Labstan Digest
Labstan Digest
1. MANILA DIAMOND VS CA (2004) ISSUE/S: WON the CA in ruling that the Secretary of
Labor’s unauthorized order of mere “Payroll
DOCTRINE: Under Article 263(g), all workers must reinstatement” is not a grave abuse of discretion.
immediately return to work and all employers must
readmit all of them under the same terms and RULING: The act of the secretary of labor
conditions prevailing before the strike or lockout. constitutes a grave abuse of discretion.
This Court must point out that the law uses the
precise phrase of "under the same terms and Court notes that the UST ruling was made in the
conditions," revealing that it contemplates only light of one very important fact: the teachers could
actual reinstatement. not be given back their academic assignments since
the order of the Secretary for them to return to
FACTS: Union filed a petition for a certification work was given in the middle of the first semester
election that it be declared exclusive bargaining of the academic year.
representative of Hotel’s employees. The petition
was dismissed by DOLE. When a letter was sent to In the present case, there is no showing that the
the Hotel for the same matter, it(Hotel) said that it facts called for payroll reinstatement as an
cannot recognize it as bargaining agent since its alternative remedy. A strained
petition before the DOLE was dismissed. A strike relationship between the striking employees and
was held and Hotel Claimed that the strike was management is no reason for payroll reinstatement
illegal and dismissed some of employees for their in lieu of actual reinstatement. Petitioner.
participation in the allegedly illegal concerted
activity. As a general rule, the State encourages an
environment wherein employers and employees
Pertinent to this case is the issue ordered by Sec. of themselves must deal with their problems in a
labor Trajano. He issued a return to work order for manner that mutually suits them best. This is the
the employees. The Hotel, however, refused to basic policy embodied in Article XIII, Section 3 of
accept the returning workers and instead filed a the Constitution, which was further echoed in
Motion for Reconsideration of the Secretary’s Article 211 of the Labor Code. Hence, a voluntary,
Order. Instead of an actual return to work, Acting instead of compulsory, mode of dispute settlement
Secretary Español directed that the strikers be is the general rule.
reinstated only in the payroll. The labor union
moved for reconsideration, however, was denied. However, Article 263, paragraph (g) of the Labor
Code, which allows the Secretary of Labor to
Hence, it filed a petition for certiorari under Rule assume jurisdiction over a labor dispute involving
65 alleging that there was a grave abuse abused of an industry indispensable to the national interest,
discretion on the part of the Secretary of Labor for provides an exception:
modifying its earlier order and requiring instead the
reinstatement of the employees in the payroll. (g) When, in his opinion, there exists a labor
dispute causing or likely to cause a strike or lockout
CA anchored its decision in the case UST vs NLRC in an industry indispensable to the national
where NLRC only provided payroll reinstatement as interest, the Secretary of Labor and Employment
remedy to actual reinstatement may assume jurisdiction over the dispute and
decide it or certify the same to the Commission for
compulsory arbitration. Such assumption or
certification shall have the effect of automatically
enjoining the
Contributors
2
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
management from expenses, which it normally
incurs during a work stoppage or slowdown. It was
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
action from the Hotel.
Contributors
3
ARCO METAL VS SAMAHAN The CA ruled that the CBA did not intend to
foreclose the application of prorated payments of
DOCTRINE: The principle of non-diminution of leave benefits to covered employees. The appellate
benefits is founded on the Constitutional mandate court found that petitioner, however, had an
to "protect the rights of workers and promote their existing voluntary practice of paying the aforesaid
welfare and to afford labor full protection. Said benefits in full to its employees, thereby rejecting
mandate in turn is the basis of Article 4 of the the claim that petitioner erred in paying full
Labor Code which states that all doubts in the benefits to its seven employees. The appellate
implementation and interpretation of this Code, court noted that aside from the affidavit of
including its implementing rules and regulations petitioner’s officer, it has not presented any
shall be rendered in favor of labor evidence in support of its position that it has no
voluntary practice of granting the contested
FACTS: ARCO METAL(petitioner) is a company benefits in full and without regard to the service
engaged in the manufacture of metal products, actually rendered within the year. It also
whereas (sais the labor union of petitioner’s rank questioned why it took petitioner 11 years before it
and file employees. Sometime in December 2003, was able to discover the alleged error.
petitioner paid the 13th month pay, bonus, and
leave encashment of three union members in Petitioner claims that its full payment of benefits
amounts proportional to the service they actually regardless of the length of service to the company
rendered in a year, which is less than a full 12 does not constitute voluntary employer practice. It
months. Respondent protested the prorated points out that the payments had been erroneously
scheme, claiming that on several occasions made and they occurred in isolated cases in the
petitioner did not prorate the payment of the same years 1992, 1993, 1994, 1999, 2002 and 2003.
benefits to 7 employees who had not served for According to petitioner, it was only in 2003 that the
the full 12 months. The payments were made in accounting department discovered the error "when
1992, 1993, 1994, 1996, 1999, 2003, and 2004. there were already three (3) employees involved
According to respondent, the prorated payment with prolonged absences and the error was
violates the rule against diminution of benefits corrected by implementing the pro-rata payment of
under Article 100 of the Labor Code. Thus, they benefits pursuant to law and their existing CBA.
filed a complaint before the NCMB. The parties
submitted the case for voluntary arbitration. ISSUE/S: WON the grant of 13th month pay, bonus,
and leave encashment in full regardless of actual
The voluntary arbitrator, Mangabat, ruled in favor service rendered constitutes voluntary employer
of petitioner and found that the giving of the practice and, consequently, the prorated payment
contested benefits in full, irrespective of the actual of the said benefits does not constitute diminution
service rendered within one year has not ripened of benefits under Article 100 of the Labor Code
into a practice. He noted the affidavit of Baingan,
manufacturing group head of petitioner, which RULING: YES.
states that the giving in full of the benefit was a The SC said that any benefit and supplement being
mere error. He also interpreted the phrase “for enjoyed by employees cannot be reduced,
each year of service” found in the pertinent CBA diminished, discontinued or eliminated by the
provisions to mean that an employee must have employer. The principle of non-diminution of
rendered one year of service in order to be entitled benefits is founded on the Constitutional mandate
to the full benefits provided in the CBA. to "protect the rights of workers and promote their
welfare and to afford labor full protection. Said
Contributors
4
mandate in turn is the basis of Article 4 of the Indeed, if petitioner wants to prove that it merely
Labor Code which states that all doubts in the erred in giving full benefits, it could have easily
implementation and interpretation of this Code, presented other proofs, such as the names of other
including its implementing rules and regulations employees who did not fully serve for one year and
shall be rendered in favor of labor. thus were given prorated benefits. Experientially, a
perfect attendance in the workplace is always the
Jurisprudence is replete with cases which recognize goal but it is seldom achieved. There must have
the right of employees to benefits which were been other employees who had reported for work
voluntarily given by the employer and which less than a full year and who, as a consequence
ripened into company practice. received only prorated benefits. This could have
easily bolstered petitioner’s theory of
Thus in mistake/error, but sadly, no evidence to that effect
DavaoFruits Corporation v. Associated was presented.
Labor Unions, et al. where an employer had
freely and continuously included in the
computation of the 13th month pay those Hence, petition was denied.
items that were expressly excluded by the
law, we held that the act which was
favorable to the employees though not
conforming to law had thus ripened into a
practice and could not be withdrawn,
reduced, diminished, discontinued or
eliminated.
In Sevilla Trading Company v. Semana, we
ruled that the employer’s act of including
non-basic benefits in the computation of
the 13th month pay was a voluntary act and
had ripened into a company practice which
cannot be peremptorily withdrawn.
Contributors
7
In this light, the language of the Act's this test an employer-employee relationship
definition of 'employee' or 'employer' exist where the person for whom the
should be determined broadly in doubtful services are performed reserves the right to
situations, by underlying economic facts control not only the end to be achieved, but
rather than technically and exclusively also the manner and means to be used in
established legal classifications. (NLRB vs. reaching the end.
Blount, 131 F [2d] 585.) In other words, the
scope of the term 'employee' must be The right of control of the film company
understood with reference to the purposes over the musicians is shown (1) by calling
of the Act and the facts involved in the the musicians through 'call slips' in 'the
economic relationship. name of the company; (2) by arranging
schedules in its studio for recording
As used in the Act, the term embraces 'any sessions; (3) by furnishing transportation
employee' that is all employees in the and meals to musicians; and (4) by
conventional as well in the legal sense supervising and directing in detail, through
expect those excluded by express provision. the motion picture director, the
(Connor Lumber Co., 11 NLRB 776.). performance of the musicians before the
camera, in order to suit the music they are
It is the purpose of the policy of Republic playing to the picture which is being flashed
Act 875; (a) To eliminate the causes of on the screen.
industrial unrest by protecting the exercise
of their right to self-organization for the Thus, in the application of Philippine
purpose of collective bargaining. (b) To statutes and pertinent decisions of the
promote sound stable industrial peace and United States Courts on the matter to the
the advancement of the general welfare, facts established in this case, we cannot but
and the best interests of employers and conclude that to effectuate the policies of
employees by the settlement of issues the Act and by virtue of the 'right of control'
respecting terms and conditions of test, the members of the Philippine
employment through the process of Musicians Guild are employees of the three
collective bargaining between employers film companies and, therefore, entitled to
and representatives of their employees right of collective bargaining under
Republic Act No. 875.
MAIN ISSUE: WON the musicians in question are
employees of the film companies. In view of the fact that the three (3) film
companies did not question the union's
The work of the musical director and majority, the Philippine Musicians Guild is
musicians is a functional and integral part of hereby declared as the sole collective
the enterprise performed at the same bargaining representative for all the
studio substantially under the direction and musicians employed by the film
control of the company. companies."
In other words, to determine whether a In the case at bar. The musical directors above
person who performs work for another is referred to have no such control over the musicians
the latter's employee or an independent involved in the present case. Said musical directors
contractor, the National Labor Relations control neither the music to be played, nor the
relies on 'the right to control' test. Under musicians playing it. The film companies summon
Contributors
9
Contributors
10
DOCTRINE: An independent contractor is one who At the outset the following consideration presents
in rendering services, exercises an independent itself: plaintiffs' right is not predicated on some
employment or occupation and represents the will statutory provision, but upon the offer or promise
of his employer only as to the results of his work contained in Annex A. The Hotel is in the best
and not as to the means whereby it is position to state who were the
accomplished. employees contemplated in the aforesaid Annex A.
Cruz and his musicians claimed the gratuity; but the ISSUE: WON they are employees of the hotel?
Manila Hotel management denied their claim -NO.
saying they were not its employees. So, an action
was instituted. RULING:
Their connection with the Hotel was only thru
The complaint alleged that plaintiffs "were Tirso Cruz who was the leader of the orchestra; and
members of the orchestra which had been they couldn't be in a better class than Tirso Cruz
employed by the defendant to furnish music in the who dealt with the Hotel.
Manila Hotel"; that they were employees of the
Hotel and are entitled to the gratuity pursuant to It will be observed that the Manila Hotel contracted
the announcement (Annex A): or engaged the "services of your orchestra" (of
Tirso Cruz) at P250 per day to "play from 7:30 p.m.
“. . . . It is for this reason that the necessary to closing time daily".
authority has already been secured for the
payment of separation gratuity to the What pieces the orchestra shall play, and how the
employees to be laid off as a result of the music shall be arranged or directed, the intervals
lease and who are not yet entitled to either and other details — such are left to the leader's
the optional or compulsory retirement discretion. The music instruments, the music
insurance provided under Republic Act No. papers and other paraphernalia are not furnished
660, as amended, . . . .” by the Hotel, they belong to the orchestra, which
in turn belongs to Tirso Cruz — not to the Hotel.
The defendant filed a motion to dismiss alleging The individual musicians, and the instruments
that plaintiffs were not its employees and that they they have not been selected by the Hotel. It
did not fall within the terms of Annex A because reserved no power to discharge any musician.
How much salary is given to the individual
Contributors
11
Contributors
12
act of hers in demanding these privileges are may terminate at any time the employment
inconsistent with the claim that she was an with just cause; or without just cause in the
independent contractor. case of an employee by serving written
notice on the employer at least one month
SUB ISSUE / RULING 2 in advance, or in the case of an employer, by
serving such notice to the employee at least
The next point at issue is whether or not the one month in advance or one-half month
petitioners herein are guilty of unfair labor for every year of service of the employee,
practice. Petitioners claim that under the whichever is longer, a fraction of at least six
decision rendered by Us in the case of Royal months being considered as one whole year.
Interocean Lines, et al. vs. Court of Industrial
Relations, et al., G.R. No. L-11745, Oct. 31, 1960, The employer upon whom no such notice
as respondent Sol was merely an employee and was served in case of termination of
was not connected with any labor union, the employment without just cause may hold
company cannot be considered as having the employee liable for damages.
committed acts constituting unfair labor practice
as defined in the Industrial Peace Act, Rep. Act The contract between the petitioners and the
875 respondent Sol providing that the respondent Sol
can be dismissed upon fifteen days' notice is
We find this contention to be well-founded. The therefore null and void. Inasmuch as respondent
term unfair labor practice has been defined as any Sol was employed since the year 1952 and was in
of those acts listed in See. 4 of the Act. The the employment of the petitioners from that time
respondent Sol has never been found to commit up to 1959, or a period of seven years, she is
any of the acts mentioned in paragraph (a) of Sec. entitled to three and one-half months pay in
4. Respondent Sol was not connected with any accordance with the above quoted section 1 of the
labor organization, nor has she ever attempted to Act.
join a labor organization, or to assist, or contribute
to a labor organization. The company cannot,
therefore, be considered as having committed an
unfair labor practice.
.DY KEH BENG VS INTERNATIONAL LABOR (8) workers and never less than five (5) including
the complainants, and that complainants used to
DOCTRINE: receive P5.00 a day. sometimes less.
RULING:
The SC ruled that there is an existence of employer-
employee relationship between the parties.
Furthermore, that the continuity of employment is
RJL Martinez vs. NLRC not the determining factor, but rather whether the
work of the laborer is part of the regular business
FACTS: or occupation of the employer.
RJL Martinez Fishing Corp. are principally engaged The SC discussed that, although it may be that
in the deep-sea fishing business. private respondents alternated their employment
Respondents were employed by RJL since 1978 as on different vessels when they were not assigned
stevedores at Navotas Fish Port for unloading of to petitioners' boats, that did not affect their
tuna fish catch by said corporation’s vessels and employee status. The evidence establishes that
then loading them on refrigerated vans for petitioners had a fleet of fishing vessels with
shipment abroad. about 65 ship captains, and as private respondents
On March 27, 1981, private respondents Antonio contended, when they finished with one vessel,
Boticario, and thirty (30) others, upon the premise they were instructed to wait for the next.
that they are petitioners' regular employees, filed a NLRC also found that the employer-employee
complaint against petitioners for non-payment of relationship between the parties herein is not co-
overtime pay, premium pay, legal holiday pay, terminous with each loading and unloading job. As
emergency allowance under P.D. Nos. 525, 1123, earlier shown, respondents are engaged in the
1614, 1634, 1678, 1713, 1751, 13th month pay (P.D. business of fishing. For this purpose, they have a
851), service incentive leave pay and night shift fleet of fishing vessels. Under this situation,
differential. respondents' activity of catching fish is a
On April 21, 1981 another complaint was filed continuous process and could hardly be
against RJL for Illegal Dismissal and for Violation of considered as seasonal in nature. The activities
Article 118 of the Labor Code, as amended. Upon performed by herein complainants, i.e. unloading
RJL’s motion, these two cases were consolidated the catch of tuna fish from respondents' vessel and
and tried jointly. then loading the same to refrigerated vans, are
RJL contended that private respondents are necessary or desirable in the business of
contract laborers whose work terminated upon respondents. These circumstances make the
completion of each unloading, and that in the employment of complainants a regular one, in the
absence of any boat arrivals, private respondents sense that it does not depend on any specific
did not work for petitioners but were free to work project or seasonal activity.
or seek employment with other fishing boat Furthermore, the employment contract signed by
operators. Antonio Boticario, which described him as "labor
contractor", is not really so inasmuch as wages
ISSUES: continued to be paid by petitioners and he and the
1. Whether or not there is an employer- other workers were uniformly paid. He was merely
employee relationship between the parties. asked by the petitioners to recruit other workers.
YES. Besides, labor-contracting is prohibited under Sec.
2. Whether or not private respondents are 9(b), Rule VIII, Book III — Rules and Regulations
entitled to legal holiday pay, emergency Implementing the Labor Code as amended.
living allowance, thirteenth month pay and
incentive leave pay. YES The SC court herein cited the case of Philippine
Fishing Boat Officers and Engineers Union vs. CIR,
where it ruled that
Contributors
17
Contributors
18
FACTS: Kimberly-Clark Philippines, Inc. (KIMBERLY) After the elections, UKCEU-PTGWO won over
executed a three-year collective bargaining KILUSAN-OLALIA by 20 votes. This count considered
agreement (CBA) with United Kimberly-Clark the votes of the 64 employees as separate.
Employees Union-Philippine Transport and General
Workers' Organization (UKCEUPTGWO) which In a case regarding the status of the 64 employees
expired on June 30, 1986. in relation to the certification election, it was held
by med-arbiter Sanchez that:
Within the 60-day freedom period prior to the
expiration of and during the negotiations for the “…2)The other casual employees not performing
renewal of the aforementioned CBA, some janitorial and yard maintenance services were
members of the bargaining unit formed another deemed labor-only contractuals and since labor-
union called "Kimberly Independent Labor Union only contracting is prohibited, such employees
for Solidarity, Activism and Nationalism-Organized were held to have attained the status of regular
Labor Association in Line Industries and Agriculture employees, the regularization being effective as of
(KILUSAN-OLALIA) the date of the decision;
3. UKCEU-PTGWO, having garnered more votes
April 21, 1986, KILUSAN-OLALIA filed a petition for than KILUSAN-OLALIA, was certified as the exclusive
certification election. KIMBERLY and UKCEU- bargaining representative of KlMBERLY's
PTGWO did not object to the holding of a employees;…”
certification election but objected to the inclusion
of the so-called contractual workers whose Since the members were only considered regular at
employment with KIMBERLY was coursed through the time of the decision, their votes were not re-
an independent contractor, Rank Manpower considered as regards the election. Winning union
Company (RANK, for short), as among the qualified and company executed a CBA.
voters.
KIMBERLY-OLALIA filed for a TRO on the CBA and
On June 2, 1986, Med-Arbiter Bonifacio I. included the question of the status of the 64
Marasigan, who was handling the certification members in question.
election case issued an order declaring the
following as eligible to vote in the certification ISSUE WON the 64 employees were regular
election, thus: employees at the time of the certification election
1) regular rank-and-file laborers/employees of the
respondent company; 2) casuals who have worked HELD: YES
at least six (6) months; 3) Contractual employees
who are allegedly in the employ of an independent A280LC provides for two kinds of regular
contractor and who have also worked for at least employees: (1) those who are engaged to perform
six (6) months activities which are usually necessary or desirable
in the usual business or trade of the employer; and
During the pre-election conference, 64 casual (2) those who have rendered at least one year of
workers were challenged by KIMBERLY and UKCEU-
Contributors
19
service, whether continuous or broken, with 1986. Consequently, the votes cast by those
respect to the activity in which they are employed employees not performing janitorial and yard
maintenance service, which forms part of the 64
The individual petitioners herein who have been challenged votes, should be opened, counted and
adjudged to be regular employees (by law) fall considered for the purpose of determining the
under the second category. These are the certified bargaining representative.
mechanics, electricians, machinists, machine shop
helpers, warehouse helpers, painters, carpenters,
pipefitters and masons. It is not disputed that these One Year Service: Kimberly v Drilon [1990]
workers have been in the employ of KIMBERLY for
more than one year at the time of the filing of the Those who have rendered at least one year of
petition for certification election by KILUSAN- service, whether continuous or broken are deemed
OLALIA. regular with respect to the activity in which they
are employed. While the actual regularization of
While the actual regularization of these employees these employees entails the mechanical act of
entails the mechanical act of issuing regular issuing regular appointment paper and compliance
appointment papers and compliance with such with such other operating procedures as may be
other operating procedures as may be adopted by adopted by the employer, it is more in keeping
the employer, it is more in keeping with the intent with the intent and spirit of the law to rule that the
and spirit of the law to rule that the status of status of regular employment attaches to the
regular employment attaches to the casual worker casual worker on the day immediately after the end
on the day immediately after the end of his first of his first yr of service.
year of service
Issue:
TABAS vs CALIFORNIA Is there an employer-employee relationship
between Danilo Tabas et al and California
Doctrine: Manufacturing Company
The existence of an employer-employee
relationship is a question of law and cannot be Ruling:
made subject to agreement.
Yes.
Facts:
The existence of an employer-employee
Danilo Tabas et al. were employees of Livi relationship is a question of law and cannot
Manpower Services. They were assigned to be made subject to agreement. The
California Manufacturing Company pursuant to a stipulations in the manpower supply
manpower supply agreement as “promotional agreement will not erase either party’s
merchandisers”. It was provided in the agreement obligations as an employer. Livi is a labor-
that: only contractor, notwithstanding the
provisions in the agreement. The nature of
1) California would have no control or one’s business is not determined by self-
supervision over the workers as to how they serving appellations but by test provided by
perform or accomplish their work statute and the prevailing case law.
2) Livi is an independent contractor and that it
has the sole responsibility of complying with California’s contention that the workers are
all the existing as well as future laws, rules not performing activities which are directly
and regulations pertinent to employment of related to its general business of
labor manufacturing is untenable. The promotion
3) the assignment to California was “seasonal or sale of products, including the task of
and contractual occasional price tagging, is an integral part
4) payroll, including COLA and holiday pay shall of the manufacturing business. Livi as a
be delivered Livi at California’s premises. placement agency had simply supplied the
manpower necessary for California to carry
Tabas et al were made to sign 6-month out its merchandising activities, using the
employment contracts which were renewed for the latter’s premises and equipment.
same period. Unlike regular employees of Merchandising is likewise not a specific
California, they did not receive fringe benefits and project because it is an activity related to
bonuses and were paid only a daily allowance. the day-to-day operations of California.
Based on Article 106 of the Labor Code, the
They contend that they have become regular labor-only contractor is considered merely
employees of California. Subsequent to their claim an agent of the employer and liability must
for regularization, California no longer re-hired be shouldered by either one or by both.
them. Livi, on the other hand, claims the workers as Petitioners are ordered reinstated as regular
its employees and that it is an independent employees.
contractor.
Contributors
21
Respondents were illegally dismissed since Fonterra The respondents were the ones who refused to
itself failed to prove that their dismissal is lawful. renew their contracts with Zytron, and they
themselves acquiesced to their transfer to A.C.
However, the illegal dismissal should be reckoned Sicat.
from the termination of their supposed
employment with Zytron on June 6, 2006. By refusing to renew their contracts with Zytron,
respondents effectively resigned from the latter.
Furthermore, respondents’ transfer to A.C. Sicat is
tantamount to a completely new engagement by Resignation is the voluntary act of
another employer. employees who are compelled by personal
reasons to dissociate themselves from their
Lastly, the termination of their contract with A.C. employment, done with the intention of
Sicat arose from the expiration of their respective relinquishing an office, accompanied by the
contracts with the latter. act of abandonment.
The CA, thus, ruled that Fonterra is liable to Respondents voluntarily terminated their
respondents and ordered the reinstatement of employment with Zytron by refusing to renew their
respondents without loss of seniority rights, with employment contracts with the latter, applying with
full backwages, and other benefits from the time of A.C. Sicat, and working as the latter’s employees,
their illegal dismissal up to the time of their actual thereby abandoning their previous employment
reinstatement. with Zytron.
A.C. Sicat
ISSUE/S: A.C. Sicat is engaged in legitimate job contracting
and was able to prove its status as a legitimate job
a. Whether or not Zytron and A.C. Sicat are contractor.
labor-only contractors.
In labor-only contracting, the law creates an
b. Whether or not respondents were illegally employer-employee relationship between the
dismissed. principal and the labor-only contractor’s employee
as if such employees are directly employed by the
RULING: principal employer, and considers the contractor
as merely the agent of the principal.
a. Whether or not Zytron and A.C. Sicat are
labor-only contractors. A.C. Sicat’s status as a legitimate job contractor is
consistent with the rules on job contracting and is
Zyrton sufficiently supported by the evidence.
Determination is immaterial as respondents
voluntarily terminated their employment with JOB-CONTRACTING
Zytron.
Contributors
23
A person is considered engaged in legitimate job Too, its Agreement with Fonterra clearly sets forth
contracting or subcontracting if the following that A.C. Sicat shall be liable for the wages and
conditions concur: salaries of its employees or workers, including
1. The contractor or subcontractor carries benefits, premiums, and protection due them, as
on a distinct and independent business well as remittance to the proper government
and undertakes to perform the job, work entities of all withholding taxes, Social Security
or service on its own account and under Service, and Medicare premiums, in accordance
its own responsibility according to its with relevant laws.
own manner and method, and free from
the control and direction of the principal These sufficiently show that A.C. Sicat carries out its
in all matters connected with the merchandising and promotions business,
performance of the work except as to independent of Fonterra’s business.
the results thereof;
2. The contractor or subcontractor has Thus, having settled that A.C. Sicat is a legitimate
substantial capital or investment; and job contractor.
3. The agreement between the principal
and contractor or subcontractor assures
the contractual employees entitlement c. Whether or not respondents were illegally
to all labor and occupational safety and dismissed. NO
health standards, free exercise of the
right to self-organization, security of Respondents were fixed-term employees.
tenure, and social and welfare benefits.
As previously held by this Court, fixed-term
Contracting is prohibited when the contractor or employment contracts are not limited, as they are
subcontractor merely recruits, supplies or places under the present Labor Code, to those by nature
workers to perform a job, work or service for a seasonal or for specific projects with
principal and if any of the following elements are predetermined dates of completion; they also
present, thus: include those to which the parties by free choice
1. The contractor or subcontractor does have assigned a specific date of termination.
not have substantial capital or
investment which relates to the job, The determining factor of such contracts is not the
work or service to be performed and the duty of the employee but the day certain agreed
employees recruited, supplied or placed upon by the parties for the commencement and
by such contractor or subcontractor are termination of the employment relationship.
performing activities which are directly
related to the main business of the In the case at bar, it is clear that
principal; or respondents were employed by A.C.
4. The contractor does not exercise the Sicat as project employees. In their
right to control over the performance of employment contract with the latter, it is
the work of the contractual employee. clearly stated that “[A.C. Sicat is]
temporarily employing [respondents] as
TMR[s] effective June 6[, 2006] under
Furthermore, A.C. Sicat has substantial capital, the following terms and conditions: The
having assets totaling P5,926,155.76 as of need for your service being only for a
December 31, 2006. specific project, your temporary
employment will be for the duration
Contributors
24
only of said project of our client, namely The second phase started in 1983 when Tongko was
to promote FONTERRA BRANDS products named Unit Manager in Manulife’s Sales Agency
x x x which is expected to be finished on Organization. In 1990, he became a Branch
or before Nov. 06, 2006. Manager. Six years later (or in 1996), Tongko
became a Regional Sales Manager.4
Respondents, by accepting the conditions of the
contract with A.C. Sicat, were well aware of and Tongko’s gross earnings consisted of commissions,
even acceded to the condition that their persistency income, and management overrides.
employment thereat will end on said pre- Since the beginning, Tongko consistently declared
determined date of termination. They cannot now himself self-employed in his income tax returns.
argue that they were illegally dismissed by the Thus, under oath, he declared his gross business
latter when it refused to renew their contracts after income and deducted his business expenses to
its expiration. arrive at his taxable business income.
This is so since the non-renewal of their contracts In 2001, Manulife instituted manpower
by A.C. Sicat is a management prerogative, and development programs at the regional sales
failure of respondents to prove that such was done management level. Respondent Renato Vergel de
in bad faith militates against their contention that Dios wrote Tongko letters to remind the latter to
they were illegally dismissed. align to the direction that the company was taking.
Among which is to recruit agents- this is the first
The expiration of their contract with A.C. Sicat step into transforming Manulife into a big league
simply caused the natural cessation of their fixed- player.
term employment there at. We, thus, see no reason
to disturb the ruling of the CA in this respect. Failing to do so, de Dios wrote Tongko another
letter, dated December 18, 2001, terminating
Tongko’s services:
TONGKO V MANUFACTURER’S LIFE INSURANCE
(2010) “It would appear, however, that despite the series
of meetings and communications, both one-on-one
DOCTRINE: Absence of evidence showing control meetings between yourself and SVP Kevin
over contractual duties points to the absence of O’Connor, some of them with me, as well as group
any employer-employee relationship. meetings with your Sales Managers, all these
efforts have failed in helping you align your
FACTS: The contractual relationship between directions with Management’s avowed agency
Tongko and Manulife had two basic phases. The growth policy.”
first or initial phase began on July 1, 1977, under a
Career Agent’s Agreement (Agreement) that Tongko on the other hand responded by filing an
provided: illegal dismissal complaint with the National Labor
Relations Commission (NLRC) Arbitration Branch.
It is understood and agreed that the Agent is an He essentially alleged – despite the clear terms of
independent contractor and nothing contained the letter terminating his Agency Agreement – that
herein shall be construed or interpreted as creating he was Manulife’s employee before he was illegally
an employer-employee relationship between the dismissed.
Company and the Agent.
ISSUE: WON there exists an employment
relationship. -NO.
Contributors
25
That Tongko assumed a leadership role but operated along the lines of principal-agent
nevertheless wholly remained an agent is the relationship in the sale of insurance.
inevitable conclusion that results from the reading
of the Agreement (the only agreement on record in c.2. Other Evidence of Alleged Control
this case) and his continuing role thereunder as
sales agent. A glaring evidentiary gap for Tongko in this case is
the lack of evidence on record showing that
Evidence indicates that Tongko consistently clung to Manulife ever exercised means-and-manner
the view that he was an independent agent selling control, even to a limited extent, over Tongko
Manulife insurance products since he invariably during his ascent in Manulife’s sales ladder.
declared himself a business or self-employed
person in his income tax returns. The best evidence of control – the agreement or
directive relating to Tongko’s duties and
This consistency with, and action made pursuant responsibilities – was never introduced as part of
to the Agreement were pieces of evidence that the records of the case. The reality is, prior to de
were never mentioned nor considered in our Dios’ letter, Manulife had practically left Tongko
Decision of November 7, 2008. alone not only in doing the business of selling
insurance, but also in guiding the agents under his
Had they been considered, they could, at the very wing.
least, serve as Tongko’s admissions against his
interest. Strictly speaking, Tongko’s tax returns What, to Tongko, serve as evidence of labor law
cannot but be legally significant because he control are the codes of conduct that Manulife
certified under oath the amount he earned as imposes on its agents in the sale of insurance. The
gross business income, claimed business mere presentation of codes or of rules and
deductions, leading to his net taxable income. This regulations, however, is not per se indicative of
should be evidence of the first order that cannot be labor law control as the law and jurisprudence
brushed aside by a mere denial. Even on a layman’s teach us.
view that is devoid of legal considerations, the
extent of his annual income alone renders his Manulife’s codes of conduct, all of which do not
claimed employment status doubtful. intrude into the insurance agents’ means and
manner of conducting their sales and only control
The conclusion with respect to Tongko’s them as to the desired results and Insurance Code
employment as a manager is, of course, norms, cannot be used as basis for a finding that
unacceptable for the legal, factual and practical the labor law concept of control existed between
reasons discussed in this Resolution. In brief, Manulife and Tongko.
the factual reason is grounded on the lack of
evidentiary support of the conclusion that Manulife Even de Dios’ letter is not determinative of control
exercised control over Tongko in the sense as it indicates the least amount of intrusion into
understood in the Labor Code. The legal reason, Tongko’s exercise of his role as manager in guiding
partly based on the lack of factual basis, is the the sales agents.
erroneous legal conclusion that Manulife controlled
Tongko and was thus its employee. The practical Strictly viewed, de Dios’ directives are merely
reason, on the other hand, is the havoc that the operational guidelines on how Tongko could align
dissent’s unwarranted conclusion would cause the his operations with Manulife’s re-directed goal of
insurance industry that, by the law’s own design, being a "big league player."
Contributors
27
The method is to expand coverage through the use can Manulife terminate his role as lead
of more agents. This requirement for the agent separately from his agency contract;
recruitment of more agents is not a means-and- and
method control as it relates, more than anything
else, and is directly relevant, to Manulife’s objective to what extent does Manulife control the
of expanded business operations through the use means and methods of Tongko’s role as lead
of a bigger sales force whose members are all on a agent?
principal-agent relationship.
The answers to these questions may, to some
An important point to note here is that Tongko was extent, be deduced from the evidence at hand, as
not supervising regular full-time employees of partly discussed above. But strictly speaking, the
Manulife engaged in the running of the insurance questions cannot definitively and concretely be
business; Tongko was effectively guiding his corps answered through the evidence on record. The
of sales agents, who are bound to Manulife through concrete evidence required to settle these
the same Agreement that he had with Manulife, all questions is simply not there, since only the
the while sharing in these agents’ commissions Agreement and the anecdotal affidavits have been
through his overrides. marked and submitted as evidence.
Undeniably, de Dios’ letter contained a directive to Given this anemic state of the evidence, particularly
secure a competent assistant at Tongko’s own on the requisite confluence of the factors
expense. While couched in terms of a directive, it determinative of the existence of employer-
cannot strictly be understood as an intrusion into employee relationship, the Court cannot
Tongko’s method. It was a solution, with an eye on conclusively find that the relationship exists in the
results; its obvious intent was to save Tongko from present case, even if such relationship only refers to
the result that he then failed to grasp. Tongko’s additional functions.
As previously discussed, what simply happened in Under this legal situation, the only conclusion that
Tongko’s case was the grant of an expanded sales can be made is that the absence of evidence
agency role that recognized him as leader amongst showing Manulife’s control over Tongko’s
agents in an area that Manulife defined. Whether contractual duties points to the absence of any
this consequently resulted in the establishment of employer-employee relationship between Tongko
an employment relationship can be answered by and Manulife.
concrete evidence that corresponds to the
following questions: He was nevertheless only an agent whose basic
contract yields no evidence of means-and-manner
as lead agent, what were Tongko’s specific control.
functions and the terms of his additional
engagement; On the issue of whether the labor bodies have
jurisdiction over an illegal termination dispute
was he paid additional compensation as a involving parties who had two contracts – first, an
so-called Area Sales Manager, apart from original contract (agency contract), which was
the commissions he received from the undoubtedly one for agency, and another
insurance sales he generated; subsequent contract that in turn designated the
agent acting unit manager (a management
what can be Manulife’s basis to terminate contract). Both the Insular Life and the labor arbiter
his status as lead agent; were one in the position that both were agency
Contributors
28
Contributors
29
Contributors
31
MANILA GOLD CLUB VS IAC state any policy of respondent that directs the
manner of caddying.
FACTS:
17 persons (including private respondent Fermin While respondent club promulgates rules and
Llamar) who styled themselves "Caddies of Manila regulations on the assignment, deportment and
Golf and Country Club-PTCCEA" filed a case before conduct of caddies the same are designed to
the Social Security Commission, "PTCCEA" impose personal discipline among the caddies
being the acronym of a labor organization, the but not to direct or conduct their actual work.
"Philippine Technical, Clerical, Commercial In fact, a golf player is at liberty to choose a
Employees Association," with which the petitioners caddy of his preference regardless of the
claimed to be affiliated. respondent club's group rotation system and
has the discretion on whether or not to pay a
They prayed for coverage and availment of benefits caddy. As testified to by petitioner Llamar that
under the Social Security Act as amended. In their income depends on the number of players
essence, although the petitioners were employees engaging their services and liberality of the
of the Manila Golf and Country Club, a domestic latter. This lends credence to respondent's
corporation, the latter had not registered them as assertion that the caddies are never their
such with the SSS. employees in the absence of two elements,
namely, (1) payment of wages and (2) control or
In the case before the SSC, the respondent Club supervision over them. In this connection, our
filed answer praying for the dismissal of the Supreme Court ruled that in the determination
petition, alleging that the petitioners, caddies by of the existence of an employer-employee
occupation, were allowed into the Club premises to relationship, the "control test" shall be
render services as such to the individual members considered decisive.
and guests playing the Club's golf course and who
themselves paid for such services; that as such The Intermediate Appellate Court reversed the
caddies, the petitioners were not subject to the decision and declared Fermin Llamar an employee
direction and control of the Club as regards the of the Manila Gold and Country Club, ordering that
manner in which they performed their work; and he be reported as such for social security coverage
hence, they were not the Club's employees. and paid any corresponding benefits.
The SSC dismissed the petition for lack of merit, Upon the evidence, the questioned employer-
ruling: employee relationship between the Club and
Fermin Llamar passed the so-called "control test,"
. . . that the caddy's fees were paid by the golf establishment in the case — i.e., "whether the
players themselves and not by respondent club. employer controls or has reserved the right to
For instance, petitioner Raymundo Jomok control the employee not only as to the result of
averred that for their services as caddies a the work to be done but also as to the means and
caddy's Claim Stub is issued by a player who methods by which the same is to be
will in turn hand over to management the other accomplished," — the Club's control over the
portion of the stub known as Caddy Ticket so caddies encompassing:
that by this arrangement management will
know how much a caddy will be paid. Likewise, (a) the promulgation of no less than twenty-
petitioner Fermin Llamar admitted that caddy four (24) rules and regulations just about every
works on his own in accordance with the rules aspect of the conduct that the caddy must
and regulations but petitioner Jomok could not observe, or avoid, when serving as such, any
Contributors
32
Contributors
34
petitioner and respondent: that of employer- one. The two obligations of the respondent to
employee and vendor-vendee. The Kasunduan remit to petitioner the boundary-hulog can stand
did not extinguish the employer-employee together.
relationship of the parties existing before the The juridical relationship of employer-employee
execution of said deed. between petitioner and respondent was not
negated by the foregoing stipulation in the
Kasunduan, considering that petitioner retained
The boundary system is a scheme by an control of respondent’s conduct as driver of the
owner/operator engaged in transporting vehicle. As correctly ruled by the CA:
passengers as a common carrier to primarily govern xxx that the existence of an employment
the compensation of the driver, that is, the latter’s relation is not dependent on how the
daily earnings are remitted to the owner/operator worker is paid but on the presence or
less the excess of the boundary which represents absence of control over the means and
the driver’s compensation. method of the work; that the amount
Under this system, the owner/operator exercises earned in excess of the "boundary hulog" is
control and supervision over the driver. It is unlike equivalent to wages; and that the fact that
in lease of chattels where the lessor loses complete the power of dismissal was not mentioned
control over the chattel leased but the lessee is still in the Kasunduan did not mean that private
ultimately responsible for the consequences of its respondent never exercised such power, or
use. The management of the business is still in the could not exercise such power.
hands of the owner/operator, who, being the
holder of the certificate of public convenience, Moreover, requiring petitioner to drive the unit for
must see to it that the driver follows the route commercial use, or to wear an identification card,
prescribed by the franchising and regulatory or to don a decent attire, or to park the vehicle in
authority, and the rules promulgated with regard to Villamaria Motors garage, or to inform Villamaria
the business operations. The fact that the driver Motors about the fact that the unit would be going
does not receive fixed wages but only the excess out to the province for two days of more, or to
of the "boundary" given to the owner/operator is drive the unit carefully, etc. necessarily related to
not sufficient to change the relationship between control over the means by which the petitioner was
them. Indubitably, the driver performs activities to go about his work; and the fact that the
which are usually necessary or desirable in the "boundary" here represented installment payment
usual business or trade of the owner/operator. of the purchase price on the jeepney did not
Under the Kasunduan, respondent was required to withdraw the relationship from that of employer-
remit P550.00 daily to petitioner, an amount which employee, in view of the overt presence of
represented the boundary of petitioner as well as supervision and control by the employer.
respondent’s partial payment (hulog) of the
purchase price of the jeepney. Thus, the daily As respondent’s employer, it was the burden of
remittances also had dual purpose; that if petitioner to prove that respondent’s termination
petitioner’s boundary and respondent’s partial from employment was for a lawful or just cause,
payment (hulog) for the vehicle. or, at the very least, that respondent failed to make
The well-settled rule is that an obligation is not his daily remittances of P550.00 as boundary.
novated by an instrument that expressly However, petitioner failed to do so. As correctly
recognizes the old one, changes only the terms of ruled by the appellate court:
payment, and adds other obligations not It is basic of course that termination of
incompatible with the old provisions or where the employment must be effected in
new contract merely supplements the previous accordance with law. The just and
Contributors
36
authorized causes for termination of in the Paalala that he would enforce the provision
employment are enumerated under Articles (in the Kasunduan) to the effect that default in the
282, 283 and 284 of the Labor Code. remittance of the boundary hulog for one week
would result in the forfeiture of the unit.
Parenthetically, given the peculiarity of the The Paalala reads as follows:
situation of the parties here, the default in the "Sa lahat ng mga kumukuha ng sasakyan
remittance of the boundary hulog for one week or "Sa pamamagitan ng ‘BOUNDARY HULOG’
longer may be considered an additional cause for "Nais ko pong ipaalala sa inyo ang
termination of employment. The reason is because Kasunduan na inyong pinirmahan particular
the Kasunduan would be of no force and effect in na ang paragrapo 13 na nagsasaad na kung
the event that the purchaser failed to remit the hindi kayo makapagbigay ng Boundary
boundary hulog for one week. The Kasunduan in Hulog sa loob ng isang linggo ay kusa
this case pertinently stipulates: ninyong ibabalik and nasabing sasakyan na
13. Na kung ang TAUHAN NG IKALAWANG inyong hinuhulugan ng wala ng paghahabol
PANIG ay hindi makapagbigay ng pa.
BOUNDARY HULOG sa loob ng isang linggo "Mula po sa araw ng inyong pagkatanggap
ay NANGANGAHULUGAN na ang ng Paalala na ito ay akin na pong ipatutupad
kasunduang ito ay wala ng bisa at kusang ang nasabing Kasunduan kaya’t aking
ibabalik ng TAUHAN NG IKALAWANG PANIG pinaaalala sa inyong lahat na tuparin natin
ang nasabing sasakyan sa TAUHAN NG ang nakalagay sa kasunduan upang
UNANG PANIG na wala ng paghahabol pa. maiwasan natin ito.
"Hinihiling ko na sumunod kayo sa hinihingi
Moreover, well-settled is the rule that, the ng paalalang ito upang hindi na tayo
employer has the burden of proving that the makaabot pa sa korte kung sakaling hindi
dismissal of an employee is for a just cause. The ninyo isasauli ang inyong sasakyan na
failure of the employer to discharge this burden hinuhulugan na ang mga magagastos ay
means that the dismissal is not justified and that kayo pa ang magbabayad sapagkat ang hindi
the employee is entitled to reinstatement and back ninyo pagtupad sa kasunduan ang naging
wages. dahilan ng pagsampa ng kaso.
In the case at bench, private respondent in his
position paper before the Labor Arbiter, alleged "Sumasainyo
that petitioner failed to pay the miscellaneous fee "Attendance: 8/27/99
of P10,000.00 and the yearly registration of the "(The Signatures appearing herein
unit; that petitioner also stopped remitting the include (sic) that of petitioner’s) (Sgd.)
"boundary hulog," prompting him (private OSCAR VILLAMARIA, JR."
respondent) to issue a "Paalala," which petitioner
however ignored; that petitioner even brought the On another point, private respondent did not
unit to his (petitioner’s) province without informing submit any police report to support his claim that
him (private respondent) about it; and that petitioner really figured in a vehicular mishap.
petitioner eventually abandoned the vehicle at a Neither did he present the affidavit of the guard
gasoline station after figuring in an accident. But from the gas station to substantiate his claim that
private respondent failed to substantiate these petitioner abandoned the unit there.
allegations with solid, sufficient proof. Notably, Petitioner’s claim that he opted not to terminate
private respondent’s allegation viz, that he the employment of respondent because of
retrieved the vehicle from the gas station, where magnanimity is negated by his (petitioner’s) own
petitioner abandoned it, contradicted his statement
Contributors
37
Contributors