Makati Haberdashery vs NLRC, 179 SCRA 449 (89) Other issues discussed:

Penned by Justice Fernan • ER-EE relationship

Nature: Held: There is such relationship because in the application of the
Petition for certiorari to review the decision of the NLRC which four-fold test, it was found that petitioners had control over the
affirmed the decision of the Labor Arbiter who jointly heard and respondents not only as to the result but also as to the means
decided two cases filed by the Union in behalf of the private and method by which the same is to be accomplished. Such
respondents control is proven by a memorandum which enumerates
procedures and instructions regarding job orders, alterations,
Facts: and their behavior inside the shop.
• Private complainants are working for Makati
Haberdashery Inc as tailors, seamstress, sewers,
basters, and plantsadoras and are paid on a piece-rate
• Minimum Wage
basis (except two petitioners who are paid on a Held: No dispute that entitled to minimum wage but court
monthly basis) and in addition, they are given a daily dismissed case for lack of sufficient evidence to support claim
allowance of P 3.00 provided they report before 9:30 that there was in fact underpayment which was ruled by the LA
a.m. and which the private resp did not appeal to in the NLRC nor in
• Work sked: 9:30-6 or 7 p.m., Mondays to Saturdays and the SC. Well-settled is the rule that “an appellee who has not
himself appealed cannot obtain from the appellate court any
even on Sundays and holidays during peak periods.
affirmative relief other than the ones granted in the decision of
• Union’s first case was on:
the court below”.
 underpayment of
• basic wage • COLA
• living allowance Held: Entitled. They are regular employees. IRR of Wage No. 1,
 non-payment of 2, and 5 provide that “all workers in the private sector,
• holiday pay regardless of their position, designation of status, and
• service incentive pay irrespective of the method by which their wages are
paid” are entitled to such allowance.
• 13th month pay
• benefits provided for under Wage Orders 1-5
• While the first case was pending decision, Pelobello left
• 13th Month pay
Held: Entitled under Sec. 3(e) of the IRR of PD 851 which is an
an open package containing a jusi barong tagalong with
exception to the exception of such provision which states that
salesman Rivera. He was caught and confronted about
employers whose workers are paid on piece-rate basis in which
this and he explained that this was ordered by Zapata,
are covered by such issuance in so far as such workers are
also a worker, for his (personal) customer. Zapata
concerned.
allegedly admitted that he copied the design of the
company but later denied ownership of the same.
• Illegal dismissal
• They were made to explain why no action should be
Held: Dismissed for justifiable ground based on Article 283 (a)
taken against them for accepting a job order which is
and (c). Inimical to the interest of the employer. Not dismissed
prejudicial and in direct competition with the business.
just because of union activities.
However they did not submit and went on AWOL until
the period given for them to explain expired hence the
dismissal.
• Illegal dismissal complaint on the second case filed
before the LA Diosana.
• LA declared petitioners guilty of illegal dismissal and
ordered to reinstate Pelobello and Zapata and found
petitioners violating decrees of COLA, service incentive
and 13th month pay. Commission analyst was directed
to compute the monetary awards which retroacts to
three years prior to filing of case.
• NLRC affirmed but limited backwages to one year.

Issue: WON employees paid on piece-rate basis are entitled to

service incentive pay (relevant to title)

Held: NO, fall under exceptions set forth in the implementing

rules

Ratio:
 As to the service incentive leave pay: as piece-rate
workers being paid at a fixed amount for performing
work irrespective of time consumed in the performance
thereof, they fall under the exceptions stated in Sec
1(d), Rule V, IRR, Book III, Labor Code.

Service Incentive Leave

SECTION 1. Coverage. — This rule shall apply to all
employees except:
(d) Field personnel and other employees whose
performance is unsupervised by the employer including
those who are engaged on task or contract basis, purely
commission basis, or those who are paid a fixed
amount for performing work irrespective of the time
consumed in the performance thereof;

Sentinel Security Agency, Inc. v. NLRC, 295 SCRA 123
1998)
Penned by Justice Panganiban
Nature:
Certiorari seeking the reversal of the two petitions to the NLRC
Facts:
• Five employees of Sentinel Security Agency filed for
illegal dismissal against the Agency and its Client
Philamlife Cebu and prayed for payment of salary
differential, service incentive pay, and separation pay.
• The complainants were assigned to Philamlife Cebu but
after nearly 20 years for some employees and more
than 20 years for some, Philam requested on Dec 16,
1993 that security guards be replaced in the Client’s
offices in Cebu, Bacolod, CDO, Dipolog and Iligan.
• Agency issued a Relief and Transfer Order replacing the
guards and for them to be reassigned to other clients
effective on Jan 16 1994. On Jan 18 and Feb 4 1994,
the employees filed an illegal dismissal complaint
because of a threat from the personnel manager who
told them that they were replaced because they were
old.
• Hence the complaint against the Agency and the Client.
• Client and Agency’s defense: No dismissal because the
contract allows them to recall security guards from
assigned posts at the will of either party and that the
Agency is allowed for a period of not more than six
months, to retain the complainants on floating status.
Agency should have been given a chance to give new
assignments to complainants.
• Client’s defense: No ER-EE relationship. Job contract,
separate corporate personalities and not necessary and
desirable to the business or trade.
LA: Agency and Client ordered to pay solidarily complainants
13th month pay and service incentive leave benefits amounting
to a little more than P60K.
NLRC: There was constructive dismissal. Modified awards.
Deleted 13th month pay for previous years. Twin remedies.
Ordered:
1) Agency to give separation pay at the rate of ½ month
pay for every year of service and
2) Agency and Client to solidarily pay backwages and 13 th
month pay for one year (Jan 1994-1995).
Issue: 1) WON there was illegal dismissal
2) And if so, WON Philam may be held liable
Held:
1) Yes there was illegal dismissal but SC does not agree
with NLRC for its reasons for ruling that there was ID.
NLRC’s reason: Client and Agency wanted to
circumvent the Retirement Law. SC: You NLRC are
speculating and your contention is unsupported!
• SOLGEN: Complainants were placed on temporary off-
detail which is a standard stipulation in employment
contracts since the availability of assignment for
security guards is dependent on contracts entered into
by the agency. Off-detail or Floating status means
“waiting to be posted” and this is not dismissal so long
as such status does not continue beyond a reasonable
time.
• However SOLGEN made a pronouncement that
although abandonment is inconsistent with illegal
dismissal, such rule is not applicable when the
complainants expressly reject this relief and ask for
separation pay instead.
• SC (with conviction): “You are wrong SolGen! How dare
you be wrong? You know that abandonment requires a
deliberate and unjustified refusal of an employee to
resume to his work coupled with a clear absence of any
intention to return to his/her work and the fact that
complainants did not pray for reinstatement is not a
sufficient proof of abandonment, you moron. They
reported to the Agency on several dates but it did not
give any reassignment. Abandonment has been ruled
to be incompatible with constructive dismissal as
stated in Escobin vs NLRC. Because I am infallible and
you are in dire need of enlightenment, let me
demonstrate the correct reasoning why they are
illegally dismissed.”
• It has been recognized that the management has a
prerogative to transfer an employee from one office to
another within the same business establishment as the
exigency of the business may require provided that
transfer:
- does not result in a demotion in rank
- diminution in salary, benefits, and other privileges
- not unreasonable, inconvenient or prejudicial to the
latter
- not used as a subterfuge by the employer to rid himself
of an undesirable worker
• SC: “Solgen, in case you don’t know what a transfer
means, let me extend my unparalleled mastery of this
craft which,unfortunately, you don’t have:
- Transfer may mean two things: a) from one position to
another of equivalent rank, level or salary b) from one office
to another within the same business establishment. Oh
please, do not even think this is equivalent to promotion
because the latter involves a scalar ascent.”
• It should have been a mere changing of the guards, a
reshuffling or exchange of their posts or assignments to
their posts and such that no security guard would be
without assignment. But did the Agency implement
such recognized concept? NO!!! It hired new security
guards, younger, braver, full of life men whose age are
in their prime! This resulted in a lack of posts to which
the senile, used and wrinkled men could have been
reassigned.
• Floating status – requires the dire exigency of the
employer’s bona fide suspension of operation, business
or undertaking. In security services, this happens when
the clients do not renew their contracts with a security
agency but in the case at bar, the Client awarded a new
contract to the Agency. No surplus of security guards
over available assignments. No suspension of operation
that would have justified placing the complainants off-
detail and making them wait for 6 months.
• SC: “The logical conclusion here Solgen, in case you
don’t know what’s logical, is that the Agency illegally
dismissed the complainants.
2) Only solidarily to the service incentive leave pay. Since
no ER-EE relationship between Client and complainants,
cannot be held liable for separation pay and
backwages.
• Art 106, 107 and 109 provide when the principal who
contracted the contractor/subcontractor may be held
solidarily liable. Art 109 states that every employer or
indirect employer shall be held responsible with his
contractor or subcontractor for any violation of any
provision of this Code. In determining the extent of
 their civil liability under this Chapter, they shall be
considered direct employers.
• Such liability covers service incentive leave pay of the
complainant during the time they were posted at the
Cebu Branch. Service had been rendered, liability
accrued even when they were eventually transferred or
reassigned.
• Art. 95 of the LC expressly provides that service
incentive leave is expressly granted to every employee
who has rendered at least one year or service shall be
entitled to a yearly service incentive leave of five days
with pay.
• IRR of the LC: Unused service incentive leave is
commutable to its money equivalent as provided by
Sec. 5: The service incentive leave shall be
commutable to its money equivalent if not used or
exhausted at the end of the year

Pau: May the contrary be stipulated? If yes, when?

Supposing the employer gives more than 5 days of service
incentive leave, can they now stipulate that such leaves
may not be converted to its money equivalent? When can
such leaves be not converted into cash?