G.R. No. 81958 June 30, 1988 It is admitted that Department Order No.
It is admitted that Department Order No. 1 is in the nature of a
PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS,
INC., petitioner,
vs.
HON. FRANKLIN M. DRILON as Secretary of Labor and
Employment, and TOMAS D. ACHACOSO, as Administrator
of the Philippine Overseas Employment
Administration, respondents.
SARMIENTO, J.:
The petitioner, Philippine Association of Service Exporters, Inc.
(PASEI, for short), a firm "engaged principally in the recruitment
of Filipino workers, male and female, for overseas
placement," 1 challenges the Constitutional validity of
Department Order No. 1, Series of 1988, of the Department of
Labor and Employment, in the character of "GUIDELINES
GOVERNING THE TEMPORARY SUSPENSION OF
DEPLOYMENT OF FILIPINO DOMESTIC AND HOUSEHOLD
WORKERS," in this petition for certiorari and prohibition.
Specifically, the measure is assailed for "discrimination against
males or females;" 2 that it "does not apply to all Filipino workers
but only to domestic helpers and females with similar
skills;" 3 and that it is violative of the right to travel. It is held
likewise to be an invalid exercise of the lawmaking power, police
power being legislative, and not executive, in character.
In its supplement to the petition, PASEI invokes Section 3, of
Article XIII, of the Constitution, providing for worker participation
"in policy and decision-making processes affecting their rights
and benefits as may be provided by law." 4 Department Order
No. 1, it is contended, was passed in the absence of prior
consultations. It is claimed, finally, to be in violation of the
Charter's non-impairment clause, in addition to the "great and
irreparable injury" that PASEI members face should the Order
be further enforced.
On May 25, 1988, the Solicitor General, on behalf of the
respondents Secretary of Labor and Administrator of the
Philippine Overseas Employment Administration, filed a
Comment informing the Court that on March 8, 1988, the
respondent Labor Secretary lifted the deployment ban in the
states of Iraq, Jordan, Qatar, Canada, Hongkong, United States,
Italy, Norway, Austria, and Switzerland. * In submitting the
validity of the challenged "guidelines," the Solicitor General
invokes the police power of the Philippine State.
further private interests at the expense of the citizenry, there is a
police power measure. The only question is whether or not it is
valid under the Constitution.
The concept of police power is well-established in this
jurisdiction. It has been defined as the "state authority to enact
legislation that may interfere with personal liberty or property in
order to promote the general welfare." 5 As defined, it consists of
(1) an imposition of restraint upon liberty or property, (2) in order
to foster the common good. It is not capable of an exact
definition but has been, purposely, veiled in general terms to
underscore its all-comprehensive embrace.
"Its scope, ever-expanding to meet the exigencies of the times,
even to anticipate the future where it could be done, provides
enough room for an efficient and flexible response to conditions
and circumstances thus assuring the greatest benefits." 6
It finds no specific Constitutional grant for the plain reason that it
does not owe its origin to the Charter. Along with the taxing
power and eminent domain, it is inborn in the very fact of
statehood and sovereignty. It is a fundamental attribute of
government that has enabled it to perform the most vital
functions of governance. Marshall, to whom the expression has
been credited, 7 refers to it succinctly as the plenary power of the
State "to govern its citizens." 8
"The police power of the State ... is a power coextensive with
self- protection, and it is not inaptly termed the "law of
overwhelming necessity." It may be said to be that inherent and
plenary power in the State which enables it to prohibit all things
hurtful to the comfort, safety, and welfare of society." 9
It constitutes an implied limitation on the Bill of Rights. According
to Fernando, it is "rooted in the conception that men in
organizing the state and imposing upon its government
limitations to safeguard constitutional rights did not intend
thereby to enable an individual citizen or a group of citizens to
obstruct unreasonably the enactment of such salutary measures
calculated to ensure communal peace, safety, good order, and
welfare." 10 Significantly, the Bill of Rights itself does not purport
to be an absolute guaranty of individual rights and liberties
"Even liberty itself, the greatest of all rights, is not unrestricted
license to act according to one's will." 11 It is subject to the far
more overriding demands and requirements of the greater
number.
Notwithstanding its extensive sweep, police power is not without
its own limitations. For all its awesome consequences, it may not
be exercised arbitrarily or unreasonably. Otherwise, and in that
event, it defeats the purpose for which it is exercised, that is, to
advance the public good. Thus, when the power is used to
clear misuse of the power. 12
In the light of the foregoing, the petition must be dismissed.
As a general rule, official acts enjoy a presumed vahdity. 13 In
the absence of clear and convincing evidence to the contrary,
the presumption logically stands.
The petitioner has shown no satisfactory reason why the
contested measure should be nullified. There is no question that
Department Order No. 1 applies only to "female contract
workers," 14 but it does not thereby make an undue
discrimination between the sexes. It is well-settled that "equality
before the law" under the Constitution 15does not import a
perfect Identity of rights among all men and women. It admits of
classifications, provided that (1) such classifications rest on
substantial distinctions; (2) they are germane to the purposes of
the law; (3) they are not confined to existing conditions; and (4)
they apply equally to all members of the same class. 16
The Court is satisfied that the classification made-the preference
for female workers — rests on substantial distinctions.
As a matter of judicial notice, the Court is well aware of the
unhappy plight that has befallen our female labor force abroad,
especially domestic servants, amid exploitative working
conditions marked by, in not a few cases, physical and personal
abuse. The sordid tales of maltreatment suffered by migrant
Filipina workers, even rape and various forms of torture,
confirmed by testimonies of returning workers, are compelling
motives for urgent Government action. As precisely the
caretaker of Constitutional rights, the Court is called upon to
protect victims of exploitation. In fulfilling that duty, the Court
sustains the Government's efforts.
The same, however, cannot be said of our male workers. In the
first place, there is no evidence that, except perhaps for isolated
instances, our men abroad have been afflicted with an Identical
predicament. The petitioner has proffered no argument that the
Government should act similarly with respect to male workers.
The Court, of course, is not impressing some male chauvinistic
notion that men are superior to women. What the Court is saying
is that it was largely a matter of evidence (that women domestic
workers are being ill-treated abroad in massive instances) and
not upon some fanciful or arbitrary yardstick that the
Government acted in this case. It is evidence capable indeed of
unquestionable demonstration and evidence this Court accepts.
The Court cannot, however, say the same thing as far as men
are concerned. There is simply no evidence to justify such an
inference. Suffice it to state, then, that insofar as classifications
are concerned, this Court is content that distinctions are borne
by the evidence. Discrimination in this case is justified.
As we have furthermore indicated, executive determinations are
generally final on the Court. Under a republican regime, it is the
executive branch that enforces policy. For their part, the courts
decide, in the proper cases, whether that policy, or the manner
by which it is implemented, agrees with the Constitution or the
laws, but it is not for them to question its wisdom. As a co-equal
body, the judiciary has great respect for determinations of the
Chief Executive or his subalterns, especially when the legislature
itself has specifically given them enough room on how the law
should be effectively enforced. In the case at bar, there is no
gainsaying the fact, and the Court will deal with this at greater
length shortly, that Department Order No. 1 implements the rule-
making powers granted by the Labor Code. But what should be
noted is the fact that in spite of such a fiction of finality, the Court
is on its own persuaded that prevailing conditions indeed call for
a deployment ban.
There is likewise no doubt that such a classification is germane
to the purpose behind the measure. Unquestionably, it is the
avowed objective of Department Order No. 1 to "enhance the
protection for Filipino female overseas workers" 17 this Court has
no quarrel that in the midst of the terrible mistreatment Filipina
workers have suffered abroad, a ban on deployment will be for
their own good and welfare.
The Order does not narrowly apply to existing conditions.
Rather, it is intended to apply indefinitely so long as those
conditions exist. This is clear from the Order itself ("Pending
review of the administrative and legal measures, in the
Philippines and in the host countries . . ."18), meaning to say that
should the authorities arrive at a means impressed with a
greater degree of permanency, the ban shall be lifted. As a stop-
gap measure, it is possessed of a necessary malleability,
depending on the circumstances of each case. Accordingly, it
provides:
9. LIFTING OF SUSPENSION. — The Secretary of Labor and
Employment (DOLE) may, upon recommendation of the
Philippine Overseas Employment Administration (POEA), lift the
suspension in countries where there are:
1. Bilateral agreements or understanding with the Philippines,
and/or,
2. Existing mechanisms providing for sufficient safeguards to
ensure the welfare and protection of Filipino workers. 19
The Court finds, finally, the impugned guidelines to be applicable
to all female domestic overseas workers. That it does not apply
to "all Filipina workers" 20 is not an argument for
unconstitutionality. Had the ban been given universal
applicability, then it would have been unreasonable and
arbitrary. For obvious reasons, not all of them are similarly
circumstanced. What the Constitution prohibits is the singling out
of a select person or group of persons within an existing class, to
the prejudice of such a person or group or resulting in an unfair
advantage to another person or group of persons. To apply the
ban, say exclusively to workers deployed by A, but not to those
recruited by B, would obviously clash with the equal protection
clause of the Charter. It would be a classic case of what Chase
refers to as a law that "takes property from A and gives it to
B." 21 It would be an unlawful invasion of property rights and
freedom of contract and needless to state, an invalid
act. 22 (Fernando says: "Where the classification is based on
such distinctions that make a real difference as infancy, sex, and
stage of civilization of minority groups, the better rule, it would
seem, is to recognize its validity only if the young, the women,
and the cultural minorities are singled out for favorable
treatment. There would be an element of unreasonableness if on
the contrary their status that calls for the law ministering to their
needs is made the basis of discriminatory legislation against
them. If such be the case, it would be difficult to refute the
assertion of denial of equal protection." 23 In the case at bar, the
assailed Order clearly accords protection to certain women
workers, and not the contrary.)
It is incorrect to say that Department Order No. 1 prescribes a
total ban on overseas deployment. From scattered provisions of
the Order, it is evident that such a total ban has hot been
contemplated. We quote:
5. AUTHORIZED DEPLOYMENT-The deployment of domestic
helpers and workers of similar skills defined herein to the
following [sic] are authorized under these guidelines and are
exempted from the suspension.
5.1 Hirings by immediate members of the family of Heads of
State and Government;
5.2 Hirings by Minister, Deputy Minister and the other senior
government officials; and
5.3 Hirings by senior officials of the diplomatic corps and duly
accredited international organizations.
5.4 Hirings by employers in countries with whom the Philippines
have [sic] bilateral labor agreements or understanding.
xxx xxx xxx
7. VACATIONING DOMESTIC HELPERS AND WORKERS OF
SIMILAR SKILLS--Vacationing domestic helpers and/or workers
of similar skills shall be allowed to process with the POEA and
leave for worksite only if they are returning to the same employer
to finish an existing or partially served employment contract.
Those workers returning to worksite to serve a new employer
shall be covered by the suspension and the provision of these
guidelines.
xxx xxx xxx
9. LIFTING OF SUSPENSION-The Secretary of Labor and
Employment (DOLE) may, upon recommendation of the
Philippine Overseas Employment Administration (POEA), lift the
suspension in countries where there are:
1. Bilateral agreements or understanding with the Philippines,
and/or,
2. Existing mechanisms providing for sufficient safeguards to
ensure the welfare and protection of Filipino workers. 24
xxx xxx xxx
The consequence the deployment ban has on the right to travel
does not impair the right. The right to travel is subject, among
other things, to the requirements of "public safety," "as may be
provided by law." 25 Department Order No. 1 is a valid
implementation of the Labor Code, in particular, its basic policy
to "afford protection to labor," 26 pursuant to the respondent
Department of Labor's rule-making authority vested in it by the
Labor Code. 27 The petitioner assumes that it is unreasonable
simply because of its impact on the right to travel, but as we
have stated, the right itself is not absolute. The disputed Order is
a valid qualification thereto.
Neither is there merit in the contention that Department Order
No. 1 constitutes an invalid exercise of legislative power. It is
true that police power is the domain of the legislature, but it does
not mean that such an authority may not be lawfully delegated.
As we have mentioned, the Labor Code itself vests the
Department of Labor and Employment with rulemaking powers
in the enforcement whereof. 28
The petitioners's reliance on the Constitutional guaranty of
worker participation "in policy and decision-making processes
affecting their rights and benefits" 29 is not well-taken. The right
granted by this provision, again, must submit to the demands
and necessities of the State's power of regulation.
The Constitution declares that:
Sec. 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. 30
"Protection to labor" does not signify the promotion of
employment alone. What concerns the Constitution more
paramountly is that such an employment be above all, decent,
just, and humane. It is bad enough that the country has to send
its sons and daughters to strange lands because it cannot satisfy
their employment needs at home. Under these circumstances,
the Government is duty-bound to insure that our toiling
expatriates have adequate protection, personally and
economically, while away from home. In this case, the
Government has evidence, an evidence the petitioner cannot
seriously dispute, of the lack or inadequacy of such protection,
and as part of its duty, it has precisely ordered an indefinite ban
on deployment.
The Court finds furthermore that the Government has not
indiscriminately made use of its authority. It is not contested that
it has in fact removed the prohibition with respect to certain
countries as manifested by the Solicitor General.
The non-impairment clause of the Constitution, invoked by the
petitioner, must yield to the loftier purposes targetted by the
Government. 31 Freedom of contract and enterprise, like all other
freedoms, is not free from restrictions, more so in this
jurisdiction, where laissez faire has never been fully accepted as
a controlling economic way of life.
This Court understands the grave implications the questioned
Order has on the business of recruitment. The concern of the
Government, however, is not necessarily to maintain profits of
business firms. In the ordinary sequence of events, it is profits
that suffer as a result of Government regulation. The interest of
the State is to provide a decent living to its citizens. The
Government has convinced the Court in this case that this is its
intent. We do not find the impugned Order to be tainted with a
grave abuse of discretion to warrant the extraordinary relief
prayed for.
WHEREFORE, the petition is DISMISSED. No costs.
[G.R. No. 119243. April 17, 1997]
BREW MASTER INTERNATIONAL INC., petitioner,
vs. NATIONAL FEDERATION OF LABOR UNIONS (NAFLU),
ANTONIO D. ESTRADA and HONORABLE NATIONAL
LABOR RELATIONS COMMISSION (Third
Division), respondents.
DECISION
DAVIDE, JR., J.:
This is a special civil action for certiorari seeking the reversal of
the 7 October 1994 decision[1] of the National Labor Relations
Commission (NLRC) in NLRC Case No. 00-06-04136-93 (CA
No. L-007370-94), which modified the 11 July 1994 decision[2] of
the Labor Arbiter by directing the reinstatement of private
respondent Antonio D. Estrada, the complainant, without loss of
seniority rights and benefits.
Private respondent National Federation of Labor Unions
(NAFLU), a co-complainant in the labor case, is a labor union of
which complainant is a member.
The factual and procedural antecedents are summarized in the
decision of the Labor Arbiter which we quote verbatim:
Complainant was first employed by respondent on 16
September 1991 as route helper with the latest daily wage
of P119.00. From 19 April 1993 up to 19 May 1993, for a period
of one (1) month, complainant went on absent without
permission (AWOP). On 20 May 1993, respondent thru Mr.
Rodolfo Valentin, sent a Memo to complainant, to wit:
Please explain in writing within 24 hours of your receipt of this
memo why no disciplinary action should be taken against you for
the following offense:
You were absent since April 19, 1993 up to May 19, 1993.
For your strict compliance.
In answer to the aforesaid memo, complainant explained:
Sa dahilan po na ako ay hindi nakapagpaalam sainyo [sic] dahil
inuwi ko ang mga anak ko sa Samar dahil ang asawa ko ay
lumayas at walang mag-aalaga sa mga anak ko. Kaya naman
hindi ako naka long distance or telegrama dahil wala akong pera
at ibinili ko ng gamot ay puro utang pa.
Finding said explanation unsatisfactory, on 16 June 1993,
respondent thru its Sales Manager, Mr. Henry A. Chongco
issued a Notice of Termination which reads:
We received your letter of explanation dated May 21, 1993 but
we regret to inform you that we do not consider it valid. You are
aware of the company Rules and Regulations that absence
without permission for six (6) consecutive working days is
considered abandonment of work.
In view of the foregoing, the company has decided to terminate
your employment effective June 17, 1993 for abandonment of
work.
Hence, this complaint.
Complainants contend that individual complainants dismissal
was done without just cause; that it was not sufficiently
established that individual complainants absence from April 19,
1993 to June 16, 1993 are unjustified; that the penalty of
dismissal for such violation is too severe; that in imposing such
penalty, respondent should have taken into consideration
complainants length of service and as a first offender, a penalty
less punitive will suffice such as suspension for a definite period,
(Position Paper, complainants).
Upon the other hand, respondent contends that individual
complainant was dismissed for cause allowed by the company
Rules and Regulations and the Labor Code; that the act of
complainant in absenting from work for one (1) month without
official leave is deleterious to the business of respondent; that it
will result to stoppage of production which will not only
destructive to respondents interests but also to the interest of its
employees in general; that the dismissal of complainant from the
service is legal, (Position Paper, respondent).[3]
The Labor Arbiter dismissed the complaint for lack of merit,
citing the principle of managerial control, which recognizes the
employers prerogative to prescribe reasonable rules and
regulations to govern the conduct of his employees. The
principle allows the imposition of disciplinary measures which
are necessary for the efficiency of both the employer and the
employees. In complainant's case, he persisted in not reporting
for work until 16 June 1993 notwithstanding his receipt of the
memorandum requiring him to explain his absence without
approval. The Labor Arbiter, relying on Shoemart, Inc. vs.
NLRC,[4] thus concluded:
Verily, it is crystal clear that individual complainant has indeed
abandoned his work. The filing of the complaint on 25 June 1993
or almost two (2) months from the date complainant failed to
report for work affirms the findings of this Office and therefore,
under the law and jurisprudence which upholds the right of an
employer to discharge an employee who incurs frequent,
prolonged and unexplained absences as being grossly remiss in
his duties to the employer and is therefore, dismissed for cause,
(Shoemart, Inc. vs. NLRC, 176 SCRA 385). An employee is
deemed to have abandoned his position or to have resigned
from the same, whenever he has been absent therefrom without
previous permission of the employer for three consecutive days
or more. This justification is the obvious harm to employers
interest, resulting from [sic] the non-availability of the workers
services, (Supra). (underscoring supplied)[5]
and ruled that complainants termination from his employment
was legal, the same with just or authorized cause and due
process.[6]
Complainant appealed to the NLRC, alleging that the immediate
filing of a complaint for illegal dismissal verily indicated that he
never intended to abandon his work, then cited Policarpio v.
Vicente Dy Sun, Jr.,[7] where the NLRC ruled that prolonged
absence does not, by itself, necessarily mean
abandonment. Accordingly, there must be a concurrence of
intention and overt acts from which it can be inferred that the
employee is no longer interested in working. Complainant
likewise invoked compassion in the application of sanctions, as
dismissal from employment brings untold hardship and sorrows
on the dependents of the wage earners. In his case, a penalty
less punitive than dismissal could have sufficed.
In the assailed decision[8] of 7 October 1994, the NLRC modified
the Labor Arbiter's decision and held that complainants
dismissal was invalid for the following reasons:
Complainant-appellants prolonged absences, although
unauthorized, may not amount to gross neglect or abandonment
of work to warrant outright termination of employment. Dismissal
is too severe a penalty. For one, the mere fact that complainant-
appellant is a first offender must be considered in his
favor. Besides, it is generally impossible for an employee to
anticipate when he would be ill or compelled to attend to some
family problems or emergency like in the case at bar.
Reliance on the ruling enunciated in the cited case of Shoemart
Inc. vs. National Labor Relations, 176 SCRA 385, is quite
misplaced because of the obvious dissimilarities of the attendant
circumstances in the said case vis-a-vis those obtaining in the
case at bar. Unlike in the aforecited Shoemart Case, herein
complainant-appellant was not dismissed for unauthorized
absences and eventually reinstated anterior to his second
dismissal for the same offense nor was he given a second
chance which he could have ignored.
Otherwise stated, the difference between the two cases greatly
lies [in] the fact that complainant in the Shoemart Case in the
language of the Supreme Court was an inveterate absentee who
does not deserve reinstatement compared to herein
complainant-appellant who is a first offender[9]
The NLRC then decreed as follows:
PREMISES CONSIDERED, and [sic] the Decision of the Labor
Arbiter, dated 11 July 1994 is hereby MODIFIED, by directing
the reinstatement of complainant-appellant to his former position
without loss of seniority rights and other benefits, but without
backwages. The other findings in the appealed decision stand
AFFIRMED.[10]
Petitioners motion for the reconsideration[11] was denied by the
NLRC in its 7 December 1994 resolution.[12] Petitioner thus filed
this special civil action contending that the NLRC committed
grave abuse of discretion in ordering complainant's
reinstatement, which in effect countenances the reinstatement of
an employee who is found guilty of excessive absences without
prior approval. It further argued that the NLRC failed to consider
the rationale behind petitioners Rules and Regulations; that it
was deprived of its prerogative to enforce them; and that
complainant's reinstatement would adversely affect its business
and send the wrong signals to its employees.
In its comment[13] for public respondent NLRC, the Office of the
Solicitor General maintained that dismissal from employment
was too severe a penalty for a first time offender like
complainant. Although he violated petitioners rules and
regulations, his absences were justified: he had to bring his
children to Samar, his home province, as his wife deserted
him. While that by itself might not excuse the failure to seek
permission, the Office of the Solicitor General submitted,
however, that it would be at [sic] the height of callousness if one,
considering his plight under the circumstance[s], would not give
due consideration to [complainants] explanation. There has to be
an exception.[14]
Applying Itogon-Suyoc Mines, Inc. v. NLRC,[15] the Office of the
Solicitor General recommended complainants reinstatement,
which would be more harmonious to the dictates of social justice
and equity. It further emphasized that the reinstatement should
not be considered a condonation of complainants irresponsible
behavior, rather, it must be viewed as a mitigation of the severity
of the penalty of dismissal. Accordingly, it prays that this petition
be dismissed.
In its reply,[16] petitioner disputed the application of Itogon-Suyoc
because: (1) the employee involved therein had been in the
service for twenty-three years while complainant herein had
served petitioner for only two years; and (2) the offense
in Itogon-Suyoc was limited to a single act of high grading while
complainant herein committed a series of unexcused absences.
We gave due course to the petition and dispensed with
complainants comment.
The sole issue to be resolved is whether the NLRC committed
grave abuse of discretion in modifying the decision of the Labor
Arbiter.
The answer must be in the negative.
A scrutiny of the facts discloses that complainants absence was
precipitated by a grave family problem as his wife unexpectedly
deserted him and abandoned the family. Considering that he
had a full-time job, there was no one to whom he could entrust
the children and he was thus compelled to bring them to the
province. It would have been extremely difficult for him to have
been husband and wife/father and mother at the same time to
the children in the metropolis. He was then under emotional,
psychological, spiritual and physical stress and strain.The
reason for his absence is, under these circumstances,
justified. While his failure to inform and seek petitioner's
approval was an omission which must be corrected and
chastised, he did not merit the severest penalty of dismissal from
the service.
Petitioners finding that complainant was guilty of abandonment
is misplaced. Abandonment as a just and valid ground for
dismissal requires the deliberate, unjustified refusal of the
employee to resume his employment. Two elements must then
be satisfied: (1) the failure to report for work or absence without
valid or justifiable reason; and (2) a clear intention to sever the
employer-employee relationship. The second element is the
more determinative factor and must be evinced by overt
acts.[17] Likewise, the burden of proof is on the employer to show
the employees clear and deliberate intent to discontinue his
employment without any intention of returning,[18] mere absence
is not sufficient.[19] These elements are not present here. First,
as held above, complainant's absence was justified under the
circumstances. As to the second requisite, we are not convinced
that complainant ever intended to sever the employer-employee
relationship. Complainant immediately complied with the memo
requiring him to explain his absence, and upon knowledge of his
termination, immediately sued for illegal dismissal. These plainly
refuted any claim that he was no longer interested in returning to
work.[20] Without doubt, the intention is lacking.
Moreover, petitioner failed to discharge the burden of proof that
complainant was guilty of abandonment. No evidence other than
complainants letter explaining his absence was
presented. Needless to state, the letter did not indicate, in the
least, that complainant was no longer interested in returning to
work. On the contrary, complainant sought petitioners
understanding. In declaring him guilty of abandonment,
petitioner merely relied on its Rules and Regulations which
limited its application to a six-day continuous absence, contrary
to the purpose of the law. While the employer is not precluded
from prescribing rules and regulations to govern the conduct of
his employees, these rules and their implementation must be
fair, just and reasonable. It must be underscored that no less
than our Constitution looks with compassion on the workingman
and protects his rights not only under a general statement of a
state policy,[21] but under the Article on Social Justice and
Human Rights,[22] thus placing labor contracts on a higher plane
and with greater safeguards. Verily, relations between capital
and labor are not merely contractual. They are impressed with
public interest and labor contracts must, perforce, yield to the
common good.[23]
We then conclude that complainants "prolonged" absence
without approval does not fall within the definition of
abandonment and that his dismissal was unjustified. While we
do not decide here the validity of petitioner's Rules and
Regulations on continuous, unauthorized absences, what is
plain is that it was wielded with undue haste resulting in a
deprivation of due process, thus not allowing for a determination
of just cause or abandonment. In this light, petitioner's dismissal
was illegal. This is not to say that his absence should go
unpunished, as impliedly noted by the NLRC in declining to
award back wages. In the absence of the appropriate offense
which defines complainants infraction in the companys Rules
and Regulations, equity dictates that a penalty commensurate to
the infraction be imposed.
WHEREFORE, the petition is hereby DISMISSED and the
decision of the National Labor Relations Commission in NLRC
Case No. 06-04136-93 is hereby AFFIRMED. No
pronouncement as to costs.
II: Er-Ee RELATIONSHIP
G.R. No. L-12582 January 28, 1961
LVN PICTURES, INC., petitioner-appellant,
vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF
INDUSTRIAL RELATIONS, respondents-appellees.
x---------------------------------------------------------x
G.R. No. L-12598 January 28, 1961
SAMPAGUITA PICTURES, INC., petitioner-appellant,
vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF
INDUSTRIAL RELATIONS, respondents-appellees.
Nicanor S. Sison for petitioner-appellant.
Jaime E. Ilagan for respondent-appellee Court of Agrarian
Relations.
Gerardo P. Cabo Chan for respondent-appellee Philippine
Musicians Guild.
CONCEPCION, J.:
Petitioners herein, LVN Pictures, Inc. and Sampaguita Pictures,
Inc. seek a review by certiorari of an order of the Court of
Industrial Relations in Case No. 306-MC thereof, certifying the
Philippine Musicians Guild (FFW), petitioner therein and
respondent herein, as the sole and exclusive bargaining agency
of all musicians working with said companies, as well as with the
Premiere Productions, Inc., which has not appealed. The appeal
of LVN Pictures, Inc., has been docketed as G.R. No. L-12582,
whereas G.R. No. L-12598 is the appeal of Sampaguita
Pictures, Inc. Involving as they do the same order, the two cases
have been jointly heard in this Court, and will similarly be
disposed of.
In its petition in the lower court, the Philippine Musicians Guild
(FFW), hereafter referred to as the Guild, averred that it is a duly
registered legitimate labor organization; that LVN Pictures, Inc.,
Sampaguita Pictures, Inc., and Premiere Productions, Inc. are
corporations, duly organized under the Philippine laws, engaged
in the making of motion pictures and in the processing and
distribution thereof; that said companies employ musicians for
the purpose of making music recordings for title music,
background music, musical numbers, finale music and other
incidental music, without which a motion picture is incomplete;
that ninety-five (95%) percent of all the musicians playing for the
musical recordings of said companies are members of the Guild;
and that the same has no knowledge of the existence of any
other legitimate labor organization representing musicians in
said companies. Premised upon these allegations, the Guild
prayed that it be certified as the sole and exclusive bargaining
agency for all musicians working in the aforementioned
companies. In their respective answers, the latter denied that
they have any musicians as employees, and alleged that the
musical numbers in the filing of the companies are furnished by
independent contractors. The lower court, however, rejected this
pretense and sustained the theory of the Guild, with the result
already adverted to. A reconsideration of the order complained
of having been denied by the Court en banc, LVN Pictures, inc.,
and Sampaguita Pictures, Inc., filed these petitions for review
for certiorari.
Apart from impugning the conclusion of the lower court on the
status of the Guild members as alleged employees of the film
companies, the LVN Pictures, Inc., maintains that a petition for
certification cannot be entertained when the existence of
employer-employee relationship between the parties is
contested. However, this claim is neither borne out by any legal
provision nor supported by any authority. So long as, after due
hearing, the parties are found to bear said relationship, as in the
case at bar, it is proper to pass upon the merits of the petition for
certification.
It is next urged that a certification is improper in the present
case, because, "(a) the petition does not allege and no evidence
was presented that the alleged musicians-employees of the
respondents constitute a proper bargaining unit, and (b) said
alleged musicians-employees represent a majority of the other
numerous employees of the film companies constituting a proper
bargaining unit under section 12 (a) of Republic Act No. 875."
The absence of an express allegation that the members of the
Guild constitute a proper bargaining unit is fatal proceeding, for
the same is not a "litigation" in the sense in which this term is
commonly understood, but a mere investigation of a non-
adversary, fact finding character, in which the investigating
agency plays the part of a disinterested investigator seeking
merely to ascertain the desires of employees as to the matter of
their representation. In connection therewith, the court enjoys a
wide discretion in determining the procedure necessary to insure
the fair and free choice of bargaining representatives by
employees.1 Moreover, it is alleged in the petition that the Guild
it a duly registered legitimate labor organization and that ninety-
five (95%) percent of the musicians playing for all the musical
recordings of the film companies involved in these cases are
members of the Guild. Although, in its answer, the LVN Pictures,
Inc. denied both allegations, it appears that, at the hearing in the
lower court it was merely the status of the musicians as its
employees that the film companies really contested. Besides,
the substantial difference between the work performed by said
musicians and that of other persons who participate in the
production of a film, and the peculiar circumstances under which
the services of that former are engaged and rendered, suffice to
show that they constitute a proper bargaining unit. At this
juncture, it should be noted that the action of the lower court in
deciding upon an appropriate unit for collective bargaining
purposes is discretionary (N.L.R.B. v. May Dept. Store Co., 66
Sup. Ct. 468. 90 L. ed. 145) and that its judgment in this respect
is entitled to almost complete finality, unless its action is arbitrary
or capricious (Marshall Field & Co. v. N.L.R.B. [C.C.A. 19431,
135 F. 2d. 891), which is far from being so in the cases at bar.
Again, the Guild seeks to be, and was, certified as the sole and
exclusive bargaining agency for the musicians working in the
aforesaid film companies. It does not intend to represent the
other employees therein. Hence, it was not necessary for the
Guild to allege that its members constitute a majority of all the
employees of said film companies, including those who are not
musicians. The real issue in these cases, is whether or not the
musicians in question are employees of the film companies. In
this connection the lower court had the following to say:
As a normal and usual course of procedure employed by the
companies when a picture is to be made, the producer invariably
chooses, from the musical directors, one who will furnish the
musical background for a film. A price is agreed upon verbally
between the producer and musical director for the cost of
furnishing such musical background. Thus, the musical director
may compose his own music specially written for or adapted to
the picture. He engages his own men and pays the
corresponding compensation of the musicians under him.
When the music is ready for recording, the musicians are
summoned through 'call slips' in the name of the film company
(Exh 'D'), which show the name of the musician, his musical
instrument, and the date, time and place where he will be picked
up by the truck of the film company. The film company provides
the studio for the use of the musicians for that particular
recording. The musicians are also provided transportation to and
from the studio by the company. Similarly, the company
furnishes them meals at dinner time.
During the recording sessions, the motion picture director, who
is an employee of the company, supervises the recording of the
musicians and tells what to do in every detail. He solely directs
the performance of the musicians before the camera as director,
he supervises the performance of all the action, including the
musicians who appear in the scenes so that in the actual
performance to be shown on the screen, the musical director's
intervention has stopped.
And even in the recording sessions and during the actual
shooting of a scene, the technicians, soundmen and other
employees of the company assist in the operation. Hence, the
work of the musicians is an integral part of the entire motion
picture since they not only furnish the music but are also called
upon to appear in the finished picture.
The question to be determined next is what legal relationship
exits between the musicians and the company in the light of the
foregoing facts.
We are thus called upon to apply R.A. Act 875. which is
substantially the same as and patterned after the Wagner Act
substantially the same as a Act and the Taft-Hartley Law of the
United States. Hence, reference to decisions of American Courts
on these laws on the point-at-issue is called for.
Statutes are to be construed in the light of purposes achieved
and the evils sought to be remedied. (U.S. vs. American
Tracking Association, 310 U.S. 534, 84 L. ed. 1345.) .
In the case of National Labor Relations Board vs. Hearts
Publication, 322 U.S. 111, the United States Supreme Court said
the Wagner Act was designed to avert the 'substantial
obstruction to the free flow of commerce which results from
strikes and other forms of industrial unrest by eliminating the
causes of the unrest. Strikes and industrial unrest result from the
refusal of employers' to bargain collectively and the inability of
workers to bargain successfully for improvement in their working
conditions. Hence, the purposes of the Act are to encourage
collective bargaining and to remedy the workers' inability to
bargaining power, by protecting the exercise of full freedom of
association and designation of representatives of their own
choosing, for the purpose of negotiating the terms and
conditions of their employment.'
The mischief at which the Act is aimed and the remedies it offers
are not confined exclusively to 'employees' within the traditional
legal distinctions, separating them from 'independent contractor'.
Myriad forms of service relationship, with infinite and subtle
variations in the term of employment, blanket the nation's
economy. Some are within this Act, others beyond its coverage.
Large numbers will fall clearly on one side or on the other, by
whatever test may be applied. Inequality of bargaining power in
controversies of their wages, hours and working conditions may
characterize the status of one group as of the other. The former,
when acting alone may be as helpless in dealing with the
employer as dependent on his daily wage and as unable to
resist arbitrary and unfair treatment as the latter.'
To eliminate the causes of labor dispute and industrial strike,
Congress thought it necessary to create a balance of forces in
certain types of economic relationship. Congress recognized
those economic relationships cannot be fitted neatly into the
containers designated as 'employee' and 'employer'. Employers
and employees not in proximate relationship may be drawn into
common controversies by economic forces and that the very
dispute sought to be avoided might involve 'employees' who are
at times brought into an economic relationship with 'employers',
who are not their 'employers'. In this light, the language of the
Act's definition of 'employee' or 'employer' should be determined
broadly in doubtful situations, by underlying economic facts
rather than technically and exclusively established legal
classifications. (NLRB vs. Blount, 131 F [2d] 585.)
In other words, the scope of the term 'employee' must be
understood with reference to the purposes of the Act and the
facts involved in the economic relationship. Where all the
conditions of relation require protection, protection ought to be
given .
By declaring a worker an employee of the person for whom he
works and by recognizing and protecting his rights as such, we
eliminate the cause of industrial unrest and consequently we
promote industrial peace, because we enable him to negotiate
an agreement which will settle disputes regarding conditions of
employment, through the process of collective bargaining.
The statutory definition of the word 'employee' is of wide scope.
As used in the Act, the term embraces 'any employee' that is all
employees in the conventional as well in the legal sense expect
those excluded by express provision. (Connor Lumber Co., 11
NLRB 776.).
It is the purpose of the policy of Republic Act 875; (a) To
eliminate the causes of industrial unrest by protecting the
exercise of their right to self-organization for the purpose of
collective bargaining. (b) To promote sound stable industrial
peace and the advancement of the general welfare, and the best
interests of employers and employees by the settlement of
issues respecting terms and conditions of employment through
the process of collective bargaining between employers and
representatives of their employees.
The primary consideration is whether the declared policy and
purpose of the Act can be effectuated by securing for the
individual worker the rights and protection guaranteed by the
Act. The matter is not conclusively determined by a contract
which purports to establish the status of the worker, not as an
employee.
The work of the musical director and musicians is a functional
and integral part of the enterprise performed at the same studio
substantially under the direction and control of the company.
In other words, to determine whether a person who performs
work for another is the latter's employee or an independent
contractor, the National Labor Relations relies on 'the right to
control' test. Under this test an employer-employee relationship
exist where the person for whom the services are performed
reserves the right to control not only the end to be achieved, but
also the manner and means to be used in reaching the end.
(United Insurance Company, 108, NLRB No. 115.).
Thus, in said similar case of Connor Lumber Company, the
Supreme Court said:.
'We find that the independent contractors and persons working
under them are employees' within the meaning of Section 2 (3)
of its Act. However, we are of the opinion that the independent
contractors have sufficient authority over the persons working
under their immediate supervision to warrant their exclusion from
the unit. We shall include in the unit the employees working
under the supervision of the independent contractors, but
exclude the contractors.'
'Notwithstanding that the employees are called independent
contractors', the Board will hold them to be employees under the
Act where the extent of the employer's control over them
indicates that the relationship is in reality one of employment.
(John Hancock Insurance Co., 2375-D, 1940, Teller, Labor
Dispute Collective Bargaining, Vol.).
The right of control of the film company over the musicians is
shown (1) by calling the musicians through 'call slips' in 'the
name of the company; (2) by arranging schedules in its studio
for recording sessions; (3) by furnishing transportation and
meals to musicians; and (4) by supervising and directing in
detail, through the motion picture director, the performance of
the musicians before the camera, in order to suit the music they
are playing to the picture which is being flashed on the screen.
Thus, in the application of Philippine statutes and pertinent
decisions of the United States Courts on the matter to the facts
established in this case, we cannot but conclude that to
effectuate the policies of the Act and by virtue of the 'right of
control' test, the members of the Philippine Musicians Guild are
employees of the three film companies and, therefore, entitled to
right of collective bargaining under Republic Act No. 875.
In view of the fact that the three (3) film companies did not
question the union's majority, the Philippine Musicians Guild is
hereby declared as the sole collective bargaining representative
for all the musicians employed by the film companies."
We are fully in agreement with the foregoing conclusion and the
reasons given in support thereof. Both are substantially in line
with the spirit of our decision in Maligaya Ship Watchmen
Agency vs. Associated Watchmen and Security Union, L-12214-
17 (May 28, 1958). In fact, the contention of the employers in
the Maligaya cases, to the effect that they had dealt with
independent contractors, was stronger than that of the film
companies in these cases. The third parties with whom the
management and the workers contracted in the Maligaya cases
were agencies registered with the Bureau of Commerce and
duly licensed by the City of Manila to engage in the business of
supplying watchmen to steamship companies, with permits to
engage in said business issued by the City Mayor and
the Collector of Customs. In the cases at bar, the musical
directors with whom the film companies claim to have dealt with
had nothing comparable to the business standing of said
watchmen agencies. In this respect, the status of said musical
directors is analogous to that of the alleged independent
contractor in Caro vs. Rilloraza, L-9569 (September 30, 1957),
with the particularity that the Caro case involved
the enforcement of the liability of an employer under the
Workmen's Compensation Act, whereas the cases before us are
merely concerned with the right of the Guild to represent the
musicians as a collective bargaining unit. Hence, there is less
reason to be legalistic and technical in these cases, than in
the Caro case.
Herein, petitioners-appellants cite, in support of their appeal, the
cases of Sunripe Coconut Product Co., Inc vs. CIR(46 Off. Gaz.,
5506, 5509), Philippine Manufacturing Co. vs. Santos Vda. de
Geronimo, L-6968 (November 29, 1954), Viana vs. Al-
Lagadan, L-8967 (May 31, 1956), and Josefa Vda. de Cruz vs.
The Manila Hotel Co. (53 Off. Gaz., 8540). Instead of favoring
the theory of said petitioners-appellants, the case of the Sunripe
Coconut Product Co., Inc. is authority for herein respondents-
appellees. It was held that, although engaged as piece-workers,
under the "pakiao" system, the "parers" and "shellers" in the
case were, not independent contractor, but employees of said
company, because "the requirement imposed on the 'parers' to
the effect that 'the nuts are pared whole or that there is not much
meat wasted,' in effect limits or controls the means or details by
which said workers are to accomplish their services" — as in the
cases before us.
The nature of the relation between the parties was not settled in
the Viana case, the same having been remanded to the
Workmen's Compensation Commission for further evidence.
The case of the Philippine Manufacturing Co. involved a contract
between said company and Eliano Garcia, who undertook to
paint a tank of the former. Garcia, in turn engaged the services
of Arcadio Geronimo, a laborer, who fell while painting the tank
and died in consequence of the injuries thus sustained by him.
Inasmuch as the company was engaged in the manufacture of
soap, vegetable lard, cooking oil and margarine, it was held that
the connection between its business and the painting
aforementioned was purely casual; that Eliano Garcia was an
independent contractor; that Geronimo was not an employee of
the company; and that the latter was not bound, therefore, to pay
the compensation provided in the Workmen's Compensation
Act. Unlike the Philippine Manufacturing case, the relation
between the business of herein petitioners-appellants and the
work of the musicians is not casual. As held in the order
appealed from which, in this respect, is not contested by herein
petitioners-appellants — "the work of the musicians is an integral
part of the entire motion picture." Indeed, one can hardly find
modern films without music therein. Hence, in the Caro case
(supra), the owner and operator of buildings for rent was held
bound to pay the indemnity prescribed in the Workmen's
Compensation Act for the injury suffered by a carpenter while
working as such in one of said buildings even though his
services had been allegedly engaged by a third party who had
directly contracted with said owner. In other words, the repair
work had not merely a casual connection with the business of
said owner. It was a necessary incident thereof, just as music is
in the production of motion pictures.
The case of Josefa Vda. de Cruz vs. The Manila Hotel Co., L-
9110 (April 30, 1957) differs materially from the present cases. It
involved the interpretation of Republic Act No. 660, which
amends the law creating and establishing the Government
Service Insurance System. No labor law was sought to be
construed in that case. In act, the same was originally heard in
the Court of First Instance of Manila, the decision of which was,
on appeal, affirmed by the Supreme Court. The meaning or
scope if the term "employee," as used in the Industrial Peace Act
(Republic Act No. 875), was not touched therein. Moreover, the
subject matter of said case was a contract between the
management of the Manila Hotel, on the one hand, and Tirso
Cruz, on the other, whereby the latter greed to furnish the former
the services of his orchestra, consisting of 15 musicians,
including Tirso Cruz, "from 7:30 p.m. to closing time daily." In the
language of this court in that case, "what pieces the orchestra
shall play, and how the music shall be arranged or directed, the
intervals and other details — such are left to
the leader's discretion."
This is not situation obtaining in the case at bar. The musical
directors above referred to have no such control over the
musicians involved in the present case. Said musical directors
control neither the music to be played, nor the musicians playing
it. The film companies summon the musicians to work, through
the musical directors. The film companies, through the musical
directors, fix the date, the time and the place of work. The film
companies, not the musical directors, provide the transportation
to and from the studio. The film companies furnish meal at
dinner time.
What is more — in the language of the order appealed from —
"during the recording sessions, the motion picture director who is
an employee of the company" — not the musical director —
"supervises the recording of the musicians and tells them what
to do in every detail". The motion picture director — not the
musical director — "solely directs and performance of the
musicians before the camera". The motion picture director
"supervises the performance of all the actors, including the
musicians who appear in the scenes, so that in the actual
performance to be shown in the screen, the musical director's
intervention has stopped." Or, as testified to in the lower court,
"the movie director tells the musical director what to do; tells the
music to be cut or tells additional music in this part or he
eliminates the entire music he does not (want) or he may want
more drums or move violin or piano, as the case may be". The
movie director "directly controls the activities of the musicians."
He "says he wants more drums and the drummer plays more" or
"if he wants more violin or he does not like that.".
It is well settled that "an employer-employee relationship exists .
. .where the person for whom the services are performed
reserves a right to control not only the end to be achieved but
also the means to be used in reaching such end . . . ." (Alabama
Highway Express Co., Express Co., v. Local 612, 108S. 2d.
350.) The decisive nature of said control over the "means to be
used", is illustrated in the case of Gilchrist Timber Co., et al.,
Local No. 2530 (73 NLRB No. 210, pp. 1197, 1199-1201), in
which, by reason of said control, the employer-employee
relationship was held to exist between the management and the
workers, notwithstanding the intervention of an alleged
independent contractor, who had, and exercise, the power to
hire and fire said workers. The aforementioned control over the
means to be used" in reading the desired end is possessed and
exercised by the film companies over the musicians in the cases
before us.
WHEREFORE, the order appealed from is hereby affirmed, with
costs against petitioners herein. It is so ordered.
G.R. No. 64948 September 27, 1994
MANILA GOLF & COUNTRY CLUB, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and FERMIN
LLAMAR, respondents.
Bito, Misa & Lozada for petitioner.
Remberto Z. Evio for private respondent.
NARVASA, C.J.:
The question before the Court here is whether or not persons
rendering caddying services for members of golf clubs and their
guests in said clubs' courses or premises are the employees of
such clubs and therefore within the compulsory coverage of the
Social Security System (SSS).
That question appears to have been involved, either directly or
peripherally, in three separate proceedings, all initiated by or on
behalf of herein private respondent and his fellow caddies. That
which gave rise to the present petition for review was originally
filed with the Social Security Commission (SSC) via petition of
seventeen (17) persons who styled themselves "Caddies of
Manila Golf and Country Club-PTCCEA" for coverage and
availment of benefits under the Social Security Act as amended,
"PTCCEA" being
the acronym of a labor organization, the "Philippine Technical,
Clerical, Commercial Employees Association," with which the
petitioners claimed to be affiliated. The petition, docketed as
SSC Case No. 5443, alleged in essence that although the
petitioners were employees of the Manila Golf and Country Club,
a domestic corporation, the latter had not registered them as
such with the SSS.
At about the same time, two other proceedings bearing on the
same question were filed or were pending; these were:
(1) a certification election case filed with the Labor Relations
Division of the Ministry of Labor by the PTCCEA on behalf of the
same caddies of the Manila Golf and Country Club, the case
being titled "Philippine Technical, Clerical, Commercial
Association vs. Manila Golf and Country Club" and docketed as
Case No. R4-LRDX-M-10-504-78; it appears to have been
resolved in favor of the petitioners therein by Med-Arbiter
Orlando S. Rojo who was thereafter upheld by Director Carmelo
S. Noriel, denying the Club's motion for reconsideration; 1
(2) a compulsory arbitration case initiated before the Arbitration
Branch of the Ministry of Labor by the same labor organization,
titled "Philippine Technical, Clerical, Commercial Employees
Association (PTCCEA), Fermin Lamar and Raymundo Jomok
vs. Manila Golf and Country Club, Inc., Miguel Celdran, Henry
Lim and Geronimo Alejo;" it was dismissed for lack of merit by
Labor Arbiter Cornelio T. Linsangan, a decision later affirmed on
appeal by the National Labor Relations Commission on the
ground that there was no employer-employee relationship
between the petitioning caddies and the respondent Club. 2
In the case before the SSC, the respondent Club filed answer
praying for the dismissal of the petition, alleging in substance
that the petitioners, caddies by occupation, were allowed into the
Club premises to render services as such to the individual
members and guests playing the Club's golf course and who
themselves paid for such services; that as such caddies, the
petitioners were not subject to the direction and control of the
Club as regards the manner in which they performed their work;
and hence, they were not the Club's employees.
Subsequently, all but two of the seventeen petitioners of their
own accord withdrew their claim for social security coverage,
avowedly coming to realize that indeed there was no
employment relationship between them and the Club. The case
continued, and was eventually adjudicated by the SSC after
protracted proceedings only as regards the two holdouts, Fermin
Llamar and Raymundo Jomok. The Commission dismissed the
petition for lack of merit, 3ruling:
. . . that the caddy's fees were paid by the golf players
themselves and not by respondent club. For instance, petitioner
Raymundo Jomok averred that for their services as caddies a
caddy's Claim Stub (Exh. "1-A") is issued by a player who will in
turn hand over to management the other portion of the stub
known as Caddy Ticket (Exh. "1") so that by this arrangement
management will know how much a caddy will be paid (TSN, p.
80, July 23, 1980). Likewise, petitioner Fermin Llamar admitted
that caddy works on his own in accordance with the rules and
regulations (TSN, p. 24, February 26, 1980) but petitioner Jomok
could not state any policy of respondent that directs the manner
of caddying (TSN, pp. 76-77, July 23, 1980). While respondent
club promulgates rules and regulations on the assignment,
deportment and conduct of caddies (Exh. "C") the same are
designed to impose personal discipline among the caddies but
not to direct or conduct their actual work. In fact, a golf player is
at liberty to choose a caddy of his preference regardless of the
respondent club's group rotation system and has the discretion
on whether or not to pay a caddy. As testified to by petitioner
Llamar that their income depends on the number of players
engaging their services and liberality of the latter (TSN, pp. 10-
11, Feb. 26, 1980). This lends credence to respondent's
assertion that the caddies are never their employees in the
absence of two elements, namely, (1) payment of wages and (2)
control or supervision over them. In this connection, our
Supreme Court ruled that in the determination of the existence of
an employer-employee relationship, the "control test" shall be
considered decisive (Philippine Manufacturing Co. vs. Geronimo
and Garcia, 96 Phil. 276; Mansal vs. P.P. Coheco Lumber Co.,
96 Phil. 941; Viana vs.
Al-lagadan, et al., 99 Phil. 408; Vda, de Ang, et al. vs. The
Manila Hotel Co., 101 Phil. 358, LVN Pictures Inc. vs. Phil.
Musicians Guild, et al.,
L-12582, January 28, 1961, 1 SCRA 132. . . . (reference being
made also to Investment Planning Corporation Phil. vs. SSS 21
SCRA 925).
Records show the respondent club had reported for SS
coverage Graciano Awit and Daniel Quijano, as bat unloader
and helper, respectively, including their ground men, house and
administrative personnel, a situation indicative of the latter's
concern with the rights and welfare of its employees under the
SS law, as amended. The unrebutted testimony of Col.
Generoso A. Alejo (Ret.) that the ID cards issued to the caddies
merely intended to identify the holders as accredited caddies of
the club and privilege(d) to ply their trade or occupation within its
premises which could be withdrawn anytime for loss of
confidence. This gives us a reasonable ground to state that the
defense posture of respondent that petitioners were never its
employees is well taken.4
From this Resolution appeal was taken to the Intermediate
appellate Court by the union representing Llamar and Jomok.
After the appeal was docketed 5 and some months before
decision thereon was reached and promulgated, Raymundo
Jomok's appeal was dismissed at his instance, leaving Fermin
Llamar the lone appellant. 6
The appeal ascribed two errors to the SSC:
(1) refusing to suspend the proceedings to await judgment by
the Labor Relations Division of National Capital Regional Office
in the certification election case (R-4-LRD-M-10-504-78) supra,
on the precise issue of the existence of employer-employee
relationship between the respondent club and the appellants, it
being contended that said issue was "a function of the proper
labor office"; and
(2) adjudicating that self same issue a manner contrary to the
ruling of the Director of the Bureau of Labor Relations, which
"has not only become final but (has been) executed or
(become) res adjudicata." 7
The Intermediate Appellate Court gave short shirt to the first
assigned error, dismissing it as of the least importance. Nor, it
would appear, did it find any greater merit in the second alleged
error. Although said Court reserved the appealed SSC decision
and declared Fermin Llamar an employee of the Manila Gold
and Country Club, ordering that he be reported as such for
social security coverage and paid any corresponding
benefits, 8 it conspicuously ignored the issue of res
adjudicata raised in said second assignment. Instead, it drew
basis for the reversal from this Court's ruling in Investment
Planning Corporation of the Philippines vs. Social Security
System, supra 9 and declared that upon the evidence, the
questioned employer-employee relationship between the Club
and Fermin Llamar passed the so-called "control test,"
establishment in the case — i.e., "whether the employer controls
or has reserved the right to control the employee not only as to
the result of the work to be done but also as to the means and
methods by which the same is to be accomplished," — the
Club's control over the caddies encompassing:
(a) the promulgation of no less than twenty-four (24) rules and
regulations just about every aspect of the conduct that the caddy
must observe, or avoid, when serving as such, any violation of
any which could subject him to disciplinary action, which may
include suspending or cutting off his access to the club
premises;
(b) the devising and enforcement of a group rotation system
whereby a caddy is assigned a number which designates his
turn to serve a player;
(c) the club's "suggesting" the rate of fees payable to the
caddies.
Deemed of title or no moment by the Appellate Court was the
fact that the caddies were paid by the players, not by the Club,
that they observed no definite working hours and earned no
fixed income. It quoted with approval from an American
decision 10 to the effect that: "whether the club paid the caddies
and afterward collected in the first instance, the caddies were
still employees of the club." This, no matter that the case which
produced this ruling had a slightly different factual cast,
apparently having involved a claim for workmen's compensation
made by a caddy who, about to leave the premises of the club
where he worked, was hit and injured by an automobile then
negotiating the club's private driveway.
That same issue of res adjudicata, ignored by the IAC beyond
bare mention thereof, as already pointed out, is now among the
mainways of the private respondent's defenses to the petition for
review. Considered in the perspective of the incidents just
recounted, it illustrates as well as anything can, why the practice
of forum-shopping justly merits censure and punitive sanction.
Because the same question of employer-employee relationship
has been dragged into three different fora, willy-nilly and in quick
succession, it has birthed controversy as to which of the
resulting adjudications must now be recognized as decisive. On
the one hand, there is the certification case [R4-LRDX-M-10-
504-78), where the decision of the Med-Arbiter found for the
existence of employer-employee relationship between the
parties, was affirmed by Director Carmelo S. Noriel, who ordered
a certification election held, a disposition never thereafter
appealed according to the private respondent; on the other, the
compulsory arbitration case (NCR Case No. AB-4-1771-79),
instituted by or for the same respondent at about the same time,
which was dismissed for lack of merit by the Labor Arbiter, which
was afterwards affirmed by the NLRC itself on the ground that
there existed no such relationship between the Club and the
private respondent. And, as if matters were not already
complicated enough, the same respondent, with the support and
assistance of the PTCCEA, saw fit, also contemporaneously, to
initiate still a third proceeding for compulsory social security
coverage with the Social Security Commission (SSC Case No.
5443), with the result already mentioned.
Before this Court, the petitioner Club now contends that the
decision of the Med-Arbiter in the certification case had never
become final, being in fact the subject of three pending and
unresolved motions for reconsideration, as well as of a later
motion for early resolution. 11 Unfortunately, none of these
motions is incorporated or reproduced in the record before the
Court. And, for his part, the private respondent contends, not
only that said decision had been appealed to and been affirmed
by the Director of the BLR, but that a certification election had in
fact been held, which resulted in the PTCCEA being recognized
as the sole bargaining agent of the caddies of the Manila Golf
and Country Club with respect to wages, hours of work, terms of
employment, etc. 12 Whatever the truth about these opposing
contentions, which the record before the Court does not
adequately disclose, the more controlling consideration would
seem to be that, however, final it may become, the decision in a
certification case, by the
very nature of that proceedings, is not such as to foreclose all
further dispute between the parties as to the existence, or non-
existence, of employer-employee relationship between them.
It is well settled that for res adjudicata, or the principle of bar by
prior judgment, to apply, the following essential requisites must
concur: (1) there must be a final judgment or order; (2) said
judgment or order must be on the merits; (3) the court rendering
the same must have jurisdiction over the subject matter and the
parties; and (4) there must be between the two cases identity of
parties, identity of subject matter and identity of cause of
action. 13
Clearly implicit in these requisites is that the action or
proceedings in which is issued the "prior Judgment" that would
operate in bar of a subsequent action between the same parties
for the same cause, be adversarial, or contentious, "one having
opposing parties; (is) contested, as distinguished from an ex
parte hearing or proceeding. . . . of which the party seeking relief
has given legal notice to the other party and afforded the latter
an opportunity to contest it" 14 and a certification case is not such
a proceeding, as this Court already ruled:
A certification proceedings is not a "litigation" in the sense in
which the term is commonly understood, but mere investigation
of a non-adversary, fact-finding character, in which the
investigating agency plays the part of a disinterested investigator
seeking merely to ascertain the desires of the employees as to
the matter of their representation. The court enjoys a wide
discretion in determining the procedure necessary to insure the
fair and free choice of bargaining representatives by the
employees.15
Indeed, if any ruling or judgment can be said to operate as res
adjudicata on the contested issue of employer-employee
relationship between present petitioner and the private
respondent, it would logically be that rendered in the compulsory
arbitration case (NCR Case No. AB-4-771-79, supra), petitioner
having asserted, without dispute from the private respondent,
that said issue was there squarely raised and litigated, resulting
in a ruling of the Arbitration Branch (of the same Ministry of
Labor) that such relationship did not exist, and which ruling was
thereafter affirmed by the National Labor Relations Commission
in an appeal taken by said respondent. 16
In any case, this Court is not inclined to allow private respondent
the benefit of any doubt as to which of the conflicting ruling just
adverted to should be accorded primacy, given the fact that it
was he who actively sought them simultaneously, as it were,
from separate fora, and even if the graver sanctions more lately
imposed by the Court for forum-shopping may not be applied to
him retroactively.
Accordingly, the IAC is not to be faulted for ignoring private
respondent's invocation of res adjudicata; on contrary, it acted
correctly in doing so.
Said Court’s holding that upon the facts, there exists (or existed)
a relationship of employer and employee between petitioner and
private respondent is, however, another matter. The Court does
not agree that said facts necessarily or logically point to such a
relationship, and to the exclusion of any form of arrangements,
other than of employment, that would make the respondent's
services available to the members and guest of the petitioner.
As long as it is, the list made in the appealed decision detailing
the various matters of conduct, dress, language, etc. covered by
the petitioner's regulations, does not, in the mind of the Court, so
circumscribe the actions or judgment of the caddies concerned
as to leave them little or no freedom of choice whatsoever in the
manner of carrying out their services. In the very nature of
things, caddies must submit to some supervision of their conduct
while enjoying the privilege of pursuing their occupation within
the premises and grounds of whatever club they do their work in.
For all that is made to appear, they work for the club to which
they attach themselves on sufference but, on the other hand,
also without having to observe any working hours, free to leave
anytime they please, to stay away for as long they like. It is not
pretended that if found remiss in the observance of said rules,
any discipline may be meted them beyond barring them from the
premises which, it may be supposed, the Club may do in any
case even absent any breach of the rules, and without violating
any right to work on their part. All these considerations clash
frontally with the concept of employment.
The IAC would point to the fact that the Club suggests the rate of
fees payable by the players to the caddies as still another
indication of the latter's status as employees. It seems to the
Court, however, that the intendment of such fact is to the
contrary, showing that the Club has not the measure of control
over the incidents of the caddies' work and compensation that
an employer would possess.
The Court agrees with petitioner that the group rotation system
so-called, is less a measure of employer control than an
assurance that the work is fairly distributed, a caddy who is
absent when his turn number is called simply losing his turn to
serve and being assigned instead the last number for the day. 17
By and large, there appears nothing in the record to refute the
petitioner's claim that:
(Petitioner) has no means of compelling the presence of a
caddy. A caddy is not required to exercise his occupation in the
premises of petitioner. He may work with any other golf club or
he may seek employment a caddy or otherwise with any entity or
individual without restriction by petitioner. . . .
. . . In the final analysis, petitioner has no was of compelling the
presence of the caddies as they are not required to render a
definite number of hours of work on a single day. Even the group
rotation of caddies is not absolute because a player is at liberty
to choose a caddy of his preference regardless of the caddy's
order in the rotation.
It can happen that a caddy who has rendered services to a
player on one day may still find sufficient time to work
elsewhere. Under such circumstances, he may then leave the
premises of petitioner and go to such other place of work that he
wishes (sic). Or a caddy who is on call for a particular day may
deliberately absent himself if he has more profitable caddying, or
another, engagement in some other place. These are things
beyond petitioner's control and for which it imposes no direct
sanctions on the caddies. . . . 18
WHEREFORE, the Decision of the Intermediate Appellant Court,
review of which is sought, is reversed and set aside, it being
hereby declared that the private respondent, Fermin Llamar, is
not an employee of petitioner Manila Golf and Country Club and
that petitioner is under no obligation to report him for compulsory
coverage to the Social Security System. No pronouncement as
to costs.
[G.R. No. 151228. August 15, 2002]
ROLANDO Y. TAN, petitioner, vs. LEOVIGILDO LAGRAMA
and THE HONORABLE COURT OF APPEALS, respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision,[1] dated
May 31, 2001, and the resolution,[2] dated November 27, 2001,
of the Court of Appeals in C.A.-G.R. SP. No. 63160, annulling
the resolutions of the National Labor Relations Commission
(NLRC) and reinstating the ruling of the Labor Arbiter which
found petitioner Rolando Tan guilty of illegally dismissing private
respondent Leovigildo Lagrama and ordering him to pay the
latter the amount of P136,849.99 by way of separation pay,
backwages, and damages.
The following are the facts.
Petitioner Rolando Tan is the president of Supreme Theater
Corporation and the general manager of Crown and Empire
Theaters in Butuan City. Private respondent Leovigildo Lagrama
is a painter, making ad billboards and murals for the motion
pictures shown at the Empress, Supreme, and Crown Theaters
for more than 10 years, from September 1, 1988 to October 17,
1998.
On October 17, 1998, private respondent Lagrama was
summoned by Tan and upbraided: Nangihi na naman ka sulod
sa imong drawinganan. (You again urinated inside your work
area.) When Lagrama asked what Tan was saying, Tan told
him, Ayaw daghang estorya. Dili ko gusto nga mo-drawing ka
pa. Guikan karon, wala nay drawing. Gawas. (Dont say anything
further. I dont want you to draw anymore. From now on, no more
drawing. Get out.)
Lagrama denied the charge against him. He claimed that he was
not the only one who entered the drawing area and that, even if
the charge was true, it was a minor infraction to warrant his
dismissal. However, everytime he spoke, Tan
shouted Gawas (Get out), leaving him with no other choice but
to leave the premises.
Lagrama filed a complaint with the Sub-Regional Arbitration
Branch No. X of the National Labor Relations Commission
(NLRC) in Butuan City. He alleged that he had been illegally
dismissed and sought reinvestigation and payment of 13th
month pay, service incentive leave pay, salary differential, and
damages.
Petitioner Tan denied that Lagrama was his employee. He
asserted that Lagrama was an independent contractor who did
his work according to his methods, while he (petitioner) was only
interested in the result thereof. He cited the admission of
Lagrama during the conferences before the Labor Arbiter that he
was paid on a fixed piece-work basis, i.e., that he was paid for
every painting turned out as ad billboard or mural for the pictures
shown in the three theaters, on the basis of a no mural/billboard
drawn, no pay policy. He submitted the affidavits of other cinema
owners, an amusement park owner, and those supervising the
construction of a church to prove that the services of Lagrama
were contracted by them. He denied having dismissed Lagrama
and alleged that it was the latter who refused to paint for him
after he was scolded for his habits.
As no amicable settlement had been reached, Labor Arbiter
Rogelio P. Legaspi directed the parties to file their position
papers. On June 17, 1999, he rendered a decision, the
dispositive portion of which reads:
WHEREFORE, premises considered judgment is hereby
ordered:
1. Declaring complainants [Lagramas] dismissal illegal and
2. Ordering respondents [Tan] to pay complainant the following:
A. Separation Pay - P 59,000.00
B. Backwages - 47,200.00
(from 17 October 1998 to 17 June 1999)
C. 13th month pay (3 years) - 17,700.00
D. Service Incentive Leave
Pay (3 years) - 2, 949.99
E. Damages - 10,000.00
TOTAL [P136,849.99]
Complainants other claims are dismissed for lack of merit.[3]
Petitioner Rolando Tan appealed to the NLRC Fifth Division,
Cagayan de Oro City, which, on June 30, 2000, rendered a
decision[4] finding Lagrama to be an independent contractor, and
for this reason reversing the decision of the Labor Arbiter.
Respondent Lagrama filed a motion for reconsideration, but it
was denied for lack of merit by the NLRC in a resolution of
September 29, 2000. He then filed a petition for certiorari under
Rule 65 before the Court of Appeals.
The Court of Appeals found that petitioner exercised control over
Lagramas work by dictating the time when Lagrama should
submit his billboards and murals and setting rules on the use of
the work area and rest room. Although it found that Lagrama did
work for other cinema owners, the appeals court held it to be a
mere sideline insufficient to prove that he was not an employee
of Tan. The appeals court also found no evidence of any
intention on the part of Lagrama to leave his job or sever his
employment relationship with Tan. Accordingly, on May 31,
2001, the Court of Appeals rendered a decision, the dispositive
portion of which reads:
IN THE LIGHT OF ALL THE FOREGOING, the Petition is
hereby GRANTED. The Resolutions of the Public Respondent
issued on June 30, 2000 and September 29, 2000 are
ANNULLED. The Decision of the Honorable Labor Arbiter
Rogelio P. Legaspi on June 17, 1999 is hereby REINSTATED.
Petitioner moved for a reconsideration, but the Court of Appeals
found no reason to reverse its decision and so denied his motion
for lack of merit.[5] Hence, this petition for review on certiorari
based on the following assignments of errors:
I. With all due respect, the decision of respondent Court of
Appeals in CA-G.R. SP NO. 63160 is bereft of any finding that
Public Respondent NLRC, 5th Division, had no jurisdiction or
exceeded it or otherwise gravely abused its discretion in its
Resolution of 30 June 2000 in NLRC CA-NO. M-004950-99.
II. With all due respect, respondent Court of Appeals, absent any
positive finding on its part that the Resolution of 30 June 2000 of
the NLRC is not supported by substantial evidence, is without
authority to substitute its conclusion for that of said NLRC.
III. With all due respect, respondent Court of Appeals discourse
on freelance artists and painters in the decision in question is
misplaced or has no factual or legal basis in the record.
IV. With all due respect, respondent Court of Appeals opening
statement in its decision as to employment, monthly salary of
P1,475.00 and work schedule from Monday to Saturday, from
8:00 oclock in the morning up to 5:00 oclock in the afternoon as
facts is not supported by the evidence on record.
V. With all due respect, the case of Lambo, et al., v. NLRC, et
al., 317 SCRA 420 [G.R. No. 111042 October 26, 1999] relied
upon by respondent Court of Appeals is not applicable to the
peculiar circumstances of this case.[6]
The issues raised boil down to whether or not an employer-
employee relationship existed between petitioner and private
respondent, and whether petitioner is guilty of illegally dismissing
private respondent. We find the answers to these issues to be in
the affirmative.
I.
In determining whether there is an employer-employee
relationship, we have applied a four-fold test, to wit: (1) whether
the alleged employer has the power of selection and
engagement of employees; (2) whether he has control of the
employee with respect to the means and methods by which work
is to be accomplished; (3) whether he has the power to dismiss;
and (4) whether the employee was paid wages.[7] These
elements of the employer-employee relationship are present in
this case.
First. The existence in this case of the first element is
undisputed. It was petitioner who engaged the services of
Lagrama without the intervention of a third party. It is the
existence of the second element, the power of control, that
requires discussion here.
Of the four elements of the employer-employee relationship, the
control test is the most important. Compared to an employee, an
independent contractor is one who carries on a distinct and
independent business and undertakes to perform the job, work,
or service on its own account and under its own responsibility
according to its own manner and method, 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.[8] Hence, while an independent contractor enjoys
independence and freedom from the control and supervision of
his principal, an employee is subject to the employers power to
control the means and methods by which the employees work is
to be performed and accomplished.
In the case at bar, albeit petitioner Tan claims that private
respondent Lagrama was an independent contractor and never
his employee, the evidence shows that the latter performed his
work as painter under the supervision and control of petitioner.
Lagrama worked in a designated work area inside the Crown
Theater of petitioner, for the use of which petitioner prescribed
rules. The rules included the observance of cleanliness and
hygiene and a prohibition against urinating in the work area and
any place other than the toilet or the rest rooms.[9]Petitioners
control over Lagramas work extended not only to the use of the
work area, but also to the result of Lagramas work, and the
manner and means by which the work was to be accomplished.
Moreover, it would appear that petitioner not only provided the
workplace, but supplied as well the materials used for the
paintings, because he admitted that he paid Lagrama only for
the latters services.[10]
Private respondent Lagrama claimed that he worked daily, from
8 oclock in the morning to 5 oclock in the afternoon. Petitioner
disputed this allegation and maintained that he paid
Lagrama P1,475.00 per week for the murals for the three
theaters which the latter usually finished in 3 to 4 days in one
week.[11] Even assuming this to be true, the fact that Lagrama
worked for at least 3 to 4 days a week proves regularity in his
employment by petitioner.
Second. That petitioner had the right to hire and fire was
admitted by him in his position paper submitted to the NLRC, the
pertinent portions of which stated:
Complainant did not know how to use the available comfort
rooms or toilets in and about his work premises. He was
urinating right at the place where he was working when it was so
easy for him, as everybody else did and had he only wanted to,
to go to the comfort rooms. But no, the complainant had to make
a virtual urinal out of his work place! The place then stunk to
high heavens, naturally, to the consternation of respondents and
everyone who could smell the malodor.
...
Given such circumstances, the respondents had every right, nay
all the compelling reason, to fire him from his painting job upon
discovery and his admission of such acts. Nonetheless, though
thoroughly scolded, he was not fired. It was he who stopped to
paint for respondents.[12]
By stating that he had the right to fire Lagrama, petitioner in
effect acknowledged Lagrama to be his employee. For the right
to hire and fire is another important element of the employer-
employee relationship.[13] Indeed, the fact that, as petitioner
himself said, he waited for Lagrama to report for work but the
latter simply stopped reporting for work reinforces the conviction
that Lagrama was indeed an employee of petitioner. For only an
employee can nurture such an expectancy, the frustration of
which, unless satisfactorily explained, can bring about some
disciplinary action on the part of the employer.
Third. Payment of wages is one of the four factors to be
considered in determining the existence of employer-employee
relation. Wages are defined as remuneration or earnings,
however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same,
which is payable by an employer to an employee under a written
or unwritten contract of employment for work done or to be done,
or for services rendered or to be rendered.[14] That Lagrama
worked for Tan on a fixed piece-work basis is of no moment.
Payment by result is a method of compensation and does not
define the essence of the relation.[15] It is a method of computing
compensation, not a basis for determining the existence or
absence of employer-employee relationship. One may be paid
on the basis of results or time expended on the work, and may
or may not acquire an employment status, depending on
whether the elements of an employer-employee relationship are
present or not.[16]
The Rules Implementing the Labor Code require every employer
to pay his employees by means of payroll.[17] The payroll should
show among other things, the employees rate of pay, deductions
made, and the amount actually paid to the employee. In the case
at bar, petitioner did not present the payroll to support his claim
that Lagrama was not his employee, raising speculations
whether his failure to do so proves that its presentation would be
adverse to his case.[18]
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.[19] In this case, there is such a connection between the
job of Lagrama painting billboards and murals and the business
of petitioner. To let the people know what movie was to be
shown in a movie theater requires billboards. Petitioner in fact
admits that the billboards are important to his business.[20]
The fact that Lagrama was not reported as an employee to the
SSS is not conclusive on the question of whether he was an
employee of petitioner.[21] Otherwise, an employer would be
rewarded for his failure or even neglect to perform his
obligation.[22]
Neither does the fact that Lagrama painted for other persons
affect or alter his employment relationship with petitioner. That
he did so only during weekends has not been denied by
petitioner. On the other hand, Samuel Villalba, for whom
Lagrama had rendered service, admitted in a sworn statement
that he was told by Lagrama that the latter worked for
petitioner.[23]
Lagrama had been employed by petitioner since 1988. Under
the law, therefore, he is deemed a regular employee and is thus
entitled to security of tenure, as provided in Art. 279 of Labor
Code:
ART. 279. Security of Tenure. In cases of regular employment,
the employer shall not terminate the services of an employee
except for a just cause or when authorized by this Title. An
employee who is unjustly dismissed from work shall be entitled
to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and
to his other benefits or their monetary equivalent computed from
the time his compensation was withheld from him up to the time
of his actual reinstatement.
This Court has held that if the employee has been performing
the job for at least one year, even if not continuously but
intermittently, the repeated and continuing need for its
performance is sufficient evidence of the necessity, if not
indispensability, of that activity to the business of his
employer. Hence, the employment is also considered regular,
although with respect only to such activity, and while such
activity exists.[24]
It is claimed that Lagrama abandoned his work. There is no
evidence to show this. Abandonment requires two elements: (1)
the failure to report for work or absence without valid or
justifiable reason, and (2) a clear intention to sever the
employer-employee relationship, with the second element as the
more determinative factor and being manifested by some overt
acts.[25] Mere absence is not sufficient. What is more, the burden
is on the employer to show a deliberate and unjustified refusal
on the part of the employee to resume his employment without
any intention of returning.[26] In the case at bar, the Court of
Appeals correctly ruled:
Neither do we agree that Petitioner abandoned his job. In order
for abandonment to be a just and valid ground for dismissal, the
employer must show, by clear proof, the intention of the
employee to abandon his job. . . .
In the present recourse, the Private Respondent has not
established clear proof of the intention of the Petitioner to
abandon his job or to sever the employment relationship
between him and the Private Respondent. On the contrary, it
was Private Respondent who told Petitioner that he did not want
the latter to draw for him and thereafter refused to give him work
to do or any mural or billboard to paint or draw on.
More, after the repeated refusal of the Private Respondent to
give Petitioner murals or billboards to work on, the Petitioner
filed, with the Sub-Regional Arbitration Branch No. X of the
National Labor Relations Commission, a Complaint for Illegal
Dismissal and Money Claims. Such act has, as the Supreme
Court declared, negate any intention to sever employment
relationship. . . .[27]
II.
The second issue is whether private respondent Lagrama was
illegally dismissed. To begin, the employer has the burden of
proving the lawfulness of his employees dismissal.[28] The
validity of the charge must be clearly established in a manner
consistent with due process. The Implementing Rules of the
Labor Code[29] provide that no worker shall be dismissed except
for a just or authorized cause provided by law and after due
process. This provision has two aspects: (1) the legality of the
act of dismissal, that is, dismissal under the grounds provided for
under Article 282 of the Labor Code and (2) the legality in the
manner of dismissal. The illegality of the act of dismissal
constitutes discharge without just cause, while illegality in the
manner of dismissal is dismissal without due process.[30]
In this case, by his refusal to give Lagrama work to do and
ordering Lagrama to get out of his sight as the latter tried to
explain his side, petitioner made it plain that Lagrama was
dismissed. Urinating in a work place other than the one
designated for the purpose by the employer constitutes violation
of reasonable regulations intended to promote a healthy
environment under Art. 282(1) of the Labor Code for purposes of
terminating employment, but the same must be shown by
evidence. Here there is no evidence that Lagrama did urinate in
a place other than a rest room in the premises of his work.
Instead of ordering his reinstatement as provided in Art. 279 of
the Labor Code, the Labor Arbiter found that the relationship
between the employer and the employee has been so strained
that the latters reinstatement would no longer serve any
purpose. The parties do not dispute this finding. Hence, the
grant of separation pay in lieu of reinstatement is appropriate.
This is of course in addition to the payment of backwages which,
in accordance with the ruling in Bustamante v. NLRC,[31] should
be computed from the time of Lagramas dismissal up to the time
of the finality of this decision, without any deduction or
qualification.
The Bureau of Working Conditions[32] classifies workers paid by
results into two groups, namely; (1) those whose time and
performance is supervised by the employer, and (2) those
whose time and performance is unsupervised by the
employer. The first involves an element of control and
supervision over the manner the work is to be performed, while
the second does not. If a piece worker is supervised, there is an
employer-employee relationship, as in this case. However, such
an employee is not entitled to service incentive leave pay since,
as pointed out in Makati Haberdashery v. NLRC[33] and Mark
Roche International v. NLRC,[34] he is paid a fixed amount for
work done, regardless of the time he spent in accomplishing
such work.
WHEREFORE, based on the foregoing, the petition is DENIED
for lack of showing that the Court of Appeals committed any
reversible error. The decision of the Court of Appeals, reversing
the decision of the National Labor Relations Commission and
reinstating the decision of the Labor Arbiter, is AFFIRMED with
the MODIFICATION that the backwages and other benefits
awarded to private respondent Leovigildo Lagrama should be
computed from the time of his dismissal up to the time of the
finality of this decision, without any deduction and
qualification. However, the service incentive leave pay awarded
to him is DELETED.
G.R. No. 167622 June 29, 2010
GREGORIO V. TONGKO, Petitioner, vs.
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.),
INC. and RENATO A. VERGEL DE DIOS,Respondents.
BRION, J.:
This resolves the Motion for Reconsideration1 dated December
3, 2008 filed by respondent The Manufacturers Life Insurance
Co. (Phils.), Inc. (Manulife) to set aside our Decision of
November 7, 2008. In the assailed decision, we found that an
employer-employee relationship existed between Manulife and
petitioner Gregorio Tongko and ordered Manulife to pay Tongko
backwages and separation pay for illegal dismissal.
The following facts have been stated in our Decision of
November 7, 2008, now under reconsideration, but are
repeated, simply for purposes of clarity.
The contractual relationship between Tongko and Manulife had
two basic phases. The first or initial phase began on July 1,
1977, under a Career Agent’s Agreement (Agreement) that
provided:
It is understood and agreed that the Agent is an independent
contractor and nothing contained herein shall be construed or
interpreted as creating an employer-employee relationship
between the Company and the Agent.
xxxx
a) The Agent shall canvass for applications for Life Insurance,
Annuities, Group policies and other products offered by the
Company, and collect, in exchange for provisional receipts
issued by the Agent, money due to or become due to the
Company in respect of applications or policies obtained by or
through the Agent or from policyholders allotted by the Company
to the Agent for servicing, subject to subsequent confirmation of
receipt of payment by the Company as evidenced by an Official
Receipt issued by the Company directly to the policyholder.
xxxx
The Company may terminate this Agreement for any breach or
violation of any of the provisions hereof by the Agent by giving
written notice to the Agent within fifteen (15) days from the time
of the discovery of the breach. No waiver, extinguishment,
abandonment, withdrawal or cancellation of the right to terminate
this Agreement by the Company shall be construed for any
previous failure to exercise its right under any provision of this
Agreement.
Either of the parties hereto may likewise terminate his
Agreement at any time without cause, by giving to the other
party fifteen (15) days notice in writing.2
Tongko additionally agreed (1) to comply with all regulations and
requirements of Manulife, and (2) to maintain a standard of
knowledge and competency in the sale of Manulife’s products,
satisfactory to Manulife and sufficient to meet the volume of the
new business, required by his Production Club membership.3
The second phase started in 1983 when Tongko was named
Unit Manager in Manulife’s Sales Agency Organization. In 1990,
he became a Branch Manager. Six years later (or in 1996),
Tongko became a Regional Sales Manager.4
Tongko’s gross earnings consisted of commissions, persistency
income, and management overrides. Since the beginning,
Tongko consistently declared himself self-employed in his
income tax returns. Thus, under oath, he declared his gross
business income and deducted his business expenses to arrive
at his taxable business income. Manulife withheld the
corresponding 10% tax on Tongko’s earnings.5
In 2001, Manulife instituted manpower development programs at
the regional sales management level. Respondent Renato
Vergel de Dios wrote Tongko a letter dated November 6, 2001
on concerns that were brought up during the October 18, 2001
Metro North Sales Managers Meeting. De Dios wrote:
The first step to transforming Manulife into a big league player
has been very clear – to increase the number of agents to at
least 1,000 strong for a start. This may seem diametrically
opposed to the way Manulife was run when you first joined the
organization. Since then, however, substantial changes have
taken place in the organization, as these have been influenced
by developments both from within and without the company.
xxxx
The issues around agent recruiting are central to the intended
objectives hence the need for a Senior Managers’ meeting
earlier last month when Kevin O’Connor, SVP-Agency, took to
the floor to determine from our senior agency leaders what more
could be done to bolster manpower development. At earlier
meetings, Kevin had presented information where evidently,
your Region was the lowest performer (on a per Manager basis)
in terms of recruiting in 2000 and, as of today, continues to
remain one of the laggards in this area.
While discussions, in general, were positive other than for
certain comments from your end which were perceived to be
uncalled for, it became clear that a one-on-one meeting with you
was necessary to ensure that you and management, were on
the same plane. As gleaned from some of your previous
comments in prior meetings (both in group and one-on-one), it
was not clear that we were proceeding in the same direction.
Kevin held subsequent series of meetings with you as a result,
one of which I joined briefly. In those subsequent meetings you
reiterated certain views, the validity of which we challenged and
subsequently found as having no basis.
With such views coming from you, I was a bit concerned that the
rest of the Metro North Managers may be a bit confused as to
the directions the company was taking. For this reason, I sought
a meeting with everyone in your management team, including
you, to clear the air, so to speak.
This note is intended to confirm the items that were discussed at
the said Metro North Region’s Sales Managers meeting held at
the 7/F Conference room last 18 October.
xxxx
Issue # 2: "Some Managers are unhappy with their earnings and
would want to revert to the position of agents."
This is an often repeated issue you have raised with me and with
Kevin. For this reason, I placed the issue on the table before the
rest of your Region’s Sales Managers to verify its validity. As you
must have noted, no Sales Manager came forward on their own
to confirm your statement and it took you to name Malou
Samson as a source of the same, an allegation that Malou
herself denied at our meeting and in your very presence.
This only confirms, Greg, that those prior comments have no
solid basis at all. I now believe what I had thought all along, that
these allegations were simply meant to muddle the issues
surrounding the inability of your Region to meet its agency
development objectives!
Issue # 3: "Sales Managers are doing what the company asks
them to do but, in the process, they earn less."
xxxx
All the above notwithstanding, we had your own records
checked and we found that you made a lot more money in the
Year 2000 versus 1999. In addition, you also volunteered the
information to Kevin when you said that you probably will make
more money in the Year 2001 compared to Year 2000.
Obviously, your above statement about making "less money" did
not refer to you but the way you argued this point had us almost
believing that you were spouting the gospel of truth when you
were not. x x x
xxxx
All of a sudden, Greg, I have become much more worried about
your ability to lead this group towards the new direction that we
have been discussing these past few weeks, i.e., Manulife’s goal
to become a major agency-led distribution company in the
Philippines. While as you claim, you have not stopped anyone
from recruiting, I have never heard you proactively push for
greater agency recruiting. You have not been proactive all these
years when it comes to agency growth.
xxxx
I cannot afford to see a major region fail to deliver on its
developmental goals next year and so, we are making the
following changes in the interim:
1. You will hire at your expense a competent assistant who can
unload you of much of the routine tasks which can be easily
delegated. This assistant should be so chosen as to complement
your skills and help you in the areas where you feel "may not be
your cup of tea."
You have stated, if not implied, that your work as Regional
Manager may be too taxing for you and for your health. The
above could solve this problem.
xxxx
2. Effective immediately, Kevin and the rest of the Agency
Operations will deal with the North Star Branch (NSB) in
autonomous fashion. x x x
I have decided to make this change so as to reduce your span of
control and allow you to concentrate more fully on overseeing
the remaining groups under Metro North, your Central Unit and
the rest of the Sales Managers in Metro North. I will hold you
solely responsible for meeting the objectives of these remaining
groups.
xxxx
The above changes can end at this point and they need not go
any further. This, however, is entirely dependent upon you. But
you have to understand that meeting corporate objectives by
everyone is primary and will not be compromised. We are
meeting tough challenges next year, and I would want
everybody on board. Any resistance or holding back by anyone
will be dealt with accordingly.6
Subsequently, de Dios wrote Tongko another letter, dated
December 18, 2001, terminating Tongko’s services:
It would appear, however, that despite the series of meetings
and communications, both one-on-one meetings between
yourself and SVP Kevin O’Connor, some of them with me, as
well as group meetings with your Sales Managers, all these
efforts have failed in helping you align your directions with
Management’s avowed agency growth policy.
xxxx
On account thereof, Management is exercising its prerogative
under Section 14 of your Agents Contract as we are now issuing
this notice of termination of your Agency Agreement with us
effective fifteen days from the date of this letter.7
Tongko responded by filing an illegal dismissal complaint with
the National Labor Relations Commission (NLRC) Arbitration
Branch. He essentially alleged – despite the clear terms of the
letter terminating his Agency Agreement – that he was
Manulife’s employee before he was illegally dismissed.8
Thus, the threshold issue is the existence of an employment
relationship. A finding that none exists renders the question of
illegal dismissal moot; a finding that an employment relationship
exists, on the other hand, necessarily leads to the need to
determine the validity of the termination of the relationship.
A. Tongko’s Case for Employment Relationship
Tongko asserted that as Unit Manager, he was paid an annual
over-rider not exceeding ₱50,000.00, regardless of production
levels attained and exclusive of commissions and bonuses. He
also claimed that as Regional Sales Manager, he was given a
travel and entertainment allowance of ₱36,000.00 per year in
addition to his overriding commissions; he was tasked with
numerous administrative functions and supervisory authority
over Manulife’s employees, aside from merely selling policies
and recruiting agents for Manulife; and he recommended and
recruited insurance agents subject to vetting and approval by
Manulife. He further alleges that he was assigned a definite
place in the Manulife offices when he was not in the field – at the
3rd Floor, Manulife Center, 108 Tordesillas corner Gallardo Sts.,
Salcedo Village, Makati City – for which he never paid any
rental. Manulife provided the office equipment he used, including
tables, chairs, computers and printers (and even office
stationery), and paid for the electricity, water and telephone bills.
As Regional Sales Manager, Tongko additionally asserts that he
was required to follow at least three codes of conduct.9
B. Manulife’s Case – Agency Relationship with Tongko
Manulife argues that Tongko had no fixed wage or salary. Under
the Agreement, Tongko was paid commissions of varying
amounts, computed based on the premium paid in full and
actually received by Manulife on policies obtained through an
agent. As sales manager, Tongko was paid overriding sales
commission derived from sales made by agents under his
unit/structure/branch/region. Manulife also points out that it
deducted and withheld a 10% tax from all commissions Tongko
received; Tongko even declared himself to be self-employed and
consistently paid taxes as such—i.e., he availed of tax
deductions such as ordinary and necessary trade, business and
professional expenses to which a business is entitled.
Manulife asserts that the labor tribunals have no jurisdiction over
Tongko’s claim as he was not its employee as characterized in
the four-fold test and our ruling in Carungcong v. National Labor
Relations Commission.10
The Conflicting Rulings of the Lower Tribunals
The labor arbiter decreed that no employer-employee
relationship existed between the parties. However, the NLRC
reversed the labor arbiter’s decision on appeal; it found the
existence of an employer-employee relationship and concluded
that Tongko had been illegally dismissed. In the petition for
certiorari with the Court of Appeals (CA), the appellate court
found that the NLRC gravely abused its discretion in its ruling
and reverted to the labor arbiter’s decision that no employer-
employee relationship existed between Tongko and Manulife.
Our Decision of November 7, 2008
In our Decision of November 7, 2008, we reversed the CA ruling
and found that an employment relationship existed between
Tongko and Manulife. We concluded that Tongko is Manulife’s
employee for the following reasons:
1. Our ruling in the first Insular11 case did not foreclose the
possibility of an insurance agent becoming an employee of an
insurance company; if evidence exists showing that the
company promulgated rules or regulations that effectively
controlled or restricted an insurance agent’s choice of methods
or the methods themselves in selling insurance, an employer-
employee relationship would be present. The determination of
the existence of an employer-employee relationship is thus on a
case-to-case basis depending on the evidence on record.
2. Manulife had the power of control over Tongko, sufficient to
characterize him as an employee, as shown by the following
indicators:
2.1 Tongko undertook to comply with Manulife’s rules,
regulations and other requirements, i.e., the different codes of
conduct such as the Agent Code of Conduct, the Manulife
Financial Code of Conduct, and the Financial Code of Conduct
Agreement;
2.2 The various affidavits of Manulife’s insurance agents and
managers, who occupied similar positions as Tongko, showed
that they performed administrative duties that established
employment with Manulife;12 and
2.3 Tongko was tasked to recruit some agents in addition to his
other administrative functions. De Dios’ letter harped on the
direction Manulife intended to take, viz., greater agency
recruitment as the primary means to sell more policies; Tongko’s
alleged failure to follow this directive led to the termination of his
employment with Manulife.
The Motion for Reconsideration
Manulife disagreed with our Decision and filed the present
motion for reconsideration on the following GROUNDS:
1. The November 7[, 2008] Decision violates Manulife’s right to
due process by: (a) confining the review only to the issue of
"control" and utterly disregarding all the other issues that had
been joined in this case; (b) mischaracterizing the divergence of
conclusions between the CA and the NLRC decisions as
confined only to that on "control"; (c) grossly failing to consider
the findings and conclusions of the CA on the majority of the
material evidence, especially [Tongko’s] declaration in his
income tax returns that he was a "business person" or "self-
employed"; and (d) allowing [Tongko] to repudiate his sworn
statement in a public document.
2. The November 7[, 2008] Decision contravenes settled rules in
contract law and agency, distorts not only the legal relationships
of agencies to sell but also distributorship and franchising, and
ignores the constitutional and policy context of contract law vis-
à-vis labor law.
3. The November 7[, 2008] Decision ignores the findings of the
CA on the three elements of the four-fold test other than the
"control" test, reverses well-settled doctrines of law on employer-
employee relationships, and grossly misapplies the "control
test," by selecting, without basis, a few items of evidence to the
exclusion of more material evidence to support its conclusion
that there is "control."
4. The November 7[, 2008] Decision is judicial legislation,
beyond the scope authorized by Articles 8 and 9 of the Civil
Code, beyond the powers granted to this Court under Article VIII,
Section 1 of the Constitution and contravenes through judicial
legislation, the constitutional prohibition against impairment of
contracts under Article III, Section 10 of the Constitution.
5. For all the above reasons, the November 7[, 2008] Decision
made unsustainable and reversible errors, which should be
corrected, in concluding that Respondent Manulife and Petitioner
had an employer-employee relationship, that Respondent
Manulife illegally dismissed Petitioner, and for consequently
ordering Respondent Manulife to pay Petitioner backwages,
separation pay, nominal damages and attorney’s fees.13
THE COURT’S RULING
A. The Insurance and the Civil Codes;
the Parties’ Intent and Established
Industry Practices
We cannot consider the present case purely from a labor law
perspective, oblivious that the factual antecedents were set in
the insurance industry so that the Insurance Code primarily
governs. Chapter IV, Title 1 of this Code is wholly devoted to
"Insurance Agents and Brokers" and specifically defines the
agents and brokers relationship with the insurance company and
how they are governed by the Code and regulated by the
Insurance Commission.
The Insurance Code, of course, does not wholly regulate the
"agency" that it speaks of, as agency is a civil law matter
governed by the Civil Code. Thus, at the very least, three sets of
laws – namely, the Insurance Code, the Labor Code and the
Civil Code – have to be considered in looking at the present
case. Not to be forgotten, too, is the Agreement (partly
reproduced on page 2 of this Dissent and which no one
disputes) that the parties adopted to govern their relationship for
purposes of selling the insurance the company offers. To forget
these other laws is to take a myopic view of the present case
and to add to the uncertainties that now exist in considering the
legal relationship between the insurance company and its
"agents."
The main issue of whether an agency or an employment
relationship exists depends on the incidents of the relationship.
The Labor Code concept of "control" has to be compared and
distinguished with the "control" that must necessarily exist in a
principal-agent relationship. The principal cannot but also have
his or her say in directing the course of the principal-agent
relationship, especially in cases where the company-
representative relationship in the insurance industry is an
agency.
a. The laws on insurance and agency
The business of insurance is a highly regulated commercial
activity in the country, in terms particularly of who can be in the
insurance business, who can act for and in behalf of an insurer,
and how these parties shall conduct themselves in the insurance
business. Section 186 of the Insurance Code provides that "No
person, partnership, or association of persons shall transact any
insurance business in the Philippines except as agent of a
person or corporation authorized to do the business of insurance
in the Philippines." Sections 299 and 300 of the Insurance Code
on Insurance Agents and Brokers, among other provisions,
provide:
Section 299. No insurance company doing business in the
Philippines, nor any agent thereof, shall pay any commission or
other compensation to any person for services in obtaining
insurance, unless such person shall have first procured from the
Commissioner a license to act as an insurance agent of such
company or as an insurance broker as hereinafter provided.
No person shall act as an insurance agent or as an insurance
broker in the solicitation or procurement of applications for
insurance, or receive for services in obtaining insurance, any
commission or other compensation from any insurance company
doing business in the Philippines or any agent thereof, without
first procuring a license so to act from the Commissioner x x x
The Commissioner shall satisfy himself as to the competence
and trustworthiness of the applicant and shall have the right to
refuse to issue or renew and to suspend or revoke any such
license in his discretion.1avvphi1.net
Section 300. Any person who for compensation solicits or
obtains insurance on behalf of any insurance company or
transmits for a person other than himself an application for a
policy or contract of insurance to or from such company or offers
or assumes to act in the negotiating of such insurance shall be
an insurance agent within the intent of this section and shall
thereby become liable to all the duties, requirements, liabilities
and penalties to which an insurance agent is subject.
The application for an insurance agent’s license requires a
written examination, and the applicant must be of good moral
character and must not have been convicted of a crime involving
moral turpitude.14 The insurance agent who collects premiums
from an insured person for remittance to the insurance company
does so in a fiduciary capacity, and an insurance company
which delivers an insurance policy or contract to an authorized
agent is deemed to have authorized the agent to receive
payment on the company’s behalf.15 Section 361 further
prohibits the offer, negotiation, or collection of any amount other
than that specified in the policy and this covers any rebate from
the premium or any special favor or advantage in the dividends
or benefit accruing from the policy.
Thus, under the Insurance Code, the agent must, as a matter of
qualification, be licensed and must also act within the
parameters of the authority granted under the license and under
the contract with the principal. Other than the need for a license,
the agent is limited in the way he offers and negotiates for the
sale of the company’s insurance products, in his collection
activities, and in the delivery of the insurance contract or policy.
Rules regarding the desired results (e.g., the required volume to
continue to qualify as a company agent, rules to check on the
parameters on the authority given to the agent, and rules to
ensure that industry, legal and ethical rules are followed) are
built-in elements of control specific to an insurance agency and
should not and cannot be read as elements of control that attend
an employment relationship governed by the Labor Code.
On the other hand, the Civil Code defines an agent as a "person
[who] binds himself to render some service or to do something in
representation or on behalf of another, with the consent or
authority of the latter."16 While this is a very broad definition that
on its face may even encompass an employment relationship,
the distinctions between agency and employment are sufficiently
established by law and jurisprudence.
Generally, the determinative element is the control exercised
over the one rendering service. The employer controls the
employee both in the results and in the means and manner of
achieving this result. The principal in an agency relationship, on
the other hand, also has the prerogative to exercise control over
the agent in undertaking the assigned task based on the
parameters outlined in the pertinent laws.
Under the general law on agency as applied to insurance, an
agency must be express in light of the need for a license and for
the designation by the insurance company. In the present case,
the Agreement fully serves as grant of authority to Tongko as
Manulife’s insurance agent.17 This agreement is supplemented
by the company’s agency practices and usages, duly accepted
by the agent in carrying out the agency.18 By authority of the
Insurance Code, an insurance agency is for compensation,19 a
matter the Civil Code Rules on Agency presumes in the absence
of proof to the contrary.20 Other than the compensation, the
principal is bound to advance to, or to reimburse, the agent the
agreed sums necessary for the execution of the agency.21 By
implication at least under Article 1994 of the Civil Code, the
principal can appoint two or more agents to carry out the same
assigned tasks,22 based necessarily on the specific instructions
and directives given to them.
With particular relevance to the present case is the provision that
"In the execution of the agency, the agent shall act in
accordance with the instructions of the principal."23 This
provision is pertinent for purposes of the necessary control that
the principal exercises over the agent in undertaking the
assigned task, and is an area where the instructions can intrude
into the labor law concept of control so that minute consideration
of the facts is necessary. A related article is Article 1891 of the
Civil Code which binds the agent to render an account of his
transactions to the principal.
B. The Cited Case
The Decision of November 7, 2008 refers to the first Insular and
Grepalife cases to establish that the company rules and
regulations that an agent has to comply with are indicative of an
employer-employee relationship.24 The Dissenting Opinions of
Justice Presbitero Velasco, Jr. and Justice Conchita Carpio
Morales also cite Insular Life Assurance Co. v. National Labor
Relations Commission (second Insular case)25 to support the
view that Tongko is Manulife’s employee. On the other hand,
Manulife cites the Carungcong case and AFP Mutual Benefit
Association, Inc. v. National Labor Relations Commission
(AFPMBAI case)26 to support its allegation that Tongko was not
its employee.
A caveat has been given above with respect to the use of the
rulings in the cited cases because none of them is on all fours
with the present case; the uniqueness of the factual situation of
the present case prevents it from being directly and readily cast
in the mold of the cited cases. These cited cases are themselves
different from one another; this difference underscores the need
to read and quote them in the context of their own factual
situations.
The present case at first glance appears aligned with the facts in
the Carungcong, the Grepalife, and the second Insular Life
cases. A critical difference, however, exists as these cited cases
dealt with the proper legal characterization of a subsequent
management contract that superseded the original agency
contract between the insurance company and its agent.
Carungcong dealt with a subsequent Agreement making
Carungcong a New Business Manager that clearly superseded
the Agreement designating Carungcong as an agent empowered
to solicit applications for insurance. The Grepalife case, on the
other hand, dealt with the proper legal characterization of the
appointment of the Ruiz brothers to positions higher than their
original position as insurance agents. Thus, after analyzing the
duties and functions of the Ruiz brothers, as these were
enumerated in their contracts, we concluded that the company
practically dictated the manner by which the Ruiz brothers were
to carry out their jobs. Finally, the second Insular Life case dealt
with the implications of de los Reyes’ appointment as acting unit
manager which, like the subsequent contracts in the
Carungcong and the Grepalife cases, was clearly defined under
a subsequent contract. In all these cited cases, a determination
of the presence of the Labor Code element of control was made
on the basis of the stipulations of the subsequent contracts.
In stark contrast with the Carungcong, the Grepalife, and the
second Insular Life cases, the only contract or document extant
and submitted as evidence in the present case is the Agreement
– a pure agency agreement in the Civil Code context similar to
the original contract in the first Insular Life case and the contract
in the AFPMBAI case. And while Tongko was later on
designated unit manager in 1983, Branch Manager in 1990, and
Regional Sales Manager in 1996, no formal contract regarding
these undertakings appears in the records of the case. Any such
contract or agreement, had there been any, could have at the
very least provided the bases for properly ascertaining the
juridical relationship established between the parties.
These critical differences, particularly between the present case
and the Grepalife and the second Insular Life cases, should
therefore immediately drive us to be more prudent and cautious
in applying the rulings in these cases.
C. Analysis of the Evidence
c.1. The Agreement
The primary evidence in the present case is the July 1, 1977
Agreement that governed and defined the parties’ relations until
the Agreement’s termination in 2001. This Agreement stood for
more than two decades and, based on the records of the case,
was never modified or novated. It assumes primacy because it
directly dealt with the nature of the parties’ relationship up to the
very end; moreover, both parties never disputed its authenticity
or the accuracy of its terms.
By the Agreement’s express terms, Tongko served as an
"insurance agent" for Manulife, not as an employee. To be sure,
the Agreement’s legal characterization of the nature of the
relationship cannot be conclusive and binding on the courts; as
the dissent clearly stated, the characterization of the juridical
relationship the Agreement embodied is a matter of law that is
for the courts to determine. At the same time, though, the
characterization the parties gave to their relationship in the
Agreement cannot simply be brushed aside because it embodies
their intent at the time they entered the Agreement, and they
were governed by this understanding throughout their
relationship. At the very least, the provision on the absence of
employer-employee relationship between the parties can be an
aid in considering the Agreement and its implementation, and in
appreciating the other evidence on record.
The parties’ legal characterization of their intent, although not
conclusive, is critical in this case because this intent is not illegal
or outside the contemplation of law, particularly of the Insurance
and the Civil Codes. From this perspective, the provisions of the
Insurance Code cannot be disregarded as this Code (as
heretofore already noted) expressly envisions a principal-agent
relationship between the insurance company and the insurance
agent in the sale of insurance to the public.1awph!1 For this
reason, we can take judicial notice that as a matter of Insurance
Code-based business practice, an agency relationship prevails
in the insurance industry for the purpose of selling insurance.
The Agreement, by its express terms, is in accordance with the
Insurance Code model when it provided for a principal-agent
relationship, and thus cannot lightly be set aside nor simply be
considered as an agreement that does not reflect the parties’
true intent. This intent, incidentally, is reinforced by the system of
compensation the Agreement provides, which likewise is in
accordance with the production-based sales commissions the
Insurance Code provides.
Significantly, evidence shows that Tongko’s role as an insurance
agent never changed during his relationship with Manulife. If
changes occurred at all, the changes did not appear to be in the
nature of their core relationship. Tongko essentially remained an
agent, but moved up in this role through Manulife’s recognition
that he could use other agents approved by Manulife, but
operating under his guidance and in whose commissions he had
a share. For want of a better term, Tongko perhaps could be
labeled as a "lead agent" who guided under his wing other
Manulife agents similarly tasked with the selling of Manulife
insurance.
Like Tongko, the evidence suggests that these other agents
operated under their own agency agreements. Thus, if Tongko’s
compensation scheme changed at all during his relationship with
Manulife, the change was solely for purposes of crediting him
with his share in the commissions the agents under his wing
generated. As an agent who was recruiting and guiding other
insurance agents, Tongko likewise moved up in terms of the
reimbursement of expenses he incurred in the course of his lead
agency, a prerogative he enjoyed pursuant to Article 1912 of the
Civil Code. Thus, Tongko received greater reimbursements for
his expenses and was even allowed to use Manulife facilities in
his interactions with the agents, all of whom were, in the strict
sense, Manulife agents approved and certified as such by
Manulife with the Insurance Commission.
That Tongko assumed a leadership role but nevertheless wholly
remained an agent is the inevitable conclusion that results from
the reading of the Agreement (the only agreement on record in
this case) and his continuing role thereunder as sales agent,
from the perspective of the Insurance and the Civil Codes and in
light of what Tongko himself attested to as his role as Regional
Sales Manager. To be sure, this interpretation could have been
contradicted if other agreements had been submitted as
evidence of the relationship between Manulife and Tongko on
the latter’s expanded undertakings. In the absence of any such
evidence, however, this reading – based on the available
evidence and the applicable insurance and civil law provisions –
must stand, subject only to objective and evidentiary Labor Code
tests on the existence of an employer-employee relationship.
In applying such Labor Code tests, however, the enforcement of
the Agreement during the course of the parties’ relationship
should be noted. From 1977 until the termination of the
Agreement, Tongko’s occupation was to sell Manulife’s
insurance policies and products. Both parties acquiesced with
the terms and conditions of the Agreement. Tongko, for his part,
accepted all the benefits flowing from the Agreement, particularly
the generous commissions.
Evidence indicates that Tongko consistently clung to the view
that he was an independent agent selling Manulife insurance
products since he invariably declared himself a business or self-
employed person in his income tax returns. This consistency
with, and action made pursuant to the Agreement were
pieces of evidence that were never mentioned nor
considered in our Decision of November 7, 2008. Had they
been considered, they could, at the very least, serve as
Tongko’s admissions against his interest. Strictly speaking,
Tongko’s tax returns cannot but be legally significant because he
certified under oath the amount he earned as gross business
income, claimed business deductions, leading to his net taxable
income. This should be evidence of the first order that cannot be
brushed aside by a mere denial. Even on a layman’s view that is
devoid of legal considerations, the extent of his annual income
alone renders his claimed employment status doubtful.27
Hand in hand with the concept of admission against interest in
considering the tax returns, the concept of estoppel – a legal and
equitable concept28 – necessarily must come into play. Tongko’s
previous admissions in several years of tax returns as an
independent agent, as against his belated claim that he was all
along an employee, are too diametrically opposed to be simply
dismissed or ignored. Interestingly, Justice Velasco’s dissenting
opinion states that Tongko was forced to declare himself a
business or self-employed person by Manulife’s persistent
refusal to recognize him as its employee.29 Regrettably, the
dissent has shown no basis for this conclusion, an
understandable omission since no evidence in fact exists
on this point in the records of the case. In fact, what the
evidence shows is Tongko’s full conformity with, and action as,
an independent agent until his relationship with Manulife took a
bad turn.
Another interesting point the dissent raised with respect to the
Agreement is its conclusion that the Agreement negated any
employment relationship between Tongko and Manulife so that
the commissions he earned as a sales agent should not be
considered in the determination of the backwages and
separation pay that should be given to him. This part of the
dissent is correct although it went on to twist this conclusion by
asserting that Tongko had dual roles in his relationship with
Manulife; he was an agent, not an employee, in so far as he sold
insurance for Manulife, but was an employee in his capacity as a
manager. Thus, the dissent concluded that Tongko’s backwages
should only be with respect to his role as Manulife’s manager.
The conclusion with respect to Tongko’s employment as a
manager is, of course, unacceptable for the legal, factual and
practical reasons discussed in this Resolution. In brief,
the factual reason is grounded on the lack of evidentiary
support of the conclusion that Manulife exercised control over
Tongko in the sense understood in the Labor Code. The legal
reason, partly based on the lack of factual basis, is the
erroneous legal conclusion that Manulife controlled Tongko and
was thus its employee. The practical reason, on the other
hand, is the havoc that the dissent’s unwarranted conclusion
would cause the insurance industry that, by the law’s own
design, operated along the lines of principal-agent relationship in
the sale of insurance.
c.2. Other Evidence of Alleged Control
A glaring evidentiary gap for Tongko in this case is the lack of
evidence on record showing that Manulife ever exercised
means-and-manner control, even to a limited extent, over
Tongko during his ascent in Manulife’s sales ladder. In 1983,
Tongko was appointed unit manager. Inexplicably, Tongko never
bothered to present any evidence at all on what this designation
meant. This also holds true for Tongko’s appointment as branch
manager in 1990, and as Regional Sales Manager in 1996. The
best evidence of control – the agreement or directive relating to
Tongko’s duties and responsibilities – was never introduced as
part of the records of the case. The reality is, prior to de Dios’
letter, Manulife had practically left Tongko alone not only in
doing the business of selling insurance, but also in guiding the
agents under his wing. As discussed below, the alleged
directives covered by de Dios’ letter, heretofore quoted in full,
were policy directions and targeted results that the company
wanted Tongko and the other sales groups to realign with in their
own selling activities. This is the reality that the parties’
presented evidence consistently tells us.
What, to Tongko, serve as evidence of labor law control are the
codes of conduct that Manulife imposes on its agents in the sale
of insurance. The mere presentation of codes or of rules and
regulations, however, is not per se indicative of labor law control
as the law and jurisprudence teach us.
As already recited above, the Insurance Code imposes
obligations on both the insurance company and its agents in the
performance of their respective obligations under the Code,
particularly on licenses and their renewals, on the
representations to be made to potential customers, the collection
of premiums, on the delivery of insurance policies, on the matter
of compensation, and on measures to ensure ethical business
practice in the industry.
The general law on agency, on the other hand, expressly allows
the principal an element of control over the agent in a manner
consistent with an agency relationship. In this sense, these
control measures cannot be read as indicative of labor law
control. Foremost among these are the directives that the
principal may impose on the agent to achieve the assigned
tasks, to the extent that they do not involve the means and
manner of undertaking these tasks. The law likewise obligates
the agent to render an account; in this sense, the principal may
impose on the agent specific instructions on how an account
shall be made, particularly on the matter of expenses and
reimbursements. To these extents, control can be imposed
through rules and regulations without intruding into the labor law
concept of control for purposes of employment.
From jurisprudence, an important lesson that the first Insular Life
case teaches us is that a commitment to abide by the rules and
regulations of an insurance company does not ipso facto make
the insurance agent an employee. Neither do guidelines
somehow restrictive of the insurance agent’s conduct
necessarily indicate "control" as this term is defined in
jurisprudence. Guidelines indicative of labor law "control," as
the first Insular Life case tells us, should not merely relate
to the mutually desirable result intended by the contractual
relationship; they must have the nature of dictating the
means or methods to be employed in attaining the result, or of
fixing the methodology and of binding or restricting the party
hired to the use of these means. In fact, results-wise, the
principal can impose production quotas and can determine how
many agents, with specific territories, ought to be employed to
achieve the company’s objectives. These are management
policy decisions that the labor law element of control cannot
reach. Our ruling in these respects in the first Insular Life case
was practically reiterated in Carungcong. Thus, as will be shown
more fully below, Manulife’s codes of conduct,30 all of which do
not intrude into the insurance agents’ means and manner of
conducting their sales and only control them as to the desired
results and Insurance Code norms, cannot be used as basis for
a finding that the labor law concept of control existed between
Manulife and Tongko.
The dissent considers the imposition of administrative and
managerial functions on Tongko as indicative of labor law
control; thus, Tongko as manager, but not as insurance agent,
became Manulife’s employee. It drew this conclusion from what
the other Manulife managers disclosed in their affidavits (i.e.,
their enumerated administrative and managerial functions) and
after comparing these statements with the managers in
Grepalife. The dissent compared the control exercised by
Manulife over its managers in the present case with the control
the managers in the Grepalife case exercised over their
employees by presenting the following matrix:31
Duties of Manulife’s Manager D
- to render or recommend prospective agents to be -
licensed, trained and contracted to sell Manulife products
and who will be part of my Unit
- to coordinate activities of the agents under [the -
managers’] Unit in [the agents’] daily, weekly and monthly sp
selling activities, making sure that their respective sales fo
targets are met; d
- to conduct periodic training sessions for [the] agents to -
further enhance their sales skill; and u
a
- to assist [the] agents with their sales activities by way of a
joint fieldwork, consultations and one-on-one evaluation d
and analysis of particular accounts
Aside from these affidavits however, no other evidence exists
regarding the effects of Tongko’s additional roles in Manulife’s
sales operations on the contractual relationship between them.
To the dissent, Tongko’s administrative functions as recruiter,
trainer, or supervisor of other sales agents constituted a
substantive alteration of Manulife’s authority over Tongko and
the performance of his end of the relationship with Manulife. We
could not deny though that Tongko remained, first and foremost,
an insurance agent, and that his additional role as Branch
Manager did not lessen his main and dominant role as insurance
agent; this role continued to dominate the relations between
Tongko and Manulife even after Tongko assumed his leadership
role among agents. This conclusion cannot be denied because it
proceeds from the undisputed fact that Tongko and Manulife
never altered their July 1, 1977 Agreement, a distinction the
present case has with the contractual changes made in the
second Insular Life case. Tongko’s results-based commissions,
too, attest to the primacy he gave to his role as insurance sales
agent.
The dissent apparently did not also properly analyze and
appreciate the great qualitative difference that exists between:
 the Manulife managers’ role is to coordinate activities
of the agents under the managers’ Unit in the agents’
daily, weekly, and monthly selling activities, making
sure that their respective sales targets are met.
 the District Manager’s duty in Grepalife is to properly
account, record, and document the company's funds,
spot-check and audit the work of the zone supervisors,
conserve the company's business in the district
through "reinstatements," follow up the submission of
weekly remittance reports of the debit agents and
zone supervisors, preserve company property in good
condition, train understudies for the position of district
managers, and maintain his quota of sales (the failure
of which is a ground for termination).
 the Zone Supervisor’s (also in Grepalife) has the
duty to direct and supervise the sales activities of the
debit agents under him, conserve company property
through "reinstatements," undertake and discharge the
functions of absentee debit agents, spot-check the
records of debit agents, and insure proper
documentation of sales and collections by the debit
agents.
These job contents are worlds apart in terms of "control." In
Grepalife, the details of how to do the job are specified and pre-
determined; in the present case, the operative words are the
"sales target," the methodology being left undefined except to
the extent of being "coordinative." To be sure, a "coordinative"
standard for a manager cannot be indicative of control; the
standard only essentially describes what a Branch Manager is –
the person in the lead who orchestrates activities within the
group. To "coordinate," and thereby to lead and to orchestrate, is
not so much a matter of control by Manulife; it is simply a
statement of a branch manager’s role in relation with his agents
from the point of view of Manulife whose business Tongko’s
sales group carries.
A disturbing note, with respect to the presented affidavits and
Tongko’s alleged administrative functions, is the selective
citation of the portions supportive of an employment relationship
and the consequent omission of portions leading to the contrary
conclusion. For example, the following portions of the affidavit of
Regional Sales Manager John Chua, with counterparts in the
other affidavits, were not brought out in the Decision of
November 7, 2008, while the other portions suggesting labor law
control were highlighted. Specifically, the following portions of
the affidavits were not brought out:32
1.a. I have no fixed wages or salary since my services are
compensated by way of commissions based on the computed
premiums paid in full on the policies obtained thereat;
1.b. I have no fixed working hours and employ my own method
in soliticing insurance at a time and place I see fit;
1.c. I have my own assistant and messenger who handle my
daily work load;
1.d. I use my own facilities, tools, materials and supplies in
carrying out my business of selling insurance;
xxxx
6. I have my own staff that handles the day to day operations of
my office;
7. My staff are my own employees and received salaries from
me;
xxxx
9. My commission and incentives are all reported to the Bureau
of Internal Revenue (BIR) as income by a self-employed
individual or professional with a ten (10) percent creditable
withholding tax. I also remit monthly for professionals.
These statements, read with the above comparative analysis of
the Manulife and the Grepalife cases, would have readily yielded
the conclusion that no employer-employee relationship existed
between Manulife and Tongko.
Even de Dios’ letter is not determinative of control as it indicates
the least amount of intrusion into Tongko’s exercise of his role
as manager in guiding the sales agents. Strictly viewed, de Dios’
directives are merely operational guidelines on how Tongko
could align his operations with Manulife’s re-directed goal of
being a "big league player." The method is to expand coverage
through the use of more agents. This requirement for the
recruitment of more agents is not a means-and-method control
as it relates, more than anything else, and is directly relevant, to
Manulife’s objective of expanded business operations through
the use of a bigger sales force whose members are all on a
principal-agent relationship. An important point to note here is
that Tongko was not supervising regular full-time employees of
Manulife engaged in the running of the insurance business;
Tongko was effectively guiding his corps of sales agents, who
are bound to Manulife through the same Agreement that he had
with Manulife, all the while sharing in these agents’ commissions
through his overrides. This is the lead agent concept mentioned
above for want of a more appropriate term, since the title of
Branch Manager used by the parties is really a misnomer given
that what is involved is not a specific regular branch of the
company but a corps of non-employed agents, defined in terms
of covered territory, through which the company sells insurance.
Still another point to consider is that Tongko was not even
setting policies in the way a regular company manager does;
company aims and objectives were simply relayed to him with
suggestions on how these objectives can be reached through
the expansion of a non-employee sales force.
Interestingly, a large part of de Dios’ letter focused on income,
which Manulife demonstrated, in Tongko’s case, to be
unaffected by the new goal and direction the company had set.
Income in insurance agency, of course, is dependent on results,
not on the means and manner of selling – a matter for Tongko
and his agents to determine and an area into which Manulife had
not waded. Undeniably, de Dios’ letter contained a directive to
secure a competent assistant at Tongko’s own expense. While
couched in terms of a directive, it cannot strictly be understood
as an intrusion into Tongko’s method of operating and
supervising the group of agents within his delineated territory.
More than anything else, the "directive" was a signal to Tongko
that his results were unsatisfactory, and was a suggestion on
how Tongko’s perceived weakness in delivering results could be
remedied. It was a solution, with an eye on results, for a
consistently underperforming group; its obvious intent was to
save Tongko from the result that he then failed to grasp – that he
could lose even his own status as an agent, as he in fact
eventually did.
The present case must be distinguished from the second Insular
Life case that showed the hallmarks of an employer-employee
relationship in the management system established. These
were: exclusivity of service, control of assignments and removal
of agents under the private respondent’s unit, and furnishing of
company facilities and materials as well as capital described as
Unit Development Fund. All these are obviously absent in the
present case. If there is a commonality in these cases, it is in the
collection of premiums which is a basic authority that can be
delegated to agents under the Insurance Code.
As previously discussed, what simply happened in Tongko’s
case was the grant of an expanded sales agency role that
recognized him as leader amongst agents in an area that
Manulife defined. Whether this consequently resulted in the
establishment of an employment relationship can be
answered by concrete evidence that corresponds to the
following questions:
 as lead agent, what were Tongko’s specific functions
and the terms of his additional engagement;
  was he paid additional compensation as a so-called
Area Sales Manager, apart from the commissions he
received from the insurance sales he generated;
 what can be Manulife’s basis to terminate his status as
lead agent;
 can Manulife terminate his role as lead agent
separately from his agency contract; and
 to what extent does Manulife control the means and
methods of Tongko’s role as lead agent?
The answers to these questions may, to some extent, be
deduced from the evidence at hand, as partly discussed above.
But strictly speaking, the questions cannot definitively and
concretely be answered through the evidence on record. The
concrete evidence required to settle these questions is simply
not there, since only the Agreement and the anecdotal affidavits
have been marked and submitted as evidence.
Given this anemic state of the evidence, particularly on the
requisite confluence of the factors determinative of the existence
of employer-employee relationship, the Court cannot
conclusively find that the relationship exists in the present case,
even if such relationship only refers to Tongko’s additional
functions. While a rough deduction can be made, the answer will
not be fully supported by the substantial evidence needed.
Under this legal situation, the only conclusion that can be made
is that the absence of evidence showing Manulife’s control over
Tongko’s contractual duties points to the absence of any
employer-employee relationship between Tongko and Manulife.
In the context of the established evidence, Tongko remained an
agent all along; although his subsequent duties made him a lead
agent with leadership role, he was nevertheless only an agent
whose basic contract yields no evidence of means-and-manner
control.
This conclusion renders unnecessary any further discussion of
the question of whether an agent may simultaneously assume
conflicting dual personalities. But to set the record straight, the
concept of a single person having the dual role of agent and
employee while doing the same task is a novel one in our
jurisprudence, which must be viewed with caution especially
when it is devoid of any jurisprudential support or precedent. The
quoted portions in Justice Carpio-Morales’ dissent,33 borrowed
from both the Grepalife and the second Insular Life cases, to
support the duality approach of the Decision of November 7,
2008, are regrettably far removed from their context – i.e., the
cases’ factual situations, the issues they decided and the totality
of the rulings in these cases – and cannot yield the conclusions
that the dissenting opinions drew.
The Grepalife case dealt with the sole issue of whether the Ruiz
brothers’ appointment as zone supervisor and district manager
made them employees of Grepalife. Indeed, because of the
presence of the element of control in their contract of
engagements, they were considered Grepalife’s employees.
This did not mean, however, that they were simultaneously
considered agents as well as employees of Grepalife; the
Court’s ruling never implied that this situation existed insofar as
the Ruiz brothers were concerned. The Court’s statement – the
Insurance Code may govern the licensing requirements and
other particular duties of insurance agents, but it does not bar
the application of the Labor Code with regard to labor standards
and labor relations – simply means that when an insurance
company has exercised control over its agents so as to make
them their employees, the relationship between the parties,
which was otherwise one for agency governed by the Civil Code
and the Insurance Code, will now be governed by the Labor
Code. The reason for this is simple – the contract of agency has
been transformed into an employer-employee relationship.
The second Insular Life case, on the other hand, involved the
issue of whether the labor bodies have jurisdiction over an illegal
termination dispute involving parties who had two contracts –
first, an original contract (agency contract), which was
undoubtedly one for agency, and another subsequent contract
that in turn designated the agent acting unit manager (a
management contract). Both the Insular Life and the labor arbiter
were one in the position that both were agency contracts. The
Court disagreed with this conclusion and held that insofar as the
management contract is concerned, the labor arbiter has
jurisdiction. It is in this light that we remanded the case to the
labor arbiter for further proceedings. We never said in this case
though that the insurance agent had effectively assumed dual
personalities for the simple reason that the agency contract has
been effectively superseded by the management contract. The
management contract provided that if the appointment was
terminated for any reason other than for cause, the acting unit
manager would be reverted to agent status and assigned to any
unit.
The dissent pointed out, as an argument to support its
employment relationship conclusion, that any doubt in the
existence of an employer-employee relationship should be
resolved in favor of the existence of the relationship.34This
observation, apparently drawn from Article 4 of the Labor Code,
is misplaced, as Article 4 applies only when a doubt exists in the
"implementation and application" of the Labor Code and its
implementing rules; it does not apply where no doubt exists as in
a situation where the claimant clearly failed to substantiate his
claim of employment relationship by the quantum of evidence
the Labor Code requires.
On the dissent’s last point regarding the lack of jurisprudential
value of our November 7, 2008 Decision, suffice it to state that,
as discussed above, the Decision was not supported by the
evidence adduced and was not in accordance with controlling
jurisprudence. It should, therefore, be reconsidered and
abandoned, but not in the manner the dissent suggests as the
dissenting opinions are as factually and as legally erroneous as
the Decision under reconsideration.
In light of these conclusions, the sufficiency of Tongko’s failure
to comply with the guidelines of de Dios’ letter, as a ground for
termination of Tongko’s agency, is a matter that the labor
tribunals cannot rule upon in the absence of an employer-
employee relationship. Jurisdiction over the matter belongs to
the courts applying the laws of insurance, agency and contracts.
WHEREFORE, considering the foregoing discussion, we
REVERSE our Decision of November 7,
2008, GRANTManulife’s motion for reconsideration and,
accordingly, DISMISS Tongko’s petition. No costs.
G.R. No. 84484 November 15, 1989
INSULAR LIFE ASSURANCE CO., LTD., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and
MELECIO BASIAO, respondents.
NARVASA, J.:
On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter
simply called the Company) and Melecio T. Basiao entered into
a contract 1 by which:
1. Basiao was "authorized to solicit within the Philippines
applications for insurance policies and annuities in accordance
with the existing rules and regulations" of the Company;
2. he would receive "compensation, in the form of commissions
... as provided in the Schedule of Commissions" of the contract
to "constitute a part of the consideration of ... (said) agreement;"
and
3. the "rules in ... (the Company's) Rate Book and its Agent's
Manual, as well as all its circulars ... and those which may from
time to time be promulgated by it, ..." were made part of said
contract.
The contract also contained, among others, provisions governing
the relations of the parties, the duties of the Agent, the acts
prohibited to him, and the modes of termination of the
agreement, viz.:
RELATION WITH THE COMPANY. The Agent shall be free to
exercise his own judgment as to time, place and means of
soliciting insurance. Nothing herein contained shall therefore be
construed to create the relationship of employee and employer
between the Agent and the Company. However, the Agent shall
observe and conform to all rules and regulations which the
Company may from time to time prescribe.
ILLEGAL AND UNETHICAL PRACTICES. The Agent is
prohibited from giving, directly or indirectly, rebates in any form,
or from making any misrepresentation or over-selling, and, in
general, from doing or committing acts prohibited in the Agent's
Manual and in circulars of the Office of the Insurance
Commissioner.
TERMINATION. The Company may terminate the contract at
will, without any previous notice to the Agent, for or on account
of ... (explicitly specified causes). ...
Either party may terminate this contract by giving to the other
notice in writing to that effect. It shall become ipso
facto cancelled if the Insurance Commissioner should revoke a
Certificate of Authority previously issued or should the Agent fail
to renew his existing Certificate of Authority upon its expiration.
The Agent shall not have any right to any commission on
renewal of premiums that may be paid after the termination of
this agreement for any cause whatsoever, except when the
termination is due to disability or death in line of service. As to
commission corresponding to any balance of the first year's
premiums remaining unpaid at the termination of this agreement,
the Agent shall be entitled to it if the balance of the first year
premium is paid, less actual cost of collection, unless the
termination is due to a violation of this contract, involving
criminal liability or breach of trust.
ASSIGNMENT. No Assignment of the Agency herein created or
of commissions or other compensations shall be valid without
the prior consent in writing of the Company. ...
Some four years later, in April 1972, the parties entered into
another contract — an Agency Manager's Contract — and to
implement his end of it Basiao organized an agency or office to
which he gave the name M. Basiao and Associates, while
concurrently fulfilling his commitments under the first contract
with the Company. 2
In May, 1979, the Company terminated the Agency Manager's
Contract. After vainly seeking a reconsideration, Basiao sued the
Company in a civil action and this, he was later to claim,
prompted the latter to terminate also his engagement under the
first contract and to stop payment of his commissions starting
April 1, 1980. 3
Basiao thereafter filed with the then Ministry of Labor a
complaint 4 against the Company and its president. Without
contesting the termination of the first contract, the complaint
sought to recover commissions allegedly unpaid thereunder,
plus attorney's fees. The respondents disputed the Ministry's
jurisdiction over Basiao's claim, asserting that he was not the
Company's employee, but an independent contractor and that
the Company had no obligation to him for unpaid commissions
under the terms and conditions of his contract. 5
The Labor Arbiter to whom the case was assigned found for
Basiao. He ruled that the underwriting agreement had
established an employer-employee relationship between him
and the Company, and this conferred jurisdiction on the Ministry
of Labor to adjudicate his claim. Said official's decision directed
payment of his unpaid commissions "... equivalent to the
balance of the first year's premium remaining unpaid, at the time
of his termination, of all the insurance policies solicited by ...
(him) in favor of the respondent company ..." plus 10% attorney's
fees. 6
This decision was, on appeal by the Company, affirmed by the
National Labor Relations Commission. 7 Hence, the present
petition for certiorari and prohibition.
The chief issue here is one of jurisdiction: whether, as Basiao
asserts, he had become the Company's employee by virtue of
the contract invoked by him, thereby placing his claim for unpaid
commissions within the original and exclusive jurisdiction of the
Labor Arbiter under the provisions of Section 217 of the Labor
Code, 8 or, contrarily, as the Company would have it, that under
said contract Basiao's status was that of an independent
contractor whose claim was thus cognizable, not by the Labor
Arbiter in a labor case, but by the regular courts in an ordinary
civil action.
The Company's thesis, that no employer-employee relation in
the legal and generally accepted sense existed between it and
Basiao, is drawn from the terms of the contract they had entered
into, which, either expressly or by necessary implication, made
Basiao the master of his own time and selling methods, left to
his judgment the time, place and means of soliciting insurance,
set no accomplishment quotas and compensated him on the
basis of results obtained. He was not bound to observe any
schedule of working hours or report to any regular station; he
could seek and work on his prospects anywhere and at anytime
he chose to, and was free to adopt the selling methods he
deemed most effective.
Without denying that the above were indeed the expressed
implicit conditions of Basiao's contract with the Company, the
respondents contend that they do not constitute the decisive
determinant of the nature of his engagement, invoking
precedents to the effect that the critical feature distinguishing the
status of an employee from that of an independent contractor
is control, that is, whether or not the party who engages the
services of another has the power to control the latter's conduct
in rendering such services. Pursuing the argument, the
respondents draw attention to the provisions of Basiao's contract
obliging him to "... observe and conform to all rules and
regulations which the Company may from time to time prescribe
...," as well as to the fact that the Company prescribed the
qualifications of applicants for insurance, processed their
applications and determined the amounts of insurance cover to
be issued as indicative of the control, which made Basiao, in
legal contemplation, an employee of the Company. 9
It is true that the "control test" expressed in the following
pronouncement of the Court in the 1956 case of Viana vs. Alejo
Al-Lagadan10
... In determining the existence of employer-employee
relationship, the following elements are generally considered,
namely: (1) the selection and engagement of the employee; (2)
the payment of wages; (3) the power of dismissal; and (4) the
power to control the employees' conduct — although the latter is
the most important element (35 Am. Jur. 445). ...
has been followed and applied in later cases, some fairly
recent. 11 Indeed, it is without question a valid test of the
character of a contract or agreement to render service. It should,
however, be obvious that not every form of control that the hiring
party reserves to himself over the conduct of the party hired in
relation to the services rendered may be accorded the effect of
establishing an employer-employee relationship between them
in the legal or technical sense of the term. A line must be drawn
somewhere, if the recognized distinction between an employee
and an individual contractor is not to vanish altogether.
Realistically, it would be a rare contract of service that gives
untrammelled freedom to the party hired and eschews any
intervention whatsoever in his performance of the engagement.
Logically, the line should be drawn between rules that merely
serve as guidelines towards the achievement of the mutually
desired result without dictating the means or methods to be
employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of
such means. The first, which aim only to promote the result,
create no employer-employee relationship unlike the second,
which address both the result and the means used to achieve it.
The distinction acquires particular relevance in the case of an
enterprise affected with public interest, as is the business of
insurance, and is on that account subject to regulation by the
State with respect, not only to the relations between insurer and
insured but also to the internal affairs of the insurance
company. 12 Rules and regulations governing the conduct of the
business are provided for in the Insurance Code and enforced
by the Insurance Commissioner. It is, therefore, usual and
expected for an insurance company to promulgate a set of rules
to guide its commission agents in selling its policies that they
may not run afoul of the law and what it requires or prohibits. Of
such a character are the rules which prescribe the qualifications
of persons who may be insured, subject insurance applications
to processing and approval by the Company, and also reserve to
the Company the determination of the premiums to be paid and
the schedules of payment. None of these really invades the
agent's contractual prerogative to adopt his own selling methods
or to sell insurance at his own time and convenience, hence
cannot justifiably be said to establish an employer-employee
relationship between him and the company.
There is no dearth of authority holding persons similarly placed
as respondent Basiao to be independent contractors, instead of
employees of the parties for whom they worked. In Mafinco
Trading Corporation vs. Ople, 13the Court ruled that a person
engaged to sell soft drinks for another, using a truck supplied by
the latter, but with the right to employ his own workers, sell
according to his own methods subject only to prearranged
routes, observing no working hours fixed by the other party and
obliged to secure his own licenses and defray his own selling
expenses, all in consideration of a peddler's discount given by
the other party for at least 250 cases of soft drinks sold daily,
was not an employee but an independent contractor.
In Investment Planning Corporation of the Philippines us. Social
Security System 14 a case almost on all fours with the present
one, this Court held that there was no employer-employee
relationship between a commission agent and an investment
company, but that the former was an independent contractor
where said agent and others similarly placed were: (a) paid
compensation in the form of commissions based on percentages
of their sales, any balance of commissions earned being payable
to their legal representatives in the event of death or registration;
(b) required to put up performance bonds; (c) subject to a set of
rules and regulations governing the performance of their duties
under the agreement with the company and termination of their
services for certain causes; (d) not required to report for work at
any time, nor to devote their time exclusively to working for the
company nor to submit a record of their activities, and who,
finally, shouldered their own selling and transportation expenses.
More recently, in Sara vs. NLRC, 15 it was held that one who had
been engaged by a rice miller to buy and sell rice and palay
without compensation except a certain percentage of what he
was able to buy or sell, did work at his own pleasure without any
supervision or control on the part of his principal and relied on
his own resources in the performance of his work, was a plain
commission agent, an independent contractor and not an
employee.
The respondents limit themselves to pointing out that Basiao's
contract with the Company bound him to observe and conform to
such rules and regulations as the latter might from time to time
prescribe. No showing has been made that any such rules or
regulations were in fact promulgated, much less that any rules
existed or were issued which effectively controlled or restricted
his choice of methods — or the methods themselves — of
selling insurance. Absent such showing, the Court will not
speculate that any exceptions or qualifications were imposed on
the express provision of the contract leaving Basiao "... free to
exercise his own judgment as to the time, place and means of
soliciting insurance."
The Labor Arbiter's decision makes reference to Basiao's claim
of having been connected with the Company for twenty-five
years. Whatever this is meant to imply, the obvious reply would
be that what is germane here is Basiao's status under the
contract of July 2, 1968, not the length of his relationship with
the Company.
The Court, therefore, rules that under the contract invoked by
him, Basiao was not an employee of the petitioner, but a
commission agent, an independent contractor whose claim for
unpaid commissions should have been litigated in an ordinary
civil action. The Labor Arbiter erred in taking cognizance of, and
adjudicating, said claim, being without jurisdiction to do so, as
did the respondent NLRC in affirming the Arbiter's decision. This
conclusion renders it unnecessary and premature to consider
Basiao's claim for commissions on its merits.
WHEREFORE, the appealed Resolution of the National Labor
Relations Commission is set aside, and that complaint of private
respondent Melecio T. Basiao in RAB Case No. VI-0010-83 is
dismissed. No pronouncement as to costs.
G.R. No. L-48645 January 7, 1987
"BROTHERHOOD" LABOR UNITY MOVEMENT OF THE
PHILIPPINES, ANTONIO CASBADILLO, PROSPERO
TABLADA, ERNESTO BENGSON, PATRICIO SERRANO,
ANTONIO B. BOBIAS, VIRGILIO ECHAS, DOMINGO
PARINAS, NORBERTO GALANG, JUANITO NAVARRO,
NESTORIO MARCELLANA, TEOFILO B. CACATIAN, RUFO
L. EGUIA, CARLOS SUMOYAN, LAMBERTO RONQUILLO,
ANGELITO AMANCIO, DANILO B. MATIAR, ET
AL., petitioners,
vs.
HON. RONALDO B. ZAMORA, PRESIDENTIAL ASSISTANT
FOR LEGAL AFFAIRS, OFFICE OF THE PRESIDENT, HON.
AMADO G. INCIONG, UNDERSECRETARY OF LABOR, SAN
MIGUEL CORPORATION, GENARO OLIVES, ENRIQUE
CAMAHORT, FEDERICO OÑATE, ERNESTO VILLANUEVA,
ANTONIO BOCALING and GODOFREDO
CUETO, respondents.
GUTIERREZ, JR., J.:
The elemental question in labor law of whether or not an
employer-employee relationship exists between petitioners-
members of the "Brotherhood Labor Unit Movement of the
Philippines" (BLUM) and respondent San Miguel Corporation, is
the main issue in this petition. The disputed decision of public
respondent Ronaldo Zamora, Presidential Assistant for legal
Affairs, contains a brief summary of the facts involved:
1. The records disclose that on July 11, 1969, BLUM filed a
complaint with the now defunct Court of Industrial Relations,
charging San Miguel Corporation, and the following officers:
Enrique Camahort, Federico Ofiate Feliciano Arceo, Melencio
Eugenia Jr., Ernesto Villanueva, Antonio Bocaling and
Godofredo Cueto of unfair labor practice as set forth in Section 4
(a), sub-sections (1) and (4) of Republic Act No. 875 and of
Legal dismissal. It was alleged that respondents ordered the
individual complainants to disaffiliate from the complainant
union; and that management dismissed the individual
complainants when they insisted on their union membership.
On their part, respondents moved for the dismissal of the
complaint on the grounds that the complainants are not and
have never been employees of respondent company but
employees of the independent contractor; that respondent
company has never had control over the means and methods
followed by the independent contractor who enjoyed full
authority to hire and control said employees; and that the
individual complainants are barred by estoppel from asserting
that they are employees of respondent company.
While pending with the Court of Industrial Relations CIR
pleadings and testimonial and documentary evidences were duly
presented, although the actual hearing was delayed by several
postponements. The dispute was taken over by the National
Labor Relations Commission (NLRC) with the decreed abolition
of the CIR and the hearing of the case intransferably
commenced on September 8, 1975.
On February 9, 1976, Labor Arbiter Nestor C. Lim found for
complainants which was concurred in by the NLRC in a decision
dated June 28, 1976. The amount of backwages awarded,
however, was reduced by NLRC to the equivalent of one (1)
year salary.
On appeal, the Secretary in a decision dated June 1, 1977, set
aside the NLRC ruling, stressing the absence of an employer-
mployee relationship as borne out by the records of the case. ...
The petitioners strongly argue that there exists an employer-
employee relationship between them and the respondent
company and that they were dismissed for unionism, an act
constituting unfair labor practice "for which respondents must be
made to answer."
Unrebutted evidence and testimony on record establish that the
petitioners are workers who have been employed at the San
Miguel Parola Glass Factory since 1961, averaging about seven
(7) years of service at the time of their termination. They worked
as "cargadores" or "pahinante" at the SMC Plant loading,
unloading, piling or palleting empty bottles and woosen shells to
and from company trucks and warehouses. At times, they
accompanied the company trucks on their delivery routes.
The petitioners first reported for work to Superintendent-in-
Charge Camahort. They were issued gate passes signed by
Camahort and were provided by the respondent company with
the tools, equipment and paraphernalia used in the loading,
unloading, piling and hauling operation.
Job orders emanated from Camahort. The orders are then
transmitted to an assistant-officer-in-charge. In turn, the
assistant informs the warehousemen and checkers regarding the
same. The latter, thereafter, relays said orders to the capatazes
or group leaders who then give orders to the workers as to
where, when and what to load, unload, pile, pallet or clean.
Work in the glass factory was neither regular nor continuous,
depending wholly on the volume of bottles manufactured to be
loaded and unloaded, as well as the business activity of the
company. Work did not necessarily mean a full eight (8) hour
day for the petitioners. However, work,at times, exceeded the
eight (8) hour day and necessitated work on Sundays and
holidays. For this, they were neither paid overtime nor
compensation for work on Sundays and holidays.
Petitioners were paid every ten (10) days on a piece rate basis,
that is, according to the number of cartons and wooden shells
they were able to load, unload, or pile. The group leader notes
down the number or volume of work that each individual worker
has accomplished. This is then made the basis of a report or
statement which is compared with the notes of the checker and
warehousemen as to whether or not they tally. Final approval of
report is by officer-in-charge Camahort. The pay check is given
to the group leaders for encashment, distribution, and payment
to the petitioners in accordance with payrolls prepared by said
leaders. From the total earnings of the group, the group leader
gets a participation or share of ten (10%) percent plus an
additional amount from the earnings of each individual.
The petitioners worked exclusive at the SMC plant, never having
been assigned to other companies or departments of SMC plant,
even when the volume of work was at its minimum. When any of
the glass furnaces suffered a breakdown, making a shutdown
necessary, the petitioners work was temporarily suspended.
Thereafter, the petitioners would return to work at the glass
plant.
Sometime in January, 1969, the petitioner workers — numbering
one hundred and forty (140) organized and affiliated themselves
with the petitioner union and engaged in union activities.
Believing themselves entitled to overtime and holiday pay, the
petitioners pressed management, airing other grievances such
as being paid below the minimum wage law, inhuman treatment,
being forced to borrow at usurious rates of interest and to buy
raffle tickets, coerced by withholding their salaries, and salary
deductions made without their consent. However, their gripes
and grievances were not heeded by the respondents.
On February 6, 1969, the petitioner union filed a notice of strike
with the Bureau of Labor Relations in connection with the
dismissal of some of its members who were allegedly castigated
for their union membership and warned that should they persist
in continuing with their union activities they would be dismissed
from their jobs. Several conciliation conferences were scheduled
in order to thresh out their differences, On February 12, 1969,
union member Rogelio Dipad was dismissed from work. At the
scheduled conference on February 19, 1969, the complainant
union through its officers headed by National President Artemio
Portugal Sr., presented a letter to the respondent company
containing proposals and/or labor demands together with a
request for recognition and collective bargaining.
San Miguel refused to bargain with the petitioner union alleging
that the workers are not their employees.
On February 20, 1969, all the petitioners were dismissed from
their jobs and, thereafter, denied entrance to respondent
company's glass factory despite their regularly reporting for
work. A complaint for illegal dismissal and unfair labor practice
was filed by the petitioners.
The case reaches us now with the same issues to be resolved
as when it had begun.
The question of whether an employer-employee relationship
exists in a certain situation continues to bedevil the courts. Some
businessmen try to avoid the bringing about of an employer-
employee relationship in their enterprises because that judicial
relation spawns obligations connected with workmen's
compensation, social security, medicare, minimum wage,
termination pay, and unionism. (Mafinco Trading Corporation v.
Ople, 70 SCRA 139).
In determining the existence of an employer-employee
relationship, the elements that are generally considered are the
following: (a) the selection and engagement of the employee; (b)
the payment of wages; (c) the power of dismissal; and (d) the
employer's power to control the employee with respect to the
means and methods by which the work is to be accomplished. It.
is the called "control test" that is the most important element
(Investment Planning Corp. of the Phils. v. The Social Security
System, 21 SCRA 924; Mafinco Trading Corp. v.
Ople, supra, and Rosario Brothers, Inc. v. Ople, 131 SCRA 72).
Applying the above criteria, the evidence strongly indicates the
existence of an employer-employee relationship between
petitioner workers and respondent San Miguel Corporation. The
respondent asserts that the petitioners are employees of the
Guaranteed Labor Contractor, an independent labor contracting
firm.
The facts and evidence on record negate respondent SMC's
claim.
The existence of an independent contractor relationship is
generally established by the following criteria: "whether or not
the contractor is carrying on an independent business; the
nature and extent of the work; the skill required; the term and
duration of the relationship; the right to assign the performance
of 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" (56 CJS Master and Servant, Sec. 3(2), 46; See also
27 AM. Jur. Independent Contractor, Sec. 5, 485 and Annex 75
ALR 7260727)
None of the above criteria exists in the case at bar.
Highly unusual and suspect is the absence of a written contract
to specify the performance of a specified piece of work, the
nature and extent of the work and the term and duration of the
relationship. The records fail to show that a large commercial
outfit, such as the San Miguel Corporation, entered into mere
oral agreements of employment or labor contracting where the
same would involve considerable expenses and dealings with a
large number of workers over a long period of time. Despite
respondent company's allegations not an iota of evidence was
offered to prove the same or its particulars. Such failure makes
respondent SMC's stand subject to serious doubts.
Uncontroverted is the fact that for an average of seven (7) years,
each of the petitioners had worked continuously and exclusively
for the respondent company's shipping and warehousing
department. Considering the length of time that the petitioners
have worked with the respondent company, there is justification
to conclude that they were engaged to perform activities
necessary or desirable in the usual business or trade of the
respondent, and the petitioners are, therefore regular employees
(Phil. Fishing Boat Officers and Engineers Union v. Court of
Industrial Relations, 112 SCRA 159 and RJL Martinez Fishing
Corporation v. National Labor Relations Commission, 127 SCRA
454).
As we have found in RJL Martinez Fishing Corporation v.
National Labor Relations Commission (supra):
... [T]he employer-employee relationship between the parties
herein is not coterminous with each loading and unloading job.
As earlier shown, respondents are engaged in the business of
fishing. For this purpose, they have a fleet of fishing vessels.
Under this situation, respondents' activity of catching fish is a
continuous process and could hardly be considered as seasonal
in nature. So that the activities performed by herein
complainants, i.e. unloading the catch of tuna fish from
respondents' vessels and then loading the same to refrigerated
vans, are necessary or desirable in the business of respondents.
This circumstance makes the employment of complainants a
regular one, in the sense that it does not depend on any specific
project or seasonable activity. (NLRC Decision, p. 94,
Rollo).lwphl@itç
so as it with petitioners in the case at bar. In fact, despite past
shutdowns of the glass plant for repairs, the petitioners,
thereafter, promptly returned to their jobs, never having been
replaced, or assigned elsewhere until the present controversy
arose. The term of the petitioners' employment appears
indefinite. The continuity and habituality of petitioners' work
bolsters their claim of employee status vis-a-vis respondent
company,
Even under the assumption that a contract of employment had
indeed been executed between respondent SMC and the
alleged labor contractor, respondent's case will, nevertheless,
fail.
Section 8, Rule VIII, Book III of the Implementing Rules of the
Labor Code provides:
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.
We find that Guaranteed and Reliable Labor contractors have
neither substantial capital nor investment to qualify as an
independent contractor under the law. The premises, tools,
equipment and paraphernalia used by the petitioners in their
jobs are admittedly all supplied by respondent company. It is
only the manpower or labor force which the alleged contractors
supply, suggesting the existence of a "labor only" contracting
scheme prohibited by law (Article 106, 109 of the Labor Code;
Section 9(b), Rule VIII, Book III, Implementing Rules and
Regulations of the Labor Code). In fact, even the alleged
contractor's office, which consists of a space at respondent
company's warehouse, table, chair, typewriter and cabinet, are
provided for by respondent SMC. It is therefore clear that the
alleged contractors have no capital outlay involved in the
conduct of its business, in the maintenance thereof or in the
payment of its workers' salaries.
The payment of the workers' wages is a critical factor in
determining the actuality of an employer-employee relationship
whether between respondent company and petitioners or
between the alleged independent contractor and petitioners. It is
important to emphasize that in a truly independent contractor-
contractee relationship, the fees are paid directly to the
manpower agency in lump sum without indicating or implying
that the basis of such lump sum is the salary per worker
multiplied by the number of workers assigned to the company.
This is the rule in Social Security System v. Court of Appeals (39
SCRA 629, 635).
The alleged independent contractors in the case at bar were
paid a lump sum representing only the salaries the workers were
entitled to, arrived at by adding the salaries of each worker
which depend on the volume of work they. had accomplished
individually. These are based on payrolls, reports or statements
prepared by the workers' group leader, warehousemen and
checkers, where they note down the number of cartons, wooden
shells and bottles each worker was able to load, unload, pile or
pallet and see whether they tally. The amount paid by
respondent company to the alleged independent contractor
considers no business expenses or capital outlay of the latter.
Nor is the profit or gain of the alleged contractor in the conduct
of its business provided for as an amount over and above the
workers' wages. Instead, the alleged contractor receives a
percentage from the total earnings of all the workers plus an
additional amount corresponding to a percentage of the earnings
of each individual worker, which, perhaps, accounts for the
petitioners' charge of unauthorized deductions from their salaries
by the respondents.
Anent the argument that the petitioners are not employees as
they worked on piece basis, we merely have to cite our rulings
in Dy Keh Beng v. International Labor and Marine Union of the
Philippines (90 SCRA 161), as follows:
"[C]ircumstances must be construed to determine indeed if
payment by the piece is just a method of compensation and
does not define the essence of the relation. Units of time . . . and
units of work are in establishments like respondent (sic) just
yardsticks whereby to determine rate of compensation, to be
applied whenever agreed upon. We cannot construe payment by
the piece where work is done in such an establishment so as to
put the worker completely at liberty to turn him out and take in
another at pleasure."
Article 106 of the Labor Code provides the legal effect of a labor
only contracting scheme, to wit:
... the person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the workers in
the same manner and extent as if the latter were directly
employed by him.
Firmly establishing respondent SMC's role as employer is the
control exercised by it over the petitioners that is, control in the
means and methods/manner by which petitioners are to go
about their work, as well as in disciplinary measures imposed by
it.
Because of the nature of the petitioners' work as cargadores or
pahinantes, supervision as to the means and manner of
performing the same is practically nil. For, how many ways are
there to load and unload bottles and wooden shells? The mere
concern of both respondent SMC and the alleged contractor is
that the job of having the bottles and wooden shells brought to
and from the warehouse be done. More evident and pronounced
is respondent company's right to control in the discipline of
petitioners. Documentary evidence presented by the petitioners
establish respondent SMC's right to impose disciplinary
measures for violations or infractions of its rules and regulations
as well as its right to recommend transfers and dismissals of the
piece workers. The inter-office memoranda submitted in
evidence prove the company's control over the petitioners. That
respondent SMC has the power to recommend penalties or
dismissal of the piece workers, even as to Abner Bungay who is
alleged by SMC to be a representative of the alleged labor
contractor, is the strongest indication of respondent company's
right of control over the petitioners as direct employer. There is
no evidence to show that the alleged labor contractor had such
right of control or much less had been there to supervise or deal
with the petitioners.
The petitioners were dismissed allegedly because of the
shutdown of the glass manufacturing plant. Respondent
company would have us believe that this was a case of
retrenchment due to the closure or cessation of operations of the
establishment or undertaking. But such is not the case here. The
respondent's shutdown was merely temporary, one of its
furnaces needing repair. Operations continued after such
repairs, but the petitioners had already been refused entry to the
premises and dismissed from respondent's service. New
workers manned their positions. It is apparent that the closure of
respondent's warehouse was merely a ploy to get rid of the
petitioners, who were then agitating the respondent company for
benefits, reforms and collective bargaining as a union. There is
no showing that petitioners had been remiss in their obligations
and inefficient in their jobs to warrant their separation.
As to the charge of unfair labor practice because of SMC's
refusal to bargain with the petitioners, it is clear that the
respondent company had an existing collective bargaining
agreement with the IBM union which is the recognized collective
bargaining representative at the respondent's glass plant.
There being a recognized bargaining representative of all
employees at the company's glass plant, the petitioners cannot
merely form a union and demand bargaining. The Labor Code
provides the proper procedure for the recognition of unions as
sole bargaining representatives. This must be followed.
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is
GRANTED. The San Miguel Corporation is hereby ordered to
REINSTATE petitioners, with three (3) years backwages.
However, where reinstatement is no longer possible, the
respondent SMC is ordered to pay the petitioners separation pay
equivalent to one (1) month pay for every year of service.
JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING
CORPORATION, respondent.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari[1] assailing
the 26 March 1999 Decision[2] of the Court of Appeals in CA-
G.R. SP No. 49190 dismissing the petition filed by Jose Y.
Sonza (SONZA). The Court of Appeals affirmed the findings of
the National Labor Relations Commission (NLRC), which
affirmed the Labor Arbiters dismissal of the case for lack of
jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation
(ABS-CBN) signed an Agreement (Agreement) with the Mel and
Jay Management and Development Corporation
(MJMDC). ABS-CBN was represented by its corporate officers
while MJMDC was represented by SONZA, as President and
General Manager, and Carmela Tiangco (TIANGCO), as EVP
and Treasurer. Referred to in the Agreement as AGENT,
MJMDC agreed to provide SONZAs services exclusively to ABS-
CBN as talent for radio and television. The Agreement listed the
services SONZA would render to ABS-CBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m.,
Mondays to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m.,
Sundays.[3]
ABS-CBN agreed to pay for SONZAs services a monthly talent
fee of P310,000 for the first year and P317,000 for the second
and third year of the Agreement. ABS-CBN would pay the talent
fees on the 10th and 25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President,
Eugenio Lopez III, which reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May
1994 entered into by your goodself on behalf of ABS-CBN with
our company relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of
recent events concerning his programs and career. We consider
these acts of the station violative of the Agreement and the
station as in breach thereof. In this connection, we hereby serve
notice of rescission of said Agreement at our instance effective
as of date.
Mr. Sonza informed us that he is waiving and renouncing
recovery of the remaining amount stipulated in paragraph 7 of
the Agreement but reserves the right to seek recovery of the
other benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y. SONZA
President and Gen. Manager[4]
On 30 April 1996, SONZA filed a complaint against ABS-CBN
before the Department of Labor and Employment, National
Capital Region in Quezon City. SONZA complained that ABS-
CBN did not pay his salaries, separation pay, service incentive
leave pay, 13th month pay, signing bonus, travel allowance and
amounts due under the Employees Stock Option Plan (ESOP).
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the
ground that no employer-employee relationship existed between
the parties. SONZA filed an Opposition to the motion on 19 July
1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly
talent fees through his account at PCIBank, Quezon Avenue
Branch, Quezon City. In July 1996, ABS-CBN opened a new
account with the same bank where ABS-CBN deposited
SONZAs talent fees and other payments due him under the
Agreement.
In his Order dated 2 December 1996, the Labor Arbiter[5] denied
the motion to dismiss and directed the parties to file their
respective position papers. The Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim that
he was an employee of respondent company until April 15,
1996 and that he was not paid certain claims, it is sufficient
enough as to confer jurisdiction over the instant case in this
Office. And as to whether or not such claim would entitle
complainant to recover upon the causes of action asserted is a
matter to be resolved only after and as a result of a
hearing. Thus, the respondents plea of lack of employer-
employee relationship may be pleaded only as a matter of
defense. It behooves upon it the duty to prove that there really is
no employer-employee relationship between it and the
complainant.
The Labor Arbiter then considered the case submitted for
resolution. The parties submitted their position papers on 24
February 1997.
On 11 March 1997, SONZA filed a Reply to Respondents
Position Paper with Motion to Expunge Respondents Annex 4
and Annex 5 from the Records. Annexes 4 and 5 are affidavits of
ABS-CBNs witnesses Soccoro Vidanes and Rolando V. Cruz.
These witnesses stated in their affidavits that the prevailing
practice in the television and broadcast industry is to treat talents
like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July
1997 dismissing the complaint for lack of jurisdiction.[6] The
pertinent parts of the decision read as follows:
xxx
While Philippine jurisprudence has not yet, with certainty,
touched on the true nature of the contract of a talent, it stands to
reason that a talent as above-described cannot be considered
as an employee by reason of the peculiar circumstances
surrounding the engagement of his services.
It must be noted that complainant was engaged by
respondent by reason of his peculiar skills and talent as a
TV host and a radio broadcaster. Unlike an ordinary
employee, he was free to perform the services he undertook
to render in accordance with his own style. The benefits
conferred to complainant under the May 1994 Agreement are
certainly very much higher than those generally given to
employees. For one, complainant Sonzas monthly talent fees
amount to a staggering P317,000. Moreover, his engagement as
a talent was covered by a specific contract. Likewise, he was not
bound to render eight (8) hours of work per day as he worked
only for such number of hours as may be necessary.
The fact that per the May 1994 Agreement complainant was
accorded some benefits normally given to an employee is
inconsequential. Whatever benefits complainant enjoyed
arose from specific agreement by the parties and not by
reason of employer-employee relationship. As correctly put
by the respondent, All these benefits are merely talent fees and
other contractual benefits and should not be deemed as salaries,
wages and/or other remuneration accorded to an employee,
notwithstanding the nomenclature appended to these
benefits. Apropos to this is the rule that the term or
nomenclature given to a stipulated benefit is not controlling, but
the intent of the parties to the Agreement conferring such
benefit.
The fact that complainant was made subject to respondents
Rules and Regulations, likewise, does not detract from the
absence of employer-employee relationship. As held by the
Supreme Court, The line should be drawn between rules that
merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or methods
to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of
such means. The first, which aim only to promote the result,
create no employer-employee relationship unlike the second,
which address both the result and the means to achieve
it. (Insular Life Assurance Co., Ltd. vs. NLRC, et al., G.R. No.
84484, November 15, 1989).
x x x (Emphasis supplied)[7]
SONZA appealed to the NLRC. On 24 February 1998, the NLRC
rendered a Decision affirming the Labor Arbiters
decision. SONZA filed a motion for reconsideration, which the
NLRC denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for
certiorari before the Court of Appeals assailing the decision and
resolution of the NLRC. On 26 March 1999, the Court of Appeals
rendered a Decision dismissing the case.[8]
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRCs finding that no
employer-employee relationship existed between SONZA and
ABS-CBN. Adopting the NLRCs decision, the appellate court
quoted the following findings of the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC
entered into the contract merely as an agent of complainant
Sonza, the principal. By all indication and as the law puts it, the
act of the agent is the act of the principal itself. This fact is made
particularly true in this case, as admittedly MJMDC is a
management company devoted exclusively to managing the
careers of Mr. Sonza and his broadcast partner, Mrs. Carmela
C. Tiangco. (Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only accrues
between complainant Sonza and MJMDC, and not between
ABS-CBN and MJMDC. This is clear from the provisions of the
May 1994 Agreement which specifically referred to MJMDC as
the AGENT. As a matter of fact, when complainant herein
unilaterally rescinded said May 1994 Agreement, it was MJMDC
which issued the notice of rescission in behalf of Mr. Sonza, who
himself signed the same in his capacity as President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN
reveal the fact that historically, the parties to the said
agreements are ABS-CBN and Mr. Sonza. And it is only in the
May 1994 Agreement, which is the latest Agreement executed
between ABS-CBN and Mr. Sonza, that MJMDC figured in the
said Agreement as the agent of Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere labor-only
contractor of ABS-CBN such that there exist[s] employer-
employee relationship between the latter and Mr. Sonza. On the
contrary, We find it indubitable, that MJMDC is an agent, not of
ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly
admitted by the latter and MJMDC in the May 1994 Agreement.
It may not be amiss to state that jurisdiction over the instant
controversy indeed belongs to the regular courts, the same
being in the nature of an action for alleged breach of contractual
obligation on the part of respondent-appellee. As squarely
apparent from complainant-appellants Position Paper, his claims
for compensation for services, 13th month pay, signing bonus
and travel allowance against respondent-appellee are not based
on the Labor Code but rather on the provisions of the May 1994
Agreement, while his claims for proceeds under Stock Purchase
Agreement are based on the latter. A portion of the Position
Paper of complainant-appellant bears perusal:
Under [the May 1994 Agreement] with respondent ABS-CBN,
the latter contractually bound itself to pay complainant a signing
bonus consisting of shares of stockswith FIVE HUNDRED
THOUSAND PESOS (P500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay
based on an amount not lower than the amount he was receiving
prior to effectivity of (the) Agreement.
Under paragraph 9 of (the May 1994 Agreement), complainant is
entitled to a commutable travel benefit amounting to at least One
Hundred Fifty Thousand Pesos (P150,000.00) per year.
Thus, it is precisely because of complainant-appellants own
recognition of the fact that his contractual relations with ABS-
CBN are founded on the New Civil Code, rather than the Labor
Code, that instead of merely resigning from ABS-CBN,
complainant-appellant served upon the latter a notice of
rescission of Agreement with the station, per his letter dated
April 1, 1996, which asserted that instead of referring to unpaid
employee benefits, he is waiving and renouncing recovery of the
remaining amount stipulated in paragraph 7 of the Agreement
but reserves the right to such recovery of the other benefits
under said Agreement. (Annex 3 of the respondent ABS-CBNs
Motion to Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the
May 1994 Agreement and/or the Stock Purchase Agreement by
respondent-appellee that complainant-appellant filed his
complaint.Complainant-appellants claims being anchored on the
alleged breach of contract on the part of respondent-appellee,
the same can be resolved by reference to civil law and not to
labor law. Consequently, they are within the realm of civil law
and, thus, lie with the regular courts. As held in the case of Dai-
Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21
November 1994, an action for breach of contractual
obligation is intrinsically a civil dispute.[9] (Emphasis
supplied)
The Court of Appeals ruled that the existence of an employer-
employee relationship between SONZA and ABS-CBN is a
factual question that is within the jurisdiction of the NLRC to
resolve.[10] A special civil action for certiorari extends only to
issues of want or excess of jurisdiction of the NLRC.[11] Such
action cannot cover an inquiry into the correctness of the
evaluation of the evidence which served as basis of the NLRCs
conclusion.[12] The Court of Appeals added that it could not re-
examine the parties evidence and substitute the factual findings
of the NLRC with its own.[13]
The Issue
In assailing the decision of the Court of Appeals, SONZA
contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING
THE NLRCS DECISION AND REFUSING TO FIND THAT AN
EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED
BETWEEN SONZA AND ABS-CBN, DESPITE THE WEIGHT
OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE
TO SUPPORT SUCH A FINDING.[14]
The Courts Ruling
We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the decision
of the Court of Appeals affirming the NLRC ruling which upheld
the Labor Arbiters dismissal of the case for lack of jurisdiction.
The present controversy is one of first impression. Although
Philippine labor laws and jurisprudence define clearly the
elements of an employer-employee relationship, this is the first
time that the Court will resolve the nature of the relationship
between a television and radio station and one of its
talents. There is no case law stating that a radio and television
program host is an employee of the broadcast station.
The instant case involves big names in the broadcast industry,
namely Jose Jay Sonza, a known television and radio
personality, and ABS-CBN, one of the biggest television and
radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the
case because he was an employee of ABS-CBN. On the other
hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction
because SONZA was an independent contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a
question of fact. Appellate courts accord the factual findings of
the Labor Arbiter and the NLRC not only respect but also finality
when supported by substantial evidence.[15] Substantial evidence
means such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion.[16] A party cannot
prove the absence of substantial evidence by simply pointing out
that there is contrary evidence on record, direct or
circumstantial. The Court does not substitute its own judgment
for that of the tribunal in determining where the weight of
evidence lies or what evidence is credible.[17]
SONZA maintains that all essential elements of an employer-
employee relationship are present in this case. Case law has
consistently held that the elements of an employer-employee
relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal;
and (d) the employers power to control the employee on the
means and methods by which the work is accomplished.[18] The
last element, the so-called control test, is the most important
element.[19]
A. Selection and Engagement of Employee
ABS-CBN engaged SONZAs services to co-host its television
and radio programs because of SONZAs peculiar skills, talent
and celebrity status. SONZA contends that the discretion used
by respondent in specifically selecting and hiring complainant
over other broadcasters of possibly similar experience and
qualification as complainant belies respondents claim of
independent contractorship.
Independent contractors often present themselves to possess
unique skills, expertise or talent to distinguish them from
ordinary employees. The specific selection and hiring of
SONZA, because of his unique skills, talent and celebrity
status not possessed by ordinary employees, is a
circumstance indicative, but not conclusive, of an independent
contractual relationship. If SONZA did not possess such unique
skills, talent and celebrity status, ABS-CBN would not have
entered into the Agreement with SONZA but would have hired
him through its personnel department just like any other
employee.
In any event, the method of selecting and engaging SONZA
does not conclusively determine his status. We must consider all
the circumstances of the relationship, with the control test being
the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no
part of his fees going to MJMDC. SONZA asserts that this mode
of fee payment shows that he was an employee of ABS-
CBN. SONZA also points out that ABS-CBN granted him
benefits and privileges which he would not have enjoyed if he
were truly the subject of a valid job contract.
All the talent fees and benefits paid to SONZA were the result of
negotiations that led to the Agreement. If SONZA were ABS-
CBNs employee, there would be no need for the parties to
stipulate on benefits such as SSS, Medicare, x x x and
13th month pay[20] which the law automatically incorporates into
every employer-employee contract.[21] Whatever benefits
SONZA enjoyed arose from contract and not because of an
employer-employee relationship.[22]
SONZAs talent fees, amounting to P317,000 monthly in the
second and third year, are so huge and out of the ordinary that
they indicate more an independent contractual relationship
rather than an employer-employee relationship. ABS-CBN
agreed to pay SONZA such huge talent fees precisely because
of SONZAs unique skills, talent and celebrity status not
possessed by ordinary employees. Obviously, SONZA acting
alone possessed enough bargaining power to demand and
receive such huge talent fees for his services. The power to
bargain talent fees way above the salary scales of ordinary
employees is a circumstance indicative, but not conclusive, of an
independent contractual relationship.
The payment of talent fees directly to SONZA and not to
MJMDC does not negate the status of SONZA as an
independent contractor. The parties expressly agreed on such
mode of payment. Under the Agreement, MJMDC is the AGENT
of SONZA, to whom MJMDC would have to turn over any talent
fee accruing under the Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party
may terminate their relationship. SONZA failed to show that
ABS-CBN could terminate his services on grounds other than
breach of contract, such as retrenchment to prevent losses as
provided under labor laws.[23]
During the life of the Agreement, ABS-CBN agreed to pay
SONZAs talent fees as long as AGENT and Jay Sonza shall
faithfully and completely perform each condition of this
Agreement.[24] Even if it suffered severe business losses, ABS-
CBN could not retrench SONZA because ABS-CBN remained
obligated to pay SONZAs talent fees during the life of the
Agreement. This circumstance indicates an independent
contractual relationship between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting
his programs, ABS-CBN still paid him his talent fees. Plainly,
ABS-CBN adhered to its undertaking in the Agreement to
continue paying SONZAs talent fees during the remaining life of
the Agreement even if ABS-CBN cancelled SONZAs programs
through no fault of SONZA.[25]
SONZA assails the Labor Arbiters interpretation of his rescission
of the Agreement as an admission that he is not an employee of
ABS-CBN. The Labor Arbiter stated that if it were true that
complainant was really an employee, he would merely resign,
instead. SONZA did actually resign from ABS-CBN but he also,
as president of MJMDC, rescinded the Agreement.SONZAs
letter clearly bears this out.[26] However, the manner by which
SONZA terminated his relationship with ABS-CBN is
immaterial. Whether SONZA rescinded the Agreement or
resigned from work does not determine his status as employee
or independent contractor.
D. Power of Control
Since there is no local precedent on whether a radio and
television program host is an employee or an independent
contractor, we refer to foreign case law in analyzing the present
case. The United States Court of Appeals, First Circuit, recently
held in Alberty-Vlez v. Corporacin De Puerto Rico Para La
Difusin Pblica (WIPR)[27] that a television program host is an
independent contractor. We quote the following findings of
the U.S. court:
Several factors favor classifying Alberty as an independent
contractor. First, a television actress is a skilled position
requiring talent and training not available on-the-job. x x x In
this regard, Alberty possesses a masters degree in public
communications and journalism; is trained in dance, singing, and
modeling; taught with the drama department at the University of
Puerto Rico; and acted in several theater and television
productions prior to her affiliation with Desde Mi
Pueblo. Second, Alberty provided the tools and
instrumentalities necessary for her to perform. Specifically,
she provided, or obtained sponsors to provide, the costumes,
jewelry, and other image-related supplies and services
necessary for her appearance. Alberty disputes that this factor
favors independent contractor status because WIPR provided
the equipment necessary to tape the show. Albertys argument is
misplaced. The equipment necessary for Alberty to conduct her
job as host of Desde Mi Pueblo related to her appearance on the
show. Others provided equipment for filming and producing the
show, but these were not the primary tools that Alberty used to
perform her particular function. If we accepted this argument,
independent contractors could never work on collaborative
projects because other individuals often provide the equipment
required for different aspects of the collaboration. x x x
Third, WIPR could not assign Alberty work in addition to
filming Desde Mi Pueblo. Albertys contracts with WIPR
specifically provided that WIPR hired her professional services
as Hostess for the Program Desde Mi Pueblo. There is no
evidence that WIPR assigned Alberty tasks in addition to work
related to these tapings. x x x[28] (Emphasis supplied)
Applying the control test to the present case, we find that
SONZA is not an employee but an independent contractor. The
control test is the most important test our courts apply in
distinguishing an employee from an independent
contractor.[29] This test is based on the extent of control the hirer
exercises over a worker. The greater the supervision and control
the hirer exercises, the more likely the worker is deemed an
employee. The converse holds true as well the less control the
hirer exercises, the more likely the worker is considered an
independent contractor.[30]
First, SONZA contends that ABS-CBN exercised control over the
means and methods of his work.
SONZAs argument is misplaced. ABS-CBN engaged SONZAs
services specifically to co-host the Mel & Jay programs. ABS-
CBN did not assign any other work to SONZA. To perform his
work, SONZA only needed his skills and talent. How SONZA
delivered his lines, appeared on television, and sounded on
radio were outside ABS-CBNs control. SONZA did not have to
render eight hours of work per day. The Agreement required
SONZA to attend only rehearsals and tapings of the shows, as
well as pre- and post-production staff meetings.[31] ABS-CBN
could not dictate the contents of SONZAs script. However, the
Agreement prohibited SONZA from criticizing in his shows ABS-
CBN or its interests.[32] The clear implication is that SONZA had
a free hand on what to say or discuss in his shows provided he
did not attack ABS-CBN or its interests.
We find that ABS-CBN was not involved in the actual
performance that produced the finished product of SONZAs
work.[33] ABS-CBN did not instruct SONZA how to perform his
job.ABS-CBN merely reserved the right to modify the program
format and airtime schedule for more effective
programming.[34] ABS-CBNs sole concern was the quality of the
shows and their standing in the ratings. Clearly, ABS-CBN did
not exercise control over the means and methods of
performance of SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his
shows proves ABS-CBNs power over the means and methods of
the performance of his work. Although ABS-CBN did have the
option not to broadcast SONZAs show, ABS-CBN was still
obligated to pay SONZAs talent fees. Thus, even if ABS-CBN
was completely dissatisfied with the means and methods of
SONZAs performance of his work, or even with the quality or
product of his work, ABS-CBN could not dismiss or even
discipline SONZA. All that ABS-CBN could do is not to broadcast
SONZAs show but ABS-CBN must still pay his talent fees in
full.[35]
Clearly, ABS-CBNs right not to broadcast SONZAs show,
burdened as it was by the obligation to continue paying in full
SONZAs talent fees, did not amount to control over the means
and methods of the performance of SONZAs work. ABS-CBN
could not terminate or discipline SONZA even if the means and
methods of performance of his work - how he delivered his lines
and appeared on television - did not meet ABS-CBNs
approval. This proves that ABS-CBNs control was limited only to
the result of SONZAs work, whether to broadcast the final
product or not. In either case, ABS-CBN must still pay SONZAs
talent fees in full until the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al.,[36] the United States Circuit
Court of Appeals ruled that vaudeville performers were
independent contractors although the management reserved the
right to delete objectionable features in their shows. Since the
management did not have control over the manner of
performance of the skills of the artists, it could only control the
result of the work by deleting objectionable features.[37]
SONZA further contends that ABS-CBN exercised control over
his work by supplying all equipment and crew. No doubt, ABS-
CBN supplied the equipment, crew and airtime needed to
broadcast the Mel & Jay programs. However, the equipment,
crew and airtime are not the tools and instrumentalities SONZA
needed to perform his job. What SONZA principally needed
were his talent or skills and the costumes necessary for his
appearance. [38] Even though ABS-CBN provided SONZA with
the place of work and the necessary equipment, SONZA was
still an independent contractor since ABS-CBN did not supervise
and control his work. ABS-CBNs sole concern was for SONZA to
display his talent during the airing of the programs.[39]
A radio broadcast specialist who works under minimal
supervision is an independent contractor.[40] SONZAs work as
television and radio program host required special skills and
talent, which SONZA admittedly possesses. The records do not
show that ABS-CBN exercised any supervision and control over
how SONZA utilized his skills and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBNs
employee because ABS-CBN subjected him to its rules and
standards of performance. SONZA claims that this indicates
ABS-CBNs control not only [over] his manner of work but also
the quality of his work.
The Agreement stipulates that SONZA shall abide with the rules
and standards of performance covering talents[41] of ABS-CBN.
The Agreement does not require SONZA to comply with the
rules and standards of performance prescribed for employees of
ABS-CBN. The code of conduct imposed on SONZA under the
Agreement refers to the Television and Radio Code of the
Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has
been adopted by the COMPANY (ABS-CBN) as its Code of
Ethics.[42] The KBP code applies to broadcasters, not to
employees of radio and television stations. Broadcasters are not
necessarily employees of radio and television stations. Clearly,
the rules and standards of performance referred to in the
Agreement are those applicable to talents and not to employees
of ABS-CBN.
In any event, not all rules imposed by the hiring party on the
hired party indicate that the latter is an employee of the
former.[43] In this case, SONZA failed to show that these rules
controlled his performance. We find that these general rules are
merely guidelines towards the achievement of the mutually
desired result, which are top-rating television and radio
programs that comply with standards of the industry. We have
ruled that:
Further, not every form of control that a party reserves to himself
over the conduct of the other party in relation to the services
being rendered may be accorded the effect of establishing an
employer-employee relationship. The facts of this case fall
squarely with the case of Insular Life Assurance Co., Ltd. vs.
NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely
serve as guidelines towards the achievement of the mutually
desired result without dictating the means or methods to be
employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of
such means. The first, which aim only to promote the result,
create no employer-employee relationship unlike the second,
which address both the result and the means used to achieve
it.[44]
The Vaughan case also held that one could still be an
independent contractor although the hirer reserved certain
supervision to insure the attainment of the desired result. The
hirer, however, must not deprive the one hired from performing
his services according to his own initiative.[45]
Lastly, SONZA insists that the exclusivity clause in the
Agreement is the most extreme form of control which ABS-CBN
exercised over him.
This argument is futile. Being an exclusive talent does not by
itself mean that SONZA is an employee of ABS-CBN. Even an
independent contractor can validly provide his services
exclusively to the hiring party. In the broadcast industry,
exclusivity is not necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted
practice in the entertainment industry.[46] This practice is not
designed to control the means and methods of work of the
talent, but simply to protect the investment of the broadcast
station. The broadcast station normally spends substantial
amounts of money, time and effort in building up its talents as
well as the programs they appear in and thus expects that said
talents remain exclusive with the station for a commensurate
period of time.[47] Normally, a much higher fee is paid to talents
who agree to work exclusively for a particular radio or television
station. In short, the huge talent fees partially compensates for
exclusivity, as in the present case.
MJMDC as Agent of SONZA
SONZA protests the Labor Arbiters finding that he is a talent of
MJMDC, which contracted out his services to ABS-CBN. The
Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an
employee of ABS-CBN. SONZA insists that MJMDC is a labor-
only contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the
labor-only contractor; (2) the employee who is ostensibly under
the employ of the labor-only contractor; and (3) the principal who
is deemed the real employer. Under this scheme, the labor-only
contractor is the agent of the principal. The law makes the
principal responsible to the employees of the labor-only
contractor as if the principal itself directly hired or employed the
employees.[48] These circumstances are not present in this case.
There are essentially only two parties involved under the
Agreement, namely, SONZA and ABS-CBN. MJMDC merely
acted as SONZAs agent. The Agreement expressly states that
MJMDC acted as the AGENT of SONZA. The records do not
show that MJMDC acted as ABS-CBNs agent. MJMDC, which
stands for Mel and Jay Management and Development
Corporation, is a corporation organized and owned by SONZA
and TIANGCO. The President and General Manager of MJMDC
is SONZA himself. It is absurd to hold that MJMDC, which is
owned, controlled, headed and managed by SONZA, acted as
agent of ABS-CBN in entering into the Agreement with SONZA,
who himself is represented by MJMDC. That would make
MJMDC the agent of both ABS-CBN and SONZA.
As SONZA admits, MJMDC is a management company
devoted exclusively to managing the careers of SONZA and his
broadcast partner, TIANGCO. MJMDC is not engaged in any
other business, not even job contracting. MJMDC does not have
any other function apart from acting as agent of SONZA or
TIANGCO to promote their careers in the broadcast and
television industry.[49]
Policy Instruction No. 40
SONZA argues that Policy Instruction No. 40 issued by then
Minister of Labor Blas Ople on 8 January 1979 finally settled the
status of workers in the broadcast industry. Under this policy, the
types of employees in the broadcast industry are the station and
program employees.
Policy Instruction No. 40 is a mere executive issuance which
does not have the force and effect of law. There is no legal
presumption that Policy Instruction No. 40 determines SONZAs
status. A mere executive issuance cannot exclude independent
contractors from the class of service providers to the broadcast
industry. The classification of workers in the broadcast industry
into only two groups under Policy Instruction No. 40 is not
binding on this Court, especially when the classification has no
basis either in law or in fact.
Affidavits of ABS-CBNs Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits
of Socorro Vidanes and Rolando Cruz without giving his counsel
the opportunity to cross-examine these witnesses.SONZA
brands these witnesses as incompetent to attest on the
prevailing practice in the radio and television industry. SONZA
views the affidavits of these witnesses as misleading and
irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses, he
was never prevented from denying or refuting the allegations in
the affidavits. The Labor Arbiter has the discretion whether to
conduct a formal (trial-type) hearing after the submission of the
position papers of the parties, thus:
Section 3. Submission of Position Papers/Memorandum
xxx
These verified position papers shall cover only those claims and
causes of action raised in the complaint excluding those that
may have been amicably settled, and shall be accompanied by
all supporting documents including the affidavits of their
respective witnesses which shall take the place of the latters
direct testimony. x x x
Section 4. Determination of Necessity of Hearing. Immediately
after the submission of the parties of their position
papers/memorandum, the Labor Arbiter shall motu propio
determine whether there is need for a formal trial or hearing. At
this stage, he may, at his discretion and for the purpose of
making such determination, ask clarificatory questions to further
elicit facts or information, including but not limited to the
subpoena of relevant documentary evidence, if any from any
party or witness.[50]
The Labor Arbiter can decide a case based solely on the
position papers and the supporting documents without a formal
trial.[51] The holding of a formal hearing or trial is something that
the parties cannot demand as a matter of right.[52] If the Labor
Arbiter is confident that he can rely on the documents before
him, he cannot be faulted for not conducting a formal trial, unless
under the particular circumstances of the case, the documents
alone are insufficient. The proceedings before a Labor Arbiter
are non-litigious in nature. Subject to the requirements of due
process, the technicalities of law and the rules obtaining in the
courts of law do not strictly apply in proceedings before a Labor
Arbiter.
Talents as Independent Contractors
ABS-CBN claims that there exists a prevailing practice in the
broadcast and entertainment industries to treat talents like
SONZA as independent contractors. SONZA argues that if such
practice exists, it is void for violating the right of labor to security
of tenure.
The right of labor to security of tenure as guaranteed in the
Constitution[53] arises only if there is an employer-employee
relationship under labor laws. Not every performance of services
for a fee creates an employer-employee relationship. To hold
that every person who renders services to another for a fee is an
employee - to give meaning to the security of tenure clause - will
lead to absurd results.
Individuals with special skills, expertise or talent enjoy the
freedom to offer their services as independent contractors. The
right to life and livelihood guarantees this freedom to contract as
independent contractors. The right of labor to security of tenure
cannot operate to deprive an individual, possessed with special
skills, expertise and talent, of his right to contract as an
independent contractor. An individual like an artist or talent has a
right to render his services without any one controlling the
means and methods by which he performs his art or craft. This
Court will not interpret the right of labor to security of tenure to
compel artists and talents to render their services only as
employees. If radio and television program hosts can render
their services only as employees, the station owners and
managers can dictate to the radio and television hosts what they
say in their shows. This is not conducive to freedom of the press.
Different Tax Treatment of Talents and Broadcasters
The National Internal Revenue Code (NIRC)[54] in relation to
Republic Act No. 7716,[55] as amended by Republic Act No.
8241,[56] treats talents, television and radio broadcasters
differently. Under the NIRC, these professionals are subject to
the 10% value-added tax (VAT) on services they
render. Exempted from the VAT are those under an employer-
employee relationship.[57] This different tax treatment accorded
to talents and broadcasters bolters our conclusion that they are
independent contractors, provided all the basic elements of a
contractual relationship are present as in this case.
Nature of SONZAs Claims
SONZA seeks the recovery of allegedly unpaid talent fees,
13th month pay, separation pay, service incentive leave, signing
bonus, travel allowance, and amounts due under the Employee
Stock Option Plan. We agree with the findings of the Labor
Arbiter and the Court of Appeals that SONZAs claims are all
based on the May 1994 Agreement and stock option plan,
and not on the Labor Code. Clearly, the present case does not
call for an application of the Labor Code provisions but an
interpretation and implementation of the May 1994 Agreement.
In effect, SONZAs cause of action is for breach of contract which
is intrinsically a civil dispute cognizable by the regular courts.[58]
WHEREFORE, we DENY the petition. The assailed Decision of
the Court of Appeals dated 26 March 1999 in CA-G.R. SP No.
49190 is AFFIRMED. Costs against petitioner.
III. JOB CONTRACTING & LABOR-ONLY CONTRACTING
G.R. No. 79004-08 October 4, 1991
FRANKLIN BAGUIO AND 15 OTHERS, BONIFACIO IGOT
AND 6 OTHERS, ROY MAGALLANES AND 4 OTHERS,
CLAUDIO BONGO, EDUARDO ANDALES and 4
OTHERS, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (3rd
DIVISION), GENERAL MILLING CORPORATION and/or
FELICIANO LUPO, respondents.
MELENCIO-HERRERA, J.:
The liability of an employer in job contracting, vis-a-vis his
contractor's employees, is the sole issue brought to the fore in
this labor dispute.
This Petition for certiorari seeks to set aside the Resolution,
dated 27 February 1987, of public respondent National Labor
Relations Commission (NLRC), Third Division, which reversed
the Resolution of its First Division, dated 27 December 1985,
and absolved private respondent General Milling Corporation
(GMC) from any and all liability to petitioners.
Sometime in 1983, private respondent Feliciano LUPO, a
building contractor, entered into a contract with GMC, a
domestic corporation engaged in flour and feeds manufacturing,
for the construction of an annex building inside the latter's plant
in Cebu City. In connection with the aforesaid contract, LUPO
hired herein petitioners either as carpenters, masons or laborers.
Subsequently, LUPO terminated petitioners' services, on
different dates. As a result, petitioners filed Complaints against
LUPO and GMC before the NLRC Regional Arbitration Branch
No. VII, Cebu City, for unpaid wages, COLA differentials, bonus
and overtime pay.
In a Decision, dated 21 November 1984, the Executive Labor
Arbiter, Branch VII, found LUPO and GMC jointly and severally
liable to petitioners, premised on Article 109 of the Labor
Code, infra, and ordered them to pay the aggregate amount of
P95,382.92. Elevated on appeal on 14 December 1984, the
NLRC (First Division) denied the same for lack of merit in a
Resolution, dated 27 December 1985.
Upon Motion for Reconsideration, filed on 27 February 1986, the
case was reassigned to the Third Division. In a Resolution of 27
February 1987, that Division absolved GMC from any liability. It
opined that petitioners were only hired by LUPO as workers in
his construction contract with GMC and were never meant to be
employed by the latter.
Petitioners now assail that judgment in this Petition for Certiorari.
Petitioners contend that GMC is jointly and severally liable with
LUPO for the latter's obligations to them. They seek recovery
from GMC based on Article 106 of the Labor Code, infra, which
holds the employer jointly and severally liable with his contractor
for unpaid wages of employees of the latter.
In his "Manifestation in lieu of Comment," the Solicitor General
recognizes the solidary liability of GMC and LUPO but bases
recovery on Article 108 of the Labor Code, infra, contending that
inasmuch as GMC failed to require them LUPO a bond to
answer for the latter's obligations to his employees, as required
by said provision, GMC should, correspondingly, be deemed
solidarily liable.
In their respective Comments, both GMC and the NLRC
maintain that Article 106 finds no application in the instant case
because it is limited to situations where the work being
performed by the contractor's employees are directly related to
the principal business of the employer. The NLRC further opines
that Article 109 on "Solidary Liability" finds no application either
because GMC was neither petitioners' employer nor indirect
employer.
Upon the facts and circumstances, we uphold the solidary
liability of GMC and LUPO for the latter's liabilities in favor of
employees whom he had earlier employed and dismissed.
Recovery, however, should not be based on Article 106 of the
Labor Code. This provision treats specifically of "labor-only"
contracting, which is not the set-up between GMC and LUPO.
Article 106 provides:
Art. 106. Contractor or subcontractor. — Whenever an employer
enters into a contract with another person for the performance of
the former's work, the employees of the contractor and of the
latter's subcontractor, if any, shall be paid in accordance with the
provisions of this Code.
In the event that the contractor or subcontractor fails to pay the
wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his contractor
or subcontractor to such employees to the extent of the work
performed under the contract, in the same manner and extent
that he is liable to employees directly employed by him.
xxx xxx xxx
There is "labor-only" contracting where the person supplying
workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed
by such persons are performing activities which are directly
related to the principal business of such employer. In such
cases, the person or intermediary shall be considered merely as
an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were
directly employed by him (Emphasis supplied).
In other words, a person is deemed to be engaged in "labor
only" contracting where (1) 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 (2) the workers recruited and placed by such person
are performing activities which are directly related to the
principal business of such employer (See Section 9, Rule VIII,
Book III of the Omnibus Rules Implementing the Labor Code;
emphasis supplied).
Since the construction of an annex building inside the company
plant has no relation whatsoever with the employer's business of
flour and feeds manufacturing, "labor-only" contracting does not
exist. Article 106 is thus inapplicable.
Instead, it is "job contracting," covered by Article 107, which is
involved, reading:
Art. 107. Indirect Employer. — The provisions of the immediately
preceding Article shall likewise apply to any person, partnership,
association or corporation which, not being an employer,
contracts with an independent contractor for the performance of
any work, task, job or project. (Emphasis supplied).
Specifically, there is "job contracting" where (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. It may be that LUPO subsequently ran
out of capital and was unable to satisfy the award to petitioners.
That was an after-the-fact development, however, and does not
detract from his status as an independent contractor.
Based on the foregoing, GMC qualifies as an "indirect
employer." It entered into a contract with an independent
contractor, LUPO, for the construction of an annex building, a
work, task, job or project not directly related to GMC's business
of flour and feeds manufacturing. Being an "indirect employer,"
GMC is solidarily liable with LUPO for any violation of the Labor
Code pursuant to Article 109 thereof, reading:
Art. 109. Solidary Liability. — The provisions of existing laws to
the contrary notwithstanding, every employer or indirect
employer shall be held responsible with a contractor or
subcontractor for any violation of any provision of this Code. For
purposes of determining the extent of their civil liability under this
Chapter, they shall be considered as direct employers.
The provision of existing law referred to is Article 1728 of the
Civil Code, which states, among others, that "the contractor is
liable for all the claims of laborers and others employed by him
..."
The foregoing interpretation finds a precedent in the case
o Deferia v. NLRC (G.R. No. 78713, 27 February 1991) per
Sarmiento, J., where Articles 107 and 109 were applied as the
statutory basis for the joint and several liability of the employer
with his contractor, in addition to Article 106, since the situation
in that case was clearly one of "labor-only" contracting.
The NLRC submission that Article 107 is not applicable in the
instant case for the reason that the coverage thereof is limited to
one "not an employer" whereas GMC is such an employer as
defined in Article 97 (b) of the Labor Code,1 is not well-taken.
Under the peculiar set-up herein, GMC is, in fact, "not an
employer" (in the sense of not being a direct employer) as
understood in Article 106 of the Labor Code, but qualifies as an
"indirect employer" under Article 107 of said Code.
The distinction between Articles 106 and 107 was in the fact that
Article 106 deals with "labor-only" contracting. Here, by
operation of law, the contractor is merely considered as an agent
of the employer, who is deemed "responsible to the workers to
the same extent as if the latter were directly employed by him."
On the other hand, Article 107 deals with "job contracting." In the
latter situation, while the contractor himself is the direct employer
of the employees, the employer is deemed, by operation of law,
as an indirect employer.
In other words, the phrase "not an employer" found in Article 107
must be read in conjunction with Article 106. A contrary
interpretation would render the provisions of Article 107
meaningless considering that everytime an employer engages a
contractor, the latter is always acting in the interest of the former,
whether directly or indirectly, in relation to his employees.
It should be recalled that a finding that a contractor is a "labor-
only" contractor is equivalent to declaring that there is an
employer-employee relationship between the owner of the
project and the employees of the "labor-only" contractor
(Associated Anglo-American Tobacco Corp. v. Clave, G.R. No.
50915, 30 August 1990, 189 SCRA 127; Industrial Timber Corp.
v. NLRC, G.R. No. 83616, 20 January 1989, 169 SCRA 341).
This is evidently because, as heretofore stated, the "labor-only"
contractor is considered as a mere agent of an employer. In
contrast, in "job contracting," no employer-employee relationship
exists between the owner and the employees of his contractor.
The owner of the project is not the direct employer but merely an
indirect employer, by operation of law, of his contractor's
employees.
As an indirect employer, and for purposes of determining the
extent of its civil liability, GMC is deemed a "direct employee" of
his contractor's employees pursuant to the last sentence of
Article 109 of the Labor Code. As a consequence, GMC can not
escape its joint and solidary liability to petitioners.
Further, Article 108 of the Labor Code requires the posting of a
bond to answer for wages that a contractor fails to pay, thus:
Article 108. Posting of Bond. — An employer or indirect
employer may require the contractor or subcontractor to furnish
a bond equal to the cost of labor under contract, on condition
that the bond will answer for the wages due the employees
showed the contractor or subcontractor, as the case may be,
fails to pay the same.
Having failed to require LUPO to post such a bond, GMC must
answer for whatever liabilities LUPO may have incurred to his
employees. This is without prejudice to its seeking
reimbursement from LUPO for whatever amount it will have to
pay petitioners.
WHEREFORE, the Petition for certiorari is GRANTED. The
Resolution of respondent NLRC, Third Division, dated 27
February 1987, is hereby SET ASIDE, and the Decision of the
Labor Arbiter, dated 21 November 1984, is hereby
REINSTATED
Separate Opinions
PADILLA, J.,:
The present petition seeks to have General Milling Corporation
(the Company) held liable for the unpaid wages of the petitioners
in solidum with the contractor (Lupo) who recruited the
petitioners' services. This majority finds for the petitioners in the
total adjudged sum of P95,382.92, a conclusion with which I am
in complete accord. But I am not quite comfortable, and
therefore disagree, with the legal basis on which the company's
liability is determined.
As determined by the majority, such liability of the company is
called for by Article 107, Chapter III, Title II, Book III of the Labor
Code, which is as follows:
ART. 107. Indirect employer. — The provisions of the
immediately preceding Article shall likewise apply to any person,
partnership, association or corporation which, not being an
employer, contracts with an independent contractor for the
performance of any work, task, job, or project. (emphasis
supplied)
It is strongly urged by the majority that the phrase "not being an
employer" found in said Article 107 be given a circumspect
appraisal. To my mind, there is no other interpretation of this
provision of the Code than that an indirect employer, to be
categorized as such, must not be an EMPLOYER as this term is
defined under the Code. Article 97 of the same Title of the Labor
Code defines an EMPLOYER as —
ART. 97. Definition. — As used in this Title
a) ...
b) "Employer" includes any person acting directly or
indirectly in the interest of an employer in relation to an
employee and shall include the Government and all its branches,
subdivision and instrumentalities, all government-owned or
controlled corporations and institutions, as well as non-profit
private institutions, or organizations.
... (emphasis supplied)
From the foregoing basic premises, it is my submission that the
company (General Milling Corporation) is an employer in every
sense of the word. It engages in the primary enterprise of
manufacturing flour and feeds, it definitely employs employees
and workers in its plant and outlets to work in various capacities.
Therefore, the company cannot, in any way, be considered an
indirect employer, as the term is defined, for purposes of the
petitioner's cause of action against it.
To hold as the majority does, that Article 107 does apply in this
case, would, in my view, render useless the phrase "not being
an employer" contained therein. Evidently, the framers of the
Labor Code had a purpose in mind in providing for such
qualification. Such a qualification, as I see it, gives protection to
those workers hired or recruited by a contractor to work on some
job for a person who is not himself engaged in any enterprise.
An example easily comes to mind: a person who wishes to have
a residential house built. He engages an architect or engineer to
undertake the project who, in turn, hires laborers, masons and
carpenters. Should the architect or engineer renege on his
obligations to the workers he shall have recruited, to whom will
the latter seek relief? By mandate of Article 107, above-quoted,
the owner of the house, who is not himself an employer as
defined by law, shall be held accountable. This is where, in my
view, Article 107 properly applies.
In the present case, however, the company's liability to the
petitioners properly comes under Article 106, Chapter III, Title II,
Book III of the Code, which, in its entirety, provides:
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 the Code.
In the event that the contractor or subcontractor fails to pay the
wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with the contractor
or subcontractor to such employees to the extent of the work
performed under the contract, in the same manner and extent
that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict
or prohibit the contracting out of labor to protect the rights of
workers established under this Code. In so prohibiting or
restricting, he may make appropriate distinctions between labor-
only contracting and job contracting as well as differentiations
within these types of contracting and determine who among the
parties involved shall be considered the employer for purposes
of this Code, to prevent any violation or circumvention of any
provision of this Code.

There is "labor-only" contracting where the person supplying
workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed
by such persons are performing activities which are directly
related to the principal business of such employer. In such case,
the person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the workers in
the same manner and extent as if the latter were directly
employed by him.
It appears abundantly clear that the juridical relationship
envisioned in Article 106 involves an employer, as defined by the
Code. It thus applies to the juridical situation involved in this
case, where the actors are General Milling Corporation (as the
employer), Lupo (as the contractor) and the petitioners (as the
employees or workers). Article 106, upon careful examination,
deals with three (3) situations in the juridical relationship
between employer-contractor-employee. It does not deal solely
with "labor-only" contracting.
The first situation in Article 106 is where the employer (project
owner) enters into a contract with a contractor for the
performance of some job or work; the employees recruited by
such contractor shall be paid, according to Article 106, first
paragraph, in accordance with the requirements of the Labor
Code. Stated in another way, the first paragraph of Article 106,
provides the manner by which such employees shall be paid
their wages and that is, in compliance with the provisions of the
Labor Code. This, therefore, would include the rules on manner
of payment, minimum wage, place of payment, etc.
In an employer-contractor-employee relationship, it is clear that
the contractor is the real employer and, therefore, responsible to
his workers for their wages. However, should such contractor fail
or renege on his said obligation, to whom will the unpaid worker
have recourse? The second paragraph of Article 106 resolves
the seeming dilemma of the workers by providing that the
EMPLOYER, (i.e., the project owner) shall be solidarily liable to
such workers to the extent of the work performed by them,
meaning that the EMPLOYER shall solidarily answer for the
payment of wages corresponding to the amount of work
undertaken by the contractor's employees in the project. This is
the second situation contemplated by Article 106.
The third and final situation treated in Article 106 is contained in
the fourth paragraph thereof. It pertains to what the majority
perceives (erroneously, in my view) as the sole coverage of
Article 106-that of a "labor-only" contracting and the extent of the
rights and liabilities of the parties involved in such a relationship.
As explained in the ponencia, for this scheme or situation to
exist, two (2) circumstances must concur: one, the contractor
who recruits the workers must have 'no substantial capital or
investment in the form of tools, equipment, machineries and
work premises,' and two, 'such workers are so engaged to
perform activities directly related to the employer's principal
business.' Should there be a finding of 'labor-only' contracting,
the law expressly provides that the EMPLOYER (or project
owner) shall be considered the direct employer of such workers.
Such juridical relationship would then spawn a whole gamut of
employer's obligations, including obligations under the
workmen's compensation, social security, medicare, minimum
wage, termination pay and unionism. 1
From the facts of this case as presented, the second paragraph
of article 106 finds clear application. Because of contractor
Lupo's default in the payment of petitioners' wages, owing to his
insolvency, the employer (company) must comply with its joint
and several obligation to answer for Lupo's accountability to his
employees for their unpaid wages. Thereafter, should the
company be inclined to do so, it may seek reimbursement from
Lupo.
In sum, it is my submission that the company's solidary liability
to the petitioners ought to be predicated on the basis, not of
Article 107 of the Labor Code (which applies only to non-
employers while the company in this case is an employer) but
rather, upon the express declaration of paragraph 2, Article 106
of the Labor Code, which covers employers (not non-employers)
as the company in the case at bar.
# Separate Opinions
PADILLA, J.,
The present petition seeks to have General Milling Corporation
(the Company) held liable for the unpaid wages of the petitioners
in solidum with the contractor (Lupo) who recruited the
petitioners' services. This majority finds for the petitioners in the
total adjudged sum of P95,382.92, a conclusion with which I am
in complete accord. But I am not quite comfortable, and
therefore disagree, with the legal basis on which the company's
liability is determined.
As determined by the majority, such liability of the company is
called for by Article 107, Chapter III, Title II, Book III of the Labor
Code, which is as follows:
ART. 107. Indirect employer. — The provisions of the
immediately preceding Article shall likewise apply to any person,
partnership, association or corporation which, not being an
employer, contracts with an independent contractor for the
performance of any work, task, job, or project. (emphasis
supplied)
It is strongly urged by the majority that the phrase "not being an
employer" found in said Article 107 be given a circumspect
appraisal. To my mind, there is no other interpretation of this
provision of the Code than that an indirect employer, to be
categorized as such, must not be an EMPLOYER as this term is
defined under the Code. Article 97 of the same Title of the Labor
Code defines an EMPLOYER as —
ART. 97. Definition. — As used in this Title
a) ...
b) "Employer" includes any person acting directly or
indirectly in the interest of an employer in relation to an
employee and shall include the Government and all its branches,
subdivision and instrumentalities, all government-owned or
controlled corporations and institutions, as well as non-profit
private institutions, or organizations.
... (emphasis supplied)
From the foregoing basic premises, it is my submission that the
company (General Milling Corporation) is an employer in every
sense of the word. It engages in the primary enterprise of
manufacturing flour and feeds, it definitely employs employees
and workers in its plant and outlets to work in various capacities.
Therefore, the company cannot, in any way, be considered an
indirect employer, as the term is defined, for purposes of the
petitioner's cause of action against it.
To hold as the majority does, that Article 107 does apply in this
case, would, in my view, render useless the phrase "not being
an employer" contained therein. Evidently, the framers of the
Labor Code had a purpose in mind in providing for such
qualification. Such a qualification, as I see it, gives protection to
those workers hired or recruited by a contractor to work on some
job for a person who is not himself engaged in any enterprise.
An example easily comes to mind: a person who wishes to have
a residential house built. He engages an architect or engineer to
undertake the project who, in turn, hires laborers, masons and
carpenters. Should the architect or engineer renege on his
obligations to the workers he shall have recruited, to whom will
the latter seek relief? By mandate of Article 107, above-quoted,
the owner of the house, who is not himself an employer as
defined by law, shall be held accountable. This is where, in my
view, Article 107 properly applies.
In the present case, however, the company's liability to the
petitioners properly comes under Article 106, Chapter III, Title II,
Book III of the Code, which, in its entirety, provides:
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 the Code.
In the event that the contractor or subcontractor fails to pay the
wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with the contractor
or subcontractor to such employees to the extent of the work
performed under the contract, in the same manner and extent
that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict
or prohibit the contracting out of labor to protect the rights of
workers established under this Code. In so prohibiting or
restricting, he may make appropriate distinctions between labor-
only contracting and job contracting as well as differentiations
within these types of contracting and determine who among the
parties involved shall be considered the employer for purposes
of this Code, to prevent any violation or circumvention of any
provision of this Code.
There is "labor-only" contracting where the person supplying
workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed
by such persons are performing activities which are directly
related to the principal business of such employer. In such case,
the person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the workers in
the same manner and extent as if the latter were directly
employed by him.
It appears abundantly clear that the juridical relationship
envisioned in Article 106 involves an employer, as defined by the
Code. It thus applies to the juridical situation involved in this
case, where the actors are General Milling Corporation (as the
employer), Lupo (as the contractor) and the petitioners (as the
employees or workers). Article 106, upon careful examination,
deals with three (3) situations in the juridical relationship
between employer-contractor-employee. It does not deal solely
with "labor-only" contracting.
The first situation in Article 106 is where the employer (project
owner) enters into a contract with a contractor for the
performance of some job or work; the employees recruited by
such contractor shall be paid, according to Article 106, first
paragraph, in accordance with the requirements of the Labor
Code. Stated in another way, the first paragraph of Article 106,
provides the manner by which such employees shall be paid
their wages and that is, in compliance with the provisions of the
Labor Code. This, therefore, would include the rules on manner
of payment, minimum wage, place of payment, etc.
In an employer-contractor-employee relationship, it is clear that
the contractor is the real employer and, therefore, responsible to
his workers for their wages. However, should such contractor fail
or renege on his said obligation, to whom will the unpaid worker
have recourse? The second paragraph of Article 106 resolves
the seeming dilemma of the workers by providing that the
EMPLOYER, (i.e., the project owner) shall be solidarily liable to
such workers to the extent of the work performed by them,
meaning that the EMPLOYER shall solidarily answer for the
payment of wages corresponding to the amount of work
undertaken by the contractor's employees in the project. This is
the second situation contemplated by Article 106.
The third and final situation treated in Article 106 is contained in
the fourth paragraph thereof. It pertains to what the majority
perceives (erroneously, in my view) as the sole coverage of
Article 106-that of a "labor-only" contracting and the extent of the
rights and liabilities of the parties involved in such a relationship.
As explained in the ponencia, for this scheme or situation to
exist, two (2) circumstances must concur: one, the contractor
who recruits the workers must have 'no substantial capital or
investment in the form of tools, equipment, machineries and
work premises,' and two, 'such workers are so engaged to
perform activities directly related to the employer's principal
business.' Should there be a finding of 'labor-only' contracting,
the law expressly provides that the EMPLOYER (or project
owner) shall be considered the direct employer of such workers.
Such juridical relationship would then spawn a whole gamut of
employer's obligations, including obligations under the
workmen's compensation, social security, medicare, minimum
wage, termination pay and unionism. 1
From the facts of this case as presented, the second paragraph
of article 106 finds clear application. Because of contractor
Lupo's default in the payment of petitioners' wages, owing to his
insolvency, the employer (company) must comply with its joint
and several obligation to answer for Lupo's accountability to his
employees for their unpaid wages. Thereafter, should the
company be inclined to do so, it may seek reimbursement from
Lupo.
In sum, it is my submission that the company's solidary liability
to the petitioners ought to be predicated on the basis, not of
Article 107 of the Labor Code (which applies only to non-
employers while the company in this case is an employer) but
rather, upon the express declaration of paragraph 2, Article 106
of the Labor Code, which covers employers (not non-employers)
as the company in the case at bar.
[G.R. No. 126586. February 2, 2000]
ALEXANDER VINOYA, petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION, REGENT FOOD CORPORATION
AND/OR RICKY SEE (PRESIDENT), respondents.
DECISION
KAPUNAN, J.:
This petition for certiorari under Rule 65 seeks to annul and set
aside the decision,[1] promulgated on 21 June 1996, of the
National Labor Relations Commission ("NLRC") which reversed
the decision[2] of the Labor Arbiter, rendered on 15 June 1994,
ordering Regent Food Corporation ("RFC") to reinstate
Alexander Vinoya to his former position and pay him backwages.
Private respondent Regent Food Corporation is a domestic
corporation principally engaged in the manufacture and sale of
various food products. Private respondent Ricky See, on the
other hand, is the president of RFC and is being sued in that
capacity.
Petitioner Alexander Vinoya, the complainant, worked with RFC
as sales representative until his services were terminated on 25
November 1991.
The parties presented conflicting versions of facts.
Petitioner Alexander Vinoya claims that he applied and was
accepted by RFC as sales representative on 26 May 1990. On
the same date, a company identification card[3] was issued to
him by RFC. Petitioner alleges that he reported daily to the office
of RFC, in Pasig City, to take the latters van for the delivery of its
products. According to petitioner, during his employ, he was
assigned to various supermarkets and grocery stores where he
booked sales orders and collected payments for RFC. For this
task, he was required by RFC to put up a monthly bond
of P200.00 as security deposit to guarantee the performance of
his obligation as sales representative. Petitioner contends that
he was under the direct control and supervision of Mr. Dante So
and Mr. Sadi Lim, plant manager and senior salesman of RFC,
respectively. He avers that on 1 July 1991, he was transferred
by RFC to Peninsula Manpower Company, Inc. ("PMCI"), an
agency which provides RFC with additional contractual workers
pursuant to a contract for the supply of manpower services
(hereinafter referred to as the "Contract of Service").[4] After his
transfer to PMCI, petitioner was allegedly reassigned to RFC as
sales representative. Subsequently, on 25 November 1991, he
was informed by Ms. Susan Chua, personnel manager of RFC,
that his services were terminated and he was asked to surrender
his ID card. Petitioner was told that his dismissal was due to the
expiration of the Contract of Service between RFC and PMCI.
Petitioner claims that he was dismissed from employment
despite the absence of any notice or investigation.
Consequently, on 3 December 1991, petitioner filed a case
against RFC before the Labor Arbiter for illegal dismissal and
non-payment of 13th month pay.[5]
Private respondent Regent Food Corporation, on the other hand,
maintains that no employer-employee relationship existed
between petitioner and itself. It insists that petitioner is actually
an employee of PMCI, allegedly an independent contractor,
which had a Contract of Service[6] with RFC. To prove this fact,
RFC presents an Employment Contract[7] signed by petitioner on
1 July 1991, wherein PMCI appears as his employer. RFC
denies that petitioner was ever employed by it prior to 1 July
1991. It avers that petitioner was issued an ID card so that its
clients and customers would recognize him as a duly authorized
representative of RFC. With regard to the P200.00 pesos
monthly bond posted by petitioner, RFC asserts that it was
required in order to guarantee the turnover of his collection since
he handled funds of RFC. While RFC admits that it had control
and supervision over petitioner, it argues that such was
exercised in coordination with PMCI. Finally, RFC contends that
the termination of its relationship with petitioner was brought
about by the expiration of the Contract of Service between itself
and PMCI and not because petitioner was dismissed from
employment.
On 3 December 1991, when petitioner filed a complaint for illegal
dismissal before the Labor Arbiter, PMCI was initially impleaded
as one of the respondents. However, petitioner thereafter
withdrew his charge against PMCI and pursued his claim solely
against RFC. Subsequently, RFC filed a third party complaint
against PMCI. After considering both versions of the parties, the
Labor Arbiter rendered a decision,[8] dated 15 June 1994, in
favor of petitioner. The Labor Arbiter concluded that RFC was
the true employer of petitioner for the following reasons: (1)
Petitioner was originally with RFC and was merely transferred to
PMCI to be deployed as an agency worker and then
subsequently reassigned to RFC as sales representative; (2)
RFC had direct control and supervision over petitioner; (3) RFC
actually paid for the wages of petitioner although coursed
through PMCI; and, (4) Petitioner was terminated per instruction
of RFC. Thus, the Labor Arbiter decreed as follows:
ACCORDINGLY, premises considered respondent RFC is
hereby declared guilty of illegal dismissal and ordered to
immediately reinstate complainant to his former position without
loss of seniority rights and other benefits and pay him
backwages in the amount of P103,974.00.
The claim for 13th month pay is hereby DENIED for lack of
merit.
This case, insofar as respondent PMCI [is concerned] is
DISMISSED, for lack of merit.
SO ORDERED.[9]
RFC appealed the adverse decision of the Labor Arbiter to the
NLRC. In a decision,[10] dated 21 June 1996, the NLRC reversed
the findings of the Labor Arbiter. The NLRC opined that PMCI is
an independent contractor because it has substantial capital
and, as such, is the true employer of petitioner. The NLRC, thus,
held PMCI liable for the dismissal of petitioner. The dispositive
portion of the NLRC decision states:
WHEREFORE, premises considered, the appealed decision is
modified as follows:
1. Peninsula Manpower Company Inc. is declared as employer
of the complainant;
2. Peninsula is ordered to pay complainant his separation pay
of P3,354.00 and his proportionate 13th month pay for 1991 in
the amount of P2,795.00 or the total amount of P6,149.00.
SO ORDERED.[11]
Separate motions for reconsideration of the NLRC decision were
filed by petitioner and PMCI. In a resolution,[12] dated 20 August
1996, the NLRC denied both motions. However, it was only
petitioner who elevated the case before this Court.
In his petition for certiorari, petitioner submits that respondent
NLRC committed grave abuse of discretion in reversing the
decision of the Labor Arbiter, and asks for the reinstatement of
the latters decision.
Principally, this petition presents the following issues:
1. Whether petitioner was an employee of RFC or PMCI.
2. Whether petitioner was lawfully dismissed.
The resolution of the first issue initially boils down to a
determination of the true status of PMCI, whether it is a labor-
only contractor or an independent contractor.
In the case at bar, RFC alleges that PMCI is an independent
contractor on the sole ground that the latter is a highly
capitalized venture. To buttress this allegation, RFC presents a
copy of the Articles of Incorporation and the Treasurers
Affidavit[13] submitted by PMCI to the Securities and Exchange
Commission showing that it has an authorized capital stock of
One Million Pesos (P1,000,000.00), of which Three Hundred
Thousand Pesos (P300,000.00) is subscribed and Seventy-Five
Thousand Pesos (P75,000.00) is paid-in. According to RFC,
PMCI is a duly organized corporation engaged in the business of
creating and hiring a pool of temporary personnel and,
thereafter, assigning them to its clients from time to time for such
duration as said clients may require. RFC further contends that
PMCI has a separate office, permit and license and its own
organization.
Labor-only contracting, a prohibited act, is an arrangement
where the contractor or subcontractor merely recruits, supplies
or places workers to perform a job, work or service for a
principal.[14] In labor-only contracting, the following elements are
present:
(a) The contractor or subcontractor does not have substantial
capital or investment to actually perform the job, work or service
under its own account and responsibility;
(b) The employees recruited, supplied or placed by such
contractor or subcontractor are performing activities which are
directly related to the main business of the principal.[15]
On the other hand, permissible job contracting or subcontracting
refers to an arrangement whereby a principal agrees to put out
or farm out with a contractor or subcontractor the performance or
completion of a specific job, work or service within a definite or
predetermined period, regardless of whether such job, work or
service is to be performed or completed within or outside the
premises of the principal.[16] A person is considered engaged in
legitimate job contracting or subcontracting if the following
conditions concur:
(a) The contractor or subcontractor carries on a distinct and
independent business and undertakes to perform the job, work
or service on its own account and under its own responsibility
according to its own manner and method, and free from the
control and direction of the principal in all matters connected with
the performance of the work except as to the results thereof;
(b) The contractor or subcontractor has substantial capital or
investment; and
(c) The agreement between the principal and contractor or
subcontractor assures the contractual employees entitlement to
all labor and occupational safety and health standards, free
exercise of the right to self-organization, security of tenure, and
social and welfare benefits.[17]
Previously, in the case of Neri vs. NLRC,[18] we held that in order
to be considered as a job contractor it is enough that a
contractor has substantial capital. In other words, once
substantial capital is established it is no longer necessary for the
contractor to show evidence that it has investment in the form of
tools, equipment, machineries, work premises, among others.
The rational for this is that Article 106 of the Labor Code does
not require that the contractor possess both substantial capital
and investment in the form of tools, equipment, machineries,
work premises, among others.[19] The decision of the Court
in Neri thus states:
Respondent BCC need not prove that it made investment in the
form of tools, equipment, machineries, work premises, among
others, because it has established that it has sufficient
capitalization. The Labor Arbiter and the NLRC both determined
that BCC had a capital stock of P1 million fully subscribed and
paid for. BCC is therefore a highly capitalized venture and
cannot be deemed engaged in "labor-only" contracting.[20]
However, in declaring that Building Care Corporation ("BCC")
was an independent contractor, the Court considered not only
the fact that it had substantial capitalization. The Court noted
that BCC carried on an independent business and undertook the
performance of its contract according to its own manner and
method, free from the control and supervision of its principal in
all matters except as to the results thereof.[21] The Court likewise
mentioned that the employees of BCC were engaged to perform
specific special services for its principal.[22] Thus, the Court ruled
that BCC was an independent contractor.
The Court further clarified the import of the Neri decision in the
subsequent case of Philippine Fuji Xerox Corporation vs.
NLRC.[23] In the said case, petitioner Fuji Xerox implored the
Court to apply the Neri doctrine to its alleged job-contractor,
Skillpower, Inc., and declare the same as an independent
contractor. Fuji Xerox alleged that Skillpower, Inc. was a highly
capitalized venture registered with the Securities and Exchange
Commission, the Department of Labor and Employment, and the
Social Security System with assets exceeding P5,000,000.00
possessing at least 29 typewriters, office equipment and service
vehicles, and its own pool of employees with 25 clerks assigned
to its clients on a temporary basis.[24]Despite the evidence
presented by Fuji Xerox the Court refused to apply the Neri case
and explained:
Petitioners cite the case of Neri v. NLRC, in which it was held
that the Building Care Corporation (BCC) was an independent
contractor on the basis of finding that it had substantial capital,
although there was no evidence that it had investments in the
form of tools, equipment, machineries and work premises. But
the Court in that case considered not only the capitalization of
the BCC but also the fact that BCC was providing specific
special services (radio/telex operator and janitor) to the
employer; that in another case, the Court had already found that
BCC was an independent contractor; that BCC retained control
over the employees and the employer was actually just
concerned with the end-result; that BCC had the power to
reassign the employees and their deployment was not subject to
the approval of the employer; and that BCC was paid in lump
sum for the services it rendered. These features of that case
make it distinguishable from the present one.[25]
Not having shown the above circumstances present in Neri, the
Court declared Skillpower, Inc. to be engaged in labor-only
contracting and was considered as a mere agent of the
employer.
From the two aforementioned decisions, it may be inferred that it
is not enough to show substantial capitalization or investment in
the form of tools, equipment, machineries and work premises,
among others, to be considered as an independent contractor. In
fact, jurisprudential holdings are to the effect that in determining
the existence of an independent contractor relationship, several
factors might be considered such as, but not necessarily
confined to, 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 specified pieces of work; the
control and supervision of the workers; the power of the
employer with respect to the hiring, firing and payment of the
workers of the contractor; the control of the premises; the duty to
supply premises, tools, appliances, materials and labor; and the
mode, manner and terms of payment.[26]
Given the above standards and the factual milieu of the case,
the Court has to agree with the conclusion of the Labor Arbiter
that PMCI is engaged in labor-only contracting.
First of all, PMCI does not have substantial capitalization or
investment in the form of tools, equipment, machineries, work
premises, among others, to qualify as an independent
contractor. While it has an authorized capital stock
of P1,000,000.00, only P75,000.00 is actually paid-in, which, to
our mind, cannot be considered as substantial capitalization. In
the case of Neri, which was promulgated in 1993, BCC had a
capital stock of P1,000,000.00 which was fully subscribed and
paid-for. Moreover, when the Neri case was decided in 1993, the
rate of exchange between the dollar and the peso was
only P27.30 to $1[27] while presently it is at P40.390 to $1.[28] The
Court takes judicial notice of the fact that in 1993, the economic
situation in the country was not as adverse as the present, as
shown by the devaluation of our peso. With the current
economic atmosphere in the country, the paid-in capitalization of
PMCI amounting to P75,000.00 cannot be considered as
substantial capital and, as such, PMCI cannot qualify as an
independent contractor.
Second, PMCI did not carry on an independent business nor did
it undertake the performance of its contract according to its own
manner and method, free from the control and supervision of its
principal, RFC. The evidence at hand shows that the workers
assigned by PMCI to RFC were under the control and
supervision of the latter. The Contract of Service itself provides
that RFC can require the workers assigned by PMCI to render
services even beyond the regular eight hour working day when
deemed necessary.[29] Furthermore, RFC undertook to assist
PMCI in making sure that the daily time records of its alleged
employees faithfully reflect the actual working hours.[30] With
regard to petitioner, RFC admitted that it exercised control and
supervision over him.[31] These are telltale indications that PMCI
was not left alone to supervise and control its alleged
employees. Consequently, it can be concluded that PMCI was
not an independent contractor since it did not carry a distinct
business free from the control and supervision of RFC.
Third, PMCI was not engaged to perform a specific and special
job or service, which is one of the strong indicators that an entity
is an independent contractor as explained by the Court in the
cases of Neri and Fuji. As stated in the Contract of Service, the
sole undertaking of PMCI was to provide RFC with a temporary
workforce able to carry out whatever service may be required by
it.[32] Such venture was complied with by PMCI when the
required personnel were actually assigned to RFC. Apart from
that, no other particular job, work or service was required from
PMCI. Obviously, with such an arrangement, PMCI merely acted
as a recruitment agency for RFC. Since the undertaking of PMCI
did not involve the performance of a specific job, but rather the
supply of manpower only, PMCI clearly conducted itself as labor-
only contractor.
Lastly, in labor-only contracting, the employees recruited,
supplied or placed by the contractor perform activities which are
directly related to the main business of its principal. In this case,
the work of petitioner as sales representative is directly related
to the business of RFC. Being in the business of food
manufacturing and sales, it is necessary for RFC to hire a sales
representative like petitioner to take charge of booking its sales
orders and collecting payments for such. Thus, the work of
petitioner as sales representative in RFC can only be
categorized as clearly related to, and in the pursuit of the latters
business. Logically, when petitioner was assigned by PMCI to
RFC, PMCI acted merely as a labor-only contractor.
Based on the foregoing, PMCI can only be classified as a labor-
only contractor and, as such, cannot be considered as the
employer of petitioner.
However, even granting that PMCI is an independent contractor,
as RFC adamantly suggests, still, a finding of the same will not
save the day for RFC. A perusal of the Contract of Service
entered into between RFC and PMCI reveals that petitioner is
actually not included in the enumeration of the workers to be
assigned to RFC. The following are the workers enumerated in
the contract:
1. Merchandiser
2. Promo Girl
3. Factory Worker
4. Driver[33]
Obviously, the above enumeration does not include the position
of petitioner as sales representative. This only shows that
petitioner was never intended to be a part of those to be
contracted out. However, RFC insists that despite the absence
of his position in the enumeration, petitioner is deemed included
because this has been agreed upon between itself and PMCI.
Such contention deserves scant consideration. Had it really
been the intention of both parties to include the position of
petitioner they should have clearly indicated the same in the
contract. However, the contract is totally silent on this point
which can only mean that petitioner was never really intended to
be covered by it.
Even if we use the "four-fold test" to ascertain whether RFC is
the true employer of petitioner the same result would be
achieved. In determining the existence of employer-employee
relationship the following elements of the "four-fold test" are
generally considered, namely: (1) the selection and engagement
of the employee or the power to hire; (2) the payment of wages;
(3) the power to dismiss; and (4) the power to control the
employee.[34] Of these four, the "control test" is the most
important.[35] A careful study of the evidence at hand shows that
RFC possesses the earmarks of being the employer of
petitioner.
With regard to the first element, the power to hire, RFC denies
any involvement in the recruitment and selection of petitioner
and asserts that petitioner did not present any proof that he was
actually hired and employed by RFC.
It should be pointed out that no particular form of proof is
required to prove the existence of an employer-employee
relationship.[36] Any competent and relevant evidence may show
the relationship.[37] If only documentary evidence would be
required to demonstrate that relationship, no scheming employer
would ever be brought before the bar of justice.[38] In the case at
bar, petitioner presented the identification card issued to him on
26 May 1990 by RFC as proof that it was the latter who engaged
his services. To our mind, the ID card is enough proof that
petitioner was previously hired by RFC prior to his transfer as
agency worker to PMCI. It must be noted that the Employment
Contract between petitioner and PMCI was dated 1 July 1991.
On the other hand, the ID card issued by RFC to petitioner was
dated 26 May 1990, or more than one year before the
Employment Contract was signed by petitioner in favor of PMCI.
It makes one wonder why, if petitioner was indeed recruited by
PMCI as its own employee on 1 July 1991, how come he had
already been issued an ID card by RFC a year earlier? While the
Employment Contract indicates the word "renewal," presumably
an attempt to show that petitioner had previously signed a
similar contract with PMCI, no evidence of a prior contract
entered into between petitioner and PMCI was ever presented
by RFC. In fact, despite the demand made by the counsel of
petitioner for the production of the contract which purportedly
shows that prior to 1 July 1991 petitioner was already connected
with PMCI, RFC never made a move to furnish the counsel of
petitioner a copy of the alleged original Employment Contract.
The only logical conclusion which may be derived from such
inaction is that there was no such contract and that the only
Employment Contract entered into between PMCI and petitioner
was the 1 July 1991 contract and no other. Since, as shown by
the ID card, petitioner was already with RFC on 26 May 1990,
prior to the time any Employment Contract was agreed upon
between PMCI and petitioner, it follows that it was RFC who
actually hired and engaged petitioner to be its employee.
With respect to the payment of wages, RFC disputes the
argument of petitioner that it paid his wages on the ground that
petitioner did not submit any evidence to prove that his salary
was paid by it, or that he was issued payslip by the company. On
the contrary RFC asserts that the invoices[39] presented by it,
show that it was PMCI who paid petitioner his wages through its
regular monthly billings charged to RFC.
The Court takes judicial notice of the practice of employers who,
in order to evade the liabilities under the Labor Code, do not
issue payslips directly to their employees.[40] Under the current
practice, a third person, usually the purported contractor (service
or manpower placement agency), assumes the act of paying the
wage.[41] For this reason, the lowly worker is unable to show
proof that it was directly paid by the true employer.
Nevertheless, for the workers, it is enough that they actually
receive their pay, oblivious of the need for payslips, unaware of
its legal implications.[42] Applying this principle to the case at bar,
even though the wages were coursed through PMCI, we note
that the funds actually came from the pockets of RFC. Thus, in
the end, RFC is still the one who paid the wages of
petitioner albeit indirectly.
As to the third element, the power to dismiss, RFC avers that it
was PMCI who terminated the employment of petitioner. The
facts on record, however, disprove the allegation of RFC. First of
all, the Contract of Service gave RFC the right to terminate the
workers assigned to it by PMCI without the latters approval.
Quoted hereunder is the portion of the contract stating the power
of RFC to dismiss, to wit:
7. The First party ("RFC") reserves the right to terminate the
services of any worker found to be unsatisfactory without the
prior approval of the second party ("PMCI").[43]
In furtherance of the above provision, RFC requested PMCI to
terminate petitioner from his employment with the company. In
response to the request of RFC, PMCI terminated petitioner from
service. As found by the Labor Arbiter, to which we agree, the
dismissal of petitioner was indeed made under the instruction of
RFC to PMCI.
The fourth and most important requirement in ascertaining the
presence of employer-employee relationship is the power of
control. The power of control refers to the authority of the
employer to control the employee not only with regard to the
result of work to be done but also to the means and methods by
which the work is to be accomplished.[44] It should be borne in
mind, that the "control test" calls merely for the existence of the
right to control the manner of doing the work, and not
necessarily to the actual exercise of the right.[45] In the case at
bar, we need not belabor ourselves in discussing whether the
power of control exists. RFC already admitted that it exercised
control and supervision over petitioner.[46] RFC, however, raises
the defense that the power of control was jointly exercised with
PMCI. The Labor Arbiter, on the other hand, found that petitioner
was under the direct control and supervision of the personnel of
RFC and not PMCI. We are inclined to believe the findings of the
Labor Arbiter which is supported not only by the admission of
RFC but also by the evidence on record. Besides, to our mind,
the admission of RFC that it exercised control and supervision
over petitioner, the same being a declaration against interest, is
sufficient enough to prove that the power of control truly exists.
We, therefore, hold that an employer-employee relationship
exists between petitioner and RFC.
Having determined the real employer of petitioner, we now
proceed to ascertain the legality of his dismissal from
employment.
Since petitioner, due to his length of service, already attained the
status of a regular employee,[47] he is entitled to the security of
tenure provided under the labor laws. Hence, he may only be
validly terminated from service upon compliance with the legal
requisites for dismissal. Under the Labor Code, the requirements
for the lawful dismissal of an employee are two-fold, the
substantive and the procedural aspects. Not only must the
dismissal be for a valid or authorized cause,[48] the rudimentary
requirements of due process - notice and hearing[49] must,
likewise, be observed before an employee may be dismissed.
Without the concurrence of the two, the termination would, in the
eyes of the law, be illegal.[50]
As the employer, RFC has the burden of proving that the
dismissal of petitioner was for a cause allowed under the law
and that petitioner was afforded procedural due process. Sad to
say, RFC failed to discharge this burden. Indeed, RFC never
pointed to any valid or authorized cause under the Labor Code
which allowed it to terminate the services of petitioner. Its lone
allegation that the dismissal was due to the expiration or
completion of contract is not even one of the grounds for
termination allowed by law. Neither did RFC show that petitioner
was given ample opportunity to contest the legality of his
dismissal. In fact, no notice of such impending termination was
ever given him. Petitioner was, thus, surprised that he was
already terminated from employment without any inkling as to
how and why it came about. Petitioner was definitely denied due
process. Having failed to establish compliance with the
requirements on termination of employment under the Labor
Code, the dismissal of petitioner is tainted with illegality.
An employee who has been illegally dismissed is entitled to
reinstatement to his former position without loss of seniority
rights and to payment of full backwages corresponding to the
period from his illegal dismissal up to actual
reinstatement.[51] Petitioner is entitled to no less.
WHEREFORE, the petition is GRANTED. The decision of the
NLRC, dated 21 June 1996, as well as its resolution,
promulgated on 20 August 1996, are ANNULLED and SET
ASIDE. The decision of the Labor Arbiter rendered on 15 June
1994, is hereby REINSTATED and AFFIRMED.
G.R. Nos. 97008-09 July 23, 1993
VIRGINIA G. NERI and JOSE CABELIN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION FAR EAST
BANK & TRUST COMPANY (FEBTC) and BUILDING CARE
CORPORATION, respondents.
BELLOSILLO, J.:
Respondents are sued by two employees of Building Care
Corporation, which provides janitorial and other specific services
to various firms, to compel Far Bast Bank and Trust Company to
recognize them as its regular employees and be paid the same
wages which its employees receive.
Building Care Corporation (BCC, for brevity), in the proceedings
below, established that it had substantial capitalization of P1
Million or a stockholders equity of P1.5 Million. Thus the Labor
Arbiter ruled that BCC was only job contracting and that
consequently its employees were not employees of Far East
Bank and Trust Company (FEBTC, for brevity). on appeal, this
factual finding was affirmed by respondent National Labor
Relations Commission (NLRC, for brevity). Nevertheless,
petitioners insist before us that BCC is engaged in "labor-only"
contracting hence, they conclude, they are employees of
respondent FEBTC.
Petitioners Virginia G. Neri and Jose Cabelin applied for
positions with, and were hired by, respondent BCC, a
corporation engaged in providing technical, maintenance,
engineering, housekeeping, security and other specific services
to its clientele. They were assigned to work in the Cagayan de
Oro City Branch of respondent FEBTC on 1 May 1979 and 1
August 1980, respectively, Neri an radio/telex operator and
Cabelin as janitor, before being promoted to messenger on 1
April 1989.
On 28 June 1989, petitioners instituted complaints against
FEBTC and BCC before Regional Arbitration Branch No. 10 of
the Department of Labor and Employment to compel the bank to
accept them as regular employees and for it to pay the
differential between the wages being paid them by BCC and
those received by FEBTC employees with similar length of
service.
On 16 November 1989, the Labor Arbiter dismissed the
complaint for lack of merit.1 Respondent BCC was considered
an independent contractor because it proved it had substantial
capital. Thus, petitioners were held to be regular employees of
BCC, not FEBTC. The dismissal was appealed to NLRC which
on 28 September 1990 affirmed the decision on appeal. 2 On 22
October 1990, NLRC denied reconsideration of its
affirmance,3 prompting petitioners to seek redress from this
Court.
Petitioners vehemently contend that BCC in engaged in "labor-
only" contracting because it failed to adduce evidence purporting
to show that it invested in the form of tools, equipment,
machineries, work premises and other materials which are
necessary in the conduct of its business. Moreover, petitioners
argue that they perform duties which are directly related to the
principal business or operation of FEBTC. If the definition of
"labor-only" contracting4is to be read in conjunction with job
contracting,5 then the only logical conclusion is that BCC is a
"labor only" contractor. Consequently, they must be deemed
employees of respondent bank by operation of law since BCC is
merely an agent of FEBTC following the doctrine laid down
in Philippine Bank of Communications v. National Labor
Relations Commission6 where we ruled that where "labor-only"
contracting exists, the Labor Code itself establishes an
employer-employee relationship between the employer and the
employees of the "labor-only" contractor; hence, FEBTC should
be considered the employer of petitioners who are deemed its
employees through its agent, "labor-only" contractor BCC.
We cannot sustain the petition.
Respondent BCC need not prove that it made investments in the
form of tools, equipment, machineries, work premises, among
others, because it has established that it has sufficient
capitalization. The Labor Arbiter and the NLRC both determined
that BCC had a capital stock of P1 million fully subscribed and
paid for.7 BCC is therefore a highly capitalized venture and
cannot be deemed engaged in "labor-only" contracting.
It is well-settled that there is "labor-only" contracting where: (a)
the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others; and, (b) the workers
recruited and placed by such person are performing activities
which are directly related to the principal business of the
employer.8
Article 106 of the Labor Code defines "labor-only" contracting
thus —
Art. 106. Contractor or subcontractor. — . . . . 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 by such persons are
performing activities which are directly related to the principal
business of such employer . . . . (emphasis supplied).
Based on the foregoing, BCC cannot be considered a "labor-
only" contractor because it has substantial capital. While there
may be no evidence that it has investment in the form of tools,
equipment, machineries, work premises, among others, it is
enough that it has substantial capital, as was established before
the Labor Arbiter as well as the NLRC. In other words, the law
does not require both substantial capital and investment in the
form of tools, equipment, machineries, etc. This is clear from the
use of the conjunction "or". If the intention was to require the
contractor to prove that he has both capital and the requisite
investment, then the conjunction "and" should have been used.
But, having established that it has substantial capital, it was no
longer necessary for BCC to further adduce evidence to prove
that it does not fall within the purview of "labor-only" contracting.
There is even no need for it to refute petitioners' contention that
the activities they perform are directly related to the principal
business of respondent bank.
Be that as it may, the Court has already taken judicial notice of
the general practice adopted in several government and private
institutions and industries of hiring independent contractors to
perform special services.9 These services range from
janitorial, 10 security 11 and even technical or other specific
services such as those performed by petitioners Neri and
Cabelin. While these services may be considered directly related
to the principal business of the employer, 12 nevertheless, they
are not necessary in the conduct of the principal business of the
employer.
In fact, the status of BCC as an independent contractor was
previously confirmed by this Court in Associated Labor Unions-
TUCP v. National Labor Relations Commission, 13 where we
held thus —
The public respondent ruled that the complainants are not
employees of the bank but of the company contracted to serve
the bank. Building Care Corporation is a big firm which services,
among others, a university, an international bank, a big local
bank, a hospital center, government agencies, etc. It is a
qualified independent contractor. The public respondent
correctly ruled against petitioner's contentions . . . . (Emphasis
supplied).
Even assuming ex argumenti that petitioners were performing
activities directly related to the principal business of the bank,
under the "right of control" test they must still be considered
employees of BCC. 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
the Shipside case, 14 we ruled —
. . . . If in the course of private respondents' work (referring to the
workers), SHIPSIDE occasionally issued instructions to them,
that alone does not in the least detract from the fact that only
STEVEDORES is the employer of the private respondents, for in
legal contemplation, such instructions carry no more weight than
mere requests, the privity of contract being between SHIPSIDE
and STEVEDORES . . . .
Besides, petitioners do not deny that they were selected and
hired by BCC before being assigned to work in the Cagayan de
Oro Branch of FFBTC. BCC likewise acknowledges that
petitioners are its employees. The record is replete with
evidence disclosing that BCC maintained supervision and
control over petitioners through its Housekeeping and Special
Services Division: petitioners reported for work wearing the
prescribed uniform of BCC; leaves
of absence were filed directly with BCC; and, salaries were
drawn only from BCC. 15
As a matter of fact, Neri even secured a certification from BCC
on 16 May 1986 that she was employed by the latter. On the
other hand, on 24 May 1988, Cabelin filed a complaint for
underpayment of wages, non-integration of salary adjustments
mandated by Wage Orders Nos. 5 & 6 and R.A. 6640 as well as
for illegal deduction 16 against BCC alone which was
provisionally dismissed on 19 August 1988 upon Cabelin's
manifestation that his money claim was negligible. 17
More importantly, under the terms and conditions of the contract,
it was BCC alone which had the power to reassign petitioners.
Their deployment to FEBTC was not subject to the bank's
acceptance. Cabelin was promoted to messenger because the
FEBTC branch manager promised BCC that two (2) additional
janitors would be hired from the company if the promotion was to
be effected. 18 Furthermore, BCC was to be paid in lump sum
unlike in the situation in Philippine Bank of
Communications 19 where the contractor, CESI, was to be paid
at a daily rate on a per person basis. And, the contract therein
stipulated that the CESI was merely to provide manpower that
would render temporary services. In the case at bar, Neri and
Cabelin were to perform specific special services. Consequently,
petitioners cannot be held to be employees of FEBTC as BCC
"carries an independent business" and undertaken the
performance of its contract with various clients according to its
"own manner and method, free from the control and supervision"
of its principals in all matters "except as to the results thereof." 20
Indeed, the facts in Philippine Bank of Communications do not
square with those of the instant case. Therein, the Court ruled
that CESI was a "labor-only" contractor because upholding the
contract between the contractor and the bank would in effect
permit employers to avoid the necessity of hiring regular or
permanent employees and would enable them to keep their
employees indefinitely on a temporary or casual basis, thus
denying them security of tenure in their jobs. This of course
violates the Labor Code. BCC has not committed any violation.
Also, the former case was for illegal dismissal; this case, on the
other hand, is for conversion of employment status so that
petitioners can receive the same salary being given to regular
employees of FEBTC. But, as herein determined, petitioners are
not regular employees of FEBTC but of BCC. At any rate, the
finding that BCC in a qualified independent contractor precludes
us from applying the Philippine Bank of
Communications doctrine to the instant petition.
The determination of employer-employee relationship involves
factual findings. 21 Absent any grave abuse of discretion, and we
find none in the case before us, we are bound by the findings of
the Labor Arbiter as affirmed by respondent NLRC.
IN VIEW OF THE FOREGOING, the Petition for Certiorari is
DISMISSED.
[G.R. No. 144672. July 10, 2003]
San Miguel Corporation, petitioner, vs. MAERC Integrated
Services, Inc.; and Emerberto Orque,
DECISION
BELLOSILLO , J.:
TWO HUNDRED NINETY-ONE (291) workers filed their
complaints (nine [9] complaints in all) against San Miguel
Corporation (petitioner herein) and Maerc Integrated Services,
Inc. (respondent herein), for illegal dismissal, underpayment of
wages, non-payment of service incentive leave pays and other
labor standards benefits, and for separation pays from 25 June
to 24 October 1991. The complainants alleged that they were
hired by San Miguel Corporation (SMC) through its agent or
intermediary Maerc Integrated Services, Inc. (MAERC) to work
in two (2) designated workplaces in Mandaue City: one, inside
the SMC premises at the Mandaue Container Services, and
another, in the Philphos Warehouse owned by MAERC. They
washed and segregated various kinds of empty bottles used by
SMC to sell and distribute its beer beverages to the consuming
public. They were paid on a per piece or pakiao basis except for
a few who worked as checkers and were paid on daily wage
basis.
Complainants alleged that long before SMC contracted the
services of MAERC a majority of them had already been working
for SMC under the guise of being employees of another
contractor, Jopard Services, until the services of the latter were
terminated on 31 January 1988.
SMC denied liability for the claims and averred that the
complainants were not its employees but of MAERC, an
independent contractor whose primary corporate purpose was to
engage in the business of cleaning, receiving, sorting,
classifying, etc., glass and metal containers.
It appears that SMC entered into a Contract of Services with
MAERC engaging its services on a non-exclusive basis for one
(1) year beginning 1 February 1988. The contract was renewed
for two (2) more years in March 1989. It also provided for its
automatic renewal on a month-to-month basis after the two (2)-
year period and required that a written notice to the other party
be given thirty (30) days prior to the intended date of termination,
should a party decide to discontinue with the contract.
In a letter dated 15 May 1991, SMC informed MAERC of the
termination of their service contract by the end of June
1991. SMC cited its plans to phase out its segregation activities
starting 1 June 1991 due to the installation of labor and cost-
saving devices.
When the service contract was terminated, complainants
claimed that SMC stopped them from performing their jobs; that
this was tantamount to their being illegally dismissed by SMC
who was their real employer as their activities were directly
related, necessary and desirable to the main business of SMC;
and, that MAERC was merely made a tool or a shield by SMC to
avoid its liability under the Labor Code.
MAERC for its part admitted that it recruited the complainants
and placed them in the bottle segregation project of SMC but
maintained that it was only conveniently used by SMC as an
intermediary in operating the project or work directly related to
the primary business concern of the latter with the end in view of
avoiding its obligations and responsibilities towards the
complaining workers.
The nine (9) cases[1] were consolidated. On 31 January 1995 the
Labor Arbiter rendered a decision holding that MAERC was an
independent contractor.[2] He dismissed the complaints for illegal
dismissal but ordered MAERC to pay complainants' separation
benefits in the total amount of P2,334,150.00. MAERC and SMC
were also ordered to jointly and severally pay complainants their
wage differentials in the amount of P845,117.00 and to pay
attorney's fees in the amount of P317,926.70.
The complainants appealed the Labor Arbiter's finding that
MAERC was an independent contractor and solely liable to pay
the amount representing the separation benefits to the exclusion
of SMC, as well as the Labor Arbiter's failure to grant the
Temporary Living Allowance of the complainants. SMC appealed
the award of attorney's fees.
The National Labor Relations Commission (NLRC) ruled in its 7
January 1997 decision that MAERC was a labor-only contractor
and that complainants were employees of SMC.[3]The NLRC
also held that whether MAERC was a job contractor or a labor-
only contractor, SMC was still solidarily liable with MAERC for
the latter's unpaid obligations, citing Art. 109[4] of the Labor
Code. Thus, the NLRC modified the judgment of the Labor
Arbiter and held SMC jointly and severally liable with MAERC for
complainants' separation benefits. In addition, both respondents
were ordered to pay jointly and severally an indemnity fee
of P2,000.00 to each complainant.
SMC moved for a reconsideration which resulted in the reduction
of the award of attorney's fees from P317,926.70
to P84,511.70. The rest of the assailed decision was
unchanged.[5]
On 12 March 1998, SMC filed a petition for certiorari with prayer
for the issuance of a temporary restraining order and/or
injunction with this Court which then referred the petition to the
Court of Appeals.
On 28 April 2000 the Court of Appeals denied the petition and
affirmed the decision of the NLRC.[6] The appellate court also
denied SMC's motion for reconsideration in a resolution[7]dated
26 July 2000. Hence, petitioner seeks a review of the Court of
Appeals judgment before this Court.
Petitioner poses the same issues brought up in the appeals
court and the pivotal question is whether the complainants are
employees of petitioner SMC or of respondent MAERC.
Relying heavily on the factual findings of the Labor Arbiter,
petitioner maintained that MAERC was a legitimate job
contractor. It directed this Court's attention to the undisputed
evidence it claimed to establish this assertion: MAERC is a duly
organized stock corporation whose primary purpose is to engage
in the business of cleaning, receiving, sorting, classifying,
grouping, sanitizing, packing, delivering, warehousing, trucking
and shipping any glass and/or metal containers and that it had
listed in its general information sheet two hundred seventy-eight
(278) workers, twenty-two (22) supervisors, seven (7)
managers/officers and a board of directors; it also voluntarily
entered into a service contract on a non-exclusive basis with
petitioner from which it earned a gross income
of P42,110,568.24 from 17 October 1988 to 27 November 1991;
the service contract specified that MAERC had the selection,
engagement and discharge of its personnel, employees or
agents or otherwise in the direction and control thereof; MAERC
admitted that it had machinery, equipment and fixed assets used
in its business valued at P4,608,080.00; and, it failed to appeal
the Labor Arbiter's decision which declared it to be an
independent contractor and ordered it to solely pay the
separation benefits of the complaining workers.
We find no basis to overturn the Court of Appeals and the
NLRC. Well-established is the principle that findings of fact of
quasi-judicial bodies, like the NLRC, are accorded with respect,
even finality, if supported by substantial evidence.[8] Particularly
when passed upon and upheld by the Court of Appeals, they are
binding and conclusive upon the Supreme Court and will not
normally be disturbed.[9]
This Court has invariably held that in ascertaining an employer-
employee relationship, the following factors are considered: (a)
the selection and engagement of employee; (b) the payment of
wages; (c) the power of dismissal; and, (d) the power to control
an employee's conduct, the last being the most
important.[10] Application of the aforesaid criteria clearly indicates
an employer-employee relationship between petitioner and the
complainants.
Evidence discloses that petitioner played a large and
indispensable part in the hiring of MAERC's workers. It also
appears that majority of the complainants had already been
working for SMC long before the signing of the service contract
between SMC and MAERC in 1988.
The incorporators of MAERC admitted having supplied and
recruited workers for SMC even before MAERC was
created.[11] The NLRC also found that when MAERC was
organized into a corporation in February 1988, the complainants
who were then already working for SMC were made to go
through the motion of applying for work with Ms. Olga Ouano,
President and General Manager of MAERC, upon the instruction
of SMC through its supervisors to make it appear that
complainants were hired by MAERC. This was testified to by two
(2) of the workers who were segregator and forklift operator
assigned to the Beer Marketing Division at the SMC compound
and who had been working with SMC under a purported
contractor Jopard Services since March 1979 and March 1981,
respectively. Both witnesses also testified that together with
other complainants they continued working for SMC without
break from Jopard Services to MAERC.
As for the payment of workers' wages, it is conceded that
MAERC was paid in lump sum but records suggest that the
remuneration was not computed merely according to the result
or the volume of work performed. The memoranda of the labor
rates bearing the signature of a Vice-President and General
Manager for the Vismin Beer Operations[12] as well as a director
of SMC[13] appended to the contract of service reveal that SMC
assumed the responsibility of paying for the mandated overtime,
holiday and rest day pays of the MAERC workers.[14] SMC also
paid the employer's share of the SSS and Medicare
contributions, the 13th month pay, incentive leave pay and
maternity benefits.[15] In the lump sum received, MAERC earned
a marginal amount representing the contractors share. These
lend credence to the complaining workers' assertion that while
MAERC paid the wages of the complainants, it merely acted as
an agent of SMC.
Petitioner insists that the most significant determinant of an
employer-employee relationship, i.e., the right to control, is
absent. The contract of services between MAERC and SMC
provided that MAERC was an independent contractor and that
the workers hired by it "shall not, in any manner and under any
circumstances, be considered employees of the Company, and
that the Company has no control or supervision whatsoever over
the conduct of the Contractor or any of its workers in respect to
how they accomplish their work or perform the Contractor's
obligations under the Contract."[16]
In deciding the question of control, the language of the contract
is not determinative of the parties' relationship; rather, it is the
totality of the facts and surrounding circumstances of each
case.[17]
Despite SMCs disclaimer, there are indicia that it actively
supervised the complainants. SMC maintained a constant
presence in the workplace through its own checkers. Its
asseveration that the checkers were there only to check the end
result was belied by the testimony of Carlito R. Singson, head of
the Mandaue Container Service of SMC, that the checkers were
also tasked to report on the identity of the workers whose
performance or quality of work was not according to the rules
and standards set by SMC. According to Singson, "it (was)
necessary to identify the names of those concerned so that the
management [referring to MAERC] could call the attention to
make these people improve the quality of work."[18]
Viewed alongside the findings of the Labor Arbiter that the
MAERC organizational set-up in the bottle segregation project
was such that the segregators/cleaners were supervised by
checkers and each checker was also under a supervisor who
was in turn under a field supervisor, the responsibility of
watching over the MAERC workers by MAERC personnel
became superfluous with the presence of additional checkers
from SMC.
Reinforcing the belief that the SMC exerted control over the work
performed by the segregators or cleaners, albeit through the
instrumentality of MAERC, were letters by SMC to the MAERC
management. These were letters[19] written by a certain Mr. W.
Padin[20] addressed to the President and General Manager of
MAERC as well as to its head of operations,[21] and a third
letter[22] from Carlito R. Singson also addressed to the President
and General Manager of MAERC. More than just a mere written
report of the number of bottles improperly cleaned and/or
segregated, the letters named three (3) workers who were
responsible for the rejection of several bottles, specified the
infraction committed in the segregation and cleaning, then
recommended the penalty to be imposed. Evidently, these
workers were reported by the SMC checkers to the SMC
inspector.
While the Labor Arbiter dismissed these letters as merely
indicative of the concern in the end-result of the job contracted
by MAERC, we find more credible the contention of the
complainants that these were manifestations of the right of
petitioner to recommend disciplinary measures over MAERC
employees. Although calling the attention of its contractors as to
the quality of their services may reasonably be done by SMC,
there appears to be no need to instruct MAERC as to what
disciplinary measures should be imposed on the specific
workers who were responsible for rejections of bottles. This
conduct by SMC representatives went beyond a mere reminder
with respect to the improperly cleaned/segregated bottles or a
genuine concern in the outcome of the job contracted by
MAERC.
Control of the premises in which the contractor's work was
performed was also viewed as another phase of control over the
work, and this strongly tended to disprove the independence of
the contractor.[23] In the case at bar, the bulk of the MAERC
segregation activities was accomplished at the MAERC-owned
PHILPHOS warehouse but the building along with the machinery
and equipment in the facility was actually being rented by
SMC. This is evident from the memoranda of labor rates which
included rates for the use of forklifts and the warehouse at the
PHILPHOS area, hence, the NLRCs conclusion that the
payment for the rent was cleverly disguised since MAERC was
not in the business of renting warehouses and forklifts.[24]
Other instances attesting to SMCs supervision of the workers
are found in the minutes of the meeting held by the SMC officers
on 5 December 1988. Among those matters discussed were the
calling of SMC contractors to have workers assigned to
segregation to undergo and pass eye examination to be done by
SMC EENT company doctor and a review of
compensation/incentive system for segregators to improve the
segregation activities.[25]
But the most telling evidence is a letter by Mr. Antonio Ouano,
Vice-President of MAERC dated 27 May 1991 addressed to
Francisco Eizmendi, SMC President and Chief Executive Officer,
asking the latter to reconsider the phasing out of SMCs
segregation activities in Mandaue City. The letter was not denied
but in fact used by SMC to advance its own arguments.[26]
Briefly, the letter exposed the actual state of affairs under which
MAERC was formed and engaged to handle the segregation
project of SMC. It provided an account of how in 1987 Eizmendi
approached the would-be incorporators of MAERC and offered
them the business of servicing the SMC bottle-washing and
segregation department in order to avert an impending labor
strike. After initial reservations, MAERC incorporators accepted
the offer and before long trial segregation was conducted by
SMC at the PHILPHOS warehouse.[27]
The letter also set out the circumstances under which MAERC
entered into the Contract of Services in 1988 with the
assurances of the SMC President and CEO that the employment
of MAERC's services would be long term to enable it to recover
its investments. It was with this understanding that MAERC
undertook borrowings from banking institutions and from affiliate
corporations so that it could comply with the demands of SMC to
invest in machinery and facilities.
In sum, the letter attested to an arrangement entered into by the
two (2) parties which was not reflected in the Contract of
Services. A peculiar relationship mutually beneficial for a time
but nonetheless ended in dispute when SMC decided to
prematurely end the contract leaving MAERC to shoulder all the
obligations to the workers.
Petitioner also ascribes as error the failure of the Court of
Appeals to apply the ruling in Neri v. NLRC.[28] In that case, it
was held that the law did not require one to possess both
substantial capital and investment in the form of tools,
equipment, machinery, work premises, among others, to be
considered a job contractor. The second condition to establish
permissible job contracting[29] was sufficiently met if one
possessed either attribute.
Accordingly, petitioner alleged that the appellate court and the
NLRC erred when they declared MAERC a labor-only contractor
despite the finding that MAERC had investments amounting
to P4,608,080.00 consisting of buildings, machinery and
equipment.
However, in Vinoya v. NLRC,[30] we clarified that it was not
enough to show substantial capitalization or investment in the
form of tools, equipment, machinery and work premises, etc., to
be considered an independent contractor. In fact, jurisprudential
holdings were to the effect that in determining the existence of
an independent contractor relationship, several factors may be
considered, such as, but not necessarily confined to, whether
the contractor was carrying on an independent business; the
nature and extent of the work; the skill required; the term and
duration of the relationship; the right to assign the performance
of specified pieces of work; the control and supervision of the
workers; the power of the employer with respect to the hiring,
firing and payment of the workers of the contractor; the control of
the premises; the duty to supply premises, tools, appliances,
materials and labor; and the mode, manner and terms of
payment.[31]
In Neri, the Court considered not only the fact that respondent
Building Care Corporation (BBC) had substantial capitalization
but noted that BCC carried on an independent business and
performed its contract according to its own manner and method,
free from the control and supervision of its principal in all matters
except as to the results thereof.[32] The Court likewise mentioned
that the employees of BCC were engaged to perform specific
special services for their principal.[33] The status of BCC had also
been passed upon by the Court in a previous case where it was
found to be a qualified job contractor because it was "a big firm
which services among others, a university, an international bank,
a big local bank, a hospital center, government agencies,
etc." Furthermore, there were only two (2) complainants in that
case who were not only selected and hired by the contractor
before being assigned to work in the Cagayan de Oro branch of
FEBTC but the Court also found that the contractor maintained
effective supervision and control over them.
In comparison, MAERC, as earlier discussed, displayed the
characteristics of a labor-only contractor. Moreover, while
MAERCs investments in the form of buildings, tools and
equipment amounted to more than P4 Million, we cannot
disregard the fact that it was the SMC which required MAERC to
undertake such investments under the understanding that the
business relationship between petitioner and MAERC would be
on a long term basis. Nor do we believe MAERC to have an
independent business. Not only was it set up to specifically meet
the pressing needs of SMC which was then having labor
problems in its segregation division, none of its workers was also
ever assigned to any other establishment, thus convincing us
that it was created solely to service the needs of SMC. Naturally,
with the severance of relationship between MAERC and SMC
followed MAERCs cessation of operations, the loss of jobs for
the whole MAERC workforce and the resulting actions instituted
by the workers.
Petitioner also alleged that the Court of Appeals erred in ruling
that "whether MAERC is an independent contractor or a labor-
only contractor, SMC is liable with MAERC for the latter's unpaid
obligations to MAERC's workers."
On this point, we agree with petitioner as distinctions must be
made. In legitimate job contracting, the law creates an employer-
employee relationship for a limited purpose, i.e., to ensure that
the employees are paid their wages.[34] The principal employer
becomes jointly and severally liable with the job contractor only
for the payment of the employees' wages whenever the
contractor fails to pay the same. Other than that, the principal
employer is not responsible for any claim made by the
employees.
On the other hand, in labor-only contracting, the statute creates
an employer-employee relationship for a comprehensive
purpose: to prevent a circumvention of labor laws. The
contractor is considered merely an agent of the principal
employer and the latter is responsible to the employees of the
labor-only contractor as if such employees had been directly
employed by the principal employer. The principal employer
therefore becomes solidarily liable with the labor-only contractor
for all the rightful claims of the employees.
This distinction between job contractor and labor-only contractor,
however, will not discharge SMC from paying the separation
benefits of the workers, inasmuch as MAERC was shown to be a
labor-only contractor; in which case, petitioner's liability is that of
a direct employer and thus solidarily liable with MAERC.
SMC also failed to comply with the requirement of written notice
to both the employees concerned and the Department of Labor
and Employment (DOLE) which must be given at least one (1)
month before the intended date of retrenchment.[35] The fines
imposed for violations of the notice requirement have
varied.[36] The measure of this award depends on the facts of
each case and the gravity of the omission committed by the
employer.[37] For its failure, petitioner was justly ordered to
indemnify each displaced worker P2,000.00.
The NLRC and the Court of Appeals affirmed the Labor Arbiters
award of separation pay to the complainants in the total amount
of P2,334,150.00 and of wage differentials in the total amount
of P845,117.00. These amounts are the aggregate of the awards
due the two hundred ninety-one (291) complainants as
computed by the Labor Arbiter. The following is a summary of
the computation of the benefits due the complainants which is
part of the Decision of the Labor Arbiter.
SUMMARY
NAME SALARY SEPARATION TOTAL
DIFFERENTIAL PAY
GRAND TOTAL P845,117.00 P2,334,150.00 P3,179,267.00
However, certain matters have cropped up which require a
review of the awards to some complainants and a recomputation
by the Labor Arbiter of the total amounts.
A scrutiny of the enumeration of all the complainants shows that
some names38 appear twice by virtue of their being included in
two (2) of the nine (9) consolidated cases. A check of the Labor
Arbiters computation discloses that most of these names were
awarded different amounts of separation pay or wage differential
in each separate case where they were impleaded as parties
because the allegations of the length and period of their
employment for the separate cases, though overlapping, were
also different. The records before us are incomplete and do not
aid in verifying whether these names belong to the same
persons but at least three (3) of those names were found to have
identical signatures in the complaint forms they filed in the
separate cases. It is likely therefore that the Labor Arbiter
erroneously granted some complainants separation benefits and
wage differentials twice. Apart from this, we also discovered
some names that are almost identical.39 It is possible that the
minor variance in the spelling of some names may have been a
typographical error and refer to the same persons although the
records seem to be inconclusive.
Furthermore, one of the original complainants40 was
inadvertently omitted by the Labor Arbiter from his
computations.41 The counsel for the complainants promptly filed
a motion for inclusion/correction42 which motion was treated as
an appeal of the Decision as the Labor Arbiter was prohibited by
the rules of the NLRC from entertaining any motion at that stage
of the proceedings.43 The NLRC for its part acknowledged the
omission44 but both the Commission and subsequently the Court
of Appeals failed to rectify the oversight in their decisions.
Finally, the NLRC ordered both MAERC and SMC to
pay P84,511.70 in attorneys fees which is ten percent (10%) of
the salary differentials awarded to the complainants in
accordance with Art. 111 of the Labor Code. The Court of
Appeals also affirmed the award. Consequently, with the
recomputation of the salary differentials, the award of attorneys
fees must also be modified.
WHEREFORE, the petition is DENIED. The assailed Decision of
the Court of Appeals dated 28 April 2000 and the Resolution
dated 26 July 2000
are AFFIRMED with MODIFICATION. Respondent Maerc
Integrated Services, Inc. is declared to be a labor-only
contractor. Accordingly, both petitioner San Miguel Corporation
and respondent Maerc Integrated Services, Inc., are ordered to
jointly and severally pay complainants (private respondents
herein) separation benefits and wage differentials as may be
finally recomputed by the Labor Arbiter as herein directed, plus
attorneys fees to be computed on the basis of ten percent (10%)
of the amounts which complainants may recover pursuant to Art.
111 of the Labor Code, as well as an indemnity fee of P2,000.00
to each complainant.
The Labor Arbiter is directed to review and recompute the award
of separation pays and wage differentials due complainants
whose names appear twice or are notably similar, compute the
monetary award due to complainant Niel Zanoria whose name
was omitted in the Labor Arbiters Decision and immediately
execute the monetary awards as found in the Labor Arbiters
computations insofar as those complainants whose entitlement
to separation pay and wage differentials and the amounts
thereof are no longer in question. Costs against petitioner.
ROLANDO SASAN, SR., LEONILO DAYDAY, MODESTO
AGUIRRE, ALEJANDRO ARDIMER, ELEUTERIO SACIL,
WILFREDO JUEGOS, PETRONILO CARCEDO and CESAR
PACIENCIA,
Petitioners,- versus -
NATIONAL LABOR RELATIONS COMMISSION 4TH DIVISION,
EQUITABLE-PCI BANK and HELPMATE, INC.,
Respondents.
DECISION
Assailed in this Petition for Review under Rule 45 of the Rules of
Court are the Decision[1] dated 24 April 2006 of the Court of
Appeals in CA-G.R. SP No. 79912, which affirmed the Decision
dated 22 January 2003 of the National Labor Relations
Commission (NLRC) in NLRC Case No. V-000241-2002 finding
that Helpmate, Inc. (HI) is a legitimate independent job
contractor and that the petitioners were not illegally dismissed
from work; and the Resolution[2] dated 31 October 2006 of the
same court denying the Motion for Reconsideration filed by the
petitioners.
Respondent Equitable-PCI Bank (E-PCIBank),[3] a banking entity
duly organized and existing under and by virtue of Philippine
laws, entered into a Contract for Services[4] with HI, a domestic
corporation primarily engaged in the business of providing
janitorial and messengerial services. Pursuant to their contract,
HI shall hire and assign workers to E-PCIBank to perform
janitorial/messengerial and maintenance services. The contract
was impliedly renewed year after year. Petitioners Rolando
Sasan, Sr.,[5] Leonilo Dayday,[6] Modesto Aguirre,[7] Alejandro
Ardimer,[8] Eleuterio Sacil,[9] Wilfredo Juegos,[10] Petronilo
Carcedo,[11] and Cesar Peciencia[12] were among those
employed and assigned to E-PCIBank at its branch
along Gorordo Avenue, Lahug, Cebu City, as well as to its other
branches in the Visayas.[13]
O 23 July 2001, petitioners filed with the Arbitration Branch of
the NLRC in Cebu City separate complaints[14] against E-
PCIBank and HI for illegal dismissal, with claims for separation
pay, service incentive leave pay, allowances, damages,
attorneys fees and costs. Their complaints were docketed as
NLRC RAB-VII Case No. 07-1381-2001 and raffled to Labor
Arbiter Jose G. Gutierrez (Labor Arbiter Gutierrez) for their
proper disposition. Subsequently, on 22 August 2001, the
petitioners[15] amended their complaints to include a claim for
13th month-pay.
Several conciliation hearings were scheduled by Labor Arbiter
Gutierrez but the parties still failed to arrive at a mutually
beneficial settlement; hence, Labor Arbiter Gutierrez ordered
that they submit their respective position papers.
In their position papers, petitioners claimed that they had
become regular employees of E-PCIBank with respect to the
activities for which they were employed, having continuously
rendered janitorial and messengerial services to the bank for
more than one year; that E-PCIBank had direct control and
supervision over the means and methods by which they were to
perform their jobs; and that their dismissal by HI was null and
void because the latter had no power to do so since they had
become regular employees of E-PCIBank.
For its part, E-PCIBank averred that it entered into a Contract for
Services with HI, an independent job contractor which hired and
assigned petitioners to the bank to perform janitorial and
messengerial services thereat. It was HI that paid petitioners
wages, monitored petitioners daily time records (DTR) and
uniforms, and exercised direct control and supervision over the
petitioners and that therefore HI has every right to terminate their
services legally. E-PCIBank could not be held liable for whatever
misdeed HI had committed against its employees.

HI, on the other hand, asserted that it was an independent job
contractor engaged in the business of providing janitorial and
related services to business establishments, and E-PCIBank
was one of its clients. Petitioners were its employees, part of its
pool of janitors/messengers assigned to E-PCIBank. The
Contract for Services between HI and E-PCIBank expired on 15
July 2000. E-PCIBank no longer renewed said contract with HI
and, instead, bidded out its janitorial requirements to two other
job contractors, Able Services and Puritan. HI designated
petitioners to new work assignments, but the latter refused to
comply with the same. Petitioners were not dismissed by HI,
whether actually or constructively, thus, petitioners complaints
before the NLRC were without basis.
In the dispositive portion of his 7 January 2002 Decision, Labor
Arbiter Gutierrez awarded to petitioners the following amounts:
xxxx
WHEREFORE, the foregoing premises considered, judgment is
hereby rendered directing the respondents Equitable PCI Bank
and Helpmate, Inc. to pay jointly and solidarily the complainants
as follows:
General Information Sheet Stock Corporation of HI showing
therein that it increased its authorized capital stock
from P1,500,000.00 to P20,000,000.00 on 12 March 1999 with
the Securities and Exchange Commission;
2. Audited Financial Statement of HI showing therein that it has
Total Assets of P20,939,935.72 as of 31 December 2000;
3. Transfer Certificate of Title No. 110173 and Tax Declaration
No. GR2K-09-063-00582 registered under the name of HI
showing that it has a parcel of land with Market Value
of P1,168,860.00 located along Rizal Avenue (now Bacalso
Avenue), Cebu City, and

1. Cesar Paciencia - P43,130.00

Labor Arbiter Gutierrez focused on the following issues: (a)
whether petitioners were regular employees of HI; (b) whether
petitioners were illegally dismissed from their employment; and
(c) whether petitioners were entitled to their money claims.
2. Dominador Suico, Jr. - 32,015.00
4. Tax Declaration No. GR2K-09-063-00583 registered under
3. Roland Mosquera - 33,250.00 the name of HI showing that it has a commercial building
constructed on the preceding lot located along Bacalso
4. Petronilo Carceda - 72,770.00 Avenue, CebuCity with market value of P2,515,170.00.[19]

5. Roland Sasan, Sr. - 60,420.00

On 7 January 2002, on the basis of the parties position papers
and documentary evidence, Labor Arbiter Gutierrez rendered a
Decision finding that HI was not a legitimate job contractor on
the ground that it did not possess the required substantial capital
or investment to actually perform the job, work, or service under
its own account and responsibility as required under the Labor
Code.[16] HI is therefore a labor-only contractor and the real
employer of petitioners is E-PCIBank which is held liable to
petitioners. According to Labor Arbiter Gutierrez:
6. Leonilo Dayday - 75,240.00
7. Eleuterio Sacil - 53,010.00
The NLRC promulgated its Decision on 22 January
8. Mario Juntilla - 65,360.00 2003 modifying the ruling of Labor Arbiter Gutierrez. The NLRC
took into consideration the documentary evidence presented by
9. Wilfredo Juegos - 57,950.00
HI for the first time on appeal and, on the basis thereof, declared
10. Modesto Aguirre - 54,245.00 HI as a highly capitalized venture with sufficient capitalization,
which cannot be considered engaged in labor-only contracting.
11. Alejandro Ardimer - 59,185.00

[T]he undisputed facts show that the [herein petitioners] were
made to perform not only as janitors but also as messengers,
drivers and one of them even worked as an electrician. For us,
these jobs are not only directly related to the main business of
the principal but are, likewise deemed necessary in the conduct
of respondent Equitable-PCI Banks principal business. Thus,
based on the above, we so declare that the [petitioners] are
employees of respondent Equitable-PCI Bank. And having
worked with respondent Equitable-PCI Bank for more than one
(1) year, they are deemed regular employees. They cannot,
therefore, be removed from employment without cause and
without due process, which is wanting in this case. Hence, the
severance of their employment in the guise of termination of
contract is illegal.[17]
TOTAL - P606,575.00[18]
On the charge of illegal dismissal, the NLRC ruled that:
Aggrieved by the decision of Labor Arbiter Gutierrez,
respondents E-PCIBank and HI appealed the same to the
The charge of illegal dismissal was prematurely filed. The record
NLRC, 4th Division, stationed in Cebu City. Their appeals were
shows that barely eight (8) days from 15 July 2001 when the
docketed as NLRC Case No. V-000241-2002. In support of its
complainants were placed on a temporary off-detail, they filed
allegation that it was a legitimate job contractor, HI submitted
their complaints on 23 July 2001 and amended their complaints
before the NLRC several documents which it did not present
on 22 August 2001 against the respondents on the presumption
before Labor Arbiter Gutierrez. These are:
that their services were already terminated.Temporary off-detail
is not equivalent to dismissal. x x x.[20]
1. Certificate of Filing of Certificate of Increase of Capital Stock,
Certificate of Filing Amended Articles of Incorporation, and
The NLRC deleted Labor Arbiter Gutierrezs award of backwages
and separation pay, but affirmed his award for 13th month pay
and attorneys fees equivalent to ten percent (10%) of the
13th month pay, to the petitioners.[21] Thus, the NLRC decreed in
its 22 January 2003 Decision, the payment of the following
reduced amounts to petitioners:
WHEREFORE, premises considered, the decision of Labor
Arbiter Jose G. Gutierrez dated 7 January 2002 is MODIFIED, to
wit:
Ordering respondents Helpmate, Inc. and Equitable PCI Bank to
jointly and severally[22] pay the complainants of their 13th month
pay and attorneys fees in the aggregate amount of Forty-Three
Thousand Four Hundred Seventy-Two and 00/100 (P43,472.00),
broken down as follows:
1. Aguirre, Modesto - P5,434.00
2. Ardimer, Alejandro - 5,434.00
3. Carcedo, Petronilo - 5,434.00
4. Dayday, Leonilo - 5,434.00
5. Juegos, Wilfredo - 5,434.00
6. Juntilla, Mario - 5,434.00
7. Paciencia, Cesar - 5,434.00
8. Sacil, Eleuterio - 5,434.00
TOTAL P43,472.00[23]
Petitioners Motion for Reconsideration was denied by the NLRC
in its Resolution dated 1 July 2003.[24]
Distressed by the decision of the NLRC, petitioners sought
recourse with the Court of Appeals by filing a Petition
for Certiorari[25] under Rule 65 of the 1997 Rules of Civil
Procedure docketed as CA-G.R. SP No. 79912.
In its Decision dated 24 April 2006, the Court of Appeals
affirmed the findings of the NLRC that HI was a legitimate job
contractor and that it did not illegally dismiss petitioners:
As to the question of whether or not, as a legitimate independent
job contractor, respondent HI illegally dismissed the
petitioners. We rule in the negative.
It is undisputed that the contract between respondent HI and its
client E-PCIBank expired on July 15, 2000. The record shows
that after said expiration, respondent HI offered the petitioners
new work assignments to various establishments which are HIs
clients. The petitioners, therefore, were not even placed on
floating status. They simply refused, without justifiable reason, to
assume their new work assignments which refusal was
tantamount to abandonment. There being no illegal dismissal,
petitioners are not entitled to backwages or separation pay.[26]
The fallo of the 24 April 2006 Decision of the appellate court
reads:
WHEREFORE, in view of the foregoing premises, judgment is
hereby rendered by us DENYING the petition filed in this case
and AFFIRMING the decision of the NLRC, Fourth Division, in
NLRC Case No. V-000145-2003 promulgated on June 22,
2003.[27]
Petitioners now come before us via the instant Petition raising
the following issues:
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
ACTED IN EXCESS OF THEIR JURISDICTION AND/OR
COMMITTED GRAVE ABUSE OF DISCRETION IN
UPHOLDING THE NLRC 4TH DIVISIONS DECISION AND
GRAVELY ERRED IN:
I. ACCEPTING AND APPRECIATING THE PIECES OF
EVIDENCE SUBMITTED BY RESPONDENTS DURING
APPEAL, ALL EXISTING DURING THE TIME THE NLRC RAB
7S TRIAL, CONTRARY TO THIS HONORABLE COURTS
PREVIOUS ESTABLISHED DECISIONS.
II. REVERSING, WITHOUT ANY LEGAL BASIS, THE FACTUAL
FINDING OF NLRC RAB 7 THAT THE RESPONDENT HI WAS
LABOR ONLY CONTRACTOR.
III. RULING, WITHOUT ANY LEGAL BASIS, THAT THE
ILLEGAL DISMISSAL COMPLAINTS WERE PREMATURELY
FILED.[28]
Before proceeding to the substantive issues, we first address the
procedural issues raised by petitioners.
Petitioners object to the acceptance and consideration by the
NLRC of the evidence presented by HI for the first time on
appeal. This is not a novel procedural issue, however, and our
jurisprudence is already replete with cases[29] allowing the NLRC
to admit evidence, not presented before the Labor Arbiter, and
submitted to the NLRC for the first time on appeal. Technical
rules of evidence are not binding in labor cases. Labor officials
should 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.[30]
The submission of additional evidence before the NLRC is not
prohibited by its New Rules of Procedure. After all, rules of
evidence prevailing in courts of law or equity are not controlling
in labor cases. The NLRC and labor arbiters are directed to use
every and all reasonable means to ascertain the facts in each
case speedily and objectively, without regard to technicalities of
law and procedure all in the interest of substantial justice. In
keeping with this directive, it has been held that the NLRC may
consider evidence, such as documents and affidavits, submitted
by the parties for the first time on appeal. The submission of
additional evidence on appeal does not prejudice the other party
for the latter could submit counter-evidence.[31]

In Clarion Printing House, Inc. v. National Labor Relations
Commission,[32] we again emphasized that:
[T]he NLRC is not precluded from receiving evidence, even for
the first time on appeal, because technical rules of procedure
are not binding in labor cases.
The settled rule is that the NLRC is not precluded from receiving
evidence on appeal as technical rules of evidence are not
binding in labor cases. In fact, labor officials are mandated by
the Labor Code to use every and all 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. Thus, in Lawin Security Services v. NLRC,
and Bristol Laboratories Employees Association-DFA v. NLRC,
we held that even if the evidence was not submitted to the labor
arbiter, the fact that it was duly introduced on appeal to the
NLRC is enough basis for the latter to be more judicious in
admitting the same, instead of falling back on the mere
technicality that said evidence can no longer be considered on
appeal. Certainly, the first course of action would be more
consistent with equity and the basic notions of fairness.
For the same reasons, we cannot find merit in petitioners
protestations against the documentary evidence submitted by HI
because they were mere photocopies.Evidently, petitioners are
invoking the best evidence rule, espoused in Section 3, Rule130
of the Rules of Court. It provides that:
Section 3. Original document must be produced; exceptions.
When the subject of inquiry is the contents of a document, no
evidence shall be admissible other than the original document
itself x x x.
The above provision explicitly mandates that when the subject of
inquiry is the contents of a document, no evidence shall be
admissible other than the original document
itself. Notably, certified true copies of these documents,
acceptable under the Rules of Court[33] were furnished to the
petitioners. Even assuming that petitioners were given mere principal.[35] A person is considered engaged in legitimate job
photocopies, again, we stress that proceedings before the NLRC contracting or subcontracting if the following conditions concur:
are not covered by the technical rules of evidence and
procedure as observed in the regular courts.Technical rules of
evidence do not apply if the decision to grant the petition
proceeds from an examination of its sufficiency as well as a (a) The contractor or subcontractor carries on a distinct and
careful look into the arguments contained in position papers and independent business and undertakes to perform the job, work
other documents.[34] or service on its own account and under its own responsibility
according to its own manner and method, and free from the
control and direction of the principal in all matters connected with
the performance of the work except as to the results thereof;
Petitioners had more than adequate opportunity when they filed
their motion for reconsideration before the NLRC, their Petition
to the Court of Appeals and even to this Court, to refute or
present their counter-evidence to the documentary evidence (b) The contractor or subcontractor has substantial capital or
presented by HI. Having failed in this respect, petitioners cannot investment; and
now be heard to complain about these documentary evidences
presented by HI upon which the NLRC and the Court of Appeals
based its finding that HI is a legitimate job contractor.
(c) The agreement between the principal and contractor or
subcontractor assures the contractual employees entitlement to
all labor and occupational safety and health standards, free
The essence of due process is simply an opportunity to be exercise of the right to self-organization, security of tenure, and
heard, or as applied to administrative proceedings, a fair and social and welfare benefits.[36]
reasonable opportunity to explain one's side. It is also an
opportunity to seek a reconsideration of the action or ruling
complained of. It is not the denial of the right to be heard but
denial of the opportunity to be heard that constitutes violation of
due process of law. Petitioners herein were afforded every
opportunity to be heard and to seek reconsideration of the In contrast, labor-only contracting, a prohibited act, is an
adverse judgment against them.They had every opportunity to arrangement where the contractor or subcontractor merely
strengthen their positions by presenting their own substantial recruits, supplies or places workers to perform a job, work or
evidence to controvert those submitted by E-PCIBank and HI service for a principal.[37] In labor-only contracting, the following
before the NLRC, and even before the Court of Appeals. It elements are present:
cannot win its case by merely raising unsubstantiated doubt or
relying on the weakness of the adverse parties evidence.
We now proceed to the resolution of the substantive issues (a) The contractor or subcontractor does not have substantial
submitted by petitioners for our consideration, particularly, capital or investment to actually perform the job, work or service
whether HI is a labor-only contactor and E-PCIBank should be under its own account and responsibility; and
deemed petitioners principal employer; and whether petitioners
were illegally dismissed from their employment.
(b) The employees recruited, supplied or placed by such
contractor or subcontractor are performing activities which are
Permissible job contracting or subcontracting refers to an directly related to the main business of the principal.[38]
arrangement whereby a principal agrees to put out or farm out to
a contractor or subcontractor the performance or completion of a
specific job, work or service within a definite or predetermined
period, regardless of whether such job, work or service is to be
performed or completed within or outside the premises of the
In distinguishing between permissible job contracting and
prohibited labor-only contracting,[39] we elucidated in Vinoya v.
National Labor Relations Commission,[40]that it is not enough to
show substantial capitalization or investment in the form of tools,
equipment, etc. Other facts that may be considered include the
following: whether or not the contractor is carrying on an
independent business; the nature and extent of the work; the
skill required; the term and duration of the relationship; the right
to assign the performance of specified pieces of work; the
control and supervision of the work to another; the employers
power with respect to the hiring, firing and payment of the
contractors workers; the control of the premises; the duty to
supply premises, tools, appliances, materials and labor; and the
mode and manner or terms of payment.[41] Simply put, the totality
of the facts and the surrounding circumstances of the case are
to be considered.[42] Each case must be determined by its own
facts and all the features of the relationship are to be
considered.[43]
In the case at bar, we find substantial evidence to support the
finding of the NLRC, affirmed by the Court of Appeals, that HI is
a legitimate job contractor.
We take note that HI has been issued by the Department of
Labor and Employment (DOLE) Certificate of
Registration[44] Numbered VII-859-1297-048. The said certificate
states among other things:
CERTIFICATE OF REGISTRATION
Numbered VII-859-1297-048
is issued to
HELPMATE, INCORPORATED
330 N. Bacalso Avenue, Cebu City
for having complied with the requirements as provided for under
the Labor Code, as amended, and its Implementing Rules and
having paid the registration fee in the amount of ONE
HUNDRED PESOS (P100.00) per Official Receipt Number
9042769, dated October 16, 1997.
In witness whereof, and by authority vested in me by the Labor
Code, as amended, and its Implementing Rules specifically
Department Order No. 10 series of 1997, I have hereunto set my
hand and affixed the Official on this 23rd day of December
1997.[45]
Having been issued by a public officer, this certification carries
with it the presumption that it was issued in the regular
performance of official duty.[46] In the absence of proof,
petitioners bare assertion cannot prevail over this presumption.
Moreover, the DOLE being the agency primarily responsible for
regulating the business of independent job contractors, we can
presume in the absence of evidence to the contrary that it
thoroughly evaluated the requirements submitted by HI as a
precondition to the issuance of the Cerificate of Registration.
The evidence on record also shows that HI is carrying on a
distinct and independent business from E-PCIBank. The
employees of HI are assigned to clients to perform janitorial and
messengerial services, clearly distinguishable from the banking
services in which E-PCIBank is engaged.
Despite the afore-mentioned compliance by HI with the
requisites for permissible job contracting, Labor Arbiter Gutierrez
still declared that HI was engaged in prohibited labor-only
contracting because it did not possess substantial capital or
investment to actually perform the job, work or service under its
own account or responsibility.Both the NLRC and the Court of
Appeals ruled to the contrary, and we agree.
Substantial capital or investment refers to capital stocks and
subscribed capitalization in the case of corporations, tools,
equipments, implements, machineries and work premises,
actually and directly used by the contractor or subcontractor in
the performance or completion of the job, work or service
contracted out.[47] An independent contractor must have either
substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others. The law does not
require both substantial capital and investment in the form of
tools, equipment, machineries, etc.[48] It is enough that it has
substantial capital. In the case of HI, it has proven both.
We have expostulated that once it is established that an entity
such as in this case, HI has substantial capital, it was no longer
necessary to adduce further evidence to prove that it does not
fall within the purview of labor-only contracting.[49] There is even
no need for HI to refute the contention of petitioners that some of
the activities they performed such as those of messengerial
services are directly related to the principal business of E-
PCIBank.
In any event, we have earlier declared that while these services
rendered by the petitioners as janitors, messengers and drivers
are considered directly related to the principal business of a
bank, in this case E-PCIBank, nevertheless, they are not
necessary in the conduct of its (E-PCIBANKs) principal
business.[50]
HI has substantial capital in the amount of P20,939,935.72. It
has its own building where it holds office and it has been
engaged in business for more than a decade now.[51] As
observed by the Court of Appeals, surely, such a well-
established business entity cannot be considered a labor-only
contractor.
Etched in an unending stream of cases are four standards in
determining the existence of an employer-employee relationship,
namely: (a) the manner of selection and engagement of the
putative employee; (b) the mode of payment of wages; (c) the
presence or absence of power of dismissal; and, (d) the
presence or absence of control of the putative employees
conduct. Most determinative among these factors is the so-
called control test.[52]
The presence of the first requisite for the existence of an
employer-employee relationship to wit, the selection and
engagement of the employee is shown by the fact that it was HI
which selected and engaged the services of petitioners as its
employees. This is fortified by the provision in the contract of
services between HI and E-PCIBank which states:
Selection, Engagement, Discharge. [HI] shall have exclusive
discretion in the selection, engagement, investigation, discipline
and discharge of its employees.[53]
On the second requisite regarding the payment of wages, it was
HI who paid petitioners their wages and who provided their daily
time records and uniforms and other materials necessary for the
work they performed. Therefore, it is HI who is responsible for
petitioners claims for wages and other employees
benefits. Precisely, the contract of services between HI and E-
PCIBank reveals the following:
Indemnity for Salaries and Benefits, etc. [HI] shall be responsible
for the salaries, allowances, overtime and holiday pay, and other
benefits of its personnel including withholding taxes.[54]
As to the third requisite on the power to control the employees
conduct, and the fourth requisite regarding the power of
dismissal, again E-PCIBank did not have the power to control
petitioners with respect to the means and methods by which
their work was to be accomplished. It likewise had no power of
dismissal over the petitioners. All that E-PCIBank could do was
to report to HI any untoward act, negligence, misconduct or
malfeasance of any employee assigned to the premises. The
contract of services between E-PCIBank and HI is noteworthy. It
states:
[HI] shall have the entire charge, control and supervision over all
its employees who may be fielded to [E-PCIBank]. For this
purpose, [HI] shall assign a regular supervisor of its employees
who may be fielded to the Bank and which regular supervisor
shall exclusively supervise and control the activities and
functions defined in Section 1 hereof. x x x.[55]
All these circumstances establish that HI undertook said contract
on its account, under its own responsibility, according to its own
manner and method, and free from the control and direction of
E-PCIBank. Where the control of the principal is limited only to
the result of the work, independent job contracting exists. The
janitorial service agreement between E-PCIBank and HI is
definitely a case of permissible job contracting.
Considering the foregoing, plus taking judicial notice of the
general practice in private, as well as in government institutions
and industries, of hiring an independent contractor to perform
special services,[56] ranging from janitorial, security and even
technical services, we can only conclude that HI is a legitimate
job contractor. As such legitimate job contractor, the law creates
an employer-employee relationship between HI and
petitioners[57] which renders HI liable for the latters claims.
In view of the preceding conclusions, petitioners will never
become regular employees of E-PCIBank regardless of how
long they were working for the latter.[58]
We further rule that petitioners were not illegally dismissed by
HI. Upon the termination of the Contract of Service between HI
and E-PCIBank, petitioners cannot insist to continue to work for
the latter. Their pull-out from E-PCIBank did not constitute illegal
dismissal since, first, petitioners were not employees of E-
PCIBank; and second, they were pulled out from said
assignment due to the non-renewal of the Contract of Service
between HI and E-PCIBank. At the time they filed their
complaints with the Labor Arbiter, petitioners were not even
dismissed by HI; they were only off-detail pending their re-
assignment by HI to another client. And when they were actually
given new assignments by HI with other clients,[59] petitioners
even refused the same. As the NLRC pronounced, petitioners
complaint for illegal dismissal is apparently premature.
WHEREFORE, premises considered, the Petition is DENIED for
lack of merit. The Decision dated 24 April 2006 and Resolution
dated 31 October 2006 of the Court of Appeals are
AFFIRMED. Costs against petitioners.
IV. EMPLOYEE CLASSIFICATION AND/OR STATUS
CHERRY J. PRICE, G.R. No. 178505
STEPHANIE G. DOMINGO
AND LOLITA Present:
ARBILERA, Petitioners,
YNARES-SANTIAGO, J.,
Chairperson,
- versus -
AUSTRIA-MARTINEZ,
INNODATA PHILS. INC.,/
INNODATA CORPORATION, CHICO-NAZARIO,
LEO RABANG AND JANE NACHURA, and
NAVARETTE, Respondents. REYES, JJ.
Promulgated:
September 30, 2008
DECISION
CHICO-NAZARIO, J.:
This Petition for Review on Certiorari under Rule 45 of the Rules
of Court assails the Decision1 dated 25 September 2006 and
Resolution2 dated 15 June 2007 of the Court of Appeals in CA-
G.R. SP No. 72795, which affirmed the Decision dated 14
December 2001 of the National Labor Relations Commission
(NLRC) in NLRC NCR Case No. 30-03-01274-2000 finding that
petitioners were not illegally dismissed by respondents.
The factual antecedents of the case are as follows:
Respondent Innodata Philippines, Inc./Innodata Corporation
(INNODATA) was a domestic corporation engaged in the data
encoding and data conversion business. It employed encoders,
indexers, formatters, programmers, quality/quantity staff, and
others, to maintain its business and accomplish the job orders of
its clients. Respondent Leo Rabang was its Human Resources
and Development (HRAD) Manager, while respondent Jane
Navarette was its Project Manager. INNODATA had since
ceased operations due to business losses in June 2002.
Petitioners Cherry J. Price, Stephanie G. Domingo, and Lolita
Arbilera were employed as formatters by INNODATA. The
parties executed an employment contract denominated as a
"Contract of Employment for a Fixed Period," stipulating that the
contract shall be for a period of one year,3 to wit:
CONTRACT OF EMPLOYMENT FOR A FIXED PERIOD
xxxx
WITNESSETH: That
WHEREAS, the EMPLOYEE has applied for the position of
FORMATTER and in the course thereof and represented
himself/herself to be fully qualified and skilled for the said
position;
WHEREAS, the EMPLOYER, by reason of the aforesaid
representations, is desirous of engaging that the (sic) services of
the EMPLOYEE for a fixed period;
NOW, THEREFORE, for and in consideration of the foregoing
premises, the parties have mutually agreed as follows:
TERM/DURATION
The EMPLOYER hereby employs, engages and hires the
EMPLOYEE and the EMPLOYEE hereby accepts such
appointment as FORMATTER effective FEB. 16, 1999 to FEB.
16, 2000 a period of ONE YEAR.
xxxx
TERMINATION
6.1 In the event that EMPLOYER shall discontinue operating its
business, this CONTRACT shall also ipso facto terminate on the
last day of the month on which the EMPLOYER ceases
operations with the same force and effect as is such last day of
the month were originally set as the termination date of this
Contract. Further should the Company have no more need for
the EMPLOYEE’s services on account of completion of the
project, lack of work (sic) business losses, introduction of new
production processes and techniques, which will negate the
need for personnel, and/or overstaffing, this contract maybe pre-
terminated by the EMPLOYER upon giving of three (3) days
notice to the employee.
6.2 In the event period stipulated in item 1.2 occurs first vis-à-vis
the completion of the project, this contract shall automatically
terminate.
6.3 COMPANY’s Policy on monthly productivity shall also apply
to the EMPLOYEE.
6.4 The EMPLOYEE or the EMPLOYER may pre-terminate this
CONTRACT, with or without cause, by giving at least Fifteen –
(15) notice to that effect. Provided, that such pre-termination
shall be effective only upon issuance of the appropriate
clearance in favor of the said EMPLOYEE.
6.5 Either of the parties may terminate this Contract by reason of
the breach or violation of the terms and conditions hereof by
giving at least Fifteen (15) days written notice. Termination with
cause under this paragraph shall be effective without need of
judicial action or approval.4
During their employment as formatters, petitioners were
assigned to handle jobs for various clients of INNODATA,
among which were CAS, Retro, Meridian, Adobe, Netlib, PSM,
and Earthweb. Once they finished the job for one client, they
were immediately assigned to do a new job for another client.
On 16 February 2000, the HRAD Manager of INNODATA wrote
petitioners informing them of their last day of work. The letter
reads:
RE: End of Contract
Date: February 16, 2000
Please be informed that your employment ceases effective at
the end of the close of business hours on February 16, 2000. 5
According to INNODATA, petitioners’ employment already
ceased due to the end of their contract.
On 22 May 2000, petitioners filed a Complaint6 for illegal
dismissal and damages against respondents. Petitioners
claimed that they should be considered regular employees since
their positions as formatters were necessary and desirable to the
usual business of INNODATA as an encoding, conversion and
data processing company. Petitioners also averred that the
decisions in Villanueva v. National Labor Relations
Commission7 and Servidad v. National Labor Relations
Commission,8 in which the Court already purportedly ruled "that
the nature of employment at Innodata Phils., Inc. is
regular,"9 constituted stare decisis to the present case.
Petitioners finally argued that they could not be considered
project employees considering that their employment was not
coterminous with any project or undertaking, the termination of
which was predetermined.
On the other hand, respondents explained that INNODATA was
engaged in the business of data processing, typesetting,
indexing, and abstracting for its foreign clients. The bulk of the
work was data processing, which involved data encoding. Data
encoding, or the typing of data into the computer, included pre-
encoding, encoding 1 and 2, editing, proofreading, and
scanning. Almost half of the employees of INNODATA did data
encoding work, while the other half monitored quality control.
Due to the wide range of services rendered to its clients,
INNODATA was constrained to hire new employees for a fixed
period of not more than one year. Respondents asserted that
petitioners were not illegally dismissed, for their employment
was terminated due to the expiration of their terms of
employment. Petitioners’ contracts of employment with
INNODATA were for a limited period only, commencing on 6
September 1999 and ending on 16 February
2000.10 Respondents further argued that petitioners were
estopped from asserting a position contrary to the contracts
which they had knowingly, voluntarily, and willfully agreed to or
entered into. There being no illegal dismissal, respondents
likewise maintained that petitioners were not entitled to
reinstatement and backwages.
On 17 October 2000, the Labor Arbiter11 issued its
Decision12 finding petitioners’ complaint for illegal dismissal and
damages meritorious. The Labor Arbiter held that as formatters,
petitioners occupied jobs that were necessary, desirable, and
indispensable to the data processing and encoding business of
INNODATA. By the very nature of their work as formatters,
petitioners should be considered regular employees of
INNODATA, who were entitled to security of tenure. Thus, their
termination for no just or authorized cause was illegal. In the
end, the Labor Arbiter decreed:
FOREGOING PREMISES CONSIDERED, judgment is hereby
rendered declaring complainants’ dismissal illegal and ordering
respondent INNODATA PHILS. INC./INNODATA
CORPORATION to reinstate them to their former or equivalent
position without loss of seniority rights and benefits. Respondent
company is further ordered to pay complainants their full
backwages plus ten percent (10%) of the totality thereof as
attorney’s fees. The monetary awards due the complainants as
of the date of this decision are as follows:
A. Backwages
1. Cherry J. Price
2/17/2000 – 10/17/2000 at 223.50/day
P5,811.00/mo/ x 8 mos. P46,488.00
2. Stephanie Domingo 46,488.00
(same computation)
3. Lolita Arbilera 46,488.00
(same computation)
Total Backwages P139,464.00
B. Attorney’s fees (10% of total award) 13,946.40
Total Award P153,410.40
Respondent INNODATA appealed the Labor Arbiter’s Decision
to the NLRC. The NLRC, in its Decision dated 14 December
2001, reversed the Labor Arbiter’s Decision dated 17 October
2000, and absolved INNODATA of the charge of illegal
dismissal.
The NLRC found that petitioners were not regular employees,
but were fixed-term employees as stipulated in their respective
contracts of employment. The NLRC applied Brent School, Inc.
v. Zamora13 and St. Theresa’s School of Novaliches Foundation
v. National Labor Relations Commission,14 in which this Court
upheld the validity of fixed-term contracts. The determining
factor of such contracts is not the duty of the employee but the
day certain agreed upon by the parties for the commencement
and termination of the employment relationship. The NLRC
observed that the petitioners freely and voluntarily entered into
the fixed-term employment contracts with INNODATA. Hence,
INNODATA was not guilty of illegal dismissal when it terminated
petitioners’ employment upon the expiration of their contracts on
16 February 2000.
The dispositive portion of the NLRC Decision thus reads:
WHEREFORE, premises considered, the decision appealed
from is hereby REVERSED and SET ASIDE and a new one
entered DISMISSING the instant complaint for lack of merit.15
The NLRC denied petitioners’ Motion for Reconsideration in a
Resolution dated 28 June 2002.16
In a Petition for Certiorari under Rule 65 of the Rules of Court
filed before the Court of Appeals, petitioners prayed for the
annulment, reversal, modification, or setting aside of the
Decision dated 14 December 2001 and Resolution dated 28
June 2002 of the NLRC.lawphil.net
On 25 September 2006, the Court of Appeals promulgated its
Decision sustaining the ruling of the NLRC that petitioners were
not illegally dismissed.
The Court of Appeals ratiocinated that although this Court
declared in Villanueva and Servidad that the employees of
INNODATA working as data encoders and abstractors were
regular, and not contractual, petitioners admitted entering into
contracts of employment with INNODATA for a term of only one
year and for a project called Earthweb. According to the Court of
Appeals, there was no showing that petitioners entered into the
fixed-term contracts unknowingly and involuntarily, or because
INNODATA applied force, duress or improper pressure on them.
The appellate court also observed that INNODATA and
petitioners dealt with each other on more or less equal terms,
with no moral dominance exercised by the former on latter.
Petitioners were therefore bound by the stipulations in their
contracts terminating their employment after the lapse of the
fixed term.
The Court of Appeals further expounded that in fixed-term
contracts, the stipulated period of employment is governing and
not the nature thereof. Consequently, even though petitioners
were performing functions that are necessary or desirable in the
usual business or trade of the employer, petitioners did not
become regular employees because their employment was for a
fixed term, which began on 16 February 1999 and was
predetermined to end on 16 February 2000.
The appellate court concluded that the periods in petitioners’
contracts of employment were not imposed to preclude
petitioners from acquiring security of tenure; and, applying the
ruling of this Court in Brent, declared that petitioners’ fixed-term
employment contracts were valid. INNODATA did not commit
illegal dismissal for terminating petitioners’ employment upon the
expiration of their contracts.
The Court of Appeals adjudged:
WHEREFORE, the instant petition is hereby DENIED and the
Resolution dated December 14, 2001 of the National Labor
Relations Commission declaring petitioners were not illegally
dismissed is AFFIRMED.17
The petitioners filed a Motion for Reconsideration of the afore-
mentioned Decision of the Court of Appeals, which was denied
by the same court in a Resolution dated 15 June 2007.
Petitioners are now before this Court via the present Petition for
Review on Certiorari, based on the following assignment of
errors:
I.
THE HONORABLE COURT OF APPEALS COMMITTED
SERIOUS ERROR OF LAW AND GRAVE ABUSE OF
DISCRETION WHEN IT DID NOT APPLY THE SUPREME
COURT RULING IN THE CASE OF NATIVIDAD & QUEJADA
THAT THE NATURE OF EMPLOYMENT OF RESPONDENTS
IS REGULAR NOT FIXED, AND AS SO RULED IN AT LEAST
TWO OTHER CASES AGAINST INNODATA PHILS. INC.
II.
THE HONORABLE COURT OF APPEALS COMMITTED
SERIOUS ERROR OF LAW IN RULING THAT THE
STIPULATION OF CONTRACT IS GOVERNING AND NOT
THE NATURE OF EMPLOYMENT AS DEFINED BY LAW.
III.
THE HONORABLE COURT OF APPEALS COMMITTED
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION WHEN IT DID NOT CONSIDER THE
EVIDENCE ON RECORD SHOWING THAT THERE IS CLEAR
CIRCUMVENTION OF THE LAW ON SECURITY OF TENURE
THROUGH CONTRACT MANIPULATION.18
The issue of whether petitioners were illegally dismissed by
respondents is ultimately dependent on the question of whether
petitioners were hired by INNODATA under valid fixed-term
employment contracts.
After a painstaking review of the arguments and evidences of
the parties, the Court finds merit in the present Petition. There
were no valid fixed-term contracts and petitioners were regular
employees of the INNODATA who could not be dismissed
except for just or authorized cause.
The employment status of a person is defined and prescribed by
law and not by what the parties say it should be.19 Equally
important to consider is that a contract of employment is
impressed with public interest such that labor contracts must
yield to the common good.20 Thus, provisions of applicable
statutes are deemed written into the contract, and the parties are
not at liberty to insulate themselves and their relationships from
the impact of labor laws and regulations by simply contracting
with each other.21
Regular employment has been defined by Article 280 of the
Labor Code, as amended, which reads:
Art. 280. Regular and Casual Employment. The provisions of
written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an employment
shall be deemed to be regular where the employee has been
engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer, except
where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been
determined at the time of engagement of the employee or where
the work or services to be performed is seasonal in nature and
employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered
by the preceding paragraph. Provided, That, any employee who
has rendered at least one year of service, whether such service
is continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his
employment shall continue while such activity exists.
(Underscoring ours).
Based on the afore-quoted provision, the following employees
are accorded regular status: (1) those who are engaged to
perform activities which are necessary or desirable in the usual
business or trade of the employer, regardless of the length of
their employment; and (2) those who were initially hired as
casual employees, but have rendered at least one year of
service, whether continuous or broken, with respect to the
activity in which they are employed.
Undoubtedly, petitioners belong to the first type of regular
employees.
Under Article 280 of the Labor Code, the applicable test to
determine whether an employment should be considered regular
or non-regular is the reasonable connection between the
particular activity performed by the employee in relation to the
usual business or trade of the employer.22
In the case at bar, petitioners were employed by INNODATA on
17 February 1999 as formatters. The primary business of
INNODATA is data encoding, and the formatting of the data
entered into the computers is an essential part of the process of
data encoding. Formatting organizes the data encoded, making
it easier to understand for the clients and/or the intended end
users thereof. Undeniably, the work performed by petitioners
was necessary or desirable in the business or trade of
INNODATA.
However, it is also true that while certain forms of employment
require the performance of usual or desirable functions and
exceed one year, these do not necessarily result in regular
employment under Article 280 of the Labor Code.23 Under the
Civil Code, fixed-term employment contracts are not limited, as
they are under the present Labor Code, to those by nature
seasonal or for specific projects with predetermined dates of
completion; they also include those to which the parties by free
choice have assigned a specific date of termination.24
The decisive determinant in term employment is the day certain
agreed upon by the parties for the commencement and
termination of their employment relationship, a day certain being
understood to be that which must necessarily come, although it
may not be known when. Seasonal employment and
employment for a particular project are instances of employment
in which a period, where not expressly set down, is necessarily
implied.25
Respondents maintain that the contracts of employment entered
into by petitioners with INNDOATA were valid fixed-term
employment contracts which were automatically terminated at
the expiry of the period stipulated therein, i.e., 16 February 2000.
The Court disagrees.
While this Court has recognized the validity of fixed-term
employment contracts, it has consistently held that this is the
exception rather than the general rule. More importantly, a fixed-
term employment is valid only under certain circumstances.
In Brent, the very same case invoked by respondents, the Court
identified several circumstances wherein a fixed-term is
an essential and natural appurtenance, to wit:
Some familiar examples may be cited of employment contracts
which may be neither for seasonal work nor for specific projects,
but to which a fixed term is an essential and natural
appurtenance: overseas employment contracts, for one, to
which, whatever the nature of the engagement, the concept of
regular employment with all that it implies does not appear ever
to have been applied, Article 280 of the Labor Code
notwithstanding; also appointments to the positions of dean,
assistant dean, college secretary, principal, and other
administrative offices in educational institutions, which are by
practice or tradition rotated among the faculty members, and
where fixed terms are a necessity without which no reasonable
rotation would be possible. Similarly, despite the provisions of
Article 280, Policy Instructions No. 8 of the Minister of Labor
implicitly recognize that certain company officials may be elected
for what would amount to fixed periods, at the expiration of
which they would have to stand down, in providing that these
officials, "x x may lose their jobs as president, executive vice-
president or vice president, etc. because the stockholders or the
board of directors for one reason or another did not reelect
them."26
As a matter of fact, the Court, in its oft-quoted decision in Brent,
also issued a stern admonition that where, from the
circumstances, it is apparent that the period was imposed to
preclude the acquisition of tenurial security by the employee,
then it should be struck down as being contrary to law, morals,
good customs, public order and public policy.27
After considering petitioners’ contracts in their entirety, as well
as the circumstances surrounding petitioners’ employment at
INNODATA, the Court is convinced that the terms fixed therein
were meant only to circumvent petitioners’ right to security of
tenure and are, therefore, invalid.
The contracts of employment submitted by respondents are
highly suspect for not only being ambiguous, but also for
appearing to be tampered with.
Petitioners alleged that their employment contracts with
INNODATA became effective 16 February 1999, and the first
day they reported for work was on 17 February 1999. The
Certificate of Employment issued by the HRAD Manager of
INNODATA also indicated that petitioners Price and Domingo
were employed by INNODATA on 17 February 1999.
However, respondents asserted before the Labor Arbiter that
petitioners’ employment contracts were effective only on 6
September 1999. They later on admitted in their Memorandum
filed with this Court that petitioners were originally hired on 16
February 1999 but the project for which they were employed was
completed before the expiration of one year. Petitioners were
merely rehired on 6 September 1999 for a new project. While
respondents submitted employment contracts with 6 September
1999 as beginning date of effectivity, it is obvious that in one of
them, the original beginning date of effectivity, 16 February
1999, was merely crossed out and replaced with 6 September
1999. The copies of the employment contracts submitted by
petitioners bore similar alterations.
The Court notes that the attempt to change the beginning date of
effectivity of petitioners’ contracts was very crudely done. The
alterations are very obvious, and they have not been initialed by
the petitioners to indicate their assent to the same. If the
contracts were truly fixed-term contracts, then a change in the
term or period agreed upon is material and would already
constitute a novation of the original contract.
Such modification and denial by respondents as to the real
beginning date of petitioners’ employment contracts render the
said contracts ambiguous. The contracts themselves state that
they would be effective until 16 February 2000 for a period of
one year. If the contracts took effect only on 6 September 1999,
then its period of effectivity would obviously be less than one
year, or for a period of only about five months.
Obviously, respondents wanted to make it appear that
petitioners worked for INNODATA for a period of less than one
year. The only reason the Court can discern from such a move
on respondents’ part is so that they can preclude petitioners
from acquiring regular status based on their employment for one
year. Nonetheless, the Court emphasizes that it has already
found that petitioners should be considered regular employees
of INNODATA by the nature of the work they performed as
formatters, which was necessary in the business or trade of
INNODATA. Hence, the total period of their employment
becomes irrelevant.
Even assuming that petitioners’ length of employment is
material, given respondents’ muddled assertions, this Court
adheres to its pronouncement in Villanueva v. National Labor
Relations Commission,28 to the effect that where a contract of
employment, being a contract of adhesion, is ambiguous, any
ambiguity therein should be construed strictly against the party
who prepared it. The Court is, thus, compelled to conclude that
petitioners’ contracts of employment became effective on 16
February 1999, and that they were already working continuously
for INNODATA for a year.
Further attempting to exonerate itself from any liability for illegal
dismissal, INNODATA contends that petitioners were project
employees whose employment ceased at the end of a specific
project or undertaking. This contention is specious and devoid of
merit.
In Philex Mining Corp. v. National Labor Relations
Commission,29 the Court defined "project employees" as those
workers hired (1) for a specific project or undertaking, and
wherein (2) the completion or termination of such project has
been determined at the time of the engagement of the
employee.
Scrutinizing petitioners’ employment contracts with INNODATA,
however, failed to reveal any mention therein of what specific
project or undertaking petitioners were hired for. Although the
contracts made general references to a "project," such project
was neither named nor described at all therein. The conclusion
by the Court of Appeals that petitioners were hired for the
Earthweb project is not supported by any evidence on record.
The one-year period for which petitioners were hired was simply
fixed in the employment contracts without reference or
connection to the period required for the completion of a project.
More importantly, there is also a dearth of evidence that such
project or undertaking had already been completed or
terminated to justify the dismissal of petitioners. In fact,
petitioners alleged - and respondents failed to dispute that
petitioners did not work on just one project, but continuously
worked for a series of projects for various clients of INNODATA.
In Magcalas v. National Labor Relations Commission,30 the
Court struck down a similar claim by the employer therein that
the dismissed employees were fixed-term and project
employees. The Court here reiterates the rule that all doubts,
uncertainties, ambiguities and insufficiencies should be resolved
in favor of labor. It is a well-entrenched doctrine that in illegal
dismissal cases, the employer has the burden of proof. This
burden was not discharged in the present case.
As a final observation, the Court also takes note of several other
provisions in petitioners’ employment contracts that display utter
disregard for their security of tenure. Despite fixing a period or
term of employment, i.e., one year, INNODATA reserved the
right to pre-terminate petitioners’ employment under the
following circumstances:
6.1 x x x Further should the Company have no more need for the
EMPLOYEE’s services on account of completion of the project,
lack of work (sic) business losses, introduction of new production
processes and techniques, which will negate the need for
personnel, and/or overstaffing, this contract maybe pre-
terminated by the EMPLOYER upon giving of three (3) days
notice to the employee.
xxxx
6.4 The EMPLOYEE or the EMPLOYER may pre-terminate this
CONTRACT, with or without cause, by giving at least Fifteen –
(15) [day] notice to that effect. Provided, that such pre-
termination shall be effective only upon issuance of the
appropriate clearance in favor of the said EMPLOYEE.
(Emphasis ours.)
are repugnant to the basic tenet in labor law that no employee
may be terminated except for just or authorized cause.
Under Section 3, Article XVI of the Constitution, it is the policy of
the State to assure the workers of security of tenure and free
them from the bondage of uncertainty of tenure woven by some
employers into their contracts of employment. This was exactly
the purpose of the legislators in drafting Article 280 of the Labor
Code – to prevent the circumvention by unscrupulous employers
of the employee’s right to be secure in his tenure by
indiscriminately and completely ruling out all written and oral
agreements inconsistent with the concept of regular
employment.
In all, respondents’ insistence that it can legally dismiss
petitioners on the ground that their term of employment has
expired is untenable. To reiterate, petitioners, being regular
employees of INNODATA, are entitled to security of tenure. In
the words of Article 279 of the Labor Code:
ART. 279. Security of Tenure. – In cases of regular employment,
the employer shall not terminate the services of an employee
except for a just cause or when authorized by this Title. An
employee who is unjustly dismissed from work shall be entitled
to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and
to his other benefits or their monetary equivalent computed from
the time his compensation was withheld from him up to the time
of his actual reinstatement.
By virtue of the foregoing, an illegally dismissed employee is
entitled to reinstatement without loss of seniority rights and other
privileges, with full back wages computed from the time of
dismissal up to the time of actual reinstatement.
Considering that reinstatement is no longer possible on the
ground that INNODATA had ceased its operations in June 2002
due to business losses, the proper award is separation pay
equivalent to one month pay31 for every year of service, to be
computed from the commencement of their employment up to
the closure of INNODATA.
The amount of back wages awarded to petitioners must be
computed from the time petitioners were illegally dismissed until
the time INNODATA ceased its operations in June 2002.32
Finally, unless they have exceeded their authority, corporate
officers are, as a general rule, not personally liable for their
official acts, because a corporation, by legal fiction, has a
personality separate and distinct from its officers, stockholders
and members. Although as an exception, corporate directors
and officers are solidarily held liable with the corporation, where
terminations of employment are done with malice or in bad
faith,33 in the absence of evidence that they acted with malice or
bad faith herein, the Court exempts the individual respondents,
Leo Rabang and Jane Navarette, from any personal liability for
the illegal dismissal of petitioners.
WHEREFORE, the Petition for Review on Certiorari
is GRANTED. The Decision dated 25 September 2006 and
Resolution dated 15 June 2007 of the Court of Appeals in CA-
G.R. SP No. 72795are hereby REVERSED and SET ASIDE.
RespondentInnodata Philippines, Inc./Innodata Corporation
is ORDERED to pay petitioners Cherry J. Price, Stephanie G.
Domingo, and Lolita Arbilera: (a) separation pay, in lieu of
reinstatement, equivalent to one month pay for every year of
service, to be computed from the commencement of their
employment up to the date respondent Innodata Philippines,
Inc./Innodata Corporation ceased operations; (b) full backwages,
computed from the time petitioners’ compensation was withheld
from them up to the time respondent Innodata Philippines,
Inc./Innodata Corporation ceased operations; and (3) 10% of the
total monetary award as attorney’s fees. Costs against
respondent Innodata Philippines, Inc./Innodata Corporation.

Pursuant to the afore-quoted provisions, petitioners have no
right at all to expect security of tenure, even for the supposedly
one-year period of employment provided in their contracts,
because they can still be pre-terminated (1) upon the completion
of an unspecified project; or (2) with or without cause, for as long
as they are given a three-day notice. Such contract provisions
Petitioners are further entitled to attorney’s fees equivalent to
10% of the total monetary award herein, for having been forced
to litigate and incur expenses to protect their rights and interests
herein.
 A. PROBATIONARY
G.R. No. L-44360 March 31, 1977
REGINA S. BIBOSO, NENITA B. BISO, FE CUBIN, MAGELENDE H.
DEMEGILLDO, EMERITA O. PANALIGAN, NILDA P. TAYO, NELDA
TORMON, ARDE M. VALENCIANO, MA. LINDA E. VILLA and the
VICMICO SUPERVISORY EMPLOYEES ASSOCIATION
(VICSEA), petitioners,
vs.
VICTORIAS MILLING COMPANY, INC. and the OFFICE OF THE
PRESIDENT OF THE PHILIPPINES, respondents.
FERNANDO, J.: The present Constitution of expanding the mandate of
protection to labor specifically casts on the State the obligation to assure
workers security of tenure. 1 The decisive question in the controversy now
before this Court is wether the mantle of such guarantee covers the case
of the nine petitioners, whose employment admittedly were on a basis. It
was the rulling of the respondent Presidential Executive Assistant Jacobo
C. Clave that its benificent effects could not be invoked by them that is
assailed before this Court. While they are pleading by captioned petition
for review, this Court considered it as a cetiorari proceeding in view on his
part, the issue of an alleged unfair labor pratice indulged in by private
respondent public official, who acted serious accusation against
respondent public, who acted on behalf of the Office of the President. The
petition is not impressed with the merit.
The order of respondent Jacobo C. Clave, who asss Presidential
Executive Assistant acted on an appeal by private respondent from a
decision of the Secretary of Labor dismissed the complaint of petitioners
for reinstatement. He noted at the outset of such challenged order:
"Individual complainants herein were employed by respondent as
academic teachers in respondent's school, the St. Mary Mazzarello
School, which is operated by respondent. On or about April 14, 1973,
complainants were notified by the school Directress that they
(complainants) were not going to be rehired for the school year 1973-
74.äüsl•älFº The necessary report for such action was filed by respondent
with the Department of Labor on May 28, 1973, informing that
complainants' services were thus terminated after the business hours on
June 30, 1973. 2 He then pointed out that petitioners were quite
successful with the Arbitrator, the former National Labor Relations
Commission under Presidential Decree No. 21, and the Secretary of
Labor. It was private respondent that appealed to the Office of the
President. After which, his order went into the basic issue thus: "This
Office had examined and analyzed the various contracts Identified during
the hearing below and admitted by the complainants to have been signed
by them which clearly show that the complainants were hired as teachers
of the school on a year-to-year basis and that they reapplied before the
expiration of the contracts and/or signed new ones, as the case may be, if
the school decided to renew the same. None of the complainants who
testified disputed the fact that they all signed Identical contracts of
employment which provided for a definite period of employment which
provided for a definite period of employment expiring June 30 of the
particular school year. Thus, under 'Status of Employment' of said
contracts, the complainants were hired as 'temporary as and when
required until June 30, 1973,' or whatever year the contract is supposed
to terminate. To he specific, Exhs. '4', '5' and '6' signed by complainant
Arde Valenciano show that she was hired on a yearly basis for school
year 1970-71, and 1971-72. The same is true with Exhs. '13' and '14'
signed by Linda Villa; Exhs. '16', '17','18' and '19', signed by Emerita 0.
Panaligan; and Exhs.'22' and '23', signed by Magelinde Demegillo all
showing that they were hired on a year-to-year basis. 3 Reference was
then made to "the official stand of the Department of Labor respecting
recognition by the Labor Code of the policy of the Bureau of Private
Schools settling the maximum probationary period for teachers at three
years. Of pertinence hereto is the official letter dated March 12, 1975, of
Undersecretary of Labor Amado G. Inciong to the President of the
Coordinating Council of Private Educational Associations touching on the
probationary period for teachers at three years, to wit: ... This refers to
your letter of 5 March 1975 in connection with the probationary period for
teachers. The Labor Code does not set the maximum probationary period
at six months. Under the Labor Code, the probationary period is the
period required to learn a skill, trade. occupation or profession. In other
words, the Labor Code recognizes the policy of the Bureau of Private
Schools settling the maximum probationary period for teachers at three
years. 4 It was likewise made plain therein that as regards the allegation
of unfair labor practice, the Office of the President "finds the same
untenable. 5
The petition, as noted at the outset, cannot proper.
1. It is to be noted that in Philippine Air Lines, Inc. v. Philippine Air Lines
Employees Association, 6 after reference was made to the specific
provision in the present Constitution not found in the 1935 Charter
requiring the State to assure workers security of tenure, it was stressed
that there should be fealty to [such] constitutional command. 7 Such a
mandate was construed in the subsequent case of Almira v. B. F.
Goodrich Philippines, Inc., 8 that even in cases affording justification for
disciplinary action to be taken by management against an employee,
"where a penalty less punitive [than dismissal] would suffice, whatever
missteps may be committed by [the latter ought not to be visited with a
consequence so severe." 9 The opinion then went on to state: "It is not
only because of the law's concern for the workingman. There is, in
addition, his family to consider. Unemployment brings untold hardships
and sorrows on those dependent on the wage-earner. The misery and
pain attendant on the loss of jobs then could be avoided if there be
acceptance of the view that under all the circumstance of this case,
petitioners should not be deprived of their means of livelihood. Nor is this
to condone what had been paid. From the strictly juridical standpoint, it
cannot be too strongly stressed, to follow Davis in his masterly work,
Discretionary Justice, that were a decision may be made to rest on
informed judgment rather than rigid rules, all the equities of the case must
be accorded their due weight. Finally, labor law determinations, to quote
from Bultmann, should be not secundum rationem but also secundum
caritatem. " 10 That is a doctrine to which this case is whether it applies to
the case of petitioner. The Office of the President answered in the
negative. Thus it exercised its discretion. It cannot be said that an abuse
could rightfully be imputed by it, much less one that is of such gravity that
calls fir judicial correction. What is decisive is that petitioners were well
aware all the time that their tenure was for a limited duration. Upon its
termination, both parties to the employment relationship were free to
renew it or to let it lapse. It was the decision of private respondent that it
should cease. The Office of the President could find nothing objectionable
when it determined that the will of the parties as to the limited duration
thereof should be respected. That was all that was decided.
2. This is by no means to assert that the security of tenure protection of
the constitution does not apply t probationary employees. The Labor code
has wisely provided for such a case thus: "The termination of employment
of probationary employees and those employed with a fixed period shall
be subject to such regulations as the Secretary of labor may priscribe to
prevent the circum\vention of the right of the employees to be secured in
their employment as provided herein." 11 There is no question here, as
noted in the assailed order of Presidential Executive Assistant Clave, that
petitioners did not enjoy a permanent status. During such period they
could remian in their positions and any circumvention of their of the rights,
in accordance with the statutory statutory scheme, subject to inquirey and
therafter correction by the Department of Labor. Thus there was the
safeguard as to the duration of their employment being respected. To that
extent, their tenure was secure. The moment, however, the period expired
in accordance with contracts freely entered into, they could no longer
invoke the constitutional protection. To repeat, that was what transpired in
this case.äüsl•älFº The ruling of the Office of the President, now assailed,
is not without support in law.
3. It would be a different matter of course had the failure to renew the
contracts of petitioners been justly attributable to their joining petitioner
labor union, Vicmico Supervisoyr Employees Association. That would be
a clear case of an unfair labor practice. 12 There was such an allegation
by them. The Office of the President found "the same untenable." 13Nor
did it stop there. It explained why: "The records disclose, and it is a fact
admitted by the union, that the teachers of Don Bosco Technical Institute,
also run and operated by respondent, are all members of the VICSEA.
The allegation that the Company refused re-employment of complainants
simply because they joined the VICSEA isnegated by the fact that in a
much bigger school, the Don bosco Technical Institute, respondent has
allowed the members of the faculty to join the CIVSEA without any
serious objection or reprisal. If at all the respondent had objected to the
teachers of the St. Mary Mazzarello school being considered within the
same bargaining unit as the otgher employees of the company, it was for
the reason that the exemption from coverage of employes hired for a
definite period of employment, like the complainants herein, who were
indisputably shown that the term of their contract of employment prior to
the time that they become permanent under the Manual of the Bureau of
Private Schools, was temporary in nature or for a definite period." 14
In the comment submitted on behalf of respondent public official,
reference was made to the admission by individual petitioners that before
they joined such labor union, "they had serious differences with the school
officials respecting their methods of teaching and conduct in
school." 15 That was followed by a recital of what was testified to by some
of the petitioners. Then came this portion of the comment: "The above-
quoted testimonies of individual petitioners clearly show that their
competence, efficiency, loyalty and integrity were in question long before
they became members of petitioner union VICSEA and it was because of
these failings on their part that their contracts to teach were not renewed.
This also shown by Exhibit 39, ... (3) Some of the teachers retained to
teach in the school were also members of petitioner union VICSEA.... If
respondent VICMICO was against individual petitioners joining the union,
why did it not terminate the employment of these two teachers as well?
(4) Don Bosco of Bacolod City, another school run by respondent
VICMICO, is manned by teachers who are members of petitioner union
VICSEA ... Considering "he foregoing circumstances, it is difficult to
believe the submission of individual petitioners that they were terminated
from employment because they joined petitioner union VICSEA It would
appear that it was the other way around. Knowing that their contracts
were about to expire and that they would probably not be extended new
ones, petitioners sought membership in petitioner union VICSEA to
render it more difficult for respondent VICMICO to remove them from their
teaching positions. This is indicated by the fact that petitioners became
members of petitioner union VICSEA only in January, 1973. Before this
date, individual petitioners were already being closely observed to gauge
their performance for purposes of determining who shall be accorded
permanent status. Thus, individual petitioners knew that they would either
be made permanent or will be dropped from the faculty roster at the end
of the school year 1972-73. So they joined the union. That the purpose of
individual petitioners in joining the union is to avert their forthcoming
removal from the faculty roster was impliedly admitted by one of the
individual petitioners in her testimony: 'Q — But according to you,
precisely, the reason why you joined the union was because it would be
very hard for the school toterminate you if you are already a member of
the union, did you not say that? A — I said it!" 16 The memorandum for
petitioners did stress testimony coming from the Directress of the school
in question to show that the refusal to retain them in employment was due
to their membership in the union. Certainly, it cannot be assumed that the
Office of the President in the evaluation of the conflicting evidence did not
take it into consideration. The conclusion it reached was adverse to
petitioners. It is now well-settled that the certiorari jurisdiction of this
Tribunal extends only to a grave abuse of discretion. There must be the
element of arbitrariness or caprice. In the light of what appears of record,
the conclusion that the decision reached by it is tainted by such infirmity is
unwarranted.
WHEREFORE, the petition for certiorari is dismissed.
G.R. No. 72222 January 30, 1989
INTERNATIONAL CATHOLIC MIGRATION COMMISSION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and BERNADETTE
GALANG, respondents.
FERNAN, C.J.:
The issue to be resolved in the instant case is whether or not an
employee who was terminated during the probationary period of her
employment is entitled to her salary for the unexpired portion of her six-
month probationary employment.
The facts of the case are undisputed.
Petitioner International Catholic Migration Commission (ICMC), a non-
profit organization dedicated to refugee service at the Philippine Refugee
Processing Center in Morong, Bataan engaged the services of private
respondent Bernadette Galang on January 24, 1983 as a probationary
cultural orientation teacher with a monthly salary of P2,000.00.
Three (3) months thereafter, or on April 22, 1983, private respondent was
informed, orally and in writing, that her services were being terminated for
her failure to meet the prescribed standards of petitioner as reflected in
the performance evaluation of her supervisors during the teacher
evaluation program she underwent along with other newly-hired
personnel.
Despite her termination, records show that private respondent did not
leave the ICMC refugee camp at Morong, Bataan, but instead stayed
thereat for a few days before leaving for Manila, during which time, she
was observed by petitioner to be allegedly acting strangely.
On July 24, 1983, private respondent returned to Morong, Bataan on
board the service bus of petitioner to accomplish the clearance
requirements. In the evening of that same day, she was found at the
Freedom Park of Morong wet and shivering from the rain and acting
bizarrely. She was then taken to petitioner's hospital where she was given
the necessary medical attention.
Two (2) days later, or on July 26, 1983, she was taken to her residence in
Manila aboard petitioner's service bus. Thru a letter, her father expressed
appreciation to petitioner for taking care of her daughter. On that same
day, her father received, on her behalf, the proportionate amount of her
13th month pay and the equivalent of her two week pay.
On August 22, 1983, private respondent filed a complaint 1 for illegal
dismissal, unfair labor practice and unpaid wages against petitioner with
the then Ministry of Labor and Employment, praying for reinstatement with
backwages, exemplary and moral damages.
On October 8, 1983, after the parties submitted their respective position
papers and other pleadings, Labor Arbiter Pelagio A. Carpio rendered his
decision dismissing the complaint for illegal dismissal as well as the
complaint for moral and exemplary damages but ordering the petitioner to
pay private respondent the sum of P6,000.00 as payment for the last
three (3) months of the agreed employment period pursuant to her verbal
contract of employment. 2
Both parties appealed the decision to the National Labor Relations
Commission. In her appeal, private respondent contended that her
dismissal was illegal considering that it was effected without valid cause.
On the other hand, petitioner countered that private respondent who was
employed for a probationary period of three (3) months could not rightfully
be awarded P6,000.00 because her services were terminated for failure
to qualify as a regular employee in accordance with the reasonable
standards prescribed by her employer.
On August 22, 1985, the NLRC, by a majority vote of Commissioners
Guillermo C. Medina and Gabriel M. Gatchalian, sustained the decision of
the Labor Arbiter and thus dismissed both appeals for lack of merit.
Commissioner Miguel Varela, on the other hand, dissented and voted for
the reversal of the Labor Arbiter's decision for lack of legal basis
considering that the termination of services of complainant, now private
respondent, was effected during her probationary period on valid grounds
made known to her. 3
Dissatisfied, petitioner filed the instant petition.
Petitioner maintains that private respondent is not entitled to the award of
salary for the unexpired three-month portion of the probationary period
since her services were terminated during such period when she failed to
qualify as a regular employee in accordance with the reasonable
standards prescribed by petitioner; that having been terminated on valid
grounds during her probationary period, or specifically on April 24, 1983,
petitioner is not liable to private respondent for services not rendered
during the unexpired three-month period, otherwise, unjust enrichment of
her part would result; that under Article 282 (now Article 281) of the Labor
Code, if the employer finds that the probationary employees does not
meet the standards of employment set for the position, the probationary
employee may be terminated at any time within the six-month period,
without need of exhausting raid entire six-month term. 4
The Solicitor General, on the other hand, contends that a probationary
employment for six (6) months, as in the case of herein private
respondent, is an employment for a definite period of time and, as such,
the employer is duty-bound to allow the probationary employee to work
until the termination of the probationary employment before her re-
employment could be refused; that when petitioner disrupted the
probationary employment of private respondent, without giving her the
opportunity to improve her method of instruction within the said period, it
held itself liable to pay her salary for the unexpired portion of such
employment by way of damages pursuant to the general provisions of civil
law that he who in any manner contravenes the terms of his obligation
without any valid cause shall be liable for damages; 5 that, as held
in Madrigal v. Ogilvie, et al, 6 the damages so awarded are equivalent to
her salary for the unexpired portion of her employment for a fixed period. 7
We find for petitioner.
There is justifiable basis for the reversal of public respondent's award of
salary for the unexpired three-month portion of private respondent's six-
month probationary employment in the light of its express finding that
there was no illegal dismissal. There is no dispute that private respondent
was terminated during her probationary period of employment for failure
to qualify as a regular member of petitioner's teaching staff in accordance
with its reasonable standards. Records show that private respondent was
found by petitioner to be deficient in classroom management, teacher-
student relationship and teaching techniques. 8 Failure to qualify as a
regular employee in accordance with the reasonable standards of the
employer is a just cause for terminating a probationary employee
specifically recognized under Article 282 (now Article 281) of the Labor
Code which provides thus:
ART. 281. Probationary employment. — Probationary employment shall
not exceed six months from the date the employee started working,
unless it is covered by an apprenticeship agreement stipulating a longer
period. The services of an employer who has been engaged in a
probationary basis may be terminated for a just cause or when he fails to
qualify as a regular employer in accordance with reasonable standard
made known by the employer to the employer at the time of his
engagement. An employee who is allowed to work after a probationary
period shall be considered a regular employee.(Emphasis supplied.)
It must be noted that notwithstanding the finding of legality of the
termination of private respondent, public respondent justified the award of
salary for the unexpired portion of the probationary employment on the
ground that a probationary employment for six (6) months is an
employment for a "definite period" which requires the employer to exhaust
the entire probationary period to give the employee the opportunity to
meet the required standards.
The legal basis of public respondent is erroneous. A probationary
employee, as understood under Article 282 (now Article 281) of the Labor
Code, is one who is on trial by an employer during which the employer
determines whether or not he is qualified for permanent employment. A
probationary appointment is made to afford the employer an opportunity
to observe the fitness of a probationer while at work, and to ascertain
whether he will become a proper and efficient employee. 9 The word
"probationary", as used to describe the period of employment, implies the
purpose of the term or period, but not its length. 10
Being in the nature of a "trial period" 11 the essence of a probationary
period of employment fundamentally lies in the purpose or objective
sought to be attained by both the employer and the employee during said
period. The length of time is immaterial in determining the correlative
rights of both in dealing with each other during said period. While the
employer, as stated earlier, observes the fitness, propriety and efficiency
of a probationer to ascertain whether he is qualified for permanent
employment, the probationer, on the other, seeks to prove to the
employer, that he has the qualifications to meet the reasonable standards
for permanent employment.
It is well settled that the employer has the right or is at liberty to choose
who will be hired and who will be denied employment. In that sense, it is
within the exercise of the right to select his employees that the employer
may set or fix a probationary period within which the latter may test and
observe the conduct of the former before hiring him permanently. The
equality of right that exists between the employer and the employee as to
the nature of the probationary employment was aptly emphasized by this
Court in Grand Motor Parts Corporation v. Minister of Labor, et al., 130
SCRA 436 (1984), citing the 1939 case of Pampanga Bus. Co., Inc. v.
Pambusco Employees Union, Inc. 68 Phil. 541, thus:
The right of a laborer to sell his labor to such persons as he may choose
is, in its essence, the same as the right of an employer to purchase labor
from any person whom it chooses. The employer and the employee have
thus an equality of right guaranteed by the Constitution. If the employer
can compel the employee to work against the latter's will, this is servitude.
If the employee can compel the employer to give him work against the
employer's will, this is oppression.
As the law now stands, Article 281 of the Labor Code gives ample
authority to the employer to terminate a probationary employee for a just
cause or 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. There is nothing under Article 281 of the
Labor Code that would preclude the employer from extending a regular or
a permanent appointment to an employee once the employer finds that
the employee is qualified for regular employment even before the
expiration of the probationary period. Conversely, if the purpose sought
by the employer is neither attained nor attainable within the said period,
Article 281 of the Labor Code does not likewise preclude the employer
from terminating the probationary employment on justifiable causes as in
the instant case.
We find unmeritorious, therefore, public respondents argument that the
security of tenure of probationary employees within the period of their
probation, as in the case of herein private respondent, justified the award
of salary for the unexpired portion of her probationary employment. The
termination of private respondent predicated on a just cause negates the
application in this case of the pronouncement in the case of Biboso v.
Victories Milling Co., Inc., 12 on the right of security of tenure of
probationary employees.
Upon inquiry by the then Ministry of Labor and Employment as a
consequence of the illegal dismissal case filed by private respondent
before it, docketed as Case No. NLRC NCR-8-3786-83, it was found that
there was no illegal dismissal involved in the case, hence, the
circumvention of the rights of the probationary employees sought to be
regulated as pointed out in Biboso v. Victorias Milling Co., Inc., 13 is
wanting.
There was no showing, as borne out by the records, that there was
circumvention of the rights of private respondent when she was informed
of her termination. Her dismissal does not appear to us as arbitrary,
fanciful or whimsical. Private respondent was duly notified, orally and in
writing, that her services as cultural orientation teacher were terminated
for failure to meet the prescribed standards of petitioner as reflected in the
performance evaluation conducted by her supervisors during the teacher
evaluating program. The dissatisfaction of petitioner over the performance
of private respondent in this regard is a legitimate exercise of its
prerogative to select whom to hire or refuse employment for the success
of its program or undertaking. More importantly, private respondent failed
to show that there was unlawful discrimination in the dismissal.
It was thus a grave abuse of discretion on the part of public respondent to
order petitioner to pay private respondent her salary for the unexpired
three-month portion of her six-month probationary employment when she
was validly terminated during her probationary employment. To sanction
such action would not only be unjust, but oppressive on the part of the
employer as emphasized in Pampanga Bus Co., Inc., v. Pambusco
Employer Union, Inc. 14
WHEREFORE, in view of the foregoing, the petition is GRANTED. The
Resolution of the National Labor Relations Commission dated August 22,
1985, is hereby REVERSED and SET ASIDE insofar as it ordered
petitioner to pay private respondent her P6,000.00 salary for the
unexpired portion of her six-month probationary employment. No cost.
G.R. No. L-63316 July 31, 1984
ILUMINADA VER BUISER, MA. CECILIA RILLOACUÑA and MA.
MERCEDES P. INTENGAN, petitioners,
vs.
HON. VICENTE LEOGARDO, JR., in his capacity as Deputy Minister
of the Ministry of Labor & Employment, and GENERAL TELEPHONE
DIRECTORY, CO., respondents.
Jimenez, Apolo & Leynes Law Office for petitioners.
The Solicitor General for respondent Deputy Minister.
Abad, Legayada & Associates for private respondent.
GUERRERO, J.:
This is a petition for certiorari seeking to set aside the Order of the Deputy
Minister of Labor and Employment, affirming the Order of the Regional
Director, National Capital Region, in Case No. NCR-STF-5-2851-81,
which dismissed the petitioners' complainant for alleged illegal dismissal
and unpaid commission.
Petitioners were employed by the private respondent GENERAL
TELEPHONE DIRECTORY COMPANY as sales representatives and
charged with the duty of soliciting advertisements for inclusion in a
telephone directory.
The records show that petitioners Iluminada Ver Buiser and Ma.
Mercedes P. Intengan entered into an "Employment Contract (on
Probationary Status)" on May 26, 1980 with private respondent, a
corporation engaged in the business of publication and circulation of the
directory of the Philippine Long Distance Telephone Company. Petitioner
Ma. Cecilia Rillo-Acuna entered into the same employment contract on
June 11, 1980 with the private respondent.
Among others, the "Employment Contract (On Probationary Status)"
included the following common provisions:
l. The company hereby employs the employee as telephone
representative on a probationary status for a period of eighteen (18)
months, i.e. from May 1980 to October 1981, inclusive. It is understood
that darung the probationary period of employment, the Employee may be
terminated at the pleasure of the company without the necessity of giving
notice of termination or the payment of termination pay.
The Employee recognizes the fact that the nature of the telephone sales
representative's job is such that the company would be able to determine
his true character, conduct and selling capabilities only after the
publication of the directory, and that it takes about eighteen (18) months
before his worth as a telephone saw representative can be fully evaluated
inasmuch as the advertisement solicited by him for a particular year are
published in the directory only the following year.
Corollary to this, the private respondent prescribed sales quotas to be
accomplished or met by the petitioners. Failing to meet their respective
sales quotas, the petitioners were dismissed from the service by the
private respondent. The records show that the private respondent
terminated the services of petitioners Iluminada Ver Buiser and Cecilia
Rillo-Acuna on May 14, 1981 and petitioner Ma. Mercedes P. Intengan on
May 18, 1981 for their failure to meet their sales quotas.
Thus, on May 27, 1981, petitioners filed with the National Capital Region,
Ministry of Labor and Employment, a complaint for illegal dismissal with
claims for backwages, earned commissions and other benefits, docketed
as Case No. NCR-STF-5-2851-81.
The Regional Director of said ministry, in an Order dated September 21,
1982, dismissed the complaints of the petitioners, except the claim for
allowances which private respondent was ordered to pay. A
reconsideration of the Order was sought by the petitioners in a motion
filed on September 30, 1982. This motion, however, was treated as an
appeal to the Minister of Labor.
On appeal, Deputy Minister Vicente Leogardo, Jr. of the Ministry of Labor
issued an Order dated January 7, 1983, affirming the Regional Director's
Order dated September 21, 1982, wherein it ruled that the petitioners
have not attained permanent status since private respondent was justified
in requiring a longer period of probation, and that the termination of
petitioners' services was valid since the latter failed to meet their sales
quotas.
Hence, this petition for certiorari on the alleged ground that public
respondent committed grave abuse of discretion amounting to lack of
jurisdiction. Specifically, petitioners submit that:
1. The Hon. Regional Director and the Hon. Deputy Minister committed
grave abuse of discretion amounting to lack of jurisdiction in ruling that
the probationary employment of petitioners herein is eighteen (18) months
instead of the mandated six (6) months under the Labor Code, and in
consequently further ruling that petitioners are not entitled to security of
tenure while under said probation for 18 months.
2. The Hon. Regional Director and the Hon. Deputy Minister committed
grave abuse of discretion amounting to lack of jurisdiction in ruling that
petitioners were dismissed for a just and valid cause.
3. The Hon. Regional Director and the Hon. Deputy Minister committed
grave abuse of discretion amounting to lack of jurisdiction in ruling that
petitioners are not entitled to the commissions they have earned and
accrued during their period of employment.
Petitioners contend that under Articles 281-282 of the Labor Code, having
served the respondent company continuously for over six (6) months,
they have become automatically regular employees notwithstanding an
agreement to the contrary. Articles 281-282 read thus:
Art. 282. Probationary Employment. — Probationary employment shall
not exceed six (6) months from the date the employee started working,
unless it iscCovered by an apprenticeship agreement stipulating a longer
period. The services of an employee who has been engaged on a
probationary basis may be terminated for a just cause or 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. An employee who is allowed to work after a probationary
period shall be considered a regular employee. (As amended by PD 850).
Art. 281. Regular and Casual Employment. — 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 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
preceeding paragraph. Provided, That, any employee who has rendered
at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the
activity in which he is employed and his employment shall continue while
such actually exists. (As amended by PD 850).
It is petitioners' submission that probationary employment cannot exceed
six (6) months, the only exception being apprenticeship and learnership
agreements as provided in the Labor Code; that the Policy Instruction of
the Minister of Labor and Employment nor any agreement of the parties
could prevail over this mandatory requirement of the law; that this six
months prescription of the Labor Code was mandated to give further
efficacy to the constitutionally-guaranteed security of tenure of workers;
and that the law does not allow any discretion on the part of the Minister
of Labor and Employment to extend the probationary period for a longer
period except in the aforecited instances. Finally, petitioners maintain that
since they are regular employees, they can only be removed or dismissed
for any of the just and valid causes enumerated under Article 283 of the
Labor Code.
We reject petitioners' contentions. They have no basis in law.
Generally, the probationary period of employment is limited to six (6)
months. The exception to this general rule is When the parties to an
employment contract may agree otherwise, such as when the same is
established by company policy or when the same is required by the
nature of work to be performed by the employee. In the latter case, there
is recognition of the exercise of managerial prerogatives in requiring a
longer period of probationary employment, such as in the present case
where the probationary period was set for eighteen (18) months, i.e. from
May, 1980 to October, 1981 inclusive, especially where the employee
must learn a particular kind of work such as selling, or when the job
requires certain qualifications, skills, experience or training.
Policy Instruction No. 11 of the Minister of Labor and Employment has
clarified any and all doubts on the period of probationary employment. It
states as follows:
Probationary Employment has been the subject of misunderstanding in
some quarter. Some people believe six (6) months is the probationary
period in all cases. On the other hand employs who have already served
the probationary period are sometimes required to serve again on
probation.
Under the Labor Code, six (6) months is the general probationary period '
but the probationary period is actually the period needed to determine
fitness for the job. This period, for lack of a better measurement is
deemed to be the period needed to learn the job.
The purpose of this policy is to protect the worker at the same time enable
the employer to make a meaningful employee selection. This purpose
should be kept in mind in enforcing this provision of the Code. This
issuance shall take effect immediately.
In the case at bar, it is shown that private respondent Company needs at
least eighteen (18) months to determine the character and selling
capabilities of the petitioners as sales representatives. The Company is
engaged in advertisement and publication in the Yellow Pages of the
PLDT Telephone Directories. Publication of solicited ads are only made a
year after the sale has been made and only then win the company be
able to evaluate the efficiency, conduct, and selling ability of its sales
representatives, the evaluation being based on the published ads.
Moreover, an eighteen month probationary period is recognized by the
Labor Union in the private respondent company, which is Article V of the
Collective Bargaining Agreement, ... thus:
Probationary Period — New employees hired for regular or permanent
shall undergo a probationary or trial period of six (6) months, except in the
cases of telephone or sales representatives where the probationary
period shall be eighteen (I 8) months.
And as indicated earlier, the very contracts of employment signed and
acquiesced to by the petitioners specifically indicate that "the company
hereby employs the employee as telephone sales representative on a
probationary status for a period of eighteen (18) months, i.e. from May
1980 to October 1981, inclusive. This stipulation is not contrary to law,
morals and public policy.
We, therefore, hold and rule that the probationary employment of
petitioners set to eighteen (18) months is legal and valid and that the
Regional Director and the Deputy Minister of Labor and Employment
committed no abuse of discretion in ruling accordingly.
On the second assignment of error that public respondent committed
grave abuse of discretion in ruling that petitioners were dismissed for a
just and valid cause, this is not the first time that this issue has been
raised before this Court. Earlier, in the case of "Arthur Golez vs. The
National Labor Relations Commission and General Telephone Directory
Co. "G.R. No. L-64459, July 25, 1983, the petition for certiorari which
raised the same issue against the herein private respondent was
dismissed by this Court for lack of merit.
The practice of a company in laying off workers because they failed to
make the work quota has been recognized in this jurisdiction. (Philippine
American Embroideries vs. Embroidery and Garment Workers, 26 SCRA
634, 639). In the case at bar, the petitioners' failure to meet the sales
quota assigned to each of them constitute a just cause of their dismissal,
regardless of the permanent or probationary status of their employment.
Failure to observe prescribed standards of work, or to fulfill reasonable
work assignments due to inefficiency may constitute just cause for
dismissal. Such inefficiency is understood to mean failure to attain work
goals or work quotas, either by failing to complete the same within the
alloted reasonable period, or by producing unsatisfactory results. This
management prerogative of requiring standards availed of so long as they
are exercised in good faith for the advancement of the employer's
interest.
Petitioners anchor their claim for commission pay on the Collective
Bargaining Agreement (CBA) of September 1981, in support of their third
assignment of error. Petitioners cannot avail of this agreement since their
services had been terminated in May, 1981, at a time when the CBA of
September, 1981 was not yet in existence.
In fine, there is nothing in the records to show any abuse or misuse of
power properly vested in the respondent Deputy Minister of Labor and
Employment. For certiorari to lie, "there must be capricious, arbitrary and
whimsical exercise of power, the very antithesis of the judicial prerogative
inaccordance with centuries of both civil and common law traditions."
(Panaligan vs. Adolfo, 67 SCRA 176, 180). The "abuse of discretion must
be grave and patent, and it must be shown that the discretion was
exercised arbitrarily or despotically." (Palma and Ignacio vs. Q. & S., Inc.,
et al., 17 SCRA 97, 100; Philippine Virginia Tobacco Administration vs.
Lucero, 125 SCRA 337, 343).
WHEREFORE, the petition is DISMISSED for lack of merit.
G.R. No. 74246 January 26, 1989
MARIWASA MANUFACTURING, INC., and ANGEL T.
DAZO, petitioners,
vs.
HON. VICENTE LEOGARDO, JR., in his capacity as Deputy Minister
of Ministry of Labor and Employment judgment, and JOAQUIN A.
DEQUILA, respondents.
Cruz, Agabin, Atienza & Alday for petitioners.
The Solicitor General of public respondent.
Norberto M. Alensuela, Sr. for private respondent.
NARVASA, J.:
There is no dispute about the facts in this case, and the only question for
the Court is whether or not, Article 282 of the Labor Code
notwithstanding, probationary employment may validly be extended
beyond the prescribed six-month period by agreement of the employer
and the employee.
Private respondent Joaquin A. Dequila (or Dequilla) was hired on
probation by petitioner Mariwasa Manufacturing, Inc. (hereafter, Mariwasa
only) as a general utility worker on January 10, 1979. Upon the expiration
of the probationary period of six months, Dequila was informed by his
employer that his work had proved unsatisfactory and had failed to meet
the required standards. To give him a chance to improve his performance
and qualify for regular employment, instead of dispensing with his service
then and there, with his written consent Mariwasa extended his probation
period for another three months from July 10 to October 9, 1979. His
performance, however, did not improve and on that account Mariwasa
terminated his employment at the end of the extended period. 1
Dequila thereupon filed with the Ministry of Labor against Mariwasa and
its Vice-President for Administration, Angel T. Dazo, a complaint for illegal
dismissal and violation of Presidential Decrees Nos. 928 and 1389.2 His
complaint was dismissed after hearing by Director Francisco L. Estrella,
Director of the Ministry's National Capital Region, who ruled that the
termination of Dequila's employment was in the circumstances justified
and rejected his money claims for insufficiency of evidence. 3 On appeal
to the Office of the Minister, however, said disposition was reversed.
Respondent Deputy Minister Vicente Leogardo, Jr. held that Dequila was
already a regular employee at the time of his dismissal, therefore, could
not have been lawfully dismissed for failure to meet company standards
as a probationary worker. He was ordered reinstated to his former
position without loss of seniority and with full back wages from the date of
his dismissal until actually reinstated. 4 This last order appears later to
have been amended so as to direct payment of Dequila's back wages
from the date of his dismissal to December 20, 1982 only. 5
Mariwasa and Dazo, now petitioners, thereafter be sought this Court to
review Hon. Leogardo's decision on certiorari and prohibition, urging its
reversal for having been rendered with grave abuse of discretion and/or
without or in excess of jurisdiction. 6
The petition, as well as the parties' comments subsequently submitted all
underscore the fact that the threshold issue here is, as first above stated,
the legal one of whether employer and employee may by agreement
extend the probationary period of employment beyond the six months
prescribed in Art. 282 of the Labor Code, which provides that:
Art. 282. Probationary Employment. — Probationary employment shall
not exceed six (6) months from the date the employee started working,
unless it is covered by an apprenticeship agreement stipulating a longer
period. The services of an employee who has been engaged on a
probationary basis may be terminated for a just cause or 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. An employee who is allowed to work after probationary
period shall be considered a regular employee.'
The Court agrees with the Solicitor General, who takes the same position
as the petitioners, that such an extension may lawfully be covenanted,
notwithstanding the seemingly restrictive language of the cited
provision. Buiser vs. Leogardo, Jr . 7 recognized agreements stipulating
longer probationary periods as constituting lawful exceptions to the
statutory prescription limiting such periods to six months, when it upheld
as valid an employment contract between an employer and two of its
employees that provided for an eigthteen-month probation period. This
Court there held:
'It is petitioners' submission that probationary employment cannot exceed
six (6) months, the only exception being apprenticeship and learnership
agreements as provided in the Labor Code; that the Policy Instruction of
the Minister of Labor and Employment nor any agreement of the parties
could prevail over this mandatory requirement of the law; that this six
months prescription of the Labor Code was mandated to give further
efficacy to the constitutionally-guaranteed security of tenure of workers;
and that the law does not allow any discretion on the part of the Minister
of Labor and Employment to extend the probationary period for a longer
period except in the aforecited instances. Finally, petitioners maintain that
since they are regular employees, they can only be removed or dismissed
for any of the just and valid causes enumerated under Article 283. of the
Labor Code.
We reject petitioners' contentions. They have no basis in law.
Generally, the probationary period of employment is limited to six (6)
months. The exception to this general rule is when the parties to an
employment contract may agree otherwise, such as when the same is
established by company policy or when the same is required by the
nature of work to be performed by the employee. In the latter case, there
is recognition of the exercise of managerial prerogatives in requiring a
longer period of probationary employment, such as in the present case
where the probationary period was set for eighteen (18) months, i.e. from
May, 1980 to October, 1981 inclusive, especially where the employee
must learn a particular kind of work such as selling, or when the job
requires certain qualifications, skills experience or training.
xxx
We therefore, hold and rule that the probationary employment of
petitioners set to eighteen (18) months is legal and valid and that the
Regional Director and the Deputy Minister of Labor and Employment
committed no abuse of discretion in ruling accordingly.
The single difference between Buiser and the present case: that in the
former involved an eighteen-month probationary period stipulated in the
original contract of employment, whereas the latter refers to an extension
agreed upon at or prior to the expiration of the statutory six-month period,
is hardly such as to warrant or even suggest a different ruling here. In
both cases the parties' agreements in fact resulted in extensions of the
period prescribed by law. That in this case the inability of the probationer
to make the grade became apparent only at or about the end of the six-
month period, hence an extension could not have been pre-arranged as
was done in Buiserassumes no adverse significance, given the lack, as
pointed out by the Solicitor General, of any indication that the extension to
which Dequila gave his agreement was a mere stratagem of petitioners to
avoid the legal consequences of a probationary period satisfactorily
completed.
For aught that appears of record, the extension of Dequila's probation
was ex gratia, an act of liberality on the part of his employer affording him
a second chance to make good after having initially failed to prove his
worth as an employee. Such an act cannot now unjustly be turned against
said employer's account to compel it to keep on its payroll one who could
not perform according to its work standards. The law, surely, was never
meant to produce such an inequitable result.
By voluntarily agreeing to an extension of the probationary period,
Dequila in effect waived any benefit attaching to the completion of said
period if he still failed to make the grade during the period of extension.
The Court finds nothing in the law which by any fair interpretation
prohibits such a waiver. And no public policy protecting the employee and
the security of his tenure is served by prescribing voluntary agreements
which, by reasonably extending the period of probation, actually improve
and further a probationary employee's prospects of demonstrating his
fitness for regular employment.
Having reached the foregoing conclusions, the Court finds it unnecessary
to consider and pass upon the additional issue raised in the Supplemental
Petition 8 that the back wages adjudged in favor of private respondent
Dequila were erroneously computed.
WHEREFORE, the petition is granted. The orders of the public
respondent complained of are reversed and set aside. Private
respondent's complaint against petitioners for illegal dismissal and
violation of Presidential Decrees 928 and 1389 is dismissed for lack of
merit, without pronouncement as to costs.
G.R. No. 109114 September 14, 1993
HOLIDAY INN MANILA and/or HUBERT LINER and BABY
DISQUITADO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (Second Division) and
ELENA HONASAN, respondents.
Inocentes, De Leon, Leogardo, Atienza, Manaye & Azucena Law Office
for petitioners.
Florante M. Yambot for private respondent.
CRUZ, J.:
The employer has absolute discretion in hiring his employees in
accordance with his standards of competence and probity. This is his
prerogative. Once hired, however, the employees are entitled to the
protection of the law even during the probation period and more so after
they have become members of the regular force. The employer does not
have the same freedom in the hiring of his employees as in their
dismissal.
Elena Honasan applied for employment with the Holiday Inn and was on
April 15, 1991, accepted for "on-the-job training" as a telephone operator
for a period of three weeks.1 For her services, she received food and
transportation allowance.2 On May 13, 1992, after completing her training,
she was employed on a "probationary basis" for a period of six months
ending November 12,
1991.3
Her employment contract stipulated that the Hotel could terminate her
probationary employment at any time prior to the expiration of the six-
month period in the event of her failure (a) to learn or progress in her job;
(b) to faithfully observe and comply with the hotel rules and the
instructions and orders of her superiors; or (c) to perform her duties
according to hotel standards.
On November 8, 1991, four days before the expiration of the stipulated
deadline, Holiday Inn notified her of her dismissal, on the ground that her
performance had not come up to the standards of the Hotel.4
Through counsel, Honasan filed a complaint for illegal dismissal, claiming
that she was already a regular employee at the time of her separation and
so was entitled to full security of tenure.5 The complaint was dismissed on
April 22, 1992 by the Labor Arbiter, 6 who held that her separation was
justified under Article 281 of the Labor Code providing as follows:
Probationary employment shall not exceed six (6) months from the date
the employee started working, unless it is covered by an apprenticeship
agreement stipulating a longer period. The services of an employee who
has been engaged on a probationary basis may be terminated for a just
cause or 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. An employee who is allowed to work after
a probationary period shall be considered a regular employee.
On appeal, this decision was reversed by the NLRC, which held that
Honasan had become a regular employee and so could not be dismissed
as a probationer.7 In its own decision dated November 27, 1992, the
NLRC ordered the petitioners to reinstate Honasan "to her former position
without loss of seniority rights and other privileges with backwages
without deduction and qualification." Reconsideration was denied in a
resolution dated January 26, 1993.8
The petitioners now fault the NLRC for having entertained Honasan's
appeal although it was filed out of time and for holding that Honasan was
already a regular employee at the time of her dismissal, which was made
4 days days before the expiration of the probation period.
The petition has no merit.
On the timeliness of the appeal, it is well-settled that all notices which a
party is entitled to receive must be coursed through his counsel of record.
Consequently, the running of the reglementary period is reckoned from
the date of receipt of the judgment by the counsel of the appellant.9 Notice
to the appellant himself is not sufficient notice. 10Honasan's counsel
received the decision of the Labor Arbiter on May 18, 1992. 11 Before that,
however, the appeal had already been filed by Honasan herself, on May
8, 1992. 12 The petitioners claim that she filed it on the thirteenth but this
is irrelevant. Even if the latter date was accepted, the appeal was
nevertheless still filed on time, in fact even before the start of the
reglementary period.
On the issue of illegal dismissal, we find that Honasan was placed by the
petitioner on probation twice, first during her on-the-job training for three
weeks, and next during another period of six months, ostensibly in
accordance with Article 281. Her probation clearly exceeded the period of
six months prescribed by this article.
Probation is the period during which the employer may determine if the
employee is qualified for possible inclusion in the regular force. In the
case at bar, the period was for three weeks, during Honasan's on-the-job
training. When her services were continued after this training, the
petitioners in effect recognized that she had passed probation and was
qualified to be a regular employee.
Honasan was certainly under observation during her three-week on-the-
job training. If her services proved unsatisfactory then, she could have
been dropped as early as during that period. But she was not. On the
contrary, her services were continued, presumably because they were
acceptable, although she was formally placed this time on probation.
Even if it be supposed that the probation did not end with the three-week
period of on-the-job training, there is still no reason why that period
should not be included in the stipulated six-month period of probation.
Honasan was accepted for on-the-job training on April 15, 1991.
Assuming that her probation could be extended beyond that date, it
nevertheless could continue only up to October 15, 1991, after the end of
six months from the earlier date. Under this more lenient approach, she
had become a regular employee of Holiday Inn and acquired full security
of tenure as of October 15, 1991.
The consequence is that she could no longer be summarily separated on
the ground invoked by the petitioners. As a regular employee, she had
acquired the protection of Article 279 of the Labor Code stating as follows:
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.
The grounds for the removal of a regular employee are enumerated in
Articles 282, 283 and 284 of the Labor Code. The procedure for such
removal is prescribed in Rule XIV, Book V of the Omnibus Rules
Implementing the Labor Code. These rules were not observed in the case
at bar as Honasan was simply told that her services were being
terminated because they were found to be unsatisfactory. No
administrative investigation of any kind was undertaken to justify this
ground. She was not even accorded prior notice, let alone a chance to be
heard.
We find in the Hotel's system of double probation a transparent scheme to
circumvent the plain mandate of the law and make it easier for it to
dismiss its employees even after they shall have already passed
probation. The petitioners had ample time to summarily terminate
Honasan's services during her period of probation if they were deemed
unsatisfactory. Not having done so, they may dismiss her now only upon
proof of any of the legal grounds for the separation of regular employees,
to be established according to the prescribed procedure.
The policy of the Constitution is to give the utmost protection to the
working class when subjected to such maneuvers as the one attempted
by the petitioners. This Court is fully committed to that policy and has
always been quick to rise in defense of the rights of labor, as in this case.
WHEREFORE, the petition is DISMISSED, with costs against petitioners.
It is so ordered.
[G.R. No. 94523. October 27, 1992.]
ST. THERESITA’S ACADEMY AND/OR THE SERVANTS OF ST.
JOSEPH, Represented by SR. ANITA BAGO, Petitioners, v. THE
NATIONAL LABOR RELATIONS COMMISSION and LILIA
ARIOLA, Respondents.
SYLLABUS
1. LABOR AND SOCIAL LEGISLATION; REGULAR AND CASUAL
EMPLOYMENT; DISTINGUISHED. — Article 280 of the Labor Code
defines regular employment as follows: "ART. 280. Regular and Casual
Employment. — The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been
engaged to perform activities which are usually necessary or desirable in
the usual business or trade of the employer except where the
employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the
engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of
the season. "An employment shall be deemed to be casual if it is not
covered by the preceding paragraph: Provided, That any employee who
has rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee with
respect to the activity in which he is employed and his employment shall
continue while such actually exists."cralaw virtua1aw library
2. ID.; ID.; ID.; APPLICATION TO SCHOOL TEACHERS; CASE AT BAR.
— With respect to school teachers, paragraph 75 of the Manual of
Regulations for Private Schools provides: "Full-time teachers who have
rendered three (3) years of satisfactory service shall be considered
permanent." The record shows that after Ariola retired in 1976, she was
rehired three (3) years later and rendered four (4) more years of
satisfactory service to the petitioner in the school years 1979-1980, 1980-
1981, 1981-1982, and 1982-1983. When she was rehired in 1979 she did
not have to undergo the 3-year probationary employment for new
teachers for her teaching competence had already been tried and tested
during her 22 years of service to the school in 1954 to 1976. She
reentered the service in 1979 as a regular or permanent teacher. She
could not be discharged solely on account of the expiration of her fourth
annual contract. She could only be dismissed for cause and with due
process, as provided in Article 279 of the Labor Code.
DECISION
GRIÑO-AQUINO, J.:
Petition for certiorari with application for preliminary injunction and/or
restraining order to annul and/or set aside the resolution dated July 2,
1990 or the Fourth Division of the National Labor Relations Commission
(Cebu City) (NLRC, for short), affirming with modification the decision
dated August 14, 1987 of the Labor Arbiter of Bacolod City in RAB-VI-
Case No. 0201-83. The dispositive portion of the decision of the NLRC
reads as follows:jgc:chanrobles.com.ph
"WHEREFORE, the appeal filed by respondents is hereby dismissed for
lack of merit and the decision of the Labor Arbiter dated August 14, 1987
is hereby MODIFIED. Respondent is hereby ordered to pay complainant
her backwages limited to three (3) years without deduction and
qualification starting April 1933. In lieu of reinstatement, respondents are
hereby ordered to give separation pay to herein complainant computed at
the rate of one month’s salary for every year of service from June 1979 up
to March 1986, the end of the three (3) year rule on backwages." (p. 39,
Rollo.)chanrobles.com:cralaw:red
The private respondent, Lilia G. Ariola, had been employed as a school
teacher since the school year 1954-55 up to the school year 1975-76 (or
for 22 continuous years). She retired on March 30, 1976 with separation
benefits in the amount of P4,927.30. For a while, she worked as an
insurance underwriter. In 1979, the Mother Superior invited her to go back
as a school teacher because the school needed qualified and good
teachers in Mathematics and English. The complainant accepted on
condition that she should be considered a regular teacher and not as a
newly hired teacher. That condition was accepted without hesitation. She
signed a contract with the school which was renewable yearly.
Complainant and her co-teachers were paid summer living allowance in
1979-1980 and 1980-1981. However, in June 1981, that amount was
deducted from their salaries. Complainant and her co-teachers protested
against the deduction. A meeting was called by the school to explain that
the payment of the summer living allowance had been a mistake, hence,
it must be paid back to the school. Another meeting was called by the
Mother Superior to discuss the legality of the deduction and/or
nonpayment of the summer living allowance. In that meeting the
complainant and her co-teachers pleaded for the revival of the summer
living allowance but they were advised by the Mother Superior that the
school could not afford to give it to them. The matter was referred to the
Ministry of Labor and Employment. Because of the agitation for the
payment of the summer living allowance, the Siervas de San Jose, which
owns and operates respondent school in Silay City, held a board meeting
on January 19, 1983 (Exhibit I), wherein it was resolved that effective
school year 1983-84, no Siervas de San Jose School shall rehire a retired
teacher and that any rehired retiree who is at present a member of the
faculty shall be notified that her/his Teacher’s Contract will not be
renewed for the coming year.chanrobles virtual lawlibrary
After four (4) years of continuous satisfactory service, complainant was
notified on March 1, 1983 that her contract would no longer be renewed at
the end of the school year 1982-83. A report was made to the office of the
Ministry of Labor and Employment regarding the impending termination of
her teacher’s contract (Annex E).
On April 7, 1985, private respondent filed in the NLRC, National
Arbitration Branch No. VI in Bacolod City, a complaint against the
petitioner for Illegal Dismissal praying for reinstatement with backwages,
ECOLA, non-payment of allowances, underpayment of 13th month pay
and damages.
On August 14, 1987, the Labor Arbiter rendered a decision ordering the
petitioner to pay the private respondent separation pay computed at one-
half (1/2) month for every year of her 4-year service with the school.
On appeal by the school to the NLRC, the latter ruled that:chanrob1es
virtual 1aw library
(1) the year-to-year contract between petitioner and private respondent
violated Art. 280 of the Labor Code, hence, despite the fixed period
provided therein, private respondent became a "regular" employee who
could not be dismissed except for cause;
(2) when the year-to-year contracts went beyond three years, private
respondent became a "regular" or "permanent" employee, pursuant to
Sec. 75 of the Manual of Regulations for private schools, which provides
that "full-time teachers who have rendered three consecutive years of
satisfactory service shall be considered permanent" (p. 11, Rollo); and
(3) the policy of the school of no longer renewing the year-to-year
contracts of teachers who had been recalled from retirement, violated the
security of tenure of the complainant.
On July 2, 1990, the NLRC issued the resolution quoted earlier in this
decision.
In its petition for review of that decision, the petitioner alleges that:.
1. the NLRC decision is clearly contrary to the decision of this Court;
2. the NLRC ruling confuses the three year-to-year probationary contracts
given to new teachers before they become "regular and permanent," with
the year-to-year or other fixed period contract given to teachers who are
being recalled from retirement; for the year-to-year contracts with retired
teacher is not intended to test the teacher’s fitness to be hired on a
permanent basis, unlike a new teacher who must first be tested;
andcralawnad
3. it is the prerogative of an employer to adopt a policy of not rehiring
retired teachers and of not renewing the annual contracts of teachers who
have been recalled from retirement.
A review of the records of this case shows that the NLRC did not abuse
its discretion in affirming with modification the decision of the Labor
Arbiter.
Article 280 of the Labor Code defines regular employment as
follows:jgc:chanrobles.com.ph
"ARTICLE 280. Regular and Casual Employment. — The provisions of
written agreement to the contrary notwithstanding and 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 is employed and his employment shall continue while such actually
exists." (Emphasis supplied.)
With respect to school teachers, paragraph 75 of the Manual of
Regulations for Private Schools provides:jgc:chanrobles.com.ph
"Full-time teachers who have rendered three (3) years of satisfactory
service shall be considered permanent." (p. 63, Rollo.).
Furthermore, paragraphs 7 and 9 of the Teacher’s Contract which the
petitioner and the private respondent signed, categorically
stipulated:chanrobles virtual lawlibrary
"7. This CONTRACT SHALL BE IN FULL FORCE AND EFFECT during
the school year 1982-1983 from June to March, unless sooner terminated
by either party for valid causes and approved by the Director of Private
Schools. In the absence of valid cause(s) for termination of services, this
CONTRACT shall be rendered the teacher shall have gained a Regular or
Permanent Status, pursuant to the pertinent provisions of the Manual of
Regulations for Private Schools.
"9. This CONTRACT shall not affect the Permanent Status of the teacher,
even if entered into every school provided that the Probationary Period for
new shall be three (3) years." (Emphasis supplied, p.-79, Rollo.)
The record shows that after Ariola retired in 1976, she was rehired three
(3) years later and rendered four (4) more years of satisfactory service to
the petitioner in the school years 1979-1980, 1980-1981, 1981-1982, and
1982-1983.
When she was rehired in 1979 she did not have to undergo the 3-year
probationary employment for new teachers for her teaching competence
had already been tried and tested during her 22 years of service to the
school in 1954 to 1976. She re-entered the service in 1979 as a regular or
permanent teacher. She could not be discharged solely on account of the
expiration of her fourth annual contract. She could only be dismissed for
cause and with due process, as provided in Article 279 of the Labor Code.
The NLRC did not abuse its discretion in holding that her dismissal from
the service, on account of the expiration of her annual contract, was
illegal and that the school is liable to pay her backwages and separation
pay.
WHEREFORE; the petition for certiorari is DISMISSED, with costs
against the petitioner.chanrobles
PHILIPPINE DAILY INQUIRER, INC., G.R. No. 164532
Petitione- versus - Promulgated:
LEON M. MAGTIBAY, JR. and July 24, 2007
PHILIPPINE DAILY INQUIRER
EMPLOYEES UNION (PDIEU),
Respondents.
DECISION
GARCIA, J.:
By this petition for review on certiorari under Rule 45 of the Rules of
Court, petitioner Philippine Daily Inquirer, Inc. (PDI) seeks the reversal
and setting aside of the decision[1] dated May 25, 2004 of the Court of
Appeals (CA) in CA G.R. SP No. 78963, affirming the resolution dated
September 23, 2002 of the National Labor Relations Commission (NLRC)
in NLRC Case No. 00-03-01945-96. The affirmed NLRC resolution
reversed an earlier decision dated July 29, 1996 of the Labor Arbiter in
NLRC Case No. 011800-96, which dismissed the complaint for illegal
dismissal filed by the herein respondent Leon Magtibay, Jr. against the
petitioner.
The factual antecedents are undisputed:
On February 7, 1995, PDI hired Magtibay, on contractual basis, to assist,
for a period of five months from February 17, 1995, the regular phone
operator. Before the expiration of Magtibays contractual employment, he
and PDI agreed to a fifteen-day contract extension, or from July 17,
1995 up to July 31, 1995, under the same conditions as the existing
contract.
After the expiration of Magtibays contractual employment, as extended,
PDI announced the creation and availability of a new position for a
second telephone operator who would undergo probationary
employment. Apparently, it was PDIs policy to accord regular employees
preference for new vacancies in the company. Thus, Ms. Regina M.
Layague, a PDI employee and member of respondent PDI Employees
Union (PDIEU), filed her application for the new position. However, she
later withdrew her application, paving the way for outsiders or non-PDI
employees, like Magtibay in this case, to apply.
After the usual interview for the second telephone operator slot, PDI
chose to hire Magtibay on a probationary basis for a period of six (6)
months. The signing of a written contract of employment followed.
On March 13, 1996, or a week before the end the agreed 6-month
probationary period, PDI officer Benita del Rosario handed Magtibay his
termination paper, grounded on his alleged failure to meet company
standards. Aggrieved, Magtibay immediately filed a complaint for illegal
dismissal and damages before the Labor Arbiter. PDIEU later joined the
fray by filing a supplemental complaint for unfair labor practice.
Magtibay anchored his case principally on the postulate that he had
become a regular employee by operation of law, considering that he had
been employed by and had worked for PDI for a total period of ten
months, i.e., four months more than the maximum six-month period
provided for by law on probationary employment. He also claimed that he
was not apprised at the beginning of his employment of the performance
standards of the company, hence, there was no basis for his dismissal.
Finally, he described his dismissal as tainted with bad faith and effected
without due process.
PDI, for its part, denied all the factual allegations of Magtibay, adding that
his previous contractual employment was validly terminated upon the
expiration of the period stated therein. Pressing the point, PDI alleged that
the period covered by the contractual employment cannot be counted with
or tacked to the period for probation, inasmuch as there is no basis to
consider Magtibay a regular employee. PDI additionally claimed that
Magtibay was dismissed for violation of company rules and policies, such
as allowing his lover to enter and linger inside the telephone operators
booth and for failure to meet prescribed company standards which were
allegedly made known to him at the start through an orientation seminar
conducted by the company.
After due proceedings, the Labor Arbiter found for PDI and accordingly
dismissed Magtibays complaint for illegal dismissal. The Labor Arbiter
premised his holding on the validity of the previous contractual
employment of Magtibay as an independent contract. He also declared as
binding the stipulation in the contract specifying a fixed period of
employment. According to the Labor Arbiter, upon termination of the
period stated therein, the contractual employment was also effectively
terminated, implying that Magtibay was merely on a probationary status
when his services were terminated inasmuch as the reckoning period for
probation should be from September 21, 1995 up to March 31, 1996 as
expressly provided in their probationary employment contract. In fine, it
was the Labor Arbiters position that Magtibays previous contractual
employment, as later extended by 15 days, cannot be considered as part
of his subsequent probationary employment.
Apart from the foregoing consideration, the Labor Arbiter further ruled that
Magtibays dismissal from his probationary employment was for a valid
reason. Albeit the basis for termination was couched in the abstract, i.e.,
you did not meet the standards of the company, there were three specific
reasons for Magtibays termination, to wit: (1) he repeatedly violated the
company rule prohibiting unauthorized persons from entering the
telephone operators room; (2) he intentionally omitted to indicate in his
application form his having a dependent child; and (3) he exhibited lack of
sense of responsibility by locking the door of the telephone operators
room on March 10, 1996 without switching the proper lines to the
company guards so that incoming calls may be answered by them.
The Labor Arbiter likewise dismissed allegations of denial of due process
and the commission by PDI of unfair labor practice.
PDIEU and Magtibay appealed the decision of the Labor Arbiter to the
NLRC. As stated earlier, the NLRC reversed and set aside said decision,
effectively ruling that Magtibay was illegally dismissed. According to the
NLRC, Magtibays probationary employment had ripened into a regular
one.
With the NLRCs denial of its motion for reconsideration, PDI went to the
CA on a petition for certiorari. Eventually, the CA denied due course to
PDIs petition on the strength of the following observations:
We agree with the findings of respondent NLRC.
Petitioner PDI failed to prove that such rules and regulations were
included in or form part of the standards that were supposed to be made
known to respondent Magtibay at the time of his engagement as
telephone operator. Particularly, as regards the first stated infraction xxx
petitioner PDI, contrary to its assertion, stated in its position paper, motion
for reconsideration and in this petition that respondent Magtibay failed to
abide by the rules and regulations of the company issued by Ms. Benita
del Rosario regarding the entry of persons in the operators booth when
respondent was already working for petitioner PDI. Further, nowhere can
it be found in the list of Basic Responsibility and Specific Duties and
Responsibilities (Annex D of the petition) of respondent Magtibay that he
has to abide by the duties, rules and regulations that he has allegedly
violated. The infractions considered by petitioner PDI as grounds for the
dismissal of respondent Magtibay may at most be classified as just
causes for the termination of the latters employment. x x x.
xxxxxxxxx
Finally, the three questionable grounds also relied upon by petitioner PDI
in dismissing respondent Magtibay may be considered as just
causes. However, petitioner PDI did not raise the same as an issue in the
present petition because the procedure it adopted in dismissing
respondent Magtibay fell short of the minimum requirements provided by
law.
PDI filed a motion for reconsideration but to no avail.
Hence, this recourse by PDI on the following submissions:
I.
THE COURT OF APPEALS COMMITTED GRAVE ERROR IN FINDING
THAT A PROBATIONARY EMPLOYEES FAILURE TO FOLLOW AN
EMPLOYERS RULES AND REGULATIONS CANNOT BE DEEMED
FAILURE BY SAID EMPLOYEE TO MEET THE STANDARDS OF HIS
EMPLOYER THUS EMASCULATING PETITIONERS RIGHT TO
CHOOSE ITS EMPLOYEES.
II.
THE COURT OF APPEALS COMMITTED A GRAVE ERROR IN
REFUSING TO FIND THAT PROCEDURAL DUE PROCESS AS LAID
DOWN IN SECTION 2, RULE XXIII OF THE IMPLEMENTING RULES OF
THE LABOR CODE HAD BEEN OBSERVED BY THE PETITIONER.
We GRANT the petition.
This Court, to be sure, has for a reason, consistently tended to be partial
in favor of workers or employees in labor cases whenever social
legislations are involved. However, in its quest to strike a balance
between the employers prerogative to choose his employees and the
employees right to security of tenure, the Court remains guided by the
gem of a holding in an old but still applicable case of Pampanga Bus, Co.
v. Pambusco Employees Union, Inc.[2] In it, the Court said:
The right of a laborer to sell his labor to such persons as he may choose
is, in its essence, the same as the right of an employer to purchase labor
from any person whom it chooses. The employer and the employee have
thus an equality of right guaranteed by the Constitution. If the employer
can compel the employee to work against the latters will, this is
servitude. If the employee can compel the employer to give him work
against the employers will, this is oppression.
Management and labor, or the employer and the employee are more
often not situated on the same level playing field, so to speak.
Recognizing this reality, the State has seen fit to adopt measures
envisaged to give those who have less in life more in law. Article 279 of
the Labor Code which gives employees the security of tenure is one
playing field leveling measure:
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. x x x.
But hand in hand with the restraining effect of Section 279, the same
Labor Code also gives the employer a period within which to determine
whether a particular employee is fit to work for him or not. This employers
prerogative is spelled out in the following provision:
Art. 281. Probationary employment. ̶ Probationary employment shall
not exceed six (6) months from the date the employee started working,
unless it is covered by an apprenticeship agreement stipulating a longer
period. The services of an employee who has been engaged on a
probationary basis may be terminated for a just cause or 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. An employee who is allowed to work after a probationary
period shall be considered a regular employee.
In International Catholic Migration Commission v. NLRC,[3] we have
elucidated what probationary employment entails:
x x x. A probationary employee, as understood under Article 282 (now
Article 281) of the Labor Code, is one who is on trial by an employer
during which the employer determines whether or not he is qualified for
permanent employment. A probationary appointment is made to afford the
employer an opportunity to observe the fitness of a probationer while at
work, and to ascertain whether he will become a proper and efficient
employee. The word probationary, as used to describe the period of
employment, implies the purpose of the term or period but not its length.
Being in the nature of a trial period the essence of a probationary period
of employment fundamentally lies in the purpose or objective
sought to be attained by both the employer and the employee during said
period. The length of time is immaterial in determining the correlative
rights of both in dealing with each other during said period. While the
employer, as stated earlier, observes the fitness, propriety and efficiency
of a probationer to ascertain whether he is qualified for permanent
employment, the probationer, on the other, seeks to prove to the
employer, that he has the qualifications to meet the reasonable standards
for permanent employment.
It is well settled that the employer has the right or is at liberty to choose
who will be hired and who will be denied employment. In that sense, it is
within the exercise of the right to select his employees that the employer
may set or fix a probationary period within which the latter may test and
observe the conduct of the former before hiring him permanently. x x x.
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.[4]
PDI invokes the second ground under the premises. In claiming that it had
adequately apprised Magtibay of the reasonable standards against which
his performance will be gauged for purposes of permanent employment,
PDI cited the one-on-one seminar between Magtibay and its Personnel
Assistant, Ms. Rachel Isip-Cuzio. PDI also pointed to Magtibays direct
superior, Benita del Rosario, who diligently briefed him about his
responsibilities in PDI. These factual assertions were never denied nor
controverted by Magtibay. Neither did he belie the existence of a specific
rule prohibiting unauthorized persons from entering the telephone
operators booth and that he violated that prohibition. This
notwithstanding, the NLRC and the CA proceeded nonetheless to rule
that the records of the case are bereft of any evidence showing that these
rules and regulations form part of the so-called company standards.
We do not agree with the appellate court when it cleared the NLRC of
commission of grave abuse of discretion despite the latters disregard of
clear and convincing evidence that there were reasonable standards
made known by PDI to Magtibay during his probationary employment. It is
on record that Magtibay committed obstinate infractions of company rules
and regulations, which in turn constitute sufficient manifestations of his
inadequacy to meet reasonable employment norms. The suggestion that
Magtibay ought to have been made to understand during his briefing and
orientation that he is expected to obey and comply with company rules
and regulations strains credulity for acceptance. The CAs observation that
nowhere can it be found in the list of Basic Responsibility and Specific
Duties and Responsibilities of respondent Magtibay that he has to abide
by the duties, rules and regulations that he has allegedly violated is a
strained rationalization of an unacceptable conduct of an employee.
Common industry practice and ordinary human experience do not support
the CAs posture. All employees, be they regular or probationary, are
expected to comply with company-imposed rules and regulations, else
why establish them in the first place. Probationary employees unwilling to
abide by such rules have no right to expect, much less demand,
permanent employment. We, therefore find sufficient factual and legal
basis, duly established by substantial evidence, for PDI to legally
terminate Magtibays probationary employment effective upon the end of
the 6-month probationary period.
It is undisputed that PDI apprised Magtibay of the ground of his
termination, i.e., he failed to qualify as a regular employee in accordance
with reasonable standards made known to him at the time of
engagement, only a week before the expiration of the six-month
probationary period. Given this perspective, does this make his
termination unlawful for being violative of his right to due process of law?
It does not.
Unlike under the first ground for the valid termination of probationary
employment which is for just cause, the second ground does not require
notice and hearing. Due process of law for this second ground consists of
making the reasonable standards expected of the employee during his
probationary period known to him at the time of his probationary
employment. By the very nature of a probationary employment, the
employee knows from the very start that he will be under close
observation and his performance of his assigned duties and functions
would be under continuous scrutiny by his superiors. It is
in apprising him of the standards against which his performance shall be
continuously assessed where due process regarding the second ground
lies, and not in notice and hearing as in the case of the first ground.
Even if perhaps he wanted to, Magtibay cannot deny as he has not
denied PDIs assertion that he was duly apprised of the employment
standards expected of him at the time of his probationary employment
when he underwent a one-on-one orientation with
PDIs personnel assistant, Ms. Rachel Isip-Cuzio. Neither has he denied
nor rebutted PDIs further claim that his direct superior, Benita del Rosario,
briefed him regarding his responsibilities in PDI.
Lest it be overlooked, Magtibay had previously worked for PDI as
telephone operator from February 7, 1995 to July 31, 1995 as a
contractual employee. Thus, the Court entertains no doubt that when PDI
took him in on September 21, 1995, Magtibay was already very much
aware of the level of competency and professionalism PDI wanted out of
him for the entire duration of his probationary employment.
PDI was only exercising its statutory hiring prerogative when it refused to
hire Magtibay on a permanent basis upon the expiration of the six-month
probationary period. This was established during the proceedings before
the labor arbiter and borne out by the records and the pleadings before
the Court. When the NLRC disregarded the substantial evidence
establishing the legal termination of Magtibays probationary employment
and rendered judgment grossly and directly contradicting such clear
evidence, the NLRC commits grave abuse of discretion amounting to lack
or excess of jurisdiction. It was, therefore, reversible error on the part of
the appellate court not to annul and set aside such void judgment of the
NLRC.
WHEREFORE, the assailed decision dated May 25, 2004 of the CA in CA
G.R. SP No. 78963 is hereby REVERSED and SET ASIDE, and the
earlier resolution dated September 23, 2002 of the NLRC in NLRC Case
No. 00-03-01945-96 is declared NULL and VOID. The earlier decision
dated July 29, 1996 of the Labor Arbiter in NLRC Case No. 011800-96,
dismissing respondent Leon Magtibay, Jr.s complaint for alleged illegal
dismissal, is REINSTATED.
CANADIAN OPPORTUNITIES UNLIMITED, INC.,
Petitioner,- versus - BART Q. DALANGIN, JR.,
Respondent.
DECISION
BRION, J.:
For resolution is the petition for review on certiorari[1] to nullify the decision
dated December 19, 2005[2] and the resolution dated March 30, 2006[3] of
the Court of Appeals (CA) rendered in CA-G.R. SP No. 84907.
The Antecedents
On November 20, 2001, respondent Bart Q. Dalangin, Jr. filed a
complaint for illegal dismissal, with prayer for reinstatement and
backwages, as well as damages (moral and exemplary) and attorneys
fees, against petitioner Canadian Opportunities Unlimited, Inc.
(company). The company, based in Pasong Tamo, Makati City, provides
assistance and related services to applicants for permanent residence
in Canada.
Dalangin was hired by the company only in the previous month, or in
October 2001, as Immigration and Legal Manager, with a monthly salary
of P15,000.00. He was placed on probation for six months. He was to
report directly to the Chief Operations Officer, Annie Llamanzares Abad.
His tasks involved principally the review of the clients applications for
immigration to Canada to ensure that they are in accordance with
Canadian and Philippine laws.
Through a memorandum[4] dated October 27, 2001, signed by Abad, the
company terminated Dalangins employment, declaring him unfit and
unqualified to continue as Immigration and Legal Manager, for the
following reasons:
a) Obstinacy and utter disregard of company policies.
Propensity to take prolonged and extended lunch breaks, shows no
interest in familiarizing oneself with the policies and objectives.
b) Lack of concern for the companys interest despite having
just been employed in the company. (Declined to attend company
sponsored activities, seminars intended to familiarize company
employees with Management objectives and enhancement of company
interest and objectives.)
c) Showed lack of enthusiasm toward work.
d) Showed lack of interest in fostering relationship with his co-
employees.[5]

The Compulsory Arbitration Proceedings
Dalangins submission
Dalangin alleged, in his Position Paper,[6] that the company issued a
memorandum requiring its employees to attend a Values Formation
Seminar scheduled for October 27, 2001 (a Saturday) at 2:00 p.m.
onwards. He inquired from Abad about the subject and purpose of the
seminar and when he learned that it bore no relation to his duties, he told
Abad that he would not attend the seminar. He said that he would have to
leave at 2:00 p.m. in order to be with his family in the province. Dalangin
claimed that Abad insisted that he attend the seminar so that the other
employees would also attend. He replied that he should not be treated
similarly with the other employees as there are marked differences
between their respective positions and duties. Nonetheless, he signified
his willingness to attend the seminar, but requested Abad to have it
conducted within office hours to enable everybody to attend.
Dalangin further alleged that Abad refused his request and stressed that
all company employees may be required to stay beyond 2:00 p.m. on
Saturdays which she considered still part of office hours. Under his
employment contract,[7] his work schedule was from 9:00 a.m. to 6:00
p.m., Monday to Friday, and 9:00 a.m. to 2:00 p.m. on Saturdays.
Dalangin argued that it has been an established company practice that on
Saturdays, office hours end at 2:00 p.m.; and that an employee cannot be
made to stay in the office beyond office hours, except under
circumstances provided in Article 89 of the Labor Code.
On October 26, 2001, Dalangin claimed that Abad issued a
memorandum[8] requiring him to explain why he could not attend the
seminar scheduled for October 27, 2001 and the other forthcoming
seminars. The following day, October 27, 2001, Abad informed him that
Mr. Yadi N. Sichani, the companys Managing Director, wanted to meet
with him regarding the matter. He alleged that at the meeting, he was
devastated to hear from Sichani that his services were being terminated
because Sichani could not keep in his company people who are hard-
headed and who refuse to follow orders from management.[9] Sichani also
told him that since he was a probationary employee, his employment
could be terminated at any time and at will. Sichani refused to accept his
letter-reply to the company memorandum dated October 26, 2001 and
instead told him to just hand it over to Abad.
The companys defense
Through their position paper,[10] the company and its principal officers
alleged that at the time of Dalangins engagement, he was advised that he
was under probation for six months and his employment could be
terminated should he fail to meet the standards to qualify him as a regular
employee. He was informed that he would be evaluated on the basis of
the results of his work; on his attitude towards the company, his work and
his co-employees, as spelled out in his job description;[11] and on the
basis of Abads affidavit.[12]
They further alleged that during his brief employment in the company,
Dalangin showed lack of enthusiasm towards his work and was indifferent
towards his co-employees and the company clients. Dalangin refused to
comply with the companys policies and procedures, routinely taking long
lunch breaks, exceeding the one hour allotted to employees, and leaving
the company premises without informing his immediate superior, only to
call the office later and say that he would be unable to return because he
had some personal matters to attend to. He also showed lack of
interpersonal skills and initiative which he manifested when the
immigration application of a company client, Mrs. Jennifer Tecson, was
denied by the Canadian Embassy. Dalangin failed to provide counsel to
Tecson; he also should have found a way to appeal her denied
application, but he did not. As it turned out, the explanation he gave to
Tecson led her to believe that the company did not handle her application
well. Dalangins lack of interest in the company was further manifested
when he refused to attend company-sponsored seminars designed to
acquaint or update the employees with the companys policies and
objectives.
The company argued that since Dalangin failed to qualify for the position
of Immigration and Legal Manager, the company decided to terminate his
services, after duly notifying him of the companys decision and the reason
for his separation.
The Compulsory Arbitration Rulings
In his decision dated April 23, 2003,[13] Labor Arbiter Eduardo G. Magno
declared Dalangins dismissal illegal, and awarded him backwages
of P75,000.00, moral damages of P50,000.00 and exemplary damages
of P50,000.00, plus 10% attorneys fees. The labor arbiter found that the
charges against Dalangin, which led to his dismissal, were not
established by clear and substantial proof.
On appeal by the company, the National Labor Relations Commission
(NLRC) rendered a decision on March 26, 2004[14] granting the appeal,
thereby reversing the labor arbiters ruling. It found Dalangins dismissal to
be a valid exercise of the companys management prerogative because
Dalangin failed to meet the standards for regular employment. Dalangin
moved for reconsideration, but the NLRC denied the motion, prompting
him to go to the CA on a petition for certiorari under Rule 65 of the Rules
of Court.
The CA Decision
In its now assailed decision,[15] the CA held that the NLRC erred when it
ruled that Dalangin was not illegally dismissed. As the labor arbiter did,
the CA found that the company failed to support, with substantial
evidence, its claim that Dalangin failed to meet the standards to qualify as
a regular employee.
Citing a ruling of the Court in an earlier case,[16] the CA pointed out that
the company did not allow Dalangin to prove that he possessed the
qualifications to meet the reasonable standards for his regular
employment; instead, it dismissed Dalangin peremptorily from the service.
It opined that it was quite improbable that the company could fully
determine Dalangins performance barely one month into his
employment.[17]
The CA denied the companys subsequent motion for reconsideration in
its resolution of March 30, 2006.[18] Hence, this appeal.
The Companys Case
Through its submissions the Petition,[19] the Reply[20] and the
Memorandum[21] the company seeks a reversal of the CA rulings, raising
the following issues: (1) whether the requirements of notice and hearing in
employee dismissals are applicable to Dalangins case; and (2) whether
Dalangin is entitled to moral and exemplary damages, and attorneys fees.
On the first issue, the company argues that the notice and hearing
requirements are to be observed only in termination of employment based
on just causes as defined in Article 282 of the Labor Code. Dalangins
dismissal, it maintains, was not based on a just cause under Article 282,
but was due to his failure to meet the companys standards for regular
employment. It contends that under the Labor Codes Implementing Rules
and Regulations, [i]f the termination is brought about x x x by failure of an
employee to meet the standards of the employer in the case of
probationary employment, it shall be sufficient that a written notice is
served the employee within a reasonable time from the effective date of
termination.[22] It points out that it properly observed the notice
requirement when it notified Dalangin of his dismissal on October 27,
2001,[23] after it asked him to explain (memorandum of October 26, 2001)
why he could not attend the seminar scheduled for October 27, 2001;
Dalangin failed to submit his explanation. It posits that contrary to the CAs
conclusion, the companys finding that Dalangin failed to meet its
standards for regular employment was supported by substantial evidence.
With respect to the second issue, the company submits that Dalangin is
not entitled to moral and exemplary damages, and attorneys fees. It
maintains that Dalangin failed to present convincing evidence establishing
bad faith or ill-motive on its part. It insists that it dismissed Dalangin in
good faith with the belief that he would not contribute any good to the
company, as manifested by his behavior towards his work and co-
employees.
The Case for Dalangin
Through his Comment[24] and Memorandum,[25] Dalangin asks the Court to
deny the petition. He argues that (1) probationary employees, under
existing laws and jurisprudence, are entitled to notice and hearing prior to
the termination of their employment; and (2) he is entitled to moral and
exemplary damages, and attorneys fees.
Dalangin disputes the companys submission that under the Labor Codes
implementing rules, only a written notice is required for the dismissal of
probationary employees. He argues that the rules cited by the company
clearly mandate the employer to (1) serve the employee a written notice
and (2) within a reasonable time before effecting the dismissal. He
stresses that for the dismissal to be valid, these requirements must go
hand in hand.
He explains that in the present case, the company did not observe the
above two requirements as he was dismissed the day after he was asked,
by way of a memorandum dated October 26, 2001,[26] to explain within
twenty-four hours why he could not attend the October 27, 2001 seminar.
He adds that on the assumption that the termination letter dated October
27, 2001 refers to the written notice contemplated under the rules, still the
company did not observe the second requirement of providing him a
reasonable time before he was dismissed. He posits that the company
disregarded the security of tenure guarantee under the Constitution which
makes no distinction between regular and probationary employees.
On the companys claim that he failed to perform in accordance with its
standards, Dalangin argues that a perusal of the grounds in support of his
dismissal reveals that none of the charges leveled against him is
supported by concrete and tangible evidence. He maintains that the
company miserably failed to cite a single company policy which he
allegedly violated and defied. He refutes the companys claim that his job
description and his employment contract apprise him of the company
policy that he is to observe for the duration of his employment. He, thus,
maintains that he had not been previously informed of the company
standards he was supposed to satisfy. He stresses that the CA did not err
in holding that the companys general averments regarding his failure to
meet its standards for regular employment were not corroborated by any
other evidence and, therefore, are insufficient to justify his dismissal.
Dalangin insists that he is entitled to backwages, moral and exemplary
damages, as well as attorneys fees, claiming that his dismissal was
unjust, oppressive, tainted with bad faith, and contrary to existing morals,
good customs and public policy. There was bad faith, he argues, because
he was dismissed without the requisite notice and hearing required under
the law; and merely on the basis of the companys bare, sweeping and
general allegations that he is difficult to deal with and that he might cause
problems to the companys future business operations. He is entitled to
attorneys fees, he submits, because he was forced to litigate and
vindicate his rights.
He bewails what he considers as a pre-conceived plan and determined
design[27] on the part of Sichani and Abad to immediately terminate his
employment. Elaborating, he points out that the company, through Abad,
prepared two memoranda, both dated October 26, 2001, one is the memo
to him requiring his written explanation[28] and the other, addressed to
Sichani, recommending his dismissal.[29] He was surprised that Sichani
did not bother to ask Abad why she gave him two conflicting memos on
the same day; neither did Sichani or Abad investigate the surrounding
circumstances on the matter nor did they give him the opportunity to
explain his side.
The Courts Ruling
As a rule, the Court is not a trier of facts, the resolution of factual issues
being the function of lower courts whose findings are received with
respect and are binding on the Court subject to certain exceptions.[30] A
recognized exception to the rule is the circumstance in which there are
conflicting findings of fact by the CA, on the one hand, and the trial court
or government agency concerned, on the other, as in the present
case. The factual findings of the NLRC on the dispute between Dalangin
and the company are at variance with those of the CA, thus necessitating
our review of the case, especially the evidence on record.[31]
We now resolve the core issue of whether Dalangin, a probationary
employee, was validly dismissed.
In International Catholic Migration Commission v. NLRC,[32] the Court
explained that a probationary employee, as understood under Article 281
of the Labor Code, is one who is on trial by an employer, during which,
the latter determines whether or not he is qualified for permanent
employment. A probationary appointment gives the employer an
opportunity to observe the fitness of a probationer while at work, and to
ascertain whether he would be a proper and efficient employee.
Dalangin was barely a month on the job when the company terminated
his employment. He was found wanting in qualities that would make him a
proper and efficient employee or, as the company put it, he was unfit and
unqualified to continue as its Immigration and Legal Manager.
Dalangins dismissal was viewed differently by the NLRC and the CA. The
NLRC upheld the dismissal as it was, it declared, in the exercise of the
companys management prerogative. On the other hand, the CA found
that the dismissal was not supported by substantial evidence and that the
company did not allow Dalangin to prove that he had the qualifications to
meet the companys standards for his regular employment. The CA did not
believe that the company could fully assess Dalangins performance within
a month. It viewed Dalangins dismissal as arbitrary, considering that the
company had very little time to determine his fitness for the job.
We disagree.
The essence of a probationary period of employment fundamentally lies in
the purpose or objective of both the employer and the employee during
the period. While the employer observes the fitness, propriety and
efficiency of a probationer to ascertain whether he is qualified for
permanent employment, the latter seeks to prove to the former that he
has the qualifications to meet the reasonable standards for permanent
employment.[33]
The trial period or the length of time the probationary employee remains
on probation depends on the parties agreement, but it shall not exceed
six (6) months under Article 281 of the Labor Code, unless it is covered
by an apprenticeship agreement stipulating a longer period. Article 281
provides:
Probationary employment. Probationary employment shall not exceed
six (6) months from the date the employee started working, unless it is
covered by an apprenticeship agreement stipulating a longer period. The
services of an employee who has been engaged on a probationary basis
may be terminated for a just cause or 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. An employee
who is allowed to work after a probationary period shall be considered a
regular employee.
As the Court explained in International Catholic Migration Commission,
the word probationary, as used to describe the period of employment,
implies the purpose of the term or period, but not its length.[34] Thus, the
fact that Dalangin was separated from the service after only about four
weeks does not necessarily mean that his separation from the service is
without basis.
Contrary to the CAs conclusions, we find substantial evidence indicating
that the company was justified in terminating Dalangins employment,
however brief it had been.Time and again, we have emphasized that
substantial evidence is such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion.[35]
Dalangin overlooks the fact, wittingly or unwittingly, that he offered
glimpses of his own behavior and actuations during his four-week stay
with the company; he betrayed his negative attitude and regard for the
company, his co-employees and his work.
Dalangin admitted in compulsory arbitration that the proximate cause for
his dismissal was his refusal to attend the companys Values Formation
Seminar scheduled for October 27, 2001, a Saturday. He refused to
attend the seminar after he learned that it had no relation to his duties, as
he claimed, and that he had to leave at 2:00 p.m. because he wanted to
be with his family in the province. When Abad insisted that he attend the
seminar to encourage his co-employees to attend, he stood pat on not
attending, arguing that marked differences exist between their positions
and duties, and insinuating that he did not want to join the other
employees. He also questioned the scheduled 2:00 p.m.seminars on
Saturdays as they were not supposed to be doing a company activity
beyond 2:00 p.m. He considers 2:00 p.m. as the close of working hours
on Saturdays; thus, holding them beyond 2:00 p.m. would be in violation
of the law.
The Values Formation Seminar incident is an eye-opener on the kind of
person and employee Dalangin was. His refusal to attend the seminar
brings into focus and validates what was wrong with him, as Abad
narrated in her affidavit[36] and as reflected in the termination of
employment memorandum.[37] It highlights his lack of interest in
familiarizing himself with the companys objectives and policies.
Significantly, the seminar involved acquainting and updating the
employees with the companys policies and objectives. Had he attended
the seminar, Dalangin could have broadened his awareness of the
companys policies, in addition to Abads briefing him about the companys
policies on punctuality and attendance, and the procedures to be followed
in handling the clients applications. No wonder the company charged him
with obstinacy.
The incident also reveals Dalangins lack of interest in establishing good
working relationship with his co-employees, especially the rank and file;
he did not want to join them because of his view that the seminar was not
relevant to his position and duties. It also betrays an arrogant and
condescending attitude on his part towards his co-employees, and a lack
of support for the company objective that company managers be
examples to the rank and file employees.
If the termination is brought about by the completion of a contract or
phase thereof, or by failure of an employee to meet the standards of the
employer in the case of probationary employment, it shall be sufficient
Additionally, very early in his employment, Dalangin exhibited negative that a written notice is served the employee within a reasonable time from
working habits, particularly with respect to the one hour lunch break policy the effective date of termination.
of the company and the observance of the companys working hours.
Thus, Abad stated that Dalangin would take prolonged lunch breaks or
would go out of the office without leave of the company only to call the
personnel manager later to inform the latter that he would be unable to
return as he had to attend to personal matters. Without expressly
countering or denying Abads statement, Dalangin dismissed the charge The company contends that it complied with the above rule when it asked
for the companys failure to produce his daily time record.[38] Dalangin, through Abads Memorandum dated October 26, 2001,[39] to
explain why he could not attend the seminar scheduled for October 27,
2001. When he failed to submit his explanation, the company, again
through Abad, served him a notice the following day, October 27, 2001,
The same thing is true with Dalangins handling of Tecsons application for terminating his employment. Dalangin takes strong exception to the
immigration to Canada, especially his failure to find ways to appeal the companys submission. He insists that the company failed to comply with
denial of Tecsons application, as Abad stated in her affidavit. Again, the rules as he was not afforded a reasonable time to defend himself
without expressly denying Abads statement or explaining exactly what he before he was dismissed.
did with Tecsons application, Dalangin brushes aside Abads insinuation
that he was not doing his job well, with the ready argument that the
company did not even bother to present Tecsons testimony.
The records support Dalangins contention. The notice served on him did
not give him a reasonable time, from the effective date of his separation,
as required by the rules. He was dismissed on the very day the notice
In the face of Abads direct statements, as well as those of his co- was given to him, or, on October 27, 2001. Although we cannot invalidate
employees, it is puzzling that Dalangin chose to be silent about the his dismissal in light of the valid cause for his separation, the companys
charges, other than saying that the company could not cite any policy he non-compliance with the notice requirement entitles Dalangin to
violated. All along, he had been complaining that he was not able to indemnity, in the form of nominal damages in an amount subject to our
explain his side, yet from the labor arbiters level, all the way to this Court, discretion.[40] Under the circumstances, we consider appropriate an award
he offered no satisfactory explanation of the charges. In this light, coupled of nominal damages of P10,000.00 to Dalangin.
with Dalangins adamant refusal to attend the companys Values Formation
Seminar and a similar program scheduled earlier, we find credence in the
companys submission that Dalangin was unfit to continue as its
Immigration and Legal Manager. As we stressed earlier, we are Damages and attorneys fees
convinced that the company had seen enough from Dalangins actuations,
behavior and deportment during a four-week period to realize that
Dalangin would be a liability rather than an asset to its operations.
Finally, given the valid reason for Dalangins dismissal, the claim for moral
and exemplary damages, as well as attorneys fees, must necessarily fail.
We, therefore, disagree with the CA that the company could not have fully
determined Dalangins performance barely one month into his
employment. As we said in International Catholic Migration WHEREFORE, premises considered, the petition is hereby GRANTED.
Commission, the probationary term or period denotes its purpose but not The assailed decision and resolution of the Court of Appeals are
its length. To our mind, four weeks was enough for the company to hereby SET ASIDE. The complaint is DISMISSED for lack of merit.
assess Dalangins fitness for the job and he was found wanting. In
separating Dalangin from the service before the situation got worse,
we find the company not liable for illegal dismissal.
Petitioner Canadian Opportunities Unlimited, Inc. is DIRECTED to pay
respondent Bart Q. Dalangin, Jr. nominal damages in the amount
of P10,000.00.
The procedural due process issue
Section 2, Rule I, Book VI of the Labor Codes Implementing Rules and
Regulations provides:
Costs against the respondent.