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G.R. No. 114337 September 29, 1995


-Petitioner Nitto Enterprises, a company engaged in the sale of glass and aluminum products,

- it is hired Roberto Capili sometime in May 1990 as an apprentice machinist, molder and core maker as
evidenced by an apprenticeship agreement for a period of six (6) months from May 28, 1990 to
November 28, 1990

-with a daily wage rate of P66.75 which was 75% of the applicable minimum wage.

-At around 1:00 p.m. of August 2, 1990,

-Roberto Capili who was handling a piece of glass which he was working on,

-accidentally hit and injured the leg of an office secretary who was treated at a nearby hospital.

-Later that same day, after office hours, private respondent entered a workshop

-within the office premises which was not his work station.

- There, he operated one of the power press machines without authority

-and in the process he injured his left thumb.

- Petitioner spent the amount of P1,023.04 to cover the medication of private respondent.


-On August 3, 1990 private respondent executed a Quitclaim and Release in favor of petitioner

- for and in consideration of the sum of P1,912.79.

-Three days after, private respondent formally filed before the NLRC Arbitration Branch, National Capital Region
a complaint for illegal dismissal and payment of other monetary benefits.

- Labor Arbiter rendered his decision finding the termination of private respondent as valid and dismissing the
money claim for lack of merit.

-Labor Arbiter gave two reasons

-for ruling that the dismissal of Roberto Capilian was valid.

-First, private respondent who was hired as an apprentice violated the terms of their agreement when he acted
with gross negligence resulting in the injury not only to himself but also to his fellow worker.

- Second, private respondent had shown that "he does not have the proper attitude in employment particularly
the handling of machines without authority and proper training.

-NLRC issued an order reversing the decision of the Labor Arbiter

-The respondent is hereby directed to reinstate complainant to his work last performed

-with backwages

-computed from the time his wages were withheld up to the time he is actually reinstated.

-The Arbiter of origin is hereby directed to further hear complainant's money claims and to dispose them on the
basis of law and evidence obtaining.

-Labor Arbiter called for a conference at which only private respondent's representative was present.

-a Writ of Execution was issued,

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-The private respondent is being commanded to proceed to the premises of [petitioner] Nitto Enterprises and
Jovy Foster located at No. l 74 Araneta Avenue, Portero, Malabon, Metro Manila

- or at any other places where their properties are located and effect the reinstatement of herein to his work
last performed or at the option of the respondent by payroll reinstatement.

-He is also entitled to collect the amount of P122,690.85 representing his backwages as called for in the
dispositive portion, and turn over such amount to this Office for proper disposition.

-Petitioner filed a motion for reconsideration but the same was denied.



-Prior approval by the Dept of Labor and employment of the proposed apprenticeship program is a condition
sine qua non. ---- before an appreticeship program is agreeement between pet. And private respondebt can be
validly entered into.

 In this case
 The apprenticeship agreement bet. Pet and pri. Res. Was executed on May 28, 1990
 Allegedly employing the latter as an apprentice in the trade of care maker / molder.
 On the same date apprenticeship program was prepared by pet. And submitted to the department of
labor and employment.
 However the agrrement was filed only on June 7, 1990.
 Notwithstanding the absence of approval by the Department of Labor and employment
 The agrrement was enforced at the date it was signed
 Pet. Did not comply the requirments provided by the law.
 Where apprenticeship agrrement has no forced anf effet the worker hired will be considered as a regular


-There is an abundance of cases wherein the Court ruled that the twin requirements of due process,
substantive and procedural, must be complied with, before valid dismissal exists. Without which, the
dismissal becomes void.


-The fact is private respondent filed a case of illegal dismissal with the Labor Arbiter only three days after he
was made to sign a Quitclaim,

-a clear indication that such resignation was not voluntary and deliberate.

-Private respondent averred that he was actually employed by petitioner as a delivery boy ("kargador" or

-He further asserted that petitioner "strong-armed" him into signing the aforementioned resignation letter and
quitclaim without explaining to him the contents thereof.

- Petitioner made it clear to him that anyway, he did not have a choice.

-Petitioner cannot disguise the summary dismissal of private respondent by orchestrating the latter's alleged
resignation and subsequent execution of a Quitclaim and Release.

-A judicious examination of both events belies any spontaneity on private respondent's part.

-The court finds no abuse of discretion committed by public respondent National Labor Relations Commission,
the appealed decision is hereby AFFIRMED.

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Filamer Christian Institute vs IAC and Kapunan
August 17, 1992
Labor Standards – Human Resources Development – Torts – Section 14, Rule X, Book III, IRR (Labor Code)

-Daniel Funtecha was a working student of Filamer.

- He was assigned as the school janitor to clean the school 2 hours every morning.

-Allan Masa was the son of the school president and at the same time he was the school’s jeepney service driver.

-On October 20, 1977 at about 6:30pm, after driving the students to their homes,

-Masa returned to the school to report and thereafter have to go home with the jeep so that he could fetch the
students early in the morning.

-Masa and Funtecha live in the same place so they usually go home together.

-Funtecha had a student driver’s license so Masa let him take the driver’s seat.

- While Funtecha was driving, he accidentally hit an elderly Kapunan

-which led to his hospitalization for 20 days.

-Kapunan filed a criminal case and an independent civil action against Funtecha.

-In the independent civil action, the lower court ruled that Filamer is subsidiarily liable for the tortious act of

-and was compelled to pay for damages based on Article 2180 which provides that employers shall be liable for
the damages caused by their employees and household helpers acting within the scope of their assigned tasks.

-Filamer assailed the decision and it argued that under Section 14, Rule X, Book III of the Labor Code IRR,

-working scholars are excluded from the employment coverage

- hence there is no employer-employee relations between Filamer and Funcheta;

-that the negligent act of Funcheta was due to negligence only attributable to him alone as it is outside his
assigned task of being the school janitor.

-The CA denied Filamer’s appeal

- the Supreme Court agreed with Filamer.

-Kapunan filed for a motion for reconsideration.

ISSUE: Whether or not Filamer should be held subsidiarily liable.



- SC ruled in favor of Kapunan (actually his heirs cause by this time Kapunan was already dead).

- The provisions of Section 14, Rule X, Book III of the Labor Code IRR was only meant to provide guidelines as
compliance with labor provisions on working conditions, rest periods, and wages is concerned.

-This does not in any way affect the provisions of any other laws like the civil code.

- The IRR cannot defeat the provisions of the Civil Code.

-In other words, Rule X is merely a guide to the enforcement of the substantive law on labor.

-There is a distinction hence Section 14, Rule X, Book III of the Rules is not the decisive law in a civil suit for
damages instituted by an injured person during a vehicular accident against a working student of a school and
against the school itself.

-this case does not deal with a labor dispute on conditions of employment between an alleged employee and
an alleged employer.
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- It invokes a claim brought by one for damages for injury caused by the patently negligent acts of a person,
against both doer-employee and his employer.

-Hence, the reliance on the implementing rule on labor to disregard the primary liability of an employer under
Article 2180 of the Civil Code is misplaced.

- An implementing rule on labor cannot be used by an employer as a shield to void liability under the substantive
provisions of the Civil Code.

-Funtecha is an employee of Filamer.

- He need not have an official appointment for a driver's position in order that Filamer may be held responsible
for his grossly negligent act,

-it being sufficient that the act of driving at the time of the incident was for the benefit of Filamer

- (the act of driving the jeep from the school to Masa’s house is beneficial to the school because this enables
Masa to do a timely school transportation service in the morning).

-Hence, the fact that Funtecha was not the school driver or was not acting with the scope of his janitorial duties
does not relieve Filamer of the burden of rebutting the presumption juris tantum

- that there was negligence on its part either in the selection of a servant or employee, or in the supervision
over him.

- Filamer has failed to show proof of its having exercised the required diligence of a good father of a family over
its employees Funtecha and Allan.

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Atlanta Industries vs Sebolino

January 26, 2011

Summary: Complainants were engaged as apprentices in Atlanta Corp. and now

suing the corporation for illegal dismissal, among others, for its refusal to grant them
regular status 6 months after commencing their apprenticeship.

Doctrine: With the expiration of the apprenticeship agreement and the

retention of the employees, Atlanta had, to all intents and purposes,
recognized the completion of their training and their acquisition of a regular

-Complainants Aprilito R. Sebolino, et.al., filed several complaints for illegal dismissal, regularization,
underpayment, nonpayment of wages and other money claims,

- as well as claims for moral and exemplary damages and attorney’s fees against the petitioners Atlanta
Industries, Inc. (Atlanta) and its President and Chief Operating Officer Robert Chan.

-Atlanta is a domestic corporation engaged in the manufacture of steel pipes.

-The complainants alleged that they had attained regular status as they were allowed to work with Atlanta
for more than six (6) months

-from the start of a purported apprenticeship agreement between them and the company.

-They claimed that they were illegally dismissed when the second apprenticeship agreement expired

-re\\and that they were actually already employees of Atlanta before they were put in the apprenticeship

-In defense, Atlanta and Chan argued that the workers were not entitled to regularization

-and to their money claims because they were engaged as apprentices under a government-approved
apprenticeship program.

- The company offered to hire them as regular employees in the event vacancies for regular positions occur in
the section of the plant where they had trained.

-They also claimed that their names did not appear in the list of employees (Master List) prior to their
engagement as apprentices.

-Subsequently a compromise agreement was entered into by the respondent with Atlanta, but the remaining
respondents had refused to sign.

Issues: Whether or not the termination of the employees after the expiration of the apprenticeship
agreement was valid cause for dismissal

Held: No.

-Based on company operations at the time material to the case,

-Costales, Almoite, Sebolino and Sagun were already rendering service to the company as employees before
they were made to undergo apprenticeship.

- The company itself recognized the respondents’ status through relevant operational records.

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-The Master List (of employees) that the petitioners heavily rely upon as proof of their position that the
respondents were not Atlanta’s employees, at the time they were engaged as apprentices, is unreliable and does
not inspire belief.

-The fact that Costales, Almoite, Sebolino and Sagun were already rendering service to the company when they
were made to undergo apprenticeship renders the apprenticeship agreements irrelevant as far as the four are

-The respondents occupied positions such as machine operator, scaleman and extruder operator - tasks that are
usually necessary and desirable in Atlanta’s usual business or trade as manufacturer of plastic building materials.

-These tasks and their nature characterized the four as regular employees under Article 280 of the Labor Code.

-Thus, when they were dismissed without just or authorized cause, without notice, and without the opportunity
to be heard, their dismissal was illegal under the law.

-Even if we recognize the company’s need to train its employees through apprenticeship, we can only consider
the first apprenticeship agreement for the purpose.

-With the expiration of the first agreement and the retention of the employees, Atlanta had, to all intents and
purposes, recognized the completion of their training and their acquisition of a regular employee status.

-To foist upon them the second apprenticeship agreement for a second skill which was not even mentioned in
the agreement itself, is a violation of the Labor Code’s implementing rules and is an act manifestly unfair to the
employees, to say the least.

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Bernardo et al v. NLRC & FEBTC
GR No. 122917, 12 July 1999


-The dismissed complainants, numbering 43, are deaf-mutes

-who were hired on various periods from 1988 to 1993 by respondent Far East Bank and Trust Co.

-as Money Sorters and Counters

- through a uniformly worded agreement called "Employment Contract for Handicapped Workers".

-Disclaiming that complainants were regular employees,

- respondent Far East Bank and Trust Company maintained that complainants were hired temporarily under a
special employment arrangement

-which was a result of overtures made by some civic and political personalities to the respondent Bank;

-that complainant[s] were hired due to "pakiusap";

-that the tellers themselves already did the sorting and counting chore as a regular feature and integral part of
their duties;

-that through the "pakiusap" of Arturo Borjal, the tellers were relieved of this task of counting and sorting bills
in favor of deaf-mutes without creating new positions as there is no position either in the respondent or in any
other bank in the Philippines which deals with purely counting and sorting of bills in banking operations.

- The LA &, on appeal, the NLRC ruled against petitioners, holding that they could not be deemed regular
employees since they were hired as an accommodation to the recommendation of civic oriented personalities
whose employments were covered by Employment Contracts w/ special provisions on duration of contract as
specified under Art. 80.

- Hence, the terms of the contract shall be the law between the parties.

Whether petitioners have become regular employees

Held: yes
-Only the employees, who worked for more than six months and whose contracts were renewed are deemed

-The facts, viewed in light of the Labor Code and the Magna Carta for Disabled Persons, indubitably show that
the petitioners, except sixteen of them, should be deemed regular employees.

-The uniform employment contracts of the petitioners stipulated that they shall be trained for a period of one

-after which the employer shall determine whether or not they should be allowed to finish the 6-month term of
the contract.

-Furthermore, the employer may terminate the contract at any time for a just and reasonable cause.

- Unless renewed in writing by the employer, the contract shall automatically expire at the end of the term.

-The stipulations in the employment contracts indubitably conform with Art. 80 LC

-w/c provides for the requisites in the employment agreement between an employer who employs handicapped
workers. Succeeding events and the enactment of RA No. 7277 (the Magna Carta for Disabled Persons),

-13 however, justify the application of Article 280 of the Labor Code.

-Respondent bank entered into the aforesaid contract with a total of 56 handicapped workers and renewed the
contracts of 37 of them.

-Verily, the renewal of the contracts of the handicapped workers and the hiring of others lead to the conclusion
that their tasks were beneficial and necessary to the bank.

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-facts show that they were qualified to perform the responsibilities of their positions.

-, their disability did not render them unqualified or unfit for the tasks assigned to them.

-In this light, the Magna Carta for Disabled Persons mandates that a qualified disabled employee should be given
the same terms and conditions of employment as a qualified able-bodied person.

-fact that the employees were qualified disabled persons necessarily removes the employment contracts from
the ambit of Article 80.

-Since the Magna Carta accords them the rights of qualified able-bodied persons, they are thus covered by
Article 280 of the Labor Code.

-Without a doubt, the task of counting and sorting bills is necessary and desirable to the business of respondent

- With the exception of sixteen of them, petitioners performed these tasks for more than six months.

-Thus, the twenty-seven petitioners should be deemed regular employees.

The contract signed by petitioners is akin to a probationary employment, during which the bank determined the
employees' fitness for the job. When the bank renewed the contract after the lapse of the six-month probationary

-the employees thereby became regular employees. 16 No employer is allowed to determine indefinitely the
fitness of its employees.

-Moreover, it must be emphasized that a contract of employment is impressed with public interest.

- Provisions of applicable statutes are deemed written into the contract, and the "parties are not at liberty to
insulate themselves and their relationships from the impact of labor laws and regulations by simply contracting
with each other."

- Clearly, the agreement of the parties regarding the period of employment cannot prevail over the provisions
of the Magna Carta for Disabled Persons, which mandate that petitioners must be treated as qualified able-
bodied employees.

An employee is regular because of the nature of work and the length of service, not because of the mode or
even the reason for hiring them.

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Televisions and Production Exponents, Inc. (TAPE, Inc.) vs. Roberto Servaña
G.R. No. 167648 January 28, 2008

Doctrine: There is an employer-employee relationship when the person for whom the services are performed
reserves the right to control not only the end achieved but also the manner and means used to achieve that


-TAPE is a domestic corporation engaged in the production of television programs

-while Antonio Tuviera serves as its president.

- Roberto Servaña served as security guard for TAPE from 1987 until his services were termitated on 3 March

-Servaña filed a complaint for illegal dismissal agianst TAPE.

-He alleged that he was first connected with Agro-Commercial Security Agency

- but was later on absorbed by TAPE as a regular company guard.

-His services were terminated on account of TAPE’s decision to contract the services of a professional security

- Tape, on the other hand, alleged that Servaña was an independent contractor falling under the talent group
category and was working under a special arrangement.

- It alleged that it was agreed that Servaña would render his services unitil such time that the company shall
have engaged the services of a professional security agency.

The case involved the question of Whether or not there is an Employer-Employee relationship
between TAPE and Servaña?


-The Labor Arbiter ruled that Servaña was a regular employee of Tape on account of the nature of the work of
Servaña, which is securing and maintaining order in the studio,

-as necessary and desirable in the usual business of TAPE.

-However, the Labor Aribter ruled the termination valid on the ground of redundancy.


-No. The NLRC reversed the ruling of the Labor Arbiter

- on the ground security services may not be deemed necessary and desirable in the usual business of TAPE.


-The CA ruled that that Servaña was a regular employee considering the nature and length of his service.

ISSUE: Whether or not there is an Employer-Employee relationship between TAPE and Servaña?



- Jurisprudence is abound with cases that recite the factors to be considered in determining the existence of
employer-employee relationship,

(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 method by which the work is
to be accomplished.
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-Servaña was hired by TAPE when the latter absorbed him upon the expiration of his security agency contract
with RPN-9.

-The monthly salary received by Servaña is considered wages despite being designated as talent fees by TAPE.

-The Memorandum informing Servaña of discontinuance of his services also proves that TAPE had the power to
dismiss him.

-Control is also manifested in the bundy cards submitted by Servaña.

-He was required to report daily and observe definite work hours.

-He is also considered a regular employee by reason of his 5 year continuous service regardless of whether or
not respondent had been performing work that is necessary or desirable to the usual business of TAPE.

-Thus being a regular employee, his services may not be terminated except for a just or authorized cause.

-TAPE is liable for illegal dismissal for it failure to comply the 1month requirement for termination of services as
required by law.

-However, with respect to the liability of petitioner Tuviera, president of TAPE, absent any showing that he acted
with malice or bad faith in terminating respondent,

-he cannot be held solidarily liable with TAPE.

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G.R. No. 192084 September 14, 2011

-Complainants (Jose Mel Bernarte and Renato Guevarra) aver that they were invited to join the PBA as referees.

-During the leadership of Commissioner Emilio Bernardino, they were made to sign contracts on a year-to-year

-During the term of Commissioner Eala, however, changes were made on the terms of their employment.

-Complainant Bernarte, for instance, was not made to sign a contract during the first conference of the All-
Filipino Cup which was from February 23, 2003 to June 2003.

- It was only during the second conference when he was made to sign a one and a half month contract for the
period July 1 to August 5, 2003.

-On January 15, 2004, Bernarte received a letter from the Office of the Commissioner advising him that his
contract would not be renewed citing his unsatisfactory performance on and off the court.

- It was a total shock for Bernarte who was awarded Referee of the year in 2003.

-He felt that the dismissal was caused by his refusal to fix a game upon order of Ernie De Leon.

-On the other hand, complainant Guevarra alleges that he was invited to join the PBA pool of referees in February

-On March 1, 2001, he signed a contract as trainee. Beginning 2002,

-he signed a yearly contract as Regular Class C referee.

-On May 6, 2003, respondent Martinez issued a memorandum to Guevarra

-expressing dissatisfaction over his questioning on the assignment of referees officiating out-of-town games.

-Beginning February 2004, he was no longer made to sign a contract.

-Respondents aver, on the other hand, that complainants entered into two contracts of retainer with the PBA in
the year 2003.

-The first contract was for the period January 1, 2003 to July 15, 2003; and the second was for September 1 to
December 2003.

-After the lapse of the latter period, PBA decided not to renew their contracts.

- Pba allged that Complainants were not illegally dismissed because they were not employees of the PBA.

-Their respective contracts of retainer were simply not renewed.

-PBA had the prerogative of whether or not to renew their contracts, which they knew were fixed.

In her 31 March 2005 Decision, the Labor Arbiter declared petitioner an employee whose dismissal by
respondents was illegal. Accordingly, the Labor Arbiter ordered the reinstatement of petitioner and the payment
of backwages, moral and exemplary damages and attorney’s fees. The NLRC affirmed the Labor Arbiter's
judgment. Respondents filed a petition for certiorari with the Court of Appeals, which overturned the decisions
of the NLRC and Labor Arbiter.

ISSUE: Whether petitioner is an employee of respondents, ? which in turn determines whether

petitioner was illegally dismissed


- Petitioner is not an employee of the respondents.

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-To determine the existence of an employer-employee relationship, case law has consistently applied the four-
fold test, to wit:
(a) the selection and engagement of the employee;
(b) the payment of wages;
(c) the power of dismissal; and
(d) the employer’s power to control the employee on the means and methods by which the work is accomplished.

-The so-called “control test” is the most important indicator of the presence or absence of an employer-employee

In this case, PBA admits repeatedly engaging petitioner’s services, as shown in the retainer contracts.

-PBA pays petitioner a retainer fee, exclusive of per diem or allowances, as stipulated in the retainer contract.

-PBA can terminate the retainer contract for petitioner’s violation of its terms and conditions.

-However, respondents argue that the all-important element of control is lacking in this case,

- making petitioner an independent contractor and not an employee of respondents.

-The contractual stipulations do not pertain to, much less dictate, how and when petitioner will blow the whistle
and make calls.

-On the contrary, they merely serve as rules of conduct or guidelines in order to maintain the integrity of the
professional basketball league.

- As correctly observed by the Court of Appeals, “how could a skilled referee perform his job without blowing a
whistle and making calls? x x x [H]ow can the PBA control the performance of work of a referee without
controlling his acts of blowing the whistle and making calls?”

-sc agreed\s with respondents that once in the playing court, the referees exercise their own independent

-based on the rules of the game, as to when and how a call or decision is to be made.

-The referees decide whether an infraction was committed, and the PBA cannot overrule them once the decision
is made on the playing court.

-The referees are the only, absolute, and final authority on the playing court.

- Respondents or any of the PBA officers cannot and do not determine which calls to make or not to make and
cannot control the referee when he blows the whistle

-because such authority exclusively belongs to the referees. The very nature of petitioner’s job of officiating a
professional basketball game undoubtedly calls for freedom of control by respondents.

-Moreover, unlike regular employees who ordinarily report for work eight hours per day for five days a week,
petitioner is required to report for work only when PBA games are scheduled or three times a week at two hours
per game.

-In addition, there are no deductions for contributions to the Social Security System, Philhealth or Pag-Ibig,
which are the usual deductions from employees’ salaries.

- These undisputed circumstances buttress the fact that petitioner is an independent contractor, and not an
employee of respondents.

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[G.R. No. 145443. March 18, 2005]

FACTS: Consulta was Managing Associate of Pamana. On 1987 she was issued a certification authorizing her to
negotiate for and in behalf of PAMANA with the Federation of Filipino Civilian Employees Association. Consulta
was able to secure an account with FFCEA in behalf of PAMANA. However, Consulta claimed that PAMANA did
not pay her commission for the PPCEA account and filed a complaint for unpaid wages or commission.

ISSUE: Whether or not Consulta was an employee of PAMANA.

HELD: The SC held that Pamana was an independent agent and not an employee.

The power of control in the four fold test is missing. The manner in which Consulta was to pursue her tasked
activities was not subject to the control of PAMANA. Consulta failed to show that she worked definite hours. The
amount of time, the methods and means, the management and maintenance of her sales division were left to
her sound judgment.

Finally, Pamana paid Consulta not for labor she performed but only for the results of her labor. Without results,
Consulta’s labor was her own burden and loss. Her right to compensation, or to commission, depended on the
tangible results of her work - whether she brought in paying recruits.

The fact that the appointment required Consulta to solicit business exclusively for Pamana did not mean 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 as long as the business
or company did not compete with Pamana’s business. The exclusivity clause was a reasonable restriction to
prevent similar acts prejudicial to Pamana’s business interest. Article 1306 of the Civil Code provides that “[t]he
contracting parties may establish such stipulation, clauses, terms and conditions as they may deem convenient,
provided that they are not contrary to law, morals, good customs, public order, or public policy.

There being no employer-employee relationship between Pamana and Consulta, the Labor Arbiter and the NLRC
had no jurisdiction to entertain and rule on Consulta’s money claim. Consulta’s remedy is to file an ordinary civil
action to litigate her claim

Petition is dismissed.

DeGoMa Labor Digest 13

Villamaria v. CA

G.R. No. 165881 April 19, 2006


Villamaria (P) owner a jeepney business called Villamaria Motors which operated along the Baclaran-Sucat route.
Bustamante (R) was one of his drivers wherein P verbally agreed to sell the jeepney to R under the "boundary-
hulog scheme," where Bustamante would remit to Villarama P550.00 a day for a period of 4 years; R would then
become the owner of the vehicle and continue to drive the same under P’s franchise. If R failed to pay the
boundary-hulog for 3 days, Villamaria Motors would hold on to the vehicle until Bustamante paid his arrears,
including a penalty of P50.00 a day. In case R failed to remit the daily boundary-hulog for a period of 1 week,
the Kasunduan would cease to have legal effect and R would have to return the vehicle to Villamaria Motors.
Under the Kasunduan, Bustamante was prohibited from driving the vehicle without prior authority from Villamaria
Motors. R failed to pay their boundary-hulog so the jeepney was taken aback.

R filed for illegal dismissal before the Labor Arbiter but was denied. The NLRC approved of this.


1. Whether employer-employee relationship existed between P & R.

2. Whether there was valid dismissal.


1. Yes. Under the boundary-hulog scheme incorporated in the Kasunduan, a dual juridical relationship was
created between petitioner and respondent: that of employer-employee and vendor-vendee. The Kasunduan
did not extinguish the employer-employee relationship of the parties extant before the execution of said deed.
The boundary system is a scheme by an owner/operator engaged in transporting passengers as a common
carrier to primarily govern the compensation of the driver, that is, the latter’s daily earnings are remitted to
the owner/operator less the excess of the boundary which represents the driver’s compensation. Under this
system, the owner/operator exercises control and supervision over the driver. Moreover, taking back the
jeepney doesn’t terminate employer-employee rel. under the Kasunduan.

The jurisdiction of Labor Arbiters and the NLRC under Article 217 of the Labor Code is limited to disputes arising
from an employer-employee relationship which can only be resolved by reference to the Labor Code, other labor
statutes or their collective bargaining agreement.

When the principal relief is to be granted under labor legislation or a collective bargaining agreement, the case
falls within the exclusive jurisdiction of the Labor Arbiter and the NLRC even though a claim for damages might
be asserted as an incident to such claim.

2. No. P failed to prove that dismissal was valid.

P failed to substantiate allegations with solid, sufficient proof. Notably, private respondent’s allegation viz, that
he retrieved the vehicle from the gas station, where R abandoned it, contradicted his statement in the Paalala
that he would enforce the provision (in the Kasunduan) to the effect that default in the remittance of the
boundary hulog for 1 week would result in the forfeiture of the unit. P did not submit any police report to support
his claim that R really

figured in a vehicular mishap. Neither did he present the affidavit of the guard from the gas station to
substantiate his claim that R abandoned the unit there.

DeGoMa Labor Digest 14

APRIL 19, 2006

Petitioner was the owner of the jeepneys, which the private respondent is the one who is driving in a “boundary
basis”. Villamaria and Bustamante entered into a contract were the petitioner agreed to sell the jeepney entitled
“Kasunduan ng Bilihan ng Sasakayan sa Pamamagitan ng Boundary-Hulog” were Bustamante would remit to
Villamaria P550.00 a day for a period of four years. Both parties agreed in such terms and stipulations of the
contract. When the private respondent failed to pay the boundary-hulog, Villarama took back the jeepney driven
by Bustamante and barred the latter from driving the vehicle. Due to the action of petitioner, Bustamante files
a complaint before the court.

Whether or not there exist an employee-employer relationshop.

Yes. The juridical relationship of employer-employee between petitioner and respondent was not negated by the
foregoing stipulation in the Kasunduan, considering that petitioner retained control of respondent’s conduct as
driver of the vehicle. Even if the petitioner was allowed to let some other person drive the unit, it was not shown
that he did so; that the existence of an employment

relation is not dependent on how the worker is paid but on the presence or absence of control over the means
and method of the work; that the amount earned in excess of the “boundary hulog” is equivalent to wages; and
that the fact that the power of dismissal was not mentioned in the Kasunduan did not mean Villamaria never
exercised such power, or could not exercise such power. Hence, the employer- employee relationship exists.

DeGoMa Labor Digest 15


Other Important Labor Provisions A. Contracting Arrangements


Asiapro, as a cooperative, is composed of owners-members. Its primary objectives are to provide savings and
credit facilities and to develop other livelihood services for its owners-members. In the discharge of the aforesaid
primary objectives, respondent cooperative entered into several Service Contracts with Stanfilco. The owners-
members do not receive compensation or wages from the respondent cooperative. Instead, they receive a share
in theservice surplus which Asiapro earns from different areas of trade it engages in, such as the income derived
from the said Service Contracts with Stanfilco.In order to enjoy the benefits under the Social Security Law of
1997, the owners-members of Asiapro in Stanfilco requested the services of the latter to register them with SSS
as self-employed and to remit their contributions as such. Petitioner SSS sent a letter to respondent cooperative
informing the latter that based on theService Contracts it executed with Stanfilco, Asiapro is actually a manpower
contractor supplying employees toStanfilco and so, it is an employer of its owners-members working with
Stanfilco. Thus, Asiapro should register itself with petitioner SSS as an employer and make the corresponding
report and remittance of premium contributions.Despite letters received, respondent cooperative continuously
ignored the demand of petitioner SSS. Respondent cooperative alleges that its owners-members own the
cooperative, thus, no employer-employee relationship can arise between them.

ISSUE. WON an employer-employee relationship exists between Stanfilco and its owner-members.


YES. an owner-member of a cooperative can be an employee of the latter and an employer-employee

relationship can exist between them. a cooperative acquires juridical personality upon its registration with the
CooperativeDevelopment Authority. It has its Board of Directors, which directs and supervises its business;
meaning, its Board of Directors is the one in charge in the conduct and management of its affairs. With that, a
cooperative can be likened to a corporation with a personality separate and distinct from its owners-members.It
is true that the Service Contracts executed between the respondent cooperative and Stanfilco expressly provide
that there shall be no employer-employee relationship between the respondent cooperative and its owners-
members.However, the existence of an employer -employee relationship cannot be negated by expressly
repudiating it in a contract, when the terms and surrounding circumstances show otherwise. The employment
status of a person is defined and prescribed by law and not by what the parties say it should be.

It is settled that the contracting parties may establish such stipulations, clauses, terms and conditions as they
want, and their agreement would have the force of law between them. However,the agreed terms and conditions
must not be contrary to law, morals, customs, public policy or public order.

The Service Contract provision in question must be struck down for being contrary to law and public policy since
it is apparently being used by the respondent cooperative merely to circumvent the compulsory coverage of its
employees, who are also its owners-members, by theSocial Security Law. The four elements in determining the
existence of an employer-employee relationship are all present in this case.

First. It is expressly provided in the Service Contracts that it is the respondent cooperative which has the
exclusive discretion in the selection and engagement of the owners-members as well as its team leaders who
will be assigned at Stanfilco.

Second. the weekly stipends or the so-called shares in the service surplus given by the respondent cooperative
to its owners-members were in reality wages, as the same were equivalent to an amount not lower than that
prescribed by existing labor laws, rules and regulations, including the wage order applicable to the area and
industry, they are also given to the owners-members as compensation in rendering services to respondent
cooperative’s client, Stanfilco.

Third. it is the respondent cooperative which has the power to investigate, discipline and remove the owners-
members and its team leaders who were rendering services at Stanfilco.

Fourth and most importantly, it is the respondent cooperative which has the sole control over the manner and
means of performing the services under the Service Contracts with Stanfilco as well as the means and methods
of work. All these clearly prove that, indeed, there is an employer-employee relationship between the respondent
cooperative and its owners-members

DeGoMa Labor Digest 16

Phil. Global Communications v. De Vera

459 SCRA 260 [2005]


Philippine Global Communications inc. is a corporation engaged in the business of communication services and
allied activities while Ricardo de Vera is a physician by profession whom petitioner enlisted to attend to the
medical needs of its employees. The controversy rose when petitioner terminated his engagement.

In 1981, Dr. de Vera offered his services to petitioner. The parties agreed and formalized the respondent’s
proposal in a document denominated as retainership contract which will be for a period of one year, subject to
renewal and clearly stated that respondent will cover the retainership the company previously with Dr. Eulau.
The agreement went until 1994, in the years 1995-1996, it was renewed verbally. The turning point of the
parties’ relationship was when petitioner, thru a letter bearing the subject TERMINATION – RETAINERSHIP
CONTRACT, informed Dr. de Vera of its decision to discontinue the latter’s retainer contract because the
management has decided that it would be more practical to provide medical services to its employees through
accredited hospitals near the company premises.

On January 1997, de Vera fileda complaint for illegal dismissal before the NLRC, alleging that he had been
actually employed by the company as its company physician since 1991. The commission rendered decision in
favor of Philcom and dismissed the complaint saying that de Vera was an independent contractor. On appeal to
NLRC, it reversed the decision of the Labor Arbiter stating that de Vera is a regular employee and directed the
company to reinstate him. Philcom appealed to the CA where it rendered decision deleting the award but
reinstating de Vera. Philcom filed this petition involving the difference of a job contracting agreements from
employee-employer relationship.

Whether or not there is an employer-employee relationship between the parties.

SC Ruling:

The elements of an employer-employee relationship is wanting in this case. The record are replete with evidence
showing that respondent had to bill petitioner for his monthly professional fees. It simply runs against the grain
of common experience to imagine that an ordinary employee has yet to bill his employer to receive his salary.

The power to terminate the parties’ relationship was mutually vested on both. Either may terminate the
arrangement at will, with or without cause.

Remarkably absent is the element of control whereby the employer has reserved the right to control the
employee not only as to the result of the work done but also as to the means and methods by which the same
is to be accomplished.

Petitioner had no control over the means and methods by which respondent went about performing his work at
the company premises. In fine, the parties themselves practically agreed on every terms and conditions of the
engagement, which thereby negates the element of control in their relationship.

DeGoMa Labor Digest 17

Coca-Cola Bottlers Phils., vs. Dr. Climaco

G.R. No. 146881, February 15, 2007


Dr. Dean N. Climaco is a medical doctor who was hired by Coca-Cola Bottlers Phils., Inc. by virtue of a Retainer
Agreement. The Retainer Agreement, which began on January 1, 1988, was renewed annually. The last one
expired on December 31, 1993. Despite the non-renewal of the Retainer Agreement, respondent continued to
perform his functions as company doctor to Coca-Cola until he received a letter dated March 9, 1995 from the
company concluding their retainership agreement effective 30 days from receipt thereof. Dr. Climaco inquired
from the management of the company whether it was agreeable to recognizing him as a regular employee. The
management refused to do so. On February 24, 1994, respondent filed a Complaint before the NLRC, Bacolod
City, seeking recognition as a regular employee of the company and prayed for the payment of all benefits of a
regular employee. While the complaint was pending before the Labor Arbiter, respondent received a letter dated
March 9, 1995 from Petitioner Company concluding their retainership agreement effective thirty (30) days from
receipt thereof.

Whether or not there exists an employer-employee relationship. Ruling:

The Court, in determining the existence of an employer-employee relationship, has invariably adhered to the
four-fold test: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power to control the employee’s conduct, or the so-called "control test," considered to be
the most important element. No employer-employee relationship exists between the parties. The... company
lacked the power of control over the performance by respondent of his duties. The...Comprehensive Medical
Plan, which contains the respondent’s objectives, duties and obligations, does not tell respondent "how to
conduct his physical examination, how to immunize, or how to diagnose and treat his patients, employees of
[petitioner] company, in each case."

DeGoMa Labor Digest 18

448 SCRA 478. January 17, 2005

The respondent company, Supreme Packaging, Inc. engaged the services of the petitioner, Pedro Chavez,
as truck driver. The respondent company furnished the petitioner with a truck. The petitioner expressed to
respondent Alvin Lee, respondent company’s plant manager, his desire to avail himself of the benefits that the
regular employees were receiving such as overtime pay, nightshift differential pay, and 13th month pay, among
others. Although he promised to extend these benefits to the petitioner, respondent Lee failed to actually do so.
Petitioner filed a complaint for regularization with the Regional Arbitration Branch. Before the case could be
heard, respondent company terminated the services of the petitioner. Consequently, the petitioner filed an
amended complaint against the respondents for illegal dismissal, unfair labor practice and non-payment of
overtime pay, nightshift differential pay, and 13th month pay, among others. The respondents, for their part,
denied the existence of an employer-employee relationship between the respondent company and the petitioner.
They averred that the petitioner was an independent contractor as evidenced by the contract of service which
he and the respondent company entered into. The relationship of the respondent company and the petitioner
was allegedly governed by this contract of service.

The respondents insisted that the petitioner had the sole control over the means and methods by which
his work was accomplished. He paid the wages of his helpers and exercised control over them. As such, the
petitioner was not entitled to regularization because he was not an employee of the respondent company. The
respondents, likewise, maintained that they did not dismiss the petitioner. Rather, the severance of his
contractual relation with the respondent company was due to his violation of the terms and conditions of
their contract.

whether or not there existed an employer-employee relationship between the respondent company and
the petitioner.

Yes. There was an employer-employee relationship in the case at bar.

The elements to determine the existence of an employment relationship are: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employer’s
power to control the employee’s conduct. All the four elements are present in this case.

Of the four elements of the employer-employee relationship, the “control test” is the most important.
Although the respondents denied that they exercised control over the manner and methods by which the
petitioner accomplished his work, a careful review of the records shows that the latter performed his work as
truck driver under the respondents’ supervision and control. Their right of control was manifested by the
following attendant circumstances:
1. The truck driven by the petitioner belonged to respondent company;
2. There was an express instruction from the respondents that the truck shall be used exclusively to deliver
respondent company’s goods;
3. Respondents directed the petitioner, after completion of each delivery, to park the truck in either of two
specific places only, to wit: at its office in Metro Manila at 2320 Osmeña Street, Makati City or at BEPZ,
Mariveles, Bataan; and
4. Respondents determined how, where and when the petitioner would perform his task by issuing to him gate
passes and routing slips.

These circumstances, to the Court’s mind, prove that the respondents exercised control over the means
and methods by which the petitioner accomplished his work as truck driver of the respondent company. The
contract of service indubitably established the existence of an employer-employee relationship between the
respondent company and the petitioner. It bears stressing that the existence of an employer-employee
relationship cannot be negated by expressly repudiating it in a contract and providing therein that the employee
is an independent contractor when, as in this case, the facts clearly show otherwise. Indeed, the employment
status of a person is defined and prescribed by law and not by what the parties say it should be.

DeGoMa Labor Digest 19


FACTS: In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was
designated as Accountant and Corporate Secretary and was assigned to handle all the accounting needs of the
company. She was also designated as Liaison Officer to the City of Makati to secure business permits,
construction permits and other licenses for the initial operation of the company.

Although she was designated as Corporate Secretary, she was not entrusted with the corporate documents;
neither did she attend any board meeting nor required to do so. She never prepared any legal document and
never represented the company as its Corporate Secretary. However, on some occasions, she was prevailed
upon to sign documentation for the company.

In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as accountant in lieu
of petitioner. As Acting Manager, petitioner was assigned to handle recruitment of all employees and perform
management administration functions; represent the company in all dealings with government agencies,
especially with the Bureau of Internal Revenue (BIR), Social Security System (SSS) and in the city government
of Makati; and to administer all other matters pertaining to the operation of Kasei Restaurant which is owned
and operated by Kasei Corporation.

For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her salary was
P27,500.00 plus P3,000.00 housing allowance and a 10% share in the profit of Kasei Corporation.

In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was required
to sign a prepared resolution for her replacement but she was assured that she would still be connected with
Kasei Corporation. Timoteo Acedo, the designated Treasurer, convened a meeting of all employees of Kasei
Corporation and announced that nothing had changed and that petitioner was still connected with Kasei
Corporation as Technical Assistant to Seiji Kamura and in charge of all BIR matters.

Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to September
2001 for a total reduction of P22,500.00 as of September 2001. Petitioner was not paid her mid-year bonus
allegedly because the company was not earning well. On October 2001, petitioner did not receive her salary
from the company. She made repeated follow-ups with the company cashier but she was advised that the
company was not earning well.

On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but she was informed
that she is no longer connected with the company.

Since she was no longer paid her salary, petitioner did not report for work and filed an action for constructive
dismissal before the labor arbiter.

Private respondents averred that petitioner is not an employee of Kasei Corporation. They alleged that petitioner
was hired in 1995 as one of its technical consultants on accounting matters and act concurrently as Corporate
Secretary. As technical consultant, petitioner performed her work at her own discretion without control and
supervision of Kasei Corporation. Petitioner had no daily time record and she came to the office any time she
wanted. The company never interfered with her work except that from time to time, the management would
ask her opinion on matters relating to her profession. Petitioner did not go through the usual procedure of
selection of employees, but her services were engaged through a Board Resolution designating her as technical
consultant. The money received by petitioner from the corporation was her professional fee subject to the 10%
expanded withholding tax on professionals, and that she was not one of those reported to the BIR or SSS as
one of the company’s employees.

Petitioner’s designation as technical consultant depended solely upon the will of management. As such, her
consultancy may be terminated any time considering that her services were only temporary in nature and
dependent on the needs of the corporation.

To prove that petitioner was not an employee of the corporation, private respondents submitted a list of
employees for the years 1999 and 2000 duly received by the BIR showing that petitioner was not among the
employees reported to the BIR, as well as a list of payees subject to expanded withholding tax which included
petitioner. SSS records were also submitted showing that petitioner’s latest employer was Seiji Corporation.

The Labor Arbiter found that petitioner was illegally dismissed, thus:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. finding complainant an employee of respondent corporation;
2. declaring complainant’s dismissal as illegal;
3. ordering respondents to reinstate complainant to her former position without loss of seniority rights and jointly
and severally pay complainant her money claims in accordance with the following computation:
DeGoMa Labor Digest 20
a. Backwages 10/2001 – 07/2002 275,000.00
(27,500 x 10 mos.)
b. Salary Differentials (01/2001 – 09/2001) 22,500.00
c. Housing Allowance (01/2001 – 07/2002) 57,000.00
d. Midyear Bonus 2001 27,500.00
e. 13th Month Pay 27,500.00
f. 10% share in the profits of Kasei
Corp. from 1996-2001 361,175.00
g. Moral and exemplary damages 100,000.00
h. 10% Attorney’s fees 87,076.50

On appeal, the Court of Appeals reversed the NLRC decision, thus:

WHEREFORE, the instant petition is hereby GRANTED. The decision of the National Labor Relations Commissions
dated April 15, 2003 is hereby REVERSED and SET ASIDE and a new one is hereby rendered dismissing the
complaint filed by private respondent against Kasei Corporation, et al. for constructive dismissal.

The appellate court denied petitioner’s motion for reconsideration, hence, the present recourse.

(1) whether there was an employer-employee relationship between petitioner and private respondent Kasei
Corporation; and if in the affirmative, (2) whether petitioner was illegally dismissed.

Considering the conflicting findings by the Labor Arbiter and the National Labor Relations Commission on one
hand, and the Court of Appeals on the other, there is a need to reexamine the records to determine which of
the propositions espoused by the contending parties is supported by substantial evidence.

We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there has been no uniform test to determine
the existence of an employer-employee relation. Generally, courts have relied on the so-called right of control
test where the person for whom the services are performed reserves a right to control not only the end to be
achieved but also the means to be used in reaching such end. In addition to the standard of right-of-control,
the existing economic conditions prevailing between the parties, like the inclusion of the employee in the payrolls,
can help in determining the existence of an employer-employee relationship.

However, in certain cases the control test is not sufficient to give a complete picture of the relationship between
the parties, owing to the complexity of such a relationship where several positions have been held by the worker.
There are instances when, aside from the employer’s power to control the employee with respect to the means
and methods by which the work is to be accomplished, economic realities of the employment relations help
provide a comprehensive analysis of the true classification of the individual, whether as employee, independent
contractor, corporate officer or some other capacity.

The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employer’s power
to control the employee with respect to the means and methods by which the work is to be accomplished; and
(2) the underlying economic realities of the activity or relationship.

This two-tiered test would provide us with a framework of analysis, which would take into consideration the
totality of circumstances surrounding the true nature of the relationship between the parties. This is especially
appropriate in this case where there is no written agreement or terms of reference to base the relationship on;
and due to the complexity of the relationship based on the various positions and responsibilities given to the
worker over the period of the latter’s employment.

The control test initially

Thus, the determination of the relationship between employer and employee depends upon the circumstances
of the whole economic activity, 22 such as: (1) the extent to which the services performed are an integral part
of the employer’s business; (2) the extent of the worker’s investment in equipment and facilities; (3) the nature
and degree of control exercised by the employer; (4) the worker’s opportunity for profit and loss; (5) the amount
of initiative, skill, judgment or foresight required for the success of the claimed independent enterprise; (6) the
permanency and duration of the relationship between the worker and the employer; and (7) the degree of
dependency of the worker upon the employer for his continued employment in that line of business.

The proper standard of economic dependence is whether the worker is dependent on the alleged employer for
his continued employment in that line of business. 24 In the United States, the touchstone of economic reality
in analyzing possible employment relationships for purposes of the Federal Labor Standards Act is dependency.
25 By analogy, the benchmark of economic reality in analyzing possible employment relationships for purposes
of the Labor Code ought to be the economic dependence of the worker on his employer.

DeGoMa Labor Digest 21
By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation because
she was under the direct control and supervision of Seiji Kamura, the corporation’s Technical Consultant. She
reported for work regularly and served in various capacities as Accountant, Liaison Officer, Technical Consultant,
Acting Manager and Corporate Secretary, with substantially the same job functions, that is, rendering accounting
and tax services to the company and performing functions necessary and desirable for the proper operation of
the corporation such as securing business permits and other licenses over an indefinite period of engagement.
Under the broader economic reality test, the petitioner can likewise be said to be an employee of respondent
corporation because she had served the company for six years before her dismissal, receiving check vouchers
indicating her salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as deductions and
Social Security contributions from August 1, 1999 to December 18, 2000. 26 When petitioner was designated
General Manager, respondent corporation made a report to the SSS signed by Irene Ballesteros. Petitioner’s
membership in the SSS as manifested by a copy of the SSS specimen signature card which was signed by the
President of Kasei Corporation and the inclusion of her name in the on-line inquiry system of the SSS evinces
the existence of an employer-employee relationship between petitioner and respondent corporation.

It is therefore apparent that petitioner is economically dependent on respondent corporation for her continued
employment in the latter’s line of business.

Based on the foregoing, there can be no other conclusion that petitioner is an employee of respondent Kasei
Corporation. She was selected and engaged by the company for compensation, and is economically dependent
upon respondent for her continued employment in that line of business. Her main job function involved
accounting and tax services rendered to respondent corporation on a regular basis over an indefinite period of
engagement. Respondent corporation hired and engaged petitioner for compensation, with the power to dismiss
her for cause. More importantly, respondent corporation had the power to control petitioner with the means and
methods by which the work is to be accomplished.

The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a month from January
to September 2001. This amounts to an illegal termination of employment, where the petitioner is entitled to
full backwages. Since the position of petitioner as accountant is one of trust and confidence, and under the
principle of strained relations, petitioner is further entitled to separation pay, in lieu of reinstatement.

In affording full protection to labor, this Court must ensure equal work opportunities regardless of sex, race or
creed. Even as we, in every case, attempt to carefully balance the fragile relationship between employees and
employers, we are mindful of the fact that the policy of the law is to apply the Labor Code to a greater number
of employees. This would enable employees to avail of the benefits accorded to them by law, in line with the
constitutional mandate giving maximum aid and protection to labor, promoting their welfare and reaffirming it
as a primary social economic force in furtherance of social justice and national development.

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals dated October 29,
2004 and October 7, 2005, respectively, in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE. The Decision
of the National Labor Relations Commission dated April 15, 2003 in NLRC NCR CA No. 032766-02, is
REINSTATED. The case is REMANDED to the Labor Arbiter for the recomputation of petitioner Angelina
Francisco’s full backwages from the time she was illegally terminated until the date of finality of this decision,
and separation pay representing one-half month pay for every year of service, where a fraction of at least six
months shall be considered as one whole year.

DeGoMa Labor Digest 22

Tongko v. Manufacturer Life Insurance Co. (MANULIFE) Inc., et al.

G.R. No 167622, January 25, 2011


Tongko was, initially an insurance agent of Manulife who was promoted to the role of a manager. The contractual
relationship between Tongko and Manulife had two basic phases. The initial phase began on July 1, 1977under
a Career Agent’s Agreement which regarded him as an independent contractor, not an employee. As an agent,
his tasks were to canvass for applications for insurance products and collect money due to the Company. The
second phase started in 1983 when Tongko was named Unit Manager. In 1990, he became a Branch Manager.
In 1996, Tongko became a Regional Sales Manager, where he earned commissions, persistency income and
management overrides. Since the beginning, Tongko consistently declared himself self-employed in his income
tax returns.

However, in 2001, Manulife instituted manpower development programs which directed the managers to
increase the number of agents to at least 1,000 strong for a start. It was found that Tongko’s region was the
lowest performer in terms of recruiting in 2000. Subsequently, Tongko received another letter, dated December
18, 2001, terminating his services. Tongko then filed an illegal dismissal complaint with the NLRC Arbitration
Branch. He alleged the existence of an employment relationship. In support of this he asserted that as Unit
Manager, he was paid an annual over-rider, a travel and entertainment allowance in addition to his overriding
commissions. He was tasked with numerous administrative functions and supervisory authority over Manulife’s
employees. He was required to follow at least three codes of conduct. On the other hand, Manulife contended
that what existed between them was a mere agency relationship.

Decisions of the Judicial Tribunals

LA: No employer-employee relationship existed between the parties.

NLRC: It found the existence of an employer-employee relationship. There was illegal dismissal.

CA: It reverted to the labor arbiter’s decision that no employer-employee relationship existed between them.

SC: In reversing the CA ruling, it declared that an employment relationship existed between them. First, there
exists the possibility of an insurance agent becoming an employee of an insurance company if evidence shows
that the company promulgated rules or regulations that effectively controlled or restricted an insurance agent’s
choice of methods or the methods themselves in selling insurance.

Second, Manulife had the power of control over Tongko, sufficient to characterize him as an employee, as shown
by the fact that he complied with 3 different codes of conduct and that he performed administrative duties. Also,
Tongko was tasked to recruit some agents in addition to his other administrative functions.

Hence, a Motion for Reconsideration was filed by Manulife and was granted by the SC.

Issue: Whether or not there exists an employer-employee relationship.

SC Ruling:

Rules regarding the desired results (e.g., the required volume to continue to qualify as a company agent & legal/
ethical rules to be followed) are built-in elements of control specific to an insurance agency and should not and
cannot be read as elements of control that attend an employment relationship governed by the Labor Code.

Based on decided cases, a determination of the presence of the Labor Code element of control was made on
the basis of the stipulations of the subsequent contracts. In this case, while Tongko was later on designated unit
manager in 1983, Branch Manager in 1990, and Regional Sales Manager in 1996, no formal contract regarding
these undertakings appears in the records of the case. Any such contract or agreement, had there been any,
could have at the very least provided the bases for properly ascertaining the juridical relationship established
between the parties.

For this reason, we can take judicial notice that as a matter of Insurance Code-based business practice, an
agency relationship prevails in the insurance industry for the purpose of selling insurance. Significantly, evidence
shows that Tongko’s role as an insurance agent never changed during his relationship with Manulife. Tongko
DeGoMa Labor Digest 23
essentially remained an agent, but moved up in this role through Manulife’s recognition that he could use other
agents approved by Manulife but operating under his guidance. For want of a better term, Tongko perhaps could
be labeled as a "lead agent" who guided under his wing other Manulife agents.

Evidence indicates that Tongko consistently clung to the view that he was an independent agent since he
invariably declared himself a business or self-employed person in his income tax returns. The concept of estoppel
– a legal and equitable concept – necessarily must come into play. Tongko’s previous admissions in several years
of tax returns as an independent agent, as against his belated claim that he was all along an employee, are too
diametrically opposed to be simply dismissed or ignored.

There was, indeed, lack of evidence on record showing that Manulife ever exercised means-and-manner control,
even to a limited extent, over Tongko during his ascent in Manulife’s sales ladder. The reality is, prior to the
directives sent by De Dios, Manulife had practically left Tongko alone not only in doing the business of selling
insurance, but also in guiding the agents under his wing. In addition, the mere presentation of codes or of rules
and regulations is not per se indicative of labor law control. The codes of conduct do not intrude into the
insurance agents’ means and manner of conducting their sales and only control them as to the desired results.

Guidelines indicative of labor law "control," based on the case of Insular Life, should not merely relate to the
mutually desirable result intended by the contractual relationship; they must have the nature of dictating the
means or methods to be employed in attaining the result, or of fixing the methodology and of binding or
restricting the party hired to the use of these means.

Hence, the failure of Tongko to comply with the guidelines & directives of Manulife is recruiting more agents, as
a ground for termination of Tongko’s agency, is a matter that the labor tribunals cannot rule upon in the absence
of an employer-employee relationship. Jurisdiction over the matter belongs to the courts applying the laws of
insurance, agency and contracts.

SC: Tongko is just an AGENT. In effect, the SC is telling us that, first, there must be an evidence of a contract
that shows that the relationship has been converted from contract of agency to that of employment, which is
absent in the case at bar. Secondly, adherence to a code of conduct is not, per se, indicative of control when it
merely controls the desired results and not the means and the manner by which agents are to conduct their
sales. The directive of De Dios to Tongko (in increasing the number of agents) was merely suggestive. Hence,
not indicative of control


G.R. No. 157802 October 13, 2010


After respondent Ricardo Coros dismissal by Matling as its Vice President for Finance and Administration,
he filed on August 10, 2000 a complaint for illegal suspension and illegal dismissal against Matling and some of
its corporate officers in the NLRC, Sub-Regional Arbitration Branch XII, Iligan City. The petitioners moved to
dismiss the complaint, raising the ground, among others, that the complaint pertained to the jurisdiction of the
Securities and Exchange Commission due to the controversy being intra-corporate inasmuch as the respondent
was a member of Matling’s Board of Directors aside from being its Vice-President for Finance and Administration
prior to his termination.

The respondent opposed the petitioners’ motion to dismiss, insisting that his status as a member of
Matling’s Board of Directors was doubtful, considering that he had not been formally elected as such; that he
did not own a single share of stock in Matling, considering that he had been made to sign in blank an undated
indorsement of the certificate of stock he had been given in 1992; that Matling had taken back and retained the
certificate of stock in its custody; and that even assuming that he had been a Director of Matling, he had been
removed as the Vice President for Finance and Administration, not as a Director, a fact that the notice of his
termination dated April 10, 2000 showed. On October 16, 2000, the Labor Arbiter granted the petitioners’ motion
to dismiss, ruling that the respondent was a corporate officer. On March 13, 2001, the NLRC set aside the
dismissal, concluding that the respondent’s complaint for illegal dismissal was properly cognizable by the LA, not
DeGoMa Labor Digest 24
by the SEC, because he was not a corporate officer by virtue of his position in Matling, albeit high ranking and
managerial, not being among the positions listed in Matling’s Constitution and By-Laws.

On motion for reconsideration, petitioners submitted a certified machine copies of Matling’s Amended
Articles of Incorporation and By Laws to prove that the President of Matling was thereby granted "full power to
create new offices and appoint the officers thereto” and the minutes of special meeting held on June 7, 1999 by
Matling’s Board of Directors to prove that the respondent was, indeed, a Member of the Board of Directors.
Nonetheless, the NLRC denied the petitioners’ motion for reconsideration. The petitioners elevated the issue to
the CA by petition for certiorari. The CA dismissed the petition for certiorari and ruled that for a position to be
considered as a corporate office, or, for that matter, for one to be considered as a corporate officer, the position
must, if not listed in the by-laws, have been created by the corporation's board of directors, and the occupant
thereof appointed or elected by the same board of directors or stockholders. Motion for reconsideration was
likewise denied. Hence this petition for review on certiorari.


Whether or not respondent was a corporate officer of Matling Industrial and Commercial Corporation.


Conformably with Section 25, a position must be expressly mentioned in the By-Laws in order to be considered
as a corporate office. Thus, the creation of an office pursuant to or under a By-Law enabling provision is not
enough to make a position a corporate office. Guerrea v. Lezama, the first ruling on the matter, held that the
only officers of a corporation were those given that character either by the Corporation Code or by the By-Laws;
the rest of the corporate officers could be considered only as employees or subordinate officials.

It is relevant to state in this connection that the SEC, the primary agency administering the Corporation Code,
adopted a similar interpretation of Section 25 of the Corporation Code in its Opinion dated November 25, 1993,
to wit:

Thus, pursuant to Section 25 of the Corporation Code, whoever are the corporate officers enumerated in the
by-laws are the exclusive Officers of the corporation and the Board has no power to create other Offices without
amending first the corporate By-laws. However, the Board may create appointive positions other than the
positions of corporate Officers, but the persons occupying such positions are not considered as corporate officers
within the meaning of Section 25 of the Corporation Code and are not empowered to exercise the functions of
the corporate Officers, except those functions lawfully delegated to them. Their functions and duties are to be
determined by the Board of Directors/Trustees.

Moreover, the Board of Directors of Matling could not validly delegate the power to create a corporate office to
the President, in light of Section 25 of the Corporation Code requiring the Board of Directors itself to elect the
corporate officers. Verily, the power to elect the corporate officers was a discretionary power that the law
exclusively vested in the Board of Directors, and could not be delegated to subordinate officers or agents. The
office of Vice President for Finance and Administration created by Matling’s President pursuant to By Law No. V
was an ordinary, not a corporate, office.

To emphasize, the power to create new offices and the power to appoint the officers to occupy them vested by
By-Law No. V merely allowed Matling’s President to create non-corporate offices to be occupied by ordinary
employees of Matling. Such powers were incidental to the President’s duties as the executive head of Matling to
assist him in the daily operations of the business.

DeGoMa Labor Digest 25

RAUL C. COSARE, Petitioner, v. BROADCOM ASIA, INC. and DANTE AREVALO, Respondents.

FACTS: In 1993, Cosare was employed as a salesman by Arevalo, who was then in the business of selling
broadcast equipment needed by television networks and production houses. In December 2000, Arevalo set up
the company Broadcom, still to continue the business of trading communication and broadcast equipment.
Cosare was named an incorporator of Broadcom, having been assigned 100 shares of stock with par value of
P1.00 per share. In October 2001, Cosare was promoted to the position of Assistant Vice President for Sales
(AVP for Sales) and Head of the Technical Coordination.

Sometime in 2003, Alex F. Abiog (Abiog) was appointed as Broadcoms Vice President for Sales and thus, became
Cosares immediate superior. Cosare sent a confidential memo to Arevalo to inform him of the anomalies which
were allegedly being committed by Abiog against the company. Cosare ended his memo by clarifying that he
was not interested in Abiogs position, but only wanted Arevalo to know of the irregularities for the corporations

Apparently, Arevalo failed to act on Cosares accusations. Cosare claimed that he was instead called for a meeting
by Arevalo on March 25, 2009, wherein he was asked to tender his resignation in exchange for "financial
assistance" in the amount ofP300,000.00.Cosare refused to comply with the directive, as signified in a letter
which he sent to Arevalo.

Cosare received from Roselyn Villareal (Villareal), Broadcoms Manager for Finance and Administration, a memo
signed by Arevalo, charging him of serious misconduct and willful breach of trust. He was given forty-eight (48)
hours from the date of the memo within which to present his explanation on the charges. He was also "suspended
from having access to any and all company files/records and use of company assets effective immediately."Thus,
Cosare claimed that he was precluded from reporting for work and was instead instructed to wait at the offices
receiving section. Upon the specific instructions of Arevalo, he was also prevented by Villareal from retrieving
even his personal belongings from the office until he was totally barred from entering the company premises.

Cosare filed a labor complaint, claiming that he was constructively dismissed from employment by the
respondents. He further argued that he was illegally suspended, as he placed no serious and imminent threat to
the life or property of his employer and co-employees.

In refuting Cosares complaint, the respondents argued that Cosare was neither illegally suspended nor dismissed
from employment. They also contended that Cosare committed the following acts inimical to the interests of
Broadcom.Furthermore, they contended that Cosare abandoned his job by continually failing to report for work
beginning April 1, 2009, prompting them to issue on April 14, 2009 a memorandum accusing Cosare of absence
without leave beginning April 1, 2009.

The Labor Arbiter dismissed the complaint on the ground of Cosares failure to establish that he was constructively

Cosare appealed the LA decision to the NLRC. It reversed the LA decision.

The respondents motion for reconsideration was denied.Dissatisfied, they filed a petition for certiorari with the
CA on the issues of constructive dismissal and intra-corporate controversy which was within the jurisdiction of
the RTC, instead of the LA. They argued that the case involved a complaint against a corporation filed by a
stockholder, who, at the same time, was a corporate officer.

The CA granted the respondents petition. It agreed with the respondents contention that the case involved an
intra-corporate controversy which, pursuant to Presidential Decree No. 902-A, as amended, was within the
exclusive jurisdiction of the RTC. Hence, this petition filed by Cosare.
DeGoMa Labor Digest 26

Was the case instituted by Cosare an intra-corporate dispute that was within the original jurisdiction of the RTC,
and not of the LAs?

Was Cosare constructively and illegally dismissed from employment by the respondents?

HELD: An intra-corporate controversy, which falls within the jurisdiction of regular courts, has been regarded in
its broad sense to pertain to disputes that involve any of the following relationships: (1) between the corporation,
partnership or association and the public; (2) between the corporation, partnership or association and the state
in so far as its franchise, permit or license to operate is concerned; (3) between the corporation, partnership or
association and its stockholders, partners, members or officers; and (4) among the stockholders, partners or
associates, themselves.Settled jurisprudence, however, qualifies that when the dispute involves a charge of
illegal dismissal, the action may fall under the jurisdiction of the LAs upon whose jurisdiction, as a rule, falls
termination disputes and claims for damages arising from employer-employee relations as provided in Article
217 of the Labor Code. Consistent with this jurisprudence, the mere fact that Cosare was a stockholder and an
officer of Broadcom at the time the subject controversy developed failed to necessarily make the case an intra-
corporate dispute.

In Matling Industrial and Commercial Corporation v. Coros,the Court distinguished between a "regular employee"
and a "corporate officer" for purposes of establishing the true nature of a dispute or complaint for illegal dismissal
and determining which body has jurisdiction over it. Succinctly, it was explained that "[t]he determination of
whether the dismissed officer was a regular employee or corporate officer unravels the conundrum" of whether
a complaint for illegal dismissal is cognizable by the LA or by the RTC. "In case of the regular employee, the LA
has jurisdiction; otherwise, the RTC exercises the legal authority to adjudicate.

Applying the foregoing to the present case, the LA had the original jurisdiction over the complaint for illegal
dismissal because Cosare, although an officer of Broadcom for being its AVP for Sales, was not a "corporate
officer" as the term is defined by law.


There are three specific officers whom a corporation must have under Section 25 of the Corporation Code. These
are the president, secretary and the treasurer. The number of officers is not limited to these three. A corporation
may have such other officers as may be provided for by its by-laws like, but not limited to, the vice-president,
cashier, auditor or general manager. The number of corporate officers is thus limited by law and by the
corporations by-laws.

In Tabang v. NLRC, the Court also made the following pronouncement on the nature of corporate offices: there
are two circumstances which must concur in order for an individual to be considered a corporate officer, as
against an ordinary employee or officer, namely: (1) the creation of the position is under the corporations charter
or by-laws; and (2) the election of the officer is by the directors or stockholders. It is only when the officer
claiming to have been illegally dismissed is classified as such corporate officer that the issue is deemed an intra-
corporate dispute which falls within the jurisdiction of the trial courts.

DeGoMa Labor Digest 27

The Court disagrees with the respondents and the CA. The only officers who are specifically listed, and thus with
offices that are created under Broadcoms by-laws are the following: the President, Vice-President, Treasurer
and Secretary. Although a blanket authority provides for the Boards appointment of such other officers as it may
deem necessary and proper, the respondents failed to sufficiently establish that the position of AVP for Sales
was created by virtue of an act of Broadcoms board, and that Cosare was specifically elected or appointed to
such position by the directors. No board resolutions to establish such facts form part of the case records.

The CAs heavy reliance on the contents of the General Information Sheets, which were submitted by the
respondents during the appeal proceedings and which plainly provided that Cosare was an "officer" of Broadcom,
was clearly misplaced. The said documents could neither govern nor establish the nature of the office held by
Cosare and his appointment thereto.

Finally, the mere fact that Cosare was a stockholder of Broadcom at the time of the cases filing did not necessarily
make the action an intra-corporate controversy. Not all conflicts between the stockholders and the corporation
are classified as intra-corporate. There are other facts to consider in determining whether the dispute involves
corporate matters as to consider them as intra-corporate controversies.


Constructive dismissal occurs when there is cessation of work because continued employment is rendered
impossible, unreasonable, or unlikely as when there is a demotion in rank or diminution in pay or when a clear
discrimination, insensibility, or disdain by an employer becomes unbearable to the employee leaving the latter
with no other option but to quit.

The Court emphasized in King of Kings Transport, Inc. v. Mamac 553 Phil. 108 the standards to be observed by
employers in complying with the service of notices prior to termination:

The first written notice to be served on the employees should contain the specific causes or grounds for
termination against them, and a directive that the employees are given the opportunity to submit their written
explanation within a reasonable period. "Reasonable opportunity" under the Omnibus Rules means every kind
of assistance that management must accord to the employees to enable them to prepare adequately for their
defense. This should be construed as a period of at least five (5) calendar days from receipt of the notice to give
the employees an opportunity to study the accusation against them, consult a union official or lawyer, gather
data and evidence, and decide on the defenses they will raise against the complaint. Moreover, in order to
enable the employees to intelligently prepare their explanation and defenses, the notice should contain a detailed
narration of the facts and circumstances that will serve as basis for the charge against the employees. A general
description of the charge will not suffice. Lastly, the notice should specifically mention which company rules, if
any, are violated and/or which among the grounds under Art. 282 is being charged against the employees.

In sum, the respondents were already resolute on a severance of their working relationship with Cosare,
notwithstanding the facts which could have been established by his explanations and the respondents full
investigation on the matter. In addition to this, the fact that no further investigation and final disposition
appeared to have been made by the respondents on Cosares case only negated the claim that they actually
intended to first look into the matter before making a final determination as to the guilt or innocence of their
employee. This also manifested from the fact that even before Cosare was required to present his side on the
charges of serious misconduct and willful breach of trust, he was summoned to Arevalos office and was asked
to tender his immediate resignation in exchange for financial assistance.

The charge of abandonment was inconsistent with this imposed suspension. "Abandonment is the deliberate
and unjustified refusal of an employee to resume his employment. To constitute abandonment of work, two
DeGoMa Labor Digest 28
elements must concur: (1) the employee must have failed to report for work or must have been absent without
valid or justifiable reason; and (2) there must have been a clear intention on the part of the employee to sever
the employer-employee relationship manifested by some overt act."Cosares failure to report to work beginning
April 1, 2009 was neither voluntary nor indicative of an intention to sever his employment with Broadcom. It
was illogical to be requiring him to report for work, and imputing fault when he failed to do so after he was
specifically denied access to all of the company's assets. Hence, the Court held Petitioner was constructively
dismissed by respondent.


Court reiterated that an illegally or constructively dismissed employee is entitled to: (1) either reinstatement, if
viable, or separation pay, if reinstatement is no longer viable; and (2) backwages.The award of exemplary
damages was also justified given the NLRC's finding that the respondents acted in bad faith and in a wanton,
oppressive and malevolent manner when they dismissed Cosare. It is also by reason of such bad faith that
Arevalo was correctly declared solidarily liable for the monetary awards.

DeGoMa Labor Digest 29

G.R. No. 195190 July 28, 2014

Case Doctrine: 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.

Facts: Royale Homes, a corporation engaged in marketing real estates, appointed Alcantara as its Marketing
Director for a fixed period of one year. His work consisted mainly of marketing Royale Homes’ real estate
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.
Alcantara filed a Complaint for Illegal Dismissal against Royale. Alcantara alleged that he is a regular employee
of Royale Homes since he is performing tasks that are necessary and desirable to its business and that the acts
of 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.
Royale Homes, on the other hand, vehemently denied that Alcantara is its employee. It argued that the
appointment paper of Alcantara is clear that it engaged his services as an independent sales contractor for a
fixed term of one year only. He never received any salary, 13th month pay, overtime pay or holiday pay from
Royale Homes as he was 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 appropriate and necessary. According to Royale Homes, Alcantara decided to leave
the company after his wife, who was once connected with it as a sales agent, had formed a brokerage company
that directly competed with its business, and even recruited some of its sales agents. Two months after he
relinquished his post, however, Alcantara appeared in Royale Homes and submitted a letter claiming that he
was illegally dismissed.
The Labor Arbiter rendered a Decision holding that Alcantara is an employee of Royale Homes and that the pre-
termination of his contract was against the law. The NLRC rendered its Decision, ruling that Alcantara is not an
employee but a mere independent contractor of Royale Homes. It based its ruling mainly on his employment
contract. The CA promulgated its Decision granting Alcantara’s Petition and reversing the NLRC’s Decision.
Applying the four-fold and economic reality tests, it held that Alcantara is an employee of Royale Homes.
Issue: Whether or not Alcantara was an independent contractor or an employee of Royale Homes.

Held: The primary evidence of the nature of the parties’ relationship in this case is the written contract that they
signed and executed in pursuance of 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 contract
unequivocally states their intention at the time they entered into it. In this case, the contract, 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 at the time of the signing of the contract.
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.
However, not every form of control is indicative of employer-employee relationship. A person who performs
work for another and is subjected to its rules, regulations, and code of ethics does not necessarily become an
employee. 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 Commission 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 employer-employee relationship unlike the second, which address both
the result and the means used to achieve it.
Notably, Alcantara was not required to observe definite working hours. Except for soliciting sales, Royale Homes
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. This Court is, therefore, convinced that Alcantara is not
an employee of Royale Homes, but a mere independent contractor.

DeGoMa Labor Digest 30