G.R. No.

138051 June 10, 2004 ABS-CBN agreed to pay for SONZA’s services a monthly talent
fee of ₱310,000 for the first year and ₱317,000 for the second
JOSE Y. SONZA, petitioner, and third year of the Agreement. ABS-CBN would pay the talent
vs. fees on the 10th and 25th days of the month.
ABS-CBN BROADCASTING CORPORATION, respondent.
On 1 April 1996, SONZA wrote a letter to ABS-CBN’s President,
DECISION Eugenio Lopez III, which reads:

CARPIO, J.: Dear Mr. Lopez,

The Case We would like to call your attention to the

Agreement dated May 1994 entered into by your
Before this Court is a petition for review on certiorari 1 assailing goodself on behalf of ABS-CBN with our company
the 26 March 1999 Decision2 of the Court of Appeals in CA-G.R. relative to our talent JOSE Y. SONZA.
SP No. 49190 dismissing the petition filed by Jose Y. Sonza
("SONZA"). The Court of Appeals affirmed the findings of the As you are well aware, Mr. Sonza irrevocably
National Labor Relations Commission ("NLRC"), which affirmed resigned in view of recent events concerning his
the Labor Arbiter’s dismissal of the case for lack of jurisdiction. programs and career. We consider these acts of
the station violative of the Agreement and the
The Facts station as in breach thereof. In this connection, we
hereby serve notice of rescission of said
Agreement at our instance effective as of date.
In May 1994, respondent ABS-CBN Broadcasting Corporation
("ABS-CBN") signed an Agreement ("Agreement") with the Mel
and Jay Management and Development Corporation ("MJMDC"). Mr. Sonza informed us that he is waiving and
ABS-CBN was represented by its corporate officers while renouncing recovery of the remaining amount
MJMDC was represented by SONZA, as President and General stipulated in paragraph 7 of the Agreement but
Manager, and Carmela Tiangco ("TIANGCO"), as EVP and reserves the right to seek recovery of the other
Treasurer. Referred to in the Agreement as "AGENT," MJMDC benefits under said Agreement.
agreed to provide SONZA’s services exclusively to ABS-CBN as
talent for radio and television. The Agreement listed the services Thank you for your attention.
SONZA would render to ABS-CBN, as follows:
Very truly yours,
a. Co-host for Mel & Jay radio program, 8:00 to 10:00
a.m., Mondays to Fridays; (Sgd.)
JOSE Y. SONZA
b. Co-host for Mel & Jay television program, 5:30 to 7:00 President and Gen.
p.m., Sundays.3 Manager4
On 30 April 1996, SONZA filed a complaint against ABS-CBN The Labor Arbiter then considered the case submitted for
before the Department of Labor and Employment, National resolution. The parties submitted their position papers on 24
Capital Region in Quezon City. SONZA complained that ABS- February 1997.
CBN did not pay his salaries, separation pay, service incentive
leave pay, 13th month pay, signing bonus, travel allowance and On 11 March 1997, SONZA filed a Reply to Respondent’s
amounts due under the Employees Stock Option Plan ("ESOP"). Position Paper with Motion to Expunge Respondent’s Annex 4
and Annex 5 from the Records. Annexes 4 and 5 are affidavits of
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ABS-CBN’s witnesses Soccoro Vidanes and Rolando V. Cruz.
ground that no employer-employee relationship existed between These witnesses stated in their affidavits that the prevailing
the parties. SONZA filed an Opposition to the motion on 19 July practice in the television and broadcast industry is to treat talents
1996. like SONZA as independent contractors.

Meanwhile, ABS-CBN continued to remit SONZA’s monthly talent The Labor Arbiter rendered his Decision dated 8 July 1997
fees through his account at PCIBank, Quezon Avenue Branch, dismissing the complaint for lack of jurisdiction.6 The pertinent
Quezon City. In July 1996, ABS-CBN opened a new account with parts of the decision read as follows:
the same bank where ABS-CBN deposited SONZA’s talent fees
and other payments due him under the Agreement. xxx

In his Order dated 2 December 1996, the Labor Arbiter 5 denied While Philippine jurisprudence has not yet, with certainty,
the motion to dismiss and directed the parties to file their touched on the "true nature of the contract of a talent," it
respective position papers. The Labor Arbiter ruled: stands to reason that a "talent" as above-described
cannot be considered as an employee by reason of the
In this instant case, complainant for having invoked a peculiar circumstances surrounding the engagement of
claim that he was an employee of respondent company his services.
until April 15, 1996 and that he was not paid certain
claims, it is sufficient enough as to confer jurisdiction over It must be noted that complainant was engaged by
the instant case in this Office. And as to whether or not respondent by reason of his peculiar skills and talent
such claim would entitle complainant to recover upon the as a TV host and a radio broadcaster. Unlike an
causes of action asserted is a matter to be resolved only ordinary employee, he was free to perform the
after and as a result of a hearing. Thus, the respondent’s services he undertook to render in accordance with
plea of lack of employer-employee relationship may be his own style. The benefits conferred to complainant
pleaded only as a matter of defense. It behooves upon it under the May 1994 Agreement are certainly very much
the duty to prove that there really is no employer- higher than those generally given to employees. For one,
employee relationship between it and the complainant. complainant Sonza’s monthly talent fees amount to a
staggering ₱317,000. Moreover, his engagement as a
talent was covered by a specific contract. Likewise, he
was not bound to render eight (8) hours of work per day
 as he worked only for such number of hours as may be SONZA filed a motion for reconsideration, which the NLRC
necessary. denied in its Resolution dated 3 July 1998.

The fact that per the May 1994 Agreement complainant On 6 October 1998, SONZA filed a special civil action for
was accorded some benefits normally given to an certiorari before the Court of Appeals assailing the decision and
employee is inconsequential. Whatever benefits resolution of the NLRC. On 26 March 1999, the Court of Appeals
complainant enjoyed arose from specific agreement rendered a Decision dismissing the case.8
by the parties and not by reason of employer-
employee relationship. As correctly put by the Hence, this petition.
respondent, "All these benefits are merely talent fees and
other contractual benefits and should not be deemed as The Rulings of the NLRC and Court of Appeals
‘salaries, wages and/or other remuneration’ accorded to
an employee, notwithstanding the nomenclature
The Court of Appeals affirmed the NLRC’s finding that no
appended to these benefits. Apropos to this is the rule
employer-employee relationship existed between SONZA and
that the term or nomenclature given to a stipulated benefit
ABS-CBN. Adopting the NLRC’s decision, the appellate court
is not controlling, but the intent of the parties to the
quoted the following findings of the NLRC:
Agreement conferring such benefit."
x x x the May 1994 Agreement will readily reveal that
The fact that complainant was made subject to
MJMDC entered into the contract merely as an agent of
respondent’s Rules and Regulations, likewise, does
complainant Sonza, the principal. By all indication and as
not detract from the absence of employer-employee
the law puts it, the act of the agent is the act of the
relationship. As held by the Supreme Court, "The line
principal itself. This fact is made particularly true in this
should be drawn between rules that merely serve as
case, as admittedly MJMDC ‘is a management company
guidelines towards the achievement of the mutually
devoted exclusively to managing the careers of Mr. Sonza
desired result without dictating the means or methods to
and his broadcast partner, Mrs. Carmela C. Tiangco.’
be employed in attaining it, and those that control or fix
(Opposition to Motion to Dismiss)
the methodology and bind or restrict the party hired to the
use of such means. The first, which aim only to promote
the result, create no employer-employee relationship Clearly, the relations of principal and agent only accrues
unlike the second, which address both the result and the between complainant Sonza and MJMDC, and not
means to achieve it." (Insular Life Assurance Co., Ltd. vs. between ABS-CBN and MJMDC. This is clear from the
NLRC, et al., G.R. No. 84484, November 15, 1989). provisions of the May 1994 Agreement which specifically
referred to MJMDC as the ‘AGENT’. As a matter of fact,
when complainant herein unilaterally rescinded said May
x x x (Emphasis supplied)7
1994 Agreement, it was MJMDC which issued the notice
of rescission in behalf of Mr. Sonza, who himself signed
SONZA appealed to the NLRC. On 24 February 1998, the NLRC the same in his capacity as President.
rendered a Decision affirming the Labor Arbiter’s decision.
Moreover, previous contracts between Mr. Sonza and than the amount he was receiving prior to
ABS-CBN reveal the fact that historically, the parties to effectivity of (the) Agreement’.
the said agreements are ABS-CBN and Mr. Sonza. And it
is only in the May 1994 Agreement, which is the latest Under paragraph 9 of (the May 1994 Agreement),
Agreement executed between ABS-CBN and Mr. Sonza, complainant is entitled to a commutable travel
that MJMDC figured in the said Agreement as the agent benefit amounting to at least One Hundred Fifty
of Mr. Sonza. Thousand Pesos (₱150,000.00) per year.’

We find it erroneous to assert that MJMDC is a mere Thus, it is precisely because of complainant-appellant’s
‘labor-only’ contractor of ABS-CBN such that there exist[s] own recognition of the fact that his contractual relations
employer-employee relationship between the latter and with ABS-CBN are founded on the New Civil Code, rather
Mr. Sonza. On the contrary, We find it indubitable, that than the Labor Code, that instead of merely resigning
MJMDC is an agent, not of ABS-CBN, but of the from ABS-CBN, complainant-appellant served upon the
talent/contractor Mr. Sonza, as expressly admitted by the latter a ‘notice of rescission’ of Agreement with the
latter and MJMDC in the May 1994 Agreement. station, per his letter dated April 1, 1996, which asserted
that instead of referring to unpaid employee benefits, ‘he
It may not be amiss to state that jurisdiction over the is waiving and renouncing recovery of the remaining
instant controversy indeed belongs to the regular courts, amount stipulated in paragraph 7 of the Agreement but
the same being in the nature of an action for alleged reserves the right to such recovery of the other benefits
breach of contractual obligation on the part of respondent- under said Agreement.’ (Annex 3 of the respondent ABS-
appellee. As squarely apparent from complainant- CBN’s Motion to Dismiss dated July 10, 1996).
appellant’s Position Paper, his claims for compensation
for services, ‘13th month pay’, signing bonus and travel Evidently, it is precisely by reason of the alleged violation
allowance against respondent-appellee are not based on of the May 1994 Agreement and/or the Stock Purchase
the Labor Code but rather on the provisions of the May Agreement by respondent-appellee that complainant-
1994 Agreement, while his claims for proceeds under appellant filed his complaint. Complainant-appellant’s
Stock Purchase Agreement are based on the latter. A claims being anchored on the alleged breach of contract
portion of the Position Paper of complainant-appellant on the part of respondent-appellee, the same can be
bears perusal: resolved by reference to civil law and not to labor law.
Consequently, they are within the realm of civil law and,
‘Under [the May 1994 Agreement] with thus, lie with the regular courts. As held in the case of
respondent ABS-CBN, the latter contractually Dai-Chi Electronics Manufacturing vs. Villarama, 238
bound itself to pay complainant a signing bonus SCRA 267, 21 November 1994, an action for breach of
consisting of shares of stocks…with FIVE contractual obligation is intrinsically a civil
HUNDRED THOUSAND PESOS (₱500,000.00). dispute.9 (Emphasis supplied)

Similarly, complainant is also entitled to be paid The Court of Appeals ruled that the existence of an employer-
13th month pay based on an amount not lower employee relationship between SONZA and ABS-CBN is a
factual question that is within the jurisdiction of the NLRC to The instant case involves big names in the broadcast industry,
resolve.10 A special civil action for certiorari extends only to issues namely Jose "Jay" Sonza, a known television and radio
of want or excess of jurisdiction of the NLRC.11 Such action personality, and ABS-CBN, one of the biggest television and
cannot cover an inquiry into the correctness of the evaluation of radio networks in the country.
the evidence which served as basis of the NLRC’s
conclusion.12 The Court of Appeals added that it could not re- SONZA contends that the Labor Arbiter has jurisdiction over the
examine the parties’ evidence and substitute the factual findings case because he was an employee of ABS-CBN. On the other
of the NLRC with its own.13 hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction
because SONZA was an independent contractor.
The Issue
Employee or Independent Contractor?
In assailing the decision of the Court of Appeals, SONZA
contends that: The existence of an employer-employee relationship is a question
of fact. Appellate courts accord the factual findings of the Labor
THE COURT OF APPEALS GRAVELY ERRED IN Arbiter and the NLRC not only respect but also finality when
AFFIRMING THE NLRC’S DECISION AND REFUSING supported by substantial evidence.15 Substantial evidence means
TO FIND THAT AN EMPLOYER-EMPLOYEE such relevant evidence as a reasonable mind might accept as
RELATIONSHIP EXISTED BETWEEN SONZA AND adequate to support a conclusion.16 A party cannot prove the
ABS-CBN, DESPITE THE WEIGHT OF CONTROLLING absence of substantial evidence by simply pointing out that there
LAW, JURISPRUDENCE AND EVIDENCE TO is contrary evidence on record, direct or circumstantial. The Court
SUPPORT SUCH A FINDING.14 does not substitute its own judgment for that of the tribunal in
determining where the weight of evidence lies or what evidence is
The Court’s Ruling credible.17

We affirm the assailed decision. SONZA maintains that all essential elements of an employer-
employee relationship are present in this case. Case law has
No convincing reason exists to warrant a reversal of the decision consistently held that the elements of an employer-employee
of the Court of Appeals affirming the NLRC ruling which upheld relationship are: (a) the selection and engagement of the
the Labor Arbiter’s dismissal of the case for lack of jurisdiction. employee; (b) the payment of wages; (c) the power of dismissal;
and (d) the employer’s power to control the employee on the
means and methods by which the work is accomplished.18 The
The present controversy is one of first impression. Although
last element, the so-called "control test", is the most important
Philippine labor laws and jurisprudence define clearly the
element.19
elements of an employer-employee relationship, this is the first
time that the Court will resolve the nature of the relationship
between a television and radio station and one of its "talents." A. Selection and Engagement of Employee
There is no case law stating that a radio and television program
host is an employee of the broadcast station.
ABS-CBN engaged SONZA’s services to co-host its television month pay"20 which the law automatically incorporates into every
and radio programs because of SONZA’s peculiar skills, talent employer-employee contract.21 Whatever benefits SONZA
and celebrity status. SONZA contends that the "discretion used enjoyed arose from contract and not because of an employer-
by respondent in specifically selecting and hiring complainant employee relationship.22
over other broadcasters of possibly similar experience and
qualification as complainant belies respondent’s claim of SONZA’s talent fees, amounting to ₱317,000 monthly in the
independent contractorship." second and third year, are so huge and out of the ordinary that
they indicate more an independent contractual relationship rather
Independent contractors often present themselves to possess than an employer-employee relationship. ABS-CBN agreed to
unique skills, expertise or talent to distinguish them from ordinary pay SONZA such huge talent fees precisely because of SONZA’s
employees. The specific selection and hiring of SONZA, because unique skills, talent and celebrity status not possessed by
of his unique skills, talent and celebrity status not ordinary employees. Obviously, SONZA acting alone possessed
possessed by ordinary employees, is a circumstance enough bargaining power to demand and receive such huge
indicative, but not conclusive, of an independent contractual talent fees for his services. The power to bargain talent fees way
relationship. If SONZA did not possess such unique skills, talent above the salary scales of ordinary employees is a circumstance
and celebrity status, ABS-CBN would not have entered into the indicative, but not conclusive, of an independent contractual
Agreement with SONZA but would have hired him through its relationship.
personnel department just like any other employee.
The payment of talent fees directly to SONZA and not to MJMDC
In any event, the method of selecting and engaging SONZA does does not negate the status of SONZA as an independent
not conclusively determine his status. We must consider all the contractor. The parties expressly agreed on such mode of
circumstances of the relationship, with the control test being the payment. Under the Agreement, MJMDC is the AGENT of
most important element. SONZA, to whom MJMDC would have to turn over any talent fee
accruing under the Agreement.
B. Payment of Wages
C. Power of Dismissal
ABS-CBN directly paid SONZA his monthly talent fees with no
part of his fees going to MJMDC. SONZA asserts that this mode For violation of any provision of the Agreement, either party may
of fee payment shows that he was an employee of ABS-CBN. terminate their relationship. SONZA failed to show that ABS-CBN
SONZA also points out that ABS-CBN granted him benefits and could terminate his services on grounds other than breach of
privileges "which he would not have enjoyed if he were truly the contract, such as retrenchment to prevent losses as provided
subject of a valid job contract." under labor laws.23

All the talent fees and benefits paid to SONZA were the result of During the life of the Agreement, ABS-CBN agreed to pay
negotiations that led to the Agreement. If SONZA were ABS- SONZA’s talent fees as long as "AGENT and Jay Sonza shall
CBN’s employee, there would be no need for the parties to faithfully and completely perform each condition of this
stipulate on benefits such as "SSS, Medicare, x x x and 13th Agreement."24 Even if it suffered severe business losses, ABS-
CBN could not retrench SONZA because ABS-CBN remained skilled position requiring talent and training not
obligated to pay SONZA’s talent fees during the life of the available on-the-job. x x x In this regard, Alberty
Agreement. This circumstance indicates an independent possesses a master’s degree in public communications
contractual relationship between SONZA and ABS-CBN. and journalism; is trained in dance, singing, and
modeling; taught with the drama department at the
SONZA admits that even after ABS-CBN ceased broadcasting his University of Puerto Rico; and acted in several theater
programs, ABS-CBN still paid him his talent fees. Plainly, ABS- and television productions prior to her affiliation with
CBN adhered to its undertaking in the Agreement to continue "Desde Mi Pueblo." Second, Alberty provided the
paying SONZA’s talent fees during the remaining life of the "tools and instrumentalities" necessary for her to
Agreement even if ABS-CBN cancelled SONZA’s programs perform. Specifically, she provided, or obtained sponsors
through no fault of SONZA.25 to provide, the costumes, jewelry, and other image-
related supplies and services necessary for her
SONZA assails the Labor Arbiter’s interpretation of his rescission appearance. Alberty disputes that this factor favors
of the Agreement as an admission that he is not an employee of independent contractor status because WIPR provided
ABS-CBN. The Labor Arbiter stated that "if it were true that the "equipment necessary to tape the show." Alberty’s
complainant was really an employee, he would merely resign, argument is misplaced. The equipment necessary for
instead." SONZA did actually resign from ABS-CBN but he also, Alberty to conduct her job as host of "Desde Mi Pueblo"
as president of MJMDC, rescinded the Agreement. SONZA’s related to her appearance on the show. Others provided
letter clearly bears this out.26 However, the manner by which equipment for filming and producing the show, but these
SONZA terminated his relationship with ABS-CBN is immaterial. were not the primary tools that Alberty used to perform
Whether SONZA rescinded the Agreement or resigned from work her particular function. If we accepted this argument,
does not determine his status as employee or independent independent contractors could never work on
contractor. collaborative projects because other individuals often
provide the equipment required for different aspects of the
collaboration. x x x
D. Power of Control
Third, WIPR could not assign Alberty work in addition
Since there is no local precedent on whether a radio and
to filming "Desde Mi Pueblo." Alberty’s contracts with
television program host is an employee or an independent
WIPR specifically provided that WIPR hired her
contractor, we refer to foreign case law in analyzing the present
"professional services as Hostess for the Program Desde
case. The United States Court of Appeals, First Circuit, recently
Mi Pueblo." There is no evidence that WIPR assigned
held in Alberty-Vélez v. Corporación De Puerto Rico Para La
Alberty tasks in addition to work related to these tapings.
Difusión Pública ("WIPR")27 that a television program host is an
x x x28 (Emphasis supplied)
independent contractor. We quote the following findings of the
U.S. court:
Applying the control test to the present case, we find that
SONZA is not an employee but an independent contractor. The
Several factors favor classifying Alberty as an
control test is the most important test our courts apply in
independent contractor. First, a television actress is a
distinguishing an employee from an independent
contractor.29 This test is based on the extent of control the hirer pay SONZA’s talent fees... Thus, even if ABS-CBN was
exercises over a worker. The greater the supervision and control completely dissatisfied with the means and methods of SONZA’s
the hirer exercises, the more likely the worker is deemed an performance of his work, or even with the quality or product of his
employee. The converse holds true as well – the less control the work, ABS-CBN could not dismiss or even discipline SONZA. All
hirer exercises, the more likely the worker is considered an that ABS-CBN could do is not to broadcast SONZA’s show but
independent contractor.30 ABS-CBN must still pay his talent fees in full.35

First, SONZA contends that ABS-CBN exercised control over the Clearly, ABS-CBN’s right not to broadcast SONZA’s show,
means and methods of his work. burdened as it was by the obligation to continue paying in full
SONZA’s talent fees, did not amount to control over the means
SONZA’s argument is misplaced. ABS-CBN engaged SONZA’s and methods of the performance of SONZA’s work. ABS-CBN
services specifically to co-host the "Mel & Jay" programs. ABS- could not terminate or discipline SONZA even if the means and
CBN did not assign any other work to SONZA. To perform his methods of performance of his work - how he delivered his lines
work, SONZA only needed his skills and talent. How SONZA and appeared on television - did not meet ABS-CBN’s approval.
delivered his lines, appeared on television, and sounded on radio This proves that ABS-CBN’s control was limited only to the result
were outside ABS-CBN’s control. SONZA did not have to render of SONZA’s work, whether to broadcast the final product or not.
eight hours of work per day. The Agreement required SONZA to In either case, ABS-CBN must still pay SONZA’s talent fees in full
attend only rehearsals and tapings of the shows, as well as pre- until the expiry of the Agreement.
and post-production staff meetings.31 ABS-CBN could not dictate
the contents of SONZA’s script. However, the Agreement In Vaughan, et al. v. Warner, et al.,36 the United States Circuit
prohibited SONZA from criticizing in his shows ABS-CBN or its Court of Appeals ruled that vaudeville performers were
interests.32 The clear implication is that SONZA had a free hand independent contractors although the management reserved the
on what to say or discuss in his shows provided he did not attack right to delete objectionable features in their shows. Since the
ABS-CBN or its interests. management did not have control over the manner of
performance of the skills of the artists, it could only control the
We find that ABS-CBN was not involved in the actual result of the work by deleting objectionable features.37
performance that produced the finished product of SONZA’s
work.33 ABS-CBN did not instruct SONZA how to perform his job. SONZA further contends that ABS-CBN exercised control over
ABS-CBN merely reserved the right to modify the program format his work by supplying all equipment and crew. No doubt, ABS-
and airtime schedule "for more effective programming." 34 ABS- CBN supplied the equipment, crew and airtime needed to
CBN’s sole concern was the quality of the shows and their broadcast the "Mel & Jay" programs. However, the equipment,
standing in the ratings. Clearly, ABS-CBN did not exercise control crew and airtime are not the "tools and instrumentalities" SONZA
over the means and methods of performance of SONZA’s work. needed to perform his job. What SONZA principally needed were
his talent or skills and the costumes necessary for his
SONZA claims that ABS-CBN’s power not to broadcast his shows appearance.38 Even though ABS-CBN provided SONZA with the
proves ABS-CBN’s power over the means and methods of the place of work and the necessary equipment, SONZA was still an
performance of his work. Although ABS-CBN did have the option independent contractor since ABS-CBN did not supervise and
not to broadcast SONZA’s show, ABS-CBN was still obligated to
control his work. ABS-CBN’s sole concern was for SONZA to Further, not every form of control that a party reserves to himself
display his talent during the airing of the programs.39 over the conduct of the other party in relation to the services
being rendered may be accorded the effect of establishing an
A radio broadcast specialist who works under minimal supervision employer-employee relationship. The facts of this case fall
is an independent contractor.40 SONZA’s work as television and squarely with the case of Insular Life Assurance Co., Ltd. vs.
radio program host required special skills and talent, which NLRC. In said case, we held that:
SONZA admittedly possesses. The records do not show that
ABS-CBN exercised any supervision and control over how Logically, the line should be drawn between rules that
SONZA utilized his skills and talent in his shows. merely serve as guidelines towards the achievement of
the mutually desired result without dictating the means or
Second, SONZA urges us to rule that he was ABS-CBN’s methods to be employed in attaining it, and those that
employee because ABS-CBN subjected him to its rules and control or fix the methodology and bind or restrict the
standards of performance. SONZA claims that this indicates ABS- party hired to the use of such means. The first, which aim
CBN’s control "not only [over] his manner of work but also the only to promote the result, create no employer-employee
quality of his work." relationship unlike the second, which address both the
result and the means used to achieve it.44
The Agreement stipulates that SONZA shall abide with the rules
and standards of performance "covering talents"41 of ABS-CBN. The Vaughan case also held that one could still be an
The Agreement does not require SONZA to comply with the rules independent contractor although the hirer reserved certain
and standards of performance prescribed for employees of ABS- supervision to insure the attainment of the desired result. The
CBN. The code of conduct imposed on SONZA under the hirer, however, must not deprive the one hired from performing
Agreement refers to the "Television and Radio Code of the his services according to his own initiative.45
Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has
been adopted by the COMPANY (ABS-CBN) as its Code of Lastly, SONZA insists that the "exclusivity clause" in the
Ethics."42 The KBP code applies to broadcasters, not to Agreement is the most extreme form of control which ABS-CBN
employees of radio and television stations. Broadcasters are not exercised over him.
necessarily employees of radio and television stations. Clearly,
the rules and standards of performance referred to in the This argument is futile. Being an exclusive talent does not by
Agreement are those applicable to talents and not to employees itself mean that SONZA is an employee of ABS-CBN. Even an
of ABS-CBN. independent contractor can validly provide his services
exclusively to the hiring party. In the broadcast industry,
In any event, not all rules imposed by the hiring party on the hired exclusivity is not necessarily the same as control.
party indicate that the latter is an employee of the former. 43 In this
case, SONZA failed to show that these rules controlled his The hiring of exclusive talents is a widespread and accepted
performance. We find that these general rules are practice in the entertainment industry.46 This practice is not
merely guidelines towards the achievement of the mutually designed to control the means and methods of work of the talent,
desired result, which are top-rating television and radio programs but simply to protect the investment of the broadcast station. The
that comply with standards of the industry. We have ruled that:
broadcast station normally spends substantial amounts of money, who himself is represented by MJMDC. That would make
time and effort "in building up its talents as well as the programs MJMDC the agent of both ABS-CBN and SONZA.
they appear in and thus expects that said talents remain
exclusive with the station for a commensurate period of As SONZA admits, MJMDC is a management company
time."47 Normally, a much higher fee is paid to talents who agree devoted exclusively to managing the careers of SONZA and his
to work exclusively for a particular radio or television station. In broadcast partner, TIANGCO. MJMDC is not engaged in any
short, the huge talent fees partially compensates for exclusivity, other business, not even job contracting. MJMDC does not have
as in the present case. any other function apart from acting as agent of SONZA or
TIANGCO to promote their careers in the broadcast and
MJMDC as Agent of SONZA television industry.49

SONZA protests the Labor Arbiter’s finding that he is a talent of Policy Instruction No. 40
MJMDC, which contracted out his services to ABS-CBN. The
Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an SONZA argues that Policy Instruction No. 40 issued by then
employee of ABS-CBN. SONZA insists that MJMDC is a "labor- Minister of Labor Blas Ople on 8 January 1979 finally settled the
only" contractor and ABS-CBN is his employer. status of workers in the broadcast industry. Under this policy, the
types of employees in the broadcast industry are the station and
In a labor-only contract, there are three parties involved: (1) the program employees.
"labor-only" contractor; (2) the employee who is ostensibly under
the employ of the "labor-only" contractor; and (3) the principal Policy Instruction No. 40 is a mere executive issuance which
who is deemed the real employer. Under this scheme, the does not have the force and effect of law. There is no legal
"labor-only" contractor is the agent of the principal. The law presumption that Policy Instruction No. 40 determines SONZA’s
makes the principal responsible to the employees of the "labor- status. A mere executive issuance cannot exclude independent
only contractor" as if the principal itself directly hired or employed contractors from the class of service providers to the broadcast
the employees.48 These circumstances are not present in this industry. The classification of workers in the broadcast industry
case. into only two groups under Policy Instruction No. 40 is not binding
on this Court, especially when the classification has no basis
There are essentially only two parties involved under the either in law or in fact.
Agreement, namely, SONZA and ABS-CBN. MJMDC merely
acted as SONZA’s agent. The Agreement expressly states that Affidavits of ABS-CBN’s Witnesses
MJMDC acted as the "AGENT" of SONZA. The records do not
show that MJMDC acted as ABS-CBN’s agent. MJMDC, which SONZA also faults the Labor Arbiter for admitting the affidavits of
stands for Mel and Jay Management and Development Socorro Vidanes and Rolando Cruz without giving his counsel the
Corporation, is a corporation organized and owned by SONZA
and TIANGCO. The President and General Manager of MJMDC
opportunity to cross-examine these witnesses. SONZA brands
is SONZA himself. It is absurd to hold that MJMDC, which is
these witnesses as incompetent to attest on the prevailing
owned, controlled, headed and managed by SONZA, acted as
agent of ABS-CBN in entering into the Agreement with SONZA,
practice in the radio and television industry. SONZA views the are insufficient. The proceedings before a Labor Arbiter are non-
affidavits of these witnesses as misleading and irrelevant. litigious in nature. Subject to the requirements of due process, the
technicalities of law and the rules obtaining in the courts of law do
While SONZA failed to cross-examine ABS-CBN’s witnesses, he not strictly apply in proceedings before a Labor Arbiter.
was never prevented from denying or refuting the allegations in
the affidavits. The Labor Arbiter has the discretion whether to Talents as Independent Contractors
conduct a formal (trial-type) hearing after the submission of the
position papers of the parties, thus: ABS-CBN claims that there exists a prevailing practice in the
broadcast and entertainment industries to treat talents like
Section 3. Submission of Position Papers/Memorandum SONZA as independent contractors. SONZA argues that if such
practice exists, it is void for violating the right of labor to security
xxx of tenure.

These verified position papers shall cover only those The right of labor to security of tenure as guaranteed in the
claims and causes of action raised in the complaint Constitution53 arises only if there is an employer-employee
excluding those that may have been amicably settled, and relationship under labor laws. Not every performance of services
shall be accompanied by all supporting documents for a fee creates an employer-employee relationship. To hold that
including the affidavits of their respective witnesses which every person who renders services to another for a fee is an
shall take the place of the latter’s direct testimony. x x x employee - to give meaning to the security of tenure clause - will
lead to absurd results.
Section 4. Determination of Necessity of Hearing. –
Immediately after the submission of the parties of their Individuals with special skills, expertise or talent enjoy the
position papers/memorandum, the Labor Arbiter shall freedom to offer their services as independent contractors. The
motu propio determine whether there is need for a formal right to life and livelihood guarantees this freedom to contract as
trial or hearing. At this stage, he may, at his discretion independent contractors. The right of labor to security of tenure
and for the purpose of making such determination, ask cannot operate to deprive an individual, possessed with special
clarificatory questions to further elicit facts or information, skills, expertise and talent, of his right to contract as an
including but not limited to the subpoena of relevant independent contractor. An individual like an artist or talent has a
documentary evidence, if any from any party or witness.50 right to render his services without any one controlling the means
and methods by which he performs his art or craft. This Court will
The Labor Arbiter can decide a case based solely on the position not interpret the right of labor to security of tenure to compel
papers and the supporting documents without a formal trial.51 The artists and talents to render their services only as employees. If
holding of a formal hearing or trial is something that the parties radio and television program hosts can render their services only
cannot demand as a matter of right.52 If the Labor Arbiter is as employees, the station owners and managers can dictate to
confident that he can rely on the documents before him, he the radio and television hosts what they say in their shows. This
cannot be faulted for not conducting a formal trial, unless under is not conducive to freedom of the press.
the particular circumstances of the case, the documents alone
Different Tax Treatment of Talents and Broadcasters

The National Internal Revenue Code ("NIRC") 54 in relation to

Republic Act No. 7716,55 as amended by Republic Act No.
8241,56 treats talents, television and radio broadcasters
differently. Under the NIRC, these professionals are subject to the
10% value-added tax ("VAT") on services they render. Exempted
from the VAT are those under an employer-employee
relationship.57 This different tax treatment accorded to talents and
broadcasters bolters our conclusion that they are independent
contractors, provided all the basic elements of a contractual
relationship are present as in this case.

Nature of SONZA’s Claims

SONZA seeks the recovery of allegedly unpaid talent fees, 13th

month pay, separation pay, service incentive leave, signing
bonus, travel allowance, and amounts due under the Employee
Stock Option Plan. We agree with the findings of the Labor
Arbiter and the Court of Appeals that SONZA’s claims are all
based on the May 1994 Agreement and stock option plan,
and not on the Labor Code. Clearly, the present case does not
call for an application of the Labor Code provisions but an
interpretation and implementation of the May 1994 Agreement. In
effect, SONZA’s cause of action is for breach of contract which is
intrinsically a civil dispute cognizable by the regular courts. 58

WHEREFORE, we DENY the petition. The assailed Decision of

the Court of Appeals dated 26 March 1999 in CA-G.R. SP No.
49190 is AFFIRMED. Costs against petitioner.

SO ORDERED.