LABOR CASES:

1.

Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 90739 October 3, 1991

NATIONAL FEDERATION OF LABOR UNIONS (NAFLU), and FLORANTE ONGBUECO, petitioners,

vs.

NATIONAL LABOR RELATIONS COMMISSION, and UNION AJINOMOTO. INC., respondents.

Bienvenida N. Carreon. for F. Ongbueco.

Felipe P. Fuentes, Jr. for private respondent.

SARMIENTO, J.:

Florante Ongbueco was an OIC and First Production Staff Engineer 1 of the private respondent, Union Ajinomoto, Inc. (Ajinomoto, for brevity).
Sometime in September 1982, the Bureau of Energy (BEU, for brevity), pursuant to B.P. 73, otherwise known as the Omnibus Energy Conservation
Law, required Ajinomoto to appoint an employee who would act as its

Energy Manager. 2 The duties and responsibilities of the Energy Manager were outlined, thus:

1. Design, plan, implement, monitor, and evaluate energy conservation programs and activities of his establishment.

2. Organize an energy conservation committee or the like in establishment and to head such committee.

3. Submit energy consumption reports and energy conservation programs to the Bureau of Energy Utilization.

4. Cooperate with the Ministry of Energy in the conduct of energy utilization efficiency.

5. Train his employer's personnel on energy conservation as part of the company's energy conservation education effort. 3

This order was followed by a letter 4 dated April 25, 1983 reminding Ajinomoto to submit its Quarterly Energy Consumption Reports, as provided for
by the said B.P. 73.

The task of preparing the required reports in conformance with BEU's April 25, 1983 letter was thus assigned to Engr. Ongbueco from then on, plus he
was given the additional assignment of preparing all the reports required by the BEU.

In a succeeding correspondence, 5 the BEU requested Ajinomoto to submit the name and bio-data of the employee it had designated as its Energy
Manager. And, in compliance with this directive, Ajinomoto, on December 8, 1983, appointed Engr. Ongbueco as Energy Manager. 6

Thereafter, by using the form attached to the letter, as advised, Ajinomoto furnished the BEU with the name and bio-data of its newly appointed
Energy Manager, Florante Ongbueco.

Ajinomoto deemed it unnecessary to provide Engr. Ongbueco with a salary increase since his designation as Energy Manager supposedly did not entail
additional responsibilities other than the preparation of the required consumption reports which he had already been attending to even prior to his
appointment. 7 For nearly three years, Engr. Ongbueco performed his role as Energy Manager. The arrangement remained undisturbed.

However, on July 7, 1986, Engr. Ongbueco filed a complaint 8 with the National Labor Relations Commission (NLRC, for brevity) for underpayment of
salary from December 1983, and on September 22, 1986, an amended complaint, 9 claiming that his promotion to the rank of Energy Manager,
entitled him to a corresponding salary increase.

On November 27, 1987, Labor Arbiter Donato Quinto, Jr. rendered judgment in favor of the petitioner, Engr. Ongbueco. The dispositive portion of the
decision reads:

WHEREFORE, in the light of the foregoing premises, judgment is hereby rendered declaring complainant to have been properly promoted with his
appointment as Energy Manager and consequently ordering respondent to properly adjust the salary of herein complainant commensurate to the
position he was appointed and promoted [sic], in accordance with respondent [sic] pay scale level, but not lower than the rank of Section Head.
SO ORDERED. 10

Private respondent Ajinomoto appealed to the NLRC, whose, Fourth Division affirmed, on May 6, 1988, the Labor Arbiter's decision. 11 Ajinomoto's
subsequent motion for reconsideration was denied by a resolution issued by the same Fourth Division on June 16, 1988. 12 Still not satisfied,
Ajinomoto filed a Second Motion for Reconsideration with a Prayer to Refer the Case to the Commission En Banc. 13 During its pendency however, the
Secretary of the Department of Labor and Employment issued Administrative Order 36, pursuant to R.A. 6715, ordering th cessation of holding En
Banc sessions for the purpose of hearin and disposing cases, and authorizing the NLRC to discharge it adjudicating functions through its respective
Divisions.

The present case was then re-raffled and assigned to th Second Division of the NLRC which entertained the motion. On September 29, 1989, the
Second Division rendered a decision 14 reversing and setting aside the decision and the resolution o the Fourth Division. The Second Division disposed
as follows:

WHEREFORE, the appealed decision is hereby Revised and Se Aside and a new one entered dismissing the complaint for underpay ment for lack of
merit. 15

Hence, this special civil action for certiorari.

The present action is basically anchored on the petitioner' supposition that his position as Energy Manager is of a permanent nature considering the
continuing policy of the State regarding energy conservation, and constitutes a promotion in rank from a rank-and-file level to a managerial position.
16 Consequently, he asks for what he presumes a corresponding salary increase. He supports his demand by citing numerous energy conservation
awards received by Ajinomoto, for instance The Don Emilio Abello Award for three consecutive year supposedly all made possible through his actual
efforts, "God Given talent and ability." 17

The petitioner then invokes the oft-repeated pronouncement that doubts in the interpretation and implementation of t labor laws should be resolved
in favor of labor 18 in justifying h allegation that even if B.P. 73 does not state a salary nor a increase in the salary of the employee to be appointed as
a energy manager, it would not have been the intention of the law-making authority to do injustice to the employee concerned. 19 Thus, he claims
that the ambiguity created by B.P. 73 should be resolved in his favor.

Finally, he asserts that the labor arbiter is vested with the power to order an increase in his (the petitioner's) salary by reason of his (the petitioner's)
promotion to the rank of Energy Manager. To support his contention, the petitioner quotes Article 217 * of the Labor Code:

Art. 217. Jurisdiction of Labor Arbiters and the Commission. (a) The Labor Arbiters shall have the original and exclusive jurisdiction to hear and
decide ..., the following cases ...:

xxx xxx xxx

3. All money claims of workers, including those based on nonpayment or underpayment of wages, overtime compensation, separation
pay and other benefits provided by law or appropriate agreement, except claims for employees compensation, social security, medicare and maternity
benefits;

xxx xxx xxx

The respondents, on the other hand, have a common defense. They argue that there is no particular labor law nor contract of employment upon
which the petitioner may anchor his claim for a salary increase. And although the duties and responsibilities of the Energy Manager have been
outlined, the petitioner was appointed as Energy Manager, not to design and implement an energy conservation program for the company, as an
effective scheme was already well in place even prior to the enactment of B.P. 73, but merely to comply with the law requiring the appointment of an
Energy Manager. 20

The respondents also aver that the petitioner could not have been promoted to managerial level as he was not vested with any powers and
prerogatives of a managerial employee. 21 His appointment as Energy Manager was simply a lateral movement rather than a scalar ascent.

At length, the respondents insist that the matter of salary increases is entirely a management prerogative which should be addressed to the sound
discretion of the employer, and is consequently outside the jurisdiction of the labor arbiter. 22

The issue to be resolved in the instant case is simple — whether or not the petitioner is entitled to a salary increase upon his assumption of office as
an Energy Manager.

We believe not.

It is a well-settled rule that labor laws do not authorize inter-ference with the employer's judgment in the conduct of his business. The determination
of the qualifications and fitness o workers for hiring and firing, promotion or reassignment, are exclusive prerogatives of management. The Labor Code
and it implementing Rules do not vest in the Labor Arbiters nor in th different Divisions of the NLRC (nor in the courts) managerial authority. The
employer is free to determine, using his own discretion and business judgment, all elements of employment "from hiring to firing," except in cases of
unlawful discrimination or those which may be provided for by law. There is none ithe instant case.

We agree with the respondents that the petitioner was no promoted, but he was merely given the functional title of Energy Manager to comply with
B.P. 73, as distinguished from hi official title of Staff Engineer. There is no showing that he ha ceased from performing his duties as Staff Engineer. Of
primordial consideration is not the nomenclature or title given to th employee, but the nature of his functions. There is no substantial proof that the
petitioner was vested with any of the power and prerogatives of a managerial employee, as defined by the Labor Code.

However, in gratia argumenti that indeed the petitioner w promoted in rank, it does not necessarily follow that he entitled to a corresponding salary
increase. The petitioner should have been aware of this fact since he even cited the case of Millares vs. Subido 23 in his Memorandum, 24 in which
this Court, speaking through Acting Chief Justice J.B.L. Reyes, said:

Promotion, on the other hand, is the advancement from one position to another with an increase in duties and responsibilities as authorized by law,
and usually accompanied by an increase in salary. (Emphasis supplied) 25

The word usually simply means that not all promotions may be accompanied by a corresponding salary increase, notwithstanding the increase in
duties and responsibilities of the employee.

Our pronouncement in Dosch vs. NLRC, 26 citing the Millares case, supra, is well-defined.

It has been held that promotion denotes a scalar ascent of an officer or an employee to another position, higher either in rank or salary. (Emphasis
supplied). 27

Again the phrase either in rank or salary plainly means that a promotion may denote an advancement merely in rank without an equivalent increase
in salary.

Undoubtedly, a subsequent increase in salary, granting that there indeed was a promotion, is non-sequitur.

Moreover, we have already specifically ruled that the matter of salary increases is a management prerogative. In Batongbacal vs. Associated Bank,
(1988), 28 we had this to say:

There is a semblance of discrimination in this aspect of the bank's organizational set-up but we are not prepared to pre-empt the employer's
prerogative to grant salary increases to its employees. 29

An employer's exercise of management prerogatives, with or without reason, does not, per se, constitute unjust discrimination. Unless there is a
showing of grave abuse of discretion, we can not substitute our discretion and judgment for that which is clearly and exclusively management's
prerogatives. To do so would take away from the employer what rightly belongs to him.

On the issue of jurisdiction, we agree with the petitioner that the Labor Arbiter and the Commission have jurisdiction over all money claims of
workers, including underpayment of wages. Art. 217(a) (6) of the Labor Code, as amended, can not be any clearer:

Art. 217. Jurisdiction of Labor Arbiter and the Commission. (a) Except as otherwise provided under this Code, the Labor Arbiters shall have original
and exclusive jurisdiction to hear and decide ..., the following cases involving all workers, whether agricultural or non-agricultural:

xxx xxx xxx

(6) Except claims for Employees Compensation, Social Security, Medicare and Maternity benefits, all other claims, arising from
employer-employee relations, ... involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether or not accompanied with a
claim for reinstatement.

xxx xxx xxx

(Emphasis supplied)

Definitely, this is within the province of the labor arbiter, th total salary differential claimed by the petitioner, being more than one million pesos
(P1,762,031,00, excluding damages an attorney's fees). 30 Our ruling in Servando's Inc. vs. Secretary of Labor 31 explicitly defines the Code:

... the exclusive jurisdiction to hear and decide employees' claim arising from employer-employee relations, exceeding the aggregate amount of
P5,000.00 for each employee is vested in the Labor Arbiter (Article 21[a] [6]).

However, before the labor arbiter or the Commission can favorably act on these claims, the said claims must be based on law or appropriate
agreement. Otherwise, this would be a violation of the free will of management to conduct its own business affairs, The labor arbiter, absent a
showing of grave abuse of discretion on the part of the employer, should have a ground where he can base his findings. Evidently, there is no law nor
agreement upon which the petitioner may justify his demand for a salary increase. Neither has the employer committed a grave abuse of discretion.

The petitioner's contention — that the ambiguity created by B.P. 73 in failing to provide for a salary (or a salary increase, as the case may be) for the
Energy Manager to be appointed should be resolved in his favor — is misplaced and must likewise fail. The law is very clear. The fact that B.P. 73 did
not provide for a salary for the Energy Manager simply means that the law left that matter to the discretion of the employer, consonant with existing
jurisprudence. Otherwise, it would have been very easy to insert a salary scale for the position of Energy Manager in the said law. Where the law is
clear, there is no need for interpretation nor construction, but merely application.

Besides, it would be stretching one's imagination too far if one considers B.P. 73 as a labor law — where doubts are resolved in favor of labor. B.P. 73 is
a law concerning the promotion of energy conservation. Its provision on the appointment of an Energy Manager is merely incidental and does not
change the nature of the law, from a law on energy conservation to a labor law.However, while we continuously affirm our enduring sympathy for the
welfare of the laborers, especially the low-salaried but modest rank-and-file whose talents, efforts, patience, and dedication have often gone
unrewarded, we can not trample upon the rights of employers in their exercise of what clearly are management prerogatives. The employees inherent
right to control and manage his/her affairs efficiently and effectively must, likewise, be respected.

WHEREFORE, the petition is DISMISSED there being no grave abuse of discretion committed by the NLRC.

SO ORDERED.

Melencio-Herrera (Chairperson), Paras, Padilla and Regalado, JJ., concur.

2.

FIRST DIVISION

[G.R. No. 128845. June 1, 2000]

INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner, vs. HON. LEONARDO A. QUISUMBING in his capacity as the Secretary of Labor
and Employment; HON. CRESENCIANO B. TRAJANO in his capacity as the Acting Secretary of Labor and Employment; DR. BRIAN MACCAULEY in his
capacity as the Superintendent of International School-Manila; and INTERNATIONAL SCHOOL, INC., respondents.

DECISION

KAPUNAN, J.:

Receiving salaries less than their counterparts hired abroad, the local-hires of private respondent School, mostly Filipinos, cry discrimination. We
agree. That the local-hires are paid more than their colleagues in other schools is, of course, beside the point. The point is that employees should be
given equal pay for work of equal value. That is a principle long honored in this jurisdiction. That is a principle that rests on fundamental notions of
justice. That is the principle we uphold today.

Private respondent International School, Inc. (the School, for short), pursuant to Presidential Decree 732, is a domestic educational institution
established primarily for dependents of foreign diplomatic personnel and other temporary residents.[1] To enable the School to continue carrying out
its educational program and improve its standard of instruction, Section 2(c) of the same decree authorizes the School to

employ its own teaching and management personnel selected by it either locally or abroad, from Philippine or other nationalities, such personnel
being exempt from otherwise applicable laws and regulations attending their employment, except laws that have been or will be enacted for the
protection of employees.

Accordingly, the School hires both foreign and local teachers as members of its faculty, classifying the same into two: (1) foreign-hires and (2) local-
hires. The School employs four tests to determine whether a faculty member should be classified as a foreign-hire or a local hire:

a.....What is one's domicile?

b.....Where is one's home economy?

c.....To which country does one owe economic allegiance?

d.....Was the individual hired abroad specifically to work in the School and was the School responsible for bringing that individual to the Philippines?
[2]

Should the answer to any of these queries point to the Philippines, the faculty member is classified as a local hire; otherwise, he or she is deemed a
foreign-hire.

The School grants foreign-hires certain benefits not accorded local-hires. These include housing, transportation, shipping costs, taxes, and home leave
travel allowance. Foreign-hires are also paid a salary rate twenty-five percent (25%) more than local-hires. The School justifies the difference on two
"significant economic disadvantages" foreign-hires have to endure, namely: (a) the "dislocation factor" and (b) limited tenure. The School explains:

A foreign-hire would necessarily have to uproot himself from his home country, leave his family and friends, and take the risk of deviating from a
promising career path-all for the purpose of pursuing his profession as an educator, but this time in a foreign land. The new foreign hire is faced with
economic realities: decent abode for oneself and/or for one's family, effective means of transportation, allowance for the education of one's children,
adequate insurance against illness and death, and of course the primary benefit of a basic salary/retirement compensation.

Because of a limited tenure, the foreign hire is confronted again with the same economic reality after his term: that he will eventually and inevitably
return to his home country where he will have to confront the uncertainty of obtaining suitable employment after a long period in a foreign land.

The compensation scheme is simply the School's adaptive measure to remain competitive on an international level in terms of attracting competent
professionals in the field of international education.[3]

When negotiations for a new collective bargaining agreement were held on June 1995, petitioner International School Alliance of Educators, "a
legitimate labor union and the collective bargaining representative of all faculty members"[4] of the School, contested the difference in salary rates
between foreign and local-hires. This issue, as well as the question of whether foreign-hires should be included in the appropriate bargaining unit,
eventually caused a deadlock between the parties.

On September 7, 1995, petitioner filed a notice of strike. The failure of the National Conciliation and Mediation Board to bring the parties to a
compromise prompted the Department of Labor and Employment (DOLE) to assume jurisdiction over the dispute. On June 10, 1996, the DOLE Acting
Secretary, Crescenciano B. Trajano, issued an Order resolving the parity and representation issues in favor of the School. Then DOLE Secretary
Leonardo A. Quisumbing subsequently denied petitioner's motion for reconsideration in an Order dated March 19, 1997. Petitioner now seeks relief in
this Court.

Petitioner claims that the point-of-hire classification employed by the School is discriminatory to Filipinos and that the grant of higher salaries to
foreign-hires constitutes racial discrimination.

The School disputes these claims and gives a breakdown of its faculty members, numbering 38 in all, with nationalities other than Filipino, who have
been hired locally and classified as local hires.[5]The Acting Secretary of Labor found that these non-Filipino local-hires received the same benefits as
the Filipino local-hires:

The compensation package given to local-hires has been shown to apply to all, regardless of race. Truth to tell, there are foreigners who have been
hired locally and who are paid equally as Filipino local hires.[6]

The Acting Secretary upheld the point-of-hire classification for the distinction in salary rates:

The principle "equal pay for equal work" does not find application in the present case. The international character of the School requires the hiring of
foreign personnel to deal with different nationalities and different cultures, among the student population.

We also take cognizance of the existence of a system of salaries and benefits accorded to foreign hired personnel which system is universally
recognized. We agree that certain amenities have to be provided to these people in order to entice them to render their services in the Philippines and
in the process remain competitive in the international market.

Furthermore, we took note of the fact that foreign hires have limited contract of employment unlike the local hires who enjoy security of tenure. To
apply parity therefore, in wages and other benefits would also require parity in other terms and conditions of employment which include the
employment contract.

A perusal of the parties' 1992-1995 CBA points us to the conditions and provisions for salary and professional compensation wherein the parties agree
as follows:

All members of the bargaining unit shall be compensated only in accordance with Appendix C hereof provided that the Superintendent of the School
has the discretion to recruit and hire expatriate teachers from abroad, under terms and conditions that are consistent with accepted international
practice.

Appendix C of said CBA further provides:

The new salary schedule is deemed at equity with the Overseas Recruited Staff (OSRS) salary schedule. The 25% differential is reflective of the agreed
value of system displacement and contracted status of the OSRS as differentiated from the tenured status of Locally Recruited Staff (LRS).

To our mind, these provisions demonstrate the parties' recognition of the difference in the status of two types of employees, hence, the difference in
their salaries.

The Union cannot also invoke the equal protection clause to justify its claim of parity. It is an established principle of constitutional law that the
guarantee of equal protection of the laws is not violated by legislation or private covenants based on reasonable classification. A classification is
reasonable if it is based on substantial distinctions and apply to all members of the same class. Verily, there is a substantial distinction between
foreign hires and local hires, the former enjoying only a limited tenure, having no amenities of their own in the Philippines and have to be given a
good compensation package in order to attract them to join the teaching faculty of the School.[7]

We cannot agree.

That public policy abhors inequality and discrimination is beyond contention. Our Constitution and laws reflect the policy against these evils. The
Constitution[8] in the Article on Social Justice and Human Rights exhorts Congress to "give highest priority to the enactment of measures that protect
and enhance the right of all people to human dignity, reduce social, economic, and political inequalities." The very broad Article 19 of the Civil Code
requires every person, "in the exercise of his rights and in the performance of his duties, [to] act with justice, give everyone his due, and observe
honesty and good faith."

International law, which springs from general principles of law,[9] likewise proscribes discrimination. General principles of law include principles of
equity,[10] i.e., the general principles of fairness and justice, based on the test of what is reasonable.[11] The Universal Declaration of Human Rights,
[12] the International Covenant on Economic, Social, and Cultural Rights,[13] the International Convention on the Elimination of All Forms of Racial
Discrimination,[14] the Convention against Discrimination in Education,[15] the Convention (No. 111) Concerning Discrimination in Respect of
Employment and Occupation[16] - all embody the general principle against discrimination, the very antithesis of fairness and justice. The Philippines,
through its Constitution, has incorporated this principle as part of its national laws.

In the workplace, where the relations between capital and labor are often skewed in favor of capital, inequality and discrimination by the employer
are all the more reprehensible.
The Constitution[17] specifically provides that labor is entitled to "humane conditions of work." These conditions are not restricted to the physical
workplace - the factory, the office or the field - but include as well the manner by which employers treat their employees.

The Constitution[18] also directs the State to promote "equality of employment opportunities for all." Similarly, the Labor Code[19] provides that the
State shall "ensure equal work opportunities regardless of sex, race or creed." It would be an affront to both the spirit and letter of these provisions if
the State, in spite of its primordial obligation to promote and ensure equal employment opportunities, closes its eyes to unequal and discriminatory
terms and conditions of employment.[20]

Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. Article 135, for example, prohibits and penalizes[21] the payment
of lesser compensation to a female employee as against a male employee for work of equal value. Article 248 declares it an unfair labor practice for an
employer to discriminate in regard to wages in order to encourage or discourage membership in any labor organization.

Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in Article 7 thereof, provides:

The States Parties to the present Covenant recognize the right of everyone to the enjoyment of just and favourable conditions of work, which ensure,
in particular:

a.....Remuneration which provides all workers, as a minimum, with:

i.....Fair wages and equal remuneration for work of equal value without distinction of any kind, in particular women being guaranteed conditions of
work not inferior to those enjoyed by men, with equal pay for equal work;

x x x.

The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal truism of "equal pay for equal work." Persons who
work with substantially equal qualifications, skill, effort and responsibility, under similar conditions, should be paid similar salaries.[22] This rule
applies to the School, its "international character" notwithstanding.

The School contends that petitioner has not adduced evidence that local-hires perform work equal to that of foreign-hires.[23] The Court finds this
argument a little cavalier. If an employer accords employees the same position and rank, the presumption is that these employees perform equal
work. This presumption is borne by logic and human experience. If the employer pays one employee less than the rest, it is not for that employee to
explain why he receives less or why the others receive more. That would be adding insult to injury. The employer has discriminated against that
employee; it is for the employer to explain why the employee is treated unfairly.

The employer in this case has failed to discharge this burden. There is no evidence here that foreign-hires perform 25% more efficiently or effectively
than the local-hires. Both groups have similar functions and responsibilities, which they perform under similar working conditions.

The School cannot invoke the need to entice foreign-hires to leave their domicile to rationalize the distinction in salary rates without violating the
principle of equal work for equal pay.

"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for services performed." Similarly, the Philippine Legal Encyclopedia
states that "salary" is the "[c]onsideration paid at regular intervals for the rendering of services." In Songco v. National Labor Relations Commission,
[24] we said that:

"salary" means a recompense or consideration made to a person for his pains or industry in another man's business. Whether it be derived from
"salarium," or more fancifully from "sal," the pay of the Roman soldier, it carries with it the fundamental idea of compensation for services rendered.
(Emphasis supplied.)

While we recognize the need of the School to attract foreign-hires, salaries should not be used as an enticement to the prejudice of local-hires. The
local-hires perform the same services as foreign-hires and they ought to be paid the same salaries as the latter. For the same reason, the "dislocation
factor" and the foreign-hires' limited tenure also cannot serve as valid bases for the distinction in salary rates. The dislocation factor and limited
tenure affecting foreign-hires are adequately compensated by certain benefits accorded them which are not enjoyed by local-hires, such as housing,
transportation, shipping costs, taxes and home leave travel allowances.

The Constitution enjoins the State to "protect the rights of workers and promote their welfare,"[25] "to afford labor full protection."[26] The State,
therefore, has the right and duty to regulate the relations between labor and capital.[27] These relations are not merely contractual but are so
impressed with public interest that labor contracts, collective bargaining agreements included, must yield to the common good.[28] Should such
contracts contain stipulations that are contrary to public policy, courts will not hesitate to strike down these stipulations.

In this case, we find the point-of-hire classification employed by respondent School to justify the distinction in the salary rates of foreign-hires and
local hires to be an invalid classification. There is no reasonable distinction between the services rendered by foreign-hires and local-hires. The
practice of the School of according higher salaries to foreign-hires contravenes public policy and, certainly, does not deserve the sympathy of this
Court.

We agree, however, that foreign-hires do not belong to the same bargaining unit as the local-hires.

A bargaining unit is "a group of employees of a given employer, comprised of all or less than all of the entire body of employees, consistent with
equity to the employer indicate to be the best suited to serve the reciprocal rights and duties of the parties under the collective bargaining provisions
of the law."[29] The factors in determining the appropriate collective bargaining unit are (1) the will of the employees (Globe Doctrine); (2) affinity and
unity of the employees' interest, such as substantial similarity of work and duties, or similarity of compensation and working conditions (Substantial
Mutual Interests Rule); (3) prior collective bargaining history; and (4) similarity of employment status.[30] The basic test of an asserted bargaining
unit's acceptability is whether or not it is fundamentally the combination which will best assure to all employees the exercise of their collective
bargaining rights.[31]

It does not appear that foreign-hires have indicated their intention to be grouped together with local-hires for purposes of collective bargaining. The
collective bargaining history in the School also shows that these groups were always treated separately. Foreign-hires have limited tenure; local-hires
enjoy security of tenure. Although foreign-hires perform similar functions under the same working conditions as the local-hires, foreign-hires are
accorded certain benefits not granted to local-hires. These benefits, such as housing, transportation, shipping costs, taxes, and home leave travel
allowance, are reasonably related to their status as foreign-hires, and justify the exclusion of the former from the latter. To include foreign-hires in a
bargaining unit with local-hires would not assure either group the exercise of their respective collective bargaining rights.

WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby GRANTED IN PART. The Orders of the Secretary of Labor and Employment
dated June 10, 1996 and March 19, 1997, are hereby REVERSED and SET ASIDE insofar as they uphold the practice of respondent School of according
foreign-hires higher salaries than local-hires.

SO ORDERED.

Puno, and Pardo, JJ., concur.

Davide, Jr., C.J., (Chairman), on official leave.

Ynares-Santiago, J., on leave.

3.

FIRST DIVISION

[ G.R. No. 212054, March 11, 2015 ]

ST. LUKE'S MEDICAL CENTER, INC., PETITIONER, VS. MARIA THERESA V. SANCHEZ, RESPONDENT.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari[1] are the Decision[2] dated November 21, 2013 and the Resolution[3] dated April 4, 2014 of the Court
of Appeals (CA) in CA-G.R. SP No. 129108 which affirmed the Decision[4] dated November 19, 2012 and the Resolution[5] dated January 14, 2013 of
the National Labor Relations Commission (NLRC) in NLRC LAC No. 06-001858-12, declaring the dismissal of respondent Maria Theresa V. Sanchez
(Sanchez) illegal.

The Facts

On June 29, 2009, Sanchez was hired by petitioner St. Luke's Medical Center, Inc. (SLMC) as a Staff Nurse, and was eventually assigned at SLMC,
Quezon City's Pediatric Unit until her termination on July 6, 2011 for her purported violation of SLMC's Code of Discipline, particularly Section 1, Rule
1 on Acts of Dishonesty, i.e., Robbery, Theft, Pilferage, and Misappropriation of Funds. [6]

Records reveal that at the end of her shift on May 29, 2011, Sanchez passed through the SLMC Centralization Entrance/Exit where she was subjected
to the standard inspection procedure by the security personnel. In the course thereof, the Security Guard on-duty, Jaime Manzanade (SG
Manzanade), noticed a pouch in her bag and asked her to open the same.[7] When opened, said pouch contained the following assortment of medical
stocks which were subsequently confiscated: (a) Syringe 10cl [4 pieces]; (b) Syringe 5cl [3 pieces]; (c) Syringe 3cl [3 pieces]; (d) Micropore [1 piece]; (e)
Cotton Balls [1 pack]; (f) Neoflon g26 [1 piece]; (g) Venofix 25 [2 pieces]; and (h) Gloves [4 pieces] (questioned items).[8] Sanchez asked SG Manzanade
if she could just return the pouch inside the treatment room; however, she was not allowed to do so.[9] Instead, she was brought to the SLMC In-
House Security Department (IHSD) where she was directed to write an Incident Report explaining why she had the questioned items in her possession.
[10] She complied[11] with the directive and also submitted an undated handwritten letter of apology[12] (handwritten letter) which reads as follows:

To In-House Security,

I am very sorry for bringing things from [SLMC] inside my bag. Pasensya na po. Taos-puso po akong humihingi ng tawad sa aking pagkakasala, Alam ko
po na ako ay nagkamali. Hindi ko po dapat dinala yung mga gamit sa hospital. Hindi ko po alam kung [paano] ako magsisimulang humingi ng patawad.
Kahit alam kong bawal ay nagawa kong makapag uwi ng gamit. Marami pang gamit dahil sa naipon po. Paisa-isa nagagawa kong makakuha pag
nakakalimutan kong isoli. Hindi ko na po naiwan sa nurse station dahil naisip kong magagamit ko rin po pag minsang nagkakaubusan ng stocks at
talagang may kailangan.

Humihingi po ako ng tawad sa aking ginawa. Isinakripisyo ko ang hindi pagiging "toxic" sa pagkuha ng gamit para sa bagay na alam kong mali. Inaamin
ko na ako'y naging madamot, pasuway at makasalanan. Inuna ko ang comfort ko keysa gumawa ng tama. Manikluhod po akong humihingi ng tawad.

Sorry po. Sorry po. Sorry po talaga.[13]

In a memorandum[14] of even date, the IHSD, Customer Affairs Division, through Duty Officer Hernani R. Janayon, apprised SLMC of the incident,
highlighting that Sanchez expressly admitted that she intentionally brought out the questioned items.

An initial investigation was also conducted by the SLMC Division of Nursing[15] which thereafter served Sanchez a notice to explain.[16]

On May 31, 2011, Sanchez submitted an Incident Report Addendum[17] (May 31, 2011 letter), explaining that the questioned items came from the
medication drawers of patients who had already been discharged, and, as similarly practiced by the other staff members, she started saving these
items as excess stocks in her pouch, along with other basic items that she uses during her shift.[18] She then put the pouch inside the lowest drawer
of the bedside table in the treatment room for use in immediate procedures in case replenishment of stocks gets delayed. However, on the day of the
incident, she failed to return the pouch inside the medication drawer upon getting her tri-colored pen and calculator and, instead, placed it inside her
bag. Eventually, she forgot about the same as she got caught up in work, until it was noticed by the guard on duty on her way out of SMLC's premises.

Consequently, Sanchez was placed under preventive suspension effective June 3, 2011 until the conclusion of the investigation by SLMC's Employee
and Labor Relations Department (ELRD)[19] which, thereafter, required her to explain why she should not be terminated from service for "acts of
dishonesty" due to her possession of the questioned items in violation of Section 1, Rule I of the SLMC Code of Discipline.[20] In response, she
submitted a letter[21] dated June 13, 2011, which merely reiterated her claims in her previous May 31, 2011 letter. She likewise requested for a case
conference,[22] which SLMC granted.[23] After hearing her side, SLMC, on July 4, 2011, informed Sanchez of its decision to terminate her employment
effective closing hours of July 6, 2011. [24] This prompted her to file a complaint for illegal dismissal before the NLRC, docketed as NLRC NCR Case No.
07-11042-11.

In her position paper,[25] Sanchez maintained her innocence, claiming that she had no intention of bringing outside the SLMC's premises the
questioned items since she merely inadvertently left the pouch containing them in her bag as she got caught up in work that day. She further asserted
that she could not be found guilty of pilferage since the questioned items found in her possession were neither SLMC's nor its employees' property.
She also stressed the fact that SLMC did not file any criminal charges against her. Anent her supposed admission in her handwritten letter, she claimed
that she was unassisted by counsel when she executed the same and, thus, was inadmissible for being unconstitutional.[26]

For its part,[27] SLMC contended that Sanchez was validly dismissed for just cause as she had committed theft in violation of Section 1,[28] Rule I of
the SLMC Code of Discipline,[29] which punishes acts of dishonesty, i.e., robbery, theft, pilferage, and misappropriation of funds, with termination
from service.

The LA Ruling

In a Decision[30] dated May 27, 2012, the Labor Arbiter (LA) ruled that Sanchez was validly dismissed[31] for intentionally taking the property of
SLMC's clients for her own personal benefit,[32] which constitutes an act of dishonesty as provided under SLMC's Code of Discipline.

According to the LA, Sanchez's act of theft was evinced by her attempt to bring the questioned items that did not belong to her out of SLMC's
premises; this was found to be analogous to serious misconduct which is a just cause to dismiss her.[33] The fact that the items she took were neither
SLMC's nor her co-employees' property was not found by the LA to be material since the SLMC Code of Discipline clearly provides that acts of
dishonesty committed to SLMC, its doctors, its employees, as well as its customers, are punishable by a penalty of termination from service.[34] To
this, the LA opined that "[i]t is rather illogical to distinguish the persons with whom the [said] acts may be committed as SLMC is also answerable to
the properties of its patients."[35] Moreover, the LA observed that Sanchez was aware of SLMC's strict policy regarding the taking of hospital/medical
items as evidenced by her handwritten letter,[36] but nonetheless committed the said misconduct. Finally, the LA pointed out that SLMC's non-filing of
a criminal case against Sanchez did not preclude a determination of her serious misconduct, considering that the filing of a criminal case is entirely
separate and distinct from the determination of just cause for termination of employment.[37]

Aggrieved, Sanchez appealed[38] to the NLRC.

The NLRC Ruling

In a Decision[39] dated November 19, 2012, the NLRC reversed and set aside the LA ruling, and held that Sanchez was illegally dismissed.

The NLRC declared that the alleged violation of Sanchez was a unique case, considering that keeping excess hospital stocks or "hoarding" was an
admitted practice amongst nurses in the Pediatric Unit which had been tolerated by SLMC management for a long time.[40] The NLRC held that while
Sanchez expressed remorse for her misconduct in her handwritten letter, she manifested that she only "hoarded" the questioned items for future use
in case their medical supplies are depleted, and not for her personal benefit.[41] It further held that SLMC failed to establish that Sanchez was
motivated by ill-will when she brought out the questioned items, noting: (a) the testimony of SG Manzanade during the conference before the ELRD of
Sanchez's demeanor when she was apprehended, i.e., "[d]i naman siya masyado nataranta,"[42] and her consequent offer to return the pouch;[43]
and (b) that the said pouch was not hidden underneath the bag.[44] Finally, the NLRC concluded that the punishment of dismissal was too harsh and
the one (1) month preventive suspension already imposed on and served by Sanchez was the appropriate penalty.[45] Accordingly, the NLRC ordered
her reinstatement, and the payment of backwages, other benefits, and attorney's fees.[46]

Unconvinced, SLMC moved for reconsideration[47] which was, however, denied in a Resolution[48] dated January 14, 2013. Thus, it filed a petition for
certiorari[49] before the CA.

The CA Ruling

In a Decision[50] dated November 21, 2013, the CA upheld the NLRC, ruling that the latter did not gravely abuse its discretion in finding that Sanchez
was illegally dismissed.
It ruled that Sanchez's offense did not qualify as serious misconduct, given that: (a) the questioned items found in her possession were not SLMC
property since said items were paid for by discharged patients, thus discounting any material or economic damage on SLMC's part; (b) the retention of
excess medical supplies was an admitted practice amongst nurses in the Pediatric Unit which was tolerated by SLMC; (c) it was illogical for Sanchez to
leave the pouch in her bag since she would be subjected to a routine inspection; (d) Sanchez's lack of intention to bring out the pouch was manifested
by her composed demeanor upon apprehension and offer to return the pouch to the treatment room; and (e) had SLMC honestly believed that
Sanchez committed theft or pilferage, it should have filed the appropriate criminal case, but failed to do so.[51] Moreover, while the CA recognized
that SLMC had the management prerogative to discipline its erring employees, it, however, declared that such right must be exercised humanely. As
such, SLMC should only impose penalties commensurate with the degree of infraction. Considering that there was no indication that Sanchez's actions
were perpetrated for self-interest or for an unlawful objective, the penalty of dismissal imposed on her was grossly oppressive and disproportionate
to her offense.[52]

Dissatisfied, SLMC sought for reconsideration,[53] but was denied in a Resolution[54] dated April 4, 2014, hence, this petition.

The Issue Before the Court

The core issue to be resolved is whether or not Sanchez was illegally dismissed by SLMC.

The Court's Ruling

The petition is meritorious.

The right of an employer to regulate all aspects of employment, aptly called "management prerogative," gives employers the freedom to regulate,
according to their discretion and best judgment, all aspects of employment, including work assignment, working methods, processes to be followed,
working regulations, transfer of employees, work supervision, lay-off of workers and the discipline, dismissal and recall of workers.[55] In this light,
courts often decline to interfere in legitimate business decisions of employers. In fact, labor laws discourage interference in employers' judgment
concerning the conduct of their business.[56]

Among the employer's management prerogatives is the right to prescribe reasonable rules and regulations necessary or proper for the conduct of its
business or concern, to provide certain disciplinary measures to implement said rules and to assure that the same would be complied with. At the
same time, the employee has the corollary duty to obey all reasonable rules, orders, and instructions of the employer; and willful or intentional
disobedience thereto, as a general rule, justifies termination of the contract of service and the dismissal of the employee.[57] Article 296 (formerly
Article 282) of the Labor Code provides:[58]

Article 296. Termination by Employer. - An employer may terminate an employment for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or his representative in connection with his work;

xxxx

Note that for an employee to be validly dismissed on this ground, the employer's orders, regulations, or instructions must be: (1) reasonable and
lawful, (2) sufficiently known to the employee, and (3) in connection with the duties which the employee has been engaged to discharge."[59]

Tested against the foregoing, the Court finds that Sanchez was validly dismissed by SLMC for her willful disregard and disobedience of Section 1, Rule I
of the SLMC Code of Discipline, which reasonably punishes acts of dishonesty, i.e., "theft, pilferage of hospital or co-employee property, x x x or its
attempt in any form or manner from the hospital, co-employees, doctors, visitors, [and] customers (external and internal)" with termination from
employment.[60] Such act is obviously connected with Sanchez's work, who, as a staff nurse, is tasked with the proper stewardship of medical
supplies. Significantly, records show that Sanchez made a categorical admission[61] in her handwritten letter[62] i.e., "[k]ahit alam kong bawal ay
nagawa kong [makapag-uwi] ng gamit"[63] that despite her knowledge of its express prohibition under the SLMC Code of Discipline, she still
knowingly brought out the subject medical items with her. It is apt to clarify that SLMC cannot be faulted in construing the taking of the questioned
items as an act of dishonesty (particularly, as theft, pilferage, or its attempt in any form or manner) considering that the intent to gain may be
reasonably presumed from the furtive taking of useful property appertaining to another.[64] Note that Section 1, Rule 1 of the SLMC Code of
Discipline is further supplemented by the company policy requiring the turn-over of excess medical supplies/items for proper handling[65] and
providing a restriction on taking and bringing such items out of the SLMC premises without the proper authorization or "pass" from the official
concerned,[66] which Sanchez was equally aware thereof.[67] Nevertheless, Sanchez failed to turn-over the questioned items and, instead, "hoarded"
them, as purportedly practiced by the other staff members in the Pediatric Unit. As it is clear that the company policies subject of this case are
reasonable and lawful, sufficiently known to the employee, and evidently connected with the latter's work, the Court concludes that SLMC dismissed
Sanchez for a just cause.

On a related point, the Court observes that there lies no competent basis to support the common observation of the NLRC and the CA that the
retention of excess medical supplies was a tolerated practice among the nurses at the Pediatric Unit. While there were previous incidents of
"hoarding," it appears that such acts were in similar fashion furtively made and the items secretly kept, as any excess items found in the concerned
nurse's possession would have to be confiscated.[68] Hence, the fact that no one was caught and/or sanctioned for transgressing the prohibition
therefor does not mean that the so-called "hoarding" practice was tolerated by SLMC. Besides, whatever maybe the justification behind the violation
of the company rules regarding excess medical supplies is immaterial since it has been established that an infraction was deliberately committed.[69]
Doubtless, the deliberate disregard or disobedience of rules by the employee cannot be countenanced as it may encourage him or her to do even
worse and will render a mockery of the rules of discipline that employees are required to observe.[70]

Finally, the Court finds it inconsequential that SLMC has not suffered any actual damage. While damage aggravates the charge, its absence does not
mitigate nor negate the employee's liability.[71] Neither is SLMC's non-filing of the appropriate criminal charges relevant to this analysis. An
employee's guilt or innocence in a criminal case is not determinative of the existence of a just or authorized cause for his or her dismissal.[72] It is
well-settled that conviction in a criminal case is not necessary to find just cause for termination of employment,[73] as in this case. Criminal and labor
cases involving an employee arising from the same infraction are separate and distinct proceedings which should not arrest any judgment from one to
the other.

As it stands, the Court thus holds that the dismissal of Sanchez was for a just cause, supported by substantial evidence, and is therefore in order. By
declaring otherwise, bereft of any substantial bases, the NLRC issued a patently and grossly erroneous ruling tantamount to grave abuse of discretion,
which, in turn, means that the CA erred when it affirmed the same. In consequence, the grant of the present petition is warranted.

WHEREFORE, the petition is GRANTED. The Decision dated November 21, 2013 and the Resolution dated April 4, 2014 of the Court of Appeals in CA-
G.R. SP No. 129108 are REVERSED and SET ASIDE. The Labor Arbiter's Decision dated May 27, 2012 in NLRC Case No. NCR 07-11042-11 finding
respondent Maria Theresa V. Sanchez to have been validly dismissed by petitioner St. Luke's Medical Center, Inc. is hereby REINSTATED.

SO ORDERED.

Sereno, C.J., (Chairperson), Leonardo-De Castro, Bersamin, and Perez, JJ., concur.

4.

Republic of the Philippines

SUPREME COURT

Manila

THIRD DIVISION

G.R. No. 187226 January 28, 2015

CHERYLL SANTOS LEUS, Petitioner,

vs.

ST. SCHOLASTICA'S COLLEGE WESTGROVE and/or SR. EDNA QUIAMBAO, OSB, Respondents.

DECISION

REYES, J.:

Cheryll Santos Leus (petitioner) was hired by St. Scholastica's College Westgrove (SSCW), a Catholic educational institution, as a non-teaching
personnel, engaged in pre-marital sexual relations, got pregnant out of wedlock, married the father of her child, and was dismissed by SSCW, in that
order. The question that has to be resolved is whether the petitioner's conduct constitutes a ground for her dismissal.

Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul and set aside the Decision1 dated
September 24, 2008 and Resolution2 dated March 2, 2009 issued by the Court of Appeals (CA) in CA-G.R. SP No. 100188, which affirmed the
Resolutions dated February 28, 20073 and May 21, 20074 of the National Labor Relations Commission (NLRC)in NLRC CA No. 049222-06.

The Facts

SSCW is a catholic and sectarian educational institution in Silang, Cavite. In May 2001, SSCW hired the petitioner as an Assistant to SSCW’s Director of
the Lay Apostolate and Community Outreach Directorate.

Sometime in 2003, the petitioner and her boyfriend conceived a child out of wedlock. When SSCW learned of the petitioner’s pregnancy, Sr. Edna
Quiambao (Sr. Quiambao), SSCW’s Directress, advised her to file a resignation letter effective June 1, 2003. In response, the petitioner informed Sr.
Quiambao that she would not resign from her employment just because she got pregnant without the benefit of marriage.5

On May 28, 2003, Sr. Quiambao formally directed the petitioner to explain in writing why she should not be dismissed for engaging in pre-marital
sexual relations and getting pregnant as a result thereof, which amounts to serious misconduct and conduct unbecoming of an employee of a Catholic
school.6

In a letter7 dated May 31, 2003, the petitioner explained that her pregnancy out of wedlock does not amount to serious misconduct or conduct
unbecoming of an employee. She averred that she is unaware of any school policy stating that being pregnant out of wedlock is considered as a
serious misconduct and, thus, a ground for dismissal. Further, the petitioner requested a copy of SSCW’s policy and guidelines so that she may better
respond to the charge against her. On June 2, 2003, Sr. Quiambao informed the petitioner that, pending the promulgation of a "Support Staff
Handbook," SSCW follows the 1992 Manual of Regulations for Private Schools (1992 MRPS) on the causes for termination of employments; that
Section 94(e) of the 1992 MRPS cites "disgraceful or immoral conduct" as a ground for dismissal in addition to the just causes for termination of
employment provided under Article 282 of the Labor Code.8

On June 4, 2003, the petitioner, through counsel, sent Sr. Quiambao a letter,9 which, in part, reads:
To us, pre-marital sex between two consenting adults without legal impediment to marry each other who later on married each other does not fall
within the contemplation of "disgraceful or immoral conduct" and "serious misconduct" of the Manual of Regulations for Private Schools and the
Labor Code of the Philippines.

Your argument that what happened to our client would set a bad example to the students and other employees of your school is speculative and is
more imaginary than real. To dismiss her on that sole ground constitutes grave abuse of management prerogatives.

Considering her untarnished service for two years, dismissing her with her present condition would also mean depriving her to be more secure in
terms of financial capacity to sustain maternal needs.10

In a letter11 dated June 6, 2003, SSCW, through counsel, maintained that pre-marital sexual relations, evenif between two consenting adults without
legal impediment to marry, is considered a disgraceful and immoral conduct or a serious misconduct, which are grounds for the termination of
employment under the 1992 MRPS and the Labor Code. That SSCW, as a Catholic institution of learning, has the right to uphold the teaching of the
Catholic Church and expect its employees to abide by the same. They further asserted that the petitioner’s indiscretion is further aggravated by the
fact that she is the Assistant to the Director of the Lay Apostolate and Community Outreach Directorate, a position of responsibility that the students
look up to as rolemodel. The petitioner was again directed to submit a written explanation on why she should not be dismissed.

On June 9, 2003, the petitioner informed Sr. Quiambao that she adopts her counsel’s letter dated June 4, 2003 as her written explanation.12

Consequently, in her letter13 dated June 11, 2003, Sr. Quiambao informed the petitioner that her employment with SSCW is terminated on the ground
of serious misconduct. She stressed that pre-marital sexual relations between two consenting adults with no impediment to marry, even if they
subsequently married, amounts to immoral conduct. She further pointed out that SSCW finds unacceptable the scandal brought about by the
petitioner’s pregnancy out of wedlock as it ran counter to the moral principles that SSCW stands for and teaches its students.

Thereupon, the petitioner filed a complaint for illegal dismissal with the Regional Arbitration Branch of the NLRC in Quezon City against SSCW and Sr.
Quiambao (respondents). In her position paper,14 the petitioner claimed that SSCW gravely abused its management prerogative as there was no just
cause for her dismissal. She maintained that her pregnancy out of wedlock cannot be considered as serious misconduct since the same is a purely
private affair and not connected in any way with her duties as an employee of SSCW. Further, the petitioner averred that she and her boyfriend
eventually got married even prior to her dismissal.

For their part, SSCW claimed that there was just cause to terminate the petitioner’s employment with SSCW and that the same is a valid exercise of
SSCW’s management prerogative. They maintained that engaging in pre-marital sex, and getting pregnant as a result thereof, amounts to a disgraceful
or immoral conduct, which is a ground for the dismissal of an employee under the 1992 MRPS.

They pointed out that SSCW is a Catholic educational institution, which caters exclusively to young girls; that SSCW would lose its credibility if it would
maintain employees who do not live up to the values and teachings it inculcates to its students. SSCW further asserted that the petitioner, being an
employee of a Catholic educational institution, should have strived to maintain the honor, dignity and reputation of SSCW as a Catholic school.15

The Ruling of the Labor Arbiter

On February 28, 2006, the Labor Arbiter (LA) rendered a Decision,16 in NLRC Case No. 6-17657-03-C which dismissed the complaint filed by the
petitioner. The LA found that there was a valid ground for the petitioner’s dismissal; that her pregnancy out of wedlock is considered as a "disgraceful
and immoral conduct." The LA pointed out that, as an employee of a Catholic educational institution, the petitioner is expected to live up to the
Catholic values taught by SSCW to its students. Likewise, the LA opined that:

Further, a deep analysis of the facts would lead us to disagree with the complainant that she was dismissed simply because she violate[d] a Catholic
[teaching]. It should not be taken in isolation but rather it should be analyzed in the lightof the surrounding circumstances as a whole. We must also
take into [consideration] the nature of her work and the nature of her employer-school. For us, it is not just an ordinary violation. It was committed by
the complainant in an environment where her strict adherence to the same is called for and where the reputation of the school is at stake. x x x.17

The LA further held that teachers and school employees, both in their official and personal conduct, must display exemplary behavior and act in a
manner that is beyond reproach.

The petitioner appealed to the NLRC, insisting that there was no valid ground for the termination of her employment. She maintained that her
pregnancy out of wedlock cannot be considered as "serious misconduct" under Article 282 of the Labor Code since the same was not of such a grave
and aggravated character. She asserted that SSCW did not present any evidence to establish that her pregnancy out of wedlock indeed eroded the
moral principles that it teaches its students.18

The Ruling of the NLRC

On February 28, 2007, the NLRC issued a Resolution,19 which affirmed the LA Decision dated February 28, 2006. The NLRC pointed out that the
termination of the employment of the personnel of private schools is governed by the 1992 MRPS; that Section 94(e) thereof cites "disgraceful or
immoral conduct" as a just cause for dismissal, in addition to the grounds for termination of employment provided for under Article 282 of the Labor
Code. The NLRC held that the petitioner’s pregnancy out of wedlock is a "disgraceful or immoral conduct" within the contemplation of Section 94(e) of
the 1992 MRPS and, thus, SSCW had a valid reason to terminate her employment.

The petitioner sought reconsideration20 of the Resolution dated February 28, 2007 but it was denied by the NLRC in its Resolution21 dated May 21,
2007.
Unperturbed, the petitioner filed a petition22 for certiorari with the CA, alleging that the NLRC gravely abused its discretion in ruling that there was a
valid ground for her dismissal. She maintained that pregnancy out of wedlock cannot be considered as a disgraceful or immoral conduct; that SSCW
failed to prove that its students were indeed gravely scandalized by her pregnancy out of wedlock. She likewise asserted that the NLRC erred in
applying Section 94(e) of the 1992 MRPS.

The Ruling of the CA

On September 24, 2008, the CA rendered the herein assailed Decision,23 which denied the petition for certiorari filed by the petitioner. The CA held
that it is the provisions of the 1992 MRPS and not the Labor Code which governs the termination of employment of teaching and non-teaching
personnel of private schools, explaining that:

It is a principle of statutory construction that where there are two statutes that apply to a particular case, that which was specially intended for the
said case must prevail. Petitioner was employed by respondent private Catholic institution which undeniably follows the precepts or norms of conduct
set forth by the Catholic Church. Accordingly, the Manual of Regulations for Private Schools followed by it must prevail over the Labor Code, a general
statute. The Manual constitutes the private schools’ Implementing Rules and Regulations of Batas Pambansa Blg. 232 or the Education Act of 1982. x x
x.24

The CA further held that the petitioner’s dismissal was a valid exercise of SSCW’s management prerogative to discipline and impose penalties on
erring employees pursuant toits policies, rules and regulations. The CA upheld the NLRC’s conclusion that the petitioner’s pregnancy out of wedlock is
considered as a "disgraceful and immoral conduct" and, thus, a ground for dismissal under Section 94(e) of the 1992 MRPS. The CA likewise opined
that the petitioner’s pregnancy out of wedlock is scandalous per segiven the work environment and social milieu that she was in, viz:

Under Section 94 (e) of the [MRPS], and even under Article 282 (serious misconduct) of the Labor Code, "disgraceful and immoral conduct" is a basis
for termination of employment.

xxxx

Petitioner contends that her pre-marital sexual relations with her boyfriend and her pregnancy prior to marriage was not disgraceful or immoral
conduct sufficient for her dismissal because she was not a member of the school’s faculty and there is no evidence that her pregnancy scandalized the
school community.

We are not persuaded. Petitioner’s pregnancy prior to marriage is scandalous in itself given the work environment and social milieu she was in.
Respondent school for young ladies precisely seeks to prevent its students from situations like this, inculcating in them strict moral values and
standards. Being part of the institution, petitioner’sprivate and public life could not be separated. Her admitted pre-marital sexual relations was a
violation of private respondent’s prescribed standards of conduct that views pre-marital sex as immoral because sex between a man and a woman
must only take place within the bounds of marriage.

Finally, petitioner’s dismissal is a valid exercise of the employer-school’s management prerogative to discipline and impose penalties on erring
employees pursuant to its policies, rules and regulations. x x x.25 (Citations omitted)

The petitioner moved for reconsideration26 but it was denied by the CA in its Resolution27 dated March 2, 2009.

Hence, the instant petition.

Issues

Essentially, the issues set forth by the petitioner for this Court’s decision are the following: first, whether the CA committed reversible error in ruling
that it is the 1992 MRPS and not the Labor Code that governs the termination of employment of teaching and non-teaching personnel of private
schools; and second, whether the petitioner’spregnancy out of wedlock constitutes a valid ground to terminate her employment.

The Ruling of the Court

The Court grants the petition.

First Issue: Applicability of the 1992 MRPS

The petitioner contends that the CA, in ruling that there was a valid ground to dismiss her, erred in applying Section 94 of the 1992 MRPS. Essentially,
she claims that the 1992 MRPS was issued by the Secretary of Education as the revised implementing rules and regulations of Batas Pambansa Bilang
232 (BP 232) or the "Education Act of 1982." That there is no provision in BP 232, which provides for the grounds for the termination of employment
of teaching and non-teaching personnel of private schools. Thus, Section 94 of the 1992 MRPS, which provides for the causes of terminating an
employment, isinvalid as it "widened the scope and coverage" of BP 232.

The Court does not agree.

The Court notes that the argument against the validity of the 1992 MRPS, specifically Section 94 thereof, is raised by the petitioner for the first time in
the instant petition for review. Nowhere in the proceedings before the LA, the NLRC or the CA did the petitioner assail the validity of the provisions of
the 1992 MRPS.

"It is well established that issues raised for the first time on appeal and not raised in the proceedings in the lower court are barred by estoppel. Points
of law, theories, issues, and arguments not brought to the attention of the trial court ought not to be considered by a reviewing court, as these cannot
be raised for the first time on appeal. To consider the alleged facts and arguments belatedly raised would amount to trampling on the basic principles
of fair play, justice, and due process."28

In any case, even if the Court were to disregard the petitioner’s belated claim of the invalidity of the 1992 MRPS, the Court still finds the same
untenable.

The 1992 MRPS, the regulation in force at the time of the instant controversy, was issued by the Secretary of Education pursuant to BP 232. Section
7029 of BP 232 vests the Secretary of Education with the authority to issue rules and regulations to implement the provisions of BP 232.
Concomitantly, Section 5730 specifically empowers the Department of Education to promulgate rules and regulations necessary for the
administration, supervision and regulation of the educational system in accordance with the declared policy of BP 232.

The qualifications of teaching and non-teaching personnel of private schools, as well as the causes for the termination of their employment, are an
integral aspect of the educational system of private schools. Indubitably, ensuring that the teaching and non-teaching personnel of private schools are
not only qualified, but competent and efficient as well goes hand in hand with the declared objective of BP 232 – establishing and maintaining
relevant quality education.31 It is thus within the authority of the Secretary of Education to issue a rule, which provides for the dismissal of teaching
and non-teaching personnel of private schools based on their incompetence, inefficiency, or some other disqualification.

Moreover, Section 69 of BP 232 specifically authorizes the Secretary of Education to "prescribe and impose such administrative sanction as he may
deem reasonable and appropriate in the implementing rules and regulations" for the "[g]ross inefficiency of the teaching or non-teaching personnel"
of private schools.32 Accordingly, contrary to the petitioner’s claim, the Court sees no reason to invalidate the provisions of the 1992 MRPS,
specifically Section 94 thereof. Second Issue: Validity of the Petitioner’s Dismissal

The validity of the petitioner’s dismissal hinges on the determination of whether pregnancy out of wedlock by an employee of a catholic educational
institution is a cause for the termination of her employment.

In resolving the foregoing question,the Court will assess the matter from a strictly neutral and secular point of view – the relationship between SSCW
as employer and the petitioner as an employee, the causes provided for by law in the termination of suchrelationship, and the evidence on record.
The ground cited for the petitioner’s dismissal, i.e., pre-marital sexual relations and, consequently, pregnancy outof wedlock, will be assessed as to
whether the same constitutes a valid ground for dismissal pursuant to Section 94(e) of the 1992 MRPS.

The standard of review in a Rule 45

petition from the CA decision in

labor cases.

In a petition for review under Rule 45 of the Rules of Court, such as the instant petition, where the CA’s disposition in a labor case is sought to be
calibrated, the Court’s review isquite limited. In ruling for legal correctness, the Court has to view the CA decision in the same context that the petition
for certiorari it ruled upon was presented to it; the Court has to examine the CA decision from the prism of whether it correctly determined the
presence or absence of grave abuse of discretion in the NLRC decision before it, not on the basis of whether the NLRC decision on the merits of the
case was correct.33

The phrase "grave abuse of discretion" is well-defined in the Court’s jurisprudence. It exists where an act of a court or tribunal is performed with a
capricious or whimsical exercise ofjudgment equivalent to lack of jurisdiction.34 The determination of the presence or absence of grave abuse of
discretion does not include an inquiry into the correctness of the evaluation of evidence, which was the basis of the labor agency in reaching its
conclusion.35

Nevertheless, while a certiorari proceeding does not strictly include an inquiry as to the correctness of the evaluation of evidence (that was the basis
of the labor tribunals in determining their conclusion), the incorrectness of its evidentiary evaluation should not result in negating the requirement of
substantial evidence. Indeed, when there is a showing that the findings or conclusions, drawn from the same pieces of evidence, were arrived at
arbitrarily or in disregard of the evidence on record, they may be reviewed by the courts. In particular, the CA can grant the petition for certiorariif it
finds that the NLRC, in its assailed decision or resolution, made a factual finding not supported by substantial evidence. A decision that is not
supported by substantial evidence is definitely a decision tainted with grave abuse of discretion.36

The labor tribunals’ respective

conclusions that the petitioner’s

pregnancy is a "disgraceful or

immoral conduct" were arrived at

arbitrarily.

The CA and the labor tribunals affirmed the validity of the petitioner’s dismissal pursuant to Section 94(e) of the 1992 MRPS, which provides that:

Sec. 94. Causes of Terminating Employment – In addition to the just causes enumerated in the Labor Code, the employment of school personnel,
including faculty, may be terminated for any of the following causes:
xxxx

e. Disgraceful or immoral conduct;

xxxx

The labor tribunals concluded that the petitioner’s pregnancy out of wedlock, per se, is "disgraceful and immoral"considering that she is employed in
a Catholic educational institution. In arriving at such conclusion, the labor tribunals merely assessed the fact of the petitioner’s pregnancy vis-à-visthe
totality of the circumstances surrounding the same.

However, the Court finds no substantial evidence to support the aforementioned conclusion arrived at by the labor tribunals. The fact of the
petitioner’s pregnancy out of wedlock, without more, is not enough to characterize the petitioner’s conduct as disgraceful or immoral. There must be
substantial evidence to establish that pre-marital sexual relations and, consequently, pregnancy outof wedlock, are indeed considered disgraceful or
immoral.

The totality of the circumstances

surrounding the conduct alleged to

be disgraceful or immoral must be

assessed against the prevailing

norms of conduct.

In Chua-Qua v. Clave,37 the Court stressed that to constitute immorality, the circumstances of each particular case must be holistically considered and
evaluated in light of the prevailing norms of conductand applicable laws.38 Otherwise stated, it is not the totality of the circumstances surrounding
the conduct per se that determines whether the same is disgraceful or immoral, but the conduct that is generally accepted by society as respectable or
moral. If the conduct does not conform to what society generally views as respectable or moral, then the conduct is considered as disgraceful or
immoral. Tersely put, substantial evidence must be presented, which would establish that a particular conduct, viewed in light of the prevailing norms
of conduct, is considered disgraceful or immoral.

Thus, the determination of whether a conduct is disgraceful or immoral involves a two-step process: first, a consideration of the totality of the
circumstances surrounding the conduct; and second, an assessment of the said circumstances vis-à-visthe prevailing norms of conduct, i.e., what the
society generally considers moral and respectable.

That the petitioner was employed by a Catholic educational institution per se does not absolutely determine whether her pregnancy out of wedlock is
disgraceful or immoral. There is still a necessity to determine whether the petitioner’s pregnancy out of wedlock is considered disgraceful or immoral
in accordance with the prevailing norms of conduct.

Public and secular morality should

determine the prevailing norms of

conduct, not religious morality.

However, determining what the prevailing norms of conduct are considered disgraceful or immoral is not an easy task. An individual’s perception of
what is moral or respectable is a confluence of a myriad of influences, such as religion, family, social status, and a cacophony of others. In this regard,
the Court’s ratiocination in Estrada v. Escritor39 is instructive.

In Estrada, an administrative case against a court interpreter charged with disgraceful and immoral conduct, the Court stressed that in determining
whether a particular conduct can be considered as disgraceful and immoral, the distinction between public and secular morality on the one hand, and
religious morality, on the other, should be kept in mind.40 That the distinction between public and secular morality and religious morality is important
because the jurisdiction of the Court extends only to public and secular morality.41 The Court further explained that:

The morality referred to in the law is public and necessarily secular, not religiousx x x. "Religious teachings as expressed in public debate may
influence the civil public order but public moral disputes may be resolved only on grounds articulable in secular terms." Otherwise, if government
relies upon religious beliefs in formulating public policies and morals, the resulting policies and morals would require conformity to what some might
regard as religious programs or agenda.The non-believers would therefore be compelled to conform to a standard of conduct buttressed by a religious
belief, i.e., to a "compelled religion," anathema to religious freedom. Likewise, if government based its actions upon religious beliefs, it would tacitly
approve or endorse that belief and thereby also tacitly disapprove contrary religious or non-religious views that would not support the policy. As a
result, government will not provide full religious freedom for all its citizens, or even make it appear that those whose beliefs are disapproved are
second-class citizens. Expansive religious freedom therefore requires that government be neutral in matters of religion; governmental reliance upon
religious justification is inconsistent with this policy of neutrality.

In other words, government action, including its proscription of immorality as expressed in criminal law like concubinage, must have a secular
purpose. That is, the government proscribes this conduct because it is "detrimental (or dangerous) to those conditions upon which depend the
existence and progress of human society" and not because the conduct is proscribed by the beliefs of one religion or the other. Although admittedly,
moral judgments based on religion might have a compelling influence on those engaged in public deliberations over what actions would be considered
a moral disapprobation punishable by law. After all, they might also be adherents of a religion and thus have religious opinions and moral codes with
a compelling influence on them; the human mind endeavors to regulate the temporal and spiritual institutions of society in a uniform manner,
harmonizing earth with heaven. Succinctly put, a law could be religious or Kantian or Aquinian or utilitarian in its deepest roots, but it must have an
articulable and discernible secular purpose and justification to pass scrutiny of the religion clauses.x x x.42 (Citations omitted and emphases ours)

Accordingly, when the law speaks of immoral or, necessarily, disgraceful conduct, it pertains to public and secular morality; it refers to those conducts
which are proscribed because they are detrimental to conditions upon which depend the existence and progress of human society. Thus, in
Anonymous v. Radam,43 an administrative case involving a court utility worker likewise charged with disgraceful and immoral conduct, applying the
doctrines laid down in Estrada, the Court held that:

For a particular conduct to constitute "disgraceful and immoral" behavior under civil service laws, it must be regulated on account of the concerns of
public and secular morality. It cannot be judged based on personal bias, specifically those colored by particular mores. Nor should it be grounded on
"cultural" values not convincingly demonstrated to have been recognized in the realm of public policy expressed in the Constitution and the laws. At
the same time, the constitutionally guaranteed rights (such as the right to privacy) should be observed to the extent that they protect behavior that
may be frowned upon by the majority.

Under these tests, two things may be concluded from the fact that an unmarried woman gives birth out of wedlock:

(1) if the father of the child is himself unmarried, the woman is not ordinarily administratively liable for disgraceful and immoral conduct.It may be a
not-so-ideal situation and may cause complications for both mother and child but it does not give cause for administrative sanction. There is no law
which penalizes an unmarried mother under those circumstances by reason of her sexual conduct or proscribes the consensual sexual activity
between two unmarried persons. Neither does the situation contravene any fundamental state policy as expressed in the Constitution, a document
that accommodates various belief systems irrespective of dogmatic origins.

(2) if the father of the child born out of wedlock is himself married to a woman other thanthe mother, then there is a cause for administrative sanction
against either the father or the mother. In sucha case, the "disgraceful and immoral conduct" consists of having extramarital relations with a married
person. The sanctity of marriage is constitutionally recognized and likewise affirmed by our statutes as a special contract of permanent union.
Accordingly, judicial employees have been sanctioned for their dalliances with married persons or for their own betrayals of the marital vow of
fidelity.

In this case, it was not disputed that, like respondent, the father of her child was unmarried. Therefore, respondent cannot be held liable for
disgraceful and immoral conduct simply because she gave birth to the child Christian Jeon out of wedlock.44 (Citations omitted and emphases ours)

Both Estrada and Radamare administrative cases against employees in the civil service. The Court, however, sees no reason not to apply the doctrines
enunciated in Estrada and Radamin the instant case. Estrada and Radamalso required the Court to delineate what conducts are considered disgraceful
and/or immoral as would constitute a ground for dismissal. More importantly, as in the said administrative cases, the instant case involves an
employee’s security of tenure; this case likewise concerns employment, which is not merely a specie of property right, but also the means by which
the employee and those who depend on him live.45

It bears stressing that the right of an employee to security of tenure is protected by the Constitution. Perfunctorily, a regular employee may not be
dismissed unless for cause provided under the Labor Code and other relevant laws, in this case, the 1992 MRPS. As stated above, when the law refers
to morality, it necessarily pertains to public and secular morality and not religious morality. Thus, the proscription against "disgraceful or immoral
conduct" under Section 94(e) of the 1992 MRPS, which is made as a cause for dismissal, must necessarily refer to public and secular morality.
Accordingly, in order for a conduct tobe considered as disgraceful or immoral, it must be "‘detrimental (or dangerous) to those conditions upon which
depend the existence and progress of human society’ and not because the conduct is proscribed by the beliefs of one religion or the other."

Thus, in Santos v. NLRC,46 the Court upheld the dismissal of a teacher who had an extra-marital affair with his co-teacher, who is likewise married, on
the ground of disgraceful and immoral conduct under Section 94(e) of the 1992 MRPS. The Court pointed out that extra-marital affair is considered as
a disgraceful and immoral conduct is an afront to the sanctity of marriage, which is a basic institution of society, viz:

We cannot overemphasize that having an extra-marital affair is an afront to the sanctity of marriage, which is a basic institution of society. Even our
Family Code provides that husband and wife must live together, observe mutual love, respect and fidelity. This is rooted in the fact that both our
Constitution and our laws cherish the validity of marriage and unity of the family. Our laws, in implementing this constitutional edict on marriage and
the family underscore their permanence, inviolability and solidarity.47

The petitioner’s pregnancy out of

wedlock is not a disgraceful or

immoral conduct since she and the

father of her child have no

impediment to marry each other.

In stark contrast to Santos, the Court does not find any circumstance in this case which would lead the Court to conclude that the petitioner
committed a disgraceful or immoral conduct. It bears stressing that the petitioner and her boyfriend, at the time they conceived a child, had no legal
impediment to marry. Indeed, even prior to her dismissal, the petitioner married her boyfriend, the father of her child. As the Court held in Radam,
there is no law which penalizes an unmarried mother by reason of her sexual conduct or proscribes the consensual sexual activity between two
unmarried persons; that neither does such situation contravene any fundamental state policy enshrined in the Constitution.

Admittedly, the petitioner is employed in an educational institution where the teachings and doctrines of the Catholic Church, including that on pre-
marital sexual relations, is strictly upheld and taught to the students. That her indiscretion, which resulted in her pregnancy out of wedlock, is
anathema to the doctrines of the Catholic Church. However, viewed against the prevailing norms of conduct, the petitioner’s conduct cannot be
considered as disgraceful or immoral; such conduct is not denounced by public and secular morality. It may be an unusual arrangement, but it
certainly is not disgraceful or immoral within the contemplation of the law.

To stress, pre-marital sexual relations between two consenting adults who have no impediment to marry each other, and, consequently, conceiving a
child out of wedlock, gauged from a purely public and secular view of morality, does not amount to a disgraceful or immoral conduct under Section
94(e) of the 1992 MRPS.

Accordingly, the labor tribunals erred in upholding the validity of the petitioner’s dismissal. The labor tribunals arbitrarily relied solely on the
circumstances surrounding the petitioner’s pregnancy and its supposed effect on SSCW and its students without evaluating whether the petitioner’s
conduct is indeed considered disgraceful or immoral in view of the prevailing norms of conduct. In this regard, the labor tribunals’ respective
haphazard evaluation of the evidence amounts to grave abuse of discretion, which the Court will rectify.

The labor tribunals’ finding that the petitioner’s pregnancy out of wedlock despite the absence of substantial evidence is not only arbitrary, but a
grave abuse of discretion, which should have been set right by the CA.

There is no substantial evidence to

prove that the petitioner’s pregnancy

out of wedlock caused grave scandal

to SSCW and its students.

SSCW claimed that the petitioner was primarily dismissed because her pregnancy out of wedlock caused grave scandal to SSCW and its students. That
the scandal brought about by the petitioner’s indiscretion prompted them to dismiss her. The LA upheld the respondents’ claim, stating that:

In this particular case, an "objective" and "rational evaluation" of the facts and circumstances obtaining in this case would lead us to focus our
attention x x x on the impact of the act committed by the complainant. The act of the complainant x x x eroded the moral principles being taught and
project[ed] by the respondent [C]atholic school to their young lady students.48 (Emphasis in the original)

On the other hand, the NLRC opined that:

In the instant case, when the complainant-appellant was already conceiving a child even before she got married, such is considered a shameful and
scandalous behavior, inimical to public welfare and policy. It eroded the moral doctrines which the respondent Catholic school, an exclusive school for
girls, is teaching the young girls. Thus, when the respondent-appellee school terminated complainant-appellant’s services, it was a valid exercise of its
management prerogative. Whether or not she was a teacher is of no moment. There is no separate set of rules for non-teaching personnel.
Respondents-appellees uphold the teachings of the Catholic Church on pre-marital sex and that the complainant-appellant as an employee of the
school was expected to abide by this basic principle and to live up with the standards of their purely Catholic values. Her subsequent marriage did not
take away the fact that she had engaged in pre-marital sex which the respondent-appellee school denounces as the same is opposed to the teachings
and doctrines it espouses.49 (Emphasis ours)

Contrary to the labor tribunals’ declarations, the Court finds that SSCW failed to adduce substantial evidence to prove that the petitioner’s
indiscretion indeed caused grave scandal to SSCW and its students. Other than the SSCW’s bare allegation, the records are bereft of any evidence that
would convincingly prove that the petitioner’s conduct indeed adversely affected SSCW’s integrity in teaching the moral doctrines, which it stands for.
The petitioner is only a non-teaching personnel; her interaction with SSCW’s students is very limited. Itis thus quite impossible that her pregnancy out
of wedlock caused such a grave scandal, as claimed by SSCW, as to warranther dismissal.

Settled is the rule that in termination cases, the burden of proving that the dismissal of the employees was for a valid and authorized cause rests on
the employer. It is incumbent upon the employer to show by substantial evidence that the termination of the employment of the employees was
validly made and failure to discharge that duty would mean that the dismissal is not justified and therefore illegal.50 "Substantial evidence is more
than a mere scintilla of evidence. It means such relevant evidence as a reasonable mind might accept as adequateto support a conclusion, even if
other minds equally reasonable mightconceivably opine otherwise."51

Indubitably, bare allegations do not amount to substantial evidence. Considering that the respondents failed to adduce substantial evidence to prove
their asserted cause for the petitioner’s dismissal, the labor tribunals should not have upheld their allegations hook, line and sinker. The labor
tribunals’ respective findings, which were arrived at sans any substantial evidence, amounts to a grave abuse of discretion, which the CA should have
rectified. "Security of tenure is a right which may not be denied on mere speculation of any unclearand nebulous basis."52

The petitioner’s dismissal is not a

valid exercise of SSCW’s

management prerogative.
The CA be labored the management prerogative of SSCW to discipline its employees. The CA opined that the petitioner’s dismissal is a valid exercise of
management prerogative to impose penalties on erring employees pursuant to its policies, rules and regulations.

The Court does not agree.

The Court has held that "management is free to regulate, according to its own discretion and judgment, all aspects of employment, including hiring,
work assignments, working methods, time, place and manner of work, processes to be followed, supervision of workers, working regulations, transfer
of employees, work supervision, lay off of workers and discipline, dismissal and recall of workers. The exercise of management prerogative, however,
is not absolute as it must beexercised in good faith and with due regard to the rights of labor." Management cannot exercise its prerogative in a cruel,
repressive, or despotic manner.53

SSCW, as employer, undeniably has the right to discipline its employees and, if need be, dismiss themif there is a valid cause to do so. However, as
already explained, there is no cause to dismiss the petitioner. Her conduct is not considered by law as disgraceful or immoral. Further, the respondents
themselves have admitted that SSCW, at the time of the controversy, does not have any policy or rule against an employee who engages in pre-marital
sexual relations and conceives a child as a result thereof. There being no valid basis in law or even in SSCW’s policy and rules, SSCW’s dismissal of the
petitioner is despotic and arbitrary and, thus, not a valid exercise of management prerogative.

In sum, the Court finds that the petitioner was illegally dismissed as there was no just cause for the termination of her employment. SSCW failed to
adduce substantial evidence to establish that the petitioner’s conduct, i.e., engaging in pre-marital sexual relations and conceiving a child out of
wedlock, assessed in light of the prevailing norms of conduct, is considered disgraceful or immoral. The labor tribunals gravely abused their discretion
in upholding the validity of the petitioner’s dismissal as the charge against the petitioner lay not on substantial evidence, but on the bare allegations
of SSCW. In turn, the CA committed reversible error in upholding the validity of the petitioner’s dismissal, failing torecognize that the labor tribunals
gravely abused their discretion in ruling for the respondents.

The petitioner is entitled to

separation pay, in lieu of actual

reinstatement, full backwages and

attorney’s fees, but not to moral and

exemplary damages.

Having established that the petitioner was illegally dismissed, the Court now determines the reliefs thatshe is entitled to and their extent. Under the
law and prevailing jurisprudence, "an illegally dismissed employee is entitled to reinstatement as a matter of right."54 Aside from the instances
provided under Articles 28355 and 28456 of the Labor Code, separation pay is, however, granted when reinstatement is no longer feasible because of
strained relations between the employer and the employee. In cases of illegal dismissal, the accepted doctrine is that separation pay is available in
lieu of reinstatement when the latter recourse is no longer practical or in the best interest of the parties.57

In Divine Word High School v. NLRC,58 the Court ordered the employer Catholic school to pay the illegally dismissed high school teacher separation
pay in lieu of actual reinstatement since her continued presence as a teacher in the school "may well bemet with antipathy and antagonism by some
sectors in the school community."59

In view of the particular circumstances of this case, it would be more prudent to direct SSCW to pay the petitioner separation pay inlieu of actual
reinstatement. The continued employment of the petitioner with SSCW would only serve to intensify the atmosphere of antipathy and antagonism
between the parties. Consequently, the Court awards separation pay to the petitioner equivalent to one (1) month pay for every year of service, with
a fraction of at least six (6) months considered as one (1) whole year, from the time of her illegal dismissal up to the finality of this judgment, as an
alternative to reinstatement.

Also, "employees who are illegally dismissed are entitled to full backwages, inclusive of allowances and other benefits or their monetary equivalent,
computed from the time their actual compensation was withheld from them up to the time of their actual reinstatement but if reinstatement is no
longer possible, the backwages shall be computed from the time of their illegal termination up to the finality of the decision."60 Accordingly, the
petitioner is entitled to an award of full backwages from the time she was illegally dismissed up to the finality of this decision.

Nevertheless, the petitioner is not entitled to moral and exemplary damages. "A dismissed employee isentitled to moral damages when the dismissal
is attended by bad faith or fraud or constitutes an act oppressive to labor, or is done in a manner contrary to good morals, good customs or public
policy. Exemplary damages may be awarded if the dismissal is effected in a wanton, oppressive or malevolent manner."61

"Bad faith, under the law, does not simply connote bad judgment or negligence.1âwphi1 It imports a dishonest purpose or some moral obliquity and
conscious doing of a wrong, or a breach of a known duty through some motive or interest or ill will that partakes of the nature of fraud."62

"It must be noted that the burden of proving bad faith rests on the one alleging it"63 since basic is the principle that good faith is presumed and he
who alleges bad faith has the duty to prove the same.64 "Allegations of bad faith and fraud must be proved by clear and convincing evidence."65

The records of this case are bereft of any clear and convincing evidence showing that the respondents acted in bad faith or in a wanton or fraudulent
manner in dismissing the petitioner. That the petitioner was illegally dismissed is insufficient to prove bad faith. A dismissal may be contrary to law
but by itself alone, it does not establish bad faith to entitle the dismissed employee to moral damages. The award of moral and exemplary damages
cannot be justified solely upon the premise that the employer dismissed his employee without cause.66
However, the petitioner is entitled to attorney’s fees in the amount of 10% of the total monetary award pursuant to Article 11167 of the Labor Code.
"It is settled that where an employee was forced to litigate and, thus, incur expenses to protect his rights and interest, the award of attorney’s fees is
legally and morally justifiable."68

Finally, legal interest shall be imposed on the monetary awards herein granted at the rate of six percent (6%) per annumfrom the finality of this
judgment until fully paid.69

WHEREFORE, in consideration of the foregoing disquisitions, the petition is GRANTED. The Decision dated September 24, 2008 and Resolution dated
March 2, 2009 of the Court of Appeals in CA-G.R. SP No. 100188 are hereby REVERSED and SET ASIDE.

The respondent, St. Scholastica’s College Westgrove, is hereby declared guilty of illegal dismissal and is hereby ORDERED to pay the petitioner, Cheryll
Santos Leus, the following: (a) separation pay in lieu of actual reinstatement equivalent to one (1) month pay for every year of service, with a fraction
of at least six (6) months considered as one (1) whole year from the time of her dismissal up to the finality of this Decision; (b) full backwages from the
time of her illegal dismissal up to the finality of this Decision; and (c) attorney’s fees equivalent to ten percent (10%) of the total monetary award. The
monetary awards herein granted shall earn legal interest at the rate of six percent (6%) per annumfrom the date of the finality of this Decision
untilfully paid. The case is REMANDED to the Labor Arbiter for the computation of petitioner’s monetary awards.

SO ORDERED.

BIENVENIDO L. REYES

Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.

Associate Justice

Chairperson

DIOSDADO M. PERALTA

Associate Justice MARTIN S. VILLARAMA, JR.

Associate Justice

FRANCIS H. JARDELEZA

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the
Court's Division.

PRESBITERO J. VELASCO, JR.

Associate Justice

Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I certify that the conclusions in the above Decision
had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P.A. SERENO

Chief Justice

5.

Republic of the Philippines

SUPREME COURT

Manila
 THIRD DIVISION

G.R. No. 208321 July 30, 2014

WESLEYAN UNIVERSITY PHILIPPINES, Petitioner,

vs.

NOWELLA REYES, Respondent.

DECISION

VELASCO, JR., J.:

Nature of the Case

The issue in this petition boils down to the legality of respondent Nowella Reyes' termination as University Treasurer of petitioner Wesleyan
University - Philippines (WUP) on the ground of loss of trust and confidence. Petitioner prays in this recourse that We reverse the February 28, 2013
Decision of the Court of Appeals (CA) in CA-G.R. SP No. 122536 which declared respondent's termination illegal.

The Facts

On March 16, 2004, respondent Nowella Reyes was appointed as WUP's University Treasurer on probationary basis. A little over a year after, she was
appointed as full time University Treasurer.

On April 27, 2009, a new WUP Board of Trustees was constituted. Among its first acts was to engage the services of Nepomuceno Suner & Associates
Accounting Firm (External Auditor) to investigate circulating rumors on alleged anomalies in the contracts entered into by petitioner and in its
finances.

Discovered following an audit were irregularities in the handling of petitioner’s finances, mainly, the encashment by its Treasury Department of checks
issued to WUP personnel, a practice purportedly in violation of the imprest system of cash management, and the encashment of various crossed
checks payable to the University Treasurer by Chinabank despite management’s intention to merelyhave the funds covered thereby transferred from
one of petitioner’s bankaccounts to another. The External Auditor’s report embodied the following findings and recommendations:1

Treasury Department (Cash Management):

Findings:

1. It was noted that checks consisting of various checks payable to teachers, staffs and other third parties had been the subject of encashment directly
with the Treasury Department under the stewardship of Mrs. Nowella A. Reyes,the University Treasurer. This practice is a clear violation of imprest
system of cash management, hence, resulting to unsound accounting practice. This laxity in cash management of those checks were paid as intended
for them. Recommendations:

For internal control reasons, the treasury should not accept any check encashment from its daily collections. Checks are being issued for encashment
with our depository bank for security reasons. The mere acceptance of checks from the collections is tantamount to cash disbursement out of
collections.

Findings:

2. It was also noted that various checks payable to the Treasurer of WUP x x x had been negotiated for encashment directly to China Bank –
Cabanatuan Branch, while the intention of the management for these checks were merely for fund transfer with the other account maintained at
China Bank. This practice is a violation not only in the practice of accounting/cash custodianship but had been mingled with spurious elements.
Unfortunately, check vouchers relating to this exception are nowhere to be found or not on file.

Findings:

3. A crossed check payable to the Treasurer – [WUP] x x x had been negotiated for encashment to China Bank – Cabanatuan Branch despite of the
restriction indicated in the face of the check. Unfortunately, the used check was no longer found on file.

As a result of said audit, petitioner served respondent a Show Cause Order and placed her under preventive suspension.2 The said Show Cause Order
required her to explain the following matters found by the External Auditors:

(a) your encashment of Php300,000.00 ofa crossed check you issued payable to yourself (Chinabank Check No. 000873613 dated 26 November 2008) x
x x;

(b) the encashment of various checks without any supporting vouchers x x x;

(c) unliquidated cash advances in the aggregate amount of Php9.7 million x x x.3
On June 18, 2009, respondent submitted her Explanation. Following which, WUP’s Human Resources Development Office (HRDO) conducted an
investigation. Finding respondent’s Explanation unsatisfactory, the HRDO, on July 2, 2009, submitted an Investigation Report4 to the University
President containing its findings and recommending respondent’s dismissal as University Treasurer.

Upon receipt of her notice of termination on July 9, 2009, respondent post-haste filed a complaint for illegal dismissal with the Arbitration Branch of
the National Labor Relations Commission. She contended that her dismissal was illegal, void and unjust, for the following reasons:

First,her 60-day preventive suspension violated the Labor Code provisions prohibiting such suspensions tolast for more than thirty (30) days. Thus, the
fact that she was not reinstated to her former position before the lapse of thirty (30) days, amounted to constructive dismissal;5 Second,there was a
violation of her right to substantive and procedural due process, as evidencedby petitioner’s failure to apply the pertinent due process provisions
under its Administrative and Personnel Policy Manual;6 and

Finally,the charges against her werebased on mere suspicion and speculations and unsupported by evidence.7

Petitioner, for its part, predicated its defense on the contention that respondent was a highly confidential employee who handled significant amounts
of money as University Treasurer and that the irregularities attributed to her in the performance ofher duties justify her dismissal on the basis of loss
of trust and confidence.8

Petitioner also averred that the 60-day preventive suspension thus imposed does not necessarily make suchsuspension void, inasmuch as the law
merely requires that after a 30-day preventive suspension, the affected employee shall automatically be reinstated. But in the case of respondent,
there was no need for her automatic reinstatement inasmuch as she was duly terminated within the 30-day period of her preventive suspension.9
Moreover, respondent was duly afforded her right to due process since WUP substantially complied with the twin-notice rule.

Ruling of the Labor Arbiter

On December 15, 2010, Labor Arbiter Reynaldo V. Abdon rendered a Decision finding for respondent. The dispositive portion of the Labor Arbiter
Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered, DECLARING that complainant Nowella Reyes x x x [was] illegally dismissed by
respondent Wesleyan University Philippines.

Accordingly, respondent Wesleyan University Philippines through its President is hereby DIRECTED to:

(1) Reinstate complainant Nowella Reyes to her former or equivalent position without loss of seniority right;

(1.1) Since reinstatement is immediately executory, to render a Report of Compliance to this Office within ten (10) days from receipt of this Decision.

(2) Pay complainant Reyes her backwages, from the time of her dismissal until reinstatement, the present sum of which is ₱429,000.00;

(3) Pay complainant Reyes, her 13th month pay in the sum of ₱52,000; her shared (sic) in related learning experience fee, ₱12,000.00; clothing
allowance, ₱6,000.00; Honorarium as member of standing committees, ₱4,000.00; and her vacation leave credits in the sum of ₱17,862.59;

(4) Pay complainant Reyes, moral damages in the sum of ₱150,000.00, exemplary damages in the amount of ₱100,000.00, and 10% attorney’s fees in
the sum of ₱77,086.25;

xxxx

SO ORDERED.10

The Labor Artbiter noted, as respondent has insisted, that the charges against the latter were based on mere rumors and speculations. As observed
too by the Labor Arbiter, petitioner itself was in the wrong because it had no proper policies on its accounting and financial procedures and that the
encashment and accommodation of checks to personnel, especially after banking hours, had been the practice of its previous and present
administrations. Thus, it was unfair to put all the blame on respondent without any evidence that her actionswere highly irregular, unfair or
unjustified.11

As regards petitioner’sfindings on the alterations in the Check Disbursement Voucher (CDV), unliquidated cash advances and duplicate checks, the
Labor Arbiter found and wrote:

Anent the alleged finding of the university that there was material alteration on the documents as regards the Check Disbursement Voucher (CDV), for
allegedly there was an absence of Board Resolution entry in the CDV filed in the Accounting while the copy submitted by the Treasurer has a Board
Resolution entry as well as the word ATM on the payee portion on the photocopy as crossed out while in the original it was not crossed out,
respondent cannot summarily state that complainant was at fault. The Human Resource should have conducted an in-depth investigation on this
matter. Unfortunately, respondent just followed the twin-notice rule, and did not conduct a thorough administrative investigation in accordance with
their own internal rules and policies in the Manual. Consequently, this Office has serious doubt that such matter was the fault of the complainant for
the blame may fall on the accounting personnel who is handling the CDV.

With respect to the unliquidated cash advances, it is not likewise the fault of the complainant. She pointed out that follow ups of the liquidation is
[sic] being handled by the auditor, while respondent claims that she was previously handling the same before it was transferred to Accounting Office
in August 2008. We see no evidence to prove that the liquidation is being handled by the complainant prior to August 2008. Moreover, it is common
practice thatthe Treasurer disburses the funds such as cash advances but the liquidation must be done by the beneficiary of the fund, and the
responsible people who should follow up the liquidation is the accounting office.

With respect to the duplicate checks, the same were done by a syndicate or individuals not connectedwith the University. The bank has already
admitted responsibility in the encashment of these checks and had returned the amounts to the respondent University, thus complainant has no fault
about this incident.12

Ruling of the NLRC

Petitioner filed an appeal withthe National Labor Relations Commission (NLRC) which was granted in the tribunal’s Decision dated July 11, 2011,
declaring that respondentwas legally dismissed. However, petitioner was ordered to pay respondent her proportionate 13th month pay, the monetary
value of her vacation leave, and attorney’s fees.

Adopting a stance entirely opposite to that of the Labor Arbiter, the NLRC held that respondent failed to controvert and disprove the established
charges of petitioner (as appellant-respondent) and insteadconveniently put the blame on other departments for her inculpatory acts. The NLRC
opined that her termination was not motivated by the change of petitioner’s officers but by the University’s goal to promote the economy and
efficiency of its Treasury Department.13

In net effect, the NLRC found petitioner’s contention of loss of trust and confidence in respondent with sufficient basis. While respondent, so the NLRC
notes, may not have been guilty ofwillful breach of trust, the fact that she held a highly confidential position, and considering that anomalous
transactions transpired under her command responsibility, provided petitioner with ample ground todistrust and dismiss her.14 The NLRC explained:

In this case, complainant-appellee [herein respondent] may not have been guilty of willful breach of trust. But as Treasurer of [WUP] who handles and
supervises all monetary transactions in the University and being a highly confidential employee at that, holding trust and confidence and after
considering the series of irregular and anomalous transactions that transpired under complainant-appellee’s command responsibility, respondent has
basis or ample reason to distrust complainant-appellee. Thus, we cannot justly deny [WUP] the authority to dismiss complainant-appellee.

The principle of respondent (sic) superior or command responsibility may be cited as basis for the termination of employment of managerial
employees based on loss of trust and confidence. In the Etcuban case (Ibid) the Supreme Court in upholding the validity of petitioner-employee’s
dismissal on the ground of loss of trust and confidence, ruled that even if the employee x x x had no actual and direct participation in the alleged
anomalies, his failure to detect any anomaly that would normally fall withinthe scope of his work reflects his ineffectiveness and amounts to gross
negligence and incompetence which are likewise justifiable grounds for his irregularity, for what is material is that his actuations were more than
sufficient to sow in his employer the seed of mistrust and loss of confidence.

As found by the External Auditor, complainant-appellee should have implemented an imprest system of cash management in order to secure the
indicated payees in those checks and they were paid of the checks as intended for them. It appears that checks payable to teachers, staffs and other
third parties had beenthe subject of encashment directly with the Treasury Department x x x and this is an unsound accounting practice.

Moreover, the External Auditors found that various checks payable to the Treasurer of Wesleyan University has been negotiated for encashment
directly to China Bank-Cabanatuan Branch while the intention of the management for those checks weremerely for fund transfer with the other
account maintained at China Bank. That this practice violated accounting or cash custodianship and check vouchers are nowhere to be found.

Further, the crossed check payable to the Treasurer (complainantappellee) in the amount of ₱300,000.00 dated 26 November 2008 had been
negotiated for encashment to China Bank – Cabanatuan Branch despite of restriction indicated in the face of the check and that the used check was no
longer found on file. There is a need for a clear policy when to issue crossed-checks or otherwise and the use of debit/credit memo to transfer one
account to another with the same bank. That these acts of violation of cash and check custodianship by complainant-appellee resulted in the loss of
respondent-appellant thus affecting the economy of the respondent-appellant institution.

In view of our finding that respondents-appellants (sic) has validly terminated complainant-appellee the latter’s claim for damages and attorney’s fees
lacks sufficient factual and legal basis. Accordingly, the Labor Arbiter’s decision directing the reinstatement of complainantappellee with full
backwages ishereby vacated and set aside.15

The NLRC denied respondent’s motion for reconsideration in a Resolution dated September 29, 2011.Therefrom, respondent went on Certiorari to the
CA, inCA-G.R. SP No. 122536.

Ruling of the Court of Appeals

On February 28, 2013, the CA, through its assailed Decision,16 found the NLRC’s ruling tainted with grave abuse of discretion and reinstated the
Decision of the Labor Arbiter. The fallo of the CA Decision reads:

WHEREFORE, premises considered, the assailed Decision and Resolution of the National Labor Relations Commission dated July 11, 2011 and
September 29, 2011 are REVERSED and SET ASIDE. The Decision of the Labor Arbiter dated December 15, 2010 is hereby REINSTATED, subject to the
modification that if reinstatement is no longer feasible, petitioner shall be awarded separation pay equivalent to one month salary for every year
ofservice reckoned from the time of employment to the finality of this decision.17

Holding that respondent’s termination was unjust, the CA, in virtual restoration of the findings and conclusions of the Labor Arbiter, pointed out,
among others, that: (1) respondent sufficiently countered all charges against her; (2) it had been the practice of the previous and present
administrations of petitioner to encash and accommodate checks of WUP personnel; thus, it would be unjust to penalize respondent for observing a
practice already in place when she assumed office; (3) the duty to liquidate cash advances is assigned to the internal auditor; (4) it has been
established that the encashments of spurious duplicate checks were perpetrated by individuals not connected with WUP, and that the bank admitted
responsibility therefor and had returned the amount involved to petitioner; (5) there was no imputation of any violation of the University’s
Administration and Personnel Policy Manual; (6) while the acts complained of violated the imprest system of cash management, there was no
showing that the said system had been adopted and observed in the school’s accounting and financial procedures; and (7) there was no showing that
respondent had the responsibility to implement changes in petitioner’s accounting system even if it were not in accordance with the generally
accepted principles of accounting.18

Hence, the instant petition.

The Issues

For consideration herein are the following issues raised by petitioner:

1. Whether or not the CA over-reached its power of review under Rule 65 of the Rules of Court when it reversed the judgment of the NLRC; and

2. Whether or not the CA erred in finding respondent illegally dismissed by petitioner on the ground of loss of trust and confidence.

The Court’s Ruling

The petition is impressed with merit. The CA erred in reinstating the Labor Arbiter’s Decision and in finding that respondent was illegally dismissed.

The CA’s power of review

We first resolve the procedural issue raised in this recourse. Petitioner contends that the CA over-reached its power of review under Rule 65 when it
substituted its own judgment over errors of judgment that it found in the NLRC Decision, stressing that the province of a writ of certiorari is to correct
only errors of jurisdiction and not errors of judgment.

This contention is misplaced. It is settled that under Section 9 of Batas Pambansa Blg.129,19 as amended by Republic Act No. 7902,20 the CA,
pursuant to the exercise of its original jurisdiction over petitions for certiorari, is specifically given the power to pass upon the evidence, if and when
necessary, to resolve factual issues. Sec. 9 clearly states:

The Court of Appeals shall have the power to try cases and conduct hearings, receive evidence and perform any and all acts necessary to resolve
factual issues raised in cases falling within its original and appellate jurisdiction, including the power to grant and conduct new trials or further
proceedings. x x x

Hence, the appellate court acted within its sound discretion when it re-evaluated the NLRC’s factual findings and substituted the latter’s own
judgment.

Loss of trust and confidence as a ground for termination

We now proceed to the substantive issue on the propriety of respondent’s dismissal due to loss of trust and confidence.As provided in Art. 282(c) of
Presidential Decree No. 442, otherwise known as the Labor Code of the Philippines:

Article 282. Termination by employer.An employer may terminate an employment for any of the following causes:

xxxx

c. Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;

We explained in M+W Zander Philippines, Inc. v. Enriquez21 the requisites of a valid dismissal based on loss of trust and confidence. As the case
elucidates:

Article 282 (c) of the Labor Code allows an employer to terminate the services of an employee for loss of trust and confidence. Certain guidelines must
be observed for the employer to terminate an employee for loss of trust and confidence. We held in General Bank and Trust Company v. Court of
Appeals, viz.:

[L]oss of confidence should not be simulated. It should not be used as a subterfuge for causes which are improper, illegal, or unjustified. Loss of
confidence may not be arbitrarily asserted in the face of overwhelming evidence to the contrary. It must be genuine, not a mere afterthought tojustify
earlier action taken in bad faith.

The first requisite for dismissal on the ground of loss of trust and confidence is that the employee concerned must be one holding a position of trust
and confidence.

There are two classes of positions of trust: managerial employees and fiduciary rank-and-file employees.

Managerial employees are defined as those vested with the powers or prerogatives to lay down management policies and to hire, transfer, suspend,
lay-off, recall, discharge,assign or discipline employees or effectively recommend such managerialactions. They refer to those whose primary duty
consists of the management of the establishment in which they are employed or of a department or a subdivision thereof, and to other officers or
members of the managerialstaff. Officers and members of the managerial staff perform work directlyrelated to management policies of their
employer and customarily and regularly exercise discretion and independent judgment.

The second class or fiduciary rank-and-file employees consist of cashiers, auditors, property custodians, etc., or those who, in the normal exercise of
their functions, regularlyhandle significant amounts of money or property. These employees, though rank-and-file, are routinely charged with the care
and custody of the employer’s money or property, and are thus classified as occupying positions of trust and confidence.22

xxxx

The second requisite of terminating an employee for loss of trust and confidence is that there must be an act that would justify the loss of trust and
confidence. To be a valid cause for dismissal, the loss of confidence must be based on a willful breach of trust and founded on clearly established
facts.23

To summarize, the first requisite is that the employee concerned must be one holding a position of trust and confidence, thus, one who is either: (1) a
managerial employee; or (2) a fiduciary rank-and-file employee, who, in the normal exercise of his or her functions, regularly handles significant
amounts of money or property of the employer. The secondrequisite is that the loss of confidence must be based on a willful breach of trust and
founded on clearly established facts.

In Lima Land, Inc. v. Cuevas,24 We discussed the difference between the criteria for determining the validity of invoking loss of trust and confidence as
a ground for terminating a managerial employee on the one hand and a rank-and-file employee on the other. In the said case, We held that with
respect to rank-and-file personnel, loss of trust and confidence, as ground for valid dismissal,requires proof of involvement in the alleged events in
question, and that mere uncorroborated assertions and accusations by the employer would not suffice. Withrespect to a managerial employee, the
mere existence of a basis for believing that such employee has breached the trust of his employer would suffice for his dismissal. The following
excerpts from Lima Land are instructive:

As firmly entrenched in our jurisprudence, loss of trust and confidence, as a just cause for termination of employment, is premised on the fact that an
employee concerned holds a position where greater trust is placed by management and from whom greater fidelity to duty is correspondingly
expected. This includes managerial personnel entrusted with confidence on delicate matters, such as the custody, handling, or care and protection of
the employer’s property.The betrayal of this trust is the essence of the offense for which an employee is penalized.

It must be noted, however, that ina plethora of cases, this Court has distinguished the treatment of managerial employees from that of rank-and-file
personnel, insofar as the application of the doctrine of loss of trust and confidence is concerned. Thus, with respect to rank-and-file personnel, loss of
trust and confidence, as ground for valid dismissal, requires proof of involvement in the alleged events in question, and that mere uncorroborated
assertions and accusations by the employer will not be sufficient. But as regards a managerial employee, the mere existence of a basis for believing
that such employee has breached the trust of his employer would suffice for his dismissal. Hence, in the case of managerial employees, proof beyond
reasonable doubt is not required, it being sufficient that there is some basis for such loss of confidence, such as when the employer has
reasonableground to believe that the employee concerned is responsible for the purported misconduct, and the nature of his participation therein
renders him unworthy of the trust and confidence demanded of his position.

On the other hand, loss of trust and confidence as a ground of dismissal has never been intended to afford an occasion for abuse because of its
subjective nature. It should not be used as a subterfuge for causes which are illegal, improper, and unjustified. It must be genuine, not a mere
afterthought intended to justify an earlier action taken in bad faith. Let it not be forgotten that what is at stake is the means of livelihood, the name,
and the reputation of the employee. To countenance an arbitrary exercise of that prerogative is to negate the employee’s constitutional right to
security of tenure.25

Respondent’s employment classification is irrelevant in light of her proven willful breach

There is no doubt that respondent held a position of trust; thus, greater fidelity is expected of her. She was not an ordinary rank-and-file employee but
an employee occupying a very sensitive position. As University Treasurer, she handled and supervised all monetary transactions and was the highest
custodian of funds belonging to WUP.26 To be sure, in the normal exercise of her functions, she regularly handled significant amounts of money of her
employer and managed a critical department.

The presence of the first requisite iscertain. So is as regards the second requisite. Indeed, the Court finds that petitioner adequately proved
respondent’s dismissal was for a just cause, based on a willful breach of trust and founded on clearly established facts as required by jurisprudence. At
the end of the day, the question of whether she was a managerial or rank-andfile employee does not matter in this case because not only is there
basis for believing that she breached the trust of her employer, her involvement in the irregularities attending to petitioner’sfinances has also been
proved.

To recall, petitioner, per its account, allegedly lost trust and confidence in respondent owing to any or an interplay of the following events: (1) she
encashed a check payable to the University Treasurer in the amount of three hundred thousand pesos (PhP 300,000); (2) she encashed crossed checks
payable to the University Treasurer, when the intention of management in this regard was to merely transfer funds from one of petitioner’s accounts
to another in the same bank; (3) she allowed the Treasury Department to encash the checks issued to WUP personnel rather than requiring the latter
to have said checks encashed by the bank, in violation of the imprest system of accounting; (4) she caused the disbursement of checks without
supporting check vouchers; (5) there were unliquidated cash advances; and (6) spurious duplicate checks bearing her signature were encashed causing
damage to petitioner.

We disagree with the CA’s finding that respondent has sufficiently countered all inculpatory allegations and accusations against her. On the contrary,
We find that here, there was anadmitted, actual and real breach of duty committed by respondent, which translates into a breach of trust and
confidence in her. For perspective, respondent’s explanation as to the charges against her is as follows:
1. That the alleged crossed check issued by her payable to THE TREASURER – WUP was done in the exercise of her duty and function as such, and not
with her name and not to herself and personal favor, and that said check had been prepared passing through the usual system; 2. That the University
heads were the beneficiaries of said amount who strongly requested that their love giftbe given, hence, the encashment;

3. That the amount of the check was properly disposed of as evidenced by the document bearing the signatures of recipients;

4. That the Office to pointto if vouchers and supporting documents will have to be checked concerning payments made is the Accounting Office;

5. That cash advances to various University personnel pass through her office in the exercise of her duties assuch but the office who follow up the
liquidation of payments received is the Office of the University Auditor;

6. That respondent Reyes adopted her reply on the show-cause order in the investigation previously conducted by Dr. Jeremias Garcia about the
duplicated checks alleging among others:

a) She and her staff confirmed that only the checks issued to General Capulong and Leodigario David were encashed by the University Teller;

b) The check issued to Norma de Jesus was encashed by the Pick-up Chinabank Teller on December 5, 2008 while collecting deposits from the
University with the assistance of the University teller;

c) That the check issued to Mercedes was not encashed with the University teller but with WEMCOOP;

d) As to the encashment and accommodation of checks to personnel, it has been the practice of previousand present administration moreso when
employees cannot anymore go to Chinabank to transact business as it is mostly beyond banking hours when checks are ready for disbursement;

e) That Respondent’s department has no control over fraudulent transactions done outside the University, that it is the Bank’s duty to protect its
clients as tothe proper procedures to secure our account;

f) That the computer system program of the University’s depository bank has very limited capabilities to detect fraudulent entries;

g) That the signature verifier also had been remiss in carefully checking the authenticity ofprevious signatories.27

a. Respondent’s encashment of checks

As it were, respondent did not deny, in fact admitted, the encashment of the three hundred thousand peso (PhP 300,000) crossed check payable to
the University Treasurer which covered the total amount of the "love gift" for administrative and academic officials of WUP. Neither did she deny the
fact that the Treasury Department encashed checks issued to WUP personnel rather than requiring them to have the checks encashed by the bank.
Instead, she explained that the beneficiaries of the amounts strongly requested that their love gifts be given in cash, hence the encashment of the PhP
300,000 crossed check and, thereafter, the accommodation and encashment of their checks directly by the Treasury Department. Moreover, she
submitted a document bearing the signatures of the recipients of the "love gift" as proof that the amount was disposed properly.28 She further
insisted that this was the usual practice of the University and that she merely accommodated the requests of WUP personnel especially when
Chinabank was already closed.

Jurisprudence has pronounced that the crossing of a check means that the check may not be encashed but only deposited in the bank.29 As Treasurer,
respondent knew or is at least expected to be aware of and abide by this basic banking practice and commercial custom. Clearly, the issuance of a
crossed check reflects management’s intention to safeguard the funds covered thereby, its special instruction to have the same deposited to another
account and its restriction on its encashment.

Here, respondent, as aptly detailed inthe auditor’s report, disregarded management’s intentions and ignored the measures in place to secure the
handling of WUP’s funds. By encashing the crossed checks, respondent put the funds covered thereby under the riskof being lost, stolen, co-mingled
with other funds or spent for other purposes. Furthermore, the accommodation and encashment by the Treasury Department of checks issued to
WUP personnel were highly irregular. First, WUP, not being a bank, had no business encashing the checks of its personnel.30 More importantly, in
encashing the said checks, the Treasury Department made disbursements contrary to the wishes ofmanagement because, in issuing said checks,
management has madeclear its intention that monies therefor would be sourced from petitioner’s deposit with Chinabank, under a specific account,
and not from the cash available in the Treasury Department.

That the encashment of crossed checks and payment of checks directly to WUP personnel had been the practice of the previous and present
administration of petitioner is of no moment. To Our mind, this was simply respondent’s convenient excuse, a poorlydisguised afterthought, when her
unbecoming carelessness in managing WUP’s finances was exposed. Moreover, the prevalence of this practice could have been contained if only
respondent consistently observed the regular procedure for encashing crossed checks and properly handled requests for accommodation of checks
issued to the WUP personnel.

b. Unliquidated cash advances

On the matter of unliquidated cash advances in the aggregate amount of nine million seven hundred thousand pesos (PhP 9,700,000), respondent
explained that while it was true that cash advances to WUP personnel passed through her office in the exercise of her duties as University Treasurer,
the office that follows up the liquidation of advances received is the office of the University Auditor.31 However, granting that the responsibility of
handling the liquidation of cash advances is no longer lodged in her office, there is proof showing that before the Treasury Department was relieved of
said responsibility, the total unliquidated cash advances was even bigger, amounting to eleven million five hundred thirty-three thousand two
hundred thirty pesos and thirty-seven centavos (PhP 11,533,230.37). There is nothing in the records before us showing that respondent denied the
following findings in the Investigation Report of the WUP’s Human Resource Development Office (HRDO)on this matter, to wit:

In the matter of unliquidated cash advances in the aggregate amount of Php9.7million as found by the External Auditors, respondent’s contention was
that cash advances tovarious University personnel pass through her office in the exercise of her duties as such but the office who follows up the
liquidation of payments received is the Office of the University Auditor.

On the inquiry done x x x of the Internal Auditor, Treasury and Accounting officer on July 1, 2009, it was found out that the responsibility of handling
cash advances and liquidation report was transferred from Treasury Office to Accounting Office on August 2008, when Ms. Luzviminda Torres, the
personnel handling the same detailed at the Treasury Office went on leave. It was transferred to Ms. Julieta Mateo. What was surprising was that as
per certification and summary submitted by Ms. Mateo, the amount of unliquidated cash advances previous to August 2008, when the same was
under the responsibility of the Treasury Office, was even bigger with the total amount of ELEVEN MILLION FIVE HUNDRED THIRTY THREE THOUSAND,
TWO HUNDRED THIRTY PESOS AND THIRTY SEVEN CENTAVOS (Attached as Annex "G")

Even if there is truth in the contention of herein Respondent that she was no longer the one in charge of the liquidation proceedings, the same would
not absolve her from gross negligence of duties. The fact that the said function was with her office until August 2008, with unliquidated cash advances
even bigger, still showed that she reneged in her duties which she had overlooked for so long. She now mistakenly points the responsibility to the
Office of the University Auditor. These informations are enough to be considered as Respondent’s acts constitutive of breach of trust and
confidence.32

xxx

c. Other irregularities inrespondent’s performance

In all, We find the Investigation Report of the HRDO a credible, extensive and thorough account of respondent’s involvementin incidents which are
sufficient grounds for petitioner’s loss of trust and confidence in her, to wit:

Respondent Nowella C. Reyes has committed breach of trust and confidence in the conduct of her office.

In her answer, Respondent admitted the encashment of the crossed check with the defense that the same was done in the performance of her duty,
not for her personal use but because of the request of University heads who wanted their love gifts begiven. She alsoadmitted habitual encashment of
checks issued by the University to its personnel on the basis of practice of previous administration.

The charge against Respondent of the act of improper encashment of a check, which aside from being irregular is clearly violative of imprest system of
cash management. Moreover, the same being a crossed check, should not be negotiated for encashment to Chinabank – Cabanatuan Branch because
of the restriction indicated on its face, which Mrs. Reyes, by reason of her office knew very well.

During the investigation conducted, it was revealed that the check disbursement voucher attached by Respondent on her answer to justify the
regularity of its issuance and eventual encashment was not exactly the same as the one filed at the Accounting Office. It showed that the photocopy
of the original CDV which was attached by Respondent (attached as Annex "E"of this report) bear some material alterations, namely:

1. The absence of entry of the Board Resolution which was reflected as a sort of inquiry by the Internal Auditor, and which at present was left blank on
the original, as compared to the photocopy submitted by respondent bearing an entry of the Board Resolution number;

2. The word ATM on the payee portion of the CDV in the original as compared to the photocopy wherein the entry ATM was crossed out.

During a discussion with the external auditors, it was categorically stated by them that during the courseof external audit, said document was
inexistent in the records presented by the Accounting and Treasurer’s Offices. The production of the photocopy by Respondent already altered only
after the suspension was effected cast doubt on the regularity of its issuance, negating her otherwise claim. Another significant observation was that
the original copy of CDV (attached as Annex "F" of this report) and corresponding signatures of administrative heads who received payments showed
folded marks halfways, with the fastener holes unmatched, showing that those two documents were not really filed together, as regularly done, and
the same were not filed in the regular course and must have been kept previously on a different manner in possession of person other than the office
which must file the same.

xxxx

On the last charge in the show cause order specifically the existence of duplicate checks in the account of the University amounting to Php 1.050
Million, included in Respondent’s defenses were that among the checks duplicated, only two of them were encashed with the University Teller, and
the check originally named to Norma de Jesus as payee was paid by the pick-up teller only through the assistance of the University teller.

Again, Respondent’s defense were void of truth and merit. The act of encashing checks issued by the Treasury Office, clearly violative of imprest
system of cash management which Mrs. Reyes by reason of her office knew very well, showed that Respondent directly reneged in her duty to
observe economic security measures.

As found on the documents attachedto the Investigation report of Dr. Garcia which had been expressly adopted by herein respondent in her answer is
an Affidavit of Norma de Jesus stating that she actually encashed the check with the personnel of the Treasury Office particularly Shirley Punay, who
gave her the amountequivalent days after the check was handed to the Treasury office.

However noble the intention of herein Respondent in helping her fellow workers in the University by her acts of accommodation by encashing their
checks directly withthe Treasury Office when Chinabank was already closed, the same still reneged in her duty to protect the economic security of the
University. An act of misconduct which caused [sic]33

An employer cannot be compelled toretain an employee who is guilty of acts inimical to the interests of the employer. A company has the right to
dismiss its employees if only as a measure of self-protection. This is all the more true in the case of supervisors or personnel occupying positions of
responsibility.34 In this case, let it be remembered that respondent was not an ordinary rank-and-file employee as she was no less the Treasurer who
was in charge of the coffers of the University. It would be oppressive to require petitioner to retain in their management an officer who has admitted
to knowingly and intentionally committing acts which jeopardized its finances and who was untrustworthy in the handling and custody of University
funds.

WHEREFORE, premises considered, we GRANTthe petition. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 122536 is, thus, SET ASIDE.
The Decision of the National Labor Relations Commission in NLRC RAB III Case No. 07-15131-09 is REINSTATED.

SO ORDERED.

PRESBITERO J. VELASCO, JR.

Associate Justice

WE CONCUR:

DIOSDADO M. PERALTA

Associate Justice

MARTIN S. VILLARAMA, JR.*

Associate Justice JOSE CATRAL MENDOZA

Associate Justice

MARVIC MARIO VICTOR F. LEONEN

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the
Court's Division.

PRESBITERO J. VELASCO, JR.

Associate Justice

Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I certify that the conclusions in the above Decision
had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice

6.

Republic of the Philippines

SUPREME COURT

Baguio City

FIRST DIVISION

G.R. No. 181490 April 23, 2014

MIRANT (PHILIPPINES) CORPORATION AND EDGARDO A. BAUTISTA, Petitioners,

 vs.

JOSELITO A. CARO, Respondent.

DECISION

VILLARAMA, JR., J.:

At bar is a petition1 under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the Decision2 and Resolution3 of the Court of Appeals
(CA) dated June 26, 2007 and January 11, 2008, respectively, which reversed and set aside the Decision4 of the National Labor Relations Commission
(NLRC) in NLRC NCR CA No. 046551-05 (NCR-00-03-02511-05). The NLRC decision vacated and set aside the Decision5 of the Labor Arbiter which found
that respondent Joselito A. Caro (Caro) was illegally dismissed by petitioner Mirant (Philippines) Corporation (Mirant).

Petitioner corporation is organized and operating under and by virtue of the laws of the Republic of the Philippines. It is a holding company that owns
shares in project companies such as Mirant Sual Corporation and Mirant Pagbilao Corporation (Mirant Pagbilao) which operate and maintain power
stations located in Sual, Pangasinan and Pagbilao, Quezon, respectively. Petitioner corporation and its related companies maintain around 2,000
employees detailed in its main office and other sites. Petitioner corporation had changed its name to CEPA Operations in 1996 and to Southern
Company in 2001. In 2002, Southern Company was sold to petitioner Mirant whose corporate parent is an Atlanta-based power producer in the
United States of America.6 Petitioner corporation is now known as Team Energy Corporation.7

Petitioner Edgardo A. Bautista (Bautista) was the President of petitioner corporation when respondent was terminated from employment.8

Respondent was hired by Mirant Pagbilao on January 3, 1994 as its Logistics Officer. In 2002, when Southern Company was sold to Mirant, respondent
was already a Supervisor of the Logistics and Purchasing Department of petitioner. At the time of the severance of his employment, respondent was
the Procurement Supervisor of Mirant Pagbilao assigned at petitioner corporation’s corporate office. As Procurement Supervisor, his main task was to
serve as the link between the Materials Management Department of petitioner corporation and its staff, and the suppliers and service contractors in
order to ensure that procurement is carried out in conformity with set policies, procedures and practices. In addition, respondent was put incharge of
ensuring the timely, economical, safe and expeditious delivery of materials at the right quality and quantity to petitioner corporation’s plant.
Respondent was also responsible for guiding and overseeing the welfare and training needs of the staff of the Materials Management Department.
Due to the nature of respondent’s functions, petitioner corporation considers his position as confidential.9

The antecedent facts follow:

Respondent filed a complaint10 for illegal dismissal and money claims for 13th and 14th month pay, bonuses and other benefits, as well as the
payment of moral and exemplary damages and attorney’s fees. Respondent posits the following allegations in his Position Paper:11

On January 3, 1994, respondent was hired by petitioner corporation as its Logistics Officer and was assigned at petitioner corporation’s corporate
office in Pasay City. At the time of the filing of the complaint, respondent was already a Supervisor at the Logistics and Purchasing Department with a
monthly salary of ₱39,815.00.

On November 3, 2004, petitioner corporation conducted a random drug test where respondent was randomly chosen among its employees who
would be tested for illegal drug use. Through an Intracompany Correspondence,12 these employees were informed that they were selected for
random drug testing to be conducted on the same day that they received the correspondence. Respondent was duly notified that he was scheduled to
be tested after lunch on that day. His receipt of the notice was evidenced by his signature on the correspondence.

Respondent avers that at around 11:30 a.m. of the same day, he received a phone call from his wife’s colleague who informed him that a bombing
incident occurred near his wife’s work station in Tel Aviv, Israel where his wife was then working as a caregiver. Respondent attached to his Position
Paper a Press Release13 of the Department of Foreign Affairs (DFA) in Manila to prove the occurrence of the bombing incident and a letter14 from the
colleague of his wife who allegedly gave him a phone call from Tel Aviv.

Respondent claims that after the said phone call, he proceeded to the Israeli Embassy to confirm the news on the alleged bombing incident.
Respondent further claims that before he left the office on the day of the random drug test, he first informed the secretary of his Department, Irene
Torres (Torres), at around 12:30 p.m. that he will give preferential attention to the emergency phone call that he just received. He also told Torres that
he would be back at the office as soon as he has resolved his predicament. Respondent recounts that he tried to contact his wife by phone but he
could not reach her. He then had to go to the Israeli Embassy to confirm the bombing incident. However, he was told by Eveth Salvador (Salvador), a
lobby attendant at the Israeli Embassy, that he could not be allowed entry due to security reasons.

On that same day, at around 6:15 p.m., respondent returned to petitioner corporation’s office. When he was finally able to charge his cellphone at the
office, he received a text message from Tina Cecilia (Cecilia), a member of the Drug Watch Committee that conducted the drug test, informing him to
participate in the said drug test. He immediately called up Cecilia to explain the reasons for his failure to submit himself to the random drug test that
day. He also proposed that he would submit to a drug test the following day at his own expense. Respondent never heard from Cecilia again.

On November 8, 2004, respondent received a Show Cause Notice15 from petitioner corporation through Jaime Dulot (Dulot), his immediate
supervisor, requiring him to explain in writing why he should not be charged with "unjustified refusal to submit to random drug testing." Respondent
submitted his written explanation16 on November 11, 2004. Petitioner corporation further required respondent on December 14, 2004 to submit
additional pieces of supporting documents to prove that respondent was at the Israeli Embassy in the afternoon of November 3, 2004 and that the
said bombing incident actually occurred. Respondent requested for a hearing to explain that he could not submit proof that he was indeed present at
the Israeli Embassy during the said day because he was not allegedly allowed entry by the embassy due to security reasons. On January 3, 2005,
respondent submitted the required additional supporting documents.17
On January 13, 2005, petitioner corporation’s Investigating Panel issued an Investigating Report18 finding respondent guilty of "unjustified refusal to
submit to random drug testing" and recommended a penalty of four working weeks suspension without pay, instead of termination, due to the
presence of mitigating circumstances. In the same Report, the Investigating Panel also recommended that petitioner corporation should review its
policy on random drug testing, especially of the ambiguities cast by the term "unjustified refusal."

On January 19, 2005, petitioner corporation’s Asst. Vice President for Material Management Department, George K. Lamela, Jr. (Lamela),
recommended19 that respondent be terminated from employment instead of merely being suspended. Lamela argued that even if respondent did not
outrightly refuse to take the random drug test, he avoided the same. Lamela averred that "avoidance" was synonymous with "refusal."

On February 14, 2005, respondent received a letter20 from petitioner corporation’s Vice President for Operations, Tommy J. Sliman (Sliman),
terminating him on the same date. Respondent filed a Motion to Appeal21 his termination on February 23, 2005. The motion was denied by petitioner
corporation on March 1, 2005.

It is the contention of respondent that he was illegally dismissed by petitioner corporation due to the latter’s non-compliance with the twin
requirements of notice and hearing. He asserts that while there was a notice charging him of "unjustified refusal to submit to random drug testing,"
there was no notice of hearing and petitioner corporation’s investigation was not the equivalent of the "hearing" required under the law which should
have accorded respondent the opportunity to be heard.

Respondent further asserts that he was illegally dismissed due to the following circumstances:

1. He signed the notice that he was randomly selected as a participant to the company drug testing;

2. Even the Investigating Panel was at a loss in interpreting the charge because it believed that the term "refusal" was ambiguous, and therefore such
doubt must be construed in his favor; and

3. He agreed to take the drug test the following day at his own expense, which he says was clearly not an indication of evasion from the drug test.

Petitioner corporation counters with the following allegations:

On November 3, 2004, a random drug test was conducted on petitioner corporation’s employees at its Corporate Office at the CTC Bldg. in Roxas Blvd.,
Pasay City. The random drug test was conducted pursuant to Republic Act No. 9165, otherwise known as the "Comprehensive Dangerous Drugs Act of
2002." Respondent was randomly selected among petitioner’s employees to undergo the said drug test which was to be carried out by Drug Check
Philippines, Inc.22

When respondent failed to appear at the scheduled drug test, Cecilia prepared an incident report addressed to Dulot, the Logistics Manager of the
Materials Management Department.23 Since it was stated under petitioner corporation’s Mirant Drugs Policy Employee Handbook to terminate an
employee for "unjustified refusal to submit to a random drug test" for the first offense, Dulot sent respondent a Show Cause Notice24 dated
November 8, 2004, requiring him to explain why no disciplinary action should be imposed for his failure to take the random drug test. Respondent, in
a letter dated November 11, 2004, explained that he attended to an emergency call from his wife’s colleague and apologized for the inconvenience he
had caused. He offered to submit to a drug test the next day even at his expense.25 Finding respondent’s explanation unsatisfactory, petitioner
corporation formed a panel to investigate and recommend the penalty to be imposed on respondent.26 The Investigating Panel found respondent’s
explanations as to his whereabouts on that day to be inconsistent, and recommended that he be suspended for four weeks without pay. The
Investigating Panel took into account that respondent did not directly refuse to be subjected to the drug test and that he had been serving the
company for ten years without any record of violation of its policies. The Investigating Panel further recommended that the Mirant Drug Policy be
reviewed to clearly define the phrase "unjustified refusal to submit to random drug testing."27 Petitioner corporation’s Vice-President for Operations,
Sliman, however disagreed with the Investigating Panel’s recommendations and terminated the services of respondent in accordance with the subject
drug policy. Sliman likewise stated that respondent’s violation of the policy amounted to willful breach of trust and loss of confidence.28

A cursory examination of the pleadings of petitioner corporation would show that it concurs with the narration of facts of respondent on material
events from the time that Cecilia sent an electronic mail at about 9:23 a.m. on November 3, 2004 to all employees of petitioner corporation assigned
at its Corporate Office advising them of the details of the drug test – up to the time of respondent’s missing his schedule to take the drug test.
Petitioner corporation and respondent’s point of disagreement, however, is whether respondent’s proffered reasons for not being able to take the
drug test on the scheduled day constituted valid defenses that would have taken his failure to undergo the drug test out of the category of "unjustified
refusal." Petitioner corporation argues that respondent’s omission amounted to "unjustified refusal" to submit to the random drug test as he could
not proffer a satisfactory explanation why he failed to submit to the drug test:

1. Petitioner corporation is not convinced that there was indeed such a phone call at noon of November 3, 2004 as respondent could not even tell who
called him up.

2. Respondent could not even tell if he received the call via the landline telephone service at petitioner corporation’s office or at his mobile phone.

3. Petitioner corporation was also of the opinion that granting there was such a phone call, there was no compelling reason for respondent to act on it
at the expense of his scheduled drug testing. Petitioner corporation principally pointed out that the call merely stated that a bomb exploded near his
wife’s work station without stating that his wife was affected. Hence, it found no point in confirming it with extraordinary haste and forego the drug
test which would have taken only a few minutes to accomplish. If at all, respondent should have undergone the drug testing first before proceeding to
confirm the news so as to leave his mind free from this obligation.

4. Petitioner corporation maintained that respondent could have easily asked permission from the Drug Watch Committee that he was leaving the
office since the place where the activity was conducted was very close to his work station.29
To the mind of petitioners, they are not liable for illegal dismissal because all of these circumstances prove that respondent really eluded the random
drug test and was therefore validly terminated for cause after being properly accorded with due process. Petitioners further argue that they have
already fully settled the claim of respondent as evidenced by a Quitclaim which he duly executed. Lastly, petitioners maintain that they are not guilty
of unfair labor practice as respondent’s dismissal was not intended to curtail his right to self-organization; that respondent is not entitled to the
payment of his 13th and 14th month bonuses and other incentives as he failed to show that he is entitled to these amounts according to company
policy; that respondent is not entitled to reinstatement, payment of full back wages, moral and exemplary damages and attorney’s fees due to his
termination for cause.

In a decision dated August 31, 2005, Labor Arbiter Aliman D. Mangandog found respondent to have been illegally dismissed. The Labor Arbiter also
found that the quitclaim purportedly executed by respondent was not a bona fide quitclaim which effectively discharged petitioners of all the claims
of respondent in the case at bar. If at all, the Labor Arbiter considered the execution of the quitclaim as a clear attempt on the part of petitioners to
mislead its office into thinking that respondent no longer had any cause of action against petitioner corporation. The decision stated, viz.:

WHEREFORE, premises considered, this Office finds respondents GUILTY of illegal dismissal, and hereby ordered to jointly and severally reinstate
complainant back to his former position without loss on seniority rights and benefits and to pay him his backwages and other benefits from the date
he was illegally dismissed up to the time he is actually reinstated, partially computed as of this date in the amount of ₱258,797.50 (₱39,815.00 x 6.5
mos.) plus his 13th and 14th month pay in the amount of ₱43,132.91 or in the total amount of ₱301,930.41.

Respondents are also ordered to pay complainant the amount of ₱3,000,000.00 as and by way of moral and exemplary damages, and to pay
complainant the amount equivalent to ten percent (10%) of the total awards as and by way of attorney’s fees.

SO ORDERED.30

The Labor Arbiter stated that while petitioner corporation observed the proper procedure in the termination of an employee for a purported
authorized cause, such just cause did not exist in the case at bar. The decision did not agree with the conclusions reached by petitioner corporation’s
own Investigating Panel that while respondent did not refuse to submit to the questioned drug test and merely "avoided" it on the designated day,
"avoidance" and "refusal" are one and the same. It also held that the terms "avoidance" and "refusal" are separate and distinct and that "the two
words are not even synonymous with each other."31 The Labor Arbiter considered as more tenable the stance of respondent that his omission merely
resulted to a "failure" to submit to the said drug test – and not an "unjustified refusal." Even if respondent’s omission is to be considered as refusal,
the Labor Arbiter opined that it was not tantamount to "unjustified refusal" which constitutes as just cause for his termination. Finally, the Labor
Arbiter found that respondent was entitled to moral and exemplary damages and attorney’s fees.

On appeal to the NLRC, petitioners alleged that the decision of the Labor Arbiter was rendered with grave abuse of discretion for being contrary to
law, rules and established jurisprudence, and contained serious errors in the findings of facts which, if not corrected, would cause grave and
irreparable damage or injury to petitioners. The NLRC, giving weight and emphasis to the inconsistencies in respondent’s explanations, considered his
omission as "unjustified refusal" in violation of petitioner corporation’s drug policy. Thus, in a decision dated May 31, 2006, the NLRC ruled, viz.:

x x x [Respondent] was duly notified as shown by copy of the notice x x x which he signed to acknowledge receipt thereof on the said date.
[Respondent] did not refute [petitioner corporation’s] allegation that he was also personally reminded of said drug test on the same day by Ms. Cecilia
of [petitioner corporation’s] drug watch committee. However, [respondent] was nowhere to be found at [petitioner corporation’s] premises at the
time when he was supposed to be tested. Due to his failure to take part in the random drug test, an incident report x x x was prepared by the Drug
Cause Notice x x x to explain in writing why no disciplinary action should be taken against him for his unjustified refusal to submit to random drug test,
a type D offense punishable with termination. Pursuant to said directive, [respondent] submitted an explanation x x x on 11 November 2004,
pertinent portions of which read:

"I was scheduled for drug test after lunch that day of November 3, 2004 as confirmed with Tina Cecilia. I was having my lunch when a colleague of my
wife abroad called up informing me that there was something wrong [that] happened in their neighborhood, where a bomb exploded near her
workstation. Immediately, I [left] the office to confirm said information but at around 12:30 P.M. that day, I informed MS. IRENE TORRES, our
Department Secretary[,] that I would be attending to this emergency call. Did even [inform] her that I’ll try to be back as soon as possible but
unfortunately, I was able to return at 6:15 P.M. I didn’t know that Tina was the one calling me on my cell that day. Did only receive her message after I
charged my cell at the office that night. I was able to call back Tina Cecilia later [that] night if it’s possible to have it (drug test) the next day.

My apology [for] any inconvenience to the Drug Watch Committee, that I forgot everything that day including my scheduled drug test due to confusion
of what had happened. It [was] not my intention not to undergo nor refuse to have a drug test knowing well that it’s a company policy and it’s
mandated by law."

In the course of the investigation, [respondent] was requested to present proof pertaining to the alleged call he received on 3 November 2004 from a
colleague of his wife regarding the bomb explosion in Tel Aviv, his presence at the Israel Embassy also on 3 November 2004. [Respondent], thereafter,
submitted a facsimile which he allegedly received from his wife's colleague confirming that she called and informed him of the bombing incident.
However, a perusal of said facsimile x x x reveals that the same cannot be given any probative value because, as correctly observed by [petitioners], it
can barely be read and upon inquiry with PLDT, the international area code of Israel which is 00972 should appear on the face of the facsimile if
indeed said facsimile originated from Israel. [Respondent] also could not present proof of his presence at the Israel Embassy on said time and date. He
instead provided the name of a certain Ms. Eveth Salvador of said embassy who could certify that he was present thereat. Accordingly, Mr. Bailon, a
member of the investigation panel, verified with Ms. Salvador who told him that she is only the telephone operator of the Israel Embassy and that she
was not in a position to validate [respondent’s] presence at the Embassy. Mr. Bailon was then referred to a certain Ms. Aimee Zandueta, also of said
embassy, who confirmed that based on their records, [respondent] did not visit the embassy nor was he attended to by any member of said embassy
on 3 November 2004. Ms. Zandueta further informed Mr. Bailon that no bombing occurred in Tel Aviv on 3 November 2004 and that the only reported
incident of such nature occurred on 1 November 2004. A letter x x x to this effect was written by Consul Ziva Samech of the Embassy of Israel. A press
release x x x of the Department of Foreign Affairs confirm[ed] that the bombing occurred on 1 November 2004.
In his explanation, the [respondent] stated that the reason why he had to leave the office on 3 November 2004 was to verify an information at the
Israel Embassy of the alleged bombing incident on the same day. However, [petitioners] in their position paper alleged that Ms. Torres of [petitioner]
company received a text message from him at around 12:47 p.m. informing her that he will try to be back since he had a lot of things to do and asking
her if there was a signatory on that day. [Respondent] did not deny sending said text messages to Ms. Torres in his reply and rejoinder x x x. He
actually confirmed that he was involved in the CIIS registration with all companies that was involved with [petitioner] company and worked on the
registration of [petitioner] company’s vehicles with TRO.

It is also herein noted that [respondent] had initially reported to Ms. Torres that it was his mother in law who informed him about the problem
concerning his wife. However, in his written explanation x x x, the [respondent] stated that it was a friend of his wife, whom he could not even
identify, who informed him of the alleged bombing incident in Tel Aviv, Israel. [Respondent] also did not deny receiving a cellphone call from Ms.
Cecilia that day. He merely stated that he did not know that it was Ms. Cecilia calling him up in a cellphone and it was only after he charged his
cellphone at the office that night that he received her message. In effect, [respondent] asserted that his cellphone battery was running low or drained.
[Petitioners] were able to refute [these] averments of [respondent] when they presented [respondent’s] Smart Billing Statement

x x x showing that he was able to make a cellphone call at 5:29 p.m. to [petitioner corporation’s] supplier, Mutico for a duration of two (2) minutes.32

Given the foregoing facts, the NLRC stated that the offer of respondent to submit to another drug test the following day, even at his expense, cannot
operate to free him from liability. The NLRC opined that taking the drug test on the day following the scheduled random drug test would affect both
the integrity and the accuracy of the specimen which was supposed to be taken from a randomly selected employee who was notified of his/her
selection on the same day that the drug test was to be administered. The NLRC further asserted that a drug test, conducted many hours or a day after
the employee was notified, would compromise its results because the employee may have possibly taken remedial measures to metabolize or
eradicate whatever drugs s/he may have ingested prior to the drug test.

The NLRC further stated that these circumstances have clearly established the falsity of respondent’s claims and found no justifiable reason for
respondent to refuse to submit to the petitioner corporation’s random drug test. While the NLRC acknowledged that it was petitioner corporation’s
own Investigating Panel that considered respondent’s failure to take the required drug test as mere "avoidance" and not "unjustified refusal," it
concluded that such finding was merely recommendatory to guide top management on what action to take.

The NLRC also found that petitioner corporation’s denial of respondent’s motion to reconsider his termination was in order. Petitioner corporation’s
reasons for such denial are quoted in the NLRC decision, viz.:

"Your appeal is anchored on your claim that you responded to an emergency call from someone abroad informing you that a bomb exploded near the
work station of your wife making you unable to undergo the scheduled drug testing. This claim is groundless taking into account the following:

We are not convinced that there was indeed that call which you claim to have received noon of November 3, 2004. On the contrary, our belief is based
on the fact that you could not tell who called you up or how the call got to you. If you forgot to ask the name of the person who called you up, surely
you would have known how the call came to you. You said you were having lunch at the third floor of the CTC building when you received the call.
There were only two means of communication available to you then: the land line telephone service in your office and your mobile phone. If your
claim were (sic) not fabricated, you would be able to tell which of these two was used.

Granting that you indeed received that alleged call, from your own account, there was no compelling reason for you to act on it at the expense of your
scheduled drug testing. The call, as it were, merely stated that ‘something wrong happened (sic) in their neighborhood, where a bomb exploded near
her workstation.’ Nothing was said if your wife was affected. There is no point in confirming it with extraordinary haste and forego the drug test which
would have taken only a few minutes to accomplish. If at all, you should have undergone the drug testing first before proceeding to confirm the news
so as to leave your mind free from this obligation.

Additionally, if it was indeed necessary that you skip the scheduled drug testing to verify that call, why did you not ask permission from the Drug
Watch [C]ommittee that you were leaving? The place where the activity was being conducted was very close to your workstation. It was absolutely
within your reach to inform any of its members that you were attending to an emergency call. Why did you not do so?

All this undisputedly proves that you merely eluded the drug testing. Your claim that you did not refuse to be screened carries no value. Your act was a
negation of your words."33

The NLRC found that respondent was not only validly dismissed for cause – he was also properly accorded his constitutional right to due process as
shown by the following succession of events:

1. On November 8, 2004, respondent was given a show-cause notice requiring him to explain in writing within three days why no disciplinary action
should be taken against him for violation of company policy on unjustified refusal to submit to random drug testing – a type D offense which results in
termination.

2. Respondent submitted his explanation on November 11, 2004.

3. On December 9, 2004, respondent was given a notice of investigation34 informing him of a meeting on December 13, 2004 at 9:00 a.m. In this
meeting, respondent was allowed to explain his side, present his evidences and witnesses, and confront the witnesses presented against him.

4. On February 14, 2005, respondent was served a letter of termination which clearly stated the reasons therefor.35

The NLRC, notwithstanding its finding that respondent was dismissed for cause and with due process, granted financial assistance to respondent on
equitable grounds. It invoked the past decisions of this Court which allowed the award of financial assistance due to factors such as long years of
service or the Court’s concern and compassion towards labor where the infraction was not so serious. Thus, considering respondent’s 10 years of
service with petitioner corporation without any record of violation of company policies, the NLRC ordered petitioner corporation to pay respondent
financial assistance equivalent to one-half (1/2) month pay for every year of service in the amount of One Hundred Ninety-Nine Thousand Seventy-
Five Pesos (₱199,075.00). The NLRC decision states thus:

WHEREFORE, the decision dated 31 August 2005 is VACATED and SET ASIDE. The instant complaint is dismissed for lack of merit. However, respondent
Mirant [Philippines] Corp. is ordered to pay complainant financial assistance in the amount of one hundred ninety-nine thousand seventy five pesos
(₱199,075.00).

SO ORDERED.36

Respondent filed a motion for reconsideration,37 while petitioners filed a motion for partial reconsideration38 of the NLRC decision. In a Resolution39
dated June 30, 2006, the NLRC denied both motions.

In a petition for certiorari before the CA, respondent raised the following issues: whether the NLRC acted without or in excess of its jurisdiction, or
with grave abuse of discretion amounting to lack or excess of its jurisdiction when it construed that the terms "failure," "avoidance," "refusal" and
"unjustified refusal" have similar meanings; reversed the factual findings of the Labor Arbiter; and held that respondent deliberately breached
petitioner’s Anti-Drugs Policy.40 Respondent further argued before the appellate court that his failure to submit himself to the random drug test was
justified because he merely responded to an emergency call regarding his wife’s safety in Tel Aviv, and that such failure cannot be considered
synonymous with "avoidance" or "refusal" so as to mean "unjustified refusal" in order to be meted the penalty of termination.41

The CA disagreed with the NLRC and ruled that it was immaterial whether respondent failed, refused, or avoided being tested. To the appellate court,
the singular fact material to this case was that respondent did not get himself tested in clear disobedience of company instructions and policy. Despite
such disobedience, however, the appellate court considered the penalty of dismissal to be too harsh to be imposed on respondent, viz.:

x x x While it is a management prerogative to terminate its erring employee for willful disobedience, the Supreme Court has recognized that such
penalty is too harsh depending on the circumstances of each case. "There must be reasonable proportionality between, on the one hand, the willful
disobedience by the employee and, on the other hand, the penalty imposed therefor" x x x.

In this case, [petitioner corporation’s] own investigating panel has revealed that the penalty of dismissal is too harsh to impose on [respondent],
considering that this was the first time in his 10-year employment that the latter violated its company policies. The investigating panel even suggested
that a review be had of the company policy on the term "unjustified refusal" to clearly define what constitutes a violation thereof. The
recommendation of the investigating panel is partially reproduced as follows:

"VII. Recommendation

However, despite having violated the company policy, the panel recommends 4 working weeks suspension without pay (twice the company policy’s
maximum of 2 working weeks suspension) instead of termination due to the following mitigating circumstances.

1. Mr. Joselito A. Caro did not directly refuse to be subjected to the random drug test scheduled on November 3, 2004.

2. In the case of Mr. Joselito A. Caro, the two conditions for termination (Unjustified and Refusal) were not fully met as he expressly agreed to undergo
drug test.

3. Mr. Joselito A. Caro voluntarily offered himself to undergo drug test the following day at his own expense.

Doubling the maximum of 2 weeks suspension to 4 weeks is indicative of the gravity of the offense committed. The panel believes that although
mitigating factors partially offset reasons for termination, the 2 weeks maximum suspension is too lenient penalty for such an offense.

The Panel also took into consideration that Mr. Joselito A. Caro has served the company for ten (10) years without any record of violation of the
company policies.

xxxx

The Panel also recommends that Management review the Mirant Drug Policy specifically ‘Unjustified [R]efusal to submit to random drug testing.’ The
Panel believes that the term refusal casts certain ambiguities and should be clearly defined."42

The CA however found that award of moral and exemplary damages is without basis due to lack of bad faith on the part of the petitioner corporation
which merely acted within its management prerogative. In its assailed Decision dated June 26, 2007, the CA ruled, viz.:

IN VIEW OF ALL THE FOREGOING, the instant petition is GRANTED. The assailed Decision dated May 31, 2006 and Resolution dated June 30, 2006
rendered by the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 046551-05 (NCR-00-03-02511-05) are REVERSED and SET ASIDE. The
Labor Arbiter’s Decision dated August 31, 2005 is hereby REINSTATED with MODIFICATION by omitting the award of moral and exemplary damages as
well as attorney’s fees, and that the petitioner’s salary equivalent to four (4) working weeks at the time he was terminated be deducted from his
backwages. No cost.

SO ORDERED.43

Petitioner moved for reconsideration. In its assailed Resolution dated January 11, 2008, the CA denied petitioners’ motion for reconsideration for lack
of merit. It ruled that the arguments in the motion for reconsideration were already raised in their past pleadings.

In this instant Petition, petitioners raise the following grounds:

I. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT FAILED TO CONSIDER THAT:

A. THE PETITION FOR CERTIORARI FILED BY RESPONDENT CARO SHOULD HAVE BEEN SUMMARILY DISMISSED CONSIDERING THAT IT LACKED THE
REQUISITE VERIFICATION AND CERTIFICATION AGAINST FORUM SHOPPING REQUIRED BY THE RULES OF COURT; OR

B. AT THE VERY LEAST, THE SAID PETITION FOR CERTIORARI FILED BY RESPONDENT CARO SHOULD HAVE BEEN CONSIDERED MOOT SINCE
RESPONDENT CARO HAD ALREADY PREVIOUSLY EXECUTED A QUITCLAIM DISCHARGING THE PETITIONERS FROM ALL HIS MONETARY CLAIMS.

II. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR AND DECIDED QUESTIONS OF SUBSTANCE IN A WAY NOT IN ACCORDANCE WITH LAW AND
APPLICABLE DECISIONS OF THE HONORABLE COURT, CONSIDERING THAT:

A. THE COURT OF APPEALS REVERSED THE DECISION DATED 31 MAY 2006 OF THE NLRC ON THE GROUND THAT THERE WAS GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION NOTWITHSTANDING THE FACT THAT IT AFFIRMED THE NLRC’S FINDINGS THAT
RESPONDENT CARO DELIBERATELY DISOBEYED PETITIONER MIRANT’S ANTI-DRUGS POLICY.

B. THE PENALTY OF TERMINATION SHOULD HAVE BEEN SUSTAINED BY THE COURT OF APPEALS GIVEN ITS POSITIVE FINDING THAT RESPONDENT CARO
DELIBERATELY AND WILLFULLY DISOBEYED PETITIONER MIRANT’S ANTI-DRUGS POLICY.

C. IN INVALIDATING RESPONDENT CARO’S DISMISSAL, THE COURT OF APPEALS SUBSTITUTED WITH ITS OWN DISCRETION A CLEAR MANAGEMENT
PREROGATIVE BELONGING ONLY TO PETITIONER MIRANT IN THE INSTANT CASE.

D. THE WILLFUL AND DELIBERATE VIOLATION OF PETITIONER MIRANT’S ANTI-DRUGS POLICY AGGRAVATED RESPONDENT CARO’S WRONGFUL
CONDUCT WHICH JUSTIFIED HIS TERMINATION.

E. IN INVALIDATING RESPONDENT CARO’S DISMISSAL, THE COURT OF APPEALS, IN EFFECT, BELITTLED THE IMPORTANCE AND SERIOUSNESS OF
PETITIONER MIRANT’S ANTI-DRUGS POLICY AND CONSEQUENTLY HAMPERED THE EFFECTIVE IMPLEMENTATION OF THE SAME.

F. THE EXISTENCE OF OTHER GROUNDS FOR CARO’S DISMISSAL, SUCH AS WILLFUL DISOBEDIENCE AND [LOSS] OF TRUST AND CONFIDENCE, JUSTIFIED
HIS TERMINATION FROM EMPLOYMENT.

III. NONETHELESS, THE AWARD OF FINANCIAL ASSISTANCE IN FAVOR OF RESPONDENT CARO IS NOT WARRANTED CONSIDERING THAT RESPONDENT
CARO’S WILLFUL AND DELIBERATE REFUSAL TO SUBJECT HIMSELF TO PETITIONER MIRANT’S DRUG TEST AND HIS SUBSEQUENT EFFORTS TO CONCEAL
THE SAME SHOWS HIS DEPRAVED MORAL CHARACTER.

IV. THE COURT OF APPEALS GRIEVOUSLY ERRED WHEN IT HELD PETITIONER BAUTISTA PERSONALLY LIABLE FOR [RESPONDENT] CARO’S UNFOUNDED
CLAIMS CONSIDERING THAT, ASIDE FROM RESPONDENT CARO’S DISMISSAL BEING LAWFUL, PETITIONER BAUTISTA MERELY ACTED WITHIN THE SCOPE
OF HIS FUNCTIONS IN GOOD FAITH.44

We shall first rule on the issue raised by petitioners that the petition for certiorari filed by respondent with the CA should have been summarily
dismissed as it lacked the requisite verification and certification against forum shopping under Sections 4 and 5, Rule 7 of the Rules, viz.:

SEC. 4. Verification. – Except when otherwise specifically required by law or rule, pleadings need not be under oath, verified or accompanied by
affidavit.

A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and correct of his knowledge and
belief.

A pleading required to be verified which contains a verification based on "information and belief," or upon "knowledge, information and belief," or
lacks a proper verification, shall be treated as an unsigned pleading.

SEC. 5. Certification against forum shopping. – The plaintiff or principal party shall certify under oath in the complaint or other initiatory pleading
asserting a claim for relief, or in a sworn certification annexed thereto and simultaneously filed therewith: (a) that he has not theretofore commenced
any action or filed any claim involving the same issues in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such other
action or claim is pending therein; (b) if there is such other pending action or claim, a complete statement of the present status thereof; and (c) if he
should thereafter learn that the same or similar action or claim has been filed or is pending, he shall report that fact within five (5) days therefrom to
the court wherein his aforesaid complaint or initiatory pleading has been filed.

Failure to comply with the foregoing requirements shall not be curable by mere amendment of the complaint or other initiatory pleading but shall be
cause for the dismissal of the case without prejudice, unless otherwise provided, upon motion and after hearing. The submission of a false
certification or noncompliance with any of the undertakings therein shall constitute indirect contempt of court, without prejudice to the
corresponding administrative and criminal actions. If the acts of the party or his counsel clearly constitute willful and deliberate forum shopping, the
same shall be ground for summary dismissal with prejudice and shall constitute direct contempt, as well as a cause for administrative sanctions.

It is the contention of petitioners that due to respondent’s failure to subscribe the Verification and Certification of Non-Forum Shopping before a
Notary Public, the said verification and certification cannot be considered to have been made under oath. Accordingly, such omission is fatal to the
entire petition for not being properly verified and certified. The CA therefore erred when it did not dismiss the petition.

This jurisdiction has adopted in the field of labor protection a liberal stance towards the construction of the rules of procedure in order to serve the
ends of substantial justice. This liberal construction in labor law emanates from the mandate that the workingman’s welfare should be the primordial
and paramount consideration.45 Thus, if the rules of procedure will stunt courts from fulfilling this mandate, the rules of procedure shall be relaxed if
the circumstances of a case warrant the exercise of such liberality. If we sustain the argument of petitioners in the case at bar that the petition for
certiorari should have been dismissed outright by the CA, the NLRC decision would have reached finality and respondent would have lost his remedy
and denied his right to be protected against illegal dismissal under the Labor Code, as amended.

It is beyond debate that petitioner corporation’s enforcement of its Anti-Drugs Policy is an exercise of its management prerogative. It is also a
conceded fact that respondent "failed" to take the random drug test as scheduled, and under the said company policy, such failure metes the penalty
of termination for the first offense. A plain, simple and literal application of the said policy to the omission of respondent would have warranted his
outright dismissal from employment – if the facts were that simple in the case at bar. Beyond debate – the facts of this case are not – and this disables
the Court from permitting a straight application of an otherwise prima facie straightforward rule if the ends of substantial justice have to be served.

It is the crux of petitioners’ argument that respondent’s omission amounted to "unjust refusal" because he could not sufficiently support with
convincing proof and evidence his defenses for failing to take the random drug test. For petitioners, the inconsistencies in respondent’s explanations
likewise operated to cast doubt on his real reasons and motives for not submitting to the random drug test on schedule. In recognition of these
inconsistencies and the lack of convincing proof from the point of view of petitioners, the NLRC reversed the decision of the Labor Arbiter. The CA
found the ruling of the Labor Arbiter to be more in accord with the facts, law and existing jurisprudence.

We agree with the disposition of the appellate court that there was illegal dismissal in the case at bar.

While the adoption and enforcement by petitioner corporation of its Anti-Drugs Policy is recognized as a valid exercise of its management prerogative
as an employer, such exercise is not absolute and unbridled. Managerial prerogatives are subject to limitations provided by law, collective bargaining
agreements, and the general principles of fair play and justice.46 In the exercise of its management prerogative, an employer must therefore ensure
that the policies, rules and regulations on work-related activities of the employees must always be fair and reasonable and the corresponding
penalties, when prescribed, commensurate to the offense involved and to the degree of the infraction.47 The Anti-Drugs Policy of Mirant fell short of
these requirements.

Petitioner corporation’s subject Anti-Drugs Policy fell short of being fair and reasonable.

First. The policy was not clear on what constitutes "unjustified refusal" when the subject drug policy prescribed that an employee’s "unjustified
refusal" to submit to a random drug test shall be punishable by the penalty of termination for the first offense. To be sure, the term "unjustified
refusal" could not possibly cover all forms of "refusal" as the employee’s resistance, to be punishable by termination, must be "unjustified." To the
mind of the Court, it is on this area where petitioner corporation had fallen short of making it clear to its employees – as well as to management – as
to what types of acts would fall under the purview of "unjustified refusal." Even petitioner corporation’s own Investigating Panel recognized this
ambiguity, viz.:

The Panel also recommends that Management review the Mirant Drug Policy specifically "Unjustified [R]efusal to submit to random drug testing." The
Panel believes that the term "refusal" casts certain ambiguities and should be clearly defined.48

The fact that petitioner corporation’s own Investigating Panel and its Vice President for Operations, Sliman, differed in their recommendations
regarding respondent’s case are first-hand proof that there, indeed, is ambiguity in the interpretation and application of the subject drug policy. The
fact that petitioner corporation’s own personnel had to dissect the intended meaning of "unjustified refusal" is further proof that it is not clear on
what context the term "unjustified refusal" applies to. It is therefore not a surprise that the Labor Arbiter, the NLRC and the CA have perceived the
term "unjustified refusal" on different prisms due to the lack of parameters as to what comes under its purview. To be sure, the fact that the courts
and entities involved in this case had to engage in semantics – and come up with different constructions – is yet another glaring proof that the subject
policy is not clear creating doubt that respondent’s dismissal was a result of petitioner corporation’s valid exercise of its management prerogative.

It is not a mere jurisprudential principle, but an enshrined provision of law, that all doubts shall be resolved in favor of labor. Thus, in Article 4 of the
Labor Code, as amended, "[a]ll doubts in the implementation and interpretation of the provisions of [the Labor] Code, including its implementing
rules and regulations, shall be resolved in favor of labor." In Article 1702 of the New Civil Code, a similar provision states that "[i]n case of doubt, all
labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer." Applying these provisions of law to
the circumstances in the case at bar, it is not fair for this Court to allow an ambiguous policy to prejudice the rights of an employee against illegal
dismissal. To hold otherwise and sustain the stance of petitioner corporation would be to adopt an interpretation that goes against the very grain of
labor protection in this jurisdiction. As correctly stated by the Labor Arbiter, "when a conflicting interest of labor and capital are weighed on the scales
of social justice, the heavier influence of the latter must be counter-balanced by the sympathy and compassion the law must accord the
underprivileged worker."49

Second. The penalty of termination imposed by petitioner corporation upon respondent fell short of being reasonable. Company policies and
regulations are generally valid and binding between the employer and the employee unless shown to be grossly oppressive or contrary to law50 – as
in the case at bar. Recognizing the ambiguity in the subject policy, the CA was more inclined to adopt the recommendation of petitioner corporation’s
own Investigating Panel over that of Sliman and the NLRC. The appellate court succinctly but incisively pointed out, viz.:

x x x We find, as correctly pointed out by the investigating panel, that the [petitioner corporation’s] Anti-Drug Policy is excessive in terminating an
employee for his "unjustified refusal" to subject himself to the random drug test on first offense, without clearly defining what amounts to an
"unjustified refusal."
Thus, We find that the recommended four (4) working weeks’ suspension without pay as the reasonable penalty to be imposed on [respondent] for
his disobedience. x x x51 (Additional emphasis supplied.)

To be sure, the unreasonableness of the penalty of termination as imposed in this case is further highlighted by a fact admitted by petitioner
corporation itself: that for the ten-year period that respondent had been employed by petitioner corporation, he did not have any record of a violation
of its company policies.

As to the other issue relentlessly being raised by petitioner corporation that respondent’s petition for certiorari before the CA should have been
considered moot as respondent had already previously executed a quitclaim discharging petitioner corporation from all his monetary claims, we
cannot agree. Quitclaims executed by laborers are ineffective to bar claims for the full measure of their legal rights,52 especially in this case where the
evidence on record shows that the amount stated in the quitclaim exactly corresponds to the amount claimed as unpaid wages by respondent under
Annex A53 of his Reply54 filed with the Labor Arbiter. Prima facie, this creates a false impression that respondent’s claims have already been settled
by petitioner corporation – discharging the latter from all of respondent’s monetary claims. In truth and in fact, however, the amount paid under the
subject quitclaim represented the salaries of respondent that remained unpaid at the time of his termination – not the amounts being claimed in the
case at bar.

We believe that this issue was extensively discussed by both the Labor Arbiter and the CA and we find no reversible error on the disposition of this
issue, viz.:

A review of the records show that the alluded quitclaim, which was undated and not even notarized although signed by the petitioner, was for the
amount of ₱59,630.05. The said quitclaim was attached as Annex 26 in the [petitioners’] Position Paper filed before the Labor Arbiter. As fully
explained by [respondent] in his Reply filed with the Labor Arbiter, the amount stated therein was his last pay due to him when he was terminated,
not the amount representing his legitimate claims in this labor suit x x x. To bolster his defense, [respondent] submitted the pay form issued to him by
the [petitioner corporation], showing his net pay at ₱59,630.05 exactly the amount stated in the quitclaim x x x. Then, too, as stated on the quitclaim
itself, the intention of the waiver executed by the [respondent] was to release [petitioner corporation] from any liability only on the said amount
representing [respondent’s] "full and final payment of [his] last salary/separation pay" x x x. It did not in any way waive [respondent’s] right to pursue
his legitimate claims regarding his dismissal in a labor suit. Thus, We gave no credence to [petitioners’] private defense that alleged quitclaim rendered
the instant petition moot.55

Finally, the petition avers that petitioner Bautista should not be held personally liable for respondent’s dismissal as he acted in good faith and within
the scope of his official functions as then president of petitioner corporation. We agree with petitioners.1âwphi1 Both decisions of the Labor Arbiter
and the CA did not discuss the basis of the personal liability of petitioner Bautista, and yet the dispositive portion of the decision of the Labor Arbiter -
which was affirmed by the appellate court - held him jointly and severally liable with petitioner corporation, viz.:

WHEREFORE, premises considered, this Office finds respondents GUILTY of illegal dismissal, and hereby ordered to jointly and severally reinstate
complainant back to his former position without loss on seniority rights and benefits and to pay him his backwages and other benefits from the date
he was illegally dismissed up to the time he is actually reinstated, partially computed as of this date in the amount of ₱258,797.50 (₱39,815.00 x 6.5
mos.) plus his 13th and 14th month pay in the amount of ₱43,132.91 or in the total amount of ₱301,930.41. Respondents are also ordered to pay
complainant the amount of ₱3,000,000.00 as and by way of moral and exemplary damages, and to pay complainant the amount equivalent to ten
percent (10%) of the total awards as and by way of attorney's fees.

SO ORDERED.56 (Emphasis supplied.)

A corporation has a personality separate and distinct from its officers and board of directors who may only be held personally liable for damages if it is
proven that they acted with malice or bad faith in the dismissal of an employee.57 Absent any evidence on record that petitioner Bautista acted
maliciously or in bad faith in effecting the termination of respondent, plus the apparent lack of allegation in the pleadings of respondent that
petitioner Bautista acted in such manner, the doctrine of corporate fiction dictates that only petitioner corporation should be held liable for the illegal
dismissal of respondent.

WHEREFORE, the petition for review on certiorari is DENIED. The assailed Decision dated June 26, 2007 and the Resolution dated January 11, 2008 in
CA-G.R. SP No. 96153 are AFFIRMED with the MODIFICATION that only petitioner corporation is found GUILTY of the illegal dismissal of respondent
Joselito A. Caro. Petitioner Edgardo A. Bautista is not held personally liable as then President of petitioner corporation at the time of the illegal
dismissal.

No pronouncement as to costs.

SO ORDERED.

MARTIN S. VILLARAMA, JR.

Associate Justice

WE CONCUR:

MARIA LOURDES P. A. SERENO

Chief Justice

Chairperson
TERESITA J. LEONARDO-DE CASTRO

Associate Justice LUCAS P. BERSAMIN

Associate Justice

BIENVENIDO L. REYES

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the 1987 Constitution, I certify that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice

7.

Republic of the Philippines

Supreme Court

Manila

FIRST DIVISION

MASING AND SONS DEVELOPMENT CORPORATION and

CRISPIN CHAN,

Petitioners,

- versus -

GREGORIO P. ROGELIO,

Respondent.

G.R. No. 161787

Present:

CORONA,C.J., Chairperson,

LEONARDO-DE CASTRO,

BERSAMIN,

DEL CASTILLO, and

VILLARAMA, JR., JJ.

Promulgated:

April 27, 2011

x-----------------------------------------------------------------------------------------x

DECISION

BERSAMIN, J.:

In any controversy between a laborer and his master, doubts reasonably arising from the evidence are resolved in favor of the laborer.

We re-affirm this principle, as we uphold the decision of the Court of Appeals (CA) that reversed the uniform finding that there existed no
employment relationship between the petitioners, as employers, and the respondent, as employee, made by the National Labor Relations
Commission (NLRC) and the Labor Arbiter (LA).

Petitioners Masing and Sons Development Corporation (MSDC) and Crispin Chan assail the October 24, 2003 decision,[1] whereby the CA reversed the
decision dated January 28, 2000 of the NLRC that affirmed the decision of the LA (dismissing the claim of the respondent for retirement benefits on
the ground that he had not been employed by the petitioners but by another employer).

Antecedents

On May 19, 1997, respondent Gregorio P. Rogelio (Rogelio) brought against Chan a complaint for retirement pay pursuant to Republic Act No. 7641,[2]
in relation to Article 287 of the Labor Code, holiday and rest days premium pay, service incentive leave, 13th month pay, cost of living allowances
(COLA), underpayment of wages, and attorneys fees. On January 20, 1998, Rogelio amended his complaint to include MSDC as a co-respondent. His
version follows.

Rogelio was first employed in 1949 by Pan Phil. Copra Dealer, MSDCs predecessor, which engaged in the buying and selling of copra in Ibajay, Aklan,
with its main office being in Kalibo, Aklan. Masing Chan owned and managed Pan Phil. Copra Dealer, and the Branch Manager in Ibajay was a certain
So Na. In 1965, Masing Chan changed the business name of Pan Phil. Copra Dealer to Yao Mun Tek, and appointed Jose Conanan Yap Branch Manager
in Ibajay. In the 1970s, the business name of Yao Mun Tek was changed to Aklan Lumber and General Merchandise, and Leon Chan became the Branch
Manager in Ibajay. Finally, in 1984, Masing Chan adopted the business name of Masing and Sons Development Corporation (MSDC), appointing
Wynne or Wayne Lim (Lim) as the Branch Manager in Ibajay. Crispin Chan replaced his father, Masing Chan, in 1990 as the manager of the entire
business.

In all that time, Rogelio worked as a laborer in the Ibajay Branch, along with twelve other employees. In January 1974, Rogelio was reported for Social
Security System (SSS) coverage. After paying contributions to the SSS for more than 10 years, he became entitled to receive retirement benefits from
the SSS. Thus, in 1991, he availed himself of the SSS retirement benefits, and in order to facilitate the grant of such benefits, he entered into an
internal arrangement with Chan and MSDC to the effect that MSDC would issue a certification of his separation from employment notwithstanding
that he would continue working as a laborer in the Ibajay Branch.

The certification reads as follows:[3]

CRISPIN AMIGO CHAN COPRA DEALER

IBAJAY, AKLAN

August 10, 1991

CERTIFICATION OF SEPARATION FROM EMPLOYMENT

To whom it may concern:

This is to certify that my employee, GREGORIO P. ROGELIO bearing SSS ID No. 07-0495213-7 who was first covered effective January, 1974 up to June
30, 1989 inclusive, is now officially separated from my employ effective the 1st of July, 1989.

Please be guided accordingly.

(SGD.) CRISPIN AMIGO CHAN

Proprietor

SSS ID No. 07-0595800-4

On March 17, 1997, Rogelio was paid his last salary. Lim, then the Ibajay Branch Manager, informed Rogelio that he was deemed retired as of that
date. Chan confirmed to Rogelio that he had already reached the compulsory retirement age when he went to the main office in Kalibo to verify his
status. Rogelio was then 67 years old.

Considering that Rogelio was supposedly receiving a daily salary of P70.00 until 1997, but did not receive any 13th month pay, service incentive leave,
premium pay for holidays and rest days and COLA, and even any retirement benefit from MSDC upon his retirement in March 1997, he commenced his
claim for such pay and benefits.

In substantiation, Rogelio submitted the January 19, 1998 affidavits of his co-workers, namely: Domingo Guevarra,[4] Juanito Palomata,[5] and
Ambrosio Seeres,[6] whereby they each declared under oath that Rogelio had already been working at the Ibajay Branch by the time that MSDCs
predecessor had hired them in the 1950s to work in that branch; and that MSDC and Chan had continuously employed them until their own
retirements, that is, Guevarra in 1994, and Palomata and Seeres in 1997. They thereby corroborated the history of MSDC and the names of the various
Branch Managers as narrated by Rogelio, and confirmed that like Rogelio, they did not receive any retirement benefits from Chan and MSDC upon
their retirement.

In their defense, MSDC and Chan denied having engaged in copra buying in Ibajay, insisting that they did not ever register in such business in any
government agency. They asserted that Lim had not been their agent or employee, because he had been an independent copra buyer. They averred,
however, that Rogelio was their former employee, hired on January 3, 1977 and retired on June 30, 1989;[7] and that Rogelio was thereafter employed
by Lim starting from July 1, 1989 until the filing of the complaint.

MSDC and Chan submitted the affidavit of Lim, whereby Lim stated that Rogelio was one of his employees from 1989 until the termination of his
services.[8] They also submitted SSS Form R-1A, Lims SSS Report of Employee-Members (showing that Rogelio and Palomata were reported as Lims
employees);[9] Lims application for registration as copra buyer;[10] Chans affidavit;[11] and the affidavit of Guevarra[12] and Seeres,[13] whereby
said affiants denied having executed or signed the January 19, 1998 affidavits submitted by Rogelio.

In his affidavit, Guevarra recanted the statement attributed to him that he had been employed by Chan and MSDC, and declared that he had been an
employee of Lim. Likewise, Guevarras daughter executed an affidavit,[14] averring that his father had been an employee of Lim and that his father had
not signed the affidavit dated January 19, 1998.

On April 5, 1999, the LA dismissed the complaint against Chan and MSDC, ruling thus:

From said evidence, it is our considered view that there exists no employer-employee relationship between the parties effective July 1, 1989 up to the
date of the filing of the instant complaint complainant was an employee of Wynne O. Lim. Hence, his claim for retirement should have been filed
against the latter for he admitted that he was the employer of herein complainant in his sworn statement dated June 9, 1998.

Complainants claim for retirement benefits against herein respondents under RA No. 7641 has been barred by prescription considering the fact that it
partakes of the nature of a money claim which prescribed after the lapse of three years after its accrual.

The rest of the claims are also dismissed for the same accrued during complainants employment with Wynne O. Lim.

WHEREFORE, PREMISES CONSIDERED, this case is hereby DISMISSED for lack of merit.

SO ORDERED.[15]

Rogelio appealed, but the NLRC affirmed the decision of the LA on January 28, 2000, observing that there could be no double retirement in the private
sector; that with the double retirement, Rogelio would be thereby enriching himself at the expense of the Government; and that having retired in
1991, Rogelio could not avail himself of the benefits under Republic Act No. 7641 entitled An Act Amending Article 287 of Presidential Decree No. 442,
As Amended, Otherwise Known as The Labor Code Of The Philippines, By Providing for Retirement Pay to Qualified Private Sector Employees in the
Absence Of Any Retirement Plan in the Establishment, which took effect only on January 7, 1993.[16]

The NLRC denied Rogelios motion for reconsideration.

Ruling of the CA

Rogelio commenced a special civil action for certiorari in the CA, charging the NLRC with grave abuse of discretion in denying to him the benefits under
Republic Act No. 7641, and in rejecting his money claims on the ground of prescription.

On October 24, 2003, the CA promulgated its decision,[17] holding that Rogelio had substantially established that he had been an employee of Chan
and MSDC, and that the benefits under Republic Act No. 7641 were apart from the retirement benefits that a qualified employee could claim under
the Social Security Law, conformably with the ruling in Oro Enterprises, Inc. v. NLRC (G.R. No. 110861, November 14, 1994, 238 SCRA 105).

The CA decreed:

WHEREFORE, premises considered, the Decision of the public respondent NLRC is hereby VACATED and SET ASIDE. This case is remanded to the Labor
Arbiter for the proper computation of the retirement benefits of the petitioner based on Article 287 of the Labor Code, as amended, to be pegged at
the minimum wage prevailing in Ibajay, Aklan as of March 17, 1997, and attorneys fees based on the same. Without costs.

SO ORDERED.

Chan and MSDCs motion for reconsideration was denied by the CA.

Issues

In this appeal, Chan and MSDC contend that the CA erred: (a) in taking cognizance of Rogelios petition for certiorari despite the decision of the NLRC
having become final and executory almost two months before the petition was filed; (b) in concluding that Rogelio had remained their employee from
July 6, 1989 up to March 17, 1997; and (c) in awarding retirement benefits and attorneys fees to Rogelio.

Ruling

The petition for review is barren of merit.

Certiorari was timely commenced in the CA

Anent the first error, the Court finds that the CA did not err in taking cognizance of the petition for certiorari of Rogelio.
Based on the records, Rogelio received the NLRCs denial of his motion for reconsideration on January 16, 2003. He then had 60 days from January 16,
2003, or until March 17, 2003, within which to file his petition for certiorari. It is without doubt, therefore, that his filing was timely considering that
the CA received his petition for certiorari at 2:44 oclock in the afternoon of March 17, 2003.

The petitioners insistence, that the issuance of the entry of judgment with respect to the NLRCs decision precluded Rogelio from filing a petition for
certiorari, was unwarranted. It ought to be without debate that the finality of the NLRCs decision was of no consequence in the consideration of
whether or not he could bring a special civil action for certiorari within the period of 60 days for doing so under Section 4, Rule 65, Rules of Court,
simply because the question being thereby raised was jurisdictional.

II

Respondent remained the petitioners

employee despite his supposed separation

Did Rogelio remain the employee of the petitioners from July 6, 1989 up to March 17, 1997?

The issue of whether or not an employer-employee relationship existed between the petitioners and the respondent in that period was essentially a
question of fact.[18] In dealing with such question, substantial evidence that amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion[19] is sufficient. Although no particular form of evidence is required to prove the existence of the relationship, and
any competent and relevant evidence to prove the relationship may be admitted,[20] a finding that the relationship exists must nonetheless rest on
substantial evidence.

Generally, the Court does not review errors that raise factual questions, primarily because the Court is not a trier of facts. However, where, like now,
there is a conflict between the factual findings of the Labor Arbiter and the NLRC, on the one hand, and those of the CA, on the other hand,[21] it is
proper, in the exercise of our equity jurisdiction, to review and re-evaluate the factual issues and to look into the records of the case and re-examine
the questioned findings.

The CA delved on and resolved the issue of the existence of an employer-employee relationship between the petitioners and the respondent thusly:

As to the factual issue, the petitioners evidence consists of his own statements and those of his alleged co-worker from 1950 until 1997, Juanito
Palomata, who unlike his former co-workers Domingo Guevarra and Ambrosio Seeres, did not disown the Sinumpaang Salaysay he executed, in
corroboration of petitioners allegations; and the Certification dated August 10, 1991 stating that petitioner was first placed under coverage of the SSS
in January 1974 to June 30, 1989 and was separated from service effective July 1, 1989, a certification executed by respondent Crispin Amigo Chan
which, petitioner maintains, was only intended for his application for retirement benefits with the SSS.

Private respondents evidence, on the other hand, consisted of respondent Crispin Amigo Chans counter statements as well as documentary evidence
consisting of (1) Wayne Lims Affidavit which petitioner acknowledged in his Reply dated July 11, 1998, par. 8, admitting to being the employer of
petitioner from July 1, 1989 until the filing of the complaint; (2) Certification dated October 22, 1991 showing petitioners employment with
respondents to have been between January 3, 1977 until July 1, 1989; (3) Affidavits of Guevarra and Seeres disowning their signatures in the affidavits
submitted in evidence by the petitioner; (4) SSS report executed by Wayne Lim of his initial list of employees as of July 1, 1989 which includes the
petitioner. On appeal, the respondents further submitted documentary evidence showing that Wayne Lim registered his business name on July 11,
1989 and apparently went into business buying copra.

At this point, we should note the following factual discrepancies in the evidence on hand: First, the respondents issued certificates stating the
commencement of petitioners employment on different dates, i.e. January 1974 and January 1977, although the earlier date referred only to the
period when petitioner was first placed under the coverage of the SSS, which need not necessarily refer to the commencement of his employment.
Secondly, while respondent Crispin Amigo Chan denied having ever engaged in copra buying in Ibajay, the certificates he issued both dated in 1991
state otherwise, for he declared himself as a copra dealer with address in Ibajay. Then there is the statement of the petitioner that Wayne Lim was the
respondents manager in their branch office in Ibajay since 1984, a statement that respondents failed to disavow. Instead, respondents insisted on
their non sequitur argument that they had never engaged in copra buying activities in Ibajay, and that Wayne Lim was in business all by himself in
regard to such activity.

The denial on respondents part of their copra buying activities in Ibajay begs the obvious question: What were petitioner and his witness Juanito
Palomata then doing for respondents as laborers in Ibajay prior to July 1, 1989? Indeed, what did petitioner do for the respondents as the latters
laborer prior to July 1, 1989, which was different from what he did after said date? The records showed that he continued doing the same job, i.e. as
laborer and trusted employee tasked with the responsibility of getting money from the Kalibo office of respondents which was used to buy copra and
pay the employees salaries. He did not only continue doing the same thing but he apparently did the same at or from the same place, i.e. the bodega
in Ibajay, which his co-worker Palomata believed to belong to the respondent Masing & Sons. Since respondents admitted to employing petitioner
from 1977 to 1989, we have to conclude that, indeed, the bodega in Ibajay was owned by respondents at least prior to July 1, 1989 since petitioner
had consistently stated that he worked for the respondents continuously in their branch office in Ibajay under different managers and nowhere else.

We believe that the respondents strongest evidence in regard to the alleged separation of petitioner from service effective July 1, 1989 would be the
affidavit of Wayne Lim, owning to being the employer of petitioner since July 1, 1989 and the SSS report that he executed listing petitioner as one of
his employees since said date. But in light of the incontrovertible physical reality that petitioner and his co-workers did go to work day in and day out
for such a long period of time, doing the same thing and in the same place, without apparent discontinuity, except on paper, these documents cannot
be taken at their face value. We note that Wayne Lim apparently inherited, at least on paper, ten (10) employees of respondent Crispin Amigo Chan,
including petitioner, all on the same day, i.e. on July 1, 1989. We note, too, that while there exists an initial report of employees to the SSS by Wayne
Lim, no other document apart from his affidavit and business registration was offered by respondents to bolster their contention, irrespective of the
fact that Wayne Lim was not a party respondent. What were the circumstances underlying such alleged mass transfer of employment? Unfortunately,
the evidence for the respondents does not provide us with ready answers. We could conclude that respondents sold their business in Ibajay and
assets to Wayne Lim on July 1, 1989; however, as pointed out above, respondent Crispin Amigo Chan himself said that he was a copra dealer from
Ibajay in August and October of 1991. Whether or not he was registered as a copra buyer is immaterial, given that he declared himself a copra dealer
and had apparently engaged in the activity of buying copra, as shown precisely by the employment of petitioner and Palomata. If Wayne Lim, from
being the respondents manager in Ibajay became an independent businessman and took over the respondents business in Ibajay along with all their
employees, why did not the respondents simply state that fact for the record? More importantly, why did the petitioner and Palomata continue
believing that Wayne Lim was only the respondents manager? Given the long employment of petitioner with the respondents, was it possible for him
and his witness to make such mistake? We do not think so. In case of doubt, the doubt is resolved in favor of labor, in favor of the safety and decent
living for the laborer as mandated by Article 1702 of the Civil Code. The reality of the petitioners toil speaks louder than words. xxx[22]

We agree with the CAs factual findings, because they were based on the evidence and records of the case submitted before the LA. The CA essentially
complied with the guidepost that the substantiality of evidence depends on both its quantitative and its qualitative aspects.[23] Indeed, the records
substantially established that Chan and MSDC had employed Rogelio until 1997. In contrast, Chan and MSDC failed to adduce credible substantiation
of their averment that Rogelio had been Lims employee from July 1989 until 1997. Credible proof that could outweigh the showing by Rogelio to the
contrary was demanded of Chan and MSDC to establish the veracity of their allegation, for their mere allegation of Rogelios employment under Lim
did not constitute evidence,[24] but they did not submit such proof, sadly failing to discharge their burden of proving their own affirmative allegation.
[25] In this regard, as we pointed out at the start, the doubts reasonably arising from the evidence are resolved in favor of the laborer in any
controversy between a laborer and his master.

III

Respondent entitled to retirement benefits

from the petitioners

Article 287 of the Labor Code, as amended by Republic Act No. 7641, provides:

Article 287. Retirement. Any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or other
applicable employment contract.

In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned under existing laws and any collective
bargaining agreement and other agreements; Provided, however, That an employees retirement benefits under any collective bargaining and other
agreements shall not be less than those provided herein.

In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, an employee upon reaching
the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who has served at
least five (5) years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for
every year of service, a fraction of at least six (6) months being considered as one whole year.

Unless the parties provide for broader inclusions, the term one-half (1/2) month salary shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th
month pay and the cash equivalent of not more than five (5) days of service incentive leaves.

Retail, service and agricultural establishments or operations employing not more than ten (10) employees or workers are exempted from the coverage
of this provision.

Violation of this provision is hereby declared unlawful and subject to the penal provisions provided under Article 288 of this Code.

Was Rogelio entitled to the retirement benefits under Article 287 of the Labor Code, as amended by Republic Act No. 7641?

The CA held so in its decision, to wit:

Having reached the conclusion that petitioner was an employee of the respondents from 1950 to March 17, 1997, and considering his uncontroverted
allegation that in the Ibajay branch office where he was assigned, respondents employed no less than 12 workers at said later date, thus affording
private respondents no relief from the duty of providing retirement benefits to their employees, we see no reason why petitioner should not be
entitled to the retirement benefits as provided for under Article 287 of the Labor Code, as amended. The beneficent provisions of said law, as applied
in Oro Enterprises Inc. v. NLRC, is apart from the retirement benefits that can be claimed by a qualified employee under the social security law.
Attorneys fees are also granted to the petitioner. But the monetary benefits claimed by petitioner cannot be granted on the basis of the evidence at
hand.[26]

We concur with the CAs holding. The third paragraph of the aforequoted provision of the Labor Code entitled Rogelio to retirement benefits as a
necessary consequence of the finding that Rogelio was an employee of MSDC and Chan. Indeed, there should be little, if any, doubt that the benefits
under Republic Act No. 7641, which was enacted as a labor protection measure and as a curative statute to respond, in part at least, to the financial
well-being of workers during their twilight years soon following their life of labor, can be extended not only from the date of its enactment but
retroactively to the time the employment contracts started.[27]

WHEREFORE, the Court denies the petition for review on certiorari, and affirms the decision promulgated on October 24, 2003 in CA-G.R. SP No.75983.

Costs of suit to be paid by the petitioners.

SO ORDERED.

LUCAS P. BERSAMIN

Associate Justice

WE CONCUR:

RENATO C. CORONA

Chief Justice

Chairperson

TERESITA J. LEONARDO-DE CASTRO MARIANO C. DEL CASTILLO

Associate Justice Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA

Chief Justice

8.

Republic of the Philippines

SUPREME COURT

Manila

FIRST DIVISION

G.R. No. 160123 June 17, 2015

CENTRO PROJECT MANPOWER SERVICES CORPORATION, Petitioner,

vs.

AGUINALDO NALUIS and THE COURT OF APPEALS, Respondents.

DECISION

BERSAMIN, J.:

In the interpretation of their provisions, labor contracts require the resolution of doubts in favor of the laborer because of their being imbued with
social justice considerations. This rule of interpretation is demanded by the Labor Code1 and the Civil Code.2

Both the Labor Arbiter3 and the National Labor Relations Commission (NLRC)4 resolved the doubt in favor of the employer when it held that
respondent Aguinaldo Naluis (Naluis) had been properly repatriated, and, consequently, not illegally dismissed. However, on April 23, 2003, the Court
of Appeals (CA) set aside their resolutions, and ruled to the contrary.5 Hence, this appeal by the employer.

Antecedents

Petitioner Centro Project Manpower Services Corporation (Centro Project), a local recruitment agency, engaged Naluis to work abroad as a piufu6er·
under Pacific Micronesia Corporation (Pacific Micronesia) in Garapan, Saipan, in the Commonwealth of the Northern Mariana Islands (Northern
Marianas). The work was covered by the primary Employment Contract dated March 11, 1997,6 whereby his employment would last for 12 months,
and would commence upon his arrival in Northern Marianas. On June 3, 1997, the Department of Labor and Immigration of Northern Mariana Islands
issued an Authorization for Entry (AE)7 in his favor. On September 3, 1997, Centro Project and Naluis executed an addendum to the primary
Employment Contract8 to make the start of his employment effective from his departure at the point of origin instead of his arrival in Northern
Marianas.

Naluis left for Northern Mariana on September 13, 1997,9 the date of his actual deployment, and his employment continued until his repatriation to
the Philippines on June 3, 1998 allegedly due to the expiration of the employment contract. Not having completed 12 months of work, he filed a
complaint for illegal dismissal against Centro Project.

The Labor Arbiter found that Centro Project had been justified m repatriating Naluis, and accordingly dismissed the complaint, to wit:

This Office finds the repatriation of complainant to the Philippines NOT A DISMISSAL BUT AS A RESULT OF THE LAWS AND REGULATIONS OF THE
COMMONWEALTH OF NORTHERN MARIANA ISLANDS AS PROVIDED FOR IN THE AUTHORIZATION FOR ENTRY.

xxxx

Although complainant has not served the twelve (12) months period stated in the Contract of Employment, the Employer has no other alternative but
to repatriate complainant otherwise, the employer could be liable for violation of the Commonwealth's Immigration Rules x x x.

xxxx

WHEREFORE, in view of the foregoing, the instant complaint is hereby DISMISSED lack of merit.10

Naluis appealed to the NLRC, which found that Centro Project had no choice but to terminate the employment contract because the AE issued by the
Department of Labor and Immigration of Northern Mariana Islands had limited his stay in Northern Marianas, and that his employment had expired
on May 13, 1998 as explicitly provided in the employment contract executed between him and Centro Project. The NLRC thus disposed:

WHEREFORE, in view of the foregoing, this Commission resolves to affirm the Decision of the Labor Arbiter and dismiss the instant appeal for lack of
merit.11

Naluis assailed the decision of the NLRC in the CA.

On April 23, 2003, the CA promulgated its judgment setting aside the decision of the NLRC, holding that the AE did not have any effect on Naluis'
employment status; that the AE did not limit his stay in Northern Marianas; and that, consequently, Centro Project had breached the contract by
ordering his repatriation. The CA decreed as follows:

WHEREFORE, the petition is GRANTED. The assailed decision is REVERSED and SET ASIDE, and a new one entered DIRECTING the private respondent to
pay the petitioner the following:

a) Four (4) months salary corresponding to the unpaid portion of his contract at $520.00 (Five Hundred Twenty U.S. Dollars) per month;

b) Guaranteed overtime pay at an average of thirty (30) to forty (40) hours per month in excess of straight eight (8) hours regular work schedule
corresponding to the unexpired portion of four ( 4) months in the contract;

c) Placement fee of Thirteen Thousand Five Hundred (13,500.00) Pesos;

d) Legal holiday equivalent to ten (10) days with pay;

e) Twelve (12) days vacation leave with pay; and

f) Attorney's fees of Ten Thousand Pesos (₱10,000.00).

SO ORDERED.12

Issues

Hence, this appeal, whereby Centro Project submits that the AE categorically fixed the period of stay of Naluis; and that even the primary Employment
Contract clearly set the date for its expiration.

Naluis counters that the handwritten date of May 3, 1998 was inserted in the primary Employment Contract only after he had signed it, as
distinguished from all other stipulations that had been typewritten. Did the expiration date contained in the AE issued by the Department of Labor
and Immigration of Northern Mariana Islands validly cut short Naluis' stay and thus justified the pre-termination of his work?

Ruling of the Court

The appeal lacks merit.

There is no dispute that Naluis did not complete the 12-month period stipulated in the primary Employment Contract. However, the NLRC concluded
that Centro Project had been justified in repatriating him because the AE had stipulated a limit of stay for him. The NLRC thereby relied on a loose
interpretation of the AE and the primary Employment Contract.
In finding that the NLRC committed grave abuse of discretion amounting to lack or excess of jurisdiction in so concluding, the CA observed that:

x x x the document upon which the employer predicated its action to terminate and repatriate the petitioner i.e., the Authorization of Entry issued by
the immigration authorities of CNMI does not appear to limit the employee's stay in the said country. The authorization upon its face simply shows
that the person to whom it is issued should enter CNMI not later than May 13, 1998 as a general rule or, if he is an employee, not later than three
months from its issuance. We submit that an authorization of entry is different from a limitation of stay in the country visited, which is not indicated in
any of the documents submitted by the respondent.13

We concur with the CA. The burden of proof to show that the employment contract had been validly terminated pertained to the employer.14 To
discharge its burden, the employer must rely on the strength of its own evidence. However, Centro Project's reliance on the AE limiting

Naluis' stay was unwarranted, and, worse, it did not discharge its burden of proof as the employer to show that Naluis' repatriation had been justified.

The recitals of the AE for Naluis were as follows:15

This letter allows authorized entry into the Commonwealth of the Northern Mariana Islands for Aguinaldo S. Naluis.

AGUINALDO S NALUIS

Expires Gender Birthdate Citizenship

5/13/98 M 4/11/57 PHL

Employer: PACIFIC MICRONESIA CORPORATION

Occupation: PLUMBER

Class: 706K Issue Date 6/3/97

Wage Rate: $3.25 Wage Type: HOURLY

You are hereby notified of the following requirements:

1. Present this Authorization for Entry letter to an Immigration Officer immediately upon arrival at your designated port of entry into the
Commonwealth of the Northern Mariana Islands.

xxxx

3. The Entry Permit, if issued for the purpose of employment, expires automatically upon termination of such employment and must be surrendered
to your employer.

xxxx

5. You must enter the CNMI within 90 days of issuance of this "Authorization for Entry" letter if you are entering for the purpose of
employment.1âwphi1 (emphasis supplied)

The AE thereby clearly indicated that the date of May 13, 1998 appearing thereon referred only to the expiration of the document itself. Centro
Project stretched its interpretation to bolster its contention that May 13, 1998 was the limit of stay for Naluis in Northern Marianas. The interpretation
is unacceptable, for item number 3 of the AE even recognized any employment period if the AE was issued for the purpose of employment. This
meant that contrary to the position of Centro Project there was no clear and categorical entry in the AE to the effect that the AE limited his stay in
Northern Marianas.

It is fundamental that in the interpretation of contracts of employment, doubts are generally resolved in favor of the worker.16 It is imperative to
uphold this rule herein. Hence, any doubt or vagueness in the provisions of the contract of employment should have been interpreted and resolved in
favor of Naluis.17

Although Centro Project alleges that it feared that Naluis would eventually be declared an illegal alien had he not been repatriated, the records do not
support the allegation. For one, Centro Project did not demonstrate that its fear was justified at all. On the contrary, its fear was, at best, imaginary
because it did not submit evidence showing that the Northern Marianas authorities had ever moved to declare him an illegal alien. Moreover, had
Centro Project been aware of any likelihood of him being soon declared an illegal alien, it could have easily advised him thereof, and explained the
situation to him in due course. Yet, he was not at all informed of the likelihood.

Denying its participation in the fixing of the expiration date, Centro Project argues that it was the Philippine representative in Northern Marianas who
had inserted by hand the date of expiration in the Employment Contract.

The argument has no basis.

Firstly, Centro Project's allegation on the expiration date being merely inserted by the Philippine representative in Northern Marianas was not
substantiated with credible proof. It supported its allegation by alluding to the fact that the signature of the person who had verified the employment
contract was similar to the handwritten insertion made on the blank space of the employment contract. That was not enough, however, in view of the
basic rule that mere allegation is not evidence and is not equivalent to proof.18 Hence, the allegation, an essentially self-serving statement, was
devoid of any evidentiary weight.

And, secondly, even assuming that Centro Project did not have any participation in fixing the expiration date, it did not amend the employment
contract despite being fully aware that the term of 12 months was clearly indicated as the period of Naluis' work. The primary Employment Contract
was sent for approval to the principal employer abroad, as well as to the immigration authorities of the Philippines and Northern Marianas. In such
circumstances, Centro Project could not but know that the period had been fixed by the immigration authorities of Northern Marianas prior to his
actual deployment. Thus, Centro Project was in bad faith in not taking any action when the Philippine immigration authorities supposedly inserted the
handwritten date of expiration of the contract. In fact, the addendum to the employment contract, approved by the POEA on September 3, 1997,
which categorically stated that "the term of this contract shall be for a period of Twelve Months,"19 was executed even before he left for Northern
Marianas on September 13, 1997, and after the AE had already been issued by Northern Marianas on June 3, 1997. Centro Project could have easily
apprised him of the change. Also, the necessary amendments to the primary contract or an addendum thereto could have been easily made prior to
his deployment.

Undoubtedly, the term of the contract was 12 months. The AE could not be used as a valid cause for pre-terminating the employment of Naluis. His
repatriation was clearly a breach of the contract of employment, for which the CA awarded to him the following money claims, to wit:

a) Four (4) months salary corresponding to the unpaid portion of his contract at $520.00 (Five Hundred Twenty U.S. Dollars) per month;

b) Guaranteed overtime pay at an average of thirty (30) to forty (40) hours per month in excess of straight eight (8) hours regular work schedule
corresponding to the unexpired portion of four ( 4) months in the contract;

c) Placement fee of Thirteen Thousand Five Hundred (13,500.00) Pesos;

d) Legal holiday equivalent to ten (10) days with pay;

e) Twelve (12) days vacation leave with pay; and

f) Attorney's fees of Ten Thousand Pesos (₱10,000.00).

We affirm the awards except those for the guaranteed overtime pay and legal holiday pay. Under Section 1020 of Republic Act No. 8042, the unjustly
terminated employee is entitled to the full reimbursement of his placement fee with interest at 12% per annum, plus his salaries for the unexpired
portion of his employment contract. We further allow the payment of vacation leave pay and sick leave pay because the employment contract2'
stipulated 12 days vacation leave with pay and seven days sick leave with pay that could be taken after one year. With his premature repatriation
being unjustified, Naluis should receive his vacation and sick leave pays, but not the guaranteed overtime pay and legal holiday pay because the
employment contract did not extend such benefits.

WHEREFORE, the Court AFFIRMS the decision promulgated on April 23, 2003, subject to the DELETION of the awards for guaranteed overtime pay and
legal holiday; and ORDERS the petitioner to pay the costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN

Associate Justice

WE CONCUR:

MARIA LOURDES P.A. SERENO

Chief Justice

TERESITA J. LEONARDO-DE CASTRO

Associate Justice JOSE PORTUGAL PEREZ

Associate Justice

ESTELA M. PERLAS-BERNABE

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Court's Division.
MARIA LOURDES P.A. SERENO

Chief Justice

9.

Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

G.R. No. L-80680 January 26, 1989

DANILO B. TABAS, EDUARDO BONDOC, RAMON M. BRIONES, EDUARDO R. ERISPE, JOEL MADRIAGA, ARTHUR M. ESPINO, AMARO BONA, FERDINAND
CRUZ, FEDERICO A. BELITA, ROBERTO P. ISLES, ELMER ARMADA, EDUARDO UDOG, PETER TIANSING, MIGUELITA QUIAMBOA, NOMER MATAGA, VIOLY
ESTEBAN and LYDIA ORTEGA, petitioners,

vs.

CALIFORNIA MANUFACTURING COMPANY, INC., LILY-VICTORIA A. AZARCON, NATIONAL LABOR RELATIONS COMMISSION, and HON. EMERSON C.
TUMANON, respondents.

V.E. Del Rosario & Associates for respondent CMC.

The Solicitor General for public respondent.

Banzuela, Flores, Miralles, Raneses, Sy, Taquio and Associates for petitioners.

Mildred A. Ramos for respondent Lily Victoria A. Azarcon.

SARMIENTO, J.:

On July 21, 1986, July 23, 1986, and July 28, 1986, the petitioners petitioned the National Labor Relations Commission for reinstatement and payment
of various benefits, including minimum wage, overtime pay, holiday pay, thirteen-month pay, and emergency cost of living allowance pay, against the
respondent, the California Manufacturing Company. 1

On October 7, 1986, after the cases had been consolidated, the California Manufacturing Company (California) filed a motion to dismiss as well as a
position paper denying the existence of an employer-employee relation between the petitioners and the company and, consequently, any liability for
payment of money claims. 2 On motion of the petitioners, Livi Manpower Services, Inc. was impleaded as a party-respondent.

It appears that the petitioners were, prior to their stint with California, employees of Livi Manpower Services, Inc. (Livi), which subsequently assigned
them to work as "promotional merchandisers" 3 for the former firm pursuant to a manpower supply agreement. Among other things, the agreement
provided that California "has no control or supervisions whatsoever over [Livi's] workers with respect to how they accomplish their work or perform
[Californias] obligation"; 4 the Livi "is an independent contractor and nothing herein contained shall be construed as creating between [California] and
[Livi] . . . the relationship of principal[-]agent or employer[-]employee'; 5 that "it is hereby agreed that it is the sole responsibility of [Livi] to comply
with all existing as well as future laws, rules and regulations pertinent to employment of labor" 6 and that "[California] is free and harmless from any
liability arising from such laws or from any accident that may befall workers and employees of [Livi] while in the performance of their duties for
[California].7

It was further expressly stipulated that the assignment of workers to California shall be on a "seasonal and contractual basis"; that "[c]ost of living
allowance and the 10 legal holidays will be charged directly to [California] at cost "; and that "[p]ayroll for the preceeding [sic] week [shall] be
delivered by [Livi] at [California's] premises." 8

The petitioners were then made to sign employment contracts with durations of six months, upon the expiration of which they signed new
agreements with the same period, and so on. Unlike regular California employees, who received not less than P2,823.00 a month in addition to a host
of fringe benefits and bonuses, they received P38.56 plus P15.00 in allowance daily.

The petitioners now allege that they had become regular California employees and demand, as a consequence whereof, similar benefits. They likewise
claim that pending further proceedings below, they were notified by California that they would not be rehired. As a result, they filed an amended
complaint charging California with illegal dismissal.

California admits having refused to accept the petitioners back to work but deny liability therefor for the reason that it is not, to begin with, the
petitioners' employer and that the "retrenchment" had been forced by business losses as well as expiration of contracts.9 It appears that thereafter,
Livi re-absorbed them into its labor pool on a "wait-in or standby" status. 10

Amid these factual antecedents, the Court finds the single most important issue to be: Whether the petitioners are California's or Livi's employees.
The labor arbiter's decision, 11 a decision affirmed on appeal, 12 ruled against the existence of any employer-employee relation between the
petitioners and California ostensibly in the light of the manpower supply contract, supra, and consequently, against the latter's liability as and for the
money claims demanded. In the same breath, however, the labor arbiter absolved Livi from any obligation because the "retrenchment" in question
was allegedly "beyond its control ." 13 He assessed against the firm, nevertheless, separation pay and attorney's fees.

We reverse.

The existence of an employer-employees relation is a question of law and being such, it cannot be made the subject of agreement. Hence, the fact
that the manpower supply agreement between Livi and California had specifically designated the former as the petitioners' employer and had
absolved the latter from any liability as an employer, will not erase either party's obligations as an employer, if an employer-employee relation
otherwise exists between the workers and either firm. At any rate, since the agreement was between Livi and California, they alone are bound by it,
and the petitioners cannot be made to suffer from its adverse consequences.

This Court has consistently ruled that the determination of whether or not there is an employer-employee relation depends upon four standards: (1)
the manner of selection and engagement of the putative employee; (2) the mode of payment of wages; (3) the presence or absence of a power of
dismissal; and (4) the presence or absence of a power to control the putative employee's conduct. 14 Of the four, the right-of-control test has been
held to be the decisive factor. 15

On the other hand, we have likewise held, based on Article 106 of the Labor Code, hereinbelow reproduced:

ART. 106. Contractor or sub-contractor. — Whenever an employee enters into a contract with another person for the performance of the former's
work, the employees of the contractor and of the latter's sub-contractor, if any, shall be paid in accordance with the provisions of this Code.

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

The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established
under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of
this Code, to prevent any violation or circumvention of any provisions of this Code.

There is 'labor-only' contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which
are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.

that notwithstanding the absence of a direct employer-employee relationship between the employer in whose favor work had been contracted out by
a "labor-only" contractor, and the employees, the former has the responsibility, together with the "labor-only" contractor, for any valid labor claims,
16 by operation of law. The reason, so we held, is that the "labor-only" contractor is considered "merely an agent of the employer,"17 and liability
must be shouldered by either one or shared by both. 18

There is no doubt that in the case at bar, Livi performs "manpower services", 19 meaning to say, it contracts out labor in favor of clients. We hold that
it is one notwithstanding its vehement claims to the contrary, and notwithstanding the provision of the contract that it is "an independent
contractor." 20 The nature of one's business is not determined by self-serving appellations one attaches thereto but by the tests provided by statute
and prevailing case law. 21 The bare fact that Livi maintains a separate line of business does not extinguish the equal fact that it has provided
California with workers to pursue the latter's own business. In this connection, we do not agree that the petitioners had been made to perform
activities 'which are not directly related to the general business of manufacturing," 22 California's purported "principal operation activity. " 23 The
petitioner's had been charged with "merchandizing [sic] promotion or sale of the products of [California] in the different sales outlets in Metro Manila
including task and occational [sic] price tagging," 24 an activity that is doubtless, an integral part of the manufacturing business. It is not, then, as if
Livi had served as its (California's) promotions or sales arm or agent, or otherwise, rendered a piece of work it (California) could not have itself done;
Livi, as a placement agency, had simply supplied it with the manpower necessary to carry out its (California's) merchandising activities, using its
(California's) premises and equipment. 25

Neither Livi nor California can therefore escape liability, that is, assuming one exists.

The fact that the petitioners have allegedly admitted being Livi's "direct employees" 26 in their complaints is nothing conclusive. For one thing, the
fact that the petitioners were (are), will not absolve California since liability has been imposed by legal operation. For another, and as we indicated,
the relations of parties must be judged from case to case and the decree of law, and not by declarations of parties.

The fact that the petitioners have been hired on a "temporary or seasonal" basis merely is no argument either. As we held in Philippine Bank of
Communications v. NLRC, 27 a temporary or casual employee, under Article 218 of the Labor Code, becomes regular after service of one year, unless
he has been contracted for a specific project. And we cannot say that merchandising is a specific project for the obvious reason that it is an activity
related to the day-to-day operations of California.

It would have been different, we believe, had Livi been discretely a promotions firm, and that California had hired it to perform the latter's
merchandising activities. For then, Livi would have been truly the employer of its employees, and California, its client. The client, in that case, would
have been a mere patron, and not an employer. The employees would not in that event be unlike waiters, who, although at the service of customers,
are not the latter's employees, but of the restaurant. As we pointed out in the Philippine Bank of Communications case:
xxx xxx xxx

... The undertaking given by CESI in favor of the bank was not the performance of a specific job for instance, the carriage and delivery of documents
and parcels to the addresses thereof. There appear to be many companies today which perform this discrete service, companies with their own
personnel who pick up documents and packages from the offices of a client or customer, and who deliver such materials utilizing their own delivery
vans or motorcycles to the addressees. In the present case, the undertaking of CESI was to provide its client the bank with a certain number of persons
able to carry out the work of messengers. Such undertaking of CESI was complied with when the requisite number of persons were assigned or
seconded to the petitioner bank. Orpiada utilized the premises and office equipment of the bank and not those of CESI. Messengerial work the
delivery of documents to designated persons whether within or without the bank premises-is of course directly related to the day-to-day operations
of the bank. Section 9(2) quoted above does not require for its applicability that the petitioner must be engaged in the delivery of items as a distinct
and separate line of business.

Succinctly put, CESI is not a parcel delivery company: as its name indicates, it is a recruitment and placement corporation placing bodies, as it were, in
different client companies for longer or shorter periods of time, ... 28

In the case at bar, Livi is admittedly an "independent contractor providing temporary services of manpower to its client. " 29 When it thus provided
California with manpower, it supplied California with personnel, as if such personnel had been directly hired by California. Hence, Article 106 of the
Code applies.

The Court need not therefore consider whether it is Livi or California which exercises control over the petitioner vis-a-vis the four barometers referred
to earlier, since by fiction of law, either or both shoulder responsibility.

It is not that by dismissing the terms and conditions of the manpower supply agreement, we have, hence, considered it illegal. Under the Labor Code,
genuine job contracts are permissible, provided they are genuine job contracts. But, as we held in Philippine Bank of Communications, supra, when
such arrangements are resorted to "in anticipation of, and for the very purpose of making possible, the secondment" 30 of the employees from the
true employer, the Court will be justified in expressing its concern. For then that would compromise the rights of the workers, especially their right to
security of tenure.

This brings us to the question: What is the liability of either Livi or California?

The records show that the petitioners bad been given an initial six-month contract, renewed for another six months. Accordingly, under Article 281 of
the Code, they had become regular employees-of-California-and had acquired a secure tenure. Hence, they cannot be separated without due process
of law.

California resists reinstatement on the ground, first, and as we Id, that the petitioners are not its employees, and second, by reason of financial
distress brought about by "unfavorable political and economic atmosphere" 31 "coupled by the February Revolution." 32 As to the first objection, we
reiterate that the petitioners are its employees and who, by virtue of the required one-year length-of-service, have acquired a regular status. As to the
second, we are not convinced that California has shown enough evidence, other than its bare say so, that it had in fact suffered serious business
reverses as a result alone of the prevailing political and economic climate. We further find the attribution to the February Revolution as a cause for its
alleged losses to be gratuitous and without basis in fact.

California should be warned that retrenchment of workers, unless clearly warranted, has serious consequences not only on the State's initiatives to
maintain a stable employment record for the country, but more so, on the workingman himself, amid an environment that is desperately scarce in
jobs. And, the National Labor Relations Commission should have known better than to fall for such unwarranted excuses and nebulous claims.

WHEREFORE, the petition is GRANTED. Judgment is hereby RENDERED: (1): SETTING ASIDE the decision, dated March 20, 1987, and the resolution,
dated August 19, 1987; (2) ORDERING the respondent, the California Manufacturing Company, to REINSTATE the petitioners with full status and rights
of regular employees; and (3) ORDERING the respondent, the California Manufacturing Company, and the respondents, Livi Manpower Service, Inc.
and/or Lily-Victoria Azarcon, to PAY, jointly and severally, unto the petitioners: (a) backwages and differential pays effective as and from the time they
had acquired a regular status under the second paragraph, of Section 281, of the Labor Code, but not to exceed three (3) years, and (b) all such other
and further benefits as may be provided by existing collective bargaining agreement(s) or other relations, or by law, beginning such time; and (4)
ORDERING the private respondents to PAY unto the petitioners attorney's fees equivalent to ten (10%) percent of all money claims hereby awarded, in
addition to those money claims. The private respondents are likewise ORDERED to PAY the costs of this suit.

IT IS SO ORDERED.

Melencio-Herrera, (Chairperson), Paras, Padilla and Regalado, JJ., concur.

10.

SECOND DIVISION

[G.R. No. 151228. August 15, 2002]

ROLANDO Y. TAN, petitioner, vs. LEOVIGILDO LAGRAMA and THE HONORABLE COURT OF APPEALS, respondents.

DECISION

MENDOZA, J.:
This is a petition for review on certiorari of the decision,[1] dated May 31, 2001, and the resolution,[2] dated November 27, 2001, of the Court of
Appeals in C.A.-G.R. SP. No. 63160, annulling the resolutions of the National Labor Relations Commission (NLRC) and reinstating the ruling of the Labor
Arbiter which found petitioner Rolando Tan guilty of illegally dismissing private respondent Leovigildo Lagrama and ordering him to pay the latter the
amount of P136,849.99 by way of separation pay, backwages, and damages.

The following are the facts.

Petitioner Rolando Tan is the president of Supreme Theater Corporation and the general manager of Crown and Empire Theaters in Butuan City.
Private respondent Leovigildo Lagrama is a painter, making ad billboards and murals for the motion pictures shown at the Empress, Supreme, and
Crown Theaters for more than 10 years, from September 1, 1988 to October 17, 1998.

On October 17, 1998, private respondent Lagrama was summoned by Tan and upbraided: Nangihi na naman ka sulod sa imong drawinganan. (You
again urinated inside your work area.) When Lagrama asked what Tan was saying, Tan told him, Ayaw daghang estorya. Dili ko gusto nga mo-drawing
ka pa. Guikan karon, wala nay drawing. Gawas. (Dont say anything further. I dont want you to draw anymore. From now on, no more drawing. Get
out.)

Lagrama denied the charge against him. He claimed that he was not the only one who entered the drawing area and that, even if the charge was true,
it was a minor infraction to warrant his dismissal. However, everytime he spoke, Tan shouted Gawas (Get out), leaving him with no other choice but to
leave the premises.

Lagrama filed a complaint with the Sub-Regional Arbitration Branch No. X of the National Labor Relations Commission (NLRC) in Butuan City. He
alleged that he had been illegally dismissed and sought reinvestigation and payment of 13th month pay, service incentive leave pay, salary differential,
and damages.

Petitioner Tan denied that Lagrama was his employee. He asserted that Lagrama was an independent contractor who did his work according to his
methods, while he (petitioner) was only interested in the result thereof. He cited the admission of Lagrama during the conferences before the Labor
Arbiter that he was paid on a fixed piece-work basis, i.e., that he was paid for every painting turned out as ad billboard or mural for the pictures
shown in the three theaters, on the basis of a no mural/billboard drawn, no pay policy. He submitted the affidavits of other cinema owners, an
amusement park owner, and those supervising the construction of a church to prove that the services of Lagrama were contracted by them. He denied
having dismissed Lagrama and alleged that it was the latter who refused to paint for him after he was scolded for his habits.

As no amicable settlement had been reached, Labor Arbiter Rogelio P. Legaspi directed the parties to file their position papers. On June 17, 1999, he
rendered a decision, the dispositive portion of which reads:

WHEREFORE, premises considered judgment is hereby ordered:

1. Declaring complainants [Lagramas] dismissal illegal and

2. Ordering respondents [Tan] to pay complainant the following:

A. Separation Pay - P 59,000.00

B. Backwages - 47,200.00

(from 17 October 1998 to 17 June 1999)

C. 13th month pay (3 years) - 17,700.00

D. Service Incentive Leave

Pay (3 years) - 2, 949.99

E. Damages - 10,000.00

TOTAL [P136,849.99]

Complainants other claims are dismissed for lack of merit.[3]

Petitioner Rolando Tan appealed to the NLRC Fifth Division, Cagayan de Oro City, which, on June 30, 2000, rendered a decision[4] finding Lagrama to
be an independent contractor, and for this reason reversing the decision of the Labor Arbiter.

Respondent Lagrama filed a motion for reconsideration, but it was denied for lack of merit by the NLRC in a resolution of September 29, 2000. He then
filed a petition for certiorari under Rule 65 before the Court of Appeals.

The Court of Appeals found that petitioner exercised control over Lagramas work by dictating the time when Lagrama should submit his billboards and
murals and setting rules on the use of the work area and rest room. Although it found that Lagrama did work for other cinema owners, the appeals
court held it to be a mere sideline insufficient to prove that he was not an employee of Tan. The appeals court also found no evidence of any intention
on the part of Lagrama to leave his job or sever his employment relationship with Tan. Accordingly, on May 31, 2001, the Court of Appeals rendered a
decision, the dispositive portion of which reads:
IN THE LIGHT OF ALL THE FOREGOING, the Petition is hereby GRANTED. The Resolutions of the Public Respondent issued on June 30, 2000 and
September 29, 2000 are ANNULLED. The Decision of the Honorable Labor Arbiter Rogelio P. Legaspi on June 17, 1999 is hereby REINSTATED.

Petitioner moved for a reconsideration, but the Court of Appeals found no reason to reverse its decision and so denied his motion for lack of merit.[5]
Hence, this petition for review on certiorari based on the following assignments of errors:

I. With all due respect, the decision of respondent Court of Appeals in CA-G.R. SP NO. 63160 is bereft of any finding that Public Respondent NLRC, 5th
Division, had no jurisdiction or exceeded it or otherwise gravely abused its discretion in its Resolution of 30 June 2000 in NLRC CA-NO. M-004950-99.

II. With all due respect, respondent Court of Appeals, absent any positive finding on its part that the Resolution of 30 June 2000 of the NLRC is not
supported by substantial evidence, is without authority to substitute its conclusion for that of said NLRC.

III. With all due respect, respondent Court of Appeals discourse on freelance artists and painters in the decision in question is misplaced or has no
factual or legal basis in the record.

IV. With all due respect, respondent Court of Appeals opening statement in its decision as to employment, monthly salary of P1,475.00 and work
schedule from Monday to Saturday, from 8:00 oclock in the morning up to 5:00 oclock in the afternoon as facts is not supported by the evidence on
record.

V. With all due respect, the case of Lambo, et al., v. NLRC, et al., 317 SCRA 420 [G.R. No. 111042 October 26, 1999] relied upon by respondent Court of
Appeals is not applicable to the peculiar circumstances of this case.[6]

The issues raised boil down to whether or not an employer-employee relationship existed between petitioner and private respondent, and whether
petitioner is guilty of illegally dismissing private respondent. We find the answers to these issues to be in the affirmative.

I.

In determining whether there is an employer-employee relationship, we have applied a four-fold test, to wit: (1) whether the alleged employer has
the power of selection and engagement of employees; (2) whether he has control of the employee with respect to the means and methods by which
work is to be accomplished; (3) whether he has the power to dismiss; and (4) whether the employee was paid wages.[7] These elements of the
employer-employee relationship are present in this case.

First. The existence in this case of the first element is undisputed. It was petitioner who engaged the services of Lagrama without the intervention of a
third party. It is the existence of the second element, the power of control, that requires discussion here.

Of the four elements of the employer-employee relationship, the control test is the most important. Compared to an employee, an independent
contractor is one who carries on a distinct and independent business and undertakes to perform the job, work, or service on its own account and
under its own responsibility according to its own manner and method, free from the control and direction of the principal in all matters connected
with the performance of the work except as to the results thereof.[8] Hence, while an independent contractor enjoys independence and freedom from
the control and supervision of his principal, an employee is subject to the employers power to control the means and methods by which the
employees work is to be performed and accomplished.

In the case at bar, albeit petitioner Tan claims that private respondent Lagrama was an independent contractor and never his employee, the evidence
shows that the latter performed his work as painter under the supervision and control of petitioner. Lagrama worked in a designated work area inside
the Crown Theater of petitioner, for the use of which petitioner prescribed rules. The rules included the observance of cleanliness and hygiene and a
prohibition against urinating in the work area and any place other than the toilet or the rest rooms.[9] Petitioners control over Lagramas work
extended not only to the use of the work area, but also to the result of Lagramas work, and the manner and means by which the work was to be
accomplished.

Moreover, it would appear that petitioner not only provided the workplace, but supplied as well the materials used for the paintings, because he
admitted that he paid Lagrama only for the latters services.[10]

Private respondent Lagrama claimed that he worked daily, from 8 oclock in the morning to 5 oclock in the afternoon. Petitioner disputed this
allegation and maintained that he paid Lagrama P1,475.00 per week for the murals for the three theaters which the latter usually finished in 3 to 4
days in one week.[11] Even assuming this to be true, the fact that Lagrama worked for at least 3 to 4 days a week proves regularity in his employment
by petitioner.

Second. That petitioner had the right to hire and fire was admitted by him in his position paper submitted to the NLRC, the pertinent portions of which
stated:

Complainant did not know how to use the available comfort rooms or toilets in and about his work premises. He was urinating right at the place
where he was working when it was so easy for him, as everybody else did and had he only wanted to, to go to the comfort rooms. But no, the
complainant had to make a virtual urinal out of his work place! The place then stunk to high heavens, naturally, to the consternation of respondents
and everyone who could smell the malodor.

...

Given such circumstances, the respondents had every right, nay all the compelling reason, to fire him from his painting job upon discovery and his
admission of such acts. Nonetheless, though thoroughly scolded, he was not fired. It was he who stopped to paint for respondents.[12]
By stating that he had the right to fire Lagrama, petitioner in effect acknowledged Lagrama to be his employee. For the right to hire and fire is another
important element of the employer-employee relationship.[13] Indeed, the fact that, as petitioner himself said, he waited for Lagrama to report for
work but the latter simply stopped reporting for work reinforces the conviction that Lagrama was indeed an employee of petitioner. For only an
employee can nurture such an expectancy, the frustration of which, unless satisfactorily explained, can bring about some disciplinary action on the
part of the employer.

Third. Payment of wages is one of the four factors to be considered in determining the existence of employer-employee relation. Wages are defined as
remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of
employment for work done or to be done, or for services rendered or to be rendered.[14] That Lagrama worked for Tan on a fixed piece-work basis is
of no moment. Payment by result is a method of compensation and does not define the essence of the relation.[15] It is a method of computing
compensation, not a basis for determining the existence or absence of employer-employee relationship. One may be paid on the basis of results or
time expended on the work, and may or may not acquire an employment status, depending on whether the elements of an employer-employee
relationship are present or not.[16]

The Rules Implementing the Labor Code require every employer to pay his employees by means of payroll.[17] The payroll should show among other
things, the employees rate of pay, deductions made, and the amount actually paid to the employee. In the case at bar, petitioner did not present the
payroll to support his claim that Lagrama was not his employee, raising speculations whether his failure to do so proves that its presentation would be
adverse to his case.[18]

The primary standard for determining regular employment is the reasonable connection between the particular activity performed by the employee
in relation to the usual trade or business of the employer.[19] In this case, there is such a connection between the job of Lagrama painting billboards
and murals and the business of petitioner. To let the people know what movie was to be shown in a movie theater requires billboards. Petitioner in
fact admits that the billboards are important to his business.[20]

The fact that Lagrama was not reported as an employee to the SSS is not conclusive on the question of whether he was an employee of petitioner.[21]
Otherwise, an employer would be rewarded for his failure or even neglect to perform his obligation.[22]

Neither does the fact that Lagrama painted for other persons affect or alter his employment relationship with petitioner. That he did so only during
weekends has not been denied by petitioner. On the other hand, Samuel Villalba, for whom Lagrama had rendered service, admitted in a sworn
statement that he was told by Lagrama that the latter worked for petitioner.[23]

Lagrama had been employed by petitioner since 1988. Under the law, therefore, he is deemed a regular employee and is thus entitled to security of
tenure, as provided in Art. 279 of Labor Code:

ART. 279. Security of Tenure. In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or
when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual reinstatement.

This Court has held that if the employee has been performing the job for at least one year, even if not continuously but intermittently, the repeated
and continuing need for its performance is sufficient evidence of the necessity, if not indispensability, of that activity to the business of his employer.
Hence, the employment is also considered regular, although with respect only to such activity, and while such activity exists.[24]

It is claimed that Lagrama abandoned his work. There is no evidence to show this. Abandonment requires two elements: (1) the failure to report for
work or absence without valid or justifiable reason, and (2) a clear intention to sever the employer-employee relationship, with the second element as
the more determinative factor and being manifested by some overt acts.[25] Mere absence is not sufficient. What is more, the burden is on the
employer to show a deliberate and unjustified refusal on the part of the employee to resume his employment without any intention of returning.[26]
In the case at bar, the Court of Appeals correctly ruled:

Neither do we agree that Petitioner abandoned his job. In order for abandonment to be a just and valid ground for dismissal, the employer must
show, by clear proof, the intention of the employee to abandon his job. . . .

In the present recourse, the Private Respondent has not established clear proof of the intention of the Petitioner to abandon his job or to sever the
employment relationship between him and the Private Respondent. On the contrary, it was Private Respondent who told Petitioner that he did not
want the latter to draw for him and thereafter refused to give him work to do or any mural or billboard to paint or draw on.

More, after the repeated refusal of the Private Respondent to give Petitioner murals or billboards to work on, the Petitioner filed, with the Sub-
Regional Arbitration Branch No. X of the National Labor Relations Commission, a Complaint for Illegal Dismissal and Money Claims. Such act has, as
the Supreme Court declared, negate any intention to sever employment relationship. . . .[27]

II.

The second issue is whether private respondent Lagrama was illegally dismissed. To begin, the employer has the burden of proving the lawfulness of
his employees dismissal.[28] The validity of the charge must be clearly established in a manner consistent with due process. The Implementing Rules
of the Labor Code[29] provide that no worker shall be dismissed except for a just or authorized cause provided by law and after due process. This
provision has two aspects: (1) the legality of the act of dismissal, that is, dismissal under the grounds provided for under Article 282 of the Labor Code
and (2) the legality in the manner of dismissal. The illegality of the act of dismissal constitutes discharge without just cause, while illegality in the
manner of dismissal is dismissal without due process.[30]
In this case, by his refusal to give Lagrama work to do and ordering Lagrama to get out of his sight as the latter tried to explain his side, petitioner
made it plain that Lagrama was dismissed. Urinating in a work place other than the one designated for the purpose by the employer constitutes
violation of reasonable regulations intended to promote a healthy environment under Art. 282(1) of the Labor Code for purposes of terminating
employment, but the same must be shown by evidence. Here there is no evidence that Lagrama did urinate in a place other than a rest room in the
premises of his work.

Instead of ordering his reinstatement as provided in Art. 279 of the Labor Code, the Labor Arbiter found that the relationship between the employer
and the employee has been so strained that the latters reinstatement would no longer serve any purpose. The parties do not dispute this finding.
Hence, the grant of separation pay in lieu of reinstatement is appropriate. This is of course in addition to the payment of backwages which, in
accordance with the ruling in Bustamante v. NLRC,[31] should be computed from the time of Lagramas dismissal up to the time of the finality of this
decision, without any deduction or qualification.

The Bureau of Working Conditions[32] classifies workers paid by results into two groups, namely; (1) those whose time and performance is supervised
by the employer, and (2) those whose time and performance is unsupervised by the employer. The first involves an element of control and supervision
over the manner the work is to be performed, while the second does not. If a piece worker is supervised, there is an employer-employee relationship,
as in this case. However, such an employee is not entitled to service incentive leave pay since, as pointed out in Makati Haberdashery v. NLRC[33] and
Mark Roche International v. NLRC,[34] he is paid a fixed amount for work done, regardless of the time he spent in accomplishing such work.

WHEREFORE, based on the foregoing, the petition is DENIED for lack of showing that the Court of Appeals committed any reversible error. The
decision of the Court of Appeals, reversing the decision of the National Labor Relations Commission and reinstating the decision of the Labor Arbiter,
is AFFIRMED with the MODIFICATION that the backwages and other benefits awarded to private respondent Leovigildo Lagrama should be computed
from the time of his dismissal up to the time of the finality of this decision, without any deduction and qualification. However, the service incentive
leave pay awarded to him is DELETED.

SO ORDERED.

Bellosillo, (Chairman), Quisumbing, and Corona, JJ., concur.

11.

SECOND DIVISION

G.R. No. 129315 October 2, 2000

OSIAS I. CORPORAL, SR., PEDRO TOLENTINO, MANUEL CAPARAS, ELPIDIO LACAP, SIMPLICIO PEDELOS, PATRICIA NAS, and TERESITA FLORES,
petitioners,

vs.

NATIONAL LABOR RELATIONS COMMISSION, LAO ENTENG COMPANY, INC. and/or TRINIDAD LAO ONG, respondents.

DECISION

QUISUMBING, J.:

This special civil action for certiorari seeks the review of the Resolution dated October 17, 1996 of public respondent National Labor Relations
Commission (First Division),1 in NLRC NCR Case No. 00-04-03163-95, and the Resolution dated March 5, 1997 denying the motion for reconsideration.
The aforecited October 17th Resolution affirmed the Decision dated September 28, 1996 of Labor Arbiter Potenciano S. Cañizares dismissing the
petitioners' complaint for illegal dismissal and declaring that petitioners are not regular employees of private respondent Lao Enteng Company, Inc..

The records of the case show that the five male petitioners, namely, Osias I. Corporal, Sr., Pedro Tolentino, Manuel Caparas, Elpidio Lacap, and
Simplicio Pedelos worked as barbers, while the two female petitioners, Teresita Flores and Patricia Nas worked as manicurists in New Look Barber
Shop located at 651 P. Paterno Street, Quiapo, Manila owned by private respondent Lao Enteng Co. Inc.. Petitioner Nas alleged that she also worked as
watcher and marketer of private respondent.

Petitioners claim that at the start of their employment with the New Look Barber Shop, it was a single proprietorship owned and managed by Mr.
Vicente Lao. In or about January 1982, the children of Vicente Lao organized a corporation which was registered with the Securities and Exchange
Commission as Lao Enteng Co. Inc. with Trinidad Ong as President of the said corporation. Upon its incorporation, the respondent company took over
the assets, equipment, and properties of the New Look Barber Shop and continued the business. All the petitioners were allowed to continue working
with the new company until April 15, 1995 when respondent Trinidad Ong informed them that the building wherein the New Look Barber Shop was
located had been sold and that their services were no longer needed.2

On April 28, 1995, petitioners filed with the Arbitration Branch of the NLRC, a complaint for illegal dismissal, illegal deduction, separation pay, non-
payment of 13th month pay, and salary differentials. Only petitioner Nas asked for payment of salary differentials as she alleged that she was paid a
daily wage of P25.00 throughout her period of employment. The petitioners also sought the refund of the P1.00 that the respondent company
collected from each of them daily as salary of the sweeper of the barber shop.

Private respondent in its position paper averred that the petitioners were joint venture partners and were receiving fifty percent commission of the
amount charged to customers. Thus, there was no employer-employee relationship between them and petitioners. And assuming arguendo, that
there was an employer-employee relationship, still petitioners are not entitled to separation pay because the cessation of operations of the barber
shop was due to serious business losses.

Respondent Trinidad Lao Ong, President of respondent Lao Enteng Co. Inc., specifically stated in her affidavit dated September 06, 1995 that Lao
Enteng Company, Inc. did not take over the management of the New Look Barber Shop, that after the death Lao Enteng petitioner were verbally
informed time and again that the partnership may fold up anytime because nobody in the family had the time to be at the barber shop to look after
their interest; that New Look Barber Shop had always been a joint venture partnership and the operation and management of the barber shop was
left entirely to petitioners; that her father's contribution to the joint venture included the place of business, payment for utilities including electricity,
water, etc. while petitioners as industrial partners, supplied the labor; and that the barber shop was allowed to remain open up to April 1995 by the
children because they wanted to give the partners a chance at making it work. Eventually, they were forced to close the barber shop because they
continued to lose money while petitioners earned from it. Trinidad also added that private respondents had no control over petitioners who were free
to come and go as they wished. Admittedly too by petitioners they received fifty percent to sixty percent of the gross paid by customers. Trinidad
explained that some of the petitioners were allowed to register with the Social Security System as employees of Lao Enteng Company, Inc. only as an
act of accommodation. All the SSS contributions were made by petitioners. Moreover, Osias Corporal, Elpidio Lacap and Teresita Flores were not
among those registered with the Social Security System. Lastly, Trinidad avers that without any employee-employer relationship petitioners claim for
13th month pay and separation pay have no basis in fact and in law.3

In a Decision dated September 28, 1995, Labor Arbiter Potenciano S. Cañizares, Jr. ordered the dismissal of the complaint on the basis of his findings
that the complainants and the respondents were engaged in a joint venture and that there existed no employer-employee relation between them. The
Labor Arbiter also found that the barber shop was closed due to serious business losses or financial reverses and consequently declared that the law
does not compel the establishment to pay separation pay to whoever were its employees.4

On appeal, NLRC affirmed the said findings of the Labor Arbiter and dismissed the complaint for want of merit, ratiocinating thus:

Indeed, complainants failed to show the existence of employer-employee relationship under the fourway test established by the Supreme Court. It is a
common practice in the Barber Shop industry that barbers supply their own scissors and razors and they split their earnings with the owner of the
barber shop. The only capital of the owner is the place of work whereas the barbers provide the skill and expertise in servicing customers. The only
control exercised by the owner of the barber shop is to ascertain the number of customers serviced by the barber in order to determine the sharing of
profits. The barbers maybe characterized as independent contractors because they are under the control of the barber shop owner only with respect
to the result of the work, but not with respect to the details or manner of performance. The barbers are engaged in an independent calling requiring
special skills available to the public at large.5

Its motion for reconsideration denied in the Resolution6 dated March 5, 1997, petitioners filed the instant petition assigning that the NLRC committed
grave abuse of discretion in:

I. ARBITRARILY DISREGARDING SUBSTANTIAL EVIDENCE PROVING THAT PETITIONERS WERE EMPLOYEES OF RESPONDENT COMPANY IN RULING THAT
PETITIONERS WERE INDEPENDENT CONTRACTORS.

II. NOT HOLDING THAT PETITIONERS WERE ILLEGALLY DISMISSED AND IN NOT AWARDING THEIR MONEY CLAIMS.7

Petitioners principally argue that public respondent NLRC gravely erred in declaring that the petitioners were independent contractors. They contend
that they were employees of the respondent company and cannot be considered as independent contractors because they did not carry on an
independent business. They did not cut hair, manicure, and do their work in their own manner and method. They insist they were not free from the
control and direction of private respondents in all matters, and their services were engaged by the respondent company to attend to its customers in
its barber shop. Petitioners also stated that, individually or collectively, they do not have substantial capital nor investments in tools, equipments,
work premises and other materials necessary in the conduct of the barber shop. What the barbers owned were merely combs, scissors, and razors,
while the manicurists owned only nail cutters, nail polishes, nippers and cuticle removers. By no standard can these be considered "substantial
capital" necessary to operate a barbers shop.

Finally, petitioners fault the NLRC for arbitrarily disregarding substantial evidence on record showing that petitioners Pedro Tolentino, Manuel
Caparas, Simplicio Pedelos, and Patricia Nas were registered with the Social Security System as regular employees of the respondent company. The SSS
employment records in common show that the employer's ID No. of Vicente Lao/Barber and Pawn Shop was 03-0606200-1 and that of the respondent
company was 03-8740074-7. All the foregoing entries in the SSS employment records were painstakingly detailed by the petitioners in their position
paper and in their memorandum appeal but were arbitrarily ignored first by the Labor Arbiter and then by the respondent NLRC which did not even
mention said employment records in its questioned decision.

We found petition is impressed with merit.

In our view, this case is an exception to the general rule that findings of facts of the NLRC are to be accorded respect and finality on appeal. We have
long settled that this Court will not uphold erroneous conclusions unsupported by substantial evidence.8 We must also stress that where the findings
of the NLRC contradict those of the labor arbiter, the Court, in the exercise of its equity jurisdiction, may look into the records of the case and
reexamine the questioned findings.9

The issues raised by petitioners boil down to whether or not an employer-employee relationship existed between petitioners and private respondent
Lao Enteng Company, Inc. The Labor Arbiter has concluded that the petitioners and respondent company were engaged in a joint venture. The NLRC
concluded that the petitioners were independent contractors.

The Labor Arbiter's findings that the parties were engaged in a joint venture is unsupported by any documentary evidence. It should be noted that
aside from the self-serving affidavit of Trinidad Lao Ong, there were no other evidentiary documents, nor written partnership agreements presented.
We have ruled that even the sharing of proceeds for every job of petitioners in the barber shop does not mean they were not employees of the
respondent company.10

Petitioner aver that NLRC was wrong when it concluded that petitioners were independent contractors simply because they supplied their own
working implements, shared in the earnings of the barber shop with the owner and chose the manner of performing their work. They stressed that as
far as the result of their work was concerned the barber shop owner controlled them.

An independent contractor is one who undertakes "job contracting", i.e., a person who (a) carries on an independent business and undertakes the
contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his
employer or principal in all matters connected with the performance of the work except as to the results thereof, and (b) has substantial capital or
investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of the business.11

Juxtaposing this provision vis-à-vis the facts of this case, we are convinced that petitioners are not "independent contractors". They did not carry on
an independent business. Neither did they undertake cutting hair and manicuring nails, on their own as their responsibility, and in their own manner
and method. The services of the petitioners were engaged by the respondent company to attend to the needs of its customers in its barber shop.
More importantly, the petitioners, individually or collectively, did not have a substantial capital or investment in the form of tools, equipment, work
premises and other materials which are necessary in the conduct of the business of the respondent company. What the petitioners owned were only
combs, scissors, razors, nail cutters, nail polishes, the nippers - nothing else. By no standard can these be considered substantial capital necessary to
operate a barber shop. From the records, it can be gleaned that petitioners were not given work assignments in any place other than at the work
premises of the New Look Barber Shop owned by the respondent company. Also, petitioners were required to observe rules and regulations of the
respondent company pertaining, among other things, observance of daily attendance, job performance, and regularity of job output. The nature of
work performed by were clearly directly related to private respondent's business of operating barber shops. Respondent company did not dispute that
it owned and operated three (3) barber shops. Hence, petitioners were not independent contractors.

Did an employee-employer relationship exist between petitioners and private respondent? The following elements must be present for an employer-
employee relationship to exist: (1) the selection and engagement of the workers; (2) power of dismissal; (3) the payment of wages by whatever
means; and (4) the power to control the worker's conduct, with the latter assuming primacy in the overall consideration. Records of the case show
that the late Vicente Lao engaged the services of the petitioners to work as barbers and manicurists in the New Look Barber Shop, then a single
proprietorship owned by him; that in January 1982, his children organized a corporation which they registered with the Securities and Exchange
Commission as Lao Enteng Company, Inc.; that upon its incorporation, it took over the assets, equipment, and properties of the New Look Barber Shop
and continued the business; that the respondent company retained the services of all the petitioners and continuously paid their wages. Clearly, all
three elements exist in petitioners' and private respondent's working arrangements.

Private respondent claims it had no control over petitioners.1âwphi1 The power to control refers to the existence of the power and not necessarily to
the actual exercise thereof, nor is it essential for the employer to actually supervise the performance of duties of the employee. It is enough that the
employer has the right to wield that power.12 As to the "control test", the following facts indubitably reveal that respondent company wielded
control over the work performance of petitioners, in that: (1) they worked in the barber shop owned and operated by the respondents; (2) they were
required to report daily and observe definite hours of work; (3) they were not free to accept other employment elsewhere but devoted their full time
working in the New Look Barber Shop for all the fifteen (15) years they have worked until April 15, 1995; (4) that some have worked with respondents
as early as in the 1960's; (5) that petitioner Patricia Nas was instructed by the respondents to watch the other six (6) petitioners in their daily task.
Certainly, respondent company was clothed with the power to dismiss any or all of them for just and valid cause. Petitioners were unarguably
performing work necessary and desirable in the business of the respondent company.

While it is no longer true that membership to SSS is predicated on the existence of an employee-employer relationship since the policy is now to
encourage even the self-employed dressmakers, manicurists and jeepney drivers to become SSS members, we could not agree with private
respondents that petitioners were registered with the Social Security System as their employees only as an accommodation. As we have earlier
mentioned private respondent showed no proof to their claim that petitioners were the ones who solely paid all SSS contributions. It is unlikely that
respondents would report certain persons as their workers, pay their SSS premium as well as their wages if it were not true that they were indeed
their employees.13

Finally, we agree with the labor arbiter that there was sufficient evidence that the barber shop was closed due to serious business losses and
respondent company closed its barber shop because the building where the barber shop was located was sold. An employer may adopt policies or
changes or adjustments in its operations to insure profit to itself or protect investment of its stockholders. In the exercise of such management
prerogative, the employer may merge or consolidate its business with another, or sell or dispose all or substantially all of its assets and properties
which may bring about the dismissal or termination of its employees in the process.14

Prescinding from the above, we hold that the seven petitioners are employees of the private respondent company; as such, they are to be accorded
the benefits provided under the Labor Code, specifically Article 283 which mandates the grant of separation pay in case of closure or cessation of
employer's business which is equivalent to one (1) month pay for every year of service.15 Likewise, they are entitled to the protection of minimum
wage statutes. Hence, the separation pay due them may be computed on the basis of the minimum wage prevailing at the time their services were
terminated by the respondent company. The same is true with respect to the 13th month pay. The Revised Guidelines on the Implementation of the
13th Month Pay Law states that "all rank and file employees are now entitled to a 13th month pay regardless of the amount of basic salary that they
receive in a month. Such employees are entitled to the benefit regardless of their designation or employment status, and irrespective of the method
by which their wages are paid, provided that they have worked for at least one (1) month during a calendar year" and so all the seven (7) petitioners
who were not paid their 13th month pay must be paid accordingly.16

Anent the other claims of the petitioners, such as the P10,000.00 as penalty for non-compliance with procedural process; P10,000.00 as moral
damages; refund of P1.00 per day paid to the sweeper; salary differentials for petitioner Nas; attorney's fees), we find them without basis.
IN VIEW WHEREOF, the petition is GRANTED. The public respondent's Decision dated October 17, 1996 and Resolution dated March 05, 1997 are SET
ASIDE. Private respondents are hereby ordered to pay, severally and jointly, the seven (7) petitioners their (1) 13th month pay and (2) separation pay
equivalent to one month pay for every year of service, to be computed at the then prevailing minimum wage at the time of their actual termination
which was April 15, 1995.

Costs against private respondents.

SO ORDERED.

Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.

12.

Republic of the Philippines

SUPREME COURT

Manila

FIRST DIVISION

G.R. No. 84484 November 15, 1989

INSULAR LIFE ASSURANCE CO., LTD., petitioner,

vs.

NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO, respondents.

Tirol & Tirol for petitioner.

Enojas, Defensor & Teodosio Cabado Law Offices for private respondent.

NARVASA, J.:

On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called the Company) and Melecio T. Basiao entered into a contract 1 by which:

1. Basiao was "authorized to solicit within the Philippines applications for insurance policies and annuities in accordance with the
existing rules and regulations" of the Company;

2. he would receive "compensation, in the form of commissions ... as provided in the Schedule of Commissions" of the contract to
"constitute a part of the consideration of ... (said) agreement;" and

3. the "rules in ... (the Company's) Rate Book and its Agent's Manual, as well as all its circulars ... and those which may from time to
time be promulgated by it, ..." were made part of said contract.

The contract also contained, among others, provisions governing the relations of the parties, the duties of the Agent, the acts prohibited to him, and
the modes of termination of the agreement, viz.:

RELATION WITH THE COMPANY. The Agent shall be free to exercise his own judgment as to time, place and means of soliciting insurance. Nothing
herein contained shall therefore be construed to create the relationship of employee and employer between the Agent and the Company. However,
the Agent shall observe and conform to all rules and regulations which the Company may from time to time prescribe.

ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from giving, directly or indirectly, rebates in any form, or from making any
misrepresentation or over-selling, and, in general, from doing or committing acts prohibited in the Agent's Manual and in circulars of the Office of the
Insurance Commissioner.

TERMINATION. The Company may terminate the contract at will, without any previous notice to the Agent, for or on account of ... (explicitly
specified causes). ...

Either party may terminate this contract by giving to the other notice in writing to that effect. It shall become ipso facto cancelled if the Insurance
Commissioner should revoke a Certificate of Authority previously issued or should the Agent fail to renew his existing Certificate of Authority upon its
expiration. The Agent shall not have any right to any commission on renewal of premiums that may be paid after the termination of this agreement
for any cause whatsoever, except when the termination is due to disability or death in line of service. As to commission corresponding to any balance
of the first year's premiums remaining unpaid at the termination of this agreement, the Agent shall be entitled to it if the balance of the first year
premium is paid, less actual cost of collection, unless the termination is due to a violation of this contract, involving criminal liability or breach of trust.

ASSIGNMENT. No Assignment of the Agency herein created or of commissions or other compensations shall be valid without the prior consent in
writing of the Company. ...

Some four years later, in April 1972, the parties entered into another contract — an Agency Manager's Contract — and to implement his end of it
Basiao organized an agency or office to which he gave the name M. Basiao and Associates, while concurrently fulfilling his commitments under the
first contract with the Company. 2

In May, 1979, the Company terminated the Agency Manager's Contract. After vainly seeking a reconsideration, Basiao sued the Company in a civil
action and this, he was later to claim, prompted the latter to terminate also his engagement under the first contract and to stop payment of his
commissions starting April 1, 1980. 3

Basiao thereafter filed with the then Ministry of Labor a complaint 4 against the Company and its president. Without contesting the termination of the
first contract, the complaint sought to recover commissions allegedly unpaid thereunder, plus attorney's fees. The respondents disputed the Ministry's
jurisdiction over Basiao's claim, asserting that he was not the Company's employee, but an independent contractor and that the Company had no
obligation to him for unpaid commissions under the terms and conditions of his contract. 5

The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that the underwriting agreement had established an employer-employee
relationship between him and the Company, and this conferred jurisdiction on the Ministry of Labor to adjudicate his claim. Said official's decision
directed payment of his unpaid commissions "... equivalent to the balance of the first year's premium remaining unpaid, at the time of his
termination, of all the insurance policies solicited by ... (him) in favor of the respondent company ..." plus 10% attorney's fees. 6

This decision was, on appeal by the Company, affirmed by the National Labor Relations Commission. 7 Hence, the present petition for certiorari and
prohibition.

The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become the Company's employee by virtue of the contract invoked by
him, thereby placing his claim for unpaid commissions within the original and exclusive jurisdiction of the Labor Arbiter under the provisions of
Section 217 of the Labor Code, 8 or, contrarily, as the Company would have it, that under said contract Basiao's status was that of an independent
contractor whose claim was thus cognizable, not by the Labor Arbiter in a labor case, but by the regular courts in an ordinary civil action.

The Company's thesis, that no employer-employee relation in the legal and generally accepted sense existed between it and Basiao, is drawn from the
terms of the contract they had entered into, which, either expressly or by necessary implication, made Basiao the master of his own time and selling
methods, left to his judgment the time, place and means of soliciting insurance, set no accomplishment quotas and compensated him on the basis of
results obtained. He was not bound to observe any schedule of working hours or report to any regular station; he could seek and work on his
prospects anywhere and at anytime he chose to, and was free to adopt the selling methods he deemed most effective.

Without denying that the above were indeed the expressed implicit conditions of Basiao's contract with the Company, the respondents contend that
they do not constitute the decisive determinant of the nature of his engagement, invoking precedents to the effect that the critical feature
distinguishing the status of an employee from that of an independent contractor is control, that is, whether or not the party who engages the services
of another has the power to control the latter's conduct in rendering such services. Pursuing the argument, the respondents draw attention to the
provisions of Basiao's contract obliging him to "... observe and conform to all rules and regulations which the Company may from time to time
prescribe ...," as well as to the fact that the Company prescribed the qualifications of applicants for insurance, processed their applications and
determined the amounts of insurance cover to be issued as indicative of the control, which made Basiao, in legal contemplation, an employee of the
Company. 9

It is true that the "control test" expressed in the following pronouncement of the Court in the 1956 case of Viana vs. Alejo Al-Lagadan10

... In determining the existence of employer-employee relationship, the following elements are generally considered, namely: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employees' conduct — although
the latter is the most important element (35 Am. Jur. 445). ...

has been followed and applied in later cases, some fairly recent. 11 Indeed, it is without question a valid test of the character of a contract or
agreement to render service. It should, however, be obvious that not every form of control that the hiring party reserves to himself over the conduct
of the party hired in relation to the services rendered may be accorded the effect of establishing an employer-employee relationship between them in
the legal or technical sense of the term. A line must be drawn somewhere, if the recognized distinction between an employee and an individual
contractor is not to vanish altogether. Realistically, it would be a rare contract of service that gives untrammelled freedom to the party hired and
eschews any intervention whatsoever in his performance of the engagement.

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without
dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to
the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address
both the result and the means used to achieve it. The distinction acquires particular relevance in the case of an enterprise affected with public
interest, as is the business of insurance, and is on that account subject to regulation by the State with respect, not only to the relations between
insurer and insured but also to the internal affairs of the insurance company. 12 Rules and regulations governing the conduct of the business are
provided for in the Insurance Code and enforced by the Insurance Commissioner. It is, therefore, usual and expected for an insurance company to
promulgate a set of rules to guide its commission agents in selling its policies that they may not run afoul of the law and what it requires or prohibits.
Of such a character are the rules which prescribe the qualifications of persons who may be insured, subject insurance applications to processing and
approval by the Company, and also reserve to the Company the determination of the premiums to be paid and the schedules of payment. None of
these really invades the agent's contractual prerogative to adopt his own selling methods or to sell insurance at his own time and convenience, hence
cannot justifiably be said to establish an employer-employee relationship between him and the company.
There is no dearth of authority holding persons similarly placed as respondent Basiao to be independent contractors, instead of employees of the
parties for whom they worked. In Mafinco Trading Corporation vs. Ople, 13 the Court ruled that a person engaged to sell soft drinks for another, using
a truck supplied by the latter, but with the right to employ his own workers, sell according to his own methods subject only to prearranged routes,
observing no working hours fixed by the other party and obliged to secure his own licenses and defray his own selling expenses, all in consideration of
a peddler's discount given by the other party for at least 250 cases of soft drinks sold daily, was not an employee but an independent contractor.

In Investment Planning Corporation of the Philippines us. Social Security System 14 a case almost on all fours with the present one, this Court held
that there was no employer-employee relationship between a commission agent and an investment company, but that the former was an
independent contractor where said agent and others similarly placed were: (a) paid compensation in the form of commissions based on percentages
of their sales, any balance of commissions earned being payable to their legal representatives in the event of death or registration; (b) required to put
up performance bonds; (c) subject to a set of rules and regulations governing the performance of their duties under the agreement with the company
and termination of their services for certain causes; (d) not required to report for work at any time, nor to devote their time exclusively to working for
the company nor to submit a record of their activities, and who, finally, shouldered their own selling and transportation expenses.

More recently, in Sara vs. NLRC, 15 it was held that one who had been engaged by a rice miller to buy and sell rice and palay without compensation
except a certain percentage of what he was able to buy or sell, did work at his own pleasure without any supervision or control on the part of his
principal and relied on his own resources in the performance of his work, was a plain commission agent, an independent contractor and not an
employee.

The respondents limit themselves to pointing out that Basiao's contract with the Company bound him to observe and conform to such rules and
regulations as the latter might from time to time prescribe. No showing has been made that any such rules or regulations were in fact promulgated,
much less that any rules existed or were issued which effectively controlled or restricted his choice of methods — or the methods themselves — of
selling insurance. Absent such showing, the Court will not speculate that any exceptions or qualifications were imposed on the express provision of
the contract leaving Basiao "... free to exercise his own judgment as to the time, place and means of soliciting insurance."

The Labor Arbiter's decision makes reference to Basiao's claim of having been connected with the Company for twenty-five years. Whatever this is
meant to imply, the obvious reply would be that what is germane here is Basiao's status under the contract of July 2, 1968, not the length of his
relationship with the Company.

The Court, therefore, rules that under the contract invoked by him, Basiao was not an employee of the petitioner, but a commission agent, an
independent contractor whose claim for unpaid commissions should have been litigated in an ordinary civil action. The Labor Arbiter erred in taking
cognizance of, and adjudicating, said claim, being without jurisdiction to do so, as did the respondent NLRC in affirming the Arbiter's decision. This
conclusion renders it unnecessary and premature to consider Basiao's claim for commissions on its merits.

WHEREFORE, the appealed Resolution of the National Labor Relations Commission is set aside, and that complaint of private respondent Melecio T.
Basiao in RAB Case No. VI-0010-83 is dismissed. No pronouncement as to costs.

SO ORDERED.

Cruz, Gancayco, Griño-Aquino, and Medialdea, JJ., concur.

13.

Ashmor M. Tesoro, Pedro Ang and Gregorio Sharp v. Metro Manila Retreaders, Inc. (BANDAG) and/or Northern Luzon Retreaders, Inc (BANDAG)
and/or Power Tire and Rubber Corp. (BANDAG), G.R. No. 171482, March 12, 2014

♦ Decision, Abad [J]

♦ Dissenting Opinion, Leonen [J]

THIRD DIVISION

March 12, 2014

G.R. No. 171482

ASHMOR M. TESORO, PEDRO ANG and GREGORIO SHARP, Petitioners,

vs.

METRO MANILA RETREADERS, INC. (BANDAG) and/or NORTHERN LUZON RETREADERS, INC. (BANDAG) and/or POWER TIRE AND RUBBER CORP.
(BANDAG), Respondent.

DECISION

ABAD, J.:

This case concerns the effect on the status of employment of employees who entered into a Service Franchise Agreement with their employer.
The Facts and the Case

On various dates between 1991 and 1998, petitioners Ashmor M. Tesoro, Pedro Ang, and Gregorio Sharp used to work as salesmen for respondents
Metro Manila Retreaders, Inc., Northern Luzon Retreaders, Inc., or Power Tire and Rubber Corporation, apparently sister companies, collectively called
"Bandag." Bandag offered repair and retread services for used tires. In 1998, however, Bandag developed a franchising scheme that would enable
others to operate tire and retreading businesses using its trade name and service system.

Petitioners quit their jobs as salesmen and entered into separate Service Franchise Agreements (SFAs) with Bandag for the operation of their
respective franchises. Under the SFAs, Bandag would provide funding support to the petitioners subject to a regular or periodic liquidation of their
revolving funds. The expenses out of these funds would be deducted from petitioners’ sales to determine their incomes.

At first, petitioners managed and operated their respective franchises without any problem. After a length of time, however, they began to default on
their obligations to submit periodic liquidations of their operational expenses in relation to the revolving funds Bandag provided them. Consequently,
Bandag terminated their respective SFA.

Aggrieved, petitioners filed a complaint for constructive dismissal, non-payment of wages, incentive pay, 13th month pay and damages against Bandag
with the National Labor Relations Commission (NLRC). Petitioners contend that, notwithstanding the execution of the SFAs, they remained to be
Bandag’s employees, the SFAs being but a circumvention of their status as regular employees.

For its part, Bandag pointed out that petitioners freely resigned from their employment and decided to avail themselves of the opportunity to be
independent entrepreneurs under the franchise scheme that Bandag had. Thus, no employer-employee relationship existed between petitioners and
Bandag.

On March 14, 2003 the Labor Arbiter rendered a Decision, dismissing the complaint on the ground that no employer-employee relationship existed
between Bandag and petitioners. Upon petitioners’ appeal to the NLRC the latter affirmed on June 30, 2003 the Labor Arbiter’s Decision. It also denied
petitioners’ motion for reconsideration. Undaunted, petitioners filed a petition for certiorari under Rule 65 with the Court of Appeals (CA) ascribing
grave abuse of discretion. On July 29, 2005 the CA rendered a Decision,1 dismissing the petition for lack of merit. It also denied their motion for
reconsideration on February 7, 2006.

Issue of the Case

The only issue presented in this case is whether or not petitioners remained to be Bandag’s salesmen under the franchise scheme it entered into with
them.

Ruling of the Court

Franchising is a business method of expansion that allows an individual or group of individuals to market a product or a service and to use of the
patent, trademark, trade name and the systems prescribed by the owner.2 In this case, Bandag’s SFAs created on their faces an arrangement that gave
petitioners the privilege to operate and maintain Bandag branches in the way of franchises, providing tire repair and retreading services, with
petitioners earning profits based on the performance of their branches.

The question is: did petitioners remain to be Bandag’s employees after they began operating those branches? The tests for determining employer-
employee relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employer’s power to control the employee with respect to the means and methods by which the work is to be accomplished. The last is called the
"control test," the most important element.3

When petitioners agreed to operate Bandag’s franchise branches in different parts of the country, they knew that this substantially changed their
former relationships. They were to cease working as Bandag’s salesmen, the positions they occupied before they ventured into running separate
Bandag branches. They were to cease receiving salaries or commissions. Their incomes were to depend on the profits they made. Yet, petitioners did
not then complain of constructive dismissal. They took their chances, ran their branches, Gregorio Sharp in La Union for several months and Ashmor
Tesoro in Baguio and Pedro Ang in Pangasinan for over a year. Clearly, their belated claim of constructive dismissal is quite hollow.

It is pointed out that Bandag continued, like an employer, to exercise control over petitioners’ work. It points out that Bandag: (a) retained the right to
adjust the price rates of products and services; (b) imposed minimum processed tire requirement (MPR); (c) reviewed and regulated credit
applications; and (d) retained the power to suspend petitioners’ services for failure to meet service standards.

But uniformity in prices, quality of services, and good business practices are the essence of all franchises. A franchisee will damage the franchisor’s
business if he sells at different prices, renders different or inferior services, or engages in bad business practices. These business constraints are
needed to maintain collective responsibility for faultless and reliable service to the same class of customers for the same prices.

This is not the "control" contemplated in employer-employee relationships. Control in such relationships addresses the details of day to day work like
assigning the particular task that has to be done, monitoring the way tasks are done and their results, and determining the time during which the
employee must report for work or accomplish his assigned task.

Franchising involves the use of an established business expertise, trademark, knowledge, and training. As such, the franchisee is required to follow a
certain established system. Accordingly, the franchisors may impose guidelines that somehow restrict the petitioners’ conduct which do not
necessarily indicate "control." The important factor to consider is still the element of control over how the work itself is done, not just its end result.4

The Court held, in Tongko v. The Manufacturers Life Insurance Co. (Phils.), Inc.,5 that, results-wise, the insurance company, as principal, can impose
production quotas upon its independent agents and determine how many individual agents, with specific territories, such independent agents ought
to employ to achieve the company’s objectives. These are management policy decisions that the labor law element of control cannot reach.
Petitioners’ commitment to abide by Bandag’s policy decisions and implementing rules, as franchisees does not make them its employees.

Petitioners cannot use the revolving funds feature of the SFAs as evidence of their employer-employee relationship with Bandag.1âwphi1 These funds
do not represent wages. They are more in the nature of capital advances for operations that Bandag conceptualized to attract prospective franchisees.
Petitioners’ incomes depended on the profits they make, controlled by their individual abilities to increase sales and reduce operating costs.

The Labor Arbiter, the NLRC, and the CA, are unanimous that petitioners were no longer "route salesmen, bringing previously ordered supplies and
goods to dealers, taking back returned items, collecting payments, remitting them, etc. They were themselves then the dealers, getting their own
supply and bringing these to their own customers and sub- dealers, if any."

The rule in labor cases is that the findings of fact of quasi-judicial bodies, like the NLRC, are to be accorded with respect, even finality, if supported by
substantial evidence. This is particularly true when passed upon and upheld by the CA.6

WHEREFORE, the i:-'stant petition is DENIED. The Decision dated July 29, 2005 and Resolution dated February 7, 2006 of the Court of Appeals in CA-
G.R. SP 82447 are AFFIRMED.

SO ORDERED.

ROBERTO A. ABAD

Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.

Associate Justice

Chairperson

DISODADO M. PERALTA

Associate Justice JOSE PORTUGAL PEREZ*

Associate Justice

I dissent. See attached separate opinion.

MARVIC MARIO VICTOR F. LEONEN

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had n reached in consultation before the case was assigned to the writer of opinion of the Court's
Division.

PRESBITERO J. VELASCO, JR.

Associate Justice

Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I certify that the conclusions in the above Decision
had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice

14.

Republic of the Philippines

 SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 195190 July 28, 2014

ROYALE HOMES MARKETING CORPORATION, Petitioner,

vs.

FIDEL P. ALCANTARA [deceased], substituted by his heirs, Respondent.

DECISION

DEL CASTILLO, J.:

Not every form of control that a hiring party imposes on the hired party is indicative of employee-employer relationship. Rules and regulations that
merely serve as guidelines towards the achievement of a mutually desired result without dictating the means and methods of accomplishing it do not
establish employer-employee relationship.1

This Petition for Review on Certiorari2 assails the June 23, 2010 Decision3 of the Court of Appeals (CA) in CA-G.R. SP No. 109998 which (i) reversed and
set aside the February 23, 2009 Decision4 of the National Labor Relations Commission (NLRC), (ii) ordered petitioner Royale Homes Marketing
Corporation (Royale Homes) to pay respondent Fidel P. Alcantara (Alcantara) backwages and separation pay, and (iii) remanded the case to the Labor
Arbiter for the proper determination and computation of said monetary awards.

Also assailed in this Petition isthe January 18, 2011 Resolution5 of the CA denying Royale Homes’ Motion for Reconsideration,6 as well as its
Supplemental7 thereto.

Factual Antecedents

In 1994, Royale Homes, a corporation engaged in marketing real estates, appointed Alcantara asits Marketing Director for a fixed period of one year.
His work consisted mainly of marketing Royale Homes’ realestate inventories on an exclusive basis. Royale Homes reappointed him for several
consecutive years, the last of which covered the period January 1 to December 31, 2003 where he held the position of Division 5 Vice-President-
Sales.8

Proceedings before the Labor Arbiter

On December 17, 2003, Alcantara filed a Complaint for Illegal Dismissal9 against Royale Homes and its President Matilde Robles, Executive Vice-
President for Administration and Finance Ma. Melinda Bernardino, and Executive Vice- President for Sales Carmina Sotto. Alcantara alleged that he is
a regular employee of Royale Homes since he is performing tasks that are necessary and desirable to its business; that in 2003 the company gave him
₱1.2 million for the services he rendered to it; that in the first week of November 2003, however, the executive officers of Royale Homes told him that
they were wondering why he still had the gall to come to office and sit at his table;10 and that the actsof the executive officers of Royale Homes
amounted to his dismissal from work without any valid or just cause and in gross disregard of the proper procedure for dismissing employees. Thus,
he alsoimpleaded the corporate officers who, he averred, effected his dismissal in bad faith and in an oppressive manner.

Alcantara prayed to be reinstated tohis former position without loss of seniority rights and other privileges, as well as to be paid backwages, moral
and exemplary damages, and attorney’s fees. He further sought that the ownership of the Mitsubishi Adventure with Plate No. WHD-945 be
transferred to his name.

Royale Homes, on the other hand, vehemently denied that Alcantara is its employee. It argued that the appointment paper of Alcantara isclear that it
engaged his services as an independent sales contractorfor a fixed term of one year only. He never received any salary, 13th month pay, overtime pay
or holiday pay from Royale Homes as hewas paid purely on commission basis. In addition, Royale Homes had no control on how Alcantara would
accomplish his tasks and responsibilities as he was free to solicit sales at any time and by any manner which he may deem appropriateand necessary.
He is even free to recruit his own sales personnel to assist him in pursuance of his sales target.

According to Royale Homes, Alcantara decided to leave the company after his wife, who was once connectedwith it as a sales agent, had formed a
brokerage company that directly competed with its business, and even recruited some of its sales agents. Although this was against the exclusivity
clause of the contract, Royale Homes still offered to accept Alcantara’s wife back so she could continue to engage in real estate brokerage, albeit
exclusively for Royale Homes. In a special management committee meeting on October 8,2003, however, Alcantara announced publicly and openly
that he would leave the company by the end of October 2003 and that he would no longer finish the unexpired term of his contract. He has decided to
join his wifeand pursue their own brokerage business. Royale Homes accepted Alcantara’s decision. It then threw a despedidaparty in his honor and,
subsequently, appointed a new independent contractor. Two months after herelinquished his post, however, Alcantara appeared in Royale Homes and
submitted a letter claiming that he was illegally dismissed.

Ruling of the Labor Arbiter

On September 7, 2005,the Labor Arbiter rendered a Decision11 holding that Alcantara is an employee of Royale Homes with a fixed-term employment
period from January 1 to December 31, 2003 and that the pre-termination of his contract was against the law.Hence, Alcantara is entitled to an
amount which he may have earned on the average for the unexpired portion of the contract. With regard to the impleaded corporate officers, the
Labor Arbiter absolved them from any liability.

The dispositive portion of the Labor Arbiter’s Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent Royale Homes Marketing Corp. to pay the complainant the
total amount of TWO HUNDRED SEVENTY SEVEN THOUSAND PESOS (₱277,000.00) representing his compensation/commission for the unexpired term
of his contract.

All other claims are dismissed for lack of merit.

SO ORDERED.12

Both parties appealed the Labor Arbiter’s Decision to the NLRC. Royale Homes claimed that the Labor Arbiter grievously erred inruling that there
exists an employer-employee relationship between the parties. It insisted that the contract between them expressly statesthat Alcantara is an
independent contractor and not an ordinary employee. Ithad no control over the means and methods by which he performed his work. RoyaleHomes
likewise assailed the award of ₱277,000.00 for lack of basis as it did not pre-terminate the contract. It was Alcantara who chose not to finish the
contract.

Alcantara, for his part, argued that the Labor Arbiter erred in ruling that his employment was for a fixed-term and that he is not entitled to backwages,
reinstatement, unpaid commissions, and damages.

Ruling of the National LaborRelations Commission

On February 23, 2009, the NLRC rendered its Decision,13 ruling that Alcantara is not an employee but a mere independent contractor of Royale
Homes. It based its ruling mainly on the contract which does not require Alcantara to observe regular working hours. He was also free to adopt the
selling methods he deemed most effective and can even recruit sales agents to assist him in marketing the inventories of Royale Homes. The NLRC also
considered the fact that Alcantara was not receiving monthly salary, but was being paid on commission basis as stipulated in the contract. Being an
independent contractor, the NLRC concluded that Alcantara’s Complaint iscognizable by the regular courts.

The falloof the NLRC Decision reads:

WHEREFORE, premises considered, the Decision of Labor Arbiter Dolores Peralta-Beley dated September 5, 2005 is REVERSED and SET ASIDE and a
NEW ONE rendered dismissing the complaint for lack of jurisdiction.

SO ORDERED.14

Alcantara moved for reconsideration.15 In a Resolution16 dated May 29, 2009, however, the NLRC denied his motion.

Alcantara thus filed a Petition for Certiorari17 with the CA imputing grave abuse of discretion on the partof the NLRC in ruling that he is not an
employee of Royale Homes and that it is the regular courts which have jurisdiction over the issue of whether the pre-termination of the contract is
valid.

Ruling of the Court of Appeals

On June 23, 2010, the CA promulgated its Decision18 granting Alcantara’s Petition and reversing the NLRC’s Decision. Applying the four-fold and
economic reality tests, it held thatAlcantara is an employee of Royale Homes. Royale Homes exercised some degree of control over Alcantara since his
job, as observed by the CA, is subject to company rules, regulations, and periodic evaluations. He was also bound by the company code of ethics.
Moreover, the exclusivity clause of the contract has made Alcantara economically dependent on Royale Homes, supporting the theory that he is
anemployee of said company.

The CA further held that Alcantara’s termination from employment was without any valid or just cause, and it was carried out in violation of his right
to procedural due process. Thus, the CA ruled that he isentitled to backwages and separation pay, in lieu of reinstatement. Considering,however, that
the CA was not satisfied with the proofadduced to establish the amount of Alcantara’s annual salary, it remanded the caseto the Labor Arbiter to
determine the same and the monetary award he is entitled to. With regard to the corporate officers, the CA absolved them from any liability for want
of clear proof that they assented to the patently unlawful acts or that they are guilty of bad faith orgross negligence. Thus:

WHEREFORE, in view of the foregoing, the instant PETITION is GRANTED. The assailed decision of the National Labor Relations Commission in NLRC
NCR CASE NO. 00-12-14311-03 NLRC CA NO. 046104-05 dated February 23, 2009 as well as the Resolution dated May 29, 2009 are hereby SET ASIDE
and a new one is entered ordering the respondent company to pay petitioner backwages which shall be computed from the time of his illegal
termination in October 2003 up to the finality of this decision, plus separation pay equivalent to one month salary for every year of service. This case
is REMANDED to the Labor Arbiter for the proper determination and computation of back wages, separation pay and other monetary benefits that
petitioner is entitled to.

SO ORDERED.19

Royale Homes filed a Motion for Reconsideration20 and a Supplemental Motion for Reconsideration.21 In a Resolution22 dated January 18, 2011,
however, the CA denied said motions.
Issues

Hence, this Petition where Royale Homes submits before this Court the following issues for resolution:

A.

WHETHER THE COURT OF APPEALS HAS DECIDED THE INSTANT CASE NOT IN ACCORD WITH LAW AND APPLICABLE DECISIONS OF THE SUPREME
COURT WHEN IT REVERSED THE RULING OF THE NLRC DISMISSING THE COMPLAINT OF RESPONDENT FOR LACK OF JURISDICTION AND
CONSEQUENTLY, IN FINDING THAT RESPONDENT WAS ILLEGALLY DISMISSED[.]

B.

WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN DISREGARDING THE EN BANCRULING OF THIS HONORABLE COURT IN
THE CASEOF TONGKO VS. MANULIFE, AND IN BRUSHING ASIDE THE APPLICABLE RULINGS OF SONZA VS. ABS CBN AND CONSULTA V. CA[.]

C.

WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN DENYING THE MOTION FOR RECONSIDERATION OF PETITIONER AND IN
REFUSING TO CORRECT ITSELF[.]23

Royale Homes contends that its contract with Alcantara is clear and unambiguous −it engaged his services as an independent contractor. This can be
readily seen from the contract stating that no employer-employee relationship exists between the parties; that Alcantara was free to solicit sales at
any time and by any manner he may deem appropriate; that he may recruit sales personnel to assist him in marketing Royale Homes ’ inventories; and,
thathis remunerations are dependent on his sales performance.

Royale Homes likewise argues that the CA grievously erred in ruling that it exercised control over Alcantara based on a shallow ground that his
performance is subject to company rules and regulations, code of ethics, periodic evaluation, and exclusivity clause of contract. RoyaleHomes
maintains that it is expected to exercise some degree of control over its independent contractors,but that does not automatically result in the
existence ofemployer-employee relationship. For control to be consideredas a proof tending to establish employer-employee relationship, the same
mustpertain to the means and method of performing the work; not on the relationship of the independent contractors among themselves or their
persons or their source of living.

Royale Homes further asserts that it neither hired nor wielded the power to dismiss Alcantara. It was Alcantara who openly and publicly declared that
he was pre-terminating his fixed-term contract.

The pivotal issue to be resolved in this case is whether Alcantara was an independent contractor or anemployee of Royale Homes.

Our Ruling

The Petition is impressed with merit.

The determination of whether a party who renders services to another is an employee or an independent contractor involves an evaluation of factual
matters which, ordinarily, is not within the province of this Court. In view of the conflicting findings of the tribunals below, however, this Court is
constrained to go over the factual matters involved in this case.24

The juridical relationship of the parties based on their written contract

The primary evidence of the nature of the parties’ relationship in this case is the written contract that they signed and executed in pursuanceof their
mutual agreement. While the existence of employer-employee relationship is a matter of law, the characterization made by the parties in their
contract as to the nature of their juridical relationship cannot be simply ignored, particularly in this case where the parties’ written
contractunequivocally states their intention at the time they entered into it. In Tongko v. The Manufacturers LifeInsurance Co. (Phils.), Inc.,25 it was
held that:

To be sure, the Agreement’s legal characterization of the nature of the relationship cannot be conclusive and binding on the courts; x x x the
characterization of the juridical relationship the Agreement embodied is a matter of law that is for the courts to determine. At the same time, though,
the characterization the parties gave to their relationship in the Agreement cannot simply be brushed aside because it embodiestheir intent at the
time they entered the Agreement, and they were governed by this understanding throughout their relationship. At the very least, the provision on the
absence of employer- employee relationship between the parties can be an aid in considering the Agreement and its implementation, and in
appreciating the other evidence on record.26

In this case, the contract,27 duly signed and not disputed by the parties, conspicuously provides that "no employer-employee relationship exists
between" Royale Homes and Alcantara, as well as his sales agents. It is clear that they did not want to be bound by employer-employee relationship
atthe time ofthe signing of the contract. Thus:

January 24, 2003

MR. FIDEL P. ALCANTARA

13 Rancho I
Marikina City

Dear Mr. Alcantara,

This will confirm yourappointment as Division 5 VICE[-]PRESIDENTSALES of ROYALE HOMES MARKETING CORPORATION effective January 1, 2003 to
December 31, 2003.

Your appointment entails marketing our real estate inventories on an EXCLUSIVE BASIS under such price, terms and condition to be provided to you
from time to time.

As such, you can solicit sales at any time and by any manner which you deem appropriate and necessary to market our real estate inventories subject
to rules, regulations and code of ethics promulgated by the company. Further, you are free to recruit sales personnel/agents to assist you in marketing
of our inventories provided that your personnel/agents shall first attend the required seminars and briefing to be conducted by us from time to time
for the purpose of familiarizing them of terms and conditionsof sale, the natureof property sold, etc., attendance of which shall be a condition
precedent for their accreditation by us.

That as such Division 5 VICE[-]PRESIDENT-SALES you shall be entitled to:

1. Commission override of 0.5% for all option sales beginning January 1, 2003 booked by your sales agents.

2. Budget allocation depending on your division’s sale performance as per our budget guidelines.

3. Sales incentive and other forms of company support which may be granted from time to time. It is understood, however, that no employer-
employee relationship exists between us, that of your sales personnel/agents, and that you shall hold our company x x x, its officers and directors,
free and harmless from any and all claims of liability and damages arising from and/or incident to the marketing of our real estate inventories.

We reserve, however, our right to terminate this agreement in case of violation of any company rules and regulations, policies and code of ethics upon
notice for justifiable reason.

Your performance shall be subject toperiodic evaluation based on factors which shall be determined by the management.

If you are amenable to the foregoing terms and conditions, please indicate your conformity by signing on the space provided below and return [to] us
a duplicate copy of this letter, duly accomplished, to constitute as our agreement on the matter.(Emphasis ours)

Since "the terms of the contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of itsstipulations
should control."28 No construction is even needed asthey already expressly state their intention. Also, this Court adopts the observation of the NLRC
that it is rather strange on the part of Alcantara, an educated man and a veteran sales broker who claimed to be receiving ₱1.2 million as his annual
salary, not to have contested the portion of the contract expressly indicating that he is not an employee of Royale Homes if their true intention were
otherwise.

The juridical relationship of the parties based on Control Test

In determining the existence of an employer-employee relationship, this Court has generally relied on the four-fold test, to wit: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employer’s power to control the employee with
respect to the means and methods by which the work is to be accomplished.29 Among the four, the most determinative factor in ascertaining the
existence of employeremployee relationship is the "right of control test".30 "It is deemed to be such an important factor that the other requisites may
even be disregarded."31 This holds true where the issues to be resolved iswhether a person who performs work for another is the latter’s employee
or is an independent contractor,32 as in this case. For where the person for whom the services are performed reserves the right to control not only the
end to beachieved, but also the means by which such end is reached, employer-employee relationship is deemed to exist.33

In concluding that Alcantara is an employee of RoyaleHomes, the CA ratiocinated that since the performance of his tasks is subject to company rules,
regulations, code of ethics, and periodic evaluation, the element of control is present.

The Court disagrees.

Not every form of control is indicative of employer-employee relationship.1âwphi1 A person who performs work for another and is subjected to its
rules, regulations, and code of ethics does not necessarily become an employee.34 As long as the level of control does not interfere with the means
and methods of accomplishing the assigned tasks, the rules imposed by the hiring party on the hired party do not amount to the labor law concept of
control that is indicative of employer-employee relationship. In Insular Life Assurance Co., Ltd. v. National Labor Relations Commission35 it was
pronounced that:

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without
dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to
the use of such means. The first, which aim only to promote the result, create no employeremployee relationship unlike the second, which address
both the result and the means used to achieve it. x x x36

In this case, the Court agrees with Royale Homes that the rules, regulations, code of ethics, and periodic evaluation alluded to byAlcantara do not
involve control over the means and methods by which he was to performhis job. Understandably, Royale Homes has to fix the price, impose
requirements on prospective buyers, and lay down the terms and conditionsof the sale, including the mode of payment, which the independent
contractors must follow. It is also necessary for Royale Homes to allocateits inventories among its independent contractors, determine who has
priority in selling the same, grant commission or allowance based on predetermined criteria, and regularly monitor the result of their marketing and
sales efforts. But tothe mind of this Court, these do not pertain to the means and methods of how Alcantara was to perform and accomplish his task
of soliciting sales. They do not dictate upon him the details of how he would solicit sales or the manner as to how he would transact business with
prospective clients. In Tongko, this Court held that guidelines or rules and regulations that do notpertain to the means or methodsto be employed in
attaining the result are not indicative of control as understood inlabor law. Thus:

From jurisprudence, an important lesson that the first Insular Lifecase teaches us is that a commitment to abide by the rules and regulations of an
insurance company does not ipso factomake the insurance agent an employee. Neither do guidelines somehow restrictive of the insurance agent’s
conduct necessarily indicate "control" as this term is defined in jurisprudence. Guidelines indicative of labor law "control," as the first Insular Lifecase
tells us, should not merely relate to the mutually desirable result intended by the contractual relationship; they must have the nature of dictating the
means or methods to beemployed in attaining the result, or of fixing the methodology and of binding or restricting the party hired to the use of these
means.In fact, results-wise, the principal can impose production quotas and can determine how many agents, with specific territories, ought to be
employed to achieve the company’s objectives. These are management policy decisions that the labor law element of control cannot reach. Our ruling
in these respects in the first Insular Lifecase was practically reiterated in Carungcong. Thus, as will be shown more fully below, Manulife’s codes of
conduct, all of which do not intrude into the insurance agents’ means and manner of conducting their sales and only control them as to the desired
results and Insurance Code norms, cannot be used as basis for a finding that the labor law concept of control existed between Manulife and Tongko.37
(Emphases in the original)

As the party claiming the existence of employer-employee relationship, it behoved upon Alcantara to prove the elements thereof, particularly Royale
Homes’ power of control over the means and methods of accomplishing the work.38 He, however, failed to cite specificrules, regulations or codes of
ethics that supposedly imposed control on his means and methods of soliciting sales and dealing with prospective clients. On the other hand, this case
is replete with instances that negate the element of control and the existence of employer-employee relationship. Notably, Alcantara was not required
to observe definite working hours.39 Except for soliciting sales, RoyaleHomes did not assign other tasks to him. He had full control over the means
and methods of accomplishing his tasks as he can "solicit sales at any time and by any manner which [he may] deem appropriate and necessary." He
performed his tasks on his own account free from the control and direction of Royale Homes in all matters connected therewith, except as to the
results thereof.40

Neither does the repeated hiring of Alcantara prove the existence of employer-employee relationship.41 As discussed above, the absence of control
over the means and methodsdisproves employer-employee relationship. The continuous rehiring of Alcantara simply signifies the renewal of his
contract with Royale Homes, and highlights his satisfactory services warranting the renewal of such contract. Nor does the exclusivity clause of
contract establish the existence of the labor law concept of control. In Consulta v. Court of Appeals,42 it was held that exclusivity of contract does not
necessarily result in employer-employee relationship, viz:

x x x However, the fact that the appointment required Consulta to solicit business exclusively for Pamana did not mean that Pamana exercised control
over the means and methods of Consulta’s work as the term control is understood in labor jurisprudence. Neither did it make Consulta an employee
of Pamana. Pamana did not prohibit Consulta from engaging in any other business, or from being connected with any other company, for aslong as the
business [of the] company did not compete with Pamana’s business.43

The same scenario obtains in this case. Alcantara was not prohibited from engaging in any other business as long as he does not sell projects of Royale
Homes’ competitors. He can engage in selling various other products or engage in unrelated businesses.

Payment of Wages

The element of payment of wages is also absent in thiscase. As provided in the contract, Alcantara’s remunerations consist only of commission
override of 0.5%, budget allocation, sales incentive and other forms of company support. There is no proof that he received fixed monthly salary. No
payslip or payroll was ever presented and there is no proof that Royale Homes deducted from his supposed salary withholding tax or that it registered
him with the Social Security System, Philippine Health Insurance Corporation, or Pag-Ibig Fund. In fact, his Complaint merely states a ballpark figure of
his alleged salary of ₱100,000.00, more or less. All of these indicate an independent contractual relationship.44 Besides, if Alcantara indeed
consideredhimself an employee of Royale Homes, then he, an experienced and professional broker, would have complained that he was being denied
statutorily mandated benefits. But for nine consecutive years, he kept mum about it, signifying that he has agreed, consented, and accepted the fact
that he is not entitled tothose employee benefits because he is an independent contractor.

This Court is, therefore,convinced that Alcantara is not an employee of Royale Homes, but a mere independent contractor. The NLRC is, therefore,
correct in concluding that the Labor Arbiter has no jurisdiction over the case and that the same is cognizable by the regular courts.

WHEREFORE, the instant Petition is hereby GRANTED. The June 23, 2010 Decision of the Court of Appeals in CA-G.R. SP No. 109998 is REVERSED and
SET ASIDE. The February 23, 2009 Decision of the National Labor Relations Commission is REINSTATED and AFFIRMED. SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO

Associate Justice
Chairperson

ARTURO D. BRION

Associate Justice JOSE PORTUGAL PEREZ

Associate Justice

ESTELA M. PERLAS-BERNABE

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the
Court's Division.

ANTONIO T. CARPIO

Associate Justice

Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I certify that the conclusions in the above Decision
had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice

15.

FIRST DIVISION

[G.R. No. 138051. June 10, 2004]

JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING CORPORATION, respondent.

DECISION

CARPIO, J.:

The Case

Before this Court is a petition for review on certiorari[1] assailing the 26 March 1999 Decision[2] of the Court of Appeals in CA-G.R. SP No. 49190
dismissing the petition filed by Jose Y. Sonza (SONZA). The Court of Appeals affirmed the findings of the National Labor Relations Commission
(NLRC), which affirmed the Labor Arbiters dismissal of the case for lack of jurisdiction.

The Facts

In May 1994, respondent ABS-CBN Broadcasting Corporation (ABS-CBN) signed an Agreement (Agreement) with the Mel and Jay Management and
Development Corporation (MJMDC). ABS-CBN was represented by its corporate officers while MJMDC was represented by SONZA, as President and
General Manager, and Carmela Tiangco (TIANGCO), as EVP and Treasurer. Referred to in the Agreement as AGENT, MJMDC agreed to provide
SONZAs services exclusively to ABS-CBN as talent for radio and television. The Agreement listed the services SONZA would render to ABS-CBN, as
follows:

a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;

b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.[3]

ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the first year and P317,000 for the second and third year of the
Agreement. ABS-CBN would pay the talent fees on the 10th and 25th days of the month.

On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III, which reads:

Dear Mr. Lopez,

We would like to call your attention to the Agreement dated May 1994 entered into by your goodself on behalf of ABS-CBN with our company
relative to our talent JOSE Y. SONZA.

As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his programs and career. We consider these acts of the
station violative of the Agreement and the station as in breach thereof. In this connection, we hereby serve notice of rescission of said Agreement at
our instance effective as of date.

Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount stipulated in paragraph 7 of the Agreement but reserves
the right to seek recovery of the other benefits under said Agreement.

Thank you for your attention.

Very truly yours,

(Sgd.)

JOSE Y. SONZA

President and Gen. Manager[4]

On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor and Employment, National Capital Region in Quezon
City. SONZA complained that ABS-CBN did not pay his salaries, separation pay, service incentive leave pay, 13th month pay, signing bonus, travel
allowance and amounts due under the Employees Stock Option Plan (ESOP).

On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship existed between the parties. SONZA
filed an Opposition to the motion on 19 July 1996.

Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his account at PCIBank, Quezon Avenue Branch, Quezon City. In July
1996, ABS-CBN opened a new account with the same bank where ABS-CBN deposited SONZAs talent fees and other payments due him under the
Agreement.

In his Order dated 2 December 1996, the Labor Arbiter[5] denied the motion to dismiss and directed the parties to file their respective position
papers. The Labor Arbiter ruled:

In this instant case, complainant for having invoked a claim that he was an employee of respondent company until April 15, 1996 and that he was
not paid certain claims, it is sufficient enough as to confer jurisdiction over the instant case in this Office. And as to whether or not such claim would
entitle complainant to recover upon the causes of action asserted is a matter to be resolved only after and as a result of a hearing. Thus, the
respondents plea of lack of employer-employee relationship may be pleaded only as a matter of defense. It behooves upon it the duty to prove that
there really is no employer-employee relationship between it and the complainant.

The Labor Arbiter then considered the case submitted for resolution. The parties submitted their position papers on 24 February 1997.

On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with Motion to Expunge Respondents Annex 4 and Annex 5 from the
Records. Annexes 4 and 5 are affidavits of ABS-CBNs witnesses Soccoro Vidanes and Rolando V. Cruz. These witnesses stated in their affidavits that
the prevailing practice in the television and broadcast industry is to treat talents like SONZA as independent contractors.

The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of jurisdiction.[6] The pertinent parts of the decision
read as follows:

xxx

While Philippine jurisprudence has not yet, with certainty, touched on the true nature of the contract of a talent, it stands to reason that a talent as
above-described cannot be considered as an employee by reason of the peculiar circumstances surrounding the engagement of his services.

It must be noted that complainant was engaged by respondent by reason of his peculiar skills and talent as a TV host and a radio broadcaster.
Unlike an ordinary employee, he was free to perform the services he undertook to render in accordance with his own style. The benefits conferred
to complainant under the May 1994 Agreement are certainly very much higher than those generally given to employees. For one, complainant
Sonzas monthly talent fees amount to a staggering P317,000. Moreover, his engagement as a talent was covered by a specific contract. Likewise, he
was not bound to render eight (8) hours of work per day as he worked only for such number of hours as may be necessary.

The fact that per the May 1994 Agreement complainant was accorded some benefits normally given to an employee is inconsequential. Whatever
benefits complainant enjoyed arose from specific agreement by the parties and not by reason of employer-employee relationship. As correctly put
by the respondent, All these benefits are merely talent fees and other contractual benefits and should not be deemed as salaries, wages and/or
other remuneration accorded to an employee, notwithstanding the nomenclature appended to these benefits. Apropos to this is the rule that the
term or nomenclature given to a stipulated benefit is not controlling, but the intent of the parties to the Agreement conferring such benefit.

The fact that complainant was made subject to respondents Rules and Regulations, likewise, does not detract from the absence of employer-
employee relationship. As held by the Supreme Court, The line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-
employee relationship unlike the second, which address both the result and the means to achieve it. (Insular Life Assurance Co., Ltd. vs. NLRC, et al.,
G.R. No. 84484, November 15, 1989).

x x x (Emphasis supplied)[7]

SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the Labor Arbiters decision. SONZA filed a motion for
reconsideration, which the NLRC denied in its Resolution dated 3 July 1998.

On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals assailing the decision and resolution of the NLRC. On
26 March 1999, the Court of Appeals rendered a Decision dismissing the case.[8]

Hence, this petition.

The Rulings of the NLRC and Court of Appeals

The Court of Appeals affirmed the NLRCs finding that no employer-employee relationship existed between SONZA and ABS-CBN. Adopting the
NLRCs decision, the appellate court quoted the following findings of the NLRC:

x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as an agent of complainant Sonza, the principal. By
all indication and as the law puts it, the act of the agent is the act of the principal itself. This fact is made particularly true in this case, as admittedly
MJMDC is a management company devoted exclusively to managing the careers of Mr. Sonza and his broadcast partner, Mrs. Carmela C. Tiangco.
(Opposition to Motion to Dismiss)

Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC, and not between ABS-CBN and MJMDC. This is
clear from the provisions of the May 1994 Agreement which specifically referred to MJMDC as the AGENT. As a matter of fact, when complainant
herein unilaterally rescinded said May 1994 Agreement, it was MJMDC which issued the notice of rescission in behalf of Mr. Sonza, who himself
signed the same in his capacity as President.

Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically, the parties to the said agreements are ABS-CBN and
Mr. Sonza. And it is only in the May 1994 Agreement, which is the latest Agreement executed between ABS-CBN and Mr. Sonza, that MJMDC figured
in the said Agreement as the agent of Mr. Sonza.

We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABS-CBN such that there exist[s] employer-employee relationship
between the latter and Mr. Sonza. On the contrary, We find it indubitable, that MJMDC is an agent, not of ABS-CBN, but of the talent/contractor
Mr. Sonza, as expressly admitted by the latter and MJMDC in the May 1994 Agreement.

It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the regular courts, the same being in the nature of an
action for alleged breach of contractual obligation on the part of respondent-appellee. As squarely apparent from complainant-appellants Position
Paper, his claims for compensation for services, 13th month pay, signing bonus and travel allowance against respondent-appellee are not based on
the Labor Code but rather on the provisions of the May 1994 Agreement, while his claims for proceeds under Stock Purchase Agreement are based
on the latter. A portion of the Position Paper of complainant-appellant bears perusal:

Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound itself to pay complainant a signing bonus consisting of
shares of stockswith FIVE HUNDRED THOUSAND PESOS (P500,000.00).

Similarly, complainant is also entitled to be paid 13th month pay based on an amount not lower than the amount he was receiving prior to
effectivity of (the) Agreement.

Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travel benefit amounting to at least One Hundred Fifty
Thousand Pesos (P150,000.00) per year.

Thus, it is precisely because of complainant-appellants own recognition of the fact that his contractual relations with ABS-CBN are founded on the
New Civil Code, rather than the Labor Code, that instead of merely resigning from ABS-CBN, complainant-appellant served upon the latter a notice
of rescission of Agreement with the station, per his letter dated April 1, 1996, which asserted that instead of referring to unpaid employee benefits,
he is waiving and renouncing recovery of the remaining amount stipulated in paragraph 7 of the Agreement but reserves the right to such recovery
of the other benefits under said Agreement. (Annex 3 of the respondent ABS-CBNs Motion to Dismiss dated July 10, 1996).

Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the Stock Purchase Agreement by respondent-
appellee that complainant-appellant filed his complaint. Complainant-appellants claims being anchored on the alleged breach of contract on the
part of respondent-appellee, the same can be resolved by reference to civil law and not to labor law. Consequently, they are within the realm of
civil law and, thus, lie with the regular courts. As held in the case of Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21 November
1994, an action for breach of contractual obligation is intrinsically a civil dispute.[9] (Emphasis supplied)

The Court of Appeals ruled that the existence of an employer-employee relationship between SONZA and ABS-CBN is a factual question that is
within the jurisdiction of the NLRC to resolve.[10] A special civil action for certiorari extends only to issues of want or excess of jurisdiction of the
NLRC.[11] Such action cannot cover an inquiry into the correctness of the evaluation of the evidence which served as basis of the NLRCs conclusion.
[12] The Court of Appeals added that it could not re-examine the parties evidence and substitute the factual findings of the NLRC with its own.[13]
The Issue

In assailing the decision of the Court of Appeals, SONZA contends that:

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS DECISION AND REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE
RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN, DESPITE THE WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO SUPPORT
SUCH A FINDING.[14]

The Courts Ruling

We affirm the assailed decision.

No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming the NLRC ruling which upheld the Labor Arbiters
dismissal of the case for lack of jurisdiction.

The present controversy is one of first impression. Although Philippine labor laws and jurisprudence define clearly the elements of an employer-
employee relationship, this is the first time that the Court will resolve the nature of the relationship between a television and radio station and one
of its talents. There is no case law stating that a radio and television program host is an employee of the broadcast station.

The instant case involves big names in the broadcast industry, namely Jose Jay Sonza, a known television and radio personality, and ABS-CBN, one of
the biggest television and radio networks in the country.

SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee of ABS-CBN. On the other hand, ABS-CBN insists
that the Labor Arbiter has no jurisdiction because SONZA was an independent contractor.

Employee or Independent Contractor?

The existence of an employer-employee relationship is a question of fact. Appellate courts accord the factual findings of the Labor Arbiter and the
NLRC not only respect but also finality when supported by substantial evidence.[15] Substantial evidence means such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion.[16] A party cannot prove the absence of substantial evidence by simply
pointing out that there is contrary evidence on record, direct or circumstantial. The Court does not substitute its own judgment for that of the
tribunal in determining where the weight of evidence lies or what evidence is credible.[17]

SONZA maintains that all essential elements of an employer-employee relationship are present in this case. Case law has consistently held that the
elements of an employer-employee relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power
of dismissal; and (d) the employers power to control the employee on the means and methods by which the work is accomplished.[18] The last
element, the so-called control test, is the most important element.[19]

A. Selection and Engagement of Employee

ABS-CBN engaged SONZAs services to co-host its television and radio programs because of SONZAs peculiar skills, talent and celebrity status. SONZA
contends that the discretion used by respondent in specifically selecting and hiring complainant over other broadcasters of possibly similar
experience and qualification as complainant belies respondents claim of independent contractorship.

Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from ordinary employees. The
specific selection and hiring of SONZA, because of his unique skills, talent and celebrity status not possessed by ordinary employees, is a
circumstance indicative, but not conclusive, of an independent contractual relationship. If SONZA did not possess such unique skills, talent and
celebrity status, ABS-CBN would not have entered into the Agreement with SONZA but would have hired him through its personnel department just
like any other employee.

In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must consider all the circumstances of
the relationship, with the control test being the most important element.

B. Payment of Wages

ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that this mode of fee payment shows
that he was an employee of ABS-CBN. SONZA also points out that ABS-CBN granted him benefits and privileges which he would not have enjoyed if
he were truly the subject of a valid job contract.

All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA were ABS-CBNs employee, there
would be no need for the parties to stipulate on benefits such as SSS, Medicare, x x x and 13th month pay[20] which the law automatically
incorporates into every employer-employee contract.[21] Whatever benefits SONZA enjoyed arose from contract and not because of an employer-
employee relationship.[22]

SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so huge and out of the ordinary that they indicate more an
independent contractual relationship rather than an employer-employee relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely
because of SONZAs unique skills, talent and celebrity status not possessed by ordinary employees. Obviously, SONZA acting alone possessed enough
bargaining power to demand and receive such huge talent fees for his services. The power to bargain talent fees way above the salary scales of
ordinary employees is a circumstance indicative, but not conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an independent contractor. The parties
expressly agreed on such mode of payment. Under the Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would have to turn over any
talent fee accruing under the Agreement.

C. Power of Dismissal

For violation of any provision of the Agreement, either party may terminate their relationship. SONZA failed to show that ABS-CBN could terminate
his services on grounds other than breach of contract, such as retrenchment to prevent losses as provided under labor laws.[23]

During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as long as AGENT and Jay Sonza shall faithfully and completely perform
each condition of this Agreement.[24] Even if it suffered severe business losses, ABS-CBN could not retrench SONZA because ABS-CBN remained
obligated to pay SONZAs talent fees during the life of the Agreement. This circumstance indicates an independent contractual relationship between
SONZA and ABS-CBN.

SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him his talent fees. Plainly, ABS-CBN adhered to its
undertaking in the Agreement to continue paying SONZAs talent fees during the remaining life of the Agreement even if ABS-CBN cancelled SONZAs
programs through no fault of SONZA.[25]

SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement as an admission that he is not an employee of ABS-CBN. The
Labor Arbiter stated that if it were true that complainant was really an employee, he would merely resign, instead. SONZA did actually resign from
ABS-CBN but he also, as president of MJMDC, rescinded the Agreement. SONZAs letter clearly bears this out.[26] However, the manner by which
SONZA terminated his relationship with ABS-CBN is immaterial. Whether SONZA rescinded the Agreement or resigned from work does not
determine his status as employee or independent contractor.

D. Power of Control

Since there is no local precedent on whether a radio and television program host is an employee or an independent contractor, we refer to foreign
case law in analyzing the present case. The United States Court of Appeals, First Circuit, recently held in Alberty-Vlez v. Corporacin De Puerto Rico
Para La Difusin Pblica (WIPR)[27] that a television program host is an independent contractor. We quote the following findings of the U.S. court:

Several factors favor classifying Alberty as an independent contractor. First, a television actress is a skilled position requiring talent and training not
available on-the-job. x x x In this regard, Alberty possesses a masters degree in public communications and journalism; is trained in dance, singing,
and modeling; taught with the drama department at the University of Puerto Rico; and acted in several theater and television productions prior to
her affiliation with Desde Mi Pueblo. Second, Alberty provided the tools and instrumentalities necessary for her to perform. Specifically, she
provided, or obtained sponsors to provide, the costumes, jewelry, and other image-related supplies and services necessary for her appearance.
Alberty disputes that this factor favors independent contractor status because WIPR provided the equipment necessary to tape the show. Albertys
argument is misplaced. The equipment necessary for Alberty to conduct her job as host of Desde Mi Pueblo related to her appearance on the show.
Others provided equipment for filming and producing the show, but these were not the primary tools that Alberty used to perform her particular
function. If we accepted this argument, independent contractors could never work on collaborative projects because other individuals often provide
the equipment required for different aspects of the collaboration. x x x

Third, WIPR could not assign Alberty work in addition to filming Desde Mi Pueblo. Albertys contracts with WIPR specifically provided that WIPR
hired her professional services as Hostess for the Program Desde Mi Pueblo. There is no evidence that WIPR assigned Alberty tasks in addition to
work related to these tapings. x x x[28] (Emphasis supplied)

Applying the control test to the present case, we find that SONZA is not an employee but an independent contractor. The control test is the most
important test our courts apply in distinguishing an employee from an independent contractor.[29] This test is based on the extent of control the
hirer exercises over a worker. The greater the supervision and control the hirer exercises, the more likely the worker is deemed an employee. The
converse holds true as well the less control the hirer exercises, the more likely the worker is considered an independent contractor.[30]

First, SONZA contends that ABS-CBN exercised control over the means and methods of his work.

SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically to co-host the Mel & Jay programs. ABS-CBN did not assign any other
work to SONZA. To perform his work, SONZA only needed his skills and talent. How SONZA delivered his lines, appeared on television, and sounded
on radio were outside ABS-CBNs control. SONZA did not have to render eight hours of work per day. The Agreement required SONZA to attend only
rehearsals and tapings of the shows, as well as pre- and post-production staff meetings.[31] ABS-CBN could not dictate the contents of SONZAs
script. However, the Agreement prohibited SONZA from criticizing in his shows ABS-CBN or its interests.[32] The clear implication is that SONZA had
a free hand on what to say or discuss in his shows provided he did not attack ABS-CBN or its interests.

We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZAs work.[33] ABS-CBN did not
instruct SONZA how to perform his job. ABS-CBN merely reserved the right to modify the program format and airtime schedule for more effective
programming.[34] ABS-CBNs sole concern was the quality of the shows and their standing in the ratings. Clearly, ABS-CBN did not exercise control
over the means and methods of performance of SONZAs work.

SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs power over the means and methods of the performance of his
work. Although ABS-CBN did have the option not to broadcast SONZAs show, ABS-CBN was still obligated to pay SONZAs talent fees. Thus, even if
ABS-CBN was completely dissatisfied with the means and methods of SONZAs performance of his work, or even with the quality or product of his
work, ABS-CBN could not dismiss or even discipline SONZA. All that ABS-CBN could do is not to broadcast SONZAs show but ABS-CBN must still pay
his talent fees in full.[35]
Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the obligation to continue paying in full SONZAs talent fees, did not
amount to control over the means and methods of the performance of SONZAs work. ABS-CBN could not terminate or discipline SONZA even if the
means and methods of performance of his work - how he delivered his lines and appeared on television - did not meet ABS-CBNs approval. This
proves that ABS-CBNs control was limited only to the result of SONZAs work, whether to broadcast the final product or not. In either case, ABS-CBN
must still pay SONZAs talent fees in full until the expiry of the Agreement.

In Vaughan, et al. v. Warner, et al.,[36] the United States Circuit Court of Appeals ruled that vaudeville performers were independent contractors
although the management reserved the right to delete objectionable features in their shows. Since the management did not have control over the
manner of performance of the skills of the artists, it could only control the result of the work by deleting objectionable features.[37]

SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and crew. No doubt, ABS-CBN supplied the
equipment, crew and airtime needed to broadcast the Mel & Jay programs. However, the equipment, crew and airtime are not the tools and
instrumentalities SONZA needed to perform his job. What SONZA principally needed were his talent or skills and the costumes necessary for his
appearance. [38] Even though ABS-CBN provided SONZA with the place of work and the necessary equipment, SONZA was still an independent
contractor since ABS-CBN did not supervise and control his work. ABS-CBNs sole concern was for SONZA to display his talent during the airing of the
programs.[39]

A radio broadcast specialist who works under minimal supervision is an independent contractor.[40] SONZAs work as television and radio program
host required special skills and talent, which SONZA admittedly possesses. The records do not show that ABS-CBN exercised any supervision and
control over how SONZA utilized his skills and talent in his shows.

Second, SONZA urges us to rule that he was ABS-CBNs employee because ABS-CBN subjected him to its rules and standards of performance. SONZA
claims that this indicates ABS-CBNs control not only [over] his manner of work but also the quality of his work.

The Agreement stipulates that SONZA shall abide with the rules and standards of performance covering talents[41] of ABS-CBN. The Agreement
does not require SONZA to comply with the rules and standards of performance prescribed for employees of ABS-CBN. The code of conduct
imposed on SONZA under the Agreement refers to the Television and Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has
been adopted by the COMPANY (ABS-CBN) as its Code of Ethics.[42] The KBP code applies to broadcasters, not to employees of radio and television
stations. Broadcasters are not necessarily employees of radio and television stations. Clearly, the rules and standards of performance referred to in
the Agreement are those applicable to talents and not to employees of ABS-CBN.

In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the former.[43] In this case,
SONZA failed to show that these rules controlled his performance. We find that these general rules are merely guidelines towards the achievement
of the mutually desired result, which are top-rating television and radio programs that comply with standards of the industry. We have ruled that:

Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the services being rendered may
be accorded the effect of establishing an employer-employee relationship. The facts of this case fall squarely with the case of Insular Life Assurance
Co., Ltd. vs. NLRC. In said case, we held that:

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without
dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to
the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address
both the result and the means used to achieve it.[44]

The Vaughan case also held that one could still be an independent contractor although the hirer reserved certain supervision to insure the
attainment of the desired result. The hirer, however, must not deprive the one hired from performing his services according to his own initiative.
[45]

Lastly, SONZA insists that the exclusivity clause in the Agreement is the most extreme form of control which ABS-CBN exercised over him.

This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an employee of ABS-CBN. Even an independent contractor
can validly provide his services exclusively to the hiring party. In the broadcast industry, exclusivity is not necessarily the same as control.

The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry.[46] This practice is not designed to control the
means and methods of work of the talent, but simply to protect the investment of the broadcast station. The broadcast station normally spends
substantial amounts of money, time and effort in building up its talents as well as the programs they appear in and thus expects that said talents
remain exclusive with the station for a commensurate period of time.[47] Normally, a much higher fee is paid to talents who agree to work
exclusively for a particular radio or television station. In short, the huge talent fees partially compensates for exclusivity, as in the present case.

MJMDC as Agent of SONZA

SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which contracted out his services to ABS-CBN. The Labor Arbiter ruled that
as a talent of MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists that MJMDC is a labor-only contractor and ABS-CBN is his employer.

In a labor-only contract, there are three parties involved: (1) the labor-only contractor; (2) the employee who is ostensibly under the employ of
the labor-only contractor; and (3) the principal who is deemed the real employer. Under this scheme, the labor-only contractor is the agent of the
principal. The law makes the principal responsible to the employees of the labor-only contractor as if the principal itself directly hired or employed
the employees.[48] These circumstances are not present in this case.
There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-CBN. MJMDC merely acted as SONZAs agent. The
Agreement expressly states that MJMDC acted as the AGENT of SONZA. The records do not show that MJMDC acted as ABS-CBNs agent. MJMDC,
which stands for Mel and Jay Management and Development Corporation, is a corporation organized and owned by SONZA and TIANGCO. The
President and General Manager of MJMDC is SONZA himself. It is absurd to hold that MJMDC, which is owned, controlled, headed and managed by
SONZA, acted as agent of ABS-CBN in entering into the Agreement with SONZA, who himself is represented by MJMDC. That would make MJMDC
the agent of both ABS-CBN and SONZA.

As SONZA admits, MJMDC is a management company devoted exclusively to managing the careers of SONZA and his broadcast partner, TIANGCO.
MJMDC is not engaged in any other business, not even job contracting. MJMDC does not have any other function apart from acting as agent of
SONZA or TIANGCO to promote their careers in the broadcast and television industry.[49]

Policy Instruction No. 40

SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8 January 1979 finally settled the status of workers in the
broadcast industry. Under this policy, the types of employees in the broadcast industry are the station and program employees.

Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of law. There is no legal presumption that Policy
Instruction No. 40 determines SONZAs status. A mere executive issuance cannot exclude independent contractors from the class of service providers
to the broadcast industry. The classification of workers in the broadcast industry into only two groups under Policy Instruction No. 40 is not binding
on this Court, especially when the classification has no basis either in law or in fact.

Affidavits of ABS-CBNs Witnesses

SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando Cruz without giving his counsel the opportunity to
cross-examine these witnesses. SONZA brands these witnesses as incompetent to attest on the prevailing practice in the radio and television
industry. SONZA views the affidavits of these witnesses as misleading and irrelevant.

While SONZA failed to cross-examine ABS-CBNs witnesses, he was never prevented from denying or refuting the allegations in the affidavits. The
Labor Arbiter has the discretion whether to conduct a formal (trial-type) hearing after the submission of the position papers of the parties, thus:

Section 3. Submission of Position Papers/Memorandum

xxx

These verified position papers shall cover only those claims and causes of action raised in the complaint excluding those that may have been
amicably settled, and shall be accompanied by all supporting documents including the affidavits of their respective witnesses which shall take the
place of the latters direct testimony. x x x

Section 4. Determination of Necessity of Hearing. Immediately after the submission of the parties of their position papers/memorandum, the Labor
Arbiter shall motu propio determine whether there is need for a formal trial or hearing. At this stage, he may, at his discretion and for the purpose
of making such determination, ask clarificatory questions to further elicit facts or information, including but not limited to the subpoena of relevant
documentary evidence, if any from any party or witness.[50]

The Labor Arbiter can decide a case based solely on the position papers and the supporting documents without a formal trial.[51] The holding of a
formal hearing or trial is something that the parties cannot demand as a matter of right.[52] If the Labor Arbiter is confident that he can rely on the
documents before him, he cannot be faulted for not conducting a formal trial, unless under the particular circumstances of the case, the documents
alone are insufficient. The proceedings before a Labor Arbiter are non-litigious in nature. Subject to the requirements of due process, the
technicalities of law and the rules obtaining in the courts of law do not strictly apply in proceedings before a Labor Arbiter.

Talents as Independent Contractors

ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries to treat talents like SONZA as independent
contractors. SONZA argues that if such practice exists, it is void for violating the right of labor to security of tenure.

The right of labor to security of tenure as guaranteed in the Constitution[53] arises only if there is an employer-employee relationship under labor
laws. Not every performance of services for a fee creates an employer-employee relationship. To hold that every person who renders services to
another for a fee is an employee - to give meaning to the security of tenure clause - will lead to absurd results.

Individuals with special skills, expertise or talent enjoy the freedom to offer their services as independent contractors. The right to life and livelihood
guarantees this freedom to contract as independent contractors. The right of labor to security of tenure cannot operate to deprive an individual,
possessed with special skills, expertise and talent, of his right to contract as an independent contractor. An individual like an artist or talent has a
right to render his services without any one controlling the means and methods by which he performs his art or craft. This Court will not interpret
the right of labor to security of tenure to compel artists and talents to render their services only as employees. If radio and television program hosts
can render their services only as employees, the station owners and managers can dictate to the radio and television hosts what they say in their
shows. This is not conducive to freedom of the press.

Different Tax Treatment of Talents and Broadcasters

The National Internal Revenue Code (NIRC)[54] in relation to Republic Act No. 7716,[55] as amended by Republic Act No. 8241,[56] treats talents,
television and radio broadcasters differently. Under the NIRC, these professionals are subject to the 10% value-added tax (VAT) on services they
render. Exempted from the VAT are those under an employer-employee relationship.[57] This different tax treatment accorded to talents and
broadcasters bolters our conclusion that they are independent contractors, provided all the basic elements of a contractual relationship are present
as in this case.

Nature of SONZAs Claims

SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay, service incentive leave, signing bonus, travel allowance,
and amounts due under the Employee Stock Option Plan. We agree with the findings of the Labor Arbiter and the Court of Appeals that SONZAs
claims are all based on the May 1994 Agreement and stock option plan, and not on the Labor Code. Clearly, the present case does not call for an
application of the Labor Code provisions but an interpretation and implementation of the May 1994 Agreement. In effect, SONZAs cause of action is
for breach of contract which is intrinsically a civil dispute cognizable by the regular courts.[58]

WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26 March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs
against petitioner.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.

16.

DIVISION

[ GR No. 199166, Apr 20, 2015 ]

NELSON V. BEGINO v. ABS-CBN CORPORATION +

DECISION

PEREZ, J.:

The existence of an employer-employee relationship is at the heart of this Petition for Review on Certiorari filed pursuant to Rule 45
of the Rules of Court, primarily assailing the 29 June 2011 Decision[1] rendered by the Fourth Division of the Court of Appeals (CA)
in CA-G.R. SP No. 116928 which ruled out said relationship between the parties.

The Facts

Respondent ABS-CBN Corporation (formerly ABS-CBN Broadcasting Corporation) is a television and radio broadcasting corporation
which, for its Regional Network Group in Naga City, employed respondent Amalia Villafuerte (Villafuerte) as Manager. There is no
dispute regarding the fact that, thru Villafuerte, ABS-CBN engaged the services of petitioners Nelson Begino (Begino) and Gener Del
Valle (Del Valle) sometime in 1996 as Cameramen/Editors for TV Broadcasting. Petitioners Ma. Cristina Sumayao (Sumayao) and
Monina Avila-Llorin (Llorin) were likewise similarly engaged as reporters sometime in 1996 and 2002, respectively. With their
services engaged by respondents thru Talent Contracts which, though regularly renewed over the years, provided terms ranging from
three (3) months to one (1) year, petitioners were given Project Assignment Forms which detailed, among other matters, the duration
of a particular project as well as the budget and the daily technical requirements thereof. In the aforesaid capacities, petitioners were
tasked with coverage of news items for subsequent daily airings in respondents’ TV Patrol Bicol Program.[2]

While specifically providing that nothing therein shall be deemed or construed to establish an employer-employee relationship
between the parties, the aforesaid Talent Contracts included, among other matters, provisions on the following matters: (a) the
Talent’s creation and performance of work in accordance with the ABS-CBN’s professional standards and compliance with its policies
and guidelines covering intellectual property creators, industry codes as well as the rules and regulations of the Kapisanan ng mga
Broadcasters sa Pilipinas (KBP) and other regulatory agencies; (b) the Talent’s non-engagement in similar work for a person or
entity directly or indirectly in competition with or adverse to the interests of ABS-CBN and non-promotion of any product or service
without prior written consent; and (c) the results-oriented nature of the talent’s work which did not require them to observe normal
or fixed working hours.[3] Subjected to contractor’s tax, petitioners’ remunerations were denominated as Talent Fees which, as of last
renewal, were admitted to be pegged per airing day at P273.35 for Begino, P302.92 for Del Valle, P323.08 for Sumayao and P315.39
for Llorin.[4]

Claiming that they were regular employees of ABS-CBN, petitioners filed against respondents the complaint[5] docketed as Sub-RAB
05-04-00041-07 before the National Labor Relations Commission’s (NLRC) Sub- Regional Arbitration Branch No. 5, Naga City. In
support of their claims for regularization, underpayment of overtime pay, holiday pay, 13th month pay, service incentive leave pay,
damages and attorney's fees, petitioners alleged that they performed functions necessary and desirable in ABS-CBN's business.
Mandated to wear company IDs and provided all the equipment they needed, petitioners averred that they worked under the direct
control and supervision of Villafuerte and, at the end of each day, were informed about the news to be covered the following day, the
routes they were to take and, whenever the subject of their news coverage is quite distant, even the start of their workday. Due to the
importance of the news items they covered and the necessity of their completion for the success of the program, petitioners claimed
that, under pain of immediate termination, they were bound by the company’s policy on, among others, attendance and punctuality.
[6]
Aside from the constant evaluation of their actions, petitioners were reportedly subjected to an annual competency assessment
alongside other ABS-CBN employees, as condition for their continued employment. Although their work involved dealing with
emergency situations at any time of the day or night, petitioners claimed that they were not paid the labor standard benefits the law
extends to regular employees. To avoid paying what is due them, however, respondents purportedly resorted to the simple expedient
of using said Talent Contracts and/or Project Assignment Forms which denominated petitioners as talents, despite the fact that they
are not actors or TV hosts of special skills. As a result of this iniquitous situation, petitioners asseverated that they merely earned an
average of P7,000.00 to P8,000.00 per month, or decidedly lower than the P21,773.00 monthly salary ABS-CBN paid its regular rank-
and-file employees. Considering their repeated re-hiring by respondents for ostensible fixed periods, this situation had gone on for
years since TV Patrol Bicol has continuously aired from 1996 onwards.[7]

In refutation of the foregoing assertions, on the other hand, respondents argued that, although it occasionally engages in production
and generates programs thru various means, ABS-CBN is primarily engaged in the business of broadcasting television and radio
content. Not having the full manpower complement to produce its own program, the company had allegedly resorted to engaging
independent contractors like actors, directors, artists, anchormen, reporters, scriptwriters and various production and technical
staff, who offered their services in relation to a particular program. Known in the industry as talents, such independent contractors
inform ABS- CBN of their availability and were required to accomplish Talent Information Forms to facilitate their engagement for
and appearance on designated project days. Given the unpredictability of viewer preferences, respondents argued that the company
cannot afford to provide regular work for talents with whom it negotiates specific or determinable professional fees on a per project,
weekly or daily basis, usually depending on the budget allocation for a project.[8]

Respondents insisted that, pursuant to their Talent Contracts and/or Project Assignment Forms, petitioners were hired as talents, to
act as reporters and/or cameramen for TV Patrol Bicol for designated periods and rates. Fully aware that they were not considered or
to consider themselves as employees of a particular production or film outfit, petitioners were supposedly engaged on the basis of
the skills, knowledge or expertise they already possessed and, for said reason, required no further training from ABS-CBN. Although
petitioners were inevitably subjected to some degree of control, the same was allegedly limited to the imposition of general
guidelines on conduct and performance, simply for the purpose of upholding the standards of the company and the strictures of the
industry. Never subjected to any control or restrictions over the means and methods by which they performed or discharged the tasks
for which their services were engaged, petitioners were, at most, briefed whenever necessary regarding the general requirements of
the project to be executed.[9]

Having been terminated during the pendency of the case, Petitioners filed on 10 July 2007 a second complaint against respondents,
for regularization, payment of labor standard benefits, illegal dismissal and unfair labor practice, which was docketed as Sub-RAB 05-
08-00107-07. Upon respondents’ motion, this complaint was dismissed for violation of the rules against forum shopping in view of
the fact that the determination of the issues in the second case hinged on the resolution of those raised in the first.[10] On 19
December 2007, however, Labor Arbiter Jesus Orlando Quiñones (Labor Arbiter Quiñones) resolved Sub-RAB 05-04-00041-07 in
favor of petitioners who, having rendered services necessary and related to ABS-CBN’s business for more than a year, were
determined to be its regular employees. With said conclusion found to be buttressed by, among others, the exclusivity clause and
prohibitions under petitioners’ Talent Contracts and/or Project Assignment Forms which evinced respondents’ control over them,
[11] Labor Arbiter Quiñones disposed of the case in the following wise:

WHEREFORE, finding merit in the causes of action set forth by the complainants, judgment is hereby rendered declaring
complainants MONINA AVILA-LLORIN, GENER L. DEL VALLE, NELSON V. BEGINO and MA. CRISTINA V. SUMAYAO, as regular employees
of respondent company, ABS-CBN BROADCASTING CORPORATION.

Accordingly, respondent ABS-CBN Broadcasting Corporation is hereby ORDERED to pay complainants, subject to the prescriptive
period provided under Article 291 of the Labor Code, however applicable, the total amount of Php2,440,908.36, representing
salaries/wage differentials, holiday pay, service incentive leave pay and 13th month pay, to include 10% of the judgment award as
attorney’s fees of the judgment award (computation of the monetary awards are attached hereto as integral part of this decision).

Moreover, respondents are directed to admit back complainants to work under the same terms and conditions prevailing prior to
their separation or, at respondents' option, merely reinstated in the payroll.

Other than the above, all other claims and charges are ordered DISMISSED for lack of merit.[12]

Aggrieved by the foregoing decision, respondents elevated the case on appeal before the NLRC, during the pendency of which
petitioners filed a third complaint against the former, for illegal dismissal, regularization, non- payment of salaries and 13th month
pay, unfair labor practice, damages and attorney’s fees. In turn docketed as NLRC Case No. Sub-RAB-V-05-03-00039-08, the complaint
was raffled to Labor Arbiter Quiñones who issued an Order dated 30 April 2008, inhibiting himself from the case and denying
respondents’ motion to dismiss on the grounds of res judicata and forum shopping.[13] Finding that respondents’ control over
petitioners was indeed manifest from the exclusivity clause and prohibitions in the Talent Contracts and/or Project Assignment
Forms, on the other hand, the NLRC rendered a Decision dated 31 March 2010, affirming said Labor Arbiter’s appealed decision.[14]
Undeterred by the NLRC’s 31 August 2010 denial of their motion for reconsideration,[15] respondents filed the Rule 65 petition for
certiorari docketed before the CA as CA-G.R. SP No. 116928 which, in addition to taking exceptions to the findings of the assailed
decision, faulted petitioners for violating the rule against forum shopping.[16]

On 29 June 2011, the CA rendered the herein assailed decision, reversing the findings of the Labor Arbiter and the NLRC. Ruling out
the existence of forum shopping on the ground that petitioners' second and third complaints were primarily anchored on their
termination from employment after the filing of their first complaint, the CA nevertheless discounted the existence of an employer-
employee relation between the parties upon the following findings and conclusions: (a) petitioners, were engaged by respondents as
talents for periods, work and the program specified in the Talent Contracts and/or Project Assignment Forms concluded between
them; (b) instead of fixed salaries, petitioners were paid talent fees depending on the budget allocated for the program to which they
were assigned; (c) being mainly concerned with the result, respondents did not exercise control over the manner and method by
which petitioner accomplished their work and, at most, ensured that they complied with the standards of the company, the KBP and
the industry; and, (d) the existence of an employer-employee relationship is not necessarily established by the exclusivity clause and
prohibitions which are but terms and conditions on which the parties are allowed to freely stipulate.[17]

Petitioners’ motion for reconsideration of the foregoing decision was denied in the CA's 3 October 2011 Resolution,[18] hence, this
petition.

The Issues

Petitioners seek the reversal of the CA’s assailed Decision and

Resolution on the affirmative of the following issues:

1. Whether or not the CA seriously and reversibly erred in not dismissing respondents’ petition for certiorari in view of the fact that
they did file a Notice of Appeal at the NLRC level and did not, by themselves or through their duly authorized representative, verify
and certify the Memorandum of Appeal they filed thereat, in accordance with the NLRC Rules of Procedure; and

2. Whether or not the CA seriously and reversibly erred in brushing aside the determination made by both the Labor Arbiter and the
NLRC of the existence of an employer-employee relationship between the parties, despite established jurisprudence supporting the
same.

The Court's Ruling

The Court finds the petition impressed with merit.

Petitioners preliminarily fault the CA for not dismissing respondents’ Rule 65 petition for certiorari in view of the fact that the latter
failed to file a Notice of Appeal from the Labor Arbiter’s decision and to verify and certify the Memorandum of Appeal they filed
before the NLRC. While concededly required under the NLRC Rules of Procedure, however, these matters should have been properly
raised during and addressed at the appellate stage before the NLRC. Instead, the record shows that the NLRC took cognizance of
respondents’ appeal and proceeded to resolve the same in favor of petitioners by affirming the Labor Arbiter’s decision. Not having
filed their own petition for certiorari to take exception to the liberal attitude the NLRC appears to have adopted towards its own rules
of procedure, petitioners were hardly in the proper position to raise the same before the CA or, for that matter, before this Court at
this late stage. Aside from the settled rule that a party who has not appealed is not entitled to affirmative relief other than the ones
granted in the decision[19] rendered, liberal interpretation of procedural rules on appeal had, on occasion, been favored in the
interest of substantive justice.[20]

Although the existence of an employer-employee relationship is, on the other hand, a question of fact[21] which is ordinarily not the
proper subject of a Rule 45 petition for review on certiorari like the one at bar, the conflicting findings between the labor tribunals
and the CA justify a further consideration of the matter.[22] To determine the existence of said relation, case law has consistently
applied the four-fold test, to wit: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employer's power to control the employee on the means and methods by which the work is accomplished.[23]
Of these criteria, the so-called “control test” is generally regarded as the most crucial and determinative indicator of the presence or
absence of an employer-employee relationship. Under this test, an employer-employee relationship is said to exist where the person
for whom the services are performed reserves the right to control not only the end result but also the manner and means utilized to
achieve the same.[24]

In discounting the existence of said relationship between the parties, the CA ruled that Petitioners' services were, first and foremost,
engaged thru their Talent Contracts and/or Project Assignment Forms which specified the work to be performed by them, the project
to which they were assigned, the duration thereof and their rates of pay according to the budget therefor allocated. Because they are
imbued with public interest, it cannot be gainsaid, however, that labor contracts are subject to the police power of the state and are
placed on a higher plane than ordinary contracts. The recognized supremacy of the law over the nomenclature of the contract and the
stipulations contained therein is aimed at bringing life to the policy enshrined in the Constitution to afford protection to labor.[25]
Insofar as the nature of one’s employment is concerned, Article 280 of the Labor Code of the Philippines also provides as follows:

ART. 280. Regular and Casual Employment. — The provisions of written agreement to the contrary notwithstanding and regardless of
the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform
activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has
been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the
engagement of the employee or where the work or service to be performed is seasonal in nature and the employment is for the
duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who has
rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with
respect to the activity in which he is employed and his employment shall continue while such actually exists.

It has been ruled that the foregoing provision contemplates four kinds of employees, namely: (a) regular employees or those who
have been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer; (b)
project employees or those whose employment has been fixed for a specific project or undertaking, the completion or termination of
which has been determined at the time of the engagement of the employee; (c) seasonal employees or those who work or perform
services which are seasonal in nature, and the employment is for the duration of the season; and (d) casual employees or those who
are not regular, project, or seasonal employees.[26] To the foregoing classification of employee, jurisprudence has added that of
contractual or fixed term employee which, if not for the fixed term, would fall under the category of regular employment in view of
the nature of the employee’s engagement, which is to perform activity usually necessary or desirable in the employer’s business.[27]

The Court finds that, notwithstanding the nomenclature of their Talent Contracts and/or Project Assignment Forms and the terms
and condition embodied therein, petitioners are regular employees of ABS-CBN. Time and again, it has been ruled that the test to
determine whether employment is regular or not is the reasonable connection between the activity performed by the employee in
relation to the business or trade of the employer.[28] As cameramen/editors and reporters, petitioners were undoubtedly performing
functions necessary and essential to ABS-CBN’s business of broadcasting television and radio content. It matters little that
petitioners’ services were engaged for specified periods for TV Patrol Bicol and that they were paid according to the budget allocated
therefor. Aside from the fact that said program is a regular weekday fare of the ABS-CBN’s Regional Network Group in Naga City, the
record shows that, from their initial engagement in the aforesaid capacities, petitioners were continuously re-hired by respondents
over the years. To the mind of the Court, respondents’ repeated hiring of petitioners for its long-running news program positively
indicates that the latter were ABS-CBN’s regular employees.

If the employee has been performing the job for at least one year, even if the performance is not continuous or merely intermittent,
the law deems the repeated or continuing performance as sufficient evidence of the necessity, if not indispensability of that activity
in the business.[29] Indeed, an employment stops being co-terminous with specific projects where the employee is continuously re-
hired due to the demands of the employer’s business.[30] When circumstances show, moreover, that contractually stipulated periods
of employment have been imposed to preclude the acquisition of tenurial security by the employee, this Court has not hesitated in
striking down such arrangements as contrary to public policy, morals, good customs or public order.[31] The nature of the
employment depends, after all, on the nature of the activities to be performed by the employee, considering the nature of the
employer’s business, the duration and scope to be done, and, in some cases, even the length of time of the performance and its
continued existence.[32] In the same manner that the practice of having fixed-term contracts in the industry does not automatically
make all talent contracts valid and compliant with labor law, it has, consequently, been ruled that the assertion that a talent contract
exists does not necessarily prevent a regular employment status.[33]

As cameramen/editors and reporters, it also appears that petitioners were subject to the control and supervision of respondents
which, first and foremost, provided them with the equipments essential for the discharge of their functions. Prepared at the instance
of respondents, petitioners’ Talent Contracts tellingly provided that ABS-CBN retained “all creative, administrative, financial and legal
control” of the program to which they were assigned. Aside from having the right to require petitioners “to attend and participate in
all promotional or merchandising campaigns, activities or events for the Program,” ABS-CBN required the former to perform their
functions “at such locations and Performance/Exhibition Schedules” it provided or, subject to prior notice, as it chose determine,
modify or change. Even if they were unable to comply with said schedule, petitioners were required to give advance notice, subject to
respondents’ approval.[34] However obliquely worded, the Court finds the foregoing terms and conditions demonstrative of the
control respondents exercised not only over the results of petitioners’ work but also the means employed to achieve the same.

In finding that petitioners were regular employees, the NLRC further ruled that the exclusivity clause and prohibitions in their Talent
Contracts and/or Project Assignment Forms were likewise indicative of respondents’ control over them. Brushing aside said finding,
however, the CA applied the ruling in Sonza v. ABS-CBN Broadcasting Corporation[35] where similar restrictions were considered not
necessarily determinative of the existence of an employer-employee relationship. Recognizing that independent contractors can
validly provide his exclusive services to the hiring party, said case enunciated that guidelines for the achievement of mutually desired
results are not tantamount to control. As correctly pointed out by petitioners, however, parallels cannot be expediently drawn
between this case and that of Sonza case which involved a well-known television and radio personality who was legitimately
considered a talent and amply compensated as such. While possessed of skills for which they were modestly recompensed by
respondents, petitioners lay no claim to fame and/or unique talents for which talents like actors and personalities are hired and
generally compensated in the broadcast industry.

Later echoed in Dumpit-Murillo v. Court of Appeals,[36] this Court has rejected the application of the ruling in the Sonza case to
employees similarly situated as petitioners in ABS-CBN Broadcasting Corporation v. Nazareno.[37] The following distinctions were
significantly observed between employees like petitioners and television or radio personalities like Sonza, to wit:

First. In the selection and engagement of respondents, no peculiar or unique skill, talent or celebrity status was required from them
because they were merely hired through petitioner’s personnel department just like any ordinary employee.

Second. The so-called "talent fees" of respondents correspond to wages given as a result of an employer-employee relationship.
Respondents did not have the power to bargain for huge talent fees, a circumstance negating independent contractual relationship.

Third. Petitioner could always discharge respondents should it find their work unsatisfactory, and respondents are highly dependent
on the petitioner for continued work.

Fourth. The degree of control and supervision exercised by petitioner over respondents through its supervisors negates the allegation
that respondents are independent contractors.

The presumption is that when the work done is an integral part of the regular business of the employer and when the worker, relative
to the employer, does not furnish an independent business or professional service, such work is a regular employment of such
employee and not an independent contractor. The Court will peruse beyond any such agreement to examine the facts that typify the
parties’ actual relationship.[38] (Emphasis omitted)

Rather than the project and/or independent contractors respondents claim them to be, it is evident from the foregoing disquisition
that petitioners are regular employees of ABS-CBN. This conclusion is borne out by the ineluctable showing that petitioners perform
functions necessary and essential to the business of ABS-CBN which repeatedly employed them for a long-running news program of
its Regional Network Group in Naga City. In the course of said employment, petitioners were provided the equipments they needed,
were required to comply with the Company's policies which entailed prior approval and evaluation of their performance. Viewed
from the prism of these considerations, we find and so hold that the CA reversibly erred when it overturned the NLRC's affirmance of
the Labor Arbiter's finding that an employer-employee relationship existed between the parties. Given the fact, however, that Sub-
RAB-V-05-03-00039-08 had not been consolidated with this case and appears, for all intents and purposes, to be pending still, the
Court finds that the reinstatement of petitioners ordered by said labor officer and tribunal should, as a relief provided in case of
illegal dismissal, be left for determination in said case.

WHEREFORE, the Court of Appeals' assailed Decision dated 29 June 2011 and Resolution dated 3 October 2011 in CA-G.R. SP No.
116928 are REVERSED and SET ASIDE. Except for the reinstatement of Nelson V. Begino, Gener Del Valle, Monina Avila-Llorin and Ma.
Cristina Sumayao, the National Labor and Relations· Commission's 31 March 2010 Decision is, accordingly, REINSTATED.

SO ORDERED.

Sereno, C. J., (Chairperson), Leonardo-De Castro, Bersamin, and Perlas-Bernabe, JJ., concur.

17.

Republic of the Philippines

SUPREME COURT

Manila

THIRD DIVISION

G.R. No. 91307 January 24, 1991

SINGER SEWING MACHINE COMPANY, petitioner

vs.

HON. FRANKLIN M. DRILON, MED-ARBITER FELIX B. CHAGUILE, JR., and SINGER MACHINE COLLECTORS UNION-BAGUIO (SIMACUB), respondents.

Misa, Castro, Villanueva, Oposa, Narvasa & Pesigan for petitioner.

Domogan, Lockey, Orate & Dao-ayan Law Office for private respondent.

GUTIERREZ, JR., J.:

This is a petition for certiorari assailing the order of Med-Arbiter Designate Felix B. Chaguile, Jr., the resolution of then Labor Secretary Franklin M.
Drilon affirming said order on appeal and the order denying the motion for reconsideration in the case entitled "In Re: Petition for Direct Certification
as the Sole and Exclusive Collective Bargaining Agent of Collectors of Singer Sewing Machine Company-Singer Machine Collectors Union-Baguio
(SIMACUB)" docketed as OS-MA-A-7-119-89 (IRD Case No. 02-89 MED).

On February 15, 1989, the respondent union filed a petition for direct certification as the sole and exclusive bargaining agent of all collectors of the
Singer Sewing Machine Company, Baguio City branch (hereinafter referred to as "the Company").

The Company opposed the petition mainly on the ground that the union members are actually not employees but are independent contractors as
evidenced by the collection agency agreement which they signed.

The respondent Med-Arbiter, finding that there exists an employer-employee relationship between the union members and the Company, granted the
petition for certification election. On appeal, Secretary of Labor Franklin M. Drilon affirmed it. The motion for reconsideration of the Secretary's
resolution was denied. Hence, this petition in which the Company alleges that public respondents acted in excess of jurisdiction and/or committed
grave abuse of discretion in that:

a) the Department of Labor and Employment (DOLE) has no jurisdiction over the case since the existence of employer-employee
relationship is at issue;

b) the right of petitioner to due process was denied when the evidence of the union members' being commission agents was
disregarded by the Labor Secretary;

c) the public respondents patently erred in finding that there exists an employer-employee relationship;

d) the public respondents whimsically disregarded the well-settled rule that commission agents are not employees but are independent
contractors.

The respondents, on the other hand, insist that the provisions of the Collection Agency Agreement belie the Company's position that the union
members are independent contractors. To prove that union members are employees, it is asserted that they "perform the most desirable and
necessary activities for the continuous and effective operations of the business of the petitioner Company" (citing Article 280 of the Labor Code). They
add that the termination of the agreement by the petitioner pending the resolution of the case before the DOLE "only shows the weakness of
petitioner's stand" and was "for the purpose of frustrating the constitutionally mandated rights of the members of private respondent union to self-
organization and collective organization." They also contend that under Section 8, Rule 8, Book No. III of the Omnibus Rules Implementing the Labor
Code, which defines job-contracting, they cannot legally qualify as independent contractors who must be free from control of the alleged employer,
who carry independent businesses and who have substantial capital or investment in the form of equipment, tools, and the like necessary in the
conduct of the business.

The present case mainly calls for the application of the control test, which if not satisfied, would lead us to conclude that no employer-employee
relationship exists. Hence, if the union members are not employees, no right to organize for purposes of bargaining, nor to be certified as such
bargaining agent can ever be recognized. The following elements are generally considered in the determination of the employer-employee
relationship; "(1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control
the employee's conduct — although the latter is the most important element" (Mafinco Trading Corporation v. Ople, 70 SCRA 139 [1976];
Development Bank of the Philippines v. National Labor Relations Commission, 175 SCRA 537 [1989]; Rosario Brothers, Inc. v. Ople, 131 SCRA 72 [1984];
Broadway Motors Inc. v. NLRC, 156 SCRA 522 [1987]; Brotherhood Labor Unity Movement in the Philippines v. Zamora, 147 SCRA 49 [1986]).

The Collection Agency Agreement defines the relationship between the Company and each of the union members who signed a contract. The
petitioner relies on the following stipulations in the agreements: (a) a collector is designated as a collecting agent" who is to be considered at all times
as an independent contractor and not employee of the Company; (b) collection of all payments on installment accounts are to be made monthly or
oftener; (c) an agent is paid his compensation for service in the form of a commission of 6% of all collections made and turned over plus a bonus on
said collections; (d) an agent is required to post a cash bond of three thousand pesos (P3,000.00) to assure the faithful performance and observance of
the terms and conditions under the agreement; (e) he is subject to all the terms and conditions in the agreement; (f) the agreement is effective for one
year from the date of its execution and renewable on a yearly basis; and (g) his services shall be terminated in case of failure to satisfy the minimum
monthly collection performance required, failure to post a cash bond, or cancellation of the agreement at the instance of either party unless the agent
has a pending obligation or indebtedness in favor of the Company.

Meanwhile, the respondents rely on other features to strengthen their position that the collectors are employees. They quote paragraph 2 which
states that an agent shall utilize only receipt forms authorized and issued by the Company. They also note paragraph 3 which states that an agent has
to submit and deliver at least once a week or as often as required a report of all collections made using report forms furnished by the Company.
Paragraph 4 on the monthly collection quota required by the Company is deemed by respondents as a control measure over the means by which an
agent is to perform his services.

The nature of the relationship between a company and its collecting agents depends on the circumstances of each particular relationship. Not all
collecting agents are employees and neither are all collecting agents independent contractors. The collectors could fall under either category
depending on the facts of each case.

The Agreement confirms the status of the collecting agent in this case as an independent contractor not only because he is explicitly described as such
but also because the provisions permit him to perform collection services for the company without being subject to the control of the latter except
only as to the result of his work. After a careful analysis of the contents of the agreement, we rule in favor of the petitioner.

The requirement that collection agents utilize only receipt forms and report forms issued by the Company and that reports shall be submitted at least
once a week is not necessarily an indication of control over the means by which the job of collection is to be performed. The agreement itself
specifically explains that receipt forms shall be used for the purpose of avoiding a co-mingling of personal funds of the agent with the money collected
on behalf of the Company. Likewise, the use of standard report forms as well as the regular time within which to submit a report of collection are
intended to facilitate order in office procedures. Even if the report requirements are to be called control measures, any control is only with respect to
the end result of the collection since the requirements regulate the things to be done after the performance of the collection job or the rendition of
the service.

The monthly collection quota is a normal requirement found in similar contractual agreements and is so stipulated to encourage a collecting agent to
report at least the minimum amount of proceeds. In fact, paragraph 5, section b gives a bonus, aside from the regular commission every time the
quota is reached. As a requirement for the fulfillment of the contract, it is subject to agreement by both parties. Hence, if the other contracting party
does not accede to it, he can choose not to sign it. From the records, it is clear that the Company and each collecting agent intended that the former
take control only over the amount of collection, which is a result of the job performed.

The respondents' contention that the union members are employees of the Company is based on selected provisions of the Agreement but ignores
the following circumstances which respondents never refuted either in the trial proceedings before the labor officials nor in its pleadings filed before
this Court.

1. The collection agents are not required to observe office hours or report to Singer's office everyday except, naturally and necessarily,
for the purpose of remitting their collections.

2. The collection agents do not have to devote their time exclusively for SINGER. There is no prohibition on the part of the collection
agents from working elsewhere. Nor are these agents required to account for their time and submit a record of their activity.

3. The manner and method of effecting collections are left solely to the discretion of the collection agents without any interference on
the part of Singer.

4. The collection agents shoulder their transportation expenses incurred in the collections of the accounts assigned to them.
5. The collection agents are paid strictly on commission basis. The amounts paid to them are based solely on the amounts of collection
each of them make. They do not receive any commission if they do not effect any collection even if they put a lot of effort in collecting. They are paid
commission on the basis of actual collections.

6. The commissions earned by the collection agents are directly deducted by them from the amount of collections they are able to
effect. The net amount is what is then remitted to Singer." (Rollo, pp. 7-8)

If indeed the union members are controlled as to the manner by which they are supposed to perform their collections, they should have explicitly said
so in detail by specifically denying each of the facts asserted by the petitioner. As there seems to be no objections on the part of the respondents, the
Court finds that they miserably failed to defend their position.

A thorough examination of the facts of the case leads us to the conclusion that the existence of an employer-employee relationship between the
Company and the collection agents cannot be sustained.

The plain language of the agreement reveals that the designation as collection agent does not create an employment relationship and that the
applicant is to be considered at all times as an independent contractor. This is consistent with the first rule of interpretation that the literal meaning of
the stipulations in the contract controls (Article 1370, Civil Code; La Suerte Cigar and Cigarette Factory v. Director of Bureau of Labor, Relations, 123
SCRA 679 [1983]). No such words as "to hire and employ" are present. Moreover, the agreement did not fix an amount for wages nor the required
working hours. Compensation is earned only on the basis of the tangible results produced, i.e., total collections made (Sarra v. Agarrado, 166 SCRA
625 [1988]). In Investment Planning Corp. of the Philippines v. Social Security System, 21 SCRA 924 [1967] which involved commission agents, this
Court had the occasion to rule, thus:

We are convinced from the facts that the work of petitioner's agents or registered representatives more nearly approximates that of an independent
contractor than that of an employee. The latter is paid for the labor he performs, that is, for the acts of which such labor consists the former is paid for
the result thereof . . . .

xxx xxx xxx

Even if an agent of petitioner should devote all of his time and effort trying to sell its investment plans he would not necessarily be entitled to
compensation therefor. His right to compensation depends upon and is measured by the tangible results he produces."

Moreover, the collection agent does his work "more or less at his own pleasure" without a regular daily time frame imposed on him (Investment
Planning Corporation of the Philippines v. Social Security System, supra; See also Social Security System v. Court of Appeals, 30 SCRA 210 [1969]).

The grounds specified in the contract for termination of the relationship do not support the view that control exists "for the causes of termination
thus specified have no relation to the means and methods of work that are ordinarily required of or imposed upon employees." (Investment Planning
Corp. of the Phil. v. Social Security System, supra)

The last and most important element of the control test is not satisfied by the terms and conditions of the contracts. There is nothing in the
agreement which implies control by the Company not only over the end to be achieved but also over the means and methods in achieving the end
(LVN Pictures, Inc. v. Philippine Musicians Guild, 1 SCRA 132 [1961]).

The Court finds the contention of the respondents that the union members are employees under Article 280 of the Labor Code to have no basis. The
definition that regular employees are those who perform activities which are desirable and necessary for the business of the employer is not
determinative in this case. Any agreement may provide that one party shall render services for and in behalf of another for a consideration (no matter
how necessary for the latter's business) even without being hired as an employee. This is precisely true in the case of an independent contractorship
as well as in an agency agreement. The Court agrees with the petitioner's argument that Article 280 is not the yardstick for determining the existence
of an employment relationship because it merely distinguishes between two kinds of employees, i.e., regular employees and casual employees, for
purposes of determining the right of an employee to certain benefits, to join or form a union, or to security of tenure. Article 280 does not apply
where the existence of an employment relationship is in dispute.

Even Section 8, Rule 8, Book III of the Omnibus Rules Implementing the Labor Code does not apply to this case.1âwphi1 Respondents assert that the
said provision on job contracting requires that for one to be considered an independent contractor, he must have "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." There is no
showing that a collection agent needs tools and machineries. Moreover, the provision must be viewed in relation to Article 106 of the Labor Code
which provides:

Art. 106. Contractor or subcontractor. — Whenever an employer enters into a contract with another person for the performance of the
former's work, the employees of the contractor and of the latter's subcontractor, if any, shall be paid in accordance with the provisions of this Code.

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

xxx xxx xxx

There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which
are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him." (p. 20)

It can readily be seen that Section 8, Rule 8, Book Ill and Article 106 are relevant in determining whether the employer is solidarily liable to the
employees of an alleged contractor and/or sub-contractor for unpaid wages in case it is proven that there is a job-contracting situation.

The assumption of jurisdiction by the DOLE over the case is justified as the case was brought on appeal by the petitioner itself which prayed for the
reversal of the Order of the Med-Arbiter on the ground that the union members are not its employees. Hence, the petitioner submitted itself as well
as the issue of existence of an employment relationship to the jurisdiction of the DOLE which was faced with a dispute on an application for
certification election.

The Court finds that since private respondents are not employees of the Company, they are not entitled to the constitutional right to join or form a
labor organization for purposes of collective bargaining. Accordingly, there is no constitutional and legal basis for their "union" to be granted their
petition for direct certification. This Court made this pronouncement in La Suerte Cigar and Cigarette Factory v. Director of Bureau of Labor Relations,
supra:

. . . The question of whether employer-employee relationship exists is a primordial consideration before extending labor benefits under the
workmen's compensation, social security, medicare, termination pay and labor relations law. It is important in the determination of who shall be
included in a proposed bargaining unit because, it is the sine qua non, the fundamental and essential condition that a bargaining unit be composed of
employees. Failure to establish this juridical relationship between the union members and the employer affects the legality of the union itself. It
means the ineligibility of the union members to present a petition for certification election as well as to vote therein . . . . (At p. 689)

WHEREFORE, the Order dated June 14,1989 of Med-Arbiter Designate Felix B. Chaguile, Jr., the Resolution and Order of Secretary Franklin M. Drilon
dated November 2, 1989 and December 14, 1989, respectively are hereby REVERSED and SET ASIDE. The petition for certification election is ordered
dismissed and the temporary restraining order issued by the Court on December 21, 1989 is made permanent.

SO ORDERED.

Fernan, C.J., Feliciano and Bidin, JJ., concur.

18.

DIVISION

[ GR No. 200580, Feb 11, 2015 ]

MARIAN B. NAVARETTE v. MANILA INTERNATIONAL FREIGHT FORWARDERS +

DECISION

VELASCO JR., J.:

The Case

Before Us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the October 4, 2011 Decision of the Court of Appeals (CA),
as effectively reiterated in its January 30, 2012 Resolution, in CA-G.R. SP No. 112102, entitled Manila International Freight Forwarders, Inc./MIFFI
Logistics Company, Inc. v. National Labor Relations Commission and Marian B. Navarette. The CA issuances reversed and set aside the February 27,
2009 Decision and October 19, 2009 Resolution of the National Labor Relations Commission (NLRC) and reinstated the May 24, 2004 Decision of the
Labor Arbiter which dismissed the complaint for illegal dismissal.

The Facts

Respondents Manila International Freight Forwarders, Inc. (MIFFI) and MIFFI Logistics Company, Inc. (MCLI) are corporations engaged in the business
of freight and cargo forwarding, hauling, carrying, handling, distributing, loading and unloading of general cargoes and all classes of goods, wares and
merchandise.

MIFF1 had, during the period material, entered into a contract with MBI Millennium Experts, Inc. (MBI) for the provision of production workers and
technical personnel for MIFFI's projects or temporary needs, including the assignment of employees to temporarily replace those in the Packaging
Department who are on maternity leave. To be able to address the immediate concerns of the employees detailed to the aforesaid department, MBI
assigned a supervisor/coordinator, Ma. Glynnis Quindo (Quindo), to MIFFI.

On January 15, 2002, MBI hired petitioner Marian Navarette (Navarette) and, on the same day, assigned her as a temporary project employee to
MIFFI's Packaging Department. There, for a fixed period of three (3) months, or until April of 2002, she worked amongst MIFFI's regular employees
who performed the same tasks as hers. She also used MIFFI's equipment and was supervised by Gidey Fajiculay and Sonny Porto, both employees of
MIFFI.

A second contract was later concluded between Navarette and MBI, under which she was to serve as MIFFI's warehouse staff from April 16, 2002 to
October 1, 2002. Another contract effective March 1, 2003 until August 1, 2003 resulted in Navarette being transferred to respondent MLCI - MIFFI's
subsidiary.
On July 29, 2003, Navarette, joined by other employees, filed a complaint for inspection against MIFFI, MLCI, MBI and a certain PAMS with the
Department of Labor and Employment (DOLE) Regional Arbitration Branch IV. Following an inspection of respondents' premises on August 5, 2003,
certain violations of labor laws were uncovered, including labor-only contracting by MBI. Several hearings were had and eventually, the parties
decided to submit an agreement to be signed by all concerned and to be approved by DOLE officials.

Pursuant to said covenant, MBI called a meeting where Navarette and her co-workers were handed and asked to sign a document entitled "Minutes of
the Hearing/Agreement, [DOLE], Region IV." Navarette found the contents of the document to be erroneous since it stated that the parties had
already come to an agreement on the issues and conditions when, in fact, no such agreement was made. This angered Navarette, causing her to throw
the document and to say, "Hindi ito ang pinag-usapan natin sa DOLE! Niloloko niyo long kami." Her actuations, to MBI, constituted serious
misconduct, for which a show cause memorandum was issued directing her to explain herself. Dissatisfied with her explanation that her actuations
were so because the Minutes did not reflect the truth MBI issued another memorandum which Navarette, upon perusal, tore and threw away.

After issuing several memoranda setting conferences on the matter to which Navarette could not attend because of her work schedule, MBI finally
terminated Navarette's employment on October 6, 2003.[1] On October 23, 2003, Navarette filed a complaint for illegal dismissal before the NLRC
against MBI, MIFFI and MCLI, docketed as NLRC-NCR Case No. 00-10-11705-03.

In a Decision dated May 24, 2004, Labor Arbiter Dolores M. Peralta-Beley dismissed the complaint on the finding that Navarette's acts complained of
constituted serious misconduct, a valid cause for dismissal. Too, MBI, being a legitimate job contractor, is Navarette's employer, not MIFFI or MCLI. The
fallo of the Decision reads:

In the light of the foregoing, the complaint for illegal dismissal must be dismissed for want of factual and legal basis. Necessarily, the claim for back
wages must likewise be dismissed as it is granted only to illegally dismissed employees by way of relief.

xxxx

WHEREFORE, premises considered, judgment is hereby rendered dismissing the instant complaint for lack of merit.

SO ORDERED.[2]

On appeal,[3] the NLRC reversed the Decision of the Labor Arbiter and ordered Navarette's reinstatement with backwages and other benefits. To the
commission, MBI is a labor-only contractor, thus making MIFFI and MCLI Navarette's employer. The NLRC disposed of the case in this wise:

WHEREFORE, premises considered, the appeal is GRANTED. The Decision of the Labor Arbiter dated May 24, 2004 is REVERSED and SET ASIDE, and a
NEW ONE rendered finding respondent MBI as a labor-only contractor. Consequently, respondents MIFFI/MCLI are declared to be complainant's
employer, and accordingly respondents MIFFI/MCLI are ordered to:

Reinstate complainant to her former position or equivalent position without loss of seniority rights;

Pay complainant her full backwages computed from the time she was illegally dismissed up to the finality of this Decision; and

Pay complainant attorney's fees in an amount equivalent to ten (10%) of the total monetary award.

Complainant's monetary award is provisionally computed as follows:

Backwages

1.) Basic Salary

10/6/03-6/15/05

250x26x20.30 131,950.00

6/16/05-7/10/06

275x26x12.83 91,734.50

7/11/06-8/27/07

300x26x13.57 105,846.00

8/28/07-6/13/08

362x26x9.53 89,696.36

6/14/08-8/27/08

377x26x2.47 24,210.94
8/28/08-2/3/09

382x26x5.17 51,348.44 494,786.24 2.) 13th mo pay

494,786.24/12 41,232.19 3.) SILP

250x5/12x20.30 2,114.58

275x5/12x12.83 1.470.10

300x5/12x13.57 1,696.25

362x5/12x9.53 1,437.44

377x5/12x2.47 387.99

382x5/12x5.17 822.89 7,929.25 4.) COLA

10/6/03-7/9/04

50x26x9.10 11,830.00

7/10/04-8/27/07

50x26x37.60 48,880.00

6/14/08-8/27/08

5x26x24.7 321.10 61,031.10 604,978.78

Attorney's fee 10% 60,497.88

Total Award P665.476.66[4] Aggrieved, respondents moved for reconsideration, alleging that Navarette is not their employee, MBI being a legitimate
job contractor, as held by the NLRC in the related case of Manlangit v. MIFFI and/or MCLI and MBI.[5] The NLRC, however, in its October 19, 2009
Resolution, found no merit therein and sustained its earlier Decision.

Respondents, thus, sought a review of the NLRC Decision and Resolution before the CA via a Petition for Certiorari under Rule 65 of the Rules of Court.
Before the CA could dispose of said petition, the Court, on August 31, 2011, in Manlangit, et al. v. MIFFI, et al.,[6] issued a Resolution where it
dismissed the Manlangit petition and upheld the ruling of the CA that MBI's contract with MIFF1/MCL1, respondents in said case as well as in the case
at bar, was one of legitimate job contracting, contrary to the assertions of therein petitioners.

Eventually, the CA, in the present case, ordered the reversal of the NLRC Decision and the reinstatement of the Labor Arbiter's ruling. The dispositive
portion of the appellate court's Decision is hereunder quoted:

WHEREFORE, the petition is GRANTED. The Decision dated February 27, 2009 and Resolution dated October 19, 2009 of the [NLRC] are REVERSED and
SET ASIDE. The Decision of the Labor Arbiter dated May 24, 2004, which dismissed the complaint for lack of merit is REINSTATED.

SO ORDERED.[7]

Petitioner's motion for reconsideration was also denied.

The Issues

Petitioner presently seeks a review of the CA Decision on the following grounds:

The Honorable [CA] misapplied the law and misapprehended the facts in ruling that there is absence of employer-employee relationship between the
petitioner and the respondent [MIFFI].

The Hon. [CA] misapplied the law in ruling that petitioner is not entitled to the reliefs prayed for.

The issues in the case at bar are as follows: (1) whether petitioner Navarette is respondents' employee; and (2) whether her dismissal is illegal.

Our Ruling

We resolve to deny the petition.

Navarette is MBI's employee

A fundamental principle in Philippine labor law is the application of the four-fold test in determining the existence of an employer-employee
relationship, thus: (1) selection and engagement; (2) payment of wages; (3) power to dismiss; and (4) power of control over the means and methods
by which the work is to be accomplished.[8] There are, however, instances when these elements are not exercised by a single person or entity. There
are cases where one or more of the said factors are assumed by another entity, for which reason, the Court made it clear that of the four tests
mentioned, it is the power of control that is determinative.[9] One such instance is whenever an employer supplies workers to another pursuant to a
contracting agreement, i.e., job contracting.

Per DOLE Order No. 3, Series of 2001, there is contracting or subcontracting whenever an employer, referred to as the principal, farms out the
performance of a part of its business to another, referred to as the contractor or subcontractor, and for the purpose of undertaking the principal's
business that is farmed out, the contractor or subcontractor then employs its own employees. In such an arrangement, the four-fold test must be
satisfied by the contractor or subcontractor.[10] Otherwise, it is the principal that shall be considered as the employer.

Not all forms of contracting arrangements are, however, permitted. In contrast, there is the so-called labor-only contracting.

Labor-only contracting exists when: (1) the person supplying workers to the purported principal does not have substantial capital or investments in
the form of tools, equipment, machineries, work premises, among others; and (2) the workers recruited and placed by such person/entity perform
activities which are directly related to the principal business of the alleged principal.[11] Finding that a contractor is engaged in labor-only contracting
is then equivalent to declaring that there exists an employer-employee relationship between the supposed principal and the employee of the
purported contractor.[12] It also results in the following: (1) the subcontractor will be treated as the agent of the principal whose acts and
representations bind the latter; (2) the principal, being the employer, will be responsible to the employees for all their entitlements and benefits
under labor laws; and (3) the principal and the subcontractor will be solidarity treated as the employer.

With the mentioned effects of labor-only contracting on employment status, a determination of the legitimacy or illegality of the contracting
arrangement between the principal and the contractor is necessary not only to determine who between the two entities is the real employer of the
employee but also to determine upon whom liability should be imposed in the event that the employee is illegally dismissed, as here, among others.

In this respect, respondents contend that MBI is a legitimate job contractor[13] and consequently, Navarette is MBI's employee, invoking the
application of the principle of res judicata. According to respondents, the Court has already passed upon and ruled on the legitimacy of MBI's contract
with them that it is one of permissible job contracting when We affirmed the contract's status through a Resolution dated August 31, 2011 in the
adverted case of Manlangit, et al. v. MIFFI, et al., docketed as G.R. No. 196175.

Briefly, Manlangit involved a complaint for regularization, illegal deduction, wage distortion and attorney's fees, later amended to include illegal
dismissal, filed by Gabriel Manlangit and thirty six (36) other workers against MIFFI, MLCI, and MBI. Like Navarette, Manlangit, et al. were also hired
by MBI and assigned to MIFFI.

After due proceedings, the Labor Arbiter found for MIFFI, MLCI and MBI and dismissed the complaint, ruling that Manlangit, et al. were project
employees of MBI, whose employments were coterminous with the service agreement between MBI and MIFFI/MLCI. Therefrom, Manlangit, et al.
went to the NLRC which dismissed their appeal for lack of merit and for non-perfection in view of their failure to comply with the mandatory provision
on verification and certification of non-forum shopping. Upon the review of the case, the CA, then later this Court, veritably affirmed the Decision of
the Labor Arbiter, as effectively upheld by the NLRC.[14]

In light of Manlangit, respondents add, the ruling on the legality of MBI and respondents' contractual relationship, being one of permissible job
contracting, can no longer be disturbed.

We agree with respondents that Our adjudication in Manlangit of the issue of the legitimacy of MBI's contract with respondents and necessarily, the
question who between MBI and MIFFI is Navarette's employer, have already been settled by the Court and must not be disturbed. Per Manlangit, MBI
is respondents' employer and res judicata by conclusiveness of judgment bars further challenge on this issue.

For res judicata by conclusiveness of judgment to apply, the following elements should be present, viz: (1) the judgment sought to bar the new action
must be final; (2) the decision must have been rendered by a court having jurisdiction over the subject matter and the parties; (3) the disposition of
the case must be a judgment on the merits; and (4) there must be as between the first and second action, identity of parties, but not identity of
causes of action.[15]

When applicable, the doctrine of conclusiveness of judgment has this effect: the prior judgment is conclusive in the second case only as to those
matters actually and directly controverted and determined and not as to matters merely involved therein. Stated differently, conclusiveness of
judgment finds application when a fact or question has been squarely put in issue, judicially passed upon, and adjudged in a former suit by a court of
competent jurisdiction.[16]

As to the first requisite, Manlangit which is being set as a bar to the instant case is a final judgment. With respect to the second requisite, the decision
was rendered by the Court of Appeals which was affirmed by this Court, both of which have jurisdiction over the subject matter and the parties. Anent
the third requisite, the dispositions were judgments on the merit.

Regarding the fourth requisite, there is identity or similarity of parties but no identity of causes of action. While Navarette is not a party in Manlangit,
there is commonality or similarity of parties in the two cases. Navarette and the petitioners in Manlangit are similarly situated, being co-workers
performing the same tasks of packaging, barcoding, and sealing, among others. Too, their assignment to herein respondents proceeded from the same
job contracting agreement between MBI and respondents.[17] In fact, it was the petitioners in Manlangit who supported herein petitioner, Navarette,
their leader, when she filed the complaint for inspection against respondents before the DOLE which, as previously mentioned, yielded a finding that
there is a labor-only contracting arrangement between MBI and respondents. It is this complaint for inspection that triggered the chain of events
which eventually led to the filing by therein petitioners of a complaint for regularization, later converted into one for illegal dismissal,[18] as well as
Navarette's subsequent filing of her own complaint for illegal dismissal against MBI and herein respondents. Thus, based on these circumstances,
there is commonality or similarity of parties. An absolute identity of parties is not necessary because a shared identity of interest will suffice for res
judicata to apply. A mere substantial identity of parties or even community of interests between the parties in the prior and subsequent cases would
be sufficient.[19]

With respect to the causes of action, the cause of action in this petition is for illegal dismissal, while in Manlangit, the causes of action are for
regularization, illegal deduction, wage distortion and attorney's fees.

Thus, all the requisites of res judicata by conclusiveness of judgment are present. The Court applies Manlangit to the instant petition moored on res
judicata by conclusiveness of judgment. To rule otherwise will not enhance and strengthen stability of judicial decisions.

With the finding that MBI is a legitimate labor contractor and is the employer of petitioner Navarette, the Court cannot, however, pass upon the issue
of whether MBI is guilty of illegal dismissal. The antecedents show that while the MBI is a party respondent in NLRC-NCR Case No. 00-10-11705-03
together with respondents MIFFI and MLCI, the ruling of Labor Arbiter Peralta-Beley is to dismiss petitioner's complaint upon a finding of a valid
dismissal grounded on serious misconduct.

Petitioner appealed said adverse decision to the NLRC against the MBI and herein respondents in NLRC CA No. 040934-04, and the NLRC found MIFFI
and MLCI liable but not MBI. As a consequence, respondents MIFFI and MLCI filed a petition under Rule 65 with the CA in CA-G.R. SP No. 112102. MBI
did not join said respondents since it was not adjudged liable by the NLRC. On the other hand, petitioner did not file a petition with the CA
questioning the NLRC decision declaring MIFFI and MLCI liable but absolving MBI. Thus, the NLRC decision dated February 27, 2004 excluding MBI
from any liability to petitioner became FINAL when petitioner no longer challenged said ruling before the CA.

WHEREFORE, premises considered, the instant petition is hereby DENIED. Accordingly, the Decision of the Court of Appeals dated October 4, 2011 and
its Resolution dated January 30, 2012 in CA-G.R. SP No. 112102 are hereby AFFIRMED.

No pronouncement as to costs.

SO ORDERED.

Villarama, Jr., Perez,* Reyes, and Jardeleza, JJ., concur.

June 8, 2015

NOTICE OF JUDGMENT

Sirs / Mesdames:

Please take notice that on February 11, 2015 a Decision, copy attached hereto, was rendered by the Supreme Court in the above-entitled case, the
original of which was received by this Office on June 8, 2015 at 1:18 p.m.

Very truly yours,

WILFRFDO V. LAPITAN

Division Clerk of Court

* Additional member per Raffle dated March 28, 2012.

19.

Republic of the Philippines

SUPREME COURT

Baguio City

FIRST DIVISION

G.R. No. 192998 April 2, 2014

BERNARD A. TENAZAS, JAIME M. FRANCISCO and ISIDRO G. ENDRACA, Petitioners,

vs.

R. VILLEGAS TAXI TRANSPORT and ROMUALDO VILLEGAS, Respondents.

DECISION
REYES, J.:

This is a petition for review on certiorari1 filed under Rule 45 of the Rules of Court, assailing the Decision2 dated March 11, 2010 and Resolution3
dated June 28, 2010 of the Court of Appeals (CA) in CA-G.R. SP No. 111150, which affirmed with modification the Decision4 dated June 23, 2009 of the
National Labor Relations Commission (NLRC) in NLRC LAC Case No. 07-002648-08.

The Antecedent Facts

On July 4, 2007, Bernard A. Tenazas (Tenazas) and Jaime M. Francisco (Francisco) filed a complaint for illegal dismissal against R. Villegas Taxi Transport
and/or Romualdo Villegas (Romualdo) and Andy Villegas (Andy) (respondents). At that time, a similar case had already been filed by Isidro G. Endraca
(Endraca) against the same respondents. The two (2) cases were subsequently consolidated.5

In their position paper,6 Tenazas, Francisco and Endraca (petitioners) alleged that they were hired and dismissed by the respondents on the following
dates:

Name Date of Hiring Date of Dismissal Salary

Bernard A. Tenazas 10/1997 07/03/07 Boundary System

Jaime M. Francisco 04/10/04 06/04/07 Boundary System

Isidro G. Endraca 04/2000 03/06/06 Boundary System7

Relaying the circumstances of his dismissal, Tenazas alleged that on July 1, 2007, the taxi unit assigned to him was sideswiped by another vehicle,
causing a dent on the left fender near the driver seat. The cost of repair for the damage was estimated at ₱500.00. Upon reporting the incident to the
company, he was scolded by respondents Romualdo and Andy and was told to leave the garage for he is already fired. He was even threatened with
physical harm should he ever be seen in the company’s premises again. Despite the warning, Tenazas reported for work on the following day but was
told that he can no longer drive any of the company’s units as he is already fired.8

Francisco, on the other hand, averred that his dismissal was brought about by the company’s unfounded suspicion that he was organizing a labor
union. He was instantaneously terminated, without the benefit of procedural due process, on June 4, 2007.9

Endraca, for his part, alleged that his dismissal was instigated by an occasion when he fell short of the required boundary for his taxi unit. He related
that before he was dismissed, he brought his taxi unit to an auto shop for an urgent repair. He was charged the amount of ₱700.00 for the repair
services and the replacement parts. As a result, he was not able to meet his boundary for the day. Upon returning to the company garage and
informing the management of the incident, his driver’s license was confiscated and was told to settle the deficiency in his boundary first before his
license will be returned to him. He was no longer allowed to drive a taxi unit despite his persistent pleas.10

For their part, the respondents admitted that Tenazas and Endraca were employees of the company, the former being a regular driver and the latter a
spare driver. The respondents, however, denied that Francisco was an employee of the company or that he was able to drive one of the company’s
units at any point in time.11

The respondents further alleged that Tenazas was never terminated by the company. They claimed that on July 3, 2007, Tenazas went to the company
garage to get his taxi unit but was informed that it is due for overhaul because of some mechanical defects reported by the other driver who takes
turns with him in using the same. He was thus advised to wait for further notice from the company if his unit has already been fixed. On July 8, 2007,
however, upon being informed that his unit is ready for release, Tenazas failed to report back to work for no apparent reason.12

As regards Endraca, the respondents alleged that they hired him as a spare driver in February 2001. They allow him to drive a taxi unit whenever their
regular driver will not be able to report for work. In July 2003, however, Endraca stopped reporting for work without informing the company of his
reason. Subsequently, the respondents learned that a complaint for illegal dismissal was filed by Endraca against them. They strongly maintained,
however, that they could never have terminated Endraca in March 2006 since he already stopped reporting for work as early as July 2003. Even then,
they expressed willingness to accommodate Endraca should he wish to work as a spare driver for the company again since he was never really
dismissed from employment anyway.13

On May 29, 2008, the petitioners, by registered mail, filed a Motion to Admit Additional Evidence.14 They alleged that after diligent efforts, they were
able to discover new pieces of evidence that will substantiate the allegations in their position paper. Attached with the motion are the following: (a)
Joint Affidavit of the petitioners;15 (2) Affidavit of Good Faith of Aloney Rivera, a co-driver;16 (3) pictures of the petitioners wearing company
shirts;17 and (4) Tenazas’ Certification/Record of Social Security System (SSS) contributions.18

The Ruling of the Labor Arbiter

On May 30, 2008, the Labor Arbiter (LA) rendered a Decision,19 which pertinently states, thus:

In the case of complainant Jaime Francisco, respondents categorically denied the existence of an employer-employee relationship. In this situation,
the burden of proof shifts to the complainant to prove the existence of a regular employment. Complainant Francisco failed to present evidence of
regular employment available to all regular employees, such as an employment contract, company ID, SSS, withholding tax certificates, SSS
membership and the like.

In the case of complainant Isidro Endraca, respondents claim that he was only an extra driver who stopped reporting to queue for available taxi units
which he could drive. In fact, respondents offered him in their Position Paper on record, immediate reinstatement as extra taxi driver which offer he
refused.

In case of Bernard Tenazas, he was told to wait while his taxi was under repair but he did not report for work after the taxi was repaired.
Respondents[,] in their Position Paper, on record likewise, offered him immediate reinstatement, which offer he refused.

We must bear in mind that the complaint herein is one of actual dismissal. But there was no formal investigations, no show cause memos, suspension
memos or termination memos were never issued. Otherwise stated, there is no proof of overt act of dismissal committed by herein respondents.

We are therefore constrained to rule that there was no illegal dismissal in the case at bar.

The situations contemplated by law for entitlement to separation pay does [sic] not apply.

WHEREFORE, premises considered, instant consolidated complaints are hereby dismissed for lack of merit.

SO ORDERED.20

The Ruling of the NLRC

Unyielding, the petitioners appealed the decision of the LA to the NLRC. Subsequently, on June 23, 2009, the NLRC rendered a Decision,21 reversing
the appealed decision of the LA, holding that the additional pieces of evidence belatedly submitted by the petitioners sufficed to establish the
existence of employer-employee relationship and their illegal dismissal. It held, thus:

In the challenged decision, the Labor Arbiter found that it cannot be said that the complainants were illegally dismissed, there being no showing, in
the first place, that the respondent [sic] terminated their services. A portion thereof reads:

"We must bear in mind that the complaint herein is one of actual dismissal. But there were no formal investigations, no show cause memos,
suspension memos or termination memos were never issued. Otherwise stated, there is no proof of overt act of dismissal committed by herein
respondents.

We are therefore constrained to rule that there was no illegal dismissal in the case at bar."

Issue: [W]hether or not the complainants were illegally dismissed from employment.

It is possible that the complainants’ Motion to Admit Additional Evidence did not reach the Labor Arbiter’s attention because he had drafted the
challenged decision even before they submitted it, and thereafter, his staff attended only to clerical matters, and failed to bring the motion in question
to his attention. It is now up to this Commission to consider the complainants’ additional evidence. Anyway, if this Commission must consider
evidence submitted for the first time on appeal (Andaya vs. NLRC, G.R. No. 157371, July 15, 2005), much more so must it consider evidence that was
simply overlooked by the Labor Arbiter.

Among the additional pieces of evidence submitted by the complainants are the following: (1) joint affidavit (records, p. 51-52) of the three (3)
complainants; (2) affidavit (records, p. 53) of Aloney Rivera y Aldo; and (3) three (3) pictures (records, p. 54) referred to by the complainant in their
joint affidavit showing them wearing t-shirts bearing the name and logo of the respondent’s company.

xxxx

WHEREFORE, the decision appealed from is hereby REVERSED. Respondent Rom[u]aldo Villegas doing business under the name and style Villegas Taxi
Transport is hereby ordered to pay the complainants the following (1) full backwages from the date of their dismissal (July 3, 2007 for Tena[z]as, June
4, 2004 for Francisco, and March 6, 2006 for Endraca[)] up to the date of the finality of this decision[;] (2) separation pay equivalent to one month for
every year of service; and (3) attorney’s fees equivalent to ten percent (10%) of the total judgment awards.

SO ORDERED.22

On July 24, 2009, the respondents filed a motion for reconsideration but the NLRC denied the same in its Resolution23 dated September 23, 2009.

The Ruling of the CA

Unperturbed, the respondents filed a petition for certiorari with the CA. On March 11, 2010, the CA rendered a Decision,24 affirming with
modification the Decision dated June 23, 2009 of the NLRC. The CA agreed with the NLRC’s finding that Tenazas and Endraca were employees of the
company, but ruled otherwise in the case of Francisco for failing to establish his relationship with the company. It also deleted the award of separation
pay and ordered for reinstatement of Tenazas and Endraca. The pertinent portions of the decision read as follows:

At the outset, We declare that respondent Francisco failed to prove that an employer-employee relationship exists between him and R. Transport. If
there is no employer-employee relationship in the first place, the duty of R. Transport to adhere to the labor standards provisions of the Labor Code
with respect to Francisco is questionable.

xxxx

Although substantial evidence is not a function of quantity but rather of quality, the peculiar environmental circumstances of the instant case demand
that something more should have been proffered. Had there been other proofs of employment, such as Francisco’s inclusion in R.R.

Transport’s payroll, this Court would have affirmed the finding of employer-employee relationship.1âwphi1 The NLRC, therefore, committed grievous
error in ordering R. Transport to answer for Francisco’s claims.

We now tackle R. Transport’s petition with respect to Tenazas and Endraca, who are both admitted to be R. Transport’s employees. In its petition, R.
Transport puts forth the theory that it did not terminate the services of respondents but that the latter deliberately abandoned their work. We cannot
subscribe to this theory.

xxxx

Considering that the complaints for illegal dismissal were filed soon after the alleged dates of dismissal, it cannot be inferred that respondents Tenazas
and Endraca intended to abandon their employment. The complainants for dismissal are, in themselves, pleas for the continuance of employment.
They are incompatible with the allegation of abandonment. x x x.

For R. Transport’s failure to discharge the burden of proving that the dismissal of respondents Tenazas and Endraca was for a just cause, We are
constrained to uphold the NLRC’s conclusion that their dismissal was not justified and that they are entitled to back wages. Because they were illegally
dismissed, private respondents Tenazas and Endraca are entitled to reinstatement and back wages x x x.

xxxx

However, R. Transport is correct in its contention that separation pay should not be awarded because reinstatement is still possible and has been
offered. It is well[-]settled that separation pay is granted only in instances where reinstatement is no longer feasible or appropriate, which is not the
case here.

xxxx

WHEREFORE, the Decision of the National Labor Relations Commission dated 23 June 2009, in NLRC LAC Case No. 07-002648-08, and its Resolution
dated 23 September 2009 denying reconsideration thereof are AFFIRMED with MODIFICATION in that the award of Jaime Francisco’s claims is
DELETED. The separation pay granted in favor of Bernard Tenazas and Isidro Endraca is, likewise, DELETED and their reinstatement is ordered instead.

SO ORDERED.25 (Citations omitted)

On March 19, 2010, the petitioners filed a motion for reconsideration but the same was denied by the CA in its Resolution26 dated June 28, 2010.

Undeterred, the petitioners filed the instant petition for review on certiorari before this Court on July 15, 2010.

The Ruling of this Court

The petition lacks merit.

Pivotal to the resolution of the instant case is the determination of the existence of employer-employee relationship and whether there was an illegal
dismissal. Remarkably, the LA, NLRC and the CA had varying assessment on the matters at hand. The LA believed that, with the admission of the
respondents, there is no longer any question regarding the status of both Tenazas and Endraca being employees of the company. However, he ruled
that the same conclusion does not hold with respect to Francisco whom the respondents denied to have ever employed or known. With the
respondents’ denial, the burden of proof shifts to Francisco to establish his regular employment. Unfortunately, the LA found that Francisco failed to
present sufficient evidence to prove regular employment such as company ID, SSS membership, withholding tax certificates or similar articles. Thus,
he was not considered an employee of the company. Even then, the LA held that Tenazas and Endraca could not have been illegally dismissed since
there was no overt act of dismissal committed by the respondents.27

On appeal, the NLRC reversed the ruling of the LA and ruled that the petitioners were all employees of the company. The NLRC premised its conclusion
on the additional pieces of evidence belatedly submitted by the petitioners, which it supposed, have been overlooked by the LA owing to the time
when it was received by the said office. It opined that the said pieces of evidence are sufficient to establish the circumstances of their illegal
termination. In particular, it noted that in the affidavit of the petitioners, there were allegations about the company’s practice of not issuing
employment records and this was not rebutted by the respondents. It underscored that in a situation where doubt exists between evidence presented
by the employer and the employee, the scales of justice must be tilted in favor of the employee. It awarded the petitioners with: (1) full backwages
from the date of their dismissal up to the finality of the decision; (2) separation pay equivalent to one month of salary for every year of service; and
(3) attorney’s fees.

On petition for certiorari, the CA affirmed with modification the decision of the NLRC, holding that there was indeed an illegal dismissal on the part of
Tenazas and Endraca but not with respect to Francisco who failed to present substantial evidence, proving that he was an employee of the
respondents. The CA likewise dismissed the respondents’ claim that Tenazas and Endraca abandoned their work, asseverating that immediate filing of
a complaint for illegal dismissal and persistent pleas for continuance of employment are incompatible with abandonment. It also deleted the NLRC’s
award of separation pay and instead ordered that Tenazas and Endraca be reinstated.28

"Well-settled is the rule that the jurisdiction of this Court in a petition for review on certiorari under Rule 45 of the Revised Rules of Court is limited to
reviewing only errors of law, not of fact, unless the factual findings complained of are completely devoid of support from the evidence on record, or
the assailed judgment is based on a gross misapprehension of facts."29 The Court finds that none of the mentioned circumstances is present in this
case.
In reviewing the decision of the NLRC, the CA found that no substantial evidence was presented to support the conclusion that Francisco was an
employee of the respondents and accordingly modified the NLRC decision. It stressed that with the respondents’ denial of employer-employee
relationship, it behooved Francisco to present substantial evidence to prove that he is an employee before any question on the legality of his
supposed dismissal becomes appropriate for discussion. Francisco, however, did not offer evidence to substantiate his claim of employment with the
respondents. Short of the required quantum of proof, the CA correctly ruled that the NLRC’s finding of illegal dismissal and the monetary awards
which necessarily follow such ruling lacked factual and legal basis and must therefore be deleted.

The action of the CA finds support in Anonas Construction and Industrial Supply Corp., et al. v. NLRC, et al.,30 where the Court reiterated:

[J]udicial review of decisions of the NLRC via petition for certiorari under Rule 65, as a general rule, is confined only to issues of lack or excess of
jurisdiction and grave abuse of discretion on the part of the NLRC. The CA does not assess and weigh the sufficiency of evidence upon which the LA
and the NLRC based their conclusions. The issue is limited to the determination of whether or not the NLRC acted without or in excess of its
jurisdiction, or with grave abuse of discretion in rendering the resolution, except if the findings of the NLRC are not supported by substantial
evidence.31 (Citation omitted and emphasis ours)

It is an oft-repeated rule that in labor cases, as in other administrative and quasi-judicial proceedings, "the quantum of proof necessary is substantial
evidence, or such amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion."32 "[T]he burden of proof
rests upon the party who asserts the affirmative of an issue."33 Corollarily, as Francisco was claiming to be an employee of the respondents, it is
incumbent upon him to proffer evidence to prove the existence of said relationship.

"[I]n determining the presence or absence of an employer-employee relationship, the Court has consistently looked for the following incidents, to wit:
(a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to control the
employee on the means and methods by which the work is accomplished. The last element, the so-called control test, is the most important
element."34

There is no hard and fast rule designed to establish the aforesaid elements. Any competent and relevant evidence to prove the relationship may be
admitted. Identification cards, cash vouchers, social security registration, appointment letters or employment contracts, payrolls, organization charts,
and personnel lists, serve as evidence of employee status.35

In this case, however, Francisco failed to present any proof substantial enough to establish his relationship with the respondents. He failed to present
documentary evidence like attendance logbook, payroll, SSS record or any personnel file that could somehow depict his status as an employee. Anent
his claim that he was not issued with employment records, he could have, at least, produced his social security records which state his contributions,
name and address of his employer, as his co-petitioner Tenazas did. He could have also presented testimonial evidence showing the respondents’
exercise of control over the means and methods by which he undertakes his work. This is imperative in light of the respondents’ denial of his
employment and the claim of another taxi operator, Emmanuel Villegas (Emmanuel), that he was his employer. Specifically, in his Affidavit,36
Emmanuel alleged that Francisco was employed as a spare driver in his taxi garage from January 2006 to December 2006, a fact that the latter failed to
deny or question in any of the pleadings attached to the records of this case. The utter lack of evidence is fatal to Francisco’s case especially in cases
like his present predicament when the law has been very lenient in not requiring any particular form of evidence or manner of proving the presence of
employer-employee relationship.

In Opulencia Ice Plant and Storage v. NLRC,37 this Court emphasized, thus:

No particular form of evidence is required to prove the existence of an employer-employee relationship. Any competent and relevant evidence to
prove the relationship may be admitted. For, if only documentary evidence would be required to show that relationship, no scheming employer would
ever be brought before the bar of justice, as no employer would wish to come out with any trace of the illegality he has authored considering that it
should take much weightier proof to invalidate a written instrument.38

Here, Francisco simply relied on his allegation that he was an employee of the company without any other evidence supporting his claim.
Unfortunately for him, a mere allegation in the position paper is not tantamount to evidence.39 Bereft of any evidence, the CA correctly ruled that
Francisco could not be considered an employee of the respondents.

The CA’s order of reinstatement of Tenazas and Endraca, instead of the payment of separation pay, is also well in accordance with prevailing
jurisprudence. In Macasero v. Southern Industrial Gases Philippines,40 the Court reiterated, thus:

[A]n illegally dismissed employee is entitled to two reliefs: backwages and reinstatement.1âwphi1 The two reliefs provided are separate and distinct.
In instances where reinstatement is no longer feasible because of strained relations between the employee and the employer, separation pay is
granted. In effect, an illegally dismissed employee is entitled to either reinstatement, if viable, or separation pay if reinstatement is no longer viable,
and backwages.

The normal consequences of respondents’ illegal dismissal, then, are reinstatement without loss of seniority rights, and payment of backwages
computed from the time compensation was withheld up to the date of actual reinstatement. Where reinstatement is no longer viable as an option,
separation pay equivalent to one (1) month salary for every year of service should be awarded as an alternative. The payment of separation pay is in
addition to payment of backwages.41 (Emphasis supplied)

Clearly, it is only when reinstatement is no longer feasible that the payment of separation pay is ordered in lieu thereof. For instance, if reinstatement
would only exacerbate the tension and strained relations between the parties, or where the relationship between the employer and the employee has
been unduly strained by reason of their irreconcilable differences, it would be more prudent to order payment of separation pay instead of
reinstatement.42
This doctrine of strained relations, however, should not be used recklessly or applied loosely43 nor be based on impression alone. "It bears to stress
that reinstatement is the rule and, for the exception of strained relations to apply, it should be proved that it is likely that if reinstated, an atmosphere
of antipathy and antagonism would be generated as to adversely affect the efficiency and productivity of the employee concerned."44

Moreover, the existence of strained relations, it must be emphasized, is a question of fact. In Golden Ace Builders v. Talde,45 the Court underscored:

Strained relations must be demonstrated as a fact, however, to be adequately supported by evidence—substantial evidence to show that the
relationship between the employer and the employee is indeed strained as a necessary consequence of the judicial controversy.46 (Citations omitted
and emphasis ours)

After a perusal of the NLRC decision, this Court failed to find the factual basis of the award of separation pay to the petitioners. The NLRC decision did
not state the facts which demonstrate that reinstatement is no longer a feasible option that could have justified the alternative relief of granting
separation pay instead.

The petitioners themselves likewise overlooked to allege circumstances which may have rendered their reinstatement unlikely or unwise and even
prayed for reinstatement alongside the payment of separation pay in their position paper.47 A bare claim of strained relations by reason of
termination is insufficient to warrant the granting of separation pay. Likewise, the filing of the complaint by the petitioners does not necessarily
translate to strained relations between the parties. As a rule, no strained relations should arise from a valid and legal act asserting one’s right.48
Although litigation may also engender a certain degree of hostility, the understandable strain in the parties’ relation would not necessarily rule out
reinstatement which would, otherwise, become the rule rather the exception in illegal dismissal cases.49 Thus, it was a prudent call for the CA to
delete the award of separation pay and order for reinstatement instead, in accordance with the general rule stated in Article 27950 of the Labor Code.

Finally, the Court finds the computation of the petitioners' backwages at the rate of ₱800.00 daily reasonable and just under the circumstances. The
said rate is consistent with the ruling of this Court in Hyatt Taxi Services, Inc. v. Catinoy,51 which dealt with the same matter.

WHEREFORE, in view of the foregoing disquisition, the petition for review on certiorari is DENIED. The Decision dated March 11, 2010 and Resolution
dated June 28, 2010 of the Court of Appeals in CA-G.R. SP No. 111150 are AFFIRMED.

SO ORDERED.

BIENVENIDO L. REYES

Associate Justice

WE CONCUR:

MARIA LOURDES P.A. SERENO

Chief Justice

Chairperson

TERESITA J. LEONARDO-DE CASTRO

Associate Justice LUCAS P. BERSAMIN

Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice

20.

G.R. No. 186621, March 12, 2014 - SOUTH EAST INTERNATIONAL RATTAN, INC. AND/OR ESTANISLAO1 AGBAY, Petitioners, v. JESUS J.
COMING, Respondent.

PHILIPPINE SUPREME COURT DECISIONS

 FIRST DIVISION

G.R. No. 186621, March 12, 2014

SOUTH EAST INTERNATIONAL RATTAN, INC. AND/OR ESTANISLAO1 AGBAY, Petitioners, v. JESUS J. COMING, Respondent.

DECISION

VILLARAMA, JR., J.:

Before the Court is a petition for review on certiorari under Rule 45 to reverse and set aside the Decision2 dated February 21, 2008 and Resolution3
dated February 9, 2009 of the Court of Appeals (CA) in CA�G.R. CEB�SP No. 02113.

Petitioner South East International Rattan, Inc. (SEIRI) is a domestic corporation engaged in the business of manufacturing and exporting furniture to
various countries with principal place of business at Paknaan, Mandaue City, while petitioner Estanislao Agbay, as per records, is the President and
General Manager of SEIRI.4

On November 3, 2003, respondent Jesus J. Coming filed a complaint5 for illegal dismissal, underpayment of wages, non �payment of holiday pay,
13th month pay and service incentive leave pay, with prayer for reinstatement, back wages, damages and attorney �s fees.

Respondent alleged that he was hired by petitioners as Sizing Machine Operator on March 17, 1984. � His work schedule is from 8:00 a.m. to 5:00
p.m.� Initially, his compensation was on �pakiao� basis but sometime in June 1984, it was fixed at P150.00 per day which was paid weekly. � In
1990, without any apparent reason, his employment was interrupted as he was told by petitioners to resume work in two months time. � Being an
uneducated person, respondent was persuaded by the management as well as his brother not to complain, as otherwise petitioners might decide not
to call him back for work.� Fearing such consequence, respondent accepted his fate. � Nonetheless, after two months he reported back to work
upon order of management.6

Despite being an employee for many years with his work performance never questioned by petitioners, respondent was dismissed on January 1, 2002
without lawful cause.� He was told that he will be terminated because the company is not doing well financially and that he would be called back to
work only if they need his services again.� Respondent waited for almost a year but petitioners did not call him back to work. � When he finally
filed the complaint before the regional arbitration branch, his brother Vicente was used by management to persuade him to withdraw the case.7

On their part, petitioners denied having hired respondent asserting that SEIRI was incorporated only in 1986, and that respondent actually worked for
SEIRI�s furniture suppliers because when the company started in 1987 it was engaged purely in buying and exporting furniture and its business
operations were suspended from the last quarter of 1989 to August 1992. � They stressed that respondent was not included in the list of employees
submitted to the Social Security System (SSS).� Moreover, respondent �s brother, Vicente Coming, � executed an affidavit8 in support of
petitioners� position while Allan Mayol and Faustino Apondar issued notarized certifications9 that respondent worked for them instead.10

With the denial of petitioners that respondent was their employee, the latter submitted an affidavit11 signed by five former co �workers stating that
respondent was one of the pioneer employees who worked in SEIRI for almost twenty years.

In his Decision12 dated April 30, 2004, Labor Arbiter Ernesto F. Carreon ruled that respondent is a regular employee of SEIRI and that the termination
of his employment was illegal.� The dispositive portion of the decision reads:chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent South East (Int �l.) Rattan, Inc. to pay complainant Jesus J.
Coming the following:chanRoblesvirtualLawlibrary

1. Separation pay

P114,400.00

2. Backwages

P 30,400.00

3. Wage differential

P 15,015.00

4. 13th month pay

P 5,958.00

5. Holiday pay

P 4,000.00

6. Service incentive leave pay

P 2,000.00

Total award

P171,773.00

The other claims and the case against respondent Estanislao Agbay are dismissed for lack of merit.

SO ORDERED.13

Petitioners appealed to the National Labor Relations Commission (NLRC) �Cebu City where they submitted the following additional evidence: (1)
copies of SEIRI�s payrolls and individual pay records of employees;14 (2) affidavit15 of SEIRI �s Treasurer, Angelina Agbay; and (3) second affidavit16
of Vicente Coming.

On July 28, 2005, the NLRC�s Fourth Division rendered its Decision,17 the dispositive portion of which states:chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, the decision of the Labor Arbiter is hereby SET ASIDE and VACATED and a new one entered DISMISSING the
complaint.

SO ORDERED.18

The NLRC likewise denied respondent�s motion for reconsideration.19

Respondent elevated the case to the CA via a petition for certiorari under Rule 65.

By Decision dated February 21, 2008, the CA reversed the NLRC and ruled that there existed an employer �employee relationship between
petitioners and respondent who was dismissed without just and valid cause. � The CA thus decreed:chanRoblesvirtualLawlibrary

WHEREFORE, in view of the foregoing, the petition is hereby GRANTED.� The assailed Decision dated July 28, 2005 issued by the National Labor
Relations Commission (NLRC), Fourth Division, Cebu City in NLRC Case No. V �000625 �2004 is REVERSED and SET ASIDE. � The Decision of the
Labor Arbiter dated April 30, 2004 is REINSTATED with MODIFICATION on the computation of backwages which should be computed from the time of
illegal termination until the finality of this decision.

Further, the Labor Arbiter is directed to make the proper adjustment in the computation of the award of separation pay as well as the monetary
awards of wage differential, 13th month pay, holiday pay and service incentive leave pay.

SO ORDERED.20

Petitioners filed a motion for reconsideration but the CA denied it under Resolution dated February 9, 2009.

Hence, this petition raising the following issues:chanRoblesvirtualLawlibrary

6.1

WHETHER UNDER THE FACTS AND EVIDENCE ON RECORD, THE FINDING OF THE HONORABLE COURT OF APPEALS THAT THERE EXISTS
EMPLOYER�EMPLOYEE RELATIONSHIP BETWEEN PETITIONERS AND RESPONDENT IS IN ACCORD WITH LAW AND APPLICABLE DECISIONS OF THIS
HONORABLE COURT.

6.2

WHETHER THE HONORABLE COURT OF APPEALS CORRECTLY APPRECIATED IN ACCORDANCE WITH APPLICABLE LAW AND JURISPRUDENCE THE
EVIDENCE PRESENTED BY BOTH PARTIES.

6.3

WHETHER UNDER THE FACTS AND EVIDENCE PRESENTED, THE FINDING OF THE HONORABLE COURT OF APPEALS THAT PETITIONERS ARE LIABLE FOR
ILLEGAL DISMISSAL OF RESPONDENT IS IN ACCORD WITH APPLICABLE LAW AND JURISPRUDENCE.

6.4

WHETHER UNDER THE FACTS PRESENTED, THE RULING OF THE HONORABLE COURT OF APPEALS THAT THE BACKWAGES DUE THE RESPONDENT
SHOULD BE COMPUTED FROM THE TIME OF ILLEGAL TERMINATION UNTIL THE FINALITY OF THE DECISION IS SUPPORTED BY PREVAILING
JURISPRUDENCE.21

Resolution of the first issue is paramount in view of petitioners � denial of the existence of employer �employee relationship.

The issue of whether or not an employer�employee relationship exists in a given case is essentially a question of fact. � As a rule, this Court is not a
trier of facts and this applies with greater force in labor cases.22 � Only errors of law are generally reviewed by this Court.23 � This rule is not
absolute, however, and admits of exceptions.� For one, the Court may look into factual issues in labor cases when the factual findings of the Labor
Arbiter, the NLRC, and the CA are conflicting.24 � Here, the findings of the NLRC differed from those of the Labor Arbiter and the CA, which compels
the Court�s exercise of its authority to review and pass upon the evidence presented and to draw its own conclusions therefrom.25

To ascertain the existence of an employer�employee relationship jurisprudence has invariably adhered to the four �fold test, to wit: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee �s
conduct, or the so�called �control test.�26� In resolving the issue of whether such relationship exists in a given case, substantial evidence �
that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion � is sufficient. Although no particular
form of evidence is required to prove the existence of the relationship, and any competent and relevant evidence to prove the relationship may be
admitted, a finding that the relationship exists must nonetheless rest on substantial evidence.27

In support of their claim that respondent was not their employee, petitioners presented � Employment Reports to the SSS from 1987 to 2002, the
Certifications issued by Mayol and Apondar, two affidavits of Vicente Coming, payroll sheets (1999 �2000), individual pay envelopes and employee
earnings records (1999�2000) and affidavit of Angelina Agbay (Treasurer and Human Resources Officer). � The payroll and pay records did not
include the name of respondent.� The affidavit of Ms. Agbay stated that after SEIRI started its business in 1986 purely on export trading, it ceased
operations in 1989 as evidenced by Certification dated January 18, 1994 from the Securities and Exchange Commission (SEC); that when business
resumed in 1992, SEIRI undertook only a little of manufacturing; that the company never hired any workers for varnishing and pole sizing because it
bought the same from various suppliers, including Faustino Apondar; � respondent was never hired by SEIRI; and while it is true that Mr. Estanislao
Agbay is the company President, he never dispensed the salaries of workers.28

In his first affidavit, Vicente Coming averred that:chanRoblesvirtualLawlibrary

6. [Jesus Coming] is a furniture factory worker.� In 1982 to 1986, he was working with Ben Mayol as round core maker/splitter.

7.� Thereafter, we joined Okay Okay Yard owned by Amelito Montececillo. � This is a rattan trader with business address near Cebu Rattan Factory
on a �Pakiao� basis.

8.� However, Jesus and I did not stay long at Okay Okay Yard and instead we joined Eleuterio Agbay in Labogon, Cebu in 1989. � In 1991, we went
back to Okay Okay located near the residence of Atty. Vicente de la Serna in Mandaue City. � We were on a �pakiao � basis. � We stayed put until
1993 when we resigned and joined Dodoy Luna in Labogon, Mandaue City as classifier until 1995. � In 1996[,] Jesus rested. � It was only in 1997 that
he worked back.� He replaced me, as a classifier in Rattan Traders owned by Allan Mayol. � But then, towards the end of the year, he left the factory
and relaxed in our place of birth, in Sogod, Cebu.

9.� It was only towards the end of 1999 that Jesus was taken back by Allan Mayol as sizing machine operator. � However, the work was off and on
basis.� Not regular in nature, he was harping a side line job with me knowing that I am now working with Faustino Apondar that supplies rattan
furniture�s [sic] to South East (Int�l) Rattan, Inc.� As a brother, I allowed Jesus to work with me and collect the proceeds of his services as part of
my collectibles from Faustino Apondar since I was on a �pakiao � basis. � He was working at his pleasure. � Which means, he works if he likes to?
� That will be until 10:00 o�clock in the evening.

x x x x29

The Certification dated January 20, 2004 of Allan Mayol reads:chanRoblesvirtualLawlibrary

This is to certify that I personally know Jesus Coming, the brother of Vicente Coming. � Jesus is a rattan factory worker and he was working with me
as rattan pole sizing/classifier of my business from 1997 up to part of 1998 when he left my factory at will. � I took him back towards the end of 1999,
this time as a sizing machine operator.� In all these years, his services are not regular. � He works only if he likes to.30

Faustino Apondar likewise issued a Certification which states:chanRoblesvirtualLawlibrary

This is to certify that I am a maker/supplier of finished Rattan Furniture. � As such, I have several rattan furniture workers under me, one of whom is
Vicente Coming, the brother of Jesus Coming.

That sometime in 1999, Vicente pleaded to me for a side line job of his brother, Jesus who was already connected with Allan Mayol. � Having
vouched for the integrity of his brother and knowing that the job is temporary in character, I allowed Jesus to work with his brother Vicente.�
However, the proceeds will be collected together with his brother Vicente since it was the latter who was working with me. � He renders services to
his brother work only after the regular working hours but off and on basis.31

On the other hand, respondent submitted the affidavit executed by Eleoterio Brigoli, Pedro Brigoli, Napoleon Coming, Efren Coming and Gil Coming
who all attested that respondent was their co�worker at SEIRI.� Their affidavit reads:chanRoblesvirtualLawlibrary

We, the undersigned, all of legal ages, Filipino, and resident[s] of Cebu, after having been duly sworn to in accordance with law, depose and
say:chanRoblesvirtualLawlibrary

That we are former employees of SOUTH EAST RATTAN which is owned by Estan Eslao Agbay;

That we personally know JESUS COMING considering that we worked together in one company SOUTH EAST RATTANT [sic];

That we together with JESUS COMING are all under the employ of ESTAN ESLAO AGBAY considering that the latter is the one directly paying us and
holds the absolute control of all aspects of our employment;
That it is not true that JESUS COMING is under the employ of one person other than ESTAN ESLAO AGBAY OF SOUTH EAST RATTAN;

That Jesus Coming is one of the pioneer employees of SOUTH EAST RATTAN and had been employed therein for almost twenty years;

That we executed this affidavit to attest to the truth of the foregoing facts and to deny any contrary allegation made by the company against his
employment with SOUTH EAST RATTAN.32

In his decision, Labor Arbiter Carreon found that respondent �s work as sizing machine operator is usually necessary and desirable to the rattan
furniture business of petitioners and their failure to include respondent in the employment report to SSS is not conclusive proof that respondent is not
their employee.� As to the affidavit of Vicente Coming, Labor Arbiter Carreon did not give weight to his statement that respondent is not
petitioners� employee but that of one Faustino Apondar. � Labor Arbiter Carreon was not convinced that Faustino Apondar is an independent
contractor who has a contractual relationship with petitioners.

In reversing the Labor Arbiter, the NLRC reasoned as follows:chanRoblesvirtualLawlibrary

First complainant alleged that he worked continuously from March 17, 1984 up to January 21, 2002. � Records reveal however that South East
(Int�l.) Rattan, Inc. was incorporated only last July 18, 1986 (p. 55 records)[.] � Moreover, when they started to actually operate in 1987, the
company was engaged purely on �buying and exporting rattan furniture� hence no manufacturing employees were hired. � Furthermore, from the
last quarter of 1989 up to August of 1992, the company suspended operations due to economic reverses as per Certification issued by the Securities
and Exchange Commission (p. 56 records)[.]

Second, for all his insistence that he was a regular employee, complainant failed to present a single payslip, voucher or a copy of a company payroll
showing that he rendered service during the period indicated therein.� x x x

From the above established facts we are inclined to give weight and credence to the Certifications of Allan Mayol and Faustino Apondar, both
suppliers of finished Rattan Furniture (pp. 442�43, records).� It appears that complainant first worked with Allan Mayol and later with Faustino
Apondar upon the proddings of his brother Vicente.� Vicente�s affidavit as to complainant �s employment history was more detailed and
forthright.� x x x

xxxx

In the case at bar, there is likewise substantial evidence to support our findings that complainant was not an employee of respondents. � Thus:

Complainant�s name does not appear in the list of employees reported to the SSS.

is name does not also appear in the sample payrolls of respondents � employees.

The certification of Allan Mayol and Fasutino Apondar[,] supplier of finished rattan products[,] that complainant had at one time or another worked
with them.

The Affidavit of Vicente Coming, complainant�s full brother[,] attesting that complainant had never been an employee of respondent. � The only
connection was that their employer Faustino Apondar supplies finished rattan products to respondents.33

On the other hand, the CA gave more credence to the declarations of the five former employees of petitioners that respondent was their co �worker
in SEIRI.�� One of said affiants is Vicente Coming�s own son, Gil Coming. � Vicente averred in his second affidavit that when he confronted his
son, the latter explained that he was merely told by their Pastor to sign the affidavit as it will put an end to the controversy. � Vicente insisted that his
son did not know the contents and implications of the document he signed. � As to the absence of respondent �s name in the payroll and SSS
employment report, the CA observed that the payrolls submitted were only from January 1, 1999 to December 29, 2000 and not the entire period of
eighteen years when respondent claimed he worked for SEIRI.� It further noted that the names of the five affiants, whom petitioners admitted to be
their former employees, likewise do not appear in the aforesaid documents. � According to the CA, it is apparent that petitioners maintained a
separate payroll for certain employees or willfully retained a portion of the payroll.

x x x As to the �control test�, the following facts indubitably reveal that respondents wielded control over the work performance of petitioner, to
wit: (1) they required him to work within the company premises; (2) they obliged petitioner to report every day of the week and tasked him to usually
perform the same job; (3) they enforced the observance of definite hours of work from 8 o �clock in the morning to 5 o �clock in the afternoon; (4)
the mode of payment of petitioner�s salary was under their discretion, at first paying him on pakiao basis and thereafter, on daily basis; (5) they
implemented company rules and regulations; (6) [Estanislao] Agbay directly paid petitioner �s salaries and controlled all � aspects of his
employment and (7) petitioner rendered work necessary and desirable in the business of the respondent company.34

We affirm the CA.

In Tan v. Lagrama,35� the Court held that the fact that a worker was not reported as an employee to the SSS is not conclusive proof of the absence of
employer�employee relationship.� Otherwise, an employer would be rewarded for his failure or even neglect to perform his obligation.36

Nor does the fact that respondent�s name does not appear in the payrolls and pay envelope records submitted by petitioners negate the existence
of employer�employee relationship.�� For a payroll to be utilized to disprove the employment of a person, it must contain a true and complete
list of the employee.37� In this case, the exhibits offered by petitioners before the NLRC consisting of copies of payrolls and pay earnings records are
only for the years 1999 and 2000; they do not cover the entire 18�year period during which respondent supposedly worked for SEIRI.
In their comment to the petition filed by respondent in the CA, petitioners emphasized that in the certifications issued by Mayol and Apondar, it was
shown that respondent was employed and working for them in those years he claimed to be working for SEIRI. � However, a reading of the
certification by Mayol would show that while the latter claims to have respondent under his employ in 1997, 1998 and 1999, respondent �s services
were not regular and that he works only if he wants to. � Apondar �s certification likewise stated that respondent worked for him since 1999
through his brother Vicente as �sideline� but only after regular working hours and �off and on � basis. � Even assuming the truth of the
foregoing statements, these do not foreclose respondent �s regular or full �time employment with SEIRI. �� In effect, petitioners suggest that
respondent was employed by SEIRI�s suppliers, Mayol and Apondar but no competent proof was presented as to the latter �s status as independent
contractors.

In the same comment, petitioners further admitted that the five affiants who attested to respondent �s employment with SEIRI are its former
workers whom they describe as �disgruntled workers of SEIRI� with an axe to grind against petitioners, and that their execution of affidavit in
support of respondent�s claim is �their very way of hitting back the management of SEIRI after disciplinary measures were meted against
them.�38 This allegation though was not substantiated by petitioners.� Instead, after the CA rendered its decision reversing the NLRC �s ruling,
petitioners subsequently changed their theory by denying the employment relationship with the five affiants in their motion for reconsideration,
thus:chanRoblesvirtualLawlibrary

x x x Since the five workers were occupying and working on a leased premises of the private respondent, they were called workers of SEIRI (private
respondent). Such admission however, does not connote employment.� For the truth of the matter, all of the five employees of the supplier assigned
at the leased premises of the private respondent.� Because of the recommendation of the private respondent with regards to the disciplinary
measures meted on the five workers, they wanted to hit back against the private respondent. � Their motive to implicate private respondent was to
vindicate.� Definitely, they have an axe to grind against the private respondent. � Mention has to be made that despite the dismissal of these five
(5) witnesses from their service, none of them ever went to the National Labor [Relations] Commission and invoked their rights, if any, against their
employer or at the very least against the respondent.� The reason is obvious, since they knew pretty well that they were not employees of SEIRI but
rather under the employ of Allan Mayol and Faustino Apondar, working on a leased premise of respondent. x x x39

Petitioners� admission that the five affiants were their former employees is binding upon them. � While they claim that respondent was the
employee of their suppliers Mayol and Apondar, they did not submit proof that the latter were indeed independent contractors; clearly, petitioners
failed to discharge their burden of proving their own affirmative allegation.40 � There is thus no showing that the five former employees of SEIRI
were motivated by malice, bad faith or any ill�motive in executing their affidavit supporting the claims of respondent.

In any controversy between a laborer and his master, doubts reasonably arising from the evidence are resolved in favor of the laborer.41

As a regular employee, respondent enjoys the right to security of tenure under Article 27942 of the Labor Code and may only be dismissed for a just43
or authorized44 cause, otherwise the dismissal becomes illegal.

Respondent, whose employment was terminated without valid cause by petitioners, is entitled to reinstatement without loss of seniority rights and
other privileges and to his full back wages, inclusive of allowances and other benefits or their monetary equivalent, computed from the time his
compensation was withheld from him up to the time of his actual reinstatement. Where reinstatement is no longer viable as an option, back wages
shall be computed from the time of the illegal termination up to the finality of the decision. � Separation pay equivalent to one month salary for
every year of service should likewise be awarded as an alternative in case reinstatement in not possible.45

WHEREFORE, the petition for review on certiorari is DENIED.� The Decision dated February 21, 2008 and Resolution dated February 9, 2009 of the
Court of Appeals in CA�G.R. No. CEB�SP No. 02113 are hereby AFFIRMED and UPHELD.

Petitioners to pay the costs of suit.

SO ORDERED.

Sereno, C.J., (Chairperson), Leonardo�De Castro, Bersamin, and Reyes, JJ., concur.

21.

THIRD DIVISION

[G.R. No. 159121. February 3, 2005]

PAMPLONA PLANTATION COMPANY, INC. and/or JOSE LUIS BONDOC, petitioners, vs. RODEL TINGHIL, MARYGLENN SABIHON, ESTANISLAO BOBON,
CARLITO TINGHIL, BONIFACIO TINGHIL, NOLI TINGHIL, EDGAR TINGHIL, ERNESTO ESTOMANTE, SALLY TOROY, BENIGNO TINGHIL JR., ROSE ANN NAPAO,
DIOSDADO TINGHIL, ALBERTO TINGHIL, ANALIE TINGHIL, and ANTONIO ESTOMANTE, respondents.

DECISION

PANGANIBAN, J.:

To protect the rights of labor, two corporations with identical directors, management, office and payroll should be treated as one entity only. A suit by
the employees against one corporation should be deemed as a suit against the other. Also, the rights and claims of workers should not be prejudiced
by the acts of the employer that tend to confuse them about its corporate identity. The corporate fiction must yield to truth and justice.

The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to annul the January 31, 2003 Decision[2] and the June 17, 2003
Resolution[3] of the Court of Appeals (CA) in CA-GR SP No. 62813. The assailed Decision disposed as follows:

WHEREFORE, in view of the foregoing, the petition is GRANTED. The assailed decision of public respondent NLRC dated 19 July 2000 [is] REVERSED and
SET ASIDE and a new one entered DIRECTING private respondents to reinstate petitioners, except Rufino Bacubac, Felix Torres and Antonio Canolas, to
their former positions without loss of seniority rights plus payment of full backwages. However, if reinstatement is no longer feasible, a one-month
salary for every year of service shall be paid the petitioners as ordered by the Labor Arbiter in his decision dated 31 August 1998 plus payment of full
backwages computed from date of illegal dismissal to the finality of this decision.[4]

The Decision[5] of the National Labor Relations Commission (NLRC),[6] reversed by the CA, disposed as follows:

WHEREFORE, premises considered, the decision appealed from is hereby REVERSED, and another one entered DISMISSING the complaint.[7]

The June 17, 2003 Resolution denied petitioners Motion for Reconsideration.

The Facts

The CA summarized the antecedents as follows:

Sometime in 1993, [Petitioner] Pamplona Plantations Company, Inc. (company for brevity) was organized for the purpose of taking over the operations
of the coconut and sugar plantation of Hacienda Pamplona located in Pamplona, Negros Oriental. It appears that Hacienda Pamplona was formerly
owned by a certain Mr. Bower who had in his employ several agricultural workers.

When the company took over the operation of Hacienda Pamplona in 1993, it did not absorb all the workers of Hacienda Pamplona. Some, however,
were hired by the company during harvest season as coconut hookers or sakador, coconut filers, coconut haulers, coconut scoopers or lugiteros, and
charcoal makers.

Sometime in 1995, Pamplona Plantation Leisure Corporation was established for the purpose of engaging in the business of operating tourist resorts,
hotels, and inns, with complementary facilities, such as restaurants, bars, boutiques, service shops, entertainment, golf courses, tennis courts, and
other land and aquatic sports and leisure facilities.

On 15 December 1996, the Pamplona Plantation Labor Independent Union (PAPLIU) conducted an organizational meeting wherein several
[respondents] who are either union members or officers participated in said meeting.

Upon learning that some of the [respondents] attended the said meeting, [Petitioner] Jose Luis Bondoc, manager of the company, did not allow
[respondents] to work anymore in the plantation.

Thereafter, on various dates, [respondents] filed their respective complaints with the NLRC, Sub-Regional Arbitration Branch No. VII, Dumaguete City
against [petitioners] for unfair labor practice, illegal dismissal, underpayment, overtime pay, premium pay for rest day and holidays, service incentive
leave pay, damages, attorneys fees and 13th month pay.

On 09 October 1997, [respondent] Carlito Tinghil amended his complaint to implead Pamplona Plantation Leisure Corporation x x x.

On 31 August 1998, Labor Arbiter Jose G. Gutierrez rendered a decision finding [respondents], except Rufino Bacubac, Antonio Caolas and Felix Torres
who were complainants in another case, to be entitled to separation pay.

xxxxxxxxx

[Petitioners] appealed the Labor Arbiters decision to [the] NLRC. In the assailed decision dated 19 July 2000, the NLRCs Fourth Division reversed the
Labor Arbiter, ruling that [respondents], except Carlito Tinghil, failed to implead Pamplona Plantation Leisure Corporation, an indispensable party and
that there exist no employer-employee relation between the parties.

xxxxxxxxx

[Respondents] filed a motion for reconsideration which was denied by [the] NLRC in a Resolution dated 06 December 2000.[8]

Respondents elevated the case to the CA via a Petition for Certiorari under Rule 65 of the Rules of Court.

Ruling of the Court of Appeals

Guided by the fourfold test for determining the existence of an employer-employee relationship, the CA held that respondents were employees of
petitioner-company. Finding there was a power to hire, the appellate court considered the admission of petitioners in their Comment that they had
hired respondents as coconut filers, coconut scoopers, charcoal makers, or as pieceworkers. The fact that respondents were paid by piecework did not
mean that they were not employees of the company. Further, the CA ruled that petitioners necessarily exercised control over the work they
performed, since the latter were working within the premises of the plantation. According to the CA, the mere existence -- not necessarily the actual
exercise -- of the right to control the manner of doing work sufficed to meet the fourth element of an employer-employee relation.

The appellate court also held that respondents were regular employees, because the tasks they performed were necessary and indispensable to the
operation of the company. Since there was no compliance with the twin requirements of a valid and/or authorized cause and of procedural due
process, their dismissal was illegal.

Hence, this Petition.[9]

Issues

In their Memorandum, petitioners submit the following issues for our consideration:

1. Whether or not the finding of the Court of Appeals that herein respondents are employees of Petitioner Pamplona Plantation Company, Inc. is
contrary to the admissions of the respondents themselves.

2. Whether or not the Court of Appeals has decided in a way not in accord with law and jurisprudence, and with grave abuse of discretion, in not
dismissing the respondents complaint for failure to implead Pamplona Plantation Leisure Corp., which is an indispensable party to this case.

3. Whether or not the Court of Appeals has decided in a way not in accord with law and jurisprudence, and with grave abuse of discretion in ordering
reinstatement or payment of separation pay and backwages to the respondents, considering the lack of employer-employee relationship between
petitioner and respondents.[10]

The main issue raised is whether the case should be dismissed for the non-joinder of the Pamplona Plantation Leisure Corporation. The other issues
will be taken up in the discussion of the main question.

The Courts Ruling

The Petition lacks merit.

Preliminary Issue:

Factual Matters

Section 1 of Rule 45 of the Rules of Court states that only questions of law are entertained in appeals by certiorari to the Supreme Court. However,
jurisprudence has recognized several exceptions in which factual issues may be resolved by this Court:[11] (1) the legal conclusions made by the lower
tribunal are speculative;[12] (2) its inferences are manifestly mistaken,[13] absurd, or impossible; (3) the lower court committed grave abuse of
discretion; (4) the judgment is based on a misapprehension of facts;[14] (5) the findings of fact of the lower tribunals are conflicting;[15] (6) the CA
went beyond the issues; (7) the CAs findings are contrary to the admissions of the parties;[16] (8) the CA manifestly overlooked facts not disputed
which, if considered, would justify a different conclusion; (9) the findings of fact are conclusions without citation of the specific evidence on which
they are based; and (10) when the findings of fact of the CA are premised on the absence of evidence but such findings are contradicted by the
evidence on record.[17]

The very same reason that constrained the appellate court to review the factual findings of the NLRC impels this Court to take its own look at the
facts. Normally, the Supreme Court is not a trier of facts.[18] However, since the findings of the CA and the NLRC on this point were conflicting, we
waded through the records to find out if there was basis for the formers reversal of the NLRCs Decision. We shall discuss our factual findings together
with our review of the main issue.

Main Issue:

Piercing the Corporate Veil

Petitioners contend that the CA should have dismissed the case for the failure of respondents (except Carlito Tinghil) to implead the Pamplona
Plantation Leisure Corporation, an indispensable party, for being the true and real employer. Allegedly, respondents admitted in their Affidavits dated
February 3, 1998,[19] that they had been employed by the leisure corporation and/or engaged to perform activities that pertained to its business.

Further, as the NLRC allegedly noted in their individual Complaints, respondents specifically averred that they had worked in the golf course and
performed related jobs in the recreational facilities of the leisure corporation. Hence, petitioners claim that, as a sugar and coconut plantation
company separate and distinct from the Pamplona Plantation Leisure Corporation, the petitioner-company is not the real party in interest.

We are not persuaded.

An examination of the facts reveals that, for both the coconut plantation and the golf course, there is only one management which the laborers deal
with regarding their work.[20] A portion of the plantation (also called Hacienda Pamplona) had actually been converted into a golf course and other
recreational facilities. The weekly payrolls issued by petitioner-company bore the name Pamplona Plantation Co., Inc.[21] It is also a fact that
respondents all received their pay from the same person, Petitioner Bondoc -- the managing director of the company. Since the workers were working
for a firm known as Pamplona Plantation Co., Inc., the reason they sued their employer through that name was natural and understandable.

True, the Petitioner Pamplona Plantation Co., Inc., and the Pamplona Plantation Leisure Corporation appear to be separate corporate entities. But it is
settled that this fiction of law cannot be invoked to further an end subversive of justice.[22]

The principle requiring the piercing of the corporate veil mandates courts to see through the protective shroud that distinguishes one corporation
from a seemingly separate one.[23] The corporate mask may be removed and the corporate veil pierced when a corporation is the mere alter ego of
another.[24] Where badges of fraud exist, where public convenience is defeated, where a wrong is sought to be justified thereby, or where a separate
corporate identity is used to evade financial obligations to employees or to third parties,[25] the notion of separate legal entity should be set aside[26]
and the factual truth upheld. When that happens, the corporate character is not necessarily abrogated.[27] It continues for other legitimate
objectives. However, it may be pierced in any of the instances cited in order to promote substantial justice.

In the present case, the corporations have basically the same incorporators and directors and are headed by the same official. Both use only one office
and one payroll and are under one management. In their individual Affidavits, respondents allege that they worked under the supervision and control
of Petitioner Bondoc -- the common managing director of both the petitioner-company and the leisure corporation. Some of the laborers of the
plantation also work in the golf course.[28] Thus, the attempt to make the two corporations appear as two separate entities, insofar as the workers
are concerned, should be viewed as a devious but obvious means to defeat the ends of the law. Such a ploy should not be permitted to cloud the truth
and perpetrate an injustice.

We note that this defense of separate corporate identity was not raised during the proceedings before the labor arbiter. The main argument therein
raised by petitioners was their alleged lack of employer-employee relationship with, and power of control over, the means and methods of work of
respondents because of the seasonal nature of the latters work.[29]

Neither was the issue of non-joinder of indispensable parties raised in petitioners appeal before the NLRC.[30] Nevertheless, in its Decision[31] dated
July 19, 2000, the Commission concluded that the plantation company and the leisure corporation were two separate and distinct corporations, and
that the latter was an indispensable party that should have been impleaded. We quote below pertinent portions of that Decision:

Respondent posits that it is engaged in operating and maintaining sugar and coconut plantation. The positions of complainants could only be
determined through their individual complaints. Yet all complainants alleged in their affidavits x x x that they were working at the golf course. Worthy
to note that only Carlito Tinghil amended his complaint to include Pamplona Leisure Corporation, which respondents maintain is a separate
corporation established in 1995. Thus, xxx Pamplona Plantation Co., Inc. and Pamplona Leisure Corporation are two separate and distinct
corporations. Except for Carlito Tinghil the complainants have the wrong party respondent. Pamplona Leisure Corporation is an indispensable party
without which there could be no final determination of the case.[32]

Indeed, it was only after this NLRC Decision was issued that the petitioners harped on the separate personality of the Pamplona Plantation Co., Inc.,
vis--vis the Pamplona Plantation Leisure Corporation.

As cited above, the NLRC dismissed the Complaints because of the alleged admission of respondents in their Affidavits that they had been working at
the golf course. However, it failed to appreciate the rest of their averments. Just because they worked at the golf course did not necessarily mean that
they were not employed to do other tasks, especially since the golf course was merely a portion of the coconut plantation. Even petitioners admitted
that respondents had been hired as coconut filers, coconut scoopers or charcoal makers.[33] Consequently, NLRCs conclusion derived from the
Affidavits of respondents stating that they were employees of the Pamplona Plantation Leisure Corporation alone was the result of an improper
selective appreciation of the entire evidence.

Furthermore, we note that, contrary to the NLRCs findings, some respondents indicated that their employer was the Pamplona Plantation Leisure
Corporation, while others said that it was the Pamplona Plantation Co., Inc. But in all these Affidavits, both the leisure corporation and petitioner-
company were identified or described as entities engaged in the development and operation of sugar and coconut plantations, as well as recreational
facilities such as a golf course. These allegations reveal that petitioner successfully confused the workers as to who their true and real employer was.
All things considered, their faulty belief that the plantation company and the leisure corporation were one and the same can be attributed solely to
petitioners. It would certainly be unjust to prejudice the claims of the workers because of the misleading actions of their employer.

Non-Joinder of Parties

Granting for the sake of argument that the Pamplona Plantation Leisure Corporation is an indispensable party that should be impleaded, NLRCs
outright dismissal of the Complaints was still erroneous.

The non-joinder of indispensable parties is not a ground for the dismissal of an action.[34] At any stage of a judicial proceeding and/or at such times
as are just, parties may be added on the motion of a party or on the initiative of the tribunal concerned.[35] If the plaintiff refuses to implead an
indispensable party despite the order of the court, that court may dismiss the complaint for the plaintiffs failure to comply with the order. The remedy
is to implead the non-party claimed to be indispensable.[36] In this case, the NLRC did not require respondents to implead the Pamplona Plantation
Leisure Corporation as respondent; instead, the Commission summarily dismissed the Complaints.

In any event, there is no need to implead the leisure corporation because, insofar as respondents are concerned, the leisure corporation and
petitioner-company are one and the same entity. Salvador v. Court of Appeals[37] has held that this Court has full powers, apart from that power and
authority which is inherent, to amend the processes, pleadings, proceedings and decisions by substituting as party-plaintiff the real party-in-interest.

In Alonso v. Villamor,[38] we had the occasion to state thus:

There is nothing sacred about processes or pleadings, their forms or contents. Their sole purpose is to facilitate the application of justice to the rival
claims of contending parties. They were created, not to hinder and delay, but to facilitate and promote, the administration of justice. They do not
constitute the thing itself, which courts are always striving to secure to litigants. They are designed as the means best adapted to obtain that thing. In
other words, they are a means to an end. When they lose the character of the one and become the other, the administration of justice is at fault and
courts are correspondingly remiss in the performance of their obvious duty.

The controlling principle in the interpretation of procedural rules is liberality, so that they may promote their object and assist the parties in obtaining
just, speedy and inexpensive determination of every action and proceeding.[39] When the rules are applied to labor cases, this liberal interpretation
must be upheld with even greater vigor.[40] Without in any way depriving the employer of its legal rights, the thrust of statutes and rules governing
labor cases has been to benefit workers and avoid subjecting them to great delays and hardships. This intent holds especially in this case, in which the
plaintiffs are poor laborers.

Employer-Employee Relationship

Petitioners insist that respondents are not their employees, because the former exercised no control over the latters work hours and method of
performing tasks. Thus, petitioners contend that under the control test, the workers were independent contractors.

We disagree. As shown by the evidence on record, petitioners hired respondents, who performed tasks assigned by their respective officers-in-charge,
who in turn were all under the direct supervision and control of Petitioner Bondoc. These allegations are contained in the workers Affidavits, which
were never disputed by petitioners. Also uncontroverted are the payrolls bearing the name of the plantation company and signed by Petitioner
Bondoc. Some of these payrolls include the time records of the employees. These documents prove that petitioner-company exercised control and
supervision over them.

To operate against the employer, the power of control need not have been actually exercised. Proof of the existence of such power is enough.[41]
Certainly, petitioners wielded that power to hire or dismiss, as well as to check on the progress and the quality of work of the laborers.

Jurisprudence provides other equally important considerations[42] that support the conclusion that respondents were not independent contractors.
First, they cannot be said to have carried on an independent business or occupation.[43] They are not engaged in the business of filing, scooping and
hauling coconuts and/or operating and maintaining a plantation and a golf course. Second, they do not have substantial capital or investment in the
form of tools, equipment, machinery, work premises, and other implements needed to perform the job, work or service under their own account or
responsibility.[44] Third, they have been working exclusively for petitioners for several years. Fourth, there is no dispute that petitioners are in the
business of growing coconut trees for commercial purposes. There is no question, either, that a portion of the plantation was converted into a golf
course and other recreational facilities. Clearly, respondents performed usual, regular and necessary services for petitioners business.

WHEREFORE, the Petition is DENIED, and the assailed Decision AFFIRMED. Costs against the petitioners.

SO ORDERED.

Sandoval-Gutierrez, Corona, Carpio-Morales, and Garcia, JJ., concur.

22.

PHILIPPINE SUPREME COURT DECISIONS

SECOND DIVISION

[G.R. No. 110358. November 9, 1994.]

QUINTIN ROBLEDO, MARIO SINLAO, LEONARDO SAAVEDRA, VICENTE SECAPURI, DANIEL AUSTRIA, ET AL., Petitioners, v. THE NATIONAL LABOR
RELATIONS COMMISSION, BACANI SECURITY AND ALLIED SERVICES CO., INC., AND BACANI SECURITY AND PROTECTIVE AGENCY AND/OR ALICIA
BACANI, Respondents.

SYLLABUS

1. LABOR AND SOCIAL LEGISLATION; LABOR CONTRACTS; DEBTS AND OBLIGATIONS TO EMPLOYEES, PERSONAL OBLIGATION OF
EMPLOYER. — As correctly found by the NLRC, BASEC is an entity separate and distinct from that of BSPA. BSPA is a single proprietorship owned and
operated by Felipe Bacani. Hence its debts and obligations were the personal obligations of its owner. Petitioners’ claim which are based on these
debts and personal obligations, did not survive the death of Felipe Bacani on January 15, 1990 and should have been filed instead in the intestate
proceedings involving his estate. Indeed, the rule is settled that unless expressly assumed labor contracts are not enforceable against the transferee of
an enterprise. The reason for this is that labor contracts are in personam. Consequently, it has been held that claims for backwages earned from the
former employer cannot be filed against the new owners of an enterprise. Nor is the new operator of a business liable for claims for retirement pay of
employees.

2. MERCANTILE LAW; CORPORATIONS; PIERCING THE VEIL OF CORPORATE ENTITY; WHEN AVAILABLE. — The doctrine of piercing the veil
of corporate entity is used whenever a court finds that the corporate fiction is being used to defeat public convenience, justify wrong, protect fraud, or
defend crime, or to confuse legitimate issues, or that a corporation is the mere alter ego or business conduit of a person or where the corporation is so
organized and controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation.

3. ID.; ID.; ID.; NOT APPLICABLE TO CASE AT BAR. — It is apparent, therefore, that the doctrine has no application to this case where the
purpose is not to hold the individual stockholders liable for the obligations of the corporation but, on the contrary, to hold the corporation liable for
the obligations of a stockholder or stockholders. Piercing the veil of corporate entity means looking through the corporate form to the individual
stockholders composing it. Here there is no reason to pierce the veil of corporate entity because there is no question that petitioners’ claims,
assuming them to be valid, are the personal liability of the late Felipe Bacani. It is immaterial that he was also a stockholder of BASEC. Indeed, the
doctrine is stood on its head when what is sought is to make a corporation liable for the obligations of a stockholder. But there are several reasons
why BASEC is not liable for the personal obligations of Felipe Bacani. For one, BASEC came into existence before BSPA was retired as a business
concern. BASEC was incorporated on October 26, 1989 and its license to operate was released on May 28, 1990, while BSPA ceased to operate on
December 31, 1989. Before, BSPA was retired, BASEC was already existing. It is, therefore, not true that BASEC is a mere continuity of BSPA. Second,
Felipe Bacani was only one of the five (5) incorporators of BASEC. He owned the least number of shares in BASEC, which included among its
incorporators persons who are not members of his family. That his wife Lydia and daughter Alicia were also incorporators of the same company is not
sufficient to warrant the conclusion that they hold their shares in his behalf. Third, there is no evidence to show that the assets of BSPA were
transferred to BASEC. If BASEC was a mere continuation of BSPA, all or at least a substantial part of the latter’s assets should have found their way to
BASEC.

4. REMEDIAL LAW; SPECIAL PROCEEDINGS, CLAIMS AGAINST ESTATE; MONEY CLAIMS OF LABORERS AGAINST THE DECEASED EMPLOYER
MUST BE FILED THEREIN; RATIONALE. — Now, the claims of petitioners are actually money claims against the estate of Felipe Bacani. They must be
filed against his estate in accordance with Sec. 5 of Rule 86. The rationale for the rule is that upon the death of the defendant, a testate or intestate
proceeding shall be instituted in the proper court wherein all his creditors must appear and file their claims which shall be paid proportionately out of
the property left by the deceased. The objective is to avoid duplicity of procedure. Hence the ordinary actions must be taken out from the ordinary
courts. Under Art. 110 of the Labor Code, money claims of laborers enjoy preference over claims of other creditors in case of bankruptcy or liquidation
of the employer’s business.

DECISION

MENDOZA, J.:

This is a petition for review of the decision of the First Division 1 of the National Labor Relations Commission, setting aside the decision of the Labor
Arbiter which held private respondents jointly and severally liable to the petitioners for overtime and legal holiday pay.

The facts of this case are as follows:chanrob1es virtual 1aw library

Petitioners were former employees of Bacani Security and Protective Agency (BSPA, for brevity). They were employed as security guards at different
times during the period 1969 to December 1989 when BSPA ceased to operate.

BSPA was a single proprietorship owned, managed and operated by the late Felipe Bacani. It was registered with the Bureau of Trade and Industry as a
business name in 1957. Upon its expiration, the registration was renewed on July 1, 1987 for a term of five (5) years ending 1992.chanrobles.com :
virtual law library

On December 31, 1989, Felipe Bacani retired the business name and BSPA ceased to operate effective on that day. At that time, respondent Alicia
Bacani, daughter of Felipe Bacani, was BSPA’s Executive Directress.

On January 15, 1990 Felipe Bacani died. An intestate proceeding was instituted for the settlement of his estate before the Regional Trial Court,
National Capital Region, Branch 155, Pasig, Metro Manila.

Earlier, on October 26, 1989, respondent Bacani Security and Allied Services Co., Inc. (BASEC, for brevity) had been organized and registered as a
corporation with the Securities and Exchange Commission. The following were the incorporators with their respective shareholdings:chanrob1es
virtual 1aw library

ALICIA BACANI — 25,250 shares

LYDIA BACANI — 25,250 shares

AMADO P. ELEDA — 25,250 shares

VICTORIA B. AURIGUE — 25,250 shares

FELIPE BACANI — 20,000 shares

The primary purpose of the corporation was to "engage in the business of providing security" to persons and entities. This was the same line of
business that BSPA was engaged in. Most of the petitioners, after losing their jobs in BSPA, were employed in BASEC.

On July 5, 1990, some of the petitioners filed a complaint with the Department of Labor and Employment, National Capital Region, for underpayment
of wages and nonpayment of overtime pay, legal holiday pay, separation pay and/or retirement/resignation benefits, and for the return of their cash
bond which they posted with BSPA. Made respondents were BSPA and BASEC. Petitioners were subsequently joined by the rest of the petitioners
herein who filed supplementary complaints.

On March 1, 1992, the Labor Arbiter rendered a decision upholding the right of the petitioners. The dispositive portion of his decision
reads:chanrob1es virtual 1aw library

CONFORMABLY WITH THE FOREGOING, the judgment is hereby rendered finding complainants entitled to their money claims as herein above
computed and to be paid by all the respondents herein in solidum except BSPA which has already been retired from business.

Respondents are further ordered to pay attorney’s fees equivalent to five (5) percent of the awarded money claims.

All other claims are hereby dismissed for lack of merit.

SO ORDERED.
On appeal the National Labor Relations Commission reversed. In a decision dated March 30, 1993, the NLRC’s First Division declared the Labor Arbiter
without jurisdiction and instead suggested that petitioners file their claims with the Regional Trial Court, Branch 155, Pasig, Metro Manila, where an
intestate proceeding for the settlement of Bacani’s estate was pending. Petitioners moved for a reconsideration but their motion was denied for lack
of merit. Hence this petition for review.

No appeal lies to review decisions of the NLRC. Nonetheless the petition in this case was treated as a special civil action of certiorari to determine
whether the NLRC did not commit a grave abuse of its discretion in reversing the Labor Arbiter’s decision.

The issues in this case are two fold: first, whether Bacani Security and Allied Services Co. Inc. (BASEC) and Alicia Bacani can be held liable for claims of
petitioners against Bacani Security and Protective Agency (BSPA) and, second, if the claims were the personal liability of the late Felipe Bacani, as
owner of BSPA, whether the Labor Arbiter had jurisdiction to decide the claims.

Petitioners contend that public respondent erred in setting aside the Labor Arbiter’s judgment on the ground that BASEC is the same entity as BSPA
the latter being owned and controlled by one and the same family, namely the Bacani family. For this reason they urge that the corporate fiction
should be disregarded and BASEC should be held liable for the obligations of the defunct BSPA.

We find the petition to be without merit.cralawnad

As correctly found by the NLRC, BASEC is an entity separate and distinct from that of BSPA. BSPA is a single proprietorship owned and operated by
Felipe Bacani. Hence its debts and obligations were the personal obligations of its owner. Petitioners’ claim which are based on these debts and
personal obligations, did not survive the death of Felipe Bacani on January 15, 1990 and should have been filed instead in the intestate proceedings
involving his estate.

Indeed, the rule is settled that unless expressly assumed labor contracts are not enforceable against the transferee of an enterprise. The reason for
this is that labor contracts are in personam. 2 Consequently, it has been held that claims for backwages earned from the former employer cannot be
filed against the new owners of an enterprise. 3 Nor is the new operator of a business liable for claims for retirement pay of employees. 4

Petitioners claim, however, that BSPA was intentionally retired in order to allow expansion of its business and even perhaps an increase in its
capitalization for credit purpose. According to them, the Bacani family merely continued the operation of BSPA by creating BASEC in order to avoid the
obligations of the former. Petitioners anchor their claim on the fact that Felipe Bacani, after having ceased to operate BSPA, became an incorporator of
BASEC together with his wife and daughter. Petitioners urge piercing the veil of corporate entity in order to hold BASEC liable for BSPA’s obligations.

The doctrine of piercing the veil of corporate entity is used whenever a court finds that the corporate fiction is being used to defeat public
convenience, justify wrong, protect fraud, or defend crime, or to confuse legitimate issues, or that a corporation is the mere alter ego or business
conduit of a person or where the corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality,
agency, conduit or adjunct of another corporation. 5 It is apparent, therefore, that the doctrine has no application to this case where the purpose is
not to hold the individual stockholders liable for the obligations of the corporation but, on the contrary, to hold the corporation liable for the
obligations of a stockholder or stockholders. Piercing the veil of corporate entity means looking through the corporate form to the individual
stockholders composing it. Here there is no reason to pierce the veil of corporate entity because there is no question that petitioners’ claims,
assuming them to be valid, are the personal liability of the late Felipe Bacani. It is immaterial that he was also a stockholder of BASEC.

Indeed, the doctrine is stood on its head when what is sought is to make a corporation liable for the obligations of a stockholder. But there are several
reasons why BASEC is not liable for the personal obligations of Felipe Bacani. For one, BASEC came into existence before BSPA was retired as a
business concern. BASEC was incorporated on October 26, 1989 and its license to operate was released on May 28, 1990, while BSPA ceased to
operate on December 31, 1989. Before, BSPA was retired, BASEC was already existing. It is, therefore, not true that BASEC is a mere continuity of
BSPA.cralawnad

Second, Felipe Bacani was only one of the five (5) incorporators of BASEC. He owned the least number of shares in BASEC, which included among its
incorporators persons who are not members of his family. That his wife Lydia and daughter Alicia were also incorporators of the same company is not
sufficient to warrant the conclusion that they hold their shares in his behalf.

Third, there is no evidence to show that the assets of BSPA were transferred to BASEC. If BASEC was a mere continuation of BSPA, all or at least a
substantial part of the latter’s assets should have found their way to BASEC.

Neither can respondent Alicia Bacani be held liable for BSPA’s obligations. Although she was Executive Directress of BSPA, she was merely an
employee of the BSPA, which was a single proprietorship.

Now, the claims of petitioners are actually money claims against the estate of Felipe Bacani. They must be filed against his estate in accordance with
sec. 5 of Rule 86 which provides in part:chanrob1es virtual 1aw library

Sec. 5. Claims which must be filed under the notice. If not filed, barred; exceptions. — All claims for money against the decedent, arising
from contract, express or implied, whether the same be due, not due, or contingent, all claims for funeral expenses and expenses for the last sickness
of the decedent, and judgment for money against the decedent, must be filed within the time limited in the notice; otherwise they are barred forever,
except that they may be set forth as counterclaims in any action that the executor or administrator may bring against the claimants. . .

The rationale for the rule is that upon the death of the defendant, a testate or intestate proceeding shall be instituted in the proper court wherein all
his creditors must appear and file their claims which shall be paid proportionately out of the property left by the deceased. The objective is to avoid
duplicity of procedure. Hence the ordinary actions must be taken out from the ordinary courts. 6 Under Art. 110 of the Labor Code, money claims of
laborers enjoy preference over claims of other creditors in case of bankruptcy or liquidation of the employer’s business.chanrobles lawlibrary : rednad
WHEREFORE, the petition for certiorari is DISMISSED.

SO ORDERED.

Narvasa, C.J., Regalado and Puno, JJ., concur.

23.

DIVISION

[ GR No. 189255, Jun 17, 2015 ]

JESUS G. REYES v. GLAUCOMA RESEARCH FOUNDATION +

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari seeking to reverse and set aside the Decision[1] and Resolution[2] of the Court of Appeals (CA),
dated April 20, 2009 and August 25, 2009, respectively, in CA-G.R. SP No. 104261. The assailed CA Decision annulled the Decision of the National Labor
Relations Commission (NLRC) in NLRC NCR Case No. 05-0441-05 and reinstated the Decision of the Labor Arbiter (LA) in the same case, while the CA
Resolution denied petitioner's motion for reconsideration.

The instant petition arose from a complaint for illegal dismissal filed by petitioner against respondents with the NLRC, National Capital Region, Quezon
City. Petitioner alleged that: on August 1, 2003, he was hired by respondent corporation as administrator of the latter's Eye Referral Center (ERC); he
performed his duties as administrator and continuously received his monthly salary of P20,000.00 until the end of January 2005; beginning February
2005, respondent withheld petitioner's salary without notice but he still continued to report for work; on April 11, 2005, petitioner wrote a letter to
respondent Manuel Agulto (Agulto), who is the Executive Director of respondent corporation, informing the latter that he has not been receiving his
salaries since February 2005 as well as his 14th month pay for 2004; petitioner did not receive any response from Agulto; on April 21, 2005, petitioner
was informed by the Assistant to the Executive Director as well as the Assistant Administrative Officer, that he is no longer the Administrator of the
ERC; subsequently, petitioner's office was padlocked and closed without notice; he still continued to report for work but on April 29, 2005 he was no
longer allowed by the security guard on duty to enter the premises of the ERC.

On their part, respondents contended that: upon petitioner's representation that he is an expert in corporate organizational structure and
management affairs, they engaged his services as a consultant or adviser in the formulation of an updated organizational set-up and employees'
manual which is compatible with their present condition; based on his claim that there is a need for an administrator for the ERC, he later designated
himself as such on a trial basis; there is no employer-employee relationship between them because respondents had no control over petitioner in
terms of working hours as he reports for work at anytime of the day and leaves as he pleases; respondents also had no control as to the manner in
which he performs his alleged duties as consultant; he became overbearing and his relationship with the employees and officers of the company
soured leading to the filing of three complaints against him; petitioner was not dismissed as he was the one who voluntarily severed his relations with
respondents.

On January 20, 2006, the LA assigned to the case rendered a Decision[3] dismissing petitioner's complaint. The LA held, among others, that petitioner
failed to establish that the elements of an employer-employee relationship existed between him and respondents because he was unable to show
that he was, in fact, appointed as administrator of the ERC and received salaries as such; he also failed to deny that during his stint with respondents,
he was, at the same time, a consultant of various government agencies such as the Manila International Airport Authority, Manila Intercontinental
Port Authority, Anti-Terrorist Task Force for Aviation and Air Transportation Sector; his actions were neither supervised nor controlled by the
management of the ERC; petitioner, likewise, did not observe working hours by reporting for work and leaving therefrom as he pleased; and, he was
receiving allowances, not salaries, as a consultant.

On appeal, the NLRC reversed and set aside the Decision of the LA. The NLRC declared petitioner as respondents' employee, that he was illegally
dismissed and ordered respondents to reinstate him to his former position without loss of seniority rights and privileges with full backwages. The
NLRC held that the basis upon which the conclusion of the LA was drawn lacked support; that it was incumbent for respondents to discharge the
burden of proving that petitioner's dismissal was for cause and effected after due process was observed; and, that respondents failed to discharge this
burden.[4]

Respondents filed a motion for reconsideration, but it was denied by the NLRC in its Resolution[5] dated May 30, 2008.

Respondents then filed a Petition for Certiorari[6] with the CA.

In its assailed Decision, the CA annulled and set aside the judgment of the NLRC and reinstated the Decision of the LA. The CA held that the LA was
correct in ruling that, under the control test and the economic reality test, no employer-employee relationship existed between respondents and
petitioner.

Petitioner filed a motion for reconsideration, but the CA denied it in its Resolution dated August 25, 2009.

Hence, the present petition for review on certiorari based on the following grounds:

I
THE HONORABLE COURT OF APPEALS ERRED AND ABUSED ITS DISCRETION IN NOT DISMISSING RESPONDENTS' PETITION FOR CERTIORARI ON THE
GROUND THAT RESPONDENTS SUBMITTED A VERIFICATION THAT FAILS TO COMPLY WITH THE 2004 RULES ON NOTARIAL PRACTICE.

II

THE HONORABLE COURT OF APPEALS ERRED AND ABUSED ITS DISCRETION IN RULING THAT NO EMPLOYER-EMPLOYEE RELATIONSHIP EXISTS
BETWEEN RESPONDENTS AND PETITIONER.[7]

As to the first ground, petitioner contends that respondents' petition for certiorari filed with the CA should have been dismissed on the ground that it
was improperly verified because the jurat portion of the verification states only the community tax certificate number of the affiant as evidence of her
identity. Petitioner argues that under the 2004 Rules on Notarial Practice, as amended by a Resolution[8] of this Court, dated February 19, 2008, a
community tax certificate is not among those considered as competent evidence of identity.

The Court does not agree.

This Court has already ruled that competent evidence of identity is not required in cases where the affiant is personally known to the notary public.[9]

Thus, in Jandoquile v. Revilla, Jr.,[10] this Court held that:

If the notary public knows the affiants personally, he need not require them to show their valid identification cards. This rule is supported by the
definition of a "jurat" under Section 6, Rule II of the 2004 Rules on Notarial Practice. A "jurat" refers to an act in which an individual on a single
occasion: (a) appears in person before the notary public and presents an instrument or document; (b) is personally known to the notary public or
identified by the notary public through competent evidence of identity; (c) signs the instrument or document in the presence of the notary; and (d)
takes an oath or affirmation before the notary public as to such instrument or document.[11]

Also, Section 2(b), Rule IV of the 2004 Rules on Notarial Practice provides as follows:

SEC. 2. Prohibitions -

(a) x x x

(b) A person shall not perform a notarial act if the person involved as signatory to the instrument or document -

(1) is not in the notary's presence personally at the time of the notarization; and

(2) is not personally known to the notary public or otherwise identified by the notary public through competent evidence of identity as defined by
these Rules.

Moreover, Rule II, Section 6 of the same Rules states that:

SEC 6. Jurat. - "Jurat" refers to an act in which an individual on a single occasion:

(a) appears in person before the notary public and presents an instrument or document;

(b) is personally known to the notary public or identified by the notary public through competent evidence of identity as defined by these Rules;

(c) signs the instrument or document in the presence of the notary; and

(d) takes an oath or affirmation before the notary public as to such instrument or document.

In legal hermeneutics, "or" is a disjunctive that expresses an alternative or gives a choice of one among two or more things.[12] The word signifies
disassociation and independence of one thing from another thing in an enumeration.[13]

Thus, as earlier stated, if the affiant is personally known to the notary public, the latter need not require the former to show evidence of identity as
required under the 2004 Rules on Notarial Practice, as amended.

Applying the above rule to the instant case, it is undisputed that the attorney-in-fact of respondents who executed the verification and certificate
against forum shopping, which was attached to respondents' petition filed with the CA, is personally known to the notary public before whom the
documents were acknowledged. Both attorney-in-fact and the notary public hold office at respondents' place of business and the latter is also the
legal counsel of respondents.

In any event, this Court's disquisition in the fairly recent case of Heirs of Amada Zaulda v. Isaac Zaulda[14] regarding the import of procedural rules vis-
a-vis the substantive rights of the parties, is instructive, to wit:

[G]ranting, arguendo, that there was non-compliance with the verification requirement, the rule is that courts should not be so strict about procedural
lapses which do not really impair the proper administration of justice. After all, the higher objective of procedural rule is to ensure that the
substantive rights of the parties are protected. Litigations should, as much as possible, be decided on the merits and not on technicalities. Every party-
litigant must be afforded ample opportunity for the proper and just determination of his case, free from the unacceptable plea of technicalities.
In Coca-Cola Bottlers v. De la Cruz, where the verification was marred only by a glitch in the evidence of the identity of the affiant, the Court was of the
considered view that, in the interest of justice, the minor defect can be overlooked and should not defeat the petition.

The reduction in the number of pending cases is laudable, but if it would be attained by precipitate, if not preposterous, application of technicalities,
justice would not be served. The law abhors technicalities that impede the cause of justice. The court's primary duty is to render or dispense justice.
"It is a more prudent course of action for the court to excuse a technical lapse and afford the parties a review of the case on appeal rather than
dispose of the case on technicality and cause a grave injustice to the parties, giving a false impression of speedy disposal of cases while actually
resulting in more delay, if not miscarriage of justice."

What should guide judicial action is the principle that a party-litigant should be given the fullest opportunity to establish the merits of his complaint or
defense rather than for him to lose life, liberty, honor, or property on technicalities. The rules of procedure should be viewed as mere tools designed
to facilitate the attainment of justice. Their strict and rigid application, which would result in technicalities that tend to frustrate rather than promote
substantial justice, must always be eschewed. At this juncture, the Court reminds all members of the bench and bar of the admonition in the often-
cited case of Alonso v. Villamor:

Lawsuits, unlike duels, are not to be won by a rapier's thrust. Technicality, when it deserts its proper office as an aid to justice and becomes its great
hindrance and chief enemy, deserves scant consideration from courts. There should be no vested rights in technicalities.[15]

Anent the second ground, petitioner insists that, based on evidence on record, an employer-employee relationship exists between him and
respondents.

The Court is not persuaded.

It is a basic rule of evidence that each party must prove his affirmative allegation.[16] If he claims a right granted by law, he must prove his claim by
competent evidence, relying on the strength of his own evidence and not upon the weakness of that of his opponent.[17] The test for determining on
whom the burden of proof lies is found in the result of an inquiry as to which party would be successful if no evidence of such matters were given.[18]
In an illegal dismissal case, the onus probandi rests on the employer to prove that its dismissal of an employee was for a valid cause.[19] However,
before a case for illegal dismissal can prosper, an employer-employee relationship must first be established.[20] Thus, in filing a complaint before the
LA for illegal dismissal, based on the premise that he was an employee of respondents, it is incumbent upon petitioner to prove the employer-
employee relationship by substantial evidence.[21]

In regard to the above discussion, the issue of whether or not an employer-employee relationship existed between petitioner and respondents is
essentially a question of fact.[22] The factors that determine the issue include who has the power to select the employee, who pays the employee's
wages, who has the power to dismiss the employee, and who exercises control of the methods and results by which the work of the employee is
accomplished.[23] Although no particular form of evidence is required to prove the existence of the relationship, and any competent and relevant
evidence to prove the relationship may be admitted, a finding that the relationship exists must nonetheless rest on substantial evidence, which is that
amount of relevant evidence that a reasonable mind might accept as adequate to justify a conclusion.[24]

Generally, the Court does not review factual questions, primarily because the Court is not a trier of facts.[25] However, where, like here, there is a
conflict between the factual findings of the LA and the CA, on one hand, and those of the NLRC, on the other, it becomes proper for the Court, in the
exercise of its equity jurisdiction, to review and re-evaluate the factual issues and to look into the records of the case and re-examine the questioned
findings.[26]

Etched in an unending stream of cases are four standards in determining the existence of an employer-employee relationship, namely: (a) the manner
of selection and engagement of the putative employee; (b) the mode of payment of wages; (c) the presence or absence of power of dismissal; and, (d)
the presence or absence of control of the putative employee's conduct. Most determinative among these factors is the so-called "control test."[27]

Indeed, the power of the employer to control the work of the employee is considered the most significant determinant of the existence of an
employer-employee relationship.[28] This test is premised on whether the person for whom the services are performed reserves the right to control
both the end achieved and the manner and means used to achieve that end.[29]

In the present case, petitioner contends that, as evidence of respondents' supposed control over him, the organizational plans he has drawn were
subject to the approval of respondent corporation's Board of Trustees. However, the Court agrees with the disquisition of the CA on this matter, to wit:

[Respondents'] power to approve or reject the organizational plans drawn by [petitioner] cannot be the control contemplated in the "control test." It
is but logical that one who commissions another to do a piece of work should have the right to accept or reject the product. The important factor to
consider in the "control test" is still the element of control over how the work itself is done, not just the end result thereof.

Well settled is the rule that where a person who works for another performs his job more or less at his own pleasure, in the manner he sees fit, not
subject to definite hours or conditions of work, and is compensated according to the result of his efforts and not the amount thereof, no employer-
employee relationship exists.[30]

What was glaring in the present case is the undisputed fact that petitioner was never subject to definite working hours. He never denied that he goes
to work and leaves therefrom as he pleases.[31] In fact, on December 1-31, 2004, he went on leave without seeking approval from the officers of
respondent company. On the contrary, his letter[32] simply informed respondents that he will be away for a month and even advised them that they
have the option of appointing his replacement during his absence. This Court has held that there is no employer-employee relationship where the
supposed employee is not subject to a set of rules and regulations governing the performance of his duties under the agreement with the company
and is not required to report for work at any time, nor to devote his time exclusively to working for the company.[33]
In this regard, this Court also agrees with the ruling of the CA that:

Aside from the control test, the Supreme Court has also used the economic reality test in determining whether an employer-employee relationship
exists between the parties. Under this test, the economic realities prevailing within the activity or between the parties are examined, taking into
consideration the totality of circumstances surrounding the true nature of the relationship between the parties. This is especially appropriate when,
as in this case, there is no written agreement or contract on which to base the relationship. In our jurisdiction, the benchmark of economic reality in
analyzing possible employment relationships for purposes of applying the Labor Code ought to be the economic dependence of the worker on his
employer.

In the instant case, as shown by the resume of [petitioner], he concurrently held consultancy positions with the Manila International Airport Authority
(from 04 March 2001 to September 2003 and from 01 November 2004 up to the present) and the Anti-Terrorist Task Force for Aviation and Air
Transportation Sector (from 16 April 2004 to 30 June 2004) during his stint with the Eye Referral Center (from 01 August 2003 to 29 April 2005).
Accordingly, it cannot be said that the [petitioner] was wholly dependent on [respondent] company.[34]

In bolstering his contention that there was an employer-employee relationship, petitioner draws attention to the pay slips he supposedly received
from respondent corporation. However, he does not dispute the findings of the CA that there are no deductions for SSS and withholding tax from his
compensation, which are the usual deductions from employees' salaries. Thus, the alleged pay slips may not be treated as competent evidence of
petitioner's claim that he is respondents' employee.

In addition, the designation of the payments to petitioner as salaries, is not determinative of the existence of an employer-employee relationship.[35]
Salary is a general term defined as a remuneration for services given.[36] Evidence of this fact, in the instant case, was the cash voucher issued in favor
of petitioner where it was stated therein that the amount of P20,000.00 was given as petitioner's allowance for the month of December 2004,
although it appears from the pay slip that the said amount was his salary for the same period.

Additional evidence of the fact that petitioner was hired as a consultant and not as an employee of respondent corporation are affidavits to this effect
which were executed by Roy Oliveres[37] and Aurea Luz Esteva,[38] who are Medical Records Custodian and Administrative Officer, respectively, of
respondent corporation. Petitioner insists in its objection of the use of these affidavits on the ground that they are, essentially, hearsay. However, this
Court has ruled that although the affiants had not been presented to affirm the contents of their affidavits and be cross-examined, their affidavits may
be given evidentiary value; the argument that such affidavits were hearsay was not persuasive.[39] Likewise, this Court ruled that it was not necessary
for the affiants to appear and testify and be cross-examined by counsel for the adverse party.[40] To require otherwise would be to negate the
rationale and purpose of the summary nature of the proceedings mandated by the Rules and to make mandatory the application of the technical rules
of evidence.[41]

These affidavits are corroborated by evidence, as discussed above, showing that petitioner has no definite working hours and is not subject to the
control of respondents.

Lastly, the Court does not agree with petitioner's insistence that his being hired as respondent corporation's administrator and his designation as such
in intra-company correspondence proves that he is an employee of the corporation. The fact alone that petitioner was designated as an administrator
does not necessarily mean that he is an employee of respondents. Mere title or designation in a corporation will not, by itself, determine the
existence of an employer-employee relationship.[42] In this regard, even the identification card which was issued to petitioner is not an adequate
proof of petitioner's claim that he is respondents' employee. In addition, petitioner's designation as an administrator neither disproves respondents'
contention that he was engaged only as a consultant.

As a final point, it bears to reiterate that while the Constitution is committed to the policy of social justice and the protection of the working class, it
should not be supposed that every labor dispute will be automatically decided in favor of labor.[43] Management also has its rights which are entitled
to respect and enforcement in the interest of simple fair play.[44] Out of its concern for the less privileged in life, the Court has inclined, more often
than not, toward the worker and upheld his cause in his conflicts with the employer.[45] Such favoritism, however, has not blinded the Court to the
rule that justice is in every case for the deserving, to be dispensed in the light of the established facts and the applicable law and doctrine.[46]

WHEREFORE, the instant petition is DENIED. The Decision and Resolution of the Court of Appeals, dated April 20, 2009 and August 25, 2009,
respectively, in CA-G.R. SPNo. 104261, are AFFIRMED.

SO ORDERED.

Del Castillo,** Villarama, Jr., Reyes, and Jardeleza, JJ., concur.

July 3, 2015

NOTICE OF JUDGMENT

Sirs / Mesdames:

Please take notice that on June 17, 2015 a Decision, copy attached hereto, was rendered by the Supreme Court in the above-entitled case, the original
of which was received by this Office on July 3, 2015 at 9:33 a.m.

Very truly yours,

(SGD.)
WILFREDO V. LAPITAN

Division Clerk of Court

* Per Special Order No. 2059 dated June 17, 2015.

** Designated Acing Member in lieu of Associate Justice Presbitero J. Velasco, Jr., per Special Order No. 2060 dated June 17, 2105.