1

PEOPLES BROADCASTING G.R. No. 179652

SERVICE (BOMBO RADYO PHILS.,
INC.), Present:
Petitioner,
CORONA, C.J.,
CARPIO,
VELASCO, JR.,
- versus - LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
THE SECRETARY OF THE DEL CASTILLO,*
DEPARTMENT OF LABOR AND ABAD,
EMPLOYMENT, THE REGIONAL VILLARAMA, JR.,
DIRECTOR, DOLE REGION VII, and PEREZ,
JANDELEON JUEZAN, MENDOZA,
Respondents. SERENO,
REYES, and
PERLAS-BERNABE, JJ.

Promulgated:
March 6, 2012
x-----------------------------------------------------------------------------------------x

RESOLUTION

VELASCO, JR., J.:

In a Petition for Certiorari under Rule 65, petitioner Peoples Broadcasting Service, Inc. (Bombo Radyo Phils., Inc.) questioned the Decision and
Resolution of the Court of Appeals (CA) dated October 26, 2006 and June 26, 2007, respectively, in C.A. G.R. CEB-SP No. 00855.

Private respondent Jandeleon Juezan filed a complaint against petitioner with the Department of Labor and Employment (DOLE) Regional
Office No. VII, Cebu City, for illegal deduction, nonpayment of service incentive leave, 13th month pay, premium pay for holiday and rest day and
illegal diminution of benefits, delayed payment of wages and noncoverage of SSS, PAG-IBIG and Philhealth.[1] After the conduct of summary
investigations, and after the parties submitted their position papers, the DOLE Regional Director found that private respondent was an employee of
petitioner, and was entitled to his money claims.[2] Petitioner sought reconsideration of the Directors Order, but failed. The Acting DOLE Secretary
dismissed petitioners appeal on the ground that petitioner submitted a Deed of Assignment of Bank Deposit instead of posting a cash or surety
bond. When the matter was brought before the CA, where petitioner claimed that it had been denied due process, it was held that petitioner was accorded
due process as it had been given the opportunity to be heard, and that the DOLE Secretary had jurisdiction over the matter, as the jurisdictional limitation
imposed by Article 129 of the Labor Code on the power of the DOLE Secretary under Art. 128(b) of the Code had been repealed by Republic Act No.
(RA) 7730.[3]

In the Decision of this Court, the CA Decision was reversed and set aside, and the complaint against petitioner was dismissed. The dispositive portion
of the Decision reads as follows:

WHEREFORE, the petition is GRANTED. The Decision dated 26 October 2006 and the Resolution dated 26 June
2007 of the Court of Appeals in C.A. G.R. CEB-SP No. 00855 are REVERSED and SET ASIDE. The Order of the then Acting
Secretary of the Department of Labor and Employment dated 27 January 2005 denying petitioners appeal, and the Orders of the
Director, DOLE Regional Office No. VII, dated 24 May 2004 and 27 February 2004, respectively, are ANNULLED. The
complaint against petitioner is DISMISSED.[4]
The Court found that there was no employer-employee relationship between petitioner and private respondent. It was held that while the
DOLE may make a determination of the existence of an employer-employee relationship, this function could not be co-extensive with the visitorial
and enforcement power provided in Art. 128(b) of the Labor Code, as amended by RA 7730. The National Labor Relations Commission (NLRC) was
held to be the primary agency in determining the existence of an employer-employee relationship. This was the interpretation of the Court of the clause
in cases where the relationship of employer-employee still exists in Art. 128(b).[5]

From this Decision, the Public Attorneys Office (PAO) filed a Motion for Clarification of Decision (with Leave of Court). The PAO sought
to clarify as to when the visitorial and enforcement power of the DOLE be not considered as co-extensive with the power to determine the existence of
an employer-employee relationship.[6] In its Comment,[7] the DOLE sought clarification as well, as to the extent of its visitorial and enforcement power
under the Labor Code, as amended.

The Court treated the Motion for Clarification as a second motion for reconsideration, granting said motion and reinstating the petition.[8] It
is apparent that there is a need to delineate the jurisdiction of the DOLE Secretary vis--vis that of the NLRC.

Under Art. 129 of the Labor Code, the power of the DOLE and its duly authorized hearing officers to hear and decide any matter involving
the recovery of wages and other monetary claims and benefits was qualified by the proviso that the complaint not include a claim for reinstatement, or
that the aggregate money claims not exceed PhP 5,000. RA 7730, or an Act Further Strengthening the Visitorial and Enforcement Powers of the
Secretary of Labor, did away with the PhP 5,000 limitation, allowing the DOLE Secretary to exercise its visitorial and enforcement power for claims
beyond PhP 5,000. The only qualification to this expanded power of the DOLE was only that there still be an existing employer-employee relationship.

It is conceded that if there is no employer-employee relationship, whether it has been terminated or it has not existed from the start, the DOLE
has no jurisdiction. Under Art. 128(b) of the Labor Code, as amended by RA 7730, the first sentence reads, Notwithstanding the provisions of Articles
129 and 217 of this Code to the contrary, and in cases where the relationship of employer-employee still exists, the Secretary of Labor and Employment
or his duly authorized representatives shall have the power to issue compliance orders to give effect to the labor standards provisions of this Code and
other labor legislation based on the findings of labor employment and enforcement officers or industrial safety engineers made in the course of
inspection. It is clear and beyond debate that an employer-employee relationship must exist for the exercise of the visitorial and enforcement power of
the DOLE. The question now arises, may the DOLE make a determination of whether or not an employer-employee relationship exists, and if so, to
what extent?

The first portion of the question must be answered in the affirmative.

The prior decision of this Court in the present case accepts such answer, but places a limitation upon the power of the DOLE, that is, the
determination of the existence of an employer-employee relationship cannot be co-extensive with the visitorial and enforcement power of the
DOLE. But even in conceding the power of the DOLE to determine the existence of an employer-employee relationship, the Court held that the
determination of the existence of an employer-employee relationship is still primarily within the power of the NLRC, that any finding by the DOLE is
merely preliminary.
2

This conclusion must be revisited.

No limitation in the law was placed upon the power of the DOLE to determine the existence of an employer-employee relationship. No
procedure was laid down where the DOLE would only make a preliminary finding, that the power was primarily held by the NLRC. The law did not
say that the DOLE would first seek the NLRCs determination of the existence of an employer-employee relationship, or that should the existence of
the employer-employee relationship be disputed, the DOLE would refer the matter to the NLRC. The DOLE must have the power to determine whether
or not an employer-employee relationship exists, and from there to decide whether or not to issue compliance orders in accordance with Art. 128(b) of
the Labor Code, as amended by RA 7730.

The DOLE, in determining the existence of an employer-employee relationship, has a ready set of guidelines to follow, the same guide the
courts themselves use. The elements to determine the existence of an employment relationship are: (1) the selection and engagement of the employee;
(2) the payment of wages; (3) the power of dismissal; (4) the employers power to control the employees conduct. [9] The use of this test is not solely
limited to the NLRC. The DOLE Secretary, or his or her representatives, can utilize the same test, even in the course of inspection, making use of the
same evidence that would have been presented before the NLRC.

The determination of the existence of an employer-employee relationship by the DOLE must be respected. The expanded visitorial and
enforcement power of the DOLE granted by RA 7730 would be rendered nugatory if the alleged employer could, by the simple expedient of disputing
the employer-employee relationship, force the referral of the matter to the NLRC. The Court issued the declaration that at least a prima facie showing
of the absence of an employer-employee relationship be made to oust the DOLE of jurisdiction. But it is precisely the DOLE that will be faced with
that evidence, and it is the DOLE that will weigh it, to see if the same does successfully refute the existence of an employer-employee relationship.
If the DOLE makes a finding that there is an existing employer-employee relationship, it takes cognizance of the matter, to the exclusion of
the NLRC. The DOLE would have no jurisdiction only if the employer-employee relationship has already been terminated, or it appears, upon review,
that no employer-employee relationship existed in the first place.

The Court, in limiting the power of the DOLE, gave the rationale that such limitation would eliminate the prospect of competing conclusions
between the DOLE and the NLRC. The prospect of competing conclusions could just as well have been eliminated by according respect to the DOLE
findings, to the exclusion of the NLRC, and this We believe is the more prudent course of action to take.

This is not to say that the determination by the DOLE is beyond question or review. Suffice it to say, there are judicial remedies such as a
petition for certiorari under Rule 65 that may be availed of, should a party wish to dispute the findings of the DOLE.

It must also be remembered that the power of the DOLE to determine the existence of an employer-employee relationship need not necessarily
result in an affirmative finding. The DOLE may well make the determination that no employer-employee relationship exists, thus divesting itself of
jurisdiction over the case. It must not be precluded from being able to reach its own conclusions, not by the parties, and certainly not by this Court.

Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully empowered to make a determination as to the existence of
an employer-employee relationship in the exercise of its visitorial and enforcement power, subject to judicial review, not review by the NLRC.

There is a view that despite Art. 128(b) of the Labor Code, as amended by RA 7730, there is still a threshold amount set by Arts. 129 and
217 of the Labor Code when money claims are involved, i.e., that if it is for PhP 5,000 and below, the jurisdiction is with the regional director of the
DOLE, under Art. 129, and if the amount involved exceeds PhP 5,000, the jurisdiction is with the labor arbiter, under Art. 217. The view states that
despite the wording of Art. 128(b), this would only apply in the course of regular inspections undertaken by the DOLE, as differentiated from cases
under Arts. 129 and 217, which originate from complaints. There are several cases, however, where the Court has ruled that Art. 128(b) has been
amended to expand the powers of the DOLE Secretary and his duly authorized representatives by RA 7730. In these cases, the Court resolved that the
DOLE had the jurisdiction, despite the amount of the money claims involved. Furthermore, in these cases, the inspection held by the DOLE regional
director was prompted specifically by a complaint. Therefore, the initiation of a case through a complaint does not divest the DOLE Secretary or his
duly authorized representative of jurisdiction under Art. 128(b).

To recapitulate, if a complaint is brought before the DOLE to give effect to the labor standards provisions of the Labor Code or other labor
legislation, and there is a finding by the DOLE that there is an existing employer-employee relationship, the DOLE exercises jurisdiction to the
exclusion of the NLRC. If the DOLE finds that there is no employer-employee relationship, the jurisdiction is properly with the NLRC. If a complaint
is filed with the DOLE, and it is accompanied by a claim for reinstatement, the jurisdiction is properly with the Labor Arbiter, under Art. 217(3) of the
Labor Code, which provides that the Labor Arbiter has original and exclusive jurisdiction over those cases involving wages, rates of pay, hours of
work, and other terms and conditions of employment, if accompanied by a claim for reinstatement. If a complaint is filed with the NLRC, and there is
still an existing employer-employee relationship, the jurisdiction is properly with the DOLE. The findings of the DOLE, however, may still be
questioned through a petition for certiorari under Rule 65 of the Rules of Court.

In the present case, the finding of the DOLE Regional Director that there was an employer-employee relationship has been subjected to
review by this Court, with the finding being that there was no employer-employee relationship between petitioner and private respondent, based on the
evidence presented. Private respondent presented self-serving allegations as well as self-defeating evidence.[10] The findings of the Regional Director
were not based on substantial evidence, and private respondent failed to prove the existence of an employer-employee relationship. The DOLE had no
jurisdiction over the case, as there was no employer-employee relationship present. Thus, the dismissal of the complaint against petitioner is proper.

WHEREFORE, the Decision of this Court in G.R. No. 179652 is hereby AFFIRMED, with the MODIFICATION that in the exercise of
the DOLEs visitorial and enforcement power, the Labor Secretary or the latters authorized representative shall have the power to determine the existence
of an employer-employee relationship, to the exclusion of the NLRC.

SO ORDERED.
3

VICTOR METEORO, REY CAGA, JIMMY CORONEL, G.R. No. 171275

COSME TAMOR, FELIXES LATONERO, ENRIQUE
SALAZAR, MAYLA LAQUI, ORLY BANUA, BERNARDO
MADRID, ARIEL REYES, ALFREDO REYES, JAVIER
TIMERESA, ARMANDO MACA, JR., ROLANDO FALQUERA,
JOSE BENITEZ, RODOLFO TIMERESA, ROLANDO
LUCENA, NOEL SUBTINIENTE, GUILLERMA QUIMADO,
BENIGNO REGALADO, RANDY DELA CRUZ, JUVY MACA, Present:
AMBROSIO CANARIA, JR., FELICIANO PAJARO, PETER
BADIANA, DANILO JORDAN, DENNIS EDIESCA, JOGIL YNARES-SANTIAGO, J.,
AVILA, ABRAHAM BURCE, ONOFRE VINAS, DENNIS Chairperson,
VITARA, ARIEL GALUPO and ALBERT AUSTERO, CHICO-NAZARIO,
Petitioners, VELASCO, JR.,
NACHURA, and
- versus - PERALTA, JJ.

CREATIVE CREATURES, INC.,

Respondent.

Promulgated:

July 13, 2009

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DECISION

NACHURA, J.:

Assailed in this petition for review on certiorari are the Court of Appeals Decision[1] dated May 31, 2005 and Resolution[2] dated January 27,
2006 in CA-G.R. SP No. 76942.

The facts of the case are as follows:

Respondent is a domestic corporation engaged in the business of producing, providing, or procuring the production of set designs and set construction
services for television exhibitions, concerts, theatrical performances, motion pictures and the like. It primarily caters to the production design
requirements of ABS-CBN Broadcasting Corporation in Metro Manila and nationwide. [3] On the other hand, petitioners were hired by respondent on
various dates as artists, carpenters and welders. They were tasked to design, create, assemble, set-up and dismantle props, and provide sound effects to
respondents various TV programs and movies.[4]

Sometime in February and March 1999, petitioners filed their respective complaints for non-payment of night shift differential pay, overtime pay,
holiday pay, 13th month pay, premium pay for Sundays and/or rest days, service incentive leave pay, paternity leave pay, educational assistance, rice
benefits, and illegal and/or unauthorized deductions from salaries against respondent, before the Department of Labor and Employment (DOLE),
National Capital Region (NCR). Their complaints were consolidated and docketed as NCR00-9902-IS-011.[5]
After the inspection conducted at respondents premises, the labor inspector noted that the records were not made available at the time of the inspection;
that respondent claimed that petitioners were contractual employees and/or independent talent workers; and that petitioners were required to punch
their cards.[6]

In its position paper, respondent argued that the DOLE-NCR had no jurisdiction over the complaint of the petitioners because of the absence of an
employer-employee relationship. It added that petitioners were free-lance individuals, performing special services with skills and expertise inherently
exclusive to them like actors, actresses, directors, producers, and script writers, such that they were treated as special types of workers. [7]

Petitioners, on the other hand, averred that they were employees of respondent, as the elements of an employer-employee relationship existed.
Meanwhile, on April 12, 1999, petitioners filed a complaint for illegal dismissal against petitioner, with prayer for payment of overtime pay, premium
pay for holiday and rest day, holiday pay, service incentive leave pay, 13th month pay and attorneys fees before the National Labor Relations
Commission (NLRC). The case was docketed as NLRC-NCR Case No. 00-04-04459-9.[8]

On October 11, 1999, DOLE Regional Director Maximo Baguyot Lim issued an Order [9] directing respondent to pay petitioners the total amount
of P2,694,709.00. The dispositive portion of the Order reads as follows:

WHEREFORE, premises considered, this Office finds merit in the complaint. Accordingly, Respondent Creative Creatures, Inc.
and/or Mr. Edmond Ty, is hereby ordered to pay thirty three (33) Complainants, within ten (10) days from receipt hereof, the total
amount of TWO MILLION SIX HUNDRED NINETY FOUR THOUSAND SEVEN HUNDRED NINE PESOS (P2,694,709.00)
representing unpaid 13th month pay, vacation and sick leave benefits, regular holiday pay, rest day and holiday premiums, overtime
pay, educational allowance, and rice allowance presented as follows:

xxxx

Failure to pay Complainants within the given period will constrain this Office to issue a WRIT OF EXECUTION for the
immediate enforcement of this order.

SO ORDERED.[10]
4

The Regional Director sustained petitioners claim on the existence of an employer-employee relationship using the determinants set forth by the Labor
Code, specifically, the elements of control and supervision, power of dismissal, payment of wages, and the selection and engagement of employees. He
added that since the petitioners had worked for more than one year doing the same routine work, they were regular employees with respect to the
activity in which they were employed. Lastly, he upheld the DOLE-NCRs jurisdiction to hear and determine cases in violation of labor standards
law.[11]

On appeal, then DOLE Secretary Patricia A. Sto. Tomas affirmed the findings of the DOLE Regional Director.[12] In upholding the jurisdiction of the
DOLE-NCR, she explained that the Secretary of Labor or his duly authorized representative is allowed to use his visitorial and enforcement powers to
give effect to labor legislation, regardless of the amount involved, pursuant to Article 128 of the Labor Code, as amended by Republic Act (R.A.) No.
7730.
For failure to obtain a favorable decision, respondent elevated the matter to the Court of Appeals in CA-G.R. SP No. 76942. On May 31, 2005, the
appellate court rendered the assailed decision, the dispositive portion of which reads:

WHEREFORE, premises considered, the instant petition is GRANTED. For lack of jurisdiction, the Orders dated October 18,
2002 and February 5, 2003, issued by respondent Secretary are hereby declared NULL and VOID. However, in view of the filing
of a similar case before the NLRC, referral of the instant case to the NLRC for appropriate determination is no longer necessary.

SO ORDERED.[13]

While recognizing the visitorial and enforcement powers of the Regional Director and his jurisdiction to entertain money claims, the appellate court
noted that Article 128 of the Labor Code provides an instance when he (Regional Director) may be divested of jurisdiction. The CA pointed out that
respondent had consistently disputed the existence of employer-employee relationship, thereby placing the case beyond the jurisdiction of the Regional
Director.

Petitioners now come before this Court in this petition for review on certiorari raising the lone issue of:

Whether or not the Court of Appeals committed an error when it ruled that the instant case falls within the exception clause of
Article 128 (b) of the Labor Code, as amended, and in annulling and setting aside the Orders of the Secretary of Labor which
affirmed the Order of the Regional Director of DOLE-NCR awarding the claims of the petitioners for benefits under the Labor
Standards laws, namely, 13th month benefit, overtime pay, night shift differentials, premium on rest days, vacation and sick leave
and other benefits accorded to employees of the responden[t] in the exercise of its visitorial powers pursuant to Article 128 (b) of
the Labor Code as amended.[14]

In fine, we are tasked to determine which body/tribunal has jurisdiction over petitioners money claims --- the DOLE Secretary or his duly
authorized representative, or the NLRC.

We sustain the appellate courts conclusion that the instant case falls within the exclusive jurisdiction of the NLRC.

The DOLE Secretary and her authorized representatives, such as the DOLE-NCR Regional Director, have jurisdiction to enforce compliance
with labor standards laws under the broad visitorial and enforcement powers conferred by Article 128 of the Labor Code, and expanded by Republic
Act (R.A.) No. 7730,[15] to wit:[16]

Art. 128. Visitorial and Enforcement Power

(a) The Secretary of Labor or his duly authorized representatives, including labor regulation officers, shall have access
to employers records and premises at anytime of the day or night whenever work is being undertaken therein, and the right to copy
therefrom, to question any employee and investigate any fact, condition or matter which may be necessary to determine violations
or which may aid in the enforcement of this Code and of any labor law, wage order or rules and regulations issued pursuant thereto.

(b) Notwithstanding the provisions of Article 129 and 217 of this Code to the contrary, and in cases where the relationship
of employer-employee relation still exists, the Secretary of Labor and Employment or his duly authorized representatives shall
have the power to issue compliance orders to give effect to the labor standards provisions of this Code and other labor legislation
based on the findings of labor employment and enforcement officers or industrial safety engineers made in the course of
inspection. The Secretary or his duly authorized representatives shall issue writs of execution, to the appropriate authority for the
enforcement of their orders, except in cases where the employer contests the findings of the labor employment and enforcement
officer and raises issues supported by documentary proofs which were not considered in the course of inspection.

xxxx

As it is now worded, and as consistently held in a number of cases, [17] the visitorial and enforcement powers of the Secretary, exercised
through his representatives, encompass compliance with all labor standards laws and other labor legislation, regardless of the amount of the claims
filed by workers.

It is well to note that the Regional Directors visitorial and enforcement powers have undergone a series of amendments. Confusion was
engendered with the promulgation of the decision in Servandos Inc. v. Secretary of Labor and Employment.[18] In that case, this Court held that to
harmonize Articles 217 (a) (6),[19] 129,[20] and 128 of the Labor Code, the Secretary of Labor should be deemed as clothed with plenary visitorial powers
to order the inspection of all establishments where labor is employed, and to look into all possible violations of labor laws and regulations; but the
power to hear and decide employees claims exceeding P5,000.00 for each employee should be left to the Labor Arbiter as the exclusive repository of
the power to hear and decide such claims.

Jurisprudence, however, rendered the Servando ruling inapplicable. In Guico, Jr. v. Quisumbing,[21] Allied Investigation Bureau, Inc. v. Sec.
of Labor,[22]
and Cirineo Bowling Plaza, Inc. v. Sensing,[23] we had occasion to explain that while it is true that under Articles 129 and 217 of the Labor
Code, the Labor Arbiter has jurisdiction to hear and decide cases where the aggregate money claim of each employee exceeds P5,000.00, these
provisions of law do not contemplate or cover the visitorial and enforcement powers of the Secretary of Labor or his duly authorized
representatives.Thus, we upheld the jurisdiction of the Regional Director, notwithstanding the fact that the amount awarded exceeded P5,000.00 per
employee.

In order to do away with the jurisdictional limitations imposed by the Servando ruling and to finally settle any lingering doubts on the extent
of the visitorial and enforcement powers of the Secretary of Labor and Employment, R.A. 7730 was enacted, amending Article 128 (b) to its present
formulation, so as to free it from the jurisdictional restrictions found in Articles 129 and 217.

This notwithstanding, the power of the Regional Director to hear and decide the monetary claims of employees is not absolute. The last
sentence of Article 128 (b) of the Labor Code, otherwise known as the exception clause, provides an instance when the Regional Director or his
representatives may be divested of jurisdiction over a labor standards case.
5

Under prevailing jurisprudence, the so-called exception clause has the following elements, all of which must concur:
(a) that the employer contests the findings of the labor regulations officer and raises issues thereon;

(b) that in order to resolve such issues, there is a need to examine evidentiary matters; and

(c) that such matters are not verifiable in the normal course of inspection.[24]

In the present case, the CA aptly applied the exception clause. At the earliest opportunity, respondent registered its objection to the findings
of the labor inspector. The labor inspector, in fact, noted in its report that respondent alleged that petitioners were contractual workers and/or
independent and talent workers without control or supervision and also supplied with tools and apparatus pertaining to their job.[25] In its position paper,
respondent again insisted that petitioners were not its employees. It then questioned the Regional Directors jurisdiction to entertain the matter before
it, primarily because of the absence of an employer-employee relationship. Finally, it raised the same arguments before the Secretary of Labor and the
appellate court. It is, therefore, clear that respondent contested and continues to contest the findings and conclusions of the labor inspector.

To resolve the issue raised by respondent, that is, the existence of an employer-employee relationship, there is need to examine evidentiary
matters. The following elements constitute the reliable yardstick to determine such relationship: (a) the selection and engagement of the employee; (b)
the payment of wages; (c) the power of dismissal; and (d) the employers power to control the employees conduct. [26] There is no hard and fast rule
designed to establish the aforesaid elements. Any competent and relevant evidence to prove the relationship may be admitted. Identification cards, cash
vouchers, social security registration, appointment letters or employment contracts, payrolls, organization charts, and personnel lists, serve as evidence
of employee status.[27] These pieces of evidence are readily available, as they are in the possession of either the employee or the employer; and they
may easily be looked into by the labor inspector (in the course of inspection) when confronted with the question of the existence or absence of an
employer-employee relationship.

Some businessmen, however, try to avoid an employer-employee relationship from arising in their enterprises, because that juridical relation
spawns obligations connected with workmens compensation, social security, medicare, termination pay, and unionism. [28] Thus, in addition to the
above-mentioned documents, other pieces of evidence are considered in ascertaining the true nature of the parties relationship. This is especially true
in determining the element of control. The most important index of an employer-employee relationship is the so-called control test, that is, whether the
employer controls or has reserved the right to control the employee, not only as to the result of the work to be done, but also as to the means and
methods by which the same is to be accomplished.[29]

In the case at bar, whether or not petitioners were independent contractors/project employees/free lance workers is a question of fact that
necessitates the examination of evidentiary matters not verifiable in the normal course of inspection. Indeed, the contracts of independent services, as
well as the check vouchers, were kept and maintained in or about the premises of the workplace and were, therefore, verifiable in the course of
inspection. However, respondent likewise claimed that petitioners were not precluded from working outside the service contracts they had entered into
with it (respondent); and that there were instances when petitioners abandoned their service contracts with the respondent, because they had to work
on another project with a different company. Undoubtedly, the resolution of these issues requires the examination of evidentiary matters not verifiable
in the normal course of inspection. Verily, the Regional Director and the Secretary of Labor are divested of jurisdiction to decide the case.

We would like to emphasize that to contest means to raise questions as to the amounts complained of or the absence of violation of labor
standards laws; or, as in the instant case, issues as to the complainants right to labor standards benefits. To be sure, raising lack of jurisdiction alone is
not the contest contemplated by the exception clause.[30] It is necessary that the employer contest the findings of the labor regulations officer during the
hearing or after receipt of the notice of inspection results.[31] More importantly, the key requirement for the Regional Director and the DOLE Secretary
to be divested of jurisdiction is that the evidentiary matters be not verifiable in the course of inspection. Where the evidence presented was verifiable
in the normal course of inspection, even if presented belatedly by the employer, the Regional Director, and later the DOLE Secretary, may still examine
it; and these officers are not divested of jurisdiction to decide the case.[32]

In sum, respondent contested the findings of the labor inspector during and after the inspection and raised issues the resolution of which
necessitated the examination of evidentiary matters not verifiable in the normal course of inspection. Hence, the Regional Director was divested of
jurisdiction and should have endorsed the case to the appropriate Arbitration Branch of the NLRC.[33]Considering, however, that an illegal dismissal
case had been filed by petitioners wherein the existence or absence of an employer-employee relationship was also raised, the CA correctly ruled that
such endorsement was no longer necessary.

WHEREFORE, premises considered, the petition is DENIED for lack of merit. The Court of Appeals Decision dated May 31, 2005 and its
Resolution dated January 27, 2006 in CA-G.R. SP No. 76942, are AFFIRMED.
SO ORDERED.
6

[G.R. No. 127598. February 22, 2000]

MANILA ELECTRIC COMPANY, petitioner, vs. Hon. Secretary of Labor Leonardo Quisumbing and Meralco Employees and
Workers Association (MEWA), respondents.
RESOLUTION
YNARES_SANTIAGO, J.:
In the Decision promulgated on January 27, 1999, the Court disposed of the case as follows:
"WHEREFORE, the petition is granted and the orders of public respondent Secretary of Labor dated August 19, 1996
and December 28, 1996 are set aside to the extent set forth above. The parties are directed to execute a Collective
Bargaining Agreement incorporating the terms and conditions contained in the unaffected portions of the Secretary of
Labors orders of August 19, 1996 and December 28, 1996, and the modifications set forth above. The retirement
fund issue is remanded to the Secretary of Labor for reception of evidence and determination of the legal personality
of the Meralco retirement fund."[1]
The modifications of the public respondents resolutions include the following:
January 27, 1999 decision Secretarys resolution
Wages -P1,900.00 for 1995-96 P2,200.00
Xmas bonus -modified to one month 2 months
Retirees -remanded to the Secretary granted
Loan to coops -denied granted
GHSIP, HMP
and Housing loans -granted up to P60,000.00 granted
Signing bonus -denied granted
Union leave -40 days (typo error) 30 days
High voltage/pole -not apply to those who are members of a team
not exposed to the risk
Collectors -no need for cash bond, no
need to reduce quota and MAPL
CBU -exclude confidential employees include
Union security -maintenance of membership closed shop
Contracting out -no need to consult union consult first
All benefits -existing terms and conditions all terms
Retroactivity -Dec 28, 1996-Dec 27, 199(9) from Dec 1, 1995
Dissatisfied with the Decision, some alleged members of private respondent union (Union for brevity) filed a motion for intervention and
a motion for reconsideration of the said Decision. A separate intervention was likewise made by the supervisors union (FLAMES [2]) of
petitioner corporation alleging that it has bona fide legal interest in the outcome of the case.[3] The Court required the "proper parties" to
file a comment to the three motions for reconsideration but the Solicitor-General asked that he be excused from filing the comment
because the "petition filed in the instant case was granted" by the Court. [4] Consequently, petitioner filed its own consolidated comment.
An "Appeal Seeking Immediate Reconsideration" was also filed by the alleged newly elected president of the Union. [5] Other
subsequent pleadings were filed by the parties and intervenors.
The issues raised in the motions for reconsideration had already been passed upon by the Court in the January 27, 1999 decision. No
new arguments were presented for consideration of the Court. Nonetheless, certain matters will be considered herein, particularly those
involving the amount of wages and the retroactivity of the Collective Bargaining Agreement (CBA) arbitral awards.
Petitioner warns that if the wage increase of P2,200.00 per month as ordered by the Secretary is allowed, it would simply pass the cost
covering such increase to the consumers through an increase in the rate of electricity. This is a non sequitur. The Court cannot be
threatened with such a misleading argument. An increase in the prices of electric current needs the approval of the appropriate
regulatory government agency and does not automatically result from a mere increase in the wages of petitioners employees. Besides,
this argument presupposes that petitioner is capable of meeting a wage increase. The All Asia Capital report upon which the Union
relies to support its position regarding the wage issue can not be an accurate basis and conclusive determinant of the rate of wage
increase. Section 45 of Rule 130 Rules of Evidence provides:
"Commercial lists and the like. - Evidence of statements of matters of interest to persons engaged in an occupation
contained in a list, register, periodical, or other published compilation is admissible as tending to prove the truth of
any relevant matter so stated if that compilation is published for use by persons engaged in that occupation and is
generally used and relied upon by them therein."
Under the afore-quoted rule, statement of matters contained in a periodical may be admitted only "if that compilation is published for
use by persons engaged in that occupation and is generally used and relied upon by them therein." As correctly held in our Decision
dated January 27, 1999, the cited report is a mere newspaper account and not even a commercial list. At most, it is but an analysis or
opinion which carries no persuasive weight for purposes of this case as no sufficient figures to support it were presented. Neither did
anybody testify to its accuracy. It cannot be said that businessmen generally rely on news items such as this in their occupation.
Besides, no evidence was presented that the publication was regularly prepared by a person in touch with the market and that it is
generally regarded as trustworthy and reliable. Absent extrinsic proof of their accuracy, these reports are not admissible. [6] In the same
manner, newspapers containing stock quotations are not admissible in evidence when the source of the reports is available. [7] With
more reason, mere analyses or projections of such reports cannot be admitted. In particular, the source of the report in this case can be
easily made available considering that the same is necessary for compliance with certain governmental requirements.
Nonetheless, by petitioners own allegations, its actual total net income for 1996 was P5.1 billion. [8] An estimate by the All Asia financial
analyst stated that petitioners net operating income for the same year was about P5.7 billion, a figure which the Union relies on to
support its claim. Assuming without admitting the truth thereof, the figure is higher than the P4.171 billion allegedly suggested by
petitioner as its projected net operating income. The P5.7 billion which was the Secretarys basis for granting the P2,200.00 is higher
than the actual net income of P5.1 billion admitted by petitioner. It would be proper then to increase this Courts award of P1,900.00 to
P2,000.00 for the two years of the CBA award. For 1992, the agreed CBA wage increase for rank-and-file was P1,400.00 and was
reduced to P1,350.00, for 1993; further reduced to P1,150.00 for 1994. For supervisory employees, the agreed wage increase for the
years 1992-1994 are P1,742.50, P1,682.50 and P1,442.50, respectively. Based on the foregoing figures, the P2,000.00 increase for the
two-year period awarded to the rank-and-file is much higher than the highest increase granted to supervisory employees. [9] As
mentioned in the January 27, 1999 Decision, the Court does "not seek to enumerate in this decision the factors that should affect wage
determination" because collective bargaining disputes particularly those affecting the national interest and public service "requires due
consideration and proper balancing of the interests of the parties to the dispute and of those who might be affected by the
dispute."[10] The Court takes judicial notice that the new amounts granted herein are significantly higher than the weighted average
salary currently enjoyed by other rank-and-file employees within the community. It should be noted that the relations between labor and
capital is impressed with public interest which must yield to the common good. [11] Neither party should act oppressively against the
other or impair the interest or convenience of the public. [12] Besides, matters of salary increases are part of management prerogative.[13]
On the retroactivity of the CBA arbitral award, it is well to recall that this petition had its origin in the renegotiation of the parties 1992-
1997 CBA insofar as the last two-year period thereof is concerned. When the Secretary of Labor assumed jurisdiction and granted the
arbitral awards, there was no question that these arbitral awards were to be given retroactive effect. However, the parties dispute the
reckoning period when retroaction shall commence. Petitioner claims that the award should retroact only from such time that the
Secretary of Labor rendered the award, invoking the 1995 decision in Pier 8 case[14] where the Court, citing Union of Filipino Employees
v. NLRC,[15] said:
"The assailed resolution which incorporated the CBA to be signed by the parties was promulgated on June 5, 1989,
the expiry date of the past CBA. Based on the provision of Section 253-A, its retroactivity should be agreed upon by
the parties. But since no agreement to that effect was made, public respondent did not abuse its discretion in giving
7

the said CBA a prospective effect. The action of the public respondent is within the ambit of its authority vested by
existing law."
On the other hand, the Union argues that the award should retroact to such time granted by the Secretary, citing the 1993 decision of St
Lukes.[16]
"Finally, the effectivity of the Order of January 28, 1991, must retroact to the date of the expiration of the previous
CBA, contrary to the position of petitioner. Under the circumstances of the case, Article 253-A cannot be properly
applied to herein case. As correctly stated by public respondent in his assailed Order of April 12, 1991 dismissing
petitioners Motion for Reconsideration---
Anent the alleged lack of basis for the retroactivity provisions awarded, we would stress that the
provision of law invoked by the Hospital, Article 253-A of the Labor Code, speaks of agreements by
and between the parties, and not arbitral awards . . .
"Therefore, in the absence of a specific provision of law prohibiting retroactivity of the effectivity of arbitral awards
issued by the Secretary of Labor pursuant to Article 263(g) of the Labor Code, such as herein involved, public
respondent is deemed vested with plenary and discretionary powers to determine the effectivity thereof."
In the 1997 case of Mindanao Terminal,[17] the Court applied the St. Lukes doctrine and ruled that:
"In St. Lukes Medical Center v. Torres, a deadlock also developed during the CBA negotiations between
management and the union. The Secretary of Labor assumed jurisdiction and ordered the retroaction of the CBA to
the date of expiration of the previous CBA. As in this case, it was alleged that the Secretary of Labor gravely abused
its discretion in making his award retroactive. In dismissing this contention this Court held:
"Therefore, in the absence of a specific provision of law prohibiting retroactive of the effectivity of
arbitral awards issued by the Secretary of Labor pursuant to Article 263(g) of the Labor Code, such
as herein involved, public respondent is deemed vested with plenary and discretionary powers to
determine the effectivity thereof."
The Court in the January 27, 1999 Decision, stated that the CBA shall be "effective for a period of 2 years counted from December 28,
1996 up to December 27, 1999." Parenthetically, this actually covers a three-year period. Labor laws are silent as to when an arbitral
award in a labor dispute where the Secretary had assumed jurisdiction by virtue of Article 263 (g) of the Labor Code shall retroact. In
general, a CBA negotiated within six months after the expiration of the existing CBA retroacts to the day immediately following such
date and if agreed thereafter, the effectivity depends on the agreement of the parties. [18] On the other hand, the law is silent as to the
retroactivity of a CBA arbitral award or that granted not by virtue of the mutual agreement of the parties but by intervention of the
government. Despite the silence of the law, the Court rules herein that CBA arbitral awards granted after six months from the expiration
of the last CBA shall retroact to such time agreed upon by both employer and the employees or their union. Absent such an agreement
as to retroactivity, the award shall retroact to the first day after the six-month period following the expiration of the last day of the CBA
should there be one. In the absence of a CBA, the Secretarys determination of the date of retroactivity as part of his discretionary
powers over arbitral awards shall control.
It is true that an arbitral award cannot per se be categorized as an agreement voluntarily entered into by the parties because it requires
the interference and imposing power of the State thru the Secretary of Labor when he assumes jurisdiction. However, the arbitral award
can be considered as an approximation of a collective bargaining agreement which would otherwise have been entered into by the
parties.[19] The terms or periods set forth in Article 253-A pertains explicitly to a CBA. But there is nothing that would prevent its
application by analogy to an arbitral award by the Secretary considering the absence of an applicable law. Under Article 253-A: "(I)f
any such agreement is entered into beyond six months, the parties shal! agree on the duration of retroactivity thereof." In other words,
the law contemplates retroactivity whether the agreement be entered into before or after the said six-month period. The agreement of
the parties need not be categorically stated for their acts may be considered in determining the duration of retroactivity. In this
connection, the Court considers the letter of petitioners Chairman of the Board and its President addressed to their stockholders, which
states that the CBA "for the rank-and-file employees covering the period December 1, 1995 to November 30, 1997 is still with the
Supreme Court,"[20] as indicative of petitioners recognition that the CBA award covers the said period. Earlier, petitioners negotiating
panel transmitted to the Union a copy of its proposed CBA covering the same period inclusive. [21] In addition, petitioner does not dispute
the allegation that in the past CBA arbitral awards, the Secretary granted retroactivity commencing from the period immediately
following the last day of the expired CBA. Thus, by petitioners own actions, the Court sees no reason to retroact the subject CBA
awards to a different date. The period is herein set at two (2) years from December 1, 1995 to November 30, 1997.
On the allegation concerning the grant of loan to a cooperative, there is no merit in the unions claim that it is no different from housing
loans granted by the employer. The award of loans for housing is justified because it pertains to a basic necessity of life. It is part of a
privilege recognized by the employer and allowed by law. In contrast, providing seed money for the establishment of the employees
cooperative is a matter in which the employer has no business interest or legal obligation. Courts should not be utilized as a tool to
compel any person to grant loans to another nor to force parties to undertake an obligation without justification. On the contrary, it is the
government that has the obligation to render financial assistance to cooperatives and the Cooperative Code does not make it an
obligation of the employer or any private individual.[22]
Anent the 40-day union leave, the Court finds that the same is a typographical error. In order to avoid any confusion, it is herein
declared that the union leave is only thirty (30) days as granted by the Secretary of Labor and affirmed in the Decision of this Court.
The added requirement of consultation imposed by the Secretary in cases of contracting out for six (6) months or more has been
rejected by the Court. Suffice it to say that the employer is allowed to contract out services for six months or more. However, a line must
be drawn between management prerogatives regarding business operations per se and those which affect the rights of employees, and
in treating the latter, the employer should see to it that its employees are at least properly informed of its decision or modes of action in
order to attain a harmonious labor-management relationship and enlighten the workers concerning their rights. [23] Hiring of workers is
within the employers inherent freedom to regulate and is a valid exercise of its management prerogative subject only to special laws
and agreements on the matter and the fair standards of justice.[24] The management cannot be denied the faculty of promoting
efficiency and attaining economy by a study of what units are essential for its operation. It has the ultimate determination of whether
services should be performed by its personnel or contracted to outside agencies. While there should be mutual consultation, eventually
deference is to be paid to what management decides.[25] Contracting out of services is an exercise of business judgment or
management prerogative.[26] Absent proof that management acted in a malicious or arbitrary manner, the Court will not interfere with
the exercise of judgment by an employer.[27] As mentioned in the January 27, 1999 Decision, the law already sufficiently regulates this
matter.[28] Jurisprudence also provides adequate limitations, such that the employer must be motivated by good faith and the
contracting out should not be resorted to circumvent the law or must not have been the result of malicious or arbitrary actions.[29] These
are matters that may be categorically determined only when an actual suit on the matter arises.
WHEREFORE, the motion for reconsideration is partially granted and the assailed Decision is modified as follows: (1) the arbitral award
shall retroact from December 1, 1995 to November 30, 1997; and (2) the award of wage is increased from the original amount of One
Thousand Nine Hundred Pesos (P1,900.00) to Two Thousand Pesos (P2,000.00) for the years 1995 and 1996. This Resolution is
subject to the monetary advances granted by petitioner to its rank-and-file employees during the pendency of this case assuming such
advances had actually been distributed to them. The assailed Decision is AFFIRMED in all other respects.
SO ORDERED.
8

G.R. No. 170054 : January 21, 2013

GOYA, INC., Petitioner, v. GOYA, INC. EMPLOYEES UNION-FFW, Respondent.
DECISION
PERALTA, J.:
This petition for review on certiorari under Rule 45 of the Rules of Civil Procedure seeks to reverse and set aside the
June 16, 2005 Decision1 and October 12, 2005 Resolution2 of the Court of Appeals in CA-G.R. SP No. 87335, which
sustained the October 26, 2004 Decision3 of Voluntary Arbitrator Bienvenido E. Laguesma, the dispositive portion of
which reads:cralawlibrary
WHEREFORE, judgment is hereby rendered declaring that the Company is NOT guilty of unfair labor practice in
engaging the services of PESO.
The company is, however, directed to observe and comply with its commitment as it pertains to the hiring of casual
employees when necessitated by business circumstances.4?r?l1
The facts are simple and appear to be undisputed.
Sometime in January 2004, petitioner Goya, Inc. (Company), a domestic corporation engaged in the manufacture,
importation, and wholesale of top quality food products, hired contractual employees from PESO Resources
Development Corporation (PESO) to perform temporary and occasional services in its factory in Parang, Marikina City.
This prompted respondent Goya, Inc. Employees UnionFFW (Union) to request for a grievance conference on the
ground that the contractual workers do not belong to the categories of employees stipulated in the existing Collective
Bargaining Agreement (CBA).5 When the matter remained unresolved, the grievance was referred to the National
Conciliation and Mediation Board (NCMB) for voluntary arbitration.
During the hearing on July 1, 2004, the Company and the Union manifested before Voluntary Arbitrator (VA)
Bienvenido E. Laguesma that amicable settlement was no longer possible; hence, they agreed to submit for resolution
the solitary issue of "[w]hether or not the Company is guilty of unfair labor acts in engaging the services of PESO, a
third party service provider, under the existing CBA, laws, and jurisprudence."6 Both parties thereafter filed their
respective pleadings.
The Union asserted that the hiring of contractual employees from PESO is not a management prerogative and in gross
violation of the CBA tantamount to unfair labor practice (ULP). It noted that the contractual workers engaged have
been assigned to work in positions previously handled by regular workers and Union members, in effect violating
Section 4, Article I of the CBA, which provides for three categories of employees in the Company, to wit:cralawlibrary
Section 4. Categories of Employees. The parties agree on the following categories of employees:cralawlibrary
(a) Probationary Employee. One hired to occupy a regular rank-and-file position in the Company and is serving a
probationary period. If the probationary employee is hired or comes from outside the Company (non-Goya, Inc.
employee), he shall be required to undergo a probationary period of six (6) months, which period, in the sole
judgment of management, may be shortened if the employee has already acquired the knowledge or skills required of
the job. If the employee is hired from the casual pool and has worked in the same position at any time during the past
two (2) years, the probationary period shall be three (3) months.
(b) Regular Employee. An employee who has satisfactorily completed his probationary period and automatically
granted regular employment status in the Company.
(c) Casual Employee, One hired by the Company to perform occasional or seasonal work directly connected with the
regular operations of the Company, or one hired for specific projects of limited duration not connected directly with
the regular operations of the Company.
It was averred that the categories of employees had been a part of the CBA since the 1970s and that due to this
provision, a pool of casual employees had been maintained by the Company from which it hired workers who then
became regular workers when urgently necessary to employ them for more than a year. Likewise, the Company
sometimes hired probationary employees who also later became regular workers after passing the probationary
period. With the hiring of contractual employees, the Union contended that it would no longer have probationary and
casual employees from which it could obtain additional Union members; thus, rendering inutile Section 1, Article III
(Union Security) of the CBA, which states:cralawlibrary
Section 1. Condition of Employment. As a condition of continued employment in the Company, all regular rank-and-
file employees shall remain members of the Union in good standing and that new employees covered by the
appropriate bargaining unit shall automatically become regular employees of the Company and shall remain members
of the Union in good standing as a condition of continued employment.
The Union moreover advanced that sustaining the Companys position would easily weaken and ultimately destroy the
former with the latters resort to retrenchment and/or retirement of employees and not filling up the vacant regular
positions through the hiring of contractual workers from PESO, and that a possible scenario could also be created by
the Company wherein it could "import" workers from PESO during an actual strike.
In countering the Unions allegations, the Company argued that: (a) the law expressly allows contracting and
subcontracting arrangements through Department of Labor and Employment (DOLE) Order No. 18-02; (b) the
engagement of contractual employees did not, in any way, prejudice the Union, since not a single employee was
terminated and neither did it result in a reduction of working hours nor a reduction or splitting of the bargaining unit;
and (c) Section 4, Article I of the CBA merely provides for the definition of the categories of employees and does not
put a limitation on the Companys right to engage the services of job contractors or its management prerogative to
address temporary/occasional needs in its operation.
On October 26, 2004, VA Laguesma dismissed the Unions charge of ULP for being purely speculative and for lacking in
factual basis, but the Company was directed to observe and comply with its commitment under the CBA. The VA
opined:cralawlibrary
We examined the CBA provision Section 4, Article I of the CBAallegedly violated by the Company and indeed the
agreement prescribes three (3) categories of employees in the Company and provides for the definition, functions and
duties of each. Material to the case at hand is the definition as regards the functions of a casual employee described
as follows:cralawlibrary
Casual Employee One hired by the COMPANY to perform occasional or seasonal work directly connected with the
regular operations of the COMPANY, or one hired for specific projects of limited duration not connected directly with
the regular operations of the COMPANY.
While the foregoing agreement between the parties did eliminate managements prerogative of outsourcing parts of its
operations, it serves as a limitation on such prerogative particularly if it involves functions or duties specified under
the aforequoted agreement. It is clear that the parties agreed that in the event that the Company needs to engage
the services of additional workers who will perform "occasional or seasonal work directly connected with the regular
operations of the COMPANY," or "specific projects of limited duration not connected directly with the regular
operations of the COMPANY", the Company can hire casual employees which is akin to contractual employees. If we
note the Companys own declaration that PESO was engaged to perform "temporary or occasional services" (See the
Companys Position Paper, at p. 1), then it should have directly hired the services of casual employees rather than do
it through PESO.
9

It is evident, therefore, that the engagement of PESO is not in keeping with the intent and spirit of the CBA provision
in question. It must, however, be stressed that the right of management to outsource parts of its operations is not
totally eliminated but is merely limited by the CBA. Given the foregoing, the Companys engagement of PESO for the
given purpose is indubitably a violation of the CBA.7?r?l1
While the Union moved for partial reconsideration of the VA Decision,8 the Company immediately filed a petition for
review9 before the Court of Appeals (CA) under Rule 43 of the Revised Rules of Civil Procedure to set aside the
directive to observe and comply with the CBA commitment pertaining to the hiring of casual employees when
necessitated by business circumstances. Professing that such order was not covered by the sole issue submitted for
voluntary arbitration, the Company assigned the following errors:cralawlibrary
THE HONORABLE VOLUNTARY ARBITRATOR EXCEEDED HIS POWER WHICH WAS EXPRESSLY GRANTED AND LIMITED
BY BOTH PARTIES IN RULING THAT THE ENGAGEMENT OF PESO IS NOT IN KEEPING WITH THE INTENT AND SPIRIT
OF THE CBA.10?r?l1
THE HONORABLE VOLUNTARY ARBITRATOR COMMITTED A PATENT AND PALPABLE ERROR IN DECLARING THAT THE
ENGAGEMENT OF PESO IS NOT IN KEEPING WITH THE INTENT AND SPIRIT OF THE CBA.11?r?l1
On June 16, 2005, the CA dismissed the petition. In dispensing with the merits of the controversy, it
held:cralawlibrary
This Court does not find it arbitrary on the part of the Hon. Voluntary Arbitrator in ruling that "the engagement of
PESO is not in keeping with the intent and spirit of the CBA." The said ruling is interrelated and intertwined with the
sole issue to be resolved that is, "Whether or not the Company is guilty of unfair labor practice in engaging the
services of PESO, a third party service provider, under existing CBA, laws, and jurisprudence." Both issues concern
the engagement of PESO by the Company which is perceived as a violation of the CBA and which constitutes as unfair
labor practice on the part of the Company. This is easily discernible in the decision of the Hon. Voluntary Arbitrator
when it held:cralawlibrary
x x x x While the engagement of PESO is in violation of Section 4, Article I of the CBA, it does not constitute unfair
labor practice as it (sic) not characterized under the law as a gross violation of the CBA. Violations of a CBA, except
those which are gross in character, shall no longer be treated as unfair labor practice. Gross violations of a CBA means
flagrant and/or malicious refusal to comply with the economic provisions of such agreement. x x x
Anent the second assigned error, the Company contends that the Hon. Voluntary Arbitrator erred in declaring that the
engagement of PESO is not in keeping with the intent and spirit of the CBA. The Company justified its engagement of
contractual employees through PESO as a management prerogative, which is not prohibited by law. Also, it further
alleged that no provision under the CBA limits or prohibits its right to contract out certain services in the exercise of
management prerogatives.
Germane to the resolution of the above issue is the provision in their CBA with respect to the categories of the
employees:cralawlibrary
xxx
A careful reading of the above-enumerated categories of employees reveals that the PESO contractual employees do
not fall within the enumerated categories of employees stated in the CBA of the parties. Following the said categories,
the Company should have observed and complied with the provision of their CBA. Since the Company had admitted
that it engaged the services of PESO to perform temporary or occasional services which is akin to those performed by
casual employees, the Company should have tapped the services of casual employees instead of engaging PESO.
In justifying its act, the Company posits that its engagement of PESO was a management prerogative. It bears
stressing that a management prerogative refers to the right of the employer to regulate all aspects of employment,
such as the freedom to prescribe work assignments, working methods, processes to be followed, regulation regarding
transfer of employees, supervision of their work, lay-off and discipline, and dismissal and recall of work, presupposing
the existence of employer-employee relationship. On the basis of the foregoing definition, the Companys engagement
of PESO was indeed a management prerogative. This is in consonance with the pronouncement of the Supreme Court
in the case of Manila Electric Company v. Quisumbing where it ruled that contracting out of services is an exercise of
business judgment or management prerogative.
This management prerogative of contracting out services, however, is not without limitation. In contracting out
services, the management must be motivated by good faith and the contracting out should not be resorted to
circumvent the law or must not have been the result of malicious arbitrary actions. In the case at bench, the CBA of
the parties has already provided for the categories of the employees in the Companysestablishment. These categories
of employees particularly with respect to casual employees serve as limitation to the Companys prerogative to
outsource parts of its operations especially when hiring contractual employees. As stated earlier, the work to be
performed by PESO was similar to that of the casual employees. With the provision on casual employees, the hiring of
PESO contractual employees, therefore, is not in keeping with the spirit and intent of their CBA. (Citations
omitted)12?r?l1
The Company moved to reconsider the CA Decision,13 but it was denied;14 hence, this petition.
Incidentally, on July 16, 2009, the Company filed a Manifestation15 informing this Court that its stockholders and
directors unanimously voted to shorten the Companys corporate existence only until June 30, 2006, and that the
three-year period allowed by law for liquidation of the Companys affairs already expired on June 30, 2009. Referring
to Gelano v. Court of Appeals,16 Public Interest Center, Inc. v. Elma,17 and Atienza v. Villarosa,18 it urged Us, however,
to still resolve the case for future guidance of the bench and the bar as the issue raised herein allegedly calls for a
clarification of a legal principle, specifically, whether the VA is empowered to rule on a matter not covered by the issue
submitted for arbitration.
Even if this Court would brush aside technicality by ignoring the supervening event that renders this case moot and
academic19 due to the permanent cessation of the Companys business operation on June 30, 2009, the arguments
raised in this petition still fail to convince Us.
We confirm that the VA ruled on a matter that is covered by the sole issue submitted for voluntary arbitration.
Resultantly, the CA did not commit serious error when it sustained the ruling that the hiring of contractual employees
from PESO was not in keeping with the intent and spirit of the CBA. Indeed, the opinion of the VA is germane to, or, in
the words of the CA, "interrelated and intertwined with," the sole issue submitted for resolution by the parties. This
being said, the Companys invocation of Sections 4 and 5, Rule IV20 and Section 5, Rule VI21 of the Revised Procedural
Guidelines in the Conduct of Voluntary Arbitration Proceedings dated October 15, 2004 issued by the NCMB is plainly
out of order.
Likewise, the Company cannot find solace in its cited case of Ludo & Luym Corporation v. Saornido.22 In Ludo, the
company was engaged in the manufacture of coconut oil, corn starch, glucose and related products. In the course of
its business operations, it engaged the arrastre services of CLAS for the loading and unloading of its finished products
at the wharf. The arrastre workers deployed by CLAS to perform the services needed were subsequently hired, on
different dates, as Ludos regular rank-and-file employees. Thereafter, said employees joined LEU, which acted as the
exclusive bargaining agent of the rank-and-file employees. When LEU entered into a CBA with Ludo, providing for
certain benefits to the employees (the amount of which vary according to the length of service rendered), it requested
to include in its members period of service the time during which they rendered arrastre services so that they could
10

get higher benefits. The matter was submitted for voluntary arbitration when Ludo failed to act. Per submission
agreement executed by both parties, the sole issue for resolution was the date of regularization of the workers. The
VA Decision ruled that: (1) the subject employees were engaged in activities necessary and desirable to the business
of Ludo, and (2) CLAS is a labor-only contractor of Ludo. It then disposed as follows: (a) the complainants were
considered regular employees six months from the first day of service at CLAS; (b) the complainants, being entitled to
the CBA benefits during the regular employment, were awarded sick leave, vacation leave, and annual wage and
salary increases during such period; (c) respondents shall pay attorneys fees of 10% of the total award; and (d) an
interest of 12% per annum or 1% per month shall be imposed on the award from the date of promulgation until fully
paid. The VA added that all separation and/or retirement benefits shall be construed from the date of regularization
subject only to the appropriate government laws and other social legislation. Ludo filed a motion for reconsideration,
but the VA denied it. On appeal, the CA affirmed in toto the assailed decision; hence, a petition was brought before
this Court raising the issue, among others, of whether a voluntary arbitrator can award benefits not claimed in the
submission agreement. In denying the petition, We ruled:cralawlibrary
Generally, the arbitrator is expected to decide only those questions expressly delineated by the submission
agreement. Nevertheless, the arbitrator can assume that he has the necessary power to make a final settlement since
arbitration is the final resort for the adjudication of disputes. The succinct reasoning enunciated by the CA in support
of its holding, that the Voluntary Arbitrator in a labor controversy has jurisdiction to render the questioned arbitral
awards, deserves our concurrence, thus:cralawlibrary
In general, the arbitrator is expected to decide those questions expressly stated and limited in the submission
agreement. However, since arbitration is the final resort for the adjudication of disputes, the arbitrator can assume
that he has the power to make a final settlement. Thus, assuming that the submission empowers the arbitrator to
decide whether an employee was discharged for just cause, the arbitrator in this instance can reasonably assume that
his powers extended beyond giving a yes-or-no answer and included the power to reinstate him with or without back
pay.
In one case, the Supreme Court stressed that "xxx the Voluntary Arbitrator had plenary jurisdiction and authority to
interpret the agreement to arbitrate and to determine the scope of his own authority subject only, in a proper case, to
the certiorari jurisdiction of this Court. The Arbitrator, as already indicated, viewed his authority as embracing not
merely the determination of the abstract question of whether or not a performance bonus was to be granted but also,
in the affirmative case, the amount thereof.
By the same token, the issue of regularization should be viewed as two-tiered issue. While the submission agreement
mentioned only the determination of the date or regularization, law and jurisprudence give the voluntary arbitrator
enough leeway of authority as well as adequate prerogative to accomplish the reason for which the law on voluntary
arbitration was created speedy labor justice. It bears stressing that the underlying reason why this case arose is to
settle, once and for all, the ultimate question of whether respondent employees are entitled to higher benefits. To
require them to file another action for payment of such benefits would certainly undermine labor proceedings and
contravene the constitutional mandate providing full protection to labor.23?r?l1
Indubitably, Ludo fortifies, not diminishes, the soundness of the questioned VA Decision. Said case reaffirms the
plenary jurisdiction and authority of the voluntary arbitrator to interpret the CBA and to determine the scope of
his/her own authority. Subject to judicial review, the leeway of authority as well as adequate prerogative is aimed at
accomplishing the rationale of the law on voluntary arbitration speedy labor justice. In this case, a complete and final
adjudication of the dispute between the parties necessarily called for the resolution of the related and incidental issue
of whether the Company still violated the CBA but without being guilty of ULP as, needless to state, ULP is committed
only if there is gross violation of the agreement.
Lastly, the Company kept on harping that both the VA and the CA conceded that its engagement of contractual
workers from PESO was a valid exercise of management prerogative. It is confused. To emphasize, declaring that a
particular act falls within the concept of management prerogative is significantly different from acknowledging that
such act is a valid exercise thereof. What the VA and the CA correctly ruled was that the Companys act of contracting
out/outsourcing is within the purview of management prerogative. Both did not say, however, that such act is a valid
exercise thereof. Obviously, this is due to the recognition that the CBA provisions agreed upon by the Company and
the Union delimit the free exercise of management prerogative pertaining to the hiring of contractual employees.
Indeed, the VA opined that "the right of the management to outsource parts of its operations is not totally eliminated
but is merely limited by the CBA," while the CA held that "this management prerogative of contracting out services,
however, is not without limitation. x x x These categories of employees particularly with respect to casual employees
serve as limitation to the Companys prerogative to outsource parts of its operations especially when hiring contractual
employees."???ñr?bl?š ??r†??l l?? l?br?rÿ
A collective bargaining agreement is the law between the parties:cralawlibrary
It is familiar and fundamental doctrine in labor law that the CBA is the law between the parties and they are obliged to
comply with its provisions. We said so in Honda Phils., Inc. v. Samahan ng Malayang Manggagawa sa
Honda:cralawlibrary
A collective bargaining agreement or CBA refers to the negotiated contract between a legitimate labor organization
and the employer concerning wages, hours of work and all other terms and conditions of employment in a bargaining
unit. As in all contracts, the parties in a CBA may establish such stipulations, clauses, terms and conditions as they
may deem convenient provided these are not contrary to law, morals, good customs, public order or public policy.
Thus, where the CBA is clear and unambiguous, it becomes the law between the parties and compliance therewith is
mandated by the express policy of the law.
Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt upon the intention of the contracting
parties, the literal meaning of their stipulations shall control. x x x.24?r?l1
In this case, Section 4, Article I (on categories of employees) of the CBA between the Company and the Union must
be read in conjunction with its Section 1, Article III (on union security). Both are interconnected and must be given
full force and effect. Also, these provisions are clear and unambiguous. The terms are explicit and the language of the
CBA is not susceptible to any other interpretation. Hence, the literal meaning should prevail. As repeatedly held, the
exercise of management prerogative is not unlimited; it is subject to the limitations found in law, collective bargaining
agreement or the general principles of fair play and justice25 Evidently, this case has one of the restrictions- the
presence of specific CBA provisions-unlike in San Miguel Corporation Employees Union-PTGWO v. Bersamira,26 De
Ocampo v. NLRC,27 Asian Alcohol Corporation v. NLRC,28 and Serrano v. NLRC29cited by the Company. To reiterate,
the CBA is the norm of conduct between the parties and compliance therewith is mandated by the express policy of
the law.30?r?l1
WHEREFORE, the petition is DENIED. The assailed June 16, 2005 Decision, as well as the October 12, 2005 Resolution
of the Court of Appeals, which sustained the October 26, 2004 Decision of the Voluntary Arbitrator, are hereby
AFFIRMED.
SO ORDERED.
11

GARDEN OF MEMORIESPARK and LIFE G.R. No. 160278

PLAN, INC. and PAULINA T. REQUIO,
Petitioners, Present:

VELASCO, JR., J., Chairperson,

PERALTA,
- versus - ABAD,
MENDOZA, and
PERLAS-BERNABE, JJ.

NATIONAL LABOR RELATIONS

COMMISSION, SECOND DIVISION,
LABOR ARBITER FELIPE
T. GARDUQUE II and HILARIA CRUZ,
Respondents.
Promulgated:

February 8, 2012

X -------------------------------------------------------------------------------------- X
DECISION

MENDOZA, J.:

This is a petition for review under Rule 45 of the Rules of Court seeking nullification of the June 11, 2003 Decision [1] and October 16, 2003
Resolution[2] of the Court of Appeals (CA), in CA-G.R. SP No. 64569, which affirmed the December 29, 2000 Decision[3] of the National Labor
Relations Commission (NLRC). The NLRC agreed with the Labor Arbiter (L.A.) in finding that petitionerGarden of Memories Memorial Park and Life
Plan, Inc. (Garden of Memories) was the employer of respondent Hilaria Cruz (Cruz), and that Garden of Memories and petitioner Paulina
Requio (Requio), were jointly and severally liable for the money claims of Cruz.

The Facts

Petitioner Garden of Memories is engaged in the business of operating a memorial park situated at Calsadang Bago, Pateros, Metro-Manila
and selling memorial Plan and services.

Respondent Cruz, on the other hand, worked at the Garden of Memories Memorial Park as a utility worker from August 1991 until her
termination in February 1998.

On March 13, 1998, Cruz filed a complaint[4] for illegal dismissal, underpayment of wages, non-inclusion in the Social Security Services,
and non-payment of legal/special holiday, premium pay for rest day, 13th month pay and service incentive leave pay against Garden of Memories before
the Department of Labor and Employment (DOLE).

Upon motion of Garden of Memories, Requio was impleaded as respondent on the alleged ground that she was its service contractor and the
employer of Cruz.

In her position paper,[5] Cruz averred that she worked as a utility worker of Garden of Memories with a salary of P115.00 per day. As a utility
worker, she was in charge, among others, of the cleaning and maintenance of the ground facilities of the memorial park. Sometime in February 1998,
she had a misunderstanding with a co-worker named Adoracion Requio regarding the use of a garden water hose. When the misunderstanding came to
the knowledge of Requio, the latter instructed them to go home and not to return anymore. After three (3) days, Cruz reported for work but she was
told that she had been replaced by another worker. She immediately reported the matter of her replacement to the personnel manager
of Garden of Memories and manifested her protest.

Cruz argued that as a regular employee of the Garden of Memories, she could not be terminated without just or valid cause. Also, her dismissal
was violative of due process as she was not afforded the opportunity to explain her side before her employment was terminated.

Cruz further claimed that as a result of her illegal dismissal, she suffered sleepless nights, serious anxiety and mental anguish.

In its Answer,[6] Garden of Memories denied liability for the claims of Cruz and asserted that she was not its employee but that of Requio, its
independent service contractor, who maintained the park for a contract price. It insisted that there was no employer-employee relationship between
them because she was employed by its service contractor, Victoriana Requio (Victoriana), who was later succeeded by her daughter, Paulina, when
she (Victoriana) got sick. Garden of Memories claimed that Requio was a service contractor who carried an independent business and undertook the
contract of work on her own account, under her own responsibility and according to her own manner and method, except as to the results thereof.

In her defense, Requio prayed for the dismissal of the complaint stating that it was Victoriana, her mother, who hired Cruz, and she merely
took over the supervision and management of the workers of the memorial park when her mother got ill. She claimed that the ownership of the business
was never transferred to her.

Requio further stated that Cruz was not dismissed from her employment but that she abandoned her work. [7]

On October 27, 1999, the LA ruled that Requio was not an independent contractor but a labor-only contractor and that her defense that Cruz
abandoned her work was negated by the filing of the present case. [8] The LA declared both Garden of Memories and Requio, jointly and severally,
liable for the monetary claims of Cruz, the dispositive portion of the decision reads:

WHEREFORE, premises considered, respondents Garden of Memories Memorial [P]ark and Life Plan, Inc.
and/or Paulina Requio are hereby ordered to jointly and severally pay within ten (10) days from receipt hereof, the
herein complainant Hilaria Cruz, the sums of ₱72,072 (₱198 x 26 days x 14 months pay), representing her eight (8)
months separation pay and six (6) months backwages; ₱42,138.46, as salary differential; ₱2,475.00, as service incentive
leave pay; and ₱12,870.00 as 13th month pay, for three (3) years, or a total sum of ₱129,555.46, plus ten percent
attorneys fee.

Complainants other claims including her prayer for damages are hereby denied for lack of concrete evidence.
12

SO ORDERED.[9]

Garden of Memories and Requio appealed the decision to the NLRC. In its December 29, 2000 Decision, the NLRC affirmed the ruling of
the LA, stating that Requio had no substantial capital or investments in the form of tools, equipment, machineries, and work premises, among others,
for her to qualify as an independent contractor. It declared the dismissal of Cruz illegal reasoning out that there could be no abandonment of work on
her part since Garden of Memories and Requio failed to prove that there was a deliberate and unjustified refusal on the part of the employee to go back
to work and resume her employment.

Garden of Memories moved for a reconsideration of the NLRC decision but it was denied for lack of merit. [10]

Consequently, Garden of Memories and Requio filed before the CA a petition for certiorari under Rule 65 of the Rules of Court. In its June
11, 2003 Decision, the CA dismissed the petition and affirmed the NLRC decision. Hence, this petition, where they asserted that:

The Public Respondents National Labor Relations Commission and Court of Appeals committed serious error,
gravely abused their discretion and acted in excess of jurisdiction when they failed to consider the provisions of Section 6
(d) of Department Order No. 10, Series of 1997, by the Department of Labor and Employment, and then rendered their
respective erroneous rulings that:

PETITIONER PAULINA REQUIO IS ENGAGED IN LABOR-ONLY CONTRACTING.

II

THERE EXISTS AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN RESPONDENT CRUZ

AND PETITIONER GARDEN OF MEMORIES.

III

RESPONDENT HILARIA CRUZ DID NOT ABANDON HER WORK.

IV

THERE IS [NO] BASIS IN GRANTING THE MONETARY AWARDS IN FAVOR OF THE RESPONDENT
CRUZ DESPITE THE ABSENCE OF A CLEAR PRONOUNCEMENT REGARDING THE LEGALITY OR
ILLEGALITY OF HER DISMISSAL.[11]

The petitioners aver that Requio is the employer of Cruz as she (Requio) is a legitimate independent contractor providing maintenance work
in the memorial park such as sweeping, weeding and watering of the lawns. They insist that there was no employer-employee relationship
between Garden of Memories and Cruz. They claim that there was a service contract between Garden of Memoriesand Requio for the latter to provide
maintenance work for the former and that the power of control, the most important element in determining the presence of such a relationship was
missing. Furthermore, Garden of Memories alleges that it did not participate in the selection or dismissal of Requios employees.

As to the issue of dismissal, the petitioners denied the same and insist that Cruz willfully and actually abandoned her work. They argue that
Cruzs utterances HINDI KO KAILANGAN ANG TRABAHO and HINDI KO KAILANGAN MAGTRABAHO AT HINDI KO KAILANGAN MAKI-USAP
KAY PAULINA REQUIO, manifested her belligerence and disinterest in her work and that her unexplained absences later only showed that she had no
intention of returning to work.

The Court finds no merit in the petition.

At the outset, it must be stressed that the jurisdiction of this Court in a petition for review on certiorari under Rule 45 of the Rules of Court
is limited to reviewing errors of law, not of fact. This is in line with the well-entrenched doctrine that the Court is not a trier of facts, and this is strictly
adhered to in labor cases.[12] Factual findings of labor officials, who are deemed to have acquired expertise in matters within their respective
jurisdictions, are generally accorded not only respect but even finality, and bind the Court when supported by substantial evidence. Particularly when
passed upon and upheld by the CA, they are binding and conclusive upon the Court and will not normally be disturbed. [13] This is because it is not the
function of this Court to analyze or weigh all over again the evidence already considered in the proceedings below; or reevaluate the credibility of
witnesses; or substitute the findings of fact of an administrative tribunal which has expertise in its special field. [14]

In the present case, the LA, the NLRC, and the CA are one in declaring that petitioner Requio was not a legitimate contractor. Echoing the
decision of the LA and the NLRC, the CA reasoned out that Requio was not a licensed contractor and had no substantial capital or investment in the
form of tool, equipment and work premises, among others.

Section 106 of the Labor Code on contracting and subcontracting provides:

Article 106. Contractor or subcontractor. - Whenever, an employer enters into a contract with another person for the
performance of the formers work, the employees of the contractor and of the latters subcontractor shall be paid in
accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code,
the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent
of the work performed under the contract, in the same manner and extent that he is liable to employees directly
employed by him.

The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the
rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions
between labor-only contracting and job contracting as well as differentiations within these types of contracting and
13

determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any
violation or circumvention of any provision of this Code.

There is labor-only contracting where the person supplying workers to an employer does not have substantial capital
or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited
and placed by such persons are performing activities which are directly related to the principal business of such
employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall
be responsible to the workers in the same manner and extent as if the latter were directly employed by
him.[Underscoring provided]
In the same vein, Sections 8 and 9, DOLE Department Order No. 10, Series of 1997, state that:

Sec. 8. Job contracting. There is job contracting permissible under the Code if the following conditions are met:

(1) The contractor carries on an independent business and undertakes the contract work on his own
account under his own responsibility according to his own manner and method, free from the
control and direction of his employer or principal in all
matters connected with the performance of the work except as to the results thereof; and

(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries,
work premises, and other materials which are necessary in the conduct of his business.

Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to an employer shall be deemed to be
engaged in labor-only contracting where such person:

(1) Does not have substantial capital or investment in the form of tools, equipment, machineries,
work premises and other materials; and

(2) The workers recruited and placed by such persons are performing activities which are directly
related to the principal business or operations of the employer in which workers are habitually
employed.

(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be considered
merely as an agent or intermediary of the employer who shall be responsible to the workers in the same manner and
extent as if the latter were directly employed by him.

(c) For cases not falling under this Article, the Secretary of Labor shall determine through appropriate orders whether
or not the contracting out of labor is permissible in the light of the circumstances of each case and after considering the
operating needs of the employer and the rights of the workers involved. In such case, he may prescribe conditions and
restrictions to insure the protection and welfare of the workers.

On the matter of labor-only contracting, Section 5 of Rule VIII-A of the Omnibus Rules Implementing the Labor Code, provides:

Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For
this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work or service for a principal, and any of the following elements
are present:

i) The contractor or subcontractor does not have substantial capital or investment which
relates to the job, work or service to be performed and the employees recruited, supplied or
placed by such contractor or subcontractor are performing activities related to the main
business of the principal, or

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

Xxxx

Thus, in determining the existence of an independent contractor relationship, several factors may be considered, such as, but not necessarily
confined to, whether or not the contractor is carrying on an independent business; the nature and extent of the work; the skill required; the term and
duration of the relationship; the right to assign the performance of specified pieces of work; the control and supervision of the work to another; the
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, manner and terms of payment. [15]

On the other hand, there is labor-only contracting where: (a) the person supplying workers to an employer does not have substantial capital
or investment in the form of tools, equipment, machineries, work premises, among others; and (b) the workers recruited and placed by such person are
performing activities which are directly related to the principal business of the employer. [16]

The Court finds no compelling reason to deviate from the findings of the tribunals below. Both the capitalization requirement and the power
of control on the part of Requio are wanting.

Generally, the presumption is that the contractor is a labor-only contracting unless such contractor overcomes the burden of proving that it
has the substantial capital, investment, tools and the like.[17] In the present case, though Garden of Memories is not the contractor, it has the burden of
proving that Requio has sufficient capital or investment since it is claiming the supposed status of Requio as independent
contractor. [18] Garden of Memories, however, failed to adduce evidence purporting to show that Requio had sufficient capitalization. Neither did it
show that she invested in the form of tools, equipment, machineries, work premises and other materials which are necessary in the completion of the
service contract.

Furthermore, Requio was not a licensed contractor. Her explanation that her business was a mere livelihood program akin to a cottage industry
provided by Garden of Memories as part of its contribution to the upliftment of the underprivileged residing near the memorial park proves that her
capital investment was not substantial. Substantial capital or investment refers to capital stocks and subscribed capitalization in the case of corporations,
tools, equipment, implements, machineries, and work premises, actually and directly used by the contractor or subcontractor in the performance or
completion of the job, work or service contracted out.[19] Obviously, Requio is a labor-only contractor.

Another determinant factor that classifies petitioner Requio as a labor-only contractor was her failure to exercise the right to control the
performance of the work of Cruz. This can be gleaned from the Service Contract Agreement [20] between Garden of Memories and Requio, to wit:
14

xxxx

NOW THEREFORE, premises considered, the parties hereto have hereunto agreed on the following terms and
conditions:

1. That the Contractor shall undertake the maintenance of the above-mentioned works in strict compliance
with and subject to all the requirements and standards of GMMPLPI.

2. Likewise, the Contractor shall perform all other works that may from time to time be designated by
GMMPLPI thru its authorized representatives, which work is similar in nature to the responsibilities of a regular
employee with a similar function.

3. The contract price for the labor to be furnished or the service to be rendered shall be THIRTY-FIVE
THOUSAND (₱35,000.00) PESOS per calendar month, payable as follows:

(a) Eight Thousand Seven Hundred Fifty Thousand (₱8,750.00) Pesos payable on every
7th, 15th, 23rd and 30th of the month.

4. The period of this Contract shall be for Three (3) months from Feb 1, April 30, 1998 and renewable at the
option of the Management.

5. It is expressly recognized that this contract was forged for the purpose of supplying the necessary
maintenance work and in no way shall the same be interpreted to have created an employer-employee relationship.

Xxxx [Underscoring supplied]

The requirement of the law in determining the existence of independent contractorship is that the contractor should undertake the work on
his own account, under his own responsibility, according to his own manner and method, free from the control and direction of the employer except as
to the results thereof.[21] In this case, however, the Service Contract Agreement clearly indicates that Requio has no discretion to determine the means
and manner by which the work is performed. Rather, the work should be in strict compliance with, and subject to, all requirements and standards
of Garden of Memories.
Under these circumstances, there is no doubt that Requio is engaged in labor-only contracting, and is considered merely an agent
of Garden of Memories. As such, the workers she supplies should be considered as employees of Garden of Memories. Consequently, the latter, as
principal employer, is responsible to the employees of the labor-only contractor as if such employees have been directly employed by it.[22]

Notably, Cruz was hired as a utility worker tasked to clean, sweep and water the lawn of the memorial park. She performed activities which
were necessary or desirable to its principal trade or business. Thus, she was a regular employee of Garden of Memories and cannot be dismissed except
for just and authorized causes.[23]

Moreover, the Court agrees with the findings of the tribunals below that respondent Cruz did not abandon her work but was illegally
dismissed.

As the employer, Garden of Memories has the burden of proof to show the employee's deliberate and unjustified refusal to resume his
employment without any intention of returning.[24] For abandonment to exist, two factors must be present: (1) the failure to report for work or absence
without valid or justifiable reason; and (2) a clear intention to sever employer-employee relationship, with the second element as the more determinative
factor being manifested by some overt acts.[25] It has been said that abandonment of position cannot be lightly inferred, much less legally presumed
from certain equivocal acts.[26] Mere absence is not sufficient.[27]

In this case, no such intention to abandon her work can be discerned from the actuations of Cruz. Neither were there overt acts which could
be considered manifestations of her desire to truly abandon her work. On the contrary, her reporting to the personnel manager that she had been replaced
and the immediate filing of the complaint before the DOLE demonstrated a desire on her part to continue her employment with Garden of Memories.
As correctly pointed out by the CA, the filing of the case for illegal dismissal negated the allegation of abandonment.

WHEREFORE, the petition is DENIED. The June 11, 2003 Decision of the Court of Appeals in CA-G.R. SP No. 64569 and its October
16, 2003 Resolution are hereby AFFIRMED.

SO ORDERED.