ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000
for the first year and P317,000 for the second and third year of the Agreement. ABS-
[G.R. No. 138051. June 10, 2004]
JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING CORPORATION, respondent.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari[1] assailing the 26 March
1999 Decision[2] of the Court of Appeals in CA-G.R. SP No. 49190 dismissing the
petition filed by Jose Y. Sonza (SONZA). The Court of Appeals affirmed the findings of
the National Labor Relations Commission (NLRC), which affirmed the Labor Arbiters
dismissal of the case for lack of jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation (ABS-CBN) signed
an Agreement (Agreement) with the Mel and Jay Management and Development
Corporation (MJMDC). ABS-CBN was represented by its corporate officers while
MJMDC was represented by SONZA, as President and General Manager, and Carmela
Tiangco (TIANGCO), as EVP and Treasurer. Referred to in the Agreement as AGENT,
MJMDC agreed to provide SONZAs services exclusively to ABS-CBN as talent for radio
and television. The Agreement listed the services SONZA would render to ABS-CBN,
as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to
Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m.,
Sundays.[3]
CBN would pay the talent fees on the 10th and 25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III,
which reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May 1994 entered into
by your goodself on behalf of ABS-CBN with our company relative to our talent JOSE
Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events
concerning his programs and career. We consider these acts of the station violative
of the Agreement and the station as in breach thereof. In this connection, we
hereby serve notice of rescission of said Agreement at our instance effective as of
date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining
amount stipulated in paragraph 7 of the Agreement but reserves the right to seek
recovery of the other benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.) JOSE Y. SONZA
President and Gen. Manager[4]
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the
Department of Labor and Employment, National Capital Region in Quezon
City. SONZA complained that ABS-CBN did not pay his salaries, separation pay, service
incentive leave pay, 13th month pay, signing bonus, travel allowance and amounts due
under the Employees Stock Option Plan (ESOP).
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no
employer-employee relationship existed between the parties. SONZA filed an
Opposition to the motion on 19 July 1996.
 Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through
his account at PCIBank, Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN
opened a new account with the same bank where ABS-CBN deposited SONZAs talent
fees and other payments due him under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter[5] denied the motion to
dismiss and directed the parties to file their respective position papers.The Labor
Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was an employee
of respondent company until April 15, 1996 and that he was not paid certain claims,
it is sufficient enough as to confer jurisdiction over the instant case in this
Office. And as to whether or not such claim would entitle complainant to recover
upon the causes of action asserted is a matter to be resolved only after and as a
result of a hearing. Thus, the respondents plea of lack of employer-employee
relationship may be pleaded only as a matter of defense. It behooves upon it the
duty to prove that there really is no employer-employee relationship between it and
the complainant.
The Labor Arbiter then considered the case submitted for resolution. The
parties submitted their position papers on 24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with
Motion to Expunge Respondents Annex 4 and Annex 5 from the Records. Annexes 4
and 5 are affidavits of ABS-CBNs witnesses Soccoro Vidanes and Rolando V. Cruz.
These witnesses stated in their affidavits that the prevailing practice in the television
and broadcast industry is to treat talents like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the
complaint for lack of jurisdiction.[6] The pertinent parts of the decision read as follows:
xxx
While Philippine jurisprudence has not yet, with certainty, touched on the true
nature of the contract of a talent, it stands to reason that a talent as above-
described cannot be considered as an employee by reason of the peculiar
circumstances surrounding the engagement of his services.
It must be noted that complainant was engaged by respondent by reason of his
peculiar skills and talent as a TV host and a radio broadcaster. Unlike an ordinary
employee, he was free to perform the services he undertook to render in accordance
with his own style. The benefits conferred to complainant under the May 1994
Agreement are certainly very much higher than those generally given to
employees. For one, complainant Sonzas monthly talent fees amount to a
staggering P317,000. Moreover, his engagement as a talent was covered by a
specific contract. Likewise, he was not bound to render eight (8) hours of work per
day as he worked only for such number of hours as may be necessary.
The fact that per the May 1994 Agreement complainant was accorded some
benefits normally given to an employee is inconsequential. Whatever benefits
complainant enjoyed arose from specific agreement by the parties and not by reason
of employer-employee relationship. As correctly put by the respondent, All these
benefits are merely talent fees and other contractual benefits and should not be
deemed as salaries, wages and/or other remuneration accorded to an employee,
notwithstanding the nomenclature appended to these benefits. Apropos to this is
the rule that the term or nomenclature given to a stipulated benefit is not
controlling, but the intent of the parties to the Agreement conferring such benefit.
The fact that complainant was made subject to respondents Rules and Regulations,
likewise, does not detract from the absence of employer-employee relationship. As
held by the Supreme Court, The line should be drawn between rules that merely
serve as guidelines towards the achievement of the mutually desired result without
dictating the means or methods to be employed in attaining it, and those that
control or fix the methodology and bind or restrict the party hired to the use of such
means. The first, which aim only to promote the result, create no employer-
employee relationship unlike the second, which address both the result and the
means to achieve it. (Insular Life Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484,
November 15, 1989).
x x x (Emphasis supplied)[7]
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a
Decision affirming the Labor Arbiters decision. SONZA filed a motion for
reconsideration, which the NLRC denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the
Court of Appeals assailing the decision and resolution of the NLRC. On 26 March 1999,
the Court of Appeals rendered a Decision dismissing the case.[8]
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
 The Court of Appeals affirmed the NLRCs finding that no employer-employee
relationship existed between SONZA and ABS-CBN. Adopting the NLRCs decision, the
appellate court quoted the following findings of the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered into the
contract merely as an agent of complainant Sonza, the principal. By all indication
and as the law puts it, the act of the agent is the act of the principal itself. This fact is
made particularly true in this case, as admittedly MJMDC is a management company
devoted exclusively to managing the careers of Mr. Sonza and his broadcast partner,
Mrs. Carmela C. Tiangco. (Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between complainant
Sonza and MJMDC, and not between ABS-CBN and MJMDC. This is clear from the
provisions of the May 1994 Agreement which specifically referred to MJMDC as the
AGENT. As a matter of fact, when complainant herein unilaterally rescinded said
May 1994 Agreement, it was MJMDC which issued the notice of rescission in behalf
of Mr. Sonza, who himself signed the same in his capacity as President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that
historically, the parties to the said agreements are ABS-CBN and Mr. Sonza. And it is
only in the May 1994 Agreement, which is the latest Agreement executed between
ABS-CBN and Mr. Sonza, that MJMDC figured in the said Agreement as the agent of
Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABS-
CBN such that there exist[s] employer-employee relationship between the latter and
Mr. Sonza. On the contrary, We find it indubitable, that MJMDC is an agent, not of
ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly admitted by the latter
and MJMDC in the May 1994 Agreement.
It may not be amiss to state that jurisdiction over the instant controversy indeed
belongs to the regular courts, the same being in the nature of an action for alleged
breach of contractual obligation on the part of respondent-appellee. As squarely
apparent from complainant-appellants Position Paper, his claims for compensation
for services, 13th month pay, signing bonus and travel allowance against respondent-
appellee are not based on the Labor Code but rather on the provisions of the May
1994 Agreement, while his claims for proceeds under Stock Purchase Agreement are
based on the latter. A portion of the Position Paper of complainant-appellant bears
perusal:
Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually
bound itself to pay complainant a signing bonus consisting of shares of stockswith
FIVE HUNDRED THOUSAND PESOS (P500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay based on an amount
not lower than the amount he was receiving prior to effectivity of (the) Agreement.
Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a
commutable travel benefit amounting to at least One Hundred Fifty Thousand Pesos
(P150,000.00) per year.
Thus, it is precisely because of complainant-appellants own recognition of the fact
that his contractual relations with ABS-CBN are founded on the New Civil Code,
rather than the Labor Code, that instead of merely resigning from ABS-CBN,
complainant-appellant served upon the latter a notice of rescission of Agreement
with the station, per his letter dated April 1, 1996, which asserted that instead of
referring to unpaid employee benefits, he is waiving and renouncing recovery of the
remaining amount stipulated in paragraph 7 of the Agreement but reserves the right
to such recovery of the other benefits under said Agreement. (Annex 3 of the
respondent ABS-CBNs Motion to Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994
Agreement and/or the Stock Purchase Agreement by respondent-appellee that
complainant-appellant filed his complaint. Complainant-appellants claims being
anchored on the alleged breach of contract on the part of respondent-appellee, the
same can be resolved by reference to civil law and not to labor law. Consequently,
they are within the realm of civil law and, thus, lie with the regular courts. As held in
the case of Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21
November 1994, an action for breach of contractual obligation is intrinsically a civil
dispute.[9] (Emphasis supplied)
The Court of Appeals ruled that the existence of an employer-employee
relationship between SONZA and ABS-CBN is a factual question that is within the
jurisdiction of the NLRC to resolve.[10] A special civil action for certiorari extends only
to issues of want or excess of jurisdiction of the NLRC.[11]Such action cannot cover an
inquiry into the correctness of the evaluation of the evidence which served as basis
of the NLRCs conclusion.[12] The Court of Appeals added that it could not re-examine
the parties evidence and substitute the factual findings of the NLRC with its own.[13]
The Issue
 In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS DECISION AND
REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED
BETWEEN SONZA AND ABS-CBN, DESPITE THE WEIGHT OF CONTROLLING LAW,
JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH A FINDING.[14]
The Courts Ruling
We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the decision of the Court of
Appeals affirming the NLRC ruling which upheld the Labor Arbiters dismissal of the
case for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine labor
laws and jurisprudence define clearly the elements of an employer-employee
relationship, this is the first time that the Court will resolve the nature of the
relationship between a television and radio station and one of its talents. There is no
case law stating that a radio and television program host is an employee of the
broadcast station.
The instant case involves big names in the broadcast industry, namely Jose Jay
Sonza, a known television and radio personality, and ABS-CBN, one of the biggest
television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because
he was an employee of ABS-CBN. On the other hand, ABS-CBN insists that the Labor
Arbiter has no jurisdiction because SONZA was an independent contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a question of
fact. Appellate courts accord the factual findings of the Labor Arbiter and the NLRC
not only respect but also finality when supported by substantial
evidence.[15] Substantial evidence means such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion.[16] A party cannot prove the
absence of substantial evidence by simply pointing out that there is contrary evidence
on record, direct or circumstantial. The Court does not substitute its own judgment
for that of the tribunal in determining where the weight of evidence lies or what
evidence is credible.[17]
SONZA maintains that all essential elements of an employer-employee
relationship are present in this case. Case law has consistently held that the elements
of an employer-employee relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employers power to control the employee on the means and methods by which the
work is accomplished.[18] The last element, the so-called control test, is the most
important element.[19]
A. Selection and Engagement of Employee
ABS-CBN engaged SONZAs services to co-host its television and radio programs
because of SONZAs peculiar skills, talent and celebrity status.SONZA contends that
the discretion used by respondent in specifically selecting and hiring complainant over
other broadcasters of possibly similar experience and qualification as complainant
belies respondents claim of independent contractorship.
Independent contractors often present themselves to possess unique skills,
expertise or talent to distinguish them from ordinary employees. The specific
selection and hiring of SONZA, because of his unique skills, talent and celebrity status
not possessed by ordinary employees, is a circumstance indicative, but not conclusive,
of an independent contractual relationship. If SONZA did not possess such unique
skills, talent and celebrity status, ABS-CBN would not have entered into the
Agreement with SONZA but would have hired him through its personnel department
just like any other employee.
In any event, the method of selecting and engaging SONZA does not
conclusively determine his status. We must consider all the circumstances of the
relationship, with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees
going to MJMDC. SONZA asserts that this mode of fee payment shows that he was an
employee of ABS-CBN. SONZA also points out that ABS-CBN granted him benefits and
privileges which he would not have enjoyed if he were truly the subject of a valid job
contract.
All the talent fees and benefits paid to SONZA were the result of negotiations
that led to the Agreement. If SONZA were ABS-CBNs employee, there would be no
need for the parties to stipulate on benefits such as SSS, Medicare, x x x and
13th month pay[20] which the law automatically incorporates into every employer-
employee contract.[21] Whatever benefits SONZA enjoyed arose from contract and
not because of an employer-employee relationship.[22]
SONZAs talent fees, amounting to P317,000 monthly in the second and third
year, are so huge and out of the ordinary that they indicate more an independent
contractual relationship rather than an employer-employee relationship. ABS-CBN
agreed to pay SONZA such huge talent fees precisely because of SONZAs unique skills,
talent and celebrity status not possessed by ordinary employees. Obviously, SONZA
acting alone possessed enough bargaining power to demand and receive such huge
talent fees for his services. The power to bargain talent fees way above the salary
scales of ordinary employees is a circumstance indicative, but not conclusive, of an
independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not
negate the status of SONZA as an independent contractor. The parties expressly
agreed on such mode of payment. Under the Agreement, MJMDC is the AGENT of
SONZA, to whom MJMDC would have to turn over any talent fee accruing under the
Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate
their relationship. SONZA failed to show that ABS-CBN could terminate his services on
grounds other than breach of contract, such as retrenchment to prevent losses as
provided under labor laws.[23]
During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as
long as AGENT and Jay Sonza shall faithfully and completely perform each condition
of this Agreement.[24] Even if it suffered severe business losses, ABS-CBN could not
retrench SONZA because ABS-CBN remained obligated to pay SONZAs talent fees
during the life of the Agreement. This circumstance indicates an independent
contractual relationship between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-
CBN still paid him his talent fees. Plainly, ABS-CBN adhered to its undertaking in the
Agreement to continue paying SONZAs talent fees during the remaining life of the
Agreement even if ABS-CBN cancelled SONZAs programs through no fault of
SONZA.[25]
SONZA assails the Labor Arbiters interpretation of his rescission of the
Agreement as an admission that he is not an employee of ABS-CBN. The Labor Arbiter
stated that if it were true that complainant was really an employee, he would merely
resign, instead. SONZA did actually resign from ABS-CBN but he also, as president of
MJMDC, rescinded the Agreement. SONZAs letter clearly bears this out.[26] However,
the manner by which SONZA terminated his relationship with ABS-CBN is
immaterial. Whether SONZA rescinded the Agreement or resigned from work does
not determine his status as employee or independent contractor.
D. Power of Control
Since there is no local precedent on whether a radio and television program
host is an employee or an independent contractor, we refer to foreign case law in
analyzing the present case. The United States Court of Appeals, First Circuit, recently
held in Alberty-Vlez v. Corporacin De Puerto Rico Para La Difusin Pblica (WIPR)[27] that a
television program host is an independent contractor. We quote the following
findings of the U.S. court:
Several factors favor classifying Alberty as an independent contractor. First, a
television actress is a skilled position requiring talent and training not available on-
the-job. x x x In this regard, Alberty possesses a masters degree in public
communications and journalism; is trained in dance, singing, and modeling; taught
with the drama department at the University of Puerto Rico; and acted in several
theater and television productions prior to her affiliation with Desde Mi
Pueblo. Second, Alberty provided the tools and instrumentalities necessary for her to
perform. Specifically, she provided, or obtained sponsors to provide, the costumes,
jewelry, and other image-related supplies and services necessary for her
appearance. Alberty disputes that this factor favors independent contractor status
because WIPR provided the equipment necessary to tape the show. Albertys
argument is misplaced. The equipment necessary for Alberty to conduct her job as
host of Desde Mi Pueblo related to her appearance on the show. Others provided
equipment for filming and producing the show, but these were not the primary tools
that Alberty used to perform her particular function. If we accepted this argument,
independent contractors could never work on collaborative projects because other
individuals often provide the equipment required for different aspects of the
collaboration. x x x
Third, WIPR could not assign Alberty work in addition to filming Desde Mi
Pueblo. Albertys contracts with WIPR specifically provided that WIPR hired her
professional services as Hostess for the Program Desde Mi Pueblo. There is no
evidence that WIPR assigned Alberty tasks in addition to work related to these
tapings. x x x[28] (Emphasis supplied)
Applying the control test to the present case, we find that SONZA is not an
employee but an independent contractor. The control test is the most important test
our courts apply in distinguishing an employee from an independent
contractor.[29] This test is based on the extent of control the hirer exercises over a
worker. The greater the supervision and control the hirer exercises, the more likely
the worker is deemed an employee. The converse holds true as well the less control
the hirer exercises, the more likely the worker is considered an independent
contractor.[30]
 First, SONZA contends that ABS-CBN exercised control over the means and
methods of his work.
SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically
to co-host the Mel & Jay programs. ABS-CBN did not assign any other work to
SONZA. To perform his work, SONZA only needed his skills and talent. How SONZA
delivered his lines, appeared on television, and sounded on radio were outside ABS-
CBNs control. SONZA did not have to render eight hours of work per day. The
Agreement required SONZA to attend only rehearsals and tapings of the shows, as
well as pre- and post-production staff meetings.[31] ABS-CBN could not dictate the
contents of SONZAs script. However, the Agreement prohibited SONZA from
criticizing in his shows ABS-CBN or its interests.[32] The clear implication is that SONZA
had a free hand on what to say or discuss in his shows provided he did not attack ABS-
CBN or its interests.
We find that ABS-CBN was not involved in the actual performance that
produced the finished product of SONZAs work.[33] ABS-CBN did not instruct SONZA
how to perform his job. ABS-CBN merely reserved the right to modify the program
format and airtime schedule for more effective programming.[34] ABS-CBNs sole
concern was the quality of the shows and their standing in the ratings. Clearly, ABS-
CBN did not exercise control over the means and methods of performance of SONZAs
work.
SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-
CBNs power over the means and methods of the performance of his work. Although
ABS-CBN did have the option not to broadcast SONZAs show, ABS-CBN was still
obligated to pay SONZAs talent fees. Thus, even if ABS-CBN was completely
dissatisfied with the means and methods of SONZAs performance of his work, or even
with the quality or product of his work, ABS-CBN could not dismiss or even discipline
SONZA. All that ABS-CBN could do is not to broadcast SONZAs show but ABS-CBN must
still pay his talent fees in full.[35]
Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by
the obligation to continue paying in full SONZAs talent fees, did not amount to control
over the means and methods of the performance of SONZAs work. ABS-CBN could not
terminate or discipline SONZA even if the means and methods of performance of his
work - how he delivered his lines and appeared on television - did not meet ABS-CBNs
approval. This proves that ABS-CBNs control was limited only to the result of SONZAs
work, whether to broadcast the final product or not. In either case, ABS-CBN must still
pay SONZAs talent fees in full until the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al.,[36] the United States Circuit Court of Appeals
ruled that vaudeville performers were independent contractors although the
management reserved the right to delete objectionable features in their shows. Since
the management did not have control over the manner of performance of the skills
of the artists, it could only control the result of the work by deleting objectionable
features.[37]
SONZA further contends that ABS-CBN exercised control over his work by
supplying all equipment and crew. No doubt, ABS-CBN supplied the equipment, crew
and airtime needed to broadcast the Mel & Jay programs. However, the equipment,
crew and airtime are not the tools and instrumentalities SONZA needed to perform
his job. What SONZA principally needed were his talent or skills and the costumes
necessary for his appearance. [38] Even though ABS-CBN provided SONZA with the
place of work and the necessary equipment, SONZA was still an independent
contractor since ABS-CBN did not supervise and control his work. ABS-CBNs sole
concern was for SONZA to display his talent during the airing of the programs.[39]
A radio broadcast specialist who works under minimal supervision is an
independent contractor.[40] SONZAs work as television and radio program host
required special skills and talent, which SONZA admittedly possesses. The records do
not show that ABS-CBN exercised any supervision and control over how SONZA
utilized his skills and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBNs employee because ABS-
CBN subjected him to its rules and standards of performance. SONZA claims that this
indicates ABS-CBNs control not only [over] his manner of work but also the quality of
his work.
The Agreement stipulates that SONZA shall abide with the rules and standards
of performance covering talents[41] of ABS-CBN. The Agreement does not require
SONZA to comply with the rules and standards of performance prescribed for
employees of ABS-CBN. The code of conduct imposed on SONZA under the
Agreement refers to the Television and Radio Code of the Kapisanan ng mga
Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY (ABS-CBN)
as its Code of Ethics.[42] The KBP code applies to broadcasters, not to employees of
radio and television stations.Broadcasters are not necessarily employees of radio and
television stations. Clearly, the rules and standards of performance referred to in the
Agreement are those applicable to talents and not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate
that the latter is an employee of the former.[43] In this case, SONZA failed to show that
these rules controlled his performance. We find that these general rules are
merely guidelines towards the achievement of the mutually desired result, which are
top-rating television and radio programs that comply with standards of the
industry. We have ruled that:
Further, not every form of control that a party reserves to himself over the conduct
of the other party in relation to the services being rendered may be accorded the
effect of establishing an employer-employee relationship. The facts of this case fall
squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we
held that:
Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the means
or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The first,
which aim only to promote the result, create no employer-employee relationship
unlike the second, which address both the result and the means used to achieve
it.[44]
The Vaughan case also held that one could still be an independent contractor
although the hirer reserved certain supervision to insure the attainment of the
desired result. The hirer, however, must not deprive the one hired from performing
his services according to his own initiative.[45]
Lastly, SONZA insists that the exclusivity clause in the Agreement is the most
extreme form of control which ABS-CBN exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean that
SONZA is an employee of ABS-CBN. Even an independent contractor can validly
provide his services exclusively to the hiring party. In the broadcast industry,
exclusivity is not necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted practice in the
entertainment industry.[46] This practice is not designed to control the means and
methods of work of the talent, but simply to protect the investment of the broadcast
station. The broadcast station normally spends substantial amounts of money, time
and effort in building up its talents as well as the programs they appear in and thus
expects that said talents remain exclusive with the station for a commensurate period
of time.[47] Normally, a much higher fee is paid to talents who agree to work
exclusively for a particular radio or television station. In short, the huge talent fees
partially compensates for exclusivity, as in the present case.
MJMDC as Agent of SONZA
SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which
contracted out his services to ABS-CBN. The Labor Arbiter ruled that as a talent of
MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists that MJMDC is a labor-
only contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the labor-only
contractor; (2) the employee who is ostensibly under the employ of the labor-only
contractor; and (3) the principal who is deemed the real employer. Under this
scheme, the labor-only contractor is the agent of the principal. The law makes the
principal responsible to the employees of the labor-only contractor as if the principal
itself directly hired or employed the employees.[48] These circumstances are not
present in this case.
There are essentially only two parties involved under the Agreement, namely,
SONZA and ABS-CBN. MJMDC merely acted as SONZAs agent. The Agreement
expressly states that MJMDC acted as the AGENT of SONZA. The records do not show
that MJMDC acted as ABS-CBNs agent. MJMDC, which stands for Mel and Jay
Management and Development Corporation, is a corporation organized and owned
by SONZA and TIANGCO. The President and General Manager of MJMDC is SONZA
himself. It is absurd to hold that MJMDC, which is owned, controlled, headed and
managed by SONZA, acted as agent of ABS-CBN in entering into the Agreement with
SONZA, who himself is represented by MJMDC. That would make MJMDC the agent
of both ABS-CBN and SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to
managing the careers of SONZA and his broadcast partner, TIANGCO. MJMDC is not
engaged in any other business, not even job contracting. MJMDC does not have any
other function apart from acting as agent of SONZA or TIANGCO to promote their
careers in the broadcast and television industry.[49]
Policy Instruction No. 40
SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor
Blas Ople on 8 January 1979 finally settled the status of workers in the broadcast
industry. Under this policy, the types of employees in the broadcast industry are the
station and program employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the
force and effect of law. There is no legal presumption that Policy Instruction No. 40
determines SONZAs status. A mere executive issuance cannot exclude independent
contractors from the class of service providers to the broadcast industry. The
classification of workers in the broadcast industry into only two groups under Policy
Instruction No. 40 is not binding on this Court, especially when the classification has
no basis either in law or in fact.
Affidavits of ABS-CBNs Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro
Vidanes and Rolando Cruz without giving his counsel the opportunity to cross-
examine these witnesses. SONZA brands these witnesses as incompetent to attest on
the prevailing practice in the radio and television industry.SONZA views the affidavits
of these witnesses as misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses, he was never
prevented from denying or refuting the allegations in the affidavits. The Labor Arbiter
has the discretion whether to conduct a formal (trial-type) hearing after the
submission of the position papers of the parties, thus:
Section 3. Submission of Position Papers/Memorandum
xxx
These verified position papers shall cover only those claims and causes of action
raised in the complaint excluding those that may have been amicably settled, and
shall be accompanied by all supporting documents including the affidavits of their
respective witnesses which shall take the place of the latters direct testimony. x x x
Section 4. Determination of Necessity of Hearing. Immediately after the submission
of the parties of their position papers/memorandum, the Labor Arbiter shall motu
propio determine whether there is need for a formal trial or hearing. At this stage,
he may, at his discretion and for the purpose of making such determination, ask
clarificatory questions to further elicit facts or information, including but not limited
to the subpoena of relevant documentary evidence, if any from any party or
witness.[50]
The Labor Arbiter can decide a case based solely on the position papers and the
supporting documents without a formal trial.[51] The holding of a formal hearing or
trial is something that the parties cannot demand as a matter of right.[52] If the Labor
Arbiter is confident that he can rely on the documents before him, he cannot be
faulted for not conducting a formal trial, unless under the particular circumstances of
the case, the documents alone are insufficient. The proceedings before a Labor
Arbiter are non-litigious in nature. Subject to the requirements of due process, the
technicalities of law and the rules obtaining in the courts of law do not strictly apply
in proceedings before a Labor Arbiter.
Talents as Independent Contractors
ABS-CBN claims that there exists a prevailing practice in the broadcast and
entertainment industries to treat talents like SONZA as independent contractors.
SONZA argues that if such practice exists, it is void for violating the right of labor to
security of tenure.
The right of labor to security of tenure as guaranteed in the
Constitution[53] arises only if there is an employer-employee relationship under labor
laws.Not every performance of services for a fee creates an employer-employee
relationship. To hold that every person who renders services to another for a fee is an
employee - to give meaning to the security of tenure clause - will lead to absurd
results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their
services as independent contractors. The right to life and livelihood guarantees this
freedom to contract as independent contractors. The right of labor to security of
tenure cannot operate to deprive an individual, possessed with special skills, expertise
and talent, of his right to contract as an independent contractor. An individual like an
artist or talent has a right to render his services without any one controlling the means
and methods by which he performs his art or craft. This Court will not interpret the
right of labor to security of tenure to compel artists and talents to render their
services only as employees. If radio and television program hosts can render their
services only as employees, the station owners and managers can dictate to the radio
and television hosts what they say in their shows. This is not conducive to freedom of
the press.
Different Tax Treatment of Talents and Broadcaster
sThe National Internal Revenue Code (NIRC)[54] in relation to Republic Act No.
7716,[55] as amended by Republic Act No. 8241,[56] treats talents, television and radio
broadcasters differently. Under the NIRC, these professionals are subject to the 10%
value-added tax (VAT) on services they render.Exempted from the VAT are those
under an employer-employee relationship.[57] This different tax treatment accorded
to talents and broadcasters bolters our conclusion that they are independent
contractors, provided all the basic elements of a contractual relationship are present
as in this case.
Nature of SONZAs Claims
SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay,
service incentive leave, signing bonus, travel allowance, and amounts due under the Employee
Stock Option Plan. We agree with the findings of the Labor Arbiter and the Court of Appeals that
SONZAs claims are all based on the May 1994 Agreement and stock option plan, and not on the
Labor Code. Clearly, the present case does not call for an application of the Labor Code provisions
but an interpretation and implementation of the May 1994 Agreement. In effect, SONZAs cause
of action is for breach of contract which is intrinsically a civil dispute cognizable by the regular
courts.[58]
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals
dated 26 March 1999 in CA-G.R. SP No. 49190 is AFFIRMED.Costs against petitioner.
SO ORDERED
ANGELITO L. LAZARO, G.R. No. 138254
that despite her employment as sales supervisor of the sales agents for Royal Star
Proprietor of Royal Star
Marketing, Present: from April of 1979 to March of 1986, Lazaro had failed during the said period, to
Petitioner,
PUNO, report her to the SSC for compulsory coverage or remit Laudatos social security
Chairman,
contributions.[4]
- versus - AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and Lazaro denied that Laudato was a sales supervisor of Royal Star, averring instead
CHICO-NAZARIO,
SOCIAL SECURITY COMMISSION, Members. ROSALINA LAUDATO, SOCIAL that she was a mere sales agent whom he paid purely on commission basis. Lazaro
SECURITY SYSTEM and THE
HONORABLE COURT OF also maintained that Laudato was not subjected to
APPEALS,
definite hours and conditions of work. As such, Laudato could not be deemed an
Respondents. Promulgated:
employee of Royal Star.[5]
July 30, 2004

x-------------------------------------x After the parties submitted their respective position papers, the SSC promulgated

DECISION a Resolution[6] dated 8 November 1995 ruling in favor of Laudato.[7] Applying the

control test, it held that Laudato was an employee of Royal Star, and ordered Royal
TINGA, J.:
Star to pay the unremitted social security contributions of Laudato in the amount of

Before us is a Petition for Review under Rule 45, assailing the Decision[1] of the Court Five Thousand Seven Pesos and Thirty Five Centavos (P5,007.35), together with the

of Appeals Fifteenth Division[2] in CA-G.R. Sp. No. 40956, promulgated on 20 penalties totaling Twenty Two Thousand Two Hundred Eighteen Pesos and Fifty Four

November 1998, which affirmed two rulings of the Social Security Commission (SSC) Centavos (P22,218.54). In addition, Royal Star was made liable to pay damages to

dated 8 November 1995 and 24 April 1996. the SSC in the amount of Fifteen Thousand Six Hundred Eighty Pesos and Seven

Centavos (P15,680.07) for not reporting Laudato for social security coverage,
Private respondent Rosalina M. Laudato (Laudato) filed a petition before the SSC for
pursuant to Section 24 of the Social Security Law.[8]
social security coverage and remittance of unpaid monthly social security

contributions against her three (3) employers. Among the respondents was herein After Lazaros Motion for Reconsideration before the SSC was denied,[9] Lazaro filed

petitioner Angelito L. Lazaro (Lazaro), proprietor of Royal Star Marketing (Royal a Petition for Review with the Court of Appeals. Lazaro reiterated that Laudato was

Star), which is engaged in the business of selling home appliances.[3] Laudato alleged merely a sales agent who was paid purely on commission basis, not included in the
company payroll, and who neither observed regular working hours nor Lazaros arguments are nothing more but a mere reiteration of arguments

accomplished time cards. unsuccessfully posed before two bodies: the SSC and the Court of Appeals. They

likewise put to issue factual questions already passed upon twice below, rather than
In its assailed Decision, the Court of Appeals noted that Lazaros arguments were a
questions of law appropriate for review under a Rule 45 petition. The determination
reprise of those already presented before the SSC.[10]Moreover, Lazaro had not
of an employer-employee relationship depends heavily on the particular factual
come forward with particulars and specifics in his petition to show that the
circumstances attending the professional interaction of the parties. The Court is not
Commissions ruling is not supported by substantial evidence.[11] Thus, the appellate
a trier of facts[15] and accords great weight to the factual
court affirmed the finding that Laudato was an employee of Royal Star, and hence
findings of lower courts or agencies whose function is to resolve factual matters.[16]
entitled to coverage under the Social Security Law.

Lazaros arguments may be dispensed with by applying precedents. Suffice

Before this Court, Lazaro again insists that Laudato was not qualified for social
it to say, the fact that Laudato was paid by way of commission does not preclude the
security coverage, as she was not an employee of Royal Star, her income dependent
establishment of an employer-employee relationship. In Grepalife v. Judico,[17] the
on a generation of sales and based on commissions.[12] It is argued that Royal Star
Court upheld the existence of an employer-employee relationship between the
had no control over Laudatos activities, and that under the so-called control test,
insurance company and its agents, despite the fact that the compensation that the
Laudato could not be deemed an employee.[13]
agents on commission received was not paid by the company but by the investor or

the person insured.[18] The relevant factor remains, as stated earlier, whether the
It is an accepted doctrine that for the purposes of coverage under the
"employer" controls or has reserved the right to control the "employee" not only as
Social Security Act, the determination of employer-employee relationship warrants
to the result of the work to be done but also as to the means and methods by which
the application of the control test, that is, whether the employer controls or has
the same is to be accomplished.[19]
reserved the right to control the employee, not only as to the result of the work

done, but also as to the means and methods by which the same is Neither does it follow that a person who does not observe normal hours of work

accomplished.[14] The SSC, as sustained by the Court of Appeals, applying the control cannot be deemed an employee. In Cosmopolitan Funeral Homes, Inc. v.

test found that Laudato was an employee of Royal Star. We find no reversible error. Maalat,[20] the employer similarly denied the existence of an employer-employee

relationship, as the claimant according to it, was a supervisor on commission basis

who did not observe normal hours of work. This Court declared that there was an has not sufficiently shown that the SSCs ruling was not supported by substantial

employer-employee relationship, noting that [the] supervisor, although evidence.

compensated on commission basis, [is] exempt from the observance of normal

A piece of documentary evidence appreciated by the SSC is Memorandum
hours of work for his compensation is measured by the number of sales he
dated 3 May 1980 of Teresita Lazaro, General Manager of Royal Star, directing that
makes.[21]
no commissions were to be given on all main office sales from walk-in customers

It should also be emphasized that the SSC, also as upheld by the Court of Appeals, and enjoining salesmen and sales supervisors to observe this new policy.[26] The

found that Laudato was a sales supervisor and not a mere agent.[22] As such, Laudato Memorandum evinces the fact that, contrary to Lazaros claim, Royal Star exercised

oversaw and supervised the sales agents of the company, and thus was subject to control over its sales supervisors or agents such as Laudato as to the means and

the control of management as to how she implements its policies and its end methods through which these personnel performed their work.

results. We are disinclined to reverse this finding, in the absence of countervailing

evidence from Lazaro and also in light of the fact that Laudatos calling cards from Finally, Lazaro invokes our ruling in the 1987 case of Social Security System

Royal Star indicate that she is indeed a sales supervisor. v. Court of Appeals[27] that a person who works for another at his own pleasure,

subject to definite hours or conditions of work, and is compensated according to the

The finding of the SSC that Laudato was an
result of his effort is not an employee.[28] The citation is odd for Lazaro to rely upon,
employee of Royal Star is supported by substantial
considering that in the cited case, the Court affirmed the employee-employer

relationship between a sales agent and the cigarette firm whose products he
evidence. The SSC examined the cash vouchers issued by Royal Star to
sold.[29] Perhaps Lazaro meant instead to cite our 1969 ruling in the similarly-titled
Laudato,[23] calling cards of Royal Star denominating Laudato as a Sales Supervisor of
case of Social Security System v. Court of Appeals,[30] also cited in the later
the company,[24] and Certificates of Appreciation issued by Royal Star to Laudato in
eponymous ruling, whose disposition is more in accord with Lazaros argument.
recognition of her unselfish and loyal efforts in promoting the company.[25] On the

other hand, Lazaro has failed to present any convincing contrary evidence, relying Yet, the circumstances in the 1969 case are very different from those at

instead on his bare assertions. The Court of Appeals correctly ruled that petitioner bar. Ruling on the question whether jockeys were considered employees of the

Manila Jockey Club, the Court noted that the jockeys were actually subjected to the
control of the racing steward, whose authority in turn was defined by the Games

and Amusements Board.[31] Moreover, the jockeys choice as to which horse to

mount was subject to mutual agreement between the horse owner and the jockey,

and beyond the control of the race club.[32] In the case at bar, there is no showing

that Royal Star was similarly precluded from exerting control or interference over

the manner by which Laudato performed her duties. On the contrary, substantial

evidence as found by the SSC and the Court of Appeals have established the element

of control determinative of an employer-employee relationship. We affirm without

hesitation.

WHEREFORE, the Petition is DENIED and the assailed Decision of the Court

of Appeals dated 20 November 1998 is AFFIRMED.Costs against petitioner.

SO ORDERED.
 [G.R. No. 157214. June 7, 2005]
PHILIPPINE GLOBAL COMMUNICATIONS, INC., petitioner, vs. RICARDO DE
VERA, respondent.
DECISION
GARCIA, J.:
Before us is this appeal by way of a petition for review on certiorari from the 12
September 2002 Decision[1] and the 13 February 2003 Resolution[2]of the Court of
Appeals in CA-G.R. SP No. 65178, upholding the finding of illegal dismissal by the
National Labor Relations Commission against petitioner.
As culled from the records, the pertinent facts are:
Petitioner Philippine Global Communications, Inc. (PhilCom), is a corporation
engaged in the business of communication services and allied activities, while
respondent Ricardo De Vera is a physician by profession whom petitioner enlisted to
attend to the medical needs of its employees. At the crux of the controversy is Dr. De
Veras status vis a vis petitioner when the latter terminated his engagement.
It appears that on 15 May 1981, De Vera, via a letter dated 15 May
1981,[3] offered his services to the petitioner, therein proposing his plan of works
required of a practitioner in industrial medicine, to include the following:
1. Application of preventive medicine including periodic check-up of
employees;
2. Holding of clinic hours in the morning and afternoon for a total of five (5)
hours daily for consultation services to employees;
3. Management and treatment of employees that may necessitate
hospitalization including emergency cases and accidents;
4. Conduct pre-employment physical check-up of prospective employees
with no additional medical fee;
5. Conduct home visits whenever necessary;
6. Attend to certain medical administrative function such as accomplishing
medical forms, evaluating conditions of employees applying for sick
leave of absence and subsequently issuing proper certification, and
all matters referred which are medical in nature.
The parties agreed and formalized respondents proposal in a document
denominated as RETAINERSHIP CONTRACT[4] which will be for a period of one year
subject to renewal, it being made clear therein that respondent will cover the
retainership the Company previously had with Dr. K. Eulau and that respondents
retainer fee will be at P4,000.00 a month. Said contract was renewed yearly.[5] The
retainership arrangement went on from 1981 to 1994 with changes in the retainers
fee. However, for the years 1995 and 1996, renewal of the contract was only made
verbally.
The turning point in the parties relationship surfaced in December 1996 when
Philcom, thru a letter[6] bearing on the subject boldly written as TERMINATION
RETAINERSHIP CONTRACT, informed De Vera of its decision to discontinue the latters
retainers contract with the Company effective at the close of business hours of
December 31, 1996 because management has decided that it would be more practical
to provide medical services to its employees through accredited hospitals near the
company premises.
On 22 January 1997, De Vera filed a complaint for illegal dismissal before the
National Labor Relations Commission (NLRC), alleging that that he had been actually
employed by Philcom as its company physician since 1981 and was dismissed without
due process. He averred that he was designated as a company physician on retainer
basis for reasons allegedly known only to Philcom. He likewise professed that since he
was not conversant with labor laws, he did not give much attention to the designation
as anyway he worked on a full-time basis and was paid a basic monthly salary plus
fringe benefits, like any other regular employees of Philcom.
On 21 December 1998, Labor Arbiter Ramon Valentin C. Reyes came out with a
decision[7] dismissing De Veras complaint for lack of merit, on the rationale that as a
retained physician under a valid contract mutually agreed upon by the parties, De
Vera was an independent contractor and that he was not dismissed but rather his
contract with [PHILCOM] ended when said contract was not renewed after December
31, 1996.
On De Veras appeal to the NLRC, the latter, in a decision[8] dated 23 October
2000, reversed (the word used is modified) that of the Labor Arbiter, on a finding that
De Vera is Philcoms regular employee and accordingly directed the company to
reinstate him to his former position without loss of seniority rights and privileges and
with full backwages from the date of his dismissal until actual reinstatement. We
quote the dispositive portion of the decision:
WHEREFORE, the assailed decision is modified in that respondent is ordered to
reinstate complainant to his former position without loss of seniority rights and
privileges with full backwages from the date of his dismissal until his actual
reinstatement computed as follows:
Backwages:
a) Basic Salary
From Dec. 31, 1996 to Apr. 10, 2000 = 39.33 mos.
P44,400.00 x 39.33 mos. P1,750,185.00
b) 13th Month Pay:
1/12 of P1,750,185.00 145,848.75
c) Travelling allowance:
P1,000.00 x 39.33 mos. 39,330.00
GRAND
TOTAL P1,935,363.75
The decision stands in other aspects.
SO ORDERED.
With its motion for reconsideration having been denied by the NLRC in its order
of 27 February 2001,[9] Philcom then went to the Court of Appeals on a petition
for certiorari, thereat docketed as CA-G.R. SP No. 65178, imputing grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of the NLRC when it
reversed the findings of the labor arbiter and awarded thirteenth month pay and
traveling allowance to De Vera even as such award had no basis in fact and in law.
On 12 September 2002, the Court of Appeals rendered a decision,[10] modifying
that of the NLRC by deleting the award of traveling allowance, and ordering payment
of separation pay to De Vera in lieu of reinstatement, thus:
WHEREFORE, premises considered, the assailed judgment of public respondent,
dated 23 October 2000, is MODIFIED. The award of traveling allowance is deleted as
the same is hereby DELETED. Instead of reinstatement, private respondent shall be
paid separation pay computed at one (1) month salary for every year of service
computed from the time private respondent commenced his employment in 1981
up to the actual payment of the backwages and separation pay. The awards of
backwages and 13th month pay STAND.
SO ORDERED.
In time, Philcom filed a motion for reconsideration but was denied by the
appellate court in its resolution of 13 February 2003.[11]
Hence, Philcoms present recourse on its main submission that -
THE COURT OF APPEALS ERRED IN SUSTAINING THE DECISION OF THE NATIONAL
LABOR RELATIONS COMMISSION AND RENDERING THE QUESTIONED DECISION AND
RESOLUTION IN A WAY THAT IS NOT IN ACCORD WITH THE FACTS AND APPLICABLE
LAWS AND JURISPRUDENCE WHICH DISTINGUISH LEGITIMATE JOB CONTRACTING
AGREEMENTS FROM THE EMPLOYER-EMPLOYEE RELATIONSHIP.
We GRANT.
Under Rule 45 of the Rules of Court, only questions of law may be reviewed by
this Court in decisions rendered by the Court of Appeals. There are instances,
however, where the Court departs from this rule and reviews findings of fact so that
substantial justice may be served. The exceptional instances are where:
xxx xxx xxx (1) the conclusion is a finding grounded entirely on speculation, surmise
and conjecture; (2) the inference made is manifestly mistaken; (3) there is grave
abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5) the
findings of fact are conflicting; (6) the Court of Appeals went beyond the issues of
the case and its findings are contrary to the admissions of both appellant and
appellees; (7) the findings of fact of the Court of Appeals are contrary to those of the
trial court; (8) said findings of facts are conclusions without citation of specific
evidence on which they are based; (9) the facts set forth in the petition as well as in
the petitioners main and reply briefs are not disputed by the respondents; and (10)
the findings of fact of the Court of Appeals are premised on the supposed absence
of evidence and contradicted by the evidence on record.[12]
As we see it, the parties respective submissions revolve on the primordial issue
of whether an employer-employee relationship exists between petitioner and
respondent, the existence of which is, in itself, a question of fact[13] well within the
province of the NLRC. Nonetheless, given the reality that the NLRCs findings are at
odds with those of the labor arbiter, the Court, consistent with its ruling in Jimenez
vs. National Labor Relations Commission,[14] is constrained to look deeper into the
attendant circumstances obtaining in this case, as appearing on record.
In a long line of decisions,[15] the Court, in determining the existence of an
employer-employee relationship, has invariably adhered to the four-fold test, to wit:
[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, or the so-
called control test, considered to be the most important element.
Applying the four-fold test to this case, we initially find that it was respondent
himself who sets the parameters of what his duties would be in offering his services
to petitioner. This is borne by no less than his 15 May 1981 letter[16] which, in full,
reads:
May 15, 1981
Mrs. Adela L. Vicente
Vice President, Industrial Relations
PhilCom, Paseo de Roxas
Makati, Metro Manila
Madam:
I shall have the time and effort for the position of Company physician with your
corporation if you deemed it necessary. I have the necessary qualifications, training
and experience required by such position and I am confident that I can serve the
best interests of your employees, medically.
My plan of works and targets shall cover the duties and responsibilities required of a
practitioner in industrial medicine which includes the following:
1. Application of preventive medicine including periodic check-up of
employees;
2. Holding of clinic hours in the morning and afternoon for a total of five
(5) hours daily for consultation services to employees;
3. Management and treatment of employees that may necessitate
hospitalization including emergency cases and accidents;
4. Conduct pre-employment physical check-up of prospective
employees with no additional medical fee;
5. Conduct home visits whenever necessary;
6. Attend to certain medical administrative functions such as
accomplishing medical forms, evaluating conditions of employees
applying for sick leave of absence and subsequently issuing proper
certification, and all matters referred which are medical in nature.
On the subject of compensation for the services that I propose to render to the
corporation, you may state an offer based on your belief that I can very well qualify
for the job having worked with your organization for sometime now.
I shall be very grateful for whatever kind attention you may extend on this matter
and hoping that it will merit acceptance, I remain
Very truly yours,
(signed)
RICARDO V. DE
VERA, M.D.
Significantly, the foregoing letter was substantially the basis of the labor arbiters
finding that there existed no employer-employee relationship between petitioner and
respondent, in addition to the following factual settings:
The fact that the complainant was not considered an employee was recognized by
the complainant himself in a signed letter to the respondent dated April 21, 1982
attached as Annex G to the respondents Reply and Rejoinder. Quoting the pertinent
portion of said letter:
To carry out your memo effectively and to provide a systematic and workable time
schedule which will serve the best interests of both the present and absent
employee, may I propose an extended two-hour service (1:00-3:00 P.M.) during
which period I can devote ample time to both groups depending upon the urgency
of the situation. I shall readjust my private schedule to be available for the herein
proposed extended hours, should you consider this proposal.
As regards compensation for the additional time and services that I shall render to
the employees, it is dependent on your evaluation of the merit of my proposal and
your confidence on my ability to carry out efficiently said proposal.
The tenor of this letter indicates that the complainant was proposing to extend his
time with the respondent and seeking additional compensation for said extension.
This shows that the respondent PHILCOM did not have control over the schedule of
the complainant as it [is] the complainant who is proposing his own schedule and
asking to be paid for the same. This is proof that the complainant understood that
his relationship with the respondent PHILCOM was a retained physician and not as
an employee. If he were an employee he could not negotiate as to his hours of work.
The complainant is a Doctor of Medicine, and presumably, a well-educated person.
Yet, the complainant, in his position paper, is claiming that he is not conversant with
the law and did not give much attention to his job title- on a retainer basis. But the
same complainant admits in his affidavit that his service for the respondent was
covered by a retainership contract [which] was renewed every year from 1982 to
1994. Upon reading the contract dated September 6, 1982, signed by the
complainant himself (Annex C of Respondents Position Paper), it clearly states that is
a retainership contract. The retainer fee is indicated thereon and the duration of the
contract for one year is also clearly indicated in paragraph 5 of the Retainership
Contract. The complainant cannot claim that he was unaware that the contract was
good only for one year, as he signed the same without any objections. The
complainant also accepted its renewal every year thereafter until 1994. As a literate
person and educated person, the complainant cannot claim that he does not know
what contract he signed and that it was renewed on a year to year basis.[17]
The labor arbiter added the indicia, not disputed by respondent, that from the
time he started to work with petitioner, he never was included in its payroll; was never
deducted any contribution for remittance to the Social Security System (SSS); and was
in fact subjected by petitioner to the ten (10%) percent withholding tax for his
professional fee, in accordance with the National Internal Revenue Code, matters
which are simply inconsistent with an employer-employee relationship. In the precise
words of the labor arbiter:
xxx xxx xxx After more than ten years of services to PHILCOM, the complainant
would have noticed that no SSS deductions were made on his remuneration or that
the respondent was deducting the 10% tax for his fees and he surely would have
complained about them if he had considered himself an employee of PHILCOM. But
he never raised those issues. An ordinary employee would consider the SSS
payments important and thus make sure they would be paid. The complainant never
bothered to ask the respondent to remit his SSS contributions. This clearly shows
that the complainant never considered himself an employee of PHILCOM and thus,
respondent need not remit anything to the SSS in favor of the complainant.[18]
Clearly, the elements of an employer-employee relationship are wanting in this
case. We may add that the records are replete with evidence showing that
respondent had to bill petitioner for his monthly professional fees.[19] It simply runs
against the grain of common experience to imagine that an ordinary employee has
yet to bill his employer to receive his salary.
We note, too, that the power to terminate the parties relationship was mutually
vested on both. Either may terminate the arrangement at will, with or without
cause.[20]
Finally, remarkably absent from the parties arrangement is the element of
control, whereby the employer has reserved the right to control the employee not
only as to the result of the work done but also as to the means and methods by which
the same is to be accomplished.[21]
Here, petitioner had no control over the means and methods by which
respondent went about performing his work at the company premises. He could even
embark in the private practice of his profession, not to mention the fact that
respondents work hours and the additional compensation therefor were negotiated
upon by the parties.[22] In fine, the parties themselves practically agreed on every
terms and conditions of respondents engagement, which thereby negates the
element of control in their relationship. For sure, respondent has never cited even a
single instance when petitioner interfered with his work.
Yet, despite the foregoing, all of which are extant on record, both the NLRC and
the Court of Appeals ruled that respondent is petitioners regular employee at the time
of his separation.
Partly says the appellate court in its assailed decision:
Be that as it may, it is admitted that private respondents written retainer contract
was renewed annually from 1981 to 1994 and the alleged renewal for 1995 and
1996, when it was allegedly terminated, was verbal.
Article 280 of the Labor code (sic) provides:
The provisions of written agreement to the contrary notwithstanding and regardless
of the oral agreements of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform 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 (1) year of
service, whether such is continuous or broken, shall be considered a regular with
respect to the activity in which he is employed and his employment shall continue
while such activity exists.
Parenthetically, the position of company physician, in the case of petitioner, is
usually necessary and desirable because the need for medical attention of
employees cannot be foreseen, hence, it is necessary to have a physician at hand. In
fact, the importance and desirability of a physician in a company premises is
recognized by Art. 157 of the Labor Code, which requires the presence of a physician
depending on the number of employees and in the case at bench, in petitioners
case, as found by public respondent, petitioner employs more than 500 employees.
Going back to Art. 280 of the Labor Code, it was made therein clear that the
provisions of a written agreement to the contrary notwithstanding or the existence
of a mere oral agreement, if the employee is engaged in the usual business or trade
of the employer, more so, that he rendered service for at least one year, such
employee shall be considered as a regular employee. Private respondent herein has
been with petitioner since 1981 and his employment was not for a specific project
or undertaking, the period of which was pre-determined and neither the work or
service of private respondent seasonal. (Emphasis by the CA itself).
We disagree to the foregoing ratiocination.
The appellate courts premise that regular employees are those who perform
activities which are desirable and necessary for the business of the employer is not
determinative in this case. For, we take it that any agreement may provide that one
party shall render services for and in behalf of another, no matter how necessary for
the latters business, even without being hired as an employee. This set-up is precisely
true in the case of an independent contractorship as well as in an agency agreement.
Indeed, Article 280 of the Labor Code, quoted by the appellate court, is not the
yardstick for determining the existence of an employment relationship. As it is, the
provision merely distinguishes between two (2) kinds of employees, i.e., regular and
casual. It does not apply where, as here, the very existence of an employment
relationship is in dispute.[23]
Buttressing his contention that he is a regular employee of petitioner,
respondent invokes Article 157 of the Labor Code, and argues that he satisfies all the
requirements thereunder. The provision relied upon reads:
ART. 157. Emergency medical and dental services. It shall be the duty of every
employer to furnish his employees in any locality with free medical and dental
attendance and facilities consisting of:
(a) The services of a full-time registered nurse when the number of
employees exceeds fifty (50) but not more than two hundred
(200) except when the employer does not maintain hazardous
workplaces, in which case the services of a graduate first-aider
shall be provided for the protection of the workers, where no
registered nurse is available. The Secretary of Labor shall
provide by appropriate regulations the services that shall be
required where the number of employees does not exceed fifty
(50) and shall determine by appropriate order hazardous
workplaces for purposes of this Article;
(b) The services of a full-time registered nurse, a part-time physician
and dentist, and an emergency clinic, when the number of
employees exceeds two hundred (200) but not more than three
hundred (300); and
(c) The services of a full-time physician, dentist and full-time registered
nurse as well as a dental clinic, and an infirmary or emergency
hospital with one bed capacity for every one hundred (100)
employees when the number of employees exceeds three
hundred (300).
In cases of hazardous workplaces, no employer shall engage the services of a
physician or dentist who cannot stay in the premises of the establishment for at
least two (2) hours, in the case of those engaged on part-time basis, and not less
than eight (8) hours in the case of those employed on full-time basis. Where the
undertaking is nonhazardous in nature, the physician and dentist may be engaged
on retained basis, subject to such regulations as the Secretary of Labor may
prescribe to insure immediate availability of medical and dental treatment and
attendance in case of emergency.
 Had only respondent read carefully the very statutory provision invoked by him, requirement has become moot and academic if not waived by the respondent
he would have noticed that in non-hazardous workplaces, the employer may engage himself.
the services of a physician on retained basis. As correctly observed by the petitioner,
while it is true that the provision requires employers to engage the services of medical WHEREFORE, the petition is GRANTED and the challenged decision of the Court
practitioners in certain establishments depending on the number of their employees, of Appeals REVERSED and SET ASIDE. The 21 December 1998 decision of the labor
nothing is there in the law which says that medical practitioners so engaged be arbiter is REINSTATED.
actually hired as employees,[24] adding that the law, as written, only requires the No pronouncement as to costs.
employer to retain, not employ, a part-time physician who needed to stay in the
premises of the non-hazardous workplace for two (2) hours.[25] SO ORDERED.

Respondent takes no issue on the fact that petitioners business of

telecommunications is not hazardous in nature. As such, what applies here is the last
paragraph of Article 157 which, to stress, provides that the employer may engage the
services of a physician and dentist on retained basis, subject to such regulations as
the Secretary of Labor may prescribe. The successive retainership agreements of the
parties definitely hue to the very statutory provision relied upon by respondent.

Deeply embedded in our jurisprudence is the rule that courts may not construe
a statute that is free from doubt. Where the law is clear and unambiguous, it must be
taken to mean exactly what it says, and courts have no choice but to see to it that the
mandate is obeyed.[26] As it is, Article 157 of the Labor Code clearly and unequivocally
allows employers in non-hazardous establishments to engage on retained basis the
service of a dentist or physician. Nowhere does the law provide that the physician or
dentist so engaged thereby becomes a regular employee. The very phrase that they
may be engaged on retained basis, revolts against the idea that this engagement gives
rise to an employer-employee relationship.

With the recognition of the fact that petitioner consistently engaged the
services of respondent on a retainer basis, as shown by their various retainership
contracts, so can petitioner put an end, with or without cause, to their retainership
agreement as therein provided.[27]

We note, however, that even as the contracts entered into by the parties
invariably provide for a 60-day notice requirement prior to termination, the same was
not complied with by petitioner when it terminated on 17 December 1996 the
verbally-renewed retainership agreement, effective at the close of business hours of
31 December 1996.

Be that as it may, the record shows, and this is admitted by both parties,[28] that
execution of the NLRC decision had already been made at the NLRC despite the
pendency of the present recourse. For sure, accounts of petitioner had already been
garnished and released to respondent despite the previous Status Quo
Order[29] issued by this Court. To all intents and purposes, therefore, the 60-day notice
G.R. No. 164156 September 26, 2006 b) Coordinate, arrange personalities for air interviews;

ABS-CBN BROADCASTING CORPORATION, petitioner, c) Coordinate, prepare schedule of reporters for scheduled news reporting and lead-
vs. in or incoming reports;
MARLYN NAZARENO, MERLOU GERZON, JENNIFER DEIPARINE, and JOSEPHINE
LERASAN, respondents. d) Facilitate, prepare and arrange airtime schedule for public service announcement
and complaints;
DECISION
e) Assist, anchor program interview, etc; and
CALLEJO, SR., J.:
f) Record, log clerical reports, man based control radio.4
Decision1
Before us is a petition for review on certiorari of the of the Court of
Appeals (CA) in CA-G.R. SP No. 76582 and the Resolution denying the motion for Their respective working hours were as follows:
reconsideration thereof. The CA affirmed the Decision2 and Resolution3 of the
National Labor Relations Commission (NLRC) in NLRC Case No. V-000762-2001 (RAB
Name Time No. of Hours
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. 1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7 ½

The Antecedents 8:00 A.M.-12:00 noon

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;
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 1. Complainants were engaged by respondent ABS-CBN as regular and full-time
the PAs that effective August 1, 2000, they would be assigned to non-drama employees for a continuous period of more than five (5) years with a monthly salary
programs, and that the DYAB studio operations would be handled by the studio rate of Four Thousand (P4,000.00) pesos beginning 1995 up until the filing of this
technician. Thus, their revised schedule and other assignments would be as follows: complaint on November 20, 2000.

Monday – Saturday Machine copies of complainants’ ABS-CBN Employee’s Identification Card and salary
vouchers are hereto attached as follows, thus:
4:30 A.M. – 8:00 A.M. – Marlene Nazareno.
I. Jennifer Deiparine:
Miss Nazareno will then be assigned at the Research Dept.
Exhibit "A" - ABS-CBN Employee’s Identification Card
From 8:00 A.M. to 12:00
Exhibit "B", - ABS-CBN Salary Voucher from Nov.
4:30 P.M. – 12:00 MN – Jennifer Deiparine
Exhibit "B-1" & 1999 to July 2000 at P4,000.00
Sunday
Exhibit "B-2"
5:00 A.M. – 1:00 P.M. – Jennifer Deiparine
Date employed: September 15, 1995
1:00 P.M. – 10:00 P.M. – Joy Sanchez
Length of service: 5 years & nine (9) months
Respondent Gerzon was assigned as the full-time PA of the TV News Department
reporting directly to Leo Lastimosa. II. Merlou Gerzon - ABS-CBN Employee’s Identification Card

On October 12, 2000, respondents filed a Complaint for Recognition of Regular Exhibit "C"
Employment Status, Underpayment of Overtime Pay, Holiday Pay, Premium Pay,
Service Incentive Pay, Sick Leave Pay, and 13th Month Pay with Damages against the Exhibit "D"
petitioner before the NLRC. The Labor Arbiter directed the parties to submit their
respective position papers. Upon respondents’ failure to file their position papers
Exhibit "D-1" &
within the reglementary period, Labor Arbiter Jose G. Gutierrez issued an Order
dated April 30, 2001, dismissing the complaint without prejudice for lack of interest
to pursue the case. Respondents received a copy of the Order on May 16, Exhibit "D-2" - ABS-CBN Salary Voucher from March
2001.7 Instead of re-filing their complaint with the NLRC within 10 days from May
16, 2001, they filed, on June 11, 2001, an Earnest Motion to Refile Complaint with 1999 to January 2001 at P4,000.00
Motion to Admit Position Paper and Motion to Submit Case For Resolution.8 The
Labor Arbiter granted this motion in an Order dated June 18, 2001, and forthwith Date employed: September 1, 1995
admitted the position paper of the complainants. Respondents made the following
allegations:
Length of service: 5 years & 10 months
III. Marlene Nazareno
Exhibit "E" - ABS-CBN Employee’s Identification Card
Exhibit "E" - ABS-CBN Salary Voucher from Nov.
Exhibit "E-1" & 1999 to December 2000
Exhibit :E-2"
Date employed: April 17, 1996
Length of service: 5 years and one (1) month
IV. Joy Sanchez Lerasan
Exhibit "F" - ABS-CBN Employee’s Identification Card
Exhibit "F-1" - ABS-CBN Salary Voucher from Aug.
Exhibit "F-2" & 2000 to Jan. 2001
Exhibit "F-3"
Exhibit "F-4" - Certification dated July 6, 2000
Acknowledging regular status of
Complainant Joy Sanchez Lerasan
Signed by ABS-CBN Administrative
Officer May Kima Hife
Date employed: April 15, 1998
Length of service: 3 yrs. and one (1) month9
Respondents insisted that they belonged to a "work pool" from which petitioner
chose persons to be given specific assignments at its discretion, and were thus
under its direct supervision and control regardless of nomenclature. They prayed
that judgment be rendered in their favor, thus:
WHEREFORE, premises considered, this Honorable Arbiter is most respectfully
prayed, to issue an order compelling defendants to pay complainants the following:
1. One Hundred Thousand Pesos (P100,000.00) each
and by way of moral damages;
2. Minimum wage differential;
3. Thirteenth month pay differential;
4. Unpaid service incentive leave benefits;
5. Sick leave;
6. Holiday pay;
7. Premium pay;
8. Overtime pay;
9. Night shift differential.
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 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 therefrom.
Complainants pray for such other reliefs as are just and equitable under the
premises.10
For its part, petitioner alleged in its position paper that the respondents were PAs 1) On Mondays and Tuesdays:
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 (a) Unzanith
listeners and field reporters and calls of news sources; generally, they perform leg
work for the anchors during a program or a particular production. They are
(b) Serbisyo de Arevalo
considered in the industry as "program employees" in that, as distinguished from
regular or station employees, they are basically engaged by the station for a
particular or specific program broadcasted by the radio station. Petitioner asserted (c) Arangkada (evening edition)
that as PAs, the complainants were issued talent information sheets which are
updated from time to time, and are thus made the basis to determine the programs (d) Balitang K (local version)
to which they shall later be called on to assist. The program assignments of
complainants were as follows: (e) Abante Sugbu

a. Complainant Nazareno assists in the programs: (f) Pangutana Lang

1) Nagbagang Balita (early morning edition) 2) On Thursdays

2) Infor Hayupan Nagbagang Balita

3) Arangkada (morning edition) 3) On Saturdays

4) Nagbagang Balita (mid-day edition) (a) Nagbagang Balita

b. Complainant Deiparine assists in the programs: (b) Info Hayupan

1) Unzanith (c) Arangkada (morning edition)

2) Serbisyo de Arevalo (d) Nagbagang Balita (mid-day edition)

3) Arangkada (evening edition) 4) On Sundays:

4) Balitang K (local version) (a) Siesta Serenata

5) Abante Subu (b) Sunday Chismisan

6) Pangutana Lang (c) Timbangan sa Hustisya

c. Complainant Gerzon assists in the program: (d) Sayri ang Lungsod

(e) Haranahan11 plus ten (10%) percent Attorney’s Fees or a TOTAL aggregate amount of PESOS:
FIFTY TWO THOUSAND NINE HUNDRED TEN (P52,910.00).
Petitioner maintained that PAs, reporters, anchors and talents occasionally
"sideline" for other programs they produce, such as drama talents in other Respondent Veneranda C. Sy is absolved from any liability.
productions. As program employees, a PA’s engagement is coterminous with the
completion of the program, and may be extended/renewed provided that the SO ORDERED.13
program is on-going; a PA may also be assigned to new programs upon the
cancellation of one program and the commencement of another. As such program
However, the Labor Arbiter did not award money benefits as provided in the CBA on
employees, their compensation is computed on a program basis, a fixed amount for
his belief that he had no jurisdiction to interpret and apply the agreement, as the
performance services irrespective of the time consumed. At any rate, petitioner
same was within the jurisdiction of the Voluntary Arbitrator as provided in Article
claimed, as the payroll will show, respondents were paid all salaries and benefits due
261 of the Labor Code.
them under the law.12

Respondents’ counsel received a copy of the decision on August 29, 2001.

Petitioner also alleged that the Labor Arbiter had no jurisdiction to involve the CBA
Respondent Nazareno received her copy on August 27, 2001, while the other
and interpret the same, especially since respondents were not covered by the
respondents received theirs on September 8, 2001. Respondents signed and filed
bargaining unit.
their Appeal Memorandum on September 18, 2001.

On July 30, 2001, the Labor Arbiter rendered judgment in favor of the respondents,
For its part, petitioner filed a motion for reconsideration, which the Labor Arbiter
and declared that they were regular employees of petitioner; as such, they were
denied and considered as an appeal, conformably with Section 5, Rule V, of the
awarded monetary benefits. The fallo of the decision reads:
NLRC Rules of Procedure. Petitioner forthwith appealed the decision to the NLRC,
while respondents filed a partial appeal.
WHEREFORE, the foregoing premises considered, judgment is hereby rendered
declaring the complainants regular employees of the respondent ABS-CBN
In its appeal, petitioner alleged the following:
Broadcasting Corporation and directing the same respondent to pay complainants
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;
I - Merlou A. Gerzon P12,025.00

2. That the Labor Arbiter erred in depriving the respondent of its Constitutional right
II - Marlyn Nazareno 12,025.00
to due process of law;

III - Jennifer Deiparine 12,025.00

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;
IV - Josephine Sanchez Lerazan 12,025.00
4. That the Labor Arbiter erred when he ruled that the complainants are regular
_________ employees of the respondent;

P48,100.00 5. That the Labor Arbiter erred when he ruled that the complainants are entitled to
13th month pay, service incentive leave pay and salary differential; and
6. That the Labor Arbiter erred when he ruled that complainants are entitled to
attorney’s fees.14
On November 14, 2002, the NLRC rendered judgment modifying the decision of the
Labor Arbiter. The fallo of the decision reads:
WHEREFORE, premises considered, the decision of Labor Arbiter Jose G. Gutierrez
dated 30 July 2001 is SET ASIDE and VACATED and a new one is entered ORDERING
respondent ABS-CBN Broadcasting Corporation, as follows:
1. To pay complainants of their wage differentials and other benefits arising from
the CBA as of 30 September 2002 in the aggregate amount of Two Million Five
Hundred, Sixty-One Thousand Nine Hundred Forty-Eight Pesos and 22/100
(P2,561,948.22), broken down as follows:
3. To grant to the complainants all the benefits of the CBA after 30 September 2002.
SO ORDERED.15
The NLRC declared that the Labor Arbiter acted conformably with the Labor Code
when it granted respondents’ motion to refile the complaint and admit their
position paper. Although respondents were not parties to the CBA between
petitioner and the ABS-CBN Rank-and-File Employees Union, the NLRC nevertheless
granted and computed respondents’ monetary benefits based on the 1999 CBA,
which was effective until September 2002. The NLRC also ruled that the Labor
Arbiter had jurisdiction over the complaint of respondents because they acted in
their individual capacities and not as members of the union. Their claim for
monetary benefits was within the context of Article 217(6) of the Labor Code. The
validity of respondents’ claim does not depend upon the interpretation of the CBA.

a. Deiparine, Jennifer - P 716,113.49 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 &
b. Gerzon, Merlou - 716,113.49
Supply Company v. National Labor Relations Commission.16

c. Nazareno, Marlyn - 716,113.49

Petitioner filed a motion for reconsideration, which the NLRC denied.

d. Lerazan, Josephine Sanchez - 413,607.75

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)
Total - P 2,561,948.22 whether the NLRC acted without jurisdiction in admitting the appeal of respondents;
(b) whether the NLRC committed palpable error in scrutinizing the reopening and
2. To deliver to the complainants Two Hundred Thirty-Three (233) sacks of rice as of revival of the complaint of respondents with the Labor Arbiter upon due notice
30 September 2002 representing their rice subsidy in the CBA, broken down as despite the lapse of 10 days from their receipt of the July 30, 2001 Order of the
follows: Labor Arbiter; (c) whether respondents were regular employees; (d) whether the
NLRC acted without jurisdiction in entertaining and resolving the claim of the
a. Deiparine, Jennifer - 60 Sacks 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
b. Gerzon, Merlou - 60 Sacks CBA although they are not members of the appropriate bargaining unit.

c. Nazareno, Marlyn - 60 Sacks 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
d. Lerazan, Josephine Sanchez - 53 Sacks 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
Total 233 Sacks; and 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,31 the Court reiterated the test in
determining whether one is a regular employee:
The primary standard, therefore, of determining regular employment is the
reasonable connection between the particular activity performed by the employee
in relation to the usual trade or business of the employer. The test is whether the
former is usually necessary or desirable in the usual business or trade of the
employer. The connection can be determined by considering the nature of work
performed and its relation to the scheme of the particular business or trade in its
entirety. Also, if the employee has been performing the job for at least a year, even
if the performance is not continuous and merely intermittent, the law deems
repeated and continuing need for its performance as sufficient evidence of the
necessity if not indispensability of that activity to the business. Hence, the
employment is considered regular, but only with respect to such activity and while
such activity exists.32
As elaborated by this Court in Magsalin v. National Organization of Working Men:33
Even while the language of law might have been more definitive, the clarity of its
spirit and intent, i.e., to ensure a "regular" 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 who are regular employees of the respondents. Moreover, under Article
1702 of the New Civil Code: "In case of doubt, all labor legislation and all labor
contracts shall be construed in favor of the safety and decent living of the laborer."

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The
assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 76582 are
AFFIRMED. Costs against petitioner.

SO ORDERED.
ROGELIO P. NOGALES, G.R. No. 142625
for himself and on behalf of the minors,
ROGER ANTHONY, Present: The Facts
ANGELICA, NANCY, and
MICHAEL CHRISTOPHER, QUISUMBING, J.,
all surnamed NOGALES, Chairperson,
Pregnant with her fourth child, Corazon Nogales (Corazon), who was then 37 years
Petitioners, CARPIO,
CARPIO MORALES, old, was under the exclusive prenatal care of Dr. Oscar Estrada (Dr. Estrada) beginning
- versus - TINGA, and
VELASCO, JR., JJ. on her fourth month of pregnancy or as early as December 1975. While Corazon was

on her last trimester of pregnancy, Dr. Estrada noted an increase in her blood pressure
CAPITOL MEDICAL CENTER,
DR. OSCAR ESTRADA, and development of leg edema[5] indicating preeclampsia,[6] which is a dangerous
DR. ELY VILLAFLOR,
DR. ROSA UY, complication of pregnancy.[7]
DR. JOEL ENRIQUEZ,
DR. PERPETUA LACSON,
DR. NOE ESPINOLA, and Promulgated: Around midnight of 25 May 1976, Corazon started to experience mild labor pains
NURSE J. DUMLAO,
Respondents. December 19, 2006 prompting Corazon and Rogelio Nogales (Spouses Nogales) to see Dr. Estrada at his
x-----------------------------------------------------------------------------------------x home. After examining Corazon, Dr. Estrada advised her immediate admission to

the Capitol MedicalCenter (CMC).

DECISION

CARPIO, J.: On 26 May 1976, Corazon was admitted at 2:30 a.m. at the CMC after the staff nurse
noted the written admission request[8] of Dr. Estrada.Upon Corazons admission at the
CMC, Rogelio Nogales (Rogelio) executed and signed the Consent on Admission and
The Case
Agreement[9] and Admission Agreement.[10] Corazon was then brought to the labor
room of the CMC.

This petition for review[1] assails the 6 February 1998 Decision[2] and 21 March
2000 Resolution[3] of the Court of Appeals in CA-G.R. CV No. 45641. The Court of
Appeals affirmed in toto the 22 November 1993 Decision[4] of the Regional Trial Court
of Manila, Branch 33, finding Dr. Oscar Estrada solely liable for damages for the death
of his patient, Corazon Nogales, while absolving the remaining respondents of any
liability. The Court of Appeals denied petitioners motion for reconsideration.
Dr. Rosa Uy (Dr. Uy), who was then a resident physician of CMC, conducted an
internal examination of Corazon. Dr. Uy then called up Dr. Estrada to notify him of
her findings.
Based on the Doctors Order Sheet,[11] around 3:00 a.m., Dr. Estrada ordered for 10
mg. of valium to be administered immediately by intramuscular injection. Dr. Estrada
later ordered the start of intravenous administration of syntocinon admixed with
dextrose, 5%, in lactated Ringers solution, at the rate of eight to ten micro-drops per administered hemacel through a gauge 19 needle as a side drip to the ongoing
minute.
intravenous injection of dextrose.

According to the Nurses Observation Notes,[12] Dr. Joel Enriquez (Dr. Enriquez), an
At 7:45 a.m., Dr. Estrada ordered blood typing and cross matching with bottled
anesthesiologist at CMC, was notified at 4:15 a.m. of Corazons
blood. It took approximately 30 minutes for the CMClaboratory, headed by Dr.
admission. Subsequently, when asked if he needed the services of an
Perpetua Lacson (Dr. Lacson), to comply with Dr. Estradas order and deliver the
anesthesiologist, Dr. Estrada refused. Despite Dr. Estradas refusal, Dr. Enriquez stayed
blood.
to observe Corazons condition.

At 8:00 a.m., Dr. Noe Espinola (Dr. Espinola), head of the Obstetrics-Gynecology
At 6:00 a.m., Corazon was transferred to Delivery Room No. 1 of the CMC. At 6:10
Department of the CMC, was apprised of Corazons condition by telephone. Upon
a.m., Corazons bag of water ruptured spontaneously. At 6:12 a.m., Corazons cervix
being informed that Corazon was bleeding profusely, Dr. Espinola ordered immediate
was fully dilated. At 6:13 a.m., Corazon started to experience convulsions.
hysterectomy. Rogelio was made to sign a Consent to Operation.[13]

At 6:15 a.m., Dr. Estrada ordered the injection of ten grams of magnesium
Due to the inclement weather then, Dr. Espinola, who was fetched from his residence
sulfate. However, Dr. Ely Villaflor (Dr. Villaflor), who was assisting Dr. Estrada,
by an ambulance, arrived at the CMC about an hour later or at 9:00 a.m. He examined
administered only 2.5 grams of magnesium sulfate.
the patient and ordered some resuscitative measures to be administered. Despite Dr.

Espinolas efforts, Corazon died at 9:15 a.m. The cause of death was hemorrhage, post
At 6:22 a.m., Dr. Estrada, assisted by Dr. Villaflor, applied low forceps to extract
partum.[14]
Corazons baby. In the process, a 1.0 x 2.5 cm. piece of cervical tissue was allegedly

torn. The baby came out in an apnic, cyanotic, weak and injured
On 14 May 1980, petitioners filed a complaint for damages[15] with the Regional Trial
condition. Consequently, the baby had to be intubated and resuscitated by Dr.
Court[16] of Manila against CMC, Dr. Estrada, Dr. Villaflor, Dr. Uy, Dr. Enriquez, Dr.
Enriquez and Dr. Payumo.
Lacson, Dr. Espinola, and a certain Nurse J. Dumlao for the death of

Corazon. Petitioners mainly contended that defendant physicians and CMC personnel
At 6:27 a.m., Corazon began to manifest moderate vaginal bleeding which rapidly
were negligent in the treatment and management of Corazons condition. Petitioners
became profuse. Corazons blood pressure dropped from 130/80 to 60/40 within five
charged CMC with negligence in the selection and supervision of defendant physicians
minutes. There was continuous profuse vaginal bleeding. The assisting nurse
and hospital staff.

For failing to file their answer to the complaint despite service of summons, the trial
court declared Dr. Estrada, Dr. Enriquez, and Nurse Dumlao in default.[17] CMC, Dr.
Villaflor, Dr. Uy, Dr. Espinola, and Dr. Lacson filed their respective answers denying
and opposing the allegations in the complaint. Subsequently, trial ensued.
After more than 11 years of trial, the trial court rendered judgment on 22 November
1993 finding Dr. Estrada solely liable for damages. The trial court ruled as follows:
The victim was under his pre-natal care, apparently, his fault
began from his incorrect and inadequate management and lack
of treatment of the pre-eclamptic condition of his patient. It is
not disputed that he misapplied the forceps in causing the
delivery because it resulted in a large cervical tear which had
caused the profuse bleeding which he also failed to control with
the application of inadequate injection of magnesium sulfate by
his assistant Dra. Ely Villaflor. Dr. Estrada even failed to notice the
erroneous administration by nurse Dumlao of hemacel by way of
side drip, instead of direct intravenous injection, and his failure
to consult a senior obstetrician at an early stage of the problem.
On the part however of Dra. Ely Villaflor, Dra. Rosa Uy, Dr. Joel
Enriquez, Dr. Lacson, Dr. Espinola, nurse J. Dumlao and CMC, the
Court finds no legal justification to find them civilly liable.
On the part of Dra. Ely Villaflor, she was only taking orders from
Dr. Estrada, the principal physician of Corazon Nogales. She can
only make suggestions in the manner the patient maybe treated
but she cannot impose her will as to do so would be to substitute
her good judgment to that of Dr. Estrada. If she failed to correctly
diagnose the true cause of the bleeding which in this case
appears to be a cervical laceration, it cannot be safely concluded
by the Court that Dra. Villaflor had the correct diagnosis and she
failed to inform Dr. Estrada. No evidence was introduced to show
that indeed Dra. Villaflor had discovered that there was
laceration at the cervical area of the patients internal organ.
On the part of nurse Dumlao, there is no showing that when she
administered the hemacel as a side drip, she did it on her own. If
the correct procedure was directly thru the veins, it could only be
because this was what was probably the orders of Dr. Estrada.
While the evidence of the plaintiffs shows that Dr. Noe Espinola,
who was the Chief of the Department of Obstetrics and
Gynecology who attended to the patient Mrs. Nogales, it was only
at 9:00 a.m. That he was able to reach the hospital because of
typhoon Didang (Exhibit 2). While he was able to give prescription
in the manner Corazon Nogales may be treated, the prescription
was based on the information given to him by phone and he acted
on the basis of facts as presented to him, believing in good faith
that such is the correct remedy. He was not with Dr. Estrada
when the patient was brought to the hospital at 2:30 oclock
a.m. So, whatever errors that Dr. Estrada committed on the
patient before 9:00 oclock a.m. are certainly the errors of Dr.
Estrada and cannot be the mistake of Dr. Noe Espinola. His failure
to come to the hospital on time was due to fortuitous event.
On the part of Dr. Joel Enriquez, while he was present in the
delivery room, it is not incumbent upon him to call the attention
of Dr. Estrada, Dra. Villaflor and also of Nurse Dumlao on the
alleged errors committed by them. Besides, as anesthesiologist,
he has no authority to control the actuations of Dr. Estrada and
Dra. Villaflor. For the Court to assume that there were errors
being committed in the presence of Dr. Enriquez would be to
dwell on conjectures and speculations.
On the civil liability of Dr. Perpetua Lacson, [s]he is a hematologist
and in-charge of the blood bank of the CMC. The Court cannot
accept the theory of the plaintiffs that there was delay in
delivering the blood needed by the patient. It was testified, that
in order that this blood will be made available, a laboratory test
has to be conducted to determine the type of blood, cross
matching and other matters consistent with medical science so,
the lapse of 30 minutes maybe considered a reasonable time to
do all of these things, and not a delay as the plaintiffs would want
the Court to believe.
Admittedly, Dra. Rosa Uy is a resident physician of the Court cannot accepts [sic] however, the theory of the
the Capitol Medical Center. She was sued because of her alleged remaining defendants that plaintiffs were motivated in bad faith
failure to notice the incompetence and negligence of Dr. in the filing of this complaint. For this reason defendants
Estrada. However, there is no evidence to support such counterclaims are hereby ordered dismissed.
theory. No evidence was adduced to show that Dra. Rosa Uy as a
resident physician of Capitol Medical Center, had knowledge of SO ORDERED.[18]
the mismanagement of the patient Corazon Nogales, and that
notwithstanding such knowledge, she tolerated the same to
happen.
Petitioners appealed the trial courts decision. Petitioners claimed that aside from Dr.

Estrada, the remaining respondents should be held equally liable for

In the pre-trial order, plaintiffs and CMC agreed that defendant
CMC did not have any hand or participation in the selection or negligence. Petitioners pointed out the extent of each respondents alleged liability.
hiring of Dr. Estrada or his assistant Dra. Ely Villaflor as attending
physician[s] of the deceased. In other words, the two (2) doctors
were not employees of the hospital and therefore the hospital On 6 February 1998, the Court of Appeals affirmed the decision of the trial
did not have control over their professional conduct. When Mrs.
Nogales was brought to the hospital, it was an emergency case court.[19] Petitioners filed a motion for reconsideration which the Court of Appeals
and defendant CMC had no choice but to admit her. Such being
denied in its Resolution of 21 March 2000.[20]
the case, there is therefore no legal ground to apply the
provisions of Article 2176 and 2180 of the New Civil Code Hence, this petition.
referring to the vicarious liability of an employer for the
negligence of its employees. If ever in this case there is fault or
negligence in the treatment of the deceased on the part of the Meanwhile, petitioners filed a Manifestation dated 12 April 2002[21] stating that
attending physicians who were employed by the family of the
deceased, such civil liability should be borne by the attending respondents Dr. Estrada, Dr. Enriquez, Dr. Villaflor, and Nurse Dumlao need no longer
physicians under the principle of respondeat superior.
be notified of the petition because they are absolutely not involved in the issue raised
WHEREFORE, premises considered, judgment is hereby rendered before the [Court], regarding the liability of [CMC].[22] Petitioners stressed that the
finding defendant Dr. Estrada of Number 13 Pitimini St. San
Francisco del Monte, Quezon City civilly liable to pay subject matter of this petition is the liability of CMC for the negligence of Dr.
plaintiffs: 1) By way of actual damages in the amount
Estrada.[23]
of P105,000.00; 2) By way of moral damages in the amount
of P700,000.00; 3) Attorneys fees in the amount of P100,000.00
and to pay the costs of suit.
The Court issued a Resolution dated 9 September 2002[24] dispensing with the
For failure of the plaintiffs to adduce evidence to support its [sic]
requirement to submit the correct and present addresses of respondents Dr. Estrada,
allegations against the other defendants, the complaint is hereby
ordered dismissed.While the Court looks with disfavor the filing Dr. Enriquez, Dr. Villaflor, and Nurse Dumlao. The Court stated that with the filing of
of the present complaint against the other defendants by the
herein plaintiffs, as in a way it has caused them personal petitioners Manifestation, it should be understood that they are claiming only against
inconvenience and slight damage on their name and reputation, respondents CMC, Dr. Espinola, Dr. Lacson, and Dr. Uy who have filed their respective
comments. Petitioners are foregoing further claims against respondents Dr. Estrada, sufficient to render the hospital liable for the physicians negligence.[28] A hospital is

Dr. Enriquez, Dr. Villaflor, and Nurse Dumlao. not responsible for the negligence of a physician who is an independent contractor.[29]

The Court noted that Dr. Estrada did not appeal the decision of the Court of Appeals The Court of Appeals found the cases of Davidson v. Conole[30] and Campbell v. Emma

affirming the decision of the Regional Trial Court.Accordingly, the decision of the Laing Stevens Hospital[31] applicable to this case.Quoting Campbell, the Court of

Court of Appeals, affirming the trial courts judgment, is already final as against Dr. Appeals stated that where there is no proof that defendant physician was an

Oscar Estrada. employee of defendant hospital or that defendant hospital had reason to know that

any acts of malpractice would take place, defendant hospital could not be held liable

Petitioners filed a motion for reconsideration[25] of the Courts 9 September for its failure to intervene in the relationship of physician-patient between defendant

2002 Resolution claiming that Dr. Enriquez, Dr. Villaflor and Nurse Dumlao were physician and plaintiff.

notified of the petition at their counsels last known addresses. Petitioners reiterated

their imputation of negligence on these respondents. The Court denied petitioners On the liability of the other respondents, the Court of Appeals applied the borrowed

Motion for Reconsideration in its 18 February 2004 Resolution.[26] servant doctrine considering that Dr. Estrada was an independent contractor who

was merely exercising hospital privileges. This doctrine provides that once the

surgeon enters the operating room and takes charge of the proceedings, the acts or
The Court of Appeals Ruling omissions of operating room personnel, and any negligence associated with such acts

or omissions, are imputable to the surgeon.[32] While the assisting physicians and

In its Decision of 6 February 1998, the Court of Appeals upheld the trial courts nurses may be employed by the hospital, or engaged by the patient, they normally

ruling. The Court of Appeals rejected petitioners view that the doctrine in Darling v. become the temporary servants or agents of the surgeon in charge while the

Charleston Community Memorial Hospital[27] applies to this case. According to the operation is in progress, and liability may be imposed upon the surgeon for their

Court of Appeals, the present case differs from the Darling case since Dr. Estrada is negligent acts under the doctrine of respondeat superior.[33]

an independent contractor-physician whereas the Darling case involved a physician

and a nurse who were employees of the hospital. The Court of Appeals concluded that since Rogelio engaged Dr. Estrada as

the attending physician of his wife, any liability for malpractice must be Dr. Estradas
Citing other American cases, the Court of Appeals further held that the mere fact that sole responsibility.

a hospital permitted a physician to practice medicine and use its facilities is not
 While it found the amount of damages fair and reasonable, the Court of
Appeals held that no interest could be imposed on unliquidated claims or damages.
The Issue
Basically, the issue in this case is whether CMC is vicariously liable for the negligence
of Dr. Estrada. The resolution of this issue rests, on the other hand, on the
ascertainment of the relationship between Dr. Estrada and CMC. The Court also
believes that a determination of the extent of liability of the other respondents is
inevitable to finally and completely dispose of the present controversy.
The Ruling of the Court
The petition is partly meritorious.
On the Liability of CMC
Dr. Estradas negligence in handling the treatment and management of Corazons
condition which ultimately resulted in Corazons death is no longer in issue. Dr. Estrada
did not appeal the decision of the Court of Appeals which affirmed the ruling of the
trial court finding Dr. Estrada solely liable for damages. Accordingly, the finding of the
trial court on Dr. Estradas negligence is already final.
Petitioners maintain that CMC is vicariously liable for Dr. Estradas negligence based
on Article 2180 in relation to Article 2176 of the Civil Code. These provisions
pertinently state:
Art. 2180. The obligation imposed by article 2176 is demandable
not only for ones own acts or omissions, but also for those of
persons for whom one is responsible.
xxxx
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of their
assigned tasks, even though the former are not engaged in any
business or industry.
xxxx
The responsibility treated of in this article shall cease when the
persons herein mentioned prove that they observed all the
diligence of a good father of a family to prevent damage.
Art. 2176. Whoever by act or omission causes damage to another,
there being fault or negligence, is obliged to pay for the damage
done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-delict
and is governed by the provisions of this Chapter.
Similarly, in the United States, a hospital which is the employer, master, or principal
of a physician employee, servant, or agent, may be held liable for the physicians
negligence under the doctrine of respondeat superior.[34]

In the present case, petitioners maintain that CMC, in allowing Dr. Estrada to practice
and admit patients at CMC, should be liable for Dr. Estradas malpractice. Rogelio
claims that he knew Dr. Estrada as an accredited physician of CMC, though he
discovered later that Dr. Estrada was not a salaried employee of the CMC.[35] Rogelio
further claims that he was dealing with CMC, whose primary concern was the
treatment and management of his wifes condition. Dr. Estrada just happened to be
the specific person he talked to representing CMC.[36] Moreover, the fact that CMC
made Rogelio sign a Consent on Admission and Admission Agreement[37] and a
Consent to Operation printed on the letterhead of CMC indicates that CMC
considered Dr. Estrada as a member of its medical staff.
On the other hand, CMC disclaims liability by asserting that Dr. Estrada was a mere
visiting physician and that it admitted Corazon because
her physical condition then was classified an emergency obstetrics case.[38]
CMC alleges that Dr. Estrada is an independent contractor for whose actuations CMC
would be a total stranger. CMC maintains that it had no control or supervision over
Dr. Estrada in the exercise of his medical profession.
The Court had the occasion to determine the relationship between a hospital and a
consultant or visiting physician and the liability of such hospital for that physicians
negligence in Ramos v. Court of Appeals,[39] to wit:
In the first place, hospitals exercise significant control in the hiring
and firing of consultants and in the conduct of their work within
the hospital premises. Doctors who apply for consultant slots,
visiting or attending, are required to submit proof of completion
of residency, their educational qualifications; generally, evidence
of accreditation by the appropriate board (diplomate), evidence
of fellowship in most cases, and references. These requirements
are carefully scrutinized by members of the hospital
administration or by a review committee set up by the hospital
who either accept or reject the application. This is particularly true
with respondent hospital.
After a physician is accepted, either as a visiting or attending
consultant, he is normally required to attend clinico-pathological
conferences, conduct bedside rounds for clerks, interns and
residents, moderate grand rounds and patient audits and perform
other tasks and responsibilities, for the privilege of being able to
maintain a clinic in the hospital, and/or for the privilege of
admitting patients into the hospital. In addition to these, the
physicians performance as a specialist is generally evaluated by a
peer review committee on the basis of mortality and morbidity
statistics, and feedback from patients, nurses, interns and
residents. A consultant remiss in his duties, or a consultant who
regularly falls short of the minimum standards acceptable to the
hospital or its peer review committee, is normally politely
terminated.
In other words, private hospitals, hire, fire and exercise real
control over their attending and visiting consultant staff. While
consultants are not, technically employees, a point which
respondent hospital asserts in denying all responsibility for the
patients condition, the control exercised, the hiring, and the right
to terminate consultants all fulfill the important hallmarks of an
employer-employee relationship, with the exception of the
payment of wages. In assessing whether such a relationship in fact
exists, the control test is determining. Accordingly, on the basis of
the foregoing, we rule that for the purpose of allocating
responsibility in medical negligence cases, an employer-employee
relationship in effect exists between hospitals and their attending
and visiting physicians. This being the case, the question now
arises as to whether or not respondent hospital is solidarily liable
with respondent doctors for petitioners condition.
The basis for holding an employer solidarily responsible for the
negligence of its employee is found in Article 2180 of the Civil
Code which considers a person accountable not only for his own
acts but also for those of others based on the formers
 responsibility under a relationship of patria potestas. x x
x[40] (Emphasis supplied)
While the Court in Ramos did not expound on the control test, such test essentially
determines whether an employment relationship exists between a physician and a
hospital based on the exercise of control over the physician as to details. Specifically,
the employer (or the hospital) must have the right to control both the means and the
details of the process by which the employee (or the physician) is to accomplish his
task.[41]
After a thorough examination of the voluminous records of this case, the Court finds
no single evidence pointing to CMCs exercise of control over Dr. Estradas treatment
and management of Corazons condition. It is undisputed that throughout Corazons
pregnancy, she was under the exclusive prenatal care of Dr. Estrada. At the time of
Corazons admission at CMC and during her delivery, it was Dr. Estrada, assisted by Dr.
Villaflor, who attended to Corazon. There was no showing that CMC had a part in
diagnosing Corazons condition. While Dr. Estrada enjoyed staff privileges at CMC,
such fact alone did not make him an employee of CMC.[42] CMC merely allowed Dr.
Estrada to use its facilities[43]when Corazon was about to give birth, which CMC
considered an emergency. Considering these circumstances, Dr. Estrada is not an
employee of CMC, but an independent contractor.
The question now is whether CMC is automatically exempt from liability considering
that Dr. Estrada is an independent contractor-physician.
In general, a hospital is not liable for the negligence of an independent contractor-
physician. There is, however, an exception to this principle. The hospital may be liable
if the physician is the ostensible agent of the hospital.[44] This exception is also known
as the doctrine of apparent authority.[45] In Gilbert v. Sycamore Municipal
Hospital,[46] the Illinois Supreme Court explained the doctrine of apparent authority
in this wise:
[U]nder the doctrine of apparent authority a hospital can be held
vicariously liable for the negligent acts of a physician providing
care at the hospital, regardless of whether the physician is an
independent contractor, unless the patient knows, or should have
known, that the physician is an independent contractor. The
elements of the action have been set out as follows:
For a hospital to be liable under the doctrine of apparent
authority, a plaintiff must show that: (1) the hospital, or its agent,
acted in a manner that would lead a reasonable person to
conclude that the individual who was alleged to be negligent was
an employee or agent of the hospital; (2) where the acts of the
agent create the appearance of authority, the plaintiff must also
prove that the hospital had knowledge of and acquiesced in them;
and (3) the plaintiff acted in reliance upon the conduct of the
hospital or its agent, consistent with ordinary care and prudence.
The element of holding out on the part of the hospital does not
require an express representation by the hospital that the person
alleged to be negligent is an employee. Rather, the element is
satisfied if the hospital holds itself out as a provider of emergency
room care without informing the patient that the care is provided
by independent contractors.
The element of justifiable reliance on the part of the plaintiff is
satisfied if the plaintiff relies upon the hospital to provide
complete emergency room care, rather than upon a specific
physician.
The doctrine of apparent authority essentially involves two factors to determine the
liability of an independent-contractor physician.
The first factor focuses on the hospitals manifestations and is sometimes described as
an inquiry whether the hospital acted in a manner which would lead a reasonable
person to conclude that the individual who was alleged to be negligent was an
employee or agent of the hospital.[47]In this regard, the hospital need not make
express representations to the patient that the treating physician is an employee of the
hospital; rather a representation may be general and implied.[48]
The doctrine of apparent authority is a species of the doctrine of estoppel. Article
1431 of the Civil Code provides that [t]hrough estoppel, an admission or
representation is rendered conclusive upon the person making it, and cannot be
denied or disproved as against the person relying thereon. Estoppel rests on this rule:
Whenever a party has, by his own declaration, act, or omission, intentionally and
deliberately led another to believe a particular thing true, and to act upon such belief,
he cannot, in any litigation arising out of such declaration, act or omission, be
permitted to falsify it.[49]
In the instant case, CMC impliedly held out Dr. Estrada as a member of its medical
staff. Through CMCs acts, CMC clothed Dr. Estrada with apparent authority thereby
leading the Spouses Nogales to believe that Dr. Estrada was an employee or agent of
CMC. CMC cannot now repudiate such authority.
First, CMC granted staff privileges to Dr. Estrada. CMC extended its medical staff and
facilities to Dr. Estrada. Upon Dr. Estradas request for Corazons admission, CMC,
through its personnel, readily accommodated Corazon and updated Dr. Estrada of her
condition.
Second, CMC made Rogelio sign consent forms printed on CMC letterhead. Prior to
Corazons admission and supposed hysterectomy, CMC asked Rogelio to sign release
forms, the contents of which reinforced Rogelios belief that Dr. Estrada was a member
of CMCs medical staff.[50] The Consent on Admission and Agreement explicitly
provides:
KNOW ALL MEN BY THESE PRESENTS:
I, Rogelio Nogales, of legal age, a resident of 1974 M. H. Del Pilar
St., Malate Mla., being the
father/mother/brother/sister/spouse/relative/ guardian/or
person in custody of Ma. Corazon, and representing his/her
family, of my own volition and free will, do consent and submit
said Ma. Corazon to Dr. Oscar Estrada (hereinafter referred to as
Physician) for cure, treatment, retreatment, or emergency
measures, that the Physician, personally or by and through the
Capitol Medical Center and/or its staff, may use, adapt, or employ
such means, forms or methods of cure, treatment, retreatment, or
emergency measures as he may see best and most expedient; that
Ma. Corazon and I will comply with any and all rules, regulations,
directions, and instructions of the Physician, the Capitol Medical
Center and/or its staff; and, that I will not hold liable or
responsible and hereby waive and forever discharge and hold
free the Physician, the Capitol Medical Center and/or its staff,
from any and all claims of whatever kind of nature, arising from
directly or indirectly, or by reason of said cure, treatment, or
retreatment, or emergency measures or intervention of said
physician, the Capitol Medical Center and/or its staff.
x x x x[51] (Emphasis supplied)
While the Consent to Operation pertinently reads, thus:
I, ROGELIO NOGALES, x x x, of my own volition and free will, do
consent and submit said CORAZON NOGALES to Hysterectomy, by
the Surgical Staff and Anesthesiologists of Capitol Medical
 Center and/or whatever succeeding operations, treatment, or
emergency measures as may be necessary and most expedient; his wife specifically chose Dr. Estrada to handle Corazons delivery not only because of
and, that I will not hold liable or responsible and hereby waive their friends recommendation, but more importantly because of Dr. Estradas
and forever discharge and hold free the Surgeon, his assistants,
anesthesiologists, the Capitol Medical Center and/or its staff, connection with a reputable hospital, the [CMC].[55] In other words, Dr. Estradas
from any and all claims of whatever kind of nature, arising from
relationship with CMC played a significant role in the Spouses Nogales decision in
directly or indirectly, or by reason of said operation or operations,
treatment, or emergency measures, or intervention of the accepting Dr. Estradas services as the obstetrician-gynecologist for Corazons
Surgeon, his assistants, anesthesiologists, the Capitol Medical
Center and/or its staff.[52] (Emphasis supplied) delivery. Moreover, as earlier stated, there is no showing that before and during

Corazons confinement at CMC, the Spouses Nogales knew or should have known that

Without any indication in these consent forms that Dr. Estrada was an independent Dr. Estrada was not an employee of CMC.

contractor-physician, the Spouses Nogales could not have known that Dr. Estrada was

an independent contractor. Significantly, no one from CMC informed the Spouses Further, the Spouses Nogales looked to CMC to provide the best medical care and

Nogales that Dr. Estrada was an independent contractor. On the contrary, Dr. Atencio, support services for Corazons delivery. The Court notes that prior to Corazons fourth

who was then a member of CMC Board of Directors, testified that Dr. Estrada was part pregnancy, she used to give birth inside a clinic. Considering Corazons age then, the

of CMCs surgical staff.[53] Spouses Nogales decided to have their fourth child delivered at CMC, which Rogelio

regarded one of the best hospitals at the time.[56] This is precisely because the

Third, Dr. Estradas referral of Corazons profuse vaginal bleeding to Dr. Espinola, who Spouses Nogales feared that Corazon might experience complications during her

was then the Head of the Obstetrics and Gynecology Department of CMC, gave the delivery which would be better addressed and treated in a modern and big hospital

impression that Dr. Estrada as a member of CMCs medical staff was collaborating with such as CMC. Moreover, Rogelios consent in Corazons hysterectomy to be performed

other CMC-employed specialists in treating Corazon. by a different physician, namely Dr. Espinola, is a clear indication of Rogelios

confidence in CMCs surgical staff.

The second factor focuses on the patients reliance. It is sometimes characterized as

an inquiry on whether the plaintiff acted in reliance upon the conduct of the hospital CMCs defense that all it did was to extend to [Corazon] its facilities is untenable. The

or its agent, consistent with ordinary care and prudence.[54] Court cannot close its eyes to the reality that hospitals, such as CMC, are in the

business of treatment. In this regard, the Court agrees with the observation made by

The records show that the Spouses Nogales relied upon a perceived employment the Court of Appeals of North Carolina in Diggs v. Novant Health, Inc.,[57] to wit:

relationship with CMC in accepting Dr. Estradas services. Rogelio testified that he and The conception that the hospital does not undertake to treat the
patient, does not undertake to act through its doctors and nurses,
 but undertakes instead simply to procure them to act upon their
own responsibility, no longer reflects the fact. Present day
hospitals, as their manner of operation plainly demonstrates, do
far more than furnish facilities for treatment. They regularly
employ on a salary basis a large staff of physicians, nurses and
internes [sic], as well as administrative and manual workers, and
they charge patients for medical care and treatment, collecting for
such services, if necessary, by legal action. Certainly, the person
who avails himself of hospital facilities expects that the hospital will
attempt to cure him, not that its nurses or other employees will act
on their own responsibility. x x x (Emphasis supplied)
Likewise unconvincing is CMCs argument that petitioners are estopped from claiming
damages based on the Consent on Admission and Consent to Operation. Both release
forms consist of two parts. The first part gave CMC permission to administer to
Corazon any form of recognized medical treatment which the CMC medical staff
deemed advisable. The second part of the documents, which may properly be
described as the releasing part, releases CMC and its employees from any and all
claims arising from or by reason of the treatment and operation.
The documents do not expressly release CMC from liability for injury to
Corazon due to negligence during her treatment or operation. Neither do the consent
forms expressly exempt CMC from liability for Corazons death due to
negligence during such treatment or operation.Such release forms, being in the
nature of contracts of adhesion, are construed strictly against hospitals. Besides, a
blanket release in favor of hospitals from any and all claims, which includes claims due
to bad faith or gross negligence, would be contrary to public policy and thus void.
Even simple negligence is not subject to blanket release in favor of
establishments like hospitals but may only mitigate liability depending on the
circumstances.[58] When a person needing urgent medical attention rushes to a
hospital, he cannot bargain on equal footing with the hospital on the terms of
admission and operation. Such a person is literally at the mercy of the hospital. There
can be no clearer example of a contract of adhesion than one arising from such a dire
situation. Thus, the release forms of CMC cannot relieve CMC from liability for the
negligent medical treatment of Corazon.
On the Liability of the Other Respondents
Despite this Courts pronouncement in its 9 September 2002[59] Resolution that the
filing of petitioners Manifestation confined petitioners claim only against CMC, Dr.
Espinola, Dr. Lacson, and Dr. Uy, who have filed their comments, the Court deems it
proper to resolve the individual liability of the remaining respondents to put an end
finally to this more than two-decade old controversy.
a) Dr. Ely Villaflor
Petitioners blame Dr. Ely Villaflor for failing to diagnose the cause of Corazons
bleeding and to suggest the correct remedy to Dr. Estrada.[60]Petitioners assert that it
was Dr. Villaflors duty to correct the error of Nurse Dumlao in the administration of
hemacel.
The Court is not persuaded. Dr. Villaflor admitted administering a lower dosage of
magnesium sulfate. However, this was after informing Dr. Estrada that Corazon was
no longer in convulsion and that her blood pressure went down to a dangerous
level.[61] At that moment, Dr. Estrada instructed Dr. Villaflor to reduce the dosage of
magnesium sulfate from 10 to 2.5 grams. Since petitioners did not dispute Dr.
Villaflors allegation, Dr. Villaflors defense remains uncontroverted. Dr. Villaflors act of
administering a lower dosage of magnesium sulfate was not out of her own volition Enriquezs knowledge of any error committed by Dr. Estrada and his failure to act upon

or was in contravention of Dr. Estradas order. such observation.

b) Dr. Rosa Uy d) Dr. Perpetua Lacson

Dr. Rosa Uys alleged negligence consisted of her failure (1) to call the attention of Petitioners fault Dr. Perpetua Lacson for her purported delay in the delivery of

Dr. Estrada on the incorrect dosage of magnesium sulfate administered by Dr. blood Corazon needed.[64] Petitioners claim that Dr. Lacson was remiss in her duty of

Villaflor; (2) to take corrective measures; and (3) to correct Nurse Dumlaos wrong supervising the blood bank staff.

method of hemacel administration.

As found by the trial court, there was no unreasonable delay in the delivery of blood

The Court believes Dr. Uys claim that as a second year resident physician then at CMC, from the time of the request until the transfusion to Corazon. Dr. Lacson competently

she was merely authorized to take the clinical history and physical examination of explained the procedure before blood could be given to the patient.[65] Taking into

Corazon.[62] However, that routine internal examination did not ipso facto make Dr. account the bleeding time, clotting time and cross-matching, Dr. Lacson stated that it

Uy liable for the errors committed by Dr. Estrada. Further, petitioners imputation of would take approximately 45-60 minutes before blood could be ready for

negligence rests on their baseless assumption that Dr. Uy was present at the delivery transfusion.[66] Further, no evidence exists that Dr. Lacson neglected her duties as

room. Nothing shows that Dr. Uy participated in delivering Corazons baby. Further, it head of the blood bank.
is unexpected from Dr. Uy, a mere resident physician at that time, to call the attention

of a more experienced specialist, if ever she was present at the delivery room. e) Dr. Noe Espinola

Petitioners argue that Dr. Espinola should not have ordered immediate hysterectomy

c) Dr. Joel Enriquez without determining the underlying cause of Corazons bleeding. Dr. Espinola should

Petitioners fault Dr. Joel Enriquez also for not calling the attention of Dr. Estrada, Dr. have first considered the possibility of cervical injury, and advised a thorough

Villaflor, and Nurse Dumlao about their errors.[63]Petitioners insist that Dr. Enriquez examination of the cervix, instead of believing outright Dr. Estradas diagnosis that the

should have taken, or at least suggested, corrective measures to rectify such errors. cause of bleeding was uterine atony.

The Court is not convinced. Dr. Enriquez is an anesthesiologist whose field of

expertise is definitely not obstetrics and gynecology. As such, Dr. Enriquez was not Dr. Espinolas order to do hysterectomy which was based on the information he
expected to correct Dr. Estradas errors. Besides, there was no evidence of Dr. received by phone is not negligence. The Court agrees with the trial courts

observation that Dr. Espinola, upon hearing such information about Corazons
condition, believed in good faith that hysterectomy was the correct remedy. At any WHEREFORE, the Court PARTLY GRANTS the petition. The Court finds respondent

rate, the hysterectomy did not push through because upon Dr. Espinolas arrival, it was Capitol Medical Center vicariously liable for the negligence of Dr. Oscar Estrada. The

already too late. At the time, Corazon was practically dead. amounts of P105,000 as actual damages and P700,000 as moral damages should each

earn legal interest at the rate of six percent (6%) per annum computed from the date

f) Nurse J. Dumlao of the judgment of the trial court. The Court affirms the rest of the Decision dated 6

February 1998 and Resolution dated 21 March 2000 of the Court of Appeals in CA-

In Moore v. Guthrie Hospital Inc.,[67] the US Court of Appeals, Fourth Circuit, held G.R. CV No. 45641.

that to recover, a patient complaining of injuries allegedly resulting when the nurse

negligently injected medicine to him intravenously instead of intramuscularly had to SO ORDERED.

show that (1) an intravenous injection constituted a lack of reasonable and ordinary

care; (2) the nurse injected medicine intravenously; and (3) such injection was the

proximate cause of his injury.

In the present case, there is no evidence of Nurse Dumlaos alleged failure to follow

Dr. Estradas specific instructions. Even assuming Nurse Dumlao defied Dr. Estradas
order, there is no showing that side-drip administration of hemacel proximately

caused Corazons death. No evidence linking Corazons death and the alleged wrongful

hemacel administration was introduced. Therefore, there is no basis to hold Nurse

Dumlao liable for negligence.

On the Award of Interest on Damages

The award of interest on damages is proper and allowed under Article 2211 of the

Civil Code, which states that in crimes and quasi-delicts, interest as a part of
the damages may, in a proper case, be adjudicated in the discretion of the court.[68]
COCA COLA BOTTLERS (PHILS.), G.R. No. 146881
INC./ERIC MONTINOLA, Manager,
Petitioners, Present: NOW, THEREFORE, in consideration of the
premises and the mutual agreement hereinafter contained, the
PUNO, C.J., Chairperson, parties agree as follows:
SANDOVAL-GUTIERREZ,
- versus - CORONA, 1. This Agreement shall only be for a period of one (1)
AZCUNA, and year beginning January 1, 1988 up to December 31,
GARCIA, JJ. 1988. The said term notwithstanding, either party may
terminate the contract upon giving a thirty (30)-day
DR. DEAN N. CLIMACO, Promulgated: written notice to the other.
Respondent.
February 5, 2007 2. The compensation to be paid by the company for the
services of the DOCTOR is hereby fixed at PESOS: Three
x ---------------------------------------------------------------------------------------- x Thousand Eight Hundred (P3,800.00) per month. The
DOCTOR may charge professional fee for hospital
services rendered in line with his specialization. All
DECISION payments in connection with the Retainer Agreement
shall be subject to a withholding tax of ten percent
AZCUNA, J.: (10%) to be withheld by the COMPANY under the
Expanded Withholding Tax System. In the event the
withholding tax rate shall be increased or decreased by
appropriate laws, then the rate herein stipulated shall
This is a petition for review on certiorari of the Decision of the Court of accordingly be increased or decreased pursuant to such
Appeals[1] promulgated on July 7, 2000, and its Resolution promulgated on January laws.

30, 2001, denying petitioners motion for reconsideration. The Court of Appeals ruled 3. That in consideration of the above mentioned
retainers fee, the DOCTOR agrees to perform the duties
that an employer-employee relationship exists between respondent Dr. Dean N.
and obligations enumerated in the COMPREHENSIVE
Climaco and petitioner Coca-Cola Bottlers Phils., Inc. (Coca-Cola), and that respondent MEDICAL PLAN, hereto attached as Annex A and made
an integral part of this Retainer Agreement.
was illegally dismissed.
4. That the applicable provisions in the Occupational
Safety and Health Standards, Ministry of Labor and
Employment shall be followed.
Respondent Dr. Dean N. Climaco is a medical doctor who was hired by

petitioner Coca-Cola Bottlers Phils., Inc. by virtue of a Retainer Agreement that stated:
WHEREAS, the COMPANY desires to engage on a
retainer basis the services of a physician and the said DOCTOR is
accepting such engagement upon terms and conditions
hereinafter set forth;
5. That the DOCTOR shall be directly responsible to the
employee concerned and their dependents for any
injury inflicted on, harm done against or damage
caused upon the employee of the COMPANY or their
dependents during the course of his examination,
treatment or consultation, if such injury, harm or
damage was committed through professional
 negligence or incompetence or due to the other valid
causes for action.
6. That the DOCTOR shall observe clinic hours at the
COMPANYS premises from Monday to Saturday of a
minimum of two (2) hours each day or a maximum
of TWO (2) hours each day or treatment
from 7:30 a.m. to 8:30 a.m. and 3:00 p.m.
to 4:00 p.m., respectively unless such schedule is
otherwise changed by the COMPANY as [the] situation
so warrants, subject to the Labor Code provisions on
Occupational Safety and Health Standards as the
COMPANY may determine. It is understood that the
DOCTOR shall stay at least two (2) hours a day in the
COMPANY clinic and that such two (2) hours be
devoted to the workshift with the most number of
employees. It is further understood that the DOCTOR
shall be on call at all times during the other workshifts
to attend to emergency case[s];
7. That no employee-employer relationship shall exist
between the COMPANY and the DOCTOR whilst this
contract is in effect, and in case of its termination, the
DOCTOR shall be entitled only to such retainer fee as
may be due him at the time of termination.[2]
The Comprehensive Medical Plan,[3] which contains the duties and
responsibilities of respondent, adverted to in the Retainer Agreement, provided:
A. OBJECTIVE
These objectives have been set to give full
consideration to [the] employees and dependents health:
1. Prompt and adequate treatment of occupational and
non-occupational injuries and diseases.
2. To protect employees from any occupational health
hazard by evaluating health factors related to
working conditions.
3. To encourage employees [to] maintain good
personal health by setting up employee
orientation and education on health, hygiene
and sanitation, nutrition, physical fitness, first
aid training, accident prevention and
personnel safety.
4. To evaluate other matters relating to health such as
absenteeism, leaves and termination.
5. To give family planning motivations.
B. COVERAGE
1. All employees and their dependents are embraced
by this program.
2. The health program shall cover pre-employment and
annual p.e., hygiene and sanitation,
immunizations, family planning, physical
fitness and athletic programs and other
activities such as group health education
program, safety and first aid classes,
organization of health and safety
committees.
3. Periodically, this program will be reviewed and
adjusted based on employees needs.
C. ACTIVITIES
1. Annual Physical Examination.
2. Consultations, diagnosis and treatment of
occupational and non-occupational illnesses
and injuries.
3. Immunizations necessary for job conditions.
4. Periodic inspections for food services and rest
rooms.
 5. Conduct health education programs and present
education materials.
6. Coordinate with Safety Committee in developing
specific studies and program to minimize
environmental health hazards.
7. Give family planning motivations.
8. Coordinate with Personnel Department regarding
physical fitness and athletic programs.
9. Visiting and follow-up treatment of Company
employees and their dependents confined in
the hospital.
The Retainer Agreement, which began on January 1, 1988, was renewed
annually. The last one expired on December 31, 1993. Despite the non-renewal of the
Retainer Agreement, respondent continued to perform his functions as company
doctor to Coca-Cola until he received a letter[4] dated March 9, 1995 from petitioner
company concluding their retainership agreement effective 30 days from receipt
thereof.
It is noted that as early as September 1992, petitioner was already making
inquiries regarding his status with petitioner company. First, he wrote a letter
addressed to Dr. Willie Sy, the Acting President and Chairperson of the Committee on
Membership, Philippine College of Occupational Medicine. In response, Dr. Sy wrote
a letter[5] to the Personnel Officer of Coca-Cola Bottlers Phils., Bacolod City, stating
that respondent should be considered as a regular part-time physician, having served
the company continuously for four (4) years. He likewise stated that respondent must
receive all the benefits and privileges of an employee under Article 157 (b)[6] of the
Labor Code.
Petitioner company, however, did not take any action. Hence, respondent
made another inquiry directed to the Assistant Regional Director, Bacolod City District
Office of the Department of Labor and Employment (DOLE), who referred the inquiry
to the Legal Service of the DOLE, Manila. In his letter[7] dated May 18, 1993, Director
Dennis P. Ancheta, Legal Service, DOLE, stated that he believed that an employer-
employee relationship existed between petitioner and respondent based on the
Retainer Agreement and the Comprehensive Medical Plan, and the application of the
four-fold test. However, Director Ancheta emphasized that the existence
of employer-employee relationship is a question of fact. Hence, termination disputes
or money claims arising from employer-employee relations exceeding P5,000 may be
filed with the National Labor Relations Commission (NLRC). He stated that their
opinion is strictly advisory.
An inquiry was likewise addressed to the Social Security System (SSS).
Thereafter, Mr. Romeo R. Tupas, OIC-FID of SSS-BacolodCity, wrote a letter[8] to the
Personnel Officer of Coca-Cola Bottlers Phils., Inc. informing the latter that the legal
staff of his office was of the opinion that the services of respondent partake of the
nature of work of a regular company doctor and that he was, therefore, subject to
social security coverage.
Respondent inquired from the management of petitioner company
whether it was agreeable to recognizing him as a regular employee.The management
refused to do so.
 On February 24, 1994, respondent filed a Complaint[9] before the of the previous finding of Labor Arbiter Jesus N. Rodriguez, Jr. in RAB Case No. 06-02-

NLRC, Bacolod City, seeking recognition as a regular employee of petitioner company 10138-94 that complainant therein, Dr. Dean Climaco, is not an employee of Coca-

and prayed for the payment of all benefits of a regular employee, including Cola Bottlers Phils., Inc.

13th Month Pay, Cost of Living Allowance, Holiday Pay, Service Incentive Leave Pay,

and Christmas Bonus. The case was docketed as RAB Case No. 06-02-10138-94. Respondent appealed both decisions to the NLRC, Fourth

Division, Cebu City.

While the complaint was pending before the Labor Arbiter, respondent

received a letter dated March 9, 1995 from petitioner company concluding their In a Decision[13] promulgated on November 28, 1997, the NLRC dismissed

retainership agreement effective thirty (30) days from receipt thereof. This prompted the appeal in both cases for lack of merit. It declared that no employer-employee

respondent to file a complaint for illegal dismissal against petitioner company with relationship existed between petitioner company and respondent based

the NLRC, Bacolod City. The case was docketed as RAB Case No. 06-04-10177-95. on the provisions of the Retainer Agreement which contract governed respondents

employment.

In a Decision[10] dated November 28, 1996, Labor Arbiter Jesus N.

Rodriguez, Jr. found that petitioner company lacked the power of control over Respondents motion for reconsideration was denied by the NLRC in a

respondents performance of his duties, and recognized as valid the Retainer Resolution[14] promulgated on August 7, 1998.
Agreement between the parties. Thus, the Labor Arbiter dismissed respondents

complaint in the first case, RAB Case No. 06-02-10138-94. The dispositive portion of Respondent filed a petition for review with the Court of Appeals.

the Decision reads:

In a Decision promulgated on July 7, 2000, the Court of Appeals ruled that

WHEREFORE, premises considered, judgment is hereby
rendered dismissing the instant complaint seeking recognition as an employer-employee relationship existed betweenpetitioner company and
a regular employee. respondent after applying the four-fold test: (1) the power to hire the employee; (2)

SO ORDERED.[11] the payment of wages; (3) the power of dismissal; and (4) the employers power to

control the employee with respect to the means and methods by which the work is

to be accomplished.
In a Decision[12] dated February 24, 1997, Labor Arbiter Benjamin
The Court of Appeals held:
Pelaez dismissed the case for illegal dismissal (RAB Case No. 06-04-10177-95) in view
 The Retainer Agreement executed by and between the
parties, when read together with the Comprehensive Medical
Plan which was made an integral part of the retainer agreements,
coupled with the actual services rendered by the petitioner,
would show that all the elements of the above test are present.
First, the agreements provide that the COMPANY
desires to engage on a retainer basis the services of a physician
and the said DOCTOR is accepting such engagement x x x (Rollo,
page 25). This clearly shows that Coca-Cola exercised its power to
hire the services of petitioner.
Secondly, paragraph (2) of the agreements showed that
petitioner would be entitled to a final compensation of Three
Thousand Eight Hundred Pesos per month, which amount was
later raised to Seven Thousand Five Hundred on the latest
contract. This would represent the element of payment of wages.
Thirdly, it was provided in paragraph (1) of the
agreements that the same shall be valid for a period of one
year. The said term notwithstanding, either party may terminate
the contract upon giving a thirty (30) day written notice to the
other. (Rollo, page 25). This would show that Coca-Cola had the
power of dismissing the petitioner, as it later on did, and this
could be done for no particular reason, the sole
requirement being the formers compliance with the 30-day
notice requirement.
Lastly, paragraphs (3) and (6) of the agreements reveal
that Coca-Cola exercised the most important element of all, that
is, control, over the conduct of petitioner in the latters
performance of his duties as a doctor for the company.
It was stated in paragraph (3) that the doctor agrees to
perform the duties and obligations enumerated in the
Comprehensive Medical Plan referred to above. In paragraph (6),
the fixed and definite hours during which the petitioner must
render service to the company is laid down.
We say that there exists Coca-Colas power to control
petitioner because the particular objectives and activities to be
observed and accomplished by the latter are fixed and set under
the Comprehensive Medical Plan which was made an integral part
of the retainer agreement. Moreover, the times for
accomplishing these objectives and activities are likewise
controlled and determined by the company. Petitioner is subject
to definite hours of work, and due to this, he performs his duties
to Coca-Cola not at his own pleasure but according to the
schedule dictated by the company.
In addition, petitioner was designated by Coca-Cola to
be a member of its Bacolod Plants Safety Committee. The
minutes of the meeting of the said committee dated February 16,
1994 included the name of petitioner, as plant physician, as
among those comprising the committee.
It was averred by Coca-Cola in its comment that they
exercised no control over petitioner for the reason that the latter
was not directed as to the procedure and manner of performing
his assigned tasks. It went as far as saying that petitioner was not
told how to immunize, inject, treat or diagnose the employees of
the respondent (Rollo, page 228). We believe that if the control
test would be interpreted this strictly, it would result in an absurd
and ridiculous situation wherein we could declare that an entity
exercises control over anothers activities only in instances where
the latter is directed by the former on each and every stage of
performance of the particular activity. Anything less than that
would be tantamount to no control at all.
To our minds, it is sufficient if the task or activity, as well
as the means of accomplishing it, is dictated, as in this case where
the objectives and activities were laid out, and the specific time
for performing them was fixed by the controlling party.[15]
Moreover, the Court of Appeals declared that respondent should be
classified as a regular employee having rendered six years of service as plant physician
by virtue of several renewed retainer agreements. It underscored the provision in
Article 280[16] of the Labor Code stating that any employee who has rendered at least
one year of service, whether such service is continuous or broken, shall be considered
 4. Give to petitioner all other benefits to which a regular
a regular employee with respect to the activity in which he is employed, and his employee of Coca-Cola is entitled from the time
employment shall continue while such activity exists. Further, it held that the petitioner became a regular employee (one year from
effectivity date of employment) until the time of actual
termination of respondents services without any just or authorized cause constituted payment.
illegal dismissal.
SO ORDERED.[17]

In addition, the Court of Appeals found that respondents dismissal was an

Petitioner company filed a motion for reconsideration of the Decision of the
act oppressive to labor and was effected in a wanton, oppressive or malevolent
Court of Appeals.
manner which entitled respondent to moral and exemplary damages.

In a Resolution promulgated on January 30, 2001, the Court of Appeals

The dispositive portion of the Decision reads:
stated that petitioner company noted that its Decision failed to mention whether

WHEREFORE, in view of the foregoing, the Decision of respondent was a full-time or part-time regular employee. It also questioned how the
the National Labor Relations Commission dated November 28,
benefits under their Collective Bargaining Agreement which the Court awarded to
1997 and its Resolution dated August 7, 1998 are found to have
been issued with grave abuse of discretion in applying the law to respondent could be given to him considering that such benefits were given only to
the established facts, and are hereby REVERSED and SET ASIDE,
and private respondent Coca-Cola Bottlers, Phils.. Inc. is hereby regular employees who render a full days work of not less that eight hours. It was
ordered to: admitted that respondent is only required to work for two hours per day.
1. Reinstate the petitioner with full backwages without
loss of seniority rights from the time his compensation
was withheld up to the time he is actually reinstated; The Court of Appeals clarified that respondent was a regular part-time
however, if reinstatement is no longer possible, to pay employee and should be accorded all the proportionate benefits due to this category
the petitioner separation pay equivalent to one (1)
months salary for every year of service rendered, of employees of [petitioner] Corporation under the CBA. It sustained its decision on
computed at the rate of his salary at the time he was
all other matters sought to be reconsidered.
dismissed, plus backwages.

2. Pay petitioner moral damages in the amount

of P50,000.00. Hence, this petition filed by Coca-Cola Bottlers Phils., Inc.

3. Pay petitioner exemplary damages in the amount The issues are:

of P50,000.00.
1. THAT THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR, BASED ON A
 SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL
LABOR RELATIONS COMMISSION, CONTRARY TO THE
DECISIONS OF THE HONORABLE SUPREME COURT ON
THE MATTER.
2. THAT THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL
LABOR RELATIONS COMMISSION, AND HOLDING
INSTEAD THAT THE WORK OF A PHYSICIAN IS
NECESSARY AND DESIRABLE TO THE BUSINESS OF
SOFTDRINKS MANUFACTURING, CONTRARY TO THE
RULINGS OF THE SUPREME COURT IN ANALOGOUS
CASES.
3. THAT THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL
LABOR RELATIONS COMMISSION, AND HOLDING
INSTEAD THAT THE PETITIONERS EXERCISED CONTROL
OVER THE WORK OF THE RESPONDENT.
4. THAT THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL
LABOR RELATIONS COMMISSION, AND FINDING THAT
THERE IS EMPLOYER-EMPLOYEE RELATIONSHIP
PURSUANT TO ARTICLE 280 OF THE LABOR CODE.
5. THAT THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL
LABOR RELATIONS COMMISSION, AND FINDING THAT
THERE EXISTED ILLEGAL DISMISSAL WHEN THE
EMPLOYENT OF THE RESPONDENT WAS TERMINATED
WITHOUT JUST CAUSE.
6. THAT THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL
LABOR RELATIONS COMMISSION, AND FINDING THAT
THE RESPONDENT IS A REGULAR PART TIME EMPLOYEE
WHO IS ENTITLED TO PROPORTIONATE BENEFITS AS A
REGULAR PART TIME EMPLOYEE ACCORDING TO THE
PETITIONERS CBA.
7. THAT THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL
LABOR RELATIONS COMMISSION, AND FINDING THAT
THE RESPONDENT IS ENTITLED TO MORAL AND
EXEMPLARY DAMAGES.
The main issue in this case is whether or not there exists an employer-
employee relationship between the parties. The resolution of the main issue will
determine whether the termination of respondents employment is illegal.
The Court, in determining the existence of an employer-employee
relationship, has invariably adhered to the four-fold test: (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, or the so-called control test,
considered to be the most important element.[18]
The Court agrees with the finding of the Labor Arbiter and the NLRC that
the circumstances of this case show that no employer-employee relationship exists
between the parties. The Labor Arbiter and the NLRC correctly found that petitioner
company lacked the power of control over the performance by respondent of his
duties. The Labor Arbiter reasoned that the Comprehensive Medical Plan, which
contains the respondents objectives, duties and obligations, does not tell respondent
how to conduct his physical examination, how to immunize, or how to diagnose and
treat his patients, employees of [petitioner] company, in each case. He likened this
case to that of Neri v. National Labor Relations Commission,[19] which held:
In the case of petitioner Neri, it is admitted that FEBTC
issued a job description which detailed her functions as a
radio/telex operator. However, a cursory reading of the job
description shows that what was sought to be controlled by
FEBTC was actually the end result of the task, e.g., that the daily
incoming and outgoing telegraphic transfer of funds received and
relayed by her, respectively, tallies with that of the register. The
guidelines were laid down merely to ensure that the desired end
result was achieved. It did not, however, tell Neri how the
radio/telex machine should be operated.
In effect, the Labor Arbiter held that petitioner company, through
the Comprehensive Medical Plan, provided guidelines merely to ensure that the end
result was achieved, but did not control the means and methods by which
respondent performed his assigned tasks.
The NLRC affirmed the findings of the Labor Arbiter and stated that it is
precisely because the company lacks the power of control that the contract provides
that respondent shall be directly responsible to the employee concerned and their
dependents for any injury, harm or damage caused through professional negligence,
incompetence or other valid causes of action.
The Labor Arbiter also correctly found that the provision in the Retainer
Agreement that respondent was on call during emergency cases did not make him a
regular employee. He explained, thus:
Likewise, the allegation of complainant that since he is
on call at anytime of the day and night makes him a regular
employee is off-tangent.Complainant does not dispute the fact
that outside of the two (2) hours that he is required to be at
respondent companys premises, he is not at all further required
to just sit around in the premises and wait for an emergency to
occur so as to enable him from using such hours for his own
benefit and advantage. In fact, complainant maintains his own
private clinic attending to his private practice in the city, where
he services his patients, bills them accordingly -- and if it is an
employee of respondent company who is attended to by him for
special treatment that needs hospitalization or operation, this is
subject to a special billing. More often than not, an employee is
required to stay in the employers workplace or proximately close
thereto that he cannot utilize his time effectively and gainfully for
his own purpose. Such is not the prevailing situation here.
In addition, the Court finds that the schedule of work and the requirement
to be on call for emergency cases do not amount to such control, but are necessary
incidents to the Retainership Agreement.
The Court also notes that the Retainership Agreement granted to both
parties the power to terminate their relationship upon giving a 30-day notice. Hence,
petitioner company did not wield the sole power of dismissal or termination.
The Court agrees with the Labor Arbiter and the NLRC that there is nothing
wrong with the employment of respondent as a retained physician of petitioner
company and upholds the validity of the Retainership Agreement which clearly stated
that no employer-employee relationship existed between the parties. The Agreement

also stated that it was only for a period of 1 year beginning January 1,

1988 to December 31, 1998, but it was renewed on a yearly basis.

Considering that there is no employer-employee relationship between the

parties, the termination of the Retainership Agreement, which is in accordance with

the provisions of the Agreement, does not constitute illegal dismissal of

respondent. Consequently, there is no basis for the moral and exemplary damages

granted by the Court of Appeals to respondent due to his alleged illegal dismissal.

WHEREFORE, the petition is GRANTED and the Decision and Resolution of

the Court of Appeals are REVERSED and SET ASIDE. The Decision and Resolution

dated November 28, 1997 and August 7, 1998, respectively, of the National Labor

Relations Commission are REINSTATED.

No costs.

SO ORDERED.
 CALAMBA MEDICAL G.R. No. 176484 issued identification cards[3] by petitioner and were enrolled in the Social Security
CENTER, INC., System (SSS).[4] Income taxes were withheld from them.[5]
Petitioner, Present:

QUISUMBING, J., Chairperson,

On March 7, 1998, Dr. Meluz Trinidad (Dr. Trinidad), also a resident
CARPIO MORALES,
- versus - TINGA, physician at the hospital, inadvertently overheard a telephone conversation of
VELASCO, JR., and
BRION, JJ. respondent Dr. Lanzanas with a fellow employee, Diosdado Miscala, through an
NATIONAL LABOR
extension telephone line. Apparently, Dr. Lanzanas and Miscala were discussing the
RELATIONS COMMISSION, RONALDO LANZANAS AND Promulgated:
MERCEDITHA* LANZANAS, November 25, 2008 low census or admission of patients to the hospital.[6]
Respondents.
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
Dr. Desipeda whose attention was called to the above-said telephone
DECISION conversation issued to Dr. Lanzanas a Memorandum of March 7, 1998 reading:

As a Licensed Resident Physician employed in

Calamba Medical Center since several years ago, the hospital
CARPIO MORALES, J.:
management has committed upon you utmost confidence in
the performance of duties pursuant thereto. This is the
The Calamba Medical Center (petitioner), a privately-owned hospital, reason why you were awarded the privilege to practice in the
hospital and were entrusted hospital functions to serve the
engaged the services of medical doctors-spouses Ronaldo Lanzanas (Dr. Lanzanas) interest of both the hospital and our patients using your
capability for independent judgment.
and Merceditha Lanzanas (Dr. Merceditha) in March 1992 and August 1995,

respectively, as part of its team of resident physicians. Reporting at the hospital twice- Very recently though and unfortunately, you have
committed acts inimical to the interest of the hospital, the
a-week on twenty-four-hour shifts, respondents were paid a monthly retainer details of which are contained in the hereto attached affidavit
of P4,800.00 each.[1] It appears that resident physicians were also given a percentage of witness.

share out of fees charged for out-patient treatments, operating room assistance and You are therefore given 24 hours to explain why no
disciplinary action should be taken against you.
discharge billings, in addition to their fixed monthly retainer.[2]
Pending investigation of your case, you are hereby
placed under 30-days [sic] preventive suspension effective
The work schedules of the members of the team of resident physicians were upon receipt hereof.[7](Emphasis, italics and underscoring
supplied)
fixed by petitioners medical director Dr. Raul Desipeda (Dr. Desipeda). And they were
 In a memorandum[16] of April 22, 1998, Dr. Desipeda echoed the April 22,

1998 order of the Secretary of Labor directing all union officers and members to
Inexplicably, petitioner did not give respondent Dr. Merceditha, who was
return-to-work on or April 23, 1998, except those employees that were already
not involved in the said incident, any work schedule after sending her husband Dr.
terminated or are serving disciplinary actions. Dr. Desipeda thus ordered the officers
Lanzanas the memorandum,[8] nor inform her the reason therefor, albeit she was later
and members of the union to report for work as soon as possible to the hospitals
informed by the Human Resource Department (HRD) officer that that was part of
personnel officer and administrator for work scheduling, assignments and/or re-
petitioners cost-cutting measures.[9]
assignments.

Responding to the memorandum, Dr. Lanzanas, by letter of March 9,

Petitioner later sent Dr. Lanzanas a notice of termination which he received
1998,[10] admitted that he spoke with Miscala over the phone but that their
on April 25, 1998, indicating as grounds therefor his failure to report back to work
conversation was taken out of context by Dr. Trinidad.
despite the DOLE order and his supposed role in the striking union, thus:

On March 14, 1998,[11] the rank-and-file employees union of petitioner

On April 23, 1998, you still did not report for work
went on strike due to unresolved grievances over terms and conditions of despite memorandum issued by the CMC Medical Director
implementing the Labor Secretarys ORDER. The same is true
employment.[12] on April 24, 1998 and April 25, 1998,--you still did not report
for work [sic].

On March 20, 1998, Dr. Lanzanas filed a complaint for illegal
suspension[13] before the National Labor Relations Commission (NLRC)-Regional
Arbitration Board (RAB) IV. Dr. Merceditha subsequently filed a complaint for illegal
dismissal.[14]
In the meantime, then Sec. Cresenciano Trajano of the Department of Labor
and Employment (DOLE) certified the labor dispute to the NLRC for compulsory
arbitration and issued on April 21, 1998 return-to-work Order to the striking union
officers and employees of petitioner pending resolution of the labor dispute.[15]
You are likewise aware that you were observed (re:
signatories [sic] to the Saligang Batas of BMCMC-UWP) to be
unlawfully participating as member in the rank-and-file
unions concerted activities despite knowledge that your
position in the hospital is managerial in nature (Nurses,
Orderlies, and staff of the Emergency Room carry out your
orders using your independent judgment) which participation
is expressly prohibited by the New Labor Code and which
prohibition was sustained by the Med-Arbiters ORDER dated
February 24, 1998. (Emphasis and italics in the original;
underscoring partly in the original and partly supplied)
For these reasons as grounds for termination, you
are hereby terminated for cause from employment effective
today, April 25, 1998,without prejudice to further action for
revocation of your license before the Philippine [sic]
 Regulations [sic] Commission.[17] (Emphasis and underscoring
supplied)
Dr. Lanzanas thus amended his original complaint to include illegal
dismissal.[18] His and Dr. Mercedithas complaints were consolidated and docketed as
NLRC CASE NO. RAB-IV-3-9879-98-L.
By Decision[19] of March 23, 1999, Labor Arbiter Antonio R. Macam
dismissed the spouses complaints for want of jurisdiction upon a finding that there
was no employer-employee relationship between the parties, the fourth requisite or
the control test in the determination of an employment bond being absent.
On appeal, the NLRC, by Decision[20] of May 3, 2002, reversed the Labor
Arbiters findings, disposing as follows:
WHEREFORE, the assailed decision is set aside. The
respondents are ordered to pay the complainants their full
backwages; separation pay of one month salary for every year
of service in lieu of reinstatement; moral damages
of P500,000.00 each; exemplary damages of P250,000.00
each plus ten percent (10%) of the total award as attorneys
fees.
SO ORDERED.[21]
Petitioners motion for reconsideration having been denied, it brought the
case to the Court of Appeals on certiorari.
The appellate court, by June 30, 2004 Decision,[22] initially granted
petitioners petition and set aside the NLRC ruling. However, upon a subsequent
motion for reconsideration filed by respondents, it reinstated the NLRC decision in an
Amended Decision[23] dated September 26, 2006 but tempered the award to each of
the spouses of moral and exemplary damages to P100,000.00 and P50,000.00,
respectively and omitted the award of attorneys fees.
In finding the existence of an employer-employee relationship between the
parties, the appellate court held:
x x x. While it may be true that the respondents are
given the discretion to decide on how to treat the petitioners
patients, the petitioner has not denied nor explained why its
Medical Director still has the direct supervision and control
over the respondents. The fact is the petitioners Medical
Director still has to approve the schedule of duties of the
respondents. The respondents stressed that the petitioners
Medical Director also issues instructions or orders to the
respondents relating to the means and methods of performing
their duties, i.e. admission of patients, manner of
characterizing cases, treatment of cases, etc., and may even
overrule, review or revise the decisions of the resident
physicians. This was not controverted by the petitioner. The
foregoing factors taken together are sufficient to constitute
the fourth element, i.e. control test, hence, the existence of
the employer-employee relationship. In denying that it had
control over the respondents, the petitioner alleged that the
respondents were free to put up their own clinics or to accept
other retainership agreement with the other hospitals. But,
the petitioner failed to substantiate the allegation with
substantial evidence. (Emphasis and underscoring
supplied)[24]
The appellate court thus declared that respondents were illegally dismissed.
x x x. The petitioners ground for dismissing
respondent Ronaldo Lanzanas was based on his alleged
participation in union activities, specifically in joining the
strike and failing to observe the return-to-work order issued
by the Secretary of Labor. Yet, the petitioner did not adduce
 any piece of evidence to show that respondent Ronaldo
indeed participated in the strike. x x x. respondents, aside from their monthly retainers, were entitled to one-half of all

suturing, admitting, consultation, medico-legal and operating room assistance

In the case of respondent Merceditha Lanzanas,
the petitioners explanation that her marriage to complainant fees.[28] These circumstances, it stresses, are clear badges of the absence of any
Ronaldo has given rise to the presumption that her
employment relationship between them.
sympat[hies] are likewise with her husband as a ground for
her dismissal is unacceptable. Such is not one of the grounds
to justify the termination of her
employment.[25] (Underscoring supplied) This Court is unimpressed.

The fallo of the appellate courts decision reads:

Under the control test, an employment relationship exists between a

physician and a hospital if the hospital controls both the means and the details of the
WHEREFORE, the instant Motion for
process by which the physician is to accomplish his task.[29]
Reconsideration is GRANTED, and the Courts decision dated June
30, 2004, is SET ASIDE. In lieu thereof, a new judgment is entered,
as follows:
Where a person who works for another does so more or less at his own
WHEREFORE, the petition is DISMISSED. The assailed
pleasure and is not subject to definite hours or conditions of work, and is
decision dated May 3, 2002 and order
dated September 24, 2002 of the NLRC in compensated according to the result of his efforts and not the amount thereof, the
NLRC NCR CA No. 019823-99 are AFFIRMED
with the MODIFICATION that the moral and element of control is absent.[30]
exemplary damages are reduced As priorly stated, private respondents maintained specific work-schedules,
to P100,000.00 each and P50,000.00 each,
respectively. as determined by petitioner through its medical director, which consisted of 24-hour
SO ORDERED.[26] (Emphasis and italics in the original;
underscoring supplied) shifts totaling forty-eight hours each week and which were strictly to be observed

under pain of administrative sanctions.

Preliminarily, the present petition calls for a determination of whether
there exists an employer-employee relationship[27] between petitioner and the
spouses-respondents.
Denying the existence of such relationship, petitioner argues that the
appellate court, as well as the NLRC, overlooked its twice-a-week reporting
arrangement with respondents who are free to practice their profession elsewhere
the rest of the week. And it invites attention to the uncontroverted allegation that
That petitioner exercised control over respondents gains light from the
undisputed fact that in the emergency room, the operating room, or any department
or ward for that matter, respondents work is monitored through its nursing
supervisors, charge nurses and orderlies.Without the approval or consent of
petitioner or its medical director, no operations can be undertaken in those areas. For
control test to apply, it is not essential for the employer to actually supervise the
performance of duties of the employee, it being enough that it has the right to wield juncture that mandatory coverage under the SSS Law[34] is premised on the existence

the power.[31] of an employer-employee relationship,[35] except in cases of compulsory coverage of

With respect to respondents sharing in some hospital fees, this scheme the self-employed. It would be preposterous for an employer to report certain

does not sever the employment tie between them and petitioner as this merely persons as employees and pay their SSS premiums as well as their wages if they are

mirrors additional form or another form of compensation or incentive similar to what not its employees.[36]

commission-based employees receive as contemplated in Article 97 (f) of the Labor

And if respondents were not petitioners employees, how does it account
Code, thus:
for its issuance of the earlier-quoted March 7, 1998memorandum explicitly stating

that respondent is employed in it and of the subsequent termination letter indicating

Wage paid to any employee shall mean the
remuneration or earning, however designated, capable of respondent Lanzanas employment status.
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 Finally, under Section 15, Rule X of Book III of the Implementing Rules of the
employer to an employee under a written or unwritten Labor Code, an employer-employee relationship exists between the resident
contract of employment for work done or to be done, or for
services rendered or to be rendered and includes the fair and physicians and the training hospitals, unless there is a training agreement between
reasonable value, as determined by the Secretary of Labor, of
board, lodging, or other facilities customarily furnished by the them, and the training program is duly accredited or approved by the appropriate
employer to the employee. x x x (Emphasis and underscoring government agency. In respondents case, they were not undergoing any
supplied),
specialization training.They were considered non-training general

practitioners,[37] assigned at the emergency rooms and ward sections.

Respondents were in fact made subject to petitioner-hospitals Code of

Ethics,[32] the provisions of which cover administrative and disciplinary measures on Turning now to the issue of dismissal, the Court upholds the appellate

negligence of duties, personnel conduct and behavior, and offenses against persons, courts conclusion that private respondents were illegally dismissed.

property and the hospitals interest.

Dr. Lanzanas was neither a managerial nor supervisory employee but part
More importantly, petitioner itself provided incontrovertible proof of the
of the rank-and-file. This is the import of the Secretary of Labors Resolution of May
employment status of respondents, namely, the identification cards it issued them,
22, 1998 in OS A-05-15-98 which reads:
the payslips[33] and BIR W-2 (now 2316) Forms which reflect their status as employees,
and the classification as salary of their remuneration. Moreover, it enrolled
xxxx
respondents in the SSS and Medicare (Philhealth) program. It bears noting at this
 In the motion to dismiss it filed before the Med-
Arbiter, the employer (CMC) alleged that 24 members of
petitioner are supervisors, namely x x x Rolando
Lanzonas [sic] x x x.
A close scrutiny of the job descriptions of the
alleged supervisors narrated by the employer only proves
that except for the contention that these employees allegedly
supervise, they do not however recommend any managerial
action. At most, their job is merely routinary in nature and
consequently, they cannot be considered supervisory
employees.
They are not therefore barred from membership in
the union of rank[-]and[-]file, which the petitioner [the union]
is seeking to represent in the instant case.[38] (Emphasis and
underscoring supplied)
xxxx
Admittedly, Dr. Lanzanas was a union member in the hospital, which is
considered indispensable to the national interest. In labor disputes adversely
affecting the continued operation of a hospital, Article 263(g) of the Labor Code
provides:
ART. 263. STRIKES, PICKETING, AND LOCKOUTS.
xxxx
(g) x x x x
x x x x. In labor disputes adversely affecting the
continued operation of such hospitals, clinics or medical
institutions, it shall be the duty of the striking union or
locking-out employer to provide and maintain an effective
skeletal workforce of medical and other health personnel,
whose movement and services shall be unhampered and
unrestricted, as are necessary to insure the proper and
adequate protection of the life and health of its patients,
most especially emergency cases, for the duration of the
strike or lockout. In such cases, the Secretary of Labor and
Employment is mandated to immediately assume, within
twenty-four hours from knowledge of the occurrence of such
strike or lockout, jurisdiction over the same or certify to the
Commission for compulsory arbitration. For this purpose, the
contending parties are strictly enjoined to comply with such
orders, prohibitions and/or injunctions as are issued by the
Secretary of Labor and Employment or the Commission, under
pain of immediate disciplinary action, including dismissal or
loss of employment status or payment by the locking-out
employer of backwages, damages and other affirmative relief,
even criminal prosecution against either or both of them.
x x x x (Emphasis and underscoring supplied)
An assumption or certification order of the DOLE Secretary automatically
results in a return-to-work of all striking workers, whether a corresponding return-to-
work order had been issued.[39] The DOLE Secretary in fact issued a return-to-work
Order, failing to comply with which is punishable by dismissal or loss of employment
status.[40]
Participation in a strike and intransigence to a return-to-work order must,
however, be duly proved in order to justify immediate dismissal in a national interest
case. As the appellate court as well as the NLRC observed, however, there is nothing
in the records that would bear out Dr. Lanzanas actual participation in the strike. And
the medical directors Memorandum[41] of April 22, 1998 contains nothing more than
a general directive to all union officers and members to return-to-work. Mere
membership in a labor union does not ipso facto mean participation in a strike.
Dr. Lanzanas claim that, after his 30-day preventive suspension ended on or
before April 9, 1998, he was never given any work schedule[42] was not refuted by
petitioner. Petitioner in fact never released any findings of its supposed investigation
into Dr. Lanzanas alleged inimical acts.
Petitioner thus failed to observe the two requirements,before dismissal can
be effected ─ notice and hearing ─ which constitute essential elements of the
statutory process; the first to apprise the employee of the particular acts or omissions
for which his dismissal is sought, and the second to inform the employee of the
employer's decision to dismiss him.[43] Non-observance of these requirements runs
afoul of the procedural mandate.[44]
The termination notice sent to and received by Dr. Lanzanas on April 25,
1998 was the first and only time that he was apprised of the reason for his
dismissal. He was not afforded, however, even the slightest opportunity to explain his
side. His was a termination upon receipt situation. While he was priorly made to
explain on his telephone conversation with Miscala,[45] he was not with respect to his
supposed participation in the strike and failure to heed the return-to-work order.
As for the case of Dr. Merceditha, her dismissal was worse, it having been
effected without any just or authorized cause and without observance of due
process. In fact, petitioner never proferred any valid cause for her dismissal except its
view that her marriage to [Dr. Lanzanas] has given rise to the presumption that her
sympath[y] [is] with her husband; [and that when [Dr. Lanzanas] declared that he was
going to boycott the scheduling of their workload by the medical doctor, he was
presumed to be speaking for himself [and] for his wife Merceditha.[46]
Petitioners contention that Dr. Merceditha was a member of the union or
was a participant in the strike remained just that. Its termination of her employment
on the basis of her conjugal relationship is not analogous to
any of the causes enumerated in Article 282[47] of the Labor Code. Mere suspicion or
belief, no matter how strong, cannot substitute for factual findings carefully
established through orderly procedure.[48]
The Court even notes that after the proceedings at the NLRC, petitioner
never even mentioned Dr. Mercedithas case. There is thus no gainsaying that her
dismissal was both substantively and procedurally infirm.
Adding insult to injury was the circulation by petitioner of a watchlist or
watch out list[49] including therein the names of respondents.Consider the following
portions of Dr. Mercedithas Memorandum of Appeal:
3. Moreover, to top it all, respondents have
circulated a so called Watch List to other hospitals, one of
which [was] procured from FoothillsHospital in Sto. Tomas,
Batangas [that] contains her name. The object of the said list
is precisely to harass Complainant and malign her good name
and reputation. This is not only unprofessional, but runs
smack of oppression as CMC is trying permanently deprived
[sic] Complainant of her livelihood by ensuring that she is
barred from practicing in other hospitals.
4. Other co-professionals and brothers in the
profession are fully aware of these watch out lists and as such,
her reputation was not only besmirched, but was damaged,
and she suffered social humiliation as it is of public knowledge
that she was dismissed from work. Complainant came from a
 reputable and respected family, her
Commission of 10% of the total judgment award as attorneys fees is reinstated. In all
father being a retired full Colonel in the Army, Col. Romeo A. other aspects, the decision of the appellate court is affirmed.
Vente, and her brothers and sisters are all professionals, her
brothers, Arnold and Romeo Jr., being engineers. The
Complainant has a family protection [sic] to protect. She
SO ORDERED.
likewise has a professional reputation to protect, being a
licensed physician. Both her personal and professional
reputation were damaged as a result of the unlawful acts of
the respondents.[50]

While petitioner does not deny the existence of such list, it pointed to the

lack of any board action on its part to initiate such listing and to circulate the same, viz:

20. x x x. The alleged watchlist or watch out list, as

termed by complainants, were merely lists obtained by one
Dr. Ernesto Naval of PAMANAHospital. Said list was given by a
stockholder of respondent who was at the same time a
stockholder of PAMAN[A] Hospital. The giving of the list was
not a Board action.[51] (Emphasis and underscoring supplied)

The circulation of such list containing names of alleged union members

intended to prevent employment of workers for union activities similarly constitutes

unfair labor practice, thereby giving a right of action for damages by the employees

prejudiced.[52]

A word on the appellate courts deletion of the award of attorneys

fees. There being no basis advanced in deleting it, as exemplary damages were

correctly awarded,[53] the award of attorneys fees should be reinstated.

WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP No. 75871

is AFFIRMED with MODIFICATION in that the award by the National Labor Relations
 SECOND DIVISION Shangri-la claimed, however, that petitioners were not its employees but of

respondent doctor whom it retained via Memorandum of Agreement

JEROMIE D. ESCASINAS and EVAN RIGOR SINGCO, G.R. No. 178827
Petitioners, (MOA)[2] pursuant to Article 157 of the Labor Code, as amended.
Present:

QUISUMBING, J., Chairperson, Respondent doctor for her part claimed that petitioners were already
- versus - CARPIO MORALES,
NACHURA,* working for the previous retained physicians of Shangri-la before she was retained by
BRION, and
Shangri-la; and that she maintained petitioners services upon their request.
PERALTA,** JJ.
SHANGRI-LAS MACTAN ISLAND RESORT and DR. JESSICA J.R.
PEPITO, Promulgated:
Respondents. March 4, 2009 By Decision[3] of May 6, 2003, Labor Arbiter Ernesto F. Carreon declared petitioners

to be regular employees of Shangri-la. The Arbiter thus ordered Shangri-la to grant

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
them the wages and benefits due them as regular employees from the time their
DECISION
services were engaged.

CARPIO MORALES, J.:

In finding petitioners to be regular employees of Shangri-la, the Arbiter
Registered nurses Jeromie D. Escasinas and Evan Rigor Singco (petitioners)
noted that they usually perform work which is necessary and desirable to Shangri-las
were engaged in 1999 and 1996, respectively, by Dr. Jessica Joyce R. Pepito
business; that they observe clinic hours and render services only to Shangri-las guests
(respondent doctor) to work in her clinic at respondent Shangri-las Mactan Island
and employees; that payment for their salaries were recommended to Shangri-las
Resort (Shangri-la) in Cebu of which she was a retained physician.
Human Resource Department (HRD); that respondent doctor was Shangri-las in-

house physician, hence, also an employee; and that the MOA between Shangri-la and
In late 2002, petitioners filed with the National Labor Relations Commission
respondent doctor was an insidious mechanism in order to circumvent [the doctors]
(NLRC) Regional Arbitration Branch No. VII (NLRC-RAB No. VII) a complaint[1] for
tenurial security and that of the employees under her.
regularization, underpayment of wages, non-payment of holiday pay, night shift

differential and 13th month pay differential against respondents, claiming that they
Shangri-la and respondent doctor appealed to the NLRC. Petitioners appealed too,
are regular employees of Shangri-la. The case was docketed as RAB Case No. 07-11-
but only with respect to the non-award to them of some of the benefits they were
2089-02.
claiming.
By Decision[4] dated March 31, 2005, the NLRC granted Shangri-las and respondent

doctors appeal and dismissed petitioners complaint for lack of merit, it finding that Petitioners thereupon brought the case to the Court of Appeals which, by

no employer-employee relationship exists between petitioner and Shangri-la. In so Decision[5] of May 22, 2007, affirmed the NLRC Decision that no employer-employee

deciding, the NLRC held that the Arbiter erred in interpreting Article 157 in relation to relationship exists between Shangri-la and petitioners. The appellate court concluded

Article 280 of the Labor Code, as what is required under Article 157 is that the that all aspects of the employment of petitioners being under the supervision and

employer should provide the services of medical personnel to its employees, but control of respondent doctor and since Shangri-la is not principally engaged in the

nowhere in said article is a provision that nurses are required to be employed; that business of providing medical or healthcare services, petitioners could not be

contrary to the finding of the Arbiter, even if Article 280 states that if a worker regarded as regular employees of Shangri-la.

performs work usually necessary or desirable in the business of the employer, he

cannot be automatically deemed a regular employee; and that the MOA amply shows Petitioners motion for reconsideration having been denied by

that respondent doctor was in fact engaged by Shangri-la on a retainer basis, under Resolution[6] of July 10, 2007, they interposed the present recourse.

which she could hire her own nurses and other clinic personnel.

Petitioners insist that under Article 157 of the Labor Code, Shangri-la is

Brushing aside petitioners contention that since their application for required to hire a full-time registered nurse, apart from a physician, hence, their

employment was addressed to Shangri-la, it was really Shangri-la which hired them engagement should be deemed as regular employment, the provisions of the MOA
and not respondent doctor, the NLRC noted that the applications for employment notwithstanding; and that the MOA is contrary to public policy as it circumvents

were made by persons who are not parties to the case and were not shown to have tenurial security and, therefore, should be struck down as being void ab initio. At

been actually hired by Shangri-la. most, they argue, the MOA is a mere job contract.

On the issue of payment of wages, the NLRC held that the fact that, for some And petitioners maintain that respondent doctor is a labor-only contractor

months, payment of petitioners wages were recommended by Shangri-las HRD did for she has no license or business permit and no business name registration, which is

not prove that it was Shangri-la which pays their wages. It thus credited respondent contrary to the requirements under Sec. 19 and 20 of the Implementing Rules and

doctors explanation that the recommendations for payment were based on the Regulations of the Labor Code on sub-contracting.

billings she prepared for salaries of additional nurses during Shangri-las peak months
of operation, in accordance with the retainership agreement, the guests payments for Petitioners add that respondent doctor cannot be a legitimate

medical services having been paid directly to Shanrgi-la. independent contractor, lacking as she does in substantial capital, the clinic having

been set-up and already operational when she took over as retained physician; that
respondent doctor has no control over how the clinic is being run, as shown by the
different orders issued by officers of Shangri-la forbidding her from receiving cash
ART. 157. Emergency medical and dental services. It
shall be the duty of every employer to furnish his employees in any
locality with free medical and dental attendance and facilities
consisting of:

payments and several purchase orders for medicines and supplies which were
(a) The services of a full-time
coursed thru Shangri-las Purchasing Manager, circumstances indubitably showing

that she is not an independent contractor but a mere agent of Shangri-la. registered nurse when the number

of employees exceeds fifty (50) but

In its Comment,[7] Shangri-la questions the Special Powers of Attorneys
not more than two hundred (200)
(SPAs) appended to the petition for being inadequate. On the merits, it prays for the
except when the employer does not
disallowance of the petition, contending that it raises factual issues, such as the

validity of the MOA, which were never raised during the proceedings before the maintain hazardous workplaces, in

Arbiter, albeit passed upon by him in his Decision; that Article 157 of the Labor Code which case the services of a
does not make it mandatory for a covered establishment to employ health personnel;
graduate first-aider shall be
that the services of nurses is not germane nor indispensable to its operations; and
provided for the protection of the
that respondent doctor is a legitimate individual independent contractor who has the
workers, where no registered
power to hire, fire and supervise the work of the nurses under her.
nurse is available. The Secretary of

The resolution of the case hinges, in the main, on the correct interpretation Labor shall provide by appropriate
of Art. 157 vis a vis Art. 280 and the provisions on permissible job contracting of the
regulations the services that shall
Labor Code, as amended.
be required where the number of

The Court holds that, contrary to petitioners postulation, Art. 157 does not employees does not exceed fifty

require the engagement of full-time nurses as regular employees of a company (50) and shall determine by
employing not less than 50 workers. Thus, the Article provides: appropriate order hazardous
 workplaces for purposes of this
Article;
(b) The services of a full-
time registered nurse, a part-time
physician and dentist, and an
emergency clinic, when the number
of employees exceeds two hundred
(200) but not more than three
hundred (300); and
(c) The services of a full-time
physician, dentist and full-time
registered nurse as well as a dental
clinic, and an infirmary or
emergency hospital with one bed
capacity for every one hundred
(100) employees when the number
of employees exceeds three
hundred (300).
In cases of hazardous workplaces, no employer shall
engage the services of a physician or dentist who cannot stay in
the premises of the establishment for at least two (2) hours, in
the case of those engaged on part-time basis, and not less than
eight (8) hours in the case of those employed on full-time
basis. Where the undertaking is nonhazardous in nature, the
physician and dentist may be engaged on retained basis, subject to
such regulations as the Secretary of Labor may prescribe to insure
immediate availability of medical and dental treatment and
attendance in case of emergency. (Emphasis and underscoring
supplied)
Under the foregoing provision, Shangri-la, which employs more than 200
workers, is mandated to furnish its employees with the services of a full-time
registered nurse, a part-time physician and dentist, and an emergency clinic which
means that it should provide or make available such medical and allied services to its
employees, not necessarily to hire or employ a service provider. As held in Philippine
Global Communications vs. De Vera:[8]
x x x while it is true that the
provision requires employers to engage the
services of medical practitioners in certain
establishments depending on the number of
their employees, nothing is there in the law
which says that medical practitioners so
engaged be actually hired as
employees, adding that the law, as written,
only requires the employer to retain, not
employ, a part-time physician who needed to
stay in the premises of the non-hazardous
workplace for two (2) hours. (Emphasis and
underscoring supplied)
The term full-time in Art. 157 cannot be construed as referring to the type
of employment of the person engaged to provide the services, for Article 157
must not be read alongside Art. 280[9] in order to vest employer-employee
relationship on the employer and the person so engaged. So De Vera teaches:
x x x For, we take it that any
agreement may provide that one party shall
render services for and in behalf of another,
no matter how necessary for the latters
business, even without being hired as an
employee. This set-up is precisely true in the
case of an independent contractorship as
well as in an agency agreement. Indeed,
Article 280 of the Labor Code, quoted by the
appellate court, is not the yardstick for
determining the existence of an employment
relationship. As it is, the provision merely
 distinguishes between two (2) kinds of
employees, i.e., regular and casual. x x
x[10] (Emphasis and underscoring supplied)
The phrase services of a full-time registered nurse should thus be taken to refer to
the kind of services that the nurse will render in the companys premises and to its
employees, not the manner of his engagement.
As to whether respondent doctor can be considered a legitimate
independent contractor, the pertinent sections of DOLE Department Order No. 10,
series of 1997, illuminate:
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. (Emphasis supplied)
The existence of an independent and permissible contractor relationship is
generally established by considering the following determinants: whether 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 a specified piece 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 the premises,
tools, appliances, materials and labor; and the mode, manner and terms of
payment.[11]
On the other hand, existence of an
employer- employee relationship is established by the presence of the following
determinants: (1) the selection and engagement of the workers; (2) power of
dismissal; (3) the payment of wages by whatever means; and (4) the power to control
the worker's conduct, with the latter assuming primacy in the overall status. It is thus presumed that said document, and not the employee manual being

consideration.[12] followed by Shangri-las regular workers, governs how they perform their respective

tasks and responsibilities.

Against the above-listed determinants, the Court holds that respondent

Contrary to petitioners contention, the various office directives issued by
doctor is a legitimate independent contractor. That Shangri-la provides the clinic
Shangri-las officers do not imply that it is Shangri-las management and not
premises and medical supplies for use of its employees and guests does not
respondent doctor who exercises control over them or that Shangri-la has control
necessarily prove that respondent doctor lacks substantial capital and
over how the doctor and the nurses perform their work. The letter[18] addressed to
investment. Besides, the maintenance of a clinic and provision of medical services to
respondent doctor dated February 7, 2003 from a certain Tata L. Reyes giving
its employees is required under Art. 157, which are not directly related to Shangri-las
instructions regarding the replenishment of emergency kits is, at most, administrative
principal business operation of hotels and restaurants.
in nature, related as it is to safety matters; while the letter[19] dated May 17, 2004

from Shangri-las Assistant Financial Controller, Lotlot Dagat, forbidding the clinic from
As to payment of wages, respondent doctor is the one who underwrites the
receiving cash payments from the resorts guests is a matter of financial policy in order
following: salaries, SSS contributions and other benefits of the staff[13]; group life,
to ensure proper sharing of the proceeds, considering that Shangri-la and respondent
group personal accident insurance and life/death insurance[14] for the staff with
doctor share in the guests payments for medical services rendered. In fine, as Shangri-
minimum benefit payable at 12 times the employees last drawn salary, as well as value
la does not control how the work should be performed by petitioners, it is not
added taxes and withholding taxes, sourced from her P60,000.00 monthly retainer
petitioners employer.
fee and 70% share of the service charges from Shangri-las guests who avail of
WHEREFORE, the petition is hereby DENIED. The Decision of the Court of
the clinic services. It is unlikely that respondent doctor would report petitioners as
Appeals dated May 22, 2007 and the Resolution dated July 10, 2007 are AFFIRMED.
workers, pay their SSS premium as well as their wages if they were not indeed her

employees.[15]
SO ORDERED.

With respect to the supervision and control of the nurses and clinic staff, it

is not disputed that a document, Clinic Policies and Employee Manual [16] claimed to

have been prepared by respondent doctor exists, to which petitioners gave their
conformity[17] and in which they acknowledged their co-terminus employment
 GREGORIO V. TONGKO, G.R. No. 167622
Petitioner, In his Motion for Reconsideration, petitioner reiterates the arguments he
Present:
had belabored in his petition and various other submissions.He argues that for 19
CORONA, C.J.,
years, he performed administrative functions and exercised supervisory authority
CARPIO,
CARPIO MORALES, over employees and agents of Manulife, in addition to his insurance agent
VELASCO, JR.,
NACHURA, functions.[4] In these 19 years, he was designated as a Unit Manager, a Branch
- versus - LEONARDO-DE CASTRO,
Manager and a Regional Sales Manager, and now posits that he was not only an
BRION,
PERALTA, insurance agent for Manulife but was its employee as well.
BERSAMIN,
DEL CASTILLO,
ABAD, We find no basis or any error to merit the reconsideration of our June 29,
VILLARAMA, JR.,
PEREZ, 2010 Resolution.
THE MANUFACTURERS LIFE INSURANCE MENDOZA, and
CO. (PHILS.), INC. and RENATO A. VERGEL SERENO, JJ.
DE DIOS, Promulgated: A. Labor Law Control = Employment Relationship
Respondents.
January 25, 2011
x-----------------------------------------------------------------------------------------x
Control over the performance of the task of one providing service both with
respect to the means and manner, and the results of the service is the primary
RESOLUTION element in determining whether an employment relationship exists. We resolve the

petitioners Motion against his favor since he failed to show that the control Manulife
BRION, J.:
exercised over him was the control required to exist in an employer-employee

relationship; Manulifes control fell short of this norm and carried only the
We resolve petitioner Gregorio V. Tongkos bid, through his Motion for
characteristic of the relationship between an insurance company and its agents, as
Reconsideration,[1] to set aside our June 29, 2010 Resolution that reversed our Decision
defined by the Insurance Code and by the law of agency under the Civil Code.
of November 7, 2008.[2] With the reversal, the assailed June 29, 2010 Resolution

effectively affirmed the Court of Appeals ruling[3] in CA-G.R. SP No. 88253 that the
The petitioner asserts in his Motion that Manulifes labor law control over
petitioner was an insurance agent, not the employee, of the respondent The
him was demonstrated (1) when it set the objectives and sales targets regarding
Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife).
production, recruitment and training programs; and (2) when it prescribed the Code
of Conduct for Agents and the Manulife Financial Code of Conduct to govern his result.[8] Tested by this norm, Manulifes instructions regarding the objectives and

activities.[5] We find no merit in these contentions. sales targets, in connection with the training and engagement of other agents, are

among the directives that the principal may impose on the agent to achieve the

In our June 29, 2010 Resolution, we noted that there are built-in elements assigned tasks. They are targeted results that Manulife wishes to attain through its

of control specific to an insurance agency, which do not amount to the elements of agents. Manulifes codes of conduct, likewise, do not necessarily intrude into the

control that characterize an employment relationship governed by the Labor insurance agents means and manner of conducting their sales. Codes of conduct are

Code. The Insurance Code provides definite parameters in the way an agent norms or standards of behavior rather than employer directives into how specific

negotiates for the sale of the companys insurance products, his collection activities tasks are to be done. These codes, as well as insurance industry rules and regulations,

and his delivery of the insurance contract or policy.[6] In addition, the Civil Code are not per se indicative of labor law control under our jurisprudence.[9]

defines an agent as a person who binds himself to do something in behalf of another,

with the consent or authority of the latter.[7] Article 1887 of the Civil Code also The duties[10] that the petitioner enumerated in his Motion are not supported by

provides that in the execution of the agency, the agent shall act in accordance with evidence and, therefore, deserve scant consideration. Even assuming their existence,

the instructions of the principal. however, they mostly pertain to the duties of an insurance agent such as remitting

insurance fees to Manulife, delivering policies to the insured, and after-sale

All these, read without any clear understanding of fine legal distinctions, services. For agents leading other agents, these include the task of overseeing other
appear to speak of control by the insurance company over its agents. They are, insurance agents, the recruitment of other insurance agents engaged by Manulife as

however, controls aimed only at specific results in undertaking an insurance agency, principal, and ensuring that these other agents comply with the paperwork necessary

and are, in fact, parameters set by law in defining an insurance agency and the in selling insurance. That Manulife exercises the power to assign and remove agents

attendant duties and responsibilities an insurance agent must observe and undertake. under the petitioners supervision is in keeping with its role as a principal in an agency

They do not reach the level of control into the means and manner of doing an assigned relationship; they are Manulife agents in the same manner that the petitioner had all

task that invariably characterizes an employment relationship as defined by labor along been a Manulife agent.

law. From this perspective, the petitioners contentions cannot prevail.

The petitioner also questions Manulifes act of investing him with different

To reiterate, guidelines indicative of labor law control do not merely relate titles and positions in the course of their relationship, given the respondents position
to the mutually desirable result intended by the contractual relationship; they must that he simply functioned as an insurance agent.[11] He also considers it an unjust and

have the nature of dictating the means and methods to be employed in attaining the
inequitable situation that he would be unrewarded for the years he spent as a unit In sum, we find absolutely no evidence of labor law control, as extensively

manager, a branch manager, and a regional sales manager.[12] discussed in our Resolution of June 29, 2010, granting Manulifes motion for

reconsideration. The Dissent, unfortunately, misses this point.

Based on the evidence on record, the petitioners occupation was to sell

Manulifes insurance policies and products from 1977 until the termination of the B. No Resulting Inequity

Career Agents Agreement (Agreement). The evidence also shows that through the

years, Manulife permitted him to exercise guiding authority over other agents who We also do not agree that our assailed Resolution has the effect of fostering

operate under their own agency agreements with Manulife and whose commissions an inequitable or unjust situation. The records show that the petitioner was very

he shared.[13] Under this scheme an arrangement that pervades the insurance amply paid for his services as an insurance agent, who also shared in the commissions

industry petitioner in effect became a lead agent and his own commissions increased of the other agents under his guidance. In 1997, his income was P2,822,620; in

as they included his share in the commissions of the other agents;[14] he also received 1998, P4,805,166.34; in 1999, P6,797,814.05; in 2001, P6,214,737.11; and in

greater reimbursements for expenses and was allowed to use Manulifes facilities. His 2002, P8,003,180.38. All these he earned as an insurance agent, as he failed to ever

designation also changed from unit manager to branch manager and then to regional prove that he earned these sums as an employee. In technical terms, he could not

sales manager, to reflect the increase in the number of agents he recruited and have earned all these as an employee because he failed to provide the substantial

guided, as well as the increase in the area where these agents operated. evidence required in administrative cases to support the finding that he was a
Manulife employee. No inequity results under this legal situation; what would be

As our assailed Resolution concluded and as we now similarly conclude, unjust is an award of backwages and separation pay amounts that are not due him

these arrangements, and the titles and positions the petitioner was invested with, did because he was never an employee.

not change his status from the insurance agent that he had always been (as evidenced

by the Agreement that governed his relationship with Manulife from the start to its The Dissents discussion on this aspect of the case begins with the wide

disagreeable end). The petitioner simply progressed from his individual agency to disparity in the status of the parties that Manulife is a big Canadian insurance

being a lead agent who could use other agents in selling insurance and share in the company while Tongko is but a single agent of Manulife. The Dissent then went on to

earnings of these other agents. say that [i]f is but just, it is but right, that the Court interprets the relationship between

Tongko and Manulife as one of employment under labor laws and to uphold his
constitutionally protected right, as an employee, to security of tenure and entitlement

to monetary award should such right be infringed.[15]We cannot simply invoke the
magical formula by creating an employment relationship even when there is none

because of the unavoidable and inherently weak position of an individual over a giant To support its arguments on equity, the Dissent uses the Constitution and

corporation. the Civil Code, using provisions and principles that are all motherhood

statements. The mandate of the Court, of course, is to decide cases based on the facts

The Dissent likewise alluded to an ambiguity in the true relationship of the and the law, and not to base its conclusions on fundamental precepts that are far

parties after Tongkos successive appointments. We already pointed out that the legal removed from the particular case presented before it. When there is no room for their

significance of these appointments had not been sufficiently explained and that it did application, of capacity of principles, reliance on the application of these fundamental

not help that Tongko never bothered to present evidence on this point. The Dissent principles is misplaced.

recognized this but tried to excuse Tongko from this failure in the subsequent

discussion, as follows: C. Earnings were Commissions

[o]ther evidence was adduced to show such duties and

responsibilities. For one, in his letter of November 6, 2001, That his earnings were agents commissions arising from his work as an
respondent De Dios addressed petitioner as sales manager. And
as I wrote in my Dissent to the June 29, 2010 Resolution, it is insurance agent is a matter that the petitioner cannot deny, as these are the
difficult to imagine that Manulife did not issue promotional
declarations and representations he stated in his income tax returns through the
appointments to petitioner as unit manager, branch manager,
and, eventually, regional sales manager. Sound management years. It would be doubly unjust, particularly to the government, if he would be
practice simply requires an appointment for any upward
personnel movement, particularly when additional functions and allowed at this late point to turn around and successfully claim that he was merely an
the corresponding increase in compensation are involved. Then,
employee after he declared himself, through the years, as an independent self-
too, the adverted affidavits of the managers of Manulife as to the
duties and responsibilities of a unit manager, such as petitioner, employed insurance agent with the privilege of deducting business expenses. This
point to the conclusion that these managers were employees of
Manulife, applying the four-fold test.[16] aspect of the case alone considered together with the probative value of income tax

declarations and returns filed prior to the present controversy should be enough to

clinch the present case against the petitioners favor.

This Court (and all adjudicators for that matter) cannot and should not fill in

the evidentiary gaps in a partys case that the party failed to support; we cannot and D. The Dissents Solution:
should not take the cudgels for any party. Tongko failed to support his cause and we Unwieldy and Legally Infirm

should simply view him and his case as they are; our duty is to sit as a judge in the
case that he and the respondent presented.
 The Dissent proposes that Tongko should be considered as part employee cases. The lower courts and the bar, most specially, look up to the rulings of this Court

(as manager) and part insurance agent; hence, the original decision should be for guidance. Unless extremely unavoidable, the Court must, as a matter of sound

modified to pertain only to the termination of his employment as a manager and not judicial policy, resist the temptation of branding its ruling pro hac vice.

as an insurance agent. Accordingly, the backwages component of the original award

to him should not include the insurance sales commissions. This solution, according The compromise solution of declaring Tongko both an employee and an

to the line taken by the Dissent then, was justified on the view that this was made on agent is legally unrealistic, unwieldy and is, in fact, legally infirm, as it goes against the

a case-to-case basis. above basic principles of judicial operation. Likewise, it does not and cannot

realistically solve the problem/issue in this case; it actually leaves more questions than

Decisions of the Supreme Court, as the Civil Code provides, form part of the answers.

law of the land. When the Court states that the determination of the existence of an

employment relationship should be on a case-to-case basis, this does not mean that As already pointed out, there is no legal basis (be it statutory or

there will be as many laws on the issue as there are cases. In the context of this case, jurisprudential) for the part-employee/part-insurance agent status under an

the four-fold test is the established standard for determining employer-employee essentially principal-agent contractual relation which the Dissent proposes to accord

relationship and the existence of these elements, most notably control, is the basis to Tongko. If the Dissent intends to establish one, this is highly objectionable for this

upon which a conclusion on the absence of employment relationship was would amount to judicial legislation. A legal relationship, be it one of employment or
anchored. This simply means that a conclusion on whether employment relationship one based on a contract other than employment, exists as a matter of law pursuant

exists in a particular case largely depends on the facts and, in no small measure, on to the facts, incidents and legal consequences of the relationship; it cannot exist

the parties evidence vis--vis the clearly defined jurisprudential standards. Given that devoid of these legally defined underlying facts and legal consequences unless the law

the parties control what and how the facts will be established in a particular case itself creates the relationship an act that is beyond the authority of this Court to do.

and/or how a particular suit is to be litigated, deciding the issues on a case-to-case

basis becomes an imperative. Additionally, the Dissents conclusion completely ignores an unavoidable

legal reality that the parties are bound by a contract of agency that clearly subsists

Another legal reality, a more important one, is that the duty of a court is to notwithstanding the successive designation of Tongko as a unit manager, a branch

say what the law is.[17] This is the same duty of the Supreme Court that underlies manager and a regional sales manager. (As already explained in our Resolution
the stare decisis principle. This is how the public, in general and the insurance industry granting Manulifes motion for reconsideration, no evidence on record exists to

in particular, views the role of this Court and courts in general in deciding provide the Court with clues as to the precise impact of all these designations on the
contractual agency relationship.) The Dissent, it must be pointed out, concludes that

Tongkos employment as manager was illegally terminated; thus, he should be In considering these rulings, a reality that cannot but be recognized is that

accordingly afforded relief therefor. But, can Tongko be given the remedies incidental cases turn and are decided on the basis of their own unique facts; the ruling in one

to his dismissal as manager separately from his status as an insurance agent? In other case cannot simply be bodily lifted and applied to another, particularly when notable

words, since the respondents terminated all relationships with Tongko through the differences exist between the cited cases and the case under consideration; their

termination letter, can we simply rule that his role as a manager was illegally respective facts must be strictly examined to ensure that the ruling in one applies to

terminated without touching on the consequences of this ruling on his status as an another.This is particularly true in a comparison of the cited cases with the present

insurance agent? Expressed in these terms, the inseparability of his contract as agent case. Specifically, care should be taken in reading the cited cases and applying their

with any other relationship that springs therefrom can thus be seen as an rulings to the present case as the cited cases all dealt with the proper legal

insurmountable legal obstacle. characterization of subsequent management contracts that superseded the original

agency contract between the insurance company and the agent.

The Dissents compromise approach would also sanction split

jurisdiction. The labor tribunals shall have jurisdiction over Tongkos employment as In Great Pacific Life, the Ruiz brothers were appointed to positions different

manager while another entity shall decide the issues/cases arising from the agency from their original positions as insurance agents, whose duties were clearly defined

relationship. If the managerial employment is anchored on the agency, how will the in a subsequent contract. Similarly, in Insular, de los Reyes, a former insurance agent,
labor tribunals decide an issue that is inextricably linked with a relationship that is was appointed as acting unit manager based on a subsequent contract. In both cases,

outside the loop of their jurisdiction? As already mentioned in the Resolution granting the Court anchored its findings of labor control on the stipulations of these

Manulifes reconsideration, the DOMINANT relationship in this case is agency and no subsequent contracts.

other.

In contrast, the present case is remarkable for the absence of evidence of

E. The Dissents Cited Cases any change in the nature of the petitioners employment with Manulife. As previously

stated above and in our assailed Resolution, the petitioner had always been governed

The Dissent cites the cases of Great Pacific Life Assurance Corporation v. by the Agreement from the start until the end of his relationship with Manulife. His

National Labor Relations Commission[18] and Insular Life Assurance Co., Ltd. v. agency status never changed except to the extent of being a lead agent. Thus, the
National Labor Relations Commission[19] to support the allegation that Manulife cited cases where changes in company-agent relationship expressly changed and

exercised control over the petitioner as an employer.

where the subsequent contracts were the ones passed upon by the Court cannot be
totally relied upon as authoritative.
We cannot give credit as well to the petitioners claim of employment based
on the affidavits executed by other Manulife agents describing their duties, because
these same affidavits only affirm their status as independent agents, not as
employees. To quote these various claims:[20]
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
soliciting 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 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.
The petitioner cannot also rely on the letter written by respondent Renato
Vergel de Dios to prove that Manulife exercised control over him. As we already
explained in the assailed Resolution:
Even de Dios letter is not determinative of control as it
indicates the least amount of intrusion into Tongkos 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 Manulifes 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
Manulifes 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.[21]
Lastly, in assailing the Agreement between him and Manulife, the petitioner
cites Paguio v. National Labor Relations Commission[22]on the claim that the
agreement that the parties signed did not conclusively indicate the legal relationship
between them.
The evidentiary situation in the present case, however, shows that despite
the petitioners insistence that the Agreement was no longer binding between him
and Manulife, no evidence was ever adduced to show that their relationship changed
so that Manulife at some point controlled the means and method of the petitioners
work. In fact, his evidence only further supports the conclusion that he remained an
independent insurance agent a status he admits, subject only to the qualification that were employees or independent contractors; the legal relationships involved are both

he is at the same time an employee. Thus, we can only conclude that the Agreement labor law concepts and make no reference to the Civil Code (or even the Insurance

governed his relations with Manulife. Code). The provisions cited in the Dissent Articles 1458-1637 of the Civil Code[31] and

Articles 1713-1720 of the Civil Code [32] do not even appear in the decisions cited.

Additionally, it is not lost on us that Paguio is a ruling based on a different

factual setting; it involves a publishing firm and an account executive, whose repeated In Algon, the issue was whether the lease contract should dictate the legal

engagement was considered as an indication of employment. Our ruling in the relationship between the parties, when there was proof of an employer-employee

present case is specific to the insurance industry, where the law permits an insurance relationship. In the cited case, the lease provisions on termination were thus

company to exercise control over its agents within the limits prescribed by law, and considered irrelevant because of a substantial evidence of an employment

to engage independent agents for several transactions and within an unlimited period relationship. The cited case lacks the complexity of the present case; Civil Code

of time without the relationship amounting to employment.In light of these realities, provisions on lease do not prescribe that lessees exercise control over their lessors in

the petitioners arguments on his last argument must also fail. the way that the Insurance Code and the Civil provide that insurance companies and

principals exercised control over their agents.

The dissent also erroneously cites eight other cases Social Security System v. Court of

Appeals,[23] Cosmopolitan Funeral Homes, Inc. v. Maalat,[24] Algon Engineering The issue in Equitable, on the other hand, is whether a lawyer-client
Construction Corporation v. National Labor Relations Commission,[25] Equitable relationship or an employment relationship governs the legal relation between

Banking Corporation v. National Labor Relations Commission,[26] Lazaro v. Social parties. Again, this case is inapplicable as it does not illustrate the predominance of

Security Commission,[27] Dealco Farms, Inc. v. National Labor Relations labor laws and jurisprudence over other laws, in general, and the Insurance Code and

Commission,[28] South Davao Development Company, Inc. v. Gamo,[29] and Abante, Jr. Civil Code, in particular. It merely weighed the evidence in favor of an employment

v. Lamadrid Bearing & Parts Corporation.[30] The dissent cited these cases to support relationship over that of a lawyer-client relationship. Similarly in Lazaro, the Court

its allegation that labor laws and jurisprudence should be applied in cases, to the found ample proof of control determinative of an employer-employee

exclusion of other laws such as the Civil Code or the Insurance Code, even when the relationship. Both cases are not applicable to the present case, which is attended by

latter are also applicable. totally different factual considerations as the petitioner had not offered any evidence

of the companys control in the means and manner of the performance of his work.
In Social Security System, Cosmopolitan Funeral Homes, Dealco Farms,

and South Davao Development, the issue that repeats itself is whether complainants
 On the other hand, we find it strange that the dissent cites Abante as a

precedent, since the Court, in this case, held that an employee-employer relationship

is notably absent in this case as the complainant was a sales agent. This case better

supports the majoritys position that a sales agent, who fails to show control in the

concept of labor law, cannot be considered an employee, even if the company

exercised control in the concept of a sales agent.[33]

It bears stressing that our ruling in this case is not about which law has

primacy over the other, but that we should be able to reconcile these laws. We are

merely saying that where the law makes it mandatory for a company to exercise

control over its agents, the complainant in an illegal dismissal case cannot rely on

these legally prescribed control devices as indicators of an employer-employee

relationship. As shown in our discussion, our consideration of the Insurance Code and

Civil Code provisions does not negate the application of labor laws and jurisprudence;

ultimately, we dismissed the petition because of its failure to comply with the control
test.

WHEREFORE, premises considered, we hereby DENY the Motion for

Reconsideration WITH FINALITY for lack of merit. No further pleadings shall be

entertained. Let entry of judgment proceed in due course.

SO ORDERED.
MARTICIO SEMBLANTE and DUBRICK PILAR, G.R. No. 196426
Petitioners, Petitioners Marticio Semblante (Semblante) and Dubrick Pilar (Pilar) assert
Present: that they were hired by respondents-spouses Vicente and Maria Luisa Loot, the

- versus - CARPIO,* J. owners of Gallera de Mandaue (the cockpit), as the

VELASCO, JR., Chairperson,
official masiador and sentenciador, respectively, of the cockpit sometime in 1993.
BRION,**
COURT OF APPEALS, 19THDIVISION, now SPECIAL FORMER PERALTA, and
19TH DIVISION, GALLERA DE MANDAUE / SERENO,*** JJ.
SPOUSES VICENTE and MARIA LUISA LOOT, As the masiador, Semblante calls and takes the bets from the gamecock
Respondents.
owners and other bettors and orders the start of the cockfight. He also distributes the
Promulgated:
winnings after deducting the arriba, or the commission for the cockpit. Meanwhile,
August 15, 2011
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]

x-----------------------------------------------------------------------------------------x
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
DECISION
or PhP 14,000 per month. They work every Tuesday, Wednesday, Saturday, and

VELASCO, JR., J.: 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
Before Us is a Petition for Review on Certiorari under Rule 45, assailing and
both been issued employees�identification cards[5] that they wear every time they
seeking to set aside the Decision[1] and Resolution[2]dated May 29, 2009 and February
report for duty. They alleged never having incurred any infraction and/or violation of
23, 2010, respectively, of the Court of Appeals (CA) in CA-G.R. SP No. 03328. The CA
the cockpit rules and regulations.
affirmed the October 18, 2006 Resolution[3] of the National Labor Relations

Commission (NLRC), Fourth Division (now Seventh Division), in NLRC Case No. V-
On November 14, 2003, however, petitioners were denied entry into the
000673-2004.
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.

 Subsequently, however, the NLRC, acting on respondents�Motion for

In answer, respondents denied that petitioners were their employees and Reconsideration, reversed its Resolution on the postulate that their appeal was

alleged that they were associates of respondents�independent contractor, Tomas meritorious and the filing of an appeal bond, albeit belated, is a substantial

Vega. Respondents claimed that petitioners have no regular working time or day and compliance with the rules. The NLRC held in its Resolution of October 18, 2006 that

they are free to decide for themselves whether to report for work or not on any there was no employer-employee relationship between petitioners and respondents,

cockfighting day. In times when there are few cockfights in Gallera de Mandaue, respondents having no part in the selection and engagement of petitioners, and that

petitioners go to other cockpits in the vicinity. Lastly, petitioners, so respondents no separate individual contract with respondents was ever executed by petitioners.[10]

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] 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

In a Decision dated June 16, 2004, Labor Arbiter Julie C. Rendoque found certiorari. In support of their petition, petitioners argued that the NLRC gravely

petitioners to be regular employees of respondents as they performed work that was abused its discretion in entertaining an appeal that was not perfected in the first

necessary and indispensable to the usual trade or business of respondents for a place. On the other hand, respondents argued that the NLRC did not commit grave

number of years. The Labor Arbiter also ruled that petitioners were illegally dismissed, abuse of discretion, since they eventually posted their appeal bond and that their

and so ordered respondents to pay petitioners their backwages and separation pay.[7] appeal was so meritorious warranting the relaxation of the rules in the interest of
justice.[11]

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 In its Decision dated May 29, 2009, the appellate court found for

NLRC on September 24, 2004, but without posting a cash or surety bond equivalent respondents, noting that referees and bet-takers in a cockfight need to have the kind

to the monetary award granted by the Labor Arbiter.[8] of expertise that is characteristic of the game to interpret messages conveyed by

mere gestures. Hence, petitioners are akin to independent contractors who possess

It was only on October 11, 2004 that respondents filed an appeal bond dated unique skills, expertise, and talent to distinguish them from ordinary employees.

October 6, 2004. Hence, in a Resolution[9] dated August 25, 2005, the NLRC denied Further, respondents did not supply petitioners with the tools and instrumentalities

the appeal for its non-perfection. 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 to be a �masiador�and �sentenciador�. As such, they had all the
liberal in the interpretation of the rules in deciding labor cases. In tools they needed to perform their work. (Emphasis supplied.)
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 The CA refused to reconsider its Decision. Hence, petitioners came to this
this Court not to strictly apply the rules and thus prevent a grave Court, arguing in the main that the CA committed a reversible error in entertaining an
injustice from being done.
appeal, which was not perfected in the first place.
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 Indeed, the posting of a bond is indispensable to the perfection of an appeal
relaxation of the rules. In this regard, we find no grave abuse
attributable to the administrative body. in cases involving monetary awards from the Decision of the Labor Arbiter.[13] Article

223 of the Labor Code provides:

xxxx
Article 223. Appeal. �Decisions, awards, or orders of the Labor
Petitioners are duly licensed �masiador�
Arbiter are final and executory unless appealed to the
and �sentenciador�in the cockpit owned by Lucia Loot.
Commission by any or both parties within ten (10) calendar days
Cockfighting, which is a part of our cultural heritage, has a
from receipt of such decisions, awards, or orders. Such appeal may
peculiar set of rules. It is a game based on the fighting ability of
be entertained only on any of the following grounds:
the game cocks in the cockpit. The referees and bet-takers need
to have that kind of expertise that is characteristic of the cockfight
xxxx
gambling who can interpret the message conveyed even by mere
gestures.They ought to have the talent and skill to get the bets
In case of a judgment involving a monetary award, an appeal by
from numerous cockfighting aficionados and decide which
the employer may be perfected only upon the posting of a cash or
cockerel to put in the arena. They are placed in that elite spot
surety bondissued by a reputable bonding company duly
where they can control the game and the crowd. They are not
accredited by the Commission in the amount equivalent to the
given salaries by cockpit owners as their compensation is based on
monetary award in the judgment appealed from. (Emphasis
the �arriba�. In fact, they can offer their services everywhere
supplied.)
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 Time and again, however, this Court, considering the substantial merits of
means and methods of the manner by which they perform their
work. In this light, they are akin to independent contractors who the case, has relaxed this rule on, and excused the late posting of, the appeal bond
possess unique skills, expertise and talent to distinguish them when there are strong and compelling reasons for the liberality,[14] such as the
from ordinary employees.
prevention of miscarriage of justice extant in the case[15] or the special circumstances
Furthermore, private respondents did not supply
petitioners with the tools and instrumentalities they needed to in the case combined with its legal merits or the amount and the issue
perform their work. Petitioners only needed their talent and skills 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 Strict implementation of the rules on appeals must give way to the factual

parties.[17] This is one case where the exception to the general rule lies. 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.

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 WHEREFORE, We DENY this petition and AFFIRM the May 29, 2009 Decision

of respondents, since their relationship fails to pass muster the four-fold test of and February 23, 2010 Resolution of the CA, and the October 18, 2006 Resolution of

employment We have repeatedly mentioned in countless decisions: (1) the selection the NLRC.

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 SO ORDERED.

important element.[18]

As found by both the NLRC and the CA, respondents had no part in

petitioners�selection and management;[19] petitioners�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.
JOSE MEL BERNARTE, G.R. No. 192084 Complainants (Jose Mel Bernarte and Renato Guevarra) aver that they
were invited to join the PBA as referees. During the leadership of
Petitionr, Commissioner Emilio Bernardino, they were made to sign contracts on a
year-to-year basis. During the term of Commissioner Eala, however,
changes were made on the terms of their employment.
Present:

Complainant Bernarte, for instance, was not made to sign a contract

- versus - CARPIO, J., Chairperson,
during the first conference of the All-Filipino Cup which was from February
23, 2003 to June 2003. It was only during the second conference when he
BRION, was made to sign a one and a half month contract for the period July 1 to
August 5, 2003.
PHILIPPINE BASKETBALL
On January 15, 2004, Bernarte received a letter from the Office of the
ASSOCIATION (PBA), JOSE Commissioner advising him that his contract would not be renewed citing
his unsatisfactory performance on and off the court. It was a total shock
EMMANUEL M. EALA, and Promulgated: for Bernarte who was awarded Referee of the year in 2003. He felt that
the dismissal was caused by his refusal to fix a game upon order of Ernie
De Leon.
PERRY MARTINEZ,
On the other hand, complainant Guevarra alleges that he was invited to
Respondents. September 14, 2011 join the PBA pool of referees in February 2001. On March 1, 2001, he
signed a contract as trainee. Beginning 2002, he signed a yearly contract
x-----------------------------------------------------------------------------------------x as Regular Class C referee. On May 6, 2003, respondent Martinez issued a
memorandum to Guevarraexpressing dissatisfaction over his questioning
DECISION on the assignment of referees officiating out-of-town games. Beginning
February 2004, he was no longer made to sign a contract.
The Case
This is a petition for review1 of the 17 December 2009 Decision2 and 5 April 2010 Respondents aver, on the other hand, that complainants entered into two
Resolution3 of the Court of Appeals in CA-G.R. SP No. 105406. The Court of Appeals contracts of retainer with the PBA in the year 2003. The first contract was
set aside the decision of the National Labor Relations Commission (NLRC), which for the period January 1, 2003 to July 15, 2003; and the second was for
affirmed the decision of the Labor Arbiter, and held that petitioner Jose September 1 to December 2003. After the lapse of the latter period, PBA
Mel Bernarte is an independent contractor, and not an employee of respondents decided not to renew their contracts.
Philippine Basketball Association (PBA), Jose Emmanuel M. Eala, and Perry Martinez.
The Court of Appeals denied the motion for reconsideration. Complainants were not illegally dismissed because they were not
employees of the PBA. Their respective contracts of retainer were simply
The Facts not renewed. PBA had the prerogative of whether or not to renew their
contracts, which they knew were fixed.4
The facts, as summarized by the NLRC and quoted by the Court of Appeals, are as
follows: In her 31 March 2005 Decision,5 the Labor Arbiter6 declared petitioner an employee
whose dismissal by respondents was illegal. Accordingly, the Labor Arbiter ordered
 the reinstatement of petitioner and the payment of backwages, moral and
exemplary damages and attorneys fees, to wit:
WHEREFORE, premises considered all respondents who are here found to
have illegally dismissed complainants are hereby ordered to (a) reinstate
complainants within thirty (30) days from the date of receipt of this
decision and to solidarily pay complainants:
The rest of the claims are hereby dismissed for lack of merit or basis.
SO ORDERED.7
In its 28 January 2008 Decision,8 the NLRC affirmed the Labor Arbiters judgment.
The dispositive portion of the NLRCs decision reads:
WHEREFORE, the appeal is hereby DISMISSED. The Decision of Labor
Arbiter Teresita D. Castillon-Lora dated March 31, 2005 is AFFIRMED.

JOSE MEL RENATO GUEVARRA SO ORDERED.9

1. backwages from January
1, 2004 up to the finality of
this Decision, which to date
is
BERNARTE
Respondents filed a petition for certiorari with the Court of Appeals, which
overturned the decisions of the NLRC and Labor Arbiter. The dispositive portion of
P211,250.00 the Court of Appeals decision reads:
P536,250.00
WHEREFORE, the petition is hereby GRANTED. The assailed Decision dated
100,000.00 January 28, 2008 and Resolution dated August 26, 2008 of the National
100,000.00 Labor Relations Commission are ANNULLED and SET ASIDE. Private
50,000.00 respondents complaint before the Labor Arbiter is DISMISSED.

2. moral damages SO ORDERED.10

50,000.00
The Court of Appeals Ruling

3. exemplary damages The Court of Appeals found petitioner an independent contractor since respondents
4. 10% attorneys fees 68,625.00 36,125.00 did not exercise any form of control over the means and methods by which
petitioner performed his work as a basketball referee. The Court of Appeals held:

While the NLRC agreed that the PBA has no control over the referees acts
TOTAL P754,875.00 P397,375.00 of blowing the whistle and making calls during basketball games, it,
nevertheless, theorized that the said acts refer to the means and methods
employed by the referees in officiating basketball games for the illogical
reason that said acts refer only to the referees skills. How could a skilled
referee perform his job without blowing a whistle and making calls?
or a total Worse, how can the PBA control the performance of work of a referee
of P1,152,250.00 without controlling his acts of blowing the whistle and making calls?
 Moreover, this Court disagrees with the Labor Arbiters finding (as affirmed
by the NLRC) that the Contracts of Retainer show that petitioners have
control over private respondents.
xxxx
Neither do We agree with the NLRCs affirmance of the Labor Arbiters
conclusion that private respondents repeated hiring made them regular
employees by operation of law.11
The Issues
The main issue in this case is whether petitioner is an employee of respondents,
which in turn determines whether petitioner was illegally dismissed.
Petitioner raises the procedural issue of whether the Labor Arbiters decision has
become final and executory for failure of respondents to appeal with the NLRC
within the reglementary period.
The Ruling of the Court
The petition is bereft of merit.
The Court shall first resolve the procedural issue posed by petitioner.
Petitioner contends that the Labor Arbiters Decision of 31 March 2005 became final
and executory for failure of respondents to appeal with the NLRC within the
prescribed period. Petitioner claims that the Labor Arbiters decision was
constructively served on respondents as early as August 2005 while respondents
appealed the Arbiters decision only on 31 March 2006, way beyond
the reglementary period to appeal. Petitioner points out that service of an
unclaimed registered mail is deemed complete five days from the date of first notice
of the post master. In this case three notices were issued by the post office, the last
being on 1 August 2005. The unclaimed registered mail was consequently returned
to sender. Petitioner presents the Postmasters Certification to prove constructive
service of the Labor Arbiters decision on respondents. The Postmaster certified:
xxx
That upon receipt of said registered mail matter, our registry in charge,
Vicente Asis, Jr., immediately issued the first registry notice to claim on July 12, 2005
by the addressee. The second and third notices were issued on July 21 and August 1,
2005, respectively.
That the subject registered letter was returned to the sender (RTS)
because the addressee failed to claim it after our one month retention
period elapsed. Said registered letter was dispatched from this office to
Manila CPO (RTS) under bill #6, line 7, page1, column 1, on September 8,
2005.12
Section 10, Rule 13 of the Rules of Court provides:
SEC. 10. Completeness of service. Personal service is complete upon actual
delivery. Service by ordinary mail is complete upon the expiration of ten
(10) days after mailing, unless the court otherwise provides. Service by
registered mail is complete upon actual receipt by the addressee, or after
five (5) days from the date he received the first notice of the postmaster,
whichever date is earlier.
The rule on service by registered mail contemplates two situations: (1) actual
service the completeness of which is determined upon receipt by the addressee of
the registered mail; and (2) constructive service the completeness of which is
determined upon expiration of five days from the date the addressee received the
first notice of the postmaster.13
Insofar as constructive service is concerned, there must be conclusive proof that a
first notice was duly sent by the postmaster to the addressee.14 Not only is it
required that notice of the registered mail be issued but that it should also be
delivered to and received by the addressee.15 Notably, the presumption that official
duty has been regularly performed is not applicable in this situation. It is incumbent
upon a party who relies on constructive service to prove that the notice was sent to,
and received by, the addressee.16
The best evidence to prove that notice was sent would be a certification from the
postmaster, who should certify not only that the notice was issued or sent but also
as to how, when and to whom the delivery and receipt was made. The mailman may
also testify that the notice was actually delivered.17
In this case, petitioner failed to present any concrete proof as to how, when and to
whom the delivery and receipt of the three notices issued by the post office was
made. There is no conclusive evidence showing that the post office notices were
actually received by respondents, negating petitioners claim of constructive service
of the Labor Arbiters decision on respondents. The Postmasters Certification does
not sufficiently prove that the three notices were delivered to and received by
respondents; it only indicates that the post office issued the three notices. Simply
put, the issuance of the notices by the post office is not equivalent to delivery to and
receipt by the addressee of the registered mail. Thus, there is no proof of completed
constructive service of the Labor Arbiters decision on respondents.
At any rate, the NLRC declared the issue on the finality of the Labor Arbiters decision
moot as respondents appeal was considered in the interest of substantial justice.
We agree with the NLRC. The ends of justice will be better served if we resolve the
instant case on the merits rather than allowing the substantial issue of whether
petitioner is an independent contractor or an employee linger and remain unsettled
due to procedural technicalities.
The existence of an employer-employee relationship is ultimately a question of fact.
As a general rule, factual issues are beyond the province of this Court. However, this
rule admits of exceptions, one of which is where there are conflicting findings of fact
between the Court of Appeals, on one hand, and the NLRC and Labor Arbiter, on the
other, such as in the present case.18
To determine the existence of an employer-employee relationship, case law has
consistently applied the four-fold test, to wit: (a) the selection and engagement of
the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employers power to control the employee on the means and methods by which the
work is accomplished. The so-called control test is the most important indicator of
the presence or absence of an employer-employee relationship.19
In this case, PBA admits repeatedly engaging petitioners services, as shown in the
retainer contracts. PBA pays petitioner a retainer fee, exclusive of per diem or
allowances, as stipulated in the retainer contract. PBA can terminate the retainer
contract for petitioners violation of its terms and conditions.
However, respondents argue that the all-important element of control is lacking in
this case, making petitioner an independent contractor and not an employee of
respondents.
Petitioner contends otherwise. Petitioner asserts that he is an employee of
respondents since the latter exercise control over the performance of his work.
Petitioner cites the following stipulations in the retainer contract which evidence
control: (1) respondents classify or rate a referee; (2) respondents require referees
to attend all basketball games organized or authorized by the PBA, at least one hour
before the start of the first game of each day; (3) respondents assign petitioner to
officiate ballgames, or to act as alternate referee or substitute; (4) referee agrees to
observe and comply with all the requirements of the PBA governing the conduct of
the referees whether on or off the court; (5) referee agrees (a) to keep himself in
good physical, mental, and emotional condition during the life of the contract; (b) to
give always his best effort and service, and loyalty to the PBA, and not to officiate as
referee in any basketball game outside of the PBA, without written prior consent of
the Commissioner; (c) always to conduct himself on and off the court according to
the highest standards of honesty or morality; and (6) imposition of various sanctions
for violation of the terms and conditions of the contract.
The foregoing stipulations hardly demonstrate control over the means and methods
by which petitioner performs his work as a referee officiating a PBA basketball game.
The contractual stipulations do not pertain to, much less dictate, how and when
petitioner will blow the whistle and make calls. On the contrary, they merely serve
as rules of conduct or guidelines in order to maintain the integrity of the
professional basketball league. As correctly observed by the Court of
Appeals, how could a skilled referee perform his job without blowing a whistle and
making calls? x x x [H]ow can the PBA control the performance of work of a referee
without controlling his acts of blowing the whistle and making calls?20
In Sonza v. ABS-CBN Broadcasting Corporation,21 which determined the relationship
between a television and radio station and one of its talents, the Court held that not
all rules imposed by the hiring party on the hired party indicate that the latter is an
employee of the former. The Court held:
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. v. 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.22
We agree with respondents that once in the playing court, the referees exercise
their own independent judgment, based on the rules of the game, as to when and
how a call or decision is to be made. The referees decide whether an infraction was
committed, and the PBA cannot overrule them once the decision is made on the
playing court. The referees are the only, absolute, and final authority on the playing
court. Respondents or any of the PBA officers cannot and do not determine which
calls to make or not to make and cannot control the referee when he blows the
whistle because such authority exclusively belongs to the referees. The very nature
of petitioners job of officiating a professional basketball game undoubtedly calls for
freedom of control by respondents.
Moreover, the following circumstances indicate that petitioner is an independent
contractor: (1) the referees are required to report for work only when PBA games
are scheduled, which is three times a week spread over an average of only 105
playing days a year, and they officiate games at an average of two hours per game;
and (2) the only deductions from the fees received by the referees are withholding
taxes.
In other words, unlike regular employees who ordinarily report for work eight hours
per day for five days a week, petitioner is required to report for work only when PBA
games are scheduled or three times a week at two hours per game. In addition,
there are no deductions for contributions to the Social Security
System, Philhealth or Pag-Ibig, which are the usual deductions from employees
salaries. These undisputed circumstances buttress the fact that petitioner is an
independent contractor, and not an employee of respondents.
Furthermore, the applicable foreign case law declares that a referee is an
independent contractor, whose special skills and independent judgment arerequired
specifically for such position and cannot possibly be controlled by the hiring party.
In Yonan v. United States Soccer Federation, Inc.,23 the United States District Court of
Illinois held that plaintiff, a soccer referee, is an independent contractor, and not an
employee of defendant which is the statutory body that governs soccer in the
United States. As such, plaintiff was not entitled to protection by the Age
Discrimination in Employment Act. The U.S. District Court ruled:
Generally, if an employer has the right to control and direct the work of an
individual, not only as to the result to be achieved, but also as to details by
which the result is achieved, an employer/employee relationship is likely
to exist. The Court must be careful to distinguish between control[ling] the
conduct of another party contracting party by setting out in detail his
obligations consistent with the freedom of contract, on the one hand, and
the discretionary control an employer daily exercises over its employees
conduct on the other.
Yonan asserts that the Federation closely supervised his performance at
each soccer game he officiated by giving him an assessor, discussing his
performance, and controlling what clothes he wore while on the field and
traveling. Putting aside that the Federation did not, for the most part,
control what clothes he wore, the Federation did not supervise Yonan, but
rather evaluated his performance after matches. That the Federation
evaluated Yonan as a referee does not mean that he was an
employee. There is no question that parties retaining independent
contractors may judge the performance of those contractors to determine
if the contractual relationship should continue. x x x
It is undisputed that the Federation did not control the
way Yonan refereed his games. He had full discretion and authority, under
the Laws of the Game, to call the game as he saw fit. x x x In a similar vein,
subjecting Yonan to qualification standards and procedures like the
Federations registration and training requirements does not create an
employer/employee relationship. x x x
 A position that requires special skills and independent judgment weights
in favor of independent contractor status. x x x Unskilled work, on the
other hand, suggests an employment relationship. x x x Here, it is WHEREFORE, we DENY the petition and AFFIRM the assailed decision of the Court of
undisputed that soccer refereeing, especially at the professional and Appeals.
international level, requires a great deal of skill and natural
ability. Yonan asserts that it was the Federations training that made him a
top referee, and that suggests he was an employee. Though substantial
training supports an employment inference, that inference is dulled
significantly or negated when the putative employers activity is the result SO ORDERED.
of a statutory requirement, not the employers choice. x x x

In McInturff v. Battle Ground Academy of Franklin,24 it was held that the umpire was
not an agent of the Tennessee Secondary School Athletic Association (TSSAA), so the
players vicarious liability claim against the association should be dismissed. In finding
that the umpire is an independent contractor, the Court of Appeals
of Tennesse ruled:

The TSSAA deals with umpires to achieve a result-uniform rules for all
baseball games played between TSSAA member schools. The TSSAA does
not supervise regular season games. It does not tell an official how to
conduct the game beyond the framework established by the rules. The
TSSAA does not, in the vernacular of the case law, control the means and
method by which the umpires work.

In addition, the fact that PBA repeatedly hired petitioner does not by itself prove
that petitioner is an employee of the former. For a hired party to be considered an
employee, the hiring party must have control over the means and methods by which
the hired party is to perform his work, which is absent in this case. The continuous
rehiring by PBA of petitioner simply signifies the renewal of the contract between
PBA and petitioner, and highlights the satisfactory services rendered by petitioner
warranting such contract renewal. Conversely, if PBA decides to discontinue
petitioners services at the end of the term fixed in the contract, whether for
unsatisfactory services, or violation of the terms and conditions of the contract, or
for whatever other reason, the same merely results in the non-renewal of the
contract, as in the present case. The non-renewal of the contract between the
parties does not constitute illegal dismissal of petitioner by respondents.
 CESAR C. LIRIO, doing business under the name and style of G.R. No. 169757
CELKOR AD SONICMIX,
Petitioner, Present: On July 9, 2002, respondent Wilmer D. Genovia filed a complaint against
petitioner Cesar Lirio and/or Celkor Ad Sonicmix Recording Studio for illegal dismissal,
VELASCO, JR., J., Chairperson,
non-payment of commission and award of moral and exemplary damages.
PERALTA,
- versus - ABAD,
PEREZ,* and In his Position Paper,[1] respondent Genovia alleged, among others, that on
MENDOZA, JJ.
August 15, 2001, he was hired as studio manager by petitioner Lirio, owner of Celkor
Promulgated:
Ad Sonicmix Recording Studio (Celkor). He was employed to manage and operate
WILMER D. GENOVIA,
Respondent. November 23, 2011 Celkor and to promote and sell the recording studio's services to music enthusiasts
x----------------------------------------------------------------------------------------x
and other prospective clients. He received a monthly salary of P7,000.00. They also

agreed that he was entitled to an additional commission of P100.00 per hour as

DECISION
recording technician whenever a client uses the studio for recording, editing or any

related work. He was made to report for work from Monday to Friday from 9:00 a.m.
PERALTA, J.:
to 6 p.m. On Saturdays, he was required to work half-day only, but most of the time,

he still rendered eight hours of work or more. All the employees of petitioner,
This is a petition for review on certiorari of the decision of the Court of including respondent, rendered overtime work almost everyday, but petitioner never
Appeals in CA-G.R. SP No. 88899 dated August 4, 2005 and its Resolution dated kept a daily time record to avoid paying the employees overtime pay.
September 21, 2005, denying petitioners motion for reconsideration.

Respondent stated that a few days after he started working as a studio

The Court of Appeals reversed and set aside the resolution of the NLRC, and
reinstated the decision of the Labor Arbiter with modification, finding that
respondent is an employee of petitioner, and that respondent was illegally dismissed
and entitled to the payment of backwages and separation pay in lieu of
reinstatement.
manager, petitioner approached him and told him about his project to produce an
album for his 15-year-old daughter, Celine Mei Lirio, a former talent of ABS-CBN Star
Records. Petitioner asked respondent to compose and arrange songs for Celine and
promised that he (Lirio) would draft a contract to assure respondent of his
compensation for such services. As agreed upon, the additional services that

respondent would render included composing and arranging musical scores only,
The facts are as follows: while the technical aspect in producing the album, such as digital editing, mixing and
sound engineering would be performed by respondent in his capacity as studio
manager for which he was paid on a monthly basis. Petitioner instructed respondent
that his work on the album as composer and arranger would only be done during his
spare time, since his other work as studio manager was the priority. Respondent then
started working on the album.
Respondent alleged that before the end of September 2001, he reminded
petitioner about his compensation as composer and arranger of the album.
Petitioner verbally assured him that he would be duly compensated. By mid-
November 2001, respondent finally finished the compositions and musical
arrangements of the songs to be included in the album. Before the month ended, the
lead and back-up vocals in the ten (10) songs were finally recorded and completed.
From December 2001 to January 2002, respondent, in his capacity as studio
manager, worked on digital editing, mixing and sound engineering of the vocal and
instrumental audio files.
Thereafter, respondent was tasked by petitioner to prepare official
correspondence, establish contacts and negotiate with various radio stations, malls,
publishers, record companies and manufacturers, record bars and other outlets in
preparation for the promotion of the said album. By early February 2002, the album
was in its manufacturing stage. ELECTROMAT, manufacturer of CDs and cassette
tapes, was tapped to do the job. The carrier single of the album, which respondent
composed and arranged, was finally aired over the radio on February 22, 2002.
On February 26, 2002, respondent again reminded petitioner about the
contract on his compensation as composer and arranger of the album. Petitioner told
respondent that since he was practically a nobody and had proven nothing yet in the
music industry, respondent did not deserve a high compensation, and he should be
thankful that he was given a job to feed his family. Petitioner informed respondent
that he was entitled only to 20% of the net profit, and not of the gross sales of the
album, and that the salaries he received and would continue to receive as studio
manager of Celkor would be deducted from the said 20% net profit share.
Respondent objected and insisted that he be properly compensated. On March 14,
2002, petitioner verbally terminated respondents services, and he was instructed not
to report for work.
Respondent asserts that he was illegally dismissed as he was terminated
without any valid grounds, and no hearing was conducted before he was terminated,
in violation of his constitutional right to due process. Having worked for more than
six months, he was already a regular employee. Although he was a so called studio
manager, he had no managerial powers, but was merely an ordinary employee.
Respondent prayed for his reinstatement without loss of seniority rights,
or, in the alternative, that he be paid separation pay, backwages and overtime pay;
and that he be awarded unpaid commission in the amount of P2,000.00 for services
rendered as a studio technician as well as moral and exemplary damages.
Respondents evidence consisted of the Payroll dated July 31, 2001 to
March 15, 2002, which was certified correct by petitioner,[2] and Petty Cash
Vouchers[3] evidencing receipt of payroll payments by respondent from Celkor.
 In defense, petitioner stated in his Position Paper[4] that respondent was
not hired as studio manager, composer, technician or as an employee in any other
capacity of Celkor. Respondent could not have been hired as a studio manager, since
the recording studio has no personnel except petitioner. Petitioner further claimed
that his daughter Celine Mei Lirio, a former contract artist of ABS-CBN Star Records,
failed to come up with an album as the latter aborted its project to produce
one. Thus, he decided to produce an album for his daughter and established a
recording studio, which he named Celkor Ad Sonicmix Recording Studio. He looked
for a composer/arranger who would compose the songs for the said album. In July
2001, Bob Santiago, his son-in-law, introduced him to respondent, who claimed to be
an amateur composer, an arranger with limited experience and musician without any
formal musical training. According to petitioner, respondent had no track record as a
composer, and he was not known in the field of music. Nevertheless, after some
discussion, respondent verbally agreed with petitioner to co-produce the album
based on the following terms and conditions: (1) petitioner shall provide all the
financing, equipment and recording studio; (2) Celine Mei Lirio shall sing all the songs;
(3) respondent shall act as composer and arranger of all the lyrics and the music of
the five songs he already composed and the revival songs; (4) petitioner shall have
exclusive right to market the album; (5) petitioner was entitled to 60% of the net
profit, while respondent and Celine Mei Lirio were each entitled to 20% of the net
profit; and (6) respondent shall be entitled to draw advances of P7,000.00 a month,
which shall be deductible from his share of the net profits and only until such time
that the album has been produced.
According to petitioner, they arrived at the foregoing sharing of profits
based on the mutual understanding that respondent was just an amateur composer
with no track record whatsoever in the music industry, had no definite source of
income, had limited experience as an arranger, had no knowledge of the use of sound
mixers or digital arranger and that petitioner would help and teach him how to use
the studio equipment; that petitioner would shoulder all the expenses of production
and provide the studio and equipment as well as his knowledge in the use thereof;
and Celine Mei Lirio would sing the songs. They embarked on the production of the
album on or about the third week of August 2002.
Petitioner asserted that from the aforesaid terms and conditions, his
relationship with respondent is one of an informal partnership under Article 1767[5] of
the New Civil Code, since they agreed to contribute money, property or industry to a
common fund with the intention of dividing the profits among themselves. Petitioner
had no control over the time and manner by which respondent composed or arranged
the songs, except on the result thereof. Respondent reported to the recording studio
between 10:00 a.m. and 12:00 noon. Hence, petitioner contended that no employer-
employee relationship existed between him and the respondent, and there was no
illegal dismissal to speak of.
On October 31, 2003, Labor Arbiter Renaldo O. Hernandez rendered a
decision,[6] finding that an employer-employee relationship existed between
petitioner and respondent, and that respondent was illegally dismissed. The
dispositive portion of the decision reads:
WHEREFORE, premises considered, we find that
respondents CELKOR AD SONICMIX RECORDING STUDIO and/ or
CESAR C. LIRIO (Owner), have illegally dismissed complainant in
his status as regular employee and, consequently, ORDERING
said respondents:
 The Labor Arbiter stated that petitioners denial of the employment
1) To pay him full backwages from
date of illegal dismissal on March relationship cannot overcome respondents positive assertion and documentary
14, 2002 until finality of this evidence proving that petitioner hired respondent as his employee.[8]
decision and, in lieu of
reinstatement, to [pay] his
separation pay of one (1) month Petitioner appealed the decision of the Labor Arbiter to the National Labor
pay per year of service reckoned Relations Commission (NLRC).
from [the] date of hire on August
15, 2001 until finality of this
decision, which as of date amounts In a Resolution7 dated October 14, 2004, the NLRC reversed and set aside
to full backwages total of the decision of the Labor Arbiter. The dispositive portion of the Resolution reads:
145,778.6 (basic P7,000.00 x 19.6
mos.=P133,000.00 + 1/12 thereof
as 13th month pay
WHEREFORE, premises considered, the Appeal is
of P11,083.33 + SILP P7,000/32.62
GRANTED. Accordingly, the Decision appealed from is REVERSED
days=P214.59/day x 5=P1,072.96 x
and, hence, SET ASIDE and a new one ENTERED dismissing the
1.58 yrs.=P1,695.27); separation
instant case for lack of merit.[9]
pay of P22,750.00 (P7,000.00 x
3.25 yrs.);

2) To pay complainant's unpaid
commission of P2,000.00;
3) To pay him moral and exemplary damages
in the combined amount of P75,000.00.
The NLRC stated that respondent failed to prove his employment tale with
substantial evidence. Although the NLRC agreed that respondent was able to prove
that he received gross pay less deduction and net pay, with the corresponding
Certification of Correctness by petitioner, covering the period from July 31, 2001 to

March 15, 2002, the NLRC held that respondent failed to proved with substantial
Other monetary claims of complainant are dismissed
for lack of merit.[7] evidence that he was selected and engaged by petitioner, that petitioner had the

power to dismiss him, and that they had the power to control him not only as to the

result of his work, but also as to the means and methods of accomplishing his work.
 Respondents motion for reconsideration was denied by the NLRC in a
Resolution9 dated December 14, 2004.
Respondent filed a petition for certiorari before the Court of Appeals.
On August 4, 2005, the Court of Appeals rendered a decision[10] reversing
and setting aside the resolution of the NLRC, and reinstating the decision of the Labor
Arbiter, with modification in regard to the award of commission and damages. The
Court of Appeals deleted the award of commission, and moral and exemplary
damages as the same were not substantiated. The dispositive portion of the Court of
Appeals decision reads:
WHEREFORE, the petition is GRANTED and the assailed
resolutions dated October 14, 2004 and December 14, 2004 are
hereby REVERSED and SET ASIDE. Accordingly, the decision dated
October 31, 2003 of the Labor Arbiter is REINSTATED, with
the modification that the awards of commission and damages
are deleted.[11] (Emphasis supplied.)
Petitioners motion for reconsideration was denied for lack of merit by the
Court of Appeals in its Resolution[12] dated September 21, 2005.
Hence, petitioner Lirio filed this petition.
Petitioner states that respondent appealed to the Court of Appeals via a
petition for certiorari under Rule 65, which will prosper only if there is a showing of
grave abuse of discretion or an act without or in excess of jurisdiction on the part of
the NLRC.[13] However, petitioner contends that the Court of Appeals decided the case
not in accordance with law and applicable rulings of this Court as petitioner could not
find any portion in the Decision of the Court of Appeals ruling that the NLRC acted
without or in excess of jurisdiction or with grave abuse of discretion amounting to lack
or excess of jurisdiction. Petitioner submits that the Court of Appeals could not review
an error of judgment by the NLRC raised before it on a petition for certiorari under
Rule 65 of the 1997 Rules of Civil Procedure. Moreover, petitioner contends that it
was error on the part of the Court of Appeals to review the finding of facts of the NLRC
on whether there exists an employer-employee relationship between the parties.
Petitioners argument lacks merit.
It is noted that respondent correctly sought judicial review of the decision
of the NLRC via a petition for certiorari under Rule 65 of the Rules of Court filed before
the Court of Appeals in accordance with the decision of the Court in St. Martin Funeral
Home v. NLRC,[14]which held:
Therefore, all references in the amended Section 9 of
B.P. No. 129 to supposed appeals from the NLRC to the Supreme
Court are interpreted and hereby declared to mean and refer to
petitions for certiorari under Rule 65. Consequently, all such
petitions should henceforth be initially filed in the Court of
Appeals in strict observance of the doctrine on the hierarchy of
courts as the appropriate forum for the relief desired.[15]
The Court of Appeals stated in its decision that the issue it had to resolve
was whether or not the public respondent [NLRC] committed grave abuse of
discretion when it declared that no employer-employee relationship exists between
the petitioner and the private respondents, since the petitioner failed to prove such
fact by substantial evidence.[16]
Errors of judgment, as distinguished from errors of jurisdiction, are not
within the province of a special civil action for certiorari, which is merely confined to

issues of jurisdiction or grave abuse of discretion.[17] By grave abuse of discretion is
meant such capricious and whimsical exercise of judgment as is equivalent to lack of
jurisdiction, and it must be shown that the discretion was exercised arbitrarily or
despotically.[18]
The Court of Appeals, therefore, could grant the petition for certiorari if it
finds that the NLRC, in its assailed decision or resolution, committed grave abuse of
discretion by capriciously, whimsically, or arbitrarily disregarding evidence that is
material to or decisive of the controversy; and it cannot make this determination
mere allegation of petitioner without any proof by way of any document evincing
without looking into the evidence of the parties.[19] Necessarily, the appellate court
their alleged partnership agreement, the Court of Appeals agreed with the Labor
can only evaluate the materiality or significance of the evidence, which is alleged to
Arbiter that petitioner failed to substantiate his claim that he had a partnership with
have been capriciously, whimsically, or arbitrarily disregarded by the NLRC, in relation
respondent, citing the Labor Arbiters finding, thus:
to all other evidence on record.[20] Thus, contrary to the contention of petitioner, the
Court of Appeals can review the finding of facts of the NLRC and the evidence of the
parties to determine whether the NLRC gravely abused its discretion in finding that
no employer-employee relationship existed between petitioner and respondent.[21]
Respondent raised before the Court of Appeals the following issues:
I. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION
COMMITTED GRAVE ABUSE OF DISCRETION IN SHIFTING THE
BURDEN OF PROVING THAT EMPLOYMENT RELATIONS EXISTED
BETWEEN THE PETITIONER AND THE PRIVATE RESPONDENTS TO
THE FORMER, IN VIOLATION OF ESTABLISHED PROVISION OF
LAWS AND JURISPRUDENCE.
II. RESPONDENT NATIONAL LABOR RELATIONS
COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION IN
HOLDING THAT NO EMPLOYER-EMPLOYEE RELATIONSHIP
EXISTED BETWEEN THE PETITIONER AND THE PRIVATE
RESPONDENTS.
III. RESPONDENT NATIONAL LABOR RELATIONS
COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION IN
DISREGARDING THE PETITIONER'S PAYROLL AND THE PETTY CASH
VOUCHERS AS AN INDICIA OF EMPLOYMENT RELATIONS
BETWEEN PETITIONER AND THE PRIVATE RESPONDENTS.[22]
Between the documentary evidence presented by respondent and the
In this case, complainant's evidence is substantial
enough to prove the employment relationship that on August 14,
2001, he was hired as 'Studio manager' by respondent Lirio to
manage and operate the recording studio and to promote and
sell its services to music enthusiasts and clients, proven by his
receipt for this purpose from said respondent a fixed monthly
compensation of P7,000.00, with commission of P100.00 per
hour when serving as recording technician, shown by the payroll
from July 31, 2001-March 15, 2002. The said evidence points to
complainant's hiring as employee so that the case comes within
the purview of our jurisdiction on labor disputes between an
employer and an employee. x x x.
Respondent Lirio's so-called existence of a partnership
agreement was not substantiated and his assertion thereto, in the
face of complainant's evidence, constitute but a self-serving
assertion, without probative value, a mere invention to justify the
illegal dismissal.
xxxx
 Indeed, we find credible that what caused
complainant's dismissal on March 14, 2002 was due to his refusal
to respondent's Lirio's insistences on merely giving him 20% Before a case for illegal dismissal can prosper, it must first be established
based on net profit on sale of the album which he composed and
arranged during his free time and, moreover, that salaries which that an employer-employee relationship existed between petitioner and
he received would be deducted therefrom, which obviously,
respondent.[27]
soured the relations from the point of view of respondent
Lirio.[23] The elements to determine the existence of an employment relationship
are: (a) the selection and engagement of the employee; (b) the payment of wages; (c)
the power of dismissal; and (d) the employers power to control the employees
Hence, based on the finding above and the doctrine that if doubt exists
conduct. The most important element is the employers control of the employees
between the evidence presented by the employer and the employee, the scales of
conduct, not only as to the result of the work to be done, but also as to the means
justice must be tilted in favor of the latter,[24] the Court of Appeals reversed the
and methods to accomplish it.[28]
resolution of the NLRC and reinstated the decision of the Labor Arbiter with

modification. Even if the Court of Appeals was remiss in not stating it in definite terms,

it is implied that the Court of Appeals found that the NLRC gravely abused its It is settled that no particular form of evidence is required to prove the
discretion in finding that no employer-employee relationship existed between existence of an employer-employee relationship.[29] Any competent and relevant

petitioner and respondent based on the evidence on record. evidence to prove the relationship may be admitted.[30]

We now proceed to the main issue raised before this Court: Whether or not In this case, the documentary evidence presented by respondent to prove

the decision of the Court of Appeals is in accordance with law, or whether or not the that he was an employee of petitioner are as follows: (a) a document denominated as

Court of Appeals erred in reversing and setting aside the decision of the NLRC, and "payroll" (dated July 31, 2001 to March 15, 2002) certified correct by

reinstating the decision of the Labor Arbiter with modification. petitioner,[31] which showed that respondent received a monthly salary of P7,000.00

(P3,500.00 every 15th of the month and another P3,500.00 every 30th of the month)

In petitions for review, only errors of law are generally reviewed by this with the corresponding deductions due to absences incurred by respondent; and

Court. This rule, however, is not ironclad.[25] Where the issue is shrouded by a conflict (2) copies of petty cash vouchers,[32] showing the amounts he received and signed for

of factual perceptions by the lower court or the lower administrative body, in this in the payrolls.

case, the NLRC, this Court is constrained to review the factual findings of the Court of
Appeals.[26] The said documents showed that petitioner hired respondent as an

employee and he was paid monthly wages of P7,000.00. Petitioner wielded the power
to dismiss as respondent stated that he was verbally dismissed by petitioner, and
respondent, thereafter, filed an action for illegal dismissal against petitioner. The
power of control refers merely to the existence of the power.[33] It is not essential for
the employer to actually supervise the performance of duties of the employee, as it
is sufficient that the former has a right to wield the power.[34]Nevertheless, petitioner
stated in his Position Paper that it was agreed that he would help and teach
respondent how to use the studio equipment. In such case, petitioner certainly had
the power to check on the progress and work of respondent.
On the other hand, petitioner failed to prove that his relationship with
respondent was one of partnership. Such claim was not supported by any written
agreement. The Court notes that in the payroll dated July 31, 2001 to March 15,
2002,[35] there were deductions from the wages of respondent for his absence from
work, which negates petitioners claim that the wages paid were advances for
respondents work in the partnership. In Nicario v. National Labor Relations
Commission,[36] the Court held:
It is a well-settled doctrine, that if doubts exist between
the evidence presented by the employer and the employee, the
scales of justice must be tilted in favor of the latter. It is a time-
honored rule that 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 formers favor. The policy is to extend the doctrine to a greater
number of employees who can avail of the benefits under the law,
which is in consonance with the avowed policy of the State to give
maximum aid and protection of labor. This rule should be applied
in the case at bar, especially since the evidence presented by the
private respondent company is not convincing. x x x[37]
Based on the foregoing, the Court agrees with the Court of Appeals that the
evidence presented by the parties showed that an employer-employee relationship
existed between petitioner and respondent.
In termination cases, the burden is upon the employer to show by
substantial evidence that the termination was for lawful cause and validly
made.[38] Article 277 (b) of the Labor Code[39] puts the burden of proving that the
dismissal of an employee was for a valid or authorized cause on the employer, without
distinction whether the employer admits or does not admit the dismissal.[40] For an
employees dismissal to be valid, (a) the dismissal must be for a valid cause, and (b)
the employee must be afforded due process.[41] Procedural due process requires the
employer to furnish an employee with two written notices before the latter is
dismissed: (1) the notice to apprise the employee of the particular acts or omissions
for which his dismissal is sought, which is the equivalent of a charge; and (2) the notice
informing the employee of his dismissal, to be issued after the employee has been
given reasonable opportunity to answer and to be heard on his defense.[42] Petitioner
failed to comply with these legal requirements; hence, the Court of Appeals correctly
affirmed the Labor Arbiters finding that respondent was illegally dismissed, and
entitled to the payment of backwages, and separation pay in lieu of reinstatement.
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in
CA-G.R. SP No. 88899, dated August 4, 2005, and its Resolution dated September 21,
2005, are AFFIRMED.
No costs.
SO ORDERED.

G.R. No. 199547 September 24, 2012
THE NEW PHILIPPINE SKYLANDERS, INC. and/or JENNIFER M. ENANO-
BOTE, Petitioners,
vs.
FRANCISCO N. DAKILA, Respondent.
RESOLUTION
PERLAS-BERNABE, J.:
The Petition for Review on Certiorari1 assails the August 31, 20112 and November 23,
20113 Resolutions of the Court of Appeals (CA) in CA-G.R. SP No. 113015 which
affirmed the September 10, 2009 Decision4 and December 15, 2009 Resolution5 of
the National Labor Relations Commission (NLRC) finding respondent Francisco
N.Dakila (respondent Dakila) to have been illegally dismissed.
The Factual Antecedents
Respondent Dakila was employed by petitionercorporation as early as 1987 and
terminated for cause in April 1997 when the corporation was sold. In May 1997, he
was rehired as consultant by the petitioners under a Contract for Consultancy
Services6 dated April 30, 1997.
Thereafter, in a letter7 dated April 19, 2007, respondent Dakila informed petitioners
of his compulsory retirement effective May 2, 2007 and sought for the payment of
his retirement benefits pursuant to the Collective Bargaining Agreement. His
request, however, was not acted upon. Instead, he was terminated from service
effective May 1, 2007.
Consequently, respondent Dakila filed a complaint for constructive illegal dismissal,
non-payment of retirement benefits, under/non-payment of wages and other
benefits of a regular employee, and damages against petitioners, The New Philippine
Skylanders, Inc. and its President and General Manager, Jennifer M. Eñano-Bote,
before the NLRC. He averred, among others, that the consultancy contract was a
scheme to deprive him of the benefits of regularization, claiming to have assumed
tasks necessary and desirable in the trade or business of petitioners and under their
direct control and supervision. In support of his claim, he submitted, among others,
copies of his time cards, Official Business Itinerary Slips, Daily Attendance Sheets and
other documents prescribing the manner in which his tasks were to be
accomplished under the control of the petitioners and acknowledging his status as a
regular employee of the corporation.
On the other hand, petitioners, in their position paper,8 asserted that respondent
Dakilawas a consultant and not their regular employee. The latter was not included
in petitioners' payroll and paid a fixed amount under the consultancy contract. He
was not required to observe regular working hours and was free to adopt means
and methods to accomplish his task except as to the results of the work required of
him. Hence, no employer-employee relationship existed between them. Moreover,
respondentDakila terminated his contract in a letter dated April 19, 2007, thus,
negating his dismissal.
Ruling of the Labor Arbiter
On May 28, 2008, Labor Arbiter Thomas T. Que, Jr. rendered a Decision9 finding
respondent Dakila to have been illegally dismissed and ordered his reinstatement
with full backwages computed from the time of his dismissal on May 1, 2007 until
his actual reinstatement as well as the payment of his unpaid benefits under the
Collective Bargaining Agreement (CBA). He declared respondent Dakila to be a
regular employee on the basis of the unrebutted documentary evidence showing
that he was under the petitioners' direct control and supervision and performed
tasks that were either incidental or usually desirable and necessary in the trade or
business of petitioner corporation for a period of ten years. Having been dismissed
without cause and notice, respondent Dakila was awarded moral and exemplary
damages in the amount of ₱ 50,000.00 each. He is also entitled to avail of
thecorporation's retirement benefits upon his reinstatement.
Ruling of the NLRC
On appeal, the NLRC sustained the Labor Arbiter's (LA) finding that respondent
Dakila was a regular employee and that his dismissal was illegal. However, it noted
that since he was already beyond the retirement age, his reinstatement was no
longer feasible. As such, it ordered the payment of his retirement pay to be
computed from 1997 until the date of the decision. Moreover, it found respondent
Dakila entitled to reinstatement wages from the time petitioners received a copy of
the LA’s Decision on July 7, 2008 up to the date of the NLRC's decision. Thus, it
ordered the petitioners to pay respondent Dakila the additional amount of ₱
278,508.33representing reinstatement wages and retirement pay.10
The petitioners' motion for reconsideration having been denied in the
Resolution11 dated December 15, 2009, they filed a petition for certiorari12 before
the CA raising the following errors:
(1) the complaint should have been dismissed against petitioner Jennifer
M. Eñano-Bote absent any showing of bad faith;
(2) respondent Dakila is not a regular employee;
(3) respondent was not illegally dismissed as it was the respondent who
resigned; and
(4) theLA’s monetary award has no basis.
Ruling of the CA
In the Resolution13 dated August 31, 2011, the CA dismissed the petition for failure
to show that the NLRC committed grave abuse of discretion in affirming the LA's
Decision. It found the factual findings of the LA and the NLRC to be supported by
substantial evidence and thus, should be accorded respect and finality. Petitioners'
motion for reconsideration therefrom was likewise denied in the Resolution14 dated
November 23, 2011.
Hence, the instant petition reiterating the arguments raised before the CA.
Ruling of the Court
The issue of illegal dismissal is premised on the existence of an employer-employee
relationship between the parties herein. It is essentially a question of fact, beyond
the ambit of a petition for review on certiorari under Rule 45 of the Rules of Court
unless there is a clear showing of palpable error or arbitrary disregard of evidence
which does not obtain in this case. Records reveal that both the LA and the NLRC, as
affirmed by the CA, have found substantial evidence to show that respondent Dakila
was a regular employee who was dismissed without cause.
Following Article 279 of the Labor Code, an employee who is unjustly dismissed from
work is entitled to reinstatement without loss of seniority rights and other privileges
and to his full backwages computed from the time he was illegally dismissed.
However, considering that respondent Dakila was terminated on May 1, 2007, or
one (1) day prior to his compulsory retirement on May 2, 2007, his reinstatement is
no longer feasible. Accordingly, the NLRC correctly held him entitled to the payment
of his retirement benefits pursuant to the CBA. On the other hand, his backwages
should be computed only for days prior to his compulsory retirement which in this
case is only a day. Consequently, the award of reinstatement wages pending appeal
must be deleted for lack of basis.
Similarly, the Court finds no basis to hold petitioner Jennifer M. Eñano-Bote,
President and General Manager of The New Philippine Skylanders, Inc., jointly and
severally liable with the corporation for the payment of the monetary awards. The
mere lack of authorized or just cause to terminate one's employment and the failure
to observe due process do not ipso facto mean that the corporate officer acted with
malice or bad faith.15 There must be independent proof of malice or bad faith which
was not established in this case. Perforce, petitioner Jennifer M. Eñano-Bote cannot
be made personally liable for the liabilities of the corporation which, by legal fiction,
has a personality separate and distinct from its officers, stockholders and members.
Moreover, for lack of factual and legal bases, the awards of moral and exemplary
damages cannot also be sustained.16 1âwphi1
WHEREFORE, premises considered, the petition is PARTLY GRANTED. The assailed
August 31, 2011 and November 23, 2011 Resolutions of the Court of Appeals in CA-
G.R. SP No. 113015 are MODIFIED as follows:
(1) petitioner Jennifer M. Eñano-Bote is ABSOLVED from liability for
payment of respondent Francisco N. Dakila's monetary awards;
(2) the awards of reinstatement wages pending appeal as well as the
moral and exemplary damages are ordered DELETED; and
(3) the computation of backwages should be limited only for a day prior to
his compulsory retirement.
The rest of the decision stands.
SO ORDERED.
 March 12, 2014 Aggrieved, petitioners filed a complaint for constructive dismissal, non-payment of
wages, incentive pay, 13th month pay and damages against Bandag with the
G.R. No. 171482 National Labor Relations Commission (NLRC). Petitioners contend that,
notwithstanding the execution of the SFAs, they remained to be Bandag’s
employees, the SFAs being but a circumvention of their status as regular employees.
ASHMOR M. TESORO, PEDRO ANG and GREGORIO SHARP, Petitioners,
vs.
METRO MANILA RETREADERS, INC. (BANDAG) and/or NORTHERN LUZON For its part, Bandag pointed out that petitioners freely resigned from their
RETREADERS, INC. (BANDAG) and/or POWER TIRE AND RUBBER CORP. employment and decided to avail themselves of the opportunity to be independent
(BANDAG), Respondent. entrepreneurs under the franchise scheme that Bandag had. Thus, no employer-
employee relationship existed between petitioners and Bandag.
DECISION
On March 14, 2003 the Labor Arbiter rendered a Decision, dismissing the complaint
on the ground that no employer-employee relationship existed between Bandag and
ABAD, J.:
petitioners. Upon petitioners’ appeal to the NLRC the latter affirmed on June 30,
2003 the Labor Arbiter’s Decision. It also denied petitioners’ motion for
This case concerns the effect on the status of employment of employees who reconsideration. Undaunted, petitioners filed a petition for certiorari under Rule 65
entered into a Service Franchise Agreement with their employer. with the Court of Appeals (CA) ascribing grave abuse of discretion. On July 29, 2005
the CA rendered a Decision,1 dismissing the petition for lack of merit. It also denied
The Facts and the Case their motion for reconsideration on February 7, 2006.

On various dates between 1991 and 1998, petitioners Ashmor M. Tesoro, Pedro Issue of the Case
Ang, and Gregorio Sharp used to work as salesmen for respondents Metro Manila
Retreaders, Inc., Northern Luzon Retreaders, Inc., or Power Tire and Rubber The only issue presented in this case is whether or not petitioners remained to be
Corporation, apparently sister companies, collectively called "Bandag." Bandag Bandag’s salesmen under the franchise scheme it entered into with them.
offered repair and retread services for used tires. In 1998, however, Bandag
developed a franchising scheme that would enable others to operate tire and
Ruling of the Court
retreading businesses using its trade name and service system.

Franchising is a business method of expansion that allows an individual or group of

Petitioners quit their jobs as salesmen and entered into separate Service Franchise
individuals to market a product or a service and to use of the patent, trademark,
Agreements (SFAs) with Bandag for the operation of their respective franchises.
trade name and the systems prescribed by the owner.2 In this case, Bandag’s SFAs
Under the SFAs, Bandag would provide funding support to the petitioners subject to
created on their faces an arrangement that gave petitioners the privilege to operate
a regular or periodic liquidation of their revolving funds. The expenses out of these
and maintain Bandag branches in the way of franchises, providing tire repair and
funds would be deducted from petitioners’ sales to determine their incomes.
retreading services, with petitioners earning profits based on the performance of
their branches.
At first, petitioners managed and operated their respective franchises without any
problem. After a length of time, however, they began to default on their obligations
The question is: did petitioners remain to be Bandag’s employees after they began
to submit periodic liquidations of their operational expenses in relation to the
operating those branches? The tests for determining employer- employee
revolving funds Bandag provided them. Consequently, Bandag terminated their
relationship are: (a) the selection and engagement of the employee; (b) the
respective SFA.
payment of wages; (c) the power of dismissal; and (d) the employer’s power to
control the employee with respect to the means and methods by which the work is
to be accomplished. The last is called the "control test," the most important
element.3
When petitioners agreed to operate Bandag’s franchise branches in different parts
of the country, they knew that this substantially changed their former relationships.
They were to cease working as Bandag’s salesmen, the positions they occupied
before they ventured into running separate Bandag branches. They were to cease
receiving salaries or commissions. Their incomes were to depend on the profits they
made. Yet, petitioners did not then complain of constructive dismissal. They took
their chances, ran their branches, Gregorio Sharp in La Union for several months and
Ashmor Tesoro in Baguio and Pedro Ang in Pangasinan for over a year. Clearly, their
belated claim of constructive dismissal is quite hollow.
It is pointed out that Bandag continued, like an employer, to exercise control over
petitioners’ work. It points out that Bandag: (a) retained the right to adjust the price
rates of products and services; (b) imposed minimum processed tire requirement
(MPR); (c) reviewed and regulated credit applications; and (d) retained the power to
suspend petitioners’ services for failure to meet service standards.
But uniformity in prices, quality of services, and good business practices are the
essence of all franchises. A franchisee will damage the franchisor’s business if he
sells at different prices, renders different or inferior services, or engages in bad
business practices. These business constraints are needed to maintain collective
responsibility for faultless and reliable service to the same class of customers for the
same prices.
This is not the "control" contemplated in employer-employee relationships. Control
in such relationships addresses the details of day to day work like assigning the
particular task that has to be done, monitoring the way tasks are done and their
results, and determining the time during which the employee must report for work
or accomplish his assigned task.
Franchising involves the use of an established business expertise, trademark,
knowledge, and training. As such, the franchisee is required to follow a certain
established system. Accordingly, the franchisors may impose guidelines that
somehow restrict the petitioners’ conduct which do not necessarily indicate
"control." The important factor to consider is still the element of control over how
the work itself is done, not just its end result.4
The Court held, in Tongko v. The Manufacturers Life Insurance Co. (Phils.),
Inc.,5 that, results-wise, the insurance company, as principal, can impose production
quotas upon its independent agents and determine how many individual agents,
with specific territories, such independent agents ought to employ to achieve the
company’s objectives. These are management policy decisions that the labor law
element of control cannot reach. Petitioners’ commitment to abide by Bandag’s
policy decisions and implementing rules, as franchisees does not make them its
employees.
Petitioners cannot use the revolving funds feature of the SFAs as evidence of their
employer-employee relationship with Bandag.1âwphi1 These funds do not
represent wages. They are more in the nature of capital advances for operations
that Bandag conceptualized to attract prospective franchisees. Petitioners’ incomes
depended on the profits they make, controlled by their individual abilities to
increase sales and reduce operating costs.
The Labor Arbiter, the NLRC, and the CA, are unanimous that petitioners were no
longer "route salesmen, bringing previously ordered supplies and goods to dealers,
taking back returned items, collecting payments, remitting them, etc. They were
themselves then the dealers, getting their own supply and bringing these to their
own customers and sub- dealers, if any."
The rule in labor cases is that the findings of fact of quasi-judicial bodies, like the
NLRC, are to be accorded with respect, even finality, if supported by substantial
evidence. This is particularly true when passed upon and upheld by the CA.6
WHEREFORE, the i:-'stant petition is DENIED. The Decision dated July 29, 2005 and
Resolution dated February 7, 2006 of the Court of Appeals in CA-G.R. SP 82447 are
AFFIRMED.
SO ORDERED.
G.R. No. 195190 July 28, 2014
ROYALE HOMES MARKETING CORPORATION, Petitioner,
vs.
FIDEL P. ALCANTARA [deceased], substituted by his heirs, Respondent.
DECISION
DEL CASTILLO, J.:
Not every form of control that a hiring party imposes on the hired party is indicative
of employee-employer relationship. Rules and regulations that merely serve as
guidelines towards the achievement of a mutually desired result without dictating
the means and methods of accomplishing it do not establish employer-employee
relationship.1
This Petition for Review on Certiorari2 assails the June 23, 2010 Decision3 of the
Court of Appeals (CA) in CA-G.R. SP No. 109998 which (i) reversed and set aside the
February 23, 2009 Decision4 of the National Labor Relations Commission (NLRC), (ii)
ordered petitioner Royale Homes Marketing Corporation (Royale Homes) to pay
respondent Fidel P. Alcantara (Alcantara) backwages and separation pay, and (iii)
remanded the case to the Labor Arbiter for the proper determination and
computation of said monetary awards.
Also assailed in this Petition isthe January 18, 2011 Resolution5 of the CA denying
Royale Homes’ Motion for Reconsideration,6 as well as its Supplemental7 thereto.
Factual Antecedents
In 1994, Royale Homes, a corporation engaged in marketing real estates, appointed
Alcantara asits Marketing Director for a fixed period of one year. His work consisted
mainly of marketing Royale Homes’ realestate inventories on an exclusive basis.
Royale Homes reappointed him for several consecutive years, the last of which
covered the period January 1 to December 31, 2003 where he held the position of
Division 5 Vice-President-Sales.8
Proceedings before the Labor Arbiter
On December 17, 2003, Alcantara filed a Complaint for Illegal Dismissal9 against
Royale Homes and its President Matilde Robles, Executive Vice-President for
Administration and Finance Ma. Melinda Bernardino, and Executive Vice- President
for Sales Carmina Sotto. Alcantara alleged that he is a regular employee of Royale
Homes since he is performing tasks that are necessary and desirable to its business;
that in 2003 the company gave him ₱1.2 million for the services he rendered to it;
that in the first week of November 2003, however, the executive officers of Royale
Homes told him that they were wondering why he still had the gall to come to office
and sit at his table;10 and that the actsof the executive officers of Royale Homes
amounted to his dismissal from work without any valid or just cause and in gross
disregard of the proper procedure for dismissing employees. Thus, he alsoimpleaded
the corporate officers who, he averred, effected his dismissal in bad faith and in an
oppressive manner.
Alcantara prayed to be reinstated tohis former position without loss of seniority
rights and other privileges, as well as to be paid backwages, moral and exemplary
damages, and attorney’s fees. He further sought that the ownership of the
Mitsubishi Adventure with Plate No. WHD-945 be transferred to his name.
Royale Homes, on the other hand, vehemently denied that Alcantara is its
employee. It argued that the appointment paper of Alcantara isclear that it engaged
his services as an independent sales contractorfor a fixed term of one year only. He
never received any salary, 13th month pay, overtime pay or holiday pay from Royale
Homes as hewas paid purely on commission basis. In addition, Royale Homes had no
control on how Alcantara would accomplish his tasks and responsibilities as he was
free to solicit sales at any time and by any manner which he may deem
appropriateand necessary. He is even free to recruit his own sales personnel to
assist him in pursuance of his sales target.
According to Royale Homes, Alcantara decided to leave the company after his wife,
who was once connectedwith it as a sales agent, had formed a brokerage company
that directly competed with its business, and even recruited some of its sales agents.
Although this was against the exclusivity clause of the contract, Royale Homes still
offered to accept Alcantara’s wife back so she could continue to engage in real
estate brokerage, albeit exclusively for Royale Homes. In a special management
committee meeting on October 8,2003, however, Alcantara announced publicly and
openly that he would leave the company by the end of October 2003 and that he
would no longer finish the unexpired term of his contract. He has decided to join his
wifeand pursue their own brokerage business. Royale Homes accepted Alcantara’s
decision. It then threw a despedidaparty in his honor and, subsequently, appointed a
new independent contractor. Two months after herelinquished his post, however,
Alcantara appeared in Royale Homes and submitted a letter claiming that he was
illegally dismissed.
Ruling of the Labor Arbiter
On September 7, 2005,the Labor Arbiter rendered a Decision11 holding that
Alcantara is an employee of Royale Homes with a fixed-term employment period
from January 1 to December 31, 2003 and that the pre-termination of his contract
was against the law.Hence, Alcantara is entitled to an amount which he may have
earned on the average for the unexpired portion of the contract. With regard to the
impleaded corporate officers, the Labor Arbiter absolved them from any liability.
The dispositive portion of the Labor Arbiter’s Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering the
respondent Royale Homes Marketing Corp. to pay the complainant the total amount
of TWO HUNDRED SEVENTY SEVEN THOUSAND PESOS (₱277,000.00) representing
his compensation/commission for the unexpired term of his contract.
All other claims are dismissed for lack of merit.
SO ORDERED.12
Both parties appealed the Labor Arbiter’s Decision to the NLRC. Royale Homes
claimed that the Labor Arbiter grievously erred inruling that there exists an
employer-employee relationship between the parties. It insisted that the contract
between them expressly statesthat Alcantara is an independent contractor and not
an ordinary employee. Ithad no control over the means and methods by which he
performed his work. RoyaleHomes likewise assailed the award of ₱277,000.00 for
lack of basis as it did not pre-terminate the contract. It was Alcantara who chose not
to finish the contract.
Alcantara, for his part, argued that the Labor Arbiter erred in ruling that his
employment was for a fixed-term and that he is not entitled to backwages,
reinstatement, unpaid commissions, and damages.
Ruling of the National LaborRelations Commission
On February 23, 2009, the NLRC rendered its Decision,13 ruling that Alcantara is not
an employee but a mere independent contractor of Royale Homes. It based its ruling
mainly on the contract which does not require Alcantara to observe regular working
hours. He was also free to adopt the selling methods he deemed most effective and
can even recruit sales agents to assist him in marketing the inventories of Royale
Homes. The NLRC also considered the fact that Alcantara was not receiving monthly
salary, but was being paid on commission basis as stipulated in the contract. Being
an independent contractor, the NLRC concluded that Alcantara’s Complaint
iscognizable by the regular courts.
The falloof the NLRC Decision reads:
WHEREFORE, premises considered, the Decision of Labor Arbiter Dolores Peralta-
Beley dated September 5, 2005 is REVERSED and SET ASIDE and a NEW ONE
rendered dismissing the complaint for lack of jurisdiction.
SO ORDERED.14
Alcantara moved for reconsideration.15 In a Resolution16 dated May 29, 2009,
however, the NLRC denied his motion.
Alcantara thus filed a Petition for Certiorari17 with the CA imputing grave abuse of
discretion on the partof the NLRC in ruling that he is not an employee of Royale
Homes and that it is the regular courts which have jurisdiction over the issue of
whether the pre-termination of the contract is valid.
Ruling of the Court of Appeals
On June 23, 2010, the CA promulgated its Decision18 granting Alcantara’s Petition
and reversing the NLRC’s Decision. Applying the four-fold and economic reality tests,
it held thatAlcantara is an employee of Royale Homes. Royale Homes exercised
some degree of control over Alcantara since his job, as observed by the CA, is
subject to company rules, regulations, and periodic evaluations. He was also bound
by the company code of ethics. Moreover, the exclusivity clause of the contract has
made Alcantara economically dependent on Royale Homes, supporting the theory
that he is anemployee of said company.
The CA further held that Alcantara’s termination from employment was without any
valid or just cause, and it was carried out in violation of his right to procedural due
process. Thus, the CA ruled that he isentitled to backwages and separation pay, in
lieu of reinstatement. Considering,however, that the CA was not satisfied with the
proofadduced to establish the amount of Alcantara’s annual salary, it remanded the
caseto the Labor Arbiter to determine the same and the monetary award he is
entitled to. With regard to the corporate officers, the CA absolved them from any
liability for want of clear proof that they assented to the patently unlawful acts or
that they are guilty of bad faith orgross negligence. Thus:
WHEREFORE, in view of the foregoing, the instant PETITION is GRANTED. The
assailed decision of the National Labor Relations Commission in NLRC NCR CASE NO.
00-12-14311-03 NLRC CA NO. 046104-05 dated February 23, 2009 as well as the
Resolution dated May 29, 2009 are hereby SET ASIDE and a new one is entered
ordering the respondent company to pay petitioner backwages which shall be
computed from the time of his illegal termination in October 2003 up to the finality
of this decision, plus separation pay equivalent to one month salary for every year of
service. This case is REMANDED to the Labor Arbiter for the proper determination
and computation of back wages, separation pay and other monetary benefits that
petitioner is entitled to.
SO ORDERED.19
Royale Homes filed a Motion for Reconsideration20 and a Supplemental Motion for
Reconsideration.21 In a Resolution22 dated January 18, 2011, however, the CA denied
said motions.
Issues
Hence, this Petition where Royale Homes submits before this Court the following
issues for resolution:
A.
WHETHER THE COURT OF APPEALS HAS DECIDED THE INSTANT CASE NOT
IN ACCORD WITH LAW AND APPLICABLE DECISIONS OF THE SUPREME
COURT WHEN IT REVERSED THE RULING OF THE NLRC DISMISSING THE
COMPLAINT OF RESPONDENT FOR LACK OF JURISDICTION AND
CONSEQUENTLY, IN FINDING THAT RESPONDENT WAS ILLEGALLY
DISMISSED[.]
B.
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF
LAW IN DISREGARDING THE EN BANCRULING OF THIS HONORABLE COURT
IN THE CASEOF TONGKO VS. MANULIFE, AND IN BRUSHING ASIDE THE
APPLICABLE RULINGS OF SONZA VS. ABS CBN AND CONSULTA V. CA[.]
C.
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF
LAW IN DENYING THE MOTION FOR RECONSIDERATION OF PETITIONER
AND IN REFUSING TO CORRECT ITSELF[.]23
Royale Homes contends that its contract with Alcantara is clear and unambiguous −it
engaged his services as an independent contractor. This can be readily seen from
the contract stating that no employer-employee relationship exists between the
parties; that Alcantara was free to solicit sales at any time and by any manner he
may deem appropriate; that he may recruit sales personnel to assist him in
marketing Royale Homes’ inventories; and, thathis remunerations are dependent on
his sales performance.
Royale Homes likewise argues that the CA grievously erred in ruling that it exercised
control over Alcantara based on a shallow ground that his performance is subject to
company rules and regulations, code of ethics, periodic evaluation, and exclusivity
clause of contract. RoyaleHomes maintains that it is expected to exercise some
degree of control over its independent contractors,but that does not automatically
result in the existence ofemployer-employee relationship. For control to be
consideredas a proof tending to establish employer-employee relationship, the
same mustpertain to the means and method of performing the work; not on the
relationship of the independent contractors among themselves or their persons or
their source of living.
Royale Homes further asserts that it neither hired nor wielded the power to dismiss
Alcantara. It was Alcantara who openly and publicly declared that he was pre-
terminating his fixed-term contract.
The pivotal issue to be resolved in this case is whether Alcantara was an
independent contractor or anemployee of Royale Homes.
Our Ruling
The Petition is impressed with merit.
The determination of whether a party who renders services to another is an
employee or an independent contractor involves an evaluation of factual matters
which, ordinarily, is not within the province of this Court. In view of the conflicting
findings of the tribunals below, however, this Court is constrained to go over the
factual matters involved in this case.24
The juridical relationship of the parties based on their written contract
The primary evidence of the nature of the parties’ relationship in this case is the
written contract that they signed and executed in pursuanceof their mutual
agreement. While the existence of employer-employee relationship is a matter of
law, the characterization made by the parties in their contract as to the nature of
their juridical relationship cannot be simply ignored, particularly in this case where
the parties’ written contractunequivocally states their intention at the time they
entered into it. In Tongko v. The Manufacturers LifeInsurance Co. (Phils.), Inc.,25 it
was held that:
To be sure, the Agreement’s legal characterization of the nature of the relationship
cannot be conclusive and binding on the courts; x x x 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
embodiestheir 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.26
In this case, thecontract,27
duly signed and not disputed by the parties,
conspicuously provides that "no employer-employee relationship exists between"
Royale Homes and Alcantara, as well as his sales agents. It is clear that they did not
want to be bound by employer-employee relationship atthe time ofthe signing of
the contract. Thus:
January 24, 2003
MR. FIDEL P. ALCANTARA
13 Rancho I
Marikina City
Dear Mr. Alcantara,
This will confirm yourappointment as Division 5 VICE[-]PRESIDENTSALES of ROYALE
HOMES MARKETING CORPORATION effective January 1, 2003 to December 31,
2003.
Your appointment entails marketing our real estate inventories on an EXCLUSIVE
BASIS under such price, terms and condition to be provided to you from time to
time.
As such, you can solicit sales at any time and by any manner which you deem
appropriate and necessary to market our real estate inventories subject to rules,
regulations and code of ethics promulgated by the company. Further, you are free
to recruit sales personnel/agents to assist you in marketing of our inventories
provided that your personnel/agents shall first attend the required seminars and
briefing to be conducted by us from time to time for the purpose of familiarizing
them of terms and conditionsof sale, the natureof property sold, etc., attendance of
which shall be a condition precedent for their accreditation by us.
That as such Division 5 VICE[-]PRESIDENT-SALES you shall be entitled to:
1. Commission override of 0.5% for all option sales beginning January 1,
2003 booked by your sales agents.
2. Budget allocation depending on your division’s sale performance as per
our budget guidelines.
3. Sales incentive and other forms of company support which may be
granted from time to time. It is understood, however, that no employer-
employee relationship exists between us, that of your sales
personnel/agents, and that you shall hold our company x x x, its officers
and directors, free and harmless from any and all claims of liability and
damages arising from and/or incident to the marketing of our real estate
inventories.
We reserve, however, our right to terminate this agreement in case of violation of
any company rules and regulations, policies and code of ethics upon notice for
justifiable reason.
Your performance shall be subject toperiodic evaluation based on factors which
shall be determined by the management.
If you are amenable to the foregoing terms and conditions, please indicate your
conformity by signing on the space provided below and return [to] us a duplicate
copy of this letter, duly accomplished, to constitute as our agreement on the
matter.(Emphasis ours)
Since "the terms of the contract are clear and leave no doubt upon the intention of
the contracting parties, the literal meaning of itsstipulations should control."28 No
construction is even needed asthey already expressly state their intention. Also, this
Court adopts the observation of the NLRC that it is rather strange on the part of
Alcantara, an educated man and a veteran sales broker who claimed to be receiving
₱1.2 million as his annual salary, not to have contested the portion of the contract
expressly indicating that he is not an employee of Royale Homes if their true
intention were otherwise.
The juridical relationship of the parties based on Control Test
In determining the existence of an employer-employee relationship, this Court has
generally relied on the four-fold test, to wit: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
employer’s power to control the employee with respect to the means and methods
by which the work is to be accomplished.29 Among the four, the most determinative
factor in ascertaining the existence of employeremployee relationship is the "right
of control test".30 "It is deemed to be such an important factor that the other
requisites may even be disregarded."31 This holds true where the issues to be
resolved iswhether a person who performs work for another is the latter’s employee
or is an independent contractor,32 as in this case. For where the person for whom
the services are performed reserves the right to control not only the end to
beachieved, but also the means by which such end is reached, employer-employee
relationship is deemed to exist.33
In concluding that Alcantara is an employee of RoyaleHomes, the CA ratiocinated
that since the performance of his tasks is subject to company rules, regulations,
code of ethics, and periodic evaluation, the element of control is present.
The Court disagrees.
Not every form of control is indicative of employer-employee
relationship.1âwphi1 A person who performs work for another and is subjected to
its rules, regulations, and code of ethics does not necessarily become an
employee.34 As long as the level of control does not interfere with the means and
methods of accomplishing the assigned tasks, the rules imposed by the hiring party
on the hired party do not amount to the labor law concept of control that is
indicative of employer-employee relationship. In Insular Life Assurance Co., Ltd. v.
National Labor Relations Commission35 it was pronounced 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 employeremployee relationship
unlike the second, which address both the result and the means used to achieve it. x
x x36
In this case, the Court agrees with Royale Homes that the rules, regulations, code of
ethics, and periodic evaluation alluded to byAlcantara do not involve control over
the means and methods by which he was to performhis job. Understandably, Royale
Homes has to fix the price, impose requirements on prospective buyers, and lay
down the terms and conditionsof the sale, including the mode of payment, which
the independent contractors must follow. It is also necessary for Royale Homes to
allocateits inventories among its independent contractors, determine who has
priority in selling the same, grant commission or allowance based on predetermined
criteria, and regularly monitor the result of their marketing and sales efforts. But
tothe mind of this Court, these do not pertain to the means and methods of how
Alcantara was to perform and accomplish his task of soliciting sales. They do not
dictate upon him the details of how he would solicit sales or the manner as to how
he would transact business with prospective clients. In Tongko, this Court held that
guidelines or rules and regulations that do notpertain to the means or methodsto be
employed in attaining the result are not indicative of control as understood inlabor
law. Thus:
From jurisprudence, an important lesson that the first Insular Lifecase teaches us is
that a commitment to abide by the rules and regulations of an insurance company
does not ipso factomake 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 Lifecase 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 beemployed in attaining the result, or of fixing with any other company, for aslong as the business [of the] company did not
the methodology and of binding or restricting the party hired to the use of these compete with Pamana’s business.43
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 The same scenario obtains in this case. Alcantara was not prohibited from engaging
achieve the company’s objectives. These are management policy decisions that the in any other business as long as he does not sell projects of Royale Homes’
labor law element of control cannot reach. Our ruling in these respects in the first competitors. He can engage in selling various other products or engage in unrelated
Insular Lifecase was practically reiterated in Carungcong. Thus, as will be shown businesses.
more fully below, Manulife’s codes of conduct, all of which do not intrude into the
insurance agents’ means and manner of conducting their sales and only control
Payment of Wages
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 existed between Manulife and
Tongko.37(Emphases in the original) The element of payment of wages is also absent in thiscase. As provided in the
contract, Alcantara’s remunerations consist only of commission override of 0.5%,
budget allocation, sales incentive and other forms of company support. There is no
As the party claiming the existence of employer-employee relationship, it behoved
proof that he received fixed monthly salary. No payslip or payroll was ever
upon Alcantara to prove the elements thereof, particularly Royale Homes’ power of
presented and there is no proof that Royale Homes deducted from his supposed
control over the means and methods of accomplishing the work.38 He, however,
salary withholding tax or that it registered him with the Social Security System,
failed to cite specificrules, regulations or codes of ethics that supposedly imposed
Philippine Health Insurance Corporation, or Pag-Ibig Fund. In fact, his Complaint
control on his means and methods of soliciting sales and dealing with prospective
merely states a ballpark figure of his alleged salary of ₱100,000.00, more or less. All
clients. On the other hand, this case is replete with instances that negate the
of these indicate an independent contractual relationship.44 Besides, if Alcantara
element of control and the existence of employer-employee relationship. Notably,
indeed consideredhimself an employee of Royale Homes, then he, an experienced
Alcantara was not required to observe definite working hours.39 Except for soliciting
and professional broker, would have complained that he was being denied
sales, RoyaleHomes did not assign other tasks to him. He had full control over the
statutorily mandated benefits. But for nine consecutive years, he kept mum about it,
means and methods of accomplishing his tasks as he can "solicit sales at any time
signifying that he has agreed, consented, and accepted the fact that he is not
and by any manner which [he may] deem appropriate and necessary." He
entitled tothose employee benefits because he is an independent contractor.
performed his tasks on his own account free from the control and direction of
Royale Homes in all matters connected therewith, except as to the results thereof.40
This Court is, therefore,convinced that Alcantara is not an employee of Royale
Homes, but a mere independent contractor. The NLRC is, therefore, correct in
Neither does the repeated hiring of Alcantara prove the existence of employer-
concluding that the Labor Arbiter has no jurisdiction over the case and that the
employee relationship.41 As discussed above, the absence of control over the means
same is cognizable by the regular courts.
and methodsdisproves employer-employee relationship. The continuous rehiring of
Alcantara simply signifies the renewal of his contract with Royale Homes, and
highlights his satisfactory services warranting the renewal of such contract. Nor does WHEREFORE, the instant Petition is hereby GRANTED. The June 23, 2010 Decision of
the exclusivity clause of contract establish the existence of the labor law concept of the Court of Appeals in CA-G.R. SP No. 109998 is REVERSED and SET ASIDE. The
control. In Consulta v. Court of Appeals,42 it was held that exclusivity of contract February 23, 2009 Decision of the National Labor Relations Commission is
does not necessarily result in employer-employee relationship, viz: REINSTATED and AFFIRMED. SO ORDERED.

x x x However, the fact that the appointment required Consulta to solicit business
exclusively for Pamana did not mean that Pamana exercised control over the means
and methods of Consulta’s work as the term control is understood in labor
jurisprudence. Neither did it make Consulta an employee of Pamana. Pamana did
not prohibit Consulta from engaging in any other business, or from being connected
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 relief or in a sworn certification annexed thereto and simultaneously filed therewith:
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
(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.
(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;
....

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.
(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

Fuji filed a comment on Arlene’s manifestation, stating that Corazon was properly
5. Such other matters as may aid in the prompt disposition of
authorized to sign. On the basis of the secretary’s certificate, Shuji Yano was
the action.99 (Emphasis in the original; Italics omitted)
empowered to delegate his authority.

Shuji Yano executed a special power of attorney appointing Ms. Ma. Corazon E.
Quoting the board resolution dated May 13, 2010, the secretary's certificate states:
Acerden and Mr. Moises A. Rollera as his attorneys-in-fact.100 The special power of
attorney states:
(a) The Corporation shall file a Petition for Certiorari with the Court of
Appeals, against Philippines’ National Labor Relations Commission
That I, SHUJI YANO, of legal age, Japanese national, with office address at 2-4-8
("NLRC") and Arlene S. Espiritu, pertaining to NLRC-NCR Case No. LAC 00-
Daiba, Minato-Ku, Tokyo, 137-8088 Japan, and being the representative of Fuji TV,
002697-09, RAB No. 05-06811-00 and entitled "Arlene S. Espiritu v. Fuji
INc., [sic] (evidenced by the attached Secretary’s Certificate) one of the respondents
Television Network, Inc./Yoshiki Aoki", and participate in any other
in NLRC-NCR Case No. 05-06811-00 entitled "Arlene S. Espiritu v. Fuji Television
subsequent proceeding that may necessarily arise therefrom, including
Network, Inc./Yoshiki Aoki", and subsequently docketed before the Court of Appeals
but not limited to the filing of appeals in the appropriate venue;
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 contracting and subcontracting arrangements among the principal, contractor,
and employees of the contractor. There is no employer-employee relationship
between the contractor and principal who engages the contractor’s services, but
there is an employer-employee relationship between the contractor and workers
hired to accomplish the work for the principal.162
Jurisprudence has recognized another kind of independent contractor: individuals
with 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 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 "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 worked at her own pleasure.165
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 the direction and control of respondents"169 and that the masiador and
sentenciador "relied mainly on their ‘expertise that is characteristic of the cockfight
gambling.’"170 Hence, no employer-employee relationship existed.
Bernarte v. Philippine Basketball Association171 involved a basketball referee. This
court ruled that "a referee is an independent contractor, whose special skills and
independent judgment are required specifically for such position and cannot
possibly be controlled by the hiring party."172
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 performance of their work.
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 ordinary employees.
Since no employer-employee relationship exists between independent contractors
and their principals, their contracts are governed by the Civil Code provisions on
contracts and other applicable laws.173
A contract is defined as "a meeting of minds between two persons whereby one
binds himself, with respect to the other, to give something or to render some
service."174 Parties are free to stipulate on terms and conditions in contracts as long
as these "are not contrary to law, morals, good customs, public order, or public
policy."175 This presupposes that the parties to a contract are on equal footing.
Theycan bargain on terms and conditions until they are able to reach an agreement.
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 1987 Constitution provides full protection to labor:
ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS
....
LABOR
Section 3. The State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and equality of
employment opportunities for all.
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.
The State shall promote the principle of shared responsibility between workers and
employers and the preferential use of voluntary modes in settling disputes, including
conciliation, and shall enforce their mutual compliance therewith to foster industrial
peace.
The State shall regulate the relations between workers and employers, recognizing
the 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.
Apart from the constitutional guarantee of protection to labor, Article 1700 of the
Civil Code states:
ART. 1700. The relations between capital and labor are not merely contractual. They
are so impressed with public interest that labor contracts must yield to the common
good. 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 and similar subjects.
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 of termination," or that the fixed-term contract be freely entered into by the
camera discounts the idea of job contracting.221 employer and the employee, then the validity of the fixed-term contract will be
upheld.230
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 V
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 Whether the Court of Appeals correctly affirmed
regular employee and not an independent contractor.223
the National Labor Relations Commission’s finding of illegal dismissal
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
Fuji argues that the Court of Appeals erred when it held that Arlene was illegally
"[t]his repeated engagement under contract of hire is indicative of the necessity and
dismissed, in view of the non-renewal contract voluntarily executed by the parties.
desirability of the petitioner’s work in private respondent ABC’s business."225
Fuji also argues that Arlene’s contract merely expired; hence, she was not illegally
dismissed.231
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
Arlene alleges that she had no choice but to sign the non-renewal contract because
employee’s contract "had been continuously extended or renewed to the same
Fuji withheldher salary and benefits.
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 With regard to this issue, the Court of Appeals held:
favor of Arlene.
We cannot subscribe to Fuji’s assertion that Espiritu’s contract merely expired and
As stated in Price, et al. v. Innodata Corp., et al.:228 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
The employment status of a person is defined and prescribed by law and not by
merely as a subterfuge to secure Fuji’s position that it was Espiritu’s choice not to
what the parties say it should be. Equally important to consider is that a contract of
renew her contract.232
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 As a regular employee, Arlene was entitled to security of tenure and could be
relationships from the impact of labor laws and regulations by simply contracting dismissed only for just or authorized causes and after the observance of due
with each other.229 (Citations omitted) process.

Arlene’s contract indicating a fixed term did not automatically mean that she could The right to security of tenureis guaranteed under Article XIII, Section 3 of the 1987
never be a regular employee. This is precisely what Article 280 seeks to avoid. The Constitution: ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS
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- LABOR
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 ....
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 the following:
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:
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.

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.1awp++i1 I knew this will come but I never thought that you will be so
‘heartless’ and 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
 G.R. No. 176908, March 25, 2015
PURISIMO M. CABAOBAS, EXUPERIO C. MOLINA, GILBERTO V. OPINION, VICENTE R.
LAURON, RAMON M. DE PAZ, JR., ZACARIAS E. CARBO, JULITO G. ABARRACOSO,
DOMINGO B. GLORIA, AND FRANCISCO P. CUMPIO, Petitioners, v. PEPSI-COLA
PRODUCTS, PHILIPPINES, INC., Respondents.
DECISION
PERALTA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court,
assailing the Court of Appeals (CA) Decision1 dated July 31, 2006, and its
Resolution2 dated February 21, 2007 in CA-G.R. S.P. No. 81712. The assailed decision
denied the petition for certiorari filed by petitioners Purisimo M. Cabaobas, Exuperio
C. Molina, Gilberto V. Opinion, Vicente R. Lauron, Ramon M. De Paz, Jr., Zacarias E.
Carbo, Julito G. Abarracoso, Domingo B. Gloria and Francisco P. Cumpio, seeking a
partial nullification of the Decision3 dated September 11, 2002 of the National Labor
Relations Commission (NLRC) in NLRC Certified Case No. V-000001-2000.4 The NLRC
dismissed petitioners' complaints for illegal dismissal and declared the retrenchment
program of respondent Pepsi-Cola Products Philippines, Inc. as a valid exercise of
management prerogative.
The facts follow.
Respondent Pepsi-Cola Products Philippines, Inc. (PCPPI) is a domestic corporation
engaged in the manufacturing, bottling and distribution of soft drink products, which
operates plants all over the country, one of which is the Tanauan Plant in Tanauan,
Leyte.
In 1999, PCPPI�s Tanauan Plant allegedly incurred business losses in the total
amount of Twenty-Nine Million One Hundred Sixty-Seven Thousand and Three
Hundred Ninety (P29,167,390.00) Pesos. To avert further losses, PCPPI implemented
a company-wide retrenchment program denominated as Corporate-wide Rightsizing
Program (CRP) from 1999 to 2000, and retrenched forty-seven (47) employees of its
Tanauan Plant on July 31, 1999.
On September 24, 1999, twenty-seven (27) of said employees,5 led by Anecito
Molon (Molon, et al.), filed complaints for illegal dismissal before the NLRC which
were docketed as NLRC RAB Cases Nos. VIII-9-0432-99 to 9-0458-99, entitled
�Molon, et al. v. Pepsi-Cola Products, Philippines, Inc.�
On January 15, 2000, petitioners, who are permanent and regular employees of the
Tanauan Plant, received their respective letters, informing them of the cessation of
their employment on February 15, 2000, pursuant to PCPPI's CRP. Petitioners then
filed their respective complaints for illegal dismissal before the National Labor
Relations Commission Regional Arbitration Branch No. VIII in Tacloban City. Said
complaints were docketed as NLRC RAB VIII-03-0246-00 to 03-0259-00, entitled
�Kempis, et al. v. Pepsi-Cola Products, Philippines, Inc.�
In their Consolidated Position Paper,6 petitioners alleged that PCPPI was not facing
serious financial losses because after their termination, it regularized four (4)
employees and hired replacements for the forty-seven (47) previously dismissed
employees. They also alleged that PCPPI's CRP was just designed to prevent their
union, Leyte Pepsi-Cola Employees Union-Associated Labor Union (LEPCEU-ALU),
from becoming the certified bargaining agent of PCPPI's rank-and-file employees.
In its Position Paper,7 PCPPI countered that petitioners were dismissed pursuant to
its CRP to save the company from total bankruptcy and collapse; thus, it sent notices
of termination to them and to the Department of Labor and Employment. In support
of its argument that its CRP is a valid exercise of management prerogative, PCPPI
submitted audited financial statements showing that it suffered financial reverses in
1998 in the total amount of SEVEN HUNDRED MILLION (P700,000,000.00) PESOS,
TWENTY- SEVEN MILLION (P27,000,000.00) PESOS of which was allegedly incurred in
the Tanauan Plant in 1999.
On December 15, 2000, Labor Arbiter Vito C. Bose rendered a Decision8 finding the
dismissal of petitioners as illegal, the dispositive portion of which
reads:chanRoblesvirtualLawlibrary
WHEREFORE, premises duly considered, judgment is hereby rendered finding the
dismissal of the ten (10) complainants herein illegal. Consequently, respondent
Pepsi-Cola Products Phils., Inc. (PCPPI) is ordered to reinstate them to their former
positions without loss of seniority rights and to pay them full backwages and other
benefits reckoned from February 16, 2000 until they are actually reinstated, which
as of date amounted to NINE HUNDRED FORTY-SEVEN THOUSAND FIVE HUNDRED
FIFTY-EIGHT PESOS AND THIRTY-TWO CENTAVOS (P947,558.32) inclusive of the 10%
attorney's fees.
Other claims are dismissed for lack of merit.
SO ORDERED.9cralawred
cralawlawlibrary
 pursuant to its CRP, a valid exercise of management prerogatives; Further, ORDERING
PCPPI appealed from the Decision of the Labor Arbiter to the Fourth Division of the Pepsi Cola Products Philippines, Inc. to pay the following complainants their package
NLRC of Tacloban City. Meanwhile, the NLRC consolidated all other cases involving separation benefits of 1 & �months salary for every year of service, plus
PCPPI and its dismissed employees. commutation of all vacation and sick leave credits in the respective amounts
hereunder indicated opposite their names:
On September 11, 2002, the NLRC rendered a Consolidated Decision,10 the
dispositive portion of which states:chanRoblesvirtualLawlibrary 1. ARTEMIO S. KEMPIS � P167,486.80�
2. EXUPERIO C. MOLINA � 168,196.38�
WHEREFORE, judgment is hereby rendered: 3. GILBERTO V. OPINION � 31,799.74�
4. PURISIMO M. CABAOBAS � 165,466.09�
(1) DECLARING, in NLRC Certified Case No. V-000001-2000 (NLRC NCR CC No. 5. VICENTE P. LAURON � 167,325.86�
000171-99), Pepsi-Cola Products Philippines, Incorporated, not guilty of union 6. RAMON M. DE PAZ, JR. - 109,652.98�
busting/unfair labor practice, and dismissing LEPCEU-ALU's Notice of Strike dated 7. ZACARIAS E. CARBO � 160,376.47�
July 19, 1999;ChanRoblesVirtualawlibrary 8. JULITO C. ABARRACOSO � 161,366.44�
9. DOMINGO B. GLORIA � 26,119.26�
(2) DECLARING, in the subsumed NLRC Case No. 7-0301-99, LEPCEU-ALU's strike on 10. FRANCISCO P. CUMPIO � 165,204.41�
July 23, 1999 ILLEGAL for having been conducted without legal authority and (6) DECLARING, in NLRC Injunction Case No. V-000003-2001, Pepsi-Cola's Petition
without observing the 7-day strike vote notice requirement as provided in Section 2 for Injunction and Application for immediate issuance of Temporary Restraining
and Section 7 of Rule XXII, Book V of the Omnibus Rules Implementing Art. 263 (c) Order, moot and academic, and DISMISSING the same; Further, DECLARING moot
and (f) of the Labor Code, but DENYING PEPSI-COLA's supplemental prayer to and academic all incidents to the case of Kempis, et al. vs. PCPPI (NLRC Case No. V-
declare loss of employment status of union leaders and some of its members as 000071-2000 relating to the execution or implementation of the nullified Decision
identification of officers and members, and the knowing participation of union dated December 15, 2000, and likewise, nullifying them.
officers in the illegal strike, or that of the officers and members in illegal acts during
the strike, have not been established;ChanRoblesVirtualawlibrary All other claims and petitions are dismissed for want of merit.

(3) DISMISSING in the subsumed NLRC Injunction Case No. V-000013-99, LEPCEU-
ALU's Petition for a Writ of Preliminary Injunction with Prayer for the Issuance of
Temporary Restraining Order, because Pepsi Cola had already implemented its
Corporate-wide CRP in the exercise of management prerogative. Moreover, LEPCEU-
ALU had adequate remedy in law;ChanRoblesVirtualawlibrary
(4) DISMISSING, in subsumed case NLRC RAB VIII Cases Nos. 9-0432-99 to 9-0459-99
(Molon, et al. vs. PCPPI) all the complaints for Illegal Dismissal except that of
Saunder Santiago T. Remandaban III, for having been validly and finally settled by
the parties, and ORDERING PEPSI COLA Products Phils., Inc. to reinstate Saunder
Santiago T. Remandaban III to his former position without loss of seniority rights but
without backwages;ChanRoblesVirtualawlibrary
(5) Nullifying, in NLRC Consolidated Case No. V-000071-01 (RAB VIII cases nos. 3-0246-
2000 to 3-0258-2000; Kempis, et al. vs. PCPPI), the Executive Labor Arbiter's Decisions
dated December 15, 2000, and DISMISSING the complaints for illegal dismissal, and in
its stead DECLARING the retrenchment program of Pepsi Cola Products Phils., Inc.
SO ORDERED.11cralawlawlibrary
Petitioners and PCPPI filed their respective motions for reconsideration of the
consolidated decision, which the NLRC denied in a Resolution12 dated September 15,
2003. Dissatisfied, petitioners filed a petition for certiorari with the CA [docketed as
CA-G.R. SP No. 81712 and raffled to the Eighteenth (18th) Division]. On July 31, 2006,
the CA rendered a Decision, denying their petition and affirming the NLRC Decision
dated September 11, 2002, the dispositive portion of which
reads:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, the petition filed in this case is
hereby DENIED and the decision dated September 11, 2002, and the resolution
dated September 15, 2003, promulgated by the National Labor Relations
Commission, Fourth Division in NLRC Certified Case No. V-000001-2000 (NCR CC. No.
000171-99) are hereby AFFIRMED.
SO ORDERED.13cralawlawlibrary
On February 21, 2007, the CA 18th Division issued a Resolution14 denying
petitioners' motion for reconsideration.
In contrast, when Molon, et al. earlier questioned the consolidated decision of the
NLRC via a petition for certiorari [docketed as CA-G.R. SP No. 82354 and raffled to its
Twentieth (20th) Division], the CA rendered on March 31, 2006 a Decision15 granting
their petition and reversing the same NLRC Decision dated September 11, 2002, the
dispositive portion of which states:chanRoblesvirtualLawlibrary
IN LIGHT OF ALL THE FOREGOING, the instant petition is GRANTED. The decision of
the NLRC dated September 11, 2002 is hereby REVERSED and SET ASIDE and
judgment is rendered as follows:
Declaring the strike conducted on July 23, 1999 as legal, it falling under the
exception of Article 263, Labor Code;ChanRoblesVirtualawlibrary
Declaring the manner by which the corporate rightsizing program or retrenchment
was effected by PEPSI-COLA to be contrary to the prescribed rules and
procedure;ChanRoblesVirtualawlibrary
Declaring that petitioners were illegally terminated. Their reinstatement to their
former positions or its equivalent is hereby ordered, without loss of seniority rights
and privileges and PEPSI-COLA is also ordered the payment of their backwages from
the time of their illegal dismissal up to the date of their actual reinstatement. If
reinstatement is not feasible because of strained relations or abolition of their
respective positions, the payment of separation pay equivalent to 1 month salary for
every year of service, a fraction of at least 6 months shall be considered a whole
year. The monetary considerations received by some of the employees shall be
deducted from the total amount they ought to receive from the company.
Attorney's fees equivalent to 10% of the amount which petitioners may recover
pursuant to Article 111 of the Labor Code is also awarded.
No pronouncement as to costs.
SO ORDERED.16cralawlawlibrary
Aggrieved, petitioners come before the Court in this petition for review
on certiorari assailing the CA 18thDivision Decision dated July 31, 2006, and its
Resolution dated February 21, 2007 on these grounds:chanRoblesvirtualLawlibrary
A.
THE HONORABLE COURT OF APPEALS, SPECIAL FORMER EIGHTEENTH DIVISION,
COMMITTED AN ERROR OF LAW WHEN IT IGNORED THE EARLIER DECISION OF THE
TWENTIETH DIVISION ON THE SAME FACTUAL AND LEGAL
ISSUES.chanroblesvirtuallawlibrary
B.
THE HONORABLE COURT OF APPEALS, SPECIAL FORMER EIGHTEENTH DIVISION,
COMMITTED AN ERROR OF LAW WHEN IT REFUSED TO REVERSE THE DECISION OF
THE NATIONAL LABOR RELATIONS COMMISSION, FOURTH DIVISION, DESPITE
PRIVATE RESPONDENT�S FAILURE TO COMPLY WITH THE REQUISITES OF A VALID
RETRENCHMENT.chanroblesvirtuallawlibrary
C.
THE HONORABLE COURT OF APPEALS, SPECIAL FORMER EIGHTEENTH DIVISION,
COMMITTED AN ERROR OF LAW WHEN IT AFFIRMED THE DECISION OF THE
NATIONAL LABOR RELATIONS COMMISSION, FOURTH DIVISION, DECLARING AS
LEGAL THE ILLEGAL DISMISSAL OF PETITIONERS AND DISMISSING THEIR
COMPLAINTS FOR ILLEGAL DISMISSAL.17cralawlawlibrary
The three issues raised by petitioners boil down to the legality of their dismissal
pursuant to PCPPI's retrenchment program.
The petition has no merit.
During the pendency of the petition, the Court rendered a Decision dated February
18, 2013 in the related case of Pepsi-Cola Products Philippines, Inc. v. Molon,18 the
dispositive portion of which reads:chanRoblesvirtualLawlibrary
WHEREFORE, the petition is GRANTED. The assailed March 31, 2006 Decision and
September 18, 2006 Resolution of the Court of Appeals in CA-G.R. SP No. 82354 are
hereby REVERSED and SET ASIDE. Accordingly, the September 11, 2002 Decision of
the National Labor Relations Commission is hereby REINSTATED insofar as (1) it
dismissed subsumed cases NLRC-RAB VIII Case Nos. 9-0432-99 to 9-0458-99 and; (2)
ordered the reinstatement of respondent Saunder Santiago Remandaban III without
loss of seniority rights but without backwages in NLRC-RAB VIII Case No. 9-0459-99.
SO ORDERED.
cralawlawlibrary

Subsumed cases NLRC-RAB VIII Case Nos. 9-0432-99 to 9-0458-99 pertain to the
dismissal of the complaints for illegal dismissal filed by Molon, et al., the 27 former
co-employees of petitioners in PCPPI. On the issue of whether the retrenchment of
the petitioners' former co-employees was in accord with law, the Court ruled that
PCPPI had validly implemented its retrenchment
program, viz.:chanRoblesvirtualLawlibrary
Essentially, the prerogative of an employer to retrench its employees must be
exercised only as a last resort, considering that it will lead to the loss of the
employees' livelihood. It is justified only when all other less drastic means have been
tried and found insufficient or inadequate. Corollary thereto, the employer must
prove the requirements for a valid retrenchment by clear and convincing evidence;
otherwise, said ground for termination would be susceptible to abuse by scheming
employers who might be merely feigning losses or reverses in their business
ventures in order to ease out employees. These requirements are:
(1) That retrenchment is reasonably necessary and likely to prevent business losses
which, if already incurred, are not merely de minimis, but substantial, serious, actual
and real, or if only expected, are reasonably imminent as perceived objectively and
in good faith by the employer;
(2) That the employer served written notice both to the employees and to the
Department of Labor and Employment at least one month prior to the intended
date of retrenchment;
(3) That the employer pays the retrenched employees separation pay equivalent to
one (1) month pay or at least one-half (�) month pay for every year of service,
whichever is higher;
(4) That the employer exercises its prerogative to retrench employees in good faith
for the advancement of its interest and not to defeat or circumvent the employees�
right to security of tenure; and
(5) That the employer used fair and reasonable criteria in ascertaining who would be
dismissed and who would be retained among the employees, such as status,
efficiency, seniority, physical fitness, age, and financial hardship for certain workers.
In due regard of these requisites, the Court observes that Pepsi had validly
implemented its retrenchment program:
(1) Records disclose that both the CA and the NLRC had already determined that
Pepsi complied with the requirements of substantial loss and due notice to both the
DOLE and the workers to be retrenched. The pertinent portion of the CA�s March
31, 2006 Decision reads:
In the present action, the NLRC held that PEPSI-COLA�s financial statements are
substantial evidence which carry great credibility and reliability viewed in light of the
financial crisis that hit the country which saw multinational corporations closing
shops and walking away, or adapting [sic] their own corporate rightsizing
program. Since these findings are supported by evidence submitted before the
NLRC, we resolve to respect the same. x x x x The notice requirement was also
complied with by PEPSI-COLA when it served notice of the corporate rightsizing
program to the DOLE and to the fourteen (14) employees who will be affected
thereby at least one (1) month prior to the date of retrenchment. (Citations
omitted)
It is axiomatic that absent any clear showing of abuse, arbitrariness or
capriciousness, the findings of fact by the NLRC, especially when affirmed by the CA
�as in this case �are binding and conclusive upon the Court. Thus, given that there
lies no discretionary abuse with respect to the foregoing findings, the Court sees no
reason to deviate from the same.
(2) Records also show that the respondents had already been paid the requisite
separation pay as evidenced by the September 1999 quitclaims signed by them.
Effectively, the said quitclaims serve inter alia the purpose of acknowledging receipt
of their respective separation pays. Appositely, respondents never questioned that
separation pay arising from their retrenchment was indeed paid by Pepsi to them.
As such, the foregoing fact is now deemed conclusive.
(3) Contrary to the CA�s observation that Pepsi had singled out members of the
LEPCEU-ALU in implementing its retrenchment program, records reveal that the
members of the company union (i.e., LEPCEU-UOEF#49) were likewise among those
retrenched.
Also, as aptly pointed out by the NLRC, Pepsi�s Corporate Rightsizing Program was a
company-wide program which had already been implemented in its other plants in
Bacolod, Iloilo, Davao, General Santos and Zamboanga. Consequently, given the
general applicability of its retrenchment program, Pepsi could not have intended to
decimate LEPCEU-ALU�s membership, much less impinge upon its right to self-
organization, when it employed the same.
In fact, it is apropos to mention that Pepsi and its employees entered into a
collective bargaining agreement on October 17, 1995 which contained a union shop
clause requiring membership in LEPCEU-UOEF#49, the incumbent bargaining union,
as a condition for continued employment. In this regard, Pepsi had all the reasons to
assume that all employees in the bargaining unit were all members of LEPCEU-
UOEF#49; otherwise, the latter would have already lost their employment. In other
words, Pepsi need not implement a retrenchment program just to get rid of LEPCEU-
ALU members considering that the union shop clause already gave it ample
justification to terminate them. It is then hardly believable that union affiliations
were even considered by Pepsi in the selection of the employees to be retrenched.

Moreover, it must be underscored that Pepsi�s management exerted conscious
efforts to incorporate employee participation during the implementation of its
retrenchment program. Records indicate that Pepsi had initiated sit-downs with its
employees to review the criteria on which the selection of who to be retrenched
would be based. This is evidenced by the report of NCMB Region VIII Director
Juanito Geonzon which states that �Pepsi�s] [m]anagement conceded on the
proposal to review the criteria and to sit down for more positive steps to resolve the
issue.�
Lastly, the allegation that the retrenchment program was a mere subterfuge to
dismiss the respondents considering Pepsi�s subsequent hiring of replacement
workers cannot be given credence for lack of sufficient evidence to support the
same.
Verily, the foregoing incidents clearly negate the claim that the retrenchment was
undertaken by Pepsi in bad faith.
(5) On the final requirement of fair and reasonable criteria for determining who
would or would not be dismissed, records indicate that Pepsi did proceed to
implement its rightsizing program based on fair and reasonable criteria
recommended by the company supervisors.
Therefore, as all the requisites for a valid retrenchment are extant, the Court finds
Pepsi�s rightsizing program and the consequent dismissal of respondents in accord
with law.19cralawlawlibrary
In view of the Court's ruling in Pepsi-Cola Products Philippines, Inc. v. Molon,20 PCPPI
contends that the petition for review on certiorari should be denied and the CA
decision should be affirmed under the principle of stare decisis.
The Court sustains PCPPI's contention.
The principle of stare decisis et non quieta movere (to adhere to precedents and not
to unsettle things which are established) is well entrenched in Article 8 of the New
Civil Code which states that judicial decisions applying or interpreting the laws or the
Constitution shall form part of the legal system of the Philippines.
In Pepsi-Cola Products Philippines, Incorporated v. Pagdanganan,21 the Court
explained such principle in this wise:chanRoblesvirtualLawlibrary
The doctrine of stare decisis embodies the legal maxim that a principle or rule of law
which has been established by the decision of a court of controlling jurisdiction will
be followed in other cases involving a similar situation. It is founded on the necessity
for securing certainty and stability in the law and does not require identity of or
privity of parties. This is unmistakable from the wordings of Article 8 of the Civil
Code. It is even said that such decisions �assume the same authority as the statute
itself and, until authoritatively abandoned, necessarily become, to the extent that
they are applicable, the criteria which must control the actuations not only of those
called upon to decide thereby but also of those in duty bound to enforce obedience
thereto.�Abandonment thereof must be based only on strong and compelling
reasons, otherwise, the becoming virtue of predictability which is expected from this
Court would be immeasurably affected and the public�s confidence in the stability
of the solemn pronouncements diminished.22cralawlawlibrary
In Philippine Carpet Manufacturing Corporation v. Tagyamon,23 the Court further
held:chanRoblesvirtualLawlibrary
Under the doctrine of stare decisis, when a court has laid down a principle of law as
applicable to a certain state of facts, it will adhere to that principle and apply it to all
future cases in which the facts are substantially the same, even though the parties
may be different. Where the facts are essentially different, however, stare
decisis does not apply, for a perfectly sound principle as applied to one set of facts
might be entirely inappropriate when a factual variant is
introduced.24cralawlawlibrary
Guided by the jurisprudence on stare decisis, the remaining question is whether the
factual circumstances of this present case are substantially the same as the Pepsi-
Cola Products Philippines, Inc. v. Molon case.25cralawred
The Court rules in the affirmative.
There is no dispute that the issues, subject matters and causes of action between
the parties in Pepsi-Cola Products Philippines, Inc. v. Molon26 and the present case
are identical, namely, the validity of PCPPI's retrenchment program, and the legality
of its employees' termination. There is also substantial identity of parties because
there is a community of interest between the parties in the first case and the parties
in the second case, even if the latter was not impleaded in the first case.27 The
respondents in Pepsi-Cola Products Philippines, Inc. v. Molon28 are petitioners'
former co-employees and co-union members of LEPCEU-ALU who were also
terminated pursuant to the PCPPI's retrenchment program. The only difference
between the two cases is the date of the employees' termination, i.e., Molon, et al.
belong to the first batch of employees retrenched on July 31, 1999, while petitioners
belong to the second batch retrenched on February 15, 2000. That the validity of
the same PCPPI retrenchment program had already been passed upon and,
thereafter, sustained in the related case of Pepsi-Cola Products Philippines, Inc. v.
Molon,29 albeit involving different parties, impels the Court to accord a similar
disposition and uphold the legality of same program. To be sure, the Court is well
aware of the pronouncement in Philippine Carpet Manufacturing Corporation v.
Tagyamon,30 that:chanRoblesvirtualLawlibrary
The doctrine though is not cast in stone for upon a showing that circumstances
attendant in a particular case override the great benefits derived by our judicial
system from the doctrine of stare decisis, the Court is justified in setting it aside. For
the Court, as the highest court of the land, may be guided but is not controlled by
precedent. Thus, the Court, especially with a new membership, is not obliged to
follow blindly a particular decision that it determines, after re-examination, to call
for a rectification.cralawlawlibrary
However, abandonment of the ruling in Pepsi-Cola Products Philippines, Inc. v.
Molon31 on the same issue of the validity of PCPPI's retrenchment program must be
based only on strong and compelling reasons. After a careful review of the records,
the Court finds no such reasons were shown to obtain in this case.
Even upon evaluation of petitioners' arguments on its supposed merits, the Court
still finds no reason to disturb the CA ruling that affirmed the NLRC. In their petition
for review on certiorari, petitioners argue that PCPPI failed to prove that it was
suffering from financial losses, and that its financial statements were perplexing. In
support of their argument, they cite the observation of the Labor Arbiter that the
alleged losses amounting to P1.2 billion in PCPPI's audited financial statements
included those of two subsidiaries that were not yet in commercial operation,
interest payments on short-term and long-term debts, and the adverse effect of the
peso devaluation.32 They also cite the Dissenting Opinion of Commissioner Edgardo
M. Enerlan that the Majority decision ignored the previous financial statement and
relied on the new document presented by PCPPI during the appeal stage, and that
the accountant admitted that the financial statement as of and for the year ended
June 30, 2000 and 1999 are still incomplete.33 They also insist that PCPPI failed to
explain its acts of regularizing four (4) employees and hiring sixty-three (63)
replacements and additional workers.
Petitioners' arguments are untenable.
At the outset, the issues petitioners raised would entail an inquiry into the factual
veracity of the evidence presented by the parties, the determination of which is not
the Court's statutory function. Indeed, petitioners are asking the Court to sift
through the evidence on record and pass upon whether PCPPI had, in fact, suffered
from serious business losses. That task, however, would be contrary to the well-
settled principle that the Court is not a trier of facts, and cannot re-examine and re-
evaluate the probative value of the evidence presented to the Labor Arbiter, and the
NLRC, which formed the basis of the questioned CA decision.34cralawred
At any rate, the Court finds that the September 11, 2002 NLRC Decision has
exhaustively discussed PCPPI's compliance with the requirement that for a
retrenchment to be valid, such must be reasonably necessary and likely to prevent
business losses which, if already incurred, are not merely de minimis, but
substantial, serious, actual and real, to wit:chanRoblesvirtualLawlibrary
More pertinent would have been SGV & Co.'s report to the stockholder. It says:
The accompanying statement of assets, liabilities and home office account of
Tanauan Operations of Pepsi-Cola Products Philippines, Inc. ('company') as of June
30, 1999 and the related statement of income for the year then ended, are integral
parts of the financial statements of the company taken as a whole. In 1999, the
Company's Tanauan Operations incurred a net loss of P29,167,390 as reported in
such plant's financial statement (ANNEX I) which forms part of the audited
consolidated financial statements as of and for the year ended June 30, 1999, to
which we have rendered our opinion dated October 28, 1999, attached hereto as
ANNEX II.
On the other hand, the accompanying financial statements as of and for the year
ended June 30, 2000 of the company's Tanauan Plant operations, which reported a
net loss P22,327,175 (ANNEX III) are included in the financial statements of the
company taken as a whole as also hereto attached (as ANNEX IV). The financial
statements were accordingly derived from the Company's accounting records, with
certain adjustments and are subject to any additional adjustments as may be
disclosed upon the completion of an audit of the financial statements of the
company taken as a whole, which is currently in progress. Since the audit of the
company's financial statements as of and for the year ended June 2000 has not yet
been completed, we are unable to express and we do not express our opinion on
the statement of assets, liabilities and home office account of Tanauan operations of
the company as of June 30, 2000 and the related statement if income for the year
then ended.
The statements of assets, liabilities and home office account and the related
statements of income of the company's Tanauan Operations are not intended to be
a complete presentation of the company's financial statement as of end for the year
ended June 30, 2000 and 1999.
The letter of SGV & Co. was accompanied by a consolidat[ed] statement of Income
and Deficit (supplementary schedule) showing a net loss of P29,167,000. in the
company's Tanauan Operations as of June 30, 1999, and P22,328,000 as of June
2000. This illustrates that the income statements and the balance sheets pertaining
to the Tanauan Plant Operations as prepared by Rodante F. Ramos were audited by
SGV & Co. This situation would have been avoided had the persistent requests for
ample opportunity to present evidence made by the respondent were not
persistently denied by the Executive Labor Arbiter.
At least the Income Statements and the Balance Sheets regularly prepared and
submitted by AVR-Asst. Controller Rodante Ramos to SGV & Co. for audit are
substantial evidence which carry great credibility and responsibility viewed in the
light of the financial crisis that hit the country which saw multinational corporations
closing shops and walking away, or adapting their own corporate rightsizing
programs.35cralawlawlibrary
The aforequoted NLRC ruling also explains why there is no merit in Commissioner
Enerlan's contention that the incomplete financial statements as of and for the year
ended June 30, 2000 and 1999 are inconclusive to establish that PCPPI incurred
serious business losses. Given that the financial statements are incomplete, the
independent auditing firm, SGV & Co., aptly explained nonetheless that they were
derived from the PCPPI's accounting records, and were subject to further
adjustments upon the completion of the audit of financial statements of the
company taken as a whole, which was then in progress. The Court thus agrees with
the CA and the NLRC that the letter of SGV & Co., accompanied by a consolidated
Statement of Income and Deficit showing a net loss of P29,167,000. in the
company's Tanauan Operations as of June 30, 1999, and P22,328,000 as of June
2000,36 is sufficient and convincing proof of serious business losses which justified
PCPPI's retrenchment program. After all, the settled rule in quasi-judicial
proceedings is that proof beyond reasonable doubt is not required in determining
the legality of an employer's dismissal of an employee, and not even a
preponderance of evidence is necessary, as substantial evidence is considered
sufficient.37 Substantial evidence is more than a mere scintilla of evidence or
relevant evidence as a reasonable mind might accept as adequate to support a
conclusion, even if other minds, equally reasonable, might conceivably opine
otherwise.38cralawred
There is likewise no merit in Commissioner Enerlan's dissenting opinion that the
majority decision ignored the previous financial statement and relied on the new
document presented by PCPPI during the appeal stage. Such act of the majority is
sanctioned by no less than Article 221 of the Labor Code, as amended, and Section
10, Rule VII of the 2011 NLRC Rules of Procedure which provide that in any
proceeding 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 the 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.
On PCPPI's alleged failure to explain its acts of regularizing four (4) employees and
hiring sixty-thee (63) replacements and additional workers, the Court upholds the
NLRC's correct ruling thereon, viz.:chanRoblesvirtualLawlibrary
Let Us squarely tackle this issue of replacements in the cases of the complainants in
this case. We bear in mind that replacements refer to the regular workers subjected
to retrenchment, occupying regular positions in the company structure. Artemio
Kempis, a filer mechanic with a salary of P9,366.00 was replaced by Rogelio Castil.
Rogelio Castil was hired through an agency named Helpmate Janitorial Services.
Castil�s employer is Helpmate Janitorial Services. How can a janitorial service
employee perform function of a filer mechanic? How much does Pepsi Cola pay
Helpmate Janitorial Services for the contract of service? These questions
immediately come to mind. Being not a regular employee of Pepsi Cola, he is not a
replacement of Kempis. The idea of rightsizing is to reduce the number of workers
and related functions and trim down, streamline, or simplify the structure of the
organization to the level of utmost efficiency and productivity in order to realize
profit and survive. After the CRP shall have been implemented, the desired size of
the corporation is attained. Engaging the services of service contractors does not
expand the size of the corporate structure. In this sense, the retrenched workers
were not replaced.
The same is true in the case of Exuperio C. Molina who was allegedly replaced by
Eddie Piamonte, an employee of, again, Helpmate Janitorial Services; of Gilberto V.
Opinion who was allegedly replaced by Norlito Ulahay, an employee of Nestor Ortiga
General Services; of Purisimo M. Cabasbas who was allegedly replaced by
Christopher Albadrigo, an employee of Helpmate Janitorial Services; of Vicente R.
Lauron who was allegedly replaced by Wendylen Bron, an employee of Doublt �N�
General Services; of Ramon M. de Paz, who was disabled, and replaced by Alex
Dieta, an employee of Nestor Ortiga General Services; and of Zacarias E. Carbo who
was allegedly replaced by an employee of Double �N�General Services. x x
x39cralawlawlibrary
On petitioners' contention that the true motive of the retrenchment program was to
prevent their union, LEPCEU-ALU, from becoming the certified bargaining agent of
all the rank-and-file employees of PCPPI, such issue of union-busting was duly
resolved in the September 11, 2002 NLRC Decision, as when supported by substantial evidence.43 Certainly, it is not the Court's function to
follows:chanRoblesvirtualLawlibrary assess and evaluate the evidence all over again, particularly where the findings of
both the CA and the NLRC coincide.44cralawred
The issue of union busting has been debunked by Us in the Certified Notice of Strike
Case No. V-000001-2000. We said in that case that Pepsi Cola, in the selection of WHEREFORE, the petition is DENIED. The Court of Appeals Decision dated July 31,
workers to be retrenched, did not take into consideration union affiliation because 2006, and its Resolution dated February 21, 2007 in CA-G.R. SP No. 81712,
the unit was supposed to be composed of all members of good standing of LEPCEU- are AFFIRMED.
UOEF#49 there being a �UNION SHOP�provision in the existing CBA. In the
conciliation conference, PEPSI COLA expressed its willingness to sit down with SO ORDERED.chanroblesvirtuallawlibrary
unions and review the criteria. When this was suggested by the conciliator, the idea
was then and there rejected by the unions, giving the impression that the real
conflict was inter-union. There being no cooperation from the unions, PEPSI COLA
went on with the first batch of retrenchment involving 47 workers. It bears stressing
that all 47 workers signed individual release and quitclaims and settled their
complaints with respondent Pepsi Cola, apparently with the assistance of LEPCEU-
ALU. It is awkward for LEPCEU-ALU to argue that a serious corporate-wide rightsizing
program cannot be implemented in PEPSI-COLA Tanauan Plant because a nascent
unrecognized union would probably be busted. Even the Executive Labor Arbiter did
not take this issue up in his Decision. The issue does not merit
consideration.40cralawlawlibrary

Significantly, the foregoing NLRC ruling was validated in Pepsi-Cola Products

Philippines, Inc. v. Molon,41thus:chanRoblesvirtualLawlibrary

Mindful of their nature, the Court finds it difficult to attribute any act of union
busting or ULP on the part of Pepsi considering that it retrenched its employees in
good faith. As earlier discussed, Pepsi tried to sit-down with its employees to arrive
at mutually beneficial criteria which would have been adopted for their intended
retrenchment. In the same vein, Pepsi�s cooperation during the NCMB-supervised
conciliation conferences can also be gleaned from the records. Furthermore, the
fact that Pepsi�s rightsizing program was implemented on a company-wide basis
dilutes respondents�claim that Pepsi�s retrenchment scheme was calculated to
stymie its union activities, much less diminish its constituency. Therefore, absent any
perceived threat to LEPCEU-ALU�s existence or a violation of respondents�right to
self-organization�as demonstrated by the foregoing actuations�Pepsi cannot be said
to have committed union busting or ULP in this case.cralawlawlibrary

Finally, this case does not fall within any of the recognized exceptions42 to the rule
that only questions of law are proper in a petition for review on certiorari under Rule
45 of the Rules of Court. Settled is the rule that factual findings of labor officials,
who are deemed to have acquired expertise in matters within their respective
jurisdiction, are generally accorded not only respect but even finality, and bind us
(I cant find the full case)
Monday, August 31, 2015
Case Digest: Begino v. ABS-CBN
NELSON V. BEGINO, GENER DEL VALLE, MONINA A VILA-LLORIN AND MA. CRISTINA
SUMAYAO, Petitioners, vs. ABS-CBN CORPORATION (FORMERLY, ABS-CBN
BROADCASTING CORPORATION) AND AMALIA VILLAFUERTE, Respondents.
G.R. No. 199166, 20 April 2015.
PEREZ, J.:
Respondent ABS-CBN, through Respondent Villafuerte, engaged the services of
Petitioners as cameramen, editors or reporters for TV Broadcasting. Petitioners
signed regularly renewed Talent Contracts (3 months - 1 year) and Project
Assignment Forms which detailed the duration, budget and daily technical
requirements of a particular project. Petitioners were tasked with coverage of news
items for subsequent daily airings in Respondents’ TV Patrol Bicol Program.
The Talent Contract has an exclusivity clause and provides that nothing therein shall
be deemed or construed to establish an employer-employee relationship between
the parties.
Petitioners filed against Respondents a complaint for regularization before the
NLRC's Arbitration branch.
In support of their complaint, Petitioners claimed that they worked under the direct
control of Respondent Villafuerte - they were mandated to wear company IDs, they
were provided the necessary equipment, they were informed about the news to be
covered the following day, and they were bound by the company’s policy on
attendance and punctuality.
Respondents countered that, pursuant to their Talent Contracts and Project
Assignment Forms, Petitioners were hired as talents to act as reporters, editors
and/or cameramen. Respondents further claimed they never imposed control as to
how Petitioners discharged their duties. At most, they were briefed regarding the
general requirements of the project to be executed.
While the case was pending, Petitioners contracts were terminated, prompting the
latter to file a second complaint for illegal dismissal.
The Arbitration Branch ruled that Petitioners were regular employees, and ordered
Respondents to reinstate the Petitioners.
The NLRC affirmed the ruling, but the CA overturned the decision.
ISSUE: W/N Petitioners are regular employees of Respondents.
RULING: Yes.
Of the criteria to determine whether there is an employer-employee relationship,
the so-called "control test" is generally regarded as the most crucial and
determinative indicator of the said relationship.
Under this test, an employer-employee relationship is said to exist where the person
for whom the services are performed reserves the right to control not only the end
result but also the manner and means utilized to achieve the same.
Notwithstanding the nomenclature of their Talent Contracts and/or Project
Assignment Forms and the terms and condition embodied therein, petitioners are
regular employees of ABS-CBN.
As cameramen, editors and reporters, it appears that Petitioners were subject to the
control and supervision of Respondents which provided them with the equipment
essential for the discharge of their functions. The exclusivity clause and prohibitions
in their Talent Contract were likewise indicative of Respondents' control over them,
however obliquely worded.
Also,the presumption is that when the work done is an integral part of the regular
business of the employer and when the worker does not furnish an independent
business or professional service, such work is a regular employment of such
employee and not an independent contractor.
 G.R. No. 200114, August 24, 2015
SOCIAL SECURITY SYSTEM, Petitioner, v. DEBBIE UBA�A, Respondent.
DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari1 assails: 1) the July 29, 2011 Decision2 of the
Court of Appeals (CA) denying the Petition for Certiorari in CA-G.R. SP No. 110006
and affirming the March 6, 2007 Order3 of the Regional Trial Court (RTC) of Daet,
Camarines Norte, Branch 39 in Civil Case No. 7304; and 2) the CA's January 10, 2012
Resolution4 denying petitioner's Motion for Reconsideration of the herein assailed
Decision.
Factual Antecedents
On December 26, 2002, respondent Debbie Ubana filed a civil case for damages
against the DBP Service Corporation, petitioner Social Security System (SSS), and the
SSS Retirees Association5 before the RTC of Daet, Camarines Norte. The case was
docketed as Civil Case No. 7304 and assigned to RTC Branch 39.
In her Complaint,6 respondent alleged that in July 1995, she applied for employment
with the petitioner. However, after passing the examinations and accomplishing all
the requirements for employment, she was instead referred to DBP Service
Corporation for "transitory employment." She took the pre-employment
examination given by DBP Service Corporation and passed the same. On May 20,
1996, she was told to report for training to SSS, Naga City branch, for immediate
deployment to SSS Daet branch. On May 28, 1996, she was made to sign a six-month
Service Contract Agreement7 by DBP Service Corporation, appointing her as clerk for
assignment with SSS Daet branch effective May 27, 1996, with a daily wage of only
P171.00. She was assigned as "Frontliner" of the SSS Members Assistance Section
until December 15, 1999. From December 16, 1999 to May 15, 2001, she was
assigned to the Membership Section as Data Encoder. On December 16, 2001, she
was transferred to the SSS Retirees Association as Processor at the Membership
Section until her resignation on August 26, 2002. As Processor, she was paid only
P229.00 daily or P5,038.00 monthly, while a regular SSS Processor receives a
monthly salary of P18,622.00 or P846.45 daily wage. Her May 28, 1996 Service
Contract Agreement with DBP Service Corporation was never renewed, but she was
required to work for SSS continuously under different assignments with a maximum
daily salary of only P229.00; at the same time, she was constantly assured of being
absorbed into the SSS plantilla. Respondent claimed she was qualified for her
position as Processor, having completed required training and passed the SSS
qualifying examination for Computer Operations Course given by the National
Computer Institute, U.P. Diliman from May 16 to June 10, 2001, yet she was not
given the proper salary. Because of the oppressive and prejudicial treatment by SSS,
she was forced to resign on August 26, 2002 as she could no longer stand being
exploited, the agony of dissatisfaction, anxiety, demoralization, and injustice. She
asserted that she dedicated six years of her precious time faithfully serving SSS,
foregoing more satisfying employment elsewhere, yet she was merely exploited and
given empty and false promises; that defendants conspired to exploit her and violate
civil service laws and regulations and Civil Code provisions on Human Relations,
particularly Articles 19, 20, and 21.8 As a result, she suffered actual losses by way of
unrealized income, moral and exemplary damages, attorney's fees and litigation
expenses.
Respondent prayed for an award of P572,682.67 actual damages representing the
difference between the legal and proper salary she should have received and the
actual salary she received during her six-year stint with petitioner; P300,000.00
moral damages; exemplary damages at the discretion of the court; P20,000.00
attorney's fees and P1,000.00 appearance fees; and other just and equitable relief.
Petitioner and its co-defendants SSS Retirees Association and DBP Service
Corporation filed their respective motions to dismiss, arguing that the subject
matter of the case and respondent's claims arose out of employer-employee
relations, which are beyond the RTC's jurisdiction and properly cognizable by the
National Labor Relations Commission (NLRC).
Respondent opposed the motions to dismiss, arguing that pursuant to civil service
rules and regulations, service contracts such as her Service Contract Agreement with
DBP Service Corporation should cover only a) lump sum work or services such as
janitorial, security or consultancy services, and b) piece work or intermittent jobs of
short duration not exceeding six months on a daily basis.9 She posited that her
service contract involved the performance of sensitive work, and not merely
janitorial, security, consultancy services, or work of intermittent or short duration. In
fact, she was made to work continuously even after the lapse of her 6-month service
contract. Citing Civil Service Commission Memorandum Circular No. 40, respondent
contended that the performance of functions outside of the nature provided in the
appointment and receiving salary way below that received by regular SSS employees
amount to an abuse of rights; and that her cause of action is anchored on the
provisions of the Civil Code on Human Relations.
Ruling of the Regional Trial Court

On October 1, 2003, the RTC issued an Order10 dismissing respondent's complaint
for lack of jurisdiction, stating that her claim for damages "has a reasonable causal
connection with her employer-employee relations with the defendants"11 and "is
grounded on the alleged fraudulent and malevolent manner by which the
defendants conspired with each other in exploiting [her], which is a clear case of
unfair labor practice,"12 falling under the jurisdiction of the Labor Arbiter of the
NLRC. Thus, it decreed:cralawlawlibrary
WHEREFORE, premises considered, the aforementioned Motion to Dismiss the
complaint of the herein plaintiff for lack of jurisdiction is hereby GRANTED. The
above-entitled complaint is hereby DISMISSED.
SO ORDERED.13
Respondent moved for reconsideration. On March 6, 2007, the RTC issued another
Order14 granting respondent's motion for reconsideration. The trial court
held:cralawlawlibrary
Section 2(1), Art. K-B, 1987 Constitution, expressly provides that "the civil service
embraces all branches, subdivisions, instrumentalities, and agencies of the
government, including government-owned or controlled corporation[s] with original
charters." Corporations with original charters are those which have been created by
special law[s] and not through the general corporation law. In contrast, labor law
claims against government-owned and controlled corporations without original
charters fall within the jurisdiction of the Department of Labor and Employment and
not the Civil Service Commission. (Light Rail Transit Authority vs. Perfecto Venus,
March 24, 2006.)
Having been created under an original charter, RA No. 1161 as amended by R.A.
8282, otherwise known as the Social Security Act of 1997, the SSS is governed by the
provision[s] of the Civil Service Commission. However, since the SSS denied the
existence of an employer-employee relationship, and the case is one for Damages, it
is not the Civil Service Commission that has jurisdiction to try the case, but the
regular courts.
A perusal of the Complaint filed by the plaintiff against the defendant SSS clearly
shows that the case is one for Damages.
Paragraph 15 of her complaint states, thus:ChanRoblesvirtualLawlibrary
xxx. Likewise, they are contrary to the Civil Code provisions on human relations
which [state], among others, that Every person, must in the exercise of his rights and
in the performance of his duties, act with justice, give everyone his due and observe
honesty and good faith (Article 19) and that Every person who, contrary to law,
willfully or negligently [causes] damages to another, shall indemnify the latter for
the same. (Art. 20)
"Article 19 provides a rule of conduct that is consistent with an orderly and
harmonious relationship between and among men and women It codifies the
concept of what is justice and fair play so that abuse of right by a person will be
prevented. Art. 20 speaks of general sanction for all other provisions of law which do
not especially provide their own sanction. Thus, anyone, who, whether willfully or
negligently, in the exercise of his legal right or duty, causes damage to another, shall
indemnify his or her victim for injuries suffered thereby." (Persons and Family
Relations, Sta. Maria, Melencio, Jr. (2004) pp. 31-32.)
Wherefore, all premises considered, the Motion for Reconsideration is hereby
GRANTED. The case against defendant Social Security System represented by its
President is hereby reinstated in the docket of active civil cases of this court.
SO ORDERED.15 [Italics in the original]
Petitioner moved for reconsideration, but the RTC stood its ground in its June 24,
2009 Order16cralawrednad
Ruling of the Court of Appeals
In a Petition for Certiorari17 filed with the CA and docketed as CA-G.R. SP No.
110006, petitioner sought a reversal of the RTC's June 24, 2009 and March 6, 2007
Orders and the reinstatement of its original October 1, 2003 Order dismissing Civil
Case No. 7304, insisting that the trial court did not have jurisdiction over
respondent's claims for "unrealized salary income" and other damages, which
constitute a labor dispute cognizable only by the labor tribunals. Moreover, it
claimed that the assailed Orders of the trial court were issued with grave abuse of
discretion. It argued that the trial court gravely erred in dismissing the case only as
against its co-defendants DBP Service Corporation and SSS Retirees Association and
maintaining the charge against it, considering that its grounds for seeking dismissal
are similar to those raised by the two. It maintained that DBP Service Corporation
and SSS Retirees Association are legitimate independent job contractors engaged by
it to provide manpower services since 2001, which thus makes respondent an
employee of these two entities and not of SSS; and that since it is not the
respondent's employer, then there is no cause of action against it.
On July 29, 2011, the CA issued the assailed Decision containing the following
pronouncement:cralawlawlibrary
Hence, petitioner seeks recourse before this Court via this Petition
for Certiorarichallenging the RTC Orders. For the resolution of this Court is the sole
issue of:cralawlawlibrary
WHETHER OR NOT THE RTC HAS JURISDICTION TO HEAR AND DECIDE CIVIL CASE
NO. 7304.
The petition is devoid of merits.
The rule is that, the nature of an action and the subject matter thereof, as well as,
which court or agency of the government has jurisdiction over the same, are
determined by the material allegations of the complaint in relation to the law
involved and the character of the reliefs prayed for, whether or not the
complainant/plaintiff is entitled to any or all of such reliefs. A prayer or demand for
relief is not part of the petition of the cause of action; nor does it enlarge the cause
of action stated or change the legal effect of what is alleged. In determining which
body has jurisdiction over a case, the better policy is to consider not only the status
or relationship of the parties but also the nature of the action that is the subject of
their controversy.
A careful perusal of Ubana's Complaint in Civil Case No. 7304 unveils that Ubana's
claim is rooted on the principle of abuse of right laid in the New Civil Code. She was
claiming damages based on the alleged exploitation [perpetrated] by the defendants
depriving her of her rightful income. In asserting that she is entitled to the damages
claimed, [she] invoked not the provisions of the Labor Code or any other labor laws
but the provisions on human relations under the New Civil Code. Evidently, the
determination of the respective rights of the parties herein, and the ascertainment
whether there were abuses of such rights, do not call for the application of the labor
laws but of the New Civil Code. Aproposthereto, the resolution of the issues raised in
the instant complaint does not require the expertise acquired by labor officials. It is
the courts of general jurisdiction, which is the RTC in this case, which has the
authority to hear and decide Civil Case No. 7304.
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. 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, [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. 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.
It is the character of the principal relief sought that appears essential in this
connection. Where such principal relief is to be granted under labor legislation or a
collective bargaining agreement, the case should fall within the jurisdiction of the
Labor Arbiter and the NLRC, even though a claim for damages might be asserted as
an incident to such claim.
The pivotal question is whether the Labor Code has any relevance to the principal
relief sought in the complaint. As pointed out earlier, Ubana did not seek refuge
from the Labor Code in asking for the award of damages. It was the transgression of
Article[s] 19 and 20 of the New Civil Code that she was insisting in wagering this
case. The primary relief sought herein is for moral and exemplary damages for the
abuse of rights. The claims for actual damages for unrealized income are the natural
consequence for abuse of such rights.
While it is true that labor arbiters and the NLRC have jurisdiction to award not only
reliefs provided by labor laws, but also damages governed by the Civil Code, these
reliefs must still be based on an action that has a reasonable causal connection with
the Labor Code, other labor statutes, or collective bargaining agreements. Claims for
damages under paragraph 4 of Article 217 must have a reasonable causal
connection with any of the claims provided for in the article in order to be
cognizable by the labor arbiter. Only if there is such a connection with the other
claims can the claim for damages be considered as arising from employer-employee
relations. In the present case, Ubana's claim for damages is not related to any other
claim under Article 217, other labor statutes, or collective bargaining agreements.
All told, it is ineluctable that it is the regular courts that has [sic] jurisdiction to hear
and decide Civil Case No. 7304. In Tolosa v. NLRC,18 the Supreme Court held that,
"[i]t is not the NLRC but the regular courts that have jurisdiction over action for
damages, in which the employer-employee relations is merely incidental, and in
which the cause of action proceeds from a different source of obligation such as
tort. Since petitioner's claim for damages is predicated on a quasi-delict or tort that
has no reasonable causal connection with any of the claims provided for in Article
217, other labor statutes or collective bargaining agreements, jurisdiction over the
action lies with the regular courts not with the NLRC or the labor arbiters." The same
rule applies in this case.
WHEREFORE, premises considered, the instant petition is DENIED and the Order
dated March 6, 2007 of the Regional Trial Court, Branch 39 of Daet, Camarines
Norte in Civil Case No. 7304 is hereby AFFIRMED.
SO ORDERED.19
Petitioner filed a Motion for Reconsideration,20 but the CA denied the same in its
January 10, 2012 Resolution.21 Hence, the present Petition.
Issue
Petitioner simply submits that the assailed CA dispositions are contrary to law and
jurisprudence.
Petitioner's Arguments
Praying that the assailed CA dispositions be set aside and that the RTC's October 1,
2003 Order dismissing Civil Case No. 7304 be reinstated, petitioner essentially
maintains in its Petition and Reply22that respondent's claims arose from and are in
fact centered on her previous employment. It maintains that there is a direct causal
connection between respondent's claims and her employment, which brings the
subject matter within the jurisdiction of the NLRC. Petitioner contends that
respondent's other claims are intimately intertwined with her claim of actual
damages which are cognizable by the NLRC. Moreover, petitioner alleges that its
existing manpower services agreements with DBP Service Corporation and SSS
Retirees Association are legitimate; and that some of respondent's claims may not
be entertained since these pertain to benefits enjoyed by government employees,
not by employees contracted via legitimate manpower service providers. Finally,
petitioner avers that the nature and character of the reliefs prayed for by the
respondent are directly within the jurisdiction not of the courts, but of the labor
tribunals.
Respondent's Arguments
In her Comment,23 respondent maintains that her case is predicated not on labor
laws but on Articles 19 and 20 of the Civil Code for petitioner's act of exploiting her
and enriching itself at her expense by not paying her the correct salary
commensurate to the position she held within SSS. Also, since there is no employer-
employee relationship between her and petitioner, as the latter itself admits, then
her case is not cognizable by the Civil Service Commission (CSC) either; that since
the NLRC and the CSC have no jurisdiction over her case, then it is only the regular
courts which can have jurisdiction over her claims. She argues that the CA is correct
in ruling that her case is rooted in the principle of abuse of rights under the Civil
Code; and that the Petition did not properly raise issues of law.
Our Ruling
The Court denies the Petition.
In Home Development Mutual Fund v. Commission on Audit,24 it was held that while
they performed the work of regular government employees, DBP Service
Corporation personnel are not government personnel, but employees of DBP
Service Corporation acting as an independent contractor. Applying the foregoing
pronouncement to the present case, it can be said that during respondent's stint
with petitioner, she never became an SSS employee, as she remained an employee
of DBP Service Corporation and SSS Retirees Association - the two being
independent contractors with legitimate service contracts with SSS.
Indeed, "[i]n legitimate job contracting, no employer-employee relation exists
between the principal and the job contractor's employees. The principal is
responsible to the job contractor's employees only for the proper payment of
wages."25cralawredcralawrednad
In her Complaint, respondent acknowledges that she is not petitioner's employee,
but that precisely she was promised that she would be absorbed into the SSS
plantilla after all her years of service with SSS; and that as SSS Processor, she was
paid only P229.00 daily or P5,038.00 monthly, while a regular SSS Processor receives
a monthly salary of P18,622.00, or P846.45 daily wage. In its pleadings, petitioner
denied the existence of an employer-employee relationship between it and
respondent; in fact, it insists on the validity of its service agreements with DBP
Service Corporation and SSS Retirees Association - meaning that the latter, and not
SSS, are respondent's true employers. Since both parties admit that there is no
employment relation between them, then there is no dispute cognizable by the
NLRC. Thus, respondent's case is premised on the claim that in paying her only
P229.00 daily - or P5,038.00 monthly - as against a monthly salary of P18,622.00, or
P846.45 daily wage, paid to a regular SSS Processor at the time, petitioner exploited
her, treated her unfairly, and unjustly enriched itself at her expense.
For Article 217 of the Labor Code to apply, and in order for the Labor Arbiter to
acquire jurisdiction over a dispute, there must be an employer-employee relation
between the parties thereto.chanrobleslaw
x x x It is well settled in law and jurisprudence that where no employer-employee
relationship exists between the parties and no issue is involved which may be
resolved by reference to the Labor Code, other labor statutes or any collective
bargaining agreement, it is the Regional Trial Court that has jurisdiction, x x x The
action is within the realm of civil law hence jurisdiction over the case belongs to the
regular courts. While the resolution of the issue involves the application of labor
laws, reference to the labor code was only for the determination of the solidary
liability of the petitioner to the respondent where no employer-employee relation
exists. Article 217 of the Labor Code as amended vests upon the labor arbiters
exclusive original jurisdiction only over the following:ChanRoblesvirtualLawlibrary
1. Unfair labor practices;
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
employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions
involving 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 (P5,000.00) regardless of whether accompanied with
a claim for reinstatement.
In all these cases, an employer-employee relationship is an indispensable
jurisdictional requisite x x x.26
Since there is no employer-employee relationship between the parties herein, then
there is no labor dispute cognizable by the Labor Arbiters or the NLRC.
There being no employer-employee relation or any other definite or direct contract
between respondent and petitioner, the latter being responsible to the former only
for the proper payment of wages, respondent is thus justified in filing a case against
petitioner, based on Articles 19 and 20 of the Civil Code, to recover the proper salary
due her as SSS Processor. At first glance, it is indeed unfair and unjust that as,
Processor who has worked with petitioner for six long years, she was paid only
P5,038.00 monthly, or P229.00 daily, while a regular SSS employee with the same
designation and who performs identical functions is paid a monthly salary of
P18,622.00, or P846.45 daily wage. Petitioner may not hide under its service
contracts to deprive respondent of what is justly due her. As a vital government
entity charged with ensuring social security, it should lead in setting the example by
treating everyone with justice and fairness. If it cannot guarantee the security of
those who work for it, it is doubtful that it can even discharge its directive to
promote the social security of its members in line with the fundamental mandate to
promote social justice and to insure the well-being and economic security of the
Filipino people.
In this jurisdiction, the "long honored legal truism of 'equal pay for equal work'" has
been "impregnably institutionalized;" "[p]ersons who work with substantially equal
qualifications, skill, effort and responsibility, under similar conditions, should be paid
similar salaries."27 "That public policy abhors inequality and discrimination is beyond
contention. Our Constitution and laws reflect the policy against these evils. The
Constitution in the Article on Social Justice and Human Rights exhorts Congress to
'give highest priority to the enactment of measures that protect and enhance the
right of all people to human dignity, reduce social, economic, and political
inequalities.' The very broad Article 19 of the Civil Code requires every person, 'in
the exercise of his rights and in the performance of his duties, [to] act with justice,
give everyone his due, and observe honesty and good faith'."28cralawrednad
WHEREFORE, the Petition is DENIED. The assailed July 29, 2011 Decision and January
10, 2012 Resolution of the Court of Appeals in CA-G.R. SP No. 110006 are AFFIRMED.
The case is ordered remanded with dispatch to the Regional Trial Court of Daet,
Camarines Norte, Branch 39, for continuation of proceedings.
SO ORDERED.
DISSENTING OPINION
JARDELEZA, J.:
The majority has voted to deny the petition on the ground that, there being no
employer-employee relationship between the parties, there is no labor dispute
cognizable by the Labor Arbiters or the National Labor Relations Commission (NLRC).
There being no labor dispute, the trial court correctly assumed jurisdiction over
respondent's suit for damages against the Social Security System (SSS), based on
Articles 19 and 20 of the Civil Code.
With all due respect, I dissent from the majority decision.
It is my view that respondent's suit against the SSS involves a labor dispute properly
cognizable by the Civil Service Commission (CSC).
Both parties agree that there is no employer-employee relation between them,
respondent being an employee of independent service contractors1 hired by the
SSS. This fact alone, however, does not preclude the controversy between them
from being a labor dispute.2 Article 212(1) of the Labor Code defines a labor dispute
to include "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 or not the disputants stand in the proximate
relations of employer and employee."3cralawrednad
person contracted through an independent contractor under a valid and legitimate
service contract.
This Court has recognized that an employer has "the proprietary right to exercise an
inherent management prerogative and its best business judgment to determine
whether it should contract out the performance of some of its work to independent
contractors."8 This right, in my view, flows from the constitutional liberty of an
employer to determine whether to perform its work itself or through independent
contractors that meet the requirements of the law.

Furthermore, respondent's claims relate to the terms and conditions of her working Accordingly, I vote to GRANT the petition filed by the SSS and order the dismissal,
relationship vis-a-vis the SSS. While captioned as a suit for damages under Articles without prejudice, of respondent's Complaint for Damages filed before the trial
19 and 20 of the Civil Code, respondent's action is really one to recover from the SSS court.
amounts she would have received had she been employed in petitioner's roster of
regular employees. This is a dispute no different from "regularization cases" usually
filed by contractual employees seeking to be absorbed as regular employees of a
company.

The SSS is a government-controlled corporation created by Republic Act (RA) No.

1161.4 Pursuant to Section 2(1), Article IX of the Constitution,5 a labor dispute
involving the SSS is cognizable by the CSC. Thus,
...that the action below is for damages under Articles 19, 20 and 21 of the Civil Code
would not suffice to keep the case within the jurisdictional boundaries of regular
Courts. That claim for damages is interwoven with a labor dispute existing between
the parties and would have to be ventilated before the administrative machinery
established for the expeditious settlement of those disputes. To allow the action filed
below to prosper would bring about "split jurisdiction" which is obnoxious to the
orderly administration of justice.6cralawrednad

(Emphasis supplied.)
I note with serious concern the statement of the majority that respondent is
"justified" in filing the case based on Articles 19 and 20 of the Civil Code "to recover
the proper salary" and that the SSS "may not hide under its service contracts to
deprive respondent of what is justly due her."7cralawrednad

The only issue for resolution in this case concerns the matter of jurisdiction. While
clearly obiter, the foregoing statement gives the impression that the merits of
respondent's claim have already been proved and settled. This, on the contrary, is
an issue still to be resolved on remand.

The foregoing statement would have serious repercussions on a significant question

of law, that is, whether or not a principal can legally be held liable for damages by a
 G.R. No. 220978, July 05, 2016
CENTURY PROPERTIES, INC., Petitioner, v. EDWIN J. BABIANO AND EMMA B.
CONCEPCION, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated April 8,
2015 and the Resolution3dated October 12, 2015 of the Court of Appeals (CA) in CA-
G.R. SP No. 132953, which affirmed, with modification the Decision4 dated June 25,
2013 and the Resolution5 dated October 16, 2013 of the National Labor Relations
Commission (NLRC) in NLRC LAC No. 05-001615-12, and ordered petitioner Century
Properties, Inc. (CPI) to pay respondents Edwin J. Babiano (Babiano) and Emma B.
Concepcion (Concepcion; collectively, respondents) unpaid commissions in the
amounts of P889,932.42 and P591,953.05, respectively.
The Facts
On October 2, 2002, Babiano was hired by CPI as Director of Sales, and was
eventually6 appointed as Vice President for Sales effective September 1, 2007. As
CPFs Vice President for Sales, Babiano was remunerated with, inter alia, the
following benefits: (a) monthly salary of P70,000.00; (b) allowance of P50,000.00;
and (c) 0.5% override commission for completed sales. His employment
contract7 also contained a "Confidentiality of Documents and Non-Compete
Clause"8 which, among others, barred him from disclosing confidential information,
and from working in any business enterprise that is in direct competition with CPI
"while [he is] employed and for a period of one year from date of resignation or
termination from [CPI]." Should Babiano breach any of the terms thereof, his "forms
of compensation, including commissions and incentives will be
forfeited."9chanrobleslaw
During the same period, Concepcion was initially hired as Sales Agent by CPI and was
eventually10promoted as Project Director on September 1, 2007.11 As such, she
signed an employment agreement, denominated as "Contract of Agency for Project
Director"12 which provided, among others, that she would directly report to
Babiano, and receive, a monthly subsidy of P60,000.00, 0.5% commission, and cash
incentives.13 On March 31, 2008, Concepcion executed a similar contract14 anew
with CPI in which she would receive a monthly subsidy of P50,000.00, 0.5%
commission, and cash incentives as per company policy. Notably, it was stipulated in
both contracts that no employer-employee relationship exists between Concepcion
and CPI.15chanrobleslaw
After receiving reports that Babiano provided a competitor with information
regarding CPFs marketing strategies, spread false information regarding CPI and its
projects, recruited CPI's personnel to join the competitor, and for being absent
without official leave (AWOL) for five (5) days, CPI, through its Executive Vice
President for Marketing and Development, Jose Marco R. Antonio (Antonio), sent
Babiano a Notice to Explain16 on February 23, 2009 directing him to explain why he
should not be charged with disloyalty, conflict of interest, and breach of trust and
confidence for his actuations.17chanrobleslaw
On February 25, 2009, Babiano tendered18 his resignation and revealed that he had
been accepted as Vice President of First Global BYO Development Corporation (First
Global), a competitor of CPI.19 On March 3, 2009, Babiano was served a Notice of
Termination20 for: (a) incurring AWOL; (b) violating the "Confidentiality of
Documents and Non-Compete Clause" when he joined a competitor enterprise
while still working for CPI and provided such competitor enterprise information
regarding CPFs marketing strategies; and (c) recruiting CPI personnel to join a
competitor.21chanrobleslaw
On the other hand, Concepcion resigned as CPFs Project Director through a
letter22 dated February 23, 2009, effective immediately.
On August 8, 2011, respondents filed a complaint23 for non-payment of commissions
and damages against CPI and Antonio before the NLRC, docketed as NLRC Case No.
NCR-08-12029-11, claiming that their repeated demands for the payment and
release of their commissions remained unheeded.24chanrobleslaw
For its part, CPI maintained25cralawred that Babiano is merely its agent tasked with
selling its projects. Nonetheless, he was afforded due process in the termination of
his employment which was based on just causes.26 It also claimed to have validly
withheld Babiano's commissions, considering that they were deemed forfeited for
violating the "Confidentiality of Documents and Non-Compete Clause."27 On
Concepcion's money claims, CPI asserted that the NLRC had no jurisdiction to hear
the same because there was no employer-employee relations between them, and
thus, she should have litigated the same in an ordinary civil action.28chanrobleslaw
The LA Ruling
In a Decision29 dated March 19, 2012, the Labor Arbiter (LA) ruled in CPI's favor and,
accordingly, dismissed the complaint for lack of merit.30chanrobleslaw

The LA found that: (a) Babiano's acts of providing information on CPI's marketing
strategies to the competitor and spreading false information about CPI and its
projects are blatant violations of the "Confidentiality of Documents and Non-
Compete Clause" of his employment contract, thus, resulting in the forfeiture of his
unpaid commissions in accordance with the same clause;31 and (b) it had no
jurisdiction over Concepcion's money claim as she was not an employee but a mere
agent of CPI, as clearly stipulated in her engagement contract with the
latter.32chanrobleslaw
Aggrieved, respondents appealed33 to the NLRC.
The NLRC Ruling
In a Decision34 dated June 25, 2013, the NLRC reversed and set aside the LA ruling,
and entered a new one ordering CPI to pay Babiano and Concepcion the amounts of
P685,211.76 and P470,754.62, respectively, representing their commissions from
August 9, 2008 to August 8, 2011, as well as 10% attorney's fees of the total
monetary awards.35chanrobleslaw
While the NLRC initially concurred with the LA that Babiano's acts constituted just
cause which would warrant the termination of his employment from CPI, it,
however, ruled that the forfeiture of all earned commissions of Babiano under the
"Confidentiality of Documents and Non-Compete Clause" is confiscatory and
unreasonable and hence, contrary to law and public policy.36 In this light, the NLRC
held that CPI could not invoke such clause to avoid the payment of Babiano's
commissions since he had already earned those monetary benefits and, thus, should
have been released to him. However, the NLRC limited the grant of the money
claims in light of Article 291 (now Article 306)37 of the Labor Code which provides for
a prescriptive period of three (3) years. Consequently, the NLRC awarded unpaid
commissions only from August 9, 2008 to August 8, 2011 �i.e., which was the date
when the complaint was filed.38 Meanwhile, contrary to the LA's finding, the NLRC
ruled that Concepcion was CPI's employee, considering that CPI: (a) repeatedly hired
and promoted her since 2002; (b) paid her wages despite referring to it as "subsidy";
and (c) exercised the power of dismissal and control over her.39 Lastly, the NLRC
granted respondents' claim for attorney's fees since they were forced to litigate and
incurred expenses for the protection of their rights and interests.40chanrobleslaw
Respondents did not assail the NLRC findings. In contrast, only CPI moved for
reconsideration,41 which the NLRC denied in a Resolution42 dated October 16, 2013.
Aggrieved, CPI filed a petition for certiorari43before the CA.
The CA Ruling
In a Decision44 dated April 8, 2015, the CA affirmed the NLRC ruling with
modification increasing the award of unpaid commissions to Babiano and
Concepcion in the amounts of P889,932.42 and P591.953.05, respectively, and
imposing interest of six percent (6%) per annum on all monetary awards from the
finality of its decision until fully paid.45chanrobleslaw
The CA held that Babiano properly instituted his claim for unpaid commissions
before the labor tribunals as it is a money claim arising from an employer-employee
relationship with CPI. In this relation, the CA opined that CPI cannot withhold such
unpaid commissions on the ground of Babiano's alleged breach of the
"Confidentiality of Documents and Non-Compete Clause" integrated in the latter's
employment contract, considering that such clause referred to acts done after the
cessation of the employer-employee relationship or to the "post-employment"
relations of the parties. Thus, any such supposed breach thereof is a civil law dispute
that is best resolved by the regular courts and not by labor tribunals.46chanrobleslaw
Similarly, the CA echoed the NLRC's finding that there exists an employer-employee
relationship between Concepcion and CPI, because the latter exercised control over
the performance of her duties as Project Director which is indicative of an employer-
employee relationship. Necessarily therefore, CPI also exercised control over
Concepcion's duties in recruiting, training, and developing directors of sales because
she was supervised by Babiano in the performance of her functions. The CA likewise
observed the presence of critical factors which were indicative of an employer-
employee relationship with CPI, such as: (a) Concepcion's receipt of a monthly salary
from CPI; and (b) that she performed tasks besides selling CPI properties. To add,
the title of her contract which was referred to as "Contract of Agency for Project
Director" was not binding and conclusive, considering that the characterization of
the juridical relationship is essentially a matter of law that is for the courts to
determine, and not the parties thereof. Moreover, the totality of evidence sustains a
finding of employer-employee relationship between CPI and
Concepcion.47chanrobleslaw
Further, the CA held that despite the NLRC's proper application of the three (3)-year
prescriptive period under Article 291 of the Labor Code, it nonetheless failed to
include all of respondents' earned commissions during that time - i.e., August 9,
2008 to August 8, 2011 - thus, necessitating the increase in award of unpaid
commissions in respondents' favor.48chanrobleslaw
Undaunted, CPI sought for reconsideration,49 which was, however, denied in a
Resolution50 dated October 12, 2015; hence, this petition.
 The Issue Before the Court
The core issue for the Court's resolution is whether or not the CA erred in denying
CPI's petition for certiorari, thereby holding it liable for the unpaid commissions of
respondents.
The Court's Ruling
The petition is partly meritorious.
I.
Article 1370 of the Civil Code provides that "[i]f the terms of a contract are clear and
leave no doubt upon the intention of the contracting parties, the literal meaning of
its stipulations shall control."51 In Norton Resources and Development Corporation v.
All Asia Bank Corporation,52 the Court had the opportunity to thoroughly discuss the
said rule as follows:ChanRoblesVirtualawlibrary
The rule is that where the language of a contract is plain and unambiguous, its
meaning should be determined without reference to extrinsic facts or aids. The
intention of the parties must be gathered from that language, and from that
language alone. Stated differently, where the language of a written contract is clear
and unambiguous, the contract must be taken to mean that which, on its face, it
purports to mean, unless some good reason can be assigned to show that the words
should be understood in a different sense. Courts cannot make for the parties better
or more equitable agreements than they themselves have been satisfied to make, or
rewrite contracts because they operate harshly or inequitably as to one of the
parties, or alter them for the benefit of one party and to the detriment of the other,
or by construction, relieve one of the parties from the terms which he voluntarily
consented to, or impose on him those which he did not.53 (Emphases and
underscoring supplied)
Thus, in the interpretation of contracts, the Court must first determine whether a
provision or stipulation therein is ambiguous. Absent any ambiguity, the provision
on its face will be read as it is written and treated as the binding law of the parties to
the contract.54chanrobleslaw
In the case at bar, CPI primarily invoked the "Confidentiality of Documents and Non-
Compete Clause" found in Babiano's employment contract55 to justify the forfeiture
of his commissions, viz.:ChanRoblesVirtualawlibrary
Confidentiality of Documents and Non-Compete Clause
All records and documents of the company and all information pertaining to its
business or affairs or that of its affiliated companies are confidential and no
unauthorized disclosure or reproduction or the same will be made by you any time
during or after your employment.
And in order to ensure strict compliance herewith, you shall not work for whatsoever
capacity, either as an employee, agent or consultant with any person whose business
is in direct competition with the company while you are employed and for a period of
one year from date of resignation or termination from the company.
In the event the undersigned breaches any term of this contract, the undersigned
agrees and acknowledges that damages may not be an adequate remedy and that in
addition to any other remedies available to the Company at law or in equity, the
Company is entitled to enforce its rights hereunder by way of injunction, restraining
order or other relief to enjoin any breach or default of this contract.
The undersigned agrees to pay all costs, expenses and attorney's fees incurred by
the Company in connection with the enforcement of the obligations of the
undersigned. The undersigned also agrees to .pay the Company all profits, revenues
and income or benefits derived by or accruing to the undersigned resulting from the
undersigned's breach of the obligations hereunder. This Agreement shall be binding
upon the undersigned, all employees, agents, officers, directors, shareholders,
partners and representatives of the undersigned and all heirs, successors and
assigns of the foregoing.
Finally, if undersigned breaches any terms of this contract, forms of compensation
including commissions and incentives will be forfeited.56 (Emphases and underscoring
supplied)
Verily, the foregoing clause is not only clear and unambiguous in stating that
Babiano is barred to "work for whatsoever capacity x x x with any person whose
business is in direct competition with [CPI] while [he is] employed and for a period of
one year from date of [his] resignation or termination from the company," it also
expressly provided in no uncertain terms that should Babiano "[breach] any term of
[the employment contract], forms of compensation including commissions and
incentives will be forfeited." Here, the contracting parties - namely Babiano on one
side, and CPI as represented by its COO-Vertical, John Victor R. Antonio, and Director
for Planning and Controls, Jose Carlo R. Antonio, on the other -indisputably wanted
the said clause to be effective even during the existence of the employer-employee
relationship between Babiano and CPI, thereby indicating their intention to be
bound by such clause by affixing their respective signatures to the employment
contract. More significantly, as CPFs Vice President for Sales, Babiano held a highly
sensitive and confidential managerial position as he "was tasked, among others, to
guarantee the achievement of agreed sales targets for a project and to ensure that
his team has a qualified and competent manpower resources by conducting
recruitment activities, training sessions, sales rallies, motivational activities, and
evaluation programs."57 Hence, to allow Babiano to freely move to direct
competitors during and soon after his employment with CPI would make the latter's
trade secrets vulnerable to exposure, especially in a highly competitive marketing
environment. As such, it is only reasonable that CPI and Babiano agree on such
stipulation in the latter's employment contract in order to afford a fair and
reasonable protection to CPI.58 Indubitably, obligations arising from contracts,
including employment contracts, have the force of law between the contracting
parties and should be complied with in good faith.59 Corollary thereto, parties are
bound by the stipulations, clauses, terms, and conditions they have agreed to,
provided that these stipulations, clauses, terms, and conditions are not contrary to
law, morals, public order or public policy,60 as in this case.
Therefore, the CA erred in limiting the "Confidentiality of Documents and Non-
Compete Clause" only to acts done after the cessation of the employer-employee
relationship or to the "post-employment" relations of the parties. As clearly
stipulated, the parties wanted to apply said clause during the pendency of Babiano's
employment, and CPI correctly invoked the same before the labor tribunals to resist
the former's claim for unpaid commissions on account of his breach of the said
clause while the employer-employee relationship between them still subsisted.
Hence, there is now a need to determine whether or not Babiano breached said
clause while employed by CPI, which would then resolve the issue of his entitlement
to his unpaid commissions.
A judicious review of the records reveals that in his resignation letter61 dated
February 25, 2009, Babiano categorically admitted to CPI Chairman Jose Antonio
that on February 12, 2009, he sought employment from First Global, and five (5)
days later, was admitted thereto as vice president. From the foregoing, it is evidently
clear that when he sought and eventually accepted the said position with First
Global, he was still employed by CPI as he has not formally resigned at that time.
Irrefragably, this is a glaring violation of the "Confidentiality of Documents and Non-
Compete Clause" in his employment contract with CPI, thus, justifying the forfeiture
of his unpaid commissions.
II.
Anent the nature of Concepcion's engagement, based on case law, the presence of
the following elements evince the existence of an employer-employee relationship:
(a) the power to hire, i.e., the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the employer's power to
control the employee's conduct, or the so called "control test." The control test is
commonly regarded as the most important indicator of the presence or absence of
an employer-employee relationship.62 Under this test, an employer-employee
relationship exists where the person for whom the services are performed reserves
the right to control not only the end achieved, but also the manner and means to be
used in reaching that end.63chanrobleslaw
Guided by these parameters, the Court finds that Concepcion was an employee of
CPI considering that: (a) CPI continuously hired and promoted Concepcion from
October 2002 until her resignation on February 23, 2009,64 thus, showing that CPI
exercised the power of selection and engagement over her person and that she
performed functions that were necessary and desirable to the business of CPI; (b)
the monthly "subsidy" and cash incentives that Concepcion was receiving from CPI
are actually remuneration in the concept of wages as it was regularly given to her on
a monthly basis without any qualification, save for the "complete submission of
documents on what is a sale policy";65 (c) CPI had the power to discipline or even
dismiss Concepcion as her engagement contract with CPI expressly conferred upon
the latter "the right to discontinue [her] service anytime during the period of
engagement should [she] fail to meet the performance standards,"66 among others,
and that CPI actually exercised such power to dismiss when it accepted and
approved Concepcion's resignation letter; and most importantly, (d) as aptly pointed
out by the CA, CPI possessed the power of control over Concepcion because in the
performance of her duties as Project Director - particularly in the conduct of
recruitment activities, training sessions, and skills development of Sales Directors -
she did not exercise independent discretion thereon, but was still subject to the
direct supervision of CPI, acting through Babiano.67chanrobleslaw
Besides, while the employment agreement of Concepcion was denominated as a
"Contract of Agency for Project Director," it should be stressed that the existence of
employer-employee relations could not be negated by the mere expedient of
repudiating it in a contract. In the case of Insular Life Assurance Co., Ltd. v. NLRC,68 it
was ruled that one's employment status is defined and prescribed by law, and not by
what the parties say it should be, viz.:ChanRoblesVirtualawlibrary
It is axiomatic that the existence of an employer-employee relationship cannot be
negated by expressly repudiating it in the management contract and providing
therein that the "employee" is an independent contractor when the terms of the
agreement clearly show otherwise. For, the employment status of a person is defined
and prescribed by law and not by what the parties say it should be. In determining
the status of the management contract, the "four-fold test" on employment earlier
mentioned has to be applied.69 (Emphasis and underscoring supplied)
Therefore, the CA correctly ruled that since there exists an employer-employee
relationship between Concepcion and CPI, the labor tribunals correctly assumed
jurisdiction over her money claims.
 III.
SO ORDERED.
Finally, CPI contends that Concepcion's failure to assail the NLRC ruling awarding her
the amount of P470,754.62 representing unpaid commissions rendered the same
final and binding upon her. As such, the CA erred in increasing her monetary award
to P591,953.05.70chanrobleslaw

The contention lacks merit.

As a general rule, a party who has not appealed cannot obtain any affirmative relief
other than the one granted in the appealed decision. However, jurisprudence admits
an exception to the said rule, such as when strict adherence thereto shall result in
the impairment of the substantive rights of the parties concerned. In Global
Resource for Outsourced Workers, Inc. v. Velasco:71
Indeed, a party who has failed to appeal from a judgment is deemed to have
acquiesced to it and can no longer obtain from the appellate court any affirmative
relief other than what was already granted under said judgment. However, when
strict adherence to such technical rule will impair a substantive right, such as that of
an illegally dismissed employee to monetary compensation as provided by law, then
equity dictates that the Court set aside the rule to pave the way for a full and just
adjudication of the case.72 (Emphasis and underscoring supplied)

In the present case, the CA aptly pointed out that the NLRC failed to account for all
the unpaid commissions due to Concepcion for the period of August 9, 2008 to
August 8, 2011.73 Indeed, Concepcion's right to her earned commissions is a
substantive right which cannot be impaired by an erroneous computation of what
she really is entitled to. Hence, following the dictates of equity and in order to arrive
at a complete and just resolution of the case, and avoid a piecemeal dispensation of
justice over the same, the CA correctly recomputed Concepcion's unpaid
commissions, notwithstanding her failure to seek a review of the NLRC's
computation of the same.

In sum, the Court thus holds that the commissions of Babiano were properly
forfeited for violating the "Confidentiality of Documents and Non-Compete Clause."
On.the other hand, CPI remains liable for the unpaid commissions of Concepcion in
the sum of P591,953.05.

WHEREFORE, the petition is PARTLY GRANTED. The Decision dated April 8, 2015 and
the Resolution dated October 12, 2015 of the Court of Appeals (CA) in CA-G.R. SP
No. 132953 are hereby MODIFIED in that the commissions of respondent Edwin J.
Babiano are deemed FORFEITED. The rest of the CA Decision stands.
March 6, 2017
G.R. No. 197899
JOAQUIN LU, Petitioner
vs
TIRSO ENOPIA, ROBERTO ABANES, ALEJANDRE BAGAS, SALVADOR BERNAL, SAMUEL
CAHAYAG, ALEJANDRO CAMPUGAN, RUPERTO CERNA, JR., REYNALDO CERNA, PETER
CERVANTES, LEONARDO CO ND ES TABLE, ROLANDO ESLOPOR, ROLLY FERNANDEZ,
EDDIE FLORES, ROLANDO FLORES, JUDITO FUDOLIN, LEO GRAPANI, FELIX HUBAHIB,
JERRY JUAGPAO, MARCIANO LANUTAN, JOVENTINO MATOBATO, ALFREDO MONIVA,
VICTORIANO ORTIZ, JR., RENALDO PIALAN, ALFREDO PRUCIA, PONCIANO REANDO,
HERMENIO REMEGIO, DEMETRIO RUAYA, EDGARDO RUSIANA, NESTOR SALILI,
VICENTE SASTRELLAS, ROMEO SUMAYANG, and DESIDERIO TABAY, Respondents
DECISION
PERALTA, J.:
Before us is a petition for review on certiorari filed by Joaquin Lu which seeks to
reverse and set aside the Decision1dated October 22, 2010 and the
Resolution2 dated May 12, 2011, respectively, of the Court of Appeals issued in CA-
G.R. SP No. 55486-MIN.
The facts of the case, as stated by the Court of Appeals, are as follows:
Petitioners (now herein respondents) were hired from January 20, 1994 to March
20, 1996 as crew members of the fishing mother boat F/B MG-28 owned by
respondent Joaquin "Jake" Lu (herein petitioner Lu) who is the sole proprietor of
Mommy Gina Tuna Resources [MGTR] based in General Santos City. Petitioners and
Lu had an income-sharing arrangement wherein 55% goes to Lu, 45% to the crew
members, with an additional 4% as "backing incentive." They also equally share the
expenses for the maintenance and repair of the mother boat, and for the purchase
of nets, ropes and payaos.
Sometime in August 1997, Lu proposed the signing of a Joint Venture Fishing
Agreement between them, but petitioners refused to sign the same as they opposed
the one-year term provided in the agreement. According to petitioners, during their
dialogue on August 18, 1997, Lu terminated their services right there and then
because of their refusal to sign the agreement. On the other hand, Lu alleged that
the master fisherman (piado) Ruben Salili informed him that petitioners still refused
to sign the agreement and have decided to return the vessel F/B MG-28.
On August 25, 1997, petitioners filed their complaint for illegal dismissal, monetary
claims and damages. Despite serious efforts made by Labor Arbiter (LA) Arturo P.
Aponesto, the case was not amicably settled, except for the following matters:
(1) Balansi 8 and 9; (2) 10% piado share; (3) sud-anon refund; and (4) refund of
payment of motorcycle in the amount of ₱15,000.00. LA Aponesto further inhibited
himself from the case out of "delicadeza," and the case was raffled to LA Amado M.
Solamo.
In their Position Paper, petitioners alleged that their refusal to sign the Joint Venture
Fishing Agreement is not a just cause for their termination. Petitioners also asked for
a refund of the amount of ₱8,700,407.70 that was taken out of their 50% income
share for the repair and maintenance of boat as well as the purchase of fishing
materials, as Lu should not benefit from such deduction.
On the other hand, Lu denied having dismissed petitioners, claiming that their
relationship was one of joint venture where he provided the vessel and other fishing
paraphernalia, while petitioners, as industrial partners, provided labor by fishing in
the high seas. Lu alleged that there was no employer-employee relationship as its
elements were not present, viz.: it was the piado who hired petitioners; they were
not paid wages but shares in the catch, which they themselves determine; they were
not subject to his discipline; and respondent had no control over the day-to-day
fishing operations, although they stayed in contact through respondent's radio
operator or checker. Lu also claimed that petitioners should not be reimbursed for
their share in the expenses since it was their joint venture that shouldered these
expenses.3
On June 30, 1998, the LA rendered a Decision4 dismissing the case for lack of merit
finding that there was no employer-employee relationship existing between
petitioner and the respondents but a joint venture.
In so ruling, the LA found that: (1) respondents were not hired by petitioner as the
hiring was done by the piado or master fisherman; (2) the earnings of the fishermen
from the labor were in the form of wages they earned based on their respective
shares; (3) they were never disciplined nor sanctioned by the petitioner; and, (4) the
income-sharing and expense-splitting was no doubt a working set up in the nature of
an industrial partnership. While petitioner issued memos, orders and directions,
however, those who were related more on the aspect of management and
supervision of activities after the actual work was already done for purposes of
order in hauling and sorting of fishes, and thus, not in the nature of control as to the
means and method by which the actual fishing operations were conducted as the
same was left to the hands of the master fisherman.
The LA also ruled that the checker and the use of radio were for the purpose of
monitoring and supplying the logistics requirements of the fishermen while in the
sea; and that the checkers were also tasked to monitor the recording of catches and
ensure that the proper sharing system was implemented; thus, all these did not
mean supervision on how, when and where to fish.
Respondents appealed to the National Labor Relations Commission (NLRC), which
affirmed the LA Decision in its Resolution5 dated March 12, 1999. Respondents'
motion for reconsideration was denied in a Resolution6 dated July 9, 1999.
Respondents filed a petition for certiorari with the CA which dismissed7 the same for
having been filed beyond the 60-day reglementary period as provided under Rule 65
of the Rules of Court, and that the sworn certification of non-forum shopping was
signed only by two (2) of the respondents who had not shown any authority to sign
in behalf of the other respondents. As their motion for reconsideration was denied,
they went to Us via a petition for certiorari assailing the dismissal which We granted
in a Resolution8 dated July 31, 2006 and remanded the case to the CA for further
proceedings.
Petitioner filed its Comment to the petition. The parties submitted their respective
memoranda as required by the CA.
On October 22, 2010, the CA rendered its assailed Decision reversing the NLRC, the
decretal portion of which reads as follows:
WHEREFORE, premises considered, the assailed March 12, 1999 Resolution of public
respondent National Labor Relations Commission (NLRC), Fifth Division, Cagayan de
Oro City, is hereby REVERSED and SET ASIDE, and a new one is entered.
Thus, private respondent Mommy Gina Tuna Resources (MGTR) thru its sole
proprietor/general manager, Joaquin T. Lu (Lu), is hereby ORDERED to pay each of
the petitioners, namely, TIRSO ENOPIA, ROBERTO ABANES, ALEJANDRE BAGAS,
SALVADOR BERNAL,
SAMUEL CAHAYAG, ALEJANDRO CAMPUNGAN, RUPERTO CERNA, JR., REYNALDO
CERNA, PETER CERVANTES, LEONARDO CONDESTABLE, ROLANDO ESLOPOR, ROLLY
FERNANDEZ, EDDIE FLORES, ROLANDO FLORES, JUDITO FUDOLIN, LEO GRAPANI,
FELIX HUBAHIB, JERRY JUAGPAO, MARCIANO LANUTAN, JOVENTINO MATOBATO,
ALFREDO MONIVA, VICTORIANO ORTIZ, JR., RENALDO PIALAN, SEVERO PIALAN,
ALFREDO PRUCIA, POCIANO REANDO, HERMENIO REMEGIO, DEMETRIO RUAYA,
EDGARDO RUSIANA, NESTOR SALILI, RICHARD SALILI, SAMUEL SALILI, VICENTE
SASTRELLAS, ROMEO SUMAYANG and DESIDERIO TABAY the following:
(1) SEPARATION PAY (in lieu of the supposed reinstatement) equivalent to one (1)
month pay for every year of service reckoned from the very moment each petitioner
was hired as fishermen-crew member of FIB MG-28 by MGTR until the finality of this
judgment. A fraction of at least six (6) months shall be considered one (l) whole year.
Any fraction below six months shall be paid pro rata;
(2) FULL BACKWAGES (inclusive of all allowances and other benefits required by law
or their monetary equivalent) computed from the time they were dismissed from
employment on August 18, 1997 until finality of this Judgment;
(3) EXEMPLARY DAMAGES in the sum of Fifty Thousand Pesos (₱50,000.00);
(4) ATTORNEY'S FEES equivalent to 10% of the total monetary award.
Considering that a person's income or earning is his "lifeblood," so to
speak, i.e., equivalent to life itself, this Decision is deemed immediately executory
pending appeal should MGTR decide to elevate this case to the Supreme Court.
Let this case be referred back to the Office of the Labor Arbiter for proper
computation of the awards.9
The CA found that petitioner exercised control over respondents based on the
following: (1) respondents were the fishermen crew members of petitioner's fishing
vessel, thus, their services to the latter were so indispensable and necessary that
without them, petitioner's deep-sea fishing industry would not have come to
existence much less fruition; (2) he had control over the entire fishing operations
undertaken by the respondents through the master fisherman (piado) and the
assistant master fisherman (assistant piado) employed by him; (3) respondents were
paid based on a percentage share of the fish catch did not in any way affect their
regular employment status; and (4) petitioner had already invested millions of pesos
in its deep-sea fishing industry, hence, it is highly improbable that he had no control
over respondents' fishing operations.
Petitioner's motion for reconsideration was denied by the CA in its Resolution dated
May 12, 2011.
Aggrieved, petitioner filed the instant petition for review on certiorari citing the
following as reasons for granting the same, to wit:
I 65 of the Rules of Court has been settled as early as this Court's decision in St.
THE HONORABLE COURT OF APPEALS RENDERED THE ASSAILED DECISION
CONTRARY TO LAW AND LOGIC BY CITING THE ABSENCE OF PROOF OF REQUISITES
OF A VALID DISMISSAL AS BASIS FOR CONCLUDING THAT THE NLRC GRAVELY
ABUSED ITS DISCRETION.
II
THE HONORABLE COURT OF APPEALS EXCEEDED ITS JURISDICTION BY TREATING
RESPONDENTS' PETITION FOR CERTIORARI UNDER RULE 65 AS AN ORDINARY
APPEAL, AND BY INSISTING ON ITS OWN EVALUATION OF THE EVIDENCE.
III
THE HONORABLE COURT OF APPEALS RENDERED THE DECISION DATED 22 OCTOBER
2010 CONTRARY TO LAW AND THE EVIDENCE ON RECORD.
IV
THE HONORABLE COURT OF APPEALS HAS DEPARTED FROM THE ACCEPTED AND
USUAL COURSE OF JUDICIAL PROCEEDINGS BY MAKING ITS ASSAILED DECISION
IMMEDIATELY EXECUTORY PENDING APPEAL IN SPITE OF THE FACT THAT
RESPONDENTS DID NOT ASK FOR IMMEDIATE PAYMENT OF SEPARATION PAY AND
OTHER CLAIMS, AND DESPITE THE CLAIM OF RESPONDENTS THAT MOST OF THEM
ARE CURRENTLY EMPLOYED IN OTHER DEEP-SEA FISHING COMPANIES.10
Petitioner contends that no grave abuse of discretion can be attributed to the
NLRC's finding affirming that of the LA that the arrangement between petitioner and
respondents was a joint venture partnership; and that the CA, in assuming the role
of an appellate body, had re-examined the facts and re-evaluated the evidence
thereby treating the case as an appeal instead of an original action
for certiorari under Rule 65.
We are not persuaded.
In Prince Transport, Inc. v. Garcia,11 We held:
The power of the CA to review NLRC decisions via a petition for certiorari under Rule
Martin Funeral Homes v. NLRC. In said case, the Court held that the proper vehicle
for such review is a special civil action for certiorari under Rule 65 of the said Rules,
and that the case should be filed with the CA in strict observance of the doctrine of
hierarchy of courts. Moreover, it is already settled that under Section 9 of Batas
Pambansa Blg. 129, as amended by Republic Act No. 7902, the CA, pursuant to the
exercise of its original jurisdiction over petitions for certiorari, is specifically given
the power to pass upon the evidence, if and when necessary, to resolve factual
issues. Section 9 clearly states:
xxxx
The Court of Appeals 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.x x x.
However, equally settled is the rule that factual findings of labor officials, who are
deemed to have acquired expertise in matters within their jurisdiction, are generally
accorded not only respect but even finality by the courts when supported by
substantial evidence, i.e., the amount of relevant evidence which a reasonable mind
might accept as adequate to justify a conclusion. But these findings are not infallible.
When there is a showing that they were arrived at arbitrarily or in disregard of the
evidence on record, they may be examined by the courts. The CA can grant the
petition for certiorari if it finds that the NLRC, in its assailed decision or resolution,
made a factual finding not supported by substantial evidence. It is within the
jurisdiction of the CA, whose jurisdiction over labor cases has been expanded to
review the findings of the NLRC.12
Here, the LA's factual findings was affirmed by the NLRC, however, the CA found
that the latter's resolution did not critically examine the facts and rationally assess
the evidence on hand, and thus found that the NLRC gravely abused its discretion
when it sustained the LA's decision dismissing respondents' complaint for illegal
dismissal on the ground of lack of merit.
The judicial function of the CA in the exercise of its certiorari jurisdiction over the
NLRC extends to the careful review of the NLRC's evaluation of the evidence
because the factual findings of the NLRC are accorded great respect and finality only
when they rest on substantial evidence.13 Accordingly, the CA is not to be restrained
from revising or correcting such factual findings whenever warranted by the
circumstances simply because the NLRC is not infallible. Indeed, to deny to the CA
this power is to diminish its corrective jurisdiction through the writ of certiorari.14
The main issue for resolution is whether or not an employer-employee relationship
existed between petitioner and respondents.
At the outset, We reiterate the doctrine that the existence of an employer-
employee relationship is ultimately a question of fact. Generally, We do not review
errors that raise factual questions. However, when there is a 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. In dealing with factual issues in labor cases, substantial
evidence or that amount of relevant evidence which a reasonable mind might
accept as adequate to justify a conclusion is sufficient.15
In determining the existence of an employer-employee relationship, the following
elements are considered: (1) the selection and engagement of the workers; (2) the
power to control the worker's conduct; (3) the payment of wages by whatever
means; and (4) the power of dismissal.16 We find all these elements present in this
case.
It is settled that 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.17
In this case, petitioner contends that it was the piado who hired respondents,
however, it was shown by the latter's evidence that the employer stated in their
Social Security System (SSS) online inquiry system printouts was MGTR, which is
owned by petitioner. We have gone over these printouts and found that the date of
the SSS remitted contributions coincided with the date of respondents' employment
with petitioner. Petitioner failed to rebut such evidence. Thus, the fact that
petitioner had registered the respondents with SSS is proof that they were indeed
his employees. The coverage of the Social Security Law is predicated on the
existence of an employer-employee relationship.18
Moreover, the records show that the 4% backing incentive fee which was divided
among the fishermen engaged in the fishing operations approved by petitioner was
paid to respondents after deducting the latter's respective vale or cash
advance.19 Notably, even the piado's name was written in the backing incentive fee
sheet with the corresponding vale which was deducted from his incentive fee. If
indeed a joint venture was agreed upon between petitioner and respondents, why
would these fishermen obtain vale or cash advance from petitioner and not from
the piado who allegedly hired and had control over them.
It was established that petitioner exercised control over respondents. It should be
remembered that the control test merely calls for the existence of the right to
control, and not necessarily the exercise thereof. It is not essential that the
employer actually supervises the performance of duties by the employee. It is
enough that the former has a right to wield the power.20
Petitioner admitted in his pleadings that he had contact with respondents at sea via
the former's radio operator and their checker. He claimed that the use of the radio
was only for the purpose of receiving requisitions for the needs of the fishermen in
the high seas and to receive reports of fish catch so that they can then send service
boats to haul the same. However, such communication would establish that he was
constantly monitoring or checking the progress of respondents' fishing operations
throughout the duration thereof, which showed their control and supervision over
respondents' activities. Consequently, We give more credence to respondents'
allegations in their petition filed with the CA on how such control was exercised, to
wit:
The private respondent (petitioner) controls the entire fishing operations. For each
mother fishing boat, private respondent assigned a master fisherman (pi ado) and
assistant master fisherman (assistant pi ado), who every now and then supervise the
fishing operations. Private respondent also assigned a checker and assistant checker
based on the office to monitor and contact every now and then the crew at sea
through radio. The checker and assistant checker advised then the private
respondent of the condition. Based on the report of the checker, the private
respondent, through radio, will then instruct the "piado" how to conduct the fishing
operations.21
Such allegations are more in consonance with the fact that, as the CA found, MGTR
had already invested millions of pesos in its deep-sea fishing industry.
The payment of respondents' wages based on the percentage share of the fish catch
would not be sufficient to negate the employer-employee relationship existing
between them. As held in Ruga v. NLRC:22
x x x [I]t must be noted that petitioners received compensation on a percentage
commission based on the gross sale of the fish-catch, i.e., 13% of the proceeds of
the sale if the total proceeds exceeded the cost of the crude oil consumed during
the fishing trip, otherwise, only 10% of the proceeds of the sale. Such compensation
falls within the scope and meaning of the term "wage" as defined under Article 97(f)
of the Labor Code, thus:
(f) "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 included 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. x x x23
Petitioner wielded the power of dismissal over respondents when he dismissed
them after they refused to sign the joint fishing venture agreement.
The primary standard for 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.24 Respondents' jobs as fishermen-crew
members of FIB MG 28 were directly related and necessary to petitioner's deep-sea
fishing business and they had been performing their job for more than one year. We
quote with approval what the CA said, to wit:
Indeed, it is not difficult to see the direct linkage or causal connection between the
nature of petitioners' (now respondents) work visa- vis MGTR's line of business. In
fact, MGTR's line of business could not possibly exist, let alone flourish without
people like the fishermen crew members of its fishing vessels who actually
undertook the fishing activities in the high seas.1âwphi1 Petitioners' services to
MGTR are so indispensable and necessary that without them MGTR's deep-sea
fishing industry would not have come to existence, much less fruition. Thus, We do
not see any reason why the ruling of the Supreme Court in Ruga v. National Labor
Relations Commission should not apply squarely to the instant case, viz.:
x x x The hiring of petitioners to perform work which is necessary or desirable in the
usual business or trade of private respondent x x x [qualifies] them as regular
employees within the meaning of Article 28025 of the Labor Code as they were
indeed engaged to perform activities usually necessary or desirable in the usual
fishing business or occupation of private respondent.26
As respondents were petitioner's regular employees, they are entitled to security of
tenure under Section 3,27 Article XIII of the 1987 Constitution. It is also provided
under Article 279 of the Labor Code, that the right to security of tenure guarantees
the right of employees to continue in their employment absent a just or authorized
cause for termination. Considering that respondents were petitioner's regular
employees, the latter's act of asking them to sign the joint fishing venture
agreement which provides that the venture shall be for a period of one year from
the date of the agreement, subject to renewal upon mutual agreement of the
parties, and may be pre-terminated by any of the parties before the expiration of
the one-year period, is violative of the former's security of tenure. And respondents'
termination based on their refusal to sign the same, not being shown to be one of
those just causes for termination under Article 282,28 is, therefore, illegal.
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.29
Respondents who were unjustly dismissed from work are entitled to reinstatement
and backwages, among others. However, We agree with the CA that since most (if
not all) of the respondents are already employed in different deep-sea fishing
companies, and considering the strained relations between MGTR and the
respondents, reinstatement is no longer viable. Thus, the CA correctly ordered the
payment to each respondent his separation pay equivalent to one month for every
year of service reckoned from the time he was hired as fishermen-crew member
of FIB MG-28 by MGTR until the finality of this judgment.
The CA correctly found that respondents are entitled to the payment of backwages
from the time they were dismissed until the finality of this decision.
The CA's award of exemplary damages to each respondent is likewise affirmed.
Exemplary damages are granted by way of example or correction for the public good
if the employer acted in a wanton, fraudulent, reckless, oppressive or malevolent
manners.30
We also agree with the CA that respondents are entitled to attorney's fees in the
amount of 10% of the total monetary award.1âwphi1 It is settled that where an
employee was forced to litigate and, thus, incur expenses to protect his rights and
interest, the award of attorney's fees is legally and morally justifiable.31

The legal interest shall be imposed on the monetary awards herein granted at the
rate of six percent (6%) per annum from the finality of this judgment until fully
paid.32

Petitioner's contention that there is no justification to incorporate in the CA decision

the immediate execution pending appeal of its decision is not persuasive. The
petition for certiorari filed with the CA contained a general prayer for such other
relief and remedies just and equitable under the premises. And this general prayer is
broad enough to justify extension of a remedy different from or together with the
specific remedy sought.33 Indeed, a court may grant relief to a party, even if the
party awarded did not pray for it in his pleadings.34

WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated
October 22, 2010 and the Resolution dated May 12, 2011 of the Court of Appeals in
CA-G.R. SP No. 55486-MIN are hereby AFFIRMED. The monetary awards which are
herein granted shall earn legal interest at the rate of six percent (6%) per
annum from the date of the finality of this Decision until fully paid.

SO ORDERED.