Manila Diamond Vs Ca (2004) : DOCTRINE: Under Article 263 (G), All Workers Must
Manila Diamond Vs Ca (2004) : DOCTRINE: Under Article 263 (G), All Workers Must
1. MANILA DIAMOND VS CA (2004) modifying its earlier order and requiring instead the
reinstatement of the employees in the payroll.
Pertinent to this case is the issue ordered by Sec. of In the present case, there is no showing that the
labor Trajano. He issued a return to work order for facts called for payroll reinstatement as an
the employees. The Hotel, however, refused to alternative remedy. A strained
accept the returning workers and instead filed a relationship between the striking employees and
Motion for Reconsideration of the Secretary’s management is no reason for payroll reinstatement
Order. Instead of an actual return to work, Acting in lieu of actual reinstatement. Petitioner.
Secretary Españ ol directed that the strikers be
reinstated only in the payroll. The labor union
moved for reconsideration, however, was denied. As a general rule, the State encourages an
environment wherein employers and employees
themselves must deal with their problems in a
Hence, it filed a petition for certiorari under Rule 65 manner that mutually suits them best. This is the
alleging that there was a grave abuse abused of basic policy embodied in Article XIII, Section 3 of the
discretion on the part of the Secretary of Labor for Constitution, which was further echoed in Article
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211 of the Labor Code. Hence, a voluntary, instead management from expenses, which it normally
of compulsory, mode of dispute settlement is the incurs during a work stoppage or slowdown. It was
general rule. an error on the part of the Court of Appeals to view
the assumption order of the Secretary as a measure
to protect the striking workers from any retaliatory
However, Article 263, paragraph (g) of the Labor action from the Hotel.
Code, which allows the Secretary of Labor to assume
jurisdiction over a labor dispute involving an
industry indispensable to the national interest,
provides an exception:
This Court must point out that the law uses the
precise phrase of "under the same terms and
conditions," revealing that it contemplates only
actual reinstatement. This is in keeping with the
rationale that any work stoppage or slowdown in
that particular industry can be inimical to the
national economy. It is clear that Article 263(g) was
not written to protect labor from the excesses of
management, nor was it written to ease
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ARCO METAL VS SAMAHAN which states that the giving in full of the benefit was
a mere error. He also interpreted the phrase “for
each year of service” found in the pertinent CBA
DOCTRINE: The principle of non-diminution of provisions to mean that an employee must have
benefits is founded on the Constitutional mandate rendered one year of service in order to be entitled
to "protect the rights of workers and promote their to the full benefits provided in the CBA.
welfare and to afford labor full protection. Said
mandate in turn is the basis of Article 4 of the Labor The CA ruled that the CBA did not intend to
Code which states that all doubts in the foreclose the application of prorated payments of
implementation and interpretation of this Code, leave benefits to covered employees. The appellate
including its implementing rules and regulations court found that petitioner, however, had an
shall be rendered in favor of labor existing voluntary practice of paying the aforesaid
benefits in full to its employees, thereby rejecting
the claim
FACTS: ARCO METAL(petitioner) is a company that petitioner erred in paying full benefits to i
engaged in the manufacture of metal products, ts seven employees. The appellate court noted that
whereas (sais the labor union of petitioner’s rank aside from the affidavit of petitioner’s officer, it has
and file employees. Sometime in December 2003, not presented any evidence in support of its position
petitioner paid the 13th month pay, bonus, and that it has no voluntary practice of granting the
leave encashment of three union members in contested benefits in full and without regard to the
amounts proportional to the service they service actually rendered within the year. It also
actually rendered in a year, which is less than a full questioned why it took petitioner 11 years before it
12 months. Respondent protested the prorated was able to discover the alleged error.
scheme, claiming that on several occasions
petitioner did not prorate the payment of the same
Petitioner claims that its full payment of benefits
benefits to 7 employees who had not served for the
regardless of the length of service to the company
full 12 months. The payments were made in 1992,
does not constitute voluntary employer practice. It
1993, 1994, 1996, 1999, 2003, and 2004. According
points out that the payments had been erroneously
to respondent, the prorated payment violates the
made and they occurred in isolated cases in the
rule against diminution of benefits under Article 100
years 1992, 1993, 1994, 1999, 2002 and 2003.
of the Labor Code. Thus, they filed a complaint
According to petitioner, it was only in 2003 that the
before the NCMB. The parties submitted the case
accounting department discovered the error "when
for voluntary arbitration.
there were already three (3) employees involved
with prolonged absences and the error was
The voluntary arbitrator, Mangabat, ruled in favor of corrected by implementing the pro-rata payment of
petitioner and found that the giving of the benefits pursuant to law and their existing CBA.
contested benefits in full, irrespective of the actual
service rendered within one year has ISSUE/S: WON the grant of 13th month pay, bonus,
not ripened into a practice. He noted the affidavit and leave encashment in full regardless of actual
of Baingan, manufacturing group head of petitioner, service rendered constitutes voluntary employer
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practice and, consequently, the prorated payment non-basic benefits in the computation of the
of the said benefits does not constitute diminution 13th month pay was a voluntary act and had
of benefits under Article 100 of the Labor Code ripened into a company practice which
cannot be peremptorily withdrawn.
RULING: YES.
In the years 1992, 1993, 1994, 1999, 2002 and 2003,
The SC said that any benefit and supplement being
petitioner had adopted a policy of freely, voluntarily
enjoyed by employees cannot be reduced,
and consistently granting full benefits to its
diminished, discontinued or eliminated by the
employees regardless of the length of service
employer. The principle of non-diminution of
rendered. True, there were only a total of seven
benefits is founded on the Constitutional mandate
employees who benefited from such a practice, but
to "protect the rights of workers and promote their
it was an established practice nonetheless.
welfare and to afford labor full protection. Said
Jurisprudence has not laid down any rule specifying
mandate in turn is the basis of Article 4 of the Labor
a minimum number of years within which a
Code which states that all doubts in the
company practice must be exercised in order to
implementation and interpretation of this Code,
constitute voluntary company practice. Thus, it can
including its implementing rules and regulations
be six (6) years, three (3) years, or even as short as
shall be rendered in favor of labor.
two (2) years. Petitioner cannot shirk away from its
responsibility by merely claiming that it was a
mistake or an error, supported only by an affidavit
Jurisprudence is replete with cases which recognize
of its manufacturing group head.
the right of employees to benefits which were
voluntarily given by the employer and which ripened Indeed, if petitioner wants to prove that it merely
into company practice. erred in giving full benefits, it could have easily
presented other proofs, such as the names of other
employees who did not fully serve for one year and
Thus in thus were given prorated benefits. Experientially, a
DavaoFruits Corporation v. Associated perfect attendance in the workplace is always the
Labor Unions, et al. where an employer had goal but it is seldom achieved. There must have
freely and continuously included in the been other employees who had reported for work
computation of the 13th month pay those less than a full year and who, as a consequence
items that were expressly excluded by the received only prorated benefits. This could have
law, we held that the act which was easily bolstered petitioner’s theory of
favorable to the employees though not mistake/error, but sadly, no evidence to that effect
conforming to law had thus ripened into a was presented.
practice and could not be withdrawn,
reduced, diminished, discontinued or
eliminated. Hence, petition was denied.
In Sevilla Trading Company v. Semana, we
ruled that the employer’s act of including
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simply referred to the facts allegedly relayed to laborer and his master, doubts reasonably arising
them by Chambers, Damoslog, Daguio, and Madao. from the evidence, or in the interpretation of
Thus, there is a need to individually scrutinize the agreements and writing, should be resolved in the
statements and testimonies of the four sources of former’s favor. The policy is to extend the doctrine
the Joint Affidavit in order to determine the latter’s to a greater number of employees who can avail
probative weight. themselves of the benefits under the law, which is
in consonance with the avowed policy of the State
In labor cases, in which technical rules of procedure
to give maximum aid and protection to labor.
are not to be strictly applied if the result would be
detrimental to the workingman, an affidavit of
desistance gains added importance in the absence
of any evidence on record explicitly showing that the
dismissed employee committed the act which
caused the dismissal.42 Accordingly, the Court
cannot turn a blind eye and disregard Madao’s
recantation, as it serves to cast doubt as to the guilt
of respondent Liagao.
Based on the foregoing, the Court is convinced that
the Joint Affidavit, being sourced from Chambers,
Damoslog, Daguio and Madao, has no probative
value to support evidence to warrant the dismissal
of the respondents. Chambers and Daguio did not
identify the miners involved in the act of
highgrading. In addition, Damoslog’s first and
second sworn statements did not implicate
respondents, and Madao recanted his statement
implicating respondent Liagao. As earlier discussed,
the sworn statements and joint affidavits of the
sources do not corroborate but actually cast doubt
as to the veracity of the statements in the Joint
Affidavit.
In the present case, the Court reiterates that the
evidence is not substantial to hold respondents
guilty of highgrading so as to warrant the dismissal
of respondents.
Moreover, it is a well-settled doctrine that if doubts
exist between the evidence presented by the
employer and the employee, the scales of justice
must be tilted in favor of the latter. It is a time-
honored rule that in controversies between a
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LVN PICTURES, INC., VS. PHILIPPINE FFW filed a petition for certification.
MUSICIANS GUILD
LVN, maintains that a petition for certification
cannot be entertained when the existence of
employer-employee relationship between the
Petitioners- LVN Pictures, Inc. and Sampaguita parties is contested. It is next urged that a
Pictures, Inc. seek a review by certiorari of an order certification is improper in the present case,
of the Court of Industrial Relations(CIR) thereof, because, "(a) the petition does not allege and no
certifying the Philippine Musicians Guild (FFW). evidence was presented that the alleged musicians-
employees of the respondents constitute a proper
Respondent- Philippine Musicians Guild(FFW)/ bargaining unit, and (b) said alleged musicians-
“The Guild”, CIR decided that FFW as the sole and employees represent a majority of the other
exclusive bargaining agency of all musicians working numerous employees of the film companies
with said companies. constituting a proper bargaining unit under section
12 (a) of Republic Act No. 875."
FFW, averred (1) that it is a duly registered
legitimate labor organization;(2) that LVN Pictures, FFW, seeks to be, and was, certified as the sole and
Inc., Sampaguita Pictures, Inc., and Premiere exclusive bargaining agency for the musicians
Productions, Inc. are corporations, duly organized working in the aforesaid film companies. It does not
under the Philippine laws, engaged in the making of intend to represent the other employees therein.
motion pictures and in the processing and
distribution thereof; that said companies employ The question to be determined next is what legal
musicians for the purpose of making music relationship exits between the musicians and the
recordings for title music, background music, company?
musical numbers, finale music and other incidental
music, without which a motion picture is SIDE-ISSUE: INTERPRETATON OF RA 875.
incomplete; (3) that ninety-five (95%) percent of all
the musicians playing for the musical recordings of In the case of National Labor Relations Board
said companies are members of the Guild; and (4) vs. Hearts Publication, 322 U.S. 111, the
that the same has no knowledge of the existence of United States Supreme Court said the
any other legitimate labor organization representing Wagner Act was designed to avert the
musicians in said companies. 'substantial obstruction to the free flow of
commerce which results from strikes and
FFW prayed that it be certified as the sole and other forms of industrial unrest by
exclusive bargaining agency for all musicians eliminating the causes of the unrest. Strikes
working in the aforementioned companies. and industrial unrest result from the refusal
of employers' to bargain collectively and the
LVN, denied that they have any musicians as inability of workers to bargain successfully
employees, and alleged that the musical numbers in for improvement in their working conditions.
the filing of the companies are furnished by Hence, the purposes of the Act 875 are to
independent contractors. encourage collective bargaining and to
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remedy the workers' inability to bargaining The work of the musical director and
power, by protecting the exercise of full musicians is a functional and integral part of
freedom of association and designation of the enterprise performed at the same studio
representatives of their own choosing, for substantially under the direction and control
the purpose of negotiating the terms and of the company.
conditions of their employment.'
In other words, to determine whether a
In this light, the language of the Act's person who performs work for another is the
definition of 'employee' or 'employer' should latter's employee or an independent
be determined broadly in doubtful contractor, the National Labor Relations
situations, by underlying economic facts relies on 'the right to control' test. Under
rather than technically and exclusively this test an employer-employee relationship
established legal classifications. (NLRB vs. exist where the person for whom the
Blount, 131 F [2d] 585.) In other words, the services are performed reserves the right to
scope of the term 'employee' must be control not only the end to be achieved, but
understood with reference to the purposes also the manner and means to be used in
of the Act and the facts involved in the reaching the end.
economic relationship.
The right of control of the film company over
As used in the Act, the term embraces 'any the musicians is shown (1) by calling the
employee' that is all employees in the musicians through 'call slips' in 'the name of
conventional as well in the legal sense the company; (2) by arranging schedules in
expect those excluded by express provision. its studio for recording sessions; (3) by
(Connor Lumber Co., 11 NLRB 776.). furnishing transportation and meals to
musicians; and (4) by supervising and
It is the purpose of the policy of Republic Act directing in detail, through the motion
875; (a) To eliminate the causes of industrial picture director, the performance of the
unrest by protecting the exercise of their musicians before the camera, in order to suit
right to self-organization for the purpose of the music they are playing to the picture
collective bargaining. (b) To promote sound which is being flashed on the screen.
stable industrial peace and the advancement
of the general welfare, and the best interests Thus, in the application of Philippine statutes
of employers and employees by the and pertinent decisions of the United States
settlement of issues respecting terms and Courts on the matter to the facts established
conditions of employment through the in this case, we cannot but conclude that to
process of collective bargaining between effectuate the policies of the Act and by
employers and representatives of their virtue of the 'right of control' test, the
employees members of the Philippine Musicians Guild
are employees of the three film companies
MAIN ISSUE: WON the musicians in question are and, therefore, entitled to right of collective
employees of the film companies. bargaining under Republic Act No. 875.
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In view of the fact that the three (3) film DECISION: THERE EXIST AN EMPLOYER-EMPLOYEE
companies did not question the union's RELATIONSHIP USING THE TEST OF CONTROL,
majority, the Philippine Musicians Guild is THEREFORE THE MUSICIANS HAVE THE RIGHT TO
hereby declared as the sole collective COLLECTIVE BARGAINING.
bargaining representative for all the
musicians employed by the film companies."
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given by the employer. It is not correct to say, The court below found that there is an employment
therefore, that she was an independent contractor, contract (Exhibit "3") between petitioners and
for an independent contractor is one who does not respondent Sol in which it was expressly agreed that
receive instructions as to what to do, how to do, Sol could be dismissed upon fifteen days' advance
without specific instructions. notice, if petitioners herein desire. Respondent Sol
was dismissed on January 13, 1959 and therefore
Finally, the very act of respondent Sol in demanding the dismissal should be governed by the provisions
vacation leave, Christmas bonus and additional of Republic Act 1787, which took effect on June 21,
wages shows that she considered herself an 1957. Section 1 of the Act provides:
employee. A contractor is not entitled to a vacation
leave or to a bonus nor to a minimum wage. This act SECTION 1. In cases of employment, without
of hers in demanding these privileges are a definite period, in a commercial, industrial,
inconsistent with the claim that she was an or agricultural establishment or enterprise,
independent contractor. the employer or the employee may
terminate at any time the employment with
SUB ISSUE / RULING 2 just cause; or without just cause in the case
of an employee by serving written notice on
The next point at issue is whether or not the the employer at least one month in advance,
petitioners herein are guilty of unfair labor or in the case of an employer, by serving
practice. Petitioners claim that under the decision such notice to the employee at least one
rendered by Us in the case of Royal Interocean month in advance or one-half month for
Lines, et al. vs. Court of Industrial Relations, et al., every year of service of the employee,
G.R. No. L-11745, Oct. 31, 1960, as respondent Sol whichever is longer, a fraction of at least six
was merely an employee and was not connected months being considered as one whole year.
with any labor union, the company cannot be
considered as having committed acts constituting The employer upon whom no such notice
unfair labor practice as defined in the Industrial was served in case of termination of
Peace Act, Rep. Act 875 employment without just cause may hold
the employee liable for damages.
We find this contention to be well-founded. The
The contract between the petitioners and the
term unfair labor practice has been defined as any
respondent Sol providing that the respondent Sol
of those acts listed in See. 4 of the Act. The
can be dismissed upon fifteen days' notice is
respondent Sol has never been found to commit any
therefore null and void. Inasmuch as respondent Sol
of the acts mentioned in paragraph (a) of Sec. 4.
was employed since the year 1952 and was in the
Respondent Sol was not connected with any labor
employment of the petitioners from that time up to
organization, nor has she ever attempted to join a
1959, or a period of seven years, she is entitled to
labor organization, or to assist, or contribute to a
three and one-half months pay in accordance with
labor organization. The company cannot, therefore,
the above quoted section 1 of the Act.
be considered as having committed an unfair labor
practice.
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.DY KEH BENG VS INTERNATIONAL LABOR Solano, although Solano was admitted to have
worked on piece basis.
DOCTRINE:
According to the Hearing Examiner, the evidence for
the complainant Union tended to show that Solano
FACTS: and Tudla became employees of Dy Keh Beng from
May 2, 1953 and July 15, 1955, respectively, and
Antecedents
that except in the event of illness, their work with
A charge of unfair labor practice was filed against Dy the establishment was continuous although their
Keh Beng, proprietor of a basket factory, for services were compensated on piece basis. Evidence
discriminatory acts within the meaning of Section likewise showed that at times the establishment had
4(a), sub-paragraph (1) and (4), Republic Act No. eight (8) workers and never less than five (5)
875, by dismissing on September 28 and 29, 1960, including the complainants, and that complainants
respectively, Carlos N. Solano and Ricardo Tudla for used to receive P5.00 a day. sometimes less.
their union activities.
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ISSUE:
while an employer
Whether there existed an employee employer
relation between petitioner Dy Keh Beng and the
includes any person acting in the interest of an respondents Solano and Tudla. YES.
employer, directly or indirectly but shall not
include any labor organization (otherwise than
when acting as an employer) or anyone acting in RULING:
the capacity of officer or agent of such labor
While this Court upholds the control test under
organization.
which an employer-employee relationship exists
"where the person for whom the services are
performed reserves a right to control not only the
Petitioner really anchors his contention of the non-
end to be achieved but also the means to be used in
existence of employee-employer relationship on the
reaching such end, " it finds no merit with
control test. He points to the case of Madrigal
petitioner's arguments as stated above.
Shipping Co., Inc. v. Nieves Baens del Rosario, et al.,
L-13130, October 31, 1959, where the Court ruled
that:
What is Control Test?
It should be borne in mind that the control test calls
The test ... of the existence of employee and merely for the existence of the right to control the
employer relationship is whether there is an manner of doing the work, not the actual exercise of
understanding between the parties that one is to the right.
render personal services to or for the benefit of
the other and recognition by them of the right of
one to order and control the other in the Considering the finding by the Hearing Examiner
performance of the work and to direct the manner that the establishment of Dy Keh Beng is "engaged
and method of its performance. in the manufacture of baskets known as kaing, it is
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natural to expect that those working under Dy generally practiced in our country, is, in fact, a
would have to observe, among others, Dy's labor contract -between employers and
requirements of size and quality of the kaing. Some employees, between capitalists and laborers.
control would necessarily be exercised by Dy as the
making of the kaing would be subject to Dy's
specifications. Parenthetically, since the work on the
baskets is done at Dy's establishments, it can be
inferred that the proprietor Dy could easily exercise
control on the men he employed.
FACTS:
circumstances must be construed to determine
indeed if payment by the piece is just a method RJL Martinez Fishing Corp. are principally engaged in
of compensation and does not define the the deep-sea fishing business.
essence of the relation. Units of time ... and units
Respondents were employed by RJL since 1978 as
of work are in establishments like respondent
stevedores at Navotas Fish Port for unloading of
(sic) just yardsticks whereby to determine rate
tuna fish catch by said corporation’s vessels and
of compensation, to be applied whenever
then loading them on refrigerated vans for shipment
agreed upon. We cannot construe payment by
abroad.
the piece where work is done in such an
establishment so as to put the worker On March 27, 1981, private respondents Antonio
completely at liberty to turn him out and take in Boticario, and thirty (30) others, upon the premise
another at pleasure. that they are petitioners' regular employees, filed a
complaint against petitioners for non-payment of
overtime pay, premium pay, legal holiday pay,
At this juncture, it is worthy to note that Justice emergency allowance under P.D. Nos. 525, 1123,
Perfecto, concurring with Chief Justice Ricardo Paras 1614, 1634, 1678, 1713, 1751, 13th month pay (P.D.
who penned the decision in "Sunrise Coconut 851), service incentive leave pay and night shift
Products Co. v. Court of Industrial Relations" (83 differential.
Phil..518, 523), opined that
On April 21, 1981 another complaint was filed
against RJL for Illegal Dismissal and for Violation of
Article 118 of the Labor Code, as amended. Upon
judicial notice of the fact that the so-called
RJL’s motion, these two cases were consolidated
"pakyaw" system mentioned in this case as
and tried jointly.
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RJL contended that private respondents are business of fishing. For this purpose, they have a
contract laborers whose work terminated upon fleet of fishing vessels. Under this situation,
completion of each unloading, and that in the respondents' activity of catching fish is a
absence of any boat arrivals, private respondents continuous process and could hardly be considered
did not work for petitioners but were free to work as seasonal in nature. The activities performed by
or seek employment with other fishing boat herein complainants, i.e. unloading the catch of
operators. tuna fish from respondents' vessel and then loading
the same to refrigerated vans, are necessary or
desirable in the business of respondents. These
ISSUES: circumstances make the employment of
complainants a regular one, in the sense that it does
1. Whether or not there is an employer-
not depend on any specific project or seasonal
employee relationship between the parties.
activity.
YES.
2. Whether or not private respondents are Furthermore, the employment contract signed by
entitled to legal holiday pay, emergency Antonio Boticario, which described him as "labor
living allowance, thirteenth month pay and contractor", is not really so inasmuch as wages
incentive leave pay. YES continued to be paid by petitioners and he and the
other workers were uniformly paid. He was merely
asked by the petitioners to recruit other workers.
RULING: Besides, labor-contracting is prohibited under Sec.
9(b), Rule VIII, Book III — Rules and Regulations
The SC ruled that there is an existence of employer-
Implementing the Labor Code as amended.
employee relationship between the parties.
Furthermore, that the continuity of employment is
not the determining factor, but rather whether the
The SC court herein cited the case of Philippine
work of the laborer is part of the regular business or
Fishing Boat Officers and Engineers Union vs. CIR,
occupation of the employer.
where it ruled that
The SC discussed that, although it may be that
Xxx "that during the temporary layoff, the
private respondents alternated their employment
laborers are considered free to seek other
on different vessels when they were not assigned to
employment is natural, since the laborers
petitioners' boats, that did not affect their employee
are not being paid, yet must find means of
status. The evidence establishes that petitioners
support" and such temporary cessation of
had a fleet of fishing vessels with about 65 ship
operations "should not mean starvation for
captains, and as private respondents contended,
employees and their families."
when they finished with one vessel, they were
instructed to wait for the next.
NLRC also found that the employer-employee 2. Whether or not private respondents are entitled
relationship between the parties herein is not co- to legal holiday pay, emergency living allowance,
terminous with each loading and unloading job. As thirteenth month pay and incentive leave pay. YES
earlier shown, respondents are engaged in the
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Facts:
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Issue:
Is there an employer-employee relationship
between Danilo Tabas et al and California
Manufacturing Company
Ruling:
Yes.
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DOCTRINE:
Desirous of continuing their work as TMRs,
In labor-only contracting, the law creates an respondents submitted their job applications with
employer-employee relationship between the A.C. Sicat, which hired them for a term of five (5)
principal and the labor-only contractor’s employees months, beginning June 7, 2006 up to November 6,
as if such employees are directly employed by the 2006.
principal employer, and considers the contractor as
merely the agent of he principal.
When respondents’ 5-month contracts with A.C.
Sicat were about to expire, they allegedly sought
FACTS: renewal thereof, but were allegedly refused.
Fonterra Brands Phils., Inc. (Fonterra) contracted Respondents then filed complaints for illegal
the services of Zytron Marketing and Promotions dismissal, regularization, nonpayment of service
Corp. (Zytron) for the marketing and promotion of incentive leave and 13th month pay, and actual and
its milk and dairy products. moral damages, against petitioner, Zytron, and A.C.
Sicat.
RULING:
Respondents were illegally dismissed since Fonterra
itself failed to prove that their dismissal is lawful.
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a. Whether or not Zytron and A.C. Sicat are labor- A.C. Sicat
only contractors.
A.C. Sicat is engaged in legitimate job contracting
and was able to prove its status as a legitimate job
contractor.
Zyrton
Determination is immaterial as respondents
voluntarily terminated their employment with In labor-only contracting, the law creates an
Zytron. employer-employee relationship between the
principal and the labor-only contractor’s employee
as if such employees are directly employed by the
As correctly held by the Labor Arbiter and the NLRC, principal employer, and considers the contractor as
the termination of respondents’ employment with merely the agent of the principal.
Zytron was brought about by the cessation of their
contracts with the latter.
A.C. Sicat’s status as a legitimate job contractor is
consistent with the rules on job contracting and is
The respondents were the ones who refused to sufficiently supported by the evidence.
renew their contracts with Zytron, and they
themselves acquiesced to their transfer to A.C. Sicat.
JOB-CONTRACTING
A person is considered engaged in legitimate job
By refusing to renew their contracts with Zytron,
contracting or subcontracting if the following
respondents effectively resigned from the latter.
conditions concur:
1. The contractor or subcontractor carries
Resignation is the voluntary act of on a distinct and independent business
employees who are compelled by personal and undertakes to perform the job, work
reasons to dissociate themselves from their or service on its own account and under
employment, done with the intention of its own responsibility according to its own
relinquishing an office, accompanied by the manner and method, and free from the
act of abandonment. control and direction of the principal in all
matters connected with the performance
of the work except as to the results
Respondents voluntarily terminated their thereof;
employment with Zytron by refusing to renew their
2. The contractor or subcontractor has
employment contracts with the latter, applying with
substantial capital or investment; and
A.C. Sicat, and working as the latter’s employees,
thereby abandoning their previous employment 3. The agreement between the principal
with Zytron. and contractor or subcontractor assures
the contractual employees entitlement
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following terms and conditions: The need FACTS: The contractual relationship between
for your service being only for a specific Tongko and Manulife had two basic phases. The
project, your temporary employment will first or initial phase began on July 1, 1977, under a
be for the duration only of said project of Career Agent’s Agreement (Agreement) that
our client, namely to promote FONTERRA provided:
BRANDS products x x x which is expected
to be finished on or before Nov. 06, 2006. It is understood and agreed that the Agent is an
independent contractor and nothing contained
herein shall be construed or interpreted as creating
Respondents, by accepting the conditions of the an employer-employee relationship between the
contract with A.C. Sicat, were well aware of and Company and the Agent.
even acceded to the condition that their
employment thereat will end on said pre- The second phase started in 1983 when Tongko
determined date of termination. They cannot now was named Unit Manager in Manulife’s Sales
argue that they were illegally dismissed by the latter Agency Organization. In 1990, he became a Branch
when it refused to renew their contracts after its Manager. Six years later (or in 1996), Tongko
expiration. became a Regional Sales Manager.4
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meetings between yourself and SVP Kevin Manulife asserts that the labor tribunals have no
O’Connor, some of them with me, as well as group jurisdiction over Tongko’s claim as he was not its
meetings with your Sales Managers, all these employee as characterized in the four-fold test
efforts have failed in helping you align your
directions with Management’s avowed agency Conflicting Rulings of the Lower Tribunals
growth policy.”
The labor arbiter decreed that no employer-
Tongko on the other hand responded by filing an employee relationship existed between the parties.
illegal dismissal complaint with the National Labor However, the NLRC reversed the labor arbiter’s
Relations Commission (NLRC) Arbitration Branch. decision on appeal; it found the existence of an
He essentially alleged – despite the clear terms of employer-employee relationship and concluded
the letter terminating his Agency Agreement – that that Tongko had been illegally dismissed. CA
he was Manulife’s employee before he was illegally however reverted to the labor arbiter’s decision.
dismissed.
ISSUE: WON there exists an employment SC: In our Decision of November 7, 2008, we
relationship. -NO. reversed the CA ruling and found that an
employment relationship existed between Tongko
and Manulife.
RULING:
A. Tongko’s Case for Employment Relationship Manulife disagreed with our Decision and filed the
present motion for reconsideration.
Tongko asserted that as Unit Manager, he was paid
an annual over-rider regardless of production levels C. Analysis of the Evidence
attained and exclusive of commissions and
bonuses. He also claimed that as Regional Sales c.1. The Agreement
Manager, he was given a travel and entertainment
allowance; he was tasked with numerous The primary evidence in the present case is the July
administrative functions and supervisory authority 1, 1977 Agreement that governed and defined the
over Manulife’s employees, aside from merely parties’ relations until the Agreement’s termination
selling policies and recruiting agents for Manulife; in 2001. This Agreement stood for more than two
and he recommended and recruited insurance decades and, based on the records of the case, was
agents subject to vetting and approval by Manulife. never modified or novated. It assumes primacy
because it directly dealt with the nature of the
B. Manulife’s Case – Agency Relationship with parties’ relationship up to the very end; moreover,
Tongko both parties never disputed its authenticity or the
accuracy of its terms.
Manulife argues that Tongko had no fixed wage or
salary. Tongko even declared himself to be self- By the Agreement’s express terms, Tongko served
employed and consistently paid taxes as such. as an "insurance agent" for Manulife, not as an
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employee. To be sure, the Agreement’s legal Evidence indicates that Tongko consistently clung
characterization of the nature of the relationship to the view that he was an independent agent
cannot be conclusive and binding on the courts; as selling Manulife insurance products since he
the dissent clearly stated, the characterization of invariably declared himself a business or self-
the juridical relationship the Agreement embodied employed person in his income tax returns.
is a matter of law that is for the courts to
determine.
This consistency with, and action made pursuant
to the Agreement were pieces of evidence that
At the same time, though, the characterization the were never mentioned nor considered in our
parties gave to their relationship in the Agreement Decision of November 7, 2008.
cannot simply be brushed aside because it
embodies their intent at the time they entered the
Agreement, and they were governed by this Had they been considered, they could, at the very
understanding throughout their relationship. least, serve as Tongko’s admissions against his
interest. Strictly speaking, Tongko’s tax returns
cannot but be legally significant because he
certified under oath the amount he earned as
Significantly, evidence shows that Tongko’s role as
gross business income, claimed business
an insurance agent never changed during his
deductions, leading to his net taxable income. This
relationship with Manulife. If changes occurred at
should be evidence of the first order that cannot be
all, the changes did not appear to be in the nature
brushed aside by a mere denial. Even on a layman’s
of their core relationship. Tongko essentially
view that is devoid of legal considerations, the
remained an agent, but moved up in this role
extent of his annual income alone renders his
through Manulife’s recognition that he could use
claimed employment status doubtful.
other agents approved by Manulife, but operating
under his guidance and in whose commissions he
The conclusion with respect to Tongko’s
had a share. For want of a better term, Tongko
employment as a manager is, of course,
perhaps could be labeled as a "lead agent" who
unacceptable for the legal, factual and practical
guided under his wing other Manulife agents
reasons discussed in this Resolution. In brief,
similarly tasked with the selling of Manulife
the factual reason is grounded on the lack of
insurance.
evidentiary support of the conclusion that Manulife
exercised control over Tongko in the sense
That Tongko assumed a leadership role but
understood in the Labor Code. The legal reason,
nevertheless wholly remained an agent is the
partly based on the lack of factual basis, is the
inevitable conclusion that results from the reading
erroneous legal conclusion that Manulife
of the Agreement (the only agreement on record in
controlled Tongko and was thus its employee.
this case) and his continuing role thereunder as
The practical reason, on the other hand, is the
sales agent.
havoc that the dissent’s unwarranted conclusion
would cause the insurance industry that, by the
law’s own design, operated along the lines of
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principal-agent relationship in the sale of Strictly viewed, de Dios’ directives are merely
insurance. operational guidelines on how Tongko could align
his operations with Manulife’s re-directed goal of
c.2. Other Evidence of Alleged Control being a "big league player."
A glaring evidentiary gap for Tongko in this case is The method is to expand coverage through the use
the lack of evidence on record showing that of more agents. This requirement for the
Manulife ever exercised means-and-manner recruitment of more agents is not a means-and-
control, even to a limited extent, over Tongko method control as it relates, more than anything
during his ascent in Manulife’s sales ladder. else, and is directly relevant, to Manulife’s
objective of expanded business operations through
the use of a bigger sales force whose members are
The best evidence of control – the agreement or all on a principal-agent relationship.
directive relating to Tongko’s duties and
responsibilities – was never introduced as part of An important point to note here is that Tongko was
the records of the case. The reality is, prior to de not supervising regular full-time employees of
Dios’ letter, Manulife had practically left Tongko Manulife engaged in the running of the insurance
alone not only in doing the business of selling business; Tongko was effectively guiding his corps
insurance, but also in guiding the agents under his of sales agents, who are bound to Manulife
wing. through the same Agreement that he had with
Manulife, all the while sharing in these agents’
What, to Tongko, serve as evidence of labor law commissions through his overrides.
control are the codes of conduct that Manulife
imposes on its agents in the sale of insurance. The Undeniably, de Dios’ letter contained a directive to
mere presentation of codes or of rules and secure a competent assistant at Tongko’s own
regulations, however, is not per se indicative of expense. While couched in terms of a directive, it
labor law control as the law and jurisprudence cannot strictly be understood as an intrusion into
teach us. Tongko’s method. It was a solution, with an eye on
results; its obvious intent was to save Tongko from
Manulife’s codes of conduct, all of which do not the result that he then failed to grasp.
intrude into the insurance agents’ means and
manner of conducting their sales and only control As previously discussed, what simply happened in
them as to the desired results and Insurance Code Tongko’s case was the grant of an expanded sales
norms, cannot be used as basis for a finding that agency role that recognized him as leader amongst
the labor law concept of control existed between agents in an area that Manulife defined. Whether
Manulife and Tongko. this consequently resulted in the establishment of
an employment relationship can be answered by
Even de Dios’ letter is not determinative of control concrete evidence that corresponds to the
as it indicates the least amount of intrusion into following questions:
Tongko’s exercise of his role as manager in guiding
the sales agents.
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as lead agent, what were Tongko’s specific He was nevertheless only an agent whose basic
functions and the terms of his additional contract yields no evidence of means-and-manner
engagement; control.
was he paid additional compensation as a
so-called Area Sales Manager, apart from On the issue of whether the labor bodies have
the commissions he received from the jurisdiction over an illegal termination dispute
insurance sales he generated; involving parties who had two contracts – first, an
what can be Manulife’s basis to terminate original contract (agency contract), which was
his status as lead agent; undoubtedly one for agency, and another
can Manulife terminate his role as lead subsequent contract that in turn designated the
agent separately from his agency contract; agent acting unit manager (a management
and contract). Both the Insular Life and the labor arbiter
to what extent does Manulife control the were one in the position that both were agency
means and methods of Tongko’s role as contracts. The Court disagreed with this conclusion
lead agent? and held that insofar as the management contract
is concerned, the labor arbiter has jurisdiction.
The answers to these questions may, to some
extent, be deduced from the evidence at hand, as As to Article 4, it applies only when a doubt exists in
partly discussed above. But strictly speaking, the the "implementation and application" of the Labor
questions cannot definitively and concretely be Code and its implementing rules; it does not apply
answered through the evidence on record. The where no doubt exists as in a situation where the
concrete evidence required to settle these claimant clearly failed to substantiate his claim of
questions is simply not there, since only the employment relationship by the quantum of
Agreement and the anecdotal affidavits have been evidence the Labor Code requires.
marked and submitted as evidence.
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FACTS: Royale Homes, a corporation engaged in the pre-termination of his contract was against the
marketing real estates, appointed Alcantara as its law. The NLRC rendered its Decision, ruling that
Marketing Director for a fixed period of one year. His Alcantara is not an employee but a mere
work consisted mainly of marketing Royale Homes’ independent contractor of Royale Homes. It based
real estate inventories on an exclusive basis. Royale its ruling mainly on his employment contract. The CA
Homes reappointed him for several consecutive promulgated its Decision granting Alcantara’s
years, the last of which covered the period January Petition and reversing the NLRC’s Decision. Applying
1 to December 31, 2003. the four-fold and economic reality tests, it held that
Alcantara is an employee of Royale Homes.
Alcantara filed a Complaint for Illegal Dismissal
against Royale. Alcantara alleged that he is a regular ISSUE/S:
employee of Royale Homes since he is performing
Whether or not Alcantara was an independent
tasks that are necessary and desirable to its business
contractor or an employee of Royale Homes.
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
RULING:
of the proper procedure for dismissing employees.
Alcantara is an independent contractor. The primary
Royale Homes denied that Alcantara is its employee. evidence of the nature of the parties’ relationship in
It argued that the appointment paper of Alcantara is this case is the written contract that they signed and
clear that it engaged his services as an independent executed in pursuance of their mutual agreement.
sales contractor for a fixed term of one year only. He While the existence of employer-employee
never received any salary, 13th month pay, relationship is a matter of law, the characterization
overtime pay or holiday pay from Royale Homes as made by the parties in their contract as to the
he was paid purely on commission basis. In addition, nature of their juridical relationship cannot be
Royale Homes had no control on how Alcantara simply ignored, particularly in this case where the
would accomplish his tasks and responsibilities as he parties’ written contract unequivocally states their
was free to solicit sales at any time and by any intention at the time they entered into it. In this
manner which he may deem appropriate and case, the contract, duly signed and not disputed by
necessary. According to Royale Homes, Alcantara the parties, conspicuously provides that "no
decided to leave the company after his wife, who employer-employee relationship exists between"
was once connected with it as a sales agent, had Royale Homes and Alcantara, as well as his sales
formed a brokerage company that directly agents. It is clear that they did not want to be bound
competed with its business, and even recruited by employer-employee relationship at the time of
some of its sales agents. Two months after he the signing of the contract.
relinquished his post, however, Alcantara appeared
in Royale Homes and submitted a letter claiming
that he was illegally dismissed. In determining the existence of an employer-
employee relationship, this Court has generally
The Labor Arbiter rendered a Decision holding that relied on the four-fold test, to wit: (1) the selection
Alcantara is an employee of Royale Homes and that and engagement of the employee; (2) the payment
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MANILA GOLD CLUB VS IAC . . . that the caddy's fees were paid by the golf
players themselves and not by respondent club.
For instance, petitioner Raymundo Jomok
FACTS: averred that for their services as caddies a
caddy's Claim Stub is issued by a player who will
17 persons (including private respondent Fermin
in turn hand over to management the other
Llamar) who styled themselves "Caddies of Manila
portion of the stub known as Caddy Ticket so
Golf and Country Club-PTCCEA" filed a case before
that by this arrangement management will know
the Social Security Commission, "PTCCEA" being the
how much a caddy will be paid. Likewise,
acronym of a labor organization, the "Philippine
petitioner Fermin Llamar admitted that caddy
Technical, Clerical, Commercial Employees
works on his own in accordance with the rules
Association," with which the petitioners claimed to
and regulations but petitioner Jomok could not
be affiliated.
state any policy of respondent that directs the
manner of caddying.
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of the Manila Gold and Country Club, ordering that instance, the caddies were still employees of the
he be reported as such for social security coverage club." This, no matter that the case which produced
and paid any corresponding benefits. this ruling had a slightly different factual cast,
apparently having involved a claim for workmen's
compensation made by a caddy who, about to leave
Upon the evidence, the questioned employer- the premises of the club where he worked, was hit
employee relationship between the Club and and injured by an automobile then negotiating the
Fermin Llamar passed the so-called "control test," club's private driveway.
establishment in the case — i.e., "whether the
employer controls or has reserved the right to
control the employee not only as to the result of the ISSUE: Whether or not persons rendering caddying
work to be done but also as to the means and services for members of golf clubs and their guests
methods by which the same is to be accomplished," in said clubs' courses or premises are the employees
— the Club's control over the caddies of such clubs and therefore within the compulsory
encompassing: coverage of the Social Security System (SSS). NO.
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must submit to some supervision of their conduct By and large, there appears nothing in the record to
while enjoying the privilege of pursuing their refute the petitioner's claim that:
occupation within the premises and grounds of
whatever club they do their work in. For all that is
made to appear, they work for the club to which (Petitioner) has no means of compelling the
they attach themselves on sufference but, on the presence of a caddy. A caddy is not required to
other hand, also without having to observe any exercise his occupation in the premises of
working hours, free to leave anytime they please, to petitioner. He may work with any other golf club
stay away for as long they like. or he may seek employment a caddy or
otherwise with any entity or individual without
restriction by petitioner. . . .
It is not pretended that if found remiss in the
observance of said rules, any discipline may be
meted them beyond barring them from the . . . In the final analysis, petitioner has no was of
premises which, it may be supposed, the Club may compelling the presence of the caddies as they
do in any case even absent any breach of the rules, are not required to render a definite number of
and without violating any right to work on their part. hours of work on a single day. Even the group
All these considerations clash frontally with the rotation of caddies is not absolute because a
concept of employment. player is at liberty to choose a caddy of his
preference regardless of the caddy's order in the
rotation.
The IAC would point to the fact that the Club
suggests the rate of fees payable by the players to
the caddies as still another indication of the latter's It can happen that a caddy who has rendered
status as employees. It seems to the Court, services to a player on one day may still find
however, that the intendment of such fact is to the sufficient time to work elsewhere. Under such
contrary, showing that the Club has not the measure circumstances, he may then leave the premises of
of control over the incidents of the caddies' work petitioner and go to such other place of work that
and compensation that an employer would possess. he wishes (sic). Or a caddy who is on call for a
particular day may deliberately absent himself if he
has more profitable caddying, or another,
The Court agrees with petitioner that the group engagement in some other place. These are things
rotation system so-called, is less a measure of beyond petitioner's control and for which it imposes
employer control than an assurance that the work is no direct sanctions on the caddies.
fairly distributed, a caddy who is absent when his
turn number is called simply losing his turn to serve
and being assigned instead the last number for the
day.
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boundary-hulog which he was required to remit control over the chattel leased but the lessee is still
daily to Villamaria under the agreement. Also, he ultimately responsible for the consequences of its
maintained that he remained an employee because use. The management of the business is still in the
he was engaged to perform activities which were hands of the owner/operator, who, being the holder
necessary or desirable to Villamaria’s trade or of the certificate of public convenience, must see to
business. it that the driver follows the route prescribed by the
franchising and regulatory authority, and the rules
promulgated with regard to the business
ISSUE: operations. The fact that the driver does not
receive fixed wages but only the excess of the
1. whether the existence of a boundary-hulog
"boundary" given to the owner/operator is not
agreement negates the employer-employee
sufficient to change the relationship between
relationship between the vendor and
them. Indubitably, the driver performs activities
vendee. NO
which are usually necessary or desirable in the
2. whether the Labor Arbiter has jurisdiction
usual business or trade of the owner/operator.
over a complaint for illegal dismissal in such
case. YES Under the Kasunduan, respondent was required to
remit P550.00 daily to petitioner, an amount which
represented the boundary of petitioner as well as
RULING: respondent’s partial payment (hulog) of the
purchase price of the jeepney. Thus, the daily
1. The SC ruled that under the boundary-hulog
remittances also had dual purpose; that if
scheme incorporated in the Kasunduan, a dual
petitioner’s boundary and respondent’s partial
juridical relationship was created between
payment (hulog) for the vehicle.
petitioner and respondent: that of employer-
employee and vendor-vendee. The Kasunduan The well-settled rule is that an obligation is not
did not extinguish the employer-employee novated by an instrument that expressly
relationship of the parties existing before the recognizes the old one, changes only the terms of
execution of said deed. payment, and adds other obligations not
incompatible with the old provisions or where the
new contract merely supplements the previous
The boundary system is a scheme by an one. The two obligations of the respondent to remit
owner/operator engaged in transporting to petitioner the boundary-hulog can stand
passengers as a common carrier to primarily govern together.
the compensation of the driver, that is, the latter’s
The juridical relationship of employer-employee
daily earnings are remitted to the owner/operator
between petitioner and respondent was not
less the excess of the boundary which represents
negated by the foregoing stipulation in the
the driver’s compensation.
Kasunduan, considering that petitioner retained
Under this system, the owner/operator exercises control of respondent’s conduct as driver of the
control and supervision over the driver. It is unlike vehicle. As correctly ruled by the CA:
in lease of chattels where the lessor loses complete
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xxx that the existence of an employment under Articles 282, 283 and 284 of the Labor
relation is not dependent on how the worker Code.
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 Parenthetically, given the peculiarity of the situation
the "boundary hulog" is equivalent to wages; of the parties here, the default in the remittance of
and that the fact that the power of dismissal the boundary hulog for one week or longer may be
was not mentioned in the Kasunduan did not considered an additional cause for termination of
mean that private respondent never employment. The reason is because the Kasunduan
exercised such power, or could not exercise would be of no force and effect in the event that the
such power. purchaser failed to remit the boundary hulog for
one week. The Kasunduan in this case pertinently
stipulates:
Moreover, requiring petitioner to drive the unit for
13. Na kung ang TAUHAN NG IKALAWANG
commercial use, or to wear an identification card, or
PANIG ay hindi makapagbigay ng BOUNDARY
to don a decent attire, or to park the vehicle in
HULOG sa loob ng isang linggo ay
Villamaria Motors garage, or to inform Villamaria
NANGANGAHULUGAN na ang kasunduang
Motors about the fact that the unit would be going
ito ay wala ng bisa at kusang ibabalik ng
out to the province for two days of more, or to drive
TAUHAN NG IKALAWANG PANIG ang
the unit carefully, etc. necessarily related to control
nasabing sasakyan sa TAUHAN NG UNANG
over the means by which the petitioner was to go
PANIG na wala ng paghahabol pa.
about his work; and the fact that the "boundary"
here represented installment payment of the
purchase price on the jeepney did not withdraw the
Moreover, well-settled is the rule that, the
relationship from that of employer-employee, in
employer has the burden of proving that the
view of the overt presence of supervision and
dismissal of an employee is for a just cause. The
control by the employer.
failure of the employer to discharge this burden
means that the dismissal is not justified and that the
employee is entitled to reinstatement and back
As respondent’s employer, it was the burden of
wages.
petitioner to prove that respondent’s termination
from employment was for a lawful or just cause, or, In the case at bench, private respondent in his
at the very least, that respondent failed to make his position paper before the Labor Arbiter, alleged that
daily remittances of P550.00 as boundary. However, petitioner failed to pay the miscellaneous fee of
petitioner failed to do so. As correctly ruled by the P10,000.00 and the yearly registration of the unit;
appellate court: that petitioner also stopped remitting the
"boundary hulog," prompting him (private
It is basic of course that termination of
respondent) to issue a "Paalala," which petitioner
employment must be effected in accordance
however ignored; that petitioner even brought the
with law. The just and authorized causes for
unit to his (petitioner’s) province without informing
termination of employment are enumerated
him (private respondent) about it; and that
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