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Sonza v. ABS-CBN Broadcasting Corp., G. R. No. 138051, June 10, 2004
Sonza v. ABS-CBN Broadcasting Corp., G. R. No. 138051, June 10, 2004
138051
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FIRST DIVISION
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari1 assailing the 26 March 1999 Decision2 of the Court of Appeals
in CA-G.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza ("SONZA"). The Court of Appeals affirmed
the findings of the National Labor Relations Commission ("NLRC"), which affirmed the Labor Arbiter’s dismissal of
the case for lack of jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-CBN") signed an Agreement ("Agreement")
with the Mel and Jay Management and Development Corporation ("MJMDC"). ABS-CBN was represented by its
corporate officers while MJMDC was represented by SONZA, as President and General Manager, and Carmela
Tiangco ("TIANGCO"), as EVP and Treasurer. Referred to in the Agreement as "AGENT," MJMDC agreed to provide
SONZA’s services exclusively to ABS-CBN as talent for radio and television. The Agreement listed the services
SONZA would render to ABS-CBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.3
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 and third year of the Agreement. ABS-CBN would pay the talent fees on the 10th and 25th days of the
month.
On 1 April 1996, SONZA wrote a letter to ABS-CBN’s President, Eugenio Lopez III, which reads:
We would like to call your attention to the Agreement dated May 1994 entered into by your
goodself on behalf of ABS-CBN with our company relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his
programs and career. We consider these acts of the station violative of the Agreement and the
station as in breach thereof. In this connection, we hereby serve notice of rescission of said
Agreement at our instance effective as of date.
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Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount
stipulated in paragraph 7 of the Agreement but reserves the right to seek recovery of the other
benefits under said Agreement.
(Sgd.)
JOSE Y. SONZA
President and Gen. Manager4
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor and Employment,
National Capital Region in Quezon City. SONZA complained that ABS-CBN did not pay his salaries, separation pay,
service incentive leave pay, 13th month pay, signing bonus, travel allowance and amounts due under the
Employees Stock Option Plan ("ESOP").
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship existed
between the parties. SONZA filed an Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZA’s monthly talent fees through his account at PCIBank, Quezon
Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account with the same bank where ABS-CBN
deposited SONZA’s talent fees and other payments due him under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter5 denied the motion to dismiss and directed the parties to file
their respective position papers. The Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was an employee of respondent company
until April 15, 1996 and that he was not paid certain claims, it is sufficient enough as to confer jurisdiction over
the instant case in this Office. And as to whether or not such claim would entitle complainant to recover upon
the causes of action asserted is a matter to be resolved only 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 matter of defense. It
behooves upon it the duty to prove that there really is no employer-employee relationship between it and the
complainant.
The Labor Arbiter then considered the case submitted for resolution. The parties submitted their position papers on
24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondent’s Position Paper with Motion to Expunge Respondent’s
Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBN’s witnesses Soccoro Vidanes
and Rolando V. Cruz. These witnesses stated in their affidavits that the prevailing practice in the television and
broadcast industry is to treat talents like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of jurisdiction.6 The
pertinent parts of the decision read as follows:
xxx
While Philippine jurisprudence has not yet, with certainty, touched on the "true nature of the contract of a
talent," it stands to reason that a "talent" as above-described cannot be considered as an employee by
reason of the peculiar circumstances surrounding the engagement of his services.
It must be noted that complainant was engaged by respondent by reason of his peculiar skills and
talent as a TV host and a radio broadcaster. Unlike an ordinary employee, he was free to perform the
services he undertook to render in accordance with his own style. The benefits conferred to complainant
under the May 1994 Agreement are certainly very much higher than those generally given to employees. For
one, 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 necessary.
The fact that per the May 1994 Agreement complainant was accorded some benefits normally given to an
employee is inconsequential. Whatever benefits complainant enjoyed arose from specific agreement by
the parties and not by reason of employer-employee relationship. As correctly put by the respondent, "All
these benefits are merely talent fees and other contractual benefits and should not be deemed as ‘salaries,
wages and/or other remuneration’ accorded to an employee, notwithstanding the nomenclature appended to
these benefits. Apropos to this is the rule that the term or nomenclature given to a stipulated benefit is not
controlling, but the intent of the parties to the Agreement conferring such benefit."
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The fact that complainant was made subject to respondent’s Rules and Regulations, likewise, does
not detract from the absence of employer-employee relationship. As held by the Supreme Court, "The
line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually
desired result without dictating the means or methods to be employed in attaining it, and those that control or
fix 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 unlike the second, which address both the
result and the means to achieve it." (Insular Life Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484,
November 15, 1989).
x x x (Emphasis supplied)7
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the Labor Arbiter’s
decision. SONZA filed a motion for reconsideration, which the NLRC denied in its Resolution dated 3 July 1998.
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. On 26 March 1999, the Court of Appeals rendered a Decision dismissing the
case.8
The Court of Appeals affirmed the NLRC’s finding that no employer-employee relationship existed between SONZA
and ABS-CBN. Adopting the NLRC’s decision, the appellate court quoted the following findings of the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as an agent of
complainant Sonza, the principal. By all indication and as the law puts it, the act of the agent is the act of the
principal itself. This fact is made particularly true in this case, as admittedly MJMDC ‘is a management
company devoted exclusively to managing the careers of Mr. Sonza and his broadcast partner, Mrs. Carmela
C. Tiangco.’ (Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC, and not
between ABS-CBN and MJMDC. This is clear from the 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 1994 Agreement, it was MJMDC which issued the notice of rescission in behalf of Mr.
Sonza, who himself signed the same in his capacity as President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically, the parties to
the said agreements are ABS-CBN and Mr. Sonza. And it is only in the May 1994 Agreement, which is the
latest Agreement executed between ABS-CBN and Mr. Sonza, that MJMDC figured in the said Agreement as
the agent of Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere ‘labor-only’ contractor of ABS-CBN such that there
exist[s] employer-employee relationship between the latter and Mr. Sonza. On the contrary, We find it
indubitable, that MJMDC is an agent, not of ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly
admitted by the latter and MJMDC in the May 1994 Agreement.
It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the regular courts,
the same being in the nature of an action for alleged breach of contractual obligation on the part of
respondent-appellee. As squarely apparent from complainant-appellant’s Position Paper, his claims for
compensation for services, ‘13th month pay’, signing bonus and travel allowance against respondent-appellee
are not based on the Labor Code but rather on the provisions of the May 1994 Agreement, while his claims
for proceeds under Stock Purchase Agreement are based on the latter. A portion of the Position Paper of
complainant-appellant bears perusal:
‘Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound itself to
pay complainant a signing bonus consisting of shares of stocks…with FIVE HUNDRED THOUSAND
PESOS (₱500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay based on an amount not lower than
the amount he was receiving prior to effectivity of (the) Agreement’.
Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travel
benefit amounting to at least One Hundred Fifty Thousand Pesos (₱150,000.00) per year.’
Thus, it is precisely because of complainant-appellant’s own recognition of the fact that his contractual
relations with ABS-CBN are founded on the New Civil Code, rather than the Labor Code, that instead of
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merely resigning from ABS-CBN, complainant-appellant served upon the latter a ‘notice of rescission’ of
Agreement with the station, per his letter dated April 1, 1996, which asserted that instead of referring to
unpaid employee benefits, ‘he is waiving and renouncing recovery of the remaining amount stipulated in
paragraph 7 of the Agreement but reserves the right to such recovery of the other benefits under said
Agreement.’ (Annex 3 of the respondent ABS-CBN’s Motion to Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the 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 alleged breach of contract on the part of respondent-appellee, the
same can be resolved by reference to civil law and not to labor law. Consequently, they are within the realm of
civil law and, thus, lie with the regular courts. As held in the case of Dai-Chi Electronics Manufacturing vs.
Villarama, 238 SCRA 267, 21 November 1994, an action for breach of contractual obligation is
intrinsically a civil dispute.9 (Emphasis supplied)
The Court of Appeals ruled that the existence of an employer-employee relationship between SONZA and ABS-
CBN is a factual question that is within the jurisdiction of the NLRC to resolve.10 A special civil action for certiorari
extends only to issues of want or excess of jurisdiction of the NLRC.11 Such action cannot cover an inquiry into the
correctness of the evaluation of the evidence which served as basis of the NLRC’s conclusion.12 The Court of
Appeals added that it could not re-examine the parties’ evidence and substitute the factual findings of the NLRC with
its own.13
The Issue
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRC’S DECISION AND REFUSING
TO FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN,
DESPITE THE WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO SUPPORT
SUCH A FINDING.14
No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming the NLRC ruling
which upheld the Labor Arbiter’s dismissal of the case for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws and jurisprudence define clearly
the 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." There is no case law stating that a radio
and television program host is an employee of the broadcast station.
The instant case involves big names in the broadcast industry, namely Jose "Jay" Sonza, a known television and
radio personality, and ABS-CBN, one of the biggest television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee of ABS-CBN.
On the other hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction because SONZA was an independent
contractor.
The existence of an employer-employee relationship is a question of fact. Appellate courts accord the factual
findings of the Labor Arbiter and the NLRC not only respect but also finality when supported by substantial
evidence.15 Substantial evidence means such relevant evidence as a reasonable mind might accept as adequate to
support a conclusion.16 A party cannot prove the absence of substantial evidence by simply pointing out that there
is contrary evidence on record, direct or circumstantial. The Court does not substitute its own judgment for that of
the tribunal in determining where the weight of evidence lies or what evidence is credible.17
SONZA maintains that all essential elements of an employer-employee relationship are present in this case. Case
law has consistently held that the elements of an employer-employee relationship are: (a) the selection and
engagement of the 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 last element, the so-
called "control test", is the most important element.19
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ABS-CBN engaged SONZA’s services to co-host its television and radio programs because of SONZA’s peculiar
skills, talent and celebrity status. SONZA contends that the "discretion used by respondent in specifically selecting
and hiring complainant over other broadcasters of possibly similar experience and qualification as complainant
belies respondent’s claim of independent contractorship."
Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them
from ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent and
celebrity status not possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an
independent contractual relationship. If SONZA did not possess such unique skills, talent and celebrity status, ABS-
CBN would not have entered into the Agreement with SONZA but would have hired him through its personnel
department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must
consider all the circumstances of the relationship, with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts
that this mode of fee payment shows that he was an employee of ABS-CBN. SONZA also points out that ABS-CBN
granted him benefits and privileges "which he would not have enjoyed if he were truly the subject of a valid job
contract."
All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA
were ABS-CBN’s employee, there would be no need for the parties to stipulate on benefits such as "SSS, Medicare,
x x x and 13th month pay"20 which the law automatically incorporates into every employer-employee contract.21
Whatever benefits SONZA enjoyed arose from contract and not because of an employer-employee relationship.22
SONZA’s talent fees, amounting to ₱317,000 monthly in the second and third year, are so huge and out of the
ordinary that they indicate more an independent contractual relationship rather than an employer-employee
relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely because of SONZA’s unique skills,
talent and celebrity status not possessed by ordinary employees. Obviously, SONZA acting alone possessed
enough bargaining power to demand and receive such huge talent fees for his services. The power to bargain talent
fees way above the salary scales of ordinary employees is a circumstance indicative, but not conclusive, of an
independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an
independent contractor. The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC is
the AGENT of SONZA, to whom MJMDC would have to turn over any talent fee accruing under the Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their relationship. SONZA failed to show
that ABS-CBN could terminate his services on grounds other than breach of contract, such as retrenchment to
prevent losses as provided under labor laws.23
During the life of the Agreement, ABS-CBN agreed to pay SONZA’s talent fees as long as "AGENT and Jay Sonza
shall faithfully and completely perform each condition of this Agreement."24 Even if it suffered severe business
losses, ABS-CBN could not retrench SONZA because ABS-CBN remained obligated to pay SONZA’s talent fees
during the life of the Agreement. This circumstance indicates an independent contractual relationship between
SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him his talent fees.
Plainly, ABS-CBN adhered to its undertaking in the Agreement to continue paying SONZA’s talent fees during the
remaining life of the Agreement even if ABS-CBN cancelled SONZA’s programs through no fault of SONZA.25
SONZA assails the Labor Arbiter’s interpretation of his rescission of the Agreement as an admission that he is not
an employee of ABS-CBN. The Labor Arbiter stated that "if it were true that complainant was really an employee, he
would merely resign, instead." SONZA did actually resign from ABS-CBN but he also, as president of MJMDC,
rescinded the Agreement. SONZA’s letter clearly bears this out.26 However, the manner by which SONZA
terminated his relationship with ABS-CBN is immaterial. Whether SONZA rescinded the Agreement or resigned from
work does not determine his status as employee or independent contractor.
D. Power of Control
Since there is no local precedent on whether a radio and television program host is an employee or an independent
contractor, we refer to foreign case law in analyzing the present case. The United States Court of Appeals, First
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Circuit, recently held in Alberty-Vélez v. Corporación De Puerto Rico Para La Difusión Pública ("WIPR")27 that
a television program host is an independent contractor. We quote the following findings of the U.S. court:
Several factors favor classifying Alberty as an independent contractor. First, a television actress is a skilled
position requiring talent and training not available on-the-job. x x x In this regard, Alberty possesses a
master’s degree in public communications and journalism; is trained in dance, singing, and modeling; taught
with the drama department at the University of Puerto Rico; and acted in several theater and television
productions prior to her affiliation with "Desde Mi Pueblo." Second, Alberty provided the "tools and
instrumentalities" necessary for her to perform. Specifically, she provided, or 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 status because WIPR provided the "equipment
necessary to tape the show." Alberty’s argument is misplaced. The equipment necessary for Alberty to
conduct her job as host of "Desde Mi Pueblo" related to her appearance on the show. Others provided
equipment for filming and producing the show, but these were not the primary tools that Alberty used to
perform her particular function. If we accepted this argument, independent contractors could never work on
collaborative projects because other individuals often provide the equipment required for different aspects of
the collaboration. x x x
Third, WIPR could not assign Alberty work in addition to filming "Desde Mi Pueblo." Alberty’s contracts
with WIPR specifically provided that WIPR hired her "professional services as Hostess for the Program Desde
Mi Pueblo." There is no evidence that WIPR assigned Alberty tasks in addition to work related to these
tapings. x x x28 (Emphasis supplied)
Applying the control test to the present case, we find that SONZA is not an employee but an independent
contractor. The control test is the most important test our courts apply in distinguishing an employee from an
independent contractor.29 This test is based on the extent of control the hirer exercises over a worker. The greater
the supervision and control the hirer exercises, the more likely the worker is deemed an employee. The converse
holds true as well – the less control the hirer exercises, the more likely the worker is considered an independent
contractor.30
First, SONZA contends that ABS-CBN exercised control over the means and methods of his work.
SONZA’s argument is misplaced. ABS-CBN engaged SONZA’s services 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 skills
and talent. How SONZA delivered his lines, appeared on television, and sounded on radio were outside ABS-CBN’s
control. SONZA did not have to render eight hours of work per day. The Agreement required SONZA to attend only
rehearsals and tapings of the shows, as well as pre- and post-production staff meetings.31 ABS-CBN could not
dictate the contents of SONZA’s script. However, the Agreement prohibited SONZA from criticizing in his shows
ABS-CBN or its interests.32 The clear implication is that SONZA had a free hand on what to say or discuss in his
shows provided he did not attack ABS-CBN or its interests.
We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZA’s
work.33 ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN merely reserved the right to modify the
program format and airtime schedule "for more effective programming."34 ABS-CBN’s sole concern was the quality
of the shows and their standing in the ratings. Clearly, ABS-CBN did not exercise control over the means and
methods of performance of SONZA’s work.
SONZA claims that ABS-CBN’s power not to broadcast his shows proves ABS-CBN’s power over the means and
methods of the performance of his work. Although ABS-CBN did have the option not to broadcast SONZA’s show,
ABS-CBN was still obligated to pay SONZA’s talent fees... Thus, even if ABS-CBN was completely dissatisfied with
the means and 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 SONZA. All that ABS-CBN could do is not to broadcast SONZA’s show but
ABS-CBN must still pay his talent fees in full.35
Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened as it was by the obligation to continue paying in
full SONZA’s talent fees, did not amount to control over the means and methods of the performance of SONZA’s
work. ABS-CBN could not terminate or discipline SONZA even 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. This proves that
ABS-CBN’s control was limited only to the result of 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 of the Agreement.
In Vaughan, et al. v. Warner, et al.,36 the United States Circuit Court of Appeals ruled that vaudeville performers
were independent contractors although the management reserved the right to delete objectionable features in their
shows. Since the management did not have control over the manner of performance of the skills of the artists, it
could only control the result of the work by deleting objectionable features.37
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SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and crew. No
doubt, ABS-CBN supplied the equipment, crew and airtime needed to broadcast the "Mel & Jay" programs.
However, the equipment, crew and airtime are not the "tools and instrumentalities" SONZA needed to perform his
job. What SONZA principally needed were his talent or skills and the costumes necessary for his appearance.38
Even though ABS-CBN provided SONZA with the place of work and the necessary equipment, SONZA was still an
independent contractor since ABS-CBN did not supervise and control his work. ABS-CBN’s sole concern was for
SONZA to display his talent during the airing of the programs.39
A radio broadcast specialist who works under minimal supervision is an independent contractor.40 SONZA’s work as
television and radio program host required special skills and talent, which SONZA admittedly possesses. The
records do not show that ABS-CBN exercised any supervision and control over how SONZA utilized his skills and
talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBN’s employee because ABS-CBN subjected him to its rules
and standards of performance. SONZA claims that this indicates ABS-CBN’s control "not only [over] his manner of
work but also the quality of his work."
The Agreement stipulates that SONZA shall abide with the rules and standards of performance "covering
talents"41 of ABS-CBN. The Agreement does not require SONZA to comply with the rules and standards of
performance prescribed for employees of ABS-CBN. The code of conduct imposed on SONZA under the Agreement
refers to the "Television and Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been
adopted by the COMPANY (ABS-CBN) as its Code of Ethics."42 The KBP code applies to broadcasters, not to
employees of radio and television stations. Broadcasters are not necessarily employees of radio and television
stations. Clearly, the rules and standards of performance referred to in the Agreement are those applicable to talents
and not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the
former.43 In this case, SONZA failed to show that these rules controlled his performance. We find that these general
rules are merely guidelines towards the achievement of the mutually desired result, which are top-rating television
and radio programs that comply with standards of the industry. We have ruled that:
Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the
services being rendered may be accorded the effect of establishing an employer-employee 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:
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of
the mutually desired result without dictating the means or methods to be employed in attaining it, and those
that control or fix 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 unlike the second, which
address both the result and the means used to achieve it.44
The Vaughan case also held that one could still be an independent contractor although the hirer reserved certain
supervision to insure the attainment of the desired result. The hirer, however, must not deprive the one hired from
performing his services according to his own initiative.45
Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the most extreme form of control which ABS-
CBN exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an employee of ABS-CBN.
Even an independent contractor can validly provide his services exclusively to the hiring party. In the broadcast
industry, exclusivity is not necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry.46 This practice
is not designed to control the means and methods of work of the talent, but simply to protect the investment of the
broadcast station. The broadcast station normally spends substantial amounts of money, time and effort "in building
up its talents as well as the programs they appear in and thus expects that said talents remain exclusive with the
station for a commensurate period of 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 talent fees partially compensates for
exclusivity, as in the present case.
SONZA protests the Labor Arbiter’s finding that he is a talent of MJMDC, which contracted out his services to ABS-
CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists
that MJMDC is a "labor-only" contractor and ABS-CBN is his employer.
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In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2) the employee who is
ostensibly under the employ of the "labor-only" contractor; and (3) the principal who is deemed the real employer.
Under this scheme, the "labor-only" contractor is the agent of the principal. The law makes the principal
responsible to the employees of the "labor-only contractor" as if the principal itself directly hired or employed the
employees.48 These circumstances are not present in this case.
There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-CBN. MJMDC
merely acted as SONZA’s agent. The Agreement expressly states that MJMDC acted as the "AGENT" of SONZA.
The records do not show that MJMDC acted as ABS-CBN’s agent. MJMDC, which stands for Mel and Jay
Management and Development Corporation, is a corporation organized and owned by SONZA and TIANGCO. The
President and General Manager of MJMDC is SONZA himself. It is absurd to hold that MJMDC, which is owned,
controlled, headed and managed by SONZA, acted as agent of ABS-CBN in entering into the Agreement with
SONZA, who himself is represented by MJMDC. That would make MJMDC the agent of both ABS-CBN and
SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to managing the careers of SONZA
and his broadcast 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 the broadcast and television industry.49
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 in the broadcast industry. Under this policy, the types of employees in the broadcast
industry are the station and program employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of law. There is no
legal presumption that Policy Instruction No. 40 determines SONZA’s status. A mere executive issuance cannot
exclude independent contractors from the class of service providers to the broadcast industry. The classification of
workers in the broadcast industry into only two groups under Policy Instruction No. 40 is not binding on this Court,
especially when the classification has no basis either in law or in fact.
SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando Cruz without giving
his counsel the
opportunity to cross-examine these witnesses. SONZA brands these witnesses as incompetent to attest on the
prevailing practice in the radio and television industry. SONZA views the affidavits of these witnesses as misleading
and irrelevant.
While SONZA failed to cross-examine ABS-CBN’s witnesses, he was never prevented from denying or refuting the
allegations in the affidavits. The Labor Arbiter has the discretion whether to conduct a formal (trial-type) hearing
after the submission of the position papers of the parties, thus:
xxx
These verified position papers shall cover only those claims and 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 witnesses which shall take the place of the latter’s direct testimony.
xxx
Section 4. Determination of Necessity of Hearing. – Immediately after the submission of the parties of their
position papers/memorandum, the Labor Arbiter shall motu propio determine whether there is need for a
formal trial or hearing. At this stage, he may, at his discretion and for the purpose of making such
determination, ask clarificatory questions to further elicit facts or information, including but not limited to the
subpoena of relevant documentary evidence, if any from any party or witness.50
The Labor Arbiter can decide a case based solely on the position papers and the supporting documents without a
formal trial.51 The holding of a formal hearing or trial is something that the parties cannot demand as a matter of
right.52 If the Labor Arbiter is confident that he can rely on the documents before him, he cannot be faulted for not
conducting a formal trial, unless under the particular circumstances of the case, the documents alone are
insufficient. The proceedings before a Labor Arbiter are non-litigious in nature. Subject to the requirements of due
process, the technicalities of law and the rules obtaining in the courts of law do not strictly apply in proceedings
before a Labor Arbiter.
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ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries to treat talents
like SONZA as independent contractors. SONZA argues that if such practice exists, it is void for violating the right of
labor to security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution53 arises only if there is an employer-
employee relationship under labor laws. Not every performance of services for a fee creates an employer-employee
relationship. To hold that every person who renders services to another for a fee is an employee - to give meaning to
the security of tenure clause - will lead to absurd results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their services as independent
contractors. The right to life and livelihood guarantees this freedom to contract as independent contractors. The right
of labor to security of tenure cannot operate to deprive an individual, possessed with special skills, expertise and
talent, 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.
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.
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.
Footnotes
2 Penned by Associate Justice Eugenio S. Labitoria with Associate Justices Jesus M. Elbinias and Marina L.
Buzon concurring.
3 Rollo, p. 150.
4 Ibid., p. 204.
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