Br. 142,21 to wit:
corporate nature of the controversy. Hence, respondents pray that this petition be dismissed
for lack of merit.
Intra-Corporate Controversy
A review of relevant jurisprudence shows a development in the Court’s approach in
classifying what constitutes an intra-corporate controversy. Initially, the main consideration in
determining whether a dispute constitutes an intra-corporate controversy was limited to a
consideration of the intra-corporate relationship existing between or among the parties. The
types of relationships embraced under Section 5(b) x x x were as follows:
a) between the corporation, partnership or association and the public;
b) between the corporation, partnership or association and its stockholders, partners,
members or officers;
c) between the corporation, partnership or association and the State as far as its
franchise, permit or license to operate is concerned; and
d) among the stockholders, partners or associates themselves.
The existence of any of the above intra-corporate relations was sufficient to confer jurisdiction
to the SEC (now the RTC), regardless of the subject matter of the dispute. This came to be
known as the relationship test.
However, in the 1984 case of DMRC Enterprises v. Esta del Sol Mountain Reserve, Inc., the
Court introduced the nature of the controversy test. We declared in this case that it is not the
mere existence of an intra-corporate relationship that gives rise to an intra-corporate
controversy; to rely on the relationship test alone will divest the regular courts of their
jurisdiction for the sole reason that the dispute involves a corporation, its directors, officers, or
stockholders. We saw that there is no legal sense in disregarding or minimizing the value of
the nature of the transactions which gives rise to the dispute.
Under the nature of the controversy test, the incidents of that relationship must also be
considered for the purpose of ascertaining whether the controversy itself is intra-corporate.
The controversy must not only be rooted in the existence of an intra-corporate relationship,
but must as well pertain to the enforcement of the parties’ correlative rights and obligations
under the Corporation Code and the internal and intra-corporate regulatory rules of the
corporation. If the relationship and its incidents are merely incidental to the controversy or if
there will still be conflict even if the relationship does not exist, then no intra-corporate
controversy exists.
The Court then combined the two tests and declared that jurisdiction should be determined by
considering not only the status or relationship of the parties, but also the nature of the
question under controversy. This two-tier test was adopted in the recent case of Speed
Distribution Inc. v. Court of Appeals:
‘To determine whether a case involves an intra-corporate controversy, and is to be heard and
decided by the branches of the RTC specifically designated by the Court to try and decide
such cases, two elements must concur: (a) the status or relationship of the parties, and (2)
the nature of the question that is the subject of their controversy.
The first element requires that the controversy must arise out of intra-corporate or partnership
relations between any or all of the parties and the corporation, partnership, or association of
which they are not stockholders, members or associates, between any or all of them and the
corporation, partnership or association of which they are stockholders, members or
associates, respectively; and between such corporation, partnership, or association and the
State insofar as it concerns the individual franchises. The second element requires that the
dispute among the parties be intrinsically connected with the regulation of the corporation. If
the nature of the controversy involves matters that are purely civil in character, necessarily,
the case does not involve an intra-corporate controversy.’ [Citations omitted.]
Guided by this recent jurisprudence, we thus find no merit in respondents’ contention that the
fact alone that petitioner is a stockholder and director of respondent corporation automatically
classifies this case as an intra-corporate controversy. To reiterate, not all conflicts between
the stockholders and the corporation are classified as intra-corporate. There are other factors
to consider in determining whether the dispute involves corporate matters as to consider
them as intra-corporate controversies.
What then is the nature of petitioner’s Complaint for Illegal Dismissal? Is it intra-corporate and
thus beyond the jurisdiction of the Labor Arbiter? We shall answer this question by using the
standards set forth in the Reyes case.
No intra-corporate relationship between the parties
As earlier stated, petitioner’s status as a stockholder and director of respondent corporation is
not disputed. What the parties disagree on is the finding of the NLRC and the CA that
petitioner is a corporate officer. An examination of the complaint for illegal dismissal,
however, reveals that the root of the controversy is petitioner’s dismissal as Manager of
respondent corporation, a position which respondents claim to be a corporate office. Hence,
petitioner is involved in this case not in his capacity as a stockholder or director, but as an
alleged corporate officer. In applying the relationship test, therefore, it is necessary to
determine if petitioner is a corporate officer of respondent corporation so as to establish the
intra-corporate relationship between the parties. And albeit respondents claim that the
determination of whether petitioner is a corporate officer is a question of fact which this Court
cannot pass upon in this petition for review on certiorari, we shall nonetheless proceed to
consider the same because such question is not the main issue to be resolved in this case
but is merely collateral to the core issue earlier mentioned.
Petitioner negates his status as a corporate officer by pointing out that although he was
removed as Manager through a board resolution, he was never elected to said position nor
was he appointed thereto by the Board of Directors. While the By-Laws of respondent
corporation provides that the Board may from time to time appoint such officers as it may
deem necessary or proper, he avers that respondents failed to present any board resolution
that he was appointed pursuant to said By-Laws. He instead alleges that he was hired as
Manager of respondent corporation solely by respondent Abe. For these reasons, petitioner
claims to be a mere employee of respondent corporation rather than as a corporate officer.
We find merit in petitioner’s contention.
"‘Corporate officers’ in the context of Presidential Decree No. 902-A are those officers of the
corporation who are given that character by the Corporation Code or by the corporation’s by-
laws. There are three specific officers whom a corporation must have under Section 25 of the
Corporation Code. These are the president, secretary and the treasurer. The number of
officers is not limited to these three. A corporation may have such other officers as may be
provided for by its by-laws like, but not limited to, the vice-president, cashier, auditor or
general manager. The number of corporate officers is thus limited by law and by the
corporation’s by-laws."22
Respondents claim that petitioner was appointed Manager by virtue of Section 1, Article IV of
respondent corporation’s By-Laws which provides:
ARTICLE IV
OFFICER
Section 1. Election/Appointment – Immediately after their election, the Board of Directors
shall formally organize by electing the President, Vice-President, the Secretary at said
meeting.
The Board, may from time to time, appoint such other officers as it may determine to
be necessary or proper. Any two (2) or more positions may be held concurrently by the
same person, except that no one shall act as President and Treasurer or Secretary at the
same time.
x x x x23 (Emphasis ours)
We have however examined the records of this case and we find nothing to prove that
petitioner’s appointment was made pursuant to the above-quoted provision of respondent
corporation’s By-Laws. No copy of board resolution appointing petitioner as Manager or any
other document showing that he was appointed to said position by action of the board was
submitted by respondents. What we found instead were mere allegations of respondents in
their various pleadings24 that petitioner was appointed as Manager of respondent corporation
and nothing more. "The Court has stressed time and again that allegations must be proven by
sufficient evidence because mere allegation is definitely not evidence."25
It also does not escape our attention that respondents made the following conflicting
allegations in their Memorandum on Appeal26 filed before the NLRC which cast doubt on
petitioner’s status as a corporate officer, to wit:
xxxx
24. Complainant-appellee Renato Real was appointed as the manager of respondent-
appellant Sangu on November 6, 1998. Priorly [sic], he was working at Atlas Ltd. Co. at Mito-
shi, Ibaraki-ken Japan. He was staying in Japan as an illegal alien for the past eleven (11)
years. He had a problem with his family here in the Philippines which prompted him to
surrender himself to Japan’s Bureau of Immigration and was deported back to the
Philippines. His former employer, Mr. Tsutomo Nogami requested Mr. Masahiko Shibata, one
of respondent-appellant Sangu’s Board of Directors, if complainant-appellee Renato Real
could work as one of its employees here in the Philippines because he had been blacklisted
at Japan’s Immigration Office and could no longer go back to Japan. And so it was
arranged that he would serve as respondent-appellant Sangu’s manager, receiving a
salary of ₱25,000.00. As such, he was tasked to oversee the operations of the company. x x
x (Emphasis ours)
xxxx
As earlier stated, complainant-appellee Renato Real was hired as the manager of
respondent-appellant Sangu. As such, his position was reposed with full trust and confidence.
xxx
While respondents repeatedly claim that petitioner was appointed as Manager pursuant to the
corporation’s By-Laws, the above-quoted inconsistencies in their allegations as to how
petitioner was placed in said position, coupled by the fact that they failed to produce any
documentary evidence to prove that petitioner was appointed thereto by action or with
approval of the board, only leads this Court to believe otherwise. It has been consistently held
that "[a]n ‘office’ is created by the charter of the corporation and the officer is elected (or
appointed) by the directors or stockholders."27 Clearly here, respondents failed to prove that
petitioner was appointed by the board of directors. Thus, we cannot subscribe to their claim
that petitioner is a corporate officer. Having said this, we find that there is no intra-corporate
relationship between the parties insofar as petitioner’s complaint for illegal dismissal is
concerned and that same does not satisfy the relationship test.
Present controversy does not relate to intra-corporate dispute
We now go to the nature of controversy test. As earlier stated, respondents terminated the
services of petitioner for the following reasons: (1) his continuous absences at his post at
Ogino Philippines, Inc; (2) respondents’ loss of trust and confidence on petitioner; and, (3) to
cut down operational expenses to reduce further losses being experienced by the
corporation. Hence, petitioner filed a complaint for illegal dismissal and sought reinstatement,
backwages, moral damages and attorney’s fees. From these, it is not difficult to see that the
reasons given by respondents for dismissing petitioner have something to do with his being a
Manager of respondent corporation and nothing with his being a director or stockholder. For
one, petitioner’s continuous absences in his post in Ogino relates to his performance as
Manager. Second, respondents’ loss of trust and confidence in petitioner stemmed from his
alleged acts of establishing a company engaged in the same line of business as respondent
corporation’s and submitting proposals to the latter’s clients while he was still serving as its
Manager. While we note that respondents also claim these acts as constituting acts of
disloyalty of petitioner as director and stockholder, we, however, think that same is a mere
afterthought on their part to make it appear that the present case involves an element of intra-
corporate controversy. This is because before the Labor Arbiter, respondents did not see
such acts to be disloyal acts of a director and stockholder but rather, as constituting willful
breach of the trust reposed upon petitioner as Manager.28 It was only after respondents
invoked the Labor Arbiter’s lack of jurisdiction over petitioner’s complaint in the Supplemental
Memorandum of Appeal29 filed before the NLRC that respondents started considering said
acts as such. Third, in saying that they were dismissing petitioner to cut operational
expenses, respondents actually want to save on the salaries and other remunerations being
given to petitioner as its Manager. Thus, when petitioner sought for reinstatement, he wanted
to recover his position as Manager, a position which we have, however, earlier declared to be
not a corporate position. He is not trying to recover a seat in the board of directors or to any
appointive or elective corporate position which has been declared vacant by the board.
Certainly, what we have here is a case of termination of employment which is a labor
controversy and not an intra-corporate dispute. In sum, we hold that petitioner’s complaint
likewise does not satisfy the nature of controversy test.
With the elements of intra-corporate controversy being absent in this case, we thus hold that
petitioner’s complaint for illegal dismissal against respondents is not intra-corporate. Rather, it
is a termination dispute and, consequently, falls under the jurisdiction of the Labor Arbiter
pursuant to Section 21730 of the Labor Code.
We take note of the cases cited by respondents and find them inapplicable to the case at
bar. Fortune Cement Corporation v. National Labor Relations Commission31 involves a
member of the board of directors and at the same time a corporate officer who claims he was
illegally dismissed after he was stripped of his corporate position of Executive Vice-President
because of loss of trust and confidence. On the other hand, Philippine School of Business
Administration v. Leano32 and Pearson & George v. National Labor Relations
Commission33 both concern a complaint for illegal dismissal by corporate officers who were
not re-elected to their respective corporate positions. The Court declared all these cases as
involving intra-corporate controversies and thus affirmed the jurisdiction of the SEC (now the
RTC)34 over them precisely because they all relate to corporate officers and their removal or
non-reelection to their respective corporate positions. Said cases are by no means similar to
the present case because as discussed earlier, petitioner here is not a corporate officer.
With the foregoing, it is clear that the CA erred in affirming the decision of the NLRC which
dismissed petitioner’s complaint for lack of jurisdiction. In cases such as this, the Court
normally remands the case to the NLRC and directs it to properly dispose of the case on the
merits. "However, when there is enough basis on which a proper evaluation of the merits of
petitioner’s case may be had, the Court may dispense with the time-consuming procedure of
remand in order to prevent further delays in the disposition of the case."35 "It is already an
accepted rule of procedure for us to strive to settle the entire controversy in a single
proceeding, leaving no root or branch to bear the seeds of litigation. If, based on the records,
the pleadings, and other evidence, the dispute can be resolved by us, we will do so to serve
the ends of justice instead of remanding the case to the lower court for further
proceedings."36 We have gone over the records before us and we are convinced that we can
now altogether resolve the issue of the validity of petitioner’s dismissal and hence, we shall
proceed to do so.
Petitioner’s dismissal not in accordance with law
"In an illegal dismissal case, the onus probandi rests on the employer to prove that [the]
dismissal of an employee is for a valid cause."37 Here, as correctly observed by the Labor
Arbiter, respondents failed to produce any convincing proof to support the grounds for which
they terminated petitioner. Respondents contend that petitioner has been absent for several
months, yet they failed to present any proof that petitioner was indeed absent for such a long
time. Also, the fact that petitioner was still able to collect his salaries after his alleged
absences casts doubts on the truthfulness of such charge. Respondents likewise allege that
petitioner engaged in a heated argument with the employees of Epson, one of respondents’
clients. But just like in the charge of absenteeism, there is no showing that an investigation on
the matter was done and that disciplinary action was imposed upon petitioner. At any rate, we
have reviewed the records of this case and we agree with the Labor Arbiter that under the
circumstances, said charges are not sufficient bases for petitioner’s termination. As to the
charge of breach of trust allegedly committed by petitioner when he established a new
company engaged in the same line of business as respondent corporation’s and submitted
proposals to two of the latter’s clients while he was still a Manager, we again observe that
these are mere allegations without sufficient proof. To reiterate, allegations must be proven
by sufficient evidence because mere allegation is definitely not evidence.38
Moreover, petitioner’s dismissal was effected without due process of law.lawphi1 "The twin
requirements of notice and hearing constitute the essential elements of due process. The law
requires the employer to furnish the employee sought to be dismissed with two written notices
before termination of employment can be legally effected: (1) a written notice apprising the
employee of the particular acts or omissions for which his dismissal is sought in order to
afford him an opportunity to be heard and to defend himself with the assistance of counsel, if
he desires, and (2) a subsequent notice informing the employee of the employer’s decision to
dismiss him. This procedure is mandatory and its absence taints the dismissal with
illegality."39 Since in this case, petitioner’s dismissal was effected through a board resolution
and all that petitioner received was a letter informing him of the board’s decision to terminate
him, the abovementioned procedure was clearly not complied with. All told, we agree with the
findings of the Labor Arbiter that petitioner has been illegally dismissed. And, as an illegally
dismissed employee is entitled to the two reliefs of backwages and reinstatement, 40 we affirm
the Labor Arbiter’s judgment ordering petitioner’s reinstatement to his former position without
loss of seniority rights and other privileges and awarding backwages from the time of his
dismissal until actually reinstated. Considering that petitioner has to secure the services of
counsel to protect his interest and necessarily has to incur expenses, we likewise affirm the
award of attorney’s fees which is equivalent to 10% of the total backwages that respondents
must pay petitioner in accordance with this Decision.
WHEREFORE, the petition is hereby GRANTED. The assailed June 28, 2005 Decision of the
Court of Appeals insofar as it affirmed the National Labor Relations Commission’s dismissal
of petitioner’s complaint for lack of jurisdiction, is hereby REVERSED and SET ASIDE. The
June 5, 2003 Decision of the Labor Arbiter with respect to petitioner Renato Real is
AFFIRMED and this case is ordered REMANDED to the National Labor Relations
Commission for the computation of petitioner’s backwages and attorney’s fees in accordance
with this Decision.
SO ORDERED.
G.R. No. 201298 February 5, 2014
RAUL C. COSARE, Petitioner,
vs.
BROADCOM ASIA, INC. and DANTE AREVALO, Respondents.
DECISION
REYES, J.:
Before the Court is a petition for review on certiorari1 under Rule 45 of the Rules of Court,
which assails the Decision2 dated November 24, 2011 and Resolution3 dated March 26, 2012
of the Court of Appeals (CA) in CA-G.R. SP. No. 117356, wherein the CA ruled that the
Regional Trial Court (RTC), and not the Labor Arbiter (LA), had the jurisdiction over petitioner
Raul C. Cosare's (Cosare) complaint for illegal dismissal against Broadcom Asia, Inc.
(Broadcom) and Dante Arevalo (Arevalo), the President of Broadcom (respondents).
The Antecedents
The case stems from a complaint4 for constructive dismissal, illegal suspension and monetary
claims filed with the National Capital Region Arbitration Branch of the National Labor
Relations Commission (NLRC) by Cosare against the respondents.
Cosare claimed that sometime in April 1993, he was employed as a salesman by Arevalo,
who was then in the business of selling broadcast equipment needed by television networks
and production houses. In December 2000, Arevalo set up the company Broadcom, still to
continue the business of trading communication and broadcast equipment. Cosare was
named an incorporator of Broadcom, having been assigned 100 shares of stock with par
value of ₱1.00 per share.5 In October 2001, Cosare was promoted to the position of Assistant
Vice President for Sales (AVP for Sales) and Head of the Technical Coordination, having a
monthly basic net salary and average commissions of ₱18,000.00 and ₱37,000.00,
respectively.6
Sometime in 2003, Alex F. Abiog (Abiog) was appointed as Broadcom’s Vice President for
Sales and thus, became Cosare’s immediate superior. On March 23, 2009, Cosare sent a
confidential memo7 to Arevalo to inform him of the following anomalies which were allegedly
being committed by Abiog against the company: (a) he failed to report to work on time, and
would immediately leave the office on the pretext of client visits; (b) he advised the clients of
Broadcom to purchase camera units from its competitors, and received commissions therefor;
(c) he shared in the "under the-table dealings" or "confidential commissions" which Broadcom
extended to its clients’ personnel and engineers; and (d) he expressed his complaints and
disgust over Broadcom’s uncompetitive salaries and wages and delay in the payment of other
benefits, even in the presence of office staff. Cosare ended his memo by clarifying that he
was not interested in Abiog’s position, but only wanted Arevalo to know of the irregularities for
the corporation’s sake.
Apparently, Arevalo failed to act on Cosare’s accusations. Cosare claimed that he was
instead called for a meeting by Arevalo on March 25, 2009, wherein he was asked to tender
his resignation in exchange for "financial assistance" in the amount of ₱300,000.00.8 Cosare
refused to comply with the directive, as signified in a letter 9dated March 26, 2009 which he
sent to Arevalo.
On March 30, 2009, Cosare received from Roselyn Villareal (Villareal), Broadcom’s Manager
for Finance and Administration, a memo10 signed by Arevalo, charging him of serious
misconduct and willful breach of trust, and providing in part:
1. A confidential memo was received from the VP for Sales informing me that you
had directed, or at the very least tried to persuade, a customer to purchase a camera
from another supplier. Clearly, this action is a gross and willful violation of the trust
and confidence this company has given to you being its AVP for Sales and is an
attempt to deprive the company of income from which you, along with the other
employees of this company, derive your salaries and other benefits. x x x.
2. A company vehicle assigned to you with plate no. UNV 402 was found abandoned
in another place outside of the office without proper turnover from you to this office
which had assigned said vehicle to you. The vehicle was found to be inoperable and
in very bad condition, which required that the vehicle be towed to a nearby auto
repair shop for extensive repairs.
3. You have repeatedly failed to submit regular sales reports informing the company
of your activities within and outside of company premises despite repeated
reminders. However, it has been observed that you have been both frequently absent
and/or tardy without proper information to this office or your direct supervisor, the VP
for Sales Mr. Alex Abiog, of your whereabouts.
 4. You have been remiss in the performance of your duties as a Sales officer as
evidenced by the fact that you have not recorded any sales for the past immediate
twelve (12) months. This was inspite of the fact that my office decided to relieve you
of your duties as technical coordinator between Engineering and Sales since June
last year so that you could focus and concentrate [on] your activities in sales.11
Cosare was given forty-eight (48) hours from the date of the memo within which to present
his explanation on the charges. He was also "suspended from having access to any and all
company files/records and use of company assets effective immediately." 12 Thus, Cosare
claimed that he was precluded from reporting for work on March 31, 2009, and was instead
instructed to wait at the office’s receiving section. Upon the specific instructions of Arevalo, he
was also prevented by Villareal from retrieving even his personal belongings from the office.
On April 1, 2009, Cosare was totally barred from entering the company premises, and was
told to merely wait outside the office building for further instructions. When no such
instructions were given by 8:00 p.m., Cosare was impelled to seek the assistance of the
officials of Barangay San Antonio, Pasig City, and had the incident reported in the barangay
blotter.13
On April 2, 2009, Cosare attempted to furnish the company with a Memo14 by which he
addressed and denied the accusations cited in Arevalo’s memo dated March 30, 2009. The
respondents refused to receive the memo on the ground of late filing, prompting Cosare to
serve a copy thereof by registered mail. The following day, April 3, 2009, Cosare filed the
subject labor complaint, claiming that he was constructively dismissed from employment by
the respondents. He further argued that he was illegally suspended, as he placed no serious
and imminent threat to the life or property of his employer and co-employees.15
In refuting Cosare’s complaint, the respondents argued that Cosare was neither illegally
suspended nor dismissed from employment. They also contended that Cosare committed the
following acts inimical to the interests of Broadcom: (a) he failed to sell any broadcast
equipment since the year 2007; (b) he attempted to sell a Panasonic HMC 150 Camera which
was to be sourced from a competitor; and (c) he made an unauthorized request in
Broadcom’s name for its principal, Panasonic USA, to issue an invitation for Cosare’s friend,
one Alex Paredes, to attend the National Association of Broadcasters’ Conference in Las
Vegas, USA.16 Furthermore, they contended that Cosare abandoned his job17 by continually
failing to report for work beginning April 1, 2009, prompting them to issue on April 14, 2009 a
memorandum 18 accusing Cosare of absence without leave beginning April 1, 2009.
The Ruling of the LA
On January 6, 2010, LA Napoleon M. Menese (LA Menese) rendered his
Decision19 dismissing the complaint on the ground of Cosare’s failure to establish that he was
dismissed, constructively or otherwise, from his employment. For the LA, what transpired on
March 30, 2009 was merely the respondents’ issuance to Cosare of a show-cause memo,
giving him a chance to present his side on the charges against him. He explained:
It is obvious that [Cosare] DID NOT wait for respondents’ action regarding the charges
leveled against him in the show-cause memo. What he did was to pre-empt that action by
filing this complaint just a day after he submitted his written explanation. Moreover, by
specifically seeking payment of "Separation Pay" instead of reinstatement, [Cosare’s] motive
for filing this case becomes more evident.20
It was also held that Cosare failed to substantiate by documentary evidence his allegations of
illegal suspension and non-payment of allowances and commissions.
Unyielding, Cosare appealed the LA decision to the NLRC.
The Ruling of the NLRC
On August 24, 2010, the NLRC rendered its Decision21 reversing the Decision of LA Menese.
The dispositive portion of the NLRC Decision reads:
WHEREFORE, premises considered, the DECISION is REVERSED and the Respondents
are found guilty of Illegal Constructive Dismissal. Respondents BROADCOM ASIA, INC. and
Dante Arevalo are ordered to pay [Cosare’s] backwages, and separation pay, as well as
damages, in the total amount of ₱1,915,458.33, per attached Computation.
SO ORDERED.22
In ruling in favor of Cosare, the NLRC explained that "due weight and credence is accorded
to [Cosare’s] contention that he was constructively dismissed by Respondent Arevalo when
he was asked to resign from his employment."23The fact that Cosare was suspended from
using the assets of Broadcom was also inconsistent with the respondents’ claim that Cosare
opted to abandon his employment.
Exemplary damages in the amount of ₱100,000.00 was awarded, given the NLRC’s finding
that the termination of Cosare’s employment was effected by the respondents in bad faith and
in a wanton, oppressive and malevolent manner. The claim for unpaid commissions was
denied on the ground of the failure to include it in the prayer of pleadings filed with the LA and
in the appeal.
The respondents’ motion for reconsideration was denied.24 Dissatisfied, they filed a petition
for certiorari with the CA founded on the following arguments: (1) the respondents did not
have to prove just cause for terminating the employment of Cosare because the latter’s
complaint was based on an alleged constructive dismissal; (2) Cosare resigned and was thus
not dismissed from employment; (3) the respondents should not be declared liable for the
payment of Cosare’s monetary claims; and (4) Arevalo should not be held solidarily liable for
the judgment award.
In a manifestation filed by the respondents during the pendency of the CA appeal, they raised
a new argument, i.e., the case involved an intra-corporate controversy which was within the
jurisdiction of the RTC, instead of the LA.25They argued that the case involved a complaint
against a corporation filed by a stockholder, who, at the same time, was a corporate officer.
The Ruling of the CA
On November 24, 2011, the CA rendered the assailed Decision26 granting the respondents’
petition. It agreed with the respondents’ contention that the case involved an intra-corporate
controversy which, pursuant to Presidential Decree No. 902-A, as amended, was within the
exclusive jurisdiction of the RTC. It reasoned:
Record shows that [Cosare] was indeed a stockholder of [Broadcom], and that he was listed
as one of its directors. Moreover, he held the position of [AVP] for Sales which is listed as a
corporate office. Generally, the president, vice-president, secretary or treasurer are
commonly regarded as the principal or executive officers of a corporation, and modern
corporation statutes usually designate them as the officers of the corporation. However, it
bears mentioning that under Section 25 of the Corporation Code, the Board of Directors of
[Broadcom] is allowed to appoint such other officers as it may deem necessary. Indeed,
[Broadcom’s] By-Laws provides:
Article IV
Officer
Section 1. Election / Appointment – Immediately after their election, the Board of Directors
shall formally organize by electing the President, the Vice-President, the Treasurer, and the
Secretary at said meeting.
The Board, may, from time to time, appoint such other officers as it may determine to be
necessary or proper. x x x
We hold that [the respondents] were able to present substantial evidence that [Cosare]
indeed held a corporate office, as evidenced by the General Information Sheet which was
submitted to the Securities and Exchange Commission (SEC) on October 22,
2009.27 (Citations omitted and emphasis supplied)
Thus, the CA reversed the NLRC decision and resolution, and then entered a new one
dismissing the labor complaint on the ground of lack of jurisdiction, finding it unnecessary to
resolve the main issues that were raised in the petition. Cosare filed a motion for
reconsideration, but this was denied by the CA via the Resolution 28 dated March 26, 2012.
Hence, this petition.
The Present Petition
The pivotal issues for the petition’s full resolution are as follows: (1) whether or not the case
instituted by Cosare was an intra-corporate dispute that was within the original jurisdiction of
the RTC, and not of the LAs; and (2) whether or not Cosare was constructively and illegally
dismissed from employment by the respondents.
The Court’s Ruling
The petition is impressed with merit.
Jurisdiction over the controversy
As regards the issue of jurisdiction, the Court has determined that contrary to the ruling of the
CA, it is the LA, and not the regular courts, which has the original jurisdiction over the subject
controversy. An intra-corporate controversy, which falls within the jurisdiction of regular
courts, has been regarded in its broad sense to pertain to disputes that involve any of the
following relationships: (1) between the corporation, partnership or association and the public;
(2) between the corporation, partnership or association and the state in so far as its franchise,
permit or license to operate is concerned; (3) between the corporation, partnership or
association and its stockholders, partners, members or officers; and (4) among the
stockholders, partners or associates, themselves.29 Settled jurisprudence, however, qualifies
that when the dispute involves a charge of illegal dismissal, the action may fall under the
jurisdiction of the LAs upon whose jurisdiction, as a rule, falls termination disputes and claims
for damages arising from employer-employee relations as provided in Article 217 of the Labor
Code. Consistent with this jurisprudence, the mere fact that Cosare was a stockholder and an
officer of Broadcom at the time the subject controversy developed failed to necessarily make
the case an intra-corporate dispute.
In Matling Industrial and Commercial Corporation v. Coros,30 the Court distinguished between
a "regular employee" and a "corporate officer" for purposes of establishing the true nature of
a dispute or complaint for illegal dismissal and determining which body has jurisdiction over it.
Succinctly, it was explained that "[t]he determination of whether the dismissed officer was a
regular employee or corporate officer unravels the conundrum" of whether a complaint for
illegal dismissal is cognizable by the LA or by the RTC. "In case of the regular employee, the
LA has jurisdiction; otherwise, the RTC exercises the legal authority to adjudicate. 31
Applying the foregoing to the present case, the LA had the original jurisdiction over the
complaint for illegal dismissal because Cosare, although an officer of Broadcom for being its
AVP for Sales, was not a "corporate officer" as the term is defined by law. We emphasized in
Real v. Sangu Philippines, Inc.32 the definition of corporate officers for the purpose of
identifying an intra-corporate controversy. Citing Garcia v. Eastern Telecommunications
Philippines, Inc.,33 we held:
" ‘Corporate officers’ in the context of Presidential Decree No. 902-A are those officers of the
corporation who are given that character by the Corporation Code or by the corporation’s by-
laws. There are three specific officers whom a corporation must have under Section 25 of the
Corporation Code. These are the president, secretary and the treasurer. The number of
officers is not limited to these three. A corporation may have such other officers as may be
provided for by its by-laws like, but not limited to, the vice-president, cashier, auditor or
general manager. The number of corporate officers is thus limited by law and by the
corporation’s by-laws."34 (Emphasis ours)
In Tabang v. NLRC,35 the Court also made the following pronouncement on the nature of
corporate offices:
It has been held that an "office" is created by the charter of the corporation and the officer is
elected by the directors and stockholders. On the other hand, an "employee" usually occupies
no office and generally is employed not by action of the directors or stockholders but by the
managing officer of the corporation who also determines the compensation to be paid to such
employee.36 (Citations omitted)
As may be deduced from the foregoing, there are two circumstances which must concur in
order for an individual to be considered a corporate officer, as against an ordinary employee
or officer, namely: (1) the creation of the position is under the corporation’s charter or by-
laws; and (2) the election of the officer is by the directors or stockholders. It is only when the
officer claiming to have been illegally dismissed is classified as such corporate officer that the
issue is deemed an intra-corporate dispute which falls within the jurisdiction of the trial courts.
To support their argument that Cosare was a corporate officer, the respondents referred to
Section 1, Article IV of Broadcom’s by-laws, which reads:
ARTICLE IV
OFFICER
Section 1. Election / Appointment – Immediately after their election, the Board of Directors
shall formally organize by electing the President, the Vice-President, the Treasurer, and the
Secretary at said meeting.
The Board may, from time to time, appoint such other officers as it may determine to be
necessary or proper. Any two (2) or more compatible positions may be held concurrently by
the same person, except that no one shall act as President and Treasurer or Secretary at the
same time.37 (Emphasis ours)
This was also the CA’s main basis in ruling that the matter was an intra-corporate dispute that
was within the trial courts’ jurisdiction.
The Court disagrees with the respondents and the CA. As may be gleaned from the
aforequoted provision, the only officers who are specifically listed, and thus with offices that
are created under Broadcom’s by-laws are the following: the President, Vice-President,
Treasurer and Secretary. Although a blanket authority provides for the Board’s appointment
of such other officers as it may deem necessary and proper, the respondents failed to
sufficiently establish that the position of AVP for Sales was created by virtue of an act of
Broadcom’s board, and that Cosare was specifically elected or appointed to such position by
the directors. No board resolutions to establish such facts form part of the case records.
Further, it was held in Marc II Marketing, Inc. v. Joson38 that an enabling clause in a
corporation’s by-laws empowering its board of directors to create additional officers, even
with the subsequent passage of a board resolution to that effect, cannot make such position a
corporate office. The board of directors has no power to create other corporate offices without
first amending the corporate by-laws so as to include therein the newly created corporate
office.39 "To allow the creation of a corporate officer position by a simple inclusion in the
corporate by-laws of an enabling clause empowering the board of directors to do so can
result in the circumvention of that constitutionally well-protected right [of every employee to
security of tenure]."40
The CA’s heavy reliance on the contents of the General Information Sheets 41, which were
submitted by the respondents during the appeal proceedings and which plainly provided that
Cosare was an "officer" of Broadcom, was clearly misplaced. The said documents could
neither govern nor establish the nature of the office held by Cosare and his appointment
thereto. Furthermore, although Cosare could indeed be classified as an officer as provided in
the General Information Sheets, his position could only be deemed a regular office, and not a
corporate office as it is defined under the Corporation Code. Incidentally, the Court noticed
that although the Corporate Secretary of Broadcom, Atty. Efren L. Cordero, declared under
oath the truth of the matters set forth in the General Information Sheets, the respondents
failed to explain why the General Information Sheet officially filed with the Securities and
Exchange Commission in 2011 and submitted to the CA by the respondents still indicated
Cosare as an AVP for Sales, when among their defenses in the charge of illegal dismissal,
they asserted that Cosare had severed his relationship with the corporation since the year
2009.
Finally, the mere fact that Cosare was a stockholder of Broadcom at the time of the case’s
filing did not necessarily make the action an intra- corporate controversy. "Not all conflicts
between the stockholders and the corporation are classified as intra-corporate. There are
other facts to consider in determining whether the dispute involves corporate matters as to
consider them as intra-corporate controversies."42 Time and again, the Court has ruled that in
determining the existence of an intra-corporate dispute, the status or relationship of the
parties and the nature of the question that is the subject of the controversy must be taken into
account.43 Considering that the pending dispute particularly relates to Cosare’s rights and
obligations as a regular officer of Broadcom, instead of as a stockholder of the corporation,
the controversy cannot be deemed intra-corporate. This is consistent with the "controversy
test" explained by the Court in Reyes v. Hon. RTC, Br. 142,44 to wit:
Under the nature of the controversy test, the incidents of that relationship must also be
considered for the purpose of ascertaining whether the controversy itself is intra-corporate.
The controversy must not only be rooted in the existence of an intra-corporate relationship,
but must as well pertain to the enforcement of the parties’ correlative rights and obligations
under the Corporation Code and the internal and intra-corporate regulatory rules of the
corporation. If the relationship and its incidents are merely incidental to the controversy or if
there will still be conflict even if the relationship does not exist, then no intra-corporate
controversy exists.45 (Citation omitted)
It bears mentioning that even the CA’s finding46 that Cosare was a director of Broadcom
when the dispute commenced was unsupported by the case records, as even the General
Information Sheet of 2009 referred to in the CA decision to support such finding failed to
provide such detail.
All told, it is then evident that the CA erred in reversing the NLRC’s ruling that favored Cosare
solely on the ground that the dispute was an intra-corporate controversy within the jurisdiction
of the regular courts.
The charge of constructive dismissal
Towards a full resolution of the instant case, the Court finds it appropriate to rule on the
correctness of the NLRC’s ruling finding Cosare to have been illegally dismissed from
employment.
In filing his labor complaint, Cosare maintained that he was constructively dismissed, citing
among other circumstances the charges that were hurled and the suspension that was
imposed against him via Arevalo’s memo dated March 30, 2009. Even prior to such charge,
he claimed to have been subjected to mental torture, having been locked out of his files and
records and disallowed use of his office computer and access to personal belongings.47While
Cosare attempted to furnish the respondents with his reply to the charges, the latter refused
to accept the same on the ground that it was filed beyond the 48-hour period which they
provided in the memo.
Cosare further referred to the circumstances that allegedly transpired subsequent to the
service of the memo, particularly the continued refusal of the respondents to allow Cosare’s
entry into the company’s premises. These incidents were cited in the CA decision as follows:
On March 31, 2009, [Cosare] reported back to work again. He asked Villareal if he could
retrieve his personal belongings, but the latter said that x x x Arevalo directed her to deny his
request, so [Cosare] again waited at the receiving section of the office. On April 1, 2009,
[Cosare] was not allowed to enter the office premises. He was asked to just wait outside of
the Tektite (PSE) Towers, where [Broadcom] had its offices, for further instructions on how
and when he could get his personal belongings. [Cosare] waited until 8 p.m. for instructions
but none were given. Thus, [Cosare] sought the assistance of the officials of Barangay San
Antonio, Pasig who advised him to file a labor or replevin case to recover his personal
belongings. x x x.48 (Citation omitted)
It is also worth mentioning that a few days before the issuance of the memo dated March 30,
2009, Cosare was allegedly summoned to Arevalo’s office and was asked to tender his
immediate resignation from the company, in exchange for a financial assistance of
₱300,000.00.49 The directive was said to be founded on Arevalo’s choice to retain Abiog’s
employment with the company.50 The respondents failed to refute these claims.
Given the circumstances, the Court agrees with Cosare’s claim of constructive and illegal
dismissal. "[C]onstructive dismissal occurs when there is cessation of work because
continued employment is rendered impossible, unreasonable, or unlikely as when there is a
demotion in rank or diminution in pay or when a clear discrimination, insensibility, or disdain
by an employer becomes unbearable to the employee leaving the latter with no other option
but to quit."51 In Dimagan v. Dacworks United, Incorporated,52 it was explained:
The test of constructive dismissal is whether a reasonable person in the employee’s position
would have felt compelled to give up his position under the circumstances. It is an act
amounting to dismissal but is made to appear as if it were not. Constructive dismissal is
therefore a dismissal in disguise. The law recognizes and resolves this situation in favor of
employees in order to protect their rights and interests from the coercive acts of the
employer.53(Citation omitted)
It is clear from the cited circumstances that the respondents already rejected Cosare’s
continued involvement with the company. Even their refusal to accept the explanation which
Cosare tried to tender on April 2, 2009 further evidenced the resolve to deny Cosare of the
opportunity to be heard prior to any decision on the termination of his employment. The
respondents allegedly refused acceptance of the explanation as it was filed beyond the mere
48-hour period which they granted to Cosare under the memo dated March 30, 2009.
However, even this limitation was a flaw in the memo or notice to explain which only further
signified the respondents’ discrimination, disdain and insensibility towards Cosare, apparently
resorted to by the respondents in order to deny their employee of the opportunity to fully
explain his defenses and ultimately, retain his employment. The Court emphasized in King of
Kings Transport, Inc. v. Mamac54 the standards to be observed by employers in complying
with the service of notices prior to termination:
[T]he first written notice to be served on the employees should contain the specific causes or
grounds for termination against them, and a directive that the employees are given the
opportunity to submit their written explanation within a reasonable period. "Reasonable
opportunity" under the Omnibus Rules means every kind of assistance that management
must accord to the employees to enable them to prepare adequately for their defense. This
should be construed as a period of at least five (5) calendar days from receipt of the notice to
give the employees an opportunity to study the accusation against them, consult a union
official or lawyer, gather data and evidence, and decide on the defenses they will raise
against the complaint. Moreover, in order to enable the employees to intelligently prepare
their explanation and defenses, the notice should contain a detailed narration of the facts and
circumstances that will serve as basis for the charge against the employees. A general
description of the charge will not suffice. Lastly, the notice should specifically mention which
company rules, if any, are violated and/or which among the grounds under Art. 282 is being
charged against the employees.55 (Citation omitted, underscoring ours, and emphasis
supplied)
In sum, the respondents were already resolute on a severance of their working relationship
with Cosare, notwithstanding the facts which could have been established by his explanations
and the respondents’ full investigation on the matter. In addition to this, the fact that no further
investigation and final disposition appeared to have been made by the respondents on
Cosare’s case only negated the claim that they actually intended to first look into the matter
before making a final determination as to the guilt or innocence of their employee. This also
manifested from the fact that even before Cosare was required to present his side on the
charges of serious misconduct and willful breach of trust, he was summoned to Arevalo’s
office and was asked to tender his immediate resignation in exchange for financial
assistance.
The clear intent of the respondents to find fault in Cosare was also manifested by their
persistent accusation that Cosare abandoned his post, allegedly signified by his failure to
report to work or file a leave of absence beginning April 1, 2009. This was even the subject of
a memo56 issued by Arevalo to Cosare on April 14, 2009, asking him to explain his absence
within 48 hours from the date of the memo. As the records clearly indicated, however,
Arevalo placed Cosare under suspension beginning March 30, 2009. The suspension
covered access to any and all company files/records and the use of the assets of the
company, with warning that his failure to comply with the memo would be dealt with drastic
management action. The charge of abandonment was inconsistent with this imposed
suspension. "Abandonment is the deliberate and unjustified refusal of an employee to resume
his employment. To constitute abandonment of work, two elements must concur: ‘(1) the
employee must have failed to report for work or must have been absent without valid or
justifiable reason; and (2) there must have been a clear intention on the part of the employee
to sever the employer- employee relationship manifested by some overt act.’"57Cosare’s
failure to report to work beginning April 1, 2009 was neither voluntary nor indicative of an
intention to sever his employment with Broadcom. It was illogical to be requiring him to report
for work, and imputing fault when he failed to do so after he was specifically denied access to
all of the company’s assets. As correctly observed by the NLRC:
[T]he Respondent[s] had charged [Cosare] of abandoning his employment beginning on April
1, 2009. However[,] the show-cause letter dated March 3[0], 2009 (Annex "F", ibid)
suspended [Cosare] from using not only the equipment but the "assets" of Respondent
[Broadcom]. This insults rational thinking because the Respondents tried to mislead us and
make [it appear] that [Cosare] failed to report for work when they had in fact had [sic] placed
him on suspension. x x x.58
Following a finding of constructive dismissal, the Court finds no cogent reason to modify the
NLRC's monetary awards in Cosare's favor. In Robinsons Galleria/Robinsons Supermarket
Corporation v. Ranchez,59 the Court reiterated that an illegally or constructively dismissed
employee is entitled to: (1) either reinstatement, if viable, or separation pay, if reinstatement
is no longer viable; and (2) backwages.60 The award of exemplary damages was also justified
given the NLRC's finding that the respondents acted in bad faith and in a wanton, oppressive
and malevolent manner when they dismissed Cosare. It is also by reason of such bad faith
that Arevalo was correctly declared solidarily liable for the monetary awards.
WHEREFORE, the petition is GRANTED. The Decision dated November 24, 2011 and
Resolution dated March 26, 2012 of the Court of Appeals in CA-G.R. SP. No. 117356 are
SET ASIDE. The Decision dated August 24, 2010 of the National Labor Relations
Commission in favor of petitioner Raul C. Cosare is AFFIRMED.
SO ORDERED
G.R. No. 92598 May 20, 1994
PURIFICACION Y. MANLIGUEZ, ANTONINA Y. LUIS and BENJAMIN C.
YBANEZ, petitioners,
vs.
THE COURT OF APPEALS, ET AL., respondents.
Rufino L. Remoreras for petitioners.
Danilo L. Pilapil for private respondents.
PUNO, J.:
This is an appeal by certiorari from the Decision of the Court of Appeals,1 dated November
16, 1989, denying due course to and dismissing the petition in CA-G.R. SP NO. 18017.2
The case at bench finds its roots in the Decision of the Department of Labor and Employment
(Region VII), ordering Inductocast Cebu, a partnership based in Mandaue City, to pay its
former employees a total of P232,908.00. As a consequence of the judgment, the labor
department's regional sheriff levied the buildings and improvements standing on Lot 109,
Plan 11-5121-Amd., at Tipolo, Mandaue City. The levied properties (hereinafter referred to as
the "Tipolo properties") were subsequently sold at public auction to said employees.
On May 25, 1988, petitioners filed with the RTC of Cebu City, 7th Judicial Branch, a
Complaint3 which sought the lifting of the levy over, and annulment of the sale of, the Tipolo
properties. The Complaint was docketed as Civil Case No. Ceb-6917, and raffled to Branch 8
of the trial court. Petitioners therein alleged that: they are the owners of the Lot 109; they
entered into a lease agreement with Inductocast Cebu over Lot 109; the lease contract
provided that, except for machineries and equipment, all improvements introduced in the
leased premises shall automatically be owned by the Lessor (petitioners) upon the
expiration/termination of the contract;4 the lease agreement was terminated by petitioners in
November, 1980 due to non-payment of rentals by Inductocast Cebu;5 thereafter, petitioners
took actual possession of and occupied the Tipolo properties. Petitioners likewise alleged in
their Complaint that they became aware of the labor dispute involving Inductocast only after
the impugned public auction sale.6
Atty. Danilo Pilapil, claiming to be the John Doe named in the Complaint, filed a motion to
dismiss on the ground that the trial court had no jurisdiction over the case. The buyers of the
Tipolo properties, as intervenors, also filed a motion to dismiss on the same ground. Both
motions, which were opposed by petitioners, were denied.
The intervenors, however, moved for reconsideration of the denial. In an Order dated April
18, 1989, the trial court granted the motion and dismissed Civil Case No. Ceb-6917. It held
that the civil case "is actually in the nature of a quashal of the levy and the certificate of sale,
a case arising out of a dispute that was instituted by the previous employees of Inductocast
before the Department of Labor and Employment, Region 7." 7 Citing Pucan vs. Bengzon, 155
SCRA 692 (1987), it held it had no jurisdiction over the case since the levy and sale "are
connected with the case within the exclusive jurisdiction of the Department of Labor and
Employment."8
Petitioners questioned the dismissal of their Complaint to the respondent Court of Appeals,
through a petition for certiorari and preliminary injunction.9 The appellate court, in its
impugned Decision, denied the petition as it held:
To Our minds, the issue on what forum the case must be tried or heard is a
settled one. The Department of Labor is the agency upon which devolves the
jurisdiction over disputes emanating from and in relation with labor
controversies to the exclusion of the regular courts.
The issue in the case at bar concerns the levy of a property in pursuance to a
writ of execution, arising out of labor disputes. There can be no doubt that
jurisdiction pertains to the Department of Labor.
xxx xxx xxx
In the light of the factual antecedents and incidents that transpired in the
hearing of this case at bar, the (trial court) correctly ruled that indeed the
Department of Labor has jurisdiction over the case. Consequently, WE see
no abuse of discretion let alone a grave one, amounting to lack or in excess
of its jurisdiction correctible with a writ of certiorari.
Indeed, the issue of granting or denying a motion to dismiss is addressed to
the sound discretion of the court, and in the absence of a capricious and
whimsical exercise of power, certiorari will not lie.
Thus, this appeal where petitioners contend:
THE RESPONDENT APPELLATE COURT ERRED IN
HOLDING THAT THE DEPARTMENT OF LABOR HAS
JURISDICTION ON THE SUBJECT MATTER AND
NATURE OF THE CASE AS AGAINST THE CIVIL COURT.
We find merit in the appeal. Firstly, respondent court erred in holding that the trial court does
not have jurisdiction over the case filed by petitioners. It is at once evident that the Civil Case
No. Ceb-6917 is not a labor case. No employer-employee relationship exists between
petitioners and the other parties, and no issue is involved which may be resolved by
reference to the Labor Code, other labor statutes, or any collective bargaining agreement.
Neither can we characterize petitioner's action before the trial court as arising out of a labor
dispute. It was not brought to reverse or modify the judgment of the Department of Labor and
Employment (DOLE). Neither did it question the validity of, or pray for, the quashal of the writ
of execution against Inductocast.
What is to be litigated in Civil Case No. Ceb-6917 is the issue of ownership over the Tipolo
properties. Clearly, it is the RTC and not the labor department which can take cognizance of
the case, as provided by B.P. Blg. 129 ("An Act Reorganizing the Judiciary, Appropriating
Funds Therefor, and For Other Purposes"), thus:
Sec. 19. Jurisdiction in civil case. — Regional Trial Courts shall exercise
exclusive original jurisdiction:
xxx xxx xxx
(2) In all civil actions which involve the title to, or possession of real property,
or any interest therein, except actions for forcible entry into and unlawful
detainer of lands or buildings, original jurisdiction over which is conferred
upon Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit
Trial Courts;
xxx xxx xxx
The action taken by petitioners before the RTC asserting their ownership over the levied
properties is mandated by Section 17, Rule 39 of the Revised Rules of Court. Time and
again, we have held that:
Under Section 17, Rule 39, a third person who claims property levied upon
on execution may vindicate such claim by action. . . . The right of a person
who claims to be the owner of property levied upon on execution to file a
third-party claim with the sheriff is not exclusive, and he may file an action to
vindicate his claim even if the judgment creditor files an indemnity bond in
favor of the sheriff to answer for any damages that may be suffered by the
third-party claimant. By "action", as stated in the Rule, what is meant is a
separate and independent action.10
Secondly, it is incorrect to argue that the trial court cannot take cognizance of Civil Case No.
Ceb-6917 without interfering with the writ of attachment and writ of execution of a co-equal
body. It is settled that the levy and sale of property by virtue of a writ of attachment is lawful
only when the levied property indubitably belongs to the defendant. If property other than
those of the defendant is attached and sold by the sheriff, he acts beyond the limits of his and
the court's authority.11 In this regard, we held in the case of Uy, Jr. vs. Court of Appeals, 191
SCRA 275 (1991) that:
The main issue in this case is whether or not properties levied and seized by
virtue of a writ of attachment and later by a writ of execution, were
under custodia legis and therefore not subject to the jurisdiction of another
co-equal court where a third party claimant claimed ownership of the same
properties.
The issue has long been laid to rest in the case of Manila Herald Publishing
Co., Inc. v. Ramos (88 Phil. 94 [1951]) where the Court ruled that while it is
true that property in custody of the law may not be interfered with, without the
permission of the proper court, this rule is confined to cases where the
property belongs to the defendant or one in which the defendant has
proprietary interests. But when the Sheriff, acting beyond the bounds of his
office seizes a stranger's property, the rule does not apply and interference
with his custody is not interference with another court's order of attachment.
Also, in the more recent case of Santos vs. Bayhon, 199 SCRA 525 (1991), we stated, viz.:
The general rule that no court has the power to interfere by injunction with
the judgments or decrees of another court with concurrent or coordinate
jurisdiction possessing equal power to grant injunctive relief, applies only
when no third-party claimant is involved. . . . When a third party, or stranger
to the action, asserts a claim over the property levied upon, the claimant may
vindicate his claim by an independent action in the proper civil court which
may stop the execution of the judgment on property not belonging to the
judgment debtor (Citations omitted.)
Finally, it must be noted that the Pucan case relied upon by respondent court is inapplicable
to the case at bench which involves a third-party claim over property levied on execution. In
Pucan, we enjoined the Regional Trial Court from acting on the petition for damages and
prohibition against the enforcement of the writ of execution issued by the NCR director of the
then Ministry of Labor and Employment in a labor case for the following reason:
A perusal of the petition for damages and prohibition filed by Saulog Transit,
Inc., in the lower court reveals that basically, what was being questioned was
the legality or propriety of the alias writ of execution dated March 1, 1985, as
well as the acts performed by the Ministry officials in implementing the same.
In other words, the petition was actually in the nature of a motion to quash
the writ; and with respect to the acts of the Ministry officials, a case growing
out of a labor dispute, as the acts complained of, were perpetrated during the
execution of a decision of the then Minister of Labor and Employment.
However characterized, jurisdiction over the petition pertains to the Labor
Ministry, now Department and not the regular courts. This conclusion is
evident, not only from the provisions of Article 224(b) of the Labor Code, but
also of
Article 218, as amended by Batas Pambansa Blg. 227 in connection with
Article 255 of the same Code.
xxx xxx xxx
Apparently, Saulog Transit, Inc. was misled by its own prayer for actual,
moral and exemplary damages. It believed that such additional cause of
action could clothe the petition with the mantle of a regular action cognizable
by the regular courts. It was, of course, mistaken for the fact remains that the
acts complained of are mere incidents of a labor dispute. Such prayer
therefore did not alter the complexion of the case as one arising from a labor
dispute, but was subsumed by the nature of the main case, over which the
regular courts had no jurisdiction, much less the power to issue a temporary
or permanent injunction or restraining order. . . .12
In fine, we prohibited the action before the trial court in Pucan because it attacked the
regularity of the issuance of the alias writ of execution in the labor case, which is but an
incident of the labor dispute. This is not so in the case at bench where the civil case filed by
petitioners does not even collaterally attack the validity of the DOLE's writ of attachment. On
the contrary, petitioners in Civil Case No. Ceb-6917 pray for the trial court's ruling that the
DOLE's judgment could not be validly executed on the Tipolo properties, which allegedly do
not belong to Inductocast.
IN VIEW WHEREOF, the petition for review is GRANTED. The Decision of the Court of
Appeals in CA-G.R. SP No. 18017, dated November 16, 1989, is REVERSED and SET
ASIDE. The Regional Trial Court of Cebu City, Branch 8 is ordered to try Civil Case Ceb-
6917 on its merit. No costs.
SO ORDERED.
Padilla, Quiason and Vitug, JJ., concur.
Narvasa, C.J. and Regalado, JJ., are on leave.
#Footnotes
1 Through its Special First Division, composed of Associate Justices
Bonifacio A. Cacdac, Jr. (ponente and acting chairman), Cecilio L. Pe, and
Jesus M. Elbinias.
2 Entitled "Purificacion Y. Manliguez, et al. vs. Hon. Bernardo Ll. Salas, et
al."
3 Entitled "Purification Y. Manliguez, Antonina Y. Luib and Benjamin C.
Ybanez represented by Taciana C. Ybanez vs. Emilio Lomontad, Celerino
Villahermosa, Register of Deeds of Mandaue City, Mandaue City Assessor
and John Doe."
4 Complaint, p. 3; Rollo, p. 60.
5 Annex "E", Complaint; Rollo, p. 75.
6 Complaint, p. 5; Rollo, p. 62.
7 RTC's Order, dated April 18, 1989, p. 4; Rollo, p. 84.
8 Ibid.
9 Docketed as CA-G.R. SP No. 18017.
10 Bayer vs. Agana, 63 SCRA 358 (1975); Abiera vs. Court of
Appeals, supra; Lorenzana vs. Cayetano, 78 SCRA 485 (1977); Sampaguita
Pictures, Inc. vs. Jalwindor Manufacturers, Inc., supra.
11 See Manila Herald Publishing Co., Inc. vs. Ramos, 88 Phil. 94 (1951);
Abiera vs. Court of Appeals, supra; Sampaguita Pictures, Inc. vs. Jalwindor
Manufacturers, Inc., supra; Escovilla, Jr. vs. Court of Appeals, 179 SCRA
108 (1989); Uy, Jr. vs. Court of Appeals, 191 SCRA 275 (1991); Santos vs.
Bayhon, 199 SCRA 525 (1991).
12 Pucan vs. Bengzon, 155 SCRA 692, 699-700.
G.R. No. 109272 August 10, 1994
GEORG GROTJAHN GMBH & CO., petitioner,
vs.
HON. LUCIA VIOLAGO ISNANI, Presiding Judge, Regional Trial Court, Makati, Br.
59; ROMANA R. LANCHINEBRE; and TEOFILO A. LANCHINEBRE, respondents.
A.M. Sison, Jr. & Associates for petitioner.
Pedro L. Laso for private respondents.
PUNO, J.:
Petitioner impugns the dismissal of its Complaint for a sum of money by the respondent
judge for lack of jurisdiction and lack of capacity to sue.
The records show that petitioner is a multinational company organized and existing
under the laws of the Federal Republic of Germany. On July 6, 1983, petitioner filed an
application, dated July 2, 1983, 1 with the Securities and Exchange Commission (SEC)
for the establishment of a regional or area headquarters in the Philippines, pursuant to
Presidential Decree No. 218. The application was approved by the Board of Investments
(BOI) on September 6, 1983. Consequently, on September 20, 1983, the SEC issued a
Certificate of Registration and License to petitioner. 2
Private respondent Romana R. Lanchinebre was a sales representative of petitioner from
1983 to mid-1992. On March 12, 1992, she secured a loan of twenty-five thousand pesos
(P25,000.00) from petitioner. On March 26 and June 10, 1992, she made additional cash
advances in the sum of ten thousand pesos (P10,000.00). Of the total amount, twelve
thousand one hundred seventy pesos and thirty-seven centavos (P12,170.37) remained
unpaid. Despite demand, private respondent Romana failed to settle her obligation with
petitioner.
On July 22, 1992, private respondent Romana Lanchinebre filed with the Arbitration
Branch of the National Labor Relations Commission (NLRC) in Manila, a Complaint for
illegal suspension, dismissal and non-payment of commissions against petitioner. On
August 18, 1992, petitioner in turn filed against private respondent a Complaint for
damages amounting to one hundred twenty thousand pesos (P120,000.00) also with the
NLRC Arbitration Branch (Manila). 3 The two cases were consolidated.
On September 2, 1992, petitioner filed another Complaint for collection of sum of money
against private respondents spouses Romana and Teofilo Lanchinebre which was
docketed as Civil Case No. 92-2486 and raffled to the sala of respondent judge. Instead
of filing their Answer, private respondents moved to dismiss the Complaint. This was
opposed by petitioner.
On December 21, 1992, respondent judge issued the first impugned Order, granting the
motion to dismiss. She held, viz:
Jurisdiction over the subject matter or nature of the action is conferred by
law and not subject to the whims and caprices of the parties.
Under Article 217 of the Labor Code of the Philippines, the Labor Arbiters
shall have original and exclusive jurisdiction to hear and decide, within
thirty (30) calendar days after the submission of the case by the parties
for decision, the following cases involving all workers, whether
agricultural or non-agricultural:
(4) claims for actual, moral, exemplary and other forms of damages
arising from an employer-employee relations.
xxx xxx xxx
(6) Except claims for employees compensation, social security, medicare
and maternity benefits, all other claims arising from employer-employee
relations, including those of persons in domestic or household service,
involving an amount exceeding five thousand pesos (P5,000.00)
regardless of whether or not accompanied with a claim for reinstatement.
In its complaint, the plaintiff (petitioner herein) seeks to recover alleged
cash advances made by defendant (private respondent herein) Romana
Lanchinebre while the latter was in the employ of the former. Obviously
the said cash advances were made pursuant to the employer-employee
relationship between the (petitioner) and the said (private respondent)
and as such, within the original and exclusive jurisdiction of the National
Labor Relations Commission.
Again, it is not disputed that the Certificate of Registration and License
issued to the (petitioner) by the Securities and Exchange Commission
was merely "for the establishment of a regional or area headquarters in
the Philippines, pursuant to Presidential Decree No. 218 and its
implementing rules and regulations." It does not include a license to do
business in the Philippines. There is no allegation in the complaint
moreover that (petitioner) is suing under an isolated transaction. It must
be considered that under Section 4, Rule 8 of the Revised Rules of Court,
facts showing the capacity of a party to sue or be sued or the authority of
a party to sue or be sued in a representative capacity or the legal
existence of an organized association of persons that is made a party
must be averred. There is no averment in the complaint regarding
(petitioner's) capacity to sue or be sued.
Finally, (petitioner's) claim being clearly incidental to the occupation or
exercise of (respondent) Romana Lanchinebre's profession, (respondent)
husband should not be joined as party defendant. 4
On March 8, 1993, the respondent judge issued a minute Order denying petitioner's
Motion for Reconsideration.
Petitioner now raises the following assignments of errors:
I
THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE
REGULAR COURTS HAVE NO JURISDICTION OVER DISPUTES
BETWEEN AN EMPLOYER AND AN EMPLOYEE INVOLVING THE
APPLICATION PURELY OF THE GENERAL CIVIL LAW.
II
THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT
PETITIONER HAS NO CAPACITY TO SUE AND BE SUED IN THE
PHILIPPINES DESPITE THE FACT THAT PETITIONER IS DULY
LICENSED BY THE SECURITIES AND EXCHANGE COMMISSION TO
SET UP AND OPERATE A REGIONAL OR AREA HEADQUARTERS IN
THE COUNTRY AND THAT IT HAS CONTINUOUSLY OPERATED AS
SUCH FOR THE LAST NINE (9) YEARS.
III
THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE
ERRONEOUS INCLUSION OF THE HUSBAND IN A COMPLAINT IS A
FATAL DEFECT THAT SHALL RESULT IN THE OUTRIGHT
DISMISSAL OF THE COMPLAINT.
IV
 THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE
HUSBAND IS NOT REQUIRED BY THE RULES TO BE JOINED AS A
DEFENDANT IN A COMPLAINT AGAINST THE WIFE.
There is merit to the petition.
Firstly, the trial court should not have held itself without jurisdiction over Civil Case No.
92-2486. It is true that the loan and cash advances sought to be recovered by petitioner
were contracted by private respondent Romana Lanchinebre while she was still in the
employ of petitioner. Nonetheless, it does not follow that Article 217 of the Labor Code
covers their relationship.
Not every dispute between an employer and employee involves matters that only labor
arbiters and the NLRC can resolve in the exercise of their adjudicatory or quasi-judicial
powers. The jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor
Code is limited to disputes arising from an employer-employee relationship which can
only be resolved by reference to the Labor Code, other labor statutes, or their collective
bargaining agreement. In this regard, we held in the earlier case of Molave Motor Sales,
Inc. vs. Laron, 129 SCRA 485 (1984), viz:
Before the enactment of BP Blg. 227 on June 1, 1982, Labor Arbiters,
under paragraph 5 of Article 217 of the Labor Code had jurisdiction over
"all other cases arising from employer-employee relation, unless
expressly excluded by this Code." Even then, the principal followed by
this Court was that, although a controversy is between an employer and
an employee, the Labor Arbiters have no jurisdiction if the Labor Code is
not involved. In Medina vs. Castro-Bartolome, 116 SCRA 597, 604 in
negating jurisdiction of the Labor Arbiter, although the parties were an
employer and two employees, Mr. Justice Abad Santos stated:
The pivotal question to Our mind is whether or not the
Labor Code has any relevance to the reliefs sought by
plaintiffs. For if the Labor Code has no relevance, any
discussion concerning the statutes amending it and
whether or not they have retroactive effect is
unnecessary.
xxx xxx xxx
And in Singapore Airlines Limited vs. Paño, 122 SCRA 671, 677, the
following was said:
Stated differently, petitioner seeks protection under the
civil laws and claims no benefits under the Labor Code.
The primary relief sought is for liquidated damages for
breach of a contractual obligation. The other items
demanded are not labor benefits demanded by workers
generally taken cognizance of in labor disputes, such as
payment of wages, overtime compensation or separation
pay. The items claimed are the natural consequences
flowing from breach of an obligation, intrinsically a civil
dispute.
xxx xxx xxx
In San Miguel Corporation vs. NLRC, 161 SCRA 719 (1988), we crystallized the
doctrines set forth in the Medina, Singapore Airlines, and Molave Motors cases, thus:
. . . The important principle that runs through these three (3) cases is that
where the claim to the principal relief sought is to be resolved not by
reference to the Labor Code or other labor relations statute or a collective
bargaining agreement but by the general civil law, the jurisdiction over the
dispute belongs to the regular courts of justice and not to the Labor
Arbiter and the NLRC. In such situations, resolutions of the dispute
requires expertise, not in labor management relations nor in wage
structures and other terms and conditions of employment, but rather in
the application of the general civil law. Clearly, such claims fall outside
the area of competence or expertise ordinarily ascribed to Labor Arbiters
and the NLRC and the rationale for granting jurisdiction over such claims
to these agencies disappears.
Civil Case No. 92-2486 is a simple collection of a sum of money brought by petitioner, as
creditor, against private respondent Romana Lanchinebre, as debtor. The fact that they
were employer and employee at the time of the transaction does not negate the civil
jurisdiction of the trial court. The case does not involve adjudication of a labor dispute but
recovery of a sum of money based on our civil laws on obligation and contract.
Secondly, the trial court erred in holding that petitioner does not have capacity to sue in
the Philippines. It is clear that petitioner is a foreign corporation doing business in the
Philippines. Petitioner is covered by the Omnibus Investment Code of 1987. Said law
defines "doing business," as follows:
. . . shall include soliciting orders, purchases, service contracts, opening
offices, whether called "liaison" offices or branches; appointing
representatives or distributors who are domiciled in the Philippines or
 who in any calendar year stay in the Philippines for a period or periods Whether or not the subject loan was incurred by private respondent as an incident to her
totalling one hundred eighty (180) days or more; participating in the profession, occupation or business is a question of fact. In the absence of relevant
management, supervision or control of any domestic business firm, entity evidence, the issue cannot be resolved in a motion to dismiss.
or corporation in the Philippines, and any other act or acts that imply a
continuity of commercial dealings or arrangements and contemplate to IN VIEW WHEREOF, the instant Petition is GRANTED. The Orders, dated December 21,
that extent the performance of acts or works, or the exercise of some of 1992 and March 8, 1993, in Civil Case No. 92-2486 are REVERSED AND SET ASIDE.
the functions normally incident to, and in progressive prosecution of, The RTC of Makati, Br. 59, is hereby ordered to hear the reinstated case on its merits.
commercial gain or of the purpose and object of the business No costs.
organization. 5
SO ORDERED.
There is no general rule or governing principle as to what constitutes "doing" or
"engaging in" or "transacting" business in the Philippines. Each case must be judged in Narvasa, C.J., Padilla, Regalado and Mendoza, JJ., concur.
the light of its peculiar circumstances. 6 In the case at bench, petitioner does not engage
in commercial dealings or activities in the country because it is precluded from doing so
by P.D. No. 218, under which it was established. 7 Nonetheless, it has been continuously,
since 1983, acting as a supervision, communications and coordination center for its #Footnotes
home office's affiliates in Singapore, and in the process has named its local agent and
has employed Philippine nationals like private respondent Romana Lanchinebre. From
this uninterrupted performance by petitioner of acts pursuant to its primary purposes and 1 Petition, Annex "F;" Rollo, pp. 41-43.
functions as a regional/area headquarters for its home office, it is clear that petitioner is
doing business in the country. Moreover, private respondents are estopped from 2 Petition, Annex "G;" Rollo, p. 44.
assailing the personality of petitioner. So we held in Merrill Lynch Futures, Inc. vs. Court
of Appeals, 211 SCRA 824, 837 (1992): 3 P100,000.00 in damages for violation of Article 285 of the Labor Code,
and P20,000.00 as Attorney's fees.
The rule is that a party is estopped to challenge the personality of a
corporation after having acknowledged the same by entering into a 4 Order, dated December 21, 1992, pp. 1-2; Rollo, pp. 19-20.
contract with it. And the "doctrine of estoppel to deny corporate existence
applies to foreign as well as to domestic corporations;" "one who has 5 Article 44, Chapter I, Book II, E.O. 226.
dealth with a corporation of foreign origin as a corporate entity is
estopped to deny its corporate existence and capacity." The principle "will
6 Top-Weld Manufacturing, Inc. vs. ECED, S.A., 138 SCRA 118
be applied to prevent a person contracting with a foreign corporation from (1985). See Granger Associates vs. Microwave Systems, Inc. 189 SCRA
later taking advantage of its noncompliance with the statutes chiefly in
631 (1990).
cases where such person has received the benefits of the contract, . . .
(Citations omitted.)
7 In fact, under the Rules and Regulations implementing P.D. No. 218,
the application for the establishment of a regional or area headquarters in
Finally, the trial court erred when it dismissed Civil Case No. 92-2486 on what it found to the country must be accompanied by, among others, "a certification from
be the misjoinder of private respondent Teofilo Lanchinebre as party defendant. It is a the principal officer of the foreign entity to the effect that the said foreign
basic rule that "(m)isjoinder or parties is not ground for dismissal of an entity has been authorized by its board of directors or governing body to
action."8 Moreover, the Order of the trial court is based on Section 4(h), Rule 3 of the establish its regional headquarters in the Philippines, specifying that:
Revised Rules of Court, which provides:
a) The activities of the regional headquarters shall be limited to acting as
A married woman may not . . . be sued alone without joining her
supervisory communications and coordinating center for its affiliates,
husband, except . . . if the litigation is incidental to the profession, subsidiaries or branches of the region.
occupation or business in which she is engaged,
 b) The headquarters will not derive any income from sources within the
Philippines and will not participate in any manner in the management of
any subsidiary or branch office the parent company might have in the
Philippines;
xxx xxx xxx
8 Sec. 11, Rule 3, Revised Rules of Court.
_____________________________________________________
G.R. No. 152121 July 29, 2003
EDUARDO G. EVIOTA, Petitioner,
vs.
THE HON. COURT OF APPEALS, THE HON. JOSE BAUTISTA, Presiding Judge of
Branch 136, Regional Trial Court of Makati, and STANDARD CHARTERED
BANK, Respondents.
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari under Rule 45 of the Revised Rules of
Court, of the Decision1 of the Court of Appeals in CA-G.R. SP No. 60141 denying the
petition for certiorari filed by the petitioner praying the nullification of the Order of the
Regional Trial Court of Makati, Branch 136.2
Sometime on January 26, 1998, the respondent Standard Chartered Bank and petitioner
Eduardo G. Eviota executed a contract of employment under which the petitioner was
employed by the respondent bank as Compensation and Benefits Manager, VP (M21).
However, the petitioner abruptly resigned from the respondent bank barely a month after
his employment and rejoined his former employer.
On June 19, 1998, the respondent bank filed a complaint against the petitioner with the
RTC of Makati City. The respondent bank alleged inter alia in its complaint that:
1. It is a foreign banking institution authorized to do business in the Philippines,
with principal offices at the 5th Floor, Bankmer Bldg., 6756 Ayala Avenue, Makati
City.
2. Defendant Eduardo Eviota ("Eviota") is a former employee of the Bank, and
may be served with summons and other court processes at 8 Maple Street,
Cottonwoods, Antipolo, Metro Manila.
3. On December 22, 1997, Eviota began negotiating with the Bank on his
possible employment with the latter. Taken up during these negotiations were not
only his compensation and benefit package, but also the nature and demands of
his prospective position. The Bank made sure that Eviota was fully aware of all
the terms and conditions of his possible job with the Bank.
4. On January 26, 1998, Eviota indicated his conformity with the Bank’s Offer of
Employment by signing a written copy of such offer dated January 22, 1998 (the
"Employment Contract"). A copy of the Employment Contract between Eviota and
the Bank is hereto attached as Annex "A."
5. Acting on the Employment Contract and on Eviota’s uninhibited display of
interest in assuming his position, the Bank promptly proceeded to carry out the
terms of the Employment Contract as well as to facilitate his integration into the
workforce. Among others, the Bank: (a) renovated and refurbished the room
which was to serve as Eviota’s office; (b) purchased a 1998 Honda CR-V (Motor
No. PEWED7P101101; Chassis No. PADRD 1830WV00108) for Eviota’s use; (c)
purchased a desktop IBM computer for Eviota’s use; (d) arranged the takeout of
Eviota’s loans with Eviota’s former employer; (e) released Eviota’s signing bonus
in the net amount of P300,000.00; (f) booked Eviota’s participation in a Singapore
conference on Y2K project scheduled on March 10 and 11, 1998; and (g)
introduced Eviota to the local and regional staff and officers of the Bank via
personal introductions and electronic mail.
6. The various expenses incurred by the Bank in carrying out the above acts are
itemized below, as follows:
a. Signing Bonus P 300,000.00
b. 1 Honda CR-V 800,000.00
c. IBM Desktop Computer 89,995.00
d. Office Reconfiguration 29,815.00
e. 2-Drawer Lateral File
Cabinet 13,200.00
f. 1 Officer’s Chair 31,539.00
 g. 1 Guest Chair 2,200.00
h. 1 Hanging Shelf 2,012.00
i. Staff Loan Processing
Title Verification 375.00
Cost of Appraisal –
Housing Loan 3,500.00
TOTAL P1,272,636.00
An itemized schedule of the above expenses incurred by the Bank is hereto
attached as Annex "B."
7. On February 25, 1998, Eviota assumed his position as Compensation and
Benefits Manager with the Bank and began to discharge his duties. At one
Human Resources ("HR") Committee meeting held on March 3, 1998, Eviota
energetically presented to senior management his projects for the year, thus
raising the latter’s expectations. The same day, Eviota instructed the Bank’s HR
Administrator to book him a flight for Singapore, where he was scheduled to
participate in a Y2K project on March 10 and 11, 1998. Confident of Eviota’s
professed commitment to the Bank, the latter made the aforementioned airline
booking for him. In addition, the Bank allowed Eviota access to certain sensitive
and confidential information and documents concerning the Bank’s operations.
8. After leading the Bank to believe that he had come to stay, Eviota suddenly
resigned his employment with immediate effect to re-join his previous employer.
His resignation, which did not comply with the 30-day prior notice rule under the
law and under the Employment Contract, was so unexpected that it disrupted
plans already in the pipeline (e.g., the development of a salary/matrix grid and
salary structure, and the processing of merit promotion recommendations),
aborted meetings previously scheduled among Bank officers, and forced the
Bank to hire the services of a third party to perform the job he was hired to do.
For the services of this third party, the Bank had to pay a total of P208,807.50. A
copy of a receipt for the above expenses is hereto attached as Annex "C" (See
also, Annex "B").
9. Aside from causing no small degree of chaos within the Bank by reason of his
sudden resignation, Eviota made off with a computer diskette and other papers
and documents containing confidential information on employee compensation
and other Bank matters, such as the salary schedule of all Corporate and
Institutional Banking officers and photocopies of schedules of benefits provided
expatriates being employed by the Bank.
10. With the benefit of hindsight, the Bank realizes that it was simply used by
Eviota as a mere leverage for his selfish efforts at negotiating better terms of
employment with his previous employer. Worse, there is evidence to show that in
his attempts to justify his hasty departure from the Bank and conceal the real
reason for his move, Eviota has resorted to falsehoods derogatory to the
reputation of the Bank. In particular, he has been maliciously purveying the
canard that he had hurriedly left the Bank because it had failed to provide him
support. His untruthful remarks have falsely depicted the Bank as a contract
violator and an undesirable employer, thus damaging the Bank’s reputation and
business standing in the highly competitive banking community, and undermining
its ability to recruit and retain the best personnel in the labor market.
11. On March 16, 1998, the Bank made a written demand on Eviota to return the
aforementioned computer diskette and other confidential documents and papers,
reimburse the Bank for the various expenses incurred on his account as a result
of his resignation (with legal interest), and pay damages in the amount of at least
P500,000.00 for the inconvenience and work/program disruptions suffered by the
Bank.
A copy of the Bank’s demand letter dated March 16, 1998 is hereto attached as Annex
"D."
12. In partial compliance with said demand, Eviota made arrangements with his
previous employer to reimburse the Bank for the expenses incurred in connection
with the Bank’s purchase of the Honda CR-V for his use. The Bank informed
Eviota that in addition to the Honda CR-V’s purchase price of P848,000.00 (of
which Eviota initially shouldered P48,000.00), incidental costs in the form of
Processing Fees (P1,000.00), FPD/MCAR/98-155684 (P1,232.53) and Fund
Transfer Price (P18,646.84) were incurred, bringing the total cost of the Honda
CR-V to P868,881.38. On April 29, 1998, the Bank received two manager’s
checks in the aggregate amount of P868,881.38, representing costs incurred in
connection with the purchase of the Honda CR-V, inclusive of processing fees
and other incidental costs. Previously, Eviota had returned his P300,000.00
signing bonus, less the P48,000.00 he had advanced for the Honda CR-V’s
purchase price.
13. Eviota never complied with the Bank’s demand that he reimburse the latter
for the other expenses incurred on his account, amounting to P360,562.12 (see,
Annex "B").3
The respondent bank alleged, by way of its causes of action against the petitioner, the
following:
First Cause of Action
14. Eviota’s actions constitute a clear violation of Articles 19, 20 and 21 of
Republic Act No. 386, as amended (the "Civil Code"). Assuming arguendo that
Eviota had the right to terminate his employment with the Bank for no reason, the
manner in and circumstances under which he exercised the same are clearly
abusive and contrary to the rules governing human relations.
14.1. By his actions and representations, Eviota had induced the Bank to
believe that he was committed to fulfilling his obligations under the
Employment Contract. As a result, the Bank incurred expenses in
carrying out its part of the contract (see Annexes "B" and "C"). Less
reimbursements received from Eviota, the Bank is entitled to actual
damages of P360,562.12. (See, Annex "C").
Second Cause of Action
15. Under Article 285 (a) of Presidential Decree No. 442, as amended (the Labor
Code), an employee may terminate without just cause the employer-employee
relationship by serving written notice on the employer at least one (1) month in
advance. In addition, Section 13 of the Employment Contract specifically
provides that: "Your [i.e., Eviota’s] employment may be terminated by either party
giving notice of at least one month." (Annex "A," p. 5.)
15.1. Eviota’s failure to comply with the above requirement threw a
monkey wrench into the Bank’s operations – Eviota’s sudden resignation
aborted meetings previously scheduled among Bank officers and
disrupted plans for a salary/merit review program and development of a
salary structure and merit grid already in the pipeline.
Hence, Eviota is liable to the Bank for damages in the amount of at least
P100,000.00.
Third Cause of Action
16. Eviota’s false and derogatory statements that the Bank had failed to deliver
what it had purportedly promised have besmirched the Bank’s reputation and
depicted it as a contract violator and one which does not treat its employees
properly. These derogatory statements have injured the Bank’s business
standing in the banking community, and have undermined the Bank’s ability to
recruit and retain the best personnel. Hence, plaintiff is entitled to moral damages
of at least P2,000,000.00.
17. By way of example or correction for the public good, and to deter other
parties from committing similar acts in the future, defendant should be held liable
for exemplary damages of at least P1,000,000.00
18. Eviota’s actions have compelled plaintiff to obtain the services of undersigned
counsel for a fee, in order to protect its interests. Hence, plaintiff is entitled to
attorney’s fees of at least P200,000.00.4
The respondent bank prayed, that after due proceedings, judgment be rendered in its
favor as follows:
WHEREFORE, it is respectfully prayed that judgment be rendered ordering the
defendant to pay the plaintiff:
1. As actual damages, the amount of P360,562.12, representing expenses
referred to in items c to i of par. 6 and the cost of the third-party services
mentioned in par. 8;
2. For violating the 30-day notice requirement under the Labor Code and order
(sic) the Employment Contract, damages in the amount of at least P100,000.00;
3. As moral damages, the amount of P2,000,000.00;
4. As exemplary damages, the amount of P1,000,000.00;
5. As attorney’s fees, the amount of P200,000.00; and
6. Costs of the suit.
Other just and equitable reliefs are likewise prayed for.5
The respondent bank appended to its complaint a copy of the petitioner’s employment
contract.
The petitioner filed a motion to dismiss the complaint on the ground that the action for
damages of the respondent bank was within the exclusive jurisdiction of the Labor Arbiter
under paragraph 4, Article 217 of the Labor Code of the Philippines, as amended. The
petitioner averred that the respondent bank’s claim for damages arose out of or were in
connection with his employer-employee relationship with the respondent bank or some
aspect or incident of such relationship. The respondent bank opposed the motion,
claiming that its action for damages was within the exclusive jurisdiction of the trial court.
Although its claims for damages incidentally involved an employer-employee
relationship, the said claims are actually predicated on the petitioner’s acts and
omissions which are separately, specifically and distinctly governed by the New Civil
Code.
On November 29, 1999, the trial court issued an order denying the petitioner’s motion to
dismiss, ratiocinating that the primary relief prayed for by the respondent bank was
grounded on the tortious manner by which the petitioner terminated his employment with
the latter, and as such is governed by the New Civil Code:
The Court holds that here, since the primary relief prayed for by the plaintiff is for
damages, grounded on the tortious manner by which the defendant terminated his
employment with the company, the same are recoverable under the applicable provision
of the Civil Code, the present controversy is removed from the jurisdiction of the Labor
Arbiter and brings in within the purview of the regular courts.6
The petitioner filed a motion for reconsideration of the said order, but the court issued an
order denying the same. The petitioner filed a petition for certiorari with the Court of
Appeals for the nullification of the orders of the trial court, alleging that the court a quo
committed grave abuse of its discretion amounting to excess or lack of jurisdiction in
issuing the said orders. The petitioner further asserted that contrary to the ruling of the
court, the respondent bank claimed damages in its complaint against the petitioner
based on his employment contract, and not on tortious acts.
On November 15, 2001, the CA promulgated a decision dismissing the petition, holding
that the trial court and not the Labor Arbiter had exclusive jurisdiction over the action of
the respondent bank. It held that the latter’s claims for damages were grounded on the
petitioner’s sudden and unceremonious severance of his employment with the
respondent bank barely a month after assuming office.
With his motion for reconsideration of the decision having been denied by the CA, the
petitioner filed his petition with this Court contending that:
Suffice to state immediately that on the basis of the allegations in the complaint, it is the
Labor Arbiter, not the Regional Trial Court, which has jurisdiction of the subject matter of
the complaint in Civil Case No. 98-1397, the principal cause of action being the alleged
omission of petitioner in giving notice to the respondent Bank employer of termination of
their relationship; whereas the claims for other actual/moral/exemplary damages are well
within the competence of the Labor Arbiter.7
The petition is barren of merit.
Article 217 of the Labor Code of the Philippines, as amended by Rep. Act No. 6715
which took effect on March 21, 1989 reads:
ART. 217. Jurisdiction of Labor Arbiters and the Commission.—(a) Except as otherwise
provided under this Code the Labor Arbiters shall have original and exclusive jurisdiction
to hear and decide within thirty (30) calendar days after the submission of the case by
the parties for decision without extension, even in the absence of stenographic notes, the
following cases involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may
file involving wages, rates of pay, hours of work and other terms and conditions
of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from
the employer-employee relations.
Case law has it that the nature of an action and the subject matter thereof, as well as
which court has jurisdiction over the same, are determined by the material allegations of
the complaint and the reliefs prayed for in relation to the law involved.
Not every controversy or money claim by an employee against the employer or vice-
versa is within the exclusive jurisdiction of the labor arbiter. A money claim by a worker
against the employer or vice-versa is within the exclusive jurisdiction of the labor arbiter
only if there is a "reasonable causal connection" between the claim asserted and
employee-employer relation. Absent such a link, the complaint will be cognizable by the
regular courts of justice.8
Actions between employees and employer where the employer-employee relationship is
merely incidental and the cause of action precedes from a different source of obligation
is within the exclusive jurisdiction of the regular court.9In Georg Grotjahn GMBH & Co. v.
Isnani,10 we held that the jurisdiction of the Labor Arbiter under Article 217 of the Labor
Code, as amended, is limited to disputes arising from an employer-employee relationship
which can only be resolved by reference to the Labor Code of the Philippines, other labor
laws or their collective bargaining agreements. In Singapore Airlines Limited v.
Paño,11 the complaint of the employer against the employee for damages for wanton
justice and refusal without just cause to report for duty, and for having maliciously and
with bad faith violated the terms and conditions of their agreement for a course of
conversion training at the expense of the employer, we ruled that jurisdiction over the
action belongs to the civil court:
On appeal to this court, we held that jurisdiction over the controversy belongs to the civil
courts. We stated that the action was for breach of a contractual obligation, which is
intrinsically a civil dispute. We further stated that while seemingly the cause of action
arose from employer-employee relations, the employer’s claim for damages is grounded
on "wanton failure and refusal" without just cause to report to duty coupled with the
averment that the employee "maliciously and with bad faith" violated the terms and
conditions of the contract to the damage of the employer. Such averments removed the
controversy from the coverage of the Labor Code of the Philippines and brought it within
the purview of the Civil Law.
Jurisprudence has evolved the rule that claims for damages under paragraph 4 of Article
217, to be cognizable by the Labor Arbiter, must have a reasonable causal connection
with any of the claims provided for in that article. Only if there is such a connection with
the other claims can the claim for damages be considered as arising from employer-
employee relations.12
The claims were the natural consequences flowing from a breach of an obligation,
intrinsically civil in nature.
In Medina v. Castro-Bartolome,13 we held that a complaint of an employee for damages
against the employer for slanderous remarks made against him was within the exclusive
jurisdiction of the regular courts of justice because the cause of action of the plaintiff was
for damages for tortious acts allegedly committed by the employer. The fact that there
was between the parties an employer-employee relationship does not negate the
jurisdiction of the trial court.
In Singapore Airlines Ltd. v. Paño,14 we held that:
Stated differently, petitioner seeks protection under the civil laws and claims no benefits
under the Labor Code. The primary relief sought is for liquidated damages for breach of
1âw phi 1
a contractual obligation. The other items demanded are not labor benefits demanded by
workers generally taken cognizance of in labor disputes, such as payment of wages,
overtime compensation or separation pay. The items claimed are the natural
consequences flowing from breach of an obligation, intrinsically a civil dispute.
In Dai-Chi Electronics Manufacturing Corporation v. Villarama, Jr.,15 the petitioner sued its
employee Adonis Limjuco for breach of contract which reads:
That for a period of two (2) years after termination of service from EMPLOYER,
EMPLOYEE shall not in any manner be connected, and/or employed, be a consultant
and/or be an informative body directly or indirectly, with any business firm, entity or
undertaking engaged in a business similar to or in competition with that of the
EMPLOYER."16
The petitioner alleged in its complaint with the trial court that:
Petitioner claimed that private respondent became an employee of Angel Sound
Philippines Corporation, a corporation engaged in the same line of business as that of
petitioner, within two years from January 30, 1992, the date of private respondent’s
resignation from petitioner’s employ. Petitioner further alleged that private respondent is
holding the position of Head of the Material Management Control Department, the same
position he held while in the employ of petitioner.17
The trial court dismissed the case for lack of jurisdiction over the subject matter because
the cause of action for damages arose out of the parties’ employer-employee
relationship. We reversed the order of the trial court and held, thus:
Petitioner does not ask for any relief under the Labor Code of the Philippines. It seeks to
recover damages agreed upon in the contract as redress for private respondent’s breach
of his contractual obligation to its "damage and prejudice" (Rollo, p. 57). Such cause of
action is within the realm of Civil Law, and jurisdiction over the controversy belongs to
the regular courts. More so when we consider that the stipulation refers to the post-
employment relations of the parties.18
In this case, the private respondent’s first cause of action for damages is anchored on
the petitioner’s employment of deceit and of making the private respondent believe that
he would fulfill his obligation under the employment contract with assiduousness and
earnestness. The petitioner volte face when, without the requisite thirty-day notice under
the contract and the Labor Code of the Philippines, as amended, he abandoned his
office and rejoined his former employer; thus, forcing the private respondent to hire a
replacement. The private respondent was left in a lurch, and its corporate plans and
program in jeopardy and disarray. Moreover, the petitioner took off with the private
respondent’s computer diskette, papers and documents containing confidential
information on employee compensation and other bank matters. On its second cause of
action, the petitioner simply walked away from his employment with the private
respondent sans any written notice, to the prejudice of the private respondent, its
banking operations and the conduct of its business. Anent its third cause of action, the
petitioner made false and derogatory statements that the private respondent reneged on
its obligations under their contract of employment; thus, depicting the private respondent
as unworthy of trust.
It is evident that the causes of action of the private respondent against the petitioner do
not involve the provisions of the Labor Code of the Philippines and other labor laws but
the New Civil Code. Thus, the said causes of action are intrinsically civil. There is no
causal relationship between the causes of action of the private respondent’s causes of
action against the petitioner and their employer-employee relationship. The fact that the
private respondent was the erstwhile employer of the petitioner under an existing
employment contract before the latter abandoned his employment is merely incidental. In
fact, the petitioner had already been replaced by the private respondent before the action
was filed against the petitioner.
IN LIGHT OF ALL THE FOREGOING, the Petition is DENIED. The Decision of the Court
of Appeals dismissing the petition of the petitioner is AFFIRMED.
SO ORDERED.
G.R. No. 131108 March 25, 1999
ASIAN ALCOHOL CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, FOURTH DIVISION, CEBU CITY and
ERNESTO A. CARIAS, ROBERTO C. MARTINEZ, RAFAEL H. SENDON, CARLOS A.
AMACIO, LEANDRO O. VERAYO and ERENEO S. TORMO, respondents.
PUNO, J.:
Contending that the dismissal of private respondents Ernesto A. Carias, Roberto C.
Martinez, Rafael H. Sendon, Carlos A. Amacio, Leandro O. Verayo and Ereneo S.
Tormo, was valid on the twin grounds of redundancy and retrenchment to prevent
business losses, petitioner Asian Alcohol Corporation (hereinafter referred to as Asian
Alcohol) filed this petition for certiorari. Asian Alcohol ascribes grave abuse of discretion
to public respondent National Labor Relations Commission 1 (hereinafter referred to as
NLRC) when, on May 30, 1997, it set aside 2 the decision 3 of the Executive Labor Arbiter
dismissing the illegal termination complaints filed by private respondents.
We first unfurl the facts.
In September, 1991, the Parsons family, who originally owned the controlling stocks in
Asian Alcohol, were driven by mounting business losses to sell their majority rights to
Prior Holdings, Inc. (hereinafter referred to as Prior Holdings). The next month, Prior
Holdings took over its management and operation. 4
To thwart further losses, Prior Holding implemented are organizational plan and other
cost-saving measures. Some one hundred seventeen (117) employees out of a total
workforce of three hundred sixty (360) were separated. Seventy two (72) of them
occupied redundant positions that were abolished. Of these positions, twenty one (21)
held by union members and fifty one (51) by non-union members.
The six (6) private respondents are among those union members 5 whose positions were
abolished due to redundancy. Private respondents Carias, Martinez, and Sendon were
water pump tenders; Amacio was a machine shop mechanic; Verayo was a briquetting
plant operator while Tormo was a plant helper under him. They were all assigned at the
Repair and Maintenance Section of the Pulupandan plant. 6
In October, 1992, they received individual notices of termination effective November 30,
1992. 7 They were paid the equivalent of one month salary for every year of service as
separation pay, the money value of their unused sick, vacation, emergency and seniority
leave credits, thirteenth (13th) month pay for the year 1992, medicine allowance, tax
refunds, and goodwill cash bonuses for those with at least ten (10) years of service. 8 All
of them executed sworn releases, waivers and quitclaims. 9 Except for Verayo and
Tormo, they all signed sworn statements of conformity to the company retrenchment
program. 10 And except for Martinez, they all tendered letters of resignation. 11
On December 18, 1992 the six (6) private respondents filed with the NLRC Regional
Arbitration Branch VI, Bacolod City, complaints for illegal dismissal with a prayer for
reinstatement with backwages, moral damages and attorney's fees. They alleged that
Asian Alcohol used the retrenchment program as a subterfuge for union busting. They
claimed that they were singled out for separation by reason of their active participation in
the union. They also asseverated that Asian Alcohol was not bankrupt as it has engaged
in an aggressive scheme of contractual hiring.
The executive Labor Arbiter dismissed the complainants. He explained, thus:
The fact that respondent AAC incurred losses in its business operations
was not seriously challenged by the complainants. The fact that it
incurred losses in its business operations prior to the implementation of
its retrenchment program is amply supported by the documents on
records, (sic) namely: (1) Balance Sheet of AAC as December 31, 1991 .
. . , (2) Statement of Income and Deficit for the year ended December 31,
1991 . . . , (3) Income Tax for Fiscal Year ending September 30, 1989 . . .
, (4) Income Tax Return for Fiscal Year ending December 31, 1989 . . . ,
(5) Income Tax Return for Fiscal Year ending December 31, 1990 . . . ,
and (6) Income Tax Return for Fiscal Year ending December 31, 1991 . .
. , indicating an accumulated deficit of P26,117,889.00.
It has to be emphasized that the law allows an employer to retrench
some of its employees to prevent of its employees to prevent losses. In
the case of respondent AAC, it implemented its retrenchment program
not only to prevent losses but to prevent further losses as it was then
incurring huge losses in it operations.
Complainants would want us to believe that their positions were With respect to Carlos Amacio, he was retrenched not because of his
abolished because they are union members, and that they were replaced being a union member but because of his poor health condition which
by casual employees. Complainants' pretense is rather untenable. For greatly affect[ed] his work efficiency. Records show that Carlos Amacio
one thing, the retrenchment program of AAC affected not only union was among the ten machine shop mechanics employed by respondent
members but also the non-union members. As earlier said, there were AAC. Under AAC's reorganization plan, it needs only nine mechanics.
117 employees of AAC who were affected by the reorganization. Of the
117 positions, 72 positions were abolished due to redundancy, 21 of xxx xxx xxx
which were occupied by unions members, while 51 were held by non-
union members. Thus, the theory of complainants that they were On the whole, therefore, the dismissal of complainants on ground of
terminated from work on ground of their union membership is far from the redundancy / retrenchment was perfectly valid or legal. 12
truth.
Private respondents appealed to the NLRC.
On the contrary, we find that complainants Ernesto Carias, Roberto
Martinez and Rafael Sendon who were all Water Pump Tenders assigned
On May 30,·1997, the NLRC rendered the challenged decision. It rejected the evidence
to AAC's water wells in Ubay, Pulupandan, Negros Occidental which
proffered by Asian Alcohol to prove its business reversals. It ruled that the positions of
were drilled and operated before under the old management by virtue of
private respondents were not redundant for the simple reason that they were replaced by
a right-of-way with the landowner, were retrenchment as an offshoot to
casuals. The NLRC essayed this explanation:
the termination of the lease agreement as the water thereunder had
become salty due to extensive prawn farming nearby, so that AAC could
no longer use the water for its purpose. As a consequence, the services In this case, [that] the respondent terminated complainants "to protect the
of Ernesto Carias, Roberto Martinez and Rafael Sendon had become company from future losses," does not create an impression of imminent
unnecessary, redundant and superfluous. loss. The company at the time of retrenchment was not then in the state
of business reverses. There is therefore no reason to retrench. . . .
As regards complainants Leandro Verayo and Ereneo Tormo, the
grounds cited by respondent AAC in support of its decision to retrench The alleged deficits of the corporation did not prove anything for the
them are too convincing to be ignored. According to respondent AAC, its respondent. The financial status as shown in the Statement of Income
boiler before was 100% coal fired. The boiler was manned by a and Deficits and Income Tax Returns from 1989 to 1991, submitted by
briquetting plant operator in the person of Leandro Verago and three (3) respondent was before the respondent, new management of Prior
briquetting helpers, namely, Ereneo Tormo, Eriberto Songaling, Jr. and Holdings, Inc., took over the operation and management of the
Rudy Javier, Jr. Since AAC had shifted to the use of bunker fuel by about corporation in October, 199[1]. This is no proof that on November 30,
70% to fire its boiler, its usage of coal had been drastically reduced to 1992 when the termination of complainant[s] took effect the company was
only 30% of its total fuel usage in its production plant, thereby saving on experiencing losses or at least imminent losses. Possible future losses do
fuel cost. For this reason, there was no more need for the position of not authorize retrenchment.
briquetting plant operator and the services of only two briquetting helpers
were determined to be adequate for the job of briquetting coal. Of the Secondly in the case of REDUNDANCY.
three (3) briquetting helpers, Ereneo Tormo was the oldest, being already
41 years old, the other two, Javier and Songaling, being only 28 and 35, Redundancy exists where the service[s] of . . . employee[s] are in excess
respectively. Considering the manual nature of the work of coal of what is reasonably demanded by the actual requirements of the
briquetting, younger workers are always preferred for reasons of enterprise. The evidence, however, proved that, in truth and in fact, the
efficiency [sic]. Hence the abolition of the position of Ereneo Tormo. We positions of the complainants were not redundant for the simple reason
have to stress that Eriberto Songaling, Jr. and Rudy Javier, Jr. are also that they were replaced by casuals.
union member. . . .
xxx xxx xxx
 Admittedly, from the testimonies of Engr. Palmares, the wells of the
respondent were operated by contractors. Otherwise stated,
complainant[s] who are regular workers of the respondent, performing
jobs necessary and desirable to the business or redundancy [so that]
their jobs [will be performed by workers belonging to a contractor.
In summation, retrenchment and/or redundancy not having been proved,
complainants, therefore, were illegally dismissed. 13
ORLANDO P. JIMENEZ, FRED P. JIMENEZ, RESTITUTO C. PAMINTUAN, JR.,
ROLANDO J. DE ANDRES, ARTUZ BUSTENERA, ROBERTO B. CRUZ, ROSEDY O.
YORDAN, DENNIS DACASIN, ALEJANDRINO ABATON, and ORLANDO S.
BALANGUE, Petitioners,
vs.
PROCTER & GAMBLE PHILS., INC., and PROMM-GEM INC., Respondents.
DECISION

The dispositive portion of the decision of the NLRC provides as follows: DEL CASTILLO, J.:

WHEREFORE, premises considered, the Decision appealed from is Labor laws expressly prohibit "labor-only" contracting. To prevent its circumvention, the
hereby ordered SET ASIDE and VACATED and in lieu thereof, the Labor Code establishes an employer-employee relationship between the employer and
respondent Asian Alcohol Corporation is hereby ordered to reinstate the employees of the ‘labor-only’ contractor.
complainants with full backwages from the time they were dismissed on
November 30, 1992 and up to actual reinstatement. Plus 10% attorney's The instant petition for review assails the March 21, 2003 Decision1 of the Court of
fees. Appeals (CA) in CA-G.R. SP No. 52082 and its October 20, 2003 Resolution2 denying
the motions for reconsideration separately filed by petitioners and respondent Procter &
SO ORDERED. Gamble Phils. Inc. (P&G). The appellate court affirmed the July 27, 1998 Decision of the
National Labor Relations Commission (NLRC), which in turn affirmed the November 29,
1996 Decision3 of the Labor Arbiter. All these decisions found Promm-Gem, Inc. (Promm-
Gem) and Sales and Promotions Services (SAPS) to be legitimate independent
contractors and the employers of the petitioners.
G.R. No. 160506 June 6, 2011
Factual Antecedents
JOEB M. ALIVIADO, ARTHUR CORPUZ, ERIC ALIVIADO, MONCHITO
AMPELOQUIO, ABRAHAM BASMAYOR, JONATHAN MATEO, LORENZO PLATON,
JOSE FERNANDO GUTIERREZ, ESTANISLAO BUENAVENTURA, LOPE SALONGA, Petitioners worked as merchandisers of P&G from various dates, allegedly starting as
FRANZ DAVID, NESTOR IGNACIO, JULIO REY, RUBEN MARQUEZ, JR., MAXIMINO early as 1982 or as late as June 1991, to either May 5, 1992 or March 11, 1993, more
PASCUAL, ERNESTO CALANAO, ROLANDO ROMASANTA, RHUEL AGOO, specifically as follows:
BONIFACIO ORTEGA, ARSENIO SORIANO, JR., ARNEL ENDAYA, ROBERTO
ENRIQUEZ, NESTOR BAQUILA, EDGARDO QUIAMBAO, SANTOS BACALSO, Name Date Employed Date Dismissed
SAMSON BASCO, ALADINO GREGORO, JR., EDWIN GARCIA, ARMANDO VILLAR,
EMIL TAWAT, MARIO P. LIONGSON, CRESENTE J. GARCIA, FERNANDO 1. Joeb M. Aliviado November, 1985 May 5, 1992
MACABENTE, MELECIO CASAPAO, REYNALDO JACABAN, FERDINAND SALVO,
ALSTANDO MONTOS, RAINER N. SALVADOR, RAMIL REYES, PEDRO G. ROY, 2. Arthur Corpuz 1988 March 11, 1993
LEONARDO P. TALLEDO, ENRIQUE F. TALLEDO, WILLIE ORTIZ, ERNESTO
3. Eric Aliviado 1985 March 11, 1993
SOYOSA, ROMEO VASQUEZ, JOEL BILLONES, ALLAN BALTAZAR, NOLI
GABUYO, EMMANUEL E. LABAN, RAMIR E. PIAT, RAUL DULAY, TADEO DURAN, 4. Monchito Ampeloquio September, 1988 March 11, 1993
JOSEPH BANICO, ALBERT LEYNES, ANTONIO DACUNA, RENATO DELA CRUZ,
ROMEO VIERNES, JR., ELAIS BASEO, WILFREDO TORRES, MELCHOR 5. Abraham Basmayor[, Jr.] 1987 March 11, 1993
CARDANO, MARIANO NARANIAN, JOHN SUMERGIDO, ROBERTO ROSALES,
GERRY C. GATPO, GERMAN N. GUEVARRA, GILBERT Y. MIRANDA, RODOLFO C. 6. Jonathan Mateo May, 1988 March 11, 1993
TOLEDO, ARNOLD D. LASTONA, PHILIP M. LOZA, MARIO N. CULDAYON,
7. Lorenzo Platon 1985 March 11, 1993 32. Cresente J. Garcia 1984 March 11, 1993
8. Jose Fernando Gutierrez 1988 May 5, 1992 33. Fernando Macabent[a] 1990 May 5, 1992

9. Estanislao Buenaventura June, 1988 March 11, 1993 34. Melecio Casapao 1987 March 11, 1993
10. Lope Salonga 1982 March 11, 1993 35. Reynaldo Jacaban 1990 May 5, 1992

11. Franz David 1989 March 11, 1993 36. Ferdinand Salvo 1985 May 5, 1992

12. Nestor Ignacio 1982 March 11, 1993 37. Alstando Montos 1984 March 11, 1993
13. Julio Rey 1989 May 5, 1992 38. Rainer N. Salvador 1984 May 5, 1992

14. Ruben [Vasquez], Jr. 1985 May 5, 1992 39. Ramil Reyes 1984 March 11, 1993
15. Maximino Pascual 1990 May 5, 1992 40. Pedro G. Roy 1987
16. Ernesto Calanao[, Jr.] 1987 May 5, 1992 41. Leonardo [F]. Talledo 1985 March 11, 1993

17. Rolando Romasanta 1983 March 11, 1993 42. Enrique [F]. Talledo 1988 March 11, 1993
18. [Roehl] Agoo 1988 March 11, 1993 43. Willie Ortiz 1987 May 5, 1992

19. Bonifacio Ortega 1988 March 11, 1993 44. Ernesto Soyosa 1988 May 5, 1992

20. Arsenio Soriano, Jr. 1985 March 11, 1993 45. Romeo Vasquez 1985 March 11, 1993
21. Arnel Endaya 1983 March 11, 1993 46. Joel Billones 1987 March 11, 1993
22. Roberto Enriquez December, 1988 March 11, 1993 47. Allan Baltazar 1989 March 11, 1993
23. Nestor [Es]quila 1983 May 5, 1992 48. Noli Gabuyo 1991 March 11, 1993

24. Ed[g]ardo Quiambao 1989 March 11, 1993 49. Emmanuel E. Laban 1987 May 5, 1992

25. Santos Bacalso 1990 March 11, 1993 50. Ramir[o] E. [Pita] 1990 May 5, 1992
26. Samson Basco 1984 March 11, 1993 51. Raul Dulay 1988 May 5, 1992
27. Aladino Gregor[e], Jr. 1980 May 5, 1992 52. Tadeo Duran[o] 1988 May 5, 1992
28. Edwin Garcia 1987 May 5, 1992 53. Joseph Banico 1988 March 11, 1993
29. Armando Villar 1990 May 5, 1992 54. Albert Leynes 1990 May 5, 1992

30. Emil Tawat 1988 March 11, 1993 55. Antonio Dacu[m]a 1990 May 5, 1992
31. Mario P. Liongson 1991 May 5, 1992 56. Renato dela Cruz 1982
57. Romeo Viernes, Jr. 1986 They all individually signed employment contracts with either Promm-Gem or SAPS for
periods of more or less five months at a time.5 They were assigned at different outlets,
58. El[ia]s Bas[c]o 1989 supermarkets and stores where they handled all the products of P&G. They received
their wages from Promm-Gem or SAPS.6
59. Wilfredo Torres 1986 May 5, 1992
SAPS and Promm-Gem imposed disciplinary measures on erring merchandisers for
60. Melchor Carda[ñ]o 1991 May 5, 1992
reasons such as habitual absenteeism, dishonesty or changing day-off without prior
61. [Marino] [Maranion] 1989 May 5, 1992 notice.7

62. John Sumergido 1987 May 5, 1992 P&G is principally engaged in the manufacture and production of different consumer and
health products, which it sells on a wholesale basis to various supermarkets and
63. Roberto Rosales May, 1987 May 5, 1992
distributors.8 To enhance consumer awareness and acceptance of the products, P&G
64. Gerry [G]. Gatpo November, 1990 March 11, 1993 entered into contracts with Promm-Gem and SAPS for the promotion and merchandising
of its products.9
65. German N. Guevara May, 1990 March 11, 1993
In December 1991, petitioners filed a complaint10 against P&G for regularization, service
66. Gilbert Y. Miranda June, 1991 March 11, 1993 incentive leave pay and other benefits with damages. The complaint was later
67. Rodolfo C. Toledo[, Jr.] May 14, 1991 March 11, 1993 amended11 to include the matter of their subsequent dismissal.

68. Arnold D. [Laspoña] June 1991 March 11, 1993 Ruling of the Labor Arbiter
69. Philip M. Loza March 5, 1992 March 11, 1993
On November 29, 1996, the Labor Arbiter dismissed the complaint for lack of merit and
70. Mario N. C[o]ldayon May 14, 1991 March 11, 1993 ruled that there was no employer-employee relationship between petitioners and P&G.
He found that the selection and engagement of the petitioners, the payment of their
71. Orlando P. Jimenez November 6, 1992 March 11, 1993 wages, the power of dismissal and control with respect to the means and methods by
which their work was accomplished, were all done and exercised by Promm-Gem/SAPS.
72. Fred P. Jimenez September, 1991 March 11, 1993 He further found that Promm-Gem and SAPS were legitimate independent job
contractors. The dispositive portion of his Decision reads:
73. Restituto C. Pamintuan, Jr. March 5, 1992 March 11, 1993

74. Rolando J. de Andres June, 1991 March 11, 1993 WHEREFORE, premises considered, judgment is hereby rendered Dismissing the
above-entitled cases against respondent Procter & Gamble (Phils.), Inc. for lack of merit.
75. Artuz Bustenera[, Jr.] December, 1989 March 11, 1993
76. Roberto B. Cruz May 4, 1990 March 11, 1993 SO ORDERED.12

77. Rosedy O. Yordan June, 1991 May 5, 1992 Ruling of the NLRC
78. Dennis Dacasin May. 1990 May 5, 1992 Appealing to the NLRC, petitioners disputed the Labor Arbiter’s findings. On July 27,
79. Alejandrino Abaton 1988 May 5, 1992 1998, the NLRC rendered a Decision13 disposing as follows:

80. Orlando S. Balangue March, 1989 March 11, 19934 WHEREFORE, premises considered, the appeal of complainants is hereby DISMISSED
and the decision appealed from AFFIRMED.
SO ORDERED.14
Petitioners filed a motion for reconsideration but the motion was denied in the November
19, 1998 Resolution.15
Ruling of the Court of Appeals
Petitioners then filed a petition for certiorari with the CA, alleging grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of the Labor Arbiter and
the NLRC. However, said petition was also denied by the CA which disposed as follows:
WHEREFORE, the decision of the National Labor Relations Commission dated July 27,
1998 is AFFIRMED with the MODIFICATION that respondent Procter & Gamble Phils.,
Inc. is ordered to pay service incentive leave pay to petitioners.
SO ORDERED.16
Petitioners filed a motion for reconsideration but the motion was also denied. Hence, this
petition.
Issues
Petitioners now come before us raising the following issues:
I.
WHETHER X X X THE HONORABLE COURT OF APPEALS HAS COMMITTED
[A] REVERSIBLE ERROR WHEN IT DID NOT FIND THE PUBLIC
RESPONDENTS TO HAVE ACTED WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF OR IN EXCESS OF JURISDICTION IN
RENDERING THE QUESTIONED JUDGMENT WHEN, OBVIOUSLY, THE
PETITIONERS WERE ABLE TO PROVE AND ESTABLISH THAT
RESPONDENT PROCTER & GAMBLE PHILS., INC. IS THEIR EMPLOYER
AND THAT THEY WERE ILLEGALLY DISMISSED BY THE FORMER.
II.
WHETHER X X X THE HONORABLE COURT OF APPEALS HAS COMMITTED
[A] REVERSIBLE ERROR WHEN IT DID NOT DECLARE THAT THE PUBLIC
RESPONDENTS HAD ACTED WITH GRAVE ABUSE OF DISCRETION WHEN
THE LATTER DID NOT FIND THE PRIVATE RESPONDENTS LIABLE TO THE
PETITIONERS FOR PAYMENT OF ACTUAL, MORAL AND EXEMPLARY
DAMAGES AS WELL AS LITIGATION COSTS AND ATTORNEY’S FEES.17
Simply stated, the issues are: (1) whether P&G is the employer of petitioners; (2) whether
petitioners were illegally dismissed; and (3) whether petitioners are entitled for payment
of actual, moral and exemplary damages as well as litigation costs and attorney’s fees.
Petitioners’ Arguments
Petitioners insist that they are employees of P&G. They claim that they were recruited by
the salesmen of P&G and were engaged to undertake merchandising chores for P&G
long before the existence of Promm-Gem and/or SAPS. They further claim that when the
latter had its so-called re-alignment program, petitioners were instructed to fill up
application forms and report to the agencies which P&G created.18
Petitioners further claim that P&G instigated their dismissal from work as can be gleaned
from its letter19 to SAPS dated February 24, 1993, informing the latter that their
Merchandising Services Contract will no longer be renewed.
Petitioners further assert that Promm-Gem and SAPS are labor-only contractors
providing services of manpower to their client. They claim that the contractors have
neither substantial capital nor tools and equipment to undertake independent labor
contracting. Petitioners insist that since they had been engaged to perform activities
which are necessary or desirable in the usual business or trade of P&G, then they are its
regular employees.20
Respondents’ Arguments
On the other hand, P&G points out that the instant petition raises only questions of fact
and should thus be thrown out as the Court is not a trier of facts. It argues that findings of
facts of the NLRC, particularly where the NLRC and the Labor Arbiter are in agreement,
are deemed binding and conclusive on the Supreme Court.
P&G further argues that there is no employment relationship between it and petitioners. It
was Promm-Gem or SAPS that (1) selected petitioners and engaged their services; (2)
paid their salaries; (3) wielded the power of dismissal; and (4) had the power of control
over their conduct of work.
P&G also contends that the Labor Code neither defines nor limits which services or
activities may be validly outsourced. Thus, an employer can farm out any of its activities
to an independent contractor, regardless of whether such activity is peripheral or core in
nature. It insists that the determination of whether to engage the services of a job
contractor or to engage in direct hiring is within the ambit of management prerogative.
At this juncture, it is worth mentioning that on January 29, 2007, we deemed as waived
the filing of the Comment of Promm-Gem on the petition.21 Also, although SAPS was
impleaded as a party in the proceedings before the Labor Arbiter and the NLRC, it was
no longer impleaded as a party in the proceedings before the CA.22 Hence, our
pronouncements with regard to SAPS are only for the purpose of determining the
obligations of P&G, if any.
Our Ruling
The petition has merit.
As a rule, the Court refrains from reviewing factual assessments of lower courts and
agencies exercising adjudicative functions, such as the NLRC. Occasionally, however,
the Court is constrained to wade into factual matters when there is insufficient or
insubstantial evidence on record to support those factual findings; or when too much is
concluded, inferred or deduced from the bare or incomplete facts appearing on
record.23 In the present case, we find the need to review the records to ascertain the
facts.
Labor-only contracting and job contracting
In order to resolve the issue of whether P&G is the employer of petitioners, it is
necessary to first determine whether Promm-Gem and SAPS are labor-only contractors
or legitimate job contractors.
The pertinent Labor Code provision on the matter states:
ART. 106. Contractor or subcontractor. – Whenever an employer enters into a contract
with another person for the performance of the former’s work, the employees of the
contractor and of the latter’s subcontractor, if any, shall be paid in accordance with the
provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees
in accordance with this Code, the employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent of the work performed under
the contract, in the same manner and extent that he is liable to employees directly
employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the
contracting out of labor to protect the rights of workers established under this Code. In so
prohibiting or restricting, he may make appropriate distinctions between labor-only
contracting and job contracting as well as differentiations within these types of
contracting and determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer
does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by
such person are performing activities which are directly related to the principal business
of such employer. In such cases, the person or intermediary shall be considered merely
as an agent of the employer who shall be responsible to the workers in the same manner
and extent as if the latter were directly employed by him. (Emphasis and underscoring
supplied.)
Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended
by Department Order No. 18-02,24 distinguishes between legitimate and labor-only
contracting:
xxxx
Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting,
there exists a trilateral relationship under which there is a contract for a specific job, work
or service between the principal and the contractor or subcontractor, and a contract of
employment between the contractor or subcontractor and its workers. Hence, there are
three parties involved in these arrangements, the principal which decides to farm out a
job or service to a contractor or subcontractor, the 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.
xxxx
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby
declared prohibited. For this purpose, labor-only contracting shall refer 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) [T]he contractor does not exercise the right to control over the performance of
the work of the contractual employee.
The foregoing provisions shall be without prejudice to the application of Article 248 (c) of
the Labor Code, as amended.
"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" shall refer 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.
x x x x (Underscoring supplied.)
Clearly, the law and its implementing rules allow contracting arrangements for the
performance of specific jobs, works or services. Indeed, it is management prerogative to
farm out any of its activities, regardless of whether such activity is peripheral or core in
nature. However, in order for such outsourcing to be valid, it must be made to
anindependent contractor because the current labor rules expressly prohibit labor-only
contracting.
To emphasize, there is labor-only contracting when the contractor or sub-contractor
merely recruits, supplies or places workers to perform a job, work or service for a
principal25 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 over the performance of
the work of the contractualemployee. (Underscoring supplied)
In the instant case, the financial statements26 of Promm-Gem show that it
has authorized capital stock of ₱1 million and a paid-in capital, or capital available for
operations, of ₱500,000.00 as of 1990.27 It also has long term assets worth ₱432,895.28
and current assets of ₱719,042.32. Promm-Gem has also proven that it maintained its
own warehouse and office space with a floor area of 870 square meters.28 It also had
under its name three registered vehicles which were used for its
promotional/merchandising business.29Promm-Gem also has other clients30 aside from
P&G.31 Under the circumstances, we find that Promm-Gem has substantial investment
which relates to the work to be performed. These factors negate the existence of the
element specified in Section 5(i) of DOLE Department Order No. 18-02.
The records also show that Promm-Gem supplied its complainant-workers with the
relevant materials, such as markers, tapes, liners and cutters, necessary for them to
perform their work. Promm-Gem also issued uniforms to them. It is also relevant to
mention that Promm-Gem already considered the complainants working under it as its
regular, not merely contractual or project, employees.32 This circumstance negates the
existence of element (ii) as stated in Section 5 of DOLE Department Order No. 18-02,
which speaks of contractual employees. This, furthermore, negates – on the part of
Promm-Gem – bad faith and intent to circumvent labor laws which factors have often
been tipping points that lead the Court to strike down the employment practice or
agreement concerned as contrary to public policy, morals, good customs or public
order.33
Under the circumstances, Promm-Gem cannot be considered as a labor-only contractor.
We find that it is a legitimate independent contractor.
On the other hand, the Articles of Incorporation of SAPS shows that it has a paid-in
capital of only ₱31,250.00. There is no other evidence presented to show how much its
working capital and assets are. Furthermore, there is no showing of substantial
investment in tools, equipment or other assets.
In Vinoya v. National Labor Relations Commission,34 the Court held that "[w]ith the
current economic atmosphere in the country, the paid-in capitalization of PMCI
amounting to ₱75,000.00 cannot be considered as substantial capital and, as such,
PMCI cannot qualify as an independent contractor."35 Applying the same rationale to the
present case, it is clear that SAPS – having a paid-in capital of only ₱31,250 - has no
substantial capital. SAPS’ lack of substantial capital is underlined by the records36 which
show that its payroll for its merchandisers alone for one month would already total
₱44,561.00. It had 6-month contracts with P&G.37 Yet SAPS failed to show that it could
complete the 6-month contracts using its own capital and investment. Its capital is not
even sufficient for one month’s payroll. SAPS failed to show that its paid-in capital of
₱31,250.00 is sufficient for the period required for it to generate its needed revenue to
sustain its operations independently. Substantial capital refers to capitalization used in
the performance or completion of the job, work or service contracted out. In the present
case, SAPS has failed to show substantial capital.
Furthermore, the petitioners have been charged with the merchandising and promotion
of the products of P&G, an activity that has already been considered by the Court as
doubtlessly directly related to the manufacturing business,38 which is the principal
business of P&G. Considering that SAPS has no substantial capital or investment and
the workers it recruited are performing activities which are directly related to the principal
business of P&G, we find that the former is engaged in "labor-only contracting".
"Where ‘labor-only’ contracting exists, the Labor Code itself establishes an employer-
employee relationship between the employer and the employees of the ‘labor-only’
contractor."39 The statute establishes this relationship for a comprehensive purpose: to
prevent a circumvention of labor laws. The contractor is considered merely an agent of
the principal employer and the latter is responsible to the employees of the labor-only
contractor as if such employees had been directly employed by the principal employer.40
Consequently, the following petitioners, having been recruited and supplied
by SAPS41 -- which engaged in labor-only contracting -- are considered as the employees
of P&G: Arthur Corpuz, Eric Aliviado, Monchito Ampeloquio, Abraham Basmayor, Jr.,
Jonathan Mateo, Lorenzo Platon, Estanislao Buenaventura, Lope Salonga, Franz David,
Nestor Ignacio, Jr., Rolando Romasanta, Roehl Agoo, Bonifacio Ortega, Arsenio
Soriano, Jr., Arnel Endaya, Roberto Enriquez, Edgardo Quiambao, Santos Bacalso,
Samson Basco, Alstando Montos, Rainer N. Salvador, Pedro G. Roy, Leonardo F.
Talledo, Enrique F. Talledo, Joel Billones, Allan Baltazar, Noli Gabuyo, Gerry Gatpo,
German Guevara, Gilbert V. Miranda, Rodolfo C. Toledo, Jr., Arnold D. Laspoña, Philip
M. Loza, Mario N. Coldayon, Orlando P. Jimenez, Fred P. Jimenez, Restituto C.
Pamintuan, Jr., Rolando J. De Andres, Artuz Bustenera, Jr., Roberto B. Cruz, Rosedy O.
Yordan, Orlando S. Balangue, Emil Tawat, Cresente J. Garcia, Melencio Casapao,
Romeo Vasquez, Renato dela Cruz, Romeo Viernes, Jr., Elias Basco and Dennis
Dacasin.
The following petitioners, having worked under, and been dismissed by Promm-Gem, are
considered the employees of Promm-Gem, not of P&G: Wilfredo Torres, John
Sumergido, Edwin Garcia, Mario P. Liongson, Jr., Ferdinand Salvo, Alejandrino Abaton,
Emmanuel A. Laban, Ernesto Soyosa, Aladino Gregore, Jr., Ramil Reyes, Ruben
Vasquez, Jr., Maximino Pascual, Willie Ortiz, Armando Villar, Jose Fernando Gutierrez,
Ramiro Pita, Fernando Macabenta, Nestor Esquila, Julio Rey, Albert Leynes, Ernesto
Calanao, Roberto Rosales, Antonio Dacuma, Tadeo Durano, Raul Dulay, Marino
Maranion, Joseph Banico, Melchor Cardano, Reynaldo Jacaban, and Joeb Aliviado.42
Termination of services
We now discuss the issue of whether petitioners were illegally dismissed. In cases of
regular employment, the employer shall not terminate the services of an employee
except for a just43 or authorized44 cause.
In the instant case, the termination letters given by Promm-Gem to its employees
uniformly specified the cause of dismissal as grave misconduct and breach of trust, as
follows:
xxxx
This informs you that effective May 5, 1992, your employment with our company,
Promm-Gem, Inc. has been terminated. We find your expressed admission, that you
considered yourself as an employee of Procter & Gamble Phils., Inc…. and assailing the
integrity of the Company as legitimate and independent promotion firm, is deemed as an
act of disloyalty prejudicial to the interests of our Company: serious misconduct and
breach of trust reposed upon you as employee of our Company which [co]nstitute just
cause for the termination of your employment.
x x x x45
Misconduct has been defined as improper or wrong conduct; the transgression of some
established and definite rule of action, a forbidden act, a dereliction of duty, unlawful in
character implying wrongful intent and not mere error of judgment. The misconduct to be
serious must be of such grave and aggravated character and not merely trivial and
unimportant.46 To be a just cause for dismissal, such misconduct (a) must be serious; (b)
must relate to the performance of the employee’s duties; and (c) must show that the
employee has become unfit to continue working for the employer.47
In other words, in order to constitute serious misconduct which will warrant the dismissal
of an employee under paragraph (a) of Article 282 of the Labor Code, it is not sufficient
that the act or conduct complained of has violated some established rules or policies. It is
equally important and required that the act or conduct must have been performed with
wrongful intent.48 In the instant case, petitioners-employees of Promm-Gem may have
committed an error of judgment in claiming to be employees of P&G, but it cannot be
said that they were motivated by any wrongful intent in doing so. As such, we find them
guilty of only simple misconduct for assailing the integrity of Promm-Gem as a legitimate
and independent promotion firm. A misconduct which is not serious or grave, as that
existing in the instant case, cannot be a valid basis for dismissing an employee.
Meanwhile, loss of trust and confidence, as a ground for dismissal, must be based on the
willful breach of the trust reposed in the employee by his employer. Ordinary breach will
not suffice. A breach of trust is willful if it is done intentionally, knowingly and purposely,
without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly,
heedlessly or inadvertently.49
Loss of trust and confidence, as a cause for termination of employment, is premised on
the fact that the employee concerned holds a position of responsibility or of trust and
confidence. As such, he must be invested with confidence on delicate matters, such as
custody, handling or care and protection of the property and assets of the employer. And,
in order to constitute a just cause for dismissal, the act complained of must be work-
related and must show that the employee is unfit to continue to work for the
employer.50 In the instant case, the petitioners-employees of Promm-Gem have not been
shown to be occupying positions of responsibility or of trust and confidence. Neither is
there any evidence to show that they are unfit to continue to work as merchandisers for
Promm-Gem.
All told, we find no valid cause for the dismissal of petitioners-employees of Promm-Gem.
While Promm-Gem had complied with the procedural aspect of due process in
terminating the employment of petitioners-employees, i.e., giving two notices and in
between such notices, an opportunity for the employees to answer and rebut the charges
against them, it failed to comply with the substantive aspect of due process as the acts
complained of neither constitute serious misconduct nor breach of trust. Hence, the
dismissal is illegal.
With regard to the petitioners placed with P&G by SAPS, they were given no written
notice of dismissal. The records show that upon receipt by SAPS of P&G’s letter
terminating their "Merchandising Services Contact" effective March 11, 1993, they in turn
verbally informed the concerned petitioners not to report for work anymore. The
concerned petitioners related their dismissal as follows:
xxxx
5. On March 11, 1993, we were called to a meeting at SAPS office. We were told by Mr.
Saturnino A. Ponce that we should already stop working immediately because that was
the order of Procter and Gamble. According to him he could not do otherwise because
Procter and Gamble was the one paying us. To prove that Procter and Gamble was the
one responsible in our dismissal, he showed to us the letter51 dated February 24, 1993, x
xx
February 24, 1993
Sales and Promotions Services
Armon’s Bldg., 142 Kamias Road,
Quezon City
Attention: Mr. Saturnino A. Ponce
President & General Manager
Gentlemen:
Based on our discussions last 5 and 19 February 1993, this formally informs you that we
will not be renewing our Merchandising Services Contract with your agency.
Please immediately undertake efforts to ensure that your services to the Company will
terminate effective close of business hours of 11 March 1993.
This is without prejudice to whatever obligations you may have to the company under the
abovementioned contract.
Very truly yours,
(Sgd.)
EMMANUEL M. NON
Sales Merchandising III
6. On March 12, 1993, we reported to our respective outlet assignments. But, we were
no longer allowed to work and we were refused entrance by the security guards posted.
According to the security guards, all merchandisers of Procter and Gamble under S[APS]
who filed a case in the Dept. of Labor are already dismissed as per letter of Procter and
Gamble dated February 25, 1993. x x x52
Neither SAPS nor P&G dispute the existence of these circumstances. Parenthetically,
unlike Promm-Gem which dismissed its employees for grave misconduct and breach of
trust due to disloyalty, SAPS dismissed its employees upon the initiation of P&G. It is
evident that SAPS does not carry on its own business because the termination of its
contract with P&G automatically meant for it also the termination of its employees’
services. It is obvious from its act that SAPS had no other clients and had no intention of
seeking other clients in order to further its merchandising business. From all indications
SAPS, existed to cater solely to the need of P&G for the supply of employees in the
latter’s merchandising concerns only. Under the circumstances prevailing in the instant
case, we cannot consider SAPS as an independent contractor.
Going back to the matter of dismissal, it must be emphasized that the onus probandi to
prove the lawfulness of the dismissal rests with the employer.53 In termination cases, the
burden of proof rests upon the employer to show that the dismissal is for just and valid
cause.54 In the instant case, P&G failed to discharge the burden of proving the legality
and validity of the dismissals of those petitioners who are considered its employees.
Hence, the dismissals necessarily were not justified and are therefore illegal.
Damages
We now go to the issue of whether petitioners are entitled to damages. Moral
and exemplary damages are recoverable where the dismissal of an employee was
attended by bad faith or fraud or constituted an act oppressive to labor or was done in a
manner contrary to morals, good customs or public policy.55
With regard to the employees of Promm-Gem, there being no evidence of bad faith,
fraud or any oppressive act on the part of the latter, we find no support for the award of
damages.
As for P&G, the records show that it dismissed its employees through SAPS in a manner
oppressive to labor. The sudden and peremptory barring of the concerned petitioners
from work, and from admission to the work place, after just a one-day verbal
notice, and for no valid cause bellows oppression and utter disregard of the right to due
process of the concerned petitioners. Hence, an award of moral damages is called for.
Attorney’s fees may likewise be awarded to the concerned petitioners who were illegally
dismissed in bad faith and were compelled to litigate or incur expenses to protect their
rights by reason of the oppressive acts56 of P&G.
Lastly, under Article 279 of the Labor Code, an employee who is unjustly dismissed from
work shall be entitled to reinstatement without loss of seniority rights and other privileges,
inclusive of allowances, and other benefits or their monetary equivalent from the time the
compensation was withheld up to the time of actual reinstatement.57 Hence, all the
petitioners, having been illegally dismissed are entitled to reinstatement without loss of
seniority rights and with full back wages and other benefits from the time of their illegal
dismissal up to the time of their actual reinstatement.1avv phi 1
WHEREFORE, the petition is GRANTED. The Decision dated March 21, 2003 of the
Court of Appeals in CA-G.R. SP No. 52082 and the Resolution dated October 20, 2003
are REVERSED and SET ASIDE. Procter & Gamble Phils., Inc. and Promm-Gem, Inc.
are ORDERED to reinstate their respective employees immediately without loss of
seniority rights and with full backwages and other benefits from the time of their illegal
dismissal up to the time of their actual reinstatement. Procter & Gamble Phils., Inc. is
further ORDERED to pay each of those petitioners considered as its employees, namely
Arthur Corpuz, Eric Aliviado, Monchito Ampeloquio, Abraham Basmayor, Jr., Jonathan
Mateo, Lorenzo Platon, Estanislao Buenaventura, Lope Salonga, Franz David, Nestor
Ignacio, Rolando Romasanta, Roehl Agoo, Bonifacio Ortega, Arsenio Soriano, Jr., Arnel
Endaya, Roberto Enriquez, Edgardo Quiambao, Santos Bacalso, Samson Basco,
Alstando Montos, Rainer N. Salvador, Pedro G. Roy, Leonardo F. Talledo, Enrique F.
Talledo, Joel Billones, Allan Baltazar, Noli Gabuyo, Gerry Gatpo, German Guevara,
Gilbert Y. Miranda, Rodolfo C. Toledo, Jr., Arnold D. Laspoña, Philip M. Loza, Mario N.
Coldayon, Orlando P. Jimenez, Fred P. Jimenez, Restituto C. Pamintuan, Jr., Rolando J.
De Andres, Artuz Bustenera, Jr., Roberto B. Cruz, Rosedy O. Yordan, Orlando S.
Balangue, Emil Tawat, Cresente J. Garcia, Melencio Casapao, Romeo Vasquez, Renato
dela Cruz, Romeo Viernes, Jr., Elias Basco and Dennis Dacasin, ₱25,000.00 as moral
damages plus ten percent of the total sum as and for attorney’s fees.
Let this case be REMANDED to the Labor Arbiter for the computation, within 30 days
from receipt of this Decision, of petitioners’ backwages and other benefits; and ten
percent of the total sum as and for attorney’s fees as stated above; and for immediate
execution.
SO ORDERED.
G.R. No. 170054 January 21, 2013
GOYA, INC., Petitioner,
vs.
GOYA, INC. EMPLOYEES UNION-FFW, Respondent.
DECISION
PERALTA, J.:
This petition for review on certiorari under Rule 45 of the Rules of Civil Procedure seeks
to reverse and set aside the June 16, 2005 Decision1 and October 12, 2005
Resolution2 of the Court of Appeals in CA-G.R. SP No. 87335, which sustained the
October 26, 2004 Decision3 of Voluntary Arbitrator Bienvenido E. Laguesma, the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered declaring that the Company is NOT guilty of
unfair labor practice in engaging the services of PESO.
The company is, however, directed to observe and comply with its commitment as it
pertains to the hiring of casual employees when necessitated by business
circumstances.4
The facts are simple and appear to be undisputed.
Sometime in January 2004, petitioner Goya, Inc. (Company), a domestic corporation
engaged in the manufacture, importation, and wholesale of top quality food products,
hired contractual employees from PESO Resources Development Corporation (PESO) to
perform temporary and occasional services in its factory in Parang, Marikina City. This
prompted respondent Goya, Inc. Employees Union–FFW (Union) to request for a
grievance conference on the ground that the contractual workers do not belong to the
categories of employees stipulated in the existing Collective Bargaining Agreement
(CBA).5 When the matter remained unresolved, the grievance was referred to the
National Conciliation and Mediation Board (NCMB) for voluntary arbitration.
During the hearing on July 1, 2004, the Company and the Union manifested before
Voluntary Arbitrator (VA) Bienvenido E. Laguesma that amicable settlement was no
longer possible; hence, they agreed to submit for resolution the solitary issue of
"[w]hether or not the Company is guilty of unfair labor acts in engaging the services of
PESO, a third party service provider, under the existing CBA, laws, and
jurisprudence."6 Both parties thereafter filed their respective pleadings.
The Union asserted that the hiring of contractual employees from PESO is not a
management prerogative and in gross violation of the CBA tantamount to unfair labor
practice (ULP). It noted that the contractual workers engaged have been assigned to
work in positions previously handled by regular workers and Union members, in effect
violating Section 4, Article I of the CBA, which provides for three categories of employees
in the Company, to wit:
Section 4. Categories of Employees.– The parties agree on the following categories of
employees:
(a) Probationary Employee. – One hired to occupy a regular rank-and-file position in the
Company and is serving a probationary period. If the probationary employee is hired or
comes from outside the Company (non-Goya, Inc. employee), he shall be required to
undergo a probationary period of six (6) months, which period, in the sole judgment of
management, may be shortened if the employee has already acquired the knowledge or
skills required of the job. If the employee is hired from the casual pool and has worked in
the same position at any time during the past two (2) years, the probationary period shall
be three (3) months.
(b) Regular Employee. – An employee who has satisfactorily completed his probationary
period and automatically granted regular employment status in the Company.
(c) Casual Employee, – One hired by the Company to perform occasional or seasonal
work directly connected with the regular operations of the Company, or one hired for
specific projects of limited duration not connected directly with the regular operations of
the Company.
It was averred that the categories of employees had been a part of the CBA since the
1970s and that due to this provision, a pool of casual employees had been maintained by
the Company from which it hired workers who then became regular workers when
urgently necessary to employ them for more than a year. Likewise, the Company
sometimes hired probationary employees who also later became regular workers after
passing the probationary period. With the hiring of contractual employees, the Union
contended that it would no longer have probationary and casual employees from which it
could obtain additional Union members; thus, rendering inutile Section 1, Article III
(Union Security) of the CBA, which states:
Section 1. Condition of Employment. – As a condition of continued employment in the
Company, all regular rank-and-file employees shall remain members of the Union in
good standing and that new employees covered by the appropriate bargaining unit shall
automatically become regular employees of the Company and shall remain members of
the Union in good standing as a condition of continued employment.
The Union moreover advanced that sustaining the Company’s position would easily
weaken and ultimately destroy the former with the latter’s resort to retrenchment and/or
retirement of employees and not filling up the vacant regular positions through the hiring
of contractual workers from PESO, and that a possible scenario could also be created by
the Company wherein it could "import" workers from PESO during an actual strike.
In countering the Union’s allegations, the Company argued that: (a) the law expressly
allows contracting and subcontracting arrangements through Department of Labor and
Employment (DOLE) Order No. 18-02; (b) the engagement of contractual employees did
not, in any way, prejudice the Union, since not a single employee was terminated and
neither did it result in a reduction of working hours nor a reduction or splitting of the
bargaining unit; and (c) Section 4, Article I of the CBA merely provides for the definition
of the categories of employees and does not put a limitation on the Company’s right to
engage the services of job contractors or its management prerogative to address
temporary/occasional needs in its operation.
On October 26, 2004, VA Laguesma dismissed the Union’s charge of ULP for being
purely speculative and for lacking in factual basis, but the Company was directed to
observe and comply with its commitment under the CBA. The VA opined:
We examined the CBA provision Section 4, Article I of the CBAallegedly violated by the
Company and indeed the agreement prescribes three (3) categories of employees in the
Company and provides for the definition, functions and duties of each. Material to the
case at hand is the definition as regards the functions of a casual employee described as
follows:
Casual Employee – One hired by the COMPANY to perform occasional or seasonal work
directly connected with the regular operations of the COMPANY, or one hired for specific
projects of limited duration not connected directly with the regular operations of the
COMPANY.
While the foregoing agreement between the parties did eliminate management’s
prerogative of outsourcing parts of its operations, it serves as a limitation on such
prerogative particularly if it involves functions or duties specified under the aforequoted
agreement. It is clear that the parties agreed that in the event that the Company needs to
engage the services of additional workers who will perform "occasional or seasonal work
directly connected with the regular operations of the COMPANY," or "specific projects of
limited duration not connected directly with the regular operations of the COMPANY", the
Company can hire casual employees which is akin to contractual employees. If we note
the Company’s own declaration that PESO was engaged to perform "temporary or
occasional services" (See the Company’s Position Paper, at p. 1), then it should have
directly hired the services of casual employees rather than do it through PESO.
It is evident, therefore, that the engagement of PESO is not in keeping with the intent and
spirit of the CBA provision in question. It must, however, be stressed that the right of
management to outsource parts of its operations is not totally eliminated but is merely
limited by the CBA. Given the foregoing, the Company’s engagement of PESO for the
given purpose is indubitably a violation of the CBA.7
While the Union moved for partial reconsideration of the VA Decision,8 the Company
immediately filed a petition for review9 before the Court of Appeals (CA) under Rule 43 of
the Revised Rules of Civil Procedure to set aside the directive to observe and comply
with the CBA commitment pertaining to the hiring of casual employees when
necessitated by business circumstances. Professing that such order was not covered by
the sole issue submitted for voluntary arbitration, the Company assigned the following
errors:
THE HONORABLE VOLUNTARY ARBITRATOR EXCEEDED HIS POWER WHICH
WAS EXPRESSLY GRANTED AND LIMITED BY BOTH PARTIES IN RULING THAT
THE ENGAGEMENT OF PESO IS NOT IN KEEPING WITH THE INTENT AND SPIRIT
OF THE CBA.10
THE HONORABLE VOLUNTARY ARBITRATOR COMMITTED A PATENT AND
PALPABLE ERROR IN DECLARING THAT THE ENGAGEMENT OF PESO IS NOT IN
KEEPING WITH THE INTENT AND SPIRIT OF THE CBA.11
On June 16, 2005, the CA dismissed the petition. In dispensing with the merits of the
controversy, it held:
This Court does not find it arbitrary on the part of the Hon. Voluntary Arbitrator in ruling
that "the engagement of PESO is not in keeping with the intent and spirit of the CBA."
The said ruling is interrelated and intertwined with the sole issue to be resolved that is,
"Whether or not the Company is guilty of unfair labor practice in engaging the services of
PESO, a third party service provider, under existing CBA, laws, and jurisprudence." Both
issues concern the engagement of PESO by the Company which is perceived as a
violation of the CBA and which constitutes as unfair labor practice on the part of the
Company. This is easily discernible in the decision of the Hon. Voluntary Arbitrator when
it held:
x x x x While the engagement of PESO is in violation of Section 4, Article I of the CBA, it
does not constitute unfair labor practice as it (sic) not characterized under the law as a
gross violation of the CBA. Violations of a CBA, except those which are gross in
character, shall no longer be treated as unfair labor practice. Gross violations of a CBA
means flagrant and/or malicious refusal to comply with the economic provisions of such
agreement. x x x
Anent the second assigned error, the Company contends that the Hon. Voluntary
Arbitrator erred in declaring that the engagement of PESO is not in keeping with the
intent and spirit of the CBA. The Company justified its engagement of contractual
employees through PESO as a management prerogative, which is not prohibited by law.
Also, it further alleged that no provision under the CBA limits or prohibits its right to
contract out certain services in the exercise of management prerogatives.
Germane to the resolution of the above issue is the provision in their CBA with respect to
the categories of the employees:
xxxx
A careful reading of the above-enumerated categories of employees reveals that the
PESO contractual employees do not fall within the enumerated categories of employees
stated in the CBA of the parties. Following the said categories, the Company should
have observed and complied with the provision of their CBA. Since the Company had
admitted that it engaged the services of PESO to perform temporary or occasional
services which is akin to those performed by casual employees, the Company should
have tapped the services of casual employees instead of engaging PESO.
In justifying its act, the Company posits that its engagement of PESO was a
management prerogative. It bears stressing that a management prerogative refers to the
right of the employer to regulate all aspects of employment, such as the freedom to
prescribe work assignments, working methods, processes to be followed, regulation
regarding transfer of employees, supervision of their work, lay-off and discipline, and
dismissal and recall of work, presupposing the existence of employer-employee
relationship. On the basis of the foregoing definition, the Company’s engagement of
PESO was indeed a management prerogative. This is in consonance with the
pronouncement of the Supreme Court in the case of Manila Electric Company vs.
Quisumbing where it ruled that contracting out of services is an exercise of business
judgment or management prerogative.
This management prerogative of contracting out services, however, is not without
limitation. In contracting out services, the management must be motivated by good faith
and the contracting out should not be resorted to circumvent the law or must not have
been the result of malicious arbitrary actions. In the case at bench, the CBA of the
parties has already provided for the categories of the employees in the
Company’sestablishment. These categories of employees particularly with respect to
casual employees serve as limitation to the Company’s prerogative to outsource parts of
its operations especially when hiring contractual employees. As stated earlier, the work
to be performed by PESO was similar to that of the casual employees. With the provision
on casual employees, the hiring of PESO contractual employees, therefore, is not in
keeping with the spirit and intent of their CBA. (Citations omitted)12
The Company moved to reconsider the CA Decision,13 but it was denied;14 hence, this
petition.
Incidentally, on July 16, 2009, the Company filed a Manifestation15 informing this Court
that its stockholders and directors unanimously voted to shorten the Company’s
corporate existence only until June 30, 2006, and that the three-year period allowed by
law for liquidation of the Company’s affairs already expired on June 30, 2009. Referring
to Gelano v. Court of Appeals,16 Public Interest Center, Inc. v. Elma,17 and Atienza v.
Villarosa,18 it urged Us, however, to still resolve the case for future guidance of the bench
and the bar as the issue raised herein allegedly calls for a clarification of a legal principle,
specifically, whether the VA is empowered to rule on a matter not covered by the issue
submitted for arbitration.
Even if this Court would brush aside technicality by ignoring the supervening event that
renders this case moot and academic19 due to the permanent cessation of the
Company’s business operation on June 30, 2009, the arguments raised in this petition
still fail to convince Us.
We confirm that the VA ruled on a matter that is covered by the sole issue submitted for
voluntary arbitration. Resultantly, the CA did not commit serious error when it sustained
the ruling that the hiring of contractual employees from PESO was not in keeping with
the intent and spirit of the CBA. Indeed, the opinion of the VA is germane to, or, in the
words of the CA, "interrelated and intertwined with," the sole issue submitted for
resolution by the parties. This being said, the Company’s invocation of Sections 4 and 5,
Rule IV20 and Section 5, Rule VI21 of the Revised Procedural Guidelines in the Conduct of
Voluntary Arbitration Proceedings dated October 15, 2004 issued by the NCMB is plainly
out of order.
Likewise, the Company cannot find solace in its cited case of Ludo & Luym Corporation
v. Saornido.22 In Ludo, the company was engaged in the manufacture of coconut oil, corn
starch, glucose and related products. In the course of its business operations, it engaged
the arrastre services of CLAS for the loading and unloading of its finished products at the
wharf. The arrastre workers deployed by CLAS to perform the services needed were
subsequently hired, on different dates, as Ludo’s regular rank-and-file employees.
Thereafter, said employees joined LEU, which acted as the exclusive bargaining agent of
the rank-and-file employees. When LEU entered into a CBA with Ludo, providing for
certain benefits to the employees (the amount of which vary according to the length of
service rendered), it requested to include in its members’ period of service the time
during which they rendered arrastre services so that they could get higher benefits. The
matter was submitted for voluntary arbitration when Ludo failed to act. Per submission
agreement executed by both parties, the sole issue for resolution was the date of
regularization of the workers. The VA Decision ruled that: (1) the subject employees
were engaged in activities necessary and desirable to the business of Ludo, and (2)
CLAS is a labor-only contractor of Ludo. It then disposed as follows: (a) the complainants
were considered regular employees six months from the first day of service at CLAS; (b)
the complainants, being entitled to the CBA benefits during the regular employment,
were awarded sick leave, vacation leave, and annual wage and salary increases during
such period; (c) respondents shall pay attorney’s fees of 10% of the total award; and (d)
an interest of 12% per annum or 1% per month shall be imposed on the award from the
date of promulgation until fully paid. The VA added that all separation and/or retirement
benefits shall be construed from the date of regularization subject only to the appropriate
government laws and other social legislation. Ludo filed a motion for reconsideration, but
the VA denied it. On appeal, the CA affirmed in toto the assailed decision; hence, a
petition was brought before this Court raising the issue, among others, of whether a
voluntary arbitrator can award benefits not claimed in the submission agreement. In
denying the petition, We ruled:
Generally, the arbitrator is expected to decide only those questions expressly delineated
by the submission agreement. Nevertheless, the arbitrator can assume that he has the
necessary power to make a final settlement since arbitration is the final resort for the
adjudication of disputes. The succinct reasoning enunciated by the CA in support of its
holding, that the Voluntary Arbitrator in a labor controversy has jurisdiction to render the
questioned arbitral awards, deserves our concurrence, thus:
In general, the arbitrator is expected to decide those questions expressly stated and
limited in the submission agreement. However, since arbitration is the final resort for the
adjudication of disputes, the arbitrator can assume that he has the power to make a final
settlement. Thus, assuming that the submission empowers the arbitrator to decide
whether an employee was discharged for just cause, the arbitrator in this instance can
reasonably assume that his powers extended beyond giving a yes-or-no answer and
included the power to reinstate him with or without back pay.
In one case, the Supreme Court stressed that "xxx the Voluntary Arbitrator had plenary
jurisdiction and authority to interpret the agreement to arbitrate and to determine the
scope of his own authority subject only, in a proper case, to the certiorari jurisdiction of
this Court. The Arbitrator, as already indicated, viewed his authority as embracing not
merely the determination of the abstract question of whether or not a performance bonus
was to be granted but also, in the affirmative case, the amount thereof.
By the same token, the issue of regularization should be viewed as two-tiered issue.
While the submission agreement mentioned only the determination of the date or
regularization, law and jurisprudence give the voluntary arbitrator enough leeway of
authority as well as adequate prerogative to accomplish the reason for which the law on
voluntary arbitration was created – speedy labor justice. It bears stressing that the
underlying reason why this case arose is to settle, once and for all, the ultimate question
of whether respondent employees are entitled to higher benefits. To require them to file
another action for payment of such benefits would certainly undermine labor proceedings
and contravene the constitutional mandate providing full protection to labor.23
Indubitably, Ludo fortifies, not diminishes, the soundness of the questioned VA Decision.
Said case reaffirms the plenary jurisdiction and authority of the voluntary arbitrator to
interpret the CBA and to determine the scope of his/her own authority. Subject to judicial
review, the leeway of authority as well as adequate prerogative is aimed at
accomplishing the rationale of the law on voluntary arbitration – speedy labor justice. In
this case, a complete and final adjudication of the dispute between the parties
necessarily called for the resolution of the related and incidental issue of whether the
Company still violated the CBA but without being guilty of ULP as, needless to state,
ULP is committed only if there is gross violation of the agreement.
Lastly, the Company kept on harping that both the VA and the CA conceded that its
engagement of contractual workers from PESO was a valid exercise of management
prerogative. It is confused. To emphasize, declaring that a particular act falls within the
concept of management prerogative is significantly different from acknowledging that
such act is a valid exercise thereof. What the VA and the CA correctly ruled was that the
Company’s act of contracting out/outsourcing is within the purview of management
prerogative. Both did not say, however, that such act is a valid exercise thereof.
Obviously, this is due to the recognition that the CBA provisions agreed upon by the
Company and the Union delimit the free exercise of management prerogative pertaining
to the hiring of contractual employees. Indeed, the VA opined that "the right of the
management to outsource parts of its operations is not totally eliminated but is merely
limited by the CBA," while the CA held that "this management prerogative of contracting
out services, however, is not without limitation. x x x These categories of employees
particularly with respect to casual employees serve as limitation to the Company’s
prerogative to outsource parts of its operations especially when hiring contractual
employees."
A collective bargaining agreement is the law between the parties:
It is familiar and fundamental doctrine in labor law that the CBA is the law between the
parties and they are obliged to comply with its provisions. We said so in Honda Phils.,
Inc. v. Samahan ng Malayang Manggagawa sa Honda:
A collective bargaining agreement or CBA refers to the negotiated contract between a
legitimate labor organization and the employer concerning wages, hours of work and all
other terms and conditions of employment in a bargaining unit. As in all contracts, the
1âwphi1
parties in a CBA may establish such stipulations, clauses, terms and conditions as they
may deem convenient provided these are not contrary to law, morals, good customs,
public order or public policy. Thus, where the CBA is clear and unambiguous, it becomes
the law between the parties and compliance therewith is mandated by the express policy
of the law.
Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of their stipulations shall control. x
x x.24
In this case, Section 4, Article I (on categories of employees) of the CBA between the
Company and the Union must be read in conjunction with its Section 1, Article III (on
union security). Both are interconnected and must be given full force and effect. Also,
these provisions are clear and unambiguous. The terms are explicit and the language of
the CBA is not susceptible to any other interpretation. Hence, the literal meaning should
prevail. As repeatedly held, the exercise of management prerogative is not unlimited; it is
subject to the limitations found in law, collective bargaining agreement or the general
principles of fair play and justice25 Evidently, this case has one of the restrictions- the
presence of specific CBA provisions-unlike in San Miguel Corporation Employees Union-
PTGWO v. Bersamira,26 De Ocampo v. NLRC,27 Asian Alcohol Corporation v.
NLRC,28 and Serrano v. NLRC29cited by the Company. To reiterate, the CBA is the norm
of conduct between the parties and compliance therewith is mandated by the express
policy of the law.30
WHEREFORE, the petition is DENIED. The assailed June 16, 2005 Decision, as well as
the October 12, 2005 Resolution of the Court of Appeals, which sustained the October
26, 2004 Decision of the Voluntary Arbitrator, are hereby AFFIRMED.
SO ORDERED.
G.R. No. 205300
FONTERRA BRANDS PHILS., INC., Petitioner,
vs.
LEONARDO1 LARGADO and TEOTIMO ESTRELLADO, Respondents.
DECISION
VELASCO, JR., J.:
The Case
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking
the reversal and setting aside of the Decision of the Court of Appeals (CA) dated
September 6, 2012, as well as its January 11, 2013 Resolution denying reconsideration
thereof, in CA-G.R. SP No. 114227, entitled Leonardo Largado and Teotimo P.
Estrellado v. National Labor Relations Commission (NLRC), Fonterra Brands Phils.,
lnc./Carlo Mendoza, Zytron Marketing & Promotions Corp./Francisco Valencia, A. C.
Sicat Marketing & Promotional Services/Arturo Sicat.
The Facts
Petitioner Fonterra Brands Phils., Inc. (Fonterra) contracted the services of Zytron
Marketing and Promotions Corp. (Z)rtron) for the marketing and promotion of its milk and
dairy products. Pursuant to the contract, Zytron provided Fonterra with trade
merchandising representatives (TMRs), including respondents Leonardo Largado
(Largado) and Teotimo Estrellado (Estrellado). The engagement of their services began
on September 15, 2003 and May 27, 2002, respectively, and ended on June 6, 2006.
On May 3, 2006, Fonterra sent Zytron a letter terminating its promotions contract,
effective June 5, 2006. Fonterra then entered into an agreement for manpower supply
with A.C. Sicat Marketing and Promotional Services (A.C. Sicat). Desirous of continuing
their work as TMRs, respondents submitted their job applications with A.C. Sicat, which
hired them for a term of five (5) months, beginning June 7, 2006 up to November 6,
2006.
When respondents’ 5-month contracts with A.C. Sicat were about to expire, they
allegedly sought renewal thereof, but were allegedly refused. This prompted respondents
to file complaints for illegal dismissal, regularization, non-payment of service incentive
leave and 13th month pay, and actual and moral damages, against petitioner, Zytron,
and A.C. Sicat.
The Labor Arbiter dismissed the complaint and ruled that: (1) respondents were not
illegally dismissed. As a matter of fact, they were the ones who refused to renew their
contract and that they voluntarily complied with the requirements for them to claim their
corresponding monetary benefits in relation thereto; and (2) they were consecutively
employed by Zytron and A.C. Sicat, not by Fonterra. The dispositive portion of the
Decision2 reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered DISMISSING the
instant case for utter lack of merit.
SO ORDERED.
The NLRC affirmed the Labor Arbiter, finding that respondents’ separation from Zytron
was brought about by the execution of the contract between Fonterra and A.C. Sicat
where the parties agreed to absorb Zytron’s personnel, including respondents. Too,
respondents failed to present any evidence that they protested this set-up. Furthermore,
respondents failed to refute the allegation that they voluntarily refused to renew their
contract with A.C. Sicat. Also, respondents did not assert any claim against Zytron and
A.C. Sicat. The NLRC disposed of the case in this wise:
WHEREFORE, premises considered, the appeals are hereby ordered DISMISSED and
the Decision of the Labor Arbiter is AFFIRMED [in] toto.
SO ORDERED.3
The NLRC decision was assailed in a petition under Rule 65 before the CA.
Ruling on the petition, the CA, in the questioned Decision,4 found that A.C. Sicat satisfies
the requirements of legitimate job contracting, but Zytron does not. According to the CA:
(1) Zytron’s paid-in capital of 250,000 cannot be considered as substantial capital; (2) its
Certificate of Registration was issued by the DOLE months after respondents’ supposed
employment ended; and (3) its claim that it has the necessary tools and equipment for its
business is unsubstantiated. Therefore, according to the CA, respondents were
Fonterra’s employees.
Additionally, the CA held that respondents were illegally dismissed since Fonterra itself
failed to prove that their dismissal is lawful. However, the illegal dismissal should be
reckoned from the termination of their supposed employment with Zytron on June 6,
2006. Furthermore, respondents’ transfer to A.C. Sicat is tantamount to a completely
new engagement by another employer. Lastly, the termination of their contract with A.C.
Sicat arose from the expiration of their respective contracts with the latter. The CA, thus,
ruled that Fonterra is liable to respondents and ordered the reinstatement of respondents
without loss of seniority rights, with full backwages, and other benefits from the time of
their illegal dismissal up to the time of their actual reinstatement. The fallo of the Decision
reads:
WHEREFORE, premises considered, the petition is hereby GRANTED. The assailed
Decision dated 20 November 2009 and Resolution dated 5 March 2010 of the National
Labor Relations Commission (NLRC), Seventh Division, are hereby ANULLED and SET
ASIDE. Private respondent Fonterra Brand, Inc. is hereby ordered to REINSTATE
[respondents] without loss of seniority rights. Private respondents Fonterra Brand, Inc.
and Zytron Marketing and Promotional Corp. are hereby further ORDERED to jointly and
severally pay petitioners their full backwages and other benefits from the time of their
illegal dismissal up to the time of their actual reinstatement; and attorney’s fees.
SO ORDERED.
Zytron and Fonterra moved for reconsideration, but to no avail. Hence, this petition.
The Issues
Petitioner presents the following issues for Our resolution:
I.The CA erred in ruling that Zytron was a mere labor-only contractor to petitioner
Fonterra, in that:
a.As held by the Court, there is no absolute figure that constitutes "substantial"
capital for an independent contractor, and the same should instead be measured
against the type of work it is obligated to do for the principal. It is most
respectfully submitted that, here, the merchandising work undertaken by Zytron’s
paid-in capital of 250,000 was as of 1990, the year it was incorporated;
b.As shown in its Articles of Incorporation, Zytron had been in business since
1990, or more than a decade before it signed a merchandising agreement with
petitioner Fonterra;
c.Very importantly, petitioner Fonterra never exercised the right to control
respondents and other employees of Zytron. Indeed, respondents neither alleged
that petitioner exercised control over them nor presented proof in support thereof
in any of their previous pleadings.
II.Respondents never claimed nor adduced evidence that they were dismissed from
employment by Zytron. In fact, Zytron denies terminating them from work. The CA, thus,
erred in finding that respondents were "illegally dismissed."
Succinctly, the issues in the case at bar are: (1) whether or not Zytron and A.C. Sicat are
labor-only contractors, making Fonterra the employer of herein respondents; and (2)
whether or not respondents were illegally dismissed.
Our Ruling
We find merit in the petition.
As regards the CA’s conclusion that Zytron is not a legitimate job contractor, We are of
the view that such is immaterial to the resolution of the illegal dismissal issue for one
reason: We find that respondents voluntarily terminated their employment with Zytron,
contrary to their allegation that their employment with Zytron was illegally terminated.
We do not agree with the CA that respondents’ employment with Zytron was illegally
terminated.
As correctly held by the Labor Arbiter and the NLRC, the termination of respondents’
employment with Zytron was brought about by the cessation of their contracts with the
latter. We give credence to the Labor Arbiter’s conclusion that respondents were the
ones who refused to renew their contracts with Zytron, and the NLRC’s finding that they
themselves acquiesced to their transfer to A.C. Sicat.
By refusing to renew their contracts with Zytron, respondents effectively resigned from
the latter. Resignation is the voluntary act of employees who are compelled by personal
reasons to dissociate themselves from their employment, done with the intention of
relinquishing an office, accompanied by the act of abandonment.5
Here, it is obvious that respondents were no longer interested in continuing their
employment with Zytron. Their voluntary refusal to renew their contracts was brought
about by their desire to continue their assignment in Fonterra which could not happen in
view of the conclusion of Zytron’s contract with Fonterra. Hence, to be able to continue
with their assignment, they applied for work with A.C. Sicat with the hope that they will be
able to continue rendering services as TMRs at Fonterra since A.C. Sicat is Fonterra’s
new manpower supplier. This fact is even acknowledged by the CA in the assailed
Decision where it recognized the reason why respondents applied for work at A.C. Sicat.
The CA stated that "[t]o continuously work as merchandisers of Fonterra products,
[respondents] submitted their job applications to A.C. Sicat x x x."6 This is further
bolstered by the fact that respondents voluntarily complied with the requirements for
them to claim their corresponding monetary benefits in relation to the cessation of their
employment contract with Zytron.
In short, respondents voluntarily terminated their employment with Zytron by refusing to
renew their employment contracts with the latter, applying with A.C. Sicat, and working
as the latter’s employees, thereby abandoning their previous employment with Zytron.
Too, it is well to mention that for obvious reasons, resignation is inconsistent with illegal
dismissal. This being the case, Zytron cannot be said to have illegally dismissed
respondents, contrary to the findings of the CA.
As regards respondents’ employment with A.C. Sicat and its termination via non-renewal
of their contracts, considering that in labor-only contracting, the law creates an employer-
employee relationship between the principal and the labor-only contractor’s employee as
if such employees are directly employed by the principal employer, and considers the
contractor as merely the agent of the principal,7 it is proper to dispose of the issue on
A.C. Sicat’s status as a job contractor first before resolving the issue on the legality of the
cessation of respondents’ employment.
In this regard, We defer to the findings of the CA anent A.C. Sicat’s status as a legitimate
job contractor, seeing that it is consistent with the rules on job contracting and is
sufficiently supported by the evidence on record.
A person is considered engaged in legitimate job contracting or subcontracting if the
following conditions concur:
1.The contractor or subcontractor carries on a distinct and independent business
and undertakes to perform the job, work or service on its own account and under
its own responsibility according to its own manner and method, and free from the
control and direction of the principal in all matters connected with the
performance of the work except as to the results thereof;
2.The contractor or subcontractor has substantial capital or investment; and
3.The agreement between the principal and contractor or subcontractor assures
the contractual employees entitlement to all labor and occupational safety and
health standards, free exercise of the right to self-organization, security of tenure,
and social and welfare benefits.8
On the other hand, contracting is prohibited when the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work or service for a principal and if
any of the following elements are present, thus:
1.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
2.The contractor does not exercise the right to control over the performance of
the work of the contractual employee.9
The CA correctly found that A.C. Sicat is engaged in legitimate job contracting. It duly
noted that A.C. Sicat was able to prove its status as a legitimate job contractor for having
presented the following evidence, to wit:
1.Certificate of Business Registration;
2.Certificate of Registration with the Bureau of Internal Revenue;
3.Mayor’s Permit;
4.Certificate of Membership with the Social Security System;
5.Certificate of Registration with the Department of Labor and Employment;
6.Company Profile; and
7.Certifications issued by its clients.10
Furthermore, A.C. Sicat has substantial capital, having assets totaling 5,926,155.76 as of
December 31, 2006. Too, its Agreement with Fonterra clearly sets forth that A.C. Sicat
shall be liable for the wages and salaries of its employees or workers, including benefits,
premiums, and protection due them, as well as remittance to the proper government
entities of all withholding taxes, Social Security Service, and Medicare premiums, in
accordance with relevant laws.
The appellate court further correctly held that Fonterra’s issuance of Merchandising
Guidelines, stock monitoring and inventory forms, and promo mechanics, for compliance
and use of A.C. Sicat’s employees assigned to them, does not establish that Fonterra
exercises control over A.C. Sicat. We agree with the CA’s conclusion that these were
imposed only to ensure the effectiveness of the promotion services to be rendered by the
merchandisers as it would be risky, if not imprudent, for any company to completely
entrust the performance of the operations it has contracted out.
These sufficiently show that A.C. Sicat carries out its merchandising and promotions
business, independent of Fonterra’s business. Thus, having settled that A.C. Sicat is a
1âwphi 1
legitimate job contractor, We now determine whether the termination of respondents’
employment with the former is valid.
We agree with the findings of the CA that the termination of respondents’ employment
with the latter was simply brought about by the expiration of their employment contracts.
Foremost, respondents were fixed-term employees. As previously held by this Court,
fixed-term employment contracts are not limited, as they are under the present Labor
Code, to those by nature seasonal or for specific projects with predetermined dates of
completion; they also include those to which the parties by free choice have assigned a
specific date of termination.11 The determining factor of such contracts is not the duty of
the employee but the day certain agreed upon by the parties for the commencement and
termination of the employment relationship.12
In the case at bar, it is clear that respondents were employed by A.C. Sicat as project
employees. In their employment contract with the latter, it is clearly stated that "[A.C.
Sicat is] temporarily employing [respondents] as TMR[s] effective June 6[, 2006] under
the following terms and conditions: The need for your service being only for a specific
project, your temporary employment will be for the duration only of said project of our
client, namely to promote FONTERRA BRANDS products x x x which is expected to be
finished on or before Nov. 06, 2006."13
Respondents, by accepting the conditions of the contract with A.C. Sicat, were well
aware of and even acceded to the condition that their employment thereat will end on
said pre-determined date of termination. They cannot now argue that they were illegally
dismissed by the latter when it refused to renew their contracts after its expiration. This is
so since the non-renewal of their contracts by A.C. Sicat is a management prerogative,
and failure of respondents to prove that such was done in bad faith militates against their
contention that they were illegally dismissed. The expiration of their contract with A.C.
Sicat simply caused the natural cessation of their fixed-term employment thereat. We,
thus, see no reason to disturb the ruling of the CA in this respect.
With these, We need not belabor the other assigned errors.
IN VIEW OF THE FOREGOING, the instant Petition for Review is GRANTED. The
assailed Decision of the Court of Appeals dated September 6, 2012 and its January 11,
2013 Resolution denying reconsideration thereof, in CA-G.R. SP No. 114227, are
hereby REVERSED and SET ASIDE. The Decision of the National Labor Relations
Commission dated November 20, 2009 and its Resolution dated March 5, 2010 in NLRC
Case No. RAB IV 12-23927-06-Q are hereby REINSTATED.
SO ORDERED.
G.R. No. 177592 June 9, 2014
AVELINO S. ALILIN, TEODORO CALESA, CHARLIE HINDANG, EUTIQUIO
GINDANG, ALLAN SUNGAHID, MAXIMO LEE, JOSE G. MORA TO, REX GABILAN,
AND EUGEMA L. LAURENTE, Petitioners,
vs.
PETRON CORPORATION, Respondent.
DECISION
DEL CASTILLO, J.:
A contractor is presumed to be a labor-only contractor, unless it proves that it has the
substantial capital, investment, tools and the like. However, where the principal is the
one claiming that the contractor is a legitimate contractor, the burden of proving the
supposed status of the contractor rests on the principal.1
This Petition for Review on Certiorari2 assails the Decision3 dated May 10, 2006 of the
Court of Appeals (CA) in CA-G.R. SP No. 01291 which granted the Petition for Certiorari
filed therewith, reversed and set aside the February 18, 2005 Decision4 and August 24,
2005 Resolution5 of the National Labor Relations Commission (NLRC) in NLRC Case No.
V-000481-2003 and dismissed the Complaint for illegal dismissal filed by petitioners
Avelino Alilin (Alilin), Teodoro Calesa (Calesa), Charlie Hindang (Hindang), Eutiquio
Gindang (Gindang), Allan Sungahid (Sungahid), Maximo Lee (Lee), Jose G. Morato
(Morato), Rex Gabilan (Gabilan) and Eugema L. Laurente (Laurente) against respondent
Petron Corporation (Petron). Also assailed in this Petition is the CA Resolution6 dated
March 30, 2007 which denied petitioners’ Motion for Reconsideration7 and Supplemental
Motion for Reconsideration.8
Factual Antecedents
Petron is a domestic corporation engaged in the oil business. It owns several bulk plants
in the country for receiving, storing and distributing its petroleum products.
In 1968, Romualdo D. Gindang Contractor, which was owned and operated by
Romualdo D. Gindang (Romualdo), started recruiting laborers for fielding to Petron’s
Mandaue Bulk Plant. When Romualdo died in1989, his son Romeo D. Gindang (Romeo),
through Romeo D. Gindang Services(RDG), took over the business and continued to
provide manpower services to Petron. Petitioners were among those recruited by
Romualdo D. Gindang Contractor and RDG to work in the premises of the said bulk
plant, with the corresponding dates of hiring and work duties, to wit:
mployees Date of Hiring Duties RDG corroborated petitioners’ claim that they are regular employees of Petron. It alleged
that Petron directly supervised their activities; they performed jobs necessary and
tiquio Gindang 1968 utility/tanker receiver/barge loader/warehouseman/mixer desirable to Petron’s business; Petron provided petitioners with supplies, tools and
equipment used in their jobs; and that petitioners’ workplace since the start of their
gema L. Laurente June 1979 telephone operator/order taker
employment was at Petron’s bulk plant in Mandaue City. RDG denied liability over
odoro Calesa August 1, 1981 utility/tanker receiver/barge loader/sounder/gauger petitioners’ claim of illegal dismissal and further argued that Petron cannot capitalize on
the service contract to escape liability.
x Gabilan July 1, 1987 warehouseman/forklift driver/tanker receiver/barge loader
arlie T. Hindang September 18, 1990 utility/tanker receiver/barge loader/sounder/gauger Petron, on the other hand, maintained that RDG is an independent contractor and the
real employer of the petitioners. It was RDG which hired and selected petitioners, paid
an P. Sungahid September 18, 1990 filler/sealer/painter/tanker receiver/utility their salaries and wages, and directly supervised their work. Attesting to these were two
former employees of RDG and Petron’s Mandaue Terminal Superintendent whose joint
ximo S. Lee September 18, 1990 gasul filler/painter/utility
affidavit12 and affidavit,13 respectively, were submitted by Petron. Anent its allegation that
elino S. Alilin July 16, 1992 carpenter/driver RDG is an independent contractor, Petron presented the following documents: (1) RDG’s
Certificate of Registration issued by the Department of Labor and Employment (DOLE)
se Gerry M. Morato March 16, 1993 cylinder checker/tanker receiver/grass cutter/janitor/utility on December 27, 2000;14 (2) RDG’s Certificate of Registration of Business Name issued
by the Department of Trade and Industry (DTI) on August 18, 2000;15 (3) Contractor’s
On June 1, 2000, Petron and RDG entered into a Contract for Services9 for the period Pre-Qualification Statement;16 (4) Conflict of Interest Statement signed by Romeo
from June 1, 2000 to May 31, 2002, whereby RDG undertook to provide Petron with Gindang as manager of RDG;17 (5) RDG’s Audited Financial Statements for the years
janitorial, maintenance, tanker receiving, packaging and other utility services in its 199818 199919 and 2000;20 (6) RDG’s Mayor’s Permit for the years 200021 and 2001;22 (7)
Mandaue Bulk Plant. This contract was extended on July 31, 2002 and further extended RDG’s Certificate of Accreditation issued by DTI in October 1991;23 (8) performance
until September 30, 2002. Upon expiration thereof, no further renewal of the service bond24 and insurance policy25 posted to insure against liabilities; (9) Social Security
contract was done. System (SSS) Online Inquiry System Employee Contributions and Employee Static
Information;26 and, (10) Romeo’s affidavit27 stating that he had paid the salaries of his
Proceedings before the Labor Arbiter employees assigned to Petron for the period of November 4, 2001 to December 31,
2001. Petron argued that with the expiration of the service contract it entered with RDG,
petitioners’ term of employment has concomitantly ended. And not being the employer,
Alleging that they were barred fromcontinuing their services on October 16, 2002,
Petron cannot be held liable for petitioners’ claim of illegal dismissal.
petitioners Alilin, Calesa, Hindang, Gindang, Sungahid, Lee, Morato and Gabilan filed a
Complaint10 for illegal dismissal, underpayment of wages, damages and attorney’s fees
against Petron and RDG on November 12, 2002. Petitioner Laurente filed another In a Decision28 dated June 12, 2003,the Labor Arbiter ruled that petitioners are regular
Complaint11 for illegal dismissal, underpayment of wages, non-payment of overtime pay, employees of Petron. It found that their jobs were directly related to Petron’s business
holiday pay, premium pay for holiday, rest day, 13th month pay, service incentive leave operations; they worked under the supervision of Petron’s foreman and supervisor; and
pay, allowances, separation pay, retirement benefits, damages and attorney’s fees they were using Petron’s tools and equipment in the performance of their works. The
against Petron and RDG. The said complaints were later consolidated. Labor Arbiter also found that Petron merely utilized RDG in its attempt to hide the
existence of employee-employer relationship between it and petitioners and avoid liability
under labor laws. And there being no showing that petitioners’ dismissal was for just or
Petitioners did not deny that RDG hired them and paid their salaries. They, however,
authorized cause, the Labor Arbiter declared them to have been illegally dismissed.
claimed that the latter is a labor-only contractor, which merely acted as an agent of
Petron was thus held solidarily liable with Romeo for the payment of petitioners’
Petron, their true employer. They asseverated that their jobs, which are directly related to
separation pay (in lieu of reinstatement due to strained relations with Petron) fixed at one
Petron’s business, entailed them to work inside the premises of Petron using the
month pay for every year of service and backwages computed on the basis of the last
required equipment and tools furnished by it and that they were subject to Petron’s
salary rate at the time of dismissal. The dispositive portion of the Decision reads:
supervision. Claiming to be regular employees, petitioners thus asserted that their
WHEREFORE, premises considered, judgment is hereby rendered ordering the
dismissal allegedly in view of the expiration of the service contract between Petron and
respondents Petron Corporation and Romeo Gindang to pay the complainants as
RDG is illegal.
follows:
 1. Teodoro Calesa P 136,890.00 Petron filed a Petition for Certiorari with prayer for the issuance of a temporary
restraining order or writ of injunction before the CA. The said court resolved to grant the
2. Eutiquio Gindang P 202,800.00 injunction.33 Hence, a Writ of Preliminary Injunction34 to restrain the implementation of the
February 18, 2005 Decision and August 24, 2005 Resolution of the NLRC was issued on
3. Charlie T. Gindang P 91,260.00
March 3, 2006.
4. Allan P. Sungahid P 91,260.00
In a Decision35 dated May 10, 2006, the CA found no employer-employee relationship
5. Jose Gerry Morato P 76,050.00 between the parties. According to it, the records of the case do not show that petitioners
6. Avelino A. Alilin P 95,680.00 were directly hired, selected or employed by Petron; that their wages and other wage
related benefits were paid by the said company; and that Petron controlled the manner
7. Rex S. Gabilan P 106,470.00 by which they carried out their tasks. On the other hand, RDG was shown to be
responsible for paying petitioners’ wages. In fact, SSS records show that RDG is their
8. Maximo S. Lee P 91,260.00
employer and actually the one remitting their contributions thereto. Also, two former
9. Eugema Minao Laurente P 150,800.00 employees of RDG who were likewise assigned in the Mandaue Bulk Plant confirmed by
way of a joint affidavit that it was Romeo and his brother Alejandre Gindang who
Total award ₱1,042,470.00 supervised their work, not Petron’s foreman or supervisor. This was even corroborated
by the Terminal Superintendent of the Mandaue Bulk Plant.
The other claims are dismissed for lack of merit.
The CA also found RDG to be an independent labor contractor with sufficient
SO ORDERED. 29 capitalization and investment as shown by its financial statement for year-end 2000. In
addition, the works for which RDG was contracted to provide were menial which were
Proceedings before the National Labor Relations Commission neither directly related nor sensitive and critical to Petron’s principal business. The CA
disposed of the case as follows:
Petron continued to insist that there is no employer-employee relationship between it and
petitioners. The NLRC, however, was not convinced. In its Decision30 of February 18, WHEREFORE, the Petition is GRANTED. The February 18, 2005 Decision and the
2005, the NLRC ruled that petitioners are Petron’s regular employees because they are August 24, 2005 Resolution of the Fourth Division of the National Labor Relations
performing job assignments which are germane to its main business. Thus: Commission in NLRC Case No. V-000481-2003, entitled "Teodoro Calesa et al. vs.
Petron Corporation and R.D. Gindang Services", having been rendered with grave abuse
of discretion amounting to excess of jurisdiction, are hereby REVERSED and SET
WHEREFORE, premises considered, the Decision of the Labor Arbiter is hereby
ASIDE and a NEW ONE is entered DISMISSING private respondents’ complaint against
affirmed. It is understood that the grant of backwages shall be until finality of the
petitioner. It is so ordered.36
Decision.
Petitioners filed a Motion for Reconsideration37 insisting that Petron illegally dismissed
The appeal of respondent Petron Corporation is hereby DISMISSED for lack of merit.
them; that RDG is a labor-only contractor; and that they performed jobs which are
sensitive to Petron’s business operations. To support these, they attached to their
SO ORDERED.31 Supplemental Motion for Reconsideration38 Affidavits39 of former employees of Petron
attesting to the fact that their jobs were critical to Petron’s business operations and that
The NLRC also denied Petron’s Motion for Reconsideration in its Resolution32 of August they were carried out under the control of a Petron employee.
24, 2005.
Petitioners’ motions were, however, denied by the CA in a Resolution40 dated March 30,
Proceedings before the Court of Appeals 2007.

Hence, this Petition.

Issue
The primary issue to be resolved in this case is whether RDG is a legitimate job
contractor. Upon such finding hinges the determination of whether an employer-
employee relationship exists between the parties as to make Petron liable for petitioners’
dismissal.
Our Ruling
The Petition is impressed with merit. The conflicting findings of the Labor Arbiter and the
NLRC on one hand, and of the CA on the other, constrains the Court to review the
factual issues involved in this case.
As a general rule, the Court does not review errors that raise factual
questions.41 Nonetheless, while it is true that the determination of whether an employer-
employee relationship existed between the parties basically involves a question of fact,
the conflicting findings of the Labor Arbiter and the NLRC on one hand, and of the CA on
the other, constrains the Court to review and reevaluate such factual findings.42
Labor-only contracting, distinguished
from permissible job contracting.
The prevailing rule on labor-only contracting at the time Petron and RDG entered into the
Contract for Services in June 2000 is DOLE Department Order No. 10, series of
1997,43 the pertinent provision of which reads:
Section 4. x x x
xxxx
(f) "Labor-only contracting" prohibited under this Rule is an arrangement where the
contractor or subcontractor merely recruits, supplies or places workers to perform a job,
work or service for a principal and the following elements are present:
(i) The contractor or subcontractor does not have substantial capital or
investment to actually perform the job, work or service under its own account and
responsibility; and
(ii) 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.
xxxx
Section 6. Permissible contracting or subcontracting. - Subject to the conditions set forth
in Section 3 (d) and (e) and Section 5 hereof, the principal may engage the services of a
contractor or subcontractor for the performance of any of the following:
(a) Works or services temporarily or occasionally needed to meet abnormal
increase in the demand of products or services, provided that the normal
production capacity or regular workforce of the principal cannot reasonably cope
with such demands;
(b) Works or services temporarily or occasionally needed by the principal for
undertakings requiring expert or highly technical personnel to improve the
management or operations of an enterprise;
(c) Services temporarily needed for the introduction or promotion of new
products, only for the duration of the introductory or promotional period;
(d) Works or services not directly related or not integral to the main business or
operation of the principal, including casual work, janitorial, security, landscaping,
and messengerial services, and work not related to manufacturing processes in
manufacturing establishments;
(e) Services involving the public display of manufacturers’ products which do not
involve the act of selling or issuance of receipts or invoices;
(f) Specialized works involving the use of some particular, unusual or peculiar
skills, expertise, tools or equipment the performance of which is beyond the
competence of the regular workforce or production capacity of the principal; and
(g) Unless a reliever system is in place among the regular workforce, substitute
services for absent regular employees, provided that the period of service shall
be coextensive with the period of absence and the same is made clear to the
substitute employee at the time of engagement. The phrase "absent regular
employees" includes those who are serving suspensions or other disciplinary
measures not amounting to termination of employment meted out by the
principal, but excludes those on strike where all the formal requisites for the
legality of the strike have been prima facie complied with based on the records
filed with the National Conciliation and Mediation Board.
"Permissible job contracting or subcontracting refers to an arrangement whereby a
principal agrees to farm out with a contractor or subcontractor the performance 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. Under this arrangement, the following conditions must be met:
(a) the contractor carries on a distinct and independent business and undertakes the
contract work on his 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 his work except as to the results thereof; (b) the
contractor has substantial capital or investment; and (c) the agreement between the
principal and contractor or subcontractor assures the contractual employees’ entitlement
to all labor and occupational safety and health standards, free exercise of the right to
self-organization, security of tenure, and social welfare benefits."44 Labor-only
contracting, on the other hand, is a prohibited act, defined as "supplying workers to an
employer who 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 such employer."45 "[I]n distinguishing between prohibited labor-only
contracting and permissible job contracting, the totality of the facts and the surrounding
circumstances of the case shall be considered."46 Generally, the contractor is presumed
to be a labor-only contractor, unless such contractor overcomes the burden of proving
that it has the substantial capital, investment, tools and the like. However, where the
principal is the one claiming that the contractor is a legitimate contractor, as in the
present case, said principal has the burden of proving that supposed status.47 It is thus
incumbent upon Petron, and not upon petitioners as Petron insists,48 to prove that RDG is
an independent contractor.
Petron failed to discharge the burden of
proving that RDG is a legitimate
contractor. Hence, the presumption that
RDG is a labor-only contractor stands.
Here, the audited financial statements and other financial documents of RDG for the
years 1999 to 2001 establish that it does have sufficient working capital to meet the
requirements of its service contract. In fact, the financial evaluation conducted by Petron
of RDG’s financial statements for years 1998-2000 showed RDG to have a maximum
financial capability of Php4.807 Million as of December 1998,49 and Php1.611 Million as
of December 2000.50 Petron was able to establish RDG’s sufficient capitalization when it
entered into the service contract in 2000. The Court stresses though that this
determination of RDG’s status as an independent contractor is only with respect to its
financial capability for the period covered by the financial and other documents
presented. In other words, the evidence adduced merely proves that RDG was financially
qualified as a legitimate contractor but only with respect to its last service contract with
Petron in the year 2000.
As may be recalled, petitioners have rendered work for Petron for a long period of time
even before the service contract was executed in 2000. The respective dates on which
petitioners claim to have started working for Petron, as well as the fact that they have
rendered continuous service to it until October 16, 2002, when they were prevented from
entering the premises of Petron’s Mandaue Bulk Plant, were not at all disputed by
Petron. In fact, Petron even recognized that some of the petitioners were initially fielded
by Romualdo Gindang, the father of Romeo, through RDG’s precursor, Romualdo
D.Gindang Contractor, while the others were provided by Romeo himself when he took
over the business of his father in 1989. Hence, while Petron was able to establish that
1âwphi 1
RDG was financially capable as a legitimate contractor at the time of the execution of the
service contract in 2000, it nevertheless failed to establish the financial capability of RDG
at the time when petitioners actually started to work for Petron in 1968, 1979, 1981,
1987, 1990,1992 and 1993.
Sections 8 and 9,Rule VIII, Book III51 of the implementing rules of the Labor Code, in
force since 1976 and prior to DOLE Department Order No. 10, series of 1997,52 provide
that for job contracting to be permissible, one of the conditions that has to be met is that
the contractor must have substantial capital or investment. Petron having failed to show
that this condition was met by RDG, it can be concluded, on this score alone, that RDG
is a mere labor-only contractor. Otherwise stated, the presumption that RDG is a labor-
only contractor stands due to the failure of Petron to discharge the burden of proving the
contrary.
The Court also finds, as will be discussed below, that the works performed by petitioners
were directly related to Petron’s business, another factor which negates Petron’s claim
that RDG is an independent contractor.
Petron’s power of control over
petitioners exists in this case.
"[A] finding that a contractor is a ‘labor-only’ contractor is equivalent to declaring that
there is an employer-employee relationship between the principal and the employees of
the supposed contractor."53 In this case, the employer employee relationship between
Petron and petitioners becomes all the more apparent due to the presence of the power
of control on the part of the former over the latter.
It was held in Orozco v. The Fifth Division of the Hon. Court of Appeals54 that:
This Court has constantly adhered to the "four-fold test" to determine whether there
exists an employer-employee relationship between the parties. The four elements 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 power to control the
employee’s conduct.
Of these four elements, it is the power to control which is the most crucial and most
determinative factor, so important, in fact, that, the other elements may even be
disregarded." (Emphasis supplied)
Hence, the facts that petitioners were hired by Romeo or his father and that their salaries
were paid by them do not detract from the conclusion that there exists an employer-
employee relationship between the parties due to Petron’s power of control over the
petitioners. One manifestation of the power of control is the power to transfer employees
from one work assignment to another.55 Here, Petron could order petitioners to do work
outside of their regular "maintenance/utility" job. Also, petitioners were required to report
for work everyday at the bulk plant, observe an 8:00 a.m. to 5:00 p.m. daily work
schedule, and wear proper uniform and safety helmets as prescribed by the safety and
security measures being implemented within the bulk plant. All these imply control. In an
industry where safety is of paramount concern, control and supervision over sensitive
operations, such as those performed by the petitioners, are inevitable if not at all
necessary. Indeed, Petron deals with commodities that are highly volatile and flammable
which, if mishandled or not properly attended to, may cause serious injuries and damage
to property and the environment. Naturally, supervision by Petron is essential in every
aspect of its product handling in order not to compromise the integrity, quality and safety
of the products that it distributes to the consuming public.
Petitioners already attained regular
status as employees of Petron.
Petitioners were given various work assignments such as tanker receiving, barge
loading, sounding, gauging, warehousing, mixing, painting, carpentry, driving, gasul filling
and other utility works. Petron refers to these work assignments as menial works which
could be performed by any able-bodied individual. The Court finds, however, that while
the jobs performed by petitioners may be menial and mechanical, they are nevertheless
necessary and related to Petron’s business operations. If not for these tasks, Petron’s
products will not reach the consumers in their proper state. Indeed, petitioners’ roles
were vital inasmuch as they involve the preparation of the products that Petron will
distribute to its consumers.
Furthermore, while it may be true that any able-bodied individual can perform the tasks
assigned to petitioners, the Court notes the undisputed fact that for many years, it was
the same able-bodied individuals (petitioners) who performed the tasks for Petron. The
engagement of petitioners for the same works for a long period of time is a strong
indication that such works were indeed necessary to Petron’s business. In view of these,
and considering further that petitioners’ length of service entitles them to become regular
employees under the Labor Code, petitioners are deemed by law to have already
attained the status as Petron’s regular employees. As such, Petron could not terminate
their services on the pretext that the service contract it entered with RDG has already
lapsed. For one, and as previously discussed, such regular status had already attached
to them even before the execution of the service contract in 2000. For another, the same
does not constitute a just or authorized cause for a valid dismissal of regular employees.
In sum, the Court finds that RDG is a labor-only contractor. As such, it is considered
merely as an agent of Petron. Consequently, the employer-employee relationship which
the Court finds to exist in this case is between petitioners as employees and Petron as
their employer. Petron therefore, being the principal employer and RDG, being the labor-
only contractor, are solidarily liable for petitioners' illegal dismissal and monetary claims.56
WHEREFORE, the Petition is GRANTED. The May 10, 2006 Decision and March 30,
2007 Resolution of the Court of Appeals in CA-G.R. SP No. 01291 are REVERSED and
SET ASIDE. The February 18, 2005 Decision and August 24, 2005 Resolution of the
National Labor Relations Commission in NLRC Case No. V-000481-2003 are hereby
REINSTATED and AFFIRMED.
SO ORDERED.
G.R. No. 160278 February 8, 2012
GARDEN OF MEMORIES PARK and LIFE PLAN, INC. and PAULINA T.
REQUIÑO, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, SECOND DIVISION, LABOR
ARBITER FELIPE T. GARDUQUE II and HILARIA CRUZ, Respondents.
DECISION
MENDOZA, J.:
This is a petition for review under Rule 45 of the Rules of Court seeking nullification of
the June 11, 2003 Decision1and October 16, 2003 Resolution2 of the Court of
Appeals (CA), in CA-G.R. SP No. 64569, which affirmed the December 29, 2000
Decision3 of the National Labor Relations Commission (NLRC). The NLRC agreed with
the Labor Arbiter (L.A.) in finding that petitioner Garden of Memories Memorial Park and
Life Plan, Inc. (Garden of Memories) was the employer of respondent Hilaria Cruz (Cruz),
and that Garden of Memories and petitioner Paulina Requiño (Requiño), were jointly and
severally liable for the money claims of Cruz.
The Facts
Petitioner Garden of Memories is engaged in the business of operating a memorial park
situated at Calsadang Bago, Pateros, Metro-Manila and selling memorial Plan and
services.
Respondent Cruz, on the other hand, worked at the Garden of Memories Memorial Park
as a utility worker from August 1991 until her termination in February 1998.
On March 13, 1998, Cruz filed a complaint4 for illegal dismissal, underpayment of wages,
non-inclusion in the Social Security Services, and non-payment of legal/special holiday,
premium pay for rest day, 13th month pay and service incentive leave pay against
Garden of Memories before the Department of Labor and Employment (DOLE).
Upon motion of Garden of Memories, Requiño was impleaded as respondent on the
alleged ground that she was its service contractor and the employer of Cruz.
In her position paper,5 Cruz averred that she worked as a utility worker of Garden of
Memories with a salary of ₱115.00 per day. As a utility worker, she was in charge,
among others, of the cleaning and maintenance of the ground facilities of the memorial
park. Sometime in February 1998, she had a misunderstanding with a co-worker named
Adoracion Requiño regarding the use of a garden water hose. When the
misunderstanding came to the knowledge of Requiño, the latter instructed them to go
home and not to return anymore. After three (3) days, Cruz reported for work but she
was told that she had been replaced by another worker. She immediately reported the
matter of her replacement to the personnel manager of Garden of Memories and
manifested her protest.
Cruz argued that as a regular employee of the Garden of Memories, she could not be
terminated without just or valid cause. Also, her dismissal was violative of due process
as she was not afforded the opportunity to explain her side before her employment was
terminated.
Cruz further claimed that as a result of her illegal dismissal, she suffered sleepless
nights, serious anxiety and mental anguish.
In its Answer,6 Garden of Memories denied liability for the claims of Cruz and asserted
that she was not its employee but that of Requiño, its independent service contractor,
who maintained the park for a contract price. It insisted that there was no employer-
employee relationship between them because she was employed by its service
contractor, Victoriana Requiño (Victoriana), who was later succeeded by her daughter,
Paulina, when she (Victoriana) got sick. Garden of Memories claimed that Requiño was
a service contractor who carried an independent business and undertook the contract of
work on her own account, under her own responsibility and according to her own manner
and method, except as to the results thereof.
In her defense, Requiño prayed for the dismissal of the complaint stating that it was
Victoriana, her mother, who hired Cruz, and she merely took over the supervision and
management of the workers of the memorial park when her mother got ill. She claimed
that the ownership of the business was never transferred to her.
Requiño further stated that Cruz was not dismissed from her employment but that she
abandoned her work.7
On October 27, 1999, the LA ruled that Requiño was not an independent contractor but a
labor-only contractor and that her defense that Cruz abandoned her work was negated
by the filing of the present case.8 The LA declared both Garden of Memories and
Requiño, jointly and severally, liable for the monetary claims of Cruz, the dispositive
portion of the decision reads:
WHEREFORE, premises considered, respondents Garden of Memories Memorial [P]ark
and Life Plan, Inc. and/or Paulina Requiño are hereby ordered to jointly and severally
pay within ten (10) days from receipt hereof, the herein complainant Hilaria Cruz, the
sums of ₱ 72,072 (₱ 198 x 26 days x 14 months pay), representing her eight (8) months
separation pay and six (6) months backwages; ₱ 42,138.46, as salary differential; ₱
2,475.00, as service incentive leave pay; and ₱ 12,870.00 as 13th month pay, for three
(3) years, or a total sum of ₱ 129,555.46, plus ten percent attorney’s fee.
Complainant’s other claims including her prayer for damages are hereby denied for lack
of concrete evidence.
SO ORDERED.9
Garden of Memories and Requiño appealed the decision to the NLRC. In its December
29, 2000 Decision, the NLRC affirmed the ruling of the LA, stating that Requiño had no
substantial capital or investments in the form of tools, equipment, machineries, and work
premises, among others, for her to qualify as an independent contractor. It declared the
dismissal of Cruz illegal reasoning out that there could be no abandonment of work on
her part since Garden of Memories and Requiño failed to prove that there was a
deliberate and unjustified refusal on the part of the employee to go back to work and
resume her employment.
Garden of Memories moved for a reconsideration of the NLRC decision but it was denied
for lack of merit.10
Consequently, Garden of Memories and Requiño filed before the CA a petition for
certiorari under Rule 65 of the Rules of Court. In its June 11, 2003 Decision, the CA
dismissed the petition and affirmed the NLRC decision. Hence, this petition, where they
asserted that:
The Public Respondents National Labor Relations Commission and Court of Appeals
committed serious error, gravely abused their discretion and acted in excess of
jurisdiction when they failed to consider the provisions of Section 6 (d) of Department
Order No. 10, Series of 1997, by the Department of Labor and Employment, and then
rendered their respective erroneous rulings that:
I are deemed to have acquired expertise in matters within their respective jurisdictions, are
PETITIONER PAULINA REQUIÑO IS ENGAGED IN LABOR-ONLY
CONTRACTING.
II
THERE EXISTS AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN
RESPONDENT CRUZ AND PETITIONER GARDEN OF MEMORIES.
III
RESPONDENT HILARIA CRUZ DID NOT ABANDON HER WORK.
IV
THERE IS [NO] BASIS IN GRANTING THE MONETARY AWARDS IN FAVOR
OF THE RESPONDENT CRUZ DESPITE THE ABSENCE OF A CLEAR
PRONOUNCEMENT REGARDING THE LEGALITY OR ILLEGALITY OF HER
DISMISSAL.11
The petitioners aver that Requiño is the employer of Cruz as she (Requiño) is a
legitimate independent contractor providing maintenance work in the memorial park such
as sweeping, weeding and watering of the lawns. They insist that there was no
employer-employee relationship between Garden of Memories and Cruz. They claim that
there was a service contract between Garden of Memories and Requiño for the latter to
provide maintenance work for the former and that the "power of control," the most
important element in determining the presence of such a relationship was missing.
Furthermore, Garden of Memories alleges that it did not participate in the selection or
dismissal of Requiño’s employees.
As to the issue of dismissal, the petitioners denied the same and insist that Cruz willfully
and actually abandoned her work. They argue that Cruz’s utterances "HINDI KO
KAILANGAN ANG TRABAHO" and "HINDI KO KAILANGAN MAGTRABAHO AT HINDI
KO KAILANGAN MAKI-USAP KAY PAULINA REQUIÑO," manifested her belligerence
and disinterest in her work and that her unexplained absences later only showed that she
had no intention of returning to work.
The Court finds no merit in the petition.
At the outset, it must be stressed that the jurisdiction of this Court in a petition for review
on certiorari under Rule 45 of the Rules of Court is limited to reviewing errors of law, not
of fact. This is in line with the well-entrenched doctrine that the Court is not a trier of
facts, and this is strictly adhered to in labor cases.12 Factual findings of labor officials, who
generally accorded not only respect but even finality, and bind the Court when supported
by substantial evidence. Particularly when passed upon and upheld by the CA, they are
binding and conclusive upon the Court and will not normally be disturbed.13 This is
because it is not the function of this Court to analyze or weigh all over again the evidence
already considered in the proceedings below; or reevaluate the credibility of witnesses;
or substitute the findings of fact of an administrative tribunal which has expertise in its
special field.14
In the present case, the LA, the NLRC, and the CA are one in declaring that petitioner
Requiño was not a legitimate contractor. Echoing the decision of the LA and the NLRC,
the CA reasoned out that Requiño was not a licensed contractor and had no substantial
capital or investment in the form of tool, equipment and work premises, among others.
Section 106 of the Labor Code on contracting and subcontracting provides:
Article 106. Contractor or subcontractor. - Whenever, an employer enters into a
contract with another person for the performance of the former’s work, the employees of
the contractor and of the latter’s subcontractor shall be paid in accordance with the
provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees
in accordance with this Code, the employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent of the work performed under
the contract, in the same manner and extent that he is liable to employees directly
employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the
contracting out of labor to protect the rights of workers established under this Code. In so
prohibiting or restricting, he may make appropriate distinctions between labor-only
contracting and job contracting as well as differentiations within these types of
contracting and determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer
does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by
such persons are performing activities which are directly related to the principal business
of such employer. In such cases, the person or intermediary shall be considered merely
as an agent of the employer who shall be responsible to the workers in the same manner
and extent as if the latter were directly employed by him.[Underscoring provided]
In the same vein, Sections 8 and 9, DOLE Department Order No. 10, Series of 1997,
state that:
Sec. 8. Job contracting. – There is job contracting permissible under the Code if the
following conditions are met:
(1) The contractor carries on an independent business and undertakes the
contract work on his own account under his own responsibility according to his
own manner and method, free from the control and direction of his employer or
principal in all matters connected with the performance of the work except as to
the results thereof; and
(2) The contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are
necessary in the conduct of his business.
Sec. 9. Labor-only contracting. – (a) Any person who undertakes to supply workers to an
employer shall be deemed to be engaged in labor-only contracting where such person:
(1) Does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials; and
(2) The workers recruited and placed by such persons are performing activities
which are directly related to the principal business or operations of the employer
in which workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the
person acting as contractor shall be considered merely as an agent or
intermediary of the employer who shall be responsible to the workers in
the same manner and extent as if the latter were directly employed by
him.
(c) For cases not falling under this Article, the Secretary of Labor shall
determine through appropriate orders whether or not the contracting out
of labor is permissible in the light of the circumstances of each case and
after considering the operating needs of the employer and the rights of
the workers involved. In such case, he may prescribe conditions and
restrictions to insure the protection and welfare of the workers."
On the matter of labor-only contracting, Section 5 of Rule VIII-A of the Omnibus Rules
Implementing the Labor Code, provides:
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby
declared prohibited. For this purpose, labor-only contracting shall refer 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 related to the main business of the principal, or
ii) The contractor does not exercise the right to control over the performance of
the work of the contractual employee.
Xxxx
Thus, in determining the existence of an independent contractor relationship,
several factors may be considered, such as, but not necessarily confined to,
whether or not the contractor is carrying on an independent business; the nature
and extent of the work; the skill required; the term and duration of the
relationship; the right to assign the performance of specified pieces of work; the
control and supervision of the work to another; the employer’s power with respect
to the hiring, firing and payment of the contractor’s workers; the control of the
premises; the duty to supply premises, tools, appliances, materials and labor;
and the mode, manner and terms of payment.15
On the other hand, there is labor-only contracting where: (a) 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 (b) the workers
recruited and placed by such person are performing activities which are directly related
to the principal business of the employer.16
The Court finds no compelling reason to deviate from the findings of the tribunals
below. Both the capitalization requirement and the power of control on the part of
Requiño are wanting.
Generally, the presumption is that the contractor is a labor-only contracting unless such
contractor overcomes the burden of proving that it has the substantial capital,
investment, tools and the like.17 In the present case, though Garden of Memories is not
the contractor, it has the burden of proving that Requiño has sufficient capital or
investment since it is claiming the supposed status of Requiño as independent
contractor. 18 Garden of Memories, however, failed to adduce evidence purporting to show
that Requiño had sufficient capitalization. Neither did it show that she invested in the
form of tools, equipment, machineries, work premises and other materials which are
necessary in the completion of the service contract.
Furthermore, Requiño was not a licensed contractor. Her explanation that her business
was a mere livelihood program akin to a cottage industry provided by Garden of
Memories as part of its contribution to the upliftment of the underprivileged residing near
the memorial park proves that her capital investment was not substantial. 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.19 Obviously, Requiño is a labor-only contractor.
Another determinant factor that classifies petitioner Requiño as a labor-only contractor
was her failure to exercise the right to control the performance of the work of Cruz. This
can be gleaned from the Service Contract Agreement20between Garden of Memories and
Requiño, to wit:
xxxx
NOW THEREFORE, premises considered, the parties hereto have hereunto agreed on
the following terms and conditions:
1. That the Contractor shall undertake the maintenance of the above-mentioned
works in strict compliance with and subject to all the requirements and standards
of GMMPLPI.
2. Likewise, the Contractor shall perform all other works that may from time to
time be designated by GMMPLPI thru its authorized representatives, which work
is similar in nature to the responsibilities of a regular employee with a similar
function.
3. The contract price for the labor to be furnished or the service to be rendered
shall be THIRTY-FIVE THOUSAND (₱ 35,000.00) PESOS per calendar month,
payable as follows:
(a) Eight Thousand Seven Hundred Fifty Thousand (₱ 8,750.00) Pesos
payable on every 7th, 15th, 23rd and 30th of the month.
4. The period of this Contract shall be for Three (3) months from Feb 1, – April
30, 1998 and renewable at the option of the Management.
5. It is expressly recognized that this contract was forged for the purpose of
supplying the necessary maintenance work and in no way shall the same be
interpreted to have created an employer-employee relationship.
Xxxx [Underscoring supplied]
The requirement of the law in determining the existence of independent contractorship is
that the contractor should undertake the work on his own account, under his own
responsibility, according to his own manner and method, free from the control and
direction of the employer except as to the results thereof.21 In this case, however, the
Service Contract Agreement clearly indicates that Requiño has no discretion to
determine the means and manner by which the work is performed. Rather, the work
should be in strict compliance with, and subject to, all requirements and standards of
Garden of Memories.
Under these circumstances, there is no doubt that Requiño is engaged in labor-only
contracting, and is considered merely an agent of Garden of Memories. As such, the
workers she supplies should be considered as employees of Garden of Memories.
Consequently, the latter, as principal employer, is responsible to the employees of the
labor-only contractor as if such employees have been directly employed by it.22
Notably, Cruz was hired as a utility worker tasked to clean, sweep and water the lawn of
the memorial park. She performed activities which were necessary or desirable to its
principal trade or business. Thus, she was a regular employee of Garden of Memories
and cannot be dismissed except for just and authorized causes.23
Moreover, the Court agrees with the findings of the tribunals below that respondent Cruz
did not abandon her work but was illegally dismissed.
As the employer, Garden of Memories has the burden of proof to show the employee's
deliberate and unjustified refusal to resume his employment without any intention of
returning.24 For abandonment to exist, two factors must be present: (1) the failure to report
for work or absence without valid or justifiable reason; and (2) a clear intention to sever
employer-employee relationship, with the second element as the more determinative
factor being manifested by some overt acts.25 It has been said that abandonment of
position cannot be lightly inferred, much less legally presumed from certain equivocal
acts.26 Mere absence is not sufficient.27
In this case, no such intention to abandon her work can be discerned from the actuations
of Cruz. Neither were there overt acts which could be considered manifestations of her
desire to truly abandon her work. On the contrary, her reporting to the personnel
manager that she had been replaced and the immediate filing of the complaint before the
DOLE demonstrated a desire on her part to continue her employment with Garden of
Memories. As correctly pointed out by the CA, the filing of the case for illegal dismissal
negated the allegation of abandonment.
WHEREFORE, the petition is DENIED. The June 11, 2003 Decision of the Court of
Appeals in CA-G.R. SP No. 64569 and its October 16, 2003 Resolution are hereby
AFFIRMED.
SO ORDERED.
G.R. No. 204944-45 December 3, 2014
FUJI TELEVISION NETWORK, INC., Petitioner,
vs.
ARLENE S. ESPIRITU, Respondent.
DECISION
LEONEN, J.:
It is the burden of the employer to prove that a person whose services it pays for is an
independent contractor rather than a regular employee with or without a fixed term. That
a person has a disease does not per se entitle the employer to terminate his or her
services. Termination is the last resort. At the very least, a competent public health
authority must certify that the disease cannot be cured within six ( 6) months, even with
appropriate treatment.
We decide this petition for review1 on certiorari filed by Fuji Television Network, Inc.,
seeking the reversal of the Court of Appeals’ Decision2 dated June 25, 2012, affirming
with modification the decision3 of the National Labor Relations Commission.
In 2005, Arlene S. Espiritu ("Arlene") was engaged by Fuji Television Network, Inc.
("Fuji") asa news correspondent/producer4 "tasked to report Philippine news to Fuji
through its Manila Bureau field office."5 Arlene’s employment contract initially provided for
a term of one (1) year but was successively renewed on a yearly basis with salary
adjustment upon every renewal.6 Sometime in January 2009, Arlenewas diagnosed with
lung cancer.7She informed Fuji about her condition. In turn, the Chief of News Agency of
Fuji, Yoshiki Aoki, informed Arlene "that the company will have a problem renewing her
contract"8 since it would be difficult for her to perform her job.9 She "insisted that she was
still fit to work as certified by her attending physician."10
After several verbal and written communications,11 Arlene and Fuji signed a non-renewal
contract on May 5, 2009 where it was stipulated that her contract would no longer be
renewed after its expiration on May 31, 2009. The contract also provided that the parties
release each other from liabilities and responsibilities under the employment contract.12
In consideration of the non-renewal contract, Arlene "acknowledged receipt of the total
amount of US$18,050.00 representing her monthly salary from March 2009 to May 2009,
year-end bonus, mid-year bonus, and separation pay."13 However, Arlene affixed her
signature on the nonrenewal contract with the initials "U.P." for "under protest."14
On May 6, 2009, the day after Arlene signed the non-renewal contract, she filed a
complaint for illegal dismissal and attorney’s fees with the National Capital Region
Arbitration Branch of the National Labor Relations Commission. She alleged that she
was forced to sign the nonrenewal contract when Fuji came to know of her illness and
that Fuji withheld her salaries and other benefits for March and April 2009 when she
refused to sign.15
Arlene claimed that she was left with no other recourse but to sign the non-renewal
contract, and it was only upon signing that she was given her salaries and bonuses, in
addition to separation pay equivalent to four (4) years.16
In the decision17 dated September 10, 2009, Labor Arbiter Corazon C. Borbolla dismissed
Arlene’s complaint.18Citing Sonza v. ABS-CBN19 and applying the four-fold test, the Labor
Arbiter held that Arlene was not Fuji’s employee but an independent contractor.20
Arlene appealed before the National Labor Relations Commission. In its decision dated
March 5, 2010, the National Labor Relations Commission reversed the Labor Arbiter’s
decision.21 It held that Arlene was a regular employee with respect to the activities for
which she was employed since she continuously rendered services that were
deemednecessary and desirable to Fuji’s business.22 The National Labor Relations
Commission ordered Fuji to pay Arlene backwages, computed from the date of her illegal
dismissal.23 The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered GRANTING the
instant appeal. The Decision of the Labor Arbiter dated 19 September 2009 is hereby
REVERSED and SET ASIDE, and a new one is issued ordering respondents-appellees
to pay complainant-appellant backwages computed from the date of her illegal dismissal
until finality of this Decision.
SO ORDERED.24
Arlene and Fuji filed separat emotions for reconsideration.25 Both motions were denied by
the National Labor Relations Commission for lack of merit in the resolution dated April
26, 2010.26 From the decision of the National Labor Relations Commission, both parties
filed separate petitions for certiorari27 before the Court of Appeals. The Court of Appeals
consolidated the petitions and considered the following issues for resolution:
1) Whether or not Espirituis a regular employee or a fixed-term contractual
employee;
2) Whether or not Espiritu was illegally dismissed; and
3) Whether or not Espirituis entitled to damages and attorney’s fees.28
In the assailed decision, the Court of Appeals affirmed the National Labor
Relations Commission with the modification that Fuji immediately reinstate Arlene
to her position as News Producer without loss of seniority rights, and pay her
backwages, 13th-month pay, mid-year and year-end bonuses, sick leave and
vacation leave with pay until reinstated, moral damages, exemplary damages,
attorney’sfees, and legal interest of 12% per annum of the total monetary
awards.29 The Court of Appeals ruled that:
WHEREFORE, for lack of merit, the petition of Fuji Television Network, Inc. and Yoshiki
Aoki is DENIED and the petition of Arlene S. Espiritu is GRANTED. Accordingly, the
Decision dated March 5, 2010 of the National Labor Relations Commission, 6th Division
in NLRC NCR Case No. 05-06811-09 and its subsequent Resolution dated April 26,
2010 are hereby AFFIRMED with MODIFICATIONS, as follows:
Fuji Television, Inc. is hereby ORDERED to immediately REINSTATE Arlene S. Espiritu
to her position as News Producer without loss of seniority rights and privileges and to
pay her the following:
1. Backwages at the rate of $1,900.00 per month computed from May 5, 2009
(the date of dismissal), until reinstated;
2. 13th Month Pay at the rate of $1,900.00 per annum from the date of dismissal,
until reinstated;
3. One and a half (1 1/2) months pay or $2,850.00 as midyear bonus per year
from the date of dismissal, until reinstated;
4. One and a half (1 1/2) months pay or $2,850.00 as year-end bonus per year
from the date of dismissal, until reinstated;
5. Sick leave of 30 days with pay or $1,900.00 per year from the date of
dismissal, until reinstated; and
6. Vacation leave with pay equivalent to 14 days or $1,425.00 per annum from
date of dismissal, until reinstated.
7. The amount of ₱100,000.00 as moral damages;
8. The amount of ₱50,000.00 as exemplary damages;
9. Attorney’s fees equivalent to 10% of the total monetary awards herein stated;
and
10. Legal interest of twelve percent (12%) per annum of the total monetary
awards computed from May 5, 2009, until their full satisfaction.
The Labor Arbiter is hereby DIRECTED to make another recomputation of the above
monetary awards consistent with the above directives.
SO ORDERED.30
In arriving at the decision, the Court of Appeals held that Arlene was a regular employee
because she was engaged to perform work that was necessary or desirable in the
business of Fuji,31 and the successive renewals of her fixed-term contract resulted in
regular employment.32
According to the Court of Appeals, Sonzadoes not apply in order to establish that Arlene
was an independent contractor because she was not contracted on account of any
peculiar ability, special talent, or skill.33 The fact that everything used by Arlene in her
work was owned by Fuji negated the idea of job contracting.34
The Court of Appeals also held that Arlene was illegally dismissed because Fuji failed to
comply with the requirements of substantive and procedural due process necessary for
her dismissal since she was a regular employee.35
The Court of Appeals found that Arlene did not sign the non-renewal contract voluntarily
and that the contract was a mere subterfuge by Fuji to secure its position that it was her
choice not to renew her contract. She was left with no choice since Fuji was decided on
severing her employment.36
Fuji filed a motion for reconsideration that was denied in the resolution37 dated December
7, 2012 for failure to raise new matters.38
Aggrieved, Fuji filed this petition for review and argued that the Court of Appeals erred in
affirming with modification the National Labor Relations Commission’s decision, holding
that Arlene was a regular employee and that she was illegally dismissed. Fuji also
questioned the award of monetary claims, benefits, and damages.39
Fuji points out that Arlene was hired as a stringer, and it informed her that she would
remain one.40 She was hired as an independent contractor as defined in Sonza.41 Fuji had
no control over her work.42 The employment contracts were executed and renewed
annually upon Arlene’s insistence to which Fuji relented because she had skills that
distinguished her from ordinary employees.43 Arlene and Fuji dealt on equal terms when
they negotiated and entered into the employment contracts.44 There was no illegal
dismissal because she freely agreed not to renew her fixed-term contract as evidenced
by her e-mail correspondences with Yoshiki Aoki.45 In fact, the signing of the non-renewal
contract was not necessary to terminate her employment since "such employment
terminated upon expiration of her contract."46 Finally, Fuji had dealt with Arlene in good
faith, thus, she should not have been awarded damages.47
Fuji alleges that it did not need a permanent reporter since the news reported by Arlene
could easily be secured from other entities or from the internet.48 Fuji "never controlled
the manner by which she performed her functions."49It was Arlene who insisted that Fuji
execute yearly fixed-term contracts so that she could negotiate for annual increases in
her pay.50
Fuji points out that Arlene reported for work for only five (5) days in February 2009, three
(3) days in March 2009, and one (1) day in April 2009.51 Despite the provision in her
employment contract that sick leaves in excess of 30 days shall not be paid, Fuji paid
Arlene her entire salary for the months of March, April, and May; four(4) months of
separation pay; and a bonus for two and a half months for a total of
US$18,050.00.52 Despite having received the amount of US$18,050.00, Arlene still filed a
case for illegal dismissal.53
Fuji further argues that the circumstances would show that Arlene was not illegally
dismissed. The decision tonot renew her contract was mutually agreed upon by the
parties as indicated in Arlene’s e-mail54 dated March 11, 2009 where she consented to
the non-renewal of her contract but refused to sign anything.55 Aoki informed Arlene in an
e-mail56 dated March 12, 2009 that she did not need to sign a resignation letter and that
Fuji would pay Arlene’s salary and bonus until May 2009 as well as separation pay.57
Arlene sent an e-mail dated March 18, 2009 with her version of the non-renewal
agreement that she agreed to sign this time.58 This attached version contained a
provision that Fuji shall re-hire her if she was still interested to work for Fuji.59 For Fuji,
Arlene’s e-mail showed that she had the power to bargain.60
Fuji then posits that the Court of Appeals erred when it held that the elements of an
employer-employee relationship are present, particularly that of control;61 that Arlene’s
separation from employment upon the expiration of her contract constitutes illegal
dismissal;62 that Arlene is entitled to reinstatement;63 and that Fuji is liable to Arlene for
damages and attorney’s fees.64
This petition for review on certiorari under Rule 45 was filed on February 8, 2013.65 On
February 27, 2013, Arlene filed a manifestation66 stating that this court may not take
jurisdiction over the case since Fuji failed to authorize Corazon E. Acerden to sign the
verification.67 Fuji filed a comment on the manifestation68 on March 9, 2013.
Based on the arguments of the parties, there are procedural and substantive issues for
resolution:
I. Whether the petition for review should be dismissed as Corazon E. Acerden,
the signatory of the verification and certification of non forum shopping of the
petition, had no authority to sign the verification and certification on behalf of Fuji;
II. Whether the Court of Appeals correctly determined that no grave abuse of
discretion was committed by the National Labor Relations Commission when it
ruled that Arlene was a regular employee, not an independent contractor, and
that she was illegally dismissed; and
III. Whether the Court of Appeals properly modified the National Labor Relations
Commission’s decision by awarding reinstatement, damages, and attorney’s
fees.
The petition should be dismissed.
I
Validity of the verification and certification against forum shopping
In its comment on Arlene’s manifestation, Fuji alleges that Corazon was authorized to
sign the verification and certification of non-forum shopping because Mr. Shuji Yano was
empowered under the secretary’s certificate to delegate his authority to sign the
necessary pleadings, including the verification and certification against forum shopping.69
On the other hand, Arlene points outthat the authority given to Mr. Shuji Yano and Mr. Jin
Eto in the secretary’s certificate is only for the petition for certiorari before the Court of
Appeals.70 Fuji did not attach any board resolution authorizing Corazon orany other
person tofile a petition for review on certiorari with this court.71 Shuji Yano and Jin Eto
could not re-delegate the power thatwas delegated to them.72 In addition, the special
power of attorney executed by Shuji Yano in favor of Corazon indicated that she was
empowered to sign on behalf of Shuji Yano, and not on behalf of Fuji.73
The Rules of Court requires the
submission of verification and
certification against forum shopping
Rule 7, Section 4 of the 1997 Rules of Civil Procedure provides the requirement of
verification, while Section 5 of the same rule provides the requirement of certification
against forum shopping. These sections state:
SEC. 4. Ver if ica tio n. — Except when otherwise specifically required by law or rule,
pleadings need not be under oath, verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and that the
allegations therein are true and correct of his knowledge and belief.
A pleading required to be verifiedwhich containsa verification based on "information and
belief," or upon "knowledge, information and belief," or lacks a proper verification, shall
be treated as an unsigned pleading.
SEC. 5. Certification against forum shopping.— The plaintiff or principal party shall certify
under oath in the complaint orother initiatory pleading asserting a claim for relief or in a
sworn certification annexed thereto and simultaneously filed therewith: (a) that he has
not theretofore commenced any action or filed any claim involving the same issues in
any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such
other action or claim is pending therein; (b) if there is such other pending action or claim,
a complete statement of the present status thereof; and (c) if he should thereafter learn
that the same or similar action or claim has been filed or is pending, he shall report that
fact within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory
pleading has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere
amendment of the complaint or other initiatory pleading but shall be cause for the
dismissal of the case without prejudice, unless otherwise provided, upon motion and
after hearing. The submission of a false certification or non-compliance with any of the
undertakings therein shall constitute indirect contempt ofcourt, without prejudice to the
corresponding administrative and criminalactions. If the acts of the party or his counsel
clearly constitute willful and deliberate forum shopping, the same shall be ground for
summary dismissal with prejudice and shall constitute direct contempt, as well as a
cause for administrative sanctions.
Section 4(e) of Rule 4574 requires that petitions for review should "contain a sworn
certification against forum shopping as provided in the last paragraph of section 2, Rule
42." Section 5 of the same rule provides that failure to comply with any requirement in
Section 4 is sufficient ground to dismiss the petition.
Effects of non-compliance
Uy v. Landbank75 discussed the effect of non-compliance with regard to verification and
stated that:
[t]he requirement regarding verification of a pleading is formal, not jurisdictional. Such
requirement is simply a condition affecting the form of pleading, the non-compliance of
which does not necessarily render the pleading fatally defective. Verification is simply
intended to secure an assurance that the allegations in the pleading are true and correct
and not the product of the imagination or a matter of speculation, and that the pleading is
filed in good faith. The court may order the correction of the pleading if the verification is
lacking or act on the pleading although it is not verified, if the attending circumstances
are such that strict compliance with the rules may be dispensed with inorder that the
ends of justice may thereby be served.76 (Citations omitted)
Shipside Incorporated v. Court of Appeals77 cited the discussion in Uy and differentiated
its effect from non-compliance with the requirement of certification against forum
shopping:
On the other hand, the lack of certification against forum shopping is generally not
curable by the submission thereof after the filing of the petition. Section 5, Rule 45 of the
1997 Rules of Civil Procedure provides that the failure of the petitioner tosubmit the
required documents that should accompany the petition, including the certification
against forum shopping, shall be sufficient ground for the dismissal thereof. The same
rule applies to certifications against forum shopping signed by a person on behalf of a
corporation which are unaccompanied by proof that said signatory is authorized to file a
petition on behalf of the corporation.78 (Emphasis supplied) Effects of substantial
compliance with the requirement of verification and certification against forum shopping
Although the general rule is that failure to attach a verification and certification against
forum shopping isa ground for dismissal, there are cases where this court allowed
substantial compliance.
In Loyola v. Court of Appeals,79 petitioner Alan Loyola submitted the required certification
one day after filing his electoral protest.80 This court considered the subsequent filing as
substantial compliance since the purpose of filing the certification is to curtail forum
shopping.81
In LDP Marketing, Inc. v. Monter,82 Ma. Lourdes Dela Peña signed the verification and
certification against forum shopping but failed to attach the board resolution indicating
her authority to sign.83 In a motion for reconsideration, LDP Marketing attached the
secretary’s certificate quoting the board resolution that authorized Dela Peña.84 Citing
Shipside, this court deemed the belated submission as substantial compliance since LDP
Marketing complied with the requirement; what it failed to do was to attach proof of Dela
Peña’s authority to sign.85 Havtor Management Phils., Inc. v. National Labor Relations
Commission86 and General Milling Corporation v. National Labor Relations
Commission87 involved petitions that were dismissed for failure to attach any document
showing that the signatory on the verification and certification against forum-shopping
was authorized.88 In both cases, the secretary’s certificate was attached to the motion for
reconsideration.89 This court considered the subsequent submission of proof indicating
authority to sign as substantial compliance.90 Altres v. Empleo91 summarized the rules on
verification and certification against forum shopping in this manner:
For the guidance of the bench and bar, the Court restates in capsule form the
jurisprudential pronouncements . . . respecting non-compliance with the requirement on,
or submission of defective, verification and certification against forum shopping:
1) A distinction must be made between non-compliance with the requirement on
or submission of defective verification, and noncompliance with the requirement
on or submission of defective certification against forum shopping.
2) As to verification, non-compliance therewith or a defect therein does not
necessarily render the pleading fatally defective. The court may order its
submission or correction or act on the pleading if the attending circumstances are
such that strict compliance with the Rule may be dispensed with in order that the
ends of justice may be served thereby.
3) Verification is deemed substantially complied with when one who has ample
knowledge to swear to the truth of the allegations in the complaint or petition
signs the verification, and when matters alleged in the petition have been made
in good faith or are true and correct.
4) As to certification against forum shopping, non-compliance therewith or a
defect therein, unlike in verification, is generally not curable by its subsequent
submission or correction thereof, unless there is a need to relax the Rule on the
ground of "substantial compliance" or presence of "special circumstances or
compelling reasons."
5) The certification against forum shopping must be signed by all the plaintiffs or
petitioners in a case; otherwise, those who did not sign will be dropped as parties
to the case. Under reasonable or justifiable circumstances, however, as when all
the plaintiffs or petitioners share a common interest and invoke a common cause
of action or defense, the signature of only one of them inthe certification against
forum shopping substantially complies with the Rule.
6) Finally, the certification against forum shopping must be executed by the party-
pleader, not by his counsel. If, however, for reasonable or justifiable reasons, the
party-pleader is unable to sign, he must execute a Special Power of Attorney
designating his counsel of record to sign on his behalf.92
There was substantial compliance
by Fuji Television Network, Inc.
Being a corporation, Fuji exercises its power to sue and be sued through its board of
directors or duly authorized officers and agents. Thus, the physical act of signing the
verification and certification against forum shopping can only be done by natural persons
duly authorized either by the corporate by-laws or a board resolution.93
In its petition for review on certiorari, Fuji attached Hideaki Ota’s secretary’s
certificate,94 authorizing Shuji Yano and Jin Eto to represent and sign for and on behalf of
Fuji.95 The secretary’s certificate was duly authenticated96 by Sulpicio Confiado, Consul-
General of the Philippines in Japan. Likewise attached to the petition is the special power
of attorney executed by Shuji Yano, authorizing Corazon to sign on his behalf.97 The
verification and certification against forum shopping was signed by Corazon.98
Arlene filed the manifestation dated February 27, 2013, arguing that the petition for
review should be dismissed because Corazon was not duly authorized to sign the
verification and certification against forum shopping.
Fuji filed a comment on Arlene’s manifestation, stating that Corazon was properly
authorized to sign. On the basis of the secretary’s certificate, Shuji Yano was
empowered to delegate his authority.
Quoting the board resolution dated May 13, 2010, the secretary's certificate states:
(a) The Corporation shall file a Petition for Certiorari with the Court of Appeals,
against Philippines’ National Labor Relations Commission ("NLRC") and Arlene
S. Espiritu, pertaining to NLRC-NCR Case No. LAC 00-002697-09, RAB No. 05-
06811-00 and entitled "Arlene S. Espiritu v. Fuji Television Network, Inc./Yoshiki
Aoki", and participate in any other subsequent proceeding that may necessarily
arise therefrom, including but not limited to the filing of appeals in the appropriate
venue;
 (b) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are hereby authorized,
to verify and execute the certification against nonforum shopping which may be
necessary or required to be attached to any pleading to [sic] submitted to the
Court of Appeals; and the authority to so verify and certify for the Corporation in
favor of the said persons shall subsist and remain effective until the termination
of the said case;
....
(d) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are hereby authorized,
to represent and appear on behalf the [sic] Corporation in all stages of the [sic]
this case and in any other proceeding that may necessarily arise thereform [sic],
and to act in the Corporation’s name, place and stead to determine, propose,
agree, decide, do, and perform any and all of the following:
1. The possibility of amicable settlement or of submission to alternative
mode of dispute resolution;
2. The simplification of the issue;
3. The necessity or desirability of amendments to the pleadings;
4. The possibility of obtaining stipulation or admission of facts and
documents; and
5. Such other matters as may aid in the prompt disposition of the
action.99 (Emphasis in the original; Italics omitted)
Shuji Yano executed a special power of attorney appointing Ms. Ma. Corazon E. Acerden
and Mr. Moises A. Rollera as his attorneys-in-fact.100 The special power of attorney states:
That I, SHUJI YANO, of legal age, Japanese national, with office address at 2-4-8 Daiba,
Minato-Ku, Tokyo, 137-8088 Japan, and being the representative of Fuji TV, INc., [sic]
(evidenced by the attached Secretary’s Certificate) one of the respondents in NLRC-
NCR Case No. 05-06811-00 entitled "Arlene S. Espiritu v. Fuji Television Network,
Inc./Yoshiki Aoki", and subsequently docketed before the Court of Appeals asC.A. G.R.
S.P. No. 114867 (Consolidated with SP No. 114889) do hereby make, constitute and
appoint Ms. Ma. Corazon E. Acerden and Mr. Moises A. Rolleraas my true and lawful
attorneys-infact for me and my name, place and stead to act and represent me in the
above-mentioned case, with special power to make admission/s and stipulations and/or
to make and submit as well as to accept and approve compromise proposals upon such
terms and conditions and under such covenants as my attorney-in-fact may deem fit, and
to engage the services of Villa Judan and Cruz Law Officesas the legal counsel to
represent the Company in the Supreme Court;
The said Attorneys-in-Fact are hereby further authorized to make, sign, execute and
deliver such papers ordocuments as may be necessary in furtherance of the power thus
granted, particularly to sign and execute the verification and certification of non-forum
shopping needed to be filed.101 (Emphasis in the original)
In its comment102 on Arlene’s manifestation, Fuji argues that Shuji Yano could further
delegate his authority because the board resolution empowered him to "act in the
Corporation’s name, place and stead to determine, propose, agree, decided [sic], do and
perform any and all of the following: . . . such other matters as may aid in the prompt
disposition of the action."103 To clarify, Fuji attached a verification and certification against
forum shopping, but Arlene questions Corazon’s authority to sign. Arlene argues that the
secretary’s certificate empowered Shuji Yano to file a petition for certiorari before the
Court of Appeals, and not a petition for review before this court, and that since Shuji
Yano’s authority was delegated to him, he could not further delegate such power.
Moreover, Corazon was representing Shuji Yano in his personal capacity, and not in his
capacity as representative of Fuji.
A review of the board resolution quoted in the secretary’s certificate shows that Fuji shall
"file a Petition for Certiorari with the Court of Appeals"104 and "participate in any other
subsequent proceeding that may necessarily arise therefrom, including but not limited to
the filing of appeals in the appropriate venue,"105 and that Shuji Yano and Jin Eto are
authorized to represent Fuji "in any other proceeding that may necessarily arise
thereform [sic]."106 As pointed out by Fuji, Shuji Yano and Jin Eto were also authorized to
"act in the Corporation’s name, place and stead to determine, propose, agree, decide,
do, and perform anyand all of the following: . . . 5. Such other matters as may aid in the
prompt disposition of the action."107
Considering that the subsequent proceeding that may arise from the petition for certiorari
with the Court of Appeals is the filing of a petition for review with this court, Fuji
substantially complied with the procedural requirement.
On the issue of whether Shuji Yano validly delegated his authority to Corazon, Article
1892 of the Civil Code of the Philippines states:
ART. 1892. The agent may appoint a substitute if the principal has not prohibited him
from doing so; but he shall be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
 (2) When he was given such power, but without designating the person, and the
person appointed was notoriously incompetent or insolvent. All acts of the
substitute appointed against the prohibition of the principal shall be void.
The secretary’s certificate does not state that Shuji Yano is prohibited from appointing a
substitute. In fact, heis empowered to do acts that will aid in the resolution of this case.
This court has recognized that there are instances when officials or employees of a
corporation can sign the verification and certification against forum shopping without a
board resolution. In Cagayan Valley Drug Corporation v. CIR,108 it was held that:
In sum, we have held that the following officials or employees of the company can sign
the verification and certification without need of a board resolution: (1) the Chairperson of
the Board of Directors, (2) the President of a corporation, (3) the General Manager or
Acting General Manager, (4) Personnel Officer, and (5) an Employment Specialist in a
labor case.
While the above cases109 do not provide a complete listing of authorized signatories to the
verification and certification required by the rules, the determination of the sufficiency of
the authority was done on a case to case basis. The rationale applied in the foregoing
cases is to justify the authority of corporate officers or representatives of the corporation
to sign the verification or certificate against forum shopping, being ‘in a position to verify
the truthfulness and correctness of the allegations in the petition.’110
Corazon’s affidavit111 states that she is the "office manager and resident interpreter of the
Manila Bureau of Fuji Television Network, Inc."112 and that she has "held the position for
the last twenty-three years."113
As the office manager for 23 years,Corazon can be considered as having knowledge of
all matters in Fuji’s Manila Bureau Office and is in a position to verify "the truthfulness
and the correctness of the allegations in the Petition."114
Thus, Fuji substantially complied with the requirements of verification and certification
against forum shopping.
Before resolving the substantive issues in this case, this court will discuss the procedural
parameters of a Rule 45 petition for review in labor cases.
II
Procedural parameters of petitions for review in labor cases
Article 223 of the Labor Code115 does not provide any mode of appeal for decisions of the
National Labor Relations Commission. It merely states that "[t]he decision of the
Commission shall be final and executory after ten (10) calendar days from receipt thereof
by the parties." Being final, it is no longer appealable. However, the finality of the
National Labor Relations Commission’s decisions does not mean that there is no more
recourse for the parties.
In St. Martin Funeral Home v. National Labor Relations Commission,116 this court cited
several cases117 and rejected the notion that this court had no jurisdiction to review
decisions of the National Labor Relations Commission. It stated that this court had the
power to review the acts of the National Labor Relations Commission to see if it kept
within its jurisdiction in deciding cases and alsoas a form of check and balance.118 This
court then clarified that judicial review of National Labor Relations Commission decisions
shall be by way of a petition for certiorari under Rule 65. Citing the doctrine of hierarchy
of courts, it further ruled that such petitions shall be filed before the Court of Appeals.
From the Court of Appeals, an aggrieved party may file a petition for review on certiorari
under Rule 45.
A petition for certiorari under Rule 65 is an original action where the issue is limited to
grave abuse of discretion. As an original action, it cannot be considered as a
continuation of the proceedings of the labor tribunals.
On the other hand, a petition for review on certiorari under Rule 45 is a mode of appeal
where the issue is limited to questions of law. In labor cases, a Rule 45 petition is limited
toreviewing whether the Court of Appeals correctly determined the presence or absence
of grave abuse of discretion and deciding other jurisdictional errors of the National Labor
Relations Commission.119
In Odango v. National Labor Relations Commission,120 this court explained that a petition
for certiorari is an extraordinary remedy that is "available only and restrictively in truly
exceptional cases"121 and that its sole office "is the correction of errors of jurisdiction
including commission of grave abuse of discretion amounting to lack or excess of
jurisdiction."122 A petition for certiorari does not include a review of findings of fact since
the findings of the National Labor Relations Commission are accorded finality.123 In cases
where the aggrieved party assails the National Labor Relations Commission’s findings,
he or she must be able to show that the Commission "acted capriciously and whimsically
or in total disregard of evidence material to the controversy."124
When a decision of the Court of Appeals under a Rule 65 petition is brought to this court
by way of a petition for review under Rule 45, only questions of law may be decided
upon. As held in Meralco Industrial v. National Labor Relations Commission:125
This Court is not a trier of facts. Well-settled is the rule that the jurisdiction of this Court
ina petition for review on certiorari under Rule 45 of the Revised Rules of Court is limited
to reviewing only errors of law, not of fact, unless the factual findings complained of are
completely devoid of support from the evidence on record, or the assailed judgment is
based on a gross misapprehension of facts. Besides, factual findings of quasi-judicial
agencies like the NLRC, when affirmed by the Court of Appeals, are conclusive upon the
parties and binding on this Court.126
Career Philippines v. Serna,127 citing Montoya v. Transmed,128 is instructive on the
parameters of judicial review under Rule 45:
As a rule, only questions of law may be raised in a Rule 45 petition. In one case, we
discussed the particular parameters of a Rule 45 appeal from the CA’s Rule 65 decision
on a labor case, as follows:
In a Rule 45 review, we consider the correctness of the assailed CA decision, in contrast
with the review for jurisdictional error that we undertake under Rule 65. Furthermore,
Rule 45 limits us to the review of questions of law raised against the assailed CA
decision. In ruling for legal correctness, we have to view the CA decision in the same
context that the petition for certiorari it ruled upon was presented to it; we have to
examine the CA decision from the prism of whether it correctly determined the presence
or absence of grave abuse of discretion in the NLRC decision before it, not on the basis
of whether the NLRC decision on the merits of the case was correct. In other words, we
have to be keenly aware that the CA undertook a Rule 65 review, not a review on
appeal, of the NLRC decision challenged before it.129 (Emphasis in the original)
Justice Brion’s dissenting opinion in Abott Laboratories, PhiIippines v.
Aicaraz130 discussed that in petitions for review under Rule 45, "the Court simply
determines whether the legal correctness of the CA’s finding that the NLRC ruling . . .
had basis in fact and in Iaw."131 In this kind of petition, the proper question to be raised is,
"Did the CA correctly determine whether the NLRC committed grave abuse of discretion
in ruling on the case?"132
Justice Brion’s dissenting opinion also laid down the following guidelines:
If the NLRC ruling has basis in the evidence and the applicable law and jurisprudence,
then no grave abuse of discretion exists and the CA should so declare and, accordingly,
dismiss the petition. If grave abuse of discretion exists, then the CA must grant the
petition and nullify the NLRC ruling, entering at the same time the ruling that isjustified
under the evidence and the governing law, rules and jurisprudence. In our Rule 45
review, this Court must denythe petition if it finds that the CA correctly
acted.133 (Emphasis in the original)
These parameters shall be used in resolving the substantive issues in this petition.
III
Determination of employment status; burden of proof
In this case, there is no question thatArlene rendered services to Fuji. However, Fuji
alleges that Arlene was an independent contractor, while Arlene alleges that she was a
regular employee. To resolve this issue, we ascertain whether an employer-employee
relationship existed between Fuji and Arlene.
This court has often used the four-fold test to determine the existence of an employer-
employee relationship. Under the four-fold test, the "control test" is the most
important.134 As to how the elements in the four-fold test are proven, this court has
discussed that:
[t]here is no hard and fast rule designed to establish the aforesaid elements. Any
competent and relevant evidence to prove the relationship may be admitted.
Identification cards, cash vouchers, social security registration, appointment letters or
employment contracts, payrolls, organization charts, and personnel lists, serve as
evidence of employee status.135
If the facts of this case vis-à-vis the four-fold test show that an employer-employee
relationship existed, we then determine the status of Arlene’s employment, i.e., whether
she was a regular employee. Relative to this, we shall analyze Arlene’s fixed-term
contract and determine whether it supports her argument that she was a regular
employee, or the argument of Fuji that she was an independent contractor. We shall
scrutinize whether the nature of Arlene’s work was necessary and desirable to Fuji’s
business or whether Fuji only needed the output of her work. If the circumstances show
that Arlene’s work was necessary and desirable to Fuji, then she is presumed to be a
regular employee. The burden of proving that she was an independent contractor lies
with Fuji.
In labor cases, the quantum of proof required is substantial evidence.136 "Substantial
evidence" has been defined as "such amount of relevant evidence which a reasonable
mind might accept as adequate to justify a conclusion."137
If Arlene was a regular employee, we then determine whether she was illegally
dismissed. In complaints for illegal dismissal, the burden of proof is on the employee to
prove the fact of dismissal.138 Once the employee establishes the fact of dismissal,
supported by substantial evidence, the burden of proof shifts tothe employer to show that
there was a just or authorized cause for the dismissal and that due process was
observed.139
 IV
Whether the Court of Appeals correctly affirmed the National Labor
Relations Commission’s finding that Arlene was a regular employee
Fuji alleges that Arlene was anindependent contractor, citing Sonza v. ABS-CBN and
relying on the following facts: (1) she was hired because of her skills; (2) her salary was
US$1,900.00, which is higher than the normal rate; (3) she had the power to bargain with
her employer; and (4) her contract was for a fixed term. According to Fuji, the Court of
Appeals erred when it ruled that Arlene was forcedto sign the non-renewal agreement,
considering that she sent an email with another version of the non-renewal
agreement.140 Further, she is not entitled tomoral damages and attorney’s fees because
she acted in bad faith when she filed a labor complaint against Fuji after receiving
US$18,050.00 representing her salary and other benefits.141 Arlene argues that she was a
regular employee because Fuji had control and supervision over her work. The news
events that she covered were all based on the instructions of Fuji.142 She maintains that
the successive renewal of her employment contracts for four (4) years indicates that her
work was necessary and desirable.143 In addition, Fuji’s payment of separation pay
equivalent to one (1) month’s pay per year of service indicates that she was a regular
employee.144 To further support her argument that she was not an independent
contractor, she states that Fuji owns the laptop computer and mini-camera that she used
for work.145 Arlene also argues that Sonza is not applicable because she was a plain
reporter for Fuji, unlike Jay Sonza who was a news anchor, talk show host, and who
enjoyed a celebrity status.146 On her illness, Arlene points outthat it was not a ground for
her dismissal because her attending physician certified that she was fit to work.147
Arlene admits that she signed the non-renewal agreement with quitclaim, not because
she agreed to itsterms, but because she was not in a position to reject the non-renewal
agreement. Further, she badly needed the salary withheld for her sustenance and
medication.148 She posits that her acceptance of separation pay does not bar filing of a
complaint for illegal dismissal.149
Article 280 of the Labor Code provides that:
Art. 280. Regular and casual employment.The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or services to be performed is
seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding
paragraph; Provided, That, any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular employee
with respect to the activity in which heis employed and his employment shall continue
while such activity exist.
This provision classifies employees into regular, project, seasonal, and casual. It further
classifies regular employees into two kinds: (1) those "engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the employer";
and (2) casual employees who have "rendered at least one year of service, whether such
service is continuous or broken."
Another classification of employees, i.e., employees with fixed-term contracts, was
recognized in Brent School, Inc. v. Zamora150 where this court discussed that:
Logically, the decisive determinant in the term employment should not be the activities
that the employee is called upon to perform, but the day certain agreed upon by the
parties for the commencement and termination of their employment relationship, a day
certainbeing understood to be "that which must necessarily come, although it may not be
known when."151 (Emphasis in the original)
This court further discussed that there are employment contracts where "a fixed term is
an essential and natural appurtenance"152 such as overseas employment contracts and
officers in educational institutions.153
Distinctions among fixed-term
employees, independent contractors,
and regular employees
GMA Network, Inc. v. Pabriga154 expounded the doctrine on fixed term contracts laid
down in Brentin the following manner:
Cognizant of the possibility of abuse in the utilization of fixed term employment contracts,
we emphasized in Brentthat where from the circumstances it is apparent that the periods
have been imposed to preclude acquisition of tenurial security by the employee, they
should be struck down as contrary to public policy or morals. We thus laid down
indications or criteria under which "term employment" cannot be said to be in
circumvention of the law on security of tenure, namely:
1) The fixed period of employment was knowingly and voluntarily agreed upon by the
parties without any force, duress, or improper pressure being brought to bear upon the
employee and absent any other circumstances vitiating his consent; or
2) It satisfactorily appears that the employer and the employee dealt with each other on
more or less equal terms with no moral dominance exercised by the former or the latter.
These indications, which must be read together, make the Brent doctrine applicable only
in a few special cases wherein the employer and employee are on more or less in equal
footing in entering into the contract. The reason for this is evident: whena prospective
employee, on account of special skills or market forces, is in a position to make demands
upon the prospective employer, such prospective employee needs less protection than
the ordinary worker. Lesser limitations on the parties’ freedom of contract are thus
required for the protection of the employee.155(Citations omitted)
For as long as the guidelines laid down in Brentare satisfied, this court will recognize the
validity of the fixed-term contract.
In Labayog v. M.Y. San Biscuits, Inc.,156 this court upheld the fixedterm employment of
petitioners because from the time they were hired, they were informed that their
engagement was for a specific period. This court stated that:
[s]imply put, petitioners were notregular employees. While their employment as mixers,
packers and machine operators was necessary and desirable in the usual business
ofrespondent company, they were employed temporarily only, during periods when there
was heightened demand for production. Consequently, there could have been no illegal
dismissal when their services were terminated on expiration of their contracts. There was
even no need for notice of termination because they knew exactly when their contracts
would end. Contracts of employment for a fixed period terminate on their own at the end
of such period.
Contracts of employment for a fixed period are not unlawful. What is objectionable is the
practice of some scrupulous employers who try to circumvent the law protecting workers
from the capricious termination of employment.157 (Citation omitted)
Caparoso v. Court of Appeals158 upheld the validity of the fixed-term contract of
employment. Caparoso and Quindipan were hired as delivery men for three (3) months.
At the end of the third month, they were hired on a monthly basis. In total, they were
hired for five (5) months. They filed a complaint for illegal dismissal.159 This court ruled
that there was no evidence indicating that they were pressured into signing the fixed-
term contracts. There was likewise no proof that their employer was engaged in hiring
workers for five (5) months onlyto prevent regularization. In the absence of these facts,
the fixed-term contracts were upheld as valid.160 On the other hand, an independent
contractor is defined as:
. . . one who carries on a distinct and independent business and undertakes to perform
the job, work, or service on its own account and under one’s own responsibility according
to one’s own manner and method, free from the control and direction of the principal in
all matters connected with the performance of the work except as to the results thereof.161
In view of the "distinct and independent business" of independent contractors, no
employer-employee relationship exists between independent contractors and their
principals. Independent contractors are recognized under Article 106 of the Labor Code:
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with
another person for the performance of the former’s work, the employees of the contractor
and of the latter’s subcontractor, if any, shall be paid in accordance with the provisions of
this Code.
....
The Secretary of Labor and Employment may, by appropriate regulations, restrict or
prohibit the contracting-out of labor to protect the rights of workers established under this
Code. In so prohibiting or restricting, he may make appropriate distinctions between
labor-only contracting and job contracting as well as differentiations within these types of
contracting and determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer
does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by
such person are performing activities which are directly related to the principal business
of such employer. In such cases, the person or intermediary shall be considered merely
as an agent of the employer who shall be responsible to the workers in the same manner
and extent as if the latterwere directly employed by him.
In Department Order No. 18-A, Seriesof 2011, of the Department of Labor and
Employment, a contractor is defined as having:
Section 3. . . .
....
(c) . . . an arrangement whereby a principal agrees to put out or farm out with a
contractor 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 oroutside the premises of the principal.
This department order also states that there is a trilateral relationship in legitimate job are free to stipulate on terms and conditions in contracts as long as these "are not
contracting and subcontracting arrangements among the principal, contractor, and contrary to law, morals, good customs, public order, or public policy."175 This presupposes
employees of the contractor. There is no employer-employee relationship between the that the parties to a contract are on equal footing. Theycan bargain on terms and
contractor and principal who engages the contractor’s services, but there is an employer- conditions until they are able to reach an agreement.
employee relationship between the contractor and workers hired to accomplish the work
for the principal.162 On the other hand, contracts of employment are different and have a higher level of
regulation because they are impressed with public interest. Article XIII, Section 3 of the
Jurisprudence has recognized another kind of independent contractor: individuals with 1987 Constitution provides full protection to labor:
unique skills and talents that set them apart from ordinary employees. There is no
trilateral relationship in this case because the independent contractor himself or herself ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS
performs the work for the principal. In other words, the relationship is bilateral.
....
In Orozco v. Court of Appeals,163 Wilhelmina Orozco was a columnist for the Philippine
Daily Inquirer. This court ruled that she was an independent contractor because of her LABOR
"talent, skill, experience, and her unique viewpoint as a feminist advocate."164 In addition,
the Philippine Daily Inquirer did not have the power of control over Orozco, and she
Section 3. The State shall afford full protection to labor, local and overseas, organized
worked at her own pleasure.165
and unorganized, and promote full employment and equality of employment opportunities
for all.
Semblante v. Court of Appeals166 involved a masiador167 and a sentenciador.168 This court
ruled that "petitioners performed their functions as masiadorand sentenciador free from
It shall guarantee the rights of all workers to self-organization, collective bargaining and
the direction and control of respondents"169 and that the masiador and sentenciador
negotiations, and peaceful concerted activities, including the right to strike in accordance
"relied mainly on their ‘expertise that is characteristic of the cockfight
with law. They shall be entitled to security of tenure, humane conditions of work, and a
gambling.’"170 Hence, no employer-employee relationship existed.
living wage. They shall also participate in policy and decision-making processes affecting
their rights and benefits as may be provided by law.
Bernarte v. Philippine Basketball Association171 involved a basketball referee. This court
ruled that "a referee is an independent contractor, whose special skills and independent
The State shall promote the principle of shared responsibility between workers and
judgment are required specifically for such position and cannot possibly be controlled by
employers and the preferential use of voluntary modes in settling disputes, including
the hiring party."172
conciliation, and shall enforce their mutual compliance therewith to foster industrial
peace.
In these cases, the workers were found to be independent contractors because of their
unique skills and talents and the lack of control over the means and methods in the
The State shall regulate the relations between workers and employers, recognizing the
performance of their work.
right of labor to its just share in the fruits of production and the right of enterprises to
reasonable returns on investments, and to expansion and growth.
In other words, there are different kinds of independent contractors: those engaged in
legitimate job contracting and those who have unique skills and talents that set them
Apart from the constitutional guarantee of protection to labor, Article 1700 of the Civil
apart from ordinary employees.
Code states:
Since no employer-employee relationship exists between independent contractors and
ART. 1700. The relations between capital and labor are not merely contractual. They are
their principals, their contracts are governed by the Civil Code provisions on contracts
so impressed with public interest that labor contracts must yield to the common good.
and other applicable laws.173
Therefore, such contracts are subject to the special laws on labor unions, collective
bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor
A contract is defined as "a meeting of minds between two persons whereby one binds and similar subjects.
himself, with respect to the other, to give something or to render some service."174 Parties
In contracts of employment, the employer and the employee are not on equal footing.
Thus, it is subject to regulatory review by the labor tribunals and courts of law. The law
serves to equalize the unequal. The labor force is a special class that is constitutionally
protected because of the inequality between capital and labor.176 This presupposes that
the labor force is weak. However, the level of protection to labor should vary from case to
case; otherwise, the state might appear to be too paternalistic in affording protection to
labor. As stated in GMA Network, Inc. v. Pabriga, the ruling in Brent applies in cases
where it appears that the employer and employee are on equal footing.177 This recognizes
the fact that not all workers are weak. To reiterate the discussion in GMA Network v.
Pabriga:
The reason for this is evident: when a prospective employee, on account of special skills
or market forces, is in a position to make demands upon the prospective employer, such
prospective employee needs less protection than the ordinary worker. Lesser limitations
on the parties’ freedom of contract are thus required for the protection of the employee.178
The level of protection to labor mustbe determined on the basis of the nature of the work,
qualifications of the employee, and other relevant circumstances.
For example, a prospective employee with a bachelor’s degree cannot be said to be on
equal footing witha grocery bagger with a high school diploma. Employees who qualify
for jobs requiring special qualifications such as "[having] a Master’s degree" or "[having]
passed the licensure exam" are different from employees who qualify for jobs that require
"[being a] high school graduate; withpleasing personality." In these situations, it is clear
that those with special qualifications can bargain with the employer on equal footing.
Thus, the level of protection afforded to these employees should be different.
Fuji’s argument that Arlene was an independent contractor under a fixed-term contract is
contradictory. Employees under fixed-term contracts cannot be independent contractors
because in fixed-term contracts, an employer-employee relationship exists. The test in
this kind of contract is not the necessity and desirability of the employee’s activities, "but
the day certain agreed upon by the parties for the commencement and termination of the
employment relationship."179 For regular employees, the necessity and desirability of their
work in the usual course of the employer’s business are the determining factors. On the
other hand, independent contractors do not have employer-employee relationships with
their principals. Hence, before the status of employment can be determined, the
existence of an employer-employee relationship must be established.
The four-fold test180 can be used in determining whether an employeremployee
relationship exists. The elements of the four-fold test are the following: (1) the selection
and engagement of the employee; (2) the payment of wages; (3) the power of dismissal;
and (4) the power of control, which is the most important element.181
The "power of control" was explained by this court in Corporal, Sr. v. National Labor
Relations Commission:182
The power to control refers to the existence of the power and not necessarily to the
actual exercise thereof, nor is it essential for the employer to actually supervise the
performance of duties of the employee. It is enough that the employer has the right to
wield that power.183 (Citation omitted)
Orozco v. Court of Appeals further elucidated the meaning of "power of control" and
stated the following:
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. . . .184 (Citation omitted)
In Locsin, et al. v. Philippine Long Distance Telephone Company,185 the "power of control"
was defined as "[the] right to control not only the end to be achieved but also the means
to be used in reaching such end."186
Here, the Court of Appeals applied Sonza v. ABS-CBN and Dumpit Murillo v. Court of
Appeals187 in determining whether Arlene was an independent contractor or a regular
employee.
In deciding Sonza and Dumpit-Murillo, this court used the four-fold test. Both cases
involved newscasters and anchors. However, Sonza was held to be an independent
contractor, while Dumpit-Murillo was held to be a regular employee.
Comparison of the Sonza and
Dumpit-Murillo cases using
the four-fold test
Sonza was engaged by ABS-CBN in view of his "unique skills, talent and celebrity status
not possessed by ordinary employees."188 His work was for radio and television
programs.189 On the other hand, Dumpit-Murillo was hired by ABC as a newscaster and
co-anchor.190 Sonza’s talent fee amounted to ₱317,000.00 per month, which this court
found to be a substantial amount that indicatedhe was an independent contractor rather
than a regular employee.191Meanwhile, Dumpit-Murillo’s monthly salary was ₱28,000.00,
a very low amount compared to what Sonza received.192
Sonza was unable to prove that ABS-CBN could terminate his services apart from
breach of contract. There was no indication that he could be terminated based on just or
authorized causes under the Labor Code. In addition, ABS-CBN continued to pay his
talent fee under their agreement, even though his programs were no longer
broadcasted.193 Dumpit-Murillo was found to have beenillegally dismissed by her
employer when they did not renew her contract on her fourth year with ABC.194
In Sonza, this court ruled that ABS-CBN did not control how Sonza delivered his lines,
how he appeared on television, or how he sounded on radio.195 All that Sonza needed
was his talent.196 Further, "ABS-CBN could not terminate or discipline SONZA even if the
means and methods of performance of his work . . . did not meet ABS-CBN’s
approval."197 In Dumpit-Murillo, the duties and responsibilities enumerated in her contract
was a clear indication that ABC had control over her work.198
Application of the four-fold test
The Court of Appeals did not err when it relied on the ruling in Dumpit-Murillo and
affirmed the ruling of the National Labor Relations Commission finding that Arlene was a
regular employee. Arlene was hired by Fuji as a news producer, but there was no
showing that she was hired because of unique skills that would distinguish her from
ordinary employees. Neither was there any showing that she had a celebrity status. Her
monthly salary amounting to US$1,900.00 appears tobe a substantial sum, especially if
compared to her salary whenshe was still connected with GMA.199 Indeed, wages may
indicate whether oneis an independent contractor. Wages may also indicate that an
employee is able to bargain with the employer for better pay. However, wages should not
be the conclusive factor in determining whether one is an employee or an independent
contractor.
Fuji had the power to dismiss Arlene, as provided for in paragraph 5 of her professional
employment contract.200 Her contract also indicated that Fuji had control over her work
because she was required to work for eight (8) hours from Monday to Friday, although on
flexible time.201 Sonza was not required to work for eight (8) hours, while Dumpit-Murillo
had to be in ABC to do both on-air and off-air tasks.
On the power to control, Arlene alleged that Fuji gave her instructions on what to
report.202 Even the mode of transportation in carrying out her functions was controlled by
Fuji. Paragraph 6 of her contract states:
6. During the travel to carry out work, if there is change of place or change of place of
work, the train, bus, or public transport shall be used for the trip. If the Employee uses
the private car during the work and there is an accident the Employer shall not be
responsible for the damage, which may be caused to the Employee.203
Thus, the Court of Appeals did not err when it upheld the findings of the National Labor
Relations Commission that Arlene was not an independent contractor.
Having established that an employer-employee relationship existed between Fuji and
Arlene, the next questions for resolution are the following: Did the Court of Appeals
correctly affirm the National Labor Relations Commission that Arlene had become a
regular employee? Was the nature of Arlene’s work necessary and desirable for Fuji’s
usual course of business?
Arlene was a regular employee
with a fixed-term contract
The test for determining regular employment is whether there is a reasonable connection
between the employee’s activities and the usual business of the employer. Article 280
provides that the nature of work must be "necessary or desirable in the usual business or
trade of the employer" as the test for determining regular employment. As stated in ABS-
CBN Broadcasting Corporation v. Nazareno:204
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 incarrying on the
particular business or trade.205
However, there may be a situation where an employee’s work is necessary but is not
always desirable inthe usual course of business of the employer. In this situation, there is
no regular employment.
In San Miguel Corporation v. National Labor Relations Commission,206 Francisco de
Guzman was hired to repair furnaces at San Miguel Corporation’s Manila glass plant. He
had a separate contract for every furnace that he repaired. He filed a complaint for illegal
dismissal three (3) years after the end of his last contract.207 In ruling that de Guzman did
not attain the status of a regular employee, this court explained:
Note that the plant where private respondent was employed for only seven months is
engaged in the manufacture of glass, an integral component of the packaging and
manufacturing business of petitioner. The process of manufacturing glass requires a
furnace, which has a limited operating life. Petitioner resorted to hiring project or fixed
term employees in having said furnaces repaired since said activity is not regularly
performed. Said furnaces are to be repaired or overhauled only in case of need and after
being used continuously for a varying period of five (5) to ten (10) years. In 1990, one of
the furnaces of petitioner required repair and upgrading. This was an undertaking distinct
and separate from petitioner's business of manufacturing glass. For this purpose,
petitioner must hire workers to undertake the said repair and upgrading. . . .
....
Clearly, private respondent was hired for a specific project that was not within the regular
business of the corporation. For petitioner is not engaged in the business of repairing
furnaces. Although the activity was necessary to enable petitioner to continue
manufacturing glass, the necessity therefor arose only when a particular furnace reached
the end of its life or operating cycle. Or, as in the second undertaking, when a particular
furnace required an emergency repair. In other words, the undertakings where private
respondent was hired primarily as helper/bricklayer have specified goals and purposes
which are fulfilled once the designated work was completed. Moreover, such
undertakings were also identifiably separate and distinct from the usual, ordinary or
regular business operations of petitioner, which is glass manufacturing. These
undertakings, the duration and scope of which had been determined and made known to
private respondent at the time of his employment, clearly indicated the nature of his
employment as a project employee.208
Fuji is engaged in the business of broadcasting,209 including news programming.210 It is
based in Japan211 and has overseas offices to cover international news.212
Based on the record, Fuji’s Manila Bureau Office is a small unit213 and has a few
employees.214 As such, Arlene had to do all activities related to news gathering. Although
Fuji insists that Arlene was a stringer, it alleges that her designation was "News
Talent/Reporter/Producer."215
A news producer "plans and supervises newscast . . . [and] work[s] with reporters in the
field planning and gathering information. . . ."216 Arlene’s tasks included "[m]onitoring and
[g]etting [n]ews [s]tories, [r]eporting interviewing subjects in front of a video
camera,"217 "the timely submission of news and current events reports pertaining to the
Philippines[,] and traveling [sic] to [Fuji’s] regional office in Thailand."218 She also had to
report for work in Fuji’s office in Manila from Mondays to Fridays, eight (8) hours per
day.219 She had no equipment and had to use the facilities of Fuji to accomplish her tasks.
The Court of Appeals affirmed the finding of the National Labor Relations Commission
that the successive renewals of Arlene’s contract indicated the necessity and desirability
of her work in the usual course of Fuji’s business. Because of this, Arlene had become a
regular employee with the right to security of tenure.220 The Court of Appeals ruled that:
Here, Espiritu was engaged by Fuji as a stinger [sic] or news producer for its Manila
Bureau. She was hired for the primary purpose of news gathering and reporting to the
television network’s headquarters. Espiritu was not contracted on account of any peculiar
ability or special talent and skill that she may possess which the network desires to make
use of. Parenthetically, ifit were true that Espiritu is an independent contractor, as
claimed by Fuji, the factthat everything that she uses to perform her job is owned by the
company including the laptop computer and mini camera discounts the idea of job
contracting.221
Moreover, the Court of Appeals explained that Fuji’s argument that no employer-
employee relationship existed in view of the fixed-term contract does not persuade
because fixed-term contracts of employment are strictly construed.222 Further, the pieces
of equipment Arlene used were all owned by Fuji, showing that she was a regular
employee and not an independent contractor.223
The Court of Appeals likewise cited Dumpit-Murillo, which involved fixed-term contracts
that were successively renewed for four (4) years.224 This court held that "[t]his repeated
engagement under contract of hire is indicative of the necessity and desirability of the
petitioner’s work in private respondent ABC’s business."225
With regard to Fuji’s argument that Arlene’s contract was for a fixed term, the Court of
Appeals cited Philips Semiconductors, Inc. v. Fadriquela226 and held that where an
employee’s contract "had been continuously extended or renewed to the same position,
with the same duties and remained in the employ without any interruption,"227 then such
employee is a regular employee. The continuous renewal is a scheme to prevent
regularization. On this basis, the Court of Appeals ruled in favor of Arlene.
As stated in Price, et al. v. Innodata Corp., et al.:228
The employment status of a person is defined and prescribed by law and not by what the
parties say it should be. Equally important to consider is that a contract of employment is
impressed with public interest such that labor contracts must yield to the common good.
Thus, provisions of applicable statutes are deemed written into the contract, and the
parties are not at liberty to insulate themselves and their relationships from the impact of
labor laws and regulations by simply contracting with each other.229 (Citations omitted)
Arlene’s contract indicating a fixed term did not automatically mean that she could never
be a regular employee. This is precisely what Article 280 seeks to avoid. The ruling in
Brent remains as the exception rather than the general rule.
Further, an employee can be a regular employee with a fixed-term contract. The law
does not preclude the possibility that a regular employee may opt to have a fixed-term
contract for valid reasons. This was recognized in Brent: For as long as it was the
employee who requested, or bargained, that the contract have a "definite date of
termination," or that the fixed-term contract be freely entered into by the employer and
the employee, then the validity of the fixed-term contract will be upheld.230
V the following:
Whether the Court of Appeals correctly affirmed
the National Labor Relations Commission’s finding of illegal dismissal
Fuji argues that the Court of Appeals erred when it held that Arlene was illegally
dismissed, in view of the non-renewal contract voluntarily executed by the parties. Fuji
also argues that Arlene’s contract merely expired; hence, she was not illegally
dismissed.231
Arlene alleges that she had no choice but to sign the non-renewal contract because Fuji
withheldher salary and benefits.
With regard to this issue, the Court of Appeals held:
We cannot subscribe to Fuji’s assertion that Espiritu’s contract merely expired and that
she voluntarily agreed not to renew the same. Even a cursory perusal of the subject Non-
Renewal Contract readily shows that the same was signed by Espiritu under protest.
What is apparent is that the Non-Renewal Contract was crafted merely as a subterfuge
to secure Fuji’s position that it was Espiritu’s choice not to renew her contract.232
As a regular employee, Arlene was entitled to security of tenure and could be dismissed
only for just or authorized causes and after the observance of due process.
The right to security of tenureis guaranteed under Article XIII, Section 3 of the 1987
Constitution: ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS
....
LABOR
....
It shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance
with law. They shall be entitled to security of tenure, humane conditions of work, and a
living wage. They shall also participate in policy and decision-making processes affecting
their rights and benefits as may be provided by law.
Article 279 of the Labor Code also provides for the right to security of tenure and states
Art. 279. Security of tenure.In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause of when authorized by this
Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time of his actual reinstatement.
Thus, on the right to security of tenure, no employee shall be dismissed, unless there are
just orauthorized causes and only after compliance with procedural and substantive due
process is conducted.
Even probationary employees are entitled to the right to security of tenure. This was
explained in Philippine Daily Inquirer, Inc. v. Magtibay, Jr.:233
Within the limited legal six-month probationary period, probationary employees are still
entitled to security of tenure. It is expressly provided in the afore-quoted Article 281 that
a probationary employee may be terminated only on two grounds: (a) for just cause, or
(b) when he fails to qualify as a regular employee in accordance with reasonable
standards made known by the employer to the employee at the time of his
engagement.234 (Citation omitted)
The expiration of Arlene’s contract does not negate the finding of illegal dismissal by Fuji.
The manner by which Fuji informed Arlene that her contract would no longer be renewed
is tantamount to constructive dismissal. To make matters worse, Arlene was asked to
sign a letter of resignation prepared by Fuji.235 The existence of a fixed-term contract
should not mean that there can be no illegal dismissal. Due process must still be
observed in the pre-termination of fixed-term contracts of employment.
In addition, the Court of Appeals and the National Labor Relations Commission found
that Arlene was dismissed because of her health condition. In the non-renewal
agreement executed by Fuji and Arlene, it is stated that:
WHEREAS, the SECOND PARTY is undergoing chemotherapy which prevents her from
continuing to effectively perform her functions under the said Contract such as the timely
submission of news and current events reports pertaining to the Philippines and
travelling [sic] to the FIRST PARTY’s regional office in Thailand.236 (Emphasis supplied)
Disease as a ground for termination is recognized under Article 284 of the Labor Code:
Art. 284. Disease as ground for termination. An employer may terminate the services of
an employee who has been found to be suffering from any disease and whose continued
employment is prohibited by law or is prejudicial to his health as well as to the health of
his co-employees: Provided, That he is paid separation pay equivalent to at least one (1)
month salary or to one-half (1/2) month salary for every year of service, whichever is
greater, a fraction of at least six (6) months being considered as one (1) whole year.
Book VI, Rule 1, Section 8 of the Omnibus Rules Implementing the Labor Code provides:
Sec. 8. Disease as a ground for dismissal.– Where the employee suffers from a disease
and his continued employment is prohibited by law or prejudicial to his healthor to the
health of his coemployees, the employer shall not terminate his employment unless there
is a certification by a competent public health authority that the disease is of such nature
or at such a stage that it cannot be cured within a period of six (6) months even with
proper medical treatment. If the disease or ailment can be cured within the period, the
employer shall not terminate the employee but shall ask the employee to take a leave.
The employer shall reinstate such employee to his former position immediately upon the
restoration of his normal health.
For dismissal under Article 284 to bevalid, two requirements must be complied with: (1)
the employee’s disease cannot be cured within six (6) months and his "continued
employment is prohibited by law or prejudicial to his health as well as to the health of his
co-employees"; and (2) certification issued by a competent public health authority that
even with proper medical treatment, the disease cannot be cured within six (6)
months.237 The burden of proving compliance with these requisites is on the
employer.238 Noncompliance leads to the conclusion that the dismissal was illegal.239
There is no evidence showing that Arlene was accorded due process. After informing her
employer of her lung cancer, she was not given the chance to present medical
certificates. Fuji immediately concluded that Arlene could no longer perform her duties
because of chemotherapy. It did not ask her how her condition would affect her work.
Neither did it suggest for her to take a leave, even though she was entitled to sick leaves.
Worse, it did not present any certificate from a competent public health authority. What
Fuji did was to inform her thather contract would no longer be renewed, and when she
did not agree, her salary was withheld. Thus, the Court of Appeals correctly upheld the
finding of the National Labor Relations Commission that for failure of Fuji to comply with
due process, Arlene was illegally dismissed.240
VI
Whether the Court of Appeals properly modified
the National Labor Relations Commission’s decision
when it awarded reinstatement, damages, and attorney’s fees
The National Labor Relations Commission awarded separation pay in lieu of
reinstatement, on the ground that the filing of the complaint for illegal dismissal may have
seriously strained relations between the parties. Backwages were also awarded, to be
computed from date of dismissal until the finality of the National Labor Relations
Commission’s decision. However, only backwages were included in the dispositive
portion because the National Labor Relations Commission recognized that Arlene had
received separation pay in the amount of US$7,600.00. The Court of Appeals affirmed
the National Labor Relations Commission’s decision but modified it by awarding moral
and exemplary damages and attorney’s fees, and all other benefits Arlene was entitled to
under her contract with Fuji. The Court of Appeals also ordered reinstatement, reasoning
that the grounds when separation pay was awarded in lieu of reinstatement were not
proven.241
Article 279 of the Labor Code provides:
Art. 279. Security of tenure. In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized by this
Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time of his actual reinstatement.
(Emphasis supplied)
The Court of Appeals’ modification of the National Labor Relations Commission’s
decision was proper because the law itself provides that illegally dismissed employees
are entitled to reinstatement, backwages including allowances, and all other benefits.
On reinstatement, the National Labor Relations Commission ordered payment of
separation pay in lieu of reinstatement, reasoning "that the filing of the instant suit may
have seriously abraded the relationship of the parties so as to render reinstatement
impractical."242 The Court of Appeals reversed this and ordered reinstatement on the
ground that separation pay in lieu of reinstatement is allowed only in several instances
such as (1) when the employer has ceased operations; (2) when the employee’s position
is no longer available; (3) strained relations; and (4) a substantial period has lapsed from
date of filing to date of finality.243
On this matter, Quijano v. Mercury Drug Corp.244 is instructive:
Well-entrenched is the rule that an illegally dismissed employee is entitled to
reinstatement as a matter of right. . . .
To protect labor’s security of tenure, we emphasize that the doctrine of "strained
relations" should be strictly applied so as not to deprive an illegally dismissed employee
of his right to reinstatement. Every labor dispute almost always results in "strained
relations" and the phrase cannot be given an overarching interpretation, otherwise, an
unjustly dismissed employee can never be reinstated.245 (Citations omitted)
The Court of Appeals reasoned that strained relations are a question of fact that must be
supported by evidence.246No evidence was presented by Fuji to prove that reinstatement
was no longer feasible. Fuji did not allege that it ceased operations or that Arlene’s
position was no longer available. Nothing in the records shows that Arlene’s
reinstatement would cause an atmosphere of antagonism in the workplace. Arlene filed
her complaint in 2009. Five (5) years are not yet a substantial period247 to bar
reinstatement.
On the award of damages, Fuji argues that Arlene is notentitled to the award of damages
and attorney’s fees because the non-renewal agreement contained a quitclaim, which
Arlene signed. Quitclaims in labor cases do not bar illegally dismissed employees from
filing labor complaints and money claim. As explained by Arlene, she signed the non-
renewal agreement out of necessity. In Land and Housing Development Corporation v.
Esquillo,248 this court explained: We have heretofore explained that the reason why
quitclaims are commonly frowned upon as contrary to public policy, and why they are
held to be ineffective to bar claims for the full measure of the workers’ legal rights, is the
fact that the employer and the employee obviously do not stand on the same footing. The
employer drove the employee to the wall. The latter must have to get holdof money.
Because, out of a job, he had to face the harsh necessities of life. He thus found himself
in no position to resist money proffered. His, then, is a case of adherence, not of
choice.249
With regard to the Court of Appeals’ award of moral and exemplary damages and
attorney’s fees, this court has recognized in several cases that moral damages are
awarded "when the dismissal is attended by bad faith or fraud or constitutes an act
oppressive to labor, or is done in a manner contrary to good morals, good customs or
public policy."250 On the other hand, exemplary damages may be awarded when the
dismissal was effected "in a wanton, oppressive or malevolent manner."251
The Court of Appeals and National Labor Relations Commission found that after Arlene
had informed Fuji of her cancer, she was informed that there would be problems in
renewing her contract on account of her condition. This information caused Arlene
mental anguish, serious anxiety, and wounded feelings that can be gleaned from the
tenor of her email dated March 11, 2009. A portion of her email reads:
I WAS SO SURPRISED . . . that at a time when I am at my lowest, being sick and very
weak, you suddenly came to deliver to me the NEWS that you will no longer renew my
contract. I knew this will come but I never thought that you will be so ‘heartless’ and
1aw p++i1
insensitive to deliver that news just a month after I informed you that I am sick. I was
asking for patience and understanding and your response was not to RENEW my
contract.252
Apart from Arlene’s illegal dismissal, the manner of her dismissal was effected in an
oppressive approach withher salary and other benefits being withheld until May 5, 2009,
when she had no other choice but to sign the non-renewal contract. Thus, there was
legal basis for the Court of Appeals to modify the National Labor Relations Commission’s
decision.
However, Arlene receivedher salary for May 2009.253 Considering that the date of her
illegal dismissal was May 5, 2009,254 this amount may be subtracted from the total
monetary award. With regard to the award of attorney’s fees, Article 111 of the Labor
Code states that "[i]n cases of unlawful withholding of wages, the culpable party may be
assessed attorney’s fees equivalent to ten percent of the amount of wages recovered."
Likewise, this court has recognized that "in actions for recovery of wages or where an
employee was forced to litigate and, thus, incur expenses to protect his rights and
interest, the award of attorney’s fees is legallyand morally justifiable."255 Due to her illegal
dismissal, Arlene was forced to litigate.
In the dispositive portion of its decision, the Court of Appeals awarded legal interest at
the rate of 12% per annum.256 In view of this court’s ruling in Nacar v. Gallery
Frames,257 the legal interest shall be reducd to a rate of 6% per annum from July 1, 2013
until full satisfaction.
WHEREFORE, the petition is DENIED. The assailed Court of Appeals decision dated
June 25, 2012 is AFFIRMED with the modification that backwages shall be computed
from June 2009. Legal interest shall be computed at the rate of 6% per annum of the
total monetary award from date of finality of this decision until full satisfaction.
SO ORDERED.
G.R. No. 196426 August 15, 2011
MARTICIO SEMBLANTE and DUBRICK PILAR, Petitioners,
vs.
COURT OF APPEALS, 19th DIVISION, now SPECIAL FORMER 19th DIVISION,
GALLERA DE MANDAUE / SPOUSES VICENTE and MARIA LUISA
LOOT, Respondents.
 DECISION
VELASCO, JR., J.:
Before Us is a Petition for Review on Certiorari under Rule 45, assailing and seeking to
set aside the Decision1 and Resolution2 dated May 29, 2009 and February 23, 2010,
respectively, of the Court of Appeals (CA) in CA-G.R. SP No. 03328. The CA affirmed
the October 18, 2006 Resolution3 of the National Labor Relations Commission (NLRC),
Fourth Division (now Seventh Division), in NLRC Case No. V-000673-2004.
Petitioners Marticio Semblante (Semblante) and Dubrick Pilar (Pilar) assert that they
were hired by respondents-spouses Vicente and Maria Luisa Loot, the owners of Gallera
de Mandaue (the cockpit), as the official masiador and sentenciador, respectively, of the
cockpit sometime in 1993.
As the masiador, Semblante calls and takes the bets from the gamecock owners and
other bettors and orders the start of the cockfight. He also distributes the winnings after
deducting the arriba, or the commission for the cockpit. Meanwhile, as the sentenciador,
Pilar oversees the proper gaffing of fighting cocks, determines the fighting cocks’
physical condition and capabilities to continue the cockfight, and eventually declares the
result of the cockfight.4
For their services as masiador and sentenciador, Semblante receives PhP 2,000 per
week or a total of PhP 8,000 per month, while Pilar gets PhP 3,500 a week or PhP
14,000 per month. They work every Tuesday, Wednesday, Saturday, and Sunday every
week, excluding monthly derbies and cockfights held on special holidays. Their working
days start at 1:00 p.m. and last until 12:00 midnight, or until the early hours of the
morning depending on the needs of the cockpit. Petitioners had both been issued
employees’ identification cards5 that they wear every time they report for duty. They
alleged never having incurred any infraction and/or violation of the cockpit rules and
regulations.
On November 14, 2003, however, petitioners were denied entry into the cockpit upon the
instructions of respondents, and were informed of the termination of their services
effective that date. This prompted petitioners to file a complaint for illegal dismissal
against respondents.
In answer, respondents denied that petitioners were their employees and alleged that
they were associates of respondents’ independent contractor, Tomas Vega.
Respondents claimed that petitioners have no regular working time or day and they are
free to decide for themselves whether to report for work or not on any cockfighting day.
In times when there are few cockfights in Gallera de Mandaue, petitioners go to other
cockpits in the vicinity. Lastly, petitioners, so respondents assert, were only issued
identification cards to indicate that they were free from the normal entrance fee and to
differentiate them from the general public.6
In a Decision dated June 16, 2004, Labor Arbiter Julie C. Rendoque found petitioners to
be regular employees of respondents as they performed work that was necessary and
indispensable to the usual trade or business of respondents for a number of years. The
Labor Arbiter also ruled that petitioners were illegally dismissed, and so ordered
respondents to pay petitioners their backwages and separation pay.7
Respondents’ counsel received the Labor Arbiter’s Decision on September 14, 2004.
And within the 10-day appeal period, he filed the respondents’ appeal with the NLRC on
September 24, 2004, but without posting a cash or surety bond equivalent to the
monetary award granted by the Labor Arbiter.8
It was only on October 11, 2004 that respondents filed an appeal bond dated October 6,
2004. Hence, in a Resolution9 dated August 25, 2005, the NLRC denied the appeal for its
non-perfection.
Subsequently, however, the NLRC, acting on respondents’ Motion for Reconsideration,
reversed its Resolution on the postulate that their appeal was meritorious and the filing of
an appeal bond, albeit belated, is a substantial compliance with the rules. The NLRC
held in its Resolution of October 18, 2006 that there was no employer-employee
relationship between petitioners and respondents, respondents having no part in the
selection and engagement of petitioners, and that no separate individual contract with
respondents was ever executed by petitioners.10
Following the denial by the NLRC of their Motion for Reconsideration, per Resolution
dated January 12, 2007, petitioners went to the CA on a petition for certiorari. In support
of their petition, petitioners argued that the NLRC gravely abused its discretion in
entertaining an appeal that was not perfected in the first place. On the other hand,
respondents argued that the NLRC did not commit grave abuse of discretion, since they
eventually posted their appeal bond and that their appeal was so meritorious warranting
the relaxation of the rules in the interest of justice.11
In its Decision dated May 29, 2009, the appellate court found for respondents, noting that
referees and bet-takers in a cockfight need to have the kind of expertise that is
characteristic of the game to interpret messages conveyed by mere gestures. Hence,
petitioners are akin to independent contractors who possess unique skills, expertise, and
talent to distinguish them from ordinary employees. Further, respondents did not supply
petitioners with the tools and instrumentalities they needed to perform work. Petitioners
only needed their unique skills and talents to perform their job as masiador and
sentenciador.12 The CA held:
In some circumstances, the NLRC is allowed to be liberal in the interpretation of the rules
in deciding labor cases. In this case, the appeal bond was filed, although late. Moreover,
an exceptional circumstance obtains in the case at bench which warrants a relaxation of
the bond requirement as a condition for perfecting the appeal. This case is highly
meritorious that propels this Court not to strictly apply the rules and thus prevent a grave
injustice from being done.
As elucidated by the NLRC, the circumstances obtaining in this case wherein no actual
employer-employee exists between the petitioners and the private respondents
[constrain] the relaxation of the rules. In this regard, we find no grave abuse attributable
to the administrative body.
xxxx
Petitioners are duly licensed "masiador" and "sentenciador" in the cockpit owned by
Lucia Loot. Cockfighting, which is a part of our cultural heritage, has a peculiar set of
rules. It is a game based on the fighting ability of the game cocks in the cockpit. The
referees and bet-takers need to have that kind of expertise that is characteristic of the
cockfight gambling who can interpret the message conveyed even by mere gestures.
They ought to have the talent and skill to get the bets from numerous cockfighting
aficionados and decide which cockerel to put in the arena. They are placed in that elite
spot where they can control the game and the crowd. They are not given salaries by
cockpit owners as their compensation is based on the "arriba". In fact, they can offer their
services everywhere because they are duly licensed by the GAB. They are free to
choose which cockpit arena to enter and offer their expertise. Private respondents
cannot even control over the means and methods of the manner by which they perform
their work. In this light, they are akin to independent contractors who possess unique
skills, expertise and talent to distinguish them from ordinary employees.
Furthermore, private respondents did not supply petitioners with the tools and
instrumentalities they needed to perform their work. Petitioners only needed their talent
and skills to be a "masiador" and "sentenciador". As such, they had all the tools they
needed to perform their work. (Emphasis supplied.)
The CA refused to reconsider its Decision. Hence, petitioners came to this Court, arguing
in the main that the CA committed a reversible error in entertaining an appeal, which was
not perfected in the first place.
Indeed, the posting of a bond is indispensable to the perfection of an appeal in cases
involving monetary awards from the Decision of the Labor Arbiter.13 Article 223 of the
Labor Code provides:
Article 223. Appeal. — Decisions, awards, or orders of the Labor Arbiter are final and
executory unless appealed to the Commission by any or both parties within ten (10)
calendar days from receipt of such decisions, awards, or orders. Such appeal may be
entertained only on any of the following grounds:
xxxx
In case of a judgment involving a monetary award, an appeal by the employer may be
perfected only upon the posting of a cash or surety bond issued by a reputable bonding
company duly accredited by the Commission in the amount equivalent to the monetary
award in the judgment appealed from. (Emphasis supplied.)
Time and again, however, this Court, considering the substantial merits of the case, has
relaxed this rule on, and excused the late posting of, the appeal bond when there are
strong and compelling reasons for the liberality,14 such as the prevention of miscarriage
of justice extant in the case15 or the special circumstances in the case combined with its
legal merits or the amount and the issue involved.16 After all, technical rules cannot
prevent courts from exercising their duties to determine and settle, equitably and
completely, the rights and obligations of the parties.17This is one case where the
exception to the general rule lies.
While respondents had failed to post their bond within the 10-day period provided above,
it is evident, on the other hand, that petitioners are NOT employees of respondents,
since their relationship fails to pass muster the four-fold test of employment We have
repeatedly mentioned in countless decisions: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to
control the employee’s conduct, which is the most important element.18 1avvphi 1
As found by both the NLRC and the CA, respondents had no part in petitioners’ selection
and management;19petitioners’ compensation was paid out of the arriba (which is a
percentage deducted from the total bets), not by petitioners;20 and petitioners performed
their functions as masiador and sentenciador free from the direction and control of
respondents.21 In the conduct of their work, petitioners relied mainly on their "expertise
that is characteristic of the cockfight gambling,"22 and were never given by respondents
any tool needed for the performance of their work.23
Respondents, not being petitioners’ employers, could never have dismissed, legally or
illegally, petitioners, since respondents were without power or prerogative to do so in the
first place. The rule on the posting of an appeal bond cannot defeat the substantive rights
of respondents to be free from an unwarranted burden of answering for an illegal
dismissal for which they were never responsible. 1avvphi1
Strict implementation of the rules on appeals must give way to the factual and legal
reality that is evident from the records of this case.24 After all, the primary objective of our
laws is to dispense justice and equity, not the contrary.
WHEREFORE, We DENY this petition and AFFIRM the May 29, 2009 Decision and
February 23, 2010 Resolution of the CA, and the October 18, 2006 Resolution of the
NLRC.
SO ORDERED.
G.R. No. 138051 June 10, 2004
JOSE Y. SONZA, petitioner,
vs.
ABS-CBN BROADCASTING CORPORATION, respondent.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari1 assailing the 26 March 1999
Decision2 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 Arbiter’s 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 SONZA’s 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 SONZA’s services a monthly talent fee of ₱310,000 for the
first year and ₱317,000 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-CBN’s President, Eugenio Lopez III,
which reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May 1994 entered
into by your goodself on behalf of ABS-CBN with our company relative to our
talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events
concerning his programs and career. We consider these acts of the station
violative of the Agreement and the station as in breach thereof. In this
connection, we hereby serve notice of rescission of said Agreement at our
instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the
remaining amount stipulated in paragraph 7 of the Agreement but reserves the
right to seek recovery of the other benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y. SONZA
President and Gen. Manager4
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 SONZA’s 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 SONZA’s talent
fees and other payments due him under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter5 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 respondent’s 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 Respondent’s Position Paper with Motion to
Expunge Respondent’s Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are
affidavits of ABS-CBN’s 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 Sonza’s monthly talent
fees amount to a staggering ₱317,000. 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 respondent’s 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 Arbiter’s decision. SONZA filed a motion for reconsideration, which
the NLRC denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of
Appeals assailing the decision and resolution of the NLRC. On 26 March 1999, the Court
of Appeals rendered a Decision dismissing the case.8
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRC’s finding that no employer-employee
relationship existed between SONZA and ABS-CBN. Adopting the NLRC’s 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-appellant’s 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 stocks…with FIVE HUNDRED THOUSAND PESOS
(₱500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay based on
an amount not lower than the amount he was receiving prior to effectivity
of (the) Agreement’.
Under paragraph 9 of (the May 1994 Agreement), complainant is entitled
to a commutable travel benefit amounting to at least One Hundred Fifty
Thousand Pesos (₱150,000.00) per year.’
Thus, it is precisely because of complainant-appellant’s 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-CBN’s 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-appellant’s 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 NLRC’s
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 NLRC’S
DECISION AND REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE
RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN, DESPITE THE
WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO
SUPPORT SUCH A FINDING.14
The Court’s 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 Arbiter’s 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 employer’s 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 SONZA’s services to co-host its television and radio programs
because of SONZA’s 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
respondent’s 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-CBN’s 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.21Whatever benefits SONZA enjoyed arose from contract and not because of an
employer-employee relationship.22
SONZA’s talent fees, amounting to ₱317,000 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 SONZA’s 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 SONZA’s talent fees as long
as "AGENT and Jay Sonza shall faithfully and completely perform each condition of this
Agreement."24 Even if it suffered severe business losses, ABS-CBN could not retrench
SONZA because ABS-CBN remained obligated to pay SONZA’s 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 SONZA’s talent fees during the remaining life of the
Agreement even if ABS-CBN cancelled SONZA’s programs through no fault of SONZA.25
SONZA assails the Labor Arbiter’s 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. SONZA’s 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-
Vélez v. Corporación De Puerto Rico Para La Difusión Pública ("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 master’s 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." Alberty’s 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." Alberty’s 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 x28 (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.
SONZA’s argument is misplaced. ABS-CBN engaged SONZA’s 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-CBN’s 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 SONZA’s 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 SONZA’s 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-CBN’s 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 SONZA’s work.
SONZA claims that ABS-CBN’s power not to broadcast his shows proves ABS-CBN’s
power over the means and methods of the performance of his work. Although ABS-CBN
did have the option not to broadcast SONZA’s show, ABS-CBN was still obligated to pay
SONZA’s talent fees... Thus, even if ABS-CBN was completely dissatisfied with the
means and methods of SONZA’s 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 SONZA’s show but ABS-CBN must still pay his talent
fees in full.35
Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened as it was by the
obligation to continue paying in full SONZA’s talent fees, did not amount to control over
the means and methods of the performance of SONZA’s 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-CBN’s
approval. This proves that ABS-CBN’s control was limited only to the result of SONZA’s
work, whether to broadcast the final product or not. In either case, ABS-CBN must still
pay SONZA’s talent fees in full until the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al.,36 the United States Circuit Court of Appeals ruled
that vaudeville performers were independent contractors although the management
reserved the right to delete objectionable features in their shows. Since the management
did not have control over the manner of performance of the skills of the artists, it could
only control the result of the work by deleting objectionable features.37
SONZA further contends that ABS-CBN exercised control over his work by supplying all
equipment and crew. No doubt, ABS-CBN supplied the equipment, crew and airtime
needed to broadcast the "Mel & Jay" programs. However, the equipment, crew and
airtime are not the "tools and instrumentalities" SONZA needed to perform his job. What
SONZA principally needed were his talent or skills and the costumes necessary for his
appearance.38Even 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-CBN’s 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 SONZA’s 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-CBN’s employee because ABS-CBN
subjected him to its rules and standards of performance. SONZA claims that this
indicates ABS-CBN’s 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 Arbiter’s 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 SONZA’s agent. The Agreement expressly
states that MJMDC acted as the "AGENT" of SONZA. The records do not show that
MJMDC acted as ABS-CBN’s agent. MJMDC, which stands for Mel and Jay
Management and Development Corporation, is a corporation organized and owned by
SONZA and TIANGCO. The President and General Manager of MJMDC is SONZA
himself. It is absurd to hold that MJMDC, which is owned, controlled, headed and
managed by SONZA, acted as agent of ABS-CBN in entering into the Agreement with
SONZA, who himself is represented by MJMDC. That would make MJMDC the agent of
both ABS-CBN and SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to
managing the careers of SONZA and his broadcast partner, TIANGCO. MJMDC is not
engaged in any other business, not even job contracting. MJMDC does not have any
other function apart from acting as agent of SONZA or TIANGCO to promote their
careers in the broadcast and television industry.49
Policy Instruction No. 40
SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople
on 8 January 1979 finally settled the status of workers in the broadcast industry. Under
this policy, the types of employees in the broadcast industry are the station and program
employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the force and
effect of law. There is no legal presumption that Policy Instruction No. 40 determines
SONZA’s 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-CBN’s 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-CBN’s 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 latter’s direct testimony. x x
x shows. This is not conducive to freedom of the press.
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 arises only if
53
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
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 SONZA’s Claims
SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation
pay, service incentive leave, signing bonus, travel allowance, and amounts due under
the Employee Stock Option Plan. We agree with the findings of the Labor Arbiter and the
Court of Appeals that SONZA’s 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, SONZA’s cause of action is for breach of contract
which is intrinsically a civil dispute cognizable by the regular courts.58
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals
dated 26 March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. 164156 September 26, 2006
ABS-CBN BROADCASTING CORPORATION, petitioner,
vs.
MARLYN NAZARENO, MERLOU GERZON, JENNIFER DEIPARINE, and JOSEPHINE
LERASAN, respondents.
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals
(CA) in CA-G.R. SP No. 76582 and the Resolution denying the motion for
reconsideration thereof. The CA affirmed the Decision2 and Resolution3 of the National
Labor Relations Commission (NLRC) in NLRC Case No. V-000762-2001 (RAB Case No.
VII-10-1661-2001) which likewise affirmed, with modification, the decision of the Labor
Arbiter declaring the respondents Marlyn Nazareno, Merlou Gerzon, Jennifer Deiparine
and Josephine Lerasan as regular employees.
The Antecedents
Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the
broadcasting business and owns a network of television and radio stations, whose
operations revolve around the broadcast, transmission, and relay of telecommunication
signals. It sells and deals in or otherwise utilizes the airtime it generates from its radio
and television operations. It has a franchise as a broadcasting company, and was
likewise issued a license and authority to operate by the National Telecommunications
Commission.
Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as
production assistants (PAs) on different dates. They were assigned at the news and
public affairs, for various radio programs in the Cebu Broadcasting Station, with a
monthly compensation of P4,000. They were issued ABS-CBN employees’ identification
cards and were required to work for a minimum of eight hours a day, including Sundays
and holidays. They were made to perform the following tasks and duties:
a) Prepare, arrange airing of commercial broadcasting based on the daily operations log
and digicart of respondent ABS-CBN;
b) Coordinate, arrange personalities for air interviews;
c) Coordinate, prepare schedule of reporters for scheduled news reporting and lead-in or
incoming reports;
d) Facilitate, prepare and arrange airtime schedule for public service announcement and
complaints;
e) Assist, anchor program interview, etc; and
f) Record, log clerical reports, man based control radio.4
Their respective working hours were as follows:
Name Time No. of Hours
1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7 ½
8:00 A.M.-12:00 noon
2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7 ½
3. Joy Sanchez 1:00 P.M.-10:00 P.M.(Sunday) 9 hrs.
9:00 A.M.-6:00 P.M. (WF) 9 hrs.
4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs.5
The PAs were under the control and supervision of Assistant Station Manager Dante J.
Luzon, and News Manager Leo Lastimosa.
On December 19, 1996, petitioner and the ABS-CBN Rank-and-File Employees
executed a Collective Bargaining Agreement (CBA) to be effective during the period from
December 11, 1996 to December 11, 1999. However, since petitioner refused to
recognize PAs as part of the bargaining unit, respondents were not included to the CBA.6
On July 20, 2000, petitioner, through Dante Luzon, issued a Memorandum informing the
PAs that effective August 1, 2000, they would be assigned to non-drama programs, and
that the DYAB studio operations would be handled by the studio technician. Thus, their
revised schedule and other assignments would be as follows:
Monday – Saturday
4:30 A.M. – 8:00 A.M. – Marlene Nazareno.
Miss Nazareno will then be assigned at the Research Dept.
From 8:00 A.M. to 12:00 Exhibit "B-2"

4:30 P.M. – 12:00 MN – Jennifer Deiparine Date employed: September 15, 1995

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

5:00 A.M. – 1:00 P.M. – Jennifer Deiparine II. Merlou Gerzon - ABS-CBN Employee’s Identification Card

1:00 P.M. – 10:00 P.M. – Joy Sanchez Exhibit "C"

Respondent Gerzon was assigned as the full-time PA of the TV News Department Exhibit "D"
reporting directly to Leo Lastimosa.
Exhibit "D-1" &
On October 12, 2000, respondents filed a Complaint for Recognition of Regular
Employment Status, Underpayment of Overtime Pay, Holiday Pay, Premium Pay, Exhibit "D-2" - ABS-CBN Salary Voucher from March
Service Incentive Pay, Sick Leave Pay, and 13th Month Pay with Damages against the
petitioner before the NLRC. The Labor Arbiter directed the parties to submit their 1999 to January 2001 at P4,000.00
respective position papers. Upon respondents’ failure to file their position papers within
the reglementary period, Labor Arbiter Jose G. Gutierrez issued an Order dated April 30,
Date employed: September 1, 1995
2001, dismissing the complaint without prejudice for lack of interest to pursue the case.
Respondents received a copy of the Order on May 16, 2001.7 Instead of re-filing their
complaint with the NLRC within 10 days from May 16, 2001, they filed, on June 11, 2001, Length of service: 5 years & 10 months
an Earnest Motion to Refile Complaint with Motion to Admit Position Paper and Motion to
Submit Case For Resolution.8 The Labor Arbiter granted this motion in an Order dated III. Marlene Nazareno
June 18, 2001, and forthwith admitted the position paper of the complainants.
Respondents made the following allegations: Exhibit "E" - ABS-CBN Employee’s Identification Card

1. Complainants were engaged by respondent ABS-CBN as regular and full-time Exhibit "E" - ABS-CBN Salary Voucher from Nov.
employees for a continuous period of more than five (5) years with a monthly salary rate
of Four Thousand (P4,000.00) pesos beginning 1995 up until the filing of this complaint Exhibit "E-1" & 1999 to December 2000
on November 20, 2000.
Exhibit :E-2"
Machine copies of complainants’ ABS-CBN Employee’s Identification Card and salary
vouchers are hereto attached as follows, thus: Date employed: April 17, 1996

I. Jennifer Deiparine: Length of service: 5 years and one (1) month

Exhibit "A" - ABS-CBN Employee’s Identification Card IV. Joy Sanchez Lerasan

Exhibit "B", - ABS-CBN Salary Voucher from Nov. Exhibit "F" - ABS-CBN Employee’s Identification Card

Exhibit "B-1" & 1999 to July 2000 at P4,000.00 Exhibit "F-1" - ABS-CBN Salary Voucher from Aug.
Exhibit "F-2" & 2000 to Jan. 2001 8. Overtime pay;

Exhibit "F-3" 9. Night shift differential.

Exhibit "F-4" - Certification dated July 6, 2000 Complainants further pray of this Arbiter to declare them regular and permanent
employees of respondent ABS-CBN as a condition precedent for their admission into the
Acknowledging regular status of existing union and collective bargaining unit of respondent company where they may as
such acquire or otherwise perform their obligations thereto or enjoy the benefits due
Complainant Joy Sanchez Lerasan therefrom.

Signed by ABS-CBN Administrative Complainants pray for such other reliefs as are just and equitable under the premises.10

Officer May Kima Hife For its part, petitioner alleged in its position paper that the respondents were PAs who
basically assist in the conduct of a particular program ran by an anchor or talent. Among
their duties include monitoring and receiving incoming calls from listeners and field
Date employed: April 15, 1998
reporters and calls of news sources; generally, they perform leg work for the anchors
during a program or a particular production. They are considered in the industry as
Length of service: 3 yrs. and one (1) month9 "program employees" in that, as distinguished from regular or station employees, they
are basically engaged by the station for a particular or specific program broadcasted by
Respondents insisted that they belonged to a "work pool" from which petitioner chose the radio station. Petitioner asserted that as PAs, the complainants were issued talent
persons to be given specific assignments at its discretion, and were thus under its direct information sheets which are updated from time to time, and are thus made the basis to
supervision and control regardless of nomenclature. They prayed that judgment be determine the programs to which they shall later be called on to assist. The program
rendered in their favor, thus: assignments of complainants were as follows:

WHEREFORE, premises considered, this Honorable Arbiter is most respectfully prayed, a. Complainant Nazareno assists in the programs:
to issue an order compelling defendants to pay complainants the following:
1) Nagbagang Balita (early morning edition)
1. One Hundred Thousand Pesos (P100,000.00) each
2) Infor Hayupan
and by way of moral damages;
3) Arangkada (morning edition)
2. Minimum wage differential;
4) Nagbagang Balita (mid-day edition)
3. Thirteenth month pay differential;
b. Complainant Deiparine assists in the programs:
4. Unpaid service incentive leave benefits;
1) Unzanith
5. Sick leave;
2) Serbisyo de Arevalo
6. Holiday pay;
3) Arangkada (evening edition)
7. Premium pay;
4) Balitang K (local version) (c) Timbangan sa Hustisya

5) Abante Subu (d) Sayri ang Lungsod

6) Pangutana Lang (e) Haranahan11

c. Complainant Gerzon assists in the program: Petitioner maintained that PAs, reporters, anchors and talents occasionally "sideline" for
other programs they produce, such as drama talents in other productions. As program
1) On Mondays and Tuesdays: employees, a PA’s 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
(a) Unzanith 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
(b) Serbisyo de Arevalo
the time consumed. At any rate, petitioner claimed, as the payroll will show, respondents
were paid all salaries and benefits due them under the law.12
(c) Arangkada (evening edition)
Petitioner also alleged that the Labor Arbiter had no jurisdiction to involve the CBA and
(d) Balitang K (local version) interpret the same, especially since respondents were not covered by the bargaining
unit.
(e) Abante Sugbu
On July 30, 2001, the Labor Arbiter rendered judgment in favor of the respondents, and
(f) Pangutana Lang declared that they were regular employees of petitioner; as such, they were awarded
monetary benefits. The fallo of the decision reads:
2) On Thursdays
WHEREFORE, the foregoing premises considered, judgment is hereby rendered
Nagbagang Balita declaring the complainants regular employees of the respondent ABS-CBN Broadcasting
Corporation and directing the same respondent to pay complainants as follows:
3) On Saturdays
I - Merlou A. Gerzon P12,025.00
(a) Nagbagang Balita
II - Marlyn Nazareno 12,025.00
(b) Info Hayupan
III - Jennifer Deiparine 12,025.00
(c) Arangkada (morning edition)
IV - Josephine Sanchez Lerazan 12,025.00
(d) Nagbagang Balita (mid-day edition)
_________
4) On Sundays:
P48,100.00
(a) Siesta Serenata
plus ten (10%) percent Attorney’s Fees or a TOTAL aggregate amount of PESOS: FIFTY
(b) Sunday Chismisan TWO THOUSAND NINE HUNDRED TEN (P52,910.00).
Respondent Veneranda C. Sy is absolved from any liability. WHEREFORE, premises considered, the decision of Labor Arbiter Jose G. Gutierrez
dated 30 July 2001 is SET ASIDE and VACATED and a new one is entered ORDERING
SO ORDERED.13 respondent ABS-CBN Broadcasting Corporation, as follows:

However, the Labor Arbiter did not award money benefits as provided in the CBA on his 1. To pay complainants of their wage differentials and other benefits arising from the
belief that he had no jurisdiction to interpret and apply the agreement, as the same was CBA as of 30 September 2002 in the aggregate amount of Two Million Five Hundred,
within the jurisdiction of the Voluntary Arbitrator as provided in Article 261 of the Labor Sixty-One Thousand Nine Hundred Forty-Eight Pesos and 22/100 (P2,561,948.22),
Code. broken down as follows:

Respondents’ counsel received a copy of the decision on August 29, 2001. Respondent a. Deiparine, Jennifer - P 716,113.49
Nazareno received her copy on August 27, 2001, while the other respondents received
theirs on September 8, 2001. Respondents signed and filed their Appeal Memorandum b. Gerzon, Merlou - 716,113.49
on September 18, 2001.
c. Nazareno, Marlyn - 716,113.49
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 d. Lerazan, Josephine Sanchez - 413,607.75
Procedure. Petitioner forthwith appealed the decision to the NLRC, while respondents
filed a partial appeal. Total - P 2,561,948.22

In its appeal, petitioner alleged the following: 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:
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; a. Deiparine, Jennifer - 60 Sacks

2. That the Labor Arbiter erred in depriving the respondent of its Constitutional right to b. Gerzon, Merlou - 60 Sacks
due process of law;
c. Nazareno, Marlyn - 60 Sacks
3. That the Labor Arbiter erred in denying respondent’s Motion for Reconsideration on an
interlocutory order on the ground that the same is a prohibited pleading;
d. Lerazan, Josephine Sanchez - 53 Sacks
4. That the Labor Arbiter erred when he ruled that the complainants are regular
Total 233 Sacks; and
employees of the respondent;
3. To grant to the complainants all the benefits of the CBA after 30 September 2002.
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
SO ORDERED.15
6. That the Labor Arbiter erred when he ruled that complainants are entitled to attorney’s
fees.14 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
On November 14, 2002, the NLRC rendered judgment modifying the decision of the
Rank-and-File Employees Union, the NLRC nevertheless granted and computed
Labor Arbiter. The fallo of the decision reads:
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 petitioner’s motion for reconsideration, the CA denied the same in a
Resolution17 dated June 16, 2004.
Petitioner thus filed the instant petition for review on certiorari and raises the following
assignments of error:
1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT JURISDICTION AND
GRAVELY ERRED IN UPHOLDING THE NATIONAL LABOR RELATIONS
COMMISSION NOTWITHSTANDING THE PATENT NULLITY OF THE LATTER’S
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 party’s 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 petitioner’s own timely appeal that empowered the NLRC to reopen the case. They
assert that although the appeal was filed 10 days late, it may still be given due course in
the interest of substantial justice as an exception to the general rule that the negligence
of a counsel binds the client. On the issue of the late filing of their position paper, they
maintain that this is not a ground to strike it out from the records or dismiss the
complaint.
We find no merit in the petition.
We agree with petitioner’s contention that the perfection of an appeal within the statutory
or reglementary period is not only mandatory, but also jurisdictional; failure to do so
renders the assailed decision final and executory and deprives the appellate court or
body of the legal authority to alter the final judgment, much less entertain the appeal.
However, this Court has time and again ruled that in exceptional cases, a belated appeal
may be given due course if greater injustice may occur if an appeal is not given due
course than if the reglementary period to appeal were strictly followed.19 The Court
resorted to this extraordinary measure even at the expense of sacrificing order and
efficiency if only to serve the greater principles of substantial justice and equity.20
In the case at bar, the NLRC did not commit a grave abuse of its discretion in giving
Article 22321 of the Labor Code a liberal application to prevent the miscarriage of justice.
Technicality should not be allowed to stand in the way of equitably and completely
resolving the rights and obligations of the parties.22 We have held in a catena of cases
that technical rules are not binding in labor cases and are not to be applied strictly if the
result would be detrimental to the workingman.23
Admittedly, respondents failed to perfect their appeal from the decision of the Labor
Arbiter within the reglementary period therefor. However, petitioner perfected its appeal
within the period, and since petitioner had filed a timely appeal, the NLRC acquired
jurisdiction over the case to give due course to its appeal and render the decision of
November 14, 2002. Case law is that the party who failed to appeal from the decision of
the Labor Arbiter to the NLRC can still participate in a separate appeal timely filed by the
adverse party as the situation is considered to be of greater benefit to both parties.24
We find no merit in petitioner’s 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 petitioner’s 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 one’s 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 Arbiter’s 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
Arbiter’s 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. Respondent’s suggestion, betrays its notion of prolonging,
rather than promoting the early resolution of the case.
Although the Labor Arbiter in his Order dated 18 June 2001 which revived and re-opened
the dismissed case without prejudice beyond the ten (10) day reglementary period had
inadvertently failed to follow Section 16, Rule V, Rules Procedure of the NLRC which
states:
"A party may file a motion to revive or re-open a case dismissed without prejudice within
ten (10) calendar days from receipt of notice of the order dismissing the same; otherwise,
his only remedy shall be to re-file the case in the arbitration branch of origin."
the same is not a serious flaw that had prejudiced the respondents’ right to due process.
The case can still be refiled because it has not yet prescribed. Anyway, Article 221 of the
Labor Code provides:
"In any proceedings before the Commission or any of the Labor Arbiters, the rules of
evidence prevailing in courts of law or equity shall not be controlling and it is the spirit
and intention of this Code that the Commission and its members and the Labor Arbiters
shall use every and all reasonable means to ascertain the facts in each case speedily
and objectively and without regard to technicalities of law or procedure, all in the interest
of due process."
The admission by the Labor Arbiter of the complainants’ Position Paper and
Supplemental Manifestation which were belatedly filed just only shows that he acted
within his discretion as he is enjoined by law to use every reasonable means to ascertain
the facts in each case speedily and objectively, without regard to technicalities of law or
procedure, all in the interest of due process. Indeed, the failure to submit a position
paper on time is not a ground for striking out the paper from the records, much less for
dismissing a complaint in the case of the complainant. (University of Immaculate
Conception vs. UIC Teaching and Non-Teaching Personnel Employees, G.R. No.
144702, July 31, 2001).
"In admitting the respondents’ position paper albeit late, the Labor Arbiter acted within
her discretion. In fact, she is enjoined by law to use every reasonable means to ascertain
the facts in each case speedily and objectively, without technicalities of law or procedure,
all in the interest of due process". (Panlilio vs. NLRC, 281 SCRA 53).
The respondents were given by the Labor Arbiter the opportunity to submit position
paper. In fact, the respondents had filed their position paper on 2 April 2001. What is
material in the compliance of due process is the fact that the parties are given the
opportunities to submit position papers.
"Due process requirements are satisfied where the parties are given the opportunities to
submit position papers". (Laurence vs. NLRC, 205 SCRA 737).
Thus, the respondent was not deprived of its Constitutional right to due process of law.29
We reject, as barren of factual basis, petitioner’s contention that respondents are
considered as its talents, hence, not regular employees of the broadcasting company.
Petitioner’s 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, the Court reiterated the test in
31
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" worker’s security of tenure, however, can hardly be
doubted. In determining whether an employment should be considered regular or non-
regular, the applicable test is the reasonable connection between the particular activity
performed by the employee in relation to the usual business or trade of the employer.
The standard, supplied by the law itself, is whether the work undertaken is necessary or
desirable in the usual business or trade of the employer, a fact that can be assessed by
looking into the nature of the services rendered and its relation to the general scheme
under which the business or trade is pursued in the usual course. It is distinguished from
a specific undertaking that is divorced from the normal activities required in carrying on
the particular business or trade. But, although the work to be performed is only for a
specific project or seasonal, where a person thus engaged has been performing the job
for at least one year, even if the performance is not continuous or is merely intermittent,
the law deems the repeated and continuing need for its performance as being sufficient
to indicate the necessity or desirability of that activity to the business or trade of the
employer. The employment of such person is also then deemed to be regular with
respect to such activity and while such activity exists.34
Not considered regular employees are "project employees," the completion or
termination of which is more or less determinable at the time of employment, such as
those employed in connection with a particular construction project, and "seasonal
employees" whose employment by its nature is only desirable for a limited period of time.
Even then, any employee who has rendered at least one year of service, whether
continuous or intermittent, is deemed regular with respect to the activity performed and
while such activity actually exists.
It is of no moment that petitioner hired respondents as "talents." The fact that
respondents received pre-agreed "talent fees" instead of salaries, that they did not
observe the required office hours, and that they were permitted to join other productions
during their free time are not conclusive of the nature of their employment. Respondents
cannot be considered "talents" because they are not actors or actresses or radio
specialists or mere clerks or utility employees. They are regular employees who perform
several different duties under the control and direction of ABS-CBN executives and
supervisors.
Thus, there are two kinds of regular employees under the law: (1) those engaged to
perform activities which are necessary or desirable in the usual business or trade of the
employer; and (2) those casual employees who have rendered at least one year of
service, whether continuous or broken, with respect to the activities in which they are
employed.35
The law overrides such conditions which are prejudicial to the interest of the worker
whose weak bargaining situation necessitates the succor of the State. What determines
whether a certain employment is regular or otherwise is not the will or word of the
employer, to which the worker oftentimes acquiesces, much less the procedure of hiring
the employee or the manner of paying the salary or the actual time spent at work. It is the
character of the activities performed in relation to the particular trade or business taking
into account all the circumstances, and in some cases the length of time of its
performance and its continued existence.36 It is obvious that one year after they were
employed by petitioner, respondents became regular employees by operation of law.37
Additionally, respondents cannot be considered as project or program employees
because no evidence was presented to show that the duration and scope of the project
were determined or specified at the time of their engagement. Under existing
jurisprudence, project could refer to two distinguishable types of activities. First, a project
may refer to a particular job or undertaking that is within the regular or usual business of
the employer, but which is distinct and separate, and identifiable as such, from the other
undertakings of the company. Such job or undertaking begins and ends at determined or
determinable times. Second, the term project may also refer to a particular job or
undertaking that is not within the regular business of the employer. Such a job or
undertaking must also be identifiably separate and distinct from the ordinary or regular
business operations of the employer. The job or undertaking also begins and ends at
determined or determinable times.38
The principal test is whether or not the project employees were assigned to carry out a
specific project or undertaking, the duration and scope of which were specified at the
time the employees were engaged for that project.39
In this case, it is undisputed that respondents had continuously performed the same
activities for an average of five years. Their assigned tasks are necessary or desirable in
the usual business or trade of the petitioner. The persisting need for their services is
sufficient evidence of the necessity and indispensability of such services to petitioner’s
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.
Petitioner’s reliance on the ruling of this Court in Sonza v. ABS-CBN Broadcasting
Corporation43 is misplaced. In that case, the Court explained why Jose Sonza, a well-
known television and radio personality, was an independent contractor and not a regular
employee:
A. Selection and Engagement of Employee
ABS-CBN engaged SONZA’S services to co-host its television and radio programs
because of SONZA’S 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
respondent’s 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-CBN’s employee, there would be no need for the
parties to stipulate on benefits such as "SSS, Medicare, x x x and 13th month pay which
the law automatically incorporates into every employer-employee contract. Whatever
benefits SONZA enjoyed arose from contract and not because of an employer-employee
relationship.
SONZA’s 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 SONZA’S 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
petitioner’s 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 respondent’s ruling that private respondents as production assistants of petitioner
are regular employees. The monetary award is not considered as claims involving the
interpretation or implementation of the collective bargaining agreement. The reason why
production assistants were excluded from the said agreement is precisely because they
were classified and treated as project employees by petitioner.
As earlier stated, it is not the will or word of the employer which determines the nature of
employment of an employee but the nature of the activities performed by such employee
in relation to the particular business or trade of the employer. Considering that We have
clearly found that private respondents are regular employees of petitioner, their exclusion
from the said CBA on the misplaced belief of the parties to the said agreement that they
are project employees, is therefore not proper. Finding said private respondents as
regular employees and not as mere project employees, they must be accorded the
benefits due under the said Collective Bargaining Agreement.
A collective bargaining agreement is a contract entered into by the union representing
the employees and the employer. However, even the non-member employees are
entitled to the benefits of the contract. To accord its benefits only to members of the
union without any valid reason would constitute undue discrimination against non-
members. A collective bargaining agreement is binding on all employees of the
company. Therefore, whatever benefits are given to the other employees of ABS-CBN
must likewise be accorded to private respondents who were regular employees of
petitioner.48
Besides, only talent-artists were excluded from the CBA and not production assistants 12 Rollo, pp. 229-233.
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 13 Id. at 257-258.
construed in favor of the safety and decent living of the laborer."
14 Rollo, p. 172.
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 15 Rollo, p. 218.
AFFIRMED. Costs against petitioner.
16 385 Phil. 93 (2000).
SO ORDERED.
17 Rollo, p. 36.
Panganiban, C.J., Chairperson, Ynares-Santiago, Austria-Martinez, Chico-Nazario,
J.J., concur. 18 Id. at 58-59.

19Mabuhay Development Industries v. National Labor Relations Commission,

351 Phil. 227, 234-235 (1998), citing City Fair Corporation v. National Labor
Relations Commission, 313 Phil. 464, 465 (1995).
Footnotes
20 Sublay v. National Labor Relations Commission, 381 Phil. 198, 204 (2000).
1Penned by Associate Justice Mariano C. Del Castillo, with Associate Justices
Rodrigo V. Cosico and Rosalinda Asuncion-Vicente, concurring, rollo, pp. 9-34. 21
Art. 223. APPEAL
2 Id. at 170-219. Decisions, awards, or orders of the Labor Arbiter are final and executory unless
appealed to the Commission by any or both parties within ten (10) calendar days
3 Id. at 220-227. from receipt of such decisions, awards, or orders. x x x
4 Rollo, p. 180. 22Buenaobra v. Lim King Guan, G.R. No. 150147, January 20, 2004, 420 SCRA
359, 364 (2004).
5 Id. at 183.
Huntington Steel Products, Inc. v. National Labor Relations Commission, G.R.
23
6 Id. at 213. No. 158311, November 14, 2004, 442 SCRA 551, 560.

7 Id. at 174. See Sandol v. Pilipinas Kao, Inc., et al., G.R. No. 87530, June 13, 1990, 186
24

SCRA 491.
8 Id. at 248-250.
25 Panlilio v. National Labor Relations Commission, 346 Phil. 30, 35-36 (1997).
9 CA rollo, pp. 128-129.
26U.I.C. v. U.I.C. Teaching & Non-Teaching Personnel and Employees Union,
10 Id. at 138-139. 414 Phil. 522, 533 (2001).

11 See CA rollo, pp. 7-8. Mayon Hotel & Restaurant v. Adana, G.R. No. 157634, May 16, 2005, 458
27

SCRA 609, 629-630.

28 Philips Semiconductors (Phils.), Inc. v. Fadriquela, Infra note 35, at 418.
29 CA rollo, pp. 51-52.
Lopez v. National Steel Corporation, G.R. No. 149674, February 16, 2004, 423
30
SCRA 109, 113.
31 G.R. No. 164736, October 14, 2005, 473 SCRA 189.
32Id. at 203-204, citing Abasolo v. National Labor Relations Commission, 400
Phil. 86, 103 (2000), De Leon v. National Labor Relations Commission, G.R. No.
70705, August 21, 1989, 176 SCRA 615, 621.
33 451 Phil. 254 (2003).
34 Id. at 260-261.
35Philips Semiconductors (Phils.), Inc. v. Fadriquela, G.R. No. 141717, April 14,
2004, 427 SCRA 408, 419.
36
De Leon v. National Labor Relations Commission, supra note 32, at 624.
37Kimberly Independent Labor Union for Solidarity v. Drilon, et al., G.R. Nos.
77629 and 78791, May 9, 1990, 185 SCRA 190, 204.
38 Villa v. National Labor Relations Commission, 348 Phil. 116, 143 (1998).
ALU-TUCP, et al. v. National Labor Relations Commission, G.R. No. 109902,
39
August 2, 1994, 234 SCRA 678, 685.
40 Samson v. National Labor Relations Commission, 323 Phil 135, 148 (1996).
41Tomas Lao Construction v. National Labor Relations Commission, 344 Phil.
268, 279 (1997).
42Section 2.2 of Department Order No. 19, cited in Integrated Contractor and
Plumbing Works, Inc. v. National Labor Relations Commission, G.R. No. 152427,
August 9, 2005, 466 SCRA 265, 273-274 and Samson v. National Labor
Relations Commission, supra note 40, at 147.
43 G.R. No. 138051, June 10, 2004, 431 SCRA 538.
44 Id. at 595-596.
45David Albert Pierce, Esq., "Management-side employment law advice for
entertainment industry" with subtitle "Classification of Workers: Independent
Contractor versus
Employee" http://www.piercegorman.com/Classification_of_Workers.html (visited
July 14, 2006).
46 Id.
47Cinderella Marketing Corporation v. National Labor Relations Commission,
Second Division, G.R. Nos. 112535 and 113758, June 22, 1998, 291 SCRA 91,
96.
48 Rollo, pp. 121-122.
G.R. No. 84484 November 15, 1989
INSULAR LIFE ASSURANCE CO., LTD., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO, respondents.
Tirol & Tirol for petitioner.
Enojas, Defensor & Teodosio Cabado Law Offices for private respondent.
NARVASA, J.:
On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called the
Company) and Melecio T. Basiao entered into a contract 1 by which:
1. Basiao was "authorized to solicit within the Philippines applications for
insurance policies and annuities in accordance with the existing rules and
regulations" of the Company;
2. he would receive "compensation, in the form of commissions ... as
provided in the Schedule of Commissions" of the contract to "constitute a
part of the consideration of ... (said) agreement;" and
 3. the "rules in ... (the Company's) Rate Book and its Agent's Manual, as
well as all its circulars ... and those which may from time to time be
promulgated by it, ..." were made part of said contract.
The contract also contained, among others, provisions governing the relations of the
parties, the duties of the Agent, the acts prohibited to him, and the modes of termination
of the agreement, viz.:
RELATION WITH THE COMPANY. The Agent shall be free to exercise
his own judgment as to time, place and means of soliciting insurance.
Nothing herein contained shall therefore be construed to create the
relationship of employee and employer between the Agent and the
Company. However, the Agent shall observe and conform to all rules and
regulations which the Company may from time to time prescribe.
ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from
giving, directly or indirectly, rebates in any form, or from making any
misrepresentation or over-selling, and, in general, from doing or
committing acts prohibited in the Agent's Manual and in circulars of the
Office of the Insurance Commissioner.
TERMINATION. The Company may terminate the contract at will, without
any previous notice to the Agent, for or on account of ... (explicitly
specified causes). ...
Either party may terminate this contract by giving to the other notice in
writing to that effect. It shall become ipso facto cancelled if the Insurance
Commissioner should revoke a Certificate of Authority previously issued
or should the Agent fail to renew his existing Certificate of Authority upon
its expiration. The Agent shall not have any right to any commission on
renewal of premiums that may be paid after the termination of this
agreement for any cause whatsoever, except when the termination is due
to disability or death in line of service. As to commission corresponding to
any balance of the first year's premiums remaining unpaid at the
termination of this agreement, the Agent shall be entitled to it if the
balance of the first year premium is paid, less actual cost of collection,
unless the termination is due to a violation of this contract, involving
criminal liability or breach of trust.
ASSIGNMENT. No Assignment of the Agency herein created or of
commissions or other compensations shall be valid without the prior
consent in writing of the Company. ...
Some four years later, in April 1972, the parties entered into another contract — an
Agency Manager's Contract — and to implement his end of it Basiao organized an
agency or office to which he gave the name M. Basiao and Associates, while
concurrently fulfilling his commitments under the first contract with the Company. 2
In May, 1979, the Company terminated the Agency Manager's Contract. After vainly
seeking a reconsideration, Basiao sued the Company in a civil action and this, he was
later to claim, prompted the latter to terminate also his engagement under the first
contract and to stop payment of his commissions starting April 1, 1980. 3
Basiao thereafter filed with the then Ministry of Labor a complaint 4 against the Company
and its president. Without contesting the termination of the first contract, the complaint
sought to recover commissions allegedly unpaid thereunder, plus attorney's fees. The
respondents disputed the Ministry's jurisdiction over Basiao's claim, asserting that he
was not the Company's employee, but an independent contractor and that the Company
had no obligation to him for unpaid commissions under the terms and conditions of his
contract. 5
The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that the
underwriting agreement had established an employer-employee relationship between
him and the Company, and this conferred jurisdiction on the Ministry of Labor to
adjudicate his claim. Said official's decision directed payment of his unpaid commissions
"... equivalent to the balance of the first year's premium remaining unpaid, at the time of
his termination, of all the insurance policies solicited by ... (him) in favor of the
respondent company ..." plus 10% attorney's fees. 6
This decision was, on appeal by the Company, affirmed by the National Labor Relations
Commission. 7 Hence, the present petition for certiorari and prohibition.
The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become
the Company's employee by virtue of the contract invoked by him, thereby placing his
claim for unpaid commissions within the original and exclusive jurisdiction of the Labor
Arbiter under the provisions of Section 217 of the Labor Code, 8 or, contrarily, as the
Company would have it, that under said contract Basiao's status was that of an
independent contractor whose claim was thus cognizable, not by the Labor Arbiter in a
labor case, but by the regular courts in an ordinary civil action.
The Company's thesis, that no employer-employee relation in the legal and generally
accepted sense existed between it and Basiao, is drawn from the terms of the contract
they had entered into, which, either expressly or by necessary implication, made Basiao
the master of his own time and selling methods, left to his judgment the time, place and
means of soliciting insurance, set no accomplishment quotas and compensated him on
the basis of results obtained. He was not bound to observe any schedule of working
hours or report to any regular station; he could seek and work on his prospects anywhere
and at anytime he chose to, and was free to adopt the selling methods he deemed most
effective.
Without denying that the above were indeed the expressed implicit conditions of Basiao's
contract with the Company, the respondents contend that they do not constitute the
decisive determinant of the nature of his engagement, invoking precedents to the effect
that the critical feature distinguishing the status of an employee from that of an
independent contractor is control, that is, whether or not the party who engages the
services of another has the power to control the latter's conduct in rendering such
services. Pursuing the argument, the respondents draw attention to the provisions of
Basiao's contract obliging him to "... observe and conform to all rules and regulations
which the Company may from time to time prescribe ...," as well as to the fact that the
Company prescribed the qualifications of applicants for insurance, processed their
applications and determined the amounts of insurance cover to be issued as indicative of
the control, which made Basiao, in legal contemplation, an employee of the Company. 9
It is true that the "control test" expressed in the following pronouncement of the Court in
the 1956 case of Viana vs. Alejo Al-Lagadan10
... In determining the existence of employer-employee relationship, the
following elements are generally considered, namely: (1) the selection
and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power to control the employees' conduct
— although the latter is the most important element (35 Am. Jur. 445). ...
has been followed and applied in later cases, some fairly recent. 11 Indeed, it is without
question a valid test of the character of a contract or agreement to render service. It
should, however, be obvious that not every form of control that the hiring party reserves
to himself over the conduct of the party hired in relation to the services rendered may be
accorded the effect of establishing an employer-employee relationship between them in
the legal or technical sense of the term. A line must be drawn somewhere, if the
recognized distinction between an employee and an individual contractor is not to vanish
altogether. Realistically, it would be a rare contract of service that gives untrammelled
freedom to the party hired and eschews any intervention whatsoever in his performance
of the engagement.
Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the means or
methods to be employed in attaining it, and those that control or fix the methodology and
bind or restrict the party hired to the use of such means. The first, which aim only to
promote the result, create no employer-employee relationship unlike the second, which
address both the result and the means used to achieve it. The distinction acquires
particular relevance in the case of an enterprise affected with public interest, as is the
business of insurance, and is on that account subject to regulation by the State with
respect, not only to the relations between insurer and insured but also to the internal
affairs of the insurance company. 12 Rules and regulations governing the conduct of the
business are provided for in the Insurance Code and enforced by the Insurance
Commissioner. It is, therefore, usual and expected for an insurance company to
promulgate a set of rules to guide its commission agents in selling its policies that they
may not run afoul of the law and what it requires or prohibits. Of such a character are the
rules which prescribe the qualifications of persons who may be insured, subject
insurance applications to processing and approval by the Company, and also reserve to
the Company the determination of the premiums to be paid and the schedules of
payment. None of these really invades the agent's contractual prerogative to adopt his
own selling methods or to sell insurance at his own time and convenience, hence cannot
justifiably be said to establish an employer-employee relationship between him and the
company.
There is no dearth of authority holding persons similarly placed as respondent Basiao to
be independent contractors, instead of employees of the parties for whom they worked.
In Mafinco Trading Corporation vs. Ople, 13the Court ruled that a person engaged to sell
soft drinks for another, using a truck supplied by the latter, but with the right to employ
his own workers, sell according to his own methods subject only to prearranged routes,
observing no working hours fixed by the other party and obliged to secure his own
licenses and defray his own selling expenses, all in consideration of a peddler's discount
given by the other party for at least 250 cases of soft drinks sold daily, was not an
employee but an independent contractor.
In Investment Planning Corporation of the Philippines us. Social Security System 14 a
case almost on all fours with the present one, this Court held that there was no
employer-employee relationship between a commission agent and an investment
company, but that the former was an independent contractor where said agent and
others similarly placed were: (a) paid compensation in the form of commissions based on
percentages of their sales, any balance of commissions earned being payable to their
legal representatives in the event of death or registration; (b) required to put up
performance bonds; (c) subject to a set of rules and regulations governing the
performance of their duties under the agreement with the company and termination of
their services for certain causes; (d) not required to report for work at any time, nor to
devote their time exclusively to working for the company nor to submit a record of their
activities, and who, finally, shouldered their own selling and transportation expenses.
More recently, in Sara vs. NLRC, 15 it was held that one who had been engaged by a rice
miller to buy and sell rice and palay without compensation except a certain percentage of
what he was able to buy or sell, did work at his own pleasure without any supervision or
control on the part of his principal and relied on his own resources in the performance of
his work, was a plain commission agent, an independent contractor and not an
employee.
The respondents limit themselves to pointing out that Basiao's contract with the
Company bound him to observe and conform to such rules and regulations as the latter
might from time to time prescribe. No showing has been made that any such rules or
regulations were in fact promulgated, much less that any rules existed or were issued
which effectively controlled or restricted his choice of methods — or the methods
themselves — of selling insurance. Absent such showing, the Court will not speculate
that any exceptions or qualifications were imposed on the express provision of the
contract leaving Basiao "... free to exercise his own judgment as to the time, place and
means of soliciting insurance."
The Labor Arbiter's decision makes reference to Basiao's claim of having been
connected with the Company for twenty-five years. Whatever this is meant to imply, the
obvious reply would be that what is germane here is Basiao's status under the contract of
July 2, 1968, not the length of his relationship with the Company.
The Court, therefore, rules that under the contract invoked by him, Basiao was not an
employee of the petitioner, but a commission agent, an independent contractor whose
claim for unpaid commissions should have been litigated in an ordinary civil action. The
Labor Arbiter erred in taking cognizance of, and adjudicating, said claim, being without
jurisdiction to do so, as did the respondent NLRC in affirming the Arbiter's decision. This
conclusion renders it unnecessary and premature to consider Basiao's claim for
commissions on its merits.
WHEREFORE, the appealed Resolution of the National Labor Relations Commission is
set aside, and that complaint of private respondent Melecio T. Basiao in RAB Case No.
VI-0010-83 is dismissed. No pronouncement as to costs.
SO ORDERED.
G.R. No. 167622 June 29, 2010
GREGORIO V. TONGKO, Petitioner,
vs.
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and RENATO A.
VERGEL DE DIOS,Respondents.
RESOLUTION
BRION, J.:
This resolves the Motion for Reconsideration1 dated December 3, 2008 filed by
respondent The Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) to set aside
our Decision of November 7, 2008. In the assailed decision, we found that an employer-
employee relationship existed between Manulife and petitioner Gregorio Tongko and
ordered Manulife to pay Tongko backwages and separation pay for illegal dismissal.
The following facts have been stated in our Decision of November 7, 2008, now under
reconsideration, but are repeated, simply for purposes of clarity.
The contractual relationship between Tongko and Manulife had two basic phases. The
first or initial phase began on July 1, 1977, under a Career Agent’s Agreement
(Agreement) that provided:
It is understood and agreed that the Agent is an independent contractor and nothing
contained herein shall be construed or interpreted as creating an employer-employee
relationship between the Company and the Agent.
xxxx
a) The Agent shall canvass for applications for Life Insurance, Annuities, Group policies
and other products offered by the Company, and collect, in exchange for provisional
receipts issued by the Agent, money due to or become due to the Company in respect of
applications or policies obtained by or through the Agent or from policyholders allotted by
the Company to the Agent for servicing, subject to subsequent confirmation of receipt of
payment by the Company as evidenced by an Official Receipt issued by the Company
directly to the policyholder.
xxxx
The Company may terminate this Agreement for any breach or violation of any of the
provisions hereof by the Agent by giving written notice to the Agent within fifteen (15)
days from the time of the discovery of the breach. No waiver, extinguishment,
abandonment, withdrawal or cancellation of the right to terminate this Agreement by the
Company shall be construed for any previous failure to exercise its right under any
provision of this Agreement.
Either of the parties hereto may likewise terminate his Agreement at any time without
cause, by giving to the other party fifteen (15) days notice in writing.2
Tongko additionally agreed (1) to comply with all regulations and requirements of
Manulife, and (2) to maintain a standard of knowledge and competency in the sale of
Manulife’s products, satisfactory to Manulife and sufficient to meet the volume of the new
business, required by his Production Club membership.3
The second phase started in 1983 when Tongko was named Unit Manager in Manulife’s
Sales Agency Organization. In 1990, he became a Branch Manager. Six years later (or in
1996), Tongko became a Regional Sales Manager.4
Tongko’s gross earnings consisted of commissions, persistency income, and
management overrides. Since the beginning, Tongko consistently declared himself self-
employed in his income tax returns. Thus, under oath, he declared his gross business
income and deducted his business expenses to arrive at his taxable business income.
Manulife withheld the corresponding 10% tax on Tongko’s earnings.5
In 2001, Manulife instituted manpower development programs at the regional sales
management level. Respondent Renato Vergel de Dios wrote Tongko a letter dated
November 6, 2001 on concerns that were brought up during the October 18, 2001 Metro
North Sales Managers Meeting. De Dios wrote:
The first step to transforming Manulife into a big league player has been very clear – to
increase the number of agents to at least 1,000 strong for a start. This may seem
diametrically opposed to the way Manulife was run when you first joined the organization.
Since then, however, substantial changes have taken place in the organization, as these
have been influenced by developments both from within and without the company.
xxxx
The issues around agent recruiting are central to the intended objectives hence the need
for a Senior Managers’ meeting earlier last month when Kevin O’Connor, SVP-Agency,
took to the floor to determine from our senior agency leaders what more could be done to
bolster manpower development. At earlier meetings, Kevin had presented information
where evidently, your Region was the lowest performer (on a per Manager basis) in
terms of recruiting in 2000 and, as of today, continues to remain one of the laggards in
this area.
While discussions, in general, were positive other than for certain comments from your
end which were perceived to be uncalled for, it became clear that a one-on-one meeting
with you was necessary to ensure that you and management, were on the same plane.
As gleaned from some of your previous comments in prior meetings (both in group and
one-on-one), it was not clear that we were proceeding in the same direction.
Kevin held subsequent series of meetings with you as a result, one of which I joined
briefly. In those subsequent meetings you reiterated certain views, the validity of which
we challenged and subsequently found as having no basis.
With such views coming from you, I was a bit concerned that the rest of the Metro North
Managers may be a bit confused as to the directions the company was taking. For this
reason, I sought a meeting with everyone in your management team, including you, to
clear the air, so to speak.
This note is intended to confirm the items that were discussed at the said Metro North
Region’s Sales Managers meeting held at the 7/F Conference room last 18 October.
xxxx
Issue # 2: "Some Managers are unhappy with their earnings and would want to revert to
the position of agents."
This is an often repeated issue you have raised with me and with Kevin. For this reason,
I placed the issue on the table before the rest of your Region’s Sales Managers to verify
its validity. As you must have noted, no Sales Manager came forward on their own to
confirm your statement and it took you to name Malou Samson as a source of the same,
an allegation that Malou herself denied at our meeting and in your very presence.
This only confirms, Greg, that those prior comments have no solid basis at all. I now
believe what I had thought all along, that these allegations were simply meant to muddle
the issues surrounding the inability of your Region to meet its agency development
objectives!
Issue # 3: "Sales Managers are doing what the company asks them to do but, in the
process, they earn less."
xxxx
All the above notwithstanding, we had your own records checked and we found that you
made a lot more money in the Year 2000 versus 1999. In addition, you also volunteered
the information to Kevin when you said that you probably will make more money in the
Year 2001 compared to Year 2000. Obviously, your above statement about making "less
money" did not refer to you but the way you argued this point had us almost believing
that you were spouting the gospel of truth when you were not. x x x
xxxx
All of a sudden, Greg, I have become much more worried about your ability to lead this
group towards the new direction that we have been discussing these past few weeks,
i.e., Manulife’s goal to become a major agency-led distribution company in the
Philippines. While as you claim, you have not stopped anyone from recruiting, I have
never heard you proactively push for greater agency recruiting. You have not been
proactive all these years when it comes to agency growth.
 xxxx
I cannot afford to see a major region fail to deliver on its developmental goals next year
and so, we are making the following changes in the interim:
1. You will hire at your expense a competent assistant who can unload you of much of
the routine tasks which can be easily delegated. This assistant should be so chosen as
to complement your skills and help you in the areas where you feel "may not be your cup
of tea."
You have stated, if not implied, that your work as Regional Manager may be too taxing
for you and for your health. The above could solve this problem.
xxxx
2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the
North Star Branch (NSB) in autonomous fashion. x x x
I have decided to make this change so as to reduce your span of control and allow you to
concentrate more fully on overseeing the remaining groups under Metro North, your
Central Unit and the rest of the Sales Managers in Metro North. I will hold you solely
responsible for meeting the objectives of these remaining groups.
xxxx
The above changes can end at this point and they need not go any further. This,
however, is entirely dependent upon you. But you have to understand that meeting
corporate objectives by everyone is primary and will not be compromised. We are
meeting tough challenges next year, and I would want everybody on board. Any
resistance or holding back by anyone will be dealt with accordingly.6
Subsequently, de Dios wrote Tongko another letter, dated December 18, 2001,
terminating Tongko’s services:
It would appear, however, that despite the series of meetings and communications, both
one-on-one meetings between yourself and SVP Kevin O’Connor, some of them with
me, as well as group meetings with your Sales Managers, all these efforts have failed in
helping you align your directions with Management’s avowed agency growth policy.
xxxx
On account thereof, Management is exercising its prerogative under Section 14 of your
Agents Contract as we are now issuing this notice of termination of your Agency
Agreement with us effective fifteen days from the date of this letter.7
Tongko responded by filing an illegal dismissal complaint with the National Labor
Relations Commission (NLRC) Arbitration Branch. He essentially alleged – despite the
clear terms of the letter terminating his Agency Agreement – that he was Manulife’s
employee before he was illegally dismissed.8
Thus, the threshold issue is the existence of an employment relationship. A finding that
none exists renders the question of illegal dismissal moot; a finding that an employment
relationship exists, on the other hand, necessarily leads to the need to determine the
validity of the termination of the relationship.
A. Tongko’s Case for Employment Relationship
Tongko asserted that as Unit Manager, he was paid an annual over-rider not exceeding
₱50,000.00, regardless of production levels attained and exclusive of commissions and
bonuses. He also claimed that as Regional Sales Manager, he was given a travel and
entertainment allowance of ₱36,000.00 per year in addition to his overriding
commissions; he was tasked with numerous administrative functions and supervisory
authority over Manulife’s employees, aside from merely selling policies and recruiting
agents for Manulife; and he recommended and recruited insurance agents subject to
vetting and approval by Manulife. He further alleges that he was assigned a definite
place in the Manulife offices when he was not in the field – at the 3rd Floor, Manulife
Center, 108 Tordesillas corner Gallardo Sts., Salcedo Village, Makati City – for which he
never paid any rental. Manulife provided the office equipment he used, including tables,
chairs, computers and printers (and even office stationery), and paid for the electricity,
water and telephone bills. As Regional Sales Manager, Tongko additionally asserts that
he was required to follow at least three codes of conduct.9
B. Manulife’s Case – Agency Relationship with Tongko
Manulife argues that Tongko had no fixed wage or salary. Under the Agreement, Tongko
was paid commissions of varying amounts, computed based on the premium paid in full
and actually received by Manulife on policies obtained through an agent. As sales
manager, Tongko was paid overriding sales commission derived from sales made by
agents under his unit/structure/branch/region. Manulife also points out that it deducted
and withheld a 10% tax from all commissions Tongko received; Tongko even declared
himself to be self-employed and consistently paid taxes as such—i.e., he availed of tax
deductions such as ordinary and necessary trade, business and professional expenses
to which a business is entitled.
Manulife asserts that the labor tribunals have no jurisdiction over Tongko’s claim as he
was not its employee as characterized in the four-fold test and our ruling in Carungcong
v. National Labor Relations Commission.10
The Conflicting Rulings of the Lower Tribunals
The labor arbiter decreed that no employer-employee relationship existed between the
parties. However, the NLRC reversed the labor arbiter’s decision on appeal; it found the
existence of an employer-employee relationship and concluded that Tongko had been
illegally dismissed. In the petition for certiorari with the Court of Appeals (CA), the
appellate court found that the NLRC gravely abused its discretion in its ruling and
reverted to the labor arbiter’s decision that no employer-employee relationship existed
between Tongko and Manulife.
Our Decision of November 7, 2008
In our Decision of November 7, 2008, we reversed the CA ruling and found that an
employment relationship existed between Tongko and Manulife. We concluded that
Tongko is Manulife’s employee for the following reasons:
1. Our ruling in the first Insular case did not foreclose the possibility of an
11
insurance agent becoming an employee of an insurance company; if evidence
exists showing that the company promulgated rules or regulations that effectively
controlled or restricted an insurance agent’s choice of methods or the methods
themselves in selling insurance, an employer-employee relationship would be
present. The determination of the existence of an employer-employee
relationship is thus on a case-to-case basis depending on the evidence on
record.
2. Manulife had the power of control over Tongko, sufficient to characterize him
as an employee, as shown by the following indicators:
2.1 Tongko undertook to comply with Manulife’s rules, regulations and
other requirements, i.e., the different codes of conduct such as the Agent
Code of Conduct, the Manulife Financial Code of Conduct, and the
Financial Code of Conduct Agreement;
2.2 The various affidavits of Manulife’s insurance agents and managers,
who occupied similar positions as Tongko, showed that they performed
administrative duties that established employment with Manulife;12 and
2.3 Tongko was tasked to recruit some agents in addition to his other
administrative functions. De Dios’ letter harped on the direction Manulife
intended to take, viz., greater agency recruitment as the primary means
to sell more policies; Tongko’s alleged failure to follow this directive led to
the termination of his employment with Manulife.
The Motion for Reconsideration
Manulife disagreed with our Decision and filed the present motion for reconsideration on
the following GROUNDS:
1. The November 7[, 2008] Decision violates Manulife’s right to due process by:
(a) confining the review only to the issue of "control" and utterly disregarding all
the other issues that had been joined in this case; (b) mischaracterizing the
divergence of conclusions between the CA and the NLRC decisions as confined
only to that on "control"; (c) grossly failing to consider the findings and
conclusions of the CA on the majority of the material evidence, especially
[Tongko’s] declaration in his income tax returns that he was a "business person"
or "self-employed"; and (d) allowing [Tongko] to repudiate his sworn statement in
a public document.
2. The November 7[, 2008] Decision contravenes settled rules in contract law and
agency, distorts not only the legal relationships of agencies to sell but also
distributorship and franchising, and ignores the constitutional and policy context
of contract law vis-à-vis labor law.
3. The November 7[, 2008] Decision ignores the findings of the CA on the three
elements of the four-fold test other than the "control" test, reverses well-settled
doctrines of law on employer-employee relationships, and grossly misapplies the
"control test," by selecting, without basis, a few items of evidence to the exclusion
of more material evidence to support its conclusion that there is "control."
4. The November 7[, 2008] Decision is judicial legislation, beyond the scope
authorized by Articles 8 and 9 of the Civil Code, beyond the powers granted to
this Court under Article VIII, Section 1 of the Constitution and contravenes
through judicial legislation, the constitutional prohibition against impairment of
contracts under Article III, Section 10 of the Constitution.
5. For all the above reasons, the November 7[, 2008] Decision made
unsustainable and reversible errors, which should be corrected, in concluding
that Respondent Manulife and Petitioner had an employer-employee relationship,
that Respondent Manulife illegally dismissed Petitioner, and for consequently
ordering Respondent Manulife to pay Petitioner backwages, separation pay,
nominal damages and attorney’s fees.13
 THE COURT’S RULING
A. The Insurance and the Civil Codes;
the Parties’ Intent and Established
Industry Practices
We cannot consider the present case purely from a labor law perspective, oblivious that
the factual antecedents were set in the insurance industry so that the Insurance Code
primarily governs. Chapter IV, Title 1 of this Code is wholly devoted to "Insurance Agents
and Brokers" and specifically defines the agents and brokers relationship with the
insurance company and how they are governed by the Code and regulated by the
Insurance Commission.
The Insurance Code, of course, does not wholly regulate the "agency" that it speaks of,
as agency is a civil law matter governed by the Civil Code. Thus, at the very least, three
sets of laws – namely, the Insurance Code, the Labor Code and the Civil Code – have to
be considered in looking at the present case. Not to be forgotten, too, is the Agreement
(partly reproduced on page 2 of this Dissent and which no one disputes) that the parties
adopted to govern their relationship for purposes of selling the insurance the company
offers. To forget these other laws is to take a myopic view of the present case and to add
to the uncertainties that now exist in considering the legal relationship between the
insurance company and its "agents."
The main issue of whether an agency or an employment relationship exists depends on
the incidents of the relationship. The Labor Code concept of "control" has to be
compared and distinguished with the "control" that must necessarily exist in a principal-
agent relationship. The principal cannot but also have his or her say in directing the
course of the principal-agent relationship, especially in cases where the company-
representative relationship in the insurance industry is an agency.
a. The laws on insurance and agency
The business of insurance is a highly regulated commercial activity in the country, in
terms particularly of who can be in the insurance business, who can act for and in behalf
of an insurer, and how these parties shall conduct themselves in the insurance business.
Section 186 of the Insurance Code provides that "No person, partnership, or association
of persons shall transact any insurance business in the Philippines except as agent of a
person or corporation authorized to do the business of insurance in the Philippines."
Sections 299 and 300 of the Insurance Code on Insurance Agents and Brokers, among
other provisions, provide:
Section 299. No insurance company doing business in the Philippines, nor any agent
thereof, shall pay any commission or other compensation to any person for services in
obtaining insurance, unless such person shall have first procured from the Commissioner
a license to act as an insurance agent of such company or as an insurance broker as
hereinafter provided.
No person shall act as an insurance agent or as an insurance broker in the solicitation or
procurement of applications for insurance, or receive for services in obtaining insurance,
any commission or other compensation from any insurance company doing business in
the Philippines or any agent thereof, without first procuring a license so to act from the
Commissioner x x x The Commissioner shall satisfy himself as to the competence and
trustworthiness of the applicant and shall have the right to refuse to issue or renew and
to suspend or revoke any such license in his discretion. 1avv phi1.net
Section 300. Any person who for compensation solicits or obtains insurance on behalf of
any insurance company or transmits for a person other than himself an application for a
policy or contract of insurance to or from such company or offers or assumes to act in the
negotiating of such insurance shall be an insurance agent within the intent of this section
and shall thereby become liable to all the duties, requirements, liabilities and penalties to
which an insurance agent is subject.
The application for an insurance agent’s license requires a written examination, and the
applicant must be of good moral character and must not have been convicted of a crime
involving moral turpitude.14 The insurance agent who collects premiums from an insured
person for remittance to the insurance company does so in a fiduciary capacity, and an
insurance company which delivers an insurance policy or contract to an authorized agent
is deemed to have authorized the agent to receive payment on the company’s
behalf.15 Section 361 further prohibits the offer, negotiation, or collection of any amount
other than that specified in the policy and this covers any rebate from the premium or any
special favor or advantage in the dividends or benefit accruing from the policy.
Thus, under the Insurance Code, the agent must, as a matter of qualification, be licensed
and must also act within the parameters of the authority granted under the license and
under the contract with the principal. Other than the need for a license, the agent is
limited in the way he offers and negotiates for the sale of the company’s insurance
products, in his collection activities, and in the delivery of the insurance contract or
policy. Rules regarding the desired results (e.g., the required volume to continue to
qualify as a company agent, rules to check on the parameters on the authority given to
the agent, and rules to ensure that industry, legal and ethical rules are followed) are built-
in elements of control specific to an insurance agency and should not and cannot be
read as elements of control that attend an employment relationship governed by the
Labor Code.
On the other hand, the Civil Code defines an agent as a "person [who] binds himself to
render some service or to do something in representation or on behalf of another, with
the consent or authority of the latter."16 While this is a very broad definition that on its
face may even encompass an employment relationship, the distinctions between agency
and employment are sufficiently established by law and jurisprudence.
Generally, the determinative element is the control exercised over the one rendering
service. The employer controls the employee both in the results and in the means and
manner of achieving this result. The principal in an agency relationship, on the other
hand, also has the prerogative to exercise control over the agent in undertaking the
assigned task based on the parameters outlined in the pertinent laws.
Under the general law on agency as applied to insurance, an agency must be express in
light of the need for a license and for the designation by the insurance company. In the
present case, the Agreement fully serves as grant of authority to Tongko as Manulife’s
insurance agent.17 This agreement is supplemented by the company’s agency practices
and usages, duly accepted by the agent in carrying out the agency.18 By authority of the
Insurance Code, an insurance agency is for compensation,19 a matter the Civil Code
Rules on Agency presumes in the absence of proof to the contrary.20 Other than the
compensation, the principal is bound to advance to, or to reimburse, the agent the
agreed sums necessary for the execution of the agency.21 By implication at least under
Article 1994 of the Civil Code, the principal can appoint two or more agents to carry out
the same assigned tasks,22 based necessarily on the specific instructions and directives
given to them.
With particular relevance to the present case is the provision that "In the execution of the
agency, the agent shall act in accordance with the instructions of the principal."23 This
provision is pertinent for purposes of the necessary control that the principal exercises
over the agent in undertaking the assigned task, and is an area where the instructions
can intrude into the labor law concept of control so that minute consideration of the facts
is necessary. A related article is Article 1891 of the Civil Code which binds the agent to
render an account of his transactions to the principal.
B. The Cited Case
The Decision of November 7, 2008 refers to the first Insular and Grepalife cases to
establish that the company rules and regulations that an agent has to comply with are
indicative of an employer-employee relationship.24 The Dissenting Opinions of Justice
Presbitero Velasco, Jr. and Justice Conchita Carpio Morales also cite Insular Life
Assurance Co. v. National Labor Relations Commission (second Insular case)25 to
support the view that Tongko is Manulife’s employee. On the other hand, Manulife cites
the Carungcong case and AFP Mutual Benefit Association, Inc. v. National Labor
Relations Commission (AFPMBAI case)26 to support its allegation that Tongko was not its
employee.
A caveat has been given above with respect to the use of the rulings in the cited cases
because none of them is on all fours with the present case; the uniqueness of the factual
situation of the present case prevents it from being directly and readily cast in the mold of
the cited cases. These cited cases are themselves different from one another; this
difference underscores the need to read and quote them in the context of their own
factual situations.
The present case at first glance appears aligned with the facts in the Carungcong, the
Grepalife, and the second Insular Life cases. A critical difference, however, exists as
these cited cases dealt with the proper legal characterization of a subsequent
management contract that superseded the original agency contract between the
insurance company and its agent. Carungcong dealt with a subsequent Agreement
making Carungcong a New Business Manager that clearly superseded the Agreement
designating Carungcong as an agent empowered to solicit applications for insurance.
The Grepalife case, on the other hand, dealt with the proper legal characterization of the
appointment of the Ruiz brothers to positions higher than their original position as
insurance agents. Thus, after analyzing the duties and functions of the Ruiz brothers, as
these were enumerated in their contracts, we concluded that the company practically
dictated the manner by which the Ruiz brothers were to carry out their jobs. Finally, the
second Insular Life case dealt with the implications of de los Reyes’ appointment as
acting unit manager which, like the subsequent contracts in the Carungcong and the
Grepalife cases, was clearly defined under a subsequent contract. In all these cited
cases, a determination of the presence of the Labor Code element of control was made
on the basis of the stipulations of the subsequent contracts.
In stark contrast with the Carungcong, the Grepalife, and the second Insular Life cases,
the only contract or document extant and submitted as evidence in the present case is
the Agreement – a pure agency agreement in the Civil Code context similar to the
original contract in the first Insular Life case and the contract in the AFPMBAI case. And
while Tongko was later on designated unit manager in 1983, Branch Manager in 1990,
and Regional Sales Manager in 1996, no formal contract regarding these undertakings
appears in the records of the case. Any such contract or agreement, had there been any,
could have at the very least provided the bases for properly ascertaining the juridical
relationship established between the parties.
These critical differences, particularly between the present case and the Grepalife and
the second Insular Life cases, should therefore immediately drive us to be more prudent
and cautious in applying the rulings in these cases.
C. Analysis of the Evidence
c.1. The Agreement
The primary evidence in the present case is the July 1, 1977 Agreement that governed
and defined the parties’ relations until the Agreement’s termination in 2001. This
Agreement stood for more than two decades and, based on the records of the case, was
never modified or novated. It assumes primacy because it directly dealt with the nature of
the parties’ relationship up to the very end; moreover, both parties never disputed its
authenticity or the accuracy of its terms.
By the Agreement’s express terms, Tongko served as an "insurance agent" for Manulife,
not as an employee. To be sure, the Agreement’s legal characterization of the nature of
the relationship cannot be conclusive and binding on the courts; as the dissent clearly
stated, the characterization of the juridical relationship the Agreement embodied is a
matter of law that is for the courts to determine. At the same time, though, the
characterization the parties gave to their relationship in the Agreement cannot simply be
brushed aside because it embodies their intent at the time they entered the Agreement,
and they were governed by this understanding throughout their relationship. At the very
least, the provision on the absence of employer-employee relationship between the
parties can be an aid in considering the Agreement and its implementation, and in
appreciating the other evidence on record.
The parties’ legal characterization of their intent, although not conclusive, is critical in this
case because this intent is not illegal or outside the contemplation of law, particularly of
the Insurance and the Civil Codes. From this perspective, the provisions of the Insurance
Code cannot be disregarded as this Code (as heretofore already noted) expressly
envisions a principal-agent relationship between the insurance company and the
insurance agent in the sale of insurance to the public. For this reason, we can take
1aw ph!1
judicial notice that as a matter of Insurance Code-based business practice, an agency
relationship prevails in the insurance industry for the purpose of selling insurance. The
Agreement, by its express terms, is in accordance with the Insurance Code model when
it provided for a principal-agent relationship, and thus cannot lightly be set aside nor
simply be considered as an agreement that does not reflect the parties’ true intent. This
intent, incidentally, is reinforced by the system of compensation the Agreement provides,
which likewise is in accordance with the production-based sales commissions the
Insurance Code provides.
Significantly, evidence shows that Tongko’s role as an insurance agent never changed
during his relationship with Manulife. If changes occurred at all, the changes did not
appear to be in the nature of their core relationship. Tongko essentially remained an
agent, but moved up in this role through Manulife’s recognition that he could use other
agents approved by Manulife, but operating under his guidance and in whose
commissions he had a share. For want of a better term, Tongko perhaps could be
labeled as a "lead agent" who guided under his wing other Manulife agents similarly
tasked with the selling of Manulife insurance.
Like Tongko, the evidence suggests that these other agents operated under their own
agency agreements. Thus, if Tongko’s compensation scheme changed at all during his
relationship with Manulife, the change was solely for purposes of crediting him with his
share in the commissions the agents under his wing generated. As an agent who was
recruiting and guiding other insurance agents, Tongko likewise moved up in terms of the
reimbursement of expenses he incurred in the course of his lead agency, a prerogative
he enjoyed pursuant to Article 1912 of the Civil Code. Thus, Tongko received greater
reimbursements for his expenses and was even allowed to use Manulife facilities in his
interactions with the agents, all of whom were, in the strict sense, Manulife agents
approved and certified as such by Manulife with the Insurance Commission.
That Tongko assumed a leadership role but nevertheless wholly remained an agent is
the inevitable conclusion that results from the reading of the Agreement (the only
agreement on record in this case) and his continuing role thereunder as sales agent,
from the perspective of the Insurance and the Civil Codes and in light of what Tongko
himself attested to as his role as Regional Sales Manager. To be sure, this interpretation
could have been contradicted if other agreements had been submitted as evidence of the
relationship between Manulife and Tongko on the latter’s expanded undertakings. In the
absence of any such evidence, however, this reading – based on the available evidence
and the applicable insurance and civil law provisions – must stand, subject only to
objective and evidentiary Labor Code tests on the existence of an employer-employee
relationship.
In applying such Labor Code tests, however, the enforcement of the Agreement during
the course of the parties’ relationship should be noted. From 1977 until the termination of
the Agreement, Tongko’s occupation was to sell Manulife’s insurance policies and
products. Both parties acquiesced with the terms and conditions of the Agreement.
Tongko, for his part, accepted all the benefits flowing from the Agreement, particularly
the generous commissions.
Evidence indicates that Tongko consistently clung to the view that he was an
independent agent selling Manulife insurance products since he invariably declared
himself a business or self-employed person in his income tax returns. This consistency
with, and action made pursuant to the Agreement were pieces of evidence that
were never mentioned nor considered in our Decision of November 7, 2008. Had
they been considered, they could, at the very least, serve as Tongko’s admissions
against his interest. Strictly speaking, Tongko’s tax returns cannot but be legally
significant because he certified under oath the amount he earned as gross business
income, claimed business deductions, leading to his net taxable income. This should be
evidence of the first order that cannot be brushed aside by a mere denial. Even on a
layman’s view that is devoid of legal considerations, the extent of his annual income
alone renders his claimed employment status doubtful.27
Hand in hand with the concept of admission against interest in considering the tax
returns, the concept of estoppel – a legal and equitable concept28 – necessarily must
come into play. Tongko’s previous admissions in several years of tax returns as an
independent agent, as against his belated claim that he was all along an employee, are
too diametrically opposed to be simply dismissed or ignored. Interestingly, Justice
Velasco’s dissenting opinion states that Tongko was forced to declare himself a business
or self-employed person by Manulife’s persistent refusal to recognize him as its
employee.29 Regrettably, the dissent has shown no basis for this conclusion, an
understandable omission since no evidence in fact exists on this point in the
records of the case. In fact, what the evidence shows is Tongko’s full conformity with,
and action as, an independent agent until his relationship with Manulife took a bad turn.
Another interesting point the dissent raised with respect to the Agreement is its
conclusion that the Agreement negated any employment relationship between Tongko
and Manulife so that the commissions he earned as a sales agent should not be
considered in the determination of the backwages and separation pay that should be
given to him. This part of the dissent is correct although it went on to twist this conclusion
by asserting that Tongko had dual roles in his relationship with Manulife; he was an
agent, not an employee, in so far as he sold insurance for Manulife, but was an
employee in his capacity as a manager. Thus, the dissent concluded that Tongko’s
backwages should only be with respect to his role as Manulife’s manager.
The conclusion with respect to Tongko’s employment as a manager is, of course,
unacceptable for the legal, factual and practical reasons discussed in this Resolution. In
brief, the factual reason is grounded on the lack of evidentiary support of the conclusion
that Manulife exercised control over Tongko in the sense understood in the Labor Code.
The legal reason, partly based on the lack of factual basis, is the erroneous legal
conclusion that Manulife controlled Tongko and was thus its employee. The practical
reason, on the other hand, is the havoc that the dissent’s unwarranted conclusion would
cause the insurance industry that, by the law’s own design, operated along the lines of
principal-agent relationship in the sale of insurance.
c.2. Other Evidence of Alleged Control
A glaring evidentiary gap for Tongko in this case is the lack of evidence on record
showing that Manulife ever exercised means-and-manner control, even to a limited
extent, over Tongko during his ascent in Manulife’s sales ladder. In 1983, Tongko was
appointed unit manager. Inexplicably, Tongko never bothered to present any evidence at
all on what this designation meant. This also holds true for Tongko’s appointment as
branch manager in 1990, and as Regional Sales Manager in 1996. The best evidence of
control – the agreement or directive relating to Tongko’s duties and responsibilities – was
never introduced as part of the records of the case. The reality is, prior to de Dios’ letter,
Manulife had practically left Tongko alone not only in doing the business of selling
insurance, but also in guiding the agents under his wing. As discussed below, the alleged
directives covered by de Dios’ letter, heretofore quoted in full, were policy directions and
targeted results that the company wanted Tongko and the other sales groups to realign
with in their own selling activities. This is the reality that the parties’ presented evidence
consistently tells us.
What, to Tongko, serve as evidence of labor law control are the codes of conduct that
Manulife imposes on its agents in the sale of insurance. The mere presentation of codes
or of rules and regulations, however, is not per se indicative of labor law control as the
law and jurisprudence teach us.
As already recited above, the Insurance Code imposes obligations on both the insurance
company and its agents in the performance of their respective obligations under the
Code, particularly on licenses and their renewals, on the representations to be made to
potential customers, the collection of premiums, on the delivery of insurance policies, on
the matter of compensation, and on measures to ensure ethical business practice in the
industry.
The general law on agency, on the other hand, expressly allows the principal an element
of control over the agent in a manner consistent with an agency relationship. In this
sense, these control measures cannot be read as indicative of labor law control.
Foremost among these are the directives that the principal may impose on the agent to
achieve the assigned tasks, to the extent that they do not involve the means and manner
of undertaking these tasks. The law likewise obligates the agent to render an account; in
this sense, the principal may impose on the agent specific instructions on how an
account shall be made, particularly on the matter of expenses and reimbursements. To
these extents, control can be imposed through rules and regulations without intruding
into the labor law concept of control for purposes of employment.
From jurisprudence, an important lesson that the first Insular Life case teaches us is that
a commitment to abide by the rules and regulations of an insurance company does not
ipso facto make the insurance agent an employee. Neither do guidelines somehow
restrictive of the insurance agent’s conduct necessarily indicate "control" as this term is
defined in jurisprudence. Guidelines indicative of labor law "control," as the first
Insular Life case tells us, should not merely relate to the mutually desirable result
intended by the contractual relationship; they must have the nature of dictating the
means or methods to be employed in attaining the result, or of fixing the methodology
and of binding or restricting the party hired to the use of these means. In fact, results-
wise, the principal can impose production quotas and can determine how many agents,
with specific territories, ought to be employed to achieve the company’s objectives.
These are management policy decisions that the labor law element of control cannot
reach. Our ruling in these respects in the first Insular Life case was practically reiterated
in Carungcong. Thus, as will be shown more fully below, Manulife’s codes of
conduct,30 all of which do not intrude into the insurance agents’ means and manner of
conducting their sales and only control them as to the desired results and Insurance
Code norms, cannot be used as basis for a finding that the labor law concept of control insurance agent; this role continued to dominate the relations between Tongko and
existed between Manulife and Tongko. Manulife even after Tongko assumed his leadership role among agents. This conclusion
cannot be denied because it proceeds from the undisputed fact that Tongko and
The dissent considers the imposition of administrative and managerial functions on Manulife never altered their July 1, 1977 Agreement, a distinction the present case has
Tongko as indicative of labor law control; thus, Tongko as manager, but not as insurance with the contractual changes made in the second Insular Life case. Tongko’s results-
agent, became Manulife’s employee. It drew this conclusion from what the other Manulife based commissions, too, attest to the primacy he gave to his role as insurance sales
managers disclosed in their affidavits (i.e., their enumerated administrative and agent.
managerial functions) and after comparing these statements with the managers in
Grepalife. The dissent compared the control exercised by Manulife over its managers in The dissent apparently did not also properly analyze and appreciate the great qualitative
the present case with the control the managers in the Grepalife case exercised over their difference that exists between:
employees by presenting the following matrix:31
 the Manulife managers’ role is to coordinate activities of the agents under the
Duties of Manulife’s Manager Duties of Grepalife’s Managers/Supervisors managers’ Unit in the agents’ daily, weekly, and monthly selling activities, making
sure that their respective sales targets are met.
- to render or recommend prospective - train understudies for the position of district  the District Manager’s duty in Grepalife is to properly account, record, and
agents to be licensed, trained and manager document the company's funds, spot-check and audit the work of the zone
contracted to sell Manulife products and who supervisors, conserve the company's business in the district through
will be part of my Unit "reinstatements," follow up the submission of weekly remittance reports of the
debit agents and zone supervisors, preserve company property in good
- to coordinate activities of the agents under - properly account, record and document the
condition, train understudies for the position of district managers, and maintain
[the managers’] Unit in [the agents’] daily, company’s funds, spot-check and audit the work
his quota of sales (the failure of which is a ground for termination).
weekly and monthly selling activities, making of the zone supervisors, x x x follow up the
 the Zone Supervisor’s (also in Grepalife) has the duty to direct and supervise
sure that their respective sales targets are submission of weekly remittance reports of the
the sales activities of the debit agents under him, conserve company property
met; debit agents and zone supervisors
through "reinstatements," undertake and discharge the functions of absentee
debit agents, spot-check the records of debit agents, and insure proper
- to conduct periodic training sessions for - direct and supervise the sales activities of the documentation of sales and collections by the debit agents.
[the] agents to further enhance their sales debit agents under him, x x x undertake and
skill; and discharge the functions of absentee debit
These job contents are worlds apart in terms of "control." In Grepalife, the details of how
agents, spot-check the record of debit agents,
to do the job are specified and pre-determined; in the present case, the operative words
- to assist [the] agents with their sales and insure proper documentation of sales and
are the "sales target," the methodology being left undefined except to the extent of being
activities by way of joint fieldwork, collections of debit agents.
"coordinative." To be sure, a "coordinative" standard for a manager cannot be indicative
consultations and one-on-one evaluation of control; the standard only essentially describes what a Branch Manager is – the
and analysis of particular accounts person in the lead who orchestrates activities within the group. To "coordinate," and
thereby to lead and to orchestrate, is not so much a matter of control by Manulife; it is
Aside from these affidavits however, no other evidence exists regarding the effects of simply a statement of a branch manager’s role in relation with his agents from the point
Tongko’s additional roles in Manulife’s sales operations on the contractual relationship of view of Manulife whose business Tongko’s sales group carries.
between them.
A disturbing note, with respect to the presented affidavits and Tongko’s alleged
To the dissent, Tongko’s administrative functions as recruiter, trainer, or supervisor of administrative functions, is the selective citation of the portions supportive of an
other sales agents constituted a substantive alteration of Manulife’s authority over employment relationship and the consequent omission of portions leading to the contrary
Tongko and the performance of his end of the relationship with Manulife. We could not conclusion. For example, the following portions of the affidavit of Regional Sales
deny though that Tongko remained, first and foremost, an insurance agent, and that his Manager John Chua, with counterparts in the other affidavits, were not brought out in the
additional role as Branch Manager did not lessen his main and dominant role as Decision of November 7, 2008, while the other portions suggesting labor law control
were highlighted. Specifically, the following portions of the affidavits were not brought
out:32
1.a. I have no fixed wages or salary since my services are compensated by way
of commissions based on the computed premiums paid in full on the policies
obtained thereat;
1.b. I have no fixed working hours and employ my own method in soliticing
insurance at a time and place I see fit;
1.c. I have my own assistant and messenger who handle my daily work load;
1.d. I use my own facilities, tools, materials and supplies in carrying out my
business of selling insurance;
xxxx
6. I have my own staff that handles the day to day operations of my office;
7. My staff are my own employees and received salaries from me;
xxxx
9. My commission and incentives are all reported to the Bureau of Internal
Revenue (BIR) as income by a self-employed individual or professional with a ten
(10) percent creditable withholding tax. I also remit monthly for professionals.
These statements, read with the above comparative analysis of the Manulife and
the Grepalife cases, would have readily yielded the conclusion that no employer-
employee relationship existed between Manulife and Tongko.
Even de Dios’ letter is not determinative of control as it indicates the least amount of
intrusion into Tongko’s exercise of his role as manager in guiding the sales agents.
Strictly viewed, de Dios’ directives are merely operational guidelines on how Tongko
could align his operations with Manulife’s re-directed goal of being a "big league player."
The method is to expand coverage through the use of more agents. This requirement for
the recruitment of more agents is not a means-and-method control as it relates, more
than anything else, and is directly relevant, to Manulife’s objective of expanded business
operations through the use of a bigger sales force whose members are all on a principal-
agent relationship. An important point to note here is that Tongko was not supervising
regular full-time employees of Manulife engaged in the running of the insurance
business; Tongko was effectively guiding his corps of sales agents, who are bound to
Manulife through the same Agreement that he had with Manulife, all the while sharing in
these agents’ commissions through his overrides. This is the lead agent concept
mentioned above for want of a more appropriate term, since the title of Branch Manager
used by the parties is really a misnomer given that what is involved is not a specific
regular branch of the company but a corps of non-employed agents, defined in terms of
covered territory, through which the company sells insurance. Still another point to
consider is that Tongko was not even setting policies in the way a regular company
manager does; company aims and objectives were simply relayed to him with
suggestions on how these objectives can be reached through the expansion of a non-
employee sales force.
Interestingly, a large part of de Dios’ letter focused on income, which Manulife
demonstrated, in Tongko’s case, to be unaffected by the new goal and direction the
company had set. Income in insurance agency, of course, is dependent on results, not
on the means and manner of selling – a matter for Tongko and his agents to determine
and an area into which Manulife had not waded. Undeniably, de Dios’ letter contained a
directive to secure a competent assistant at Tongko’s own expense. While couched in
terms of a directive, it cannot strictly be understood as an intrusion into Tongko’s method
of operating and supervising the group of agents within his delineated territory. More
than anything else, the "directive" was a signal to Tongko that his results were
unsatisfactory, and was a suggestion on how Tongko’s perceived weakness in delivering
results could be remedied. It was a solution, with an eye on results, for a consistently
underperforming group; its obvious intent was to save Tongko from the result that he
then failed to grasp – that he could lose even his own status as an agent, as he in fact
eventually did.
The present case must be distinguished from the second Insular Life case that showed
the hallmarks of an employer-employee relationship in the management system
established. These were: exclusivity of service, control of assignments and removal of
agents under the private respondent’s unit, and furnishing of company facilities and
materials as well as capital described as Unit Development Fund. All these are obviously
absent in the present case. If there is a commonality in these cases, it is in the collection
of premiums which is a basic authority that can be delegated to agents under the
Insurance Code.
As previously discussed, what simply happened in Tongko’s case was the grant of an
expanded sales agency role that recognized him as leader amongst agents in an area
that Manulife defined. Whether this consequently resulted in the establishment of an
employment relationship can be answered by concrete evidence that corresponds
to the following questions:
 as lead agent, what were Tongko’s specific functions and the terms of his
additional engagement;
  was he paid additional compensation as a so-called Area Sales Manager, apart
from the commissions he received from the insurance sales he generated;
 what can be Manulife’s basis to terminate his status as lead agent;
 can Manulife terminate his role as lead agent separately from his agency
contract; and
 to what extent does Manulife control the means and methods of Tongko’s role as
lead agent?
The answers to these questions may, to some extent, be deduced from the evidence at
hand, as partly discussed above. But strictly speaking, the questions cannot definitively
and concretely be answered through the evidence on record. The concrete evidence
required to settle these questions is simply not there, since only the Agreement and the
anecdotal affidavits have been marked and submitted as evidence.
Given this anemic state of the evidence, particularly on the requisite confluence of the
factors determinative of the existence of employer-employee relationship, the Court
cannot conclusively find that the relationship exists in the present case, even if such
relationship only refers to Tongko’s additional functions. While a rough deduction can be
made, the answer will not be fully supported by the substantial evidence needed.
Under this legal situation, the only conclusion that can be made is that the absence of
evidence showing Manulife’s control over Tongko’s contractual duties points to the
absence of any employer-employee relationship between Tongko and Manulife. In the
context of the established evidence, Tongko remained an agent all along; although his
subsequent duties made him a lead agent with leadership role, he was nevertheless only
an agent whose basic contract yields no evidence of means-and-manner control.
This conclusion renders unnecessary any further discussion of the question of whether
an agent may simultaneously assume conflicting dual personalities. But to set the record
straight, the concept of a single person having the dual role of agent and employee while
doing the same task is a novel one in our jurisprudence, which must be viewed with
caution especially when it is devoid of any jurisprudential support or precedent. The
quoted portions in Justice Carpio-Morales’ dissent,33 borrowed from both the Grepalife
and the second Insular Life cases, to support the duality approach of the Decision of
November 7, 2008, are regrettably far removed from their context – i.e., the cases’
factual situations, the issues they decided and the totality of the rulings in these cases –
and cannot yield the conclusions that the dissenting opinions drew.
The Grepalife case dealt with the sole issue of whether the Ruiz brothers’ appointment
as zone supervisor and district manager made them employees of Grepalife. Indeed,
because of the presence of the element of control in their contract of engagements, they
were considered Grepalife’s employees. This did not mean, however, that they were
simultaneously considered agents as well as employees of Grepalife; the Court’s ruling
never implied that this situation existed insofar as the Ruiz brothers were concerned. The
Court’s statement – the Insurance Code may govern the licensing requirements and
other particular duties of insurance agents, but it does not bar the application of the
Labor Code with regard to labor standards and labor relations – simply means that when
an insurance company has exercised control over its agents so as to make them their
employees, the relationship between the parties, which was otherwise one for agency
governed by the Civil Code and the Insurance Code, will now be governed by the Labor
Code. The reason for this is simple – the contract of agency has been transformed into
an employer-employee relationship.
The second Insular Life case, on the other hand, involved the issue of whether the labor
bodies have jurisdiction over an illegal termination dispute involving parties who had two
contracts – first, an original contract (agency contract), which was undoubtedly one for
agency, and another subsequent contract that in turn designated the agent acting unit
manager (a management contract). Both the Insular Life and the labor arbiter were one
in the position that both were agency contracts. The Court disagreed with this conclusion
and held that insofar as the management contract is concerned, the labor arbiter has
jurisdiction. It is in this light that we remanded the case to the labor arbiter for further
proceedings. We never said in this case though that the insurance agent had effectively
assumed dual personalities for the simple reason that the agency contract has been
effectively superseded by the management contract. The management contract provided
that if the appointment was terminated for any reason other than for cause, the acting
unit manager would be reverted to agent status and assigned to any unit.
The dissent pointed out, as an argument to support its employment relationship
conclusion, that any doubt in the existence of an employer-employee relationship should
be resolved in favor of the existence of the relationship.34This observation, apparently
drawn from Article 4 of the Labor Code, is misplaced, as Article 4 applies only when a
doubt exists in the "implementation and application" of the Labor Code and its
implementing rules; it does not apply where no doubt exists as in a situation where the
claimant clearly failed to substantiate his claim of employment relationship by the
quantum of evidence the Labor Code requires.
On the dissent’s last point regarding the lack of jurisprudential value of our November 7,
2008 Decision, suffice it to state that, as discussed above, the Decision was not
supported by the evidence adduced and was not in accordance with controlling
jurisprudence. It should, therefore, be reconsidered and abandoned, but not in the
manner the dissent suggests as the dissenting opinions are as factually and as legally
erroneous as the Decision under reconsideration.
In light of these conclusions, the sufficiency of Tongko’s failure to comply with the
guidelines of de Dios’ letter, as a ground for termination of Tongko’s agency, is a matter
that the labor tribunals cannot rule upon in the absence of an employer-employee
relationship. Jurisdiction over the matter belongs to the courts applying the laws of
insurance, agency and contracts.
WHEREFORE, considering the foregoing discussion, we REVERSE our Decision of
November 7, 2008, GRANTManulife’s motion for reconsideration and,
accordingly, DISMISS Tongko’s petition. No costs.
SO ORDERED.
G.R. No. 179807 July 31, 2009
RAMY GALLEGO, Petitioner,
vs.
BAYER PHILIPPINES, INC., DANPIN GUILLERMO, PRODUCT IMAGE MARKETING,
INC., and EDGARDO BERGONIA, Respondents.
DECISION
CARPIO MORALES, J.:
Ramy Gallego (petitioner) was contracted in April 1992 by Bayer Philippines, Inc.
(BAYER) as crop protection technician to promote and market BAYER products.1 Under
the supervision of Aristeo Filipino, BAYER sales representative for Panay Island,
petitioner made farm visits to different municipalities in Panay Island to convince farmers
to buy BAYER products.2
In 1996, petitioner’s employment with BAYER came to a halt, prompting him to seek
employment with another company. BAYER eventually reemployed petitioner, however,
in 1997 through Product Image and Marketing Services, Inc. (PRODUCT IMAGE) of
which respondent Edgardo Bergonia (Bergonia) was the President and General
Manager, performing the same task as that of crop protection technician – promoting
BAYER products to farmers and dealers in Panay Island – solely for the benefit of
BAYER.3
By petitioner’s claim, in October, 2001, he was directed by Pet Pascual, the newly
assigned BAYER sales representative, to submit a resignation letter, but he refused; and
that in January, 2002, he was summoned by his immediate supervisors including
respondent Danpin Guillermo (Guillermo), BAYER District Sales Manager for Panay, and
was ordered to quit his employment which called for him to return all pieces of service
equipment issued to him, but that again he refused.4
Still by petitioner’s claim, he continued performing his duties and receiving compensation
until the end of January, 2002; that on April 7, 2002, he received a memorandum that his
area of responsibility would be transferred to Luzon, of which memorandum he sought
reconsideration but to no avail; and that Guillermo and Bergonia spread rumors that
reached the dealers in Antique to the effect that he was not anymore connected with
BAYER and any transaction with him would no longer be honored as of April 30, 2002.5
Believing that his employment was terminated, petitioner lodged on June 6, 2002 a
complaint for illegal dismissal with the National Labor Relations Commission (NLRC)
against herein respondents Bayer, Guillermo, Product Image, and Bergonia, with claims
for reinstatement, backwages and/or separation pay, unpaid wages, holiday pay,
premium pay, service incentive leave and allowances, damages and attorney’s fees.6
Respondents BAYER and Guillermo denied the existence of an employer-employee
relationship between BAYER and petitioner, explaining that petitioner’s work at BAYER
was simply occasioned by the Contract of Promotional Services that BAYER had
executed with PRODUCT IMAGE whereby PRODUCT IMAGE was to promote and
market BAYER products on its (PRODUCT IMAGE) own account and in its own manner
and method. They added that as an independent contractor, PRODUCT IMAGE retained
the exclusive power of control over petitioner as it assigned full-time supervisors to
exercise control and supervision over its employees assigned at BAYER.7
Respondents PRODUCT IMAGE and Bergonia, on the other hand, admitted that
petitioner was hired as an employee of PRODUCT IMAGE on April 7, 1997 on a
contractual basis to promote and market BAYER products pursuant to the Contract of
Promotional Services forged between it and BAYER. They alleged that petitioner was a
field worker who had no fixed hours and worked under minimal supervision, his
performance being gauged only by his accomplishment reports duly certified to by
BAYER acting as his de facto supervisor;8 that petitioner was originally assigned to Iloilo
but later transferred to Antique; that petitioner was not dismissed, but went on official
leave from January 23 to 31, 2002, and stopped reporting for work thereafter; and that
petitioner was supposed to have been reassigned to South Luzon effective March 15,
2002 in accordance with a personnel reorganization program, but he likewise failed to
report to his new work station.9
By Decision of May 6, 2004,10 the Labor Arbiter declared respondents guilty of illegal
dismissal, disposing as follows:
WHEREFORE, judgment is rendered declaring respondents, Bayer Phil. Inc./Danpin
Guillermo and Product Image Marketing Services, Inc./Edgardo Begornia [sic] guilty of
Illegal Dismissal and is hereby ORDERED to Reinstatecomplainant to his former or
equivalent position ten (10) days from receipt hereof and to immediately pay complainant
upon receipt of this decision the following:
 Backwages Php 228,000.00
13th Month Pay Php 19,000.00
Holiday Pay Php 9,500.00
Service Incentive Leave Pay Php 4,750.00
Attorney’s Fees ` Php 26,125.00
Total: Php 287,375.00
In so deciding, the Labor Arbiter found, among other things, that there was an employer-
employee relationship between BAYER and petitioner since BAYER furnished petitioner
the needed facilities and paraphernalia, and fixed the methodology to be used in the
performance of his work.
On appeal by respondents, the NLRC reversed the Decision of the Labor Arbiter and
dismissed petitioner’s complaint by Decision of February 22, 2006,11 holding that as an
independent contractor, PRODUCT IMAGE was the employer of petitioner but there was
no evidence that petitioner was dismissed by either PRODUCT IMAGE or BAYER.
Sustaining PRODUCT IMAGE’s claim of abandonment, it held that an employee is
deemed to have abandoned his job if he failed to report for work after the expiration of a
duly approved leave of absence or if, after being transferred to a new assignment, he did
not report for work anymore.
Petitioner’s Motion for Reconsideration having been denied by Resolution of May 25,
2006,12 he appealed to the Court of Appeals via Certiorari.13
By Resolution of September 25, 2006, the appellate court dismissed petitioner’s petition
for failure to attach to it the complaint and the parties’ respective position papers filed
with the Labor Arbiter.14 His Motion for Reconsideration having been denied by
Resolution of August 14, 2007,15 petitioner comes before this Court via the present
Petition for Review on Certiorari.
Petitioner argues that the appellate court erred in dismissing his petition outright
considering that it had previously allowed subsequent submission of required documents
not attached to a petition for certiorari; and that he attached the required pleadings to his
Motion for Reconsideration with the appellate court. Moreover, he contends that
respondents failed to discharge the burden of proving the validity of his dismissal in order
to overturn the finding of the Labor Arbiter that he was illegally dismissed.16
BAYER and Guillermo counter that petitioner raised factual issues in his petition before
the appellate court which are not reviewable by certiorari; that petitioner’s failure to
attach the required pleadings to his petition before the appellate court, coupled with his
failure to offer any justification therefor, provides no occasion for a liberal application of
the rules in his favor; that petitioner has no cause of action against them as his employer
is PRODUCT IMAGE; and that assuming that petitioner is entitled to his money claims,
the same should be enforced against the performance bond posted by PRODUCT
IMAGE to cover the claims of its employees assigned at BAYER.17
PRODUCT IMAGE and Bergonia postulate in their Comment that the appellate court’s
outright dismissal of petitioner’s appeal was proper in view of, among other things, the
summary nature of proceedings in labor cases. They also contend that petitioner’s
present petition suffers from the following infirmities: (1) it does not contain an affidavit of
service; (2) it is not accompanied by petitioner’s Petition for Certiorari before the
appellate court; (3) it does not specify the errors of law allegedly committed by the
appellate court; (4) it is not accompanied by proof of service upon the adverse party of a
copy of the payment of docket fees; (5) it raises questions of fact; and (6) it impleads the
NLRC and imputes grave abuse of discretion to the appellate court, thereby implying that
the petition is likewise made under Rule 65 of the Rules of Court. Lastly, they maintain
that petitioner was not dismissed as he actually abandoned his job.18
The Court shall first resolve the procedural issues.
Only errors of law are generally reviewed by this Court in petitions for review on certiorari
of the appellate court’s decisions,19 and the question of whether an employer-employee
relationship exists in a given case is essentially a question of fact.20 Be that as it may,
when, as here, the findings of the NLRC contradict those of the Labor Arbiter, this Court,
in the exercise of its equity jurisdiction, may look into the records of the case and
reexamine the questioned findings.21
Respecting the appellate court’s dismissal of petitioner’s Petition for Certiorari for his
failure to attach thereto the relevant pleadings filed with the Labor Arbiter, the
requirement to attach the same under Section 1, Rule 6522 is considered vis a vis Section
3, Rule 4623 which states that the failure of the petitioner to comply with any of the
documentary requirements, such as the attachment of relevant pleadings, "shall be
sufficient ground for the dismissal of the petition." By and large, the outright dismissal of
a petition for failure to comply with said requirement cannot be assailed as constituting
either grave abuse of discretion or reversible error of law.24
The Court, however, is inclined to, as it does, overlook petitioner’s failure to attach the
subject relevant pleadings to his Petition for Certiorari before the appellate court in view
of the serious matters dealt with in this case. That brings the Court to consider the
substantial merits of the case, thus rendering it unnecessary to still discuss the other
procedural matters raised by respondents. 1avv ph!1
In the main, the substantive issues are: whether PRODUCT IMAGE is a labor-only
contactor and BAYER should be deemed petitioner’s principal employer; and whether
petitioner was illegally dismissed from his employment.
Permissible job contracting or subcontracting refers to an arrangement whereby a
principal agrees to farm out with a contractor or subcontractor the performance 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.25 Under this arrangement, the following conditions must be
met: (a) the contractor carries on a distinct and independent business and undertakes
the contract work on his 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 his work except as to the results thereof; (b)
the contractor has substantial capital or investment; and (c) the agreement between the
principal and contractor or subcontractor assures the contractual employees’ entitlement
to all labor and occupational safety and health standards, free exercise of the right to
self-organization, security of tenure, and social welfare benefits.26
In distinguishing between permissible job contracting and prohibited labor-only
contracting,27 the totality of the facts and the surrounding circumstances of the case are
to be considered,28 each case to be determined by its own facts, and all the features of
the relationship assessed.29
In the case at bar, the Court finds substantial evidence to support the finding of the
NLRC that PRODUCT IMAGE is a legitimate job contractor.
The Court notes that PRODUCT IMAGE was issued by the Department of Labor and
Employment (DOLE) Certificate of Registration Numbered NCR-8-0602-176 reading:
CERTIFICATE OF REGISTRATION
Numbered NCR-8-0602-176
issued to
Mr. Edgardo V. Bergonia
President
PRODUCT IMAGE & MARKETING SERVICES, INC.
Unit 5& 6 GF J & L Bldg., 251 EDSA Greenhills,
Mandaluyong City
for having complied with the requirements as provided for under the Labor Code, as
amended, and its implementing Rules and having paid the registration fee in the amount
of ONE HUNDRED (P100) PESOS per Official Receipt Number 6530485Y, dated 21
June 2002.30
The DOLE certificate having been issued by a public officer, it carries with it the
presumption that it was issued in the regular performance of official duty.31 Petitioner’s
bare assertions fail to rebut this presumption. Further, since the DOLE is the agency
primarily responsible for regulating the business of independent job contractors, the
Court can presume, in the absence of evidence to the contrary, that it had thoroughly
evaluated the requirements submitted by PRODUCT IMAGE before issuing the
Certificate of Registration.
Independently of the DOLE’s Certification, among the circumstances that establish the
status of PRODUCT IMAGE as a legitimate job contractor are: (1) PRODUCT IMAGE
had, during the period in question, a contract with BAYER for the promotion and
marketing of BAYER products;32 (2) PRODUCT IMAGE has an independent business
and provides services nationwide to big companies such as Ajinomoto Philippines and
Procter and Gamble Corporation;33 and (3) PRODUCT IMAGE’s total assets from 1998
to 2000 amounted to ₱405,639, ₱559,897, and ₱644,728, respectively.34 PRODUCT
IMAGE also posted a bond in the amount of ₱100,000 to answer for any claim of its
employees for unpaid wages and other benefits that may arise out of the implementation
of its contract with BAYER.35
PRODUCT IMAGE cannot thus be considered a labor-only contractor.
The existence of an employer-employee relationship is determined on the basis of four
standards, namely: (a) the manner of selection and engagement of the putative
employee; (b) the mode of payment of wages; (c) the presence or absence of power of
dismissal; and (d) the presence or absence of control of the putative employee’s
conduct. Most determinative among these factors is the so-called "control test."36
The presence of the first requisite which refers to selection and engagement is
evidenced by a document entitled Job Offer, whereby PRODUCT IMAGE offered to hire
petitioner as crop protection technician effective April 7, 1997, which offer petitioner
accepted.37
On the second requisite regarding the payment of wages, it was PRODUCT IMAGE that
paid the wages and other benefits of petitioner, pursuant to the stipulation in the contract
between PRODUCT IMAGE and BAYER that BAYER shall pay PRODUCT IMAGE an
amount based on services actually rendered without regard to the number of personnel
employed by PRODUCT IMAGE; and that PRODUCT IMAGE shall faithfully comply with
the provisions of the Labor Code and hold BAYER free and harmless from any claim of
its employees arising from the contract.38
As to the third requisite which relates to the power of dismissal, and the fourth requisite
which relates to the power of control, both powers are vested in PRODUCT IMAGE. The
Contract of Promotional Services provides that PRODUCT IMAGE shall have the power
to discipline its employees assigned at BAYER, such that no control whatsoever shall be
exercised by BAYER over those personnel on the manner and method by which they
perform their duties,39 and that all directives, complaints, or observations of BAYER
relating to the performance of the employees of PRODUCT IMAGE shall be addressed
to the latter.40
If at all, the only control measure retained by BAYER over petitioner was to act as his de
facto supervisor in certifying to the veracity of the accomplishment reports he submitted
to PRODUCT IMAGE. This is by no means the kind of control that establishes an
employer-employee relationship as it pertains only to the results and not the manner and
method of doing the work. It would be a rare contract of service that gives untrammelled
freedom to the party hired and eschews any intervention whatsoever in his performance
of the engagement.41 Surely, it would be foolhardy for any company to completely give
the reins and totally ignore the operations it has contracted out.42
In fine, PRODUCT IMAGE is ineluctably the employer of petitioner.
Respecting the issue of illegal dismissal, the Court appreciates no evidence that
petitioner was dismissed. What it finds is that petitioner unilaterally stopped reporting for
work before filing a complaint for illegal dismissal, based on his belief that Guillermo and
Bergonia had spread rumors that his transactions on behalf of BAYER would no longer
be honored as of April 30, 2002. This belief remains just that – it is unsubstantiated.
While in cases of illegal dismissal, the employer bears the burden of proving that the
dismissal is for a valid or authorized cause, the employee must first establish by
substantial evidence the fact of dismissal.43
WHEREFORE, the petition is, in light of the foregoing, DENIED.
SO ORDERED.
G.R. No. 179546 February 13, 2009
COCA-COLA BOTTLERS PHILS., INC., Petitioner,
vs.
ALAN M. AGITO, REGOLO S. OCA III, ERNESTO G. ALARIAO, JR., ALFONSO PAA,
JR., DEMPSTER P. ONG, URRIQUIA T. ARVIN, GIL H. FRANCISCO, and EDWIN M.
GOLEZ, Respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court, assailing
the Decision1 dated 19 February 2007, promulgated by the Court of Appeals in CA-G.R.
SP No. 85320, reversing the Resolution2 rendered on 30 October 2003 by the National
Labor Relations Commission (NLRC) in NLRC NCR CA No. 036494-03. The Court of
Appeals, in its assailed Decision, declared that respondents Alan M. Agito, Regolo S.
Oca III, Ernesto G. Alariao, Jr., Alfonso Paa, Jr., Dempster P. Ong, Urriquia T. Arvin, Gil
H. Francisco, and Edwin M. Golez were regular employees of petitioner Coca-Cola
Bottlers Phils., Inc; and that Interserve Management & Manpower Resources, Inc.
(Interserve) was a labor-only contractor, whose presence was intended merely to
preclude respondents from acquiring tenurial security.
Petitioner is a domestic corporation duly registered with the Securities and Exchange
Commission (SEC) and engaged in manufacturing, bottling and distributing soft drink
beverages and other allied products.
On 15 April 2002, respondents filed before the NLRC two complaints against petitioner,
Interserve, Peerless Integrated Services, Inc., Better Builders, Inc., and Excellent
Partners, Inc. for reinstatement with backwages, regularization, nonpayment of 13th
month pay, and damages. The two cases, docketed as NLRC NCR Case No. 04-02345-
2002 and NLRC NCR Case No. 05-03137-02, were consolidated.
Respondents alleged in their Position Paper that they were salesmen assigned at the
Lagro Sales Office of petitioner. They had been in the employ of petitioner for years, but
were not regularized. Their employment was terminated on 8 April 2002 without just
cause and due process. However, they failed to state the reason/s for filing a complaint
against Interserve; Peerless Integrated Services, Inc.; Better Builders, Inc.; and Excellent
Partners, Inc.3
Petitioner filed its Position Paper (with Motion to Dismiss),4 where it averred that
respondents were employees of Interserve who were tasked to perform contracted
services in accordance with the provisions of the Contract of Services5 executed between
petitioner and Interserve on 23 March 2002. Said Contract between petitioner and
Interserve, covering the period of 1 April 2002 to 30 September 2002, constituted
legitimate job contracting, given that the latter was a bona fide independent contractor
with substantial capital or investment in the form of tools, equipment, and machinery
necessary in the conduct of its business.
To prove the status of Interserve as an independent contractor, petitioner presented the
following pieces of evidence: (1) the Articles of Incorporation of Interserve;6 (2) the
Certificate of Registration of Interserve with the Bureau of Internal Revenue;7 (3) the
Income Tax Return, with Audited Financial Statements, of Interserve for 2001;8and (4)
the Certificate of Registration of Interserve as an independent job contractor, issued by
the Department of Labor and Employment (DOLE).9
As a result, petitioner asserted that respondents were employees of Interserve, since it
was the latter which hired them, paid their wages, and supervised their work, as proven
by: (1) respondents’ Personal Data Files in the records of Interserve;10 (2) respondents’
Contract of Temporary Employment with Interserve;11 and (3) the payroll records of
Interserve.12
Petitioner, thus, sought the dismissal of respondents’ complaint against it on the ground
that the Labor Arbiter did not acquire jurisdiction over the same in the absence of an
employer-employee relationship between petitioner and the respondents.13
In a Decision dated 28 May 2003, the Labor Arbiter found that respondents were
employees of Interserve and not of petitioner. She reasoned that the standard put forth in
Article 280 of the Labor Code for determining regular employment (i.e., that the
employee is performing activities that are necessary and desirable in the usual business
of the employer) was not determinative of the issue of whether an employer-employee
relationship existed between petitioner and respondents. While respondents performed
activities that were necessary and desirable in the usual business or trade of petitioner,
the Labor Arbiter underscored that respondents’ functions were not indispensable to the
principal business of petitioner, which was manufacturing and bottling soft drink
beverages and similar products.
The Labor Arbiter placed considerable weight on the fact that Interserve was registered
with the DOLE as an independent job contractor, with total assets amounting to
₱1,439,785.00 as of 31 December 2001. It was Interserve that kept and maintained
respondents’ employee records, including their Personal Data Sheets; Contracts of
Employment; and remittances to the Social Securities System (SSS), Medicare and Pag-
ibig Fund, thus, further supporting the Labor Arbiter’s finding that respondents were
employees of Interserve. She ruled that the circulars, rules and regulations which
petitioner issued from time to time to respondents were not indicative of control as to
make the latter its employees.
Nevertheless, the Labor Arbiter directed Interserve to pay respondents their pro-rated
13th month benefits for the period of January 2002 until April 2002.14
In the end, the Labor Arbiter decreed:
WHEREFORE, judgment is hereby rendered finding that [herein respondents] are
employees of [herein petitioner] INTERSERVE MANAGEMENT & MANPOWER
RESOURCES, INC. Concomitantly, respondent Interserve is further ordered to pay
[respondents] their pro-rated 13th month pay.
The complaints against COCA-COLA BOTTLERS PHILS., INC. is DISMISMMED for lack
of merit.
In like manner the complaints against PEERLESS INTEGRATED SERVICES, INC.,
BETTER BUILDING INC. and EXCELLENT PARTNERS COOPERATIVE are
DISMISSED for failure of complainants to pursue against them.
Other claims are dismissed for lack of merit.
The computation of the Computation and Examination Unit, this Commission if (sic)
made part of this Decision. 15
Unsatisfied with the foregoing Decision of the Labor Arbiter, respondents filed an appeal
with the NLRC, docketed as NLRC NCR CA No. 036494-03.
In their Memorandum of Appeal,16 respondents maintained that contrary to the finding of
the Labor Arbiter, their work was indispensable to the principal business of petitioner.
Respondents supported their claim with copies of the Delivery Agreement17 between
petitioner and TRMD Incorporated, stating that petitioner was "engaged in the
manufacture, distribution and sale of soft drinks and other related products with various
plants and sales offices and warehouses located all over the Philippines." Moreover,
petitioner supplied the tools and equipment used by respondents in their jobs such as
forklifts, pallet, etc. Respondents were also required to work in the warehouses, sales
offices, and plants of petitioner. Respondents pointed out that, in contrast, Interserve did
not own trucks, pallets cartillas, or any other equipment necessary in the sale of Coca-
Cola products.
Respondents further averred in their Memorandum of Appeal that petitioner exercised
control over workers supplied by various contractors. Respondents cited as an example
the case of Raul Arenajo (Arenajo), who, just like them, worked for petitioner, but was
made to appear as an employee of the contractor Peerless Integrated Services, Inc. As
proof of control by petitioner, respondents submitted copies of: (1) a
Memorandum18 dated 11 August 1998 issued by Vicente Dy (Dy), a supervisor of
petitioner, addressed to Arenajo, suspending the latter from work until he explained his
disrespectful acts toward the supervisor who caught him sleeping during work hours; (2)
a Memorandum19 dated 12 August 1998 again issued by Dy to Arenajo, informing the
latter that the company had taken a more lenient and tolerant position regarding his
offense despite having found cause for his dismissal; (3) Memorandum20 issued by Dy to
the personnel of Peerless Integrated Services, Inc., requiring the latter to present their
timely request for leave or medical certificates for their absences; (4) Personnel Workers
Schedules, 21prepared by RB Chua, another supervisor of petitioner; (5) Daily Sales
Monitoring Report prepared by petitioner;22and (6) the Conventional Route System
Proposed Set-up of petitioner. 23
The NLRC, in a Resolution dated 30 October 2003, affirmed the Labor Arbiter’s Decision
dated 28 May 2003 and pronounced that no employer-employee relationship existed
between petitioner and respondents. It reiterated the findings of the Labor Arbiter that
Interserve was an independent contractor as evidenced by its substantial assets and
registration with the DOLE. In addition, it was Interserve which hired and paid
respondents’ wages, as well as paid and remitted their SSS, Medicare, and Pag-ibig
contributions. Respondents likewise failed to convince the NLRC that the instructions
issued and trainings conducted by petitioner proved that petitioner exercised control over
respondents as their employer.24 The dispositive part of the NLRC Resolution states:25
WHEREFORE, the instant appeal is hereby DISMISSED for lack of merit. However,
respondent Interserve Management & Manpower Resources, Inc., is hereby ordered to
pay the [herein respondents] their pro-rated 13th month pay.
Aggrieved once more, respondents sought recourse with the Court of Appeals by filing a
Petition for Certiorari under Rule 65, docketed as CA-G.R. SP No. 85320.
The Court of Appeals promulgated its Decision on 9 February 2007, reversing the NLRC
Resolution dated 30 October 2003. The appellate court ruled that Interserve was a labor-
only contractor, with insufficient capital and investments for the services which it was
contracted to perform. With only ₱510,000.00 invested in its service vehicles and
₱200,000.00 in its machineries and equipment, Interserve would be hard-pressed to
meet the demands of daily soft drink deliveries of petitioner in the Lagro area. The Court
Appeals concluded that the respondents used the equipment, tools, and facilities of
petitioner in the day-to-day sales operations.
Additionally, the Court of Appeals determined that petitioner had effective control over
the means and method of respondents’ work as evidenced by the Daily Sales Monitoring
Report, the Conventional Route System Proposed Set-up, and the memoranda issued by
the supervisor of petitioner addressed to workers, who, like respondents, were
supposedly supplied by contractors. The appellate court deemed that the respondents,
who were tasked to deliver, distribute, and sell Coca-Cola products, carried out functions
directly related and necessary to the main business of petitioner. The appellate court
finally noted that certain provisions of the Contract of Service between petitioner and
Interserve suggested that the latter’s undertaking did not involve a specific job, but rather
the supply of manpower.
The decretal portion of the Decision of the Court of Appeals reads:26
WHEREFORE, the petition is GRANTED. The assailed Resolutions of public respondent
NLRC are REVERSED and SET ASIDE. The case is remanded to the NLRC for further
proceedings.
Petitioner filed a Motion for Reconsideration, which the Court of Appeals denied in a
Resolution, dated 31 August 2007.27
Hence, the present Petition, in which the following issues are raised28:
I
WHETHER OR NOT THE COURT OF APPEALS ACTED IN ACCORDANCE WITH
EVIDENCE ON RECORD, APPLICABLE LAWS AND ESTABLISHED
JURISPRUDENCE WHEN IT RULED THAT INTERSERVE IS A LABOR-ONLY
CONTRACTOR;
II
WHETHER OR NOT THE COURT OF APPEALS ACTED IN ACCORDANCE WITH
APPLICABLE LAWS AND ESTABLISHED JURISPRUDENCE WHEN IT CONCLUDED
THAT RESPONDENTS PERFORMED WORK NECESSARY AND DESIRABLE TO THE
BUSINESS OF [PETITIONER];
III
WHETHER OR NOT THE COURT OF APPEALS COMMITTED SERIOUS ERROR
WHEN IT DECLARED THAT RESPONDENTS WERE EMPLOYEES OF [PETITIONER],
EVEN ABSENT THE FOUR ELEMENTS INDICATIVE OF AN EMPLOYMENT
RELATIONSHIP; AND
IV
WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT
CONCLUDED THAT INTERSERVE WAS ENGAGED BY [PETITIONER] TO SUPPLY
MANPOWER ONLY.
The Court ascertains that the fundamental issue in this case is whether Interserve is a
legitimate job contractor. Only by resolving such issue will the Court be able to determine
whether an employer-employee relationship exists between petitioner and the
respondents. To settle the same issue, however, the Court must necessarily review the
factual findings of the Court of Appeals and look into the evidence presented by the
parties on record.
As a general rule, factual findings of the Court of Appeals are binding upon the Supreme
Court. One exception to this rule is when the factual findings of the former are contrary to
those of the trial court, or the lower administrative body, as the case may be. This Court
is obliged to resolve an issue of fact herein due to the incongruent findings of the Labor
Arbiter and the NLRC and those of the Court of Appeals. 29
The relations which may arise in a situation, where there is an employer, a contractor,
and employees of the contractor, are identified and distinguished under Article 106 of the
Labor Code:
Article 106. Contractor or subcontractor. - Whenever an employer enters into a contract
with another person for the performance of the former’s work, the employees of the
contractor and of the latter’s subcontractor, if any, shall be paid in accordance with the
provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees
in accordance with this Code, the employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent of the work performed under
the contract, in the same manner and extent that he is liable to employees directly
employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the
contracting out of labor to protect the rights of workers established under this Code. In so
prohibiting or restriction, he may make appropriate distinctions between labor-only
contracting and job contracting as well as differentiations within these types of
contracting and determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employee
does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by
such persons are performing activities which are directly related to the principal business
of such employer. In such cases, the person or intermediary shall be considered merely
as an agent of the employer who shall be responsible to the workers in the same manner
and extent as if the latter were directly employed by him.
The afore-quoted provision recognizes two possible relations among the parties: (1) the
permitted legitimate job contract, or (2) the prohibited labor-only contracting.
A legitimate job contract, wherein an employer enters into a contract with a job contractor
for the performance of the former’s work, is permitted by law. Thus, the employer-
employee relationship between the job contractor and his employees is maintained. In
legitimate job contracting, the law creates an employer-employee relationship between
the employer and the contractor’s employees only for a limited purpose, i.e., to ensure
that the employees are paid their wages. The employer becomes jointly and severally
liable with the job contractor only for the payment of the employees’ wages whenever the
contractor fails to pay the same. Other than that, the employer is not responsible for any
claim made by the contractor’s employees.30
On the other hand, labor-only contracting is an arrangement wherein the contractor
merely acts as an agent in recruiting and supplying the principal employer with workers
for the purpose of circumventing labor law provisions setting down the rights of
employees. It is not condoned by law. A finding by the appropriate authorities that a
contractor is a "labor-only" contractor establishes an employer-employee relationship
between the principal employer and the contractor’s employees and the former becomes
solidarily liable for all the rightful claims of the employees. 31
Section 5 of the Rules Implementing Articles 106-109 of the Labor Code, as amended,
provides the guidelines in determining whether labor-only contracting exists:
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby
declared prohibited. For this purpose, labor-only contracting shall refer 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 [is] 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.
The foregoing provisions shall be without prejudice to the application of Article 248(C) of
the Labor Code, as amended.
"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" shall refer to the right reversed 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. (Emphasis supplied.)
When there is labor-only contracting, Section 7 of the same implementing rules,
describes the consequences thereof:
Section 7. Existence of an employer-employee relationship.—The contractor or
subcontractor shall be considered the employer of the contractual employee for purposes
of enforcing the provisions of the Labor Code and other social legislation. The principal,
however, shall be solidarily liable with the contractor in the event of any violation of any
provision of the Labor Code, including the failure to pay wages.
The principal shall be deemed the employer of the contractual employee in any of the
following case, as declared by a competent authority:
a. where there is labor-only contracting; or
b. where the contracting arrangement falls within the prohibitions provided in
Section 6 (Prohibitions) hereof.
According to the foregoing provision, labor-only contracting would give rise to: (1) the
creation of an employer-employee relationship between the principal and the employees
of the contractor or sub-contractor; and (2) the solidary liability of the principal and the
contractor to the employees in the event of any violation of the Labor Code.
Petitioner argues that there could not have been labor-only contracting, since
respondents did not perform activities that were indispensable to petitioner’s principal
business. And, even assuming that they did, such fact alone does not establish an
employer-employee relationship between petitioner and the respondents, since
respondents were unable to show that petitioner exercised the power to select and hire
them, pay their wages, dismiss them, and control their conduct.
The argument of petitioner is untenable.
The law clearly establishes an employer-employee relationship between the principal
employer and the contractor’s employee upon a finding that the contractor is engaged in
"labor-only" contracting. Article 106 of the Labor Code categorically states: "There is
‘labor-only’ contracting where the person supplying workers to an employee does not
have substantial capital or investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by such persons are
performing activities which are directly related to the principal business of such
employer." Thus, performing activities directly related to the principal business of the
employer is only one of the two indicators that "labor-only" contracting exists; the other is
lack of substantial capital or investment. The Court finds that both indicators exist in the
case at bar.
Respondents worked for petitioner as salesmen, with the exception of respondent Gil
Francisco whose job was designated as leadman. In the Delivery Agreement32 between
petitioner and TRMD Incorporated, it is stated that petitioner is engaged in the
manufacture, distribution and sale of softdrinks and other related products. The work of
respondents, constituting distribution and sale of Coca-Cola products, is clearly
indispensable to the principal business of petitioner. The repeated re-hiring of some of
the respondents supports this finding.33 Petitioner also does not contradict respondents’
allegations that the former has Sales Departments and Sales Offices in its various
offices, plants, and warehouses; and that petitioner hires Regional Sales Supervisors
and District Sales Supervisors who supervise and control the salesmen and sales route
helpers.34
As to the supposed substantial capital and investment required of an independent job
contractor, petitioner calls the attention of the Court to the authorized capital stock of
Interserve amounting to ₱2,000,000.00.35 It cites as authority Filipinas Synthetic Fiber
Corp. v. National Labor Relations Commission36 and Frondozo v. National Labor
Relations Commission,37 where the contractors’ authorized capital stock of
₱1,600,000.00 and ₱2,000,000.00, respectively, were considered substantial for the
purpose of concluding that they were legitimate job contractors. Petitioner also refers to
Neri v. National Labor Relations Commission38 where it was held that a contractor
ceases to be a labor-only contractor by having substantial capital alone, without
investment in tools and equipment.
This Court is unconvinced.
At the outset, the Court clarifies that although Interserve has an authorized capital stock
amounting to ₱2,000,000.00, only ₱625,000.00 thereof was paid up as of 31 December
2001. The Court does not set an absolute figure for what it considers substantial capital
for an independent job contractor, but it measures the same against the type of work
which the contractor is obligated to perform for the principal. However, this is rendered
impossible in this case since the Contract between petitioner and Interserve does not
even specify the work or the project that needs to be performed or completed by the
latter’s employees, and uses the dubious phrase "tasks and activities that are considered
contractible under existing laws and regulations." Even in its pleadings, petitioner
carefully sidesteps identifying or describing the exact nature of the services that
Interserve was obligated to render to petitioner. The importance of identifying with
particularity the work or task which Interserve was supposed to accomplish for petitioner
becomes even more evident, considering that the Articles of Incorporation of Interserve
states that its primary purpose is to operate, conduct, and maintain the business of
janitorial and allied services.39But respondents were hired as salesmen and leadman for
petitioner. The Court cannot, under such ambiguous circumstances, make a reasonable
determination if Interserve had substantial capital or investment to undertake the job it
was contracting with petitioner.
Petitioner cannot seek refuge in Neri v. National Labor Relations Commission. Unlike in
Neri, petitioner was unable to prove in the instant case that Interserve had substantial
capitalization to be an independent job contractor. In San Miguel Corporation v. MAERC
Integrated Services, Inc.,40 therein petitioner San Miguel Corporation similarly invoked
Neri, but was rebuffed by the Court based on the following ratiocination41 :
Petitioner also ascribes as error the failure of the Court of Appeals to apply the ruling in
Neri v. NLRC. In that case, it was held that the law did not require one to possess both
substantial capital and investment in the form of tools, equipment, machinery, work
premises, among others, to be considered a job contractor. The second condition to
establish permissible job contracting was sufficiently met if one possessed either
attribute.
Accordingly, petitioner alleged that the appellate court and the NLRC erred when they
declared MAERC a labor-only contractor despite the finding that MAERC had
investments amounting to ₱4,608,080.00 consisting of buildings, machinery and
equipment.
However, in Vinoya v. NLRC, we clarified that it was not enough to show substantial
capitalization or investment in the form of tools, equipment, machinery and work
premises, etc., to be considered an independent contractor. In fact, jurisprudential
holdings were to the effect that in determining the existence of an independent contractor
relationship, several factors may be considered, such as, but not necessarily confined to,
whether the contractor was carrying on an independent business; the nature and extent
of the work; the skill required; the term and duration of the relationship; the right to assign
the performance of specified pieces of work; the control and supervision of the workers;
the power of the employer with respect to the hiring, firing and payment of the workers of
the contractor; the control of the premises; the duty to supply premises, tools,
appliances, materials and labor; and the mode, manner and terms of payment.
In Neri, the Court considered not only the fact that respondent Building Care Corporation
(BCC) had substantial capitalization but noted that BBC carried on an independent
business and performed its contract according to its own manner and method, free from
the control and supervision of its principal in all matters except as to the results thereof.
The Court likewise mentioned that the employees of BCC were engaged to perform
specific special services for their principal. The status of BCC had also been passed
upon by the Court in a previous case where it was found to be a qualified job contractor
because it was a "big firm which services among others, a university, an international
bank, a big local bank, a hospital center, government agencies, etc." Furthermore, there
were only two (2) complainants in that case who were not only selected and hired by the
contractor before being assigned to work in the Cagayan de Oro branch of FEBTC but
the Court also found that the contractor maintained effective supervision and control over
them.
Thus, in San Miguel Corporation, the investment of MAERC, the contractor therein, in the
form of buildings, tools, and equipment of more than ₱4,000,000.00 did not impress the
Court, which still declared MAERC to be a labor-only contractor. In another case, Dole
Philippines, Inc. v. Esteva,42 the Court did not recognize the contractor therein as a
legitimate job contractor, despite its paid-up capital of over ₱4,000,000.00, in the
absence of substantial investment in tools and equipment used in the services it was
rendering.
Insisting that Interserve had substantial investment, petitioner assails, for being purely
speculative, the finding of the Court of Appeals that the service vehicles and equipment
of Interserve, with the values of ₱510,000.00 and ₱200,000.00, respectively, could not
have met the demands of the Coca-Cola deliveries in the Lagro area.
Yet again, petitioner fails to persuade.
The contractor, not the employee, has the burden of proof that it has the substantial
capital, investment, and tool to engage in job contracting.43 Although not the contractor
itself (since Interserve no longer appealed the judgment against it by the Labor Arbiter),
said burden of proof herein falls upon petitioner who is invoking the supposed status of
Interserve as an independent job contractor. Noticeably, petitioner failed to submit
evidence to establish that the service vehicles and equipment of Interserve, valued at
₱510,000.00 and ₱200,000.00, respectively, were sufficient to carry out its service
contract with petitioner. Certainly, petitioner could have simply provided the courts with
records showing the deliveries that were undertaken by Interserve for the Lagro area, the
type and number of equipment necessary for such task, and the valuation of such
equipment. Absent evidence which a legally compliant company could have easily
provided, the Court will not presume that Interserve had sufficient investment in service
vehicles and equipment, especially since respondents’ allegation – that they were using
equipment, such as forklifts and pallets belonging to petitioner, to carry out their jobs –
was uncontroverted.
In sum, Interserve did not have substantial capital or investment in the form of tools,
equipment, machineries, and work premises; and respondents, its supposed employees,
performed work which was directly related to the principal business of petitioner. It is,
thus, evident that Interserve falls under the definition of a "labor-only" contractor, under
Article 106 of the Labor Code; as well as Section 5(i) of the Rules Implementing Articles
106-109 of the Labor Code, as amended.
The Court, however, does not stop at this finding. It is also apparent that Interserve is a
labor-only contractor under Section 5(ii)44 of the Rules Implementing Articles 106-109 of
the Labor Code, as amended, since it did not exercise the right to control the
performance of the work of respondents.
The lack of control of Interserve over the respondents can be gleaned from the Contract
of Services between Interserve (as the CONTRACTOR) and petitioner (as the CLIENT),
pertinent portions of which are reproduced below:
WHEREAS, the CONTRACTOR is engaged in the business, among others, of
performing and/or undertaking, managing for consideration, varied projects, jobs and
other related management-oriented services;
WHEREAS, the CONTRACTOR warrants that it has the necessary capital, expertise,
technical know-how and a team of professional management group and personnel to
undertake and assume the responsibility to carry out the above mentioned project and
services;
WHEREAS, the CLIENT is desirous of utilizing the services and facilities of the
CONTRACTOR for emergency needs, rush jobs, peak product loads, temporary,
seasonal and other special project requirements the extent that the available work of the
CLIENT can properly be done by an independent CONTRACTOR permissible under
existing laws and regulations;
WHEREAS, the CONTRACTOR has offered to perform specific jobs/works at the
CLIENT as stated heretofore, under the terms and conditions herein stated, and the
CLIENT has accepted the offer.
NOW THEREFORE, for and in consideration of the foregoing premises and of the mutual
covenants and stipulations hereinafter set forth, the parties have hereto have stated and
the CLIENT has accepted the offer:
1. The CONTRACTOR agrees and undertakes to perform and/or provide for the
CLIENT, on a non-exclusive basis for tasks or activities that are considered
contractible under existing laws and regulations, as may be needed by the
CLIENT from time to time.
2. To carry out the undertakings specified in the immediately preceding
paragraph, the CONTRACTOR shall employ the necessary personnel like Route
Helpers, Salesmen, Drivers, Clericals, Encoders & PD who are at least
Technical/Vocational courses graduates provided with adequate uniforms and
appropriate identification cards, who are warranted by the CONTRACTOR to be
so trained as to efficiently, fully and speedily accomplish the work and services
undertaken herein by the CONTRACTOR. The CONTRACTOR represents that
its personnel shall be in such number as will be sufficient to cope with the
requirements of the services and work herein undertaken and that such
personnel shall be physically fit, of good moral character and has not been
convicted of any crime. The CLIENT, however, may request for the replacement
of the CONTRACTOR’S personnel if from its judgment, the jobs or the projects
being done could not be completed within the time specified or that the quality of
the desired result is not being achieved.
3. It is agreed and understood that the CONTRACTOR’S personnel will comply
with CLIENT, CLIENT’S policies, rules and regulations and will be subjected on-
the-spot search by CLIENT, CLIENT’S duly authorized guards or security men on
duty every time the assigned personnel enter and leave the premises during the
entire duration of this agreement.
4. The CONTRACTOR further warrants to make available at times relievers
and/or replacements to ensure continuous and uninterrupted service as in the
case of absences of any personnel above mentioned, and to exercise the
necessary and due supervision over the work of its personnel.45
Paragraph 3 of the Contract specified that the personnel of contractor Interserve, which
included the respondents, would comply with "CLIENT" as well as "CLIENT’s policies,
rules and regulations." It even required Interserve personnel to subject themselves to on-
the-spot searches by petitioner or its duly authorized guards or security men on duty
every time the said personnel entered and left the premises of petitioner. Said paragraph
explicitly established the control of petitioner over the conduct of respondents. Although
under paragraph 4 of the same Contract, Interserve warranted that it would exercise the
necessary and due supervision of the work of its personnel, there is a dearth of evidence
to demonstrate the extent or degree of supervision exercised by Interserve over
respondents or the manner in which it was actually exercised. There is even no showing
that Interserve had representatives who supervised respondents’ work while they were in
the premises of petitioner.
Also significant was the right of petitioner under paragraph 2 of the Contract to "request
the replacement of the CONTRACTOR’S personnel." True, this right was conveniently
qualified by the phrase "if from its judgment, the jobs or the projects being done could not
be completed within the time specified or that the quality of the desired result is not being
achieved," but such qualification was rendered meaningless by the fact that the Contract
did not stipulate what work or job the personnel needed to complete, the time for its
completion, or the results desired. The said provision left a gap which could enable
petitioner to demand the removal or replacement of any employee in the guise of his or
her inability to complete a project in time or to deliver the desired result. The power to
recommend penalties or dismiss workers is the strongest indication of a company’s right
of control as direct employer.46
1avv phil.zw+
Paragraph 4 of the same Contract, in which Interserve warranted to petitioner that the
former would provide relievers and replacements in case of absences of its personnel,
raises another red flag. An independent job contractor, who is answerable to the principal
only for the results of a certain work, job, or service need not guarantee to said principal
the daily attendance of the workers assigned to the latter. An independent job contractor
would surely have the discretion over the pace at which the work is performed, the
number of employees required to complete the same, and the work schedule which its
employees need to follow.
As the Court previously observed, the Contract of Services between Interserve and
petitioner did not identify the work needed to be performed and the final result required to
be accomplished. Instead, the Contract specified the type of workers Interserve must
provide petitioner ("Route Helpers, Salesmen, Drivers, Clericals, Encoders & PD") and
their qualifications (technical/vocational course graduates, physically fit, of good moral
character, and have not been convicted of any crime). The Contract also states that, "to
carry out the undertakings specified in the immediately preceding paragraph, the
CONTRACTOR shall employ the necessary personnel," thus, acknowledging that
Interserve did not yet have in its employ the personnel needed by petitioner and would
still pick out such personnel based on the criteria provided by petitioner. In other words,
Interserve did not obligate itself to perform an identifiable job, work, or service for
petitioner, but merely bound itself to provide the latter with specific types of employees.
These contractual provisions strongly indicated that Interserve was merely a recruiting
and manpower agency providing petitioner with workers performing tasks directly related
to the latter’s principal business.
against them. Certainly, the respondents’ dismissal was not carried out in accordance
with law and, therefore, illegal.48
Given that respondents were illegally dismissed by petitioner, they are entitled to
reinstatement, full backwages, inclusive of allowances, and to their other benefits or the
monetary equivalents thereof computed from the time their compensations were withheld
from them up to the time of their actual reinstatement, as mandated under Article 279 of
the Labor Code,.
IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The Court AFFIRMS
WITH MODIFICATION the Decision dated 19 February 2007 of the Court of Appeals in
CA-G.R. SP No. 85320. The Court DECLARES that respondents were illegally dismissed
and, accordingly, ORDERS petitioner to reinstate them without loss of seniority rights,
and to pay them full back wages computed from the time their compensation was
withheld up to their actual reinstatement. Costs against the petitioner.
SO ORDERED.

The certification issued by the DOLE stating that Interserve is an independent job
contractor does not sway this Court to take it at face value, since the primary purpose
stated in the Articles of Incorporation47 of Interserve is misleading. According to its
Articles of Incorporation, the principal business of Interserve is to provide janitorial and
allied services. The delivery and distribution of Coca-Cola products, the work for which
respondents were employed and assigned to petitioner, were in no way allied to janitorial
services. While the DOLE may have found that the capital and/or investments in tools
and equipment of Interserve were sufficient for an independent contractor for janitorial
services, this does not mean that such capital and/or investments were likewise sufficient
to maintain an independent contracting business for the delivery and distribution of Coca-
Cola products.

With the finding that Interserve was engaged in prohibited labor-only contracting,
petitioner shall be deemed the true employer of respondents. As regular employees of
petitioner, respondents cannot be dismissed except for just or authorized causes, none
of which were alleged or proven to exist in this case, the only defense of petitioner
against the charge of illegal dismissal being that respondents were not its employees.
Records also failed to show that petitioner afforded respondents the twin requirements of
procedural due process, i.e., notice and hearing, prior to their dismissal. Respondents
were not served notices informing them of the particular acts for which their dismissal
was sought. Nor were they required to give their side regarding the charges made