1 Labor and Social Legislation I | 26 October 2020 | Atty.

Jerwin Lim

G.R. No. 138051 June 10, 2004 the Agreement. ABS-CBN would pay the talent fees on the 10th and 25th
days of the month.
JOSE Y. SONZA, petitioner,
vs. On 1 April 1996, SONZA wrote a letter to ABS-CBN’s President, Eugenio
ABS-CBN BROADCASTING CORPORATION, respondent. Lopez III, which reads:

DECISION Dear Mr. Lopez,

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

Before this Court is a petition for review on certiorari1 assailing the 26 As you are well aware, Mr. Sonza irrevocably resigned in view of
March 1999 Decision2 of the Court of Appeals in CA-G.R. SP No. 49190 recent events concerning his programs and career. We consider
dismissing the petition filed by Jose Y. Sonza ("SONZA"). The Court of these acts of the station violative of the Agreement and the
Appeals affirmed the findings of the National Labor Relations station as in breach thereof. In this connection, we hereby serve
Commission ("NLRC"), which affirmed the Labor Arbiter’s dismissal of notice of rescission of said Agreement at our instance effective as
the case for lack of jurisdiction. of date.

The Facts Mr. Sonza informed us that he is waiving and renouncing

recovery of the remaining amount stipulated in paragraph 7 of
In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS- the Agreement but reserves the right to seek recovery of the other
CBN") signed an Agreement ("Agreement") with the Mel and Jay benefits under said Agreement.
Management and Development Corporation ("MJMDC"). ABS-CBN was
represented by its corporate officers while MJMDC was represented by Thank you for your attention.
SONZA, as President and General Manager, and Carmela Tiangco
("TIANGCO"), as EVP and Treasurer. Referred to in the Agreement as Very truly yours,
"AGENT," MJMDC agreed to provide SONZA’s services exclusively to
ABS-CBN as talent for radio and television. The Agreement listed the (Sgd.)
services SONZA would render to ABS-CBN, as follows: JOSE Y. SONZA
President and Gen. Manager4
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m.,
Mondays to Fridays; On 30 April 1996, SONZA filed a complaint against ABS-CBN before the
Department of Labor and Employment, National Capital Region in
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Quezon City. SONZA complained that ABS-CBN did not pay his salaries,
Sundays.3 separation pay, service incentive leave pay, 13th month pay, signing
bonus, travel allowance and amounts due under the Employees Stock
ABS-CBN agreed to pay for SONZA’s services a monthly talent fee of Option Plan ("ESOP").
₱310,000 for the first year and ₱317,000 for the second and third year of
A n d r e i D a J o s e | P a g e 1 | 10
2 Labor and Social Legislation I | 26 October 2020 | Atty. Jerwin Lim

On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that xxx
no employer-employee relationship existed between the parties. SONZA
filed an Opposition to the motion on 19 July 1996. While Philippine jurisprudence has not yet, with certainty,
touched on the "true nature of the contract of a talent," it stands
Meanwhile, ABS-CBN continued to remit SONZA’s monthly talent fees to reason that a "talent" as above-described cannot be considered
through his account at PCIBank, Quezon Avenue Branch, Quezon City. as an employee by reason of the peculiar circumstances
In July 1996, ABS-CBN opened a new account with the same bank where surrounding the engagement of his services.
ABS-CBN deposited SONZA’s talent fees and other payments due him
under the Agreement. It must be noted that complainant was engaged by
respondent by reason of his peculiar skills and talent as a
In his Order dated 2 December 1996, the Labor Arbiter5 denied the TV host and a radio broadcaster. Unlike an ordinary
motion to dismiss and directed the parties to file their respective position employee, he was free to perform the services he
papers. The Labor Arbiter ruled: undertook to render in accordance with his own style. The
benefits conferred to complainant under the May 1994 Agreement
In this instant case, complainant for having invoked a claim that are certainly very much higher than those generally given to
he was an employee of respondent company until April 15, 1996 employees. For one, complainant Sonza’s monthly talent fees
and that he was not paid certain claims, it is sufficient enough as amount to a staggering ₱317,000. Moreover, his engagement as a
to confer jurisdiction over the instant case in this Office. And as to talent was covered by a specific contract. Likewise, he was not
whether or not such claim would entitle complainant to recover bound to render eight (8) hours of work per day as he worked only
upon the causes of action asserted is a matter to be resolved only for such number of hours as may be necessary.
after and as a result of a hearing. Thus, the respondent’s plea of
lack of employer-employee relationship may be pleaded only as a The fact that per the May 1994 Agreement complainant was
matter of defense. It behooves upon it the duty to prove that there accorded some benefits normally given to an employee is
really is no employer-employee relationship between it and the inconsequential. Whatever benefits complainant enjoyed
complainant. arose from specific agreement by the parties and not by
reason of employer-employee relationship. As correctly put
The Labor Arbiter then considered the case submitted for resolution. The by the respondent, "All these benefits are merely talent fees and
parties submitted their position papers on 24 February 1997. other contractual benefits and should not be deemed as ‘salaries,
wages and/or other remuneration’ accorded to an employee,
On 11 March 1997, SONZA filed a Reply to Respondent’s Position Paper notwithstanding the nomenclature appended to these benefits.
with Motion to Expunge Respondent’s Annex 4 and Annex 5 from the Apropos to this is the rule that the term or nomenclature given to
Records. Annexes 4 and 5 are affidavits of ABS-CBN’s witnesses Soccoro a stipulated benefit is not controlling, but the intent of the parties
Vidanes and Rolando V. Cruz. These witnesses stated in their affidavits to the Agreement conferring such benefit."
that the prevailing practice in the television and broadcast industry is to
treat talents like SONZA as independent contractors. The fact that complainant was made subject to
respondent’s Rules and Regulations, likewise, does not
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the detract from the absence of employer-employee
complaint for lack of jurisdiction.6 The pertinent parts of the decision relationship. As held by the Supreme Court, "The line should be
read as follows: drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the
A n d r e i D a J o s e | P a g e 2 | 10
3 Labor and Social Legislation I | 26 October 2020 | Atty. Jerwin Lim

means or methods to be employed in attaining it, and those that Clearly, the relations of principal and agent only accrues between
control or fix the methodology and bind or restrict the party hired complainant Sonza and MJMDC, and not between ABS-CBN and
to the use of such means. The first, which aim only to promote the MJMDC. This is clear from the provisions of the May 1994
result, create no employer-employee relationship unlike the Agreement which specifically referred to MJMDC as the
second, which address both the result and the means to achieve ‘AGENT’. As a matter of fact, when complainant herein
it." (Insular Life Assurance Co., Ltd. vs. NLRC, et al., G.R. No. unilaterally rescinded said May 1994 Agreement, it was MJMDC
84484, November 15, 1989). which issued the notice of rescission in behalf of Mr. Sonza, who
himself signed the same in his capacity as President.
x x x (Emphasis supplied)7
Moreover, previous contracts between Mr. Sonza and ABS-CBN
SONZA appealed to the NLRC. On 24 February 1998, the NLRC reveal the fact that historically, the parties to the said
rendered a Decision affirming the Labor Arbiter’s decision. SONZA filed a agreements are ABS-CBN and Mr. Sonza. And it is only in the
motion for reconsideration, which the NLRC denied in its Resolution May 1994 Agreement, which is the latest Agreement executed
dated 3 July 1998. between ABS-CBN and Mr. Sonza, that MJMDC figured in the
said Agreement as the agent of Mr. Sonza.
On 6 October 1998, SONZA filed a special civil action for certiorari before
the Court of Appeals assailing the decision and resolution of the NLRC. We find it erroneous to assert that MJMDC is a mere ‘labor-only’
On 26 March 1999, the Court of Appeals rendered a Decision dismissing contractor of ABS-CBN such that there exist[s] employer-
the case.8 employee relationship between the latter and Mr. Sonza. On the
contrary, We find it indubitable, that MJMDC is an agent, not of
Hence, this petition. ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly
admitted by the latter and MJMDC in the May 1994 Agreement.
The Rulings of the NLRC and Court of Appeals
It may not be amiss to state that jurisdiction over the instant
controversy indeed belongs to the regular courts, the same being
The Court of Appeals affirmed the NLRC’s finding that no employer-
in the nature of an action for alleged breach of contractual
employee relationship existed between SONZA and ABS-CBN. Adopting
obligation on the part of respondent-appellee. As squarely
the NLRC’s decision, the appellate court quoted the following findings of
apparent from complainant-appellant’s Position Paper, his claims
the NLRC:
for compensation for services, ‘13th month pay’, signing bonus
and travel allowance against respondent-appellee are not based
x x x the May 1994 Agreement will readily reveal that MJMDC on the Labor Code but rather on the provisions of the May 1994
entered into the contract merely as an agent of complainant Agreement, while his claims for proceeds under Stock Purchase
Sonza, the principal. By all indication and as the law puts it, the Agreement are based on the latter. A portion of the Position
act of the agent is the act of the principal itself. This fact is made Paper of complainant-appellant bears perusal:
particularly true in this case, as admittedly MJMDC ‘is a
management company devoted exclusively to managing the
‘Under [the May 1994 Agreement] with respondent ABS-
careers of Mr. Sonza and his broadcast partner, Mrs. Carmela C.
CBN, the latter contractually bound itself to pay
Tiangco.’ (Opposition to Motion to Dismiss)
complainant a signing bonus consisting of shares of
stocks…with FIVE HUNDRED THOUSAND PESOS
(₱500,000.00).
A n d r e i D a J o s e | P a g e 3 | 10
4 Labor and Social Legislation I | 26 October 2020 | Atty. Jerwin Lim

Similarly, complainant is also entitled to be paid 13th NLRC.11 Such action cannot cover an inquiry into the correctness of the
month pay based on an amount not lower than the evaluation of the evidence which served as basis of the NLRC’s
amount he was receiving prior to effectivity of (the) conclusion.12 The Court of Appeals added that it could not re-examine the
Agreement’. parties’ evidence and substitute the factual findings of the NLRC with its
own.13
Under paragraph 9 of (the May 1994 Agreement),
complainant is entitled to a commutable travel benefit The Issue
amounting to at least One Hundred Fifty Thousand Pesos
(₱150,000.00) per year.’ In assailing the decision of the Court of Appeals, SONZA contends that:

Thus, it is precisely because of complainant-appellant’s own THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING
recognition of the fact that his contractual relations with ABS- THE NLRC’S DECISION AND REFUSING TO FIND THAT AN
CBN are founded on the New Civil Code, rather than the Labor EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED
Code, that instead of merely resigning from ABS-CBN, BETWEEN SONZA AND ABS-CBN, DESPITE THE WEIGHT
complainant-appellant served upon the latter a ‘notice of OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE
rescission’ of Agreement with the station, per his letter dated TO SUPPORT SUCH A FINDING.14
April 1, 1996, which asserted that instead of referring to unpaid
employee benefits, ‘he is waiving and renouncing recovery of the The Court’s Ruling
remaining amount stipulated in paragraph 7 of the Agreement
but reserves the right to such recovery of the other benefits under
We affirm the assailed decision.
said Agreement.’ (Annex 3 of the respondent ABS-CBN’s Motion
to Dismiss dated July 10, 1996).
No convincing reason exists to warrant a reversal of the decision of the
Court of Appeals affirming the NLRC ruling which upheld the Labor
Evidently, it is precisely by reason of the alleged violation of the
Arbiter’s dismissal of the case for lack of jurisdiction.
May 1994 Agreement and/or the Stock Purchase Agreement by
respondent-appellee that complainant-appellant filed his
complaint. Complainant-appellant’s claims being anchored on the The present controversy is one of first impression. Although Philippine
alleged breach of contract on the part of respondent-appellee, the labor laws and jurisprudence define clearly the elements of an employer-
same can be resolved by reference to civil law and not to labor employee relationship, this is the first time that the Court will resolve the
law. Consequently, they are within the realm of civil law and, nature of the relationship between a television and radio station and one
thus, lie with the regular courts. As held in the case of Dai-Chi of its "talents." There is no case law stating that a radio and television
Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21 program host is an employee of the broadcast station.
November 1994, an action for breach of contractual
obligation is intrinsically a civil dispute.9 (Emphasis The instant case involves big names in the broadcast industry, namely
supplied) Jose "Jay" Sonza, a known television and radio personality, and ABS-
CBN, one of the biggest television and radio networks in the country.
The Court of Appeals ruled that the existence of an employer-employee
relationship between SONZA and ABS-CBN is a factual question that is SONZA contends that the Labor Arbiter has jurisdiction over the case
within the jurisdiction of the NLRC to resolve.10 A special civil action for because he was an employee of ABS-CBN. On the other hand, ABS-CBN
certiorari extends only to issues of want or excess of jurisdiction of the
A n d r e i D a J o s e | P a g e 4 | 10
5 Labor and Social Legislation I | 26 October 2020 | Atty. Jerwin Lim

insists that the Labor Arbiter has no jurisdiction because SONZA was an unique skills, talent and celebrity status, ABS-CBN would not have
independent contractor. entered into the Agreement with SONZA but would have hired him
through its personnel department just like any other employee.
Employee or Independent Contractor?
In any event, the method of selecting and engaging SONZA does not
The existence of an employer-employee relationship is a question of fact. conclusively determine his status. We must consider all the
Appellate courts accord the factual findings of the Labor Arbiter and the circumstances of the relationship, with the control test being the most
NLRC not only respect but also finality when supported by substantial important element.
evidence.15 Substantial evidence means such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion. 16 A B. Payment of Wages
party cannot prove the absence of substantial evidence by simply pointing
out that there is contrary evidence on record, direct or circumstantial. ABS-CBN directly paid SONZA his monthly talent fees with no part of
The Court does not substitute its own judgment for that of the tribunal in his fees going to MJMDC. SONZA asserts that this mode of fee payment
determining where the weight of evidence lies or what evidence is shows that he was an employee of ABS-CBN. SONZA also points out that
credible.17 ABS-CBN granted him benefits and privileges "which he would not have
enjoyed if he were truly the subject of a valid job contract."
SONZA maintains that all essential elements of an employer-employee
relationship are present in this case. Case law has consistently held that All the talent fees and benefits paid to SONZA were the result of
the elements of an employer-employee relationship are: (a) the selection negotiations that led to the Agreement. If SONZA were ABS-CBN’s
and engagement of the employee; (b) the payment of wages; (c) the power employee, there would be no need for the parties to stipulate on benefits
of dismissal; and (d) the employer’s power to control the employee on the such as "SSS, Medicare, x x x and 13th month pay"20 which the law
means and methods by which the work is accomplished.18 The last automatically incorporates into every employer-employee contract.21
element, the so-called "control test", is the most important element.19 Whatever benefits SONZA enjoyed arose from contract and not because of
an employer-employee relationship.22
A. Selection and Engagement of Employee
SONZA’s talent fees, amounting to ₱317,000 monthly in the second and
ABS-CBN engaged SONZA’s services to co-host its television and radio third year, are so huge and out of the ordinary that they indicate more an
programs because of SONZA’s peculiar skills, talent and celebrity status. independent contractual relationship rather than an employer-employee
SONZA contends that the "discretion used by respondent in specifically relationship. ABS-CBN agreed to pay SONZA such huge talent fees
selecting and hiring complainant over other broadcasters of possibly precisely because of SONZA’s unique skills, talent and celebrity status
similar experience and qualification as complainant belies respondent’s not possessed by ordinary employees. Obviously, SONZA acting alone
claim of independent contractorship." possessed enough bargaining power to demand and receive such huge
talent fees for his services. The power to bargain talent fees way above
Independent contractors often present themselves to possess unique the salary scales of ordinary employees is a circumstance indicative, but
skills, expertise or talent to distinguish them from ordinary employees. not conclusive, of an independent contractual relationship.
The specific selection and hiring of SONZA, because of his unique
skills, talent and celebrity status not possessed by ordinary The payment of talent fees directly to SONZA and not to MJMDC does
employees, is a circumstance indicative, but not conclusive, of an not negate the status of SONZA as an independent contractor. The
independent contractual relationship. If SONZA did not possess such parties expressly agreed on such mode of payment. Under the Agreement,

A n d r e i D a J o s e | P a g e 5 | 10
6 Labor and Social Legislation I | 26 October 2020 | Atty. Jerwin Lim

MJMDC is the AGENT of SONZA, to whom MJMDC would have to turn foreign case law in analyzing the present case. The United States Court
over any talent fee accruing under the Agreement. of Appeals, First Circuit, recently held in Alberty-Vélez v. Corporación
De Puerto Rico Para La Difusión Pública ("WIPR")27 that a
C. Power of Dismissal television program host is an independent contractor. We quote the
following findings of the U.S. court:
For violation of any provision of the Agreement, either party may
terminate their relationship. SONZA failed to show that ABS-CBN could Several factors favor classifying Alberty as an independent
terminate his services on grounds other than breach of contract, such as contractor. First, a television actress is a skilled position
retrenchment to prevent losses as provided under labor laws.23 requiring talent and training not available on-the-job. x x x
In this regard, Alberty possesses a master’s degree in public
During the life of the Agreement, ABS-CBN agreed to pay SONZA’s communications and journalism; is trained in dance, singing, and
talent fees as long as "AGENT and Jay Sonza shall faithfully and modeling; taught with the drama department at the University of
completely perform each condition of this Agreement."24 Even if it Puerto Rico; and acted in several theater and television
suffered severe business losses, ABS-CBN could not retrench SONZA productions prior to her affiliation with "Desde Mi Pueblo."
because ABS-CBN remained obligated to pay SONZA’s talent fees during Second, Alberty provided the "tools and instrumentalities"
the life of the Agreement. This circumstance indicates an independent necessary for her to perform. Specifically, she provided, or
contractual relationship between SONZA and ABS-CBN. obtained sponsors to provide, the costumes, jewelry, and other
image-related supplies and services necessary for her appearance.
Alberty disputes that this factor favors independent contractor
SONZA admits that even after ABS-CBN ceased broadcasting his
status because WIPR provided the "equipment necessary to tape
programs, ABS-CBN still paid him his talent fees. Plainly, ABS-CBN
the show." Alberty’s argument is misplaced. The equipment
adhered to its undertaking in the Agreement to continue paying SONZA’s
necessary for Alberty to conduct her job as host of "Desde Mi
talent fees during the remaining life of the Agreement even if ABS-CBN
Pueblo" related to her appearance on the show. Others provided
cancelled SONZA’s programs through no fault of SONZA.25
equipment for filming and producing the show, but these were not
the primary tools that Alberty used to perform her particular
SONZA assails the Labor Arbiter’s interpretation of his rescission of the function. If we accepted this argument, independent contractors
Agreement as an admission that he is not an employee of ABS-CBN. The could never work on collaborative projects because other
Labor Arbiter stated that "if it were true that complainant was really an individuals often provide the equipment required for different
employee, he would merely resign, instead." SONZA did actually resign aspects of the collaboration. x x x
from ABS-CBN but he also, as president of MJMDC, rescinded the
Agreement. SONZA’s letter clearly bears this out. 26 However, the manner
Third, WIPR could not assign Alberty work in addition to
by which SONZA terminated his relationship with ABS-CBN is
filming "Desde Mi Pueblo." Alberty’s contracts with WIPR
immaterial. Whether SONZA rescinded the Agreement or resigned from
specifically provided that WIPR hired her "professional services
work does not determine his status as employee or independent
as Hostess for the Program Desde Mi Pueblo." There is no
contractor.
evidence that WIPR assigned Alberty tasks in addition to work
related to these tapings. x x x28 (Emphasis supplied)
D. Power of Control
Applying the control test to the present case, we find that SONZA is not
Since there is no local precedent on whether a radio and television an employee but an independent contractor. The control test is the most
program host is an employee or an independent contractor, we refer to important test our courts apply in distinguishing an employee from an
A n d r e i D a J o s e | P a g e 6 | 10
7 Labor and Social Legislation I | 26 October 2020 | Atty. Jerwin Lim

independent contractor.29 This test is based on the extent of control the Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened as it
hirer exercises over a worker. The greater the supervision and control the was by the obligation to continue paying in full SONZA’s talent fees, did
hirer exercises, the more likely the worker is deemed an employee. The not amount to control over the means and methods of the performance of
converse holds true as well – the less control the hirer exercises, the more SONZA’s work. ABS-CBN could not terminate or discipline SONZA even
likely the worker is considered an independent contractor. 30 if the means and methods of performance of his work - how he delivered
his lines and appeared on television - did not meet ABS-CBN’s approval.
First, SONZA contends that ABS-CBN exercised control over the means This proves that ABS-CBN’s control was limited only to the result of
and methods of his work. SONZA’s work, whether to broadcast the final product or not. In either
case, ABS-CBN must still pay SONZA’s talent fees in full until the expiry
SONZA’s argument is misplaced. ABS-CBN engaged SONZA’s services of the Agreement.
specifically to co-host the "Mel & Jay" programs. ABS-CBN did not assign
any other work to SONZA. To perform his work, SONZA only needed his In Vaughan, et al. v. Warner, et al.,36 the United States Circuit Court
skills and talent. How SONZA delivered his lines, appeared on television, of Appeals ruled that vaudeville performers were independent contractors
and sounded on radio were outside ABS-CBN’s control. SONZA did not although the management reserved the right to delete objectionable
have to render eight hours of work per day. The Agreement required features in their shows. Since the management did not have control over
SONZA to attend only rehearsals and tapings of the shows, as well as the manner of performance of the skills of the artists, it could only control
pre- and post-production staff meetings.31 ABS-CBN could not dictate the the result of the work by deleting objectionable features.37
contents of SONZA’s script. However, the Agreement prohibited SONZA
from criticizing in his shows ABS-CBN or its interests.32 The clear SONZA further contends that ABS-CBN exercised control over his work
implication is that SONZA had a free hand on what to say or discuss in by supplying all equipment and crew. No doubt, ABS-CBN supplied the
his shows provided he did not attack ABS-CBN or its interests. equipment, crew and airtime needed to broadcast the "Mel & Jay"
programs. However, the equipment, crew and airtime are not the "tools
We find that ABS-CBN was not involved in the actual performance that and instrumentalities" SONZA needed to perform his job. What SONZA
produced the finished product of SONZA’s work. 33 ABS-CBN did not principally needed were his talent or skills and the costumes necessary
instruct SONZA how to perform his job. ABS-CBN merely reserved the for his appearance.38 Even though ABS-CBN provided SONZA with the
right to modify the program format and airtime schedule "for more place of work and the necessary equipment, SONZA was still an
effective programming."34 ABS-CBN’s sole concern was the quality of the independent contractor since ABS-CBN did not supervise and control his
shows and their standing in the ratings. Clearly, ABS-CBN did not work. ABS-CBN’s sole concern was for SONZA to display his talent
exercise control over the means and methods of performance of SONZA’s during the airing of the programs.39
work.
A radio broadcast specialist who works under minimal supervision is an
SONZA claims that ABS-CBN’s power not to broadcast his shows proves independent contractor.40 SONZA’s work as television and radio program
ABS-CBN’s power over the means and methods of the performance of his host required special skills and talent, which SONZA admittedly
work. Although ABS-CBN did have the option not to broadcast SONZA’s possesses. The records do not show that ABS-CBN exercised any
show, ABS-CBN was still obligated to pay SONZA’s talent fees... Thus, supervision and control over how SONZA utilized his skills and talent in
even if ABS-CBN was completely dissatisfied with the means and his shows.
methods of SONZA’s performance of his work, or even with the quality or
product of his work, ABS-CBN could not dismiss or even discipline Second, SONZA urges us to rule that he was ABS-CBN’s employee
SONZA. All that ABS-CBN could do is not to broadcast SONZA’s show because ABS-CBN subjected him to its rules and standards of
but ABS-CBN must still pay his talent fees in full.35
A n d r e i D a J o s e | P a g e 7 | 10
8 Labor and Social Legislation I | 26 October 2020 | Atty. Jerwin Lim

performance. SONZA claims that this indicates ABS-CBN’s control "not The Vaughan case also held that one could still be an independent
only [over] his manner of work but also the quality of his work." contractor although the hirer reserved certain supervision to insure the
attainment of the desired result. The hirer, however, must not deprive
The Agreement stipulates that SONZA shall abide with the rules and the one hired from performing his services according to his own
standards of performance "covering talents"41 of ABS-CBN. The initiative.45
Agreement does not require SONZA to comply with the rules and
standards of performance prescribed for employees of ABS-CBN. The code Lastly, SONZA insists that the "exclusivity clause" in the Agreement is
of conduct imposed on SONZA under the Agreement refers to the the most extreme form of control which ABS-CBN exercised over him.
"Television and Radio Code of the Kapisanan ng mga Broadcaster sa
Pilipinas (KBP), which has been adopted by the COMPANY (ABS-CBN) This argument is futile. Being an exclusive talent does not by itself mean
as its Code of Ethics."42 The KBP code applies to broadcasters, not to that SONZA is an employee of ABS-CBN. Even an independent
employees of radio and television stations. Broadcasters are not contractor can validly provide his services exclusively to the hiring party.
necessarily employees of radio and television stations. Clearly, the rules In the broadcast industry, exclusivity is not necessarily the same as
and standards of performance referred to in the Agreement are those control.
applicable to talents and not to employees of ABS-CBN.
The hiring of exclusive talents is a widespread and accepted practice in
In any event, not all rules imposed by the hiring party on the hired party the entertainment industry.46 This practice is not designed to control the
indicate that the latter is an employee of the former.43 In this case, means and methods of work of the talent, but simply to protect the
SONZA failed to show that these rules controlled his performance. We investment of the broadcast station. The broadcast station normally
find that these general rules are merely guidelines towards the spends substantial amounts of money, time and effort "in building up its
achievement of the mutually desired result, which are top-rating talents as well as the programs they appear in and thus expects that said
television and radio programs that comply with standards of the talents remain exclusive with the station for a commensurate period of
industry. We have ruled that: time."47 Normally, a much higher fee is paid to talents who agree to work
exclusively for a particular radio or television station. In short, the huge
Further, not every form of control that a party reserves to himself over talent fees partially compensates for exclusivity, as in the present case.
the conduct of the other party in relation to the services being rendered
may be accorded the effect of establishing an employer-employee MJMDC as Agent of SONZA
relationship. The facts of this case fall squarely with the case of Insular
Life Assurance Co., Ltd. vs. NLRC. In said case, we held that: SONZA protests the Labor Arbiter’s finding that he is a talent of
MJMDC, which contracted out his services to ABS-CBN. The Labor
Logically, the line should be drawn between rules that merely Arbiter ruled that as a talent of MJMDC, SONZA is not an employee of
serve as guidelines towards the achievement of the mutually ABS-CBN. SONZA insists that MJMDC is a "labor-only" contractor and
desired result without dictating the means or methods to be ABS-CBN is his employer.
employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of In a labor-only contract, there are three parties involved: (1) the "labor-
such means. The first, which aim only to promote the result, only" contractor; (2) the employee who is ostensibly under the employ of
create no employer-employee relationship unlike the second, the "labor-only" contractor; and (3) the principal who is deemed the real
which address both the result and the means used to achieve it. 44 employer. Under this scheme, the "labor-only" contractor is the agent
of the principal. The law makes the principal responsible to the

A n d r e i D a J o s e | P a g e 8 | 10
9 Labor and Social Legislation I | 26 October 2020 | Atty. Jerwin Lim

employees of the "labor-only contractor" as if the principal itself directly Affidavits of ABS-CBN’s Witnesses
hired or employed the employees.48 These circumstances are not present
in this case. SONZA also faults the Labor Arbiter for admitting the affidavits of
Socorro Vidanes and Rolando Cruz without giving his counsel the
There are essentially only two parties involved under the Agreement,
namely, SONZA and ABS-CBN. MJMDC merely acted as SONZA’s agent. opportunity to cross-examine these witnesses. SONZA brands these
The Agreement expressly states that MJMDC acted as the "AGENT" of witnesses as incompetent to attest on the prevailing practice in the radio
SONZA. The records do not show that MJMDC acted as ABS-CBN’s and television industry. SONZA views the affidavits of these witnesses as
agent. MJMDC, which stands for Mel and Jay Management and misleading and irrelevant.
Development Corporation, is a corporation organized and owned by
SONZA and TIANGCO. The President and General Manager of MJMDC While SONZA failed to cross-examine ABS-CBN’s witnesses, he was
is SONZA himself. It is absurd to hold that MJMDC, which is owned, never prevented from denying or refuting the allegations in the affidavits.
controlled, headed and managed by SONZA, acted as agent of ABS-CBN The Labor Arbiter has the discretion whether to conduct a formal (trial-
in entering into the Agreement with SONZA, who himself is represented type) hearing after the submission of the position papers of the parties,
by MJMDC. That would make MJMDC the agent of both ABS-CBN and thus:
SONZA.
Section 3. Submission of Position Papers/Memorandum
As SONZA admits, MJMDC is a management company devoted
exclusively to managing the careers of SONZA and his broadcast
xxx
partner, TIANGCO. MJMDC is not engaged in any other business, not
even job contracting. MJMDC does not have any other function apart
from acting as agent of SONZA or TIANGCO to promote their careers in These verified position papers shall cover only those claims and
the broadcast and television industry.49 causes of action raised in the complaint excluding those that may
have been amicably settled, and shall be accompanied by all
supporting documents including the affidavits of their respective
Policy Instruction No. 40
witnesses which shall take the place of the latter’s direct
testimony. x x x
SONZA argues that Policy Instruction No. 40 issued by then Minister of
Labor Blas Ople on 8 January 1979 finally settled the status of workers
Section 4. Determination of Necessity of Hearing. – Immediately
in the broadcast industry. Under this policy, the types of employees in the
after the submission of the parties of their position
broadcast industry are the station and program employees.
papers/memorandum, the Labor Arbiter shall motu propio
determine whether there is need for a formal trial or hearing. At
Policy Instruction No. 40 is a mere executive issuance which does not this stage, he may, at his discretion and for the purpose of making
have the force and effect of law. There is no legal presumption that Policy such determination, ask clarificatory questions to further elicit
Instruction No. 40 determines SONZA’s status. A mere executive facts or information, including but not limited to the subpoena of
issuance cannot exclude independent contractors from the class of service relevant documentary evidence, if any from any party or
providers to the broadcast industry. The classification of workers in the witness.50
broadcast industry into only two groups under Policy Instruction No. 40
is not binding on this Court, especially when the classification has no
The Labor Arbiter can decide a case based solely on the position papers
basis either in law or in fact.
and the supporting documents without a formal trial.51 The holding of a
A n d r e i D a J o s e | P a g e 9 | 10
10 Labor and Social Legislation I | 26 October 2020 | Atty. Jerwin Lim

formal hearing or trial is something that the parties cannot demand as a The National Internal Revenue Code ("NIRC")54 in relation to Republic
matter of right.52 If the Labor Arbiter is confident that he can rely on the Act No. 7716,55 as amended by Republic Act No. 8241,56 treats talents,
documents before him, he cannot be faulted for not conducting a formal television and radio broadcasters differently. Under the NIRC, these
trial, unless under the particular circumstances of the case, the professionals are subject to the 10% value-added tax ("VAT") on services
documents alone are insufficient. The proceedings before a Labor Arbiter they render. Exempted from the VAT are those under an employer-
are non-litigious in nature. Subject to the requirements of due process, employee relationship.57 This different tax treatment accorded to talents
the technicalities of law and the rules obtaining in the courts of law do and broadcasters bolters our conclusion that they are independent
not strictly apply in proceedings before a Labor Arbiter. contractors, provided all the basic elements of a contractual relationship
are present as in this case.
Talents as Independent Contractors
Nature of SONZA’s Claims
ABS-CBN claims that there exists a prevailing practice in the broadcast
and entertainment industries to treat talents like SONZA as independent SONZA seeks the recovery of allegedly unpaid talent fees, 13th month
contractors. SONZA argues that if such practice exists, it is void for pay, separation pay, service incentive leave, signing bonus, travel
violating the right of labor to security of tenure. allowance, and amounts due under the Employee Stock Option Plan. We
agree with the findings of the Labor Arbiter and the Court of Appeals
The right of labor to security of tenure as guaranteed in the that SONZA’s claims are all based on the May 1994 Agreement and
Constitution53 arises only if there is an employer-employee relationship stock option plan, and not on the Labor Code. Clearly, the present
under labor laws. Not every performance of services for a fee creates an case does not call for an application of the Labor Code provisions but an
employer-employee relationship. To hold that every person who renders interpretation and implementation of the May 1994 Agreement. In effect,
services to another for a fee is an employee - to give meaning to the SONZA’s cause of action is for breach of contract which is intrinsically a
security of tenure clause - will lead to absurd results. civil dispute cognizable by the regular courts.58

Individuals with special skills, expertise or talent enjoy the freedom to WHEREFORE, we DENY the petition. The assailed Decision of the
offer their services as independent contractors. The right to life and Court of Appeals dated 26 March 1999 in CA-G.R. SP No. 49190 is
livelihood guarantees this freedom to contract as independent AFFIRMED. Costs against petitioner.
contractors. The right of labor to security of tenure cannot operate to
deprive an individual, possessed with special skills, expertise and talent, SO ORDERED.
of his right to contract as an independent contractor. An individual like
an artist or talent has a right to render his services without any one
controlling the means and methods by which he performs his art or craft.
This Court will not interpret the right of labor to security of tenure to
compel artists and talents to render their services only as employees. If
radio and television program hosts can render their services only as
employees, the station owners and managers can dictate to the radio and
television hosts what they say in their shows. This is not conducive to
freedom of the press.

Different Tax Treatment of Talents and Broadcasters

A n d r e i D a J o s e | P a g e 10 | 10